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Many homes in the Phoenix valley today are being sold with FHA loans, and with the recent increase in the FHA limit, that gives people who want a larger home the opportunity to buy FHA. In San Ramon, CA, an appraiser I know said that 90% of his business is now appraising for FHA loans.
People are still relocating to Phoneix, and they will contine. It's mainly for the weather and lower cost housing, and in many cases for jobs. Also, overseas buyers are beginning to come here in addition to the Canadian snowbirds and investors.
Most of my resale business is with relocation buyers and local investors, and I specialize in buying REO and short sale homes. My last 5 buyer clients have come here from MN, Chicago, Atlanta, MO and VA. All of them came here for jobs with an increase in pay. My MO client doubled his pay rate. My Canadian clients are both snowbirds and investors. My daughter and son in law moved here from Denver 6 years ago for a large increase in pay and lower housing costs.
He went to work for a company that later sold to General Dynamics. This month he launched a satellite in Cape Canaveral that he was in charge of building. That is the second satellite that the Gilbert division of GD has launched this year and they are hoping to launch 2 more this year, and to get more government contracts as a result of the success they're having in building and launching these satellites. That will be a positive for the job market in Gilbert.
I don't think it's possible to predict the market bottom because there are so many variables. In the Phoenix area I watch the trends and listen to the buyers to get a good feel for what is happening in the present time. That gives an indication of what may happen in the future, but not sufficient enough to predict.
For the past 5 months, through May, the inventory has been declining, and the sales have been increasing. However, the prices are still declining. The reason for the decline is that buyers today are looking at the REO and Short sale homes. Mostly the REO's (bank owned) because they don't understand the short sale market, and so many agents don't understand it and don't know how to work with the banks loss mitigators. That is not meant to knock my fellow agents. It just takes a lot of experience and acquired knowledge to learn what the loss mitigators need and how to negotiate with them in order to get your file on the top of their pile. Make a mistake and your file goest to the bottom of the pile.
The buyers are out in strong force. Just yesterday I was with a client looking at 3 REO's. The first was in move-in condition and priced very far below the market for the community, and obviously it was priced that way in order to attract multiple offers. We were actually at the property 3 times during 2 days, and each time we were there, other buyers were there also. When we saw the other two properties there were others there at the same time also.
As of Friday the one home already had 4 offers with 3 stating they would offer that day, and the agent was holding all offers until Sunday at 3pm. I expect that he will have up to 15 offers and the home will sell at about 20k over list price, which is still a bargain.
There are bargain basement prices in Queen Creek, but with the difficult commute, and the lack of infrastructure, along with the fissure problems, combined with the over building and glut of homes for sale, that area will have a difficult time recovering. If someone is going to be in that area for 10 years or so and really likes the area then they should be ok. However, as an investor I stay away.
I invest in properties in the Gilbert and east Mesa area, and a little in Phoenix. Someone mentioned 2500 sq ft for $700 month. I'm assuming you meant a $700 mortgage payment for a 2500 sq ft house. I just bought a property that is currently in escrow. It's a 2370 sf home in a gated community in East Mesa and we will be selling it for $200,000. We expect to have a buyer by the time our escrow closes on July 21. We can't sell it FHA because of the 90 day seasoning rule. But a 10% down buyer will have a 190k mortgage, and at 6.25% the payment is $533/mo.
This is a 4 year old home in move in condition, and the price is only $84 per square foot. Rent in that area goes for about $.58 per square foot, so there is a positive cash flow for an investor.
I mention that to show that there are some real bargains are out there; it just takes a lot research time and some knowledge of how to find them. I work with a partner who is also a realtor and when we find the bargains we buy them ourselves and resell them. However, if we have a client that is looking for the house that we find, then we help our client buy the house so they can take advantage of the bargain. We never buy a house that a client of ours wants. We want them to get the bargain. We know that we'll find another one for ourselves.
Someone also mentioned that they thought the rate of appreciation will hit 10%. I personally don't see that happening, because that is a very high rate. My "guess" is that when we do see some appreciation it will be very slow, possibly starting at the inflation rate of around 3% and perhaps up to 5%. But I would not count on 10% in the foreseeable future.
