Happy Halloween to our valued clients:
Scroll down to read the articles of interest. 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. If you know of anyone who is thinking about buying or selling please let me know. You can search the MLS from my website at www.greathouseaz.com.
If you have a rental property and need a property manager or if your Homeowner's Association is looking for a new management company please email Karen Van Vugt at ftr9558@cox.net. Karen manages over 350 rental units and several Homeowner's Associations in the greater Phoenix area.
I just posted some short three minute videos on my website explaining how to do a short sale. You can see them at www.greathouseaz.com.
If you no longer want to receive this newsletter reply with remove in the subject line.
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
Treats
Retail rebound scattered across the greater Phoenix area could be signs the economy is starting to improve. The projects range from historic building redevelopment to new stores from YouFit Health clubs, Summerwinds Nursery, Texas Roadhouse and QuickTrip.
Home prices continue the slow but steady increase from $107,000 on August 18 to $114,950 on October 3 (all areas & types). That's a 7.4% increase in less than 7 weeks. REOs are losing market share very quickly now. Fewer trustee sales are taking place. There were 2,689 residential trustee sales in Maricopa County during September 2011, 44% fewer than the 4,808 of September 2010. In addition a larger percentage of these auctions are now won by third parties (42% in September 2011 versus 20% a year ago). So the quantity of homes reverting back to the the bank is dropping extremely fast.
Interest rates ticked up slightly to 4.00% for FHA with 1% origination fee and and 4.375% for conventional with 1% origination fee. Some mortgage companies are offering 150 day locks on interest rates without a contract. This should encourage anyone who has been thinking about a home purchase to lock their interest rate while they are shopping so they know what their payments will be.
Home Equity Protection - Never Lose Money On A Home Purchase Again? No home buyer wants their home to be worth less than what they paid or have invested in repairs or improvements. Every home buyer would love to time the market perfectly so they can sell their current home for the same or hopefully more than they have invested. Several companies are offering home equity protection to owner occupied homes including a company called EquityLock Solutions. Though this is not insurance EquityLock has a reinsurance agreement with a licensed, regulated insurance company to cover claims. The costs vary but typically range between 1.5% to 3% of the home value.
Tricks
Inventory is down and competition is fierce for homes priced right and in good or reasonable condition. Speaking from personal experience both owner occupant and investor buyers are being out bid or waiting too long to make an offer. Successful buyers have to be quick and be prepared to pay more than asking especially if the house has received multiple offers. Short sales still tend to be the best bargains but even these houses get offers quickly despite buyers not knowing when, or even if, bank approval will be received.
Articles
1) STAT Newsletter Link
2) The Cromford Report
3) Bank of America ‘Enhanced Short Sale Relocation Assistance’ program PAYS owners $5,000 to $20,000 to short sale
4) Buy And Bail? Or, Bail And Buy?
5) Home Equity Protection - Never Lose Money On A Home Purchase Again?
6) Real Estate News Briefs
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1) STAT Newsletter Link - STAT is produced monthly by the Arizona Regional Multiple Listing Service - the database realtors use to list homes for sale and that have sold.
http://www.armls.com/docs/stat-and-ppi-2011/stat-october-2011.pdf
Highlights from the newsletter are:
Sales activity, while not as robust as the last several months, still remains high; foreclosures pending continue its downward trend, albeit on a less steep decline; market wide MSI (months supply of inventory) remains under 4 and the average DOM dropped 5 days in September. Pricing even took a whimsical upward turn for all four price metrics: median and average prices for both sales and new listings. Tune in next month to learn if the upward turn is pure whimsy or the start of something.
More notable is this month’s metrics in the historical perspective of the entire decade. Considering that the mid to second half of the decade was marred by an unrealistic buying/selling frenzy which drove prices to unrealistic heights followed by a market in free fall, the first half of the decade looks fairly normal. In fact, today’s total inventory levels are comparable to levels of 2003-2004, the years right before the frenzy. Similarly, MSIs in the 3-4 month range have not been enjoyed consistently since 2003.
