Multiple Bids Are Getting Rare In Arizona
Bloomberg reports on Arizona. “Rick Cartagena moved his family of five in 2010 from San Francisco, one of the most expensive markets in the country, to Phoenix, where he expected lower home prices to give him a shot at owning. He wasn’t prepared for the competition. Phoenix was one of the first cities to begin attracting Wall Street-backed investors. The house Cartagena is now renting was bought by an investor for $52,000 in August 2011, public records show, down from the last sale of $194,336 in 2006. Of the 24 homes on his block, all built in 2006, only four still belong to the original owners and one was slated for auction last month, according to Maricopa County property records. The rest were lost to foreclosure.”
“Investors, including Blackstone, Colony and Progress Residential LP, have bought half the homes on the block. Cartagena is paying $950 a month to rent the three-bedroom house. He estimates it would cost him about $200 less a month — including taxes, insurance and homeowner association dues — to buy a place for $120,000, the going price for homes in his neighborhood. When he puts in bids, though, investors go higher.”
“‘I can’t compete with all the investors,’ Cartagena said. ‘They jacked up all the prices.’”
The Arizona Republic. “Homebuyer demand in metro Phoenix has backed off during the past few months, according to an ASU real-estate analyst. Sales fell in October while the number of homes listed for sale climbed, according to the latest report from the W.P. Carey School of Business at Arizona State University. The region’s median home price inched up to $200,000 from $199,000 in September. ‘Sales will be way down in November and through the holidays, when some people even take their homes off the market until late January,’ said Mike Orr, director of W.P. Carey’s Center for Real Estate Theory and Practice. ‘We also anticipate a much slower rate of price appreciation in 2014 than the furious pace we have witnessed over the last two years.’”
“Home sales to investors as well as those to out-of-state buyers have dropped over the past six months. Investors were behind almost 40 percent of all home sales in July 2012, the peak of those types of purchases. In October, investor purchases accounted for about 23 percent of home sales. Second-home buyers from outside Arizona accounted for 16.4 percent of October’s home sales, down from 20.1 percent a year earlier.”
“Listings are up 40 percent since November 2012, though Orr said the supply of homes for sale still is 15 to 20 percent below what would be considered normal for metro Phoenix. Currently, about 26,500 homes are for sale in the Valley.”
From KnowWPC. “The Phoenix real estate market, known in recent years for its volatility, is ending the year on a quiet note. According to Mike Orr, author of the W. P. Carey School’s monthly housing report, a trend that started in July continued through October, as supply increased primarily because of a drop in demand. KnowWPC: Across the balance of the market, properties are selling, but the environment is not as frenetic as it was. Multiple bids are getting rare, and sellers are finding that it’s not uncommon for a week to go by without anyone looking at their house.”
“Orr: So it’s really back to normal — in fact it’s probably a little quieter than normal, you know, the actual quantity of sales per month is down from normal. And I don’t see things changing quickly; I think we’re going to see this continue probably until the end of January.”
Inside Tucson Business. “Tucson’s overall housing market is shifting toward buyers’ favor, according to Long Realty’s latest monthly housing report. In the price bands that saw a change in market conditions between October and November, all moved from either ’slightly seller” to balanced, balanced to ’slightly buyer,’ or even slightly buyer to buyer. This was in the broad $175,000 and $599,999 range – six of the nine price bands here saw the rise in inventory needed to move away from sellers’ favor. The budget buys below $175,000 stayed in a seller’s market, while the higher-dollar homes at $600,000 and beyond stayed firmly in a buyers’ market.”
“Tucson’s new home permits hit a two-year low in November. Bright Future Real Estate Research found that the 118 permits for single-family homes is the lowest since the pre-recovery days of December 2011. A dip is normal this time of year, as builders tend to push out inventory homes that will close by year’s end, wrote Bright Future’s Ginger Kneup. But it’s disappointing, and enough to mean the area will blow Bright Future’s annual forecast by 200 units.”
“Kneup pinned this on overall economic uncertainty, and a shortage of ready lots in high-demand areas. The lots are coming, though – about 1,500 are in the final stages of development and ready for delivery in the next six months.”