This is a good thread with some reasonable ideas being discussed, without some of the name calling and insulting that goes on in some of the other threads.
may happen in the future, but not sufficient enough to predict.
For the past 5 months, through May, the inventory has been declining, and the sales have been increasing.
. But a 10% down buyer will have a 190k mortgage, and at 6.25% the payment is $533/mo.
Someone also mentioned that they thought the rate of appreciation will hit 10%. I personally don't see that happening, because that is a very high rate. My "guess" is that when we do see some appreciation it will be very slow, possibly starting at the inflation rate of around 3% and perhaps up to 5%. But I would not count on 10% in the foreseeable future.
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Don't sales alway increase from January into May? That's wht YOY is a better barometer. YOY sales are down when you exclude REOs and foreclosures.
Check you math. I get double your quote. 200k, 10% down = 180k at 6.25% x 30 years = P&I of $1108.29.
I agree 10% is a long way away unless inflation is running 15%.
Don't sales alway increase from January into May? That's wht YOY is a better barometer. YOY sales are down when you exclude REOs and foreclosures.
Check you math. I get double your quote. 200k, 10% down = 180k at 6.25% x 30 years = P&I of $1108.29.
I agree 10% is a long way away unless inflation is running 15%.
Thanks for the correction. Got in too much of a hurry and didn't double check.
YOY sales are down, and that was expected. However, what I'm looking at is what is happening to today's inventory, sales, and pricing. This way I can watch for a trend and follow along to see if it continues. It gives me a much better feel for the current market.
At the beginning of the year we had about a 16 month or higher supply. I forget the exact number and don't want to look it up right now. On June 1 we had an 8 month supply.
I had expected that with the REO's and short sales that the inventory would continue declining and the sales would slow. But that didn't happen.
Our inventory has been declining all year, and the sales have been increasing. That was not expected to happen. The inventory dropped to about 8 months supply at the end of May.
Typically our sales increase the first quarter. Then the snow birds migrate back home and sales slow down. They will slow down more as summer comes on, and pick back up around September-October. I have a listing that we're taking off the market on July 1 so we can put it back on fresh in October with zero days on market.
Our prices are still declining despite the merging of the inventory and sales lines. That's because the buyers are latching on to the REO's; and in many communities, not all, the REO's become the price driver.
Many resale homes are being taken off the market by people who don't need to sell. At some point they'll come back on; many of them will wait until they see the market prices begin to pick back up.
It will be an interesting couple of years. The REO's have reached bargain levels and both retail buyers and investors are out in droves buying them. So as the inventory declines, if the REO supply begins to decline, and the resale buyers begin to price their homes in competition with the REO's then we may see some drastic changes in the market.
As inventory declines and sales increase, then when the supply of almost-move-in-ready REO's declines, the prices should begin to level off.
Retail buyers don't want the REO fixer uppers. They want to do no more than carpet, paint and yard work. That supply is eaten up as fast as it comes on the market. The investors buy the fixer uppers and resell them for a profit to the buyers who want a move in ready home at a slight discount to the current market.
I don't know if that makes sense the way I've described it, but that's what's happening in the market that I'm working.
Location: Sunny Phoenix Arizona...wishing for a beach.
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Quote:
Originally Posted by markas214
As others have stated if there are not good paying jobs the only ones flocking will be retirees who will boost demand for more low paying service jobs and refuse to fund quality education for children. That is not a formula for a world class city. Also with a majority of jobs being low wage there will be less people qualified for mortgages at todays prices further putting downward pressure on the real estate market. The days of landscapers qualifying for $400,000 homes with zero down are gone forever.
I've always had a good paying job in Phoenix and so has my husband. If not we would not be here.
I am not a big fan of long winded posts. AZJack said it best
When the average buyer can afford 20% down and payments on a fully amortizing loan, house purchase prices will stop dropping. That will not be in 2009.
I've always had a good paying job in Phoenix and so has my husband. If not we would not be here.
