Wednesday, December 30, 2015

Forecast Says U.S. Home Prices Are Overvalued, Will Peak In 2016

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By Nick Timiraos 
Wall Street Journal
The U.S. home price rebound has nearly run its course, and Americans should prepare for several years of home prices that don’t increase much, if they rise at all, according to a report published by bond strategists at Bank of America Merrill Lynch.

Most economists expect home prices to rise around 5% this year, before rising at around 3% over the next few years. Home price increases in recent years have been driven primarily by supply shortages, and some economists have said that prices could continue to outpace income or rent growth if more homes aren’t made available for sale.

To be sure, U.S. home prices have been especially difficult to predict in recent years. Many analysts prematurely called a bottom in 2008 or 2009, and others called for continued declines in 2012, after prices had started rising.

Analysts Chris Flanagan and Gregory Fitter concede that their view is “well out of consensus.” They say that U.S. home prices, after being undervalued relative to household incomes by around 6% at the end of 2011, have now rebounded to levels that are 9.7% overvalued. Their model uses the S&P/Case-Shiller home-price index.
They estimate that home prices will rise another 3% annually in each of the next two years, well below the 9.5% annualized growth rate since the end of 2011, when the market hit bottom. That would leave prices around 12% above the “fair value” level implied by household incomes. The model then forecasts modest declines in the following years, resulting in net annualized home-price gains that are flat through the middle of 2022.

So does this mean U.S. housing markets are in another bubble? If it is, it’s much less pronounced than in 2006, when home prices peaked at levels that were overvalued by nearly 59%, resulting in price declines of nearly 35% over six years.

Messrs. Flanagan and Fitter say that the regulatory framework enacted since the financial crisis in 2008 should largely prevent a return to the loose-lending standards that inflated the housing bubble. Against that backdrop, flat home prices between 2016 and 2022 “seems to us to be a fantastic outcome and exactly what policymakers had hoped for when establishing the new regulatory framework,” they write.

They also point to recent home-price indexes that show that the pace of increases has already slowed, suggesting that the post-crisis boom in home prices witnessed over the last two years “is most likely over.” A new period of “exceptionally low home-price growth” in which prices will rise by just 1% a year, on average, over the next eight years “most likely has started,” they write.

Why Arizona real estate may not be a good economic bet in 2016

If I were the type of person who extrapolated from data to form a conclusion I wished would be true I’d say that there will be much more money for Arizona entrepreneurs in the future than there has been in the past.
The reason is that an economic forecast for 2016 I attended last month predicted real estate would be a lousy investment in the foreseeable future. And if Elliott Pollack is saying that – he of the endlessly optimistic forecasts since the '80s – it must be grim for the money in Arizona that knows no other investment.

According to Pollack, next year will be just like this year. There’s no irrational exuberance and the debt ratio is low, as low as it was in the 1980s. Inflation is low, and oil prices are low. We are now down to importing only 21 percent of our oil, compared to 65 percent in 2005, which means as a nation we’re saving about $420 million a day on oil.

The dollar is stronger, mostly because the U.S. is the prettiest house on an ugly block. In times of crisis, people flee to the dollar, and that means foreign goods are cheap here, but our goods are expensive overseas. It’s a good time to go on an international vacation.

So there’s no recession coming.

However, the remaining debts are auto debt and student loans. In manufacturing, which largely means automobiles, inventory to sales ratios are out of line, which means cutbacks in manufacturing even though the average age of a car in the U.S. is 11.5 years.

For the first time in 40 years people have had to live within their incomes, because there are no bubbles, either in the stock market or housing, which would allow them to feel wealthy.
Moreover, the number of people in their peak earning years (45-54) is decreasing and won’t increase again until 2023. Only 26 percent of people 18 to 34 are married, so millennials won’t get to the suburbs with their kids until the mid 2020s.

Predictions for the 2016 Housing Market

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Thursday, December 10, 2015

Here’s what the housing and mortgage industry will look like in 2016

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One insider's look at 2016
December 8, 2015

Lynn Effinger

Lynn Effinger is a veteran of more than three decades in the housing and mortgage servicing industries. He serves as president of Effinger Consulting and is the author of the inspiring memoir, Believe to Achieve – the Power of Perseverance.

