60% of Home Buyers are Investors in Phoenix market (Buckeye: spring break, rent)

[pgc323]

Concerning the national press picking up on the Phoenix real estate market as Captain Bill commented. I was visiting with my father in law in PA today, and he commented to me that the Phoenix real estate market was improving. This was based on something he watched on TV a few days ago. I had to laugh to myself, because I was just about to tell him what he said!

I guess I would be statistically considered an "investor", or one of those 26% who purchased in the Phoenix metro with the intent to rent the home. However, within 10 years or less, I will no longer rent my AZ home. My wife and I will use it as a winter residence. During the upcoming 10 year span, I will upgrade to a nicer home more suitable to what we want for ourselves. Perhaps very soon. However, I wanted to get in near the bottom, and purchased 18 months ago. No regrets.

[Captain Bill]

Originally Posted by pgc323

Concerning the national press picking up on the Phoenix real estate market as Captain Bill commented. I was visiting with my father in law in PA today, and he commented to me that the Phoenix real estate market was improving. This was based on something he watched on TV a few days ago. I had to laugh to myself, because I was just about to tell him what he said!

I guess I would be statistically considered an "investor", or one of those 26% who purchased in the Phoenix metro with the intent to rent the home. However, within 10 years or less, I will no longer rent my AZ home. My wife and I will use it as a winter residence. During the upcoming 10 year span, I will upgrade to a nicer home more suitable to what we want for ourselves. Perhaps very soon. However, I wanted to get in near the bottom, and purchased 18 months ago. No regrets.

Right, you are an investor, and being an investor in real estate is good. Plus you were astute enough to get in while there was plenty of supply to choose from.

[pgc323]

Exactly Bill. We didn't have to compete with anyone on the house we purchased. It was a lender owned home in excellent condition, and ready to be rented. We offered below asking price, and it was accepted. Within 2 weeks we had tenants.

[plusmiles]

Originally Posted by Captain Bill

First we had the infamous "Shadow Inventory theory" that was supposed to flood the market and drive prices down even further.

Now we have the "Shadow Rental Inventory theory" that will magically in 10 years have millions of homes dumped on the market and drive it down again. And in the interim the theory is that the "rentals" are flooding the market, and that will cause landlords to have vacant houses they will have to dump.

• We know that several years ago the rehab investors saved the market from crashing further by buying up the homes that were a blight on the neighborhood, fixing them up and selling them to people who needed a home.
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• We also know that for the past few years the supply was declining, while sales were increasing; and the law of supply and demand was telling us that if this keeps up, the prices will follow. I was showing that graphically, and was criticized by some people who did not have an understanding of real estate (but thought they did). People wanted to equate real estate supply/demand changes with commodity changes where the price change is immediate. As I stated, and as happened in 2005/2006, in real estate there is a time lag between supply/demand change and price change.
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• Then the landlord investors saw the bargains, and began to buy properties. Their percentage grew to around 26% of all sales (not 60% as has been reported in an article).
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• Then the national press began to pick up on our improving market.
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• Then the buying public in the lower price ranges began buying because they realized that things were changing; but by this time the pickings were slim; now they are almost non-existent, consequently prices are being bid up, and those increases will probably trickle up.
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• There is an extremely low inventory level of REO's and Short Sales, and still declining.
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• Now we're seeing, in March, a greater volume of traditional sales than has been seen since 2007; and that is a very positive signal.
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• It was discussed long ago that the general public would not know the bottom was here until it passed. All indications are that it has passed.
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• It was also discussed that when the general public rushed in, there would be price increases. Seems that is what is happening now.
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• One poster seems to have thought that the luxury market would continue decreasing. Well, while there is still a decent supply of luxury homes, every price range has now seen an annual percentage increase in price except the <$25k and the >$2mil range.

Whether one likes it or not, the Phoenix real estate market has changed, and all indications are that the turnaround is here.

Capt B., thanks so much for your expert conclusions, I truely believe you have explained the Phoenix area market spot on.

I posted in the "Shadow Inventory" thread to explain my experience in the Phoenix market during the past two years and to dispel suspicions of a shadow inventory which I just haven't seen.
I would also like to say that there are still oportunities for the traditional homebuyers who do their homework and who follow your advice.
Thanks again Capt B., you are a breath of fresh air much needed in this market.

[jimj]

All I've got to say is we went from a $350k custom house we built to the $120k Pulte house and don't have any regrets ESPECIALLY when we pay the mortgage every month.
We got in about 19 months ago when there was inventory everywhere, we had literally hundreds of houses to choose from all over the valley. Now I wish I'd bought 2-3 of 'em but had just started dealing with being burned by the good 'ole stock market that some love so much.
We'll sit on this one for a while, hopefully we'll make some of the money back that was stolen from us when GM took my bonds.
At least I'm living in it, kind of nice actually sitting in an investment for once.

