Tags: Clarksville TN, home buyers, homeowner, market value, moving, real estate, real estate agent, real estate market, second home

If you’re a late “Boomer” or a “Gen X” or “Gen Y’er,” you’re likely looking for a place to position assets given the extreme volatility of U.S. equity markets and paltry returns of money market instruments and other safe havens.

People looking for family-size houses to rent in Phoenix-area neighborhoods have far fewer choices.

Since September, the number of available rental homes in metropolitan Phoenix has dropped by 40 percent, and probably even more than that when it comes to three- to four-bedroom homes in desirable neighborhoods.

The sharp drop is another ripple effect of the foreclosure crisis.

At first, foreclosures increased the number of houses in the rental market. And people who lost homes to foreclosure or short sales, or who just walked away from underwater mortgages, found they could rent similar-size houses, often in the same neighborhood, for less than their mortgage payment.

In many of the region’s newer neighborhoods, even tenants with bad credit could negotiate lower rents and how long they wanted to stay.

But in the past few months, as more of those former owners became renters, demand for those three- to four-bedroom rental homes climbed. And as lenders foreclose on more homes but are slow to resell them, the number of available houses has dropped. When houses do come on the rental market, rents are rising and landlords of family-size homes are receiving multiple offers and filling houses in days.

“The demand for single-family rentals is clearly outstripping the supply, causing an unprecedented fall in the inventory of available rentals,” said metro Phoenix housing analyst Mike Orr, who publishes the Cromford Report. “The trend shows no sign of stopping.”

Orr said many Phoenix-area apartment complexes still are having a tough time attracting tenants, but rental agencies managing homes have waiting lists.

Rental search

Melissa Flores is a mother of three who lost her Avondale home to foreclosure in January. Ever since then, she has been looking for a house near her children’s elementary school. Flores has made offers on more than a dozen three-bedroom homes in Avondale and Surprise. But each time she lost out to other renters who were either willing to pay more or had better credit records.

“I knew people who lost homes and rented houses blocks from their old home,” she said. “I thought at least I could keep my kids close to their school and friends.”

Eight months ago, according to Orr, there were 5,460 rental houses listed on the Arizona Regional Multiple Listing Service. Now, there are about 3,100. Not all metro Phoenix rentals are listed on the MLS, but market watchers say rental activity on the Realtor-run site is representative of the overall market.

“The rental market is really tight for decent-sized homes now,” said agent Brett Barry.

Barry recently searched north Phoenix for a family who lost a home in the area to foreclosure. There were only four houses available with monthly rents that the family could afford. Six months ago, Barry said, the family would have been able to choose from at least 20 rentals in the area.

The rental market isn’t nearly as competitive for small houses or condominiums, market watchers say.

Dave Zundel, co-owner of a Phoenix rental-management firm, said many investors immediately opt to buy lower-end homes, thinking those houses will draw the most renters.

In fact, he said, the upper- to middle-income type of home currently is considered the rock-solid investment for landlords.

“We don’t have enough of those homes available for rent now,” Zundel said.

Forecast

Metro Phoenix foreclosures and short sales hit a record in March. But the number of rentals available for the displaced homeowners from those deals isn’t climbing at the same pace.

Flores heard that more three-bedroom homes may soon be up for rent in her old neighborhood as investors like the one who bought her home turn houses into rentals.

A year ago, investors were buying a few thousand homes each month and turning them into rentals. But now, lenders are holding on to more of their foreclosure homes as they work to catch up on a backlog of delinquent mortgages. So, the number of houses in the pipeline to possibly become rentals has dropped.

What had only recently become a pattern among displaced homeowners – renting in their old neighborhood – is now far less of an option. And even when houses come on the rental market, rents are now running close to or above comparable mortgage rates.

“If the rental inventory continues to fall in this way,” Orr said, “it is very likely that average rents for homes will start to rise in the not-too-distant future, something that hasn’t happened for a very long time.”

The large and stable lenders in the US are more than happy to provide mortgages for Canadians.  

From 4.25 percent interest

30 Year Fixed Rates

No Pre-pay penalties

 
Q.  What is the minimum down payment required to get a mortgage? The minimum down payment as of October 2009 is 25 percent. One financial institution was offering 20 percent down but they discontinued that program recently. As a general rule it is normally between 20 and 30 percent. Plan for 30, just to be on the safe side.

