Sunday, December 22, 2013

Mortgage rates will go up in 2014 and the middle class is going to feel the burn of higher fees on mortgages: Can this momentum continue into 2014?

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BY: http://www.doctorhousingbubble.com

The Fed’s archaic language makes it very clear that there will be no taper anytime soon.  To the contrary, the Fed will still be buying something like $75 billion a month in bonds instead of $85 billion.  What bold movement right?  Of course this sent the stock market into another easy money induced rally.  However, during the same period we find that existing home sales took a hit and prices are definitely softening.  Over the summer, the popular FHA insured loans took a giant hit via mortgage insurance premiums increasing dramatically.  This action certainly impacted the origination volume of one product that was leveraging buyers into homes with as little as 3.5 percent down.  Even in expensive SoCal, FHA insured loans made up 20 percent of purchases last month.  In 2014 there will be new fees hitting vanilla mortgages as part of the Federal Housing Finance Agency (FHFA) trying to push private lenders to take on some of the mortgage market which is fully dominated by the Fed and government.  These fees will happen at a time when home owners are already leveraging up to compete with big money investors.

The slowdown in housing
Higher rates have certainly had an impact on the housing market.  The median price nationwide has certainly slowed down during the last few months (we will find out soon how much of this is seasonal and how much of this is due to changing winds):

 http://www.doctorhousingbubble.com/wp-content/uploads/2013/12/nar-existing-median-home-price.png


We’ve already noted that investors are certainly pulling back in many inflated markets around the country.  Some seem to think the Fed is fully omnipotent in controlling rates.  People do realize that the 30-year fixed rate mortgage has gone up over 100 basis points in spite of the Fed now having a balance sheet well above $4 trillion and now owning 12 percent of the mortgage market?  When the stock market is rallying as it is, tiny gains in land-lording don’t look as appealing as jumping on the next IPO.
The new fee increases next year will have an impact.  They come in two parts:
-1.  A mandated 0.1 percent to the rate for all new loans
-2.  Loan Level Price Adjustments (LLPAs)
The second item is going to make a bigger impact as it is going to make it more expensive for people to borrow (table below depending on LTV):


 rates llpa
Source:  Mortgagenewsdaily 

These are fairly significant increases when you consider most middle class families are squeezing into mortgages.  The bigger impact from LLPAs will come with raising the standard with credit scores for the best mortgage rates.  For example, borrowers with scores of 740 receive Fannie Mae’s lowest pricing but the new requirements will push it above 800.  In 2007 a 680 received the best (and look how things turned out).
Again, I want to be clear that the last housing crisis was brought on by more than just subprime buyers.  The bulk of people that lost their homes were in traditional vanilla 30-year mortgages.  The facts back this up.  Yet people like to believe that subprime borrowers were the central cause of the implosion of our entire system.
The FHA already required a lifeline this year since loans were performing poorly in spite of the hot market.  The problem with looking at aggregate data is that the 30 percent cash buyers have distorted the typical down payment across the board.  For example, the typical down payment for FHA buyers is 4 percent (slightly above the mandated minimum 3.5 percent).  Adjustable rate mortgages are already going up in usage as more regular buyers need more leverage as household incomes are not going up.
Folks in the mortgage industry realize this is going to be a big impact and there is already buzz because of this.  When mortgage applications hit multi-year lows even before any of these changes hit:

 mortgage apps

Source:  Bloomberg, ZeroHedge

Mortgage applications hit a 13 year low even with the housing market having one of its best years in terms of prices.  Let us be clear, prices moved because of low inventory, low rates (for the first half), and manic demand from investors.  Yet this has obviously changed towards the end of the year.
Regular buyers are already tapped out and the data reflects this.  There is also an odd notion that folks, either domestic or international, are ready to lose their money no matter what in real estate.  People do realize that many people that have saved a good amount are actually concerned about preserving their funds?  This is why investors have slowed down buying in this market.  As those double-digit price gains ebb to single-digit to possibly flat or negative year-over-year gains, the headlines will enter another echo chamber that isn’t going to sound so pleasing to investors.  It already started in the middle of the year.
The fee increases coming next year simply add another cost to getting a mortgage regardless of what the 30-year does or doesn’t do (similar to MIP on FHA insured loans).  People also were pointing to the nice little jump in recent housing starts but most of these were for multi-unit dwelling (i.e., the rental revolution continues).


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(855) 855 8182

Saturday, December 21, 2013

Phoenix-area home sales dipped in past few months

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Phoenix-area home sales dipped in past few months


The Republic | azcentral.com Thu Dec 12, 2013 
 
Homebuyer demand in metro Phoenix has backed off during the past few months, either because of a drop in confidence from the government shutdown or the area’s rising home prices, according to an ASU real-estate analyst.

Sales fell in October while the number of homes listed for sale climbed, according to the latest report from the W.P. Carey School of Business at Arizona State University. The region’s median home price inched up to $200,000 from $199,000 in September.

“Sales will be way down in November and through the holidays, when some people even take their homes off the market until late January,” said Mike Orr, director of W.P. Carey’s Center for Real Estate Theory and Practice. “We also anticipate a much slower rate of price appreciation in 2014 than the furious pace we have witnessed over the last two years.”

In October, 7,045 houses sold in metro Phoenix. That’s about 100 fewer sales than in September. In the spring, home sales were hovering around 9,000 a month.

Home sales to investors as well as those to out-of-state buyers have dropped over the past six months. Investors were behind almost 40 percent of all home sales in July 2012, the peak of those types of purchases. In October, investor purchases accounted for about 23 percent of home sales. Second-home buyers from outside Arizona accounted for 16.4 percent of October’s home sales, down from 20.1 percent a year earlier.

High-end home sales are climbing, which partially accounts for the higher median price. Sales of homes priced above $500,000 are up 34 percent from a year earlier.

Listings are up 40 percent since November 2012, though Orr said the supply of homes for sale still is 15 to 20 percent below what would be considered normal for metro Phoenix.

Currently, about 26,500 homes are for sale in the Valley.


