Multiple Offers? Bidding Wars? Cash Sales? Oh My!
Surely I refer to the good ole days of 2005, right? Not exactly. Try 2008.
How do I know that we have either reached or are very near the nadir of the Great Phoenix Real Estate slump of 2007-2008? Well, I don't. Unlike the "experts" who like to think they can accurately forecast our market's health, I offer no promises as to the month, week, day and minute that we hit absolute rock bottom. I am but a simple Realtor. I do know one thing. When it does happen, there will be no starter's gun fired into the sky signaling that it is time to BUY NOW! We will only know with certainty that we hit the mythical bottom when looking back from a vantage point of 3-6 months past the mark. That fleeting moment in time will last about as long as a Bob Saget tribute reel before prices begin the slow march back up. Until then, it's all speculation.
Speaking of speculation, I do offer the reappearance of the investor to the local Real Estate scene as anecdotal evidence that we may be finally nearing the elusive bottom. While many still see only the inky darkness of the abyss, others have firmly planted their feet where they believe the ocean floor to be.
Investors are back in a big way in the Phoenix Real Estate market.
Bank REO properties are getting gobbled up at an amazing rate. In the most price driven market this agent has ever seen, the cheap properties are selling at a startling clip. This is not just happening in the historically sought after communities, but in the far reaches of the Valley as well. The dinner bell is ringing, and the professional investors are heeding the call.
Ah, the scavengers! Loathe them or love them, the Real Estate investor can help stabilize a market by establishing the basement. When the bottom feeders (affectionately dubbed in this instance) start snapping up the delicacies that fall to their depths, it's a signal that the tide may be set to turn. Not only does it display confidence that values are at a perceived low point from a group of buyers that purchases for the sole purpose of making money, but it helps to cut through the ample inventory that has plagued our market. With sales increasing with each passing month this year, builders pulling very few permits as they sell their existing inventory and investors now fighting tooth and nail over low-priced homes, I like our chances of turning the corner sooner rather than later.
Like it or not, the banks are setting the market. Foreclosure properties are what is selling right now. As long as investors keep gobbling up this segment of the market, it will bring the regular Mom and Pop buyers back to the regular Mom and Pop sellers. They just can't compete with the deep pocketed investors (who often pay cash) for the distressed properties, and often don't have the means to invest in the required fix up costs. Shoot, we still have one of the fastest growing populations in the country. There is no shortage of demand. With signs of life permeating the market, a nice big dose of consumer confidence may be just what the doctor ordered. Needing livable housing, and unable to swim with the sharks, these buyers will turn to you, Mr. and Mrs. Seller.
Fear not, better days are near.
And they will begin on August 17th, 2008 at 5:24 PM.
Damn, couldn't resist.
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Paul......I showed a property over the weekend that had 30 offers written on it in two days. The property was underpriced and would go about 150K over asking price. go figure.
Pam - I just looked at a property thathit the market today that had three offers on it before I even got there. That hasn't happened here in a while.
Paul- We have few investors that get our short sales. The lenders like the end users. We do have tons of buyers who are really going to make the houses their homes and that makes me happy. The prices have come enough that people can afford to buy again. We just sold a house with all seller financing- went into contract today. I felt so good for our seller because being the bank is the way to go and the buyer is a Realtor we know who got a divorce and could not buy through a mortgage co right now. It was a win/win and the price was right on the comps.
When I was reading about the part in your post, about the 'starting gun' that movie with Tom Cruise, came to my mind, Far and Away. Where they raced to get the land that was being given away!
Paul, the market is driven, like investment markets, by greed and fear. Fear drops them much faster, but greed takes hold at the bottom where the sure thing buy takes place by the investor. I have been approached by many investors in my area to scour the banks for the steals that are out there. Your point is well taken that it looks like an indicator arrow pointing back in the positive direction again. The pundits on the radio today said in some regions the recovery now could be delayed till 2010. Who knows?
Paul,
You have some very valid points. Finding the bottom is no different in difficulty than it was to know when we hit the top. You only know in hindsight.
Katerina - That sounds like a great scenario for all. Most investors here aren't screwing around with the short sales. They just wait for the bank to take them and go after them when they have a real price (rather than a moving target).
Gary: Money Magazine recently opined that our recovery is likely to be delayed by a new wave of ARM resets in 2009. As you said, who knows? I happen to believe that such factors will slow the process, but not derail it. I do not expect values to fall much further in the central areas, but there are a few communities that I wouldn't buy into right now for a wooden nickel either.
Christine - True, true, true.
You do bring up a good point. banks are started to set the market that can be a good or a bad thing. congrats on the multiple offers.
Anthony - Thanks for the congrats, but this was not a scenario on one of my listings. Actually, in my most recent experience in this part of the market, I was a two-time loser in bidding situations with a buyer before we secured the third property in ... you guessed it, a bidding situation.
Well, Mei Ling, we may have lost Lenza.... but there are a few jesters running around who are doing a pretty decent job of filling those fine Italian loafers.
