Tucson’s real estate market is broken down into three distinct markets.  Foreclosures, Short Sales and Clean Sales.  Clean Sales are what everyone used to think of as a normal sale where the owner selling the house either has the equity to sell the home or is coming to the closing table with additional funds to close the sale.  We see a number of sellers doing the latter as they want to protect their credit and have the opportunity to buy a bigger better home with the many great buys there are available.  What we have done is look at the market as a whole, then break each of the three key markets down so that you can see what is happening in each. 

 The areas of Tucson I am referencing are the core of Tucson.  When I speak of the “core”, I mean Tucson, Oro Valley, Marana and Vail).  To see a map of the core of Tucson click here to see the Map of Tucson.  We have this Map Search set up that shows you which areas we are referring to but also to alw you to search for homes in specific areas and by price.

 Foreclosures:  Starting off is the Foreclosure Market.  I am easily asked more foreclosure questions daily than any other.  At every open house I hold I am asked about buying foreclosures with good reason.  They are a great investment opportunity.  Many foreclosures that are truly distressed properties are being sold at auction as they are not financeable; the auction guarantees a cash sale quickly.  These homes always require significant work to get them livable, but savvy investors can make some great buys.  Of the homes listed in the Tucson Multiple Listing Service, the numbers are very interesting.  There are currently only 305 foreclosures listed in the core of Tucson with 527 listings currently under contract, giving us a percent pending of an astounding 63.3%.   Some 1,860 foreclosures have sold in the last six months, leaving us with an inventory of only .98 months.  Sure, that is one month rounded up but I wanted you to be struck by that number just as I was.  When foreclosures come on the market they are selling quickly, a great sign for our recovery.  We need to get through the bulk of the foreclosure inventory, both real inventory and the Shadow Inventory.   Now, we will still be working with foreclosures for a number of years.  As we get the bulk of the inventory off the market, we will start to see real appreciation!  (Yes, I said appreciation).

 In speaking yesterday with an agent in our office who works with many banks listing foreclosures, he told us that there is a new wave of foreclosures being released as we speak.  He had not had any new listings for a few weeks then suddenly has four new ones and more in the pipeline.  What this shows us is that the banks are also aware of the diminished inventory and are ready to sell off some more of the shadow inventory.  We will be following this new release very carefully, so please let us know if you or someone you know is interested in purchasing future foreclosures.

Now, when you hear statistics in the media about where prices are for Arizona, remember that they are talking about the market as a whole.  The whole market of single family homes in the core of Tucson has an average sale price of $174,794.  This number is a bit misleading.  There are 1,860 foreclosures that have sold in the last six months with an average sale price of $109,689.  That number alone has brought down the average price the media talks about dramatically.  Of course, if you are selling a home in a community where half of the sales are short sales and foreclosures you have to be competitive.  But, many neighborhoods are turning away from the dark side of foreclosures as we now see many more clean sales and short sales than foreclosures.  For Long Realty the ratio has reversed:  a year ago 65% of company sales were distressed sales with 35% “clean” sales; now 65% are “clean” sales and only 35% distressed.

Short Sales:  The Tucson Short Sale Market is equally fascinating.  For years we have been struggling with lenders to allow more short sales to go through, process them more quickly, and save people from foreclosure.  Now it seems the banks have come around to this logic and are more agreeable to accepting short sales.  There are currently 369 short sale listings in the core of Tucson’s market.  There are also 999 short sale homes under contract right now in Tucson.  With short sales, however, that number is not always reliable.  Probably 600 of those are still waiting for the seller’s lenders to approve the short sale and potentially half of those will fall through.  Not always is it due to the seller not being able to reach an agreement with their lender; many buyers are not willing to wait that long for the lender’s response and cancel the sale.  So let’s say that 700 homes are truly under contract.  That is still a strong number.  That means that we are over 65% pending and there have been 703 closed short sales in the last six months, up dramatically from a year ago when the banks were much more stubborn with short sales.  There are some limitations.  For instance, you cannot be related to the seller.  Doing a short sale is becoming a good alternative to homeowners who are under water but need to get out of the burden of their mortgage with less damage to their credit. 

