Monday, December 19, 2011

Phoenix Residential Market Report Summary ~ Time To Buy Is NOW!!

This data includes single family detached homes, patio homes, condos, and townhomes provided by the Arizona Multiple Listing Service. The monthly charts above are based on trailing twelve monthly averages from December 2010 to November 2011 which shows the total activity in the Phoenix Metropolitan real estate market over a twelve month period. The yearly charts above are based on a yearly average for 2005 to 2010 but a trailing twelve month average from December 2010 to November 2011 for the year 2011. Without the trailing twelve month average for the year 2011, the charts would be substantially skewed and would not portray an accurate view of the market on an annual basis.

As you can see from the first chart above, Cromford Market Index, the first time home buyer tax credit created a great deal of demand in the market similar to the real estate boom from 2004 to 2006. When the government withdrew the first time home buyer tax credit on April 30, 2010, the average sold price and number of transactions decreased and the average days on market increased. Currently, the residential real estate market is experiences another buying frenzy that is caused without government intervention or relaxed mortgage underwriting standards. Consumers are jumping into the real estate market because market statistics are indicating the market has hit bottom and investors can purchase homes at rock bottom prices where they can rent the homes out to receive a 10% to 15% or more return on investment. Due to the current oversupply of homes on the market, real estate prices have not increased significantly but as you can see from Chart #2 the shadow inventory everyone is afraid of is decreasing. Once the supply of homes is purchased real estate prices will start to increase at a faster pace and then it will be too late to buy. Since January 2011, the average sold price has increased approximately +1.8% (up from last month), the average days on market have decreased approximately -18.0% (down from last month) and the number of transaction has increased approximately +10.5% (down from last month). It should be noted that approximately +35% of all transaction are cash purchases either by investors or homeowners due to tighter lending requirements. The volume of REO purchases since January is down -26.1% and the volume of short sale is up +44.9%. The volume of REO purchases are shrinking due to the increased volume of trustee sales and existing supply of inventory is getting absorbed at a faster rate.        
The number of Notice of Trustee Sales is currently experiencing a decline due to the declining number of adjustable rate mortgages coming due and from more lending institutions working harder on helping people stay in their homes. The number of foreclosures “notices” entering the market is expected to continue its decline throughout 2012 due to the exhaustion of adjustable rate mortgages created between 2003 to 2007. The percentage of third party purchases (other than banks taking back as REO) has increased substantially since the beginning of 2011 where we are currently at 50% of all purchases are from third parties. The percentage might appear to be a low number but the last time we experienced this volume of purchase was back in August 2006. The real estate market has reached a level of equilibrium where demand is equal to supply and all buyers are rushing into the market to take advantage of low prices. Once the supply of residential homes is exhausted and demand continues to rise, real estate prices will begin to rise (depends on the sustained level of demand). Time to buy is NOW!! Give us a call to discuss your best competitive strategy, NOW!!

Wednesday, December 14, 2011

What will new homes look like in 2015?

Members of the National Association of Home Builders (NAHB) were asked earlier this year what they anticipate the new home size will be 2015. While the size of new American homes has been shrinking for years, the builders offered some insights into what home features will start to disappear and which will become more popular.

In terms of square footage, the anticipated drop isn’t drastic. Currently, single-family homes measure an average of 2,400 square feet, a slight decrease from an average of around 2,521 square feet five years ago. In 2015, industry professionals believe it will drop to around 2,150 square feet.

To make up for less square footage, many new homes won’t have living rooms. Of the builders surveyed, 52 percent believe traditional living rooms will be combined into other areas of the home, such as family rooms and kitchens, to form “great rooms.” About 30 percent of builders believe the living room will vanish entirely.

Also likely to become less in demand by 2015? Mudrooms, formal dining rooms, skylights, sunrooms, three-season porches, media rooms, butler ‘s pantries, and homes exceeding four bedrooms and three bathrooms.

