Arizona Real eStatesman

Continued Signs of Improvement in Greater Phoenix Residential Real Estate Market

admin — Tue, 06 Oct 2009 19:45:59 +0000

According to official stats published by the Arizona Regional MLS, which covers all of the Greater Phoenix area, the residential housing market continues to show good momentum. While overall trends remain positive, we’re still seeing some up and down ‘bouncing’ from month to month.

Here are some highlights:

-Home Sales per Month:

The Positive: More than 9,000 homes were sold in each of May, June, and July. You’d have to look back all the way to September 2005 (almost 4 years) to find a comparable sales level. In fact, prior to March 2009, there haven’t been more than 7,000 homes sold in any given month since June 2006. Sales volume is not just up…it’s WAY up!

The Questionable: While sales unit volume has increased every month this year from January through June, they dipped slightly in July and dropped more than 10% from July to August to a still respectable 8,009 units. The last quarter of the year should be telling.

Average Sales Price:

The Positive: After a prolonged contraction, there are signs that our prices have stabilized, at least at the low end. For each of the four months, April - July, the average sales price rose. You’d have to look all the way back to February - May 2005 to find four consecutive months of increasing sales prices.

The Questionable: The average sales price dipped between July and August 2009 to $170,401, which is still below the average at the start of the year of $180,328.

Median Home Sales Price:

The Positive: For the past 5 months, the median home price in the Valley has risen or remained stable. Not since February - June 2006 have we seen such a trend.

The Questionable: Nothing, at this point. Since the median price has fallen from $220,000 in January 2008 to a rock-bottom $126,000 today, I don’t expect we’ll see a further decline in this metric. It’s worth pointing out that we haven’t seen a median home price this low since the start of 2001, well before the boom!

Days on Market

The Positive: DOM has fallen for 6 consecutive months to our current level of 100 days. We haven’t been below 100 days since 2006.

The Questionable: Again, this is positive news. I expect to see the number rise through the holidays, then continue to lower again after the start of the new year.

We’re still seeing some fluctuations from month-to-month, but the overall trend among leading indicators supports the theory that the Greater Phoenix residential real estate market is on the rebound!

Customer satisfaction high among Phoenix new-home buyers

admin — Sun, 04 Oct 2009 04:28:07 +0000

According to the J.D. Power and Associates 2009 New-Home Builder Customer Satisfaction Study, Phoenix has one of the highest levels of overall customer satisfaction, along with Orange/San Diego, CA, Sacramento, CA, Inland Empire, CA, and Tampa, FL.

The national trend reflects increased satisfaction between 2008-2009, with the rate of customer-reported problems falling to 9.55 problems per home, down from 11.51 problems in 2008. I suspect there’s a strong correlation between number of problems and construction activity levels. Fewer homes built should, in theory, lead to a better quality home. Also, the number of homes completed on-time increased 6 percentage points to 76% in 2009 versus 2008.

Nine factors drive overall customer satisfaction with home builders: workmanship/materials, builder’s warranty/customer service staff, price/value, builder’s sales staff, construction manager, home readiness, recreational facilities provided by the builder, builder’s design center, and location.

The workmanship/materials factor increased the most, while builder’s sales staff, construction manager, and home readiness declined in importance.

It will be interesting to see how the numbers change in the next 2-3 years as more and more new homes are built.

(Foreclosure) Buyer Beware!

admin — Fri, 02 Oct 2009 01:14:31 +0000

As if there weren’t enough risks and potential pitfalls in purchasing real estate foreclosures, I’ll add another one to the list: angry former homeowners!

If you thought the worst a previous homeowner could do was to strip the house from carpet tack strips to ceiling fans, you should consider this story. Earlier this week, a middle-aged man suffering from health issues and financial troubles lost his house at the public foreclosure auction at the courthouse steps. When the new owners drove to the property to check out their acquisition, they found the previous homeowner was still in the home…armed and very dangerous! He shot the tires out of the new owners’ cars and proceeded to chase them away with his .357 magnum in hand. He was later killed in a standoff with Phoenix SWAT after firing at them.

