To our valued clients:
The format of the newsletter has changed. The Arizona Regional MLS now publishes a newsletter called STAT. A link to the website is included below. This newsletter is published ahead of most other statistical publications so the numbers are more current. I will no longer make the comparison from month to month on inventory, days on market and prices as the information is included in the STAT newsletter. I will still included local real estate articles pertaining to the Greater Phoenix area and may pull some statistics from STAT. I hope this additional information is helpful.
http://www.armls.com/Libraries/STAT/STAT_October_2010.sflb.ashx
Market Recap
Good News
Interest rates continue to be the lowest in history hovering just about 4% sparking a rash of refinancing for those who still have equity in their homes. Buyers are also taking advantage of low rates and the competition for entry level housing priced under $125,000 is fierce.
Elliot D Pollack and Company think the commercial market is at or near the bottom ASU Realty Studies predicts the 2010 vacancy rate for multi-family apartment buildings to be at 12.9%. This is down from 14.2% in 2009. The last time vacancy rates were at 14% was in 1988. Despite the high vacancy rates there are 293 multi-family units under construction due the the low cost of land and low interest rates. Kammrath & Associates report apartments are selling for $56.9 per square foot which is about what they sold for in 1998. CB Richard Ellis reports the office space vacancy rate at 24.5%. The last time it was this high was in 1991. There is currently no multi-tenant office space under construction and no significant construction expected in the next 5 years. Industrial space vacancies are at 16.1% which is the highest since 1986. The is about 0.8 million SF of industrial space under construction. Retail space vacancies are at 12.9% and have not been this high since 1990 when the vacancy rate was 14.2%. In general Elliot D Pollack and Company predict no new commercial construction is needed for years.
Bad News
Phoenix home foreclosures hit highest level of the year. The actual number of existing-home foreclosures in September was just over 4,100. It’s the highest number recorded since March and up slightly from about 4,000 in August. It’s also way up from fewer than 3,000 foreclosures last September.
Buyers are taking advantage of low rates though many are still hesitating as home values in the greater Phoenix area have dropped slightly in the last 90 days.
Articles
1) STAT Newsletter Link
2) Arizona home sales propped up by investors
3) Phoenix home foreclosures hit highest level of the year
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1) STAT Newsletter Link
http://www.armls.com/Libraries/STAT/STAT_October_2010.sflb.ashx
Highlights from the newsletter are:
Sales Month to Month - The sales increase seen in August was reversed in September with 6,764 listings sold, compared to 7,358 sold units the month before. This represents an 8.1% decline in sales and the lowest sold units since February. With the exception of the teaser increase in sales in August, the overall trend since June is downward. The 27% overall decline from June (9,280 sales) to September (6,764 sales), reverses the stable sales levels enjoyed from March to June, but is still the second highest September sales total in the past five years.
New Inventory - The trend of new inventory to the market since June has held steady with an average of 12,540 new listings per month. September’s 12,601 new listing figure represented only a .48% deviation from the recent four month average. In Q4 2010, ARMLS expects the new inventory figures to hold steady or rise slightly in October, and drop in November and December, mimicking the pattern of previous years. Seven out of the last nine years saw new inventory rise in October, and every year since 2001 experienced an inventory drop in November and again in December.
Prices - Median List Price which has been on a downward trend since February, finally pulled out of the nose dive to realize a nominal increase in September, rising a meager .1% to $130,000 from $129,900 in August. More discouraging is the decline of 10.3% in the Median List Price over September 2009 figure of $145,000.
Average List Price, which remained flat through July and August, with the lowest averages in the last ten years ($198,700 and $200,800 respectively), took a refreshing 3.5% upward turn in September to $207,900. This indicates that more higher-end homes were added to the average price calculation, offering one of the few positive glimmers in the October STAT report.