[MN-Born-n-Raised]

Originally Posted by jimj

We got in about 19 months ago when there was inventory everywhere, we had literally hundreds of houses to choose from all over the valley. Now I wish I'd bought 2-3 of 'em but had just started dealing with being burned by the good 'ole stock market that some love so much.
We'll sit on this one for a while, hopefully we'll make some of the money back that was stolen from us when GM took my bonds.
At least I'm living in it, kind of nice actually sitting in an investment for once.

We bought 13 months ago. After looking at several areas, I wanted to buy in a specific development. Since then, there has only been two other house that would have worked for us because my wife wanted a 5 bedrooms for future guests. There were other flips that came up but I'm too frugal to pay someone that much more to paint and clean up the landscaping.

On that other home we liked (better), it was on the market last April and people were swarming around it like vultures. I sold right away with several offers. Cash took it for more than asking. For whatever reason, the listing agent left the pictures off of the MLS until after it sold. I've observed this from time to time on other listings. My (possible) theory is a slimy agents did this so that the listing agent gets phone calls directly from buyers for leads or to double dip on the commission. One weekend day after it was listed for more than a week, I saw 5 people walking around the home.

When I bought, I "knew" that whenever the perceived bottom was in, the inventory below $200K would dry up fast. That's because I saw the precursor to the frenzy. It was in April of 2009 when the tax incentive was issued. Back in mid 2009, I accurately guessed that the inventory still had a steady pipeline. I bet that the tax incentive could not outlast the future pipeline of foreclosed homes so I refused to take the bait. In the tax incentive era, there were plenty multiple offers on 1st time buyer homes even WITH a ballooned inventory. But when the REAL perceived bottom hit, I envisioned THOUSANDS of hungry buyers who wanted in on the "bottom". I was right.
Like pgc323, I got in before the tsunami of buyers hit the market and we also rent it out. Knowing I wanted to buy the most house that I could for the least amount of money AND knowing I wanted some selection before multiple offers came back, I intentionally bought a little earlier than I really wanted to. We decided to rent it by the week furnished versus by the year to have someone else pay for our repairs and upgrades. That has successfully worked out as good as I expected.
We plan on using our new home for months at a time in 2013 but on paper, we are officially one of those no-good cash "investors" others are talking about. I don't feel one bit guilty (nor should I)

[Captain Bill]

Originally Posted by azriverfan.

...Yup, the Kiyosaki wannabes are back and that's exactly what they are doing. They are buying shacks for cash to rent out and then plan to dump them in 10 years for profit. It's pretty obvious. Regular folks can't buy these homes and the market is being flooded with these rentals. Listen to the stories on this forum. When people are saying "I can't get a house because there were 4 bids on it" guess who the winning bid went to....the investor who paid cash.

We should be having an intelligent discussion of the facts of the Phoenix market and should not be resorting to name calling of people who buy rental properties as an investment. Too many intelligent people are being unjustly insulted by these type remarks. You bought a $150k investment property last year and no one called you a Kiyosaki wannabe then; and they shouldn't.

There is absolutely no stigma attached to anyone who buys a rental property for an investment when they buy it at a time and a price where the numbers make sense; when they are able to get a good return on the rental income, and in addition, because they bought near the bottom of the market, have an excellent chance of future price appreciation, in addition to some of the tax write offs that are possible when owning rental property(s).

Regarding the market "being flooded with rentals":

The MLS shows 5,923 Active Rental Listings
In March 2011 there were 5,130, so we have around 15% more than one year ago.

Is that a flood? Hardly.

• 9,846....Highest rental listing number was in Dec 2008.
• 5,130....Listings March 2011
• 7,241....Listings Nov 2011
• 5,923....Listings March 17, 2012

This appears that the supply and demand for rentals is pretty well balanced.

[coorsleftfield]

The way I see it, all of the investor buying is putting a floor under the falling house prices and are the best friend of existing home owners. Without all of the investor and out of state buyers, prices would almost certainly be continuing to fall in Phoenix. Now we are starting to see an uptick in prices, which will hopeful get move potential buyers off the fence, and the increase in prices will get more sellers putting their houses on the market.

Supply/demand should balance out as prices start to increase more.

[jdahunt]

With the snowbirds leaving and heading north is that going to slow things down a little?

[Captain Bill]

Originally Posted by jdahunt

With the snowbirds leaving and heading north is that going to slow things down a little?

The Phoenix Metro real estate buying season begins in January and peaks in June. Then things begin to taper down.