Consider the yearly averages for both median and average sales prices. The decade high yearly average for median sales price occurred in 2006 at $254,450, a 42% gain from the same figure in 2003 ($148,483). The current YTD average for median sales price is $110,389, a 57% fall from the 2006 high. The same phenomenon occurred for average sales price, which reached the decade high yearly average of $334,567 in 2006, 41.6% above the 2003 figure of $195,450. The 2011 YTD average is $156,857, 53.1% below the decade high. Thus the pricing gains in the Valley which peaked in 2006 were wiped away by 2011. After such radical price declines, median and average pricing from 2003 now looks very attractive, almost normal.
This month PPI added a new dimension to its Supplement, tracking movements in price per square foot at various price points for pending sales data added to the existing pending pool each month. The Supplement will detect subtle changes in pricing through the price/sq ft metric. As property at the lowest tiers is absorbed, buyers will move to the next price range to take advantage of the Valley’s housing affordability. Pricing recovery will be based on such subtle changes.
At the recent 2012 Economic Outlook* breakfast sponsored by the Phoenix Chamber of Commerce, economists, Dr. Angel Cabrera and Elliot Pollack, and Beckie Holmes, Director of Marketing Science with Cox Communications, focused on the interdependencies of economies (global, national, state and local), jobs, debt and migration on the Valley’s recovery. They pointed out that our recovery will remain vulnerable until consumers finish restructuring their debt, new construction is no longer eclipsed by existing inventory, people in other states can liquidate their homes and move to Arizona, housing formation reverses it direction and pent up housing demand can access credit.
The unemployment figure for Phoenix Metro decreased slightly from 8.7 in July to 8.4** in August. In 2011 Greater Phoenix gained 31,330 net jobs, a small yet positive number compared to the 246,400 lost over the three prior years. Jobs like other metrics such growth in manufacturing, tourism and education and health services, retail sales, etc. can best be described as going in the right direction but at a painfully slow pace. Conclusions reached at the Economic Summit pointed to slow, yet positive growth until 2015, followed by accelerated growth and a strong economy from 2015 to 2020. We are ready!
(The areas and property types included in these statistics are: The figures shown are for the entire Arizona Regional area as defined by ARMLS. All residential resale transactions recorded by ARMLS are included. Geographically, this includes Maricopa county, the majority of Pinal county and a small part of Yavapai county. In addition, "out of area" listings recorded in ARMLS are included, although these constitute a very small percentage (typically less than 1%) of total sales and have very little effect on the statistics. All dwelling types are included. For-sale-by-owner, trustee auctions and other non-MLS transactions are not included. Land, commercial units, and multiple dwelling units are also excluded. In addition very few new new home builders list their new homes in the MLS so these numbers are tracked separately in the RL Brown Reports. )
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2) The Cromford Report - September 2011
Sales Price as a Percentage of List: 96.70% on October 1, almost the same as 96.72% on September 1 but up from 95.43% on October 1, 2010. We can see that all these numbers are far better than 12 months ago but most are not as good as last month. However the Cromford Report Index™ continued to improve. This is because this index is a seasonally adjusted measure and it is normal for inventory to increase between September and October. In fact the inventory increased only 0.2%, far less than in an average year and causing most of the improvement in the index.
It is also normal for sales volume and pending listings to decline between September and October. This year sales volumes fell faster than pending sales, which is partly due to the decline in REO listings. With fewer lender-owned and HUD properties available, last year's sales volume for REOs is no longer sustainable. We now see demand in slight decline and expect to see the Cromford Market Index™ fall back from its recent highs as a result.
