Phoenix Scooped Up By Large Investors

If Large Cap Investors are buying........shouldn't you??

The names of the buyers at trustee sales reveal how much of this market is being captured by large players. If we examine trustee deeds issued in Maricopa and Pinal Counties since January 2012, we find the following top ten spenders:

1. THR - 511 deeds - $54M
2. AH4R - 305 deeds - $33M
3. EZ Homes - 339 deeds - - $30M
4. Castle - 58 deeds - $22M
5. THPI - 191 deeds - $22M
6. American Residential - 180 deeds - $21M
7. Nancy Blue - 188 deeds - $19M
8. Colfin (Colony Capital) - 172 deeds - $18M
9. Skyline Vista - 88 deeds - $15M
10. 2012-B Property Holdings - 100 deeds - $12M

THR is in the top spot and they only started to buy in May 2012! They are part of the Blackstone company which holds over $50 billion in real estate assets round the world. They have already bought more properties at the trustee sale in September than they did in the previous 3 months. They are the largest private equity real estate firm and currently have a strong appetite for Phoenix homes. Colfin also started in May but have not bought anything since July, apparently moving to other cities where prices have not moved upwards so quickly. AH4R started in April, when they were very active, but they have not bought anything since August. EZ Homes is a wholesaler who has been operating in Phoenix for many years currently averaging 30 to 40 homes purchased per month. Nancy Blue runs a large fix and flip operation that has been very active since 2008. American Residential is a locally run investment company that buys home to rent and has been active here for several years. Recently we have seen American Residential buy a large number of homes in bulk from other investors such as AH4R. THR have also purchased in bulk from other investors in June and August.

Of course many of these buyers are active in other types of transactions too (REOs, short sales, etc). The above is just based on what they acquire from the foreclosure auctions. Cromford Report Daily Observations

We know the market cannot truly be in full recovery mode until the distress segment is absorbed. Even so, clearly this drag on the market spells opportunity for cash investors (and of course, has for some time). However, for most of us, the most enjoyable transactions are with that 'normal' owner-occupant buyer who wants the best home (and best value all things considered). And yes, they'd like to think that their purchase might appreciate over time. Perhaps the above info helps in the sense that you now know and can give chapter and verse on who's who when it comes to big money players buying local residential real estate for cash flow and upside potential. 

In other words, the message is, if big money is buying, shouldn't you?

September 26th Update

September 26 - Some more observations on the luxury market over $1,000,000 in Maricopa County. In 2012 so far, some 57% of luxury homes sales have been to buyers with Arizona mailing addresses. This is far lower than the 74% we see for for the overall market, but higher than the 53% we saw for the luxury market in 2011. Canadian buyers have slipped from 8.3% to 7.3% while Californians have jumped from 2.7% to 5.2% since last year.Colorado has rocketed into 3rd place with 3.4%, up from 1.8% in 2011. Washington state is steady at 2.6% versus 2.8% last year while Illinois has dived from 3.9% to 2.1%. Texas is also strong, up from 1.0% to 2.6% as is New York, up from 1.4% to 2.3%. So far in 2012 there have been 655 sales over $1,000, 000 and there were 812 for the whole of 2011. To put this in perspective, 2005 had 2,424 sales over $1,000.000, but many of those homes are no longer in that price bracket. Back in 2005, only 0.8% of homes over $1,000,000 were purchased by Canadians and 74% of buyers were based in Arizona. California had the largest number of out of state buyers in 2005 with 5.9%. Cromford Daily Observation

Chris Tiller Comments:

Put another way: 43% of the 655 luxury home sales (over $1M) so far this year have been to non-residents of Arizona rank-ordered as follows:

1. 7.3% Canada
2. 5.2% California
3. 3.4% Colorado
4. 2.6% Washington
5. 2.6% Texas
6. 2.3% New York
7. 2.1% Illinois

Presidential Election Prompts Home Buyers to Wait-and-See

DAILY REAL ESTATE NEWS | TUESDAY, SEPTEMBER 25, 2012

A quarter of Americans say they want to put off purchasing a home until they know who the next president will be, according to a poll conducted on behalf of MortgageMarvel.com of more than 2,500 adults. 

