Category: Real Estate (page 261 of 266)

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

I wrote this earlier today as a response to a comment, but I think it warrants a post of its own.

Here’s the Cliff’s Notes: After a huge run-up in home values, so far the Phoenix-area residential resale real estate market has given back four percent from the peak in December of 2005. We have a surfeit of inventory, but I suspect that many sellers are loosely-motivated. We have a completely normal number of buyers buying a completely normal number of homes in a completely normal number of days on market at a completely normal level of discounting on price. The idiot newspapers cannot stop comparing current conditions to the middle of the boom, but if the current market is compared to 2003, it becomes clear that, except for the surplus inventory, we are in a relatively normal market.

Whatever might happen in the future in the Phoenix real estate market, it is clear that, after more than two years’ worth of predictions of imminent doom, our oft foretold Armageddon has not yet come to pass. These facts are documented here. The blockquoted matter is snipped from the remarks of my interlocutor.

What makes you so certain that the majority of individuals who are re-selling at the moment are “loosely motivated” as you say?

First-hand experience and peering into the MLS. The surge in inventory started about September of 2005, and, from the beginning, I had the strong impression that many of the sellers were owner-occupants looking to cash out at the top of the market. When I show, I see a lot of homes that are not market-ready. A significant number of homes aren’t even available to be shown.

It seems that this housing run-up has featured a lot of speculation from “flippers” who bought as an investment and plan on selling for a profit.

I do not have this impression. Certainly most of the homes I’m showing (and most of those I represent) are owner-occupied. I have investors with homes for sale right now, but none at fire-sale prices. To the contrary, my investors are doing very well.

For what it’s worth, most mainstream media reports Read more

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

Glen Creno of the Arizona Republic catches sight of The Mole:

That’s especially true these days in metropolitan Phoenix’s post-boom housing market, where nearly everything has reversed since last year’s frenzy. The number of homes for sale on the Arizona Regional Multiple Listing Service increased nearly four times from June 2005 to last month, when it hit a level nearly double what experts consider healthy. Last year, homes sold in about three weeks. Now, it’s about triple that.

Some of the post-boom market figures are closer to historic Valley norms, but many homeowners had their assumptions of what a house is worth and how quickly it should sell recalibrated by the buying craze.

If you can get your mind past the sad fact that the Republic has never heard of a year before last year, it’s actually a fun article about the added value Realtors can bring to their clients.

Technorati Tags: arizona, arizona real estate, phoenix, phoenix real estate, real estate, real estate marketing

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

That sounds like a late-night TV pitch, but it’s actually possible in residential real estate. Housing is distinct from other investment vehicles in important respects. Unlike securities, real estate is a hard asset with an enduring intrinsic value. There are huge tax benefits accruing from owning real property, either as an owner-occupant or an investor. Most significantly, real estate can be leveraged up to 100% of its value.

Yes, you can buy a home with “nothing down.” Through the masquerade of a seller concession, you can even roll the closing costs into the loan, so that you can take possession of a rental property with absolutely no money out of pocket.

Why would you want to do this? Because the purpose of investing your money in real estate is not to own it but to profit from it. Real estate investment books are filled with bad ideas — never buy a cash-flow negative property, buy the cheapest home you can find, buy four-plexes in challenged neighborhoods, pay ahead on your mortgage to increase your equity. These are all terrible ideas because your sole objective should be cash-on-cash return: How much money did you take out of your pocket at the start of the investment, and how much money did you put back into your pocket at the end.

Is a cash-flow positive property a bad thing? No, but a home that is cash-flow negative — if you can afford the negatives out of other sources of income — can be a much better cash-on-cash investment.

Buying cheap is usually a terrible idea. The money from real estate investing comes from appreciation, not rents. Unless you convert the property to a higher and better use, what starts cheap usually stays cheap.

In the same way, buying multi-family properties or other homes in bad neighborhoods is unlikely to be a winning strategy. Your ratio of rents to costs may be better, but your appreciation will almost certainly be worse than buying in a more-avidly-desired neighborhood.

