REO Is About Gone!

Active REO listings in Greater Phoenix (including HUD listings) reached a low point of 1,053 on May 31, 2012 and then started to rise quickly during the second half of the year reaching a peak of 1,665 on December 3. Since then the number has fallen away  down to 1,383 today. Given the numbers of lender owned homes that have not yet been listed and the dwindling number of pending foreclosures, this downward trend is likely to continue until we get back down to normal levels. The age of the REO is drawing to a close. All these numbers pale into insignificance compared with the 14,424 that were active on January 16, 2009 at the height of the REO era.

This explains why investors acted a lot less and cash deals also getting less. It is the time for financed investors come in to play before the prices and interest rates get higher and higher.

What’s the indicator for financed investors?

It is not about the REO getting vanished. It is not about cash deals disappearing. It’s also not the investor mortgage interest rates going over 4% or housing prices increased over certain percentage.

It’s the Cash On Cash Rate! Capitalization rate is more for the cash investor while cash on cash is for the financed investors to decide whether to act or not.

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Arizona Among States With Highest Number of Underwater Borrowers

The number of home owners underwater on their mortgage — owing more than their home is currently worth — continues to drop, but “sand states” still account for the highest number of borrowers facing negative equity.

Twenty-two percent of all residential properties with a mortgage—or about 10.7 million home owners—were underwater by the end of the third quarter for 2012, according to CoreLogic data. From September 2011 to September 2012, 1.4 million home owners had moved from negative equity to positive equity.

Rising home prices are pushing more Americans above water, as they once again see equity in their homes after five years of a downward housing market.

The following five states had the highest number of underwater mortgages and accounted for 34 percent of the total amount of negative equity in the entire country:

  1. Nevada: 56.9% properties were in negative equity (was 61.2% in July 2012)
  2. Florida: 42.1% (was 45.1% July 2012)
  3. Arizona: 38.6% (was 43.4% July 2012, dropped the most.)
  4. Georgia: 35.6% (was 37.2%)
  5. Michigan: 32% (was 35.6%)

Adopted from Real Estate Economy Watch.

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Distressed Properties Disappearing from the Market

Maricopa County foreclosure rates are falling again after bumping up slightly in January. The rate of new Notices of Trustee Sale is 107 per working day over the last 30 days and 93 so far in February.

The peak rate was 498 on March 12, 2009. The lowest rate seen since January 1, 2001 is 30 per working day on April 17, 2006. Trustee deeds are running at 65 per working day (64 for February month to date). The peak level was 270 on March 3, 2009 and the lowest seen was 1 on March 6, 2006.

We all know the inventory has been low while the demand is still strong. The imbalance of demand and supply pushes the prices higher. However the shortage of new inventory is highly concentrated in certain price ranges. By price range the change in new inventory compared with last February is:

  • Below $100,000 – down 51%
  • $100,000 to $200,000 – up 4%
  • $200,000 to $300,000 – up31%
  • $300,000 to $500,000 – up 36%
  • $500,000 to $1M – up 22%
  • Over $1M – up 9%

We can see that the disappearing new listings are in the price ranges below $100,000. In fact new listings are down for all ranges below $125,000 and up for all price ranges above that level.

All in all, distressed properties becomes a lot less and this is inline with our earlier finding that cash purchase get less and investor activities also winding down.

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Market Record Low

Market Statistic
Reading
Extreme
Date
Annual Sales $/SF $81.74 record low 11/21/11
Annual Sales $/SF as % Peak 44.3% record low 11/21/11
Appreciation – Long Term $/SF -1.5% record low 11/1/11
Average Price – Annual Sales $156,967 record low 11/21/11
Average Price – Monthly Sales $151,032 record low 9/5/11
Median Price – Monthly Sales $107,000 record low 2/24/11
Monthly Sales $/SF $78.83 record low 9/15/11
Monthly Sales $/SF as % Peak 41.4% record low 9/15/11
Pending Listings $/SF $77.59 record low 8/20/11

These are based on the current millennium (2001 onwards). The figures shown are for the entire ARMLS area and all dwelling types are included. For-sale-by-owner, auctions and other non-MLS transactions are not  included.

September 5, 2011 is currently the candidate for the lowest monthly average sale price and September 15, 2011 saw the lowest monthly average sales $/SF. Since September 15 all readings have been higher for both these measures.

The lowest median sales price was recorded on February 24, 2011.

With prices in the market having moved much higher during the last year there have been no new low set since November 21, 2011.

