Well we are not out of the woods yet! According to the Arizona Business Journal Phoenix and Arizona continue to struggle with negative equity for homeowners, each ranking in the top three of the worst in the nation, according to a study out today by CoreLogic.
Arizona ranked third as a state during the fourth quarter of 2014 with negative equity — defined as homeowners who have a mortgage that is worth more than their home — with 18.7 percent of homeowners owing more than they can sell. Only Florida at 23.2 percent and Nevada at 24.2 percent were higher.
The Phoenix metro ranked second on the list of the worst negative equity markets, with 18.8 percent of homes in the region being underwater. Only the Tampa-St. Petersburg area in Florida was worse at 24.8 percent. It’s no surprise these areas were the most affected by the Real Estae crash and as we are still seeing, taking the most time to rebound. Stay tuned…..
Metro Phoenix’s housing market experienced a jump in the housing market The area’s median home-sales price climbed almost $10,000 in March from February.
The median price for March was $204,500, up almost 4.9 percent compared with $195,000 in February, according to a new report from the W. P. Carey School of Business at Arizona State University.
March’s higher home prices came as part of the traditionally busy spring sales season for metro Phoenix. Increases likely will continue through May says the report.
February’s median price had been the lowest median sales price reported for the region in seven months and despite the bump in home prices in March, the number of sales is still far behind last year’s pace. Home sales were down 20 percent in March compared with the same month a year ago.
Demand for Valley homes will continue to rebound more strongly next year, but a recent drop in mortgage rates and lenders making mortgages available to more buyers could help the housing market over the next few months.
The average rate for a 30-year mortgage fell to 4.18 percent this week, according to real estate research firm Zillow. And in mid-April, the Mortgage Bankers Association’s survey indicated it was the easiest time for borrowers to get mortgages in the past three years.
Median metro Phoenix home-sale price likely will fall again during summer, when luxury, snowbird and active-adult home buyers retreat from the area’s heat.
We may still be looking at little to no annual price appreciation by the end of the year though so we will have a level market as we finish out the year.
On the horizon we see a big wave of buyers who lost homes to foreclosures and short sales during the recession should be back in the housing market starting next year, boosting demand and prices in metro Phoenix.
So stabilization is the key word for the first half of 2014 and will continue till 2015.
Stay tuned for more…
I don’t normally disucuss the temperature of the Retail Market, but we live in an economic ecosytem where what happens in one part affects the other so we as Realtors and our clients should pay attention to what’s happening in other segmensts of the market.
When the recession was in full swing, one of the markets that took the biggest hit was Phoenix. Residential and commercial real estate were overbuilt in the market, and the retail sector became a casualty.
That’s all changing now, as retailers are starting to expand into the market. Retail real estate vacancy rates in Phoenix are currently around 10.5% and expected to fall below 10% by the end of the year. That’s a marked improvement from two years ago, when they were around 13.5%.
Right now retailers that are already in the market are focusing on filling gaps within the core and backfilling vacancies left by former tenants in shopping centers. There isn’t a whole lot of new development, so space is tight. Retailers are cautiously looking in growth areas but are going to make sure that the customers are in place before committing.
There are some concepts constructing new stores, though. Discount grocer WinCo Foods and Sprouts Farmers Market are two chains looking to build and expand. While there are some concerns about potential grocery store closings in the area due to the parent company of Albertsons acquiring Safeway, many of those closings could easily be backfilled by concepts like Planet Fitness and Blast Fitness, as well as furniture retailers such as, Ashley Furniture and Living Spaces.
As long as the market stays affordable and there isn’t another overzealous building boom experts say the rebound should continue.
Since our housing market has stabilized and everyone is cautiously optimistic the Retail Market has seen the same stabilization we have seen in the housing market in the last 18 months and that is good news for everyone.
For anyone who owns or rents property in Arizona, the road to recovery has been just as rocky as the road to sales recovery. Trends guidng it have affected the rental market too, and not always with positive results. Lately we are seeing the rental market being highy infulenced by the large investment firms who’s buying sprees of huge blocks of homes has begun to slow.
