We recently talked with Danny Brown, founder of the Myriad Real Estate Group, a highly skilled residential real estate team. Danny shares a key core principle with us; dedicate yourself to always putting the client first! That sounds like it should be obvious but it’s surprisingly not always the case in this business.
On his podcast we covered the COVID-19 pandemic’s impact on apartment sales, addressed public perception that metro Phoenix might be building too many apartments (we’re not!), and we all shared observations on the current single family housing market and its impact on apartment rents.
Show Highlights
- How Chris Norton and Jim Kasten Each Started In Commercial Real Estate
- What Makes Us Different When Compared With Other Brokers
- How Many Apartments In Phoenix Are Being Built
- Are We Building Too Many Apartments
- Affordable Housing in Metro Phoenix
- What Are Current Market CAP Rates (What is a Capitalization Rate?)
- Homes Sales & Rentals
- Opportunities For Commercial Real Estate Investors
Learn more about Danny Brown and the Myriad Real Estate Group
Summary
Danny Brown sits down with Chris Norton and Jim Kasten of Metro Phoenix Commercial to discuss the state of the Phoenix housing market. The discussion covers topics like the apartment market, the growth of the city, and the need for affordable housing.
Highlights
🏘️ The Phoenix housing market is booming, with a shortage of homes and apartments for sale and rent.
🏢 The apartment market is seeing a surge in luxury construction, with developers building high-end complexes in walkable areas.
🚧 The city is facing a growing need for affordable housing as rents and home prices continue to rise.
💰 The rise in housing costs is affecting everyday citizens, including school teachers, service workers, and seniors on fixed incomes.
📉 There are concerns about the potential for a housing market crash, as the eviction moratorium ends and unemployment benefits run out.
Transcript
Danny:
Welcome back everybody. This is another edition of Danny Brown Talks Phoenix. And always, I am your host, Danny Brown. So today I have the pleasure of sitting down with Chris Norton and Jim Kasten of Metro Phoenix Commercial. Welcome to the show guys.
Chris:
Thank you.
Jim:
Thank you Danny.
Danny:
Yeah. So first off, I’d love to get to know you both. So why don’t you tell me a little bit about yourself and what Metro Phoenix Commercial is all about.
Chris:
You want to start Jim?
Jim:
I will. So again, thanks for the opportunity to visit with you guys and to learn something about your company and your clients. So, I’m retired, professional minerals exploration geologist. I spent 20 plus years bouncing around the world looking for precious and base metals gave that up essentially in ’98 and joined RE/MAX Commercial and started a team, an apartment team. 10 years later started my own company, Sand Group, who just moved down the sidewalk in the same office building. And over the 20 plus years, we’ve sold 1,000, 1,500 apartment communities give or take, maybe a billion and a half gross value of dollars. And it’s been fun to work in that arena and do better than I think other agents, other professional agents have done, just serving the client better. That’s my story.
Danny:
Very interesting. And Chris?
Chris:
Well, I got into this business a little differently, first was an investor. I looked into, I considered investing in real estate for 10 years, and then finally realized looking back, I’m not getting any younger. I probably should take some action. I moved out to here in Phoenix in November of ’09 and within four or five months, having never bought a property in my life, not even with myself to live in, I bought my first investment property, one I still hold today in my IRA. So I came at this business as an investor first, sank a lot of money into my education with a lot of credible, ethical, highly experienced [inaudible 00:02:11]. That’s how I kind of learned about apartments, that prompted me to kind of pick apartments as what I wanted to pursue. It led me to meet Jim Kasten. And at the time I had gotten a real estate license for the purposes of my investing and made the switch to becoming a full-time apartment real estate broker.
Danny:
Very interesting.
Chris:
So that’s my background.
Danny:
So commercial is very different than residential, because in residential, you kind of specialize in anyone looking to buy a home. You don’t necessarily have those specific niches that a lot of commercial agents fall into. So, for commercial, I’ve got friends that do commercial leasing that do industrial, that do restaurants and food versus retail shops. And there’s just this whole gambit of commercials. So you guys have mentioned apartment complexes a couple of times. So for our audience, why don’t you dive into a little bit deeper about what your specialty is in that commercial world?
