Community Property Type Price Min Price Max Beds Baths

Arizona Loses Top 10 Spot As Foreclosure Capital

August 27, 2013 by · Leave a Comment 

The nation’s foreclosure landscape is changing rapidly.

While it looks like foreclosure activity continued to boil over in a select group of markets in July, Arizona slid out of its top 10 highest foreclosure rate slot for the first time since the zenith of the housing boom.

The amount of foreclosure filings in Arizona fell 15.8% in July and is also down nearly 50% from year ago levels. The state is now in the ranks with California’s foreclosure rate, which was out of the top 10 for the sixth consecutive month in July, according to RealtyTrac’s latest report.

“The foreclosure boil-over markets are becoming fewer and farther between as lenders have caught up with the backlog of delayed foreclosures in some of the states with the more lengthy judicial foreclosure process,” said Daren Blomquist, vice president of RealtyTrac. Arizona is both a non-judicial and judicial foreclosure state and states with this quasi-judicial status are trending slower and slower foreclosures.

Nationwide, foreclosure filings were up 2%, or 130,888 filings, in July, an increase from the 78-month low in June, but still down 32% from a year earlier.

The monthly increase in foreclosure activity was driven by an increase in foreclosure starts, up 6%, and an increase in bank repossessions, which rose 4%.

Foreclosures starts increased in 26 states from the previous month, and were also up in 15 states from a year ago, including Maryland (275%), Oregon (137%), New Jersey (40%) and Ohio (20%).

Bank repossessions also increased in 29 states from the previous month, and also rose in 18 states from a year earlier, including Arkansas (266%), Oklahoma (126%), Maryland (101%), New York (100%), Connecticut (67%), New Jersey (40%) and Ohio (20%).

“U.S. foreclosure activity in July is 64% below the peak of more than 367,000 properties with foreclosure filings in March 2010, but is still 54% above the historical average of 85,000 properties with foreclosure filings per month before the housing bubble burst in late 2006,” Blomquist explained.

Meanwhile, nine of the nation’s 10 highest metropolitan foreclosure rates were Florida cities.

Florida posted the nation’s highest state foreclosure rate for the third consecutive month in July – one in every 328 units had a foreclosure filing in July, more than three times the national average, RealtyTrac noted.

Jacksonville, Fla., posted the nation’s highest foreclosure rate among metropolitan statistical areas, increasing 19% from the previous month and rising 24% from a year ago.

Nonetheless, there were a dozen states where foreclosure activity levels in July were at or below average monthly levels.

Those states included Colorado, Indiana, Michigan, Oklahoma and Texas.

“More and more homes are now coming on the market from non-distressed homeowners thanks to the snap back in pricing that homeowners have experienced over the past 12 months or so,” said Rich Cosner, CEO of Prudential California Realty.

He concluded, “Because these prices moved up in favor of the homeowners, more and more people are now putting their home on the market and over time this will relieve the dire inventory shortage.”

From: http://www.housingwire.com/articles/26175-arizona-loses-spot-as-foreclosure-riddle-state

Funny Phoenix Real Estate Photos

August 21, 2013 by · Leave a Comment 

Over the years, I’ve seen some pretty remarkable things in the Phoenix real estate market, both at properties and in the MLS.  A few years ago, I finally started collecting images of the more interesting topics.  I also have an outstanding collection of Realtor business cards that’ll leave you rolling, but that’s another blog post for a different day.

As you look through these photos, keep in mind that some are pulled directly from the MLS.  You know, the main source for marketing properties to buyers around the world?  Yeah, that MLS.  Seems that some sellers (and their Realtors!) have forgotten that the goal of posting photos is to generate INTEREST in a property, not scare people away.

The main take-away here, besides a few memorable laughs, is that when you list a home for sale, be sure to review your agent’s marketing materials!  It’s no wonder that properties marketed like the ones below can sit on the market a loooonnnngggg time.

Without further ado, here’s a sampling of my collection…

 

The MLS “Public Remarks” for this one included, “Can’t even tell it’s been lived in!”

Hate to burst your bubble, but, uh, I can tell.

Cant Even Tell its Been Lived In Public Remark 2 Cant Even Tell its Been Lived In Public Remark 2 (1)

 

 Excuse me, but you have weeds growing in your pool.

Is that a weed growing in the pool?

 

 

Hey, look, a toilet koozie!

Ah, the toilet koozie!

 

 

This was the MAIN photo in the MLS, traditionally considered a property’s most compelling “side.”

