azpropertypro blog

Article Source: Phoenix Business Journal by David Sydiongco
Date: Wednesday, April 25, 2012, 7:31am MST – Last Modified: Wednesday, April 25, 2012, 2:07pm MST

Phoenix home values will have the largest national gains in 2012, according to a recent forecast by Zillow Inc., a Seattle-based real estate tracker.

Released Wednesday, Zillow’s report for the first quarter of 2012 predicted Phoenix home appreciation of 6.5 percent between March 2012 and March 2013, the largest growth among the 30 major metros included in the report.

Stan Humphries, Zillow’s chief economist, credits the recent month-to-month performance of Phoenix home values for this forecast.
“In Phoenix, your February-to-March change is 1.4 percent, which is really quite extraordinary,” he said.

Humphries explains that Phoenix has be experiencing “very fast monthly appreciation,” a pattern that has led to the Zillow to forecast this substantial increase in home values in the next year.

“Clearly what’s happening in Phoenix is that demand is outstripping supply,” said Humphries. “Phoenix is seeing a lot of investor demand, a lot of second-home and retiree buyers, and a fair bit of international buyers.”

Ultimately, Humphries describes the Valley’s residential price growth as “surprising.”

“It’s been our thesis that most housing markets would see a period of two to four years of very modest home price appreciation after hitting bottom,” he said, rationalizing that high negative equity and foreclosure rates would keep price appreciation minimal.

Last month, Phoenix foreclosure re-sales made up almost 30 percent of the market. However, this figure is 17 percentage points lower than it was a year ago, and half of what it was at its peak in 2009.
“Phoenix is probably the best example of a hard-hit market that is showing signs of recovery,” said Humphries.

The forecast for Phoenix’s home-value growth is followed by the Miami metro area, which is predicted to experience a 5.6 percent increase in home appreciation for the next year.

The Minneapolis metro area fared the worst, with a 1.8 percent drop forecasted in home value in 2012.

For more information about any specific Phoenix Area neighborhood, contact Troy Elston at West USA Realty at 602-375-3300.

Here’s a great article by the Cromford Report (a leading market data provider and local market analyst).  This confirms what we’ve been seeing at the trustee sale auctions lately and explains how hard investors are hitting this market right now.

“We have a confirmed market price bottom during the third quarter of 2011 and we are now a comfortable 18% above that low point when measured by average $/SF, and 21% above when measured by monthly median sales price. The average $/SF for pending listings on Apr 1 is $91.68!”

The Cromford Report – April 2, 2012
Market Summary for the Beginning of April

In 2011 we experienced a relatively stable and predictable market with very little price movement. In 2012 we have a market in which dramatic change is not only to be expected, but is already happening. Prices have moved in the single month of March 2012 more than they did in the whole of 2011. In these circumstances it is very difficult to appraise homes accurately, and in many cases appraisals are coming well below current market pricing. Normally this would act as a brake on price movement, but as so much of our market is cash-based, with the buyer waiving the appraisal contingency, the braking effect is less than normal.

Let us look at some basic numbers for March 2012 relative to March 2011. So for all areas & types we record the following:

Active Listings (excluding AWC): 14,175 versus 30,230 last year ˆ down 53%
Active Listings (including AWC): 21,841 versus 37,246 last year ˆ down 41%
Pending Listings: 11,964 versus 12,923 ˆ down 7.4%
Monthly Sales: 8,782 versus 9,952 ˆ down 11.8%
Monthly Average Sales Price per Sq. Ft.: $93.06 versus $82.13 ˆ up 13.3%
Monthly Median Sales Price: $129,900 versus $110,000 ˆ up 18.1%

So we can conclude that supply is down dramatically year over year, while pricing is clearly well up over last year at this time. It is no longer possible to measure demand freely since it is now heavily constrained by the lack of supply. Sales volumes are nearly 12% down on last year, so this suggests at first sight that demand has fallen. However we know that sales numbers would be much higher if more homes were available. That is why multiple bids have become the norm for most properties under $450,000 and this supply shortage means the upward pricing pressure is continuing.

