The portion of the inventory that is considered distressed is still much smaller than it has been for years, and will continue to be that way.

If you look at the number of listings in the inventory, above, you will see that we had an increase in “normal” listings at the end of last year. That is because people who bought during the really low points or before about 2003 are putting their houses on the market. You see that January inventory is down a little bit.  I’m guessing this is because people think prices will go up, so they are holding off listing. But that’s tough to say –and it is a bit of a gamble for those folks who think they should wait.

Here’s why: while most folks think interest rates will stay where they are this year, I’m also hearing loan officers reporting that rates are starting to go up. You don’t want to try to sell a house while the interest rates are higher. It erases all of the price increase you were waiting for!

Still, you can see in this chart that the prices continue to go up, generally.

This is why you will see fewer investors in the market. First, their ability to get a super cheap house which they can flip up is going away in most areas. Second, it is more difficult to turn that house in to a rental and get cash flow when you bought it at a higher price.

I expect to see more “normal” buyers in the market, as those people who lost their credit scores recover and decide to pick up a new home.

If you are thinking about listing you home (even for short sale), please give me a call and let’s meet. If you are thinking of buying, let’s grab a cup of coffee and talk about your plans. We can build a strategy that gets you the home that you are looking for.

Call me at 602-456-9388.

Part 3 ended with the big question, “What are the home builders doing?” I’m going to end my four-part market analysis with this answer and what they tells us as we’ve crossed into 2013 and heading into February already.

At the same conference that was put on for realtors by old Republic, where Mike Orr spoke, the home builders got up on stage. There were five of them and they had this total love-fest among themselves talking about how proud they were, “We’ve got this land out by the San Tans and were going to put like 8,000 homes on it!” And “yeah that’s right! And every one of them is going to have a pool!” They were really proud of themselves because they’re really starting to build 424 a month, 704 per month, 805 a month and they just saw a great future for themselves.

This is where they used to be. And this is where they are now…

Back when I was working for the State Energy Office. We were trying to convince home builders to put energy efficiency improvements in their homes and they were like, “Don’t bother us. We’re too busy.”

This is where they were in 2006. They built 60,000 homes in a year. Way too many for us to absorb.

I think what these guys are going to find, in the next two or three years is that they will never reach that old demand for “sprawl” housing.

Bear with me. I’m going to pontificate a little bit here. As the United States gears up its economy,

and China gears up its economy,

and Europe gears up its economy,

the price for auto fuel is going to go up. I think, it will reach over $5 per gallon, and that is going to affect home buying decisions.

One of the things I learned back at the energy office when I was there is that the price per barrel to get oil out of the ground has only gone up year after year. You may be fracking for natural gas and all that, but you don’t drive a natural gas car, typically, from Ahwatukee to downtown Phoenix, or from Avondale or the San Tans to your job.

So these guys are going to continue building out in the ‘burbs, but they’re going to find, as I have found, that people are less and less enthralled with the idea of living so far out.

So what will that do to home buying decisions?

I think you’re going to see those zip codes that we talked about before continue with an even greater price pressure upward. I think you’re going to see more desire for infill. Unfortunately,  the big developers sitting on the stands, congratulating themselves only want to do 1000+ homes. They’re not interested in doing a little infill project with six homes (which is about the best you can do in central Phoenix). They’re going to have a really hard time putting in new condos until we can continue selling off the ones we built at like $500 per square foot back in the peak of all this.

That’s going to make central Phoenix even more interesting to people.

This is the outlook that Mike Orr presented:

…Because more folks are finding reasons to sell to folks who bought before 2003 and they feel safe to put it back on the market. They’re going to add to the inventory…

…‘Cap Rates’ are their ability to make money off of these investments. So the investors will slow down as those Cap Rates fall. You have to ask yourself, is that going to put me in a situation where we are going to have less and less of a possibility for renters to find a place? We’ll talk about that, shortly…

…and they’ll do it…

Now this is my speculation, which I’m going to separate to make it even clearer that I don’t represent what Mike Orr has to say here.