Rents for single-family homes are rising slower than property prices as firms such as Blackstone Group LP (BX) flood the market with homes for lease, posing risks to investors betting billions on the burgeoning market.
Monthly payments for properties in Phoenix rose 1.3 percent in February from a year earlier, compared with a 25 percent jump in for-sale asking prices, according to Trulia Inc. (TRLA), which operates an online listing service. In Atlanta, asking prices climbed 14 percent as single family rents gained 0.5 percent, and in Las Vegas rents dropped 1.7 percent even as asking prices soared 18 percent.
While private-equity firms are helping real estate values recover from the worst slump since the 1930s by cutting the supply of foreclosures for sale, they’re also crowding the market with rentals. Leases for U.S. apartments rose 3.9 percent in February from a year earlier, more than quadruple the 0.9 percent increase for single-family homes, Trulia said.
“Investors are buying homes, in part, to rent them out, and that has added a lot of rental supply, and that’s preventing rents from rising,” Jed Kolko, San Francisco-based Trulia’s chief economist, said in a telephone interview. “It means some investors will start to think about selling those single-family rentals.”
Changed Market
“The institutional people have definitely changed the game,” McGary said in a telephone interview.
Investors flocked to Phoenix after home prices plunged 56 percent from their June 2006 peak to a September 2011 low, according to the S&P/Case-Shiller index of home values. Last year, Phoenix rose the most in the 20-city index, making it harder for investors to find bargains then profit from renting.
Prices paid by the largest buyers probably rose more than the broader market because they’re competing to buy similar homes — typically three-bedroom houses built since 1990, said Oliver Chang, co-founder and managing director of Sylvan Road Capital LLC, an Atlanta-based single-family rental investor.
Pushing Prices
“They’re effectively pushing prices up on each other,” Chang, a former Morgan Stanley housing analyst, said in a telephone interview.
The median purchase price for a single-family home in Phoenix jumped 35 percent to $163,000 in January from a year earlier, according to a March 8 report by Center for Real Estate Theory at Arizona State University’s W.P. Carey School of Business. Median rents on a per-square-foot basis, meanwhile, dropped 3 percent in February from a year earlier after climbing 1.5 percent in the 12 months through February 2012 and 3 percent a year earlier, according to Fletcher Wilcox, a real estate analyst at Grand Canyon Title Agency in Phoenix.
Colony Doubled
In the fourth quarter, the number of homes major investor Colony Equity owned in Arizona, outside joint ventures, declined 1 percent from the previous quarter to 823 units, according to a regulatory filing.
“Colony came in with a bang and fizzled out once prices went up,” Michael Orr, director of the Center for Real Estate Theory, said in a telephone interview.
Orr estimated that large investors bought 8 percent of the Phoenix-area homes sold last year, peaking in July and August before tapering off as prices rose. Purchases by all investors dropped to almost 32 percent of transactions in January from more than 39 percent a year earlier, he said.
‘Rental Economics’
More than 5 million former U.S. owners have lost their properties to foreclosure or in a distressed sale since home prices peaked in 2006, data from RealtyTrac show. Last year, the total number of renter-occupied residences increased 1.1 million, while the number of owner-occupied households fell by 106,000, according to a Commerce Department report.
The apartment market has remained strong even as single- family home rental supply increases, in part, because the properties appeal to different tenants, said Greg Willett, vice president of MPF Research, a Carrollton, Texas-based apartment- data firm. While apartments attract young single people, houses draw in families, he said.
Phoenix Leases
Monthly leases in Phoenix’s west side, where investors bought the most rentals, fell by about $100 a month, or 10 percent, in 2012, said James Breitenstein, CEO of Landsmith, a San Francisco-based single-family rental firm that sold most of its 250 Phoenix rental houses last year. Rents also softened in Las Vegas and in Atlanta, where Landsmith acquired about 300 homes in the past six months, he said.
Phoenix Rentals
Major buyers of single-family rentals are concentrating on acquiring properties and filling them with tenants. The first step is to focus on stabilization. The next phase is to focus on growing rents. That will come later but has been slow to be realized.
