Archive for September, 2009

Looking for a reason to buy real estate? How about free ice cream?

This from my Arizona Republic real estate column (permanent link):

When I was a kid, my Uncle Jack, my mother’s oldest brother, told me a story I’ve never forgotten. He was at a little county fair way out in corn country. Nothing special, just beauty contests for hogs, cheesy little rides and sticky, sugared confections.

Late in the day, the ice cream vendor decided to pack it in, announcing that he was giving away what was left of his inventory. People elbowed their way to the front of the crowd, so eager were they to get something for nothing. They walked away with the ice cream piled into their bare hands, rushing off to their cars, leaving a trail of melted drips behind them.

The lesson I took from my uncle’s story was that those folks didn’t really want ice cream. They were willing to get themselves dirty, and to get their vehicles dirty, just to have something for free. Most of them probably didn’t even eat the ice cream, and they certainly couldn’t have enjoyed it. Imagine trying to inhale a glutton’s quantity of chocolate-fudge-swirl before it melts all over your clothes.

Could that be what’s going on right now with the $8,000 first-time home-buyer’s tax credit? I happen to be carrying three listings that are undeniably “investor’s specials” — which means they’re a good buy, but they need a lot of work. Even so, my phone is ringing off the hook with agents trying to sell those houses to owner-occupants — folks with very little cash trying to get an FHA loan so they can buy a house, thus to get $8,000 in “free” money.

Do those buyers really want homes, or do they just want that free money? What will happen to the properties when the $8,000 is spent? Should we dial the clock back to 2006 to see if anything looks familiar?

Meanwhile, the National Association of Realtors is campaigning for even more “free” money to bribe even more otherwise-unmotivated buyers. The only thing that could make the deal sweeter would be a double hand-full of “free” ice cream.

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When the weather finally breaks in Phoenix — it breaks for ten solid months of pure paradise…

This from my Arizona Republic real estate column (permanent link):

If you live in New York or Boston or Chicago, there will come a day in the Spring when the cold will seem to be in full retreat. The sun will be shining. The icicles on the trees will be melting, and the tickle of the cold drops of water on your hair and neck will make you want to throw your arms out wide and rejoice in your release from the awful prison of Winter.

That happens in Phoenix, too, but it happens six months earlier, on September 15th. Mid-March has its own charms, when the citrus trees open their blossoms and the air is thick with the nectar of heaven perfected. But it’s when the Summer breaks in Phoenix that people come outdoors, knowing that the next ten months will be simply perfect.

Consider: On August 15th, the late-afternoon temperature could be 115 blistering degrees. The sun will be relentless, seeming to hang for hours above the horizon, seeming never to set. The relative humidity will be 40% or more — which doesn’t sound too bad until you remember the temperature. Late in the day, huge storms could come thundering into the Valley of the Sun, flooding the low-lands and even tearing the roofs off of older houses.

That season — we call it “the Monsoon” — lasts from July 15th to September 15th. But when September 15th rolls around… paradise ensues. Daytime high temperatures drop to below 100 and the relative humidity tops off at below 10% — so dry you can smell the dry leaves and pine needles baking in the sunlight.

That might still sound too hot to you, but it’s not. It’s just perfect, an ideal time to be outdoors — all day and all night. There is simply no place like Phoenix, no place on Earth. We suffer, slightly, during the Monsoon, but we are repaid with ten months of the kind of weather that other cities are lucky to see for ten days in any given year.

And Winter — which you are just now beginning to dread — is our most perfect season of them all…

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Are banks “warehousing” foreclosed homes in the Phoenix real estate market? If so, sooner or later something will have to give

This from my Arizona Republic real estate column (permanent link):

Break out the champagne! Prices for bread-and-butter resale homes in Metropolitan Phoenix were up for the month of August! Hurray!

“Up by how much?” you ask. Well… Not very much, alas.

The average price for a three-bedroom, two-bath, stucco-and-tile American Dream home was $119,666 in July. In August, that number had risen to the lofty sum of — wait for it — $119,872.

In any other business, a difference like that would be written off as noise, but in real estate — hot dang! — it’s a bonanza!

Here’s what’s really happening: Banks are foreclosing on many, many houses, but they’re only dribbling a few at a time into the marketplace. In conjunction with added demand caused by the $8,000 first-time home-buyer’s tax credit, we’re seeing what looks like a shortage of available homes.

