Saturday, July 9, 2016

Blackstone Tenants Get a Shot at Buying Their Rental Houses

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Dear Subscribers, If you are planning to take some profits off the table or can no longer afford hanging on to your rental propertiy(ies), this could be the right opportunity to sell it.

Home values have substantially gone up in Arizona since it bottomed out in 2010. In some areas we have surpassed the values at the height of the market in 2005!!!

There are approximately over 300,000 rental properties in Phoenix Metropolitan Area. Majority of them are held by large Equity Funds. They have now quietly started taking some profits off the table by selling to our #1 buyers, the tenants. This trend will accelerate next year and as fierce competition amongst these equity funds heat up, they are going to flood the market with thousands of unsold inventory driving prices back down again.

If you are planning to sell your property, you should price it according to the market and offer the right terms to avoid getting caught at the exit. We have years of experience selling rental properties with or without tenants in place and short sale.

Blackstone Tenants Get a Shot at Buying Their Rental Houses
BY: Heather Perlberg
July 5, 2016 

Firm’s Invitation Homes unit is selling in Arizona, California

Single-family landlords have been losing renters to home buying

Melissa Suniga and her mother had been renting a three-bedroom Phoenix house for less than a year when their landlord, Blackstone Group LP’s Invitation Homes, gave them the chance to buy it.
Suniga, a 40-year-old childcare worker, used her security deposit and $2,000 she’d saved from her income-tax refund, along with a county grant and a credit from Invitation Homes that together provided her with $10,600 more for her down payment and closing costs. She expects to complete her purchase of the $150,000 house this week.
“When I started renting, I thought, ‘I wish I could buy this home,’” Suniga said in an interview.
U.S. landlords who built rental businesses by buying homes en masse are now consolidating and streamlining their operations, in part by selling for a profit properties that have soared in value or no longer fit their business models. Invitation Homes is the first of the large rental companies to give residents a shot at owning their houses, seeking to benefit from having its own pool of ready buyers who are constrained by a market starved for affordable homes.
Blackstone has amassed about 50,000 rental houses in the past four years. While Invitation Homes is still buying selectively, spending about $5 million a week, it expects to cull about 5 percent of its properties annually, Chief Executive Officer John Bartling said.

Staying Put

Selling rental homes to tenants is a way for investors to make more money than they would selling in bulk, and saves them the costs of renovating and carrying the properties until they sell on the open market. It’s also a way to help people stay put, keep their kids in the same schools and stabilize neighborhoods, according to Bartling.
“This is an important part of the maturation of the industry and for Invitation Homes as we grow over time,” he said in an interview.
About 25 percent of Invitation Homes renters who move out each year are leaving to become buyers, according to the company. That’s similar to what the industry’s other large firms are experiencing. Colony Starwood Homes has reported losing about 23 percent of departing tenants to homeownership, and American Homes 4 Rent has said its figure is about 30 percent.

American Homes 4 Rent, the No. 2 single-family landlord, with about 48,000 houses, didn’t respond to requests for comment about whether it would be selling homes to tenants. Colony Starwood, the third-largest, with about 31,100 homes, declined to comment, spokeswoman Caroline Luz said.

Homebuying Option

Selling homes to renters is “an evolution of the business model,” said Jade Rahmani, a Keefe Bruyette & Woods Inc. analyst. “The differentiating factor in this industry is they can sell to an owner-occupant as well as an investor.”
Renters may have better luck buying a home from their landlords than venturing into the open market. Inventory is tight, and home prices nationally are up 32 percent since the 2012 low -- and have risen even more in areas hit hard by the housing crash, with increases of greater than 50 percent in Phoenix and Miami from their troughs. And soaring rents are causing some tenants to view homeownership as more economical.
Invitation Homes started selling houses to renters in Phoenix and Sacramento, California, this year, with plans to expand the program, to be called “Resident First Look,” in all 14 of its markets across the U.S. in the next few months.
The company’s decision to sell a home is based on a variety of factors, including the concentration of properties it wants to have in individual markets, prices and whether it wants to reallocate funds in other parts of the country, Bartling said.

Rising Prices

Invitation Homes bought Suniga’s house for $83,000 in 2013, according to property records. Values in Phoenix have since risen about 25 percent, and rents in the area have climbed 15 percent in the same period.
Now, Suniga is buying the renovated place for $150,000 with a loan from the Blackstone-owned Finance of America Mortgage LLC. A bankruptcy from more than a decade ago, along with a past sale of a home for less than what was owed on it, had raised flags with other lenders Suniga talked to, even though she’s brought her credit score up to 660, she said.
While Invitation Homes said its renters-turned-homebuyers are free to use any lender they want, the company is working with a small number of mortgage providers that are more familiar with the new buying program, including Finance of America.

