Monday, January 26, 2009

The Good News, and the Not So Good News in the Housing Resale Market

Today, Bloomberg.com published an informative article by Bob Willis, on November existing home sales. Please click the link to read.
The article speaks for itself and shows the power of the free market to stimulate sales. Yes, prices were down, but it encouraged buyers to step up. I have never understood the rush to artificially prop up prices. What is wrong with lower prices? It allows more folks to become home-owners without the lowering of credit-worthiness standards that have brought us to this current debacle. Note that all government attempts at "rescue" have centered on helping the banks that were encouraged, aided and abetted by Congress and Wall Street, to offer loans to people who could not afford them. Other organizations, like the under-investigated A.C.O.R.N. and various inter-faith groups are slated to receive billions in funding to offer "counselling" to those who are in danger of losing their homes. Counselling? We are witnessing the largest single giveaway of public funds, that we do not have, in the history of this country. Future generations will pay dearly.
Senator Chris Dodds, currently under an ethics investigation due to the preferential terms and conditions of two mortgages from Countrywide, was not only in charge of this tragedy, he remains empowered as someone who is supposed to extricate us from this mess. As I write this, Dodds promised to reveal the details of his sweetheart loan 185 days ago. Click on this link to see how much time has elapsed since his empty promise.
In politics there is no longer any shame. Throughout this entire fiasco, name one politico who has resigned. Remember, Pelosi promised to "drain the swamp" and give us the "most ethical Congress ever". I'm still waiting.

Thursday, January 22, 2009

North Phoenix Real Estate Market, Healthy or Not?


In response to various inquiries, I delved into the statistics of an anonymous Phoenix area neighborhood to check the pulse of the market.

Around this time of year, whilst attending a never-ending round of cocktail parties that being a busy Realtor entails, one question is posed time after time..."How's the real estate business?" the truth is- not bad! It could be, and has been, far worse.

So I decided to run the numbers on a neighborhood that has homes for sale from the low $200's, up to the one million dollar mark; and here is what I found.

In the last six months there have been 37 genuine sales, not change of ownership by virtue of a property being returned to the bank. Of these sales, 13 (35%) were regular person to person, arms-length transactions. A further 43% (16 homes) were either REO's or short-sales, and the remaining 8 homes (21%) were sold at a loss by their owners. Currently, in the same area, there are 83 homes active on the market. This means that this community has slightly more than a 12 months supply of homes available; or slightly less than 12 months if the 8 homes that are currently "pending", actually close. Not good news for sellers but definetly a buyers market.

Clearly, from the numbers I have cited, two thirds of sales have been a distress sale of some kind, which is not good for sellers. However, buyers are out in force, and taking advantage of lower sales prices. If this trend continues, it will represent a great stride towards the return of a normal and balanced market-place. Once all foreclosed and bank owned properties are absorbed, we will begin to see a return to single-digit annual appreciation.

Strangely enough, we hear some buyers are still being reticent, lest prices fall further. Whilst, no one really knows for sure if they will, it is a lucky man who is able to buy at the absolute bottom, or sell at the absolute top. Most of us just need to ride the general wave of the trend to do well. Interestingly, during the crazed sellers' market of 2005-2006, buyers were falling over themselves to purchase a home in case they missed out to higher prices. My suggestion would be to take advantage of this current buyers' market and remember that, in the long term, a home is still the best investment you can make.

If you were unfortunate enough to have purchased your home at the wrong time, but are able to weather the storm; then do so. It will turn around soon.

Sunday, January 04, 2009

2009 Predictions for the Phoenix Real Estate Market


My annual attempt at the impossible. Trying to guess where real estate markets will trend in the greater Phoenix metropolitan area in the coming year.

Predicting future events is never an easy job, and more often than not, a futile exercise of vanity over reality. However, that has never stopped me from sticking my neck out! Further complicating the issue this year is the fact that we will be installing a new administration on January 20th, 2009. Also, due to the strange peccadilloes of the electorate in general, we have managed to re-elect virtually every member of Congress, (leastwise those who were up for re-election). Please bear in mind, that this was a congress whose popularity rating has never, ever been rated at a lower percentage, since records have been kept. This means that they very same congress-critters who got us into this mess, will be the ones who will be attempting to fix it! Encouraged-I am not!

I believe that the volume of sales will remain steady, or increase slightly, during the course of 2009. Here, in the Valley of the Sun, we have a great deal of affordable housing, which attracts out of state buyers. If the economy remains constant, or improves slightly, there will be a commensurate increase in sales. Notice I said "increase in sales"- not increase in prices. Big distinction. I still believe that the majority of sales will be some kind of distress sale, i.e. REO's, short sales or people losing money personally to close the deal. However, it is absolutely vital for these properties to be absorbed into the market in order for normalcy. Whatever that may be, to eventually return.

In the more affluent neighborhoods, Cave Creek, Carefree or Fountain Hills for example, I think we will see fewer sales. This is because in those areas, many of the homes are owned by retirees or wealthy snowbirders. Often, they do not have to sell, so the decision to stay in the property and ride out the storm is a relatively easy one.

So, is it going to be a good year, or a bad one? Well, it all depends on your perspective. For buyers, I think it will be all good--especially first-time buyers. For homeowners, who purchased in 2005 or later, who have to sell, there will be some degree of pain. For those who don't have to sell, or bought before 2004, it's a wash. Although, the growth they initially experienced has gone away, I think we will return to low single digit appreciation in late 2009, early 2010. Which will mean, as ever, that a home is always a good Long-Term investment.

More importantly than all of the above, however, is to stay healthy and enjoy life.