Arrowhead Lakes: Market update August 2010

I am constantly asked questions about the market and how things look for homeowners and homebuyers. If you watch the news or read articles about real estate, you can get completely bombarded with information that seems to be contradictory. There are so many ways to approach questions of economics in this volatile economy. Let's take a look at some of the common questions I hear day to day.

How bad is the market?

This question is one I get all the time. The answer most definitely depends on the person asking the question. For example, if you are a homeowner that purchased at the top of the market, you might think it is pretty bad. Prices are approximately half of the peak prices we were so proud of just 4-5 years ago. So as a potential seller, the situation might be pretty bad. However, if you purchased before the historic run up in home values or in the last year, you could be sitting with equity even today.

Buyers on the other hand should be outright bragging as to how good this market is today. The prices have been stable in our area for over a year, the interest rates have dropped to all-time lows and sellers have shown pretty good motivation to get a deal done.

How long will it take for housing to improve?

The way we need to look at the market is not as good or bad. It is almost always good for someone. A healthy market on the other hand is one that has predictability, regular turn over, and stability, in pricing. A healthy real estate market is one that allows buyers to buy with confidence and sellers to sell at a price that is close to the estimate of value based on recent real estate activity.  It is my opinion that we currently have a relatively healthy market based on the criteria I just mentioned. Most buyers are pretty certain that they are paying a good price today. Sellers may not be happy about the value of real estate, but at least the pricing has become stable and predictable. Additionally, our inventory of available homes, are sold at approximately the same pace as new listings hit the market. I actually believe that our sales rate would exceed the new listing rate if less of our listings were short sales. The short sale process artificially slows sales and demand by causing the process to linger and frustrate buyers and sellers alike.

What do I do if I can't afford my home anymore?

Every day I talk to someone about this situation. Unemployment and underemployment have certainly taken a toll on families financially. There are options for families that are experiencing a hardship. The first step I would advise someone to take is to talk to an attorney. I know that the expense of an attorney may seem steep when you are already struggling, but the expense of not being properly informed may be far greater. Once you know best and worst case scenarios, you may feel a sense of relief. I recommend that you not put this process off too long. The sooner you know your options, the more likely you are to make the best decisions.

If you would like to discuss this article or something else you find interesting about Arrowhead Lakes, feel free to give us a call or send us an email. We look forward to seeing you in the neighborhood.

Your Neighborhood Real Estate Resource,

Jim and Anna Kuttner

The Kuttner Team, RE/MAX Professionals

Email us at jim.kuttner@remax.net or annakuttner@remax.net

Visit us at www.kuttnerteam.com

http://money.cnn.com/galleries/2010/moneymag/1007/gallery.best_places_affordable_homes.moneymag/6.html

Arrowhead Lakes: May 2010

As we go into the summer months, I can say that the Arrowhead Lakes real estate market continues to stay quite balanced.  By balanced, I mean that there is a steady number of homes coming on and going off the market keeping inventories at a stabile levels for the last year. This balance allows for sellers and buyers to predict pricing trends.

Levels of Inventory

Our inventory of available homes for sale has been steady at just around 20 homes for sale during the year. At the time this went to publication (May 3), the inventory was sitting at 21.

Prices of  Available Homes

Prices of homes available range from $146,900 (off the Lake) to $2,000,000. The least expensive home on the lake is listed at $250,000.

Homes under contract

Currently there are 10 homes under contract. The list prices of these homes vary from $209,000 (not on the lake) to $489,000. The actual purchase prices will not be public information until the property closes escrow.

Homes Sold Since January 1, 2010

There have been 14 homes that have sold between the first of the year and April 30^th. This keeps the average number of homes that have sold per month at just below 4 homes per month.

The average price of homes on the lakes has been $144 per square foot year to date. The range has been $116.5 to $169 per square foot.  Actual prices have ranged from $171,000 to $680,000.

Days on Market

The number of days on the market for homes sold has averaged approximately 152 days.

If you have any questions about the data provided or if you have questions about other details not included, please call or email us.

