Investors…..STOP! It is not making sense anymore!
What is left on the REO market is literally undesirable and they are overpriced by 10 to 15 percent. Once in a blue moon, you may come across one (a fresh inventory) that you should pay 5% less for.
Here are some suggestions:Single Family Homes, 1995 or newer, 2ooo sq ft or larger, 4 bed rooms, 2 baths, 2 car garage.
Northwest Valley: Surprise, Glendale and Peoria: Stay under 135. Ask for 8% to 10% discount.
El Mirage, Waddell and Youngtown: Stay under 100k. Ask for 10% to 15% Discount
Sun City: don’t make much of an investment. Their HOA fees are too high.
South West Valley:
Avondale, Good year, Litchfield Park: Stay under 130k Ask for 8% to 10% discount.
Buckeye, Laveen and Tolleson. Stay Away for now
North East Valley: Scottsdale: Stay under 175K. Ask for 8% to 10% discount.
North Phoenix and Anthem: Stay under 150K. Ask for 10% to 12% discount.
Cave Creek, Fountain Hills, Paradise Valley, Rio Verde. Prices will continue to fall 20% or more.
South East Valley: Ahwatukee, Chandler, Gilbert, Tempe and Mesa: Stay under 165k. 5% to 10% Discount.
Queen Creek, Collage, Casa Grande, Maricopa, Gold Canyon, Florance and Apcahe Junction. Not right now. They still have ways to go down.
We are talking about single family income producing properties here… If you want to buy one to live in, it is good time to buy anywhere.
For more information call Payam Raouf 623-435-6633 ext 111 or info@azezrentals.com.
Sunday, January 30, 2011
Tuesday, December 21, 2010
Back to Location, Location, Location
Back to Location, Location, Location
By: Payam Raouf Owner/Assocaite Broker
888-777-6664
Arizona Property Management and Investments
www.azezrentals.com
Looking for a better return on your investment? I am not going to tell you what to do with your money. If you are a savvy investor you already know and you are my target audience.
You can easily get somewhere between 7 to 8 percent net return on a good investment property in Phoenix Metro Area right now. I am not going to tell you what to buy and where to buy here on this blog. The same popular floor plan may not be as an attractive in a subdivision within a block away from the other. Arizona is weird when it comes to that. The same home could rent $200 more or less and may not appreciate as much, or appreciate substantially in the future.
One thing I can tell you for sure though is we are back to Location, Location, and Location in real estate again. I get all these calls every day from investors who want to know what such and such home rents for. Some are right on the money; some are misled that it rents for a lot more than it should. Here are the things you need to consider when buying a rental investment property:
A) Location
B) Curb appeal
C) Floor Plan/Landscaping
D) Builder
E) Year built
F) Amenities
G) Taxes and Insurance
H) Costs associated with leasing/management /vacancy factor/maintenance cost, etc.
I) Legal and Tax consequences
The way we calculate these factors, a good rental property should rent for 1% of purchase price and the total annual operating cost should not exceed 30% of the gross rent.
EX:
Price of the home $100.000.
Gross Rent $1000 per month
Total Operating Cost including, tax, insurance, maintenance, management fee, Vacancy factor, HOA Fee etc should be around $300
Your Net Return should be $700 per month or 7% per year
If you are collecting less than that after you calculate all your costs, you are in the wrong business!
I own a pretty good size property management/ Investment Company in Phoenix. I am extremely busy with my own personal investors. However if you need some hints as what to buy and what it rents for etc, give me a call. I can give you my 2 cents to put into your own calculations. I also have several agents I have trained to help you find the right property if you need one. As for managing your property, we are a full service Real Estate/Property Management Company serving the entire valley. My designated Broker Rhonda Urtuzuastegui or one of our seven district managers can give you the personal attention you need. You can reach me at 888-777-6664. Ask for Payam Raouf. Good Luck.
By: Payam Raouf Owner/Assocaite Broker
888-777-6664
Arizona Property Management and Investments
www.azezrentals.com
Looking for a better return on your investment? I am not going to tell you what to do with your money. If you are a savvy investor you already know and you are my target audience.