As an interested observer and active participant within the housing and mortgage servicing industries for more than three decades, I have opined on many industry-related subjects over the years, and each year also present my own predictions for the coming year. Why not, since predictions are like opinions and noses… most everyone has one?

There are numerous reports and other predictions out there pointing to positive improvement for the housing sector in 2016, or that indicate there are signs that we will continue to experience a housing recovery next year (which has actually only been true in specific markets, i.e., the Bay Area, Manhattan, Southern California, Denver and Salt Lake City to name a few). My opinion is that although 2015 looked a lot like 2014, next year will not mirror them in this vital sector.

Before I list my predictions, it is important to note that everyone’s predictions are relative to the economy in general, and the housing sector in particular is subject to unforeseen domestic and global disasters, man-made and otherwise.

Therefore, since 2016 is shaping up to be a potentially chaotic, unstable and unprecedented year of upheaval around the world, and is perhaps the most important national election year of my lifetime, it is quite possible that my predictions will not come to pass after all.
That being said, the following are some of my housing and mortgage industry-related predictions for 2016:

1. Interest rates 
Interest rates will rise not only in December by at least one-quarter percentage point, but will continue to rise throughout the year for a total increase of more than 1%, due to actions of the Federal Reserve. Each uptick in mortgage rates will prevent many potential first-time buyers (and others) from qualifying for a loan. This will impact days on market of homes listed and will put pressure on listing prices to be reduced. If there are not enough first-time buyers entering the housing market there is less opportunity for existing homeowners to move up, which will also add days on market and impact pricing.
2. Luxury housing 
A continued drop in luxury home prices, as reported in HousingWire, will influence a similar drop in home prices of nearly all price categories, which, combined with higher interest rates as stated above, will have a negative impact on the health of the housing sector.
3. Mortgage credit 
Credit will remain tight in 2016, despite efforts by Fannie Mae and Freddie Mac to make more 3% down payment loans. This means that rental properties will continue to be in high demand causing ever increasing rents, which, like many mortgages today represent 40% – 50% of the income of renters and homeowners, which, with stagnant wages is unsustainable. This will negatively impact consumer confidence.
4. Consumer confidence 
Consumer confidence in general will be negatively impacted because of the continued lackluster growth of our domestic economy. Until there is a dramatic change in the direction of this country with respect to deregulation of businesses (especially small businesses) and the creation of meaningful full-time jobs, the housing sector will not gain the strength it has had in the past.
5. Delinquent housing inventory 
Inventories of delinquent and foreclosed loans have not disappeared and will only grow, further negatively impacting home prices in many markets, as reported by Ben Lane in HousingWire. In his article, Lane said, “Based on the number of past distressed loan sales and the amount of non-performing loan sales and re-performing loans that still exist on the books of Fannie, Freddie, HUD and commercial banks, even if the number of NPL and RPL sales stays at its current post-crisis high, there are still four years’ worth of potential NPL sales volume and six years worth of RPL sales volume left to sort out.”
And that is assuming, as Lane noted, that no more additional loans become delinquent, which is unlikely in the extreme.
With dramatic improvement in the quality of leadership in Washington and elsewhere, perhaps a more positive outlook is possible, but I can only call ‘em as I see ‘em.

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Saturday, September 26, 2015

Where are we going from here? REAL ESTATE MARKET IS HOT HOT HOT IN ARIZONA.

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Where are we going from here?

On the one hand I wish the phones stopped ringing, on the other this is best market we have had since the crash of real estate in 2006/2007.  In some areas prices have surpassed the heights of 2004/2005, in others they are getting very close to it. 

Unemployment is at its lowest level in Phoenix Metro since 2006. Good luck finding a handyman, a skilled construction worker or even a skilled office manager at a reasonable hourly rate! In June 2015 unemployment rate dropped to 5% less than the 5.3% national average.  There have been 61,400 new hires in Maricopa and Pinal counties since February 2014, according to the Arizona Department of Administration ---  a pace higher than the average number of new jobs created during February over the last 10 years.