“It’s understandable that a considerable number of people say the upcoming election would give them pause for thought,” says Rick Allen, chief operating officer of Mortgage Marvel. “There has been speculation that tax policies could change depending upon who wins. Some have even indicated that the longstanding deduction for mortgage interest could be eliminated. It appears that mortgage interest rates will remain low for the foreseeable future, so there’s no pressure on people to act before rates rise. In such an environment, I can see that cautious people would take a wait-and-see attitude before making a home purchase.” 

On a regional basis, people in the South had the highest percentage of those who said they’d delay buying a home because of the uncertainty surrounding the presidential election. Meanwhile, Americans in the West had the largest percentage of people who said the upcoming election has no effect on their home purchase decisions. 

Source: “Study Shows 25 Percent of Americans Would Delay Home Purchase Until After Election,” RISMedia (Sept. 24, 2012)

Arizona's Real Estate Rebound

Opportunity Knocks in Mid-Range Luxury

The Cromford Report has a chart (below) called Contract Ratio–a simple algorithm for taking the market pulse each month–from slow to normal to hot. Mike Orr defines Contract Ratio this way:

Contract Ratio indicates how “hot” a market is. It specifically measures the number of completed sales contracts relative to the supply of active listings. It is defined as 100 x (Pending Listings + Active Listings with Contingent Offer) / Active Listings Without a Contingent Offer. The higher the number the greater the buying activity relative to supply. If this number rises then it is a sign of growing contract activity and a positive signal for sellers. Conversely a falling number is a sign of a weakening market – either supply of active listings is increasing or contract activity is slowing, or both. In a balanced market for normal market segments, the value of the Contract Ratio is usually between 20 and 40. When it lies below 20 the market can be considered “slow” or a “cold market”. Above 40 can be considered a “hot market” and when it moves above 100 we regard this as evidence of a “buying frenzy”. In high-end luxury market segments the normal level is lower, usually lying between 15 and 25.


What this graph says is that the current market, averaging all activity in ALL price ranges, is a very hot ‘buying frenzy’ Contract Ration score of 114. While trending ‘cooler,’ still very much in the ‘buying frenzy’ zone over 100.

No doubt the slight cooling trend is a function of at least 3 major factors that have been amply discussed elsewhere—diminishing supply of distressed properties and the rapid appreciation in those lower-end market sector. There’s a seasonal component as well.
The less publicized story is what is happening in the mid-range to high-end, luxury property segment. We have speculated in earlier blog articles about the ‘trickle-up’—that rising prices and fewer underwater homeowners creates a demand for mid-range properties…’trickle-up.’
In other words, upward mobility follows. There are other factors as well, like the increasing availability of financing at continuing record low rates, et al.

For the purpose of this article, let’s apply Mike Orr’s Contract Ratio formula to the mid and upper-range properties for a snapshot of where we are today in the luxury sector.
Using his formula, mid-range homes (between $400K and $800K) have a Contract Ratio of 40. Looking back at his definition—a normal / balanced market being between 20 and 40, the contract ratio of 40 looks pretty good. Especially when we factor in that a normal / balanced market in the luxury sector is between 15 and 25.

Looking specifically at homes over $1M the Contract Ratio is currently 14, or ‘slow.’ Even so, luxury specialists will be quick to point out that the ‘best of class’ luxury properties, when priced ‘right,’ are absolutely selling.
With all of the above in mind, it is fair to say that both investors and owner-occupant buyers may do well to direct their attention especially to the mid-range. Here we find that the bleeding has stopped. The market is stabilizing.

When we look at asking prices in a market with low inventory, prices are on the rise. Pending sales and closed sales have yet to show a significant appreciation trend, but this may well be where a significant investment opportunity lies.

Another mid-price range indicator is the Number of Month Supply. In Scottsdale, where the average sales price is just $497K, there are currently 462 active listings. In that same range there have been 1045 closed sales in the past 6 months, or a market absorption rate of 174 per month. If we divide 174 into 462 we get a number of month supply of less than 3 months! Note: A 6-month supply of homes is considered balanced. Below 6 months favors sellers and explains why mid-range prices in Scottsdale are on the rise–about 5% year-over-year (comparing the average closed $ Sq/Ft over the last 6-months with the same period in 2011).

