Compare your rent with a mortgage payment on a similar size property. If you want a larger home than your current one, use the rent that property would require instead of what you’re currently paying. If it’s considerably cheaper, you may not need any further encouragement.

By the time you consider the principal reduction, appreciation and tax savings, your monthly cost of housing could be much less than the rent you’re paying.

The principal reduction included in each payment is like a forced savings account that increases as your mortgage balance decreases. Your equity in the property will also grow due to appreciation. The equity is part of your net worth and an investment in your family’s future.

The income tax savings can be an additional financial consideration if the combined interest and property taxes exceed the allowable standard deduction.

Trends are showing that both tenants and homeowners are staying in their homes longer. It’s been said that whether you rent or own, you’re paying for the home. Do you really want to buy the home for your landlord?

How has the market changed over the past year?  Interesting stuff – what a cycle we have run!  From December 2011 to December 2012, our active inventory is down 15%.   Total inventory equals 3 months worth of homes average. The inventory in homes under $150,000 is so low that it amounts to about 2 1/2 months worth of inventory.  In any real estate market, that is considered a real shortage.  In fact, even in the price ranges up to $350,000, there is a 4 month or less inventory.  As price ranges increase, the amount of inventory increases gradually until we get to the $800,000 mark, where inventory jumps to almost 10 months worth, and at $1 million, we have over a year’s worth of inventory.

Due to the lower inventory, the actual number of closings in the valley is down 11%, and new contracts pending is down 10% over the year.

Here’s the net effect:  The median price of sold homes is UP 32% over the year.  That means we have finally gotten to the point where families can sell their homes if they need to move up into that larger home they’ve been thinking about.  While we have not gone back to 2005 prices, the recovery is pretty powerful.

Foreclosure filings (notice of foreclosure) are down 50% over the year, and actual foreclosures are down over 33%.  The lower the number of foreclosures, the less they will affect home prices.

If you are wondering what your home is worth today and whether you can manage to move up to a  larger home, call for a market analysis at no charge so you can determine what your equity really is.

Here’s a comparison of REO (foreclosed), short sale, and non-distressed (traditional sales) in our market last month.

Non-Distressed Sales:    61.2%

Short Sales:                   26.8%

REO Sales:                    12.1%

This is another indication that our market is pulling out of the severe recession.  Following is a graph representing the number of closed sales for the past 3 years, showing improvement in the number of sales for 2012.  Our biggest problem currently is lack of inventory, particularly under $200,000.  For homes under $150,000, bidding wars are common and cash buyers are still getting the edge because no appraisal would be required for those sales.    We didn’t drop in sales as is typical in October, but saw a 7.4% increase last month from September, possibly due to more listings entering the market helping to alleviate the shortage of listings we’ve had over the summer.  Red line represents 2012, black line 2011, blue line 2010.

Lower sales in 2012 from the past 2 years are due to severely decreased inventory; a slight increase of inventory in October boosted sales effectively.

Further evidence of a market shortage is regional MLS  average price increase average of 2.8% to $211,537.  This is a result of two factors:  prices are actually increasing AND more expensive homes are selling due to shortage of inventory in the lower price ranges.

Homes on the market (active listings inventory) increased somewhat in October to 13,704 – a welcome change although it is still far lower than the previous 2 years when we saw 19,781 (2011) and 39,176 (2010).    Our inventory dipped as low as 9,785 in May -  an extreme shortage.  Our current inventory is still considered a seller’s market.

Buyers and Sellers, listen to your agent if buying or selling a home is a plan for this or next year..  The market it is a-changin’!

HALLELLULIA!  Finally -  some encouraging news for financially stressed homeowners across the country: The Senate Finance Committee has approved a bipartisan bill that would extend the Mortgage Forgiveness Debt Relief Act through 2013.

The Senate committee managed to pull together enough votes Aug. 2 to pass the debt relief extension, after heavy lobbying by the National Assn. of Realtors and the National Assn. of Home Builders. The bill, which now moves to the full Senate for possible action next month, also would extend tax write-offs for mortgage insurance premiums for 2012 and through 2013 and continue some energy-efficiency tax credits for remodelings and home construction.

But underwater homeowners aren’t in the clear yet:  Republican Party strategists are speculating that tea party freshmen in the House might oppose the debt relief extension because they see it as another costly bailout funded by taxpayers. The estimated revenue cost to the Treasury for a two-year extension is $2.7 billion.

Interesting statistics from our MLS as of June 30, 2012: 

Our inventory has fallen 31% from June of 2011.  We have what equates to 2.3 months of inventory (a normal market would have 3-4 months of active inventory).  Closings and New Contracts this month are actually down from last year because of lack of adequate inventory (down 21-25% from last year).  Biggest clue to our housing market:  Median Price of Sold Homes is up 31%!

Inventory last year at this time was approximately 20,200; this month it was 8,600.  In general, the lower price ranges are most in shortage.  Every price range under $200,000 has under 2 months worth of inventory; this means that sellers are able to pick and choose from often multiple contracts on their property.  They are often choosing cash offers which are not dependent on appraisals.  This is most true on close-in areas of the valley, but even sellers in outlying areas are experiencing multiple contracts (and often cash offers), decreased inventory, and increasing prices. There are 4 months of inventory in homes around $500,000; but still 12 months worth of inventory in the $1,000,000+ price category.