 Clean Sales:  Now, the fun part!  The Tucson Clean Sale Market is alive and well!  I break our market down to these three parts as they each need to be looked at independently.   The “clean sales” in Tucson are as active as they have been for some time.  There are 2170 active listings for clean sales in Tucson with 883 under contract.  That gives us a 28% pending ratio.  Remember that the breakeven from a buyer’s to a seller’s market is 25%, which puts the Tucson Clean Sale Market closer to the Seller’s Market category than it has been since 2007.  Remarkably, there have been 2161 “clean sale” homes successfully closed in the last 6 months.  That gives the Tucson market for clean sales an inventory of 6 months, a number we have been searching for to get us back to market norms. 

 When we consider that we have a 6 month inventory of clean sales and that our inventory has dropped for 4 consecutive months, we see the activity create a bit of a buying frenzy when homes are attractive and priced well.  This is not only in the lower price ranges.  I watched a new listing in the Foothills go on the market at $689,000 and it was under contract in 17 days.  The buyers are out there.  If you or someone you know is thinking of selling their home, call us so we can show you your specific market information and discuss your personal marketing needs and strategy. 

 Also, look at the average sale price.  The average sale price for clean sales in Tucson is $237,029– buyers can identify with attractive properties and are willing to pay good, fair market prices for them. 

 Investment Opportunities:  This is the new buzz word in real estate in Tucson.  When you are looking to buy investment properties for rentals, short sales can be a good opportunity.  Most are in good condition and owner occupied.  As long as you are not in a hurry to close on the sale, you can wait out the bank’s agreement.  Also, they become more attractive because more foreclosures require a 15 day window before investors can submit offers.  This is designed to help keep neighborhoods from becoming rental neighborhoods and maintain some property values.  What this means to investors is they can identify 5-10 foreclosures they would be interested in buying, but they have to wait until the 15th day to submit their offer, if the house was not purchased by an “owner-occupier.” 

 It can be frustrating.  One superior foreclosure home that we recently showed to investor clients on Day 1 required 15 days for investor offers.  By Day 8, when the bank would consider “owner occupant offers,” the bank’s agent had received 20 offers.  It went under contract on Day 9. 

There are investors buying trashed foreclosures, fixing them up, and selling /flipping them.  This is another way to make some money immediately, but you also have some significant risks.

We work with our investor clients to help you find homes that you will want to buy and can buy.  We cannot minimize risks, but we do inform you of them and make sure you are making your real estate investment decisions with eyes wide open.  It is a great time to be making investments in Tucson!  We can set you up so that you can see the listings first and be in the best position to make an offer. 

As you can see from the enclosed analysis of the Tucson market, all areas in Tucson’s  “Core” now fall into the sellers’ market category—quite a dramatic change from one year ago.  You will also see a correlation with the decline in median prices (which will include foreclosures).  Notice that there are only 2870 single family homes for sale!  In August when we last shared our chart, the number was 4811!  Also in August some 23% of active listings were under contract; today that number is a whopping 46%.  Overall there is only a 3.65 month supply of homes, which is encouraging for those who have delayed putting their homes on the market and who have postponed upsizing or downsizing!  The Bluffs (Overton and La Cholla) in the near Northwest is exceptional!  Popular for its location and for investment properties, there is less than a one-month supply.  The communities of Continental Ranch/Continental Reserve in the northwest and Rancho del Lago in the southeast/Vail were particularly hard hit by foreclosures.  You’ll notice that single family homes under contract there now exceed 50%.  Retirement communities like Saddlebrooke and Heritage Highlands remain in Buyers’ Market territory, but then many retirees do not have loans which could put them into a “distressed” situation.