Similar Payment

Suniga’s monthly mortgage payment will be $920, about $65 less than her rent, she said. Her down payment wouldn’t have been large enough without the help of the Maricopa County, Arizona, homebuyer-assistance program, which required both her and her mother to take an eight-hour online course. She also received a $5,000 credit from Invitation Homes for closing costs and used her security deposit toward the down payment.
That kind of help might lead to questions from lawmakers and regulators in Washington, according to Isaac Boltansky, an analyst in Washington with Compass Point Research & Trading LLC.
“There’s inherent skepticism in D.C. regarding Wall Street’s motivations in the mortgage-finance market,” he said. “Novel forms of credit access are going to be scrutinized closely even though they purport to increase homeownership.”
Some housing advocates have pressed rental companies to allow renters the opportunity to buy their homes before properties are sold to investors.

‘Help Households’

“A first look for renters, as long as the renter can afford the home and purchases it on fair terms, could help households get on the road toward building equity and limit turnover in the neighborhood,” said Sarah Edelman, director of housing policy at the Center for American Progress in Washington. “It’s important, though, that they shop around for a mortgage.”
Smaller investors, such as Axonic Capital LLC, have been offering renters the chance to buy their homes for years.
“We definitely see it as one of the best ways to sell, because there’s no down time or rehab cost between tenants,” said Jonathan Shechtman, portfolio manager for residential strategies at the $2.7 billion investment firm.

More Flexibility

Like Invitation Homes, Axonic -- which owns fewer than 1,000 properties, all in Florida -- has more flexibility on timing when selling to existing residents, many of whom are getting low-down-payment loans insured by the Federal Housing Administration, Shechtman said.
Suniga, the Blackstone tenant, is planning to replace some carpeting and upgrade the kitchen cabinets once she officially owns the rental home she had thought was unattainable.
“I’m thankful for the opportunity,” she said. “It’ll be a shock until I know it’s mine.”

Sunday, March 13, 2016

Inventory For Sale is way too low, demand is way too high, Home prices are going higher and higher taking rents up with it.

Arizona Property Management & Investments
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BY: Payam Raouf
Designated Broker

Inventory For Sale is way too low, demand is way too high, Home prices are going higher and higher taking rents up with it.

Lately, we have been getting calls from a few equity funds that purchased several thousand homes in Phoenix Metro Area back in 2009 through 2012 asking us if we have buyers for them. We also see a good number of Canadian and Mid-Size investors that are putting their homes on the market for sale.  Some speculators who purchased homes in 2005 and 2006 at the height of the market are trying to do the same one way or another.  Builders are back at it again building up the inventory.
Market is moving at a fast pace as more tenants and first time home buyers are purchasing homes. Cali-vestors are back at it as they get more bang for their buck in Arizona. Not much flipping is going on. Margins are not simply there. 

There is a shortage of rental homes throughout the valley. Rents have gone up considerably and homes prices are going up in most areas. It looks like market is shooting back up. 

Multi-Family sale prices have skyrocketed. As they are a more affordable alternative to single family home rentals. We see a lot of flipping in this area as well as an influx of 1031 exchange money pouring in to this segment. 

Inventory of single family Homes for sale is low. We are hovering around 18500 active homes for sale on MLS. For a city the size of Phoenix Metro, normal is around 25000. This has made the condo prices go up substantially. We are at about 3500 units on MLS. That is a little bit above normal in comparison. So, even if the equity funds, Canadians, small/mid size investors and speculators dump some of their inventory this year it is not going to affect the sale prices. It will just help it to go higher because the shortage will continue. 
If you are interested in renting/managing buying or selling your property(ies),  please let me know

Arizona Property Management & Investments
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Thursday, December 10, 2015

Here’s what the housing and mortgage industry will look like in 2016

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Payam Raouf
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One insider's look at 2016
December 8, 2015

Lynn Effinger

Lynn Effinger is a veteran of more than three decades in the housing and mortgage servicing industries. He serves as president of Effinger Consulting and is the author of the inspiring memoir, Believe to Achieve – the Power of Perseverance.

As an interested observer and active participant within the housing and mortgage servicing industries for more than three decades, I have opined on many industry-related subjects over the years, and each year also present my own predictions for the coming year. Why not, since predictions are like opinions and noses… most everyone has one?

