Urban Life

PHOENIX REAL ESTATE PREDICTIONS FOR 2009

We posted an update to this article on March 16, 2009. Click on this link to see the updated information

As 2008 comes to a close we'd like to offer our humble predictions for 2009. If we had a gleaming crystal ball of future events we could tell you what we are about to say is absolute... alas, we simply have our opinions.

Readers of our blog know we look at the affect of the foreclosure market on future price and sales trends. This factor was not one we used in years past, however, like a huge whale, it tips the scales of consideration with great importance these days.

For much of 2008 we saw trustee sales (what happens when a home is bought back or sold by the lender) in the 1200 to 1500 per week range. In the waning months of the year numbers began to fall suggesting the worst is over.  This is good news for future pricing yet the numbers are still quite high and suggests prices will continue to fall in the first two quarters of 2009. 

The good news is existing bank owned properties are selling well. According to ARMLS figures, over 4600 REO homes sold in November and December 2008. This figure is close to the number of new foreclosures entering the market during the same time period.  Early summer figures for the same relationship show nearly twice as many REO homes entering the market as those sold.  Thus, the patient seems to be bleeding a bit more slowly as we enter 2009 and probably still in a coma.

So, the 10 trillion dollar question is,"When will we see prices stabilize and the market start rebounding?" The graph below says a lot on that subject. Click on the picture to enlarge.)

The green line shows sales numbers for the past year. The numbers rose steadily until Fall and started waning a bit. This is a normal sales cycle with October through January numbers down from the Spring and Summer. 

Black shows the evil price plunge. As you can see, the free-fall has been holding its track and perhaps flattening a bit in the final months of 2008.

Red represents the number of days it takes to find a buyer for a home. Clearly, this number has fallen considerably. The good news is that DOM (days on market) is an indication of buyer confidence and the public perception of prices verses perceived value. Obviously, people are feeling a bit more confident about making a purchase and a sense of parity is being found on prices.

So, here we go... a drum roll please. The great and powerful OZ, chief prognosticator at the Urban Team predicts home prices will continued to fall at a slow rate for the 1st and 2nd quarter of 2009. We expect the fall to be minimal as demand rises in March, April, May, June and July. We believe much of the Greater Phoenix market will have found its bottom by Summer with the exception of higher priced homes were inventory levels are very high and the ability to find credit is lower. We do not expect prices to begin rising in 2009 with the exception of the under $200,000 market where demand is the highest. 

So boys and girls, hold on to your pants, tighten the belt and wait things out for a while. If you have money, early 2009 will be a great time to buy a home at a low price.

There you have it and we'll have fun reading this post at the end of 2009 to see just how accurate we were.

A most happy New Year to you and yours...

Gene Urban and Ron Urban
The Urban Team at Realty Executives
www.urbanteamaz.com

BANK OWNED HOMES DOMINATE THE 85004 SINGLE FAMILY HOME SALES

Homes buyers seem to be catching on to the real deals out there with bank owned homes. If you saw the news piece by Melissa Blasius, click here, you already know that bank owned homes comprise approximately 1/4 of the listings but account for about 50% of the sales. This statistic is even more pronounced in the 85004 zip code.

85004 is a downtown Phoenix zip code with a mix of trendy urban-style condos, historic neighborhoods and other areas not so noteworthy. Condo/Loft developments such as Tapestry, Summit at Copper Square, McKinley Condos and such have dominated much of the real estate conversation. However, there is a new player who is winning the sales game... banks.

This Fall, September to mid-December, seven of the eight single family homes to sell in 85004 were bank owned homes. That seems to be an amazingly high number until you dig a bit deeper. The bank owned homes are highly affordable. Of the current "for sale" inventory on ARMLS, half is bank owned and all of these homes fall into the lowest price range.

