Archive for the ‘Hot Arizona Investments’ Category

Phoenix Real Estate demand for listings is up…demand is not the problem in Metropolitan Phoenix, as homes attractively priced are selling quickly as demonstrated by an average of 66 days on the market before Sold. Our issue is low supply and the imbalance between the two is clearly reflected by continued price appreciation. The monthly median sales price rose 2.9% from $175,000 to $180,000. The year-over-year increase in the median sales price for all ARMLS Phoenix sold listings showed a dramatic 27.7% increase. The median sales price is $39,000 higher than last year at this time, up from $141,000. WOW!

The average sales price for June was $236,954 which is down from $237,000 in May. The modest decline in the average price in June is not indicative of softening prices, but instead is reflective of fewer sales on the high end. With the current shortage of supply, 19,511 listings in total, upward pricing pressure will continue for Phoenix Real Estate.

ARMLS is currently showing 15,725 Active lisgins and 3,786 UCB listings, 30,000 total active listings is considered typical. UCB listings are down 45% to 3,186 from 6,859 this time last year, which is a significant change. UCB listings are comprised almost entirely of Phoenix Short Sales. Pair dwindling short sale numbers with active notices declining 55% year-over-year(17,910 to 8,027) and we have a rapidly declining distressed inventory market in the valley. While distressed sales still account for 21.5% of our total sales, one year ago they accounted for 46.8%. ARMLS defines distressed sales as a combination of short sale, preforeclosure and REO properties. If we look at the median price by category in June, the median price for a normal sale was $210,000 and the distressed median was $142,000.

As the level of distress continues to decline in Phoenix, prices will gravitate to the higher price point. New inventory in June was at 9,246 compared to 9,271 a year ago. With the current shortage of supply, and no significant changes coming with new inventory, upward pricing appreciation is inevitable. The Pending Price Index projects an increase in July in both the average and median sales prices.
Phoenix Real Estate Investors who are willing to get their hands dirty with fix up properties are doing well in a market like this. There are still distressed homes available for purchase and with some cosmetic repairs investors can really capitalize. The fact that the rates are staying low is also a good indication that buyers will be out there looking to get into their new home before the kids go back to school in August/September.

Why are so many Real Estate Investors rushing to the Arizona Investment Property Market?! Rental households comprise 34% of the housing stock, and are growing at the incredible rate of 1.6 million per year, while owned occupied households are actually declining in number. This is an incredible surge in demand. Some may say that the new American Dream is going to be “Renting”.

In a summary of the U.S. housing market, only 20% of renters live in large buildings or so called Mutli-Family Housing (20+ units), and the remaining 80% of renters live in alternative types of housing such as Single-Family Homes and Townhomes.

Approximately 55% of new renters are renting single-family homes, while 45% are renting apartments. The single-family rental markdet, which is already larger than the institutional quality apartments, is booming. Unprecedented levels of distressed home sales, at home price/rent ratios that are the lowest in decades, is driving the boom.

With some much demand for newer homes in Arizona, the supply diminishing and more and more investors coming into the valley with Big Money it is difficult to win bids out there. If you are an FHA buyer or even Conventional financing with 10 to 30% down, you are left on the back burner as cash offers of above asking price are what is dominating the market. More and more privately owned homes are becoming available on the market as opposed to just about 1 year ago when REO (Lender Owned) homes and Short Sales ruled the Multiple Listing Service.

Seems as though our market is changing for the better…although if you are an agent representing buyers, you are probably having a hard time getting your clients into something in today crazy market.