I think that as you watch those historic neighborhoods that are a walking distance to the light rail (typically considered as between the 7’s; Seventh Avenue and Seventh Street), you’re going to see those prices continue to go up. That’s because builders are in the ‘burbs, not in central Phoenix and the inventory downtown is limited. Like Tempe, it’s landlocked. I think we’re going to see more of that.

Investors: the Cap Rates are going down, so if you’re thinking of investing, I think the window is closing for your potential to get an investment.

Home buyers: the prices will continue to go up, though we don’t know where the interest rates are going to be.

Home sellers: when you look at the charts above, and you think, “Great! The prices are going to continue to go up!” But we think that interest rates are going to stay low for another year, but if you are a home seller and home buyers interest rates go up, their ability to buy your house goes down. You have to keep an eye on that. In other words, this might be a good time for you to sell if you’ve been waiting.

Mike Orr also said that we can expect a rush this month (January 2013). I want to say something about that. Typically, if agents don’t get their sales completed by August, September, or October, they’re going to have a really bad Christmas/Hanukkah. The reason is because it’s slow during the holidays. The last two years, I have hardly had a day off during the holidays because it’s just been so busy. I think Mike could tell you that we don’t expect to have a whole lot of free time, because it is going to stay busy during Christmas.

Having said that, what always happens is that people finally shake off the left over Christmas tinsel at the end of January and say, “Oh, yeah, weren’t we talking about buying a house back in October? Must’ve forgotten about it because of how Halloween and all those other goings on.” And then you get that big rush of buyers. I think that this drastic upward momentum they receive is going to continue until the end of January 2013.

Moving forward

I would love to see my friends and my clients and the folks who are supporting downtown and central Phoenix getting some good information. I have access to all of this data from Mike Orr’s Cromford Report and it can reveal so much.

Please tell me, how helpful you folks think this market analysis series has been to you? What areas would you like me to zero in on?  Are there listing conditions you’d like me to do some research on?

If you have questions about buying or selling your home, please call me at 602-456-9388. I can help.

Thank you again to Amber Harrold of Camelbackpackers Hostel. Amber and her family put out an incredible spread for us, including local craft beer, wine and even camel-shaped cookies. If she went to those lengths for us, you can feel good recommending your friends to say at CamelbackPackers Hostel when they come through town.

As we roll in to the cooler weather we start to think about family and all of the holidays centered on spending time together.

This month, please join us for our first annual Get Your PHX Family Thanksgiving. You’ve all been so supportive of Get Your PHX and Cenpho businesses for so long that you really are part of the family. So, before you head off for your “other” family dinners in late November, please join your Get Your PHX family for one special thanksgiving meal.

Hob Nobs owners Bob and Sharilyn are preparing a very warm reception for us. In addition to their regular, vast menu of goodies, Hob Nobs is offering a Thanksgiving Sandwich special for just $10 -that’s a turkey and cranberry sandwich and a drink. In addition, they are offering a $1.99 craft bottle of beer, to be announced.

Hob Nobs is also organizing for their most popular musical act, DirtMusic, to entertain us for Get Your PHX. This band has travelled around the world to play its mix of alternative blues and bluegrass. You don’t want to miss this.

And, of course, I will be hosting the monthly raffle. Don’t miss out. Your PHX family misses you!

If you owe a debt to someone and they cancel or forgive that debt, the canceled amount may be taxable. Same goes for mortgage debts. Hence, the creation in 2007 of the Mortgage Debt Forgiveness Relief Act. The IRS explains the concept surprisingly well. This act expires in 96 days, the end of this year, after the holidays; much sooner than you realize.

People have been opining this whole year about the possible extension of the $1 billion mortgage debt forgiveness relief provision at the end of the year. I’ve been hearing the following:

“Should I short sell before the end of the year?”

“Can I count on the hopeful January 1 extension?”

“The $1 billion mortgage debt relief provision allows me to avoid paying taxes on mortgage debt forgiven by my lender, but it expires at the end of the year! My chance to short sell and still seek tax relief is disappearing quickly!”

“But I hear these holiday months aren’t as slow as one might think. Oh, no! I’m almost out of time to avoid the tax repercussions of selling my home short!”

