Best of Living in Scottsdale & Phoenix Arizona Newsletter
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😮 Phoenix manufacturing booms, a neighborhood transformation, & interest rate cuts

😮 Phoenix manufacturing booms, a neighborhood transformation, & interest rate cuts

Check out what's shaping Phoenix and Scottsdale's economy right now.

Josh Zuniga
December 21, 2023

Happy Thursday!

The Phoenix area has a lot going on as we rapidly approach 2024.

We are getting more and more semiconductor plants, which are not only creating jobs but also putting AZ on the map in the global semiconductor space.

There are also some new plans for Steele Indian School Park that we are diving into and we are looking at how the dip in interest rates is impacting our housing market.

I hope that you have a wonderful Christmas and safe travel if you are out visiting loved ones next week!

— Josh

🧑‍🔧 Can Arizona become the next global semiconductor hub?

Driving the news: Taiwan Semiconductor Manufacturing Co. (TSMC), the world's leading computer chip manufacturer, is constructing two highly publicized plants in Phoenix, Arizona.

This move positions Phoenix to potentially become the top region for semiconductor manufacturing in the U.S.

Details: TSMC's presence in Phoenix relies on an extensive network of specialized smaller companies essential for chip production.

Approximately 20 semiconductor companies have announced plans to operate in Arizona, with about 20 more in consideration, as per the Greater Phoenix Economic Council (GPEC).

Why it matters: TSMC's $40 billion investment in Arizona is seen as a crucial step in making Phoenix a semiconductor hub and reviving U.S. chip production.

However, for Arizona to compete globally, it needs to attract a larger network of suppliers, as TSMC worked with over 1,200 suppliers in 2022.

The big picture: The semiconductor industry in Phoenix, already hosting major players like Intel and Onsemi, is expected to grow in phases, starting with TSMC and its main suppliers, followed by downstream companies in testing, quality assurance, and related fields.

What's next: With TSMC's Arizona plants nearing operation, the region could see a significant influx of semiconductor-related companies.

Partnerships are being formed to attract Taiwanese businesses, including semiconductor firms, to Arizona.

The bottom line: Arizona's burgeoning semiconductor industry, bolstered by TSMC's investment and federal policy support, could mark a pivotal shift in U.S. chip production.

However, challenges like labor shortages and cultural differences pose hurdles that must be addressed to sustain long-term growth and competitiveness.

🎥 You MUST SEE these new homes in North Phoenix!

Let's tour the best Union Park at Norterra, arguably the best new home community in North Phoenix Arizona! I’ve also got the floorplans with price sheets available to download here.

🧱 Steele Indian School Park's Major Development Set to Transform Cityscape

Driving the news: An ambitious project on a long-vacant parcel of land in one of the Valley's most prime locations is set to make significant progress.

Details: Pivotal Group, a Phoenix-based developer, is gearing up for city approval of The Central Park, a mixed-use complex proposed at the northeast corner of Central Avenue and Indian School Road.

This strategic location places it adjacent to Steele Indian School Park and along the Central Avenue light rail route.

Central Park envisions a large-scale development featuring 1,450 residential units spread across five buildings, including a 320-unit senior living facility.

In addition to residential space, plans include about 245,000 square feet for office use, retail shops, and restaurants at ground level. The design also integrates pedestrian pathways linking the complex with the adjacent park.

Why it matters: This development aims to transform a vacant lot into a landmark destination within Phoenix's central corridor.

The big picture: Echoing Pivotal Group's original 2019 proposal, the revamped plan shifts focus from office to residential space, responding to post-pandemic market trends.

What's next: An appeal from a local resident has escalated the decision to Phoenix's Planning Commission, with a final city council vote anticipated in early 2024.

If approved, construction could commence before the end of that year, although numerous preparatory steps remain.

The bottom line: The Western vicinity of Steele Indian School Park is set for a major facelift.

Alongside The Central Park project, nearby developments including a 1,500-apartment complex and a 263-unit building are in the pipeline, signaling a significant transformation of this central Phoenix area.

🏠 Mortgage rates have dropped
below 7%

Driving the news: In a significant development for the housing market, mortgage rates have dipped below 7% for the first time since mid-August.

This marks the seventh consecutive week of declining rates, influenced by improving inflation figures and the Federal Reserve's pause in rate hikes.

Details: The 30-year fixed-rate mortgage averaged 6.95% in the week ending December 14, a slight decrease from the previous week's 7.03%, as reported by Freddie Mac.

This is a noteworthy shift from the 6.31% rate observed a year ago.

These figures are based on data collected from numerous lenders and reflect mortgages with a 20% down payment and excellent credit.

Mortgage applications have risen for six weeks straight, indicating growing borrower demand in response to the falling rates.

This trend is particularly significant for first-time buyers, who have struggled with affordability and low housing inventory.

Why it matters: This decline is critical for potential homebuyers who have been grappling with high rates and an unaffordable housing market.

Freddie Mac’s chief economist, Sam Khater, anticipates a gradual revival of the housing market in the coming year, particularly if inflation continues to slow and the Fed cuts rates as expected in 2024.

The big picture: The rates peaked at 7.79% in late October, making the current decline a sign of potential relief for prospective buyers.

The housing market, which has been experiencing its least affordable period since the 1980s, could see increased activity as rates continue to fall.

Between the lines: Despite the dip in rates, challenges remain due to the persistently low housing inventory.

Current mortgage holders, the majority of whom have rates below 6%, are hesitant to sell, leading to sustained low inventory and elevated prices.

What’s next: The Federal Reserve's recent decision to pause rate increases and the possibility of rate cuts in 2024 are pivotal factors influencing mortgage rates.

These actions, coupled with economic indicators like job growth and inflation rates, will continue to shape the housing market dynamics in the upcoming year.

The bottom line: While the drop in mortgage rates is a welcome development for potential buyers, the market faces ongoing challenges due to low inventory and the 'lock-in effect' of existing homeowners with low mortgage rates.

The upcoming year will likely see a continued focus on affordability and inventory levels as key drivers of the housing market.

📊 Market Insights

The housing market in Phoenix is somewhat competitive due to inventory being so low. Here’s what the data is telling us this month:

Data shows that home prices are up 6.6% compared to last year.
The median sales price for Phoenix homes is $449K.
The median price per square foot is $276.
Homes in our area are averaging 3 offers and spending ~35 days on the market.

If you are looking to buy a home in this market, new construction is a great option that I highly recommend if you want to avoid competing with other offers.

You’ll want to have a good search and offer strategy when looking for existing homes and be patient because it could take a while to find the right one at your desired price point.