In a big step for our city, the City Council has all agreed on a new rule to control Short Term Rentals (STRs), like those you'd find on Airbnb. This important decision came after a lot of talk and thought. The goal is to find a good middle ground between allowing STRs and keeping our neighborhoods safe, bringing in several important changes.One major part of this new rule is the big jump in fines for breaking STR rules. Now, people who break the rules will have to pay between $500 and $3,500, or the cost of one to three nights' rent, depending on how serious the violation is. This tougher approach is meant to stop illegal STR activities, but it might make things hard for some Airbnb owners. The bigger fines could really hurt their money situation, possibly making them rethink staying in the STR market.Another big change is that people can no longer face criminal charges for STR-related problems. This change shows the city's focus on solving STR issues. However, this might also cause problems for some Airbnb owners who used the threat of criminal charges to keep guests in line. Now, they have to handle STR issues without this option.Also, the new rule deals with people who keep breaking STR rules by not letting them renew or apply for STR permits again during a time they are suspended. This part aims to stop ongoing violations but might hurt some Airbnb owners who need the STR income. The stopping of permits could lead to money problems for them.Plus, the rule clearly says that STRs can’t be used in Accessory Dwelling Units (ADUs), which are smaller housing units on the same property as a main house. This move is made to keep residential neighborhoods nice and unified. Even though this is good for community togetherness, it might negatively hit Airbnb owners who have invested in ADUs specifically for short-term rentals, leading them to look for other uses for their ADUs.In conclusion, the City Council's all agreeing on the new STR rule shows a hands-on approach to deal with the challenges brought by short-term rentals in our city. By making fines stricter and making a clear difference between STR and non-STR violations, the rule aims to find a balance that’s good for the whole community. However, it's important to see that these new rules may cause problems for some Airbnb owners, possibly affecting their money and property investments. As the city keeps moving forward, it’s key to keep an eye on the effects of these changes and think about possible adjustments to make sure everyone is treated fairly."When it comes to luck, you make your own."— Bruce Springsteen Have a great week everyone!

August brought with it a range of economic data that can provide us with insights into the broader market, particularly in regions like Phoenix. The Consumer Price Index (CPI) of August revealed an inflation increase of 0.6%, aligning closely with most estimates. This sees the annual CPI rising from 3.2% to 3.7% for the past month. Remarkably, this is still near the lowest it's been in over two years. The Core CPI, which omits the often unpredictable food and energy prices, rose by 0.3% in contrast to its annual figure which dropped from 4.7% to 4.3%. Phoenix, with our volatile housing market, closely watches these numbers, as they can significantly influence real estate trends.The breakdown of these figures demonstrates how diverse factors can impact inflation. For instance, the prominent surge in energy and gasoline prices accounted for a large portion of the month's increase. Conversely, steady food and shelter costs, coupled with a decrease in used car prices, provided a counterbalance. Interestingly, for regions like Phoenix with a demand for housing compared to others, any prolonged impact from events like the United Auto Workers strike can influence the supply of new cars, potentially causing a surge in used car prices.Further, on the wholesale front, the Producer Price Index (PPI) for August witnessed a rise of 0.7%, surpassing expectations. This signifies that, annually, the PPI leaped from 0.8% to 1.6%. When isolating the volatile costs of food and energy, the Core PPI saw an increase of 0.2%, while its year-over-year figure slid from 2.4% to 2.2%. A significant portion of this inflation can be attributed to escalating energy prices. For cities like ours, where the housing market is intertwined with broader economic trends, understanding these inflationary movements is crucial.As inflation remains a central concern, the Federal Reserve has been proactive. The benchmark Fed Funds Rate, which represents the overnight borrowing rate for banks, has been raised in an effort to temper the economy and mitigate inflation. Following their most recent increase in July, the rate reached its highest in 22 years. But with the progress seen in controlling inflation, there is speculation that the Fed may consider pausing further hikes. Comments from influential figures like New York President John Williams and Dallas Fed President Lorie Logan hint at such a direction. As the Fed wraps up its two-day meeting this Wednesday, all eyes will be on them, awaiting their next move."Keep your face always toward the sunshine, and shadows will fall behind you."— Walt Whitman Have a great week everyone!