In 2011 we experienced a relatively stable and predictable Arizona Real Estate market with very little price movement. In 2012 we have a very different and dynamic 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 – down 53%
Active Listings (including AWC): 21,841 versus 37,246 last year – down 41%
Pending Listings: 11,964 versus 12,923 – down 7.4%
Monthly Sales: 8,782 versus 9,952 – down 11.8%
Monthly Average Sales Price per Sq. Ft.: $93.06 versus $82.13 – up 13.3%
Monthly Median Sales Price: $129,900 versus $110,000 – 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 Arizona home has a price per square foot for pending listings on Apr 1 of $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 – up 33.5%
El Mirage – up 23.5%
Maricopa – up 22.8%
Florence – up 20.7%
Buckeye – up 20.6%
Queen Creek / San Tan Valley – up 19.2%
Eloy – up 16.8%
Casa Grande – up 15.5%
Waddell – up 14.7%
Tolleson – up 13.8%
Phoenix – up 13.8%
Avondale – up 12.7%
Apache Junction – up 12.4%
Chandler – up 11.9%
Mesa – up 11.6%
Cave Creek – up 11.2%
Peoria – up 10.7%
Glendale – up 10.0%
Laveen – up 9.0%
Surprise – up 8.0%
Gilbert – up 7.5%
Wittmann – up 5.7%
Scottsdale – up 4.9%
Youngtown – up 4.9%
Anthem – up 4.7%
Litchfield Park – up 4.0%
Arizona City – up 2.5%
Goodyear – up 1.4%
Fountain Hills – up 1.2%
Sun City – up 1.2%
Tempe – up 0.8%
New River – down 0.7%
Paradise Valley – down 6.3%
Rio Verde – down 6.9%
Carefree – down 8.4%
Sun Lakes – down 8.4%
Sun City West – down 11.9%
Wickenburg – 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 this pertains to high investment property areas of Laveen Tolleson, Avondale and Buckeye. 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 – down 2.1% for the month
Trustee Deeds Recorded: 2,091 versus 2,219 in February – 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 – down 21.2%
Trustee Sales: 2,091 versus 5,173 – 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!

If you are looking to build a Phoenix Investment Property Portfolio, don’t put it on the back burner. Get in on this market, bid strong and still obtain newer built housing which can bring positive cash flow.

Article courtesy of: The Cromford Report

I have noticed that some of you have been curious with the current Arizona Real Estate Market conditions and just wanted to shine some light on the developments that are happening at the Arizona Trustee Sales.

A dramatic increase in investor bidding competition has been happening and it has been difficult to purchase Trustee sale properties under previous pricing of plus/minus 80% of retail value for Arizona wholesalers of Real Estate.  The recent market appreciation here in Maricopa County is evidenced by many local statistics.  The average median sales price of a Single Family Home in Maricopa County went from $113,000 in August, 2011 to $127,000 in February, 2012.  This constitutes a 21.26% annualized increase.  Also, the active retail inventory dropped from 5.79 months in February 2011 down to 3.35 months in February 2012, showing a 42% decrease in supply of available homes on the open market.  And of course, it doesn’t help when Warren Buffett on February 28th, 2012 states on CNBC, “If I had a way of buying a couple hundred thousand single family homes, I would load up on them.”  Since this current market is so aggressive, purchasing properties up to 85% of retail value is starting to occur by wholesalers.

Purchasing Trustee Sale Homes in Arizona with lower spreads is common, however with shortage of actual inventory on the market for all the buyers, investors are still selling them at the retail level in this “hot” market.

Arizona Foreclosed Homes activity slid 3% in November when compared to the previous month, but filings at various stages of the process showed substantially different movements, according to RealtyTrac latest Arizona Real Estate report.

We can start it off by saying and quoting RealtyTrac that scheduled home auctions hit a nine-month high following the default surge that began in August.  On a more positive note, RealtyTrac states Arizona Bank Owned Homes activity is at a 44-month low.

Total foreclosure filings  are down by double-digits from a year ago, but RealtyTrac doesn’t view the numbers as the making of a positive trend.

James Saccacio, co-founder of RealtyTrac, says the 14 percent year-over-year decline in filings last month is the smallest annual decrease recorded over the past year, and he points out that some states such as California, Arizona, and Massachusetts actually posted increases in foreclosure activity from November 2010 through November 2011.

