I believe it is time.
Couple of key indicators are pointing the needle back to Phoenix.
It's been a long time since the red hot investor needle was pointing to the desert.
So, what is it that has changed?
1. Builders have virtually stopped building. Limiting the increase in supply.
2. Inventory is shrinking. Sales are up 60% Nov-Dec 08 and 135% 07-08
3. Population is still increasing faster than national rates. 2.5% projection vs 1% US
4. Still plenty of jobs to hold in the population. Only 6.3% unemployment. US 7.2%
5. Affordability of homes. Median prices come down, renters gravitate toward buying.
6. Investor levels are rising. No one wants to be the first and be wrong.
But if you wait too long, you are the last and hold all the regret.
Not only have builders stopped building, many have gone out of business. Those that are still in the game, have lost the large credit lines that allowed them to stretch their reach from 100 homes per year, to 1000 homes per year. This will keep the new housing inventory to a level of normalcy. Also, the population projections appear to be lower than the previous decade. Builders get overzealous with building permits when population expectations are above 3% growth rate.
Housing monthly inventory index is shrinking. Part of it has to do with the builders not building. But that seems to be offset by the massive foreclosures that are piling up. What is changing is the buyers are buying again. Prices have reached affordable levels that have made home buying attractive again. The question of rent vs buy now is being answered with BUY!
The actual number of houses on the market is fluctuating at 45,000 to 48,000. Which is not a low number. How the monthly index is determined, is by the amount of buyers entering the market each month. Stats are showing sales keep increasing. In Phoenix the monthly index has been slowly dropping and now is at a 10 month supply. In many markets around the country, the montly supply index has simply been increasing all year and the national average is now over 11 months supply.
Prices have been pounded in Phoenix, and there will be more foreclosures, which will keep these prices low. Investors have taken notice. The rate of investors in the market this month is 15%. A number Phoenix hasn't seen since 2005. Investors were part of the problem for the Phoenix decline, but mostly speculative investors. Combined with over-building, and a sub prime lending spree. This time investors are looking at an attractive 1% price to rent ratio. Cash flow is the difference. Let's face it. Rent doesn't change that drastically in 3 years. But prices in Phoenix have been a roller coaster. They have now rolled back to roughly half of their peak.
Properties like this example are available:
Avondale, West Valley Suburb.
Master Plan Community
Homes all built post 2000
Variety of home prices ranging from $120k-$400k
2005 levels, homes were minimum $200's
One bank owned REO cuts the $99,000 mark.
3 bedrooms, 2 baths, tile floors, covered patio.
Rent estimates $900-$1000
1% Price to Rent Ratio = Cash Flow
Since, today's investors are less speculative, and more cashflowcentric, then this is a healthy addition to the reason Phoenix could be on the road to recovery sooner than later.
Some of the markets that were first to bust, are going to be the first to recover.
Phoenix will be one of those markets, the signs are already pointing in the right direction.
Jacksonville appears to have suffered less real estate pricing volatility than most Florida markets. The pricing correction has appeared to slow down in its decline, and many submarkets have actually seen small month over month increases. (study by DataQuick 12/08)
Would I say buy? Yes, But, Buy at a discount!
Reasons Jacksonville is different than other markets:
Many cities of similar size are not considered for an NFL Franchise, let alone considered sufficient to support a Superbowl.
Jacksonville has an economy strong enough to support and attract amenities that some major markets cannot.
Its location on the coast increases the quality of life component, with less fear of the hurricane factor. Jacksonville waters are a cooler temperature than the rest of Florida, and it is located North of the Gulf Stream. No hurricane has come close since approximately 1964, therefore the insurance rates are lower, making this a better cash flow investment than other cities in Fl.
Where to buy in Jacksonville:
Property Profile:
Remodeled Foreclosures, allow you to purchase at discount, without the headache of repairs, extra liens on title, and large capital investments. Companies, NorthPoint, can help find the safest investment, complete with improvements and with tenants already in place.
Be ahead of the curve.
For more investments like this one:
http://www.northpointgroup.com/
Steve@NorthPointGroup.com
503-213-3550
rushsteve1 @ skype
http://www.linkedin.com/in/steveroesch
How is this still possible, with banks so afraid to lend money today?
Sometimes you can find a New Home Development where the builder ran out of time before the market closed in on him.
And then the bank swoops in and takes over the development. But the bank has to finish the development before it can sell anything. Usually, the houses are not quite finished. Maybe they need carpet and sinks. Or sometimes just landscaping and a doors. But nevertheless, whatever needs to be finalized, the bank, now owner, will finish and sell on the open market.
Most banks want to clear their books. Take the write down and move on. But some banks will think a development is worth holding on to. Perhaps, today, it is worth less than they lent on it. But in the near future, they predict, the values will come back up. Instead of holding the real property and being a landlord, which banks are not in the business of doing, they will simply sell it and lend on it again.
In other words, they are the owner free and clear, and will owner finance. If they intend to keep the loan, they do not have to fear what guidelines Wall Street will require, if they were to sell the note as a MBS or mortgage backed security. So if they want the risk of low down or no down, they can do it.
As lending requirements have tightened, owner financing will become the attractive alternative measure to the mainstream lending.
Here's one example:
On a quiet street in Atlanta Metro, Georgia.
These are big 2000+ square feet, 5 bedroom, 3 bath houses.
Complete move in ready, blinds, fridge, landscaping.
The market rent is $1200 per month.
2 Homes just like this are rented for $1200 in the neighborhood.
The rest are known to be owner occupied.
The Mortgage payment will be $948 for the next 3 years.
After taxes and insurance, and a recommended property manager fee, the cash flow is projected to be neutral.
Here's the deal.
$175,000 price
Zero Down
100% finance at 6.5% interest only, 3 year fix.
These are appraised for $195,000 and were listed for well above $200k
call Steve Roesch at NorthPoint for more details, 503-318-6351 or steve@northpointgroup.com
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