How I see it in the trenches here on the front lines. Arizona Real Estate/Rental Market Update.

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Payam Raouf
Designated Broker

11/26/2021

I have come to the conclusion that the market will peak off again after a short pause. That’s at least how I see it in the trenches here on the front lines.

 

I have been in the midst of it all since 2003!  I flew into Phoenix with two other brokers from Vegas in May of 2003 after the market started showing signs of cooling off there.

 

I picked Surprise, they picked Queen Creek. In Queen Creek, we drove through some rough muddy roads on the way to a new home subdivision that turned me kind of off. I had seen a drawing of what is now the post office complex on Bell Rd by Sun City Grand in Surprise and the hotels and shopping center at a developer office in Las Vegas prior to flying in.

 

I think that day I put my name on 20 to be built houses by Pulte  at Cotton Farms in Surprise. When I went back to Vegas, we immediately transferred those to the investors and the journey had just begun! Picking up one to three investors at the Phoenix Sky Harbor airport daily, taking them to a subdivisions, signing them up for a few properties here and there, and kept doing it for a good one and half year mostly in the west and northwest valley area. 

What a ride it has been since. Two BIG ups and one BIG down so far and everything in between. 

 

What’s next?

 

The game is changing. There is more competition for the same product, affordable single-family homes for the purpose of turning them into rentals. Not all homes make the best rentals. Unfortunately, that’s not what we see happening out there! Buying a desirable rental property is the key to your success and not all agents are in tune with that market.

 

Don’t expect any exceptional deals! Inflation has already got the best of it and is not going anywhere anytime soon! Not quite yet, but soon, you maybe able to find what you are looking for at slightly lower price than todays values. This window of opportunity is a very small and possibly towards the second and the third quarter of 2022. If you find the right one between now and then, take it.

 

If you are looking for immediate cash flow it is definitely not the right market for the time being. The return is not that great but with the right down payment it keeps you afloat for the first couple of years before it goes up the 3 to 5 usual percentage. At long as it appreciates at the same rate of inflation and above, it should be ok. With all the new money put into the circulation there’s only way it could go back down like in 2008; a natural disaster of some sort or an event somewhere in the world that is going to affect us directly. Riots and Chaos is short lived.

 

Everywhere you look they are building multifamily housing of some sort with many towards completion. Currently a lot of families and friends are moving in together to afford the rents. Once they move out into these units, it relieves some pressure from the SFR rental market, that is more like a year from now or so. It is expected that some of the other iBuyers like Zillow are going to stop or slow down their purchases substantially as the Fed is tapering down their asset purchase.  

 

What the cash iBuyers have been buying in 2020-2021 are mostly 4 bed room, 2000 and newer, properties around $350-425K that rent for $2,000 to $2,500, just like in 2010 and 2011 when they were buying almost every property at the auction at over the market value. Look at them now! What did they know?

 

It's simple. There will more people renting in the future than buying. Renting is not necessarily cheaper but you can work remotely from anywhere. Why tie yourself down to one place or another for too long?

 

They are moving a lot of distribution centers to Phoenix metro as well as some high-tech industries. Once we pass through this hurdle, market should get back to its normalcy. It would take a few years maybe three to even four.  

 

There will be a place to live for everybody across the board.

The influx of population to Phoenix is slowing down a bit for now. We used to have more out of state applicants in management position applying for our properties. Now a days, it is mostly the folks who come here to work at these facilities. 

In about five years Phoenix Metro may become one of the main tech hubs in the country as fast as they are are moving in ; Intet, Taiwanese microchip manufacturing facilities, Microsoft in addition to what we already have. 

So, expect a short pause before the prices go back up to the next level.

Yes, you should invest for the long run. Speculation is what got us where we were in 2006. This time is different; Yet, don’t get too excited to pay over asking price on the wrong type of rental investment. There is NO rush in this market. Do your due diligence first.  

 

Please Click Here and tell us what you are considering buying. We will do a FREE rental analysis for you! 

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Thank you.

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Sad but true. “I kill myself if I don’t find a place to live … !”

By: Payam Raouf
Designated Broker

Sad but true. “I kill myself if I don’t find a place to live … !”

“I kill myself if I don’t find a place to live because we are going to be on the street!” That’s what an applicant told me over the phone when his applications kept being turned down over a previous eviction. Some applicants are paying in access of $1200 application fees for various rentals.

Almost everyone tells me the reason they have to move is “the owner is selling.” Do you blame them? For sale inventory is going up by leaps and bounds. Since mid August 2021 number of single family homes for sale has gone up by a surplus of  about 100 per day.

For almost a year we have been hovering around 4000 SFH for sales at any given time. Now we are over 6000 as of today 9/19/21.

