We have had declining prices and slow sales since January of 2006. The over-heated market we experienced with high appreciation and easy loans peaked in late 2005. It is my opinion, backed by statistics, that we are at the bottom right now.

 At EXIT Realty Cool Mountain and EXIT Realty Cool Valley of Central Arizona we are experiencing renewed interest in properties. Buyers are now looking. We have calls coming in and people stopping by for information. Prices have corrected to levels of reason. The qualified buyer is starting to show his head again.

 There are many properties for buyers to choose from and at prices that make sense. Some great deals are sitting and waiting for the right buyer to come along. Both homes and land are available for you. Unlike any other investment item except artwork, these properties are one-of-a-kind. Each is unique unto itself.

 Look for the next trigger to bring a spike to sales– an interest rate increase. Yes an increase. The Fed has lowered rates over the past six months and yet there has been little or no trickle down to consumer mortgage loans. The lowered rates have only benefited the banking industry. Consumers have had programs and loan products discontinued. We have had last minute changes that have killed transactions the day of closing. The wheat has lost the chaff now. Most buyers will need to fully qualify for the purchase.

 Buyers have been waiting on the sidelines to see what would happen to the mortgage industry and to property values. The shake out has now completed. There is an enormous amount of pent up demand. People need to relocate for a variety of reasons; job changes, births, deaths, retirement to name a few.

 If interest rates break upward, those waiting for the prices to drop further or rates to slide down will realize that now is the time to buy. Interest rates are more important of a factor than the actual price of a home over the term of your payments. Example: You purchase a home for $300,000 at 6% interest with 20% down. The payment is $1438.92 per month. If the price dropped to $280,000 but the rate rose to 7.5%, the monthly payment would be $1566.24 or $127.32 more per month. The $20,000 savings in the purchase price will be wiped out in less than half the 30 year loan life.

 You see, interest rates do not have anywhere to go but up. The latest word from the Fed is that they will be increasing rates. They must do so because of the value of the dollar in the world. Dollar value is why you are paying an increasing percentage of your income to fuel your vehicles. Increased interest rates will be felt directly by the consumer in higher mortgage rates. Now is the time to buy!

 Most investments are purchased after the bottom of a market. That is a true statement in real estate and the stock market. The same is true of a seller waiting too long past the peak and hitting the downside market. The smartest investment is one purchased at the low of the market cycle and for fair value. Now is the time!

 A sales associate of EXIT Realty Cool Mountain or EXIT Realty Cool Valley can assist you in finding a great property that protects your most important investment, your home, while prices are at the low and rates are at the bottom. You will not want to miss the bottom if you have been getting ready to buy at the right time. Now is the right time.

 Location, location, location is a common saying in real estate. Here is the true secret to success; It’s all in the timing. Now is the time. Now is the time to buy.

Jerry Germansen
EXIT Realty Cool Valley
EXIT Realty Cool Mountain
Broker/Owner
928-632-1600

Pat Kelly, Franchisee

480.812.1900

www.exitrealtyev.com

EXIT Realty East Valley
Gilbert, AZ

EXIT Realty Arizona leaves its mark in Gilbert, AZ with the help of Franchisee, Pat Kelly, who’s office is now 50 agents strong!

It didn’t take long for local real estate professionals to see the appeal of EXIT’s revolutionary Formula after EXIT Realty East Valley opened for business in August of 2006.  With amazement and pride, Pat watched his office grow from only 11 sales associates to a total of 50 agents by May, 2008!

“EXIT Realty is really catching on in Gilbert and the surrounding areas,” Pat said.

“Once agents hear about all that the company has to offer, it’s really a pretty easy decision for them to make, both for new and experienced agents alike.”

EXIT Realty East Valley is growing and profitable!  Congratulations to Pat Kelly and his entire staff for a fantastic year! 

 

Obtaining a home loan is going to get even more difficult.Lending guidelines are tightening almost daily for borrowers as the subprime-loan crisis spreads. Those higher-risk loans have just about disappeared as their default rates soar.Now, financing is getting tougher for all homebuyers.On Thursday, megalender Countrywide Financial Corp. had to take out an emergency loan to keep operating, and Tucson-based First Magnus Financial Corp. stopped taking loan applications. Magnus is one of the nation’s top private lender.Earlier this year, New Century Financial Corp. and American Home Mortgage Investment Corp. filed for bankruptcy. So far, at least 70 mortgage firms have closed or put themselves up for sale since last year.Because of the meltdown in the mortgage market, lenders have begun requiring higher credit scores and bigger down payments from all borrowers. They also are charging higher interest rates to people who want to buy a home for $417,000 or more because fewer lenders want to fund them.The tighter mortgage market will work to slow metro Phoenix’s housing market. Real-estate analysts say the new lending restrictions could knock 10 to 15 percent of home buyers out the market because they can’t get funding. That could significantly affect the local market, where a record number of homes are for sale and where sales are already down about 25 percent from 2006’s pace. “The mortgage market has changed drastically in just the past few weeks,” said Tom Miner of the Scottsdale-based mortgage firm Miner Kennedy Chmura Associates. “We are getting calls from buyers who can’t close anymore because lenders want more documentation or money down.”Cheryl Serbic wanted to buy a condominium in central Scottsdale. Earlier this summer, the restaurant manager qualified for an adjustable-rate mortgage that required little down.

