A rise in pending transactions bodes well for the future of real estate in the Phoenix metropolitan area.
As we have noted in the past, the free-market, when it is allowed to operate always has and always will re-dress the housing market. You may not like the way in which it is achieved, but it will occur naturally, if left to regular market forces. By this, I mean that well intentioned programs to enable folks to stay in homes they still cannot afford, only delays the inevitable.
Twice in recent memory, November 2008 and March 2009, prices have dropped so drastically, partly due to foreclosures and partly due to the economy, that sales have leapt up. Many people who thought they had missed the boat are now stepping up and finding that there are many bargains to be had.
Analysts use many benchmarks to gauge the health of the real estate market-pending sales is one of them. A pending sale is classified as one that has an executed contract, with an agreed price, has been taken off the "active" market, and is going through the regular processes prior to closing.
The Cromford report compiles such statistics and shows that in March 2009, pendings were up over March 2008 virtually across the board, with the exception of Anthem and Paradise Valley. The latter probably due to the high cost of homes and the tendency for the wealthier to be able to ride out bad economic times and stay put. The former, Anthem was down a little, but from a statistical standpoint of just one month, may merely be a hiccough.
One minor nitpick with the report is the figures for Cave Creek, which show 45 pendings versus 32 for March last year. Anybody with a working knowledge of Cave Creek would know that 45 is an absurdly high number for such a small town, as was the 32. the compiler of the report makes the same mistake that many "analysts" make. By dint of post office fiat, Cave Creek shares a zip code (85331) with a large portion of North Phoenix. This radically distorts the figures. I complained when the number of foreclosures reported in Cave Creek, which is detrimental to the community, were mis-reported; so in the interest of remaining fair, I must complain when it inflates the re-sale activity as well.
Other than that, things are slowly beginning to recover, so long as government doesn't stop by to "help" again.
Wednesday, April 08, 2009
Thursday, April 02, 2009
Pricing Is Key; Always Was, Still Is.
Pricing your home to sell is always a main factor in marketing your home. The sagging Phoenix real estate market makes it vital.
The old adage in selling real estate was always, "Location, location, location". While that still holds true to a large extent, there are other factors just as crucial, not least of which is - Price.
I was reminded of this again, today, as I was sifting through the MLS. Time after time, the same old frequent flyers kept popping up. Homes that were $550K two years ago when they should have been $500K, now marked down to $400K, when they should be $350K. Always a day late and a dollar short, as the expression goes. You have to price into a falling market, not reflexively reducing to imitate local sales after they have closed. In the above example, had the seller started at a realistic $450-$475K two years ago, it would have sold. Now the selling price will likely be $100K less than that.
It is sometimes too easy to blame the seller, when many times it is the fault of a weak agent. Someone who has not worked through tough times may not have developed the skills needed to persuade a recalcitrant seller to lower their price. Or indeed, may not have developed the confidence to walk away from, or decline in the first place, an over-priced property. All Realtors say they need listings; what they really need are saleable listings. Big difference.
As a home seller you need to speak to your prospective agent in order to satisfy yourself that he/she is capable of getting the job done.
Then we have homes that have been around so long, that the sellers are now upside-down, and owe more than it is worth. Often, this is as a result of re-financing to release equity. In retrospect, not a good idea, at all. These "short sale" homes are often priced temptingly low, in order to hook a buyer with which to begin the process. For a serious buyer, this can be a frustrating experience. Be wary of the short sale that is under-priced, it may disappoint you. Given the choice, I would go for the bank-owned, or real live actual motivated seller, if I were able.
The old adage in selling real estate was always, "Location, location, location". While that still holds true to a large extent, there are other factors just as crucial, not least of which is - Price.
I was reminded of this again, today, as I was sifting through the MLS. Time after time, the same old frequent flyers kept popping up. Homes that were $550K two years ago when they should have been $500K, now marked down to $400K, when they should be $350K. Always a day late and a dollar short, as the expression goes. You have to price into a falling market, not reflexively reducing to imitate local sales after they have closed. In the above example, had the seller started at a realistic $450-$475K two years ago, it would have sold. Now the selling price will likely be $100K less than that.
It is sometimes too easy to blame the seller, when many times it is the fault of a weak agent. Someone who has not worked through tough times may not have developed the skills needed to persuade a recalcitrant seller to lower their price. Or indeed, may not have developed the confidence to walk away from, or decline in the first place, an over-priced property. All Realtors say they need listings; what they really need are saleable listings. Big difference.
As a home seller you need to speak to your prospective agent in order to satisfy yourself that he/she is capable of getting the job done.