You can easily get somewhere between 7 to 8 percent net return on a good investment property in Phoenix Metro Area right now. I am not going to tell you what to buy and where to buy here on this blog. The same popular floor plan may not be as an attractive in a subdivision within a block away from the other. Arizona is weird when it comes to that. The same home could rent $200 more or less and may not appreciate as much, or appreciate substantially in the future.
One thing I can tell you for sure though is we are back to Location, Location, and Location in real estate again. I get all these calls every day from investors who want to know what such and such home rents for. Some are right on the money; some are misled that it rents for a lot more than it should. Here are the things you need to consider when buying a rental investment property:
A) Location
B) Curb appeal
C) Floor Plan/Landscaping
D) Builder
E) Year built
F) Amenities
G) Taxes and Insurance
H) Costs associated with leasing/management /vacancy factor/maintenance cost, etc.
I) Legal and Tax consequences
The way we calculate these factors, a good rental property should rent for 1% of purchase price and the total annual operating cost should not exceed 30% of the gross rent.
EX:
Price of the home $100.000.
Gross Rent $1000 per month
Total Operating Cost including, tax, insurance, maintenance, management fee, Vacancy factor, HOA Fee etc should be around $300
Your Net Return should be $700 per month or 7% per year
If you are collecting less than that after you calculate all your costs, you are in the wrong business!
I own a pretty good size property management/ Investment Company in Phoenix. I am extremely busy with my own personal investors. However if you need some hints as what to buy and what it rents for etc, give me a call. I can give you my 2 cents to put into your own calculations. I also have several agents I have trained to help you find the right property if you need one. As for managing your property, we are a full service Real Estate/Property Management Company serving the entire valley. My designated Broker Rhonda Urtuzuastegui or one of our seven district managers can give you the personal attention you need. You can reach me at 888-777-6664. Ask for Payam Raouf. Good Luck.
Saturday, November 20, 2010
4 Things You Must Know When Buying Arizona Investment Property
Payam Raouf
Associate Broker
Arizona Property Management and Investments
www.azezrentals.com
888-777-6664
Even in a real estate market where you can acquire property at huge discounts, you still need to do your homework! What you know, or don't know, will impact the outcome of the investment. For example if you purchase a property in the wrong area of town or inaccurately calculate the rental market, then you may significantly hinder the growth of your investment. The proper research will allow you to minimize risk. Take the guesswork out of your decision to invest in real estate. This article will not necessarily tell you exactly which Arizona investment property to purchase; however will highlight 4 key components that should be researched when making the buying decision. You will also be provided with a few tools that will aid you in your analysis.
Location
The first component of buying an Arizona investment property is to determine the best location. How would you know this, unless you are actively working in or studying the Arizona real estate market? Just because you can pick up a single family home for $40,000 doesn't mean it is the greatest deal out there. There is a lot of money flowing into the Arizona market from investors located in other parts of the country, as well as other parts of the world. Many of these investors are purchasing property because it is cheap, not necessarily because it is in the best location.
The September 2010: Repeat Sales Index Report, published monthly by Arizona State University's W.P. Carey School of Business, provides detailed information on the state of the Arizona real estate market. This report highlights changes in housing prices by location, which is a great indicator for potential investors.
June 2009 - June 2010 Changes in Housing Prices by Region
Central +5.8%
Northeast -5.1%
Southeast -1.3%
Northwest +1.8%
Southwest +4.2%
Based on the data above, it would appear that homes located in the Central region (Phoenix) have outperformed other areas of the Valley. Some of the other indicators used in determining the best Arizona investment property location are foreclosure rates, median home prices, and pending home sales.
Property Type
The second component of buying an Arizona investment property is to determine property type. Whether it is a single family, townhome, condominium, or multi-family, you need to make sure the property fits in with your overall investment strategy. If you are looking to buy and hold for cash flow, then you are looking for the property that can yield the highest monthly rent (a duplex or tri-plex over a condominium or townhome). If you are looking for a fix and flip property, then a single family home with the most resale potential may be the best option. Once again, this article is not looking at what you should do, but to explain that there is a difference in property type based on your investment expectations.
Let's look at the investment strategy of purchasing a cash flow property. Obviously the goal is to acquire a property at the lowest cost possible producing the highest possible rate of return. The comparison below will show the potential impact that a certain property type could have on your cash flow strategy.
