Phoenix Real Estate Market Keeps Tanking (Scottsdale, Gilbert: transporting, homes, buyers)

[Captain Bill]

Originally Posted by MN-Born-n-Raised

...If my kids were in the market, I'd be telling them to buy NOW!

I believe that would be wise, and educated, advice.

One of my long time friends is a client. I helped him buy a home for his mother in 2010 to move her closer so they could help her out. Then he encouraged is daughter and son to buy a home.

We found a home for the daughter and she closed on it last year. The son has a short sale under contract for the past 4 months and we're getting pretty close to a deal with the second lien holder. The first has approved the sale. We're keeping our fingers crossed that this doesn't fall through at the last minute because of the 2nd lien holder being stubborn.

The problem today is: There is insufficient inventory for the demand in these first home price ranges. Two of my investor clients, and another client in the sub $150k range constantly make offers and get out bid (above list price).

Because of the shortage of inventory, I have had to turn down working with a couple of new clients in that price range. First, they would be competition for my current clients; and secondly, I probably couldn't find them a home.

Yesterday I had a phone call from a Realtor who knew that I was a rehabber (I did not do any rehabs last year). She was desperate to find a $125k home for her client and was calling all Realtors whom she thought may have a home being rehabbed but not yet on the market.

The banks are really playing hard ball in holding tight on unrealistic prices.

One Fannie Mae home is listed at $130k. The community comps support $93k. We made a $93k offer and they rejected without countering.

Part of that issue "MAY" be that it's being serviced by a Servicing Company, and they get paid for all of their servicing activities for the property. So the longer they can keep the property the more money they make on "servicing" it.

[whodiman]

Now that the market is picking up I have several friends that are looking to buy (funny how that works). It sounds like they could buy without too much difficulty under 150k if they pay cash but can they even purchase a good property if they have to go with financing?

[Ponderosa]

Originally Posted by MN-Born-n-Raised
...If my kids were in the market, I'd be telling them to buy NOW!

Some of the single "kids" in our neighborhood who had been living at home were buying last summer. They have already made a good return and in all probability will get enough for their houses in a couple years either in sale or rental to pay off their college loans. This is the best opportunity for young people in at least a generation.

[Captain Bill]

Originally Posted by whodiman

Now that the market is picking up I have several friends that are looking to buy (funny how that works). It sounds like they could buy without too much difficulty under 150k if they pay cash but can they even purchase a good property if they have to go with financing?

They will have difficulty even with cash unless they're prepared to offer way over market value price. There are a ton of cash buyers out there. My 2 remaining investors are cash buyers, and they are losing bids (over list) right and left. I normally limit the number of investors to 4, but now I'm not even taking any new investors, nor any new clients in the under $150k market because it's too difficult with this low inventory and high demand.

The cash buyer can pay over market value because they don't need to have an appraisal. The person getting a mortgage must have an appraisal, and today the sellers will hold to the selling price and not negotiate down to the appraisal. If the people getting a mortgage don't have the cash to pay down to the appraisal value, then they will lose out.

They'll also lose the money they paid for home inspections and the appraisal. So they should not offer above market value unless they're prepared to pay cash down to the appraisal value.

[Ponderosa]

Originally Posted by Captain Bill

They will have difficulty even with cash unless they're prepared to offer way over market value price. There are a ton of cash buyers out there. My 2 remaining investors are cash buyers, and they are losing bids (over list) right and left. I normally limit the number of investors to 4, but now I'm not even taking any new investors, nor any new clients in the under $150k market because it's too difficult with this low inventory and high demand.

The cash buyer can pay over market value because they don't need to have an appraisal. The person getting a mortgage must have an appraisal, and today the sellers will hold to the selling price and not negotiate down to the appraisal. If the people getting a mortgage don't have the cash to pay down to the appraisal value, then they will lose out.

They'll also lose the money they paid for home inspections and the appraisal. So they should not offer above market value unless they're prepared to pay cash down to the appraisal value.

This ain't right. It is something that FNMA and FHA could deal with too, without the do nothing Congress. In econ, the value is what someone is willing to pay, not some opinion of worth. If you have multiple bidders on a house, particularly cash bidders, that should be the value. Eventually, of course, the higher cash offers will work into the comps, but it takes times and keeps potential owners (much more desirable than investors) on the sidelines until prices go even higher for them. Just another example of how the little man gets screwed.

[ReadyFreddy]

7,886 All REO Properties as of March 6, 2012, Down from over 19,000 in May 2011.

I'm curious what the REO count was in 2005 and prior. I noticed the other day that Wells Fargo's Net Foreclosed Assets balance is down 20% from its high in 2010 but it's also still about 20 TIMES 2004-05 levels! That's not local and probably not even all homes.

This ain't right. ... In econ, the value is what someone is willing to pay

My sister, an appraiser, says this a lot. She can have a sale with competing bidders at that price and she can't appraise it as that value without historical sales to support it, especially in today's conservative banking environment. It was actually the same problem in the high appreciation years, but the banks were more laid back. I see the banks' point. They don't know of multiple bids, just the legal sales contract. They need to make sure there isn't funny business going on, where the sales price is inflated and it's all done to defraud the bank. Buyers are still welcome to pay whatever amount they want for a property. They just can't mortgage it all.

[whodiman]

Originally Posted by ReadyFreddy

I'm curious what the REO count was in 2005 and prior. I noticed the other day that Wells Fargo's Net Foreclosed Assets balance is down 20% from its high in 2010 but it's also still about 20 TIMES 2004-05 levels! That's not local and probably not even all homes.

Since this is an Assets Balance my first instinct is that this is based on dollars and not number of houses. This means that even as Foreclosed houses are being removed from their balance the remaining houses can keep rising in price which increases their balance so it would be very tough to compare these two things. What you need to compare is the number of listings in the assets balance if they provide it. I don't know what accounting policies they use but my assumption is they adjust the value of the foreclosure each month. It might not be fair market value but they have some valuation system in place.

So in theory you can actually sell many of these homes from their inventory and if the price of these homes go up fast enough the Assets Balance can actually increase.

[Captain Bill]

Originally Posted by ReadyFreddy

I'm curious what the REO count was in 2005 and prior...

The link to the Trustee Sale graph on the other post showing REO's doesn't seem to be working. Here is the Trustee Sale graph again. Workbook: TD1 (http://public.tableausoftware.com/views/TD1/TrusteeDeeds?:embed=y&:loadOrderID=0&:tabs=no&:dis play_count=yes - broken link)
courtesy of the Cromford Report.
If you look at the REO's in 2006, it would appear that 2005 and before probably had a very low REO count.

[ReadyFreddy]

Yeah, it's definitely $, not houses.

[Captain Bill]

Originally Posted by Ponderosa

This ain't right. It is something that FNMA and FHA could deal with too, without the do nothing Congress. In econ, the value is what someone is willing to pay, not some opinion of worth. If you have multiple bidders on a house, particularly cash bidders, that should be the value. Eventually, of course, the higher cash offers will work into the comps, but it takes times and keeps potential owners (much more desirable than investors) on the sidelines until prices go even higher for them. Just another example of how the little man gets screwed.

It really isn't that one sided. It's a matter of who has the cash and is "willing" to pay above current market value.

Many investors are getting mortgages, and many regular buyers are paying cash.