Category: Sun City Real Estate (page 5 of 8)

by Greg Swann

Sun City Real Estate Broker

Author website

This from my Arizona Republic real estate column (permanent link):

Is now the time to buy a home in Metropolitan Phoenix?

It depends.

If you plan to take advantage of the $8,000 first-time home-buyer tax credit, you need to get moving. If your loan hasn’t closed by November 30th, you won’t get the concession.

If you’re afraid of rising interest rates, you’re probably better off acting now. Mortgage rates cannot stay this low forever. When they go up, they’re likely to go up decisively and for a long time.

On the other hand, if your plan is to pay cash, and if you don’t have to move right away — you might be better off sitting tight. The same goes for all-cash rental home investors.

The mini-boom we’ve seen over the past few months was based in an erroneous belief that the supply of homes in the Phoenix area was limited.

This is untrue. The length and depth of our real estate correction is a consequence of our being overbuilt. There is no shortage of homes for sale, nor any shortage of bargain-priced lender-owned homes. And I think it is silly to bid up the prices of properties that are not in short supply.

The market is already flooded with available housing, and there is a three-year tsunami of short sales and lender-owned homes still to come. If there are enough buyers to absorb that supply of homes, prices may not go down further, or at least not by much. But for bread and butter houses, there is no reason to expect values to go up any time soon.

But there’s more. We are headed into a hyper-inflationary economy — which among other things transfers income from creditors to debtors. The money that you’ve managed to save will lose value over time, while the money you owe will be repaid from a progressively higher income.

The bottom line: Whether you take out a mortgage or pay cash, real estate can be a very strong hedge against inflation. Just by itself, that might be a good reason to buy a home sometime soon.

 
Further notice: I recorded an extended podcast about the state of the Phoenix real estate market, which you can find by clicking on that link.

by Greg Swann

Sun City Real Estate Broker

Author website

This from my Arizona Republic real estate column (permanent link):

The “cap and trade” bill that passed in the House of Representatives last week contains within it the seeds of a national building code. It rarely rains in Phoenix and it rarely fails to rain in Portland, but both cities will build new structures according to the dictates of some Washington bureaucrat.

Drive along 19th Avenue in Phoenix and you’ll pass block after block of condemned houses. They were taken by the city for the planned light rail expansion, now delayed. The neighbors are left to fight off the kind of vermin vacant homes attract while they worry what that blight is doing to their home values.

In Glendale, the city government is doing everything it can to prevent the Tohono O’Odham tribe from developing its own sovereign land as a casino.

The essence of the freedom we celebrate on Independence Day is the free ownership of the land. The Hoplite Greeks fought and died to protect their own lands. The Roman Legionnaires fought and died because their farms were their own property. A Cincinnatus — or a George Washington — lays down his arms because being a dictator is nothing when you can instead be a freeholder in the land.

The essence of our freedom is the free ownership of the land, and yet everywhere we turn, private property is subjected to one law after another, and everything that is not forbidden is compulsory instead.

This is a grievous error. The men who become Brownshirts or Klansmen or Khmer Rouge — the men who make up murderous mobs — are men without land. It is the husbandry of the land — each man to his own parcel — that most makes husbands of us, that sweeps away our willingness to live as brigands or rapists or thugs.

By robbing the private ownership of the land of its meaning, the state is, by increments, robbing its citizens of their humanity. No one burns down his own home, nor his neighbor’s home. But when the time comes that we all seem to own our homes only by sufferance, none of us will have anything left to defend.

 
Further notice: I posted an audio tweet on this topic, as well.

by Greg Swann

Sun City Real Estate Broker

Author website

This from my Arizona Republic real estate column (permanent link):

So we started with a $7,500 tax deduction for first-time home-buyers.

But that didn’t juice the real estate market enough, so we bumped the number up to $8,000 and made it a full-blown tax credit. If you owe $8,000 in taxes next April, your slate is wiped clean.

But even that didn’t juice the the real estate market enough, so this week Republicans — the alleged party of fiscal responsibility — proposed bumping the tax credit up to $15,000 and making it available to everyone — including billionaires.

How cool is that? You buy a $150,000 house, you get 10% back when you file your taxes. And you can file an early return to get the money now. And you can even finance the tax credit now and pay it back when you file your return.

You can’t — quite — use the tax credit as your down payment, but that “reform” can’t be more than inches and hours away. And a $15,000 down payment on an FHA loan buys you a $428,500 house.

Unfortunately, that’s more than the FHA limit for metropolitan Phoenix, so that limit will need to be “reformed” as well.

Paying people to buy houses would be insane if we actually had the money to back up our promises. But, since we don’t, these “reforms” are the mark of true statesmanship.

I’m helping an ambitious young couple buy their first home right now. We’re late to close, a common enough situation.