Homeland Security deals another blow to the Muslim Brotherhood. I hope they used their million dollar armored vehicles, one can never be too careful.
Brockton cops and Homeland Security raided a strip club authorities say was peddling fake Red Sox and Patriots gear in exchange for lap dances and seized the counterfeit goods — part of a growing problem that one expert says is not necessarily a victimless crime.
Not everyone who is involved in counterfeiting merchandise is affiliated with crime rings, but many criminals — from street gangs and Mexican drug cartels to Hezbollah and the Muslim Brotherhood — have exploited the counterfeit markets, said Kris Buckner, president of Investigative Consultants, a company paid to probe intellectual property crimes.
http://bostonherald.com/news_opinion/local_coverage/2013/12/strip_club_sweep_nets_fake_fan_gear
So women will disrobe for me if I give them Red Sox paraphernalia?
I learn the most interesting and useful things here!
“Listings are up 40 percent since November 2012, though Orr said the supply of homes for sale still is 15 to 20 percent below what would be considered normal for metro Phoenix. Currently, about 26,500 homes are for sale in the Valley.”
Well Mr. (Wh)Orr…… 26 THOUSAND excess empty houses is low inventory?
How much cha-ching was in the brown envelope this month Mr. (Wh)Orr?
Fairfax VA Mortgage Salesman Convicted On Fraud Charges
http://herndon.patch.com/groups/police-and-fire/p/herndon-area-mortgage-loan-officer-indicted-for-fraud
Mortgage Firm Principal Cops Guilty Plea In Bank Fraud Case
http://nt.gmnews.com/news/2013-11-13/Front_Page/Freehold_resident_pleads_guilty_in_mortgage_fraud.html
Mortgage pimps, realtors, “appraisers”….. they can’t be trusted.
“Remember. A housing recovery is falling housing prices to dramatically lower and more affordable levels by definition.”
You are correct.
‘We also anticipate a much slower rate of price appreciation in 2014 than the furious pace we have witnessed over the last two years.’”
Go ahead, you can say it, priiiiiiice droooooooooop.
See that wasn’t so bad.
Allow me;
The housing priceCRATERRRRRRRING has resumed.
I’d like to think so. But I have a real hard time thinking things will go down in the next two years the way they went up in the last two years in the PHX area. Giving back last years price run up at the same pace would be psychologically devastating for the area I think.
‘Giving back last years price run up at the same pace would be psychologically devastating for the area I think’
You make it sound like a football game. I don’t think that’s how it will work.
The big investors are curtailing their purchases much more than what’s reported above; Orr’s group said so:
http://wpcarey.asu.edu/sites/default/files/uploads/center-real-estate-research-and-practice/full-report-201311.pdf
Now we find out if these institutional investors really did “jack prices up”, because here comes the inventory:
http://www.movoto.com/statistics/az/phoenix.htm#city=&time=1Y&metric=Inventory&type=0
Same thing is happening in Las Vegas and Sacramento.
“Same thing is happening in Las Vegas and Sacramento.”
Hopefully our Jingle Bells will be able to sell all his investment holding before the inventory tsunami washes his gains away.
You make it sound like a football game. I don’t think that’s how it will work.
I’m just talking about people I know who hosed themselves last time and how I think they’d take it. I’ve been on the sidelines so long, for a variety of reasons, it’s hard to see things going my way, even though I know they did only a few years ago.
I don’t care how it works as long as it does.
‘people I know who hosed themselves last time and how I think they’d take it’
I think we’d see more strategic defaults.
One thing about all this; we read about what the central bank did in the past 3 years, or the FHFA or HARP/HAMP, state and local foreclosure delay tactics. But if this is a bubble, it took many individuals to make it happen. If I was sitting on a house in Phoenix, watching prices rise and waiting to sell at the top, expecting I could time that better than everyone else, I would have no one to blame but myself if I got caught in a down draft. IMO we’re about to find out what percentage of the market are gambling.
“Investors, including Blackstone, Colony and Progress Residential LP, have bought half the homes on the block ??