Chris:
So I’ll tell you this and then hand it off to Jim. One of the things that differentiates people is when you get into commercial, you can be a generalist or a specialist. And I think the client is best served when you’re a specialist, because you intensely know the market much greater than you can if you chase all the rabbits. So if you’re doing industrial sales, multi-family sales, retail leasing, I can’t see how you would be excellent at any one of those, if you’re trying to do them, juggle all the balls at once in the air. So to this end, becoming a specialist, we have a concept of dedicated client first. That’s our approach. Like your company, you have specialists that you have synergy with and that can help serve the client. And they’re there to support one another. We’ve had a team in the past with the same concept. We all communicate, we all share what’s going on with what we’re working on, and everybody helps each other. So the client’s always served by putting the client first, by being dedicated to the apartment market and being dedicated to that client.
If we look at the transaction they’re involved in and we feel like the best course of action is for them to walk away, we know we’re not going to get paid. That’s what’s in the best service and the best interest of the client, right Jim?
Jim:
Sure. It is a client-first dedication. And it’s a mandate for all the agents that have worked at the company. So nicely said, Chris.
Danny:
Yeah, I think that’s super-important in both our industries that you’ve got to put people ahead of profits. You’ve got to put the client’s needs ahead of your own. And at the end of the day, what’s in my best interest may not be what’s in the client’s best interest. And you’ve got to try and separate yourself from that so that you can properly advise your clients. And I think that that’s super-important and something that gets lost in both our industries quite often.
Chris:
A real quick summation on that. If you ask a lot of the very successful people in the country, what’s their top six reading list of books, Think and Grow Rich, repeatedly shows up over and over. Napoleon Hill has a very good quote in that book, “Provide the great service first, the money will follow.” So I think that principle holds true today.
Danny:
Yeah. There’s a variety of ways, in different people who kind of say similar things. I think Zig Ziglar had one that, “If you help enough people get what they want in life, that you’ll end up getting what you want in life.” I always butcher that quote, but it’s along those lines. And I’ve always said that on a long enough timeline, if you do the right thing, that you’ll end up winning as well. So I think a lot of great people throughout history have said very similar things. So I like that.
Chris:
That’s the distinguishing point to make, because a lot of commercial brokers are about the transaction. They’re just about making a deal and cashing a check and moving onto the next one. And so, I think that really kind of sets us apart that.
Danny:
And that’s very true in my industry as well, that as soon as the deal closes, people are on to the next one. The statistic is crazy, it’s like seven out of 10 people they’d use the agent that they used before, but they don’t remember who they are or even how to reach out to them. And that’s because they got their check and they just disappeared. So, it’s all about maintaining that long-term relationship for sure. So you guys specialize in helping people or developing apartment complexes, is that correct?
Jim:
Yes. Primarily.
Danny:
So tell me a little bit about that, how you got into developing apartment complexes and what that has looked like over the last few years here in Phoenix.
Jim:
Let me go back a little bit. So, I started back into apartments [inaudible 00:07:03] in Reno, Nevada. And I did some of those as a geologist. Sometimes commodity prices are low and so there’s no income. You get fired from the job, so you got to do something. So I did a few years of apartments and I came into Phoenix and I started working with duplexes and fourplexes and apexes and little things. I’m learning the game. And ran into some folks, I call them Dick and Bob. They become friends after years, we started putting our heads together. One was an attorney, one was an engineer and I’m the broker and stuff. So, but we took them from also investing in fourplexes and things like that, to get them into a 20 unit than a 40 unit. Then we stepped up to 153. Then we were at a 213 or 14 unit property.
It’s all the same effort per property kind of, but the scale of making money is way better on big properties. So, that’s been a good thing. And helping people like that has been, something you feel good about at the end of the day. So, and then you asked about what’s happened in the last few years. Well, the same group I was investing in, they were getting older, attorney had to retire. The engineer, he’s older than I am. He’s 75. And he just said, “It’s time to quit.” So we sold it. I’m going, “Guys, the rents are going up. You can’t do that.” That was the start of rents going crazy here four or five years ago. So you never looked back on making a profit. So that was fine, we did well. But in the last four or five years, rents have gone up significantly. The standard, most people know a two bedroom, one bath, 820 square feet something like that, five, six years ago that was renting at 600, 575, 600. That same unit today is probably at 950 without doing anything, nothing at all.