Voila_Capture4

 

 

This photo was posted in the MLS and says, “Good day!  Welcome to (Address).  Please allow me to show you around…”

Thanks, but I think I can handle it myself.

Voila_Capture5

 

 

“Power to the TOWEL BAR!”

IMG00217-20100301-1537 IMG00218-20100301-1537

 

 

This dining set really opens up the room!

Voila_Capture6

 

“Root damage?!  What root damage?”

IMG00069-20101124-1354

 

 

This property was a cosmetic fix and flip.  All the big work had been done throughout, which is why I laughed when I saw this bathroom sink and vanity. Notice the granite accent trim over it, which tied nicely into the kitchen countertops.

Classy Bathroom Remodel 2 Classy Bathroom Remodel

 

 

Speaking of kitchens… Have you ever wished you could invite the gang over for a big screening party without having to worry about missing the movie while you did the dishes?

If so, this could be the home for you!

The family room has been converted to a high tech movie theater, complete with tiered stadium-style seating, projector, and wall-sized screen with retractable curtain.  And yes, it’s directly connected to the one and only kitchen in the house.

As an added bonus, the walls and windows have been paneled over for a completely dark movie theater experience.

Is it noon or is it midnight?   For you, my friend, it just doesn’t matter.

IMG00047-20100801-1124 IMG00046-20100801-1124

 

 

This one’s a little tough to read.  The “Realtor Remarks” in the MLS say, “Property mistakenly listed as ‘vacant.’  Call Listing Agent for showing.”  The funny thing is, most agents wouldn’t bother with the verbiage.  Instead, they’d change the “Showing Instructions” field to say “Occupied” because that’s where agents look.

Not only did this agent take the time to spell out the error, but he left the showing instructions field (DIRECTLY BELOW IT) labeled as “Vacant.”

Voila_Capture3

 

 

 

Perhaps you won’t notice the cluttered kitchen if you put on these beer goggles…

Kitchen with beer goggles?

 

 

 

Yes, that is a light switch mounted directly to the inside middle of a garage door.  Needless to say, with no idea on earth what would happen, I didn’t touch it.

Don't try to turn the lights on when the door is open!

 

 

 

And here’s my favorite.  You know it’s a seller’s market when the birds get into the game…

 

Neighborhood is Going to the Birds

What is a home warranty?

August 14, 2013 by · Leave a Comment 

I’ve been a big believer in home warranties since I began my career in real estate, which is why it’s surprising to me how many people aren’t aware of exactly what a home warranty is or does.  While some, particularly those from other countries, are often completely unfamiliar with the concept, others tend to confuse it with home insurance.

Home insurance is a very different protective mechanism for homeowners than a home warranty!

At it’s most basic level, a home insurance policyHome protection protects the homeowners against catastrophic loss, theft, and/or liability arising from injury on or in the premises.  Think of it as “big stuff” coverage.

A home warranty, on the other hand, covers breakdowns to major and minor systems and components at the home.  A home warranty is designed to bring a level of certainty to the maintenance and repair costs of ownership.

With a home warranty, you pay a set amount (lump sum or payments) for coverage.  When a breakdown occurs, such as a water heater leak, you call the home warranty company’s 800-number and file a service request.  The service request is sent to the home warranty company repair contractor network and you’ll usually receive a phone call to schedule service within hours.

A home warranty offers distinct benefits:

-Simplified logistics.  One call to one phone number for any covered repair.

-Predictable costs.  For most repairs, all you’ll pay is a $55-75 trade call fee.   Labor and materials are billed to the home warranty company.

-Repair or replacement.  If a covered item cannot be repaired, the home warranty company will replace it! (Even heating/cooling systems and water heaters)

-Security.  Home warranty companies use licensed, bonded contractors, which offers a degree of security and recourse in the event there’s a problem with the contractor.

-Coverage options.  Home warranties offer different levels of core coverage, as well as supplemental coverage for, say, pool equipment or appliances.  So you can extend your coverage beyond the basic dwelling with the same “repair or replace” policy.

What are the drawbacks to home warranty protection?

-Coverage varies.  There are hundreds of home warranty companies across the country and each offers different levels of coverage, premiums, and deductibles.  Old Republic Home Protection is my home warranty company of choice, but your Realtor can offer other options, too.  You should compare plans and prices to ensure you select the right choice for your particular situation.

