So, when the inventory goes down, what happens? Yep, demand goes up.

I’ve heard all this talk about a double dip recession (which we now know never happened) or this second huge wave of foreclosures (which has also not happened). I’ve learned not to trust the doomsayers in the press or at the universities.

In fact, the market has been clearing the inventory of new foreclosed homes as quickly as they have been coming on.

This time last year, we were on track for 24,995 annual home sales in Maricopa County. As of today, we have sold 30,063 in the last 12 month period. (Source: www.cromfordreport.com)

Wave? Right.

So, here is what I’m seeing:

1) Inventory is actually down a little since September. See below. This is an incredible time to pick up a new home.

2) I’m seeing investors snapping up the good homes in less than a week. Those that need more work sit on the market longer. So, if you are looking, be ready with your Loan Status Report or your Proof of Funds so you can jump on a good deal when you see it.

3) Don’t expect prices to drop too much further. They tend to drop around the holidays, but people start scooping up properties in late January.

4) We still don’t know how long these low interest rates will hold out. A slight change in interest rates can mean a huge increase in your monthly payments.

5) If you are thinking of selling, hold off a little longer, unless you have true equity in your home.

Give me a call if you have more questions.

Three major condo projects, 44 Monroe in downtown Phoenix, 3rd Avenue Palms in Phoenix and Safari Drive Scottsdale, all went in to foreclosure in 2007 when the builders could not sell at the obnoxiously high prices they listed.

After the developer, Corus Bankshares Inc., lost the properties and went bankrupt, a Chicago firm, ST Residential, was created to move the properties again.

Check out the AZ Republic notice here.

This is an interesting development because the condo market is in such disarray right now. Long story short, almost every condominium project in the country last year was “de-certified.” Certification is required if you want to buy a condo property with an FHA loan. Since the vast majority of buyers right now are FHA buyers, the condo market is in trouble.

This is why I have been able to help people find incredible condos for less than $100,000. Some even lower, like the 2br/1.75ba place around the corner from me for $40,000.

But, how do they recover? Well, these three developments will certainly get FHA certification. So, you would be able to buy there. But even with FHA certification, there are only a certain number that are allowed to go FHA. For instance, the Pierre of 5th condominiums were certified when they came back from foreclosure. But they can only do conventional at this point because they sold the maximum allowed to go FHA.

I don’t know what the limit is on these new properties, but it is easy enough to find out.

Still, given all of that, I think the prices for 44 Monroe and Safari will  be a little too high for most and they will have to come down. I think that 3rd Avenue Palms is pretty well priced, starting at $80,000 (undoubtedly for a 1br/1ba). However, I can’t imagine that Safari Drive, starting at $249,500, will do a brisk business for a while –even for Scottsdale.

In other words, I don’t see other condos or residential homes coming down any further (we have been skipping along the bottom of the market for a while), but at least two of these particular projects will probably have to come down or sit empty for a while longer.

…Just a little prediction. File it appropriately.

I know that I like the idea of being able to refinance the loan on my home, even though the market would not allow my home to appraise for the purchase price.

Why not? After all, I’ve never missed a payment, even at the higher rate. I’m a good borrower. I’d love to get 4.3% interest!

Heck, I just did it with my car. I went to a different lender and asked if I could give them the balance of my loan. They did it and it saved me 30% of my monthly costs.

Well, a proposed law would allow you refinance your home, even if you can’t get an appraisal for what you bought the home. You would have to have an FHA, or government backed, loan. There will certainly be other limitations, I’m sure.

It is called “Blanket Refinancing.” See more here and here. There are not many details as of yet.

So, this is the question that I want to throw out to you: Is this a good idea?

On one side, it will lower costs for 30 million home owners. Maybe they can start spending the money they save in the economy and get the economy moving again.

On the other side, the bond markets already reacted negatively when this idea was floated previously. If people don’t want to invest in bond markets because they are afraid that government interference could have some negative consequences on their profits, then maybe this could have some unintended consequences. Also, would it cost even more for our already-indebted federal government?