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Thursday, November 21, 2013

Arizona Housing News: It's time to make a decision



Payam H. Raouf
Designated Broker
Arizona Property management & Investments
(888) 777 6664 ext 114

We saw an amazing price increase between June 2012 to April 2013, over 35% in most Phoenix Metropolitan Area. We did advise you to sell if you had the option to or wanted to take some money off the table. Some homeowners that have been hanging on to their properties for years renting them out to pay their mortgages seem to be very frustrated as they missed that window of opportunity.



redfin price drops


What is to do next? It all depends what your plans are. The other factor that is playing into this game is the rents seem to be going down! Your main competitors are large equity funds who have purchased a large sum of rental properties somewhere around 20,000 in the Phoenix market in the past 3 years are able to afford spending a good amount of money on their properties renovating and fixing them up and renting them for less. Tenants have more options to choose from and are taking advantage of the situation moving out of yours - if you can not afford maintaining the house properly - and renting one of theirs. They also pay leasing agents the highest commission I have ever seen. So their homes are renting before yours.

The other factor is many of the tenants are now re-qualifying to buy homes. That adds more to the rental inventory as there are only so many renters in the market. 

The fact that prices have gone up so considerably, does not mean that the rents have increased accordingly . Desperate to rent, home owners who are upside down in their properties are now lowering their rent just to be able to pay their mortgages.

We are also seeing a good influx of tenants that are forced to move out of their rentals because the home owners are either selling by choice or by force. That is adding up to the inventory for sale making the prices fall even further.

It's a tough situation to decide what to do at this point. If you can hang on for a long time, there are hopes that the prices will go back up again once the inventory stabilizes. In  the long run adjusted to inflation you might even come ahead. That may be 5 to 10 years away depending on where you are at with your mortgages.

Meanwhile, there are costs associated with your decision. If you decide to continue renting, you have to be able to absorb the cost of owning a rental property. That adds up to be about 30% of your rent over a period of time as the homes need more improvements and repairs, increasing cost of association fees, taxes, insurance etc at the cost of keeping your credit in good standing.

On the other hand, If the negative equity in your home is much larger than you can afford to wait, then may be it is time to reconsider renting it out. Banks are getting harder to do a short sale but are still considering some. Even though the number of foreclosures have decreased in the Phoenix Metro Area in general over he past twelve months, It is anticipated to go back up again next year.

One option you might want to consider is leasing your home with an option to buy. Some tenants have saved up a good amount of money but yet do not have the credit to be able to secure financing. Quite a few of the tenants will be able to secure financing in a few more years. If you are marginally under the water, you might want to consider that. The tenants stay in your properties longer and take care of it better reducing your overhead.

Consider renewing your current lessees with your tenants or renting out your home for two or three years providing the tenants some incentives, lowering the rent, deposits or be more flexible with your terms.

You also may want to consider offering the leasing agents an extra incentive to rent your house faster. I have been getting a good amount of calls lately from owners who have been renting their homes in the past through craigslist and managing their homes themselves asking for help. Their homes are either not renting fast enough or the tenants are giving them a hard time and mostly not paying rents.

Homeowner association have become more vicious than ever to fine you for whatever reason they can especially, the front yard landscaping and if the house sits on the market for too long, that may be an additional charge that could have been avoided had the house been rented earlier.

To deal with today's rental home ownership challenges you need to be proactive and make a decision that is right for you. You are at a junction that you have to either decide one way or another. If you decide to keep your property as a rental you must bear in mind that it could get very costly and you need to have the right reserve to back it up. If you decide to sell, consult your accountant and your attorney first. Either way, if you need any assistance with the marketing, renting and managing your property, consult a reputable property management company to weight your options.

CLICK HERE TO GET A FREE PROPERTY MANAGEMENT QUOTE

If you are considering selling your property traditionally or short selling it, contact a local realtor that is experienced and knows the market in your area and is up to date with the market trends to get some advise.

 NEED A FREE HOME VALUATION? CLICK HERE TO ASK A PROFESSIONAL

In the event you are an investor and looking to purchase additional properties, You can contact me directly at (888) 777.6664 ext 114 and we can discuss your some of the opportunities that are available to you. 

We hope that in the long run you all have a prosperous and enjoyable experience no matter what your decision may be.

Payam H. Raouf
Designated Broker.



Nov 5, 2013, 2:09pm MST

Home prices jumped in September; appreciation expected to slow

Kristena Hansen
Reporter- Phoenix Business Journal

Home prices continued on a strong upward pace in September, jumping by one-third from a year ago to a median price of $199,000, according to Arizona State University’s latest housing report.
But don’t let the price jump fool you.

Michael Orr says the local housing market overall has actually “cooled dramatically” since July, and the Valley should expect a much slower rate of price appreciation moving forward.
The cool-down, he said, is largely due to economic uncertainty, which was exacerbated by the recent government shutdown.

“The main change is a steep fall in demand, which we can see in the 12 percent drop in single-family home sales activity just between August and September alone ... The sudden weakness in owner-occupier demand since July is unusual and unexpected,” said Orr, the report’s author and real estate expert at ASU’s W.P. Carey School of Business.
On a positive note, the chronic supply shortage of homes for sale that had caused a throbbing headache for buyers for more than a year has finally been easing.

There were 15,150 single-family listings not under contract on the Arizona Regional Multiple Listing Service on Oct. 1 — up 13 percent from a month prior and by nearly one-third year-over-year, Orr said. Supply is still, however, restrained for homes priced below $150,000.

“If the current trend continues, supply will exceed demand by the end of the year,” Orr said. “We now expect a balanced market to prevail during November. This is great news for buyers since they will experience less competition and be in a strong position to negotiate.”

Foreclosure activity also continued on a dramatic decline in September, and Orr predicts that downward trend will continue thanks to lenders’ tight underwriting standards.

Foreclosure starts — when a homeowner receives notice that their lender may foreclose in 90 days — were down 17 percent from August and a whopping 61 percent year-over-year. Complete foreclosures also were down 5 percent from August and 63 percent year-over-year.

