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Interesting article in the Arizona Republic by Catherine Reagor. Here are some quotes from the article. It confirms a lot of what we've been saying. I guess we are not as paranoid as some of us have been labeled.
Cash buyers, who are typically investors looking to resell the properties or use them as rentals, account for nearly 60 percent of all Phoenix-area homebuyers now, according to data compiled by AZBidder.com, an online foreclosure-auction service.
Housing analysts say the current buying frenzy may run its course in six months and not create a lasting recovery. Experts say the region's housing market won't really recover until regular homeowners, who can afford their mortgages, feel like they can sell and make a decent profit -- not the profit of 2006, but enough to pay off their mortgage and net a slight profit if they bought before 2000.
That is not to say the bidding wars are driving up prices in the overall housing market nearly as much as they did in boom times. Median resale prices remain near the bottom of the lows to which they fell after the housing crash and wave of foreclosures that began in 2007.
Interesting article in the Arizona Republic by Catherine Reagor. Here are some quotes from the article. It confirms a lot of what we've been saying. I guess we are not as paranoid as some of us have been labeled.
Cash buyers, who are typically investors looking to resell the properties or use them as rentals, account for nearly 60 percent of all Phoenix-area homebuyers now, according to data compiled by AZBidder.com, an online foreclosure-auction service.
Housing analysts say the current buying frenzy may run its course in six months and not create a lasting recovery. Experts say the region's housing market won't really recover until regular homeowners, who can afford their mortgages, feel like they can sell and make a decent profit -- not the profit of 2006, but enough to pay off their mortgage and net a slight profit if they bought before 2000.
That is not to say the bidding wars are driving up prices in the overall housing market nearly as much as they did in boom times. Median resale prices remain near the bottom of the lows to which they fell after the housing crash and wave of foreclosures that began in 2007.
According to the local statistics that the Cromford Report gets from the recorders office, the percentage of investor buyers is only 26%, not the 60% that the article states.
Here are a couple more quotes from that article:
Quote:
Regular buyers, who have to put down 10 to 20 percent for a mortgage, might have to wait for those regular sellers to put their homes on the market, creating enough supply to ease the bidding frenzy. When demand is strong enough that multiple bids are made on houses owned by homeowners, not lenders, that will be a strong sign of a return to a normal market.
"Once sellers begin to realize the market is recovering, and they can actually make some money on their home, then the market will truly start to stabilize," said ASU housing analyst Orr
Below are two current charts courtesy of the Cromford Report
Percentage of Homes Purchased with Cash
Landlord Sales
On the homes purchased with cash chart, we see that about 40% of homes today are being purchased with cash. With some peaks and valleys, that has been around the same for a couple of years.
On the Landlord Sales chart we see that today 26% of sales are to landlords.
NOTE: In the Affidavit of Value which is filled out and signed by the buyer, and submitted from the Title companies. The Affidavit has only two choices to fill out.
To be Occupied by Owner or Family Member
To be Rented to someone other than Family Member
There is no third option such as Intend to Rehab and Resell
The investors I work with are all renting so theirs is option 2. When I rehabbed homes I also selected Option 2 because I could not select Option 1. It's reasonable to expect that the escrow officers would suggest to any investor that if they are not going to Occupy the home or a Family Member is not going to occupy the home, that they should not select Option 1.
1. The home frenzy concerns cheaper homes (150K or less)
2. The majority of the buyers are investors
3. People seeking these cheap homes are seeing multiple bids because they are competing with investors and others like them who are seeking cheap homes
Wow, that's so different than a year ago
But I get it, that means every single person in the Valley need to jump into the market and buy a home now because these trends pertain to all of us. Oh the urgency!!!!!
Again, in 2008 and 2009, nearly anyone with money were buying cheap homes for cash in places like El Mirage. I remember my brother bought a home in El Mirage for 80K in 2008 and he competed with 3 offers for that house. He paid cash. This is nothing new folks
...But I get it, that means every single person in the Valley need to jump into the market and buy a home now because these trends pertain to all of us. Oh the urgency!!!!!
I think it's been made quite clear from the data presented where the trends apply, and it's not all buyers in all price ranges. Not sure why you persist in distorting the intent and meaning of the various posts.
I think it's been made quite clear from the data presented where the trends apply, and it's not all buyers in all price ranges. Not sure why you persist in distorting the intent and meaning of the various posts.
My guess is that someone isn't getting any offers on their home that is for sale in Chandler. Therefore someone is upset that the buying frenzy isn't happening on their home.
But as you know rjrcm, the demand isn't as strong on larger and more expensive homes. It should go without saying when people can plunk down cash for a large percentage of home sales the consumer will have an opinion that they are not spending a lot of money. Hence, the buyers don't have to be "investors", they just might want to buy a nice 2nd home that they can easily afford or even a 1st home buyers using their equity from a more expensive area of the country. I for one don't think the article is some smoking gun that proves 60% of the buyers are "investors".
My wife mentioned to me last night that several of her clients with good sized investment holdings in Florida, one was naples area are now concentrating on the Greater Phoenix area.
Their comments are that they believe Phoenix will lead the country even above Florida in the housing market with better returns.
If you go into local media and read what people are saying about high taxes and such I think in the next several years you may see a larger movement of people to areas like Phoenix then there were before.
In my area my property taxes have gone from $1800 a year 15 years ago to over $4000 a year now. My state income taxes last year went up a whopping 66% in one year, on top of that I pay as high as 10% state and local sales taxes.
I think people are sick and tired of it and are looking at their options...investors and home owners.