I know that a lot of people will argue that there are too many homes on the market. That is true to some extent. In the Phoenix / Scottsdalearea, if you look at the number of homes that are listed for over a $1,000,000, then yes we have an overabundance of inventory. If you look at the number of 4 bedrooms under $150,000, you may not have the same conclusion. For those that believe we are going to never have a shortage of homes, consider the following. The population in the US grows at just over 1.1% per year. That is just over 3,400,000 new people every single year. Every year this happens. According to census information, there is an average of 2.6 people per household. Quick math tells me that we need approximately 1.2 million new residenses each year. Currently, our country is building around 500,000 per year.

Any comments?

Arrowhead Lakes Market Update

Here we are 1/4^th of the way through the year. We have seen some additional listings come to market as expected. Sales are pretty steady compared to last year; however I am pretty optimistic that the demand level is starting to pick up. We would normally expect showing activity to increase as we get closer to spring and this year is no exception. The question is "how do these showings become offers?"

To actually get an offer takes an effort on both sides of the potential transaction. Yes, receiving an offer can be equally the responsibility of the seller and the buyer. Let's explore what I mean by this statement.

Buyers Dilemma

One would obviously expect that buyers make offers for houses that want to buy. Makes sense to me. What makes them want to buy a particular house? I am not going to go with the cliché "location, location, location". The best location is not always the best location for everyone. I like to say that buying a home is somewhat a compromise. We must eliminate homes for many reasons. For the most part we are all on a budget, whether small or large. That immediately eliminates many locations that could be considered premiere. In fact, every decision one makes regarding the purchase of a home could be considered a compromise. Pool or no pool? 2 car garage or 3 car? This school or that school? On the lake or backing the golf course? All of these decisions may not fit perfectly in the home of your dreams. So we compromise.

The location, features, schools, and price would be some of the most common factors in a home's desirability. Other factors for the buyer may be more investment based. Yes price is still a factor; however, some investors may like to see a robust rental market for a particular area in order to purchase a home.

Sellers' Role - The Price MUST Be Right

Well one may ask what role a seller has in making a buyer offer to purchase a house. I think that this is probably the most important piece of the process. I think that every house can sell. I really don't care if it is in poor condition, has a poor location or possesses zero features. Even the worst home will sell if the price is right. OK, I am sure there may be a home that cannot sell - this is not a contest to prove me wrong with that house in Chernobyl you saw on 60 minutes. The truth is that we live in an area that homes have been on the market and received multiple offers the first few days. We also have homes that are actively listed and have been on the market for over 680 days. Yes, almost 23 months and not sold. There are many reasons for this to be the case. Maybe the house is a short sale driving many buyers away for fear of a long wait for an answer to their offer. Maybe there are other reasons, however if this house presented itself as a good value it most likely would have sold or at least been under contract.

What Price?

How do we price our home? This is the number one question we receive from sellers. Sometimes this can be difficult. As an example, it is quite difficult to price homes that are custom. Custom homes have very unique selling features and usually cost more to construct. Another reason it may be difficult to determine a price, there may not be any sales in recent months. If you are lucky enough to live in a neighborhood with recent sales or comparable homes to yours, that will make it easier to come up with an accurate sales price. One thing is for certain, if you are trying to sell your home and the offers are not coming in price is definitely something to reconsider.

If you would like to discuss this article or something else you find interesting about Arrowhead Lakes, give us a call or send us an email. We look forward to seeing you in the neighborhood.

The waiver begins on February 1, 2010 and is scheduled to expire in one year unless extended at that time. The easing of this rule will allow homes to move through the free market without impediment. In the past, investors would have to hold on to a home for 90 days prior to accepting any contracts from buyers that were utilizing FHA loan programs. This restriction was not placed on the banks as they were exempt. They have better lobbyists than we do.

http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

The year of 2009 has come to a close and the New Year is upon us. 'Hope springs eternal' is an expression that never rings truer as we enter 2010. You would imagine that the last couple of years would have restricted on one's ability to stay positive. However, I have to say that most of the people that I come across each day are decidedly more optimistic than pessimistic. Not that we ignoring the very real challenges in every aspect of the economy.

