John Guthrie

The Maricopa real estate market continues to work through a large volume of Foreclosure inventory. There are 375 active foreclosure listings as of 12/20/2008. This is well above the 130 to 180 we experienced throughout most of 2008. Banks appear to be aggressively trying to unload inventory at this time. Price declines continue however at a much slower pace. MLS data for December is actually showing a rise in the Median Price from November. The most positive indicator at this time is the Sales volume. Despite absolutely terrible lending conditions for investors in particular sales volume is very strong compared to activity from previous years.

Primary Home Buyers are very hesitant at this time likely an effect of the dismal US Economy and the weak and insecure job market. Affordability and access to quality loans for Primary Home Buyers is not the issue. A recent study indicates that affordability for the Phoenix-Metro area has increased to 72% compared to only 27% a few years ago. FHA loans, which require a low down payment (3% increasing to 3.5% soon), are readily available for Primary home buyers with credit scores as low as 580. 100% financing is also still available through the USDA Rural Development program. This program has been around since 1991 but its use is absolutely sky rocketing at this time. This government backed program offers great options for primary home buyers. Qualifications are also very reasonable. Primary home buyers with steady income and a credit score above 620 are likely to qualify. Individuals with credit scores as low as 580 may also qualify depending on the overall financial situation of the individual. Maricopa is one of several areas of the Valley that qualifies for this program.

The Maricopa real estate market will continue to be dominated by foreclosure listings and sales for at least several months to come. It is hard to imagine that the market conditions could get any worse than we have seen in 2008. The market is already showing signs of improvement with the high volume of sales despite terrible market conditions. The million dollar question is how many more foreclosures are coming in 2009? If the wave subsides and sales remain strong we could see a major shift in the market. Foreclosures and Short Sales are the majority of the active inventory. There are less than 100 Active listings on the market that are "Regular Resales". The other primary source of listings Builders are trying to survive and simply can't afford to sell at current market prices and make a profit. It will likely take at least several years before builders aggressively build in Maricopa again. Many have already sold off land in subdivisions already in progress. It is very logical that the dynamic could shift rapidly from too many homes and not enough buyers to too many buyers and not enough homes. Maricopa has seen pretty incredible things in its brief history. Wild swings are more the normal than the abnormal in the Maricopa real estate market.

www.SearchMaricopa.com

Market Data from November 2008 for Maricopa, Arizona indicate some troubling signs. Banks have continued to unload properties in masses onto the market. Most of 2008 Active Foreclosure listings varied between 130 and 190 at any given time. The numbers dipped in late August and Activity halted as news of a bailout and the take over of Fannie Mae and Freddie Mac became apparent. Banks appeared to have held back some inventory in hopes that the Federal Reserve would purchase some of these "Toxic Assets". As the strategy changed by the FED banks then began to quickly add homes to the market. Currently we have 330 Active Foreclosure listings.

Sales volume also saw a significant decrease in November 2008 dropping to a total of 124 sales for the month in Maricopa, Arizona. Price indicators also dropped to new lows with the Average Price Per Square Foot dropping to $59.36. The entry level home market and large homes (Above 3000 Sqft.) are currently over supplied. Entry level homes are currently selling as low as the mid $70,000.

It is no secret that the US Economy is facing a very serious downturn. Maricopa has been hit very hard by both falling home prices as well as a weak job market. A recent study pegged the Maricopa unemployment rate at 8.2% over 2% higher than the unemployment rate for the State. Home prices have dropped to a point where the issue for primary home buyers has less to do with affordability and more to do with job security.

There is some positive news for the market. Mortgage rates have dropped significantly and loans for Primary Home Buyer's are readily available thanks to the government backed FHA loans and USDA loans. Investors in particular are seeing the most effect in attaining loans do to the freezing credit markets. If this loosens even just a little bit we will see a massive wave of investors purchasing at the current prices. Cash Flow is very possible which hasn't been the case in the past. Investors are already targeting the area and want to buy but simply can't because of the lack of reasonable loan products. I believe there will be a loosening of credit very soon for established investors. There has to be for us to see any type of significant recovery soon. Primary Home Buyer's over all are not in a position because of the weak economy and job market to buy in masses. Many will rent until they feel more secure about their jobs and the over all economy. The fear of further home price decline is subsiding. Prices are already at jaw dropping levels. The savvy buyer will put fear aside and look at the numbers. This is the time to buy!

