After drop, home prices on the rise in Valley
by Catherine Reagor - Dec. 9, 2011 04:04 PM
The Arizona Republic
In August, as metro Phoenix home prices dipped to another new low, some real-estate analysts predicted the area's home values would keep falling. Other analysts disagreed, saying all the indicators, besides home prices, were heading in the right direction for values to climb before year's end.
The median price for an existing Phoenix-area home climbed to $119,900 in November, according to a new report from the Information Market. It's the region's highest median home price since November 2010.
In October, Phoenix's median home price was $115,000, which is where it had hovered most of the first half of this year. But when it fell to $112,000 in August, some market watchers thought it would drop all the way down to $100,000 by the end of this year. Of course, some panic ensued.
But the housing analysts who were watching foreclosures fall, sales climb ahead of last year's pace and listings plummet, stood firm in their opinion that home prices would begin to rise again.
During the past few months, not only short-sale prices but the prices for foreclosure resales known as REOs, or real-estate owned, have been steadily climbing. In some areas of metro Phoenix, REOs are now selling for more than houses sold through lender-approved short-sale deals. In 2008 and 2009, REOs were dragging down the area's home values as lenders took back houses through foreclosure and then resold them quickly for bargain prices to get the properties off their books.
Home prices are also climbing at foreclosure auctions, also known as trustee sales, held daily in front of the Maricopa County Courthouse. The auctions are Arizona's method for lenders to foreclose.
In 2008, when foreclosures started to climb, few properties sold at these trustee auctions. Back then, lenders weren't lowering prices beyond what was owed on a house, so investors weren't interested in purchasing a house for at least twice what it was actually worth. But once lenders started lowering prices to much less than what they were owed, bidding picked up quickly.
Competition is also driving up prices at the trustee auctions. Each month this year, more than 1,000 foreclosure homes have been bought at Maricopa County trustee auctions. That compares with 100 per month at the beginning of the crash.
Arizona Property Management and Investments
If you are interested in purchasing investment properties or receiving a free quote for our property management services, please call us at (888)777.6664 for immediate assistance.
Monday, December 12, 2011
Thursday, December 8, 2011
Phoenix: Good Time to Buy?
Good Time to Buy? Housing Cheaper to Own vs. Rent in 12 U.S. Metro Areas: WSJ
By Peter Gorenstein | Daily Ticker – Mon, Nov 28, 2011 12:30 PM EST
Five years after the market peaked, the housing market remains depressed. October new home sales, released this morning, totaled 307,000, slightly below estimates. Meanwhile, prices rose slightly.
But, as your real estate broker will happily mention - 'Now is a great time to buy!' Unlike 2007, when that obviously was not the case for most, now it might actually be true. Ironically, the reluctance for many to buy a home is what makes it a good (relatively) time to purchase.
As Aaron and Henry discuss in the accompanying clip, owning a home is now more affordable than any time in the last 15 years, based on a new Wall Street Journal survey. In fact -- with the average price of a home $242,300 -- it is now cheaper to own than rent in 12 metro areas including Atlanta, Chicago, Detroit, Las Vegas, Miami, Orlando and Phoenix.
As the WSJ article points out, the discrepancy between buying and renting can be extreme in some areas:
"In Atlanta, which had the most favorable values for owning versus renting, the monthly payment on the average home was $539 assuming a 20% down payment during the third quarter. By contrast, the average asking rent stood at $840."
Sagging prices and sub-4% interest on a 30-year fixed mortgage are the biggest drivers behind the trend of record housing affordability. However, unlike the glory days when buying a home merely took a pulse, securing a loan today is much tougher. And, flipping property is a dead game.
Arizona Property Management and Investments
If you are interested in purchasing investment properties or receiving a free quote for our property management services, please call us at (888)777.6664 for immediate assistance.
By Peter Gorenstein | Daily Ticker – Mon, Nov 28, 2011 12:30 PM EST
Five years after the market peaked, the housing market remains depressed. October new home sales, released this morning, totaled 307,000, slightly below estimates. Meanwhile, prices rose slightly.
But, as your real estate broker will happily mention - 'Now is a great time to buy!' Unlike 2007, when that obviously was not the case for most, now it might actually be true. Ironically, the reluctance for many to buy a home is what makes it a good (relatively) time to purchase.
As Aaron and Henry discuss in the accompanying clip, owning a home is now more affordable than any time in the last 15 years, based on a new Wall Street Journal survey. In fact -- with the average price of a home $242,300 -- it is now cheaper to own than rent in 12 metro areas including Atlanta, Chicago, Detroit, Las Vegas, Miami, Orlando and Phoenix.
As the WSJ article points out, the discrepancy between buying and renting can be extreme in some areas:
"In Atlanta, which had the most favorable values for owning versus renting, the monthly payment on the average home was $539 assuming a 20% down payment during the third quarter. By contrast, the average asking rent stood at $840."
Sagging prices and sub-4% interest on a 30-year fixed mortgage are the biggest drivers behind the trend of record housing affordability. However, unlike the glory days when buying a home merely took a pulse, securing a loan today is much tougher. And, flipping property is a dead game.
Arizona Property Management and Investments
If you are interested in purchasing investment properties or receiving a free quote for our property management services, please call us at (888)777.6664 for immediate assistance.
Thursday, December 1, 2011
Second Half Of The Financial Crisis Is Approaching Soon.
Payam Raouf
Owner/Associate Broker
Arizona Property Management and Investments
Toll Free: (888)777.6664
If you are interested in receiving a free quote for our property management services,
please CONTACT US.
Investors,
We are approaching the second half of the storm (financial crisis). We have been in the eye of the storm for a year now making everyone feeling good. We are ¾ over, approaching the second half. If you missed the first half, this is your chance to pick up some nice properties in more established areas at a very reasonable price.
1/3 of variable mortgages has or is coming due soon in areas where prices have yet to come down another 10 to 20 percent such as in Scottsdale, N Peoria, Cave Creek, Chandler, Ahwatukee and Gilbert.
Institutional investors are yet to consider these areas. They hover more and less in the 80k to 120k range where there are already too many rentals in the market.
If you are looking for some solid investment properties, it is time to keep an eye on the areas I mentioned above.
If you have any questions, call 888-777-6664 and ask for Payam Raouf.
Owner/Associate Broker
Arizona Property Management and Investments
Toll Free: (888)777.6664
If you are interested in receiving a free quote for our property management services,
please CONTACT US.
Investors,
We are approaching the second half of the storm (financial crisis). We have been in the eye of the storm for a year now making everyone feeling good. We are ¾ over, approaching the second half. If you missed the first half, this is your chance to pick up some nice properties in more established areas at a very reasonable price.
1/3 of variable mortgages has or is coming due soon in areas where prices have yet to come down another 10 to 20 percent such as in Scottsdale, N Peoria, Cave Creek, Chandler, Ahwatukee and Gilbert.
Institutional investors are yet to consider these areas. They hover more and less in the 80k to 120k range where there are already too many rentals in the market.
If you are looking for some solid investment properties, it is time to keep an eye on the areas I mentioned above.
If you have any questions, call 888-777-6664 and ask for Payam Raouf.
Saturday, November 19, 2011
A third option, offering foreclosed homes in rent-to-own deals.
Real Estate: Why Home Prices Won't Bottom Out
By John Wasik | Reuters – Fri, Nov 18, 2011 1:10 PM EST
Watching the U.S. home market struggle to rebound is like listening to children in the back of a car. No, we're not there yet.
The National Association of Realtors reported that ten real estate markets are "leading the nation toward a general recovery and stability of the housing sector," but myriad problems are going to weigh down the housing market for months to come.