Currency markets, stock markets, commodity markets and yes, housing markets have been extremely tumultuous for the last couple of years. When I look at the housing market in the greater phoenix area, I see several factors that lead me to believe that stabilization and recovery are underway.

Levels of Inventory

First, our inventory levels have come down to very good levels through 2009. At the time of this article, there are only 18 homes on the market.  There are another 14 homes under contract. Since the first of the year, 47 homes have sold. That is just over 4 closing sales per month or in other words, we currently have just over 4 months of inventory available. In real estate terms, 4 months of inventory is pretty healthy for sellers.

Prices of Homes

It should not come to anyone's surprise that prices are much lower than they once were. The average price per square foot for the year was $142.64 and ranged from $95.80 to $189.95. This lower level of prices has led to the higher demand in home purchasing.  Today, many builders, investors and other industry insiders tend to agree that the cost of building a home would be higher than purchasing an existing home in many cases.  I bring that point up for one main reason: we may be in an over correction in some cases.

Over Correction?

The term over correction should not be something that we should apply to the entire market. However, in some cases, where a home could be purchased for much less than the competition and much less than building the same house, one could believe that home is a pretty good value. I have always looked at the cost of replacement as a comparison to resale values.

Buyer Preview

Arrowhead Lakes has become one of the most sought after communities in the Valley. With close proximity to highways, entertainment, shopping, and dining Arrowhead Lakes fits many of the search criteria for today's home buyer. The fact that we have the Lakes, many people find our community as a unique consideration when looking for a home.  With inventory levels lower than last year, buyers should expect to compete for the best home values.  One may argue that with a 4 month inventory, a buyer could take their time. This is true to a point. There are homes that come to market that are considerably better in value than others. When this happens, buyers should move quickly. One more important factor for buyers to consider is the very low rate of interest for mortgages today. This allows for much greater purchase power than when higher rates exist. In fact, if you are buying at 5% versus 7.5% and want to keep your principle and interest payment at $2000 per month, you could borrow $374,000 at 5% or you could borrow $286,000 at 7.5%. I am not saying that rates are going to go higher anytime soon; however, the risk of waiting seems to be a real issue.

Seller Preview

Sellers should be prepared for sales to be similar to the past year. It is my opinion that we will see prices pretty stable over the next year. There are macroeconomic forces that may increase or decrease the demand in the overall economy.  The homebuyer tax credit extension and amendment will have some impact on the level of sales.

I have to say that when looking at the housing market in our area, people have reason to feel good about going forward.  The Kuttner Team at RE/MAX Professionals believes that 2010 is going to be a great year for the area. We want to thank those we have worked with over the last year. We also look forward with anticipation to the new relationships we will make in the year ahead.

Please let us know if you have any questions. We would be happy to assist you.

Current Market Conditions: (Lake Homes Only)

Active Listings: 10 - Price Range $359,900 to $2,500,000

Under Contract Listings: 9 - Price Range $224,000 to $575,500.

Homes sold in October: 2 - Price Range $342,000 to $595,000.

Arrowhead Lakes Real Estate Update

What's going on in Arrowhead Lakes?  The economy has certainly affected home values in our wonderful community.  Buyers are in a position to purchase homes at approximately 50% of the peak value of 3 years ago.  Sellers are constantly second guessing themselves for not selling when they "had a chance."  Regardless of which side of the deal you are on, you need information to help you make the right decision for you and your family. Although it is helpful to look at the past, the past does not prepare people for a sale or purchase right now.  Let's take a look at the market today.

PRICES: The Arrowhead Lakes community currently has approximately 20 homes available for sale; prices range from $188,000 to $2,500,000. There are approximately 15 homes that are under contract; prices range from $135,000 to $650,000. Since June 1, 2009, approximately 18 homes have sold; prices ranged from $147,000 to$ 475,000.

PRICE PER SQUARE FOOT:  The average price per square foot for homes on the lake since June 1, 2009 has averaged $142 per square foot. The range varied quite significantly from a low of $84 and a high or $170 per foot. The reason for the wide range is due to each home having conditions and other factors that can considerably affect the value of the property.  One of the main reasons is based on the type of sale.

