Arizona Real Estate Blog Archives: October 2009
Thursday, October 29, 2009
Dear nice folks at Arizona Regional MLS (ARMLS®),
What happened to the zip code? It used to be prominently displayed at the very top of the MLS printout (after the city & state where it belongs!). It looked like this...
It just disappeared in the past couple of weeks, so hopefully it won't be too hard for you to find it. I know you're usually very good about informing Realtors® when you make changes to MLS. So perhaps you did send out an email informing Realtors® the zip code would be disappearing soon. Unfortunately, I didn't get the memo. So here I sit wondering, what the heck happened to the zip codes?
Please help. Thank you!
Here's a recent "Scam Alert"sent out by ARMLS®. Realtors® and anybody who owns a vacant home should beware:
So sellers - keep an eye on your vacant homes and/or ask your neighbors to watch for suspicious activity. Realtors® - check your vacant listings. And renters - verify the owner/history of the property you're renting, and check out your potential landlord!
Tuesday, October 20, 2009
As a Home Inspector, I come across all kinds of pets in the homes that I inspect. Some pets love me, some pets hate me, some want to eat me, others just follow me around and supervise. In recent months, I've been inspecting more occupied homes, but for awhile there it was mostly vacant houses with no animal friends. Over the years, I've had all types of animals follow me around during inspections. Afterall, I'm in their territory so I don't mind. But I never expected to be followed by a tortoise!
I don't know his real name, but I called this guy, "Big Swifty". He totally followed me around the backyard as I inspected this house. He'd start walking towards me and as soon as I moved, he'd turn and follow me. Sorry if the picture's a little blurry, he was really bookin' for a tortoise!
Monday, October 19, 2009
Knowing that I'm a Realtor® and that much of my income is dependant upon the real estate market, you might be surprised as you read my opinion on extending and/or expanding the Homebuyer Tax Credit. For starters, I'll say that I believe the free market can almost always solve problems better without government involvement. Unfortunately, the real estate market has not been allowed to operate without government interference for some time. I'll even go one step further and say that government interference caused the real estate market bubble and resulting crash, and the same idiots who created the problem should not be trusted to fix it.
Politicians, who wanted to buy votes by forcing banks to give loans to people who could not afford to pay them back, are the primary cause of the real estate bubble and ultimate crash (which I believe also caused the current recession). This effort was driven by bleeding-heart liberal Democrats, but many of the so-called conservative Republicans shamefully went along with it for many years and many administrations. We all know what happens when banks are forced to lend money to people who can't afford to pay it back... eventually they don't pay it back and the banks lose money. The banks then have to make up these losses somewhere else: either by charging good customers more, or by (the new trend of) getting billions in bailout dollars from taxpayers. So either way, hard-working taxpayers lose when government forces businesses to make bad bets.
But instead of recognizing that government is the problem, our brilliant bureaucrats instantly (and without any real thought) decided that more government is the answer. So they offered $8,000 refundable tax credits (aka govt handouts) aimed at first time homebuyers who otherwise could not afford to buy a house. HELLO? These are the people whose loans are currently foreclosing at astronomical rates. Incentivizing people who can't really afford a house into buying one anyway isn't going to fix the real estate market or the banking situation. This is what caused the problem! Repeating the same mistake will only prolong the agony and further stress the financial institutions that finance these properties. Not to mention the fact that it's inherently unfair to ask some taxpayers to pay higher taxes so the government can give their money to others for a down-payment on a new house they can't really afford. And then add insult to injury by forcing those same taxpayers to bail out the banks when these loans foreclose, as if it were not foreseeable (right!).
So like cash-for-clunkers, I believe the First Time Homebuyer Tax Credit was a stupid idea, and therefore extending or expanding it will ultimately do more harm than good to the real estate market. It may cause a short-lived spike in sales like cash-for-clunkers did (at the cost of future sales, by the way). But do we really want manic ups and downs in the real estate market, or do we want a slower but sustainable growth? I think anyone who owns real estate or works in the real estate industry would agree that a slow, sustained growth is better for all of us in the long run. Some lawmakers and various Realtor® associations are pushing to increase the tax credit to $15,000 and extend it to more than just first time homebuyers, with a higher limit on the buyer's income. To me, this is just the same dumb idea with longer lines of people taking the handout, and with a much higher price tag.
