What Every Arizona Homeowner and Property Investor Needs to Know about Proposition 117
By Bill Aust, Senior Vice President, The Biltmore Bank of Arizona
In November, The Biltmore Bank of Arizona had the great pleasure of hosting a panel of experts to speak about the greater Phoenix residential real estate market and the hidden implications of Proposition 117. For those of you who couldn’t attend, I’d like to share some key points our accomplished speakers covered during their presentations.
First, I’d like to mention some of the general market intelligence our panelist Michael Orr imparted. Michael is Director of the Real Estate Center at the W.P. Carey School of Business at Arizona State University and is widely considered one of the leading experts on the status of the Arizona residential real estate market. According to Michael:
- The residential sales market in greater Phoenix area is mostly flat, with the exception of high-end properties, which are selling at a faster clip but not at a much higher price than last year.
- More people are interested in renting the home they live in versus owning it.
- Rental property demand is driven by multiple factors:
- Millennials prefer to rent rather than own;
- Homeowners who were foreclosed upon often rent while they rebuild their credit;
- Investor activity has declined since last year, when large group buyers were snatching up single family residential homes to use for rental properties; and
- Income and wealth disparity is increasing.
- The future of our residential real estate market depends heavily on action by lenders.
Attorney James Nearhood and real estate appraiser William Dominick of Burke Hansen followed Michael’s presentation with an overview of Proposition 117, a state constitutional amendment voters passed in 2012 that was intended to control how quickly property taxes can increase.
Jim and William explained that Prop 117 might have a big impact on commercial and residential properties that are improved after January 1, 2015. They cautioned the audience that while we know what the law says, we don’t know how it will be interpreted and applied by the Arizona Department of Revenue. They suggested that if you are thinking of improving a property or buying a new property and improving it, you should consult with a real estate expert about the potential impacts of the new law on future real estate tax bills.
We’re grateful to all of our panelists for sharing this valuable information.