Over the past few weeks Maricopa has seen a wave of new foreclosure listings. In mid October there where approximately 170 active Bank Owned Properties and now today we have 308 active listings. Sales volume has been strong since March 2008 and was at record levels in September 2008 (174 Sales). October recorded 154 sales which was the 3^rd strongest month for sales in Maricopa this year. Mid November data shows a slow down in both sales (48) and pending sales (201). The slow down is typical for this time of year and to put it in perspective this November will have the highest number of sales in Maricopa for any November on record. The primary issue remains the massive amount of foreclosure and short sale listings. The combination of the seasonal slow down and wave of new foreclosure listing has increased the estimated supply to 14.02 months. Octobers estimated supply was 8.51 month in Maricopa.

Maricopa is a town with a brief but wild real estate history. According to 2000 US Census data the population was a little over 1000. Today a conservative population estimate is 37,000. The area included farms, dairy's, and feed lots as well as the train station. Most Arizonan's rarely ever came through the area unless on a road trip to Rocky Point or San Diego as Highway 347 is a prime link to I-8 from the Valley. This report will focus on how the Maricopa real estate market has evolved over the past decade but for those that want to know more about the history of the area here is a link to the City of Maricopa's history page.

Reason's to the incredibly quick rise of the Maricopa real estate market can be traced back to May 2, 1997. The Clinton Administration made significant changes to the way real estate profits are taxed. This legislation not only gave us the 2 in 5 rule but also lowered long term capital gains rate to 15%. Both these had a major effect on the housing market. The 2 in 5 rule allowed primary home owners to pocket all real estate profits from the sale of one's primary residents with tax free profits limited to $250,000 for single individuals and $500,000 for married home owners as long as they had lived in their home for 2 of the past 5 years as of close of escrow. This was the first layer of grease that began the unprecedented rise in property values and ultimately their crash.

The effects of the new legislation started to show signs of helping many real estate markets. One of the first to boom was San Diego. San Diego offered housing near the ocean for under $300,000. This first wave was lead by investors whom with the lower capital gains rate and a shorter learning curve started buying in masses. This propped up the San Diego market allowing many home sellers to join in the buying frenzy as they where able to sell upgrade their home using the tax free profits as a down payment for their new home. For some this became a 2 year thing. Buy a home watch it go up in price sell the home pocket some of the profits use the rest for a down payment on a better home.

The boom then started to slowly spur markets across the nation with the next boom in the west moving to Orange County, California. In 2002, Orange County home prices began to sky rocket, leading to many being priced out of Southern California and a large scale exiting from the Southland. In mid 2003 the first choice for the masses exiting was Las Vegas, NV. On June 16, 2003 the Bush Administration enacted "The American Dream" legislation that basically allowed banks to bundle Mortgages into Securities that where then sold to investors. This added a second layer of grease which prompted a dramatic rise in many real estate markets across the nation. Las Vegas recorded the highest recorded one year median gain on record at 52.7%. Las Vegas saw incredible demand for new homes from both investors and primary home buyers. The demand was so incredible that lotteries where the norm. Builders went even further to restrict new homes sales to primary and second home buyers only. No rentals no investors. The Vegas market was too small and no match for this wave of buyers so the wave looked elsewhere, Arizona was next.

The South East Valley and in particular Gilbert, Arizona saw a huge boom quickly. At the same time Anthem and Queen Creek (Pinal County) started to become read hot markets as well. Anthem held a higher price point so much of the wave was targeting on Queen Creek. The West Valley quickly jumped in as builders swallowed up land and began to build at a record pace. Lotteries became normal especially in the most popular new developments. In the spring of 2004 many investors where shut out of the new home market. Not all but many. This lead to an incredible run on resale homes as investors raced to purchase as many as they could and with the added layers of grease many did buy several properties. Maricopa by late 2004 was in a frenzied market. New home builders could not build quick enough.

The Maricopa real estate market was at full throttle until about August of 2005. Inventory began to sharply rise and sales slowed significantly. The average price per square foot peaked in December of 2005 at $150.03. The real estate market shifted very quickly from a Seller's market to a Buyer's market in the fall of 2005. In 2006 resales dropped off significantly in Maricopa lead by a sharp decline in New Home Prices. New home builders lead in sales throughout the area from mid 2006 throughout 2007. Resale homes where slow during this time with the best priced well kept homes being the few to sell. The regular resale market has been very slow for more than 2 years. At this time it is practically on hold as the area works through distress sales.