For now, Phoenix landlords are lowering rents to fill units. Investors are competing with so-called reluctant landlords who are leasing their houses because they can’t afford the mortgage payments and have moved somewhere cheaper.
There are a lot of properties out there, so the competition to get your property rented is fierce. Tenants are very savvy. If you’re overpriced by $25, they’ll let you know and go to another one around the corner.
The good news for metro Phoenix is that home values are still on a steep upswing — by more than 35 percent in November, to be exact — and foreclosures and short sales continue drying up. Ironically, that leads us to the bad news, which is that the Valley may be headed toward — and I quote the words of a local expert — a “chronic supply problem.”
Michael Orr, a real estate expert at Arizona State University’s W.P. Carey School of Business, released his latest housing report on Thursday stating that last year’s surge in Valley median home prices continued through November, which also climbed by about 3.5 percent from the previous month to $162,500.
The boost, Orr said, has been gradually pushing out cash investors, who made up 27.5 percent of all Valley home sales in November. That’s still a high figure, but was nonetheless down from the August peak of about 35 percent.
Much to the relief of traditional homebuyers, who typically need financing, fewer investors could mean a less competitive market in 2013, he said. But their woes may not end there.
The price surge has been driven by an abnormally low supply of homes for sale in the Phoenix market — and Orr believes the problem may persist, or even worsen, this spring.
“We don’t see a strong flow of new listings coming onto the market,” Orr said in the report. “For example, short-sale listings are down about 70 percent compared to this same time last year. As the market improves, it seems many people may have decided to hang onto their homes in an effort to let values keep going up. I also anticipate another possible drop in supply this spring.”
In recent months, competition for the few homes for sale has grown increasingly fierce, and more often than not favors those with cash-on-hand. Ordinary buyers have thus turned to the new-home market out of frustration. While the investor trend seems to be waning, the supply problem persists, and “Unless new-home builders can start keeping up with rising demand, we may have a chronic supply problem,” Orr said.
On Dec. 1, almost 13,500 single-family homes were for sale on the Arizona Regional Multiple Listing Service, according to Orr’s report. That’s down 7 percent year-over-year, but was still 8 percent better than November and up by almost one-third from September. But supply may dip again early this year as the number of distressed properties that once flooded the market continues to dwindle.
In November, there were 34 percent less completed foreclosures year-over-year, nearly 48 percent fewer homeowners that started the foreclosure process and a whopping 43 percent drop in overall supply of distressed properties, the report said.
That means bargain deals are now increasingly harder to come by, with homes priced below $150,000 making up only 6 percent of all supply — or about 810 homes — on Dec. 1.
“As prices go up each month, price-sensitive buyers, such as investors, get a little less enthusiastic,” Orr said. “Bargain hunters haven’t got much left to pick over, which is allowing more normal buyers to jump into the market before prices rise past what they can afford.”
The next few months may be a good window to purchasing a home as investors drop off and before prices surge up.
Developers and homebuilders in metropolitan Phoenix are scrambling to buy property for dozens of new subdivisions. What a differerence a year makes!!
The Arizona Republic reports that new home building rose 71 percent in 2012 over 2011 and that the number of available lots is dwindling.
The land rush is further evidence that metro Phoenix’s homebuilding industry is recovering from its devastating six-year slump.
Homebuilders sealed nearly 100 land deals in December alone that will create thousands of sites for homes and are now buying more land in more moderately priced areas in the northwest and southwest parts of metro Phoenix as prices continue to rise in the metro area’s southeastern portion.
The number of empty lots ready for construction has shrunk to its lowest level in more than a decade, with only enough lots in hand to last builders a year.
The land purchases are mostly in communities started before the crash and in some ways echo growth in the boom years, except the developments farthest from Phoenix’s core aren’t yet attracting builder or buyer attention. Most of the land purchases are inside the outermost freeways.