They just had their second child, an event mere bureaucracy cannot delay. Their baby boy — his name is James — is sweet and beautiful, healthy and smart, a perfect specimen of incipient humanity.

They’re taking the $8,000 tax credit, of course, as they should. The government doesn’t become less insane if you shoot yourself in the foot.

But it is sweet little Baby James who will pay for that tax credit, and for millions of others, and possibly for millions more at $15,000 a pop. Our economy runs on theft — and we’re running out of people to steal from.

by Greg Swann

Sun City Real Estate Broker

Author website

This from my Arizona Republic real estate column (permanent link):

There was a time, just a few years ago, when the residential real estate industry in Phoenix worked like a well-oiled machine.

We were all using the same court-tested paperwork — all the same way and all according to the same standards of care. Realtors knew what to expect of each other, and our arbitration systems made sure we could trust each other.

No more. We’re back to the days of wild west real estate, where every critical detail is negotiated verbally and where every promise is as sound as a three dollar coin.

It’s not the banks who are at fault, at least not directly. Every purchase contract for a bank-owned home will be rewritten by the bank, but lenders are keeping their promises, even their verbal promises, on foreclosed homes.

Short sales are another matter entirely. Many agents handling short sales are scrupulously honest, letting buyers know exactly where they stand and keeping everyone up to speed.

But there are agents who treat short sale listings as an undisclosed silent auction, submitting every offer to the lender and not informing buyers they are being pitted against each other.

So you wait six weeks to six months for a response from the bank, only to learn that the property will be sold to someone else. The upshot is that short sales are not a viable option for anyone who needs to move by a specific date.

That’s a worst case scenario, but in this little mini-boom we’re going through, we are once again seeing some of the worst practices from the boom years.

For example, the bidding wars you’ve read about are carried out by means of the Multiple Counter Offer form. Each buyer is invited to make a better offer, without knowing what the other offers are, without knowing how many there are, and without knowing if the other buyers are even still in the game.

I can’t imagine a situation less fair to buyers. This is the kind of opacity we can expect efficient market systems (read: the internet) to fix going forward.

by Greg Swann

Sun City Real Estate Broker

Author website

This from my Arizona Republic real estate column (permanent link):

If there’s one thing we can say we’ve learned from the housing bust, it’s this: The worst conceivable stewards of financial assets are bankers.

At every step of the real estate market’s retrenchment, the bankers have been right there, on the spot, ready to make precisely the wrong decision — days, weeks or even months late.

Can’t make your payments? Put the home up for sale. Will the bank honor an offer short of the amount owed? Maybe. Maybe in six weeks, maybe in six months. Will the buyer still be there when the bank finally responds? With prices declining by thousands of dollars a month?

So the bank has to foreclose on the home — at an imputed value far lower than it could have had from the short sale. And then it must list that home for sale at a still lower price.

But don’t waste your time looking for evidence of prudence or even simple greed in a lender-owned listing. The home will be filthy, with fixtures and smoke alarms missing. The kitchen range will have been stolen, thus to assure that the home is not accidentally sold to an FHA or VA buyer.

If the bank inadvertently approves a purchase contract for the home, it will do everything it can to avoid recouping even a tiny fraction of its losses. First the bank will attempt to savage the deal by completely rewriting the contract. And everyone involved in the process will be insanely overworked, so that even the simplest question will occasion a two- to five-day delay.

Absolutely nothing will be done to address even deal-killing defects. But because the decision chain is so convoluted, negotiations over problems will drag on for weeks or even months. That way, when the deal falls apart, as many do, the bank will be able to relist the house at an even lower price.

I wish I were making this up. I want to deride bankers as being clowns, but that’s unfair to the clowns. They produce wealth, rather than destroying it — and they dress better for work, too.

by Greg Swann

Sun City Real Estate Broker

Author website

This from my Arizona Republic real estate column (permanent link):

Do you feel an insatiable urge to rush right out and buy a house?

There’s a reason for that: You’re being conned into thinking there is a shortage of available housing, when the exact opposite is actually the case.

Maybe conned is too strong a word. Are you begin misled? Are experts and pundits themselves misled? Are we all of us suffering under a mass delusion, an amplified species of wishful thinking?

Here’s what’s really going on: Last fall FannieMae and FreddieMac, along with some of the bigger private mortgage banks, declared a moratorium on new foreclosures.

So for four months, homes that would have been foreclosed on sat on the sidelines of the real estate market.

And for those same four months, inventories of already-foreclosed homes declined. In March of 2009, for example, a total of 7,621 listed homes were sold in the Phoenix area, of which 5,066 — two thirds! — were lender-owned homes.

That sounds good doesn’t it? Even better, as I write this, only 7,607 lender-owned homes are listed as being Active in the MLS database. That’s just a month-and-a-half’s supply. Happy days are here again!

