Laveen's Delicate State of Housing, Density, and Growth

This site plan for a new subdivision at the corner of Baseline and 43rd is causing quite a stir, depending on your social circle. This site plan is otherwise known as Case # Z-152-03-7(8) in the city of Phoenix's planning department. There is a rather vocal group of Laveen residents headed to the Phoenix City Council meeting this Wednesday, October 30, 2013, at 3:00 PM, to oppose this site plan (agenda item 74, in case you're interested).

For the record, I spoke at the PHO hearing a couple months ago, partially in favor of this project and partially opposed to it. I really can't decide if I'm energized enough about this to attend the upcoming council meeting. And here's why: What I hear being described as the most contentious part of this site plan is the housing density (we're still talking single family, here).

Firstly, I don't mind higher density single-family homes. I own a home very close to this property, where my family and I once lived. We intentionally bought small and wanted to be situated between the shopping centers at 51st Avenue and Baseline and the beautiful park/school/library complex at 39th Avenue and Baseline. That brings me to a related point, which is that I think there should be more density in such an area as this. And further, when I think about density in this area, the first thing that comes to mind is the 80-unit community of duplexes that already sits directly adjacent to the subject property, known as Vistas Montanas (a part of the Cheatham Farms subdivision).

In thinking through this mental image of the area, I immediately went to google maps to try and settle my cognitive dissonance. No such luck, and here's why: When I look at the map, I immediately remember several other medium to high-density single-family developments in this vicinity. Many of the builders who built subdivisions along Baseline Road, both north and south, combined lower and higher densities together, which has proven an overall good strategy for most of them. In this image, I have circled all of those in the immediate area:

Here's a list of the communities by name, as well as the total number and percentage of lots in each that are less than 6,000 square feet -- generally an agreeable cutoff size for small versus medium residential lots.

The total number is 2,081 in the surrounding subdivisions. The total number of residential lots under 6,000 square feet in all of Laveen (85339 only) is approximately 3,633, which means that they tend to be concentrated in this area. This makes sense to me, given those amenities that I already mentioned and the common sense notion that we should want to concentrate populations nearest shared amenities like parks, schools, libraries, and such. But it doesn't make sense when I hear my friends who are opposed to this project say that the density was never supposed to go here and that the general plan is the holy grail. Oh how I want to agree.... I too have fought in favor of the general plan as a static instrument in the past.... But I can't. I sincerely think the GP could use an update -- in part because of this very area and this contentious issue!

Remember a few years ago when we fought Berkana? That turned into a pyrrhic victory if ever there was one! We fought density at 27th Avenue and Baseline only to find out a few years later that Valley Metro was moving forward with a transit facility at the same intersection. Generally speaking, transit = density (or it should, anyway). While that experience made me feel a little disheartened by the process of challenging proposals such as this one, it also forced me to reconsider what I think are the most important concerns related to city planning and when we should intervene in the planning process on someone else's private property.

Should we be concerned about small lots, small houses, cheap houses, or any of that stuff? That's what I wanted to know, and particularly with regard to this area. This means it's time to test some assumptions, starting with density. One claim that I've heard is that higher density means more rentals, but then we could say the same about smaller homes and cheaper homes -- the latter two being set aside momentarily by the builders' claims that they plan on building market-priced average sized homes on these smaller lots. Whether you think rentals are good or bad for a neighborhood probably depends on your perspective, but it's sort of a foregone conclusion in this debate. 

Here's what I found when I ran some rudimentary statistics on tax-record data available through a web-based database program called Imapp, comparing various homes built in Laveen (85339 only) after "the year 2000" (yeah, that's a gratuitous Conan reference):

• Of all lots that are less than 6,000 sq ft, 1,497 or 41.2% are rentals.
• Of all lots that are at least 6,000 sq ft, 1,854 or 27.8% are rentals.
• Of all homes that are less than 2,200 sq ft, 2,113 or 36.9% are rentals.
• Of all homes that are at least 2,200 sq ft, 1,238 or 27% are rentals.
• Of all homes that sold for less than $180,000, 2,742 or 38.6% are rentals.
• Of all homes sold for at least $180,000, 599 or 18.9% are rentals.

