Phoenix High Rise and Loft Condo Expert, Will Daly at www.WeKnowUrban.com

I heard recently that historically Americans pay 26% more to own property than to rent it. As I didn't know whether this was true or not I did a little digging and found a site called www.economicpolicyjournal.com with the following:

"After two years of rapid home-price depreciation, the relationship between the cost of rental payments versus after-tax mortgage payments is tilting toward ownership in a number of metropolitan areas.

Over the past 18 years, after-tax mortgage payments have averaged 26% more than rent payments, according to Green Street Advisors, a real-estate consultancy based in Newport Beach, Calif. In 2006, at the height of the housing bubble, mortgage payments reached as high as 66% more than rent payments. But by the end of 2008, average monthly rent for the largest 50 metropolitan areas was $1,045, compared with after-tax mortgage payments of $1,300, assuming a rate of 5.5% on a 30-year fixed mortgage. That means mortgage payments averaged just 24% more than rent payments, the narrowest gap since 2001.

In more than half of the top 50 U.S. housing markets - including Los Angeles, northern Virginia and Las Vegas - the ratio is now below its 18-year average. In Los Angeles, for example, mortgage payments averaged 60% more than rent payments between 1990 and 2008. Now, those payments average 30% more than rent...

A separate report by Moody's Economy.com also finds that home prices relative to rents are more in line with their historical relationship...The report notes that home prices relative to rents remain well above historical levels in 30 markets, including Philadelphia; Portland, Ore.; and Virginia Beach, Va."

OK, so of course I had to check this out in relation to high rise condos in Phoenix. I spent a large part of the day first trying to figure out how to pull relevant data from the MLS and then how to build it into a useable format. I picked Optima Biltmore Towers because it was definitely a product of the boom, it has a lot of rentals, and it has enough sales to provide adequate data for the study. A number of complications presented themselves. For example in 2006 property taxes hadn't been established so I used the numbers from 2007 instead. Also, since I relied on MLS data that means that my numbers are only as good as the data that was inputted into MLS by all the various agents. In some cases agents did not list the square footage of their condo listings so I had to drop those properties, in other cases they did not include the HOA fees so I had to drop those. Also, for two different quarters there weren't any sales at Optima Biltmore Towers so there is no data point for those periods. And finally, the article above mentioned that the rent vs. own difference was based on after tax dollars. I adjusted the principal and interest "mortgage" amount by 20% to adjust for taxes. Argue with me all you want about it; I just needed a number and I figure 20% is conservative. And after all I'm just trying to see a trend not have a bullet proof statistical analysis.

In the first quarter of 2006 we see that purchases ran about 61% more per month (after any tax benefits of owning) than comparable rentals just like the article mentions. But we see that the gap grew larger throughout the rest of 2006. I'm not surprised by this. Investors went really crazy for high rise condos largely because they liked the extended build time, thinking that they would "ride the appreciation" that much longer for extra profits. Because of this sales prices of high rise condos probably "boomed" more than other market segments and will probably "bust" harder as well.

Eventually I'll get around to posting more of the data but for now, know that the gap for the first quarter of 2009 is at approximately 25%, slightly better than "historical norms." And again, this number may be artifically high as I only used a 20% factor for the tax benefit. Regardless, it seems that the gap between buying and renting condos at Optima Biltmore Towers is starting to make sense again and may warrant further looking into a purchase.

You asked for it so we went out and got it. Short term rentals that is. In the past we turned away many people who needed help finding cool condos in downtown Phoenix because there flat out wasn't anything available, until now. We now have access to VERY nice furnished one and two bedroom high rise condos right next to the baseball stadium downtown. These condos are available for as short as one night and for as long as six months. Each condo comes fully furnished, with complete kitchens, wi-fi, Direct TV, and even room service from a local restaurant. Enjoy the "A-Cabin" amenities including the fifth floor pool and spa, professional fitness center, sauna, roof top entertainment room and patio, attached garage, conference room and more. All this, walking distance from Phoenix Convention Center, Chase Baseball Field, US Airways Basketball Arena, three live theaters, multi-screen movie theater, shopping and tons of great restaurants and bars like: Pizzeria Bianco, Sens, Pasta Bar, Hannys, Coach and Willys, Rose and Crown, Tufts and more. Also, with a light rail stop 1000′ feet away ASU and all of Tempe are open to you.

Walk to professional baseball, basketball, great restaurants and bars. Stay in the heart of downtown Phoenix.

So if you are relocating to Phoenix and need interim housing until you buy something or if you're visiting for conventions or athletic events, give us a call and we'll hook you up with a great downtown Phoenix condo rental.

I want to buy now but I'm afraid that prices may go down further and I don't want to miss a better deal later. What should I do?

Answer: You're not the only one. Many prospective buyers are "sitting on the fence" and not buying now for this very reason. But, more and more people are pulling the trigger. Here's why.