The combination of dramatic price increases and fewer bargain deals has been causing investor activity also to wane.
Investor purchases made up 22.7 percent of all sales in September — down from 23.7 percent in August and the peak of nearly 40 percent in July 2012.

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Friday, October 25, 2013

Arizona Property Management & Investments



Arizona Property Management and Investments is one of the largest Residential Property Management Companies in Arizona. Our team has over 20 years of combined property management experience managing various residential investment portfolios worth over 100 million dollars. We offer a worry free Landlord/Tenant environment in a market that continues to become more complex with changes in legislation, placing greater responsibilities on the Landlords.

Types of Properties We Manage:
  • Single Family Homes, Condo's and Townhouses
  • Multi-Family (2 to 100+ units)
Our Philosophy:
We built our business on the philosophy that management by anticipation is more productive and cost effective than management by reaction. The key element in our management philosophy is the recognition that each property is unique. Our management program is designed to be flexible in order to tailor our services to the particular needs of each client.

Our goal is to:
  • Keep your property occupied with quality tenants
  • Maintain the marketability of your property
  • Keep you in compliance with rules and regulations governed by the Arizona Landlord Tenant Act as well as local, state and federal laws.
What we offer:
  • Full time property Managers with unrivaled knowledge and experience
  • Online solutions for our marketing, management, accounting and maintenance operations
  • Cost effective and practical solutions to your property management needs
  • Reliable and dependable maintenance service every day of the year, 24 hours a day without exceptions
Our Services:
  • A range of leasing services for Landlords from "Tenant Find only to "Full Management."
  • Marketing, Advertising and Showing your Property
  • Nationwide Tenant screening; credit, criminal, employment, rental and ownership history
  • Preparation of all Tenancy Agreements & Notices
  • Premise inspection at the beginning, during and end of each tenancy
  • Collection of Rent and pursuing any late fees and HOA fines
  • Collection and Distribution of Rental Tax
  • Payment of HOA Fees, Property Taxes and Utility Bills when authorized
  • Licensing, County and HOA Registrations
  • Prompt payment of net rental income into your bank account
  • Detailed monthly statements 
  • Regular Property Inspections with written reports
  • Arrangement of Maintenance and Repairs
  • Handling any Insurances claims
  • Issuance of notices to tenant
  • Full Eviction Services, (We offer Eviction Protection Package)
Our Fees:
At Arizona Property Management & Investments, we recognize that all our clients require an individual approach. An institutional landlord will require a different service than an individual investor, family trust, overseas and out of state landlord. Some prefer us to manage their portfolio, gathering income while others require special input, reports or meetings. In summary we can offer a tailored service to suit each client’s individual needs and requirements.
If you are considering having your property or properties managed by our company, please contact us at (888) 777-6664 ext 111 for further information for our management services.


Thursday, October 10, 2013

Not Much To Report! Market Is Very Quite.


Payam Raouf
Owner/Designated Broker
Arizona Property Management & Investments
(888)7776664 ext 114
Need Property Management Services?  Fill out this form.

Not Much To Report!


There is not much to report these days. Market has been very quite lately. Small investors owning one or two properties are calling in to see what their home is worth. Larger institutional money seems to be drying up. There is a ton of first time home buyers in the market. Tenants are sitting it out waiting to get a chance to re qualify to buy. Good rentals are moving fast. Rents are holding steady.

We also see a lot of banks lowering their qualifying criteria. You have just to have the right documents to qualify.

Is it good time to re-enter the market? I do believe so if you know what you are buying. They are few and far in between but they are out there, look for unique properties that rent fast, have lower turn over and good potential for growth. Stay away from buying in Katmandu just because it is cheap. This is my specialty. Call me directly if you need get some directions. (888) 777 6664 ext 114.

One way to cut your cost is to maintain your property. Being a slum lord costs you more over the long haul. We sell maintenance packages to reduce your maintenance cost by 50%.You buy an annual maintenance package at $329 for 8 hours of labor, (Licensed and Insured Handyman). You can buy up to three packages per year and use it in 4 hour increments. Every time your house needs repair or your tenant moves out and the house needs paint, touch ups, minor repairs, trash haul, clean up etc you fill out an order form by selecting the services, prioritizing them _ the time associated with each service is defined up front based on the industry’s average time- and send it to us. We go and get it done for you and even pick up the supplies! It’s good for a whole year.

There is a lot of competition out there. Keep your properties rent ready or expect a longer time to rent it. Institutional investors have too many properties to rent. Their homes are rent ready and they charge less deposit and lower rent.

The secret to success in rental business is having a good tenant in your property. Make sure they know how to take care of your property. Spend an hour upfront to show them how and you pay a lot less for repairs. A happy tenant stays in your property longer reducing your overhead.  

We are here to help you. Property management is a tedious business. We do it anyway! But we have learned how to do it well. If you need any assistance in this area. Fill out this form and let us show you how.

Thank you for your time. I will update you once there are some worthy news to pass on. 

Payam Raouf
Owner/Designated Broker
Arizona Property Management & Investments
(888)7776664 ext 114

Thursday, August 8, 2013

Is it time to rethink being a small rental property owner?

By: Payam Raouf
Designated Broker
Arizona Property Management and Investments
(888) 777 6664 ext 114
THE WINNER OF 2011 and 2012 " BEST IN PROPERTY MANAGEMENT" IN PHOENIX. USCA


Institutional investor owned rental properties are flooding the market. Equity Funds backed by US tax payers money have bought too many single family homes in Phoenix Metro and  it is getting harder to get the kind of return mom n pop investors were getting a few years ago forcing them to sell and lose their retirement supplemental income.

Up to just a couple years ago, rent was almost equal to one percent of the purchase price on homes under $200,000. After all owner's costs, he/she would have cleared six to seven percent annually on their investment. Now a days try one or two if they are lucky.

I have read that these equity funds are losing their shirts on these purchases gambling big on the future appreciation. Some have pulled out reducing their exposure,  some are still sitting at the table playing with someone else's  money. 