REOs are losing market share very quickly now. Fewer trustee sales are taking place. There were 2,689 residential trustee sales in Maricopa County during September 2011, 44% fewer than the 4,808 of September 2010. In addition a larger percentage of these auctions are now won by third parties (42% in September 2011 versus 20% a year ago). So the quantity of homes reverting to the beneficiary is dropping extremely fast. Only 1,280 single family homes went back to the lenders in Maricopa County in September 2011. This is the lowest total since November 2007. It is also 61% lower than the 3,289 that they received in September 2010. They are selling far more than this number through ARMLS each month and so the lenders' inventory is being rapidly depleted.
It is a clear sign of the strength and dominance of negative sentiment that this remarkable turn round is mostly overlooked. At the same time, a completely irrelevant increase in foreclosures between July and August (due entirely to August having 23 trustee sale days instead of July's 20) managed to make headlines in the local papers. When bad news is amplified like this and good news is ignored we know sentiment has swung too far.
For the housing doom fans who like foreclosures, September 2011 was a pretty dismal month. There were a total of 4,544 new notices issued in Maricopa County of which 4,335 were residential. This is 39% lower than September 2010. This new number is actually slightly higher than April through July 2011, but 15% lower than last month and lower than every month prior to April until we get all the way back to December 2007. The downward trend has slowed but remains in place. The bigger news is that there were only 2,840 trustee sales of all property types. This is 44% down from September 2010. This is also the lowest number since March 2008 (except for November 2010 when Bank of America completely halted its trustee sales). Foreclosures are clearly well past their peak and the short sale is looking likely to overtake the foreclosure in the coming months as the primary mechanism to resolve homeowners' financial distress.
Pricing
After hitting a low point in late August and again in mid September, pricing is on a slight upward trend again. The monthly median sales price has climbed from $107,000 on August 18 to $114,950 on October 3 (all areas & types). That's a 7.4% increase in less than 7 weeks and illustrates how violently the monthly median sales price reacts when REOs start disappearing from the mix and increasing in price at the same time. For Greater Phoenix REOs the monthly median sales price has jumped from $80,000 to $86,400 in the same period, an 8% increase. Pricing for short sales and foreclosures has not followed suit and neither have sales prices for normal sales. In fact pricing has been a little weaker at the higher price points cancelling out some of the gains at the bottom of the market. The overall average price per sq. ft. is up only modestly. Having hit a decade low of $78.51 per sq. ft on September 15, we are now looking at $79.81 per sq. ft. for October 3, a bounce but not a very convincing one. The most encouraging sign is that the pending $/SF has finally started to change direction and is moving up again after trending downward for a prolonged 15 month period since May 2010. We wait with bated breath to see if it can keep this up throughout October.
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3) New Bank of America ‘Enhanced Short Sale Relocation Assistance’ program PAYS owners to short sale…starting in Florida…expect a national roll out soon.
Florida Enhanced Short Sale Relocation Assistance Florida homeowners may receive $5,000 to $20,000 in relocation assistance. Bank of America encourages distressed homeowners to explore a short sale as a viable option for avoiding foreclosure. To that end, for a limited time we are offering enhanced relocation assistance to help motivate homeowners to engage with us on a pre-offer short sale. An additional benefit for these pre-offer programs – such as the Home Affordable Foreclosure Alternatives (HAFA) and Bank of America’s proprietary program – is that deficiency may be waived for the homeowner.
Eligibility:
1) Homeowners with property in Florida
2) Short sales initiated without an offer between September 26 and November 30
3) The customer will have to be eligible for one of the without offer programs such as the HAFA program or our proprietary program (specific investor participation and eligibility criteria do apply to these programs)
4) Successful closing of the eligible short sale by August 31, 2012
5) Minimum relocation assistance is $5,000 and maximum is $20,000, with the specific amount calculated based on the unpaid principal balance
Exclusions:
Ginnie Mae, FHA, VA and USDA loans are not eligible for participation. Lot loans are not eligible for participation. Properties outside the state of Florida are ineligible for participation
Short sales initiated with an offer are not currently eligible for the enhanced relocation assistance
Frequently Asked Questions:
Q: How can I find out if my client/homeowner qualifies for this relocation assistance?