Just watch….These guys are going to turn into lenders rather that owners down the road…Its all about IRR to them..The only thing thats going to blow a hole in their model is if somehow prices fall back to 2010 levels…There is no way there IRR proforma can be achieved based on rents minus operating cost even if they are getting money at 3%…They need appreciation off the baseline that they paid to get there…
From that link, Blackstone et al own about 13,000 houses in Maricopa County. That ain’t chit in the grand scheme of things, but the fact that they were all purchased in a very short time frame, and that they were all essentially bidding against one another during that time frame, means that they set the comps. These speculators created a mini-bubble, but as I’ve said all along- they can’t carry the market. Their little specuvestor party is OVER.
Giving back last years price run up at the same pace would be psychologically devastating for the area I think.
reality doesn’t give a crap about hurt feelings. i think the snap back might be quick because they’ve already experienced the pain. everyone knows what can happen now, and they don’t want to be the one without a chair when the music stops.
and why is it that in the article above, no one can say ‘prices’? they always use the incorrect term ‘values’. are they trying to sound sophisticated?
“reality doesn’t give a crap about hurt feelings.”
Precisely.
“and why is it that in the article above, no one can say ‘prices’? they always use the incorrect term ‘values’. are they trying to sound sophisticated?”
The insidious use of language to compel subconsciously. It seems you and I have a hyper-sensitivity to marketing bull$hit.
‘they don’t want to be the one without a chair when the music stops’
Which is why inventory is growing almost every where in the country, IMO. It’s often said, ‘people are underwater, and when they aren’t anymore, they’ll sell the house.’
I don’t think so. If they aren’t missing payments, most would want to sell near the top. That’s what is motivating this new crop of would be sellers, IMO. But emotion does play a role; greed turns to panic. These people have seen that before too. Some houses I’ve watched in Las Vegas are seeing huge listing price drops. Those are the smart ones.
The insidious use of language to compel subconsciously.
yes, and we all pay a price for it, even if it isn’t obvious.
But emotion does play a role; greed turns to panic.
yes, that was my point. it should be quicker this time because we’ve already been stung before.
Some houses I’ve watched in Las Vegas are seeing huge listing price drops. Those are the smart ones.
i think so too. the economy is getting worse by the day, even if the deterioration is slow right now. there will be less jobs, less pay and businesses will be closing their doors.
there’s a madman in the white house. he’s wrecking everything he can. he’s controlled by an iranian witch that resents america and christianity. this is costing everyone in america. as we get poorer home prices will naturally go lower in real terms. possibly even nominally. depends on how fast inflation will kick in.
“it should be quicker this time because we’ve already been stung before.”
Not to mention that the current levels of Housing Bubble denial and delusion are epic…
Some houses I’ve watched in Las Vegas are seeing huge listing price drops ??
Ben…As a percentage what kind of drops in listing price are you seeing in Vegas ?? 10% 20% ??
Sometimes 30%. Some of these sellers paid half of what they’re now asking 2, 3 or 4 years ago.
And the picture is complicated by short sales, like this:
http://www.realtor.com/realestateandhomes-detail/746-Biltmore-Dr_Las-Vegas_NV_89101_M10544-96601?row=1&source=web
12/15/2013 Listed $8/sq ft - $10,000
05/11/2004 Sold $87,630 $74/sq ft
Wow….Okay…Its a little shack but $10,000. in Vegas…What happens with the guy across the street that may owe $40,000…He is underwater as far as an appraisal and without the appraisal your not getting a loan…
They’re all shacks. ALL of them. That reality is going to be a painful lesson for some.
Non-forward Price Apreciation
its those evil speculators running up prices.
That was last year.
This year prices resumed their decline.
It’ll get lots more evil when they dump their investments, leaving Joe6Pack with an FHA loan holding the bag.
Does this mean my “Good Debt” is going away ??
In the summer of 2010 I observed the sheriff sales at the courthouse in Phoenix. It was a circus. But I would overhear the bidders talking on phones to the financiers. They would talk about 8% yields, etc. I was skeptical, because these purchases were sight unseen, at least on the inside, and there were no inspections. A least on the surface, the buyers looked to be trying to get a deal. And there were a few to be had until around 2011. Remember this is all before the institutions even got started. I’ve found several reports of the bigs and small purposefully overpaying in the past two years. I’ve always asked, if you are paying cash, why would you outbid retail? You should be using your cash to get a lower price. But over and over, from Ventura County to Florida, these guys were going over asking. A week or so ago, we saw a report talking about quotas! Imagine if it was stocks; “I have to buy a quota of Twitter today”. That’s not smart, and smells like a bet on appreciation. Which was self-fulfilling for a while.
smells like a bet on appreciation ??