Walmart's recent decision to reduce starting pay for new store employees comes at a time when incomes in Arizona are already out of line with soaring home prices, potentially making it even tougher for newer buyers to enter the housing market. This development has raised questions about the broader economic implications and the challenges facing prospective homebuyers in the region.In July, Walmart confirmed the reduction in starting wages for personal shoppers and stockers, impacting those who are just joining the company. These employees play a critical role in fulfilling online orders and maintaining store shelves. New recruits in the digital and stocking teams now earn about one dollar less per hour than their counterparts hired just a few months ago. This adjustment, however, does not affect the pay of current employees in these roles.It's essential to understand that Arizona has been grappling with a situation where household incomes have struggled to keep pace with the surging home prices. The decision by Walmart to cut starting wages only exacerbates this issue, potentially making it even more challenging for newcomers to the housing market. As the largest private employer in the U.S., Walmart's actions hold significance as they shed light on the broader economic trends affecting various sectors, including housing.Walmart's rationale for these changes centers on the importance of consistent starting pay across different roles within the organization, emphasizing the benefits of stable staffing and improved customer service. While the long-term impact of these pay adjustments remains uncertain, they underscore the company's efforts to navigate evolving market dynamics while ensuring competitiveness. For Arizona residents, the confluence of stagnant incomes and rising home prices presents a formidable challenge that warrants careful consideration from policymakers and stakeholders alike.“If we learn nothing else from this tragedy, we learn that life is short and there is no time for hate.”—Sandy Dahl, wife of Flight 93 pilot Jason Dahl, in Shanksville, Pennsylvania, in 2002

In February, Zillow's housing economists predicted a modest 0.5% rise in nationwide U.S. home prices over the forthcoming year. Surpassing expectations, these nationwide prices not only escalated but also reached an unprecedented high. The primary driver behind this was a notably tight housing inventory which effectively counteracted the challenges presented by fluctuating mortgage rates. Amidst these market dynamics, Zillow Home Loans has now just introduced an enticing option for buyers struggling with affordability: a mere 1% down payment.This unexpected surge prompted Zillow to continually readjust its forecast for nationwide prices. As of now, they project a 6.5% increase in nationwide U.S. home prices from July 2023 to July 2024, a slight but significant rise from their 6.3% estimate just a month prior. It's worth noting that this is higher than the historical annual average increase of 5.5% for nationwide prices since 1975.Through Zillow's innovative program, eligible buyers can pay as little as 1% toward a down payment. To sweeten the deal, Zillow Home Loans contributes an extra 2%, elevating the total down payment to the conventional 3% minimum. Buyers also have the option to put down 3% themselves, with Zillow's 2% addition boosting the total down payment to 5%. This additional 2% isn't handed to the borrower but is channeled through closing costs. Currently, this program is exclusive to buyers in Arizona, but Zillow has aspirations for a broader reach.The dynamics of the nationwide housing market, however, are not universally interpreted in the same way in each region. While Zillow, CoreLogic, and the AEI Housing Center express optimism about the upward trajectory, others offer a more conservative viewpoint. Firms like Moody's Analytics and Morgan Stanley anticipate potential dips in nationwide U.S. home prices by the close of 2024. In this landscape of predictions and shifts, Zillow's strategic initiatives like the new down payment program could potentially reshape the market narrative.However, with Zillow trying to stirrup incentives to buying, do not take this as a sure guarantee our market here in AZ will boom again. This is the same company that started home-flipping here, and ended up with a $880M loss in one year! Even with this low-cost incentive to buy, it will still be hard for buyers to get over the payment increase from current rates, especially only buying with 1% down making their payment extremely high compared to relative income! "Better a witty fool than a foolish wit.”-William Shakespeare

