Owner Occupied!

There have been several articles in the press recently on the subject of owner-occupancy. The focus here in Arizona is on the fact that owner occupants receive a small break on their property taxes, and many folks are receiving that benefit even though they do not live in the property. With the huge increase in prices over the last year, Arizona real estate has attracted many investors. Many have not been truthful.
However, while the state suffers the loss of revenue from reduced taxes, there is a much more serious aspect to this situation. Oh, and by the way, it's a felony.
When investors, usually with a "co-operative" lender, falsely claim that they will occupy the property, that is a felony and as such will be prosecuted by the FBI. That's because they are misleading the lender to get better terms on their loan i.e. lower interest rate and lower downpayment. Also, the risk of default is much greater when an investor buys a property.
Regrettably, there are many unscrupulous Realtors and lenders who will help you commit this crime, in order to line their own pockets. Remember, in a downturn, when banks are forced to take back defaulted properties, they will investigate. Indeed, there have been successful prosecutions even when the Lender incurred no loss at all.
Think about it!

Do you really want to sell your home?

Interesting question. As mentioned in one of our previous blogs, inventory has more than doubled since June of this year. But how many are really for sale? Despite the recent slow down in home price appreciation some people are still pricing into the curve, as if prices were still off to the races. These are what I call "opportunistic sellers". That is to say if someone is crazy enough to meet their price then they will sell. Of course, there are plenty of dopey agents who will accept those listings, but they won't stay in business very long. "But they show my house all the time" bleats the seller; little realizing that an astute agent will show the overpriced turkey in order to sell the house down the street that is priced correctly. Also, with these types of sellers, if the actual market value creeps up to their price over time they will actually raise the price! Always a day late and a dollar short.
Finally, don't reward the buyer's agent with bonuses and extra commission, after all the buyer ultimately pays for those incentives. In any case that is a red flag to an experienced agent that your property is over-priced. Don't try to re-invent the wheel, reward the Buyer with a lower sale price. It just makes sense.

Will the "Bubble Burst"?

Figures released today by the National Association of Realtors show that the Metro Phoenix Area actually increased in price in the last year by an amazing 55.2%, the highest in the nation.
Nobody is predicting a bursting of the "Bubble" but it may lose a few pounds of pressure. The market has been driven by speculators, cash-rich Californians and first time buyers eager to get a foot on the ladder. But remember, unlike California, we have plenty of room to build, and continue to build lots more homes to satisfy demand. To that end, expect to see home builders start to be a little friendlier, no more lines around the block; no more lotteries for your lot, a welcome return to civility.
Finally, interest rates are creeping up to 6.36% 30 year fixed (national average). Although it affects affordability, realistically it is still very cheap money for those of us who remember 8 1/2% ten years ago, and high double digit interest rates twenty five years ago.

Is the boom over?

It seems very likely that the housing market has stopped it's meteoric rise, which last year rose 40%. Those days are over, as home prices dipped slightly in October, the first such monthly drop since December, 2003.
In reality, I think it is a well needed return to normalcy. The growth of late is unsustainable and I would expect the prices to level out slightly, with annual increases more likely to be in the single digit level in the near future.
Another reason for a return to normalcy is a marked increase in inventory, which in June was at an all-time low. Of course, some of those listings are opportunistic in the sense that owners are pricing into the rising market, which no longer exists, so they will ultimately be disappointed.
Remember, if you need to sell, be reasonable. Pigs get fat, hogs get slaughtered.