Call For a Free Property Management Quote:888-777-6664
Payam H. Raouf, Designated Broker
There are
two arguments. 1) this shall also pass soon 2) It’s going to linger around for
a while.
Short term:
we have had a big shortage of homes for sale. Inventory is rising slowly as the
result of COVID-19. Quite a few deals have already been canceled and are going
to in the near future adding to the inventory. Banks have started tightening up
their lending practices, they require more down payment and higher scores and down
payment assistance programs are seeming to have dried up.
On the other
hand, buyers are digging into their savings to get through these tough days and
are uncertain about their jobs and ability to pay a mortgage with all that goes
with it, tax, insurance, HOA, upkeep, PMI etc.
Some sellers
are getting into a panic mode. I have seen on MLS one dropped the sales price
from $300,000 to $275000 to $229000 in two weeks’ time. That is most likely
one that might have some other circumstances to do that. I am hearing a couple
others calling our office to sell their homes $25000 to $30,000 below the
comps. Some seem to be very anxious and are offering tenants generous incentives
to buy the house if they qualify.
This month,
in April we have received 99% of our rents and I believe we receive a few left
by the months end. We have a selective process
to rent our homes and our homes are well kept and maintained.
Not everyone
is in the same situation as us I hear though. I have heard up to 30% of their tenants
have yet not paid or cannot, especially in the apartment complexes.
There are
some good deals to be made in this uncertain time … how long is that going to
continue? Not for long. Demand is still there. I would say it goes on to June
and July before we know where we exactly are.
In August through
the end of the year we are going to see the real affect of this virus specially
when the cold whether comes upon us again. If we have not found a cure or vaccine
by then, its going to get really ugly if COVID -19 hits in large numbers again.
You don’t need to be rocket scientists to know that.
However; the
reverse is possible but slowly as buyers solidify their positions to get back
on the market.
By then we
are going to have a healthier market, a more balanced one like in the 1998 -2003
in Phoenix Metro area.
Builders are
not going to stop building, they have got the permits and are building non stop
while they can and before offering bigger incentives to entice buyers like in
the 2006 through 2008.
Remember the
days homes were going up $5000 a week in 2005? We were about to reach that
point in time again but COVID-19 brough it to a halt.
We have literally
gone up from the normal prices in 2003-2004 at 3.5% to 5% increase year over
year to where we are today. Here is an example: If you bought a house in most
Phoenix Metro area in 2004 for $185000, it should be worth around $315000 to
$335000 today. Its normal.
We are not
going to see the crazy price drops of 30% to 50% this time around. Different circumstances.
Aside from a short-term panic, like buying toilet paper, market will stabilize at
3% going forward for a couple years. As cost of labor and material rises which
is going to sharply .. to cope with $5.5 trillion infusion to the market now
and even more in the years to come, the
rate of increase in prices will accelerate to the levels you have not seen …
The same house we talked about earlier could triple in value in 15-20
years to potentially $900000 to $1000000!
What a wise
man should do now. Look for deals. At these interest rate, you be out of your mind
to question that.
Rents have gone up substantially, even if they stop going up or drop slightly, you can still pay off all or a big part of your mortgage with your rent. Buy a few properties as you go along and as many as
you can while you can. Retire young and fat or you be skinny and poor before
you know it.
Good Luck
all.
Call For a Free Property Management Quote:888-777-6664
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