I never said there aren't high paying jobs in the Phoenix metro area. I did say "Also with a majority of jobs being low wage there will be less people qualified for mortgages at todays prices further putting downward pressure on the real estate market". Personally I earn better than most myself but find prices discouraging due to the fact they are so out of whack with historic levels in Phoenix. I also see interest rates rising, tight credit, flat wages and continuing foreclosures further putting pressure on prices.
The fact that Arizona schools rate so low nationally doesn't help attract top corporations or ambitious and educated young families either. Schools are a big issue for me and that really restricts which areas I would buy in. As Bill said the next year or two will be interesting. Does the area adjust from a construction driven economy to a production, education and technological one or stagnate? The potential is there but is the leadership?
Last edited by markas214; 06-22-2008 at 11:20 PM..
I never said there aren't high paying jobs in the Phoenix metro area. I did say "Also with a majority of jobs being low wage there will be less people qualified for mortgages at todays prices further putting downward pressure on the real estate market". Personally I earn better than most myself but find prices discouraging due to the fact they are so out of whack with historic levels in Phoenix. I also see interest rates rising, tight credit, flat wages and continuing foreclosures further putting pressure on prices.
The fact that Arizona schools rate so low nationally doesn't help attract top corporations or ambitious and educated young families either. Schools are a big issue for me and that really restricts which areas I would buy in. As Bill said the next year or two will be interesting. Does the area adjust from a construction driven economy to a production, education and technological one or stagnate? The potential is there but is the leadership?
You have no idea what you are talking about and I'm not about to get in one of these "Phoenix is a low income city" because it's not true. And while AZ schools rank low, the schools in the metro area do not. There are dynamics at work in AZ that cause the state to have a bad track record unlike the school systems in many regions of the Valley; which are not at the bottom. Do some research. The Phx metro area has a high median income and per capita income compared to other large metro areas. The housing market will be fine after a while. This happened in the 80's, 90's, and in 2001-2002. Everything works in cycles. As soon as things stabilize, investors and speculators leave, people stop freaking out and putting their homes on the market, there will be a leveling off.
US Census Press Releases (http://www.census.gov/Press-Release/www/releases/archives/facts_for_features_special_editions/011342.html - broken link)
What people need to understand is that the state of Arizona usually lags far behind the Phoenix metro area, which hurts state statistics a bit. For example, NYC's median income is $46,480, Boston's is $47,974 AND Arizona's is $47,265 BUT Phoenix's is $51,862. This is true of the school systems, Arizona in general is hurting, but Phoenix area schools fair much better...point in case...Mesa Public school's ranked number one in the nation for graduates and is considered a top performer nation wide.
Mesa Public Schools, Mesa, AZ (http://www.mpsaz.org/main2/indx_news/grad_rate.html - broken link)
Most of the school districts in the Phoenix area are small, so they have high graduation rates and some will argue, better oversight. They are trying to consolidate into city wide districts, however. This is for 2006 and shows Mesa's climb to the top and that other city's that some would claim are ahead, are actually behind. You can find a link to 2008's data from this link:
I have some idea of what I'm talking about. We plan on making our move to Phoenix in the next year and I'm constantly researching. I read the local news daily and folow the statistics. I also have an open mind and read your post and found it enlightening. I have family and friends living in the area and we've visited. I know I'll be OK employmentwise being in the medical field but we still are anxious making the move. Without having lived there it is hard to choose an area even with local connections. Thank you for your perspective.
I have some idea of what I'm talking about. We plan on making our move to Phoenix in the next year and I'm constantly researching. I read the local news daily and folow the statistics. I also have an open mind and read your post and found it enlightening. I have family and friends living in the area and we've visited. I know I'll be OK employmentwise being in the medical field but we still are anxious making the move. Without having lived there it is hard to choose an area even with local connections. Thank you for your perspective.
You are welcome, just remember that many "statistics" are for the entire state of Arizona...including the Indian Reservations which are among the most economically stranded places in the country. You have to learn to search through the data and information to extrapolate the information for Phoenix and Arizona's metro areas and not lump the entire state together.
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