*2,200 sq ft and $180,000 were selected as dividing lines based on the recent average size and price of homes sold in Laveen.

From what I can tell based on that information -- and if there are any statisticians who disagree, please let me know -- it looks like price is a better indicator for whether properties will likely become rentals. Only a multiple regression analysis would likely indicate the strength of any one variable, but this makes sense to me based on common sense.

So what if "we" lose the battle for low density, which in my mind amounts to a spurious concern for this particular area based on the information above. Why not focus on something else, like the quality of construction, that directly influences the builder's bottom line and can more meaningfully impact the surrounding community? After all, this is the excuse given for why we don't mind the adjacent duplexes -- "But they're pretty nice!" we say. This is also how we agreed to let another developer adjust its site plans to allow patio homes as a part of the planned Carver Mountain subdivision -- they look like they'll be beautiful (and I'm a fan of patio homes in many cases). This is why I maintain that this fight ought to be about the characteristics of the construction, specifically the 4-sided architectural focus and other elements of landscaping and overall design that are mentioned in the approved stipulations.

When I combined price and lot size in my analysis of past sales, guess what I found? Small lots (under 6,000 sq ft) that have sold for at least $180,000 resulted in 184 rentals, or a rate of 27%, which appears to be an improvement on lot size or building size alone. So can we encourage this to happen? Yes, I think so, and I'm sure the builders do as well or else they wouldn't be building again. For data support, let's look to current market activity for new homes in Laveen only:

According to MLS data as of today, of all the homes built and sold since 2011, the average size is 1,980 sq ft, average sale price is $180,630, and the average price per sq ft is $92.35. Pending listings have jumped to an average sale price of $222,650, based on an average increase in size to 2,107 sq ft and an average listed price per sq ft of $106.43.

You can see that the active listing numbers have slipped a little bit for Laveen on a slight reduction in the listed price per sq ft to $99.73. It makes sense based on the fact that the Cromford Report shows Laveen having already entered "balanced" territory as of early this month, with a contract ratio of 102 (down from 191 last quarter) -- meaning that demand has slowed and fewer new listings are being sold as quickly (note the increased days on market). After the last couple of years, this should be expected; buyers tend to seek value in Laveen. Home values have increased dramatically during the almost seemingly savage pricing recovery that we've enjoyed, thanks in large part to those controversial institutional investor purchases in the last year. This is likely to scare away some buyers temporarily, as mortgage rates have increased over the same period and negatively impacted housing affordability.

Another indicator that I like to use when looking at Laveen for contextual market performance is to compare it to the nearby 85042 ZIP code, located slightly east of Laveen in South Mountain Village. As has been the norm lately, 85339 lags 85042 by about 30% in price per sq. foot. That said, the recent monthly median price of $172K (as reported by Cromford for October 1st) is identical between the two ZIP codes, which further validates the value-seeking motive behind sales in the 85339 ZIP code. As does the fact that more resale transactions are still happening in Laveen, as distressed inventory continues getting bought up.

This looks to me like a generally healthy point for the market to take traction -- especially considering that Laveen's sales activity, more than other areas, has temporarily slowed as cash investors have started disappearing from the Phoenix market. The fact that buyers once again have some negotiating power, as reported here, likely bodes well for a continued housing recovery.

So please do not be afraid of density, Laveen -- at least not for density's sake when we're comparing similar new subdivisions of single-family homes. None of these are really comparable to the "old Laveen" that consists of ranch ramblers and lush green open spaces. If you want to talk about Laveen's rural character, that's a different discussion -- one that is very worthwhile, as Laveen faces something of an identity crisis in light of future development plans. One thing is certain: We are not seeing any indicator of a trend away from new HOA developments, which tend to be far more similar within the subset of newer communities than when compared with the older low-density neighborhoods in Laveen. And that ship has sailed anyhow -- most large tracts of farm land in Laveen are already platted for new subdivisions, some with different characteristics than others, but still very different than what you see now when you drive down the older neighborhood streets in Laveen. By going to battle over slight modifications to these plans, we're looking at the potential for little more than another pyrrhic victory. 