We have a confirmed market price bottom during the third quarter of 2011 and we are now a comfortable 18% above that low point when measured by average $/SF, and 21% above when measured by monthly median sales price. The average $/SF for pending listings on Apr 1 is $91.68. The improvement in pricing is due to two separate factors:

Prices are increasing when comparing like with like properties
The sales mix is changing in favor of higher priced normal sales and flips and against distressed sales (especially lender-owned homes)

With annual appreciation now in highly positive territory we repeat our analysis of which cities are looking strongest from that perspective. Here’s a ranking table which shows the change in monthly average sales $/SF between March 2011 and March 2012 for single family detached homes:

Coolidge ˆ up 33.5%
El Mirage ˆ up 23.5%
Maricopa ˆ up 22.8%
Florence ˆ up 20.7%
Buckeye ˆ up 20.6%
Queen Creek / San Tan Valley ˆ up 19.2%
Eloy ˆ up 16.8%
Casa Grande ˆ up 15.5%
Waddell ˆ up 14.7%
Tolleson ˆ up 13.8%
Phoenix ˆ up 13.8%
Avondale ˆ up 12.7%
Apache Junction ˆ up 12.4%
Chandler ˆ up 11.9%
Mesa ˆ up 11.6%
Cave Creek ˆ up 11.2%
Peoria ˆ up 10.7%
Glendale ˆ up 10.0%
Laveen ˆ up 9.0%
Surprise ˆ up 8.0%
Gilbert ˆ up 7.5%
Wittmann ˆ up 5.7%
Scottsdale ˆ up 4.9%
Youngtown ˆ up 4.9%
Anthem ˆ up 4.7%
Litchfield Park ˆ up 4.0%
Arizona City ˆ up 2.5%
Goodyear ˆ up 1.4%
Fountain Hills ˆ up 1.2%
Sun City ˆ up 1.2%
Tempe ˆ up 0.8%
New River ˆ down 0.7%
Paradise Valley ˆ down 6.3%
Rio Verde ˆ down 6.9%
Carefree ˆ down 8.4%
Sun Lakes ˆ down 8.4%
Sun City West ˆ down 11.9%
Wickenburg ˆ down 12.5%

It is surely encouraging that we have 18 cities showing double digit appreciation rates, including the giant cities of Phoenix and Mesa. Scottsdale is now well into positive territory but is held back by its relatively slow super-luxury segment, as are Paradise Valley and Carefree. The active adult cities are also much weaker than average.

There is another obvious pattern here. Those cities least affected by foreclosures are seeing the least improvement in pricing (with several still showing negative appreciation). Those with a history of very high foreclosure rates and huge price collapses in 2006 through 2009 are seeing the fastest price improvement as distressed properties start to become a much smaller part of the market. So for example we have Coolidge, one of the most devastated cities where developers pulled out and abandoned their subdivisions, and prices fell by 79% from April 2006 to February 2011. Coolidge has seen average monthly sales $/SF jump by over one third in 12 months. Now it has to be admitted this is a jump from an eye-wateringly low $27.45 to a still very low $36.65 per sq. ft., but 33% is still a healthy percentage growth in value in anybody‚s book.

We also note that Pinal County is extremely strong, and much of the west valley and southeast valley is doing well. One exception is Tempe, where appreciation is a modest 0.8%. Tempe saw fewer foreclosed homes because it had very little new construction and therefore fewer problem purchase-money loans issued during the crucial bubble period of 2004 to 2007. Its pricing therefore stayed higher for longer than most of its neighbors.

So what we are seeing so far is primarily a strong bounce back for the over-corrected areas. We are still a long way below the long term trend line for Greater Phoenix pricing. So despite the increases so far, housing is still very cheap by any historic measure and relative to our surrounding states. The recovery is still in a very early phase and the supply shortage is yet to have a big impact on normal (non-distressed) transaction pricing.