Let’s be clear on what the act does.

The 2007 Mortgage Debt Relief Act allows taxpayers to exclude up to $2 million of forgiven debt on their principal residence in calendar years 2007 through 2012. With one caveat: The discharge of debt must be directly related to the decline in the residence’s value or in the financial condition of the taxpayer.

The Mortgage Forgiveness Debt Relief Act was originally going to expire at the end of 2010, but lawmakers decided to extend it until the end of 2012. If it does expire, anyone who receives mortgage forgiveness on day one of 2013, or after that, will have to face paying income tax on a forgiven debt.

Isn’t it in the President’s budget?
Didn’t it pass the committee level in the Senate?

Yes/But… We don’t know the outcome of the election in November and nothing is moving in Congress for the next 6 weeks. This time bomb very likely won’t be voted on before the end of the year, what with their attention consumed with the nation’s budget crisis.

Furthermore, given that it takes 3 to 6 months to close on a short sale…Are you really willing to take the risk that the act will be extended?

What’s the bottom line?

List now and be more certain that you will avoid that tax liability. I strongly advise you consult with a tax attorney!

[referee photo: compujeremy] [house photo: surprise truck]

There was a great story on KJZZ yesterday morning on their Changing America series. Reporter Peter O’Dowd talked about how retirees are moving into downtown areas and urban cores along the Valley Metro light-rail line.

Finding homes for these folks in CenPho is driven by a need I saw coming years ago: Baby Boomers—the post-WWII generation born between 1946 and 1964—are changing the way we view retirement. I say that because I have helped many folks in their retirement years as they search for homes in downtown. So, this story really hit home.

“As a group,” said Landon Jones in his book that coined the word, “[Baby Boomers], were the wealthiest, most active, and most physically fit generation to that time, and amongst the first to grow up genuinely expecting the world to improve with time.”

It should come as no surprise, then, that 60 housing units are opening at the end of this month in downtown Phoenix, along the “pedestrian friendly street with historic sidewalks and that sort of thing”—which is how Gordan and Company Developer Brian Swanton described Lofts at McKinley in the KJZZ piece.

The Lofts will attend to the lower and middle income residents, 55 years and older. It’s just a few blocks from a light-rail station. When the complex broke ground last year, KPHO reported,

Despite the lower price tag, amenities will not be cheap. Tenants met by doormen, high end appliances and even green products. Recycled water for irrigation purposes. Rent will range from $400 to $900. Eligible tenants must have an annual income between $18,000 to $32,000.”

There aren’t many seniors or retirees who can afford early retirement these days. Guaranteed pensions are even less likely. Swanson said that by 2013 close to 300 units for seniors will be available along the light-rail line between Phoenix and Mesa.

Shannon Scutari, who leads the Sustainable Communities Collaborative (and is quoted in the KJZZ piece), “helps coordinate a 20-million dollar fund to kickstart financing for affordable housing near transit. Without various stacks of private money, Scutari says the banks just aren’t interested in taking the risk on their own.”

Encore on Farmer is another senior housing complex that opened January in downtown Tempe.

The prospects are not just for rentals, but also for home sales in CenPho and downtown. This is what I find so exciting. I love the diversity. As a famous baby boomer said, “The times they are a changin’….”

There are plenty of homes, town homes, patio homes and condos for sale that meet this need. Please give me a call at 602-456-9388 if you are interested to learn more.

[Lofts at Finley photo: combusean] [Baby Boomers photos: NGOA&ENGAF]

As the summer begins to tease us with signs of fading out–the sky is overcast and the rain is supposed to continue for the next week or so, I find myself thinking about the end of the year. Specifically, I think about how the older realtors always talk about the “slow months” –November through January.

Now, I’m no old hand, but I’m not that new and I can tell you that last Halloween through New Year’s was all work for me in the real estate business.

As the story goes, people stop buying or selling houses because the holidays just creep up on them and they get distracted. The common wisdom says that the market slows down after the summer and then maybe you may be able to negotiate a better deal during the holidays and Christmas. But that has not been the case the last two years.

