US Census data released today shows Maricopa County was the fastest growing county in the United States from July, 2006 – July, 2007.  Maricopa County consists of Phoenix, Mesa, Scottsdale, Tempe, Chandler, Glendale, Gilbert, Peoria, or what others commonly refer to as the Metro-Phoenix area; if you live here, we just call it the “Valley” which is short for the “Valley of the Sun”.… 

    

I am admittedly biased as a fourth-generation Arizona native, whom I might add, is also married to an Arizona native. Here are some of my thoughts on why people love to live in Arizona in 2008.

• Low Unemployment Rate (4.3% in 1/08 compared w/national rate of 4.8%)
• Golf
• ASU, U of A, NAU, Embry Riddle Aeronautical University, Thunderbird International Graduate School(rated number 1 MBA International program for 11 consecutive years by US World and News Report)
• Sedona
• Great Dog Parks
• Affordable Housing
• Super Bowl 2008, Phoenix Open, Barrett-Jackson Car Show/Auction
• Premier Resort Destination
• More than 330 days of sunshine a year!
• Grand Canyon
• Live in the Valley in the winter, visit or have 2^nd home in pine/snow country only 2-3 hour away!
• Did I mention the sunshine?
• Intel, General Dynamics, Boeing, GoDaddy.com
• Hiking, fishing, cycling
• Beautiful Sonoran Deserts
• 6 hour drive to Disneyland or Las Vegas – take your pick!  Mexico resort towns even closer!
• Canadians like Arizona
• No Natural Disasters
• Art, Culture, Friendly Folks, Sunshine, Great Schools and Employers, and Still Affordable!!

Yesterday while at a REALTOR tour a lender stood up and told us one of his client’s banks had closed his home line of credit (also known as a HELOC in the lending world) without warning.  Apparently, 18 months ago when the gentlemen had taken out the line of credit the bank had estimated his house was worth 10% more than he owed on it, (90/10 ratio).  With the market depreciation that we have seen, a line of credit based on an appraisal done 12 months to 3 years ago would be obsolete.   It is very likely that if the gentlemen above could already owe more than his house is worth without even having any additional liabilities via his line of credit. 

My intention is not to cause a panic, however I have access to this information and I just thought some of you might want to be made aware of it.  If you are relying on that line of credit for something like a down payment on your next home, an upcoming wedding or trip, you might want to take a closer look and even talk to your financial institution.

·        Is it better to buy on this side of the bottom of the curve or the other side of the bottome of the curve?  Investors know that it's better to buy before the media starts declaring the market is headed up.  Sellers are more motivated to sell when they feel the bottom has not been hit yet.  Once it is obvious that things are headed back up, it will be harder to negotiate those 'screaming deals' with those same sellers.  In addition, some experts have speculated that there has been so much "pent-up buyer anxiety" from buyer's waiting, that once they do feel the bottom has been reached there will be a frenzy of purchasing that will fuel the upswing of the curve much more quickly than most people anticipate.  This would be especially true in Arizona where we still have a net of 97,000 people moving into the Valley on an annual basis.

·         Consider This:  Our inventory has decreased for 3 consecutive months now.  We usually see inventory rise in Feb/March as people get their homes on the market in anticipation for our spring/summer buying season.  That has not happened so far.

·         Consider This:  There are fewer new home builder permits being issued and absorption is starting to happen in the New Homes sales market (which has had a huge impact on our inventory for resale homes)

·         Consider This:  Valley wide absorption rates of single-family detached homes in Maricopa county have gone from over 20 weeks just several weeks ago down to 15.74 weeks.

·         Consider This:  We have 100% financing back, we have the Nehemiah gifting program back for down payments, FHA loan limits rose this week to $346,250.  All of the sudden, we have financing available to us for buyers that we haven't had in almost a year. 

·         Consider This:  The most recent data from the AZ Multiple listing service shows that of homes closed, 20% of them are cash sales!  Cash sales are second only to conventional financing right now.  We are used to seeing about an 8-10% of closed homes paid for with cash.  INVESTORS ARE BUYING HOMES FOR CASH because they know this is the time to buy!

Advertised Short Sale Can Be Misleading

It is easy to get exited when one is looking for homes and sees a 3400 sq/ft home in Gilbert built in 2004 listed at $299,000 with a huge yard and pool.  You read the description and think it sounds perfect…it’s advertised as a short sale, but surely you can put up with a little extra work and inconvenience if it will net you a smoking deal right?  My Grandmother, and probably yours too, used to say, “If it sounds too good to be true, then it probably is”….and once again my Grandmother is right.

Some agents are advertising short sales well below what is reasonable and what a bank will accept trying to create a bidding atmosphere.  They have no intention of getting an approval at the advertised price.  Most often these properties either sell for well over the advertised price or they end up at auction or as an approved bank-owned foreclosure. 

One year I got a two-paged typed Christmas list from my then nine year old.  Getting that good of a deal is pretty much the same idea…wishful thinking!

Being approved for a short sale can be much harder than being approved for your original home loan.  Essentially you have to qualify all over again and prove that you don’t have the ability to make your payments.  Yep, we are talking tax returns, paystubs, bank statements, letters detailing your situation, etc….Initially when you bought your home this was a minimum 3 week process…now the banks are overloaded, understaffed and quite frankly, don’t have the same incentive to get you moved through the system as they did when you were qualifying for your original home loan that was going to net them cash.  In addition to proving, or essentially qualifying with the bank to sell it short their must be a meeting of the minds on acceptable terms.  Negotiating the terms of an acceptable sale can take days or weeks….it all depends on the parties involved.  Now as always there are exceptions, but as a rule, it is not as easy as submitting an offer from a potential buyer and hearing back from the bank in 48 hours.

For all of you Arizona natives you might be thinking, "What is a Real Estate Transfer Tax?"  If you are from the East Coast or one of the other states that currently have a real estate transfer tax, you more than likely have had the opportunity to experience this tax first hand.  A Real Estate Transfer Tax is a tax on transferring real property (your home) to another entity (i.e. a buyer).

So who cares?  We are one of the 14 states that don't have this tax.................yet.  Every time the state of Arizona gets in the red they set up a 'blue ribbon committee' to study additional revenue source.  As I write this, the State of Arizona has an estimated 1.7 billion dollar deficit.  They are currently 'studying' enacting a transfer tax here in Arizona.

Here is the first problem I have with a transfer tax....you don't make anything more affordable by taxing it.   Since our real estate median home price has increased over 100k in the last 5 years it has been increasingly difficult for Arizona teachers, other civil servants and just working class folks to purchase a home.  Consider this, in order to keep pace with this type of housing inflation the average teacher's salaries would need to be about 35k more than it was just 5 years ago....I can assure you that has NOT happened.  

Secondly, aren't we already taxed on our property value?  In fact, we are even taxed on the inflation of such value although we might not even benefit or actually realize that appreciated value.  Since the value of my home has decreased in the last year, the taxes I paid last year were on appreciation that I never realized.  That is a pretty good deal for the State of Arizona.  Why should the state double tax my home?