Michael Fitzpatrick

Well the mid-winter urban market in Phoenix is hotter than ever. We are seeing large demand in the 150-400K range in downtown Phoenix, midtown Phoenix and the Biltmore area. Increasingly people are recognizing that these corridors offer allot of unique properties at very compelling prices especially when compared to Scottsdale and downtown Tempe. Since November we've seen demand increase by 40% with inventory decrease by as much as 50%. This is exciting because now in certain areas and projects we see demand equal to supply which we haven't seen for sometime. These are the 'tea leaves' of recovery in the urban market and since this market has a much smaller supply of homes than the suburban areas of Phoenix, urban will recover quicker and in better shape. As mentioned in an earlier article, days on market came back to the average of 110 days a couple months ago. We now are below that averaging 75 days. Of course we are coming into our 'season' here in Phoenix and that usually adds a bit more demand than usual however we much farther ahead than last year. This is all positive signs so keep your chin up!! Check out all the propeties at www.phoenixurbanliving.com. M.

FHA has long been a great vehicle for first time home buyers to purchase property. Recent changes in legislation has made it easier and more difficult at the same time for people to qualify for FHA financing (leave it up to legislators to solve a problem and then create another). They've increased the down payment and FICO requirements but have dropped certain project requirements. If your an urban buyer looking for an FHA approved project, there are very few options that will appeal to you. Most are more traditional, Arizona style large condominium projects that are away from the core and mass transit. However, there are a few unique projects in downtown Phoenix nestled neatly in the urban landscape like Evergreen 9 and Portland 38 that are FHA approved. I believe that since these are really the only architecturally unique, FHA approved projects that are close to downtown Phoenix that this will add to property values within those communities. FHA regulations are only getting more challenging and existing approved projects should benefit from these newer regulations. The same will hopefully be true of Century Plaza. At one point the project was FHA approved and hopefully the new owners will continue to pursue FHA approval. Since getting a loan isn't what it used to be and the largest growing segment of buyers is FHA buyers then the properties should become much more desirable. This is also a good strategy for an investor looking to buy. If a project is FHA approved then the largest group of buyers would qualify to purchase in that project. As an investor that spells liquidity. Something to keep in mind. M.

This has been the topic of discussion lately with my good friend and business partner Will Daly. We have been working on a few new and exciting incentive programs for certain buyers who have unique needs and requirements. As we looked into auctions as an avenue for our buyers to purchase urban property we've uncovered possible challenges. 1). Banks do not have a good understanding of how to value urban condos in the current fluid market. Many times they are so disconnected from the micro economics of these types of properties and unfortunately consult real estate practitioners that do not know the niche as well. This causes the banks to misvalue the property when it goes to auction usually based more on the mortgage value rather than current market value. This is why many urban properties go back to the bank rather than purchased at a trustee sale by a third party. 2). There is no traditional title services with these transactions which means the property 'could' have clouds on the title and possible unmarketable deed. 3). Properties purchased at auction need to close within 24 hours so there is no traditional financing with these properties. You need to pay cash. Of course you can finance the property after the fact but you'll need to cash at close. 4). Mostly buyers will not be able to view the property prior to purchase so it's truly a "buyer beware" transaction and buyers need to be fully informed of the project they are buying into and any possible risks. 5). Buyers need to be working with a real estate professional before hand to truly pinpoint a value on the property that is coming up for auction and any weighted risks. You will have no idea if the bid price set by the bank the night before is reflective of the current market value. What looks like a steal might be expensive unless the right analysis is done before hand. These are things we think about everyday to help ensure a positive transaction for our buyers.

With the amount of urban inquiries we get, Will and I are sometimes taken back by the lack of understanding most buyers have of this type of product. Most people are used to single family homes where "it is what it is". If it looks like and sounds like a duck then it's gotta be a duck right? Well, as far as urban is concerned, you would be wrong. Each project is unique in it's design, floor plans, amenities, HOA dues, taxes, ownership vs renters, infrastructure challenges, location and convenience, ability to get loans for units in the project, status in regards to future price erosion, etc.. These are all VERY material concerns that could very much affect the buyers ability to purchase, protect their investmentand make the transaction a positive in the short and long term. Now these are not the only questions (that is why you call us) but these are basics that 100% of the buyers who contacting us are not thinking about for the most part. We see the destruction of personal wealth all around us and mistakes made are prominently displayed through "For Sale" signs of distressed properties. With this still very much affecting everyone wouldn't you think it would be prudent to truly understand your real estate investments before you make them? Real estate is such a common commodity that most people believe that they understand it enough to make an educated decision. However, like everything, unless you study it and work in it everyday there is no way for you to truly understand it. Wouldn't it be important to get an understanding of: 1). Whether your investment will go up or down in the next two years? 2). Whether or not you can obtain a loan to purchase within that project given your financial goals? 3). Even though you have cash, does it makes sense to for you to use that cash to purchase a specific piece of property? 4). Does the project have 'looming' infrastructure problems that could drastically affect your cost basis or laden you with a large one time assessment? 5). How is the area trending as far as appreciation? 6). Is the project slowly turning into a rental community and how does that affect values going forward? 7). Does buying short sales make sense in urban projects? If so, which ones. 8). Is there specific floor plans, orientations, etc.. that perform better than others? I could go on but I'll stop there and these are just SOME of the questions that help you the buyer to be more informed and thus make a better decision. Most real estate companies do not focus on this and that is why buying mistakes are still being made which could cost buyers plenty. We are here to help answer these questions and many more. There are amazing opportunities but you need to know what to look for and we can help with that. Thanks, Will and fitz.

The past two years have been nothing short of 'interesting'. The middle of 2009 (June/July/August) saw a surge of buying in the 300K and below segment. This was perceived as deals since the overall price points started to come in line with commonly used rental equations. Thus the cash on cash return was starting to get very attractive to investors and second home buyers who initially wanted to use the property as a investment vehicle since their paper investments were not performing. The luxury market, say 500K and above has been ice cold for the past 18 months and once you get into the super luxury estates or condos, that market doesn't exist today since there really are no buyers (at least in volume). An argument could be made that the luxury market could 'hang on' longer since they had more resources (money) to wait out the recession. Well it appears they can wait no longer. We are seeing distressed properties in form of short sales and foreclosures creeping into this market which in turn is attracting speculative investors. Six months ago there wasn't hardly any inquiries into luxury condos since most people were pulling their horns in to weather the storm. Now it appears that consumer sentiment is getting better, investments are performing, people are feeling more confident and thus demand for luxury distressed properties is starting to increase. I would have to say we've had 75% increase in the amount of inquiries in the luxury market over the past three months. Since the holidays that we've seen that figure probably double. I believe 2010 will be a year with allot of activity in the luxury market with a majority of it being speculative investors and move down buyers. The unfortunate part of this story is it's all based upon distressed property which means someones hardship will become someones opportunity. M.