The lingering malaise in the economy has triggered a new wave of defaults and foreclosures. After five straight quarterly drops, foreclosures nationwide shot up 14 percent from the second to third quarter this year, according to data released by Realtytrac, the foreclosure information service, in October.
While RealtyTrac doesn't foresee that the latest foreclosure wave will equal the severity of the 2007-2010 pattern -- in which three million borrowers lost their homes -- it's going to slam on the brakes where areas are getting hit the hardest.
In theory, it should be a good time to buy a home. In the worst-hit areas, properties have lost more than half their value.
Yet as the average 30-year mortgage rate has slipped below 4 percent, the combination of employment insecurity and unusually tight standards for lending are discouraging buyers en masse. Lenders are asking for extensive income verification and tax returns. One lender I contacted for refinancing even wanted me to get an accountant to certify that I wasn't lying to the IRS.
Here are some of the biggest roadblocks:
--Even in bruised cities where price appreciation is evident, unemployment is still too high. Six out of 10 of the "top turnaround towns" listed by Realtor.com for the third quarter had jobless rates above 10 percent. People can't buy homes if they're not working or soon to lose their jobs. Those cities, which include four of the largest cities in Florida, still have a long way to go to recover from the housing bust.
--Although at a record low, the home mortgage rate may still be high relative to home prices. This may sound counterintuitive, but research from the Leuthold Group in their November newsletter shows that a "real" mortgage rate -- which factors in the falling market value of the home prices -- is 8 percent. Leuthold says that real cost of buying must include the 4 percent interest rate and the 3.9 percent average home prices decline over the past 12 months. That cost is still scaring away buyers.
--The combination of unemployment, high housing inventory and foreclosures is hurting places where there wasn't an excessive price run-up. Realtor.com found that the largest year-over year median listing price decreases through October were in cities like Chicago, Detroit and Atlanta. This three-punch combination will continue to ravage markets where there's a sluggish economy
Possible solutions to the housing blockage range from the radical to the necessary. A group called Remortgage America is calling for the government to loan Americans mortgages at 1 percent to finance a new or existing residence.
Others would like to see Fannie Mae and Freddie Mac take the foreclosed homes they own and either auction them off or offer them in a huge fire sale.
The seized mortgage agencies account for up to one-third of foreclosed homes -- about 250,000. American taxpayers are pouring tens of billions into propping up these two wards of the state, which were taken over by the U.S. Treasury in late 2008. The Obama Administration has yet to announce what it wants to do with the companies. Will they be restructured, liquidated or privatized?
A third option, which may have the least impact on a battered market, is to offer foreclosed homes in rent-to-own deals. Prospective homeowners get a place to live under reasonable leases and can build equity toward a purchase.
It's estimated that some 3.4 million foreclosed homes will be on the books of banks and mortgage companies by the end of this year. As regulators, banks, mortgage companies and state attorneys general move sheepishly to unblock mortgage modifications, refinancings and resales, only one certainty prevails: The open market will not be able to properly price every property until all government restrictions are lifted on their sales and re-financing.
Arizona Property Management and Investments
Toll Free: (888)777.6664
If you are interested in receiving a free quote for our property management services,
please CONTACT US.
By John Wasik | Reuters – Fri, Nov 18, 2011 1:10 PM EST
Watching the U.S. home market struggle to rebound is like listening to children in the back of a car. No, we're not there yet.
The National Association of Realtors reported that ten real estate markets are "leading the nation toward a general recovery and stability of the housing sector," but myriad problems are going to weigh down the housing market for months to come.
The lingering malaise in the economy has triggered a new wave of defaults and foreclosures. After five straight quarterly drops, foreclosures nationwide shot up 14 percent from the second to third quarter this year, according to data released by Realtytrac, the foreclosure information service, in October.
While RealtyTrac doesn't foresee that the latest foreclosure wave will equal the severity of the 2007-2010 pattern -- in which three million borrowers lost their homes -- it's going to slam on the brakes where areas are getting hit the hardest.
In theory, it should be a good time to buy a home. In the worst-hit areas, properties have lost more than half their value.
Yet as the average 30-year mortgage rate has slipped below 4 percent, the combination of employment insecurity and unusually tight standards for lending are discouraging buyers en masse. Lenders are asking for extensive income verification and tax returns. One lender I contacted for refinancing even wanted me to get an accountant to certify that I wasn't lying to the IRS.
Here are some of the biggest roadblocks:
--Even in bruised cities where price appreciation is evident, unemployment is still too high. Six out of 10 of the "top turnaround towns" listed by Realtor.com for the third quarter had jobless rates above 10 percent. People can't buy homes if they're not working or soon to lose their jobs. Those cities, which include four of the largest cities in Florida, still have a long way to go to recover from the housing bust.
--Although at a record low, the home mortgage rate may still be high relative to home prices. This may sound counterintuitive, but research from the Leuthold Group in their November newsletter shows that a "real" mortgage rate -- which factors in the falling market value of the home prices -- is 8 percent. Leuthold says that real cost of buying must include the 4 percent interest rate and the 3.9 percent average home prices decline over the past 12 months. That cost is still scaring away buyers.
--The combination of unemployment, high housing inventory and foreclosures is hurting places where there wasn't an excessive price run-up. Realtor.com found that the largest year-over year median listing price decreases through October were in cities like Chicago, Detroit and Atlanta. This three-punch combination will continue to ravage markets where there's a sluggish economy
Possible solutions to the housing blockage range from the radical to the necessary. A group called Remortgage America is calling for the government to loan Americans mortgages at 1 percent to finance a new or existing residence.
Others would like to see Fannie Mae and Freddie Mac take the foreclosed homes they own and either auction them off or offer them in a huge fire sale.
The seized mortgage agencies account for up to one-third of foreclosed homes -- about 250,000. American taxpayers are pouring tens of billions into propping up these two wards of the state, which were taken over by the U.S. Treasury in late 2008. The Obama Administration has yet to announce what it wants to do with the companies. Will they be restructured, liquidated or privatized?
A third option, which may have the least impact on a battered market, is to offer foreclosed homes in rent-to-own deals. Prospective homeowners get a place to live under reasonable leases and can build equity toward a purchase.
It's estimated that some 3.4 million foreclosed homes will be on the books of banks and mortgage companies by the end of this year. As regulators, banks, mortgage companies and state attorneys general move sheepishly to unblock mortgage modifications, refinancings and resales, only one certainty prevails: The open market will not be able to properly price every property until all government restrictions are lifted on their sales and re-financing.
Arizona Property Management and Investments
Toll Free: (888)777.6664
If you are interested in receiving a free quote for our property management services,
please CONTACT US.
Tuesday, November 1, 2011
Renters are running out of cash reserve to rent homes.
Payam Raouf
Owner/Associate Broker
Arizona Property Management and Investments
Toll Free: (888)777.6664
If you are interested in receiving a free quote for our property management services,
please CONTACT US.
Renters are running out of cash reserve to rent homes.
In the past few months we have seen an increasing number of potential rental applicants having difficulty coming up with required deposits to rent a single-family home.
Traditionally when you rent a single family home, owners require an amount equal to the first month’s rent as the security deposit. In some cases when potential rental applicants have less than prefect credit, owners could ask for up to one and a half times of that amount.
In addition to the security deposit, some homeowners may require additional upfront fees for pets, cleaning and re-keying of the property.
Also, leasing agencies require an up front application fee which could run up to $50 per adult applicant to offset their cost of finding a qualified tenant for their clients. Potential tenants must meet certain guidelines set by the homeowners to be considered, which may include, running nationwide credit, criminal, eviction, sex offender and FBI most wanted searches, and the verification of their employments and rental history.
