I have been trying to get the word out to my clients before everyone gets it. The word, yes the word is our Real Estate Market is on fire! For all homes priced at market we are seeing bidding wars. Prices are rising. Home values were up 3.2% from January 2012 to February 2012. Wow, when was the last time we jumped in value like that?
Ahhhh, I think 2005. And this is the beginning of the selling season. Oh, if I knew then what I know today! I would be independently wealthy! Bummer I don’t have the cash and credit I had then! But I have my skills of selling real estate and helping people through the process. I may not get rich, but I can create a lot of wealth for my friends, family, neighbors and new acquaintances! I am ready! Are you ready to buy? Or are you going to wait. Then in 5 years say I should of, could of and be real bummed out?
PHOENIX-As home prices continue to drop in most cities, a nascent real-estate rebound here holds lessons for the rest of the country.
This sprawling desert metropolis was one of the hardest hit housing markets
during the bust. Phoenix home prices declined 55% from 2006 through the end
of 2011, and Arizona’s foreclosure rate jumped to No. 3 in the nation in
2009. Hundreds of thousands of homeowners are underwater, meaning they owe
more than their homes are worth.
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Now real-estate economists across the country are studying an early but
surprisingly broad Phoenix turnaround. The sharp drop in home prices has
brought new buyers into the market. Unlike other markets where housing
recoveries have been snuffed out by big overhangs of homes for sale and
foreclosed properties, inventories are lean here.
“Phoenix has hit a bottom,” says Thomas Lawler, an independent housing
economist who was one of the first to warn six years ago that prices in
overbuilt metros were poised to fall.
The nation’s hard-hit housing markets face a tough act: engineering a
housing recovery without traditional trade-up buyers, many of whom are
either unwilling or unable to sell because of huge price declines.
Phoenix has found a viable formula. Low prices are igniting demand from
first-time buyers and investors who are converting the homes to rentals. The
local economy is on the upswing with several big employers like Amazon.com
Inc. and Intel Corp. hiring again, which is further increasing demand for
housing. And the region is benefiting from a surge of buyers from Canada who
are using their favorable exchange rate to scoop up bargains in the desert.
Local mom-and-pop investors are also playing key roles in soaking up supply.
“I’m running my Realtor ragged looking at properties,” said Robert Gerundo,
who last month stood inside a two-bedroom condominium, scribbling his
signature on an offer to buy the unit for $50,200, slightly above the
listing price set by the bank, which recently foreclosed on the unit.
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Phoenix
Phoenix
Bloomberg News
Mike Jones flips real-estate signs for a Realtor, David Rod, as they are
printed. Investors are buying many Phoenix properties and renting them out.
Mr. Gerundo has bought 13 properties in Phoenix in the past two years and
rents them out for as little as $950 a month. The 49-year-old, who drives
around in a Jaguar with a Rutgers sticker on it, says he is making so much
money as a landlord that he quit his job last year in New Jersey as a
banker.
Nationally, housing demand still remains weak and bank-owned sales are
expected to rise this year, putting more pressure on prices. Many economists
say they expect home prices nationally could fall by another 3% or so this
year before hitting a bottom next year. Most expect that prices will rise
little for several years.
U.S. home prices fell another 2% in the fourth quarter on a seasonally
adjusted basis, according to the Standard & Poor’s/Case-Shiller index
tracking 20 cities. But prices rose by 2% in Phoenix, the biggest increase
of any metro area in the country. Over the past year, prices in Phoenix are
down by 1.2%, the smallest drop since its prices started falling in 2006.
Other markets are showing signs of life, too, as the spring buying season
gets under way. Recent job gains for Detroit’s auto sector have helped rev
up sales in recent months. Home prices in Washington, D.C., have fared
better than in much of the country thanks to better employment prospects
from government-related hiring.
Big price drops, like those in Phoenix, are another key. In Detroit, prices
are down by 46% over the past six years and have fallen to levels last seen
in 1994. Sales have picked up in Miami, where prices are down by 51% over
the past five years.
But low prices alone haven’t been enough to so stabilize other epicenters of
the housing bust where job growth still lags. In Las Vegas, where prices
have tumbled 62% since 2006, including 8.9% over the past year, the local
economy is heavily dependent on tourism and gambling, both industries that
haven’t recovered. “A lot of markets in the country have hit a bottom, but I
just don’t see them coming back the way Phoenix has,” says John Burns, a
homebuilding consultant in Irvine, Calif.
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The improving housing market in Phoenix isn’t much comfort to anybody who
bought a home there a few years ago. More than 52% of mortgage borrowers owe
more than their homes are worth, according to CoreLogic, a real-estate data
company. And not everyone in Phoenix is convinced that the improvements will
last, especially if the economy falters or oil prices soar.
Phoenix saw a small run-up in prices three years ago when federal tax
credits spurred a buying frenzy, but prices dropped again once the credits
expired. Others worry that banks have delayed foreclosures and will begin to
saturate the market with more properties in the coming year. “It feels like
a temporary bottom,” says Brett Barry, a real-estate agent who lists
properties for Fannie Mae.
