Has the bottom hit? (Glendale, Scottsdale: mortgages, credit score, house prices)

[markas214]

Originally Posted by musicforme

What predictions do y'all have for pricing in the next six months? Do you think it will level off and stay about the same, or continue to go down? We're looking at the North Phoenix area (near I-17 and Carefree Highway).

My wife and I would move to AZ today if we could, but we're expecting our second child in mid April and can't list our house in Texas until our future child is old enough to travel.

Those who have been right are predicting 10-20% declines. Rent for a year if you want to play it safe.

[markas214]

Originally Posted by Howard Roark

Yeah, investors have been active since 2002, driving up housing prices to more than double. They are still too high (prices). Option ARM resets and ALT-A resets are keeping the smart money out until the peak is over (2009 through 2011).

Flippers were not investors. An investor looks at fundamentals and chooses wisely. Please don't confuse the two. Most investors have a plan and look at cash flow for rentals or the return on a rehab. They are willing to put in some work. The recent wave that drove prices through the roof resulted from people jumping on the real estate mania looking for a quick buck. Most lost everything.

[aaron kristen]

Originally Posted by markas214

I agree and should not have included Canada. Smart banking regulations have been proven to work by our northeren neighbors. There won't be the real estate purchases from Canadians as had been as they conserve cash but Canada is in better shape than most economies.

Thanks
Our economy is significantly stronger, but we still will feel the downturn, and have already. With much of our manufacturing and other industries heavily focused on export to the USA, we have to suffer. Add in $35 oil, doesn't help. Heck, our little province here in canada exports more oil to the USA than does Kuwait!!

I was down in AZ last spring, looking at homes. There were tons, and would have fit our budget and needs perfectly.
HOWEVER REMEMBER that 12 mo ago, the canadian and US dollar were at par. Infact our CND$ was worth more than the US. So a house worth $200,000, I could buy for the equivalent of $180. Today is not the case. The value of the canadian dollar is 25% less than what it was. Candians investing in AZ will be MUCH slower than a year ago.

[Captain Bill]

Originally Posted by Howard Roark

Yeah, investors have been active since 2002, driving up housing prices to more than double. They are still too high (prices). Option ARM resets and ALT-A resets are keeping the smart money out until the peak is over (2009 through 2011).

It wasn't the true investors that drove up the prices. It was the general public, speculators, and the sub-prime loans by the mortgage companies, along with the wall street method of packaging of these loans.

That is the greed factor mode I speak of, that was in effect at that time. Today we're in the fear factor mode.
Before long we'll enter the greed mode again. That will be when all the people who are trying to time the bottom realize they missed it because they were listening to the negative news.

The investors of today are true investors; most of them experienced, and many who have wanted to invest, and recognize the opportunity and are getting an education in real estate investing. The investors today, in this declining market, must work very hard and very smart in order to make money, and the investors I know are doing very well at it.

If one looks at Scottsdale, they'll find that the number of REO's are minimal compared to the rest of the valley. The market has fared well in that city because of the more desirable location. Other pockets have also held up very well.

The home prices are over sold and I think that opinion is supported by the statistics as compiled by The Cromford Report.

In January 2001 the median price was about $136,000
In january 2009 the median price is $131,500
That is without factoring in any inflation to determine what the current median price should be.

Remembering that in median pricing, one half of the homes are less than the median, and one half are above, one doesn't have to look very far to find the bargains that exist in the prices below the median range.

Here is a very interesting sales statistic which gives a strong hint of a changing market.
Greater Phoenix Area
2435 January sales 2008
4390 January sales 2009
The number of sales almost doubled from the same period one year ago.

Number of Sales in price ranges.
January 2008
~800 Sales in Less than $200k price
~800 Sales in $200 - 300k price range
~800 Sales in $300k plus range

(The numbers are approximate because I'm reading from a graph)

January 2009
~3200 Sales in Less than $200k price
~700 Sales in $200 - 300k price range
~500 Sales in $300k plus range

Notice the large jump in the <$200 price range sales. There are probably several reasons for that. One is that there are many bargains in that range for first time home buyers. Another is that investors recognize that range as a good range to buy in. Another is that the banks have lowered their prices so that there are some great bargains for those who don't mind doing a little fix up. And also, the investors are buying homes in that range, fixing them up and selling to those who want move-in-ready homes.

The average price per square foot of houses in Jan 2001 was about $102/sf.

The average in Jan 2009 is only $91.