-Service contractors.  Try as they might to work with only the best contractor partners, not all service providers are created equal.  Since many (most? all?) home warranty companies reimburse contractors at low fixed rates, some contractors with thriving businesses don’t work with home warranty companies.  Simply put, the best of the best face enough demand that they don’t have to pay a home warranty company for customers.  If you do have a problem with a contractor that a home warranty company sends to your home, contact the home warranty company to discuss your concern.  If you don’t feel you’re getting the attention you expect or deserve, contact your Realtor.  Home warranty companies have special representatives who interface solely with Realtors and have a vested interest in responding to their concerns.

-Premiums and deductibles.  Changing market conditions and dishonest claims have resulted in less coverage, higher premiums, and higher deductibles across the industry as companies struggle to be profitable.  In general, however, it’s still the case that one mid-level claim, such as a hot water heater or air conditioner repair, will more than offset the cost of the plan + deductible.

I recommend a home warranty to virtually every buyer, but they’re particularly helpful to vacation owners and out of state landlords who don’t have a developed network of repair people to call when an emergency comes up.  One call can resolve just about any problem, and that’s peace of mind for any homeowner!

Have a question about home warranties?  Let’s hear it!

Valley home prices back to 2008 levels

July 29, 2013 by · Leave a Comment 

In 2007, the Valley’s housing market began a long spiral collapse, followed by years of high supply and low demand, leading to a multi-year, very slow, very steady period of recovery.

About 19 months ago, people realized that the Phoenix real estate inventory, once as high as 60,000 available properties, had dwindled to well below 10,000 units.  Indeed, we had shifted from a strong buyer’s market, to a rabid seller’s market, which is where we remain today.

One of the easiest statistics for people to relate to is price.  Both “Average Sale Price” and “Median Sale Price” are helpful measures of a market’s affordability.  When tracked over time, they can also show the relationship trend between supply and demand.

With increasing demand and historically low supply, the Greater Phoenix housing market has about recovered to where it was in June 2008, when the median price of all single family homes was $195,000.  As of June 2013, the median sales price is $192,000, up from $185,000 the month prior.

Here’s a chart that illustrates Median home values from mid-2008 to mid-2013:

 

Not surprising, the Average Sale Price of a single family home has mirrored the graph above:

 

 

In July 2008, the Average Sale Price was $254,863.  In June 2013, it was $250,965.

Though we experienced a small $2000 dip in the average sales price between May 2013 and June 2013, I expect appreciation to continue for as long as the inventory supply remains tight.  Investment opportunities are still out there!

Condos are a Different Animal

July 17, 2013 by · Leave a Comment 

Very often, I work with buyers who are more focused on specific property characteristics (e.g. square footage, # of rooms, interior upgrades, price, location, etc) than the type of property they purchase.  They’d equally entertain a house or a condo with no strong preference either way.  This is particularly true of seasonal “snow bird” residents, who tend to have stronger preferences for location.

Any home buyer who’s considering a Phoenix condo should be aware that they require a different set of considerations than a traditional home, patio home, or even townhouse.

For starters, lending guidelines have tightened across the board, but remain particularly strict for condos.  The owner 0ccupancy rate, reserve fund balance, dues delinquency rate, etc, all come into play in the underwriting process.  The guidelines are so strict that I know of reputable lenders who won’t even take applications for condo purchases.

Compounding the problem is that you’d think you could just call someone at the property management company to determine if a unit qualified for financing, right?  Unfortunately, no.  Even though I (as a Buyer’s Agent) can do some tax record research to assess the possibility of a condo qualifying for mortgage financing, the actual answer won’t be clear until the lender receives the HOA questionnaire from the property management company.  And since some of the variables change monthly, so can a property’s suitability.  Even if tax records and the property manager indicate there have been recent financed sales, a change in numbers could cause a property to no longer qualify once the underwriter actually reviews the questionnaire.

And here’s the kicker: The property management company charges fees of $150 and up to put the packet together and send it to the lender, and even more for expedited turnaround.  Though almost everything is negotiable, it’s customarily the buyer who pays for the HOA packet.

So a buyer could go through the emotional process of negotiating an offer, arriving at an acceptance, conducting (costly) inspections, making arrangements to move, and then learning late in the process that their condo won’t qualify for financing.  Even though the Purchase Contract’s financing contingency calls for a refund of the buyer’s earnest deposit, the fees (emotional and financial) paid up until that point cannot be recovered.