Mortgage companies are back logged 45 to 60 days. Days you put an offer with closed of escrow within 30 days are over! Rates are low, down payment assistance programs are back, financial institutions have eased up, first time home buyers and renters are swarming the market and multiple offers jamming up the fax machines. 

Title companies, I call them the “Moo Cow Corrals” offer no incentives to Realtors to get their business, let alone offering their clients a glass of water going to sign their docs. Buyers, Seller check your HUDs twice before you sign on the dotted line. They are making a ton of mistakes.  
Who is buying who is moving to Phoenix? 

Renters who lost their homes are on the top of the chart, second to that are the first time home buyers and thirdly savvy investor, Californians and opportunists.

From 2008-2011forclosures and short sales had become the norms of the market. As the result, too many home owners lost their homes and entered the rental market. 7 out of 10 of our tenants when they give their notice to vacate, “BOUGHT A HOUSE” is their answer to why they are moving out.  
With rent increasing 15 to 30 percent in most areas in the past 18 months and how affordable homes

are still out here in Phoenix Metro, rates being so low, banks competing and sellers contributing up to 3% towards buyers closing costs, it will be foolish not to buy a home. We see a lot of first time home buyers entering the market. For just a little more than their deposits and first months rents combined, they are buying homes and their payments are equal or a bit higher than the rent. 

Savvy investors sold their investment properties in California where prices have sky rocketed and it feels like we are back in the 2003 area where speculators were sleeping behind the new home construction offices to enter into a drawing to buy a home. Owning rental properties in Phoenix Metro pencils out way better than in larger metropolitan areas, especially in California. I heard from one investor in California that the exchange boards at her 1031 exchange office are filled up with investors looking to complete their exchanges and no properties to exchange it with in California that makes any sense. A lot of them are coming to Arizona from buying one to multiple single family homes to mid and large size multiplexes. I know first hands because we are getting those calls.
Younger Californians especially from Silicon Valley area are moving to Scottsdale. They tell me, you cannot get a decent condo for $700,000 up there. A 3000 square feet home with pool on a large size lot in a decent area costs a fortune. Most tech guys work from home anyway. So we get a lot of those calls too. Quite a few that have already moved down here seem to be very happy with their decisions specially the ones with children.

We also see a lot of big corporations in the east coast transferring their head honchos to Phoenix Metro looking to expand their operation. Cooperate relocation has picked up by at least 6% in the last 12 months and a few more applications are under review as we speak. 

Recently there have had quite a few tenants with good credits from Los Angeles and Orange County moving to Arizona in search of new opportunities.  Soon they will enter the home buying market as well. 

Who are the sellers? 

A)     Owners that have been under water with their mortgages for the last ten years finding it now make sense to sell.
B)      Canadians investors: Most of the Canadians who bought investment properties in Phoenix Metro bought in when Canadian Dollar and US Dollar were at par in 2011. Now one US Dollar equals to 1.33 Canadian Dollar so they enjoy the property value appreciation plus an additional 33%.
C)      Owners who are up sizing/downsizing. Regular sellers.
D)     Flippers. There are still some opportunities not as much in the lower end homes out there to fix and flip. Higher price homes make more sense as long as the economy is doing well. A fine line to walk in that area. Be careful.  
E)     Very little foreclosure.

We specialize in buying and selling investment opportunities from a single family home to multi million dollar multiplexes. Our team at Global Real Estate Investments consists of seasoned Realtors that have got the pulse of the market and can lead you to the right opportunities. Our property management Company, Arizona Property Management & Investments is an award winning property Management Company in Phoenix Metro ready to get your vacancies filled and get those dollars into your back account reducing your liabilities. Our Maintenance Company, Arizona Handyman and Remolding Services LLC makes sure your investment is maintained well and up to date at a reasonable cost reducing your overhead  adding to your bottom line.