The old saying that there's money to be made when there's blood in the streets exists for a reason. The movement of investors back into many segments of the market is a sure sign that the light at the end of the tunnel isn't really a train after all.
Well, of course the good days will start again on Aug 17th. That's my anniversary, and everyone must celebrate by buying a home or two. ; )
We are seeing the same thing here, multiple offers on forclosed homes, but at least it is shrinking our inventory. When this happens I tell my team, welcome to the sellers market in forclosed homes. Each market has it's ups and downs.
Paul,
We are looking at a slow but steady improvement in our market. My one suggestion would be based on your point would be for the buyers to follow the investors lead and do it now because who knows when the market will bottom even the prognosticators can't agree when that will be. Darn weather people can't get it right and they have all of those fancy machines to help them.
Shoot why not I think it will turn around on 8/16/08 at exactly 12:01am
Don R.
It's about time that a REALTOR actually made the call as to when the bottom of the market is actually going to be. I imagine that on August 17th, your dockett is going to be full. Better pack a lunch.
Paul, we are seeing some multiple offers in our area too. Great news for a change! Looking forward to 8/17/08. I say we all raise our glasses at 5:24 PM and say hallelujah!! We made it through! thanks for some uplifting information.
It seems to me that the investors and speculators actually contributed to many of the problems we face today in the housing market. They artificially drove up demand and when the market started to decline, they dumped all their properties flooding the market and creating an over-supply. Here we go again.
Great news! I am ready for a sellers market. It has been brutal!
Paul - This is a great illustration of what indicators we can look to when trying to establish a new direction in the market. We haven't had nearly as much investor activity here this year for some reason. Incidentally, of course the market is going to turn around on August 17th - it's my birthday! By the way, I was actually born at 5:19pm, not 5:24 (yes, really).
I certainly hope your market is getting better (or at least busier) since our market (I'm in Payson) follows yours. If people can sell there, maybe they can still buy here.
It was great to sit around at lunch on Friday and hear the stories about multiple offers. It may take more time but the direction of prices might be at least stabilizing and it could turn up any time.
We have had multiple offers on a couple of well priced properties here lately, which was a really great sign for my little niche. Our buyers are almost always buying as a principle residence though, so I don't really deal with investors. It is too hard to make a profit that way in Topanga. Savvy buyers are coming around to get into our little paradise and the timing for them is great.
I'm marking your prediction date on my calendar in big numbers -- I'll have room if I just erase this other entry about somebody's birthday. Hi Jason ;)
Hi E - No need to erase it. I have decided to go ahead and move the market turnaround to the 16th of August, so that everyone will be in a great mood for my birthday celebration blowout spectacular.
Jason, that's using the mojo! It will be a great weekend for one and all!
I do hear what you are saying. Investors back may mean the bottom. Just sad that many FTHB are still going to find it difficult to get the home they want due to tight underwriting and the continued credit crunch, so to speak. The competition will be good for real estate though, any way you look at it.
Paul, I wrote about the bottom feeders about 2 months ago...good stuff you have here!
Paul - We're witnessing the exact same scenario here. Bidding wars, multiple offers, you name it. I am shaking my head over the prices I'm seeing and wish I could get in on the action!
August 17 sounds good to me. Veronica
Why isn't this one featured?
JESSE - While I thank you for the misguided plug, we all know that Lenza took those Italian loafers with him. There will be no filling that cat's shoes. Leather chafes my skin anyway.
PAM - That is but one of two high ironic coincidences on this thread. Congratulations on being 50% responsible for the upcoming turnaround!
MISSY - Interesting, isn't it? In the midst of our Valleywide buyer's market here, the submarket of bank owned property is shaping up as a seller-dominated arena as well. The days of a buyer showing up and lopping another 10% off of an already aggressively priced REO home is basically already behind us, except in the doldrums of a few localities where absolutely nothing is moving.
DON - I have logged your predicition, and will compare it against mine. Let the better prognosticator win!
ADAM - You have to be more forward thinking than that. With the turnaround set to occur on August 17th, the big push will come on the 16th. Pack a lunch? Who'll have time? I'll just have to make do with a glove compartment full of Slim Jims and Red Bull.
SUSAN - Why wait? I'll raise my glass to the return of the investor right now. All victories, large and small, are grounds for celebration right now.
KELLY - I understand your concern, but I don't see it that way. These are not the naive speculators who descended upon our Valley from California and other parts to strike it rich on Arizona Real Estate. These are deep pocketed investors who are not artificially fueling a boom, but who recognize value when they see it. Lenn Harley wrote a great piece deconstructing the differences amongst Real Estate investors, and the categories are very apt. Further, with lending guidelines so tight these days, there is little to no risk of such a frenzy occuring in the near future. People who shouldn't buy houses won't be buying houses, and properties that aren't worth what is contracted for won't appraise. The bust is too fresh to permit an immediate scrubbing from the collective memory bank. We won't see anything like the boom period experienced here for a very long time, if ever. We have never experienced such a thing before, just solid annual appreciation from the early 90s through 2004 before the big spike of 2005. We'll see modest and sustainable appreciation when we eventually pull out of this in my opinion.