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Q. Can I put down additional money above the amount of my mortgage payment? As much as you like. The amount will be applied to the principal. 

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Q. Should I set-up bi-weekly payments? Many Canadians ask about setting up bi-weekly payments as this is an effective strategy in Canada. With a US mortgage the advantage is not the same and in fact it may not be in your best interest. The banks will accommodate your request but there are often hidden costs and fees involved. I discourage bi-weekly payments on a US mortgage because the same thing can be accomplished by making an extra payment on your mortgage at your convenience. ******************************************************************************************************************************************************************************** 

Q. Can I pay cash for a home? Yes. In fact it makes the transaction easier.

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 Q. What Cost are Involved in Purchasing a Property in Arizona? Most of the cost involved in purchasing a property will be fees that you pay to the lender. This is primarily done through a title company. In Arizona, the title company handles the transaction, so there isn’t the cost of an attorney. You will also need to pay for a home inspection, termite inspection, an appraisal, the escrow (title) fee, title insurance, recording fee, property taxes and homeowners insurance. A good rule of thumb is to figure your closing costs will be approximately 2.5% on the purchase price of the home. This cost will be less if you are paying cash for a property. Arizona does not have a real estate transfer fee. The seller pays the commission for the real estate agent.

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Q. Is the process of buying a home in Arizona very different than purchasing in Canada? The process is similar to buying in Canada with a couple of exceptions. A major one is that the closing agents are Title Companies as opposed to attorneys. Instead of the transaction and property title being insured by the attorney it is insured by the Title Company, which is governed by the Arizona State Banking Board.

America’s Most Underwater Housing Markets

by Luke Mullins
Friday, March 19, 2010provided by

Negative equity–what you have when you owe more on your home loan than the property is worth–is one of the defining features of the still-unfolding mortgage crisis. It’s a particularly nasty problem because it can lead to all sorts of unpleasant outcomes for the real estate market and the economy as a whole.

 

More from USNews.com:• Slideshow: America’s Most Underwater Housing Markets• Tips for Selling a Home in the Off Season • America’s Best Places to Live

 

Having negative equity, which is also known as being “underwater” on a mortgage, makes homeowners more likely to end up in foreclosure. It restricts a borrower’s ability to refinance or buy another home, which in turn stifles demand for housing. It even reduces the flexibility of the labor market, since underwater homeowners are less willing to leave town to take a different job, says Stan Humphries, the chief economist at Zillow.

“We have never had negative equity like this at the national level in as many different regions as we have now,” Humphries says. To get a better sense of the cities with the greatest concentrations of negative equity, Zillow provided U.S. News with data that detail the percentage of mortgage borrowers who are underwater in 142 distinct markets throughout the country. Based on this research, we compiled the following list of America’s most underwater housing markets. (Please note: We chose no more than one city per state.)

 

1. Las Vegas

 

Las Vegas
© Getty Images

 

Las Vegas was ground zero for the housing market’s historic boom and bust. Loose lending standards and speculative fervor helped send home prices surging more than 104 percent from 2002 to their 2006 peaks, according to Moody’s Economy.com.

“We all knew in our hearts it was unsustainable and there had to be a correction,” says Larry Murphy, the president of SalesTraq. That correction came as the housing bubble popped and the economy tanked: Home prices in Las Vegas fell more than 56 percent from 2006 to the third quarter of 2009. This steep decline has pulled a vast swath of mortgage borrowers underwater.

“If you bought a home in Las Vegas since 2004 up to about 2007, whatever you bought–I don’t care if you bought a big house or a little house, in a great neighborhood or a crummy neighborhood–it’s worth about half what you paid for it,” Murphy says.

More than 81 percent of single-family home mortgages in Las Vegas had negative equity in the fourth quarter of 2009, according to Zillow. And it may take 20 years for some of these home values to climb back to the levels they hit at the peak of the housing boom, Murphy says.

2. Merced, Calif.

The housing crisis that has rocked Merced, Calf., was initially linked to rising property values in relatively nearby metropolitan areas like San Francisco. As real estate became increasingly unaffordable in the bigger cities, many would-be home buyers started exploring options in smaller markets, such as Merced.