Email Market Updates:  If you would like to receive our email market update for the whole Tucson real estate market as w hole, or specific areas please email us at Info@GoTucsonRealEstate.com.  We will needthe email address where you would like to receive the list and also to know what areas of Tucson you are focusing on.  Please also feel free to call us at either 520-404-5533 (Jack) or 520-400-0505 (Barbara).

Who is buying them?  Some are being bought by buyers that plan for them to be their primary residence but a large portion are being grabbed up by savvy investors looking to buy distressed properties and fix them up, then either rent them for a few years or sell them as clean homes.  The rental market in Tucson is thriving.  A good friend of mine has bought 4 foreclosures and has fixed them up – All of them are rented for between $795-$850 a month and his highest mortgage payment is $625.00.  He has been able to leverage these properties to make them have a positive cash flow that not only covers his mortgages and expenses but also makes him some money while he waits for the markets to come back around to make his profits.

Could this be you?  If you or someone you know have thought about investing in something more stable than the stock market, foreclosures are a great investment.  Of course nothing is guaranteed and being a landlord is not hassle-free but it is a great way to make some money in a very difficult time.

Where do you find these foreclosures?  There are many websites that give access to foreclosure listings.  However, they do not differentiate between listings that are Active & Available vs. listings that are Active Contingent (under contract that has a pending contingency such as inspection periods or appraisals but are very likely to close) or listed as Active CAPA (under contract but Can Accept Purchase Agreements – mostly short sales).  This gets frustrating since you will find a home that looks perfect, go out to drive by it and then call me only to find out it is already under contract. 

We have designed a search website that ONLY searches for Active & Available Foreclosures and you can search by area, community or subdivision.  It is www.ForeclosureListingsInTucson.com.   

Check out this website and please share it with all of your friends, family and co-workers that have been talking to you about buying foreclosures.  We will get you into the homes as soon as possible to give you the best chance to submit your offer before others can beat you to it.  Call us today with any questions or to get together to discuss the amazing opportunities there are waiting for you!

Jack Murray                                                    Barbara Murray

520-404-5533                                                  520-400-0505

Info@ABMurray.com                 www.GoTucsonRealEstate.com

PS, As I was writing this another foreclosure closed to bring the total up to 2,362 sold foreclosures.

The housing market for Tucson homes is soft still, with good signs of recovery in sight, but there is an opportunity in the chaos: The Rental Market!  With many homes going into foreclosure, credit scores falling and many potential buyers not ready to make a purchase, the demand for rental properties is as high as it has been in years.  If you have a rental property inTucson, you are in a position to get stronger rents and not have to see vacancies.  Jeff Wallach quoted Hotpad.com in his article stating that rents nationwide jumped 11.6% in 2010 to $1320.00 a month.

For those investors with a mind for money, we now have an amazing opportunity with low, low prices and fantastic interest rates that are at a 40 year low, make your purchase of a rental home in Tucson cash flow from day one.  The median sale price currently for homes inTucsonis $138,000.  The mortgage for a rental home with 20% down would be roughly $680.00 for your principle and interest.  The average monthly rent inTucsonis $1,050.00.  Factor in $200.00 for taxes and insurance and there is a true potential for IMMEDIATE cash flow. 

It is wise to plan to use that rental income to tide you over until home values come back up.  If you plan to hold onto the home for 8-10 years there should be solid gains on your investment, especially if you leverage your purchase by financing it. 

It is important that you must be able to afford to hold onto the property for a length of time without needing the equity of the home for other purchases or investments.  Also, banks will require 20-25% as a down payment for investment purchases and will usually require you to prove you have the cash and to cover 6 months of expenses, mortgage, taxes and insurance.

Buy Where You Live!  It is best to buy a rental home within 10 miles from where you live.  It means you are generally familiar with the area and know what you are buying.  It also helps to know what your competition in the rental market is and it is easier to learn your current area.

