Real Estate Information

The numbers are in and, according to a report from Arizona State University’s W.P. Carey School of Business, 2011 ended up just a bit better than 2010 as far as foreclosures go. There were about 42,000 foreclosures in 2010 and roughly 36,000 in 2011, a decrease that isn’t considered particularly spectacular. 2011 median home prices dropped from 2010 numbers as well.

Now, one thing we need to keep in mind is that this report covers an entire year, but doesn’t take into account changes that take place month to month. Let’s look at this report based on what has been happening in our market the last several months. Foreclosures ARE decreasing. Maybe not as fast as we’d like, but they are going down. Home prices may have been lower the end of 2011 than compared to the previous year, but those end of year prices were higher than they were in previous months. It’s pretty easy to find a silver lining to the cloud in this case.

An interesting question posed by Jay Butler, author of the report, is what the role of owner/occupants will be. Investors have been quite active recently, and they are getting more involved in purchasing foreclosed homes at auction rather than waiting for them to come on the market as bank-owned listings. This in effect further reduces the number of homes that come on the market (at least in the short term as many investors buy properties to fix and resell).

2012 promises to be a pivotal year in Phoenix area real estate. We may be on the road to recovery, but it remains to be seen how robust that recovery might be.

From the “They just can’t leave well enough alone” department; the US government is looking into converting federally controlled foreclosed homes into rental properties. Most folks accept the idea that federally-backed Fannie Mae and Freddie Mac had a lot to do with the mortgage crisis by pushing high risk loans backed by taxpayer dollars. And now, having not learned the lesson that the government shouldn’t be in the real estate business, Capitol Hill is looking into converting all those federally-controlled foreclosures into rentals.

On a national level, it might seem like a good idea. After all, there are plenty of national statistics that show the foreclosure crisis has really taken its toll on real estate values. Many markets are still experiencing decreases in home values due to the large number of short sales and foreclosures and a small pool of buyers.

However, our Phoenix real estate market is actually growing. Buyers are snapping up homes almost as soon as they come on the market. We currently have approximately 2.5 months’ worth of inventory; to support the buyer demands, we should have 4-6 months. If the government sells the federally backed foreclosures to investors with the provision they be converted into rentals, we will likely see the inventory drop dramatically. Now, on the surface this looks like it could be a good thing. Low inventory and lots of buyers would mean prices go up. However, there’s a dark side to this equation. The demand is artificial; only a few big firms would be buying all these homes, pushing out individuals who might want to purchase a home to live in themselves. Right now we have lots of investor activity on the market, but there are very, very few investors that would be as big as the big companies that would be working with the government to acquire these homes. These large companies would in effect control a significant portion of the real estate market, and not just on a local level since it’s likely that the companies chosen to participate would be national.

I just don’t have a good feeling about this at all, and think that the government needs to quit this “one size fits all” approach to solving the mortgage crisis. What might work in one market may not work here in the Phoenix area, and may in fact stall out what looks to be the beginnings of a recovery for us.

According to data research company CoreLogic, November Phoenix area home values were down 5% from what they were November 2010. If distressed (ie short sale and foreclosure) sales are removed from the equation, that percentage jumps to 5.3%. This indicates that non-distressed properties experienced the biggest drop in value, which comes as no surprise. Short sales and foreclosures have been setting the price of homes for a while, which is why many homeowners who don’t have to sell aren’t putting their homes on the market. Or, if they DO sell their homes, they have to price them to be competitive with the distressed listings.

However, this report doesn’t take into consideration that prices have been gradually edging upwards. Prices may be lower from last year at the same time, but they are up from what they were a few short months ago.  Buyers are still going to find good deals and historically low interest rates, but it appears that they will be paying more to buy the home of their dreams. And, as buyers absorb the short sales and foreclosures, more sellers will find the increasing prices and demand for homes attractive enough to put their homes on the market.

Being at the beginning of a new year, I would like to take this opportunity to wish everyone a very Happy 2012. Although I’m a bit of a pessimist at times, it seems that that things are finally improving. It might take longer than we’d like, but any step forward is welcome!

One effect of our troubled real estate market is that foreign investors are being attracted by the historic low prices. According to an article “Snowbirds flock to U.S. Bargains” in the Montreal Gazette, Arizona comes it at fourth place in the markets that attract foreign investors (behind Florida, Texas and California.) According to Credit Sesame, a US-based company, the largest number of foreign home buyers of US properties come from Canada, followed by Asia and Europe. These buyers are purchasing primarily single family homes under $100,000.

Many folks point to the frenzy of investing that helped push the real estate balloon to it’s bursting point a few years ago, and fear that this current interest by investors could create a similar situation in the future. However, a good point that this article brought up was that we have a large inventory of homes available for sale, and that our economy may remain sluggish until that excess is absorbed. Investors, whether foreign or domestic, are indeed snapping up the good deals our market is offering and as the number of available homes decreases we are seeing prices edging upward. It remains to be seen as to what the future implications of investor-driven sales will be, but this article shows that interest in the Phoenix market extends beyond our borders. It also shows that there is competition for good deals, and folks who are thinking about purchasing a home might be well-advised to take advantage of the historically low interest rates and the low prices before both disappear.

We’re deep into the holiday season. Hanukkah started a few days ago, while Christmas and Kwanzaa are a few days away. This time of year is usually exciting and hectic; kind of like our local real estate market has been lately. The number of homes on the market has dropped, while prices are edging upward, and we’ve gotten some good news. According to Realtor.com, the Phoenix area market was #2 on their top 10 list of cities where median prices increased from October to November.  You can read the whole article by clicking here. It’s great to see the housing market showing signs of recovery, especially this time of year when so many people celebrate hope and renewal!