To defray the cost of lease administration, conducting tenant's orientation and setting up tenant's account, leasing agencies charges tenants between a $100 to $300 non refundable up front lease administration fee. In the past this cost was paid by the homeowner, but as more rental agencies have entered the market in the past twelve-month competing for homeowners’ business, this charge has been passed on to the tenants.
The following is an example of what a married couple with less than perfect credit with two children and one pet has to come up with to lease a home renting for $1,000.
Credit Application fee: $45X2= $90
First month’s rent: $1,000
Security Deposit: $1,500
Pet Deposit: $250
Cleaning Deposit: $300
Re-key fee: $100
Lease Administration fee: $200
TOTAL: $3,440
Average Moving Cost: $1,000
Total Cost: $4,440.
Now let’s review the situation. Most applicants in this situation make somewhere between $3000 to $4000 per month. They have already depleted most of their cash/credit reserve and are either losing their own home to foreclosure, or the one they are renting is being foreclosed on. They have to move, but don’t have the money to rent a new place. What are their options?
Many are moving in with the other family members to save money to eventually rent their own. Some are moving into apartments where they do not require as much deposits. Many others settle for a home in less desirable areas where homeowners are willing to take less deposits. Others, who cannot afford facing the consequences of, for example, taking their children out of schools in the middle of the school year, may borrow the money. Some take “cash for keys”, and others stay in the property for as long as permitted by law. However, they can exercise other options which will be elaborated on throughout this article.
Landlord
There are ten types of landlords in the market, but not necessarily in this order as the market keeps changing:
1) Owners who are upside down in their mortgages. There are 4 groups:
a) Owners with good jobs and income who can afford to keep their property long enough to sell it when the market turns around,
b) Business owners who need to maintain their good credit rating for their suppliers,
c) Owners facing near-term foreclosures who are unable to hang on to their property much longer, hoping for the best by renting it out.
d) Those moving out of the area.
2) Small to mid size speculators taking advantage of historically lower home prices in Arizona, hedging against inflation and hoping to cash out with substantial gains in 5 to 10 years.
3) Foreign investors, such as Canadians and Australians taking advantage of week weak dollar, low home prices and higher rent in Arizona who have been buying thousands of homes in the valley for the past three years. This group is also fading away from the market as the dollar is strengthening.
4) Institutional investors entered the market more aggressively about a year ago and since have purchased thousands of single-family rental homes at the trustee auctions resulting in a substantial artificial increase in home prices. Many now are directly negotiating with financial institutions, buying them in bulk. Fannie Mae is planning to liquidate most of their toxic assets through this process.
5) Individuals self-managing their own IRAs. A new group of investors has recently emerged as the result of the stock market volatility and are buying rental homes instead.
6) Out of state retirees who are planning to retire soon and want to move to Arizona. They pay end-user prices and rent them for less than the market value to well qualified tenants who are going to take a better care of their property till they decide to move into it themselves.
7) Fannie Mae has also recently joined the group of landlords by renting back to tenants whose rental houses have gone to foreclosure. They do not require any deposits, but the tenants are in danger of getting booted out when the house is sold.
8) Investors buying to flip to end users are stuck with some of their purchases and are now putting them on the market for rent hoping to sell them to another investor with a tenant in place.
9) Handyman and contractors who bought at the height of the market competing with institutional investors at the trustee auctions are forced to rent them out to pay off their high interest loans. The number of e-flyers sent to Realtors has increased ten folds recently offering such properties for rent at a higher percentage commission rates.
10) Slumlords: Investors buying older run-down houses in less desirable areas to rent them to less qualified renters at a much higher than average prices or leasing them to them with an option to buy, thereby avoiding much required repairs.
Rental Inventory
The 5,000 single family homes advertised monthly on Realtor Multiple Listing Services (MLS) is a fraction of what is really available for rent in the valley. It could be as high as three times that amount. Not every rental agency advertises their homes on MLS. Additionally there are thousands of apartments for rent valley-wide at any given time.
In addition to MLS, a good look at Rentals.com, Rent.com, Craigslist and Rental Agencies’ own web sites would provide a better indication of how many homes are for rent in the valley.
Leasing Agents
It used to be a common practice that a leasing agent would list and rent a house for 6% of the gross lease amount or an amount equal to one months rent. As the cost of marketing has increased along with demand for better customer service leasing agencies have centralized their efforts and are now listing the homes for rent themselves and are hiring either their own leasing agents or paying a referral fee to other agents to lease them out for them. This reduces the cost of marketing as well as a huge liability for the homeowners. As a result, leasing agents make less money when leasing a house now than in the traditional way.
Renters demand to be treated like buyers. They want to evaluate all their options before making a move. It is not easy to move every year. They want to make sure they find the home they really like and that it suits all their wants and needs at an affordable price. At the same time, they want to deal with a reputable leasing agency that will still be in business to take care of them while they are are there.
on the other hand, finding a qualified applicant that homeowners approve is a tedious, time consuming and at times a frustrating job for the leasing agents. Quite often, prospective tenants fall in love with a home they may not qualify for. At times it takes several weeks to find a home they would approve and qualify for. Leasing agents invest an enormous amount of time and money in the process.
Conclusion:
Times are tough for everyone including Landlords, tenants and leasing agents. Homeowners must realize that not everyone has perfect credit or has a ton of surplus cash to give them for deposits. Tenants must put themselves in place of the homeowners and ask themselves this question: If I were the homeowner, would I rent this house to a tenant with my credit and background history, employment and financial situation?
There are solutions, where a prospective tenant with less than perfect credit who does not have all the deposits can rent a home they like. Your leasing agent must prepare an offer along with a complete credit application and a good letter of explanation to present it to the homeowner. Just like as if you were applying for a loan and making an offer to purchase a house. Most often owners will come to terms with the prospective tenant provided they earn their confidence.
One way to negotiate a lower deposit is to offer a higher monthly rent amount equal to or a slightly greater than the deficiency in deposit for a period of twelve months. If the tenants have a pets and the owner requires a pet deposit, they can offer $25/$50 more per month which is less expensive than boarding pet in a pet motel for a single night.
Tenants, who are working with a leasing agent who has been working hard for them should give them a chance if they find a home on their own. 2/3 of the rental homes on the market are not listed on MLS, so your agent has no way of knowing if that property is available for rent. If you give them the information, they can represent and make the offer for you.
Leasing agencies must make it more affordable for tenants to submit an application for rent and be open to offers submitted by prospective tenants. If the tenants can not afford the lease administration fee, either ask the owners to pay for it or split it with the homeowners.
In conclusion, the housing market has changed. Accepting that, is like piloting a sailing vessel at sea. When the winds change, you have to adjust your sails to stay on course and ensure all personnel and cargo on board have a safe and enjoyable trip so that they to achieve their goals upon arrival to at their charted destination.
Arizona Property Management & Investments is a leader, highly renowned and recognized as a Real Estate Industry Benchmark; with recent confirmation coming in the form of being awarded the highly coveted and prestigious Best of Phoenix Award, in the Property Management category, by the United States Commerce Association. Our primary focus and specialization is in Residential Real Estate Acquisitions, Sales, Property Management and Leasing of single family properties throughout the valleys and Phoenix Metropolitan areas; serving our clients professionally and conveniently from our three locations.
If you are interested in receiving a free quote for our property management services,
please CONTACT US.
Owner/Associate Broker
Arizona Property Management and Investments
Toll Free: (888)777.6664
If you are interested in receiving a free quote for our property management services,
please CONTACT US.
Renters are running out of cash reserve to rent homes.
In the past few months we have seen an increasing number of potential rental applicants having difficulty coming up with required deposits to rent a single-family home.
Traditionally when you rent a single family home, owners require an amount equal to the first month’s rent as the security deposit. In some cases when potential rental applicants have less than prefect credit, owners could ask for up to one and a half times of that amount.