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2) Arizona home sales propped up by investors Valley landlords buying some houses; hedge funds and equity firms want to buy more by Catherine Reagor - Oct. 17, 2010 12:00 AM The Arizona Republic
Investors are dominating metropolitan Phoenix's home-buying market again. The region's growing supply of inexpensive foreclosure homes is drawing thousands of investors, who can pay cash and close deals fast. The growing supply of renters means those investors can make money off the homes they have scooped up. The market has drawn a diverse crowd of investors, spurring small-scale landlords to add more homes to their holdings and attracting buyers from around the world looking to get in on a down market. It also has quietly attracted investment firms that are buying huge quantities of houses in a strategy aimed at reaping big profits from today's low prices. Big investors are showing so much interest that some observers say lenders may soon start selling foreclosure homes in bulk batches, an unprecedented tactic in metro Phoenix where the homes have always been sold in small groups or one at a time. Whether the investor-buying trend of the past few months continues at this pace in the Phoenix area depends in some part on the foreclosure moratoriums announced in the past few weeks by a handful of the nation's biggest lenders. So far, many Valley real-estate agents and investors aren't seeing a drop in supply of fore- closure homes for sale or problems finalizing sales on lender-owned homes. In the past, too many investors hurt Phoenix's housing market. Speculators were blamed for driving up home prices during the area's housing boom of 2004-06. But now many traditional buyers, who would purchase a single home and live in it, won't buy because of concerns about another dip in home prices or can't because of bad credit. So market experts say investors are welcome these days; without them, even fewer homes would sell. That would drive home prices down further and likely trigger even more foreclosures. Investors are behind nearly 40 percent of all Phoenix-area home sales now, according to industry estimates, up from about 25 percent in January.
During the next year, Fannie Mae, Freddie Mac and other big lenders are expected to unload tens of thousands of additional foreclosure homes in metro Phoenix, meaning more low-priced properties ready for investors. Foreclosure homes taken back by lenders are known as REOs, "real estate owned." It's a banking-industry term that has now become
a buzzword among buyers and sellers in Phoenix's real-estate market. "REO inventories have been climbing quickly, up 70 percent since early May," said Mike Orr, publisher of the "Cromford Report," a daily online analysis of metro Phoenix home sales and foreclosures. "If investors were not active in this market, the situation would be dramatically worse," he said. "Prices would be very much lower, and blighted properties would be deteriorating instead of getting fixed up and resold." All investors are looking for the best return on their money, whether that means keeping a home as a rental or trying to resell it for a profit. But the huge number of purchases means investors will shape neighborhoods and the resale housing market for years to come.
Classic investors
Julie and Mike Bieganski have bought 10 Phoenix foreclosure homes in the past 15 months. The couple have lived in the Valley for several years and know the neighborhoods where they are buying. The Bieganskis' strategy is to pay cash for bargain-priced homes in central Phoenix that they can spend less than $20,000 to fix up for renters. Julie is a real-estate agent and finds the homes and renters; Mike handles most of the renovations. "It's all cash deals now. But if you buy a home for $65,000 and rent it out for $850 to $900, that's a much better return than you would get on your money with a bank," Julie said. "To rent our homes fast, we can list them below current rental rates. With so many displaced people, the rental market will be excellent for years to come." The Bieganskis already have a renter lined up for their latest foreclosure home, which they closed on less than two weeks ago. The couple are looking for more to buy.
Julie found a low-priced, lender-owned home in northeast Phoenix last weekand was going to make an offer but was unsure if the foreclosure moratoriums would stop or slow a sale. "I asked the Realtor who has the listing what may happen, and she said everything seems to be fine," Julie said. "There was already another offer on the home. I really think if the folks left the house willingly and let the house go into foreclosure, it shouldn't be a problem to buy it from the lender. There are so many vacant homes out there." The couple plan to keep acquiring foreclosure homes that fit their strategy and hold onto them longer, profiting on steady rents until they can sell the homes for a considerable profit. Many of their renters can't buy because their own recent foreclosures or short sales, in which banks allowed them to sell for less than they owed, hurt their credit.
If the investor-buying trend continues, some metro Phoenix neighborhoods are bound to have more renters than homeowners living in them. But since many investors are paying cash and fixing up the houses, another foreclosure cycle for those neighborhoods is less likely. "We try to buy the ugliest home on the block and make it one of the nicest," Julie said. "We are also open to working out deals for people to rent-to-own our homes. We know it's tough to get financing now."
International buyers
Terri and Don Bozok live in Edmonton, Alberta, but were recently in Phoenix shopping for inexpensive houses. The semiretired couple own a home in Mesa and visit the Valley often. They have seen home prices sag and feel like it's a good time to buy a few fixer-uppers they can renovate and sell quickly. "We are definitely looking at foreclosures and not short sales because those take too long to negotiate," Terri said. "Because prices are down, we feel like it's definitely feasible we can make a few dollars on homes here." In April, Canadians passed Californians as the biggest group of out-of-state buyers of metro Phoenix homes, according to the Information Market, a Phoenix-based real-estate data firm.
