Archive for August, 2008

With its new iPhone application, Trulia.com is taking on-line real estate search to the streets

This is my column for this week from the Arizona Republic (permanent link). There is a fuller review of this new technology here.

 
With its new iPhone application, Trulia.com is taking on-line real estate search to the streets

So who is winning the Realty.bot race, Trulia.com or Zillow.com? Your guess is as good as anyone’s, but this week marks a decisive change in the game: Trulia just released an iPhone application.

Trulia Mobile will offer a limited set of location-based searches from Apple’s iPhone, from an array of other smartphones and from Dash Navigation GPS devices. The user-experience will differ by device, but the design premise is based on location-sensitivity: Your iPhone always knows where you are, so it can interact with Trulia’s file servers to show you a list of nearby listings or open houses. You can get a detailed summary for each home on your list, and you can then email the listing to a friend, contact the listing agent directly or map the home so that you can hop over for a quick peek.

It’s hard to argue with the design premise: If people are going to go out house-hunting on their own, whether they are really looking for a house or simply touring open houses for decorating ideas, why not use the location-sensing power of modern electronics to hook them into Trulia’s listings database?

The ability to contact the listing agent plausibly increases the likelihood of dual agency transactions, but the fact of life is that many, many people are at least starting their home search without the advice of a buyer’s agent.

But here’s the bonus that popped out at me when I heard about Trulia’s iPhone application: Listing agents who want to compete for mobile-empowered buyers need to get their listings into Trulia and they need to keep their open house schedules up to date. I like anything that makes listers more diligent in their duties to their clients.

The iPhone application is slick and useful as written, this because “data is the new Intel-inside” and Trulia has a rich store of data to draw upon. The usual caveats about opt-in versus MLS listings apply, along with concerns about decay among voluntarily-maintained listings. But, all that notwithstanding: Trulia’s mobile-computing initiative is cool.

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Buy low? Sell high? You can’t sell high for now, but prices are low enough that a buy-and-hold strategy could pay off handsomely

This is from my Arizona Republic column (permanent link):

Last week I met with a potential real estate investor. She’s an investor because she’s got the money, the credit and the will to dip her toe in the water. She’s a potential investor because she hasn’t yet been a landlord.

With new investors, I talk about premium suburban single-family rental homes. This is normally the safest, most economical way to start a real estate investment plan in Phoenix. That’s especially true right now, when the right rental home will be cash-flow positive from the outset.

But I also talk about other income opportunities in real estate, if only because land-lording is not for everyone. I would not advise a first-time investor to take the plunge in a large multi-family community or a strip mall, but there are plenty of other ways to take advantage of our current market conditions.

An example? Flipping. There never was heard a more discouraging word, but flipping has a horrible reputation because a horde of TV-educated tycoons bought at the top of the market and sold their refurbished masterpieces at auction. Now, when entry prices are low and trending lower, a slow flipping strategy promises nice rewards.

Here’s one slow strategy: Find a great flip candidate at a rock-bottom price. Buy it to own as a rental. Hold it in that state — with the monthly cash-flow covering your costs — until prices recover to your satisfaction. Then do the refurb and sell.

Here’s another one: Buy your cheap refurb candidate and move into it. Redo the home slowly, room by room, especially when the materials for doing a particular room are very cheap. Sell it after you’ve owned it for five years or more and take the capital gain tax free.

There is a common investment idea behind these strategies: Buy low. Sell high. You can’t predict when you’ll be able to sell high, but you know for sure you can buy low right now. If the investment property is either self-amortizing or your own residence, you can afford to wait for the market to turn.

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Amazing bargains abound in the Phoenix-area real estate market — and here’s a web site full of photos to prove it

I wrote last week about the incredible bargains to be had in the Phoenix resale real estate market. Dumpy homes in bad neighborhoods are very, very cheap, but there are so many Short Sales and Lender-Owned homes on the market right now that you can buy choice homes in choice neighborhoods for amazingly low prices.