Now, what about cash buyers?  Indeed, underwriting guidelines are irrelevant to cash buyers.  However, cash buyers and non-cash buyers alike face some due diligence concerns that are especially important with a condo purchase:

  • Budgetary and financial health of the community
  • HOA fees and what do they cover
  • Special assessments?
  • Common area maintenance
  • Specific CCR and bylaw restrictions (e.g. no rentals allowed or no BBQs on patios)

So if you are in the market for a condo and will be taking out a mortgage on the property, be sure to have a detailed conversation with your lender before you begin your search.  That could save you valuable time and effort.

And if you move forward, regardless of the type of financing, ask your real estate agent what specific questions they’d recommend you ask to supplement yours when you call the HOA.

 

What Obama’s Re-Election Means for Housing

November 15, 2012 by · Leave a Comment 

Election Day has come and gone and regardless of who you voted for, there will be consequences on the domestic housing market.  This article is courtesy of Jed Kolko, Chief Economist at Trulia.com.

—–

Refinancing, new mortgage regulations, and the mortgage interest deduction all won on Tuesday. But the best shot at more principal reductions might have been lost.

Throughout the 2012 presidential campaign, both candidates were short on specifics about their housing policy, to put it very kindly. They ignored housing in the debates and acted as if the housing crisis were over. Neither their actions nor their policy statements gave a clear idea of what they might do about housing. But what the candidates DIDN’T do or say helps draw out the differences between what housing policy will look like during Obama’s second term and what housing policy would have looked like with a Romney administration. Here’s what Obama’s re-election means for housing:

1.  The refinancing push continues. The Obama Administration has made it easier for homeowners to refinance at today’s low mortgage rates and plans to make refinancing available to even more borrowers. Refinancing is economic stimulus since it gives homeowners with mortgages more spending money, but it doesn’t help most people on the verge of losing their homes. Although refinancing has been a priority for Obama, Romney made no mention of refinancing in his housing plan – despite strong support for refinancing from one of his economic advisors.

 2.  New mortgage regulations are coming. The Consumer Financial Protection Bureau, established by the Dodd-Frank Act, will set new mortgage standards by January 2013. These standards will define which mortgages are judged to be beyond a borrower’s ability to repay and would therefore trigger legal and financial implications for lenders. These standards, yet to be established, will need to strike a delicate balance between protecting consumers from high-risk loans and giving lenders the incentive to expand mortgage credit. Romney blamed Dodd-Frank for holding back mortgage lending, pledging to “repeal and replace” it. But with Obama’s re-election, Dodd-Frank–and the coming mortgage regulations–is a reality.

 3.  The mortgage interest deduction lives to fight another day.Romney proposed capping overall income tax itemized deductions at $25,000, which would have, in effect, reduced the mortgage interest deduction (which accounts for 35% of the value of total itemized deductions) even for many middle-income taxpayers. Obama, in contrast, is open to cutting the mortgage interest deduction only for the wealthy. Even if deeply cutting deductions finds bipartisan agreement in Congress–and it might–Obama is likely to resist gutting the mortgage interest deduction. Why? The ten states that benefit most from the mortgage-interest-deduction ALL voted for Obama on Tuesday (see table below). The average household in an Obama-voting state claims 66% more for the mortgage interest deduction than the average household in a Romney-voting state. If Obama takes a swing at the mortgage interest deduction, he’ll be hurting his supporters and putting his fellow Democrats in a tough political spot.

 

States with the Most Mortgage Interest Deducted Per Household
# State Average Amount Deducted, $*
1 Maryland $5,920
2 California $5,718
3 Virginia $5,100
4 Hawaii $5,009
5 New Jersey $4,890
6 Connecticut $4,739
7 Colorado $4,625
8 Washington $4,610
9 District Of Columbia $4,581
10 Massachusetts $4,490
* Average amount of mortgage interest deduction claimed per household. Includes households who do not itemize. National average = $3,343.

 

4.  A chance for principal reductions may have been lost. In his housing plan, Romney called for more “shared appreciation” loan modifications. This means that a borrower would get a reduction in their unpaid principal balance but would have to share some of the upside with whoever took the hit for the principal reduction if the home’s value appreciates. Shared-appreciation loan modifications reduce a borrower’s incentive to strategically fall behind on their payments in order to get a principal reduction. This “moral hazard” problem was one reason why many Republicans and the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, resisted the Obama Administration’s call for more principal reductions earlier this year. Shared-appreciation loan modifications are an approach to principal reductions that Democrats, Republicans, and even a financial regulator could all learn to love. It would be a shame if this approach to keeping more people in their homes goes down in defeat.