Smaller investors can not compete with these large equity funds to keep up with the losses waiting for long term  gains, if this  is a part of their income they depend on to pay their bills with.

Is it time to rethink being a small rental property owner in Phoenix? Should you take some money off the table now and put it back into your pocket or keep playing against the casino.?

Are you a day trader and watching every move the market makes 24/7 or have any idea what you can get for your house these days? We have come off the peaks a bit. The MLS data shows less sales and a lot more price  reductions comparing to a month ago.

the question is what to do with the money if you sell. Right? The right question to ask is, what could I have done with the extra money I would have got selling now as oppose to a few months later as interest rate goes up bringing the prices down and That is just one factor affecting the prices. What if everyone wakes up one morning and says, lets sell ours too. We are not too far away from that day either .

Think about it. 

Call me directly for all your property management needs in Phoenix metro and a free home valuation . 623.776.5774 

Thank you,

Payam Raouf

Friday, July 26, 2013

House sales fell in June as prices rose.

What IS My Home Worth These Days? Click here to find out.

House sales fell in June as prices rose
The Republic 

Metro Phoenix home sales fell in June. Prices for houses put on the market climbed. And the time it took for houses to sell shortened.

That data is all from the latest Arizona Regional Multiple Listing Service Stat Report. It’s the first issue of the report researched by housing analyst Tom Ruff of the Information Market.

“During the last five years, our housing market has been in one painful transition: not unlike the party boy who was dancing on the table with a lampshade on his head all night, having to put on his game face for a 7 a.m. sales meeting the next day,” writes Ruff in his inaugural report. “The ramifications of these actions have been both brutal and subtle, and the market corrections have been obvious.”

New data from Stat:
In June, 8,228 home sales closed in metro Phoenix, down 12.9 percent from a year earlier.
The number of all residential pending foreclosures fell 55 percent from June 2012 to 8,027 last month.
Based on ARMLS’ pending-sales index, the average Prices for houses sold will climb to $242,100 in the next month, up from $237,000 in June.

The Information Market was purchased by ARMLS last year.

 

Tuesday, July 16, 2013

"some markets in Arizona, Florida, and Nevada are saturated with rentals."

Payam Raouf
Designated Broker
Arizona Property Management & Investments
(888)7776664 ext 114



To Get a Free Home Valuation
Please click on the link below:
MyTrueHomeValue.com

___________________________________________________________________________________

The renting revolution: As home prices rise, the nation continues to add renters in lieu of home owners. Is this a temporary shift or something more permanent?

By: doctorhousingbubble.com

 Renting is in vogue.  Regardless of the rhetoric, we have added over 1 million renting households since the housing bubble burst in epic fashion while losing home owners.  What is interesting in spite of the rapid rise in home values is that many more households are becoming renters.  Part of this dynamic is occurring because of a dramatic amount of purchases going to investors seeking to become landlords but also, we have 5 million people that have lost their homes to foreclosure and may now opt to go the renting way.  The nation is becoming much more comfortable with renting a variety of items including cars (ZipCar), locations for brief trips (AirBnB), and of course housing.  It is also the case that a large part of our nation is having a tough time financially and job security is definitely not what it used to be so people are opting for more mobility.  It is a fascinating reversal that reflects a change in economics and also a drive by investors leveraging low rates to chase yields in unlikely markets.  Is this a temporary trend of something more permanent?

Nationwide homeownership rate
The homeownership trend is rather clear:

http://www.doctorhousingbubble.com/wp-content/uploads/2013/07/homeownership-rate-nationwide-2013.png

Source:  Census

The peak was reached in 2004 and has now reliably fallen to levels last seen in 1995.  Interestingly enough, household incomes adjusting for inflation are also back to levels last seen in 1995.  As we mentioned in a previous article, if we include all additional households in negative equity positions the homeownership rate is likely closer to 62 percent pushing the chart to multi-decade lows.  It is clear that once the bubble burst in 2007 that the quick reversal was because of people losing their leveraged properties.  But the housing market is on a rapid ascent up at least with prices and in some markets with mania like actions taking place.  So why is this happening?

 http://www.doctorhousingbubble.com/wp-content/uploads/2013/07/rental-stats.png

We’ve added over 1 million renting households since the bubble popped.  In the last year alone, we’ve lost on a net basis 91,000 owner occupied households and added 610,000 renters.  In this period, we’ve also added 486,000 additional housing units.  Doing the math and given the investor demand, the additional housing units are very likely in favor of rental supply (multi-unit housing permits are also on the rise).
The push towards renting
The good news is the rental vacancy rate continues to decline:
http://www.doctorhousingbubble.com/wp-content/uploads/2013/07/vacancy-rates.png
At least from a renting perspective, this is a positive trend for those owning rental properties.  Obviously Wall Street spotted this trend since the bubble burst and has been diving in hand over fist into the housing market pool, initially empty but knowing the Fed would be the source of the water.  Yet some markets in Arizona, Florida, and Nevada are saturated with rentals.  There is now a likely tipping point in terms of large money investors putting in large sums of money for very weak yields.  After all, with rates zooming up and the stock market on a roll there are other sectors to chase for money.
Expensive state nearly 50/50 when it comes to renters and home owners
California’s homeownership rate is inching closer to where it was in the 1980s in spite of home prices going bonkers in the last year or so:
 http://www.doctorhousingbubble.com/wp-content/uploads/2013/07/california-home-ownership-rate.png
California has a homeownership rate of 54 percent and with negative equity owners thrown in we are closer to 50 percent meaning half the state is renting.  And make no mistake, those that are underwater are basically in a renting position or worse.  They cannot move without selling their home for a loss.  At least with a rental, you give a 30 day notice and you can move as you see fit.  Some that bought at the peak, even with the wild appreciation in some areas, are still down $100,000 or $200,000.  To leave, they would have to pay to sell.
There is this pervasive logic that somehow, some people missed another opportunity.  These people claim that they want to buy to stay put so what does it matter that the mania pushed prices up again?  You don’t unlock any equity until you sell!  So in other words, they are speculating since they say “I missed out on a $100,000 gain” but this flies in the face of staying put and setting roots with your family.  If a simple one year move is enough to price these people out they are not in a financial position to buy anyway.  Yet some will never feel satisfied until they own a home like they lost their trusted childhood security blanket.  Given the above data, this seems to be more of a minority in probably high cost areas because in most of the country you can buy a modest home with the absurdly low interest rates and likely be at rental parity.  In very prime California markets, that is unlikely unless you come in with large down payments (i.e., $200,000+) and are ready to contend with the hoards of people stampeding into weekend open houses.
Looking at the data, the trend is very clear.  As we have chronicled for a couple of years now the investor demand is unprecedented and many are left diving in to fight for the limited supply or rent.  Because of the sour taste of the bursting housing bubble and emerging trends regarding home buying behavior, renting has been on a solid trend going back to 2007.  Even with the recent gains in the market renting is powering forward over buying.  People adapt.  Many people are finding alternatives and are finding it more beneficial to live where they choose based on their career and lifestyle mobility versus “drive until you qualify” which is a very typical mindset in California.  You also have to wonder what impact this will have where in states like California, half rent (think of raising taxes or other challenges that may arise in the future when they go to vote).
I’m curious to hear in the comments about those that have decided to rent versus buy in the current market even though they are financially in a position to buy.