Condominium vs. Duplex Example
Condo
Purchase Price - $50,000
Monthly Rent - $650
Monthly Expense - $270
Monthly Cash Flow - $380
ROI - 9.12%
______________________
Duplex
Purchase Price - $100,000
Monthly Rent - $1,150
Monthly Expense - $270
Monthly Cash Flow - $880
ROI - 10.56%
Based on the above example even though the condominium is half the cost of the duplex, it yields a smaller Return on Investment (ROI). It is important that you factor in the monthly expenses associated with each property type. This particular condo had a $200 monthly homeowner association due (common on condominiums and townhomes), which lowered our monthly cash flow.
Market Value
The third component of purchasing a profitable Arizona investment property is accurately determining the market value. This is a MUST and to ensure the best information it is recommended that you contact a real estate professional. If you are not sure who to contact in the Arizona market, feel free to contact Payam Raouf at Arizona Property Management and Investments for a recommendation.
This section is not a guide to completing your own market valuation; however will provide you some tools to do your own due diligence and to be knowledgeable of the assessment process. There are many websites (Zillow.com, Cyberhomes.com, etc.) that will run an automated valuation for a specific property. In determining the actual value, these should only be used to give you a ball park and do not always take into account all factors that could impact what the property is really worth.
How is a property's value determined? This is not an exact science, but more of an educated opinion. The true value of a property is what someone is willing to pay for it. Whether it is an appraiser or other real estate professional, the market value is determined by analyzing comparable home sales in the subject property's locale. Some comparable factors include; age, lot size, square footage, number of bedrooms and bathrooms, and amenities (pool, upgrades, etc.).
At the end of the day, the market value will have a direct impact on what you will pay for a property. If the value is miscalculated, then you may find yourself overpaying for a property. This could result in a hit to your expected profit.
Rental Market
The fourth component that should be researched before purchasing Arizona investment property is the rental market. Whether your intention is to buy and hold or to fix and flip, it is important to know the strength of the local rental market. For those investors looking for a cash flow investment, the rate of return is largely dependant on this component. How much can you charge for rent in this area? How quickly are properties being rented out? For those primarily looking for a short term fix and flip investment, do not overlook this component. What happens if you are not able to sell your property as quickly as you had intended? This is your exit strategy.
There are 2 main factors to research when studying the Arizona rental market, monthly rents charged and vacancy rates. You may notice significant differences in these factors from one location to another. For example, the Department of Housing and Urban Development's 2011 Estimated Rent Report shows the estimated monthly rent for a 3 Bedroom Property in Phoenix with a 85021 zip code is $1,220 whereas the estimated monthly rent for a 3 Bedroom Property (also in Phoenix) with a 85022 zip code is $1,440. These estimates may have a large impact on where an investor purchases their property.
There are a many resources available to you with information on the Arizona rental market. However as with determining the market value, it is important to consult with a real estate professional or property management company. If you are not sure who to contact in the Arizona real estate market, please feel free to contact Payam Raouf at Arizona Property Management and Investments to get a recommendation.
It is a great time to purchase Arizona investment property; however it is important to do your homework. Now that you are familiar with the key components to purchasing a successful investment, it is time to do your research. Learn how Arizona Investment Property by Arizona Property Management and Investments can assist you in that research.
Associate Broker
Arizona Property Management and Investments
www.azezrentals.com
888-777-6664
Even in a real estate market where you can acquire property at huge discounts, you still need to do your homework! What you know, or don't know, will impact the outcome of the investment. For example if you purchase a property in the wrong area of town or inaccurately calculate the rental market, then you may significantly hinder the growth of your investment. The proper research will allow you to minimize risk. Take the guesswork out of your decision to invest in real estate. This article will not necessarily tell you exactly which Arizona investment property to purchase; however will highlight 4 key components that should be researched when making the buying decision. You will also be provided with a few tools that will aid you in your analysis.
Location
The first component of buying an Arizona investment property is to determine the best location. How would you know this, unless you are actively working in or studying the Arizona real estate market? Just because you can pick up a single family home for $40,000 doesn't mean it is the greatest deal out there. There is a lot of money flowing into the Arizona market from investors located in other parts of the country, as well as other parts of the world. Many of these investors are purchasing property because it is cheap, not necessarily because it is in the best location.