Once you identify candidates (to search for them go to www.GoTucsonRealEstate.com), make sure you crunch the numbers.  As Jeff Wallach reported, it is best to make sure your rental income will at least cover your mortgage payments, taxes and insurance plus leave a 20% cushion for vacancies, repairs and possibly property management fees.  Also, check sites like Craigslist and Rentometer to see what similar homes are renting for. 

It is also good to brush up on your people skills.  You may find yourself answering tenants’ calls, possibly in the middle of the night for headaches and repairs.

If you have and questions about rental homes inTucson, please feel free to Contact Us.  We are always here for you!

A Great Place to Stars is with Tucson Foreclosures!  For ALL of the Tucson Foreclosures in the FLEX Multiple Listing Service Click Here!

We are seeing some great signs that the Tucson real estate market is turning and we want to put the numbers in front of you to see where things are and how we have progressed in the last 12 months.  We look at the existing inventory and the number of homes sold in Tucson over the last 6 months to show the supply and demand.  We also look at the months of inventory to show the absorption rate as well as the percent pending to show what percent of active home for sale in Tucson are under contract. 

Catalina Foothills, Tucson AZ – Active listings of homes for sale in the Catalina Foothills are down 15.1% from 444 in 2010 to 377 active listings currently. There have also been 360 homes successfully sold in the Catalina Foothills which is up 15% from 313 sold homes last year. The inventory reflects this change: there is only a 6.3 month supply of homes, down 26.2% from 2010. The only slowdown shown is in the percent pending which is only 12.7%. This is down 23% from 2010’s 16.5% pending ratio. This reflects some consumer slowdown which is likely reflected from Wall Street’s chaos over the last few weeks. Many Tucson home buyers in the Catalina Foothills are either cash sales or mostly cash. Many people feel that they are in limbo about what to do and this has slowed the activity in the higher price ranges. One good sign is that the median sale price in the Catalina Foothills has stayed the same from last year at $415,000.

As specialists in the Catalina Foothills real estate market, we focus on the trends of this market to help out our clients in the best position to make their move. Whether buying or selling we want you to be the most knowledgeable to make your real estate transaction a success! Please feel free to contact us with any question we can answer for you. Also, to search for homes for sale in Tucson and homes for sale in the Catalina Foothills, just click these links.

Jack Murray, 520-404-5533 Info@GoTucsonRealEstate.com.

Why renewed downward pressure?

Any item’s price is determined by ‘supply and demand’. In many parts of the country existing housing inventory is already high and actually increasing. In addition, an inventory of distressed properties (foreclosures and short sales) will be coming to market later this year. This inventory has been delayed for the last several months because of faulty paperwork by the banks when they originally attempted foreclosure proceedings on these homes.

Celia Chen, of Moody’s Analytics explains:

“Foreclosures are weighing on the outlook for U.S. house prices, and the slow resolution of issues surrounding the so-called robo-signing scandal is keeping distressed homes off the market”.

The New York Times also recently reported on this issue. They looked at the delays in certain states. As an example, this is what they found in New York:

“Last September, before the documentation crisis, nearly 1,500 New Yorkers lost their houses as a result of foreclosure, according to LPS. The average over the last six months: 286. That is far lower than at any point since the recession began.”

–In the Tucson real estate market, there are more foreclosures selling than in the majority of the country.  As this is helping our market stabilize it is also presenting an opportunity for the banks to put more Tucson Foreclosures into the Tucson MLS (multiple listing service) for sale.  This will put additional downward pressure on homes in the near future.  There is a window  before the banks set loose the next wave of foreclosure listings where savvy sellers can get there homes on the market to take advantage of the current buying atmosphere.  Good homes that are priced well are selling if they are properly marketed!

Banks are now correcting these errors.