“A number of people said, ‘Hey, I have got a couple of choices: I can get a 1,000-foot condo in San Francisco, or I can move east and I can get myself a fairly significant home for the same price,’ ” says John Walsh, the president of DataQuick. Although this trend increased real estate demand in Merced, prices appreciated even faster as exotic mortgage products and investor interest hit the market.

Area home prices jumped nearly 129 percent from 2002 to 2006. But after the euphoria subsided, home prices crashed more than 72 percent through the third quarter of 2009. This rapid deflation dragged about 64 percent of single-family home mortgages underwater by the fourth quarter of 2009, according to Zillow. Walsh says it could be 10 to 20 years before Merced home prices reach former peak levels.

3. Phoenix

 

Phoenix
© Getty Images

 

As exotic mortgage loans and investor demand swept through the market, home prices in Phoenix jumped more than 101 percent from 2002 to their 2006 peaks. Jay Butler, an associate professor of real estate at Arizona State University, says many people who purchased property in Phoenix during the boom felt pressure to get in on the action. “You had [real estate] seminars all over the place, you had ‘flip this’ shows,” Butler says.

“You were constantly being fed a barrage that if you weren’t actively participating in this thing, you were not only denying yourself a great bit of wealth but your kids [and] your grandkids.” But once the music stopped, the housing market in Phoenix was clobbered. Home prices dropped more than 52 percent from their peaks through the third quarter of 2009. And as of the fourth quarter of last year, nearly 62 percent of single-family home mortgages were underwater, according to Zillow.

4. Orlando

Like other cities in Florida, the Orlando market saw tremendous demand from investors during the first half of the previous decade. Some were looking to cash in on the appreciating market through short-term property flipping, while others were buying properties for vacation homes. Although the market attracted interest from buyers in the Midwest and Northeast, condo developers also marketed developments specifically to foreign buyers, particularly in the United Kingdom, says Jack McCabe, CEO of McCabe Research & Consulting.

“It’s almost like [the British] were setting up another colony in the United States,” McCabe says. Abetted by easy credit, such demand helped send home prices surging by more than 102 percent from 2002 to the market’s peak in 2006. But the subsequent crash has been painful. The nearly 48 percent drop from the peak through the third quarter of 2009 has pulled 58 percent of single-family home mortgages in Orlando underwater, according to Zillow. And McCabe isn’t optimistic about a quick rebound. “For the condo or condo conversion owner, literally they may carry them out feet first before they ever see that property reach 2006 values,” he says.

5. Greeley, Colo.

With 45 percent of single-family mortgages underwater, the Greeley, Colo., market has among the higher concentrations of negative equity in the nation. The predicament is rooted in an increase in smaller homes built during the first half of the previous decade that were purchased with risky, subprime mortgages, says Randy Moser, the president of the Greeley Area Realtor Association.

“If you had a 550 credit score, you could maybe even get 110 percent financing [and] roll in your closing costs,” he says. But after many of these buyers began falling behind on their payments, area foreclosures surged, and home prices fell about 15 percent through the third quarter of 2009. “We were probably one of the first counties in the United States that went into the foreclosure mess,” Moser says.

6. Bend, Ore.

 

Bend
© Getty Images

 

From 2002 to early 2007, home prices in Bend, Ore., jumped by 99 percent, as second-home buyers and retirees were drawn to this community. But after the housing bubble popped and economy eroded, home prices have slumped some 32 percent through the third quarter of 2009. “We are seeing homes that people bought for $2.5 million now selling for under $1 million,” says Kathy Ragsdale, the CEO of the Central Oregon Association of Realtors.

Ragsdale says the initial phase of the downturn was triggered by evaporating demand from second-home buyers. But more recently, as unemployment has surged, many residents have found themselves unable to make their mortgage payments. Today, more than half of the residential property transactions in Bend are distressed sales, Ragsdale says.

“It’s huge when somebody stands up in a meeting and says, ‘I have a home for sale, and by the way, it’s not a short sale,’ ” she says. As of the fourth quarter of last year, roughly 41 percent of single-family home mortgages were underwater, according to Zillow.

7. Minneapolis-St. Paul

Although this area is far removed from the cities most closely associated with the housing bubble, home prices in Minneapolis-St. Paul inflated significantly in the early part of the previous decade. Real estate values increased nearly 34 percent from 2002 to 2006. Brad Fisher, the president of the Minneapolis Area Association of Realtors, says subprime lending played a key role.