And we had a big run-up in apartment values in 2006 and ’07, then it kind of cratered at the end of ’07 and at 2008, Lehman Brothers collapsed in ’08.
But the difference between the two cycles is this time the rents have gone up significantly to support the value increases. So, and units that were selling for what’d I sell some things for? 50 or $60,000 a unit five years ago, they were at a 100, 115, 120,000 unit. Nothing’s changed with the complex. It’s just the rents have gone up, because the economy has gone up.
Danny:
Yeah. It seems like they’re building apartment complexes all over the place. Every time, every direction you turn it, at least in kind of central Phoenix, it seems like there’s a new high-end apartment complex that’s serving this semi-luxury type client. Why is that?
Jim:
I’ll take it. So yeah, there’s sticks going up everywhere and it’s amazing. And almost every complex is going to be condo quality high-end stuff, dressed up to the nines. There’s a difference, a little bit of affordable housing that Chris we’ll talk of in a little bit, but just to give you some background. So right now, and I tracked this and it’s on our website and Chris has made a map. You can see where this new construction. There’s 28,000 units under construction, 28,000. There’s another 24,000 that are at planning stage. It’ll probably get into the construction. And then there’s a 19,000, almost 20,000 that are prospective. And most of those probably. So 72,000 total in the pipeline. So the question that people ask with all this construction, you can go every place and see this new construction and are we going to overbuild?
And at some point we might. Right now, we’re not, you’ve got enough people coming into the Valley, a lot from California. The net migration is probably 80 to 90,000 per year into Metro Phoenix. We are not building enough to support that influx of population that will use apartments. Will that turn? Yeah, probably we’ll keep building and then the population will not support it. And so, but right now we can, we can fill it. And the vacancy, I would say that we’re at a historic low of 4.5% vacancy. 4.5% vacancy is essentially 100% full. It takes three or four days to turn a unit, if a tenant’s leaving and then new tenants coming in. Turning is cleaning the unit, getting that set up for the next tenant, then a few days for that tenant to move in. That’s your vacancy, but there’s a waiting list already for almost every apartment complex. So lots of new construction to come and lots we’ll continue to be built.
Danny:
Yeah. I mean, we’re facing the same thing in residential market where there’s just not enough homes to go around, just period with the influx of people moving to Phoenix, a lot from California. Of course, we’ve always had the winter visitors moving from the Midwest to escape the cold, lots of people from Washington. So, I track where people are moving from to come and move to Phoenix. And I think last year was one of the greatest gains in our population that we’ve seen in about five years and that’s with a raging pandemic. And so, these people have to live somewhere and the housing market I’m sure, as you know, is just been going nuts in terms of property values, to where not everybody’s getting a house to purchase. So they’ve got to end up somewhere and it makes sense that they would turn to apartments.
Chris:
Danny, quick question roughly today about how many homes are listed for sale on the MLS?
Danny:
Right around just over 3,500. I know different sites will report different things, but I track what I consider to be the Greater Phoenix area. I don’t just pull up what’s listed in the MLS. I’m tracking the parts that matter. And so, it’s about 3,500 between house, town homes and condos.
Chris:
If we put that in context, you’re talking about 35, 3,600 homes for sale in a metro that has 4.6 million people that that’s crazy. I know a normal market should have much more for inventory. So I mean, this both are telling a very clear picture here, both on the for rent product and the for sale product.
Danny:
Yeah. I mean, for us, we should be closer to 35,000 to 40,000 homes on the market to the balanced between buyers and sellers. We have noticed, and I follow this data really closely. And between basically last week, we started to see things kind of peak to where that demand has kind of started to finally level out, which is coincidentally, when we saw mortgage rates go up as well. So, whenever you see mortgage rates go up, you always see a softening in demand and then conversely, an increase in supply. So, these raising rates might actually be something that’s a little bit healthy for the housing market to kind of slow that level of demand to bring it back down some, kind of balance things out a little bit.
Chris:
Yeah.
Danny:
So what are you guys seeing then in the apartment arena? Are you seeing the cost to acquire land skyrocket, the cost to build these apartment complexes get very expensive, because everything’s gotten expensive? Does that have something to do with the higher rents as well? Are we starting to see what you guys would consider inflation just with the cost of living and the cost of products and the cost to build?