This incident not only reminds us that these are very hard, very desperate times for a lot of people, but also that the scope of due diligence related to a foreclosure purchase is much broader than many realize. I’ve seen homes that have been set ablaze by their former owners. I’ve seen concrete in plumbing. I’ve seen post-tension slabs intentionally cut. And I’ve seen upstairs bathtubs plugged up, the water turned on and left running to the point where the floor caved in. This is the first time I’ve heard of the threat of fatal physical violence against a new owner.

I’ve found that most people that lose their homes blame the banks and seem to understand the position of the new buyer, because they themselves were often in the same position not so long ago.

Your Realtor can explain the pros and cons, as well as the potential pitfalls and rewards, of purchasing a foreclosure property, and he or she can help you create a purchase plan that minimizes your risks.

Realtor Representation and New Home Builders: What’s the Deal?

admin — Wed, 09 Sep 2009 06:36:14 +0000

Walk into any model home center in Arizona and you’ll see a the following phrase posted prominently on the door:

“If you are working with a Realtor, they must accompany you during your first visit.”

The implication of entering the model home center without your Buyer’s Agent with you is that the builder will deny you representation. Read carefully: ANY representation.

You see, if your Realtor isn’t allowed to represent you, you won’t get representation. The sales agent that gives you the colorful packet of information and the ‘Grand Tour’ of the models doesn’t represent you. In fact, they are paid to represent the builder ONLY. They don’t serve as dual agents. You’ll sign several disclosure statements indicating as much.

But you’ll save money by not working with an agent, right? Nope. The commission has already been factored into the cost of the home and will either be directed towards your Realtor, a professional to represent you during the transaction, or it will remain in the builder’s pockets.

Not only will representation by your Realtor be free, but a professional who’s experienced with new home sales may in fact know how to negotiate on your behalf to save you as much as possible, while simultaneously looking out for your best interests.

Let’s take it one step further. According to a Community Representative at Trilogy at Vistancia, Shea Homes will not allow you to be represented by a Realtor IF YOU CONTACT SHEA BY EMAIL, PHONE, OR WEBSITE, regardless of whether or not your Realtor accompanies you to the community on your first visit. So if you’re looking to buy a new Shea Home at Trilogy or any other Shea community, buyer beware! Be sure to run any and all initial correspondence through your agent, if you have one. It’s their job to help you anyway. A simple, harmless email to the builder could cost you in more ways than one.

Looking for an ‘incredible’ Phoenix real estate agent??

admin — Mon, 31 Aug 2009 17:15:34 +0000

There’s a great directory service out there called “Incredible Agents.”

The service provides both homebuyers and homesellers with a robust mechanism for finding good, qualified real estate professionals across the country.

From one central location, prospective buyers and sellers can interview agents, learn about their backgrounds and designations, and even read testimonials from past clients.

So if you are looking for a good Phoenix real estate agent or a good Scottsdale real estate agent, you might want to start your search with IncredibleAgents.com. It won’t substitute for a live interview or personally calling references, but it may give you a good starting point for your search for the right agent.

Investor money is back in Phoenix real estate

admin — Mon, 31 Aug 2009 04:28:52 +0000

Phoenix real estate analyst R.L. Brown reported last week that more than $500,000,000 (yes, five-hundred million dollars) was spent by ‘pure cash’ buyers of metro Phoenix real estate in July. That figure excludes mortgage money and down payments!

Since the $8,000 tax credit is still being offered, one can infer that these are generally investor and 2nd home buyers capitalizing on our softened market.

As I’ve discussed in this forum recently, I expect to see the sub-$300k market segment continue to really move, which should hasten our return to a normal market and (GASP!) get us one step closer to the day that our home values actually resume appreciation.

Builders resume construction…

admin — Tue, 18 Aug 2009 03:39:58 +0000

In perhaps the strongest sign yet that the bottom may indeed be here, several homebuilders have resumed construction of projects that were formally abandoned prior to completion.

Builders in relatively solid positions, including Blandford Homes, Meritage Homes, Richmond American Homes, Lennar Homes, and K. Hovnanian homes are capitalizing on the cost savings of building in subdivisions where the basic infrastructure has been installed and the permit process is complete.

Cities benefiting from the new construction include Deer Valley, Litchfield Park, Maricopa, East Mesa, Avondale, and Gilbert.