“Outside of the coasts, the Minneapolis-St. Paul area was one of the higher areas [of] subprime loans,” Fisher says. “We have paid a price because of that.” The subsequent 29 percent price decline through the third quarter of 2009 pulled nearly 39 percent of single-family home mortgages underwater by the fourth quarter of 2009, according to Zillow.

8. Memphis

 

Memphis
© Getty Images

 

Home prices in Memphis didn’t surge as aggressively as other markets during the boom. But pockets of subprime mortgages–coupled with a modest slump in prices over the past three years–have created a notable concentration of negative equity. Real estate values increased about 12 percent from 2002 to 2006, but prices then fell nearly 18 percent through the third quarter of 2009.

And as of the fourth quarter of last year, roughly a third of all single-family home mortgages were underwater, according to Zillow. Glenn Moore, the president of the Memphis Area Association of Realtors, argues that the negative equity is concentrated in a small part of the overall market. “It is limited to mostly suburban areas and maybe some areas where there was maybe some predatory lending going on,” Moore says.

9. Cleveland

Home prices in Cleveland increased 13 percent from 2002 to 2006 but then fell nearly 16 percent through the third quarter of 2009. “There was a little bit of overinvestment in housing, and the economy started weakening,” says Celia Chen of Moody’s Economy.com. “[Cleveland] entered recession before the rest of the U.S., and I think weak economic conditions have pulled down home prices.” Exposure to subprime lending has also played a role in the real estate market’s decline. Roughly 32 percent of single-family home mortgages were underwater as of the fourth quarter of last year, according to Zillow.

10. Grand Rapids, Mich.

Real estate values in Grand Rapids, Mich., increased 15 percent from 2002 to 2005 and then fell about 13 percent through the third quarter of last year. As of the fourth quarter of 2009, roughly 29 percent of single-family home mortgages were underwater, according to Zillow. The weakness in the housing market is linked to the area’s deteriorating economy, Chen says.

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Philip McKernan is an inspirational speaker and successful international real estate investor. He has spoken at many different events including conferences, retreats, team building events, real estate meetings and business conventions. He has inspired hundreds of people through his presentations and workshops and has helped many individuals to accomplish their dreams and goals.
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While the Stock Market offers high returns, many investors have found it to be a volatile and dangerous place. This is especially true for the non-professional investor as there are many hidden external factors that can effect a financial investment. Added to this, the major Stock Markets have been underperforming generally, and many investors are now turning to property as a far better option than other forms of investment.

No other investment allows you to purchase with other peoples’ money (The Bank’s) and pay this back with other peoples’ money (the rental income from tenants).

Buying specifically for investment purposes allows the investor to remove the emotion from the purchase and look at the property purely as an investment vehicle. This may mean utilizing our re-assignable contract option and selling at a substantial profit prior to completion while carrying no redemption penalty. Alternatively a “buy-to-let” situation can generate a reliable rental income, incorporating substantial capital appreciation.

If you own property, you can release equity against this. Although there is no law that states that your property will increase in value each year, it is generally accepted that a well maintained property in a reasonable area will appreciate in value.

It is a well documented fact that on average the value of a property doubles every seven years

When the US economy entered a downturn, the real estate market in Phoenix was hit hard. During the boom the city had a lot of space to grow so speculative investors over-built and over-financed resulting in a sea of foreclosed and distressed properties. With single family home CAP rates of 9-10 percent and future appreciation, historically high returns are likely. The bottom line is that Phoenix is a buyers market with unbeatable bargains and the cash flow numbers really work. This city will emerge with a strong, re-newed, expanding economic base.

Here is some of what the city of Phoenix has to offer you as an investor:

Phoenix is top 5 in the US in terms of population growth
Residential resale’s are at a 5 year low which allows for large return on investment
Low unemployment rates
Low taxes
Low interest rates
High job growth
Arizona is a landlord friendly state and quality tenants are easily found
High appreciation rate
Phoenix has a diversified economy, with an educated workforce and is a magnet for corporations like Intel and Boeing
Beautiful weather – sunshine 325 days of the year
Great golfing community
Convenient airport access