A: Call a Bank of America short sale specialist at 1.877.459.2852.
Monday – Friday 8 a.m. – 10 p.m.; Saturday 9 a.m. – 5:30 p.m. Eastern
Q: Do I have to do anything differently when initiating or completing the short sale?
A: No. As long as the homeowner’s short sale is initiated between September 26 and November 30, 2011, and the property closes by August 31, 2012, they will be eligible.
Q: Will the relocation assistance funds be reported on the HUD-1?
A: Yes, they will be documented on the HUD-1, and a 1099-MISC will be issued.
Q: Can the relocation assistance funds be used to pay off existing liens?
A: Yes, if the investor approves it.
Q: Is the relocation assistance added to any other incentives, such as the HAFA or Bank of America proprietary program incentives?
A: No. A homeowner will receive the $5,000 to $20,000 in place of the typical incentive paid out by these programs. The relocation assistance is essentially an enhancement to the standard payout offered on these programs.
Q: Is the enhanced relocation assistance available for other programs?
A: Currently, the enhanced relocation assistance is only available to short sale programs initiated without an offer. However, as we gauge the success we may extend this incentive to other programs.
Questions?
Homeowners and agents may call 1.877.459.2852 to speak to a Bank of America short sale specialist about this exciting relocation assistance offering.
Visit the Agent Resource Center at bankofamerica.com/realestateagent for additional short sale education, news and resources to help you complete short sales at Bank of America.
* The relocation assistance payment is calculated based on the unpaid principal balance of the homeowner’s loan and the type of short sale that the homeowner completes, but will not be less than $5,000 or more than $20,000. The payment amount will be calculated based on the homeowner’s loan balance as of August 2011 and the short sale program in which the homeowner is eligible. The payment will be delivered at the time of closing if the homeowner complies with all terms and conditions of the Short Sale Agreement, including the satisfaction of all second liens and presentation of clear title for the property (the relocation assistance payment can be used to clear those liens). If the homeowner does not comply with all terms and conditions of the Short Sale Agreement, the homeowner will not receive the relocation assistance payment. Even if the homeowner receives relocation assistance, Bank of America, N.A., and their successors and assigns may reserve and retain the right to pursue collection of any deficiency following the completion of the short sale, unless otherwise prohibited by law. The amount of the deficiency and relocation assistance will be reported to the Internal Revenue Service (IRS) on the appropriate 1099 Form or Forms. We suggest that homeowners contact the IRS or their tax preparer to determine if they have any tax liability. This offer is for Florida properties only. To receive the relocation assistance, the property must close by August 31, 2012.
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4) Buy And Bail? Or, Bail And Buy?
October 4, 2011
Have you heard the term “buy and bail” yet? In markets where home values have fallen significantly, many people are buying a new house and bailing on their current one. And even more people are asking questions and wondering if they can buy a new house and bail on their old one.
Buy And Bail: Example Of How It Works
Mary Homeowner has seen home values decrease by 50% and as a result, she currently owes $400,000 on a home that is worth $200,000. Mary finds a home that is closer to work, 1,500 square feet larger and with nicer upgrades than her current home selling for $300,000. Mary is the CEO of a small business and can qualify for both mortgage payments. She wants to know if it is possible to buy the new home, move into it and then do a short sale on the existing home or just let it go to foreclosure. This is referred to as buy and bail i.e. buying a new home and bail on the old one. Because the buy and bail scenario has become more common, many lenders have put guidelines in place to prevent it from happening.
Although the guidelines vary by lender most will ask:
• Do you have equity in your existing house, or do you owe more than it is worth?
• Is the new house closer to your work?
• Is the new school district better than the old one?
• Are there sex offenders that have moved into your old neighborhood?
• Has your family size increased?