Via Jed Kolko, Chief Economist – Trulia.com

Experts see home prices increasing in Phoenix

October 30, 2012 by · Leave a Comment 

Metro Phoenix home prices are expected to continue climbing during the next few years.

Housing analysts agree that demand for homes in the region is strong, and many don’t appear to be concerned about prices rising too fast and shutting the door on regular homebuyers or investors.

Several experts are looking for metro Phoenix home prices to climb more than 10 percent annually during the next three years.

“We think Phoenix home prices will appreciate 12 percent in 2013, 12 percent in 2014 and 10 percent in 2015,” said national housing analyst John Burns of Los Angeles.

He said the price increases will be driven by “boomerang” buyers who purchase after waiting three years — as required under new credit standards — following a foreclosure or short sale.

“Our major assumption is continued strong economic growth (for Phoenix) and low mortgage rates,” said Burns of John Burns Real Estate Consulting.

The Phoenix area’s median home price has jumped by 35 percent during the past year, boosting the number of sales by homeowners who are not facing foreclosure or a distressed sale. The price gains in recent months have been smaller than earlier this year.

Matt Widdows, CEO of HomeSmart, Arizona’s largest residential-real-estate brokerage, is also bullish on a further rebound in home prices.

“I would say that in the next five to seven years, we will see (home) prices back to levels we saw in 2005,” he said. “Many (Phoenix-area) homes dropped to one-third of their value in 2005, and I have no doubt that we will be right back to those levels.”

These might sound like aggressive forecasts, but even Arizona economist Elliott Pollack, whose forecasts are often conservative, recently projected Phoenix-area home prices would climb 50 percent by 2015-16.

Metro Phoenix’s median home price is currently $150,000, so it would have to increase at least 11 percent annually over the next four years to reach $225,000, a 50 percent increase.

In May 2005, the median existing-home price in metro Phoenix was $228,000.

Other analysts aren’t as bullish.

Mike Orr, an analyst with the W.P. Carey School of Business at Arizona State University, tracks home sales daily but never forecasts home prices more than a month out.

“At the moment, pricing pressure is upwards, but there is always the potential for prices to dip,” he said. His monthly report on prices is due out this week.

An unknown for the housing market is what the handful of large investors who are buying thousands of homes in metro Phoenix plan to do with them.

If they decide to sell around the same time, the supply of homes could jump, dampening prices.

That’s unlikely to happen, at least in the short term, industry experts say.

“We wouldn’t sell now,” said Justin Chang, a principal with one of the biggest residential investors in the country, Los Angeles-based Colony Capital. “We think (Phoenix) home prices will recover more.”

He said the company wants to create a real-estate investment trust next year and put its metro Phoenix rental homes in the trust, then sell shares to individual investors.

Mark Stark, CEO of Prudential Arizona Properties, believes the increase in home prices has slowed and the market has steadied.

“If additional price increases do happen, I feel they will be gradual,” Stark said. “We’re not looking at any dramatic pricing changes.”

Homebuilding in metro Phoenix was a dominant factor in the housing market until the crash. Many buyers once again are opting for new homes so they don’t have to compete in bidding wars for inexpensive existing houses.

New-home building has more than doubled this year, and the price of new houses is climbing.

“We originally forecast 10,000 permits for new homes this year, but we are going to go well past 11,000,” said Greg Burger, co-publisher of the Phoenix Housing Market Letter.

He said he expects the trend of rising new-home prices to continue for the next few years. The median price for a new Phoenix-area home is $222,000.

“Buyers waiting for the bottom of the market missed out months ago,” Orr said.

Source: The Arizona Republic, 10/28/2012

Phoenix metro becomes virtual investor’s housing market

October 23, 2012 by · Leave a Comment 

Buying sprees by billion-dollar hedge funds and real-estate investment firms have investors owning nearly 20 percent, or one out of every five, of the region’s single-family houses and condominiums, according to an Arizona Republic analysis of recent sales data.

That’s double the number of rentals considered normal in metro Phoenix in 2000, according to housing-market analysts.

Although it is too soon to gauge the impact of such a large increase in rental properties, the jump in investor-owned properties has the potential to change the character of neighborhoods, influence the options available to other homebuyers and ultimately alter the trajectory of the region’s housing recovery.