"Canadians are finding great values in Phoenix homes for their dollar," said one realtor. "Some are investing in a home they will rent for a few years and then use as a part-time retirement home." Phoenix's housing market also is drawing the attention of buyers much farther away than Canada. "We are seeing an interesting mix of international investors now. Everyone thinks Canadians are the only ones, but we have buyers from Pakistan, Bogota (Colombia) and Israel," said an REO expert "Investors from around the world are seeing the housing deals in Phoenix." Although some investors have been able to buy foreclosures for prices low enough to resell them quickly for a profit, most investors are buying knowing they will need to hold onto Phoenix homes for at least a few years before prices rebound enough to flip them.
Big groups, big funds
Since last year, G8 Capital has paid cash for more than a hundred metro Phoenix foreclosures homes. The Ladera Ranch, Calif.-based investment firm typically buys Valley foreclosure homes for less than $20,000. The company led by Evan Gentry, former CEO of Money Line Lending Services, has been able to flip some of the Valley foreclosure homes it has bought but is also holding onto other properties and renting them out until home prices climb again. "We will continue to buy in Phoenix. It's a great long-term market for us," Gentry said. "The foreclosure cycle is far from over, despite any lender moratoriums." Unlike smaller investors, G8 can buy bulk portfolios of foreclosure homes located across the country from lenders. "We can buy a portfolio that gives us five foreclosure homes in Phoenix and five in Cleveland," Gentry said. "Our strategies differ by city. We think Phoenix will be a great rental market for a while." Several out- of-state U.S. hedge funds and investment partnerships are buying Phoenix foreclosure homes. Some of the firms are very low-key about their strategies, partly because they don't want to be seen as "vulture funds" profiting on the real-estate crash. Most of these large investment firms have had to buy foreclosure properties one-by- one in metro Phoenix. Elsewhere in the country, they have received discounts from lenders when they buy several homes at once.
One realtor said when foreclosures started to climb in metro Phoenix in 2008, several groups formed to try to buy portfolios of bank-owned homes in the region. But so many individuals are buying foreclosures that lenders offer few deals to buy multiple Valley properties at once unless foreclosure homes in other parts of the country are acquired at the same time. "In this second leg of foreclosures, lenders could start to sells homes in bulk to save time and money," she said. "Investors are an important part of the market now and will definitely help keep inventories from climbing too fast."
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3) Phoenix home foreclosures hit highest level of the year October 14, 2010
The Phoenix area just hit an unfortunate record for 2010. According to a new report from ASU's W. P. Carey School of Business, 46 percent of the total transactions in the existing-home market last month were foreclosures. That’s the highest percentage recorded in any month this year. Unfortunately, the report’s author predicts even more trouble from foreclosures. “The biggest issue is heightening uncertainty in the housing market throughout the country, brought about by the evolving problems within the foreclosure process,” said Jay Butler, associate professor of real estate. “The potential impact could include foreclosure moratoriums, the availability of title insurance, the willingness of people to purchase foreclosed properties, and the public perception and acceptance of the entire home-financing process. In confronting potential uncertainty, the level of activity and prices could even be lower than generally expected as people await the review and resolution of the problems associated with the foreclosure process.” The actual number of existing-home foreclosures in September was just over 4,100. It’s the highest number recorded since March and up slightly from about 4,000 in August. It’s also way up from fewer than 3,000 foreclosures last September. Butler said the market experienced a bump up in home resales in September. That’s normal for the end of the annual selling season, when people are wrapping up summer vacations and children start to go back to school. About 4,900 homes were resold in the Phoenix area in September. That’s up from 4,800 resales in August, but it’s still way down from more than 6,100 resales in September of last year.
The median home-resale price for September was $135,000, the same as in August. It’s down from $140,000 last September. “Another influence on the market is that, for the last year approximately 40 percent of the traditional resales were foreclosed homes sold again with a median price markdown of 14 percent from the foreclosed price,” Butler said.
In the townhouse/condominium segment of the market, more than 550 foreclosures occurred in September. That’s down from 630 in August, but still up from 410 last September. The median resale price of a townhome/condo in the Phoenix area was $75,000 in September, a step down from $80,000 in August, and a huge step down from $100,000 last September.
Butler’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed athttp://wpcarey.asu.edu/realestate/Phoenix-Resale-Market-Reports.cfm . More analysis also is available from Knowledge@W. P. Carey, the business school’s online resource and biweekly newsletter, athttp://knowledge.wpcarey.asu.edu
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