Paul - glad to see your market boucing back! especially because it will rub off on your neighbor state nevada! Be well.
MELODY - I'm not really ready for another seller's market either, to be honest. I didn't particularly enjoy our boom year of 2005 because buyers were too frantic to snap at the first available property out of fear of loss. Too many rash decisions and poor investments made. Give me a nice, relatively neutral market which does not provide a clear cut advantage to either party to a transaction. That is the environment which fosters critical thinking, honest negotiation and open dialogue. Each party can take the time needed to weigh options and make informed decisions. Sounds lovely, yes?
JASON - I missed by 5 minutes? I must be slipping. That is just insanely ridiculous.
ELAINE - It's not happening in my primary area here in Scottsdale as it is elsewhere in the Valley where price points are marketly lower. Like Topanga, the buyer who is making out today in the Scottsdale market is the user who is leveraging the current environment to get a terrific value on a property he/she intends to occupy. Every once in a while, a smoking bank owned deal will come along, and multiple offers will ensue as investors jump in. Interesting to note, investors are buying such properties to hold as rentals, not to flip. Another indicator of the investor confidence in the long term health of Scottsdale Real Estate.
ERIC - Yes, it will be hard for many first time home buyers, and renters with less than stellar credit for the foreseeable future. I don't think I'm wrong that it should be somewhat difficult, however. Buying a home is not an entitlement, and not everyone should be a buyer. I welcome the movement back to selling homes to only those who can truly afford the property. Not just for this year or the next either, but for the entire term of the loan. It will make total recovery slower, but more sustainable. We can't create any more foreclosure/short sale headaches.
JEREMY - You guys must be just ahead of us in terms of finding your temporary bottom. When the bottom feeders come out en masse ...
LESLIE - It's been a slow process, but I really do think we are nearing a crucial juncture in the maze. Most agents, title reps and lenders I speak with have seen upticks in their activity levels. I'll see about sending a few of our displaced sellers up your way ;)
BILL: I completely agree. Things are getting better. Values have suffered considerably to bring us to this point, but the market is beginning to tell us what buyers are willing to pay to reengage.
TOM - I lament every missed opportunity. This is the type of market where a shrewd investor can really establish his estate. I see deals come across my desk my every day that make me wish I was in a position to invest in personally. I am actually exploring a few different financing options to pick up a rental property or two. I am that confident in the value of Scottsdale right now.
VERONICA - Glad the date works for you. I've already printed the flyers and embossed the party hats.
Amanda: He Hate Me.
STEVE - We Western states do trend off each other. I always look to California. While we never come close to mirroring the wild gesticulations in their market, we do tend to experience milder echoes. I hope things start to clarify in your market soon.
Paul - Your committment to the blog is great and a sure fire reason why people enjoy reading it. Your reply comments are thought out and creative. I especially like "He Hate Me" - that is good. In response to your reply; I completely agree that only those who can afford the home should buy. My feeling is just that they may miss out if the price is "inflated" or "driven up" by investors, however... you answered that concern of mine in your response to Kelly. No more foreclosures and short sales - it should become a mantra of some sort.
I will set my alarm! I will have just come back from my honeymoon and I will be ready to make some money (to pay off this money-sucking wedding)!
ERIC - Get the copyright on that phrase and I'll start silkscreening the t-shirts!
MIKE - Sounds like the ship will be righting itself just in time then. I bet you're going somewhere they serve drinks in half coconut shells with twisty straws and little umbrellas, aren't you? I think I hate you.
I have one in escrow that was multiple offers . . . and I showed one last weekend that had 9 offers on it as well . . .
Paul, I wish I were. Wedding+New Realtor=Broke. We are doing some camping, visiting the Wisconsin Dells, making a trip to the Leinie Lodge, spending a little time in the U.P., then a couple of days visiting wineries in Traverse City.
We HOPE to hit Hawaii in a year or two.
Paul, Yep, multiple offers on bank owned properties. That is the same game we are having here in Vegas.
Its coming back but loans are either liar loans (FHA with seller contribution for down payment and closing costs) or cash deals.
its getting more and more difficult to get deals closed in this environment.
That it is, ANDREW. That it is. We have to start somewhere, though, and the investors are establishing the ground floor. Money should start loosening up a bit as confidence returns to the market, from consumers and the institutions alike. Most of my transactions are actually still conventional.
Paul, I work predominantly the west valley active adult communities and the Canadian clients are what has helped that market tremendously. I also ran some numbers for the Surprise family communities and was shocked to see (at the time) that we had just over a 5 month supply of homes! With all the short sales out here the prices have plummeted but I was shocked at how fast the inventory was moving. Once the mortgage mess clears out...
I too feel as though we are at or close to the bottom. For the first time in a few years our office sales are outpacing new listings.