The September 2010: Repeat Sales Index Report, published monthly by Arizona State University's W.P. Carey School of Business, provides detailed information on the state of the Arizona real estate market. This report highlights changes in housing prices by location, which is a great indicator for potential investors.
June 2009 - June 2010 Changes in Housing Prices by Region
Central +5.8%
Northeast -5.1%
Southeast -1.3%
Northwest +1.8%
Southwest +4.2%
Based on the data above, it would appear that homes located in the Central region (Phoenix) have outperformed other areas of the Valley. Some of the other indicators used in determining the best Arizona investment property location are foreclosure rates, median home prices, and pending home sales.
Property Type
The second component of buying an Arizona investment property is to determine property type. Whether it is a single family, townhome, condominium, or multi-family, you need to make sure the property fits in with your overall investment strategy. If you are looking to buy and hold for cash flow, then you are looking for the property that can yield the highest monthly rent (a duplex or tri-plex over a condominium or townhome). If you are looking for a fix and flip property, then a single family home with the most resale potential may be the best option. Once again, this article is not looking at what you should do, but to explain that there is a difference in property type based on your investment expectations.
Let's look at the investment strategy of purchasing a cash flow property. Obviously the goal is to acquire a property at the lowest cost possible producing the highest possible rate of return. The comparison below will show the potential impact that a certain property type could have on your cash flow strategy.
Condominium vs. Duplex Example
Condo
Purchase Price - $50,000
Monthly Rent - $650
Monthly Expense - $270
Monthly Cash Flow - $380
ROI - 9.12%
______________________
Duplex
Purchase Price - $100,000
Monthly Rent - $1,150
Monthly Expense - $270
Monthly Cash Flow - $880
ROI - 10.56%
Based on the above example even though the condominium is half the cost of the duplex, it yields a smaller Return on Investment (ROI). It is important that you factor in the monthly expenses associated with each property type. This particular condo had a $200 monthly homeowner association due (common on condominiums and townhomes), which lowered our monthly cash flow.
Market Value
The third component of purchasing a profitable Arizona investment property is accurately determining the market value. This is a MUST and to ensure the best information it is recommended that you contact a real estate professional. If you are not sure who to contact in the Arizona market, feel free to contact Payam Raouf at Arizona Property Management and Investments for a recommendation.
This section is not a guide to completing your own market valuation; however will provide you some tools to do your own due diligence and to be knowledgeable of the assessment process. There are many websites (Zillow.com, Cyberhomes.com, etc.) that will run an automated valuation for a specific property. In determining the actual value, these should only be used to give you a ball park and do not always take into account all factors that could impact what the property is really worth.
How is a property's value determined? This is not an exact science, but more of an educated opinion. The true value of a property is what someone is willing to pay for it. Whether it is an appraiser or other real estate professional, the market value is determined by analyzing comparable home sales in the subject property's locale. Some comparable factors include; age, lot size, square footage, number of bedrooms and bathrooms, and amenities (pool, upgrades, etc.).
At the end of the day, the market value will have a direct impact on what you will pay for a property. If the value is miscalculated, then you may find yourself overpaying for a property. This could result in a hit to your expected profit.
Rental Market
The fourth component that should be researched before purchasing Arizona investment property is the rental market. Whether your intention is to buy and hold or to fix and flip, it is important to know the strength of the local rental market. For those investors looking for a cash flow investment, the rate of return is largely dependant on this component. How much can you charge for rent in this area? How quickly are properties being rented out? For those primarily looking for a short term fix and flip investment, do not overlook this component. What happens if you are not able to sell your property as quickly as you had intended? This is your exit strategy.
There are 2 main factors to research when studying the Arizona rental market, monthly rents charged and vacancy rates. You may notice significant differences in these factors from one location to another. For example, the Department of Housing and Urban Development's 2011 Estimated Rent Report shows the estimated monthly rent for a 3 Bedroom Property in Phoenix with a 85021 zip code is $1,220 whereas the estimated monthly rent for a 3 Bedroom Property (also in Phoenix) with a 85022 zip code is $1,440. These estimates may have a large impact on where an investor purchases their property.
