Sunday, August 29, 2010

HOA groups in Arizona cutting services, raising fees

For the past six months we have been encouraging our investors to stay away from purchasing single family income producing residential properties in the following cities, Buckeye, Maricopa and Queen Creek. Even though, there are still some pockets in these towns that we might consider at the right price.

Here are the areas we have been recommending:

North of I-10: Surprise, Avondale, Goodyear, Litchfiled Park, North of Glendale, Peoria north of I-10, West Wing Mountain, Deer Valley area.

South of I-10: Avondale within 1/1/2 miles south of I-10 and Estrella Mountain Ranch

EAST VALLEY: On the edges of Gilbert, Central Chandler, Ahwatukee and some new homes pockets in Mesa, Scottsdale South East of 101 freeway.

NORTH VALLEY: Anthem and North Phoenix


Home Prices in Scottsdale North of 101 have not hit the bottom yet, wait till November and December.

Cities of Buckeye and of Queen Creek are on the verge of Bankruptcy. City of Maricopa seems to be the best of the three.

Payam Raouf

HOA groups in Arizona cutting services, raising fees
Homeowners associations facing own crisis amid foreclosures
by J. Craig Anderson - Aug. 29, 2010 12:00 AM
The Arizona Republic

Thousands of vacant properties and millions of dollars in unpaid dues are taking their toll on Arizona homeowners associations, and homeowners are paying the price.

Over the past 18 months, an estimated 10 percent of the state's million-plus HOA members have abandoned their homes or been forced out by foreclosure, based on data from Arizona's largest community-management firms. Without payments from those members, many HOAs have been forced to raise dues, crack down on late payers and cut back on services.

As a result, the remaining homeowners have become secondhand sufferers in the foreclosure crisis, experts said.

In the most troubled master-planned communities, generally those in recent high-growth areas such as Buckeye, Maricopa and the Hunt Highway corridor near Queen Creek, delinquencies have reached alarming proportions, placing some HOAs under serious threat of bankruptcy.

Should an HOA go bankrupt, prospective homebuyers would not be able to obtain title insurance on the community's homes, making them nearly impossible to buy or sell.

With no contingency plans and little help available from cash-strapped cities and towns, homeowners associations are likely to face money problems for years to come, market analysts said.

"Associations are not designed to have 38 percent delinquencies, or even 20 percent," said Amanda Shaw, president of HOA management firm Associated Asset Management of Phoenix. "They're designed to have a 2 percent to 5 percent delinquency. They are designed to be successful."

Missing instructions

Arizona's estimated 9,000 HOA-managed communities range in membership size from a few dozen homeowners to thousands. Most require homeowners to follow detailed rules. But what they lack is a set of effective instructions telling HOA leaders how to manage when members don't pay.

Until about 15 years ago, HOAs were mainly for condominium projects and retirement communities. But beginning in the mid-1990s, homebuilders began applying the HOA model to nearly all new development on the metro area's fringes.

The HOA model proved useful to developers, he said, allowing them to offer more recreational amenities and maintain strict aesthetic control while they continued to build and sell new homes.

Under state law, each association has the ability to enforce its own rules, known as "covenants, codes and restrictions," which generally require homeowners to keep their property's exterior clean and uniformly decorated and their property free of excessive noise and vehicle traffic. The HOA covenants set regular monthly dues and grant HOAs the ability to raise money for extraordinary expenses through one-time fees known as special assessments.

The covenants also cover procedures for enforcing the rules, which usually begin with written warnings, followed by fines and, in the most extreme cases, home foreclosure. But foreclosure is useless against owners with no equity in their home; the lender receives all sale proceeds, leaving the HOA with nothing.

A recent study by online home-sales portal suggested that two-thirds of Arizona mortgage holders in the second quarter were "underwater," meaning the remaining balance of their loans exceeded the home's market value.

One thing HOAs still can do is pursue delinquent members via bill collectors and the court system, but Chandler resident and HOA member Liz Murray said it doesn't always go as planned.

"Our association went after one of our neighbors to collect $2,700," said Murray, a resident of the 2,100-home Southridge community.

"They won a judgment in court, but then she filed for bankruptcy," Murray said, leaving the HOA at a net loss because of legal expenses.

Delinquency crisis

The more vacancies in a community, the more aggressive an HOA must become to collect money.

