House Flipping in Phoenix Back in Fashion

In Phoenix, flipping homes are starting to make a comeback. As banks release more foreclosed homes into the market place at below market value, and as investors with cold hard cash pick them up at auctions, they are able to flip the homes in the market place for market value. This is particularly the case with once million dollar homes. Some of the homes that used to sell at more than a million in 2005-2007 can now be picked up at auction for $300-500 000. The catch is, the buyer must have cash to play. Then, these homes are sold on MLS for $600-800 000, still a great deal for those who can afford these multi-million dollar homes.

Here is a specific example of a house in such a situation that is currently on the market place: http://www.trulia.com/property/1050979790-755-E-Windmere-Dr-Phoenix-AZ-85048. If this mansion on 755 E Windmere Drive Phoenix, AZ does not sell soon, it will go into foreclosure and can probably be picked up at the auction for $800 000.

To read more on this spectacle, check out this site.

Phoenix Real Estate Inventory at a Glance

Phoenix Real Estate Inventory at a Glance

Since mid December 2009, there are 22,136 single-family detached homes for sale in the Phoenix real estate market. Of these, 43% of the active listings are distressed sales of some sort.

We currently have 3.91 months of inventory overall, 1.44 months of bank owned inventory, 5.07 months of short sale inventory and 5.88 months of “traditional” - non-bank owned, non-short sale inventory.

Last year at this time, there were 38,765 single family detached homes for sale in the Phoenix real estate market and 10.35 months of inventory. There were 8,669 bank owned properties on the market and just shy of five months of bank owned inventory.

Add another five thousand homes to the market to equalize the bank owned side of things compared to last year, and we’re still sitting at under five months of inventory overall - still half of where things were a year ago.

So what does all this mean?

Limited bank owned inventory has helped slow the market’s descent to some degree. The bank going forward, will be cautious with how they price their homes for sale, most likely AT market value (neither too high or too low).

Interest in the Phoenix market remains high despite what's happening in the economy (i.e. high unemployment rate for Phoenix's standards).

The combination of low prices, low interest rates, favorable exchange rates, and the homebuyer’s tax credit is keeping the market moving even during what traditionally is the slowest time of year.

There were 3,745 total sales from mid-November to mid-December last year. The year before that, there were 2,361.

Phoenix will be bound for a slow and steady recovery. However, the housing prices have reached bottom and most likely would not go any lower than it is now.

What To Do After Your Offer Gets Accepted

By Tanya Chu

For many first time investment property buyers, they often don't know what to do after their offer gets accepted. To help you in your final process, follow these steps that I use:

1) Get your realtor to go out to the property within 72 hours to take LOTS of pictures of the property, both inside and out. They should also take pictures of each of the 4 houses to the right, and each of the 4 houses to the left of your property. Plus, the 9 across the street from yours.

2) Get at least 3 property managers from different companies to go out to the property and take pictures as well. They should each produce you with a report of all the income and expenses they anticipate you'd be accountable for when you possess the house.

3) Once the pictures come in, you want to take a closer look at the property and decide if there will be lots of repairs required.

4) From the property managers' reports, you want to recrunch your numbers and your numeric analysis.

5) Re-do your insurance quote. Get at least 3 from different brokers.

6) Have your realtor do a Broker Price Opinion (BPO) if he's qualified to get an "accuraate" appraised value. Recrunch your numbers and twik your analysis.

7) Get an appraisal. Recrunch your numbers and recalculate cashflow.

8) Get an home inspection done. If the amount in repairs is reasonable, then proceed. Again, recrunch your numbers and recalculate cashflow.

9) Renegotiate the sales price by filling out an addendum.

10) Once the Seller agrees with you on a price and you're happy with the proposal. The sale is complete. Wire your money into Seller's escrow agent.

Voila! Congratulations on your home purchase!!!

ASU Economist Predicts More Phoenix Area Foreclosures

Arizona State University's Economist Jay Butler announced Dec 10 in the Phoenix Business Journal that "Another wave of foreclosures could hit the already downtrodden Phoenix housing market in early 2010". He says, "I think the foreclosure rate will pick up after the first of the year because of the continued weak job market and frustration on the part of homeowners struggling to pay their mortgages.”

Watch the interview clip here.

#1 Most Common Mistake New Real Estate Investors Make

The #1 Most Common Mistake New Real Estate Investors Make is Buying and Selling Real Estate at the Wrong Real Estate Cycle.

Many newbie real estate investors bought their first home when the market was high and most likely paid a premium on their property. This usually occurs and is quite commonplace because they get caught up in the hype. And when emotions are high and there is a real estate frenzy about town to "BUY REAL ESTATE!", intelligence is LOW.

Our "thrill" phase (see Real Estate Emotions graph) is best characterized 2005/2006 when Vancouver's Pre-Sale condos were selling out in less than an hour and when the line-ups for these homes were a mile long! However, after they've paid the price on their "investment" property, they realized "Oops! What have I done?! I paid WAY too much!" and now their properties (if they did not liquidate them already) are now negatively cashflowing.

Understanding the real estate cycles is really KEY to not making those junior mistakes. You must OBSERVE what is going on in the city of your choice (whether it be Vancouver, Phoenix, Las Vegas:
Is there active construction?
Is the city currently experiencing over supply?
Are rents coming down?
Are property values plummeting?
Are development projects being halted? (like in Vancouver)
What are the emotions of the people/of the headlines?

Knowing the answers to these questions will help you gage where we are on the real estate cycle. And from there, you can make your buying and decisions with more accuracy and better timing!