There is evidence that the banks are getting their documentation in order and about to again increase their foreclosure repossessions. Housing Wire reported:

“Since major lenders delayed foreclosures to fix a broken process late last year, the amount of filings declined, but in May signs emerged the effect might be wearing off.”

They went on to quote RealtyTrac CEO James Saccacio:

“…lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures and as they determine that some local markets are able to absorb more foreclosure inventory… Foreclosure processing delays continue to mask the true face of the foreclosure situation, although there were some clues in the May numbers of what lies behind that mask.”

What will this mean to Tucson home prices?

As this inventory comes to the Tucson real estate market, it will impact Tucson home prices in two ways:

1. It will provide discounted competition for buyers
2. It will impact the appraisal values of all Tucson homes in the area

Again, we quote Celia Chen:

“It is quite possible that house prices will pick up slightly in the second or third quarter of this year, as foreclosure sales remain depressed while nondistress sales pick up…By the fourth quarter of this year, however, the distress share will rise, sending the house price index back down…

House prices will founder until early next year and start rising in earnest at the end of 2012.”

 

Bottom Line

There is a window of opportunity currently which sellers should take advantage of. Waiting until later this year or until next year will not guarantee a higher sales price. If anything, it probably guarantees the exact opposite.

The difference is that COST is determined by two components: the price of the home and the expenses associated with mortgaging that home. As we have put forth in several posts, we believe that the expense of obtaining a mortgage will increase as the year goes on.

We also believe strongly that, in most parts of the country, prices will continue to soften; however, in the Tucson Real Estate Market prices are closer to a bottom. Here are the reasons why:

Existing Months’ Supply of Inventory Is Still Too High Nationally

A balanced market (where prices are stable) can handle 5-6 months worth of active inventory. Anything less than 5 months constitutes a seller’s market as there are not enough houses to meet buyer demand. This usually results in price appreciation. Anything more than 6 months constitutes a buyer’s market as there are not enough buyers for the number of houses on the market. This usually results in price depreciation.

Currently, as per the National Association of Realtors (NAR), there is a 9.2 month supply of inventory Nationally. This alone would put downward pressure on prices.

In the Tucson Real Estate Market (for single family homes for sale in Tucson) we have 3,676 Active listings and 4,577 Tucson Homes have Sold in the last 6 months.  This puts the Tucson Inventory of Homes at 4.8 months supply.  MUCH healthier than the national average!  We also look at the “Percent Pending” when analysing the Tucson Real Estate Market.  This is the percentage of homes that are activeley listed that are under contract.  This shows us what the curve will look like in the near future as well as show us the active trend of Tucson Home Buyers.  Our Percent Pending for Tucson Homes is 35.7%.  In a “normal market” were it is even between sellers and buyers, this would be at 25%.  It has been as low as 8% in recent years showing a strong buyer’s market and in the Boom, it was as high as 47% swinging the market to the seller’s advantage.    At the current 35.7% we are seeing great activity from Tucson home buyers who are realizing that the “Cost” of buying a home is potentially at the Bottom even if prices may continue to slide slightly.  The Tucson Real Estate market is Alive and Active while the “National” market continues to slide.

Distressed Property Inventory Is About to Enter Market

There are over over 4 million homes that have the potential to become a distressed property sale (foreclosure or short sale) over the next few years. A percentage of these properties are set to enter the market before year’s end. No one knows exactly how many will come to market in each region but the common belief is that the number will be substantial.

These properties will sell at a discount thereby attracting a portion of buyers in the market. After they close, they can also be used in an appraisal to help establish values of other homes which sell in the area. A short sale sells for approximately 90% of its non-distressed value. A foreclosure sells for approximately 65% of full value.

In the Tucson Real Estate Market we are handling the sale of Tucson Foreclosures and Short Sales better than the National market.  Whereas the East Coast has an issue with Shadow Inventory (New Jersey is close to a 51 month supply of Shadow Inventory) Arizona has only a 9 month supply of Shadow Inventory.  This puts us in the dentists chair, with our tooth being pulled.  Soon we will be home and recovering while the majority of the country is just starting to feel a toothache.