Above information was compiled by The Cromford Report.

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Highlight of Metro Phoenix Housing Market Trend – February 2013

Here below are some lightlights from Center for Real Estate Theory and Practice, W P Carey School of Business, Arizona State University —

  1. Single family home prices rose yet again between November and December and are dramatically higher than a year ago:
    • The median sales price is up 33.9% from $122,500 to $164,000
    • Average price per square foot is up 27.2% from $83.88 to $106.72
  2. Townhouse/condo prices were stable between November and December 2012 but are still showing very substantial increases over December 2011:
    • The median sales price is up 42.7% from $70,000 to $99,900
    • Average price per square foot is up 23.6% from $85.19 to $105.30
  3. Overall supply (excluding homes already under contract) was down 6% at the start of January 2013 compared with January 2012, and distressed supply was down 42% over the same time frame. However overall supply increased by 13% during the fourth quarter of 2012.
  4. Foreclosure starts on single family and condo homes fell by 4% between November and December 2012 and were down 40% from December 2011.
  5. Recorded trustee deeds (completed foreclosures) on single family and condo homes fell 16% between November and December 2012, and were down 51% from December 2011.
  6. Sales of single family homes were 12% lower than in December 2011 while sales of townhouse/condos dropped by 13%.
  7. Residential properties purchased by investors remains high at 32.4% (including trustee sales) but this is now in a downward trend having peaked at 39.7% in July.
  8. Only 652 new single family home permits were issued in December but in contrast developers purchased 2,272 vacant lots and several tracts of undeveloped land.
  9. Single family home sales increased dramatically year on year for the most expensive sectors:
    • New homes (up 30%)
    • Normal re-sales (up 65%)
  10. Single family home sales reduced year on year for homes sold at discounts to full market value:
    • Investor flips (down 20%)
    • Short sales and pre-foreclosures (down 36%)
    • Bank owned homes (down 55%)
    • GSE (Fannie Mae, Freddie Mac, etc.) owned homes (down 70%)
    • HUD sales (down 44%)
    • Third party purchases at trustee sale (down 51%)

Unless otherwise stated all the statistics shown are for Maricopa and Pinal Counties combined.

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Residential Housing Developers Continue Focus on Chandler

With the success release of Waters @ Ocotillo, Pulte Homes again released Hamilton Heights just 2 miles East of Ocotillo. Again, it is very successful and attracts lots of home buyers. Both new home sites are at South of Loop 202, in the Bogle Junior and Hamilton High School attending area, close to 101 and 202, near Intel, Wells Fargo, Orbital, Chandler Regional Medical Center, BofA campus and many other employers in the area.

Recently, the two long time vacant land at Alma School and Pecos were sold to residential developer. They were zoned for commercial per City’s development guideline. However, there are already many commercial sites and shops in the neighborhood area. So these two lots has been sit there for 7 years. The new usage for low density residential has been approved by the City and soon the construction will get started. These developments will be town homes from 650 to 1,250 square feet with granite counter, stainless steel appliances and back yard.

The Southeast corner of Dobson and Germann was also zoned for commercial and has been idle for years. Not long ago, City approved the request for re-zoning to high density residential. A 360 untis 3-level apartment will soon break ground there.

Right next to above mentioned Hamilton Heights by Pulte Homes, a brand new apartment complex has just opened for business.

At the Northeast side of Alma School and Willis, there is also a brand new apartment complex ready to take applications.

Five years ago, City of Chandler in anticipation of reaching city build-out, hired Mary Jo Waits to address the implications and challenges with having a limited land supply that is rapidly decreasing. The result is the Next Twenty Report, which was then adopted by Chandler General Plan.

The result of above zoning changes and prompting more residential developments is in line with the revised Chandler General Plan.

 

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ARMLS Subscriber Confidence Index for February 2013

For the third month in a row, all three indices buoyed with new confidence. And for the very first time, all three indice are standing on 87 and higher.

The current Subscriber Confidence Index rose 4.3 points to 87.5.The Present Confidence Index also increased, by 1.4 points, to 87.1.  More notable is the greater uptick in the Ex-pectation Index which, unlike the other two indices, factors in the respondent’s expectation of their own family income in the next six months. The Expectation Index rose 6.4% to 87.7.