In addition to the security deposit, some homeowners may require additional upfront fees for pets, cleaning and re-keying of the property.
Also, leasing agencies require an up front application fee which could run up to $50 per adult applicant to offset their cost of finding a qualified tenant for their clients. Potential tenants must meet certain guidelines set by the homeowners to be considered, which may include, running nationwide credit, criminal, eviction, sex offender and FBI most wanted searches, and the verification of their employments and rental history.
To defray the cost of lease administration, conducting tenant's orientation and setting up tenant's account, leasing agencies charges tenants between a $100 to $300 non refundable up front lease administration fee. In the past this cost was paid by the homeowner, but as more rental agencies have entered the market in the past twelve-month competing for homeowners’ business, this charge has been passed on to the tenants.
The following is an example of what a married couple with less than perfect credit with two children and one pet has to come up with to lease a home renting for $1,000.
Credit Application fee: $45X2= $90
First month’s rent: $1,000
Security Deposit: $1,500
Pet Deposit: $250
Cleaning Deposit: $300
Re-key fee: $100
Lease Administration fee: $200
TOTAL: $3,440
Average Moving Cost: $1,000
Total Cost: $4,440.
Now let’s review the situation. Most applicants in this situation make somewhere between $3000 to $4000 per month. They have already depleted most of their cash/credit reserve and are either losing their own home to foreclosure, or the one they are renting is being foreclosed on. They have to move, but don’t have the money to rent a new place. What are their options?
Many are moving in with the other family members to save money to eventually rent their own. Some are moving into apartments where they do not require as much deposits. Many others settle for a home in less desirable areas where homeowners are willing to take less deposits. Others, who cannot afford facing the consequences of, for example, taking their children out of schools in the middle of the school year, may borrow the money. Some take “cash for keys”, and others stay in the property for as long as permitted by law. However, they can exercise other options which will be elaborated on throughout this article.
Landlord
There are ten types of landlords in the market, but not necessarily in this order as the market keeps changing:
1) Owners who are upside down in their mortgages. There are 4 groups:
a) Owners with good jobs and income who can afford to keep their property long enough to sell it when the market turns around,
b) Business owners who need to maintain their good credit rating for their suppliers,
c) Owners facing near-term foreclosures who are unable to hang on to their property much longer, hoping for the best by renting it out.
d) Those moving out of the area.
2) Small to mid size speculators taking advantage of historically lower home prices in Arizona, hedging against inflation and hoping to cash out with substantial gains in 5 to 10 years.
3) Foreign investors, such as Canadians and Australians taking advantage of week weak dollar, low home prices and higher rent in Arizona who have been buying thousands of homes in the valley for the past three years. This group is also fading away from the market as the dollar is strengthening.
4) Institutional investors entered the market more aggressively about a year ago and since have purchased thousands of single-family rental homes at the trustee auctions resulting in a substantial artificial increase in home prices. Many now are directly negotiating with financial institutions, buying them in bulk. Fannie Mae is planning to liquidate most of their toxic assets through this process.
5) Individuals self-managing their own IRAs. A new group of investors has recently emerged as the result of the stock market volatility and are buying rental homes instead.
6) Out of state retirees who are planning to retire soon and want to move to Arizona. They pay end-user prices and rent them for less than the market value to well qualified tenants who are going to take a better care of their property till they decide to move into it themselves.
7) Fannie Mae has also recently joined the group of landlords by renting back to tenants whose rental houses have gone to foreclosure. They do not require any deposits, but the tenants are in danger of getting booted out when the house is sold.
8) Investors buying to flip to end users are stuck with some of their purchases and are now putting them on the market for rent hoping to sell them to another investor with a tenant in place.
9) Handyman and contractors who bought at the height of the market competing with institutional investors at the trustee auctions are forced to rent them out to pay off their high interest loans. The number of e-flyers sent to Realtors has increased ten folds recently offering such properties for rent at a higher percentage commission rates.
10) Slumlords: Investors buying older run-down houses in less desirable areas to rent them to less qualified renters at a much higher than average prices or leasing them to them with an option to buy, thereby avoiding much required repairs.
Rental Inventory
The 5,000 single family homes advertised monthly on Realtor Multiple Listing Services (MLS) is a fraction of what is really available for rent in the valley. It could be as high as three times that amount. Not every rental agency advertises their homes on MLS. Additionally there are thousands of apartments for rent valley-wide at any given time.
In addition to MLS, a good look at Rentals.com, Rent.com, Craigslist and Rental Agencies’ own web sites would provide a better indication of how many homes are for rent in the valley.
Leasing Agents
It used to be a common practice that a leasing agent would list and rent a house for 6% of the gross lease amount or an amount equal to one months rent. As the cost of marketing has increased along with demand for better customer service leasing agencies have centralized their efforts and are now listing the homes for rent themselves and are hiring either their own leasing agents or paying a referral fee to other agents to lease them out for them. This reduces the cost of marketing as well as a huge liability for the homeowners. As a result, leasing agents make less money when leasing a house now than in the traditional way.
Renters demand to be treated like buyers. They want to evaluate all their options before making a move. It is not easy to move every year. They want to make sure they find the home they really like and that it suits all their wants and needs at an affordable price. At the same time, they want to deal with a reputable leasing agency that will still be in business to take care of them while they are are there.
on the other hand, finding a qualified applicant that homeowners approve is a tedious, time consuming and at times a frustrating job for the leasing agents. Quite often, prospective tenants fall in love with a home they may not qualify for. At times it takes several weeks to find a home they would approve and qualify for. Leasing agents invest an enormous amount of time and money in the process.
Conclusion:
Times are tough for everyone including Landlords, tenants and leasing agents. Homeowners must realize that not everyone has perfect credit or has a ton of surplus cash to give them for deposits. Tenants must put themselves in place of the homeowners and ask themselves this question: If I were the homeowner, would I rent this house to a tenant with my credit and background history, employment and financial situation?
There are solutions, where a prospective tenant with less than perfect credit who does not have all the deposits can rent a home they like. Your leasing agent must prepare an offer along with a complete credit application and a good letter of explanation to present it to the homeowner. Just like as if you were applying for a loan and making an offer to purchase a house. Most often owners will come to terms with the prospective tenant provided they earn their confidence.
One way to negotiate a lower deposit is to offer a higher monthly rent amount equal to or a slightly greater than the deficiency in deposit for a period of twelve months. If the tenants have a pets and the owner requires a pet deposit, they can offer $25/$50 more per month which is less expensive than boarding pet in a pet motel for a single night.
Tenants, who are working with a leasing agent who has been working hard for them should give them a chance if they find a home on their own. 2/3 of the rental homes on the market are not listed on MLS, so your agent has no way of knowing if that property is available for rent. If you give them the information, they can represent and make the offer for you.
Leasing agencies must make it more affordable for tenants to submit an application for rent and be open to offers submitted by prospective tenants. If the tenants can not afford the lease administration fee, either ask the owners to pay for it or split it with the homeowners.
In conclusion, the housing market has changed. Accepting that, is like piloting a sailing vessel at sea. When the winds change, you have to adjust your sails to stay on course and ensure all personnel and cargo on board have a safe and enjoyable trip so that they to achieve their goals upon arrival to at their charted destination.
Arizona Property Management & Investments is a leader, highly renowned and recognized as a Real Estate Industry Benchmark; with recent confirmation coming in the form of being awarded the highly coveted and prestigious Best of Phoenix Award, in the Property Management category, by the United States Commerce Association. Our primary focus and specialization is in Residential Real Estate Acquisitions, Sales, Property Management and Leasing of single family properties throughout the valleys and Phoenix Metropolitan areas; serving our clients professionally and conveniently from our three locations.