I for one don't think the article is some smoking gun that proves 60% of the buyers are "investors".
The only way to determine, as closely as possible, the number of "investors" is to check each Affidavit of Value at the Recorders office that buyers are required to fill out. The escrow officer provides this form.
As I explained before, there are 2 fields, one for Owner Occupied and one for Landlords. There is not a box for "fix and flip".
If the home is not going to be Owner Occupied, then the Owner Occupied box cannot be checked.
The Landlord box would be checked.
If the home is a fix and flip, then why not just check the Owner Occupied box instead of the Landlord???
Because, most of these homes are being bought from banks or through banks in a short sale, and they require an Owner Occupant Certification. The buyer, and buyers and sellers agent must certify that the house will or will not be owner occupied.
The astute investor will always be truthful here and state that it will not be owner occupied. If that investor has Certified on the Owner Occupant Certification that it will not be owner occupied, and fills out the Affidavit of Value that it will be Owner Occupied, that could wind up getting that investor in a lot of financial trouble down the road.
The chart below from the Cromford Report shows the percentage of sales by "Landlords". This information is gathered from the Affidavit of Value forms at the recorders office.
It shows that 26.9% of homes are being sold to Landlords (including fix and flip, although it does not show that way). There is not 60% sold to investors, according to this chart.
One could put it another way and say that 73.9% of homes (both single family and condo's) are being sold to Owner Occupied.
Among those "Owner Occupied" would be 2nd homeowner snowbirds who only use the home for the owner and family.
Two major things have changed, and one has led to the other:
A decline in the percentage of loans 90 days or more past due driven by improving numbers for loans originated between 2005 and 2007.
A major reduction in NOTS, Trustee Deed Sales, resulting in a drastic reduction in inventory, almost by 50%. See this chart...
....Workbook: Active Listings Counts (http://public.tableausoftware.com/shared/YQHFYDJSY?:display_count=yes - broken link)courtesy, the Cromford Report
"... Loans of all types originated prior to 2005 make up nearly one third of the existing portfolio but constitute only 21 percent of delinquent loans.
In each subsequent year until 2009 the incidence of delinquencies represents a higher share of the portfolio than do originations from that period.
Eleven percent of the loans originated in 2005 but 17 percent of delinquencies are from that loan vintage.
In 2006 is was 11 percent v 26 percent;
in 2007 10 percent against 22 percent, while in
2008 originations shrunk to 8 percent but 9 percent of the delinquencies are from that group.
"...Of particular importance is that the drop in the percentage of loans 90 days or more past due was driven by improving numbers for loans originated between 2005 and 2007.
These are the loans that drove the mortgage market collapse and now represent about 31 percent of loans outstanding but 65 percent of the loans seriously delinquent. Given that loans originated during this period are now past the point where loans normally default, and that loans originated since then generally have better credit quality, mortgage performance should continue to improve," Brinkmann said.
The rate of foreclosure activity in judicial states is continuing to rise and is now near 7 percent while the rate is dropping in non-judicial states and is now close to 3 percent.
Quote:
"...Brinkmann said that national foreclosure rates are misleading because they are dominated by areas that are large and have outsized problems such as Florida. The numbers of homes in foreclosure in Florida are larger than the combined total of home loans outstanding in 22 U.S. states and the top five states in terms of foreclosures account for more than half of the nation's total.
If those states are removed from the equation he said, there are clear signs of a market on the mend. In Q1 (2011) 38 states had foreclosure rates below the national average..."
In June 2011, Howard Ruff of the Information Market, and associate of Mike Orr of the Cromford Report published an article in the Cromford Report that predicted what we are seeing today. He began the article with a quote from Groucho Marx.
" A child of five would understand this. Send someone to fetch a child of five." Groucho Marx
Below are a couple of snippets from that article:
Quote:
"Distressed Inventory Continues Slide
The big news in Maricopa County’s housing market in May (2011) continues to be the rapidly declining distressed housing inventory. This decline is not subtle folks...
...We define distressed inventory as the number of homes with an active notice combined with the number of bank held properties.
On January 1st of this year (2011) Maricopa County had 39,724 homes with an active notice and another 18,889 REOs.
Our distressed inventory began 2011 at 58,613 homes.
At the end of May these numbers had fallen to 27,396 and 18,451 respectively, combined 45,847.
In the last five months distressed inventory has fallen on average 2,553 homes per month.
During the last two months these declines have continued at an accelerating pace, reducing inventory by 3,704 in April and 4,265 in May.
The decline we saw in May was the highest on record indicating the snowball is gaining momentum and heading down hill.
Our early June numbers are projecting the same accelerated pace.
Simple math tells us that if distressed inventory continues to decline at its current rate, in 10 months it will dry up, but then, that’s merely simple math.."
Of course he was correct. Since May of last year I have been reporting the declining number of REO's (total of all including those listed, and those not listed).
In May 2011 the total of those REO's was over 19,000. Today the total is only 7,772.
Howard Ruff doesn't pull any punches. Here is another snippet from that article:
Quote:
"...When I present my simple logic, readers and other experts counter with complex math factoring together a Massive Backlog of “Shadow Inventory”, "Robo-Signings", a declining demand as QE2 ends and the ever popular bank conspiracies. Sometimes, I feel like I’m conversing with Hollywood screen writers..."
Below is a chart courtesy of the Cromford Report that I've shown before, showing the decline in the distressed housing. It shows the total of NOTS, REO's Listed, REO's not Listed, and REO's Pending (under contract) to be only around 22,000, down from over $50,000 last May 2011..
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