There are numerous reports and other predictions out there pointing to positive improvement for the housing sector in 2016, or that indicate there are signs that we will continue to experience a housing recovery next year (which has actually only been true in specific markets, i.e., the Bay Area, Manhattan, Southern California, Denver and Salt Lake City to name a few). My opinion is that although 2015 looked a lot like 2014, next year will not mirror them in this vital sector.

Before I list my predictions, it is important to note that everyone’s predictions are relative to the economy in general, and the housing sector in particular is subject to unforeseen domestic and global disasters, man-made and otherwise.

Therefore, since 2016 is shaping up to be a potentially chaotic, unstable and unprecedented year of upheaval around the world, and is perhaps the most important national election year of my lifetime, it is quite possible that my predictions will not come to pass after all.
That being said, the following are some of my housing and mortgage industry-related predictions for 2016:

1. Interest rates 
Interest rates will rise not only in December by at least one-quarter percentage point, but will continue to rise throughout the year for a total increase of more than 1%, due to actions of the Federal Reserve. Each uptick in mortgage rates will prevent many potential first-time buyers (and others) from qualifying for a loan. This will impact days on market of homes listed and will put pressure on listing prices to be reduced. If there are not enough first-time buyers entering the housing market there is less opportunity for existing homeowners to move up, which will also add days on market and impact pricing.
2. Luxury housing 
A continued drop in luxury home prices, as reported in HousingWire, will influence a similar drop in home prices of nearly all price categories, which, combined with higher interest rates as stated above, will have a negative impact on the health of the housing sector.
3. Mortgage credit 
Credit will remain tight in 2016, despite efforts by Fannie Mae and Freddie Mac to make more 3% down payment loans. This means that rental properties will continue to be in high demand causing ever increasing rents, which, like many mortgages today represent 40% – 50% of the income of renters and homeowners, which, with stagnant wages is unsustainable. This will negatively impact consumer confidence.
4. Consumer confidence 
Consumer confidence in general will be negatively impacted because of the continued lackluster growth of our domestic economy. Until there is a dramatic change in the direction of this country with respect to deregulation of businesses (especially small businesses) and the creation of meaningful full-time jobs, the housing sector will not gain the strength it has had in the past.
5. Delinquent housing inventory 
Inventories of delinquent and foreclosed loans have not disappeared and will only grow, further negatively impacting home prices in many markets, as reported by Ben Lane in HousingWire. In his article, Lane said, “Based on the number of past distressed loan sales and the amount of non-performing loan sales and re-performing loans that still exist on the books of Fannie, Freddie, HUD and commercial banks, even if the number of NPL and RPL sales stays at its current post-crisis high, there are still four years’ worth of potential NPL sales volume and six years worth of RPL sales volume left to sort out.”
And that is assuming, as Lane noted, that no more additional loans become delinquent, which is unlikely in the extreme.
With dramatic improvement in the quality of leadership in Washington and elsewhere, perhaps a more positive outlook is possible, but I can only call ‘em as I see ‘em.

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Sunday, September 27, 2015

How is the Real Estate Market in Arizona?

Arizona Property Management & Investments
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Payam Raouf
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Where are we going from here?

On the one hand I wish the phones stopped ringing, on the other this is best market we have had since the crash of real estate in 2006/2007.  In some areas prices have surpassed the heights of 2004/2005, in others they are getting very close to it. 

Unemployment is at its lowest level in Phoenix Metro since 2006. Good luck finding a handyman, a skilled construction worker or even a skilled office manager at a reasonable hourly rate! In June 2015 unemployment rate dropped to 5% less than the 5.3% national average.  There have been 61,400 new hires in Maricopa and Pinal counties since February 2014, according to the Arizona Department of Administration ---  a pace higher than the average number of new jobs created during February over the last 10 years.

Mortgage companies are back logged 45 to 60 days. Days you put an offer with closed of escrow within 30 days are over! Rates are low, down payment assistance programs are back, financial institutions have eased up, first time home buyers and renters are swarming the market and multiple offers jamming up the fax machines. 

Title companies, I call them the “Moo Cow Corrals” offer no incentives to Realtors to get their business, let alone offering their clients a glass of water going to sign their docs. Buyers, Seller check your HUDs twice before you sign on the dotted line. They are making a ton of mistakes.  
Who is buying who is moving to Phoenix? 

Renters who lost their homes are on the top of the chart, second to that are the first time home buyers and thirdly savvy investor, Californians and opportunists.

