Is Phoenix On The Top 10 Hot Spots for International Home buyers?

International buyers accounted for 4.2 percent of Phoenix home sales between May 2011 and January 2012, with 90 percent of them from Canada, according to public records analyzed by DataQuick.

Foreign buyers accounted for 3.9 percent of sold homes in Phoenix during that time in Maricopa County and 7.1 percent of homes sold in Pinal County. Maricopa County contains about 90 percent of the Phoenix metro's population of 4.2 million.

Resale condos were proportionally the most popular property type in both counties: buyers listing non-U.S. mailing addresses purchased 9.7 percent of resale condos in Maricopa and 12.2 percent in Pinal, according to DataQuick.

Existing, single-family homes sold for a median $118,800 in the last three months of 2011, down 10.2 percent from the year before. Existing condos sold for a median $66,100, down 4.1 percent.

Foreign investment clients see the current return on investment, combined with investing in the U.S., as superior to other areas and they look forward to future appreciation in the Phoenix area. Our warm climate is also desirable to foreign investors.

The (Canadian dollar to U.S. dollar) conversion rate is good. Homes in Phoenix are still cheap -- although that has changed in recent months.

Most of foreign clients are looking for investments to make monthly returns between 6 (and) 10 percent for the short term, and then sell for a profit when the market price is up in five to 10 years. If they are purchasing a second home, they want to take advantage of the lower prices and favorable conversion rate. They will use the home as a vacation/winter home now, then eventually retire here.

According to statistics from real estate data firm The Information Market, Canadian buyers were virtually non-existent in the Phoenix real estate area from at least 1999 until the fall of 2007. In 2008 they hovered around 2 and 3 percent of the market, but it wasn't until December 2009 that they hit more than 4 percent of the market and have since more or less stayed above that threshold.

Canadian buyers peaked in April 2011, when they accounted for 6.2 percent of the market; they accounted for 4.8 percent of all buyers in February.

<strong>Buying for long-term investment</strong>

From the beginning, Canadian real estate appraiser and U.S. real estate investor Richard McMahon said he knew he wanted to invest in a distressed U.S. market with low prices and the potential for retirement-income generation that would far exceed any yield from a bank savings account.

"Also, having a source of U.S. funds is a good hedge against the Canadian dollar," McMahon said.

An American real estate expert, whose name he said he can't recall, also gave him some valuable advice.

We recommended that he invest in a city that has well-known universities and at least three professional sports teams and has a leisure component to its economy. Presto, Phoenix!

He said he wasn't worried about the legal or tax implications of buying real estate in the U.S. because he'd read "South of 49: The Canadian Guide to Buying Residential Real Estate in the U.S."

He and his partners have so far bought four homes in the Phoenix area, all for long-term investment.

"We do not mind whether it is a short (sale) or a bank property. The first two need some work (while) the last two were near move-in ready. We initially were looking for condos but ultimately chose houses due to their low vacancy and price points (compared to condos)," McMahon said.

Though still high by national standards, in 2010 the Phoenix area had the third-lowest vacancy rate among the 10 markets in this report, at 16.5 percent.

Nearly two out of five sales in the Phoenix area were distressed sales in the fourth quarter -- a rate second only to that in the Las Vegas area among the 10 markets in this report. The Phoenix area also had the second-highest foreclosure activity rate in the fourth quarter, with 1 in 80 units receiving a foreclosure filing.

Housing Is ‘Awakening From Hibernation,’ Freddie Says

An improving economy is contributing to a gradual rebound in home prices across the country, according to mortgage giant Freddie Mac’s 2012 Economic Outlook report, released Wednesday. But there is still a way to go in the road to recovery for the housing market, the report noted.

“The housing market is showing some signs of shaking off the depression-like conditions that have plagued it for much of the past few years,” according to the report. “As if awakening from hibernation, housing starts and home sales moved to higher levels of activity.”

In fact, the signs have prompted Freddie Mac to revise its forecast upwards for home sales and originations. One economic contributor that’s helping to stabilize housing: The drop in the unemployment rate to 8.3 percent, its lowest level in three years, according to the report.

“A variety of encouraging indicators suggest that the housing market may be feeling a nascent recovery ... and more neighborhoods may see a stabilization in overall demand and housing values this spring,” says Frank Nothaft, Freddie Mac’s chief economist.

Median home sale prices are up, despite a slight drop in new and existing home sales, Freddie Mac reports. About a half of the increase in housing starts has been for construction of rental apartments in multi-unit buildings to meet the increasing demand, the report notes. New rental construction, at its current pace, is expected to reach its highest level since 2005.

“Housing starts continue to run below net household formations [and will allow for absorption of existing vacant homes],” according to the report.

Homes for sale in Phoenix have experienced an 8.9% increase in the average sales price due to buyers jumping into the market to try to get a good deal. We are seeing multiple offers on homes in Phoenix similar to what Phoenix experienced during the real estate boom. This is good news for the Phoenix real estate market.

Homeownership Rate Rises After Two Years of Decline

After falling to a 13-year low during the second quarter, the homeownership rate posted a highly unexpected rise in the third quarter, according to a Census Bureau report released Wednesday.

With foreclosures forcing homeowners out of their homes and buyers waiting on the sidelines as home values declined, the homeownership rate has been on the decline for quite some time. In fact, according to Bloomberg, the third quarter rise is the first in two years.

However, the 0.4 percent increase, which brought the homeownership rate to 66.3 percent for the third quarter, was not enough to post an annual increase.

The current homeownership rate remains 0.6 percent below the rate recorded in the third quarter of 2010.

Furthermore, according to the Census report, when the current rate is seasonally adjusted – which brings it to 66.1 percent – it is “not statistically different from the rate last quarter” – an even 66 percent.

Homeowner vacancy rates fell 0.1 percent in the third quarter arriving at 2.4 percent.

At the same time, rental vacancies rose 0.6 percent arriving at 9.8 percent.

Despite this shift, Capital Economics says in response to the Census findings, “The modest increase in the rental vacancy rate in the third quarter does little to alter our view that rental yields will soon rise above 5.5%, comfortably beating the yields available on Treasuries and equities.”

“Meanwhile, the homeownership rate remains at a level that suggests America’s love-affair with housing is still on the rocks,” Capital Economics adds.

About 85.8 percent of housing units were occupied in the third quarter.

The region with the highest homeownership rate was the Midwest with a rate of 70.3 percent, while the lowest homeownership rate was seen in the West at 60.7 percent.

The Northeast and South feel in between at 63.7 percent and 68.4 percent respectively.

At 76.1 percent, West Virginia had the highest homeownership rate. The state was followed closely by Mississippi with a 70 percent homeownership rate.

The lowest homeownership rate was seen in the District of Columbia, where the rate for the quarter was 44.3 percent. New York followed with 54.4 percent.

Nevada and California – states hard-hit by the housing crisis – were also in the bottom five with homeownership rates of 55.3 percent and 55.9 percent respectively.