Avoiding a repeat of the 60,000 houses built in the region during 2005-06 is good news. This time around, new-home construction is based on real demand from homeowners and not speculation by investors and builders. Metro Phoenix homebuilders began to see more people checking out their model homes and sales start to rise in spring 2012, six months after the resale market had begun to recover.
The number of new homes built in the Phoenix area climbed 71 percent to 11,600 in 2012. New-home sales followed the trend, with buyers closing on 10,034 new houses last year, up 41 percent from 2011. These are the biggest jumps for the new-home market since 2006. The median price of a new house climbed almost 15 percent during 2012 to reach $240,000.
“The recovery in the home market is real. It’s not about wishing and building for buyers who aren’t there or can’t afford the house,” said Arizona real-estate analyst RL Brown, co-publisher of the Phoenix Housing Market Letter.
Mike Orr, who studies real estate at Arizona State University’s W.P. Carey School of Business, believes builders must construct more houses in the Phoenix area this year to keep up with buyer demand. Another reason: The number of houses offered for resale has hovered near a record low for the past year.
“It seems many people may have decided to hang onto their homes in an effort to let values keep going up. I also anticipate another possible drop in supply this spring,” Orr said. “Unless homebuilders can start keeping up with rising demand, we may have a chronic supply problem.”
And with the competition among Buyers for Short Sales and Foreclosures, buying a new home is a relatively stress free way of purchasing… Stay tuned!
As Phoenix home values surged and foreclosures and short sales declined during the last year, homes priced at the lower end of the market have received the bulk of the attention.
But what about the luxury home market such as Scottsdale and Paradise Valley?
Real Estate Experts in those luxury markets have reported the luxury home market — which accounts for homes priced above $1 million — did not lose the same value as we have seen in the Phoenix Metro market. Additionally, values on those homes have been recovering at a slower pace than most.
The number of Phoenix-area luxury home sales peaked in 2005 at 1,563 — almost four times the sales volume reported four years earlier. Although sales gradually declined thereafter, luxury prices peaked at $404 per square foot in Dec. 2007.
But those mega-home values tumbled beginning in 2008 as the housing crisis crippled the Valley. While luxury home values continued to decline for a longer period than those of lower-priced homes, their overall peak-to-trough decline was not nearly as dramatic.
For example, luxury-home prices hit bottom in February 2012 at $277 per square foot, while the rest of market had already been rising for four months prior. Although that February figure was a significant 31 percent drop from the 2007 peak, it was still less of a blow than the whopping 59 percent decline the rest of the Valley housing market experienced from its peak.
Last year, luxury home sales — about 800 — reached the highest level since 2007. By the end of 2012, luxury home prices had also risen slightly by about 5 percent to $291 per square foot, and are expected to continue rising.
And, unlike the Valley housing market’s supply problem, the supply of luxury homes for sale was roughly in balance with demand by the end of last year.
After three consecutive years of holding strong at No. 2, Arizona’s 2.69 percent home foreclosure rate dropped to the No. 3 spot in the nation last year, according to RealtyTrac’s 2012 year-end report released late Wednesday.
Improving from second worst to third worst is hardly an improvement by most standards however, foreclosure activity throughout Arizona was still down significantly — by 33 percent from 2011 and 51 percent from 2012.
That 33 percent year-over-year decline in foreclosure activity last year was also the fourth-biggest drop in the nation, the report said.
• Arizona’s 2.69 percent foreclosure rate for 2012 means that nearly 76,500 homes statewide had a foreclosure filing — meaning a default notice, scheduled auction or bank repossession — at some point of the year. In other terms, that’s one in every 37 existing homes in Arizona that entered some stage of the foreclosure process.
• The metro Phoenix foreclosure rate was 3.09 percent, which ranked the area at No. 17 in the nation.
• Both Arizona and Phoenix have notably higher foreclosure rates than that of the nationwide figure, which fell slightly to 1.39 percent for the year.
• The foreclosure process continues to grow longer for struggling homeowners. In the final three months of 2012, the foreclosure process took an average 414 days to complete. That’s up almost 20 percent year-over-year and the longest-ever time frame since RealtyTrac began tracking that data in 2007.