From 2008-2011forclosures and short sales had become the norms of the market. As the result, too many home owners lost their homes and entered the rental market. 7 out of 10 of our tenants when they give their notice to vacate, “BOUGHT A HOUSE” is their answer to why they are moving out.  
With rent increasing 15 to 30 percent in most areas in the past 18 months and how affordable homes

are still out here in Phoenix Metro, rates being so low, banks competing and sellers contributing up to 3% towards buyers closing costs, it will be foolish not to buy a home. We see a lot of first time home buyers entering the market. For just a little more than their deposits and first months rents combined, they are buying homes and their payments are equal or a bit higher than the rent. 

Savvy investors sold their investment properties in California where prices have sky rocketed and it feels like we are back in the 2003 area where speculators were sleeping behind the new home construction offices to enter into a drawing to buy a home. Owning rental properties in Phoenix Metro pencils out way better than in larger metropolitan areas, especially in California. I heard from one investor in California that the exchange boards at her 1031 exchange office are filled up with investors looking to complete their exchanges and no properties to exchange it with in California that makes any sense. A lot of them are coming to Arizona from buying one to multiple single family homes to mid and large size multiplexes. I know first hands because we are getting those calls.
Younger Californians especially from Silicon Valley area are moving to Scottsdale. They tell me, you cannot get a decent condo for $700,000 up there. A 3000 square feet home with pool on a large size lot in a decent area costs a fortune. Most tech guys work from home anyway. So we get a lot of those calls too. Quite a few that have already moved down here seem to be very happy with their decisions specially the ones with children.

We also see a lot of big corporations in the east coast transferring their head honchos to Phoenix Metro looking to expand their operation. Cooperate relocation has picked up by at least 6% in the last 12 months and a few more applications are under review as we speak. 

Recently there have had quite a few tenants with good credits from Los Angeles and Orange County moving to Arizona in search of new opportunities.  Soon they will enter the home buying market as well. 

Who are the sellers? 

A)     Owners that have been under water with their mortgages for the last ten years finding it now make sense to sell.
B)      Canadians investors: Most of the Canadians who bought investment properties in Phoenix Metro bought in when Canadian Dollar and US Dollar were at par in 2011. Now one US Dollar equals to 1.33 Canadian Dollar so they enjoy the property value appreciation plus an additional 33%.
C)      Owners who are up sizing/downsizing. Regular sellers.
D)     Flippers. There are still some opportunities not as much in the lower end homes out there to fix and flip. Higher price homes make more sense as long as the economy is doing well. A fine line to walk in that area. Be careful.  
E)     Very little foreclosure.

We specialize in buying and selling investment opportunities from a single family home to multi million dollar multiplexes. Our team at Global Real Estate Investments consists of seasoned Realtors that have got the pulse of the market and can lead you to the right opportunities. Our property management Company, Arizona Property Management & Investments is an award winning property Management Company in Phoenix Metro ready to get your vacancies filled and get those dollars into your back account reducing your liabilities. Our Maintenance Company, Arizona Handyman and Remolding Services LLC makes sure your investment is maintained well and up to date at a reasonable cost reducing your overhead  adding to your bottom line.

Please call me directly at 888-777-6664 ext  114 ( please make sure you tell the receptionist  you are an investor, they screen all my calls) or email me at
By looking at the articles below, you will see that we have been preaching those areas to our investors for the past two years.  We know what, where and how to help you make your next investment move to maximize your long and short term gains. Don’t make this decision on your own even if you live in Phoenix yourself. This is a free consultation.

Thank you.
Payam H. Raouf
(888) 777 6664 ext 114

Arizona Property Management & Investments
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8 Phoenix-area cities hit top 50 healthiest US housing markets


Eight Arizona cities are rising in the ranks of healthiest housing markets in the U.S., according to a WalletHub study. They all landed in the top 50 healthiest U.S. housing markets for comparably sized cities based on population.
Gilbert, a midsize city, ranked the highest of the Arizona cities at No. 11. Chandler was next at No. 22 and Tempe ranked No. 28 in the midsize cities. Among large U.S. cities Mesa ranked No. 40 and Phoenix was No. 46.

The website consolidated rankings in 14 criteria, including pricing, percent of homes still under water, days on market, affordability, and other measures to determine the healthiest markets in the U.S.
Texas topped the healthiest markets list with No. 1 positions for Austin (large), Plano (midsize) and Frisco (small).
Other Western markets ranked high as well. Seattle (No. 2, large) and Denver (No. 3, large) ranked higher than all Arizona cities. Salt Lake City (No. 21, midsize), trailed Gilbert, but was just one ranking ahead of Chandler.
Rank of Arizona cities among healthiest U.S. residential real estate markets
  • 11 Midsize - Gilbert
  • 22 Midsize - Chandler
  • 28 Midsize - Tempe
  • 35 Midsize - Peoria
  • 36 Midsize - Scottsdale
  • 40 Large - Mesa
  • 46 Large - Phoenix
  • 49 Large - Tucson
  • 55 Midsize - Glendale
  • 88 Small - Surprise
  • 123 Small - Yuma
Source: WalletHub
Eric covers economic development, banking and finance, infrastructure, transportation and utilities.