Thats my opinion also as my post above suggests…If it rolls over, they are going to get bent…
There were likely “quotas” because some genius with an algorithm decided that they needed “x” number of properties to construct the portfolio which he planned upon slicing and dicing into derivatives to be passed onto unsuspecting “investors.”
Wall Sts large scale buy-to-rent scheme can’t produce sustained operating profits. They need the capital appreciation to make it pencil out. So now they are looking to sell houses to capitalize on the price increases they created. So who wants to be a muppet? Here’s your chance.
That’s right. Blackstones cap rates are negative. Worse yet, they’re running 50%+ vacancy rates.
Some investment eh?
Can I be Kermit?
Here’s another opportunity for any muppet wannabes out there … Invitation Homes bond offering backed by SFH rental income. There’s even a tranche rated triple A. Can’t get any better than that.
What’s the yield on the triple A slice?
1.3%
That’s what I read. So, this is curious. Why would people give them millions of dollars when they could get twice the yield in government paper? (In a rising rate market!)
It’s almost like they are expecting some money to come their way from something other than rents. Could it be?
‘American Homes 4 Rent today announced the pricing of its underwritten public offering of 4,000,000 of its 5% Series B Participating Preferred Shares for gross proceeds of $100 million, before deducting underwriting discounts and estimated offering expenses. The Series B Participating Preferred Shares have an initial liquidation preference of $25.00 per share that may be increased by an additional amount based on home price appreciation in the Company’s top 20 markets…’
http://finance.yahoo.com/news/american-homes-4-rent-announces-142700082.html
So how would this work?
‘initial liquidation preference’
“…may be increased by an additional amount based on home price appreciation in the Company’s top 20 markets…”
It’s all based upon speculation and price appreciation.
‘4,196 properties found
Phoenix Single Family Homes for Sale’
http://www.realtor.com/realestateandhomes-search/Phoenix_AZ/type-single-family-home
‘2,466 properties found
Phoenix, AZ Price Reduced Homes for Sale’
http://www.realtor.com/realestateandhomes-search/Phoenix_AZ/show-price-reduced
I believe this is SFH in Phoenix only, not greater Phoenix.
Ben…Do you have any historical numbers on Phoenix inventory ?? What would be a average lets say…
I’m not sure. Orr says it’s still low. You could probably find it in here:
Warning PDF - 22 pages
http://wpcarey.asu.edu/sites/default/files/uploads/center-real-estate-research-and-practice/full-report-201311.pdf
Thanks for the Arizona thread Ben - have to be on the road so cannot read this stuff until the late afternoon!
Ho ho NO!
‘BSteel Corp in Shenyang and Hengdun Group in Hunan, which produces bamboo products, have not paid their workers in some time while banks are short of cash, our sister paper Want Daily reported on Dec. 22.’
“Banks do not have enough cash to withdraw. This affects private firms, which do not have enough cash, either. This is going from bad to worse,” said Qin Fenfen, an analyst.’
‘BSteel, a 20-year old steel manufacturer with more than 300 employees, owes debts of more than US$825 million. Its owner Zhou Bo has gone to ground and its factory has been seized by the courts.’
‘In Hunan, the head of Hengdun Group reportedly committed suicide due to the company’s mounting debt. Chairman Wang Jianzhong reportedly borrowed from loan sharks as he could not get loans from cash-strapped banks and realized he could not pay back what he owed.’
http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20131224000087&cid=1103
Ho ho ho!
China Credit Market Tensions Stoke Wider Concerns
BEIJING December 24, 2013 (AP)
Associated Press
For the second time in six months, a shortage of cash in one corner of China’s banking industry has stirred anxiety in financial markets.