To Get a Free Home Valuation
Please click on the link below:

Saturday, June 29, 2013

Signs market maybe flattening out in most major Phoenix Metro Area.YOU DECIDE.

June 29 2013
Payam Raouf 
Designated Broker
Arizona Property Management & Investments
psraouf@aol.com
623-776-5774



Is it a good time to buy, sell or hold off? YOU DECIDE.

For those of you who are in the business day in, day out and watching the price changes, this is almost an old news. In the past 45 days, we have seen a large number of homes for sale on MLS with a substantial price reduction especially in Scottsdale, Chandler, Gilbert, N. Peoria and N. Phoenix. 

From October 2012 to mid May 2013 we have seen an unanticipated price increase as much as 40% in some Phoenix Metro Areas. This was mainly due a combination of things such as:

A)    Lenders not foreclosing. We have managed properties for Major financial institutions including Fannie Mae. Fannie Mae will do almost anything to keep the tenants in place.

B)  Institutional Investors: Almost 70 percent of purchases in the same time period have been done by institutional investors, Private Equity Funds and Forign Investors.

C)  New Buyers: There has been a surge of new buyers, the ones that did a BK, short sale or foreclosure a few years ago and are tired of renting. They re-qualify to buy an home using FHA loan. They are a small percentage and have not had much success competing against big investors but have been putting some crazy offers together with 3% cash back towards escrow fees.

D)  Low interest rate: this needs no explanation.

E) New home builder: Rising the prices to offer bigger incentives to lure buyers in. 

On the contrarily we are seeing the trend changing fast:

A)    Fannie Mae Owned Properties:  Regardless of the low rents, a lot of tenants are moving out of these rentals, mostly due to maintenance issues and lack of TLC. They have been tossed around to several property management companies in less than 3 years and tenants just want out. We have seen over 50 percent of them moving out in the past 90 days. These homes are not in the best condition and won't rent easily. So they are being put back on the market.

B)   Institutional Investors: Carrington Financial Services, a major player in the industry stopped purchasing residential renal properties about 3 weeks ago and a few others have followed suit since. (See the article below). Blackstone and Colony American have slowed down quite a bit, 50 percent of their rental inventory is sitting empty.  As the result, in most Phoenix Metro Areas rents have either stayed the same or even gone down comparing to this time last year.

C)  Canadian Investors: Canadian dollar has been falling steadily and we have seen a lot less of them buying properties down here in Phoenix lately.  I talked to two major title companies in the past two days and they both confirmed that they are more on the selling end of it now. They bough quite a few properties in the past 5 years and once this epidemic of selling spreads through out the market, it can get really ugly. They will all try to exit at once and inventory shoot up through the roof bringing the prices down.

D)  Buyers sitting on the side line: Recently, we have been receiving an unusual amount of rental applicants from applicants with steady jobs, good income and 700 to 800 plus FICO scores! When asked why they are not buying, they say, they are waiting for the market to level off and believe the prices are going to go back down (Perception is a reality). Plus the rents are so low that it beats the total monthly payments with all the expenses and headaches associated with home ownership.

E)   Rate increase: Mortgage rates have gone up by nearly 1% in the past 45 days pushing home buyers already in escrow to take variable loans which in a major way contributed to the whole housing boom and bust. On the contrary belief that a lot of buyers are going to jump on the ban wagon to take advantage of the yet lower rate before it goes any higher, there are still quite a few who are hesitate to take the plunge. Unemployment is still at 7.5% and the ones who are working are barely making the ends meet.

F)    The Musical Chair affect: : As more tenants hop from one rental to another for a better deal, the homeowners who are upside down in their mortgage are no longer able to hang on to these properties. They are throwing in the towel and putting their houses on the market either to short sale it or just getting barely getting from under them as well. We have been getting calls from these home owners to sell their properties once the tenants move out or even with a tenant in place. They seem to be fed up with the costs associated with rental properties and the cost of maintaining them as these homes are getting older needing additional maintenance. On the other hand, institutional investors are offering lower deposits and lower rents just to fill in their vacancies making it more difficult for the smaller investors or these home owners to compete with.

G)   Investors taking some money off the table: We are seeing investors are paying very close attention to these details. In the six months we must have at least sold 50 of these properties and just in the past 30 days we have received more calls from investors wanting to know what their properties are worth and what their options are.  It seems they are getting a bit concerned about the market.  Foreign investors specially the Canadians are getting really jittery.  

Luckily, we live in a county that is economically much more stable comparing to the rest of the world and our people have shown time and again they are more resilient to these market upheavals. However the world is now much more inter-connected than ever before and we need to pay closer attention at not only what is happening around us but about the globe.