The Maricopa County foreclosure statistics are:

New Notices of Trustee Sale: 4,487 versus 4,584 in February ˆ down 2.1% for the month
Trustee Deeds Recorded: 2,091 versus 2,219 in February ˆ down 5.8% for the month
To put the current levels of foreclosure in proper context we need to compare March 2012 to March 2011:

New Notices of Trustee Sale: 4,487 versus 5,693 ˆ down 21.2%
Trustee Sales: 2,091 versus 5,173 ˆ down 59.6%
Since fewer than half of the trustee deeds were issued in favor of the beneficiary, we have a lower supply of REO properties coming onto the market than we have seen since 2007. There is still much talk of a “shadow inventory” supposedly manipulated in a conspiracy by the banks, but no sign whatsoever of it actually coming onto the market any time soon. Anyone attempting to buy a residential property in Greater Phoenix would love to see some of that mythical “shadow inventory” emerge in volume to relieve the severe shortage of homes currently offered for sale. My advice is: don’t hold your breath!

FHA Announces Increases to MIP

You may have heard talk in the news lately regarding some increases FHA is making to both its upfront and annual mortgage insurance premiums. I wanted to reach out to you and let you know why FHA is doing this…and what this could mean to you.

It’s important to understand that mortgage insurance premiums for new purchases and regular refinances are increasing to help keep FHA financially strong. FHA’s cash reserves hit a record low of $2.6 billion last year–and since approximately one-third of all residential home loans in the U.S. are FHA loans, it is important for FHA to be in a strong position.

So what does this mean to FHA borrowers? FHA case numbers assigned after April 1, 2012 will be subject to the higher mortgage insurance premiums.

The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual, (monthly) MIP it collects by 0.10 percent. The monthly MIP factor will increase from 1.15 to 1.25. This change is effective for case numbers assigned on or after April 1, 2012.

The upfront MIP will be increased from 1.0 percent to 1.75 percent of the base loan amount. FHA will continue to permit financing of this charge into the mortgage. This change is effective for case numbers assigned on or after April 1, 2012.

There’s still time to act before these increases go into effect! Call Troy Elston at West USA Realty today!

Came across an article in the Arizona Republic today about how most people will receive a tax cut on their property taxes. That’s the least they could do for homeowner/taxpayers since the property values have decreased over 60 percent since 2006. Please be sure and read further into the article and into the comments about how each school district will raise the tax rate to compensate for missed income. Are you kidding? I wish the AZ government had its act together for once.

Here’s the link if you’d like to read it. I also suggest reading the comments. If you’re a teacher, some of the comments will most likely strike a nerve or two.

ARTICLE LINK

How to buy a house after defaulting on the last mortgage. This is a question more and more people will be asking in the next few years. I don’t agree with the government’s stance that “defaulters shouldn’t have owned a house in the first place and maybe they shouldn’t be home owners now”. Look. I’m not saying that home buyers in 2005-2008 were not responsible for their decisions. However in areas like Phoenix, not only were homes easy to finance, but were at a all-time high in price. We don’t have that now. Mortgage rates are not only at all-time lows, but home prices are comparable to that of the nineties. Let’s loosen up the financing again! It’s true that those who defaulted did it because they couldn’t afford the monthly mortgage rate. Now they can! In many ways, rent is becoming less affordable than home ownership. THE BIG PICTURE: Home owners that defaulted NEED another chance. Not only will it move inventory, it will help our housing market tremendously. “2011 Another Chance Bill”! Doesn’t that make sense?

Your debt-to-income ratio can be a valuable number — some say as important as your credit score. It’s exactly what it sounds: the amount of debt you have as compared to your overall income.

Lenders look at this ratio when they are trying to decide whether to lend you money or extend credit. A low DTI shows you have a good balance between debt and income. As you might guess, lenders like this number to be low — generally you’ll want to keep it below 36, but the lower it is, the greater the chance you will be able to get the loans or credit you seek.