For buyers of mid-range properties the message might well be that the appreciation train has left the station.

From Moody’s Co-founder and Chief Analyst Mark Zandi comes this: ”We’ve clearly reached a key psychological shift in home buyers’ psychology, where folks are now starting to worry about missing the boat, rather than fearing whatever house they buy, no matter how attractive the price, can only go down in value,”

Time to jump on board?

Quick Update on "Shadow Inventory" Myth and AZ Real Estate

Lender Processing Services just published their latest Mortgage Monitor presentation covering the month of July. This allows us to compare Arizona with the other 49 states and the country as whole. Arizona home loans more than 30 days late but not yet in foreclosure stood at 5.9%, the same as the previous month. Loans in foreclosure dropped from 2.9% to 2.6% and total non-current loans fell from 8.8% to 8.5%. Arizona continues to improve its delinquency rates at the fastest speed in the nation, with the total non-current rate down 24.8% in the last 12 months. California is runner up with a fall of 19.8% and Michigan comes third with a 15.7% improvement. Florida is still the worst state with a non-current rate of 21.1%, but at least it fell by 5.4% in the last year. Still getting worse are Arkansas (up 7.4%), New Jersey (up 7.4%), Hawaii (up 5.1%), Vermont (up 4.7%), Connecticut (up 3.8%), Washington (up 3.4%), New York (up 2.5%), Maine (up 1.5%) and Pennsylvania (up 0.5%). 

 Arizona now ranks 36 out of 50 for overall non-current mortgages. In February 2010 we were number 5. The really shadowy "shadow inventory" is represented by an excess of loans that are late but not yet in foreclosure. These are highest in Mississippi (13.1%), Nevada (10.4%), Georgia (9.7%), Louisiana (9.4%) and Alabama (9.4%). In comparison Arizona's rate of 5.9% is not far above its long term average of 4.5%. Arizona's main problem now is the relatively large percentage of homes that are underwater. Lender Processing Services estimate's Arizona's underwater loan rate at 28.4%, which puts us in 5th worst position behind Nevada (54.7%), Georgia (42.8%), Florida (33.1%) and Michigan (29.8%). Cromford Daily Observations

Market Update - May 2012

HARP II SLOWLY BUT SURELY

The Home Affordable Refinance Program has now been sweeping the Nation, or should I say parts of California, Arizona, Florida, and Nevada for just over a month. HARP II as it is referred to, is the brain child of the President. Never in history has such a program existed. Allow those homeowners with a Fannie or Freddie guaranteed loans, which have been making payments on time, to refinance to a lower interest rate, regardless of how much they owe. Fantastic idea! The problem, Fannie and Freddie do not make loans directly to the public. There is not a Fannie or Freddie “retail” presence. Loans need to be originated by mortgage lenders, and mortgage lenders need to participate in the program for it to work; although they can simply choose not to.

Who wants to willingly take on the responsibility of originating a new mortgage that is greater than the value on the property which is being used as collateral (without an appraisal in most situations)? Some of the risks have been diminished by Fannie and Freddie, but there is still risk. So, if you do have to take back a loan, you now own, for example a $200,000 mortgage and the property (collateral) has a “stated” value of $100,000. That would be considered by most as a bad business decision. Unfortunately for most home owners, the majority of mortgage lenders have taken this stance.

Most of the “Big Banks” and large mortgage servicers do not offer HARP II, and if they do it is offered at excessive costs and with many restrictions. Geneva Financial, LLC is a relatively small community mortgage bank that has lending relationships with over 50 investors; including all the BIG banks that are still in the mortgage business. Of those 50 or so investors, about a dozen offer HARP II at some level. Of those that offer HARP II, only 2 or 3 offer HARP II will little or no lender “overlays.” What that means is that hundreds of thousands of loans are going through a few lending channels. The process is a slow one at best. Ultimately, the good news is that people that are upside-down and been paying higher than market interest rates, can now refinance and in many cases, drastically lower their mortgage payment. It just takes some patience.

