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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by Greg Swann

Sun City Real Estate Broker

Author website

Here’s the news, a short, sharp shock: Home prices are down by 5.79% in the February Market Basket of Homes. A total of 125 homes in the market basket sold, down from the trend of recent months. Days on market was up.

Were it not for the machinations going on in Washington right now, I would say that the market is arguing that prices are not done declining. Given the manipulations being proposed by the president and the congress, what will actually happen is anyone’s guess.

We produce the Market Basket of Homes every month. It is always available from this link, with the new month’s addition usually be available on or before the seventh of the month.

Technorati Tags: arizona, arizona real estate, investment, phoenix, phoenix real estate, real estate, real estate marketing

by Greg Swann

Sun City Real Estate Broker

Author website

I’m not going to link to the news story, because this poor sap’s got troubles enough.

But the headline itself is perfect like algebra:

        man + beer_festival + cop = man_hits_cop

That’s as perfect an outcome as any math can achieve.

But wait. There’s more:

        man_hits_cop = arrest

Easily understood. But consider this:

        arrest = jail = bail

Not quite so obvious, but, given that proposition, this outcome must follow logically:

        jail = bail = marriage_counseling

It’s the math of suburban life gone awry…

by Greg Swann

Sun City Real Estate Broker

Author website

In its on-going effort to waste as much tax-payer money as possible on the pretense that Phoenix is a city, the Downtown Phoenix Partnership blew $160,000 on a new image campaign for our fair suburb.

The result? Downtown Phoenix is to be known, henceforth, as “Arizona’s urban heart.”

That’s the best they could do.

I admit the job is a challenge, since Phoenix is not and never will be a city. It’s the world’s biggest suburb, and, if you like suburban life, it is heaven on earth. But if you’re looking for hustle and bustle, thrills and chills, action and crowds — you’ll have to look elsewhere. We don’t do that.

Consider the points made in the Republic article, though:

“The brand touts Phoenix as the best place to have a cosmopolitan experience in Arizona.” Damn betcha. In fact, I think I might prefer this as a slogan: “Phoenix: The cosmopolitan cow-town!”

More from the article: “A new brand alone won’t draw more tourists overnight.” A very safe prediction.

“Phoenix has a long way to go.” Wrong. It’s perfect the way it is. Only our city government hates it.

“For a brand to work, it can’t just be a lofty goal, marketing experts say. A successful brand must spotlight something unique about the city and deliver on what was promised.”

Indeed. I agree completely, so I thought I’d chip in my ideas for a motto for Downtown Phoenix — for free!

How about this? “Downtown Phoenix: Even the bad guys go home by six!”

Or this? “Downtown Phoenix: The city with elbow room!”

Or this? “Downtown Phoenix: As much fun as Omaha — but no snow!”

Or this? “Downtown Phoenix: More government boondoggles than Egypt!”

But for a motto that really works for Phoenicians, we need to isolate the one fact about Downtown that matters most to everyone. So this is my idea for a perfect slogan:

“Downtown Phoenix: Where the hell do I park for jury duty?”

Technorati Tags: arizona, arizona real estate, phoenix, phoenix real estate, real estate, real estate marketing

by Greg Swann

Sun City Real Estate Broker

Author website

So says Arizona Republic reporter Catherine Reagor. A home is said to be “pending” when it is under contract to be sold, but the sale has not closed.

The bad news? Many of those pending sales are short sales — they are “pending” the lender’s approval — and the contracts will never close. The agents mark the listings as “pending” while the lender deliberates to keep the number of Days on Market from accumulating.

The worst news? The Republic’s Craig Anderson has it that the inventory of unsold homes in the Phoenix area may be as high as 86,000 domiciles.

The implication? If you’re an investor, cash-flow positive rental homes are yours for the picking.

And if you’re a would-be homeowner who is renting now, with a 3.5% down payment you can buy a lot more house than you ever thought you could afford.

But there is a caveat: With this much available inventory, and with the foreclosure pipeline still very full, appreciation in home values may be a distant dream.

Investment homes for income? Doable, but growth may be a long way off.

A very nice home for you and your family to live in for at least five years? Very easily done.

Thinking of selling? You’ll need a strong motivation and a stronger stomach. We’re a long way from being done with this market.

Technorati Tags: arizona, arizona real estate, investment, phoenix, phoenix real estate, real estate, real estate marketing

by Greg Swann

Sun City Real Estate Broker

Author website

What kind of price trend can we expect in the Phoenix-area real estate market going forward?

My bet is that the houses that sell in metropolitan Phoenix will tend to sell below $500,000. The reason is that the conforming loan limit for Phoenix is $417,000. Anyone borrowing more than that has to qualify for a jumbo loan, paying at least 1% more in interest. The Obama rescue plan announced last week puts the middle of the market in doubt, but the top of the market — or the upper-middle — will tend to stagnate until the market turns.

When will that happen? My guess would have been this year, perhaps even now, before last week’s announcement. But by buttressing home prices above market demand, the plan the president announced last week seems likely to delay the turn of the market by quite a while.

And as Arizona Republic reporter Craig Anderson points out, FHA loan limits are also putting a squeeze on the middle of the market.

Despite Obama’s promises, this is all pretty bad news for sellers. It should be good news for buyers, but how good depends on which type of sellers those buyers are approaching.

There are three kinds of sellers right now, depending on who owns the home.

Lender-owned homes are easy to get, and easy to get for fairly low prices. They often need help, but there are loan programs that can be used to refurbish a home on the way in.

Homes owned by owners with equity are a crap shoot. If they need to move, they’ll negotiate. If not, they’ll waste a lot of your time. They want the December 2005 price, and they will happily wait until December 2015 to get it.

Homes owned by owners without equity — short sales. These can be very tough to get, since the lender wants to maximize return despite the trend of the market. You can wait four months to get permission to buy a house that is now worth 10% less than what you offered for it.

Those are generalizations. Everything boils down to working house-by-house, figuring out what the situation is and what might make a difference in swinging the deal. Complicating everything, appraisers are as risk-averse now as they were risk-tolerant in 2005. I’ve had two buyers’ houses fail to appraise, despite both offers being deliciously low. In both cases, the buyers got to take even more money off the table, but that’s not a guaranteed outcome.

I used to tell people that they would have to plan to stay in their homes for three years before that could anticipate selling at a profit. In 2004 and 2005, it was possible to move on in three months. By now, my projection is at least five years, possibly longer.

Phoenix should do better on the way up than other markets, as long as it keeps snowing in the Great Lakes. But we don’t know when the market will turn, nor with what velocity, nor do we know what other spanners the federal government will forge to throw into the works.

On the sunny side of the street, homes in and around Phoenix have not been this affordable in many years. Buying the right home at the right price is as close as you can come to a good gamble right now.

So, do you feel like taking a chance on the Phoenix real estate market? I’m at your disposal if you have any questions, or if you’d like to see some homes at first hand. Give me a call at 602-740-7531 and let’s go snag a bargain.

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