At Johnson Ranch, a 6,000-home community along Hunt Highway, southeast of Queen Creek, vacant properties have become so prevalent that it's costing the community $18,000 a week to keep up with the problem, said Debra Campbell, who manages Johnson Ranch Community Association.

So far this year, Johnson Ranch is on pace to see about 1,500 homes change hands because of foreclosure or short sale, up from 1,058 transactions in 2009. Campbell said the HOA has turned that "churn" into a source of revenue.

The association recently introduced a new fee that is assessed every time a home is sold. The $174 fee, known as a "working-capital fee," is charged to both buyer and seller, which means the association gets almost $350 for every turnover.

Campbell said the fee has kept Johnson Ranch's HOA financially viable.

Several Phoenix-area HOA communities have added similar transactional fees, much to the chagrin of real-estate agents.

A law that took effect July 29 may challenge the use of such fees, though industry experts expect a court will need to determine how it applies.

Aside from property-transfer fees, Campbell said, Johnson Ranch has worked to reduce its delinquencies by tracking down current and former members who owe the association money.

Experts said many Phoenix-area HOAs have adopted tactics similar to those used in Johnson Ranch, which include the use of professional bill collectors, process servers and attorneys to track down debtors.

When necessary, Campbell said, her association has been using the courts to garnishee current or former homeowners' wages.

Some residents of the community described the association's tactics as cold-hearted and extreme, given the economic hardship many households are facing because of layoffs and repayment of predatory loans.

"I have been living in Johnson Ranch for five years, always paid my dues and cannot believe the constant harassment from the association," Johnson Ranch resident Michael Masters said. "Do we really need this in this economic hard time? This is the time we need to stick together and look out for each other."

HOA attorney Penny Koepke said it isn't fair to compare HOAs' current collections strategies to those of the past.

"Before, there weren't really that many people who were getting foreclosed on, so there's nothing you can really compare it to," said Koepke, of the Scottsdale-based law firm Ekmark & Ekmark LLC.

Community managers have to hold HOAs together financially, she said, and steep revenue declines have left many managers with limited options.

"We've had some communities where the delinquency rate was 50 to 60 percent and they had to stop providing certain services," Koepke said. "We've had some that have closed the pools, emptied them, because they just couldn't afford them."

Although there are no recorded instances of Arizona HOAs declaring bankruptcy thus far, the home-vacancy problem is widespread enough to cause serious concern, said Steve DeLaveaga, vice president of sales and marketing at Fidelity National Title in Tempe.

"There are over 25,000 homes in our state that are just empty, vacant," DeLaveaga said.

If an HOA did go bankrupt, the most serious consequence would be the inability of prospective homebuyers to obtain title insurance, required for any home purchased with a mortgage loan, he said.

"Title insurers cannot insure a home in an HOA that is bankrupt," DeLaveaga said.


HOA residents, boards and community managers have few resources to fall back on other than themselves.

West Valley resident Dustin Jones, an attorney who has been working with HOAs and the city of Goodyear on projects to reduce neighborhood blight, is one of thousands of Valley residents who have participated in volunteer efforts to pull weeds and clean up trash and debris inside what Jones called "zombie subdivisions."

"There's like three or four homes in there, and the rest of it is just dead," said Jones, who lives in Litchfield Park.

Johnson Ranch's Campbell, having confronted the problem and developed solutions, is now one of a handful of community managers visiting other developments to teach what she has learned.

At a June meeting organized by Chandler officials, Campbell explained to a group of HOA board members and residents how the Johnson Ranch association's financial situation has improved even though its foreclosure problem has worsened.

Chandler officials at the meeting said they were trying to support HOA communities in various ways, such as by hosting neighborhood meetings featuring speakers like Campbell, in addition to offering limited city resources such as landscaping and cleanup tools.

But with budget deficits of their own to contend with, most cities can't offer what HOAs need most: money and manpower.

"With a $16 million budget shortfall, we're really not able to do all of the things that we'd like to do," said Jennifer Morrison, director of Chandler's neighborhood resource division.

The Arizona Association of Community Managers, the industry group representing management firms, also has committed time and resources since the problems began, including the coordination of a cleanup effort inside the Higley Park community in Gilbert that involved 500 volunteers, industry spokeswoman Laura Zilverberg said.