Some concerning news from China last week. The Chinese real estate market, epitomized by companies such as Country Garden Holdings, plays a crucial role in the global economic ecosystem. Recently, shares of Country Garden Holdings plummeted to a historic low following the issuance of a profit warning. The company's valuation dropped to 90 Hong Kong cents after a concerning eight-session losing streak in nine days, notably featuring a 14.3% nosedive on August 8. This declining trend wasn't limited to Country Garden alone; the broader Hang Seng Mainland Property Index saw a decrease of 1.49%, with significant players such as Longfor Group and China Resources Land experiencing downturns in their share values.Country Garden's financial troubles provide insight into deeper issues plaguing the Chinese real estate sector. According to a report submitted to the Hong Kong exchange, the company anticipates a net loss ranging from 45 billion to 55 billion yuan (approximately $6.24 billion to $7.63 billion) for the first half of the year, a stark contrast to the 1.91 billion yuan profit from the same timeframe the previous year. This significant financial reversal is attributed primarily to reduced profit margins in real estate and an uptick in impaired property projects, a consequence of diminished sales in the industry. Moreover, the company reported a 35% year-on-year decrease in sales from January to July, with a striking 61% reduction from 2021's figures.Further exacerbating Country Garden's woes, news emerged that the firm had defaulted on two bond coupon payments, aggregating to $22 million. While an investor relations representative refrained from negating the news, there was a conspicuous absence of clarity regarding the company's future payment strategies, highlighting the ambiguity and potential risks associated with investments in the sector.Why is it vital for global homeowners, especially those in the U.S., to keep a close watch on such developments in the Chinese real estate market? The real estate market in China is a significant component of the global market, and tremors in this sector can potentially trigger a ripple effect. Any destabilization in China's property market could reverberate through global financial systems and may influence the U.S. housing market. Therefore, recognizing and understanding the dynamics and fluctuations in China's real estate industry is imperative for forecasting and safeguarding global economic stability.China's GDP majority relies on housing as its main economic driver. If this continues to crumble and China's economy worsens, it will put them in a desperate situation and potentially make them do something drastic like possibly invade Taiwan or other aggressive military actions. And if the U.S. somehow gets involved with this directly, who knows how not only the real estate market will react but how all U.S. financial markets will handle any sort of military intervention. Don't forget China also supplies the U.S. with about 18% of our imports across all goods. Just something to keep an eye on in the news."The ultimate value of life depends upon awareness and the power of contemplation rather than upon mere survival."-Aristotle Have a great week everyone!

  Mortgage rates experienced a significant surge on Monday, reaching 7.48% on the 30-year fixed mortgage, the highest since November 2000, due to rising bond yields. These increases in bond yields are driven by investors' worries about prolonged high interest rates and inflation. Matthew Graham of Mortgage News Daily highlighted that investors haven't observed the anticipated economic deterioration, which the Federal Reserve is also waiting for before contemplating any policy shifts. Consequently, long-term rates like the 10-year Treasury yields and mortgages are affected negatively.Additionally, this uptick in rates comes as another blow to potential homebuyers, who are already grappling with inflated home prices due to the Covid pandemic. While 2020 saw record-low rates, sparking a massive demand in homes and driving up prices by over 40% by the summer of 2022, the current rate environment is drastically different. Many homeowners, who locked in rates around or even below 3%, are now hesitant to sell and relocate, fearing the financial repercussions of the present high rates. This phenomenon is termed as "golden handcuffs" among potential sellers.The implications for buyers are equally significant. Comparing the present situation to just a year prior, a person looking to buy a $400,000 home, putting down 20% on a 30-year fixed loan, would now be paying approximately $420 more every month. As a result, many borrowers are turning to adjustable-rate loans, which provide lower interest rates for shorter durations. For instance, last week, the average rate for a 5-year ARM stood at 6.2%, and its application share increased to 7%, a stark contrast to the less than 2% in 2020 when the 30-year fixed rates were at record lows.In response to these rising mortgage rates, homebuilders are employing strategies such as buying down these rates for different terms or reducing home prices. Although they had limited these incentives earlier this year due to increased demand and decreasing rates, they've recently reintroduced them. However, homebuilder sentiment took a hit in August, primarily attributing the decline to these rising interest rates.This situation is very unique since buyer demand has dropped, pricing however is still remaining elevated due to our low inventory. It is a self-inflicting feedback loop. Sellers don't want to sell to buy high, buyers don't want to buy high and low inventory, rates are too high to incentivize buying, and the cycle continues. We should be keeping an eye on the unemployment charts month over month because one canary in the coal mine will be just that, once sellers are forced to sell into a high-interest rate environment, then things will get interesting.“We cannot solve problems with the kind of thinking we employed when we came up with them.”— Albert Einstein Have a great week everyone!