There are a many resources available to you with information on the Arizona rental market. However as with determining the market value, it is important to consult with a real estate professional or property management company. If you are not sure who to contact in the Arizona real estate market, please feel free to contact Payam Raouf at Arizona Property Management and Investments to get a recommendation.
It is a great time to purchase Arizona investment property; however it is important to do your homework. Now that you are familiar with the key components to purchasing a successful investment, it is time to do your research. Learn how Arizona Investment Property by Arizona Property Management and Investments can assist you in that research.
Monday, October 18, 2010
Arizona home sales propped up by investors
Arizona home sales propped up by investors
Valley landlords buying some houses; hedge funds and equity firms want to buy more
by Catherine Reagor - Oct. 17, 2010 12:00 AM
The Arizona Republic
Investors are dominating metropolitan Phoenix's home-buying market again.
The region's growing supply of inexpensive foreclosure homes is drawing thousands of investors, who can pay cash and close deals fast. The growing supply of renters means those investors can make money off the homes they have scooped up.
The market has drawn a diverse crowd of investors, spurring small-scale landlords to add more homes to their holdings and attracting buyers from around the world looking to get in on a down market.
It also has quietly attracted investment firms that are buying huge quantities of houses in a strategy aimed at reaping big profits from today's low prices. Big investors are showing so much interest that some observers say lenders may soon start selling foreclosure homes in bulk batches, an unprece- dented tactic in metro Phoenix where the homes have always been sold in small groups or one at a time.
Whether the investor-buying trend of the past few months continues at this pace in the Phoenix area depends in some part on the foreclosure moratoriums announced in the past few weeks by a handful of the nation's biggest lenders. So far, many Valley real-estate agents and investors aren't seeing a drop in supply of fore- closure homes for sale or problems finalizing sales on lender-owned homes.
In the past, too many investors hurt Phoenix's housing market. Speculators were blamed for driving up home prices during the area's housing boom of 2004-06.
But now many traditional buyers, who would purchase a single home and live in it, won't buy because of concerns about another dip in home prices or can't because of bad credit.
So market experts say investors are welcome these days; without them, even fewer homes would sell. That would drive home prices down further and likely trigger even more foreclosures.
Investors are behind nearly 40 percent of all Phoenix-area home sales now, according to indus- try estimates, up from about 25 percent in January.
During the next year, Fannie Mae, Freddie Mac and other big lenders are expected to unload tens of thousands of additional foreclosure homes in metro Phoenix, meaning more low-priced properties ready for investors.
Foreclosure homes taken back by lenders are known as REOs, "real estate owned." It's a banking-industry term that has now become a buzzword among buyers and sellers in Phoenix's real-estate market.
"REO inventories have been climbing quickly, up 70 percent since early May," said Mike Orr, publisher of the "Cromford Report," a daily online analysis of metro Phoenix home sales and foreclosures.
"If investors were not active in this market, the situation would be dramatically worse," he said. "Prices would be very much lower, and blighted properties would be deteriorating instead of getting fixed up and resold."
All investors are looking for the best return on their money, whether that means keeping a home as a rental or trying to resell it for a profit. But the huge number of purchases means investors will shape neighborhoods and the resale housing market for years to come.
Classic investors
Julie and Mike Bieganski have bought 10 Phoenix foreclosure homes in the past 15 months.
The couple have lived in the Valley for several years and know the neighborhoods where they are buying. The Bieganskis' strategy is to pay cash for bargain-priced homes in central Phoenix that they can spend less than $20,000 to fix up for renters. Julie is a real-estate agent and finds the homes and renters; Mike handles most of the renovations.
"It's all cash deals now. But if you buy a home for $65,000 and rent it out for $850 to $900, that's a much better return than you would get on your money with a bank," Julie said. "To rent our homes fast, we can list them below current rental rates. With so many displaced people, the rental market will be excellent for years to come."
The Bieganskis already have a renter lined up for their latest foreclosure home, which they closed on less than two weeks ago.
The couple are looking for more to buy.
