It only takes one look at the numbers to understand that the hemorrhage of foreclosures is the single most important element destabilizing our local market. The ASU Morrison School of Business just issued their assessment of the local activity: “Greater Phoenix resale numbers show foreclosures not slowing.” In it Jay Butler, Director of Realty Studies is quoted as saying:
“The local housing market will continue to be vexed well into the next year by eroding consumer confidence, brought on by a weak economy, possible job losses and tighter mortgage underwriting guidelines…”
The report further states that:
“The declining prices have piqued interest for potential investors and owner-occupants, especially in the lower income ranges. For the traditional market, the median price in January was $136,000 ($243,000 for January 2008), while the foreclosed properties had a median price of $135,000 ($208,250 for January 2008). “
Now that Mr. Obama has put in place a program to deal with the effects, and slow the number of foreclosures, we see a number of positives for our local market. The Obama plan will not cover every default or foreclosure but may cut them in half, so we should experience a reduction in inventories in the very near future. Interest rates remain low and the FED has promise to do everything they can to keep them there. For first time buyers $8,000 credit if the home is purchased before December 2009. Free money.
On February 25, HUD raised the Maricopa County maximum FHA loan amount for a single residence from $271,050 to $346,250. This change, which is good through the end of the year was signed by President Obama as part of the $700 billion plus stimulus package.
Prices are so low that monthly rents vs. monthly payment are running so close and back to historical levels. We recently helped a first time buyer to purchase a home, 1300 sq. ft., 3BR, 2BA, 2-car garage (Baseline & Gilbert Rd). With rents in the range of $0.60-0.70 per sq. ft., this home should lease for around $780-910 a month. If we use the stick of 15 times (historical average) the annual rent to calculate the purchase price, the price for this home would be in the range of $140,400-163,800. We paid $102,000! The PITI payment: $720 a month. And to top it all, our buyer will get an $8,000 check after he files his income tax returns. We think is a great time to buy.
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