If you are interested in receiving a free quote for our property management services,
please CONTACT US.
Renters are running out of cash reserve to rent homes.
Renters are running out of cash reserve to rent homes.
In the past few months we have seen an increasing number of potential rental applicants having difficulty coming up with required deposits to rent a single-family home.
Traditionally when you rent a single family home, owners require an amount equal to the first month’s rent as the security deposit. In some cases when potential rental applicants have less than prefect credit, owners could ask for up to one and a half times of that amount.
In addition to the security deposit, some homeowners may require additional upfront fees for pets, cleaning and re-keying of the property.
Also, leasing agencies require an up front application fee which could run up to $50 per adult applicant to offset their cost of finding a qualified tenant for their clients. Potential tenants must meet certain guidelines set by the homeowners to be considered, which may include, running nationwide credit, criminal, eviction, and sex offender background checks, FBI most wanted searches, and the verification of their employments and rental history.
To defray the cost of lease administration, conduct a tenant orientation, setting up a tenant portal and prove HOA documents when applicable, leasing agencies charges tenants between a $100 to $300 non refundable up front lease administration fee. In the past this cost was to the homeowner, but as more rental agencies have entered the market in the past twelve-month competing for homeowners’ business, almost all have passed this charge to the tenants. .
The following is an example of what a married couple with less than perfect credit with two children and one dog has to come up with to lease a home renting for $1,000 per month.
Credit Application fee: $45X2= $90
First month’s rent: $1,000
Security Deposit: $1,500
Pet Deposit: $250
Cleaning Deposit: $300
Re-key fee: $100
Lease Administration fee: $200
TOTAL: $3,440
Average Moving Cost: $1,000
Total Cost: $4,440.
Now let’s review the situation. Most applicants in this situation make somewhere between $3000 to $3500 per month. They have already depleted most of their cash/credit reserve and are either losing their own home to foreclosure, or the one they are renting is being foreclosed on. They have to move, but don’t have the money to rent a new place. What are their options?
Many are moving in with the other family members to save money to eventually rent on their own. Some are moving into apartments where they do not require as much deposits. Many others settle for a home in less desirable areas where homeowners are willing to take less deposits. Others, who cannot afford facing the consequences of, for example, taking their children out of schools in the middle of the school year, borrow the money. Some take “cash for keys”, and others stay in the property for as long as permitted by law. However, they can exercise other options which we will be elaborated on throughout this article.
Landlord
There are ten types of landlords in the market, but not necessarily in this order as the market keeps changing:
1) Owners who are upside down in their mortgages. There are 4 groups:
a) Owners with good jobs and income and who can afford to keep it their property long enough to sell it.
b) Business owners who need to maintain their good credit rating for their suppliers
c) Owners facing near-term foreclosures who are unable to hang on to their property it much longer, hoping for the best by renting it out.
d) Those moving out of the area.
2) Small to mid size speculators taking advantage of historically lower home prices in Arizona, hedging against inflation and hoping to cash out with substantial gains big in 5 to 10 years when the market turns around.
3) Foreign investors, such as Canadians and Australians taking advantage of week weak dollar, low home prices and higher rent in Arizona who have been buying thousands of homes in the valley for the past three years. This group is also fading away from the market as the dollar is strengthening and while tax consequences and the rising cost of maintenance and repairs has diminished their return of on their investments.
4) Institutional investors entered the market more aggressively about a year ago and since have purchased thousands of single-family rental homes at the trustee auctions resulting in a substantial artificial increase in home prices at the auctions in the recent months. Many now are directly negotiating with financial institutions, buying them in bulk. Fannie Mae is planning to liquidate most of their toxic assets through this process.
5) Individuals self-managing their IRAs. A new group of investors has recently emerged as the result of the stock market volatility. They are buying rental homes instead. They are conservative buyers and look for the right opportunity to invest.
6) Out of state retirees who are planning to retire soon and want to move to Arizona. They pay end-user prices and rent them at a lesser rental market value to a well qualified tenant who is going to take care of their property till they decide to move into it themselves.
7) Fannie Mae has also recently joined the group of landlords by renting back to tenants whose rental houses have gone to foreclosure. They do not require any deposits, but the tenants are in danger of getting booted out when the house is sold.
8) Investors paying cash or using high interest hard money loans are buying to flip to end users for a quick return are stuck with these purchases and are now putting them in on the market for rent hoping to sell them to another individual investor at a profit with a tenant in place.
9) Handyman and contractors who bought at the height of the market competing with institutional investors at the trustee auctions are forced to rent them out as well or sell it at a loss. The number of e-flyers sent to realtors has increased ten folds recently offering properties either for sale at a high commission, or rent
10) Slumlords: Investors buying for Gross Rent Multiplier (GRM), three and four, mostly old run-down houses in undesirable areas, leasing them out to less qualified renters at a much higher than average rent amount, or leasing it to them with an option to buy, thereby avoiding much required repairs.
Rental Inventory
The 5,000 single family homes advertised each month on Realtor Multiple Listing Services (MLS is a fraction of what is really up available for rent, and it could be as high as three times that amount. Not every rental agency advertises their homes on MLS. Additionally there are thousands of apartments for rent valley-wide at any given time.
In addition to MLS, a good look at Rentals.com, Rent.com, Craigslist and Rental Agencies’ own web sites would be provide a better indication of how many single-family homes are for rent in the valley. There are well over 15,000.
Leasing Agents
It used to be a common practice that a leasing agents, mostly Rrealtors, would list and rent a house for 6% of the gross lease amount, or an amount equal to one months rent. As the cost of marketing has increased along with demand for better customer service increasing, leasing agencies have centralized their efforts and are now listing the homes for rent themselves and are hiring either their own leasing agents or paying a referral fee to other agents to lease them out for them. This reduces the cost of marketing as well as the huge liability for the homeowners as well.
As a result, leasing agents make less money when leasing a house now than in the traditional way. Renters demand to be treated like buyers. They want to evaluate all their options before making a move. It is not easy to move every year. They want to make sure they find the home they really like and that it suits all their wants and needs at an affordable price. At the same time, they want to deal with a reputable leasing agency that manages the property, and will take care of them while they are there.
To find a qualified applicant that homeowner approves is a tedious, time consuming and at times frustrating job for the leasing agents. Quite often, prospective tenants fall in love with a home that they may not qualify for. At times it takes a couple of weeks to find a home they would approve of and leasing agents invests an enormous amount of time to find it for them. However;, there are times when a prospective tenants simply calls another listing agent off their sign and leases the house through them with no regards for the original leasing agent’s time and efforts.
Conclusion:
Times are tough for everyone including homeowners, tenants and leasing agents. Homeowners must realize that not everyone has perfect credit or has a ton of surplus cash to give them for deposits. Tenants must put themselves in place of the homeowners and ask themselves this question: If I were the homeowner, would I rent this house to a tenant with my credit and background history, employment and financial situation?
There are solutions, where a good prospective tenant with less than perfect credit who does not have all the deposits can rent a home they like. Your leasing agent must prepare an offer along with a complete application and present it to the owner or the listing agent on their behalf. Most often owners will come to terms with the prospective tenant provided that the demands are reasonable.
One way to negotiate a lower deposit is to offer a higher monthly rent amount equal to or a slightly greater than the deficiency in deposit for a period of twelve months. If the tenants have a pets and the owner requires a pet deposit, they can offer $25 per pet per month which is less expensive than boarding pet in a pet motel for a night.
Tenants, who are working with a leasing agent who has been working hard for them should give them a courtesy call if they find a home on their own. 2/3 of the homes are not listed on MLS, so agent has no way of knowing if that property is available for rent. If you give them the information, they will do all the rest for
Leasing agencies must make it more affordable for tenants to submit an application for rent and be open to offers submitted by prospective tenants. If the tenants can not afford the leasing administration fee, either ask the owners to pay for it or split it between the tenants and owners.