Saturday, February 14, 2015

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 Foreclosures hit a 20-month high both in Phoenix and Arizona as a whole in January.

Senior Reporter- Phoenix Business Journal
Foreclosures hit a 20-month high both in Phoenix and Arizona as a whole in January.
Foreclosures jumped more than 100 percent in January compared to December both in Phoenix and statewide, according to new numbers today from RealtyTrac.
Foreclosure activity both locally and statewide are at 20-month highs as banks step up their repossessions, auctions and filing of default notices.
Phoenix saw a 45 percent increase in January foreclosures compared a year earlier, according to the real estate research firm.
Foreclosure auctions in Arizona were up 37 percent in January, also a 20-month high. Bank repossessions are up 61 percent, according to RealtyTrac.
Those same repossessions are up 58 percent in Phoenix.
There were more than 2,300 homes and condos in the foreclosure process last month. That is up 104 percent from December.
Statewide that increase is 109 percent from January 2014.
The jump in foreclosures comes as the Phoenix housing market tries to shake off a slow 2014 where low demand for homes and tough mortgage qualifications stymied sales.
Foreclosure activity was also up in states such as Ohio, New Jersey, Maryland and California and metropolitan areas such as St. Louis, Los Angeles and San Francisco.
The worst cities for foreclosures include Atlantic City, Las Vegas and eight Florida markets including Tampa, Orlando, Miami and Jacksonville.
"The year-over-year increase in REOs in January was the first annual increase nationwide following 25 consecutive months of declines, getting the foreclosure spring cleaning we anticipated in our last foreclosure report off to a quick start in 2015," said Daren Blomquist, vice president at RealtyTrac. "Meanwhile, the number of future foreclosure auctions scheduled in January continued to increase in many states, foreshadowing more foreclosure spring cleaning to come in the next several months in those states."
Mike Sunnucks writes about residential and commercial real estate, government, law, sports business and workplace issues.

Housing ended 2014 on slow note; Phoenix home starts down 15 percent

Senior Reporter- Phoenix Business Journal
Housing starts ended 2014 down 15 percent across Phoenix while new home sales were off 10 percent and existing sales fell 8 percent as the local residential market slogs into 2015.
RL Brown Housing Reports says 2014 fell short in terms of volume. The regional housing market is challenged by demand stunted by slow population growth, tougher mortgage standards and plenty of borrowers preferring to be or stuck in rentals because of poor credit and past foreclosures.
The average price of a new home last year in the Valley was $351,196, up 1.5 percent, according to RL Brown.
The average price of an existing home was $247,825, up 1 percent. But there are plenty of real estate analysts and agents who note the overall price gains are spurred more by some high-end home sales than price gains across segments.
Another local real estate expert, Jim Belfiore at Belfiore Real Estate Consulting, also expects some housing challenges to persist in at least the first half of this year. Belfiore notes the slip in demand challenges and can create oversupply issues for home builders.
Belfiore does note home builders are seeing some indications that demand could improve this year.
That could be especially true with new subdivisions geared toward seniors in so-called "active adult communities."

Rents dip in Phoenix even as more units hit market

Senior Reporter- Phoenix Business Journal
Dec 31, 2014, 12:12pm MST

Rents dip in Phoenix even as more units hit market.
Apartment rents have dropped in the Phoenix metro area even as more new units are entering the market. Still, the RealtyTrac real estate research firm said it's a better deal to buy a house under current conditions than it is to rent an apartment.
That's if a borrower can qualify for a mortgage.
Three-bedroom apartments rented on average for $1,338 per month in Phoenix during this fiscal year, according to RealtyTrac and the U.S. Department of Housing and Urban Development. That is down 5 percent from $1,410 last year.
Rents also declined in Dallas, Las Vegas, Houston, Tucson and Los Angeles. Texas and Southern California — like Phoenix — have seen plenty of new apartment developments. There are more units in the construction pipeline and planning stages and numerous sales this year of older complexes.
Conversely, apartment rental prices increased in markets such as Chicago, Denver and Seattle.
RealtyTrac estimates it takes 33 percent of the median income in Phoenix to rent a three-bedroom apartment compared to 27 percent to afford the Valley's median home price ($188,040). That's after all of the tax advantages are factor into the mix. Still, many borrowers cannot qualify for home loans because of poor credit, previous foreclosures and tighter lending standards.
Median home prices increased 4 percent in Phoenix this year, according to the real estate data company. That is not as strong as home value improvements in California, Texas and Florida.