However, surveyed builders expect to see more ceiling fans, larger laundry rooms, eat-in kitchens, first-floor master suites with walk-in closets, kitchens with double sinks and recessed lighting. And while two-car garages won’t go anywhere, demand will probably sink for three-car garages.

Sixty-eight percent of builders surveyed say that energy-saving technologies and features including low-E windows, energy-efficient appliances and LED lighting will be common, along with other green features, such as engineered wood products, dual-flush toilets and low-flow faucets. Whole-house Energy Star certification is likely to become the norm for new homes in 2015, but LEED certification will not. Green features considered “somewhat likely” to be in new homes include argon windows, tankless water heaters, above-code insulation, and solar photovoltaic and thermal systems.

Says Stephen Melman, director of Economic Services with the NAHB: “Although affordability is driving these decisions, smaller homes are a positive for builders. It allows for more creative design, more amenities, better flow. It’s an opportunity to deliver a better home.

20 Cities Added to Improving Housing Market List

More cities were added to this month’s Improving Markets Index, which was created earlier this year by the National Association of Home Builders and First American. The index identifies cities that are showing improvement in housing permits, employment, and home prices for at least six consecutive months.
The latest index results is “very much in keeping with the latest government housing data and our own builder surveys, which have shown modest signs of improvement in certain individual markets where employment is gaining and distressed properties are not as numerous," NAHB Chief Economist David Crowe said in a statement. "These gradual improvements are now becoming evident not just in small, energy-producing metros that have previously dominated the [index], but also in several larger markets and areas with more diverse economies."
The 20 new metro areas added to this month’s list are: 

  • Ann Arbor, Mich.
  • Athens, Ga.
  • Boulder, Col
  • Phoenix, AZ
  • Canton, Ohio
  • Charleston, W.V.
  • Danville, Va.
  • Fort Wayne, Ind.
  • Grand Forks, N.D.
  • Jackson, Miss.
  • Kingsport, Tenn.
  • Laredo, Texas
  • Lincoln, Neb.
  • Muncie, Ind.
  • Muskegon, Mich.
  • San Jose, Calif.
  • Scranton, Pa.
  • Toledo, Ohio
  • Washington, D.C.
  • Winchester, Va.

Meanwhile, nine markets were taken off the list in December -- mostly due to softening in housing prices. The nine markets removed from the list in December are: Alexandria, La.; Fairbanks, Alaska; Hinesville, Ga.; Houma, La.; Jonesboro, Ark.; Lima, Ohio; Pine Bluff, Ark.; Sumter, S.C.; and Waco, Texas. 
To see the complete list of all 41 metro areas on the improved housing market list, visit the National Association of Home Builders web site

2012 Mortgage Delinquencies seen Dropping Sharply

If the U.S. economy does not suffer more setbacks, the rate of mortgage holders behind on their payments should decline significantly by the end of next year, according to credit reporting agency TransUnion.

Mortgage delinquency rates – the ratio of borrowers 60 or more days behind on their payments – will likely tick up to about 6 percent through the first three months of 2012, TransUnion said in its annual delinquency forecast issued Wednesday.

But by the end of next year, it could drop to 5 percent, TransUnion said. That’s well off the peak of 6.89 percent seen in the fourth quarter of 2009.

Chicago-based TransUnion’s forecast takes into consideration several factors, including expectations that consumer confidence and the economy will improve next year.

Also, banks are expected to get a good portion of pending foreclosures off their books next year, said Charlie Wise, TransUnion director of research and consulting.

Banks are still working through a backlog of foreclosures created by issues including the robo-signing scandal, in which bank officials signed mortgage documents without verifying the information they contained. The issue surfaced last year in areas with large numbers of foreclosures, and banks had to backtrack and review foreclosures across the country to make sure their paperwork was in order.

That slowed down the process, Wise said, and left mortgages listed as delinquent for longer than they otherwise might have been, temporarily boosting delinquency rates.

