May 2011 Real Estate Market Report.
Arizona Property Management and Investments
Despite all the bad news coming in the past couple of days that real estate is heading for another 8% decline in the next 12 months, we are not seeing it here in most Phoenix Metro Areas. I do agree however, that we are top heavy in North Scottsdale, Fountain Hills and Paradise valley. We should see a considerable decline in prices by the end of this year in these areas.
Numbers speak louder than words!
As for the numbers: there are only 26024 homes showing active on Multiple Listing Services as of today May 10 2011 with 21878 homes under contract. In most areas, we have seen a price increase of at least 10% since December 2010.
Almost 70% of the homes under contract are purchased by investors. As the result, the number of rental homes is increasing. Currently there are 5388 homes for rent. The number of single family homes for rent has increased to 3216 an increase of 30% over the past 30 days and we see a substantial increase in that number in near the future as the homes cuurently under contract close.
Since January, rents in most areas have steadily increased by 5%. However; going forward I see rents stay where they are for the next six to eight months, until the excess rental inventory is absorbed by the number of homeowners losing their homes to foreclosure.
We are still short of 4 bed room homes. The number of 4 bed room homes verses three is a 3 to 1 ratio. Most investors bought 4 bed room homes and we shall also see that ratio balancing itself out going forward.
Our formula of monthly rent being equal or greater than 1% of purchase price still applies in most cases ( ex: purchase price $100000, rent $1000 ) but if you are looking for a higher rate of return on your investment ( ex: purchase price $50,000, rent $800 ), there are other opportunities out there. One must be very careful getting into that market as such older properties could become a burden if not selected and managed properly.
Banks have been releasing more foreclosures into the market in the past 30 days. They are going very fast. Asset managers have been pricing them below the market to create a frenzy and get the price they ultimately want instead of pricing them high to begin with and lowering it eventually which takes longer for them to sell.
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