Each Sunday, ABC15.com debuts an Arizona issue - along with two opposing sides on the topic.
Don’t worry, you always have the opportunity to make comments at the bottom of the page. Yeah, your opinion matters, too. This week we're tackling the debate on how the housing market will look like in 2011.
Greg Burger, president of RL Brown Reports, says there are signs of positive growth on the horizon. Burger says through a variety of well thought out incentives, not public tax payer bailouts, we believe that the metro Phoenix housing market and employment will begin to improve in the second half of 2011, and then continue to strengthen into 2012 and beyond.
Kent Gagon, a seller of new and resale homes in the Arizona southeast valley for 12 years, says most real estate and financial analysts predict a continued slow recovery with potential for additional loss of value through 2011. Gagon says with interest rates rising, there is the potential for further reduction/depreciation of prices since rising rates decrease buyer affordability.
So, what will the housing market look like in 2011?
Click "next page" to read the first of two positions, “Analysts predict a continued slow recovery"
“Analysts predict a continued slow recovery”: By Kent Gagon, seller of new and resale homes in the Arizona southeast valley for 12 years.
2010 wrapped up as the 4th best year for highest number of closed sales since 2003: See numbers below source MLS:
MLS 2010 Closed Sales 90,487 – 4th
MLS 2009 Closed Sales 91,760 – 3rd
MLS 2008 Closed Sales 59,223
MLS 2007 Closed Sales 54,234
MLS 2006 Closed Sales 74,108
MLS 2005 Closed Sales 104,136 – 1st
MLS 2004 Closed Sales 98,297 – 2nd
MLS 2003 Closed Sales 79,515
So, what lies ahead in 2011? Most real estate and financial analysts predict a continued slow recovery with potential for additional loss of value through 2011. Many of the 2010 sales were brought on as a result of the federal first time buyer tax credits, and since those have ended, MLS inventory has risen, pending and closed sales have fallen, and prices have declined.
In 2011 we are likely to see sales spurred on by rising interest rates that push sidelined buyers off of the fence and into the market place to purchase, taking advantage of still historically low interest rates. With interest rates rising, there is the potential for further reduction/depreciation of prices since rising rates decrease buyer affordability. Hopefully however, increased buyer demand will help to hold prices steady.
Banks still have large inventories of unsold homes that will be released to the active market to make room for new foreclosures that still need to take place. So we will continue to see increased active inventory as the banks work through the glut of homes they already have on their balance sheets. Bank owned homes will continue to account for approximately 30-40% of the active listings and approximately 40 to 50 percent of the sold homes each month.
The initial round of foreclosures stemmed from the sub prime mortgage collapse. In 2011 Strategic defaults are likely to be the cause as an increase in homeowners who are upside down in value make the business decision to “walk away” and rent rather than continue to pay for an overvalued home mortgage.
Short sales will continue to be a major part of the active market accounting for approximately 30 to 40 percent of the active inventory, and 10 to 20 percent of the closed sales each month. Hopefully banks will start to streamline the process of approval for these sales so that more of the contracted short sales end up on the closed list rather than the foreclosure list.
Homes that are priced correctly, and in good condition, will continue to sell quickly. Homes that meet FHA qualifying guidelines and pricing up to $346,250, will continue to sell quicker as will homes that qualify for Homesteps financing (homes owned by Fannie Mae and Freddie Mac). Both of these programs allow for low down payment options and seller contribution to closing costs.
Homes priced under $150,000 will continue to be the fastest moving price range and will probably start to see some appreciation. Homes over $300,000 will most likely continue to see some additional price depreciation at least through the 1st half of the year. Homes that fall into the Jumbo loan limit category of $417,000 will take the longest to recover. Prices in all areas and all price ranges should finally hit the bottom this year, most likely in the 2nd half, and we will start to see some appreciation, though it will be a slow appreciation, with values seen in the peak market of 2006 not to be seen for many years.
In 2011, Investors buying to hold and rent will continue to account for a significant portion roughly 15 to 25 percent of all buyers each month. Cash purchases will continue to account for approximately 10 to 20 percent of the sales each month. We will see more speculative buying, investors buying at trustee sales rehabbing and flipping homes for a profit. However, for there to be a true real estate recovery we have to see the majority of purchases going to owner occupant buyers and for that to take place the job market must stabilize and people must feel comfortable enough that values will not continue to fall.