In late 2007 Short Sales and Foreclosure Listings began to steadily enter the market. By February 2008 these distressed listing where coming on the market in masses. The estimated supply for the area in January 2008 was greater than 20 months. Buying activity was a little slow in January and February 2008. In March of 2008 home sales in Maricopa skyrocketed to record levels. Sales activity has been dominated by the Foreclosure market for all of 2008. Sales activity continued to break monthly records peaking in June of 2008 at 156 based on MLS data. This has lead to the estimated supply dropping to under 8-months. Currently sales remain near record levels in Maricopa and foreclosures are continuing to dominate the sales totals.

The US Government is at this time working out the details of the largest economic bailout in history and facing the most serious National economic crisis since the Great Depression. Maricopa in its brief history echoes a similar story for growth areas from Nevada to Florida and the dramatic rise and fall of the US housing market. The reality is that this collapse is devastating for many of these growth areas. The damage has already been done. So where is the future for Maricopa and these growth areas? The market is already starting to recover as we see in the increase sales activity at the peril of banks as they have slashed prices to move inventory leaving huge losses on many properties. This does not suggest the market is healthy but simply starting to heal.

At this time a lot of the buying activity in Maricopa is coming from deep pocket investors and second home buyers. Canadians in particular have had a significant presence in the Maricopa market. These buyers are often using cash to purchase. Investors are more limited with lending options and many if they can find lending are required to put down greater than 30% to obtain financing and rated are significantly higher than owner occupied loans. This has actually slowed some investing as many investors would like to buy and manage more properties however they too have become cash strapped with the higher down payment requirements. The buying activity is even more impressive considering that there are very few primary home buyers purchasing at this time. Many are still on the sidelines as the dust has yet to settle across the Valley.

The reality of the crash of the Maricopa housing market has more than settled in for many in the area. One fortunate change from the fallout is something that too many individuals overlooked during the run and that is homes are now actually affordable for working families. Investors have begun to figure out that at current prices there investment can now actually generate a positive cash flow. Primary home buyers will at some point begin to enter the market for very logical reasons hopefully sooner than later. In Maricopa's case buyers can actually purchase a home for nearly the same amount as they can rent a home. It will soon be the most economical way to provide shelter. Primary home buyers will also have to in masses become more aware of new lending guidelines and in particular FHA loans. The new rules will likely drive more population towards the areas with the most affordability because buyer's incomes will be verified to prove the ability to repay the loan. With the prevailing wages in the area for many Maricopa will be one of a few viable options until either wages rise or home prices fall in the higher priced areas of the valley.

It is easy to say today the Nation is just now coming to grips with the economic realities we face. In Maricopa this reality has been upon us for a little while now. The housing market has been absolutely devastated over the past 2 and ½ years. It has taken a serious toll on the entire community. Still the community continues to grow and life goes on. Maricopa offers a lot today for many families. The area is within a 35 minute commute of the main work areas of the Valley. Families will find nice homes and a safe community centered environment at affordable prices.

For more information please visit www.SearchMaricopa.com

John Guthrie

DPR Realty, LLC

520-282-5102

john@347homes.com

The investment strategies used in Arizona have changed dramatically over the past several years. The days of buying properties with the expectation of huge gains in a short period of time are over. Today's investors are back to the basics. These include "Flip" investors as well as "Hold" investors. The flip investors are the minority at this time. There is some activity in Maricopa however this is still rare in this market. These particular investors are seasoned investors using sweat equity to make a profit. In this market many are settling for far less expectations. A little profit is better than no profit. These investors like most investors are targeting the foreclosure market. The larger share of the investor market can be categorized as "Hold" investors. In Maricopa we are seeing traditional investors picking up distress properties and turning them into rentals. We are also seeing Buyer's looking to retire here in Arizona taking advantage of current prices to purchase their retirement home now. These types of buyers often will lease the home for several years until they retire. For years the average rents simply did not even come close to the mortgage on many properties in Maricopa. This equation is getting much closer today with the dramatic drop in prices. Investors should be well aware of the Maricopa rental market as it has a lot nuances. Below is a sampling of data taken from the MLS Rental Activity in Maricopa between 6/1/2008 to 9/16/2008. Homes with pools are very much in demand at this time and carry a significant premium. In fact several foreclosure deals with pools recently have turned into some of the best income producing properties. The other interesting trend is the amount of interest in larger homes. This is likely an effect of the foreclosure crisis as more families move from owning to renting. Entry level homes are still over supplied leading to depressed rental rates. The rental market is solidifying quickly in Maricopa. For Landlords, the good news is that far fewer incentives have been needed this year than in past years. On the downside rental prices remain low. Knowing what to expect on the rental market is the key to making a successful long term investment in the Maricopa real estate market.