In conclusion, the housing market has changed. Accepting that, is like piloting a sailing vessel at sea. When the winds change, you have to adjust your sails to stay on course and ensure all personnel and cargo on board have a safe and enjoyable trip so that they too achieve their goals upon arrival to at their charted destination.
In the past few months we have seen an increasing number of potential rental applicants having difficulty coming up with required deposits to rent a single-family home.
Traditionally when you rent a single family home, owners require an amount equal to the first month’s rent as the security deposit. In some cases when potential rental applicants have less than prefect credit, owners could ask for up to one and a half times of that amount.
In addition to the security deposit, some homeowners may require additional upfront fees for pets, cleaning and re-keying of the property.
Also, leasing agencies require an up front application fee which could run up to $50 per adult applicant to offset their cost of finding a qualified tenant for their clients. Potential tenants must meet certain guidelines set by the homeowners to be considered, which may include, running nationwide credit, criminal, eviction, and sex offender background checks, FBI most wanted searches, and the verification of their employments and rental history.
To defray the cost of lease administration, conduct a tenant orientation, setting up a tenant portal and prove HOA documents when applicable, leasing agencies charges tenants between a $100 to $300 non refundable up front lease administration fee. In the past this cost was to the homeowner, but as more rental agencies have entered the market in the past twelve-month competing for homeowners’ business, almost all have passed this charge to the tenants. .
The following is an example of what a married couple with less than perfect credit with two children and one dog has to come up with to lease a home renting for $1,000 per month.
Credit Application fee: $45X2= $90
First month’s rent: $1,000
Security Deposit: $1,500
Pet Deposit: $250
Cleaning Deposit: $300
Re-key fee: $100
Lease Administration fee: $200
TOTAL: $3,440
Average Moving Cost: $1,000
Total Cost: $4,440.
Now let’s review the situation. Most applicants in this situation make somewhere between $3000 to $3500 per month. They have already depleted most of their cash/credit reserve and are either losing their own home to foreclosure, or the one they are renting is being foreclosed on. They have to move, but don’t have the money to rent a new place. What are their options?
Many are moving in with the other family members to save money to eventually rent on their own. Some are moving into apartments where they do not require as much deposits. Many others settle for a home in less desirable areas where homeowners are willing to take less deposits. Others, who cannot afford facing the consequences of, for example, taking their children out of schools in the middle of the school year, borrow the money. Some take “cash for keys”, and others stay in the property for as long as permitted by law. However, they can exercise other options which we will be elaborated on throughout this article.
Landlord
There are ten types of landlords in the market, but not necessarily in this order as the market keeps changing:
1) Owners who are upside down in their mortgages. There are 4 groups:
a) Owners with good jobs and income and who can afford to keep it their property long enough to sell it.
b) Business owners who need to maintain their good credit rating for their suppliers
c) Owners facing near-term foreclosures who are unable to hang on to their property it much longer, hoping for the best by renting it out.
d) Those moving out of the area.
2) Small to mid size speculators taking advantage of historically lower home prices in Arizona, hedging against inflation and hoping to cash out with substantial gains big in 5 to 10 years when the market turns around.
3) Foreign investors, such as Canadians and Australians taking advantage of week weak dollar, low home prices and higher rent in Arizona who have been buying thousands of homes in the valley for the past three years. This group is also fading away from the market as the dollar is strengthening and while tax consequences and the rising cost of maintenance and repairs has diminished their return of on their investments.
4) Institutional investors entered the market more aggressively about a year ago and since have purchased thousands of single-family rental homes at the trustee auctions resulting in a substantial artificial increase in home prices at the auctions in the recent months. Many now are directly negotiating with financial institutions, buying them in bulk. Fannie Mae is planning to liquidate most of their toxic assets through this process.
5) Individuals self-managing their IRAs. A new group of investors has recently emerged as the result of the stock market volatility. They are buying rental homes instead. They are conservative buyers and look for the right opportunity to invest.
6) Out of state retirees who are planning to retire soon and want to move to Arizona. They pay end-user prices and rent them at a lesser rental market value to a well qualified tenant who is going to take care of their property till they decide to move into it themselves.
7) Fannie Mae has also recently joined the group of landlords by renting back to tenants whose rental houses have gone to foreclosure. They do not require any deposits, but the tenants are in danger of getting booted out when the house is sold.
8) Investors paying cash or using high interest hard money loans are buying to flip to end users for a quick return are stuck with these purchases and are now putting them in on the market for rent hoping to sell them to another individual investor at a profit with a tenant in place.
9) Handyman and contractors who bought at the height of the market competing with institutional investors at the trustee auctions are forced to rent them out as well or sell it at a loss. The number of e-flyers sent to realtors has increased ten folds recently offering properties either for sale at a high commission, or rent
10) Slumlords: Investors buying for Gross Rent Multiplier (GRM), three and four, mostly old run-down houses in undesirable areas, leasing them out to less qualified renters at a much higher than average rent amount, or leasing it to them with an option to buy, thereby avoiding much required repairs.
Rental Inventory
The 5,000 single family homes advertised each month on Realtor Multiple Listing Services (MLS is a fraction of what is really up available for rent, and it could be as high as three times that amount. Not every rental agency advertises their homes on MLS. Additionally there are thousands of apartments for rent valley-wide at any given time.
In addition to MLS, a good look at Rentals.com, Rent.com, Craigslist and Rental Agencies’ own web sites would be provide a better indication of how many single-family homes are for rent in the valley. There are well over 15,000.
Leasing Agents
It used to be a common practice that a leasing agents, mostly Rrealtors, would list and rent a house for 6% of the gross lease amount, or an amount equal to one months rent. As the cost of marketing has increased along with demand for better customer service increasing, leasing agencies have centralized their efforts and are now listing the homes for rent themselves and are hiring either their own leasing agents or paying a referral fee to other agents to lease them out for them. This reduces the cost of marketing as well as the huge liability for the homeowners as well.
As a result, leasing agents make less money when leasing a house now than in the traditional way. Renters demand to be treated like buyers. They want to evaluate all their options before making a move. It is not easy to move every year. They want to make sure they find the home they really like and that it suits all their wants and needs at an affordable price. At the same time, they want to deal with a reputable leasing agency that manages the property, and will take care of them while they are there.
To find a qualified applicant that homeowner approves is a tedious, time consuming and at times frustrating job for the leasing agents. Quite often, prospective tenants fall in love with a home that they may not qualify for. At times it takes a couple of weeks to find a home they would approve of and leasing agents invests an enormous amount of time to find it for them. However;, there are times when a prospective tenants simply calls another listing agent off their sign and leases the house through them with no regards for the original leasing agent’s time and efforts.
Conclusion:
Times are tough for everyone including homeowners, tenants and leasing agents. Homeowners must realize that not everyone has perfect credit or has a ton of surplus cash to give them for deposits. Tenants must put themselves in place of the homeowners and ask themselves this question: If I were the homeowner, would I rent this house to a tenant with my credit and background history, employment and financial situation?
There are solutions, where a good prospective tenant with less than perfect credit who does not have all the deposits can rent a home they like. Your leasing agent must prepare an offer along with a complete application and present it to the owner or the listing agent on their behalf. Most often owners will come to terms with the prospective tenant provided that the demands are reasonable.
One way to negotiate a lower deposit is to offer a higher monthly rent amount equal to or a slightly greater than the deficiency in deposit for a period of twelve months. If the tenants have a pets and the owner requires a pet deposit, they can offer $25 per pet per month which is less expensive than boarding pet in a pet motel for a night.