There is no waiting list at new home builders and spec homes are piling up again. A few builders have already started offering bigger incentives to get rid of their existing inventory. 

Well, that reminds of me of about the end of 2005 to mid-2006. For those of you who have been around don’t you see similar trends?

To top that off, everywhere I turned my head I see rental apartments being build. Some are almost done, some will be completed in less than 6 months. Well, that’s good news for the buyers and renters and may be bad news for some sellers and landlords.

Well my friend I told him, “Calm down and have faith, fix your credit and wait another 6 to 12 months meanwhile let me see what I can do for you”.

A large number of applicants write down on their application the reason they are moving is, “OWNER IS SELLING”. They also tell me they just need a few more months, they have already applied for these apartments and been accepted but they won’t be able to move in for another two to three months.  

The way it is going we should see the inventory for sale increase to 10,000 by the end of this year and around 20,000 by July 2022. Lot of renters has already renewed their leases for another 12 months and even if they were going to buy, they have to wait till their lease is up. I see builders or sellers offering to pay off their lease as an incentive to get them buy their homes. Why not?

Of course, the bigger the supply, the less rents and prices. They eventually come down even if the fed slows or even stops buying these inflated mortgage bonds and keep printing more money.  

So:

If you are a buyer you might want to wait a bit longer even if you risk the rate going up even a point. Prices should adjust to it, pretty much same payment but at least you will be able to find the right home, negotiate a better price and posed for higher future gains adjusted to the financial climate. Being upside down locks you in place for a while even if your life circumstances change. That’s a tough position to be. It’s like being in a bad relationship you want out but you cannot.

If you are a renter, renew your lease for a year. Rental inventory will be going up. The writing is on the wall. Just look around. A lot of these cash buyers have to rent them on top of all the condos being build, the higher the inventory the better your chances of finding a more desirable home and a better deal.

If you are considering selling, you should take advantage of these cash buyers unless you have a unique property in a desirable location. It may not be affected as much. I am considering doing the same.

Now folks in the long run once everyone gets adjusted to the “New Normal” find the right job, you are going to see the hyperinflation kick in again. You will be able to make more and afford more. I encourage you highly to be a home owner because going forward; rent will always be running ahead of your income. If socialism is what you are looking forward to, that may be your only option.

If you own rentals and going long why even consider selling? Even if the prices come down in the short time, you are going to have buying and selling costs of about 15 percent plus loss of rent and possibly paying a lots of taxes if you don’t find a good place to reinvest your money. What a better place than real estate.

Here is my two cents. You may see it different. This is just my personal opinion you have to do what you think is right for you.

Best wishes to all.

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How is the rental market in Arizona? There is a silver lining in the market, take advantage of it.

By Payam Raouf

Owner/Designated Broker

IF IT IS MEANT TO BE, IT’S UP TO ME. JUST DO IT.

 

There is no excuse for not making money hand over fist these days in real estate. You listened to all naysayers on Youtube and now you are on this page!

 

Welcome! Since 2008, when I first started this blog, and 120,000 readers later, I have been able to predict what is coming next at least 6 months in advance. 

Except this time it is a no brainer. Yes, Yes, Yes, and Yes. There are some indicators that the market is going to make a short term ADJUSTMENT or at least go sideways for a very short time ( The silver lining in the market you have been waiting for) until everyone gets used to the NEW NORMAL.

 

Ok, let’s see: How come I see on most of rental applications the incomes have almost doubled in the last 10 years?

 

Remember a time not too long ago in 2011 when you could buy a house for 150K in Phoenix Metro? Now, it’s practically $400K. Imagine if this house becomes $800K in 10 years’ time. What’s wrong with that?! Then, you were making $3,000 a month. Now you are making $6,000 and in 10 more years maybe $12,000? Hyperinflexion is here to stay.

An older friend of mine said he used to own a house in Hollywood Hills that he paid $25,000 for 50 years ago and now it’s well over $2 million. Ask your grandparents, they’ll tell you.

 

In the last 5000 years rates have never been so low!!! Home prices are off the chart. It seems as if banks don’t care about the appraisal anymore. Then why should you?

 

Rents have gone up so high. I couldn’t believe when I heard a landlord asked us to raise the rent $1,000 a month, the tenant said, they would do $750 if the landlord agrees to renew it for two more years!!! An eighty year old man asked if we could only raise his rent $250 a month or he has to move in with the kids, a great tenant and a greeat Landlord, they agreed on $125. Every renter knows what I am talking about and seem to have no problem with the substantial rent increases. 

 

Either buy or rent, you have to roll with the punches. Make lemonade out of lemons as they say. Get up and go to work. Try to catch the train at the next station and if you are thinking the train is backing up to get you, dream on. Home prices are NOT going down like they did in 2010.