Chris:
I think all of those are related. We certainly have our working and have worked with some developers. A lot of the clients we’ve worked with are buying existing product, existing department communities and renovating them. So they’re doing their own construction on an existing property. The land value has skyrocketed, because the demand has skyrocketed. You at one time could look at downtown Phoenix skyline and count 14 cranes in the area at the same time. That’s a record for downtown, unlike anything else. So with all this demand and all these construction projects, you have a shortage of skilled labor and you have material costs going up. So you have land costs going up, labor shortage and labor costs going up, and material costs going up. So to support building something, they have to get a product that is more high-end, maybe class A luxury, something that’s almost in some places, $2 and 44 cents a square foot, which by comparison, we were talking about things five years ago that might be 80 cents a square foot with some renovation you can push to a $1.40.
So, I mean, it’s just a significant jump, because of the costs associated to build these. What would you say Jim?
Jim:
Yeah. I just got a question for Danny. So on the houses, are you seeing lease rates of houses continue to go up as well as the value of going up?
Chris:
Absolutely. Yeah. The cost of renting a property seems to be going up just as quickly as the cost to purchase.
Jim:
One of the thoughts that has been thrown out to us. What do we have? 10, 12 years ago, we had a crazy condo craze, where you took apartments, turned them into condos, did a condo map of the thing for $20,000, turned it into condos and sold the condos, individual units.
Chris:
That was going to be my next question for you is do you see condo conversions coming back where maybe there’s not enough people to occupy these luxury apartments and then they start converting them into condos and selling them?
Jim:
I do see that. There’s been a caveat put on the federal loans for apartment complexes that you can’t do that for a 10-year period. So some of the apartment complexes will not have that ability, depending on how long ago they were financed, but some are not going to be under those constraints. And I can see that with house values going up and there’s the baby boomers maybe can’t get into a very expensive house, they want some of those tax write-offs that you get. So I could see there a push to go to the condo craze again.
Danny:
Well, that’s interesting you say that because I think one of the things that stalling the housing market is baby boomers. I think there’s a lot of baby boomers who are aging and retiring in place, especially if you’re a baby boomer who has their kids who have moved back home just due to the cost of living. And if you think about poor millennials and gen Z, they’ve gone through the great recession and now they’re going through a pandemic. Those are just 10 years apart. And so, if these are your prime years for making money, I mean, you could be set up, really be set back in life due to these two experiences. So one of the things that’s holding the housing market back is boomers just not selling homes. And I think part of that’s due to, absolutely due to the pandemic. Also living longer. So boomers are definitely living a lot longer as well.
Jim:
One of the things, another interesting aspect about the apartments was probably 10 or 15% of the occupants of the apartments are now occupants, they’re tenants by choice and their second homes. There’ll be, live in the North, they’ll come down here and they’ll rent an apartment. They’ll rent the apartment for the whole year. They’ll continue to rent the apartment and maybe they sublease it during the year at some point, but that’s their secondary home as an apartment down here, because they’re making these new apartments that are just spectacular. They’re they’re condo-quality. They’re great. All the amenities. And they’re a lot of the new apartments, especially in the last three or four years have been built in high walk score areas. So they’re downtown Scottsdale, uptown Scottsdale, downtown Phoenix. They’re in the little areas in Mesa, which are [inaudible 00:18:59] or Chandler or something they’re areas that you want to live, because you can go and play and have that nice environment nearby.
Danny:
Have you seen a pullback in your market at all due to COVID and the so-called…? I think Phoenix is a little different, because we’re such a large city and everything so spread out where it’s not as concentrated, but I haven’t seen that, or felt that move to the suburbs where everybody wants a house. Have you seen that in the apartment space?
Jim:
I did in the new apartment construction. If you go back three or four years, the apartments, the new apartments were being built in the main cities, downtown Phoenix and Mesa, and Chandler and Gilbert and stuff, Tempe, especially. And now the last couple of years, if you look at, and we have this website, Metro Phoenix Commercial, which Chris developed, and he’s got this map on there and you can see now the apartments are spread out all over Metro Phoenix, all into the suburbs. So yes, there is a trend to move those apartments out into the suburbs and people are going out there.