We've been saying for some time now that there are some sweet deals out there that will make a lot of home buyers merry... not a bad thing during the holidays. Add to the great prices are truly fantastic mortgage rates. Yeah... some good news during this holiday season. Maybe Santa will be bringing a well priced home into your life.

Gene Urban
Santa's Helper
The Urban Team at Realty Executives

REO AND BANK OWNED HOMES ARE GETTING EASIER TO BUY

Ron and I have noticed a shift in the mindset of banks trying to sell their foreclosed inventory.  This is good news for everyone, including the banks and buyers.

Just a few months ago it could take several days to weeks to get a response to an offer on a bank owned property. You’d have a willing and able buyer and the banks would simply not reply to the offer in a timely manner. It was frustrating to the buyer and made the agent look like an idiot. I know some of you are saying… the agents are idiots but that is another conversation.

Today, we are seeing the banks respond with blazing speed to our offers. One day answers are not uncommon. However, the process is a little different; verbal verses written replies are common. This, to a seasoned Realtor, is a bit of an adjustment.  We are trained to conduct all transactions in writing as oral agreements are not upheld by the courts in Arizona.

The first time we received an oral counter offer we replied, please put that in writing. We were met with an eerie silence followed by a "banks don't work that way." In fact, most banks conduct their initial counter offers and contract adjustments through conversation. This shift has quickened the process of arriving at a meeting of the minds. Thus far, the new approach has been effective and without problems.

Once the oral bartering is concluded and all parties reach agreement, the bank/seller pops out an addendum to the contract confirming the final deal and sends it to the buyer's agent for signatures. The document is returned for bank sign-offs and you have a fully executed contract. The time period for getting bank/seller signatures can be a week or so.

We've found that Title/Escrow companies, as well as lenders understand this process and will take the the contract and seller addendum with only the buyer's signatures to get their part of the transaction started.

A couple of other notes of interest:

• Like most sellers, the banks are typically not dropping their shorts (price wise) during the first month of listing. They want to test the waters as does any seller of real property.
• Many banks are accepting contracts asking for help with the buyer's closing costs.
• Some banks are offering to pay for home warranties. This is great since the buyer is accepting the home in as is condition.
• If the inspections uncover significant unknown problems, don't be afraid to as the bank to make repairs. You might be surprised, especially when it comes to termites.
• Most of the bank generated addenda require the buyer to pay real estate transfer fees. This  includes real estate transfer taxes (we don't have these in Arizona and won't thanks to Proposition 100) and HOA transfer fees. Make sure you know what the HOA transfer fee are as some are quite high.

We, at the Urban Team, are happy working with bank owned real estate. The transactions are pretty straight forward with only a few hurdles and unconventional  processes. Hope this info helps.

Gene Urban
The Urban Team at Realty Executives
602-234-5777
www.UrbanTeamAZ.com

REAL ESTATE AUCTIONS... FRAUD OR GOOD OPPORTUNITY?

Real estate auctions have been making the news again and we thought we'd put out a few of our thoughts. If you missed Craig Anderson's piece today, you should take a read... good stuff (Click Here). 

Auctions are a method to sell real estate that has gotten a lot of attention in this market. Lots of homes, great prices, a feeding frenzy... sounds fun doesn't it.

They can be fun and profitable for the right person. They can be tedious and potentially dangerous too. The real key (and problem) is knowledge.

Buyers have little, if any, time to inspect the home they are going to bid on. Unless you are a professional inspector or general contractor, you may not see hidden problems that can turn into big costs. Do you how how to recognize grading issues, foundation problems, roof or pool issues? Do you know the real costs of fixing such problems?

In addition, you must understand the total acquisition costs and the market value of the home. Are there back taxes due, are there HOA payments due, or mechanics liens? You could buy a house only to find out you owe a lot of people money... maybe the government. You will buy the home AS IS so be careful.

Craig's article talks a lot about the price. Many auction companies lure their audience in with low advertised prices. Some give a very low price and say "No Reserve."  What they don't tell you is the starting price of the bid. That amount may be quite a bit higher than you anticipated.

