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.

This is part two of my little analysis of what you might want to consider when deciding between a house and a condo. So, let’s get right in to it.

1.      Gated security may be just what you’re looking for right now.

Perhaps you are living alone. Perhaps you like to know that there are people right next door. These are all legitimate concerns that condominiums (at least the good ones) seek to address.

Some questions to consider regarding security at condos:

• How careful is the management company with the common area keys or codes?
• Is the common are well-lit?
• Is the HOA paying for any live security? If so, how much does that impact the monthly assessments?
• When you look at the condo, does it look like the other condo dwellers take security seriously?

2.      Condos are often close to public transportation (the car-free life!)

One of the best things about urban dwelling is that you can leave that car in the garage, or just go without it completely.

Some things to consider when you’re looking for a condo:

• Some condos used to be apartment buildings and the parking may not always protect your car from the sun and weather while you are taking the light rail to work every day.
• The closer your condominium is to public transportation, the more likely that your condo will eventually sell for more.
• If you are thinking of the car-free lifestyle, also consider whether amenities such as groceries, the dry cleaners, and coffee shops are near-by.

3.      Condos maintain all the goodies: pools, landscaping, general maintenance.

 Especially on those hot summer days, it’s a great relief not to have to maintain your own landscaping, or pay somebody else to do it. This is especially helpful if the condo has a pool. Maintaining a pool at a detached residence house can cost thousands every year, and you may not even use it 10% of the time!

Some things to ask yourself before you buy a condominium**:

• Is the current HOA solvent? Do they have enough to properly maintain all of the features they promise when you buy?
• Who manages the property? Many HOA’s pay a management company to take care of details such as landscaping contracts and maintenance.
• How long has that company been working? How many properties do they maintain? What do the current residents think of their work?

** You can have a chance to ask these questions during the inspection period.

 4.      What is an assessment and what is expected of you in an HOA?

An assessment is a monthly fee on every unit in condo that goes in to a pot to pay to keep the place up. If you don’t pay your assessments, the HOA can record a lien against your property. If you have a lien against your property, you can’t finalize the sale of your condo to another person without paying off that lien.

The more units vacant in a condominium, the harder it is for the HOA to pay the bills.

Also, if there are outstanding big projects or maintenance issues on the condominium, or if the HOA board is not wise with its money (your money!), your assessment might go up every month.

Learn what you can about the HOA board, before you purchase a condominium.

5.      What is a CC&R?

CC&R means “Covenants, Conditions, and Restrictions”. It means, basically, that all of the people in a Home Owner’s Association agree that their property came with (and will go with, in the future) certain conditions and restrictions.

In other words, condo owners can’t just do anything they want with their condo.

CC&R’s outline everything from how often the board meets, to what is considered common property.

When you buy a condominium, inspecting the CC&R before your purchase is just as important as inspecting the condo’s wiring!

If you are part of an HOA, read what is expected of you in the CC&R’s. The best way to protect your investment is to stay involved in the HOA.

Good news for you Downtown Phoenix home renovators out there.

In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, the Federal Housing Administration (FHA)  has extended the FHA 90 day flip rule temporary waiver of the anti-flipping regulations. The extension will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. The extension  will continue through December 31, 2012, unless otherwise extended or withdrawn by FHA.

The waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers. (We like responsible renovations here. Flipping can be a little nasty, you know.)

All other terms of the existing waiver remain the same, and these transactions continue to be limited to sales meeting the following conditions:

• All transactions must be arms-length, which means buyer and seller are acting in their own interest in the sales transaction.
• In cases in which the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions and documents, like a lender review of property inspection report, the justification for the increase in value.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
• No pattern or history of flipping can have occurred in the previous 12 months.. One investor can’t flip to another investor and then flip to an FHA buyer.

You can read the full FHA 90 day flip guidelines details here.

So whats the big deal? Well, homes that are purchased at a low price and re-sold at a much higher price in such a short time period with little repairs/renovations are sometimes fraudulent.  Lenders are afraid of lending on homes that may be inflated or acquired under duress. With the 90 day flip waiver, and extension until December 31, 2012, investors can now accept offers from FHA buyers in the first 90 days.

Nova Home Loans has an investor for these types of loans.  Please call J Please call Jeannie Bolger, Sr. Loan Officer –for more information.