Housing Bubble & Net Zero Energy Bldg. & Green Nat'l Guard

>>> Coming up next on "Arizona Horizon" -- home prices are skyrocketing but one real estate analyst says we're not headed for another housing bubble. Also we'll find out about Arizona's first net zero energy commercial building. Those stories next on "Arizona Horizon." >> "Arizona Horizon" made possible by contributions from the friends of , members of your Arizona PBS station. Thank you. >>> Good evening. Welcome to "Arizona Horizon." I'm Ted Simons. Valley home prices are up 30% from last year, so are we headed for another housing bubble? Not according to our guest Mike Orr. Thanks for joining us. >> Thank you for having me. >> home prices are surging yet not necessarily a bubble? >> I don't think they are. I'm not afraid to call a bubble if I see it. In 2005 I thought we had all the makings of a bubble but it's different this time. The reason is that the prices are going up because people actually want homes to live in them or to rent to other people. They are not using them as speculation vehicles. That's what we learned in 2005. I think the supply shortage is going to be with us for quite some time. It's not just that they have already gone up a lot they are probably going to continue to increase until we get more homes on to the market. >> Let's talk about inference regarding investors. Are investors a major factor and if they are why shouldn't that be a warning sign? >> They are a major factor but they are not buying just to sell to other people. They are buying to rent them out. We have a lot of people that have been through foreclosure, short sales that can't buy. They need to live here still so there has to be some rental accommodation. If we didn't have people coming in and renting them out there would be no place for people to live. They would be owned by banks and not available. In a sense there a necessary part of the churn that's happened because of the foreclosure wave. Those homes are not empty, so if an investor decides to sell one it's got a tenant family in them. So when that home changes hands you get a family that needs somewhere to live so it's neutral to the over all market. It's not creating new supply. >> Yet if the investors all decide to bail at the same time for whatever reason, got a problem, don't you? >> Well, you have, but that just does not happen. There's been a lot of talk about institutional investors. We have had a lot of small time investors in the valley for a very long time and they are actually still in the majority but last year we had a lot of big companies come to town, start buying with cash because they saw a good opportunity. All the people said, are the markets dominated by these? That just isn't true. There's something like 10 or 11,000 homes now in the possession of these big player but that's a really small number compared with the 1.7 million homes in Maricopa County that we have in total. Even if all 10,000 of them went on the market tomorrow, that wouldn't create a surplus. >> Yet talk about the dynamics and the change and behavior characteristics between an institutional lender and the mom and the pop. Does that change the landscape? >> It potentially could because we have not seen the institutional investors before. Most of them have fairly long term plans. They are not buying the homes just to turn them over within 12 months. Had their plan is to hold on to them four to eight years. They are buying them because they can make money out of renting them out, the money they received in rent gives return on the initial investment. Anything they make in terms of appreciation is all bonus. It's very unlikely all of them would suddenly decide to sell immediately. If they did we would have a lot of fancy who currently lease them who would need a place to live anyway. It's knot like a lot of empty homes come on to the market. >> do we know the families are interested in buying homes? >> It may not be them that buys them what. Often happens is another investor says, you want to sell but I want to be a landlord. They basically swap. It still remains a rented home for a long time. >> you mentioned tight housing supply. How tight is that supply and why is it so tight? >> We are at about 2.2 to 2.3 months of supply. That's very tight, normally between four and six months in a typical balance market. We have less than half of what we would normally see on the market. The reason is we have had very little construction going on for the last five years. The homebuilders could not compete with all these bank owned homes so they downsized, many went bust, now we have the population growing again, they are knot able to build homes fast enough to keep pace with the growing population. >> that's an interesting dynamic, interesting equation. Homebuilders, if they can't keep up, the price goes up, not a bad deal to get into. >> Homebuilders are like that. In fact I think a few of them are saying we might be able to build them a bit faster but why should we? We like someone appreciating our product. They were the lowest of the low in the past. >> do you see a gentle pace in terms of rising, falling? >> I don't know. Like most people you're looking at the future it's a mystery what is going to happen. I'm trying to detect where we're going. At the moment there's not much sign of change. The supply is low and it's not improving but not getting worse. It's kind of stuck. It's going to be interesting to see if the price is right whether that encourages more ordinary people to sell their homes thinking, okay, it's reached a level where I can make some money out of selling my house. We still have a lot of people under water. There's a disincentive for enlisting a home if you're under water. >> Also lenders will be looking at you cross eyed. Talk about interest rates R. lenders relaxing a bit? >> Well, very interesting dynamic there. Interest rates are starting to edge up. They are no longer at the lowest level in 50 years as they were recentsly but still very low from a historic point of view. What happens when interest rates go up, two things. First it gets more expensive so that puts people off. But then they start thinking, well, it may go higher still. If I really need a house because in a sense of urgency in some cases it increases demand. People think buying now rather than wait until it gets up to 5%. I'm seeing that now. People are starting to get more urgency and the banks are saying well if interest rates go up we can make more profit on the difference between the rate at which we borrow and the rate at which we lend it so think maybe we should relax our lending rules just a little bit. They are very tight at the moment. >> still pretty tight. >> very tight. If they went closer to normal more people would qualify