I hope that you and your loved ones have a wonderful holiday season!

Although I consider myself a pretty optimistic person, when it comes to current affairs in real estate I’m very cautious. These past few years have put real estate everywhere through the proverbial wringer, and after years of plummeting prices and stagnant economic news, I’ve grown cautious about being TOO optimistic.

But these last several months have given me a flicker of hope that things may really be turning around for our hard-hit market. Earlier this month, the Arizona Regional Multiple Listing Service released data that indicates the percentage of home listings that are distressed is dropping. The outlying areas seem to have the greatest numbers of short sale and bank owned listings, while the cities towards the center of the metropolitan Phoenix area have the least number.

Although I think it’s still too soon to tell if we’re seeing an honest-to-goodness recovery of the Phoenix area real estate market, things are sure looking a lot better than they did this time last year!

It’s hard to believe that we’re approaching the end of 2011!  The number of listings that are under contract as of December 1 and the number of sales for the past month have dropped, which is likely to be at least in part due to seasonal fluctuations that we see this time of the year. Since we expect the market to cool off a bit during the holiday season, it’s not necessarily a sign that the market is cooling.

Other parts of the report, in fact, are quite positive. The number of active listings on the market continues to decrease. Although this too is likely to be in part due to seasonal fluctuations, it is good news as far as price goes. With historically low interest rates and home prices, buyers have been snapping up well-priced homes as soon as they come on the market. Back before the bottom fell out of the real estate market, we would have expected home prices to go up due to the demand and sometimes fierce competition among buyers. However, this hasn’t been the case until recently. Despite the increasing demand, home prices continued to creep downward until lately. For the past several years, buyers have had a wide selection of properties to choose from, and if an offer on one home wasn’t accepted, they could easily find another.  It appears that the number of available listings has dropped to a point where buyers don’t have quite as wide a selection, and in order to make a purchase they have to come to the bargaining table with more money. And, this is what we see on this month’s report; the average price per square foot is edging upward.

Are we on the road to recovery? It’s still too soon to tell, but this is a unique time for both buyers and sellers. Although prices are going up, there are still plenty of great deals available for buyers. And sellers who price their properties well are finding willing buyers. If you would like to take advantage of our unique market, give me a call or send me an email and let’s talk about how I can help!

Although this month’s Phoenix area real estate data indicates that overall things are still improving, they are slowing down a bit. This is very likely a result of the seasonal doldrums we see every year around this time.  The good news; the number of active listings on the market continues to decrease while the number of sales per month increased from October, and the days of inventory has dropped to below 100. On the down side, the days on market for listings that have sold increased slightly while the listing success rate declined slightly.

Still, overall the Phoenix market looks to be on track for a much-needed recovery. After all the bad news about our real estate market these past few years, I’ll take any bit of good news as signs that we’re on our way back up.

Despite the public outcry regarding the huge bonuses that top level bank execs get, the government regulator of Fannie Mae and Freddie Mac approved seven figure bonuses for the top brass of the troubled lenders for meeting “modest” performance goals. According to Securities and Exchange Commission documents, Freddie Mac CEO Ed Haldeman received $2.3 million in bonus pay on top of his $900,000 base salary, while Fannie Mae CEO Michael Williams received a $2.37 million bonus.

Most economic experts agree that Fannie and Freddie were partly responsible for the foreclosure crisis because of their willingness to back risky loans in support of home ownership. They have a massive backlog of homes they’ve foreclosed on, which pundits feel contributes greatly to the suppression of home values and thus the snail’s pace of market improvement that we’ve been experiencing since the real estate bubble burst. The execs in charge back then have been replaced, and supporters of the pay scale say that the companies have to offer Wall Street sized compensation packages to attract the talent needed to steer the floundering firms back to solvency.

Still, when looking over the performance records, one might argue that there is still much room for improvement. Freddie Mac contacted only 45% of their eligible borrowers to offer loan modification, and completed loan modifications for only 160,000 homeowners. Fannie Mae did a bit better, modifying 400,000 loans but still far, far short of the goal set forth by the Obama administration. Bonuses are ultimately paid in cash because the stocks of both companies is worthless so stock options are not an option.  Critics point out that this cash has to come from somewhere, and that somewhere is taxpayers, many whose homes are now part of Fannie’s and Freddie’s massive inventory of foreclosed homes.

You can read more at http://www.politico.com/news/stories/1011/67292.html

One of the side effects of the foreclosure crisis is the increase in the number of renters. Even though home prices are at historic lows, an increasing number of families are renting rather than purchasing homes. Equally historically low interest rates, combined with the low home prices, have created a situation where the median mortgage payment is the same, or even lower, than the median rent payment. According to a study by Corelogic, a company that collects and analyzes financial information, homeowner expenses have increased by 12% over the last 26 years, while renter expenses increased a whopping 22% over the same time.

Why are more and more people opting to rent rather than buy a home? Some are nervous about the long-term financial commitment that home ownership represents. Others are concerned about the state of the economy. Although the unsteady job situation that many areas of the country are experiencing is a major reason for people to shy away from the financial commitment of a mortgage payment, a large number of renters are homeowners who lost their homes in short sale or foreclosure actions. For these folks, the dream of owning their own homes again may seem distant, but with smart financial planning, it is possible to qualify for another home loan in as little as two years. If you have experienced the short sale or foreclosure of your home, visit our website www.FREECREDITHAWK.com to see how you can plan for purchasing a new family home!