Not quite. That Fannie/Freddie moratorium on new foreclosures ended on April 1st. In the first three weeks of April, there were 2,460 new lender-owned listings. And there are still two years of foreclosures in the pipeline.

What we’re seeing is a Fool’s Gold Rush. The perceived shortage of housing is an illusion, an artifact of a normal number of buyers competing for an inventory that seems to be declining rapidly. It isn’t. Instead, even now the inventory of lender-owned homes is surging.

If you need to move, you need to move, and interest rates are amazingly low. If you want to bite the bullet and move up, now might be a good time.

But even if we see a month or two of stable or even rising prices, there is an echo-bust in our future as buyers catch on to the artificial nature of our illusory housing shortage.

by Greg Swann

Sun City Real Estate Broker

Author website

The other shoe drops:

The number of homeowners facing foreclosure surged in March as lenders lifted temporary moratoriums and resumed legal actions against delinquent mortgage payers.

Foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 341,180 properties in March, 46% more than a year ago and 17% above February’s total, RealtyTrac reports today.

One in 159 U.S. housing units received at least one foreclosure notice in the first quarter, for a total of 803,459, according to RealtyTrac, which lists foreclosed properties around the country.

The sharp increase in foreclosures comes as the Obama administration is launching an effort to help as many as 9 million borrowers avoid foreclosure by modifying their loans or refinancing mortgages. Many lenders put a temporary freeze on foreclosures late last year while the administration prepared its program.

Much of March’s activity was in new foreclosure actions — bank repossessions fell 3% from February. With most of the moratoriums now lifted, bank repossessions are likely to start rising again.

This is not the end of the world, but reports of the real estate market’s immediate resurrection may have been exaggerated.

Put another way: This does not mean the Phoenix real estate market is not going to find a bottom, but it does seem to imply that, once it does, it’s going to stay there for a while.

Buying a residence with plans to stay put for five years? It’s hard to argue with today’s interest rates.

Buying a rental home for cash-flow now, putting off any hopes for appreciation for the next few years? You’re probably okay.

Buying to fix and flip? Guard your upside and get it sold fast.

Buying to fix and hold, either as a residence or a rental? This may be the best bet of all right now.

Selling a home? Don’t play games. Price it to the market and get it sold. If your home is not showing, the price is too high. If it’s showing but not selling, unearth the deal-killing defect and correct it. Every month you waste is costing you money.

We have two years, at least, of bad loans still to work through. If demand rises to meet the inflow of foreclosure inventory, prices will rise despite everything. But don’t hold your breath on that outcome. Long-term risk is probably pretty safe. Short-term risk is foolhardy, for now.

by Greg Swann

Sun City Real Estate Broker

Author website

This from my Arizona Republic real estate column (permanent link):

I was in a new-home sales office last weekend, and the sales rep was raving about how the real estate market has turned. It was hard to argue with her. That subdivision had a lot of traffic, and, besides, the newspapers have carried story after story bearing good real estate news. And who wants to rain on the parade?

There is good news out there, after all. We track bread-and-butter tract homes month-by-month, and, in some respects, March was a great month. Volume of sales was up 62% over February, for example, and this past month was the best March since 2005.

But both August and September of 2008 were better months. Still worse news, sales prices were down another 5.2% for the month. That’s 35.22% year-over-year and 54.13% from the peak in December 2005.

So, yes, people are buying homes. And, yes, for now inventories are declining. But FannieMae and FreddieMac had declared a moratorium on new foreclosures late last year. This was quietly ended on April Fool’s Day. There are 10,000 new foreclosures happening right now, half of which will hit the market as lender-owned homes in the next 60-90 days.

So what? Boom? Bust? Both?

If purchases exceed new listings, prices should stabilize or even go up. But if that’s a temporary phenomenon — a temporary “shortage” of newly-foreclosed homes — we could see an echo-bust: Stability for now followed by more price declines later.

And heads matter more than beds. If investors buy homes for which they can’t find tenants, this will depress prices, too.

On the other hand, interest rates are at unprecedented lows. Is it possible that you could save more by paying a higher purchase price now, at a lower interest rate? Or are you better off waiting for better prices, even if you end up paying a higher interest rate?

Here’s an easier question to answer: Is it time to put the champagne on ice, thus to celebrate the bottom of the real estate market? Possibly. Just don’t pop the cork yet.

by Greg Swann

Sun City Real Estate Broker

Author website

This from my Arizona Republic real estate column (permanent link):

If you’re going to call a bottom for the Phoenix real estate market, be prepared to do it more than once.

When the real estate market was booming, there were people declaring that the market had reached its peak 18 months before it actually did.

I was on the other side of that error. While prices for bread and butter suburban homes reached their high water mark in December of 2005, I was convinced at the time that the boom would run for another eight months.