Since 2009, deep-pocketed buyers have snapped up tens of thousands of houses in all-cash deals, helping to stanch the bleeding in metro Phoenix’s real-estate market. Their purchases have driven up the region’s median home price 40 percent in the past year and significantly cut the supply of houses for sale.

While real-estate analysts laud investors for buying when others wouldn’t, analysts also express concern about the potential impact of so many buying in such a short time.

In Avondale’s 85323 ZIP code in the West Valley, with many relatively new, affordable homes, 32 percent of the houses are investor-owned rentals. That’s one of the highest rates for single-family homes in metro Phoenix.

In several other West Valley neighborhoods, more than 30 percent of all homes are rentals. About 32 percent of houses and condos in north Glendale ZIP code 85301 are rentals.

But the trend isn’t limited to the West Valley. In the East Valley, 30 percent of all homes in central Mesa’s 85210 ZIP code are owned by investors. And large swaths of the Valley’s core include ZIP codes where 25 percent or more of all residential properties are investor-owned.

Market analysts worry about investors’ impact on traditional buyers, who are finding it extraordinarily difficult this year to close a deal. Sellers, especially those of distressed properties and of homes priced below $150,000, often take the simpler route, accepting bids from investors paying cash instead of from traditional buyers who need to get a mortgage. Bidding wars on the moderately priced houses are the norm, and investors usually win.

What investors plan to do with nearly 225,000 homes they own in metro Phoenix is the multibillion-dollar question. When a handful of major investors, who together have purchased more than 10,000 Phoenix-area homes this year, decide to buy, sell or hold, their decisions will affect the rest of the market. Now, the majority of investors are renovating and renting out the properties. But if the big companies decide to take their profit in five to seven years and move on, real-estate insiders worry that a flood of houses back on the market could send prices spiraling down again.

“Investors helped stabilize Phoenix’s housing market,” said Mark Stapp, director of real-estate development for Arizona State University’s W.P. Carey School of Business. “My concerns are that too many investors are treating Phoenix’s homes as a commodity, and not the area as a community.”

Who’s buying

Investors have purchased more than 30 percent of all single-family houses and condominiums sold this year, and their purchases have grown to an even bigger percentage of all sales in the past few months.

The type of investor has shifted dramatically this year, from small and large local investors to billion-dollar funds based in New York and Los Angeles. A Republic analysis of purchases, provided by real-estate data firm Information Market, found that in some areas of metro Phoenix, the most active three or four investors own more than half of the rentals.

The most prolific homebuyers are New York-based Blackstone Real Estate, Los Angeles-based Colony Capital and Scottsdale-based American Residential Properties. Those groups alone have purchased more than 3,000 houses in the area so far this year.

Local investor and real-estate agent Julie Bieganski is selling a 2,000-square-foot south Phoenix house for $82,000. The day the house went on the market in early October, a real-estate agent representing Tempe-based Treehouse Group made her a full-cash offer to buy the house “as is” for cash and close within 30 days. Treehouse is buying homes for Blackstone and other investors.

“According to the contract, the buyer has purchased 1,400 houses in Maricopa County in the past 90 days and plans to own the home and rent it out for five to seven years,” she said.

The investor-buying frenzy in metro Phoenix began with smaller investors like Bieganski with the cash to pick up a couple of houses as foreclosures peaked more than two years ago. With auctions running all day in front of the Maricopa County Courthouse, large out-of-state buyers’ interest in the market grew. As foreclosures slowed, many of these investors turned to short sales. But those deals must be lender-approved and take longer to close. Now, the biggest and richest of the investors have stepped in, often purchasing foreclosure houses previously bought by those earlier investors. Still bullish on the Phoenix market even as prices rise, these big investors sometimes buy one home at a time — and often 50 to 100 homes at once.

Next moves

Investors now own 225,000 homes, the same number of all homes typically found in a city the size of Glendale. Their profit-focused strategy is a key issue for everyone else with a stake in the housing market.

Because of the high demand for rental homes and relatively low prices to buy, most are making 5 to 10 percent annual returns on houses by leasing them to tenants. But investors don’t hold on to properties forever, and those that control hundreds or thousands of properties can have outsize impact. If too many big property-holders try to sell at the same time, it could lead to another drop in Valley home prices.

Large investors are guarded about strategies. Publicly traded companies such as Blackstone can’t talk about future plans because that violates shareholders’ rights. Many of the latest investors in the Phoenix market want to become publicly traded real-estate investment trusts to attract smaller investors looking to grab a stake in real estate.