TYPES OF SALES: There are several types of sales in our current market:

Short Sales: Owner negotiates with lender to sell home "short" of what they owe.

Lender Owned/Foreclosure: Home has been taken by the bank and they are the new owner.

Traditional Sales

SHORT SALE ACTIVITY:  15% of the active listings, 73% of the homes under contract and 16% of the sold properties were short sales.

LENDER OWNED ACTIVITY:  5% of the active listings, 0 homes under contract, 55% of the sold properties were owned by the bank.

TRADITIONAL ACTIVITY: 80% of the active listings, 27% of the homes under contract, and 34% of the sold properties were traditional sales.

What does all of this mean to you?  Each homeowner has unique circumstances, so it is best to have a personal conversation with your REALTOR®. If you do not have a Realtor®, call or email The Kuttner Team at RE/MAX Professionals. We would be happy to assist you and answer all of your Real Estate questions.

Call me and I will show you why now is a great time to buy a house.

These types of forces are dramatically changing the marketplace here in Arizona. Take a look at the market by the numbers on ARMLS in Maricopa County:

Sold residential listings January 2009:    4078

Sold residential listings February 2009:  4725

Sold residential listings March 2009:      6592

Sold residential listings April 2009:       7373

Active listings : 35,000 approx

AWC and Pending sales: 14,500 approx

Once could see that the trend is steady and strong. The number of AWC and Pending sales indicates to me that the number of homes that will sell in May will be an increase over the numbers in April. The Active inventory is shrinking much faster than most would imagine. As we stand today, 1 out of 4 homes that are for sale are under contract. That statistic tells me that we currently have a 3 month inventory level. Most economists would agree that this level is considered a sellers market. Now I am not willing to state that we are in a sellers market due to the number of homes that are selling in distress. However, I do believe that we will see a bounce off of the bottom that will disappoint many soon to be buyers.

RISK VS. REWARD:

What is a buyer to do? The typical potential buyer has sat on the sidelines watching the market slide to levels that are now, in most cases, lower than 2004 and in some cases, levels that have not been seen since the late 90's.  At the same time, interest rates have dropped to levels that may never be seen again. Buyers must decide when the time is right. How is a buyer to decide the perfect time to buy? Well it comes down to risk vs. reward. There are risks and rewards for all the financial decisions we make, especially now.

What kinds of risks are there in buying a home? The biggest risk when purchasing a home is falling value. That is a real risk we have learned all about during the last 3 years. Values have dropped in our area 30 to 70 percent, depending on where the home is located. That begs the question, "what rewards are there in buying a home?"  There are several advantages (rewards) that come to mind. The first one that I think about is the pride and enjoyment of homeownership. You cannot put a dollar value on "living the American Dream".

Financially, homeownership usually provides tax advantages to the home owner (Check with your tax advisor to be sure). The other financial reward is home appreciation. Over time, we as a nation have averaged approximately the same rate of housing appreciation as the rate of inflation. This tells me that owning a home is a great way to hedge against inflation.

What are the risks in not buying a home? There are a several high risks in not buying in times like these: First, not buying a home in times with huge inventory levels reduces the chances of buying what you want. With so many choices, one can be highly selective as opposed to when inventory is low. Another risk is missing the bottom of the market. In some desirable areas, inventory levels are already less than half of what they were 18 months ago. But realistically prices may not escalate too soon.

BIGGEST RISK TODAY:

The most pertinent risk today is related to interest rates. Rates are low, very low. So low in fact, it should be one of the most pressing issues of the buyers' decision making process. I have several examples of how critical the interest rate is when buying a home. Interest rates directly affect the purchasing power of a buyer. Lets' look at some of the differences in purchasing power of two example rates or the current rate of 4.875 % vs. a great rate of 6.50 %: (Principle and interest payments to be compared only.)