I don’t pretend to understand how this could be bad (or good) for the bond markets and, therefore, you and me….yet.

I will keep an eye on this and report more to you as I learn more. Stay tuned…

Remember a couple weeks ago how I said that markets are driven by consumer confidence and that after a couple weeks of better news people will start spending part of that pent-up savings?

Perhaps this is one of those indicators. A stock market news and commentary website is suggesting that Phoenix real estate is a good investment, citing that our economy always bounces back.

Other news sources are reporting initial upswings in new home construction.

I reject all of the double-dip recession talk. In fact, the recent increase in the stock market seems to have thrown that in to serious doubt. I certainly rejected the talk of a wave of new foreclosed properties flooding the market.

Maybe going in to the holidays we will start having some good news. That would be a nice synergy: holiday spending mixed with higher consumer confidence and really, really low home prices.

Most economists will tell you that the market is driven by how people feel about the market. And how they feel about the market is directly impacted by what they hear in the news.

This is as true in the stock market as it is in the housing market.

So, it is no wonder that people (even those with stable jobs and some savings) are fearful of  buying a new home right now. All we hear is how bad it is and we hear speculation of a double dip, despite the presence of some positive economic news (and the lowest prices and interest rates in eons). For instance, there are more sales of homes right now than there have been since most of 2006, all of 2007 and 2008 and half of 2009. The market is robust.

Now, I’m not going to spin a yarn trying to convince you that the economy is peaches and cream. But there are indicators that the economy is going in the right direction. Jobless claims were down and some businesses are reporting profits or are planning for when they will hire again.

Interestingly enough, at the same time, Americans are sitting on a lot of cash. The US Dept. of Commerce reports that Americans have a 6% savings rate, up from about 1% in 2004.

While it is sad that so many have lost homes, buyers should keep in mind that Arizona has some of the cheapest housing in the country. Prices are hovering just above 2009 levels.

All of this means that we have pent-up demand which is just waiting for some good economic news to spring forward. I won’t pretend that all will be sun and roses, but once you hear a few tidbits of good economic news on the radio, watch as those folks who are sitting on their cash to enter the market again.

I never advocate for trying to time the housing market like the stock market. You should buy or sell based on need and life choices. However, if you are nearly ready to get in to the market, don’t underestimate the benefit of getting in right at the moment before that psychology starts to shift.

For those of you buying, listen to the radio. You will hear the same news that others do. We have the lowest interest rates in 40 years and the lowest prices in the nation. The key point to buy will be before that psychological turn-around.

For those of you who are selling homes, be prepared for buyers to bid low until a few months in to a turn-around.

If you want to get a better idea of what is out there, please give me a call at 602-456-9388.

<begin crowing>

I love when the Wall Street Journal backs me up.

Over the last 9 months there as been a lot of talk about a flood of foreclosed homes that is going to drive prices down.

My position has been that this is not likely because (1) banks are doing marginally better at preventing foreclosures, but more than that, (2) the banks know that they would undercut their own prices if they just flooded the market with homes.

So, they are not in a hurry. They will sell the houses at a pace that does not undermine the prices they can get for the homes.

That is not great for neighborhoods where houses sit empty, but it is good for the market.

And it means that there is not likely to be a second tidal wave of foreclosures.

<end crowing, back to your regularly scheduled program>

I just like to share with you one of my sources of information regarding the market. This little video clip is from my broker, Jim Sexton, who is describing what is happening in the market. Despite talk of a “double dip” (of which I am skeptical), Jim points to a couple interesting points:

1) Foreclosure notices (banks telling people they are going to lose their house) are down 10% from August.

2) The number of active foreclosure notices is lower than its been since April of last year (about 39,000) county-wide.

3) About 71% of bank-owned properties are in MLS in one form or fashion. In other words, we may be on a path to start clearing the market.

Have a look at what Jim has to say and feel free to give me a call at 602-456-9388 if you have any questions.

I have been inundated over the last week with conflicting market news.