Default notices were filed for the first time on a total of 71,730 U.S. properties in November. Foreclosure auctions were scheduled on 96,540 properties during the month, and lenders repossessed a total of 56,124 homes.

Of course, Nevada leads the nation as highest foreclosure rate for the 59th straight month.  One in every 175 Nevada housing units had a foreclosure filing last month, more than three times the national average. Wow!

Scheduled trustee’s sales in California hit a 10-month high in November, helping the state maintain the nation’s second highest foreclosure rate. A total of 26,509 trustee’s sales were scheduled in California last month, up 14 percent from November 2010 – the first year-over-year increase in scheduled foreclosure auctions in the Golden State since March 2010.

Arizona foreclosure activity increased on a year-over-year basis in November for the first time since October 2010. With filings up 4% from a year earlier, Arizona posted the nation’s third highest foreclosure rate for the fifth month in a row.

Substantial monthly increases in foreclosure activity in Utah and Georgia lifted those states’ foreclosure rates into the nation’s top five in November. Utah’s foreclosure rate ranked No. 4 thanks to a 74 percent monthly increase in foreclosure activity. Georgia saw a 23 percent increase in filings, giving it the No. 5 spot.

Other states with foreclosure rates ranking among the top 10 were Michigan, Florida, Illinois, Ohio, and South Carolina. South Carolina cracked the top 10 for the first time since RealtyTrac began issuing its report in 2005.

Well these numbers are not positive for a rebound of the local Phoenix Real Estate Market, but it does outline for a great time to start building a solid Arizona Investment Property Portfolio. Foreclosures are leaving good potential tenants out in the market looking for a long term rental since they will be out of the purchase market for the next 2 to 7 years. Capitalize on the current market.

The US and Phoenix Real Estate Markets are Improving … Slowly But Surely

It was a good week for the U.S. economy, despite what was going on in Europe. The Conference Board Index of Leading Indicators was up to 117.4 from 110.1 from October 2010.

  • Industrial production grew again. It expanded 0.7% in October. At 94.7% of its 2007 average, total industrial production for October was 3.5% above its year-earlier level. Capacity utilization for total industry stepped up to 77.8%. This is a key to the recovery because major increases in business spending for new plant is not likely to occur until capacity utilization reaches 80% or more.
  • The Consumer Price Index for All Urban Consumers now stands 3.5% over year earlier levels.
  • National retail sales, according to advanced estimates, increased 7.2% from October 2010.
  • Housing had a “better than expected” month but the expectations were low. Privately-owned housing starts in October were at a seasonally adjusted annual rate of 628,000. This is well above year earlier levels of 539,000 and expectations of about 600,000 units. Housing permits were also higher than prior month and year levels.
  • Arizona also saw continued employment gains. Total nonfarm jobs were up 44,700 over year earlier levels to 2,433,500 in the state. That is a gain of 1.9% over October 2010. For Greater Phoenix, job gains were 43,200. That equates to gains of 1.8% for October, 2011 vs. October, 2010.While these gains are modest and weak when compared to the extent of the decline since 2007, at least employment is growing.
  • In housing news, R. L. Brown reports that 543 permits were recorded in October compared to 485 in October 2010. Median new home prices were $218,504 in October while median resale prices were $110,000.
  • According to the Cromford Report, the average number of listings on MLS is 27,354 homes so far in November compared to 45,836 listings in November 2010.
  • Days on market were down to 93 in October of this year compared to 104 in October of last year.

Major Point: Not a roaring improvement for Arizona Real Estate… . but slow and steady grow and a sharp decline in average listings.

Fannie Mae has rolled out new guidelines. Phoenix investors who have recently purchased an investment home for cash can now recoup a large portion of their investment immediately!

Cash Out without continuity: when the property is purchased for cash, the new loan is considered delayed financing, allowing the borrower to recoup the cash put into the purchase.  This can be done even if the borrower owns over four financed properties.


