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Phoenix Residential Market Report ~ October 2016

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The current real time market profile shows there were approximately 10,023 new listings (up 85 listings from last month) on the market in October 2016 and 7,100 sold transactions. The overall inventory of homes on the market is down -16.4% in October 2016 as compared to the number of home on the marker in August 2014. The current number of home on the market is equivalent to houses on the market in September 2015 but due to the greater demand this year the low inventory of homes on the market may cause prices to appreciate at a faster rate. There is currently 22,986 listing on the market and 7,100 sold transactions which equates to 3.2 months of inventory at the market.

In July 2016, the average sold price took a steep dive south to $272,845. The month of October the average sold price increased approximately +4.4% to $284,888 which is higher than the average price in June 2016 at $282,879. Historically, as we enter the winter holiday season the number of sold transaction will decrease but since 2014 the average sold price increased. In 2014, the average sold price increased +5.3% from September to December and in 2015 the average sold price increased +3.6%. Another interesting factor to consider is how the election of our new president will affect real estate prices. After the election mortgage interest rates increased making it harder for people to buy. Since November 2015 (12 months ago), the average sold price has increased approximately +7.6% (up from last month), the average days on market has increased approximately +1.4% (up from last month) and the number of sold transactions has increased approximately +32.4% (down from last month).

The volume of foreclosure purchases since November 2015 (12 months ago) has decreased approximately -22.2% and the volume of short sales decreased of approximately -15.1%. Since August 2013 the number of foreclosures have decreased -298.7% indicating a healthy market. Also, since August 2013 the volume of short sales have decreased -451.6% because the inventory of homes “up-side-down” have been exhausted and values have risen to a point where consumers can break-even or sell with some equity but some homeowners are still up-side-down if they purchased their homes between 2005 and 2007.

Since November 2015 (12 months ago), the number of homes for sale on the market have decreased approximately -2.5% or 23,585 homes for sale on the market to a gradual decrease of 22,986 homes. The total number of listings is low as compared to 26,076 listings in August 2014. This decrease in the number of homes for sale indicates we are currently in a seller’s market (low supply and increased demand).

Real estate prices are still relatively low (near 2008 prices), mortgage rates are still at a historical low and the macroeconomic market is improving both in terms of prices and the overall economy. Give us a call to discuss your best buying or selling strategy, TODAY!!

Position Realty
Office: 480-213-5251

Rental House Investments Beats Investing In Stocks

After seeing the stock market and real estate market decline so significantly the past few years, many investors are wondering whether now is a better time to buy stocks or invest in real estate and which would be a better investment?

Real Estate Investing vs. Stock Market Investing

Consider the following facts about a recent rental house purchase which was purchased a few weeks ago. The house in question was purchased in Port St Lucie, Florida and was a bank owned REO property which was purchased directly from the bank.

Purchase Price _________________$47,500
Monthly Rental _________________$800

Annual Rental Income____________$9,600
Less Annual Insurance___________$1,045
Less Property Taxes_____________$1,300
Less Vacancies_________________$800
Less Repairs __________________$800

Net Annual Income (NOI)_______$5,655

Cash on Cash Return__________$11.9%

If we assume that the property is vacant 1 month out of every twelve and that we spend another 1 months rent on repairs, we would still net a very healthy 11.9% return. Where else can you get almost 12% on your money with very little risk? This house previously sold for almost $200,000 and buying it at less than 1/4 of that price has obviously significantly reduced the downside risk.

The Real Value of Your Rental Property

The current market value of this property is around $77,000. So while this investment yields a current yield of 11.9% I have the added luxury of knowing that there is around $30,000 worth of equity in this property. And considering that historically most rental property in Florida sells at around 140 times rent (this number changes based on market conditions), the fair market value for this property could be somewhere around $112,000. That is how much I would sell this property for if I were to sell it to a Rent to Own Buyer with an FHA mortgage.

Zillow estimates the value of the property at $124,000. The insurance company has the property estimated at $125 per square foot replacement cost. Since the property is 1,176 square feet that puts the valuation at $147,000. I think the property is worth around $77,000. The fact that properties are selling at such a discount to replacement cost should be a huge red flag. That is the builder’s way of letting you know that you should be buying real estate now.

The real replacement cost is around $75 per square foot which would put the properties value at $88,200 which is probably fairly accurate. However this is the value if the house was constructed new and without the land. The lot is worth $25,000 so the house built new would cost around $113,200 to build. Existing homes need to be depreciated since obviously they are worth less than new homes so the $77,000 to $88,000 is probably a healthy range for what the house is really worth. If we are conservative and assume $77,000 that is still a definite $30,000 in equity.