Phoenix homes among most overvalued in the country

Dec 29, 2014, 6:05am MST Updated: Dec 29, 2014, 7:27am MST

Fitch Ratings says Phoenix-area homes are some of the most overvalued in the country.

Digital Producer- Phoenix Business Journal
If you've thought home prices in Phoenix seem a bit high, you're not alone.
In a new report, bond-rating agency Fitch Ratings says Phoenix-area homes are some of the most overvalued in the country, reports The Arizona Republic. The fifth most overvalued, in fact -- more than pricey California markets Los Angeles and San Francisco.
Metro Phoenix homes are roughly 16 percent overvalued, according to Fitch. The agency pegs Arizona as among the six priciest states.
Statewide, Arizona home prices are 10 to 15 percent overvalued, according to Fitch. That puts it in the same vein as California, Hawaii, Idaho, Nevada and Texas.
Phoenix housing was undervalued in 2011, according to the rating agency. The market was sustainably valued in 2012 and 10 to 15 percent overvalued in 2013.
Besides Phoenix, the rest of Fitch's top 10 overvalued cities are in California, Texas or Florida, with hipster hub Austin ranked at the top. Fitch estimates homes in the Texas capital are 20 percent overvalued, followed by energy boomtown Houston, whose homes are overvalued by 19 percent, according to Fitch.

The world may not be flat, but Phoenix's housing market is

Dec 16, 2014, 1:53pm MST Updated: Dec 16, 2014, 2:07pm MST
The Phoenix housing market will end the year on a flat note.

Digital Producer- Phoenix Business Journal
This year will go down as a generally flat one for the greater Phoenix housing market.
That's according to the latest report from Arizona State University real-estate guru Michael Orr, who noted that demand remains lower than a year ago.
Sales of single-family homes fell 5 percent from October 2013 to October 2014, with activity among first-time home buyers particularly low.
See Also
The report cites the usual culprits of potential buyers carrying tarnished credit histories from the recession and the fact that 20-somethings continue to forgo home purchases.
"We've seen very little change in the greater Phoenix housing market for the last year, and stability is the order of the day," said Orr.
Coincidentally, these are the same reasons the rental market is strong, according to the report.
Rents have risen 3.7 percent during the past year and likely will continue to climb next year.
Despite the challenges of the market during the past year, the median home price still rose 4 percent from October 2013 to October 2014, rising from $200,000 to $208,000.
Also, Orr noted the market is seeing a small bump in investor interest and new-home sales.
The percentage of residential properties bought by investors hit 15.5 percent, the highest level since May, but still well below last year's levels, according to Orr's report.
"Investors and out-of-state buyers are showing a small recovery in buying interest, but to get our market back to what we would consider normal will still require a major increase in demand from local first-time home buyers," Orr said.
New homes are faring better of late, with their share of sales up to 14 percent. That's the same level as it was in October 2013.

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Saturday, January 10, 2015

The road to American serfdom via the housing market: The trend towards renter households will continue deep into 2015.

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By: DrHousingBubble

If you bought or rented in 2014 a larger portion of your income went to housing.  Rents and housing values are quickly outpacing any pathetic gains to be had with wages.  With the stock market at a peak, talking heads are surprised when the public is still largely negative on the economy.  Can it be that many younger adults are living at home or wages are stagnant?  It can also be that our housing market is still largely operated as some feudal operation.  Many lucrative deals were done with big banks and generous offers circumventing accounting rules.  This works because many perceive they are temporarily embarrassed Trumps, only one flip away from being a millionaire.  Why punish financial crimes when you will likely need those laws to protect your gains once you join the club?  The radio talk shows are all trying to convince people to over leverage and buy a home because you know, this time is the last time ever to buy.  Yet home sales are pathetic because people don’t have the wages to support current prices.  So sales drop and many sellers pull properties off the market.  You want to play, you have to pay today.  Rents are also rising and this is where a large portion of household growth has occurred.  2015 will continue to see housing consume a large portion of income and will lead many into a new modern day serfdom.