So when will the real estate market start to recover if government stops interfering? It's already started to recover, in Arizona at least. Keep in mind that national statistics quoted in the news may not be applicable to Arizona's real estate market. Real estate is local. Arizona was one of the first and hardest hit areas of the country when the real estate bubble started to burst (for lack of a better term!). And I think Arizona was also one of the first to start recovering, because Arizona real estate prices were driven down faster and lower than other areas. And lower prices is what makes buyers start coming out.
Don't get me wrong, the Arizona real estate market is not all sunshine and lolli-pops. Not at all. There are still tough times ahead, but people are buying despite the fact that banks aren't really lending like they should be (I guess it's more profitable for banks not to lend, and suck up taxpayer bailouts instead!). But if the government just stays out of the way, the market will slowly recover on its own - without unnecessary, artificial government stimulation that really just wastes billions in taxpayer's money.
Here's a snapshot of the current Phoenix metro area real estate market, as I see it:
At the end of last year, the real estate market in the Phoenix metropolitan area started to pick up... not because of any government program, but because the free market works. When prices came down to a certain level, the investors came out to play. Some of those who were sitting on the sidelines waiting decided it was time. And people started buying again... not in huge droves like a few years back when people were fighting each other for houses. But then again, who wants that, really? (I was taught that slow and steady wins the race!).
Since then, I've seen a steady flow of buyers into the market, and many banks/real estate agents are even creating bidding wars again. Of course, these bidding wars are driven by totally fabricated demand. The bank has a real estate agent list the house for a super low price to attract multiple offers. Then instead of rejecting any of the offers, they entice all of the propsective buyers into a bidding war and tell them to make their "highest and best offer". None of the buyers know what the other bids are, so they often times end up bidding higher than they should because they get sucked into the emotion of 'wanting to win the bid' rather than rationally determining what the house is worth without that emotion present. I always tell buyers to avoid bidding situations, even in a sellers market. But especially in the current buyer's market... there are still way too many houses available for sale right now to get into a bidding war. Go find a seller who appreciates your offer more and is willing to negotiate under your terms. In a buyer's market, the buyer should feel like they're driving the terms of the deal, not the seller.
But realize that Arizona's residential real estate market still faces significant foreclosures, and this will continue for some time. Supply is good for buyers and you shouldn't let uncertainty scare you away from the market if you're buying an owner-occupied home that you plan to keep for at least 3-5 years. However, I would advise inexperienced investors to be very careful buying Arizona real estate right now, especially if you plan to do a short-term flip. There's money to be made, but you can also lose a bunch so just know what you're doing.
In my opinion, Arizona's real estate market is recovering, but is not out of the woods yet. The biggest danger to this recovery (other than government interference) is the commercial real estate market. I'm not sure why nobody is talking about it, but the commercial market could create huge problems in the coming years, especially if banking problems are not addressed. Commercial real estate market trends lag the residential market, and I don't think we've even started to see the real impact of the commercial market yet. Here's why: Many commerical real estate mortgages are 5-year or 10-year interest-only loans with balloon payments due at the end of the term. So as those commercial loans made at the height of the real estate bubble start to come due (as they currently are), the property owner (probably a small business owner) will have only a few choices. They either have to pay off the entire balance, which is unlikely for most businesses since they're probably already struggling to make ends meet. Or they'll have to re-finance the loan, which is also unlikely because 1) property values are much lower now and the property is probably not worth the loan amount anymore, and 2) lending standards are tighter and commercial loans are very hard to get. So if these loans can't be re-financed or paid off, the only other option is to sell the property before the loan is due. Many property owners will wait too long, not realizing how long it takes to sell a commercial property in today's market and will consequently face foreclosure. For this reason, I believe the commercial market could be the next big real estate crisis.
Of course, I don't have a crystal ball, and nobody really knows for sure what tomorrow will bring. Everybody with an opinion on the future of the real estate market is really just guessing :) So my advice is guess carefully, and as always, buyer beware!
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