Please call me directly at 888-777-6664 ext  114 ( please make sure you tell the receptionist  you are an investor, they screen all my calls) or email me at
By looking at the articles below, you will see that we have been preaching those areas to our investors for the past two years.  We know what, where and how to help you make your next investment move to maximize your long and short term gains. Don’t make this decision on your own even if you live in Phoenix yourself. This is a free consultation.

Thank you.
Payam H. Raouf
(888) 777 6664 ext 114

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8 Phoenix-area cities hit top 50 healthiest US housing markets


Eight Arizona cities are rising in the ranks of healthiest housing markets in the U.S., according to a WalletHub study. They all landed in the top 50 healthiest U.S. housing markets for comparably sized cities based on population.
Gilbert, a midsize city, ranked the highest of the Arizona cities at No. 11. Chandler was next at No. 22 and Tempe ranked No. 28 in the midsize cities. Among large U.S. cities Mesa ranked No. 40 and Phoenix was No. 46.

The website consolidated rankings in 14 criteria, including pricing, percent of homes still under water, days on market, affordability, and other measures to determine the healthiest markets in the U.S.

Texas topped the healthiest markets list with No. 1 positions for Austin (large), Plano (midsize) and Frisco (small).
Other Western markets ranked high as well. Seattle (No. 2, large) and Denver (No. 3, large) ranked higher than all Arizona cities. Salt Lake City (No. 21, midsize), trailed Gilbert, but was just one ranking ahead of Chandler.
Rank of Arizona cities among healthiest U.S. residential real estate markets
  • 11 Midsize - Gilbert
  • 22 Midsize - Chandler
  • 28 Midsize - Tempe
  • 35 Midsize - Peoria
  • 36 Midsize - Scottsdale
  • 40 Large - Mesa
  • 46 Large - Phoenix
  • 49 Large - Tucson
  • 55 Midsize - Glendale
  • 88 Small - Surprise
  • 123 Small - Yuma
Source: WalletHub
Eric covers economic development, banking and finance, infrastructure, transportation and utilities.

Monday, June 22, 2015

US home sales jump in May, average prices close to 2006 peak

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Rents have increased by 10% or more in most Phoenix Metro Areas since January of 2015! The inventory is low and demand is very high specially in areas where school districts are most  desirable such as Anthem, N Peoria, Deer Valley, N Glendale, Gilbert, Chandler, Mesa, Ahwatukee and N. Phoenix. 

Even with the home prices rising, the demand to purchase rental investment
properties in Phoenix Metro Area has picked up. Quite a few investors from California and New York  where home prices has gone up substantially in the past two years have started investing in rental properties in Phoenix Metro again. Their focus is long term. They are buying prime real estate in the $180,000 to $300,000 in the most desirable areas. 

If you are interested in knowing where and what they are buying and need some recommendations, please contact Payam Raouf, Owner/Designated Broker at (888)777.6664 ext 114.  Thank you. 