• Government-backed entities of Fannie Mae, Freddie Mac and the Department of Housing and Urban Development were responsible for 26 percent of all bank-owned inventory last year. Bank of America followed in second place with 8 percent of all bank-owned inventory, Wells Fargo had 6 percent while US Bank Corp and JPMorgan Chase each had 4 percent.
Happy New Year! As we move into 2013 we going to see some specific changes throughout the real estate landscape. In this blog, I’d like to point out some important changes that will be happening with FHA loans.
FHA Home loans will have new changes going into effect on January 1st, 2013. Recently, HUD, which oversees the FHA announced their latest budget numbers and announced a slew of new methods they will use to try make the agency’s finances more balanced.
Specifically, here are the two most important parts of their announcements for someone considering get an FHA loan after January 1st.
1) FHA Mortgage Insurance annual premiums (MIP) will be moving from 1.25% to 1.35% for borrowers who make a 5% or less down payment.
2) The policy of a homeowner being able to cancel the MIP on their FHA loan after 5 years, if they are at 78% of the value of their home will be eliminated.
Now moving from 1.25% to 1.35% on an annual basis may not seem like a big deal, but is just the latest escalation of mortgage insurance premiums on FHA loans. Just three years ago, monthly mortgage insurance on FHA loans were set at .55%. That means that in the past three years as the Government has crafted programs to push down home loan interest rates, the FHA has raised the annual cost of their mortgage insurance from $91.67 per month to $225 per month on a $200,000 loan. That’s quite a jump and unfortunately, as we had warned in past articles, it doesn’t seem as there is an end in sight.
In addition, the new policy to never allow for the cancellation of this mortgage insurance will also hurt new homeowners who decide to keep FHA loans for the long term. As they will never be able to eliminate the mortgage insurance associated with it. In fact, those who have an existing FHA loan, also may be further deterred from refinancing into a new FHA loan, knowing that they will never be able eliminate the mortgage insurance associated with it.
In the end, this may not be the last changes we see with FHA loans, but it is yet again in our opinion a negative for the FHA loan going forward. However, with mortgage loan rates at all time lows and FHA loans still only requiring a 3.5% down payment, FHA loans still provide a very attractive option for buyers with a lower down payment requirement.
Now that the elections are over, one of the biggest questions facing our economy is what will happen as we approach the “fiscal cliff.” we are all hearing about? What does this mean for home loan rates?
Last week, President Obama was re-elected to a second term in office and the market’s position is that the Fed will continue its latest round of bond buying until the labor market and economy improve significantly. While recent Jobs Reports have shown modest improvement in the labor market, it is still a fragile area of our economy.
The word on Wall Street as we approach 2013 is “fiscal cliff.” What is the fiscal cliff and why is it significant? Essentially as we head into 2013, tax cuts for individuals and various tax breaks for businesses are due to expire, taxes pertaining to President Obama’s health care law will begin, spending cuts enacted by Congress as part of the debt ceiling deal of 2011 will go into effect, and long-term jobless benefits will expire. The Congressional Budget Office estimates that if all of these items occur, it could take an estimated $600 billion out of the U.S. economy in 2013, pushing the country into a recession.
What does this mean for home loan rates? The issues surrounding the “fiscal cliff” will be talked about from now until the end of 2012 and that could mean a lot of market uncertainty, which typically results in investment dollars moving from stocks into bonds, thereby improving home loan rates (which are tied to mortgage bonds). In addition, continued concerns over the debt crisis in Europe and more turmoil in Greece will likely keep investors in the safe haven of our bond markets, which will also benefit home loan rates.
However, a big issue we need to continue to monitor is inflation. One of the goals is actually to create inflation. And remember, inflation is has a negative effect on bonds (and therefore home loan rates) as it reduces the value of fixed investments like bonds. This is an important issue to watch in the weeks and months ahead.
All these factors indicate a rate increase is a good bet in the near future so the bottom line is that now is a great time to consider a home purchase or refinance, as home loan rates remain near historic lows.
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