Then we have homes that have been around so long, that the sellers are now upside-down, and owe more than it is worth. Often, this is as a result of re-financing to release equity. In retrospect, not a good idea, at all. These "short sale" homes are often priced temptingly low, in order to hook a buyer with which to begin the process. For a serious buyer, this can be a frustrating experience. Be wary of the short sale that is under-priced, it may disappoint you. Given the choice, I would go for the bank-owned, or real live actual motivated seller, if I were able.
Saturday, March 21, 2009
Are Short Sales A Good Deal
A quick look at short sales vs. foreclosed properties, in the Phoenix metropolitan area real estate market.
A short sale, as opposed to a fore-closed home, is neither good nor bad, in and of itself. The real question is whether the house you are attempting to buy is worth the price you will have to pay.
Let's back up a moment, and discuss the difference between the two. Briefly, a short sale is where the home is worth less than the amount owed, and in order to sell the home, the lender(s) must forgive some of that debt. A foreclosed home is one that has passed that point, and the bank has re-possessed it, and is the actual owner.
If two homes in the same subdivision, with essentially the same features are offered for sale at the same price, one being a short sale, the other a foreclosure, the only real difference might be the ease with which the deal can be closed. With a foreclosure, the bank has already taken the loss, so a sale can be completed as easily as one from a private seller.
With a short sale, things may get a little complicated. Not only are you dealing with a seller, you also have to get the approval of the lender. Sometimes, the lender may be 100s of miles away, in a different state, and be unaware of prevailing market conditions. This can stall the process. Maybe, the listing agent has never dealt with the intricacies of a short sale before with potentially fatal results to the transaction. Some sellers may have been less than truthful (i.e. lied) on the loan application when they bought the house. Now, upon claiming hardship to garner a short-sale, those lies are often revealed, resulting in no short sale and criminal charges.
Also, as a buyer, be aware that some agents price short sales at ridiculously low levels, a practice with which I disagree, in order to suck in a buyer with whom to initiate the process. These are just some of the many pitfalls you may experience.
My advice is usually as follows; if you love the house that is a short sale, by all means, let's try to buy it. But do not let the sometime lengthy process deter you or cause you to lose, another readily available property that might come you way, that will serve your needs equally well.
So, are they good or bad? They are neither. The overwhelming considerations should be the price, and the ease with which you can consummate the transaction.
A short sale, as opposed to a fore-closed home, is neither good nor bad, in and of itself. The real question is whether the house you are attempting to buy is worth the price you will have to pay.
Let's back up a moment, and discuss the difference between the two. Briefly, a short sale is where the home is worth less than the amount owed, and in order to sell the home, the lender(s) must forgive some of that debt. A foreclosed home is one that has passed that point, and the bank has re-possessed it, and is the actual owner.
If two homes in the same subdivision, with essentially the same features are offered for sale at the same price, one being a short sale, the other a foreclosure, the only real difference might be the ease with which the deal can be closed. With a foreclosure, the bank has already taken the loss, so a sale can be completed as easily as one from a private seller.
With a short sale, things may get a little complicated. Not only are you dealing with a seller, you also have to get the approval of the lender. Sometimes, the lender may be 100s of miles away, in a different state, and be unaware of prevailing market conditions. This can stall the process. Maybe, the listing agent has never dealt with the intricacies of a short sale before with potentially fatal results to the transaction. Some sellers may have been less than truthful (i.e. lied) on the loan application when they bought the house. Now, upon claiming hardship to garner a short-sale, those lies are often revealed, resulting in no short sale and criminal charges.
Also, as a buyer, be aware that some agents price short sales at ridiculously low levels, a practice with which I disagree, in order to suck in a buyer with whom to initiate the process. These are just some of the many pitfalls you may experience.
My advice is usually as follows; if you love the house that is a short sale, by all means, let's try to buy it. But do not let the sometime lengthy process deter you or cause you to lose, another readily available property that might come you way, that will serve your needs equally well.
So, are they good or bad? They are neither. The overwhelming considerations should be the price, and the ease with which you can consummate the transaction.
Friday, February 27, 2009
Cancelling A Listing
Over the weekend, a letter was published in the real estate section of the Arizona Republic regarding the cancellation of a listing. The seller, it seems, had reluctantly agreed to a 6 month listing, after the listing broker had verbally agreed to cancel at any time. Right there, you can see the problem. Verbally.
After two months, for whatever reason, the sellers decided they no longer wanted to sell their home, and requested cancellation of the listing agreement. The broker said "Sure"; but requested $1000 compensation for advertising and promotion already completed.
The attorney who responded to the letter surprised me with his answer which was, essentially, try to come to a financial agreement.
First, let me say that if, as a Broker, you are willing to cancel the agreement, and so state at its inception, it is to the benefit of both parties to put the terms, and any financial penalties of such action, in writing at that time.