And yet, even in these straightened circumstances, prices are essentially flat. As an example, the average price for these homes was $121,898 in March.

One theory has it that the banks are releasing just enough inventory to maintain stable prices. That’s a satisfying explanation — given that it conforms to the observable facts — but who knows if it’s true.

Meanwhile, if the banks are in fact warehousing ever-increasing quantities of homes — foreclosed upon but not listed for sale in the resale market — eventually something will have to give.

Even though the banks might own those homes “free and clear,” there are still carrying costs associated with warehoused homes. Lawns must be mowed — or at least weeds must be chopped back. Roofing tiles will crack and break away, exposing the home to water damage. Pests of all sizes will invade the home, some to eat the wood, some to steal the appliances, the piping, the wiring — whatever is left undefended.

If we assume that this is true — that banks are acquiring foreclosed homes at a faster rate than they are releasing them into the resale market — then sooner or later something has to give. The banks simply cannot warehouse those homes long enough for the market to recover.

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Even though much of the current real estate “news” is really just hype, there can still be good reasons for you to be in the market

This from my Arizona Republic real estate column (permanent link):

Get a load of all that great housing news! Median prices are up! Sales volumes are up! The prognosis for the future? Up, up, up!

Here’s a different take: If it looks, walks and talks like hype, it’s probably hype.

Are houses selling well, compared to a year ago? They are — but the federal government is giving first-time home-buyers $8,000 in free money to buy houses right now. If that tax credit is not extended or replaced with something even more generous, the music will stop on November 30th.

And while median home prices may be up, prices for homes that normal working people actually buy are flat at best — and they have been trending downward since December of 2005.

But what about the shortage of available homes you have read about? What about the multiple offer scenarios, with homes selling for thousands of dollars over list price?

What would you expect to happen when you artificially stimulate demand at the same time that you artificially limit supply? We should be doing what your grandpa used to call “a land-office business.” Instead, even with $8,000 in free money, prices are still trending downward.

And that artificially-limited supply — all of the foreclosed homes that banks are withholding from the marketplace — will flood the market sooner or later.

If you’re in the real estate market right now, what you should do depends on your circumstances.

If you’re a seller, make a deal. Your carrying costs will almost certainly exceed any gain you can hope to realize by waiting out the market.

If you’re a first-time home-buyer, jump. If you’re not under contract by October 15th, you’ll probably miss out on the tax credit — and houses are not easy to get, taking account of the artificially-limited supply.

Buying with a loan? Interest rates are low for now, but they may not stay that way.

Buying all cash? Sit tight. As sweet as prices look right now, it seems likely they’ll get a lot sweeter when the banks finally release all the homes they’ve been hoarding.

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Does your smart-phone hold within it the future of real estate marketing?

This from my Arizona Republic real estate column (permanent link):

Do you have a smart-phone like the iPhone, Blackberry or Palm Pre? How much time do you spend on it? Is it possible that your smart-phone is your primary interface for accessing the internet? If you’re not there already, can you foresee a day when that might be the case?

It’s certainly that way for us, and we see smart-phone surfing as the next big wave in internet use. Because of that, we’re devoting more of our marketing efforts to promoting real estate by smart-phone.

As an example, we just added SMS messaging from a company called Drive-Buy Technologies. If you happen to drive by one of our listings, you can text a short message to a pre-set SMS account number and you will get a return SMS message with a link to a mobile web site featuring property details, photos and a link to that property’s main web site.

Want to see it in action? Text HOUND1 to 88000.

I’ve never been a huge fan of video as a real estate marketing tool. But smart-phone technology is changing my opinion. The integration of YouTube into smart-phones is so seamless that touring a home by video — as you sit outside in your car — is suddenly a viable option.

Another use for real estate video on smart-phones would be a sixty-second neighborhood tour — photos of houses, nearby stores and restaurants, schools and parks. And that video might link back to a Google map of the neighborhood, with each featured landmark shown on the map.

We’ve also just added the SmarterAgent smart-phone MLS client. This is a tiny app that gives you access to the full Phoenix-area MLS database. You can search for homes any way you want — by address, zip code, school district, MLS number. Even cooler, the app will use your smart-phone’s built-in GPS system to show you listings at your current location.

Is the smart-phone the future of real estate search? Maybe not, but when you spot the house of your dreams, won’t it be nice to find out all about it — right there on the spot?

You can download our smart-phone MLS client by clicking on this link, or simply text HOUND to 87778.

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