It is hard for me to advise you what to do these days. YOU DECIDE.There is not such a thing as the "NORMAL" any more! To get a better insight of what is happening worldwide in the money market, I called a good buddy of mine Stan Serklew,  a seasoned financial Adviser in Scottsdale Arizona. In the past 8 years I have had the pleasure of knowing Stan, he has made some unparalleled predictions that have been right on the money. Seven years ago, in the heat of the real estate market, he told me that government is going end up paying people to stay in these properties, DOW is going to 16000 from 13000 just a few months ago when almost everyone else expected it to collapse, and gold to drop down to $1100 from $1600 an ounce a year ago and may many other solid predictions to motion here. I hope the information here helps you make a better financial decision. Please let me know how we can assist you.

Here is Stan.

Written by Stan Serklew . June 28, 2,013........Resident manager...'Private Equity Advisory Services' in Scottsdale, Az

As an aside, my comments are a disclaimer, as to the numerical processes, which seem to influence an overall residential market based price restructuring, however interest rates, as they influence derivatives option costs have had a nuclear effect in June, as the sudden decline of bond fund prices based on a furious drop in U.S. Treasuries. In the past week, generated a flurry of appearances and commentaries of a goodly number of Fed. Governors, who functioned to hit the brakes on Treasury prices, with a sudden increase and  decrease in yields. The struggle to lower rates has been a source of headaches for money managers, and their clients, who are having difficulty in determining, how effective the Fed's attempts to re balance, an accurate interpretation of Chairman, Bernanke intent in his most recent report on progress of 'recovery' in the U.S. economy, as it relates to the effectiveness of the QE 2,3, bond buying  process......Those of us who were paying attention to the efforts of the PBOC . (Peoples Bank Of China) to act quickly to extinguish the consistent increase in  bank over night lending rates, which reached 15% in the 1st. 5 months of the year, played into the massive selling  by institutions, as well as retail investors  of bond funds, approximately 44 billion this month, adding to an already jittery market, the sudden rate increases of U.S. credit instruments...........The battle continues, between the Central Banks of the world, and the bond vigilanties which appear with shark like attacks, in world wide debt markets., no doubt bear significant observation, as Dallas Fed Gov. Stanley Fisher commented this past week, with a somewhat stern admonition, that winning over the Fed is impossible......however, as we endure a slow recovery in the housing market, which is dependent on our domestic mortgage capabilities, there is no doubt, that the so called 'Perfect Storm'  has subsided in recent days...........And now comes the steepest decline in the price of Gold, in any period since 1920.. closing at 1,201. per oz......to days close wit an Aug. 13 futures in the 1,100  handle ......The traditional interpretation is the war on inflation domestically has been won, however, as everyone with consistency is grappling with this 'Phenomenon' referred to as the 'New Normal',  with sudden changes in pricing of all hard goods that are 'marked to the market' priced on the up and downside, and we certainly have to be alert to changes in price structure in the residential housing market......In short, buyers, and sellers have little margin of time to 'think it over'...The Caveat is 'act quickly'..for the retail buyer........More to come with vigor, as we progress to make U.S. housing, the  New Gold Standard  in our domestic market, for all who dwell in our Dynamic Country.
Please forward all your questions to psraouf@aol.com. Thank you and Happy investing. 

Monday, June 3, 2013

Carrington Stops Buying U.S. Rentals as Blackstone Adding

Arizona Property Management & Investments
"Best in Property Management in Phoenix" 2011/2012
Payam Raouf
Designated Broker
(888) 777-6664 ext 114



Carrington Stops Buying U.S. Rentals as Blackstone Adding



Hedge fund manager Bruce Rose was among the first investors to coax institutional money into the mom and pop business of single-family home rentals, raising $450 million last year from Oaktree Capital Group LLC. (OAK)
Now, with house prices climbing at the fastest pace in seven years and investors swamping the rental market, Rose says it no longer makes sense to be a buyer.

“We just don’t see the returns there that are adequate to incentivize us to continue to invest,” Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. “There’s a lot of -- bluntly -- stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”
Carrington, which started in 2003 as a mortgage investment fund and has managed almost 25,000 rental homes for itself and others, has been joined by hundreds of institutional and international investors buying single-family homes after prices plunged following the housing crash. The firms are building a new institutional real estate asset class from the 14 million leased single-family residences that are worth an estimated $2.8 trillion, according to Goldman Sachs Group Inc.
Even as demand for rentals rises amid a falling homeownership rate, yields are declining and companies formed to buy the homes that have gone public haven’t yet been profitable.

Rising Prices 

It’s also getting harder to buy properties cheaply, with purchase prices rising 11 percent in April from a year earlier to a median $192,800, according to the National Association of Realtors. Asking prices for rents rose just 2.4 percent in the 12-month period, according to Trulia Inc. (TRLA)

Funds are buying property now, including homes sold by Carrington, for rents that yield 6 percent to 8 percent a year, before costs such as insurance, taxes and vacancies, according to Rose. Carrington’s model called for mid-single digit net returns on annual rents on an unlevered basis, according to Rose. While returns would vary by market, they would generally be in the mid- to high teens over the duration of the holding period, with the profit from home price appreciation.
“We selected our capital for this trade, sourced from a level that’s just too expensive for what the market has morphed into,” Rose said. Oaktree, the Los Angeles-based investment firm founded by Howard Marks, declined to comment, said Alyssa Linn, a spokeswoman at Sard Verbinnen & Co.

Nonperforming Loans

Instead of acquiring rental homes, Carrington is buying nonperforming loans, including about $4 billion in 2012. While that’s a potential source of rental properties if the owners can’t pay the mortgages, Rose’s preferred outcome is to get the loans performing again by offering a modification that keeps the current owner in the house, he said.
Carrington also is buying mortgage servicing rights and expanding a loan origination business for borrowers who can’t qualify for prime loans because of low credit scores. Rose expects to issue securities backed by these loans as soon as the end of this year, he said.
“It’s all about control,” Rose said. “We learned the better loans would be created for us to invest in if they originated off of our own platform and then boarded onto our own servicer, where we could control the performance longer term rather than leaving it in someone else’s hands.”