Chris:
What’s driving that as well is you have additional industries and companies creating jobs out the yeah, where it’s more affordable for them to get the land, to build a new factory. You’ve got the Loop 303 that’s going to be filled in over the year. So there’s a lot of economic engines on the outer circle of the Metro and developers are keen off of that.
Danny:
Yeah. I mean, I think the West side of Phoenix, along the 10 and out along the 303 is prime for some explosive growth, same with North Phoenix, like the Norterra, Happy Valley area that is just booming around USA. So the peripheries are definitely growing rapidly right now.
Chris:
And even further North of Deer Valley where it’s kind of a lot of open space, but you’re starting to see a few surplus malls pop-up, there’s a Taiwanese semiconductor company that’s going to be setting up on 100 plus acres and creating a ton of jobs. And I forget the exact numbers behind it, but we’re talking about billions of revenue into the economy. So yes, suburbs are not to be ignored, but at the end of the day, when you break down the renters by choice, as Jim alluded to, I’ve talked to a number of them, Mayor Kate Gallego, of the city of Phoenix, her herself is a millennial. And she wants was touring with a group I was on a building tour and explained, this was just before she was mayor.
She said, “I’m a millennial and we do things a little differently than the boomers and the generations before us. They used to find a job that they really loved or they really wanted and then they would move to where the job was. Us millennials, we first find the place we want to live and then we find a job in that area we want to live.” So there is a shift. And so, when you look at the trends, I’ve looked at and the people I’ve talked to, they don’t want to be out in the suburbs necessarily, because that’s not where their friends are, it’s not where the entertainment is, the shopping is. And conversely, some of these boomers are downsizing. I’m not saying it’s not a problem that they’re not. But some are downsizing and they’re wanting the same thing. The walk score, you’d be close to arts, culture and dining. And so, some of these renters by choice are seeking a more centralized developed density by the choice of a lifestyle.
And so, that’s kind of a fundamental shift I’ve seen in the tenant space. I’ve only been in Phoenix 10 years, but that seems to be a shift I’ve observed in the last five.
Danny:
Very interesting. How has everything that’s been going on affect affordable housing? I mean, one of the things that’s made Phoenix such a draw for such a long time is the affordability. And I’m curious to see, I’ve always considered, I’m a native and I love Phoenix, but I’ve always considered it kind of a second tier city. And I think COVID has really catapulted Phoenix into kind of that first tier. And I think that’s really starting to affect affordability. And so, what do you see in affordable housing, affordable apartments going forward for Phoenix?
Chris:
There is enough there to have a whole separate podcast about, so I’ll try and touch on just kind of the highlights. To your point, the big data trackers will consider or classify the Metro Phoenix as a secondary market. I think some of that’s changing. I don’t know when it will be that they start considering this more of a primary market. We have a 365 international airport. We have a lot of people growing the county, Maricopa County encompasses all the cities, Metro Phoenix, I think we’re the third or fourth year running as the largest, the fastest growing county in the entire United States. We end up meeting 90,000 more people at the end of the year. And a lot of these people are coming from more expensive areas, maybe coming from the coastal cities where they’re accustomed to making more salary. So they arrive and they look at Phoenix, for them Phoenix is cheap compared to the million dollar home that was 1,300 square feet they’re leaving. They can buy the same home from half price. So for affordability, it depends who you ask.
Now, if you talk to people who lived here for some time, they’re getting priced out of the market, because of this demand that has more money coming into our market. And plus, all the factors we’ve talked about for construction driving the necessary rents to support that product way up out of the reach of normal everyday blue collar Joe living in Phoenix. The city of Phoenix has a affordable housing advocate, Sheree Bouchee and she even go to KJZZ’s website. They did an interview with her and another gentleman back in May of 2020. And they said, “What does affordable housing mean to Phoenix?” And so some of the big takeaways from that are that using HUD standards and some various definitions, the questions first center around, what does it mean for it to be affordable housing?