And paying ahead on your mortgage is just dumb no matter where you buy. With a 100% leveraged property, every penny of appreciation is Read more

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

Catherine Reagor of the Arizona Republic actually acknowledges that comparing this year to last year may not be an ideally-informative strategy:

Although the Valley’s housing market is definitely slowing, comparisons to last year’s frenzied sales pace and appreciation gains aren’t a perfect indicator. During 2005, metro Phoenix home prices soared 50 percent and houses were selling within days.

We call this tactic The Mole, in honor of Dr. Evil (who now runs a BubbleBlog from which he hopes to extract milllllllions of dollars). The alleged news is that new-build permits are down from last year. Big surprise. The actual news is that 29,943 have been pulled in the Valley through the end of June, which would have been a record-setting pace were it not for last year. Irresponsible reporting? You bet. Alas, we have no other kind in Phoenix.

Technorati Tags: arizona, arizona real estate, phoenix, phoenix real estate, real estate, real estate marketing

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

Catherine Reagor in the Arizona Republic runs down all the bad news, but there is a better lens for interpreting this information. Take note of M. Anthony Carr in Realty Times:

Buyers scurry, afraid of buying at the height of the market.

So why aren’t builders running scared? Because the underlying principles of a good market remain sound in the midst of the market fears. While nationally, the industry has cooled to “more sustainable levels,” according to the National Association of Home Builders, “The Bureau of Labor Statistics reports strong job gains in many of the fastest-growing states, with 37 states exceeding their pre-recession peak levels of employment in 2005.”

The group recently released a mid-year housing report on its real estate trends website, HousingEconomics.com. A cooling of the market this year will still result in the third highest level of housing starts in the last few years.

That’s why you keep seeing building projects going up. Definitely, not as many houses are being constructed in 2006 as last year, but the NAHB report points to several positive market growth indicators in various regions across the country.

Job growth is continuing upward. Unemployment is dropping. Businesses continue to expand and economists across the country continue to estimate that the need for more housing will stretch beyond the current inventory surplus.

The National Association of Realtors still is holding to 2006 being another very strong year — the third highest on record. NAHB members are still bull on the housing market. What we’re seeing in ’06, it seems, is a transition year. For buyers who have no choice but to buy because of social or lifestyle reasons (birth of new baby, marriage, retirement, in-laws moving in, new job, relocation, etc.) they will buy now and unwittingly pick up a great deal.

For buyers who are too skittish about the market, they will miss a financial boosting opportunity. In markets where it has normalized (D.C., Miami, Chicago, Phoenix) buyers who buy based on rock-hard solid economic evidence, will be excited in a few years that they bought a house low and now stand to earn a handsome profit a few Read more

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

My phone hasn’t rung yet, but my ears are already burning. My column in today’s Arizona Republic: Buyer should negotiate compensation for agent. (A more-permanent link.) This is Ardell’s turf, of course, although my take on The Big Picture is somewhat different. In any case, I expect to have my ears — and, heaven help me, not my hide — well warmed today.

Buyer should negotiate compensation for agent

Last week we established that the buyer pays for everything in the purchase of a home. Why, then, does the seller negotiate the sales commissions?

The short answer is, because that’s the way it’s always been done. The longer answer is not as pretty: Historically, only sellers were represented in a real estate transaction, and, despite efforts at reform, the buyer is still often treated as a second-class citizen.

Consider the buyer’s agent’s bonus, for example. It will be there as plain as day in the listing: “Seller to pay buyer’s agent a bonus of $5,000 for successful close of escrow by Aug. 31.”

What does that say? It says in the plainest possible language that both the seller and the listing agent believe that the buyer’s agent really works for the seller, not for the buyer. The objective of the bonus is to induce the buyer’s agent to push the buyer into buying the home that is offering the bonus, rather than another.

The goal, motive and purpose of a buyer’s agent’s bonus are to give the buyer’s agent an incentive to betray his agency. His fiduciary duty is to the buyer. The seller and the listing agent are using the bonus to “buy” his fidelity.

So what should a buyer’s agent do, when showing a home for which a bonus is offered? Disclose the bonus to the buyer and commit to either waiving the bonus or passing it through to the buyer. There should be no doubts in the buyer’s mind about the agent’s loyalties.

But there’s more to this issue: If the seller can negotiate compensation with the listing agent, why can’t the buyer negotiate compensation with the buyer’s agent?

The short answer is, because it’s never been Read more