Julie found a low-priced, lender-owned home in northeast Phoenix last week and was going to make an offer but was unsure if the foreclosure moratoriums would stop or slow a sale.
"I asked the Realtor who has the listing what may happen, and she said everything seems to be fine," Julie said. "There was already another offer on the home. I really think if the folks left the house willingly and let the house go into foreclosure, it shouldn't be a problem to buy it from the lender. There are so many vacant homes out there."
The couple plan to keep acquiring foreclosure homes that fit their strategy and hold onto them longer, profiting on steady rents until they can sell the homes for a considerable profit. Many of their renters can't buy because their own recent foreclosures or short sales, in which banks allowed them to sell for less than they owed, hurt their credit.
If the investor-buying trend continues, some metro Phoenix neighborhoods are bound to have more renters than homeowners living in them. But since many investors are paying cash and fixing up the houses, another foreclosure cycle for those neighborhoods is less likely.
"We try to buy the ugliest home on the block and make it one of the nicest," Julie said. "We are also open to working out deals for people to rent-to-own our homes. We know it's tough to get financing now."
International buyers
Terri and Don Bozok live in Edmonton, Alberta, but were recently in Phoenix shopping for inexpensive houses.
The semiretired couple own a home in Mesa and visit the Valley often. They have seen home prices sag and feel like it's a good time to buy a few fixer-uppers they can renovate and sell quickly.
"We are definitely looking at foreclosures and not short sales because those take too long to negotiate," Terri said. "Because prices are down, we feel like it's definitely feasible we can make a few dollars on homes here."
In April, Canadians passed Californians as the biggest group of out-of-state buyers of metro Phoenix homes, according to the Information Market, a Phoenix-based real-estate data firm.
"Canadians are finding great values in Phoenix homes for their dollar," said Diane Brennan of Scottsdale-based Keller Williams Integrity First Realty. "Some are investing in a home they will rent for a few years and then use as a part-time retirement home."
Phoenix's housing market also is drawing the attention of buyers much farther away than Canada.
"We are seeing an interesting mix of international investors now. Everyone thinks Canadians are the only ones, but we have buyers from Pakistan, Bogota (Colombia) and Israel," said Beth Jo Zeitzer, an REO expert and president of Phoenix-based R.O.I. Properties. "Investors from around the world are seeing the housing deals in Phoenix."
Although some investors have been able to buy foreclosures for prices low enough to resell them quickly for a profit, most investors are buying knowing they will need to hold onto Phoenix homes for at least a few years before prices rebound enough to flip them.
Big groups, big funds
Since last year, G8 Capital has paid cash for more than a hundred metro Phoenix foreclosures homes. The Ladera Ranch, Calif.-based investment firm typically buys Valley foreclosure homes for less than $20,000.
The company led by Evan Gentry, former CEO of MoneyLine Lending Services, has been able to flip some of the Valley foreclosure homes it has bought but is also holding onto other properties and renting them out until home prices climb again.
"We will continue to buy in Phoenix. It's a great long-term market for us," Gentry said. "The foreclosure cycle is far from over, despite any lender moratoriums."
Unlike smaller investors, G8 can buy bulk portfolios of foreclosure homes located across the country from lenders.
"We can buy a portfolio that gives us five foreclosure homes in Phoenix and five in Cleveland," Gentry said. "Our strategies differ by city. We think Phoenix will be a great rental market for a while."
Several out-of-state U.S. hedge funds and investment partnerships are buying Phoenix foreclosure homes. Some of the firms are very low-key about their strategies, partly because they don't want to be seen as "vulture funds" profiting on the real-estate crash.
Most of these large investment firms have had to buy foreclosure properties one-by-one in metro Phoenix. Elsewhere in the country, they have received discounts from lenders when they buy several homes at once.
Zeitzer said when foreclosures started to climb in metro Phoenix in 2008, several groups formed to try to buy portfolios of bank-owned homes in the region. But so many individuals are buying foreclosures that lenders offer few deals to buy multiple Valley properties at once unless foreclosure homes in other parts of the country are acquired at the same time.
"In this second leg of foreclosures, lenders could start to sells homes in bulk to save time and money," Zeitzer said. "Investors are an important part of the market now and will definitely help keep inventories from climbing too fast."