Though tensions eased somewhat Tuesday after China’s central bank provided billions of dollars in short-term funding to banks, financial market analysts are keeping a close watch on developments in China’s credit markets. Because China is now the world’s second-largest economy, tensions there could have repercussions worldwide.
“If it looks vulnerable as we start the New Year then the rest of the world should be getting nervous,” said Kathleen Brooks, a research director at Forex.com in London. “If China catches a cold this winter, we expect the rest of the financial system to get a dose of the shivers.”
…
“If it looks vulnerable as we start the New Year then the rest of the world should be getting nervous,” ??
Which is precisely what Michael Spence Nobel Laterite said the other day…He said watch China GDP carefully…Right now its around 7.5%..He said if it falls below 7% we have trouble…I assume he means trouble with their lenders which then spills over into the world economy…
‘BSteel Corp in Shenyang and Hengdun Group in Hunan, which produces bamboo products, have not paid their workers in some time while banks are short of cash, our sister paper Want Daily reported on Dec. 22.’
“Banks do not have enough cash to withdraw. This affects private firms, which do not have enough cash, either. This is going from bad to worse,” said Qin Fenfen, an analyst.’
Ho ho, you do-hon’t say! Meanwhile, the DOW is up!
If you take on mortgage debt at current massively inflated housing prices, you’ll enslave yourself for the rest of your life.
“Debt is bondage.”~Suze Orman, May 11, 2013
In other words, don’t buy housing at these massively inflated prices. Don’t Be A Debt Donkey®
“Housing as a rental investment is a huge gamble considering it’s negative cash flow at current inflated asking prices of resale housing.
Beware.”
Exactly.
“Housing is a depreciating asset and a loss, always. Your losses are magnified tremendously if you finance it.”
BINGO
“The deflationary spiral rages on…… whatever you do, stay out of debt and hold onto your cash.”
You better believe it mister.
“When is housing massively overpriced? It’s quite simple. When the price of the house is in excess of the cost to build (lot, materials, labor and profit), less depreciation for a used house.”
Exactly. No need to confuse it. Our cost to build is right around $55/sq ft, with profit.
“I’m calling it a soft landing — a return to what is considered to be more normal market conditions,”
Leslie Appleton-Young, Chief Economist, California Association of Realtors, 2006
“Maybe we need something new. That’s all I’m prepared to say”
“I’m sorry I ever made that comment.”
“When I get my new term, I’ll let you know.”
Leslie Appleton-Young, Chief Economist, Cal. Assoc. Realtors
When asked about her “Soft Landing” prediction, 2006
Instead of “prepared” misrepresentations, how about just speaking truthfully about this debacle that is housing? Who is “preparing” these tall tales for you to read and why?
Ex Governator…..She vas alvays my favorite…. that Zittle Appleface….vatever
“Remember what I told you? Debt is bondage”~Suze Orman, November 09, 2013
“Housing is a money pit.”
You better believe it. Especially considering current resale housing prices are 3x higher than construction costs(lot, materials, labor, profit).
Renting is half the cost of buying so you know what to do. Buy later for 70% less.
25 MILLION excess, empty and defaulted houses CHECK
Housing demand at 14 year lows and falling CHECK
Housing prices inflated by 250% CHECK
Household formation at multi decade lows CHECK
Rampant housing fraud CHECK
Public denial formed and supported by a corrupt media CHECK
Population growth the lowest in US history CHECK
Immigration flat to slightly negative CHECK
Oh my word……
Awesome articles Ben. Looks like a big change in the Phoenix bubble and it won’t be pretty for those holding the bag.
Here we go again the sky has fallen?
Remember when the stock market was 14k and most said can’t go higher get out. I bought in at 13k guess what, we had a very nice Xmas. BTW I sold gold at 17 when most said buy, it is going to 20 where is it now. That is the pure speculative play metals, not houses.
new cars and houses this spring will boom, the real players want to buy before rates will go to 5.5% by Aug 2014. Then it will slow, people will remember when 5.5 is a decent rate and it will take off again. In other words we are going back to normal buying and sellng in 2015 that
is good news.
You can all scream and shout, but the Cycle that happens during recession is and will end by 2015, wake up and make money in 2014.