HARP II is also changing. The few lenders that do offer HARP II, without notice have changed not only guidelines, but rates; mostly to slow loan submissions. But the GSEs are also making changes. Both Fannie Mae and Freddie Mac have manipulated their automated underwriting engines since the HARP II release, just over a month ago. There will likely be more changes ahead of us. If you currently are in the HARP II refinance process, be patience. It may be a slow process, but we will get it down.

 HARP II RECAP

• Appraisal requirements vary based automated underwriting findings. Most do not require an appraisal.
• High rate of approvals on Fannie and Freddie loans; although Freddie loans are slightly more challenging.
• Maximum Loan to Value: Unlimited. Value is not an issue.
• Maximum Combined Loan to Value: Unlimited
• Occupancy: Owner Occupied, Non Owner (Investment Properties) & 2nd Homes allowed.
• Loan must be guaranteed by Fannie Mae or Freddie Mac.
• If there is a 2nd mortgage, 2nd mortgage lender must agree to subordinate.
• Loan must have been originated and delivered prior to June 1st, 2009.
• No cap on number of financed properties.
• Income documentation is required, although it may be limited based on automated underwriting findings.
• Rates are great, but there are some pricing adjustments due to loan to value, credit, occupancy etc

FHA REFI BOOM IS HERE

If you have an FHA mortgage that was funded prior to June 1st, 2009, you will be able to lower your interest rate and save money.

Over the last several years, while interest rates have been on a rapid decline, mortgage insurance on FHA loans has been increasing. Due to the increasing mortgage insurance costs on FHA loans, many home owners with FHA financing have been unable to capitalize on the historically low interest rates. That will finally change in June.

On June 11th, 2012, FHA will be lowering the Up-Front MIP to 0.01%, and the Annual (Monthly) MIP to .55%.

Nearly everyone that has a FHA loan that was funded prior to June 1st, 2009 will be able to lower their interest rate, with little or no closing costs, and no appraisal. This applies to owner occupied and non-owner occupied properties.

INTEREST RATES LIKELY TO SPIKE SOON

Interest rates have been at historic lows for some time now. The FED will be winding down “Operation Twist” in June. “Operation Twist” was a program created by the Federal Reserve to buy mortgage backed securities to “artificially” drive down the long term interest rates. As the market and the economy stabilize, interest rates will rise.

FHA DELAYS COLLECTION RULING

“The Federal Housing Administration rescinded and will delay a rule that as of April 1 prohibited borrowers with more than $1,000 in disputed collections accounts from getting a federally backed mortgage, according to a notice sent late Friday. FHA postponed the rule until July, and will take public comment from lenders, builders and others in the industry until then to clarify guidance.” (housingwire.com)

FANNIE MAE REBOUND

“Mortgage backer Fannie Mae reported the best quarterly results since the housing bubble burst five years ago, saying it did not need additional billions in tax funds for the quarter and that it believes losses on past mortgages peaked at the end of last year. The company also reported just enough profit in the three months ended March 31 to cover its latest payment to the Treasury Department, and predicted better profits ahead. Fannie attributed the better results to a slowing in the decline in home prices, a drop in its inventory of foreclosed homes and better sale prices for the foreclosed homes it sold.” (cnnfn.com)

RATE WATCH

MORTGAGE TYPE

INTEREST RATE
APR

30 YEAR FIXED
3.500%
3.543%

15 YEAR FIXED

2.750%
2.826%

5/1 ARM

2.375%
2.765%

Interest rates as of 05/09/2012. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote. Published rates do not apply to HARP programs.

Chris Tiller

Home Smart - Realtor
10601 N. Hayden Rd. Suite I-100
Scottsdale, AZ 85260
Office: 602.733.5643
Cell: 602.561.1346
Fax: 1-888-292-0678
ctiller@hsmove.com
http://tillersreupdate.blogspot.com/

MARCH MARKET UPDATE - A LITTLE LATE : (

HARP II IS HERE!