The basic definition I like that I read there that validates how I screen my own tenants is that no more than one third of your gross monthly income should go towards your housing costs and that’s either rent or mortgage payment, plus your utilities. And generally speaking, when you take HUD standards and clarify, what’s the median income, where does that lie? Something like 46% of Phoenicians are classified as low, very low or extremely low income. And that could be for household of four, anywhere from zero to say, $58,300, not a lot of money. So when you have gentrification, you have high product and you’re getting outbid by people with more money coming into this market, housing becomes a struggle. And we’re talking about people, we’re talking, I’m not talking about people that people would fear, we’re talking about school teachers starting out, we’re talking about service professionals like waiters at restaurants. We’re talking about professional services, people that are entering the job market. We’re talking about seniors on fixed incomes. These are not your boogeyman. These are just everyday citizens that are getting priced out and finding the housing choices around are no longer affordable.
The city of Phoenix has a bunch of land, this is one example, between say 16th Street and 24th Street from Washington to Roosevelt. They own a lot of land out there, and they would love nothing more than to help partner with developers and build affordable housing. If you drive in that area, you’ll see three projects coming on the ground now, and it’s a combination of partnerships, some low income housing tax credits and incentives. There’s a whole other podcast that can be talked about this. So I see that there’s a tremendous need for affordable housing. If you go to phoenix.gov/housing and see more. If people or your friends would like to learn more, that’s it the resource to go to. If the listeners are in Phoenix and they’d like to become involved, the Phoenix Community Alliance has been around for 30 years, advocating and promoting and developing. Downtown in particular, they have a committee called Social and Housing Advancement.
So this organization has made up of civic leaders, business leaders, and government leaders, all trying to solve big problems and taking two or three years, but not in a rush. It’s not a for-profit company and coming up with real solutions. So there is some ground being made, but we have a lot more work to do in that area.
Danny:
We actually, I actually joined that organization and then COVID hit. So I have not had an opportunity to participate in anything, because I don’t know anyone. It’s all shifted to Zoom. I participate in one meeting and I was just like lost. So I kind of put a pin in that so that when we could meet in person start joining that, but we also support UMOM and we donate to them on a regular basis. And they’re about and homelessness and they build affordable housing in Phoenix, and they always talk about how everybody’s in support of it, but nobody wants to, “Not in my backyard,” is the saying. And so, it’s a very challenging thing to navigate for sure.
Chris:
One final tip that I could add on it that might touch anybody. The State of Arizona, Tim Sprague, and a few others spearheaded this effort to combat the problem with people experiencing homelessness and finding more affordable options for them. When anybody sells a home, it can tick a box or ask the title company and set aside $25 of their sale proceeds to go to the Arizona Housing Fund. And for commercial suggested $100. Well, if you’re selling a $4 million, what’s $100? If you’re selling a $300,000 house, what’s $25? It’s raised several million already. It needs more funding, but it’s so small and so simple. If we could just get the word out, that would make a significant difference to getting these projects built so people have an affordable choice.
Danny:
Yeah, I think title companies need to do a better job of training their notary staff to see that as an option. As someone pre-COVID, that went to all of their clients signings, it’s not something that gets talked about enough.
Chris:
Yeah. It’s a messaging exercise and the title companies are not always up to speed on it, but it’s the word is spreading. I’m just trying to spread it here.
Danny:
That’s good. That’s good. So, we’re kind of running out of time here, but I wanted to get your thoughts on what the future for Phoenix looks like as guys who are in the trenches and helping Phoenix grow in building housing here, what do you see in the future for Phoenix?
Chris:
Do you want to go first Jim?
Jim:
Yeah. And Chris knows kind of where I’m going to come from. So I’m not a big fan of the new administration. I think there’s a lot of problems that could be created tax-wise and job-wise and border-wise and things, but some other things that are of concern and Danny, maybe you can help with this. Pretty soon, we’re going to run out of the ability to defer evictions. Right now, people can stay in there and not pay rent, and you can’t get evicted. In some cases you can. We’re also, at some point, this unemployment insurance is probably going to run out. So people that are just on the dole won’t have the ability to pay for their mortgage payments or their rents. And the other thing is, many people have not had to pay on their mortgage payment for over a year now. And at some point that’s going to come to an end. So there’s some news writers out there that are saying that we’re going to have a big change in our economy here with those kinds of things. I don’t know if you anticipate that as well Danny, what are your thoughts on that?