Return on Investment For Rentals

At a purchase price of $47,000 that represents 63.82% return on my money when I purchase ($30,000/$47,000). In addition to this $30,000 in instant equity I also receive almost 12% annually as mentioned previously. And this is all without utilizing any leverage whatsoever.

Imagine what the return would be if I borrowed 90% of the purchase price ($42,750) at 7% on a 30 year fixed mortgage. My monthly payment would then be $281.09 for both principal and interest which adds up to a total of $3,373.08 for the year.

If I deduct this $3,373.08 from the $5,655 net operating income above then I would be left with a net annual income of $2,281.92. Consider that if you put down 10% ($4,750) that would work out to be a “cash on cash” return of 48%. Where else can you get this kind of return?

Less Risk Investing In Rentals

There is no other investment that can do this with any certainty. Keep in mind that in these calculations I am still factoring in all the expenses of owning property including vacancies, maintenance, taxes, insurance and repairs. I have not factored in the “headache” factor which is basically the headache that comes along with being a landlord.

The “headache” factor is without a doubt the biggest downside to being a landlord. Being a landlord is a lot more hands on that looking at your monthly mutual fund statement. In my opinion that is the biggest issue that a potential landlord should consider before investing in rental properties.

Going back to the example of the $47,000 house, investing this same $47,000 into stocks would be a much less secure way to invest your retirement money. I should know. I spent fifteen years as a stockbroker and money manager before becoming a distressed real estate investor. And I am here to tell you what many other real estate investors and landlords like me already know. The best place to invest your money is in single family rental properties.

Why Investing In Rental Properties Beats Stocks?

Any landlord will tell you that being a landlord can be a headache too. Chasing after dead beat tenants, lost rent, damage to properties, maintenance and repairs are all part of being a landlord so you need to make sure that you have the time, desire, inclination and patience to become a landlord. But if you do and you hold for the long term you will be rewarded very well.

Unless your name ends in Buffet or Soros you are probably much better off investing in single family rental properties than you are investing in the stock market. Investing is about getting as much cash flow or yield as possible, without risking your nest egg and doing so in the most secure way.

Anything else is not investing. It is speculating. And speculating is anyone’s guess. If you are looking for a sure thing then you should go out and find a single family rental house that is way below current market value and you should buy it, fix it up and rent it out. If you hold that house until the mortgage is paid off you will have a good investment.

Position Realty
Office: 480-213-5251

Phoenix Luxury Market Report ~ December 2013

Prices in the Phoenix luxury real estate markets typically go up during the winter season and go back down during the summer months. Since the end of the summer in August 2013, the average sold price has increased approximately +10.4% (up from last month), the average days on market have decreased approximately -22.3% (down from last month) and the number of transactions have increased approximately +13.2% (up from last month). The average price per square foot is approximately $330 PSF, average days on market is 178 days and 103 transactions last month. This holiday season the average sold price has increased, the average days on market has increased and the average days on market has decreased.

The luxury market is following its typical trend during the winter months; the average sold price trend is upward, the average days on market are decreasing but the numbers of transactions are down as compared the winter months in 2012. The slowdown in the number of transaction indicates the market is in confusion regarding the overall direction of the market and macro economy as a whole. The government shut down experienced in October and the upcoming deficient negotiations could be causing this dramatic decrease in the number of transactions.

Trying to “time the market” for the perfect time to buy is nearly impossible but there is no better time than now to purchase. Real estate prices are at an all time low and the economy is continuing to show signs of improvement both in terms of real estate prices and the overall economy. Time to buy is NOW!! Give us a call to discuss your best buying strategy, TODAY!!

Position Realty
Office: 480-213-5251

Phoenix Residential Market Report Summary ~ October

As you can see from the first chart above, Position Realty 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. From March to June of this year the residential real estate market experienced another buying frenzy caused without government intervention or relaxed mortgage underwriting standards. Currently the number of transactions is slowing back down to number of transaction experienced around the same time a year ago due to the lack of inventory and we are currently in the holiday seasons.

Since January 2012 (10 months ago), the average sold price has increased approximately +23.5% (up from last month), the average days on market have decreased approximately -22.7% (up from last month) and the number of transaction has increased approximately +10.3% (up from last month). The largest average price increase over the last 12 months was experienced in March from $168,961 in February to $184,078 in March.

