Pook's Message - 6/26/12

Please forgive me for repeating the same news, but I think there are still some folks out there who don't believe that the Phoenix metro market is turning around.  I still have Buyers asking for great Short Sale deals and foreclosures at rock bottom prices.  Well, they're pretty hard to find these days. For those still in doubt, in a 5/31/12 report by Michael Orr, Director of the Center for Real Estate Theory and Practice at Arizona State University and author of The Cromford Report, he noted that, "Demand remains strong in the market, as evidenced by multiple-bid situations for the majority of resale home listings... Most homes priced well are attracting multiple offers within a couple of days. Up to 20 or 30 offers for a home are becoming common, and often, many offers exceed the asking price.”  Additionally, Mike Orr notes that "Certain areas of the Valley that took a particular beating during the recession, such as El Mirage, Glendale, Maricopa and Tolleson, are now seeing some of the greatest rebounds. The pricing boost also applies to condominiums and townhomes... with their values up 23 percent year-over-year." 

If you've been reading my newsletters or checking out my blog, you'll see that I've been reporting on the turnaround for quite a while now.  Today's articles, "Sellers' Asking Prices Jumped in May" and "Phoenix-Area Housing Prices on the Rise," include the latest reports about the Phoenix metro housing market.  I've added a third article, "In Hard-Hit Cities Like Phoenix, the Home Market Rises," because it comes not from a local source, but from a Canadian newspaper that is also spreading the news. 

For those who are thinking about making a purchase, there is an additional article today that provides some insight on appraisals in today's market. 

Please share the news with your friends, colleagues, and family.

Sellers' Asking Prices Jumped in May

Source: The Wall Street Journal 

Article by Nick Timiraos

June 13, 2012

Median asking prices hit their highest level in 2½ years in May, the latest sign that sellers are feeling brighter about their prospects amid slimmer pickings of homes listed for sale.

Click for metro-level data

Median asking prices rose to $194,400, up 1.9% from April and 3.2% from one year ago, according to data released Wednesday by Realtor.com. Meanwhile, home listings increased by 2% from April, a slower-than-normal seasonal jump, and they stood 20% below their levels of year ago.

Reduced competition for sellers is making it easy for them to push the envelope on price. Compare May’s report with that of one year ago, when median asking prices in May 2011 fell by 1.6% from April 2011.

Meanwhile, the median amount of time that homes listed for sale had been on the market fell to 83 days, down by 9.8% from one year ago.

Here’s a closer look at the report:

Inventory: The number of homes for sale fell in all but two of the 146 markets tracked by Realtor.com on an annual basis, with inventory rising by 5% in Philadelphia and by 19% in Shreveport, La.

Nearly half of all markets saw a 20% year-over-year drop in the number of homes listed for sale, led by Oakland, Calif. (down 56.6%); Fresno, Calif. (48.8%); Bakersfield, Calif. (48.6%); Phoenix (44.7%) and Seattle (42.7%).

On a monthly basis, around three quarters of markets say inventories rise in May.


Prices: On an annual basis, asking prices fell in 24 markets, led by Reading, Pa. (down 5.4%); Allentown, Pa. (5.3%); and Milwaukee, Wis. (5.2%). The largest year-over-year jumps in median asking prices were reported in Phoenix (up 32.6%), Santa Barbara, Calif. (30.1%), and Chattanooga, Tenn. (up 24.1%). Median prices can overstate big swings because they may instead reflect a change in the mix of sales.

Median list prices fell on a monthly basis in just 17 markets, led by Daytona Beach, Fla., and Asheville, N.C. (down 1.4%), and were unchanged in another 35. They rose from April’s levels by 19% in Santa Barbara, Calif., and by 10% in Oakland.

The Realtor.com figures include sale listings from more than 900 multiple-listing services across the country. They don’t cover all homes for sale, including those that are “for sale by owner” and newly constructed homes that aren’t always listed by the services.

Phoenix-area Housing Prices on the Rise

Source:  The Republic | azcentral.com
Article by Catherine Reagor - May. 31, 2012 11:12 PM

More metro Phoenix homeowners may soon be able to sell for a profit, albeit a small one, as home prices in the region continue to rise.

Arizona State University's latest real-estate report shows the median home price in the Phoenix area climbed again in April to $140,000 -- 25 percent higher than the year before. 

Helping push up prices is a limited supply of homes for sale and a growing pool of buyers. If those trends hold, the outlook is for home prices to keep rising, which could be good news for many owners who for years have owed more than their houses have been worth.

The report highlights some significant movements in the market:

Fewer houses for sale: Supply has dwindled as a smaller number of foreclosure homes go up for sale, and the number of homes on the market is at its lowest since the pre-2007 boom. There are about 8,800 houses for sale without a pending contract from a buyer. In 2008, there were more than 50,000. The total number of sales was down, as well, about 12 percent lower than in April 2011.

Declining foreclosures: The number of foreclosures was down 62 percent from a year earlier, to approximately 1,600.