If the run-up in prices in 2005 was caused by “irrational exuberance,” then our current market is driven by “irrational despondency.” The question for people who are not irrational is this one: How low can these prices go?

I’ve been shopping for a getaway-home for an out-of-state buyer. I’ve built a web site to show off some of the homes I’ve been previewing. The winner so far? A newer three bedroom, two bath home with a pool — on a golf course — with custom tile mosaics — for $110,000.

It’s a sad thing for the folks who lost these homes — and their lenders are no doubt shedding salty tears, too. But if you have the means to buy a home in the Metropolitan Phoenix area right now, you can get incredible values for your money.

You can visit the web site or just click on one of these links to see these homes:

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What went wrong in the Phoenix real estate market? We told homeowners to treat their homes like investments — and they did…

This is my column for this week from the Arizona Republic (permanent link).

 
What went wrong in the Phoenix real estate market? We told homeowners to treat their homes like investments — and they did…

If you were to turn back the clock on the Phoenix real estate market by four years — that would be just about right.

Judging by prices for bread-and-butter homes, it’s just as if the last four years didn’t happen. The average stucco and tile suburban dream home sold in July of 2008 for almost the same price you would have paid for it in July of 2004.

A lot has happened since then, of course. The 1,400 square foot single family home you could have had back then for $150,000 soared to $250,000 by December of 2005. That seemed like $100,000 in free money, and, regrettably, many people borrowed against that paper equity in their homes. Even if they did not, it has proved difficult to eradicate that entirely imaginary $100,000 from list prices.

The real estate market got hammered good and hard by two very bad ideas. The first is that homeownership is an unlimited good, that everyone should own a home regardless of their circumstances. Governments — and the National Association of Realtors — came up with program after program to induce more and more people to buy homes — regardless of their income, regardless of their credit, regardless of their debt load.

At the same time, lenders threw away all of their old, time-tested, flinty-eyed ideas about thrift, declaring that real estate investment was just like securities investment, the leveraged path to assured wealth.

By the old rules, a homeowner or rental property investor had worked and saved for years to accumulate a down payment. That down-payment was more than enough to cover the foreseeable losses of a foreclosure action, so the loan was secured by the property. Buyers and investors didn’t abandon homes when the market went down, dumping the investment like a declining stock in the face of a margin call.

The market is what it is, but it would be a boon for all of us if we could turn back the clock on those four years and play the game over — by the old rules.

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There’s more to the mortgage relief bill than just mortgage relief

This is my column for this week from the Arizona Republic (permanent link).

 
There’s more to the mortgage relief bill than just mortgage relief

Having trouble making your mortgage payments? You might be able to make a change in your loan, thanks to the mortgage relief bill President Bush recently signed into law. Under the bill, you can convert your high-interest adjustable-rate loan to a lower-interest fixed-rate note if you meet what might, in a declining market, seem to be Catch-22-like guidelines: Your payment must be more than 31% of your income, and your new loan cannot exceed 90% of your home’s value. Help is available — provided you don’t need it.

Starting October 1st, seller-paid down-payment assistance grants will be outlawed for FHA loans. This is bad news for lower-priced neighborhoods in Metropolitan Phoenix, where as many as nine out of ten homes are being sold with down-payment assistance. Expect to see a flurry of this activity in the next two months.

But the left hand gives where the right hand takes away: Buyers who have not owned a home for three years can take a $7,500 “refundable” tax-credit if they buy between April 9, 2008 and July 1, 2009. The credit is to be repaid over the next 15 years.

Perhaps the biggest change introduced by the bill is a revision of the capital gains exclusion rules. Since 1997, sellers have been able to deduct up to $250,000 of the capital gain on the primary residence from their tax burden — up to $500,000 for married couples — if they lived in the home for at least 24 months out of the preceding 60. Under the new law, the deduction will be pro-rated over those 60 months. If you live in the home for the full five years, you will take the full deduction. If you live there for three years out of the five, you’ll deduct only 60%.