If you look at previous years (see below), you will see that this is generally true; especially around Thanksgiving. In the first chart below you will see the last nine years. Some of them drop off drastically, but come back around February. In the second chart you will see 2004 and 2005 compared to 2010 and 2011. In ’10 and ’11 there was a little drop around November, but then we just picked right up again.

In other words, don’t assume that the end of the year is going to be slow!

The take away?

First: Don’t assume the end of the year is going to be slow. Whether you are selling or buying, take advantage of the active market.

Second, it’s been hectic the last two years. We have every reason to believe it’s going to be hectic this year, too.

And by the way, if you’re thinking to short sale, you’re running out of time if you want to avoid the tax repercussions of selling your home short. Please see this article and learn how the Mortgage Forgiveness Debt Relief Act allows you to avoid paying taxes on mortgage debt forgiven by your lender. This act runs out at the end of this year.

For those looking to relieve some pressure from the uncertainty of when to swing their buy-it-now bat and make contact with the house-ball, the number of listings  are creeping up again, wouldn’t you know it. (See the brown line in the “Monthly Average Sales Price” chart below).

Why is that, you ask?

Which is better:

The freedom of a condo? Or the land value of a house? You’ve found the area where you want to live. You have your financing arranged. But, you are stuck.

[Image:davecito]

This week and next I’ll be sharing some ideas to help you sort it all out by comparing the pro’s and con’s of each option. Today, I’m going to focus on the bonus features of a detached, residential house. (If you’re leaving toward a condo, you’ll want to read this, though, as you’ll get advice, too, since I’ll be comparing the two options.)

1.   The land Will Never Go Away

90% of all millionaires become so through owning real estate.”
~ Andrew Carnegie

Let’s face it. Buildings fall down.

But unless you live on an island in the Mississippi, your land will probably not go away.

This is a drawback for condominiums. Although many are built to last, some have been thrown up so quickly in recent years, they may not last 30 years.

Ask yourself this question:

Which is more important to me at this time in my life: being free from yard and home maintenance or buying something that I will have 20 years from now?”

[image: PrimeImageMedia.com]

2.   No Shared Walls

In a condo development, you may hear your neighbors. If you are the kind of person who does not like to see the same neighbors almost every day in close proximity, you may consider a house.

You can build a privacy wall or grow bushes around your home. Your back yard can be a fantastic get-away.

Ask yourself this question:

Do I enjoy the sense of community that I can have by sharing a common living area. Or, do I prefer more space that I can call just my own?”

How much more are you willing to pay for that luxury?

3.  Greater Flexibility to Improve and Remodel

Most condominiums, if built with block construction, give you some flexibility to re-arrange inside. You may be able to remove some walls and expand rooms.

However, once you start talking about windows, balconies, and patios, the restrictions begin to pile on.

If you have a house, you can go crazy repainting, adding features, and personalizing your home.

However, you must still adhere to city code for things like wall height and that massive Trojan Horse water slide you are planning to build in the back yard.

Get to know and love these two links:

City of Phoenix Historic Preservation

City of Phoenix Residential Building Permits

4.  Your Property Value is Tied to the Success of Neighbors

In a condominium, all owners pay into a fund that maintains the common property, including landscaping and insurance for things that owners share, such as walls and a roof.

In a house, you don’t have to pay these monthly assessments. But, then again, you have very little power over your neighbor, who has decided to park a massive pink RV between your two homes.

Or, if your neighbors don’t take crime prevention seriously, will your neighborhood likely improve or decline?

Ask yourself this question:

Am I willing to spend the time volunteering with the neighborhood association in order to protect my property value?”

Hint: You will want to ask a similar question for condos.

5.  Keeping Up Appearances

People often talk about keeping up appearances in the negative, as if it is all about superficiality.

But in a neighborhood, keeping the street looking good has a very direct impact on your property value.

If you are inclined toward a condominium because you don’t have to mow the lawn, consider this:

• The Average HOA Assessment = $200/month
• Average gardener = $100/month

6.  Other Things to Consider with Houses

Growth potential tends to be higher.