More new-home sales: After years of stagnation, closed deals on new-construction homes were up 43 percent, to about 900, which is still far from the boom years.

Michael Orr

"If prices continue to climb, more homeowners will be enticed to sell," said Mike Orr, real-estate analyst with ASU and publisher of the "Cromford Report," a daily analysis of metro Phoenix home sales. "Some homeowners might be surprised how much their values have gone up since last year."  Regular home sales, between a homeowner and a buyer who plans to live in the house, are up 57 percent from last year, but still less than half of all sales.

Metro Phoenix's supply of homes is so low that bidding wars have become the norm. Orr started a survey among real-estate agents to track how competitive homebuying is in the region.  So far, the most competitive purchase he has documented was a home sale with 76 bids in Chandler. Of the offers, at least 65 came from regular buyers.

Regular buyers have been scarce in the Phoenix-area market in recent years, with few new residents buying and existing homeowners unable to sell their houses to move up.

But the winning buyer of the Chandler home was one of 11 investors. These buyers, who offer cash up front without contingencies, often still win the house.

"Regular buyers definitely outnumber investors trying to purchase houses now," Orr said. "But investors continue to win out in bidding wars because they can pay cash and take the home off the lender's hands without an appraisal."

The number of homes for sale in metro Phoenix is so low because the slowdown in foreclosures has left fewer lender-owned and short-sale houses on the market. Those types of sales have been among the most common for the past three years.

Many regular homebuyers and investors had been waiting for home prices to hit bottom before trying to buy. After several years of fluctuations, most market-watchers now agree Phoenix home prices hit that bottom in August.

Potential buyers seeing the rapid run-up in home prices during the past few months are now rushing to try to buy, Orr said.

But with supply at a low and little sign of a coming jump in new foreclosures, it's not clear there will be enough homes for sale to meet demand.

The only way supply can truly increase and slow the bidding frenzy for houses is if regular homeowners can start to sell again for a profit, even a small one. When they can, more will put their houses up for sale.

Rob Shaw, a Phoenix-area real-estate agent with HomeSmart, said that there are regular homeowners who can now sell for a profit but that appraisals aren't keeping up with rising values. That means traditional buyers, who must get an appraisal to secure a mortgage, may not be able to close the deal.  "We are encouraging sellers to consider marketing their homes to cash-only buyers to avoid having to get an appraisal," he said.

Metro Phoenix's median home price is back to the mid-2002 level, which means the values still are far from rebounding to boom prices.  but many of the area's current homeowners who bought in 2002 or earlier may be able to sell for a profit now.

The big question for the market is where buyers and sellers will find a balance. As prices rise, more owners will sell. But if prices rise too much, buyers will lose interest or no longer be able to bid.
"Phoenix is a volatile housing market," Orr said. "I always tell people we are the dot-com of real estate. When the market is doing well, people jump in, and when it goes bad, panic sets in fast."

The Unspoken Appraisal Problem

Courtesy of Keeping Current Matters/The KCM Blog
by Dean Hartman on May 31, 2012

As lenders, buyers, sellers, and real estate agents, the big unknown after a deal is put together is the appraisal. A proper pre-approval can smooth out the other components of the mortgage approval (income, assets, and credit- even title issues can be uncovered before the contracts are signed), so the only “unknown” is the appraisal.

As lenders, buyers, sellers, and real estate agents, the big unknown after a deal is put together is the appraisal. A proper pre-approval can smooth out the other components of the mortgage approval (income, assets, and credit- even title issues can be uncovered before the contracts are signed), so the only “unknown” is the appraisal.

The spoken challenges:

• An appraised value has always been loosely defined as “what a reasonable buyer would pay to a reasonable seller”, meaning that both sides were of sound mind and under no external pressure.  But in today’s environment of foreclosures and short sales, the whole concept of “reasonable” is muddled.  So, appraisers are challenged, through no fault of their own, in determining a home’s value because they can’t ignore the data and the distressed transactions, but should they be considered “reasonable”?
• Add to it the prevalence of seller’s concessions today (wherein the seller agrees to pay the buyer’s closing costs) and the appraiser is faced with a further dilemma>  If the seller is willing to pay $10,000 of the buyer’s closing costs, doesn’t that mean that they believe the “reasonable” value of their home is less than the actual price? Many will argue that the seller’s merely looking to make their home more financially attractive to solicit more interest in it, creating more competition, and thereby securing the highest price for themselves.

So, appraisers are in a difficult position, for sure. But, there is a problem with appraisals today that goes beyond a property’s worth. It’s the unspoken challenge.

With the advent of post real estate bubble regulations (predominantly HVCC - Home Valuation Code of Conduct - in terms of appraisals), most lenders order their appraisals through a third-party company. This company gives the appearance of independence- a company immune to the pressures of a loan officer or a real estate agent who might push a value too high. But, in fact, many of these Appraisal Management Companies (AMCs) are owned or controlled by the lenders themselves.  And these AMCs don’t actually do the appraising. In many cases, they subcontract the work out to actual appraisers, but only pay them a fraction of the monies collected.