Campbell said that her firm has organized many "self-help" maintenance groups made up of residents and that management staff have gone beyond what's expected to keep the community safe, even trespassing if necessary to eliminate safety hazards in vacant backyards.

Shaw said associations will continue to do what it takes to help their communities survive until Arizona's economy and job market recover.

Some municipal officials also are trying to figure out how to prevent future HOA meltdowns.

Gail Bosgeiter, Goodyear city code compliance manager, said city leaders are looking into possible new regulations that would keep future HOAs more financially stable.

Linda Lang, CEO of the Arizona Association of Community Managers, said officials probably will have a few years to figure it out.

"Homebuilders are saying the development isn't going to come back until 2013 or 2014," she said.

Saturday, August 28, 2010

Just be ready for it.


There is only one place investors may get 10% plus return on their money and that is buying and holding real estate at these levels in Arizona.

Stocks are down, bonds will tank SOON, banks bankrupt, Fed Bankrupt, (deep)Recession, stagflation, hyper-inflation, war world III around the corner...where the freaking Jiggity would you bury your cash if you don't speak Urdu or Pashtu? Sorry the rail roads are taken! Read this: Remember this dude runs the world’s largest bond fund. Next week we will go over investment strategies. Be at the meeting.

I have been bombarded with calls from serious investors wanting to re-enter the market in October with a ton of cash...Just be ready for it.

Sunday, August 15, 2010

Arizona real estate: Phoenix home prices down

by Catherine Reagor - Aug. 15, 2010 12:00 AM
The Arizona Republic

Home prices in metro Phoenix are falling again, and new data about upcoming sales suggest that they are likely to keep falling over the next few months, bringing concerns of a housing-market "double dip" closer to reality.

Home prices had fallen to a median $119,900 back in April 2009, marking the low point of the region's housing crash. Recent months showed small but steady increases, keeping the price above $130,000.

But in July, the median sales price of a metropolitan Phoenix house fell more than 2 percent, according to the real-estate research firm Information Market. It was the first time the area's median has fallen below $130,000 this year, and the second month in a row that home prices fell.

Pending home-sales data provided to The Arizona Republic show the downward trend continuing.

Thousands of Phoenix-area homes are in escrow. If those deals close at the sales prices listed in their contracts, the region's overall home-sales price will tumble nearly as far as April 2009's low point.

If home prices drop below that mark, most analysts will consider it a double dip. With prices below their previous low point, a housing recovery will be even further away.

July is traditionally a slow month for the Phoenix-area housing market. But there is little data to contradict what pending home sales indicate about where prices are headed.

Instead, several other factors also point to a continuing decline.

The region's recession-battered job market is still weak, meaning few new buyers.

The number of foreclosed homes, which often end up being resold at bargain prices, continues to rise.

And most people who were considering buying anytime soon have likely already bought, getting in on a federal tax credit for homebuyers before it expired in June.

Also concerning to some in the industry is Arizona's crackdown on illegal immigration, which has spurred some people to leave the state.

New residents, who help fuel home buying in metro Phoenix, are no longer moving to the area like they were before the real-estate crash and recession.

"The market is much weaker now than it was a few months ago, with demand down severely almost everywhere," said Mike Orr, who publishes a daily online analysis of Phoenix-area housing called The Cromford Report. "I am currently expecting the average square-foot sales price to fall about 1 percent a month during the next two months. It's anybody's guess after that. It could get quite ugly."

He tracks average square-foot prices because they are less skewed by a few high or low prices. The current average is $87 a square foot, down from $91 a month ago.

Declining prices

The search for a recovery in metro Phoenix's housing market began in April of last year.

Prices had shot up more than 50 percent during the boom of 2004-06, then collapsed amid a mortgage crisis and a local, national and international economic crash.

April 2009 brought the bottom. With the median sales price at $119,900, home values were the lowest they had been since January 2000, according to Information Market. Since then, home prices showed what appeared to be a small, slow recovery. Prices dipped occasionally but never for two months in a row.

Last month changed that. The 2 percent decline was the largest this year.

The Arizona Regional Multiple Listing Service, the home-sales database set up for the state's real-estate industry, now tracks home prices in pending sales agreements.

The index shows metro Phoenix's median home price falling from $128,000 in July to $125,000 this month to $120,000 in September. A slight recovery is expected for October, to $123,000.