• $1000. P&I @ 4.875%, Mortgage Loan amount of $188,900.
• $1000. P&I @ 6.500%, Mortgage Loan amount of $158,211. (Loan difference of $30,689)
• $1500. P&I @ 4.875%, Mortgage Loan amount of $283,442
• $1500. P&I @ 6.500%, Mortgage Loan amount of $237,316. (Loan difference of $46,126) 
• $2200. P&I @ 4.875%, Mortgage Loan amount of $415,750
• $2200. P&I @ 6.500%, Mortgage Loan amount of $348,064. (Loan difference of $67,686)

I will let each of you decide how important this is to you. However, I find that this is a strong argument to purchase today. In my opinion, the risk of prices going down further is nothing compared to the risk of interest rates going up. If you would like to discuss this further or the plans to purchase a home in Arizona, please call me (623-680-2081) or email me jim.kuttner@remax.net anytime.

Today I found 87 properties on ARMLS that are priced above $1,000,000 for sale in Peoria and Glendale.  Would you like to know how many homes over $1M have sold in last 12 months in Peoria and Glendale? .....The answer  is 13 (Peoria had 7 and Glendale had 6).

Statistically speaking, the number of homes listed, divided by the yearly sales total tells us that we have an 80 month (6 Years, 8 months) inventory. Ouch! I would like to think that in less time than 6 years, we will be well into another bullish real estate market. But until we turn the corner, how long can these sellers last? Some will sell, some will change their minds, some will lose there homes, and if I know some of these people well enough, some will still be on the market waiting for that elusive buyer.

What should you do as a buyer today? You should consider offering a price that makes sense to you. How do you determine the best amount to offer? The most common method is to base offers on recent sales. Whatever the offer, it does not hurt to make that offer. Of course there are offers that will not work based on a number of factors to include the ridiculously low offer. Yet a reasonable offer that can be supported by data is something that many sellers are waiting for anxiously.

How much longer will this market continue? Noone can be quite sure. But I am pretty sure that our local population will continue to grow among the highest rates in the nation. I am also pretty sure that they need to live somewhere. 

In essence, the program works like this....

First-Time Home Buyer Tax Credit at a Glance

• The tax credit is available for first-time home buyers only. (See frequently asked questions below to see the definition of first-time home buyer).
• The maximum credit amount is $7,500.
• The credit is available for homes purchased on or after April 9, 2008 and before
  July 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
• The tax credit works like an interest-free loan and must be repaid over a 15-year period.

More great information from the NAHB (National Association of Home Builders)

Tax Credit at a Glance

Frequently Asked Questions

The Law's Other Provisions

Please contact us if you have questions about this or other real estate related issues. We strive to provide the most up to date and relevent information for you.

The Kuttner Team at RE/MAX Professionals is providing the information on this web site for general guidance only. The information on this site does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action on this information, you should consult a qualified professional adviser to whom you have provided all of the facts applicable to your particular situation or question. None of the tax information on this web site is intended to be used nor can it be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

With that said, I predict that we will look back at this time and see that the real estate bottom in Metro Phoenix has been reached. Does that mean we are on our way back up? No. However, the bottom is a good place to be if your a buyer. We may bounce around for another year is my guess. Of course, macro-economic factors can prolong this bottoming experience.

Technically, we can now look back to when the slide officially began. The Phoenix market began to round off in October of 2005 and started downward around Spring of 2006.  So officially, we have been in a declining market for over two years. This being said, prices have come to a point in many areas that allow for homes to be purchased at levels "pre-bubble".

One of the indications that I have been watching is the Rent Rate vs. Mortgage payment comparisons. You can talk to your lender about this one. I can tell you that if you are purchasing a home under $180,000, depending on a number of factors I would be happy to discuss with you, your payment should be pretty close to what rent payments are in that area.

Why is that so significant? Not only does that cause renters to think twice about renting or buying, but investors love to see that they can cover the costs of a rental with a rent payment. When you realize that most investors are putting down 20% when they purchase investment properties, that most certainly brings the rent/mortgage payment even closer.

How does this affect the normal buyer? Competition for these affordable homes is picking up speed. The last several offers that I have written, ended up having multiple offers. Does this mean that the market has bottomed? We won't know right away. Once we hear that news from the mainstream media, we will certainly have passed the "bottom".

One more thing...You may ask "what type of home can you possibly find for 180K?" The answer may surprise you.

Please contact me if you have any questions about this article or if you need some assistance buying or selling today.