Danny:
So don’t have a lot of input on the eviction moratorium and what that’s going to turn into, but I do, I survived the great recession and was in real estate during that. And I don’t think that lenders, the banks want to go through anything like that again. So I know that they don’t want to foreclose on anybody. And I think that a lot of the forbearances, and especially the ones backed by Fannie and Freddie have the ability to turn into deferments where, yeah, you’ve put those mortgage payments on hold and with the forbearance that they technically would all be due at once. And that would probably just destroy people if they’ve been not making their payment for a year and probably can’t come up with that money. So the banks are allowing for deferments where that money is just it’s there and it’s hanging out and you owe us it. It’s kind of an IOU to where, when you go to do a refinance or you sell your property in the future, you pay that off at that time.
So I think that that will be there. And I think it just takes people picking up the phone and calling their servicer to make sure that those things happen. I know for example, Quicken Loans does not want to foreclose on anybody. And they’re sending letters like, “Call us. We don’t want to foreclose on you.” They’re sending people knocking on the door saying, “We’ve mailed you, we’ve called you. Talk to us. All we need to do is have a conversation with you so that we can get your authorization to do these things.” So I don’t necessarily think that there’s going to be this sudden foreclosure crisis like we saw in 2007, 2008, because I think that the banks are more prepared for it this time around. And they lost a ton of money kicking people out of homes. And I don’t think they want to go through that again.
Jim:
Something that just occurs to me back in ’08 and ’09, ’10, we had kind of a subdivision of our group, are the Kasten Long Commercial Group. They were helping people with getting into short sales or not short sales and helping to negotiate with the banks. We learned how to quickly talk to the bank and see what their ability was to help a borrower. We both might get into some of the things on the residential your side, commercial on our side to help people down the line. I’m just thinking out loud here.
Danny:
Yeah. There’s more equity in people’s homes than ever before. So the housing market would have to tank, really tank to wash up all that equity. So if somebody is really hurting, then it’s a sellers market and they should probably sell their home and cash out and just get out of the home rather than allowing it to go to foreclosure. I mean, we’re going to be in a world of hurt if those property values crash and we get back into short sales.
Jim:
Maybe not so much for foreclosure, but just helping people negotiate with their lender so they have the best scenario. Like if they pay maybe the back tax and insurance that hasn’t been paid, they put everything else back in and pay it off down the line. If as long as the borrower knows that’s an ability. I mean, that’s just a free service. We might be able to do that.
Danny:
Yeah, no, I think it’s great. And I think the worst thing that anybody can do is bury their head in the sand. Because if that happens, then the banks will have no choice, but to foreclose on you, I think the best move for anybody is to have conversations. And I think you can avoid a lot of these things if you just pick up the phone and talk to the people in charge.
Chris:
Agreed.
Jim:
So if you’ve got some other thoughts, I know Danny asked about the future, you’ve got some thoughts on the future, probably more positive… I mean, it’s a great economy. Our economy is great, it’s diversified. Michael Crow has done a great job with ASU and creating an incubator for employees, future employees to go to these companies coming in from California and the NAU the university is doing great.
Danny:
And unfortunately, we only have less than a minute to go before we cut off.
Chris:
The cities, have reinvested themselves since the great recession, I think better position to weather the next downturn. There’s warning signs on the horizon. I would just direct your viewers, if they’d like to learn more specifically about what the apartment market is like, where we talk about the economy, we talk about the diversification of the jobs, go to metrophoenixcommercial.com and just click or tap on market insights. That’s our blog, metrophoenixcommercial.com, just tap or click on market insights. And if you’d like to head on over to the newsletters, we put out a newsletter each quarter, gives you all the sales data tells where the trends are happening, what we see happening in the future. They can learn more that way.
Danny:
All right. So we got cut off a little bit by Zoom, got to love technology. We will have Chris and Jim back for another in the future, because there’s just a lot of good information to get into, but thank you guys so much for tuning into another edition of Danny Brown Talks Phoenix, and we will see you next time.
Just wanted to say a quick thank you to all of you who tuned in for this episode of Danny Brown Talks Phoenix. I know there are many podcasts out there, and I truly appreciate that you chose to listen to mine. If you go ahead and subscribe and leave a review, I’d really appreciate it. Lastly, I wanted to remind you that this episode was brought to you by Myriad Real Estate Group. So if you ever have any questions about real estate or looking to buy or sell in the Phoenix area, please visit myriadaz.com, which will be linked in the description. Thanks again for tuning into Danny Brown Talks Phoenix.