In the long run, this will slow down the level of residence-churning seen among monied home-owners. In the short run, expect a lot of pricey homes to sell between now and January 1st, when the old exclusion goes away.

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A hundred under a hundred: Right now, you can buy over 100 rental homes in Suburban Phoenix for less than $100,000

This link is from our new MLS system, and there are still some kinks to be worked out. But, even so, the results are astounding.

What you’re seeing are newer (1995 and later) single-family suburban tract homes — 3 or 4 bedrooms, 2 baths, 2+ car garages, stucco walls, all tile roofs — all listed for $100,000 or less. Some will be short sales, so the prices might be fanciful. Many will be lender-owned, and so they could be in rough condition. But each one of these houses can lease for at least $750 a month, so they will be cash-flow positive from the first tenant.

The fact is, my preference is to ignore all of these houses. The next tier up — $100,000 to $125,000 — are the ones worth having. Premium locations, upgraded amenities, higher potential resale values. But still — the mind boggles.

Right now, as I write this, there are 731 of these homes available for $125,000 or less. Not in insane locations like Buckeye, Maricopa or Queen Creek, but in developed suburbs with easy access to schools, entertainment, retail and jobs. In other words, rental homes that will stay rented, that won’t sit vacant for month after month.

For goodness’ sakes, there are twelve homes available for $125,000 or less in Estrella Vista, the best little subdivision in Goodyear.

If you want, I can build you a custom searchbot that will show you premium rental homes as they become available. What’s a premium rental home? It’s one that will attract premium tenants at a premium rent, will stay rented while you own it, will occasion few if any eviction or repair nightmares, and will sell at a premium price to owner-occupants when you’re ready to move on. Any Realtor can sell you a cheap house. I have been very successful at identifying premium rental homes — profitable to buy, profitable to own and rent, profitable at resale.

This search will expire on September 7, 2008, but I think our inventory of sweet suburban rentals might last a little longer than that. Email me if you want to discuss your opportunities.

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New FlexMLS system is a bold stride into the twenty-first century for Phoenix-area Multiple Listings Service

This is my column for this week from the Arizona Republic (permanent link).

 
New FlexMLS system is a bold stride into the twenty-first century for Phoenix-area Multiple Listings Service

Metropolitan Phoenix got a brand new MLS system this week. MLS is the Multiple Listings Service, the system by which Realtors share their listings with one another. Until this week, the Arizona Regional Multiple Listings Service had been using a computing system called Tempo to share listings. As of this Monday just past, we have switched to the FlexMLS system.

Had you guessed that something had changed? If your Realtor has been sending you listings from a saved search, or if you had been receiving updates to a Tempo Gateway, all that stopped on Monday morning. Chances are your agent has spent much of this week rewriting searches and reestablishing gateways. The FlexMLS system is more robust than anything we’ve had before, but it’s also quite a bit more complicated. It may take a while before things get back to normal.

So why make the switch? For one very good reason, to tap into that much more robust technology. Tempo permitted a crude kind of map-based search, but FlexMLS allows you to select houses from within multiple non-contiguous irregular polygons. So, as an example, I can search for homes that are either within walking distance of Apollo High School or within walking distance of Valley Metro bus lines servicing Apollo High School.

There’s more: The FlexMLS pricing software is comparable to the tools appraisers use. Realtors will have to stretch themselves to learn how to tap this power, but our Comparative Market Analyses are going to be painstakingly accurate.

But not without some growing pains. ARMLS is by far the largest MLS system FlexMLS has taken on so far. This first week has been a trial for the North Dakota company — a strain on their servers, and, no doubt, a strain on their tech support staff as well.

And workaday Realtors are sharing the pain. No doubt many are grumbling, “If it ain’t broke, don’t fix it.” But FlexMLS is a bold stride into the twenty-first century for ARMLS. This transition may not be fun, but it will be a boon to everyone in the long run.

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