HARP II

• Maximum Loan to Value: Unlimited
• Maximum Combined Loan to Value: Unlimited
• Occupancy: Owner Occupied / Non Owner / 2^nd Home
• Loan must be guaranteed by Fannie Mae or Freddie Mac.
• If there is a 2^nd mortgage, 2^nd mortgage lender must agree to subordinate.
• Loan must have been originated prior to June 1^st, 2009.
• Appraisals may be required per automated underwriting (DU / LP) findings.
• Loans will be submitted to underwriting the week of March 19^th, 2012.

Please contact me if you want to see if you can take advantage of the HARP II program. (ctiller@hsmove.com / 602-561-1346).

FHA MORTGAGE INSURANCE ON THE RISE AGAIN

On April 1^st, 2012, FHA will be once again be increasing the mortgage insurance for all new FHA mortgages originated. Upfront mortgage insurance premiums will be higher by 75 basis points, or 0.75%; and annual mortgage insurance premiums will be higher by 10 basis points per year, or 0.10%. For borrowers with a loan size of $200,000, the new MIP will add $1,500 in one-time loan costs, plus an on-going, annual $200 increase in total mortgage insurance premiums paid.

This is a substantial increase. If you are in need of new FHA financing, either for a purchase or a refinance (including Streamlines), it will be in your best interest to pull a new FHA case number prior to April 1^st, 2012.

The increase is to combat the rising FHA delinquency rate, which reached 9.6% in December; the highest level in more than two years. Delinquency is up almost 20% from one year earlier, with over 711,000 FHA loans seriously delinquent. – Housingwire.com

NEGATIVE EQUITY STILLS HAUNTS HOUSING

“CoreLogic released negative equity data showing that 11.1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011. This is up from 10.7 million properties, 22.1 percent, in the third quarter of 2011. An additional 2.5 million borrowers had less than five percent equity, referred to as near-negative equity, in the fourth quarter. Together, negative equity and near-negative equity mortgages accounted for 27.8 percent of all residential properties with a mortgage nationwide in the fourth quarter, up from 27.1 in the previous quarter. Nationally, the total mortgage debt outstanding on properties in negative equity increased from $2.7 trillion in the third quarter to $2.8 trillion in the fourth quarter.” - CoreLogic

“Nevada had the highest negative equity percentage with 61 percent of all of its mortgaged properties underwater, followed by Arizona (48 percent), Florida (44 percent), Michigan (35 percent) and Georgia (33 percent). This is the second consecutive quarter that Georgia was in the top five, surpassing California (30 percent) which previously had been in the top five since tracking began in 2009. The top five states combined have an average negative equity share of 44.3 percent, while the remaining states have a combined average negative equity share of 15.3 percent.” - CoreLogic

-Graph provided by CoreLogic.

FANNIE MAE RELEASES PROPERTIES TO INVESTORS

Fannie Mae and Freddie Mac currently own approximately 180,000 real estate properties (REO). Fannie Mae is now moving to sell up to 2,500 of those properties in bulk to investors in Atlanta, Phoenix, Las Vegas, Los Angeles, and parts of Florida. The investors will be forced to rent the properties for a specific period of time. That time has not yet been disclosed.

HOME PRICES FALL EVERYWHERE EXCEPT…

Home prices posted a steep, month-over-month drop in November, falling 1.3%, according to the latest S&P/Case-Shiller 20-city report. Prices fell in 19 of the 20 cities the index covers. – cnnfn.com

Phoenix Arizona was the only city to post a gain. The Phoenix metropolitan area currently has less than a two month inventory of homes on the market which is driving home prices up. The inventory currently on the market is declining. Some researchers anticipate a 5% increase in home prices through the summer, with the possibility of up to 20% increase for the year.

RATE WATCH

MORTGAGE TYPE	INTEREST RATE	APR
30 YEAR FIXED	3.500%	3.684%
15 YEAR FIXED	2.875%	2.951%
5/1 ARM	2.375%	2.765%

Chris Tiller
Home Smart - Realtor

10601 N. Hayden Rd. Suite I-100

Scottsdale, AZ 85260

Office: 602.733.5643

Cell: 602.561.1346
Fax: 1-888-292-0678
ctiller@hsmove.com

http://tillersreupdate.blogspot.com/

Interest rates as of 03/05/2012. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 720+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote. Published rates may not apply to HARP programs.