Tenants, who are working with a leasing agent who has been working hard for them should give them a courtesy call if they find a home on their own. 2/3 of the homes are not listed on MLS, so agent has no way of knowing if that property is available for rent. If you give them the information, they will do all the rest for
Leasing agencies must make it more affordable for tenants to submit an application for rent and be open to offers submitted by prospective tenants. If the tenants can not afford the leasing administration fee, either ask the owners to pay for it or split it between the tenants and owners.
In conclusion, the housing market has changed. Accepting that, is like piloting a sailing vessel at sea. When the winds change, you have to adjust your sails to stay on course and ensure all personnel and cargo on board have a safe and enjoyable trip so that they too achieve their goals upon arrival to at their charted destination.
Sunday, October 9, 2011
Phoenix-area home prices remain too cheap
Arizona Property Management and Investments
www.AZEZRentals.com
Toll Free: 888-777-6664 ext 111
Fax: 888-777-3711
Glendale: 5723 W Glendale Ave. Glendale AZ 85301
Mesa: 4856 E Baseline RD suite 104 Mesa AZ 85206
Sun City: 13211 N 103rd Ave. Suite 2 Sun City AZ 85351
Phoenix-area home prices remain too cheap
by J. Craig Anderson, Ryan Konig and Matthew Dempsey - Oct. 8, 2011 08:35 PM
The Arizona Republic
The Phoenix-area housing market has seen significant improvement in a number of fundamental areas thus far in 2011, including decreases in housing supply, the number of monthly bank foreclosures and the length of time it takes to sell a home. Still, these promising changes in the market have given rise to a question that has confounded many sellers, lenders, real-estate agents and brokers:
If the fundamentals have improved, why haven't home prices increased?
"Normally, the laws of supply and demand would kick in, and it would affect the price, just like you learn in economics class," said Matt Widdows, president and CEO of Phoenix-based residential-real-estate brokerage HomeSmart International.
The supply of available homes has shrunk dramatically during the past year, while buyer demand - particularly among investors - remains strong.
But an Arizona Republic analysis of Valley Home Values data provided by Glendale-based Information Market from Jan. 1 through Aug. 31 shows that home prices continued to drop from 2010 to 2011 in all but a handful of Phoenix-area communities.
In metro Phoenix, just three communities - Carefree, Litchfield Park and Rio Verde - experienced positive growth in the median home price from 2010 to 2011.
Wittmann had zero growth in its median home price, and all other communities had negative growth.
Overall, the Phoenix area's median price fell to a 10-year low of $116,500 through the year.
The laws of supply and demand, it would seem, have been suspended. Why?
Appraisal issues
The first thing to understand, investment homebuyer Jeff Hale said, is that home prices are not driven entirely by supply and demand.
There is an intervening force that affects the sale price of every home purchased with a mortgage: the appraisal.
Hale, purchasing coordinator for Phoenix-based AZ Equity, said the appraisal places an artificial cap on the amount a home's seller can charge, because lenders will not allow the buyer's mortgage to exceed a home's appraised value.
Appraisers look at a home's size, quality, age, condition and location, along with recent sales of comparable homes in the same general area, to determine an appraised value.
Those comparable sales, or "comps," are where the problem often lies when an appraisal comes in unreasonably low, Hale said.
"They can choose whichever comps they want," he said, such as the sale of a bank-owned home in which the kitchen had been ripped out. "That becomes a really difficult thing to overcome."
Sue Miller, president of the Appraisal Institute's Phoenix chapter and a certified residential appraiser, said appraisers have been doing their best to match homes they are hired to evaluate with relevant comps.
Miller, of Phoenix-based Miller Pipher Inc., said appraisals merely reflect the local housing market's many ongoing problems.
"As appraisers, we have to look at the data," she said. "In some of the areas we're appraising, 80 percent of the sales are foreclosures."
When the housing market crashed, appraisers became easy targets for blame and criticism for the way they had evaluated home values during the bubble years, when home prices were inflated to an unsustainable level.
Their reaction has been to err on the low side, Hale said, to steel themselves against further accusations of overvaluing properties.
Widdows said another problem is that appraisers sometimes don't have enough available information to determine the appropriateness of certain comps.
"The Number 1 complaint that we hear from our agents is low appraisals," he said. "There is a little bit of confusion in the marketplace, because you're comparing bad apples with good apples."
Miller agreed that lack of information can be a problem, particularly if the comparable sale occurred at auction or if the buyer was an investment firm.
In some cases, she said, the appraiser simply doesn't do a very good job.
"There are a lot of appraisers that aren't doing as thorough a job as they should," Miller said.
Investment homes
The explosion of demand for single-family rental properties in the Phoenix area also has affected home values in various ways, according to investors, agents and brokers.
Most significantly, it has set the optimal price point at the low end of the market, they said, because investors can minimize their financial risk and turn a profit more quickly on a rental home if the purchase price is low.
Many investment firms that amass large portfolios of rental homes have connections within the housing and lending industries that allow them to buy homes at well below market price, Miller said.
Those bargain purchases contribute to the overall downward pressure on home prices, she said.
"Investment firms can buy homes cheaper because they know who to go to," Miller said.
Sometimes, mortgage lenders anxious to unload a large quantity of foreclosure homes will slash their asking prices in order to sell them in bulk to investment firms.
Phil Mahr, an investment homebuyer and real-estate agent with Glendale-based Arizona Property Management and Investments, said one of the biggest contributors to low prices is the unending flood of homes coming up for auction at trustee sales, where lenders attempt to avoid repossession of foreclosure homes by allowing third parties to bid on the properties.
Most of the homes up for bid at trustee-sale auctions are being purchased for significantly less than market value, because they are sold as is, with no warranty against damage or defect.
The typical buyer is a rental-home investor, although Mahr said that trend has begun to shift as consumers have gotten more comfortable with the idea of competing with investment buyers on the courthouse steps.
"It's become popular now, so we're actually seeing prices rise here at the trustee's sale auctions," he said.
As home prices in most areas continue to decline, Miller said, some investors are questioning whether they should hold back until the market stabilizes.
"A lot of these investors are saying, 'Whoa, whoa, whoa - let's wait,' " she said.
Lack of confidence
Rental-home investors aren't the only prospective buyers feeling trepidation about future home-price declines, said Kristie Austin, a Scottsdale-based investment buyer of foreclosure homes.
"I think everybody is still scared to buy a home," including consumers, Austin said. "It's still a big financial risk."
Jim Sexton, owner and designated broker of Phoenix-based residential-real-estate brokerage John Hall & Associates Inc., said lack of consumer confidence continues to plague the housing market and is one of the biggest factors dragging down home prices.
With a non-stop barrage of depressing or contradictory statistics about the housing market presented to the public, many eligible homebuyers have decided not to buy until they see clearer evidence of an economic recovery on the horizon.
Sexton said there are two serious problems with the way housing-market trends are being reported by the news media.
The first problem is timeliness, he said. By the time home-price analyses reach consumers, the data upon which they are based can be anywhere from 1 to 3 months old.
That means consumers are using information about the past to make decisions about future buying behavior, which Sexton said perpetuates the housing market's downward cycle.
The second problem is that most of the housing-market data reported by the media is too general, he said, lumping together hundreds of discrete submarkets and localized pricing trends into a single, useless statistic.
"Grouping Maricopa County into all sales doesn't tell you much about the market," Sexton said.
Economic woes
Still, most housing-market experts agreed that low prices aren't just the result of a perception problem.
There's a serious reality problem to contend with, too.
High unemployment, consumer credit woes, lender losses and other broad economic factors have contributed to the prolonged home-values slump.
"A big part of it is just the stagnant economy," Miller said.