Delayed Financing Exception

Investors who purchased a property within the past six months are eligible for a cash-out refinance if all of the following requirements are met:

  • The new loan amount can be no more than the actual documented amount of the borrower’s initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV/CLTV/HCLTV ratios for the transaction).
  • The purchase transaction was an arms-length transaction.
  • The transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property.
  • The sources of funds for the purchase transaction are documented (such as, bank statements, personal loan documents, HELOC on another property).
  • All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.

Note: The preliminary title search or report must not reflect any existing liens on the subject property. If the source of funds to acquire the property was an unsecured loan or HELOC (secured by another property), the new HUD-1 must reflect that source being paid off with the proceeds of the new refinance transaction.


Eligibility Requirements for Investor and Second Home Borrowers with Five to Ten Financed Properties

With the exception of high-balance mortgage loans, Phoenix investors and second home borrowers with five to ten financed properties must meet the following eligibility requirements:

Transaction Type Number of Units Maximum LTV/CLTV/HCLTV Minimum Credit Score
Second Home or Investment Property
Purchase 1 unit 75%/75%/75% 720
Limited Cash-Out Refinance 1 unit 70%/70%/70% 720
Cash-Out Refinance (only if delayed financing exception requirements are met — See B2-1.2-03, Cash-Out Refinance Transactions (06/28/2011)) 1 unit 70%/70%/70% 720
Investment Property
Purchase and Limited Cash-Out Refinance 2-4 units 70%/70%/70% 720
Cash-Out Refinance (only if delayed financing exception requirements are met — See B2-1.2-03, Cash-Out Refinance Transactions (06/28/2011)) 2-4 units 65%/65%/65% 720

Rates have moved down quickly in the past ten days even for Phoenix Investment Properties. Refinance and purchase applications are already surging to 2011 highs with consumers taking advantage of the opportunity of locking in low payments.
Non-distressed Phoenix properties sold by sellers and/or investors have started to stabilize. That is an attribute proving that the worst could be behind us, Ajay Rajadhyaksha, the co-head of U.S. fixed income strategy at Barclays Capital, said in a research note. An increase in straight sales with no Banks involved over the summer should lead to another change in the mix of homes, in favor of non-distressed sales, and the aggregate index of home prices should stop declining and in hopes seeing a slow increase and stabilization of home prices in Phoenix. “In sum, there are many reasons to worry about the U.S. macroeconomic picture (the recent softening in the labor market, the U.S. fiscal picture, etc.) but the recent drop in Phoenix home prices should not be one of them,” according to Rajadhyaksha. Source:
The U.S. population is projected to grow by 150 million within the next 40 years and “more compact, mixed-use development” is needed to handle the growth and changing demands, Patrick Phillips, CEO for the Urban Land Institute, told an audience at the National Association of Real Estate Editors annual conference this week. “The design and development of urban areas will be radically different in the decades ahead. We are seeing a push to make our cities more livable and sustainable with more construction near downtown. Single Family homes are the number #1 demand properties, he noted. Also, younger generations, in buyer preference surveys, are placing a higher value on the sense of community and are willing to swap extra space for convenience. An urban renaissance has been taking place with neighborhoods that are near urban centers becoming more desirable, Phillips said.
Laveen Investment Property is a sound financial decision as it is close to proximity of the Phoenix Sky Harbor Airport, University of Phoenix as well as Downtown Phoenix. In that case investors who have purchase properties in Laveen are close in proximity getting the best of both worlds, a newer construction single family home paired with a good sized lot and close in proximity to the inner city. Contact us today for our Turn Key Laveen Investment Homes and surround Phoenix Area. Build a solid Phoenix Rental Homes Portfolio today with expert guidance from acquisition to Cash Flow leases.

The current Real Estate Market in the Phoenix area has seen a decline in prices as well as an increase in properties being bought by investors from all over the Nation as well out of country investors such as Australia, Middle East, Europe and many Canadian Investors. More often than not, these are cash buys in prices where positive cash flow can easily be obtained. In most cases properties are cleaned up and then put back on the market for resale after they have been leased to a tenant with 1+ year lease term. Lenders and Banks have imposed the 90 day flip rule And while it is not a deal breaker, it is important to know how things work in a quick re-sale situation of a Phoenix Investment Property.