Condo boards politics can be tricky.

Houses are more adaptable for growing a family.

Always meet the neighbors before you buy, as part of your inspection period.

Kenneth “Ken” Clark
REALTOR(r)
At Your Service!
HomeSmart
(602) 561-5881
Ken@GetYourPHX.com

 

Nobody has any idea. But I predict that, while it won’t be as dramatic as our last, it may go on for a while.

Here’s the analysis:

After the presidential elections in November, regardless of the winner,  prices will continue to move upward. How do I know this? And why does this sound like a weather report prediction?

It’s because the coming change in home-buying patterns is showing evidence of a refreshing rain moving our way. After a six-year long summer of dry, cloudless skies, we’re beginning to smell the change in the air. A break from the scorching heat is a ‘comin.

To say it without the weather analogy, the increase in buying will continue, in part because a lot of companies are holding off on major projects and hiring until after the elections’ fallout. However, that upswing won’t be dramatic because our national debt and energy prices will continue to be a drag on our economy.

In regards to prices, we don’t see where new inventory in our Phoenix market will come from, especially in CenPho. Tight inventory means higher prices.

Mark Zandy, one of the nation’s preeminent housing analysts was on the Diane Rems Show yesterday morning talking about prices and how they are continuing to move upward as distressed properties are going away.

In Phoenix house prices have gone up 30% from last year. Yes 30%.

Take a look at the graph below, showing the Monthly Average Sales Price Per Square Foot. You can’t see the wind, but you can tell how and where it’s moving by watching the things it affects.

This chart shows a snapshot of four years worth of housing prices on the move. The brown line on top, the one with the greatest upward spiking is 2012.

My expert conclusion?

The heat is unbearable and so many people are walking around with sunburned proof of the long, hot summer. If you’re thinking of buying, make your move and buy now.

I want to say this very clearly: while prices will be going up for the foreseeable future, they won’t return to 2007 levels for years. So, if you are thinking to BUY, do it now before you lose another 30% of your buying power. If you think you want to hold off SELLING until you hit 2008 prices again, don’t expect to see that again until 2020.

If you want more information, please contact me at 602-456-9388.

Houses are being scooped up really quickly right now.  This is no exaggeration: good homes are selling within 24-48 hours now. I’ve seen how frustrating it’s been for some of my clients when they don’t get the properties they offered on.

So… Here are five things that I am asking my clients to do to increase there chances of getting the property that they want. (There are other things, but I can’t give away all my trade secrets!)

1.  Check MLS in the evening, rather than the morning.

Most agents don’t get up early and post new listings. They do it at night. I try to check for new listings in the evening for this reason. If you see something you like, shoot your Realtor an email.

2.   Look closely at the neighborhood on the Internet before visiting the property.

If you are looking at one property in a neighborhood you don’t like, you might miss another property that you do like. So, let’s use the Internet to our advantage. Type the address of the property in to Google Street View and have a look around. We agents already have an opinion of the neighborhoods that we know. But we can’t always predict what you like.

3.  View the property within hours of identifying it, not days.

My “Get Your PHX Team” is adapting to the market conditions. When a property comes on that one of my clients wants to see, the member of our team who is available immediately will try to get them in to see the property, quickly.

4. Have your prequalifcation letter or proof of funds ready.

Realtors cannot show properties unless the buyer has all their financing sorted out. In this market, we need to make decisions in hours. Further, sellers want to verify the buyer’s purchase method. So, everything has to be ready to go.

5. Print/Scan/Fax

These days, we are allowed to sign contracts, then scan or fax them. For this reason, I have my team carry blank contracts to a property in case a buyer wants to make the offer immediately. However, if we don’t write a contract on the spot, we may need the buyer to print/sign/return documents quickly. If a buyer doesn’t have this capability at their office or home, it’s important for them to let us know before we view properties.

The rush that we Realtors feel in this market is frustrating. We understand that nobody likes to feel pressured. Yet, we want the buyer to get what they need and we sincerely appreciate their patience and accommodations. By doing these five things, we are more competitive in getting buyers the property they want.

[image: woodleywonderworks]