DEA Pilot

That desire for control is reflected in Rose’s life outside the office. He got a pilot’s license at age 17 and worked as a commercial aviator, including a stint flying for the U.S. Drug Enforcement Agency, before moving to Wall Street. He still enjoys taking the helm of Carrington’s two Dassault Falcon jets when he visits the company’s properties around the country.
Another investor that has stopped putting money into rental homes is Och-Ziff Capital Management Group LLC (OZM), a $31 billion hedge fund managed by Daniel Och, which cut its stake last year in 643 Capital Management LLC, a single-family rental operator with almost 2,000 homes in California, Florida, Nevada and Texas. Gregor Watson, managing partner at San Francisco-based 643 Capital, declined to comment on the Och-Ziff relationship. In general, the single-family rental business has matured to a lower-risk, lower-return investment as more funds get a track record, he said.
“It’s gone from an opportunistic business to a value-add one in terms of returns,” Watson said in a telephone interview. “We and other groups have proved you can manage these at scale.”

Blackstone Buying

Blackstone Group LP (BX), the largest investor in single-family rentals, has spent $4.5 billion to amass more than 26,000 homes and continues to buy, according to Eric Elder, a spokesman for Invitation Homes, the rental housing division of the world’s largest private equity firm.
“We’re continuing to purchase homes where they fit into our business plan,” Elder said.
Blackstone’s net yields on its occupied houses are about 6 percent to 6.5 percent, Jonathan Gray, the firm’s global head of real estate, said during a May 3 conference call with investors. That’s before using leverage from a $2.1 billion line of credit the private-equity giant arranged in March from a lending syndicate headed by Deutsche Bank AG. (DBK)
While about 85 percent of Blackstone’s renovated homes were leased, Gray said, “we’ve got an awful lot of homes to continue renovating.”

Losses Reported

Companies that release financial results for single-family rental investments have reported losses as they acquired homes faster than they can renovate and find tenants.
Colony American Homes Inc (0773189D)., a division of Thomas Barrack Jr.’s Colony Capital LLC, has found tenants for only 51 percent of the 9,931 homes it bought for $1.4 billion, according to a filing yesterday with the U.S. Securities and Exchange Commission.
American Residential Properties Inc. (ARPI), a Scottsdale, Arizona-based real estate investment trust, and Silver Bay Realty Trust Inc., a New York-based single-family REIT, both reported losses in the quarter ending March 31. Owen Blicksilver, a spokesman for Colony Capital, declined to comment. Silver Bay CEO David Miller was unavailable to comment, according to Tricia Ross, a spokeswoman at Financial Profiles Inc. American Residential CEO Steve Schmitz and President Laurie Hawkes didn’t reply to e-mails seeking comment.
Silver Bay declined 2.6 percent today in New York to $18.24 and has lost 4.4 percent this month. The company sold shares to the public in December for $18.50.

Defaults Soaring

Rose worked in the mortgage department at Salomon Brothers from 1991 until 2003, after it had been acquired by Citigroup Inc. He started Carrington in Greenwich, Connecticut, as a securitizer of mortgages originated by subprime lenders such as New Century Financial Corp., Fremont General Corp. and H&R Block Inc.’s Option One Mortgage Corp.
In 2007, as defaults began to soar and the lenders were collapsing, Rose sought to gain more control over the trusts that admistered the loans. He paid $188 million for the servicing business of then-bankrupt New Century’s mortgages.
When Carrington foreclosed on the homes in its portfolio, Rose calculated it often made more sense to keep the houses as cash-flowing rentals rather than sell them into a weak market. By 2009, Carrington had expanded from being an asset manager to a loan servicer and property manager, overseeing its own holdings plus more than 3,000 rental homes that Fannie Mae had repossessed.

Housing Exposure

With home prices about one-third below peak at the time, Rose saw the opportunity to buy and manage thousands of properties as a way to make money on rents while betting on a long-term real estate recovery.
“This was the purest way to get pure housing exposure,” he said. “You can’t do it through banks or builders or mortgage companies or anyone else.”
Rose initially found it hard to find backers.
“There wasn’t a domestic investor at the time that had the foresight to see what the value of the product was,” he said. “Universally we got back: Oooh, housing. Really scary. It’ll never go back up.”
By the time Oaktree invested with Carrington, the housing market had begun to turn around in markets like Phoenix and California, where funds had started to buy thousands of residences for rentals.
While Rose isn’t buying now, Carrington’s 3,000 employees’ experience in renovation and rental management are a resource available to other investors entering the market, Chief Operating Officer David Gordon said during an interview.

‘Gold Rush’

“All the people who made money during the gold rush in California, they were selling the buckets and shovels,” Gordon said. “I think there is gold in them there hills, but you’re going to have to dig deep. And hopefully you’re going to need more than one shovel.”
Carrington may start buying rental homes again when other large investors decide to sell after learning they can’t make returns that justify the prices they paid, Rose said.
“We’ll sit back in the weeds for a while and wait for a couple of blowups,” he said. “There’ll be a point in time when we’ll be happy to get back into the market at levels that make more sense.”

Wednesday, May 1, 2013

Investors buying homes in metro Phoenix at slower pace

reaching a plateau in home prices in most Phoenix Metro Area. In some areas such as West Wing Mountain in Peoria, home prices have climbed close to what they sold on the top in 2005 and 2006!!!
 
We are receiving more purchase inquires in North Scottsdale Area in the $400,000 to $600,000 price ranges. Many investors who purchased lower end homes are selling to either institutional investors or first time home buyers and replacing those with higher end homes in more desirable areas.
 
It seems, Homes in Ahwatukee, Chandler, Gilbert, N Peoria, North Phoenix and Scottsdale have seen the most increase in prices and  it seems the prices would continue to climb as demand surpasses the supply by far.
 
Surprise might have reached it plateau, Queen Creek, Coolidge, Casa Grande, Buckeye have seen a 20% increase and there is still some room but rents continue to decline as homes are more affordable to purchase than to rent. 
 
