Has the bottom hit? (Phoenix, Scottsdale: home, buyers, schools)

[Captain Bill]

Originally Posted by mwwwin

True...but only in terms of resets to a reasonable interest rate...folks that bought 700K homes that are now worth 450K and will more than likely go lower are/will walk...the plan for these folks was to buy and sell for a profit...now they're so upside down and are losing their jobs and paying mortgages on their credit cards...

Scottsdale will be hit hard in the next several years IMO...

That's very possible, and I agree it is something that we should watch. However, Scottsdale is a highly desirable area and a lot of people are waiting and hoping for homes there to come down to their price point, and they will buy them.

I believe what is really hurting the AZ econony right now is the lack of consumer confidence. Financing is available for those with good credit; interest rates are very low; housing prices have declined considerably so that housing is affordable and people are wanting to buy homes; and they're wanting to spend money on things, as always.

But because they are unsure of where the economy is heading, they are holding on to their money. That puts Phoenix and AZ in a cash crunch.

Once people see that progress is being made and that some of these programs are showing signs of working, people will begin spending again.

People have already begun to buy more houses in the under $200k range. Sales in that range have increased dramatically .

I'm reading that FHA is going to be increasing their limit to the $700k range in high cost areas. I don't know if it will increase much here, but if it does, that will give us a big boost.

Since I go to Home Depot a lot for my house rehab business, one thing I watch is the amount of traffic there during the week. During the week because that is when the professionals shop. The traffic has definately increased. Part of it is the weather and the season of course, but the other part is that more people are doing more building type projects.

A lot of the activity is due to investors/rehabbers buying these properties at good prices and rehabbing them. All of that is good for our economy.

Some of the contractor/vendors that work with me are getting more work now. A granite fabricator who will be doing counter tops in a kitchen I'm rehabbing is now keeping one crew busy full time, when a few months ago he was working only about 2 weeks per month.

[Ponderosa]

Originally Posted by Captain Bill

That's very possible, and I agree it is something that we should watch. However, Scottsdale is a highly desirable area and a lot of people are waiting and hoping for homes there to come down to their price point, and they will buy them.

I believe what is really hurting the AZ econony right now is the lack of consumer confidence. Financing is available for those with good credit; interest rates are very low; housing prices have declined considerably so that housing is affordable and people are wanting to buy homes; and they're wanting to spend money on things, as always.

But because they are unsure of where the economy is heading, they are holding on to their money. That puts Phoenix and AZ in a cash crunch.

Once people see that progress is being made and that some of these programs are showing signs of working, people will begin spending again.

People have already begun to buy more houses in the under $200k range. Sales in that range have increased dramatically .

I'm reading that FHA is going to be increasing their limit to the $700k range in high cost areas. I don't know if it will increase much here, but if it does, that will give us a big boost.

Since I go to Home Depot a lot for my house rehab business, one thing I watch is the amount of traffic there during the week. During the week because that is when the professionals shop. The traffic has definately increased. Part of it is the weather and the season of course, but the other part is that more people are doing more building type projects.

A lot of the activity is due to investors/rehabbers buying these properties at good prices and rehabbing them. All of that is good for our economy.

Some of the contractor/vendors that work with me are getting more work now. A granite fabricator who will be doing counter tops in a kitchen I'm rehabbing is now keeping one crew busy full time, when a few months ago he was working only about 2 weeks per month.

Maybe what you are seeing in Home Depot is acceptance of the reality that we are not going to be able to move up or on for some time so we might as well fix up the old place and live with it. That is my situation. I have pretty much given up on getting out of Phoenix alive so we are using our non-existent equity doing some long-neglected upgrading around the house, making the back yard look nicer, etc and settling in for a spell.

[Captain Bill]

Originally Posted by azjack

I am aware of many houses that have been foreclosed and remain unlisted after 4 to 8 weeks. They sit vacant while titled to institutions like Deutsche Bank and are often on the same street as listed REOs.

Many lenders are also easing up on the repo process so as not to add to their own stucco holdings. But I really doubt that many are willing/able to write down the principal balances low enough to motivate people to not walk away in non-recourse Arizona. Eventually, they will have to foreclose because most underwater folks will (do) see that as the most attractive option, at least in AZ.

I agree with both of your statments.

It's certainly possible for some to take more than 8 weeks to get on the market. But most are on in that 4-8 week time frame. Also, there are quite a few REO agents who do not put signs on their listings. So a home may not have a sign, but still may be listed.

The reason some don't place signs is that they only list REO's. They don't work with buyers and will not list a home for a regular home seller. They don't' have the personality or the patience to work with the public. However, they are very busy and quite proficient in their chosen niche.

They don't want to deal with the public, and don't want telephone calls from neighbors and tire kickers calling to just find out the price, or ask for more pictures. They don't want to represent a buyer as a dual agent.

They only want to deal with other agents who come to them with an offer. That is their business model; so answering phones for curiosity seekers and tire kickers is a waste of their time.