The volume of REO purchases since January 2012 has decreased approximately -50.7% and the volume of short sales have decreased approximately -0.5%. The volume of REO purchases are shrinking due to the increased volume of trustee sales, more banks are accepting short sale transaction and an existing supply of inventory is getting purchased at a faster rate.

The current supply of homes for sale on the market is 22,283 (up from last month) where the same time a year ago there were 46,197 homes on the market which is a decrease of -51.8%. Since the January 2012 (10 months ago), the number of homes for sale on the market has decreased approximately -6.5% (down from last month). As more and more buyers enter the market and as more of the supply of residential homes are exhausted, real estate prices will continue to increase at a faster rate (lack of supply causes prices to increase).

Trying to “time the market” for the perfect time to buy is nearly impossible but there is no better time than now to purchase. Real estate prices are at an all time low (not for long), mortgage rates are at a historical low and the market is improving both in terms of prices and the overall economy. Time to buy is NOW!! Give us a call to discuss your best buying strategy, TODAY!!

PositionRealty.com
Office: (480) 213-5251

Phoenix Luxury Real Estate Market Report ~ September

Since January 2012 (9 months ago), the average sold price has decreased approximately -3.8% (down from last month), the average days on market have increased approximately +1% (up from last month) and the number of transaction has increased approximately +8.6% (same as last month). As you can see from the fourth chart above, Luxury Market Index, the real estate boom from 2004 to 2006 created a great deal of demand in the market and the number of transaction is back down to the 2003 to 2004 levels.

Unlike the rest of the Phoenix real estate market, the Luxury market is trending sideways but the good news is that prices are no longer going down. We will not see an immediate increase in prices until consumers feel the economy has fully recovered and lenders become more willing to issue jumbo loans to qualified buyer.

Trying to “time the market” for the perfect time to buy is nearly impossible but there is no better time than now to purchase. Real estate prices are at an all time low and the economy is starting to see signed of improvement both in terms of real estate prices and the overall economy. Time to buy is NOW!! Give us a call to discuss your best buying strategy, TODAY!!

PositionRealty.com
Office: 480-213-5251

More Borrowers See Mortgage Payoff Possible

More borrowers are shortening their mortgage terms, and are considering paying off their mortgage a possible feat. Record low interest rates has allowed more borrowers to refinance their loans from 30 years to 15- or 20-year terms.

A recent Freddie Mac report shows that 31 percent of recent refinancers shortened their loan terms, which is the second highest level since 2002.

“Historically low rates and an average three-quarters of a percentage point difference between 30- and 15-year mortgage fixed-rate mortgages are important drivers for moving to a shorter term,” Frank Nothaft, Freddie Mac’s chief economist, told The New York Times.

Fifteen-year fixed-rate mortgages reached a new record low last week, averaging 2.97 percent, according to Freddie Mac’s weekly mortgage market survey. The 30-year fixed-rate mortgage also reached a new record low last week, averaging 3.75 percent.

People are paying off their mortgages at a faster rate because they feel the real estate market is improving and real estate prices are increasing once again. Before no one wanted to pay down their mortgage when every month they were losing equity.

PositionRealty.com

Sellers to Buyers: Stop With the Lowball Offers!

Phoenix Home buyers who are looking for big discounts on housing nowadays are finding that their lowball offers are no longer sticking with sellers, and that their offers are getting a flat-out “no” when they’re way below the asking price.

Right off the bat, buyers say, ‘I want a steal,’ and I tell them they have to wipe that word out of their vocabulary.People come in, and they think the market is 2008 or 2009, when sellers were desperate, They’re not desperate. Not at all.

What qualifies as a lowball offer? Sellers generally consider lowball offers to be less than 90 percent of their asking price.

Buyers, on the other hand, tend to say offers of 80 percent to 85 percent of the list price are reasonable.

The mistake some buyers make is going so low it’s not even reasonable, says Stephanie Chen, a seller, who refused to take an offer $40,000 less than her asking price. We just walked away from the table.

Another big mistakes home buyers are making in today’s changing housing market is that they are taking too long to make an offer, real estate professionals say, and because of that they are losing out on getting the house they want. The number of for-sale homes on the market nationwide has shrunk considerably in recent months, bringing out higher competition for properties, particularly for move-in ready homes.

The Phoenix real estate market is so hot that properties are receiving multiple offer within a few days. The days of the low ball offers are a thing of the past in Phoenix real estate. Real estate prices in Phoenix are estimated to rise considerably by the end of the year.

Position Realty
www.PositionRealty.com
Office: 480-213-5251

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