Economic uncertainty has also contributed. In the third quarter of 2011, mortgage delinquencies saw their first uptick in six quarters, largely fueled by concerns over the economy as lawmakers were debating the U.S. debt ceiling and Europe’s debt crisis was unfolding.

Helping to cut the mortgage delinquency rate are a slowly improving job market and a stabilizing housing market.

While the drop will be significant, the rate will remain well above the pre-recession average of 1.5 to 2 percent.

“We have a long way to go to get back,” said Steven Chaouki, a TransUnion vice president.

The situation with credit cards is much stronger. Card delinquencies – payments late by 90 days or more – dropped to their lowest levels in 17 years during the spring, then saw a slight increase in the third quarter, but still remained near historic lows.

TransUnion expects further edging up in the current quarter and the first three months of 2012, but then late payments on bank-issued cards should fall again.

One reason card delinquencies are expected to remain so low is that credit is much tighter than it was before the recession. TransUnion data showed that nearly a quarter million new card accounts were opened by people with less-than-stellar credit scores during the third quarter, which contributed to the slight increase in late payments during the summer months. But banks are mainly still going after consumers with top-tier credit histories.

“Lenders are willing to lend, but are still pursuing the best customers,” said Chaouki.

TransUnion predicts by the end of 2012, just 0.69 percent of cards will be considered delinquent, down from a predicted 0.74 percent in the current quarter. The rate has wobbled in the last few years, peaking at 1.36 percent in the fourth quarter of 2007, then dropping and bouncing back up to 1.32 percent in the first quarter of 2009.

The figures reflect a shift in which debt payments consumers consider most important, largely because home prices fell so far.

Chaouki said the conventional wisdom before the Great Recession was that homeowners would put their mortgages first because of concern about their reputation and the emotional attachment involved in owning a home. But what has become clear as housing prices have continued to fall, he said, is that bill payment is far more practical.

“People were protecting their home equity,” he said. Credit cards were relatively easy to come by in years past, he said, so when money got tight, it was an easy decision to default on cards and maintain house payments. Now it’s common to owe more on a mortgage than a house is actually worth, but credit cards are harder to get. So consumers are being practical and protecting what is more valuable to them.

He said he expects the equation will shift again if housing prices rebound and people go back to building home equity.

Tuesday, December 6, 2011

6 Top Job States to find Jobs

One factor reportedly holding many Americans back from purchasing a home is job stability. But several states’ future looks bright when it comes to adding jobs. 
Texas is expected to add the most jobs over the next five years on a percentage basis, according to Forbes (it edges out Nevada if you do not round up the growth rate). Employment in Texas is expected to increase by 2.9 percent annually through 20150— or add 1.6 million new net jobs in that period, according to research from Moody’s Analytics. 
Here are the states expected to grow the most with jobs in the next five years, according to Forbes:

1. Texas
Projected 5-year annual job growth: 2.9%

2. Nevada
Projected 5-year annual job growth: 2.9%

3. Arizona
Projected 5-year annual job growth: 2.8%

4. New Mexico
Projected 5-year annual job growth: 2.6%

5. North Dakota
Projected 5-year annual job growth: 2.6%

6. Utah
Projected 5-year annual job growth: 2.4%

Senior-Housing Market Gone Gangbusters

Though the overall housing market has not escaped the doldrums, the senior housing sector, driven by investment companies, has gone gangbusters since 2010.

In the third quarter of 2011 alone, 39 senior housing deals worth $5.5 billion were completed, primarily by real estate investment trusts that specialize in housing for the elderly. That figure includes independent-living and assisted-living communities, but not nursing homes.

The total value of senior housing deals in the quarter ended Sept. 30 was greater than the combined total in the previous two full years, according to the National Investment Center for the Seniors Housing & Care Industry in Annapolis, Md.