The Wall Street Journal saw the Case-Schiller Index and feared a possible double-dip. The best quote from that article tells the story of why people are waiting to buy: they are nervous from hearing bad news, feeding a self-fulfilling prophesy. “You’ve got a whole bunch of people who are sitting, waiting in the wings to get into house buying because they know it’s cheap, they know interest rates are low, they know it’s a highly subsidized investment,” said Wellesley College economist Karl Case, who developed the house-price index with Yale University economist Robert Shiller. “If they stay out because they’ve become a little bit more nervous, it can mean the whole market moves.”

But at the same time, AZ Central is reporting that people are doing a better job keeping up with their mortgage payments. Fewer people locally and nationally are behind at least 60 days on their mortgage payments. Certainly this is a precursor to a stabilizing in the market.

Then I turn around again and my broker, Jim Sexton is pointing to lower prices in July, partially due to the very small number of “normal” sales (non-foreclosure, non-short sale) in August.  As my real estate mentor, Leif Swanson, likes to also point out, the huge number of super-cheap, cash-only condos that sold recently have dragged prices down, to0.

So, what is one to believe? For me, it all comes down to a couple simple, but true facts.

1) People hear bad news about the economy and they are holding off on that big decision until they feel more confident that their job will be there 6 months from now. This too shall pass –specifically once we get about a month of improving jobs numbers.

2) A home is not the stock market, as pointed out in this great article. If you need a home, these are the lowest prices in a quarter century and the lowest interest rates in 40 years. Don’t buy a home because you think you will make a killing tomorrow. Buy because you need a place to live and it is better to pay yourself to live there than a landlord.

There was this very interesting article about “Vultures”, those investors who buy up very cheap property and fix them up. This article centered on the Phoenix market.

On its face, vultures are a bad thing. They are doing well because somebody lost their home to foreclosure. One could argue that if too many of them are just doing fix n flips, then they will just drive the market back upward needlessly (and possibly flood the market with bad renovations).

The other perspective is that, just as in the wild, they are part of ….. (wait for it) …..the circle of life.

So, you have this home that was on the market in 2007 for $300,000. In the process of foreclosure, it was beat up and damaged. It was sold to a vulture for $100,000. They come in and fix it up at a cost of about $30,000.

As the article points out, many vultures are fixing and sitting, rather than fixing and flipping. This can be a stabilizing thing. If they fix and flip at $150,000 that can be good if (1) they did a good job at the renovation and (2) some family gets a like-new home. Its much better for the neighborhood than a home sitting empty.

But it is equally good if they fix the property and get somebody in to it for the long term. This means they are not driving prices recklessly upward. It also means some stability in the neighborhood. It all depends on who they rent to, I guess.

It all moves us back to a stable market.

I think you will see more of this going on, even in the condo market.

Well, you decide if you think it is good or not. I don’t think this story is over, though.

Earlier this week, I posted a quick note about how the Arizona Republic took a national report and drew some sweeping conclusions about the Arizona market. Their headline sent many people to their phone, computers or social networking spaces to comment in fear that the Phoenix market was about to tumble all over again.

See how this AP story takes the same story and concludes completely different news:

“Yet over the past year, while home prices rose 7.2 percent in Phoenix, they ticked up only 1.2 percent in the Miami and fell 6.5 percent in Las Vegas. Part of the reason is that Phoenix has a healthier job market than the other two cities. Its metro area had an 8.7 percent unemployment rate in May, one point lower than the national average.”

They still predict nation-wide drops in prices due to the end of the tax credit and a slow economic recovery. But at least they recognize the difference in cities.

To which I say, if you are thinking of buying, now is still a great time. If you want to wait for this predicted price drop, any savings could be eliminated by interest rate increases. As I said in the last post, home buying is not the stock market. You are not day trading here.

If you buy generally when prices are low, and sell generally when prices are high, you will be in good shape. Buy now at incredibly low prices and interest rates. Purchase modestly. Have a home that makes you happy and expect to live in it for a few years. That’s the simple model.