Bottom Line

The inventory of homes currently for sale added to the inventory of distressed properties about to come to market will far exceed demand Nationally for the next twelve months. When there is less demand for any item then there is supply of that item, prices fall. Check with a local real estate professional to see how this may impact the value of your home over the next year.

However, In the Tucson Real Estate Market, the demand for Tucson Homes is still surpassing the incoming inventory and the best homes, that are priced appropriately, are selling and selling quickly.  This IS the time to buy a Tucson Home!

Many people ask us whether they should hire an agent to sell their home or whether they should first try as a For Sale by Owner (FSBO). In today’s volatile market, we believe this is an easy decision: you need an experienced professional!

Answer: Basically “No” but a few home sellers may be subject to the tax.

The 3.8% tax targets high incom earners (Single Income exceeding $200,000; Married exceeding $250,000) with large “net gains” from investment sales.  The tax falls on the net gain attributed to the property.

Net gain exclusion on $250,000 for single filers and $500,000 for married filers.  In other words, the first $250,000 or $500,000 of profit from the sale may not be taxed.

• Does not apply to vacation homes or rental properties.  Exclusionfor Primary Residences only.
• Primary Residence exclusion applies only if owner lived in the “Main Home” two out of te last five years.

Examples from Factcheck.org:

• A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit.  His tax on the sale of that vacation home would amount to $1,900, in addition to the capitol gains tax he would have to pay anyway.
• An “empty nester” couple with a combined income of over $250,000 who sell their $1,000,000 primary residence to move to smaller quarters.  If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the $500,000 exclusion).  Their health care tax on the sale would amount to $3,800 over and above the usual capital gains tax.

Keep in mind, this new tax in on all taxable investment income including interest, dividends, annuities, royalties and rents if the income limits are exceeded.

ONCE AGAIN, we are passing along this information to you as a courtesy.  If you have any questions on the tax implications on your taxes and filings you need to consult a licensed tax consultant.

1.) Impact on Your Future Ability to Get a Mortgage

There are many different lending institutions, each with their own requirements when it comes to your ability to obtain a mortgage in the future. However, a common trend is to be much more lenient with someone working through a short sale rather than letting the house go to foreclosure. As an example, the Fannie Mae site, Know Your Optionsexplains you:

May be able to get a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) than if you went through foreclosure (at least 7 years)

You can get further information here. However, in a rapidly changing environment, make sure you get the latest information available from the actual lending institutions mentioned.

2.) Impact on Your Credit Score

There has been much dialogue on this issue. The question is whether or not a foreclosure will have a more severe impact on your credit score than a short sale. A recentFICO study sheds needed light on this question. Here is a chart from that report.

The first chart shows the impact on the score for each stage of delinquency, and the second shows how long it takes the score to fully “recover” after the fact.

We can see that there is very little difference in impact on your credit score whether you choose a short sale or a foreclosure.

3.) Impact on Your Family during the Move

Usually a family asking this question is already experiencing major financial difficulties. This may be putting immense pressure on both parents and the children. If you allow your home to go to foreclosure, you move and leave it vacant or you stay waiting for an official to knock on your door demanding you move. That added burden can cause even more stress for a family.

In the short sale process, you work with the bank and pre-determine the day you will move. The new purchasers usually move in the same day. Your family moves with a plan and you don’t leave the neighborhood with a vacant house to deal with. There is a level of dignity in this type of move that does not always take place in a foreclosure situation.

Bottom Line

For several reasons, a short sale may be the better option for your family. It is best to get professional advice if faced with this decision.

What Exactly Is Shadow Inventory?

by THE KCM CREW on FEBRUARY 2, 2011 · 1 COMMENT

in FORECLOSURES,PRICING,SHORT SALES