In 2003, lenders started offering a slew of new easier-to-get mortgages that enabled the nation’s housing boom.Borrowers with bad credit and lower incomes could buy homes by getting subprime loans with higher interest rates.Other borrowers could get in with nothing down and without paying private mortgage insurance by using 80/20 or piggyback loans.The 20 percent was typically a home-equity loan that covered the down payment. Lenders also cut back on the income documentation they required on loans. These “no doc” loans opened the door for people to qualify.The housing market was booming. People thought they could refinance into better loans as home prices climbed. Lenders were making money.Then last year, home prices and sales started to slip. The subprime market started to implode as foreclosures on those loans jumped.

Lending guidelines are changing quickly.Not only borrowers but sellers looking to move up should make sure they qualify first.The “jumbo” loan market for mortgages of $417,000 has tightened up because mortgage institutions Fannie Mae and Freddie Mac don’t guarantee loans above that amount. The investors who would have backed the bigger loans have pulled back, which is part of the mortgage market’s liquidity problem.Tighter lending practices are also affecting homeowners looking to refinance.In a slowing housing market, some homeowners who got subprime or adjustable-rate and interest-only loans a few years ago are finding they can’t refinance because they don’t have a high enough credit score or their house is worth less than they owe.“Now, their rates are adjusting up, and they can’t refinance because don’t qualify under the new guidelines,” said Andy Griffin of Scottsdale-based Core Mortgage Group.

Every significant real estate collapse has been historically tied to jobs and negative migration.  It is clear that when communities lose jobs negative migration soon follows then the residential real estate market collapses.  Phoenix Arizona is quite the opposite.  With over 190,000 people migrating a year to the Phoenix metropolitan area it is obvious that there is still tremendous demand.  Especially considering a new housing unit is needed for every 2.7 people.  That is over 70,000 new units per year needed to maintain the population growth.

With the job estimates continually being revised upward since 2002, Phoenix is becoming more and more a popular relocation destination.  In 2006, Greater Phoenix created a record 106,900 new jobs!!!  To put those numbers into perspective, Greater Phoenix was responsible for 1 out of every 25 new jobs created in the entire country for 2006.  It is not just jobs it is the type of jobs.  In 2006 the largest sector of growth in Greater Phoenix at 21.3% was “Professional and Business Services”.  So, not only is Phoenix growing new jobs it is the high paying type of jobs that are being created.  By comparison, Los Angeles County created only approximately 85,000 new jobs. Considering the disparity of the population the ratio is significant.

Mesa, Arizona a suburb of Phoenix now posts a greater population than Cleveland, OH and Kansas City, MO.  Mesa, Arizona is now in the Top 40 most populated cities in America.  Other Phoenix-area suburbs continue to rank in the Top 5 for growth when compared to the cities of equivalent size.

So the answer is yes!!!  Phoenix can and will sustain the growth for decades to come.

All of the big markets are feeling the downturn, some more than others. Single-family home construction has fallen 10 percent in Houston, 20 percent in Atlanta and 35 percent in Dallas, according to the association’s report.Last year, Phoenix ranked No. 4 for home building after Atlanta, Houston and Dallas, according to the National Association of Home Builders.Metro Phoenix beat out Atlanta to be the top home-building market in 2004 and ‘05, but, in retrospect, that wasn’t necessarily a good thing. At least 30 percent of the homes built during the market’s high point a couple of years ago were bought by investors who either didn’t move into them or found renters.

Consumers are asking for it, cities are urging it and industry is pushing it. 

But taking on green building won’t be easy for struggling builders whose main focus has been to regain their footing in a sluggish market.  Many custom builders already have embraced the style of construction that emphasizes conservation of energy, water and materials. Yet going green for the large national companies that build most of the houses in metropolitan Phoenix means overhauling their production-driven businesses, which could be risky at a time when revenue is down and sales are stalled. 

“These guys are fighting for their lives at the moment,”‘ said RL Brown, a Valley housing analyst. “They’re trying to figure out how to make a sale, how to carry the burden of the inventory, how to get rid of the excess land, how to get the cancellations to go away. They’re into serious, hard marketing challenges right now. They’re not into that (green) kind of thing.” 

Industry, however, is. 

The National Association of Home Builders, or NAHB, is creating guidelines to help companies incorporate green-building practices and to offer consistency throughout the industry.  

And the U.S. Green Building Council is wrapping up its pilot program for evaluating houses and expects to issue a formal rating system in the fall. 

Home builders recognize the market, and many already incorporate features such as dual-pane glass and low-water bathroom fixtures. Green building, though, involves a checklist of other items: ductwork placed in “conditioned” enclosures or “gray water” systems that recover water from kitchens and bathrooms and laundry rooms and use it to water the landscaping. 

Those things cost money. And builders question whether enough buyers are willing to spend more on a home.  

Green construction typically raises the initial cost of a house about 5 percent above the non-green competitor, said Thad Johnson, president of SolarTerra, a Williams-based company that designs and builds solar systems, alternative wall systems and water-preservation systems. 

Yet it may be hard persuading buyers to spend even $5,000 more for solar water heating when they could use the money to upgrade countertops, pay closing costs or buy down the mortgage rate.  

“If we implement it, does it cost a certain amount of money that makes the consumer not want to purchase it?” asked Sean Terrell, director of purchasing for Pulte Homes’ west Phoenix area.  

It’s tough for builders to take on anything that will significantly bump the price of their houses. Right now, they’re struggling to get their finances in shape as they try to clear an excess of inventory. At least 20,000 unsold new homes in the Valley wait for buyers, according to various analysts.  

Doug Fulton of Tempe-based Fulton Homes said his company has started to sell houses below cost in some fringe markets, and he believes other builders are, too.  

It’s hard to think green in that environment. 

“If it sold homes and made sense, I’d do it,” Fulton said. “We’re just trying to keep our heads above water. It’s a little brutal out there.”

Glen CrenoThe Arizona Republic