May 2016 Phoenix Real Estate Update


Phoenix Real Estate Update


I hope you enjoy this monthly newsletter. Remember whether you are buying a new or resale home it is important to have a realtor to represent your interests. When you go to a new home development the very nice builder’s realtor is working strictly for the builder. You have NO representation.  If you know of anyone who is thinking about buying or selling please let me know.  


Do you have a rental property and need a property manager?  Please call or email Karen Van Vugt at 602-316-7028 or ftr9558@cox.net


Sincerely,

Pat Hune

Broker

greathouseaz@gmail.com

1st Southwest Realty

www.greathouseaz.com

Search the real MLS from my website!

Cell 480-703-1976

Fax 480-304-9099

Equal Housing Opportunity



Market Overview by Pat Hune from Various Sources

The weather isn’t the only thing that is hot in Phoenix.  Homes priced under $250,000 that are not total dumps will receive multiple offers.  Some offers will be more than asking depending on how desperate the buyers are.  A resurgence in waivers of contingencies repairs and appraisal along with giving up asking the seller to contribute to closing costs are becoming more common.  Owners who bought before the crash, rented because they could not afford to sell or did not want to short sale or let the bank foreclose are listing their homes for sale.  These sellers are so close to breaking even or losing money the negotiations are fierce on the price, repairs and appraisal.  The mortgage interest rates are staying low but as the economy improves there is a distinct possibility they will go up.  


The multifamily market has exploded.  One fourplex in Mesa on Greenway Street sold on average during the bust for $170,00 are now selling for around $400,000. I had clients looking at these fourplexes but I could not convince them to buy.  As the saying goes hindsight is always 20/20.


Articles


1)  STAT Newsletter 

2)  Rental Market  

3)  Multifamily and Commercial Real Estate Trends

4)  How Do You Buy A Home When There Are Multiple Offers?

5)  Does Converting A Rental Property To A Principal Residence Save On Taxes?

6)  Where Are Mortgage Rates Going?

7)  Tales from the Real Estate Trenches 

     Can You Fight A Bad Appraisal?


 

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1) STAT Newsletter Link -(Note the numbers are reported a month behind.  The MLS has renamed to reflect the report is for the prior month.)  STAT is produced monthly  by the Arizona Regional Multiple Listing Service - the database realtors use to list homes for sale and that have sold.   

ARMLS® COPYRIGHT 2016


April STAT


STAT Newsletter and Real Estate Market Highlights

Commentary by Tom Ruff of The Information Market


There was no significant movement in the real estate market in May.  Monthly sales are down by 1.4% month over month (MOM)  and .09% year over year (YOY). New inventory is down 3.2% month over month but up 6.1% year over year.  Total inventory is down 2.4% MOM while YOY increased to 4.3%.  Month’s supply of inventory for March was 3.29 and down slightly in April at 3.26.  Prices continue to inch up with 2.2% YOY for the average price and up 4.6% for the median price.

ARMLS Pending Price Index (PPI) 

Our last Pending Price Index projected an April median price of $220,000 with the actual median coming in at $222,000, off by 0.91%. MLS sales volume in April landed at 8,293, 107 fewer sales than our projected volume of 8,400. Looking ahead to May, the ARMLS Pending Price Index projects a median sales price of $223,839. We begin May 2016 with 7,911 pending and 4,622 UCB listings giving us a total of 12,533 residential listings practically under contract. This compares to 12,291 of the same type of listings at this time last year. We expect sales volume in May to be slightly higher than the numbers last year with an accompanying increase in the median sales price. There will be 21 business days this May compared to 20 business days in May 2015. Our projected sales volume for May is 8,500.

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2)  Rental Market Check - Rent Check is an ARMLS's  publication tracking single family home rentals.  Click on the link for the statistics.

April Rent Stat


Rents continue to increase and vacancy rates are down. This month we had only 2 vacant properties in our entire portfolio.  One trend we are starting to see is tenants who are tired of wasting money on rent and are buying instead.  One would expect this trend to increase vacancy rates but it has no impact thus far.  One could speculate the millennials who have been living at home are now moving out and renting.  They don’t want to or can’t afford to buy.  Student debt is probably still a factor.


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3) Multifamily and Commercial  Real Estate Trends


Current Phoenix market trends data indicates an increase of 5.9% in the median asking price per unit for Multifamily properties compared to the prior 3 months, with an increase of 17.4% compared to last year's prices. County-wide, asking prices for Multifamily properties are 5.1% higher at $65,720 per unit compared to the current median price of $64,758 per unit for Multifamily properties in Phoenix, AZ.  There has been an significant increase in the sales prices for duplexes, triplexes and fourplexes with very little available under $250,000.  


Loopnet Commercial Trends


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4)  How Do You Buy A Home When There Are Multiple Offers?

Brenda Swanson, Housingwire, May 2016


Low listing inventories, low interest rates and strong buyer demand are driving multiple offer scenarios nationwide.  Securing the home your have your heart set on depends on your skills in getting your offer accepted over all the others.  Check out these simple and thoughtful best practices for multiple offers.