My good friend and business partner is one of those agents.


I think the various departments in the banks have set up their own little kingdom and they have to keep them going to keep their jobs secure even though it means more losses for the banks. That's a long subject so I won't get into it here.

However, one reason they won't write down the loan in the beginning is that many of these mortgages have mortgage insurance and the bank is protected from a large loss if it goes through the foreclosure process and ends up back as an REO, and then they sell it.

I don't know all the details about how and when the mortgage insurance kicks in, but that is one reason so many foreclosures do hit the market.

But once the property gets listed, it has to get sold because every home on their books as an REO reduces the amount of funds they can get to loan out. Some banks are more aggressive on price than others in the beginning. Other banks need to have a property on the market for 6 months before they get aggressive.

Then again there are some that seem to have no clue. I'm watching an REO that is on the market for around $130k that has serious structural problems. Every room in the house has large cracks in the slab. A house across the street is the same, due to soil expansion.

The house has been on the market for a year and is still listed at a price that does not reflect the very expensive job of correcting the structural problem.

[ArizonaBear]

Going out on a limb here: barring a double-dip recession; I truly think the economy bottomed out this past February.

[Captain Bill]

Originally Posted by Ponderosa

Maybe what you are seeing in Home Depot is acceptance of the reality that we are not going to be able to move up or on for some time so we might as well fix up the old place and live with it. That is my situation. I have pretty much given up on getting out of Phoenix alive so we are using our non-existent equity doing some long-neglected upgrading around the house, making the back yard look nicer, etc and settling in for a spell.

I know what you mean. My wife has been after me for over a year to do some upgrading in our house. A few months ago we had the interior painted; the cool deck resurfaced; and an acid wash and paint finish on the back concrete patio.

She wants much more done, and I'm holding off until we get some more of our rehab projects done so we can use the money from those projects to do the work she wants done.

[Captain Bill]

Originally Posted by ArizonaBear

Going out on a limb here: barring a double-dip recession; I truly think the economy bottomed out this past February.

Here's some more information that may support your analysis.

The information below is excerpted from The Cromford Report. If anyone is interested in getting a lot of good statistics on housing in the valley, this is the place to go. There are some statistics available without the subscription. The subscription gives much more information and is reasonably priced.


As of March 19, the average $/SF for monthly sales across all areas and types in the valley was $85.11 down 7.6% from $91.96 on February 17.


(This information is taken from the recorder office, not just the mls.)

There was a reversal of direction and an increase in the sales price percentage of list price from 94.07% on February 17 to 94.65% on March 19.


Today the pending listings for all areas & types show an average list $/SF of $87.67. This is somewhat below the average list $/SF for homes sold in the last month ($89.92), which suggests that average sales pricing will suffer a fall in the next 30 to 50 days, but that will be less than the large fall between February 17 and March 19.


The forecast for April 18 is currently $81.11


The implication is that overall average sales $/SF is expected to fall in the next month by between 3% and 6%. Since the $/SF pricing fell by 7.6% in the last 28 days this represents a considerable deceleration in the decline.

(My understanding is that a reversal in price will be the last to show up in a market reversal. What we’ve been seeing is an increase in sales activity; dramatically in the lower price range, and a slowing up of the rate of price decline; and buyers paying closer to the listed price. It's almost like a train trying to roll to a stop. It takes time, but the screeching of the brakes are a good indication that it's trying to stop.)

[Captain Bill]

Here's a little more information for those who would like to use statistics as one means of forecasting.

ArizonaBear has used some other indicators to make his analyis that the valley has reached the bottom, and this index appears to support his analysis.



The Cromford Report developed a CMI which is an index that measures the balance between Supply and Demand of all types of residential real estate in the Phoenix market

• 100 is a balanced market.
• Above 100 is an under supply
• Below 100 is an over supply.

You can draw these numbers on a graph to see the trend.

• In 2002 and 2003 the index hovered close to 100, a balanced market
• From January 2004 to Dec 2004 the index moved up from 113 to 244.
• In April 2005 the index peaked at 312, then dropped to 87 in December 2005.
• In 2006 the index dropped more to 46 by December.
• In November 2007 the index bottomed at 26.5 and increased to 29.6 in December 2007
• In 2008 the index climbed to 52 in December
• In 2009 the index has climbed steadily to 70.5 in March.

For 16 months, the Supply/Demand index has been climbing at a rather steady rate toward the balanced 100 mark. Naturally the prices will still decline during this period of time because prices will be the last to reverse.


These statistics are also broken down by cities and they all show the same trend, although at a different pace.

• Queen Creek’s current CMI is 152 showing an under supply
• Gilbert is 77 which is an over supply
• Phoenix is 69
• Scottsdale’s current CMI is only 36.6

We know that many buyers have been attracted to Queen Creek because of the steepr decline in price which is affordable to more people.

We also know that the prices in Scottsdale are in a higher price bracket, out of the reach of first time home buyers and those who can afford the homes there are holding off hoping for further price reductions.