Colony said it plans to keep most of its metro Phoenix homes as rentals for five to seven years. The company is planning to go public next year. “We started looking at investing in housing a year ago. There’s a real opportunity to renovate homes and lease them to people who need them,” said Justin Chang, principal of Colony Capital and acting CEO of Colony American Homes. “We like what we have bought in Phoenix and the value there.”

American Residential also has a long-term buy and hold strategy. “We are not in business to flip real estate. American Residential hasn’t sold one of the 1,000 houses it has purchased in Phoenix since 2008,” said Steve Schmitz, CEO and founder of the firm. “We are in the business of providing nice, clean housing to families.”

Mike Orr, who analyzes real-estate information for ASU’s W.P. Carey School of Business, is another market analyst with concerns about the investor influx. “We don’t know their plans. They don’t want their competitors to know their plans. But they clearly have a lot of money to spend.”

The rental market

In Avondale ZIP code 85323, Liz Moad, who said she has owned her home there for three years, pointed across the street and said, “This house has had four families move in and out in the last two years.”

Empty houses that had been foreclosed on and auctioned are now rentals, said Chris Sammons, who said he has owned his home there for five years.

“Definitely you don’t want to see them just sitting there empty,” Sammons said.

“Probably within the last month there’s been half a dozen different houses where the ‘for rent’ signs have come up.”

“I think eventually when the economy picks up more, you are going to have more people that will take the next step to actually owning their own home,” he said.

Renter demand so far has kept up with the number of investor-home purchases in metro Phoenix, mostly because there are now more potential tenants. In addition to the typical renter who can’t afford to purchase a home, and newcomers moving to Arizona from out of state, former homeowners who lost houses to foreclosure must rent to rebuild their credit. Then there are the prospective homebuyers who are getting outbid by investors. Finally, there is a new group of people who can afford to buy but choose to rent.

A record 3,500 leases a month for rental homes in the Valley were signed in June, July and August, according to the Arizona Regional Multiple Listing Service. Houses in the best locations often draw competing offers.

“We were astounded by the rental market here,” said Mara Lewis, who relocated to Phoenix from Wisconsin. “Not only the up-front fees, and the methods by which they had to be paid (cashier’s checks), but the rules for what a (rental) house has to have here is very lax. We had to purchase our own washer and dryer.”

She and her husband own rental properties in Wisconsin and chose to rent here instead of buying. Lewis leased through a real-estate agency and isn’t sure who owns the house.

Jennifer Taylor said she moved out of a north Phoenix condominium because most of the units in the building were owned by different investors, and the maintenance varied by condo, as did the type of tenant. “The neighbors were messy, and I always had my stuff vandalized,” said Taylor, who recently moved to a central Phoenix condo. “Now I know my landlord, and the issues I had since moving in were all fixed that same week.”

Forecast for future

Before the boom, investors owned 8 to 10 percent of metro Phoenix’s houses. The current rate of 18.2 percent is double that. The shift is so new that it’s difficult to predict what might happen.

Stapp said, “A valid concern is whether people will want to buy homes in neighborhoods where there are the most rentals. We don’t know yet.”

But market analysts offer some scenarios.

The best-case scenario is for investors to hold onto houses for at least a few years and slowly sell to regular buyers before home prices soar. It wouldn’t have too large of a negative impact on the market if one major investor sold all of its homes as long as other major investors continued to hold on and lease out their properties until the supply of houses stabilizes again, market analysts said. Then there’s the worst-case scenario: Home prices continue to climb, and all of the major investors want to lock in their return and try to sell at once.

“It was good when all of the investors came into metro Phoenix and bought when no one else was buying,” said Orr, an early investor himself. “But it might be time for investors to take a rest, and let regular buyers have a chance.”

Source: Arizona Republic. Includes information from data reporter Matthew Dempsey and 12 News reporter Melissa Blasius.

Scottsdale Real Estate Update: August 2012

September 26, 2012 by · Leave a Comment 

 

Below is a chart from the Arizona Regional Multiple Listing Service (ARMLS) highlighting and comparing Scottsdale real estate stats between August 2011 and August 2012.

Consistent with other areas of the Valley, inventory is down (37%), as are days on market (27%), reflecting the recovering real estate market in Scottsdale.

Meanwhile, as inventory has dropped, prices have risen.  The average sold price of a Scottsdale house (single family residence) was up 7.4% year-over-year, and 11.3% among all property types combined.

(CLICK CHART TO ENLARGE) 

 

Have questions about the Scottsdale real estate market?  