The index tracks future home prices by analyzing signed purchase agreements scheduled to close in a given month. The actual median prices for those months may turn out to be slightly higher. The predictions typically run slightly lower than actual sales prices because of last-minute changes to purchase agreements that drive up the final selling prices.

Since most home sales close within three months of a buyer signing a contract, the listing service can track prices and sales from its real-estate-agent members as far out as three months.

"Even with historically low mortgage rates, people in Phoenix just aren't that excited about buying a house now," said Mike Metz, managing director of Scottsdale-based Sun State Home Loans. "More inventory and fewer buyers equals lower prices."

Falling demand

A declining number of home sales indicates that there are fewer homebuyers in the market.

Valley home sales neared record-high levels during the past 18 months as buyers snapped up inexpensive foreclosure homes and houses discounted for short sales. But last month, sales of existing homes dropped 24 percent from June's robust pace. New-home sales in July fell to 534, half their pace in June.

"We have been predicting this kind of contraction as the tax credit expires," said Phoenix home-building analyst RL Brown.

Market watchers say there were fewer first-time buyers last month because of the June 30 expiration of the federal homebuyer tax credit. People who would have purchased later this year or next year rushed to buy to receive the $6,500 to $8,000 credit and are now out of the market.

Investors continue to buy Valley homes, particularly from lenders who have recently foreclosed on them. In July, investors were behind more than 21 percent of all home sales, up from 17 percent the month before, reports Information Market.
"If you aren't selling an inexpensive home, it can be tough to sell in this market," said Jay Butler, director of realty studies at Arizona State University.

Interest rates are near record lows, but it's more difficult to obtain a mortgage now. Also, potential buyers who own homes and can't sell them are stuck until home prices climb.

Rising supply

As demand from homebuyers dropped, the inventory of homes for sale in metro Phoenix climbed. Too many homes for sale and too few buyers will continue to drive down home prices.

There are 43,000 homes listed for sale in the region, up from 41,500 in June and 37,000 a year ago but still well below the record 55,000 homes listed in early 2008, when prices began to plummet.

Still, sales prices are falling, and many of the houses for sale now are lower-priced: one-fourth are foreclosure homes or houses discounted for short sales.

Pre-foreclosures rose 34 percent in July. If many of those homes are foreclosed on and go up for resale, the median price could drop further.

Part of metro Phoenix's home-price plunge can be attributed to foreclosure homes that lenders sold at bargain prices in late 2008 and early 2009.

"So many homeowners and investors are underwater with their homes that foreclosures will continue to lead market pricing," said Deila Mangold, a broker with Scottsdale-based Ideal Homes Realty.

There also is concern that Arizona's new immigration law will cause more legal and illegal residents to leave the state and that many may leave behind homes that will end up in foreclosure.

"Demand for housing is directly related to population," said Ruff, the Information Market analyst. "If there's an exodus due to SB 1070, expect home prices and sales volume to drop dramatically."

Despite the housing market's current setback, many analysts still expect a return to a normal market of steady annual growth by 2015.

For now, market watchers are tracking home sales and foreclosures to determine if prices will drop as far as expected in September and whether they climb again in October as the Arizona Regional Multiple Listing index predicts.

"It's just that there are now far fewer buyers and far more sellers than at this time last year," Orr said. "It's too early to say whether the current setback will be mild, moderate or severe, but there are no encouraging signs in the data from August so far."

Sunday, August 8, 2010

Real Estate Market in Arizona August 2010

By: Payam Raouf
Owner/Designated Broker
Arizona Property Management and Investments
888-777-6664 ext 110

