Phoenix Area Foreclosure Rate Declines

According to CoreLogic as reported in the Phoenix Business Journal, foreclosure rates continue to decline to a 3.1 percent rate as of November 2011, down from 4.8 percent a year earlier. 

The Real Estate Market-Now What?

First we had a frothy real estate market and prices rose rapidly keeping some out of the market and forcing others to make bad purchasing and loan decisions.  Then we have had several years of falling prices, foreclosures, short sales, bankruptcies ect.  What in the world can happen next?

Answer: Can you believe a shortage of inventory?  Yes, real estate professionals all over the country are reporting a shortage of housing inventory as the number of homes on the market are plummeting.  Here in the greater Phoenix market, inventory is as low as it was at the peak of the frothy market.  At some point, this is going to effect pricing.  In fact, in some neighborhoods, it already has with price stabilization and some appreciation.  Listing prices are on the rise so it appears a struggle between buyers and sellers and don't forget the loan underwriters and appraisers. 

Phoenix Housing Prices Up In Latest Case Shiller Release

The Phoenix area housing composite was the only market in the 20 city index to record a month over month increase from October to November of 2011.  With inventory near all time lows, this trend is expected to continue with year over year numbers to be in positive territory in the next one or two releases of data.

Arizona up in population rankings

According to the Phoenix Business Journal, Arizona is poised to overtake Indiana and become the 15th most populous state.  Population was expected to hit 6,553,719.

Careful of what you wish for

In a recent article, the Arizona Republic pointed out that those who are thinking of doing strategic foreclosures or sympathize with those who do may be doing their own pocketbooks harm.  As we so often forget, most loans are sold off to FNMA or Freddie MAC, so any loses on those loans is now costing us, the taxpayer.  They would have absorbed the costs themselves in the past but the government has stepped in due to their insolvency and the burden of the loss has been place squarely on our shoulders. 

Now the two government sponsored entities are getting banks to pony up for losses due to faulty underwriting but that is a drop in the bucket.  It is hard not to sympathize with people who are 30-50% underwater because we see big businesses do it all the time.  There is a sentiment out there that "Wall Street got theirs, where is ours?"  I would never be one to judge someone for what they decide to do but keep in mind, it is not harming the Banks as much as you think.  As usual, it is coming to rest on the shoulders of we, the taxpayers.

Wealthiest Zip Codes in the Phoenix MSA

The numbers are in from the end of last year and according to the Phoenix Business Journal the five wealthiest zip codes were, in order:

85253 Paradise Valley with a median net worth of $808,289 and average new worth of $1,716,970
85262 Scottsdale with a median net worth of $804,999 and an average net worth of $1,728,889
85263 Rio Verde Foothills with a medium net worth of $705,209 and an average net worth of $1,571,223
85266 Scottsdale with a median net worth of $699,486 and an average net worth of $1,590,101
85255 Scottsdale with a medium net worth of $646,958 and an average net worth of $1,507,681

Pending Sales up 14.9% in the West

The National Association of Realtors released pending sales data today and the west region lead all others with a 14.9% monthly gain!  Overall, pending sales nation wide were up 7.3% from last month.  For those who wish to make a home purchase consider this.  The affordability index is the best in years, interest rates at or near record lows, and now others are starting to make their moves into the market.  All of this coupled with record low inventory levels and fewer properties going into foreclosure would indicated to me that the market is poised for a rebound.  As I posted in the past few days, our market in Phoenix was the only one of the 20 city composite to show an increase in month over month pricing.  There was an old saying, "Never fight the Fed".  One should also never fight market supply and demand fundamentals. 

Phoenix Prices rise according to Case-Shiller Index

Phoenix was the only city in the 20 city composite to post a month to month gain according to the Case-Shiller numbers released today.  Prices were up .3%.  Inventory is near all time lows so this comes as no surprise to those who follow the numbers.

Year Over Year Pricing Increases In Phoenix Market Predicted: You Heard It Here First

Don't be surprised if you start hearing of year over year real estate pricing increases in the greater Phoenix market really soon.  After falling up through around a year ago, prices have started to rebound and we are going to see year over year pricing increases starting this next month.  This may be the news that causes momentum to pick up in pricing because we have very low inventory levels, over 40% fewer MLS listings than one year ago.  That translates to a 3.7 month supply of housing area wide.  Closer in markets are experiencing an even tighter market with impressive month over month price appreciation.  Interviews with investors at Trustees sales auctions indicate that prices are being bid up there too with fix and flip margins being squeezed by an increasing measure.  Hopefully, once these stats are reported, lenders will start looking for reasons to make loans instead of reasons to reject, adding more momentum.  From what the author is reading, several other markets are in much the same status.  The media template of doom and gloom may have to be re-designed to show a more balanced and more positive viewpoint.  Hopefully, this protracted nightmare is coming to an end.  I, for one, am ready for it.