The gain of 7 million rental households
Over the last decade we have added 7 million renting households.  Is this because of population growth?  No.  This trend was driven because of the boom and bust in the housing market.  Investors crowded out regular home buyers in buying single family homes and now, we have millions of new renters out in the market.  Many of these people are folks who lost their homes via foreclosure.
Learn About Credit Card Balances & Credit.
Take a look at the obvious jump in renters:
For better or worse, homeownership is a path to building equity.  It is a forced saving account for many.  Most Americans don’t even benefit from the stock market peaking because nearly half of the country doesn’t even own stocks.  And many own only a small amount.  Most Americans derive their net worth from their primary residence.  With fewer buying and more renting, I doubt that on a full scale people are suddenly buying stocks for the long-term.  But it is also the case that many are simply renting because that is all they can afford.  Many young Americans have so much debt that this is all they can pay.  Think of places like San Francisco where jobs pay well but rents are simply out of this world and home prices are nutty.
Rents more stable versus wild housing prices
Thanks to low rates, generous tax structures, and the American Dream marketing machine home values are operating in a casino like environment.  This wasn’t the case in previous generation but take a look at fluctuations in rents versus home prices:
rents and home prices
A crazy year for rents is when rents go up over 4 percent year-over-year.  For home values we routinely had year-over-year gains of 25 percent in the last 20 years (including the latest boom in 2013).  Rents are driven by net income of local families.  No funny leverage here.  But with buying homes, you have investors chasing yields, or loans that allow tiny down payments for buyers but then tack on a massive 30 year mortgage with a monthly nut that seems reasonable but only because of a low interest rate.  Some of these people have no retirement account yet take on a $600,000 or $800,000 mortgage without batting an eye.  So what we find is this psychological shift where some that want to buy are convinced that they need to start at the bottom of the ladder and pay an enormous price tag just to get in.  To move out of serfdom, you have to embrace the cult of Mega Debt.
Young adults more likely to stay close to home – and rent
Young adults are facing the biggest impact of the housing crunch.  Many are living at home because they can’t even afford current rents.  Those that do venture out, will likely rent as their first step.  A recent survey found that many young adults are planning on staying local.  Say you live with your baby boomer parents in Pasadena or San Francisco.  You want to buy like they did but good luck.  So many have their network within said community and will likely rent (or live with mom and dad deep into their 30s and 40s):
rentals young adults
I found this data interesting.  People are simply moving less from their home area.  So this will create more demand for rentals in these markets.  In California, we have 2.3 million adults living at home.  Pent up demand?  Unlikely.  The main reason they are at home is because of financial constraints.  These are people that can’t even afford a rental.  I’m sure this trend is occurring in other higher priced metro areas as well.
Rental income soaring for investors
Rental income has soared since the bust happened.  The biggest winners?  Those who bought properties to become the new feudal landlords.  You can see by the below chart that there was a larger concerted effort to consolidate rental income beyond the mom and pop buyers of former years:
rental income
Serfdom is also occurring to many households buying.  They are leveraging every penny into their mortgage payment.  Think you own your place?  Try missing a few payments and become part of the 7 million completed foreclosures since the crisis hit.  2014 simply saw more net income going into housing.  Is this good?  Not really since housing is a dud for the economy unless we have new construction being built but that is not happening on a large scale.  2015 will likely see this continuation of serfdom via renting or buying but at least you might save a few bucks with lower oil!  The road to serfdom apparently runs through housing.

Flip or Hold: Best Real Estate Moves for 2015

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Flip or Hold: Best Real Estate Moves for 2015

Whether it makes sense to flip or hold property depends entirely on your region.

Closeup of a man calculating payments for a home.
There is plenty of positive news for real estate investors to look forward to in 2015.

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Wild fluctuations in the nation’s real estate cycle have taken investors on a roller coaster ride since the early part of this century. From the first decade, marked by overheated home prices in many of the nation’s most popular metropolitan areas, to the post-Great Recession era sending home values into a free fall, investors have had to adjust and adapt their investment strategies to market conditions.

So, going forward, which are the best strategies to pursue for real estate investors next year?
The big picture for 2015. Looking at the nation’s housing and economic indicators, there is plenty of positive news to justify continued investor optimism in 2015. Home sales – both existing and new – are projected to increase next year, which is welcome news for fix-and-flip investors.

At the 2014 Realtors Conference & Expo, Lawrence Yun, chief economist for the National Association of Realtors, or NAR, predicted a rebound for existing home sales for the next two years, and he projects the national median existing-home price will rise at a moderate 4 percent in each of those years. On the new home front, David Crowe, chief economist for the National Association of Home Builders, forecasted in an Oct. 31, 2014 National Association of Home Builders webinar that multi-family housing starts were projected to increase 15 percent in the rest of 2014 and hold steady in 2015.