So, appraisers, besides being under tremendous scrutiny, today have a tougher job and they are asked to work for less money. Is it surprising that they would be conservative in their evaluations? The bubble was not the appraisers fault. There were multiple reasonable buyers willing to pay the prices in 2006, and the values reported were valid at the time. The appraisers didn’t create outrageous underwriting guidelines that allowed too many unqualified buyers to bid on those homes.

Let’s get rid of HVCC and let the appraisers do their job; otherwise, home appraisers will not be showing appreciation in any real estate market.

In Hard-Hit Cities Like Phoenix, the Home Market Rises

Source:  The Globe and Mail - The Globe lets you experience Canada's deepest coverage of national, international, business, and lifestyle news where you want, when you want.
Last updated Sunday, May. 27, 2012 10:42PM EDT


The Phoenix real estate market is suddenly experiencing something it hasn’t seen in years: Bidding wars.

Phoenix used to represent just about the worst of the U.S. housing market, with suburbs full of empty homes and foreclosures running so high that investors gathered like vultures at the county courthouse to snap up distressed properties.

But like its namesake, Phoenix’s housing market is rising. Foreclosures have dropped 20 per cent in the past year and the median house price has climbed about 25 per cent, making the city one of the hottest real estate markets in the U.S. But perhaps the most telling sign of a recovery is the return of heated bidding that has been a long time coming for agents like Maureen Porter.

“A good house in a good neighbourhood will go on the market for two days and they’ll already have five or 10 offers,” Ms. Porter said. “When I started my business [four years ago] there were around 56,000 homes for sale in Maricopa County [which includes Phoenix]. Now there’s about 12,000 homes for sale.”

Ms. Porter said she recently took two clients from Vancouver to look at a 70-lot housing development in Goodyear, a community outside Phoenix.

“It was all dirt, there were maybe two homes built,” Ms. Porter recalled. “We walked into the presentation centre and everything but two lots were sold out.”

The housing market is showing signs of life across the U.S., with existing home sales and the median price up about 10 per cent year-over-year, hitting levels not seen since the summer of 2010. Sales and prices have been rising steadily for months, proof that the long-suffering real estate sector may have finally turned the corner. Buyers are returning thanks to an improved employment picture, record-low mortgage rates and near-bottom prices.

Housing is a critical component to the U.S. economy and improvements in the sector usually lead to a boost in consumer confidence, employment and spending. All of which is good news for the Canadian economy, as well.

The real impact of the recovery can be seen in places like Phoenix, Miami and southern California, which were among the hardest hit during the recession. The supply of homes for sale has dropped in all three locations as banks move quickly to unload troubled properties, often through “short sales” where mortgage holders get permission from lenders to sell their property for less than the amount owed. Banks often prefer short sales to foreclosures because they are a faster way to deal with borrowers.

In Miami, the median price is up 15 per cent from a year ago and the occupancy rates in downtown condominiums is 94 per cent. Southern California has a four-month supply of homes for sale, roughly two months less than what is considered a healthy market, and foreclosure sales have reached a four-year low.

Phoenix offers some of the most dramatic evidence of the turnaround. This is a city where house prices fell by up to 50 per cent during the recession and people walked away from their homes in droves, leaving vast stretches of empty neighbourhoods. Today the number of homes listed for sale has dropped by 64 per cent in the last year and foreclosures have fallen by 20 per cent. The market has tightened up so much that prices are jumping 5 per cent each month and buyers are competing fiercely for just about anything that’s available. 

“We’ve now got a fully fledged buying frenzy going on while people try to buy something before they miss the boat,” said Michael Orr, director of the Center for Real Estate Theory and Practice at Arizona State University.

Last week there were roughly 12,000 homes listed for sale across the city. That compared to more than 50,000 around the same time last year.

Despite the current boom, the market still has a long way to go. The median price is now about $135,000 (U.S.). That’s still well below the peak in 2006, when it reached $265,000, and it puts prices at about the same level as in 2000. And although the number of existing homes sold in April across the country rose to an annualized rate of 4.6 million, economists say a healthy U.S. housing market would see almost 6 million sales of existing homes a year.

Much of the activity is also being driven by outsiders, many from Canada, eager to snap up investments. In Phoenix, the number of “investor flips,” people who buy houses and then re-sell them quickly for a profit, has increased 31 per cent year-over-year, according to Mr. Orr.

But with prices rising quickly, good deals are harder to find. Three years ago, dozens of investors lined the steps of the courthouse in downtown Phoenix to bid on foreclosed properties, many going for well below $100,000. This week only a handful of bidders showed up for the auction and just four houses sold.

“The days of getting a property under $125,000 are slim to nil,” said Diane Olson, a real estate agent who caters largely to Canadians.

The question for many agents like Justin Lombard is whether this is a blip or a real recovery. He is cautiously optimistic.

“We’ve seen such steady progress in the way of inventory absorption that I’d be really surprised if we took a big backward step,” he said. “We hit bottom a long time ago. It’s just that a lot of people didn’t realize it because our bottom was so bad.”