This year renters will be scurrying for shelter in Phoenix Metro Area until the ball drops in NY in 2011.
• Stranded speculators who bought homes for a quick flip at the peak of the market in 2005 and 2006 have been struggling to pay their mortgages. They have simply ran out of resources and no matter what they get for rent is not enough to cover their debt obligations. As the result they are either short selling or having the bank foreclose on them.Bara bing, bara boom and have nice day.
• Many of the homeowners living in their homes currently have thrown in the towel as well. They are too upside down in their homes and they aren't not simply worth keeping, knowing it would take 10 years before they can sell for what they owe on them. Meanwhile they are milking it to the last drop by not paying their mortgages, taxes, HOA fees etc saving as much as they can till they save enough money to move or rent. Short selling seems to do just that for them, so every hour we are having one more. Haleluya and thank you very much.
• Hispanics are vacating homes overnight leaving behind homes full of furniture, appliances, toys and kids bikes! Those homes will be lined up for sales as well. Hasta la vista baby and muchos gracias.
• New home builders such a s Pulte, Centx, KB etc are offering a better solution (kissing the papers again) to first time home buyers. They are sucking a good portion of buyers off the resale market, about 6000 of them last month. The resale inventory keep piling up as the result. Thank you for your contributions.
• The DOW bouncing one thousand points up and down on a monthly basis, long-term bonds losing their desirability, Two hundred and twenty two banks failing since the beginning of 2008, fighting two wars simultaneously, having a un experienced president is not helping the housing crisis in America specially in Arizona. "Xie xie" means "thank you" in Chinese.

Here is what we see happening in the Phoenix Metropolitan housing market.
Rents will continue to go up in most areas and home prices will continue to fall valley wide with no reasonable exit strategy at sight.

Here is economist Dean Baker's solution, proposed more than three years ago. I still haven't heard a good argument against it.

Instead of foreclosing on a loan and evicting the family, the lender should take ownership of the house and rent it out to them at a market rate for an extended period. In many areas, rents are much lower than mortgage payments, so the family can afford to stay put. Eventually, once the market recovers, the bank could sell the house.

What are the benefits of the Baker plan?

• It would reduce the supply of foreclosed homes for sale.

• It would keep neighborhoods intact and maintain home values by avoiding the blight of boarded-up, abandoned houses.

• It would not bail anyone out.

• It would keep families off the street, but wouldn't force them to pay more than the going rate for rents.

What are the drawbacks to the plan?

• It wouldn't work for everyone. Not every homeowner could afford to rent the house they now live in. Many wouldn't want to rent it.

• Banks don't want to be landlords. And they could potentially lose money by not selling the house now. Or not: dumping millions of houses on the market right now wouldn't be prudent, anyway.

• It would be a retreat from the idea that all Americans, regardless of their finances, should be home owners.

Currently as of 8/8/2010, there are 43,560 homes for sale in the phoenix metro area, up 26% since June 1, 2010. We shall see this number reach 55000 and by this year’s end and if no cure possibly 100,000 by end of 2012. There are 17,232 homes in short sale that number is increasing by the minute.

Homes in more desirable area are renting faster. Most desirable rentals are in Surprise, Goodyear, Litchfield Park, North side of Glendale, South part of Peoria,North side of Avondale. Scottsdale, Gilbert, Chandler, Tempe, as well as some parts of Mesa.

The factors affecting rent increases are as follows:

(1) Location, (2) number of bedrooms (4 to 5 bedrooms), (3) amenities, and (4) school district. There is ONLY 3,609 single-family homes in the market today … consisting of 1,803 three-bed rooms, 1,040 four-bed rooms, and 232 five-bed rooms. We are quickly running low on 4/5 bed room homes.

Over a year ago, under $1,000 rentals were very popular. Now, if we get a $2000 to $3000 rental it is gone within hours. We have never seen so many successful business people losing their homes and renting as in the past few months. We shall see a huge drop in luxury home prices valley wide soon.

If you are an investor, it is a good time for picking in certain areas. Stay away from short sales as 70% of them will be bank owned soon. Since there are so many short sales at unreasonably low prices, REOs (bank owned properties) are staying in the market longer and you can get them at a good discount.

Coming October, November, December, there will be thousands of renters in the market. If you start buying now, your house will be ready for rent by then.
If you are planning to rent, don’t wait until the last minute to find a home. It is going to get very difficult to find what you want and if so, you will pay a lot more for it. If you have the financial ability and your house is in the process of a short sale try to rent by the end of October

This is only my opinion based on changes I see in the inventory, requests for showing and application coming to my office. As renters and Investors, you are to do your own due diligent.

Phoenix metro housing is on steroid. Take refuge! 7 to 9 percentage mortgages are around the corner.

A+ with BBB CALL TOLL FREE: (888)7776664 Get a free Quote Payam Raouf Designated broker Phoenix metro housing is on steroid. Take refuge! 7 ...