This is refreshing news considering I read a report that indicated only 3 new homes were constructed in all of Maricopa County during Q1 2009.

Prices at these communities are so competitive that people are literally lining up to put their deposits down, as they were when the boom kicked off in 2004.

After a period of relative quiet, I’ve also started seeing more advertising by homebuilders. Bus stops, radio, TV, newspaper, magazines.

Hopefully an uptick in competitively-priced new construction will offer nice alternatives to the supply of foreclosures that banks are allowing to ‘trickle’ into the market.

Has Phoenix real estate hit bottom?

admin — Thu, 13 Aug 2009 20:09:58 +0000

As always, opinions are a dime a dozen. Even the most knowledgeable ‘experts’ on our housing market are divided on the status of our market. Most believe that we’ve either hit, or are very close to hitting, the bottom. Some have speculated that there’s a huge number of foreclosures that are still working through the system that will act to reduce prices further.

Here’s my opinion: We have bottomed out at the entry level price point, but will see some additional correct in the mid-level and high-end segments.

What factors influence my opinion?

First of all, for the first time in a long time it is possible to be cash-flow-positive with an investment property. Values have corrected so heavily and there are so many good deals out there, that *seasoned* investors are back in the game. I have not read a comment anywhere that’s bearish on the long-term health of our economy or our housing market, so many investors believe their position in today’s market has nowhere to go but up.

Also driving the market is the abundance of mortgage incentives and historically-low interest rates. First-time buyers can take advantage of a healthy $8,000 tax rebate if they purchase by December 1, 2009. Not an ‘interest-free loan’ like the credit that was offered last year. This is a true rebate. It equates to up to $8,000 off the price of your home. That’s serious savings!

In the long-run, supply and demand drive any market for goods or services. In terms of demand, the entry-level market segment has become extremely competitive. Bidding wars are common and I’ve recently competed against 34 offers on one property and 16 offers on another.

With regards to supply, I have spoken with several foreclosure listing specialists over the past months who have unanimously indicated that banks are holding properties back and releasing them slowly to market to artificially affect supply. As long as banks are able to carry their foreclosure inventories and ‘trickle’ properties to market, supply will remain low.

But what do the official numbers from the Regional Multiple Listing Service tell us?

So far in 2009, we have seen unit sales increase every month!

2009 Unit Sales of Residential Properties Across Greater Phoenix

January: 4,742
February: 5,477
March: 7,636
April: 8,564
May: 9,284
June: 9,327

You have to go clear back to August 2005 to find a month with as many unit sales as June of this year. In fact, in 2007 fewer than 55,000 homes were sold. For 2009, we’re on pace to eclipse that number in July! The real estate market is ROCKIN’!

So we see that sales units are comparable to 2005 levels, but what about inventory absorption? Isn’t the market being flooded with properties?

Well, if you listen to the media, you’d think so. Actually, in 2005 we averaged almost precisely 12,000 new listings per month. Through June 2009, we’re averaging 12,535 new listings per month! When you consider the fact that an average of 6,527 properties per month have been cancelled, expired, or taken off the market, coupled with an average of 7,505 sales per month, our inventory is actually shrinking by an average of 1500 properties per month.

What’s going on with prices?

In May 2007, the median sales price of residential homes was $350,000. From June 2007 - March 2009 it declined steadily to a ‘bottom’ of $159,080. However, April, May, and June 2009 have all posted increases to $170,580. Indeed, the huge price correction has been the core of our overall market correction. I believe that 3 months don’t necessarily indicate a long-term trend, but we should have a better idea by the end of the year as to whether or not we’re in full-fledged ‘recovery,’ or if we’re just seeing a positive ‘blip’ on the radar.

What about mid-and-high-end homes?

This is where I think we’ll continue to see a price correction. Anywhere above about $300k. It’s not that the deals aren’t there, because they definitely are, but it’s harder to obtain financing than it has been in recent years. When you couple a high inventory of homes whose owners are under water with a low number of buyers who are qualified to purchase, you’re going to see prices continue to retreat and inventory turnover remain low. Eventually we’ll arrive at a level where cash buyers move in along with people who can qualify for financing, but for whatever reason have been sitting on the sidelines. ANYTHING will sell at the right price.