Valley landlords buying some houses; hedge funds and equity firms want to buy more
by Catherine Reagor - Oct. 17, 2010 12:00 AM
The Arizona Republic
Investors are dominating metropolitan Phoenix's home-buying market again.
The region's growing supply of inexpensive foreclosure homes is drawing thousands of investors, who can pay cash and close deals fast. The growing supply of renters means those investors can make money off the homes they have scooped up.
The market has drawn a diverse crowd of investors, spurring small-scale landlords to add more homes to their holdings and attracting buyers from around the world looking to get in on a down market.
It also has quietly attracted investment firms that are buying huge quantities of houses in a strategy aimed at reaping big profits from today's low prices. Big investors are showing so much interest that some observers say lenders may soon start selling foreclosure homes in bulk batches, an unprece- dented tactic in metro Phoenix where the homes have always been sold in small groups or one at a time.
Whether the investor-buying trend of the past few months continues at this pace in the Phoenix area depends in some part on the foreclosure moratoriums announced in the past few weeks by a handful of the nation's biggest lenders. So far, many Valley real-estate agents and investors aren't seeing a drop in supply of fore- closure homes for sale or problems finalizing sales on lender-owned homes.
In the past, too many investors hurt Phoenix's housing market. Speculators were blamed for driving up home prices during the area's housing boom of 2004-06.
But now many traditional buyers, who would purchase a single home and live in it, won't buy because of concerns about another dip in home prices or can't because of bad credit.
So market experts say investors are welcome these days; without them, even fewer homes would sell. That would drive home prices down further and likely trigger even more foreclosures.
Investors are behind nearly 40 percent of all Phoenix-area home sales now, according to indus- try estimates, up from about 25 percent in January.
During the next year, Fannie Mae, Freddie Mac and other big lenders are expected to unload tens of thousands of additional foreclosure homes in metro Phoenix, meaning more low-priced properties ready for investors.
Foreclosure homes taken back by lenders are known as REOs, "real estate owned." It's a banking-industry term that has now become a buzzword among buyers and sellers in Phoenix's real-estate market.
"REO inventories have been climbing quickly, up 70 percent since early May," said Mike Orr, publisher of the "Cromford Report," a daily online analysis of metro Phoenix home sales and foreclosures.
"If investors were not active in this market, the situation would be dramatically worse," he said. "Prices would be very much lower, and blighted properties would be deteriorating instead of getting fixed up and resold."
All investors are looking for the best return on their money, whether that means keeping a home as a rental or trying to resell it for a profit. But the huge number of purchases means investors will shape neighborhoods and the resale housing market for years to come.
Classic investors
Julie and Mike Bieganski have bought 10 Phoenix foreclosure homes in the past 15 months.
The couple have lived in the Valley for several years and know the neighborhoods where they are buying. The Bieganskis' strategy is to pay cash for bargain-priced homes in central Phoenix that they can spend less than $20,000 to fix up for renters. Julie is a real-estate agent and finds the homes and renters; Mike handles most of the renovations.
"It's all cash deals now. But if you buy a home for $65,000 and rent it out for $850 to $900, that's a much better return than you would get on your money with a bank," Julie said. "To rent our homes fast, we can list them below current rental rates. With so many displaced people, the rental market will be excellent for years to come."
The Bieganskis already have a renter lined up for their latest foreclosure home, which they closed on less than two weeks ago.
The couple are looking for more to buy.
Julie found a low-priced, lender-owned home in northeast Phoenix last week and was going to make an offer but was unsure if the foreclosure moratoriums would stop or slow a sale.
"I asked the Realtor who has the listing what may happen, and she said everything seems to be fine," Julie said. "There was already another offer on the home. I really think if the folks left the house willingly and let the house go into foreclosure, it shouldn't be a problem to buy it from the lender. There are so many vacant homes out there."
The couple plan to keep acquiring foreclosure homes that fit their strategy and hold onto them longer, profiting on steady rents until they can sell the homes for a considerable profit. Many of their renters can't buy because their own recent foreclosures or short sales, in which banks allowed them to sell for less than they owed, hurt their credit.