As far as price is concerned, we definately have not reached the bottom. But as we all know, when there is more demand than supply the prices will increase because of increased competition, and from pent up demand.

The CMI shows the supply vs demand bottoming out in November 2007, and other indicators such as the percentage of sale price to list price are beginning to show a reversal.

Nothing is going to happen in a straight line, but these indicators are good for forecasting if used together with other economic factors.

[sheena]

Originally Posted by Captain Bill

I agree with both of your statments.

It's certainly possible for some to take more than 8 weeks to get on the market. But most are on in that 4-8 week time frame. Also, there are quite a few REO agents who do not put signs on their listings. So a home may not have a sign, but still may be listed.

The reason some don't place signs is that they only list REO's. They don't work with buyers and will not list a home for a regular home seller. They don't' have the personality or the patience to work with the public. However, they are very busy and quite proficient in their chosen niche.

They don't want to deal with the public, and don't want telephone calls from neighbors and tire kickers calling to just find out the price, or ask for more pictures. They don't want to represent a buyer as a dual agent.

They only want to deal with other agents who come to them with an offer. That is their business model; so answering phones for curiosity seekers and tire kickers is a waste of their time.

My good friend and business partner is one of those agents.


I think the various departments in the banks have set up their own little kingdom and they have to keep them going to keep their jobs secure even though it means more losses for the banks. That's a long subject so I won't get into it here.

However, one reason they won't write down the loan in the beginning is that many of these mortgages have mortgage insurance and the bank is protected from a large loss if it goes through the foreclosure process and ends up back as an REO, and then they sell it.

I don't know all the details about how and when the mortgage insurance kicks in, but that is one reason so many foreclosures do hit the market.

But once the property gets listed, it has to get sold because every home on their books as an REO reduces the amount of funds they can get to loan out. Some banks are more aggressive on price than others in the beginning. Other banks need to have a property on the market for 6 months before they get aggressive.

Then again there are some that seem to have no clue. I'm watching an REO that is on the market for around $130k that has serious structural problems. Every room in the house has large cracks in the slab. A house across the street is the same, due to soil expansion.

The house has been on the market for a year and is still listed at a price that does not reflect the very expensive job of correcting the structural problem.

Bill can you see what you can do to get this house sold behind me. I think it's at a good price now but I'm not sure it's getting many showing. You know where I live I'd buy it if I had the money.

[sh9730]

Bill,

I agree with you and Arizbear about Pinal County - The MLS (www.armls.com) verifies the info you posted pretty well. Unfortunately they no longer publish the sales and listing figures per local MLS so all of Pinal County is listed together every month...that is ALOT of variation, covering everything from Johnson Ranch (Pinal's Queen Creek for those unfamiliar), Apache Junction to Maricopa City, to Casa Grande, Florence, Coolidge, Arizona City and then all the outlying areas to Oracle and Picacho!

But, I just looked at all the reports from July last year to Feb 09 (nothing prior available anymore), and the county has consistently been selling approx 600 single detach per month. Listings were averaging about 4600 per month, but have dropped now to 4200 or so. That is just over 6 months supply and remember this report covers the extremely hard hit areas of Maricopa and Johnson Ranch which as we all know were really overbuilt.

Now, as Bill points out, both the average and the median PRICE have come down about 30% from that point, but ALOT of that price drop occurred late last year and has slowed considerably (although not stopped as of February) of late.

I ve already posted in this thread about Casa Grande specifically - very consistently selling over about 100 units a month with less than 400 listed. I know there is still "shadow" inventory out there, but as others point out. The outlying areas of Pinal County I believe are starting to firm up.

Now, I have ZERO idea how long it will be to pick up steam at all....its tough to know whether the outlying concept of more house/more drive/less money, will rebound at all....but the good news is the county itself is over 300K people now so we have the makings of some base economy on our own, though of course we will be PHX bedroom communities for a lot of years to come.

[azjack]

"It's certainly possible for some to take more than 8 weeks to get on the market. But most are on in that 4-8 week time frame. Also, there are quite a few REO agents who do not put signs on their listings. So a home may not have a sign, but still may be listed.

The reason some don't place signs is that they only list REO's. They don't work with buyers and will not list a home for a regular home seller. They don't' have the personality or the patience to work with the public. However, they are very busy and quite proficient in their chosen niche."

Just to be clear, the houses that I described as unlisted for a good while were unlisted, not just lacking a sign. Not on the MLS in any way. Of course, as you mention, there are also many listed REOs where the formality (and minimal cost) of a sign is put aside for various reasons.

I really do not know the average timeframe for putting houses on the MLS after a lender has acquired title, but there are definitely many outliers in Surprise and Peoria if the average is under 8 weeks.

A house in North Phoenix that I used to live in for a brief period (used to belong to a relative) was recently listed as an REO. Relative sold it for about $200K in early 2005, it probably had a bubble peak "value" of $230K in late 2005, and is listed in the $80s right now.