Here below is the quick review of the SCI index performance in last 3 months –

  • Current Subscriber Confidence Index – 78.6/Dec 2012  >> 83.2/Jan 2013 >> 87.5/Feb 2013
  • Present Confidence Index – 81.3/Dec 2012 >> 85.7/Jan 2013 >> 87.1/Feb 2013
  • Expectation Index –  76.5/Dec 2012 >> 81.3/Jan 2013 >> 87.7/Feb 2013

For how these indice being developed and measured, check out our Jan 2013 ARMLS SCI posting for more information.

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February 9, 2013

Metro Phoenix Housing¹ Market Snapshot
February 9, 2013
City Active Pending Sales DOM² Avg $/SF
Anthem 160 74 43 63 $119.58
Chandler 683 438 255 72 $113.44
Fountain Hills 238 51 45 90 $181.31
Gilbert 752 529 323 58 $110.78
Glendale 597 448 272 61 $86.56
Laveen 156 138 65 77 $67.85
Maricopa 554 249 138 82 $64.39
Mesa 1,224 781 439 61 $103.25
Peoria 526 398 213 68 $102.44
Phoenix 3,142 2,060 1,152 58 $106.74
Queen Creek 917 450 226 72 $77.14
Scottsdale 1,848 468 330 99 $191.38
Tempe 220 129 88 69 $119.26
Note¹ – Housing = Single Family Homes, Note² – DOM = Days On Market
Data Source: Arizona Regional Multiple Listing Service (ARMLS)
For other cities or area, please call (480)292-8281 or email gchen@az-realty.com
Above data was compiled by Gary Chen, Associate Broker, ABR, CIAS, CNE, SFR
Original data complied by The Cromford Report
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Landlord Quick Tip – Strengthen Your Lease Agreement

3 Easy Ways to Strengthen Your Lease Agreement

For those times when tenants becomes a problem, landlords need their lease agreement to stand up to the test. These 3 problems come up routinely in legal disputes, but can be easily avoided. The trick is to clean up the lease before a tenant signs:

1. The names of the occupants in the rental don’t match the names on the lease

It seems simple, but this is a frequent problem for landlords looking to enforce a lease to collect unpaid rent or evict a bad tenant. In order to enforce any provisions in the lease, each adult occupant should be listed as a tenant. In addition, each of those occupants have to sign the written lease. Otherwise, a landlord may not be able to enforce legal rights, or easily reclaim the property for a new tenant.  Make sure everyone signs using their legal name — the names and the signatures must match. Sometimes the lease is reviewed online and the negotiations are via email. That can make it hard to determine whether you have a signed lease. Don’t let e-signatures or online forms jeopardize your legal rights.

2. The security deposit terms are unclear

Many landlords find themselves in court over security deposit disputes. One issue that comes up frequently is the actual amount of the deposit. Also, questions arise over whether a separate pet deposit was allocated, what the deposit is for, and when it is to be returned. Arizona Landlord and Tenant Act allows landlord to collect no more than 1.5 month of rent as deposit. Be sure that the security deposit is clearly delineated from any other fees, especially any non-refundable fees.

3. The lease is not tough enough on crime

More and more cities are passing ordinances making landlords responsible for tenant crimes and disorderly behavior. In many cases, these laws require landlords to take legal action against a tenant in order to avoid fines. It is important that the lease give the landlord that flexibility with problem tenants.

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Landlord Quick Tip – Handling Repair Requests

Here are some tips for getting a handle on tenant maintenance and repair requests:

  1. Every repair request should be documented. If possible, a repair request form should be used. Note the date and time when the request is received. If requests are taken over the phone, make a written note of the conversation in the property file. Repair requests need to contain enough information to determine how urgent the problem is and how to prioritize requests. A landlord or manager needs to know who to send in to fix the problem and when.
  2. Respond quickly to every repair request. Evaluate the urgency, and give the tenant an estimated time for the scheduled repair. If the request is a low priority, at the very least assure the tenant that the request has been noted and will be completed at a later date.
  3. Follow up after the service date to see if the tenant is happy with the repair.
  4. Vendors need to be vetted before they get access to tenants’ units. Not only do they need to be safe, but these workers need to be briefed on proper customer service.
  5. When tenants are present during repairs, they tend to add on other requests directly with the vendor. Make sure vendors are trained to stay on task and not run up the bill on undocumented repairs.
  6. Avoid situations where tenants request repairs or maintenance directly from a vendor, or supervise repairs.
  7. Some tenants persist in requesting repairs that appear frivolous. These tenants will never be happy, and can spread their dissatisfaction to others, or to prospective tenants over the Internet. Consider whether it may be financially prudent to offer to terminate the problem tenant’s lease early and look for a more suitable tenant.
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