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.

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.

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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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