This is NOT a time to make low-ball offers on a property in good condition.  Many of those are selling for at least list price, often higher! 

The number of foreclosures has dropped significantly over the past year.  Rather than foreclosing, most banks are now working more efficiently on short sales and there are still a significant number of short sale listings in MLS.  But those, too, have risen in price and are selling very quickly because they are still somewhat lower than traditional sales.  The number of traditional listings and sales has now surpassed short sales; more sellers now feel they can get a reasonable price for their homes, so they are willing to put their homes on the market. 

One of the biggest issues right now for buyers and sellers is APPRAISAL.  Lower sales in the past 6 months are holding down current sales appraisals so they can only increase gradually; but cash contracts that are not subject to appraisal are quickly providing higher appraisals in most areas.

For more detailed information about your neighborhood or area, feel free to call or email.  The market is definitely regional!

March activity in the greater Phoenix area shows a significant increase in the number of sales closed – 22.1% over February.  That was added to a 12.6% increase in February.  Competition among buyers is very high; we are seeing more and more properties having 10 or more offers within the first few days on the market.  Sellers are picking and choosing among offers, often selecting those that are cash offers, often 10% or more over list price, and some buyers even waiving the contingency of an appraisal.

More and more, statistics show listings shifting toward a more traditional market. In March, bank-owned and short-sales each decreased by 2%.  Traditional sales increased by 4%.  This means that competition from foreclosure properties is decreasing against sellers with equity.

Market stats show that we actually hit bottom in our market in August 2011!  Since that date, we have seen almost 21% increase in average sales price.  March alone had an 8.97% increase over February, to an average sale price of $188,088.

Appraisers are not currently keeping up with the increases in prices on financed sales; appraisals are coming in substantially under sales prices in many cases.  Cash sales are helping to raise the comparables to get prices up for financed buyers, but we need more closed sales to use as comps.   I personally wrote a contract on a property for $125,000 recently, only to find it appraised for $100,000.  The buyer wrote the contract to waive appraisal and will come in with additional cash to meet contract price!  He was desperate to get a property in a specific, popular area; and waiving appraisal was the only way to get an offer accepted!  This is especially common in the lower price ranges.

March had the 4th lowest number of new inventory in the 36-month reporting period.  We typically see higher numbers of new listings in March than in many other months.

Buyers and sellers must work closely with their agent in this aggressive market!  Buyers must do everything they can to make their offers more attractive to sellers; and sellers must pay attention to pricing as well as be educated on the various types of offers they may receiving.  Sellers will also be considering the rising market in establishing new list prices.

What can you expect if you are beginning to search for or sell a home in this price range?  According to the Cromford Report, a very detailed and comprehensive real estate market report, here’s what’s happening between $200K-$400K:

1.  Monthly sales rate is 7% above last year.

2.  Listing inventory (supply) is down 25% from last year.  Foreclosed homes are down 60%.

3.  Pending listings are 20% above last year.

4.  Price per square foot is up 2.3% from this time 2011, but has been mostly unchanged for the last quarter.

5.  This price range is weighted in favor of sellers, but not as much so as the lower ranges.

What can you expect if you are beginning to search in this price range?  According to the Cromford Report, a very detailed and comprehensive real estate market report, here’s what’s happening between $200K-$400K:

1.  Monthly sales rate is 7% above last year.

2.  Listing inventory (supply) is down 25% from last year.  Foreclosed homes are down 60%.

3.  Pending listings are 20% above last year.

4.  Price per square foot is up 2.3% from this time 2011, but has been mostly unchanged for the last quarter.

5.  This price range is weighted in favor of sellers, but not as much so as the lower ranges.

Between $100,000 and $200,000:

1.  Listing supply is down 44% from last year.  REOS are down 72%.

2.  Pending listings are down 7% from last year, constrained by LACK of SUPPLY.

3.  Price range is weighted heavily in favor of sellers.

4.  Price per square foot is up 4.1% from last year and up 2.3% in the last quarter.

5.  Sale pricing is the highest since June 2010.

6.  Below $150,000, compared to last year at this time, REO listings are down 81%, short sale listings are down 87%; HUD listings are down 93%; normal listings are down 37%

If you are feeling confused about our real estate market in the Phoenix area, no wonder!  The real estate market is behaving quite differently at different price ranges.  I’ll start with today telling you about the price range BELOW $100,000:

1.  Pending sales are 17% below last year, not because of lack of demand but because of SEVERE lack of supply!

2.  Monthly sales rate is 27% below last year – due to SEVERE lack of supply.

3.  Sale pricing is the highest since August 2010.  Price per square foot is up 10.7% from last year and up 2.7% in one month.

4.  Supply is down 63% from last year!   REOs are down 86%.

5.  Sale price to percent of list price is rising, up .9% from last quarter.  This is not a time to make low-ball offers in this price range.  Multiple offers are being presented on almost everything in this price range.  It is very difficult to get a non-cash offer accepted, and sellers can often choose among multiple cash offers. 

6.  This price point is driven very much by INVESTOR demand because properties in this price range will cash flow and provide excellent return on investment.

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