We recommend you work with a team of pros. Get a seasoned agent to help you with comps. A title company can give you a preliminary title report on the home that will uncover hidden liens. It may cost you a few bucks and save you even more in the long run. I'd take along a competent home inspector or general contractor to examine the home as well.

A little pre-show work will save you money and headaches down the road.

Hope this helps,

Gene Urban
The Urban Team at Realty Executives
602-234-5777
www.urbanteamaz.com

CB RICHARD ELLIS AND THE FDIC GET COZY

CB Richard Ellis Group Inc. just landed a fat-cat real estate client…albeit a government agency.

The Los Angeles-based global firm was just chosen as a primary consultant for the residential and commercial real estate assets the Federal Deposit Insurance Corp. will obtain as it takes over abortive banks. Nationwide, 22 banks have failed so far this year, compared with three in all of 2007

CBRE will be responsible for valuing, managing, leasing and selling FDIC’s real estate in the U.S., Puerto Rico and the Virgin Islands.

CBRE has subcontracted with a number of other partners on the FDIC account. The subcontractors include Realogy Corp. to handle the residential real estate portion of the FDIC account.

A point of interest is Richard C. Blum, Chairman of CBRE, is the husband of United States Senator from California Dianne Feinstein. Could she have possibly influenced this decision? Say it isn’t so.

A Letter to The Commissioner of ADRE Regarding Real Estate Licence Standards

Below is a copy of an email we sent to ADRE Commissioner Sam Wercinski regarding the perception people have about real estate agents and the lax State standards for new licensees. I welcome comments on this post.

Dear Commissioner Wercinski,

I hope you had a chance to read the comments regarding this weekend’s article in AZCentral.com on the proposed ARMLS public web site.  The article is secondary to this writing; what concerns me is the tenor of the public comments.  Click on the link below to take a read… http://www.azcentral.com/business/articles/2008/11/29/20081129biz-armls1129.html#comments. 

As an industry we are perceived as inconsequential money-grubbing blowhards who whine too much. I say this having read hundreds of comments posted in reply to articles about real estate. The general public opinion is consistently the same… real estate agents are perceived as pond scum.

My brother and I work very hard to practice both ethical and effective real estate, as do so many in our profession. However, the lack of educational standards for new agents is a driving force in the public perceptional of our industry.

As you are aware, the requirements to become an agent are minimal. Relative to other professions that have State licensing requirements (massage therapist, nail technician, home inspector, appraiser, among others), the requirements to be a real estate agent are incredibly lax. A residential agent is expected to perform complex math calculations, understand, write and execute legal contracts, perform the duties of agency, recognized and traverse changing market conditions and much more. Yet, our license requirements do not include a GED, mentoring, economics and much more. I would bet a hundred bucks that not one in a hundred new licensees could write an accurate residential transaction timeline.  Yet, we let these people out on the streets and the public doesn’t know they are incompetent.  I am a smart, college educated man and for the first 10 or 15 transactions I was clueless. Thank God I was mentored during this time so I could not cause grievous harm to the public.

I, as do thousands of seasoned agents, believe it is time to significantly up the requirements and start on a path that will put our industry on the course to greatness verses mediocrity.

Many of us would like the opportunity to sit down with the appropriate players at ADRE and begin outlining an effective curriculum that would produce quality new licensees.  We have a great opportunity to demonstrate, to both the public and our industry, that the job of real estate agent is a serious one with significant social and economic impact.

However, until ADRE sets high standards for licensing, we will continue to be regarded with little more respect than the veritable used car salesman (an often used comparison by the public.)

We need a significant overhaul of the real estate licensing requirements now. Politics need to be set aside so great policy changes can emerge. Both our industry and the public deserve it.

Respectfully yours,

Gene & Ron Urban
The Urban Team at Realty Executives
www.UrbanTeamAz.com