In summary, while we are not completely out of the woods yet. We are close and 2011 should mark the year when we can finally see value coming back into our homes.
Hopefully, we learned our lesson and will not use them as ATM’s in the future.
Do you agree with this opinion? Add a comment below to sound off.
Click "next page" to read the second position, “Signs of positive growth on the horizon".
“Signs of positive growth on the horizon”: By Greg Burger, president of RL Brown Reports
As we observe the marketplace and look at the data flowing in every day, we are able to track the pulse of new and resale housing objectively in metro Phoenix. We talk to the region’s housing market pros on an almost daily basis and capture impressions and facts that really allow us to gain a perspective beyond the hype and the gloom of the headlines and news flashes.
While many continue to walk down the muddy path of pessimism, others have chosen to walk on the leaves beside the path and stay focused on the new housing market of today. We can tell you those who reinvented their product and honed their positioning skills have indeed stayed out of the muck and have been successful in 2010....for this group, impressions are pretty positive.
We acknowledge there are still immense challenges ahead for our local housing market and economy and for the national housing market and national economy, however there are signs of positive growth on the horizon.
First, let's step away from the noise of paid analysts and those with personal objectives and look at the housing numbers generated in 2010. As of this writing, we examine data from January through November which is the most current available.
Total home closings in metro Phoenix, which includes both Maricopa and Pinal county, was 88,521 thru November. From a percentage basis, 92 percent were resales and 8 percent were new home closings. The foreclosure rate was at an all time high and lenders were challenged with buyer credit worthiness and government scrutiny of policy and procedure.
A key point to the challenges of the new home builders was the price differential between the resale home and the new home. The median new home closing price in November was $209,463 while the median resale home closing price was $115,000. This divergence will continue to challenge the new home builder in the near term but will become more isolated to geographic areas and neighborhoods as we move into the latter part of the 2011 forecast period.
Our 2011 Housing Forecast and Overview will be presented via web conference on Feb. 8, but our preliminary calculations suggest a new home market similar to what we experienced this past year with new home permits around 8,000 and new home closings around 10,000 units. Resale housing will be north of 100,000 units as distressed properties continue to be viewed as a "bargain buy" by investors and some traditional buyers.
Other consumers will seek new, more efficiently built homes in areas where foreclosures will not be prominent and housing values will tend to remain stable short term and step up with appreciation over time. The active adult segment will continue to drive the market and dominate in several submarkets in the region. While we don't forecast specific market segments, recent and long term historical data suggest no change in this demographic housing demand in the foreseeable future. Three out of the top five communities based on permit activity were active adult communities in 2010.
Additionally, our recently published Canadian Home Buyers report revealed a strong niche of consumers who continue to purchase new and resale homes in Arizona for primary or second homes to vacation and/or retire to, bringing additional demand for housing and revenue for the state.
So where will the growth occur, and why, is the obvious question. Each submarket of Maricopa and Pinal County is unique and offers a variety of employment, services, recreation and affordability. Consumers are more savvy shoppers than ever with the ability to search out master plans with major amenities, or the most affordable home size/ price per square foot available. The wonders of technology at their fingertips will allow for much window shopping before stepping a foot into the sales office.
Realtors will continue to be an integral part of the housing recovery and will seek to become more educated in their area of expertise. They will be enticed by new home builders with healthy commissions but will also find themselves dealing with educated home buyers who have done their own due diligence and many will find the subdivision of their choice without the 3rd party assistance.
Finally, and of utmost importance to a steady housing recovery and economic growth, will be available credit, consumer confidence, current employment stability and job growth. Steps must be taken on both local and Federal levels to fuel job growth and entice employers to move to Arizona or expand their current operation to create employment opportunities. Through a variety of well thought out incentives, not public tax payer bailouts, we believe that the metro Phoenix housing market and employment will begin to improve in the second half of 2011, and then continue to strengthen into 2012 and beyond.
Many factors can and will influence the dynamics that will shape Arizona's future. Those that choose to work closely with their industries for the benefit of all will likely prosper much quicker than those seeking to do it alone. For the latest updates PRESS CTR + D or visit Stock Market news Today
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