1) Get pre-approved, not prequalified, for the mortgage. 

2) Hire a realtor so you see the homes as soon as they are listed for sale. 

3) Don't ask for contingencies like contribution to closing costs or anything else you don't absolutely need.  

4) Provide the cleanest contract possible. 

5) Don't try to negotiate the price down if the home is priced right. 

6) Move quickly as sometimes homes will sell in a day or less!


Click to view the entire article on Housingwire..


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5)  Does Converting A Rental Property To A Principal Residence Save On Taxes?

Christopher A Combs, Attorney, Combs, Gottlieb & MacQueen, June 2016


Question: In a recent article you said that IRS income tax law was changed to limit the tax benefits when the owner of a rental home moves into that rental home–which then becomes the owner’s “principal residence.” My husband and I are considering converting rental property to our personal residence. We have owned a rental home in Paradise Valley, Arizona for eight years. The appreciation on that home is approximately $500,000. We are planning on retiring to Utah, but don’t want to pay tax on this $500,000 in appreciation. We are willing to move into this rental home as our primary residence for two years, and then sell the home. In light of this change in the tax law, would we have any tax benefit?


Answer: Prior to 2008 an owner of a rental home could move into that rental home as a principal residence for two years, and, upon the sale of the home after two years of residence, the entire capital gain on the sale for up to $500,000 for a married couple ($250,000 for a single person) would be exempt from income tax. This tax windfall was very common in the “boom” mid-2000’s when home values were skyrocketing, and investors owned several rental homes. Investors would move into rental properties every two years and realize the maximum tax benefit on many properties.


In 2008 this tax law changed. An owner is still required to live in the property for two or more years within the past five years to qualify for capital gain income tax benefits, however, no longer is the entire capital gain exempt from income tax. The new law requires a prorated calculation of the tax benefits based on the number of years owned as a rental home and the number of years owned as a principal residence. Therefore, if your Paradise Valley home has been rented for eight years, and then becomes your principal residence for two years, only the time that the Paradise Valley home was your principal residence would be eligible for the capital gain exemption. In other words, if you owned the Paradise Valley home for ten years—eight years as a rental home and two years as a principal residence—only 2/10 of the $500,000 capital gain would be exempt from income tax. That amount would be $100,000.


To read the full article click on Rental to Personal Residence.


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6)  Where Are Mortgage Rates Going?

Justin Oliver & Ryan Whalen, Nova Home Loans and various sources, June 2016


The probability of a Fed rate increase at June’s Federal Reserve Meeting seemed very high.  Economic data continues to point to a slowly improving economy and small signs of increasing inflationary pressures are beginning to appear.  Then the bombshell hit with only 38,000 new jobs created in May and April’s tally was lowered to 123,000. Bonds and mortgage rates reversed course and settled lower as the week ended.  Everyone was reminded that one reading does not make a trend.  While this report was significantly below expectations it may be revised next month.  Most other economic indicators continue to point to slow economic growth.  


Federal Reserve Chair Janet Yellen will be speaking at the World Affairs Council of Philadelphia on June 6.  Her comments will set the tone for rates for the next two weeks.  If the market perceives her comments as giving the Fed more room on when to increase rates then mortgage rates are likely to remain level.  If she reiterates the overall strength of the economy then rates may move upward.   


Sean Becketti says our final thought for this month best: "Disappointing April employment data once again kept a lid on Treasury yields, which have struggled to stay above 1.8 percent since late March. As a result, the 30-year mortgage rate fell 4 basis points to 3.57 percent, a new low for 2016 and the lowest mark in 3 years. Prospective homebuyers will continue to take advantage of a falling rate environment that has seen mortgage rates drop in 14 of the previous 19 weeks." — Sean Becketti, Chief Economist, Freddie Mac.



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7)  Tales from the Real Estate Trenches 

Pat Hune, Broker at 1st Southwest Realty


Can You Fight A Bad Appraisal?


Recently Pebbles and Bam Bam decided to sell their single family home investment property they had owned for many years.  The property was in overall good condition but to maximize the return on investment they did some upgrades and  maintenance to the flooring, landscaping, interior and exterior paint.  The house was in need of updating but I advised against spending the money in case the buyers wanted to do something completely different.  Houses in the area were taking more than 90 days to sell so I advised a fairly aggressive price of $450,000.  An acceptable offer was received in two days, the house went under contract and the inspection period began.  During the repair negotiation the appraisal was received that missed the contract price by a measly $7,000.  Upon review of the comps used by the appraiser it was discovered no houses in the immediate neighborhood were used despite the fact there were comparable sales.  All properties were over a mile away and two backed up to busy streets while the subject property was on a quiet cul de sac lot.   The standards of practice an appraiser must follow require them to use the comps within the same neighborhood.  The buyers and sellers could not come to an agreement about the repairs and the low appraisal so the deal fell apart even though everyone agreed the appraisal was not valid.  


The only recourse the sellers have is to file a complaint with the Board of Appraisers.  However this takes time and was too late to save this deal because the buyers needed to move quickly.   So yes bad appraisals can be contested but typically it will be too late to save the current contract.


Board of Appraisers