and we would actually get more transactions going through. >> From lending requirements to supply of homes, how is a difference between lower cost homes higher priced homes? >> Well, higher priced homes are more expensive per square foot and also from a long point of view because the interest rates on jumbo loans are higher than on the other loans. Most activity and interest is at the lowest end of the market but the luxury market is also hotting up. It it often has its best markets in April and may. I think that market is actually done the best that I have seen since 2007 for the last two months. >> The bottom line for you is things are moving relatively slowly, 30% year over year? >> I wouldn't say slowly. I would say they are pretty hot. >> but as far as the other factors involved, slow enough to where you adopt see a bubble popping here. >> The key thing about a bubble is it's going to pop. I don't think we're ever going to see today's prices again. At some point if they continue to go up at 30% we're going to get into a bubble but we're nowhere near that yet. We would have to carry on at that rate for a couple of years before I would start to get worried about that. >> Good stuff. Thank you for having us. >> Thank you very much. >> Tonight's focus on U.S.S. trainability looks at Arizona's first net zero energy commercial building. They recently completed a net zero energy consumption building for its regional oil. Dave elrod is regional manager for DPR construction. Thanks for coming. >> Thanks for having me. >> was a net zero energy building? >> The term net zero means we will produce on site renewable energy that will exceed what we use for the year. >> As much or more in other words. >> correct. >> who makes this particular certification? >> So ILFI, the international living foundation institute, is the certifier for that program. >> This is the first net zero energy construction in Arizona? >> Is that certified. >> why so few? >> I really couldn't tell you why that is. There is -- it is a bit of an arduous process to become certified. I think that of the program that they are looking at there's four aspects to it which is the site, brown field or gray field sites are more typical what they are looking for, as well as the beauty of the building, the energy use, the certification of that. >> We're looking at the building now. It's a beautiful building. This was actually if I'm not mistaken like a 19 2 building that you guys just absolutely overhauled, didn't you? >> Yes, it was a retail outlet originally. It had some hard years on it. But the bones of the building were fantastic. I went in in June it was about 105 degrees, and when I went in, there was about a 20 degree difference in the interior from the outside. There was no power or water to the building at the time. >> you knew something could happen here. It was holding its own even though it was an older building. >> the structure was good, something we could work with and the location was fantastic. >> This is the largest net zero certified commercial building in the world? >> Because of the limited number of people who have gone through the certification process. >> let's talk about some of the things on this. Temperature sensitive windows. >> The temperature sensing is done by the building automation system. It is a living, breathing building because of the system. So the windows are operated by the system based on air quality. So if the air outside is better than the air inside the windows will open. Then simultaneously with the windows the 84 foot long solar chimney on the roof will, the dampers on that will also open which as the Chimney heats up in the morning from the sunshine it will create that convection current, creating that air flow which creates that sensible cooling for people. Even as we operate the building at a higher temperature we're able to still feel as cool or cooler than if you were operating at a 72 plus or minus temperature. >> pushing air out, drawing air in, all by way of sensors? Like a central location that senses all this? >> There's sensors through the building monitoring temperature and humidity. We're also monitoring the -- we're very close to the airport at 44th and Van Buren, which we're able to use I have that web link we use the weather information from the airport. So that allows us because the building operates automatically we could run into issues with monsoons and Haboobs. >> Some of the lighting structures look like there's outdoor light coming through there. How do you divert that? Is there a need for daytime lighting? >> We depend on daytime lying. Today there won't be any lights on in our building. >> my goodness. >> we did significant analysis and through our analysis we realized that led lighting internally was not the best most efficient use of the money that we spent on the building but we did use led where the lights are on all night. >> There is old fashioned technology I would assume, I think I read about this, evaporation coolers, big old fans. >> Yes. The convection cooling has been used over 100 years in the valley was the original cooling system. The chimneys that you're talking about that we use as our evaporative coolers are on the exterior of the building. We use water flow from shower heads that will creating an air flow through those and funnel that into the building. >> What were some of the challenges you faced building this? Again, for someone else that maybe runs a business and has a property manager, I wouldn't mind something like this for my company, my corporation. Some of the things to watch for, some of the concerns you had going in. >> I think the biggest thing is the change in how you operate your space. With respect to your employees and the people you work with every day. It was a drastic change from coming to an office building that just operates like I said plus or minus two degrees off 72 degrees. We operate from 68 to 84 degrees in our temperature band which means that now we have air flowing across people and it's just it's a shift in the paradigm for people and how they work at their desk. >> how are they responding? >> Very well. We have had great results with people understanding what we're trying to accomplish with our net zero building and sustainable initiatives. >> how long ago was this completed? >> We finished October of 2011. So we have completed over one year cycle which we achieved -- net zero based on our electric bill but until we got the ILFI certification we couldn't really say we were certified as net zero. >> even on a day like today or even tomorrow or coming newspaper July and August when the humidity hits people will be able to go to work, sit down and still in this kind of a building be comfortable. >> Absolutely. So we operate with the