Brandywine Senior Living in Mount Laurel, N.J., has participated in the consolidation frenzy. Brandywine, which had been owned by New York private equity firm Warburg Pincus LLC since 2006, sold its 19 assisted-living facilities in five states in December to Health Care REIT of Toledo, Ohio, in a deal valued at $600 million.

Brandywine Senior Living, now primarily a management company owned by Chief Executive Brenda G. Bacon and other executives, leased the facilities back and continues to operate them.

Brandywine, with 2,000 employees, is not standing still.

This fall, Brandywine, in partnership with Health Care REIT, bought five more assisted-living facilities in New Jersey for an undisclosed price and indicated that it would add more New Jersey locations soon.

Driving the consolidation in senior housing is the ability of real estate investment trusts to borrow cheaply in conjunction with the resilience of senior housing during the recession, giving investors confidence that strong returns will continue.

“The senior-living industry survived the pressure on real estate after Lehman Bros. collapsed,” said Bacon, 61, who co-founded Brandywine in 1996 with two nursing homes that she owned and $65 million in private equity.

Steve Monroe, editor of the trade newsletters SeniorCare Investor and Senior Care Acquisition Report in Norwalk, Conn., cited the relatively small drop in the senior housing occupancy rate during the real estate collapse of recent years as reason for its attractiveness to investors.

“It dropped from 91 percent to 87 percent,” Monroe said. “If you only dropped that much in the worst we can throw at you in 70 years, that’s pretty damn good.”

Senior housing includes independent living and Brandywine’s specialty, assisted living, which is for the elderly who can no longer live safely on their own but who do not need the more intense level of care provided in nursing homes.

For investors and operators, assisted living has an advantage over nursing homes in that it is not very dependent on government funding.

Nursing homes run the risk that the federal government could radically reduce Medicare reimbursement rates, as happened in the 1990s. The 11 percent cut that started Oct. 1 is hurting, but not destroying, nursing homes’ bottom lines.

Assisted-living residents, by contrast, typically use private resources to pay rent.

Assisted living also has a business advantage over continuing-care retirement communities, where seniors have the assurance that they will not have to move again, Bacon said.

Seniors who move to continuing-care retirement communities live first in the independent-living section. They have to be able to get by on their own, which means they could just as well remain in their houses. Because many seniors are reluctant to sell their houses in a weak market, some continuing-care retirement communities are dealing with significant drops in occupancy rates.

Moving to assisted living is usually not a choice, Bacon said, speaking in the voice of a senior: “I’m going to move into assisted living because I need to. I have some needs that need to be met and can’t be met at home.”

That can overcome reluctance to sell a house for less than expected or the desire to remain at home.

That was the case for Marie Ruggeri, 89, who moved to Brandywine’s Moorestown Estates about 18 months ago – and who still misses her house. “I loved my house. I had a lot of parties,” she said while chatting one afternoon this month with Cecilia Sacca, 93.

Public records show Ruggeri sold her one-story house with a patio in back in April for $176,000.

For most seniors, the cost of assisted living ranges from $3,000 to $10,000 a month, depending on the accommodations and the level of care, said Bacon, who started her career as a social worker before earning an MBA at the Wharton School of the University of Pennsylvania in 1980.

Bacon said assisted-living residents, most of whom move in at about 85, typically pay their rent with the money they get from selling their houses, with help from Social Security and, for some, a pension. Medicare does not pay for assisted living. Medicaid can contribute in some states, including New Jersey.

Brandywine has wings at five of its communities that charge more than $10,000 per month. Bacon called it “Ritz-Carlton” living, with the services of a butler, a daily happy hour from 3 to 4 p.m., and the choice of room service for meals among the perks.

The Serenade wings at two Brandywine communities opened in 2008, as the economy was tanking, and “filled up immediately,” Bacon said.

Mary Stiles, 97, who moved into the Serenade wing in Moorestown about a year and a half ago, enjoyed the attention of butler Lisa Laphan one afternoon this month.

“Lisa will do anything I ask her,” Stiles said. “She’s so good.”