Add up all of your monthly debt obligations — often called recurring debt — including your mortgage (principal, interest, taxes and insurance) and home equity loan payments, car loans, student loans, your minimum monthly payments on any credit card debt, and any other loans that you might have.
Do not include such expenses as groceries, entertainment, utilities and gasoline. The resulting number is also often called your back-end ratio.

This ratio tells a lot about your financial well-being. For more information, contact Troy Elston at West USA Realty at 602.740.1035.

Ever tried to buy a bank-owned home lately? It’s becoming less of a pleasant experience each day. Many buyers enter the foreclosure market disillusioned because what they find is absolute risk. Here’s how it works. The homebuyer hires a real estate agent who presents an AAR offer to the listing agent hired to sell the bank-owned property. Before the offer even gets submitted, the description on the MLS property listing demands that the buyer submits an “AS-IS” offer and completes dozens of pre-qualifying questions. The buyer can’t even select his or her own title company anymore. If you’ve made it past this point, you’ll love what comes next. REO agents make it very clear that the bank “will not perform ANY repairs”. Although they simply say that’s not true, it’s a very difficult endeavor to say the least. One way to approach this as a buyer is to bring your inspector or contractor in at the beginning – before you write the offer. If you’re able to live with the numerous issues found in the foreclosure property your looking at, simply adjust this into your offer price. Yes, it’s true – you will most likely have an inspection period, but you signed the as-is addendum, remember? Negotiating with asset managers after the inspection period won’t go so well. There are occasions where the buyer has leverage because of the type of financing they use, but that usually covers a list of items that MUST be present and working as per the FHA inspection.

As I work more and more with Freddy Mac and Fannie Mae, it’s becoming clear that buyers and their agents are taking on too much risk. Talk to any Real Estate Attorney and he’ll tell you that nothing in the 18-page REO Addendum is in your favor. Does your agent go over the addendums with you or are they just looking to get the house under contract and deal with it later? Does your agent even explain the bank’s addendum to you? They should. It’s common knowledge that an addendum will override any previous written and verbal agreements made in the original offer. Read these addendums closely. Yes, you! Your agent isn’t trained to work with REO forms in school. Your agent was trained to use the Arizona Association of Realtors forms. Many addendums protect only the Seller and limit their liability in case of any future misunderstandings. Most importantly, they change the terms of the original offer. Always seek legal guidance before assuming the REO addendum is harmless.

Many addendums from Fannie Mae and other lenders/servicers/investors and so on disregard the original terms of the offer completely. There needs to be some kind of regulation to these practices. Bank-owned properties are far from precious, they have lots of problems. Many of these problems are rarely addressed and if they are, it’s not out of kindness. Buyers need to understand what they’re getting themselves into when they buy a foreclosed home. Whether it’s a home that’s been vacant for the last 30 months or a home with serious material latent defects, writing the offer price that takes future repairs into account ultimately determines whether we have a sale or not.

As an agent, I want my homebuyers to live in a home they love with as little risk as possible, but my buyers have to understand that the rules to buying are constantly being changed by the lenders – and often for the worst. If you’d like to discuss buying a foreclosed or bank-owned property further, please feel free to contact me via email at troy.elston@cox.net or call Troy Elston at 602-740-1035.

Troy Elston, West USA Realty is a licensed Realtor in Arizona and a member of the Phoenix Association of Realtors, Arizona Association of Realtors and the National Association of Realtors.

Only $879/Month! Available February 1st. Apply Today!

Fees paid by renter: Credit App:$45; Security Deposit:$1000; Cleaning Deposit: $250;

To all of you, I wish you the best Christmas ever!

Introducing my Phoenix Winter Promotion. When you use Troy Elston to find your next Rental Home, you’ll receive a Black Angus $30 Gift Card upon a successful lease signing and move in. Please visit http://www.azpropertynews.com/rentgetasteak.jpg for more details or contact Troy at 602.740.1035 today!