 

Another thing I am noticing on rental applications are more and more people are going into business for themselves, having a 9-5 job for the benefits and driving Uber or streaming videos on the side. Almost the whole country is back on selling something. How many calls do you get a day or are you making yourself to buy or sell something? Who are the losers? We all know. If ALL you are counting on is waiting for the stimulus check and government handouts to arrive stay where you are, this is a blog is not for you. Yes, There are some people that need the stimulus money like some elderly, single parents, sick and handicap to make the ends meet, the rest are free loaders if you ask me. Some don’t deny it either. “It’s free money and the landlord can wait for his rent” one tenant applying for rental assistance told me to my face in my office. He lived in a gated community in Scottsdale, drove a $125,000 BMW and got in excess of $20,000 in rental assistance. He has gone to lives in Newport Beach. 

 

Listen folks, I could have, should have, would have doesn’t work and never did. Set your goal to become a homeowner. Don’t let the institutional investors scare you off. Take advantage of the times. There is a silver lining in the market. It is short lived. JUST DO IT, Go house hunting today. Because, IF IT IS MEANT TO BE, IT’S UP TO ME. 

And if you are a real estate investor, you already doing it. Best wishes to you all. 

Please do your own due diligent. I don't have a crystal ball. Please leave your comments below. 

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What else is possible? Is Real Estate market going up or down in Phoenix Metro?

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Payam H. Raouf
President/Designated Broker

What else is possible?

Not much these days except sitting, hoping, watching the market and seeing your buying power go to hell!

Last I spoke with an agent in Las Vegas, there were less than 1000 single family homes for sale, here in Phoenix Metro less than 4000 and in Houston TX and  Charlotte, NC,  a similar story. 

You market a $300,000 house, it sells for $325000, and by the time it closes in 30 days, you’d be lucky to find one like it for less than $350,000.

Everyone is sitting put.

Institutional investors are buying whatever pops up at any price, one in particular I researched, bought 1600 plus homes, paid cash at asking price or above since the pandemic began in March 2020 until the end of the year driving the prices up through the roof.

Renters are sitting put literally taken hostage by the situation. They pay whatever it takes to renew their leases. No one is moving out except the ones that are getting lucky enough to buying a pocket listing or the rug is being pulled off from underneath their feet by the landlord selling.

You get the picture?

Nowadays cash is a liability and mortgage is an asset. So, get used to it. No one is asking what the cash-on-cash return is, everyone wants to dump their cash into something, what else better than into Real Estate?

If this trend continues which it seems it is going to for the next 3 years, the house you put on the market for the $300,000 now may be $600,000 by then. That’s at least what everyone I ask to sell their house tells me. 

Some think there will be a hiccup somewhere ahead but when, who knows, and if so, demand is so high right now that it doesn’t really matter? No one has a crystal ball. We are at the mercy of the global market specially China. 

Here we go. Have you heard of 40, 45 even 50-year mortgages? Now you did and remember where you did, right here. As an idea take for example:

Borrow $300,000 at 5% for 30 years you pay $1600 P&I

Borrow $500,000 at 2.5% for 40 years you pay $1600 P&I

Borrow $600,000 at 1.75% for 40 years you pay $1600 P&I

 $15 an hour is not going to cut it. We cannot buy, China cannot grow, as long as they keep buying our papers (inflated notes), fed is going to print more money and keep the rates low.

Have you looked at the cost of labor and material lately?  A 4x8-foot sheet of construction-grade plywood used to cost $10 a sheet. Have you been to Home Depot lately? How about $45. Labor cost, do not even go there, try to call a plumber or a handyman. Good luck finding one.

At least this is what I see in the trenches for now. Each market holds its own. Here in Arizona, we went from being a red to a blue state in this election that’s why all those from California, Washington, New York and Chicago are moving here. To them our prices are low comparing to where they come from driving rent and home prices up. 

Jobs here are plenty. Big boxes, distribution centers, factories are opening up everywhere. Big industry from Microsoft to Amazon  are here to stay. For the last four years, Chief Executive Magazine has ranked Arizona in the top ten best states for business.

I am not hyping it. I have been guilty of sitting on the side line myself to see how this election went but It’s time to start actively looking for a deal that makes sense. Not chasing the price but location, future potential and, if lucky, make $10 on your $5 scratcher after losing 2 or 3 times in a row.

And if you come up with a new invention 2 o’clock in the morning wondering what to do with your money, google it before you rush to buy the domain. Chances are it already exist.   

We know property management and investment market down here in Phoenix Metro. When you are ready to park your investment with us and let us handle all aspects of your rental management, give us a call. We have a proven track record, bar none. Here is the number. 888-777-6664. We are ready when you are. 

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