Arizona is expected to gain jobs within the coming year, but it will be fewer than earlier forecasts had projected, state economists said last week.
By the end of 2011, Arizona should have gained about 15,500 non-farm jobs since December 2010, and by the end of 2012 it is expected to have gained an additional 14,400 jobs.
Those figures are lower than the gains state economists had projected in April.
Arizona unemployment in August was 9.3 percent, slightly above the national jobless rate of 9.1 percent.
www.AZEZRentals.com
Toll Free: 888-777-6664 ext 111
Fax: 888-777-3711
Glendale: 5723 W Glendale Ave. Glendale AZ 85301
Mesa: 4856 E Baseline RD suite 104 Mesa AZ 85206
Sun City: 13211 N 103rd Ave. Suite 2 Sun City AZ 85351
Phoenix-area home prices remain too cheap
by J. Craig Anderson, Ryan Konig and Matthew Dempsey - Oct. 8, 2011 08:35 PM
The Arizona Republic
The Phoenix-area housing market has seen significant improvement in a number of fundamental areas thus far in 2011, including decreases in housing supply, the number of monthly bank foreclosures and the length of time it takes to sell a home. Still, these promising changes in the market have given rise to a question that has confounded many sellers, lenders, real-estate agents and brokers:
If the fundamentals have improved, why haven't home prices increased?
"Normally, the laws of supply and demand would kick in, and it would affect the price, just like you learn in economics class," said Matt Widdows, president and CEO of Phoenix-based residential-real-estate brokerage HomeSmart International.
The supply of available homes has shrunk dramatically during the past year, while buyer demand - particularly among investors - remains strong.
But an Arizona Republic analysis of Valley Home Values data provided by Glendale-based Information Market from Jan. 1 through Aug. 31 shows that home prices continued to drop from 2010 to 2011 in all but a handful of Phoenix-area communities.
In metro Phoenix, just three communities - Carefree, Litchfield Park and Rio Verde - experienced positive growth in the median home price from 2010 to 2011.
Wittmann had zero growth in its median home price, and all other communities had negative growth.
Overall, the Phoenix area's median price fell to a 10-year low of $116,500 through the year.
The laws of supply and demand, it would seem, have been suspended. Why?
Appraisal issues
The first thing to understand, investment homebuyer Jeff Hale said, is that home prices are not driven entirely by supply and demand.
There is an intervening force that affects the sale price of every home purchased with a mortgage: the appraisal.
Hale, purchasing coordinator for Phoenix-based AZ Equity, said the appraisal places an artificial cap on the amount a home's seller can charge, because lenders will not allow the buyer's mortgage to exceed a home's appraised value.
Appraisers look at a home's size, quality, age, condition and location, along with recent sales of comparable homes in the same general area, to determine an appraised value.
Those comparable sales, or "comps," are where the problem often lies when an appraisal comes in unreasonably low, Hale said.
"They can choose whichever comps they want," he said, such as the sale of a bank-owned home in which the kitchen had been ripped out. "That becomes a really difficult thing to overcome."
Sue Miller, president of the Appraisal Institute's Phoenix chapter and a certified residential appraiser, said appraisers have been doing their best to match homes they are hired to evaluate with relevant comps.
Miller, of Phoenix-based Miller Pipher Inc., said appraisals merely reflect the local housing market's many ongoing problems.
"As appraisers, we have to look at the data," she said. "In some of the areas we're appraising, 80 percent of the sales are foreclosures."
When the housing market crashed, appraisers became easy targets for blame and criticism for the way they had evaluated home values during the bubble years, when home prices were inflated to an unsustainable level.
Their reaction has been to err on the low side, Hale said, to steel themselves against further accusations of overvaluing properties.
Widdows said another problem is that appraisers sometimes don't have enough available information to determine the appropriateness of certain comps.
"The Number 1 complaint that we hear from our agents is low appraisals," he said. "There is a little bit of confusion in the marketplace, because you're comparing bad apples with good apples."
Miller agreed that lack of information can be a problem, particularly if the comparable sale occurred at auction or if the buyer was an investment firm.
In some cases, she said, the appraiser simply doesn't do a very good job.
"There are a lot of appraisers that aren't doing as thorough a job as they should," Miller said.
Investment homes
The explosion of demand for single-family rental properties in the Phoenix area also has affected home values in various ways, according to investors, agents and brokers.
Most significantly, it has set the optimal price point at the low end of the market, they said, because investors can minimize their financial risk and turn a profit more quickly on a rental home if the purchase price is low.
Many investment firms that amass large portfolios of rental homes have connections within the housing and lending industries that allow them to buy homes at well below market price, Miller said.
Those bargain purchases contribute to the overall downward pressure on home prices, she said.
"Investment firms can buy homes cheaper because they know who to go to," Miller said.
Sometimes, mortgage lenders anxious to unload a large quantity of foreclosure homes will slash their asking prices in order to sell them in bulk to investment firms.
Phil Mahr, an investment homebuyer and real-estate agent with Glendale-based Arizona Property Management and Investments, said one of the biggest contributors to low prices is the unending flood of homes coming up for auction at trustee sales, where lenders attempt to avoid repossession of foreclosure homes by allowing third parties to bid on the properties.
Most of the homes up for bid at trustee-sale auctions are being purchased for significantly less than market value, because they are sold as is, with no warranty against damage or defect.
The typical buyer is a rental-home investor, although Mahr said that trend has begun to shift as consumers have gotten more comfortable with the idea of competing with investment buyers on the courthouse steps.
"It's become popular now, so we're actually seeing prices rise here at the trustee's sale auctions," he said.
As home prices in most areas continue to decline, Miller said, some investors are questioning whether they should hold back until the market stabilizes.
"A lot of these investors are saying, 'Whoa, whoa, whoa - let's wait,' " she said.
Lack of confidence
Rental-home investors aren't the only prospective buyers feeling trepidation about future home-price declines, said Kristie Austin, a Scottsdale-based investment buyer of foreclosure homes.
"I think everybody is still scared to buy a home," including consumers, Austin said. "It's still a big financial risk."
Jim Sexton, owner and designated broker of Phoenix-based residential-real-estate brokerage John Hall & Associates Inc., said lack of consumer confidence continues to plague the housing market and is one of the biggest factors dragging down home prices.
With a non-stop barrage of depressing or contradictory statistics about the housing market presented to the public, many eligible homebuyers have decided not to buy until they see clearer evidence of an economic recovery on the horizon.
Sexton said there are two serious problems with the way housing-market trends are being reported by the news media.
The first problem is timeliness, he said. By the time home-price analyses reach consumers, the data upon which they are based can be anywhere from 1 to 3 months old.
That means consumers are using information about the past to make decisions about future buying behavior, which Sexton said perpetuates the housing market's downward cycle.
The second problem is that most of the housing-market data reported by the media is too general, he said, lumping together hundreds of discrete submarkets and localized pricing trends into a single, useless statistic.
"Grouping Maricopa County into all sales doesn't tell you much about the market," Sexton said.
Economic woes
Still, most housing-market experts agreed that low prices aren't just the result of a perception problem.
There's a serious reality problem to contend with, too.
High unemployment, consumer credit woes, lender losses and other broad economic factors have contributed to the prolonged home-values slump.
"A big part of it is just the stagnant economy," Miller said.
Arizona is expected to gain jobs within the coming year, but it will be fewer than earlier forecasts had projected, state economists said last week.
By the end of 2011, Arizona should have gained about 15,500 non-farm jobs since December 2010, and by the end of 2012 it is expected to have gained an additional 14,400 jobs.
Those figures are lower than the gains state economists had projected in April.
Arizona unemployment in August was 9.3 percent, slightly above the national jobless rate of 9.1 percent.
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