Such concerns haven’t discouraged buyers like Lloyd Sheiner from taking
advantage of low prices to build an inventory of 143 homes, which he rents
out to families that haven’t been able to hold on to their homes.
“The panic is over,” says Mr. Sheiner, an apartment and commercial
real-estate investor who lives in Montreal and began buying 18 months ago
after he concluded prices were too low.
His average renter, he says, is a family of four with parents who have jobs.
“They’ve been sitting around their kitchen table with a $350,000 mortgage on
a house worth $140,000,” he says. “And they’re saying to themselves, ‘Geez,
what are we going to do? Do we spend the next 20 years of our life paying
this down or do we start over?’ ”
His company, Living Well Homes, has built its own property-management
infrastructure that allows tenants to submit work orders online and
automatically deducts rent from their checking account. “We don’t go running
around the valley banging on the door collecting rent,” he says.
Out-of-state buyers accounted for one-quarter of all purchases last month.
One in every 25 sales went to a buyer that listed a Canadian address when
registering the sale, according to the Cromford Report, a local real-estate
publication. Many are flush with cash from a real-estate boom of their own
in Canada and an exchange rate that has given Canadians unusual buying
power.
Dean Selvey, a real-estate agent and investor who has built his business
around marketing to Canadian snowbirds, last month set up a big booth at a
two-day trade show in nearby Mesa called “Canadian Snowbird Extravaganza
Celebration” that drew 5,000 attendees. “It’s chase the Canadians-that’s our
market,” he says.
A few days later, Jon Mirmelli, a local real-estate agent who has bought
nearly a dozen foreclosures as rentals, knocked on the door of a homeowner
whose home was slated for a bank foreclosure auction. After introducing
himself and informing the occupant about the imminent foreclosure sale, he
popped the question: “If you’re not able to keep your house, would you be
interested in renting it?”
From the porch, Mr. Mirmelli’s business partner sized up the condition of
the three-bedroom house, which the current owner bought for $150,000 in a
short sale two years ago. At courthouse auctions, homes are sold as is,
meaning the buyers may have to evict the former owner.
Nearly 29% of homes sold last month went to buyers who indicated they
planned to rent out the properties, according to the Cromford Report. That
figure has been on the rise over the past two years. In mid-2010, the share
stood near 15%.
Competition from investors is frustrating for aspiring first-time buyers
like Adam Brenner. “This does not feel like a buyer’s market at all,” says
Mr. Brenner, a pharmacist who estimates that he has looked at 60 houses
since last fall. “You hear and read about how there are so many homes for
sale, but once you start looking, it’s a pretty big shock.”
Many real-estate agents have reported more bidding wars in recent weeks, and
some buyers are agreeing to escalation clauses, a bubble-era provision where
they agree to pay a certain price above the highest offer.
Arizona makes it easier for banks to take back properties through
foreclosure without going to court. The state saw the largest decline in the
share of loans that were seriously delinquent or in foreclosure during 2011,
according to Lender Processing Services. So-called judicial states such as
Florida, where banks must process foreclosures by going through court, have
seen growing backlogs, which some fear could eventually drag down Florida
markets again in the future.
Now prices are firming up because fewer homes are selling out of
foreclosure. Foreclosed properties accounted for 36% of all home resales in
January, down from 55% one year ago and a peak of 66% in March 2009,
according to DataQuick, a real-estate data firm. Those declines have fallen,
in part, because banks are also becoming more efficient at approving short
sales, where it allows a sale for less than the mortgage debt owed.
Mike Orr, founder of the Cromford Report, says concerns that banks will
begin to dump more foreclosures on the market are overblown, at least in
Phoenix. “People think there’s a glut of homes the banks are hiding
somewhere, and that may be the case in other markets, but not here,” he
says.
Still, a market recovery on paper means little to hundreds of thousands of
underwater homeowners. Consider the case of Gil Monti. In just two days, he
received five offers for this home-four above his asking price.
But that offers little comfort: He has been forced to sell the home, which
he built 34 years ago and where he raised all three of his children, in a
short sale for $275,000.
Mr. Monti was one of many people who refinanced his home repeatedly during
the boom, pulling out cash along the way to fund home improvements and his
kids’ college educations. He paid $100,000 in construction and land costs in
1978, and the home was valued at nearly $600,000 in 2006. He sold the
property last month in a short sale because his “interest only” $473,000
mortgage reset last year, requiring full interest and principal payments.
He realized the depth of his troubles last year when a neighbor sold a home
for just $199,000, a third of what Mr. Monti’s home was worth at the peak.
Mr. Monti isn’t alone. “The recovery that gives people like Gil the freedom
to sell their property is not going to happen, possibly ever, for a lot of
people here,” says Greg Markov, his real-estate agent.
Mr. Markov also represents Mr. Gerundo, the investor who bought 13
properties as rentals. “That recovery is already here” for Mr. Gerundo, Mr.
Markov says. “His investment is not going down in value.”
480-652-2004