My below average math skills tells me that if a price of $102 existed in 2001, and I factor in a cost of living increase of 2% per year, that the average price 8 years later should be $119.

All the math experts will be able to find any errors in my math, and I welcome that.

In 2008 the median price declined 14% to $131.5k
If it declines 14% in 2009 the price will be $113.k
If it declines another 14% in 2010 the price will be $96.3k

The average price per square foot in that two years would decline from $91/sf to $67/sf.

I can't see that happening. Greed won't let that happen.

Here is an example of some of the bargains out there, and another reason why the uner $200k homes are selling more. I'm buying a house and have it under contract. It needs about $6-7k to fix up. We are going to sell it for $29,950. That is $26.72 per square foot. The rents in the area are around $750/mo. The only reason I'm not keeping it to rent is that I manage my own properties and this is too far from my home. I only keep properties that are within 30 minutes from home.

Someone will pay cash for that property, fix it up and with $9000 rental income, less $3000 for vacancy factor, insurance, taxes and maintenance, will have a 17% annual return on a total $36k investment. We expect to have it sold within a few days, and do a double escrow.

If that price isn't over sold, then I don't know what over sold means.

I mention that property because it's a good example of what is out there. If people just focus on the negative, such as the foreclosure signs that the news media shows every day, and the Alt A resets, etc, and do not look at statistics, and factor in what the government is doing that will help the economy, and study the full picture of what is happening in the market, they will miss the bottom, which I feel will happen by the end of 2010.

[musicforme]

Originally Posted by markas214

Those who have been right are predicting 10-20% declines. Rent for a year if you want to play it safe.

After reading the specifics regarding Obama's "rescue" plan, I agree with you. My wife is worried that housing prices will start to increase before we can move out there this summer.

Here is what I've told her to explain why prices shouldn't go up:

1. Refinancing plan only covers up to 105% of Loan to Value (LTV), the decreases in home value where we are looking in North Phoenix is vastly higher
2. Income must be documented, those people that bought a home without income documentation won't the ability to do that again
3. Reduction in Principal capped at $5,000 for first mortgage, no support for second mortgages
4. Lenders halted additional foreclosures until Obama's plan was released, I expect the number of foreclosures to drastically increase in the next couple of months.

We're not worried about buying before the bottom hits. As long as we're within 10-15% of it, I'm ok with that. Whatever house we buy we intend to live in a very long time. If anything, we'll be able to buy a larger house than we'd ever hoped to buy here in Texas.

[d2snow]

Originally Posted by Captain Bill

It wasn't the true investors that drove up the prices. It was the general public, speculators, and the sub-prime loans by the mortgage companies, along with the wall street method of packaging of these loans.

That is the greed factor mode I speak of, that was in effect at that time. Today we're in the fear factor mode.
Before long we'll enter the greed mode again. That will be when all the people who are trying to time the bottom realize they missed it because they were listening to the negative news.

The investors of today are true investors; most of them experienced, and many who have wanted to invest, and recognize the opportunity and are getting an education in real estate investing. The investors today, in this declining market, must work very hard and very smart in order to make money, and the investors I know are doing very well at it.

You are spot on, Bill!

[d2snow]

Yesterday's Arizona Republic:

It's official: Phoenix-area home pricing has overcorrected for the housing bubble.
Preliminary same-home resale data from show the Valley's median home price fell to $130,000 in January, equivalent to the median price in January 2001.

Valley median home price hits 8-year low

[markas214]

Tempe, Scottsdale, Ahwatukee, Cave Creek, Paradise Valley, areas in the northwestern valley, Peoria, Glendale and plenty more are still 50%-100% higher than they were in Jan,'01. Houses priced greater than $400k are still facing a big decline and since the foreclosure program announced by Obama only covers mortgages up to the conforming loan limit those areas with high priced homes will get no relief. Those are the areas most affected by the Option ARMs and other nonconforming "prime" loans that are the second shoe to drop. As they say "got popcorn?". The drama continues to unfold and will not reach the final acts until at least a year or two.

[YAZ]

We're closing on a home this weekend.


Gonna rent out the condo, cuz we're sure not gonna be able to sell for what we owe...not RIGHT NOW.

We're taking a risk, but the potential reward seems worthwhile.

We'll be OK; I don't mind slingin' hash or cleaning toilets in the evening to make ends meet. If that's what it takes, so be it.

Dealing with unruly tenants is another thing....

[Howard Roark]

Captain Bill (rather than quote I just reply from your most recent post) - we'll see who is right!