US home sales climb 5.1 percent in May; tight supplies drive up prices

By Josh Boak, AP Economics Writer 

WASHINGTON (AP) -- More Americans bought homes in May, a sign of economic strength that is pushing up average prices.
The National Association of Realtors said Monday that sales of existing homes climbed 5.1 percent last month to a seasonally adjusted annual rate of 5.35 million. May was the third consecutive month of the sales rate exceeding 5 million homes, putting home-buying on pace for its best year since 2007.
Solid hiring since 2014 and relatively low mortgage rates have stirred up demand and helped generate more first-time buyers, though rising sales have fueled spiking prices because relatively few properties are listed for sale.
"We can credit that to the stronger job market, a more confident consumer" and some additional listings in an otherwise tight market, said Jennifer Lee, a senior economist at BMO Capital Markets.
Some of the buying might also reflect a rush to capture the benefits of lower interest rates and relatively cheap prices that are jumping higher each month.
"There may be some anticipation of prices going even higher, which is sparking a move off the sidelines," Lee added.
Median home prices climbed 7.9 percent over the past 12 months to $228,700, about $1,700 shy of the July 2006 peak.
The market has just 5.1 months' supply of homes, versus an average of six months in a healthy market.
Economists say that the sales gains of recent months could be short-lived if prices increase so sharply buyers are priced out of the market. The recent rise in mortgage rates could also curtail sales, similar to the higher mortgage rates slashing into sales in the middle of 2013.
Still, real estate has begun to show some strength after muddling through much of the six-year recovery from the recession that has left millions of Americans still owing more on their mortgages than their homes are worth.
Sales jumped in all four major geographic regions: Northeast, Midwest, South and West. First-time buyers also accounted for a growing share of sales, a sign that younger buyers are returning to the market after enduring an economic downturn and sluggish rebound that delayed their purchases.
About 32 percent of the homes sold last month went to first-timers, compared to 27 percent a year ago. The improvement is substantial but still lags behind the historical average of first-time buyers composing 40 percent of the market.
More Americans signed contracts to buy existing homes in April — which should translate into more finalized sales in the following months. The Realtors' seasonally adjusted pending home sales index climbed 3.4 percent to 112.4 in April, the highest reading since May 2006.
Sales of newly constructed homes through the first four months of the year are up 23.7 percent compared to the same period in 2014, according to the Commerce Department.
Builders are gearing up to meet the additional demand.
Approved building permits in May surged 11.8 percent to an annual rate of 1.28 million, the strongest reading since August 2007, according to the Commerce Department. Construction firms are breaking ground on more houses and apartment complexes, with the government reporting a 6 percent increased year-to-date.
Much of that growth stems from the spillover effect from a stronger jobs market. Employers have added 3.1 million jobs over the past 12 months, increasing the total number of paychecks in the economy and the likelihood that more Americans will shop for homes.
Low mortgage rates have also helped, although rates are now starting to steadily rise in ways that might limit sales later in the year.
Average 30-year fixed rates were 4 percent last week, according to the mortgage giant Freddie Mac. That average has increased from a 52-week low of 3.59 percent.
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Saturday, January 10, 2015

Flip or Hold: Best Real Estate Moves for 2015

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    Whether it makes sense to flip or hold property depends entirely on your region.

    Closeup of a man calculating payments for a home.

    There is plenty of positive news for real estate investors to look forward to in 2015.
    Wild fluctuations in the nation’s real estate cycle have taken investors on a roller coaster ride since the early part of this century. From the first decade, marked by overheated home prices in many of the nation’s most popular metropolitan areas, to the post-Great Recession era sending home values into a free fall, investors have had to adjust and adapt their investment strategies to market conditions.

    So, going forward, which are the best strategies to pursue for real estate investors next year?
    The big picture for 2015. Looking at the nation’s housing and economic indicators, there is plenty of positive news to justify continued investor optimism in 2015. Home sales – both existing and new – are projected to increase next year, which is welcome news for fix-and-flip investors.

    At the 2014 Realtors Conference & Expo, Lawrence Yun, chief economist for the National Association of Realtors, or NAR, predicted a rebound for existing home sales for the next two years, and he projects the national median existing-home price will rise at a moderate 4 percent in each of those years. On the new home front, David Crowe, chief economist for the National Association of Home Builders, forecasted in an Oct. 31, 2014 National Association of Home Builders webinar that multi-family housing starts were projected to increase 15 percent in the rest of 2014 and hold steady in 2015.

    “Multi-family housing starts have rebounded back to normal since the downturn, mostly due to the strong demand for renting,” says NAR’s Yun, who also notes that renter households have increased by 4 million since 2010, while homeowner households have decreased by 1 million.

    Two major concerns remain: tight lending standards, which continue to keep people who could otherwise afford to buy a home from qualifying for a loan to finance the purchase, and interest rates, which are expected to hit at least 5 percent by year-end.

    Looking at the numbers. Daren Blomquist, vice president at RealtyTrac, says he believes 2015 is going to be a better year for buy-and-hold investors than for flippers – with the caveat that real estate values vary from area to area and property to property, so investment strategies will have to adjust accordingly.

