Sunday, August 8, 2010

Real Estate Market in Arizona August 2010

By: Payam Raouf
Owner/Designated Broker
Arizona Property Management and Investments
888-777-6664 ext 110
info@azezrentals.com

This year renters will be scurrying for shelter in Phoenix Metro Area until the ball drops in NY in 2011.
• Stranded speculators who bought homes for a quick flip at the peak of the market in 2005 and 2006 have been struggling to pay their mortgages. They have simply ran out of resources and no matter what they get for rent is not enough to cover their debt obligations. As the result they are either short selling or having the bank foreclose on them.Bara bing, bara boom and have nice day.
• Many of the homeowners living in their homes currently have thrown in the towel as well. They are too upside down in their homes and they aren't not simply worth keeping, knowing it would take 10 years before they can sell for what they owe on them. Meanwhile they are milking it to the last drop by not paying their mortgages, taxes, HOA fees etc saving as much as they can till they save enough money to move or rent. Short selling seems to do just that for them, so every hour we are having one more. Haleluya and thank you very much.
• Hispanics are vacating homes overnight leaving behind homes full of furniture, appliances, toys and kids bikes! Those homes will be lined up for sales as well. Hasta la vista baby and muchos gracias.
• New home builders such a s Pulte, Centx, KB etc are offering a better solution (kissing the papers again) to first time home buyers. They are sucking a good portion of buyers off the resale market, about 6000 of them last month. The resale inventory keep piling up as the result. Thank you for your contributions.
• The DOW bouncing one thousand points up and down on a monthly basis, long-term bonds losing their desirability, Two hundred and twenty two banks failing since the beginning of 2008, fighting two wars simultaneously, having a un experienced president is not helping the housing crisis in America specially in Arizona. "Xie xie" means "thank you" in Chinese.

Here is what we see happening in the Phoenix Metropolitan housing market.
Rents will continue to go up in most areas and home prices will continue to fall valley wide with no reasonable exit strategy at sight.

Here is economist Dean Baker's solution, proposed more than three years ago. I still haven't heard a good argument against it.

Instead of foreclosing on a loan and evicting the family, the lender should take ownership of the house and rent it out to them at a market rate for an extended period. In many areas, rents are much lower than mortgage payments, so the family can afford to stay put. Eventually, once the market recovers, the bank could sell the house.

What are the benefits of the Baker plan?

• It would reduce the supply of foreclosed homes for sale.

• It would keep neighborhoods intact and maintain home values by avoiding the blight of boarded-up, abandoned houses.

• It would not bail anyone out.

• It would keep families off the street, but wouldn't force them to pay more than the going rate for rents.

What are the drawbacks to the plan?

• It wouldn't work for everyone. Not every homeowner could afford to rent the house they now live in. Many wouldn't want to rent it.

• Banks don't want to be landlords. And they could potentially lose money by not selling the house now. Or not: dumping millions of houses on the market right now wouldn't be prudent, anyway.

• It would be a retreat from the idea that all Americans, regardless of their finances, should be home owners.

Currently as of 8/8/2010, there are 43,560 homes for sale in the phoenix metro area, up 26% since June 1, 2010. We shall see this number reach 55000 and by this year’s end and if no cure possibly 100,000 by end of 2012. There are 17,232 homes in short sale that number is increasing by the minute.

Homes in more desirable area are renting faster. Most desirable rentals are in Surprise, Goodyear, Litchfield Park, North side of Glendale, South part of Peoria,North side of Avondale. Scottsdale, Gilbert, Chandler, Tempe, as well as some parts of Mesa.

The factors affecting rent increases are as follows:

(1) Location, (2) number of bedrooms (4 to 5 bedrooms), (3) amenities, and (4) school district. There is ONLY 3,609 single-family homes in the market today … consisting of 1,803 three-bed rooms, 1,040 four-bed rooms, and 232 five-bed rooms. We are quickly running low on 4/5 bed room homes.

Over a year ago, under $1,000 rentals were very popular. Now, if we get a $2000 to $3000 rental it is gone within hours. We have never seen so many successful business people losing their homes and renting as in the past few months. We shall see a huge drop in luxury home prices valley wide soon.

If you are an investor, it is a good time for picking in certain areas. Stay away from short sales as 70% of them will be bank owned soon. Since there are so many short sales at unreasonably low prices, REOs (bank owned properties) are staying in the market longer and you can get them at a good discount.

Coming October, November, December, there will be thousands of renters in the market. If you start buying now, your house will be ready for rent by then.
If you are planning to rent, don’t wait until the last minute to find a home. It is going to get very difficult to find what you want and if so, you will pay a lot more for it. If you have the financial ability and your house is in the process of a short sale try to rent by the end of October



This is only my opinion based on changes I see in the inventory, requests for showing and application coming to my office. As renters and Investors, you are to do your own due diligent.