This 90 day flip rule set forth by The Federal Housing Administration has been around for many years to prevent the buy and quick resale of a home within 90 days. Likewise, while there was no rule in place for conventional loans, backed by Fannie Mae and Freddie Mac, many lenders followed suit and did not allow for financing, for the resale of properties within 90 days. In our case we have lenders who would like 30 day seasoning and very few who will lend on a home with less than that.

However, in recent years this rule was lifted by the FHA and allowed for ownership change and immediate resale of a property. Initially, the ruling pertained just to banks that would obtain homes through foreclosure. Basically, banks had no restrictions after taking back a property through Foreclosure and re marketing to home buyers immediately.

However, that is no longer the case, as the resale of properties within 90 days by private sellers and investors is now permissible in many cases with both FHA and conventional loans.

The real key to making sure that the sale is permissible has to do with the difference between sales price or asking price compared to acquisition price of Investment Property. Basically, a property can be re sold much easier if Investor re markets the home with a less than 20% increase in price post acquisition.
However, if a property is re-sold within 90 days with sales price of more than 20% of what the first buyer bought the home for, then documented improvements (aka proof of money being invested to fix or upgrade the home) must be shown and well documented to warrant the new sales price. In addition, there will also often be two appraisals needed in these cases as well. And the lenders will take the lowest of the 2 appraisals as a final contract and purchase price of what they will lend for.
The Arizona Investment Property Market is definitely coming to life although prices are still being driven down by Phoenix Bank Owned Homes flooding the market. The market is good for the investor willing to work hard for a smaller spread than in a solid real estate market. On a side note, home prices have fallen in the first few months of the year at about 4 percent and downward pressure the Arizona Real estate market is projected through 2011…outlining a great opportunity for Phoenix Investors to build a solid Investment Property Portfolio in Arizona.

Finally some good news regarding the Arizona Real Estate Market and the nation as a whole…Purchase applications for home loans increased 6.7 percent last week, reaching highest level of the year, according to the Mortgage Bankers Association. The MBA reports that government loan applications FHA loans reached their highest level since May 2010, increasing 10.3 percent last week compared to the week prior. This could have been caused by the projected and now imposed FHA mortgage premium increase in Arizona and nation alike.

Below replacement cost pricing of Phoenix homes combined with low interest rates below 5 percent may bring the Phoenix real estate market its busiest spring season in years, economists say. Phoenix Foreclosed Homes sales and other distressed property transactions continue to put downward pressure on home prices, which may lure more buyers off the fence and bring more hungry Phoenix investors ready to snag a deal during the typical prime-time buying season…Spring and early Summer. Some builders are imposing discounts on new homes as well as boosting commissions to buyer agents to try to spark more interest and closings of New Homes Sale transactions in areas such as Laveen, Tolleson, Avondale and parts of the East Valley such as Gilbert, Chandler and Queen Creek in Arizona Homeowners also are getting more competitive in pricing their homes. “After three years of downturn on pricing, people are becoming much more realistic in terms of valuing their home, and if they want to sell their Phoenix Home in some cases underpricing,” says Lawrence Yun, chief economist at the National Association of Realtors®. An improved job market with better income potential may also motivate more people to jump in and Buy Arizona Foreclosed Homes, says David Berson of the PMI Group. “Household formations are also very important,” Berson says. “Kids have moved back home with mom and dad, or two people may have moved in together, due to job concerns. Now they can venture out and purchase a home.” While rates are sitting comfortably below 5 percent for now, economists warn the attractive low rates won’t last long. “Few think rates are going lower,” says Mark Zandi, Moody’s Analytics chief economist. “It’s more likely they will be 6 percent than 4 percent next spring. This lights a fire under Phoenix home buyers to get in and buy before rates adjust.” Source: The Wall Street Journal