It seemed to me that the broker decided, retroactively, to charge for services rendered, and held the seller to ransom until he coughed up. Ethically, I find this disturbing and disappointing. We charge a reasonable rate for our services, but never collect a penny until they are completed, i.e. the home is sold. Some we win, and some we lose. It's part of the cost of being in business.
There are some companies who break down each individual service offered, and charge accordingly, sort of "a la carte" pricing. That is fine. In this instance I think the broker should take the high road, forget the charges and move on. If, in the future, that is how he/she wishes to conduct their business, disclose it up front and in writing.
Tuesday, February 17, 2009
Making Phoenix Home Buying Easier
Freddie and Fannie try to make it easier for you to buy a home, not like it's been that hard in the last few years.
Sometimes, here in Phoenix, and other parts of the nation, you will come across a home for sale in which you will be encouraged to use either "Homepath", or "Homesteps".
Let's look at "Homepath" first. This is a program for homes that are owned by Fannie Mae. Naturally, they need to shift their inventory, so they are trying to make the home-buying process as streamlined as possible. No appraisal is required as they have priced the home right at market, allegedly, although that doesn't mean you have to offer full price: bargain away. A down payment of 3% is usual, although seller's can contribute up to 6% of purchase price towards closing costs. Also, investors can buy 1-2 unit buildings with only 10% down.
"Homesteps" is a similar program offered by Freddie Mac for homes which it owns (REOs). They are trying to combat the notion that foreclosed homes are wrecks (they often suffer damage at the hands of spiteful owners) and will mildly re-hab a property to enhance its chances of selling. Typically, that would include fresh paint, carpet and, in some cases, new appliances.
Finally, you may come across a program, from non-government lenders, called "Express Path". Supposedly, they are pre-inspected, pre-appraised, low closing-cost, ready to buy homes. Of course, all those services are paid for in the asking price, there is no free lunch. This allows a speedy close, but to whose benefit? Some processes need not, and should not, be rushed. Industry fondness for this program seems to be mixed. Remember, one stop shopping rarely benefits the buyer, as the savings are not passed on, but retained, as profit.
Caveat emptor!
Sunday, February 15, 2009
Foreclosures Are Up In The Greater Phoenix Metropolitan Area
Free market principles at work as sales jump to meet drop in prices.
I have said this before but it bears repeating. When the free market is allowed full rein, it will correct itself. Echoing a national trend reported recently, we discover that as prices tumble, in part due to the increase in foreclosures, buyers in Phoenix are stepping up in larger numbers.
Our misguided government's attempts to cure the market by forestalling foreclosures will only delay the inevitable. The renewed push to lower lending standards, or provide tax credits to first time buyers are merely band-aid fixes. They are just kicking the can down the road.
Anecdotally, we are seeing an uptick in enquiries at our website, which is a welcome development. Hopefully, buyers are being encouraged by lower median prices. As they begin to absorb the aforementioned inventory, swollen by foreclosures, we will begin to see a true market recovery. Not one artificially created by Congress.
I have said this before but it bears repeating. When the free market is allowed full rein, it will correct itself. Echoing a national trend reported recently, we discover that as prices tumble, in part due to the increase in foreclosures, buyers in Phoenix are stepping up in larger numbers.
Our misguided government's attempts to cure the market by forestalling foreclosures will only delay the inevitable. The renewed push to lower lending standards, or provide tax credits to first time buyers are merely band-aid fixes. They are just kicking the can down the road.
Anecdotally, we are seeing an uptick in enquiries at our website, which is a welcome development. Hopefully, buyers are being encouraged by lower median prices. As they begin to absorb the aforementioned inventory, swollen by foreclosures, we will begin to see a true market recovery. Not one artificially created by Congress.
Friday, February 13, 2009
Pricing Your Home
A home or any commodity, is only worth what the market will bear. A troubled Phoenix real estate market doesn't change that.
Quite often, we hear from sellers that they need to net X amount of dollars from their home sale, despite its value being considerably less. Well, I'd like a second home in the south of France, but that's not going to happen, either.
The point is, you have to be realistic in your hopes for your home, and be able to adapt your plans accordingly, or you are effectively buying your home back at your inflated asking price.
The other side of the problem, unfortunately, is that weak agents often encourage, and support that behavior which is a waste of everybody's time.
Remember, you have the right to want whatever you want for your home, as much as the market has the right to insist that you keep it.
Quite often, we hear from sellers that they need to net X amount of dollars from their home sale, despite its value being considerably less. Well, I'd like a second home in the south of France, but that's not going to happen, either.
The point is, you have to be realistic in your hopes for your home, and be able to adapt your plans accordingly, or you are effectively buying your home back at your inflated asking price.
The other side of the problem, unfortunately, is that weak agents often encourage, and support that behavior which is a waste of everybody's time.
Remember, you have the right to want whatever you want for your home, as much as the market has the right to insist that you keep it.
Subscribe to:
Posts (Atom)