passive cooling when the air will allow it, so in the morning the windows will be open tomorrow morning but as the temperature rises they will close automatically and as we cross that threshold of 84 degrees internal temperature, then we'll go to mechanical cooling. >> Are there other net zero projects on board? Anyone else looking to do something like this? >> Locally we have a lot of people that are very interested. We have toured thousands of potential project customers through our space. Whether they use pieces or parts, what we're trying to do is create this living lab that people can come do and see how you can live or work differently here in the desert. >> it's a fascinating structure. Thank you so much for joining us. >> Thank you. >>> Protecting the country is job one for the nation's military. How much is protecting the environment fit into that job description? Here to discuss the military's efforts to go grow is retired lieutenant colonel Joe Knott, now a doctoral candidate at ASU's school of sustainability. Good to have you. >> good to be here. >> what does that mean? >> It means that besides doing the Army's mission of doing what the country asks us to do fighting and winning wars, do it sustainably, lower greenhouse gas, more renewable energy, less dependence on fossil fuels. Doing things we have to get done but doing it more efficiently, less impact on the environment. >> talk about the Arizona guard in particular. Talk about efforts there to go Green. >> Arizona guard just about to give a plug here but the Department of Defense, secretary of defense of the United States once a year issues an award to a sustainable person who has made the most impact worldwide on the Department of Defense. Winner this year, Arizona national guard. Leading the way on renewable energy at their facilities in Buckeye, Flagstaff, solar, wind, new types of technology, education. The Army and the Army guard in Arizona educating their soldiers. The soldiers we have now that come in are young, they want to do the right thing, serve their country. So we owe them as leaders the tools to do that. >> How do those efforts coincide with security efforts? >> You can't separate them. Again, national security, the Army job is to defend the country and do what we're asked to by the American people. At the same time, dependence on fossil fuels is a national security issue, it costs billions of dollars. Most importantly in my opinion people's lives. Afghanistan, perfect example where every 24 convoys one of 24 unfortunately experiences a terrorist attack, an IED, a soldier, airman or Navy man will be injured or unfortunately killed. That's where in my opinion last ten years in the Pentagon I saw the change where we always Miami International Airport to do good but when you show less fuel is needed in a place like Afghanistan less soldiers were hurt and killed, the light came on. It's made a culture change that started in the Army in the Department of Defense. >> is DOD starting to understand this? >> They are getting it. They are getting this three decades ago I'm a tree hugger. Two decades ago there was not a lot of tree huggers in the Pentagon. I have seen in the last several years the doors open, they understand it is a responsibility not only to protect and serve our country, protect and serve the environment. It goes hand in hand. >> as far as the national guard is concerned and national military efforts relatively similar? Over all, same direction, same folk us? >> Same policy. Policy for the Army is the same as for Arizona national guard, Army reserve and actually to highlight Arizona the Army in the last several months issue out a commitment to spend 7 billion on renewable energy systems to power Army national guard bases. Arizona just two weeks ago the announcement was made by the Army for for Huachuca south of Tucson they are looking for solar energy to building a plant to power the base. What the Army will give them we're your customer. 30 years we will be your customer. So it brings together the industry and academia to develop these technologies. >> talk about am Deca here and partner -- academia and partnering with businesses, with universities. Talk about those efforts. >> two key parts with the Army sustainability policy issued a couple of years ago which flies for the Army guard. Education of our soldiers and civilians because we have to empower them with the knowledge otherwise how can they conserve energy? How can they do the right thing and create left waste unless they a taught these things. The second is partnerships. The Army's job is to win war. Soldiers to be the best in the world. We're not experts in the environment. That's where the partnerships come in. Industry. Renewable industry. Energy efficiency experts. Arizona State University academia perfect example in Tempe where first time ever in the history of Army in the last two years Arizona State University through global institute of sustainability has partnered with the Army national guard and Department of Army headquarters at the Pentagon to create courses at the graduate level specifically made for leaders in the Army. tailored to a military manager. >> you have been there 30-odd years. You know the background. Was there a point when you saw this really kick into high gear or was it a gradual increase in interest? >> That's a great question. It's a giant organization so things do move slow, but my perm opinion from my experience being stationed at the Pentagon it hit home if you were a tree hugger or not, when you can equate a soldier's life to having less fuel go into the base camp because we're powered with solar energy. Organization tree, a nonprofit, is existing to help us educate folks on we have to get off the fossil fuels. It's cost lives not only billions of dollars in climate change but when it takes a soldier's life or injures them that's priceless. There is no second best. That is where the rubber meets the road. That's where the Army has changed when leaders can see by being sustainable more soldiers came back. >> especially whether there's a viable alternative. >> exactly. So many. Solar, wind, that partnership with industry to develop the next generation of renewable alternative energy. >> great information. Thank you so much for joining us. >> Thanks for having me. >>> Wednesday the latest on Medicaid expansion and our weekly legislative update with the Arizona Capitol Times and a company that makes specialty coatings for computer chips. on the next "Arizona Horizon." That is it for now. I'm Ted Simons. Thank you so much for joining us. You have a great evening. >>> "Arizona Horizon" made possible by contributions from the friends of 8, members of your Arizona PBS station. 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