Bank of America Mortgage Cleanup Unit

Recently Bank of American announced Terry Laughlin would head up a new unit responsible for cleaning up the Bank's mortgage mess.  One has to wonder if this is yet another in a string of impotent moves the large banks are making or if Mr. Laughlin is really going to make headway into the Bank's massive issues.  As one who deals with this on a daily basis, I can only hold out hope.  Last year, they did make some progress on the short sale side by allocating additional personnel to assist in processing them.  In that way, things have improved.  Negotiators are assigned a case and have been fairly timely in getting the files processed.  However, in their zeal to save money by assigning low fee appraisers who do not appear to have knowledge or experience in the markets, they have short circuited what would otherwise would be considered a success.  If you are out there Mr. Laughlin, please start making an effort to use seasoned appraisers who are familiar with the market the assignment is in and start paying them as the professionals they are.  In one example a house was listed on the market for over 90 days and received a cash offer of $750,000....bank came back at $820,000....result buyer walked.  After another 90 days another offer comes in at $728,000 the bank comes back at $740,000....result...buyer found another house they liked better.  While the second one may have been close enough to work out, one has to wonder what the ???

I don't envy anyone who has to take on a portfolio the size of Mr. Laughlin.  Of course, it would not have been near the issue had they not bought Countrywide (what were they thinking? they had time to back out when things were crumbling around them) but that is an issue perhaps for another day.

In closing, I would like to wish Mr. Laughlin luck with his new endeavour because the sooner he and is contemporaries in other banks have success, the sooner we can get through this and recover.

Vacation Home Market on Rise

Amid the rising interest rates, sales in many vacation communities in the U.S. are soaring.  According to the Wall Street Journal, the low prices and a general feeling that the worst is over is catapulting sales to their heights levels in years.  Here in Arizona, we have seen similar results.  Inventory levels of homes in many of the price ranges in Paradise Valley are the lowest in years and not that much new is coming to the market.  I have interviewed architects, builders, and subcontractors and calls are up for all of them.  Now whether that translates into new builds or not remains to be seen.  However, the inventory of newly built speculative homes abundant in the market a few years ago is all but gone. 

What was surprising to many of us was how few new listings came on the market at the first of the year, typically the beginning of our busy selling season.  Here in Paradise Valley, there were several homes built after 1996 priced under $1.6m, but they are almost all gone.  The most recent to go under contract were the ones on busy streets which is always an indication of depleted inventory.

Sales have been very brisk in Silverleaf, an exclusive gated golf community in north Scottsdale but those sales have not translated into greater activity in Desert Mountain yet in far north Scottsdale.  We are just going to have to see, but things started feeling better a year ago October but then died down this summer and have really accelerated since November/December.

Jumping Rates Hit Refis

Is it me or does it seem like every time it feels like we have put the worst behind us something else happens?  Mortgage rates have started to jump recently due to inflationary worries.  Only a few months ago we were more concerned with deflation.  The American public must be wondering 'what the heck is going on?'  In my opinion, the recent unrest in the Middle East, while fascinating and in the long term positive, is allowing shrewd speculators to venture into and I am sorry, manipulate the commodities markets.  Just back in 2008 we saw something similar as corn, oil and other commodities appreciated at meteoric rates.  We all know it was investment banks and large hedge funds driving it and there was supposed to be limits on speculative positions in some commodities, namely food, to stop this.  Have they been put in place yet?

While Libya represents only 2% of the world's oil supply, prices increases in the oil markets have far exceeded that and are up around 14%.  This when Saudi Arabia can make up for any supply interruptions of this size.  So what is going on and why should it matter and what in the world does this have to do with real estate?

Well if oil goes up and stays up, the cost of everything, farming, transportation of goods, materials made of plastics, everything starts going up and a 'cycle' of inflation can occur.  Bond markets price the risk of future inflation and if they, the bond investors, see inflationary worries, they pull back and bond prices fall.  Since interest rates are inverse to bond pricing, the rates start to climb until they are high enough to entice enough buyers into position to create stasis.  Mortgage rates are closely tied to the 10 year U.S. Treasury note. So there you go. 

My fear is that if speculating drives oil prices too high for too long, any momentum we have started to seen in real estate will be quashed.