• Is the new home one level vs. two levels for your old house?
Simply put: if Mary applies for a mortgage for the new house, she can reasonably expect to be asked questions designed to prevent buying and bailing. If the new lender suspects that it is a buy and bail scenario, they most likely will not give her a loan for the new home — even though she may be able to qualify for it.
Joe Homeowner is renting out his current home. Joe wants the lender to consider the rental income as part of Joe's qualification for the new loan. The lender will look at how much equity Joe has in his current home. If there is not 20% equity Joe may still not be able to buy. The lender will also look at whether the rental income covers the payments for the rental property. If the rental income does not cover or exceed the monthly mortgage payment then this income help some but not as much as Joe might have wished. Plus the lender will be looking at the rental history. If Joe has just started renting the property the lender may want to see at least a 6-12 months of rental income and expenses before consider the income as part of the qualification to buy the new home.
Bail And Buy: An Alternative To Buy And Bail?
What if Joe Homeowner applies for a loan and is denied because the lender suspected that he was trying to buy a new home and bail on his old home. Is he out of options? No.
It is possible for Joe to bail on his current home and buy a new one, although probably not the superior house that Joe has his eye on.
However it is possible to buy a home one day after short selling his current house if:
• Joe has made all of his mortgage payments in the previous 12 months prior to his short sale
• Joe has been current on all of his other payments in the previous 12 months prior to his short sale
• Joe is not buying a home that is superior to the home he short-sold in the same area.
What FHA is concerned about is “taking advantage of declining market conditions” and it is what they are trying to prevent.
With both the buy and bail and the bail and buy scenarios, there is a significant gray area that many people seem to have opinions on. Is it right to buy and bail? Is it wrong to buy and bail? I have heard arguments both ways. The real question is this: How many people who have bought a house in the last 12 months have short sold a house in the 12 months after they bought a house? I suspect it may be more than you think.
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5) Home Equity Protection - Never Lose Money On A Home Purchase Again?
October 25, 2011
No home buyer wants their home to be worth less than what they paid or have invested in repairs or improvements. Every home buyer would love to time the market perfectly so they can sell their current home for the same or hopefully more than they have invested. Several companies are offering home equity protection to owner occupied homes including a company called EquityLock Solutions. Though this is not insurance EquityLock has a reinsurance agreement with a licensed, regulated insurance company to cover claims. The costs vary but typically range between 1.5% to 3% of the home value. There is a waiting period of 24 months and the maximum coverage period is 15 years. Maximum claim amount is 20% of the home value. EquityLock offers financing to home owners to cover the cost. It is for owner occupants not investors.
A few key points come to mind:
1) Though this is not insurance it is like insurance. We all know insurance companies do not like to pay claims. If companies are springing up offering home equity payments then they must think the housing market is at the bottom, prices are going to go up and they are never going to pay a claim. This is supported by the Commerce Department's October 26, 2011 report that said September's new-home sales beat estimates and came in at a seasonally adjusted annual pace of 313,000. The National Association of Home Builders trade group, meanwhile, recently reported that its closely watched housing market index surged four points to 18 out of 100 in October.
2) We all have insurance but the last thing we want to do is to make a claim, ie it is a bad day when you have to use your medical insurance for anything other than preventative care. If the worst thing we do is pay for insurance we don't ever use then this is great news. It means our homes increased in value.
3) The maximum claim is 20%. This would not have helped most of the home owners in Arizona as values dropped far more than 20% especially in the lower priced houses. It will provide peace of mind for today's home buyers worried about buying a house in a declining market even if the decline is slow or flat.
4) This might be something new home builders want to offer to potential buyers to increase sales. New home buildings report potential buyers continue to bypass new homes because they fear that the values of new homes will erode. Include equity protection may become a common new home upgrade option just like ceramic tile or upgraded carpet.
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6) Real Estate News Briefs
A) Lure to Foreign Buyers: Buy a Home, Get a Visa?