10/31/2013 Update: The Laveen residents who opposed this developer have won their case, on a council vote of 7-1. 

Retail Update September 1, 2013

I'm all about taking short cuts..... So while I would love to elaborate on all the exciting progress we've made in recent retail growth, I'll instead provide the following email I sent to an area representative for Harbor Freight Tools, as inspired by Mike Hernandez in our Laveen FB group. The only major development that comes to mind that I missed in this email is the opening of Sinbad's Grocery, just outside Laveen in SoMo (27th Ave. & Baseline) -- go check it out on a weekend, when they have huge spreads of prepared Middle Eastern food available for take-out or (standing) dine-in. We also just got Chipotle and Barro's Pizza, both near Fry's at 51st Ave. & Baseline, so we are finally getting more dining options!

Without further ado, here goes (please let me know what I might have missed):

To: Chris Malherbe

cmalherbe@ngkf.com

(405) 306-7774
http://www.harborfreight.com/real-estate.html

As a former regional director for Choice Hotels International, I know how challenging it can be to manage a large territory and constantly keep up with every corner of every market (mine was essentially "the West" at one point). Therefore, I hope you are as receptive to local insight as I always was in that role, especially if it makes your job a little easier in identifying ideal submarkets with solid locations available. So I have one for you: 

Laveen Village Center, NWC of 35th Ave. & Baseline

Managed by Hinkson Company, LLC

Property Flier: http://hinksoncompany.com/13_0506_laveen_vlg_marketing.pdf

Space available: 15,600 sq ft in-line with monument signage in a newer shopping center

Other major tenants: Big 5, 99 Cents Only, Big Lots, Circle K, Wendy's (just announced), and several local businesses

Key demographics (from property flier): 

1 Mile: 10,685 population, $68,915 avg income

3 Mile: 60,508 population, $72,206 avg income

5 Mile: 146,657 population, $61,764 avg income

Traffic (from property flier):

Baseline Road  29,275 CPD

35th Avenue 17,813 CPD

More about the area:

• Proven demand: Home Depot located 2 miles west at 51st Ave. & Baseline, Lowe's located 2 miles east at 19th Ave. & Baseline.
• 1, 3, 5-mile radii can be misleading; as you can see from the street/freeway configuration and the area's population growth, There is a rather large residential population located to the south and west (85339 ZIP) that travels Baseline Rd. for their daily commute, many of whom turn north on 35th Avenue or 19th Avenue, toward downtown and the large government complex located directly north-northeast of this site.
• Large population to the east in ZIPs 85041, 85042, 85040 may also be drawn to this location.
• Large industrial area to the north and interspersed ranch/agricultural properties indicates significant likelihood that lifestyle/psychographic analysis will yield a sizable DIY market, where Harbor Freight will likely thrive.
• C-A-L Ranch is currently opening a location 1 mile north (35th Ave. and Southern) to reach a similar demographic. 
• This site has direct visibility to the large municipal area directly across the street: park, library, golf course, and school(s); this means great weekday and weekend traffic/visibility

Please let me know if you have any additional questions about the area. I am passionate about this part of town and involved with a great group of like-minded volunteers who come from professional backgrounds and are able to help provide more contextual area information, (besides that readily available to you through ESRI and CoStar reports). This could be helpful if your client, Harbor Freight, decides to pursue this option further. I think it's a slam dunk for you, and this shopping center's owner/manager are working to get deals done quickly, so please do look into it as soon as possible. 

Best regards,

Patrick T. Brennan

@Home Properties and Management

http://www.patrickbrennan.us
Direct | 480.559.9429
Fax | 602.467.3165

Laveen Real Estate Update

Can you feel it? The pains from the real estate boom and bust are gradually easing, and more and more of us are finding ourselves back in the black every month, as far as home equity is concerned. Market distress is easing in Laveen:

Distressed inventories have diminished rapidly over the last two years, as more and more people take advantage of our low housing prices and centralized location with great amenities nearby. As this trend continues, builders have also come back to get in on the action. We've all observed renewed activity at some of our incomplete and "zombie" subdivisions, and I just learned of another major land deal that will hopefully be announced tomorrow, for the 20-acre parcel located on the northwest corner of 19th Avenue and Southern. According to a confidential source, at least two homebuilders bid against each other for the opportunity to build there. Things are most certainly heating up this summer, even in land transactions, which tend to lag the resale residential market.