Drop me a line anytime and I’d be happy to help!

Housing Prices Rise at Low End

September 26, 2012 by · Leave a Comment 

The housing market continues to gather strength, and the biggest gains in price now appear to be among the least expensive homes, whose values fell the most in the downturn and have weighed against any would-be recovery.

Over all, the Standard & Poor’s Case-Shiller index showed an annual gain of 1.2 percent in the price of single-family homes across 20 cities in July, according to data released Tuesday. In addition, all 20 cities showed price increases from the previous month, the third monthly gain in a row, supporting the idea that the nation’s housing market has bottomed out and, some analysts said, contributing to an unexpected bump in consumer confidence.

Luxury homes lost less value in the housing crisis and began to rebound more quickly, but lower-price homes are catching up, rising slightly faster in value than homes in the middle and upper tiers, according to an analysis of the Case-Shiller data by Patrick Newport and Michelle Valverde of IHS Global Insight, a private research firm in Lexington, Mass.

The typical lower-price home rose at an annualized rate of 1 percent from June to July on a seasonally adjusted basis. The middle tier posted a one-month gain of 0.4 percent, and the highest tier inched up by 0.1 percent.

In the last three months, Mr. Newport said, the lowest tier has been rising in value more than twice as fast as the other two categories. For the least expensive homes, “prices just shot up too fast on the way up and then went down more sharply,” he said. “We’re seeing the correction from that.”

The price cutoffs for each tier vary widely depending on the city. The cutoff for the lowest tier ranges from $86,000 in Atlanta to $349,000 in San Francisco.

Other data supports the trend. According to a report from Zillow, a real estate Web site that divides homes into three price groups, the gap in price changes between the top and the bottom of the market is narrowing. “It’s less that the top tier is cooling than that the bottom tier is strengthening,” said Stan Humphries, chief economist at Zillow. “The bulk of the recovery is due to the changes in the bottom and middle tiers.”

Even in Las Vegas, where housing prices are still slightly down over the last year, lower-end homes have ticked up in value, which may be good news for sellers but can be a hurdle for buyers. Mark Graham, a youth pastor who has been looking for a house for his family there for months, said buying a home for less than $150,000 could be a challenge.

“Houses are going on the market and within a day have multiple offers already on them,” Mr. Graham said, adding that most of the offers were from investors who did not need financing. “It’s more or less a heartbreaking market, because you get your heart set on a house, and then someone walks in with cash.”

Not every market is showing improvement on the low end, according to Case-Shiller. Atlanta and Chicago are still lagging, but in places like Boston and San Diego, the bottom third of houses are doing better.

“The majority of the cities have been more like Boston and San Diego,” said Maureen Maitland, a vice president at S.& P. Dow Jones Indexes, which produces the Case-Shiller index.

In Phoenix, which has shown the strongest recovery in housing prices of the 20 cities surveyed, the lowest third — homes under $127,000 — gained 33.5 percent from July 2011 to July 2012, while the top tier — homes above $211,000 — posted an 11.5 percent increase in that period.

Prices have been bolstered by a decline in the number of foreclosure sales and strong interest from investors, who are buying low-price properties and converting them to rentals.

In the Sarasota, Fla., area, investor demand has driven up prices for lower-end homes, said Roxanne Moore, a real estate agent with Green Lion Realty there.

“Investors are finding properties that they used to be able to buy for $80,000 or $90,000 are now going for $100,000,” she said. In addition, after a long absence, first-time home buyers are beginning to trickle back in.

Over all, home values in the first seven months of the year rose 5.9 percent, the best year-to-date performance in seven years. Nevertheless, the broad housing market is still nearly 30 percent below its high in 2006.

In four cities — Atlanta, Chicago, Las Vegas and New York — prices are lower than they were a year ago. In New York, including the surrounding suburbs, prices increased 1.2 percent from June to July, but remain 2.6 percent lower than they were in July 2011. Prices at the low end of the market — houses below $271,000 — have dropped 3.9 percent in the last year, while high-end homes — $437,000 or more — have dropped 2.5 percent.

But in an optimistic sign, consumer confidence rose in September to its highest level since February, according to a report released Tuesday by the Conference Board, a private group.

The consumer confidence index reached 70.3 points, well above economists’ expectations of 63 and a significant improvement from the upwardly revised level of 61.3 in August. Some analysts attributed the bump to gains in the stock market, while others credited the improved outlook for housing.

Source: New York Times