DAILY REAL ESTATE NEWS | FRIDAY, OCTOBER 21, 2011
A bill recently introduced in the Senate proposes that foreigners who spend $500,000 or more on a residential property should be eligible to obtain a visa that will allow them to stay in the country. Several stipulations would be attached to the offer, however. Foreign investors would need to purchase a primary residence of at least $250,000 but spend at least $500,000 on residential real estate (another property could be a rental) — and through cash purchases only. The property would also need to be purchased for more than its appraised value, and the buyer would need to agree to live in the home for at least 180 days each year, which means any foreign buyer would be required to pay U.S. income taxes on any foreign earnings too. The visa could be renewed every three years, but it would not serve as a way toward citizenship.
"Many people want to come and live in the United States," says Sen. Charles Schumer, D-N.Y., who introduced the legislation this week with Sen. Mike Lee, R-Utah. "They will be here spending money and paying taxes, and the most important thing is they'll sop up the extra supply of homes we have right now compared to demand, and that's what's dragging our economy down." Some brokers say that a visa incentive to foreign buyers could potentially even triple sales in their markets. "California, Florida, New York, Colorado, Hawaii, and Texas — those states will see a huge increase in demand," Sandra Miller, a broker at Engel & Volkers in Santa Monica, told the Los Angeles Times.
B) Could Loan Limits Be Restored?
DAILY REAL ESTATE NEWS | FRIDAY, OCTOBER 21, 2011
The Senate voted on Thursday to attach a proposal to a spending bill that could restore the size of loans the government buys or insures to a maximum mortgage amount of $729,750 in many markets. The higher conforming loan limits expired at the end of September, reverting to a maximum amount of $625,500, despite mass calls from the industry that doing so could potentially weaken the housing market, particularly in high-priced areas.
The lower loan limits are making it more difficult for “middle class home buyers to get credit when credit is tight," says Robert Menendez, D-N.J., who introduced the bill amendment. "Getting our housing market moving again is one of the most important tasks facing the country.” The Senate voted 60-38 on the spending bill. It’s expected to go before the House later this year. The National Association of REALTORS®, along with several other housing groups, have been urging Congress to renew a two-year extension that would maintain the GSE maximum loan limit at $729,750.
C) New Apartment Complex For Veterans
Arizona Republic October 29, 2011, J Craig Anderson
Madison Pointe Apartment Homes will be built at 4134 N Ninth Street and is scheduled to be completed by the second half of 2012. The community will be a short walk to Carl T Hayden VA Medical Center and other veteran service buildings. The building will offer 60 affordable 1, 2 and 3 bedroom apartment homes with a full sized laundry, full kitchen and patio or balcony. There will be 15 units of the 60 set aside for a joint voucher program between the Department of Housing and Urban Development and the Department of Veterans Affairs. Non-veterans with low to moderate incomes will also be able to rent apartments.
Financing was provided by Bank of America, AZ Department of Housing and the city of Phoenix.
D) Seattle investors buy W. Phoenix apartments
Arizona Republic J. Craig Anderson - Sept. 29, 2011
A Seattle investment firm said Wednesday that it has purchased a 298-unit apartment complex in west Phoenix called Hampton Square for $22.6 million. The buyer, Weidner Apartment Homes, has been on a tear lately, buying up Arizona multifamily properties. Orion Investment Real Estate Solutions of Scottsdale brokered the transaction. Hampton Square is at 7205 W. McDowell Road, just north of Interstate 10. The property was built in 2005 and is 93 percent occupied. It has a mix of two- and three-bedroom units averaging 1,270 square feet, Orion said in a news release. Hampton Square was developed by the seller, Hampton Square LLC, an affiliate of Inland Empire Builders and Heers Management, based in Las Vegas. Weidner Apartment Homes said it bought the community for its monthly lease revenue and intends to hold the property for the long term. It assumed a $20 million loan from Principal Commercial Funding LLC in the acquisition of Hampton Square. Weidner has acquired more than 6,000 apartment units in the Phoenix and Tucson areas during the past 18 months.