Why all the hype? First, we offer a great value. Take a look at this recent post from my real estate blog, titled "South Side Special Report". I'll add here that while 'Tukee has had its day in the sun, I predict that it is now Laveen's turn to shine. This is owed in part to all of the good that's happening in Laveen and SoMo, but there's another reason as well: Take a look at this other post, titled "New Market Stats for July!", which features recent figures from ARMLS that point to an overall tight market in the Phoenix metro area.

The rising tide truly is helping all ships rise, and Laveen, like other "newer" communities, is seeing a return of boomerang buyers -- folks who lost their homes and are starting to buy again. According to this morning's real estate article in the AZ Republic, this group now makes up about 25-30% of all buyers, even as interest rates have risen steeply in the last month (but are still a phenomenal deal compared to historical rates). I know from my experience that this appears to be true and I am a huge fan. While I'm outraged that our state housing department didn't do more to help these folks when they needed it most (read more here), I see their desire to commit to our community as a tremendously positive sign. Local boomerang buyers are making a choice to reinvest where they already got burned once, and that takes faith and courage (not to mention, common sense).

Laveen-SoMo, Motor City?

It's been a while, but I'd like to revisit and expand on my last post about the now closed Manzanita Speedway on Broadway Road and 35th Avenue. That one was inspired by my contribution to the PlanPHX collaborative brainstorming website, as well as pent up frustration from years of hearing about and reviewing plans to "redevelop" Broadway Rd. I'm for beautification as much as the next guy, but it occurred to me that this big idea from the city was borne almost entirely out of plans for a traffic reliever corridor, with the added benefit of some speculative land development along the way. So let's call into questions some of the broader assumptions we've made thus far about such ideas -- seems like fair game at this point -- and I promise to bring it back to Manzy's old home stretch of Broadway Road in the end.

"If we zone it, they will come!"

While we've all been quite patient in awaiting desirable development in the Laveen area over the years, it's becoming more and more imperative that the city gain a better appreciation for the affected community and overall financial/development markets when pushing these "big idea" redevelopment plans. We keep falling into a 2005 real estate boom mindset when it comes to development and, while it may work enough of the time overall, who wants to wait through a decade or two of ugliness and empty promises in hopes of a better community? My bold assertion about this idea's fallacy is that it can only bring us a more boring suburban bedroom community with a whole lot of empty dirt lots that may or may not have cotton/alfalfa planted on them. Flip a coin, hope, pray -- it's all we can really do for the most part, as we take pleasure in the few fun ideas that may be allowed to pop up along the way.

"Let development take shape organically"

There's an equally sound argument that works much of the time, but likewise assumes that certain conditions are already met. The notion that we can take a more passive approach to economic development by simply enabling those who want to bring new ideas to the area works really well in adaptive reuse situations where the community is highly vested. We see it now along the light rail line, and have a great proof of concept in the downtown area -- particularly along Roosevelt (some may remember when the city proposed clearing the entire area for more sports venues -- thank goodness we didn't!). In Laveen, I'd argue that this is partly the kind of thinking we need in filling our vacant retail spaces and as a means to more creatively re-envision opportunities for something more interesting than the subdivision-meets-strip-mall scenery that we've mostly seen pop up in the last decade. However, if you scroll through this blog or take a survey on public sentiment, I don't imagine you'll get the sense that a Houston-like no zoning model would meet the community's interest very well on a widespread basis here.

A better alternative: the "integrated economic development" approach

If you google the above phrase, you'll likely find scholarly articles about promoting economic development in struggling third world locales. That's because the folks who have studied such ideas from a holistic viewpoint recognize that a scorched earth model of redevelopment doesn't work in helping communities build themselves up. It may work great for slapping a five-star resort on top of an impoverished area and then building walls around it, but not if you recognize an intrinsic value in the people and the community targeted for development/redevelopment. Instead of replacing everything in sight, let's focus on the infrastructure and guided assistance to improve upon whatever positive attributes are already present -- one iteration of this idea that I've seen both poorly and brilliantly applied in economic development circles is "cluster development" (see San Diego bioscience cluster, for a good example). Doesn't this seem more fitting of the Laveen and SoMo area? It does if you take a moment to appreciate what we already have here.