This week new construction analyst R.L. Brown announced that he may be seeing an incipient stability in the median sales prices for new builds.

That’s a prediction with the tensile strength of a willow frond, but that hasn’t stopped pundits from speculating that Phoenix may be nearing the bottom of the market.

Not to rain on anyone’s parade, but prices for those bread and butter suburban homes — the ones that told us when the boom had ended — fell 5.79% last month.

That’s a big drop. Year over year, those homes, on average, are down 31.31%. They’re down 53.32% from the peak.

We have to hit bottom sometime, surely, but new home sales won’t tell us anything about the bottom of this market. Why? Because resale homes are selling for substantially less than their replacement cost.

How can that be?

The ponderous, pontificating answer is that buyers are radically underbidding our home values.

The plain-spoken answer is much simpler: We’re overbuilt. We have more bedrooms than people wanting to sleep in them, more kitchens than people looking for a place to cook dinner.

So when will the market in the Phoenix area finally turn around? When the population increases to match the quantity of available homes.

This won’t take long — particularly since the new-home builders cannot compete against the prices of resale homes. But it won’t happen overnight — and our current economic troubles aren’t helping.

Even so, Phoenix has it a lot better than other markets. Our climate will attract the people we need to fill our excess housing. Just give it time.

by Greg Swann

Sun City Real Estate Broker

Author website

From the East Valley Tribune:

The economy may be in the tank. But people continue to move into Arizona – at least parts of it – in record numbers.

New figures Thursday from the U.S. Census Bureau show that Maricopa County added 89,550 people in the year ending June 30, 2008. That’s a change of 2.3 percent.

Potentially more significant, the number of people living in the state’s most populous county is up by more than 882,000 since the official count in 2000. And that numeric change, according to the Census Bureau, is not only the greatest of any county in the country. That difference alone is larger than the populations of six states.

There are caveats, of course. The study is backward-looking, and it covers a period of time prior to this economic downturn.

But still… The sun shines almost every day, and we’re an opportunity state for new business formation. And half of the Baby Boom will be retiring here.

The real estate market stinks pretty much everywhere right now. But it will recover first and strongest where the population is growing fastest.

by Greg Swann

Sun City Real Estate Broker

Author website

I hate to say it, but “I told you so…”

The politics of light rail is very well-established. We will never be told what the actual operating losses for the Trolley are, but we will go through a rash of fare increases, service cuts, advertising initiatives, corporate “partnerships,” etc.

Mass transportation cannot show a profit, that’s understood. But government-controlled mass transportation results in losses far greater than necessary.

The true victims won’t even be the Trolley’s riders. The people who will be hit hardest by the light rail boondoggle will be the poorest of the Valley’s residents, who will have their bus service cut to subsidize the trolley.

These are folks who can’t get to work — or to the doctor — without bus service, but their bus routes will be curtailed or eliminated for the benefit of preening rich people.

Nice…

by Greg Swann

Sun City Real Estate Broker

Author website

This is my column for this week from the Arizona Republic (permanent link).

 
Do you own a home in Metropolitan Phoenix? Trying to sell one? I feel your pain. But for investors and first-time home buyers, prices and interest rates are low and incentives abound.

It can hurt to be a home seller right now. Buyers are thin on the ground, and the fire-sale prices available for bank-owned homes makes holding out for more very tough.

It’s really not all that pleasant to be a home owner for now. Whatever equity you had is gone, and every time another one of your neighbors loses a home to the bank, values go down even more.

If you keep making your payments, you’re probably throwing good money after bad. But if you let your house go by short sale or foreclosure, your credit’s wrecked.

Is there anyone for whom the housing market is not a disaster?

There is, actually. Two groups of consumers have a lot to gain from this real estate market.

The first group is rental home investors. Prices in Metropolitan Phoenix are very low, as are interest rates, but rents have held steady for the past five years. And Fannie Mae just raised the limit — from four houses to ten — on the number of homes investors can buy.

The second group — first time home buyers — has things even better. FHA loans require only a 3.5% down-payment. And the newly-passed stimulus bill includes an $8,000 tax-credit for first-time buyers.

That’s a true credit against taxes owed, not a deduction from taxable income. Buyers will be credited 10% of the purchase price of the home, up to $8,000.

So let’s go buy an $80,000 house — which can be a lot of house in Metropolitan Phoenix right now.

You’ll need $2,800 for the down payment. But since we’re going to get the seller to pay closing costs, that’s all the money you would need to buy the house.

Principal and interest is going to run $463 a month, and taxes, insurance and the HOA fee will add another $193. A three-bedroom home in the suburbs is going to cost you less per month than a three-bedroom apartment.

And next April, $8,000 cash is going to come back to you from the tax credit.

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