E) Rebound for Retail
Arizona Republic October 23, 2011
With all the dismal economic news it is refreshing to hear about retail expansion. This mini building boom is underway due to the great real-estate bargains. The projects range from historic building redevelopment to new stores from YouFit Health clubs, Summerwinds Nursery, Texas Roadhouse and QuickTrip.
http://www.azcentral.com/community/phoenix/articles/2011/10/22/20111022rebound-retail1023.html
F) Property Taxes - Some Homeowners see an increase while others do not. Commercial property tax forcing companies out of business
For the first time since metro Phoenix home values crashed, most of the region's homeowners can expect a noticeable drop in their property taxes. Maricopa County property-tax bills are being mailed this week, and the average homeowner bill is expected to decline more than $60 from last year's bill. The bills reflect taxes from a variety of cities, school districts and other taxation districts, which take a percentage of a property's assessed value each year. Most of those districts raised tax rates this year, but the overall amount of taxes those districts plan to collect is down almost 6 percent. For example, the Maricopa County Board of Supervisors decided two weeks ago to raise the county's property-tax rate from $1.05 in 2010 to $1.24 per $100 of net assessed valuation. At the same time, the amount the county will collect from property taxes will fall by $21.7 million because of decreased assessed home values. To deal with the revenue shortfall, the county has spread budget cuts across its approximately 50 agencies and departments.
"I think that this is rather telling about the insignificance of tax rates," said Charles Hoskins, county treasurer. "Rates have increased because values have dropped more than spending, but the reduced spending is what ultimately determines what property owners pay." This year's tax bills are based on 2009's valuations, when Valley home prices dropped a median of 15.2 percent. That was the third consecutive drop for home valuations in Maricopa County. Next year's property taxes will be based on 2010 valuations, which showed home values fell 11 percent. Last year, county property-tax assessments were down 3.7 percent from 2009. This year, Hoskins expects most homeowners to see a decrease.
But not every homeowner saw a decrease in his tax bills during 2010 because several municipalities and special districts had to raise their tax rates to offset budget shortfalls. Kevin McCarthy, president of the Arizona Tax Research Association, cautioned that not all homeowners' tax bills will drop. It will depend on how much their respective school districts and cities raise tax rates. School districts are expected to raise taxes this year, he said. On average, property taxes from school districts make up 61 percent of a homeowner's tax bill. Although tax bills are declining, the drop isn't nearly as much as the plunge in home prices, which have tumbled about 60 percent since 2006.
Are Maricopa Commercial Property Taxes Forcing Companies Out of Business?
Tax consultants believe Maricopa County has one of the most complicated property-taxing systems in the country. However, property-tax reform doesn't draw as much support in Arizona as other parts of the nation because the state has one of the lowest tax rates. Arizona has the 39th-lowest property-tax rate in America, according to the Tax Foundation, a Washington, D.C.-based non-profit. McCarthy said although that may be the case for residential homes, Arizona ranks about 16th-highest state in commercial and industrial tax rates. The residential-home market may have bottomed out, but the commercial market still has room to decline, and business taxpayers are still seeing tax increases, he said. "We have low homeowner property taxes, and we have high business-property taxes because we don't generate property taxes from homeowners on an even basis like most states," McCarthy said.
"The property tax is so high and the rental rates so low the owner would have to pay every month to have it rented." said Don Mortensen, Commercial Real Estate Broker at LRA Real Estate Group in Tempe. Don was commenting on his client's dilemma with a commercial building recently vacated by a tenant. The high property taxes combined with the other expenses require a rent too high to attract another tenant. "The owner has been forced to let the property go to foreclosure which is not good for the area or the economy. Commercial property owners need property tax relief to be able to keep the properties rented until the economy improves."