If the investor-buying trend continues, some metro Phoenix neighborhoods are bound to have more renters than homeowners living in them. But since many investors are paying cash and fixing up the houses, another foreclosure cycle for those neighborhoods is less likely.
"We try to buy the ugliest home on the block and make it one of the nicest," Julie said. "We are also open to working out deals for people to rent-to-own our homes. We know it's tough to get financing now."
International buyers
Terri and Don Bozok live in Edmonton, Alberta, but were recently in Phoenix shopping for inexpensive houses.
The semiretired couple own a home in Mesa and visit the Valley often. They have seen home prices sag and feel like it's a good time to buy a few fixer-uppers they can renovate and sell quickly.
"We are definitely looking at foreclosures and not short sales because those take too long to negotiate," Terri said. "Because prices are down, we feel like it's definitely feasible we can make a few dollars on homes here."
In April, Canadians passed Californians as the biggest group of out-of-state buyers of metro Phoenix homes, according to the Information Market, a Phoenix-based real-estate data firm.
"Canadians are finding great values in Phoenix homes for their dollar," said Diane Brennan of Scottsdale-based Keller Williams Integrity First Realty. "Some are investing in a home they will rent for a few years and then use as a part-time retirement home."
Phoenix's housing market also is drawing the attention of buyers much farther away than Canada.
"We are seeing an interesting mix of international investors now. Everyone thinks Canadians are the only ones, but we have buyers from Pakistan, Bogota (Colombia) and Israel," said Beth Jo Zeitzer, an REO expert and president of Phoenix-based R.O.I. Properties. "Investors from around the world are seeing the housing deals in Phoenix."
Although some investors have been able to buy foreclosures for prices low enough to resell them quickly for a profit, most investors are buying knowing they will need to hold onto Phoenix homes for at least a few years before prices rebound enough to flip them.
Big groups, big funds
Since last year, G8 Capital has paid cash for more than a hundred metro Phoenix foreclosures homes. The Ladera Ranch, Calif.-based investment firm typically buys Valley foreclosure homes for less than $20,000.
The company led by Evan Gentry, former CEO of MoneyLine Lending Services, has been able to flip some of the Valley foreclosure homes it has bought but is also holding onto other properties and renting them out until home prices climb again.
"We will continue to buy in Phoenix. It's a great long-term market for us," Gentry said. "The foreclosure cycle is far from over, despite any lender moratoriums."
Unlike smaller investors, G8 can buy bulk portfolios of foreclosure homes located across the country from lenders.
"We can buy a portfolio that gives us five foreclosure homes in Phoenix and five in Cleveland," Gentry said. "Our strategies differ by city. We think Phoenix will be a great rental market for a while."
Several out-of-state U.S. hedge funds and investment partnerships are buying Phoenix foreclosure homes. Some of the firms are very low-key about their strategies, partly because they don't want to be seen as "vulture funds" profiting on the real-estate crash.
Most of these large investment firms have had to buy foreclosure properties one-by-one in metro Phoenix. Elsewhere in the country, they have received discounts from lenders when they buy several homes at once.
Zeitzer said when foreclosures started to climb in metro Phoenix in 2008, several groups formed to try to buy portfolios of bank-owned homes in the region. But so many individuals are buying foreclosures that lenders offer few deals to buy multiple Valley properties at once unless foreclosure homes in other parts of the country are acquired at the same time.
"In this second leg of foreclosures, lenders could start to sells homes in bulk to save time and money," Zeitzer said. "Investors are an important part of the market now and will definitely help keep inventories from climbing too fast."
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:
WEST VALLEY:
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
ACTIVE ADULT COMMUNITIES: Sun City Grand
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 Zillow.com 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.
'Self-help'
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.
Here are the areas we have been recommending:
WEST VALLEY:
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
ACTIVE ADULT COMMUNITIES: Sun City Grand
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 Zillow.com 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.
'Self-help'
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.
Team,
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.
http://www.bloomberg.com/news/2010-08-27/pimco-s-el-erian-says-alarming-data-signals-show-u-s-economy-faltering.html
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.
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.
http://www.bloomberg.com/news/2010-08-27/pimco-s-el-erian-says-alarming-data-signals-show-u-s-economy-faltering.html
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."
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."
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