“Multi-family housing starts have rebounded back to normal since the downturn, mostly due to the strong demand for renting,” says NAR’s Yun, who also notes that renter households have increased by 4 million since 2010, while homeowner households have decreased by 1 million.
Two major concerns remain: tight lending standards, which continue to keep people who could otherwise afford to buy a home from qualifying for a loan to finance the purchase, and interest rates, which are expected to hit at least 5 percent by year-end.

Looking at the numbers. Daren Blomquist, vice president at RealtyTrac, says he believes 2015 is going to be a better year for buy-and-hold investors than for flippers – with the caveat that real estate values vary from area to area and property to property, so investment strategies will have to adjust accordingly.

According to RealtyTrac’s numbers, the volume of properties being flipped declined dramatically, down from their most recent peak of 8.8 percent of all single-family home sales in the second quarter of 2012, to 4 percent of all home sales in the third quarter of this year.
“As home-price appreciation slowed down, the flippers have become less active in this market as well,” Blomquist explains. “The interesting thing is that the volume of flipping is going down, but the average profit on a flip is staying very strong. The gross profit has stayed strong for the past three years in the 30 percent range.”

For buy-and-hold investors, rental properties did well in 2014, although gross rental return was down slightly in the 586 counties surveyed by RealtyTrac, compared to 2013.

“This year was not as good for buying rentals as last year. Last year, we had a 10 percent return because home prices went up, even though rents went up. Returns have slipped a bit because the cost of acquisition went up,” he says.

Still, Blomquist says he believes it is a good time to buy rental properties, because the dynamics of this market are right.

“We will see it flatten out because home prices are starting to flatten out as well. That will allow rents to catch up with home prices, which is good for buy-and-hold investors, but not as good for the flipper,” Blomquist says.

The local perspective. To best-selling real estate author, attorney and longtime investor William Bronchick, 2015 is going to be a good year in the Denver market for owning rental properties, but not as good for flippers.

“It’s great market for rentals, because people still can’t get loans and there’s so many renters. The lending market is tight, so there are more renters, so higher rental rates and lower vacancies make for a great rental market,” Bronchick says. “On other hand, inventory is low, so if you can get your hands on a good motivated property, then you’re good for a flip.”

Working in North Carolina and South Carolina, investor and trainer Larry Goins, says current market conditions in these states are good for both flippers and rental property owners.

“There are deals to be had, but you have to work harder to get them,” Goins says. “I like to buy lower-priced houses and rent them or do lease options or seller financing.”

Specializing in the Atlanta market for decades, Andy Heller, a real estate investor and trainer on these topics, says that since the market crash, a buy-and-hold strategy has made more sense, because investors could buy property very inexpensively.

“Most of the country has settled into a more normal appreciation especially in the last six months or so,” Heller says. “Allowing for the fact that we’re in a time of normal appreciation, what strategy is the best? Both. We don’t have an overheated market and we don’t have a collapsing market.”
In the Greater Phoenix area, supply and demand economics will dictate the right investment strategy in 2015.

“The Greater Phoenix market has been in low supply and low demand for 15 months now,” says Alan Langston, executive director of the Arizona Real Estate Investors Association or AZREIA. “We’re not sure that’s going to change anytime soon. Our market’s been stagnant for a long time, but that doesn’t mean real estate investing has been bad. It’s been different.”

Langston believes investors will continue to be successful, they are whether rehabbing and flipping houses, or holding onto rentals - but they will have to approach the business differently than they used to.

“If you know what you’re doing as a real estate investor, you’re going to adjust what you need to adjust so you do well on your property,” Langston says. “If you’re an informed investor, you’re going to be fine,” he says.

Investor activity varies by investor, region and property types., the largest online real estate marketplace, recently released survey data collected from investors bidding on properties across the country, which confirmed that buying property to hold and rent is currently favored over flipping nationwide. However, investor intent varies considerably between online and offline investors, regions, and property prices.

The study showed that purchasing property to rent is more prevalent in the Midwest and South, whereas there appears to be a higher propensity for flipping in the Northeast. The flip versus rent split is nearly even in the West, with a very slight preference toward renting.

“Real estate investors appear more likely to flip a property in those regions where home values are higher,” says Executive Vice President Rick Sharga. “Higher prices can translate to a faster and potentially more significant short-term return on investment. The hold-and-rent strategy seems most popular in markets where home prices are lower, allowing investors to charge a more competitive monthly rental rate and still produce reasonable returns over an extended period of time."