    According to RealtyTrac’s numbers, the volume of properties being flipped declined dramatically, down from their most recent peak of 8.8 percent of all single-family home sales in the second quarter of 2012, to 4 percent of all home sales in the third quarter of this year.

    “As home-price appreciation slowed down, the flippers have become less active in this market as well,” Blomquist explains. “The interesting thing is that the volume of flipping is going down, but the average profit on a flip is staying very strong. The gross profit has stayed strong for the past three years in the 30 percent range.”

    For buy-and-hold investors, rental properties did well in 2014, although gross rental return was down slightly in the 586 counties surveyed by RealtyTrac, compared to 2013.

    “This year was not as good for buying rentals as last year. Last year, we had a 10 percent return because home prices went up, even though rents went up. Returns have slipped a bit because the cost of acquisition went up,” he says.

    Still, Blomquist says he believes it is a good time to buy rental properties, because the dynamics of this market are right.

    “We will see it flatten out because home prices are starting to flatten out as well. That will allow rents to catch up with home prices, which is good for buy-and-hold investors, but not as good for the flipper,” Blomquist says.

    The local perspective. To best-selling real estate author, attorney and longtime investor William Bronchick, 2015 is going to be a good year in the Denver market for owning rental properties, but not as good for flippers.

    “It’s great market for rentals, because people still can’t get loans and there’s so many renters. The lending market is tight, so there are more renters, so higher rental rates and lower vacancies make for a great rental market,” Bronchick says. “On other hand, inventory is low, so if you can get your hands on a good motivated property, then you’re good for a flip.”

    Working in North Carolina and South Carolina, investor and trainer Larry Goins, says current market conditions in these states are good for both flippers and rental property owners.

    “There are deals to be had, but you have to work harder to get them,” Goins says. “I like to buy lower-priced houses and rent them or do lease options or seller financing.”

    Specializing in the Atlanta market for decades, Andy Heller, a real estate investor and trainer on these topics, says that since the market crash, a buy-and-hold strategy has made more sense, because investors could buy property very inexpensively.

    “Most of the country has settled into a more normal appreciation especially in the last six months or so,” Heller says. “Allowing for the fact that we’re in a time of normal appreciation, what strategy is the best? Both. We don’t have an overheated market and we don’t have a collapsing market.”
    In the Greater Phoenix area, supply and demand economics will dictate the right investment strategy in 2015.

    “The Greater Phoenix market has been in low supply and low demand for 15 months now,” says Alan Langston, executive director of the Arizona Real Estate Investors Association or AZREIA. “We’re not sure that’s going to change anytime soon. Our market’s been stagnant for a long time, but that doesn’t mean real estate investing has been bad. It’s been different.”

    Langston believes investors will continue to be successful, they are whether rehabbing and flipping houses, or holding onto rentals - but they will have to approach the business differently than they used to.

    “If you know what you’re doing as a real estate investor, you’re going to adjust what you need to adjust so you do well on your property,” Langston says. “If you’re an informed investor, you’re going to be fine,” he says.

    Investor activity varies by investor, region and property types., the largest online real estate marketplace, recently released survey data collected from investors bidding on properties across the country, which confirmed that buying property to hold and rent is currently favored over flipping nationwide. However, investor intent varies considerably between online and offline investors, regions, and property prices.

    The study showed that purchasing property to rent is more prevalent in the Midwest and South, whereas there appears to be a higher propensity for flipping in the Northeast. The flip versus rent split is nearly even in the West, with a very slight preference toward renting.

    “Real estate investors appear more likely to flip a property in those regions where home values are higher,” says Executive Vice President Rick Sharga. “Higher prices can translate to a faster and potentially more significant short-term return on investment. The hold-and-rent strategy seems most popular in markets where home prices are lower, allowing investors to charge a more competitive monthly rental rate and still produce reasonable returns over an extended period of time."

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

      Call For a Free Property Management Quote:  888-777-6664 Click Here Payam Raouf Designated  Broker 11/26/2021 I have come to the conclusio...