• The United States housing market just wrapped up its best season in three years and prices are up 3.6% since April.
• Talk of a new "wave" of inventory about to hit the market may be exaggerated. We believe that the vast number of homes that are expected to come to the market as foreclosures are already on the market as short sales. This means that the majority of these homes are already counted and will not contribute to a flood of new inventory. "Authentic new "supply" (housing starts) currently hitting the market is actually quite low. In fact, it hasn't been this low since at least 1959 (and probably a lot longer, but we don't have data prior to then). This year, builders will begin construction on somewhere around 620,000 units, a number that's about 32% below the old record low of 906,000 set-you guessed it-last year" (Home Prices: Sustainable Bottom or Dead Cat Bounce? By: Morningstar Monday, October 12, 2009 7:38 PM).
• Most of the urban condos built early in the boom already "busted" meaning they sold as short sales or foreclosures. In many of these buildings we are seeing price stabilization and/or price gains.
• In some urban condo communities sales prices are low enough for investors to buy and rent the property out and net a positive cash flow. We have seen an absolute flurry of buyers in some of these recovering buildings. Competition is hot for the right condo in the right community.
• We expect interest rates to go up and soon for two reasons. First, it is very likely that the US will experience high inflation in the not too distant future. Interest rates go up during times of inflation. Secondly, interest rates are currently artificially low due to US government influence. Investors (other than the US government) are not buying mortgage backed securities because the rate doesn't support the risk. In other words would you yourself loan money today for someone to buy real estate if you were only going to earn 4.5 or 5% for the next 30 years? Probably not. But that's the going rate today. Would I feel better about loaning money if I was going to earn 8 or 9 or 10%? Probably. The problem is that mortgage interest rates are half that. So "investors" like me aren't loaning money for such purchases. The US government can not loan money at these low rates 4.5 to 5% forever. When the US stops loaning money rates will have to go up enough to attract other investors. So, expect interest rates to go up for this reason and with the coming inflation.
• We believe that there is pent up demand for properties. In many cases people stopped buying in 2005 or so. Those folks have been sitting on the sidelines waiting for the dust to settle before they will buy. However, there's a point where people don't want to wait, or can't wait, any longer (i.e. pent up demand) and they buy. There is strong evidence to suggest that things are getting there. In downtown Phoenix, condo sales far exceed the supply (see chart below). You'll see that in 2008, inventory (the number of condos for sale) far exceeded the number of buyers so prices dropped and dropped and dropped. In February 2009, the line representing inventory and the line representing the number of buyers intersected meaning that the numbers of buyers and the numbers of sellers were about equal. Since then, dramatically more people are buying than people are selling.

Gang, there are always exceptions to any rule. But it is our opinion that there are great deals out there for those who know where to look AND who meet certain other criteria. If interest rates do go up, and I strongly believe they will, then you might want to take advantage of today's low rates, take advantage of the many sellers who really do need to sell (at lower prices), and get yourself a great urban condo now rather than later. Don't be one of those folks who years from now say "boy I really wish I had bought when I had the chance." Call us at We Know Urban Realty and get our help. We don't sugar coat stuff and we know where the deals are and can show you why they are good deals.

I am hearing more and more stories from renters of high rise condos and lofts who are getting cheated out of rents and deposits when their "landlord" stops paying the mortgage and the bank forecloses. These poor folks sometimes have to move in a matter of days or weeks. Talk about disruption!

If you do not know how to protect yourself from this then you really should be calling an experienced real estate agent to represent you. Yes, I emphasized "experienced" intentionally. Believe it or not there are few agents who are experienced in condo rentals and even fewer who know how to protect their clients from the nightmare I describe above. The agents at WeKnowUrban get 20-30 inquiries from renters who want our help. Because of this volume we have the experience and knowledge to protect our clients. Take advantage of this experience and knowledge and call us. It won't cost you anything (the landlords pay us) and you might save yourself thousands of dollars, a lot of aggravation, and the stress of moving out on short notice.

Ok I know that there is still tons of bad news out there and plenty of reasons to believe it but here are a few things that MIGHT indicate that the real estate market is starting to firm up in Phoenix.

1. A mortgage lender friend of mine says that April will be his best month since 2005.

2. I wrote purchase contracts on two different properties today and received offers on two different listings this weekend. This constitutes the busiest weekend I have had in four years. One of the offers I received was for full price.

3. My wife, an escrow officer, says that April will be her busiest month since 2005. About 50% of the transactions are refinancing of existing mortgages and 50% purchase contracts. Yes, most of the contracts are of lower priced foreclosures but its still promising to see that so many people believe prices now "make sense".

4. We have received more buyer leads over the last two weeks than we have in four years.

5. We are finding properties priced low enough that one can easily enjoy positive cash flow if they buy and then rent the property out.

I'm not saying that we can now declare that the bust is over and full steam ahead but if things keep going in this direction we very well may be seeing the beginning of a recovery.