City of Maricopa has seen a substantial increase in prices and I think prices will continue to rise as more end users are buying homes and household income and education level is much higher than most cities in Phoenix Metro as well as the well designed master planned communites in this city.
 
For more information about the market condition please contact me directly at info@azezrentals.com or (888) 777-6664 ext 114.
Thank you,
Payam Raouf
Designated Broker
The Republic | azcentral.com Fri Mar 29, 2013 2:13 PM
 
Wall Street funds and other large well-funded investors continue to buy houses in metro Phoenix, even though the pace has slowed as sales prices have jumped.
Some of the early investors, who bought in 2009, have flipped the houses for a quick profit, but most of these buyers are holding on to the properties and turning them into long-term rentals.
David Bignoli, president of real estate data research firm Netvaluecentral Inc., recently complted a report on metro Phoenix’s biggest investors.

Currently, THR Phoenix, also known as Treehouse LLC, owns more than 6,000 houses in metro Phoenix. THR’s house purchases are funded by New York-based international investor Blackstone Group.
Since early 2012, Blackstone has been on a house-buying spree in Phoenix and other markets hit by the foreclosure crisis, including Atlanta, cities in Florida and California since early 2012.

Most of the big residential investors in metro Phoenix are buying in these other markets as well.
Scottsdale-based American Residential Properties ranks no. 2 for house ownership in the Valley with more than 2,700 houses. The firm was started by some former executives of Franchise Finance Corp.
Empire Residential owns almost 1,700 houses in the Phoenix-area. The Scottsdale-based investment group has been around for several years and is led by Richard Felker and Geoffrey Jacob.

The fourth-largest holder of houses in the region is Santa Monica, Calif.-based Colony Capital. The well-known investment group has set up a Scottsdale headquarters for its residential activity. Colony owns more than 1,600 metro Phoenix houses.

Most of these investors rent their houses out, and say they plan to hold them for the long-term and make money on stable rents.

A few plan to package rental houses into publicly traded real estate investment funds sold to other investors.
Another interesting fact to note about many of metro Phoenix’s biggest investors: about half of their houses are listed in property records as owner-occupied.

It will be telling to see what these investment numbers look like in six months. Will these investors stop purchasing metro Phoenix houses in the next six months because of rising prices? Or will some sell their houses in the area because of rising prices?


Home buyers paying cash declining in metro Phoenix


Homebuyers using conventional mortgages outnumbered cash purchasers in metro Phoenix during March.
It’s the first time in four years that cash buyers haven’t dominated the region’s homebuying market, according to the latest Wilcox Report.

Last month, 2,188 houses were purchased with home loans, compared with 2,144 bought with cash.
Fletcher Wilcox, real-estate analyst with Grand Canyon Title Agency, said the gap between cash purchases and conventional-loan purchases had been narrowing in recent months. Most cash buyers are investors, and investment activity has been slowing as metro Phoenix’s foreclosures fall and home prices climb.

In March 2013, 36 percent of Valley home purchases were all-cash deals, compared to 41.5percent in March 2012. Early in the housing crash, during March 2008, 16 percent of the home sales were paid for with cash. At the start of the housing boom in March 2004, 14 percent of all sales were cash transactions.

Sunday, April 7, 2013

How to market your rental homes in a competitive rental market in Arizona

Payam Raouf
President/Designated Broker
Arizona Property Management & Investments

Hello everyone. I do not want to be repetitive, please read the  post below (Investor home-buying update for metro Phoenix) to better understand the rental market condition in Phoenix Metropolitan Area. 

Institutional investors have dominated the market competing against each other renting their homes. If you own one or several renal properties you must be aware of the changes in the renal market to market your home right or it sits there for months without a tenant.

We manage homes for several institutional investors. A) their homes are rent ready, completely renovated. B) they require less initial deposits C) they rent it up to 20% below the current market rent. D) their standards to lease are a lot easier than most landlords. E) they are very generous when it comes to paying a commission to agents to rent their homes quickly, they pay the first month's rent or at least 75% of the gross rent amount.

Fannie Mae and several other institutional investors go as far as keeping the current tenants in place with very favorable terms and no deposits!

Investor home-buying update for metro Phoenix

Posted on by
Street funds and other large well-funded investors continue to buy houses in metro Phoenix, even though the pace has slowed as sales prices have jumped.
Some of the early investors, who bought in 2009, have flipped the houses for a quick profit, but most of these buyers are holding on to the properties and turning them into long-term rentals.
David Bignoli, president of real estate data research firm Netvaluecentral Inc., recently completed a report on metro Phoenix’s biggest investors.
Currently, THR Phoenix, also known as Treehouse LLC, owns more than 6,000 houses in metro Phoenix. THR’s house purchases are funded by New York-based international investor Blackstone Group.
Since early 2012, Blackstone has been on a house-buying spree in Phoenix and other markets hit by the foreclosure crisis, including Atlanta, cities in Florida and California since early 2012.
Most of the big residential investors in metro Phoenix are buying in these other markets as well.
Scottsdale-based American Residential Properties ranks no. 2 for house ownership in the Valley with more than 2,700 houses. The firm was started by some former executives of Franchise Finance Corp.
Empire Residential owns almost 1,700 houses in the Phoenix-area. The Scottsdale-based investment group has been around for several years and is led by Richard Felker and Geoffrey Jacob.
The fourth-largest holder of houses in the region is Santa Monica, Calif.-based Colony Capital. The well-known investment group has set up a Scottsdale headquarters for its residential activity. Colony owns more than 1,600 metro Phoenix houses.
Most of these investors rent their houses out, and say they plan to hold them for the long-term and make money on stable rents.
A few plan to package rental houses into publicly traded real estate investment funds sold to other investors.
Another interesting fact to note about many of metro Phoenix’s biggest investors: about half of their houses are listed in property records as owner-occupied.
It will be telling to see what these investment numbers look like in six months. Will these investors stop purchasing metro Phoenix houses in the next six months because of rising prices? Or will some sell their houses in the area because of rising prices?