"One man's blight is another man's playground"

So, now we return to Broadway Rd. If you have generally avoided it, as I know many have, please do yourself a favor and take a little cruise next weekend to see what's there. If you see either "junk yards" or "brilliant green recycling businesses", you've probably made a value-based judgment. Let's try not to go there and instead focus on a common denominator. I see money -- and believe me, others do too. I may be a real estate guy, but I'm not looking at how we can get rid of all that industrial "junk" in hopes of redefining the "highest and best use" for the area. That's because I see economic activity, a crucial component of which is the "activity" part. I also see a lot of land owners and business operators who have been around for a long time and have a great basis in their land -- not to mention all those potentially valuable assets that appear to sit there rusting away (but believe it or not, some of those lumps of metal actually change hands from time to time).

Instead of asking how we can successfully move everything to a different area of town or different city altogether (where someone else's vision is executed), why aren't we asking how we can facilitate their success in moving merchandise within our city limits, meanwhile improving the aesthetics and streetscape in the area? Why not go for the win-win, which may seem like a lot more work from a concept design standpoint but would be infinitely more valuable and less expensive to the city overall. If you saw the Broadway Road plans from the city's streets department last year (or was it 2011?), you may recognize that we haven't really been asking these questions -- the proposed landscaped island and high crowning/slope of the street are unacceptable to heavy trucks in the area, for instance. To the city's credit, these points were heard at the LVPC meeting a while back and we were told that city staff would revisit the plans.

But there's more that we can do. This ought to constitute its own visioning project, and the city should call in the business/property owners in the immediate area as the primary group, while seeking broader community input on aesthetics. All that most people want without thinking too much about it is for things to look nice and be more convenient/harmonious. We can certainly address these criteria, while at the same time unlocking a phenomenal economic development opportunity in the process that benefits all. Better yet, we can do it on the cheap if we all put our heads together -- after all, I can't imagine a more resourceful and industrious area nearby than the Broadway Road corridor.

Our Vision and Our Goal

If we really work to build community support and put the full power of the city behind this idea, great things can happen. We can tap into far more of the wealth that changes hands each year at Barrett-Jackson and the other big car shows (this should be a record setting year, btw, according to the Phoenix Biz Journal -- read it here). Sellers are already buying parts in our corner of town after all, so why don't we push them to start doing more of the work and spending more time/money here as well? Likewise, why don't we have some of these U-Fix-It business concepts that appeal to many classic car enthusiasts (code for recently retired guys or busy professionals with disposable income who prefer to outsource the heavy equipment but want to keep the nice car at home) -- a great idea that I wish was mine, presently serving the north Phoenix area. And while we're at it, how about making up for missed opportunities to attract national companies already doing business in the area, like the "totally awesome" Local Motors (see video, above) or that hybrid/electric vehicle battery maker we heard about a while back (battery makers may like our harsh climate for testing purposes), not to mention all those automotive testing grounds scattered around the region. There's plenty of room for the old and the new on the south side of town, especially in light of the forthcoming Del Rio Brownfield redevelopment, which could anchor the automotive focus of the area. For added community support, might I suggest our two great engineering schools at UA and ASU, our various private technical schools and programs at community colleges, and the "Maker" community (look it up -- very cool stuff). And if we're looking for an economic cluster, mechanical design/servicing makes sense in the area, where we also have several aerospace component companies to the east. So, who's with me? You're welcome, City of Phoenix. I may not have cited all my resources, but I think I just offered the outline for a compelling powerpoint presentation if nothing else.

Who wants to help push city staff to get to work on this? If you hate the idea, please tell me why and offer constructive criticism. We need to start taking action, even if it's just to get our voices heard, and we need to get to it sooner rather than later. We also need executable ideas if we're going to successfully push the city to invest its energy in our community as we see fit. That's all I'm trying to do here, other than please my inner child by preserving a wide swath of land where we can make cool stuff.