Obviously, nobody knows with any real degree of certainty what the real estate market holds in store for us. A number of issues complicate the very simple concepts of supply and demand, such as the future of interest rates and lending standards and, more importantly, the state of the economy and consumer confidence. Still, the Phoenix real estate market appears to be solidly on track for recovery this year.

Purchasing a home in Arizona with a VA Loan

admin — Wed, 12 Aug 2009 21:17:52 +0000

Today’s guest article comes from Brandon Laughridge and our friends at MortgageLoanPlace.com and covers the topic of VA Loans.

One of the nation’s best home loan programs was created specifically for veterans and their families. Today, VA loans remain among the country’s most popular, and with good reason. VA loans provide a degree of flexibility and low-cost incentive that few loans, if any, can match.

The Veterans Administration does not issue loans. Rather, it guarantees the loans, giving lenders financial security that often translates to excellent loan terms for qualified borrowers. The VA offers several types of loans, from home construction and purchase to loans that can be used for energy efficiency improvements.

Besides the ultra-competitive rates, VA loans come with a host of other significant benefits for veterans and their families. There is no down payment requirement on a home with a VA loan. Borrowers also do not have to pay for private mortgage insurance every month.

Qualified borrowers can receive up to 100 percent of a home’s value. The VA uses loan limits that vary by state. Borrowers cannot exceed these established limits, which currently max out at $729,000 in high-cost areas of the country. Right now, the loan limit for Maricopa County and the Scottsdale region of Arizona is $417,000.

For active-duty military members, interest rates on VA loans are capped at 6 percent. Many military members can make interest-only payments while on active duty, ensuring that banks or other lending institutions cannot foreclose on their home.

Closing costs are also capped and can be pooled with the overall cost of the loan. VA loan holders can also prepay on their loans without financial penalty. Even veterans with conventional home loans can utilize a VA loan to refinance up to 90 percent of their home’s appraised value.

There are some eligibility requirements for veterans interested in obtaining a VA loan. First, veterans must obtain a Certificate of Eligibility, which certifies that they meet the program’s initial criteria.

Any military member who has served 181 days on active duty during peace time or 90 days during war time may be eligible, along with those who have served at least six years in the Reserves or National Guard. Spouses of service members killed in the line of duty may also be eligible.

Not everyone who is eligible will qualify for a VA loan. The agency will ultimately examine a veteran’s credit and financial history, along with other key indicators. But veterans with poor or even no credit history can obtain a VA home loan. So can those with bankruptcy or foreclosure in their past.

Further proof that there’s never a dull moment in Phoenix real estate sales…

admin — Fri, 07 Aug 2009 06:13:16 +0000

I spent 2 days this week showing properties to a couple of Canadian investors. On our second day, we found a great condo in a really nice community close to the PV Mall.

The property is a foreclosure with all the features they’re looking for. It was priced aggressively, even by foreclosure standards, and in surprisingly good condition with a great location just steps from the pool.

I called the agent to find out how many offers were in and was surprised to hear that no offers had come in yet. Only 8 days on market, I guess anything’s possible. Still, it didn’t seem right. We knew the developer had fallen short on selling units and had converted back to rental status to cover the remaining inventory of unsold units. We speculated that maybe people were turned off by owning in a community that would definitely have a high proportion of tenants.

Upon further investigation, we determined that the developer still held 65 units and was recently served with a Notice of Default with the foreclosure scheduled for September. That threw a wrench into things.

At $82,000, the condo is a steal. However, what are the risks of buying a condo that’s part of a well-done conversion project that never fully ‘converted’ before being ‘reverted’ to residential rental status? What if the project is foreclosed on and languishes on the market for months? What are the lien holder’s obligations in terms of property care and upkeep? Of management and fee collections? How will the new owner’s possible uses for the property affect the values of currently-owned units?

The reality is that there are probably very clear laws that cover many aspects of this situation, but I am quite confident that legal precedence hasn’t been established for other issues that will undoubtedly arise.

In so many ways, from lending to sales to appraisals to legal concerns, the real estate industry is in a state of flux, perhaps more so than ever before. It may not always be pleasant, but it’s always exciting.