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Hot Year Begins to Slow – Better Time for Buyers or Sellers?

Although Flagstaff home sales in late spring and early summer were hot, sales in early fall have tapered off and are shaping up to look at lot like last year. Every month from January to July had more sales this year than last, and in some of these months it was significantly more. But then something interesting happened… August and September reversed course and actually had fewer sales than last year, although just barely. It seems strange that the entire year has been “hotter” than last year and then we see a sudden shift. Explanations could be that people are more focused on the upcoming elections, that demand was merely shifted from August and September to prior months, or that this was just an anomaly.

Another possible explanation for fewer sales recently is that due to limited supply, many would-be buyers aren’t finding the home that suits their needs. The inventory of available homes in Flagstaff continues to be very low, making the home search slightly more challenging. The low inventory, along with a 13% increase of year-to-date home sales over last year-to-date, has changed the balance from a strong buyer’s market to somewhat of a seller’s market.

It’s too soon to know what effect this limited supply will have on pricing in the long-term. If sales continue to taper off, even to just last year’s levels, this will likely keep the market balanced and keep prices steady. If this recent cooling of sales is just an anomaly and sales go back to outpacing last year, and/or we continue to see a drop in available inventory, it seems likely that prices would increase. This, of course, will depend on many factors such as the economy, employment levels, consumer confidence, etc.

Based on all of this, the current lack of inventory could make now a good time to sell due to less competition and slightly higher pricing power. Plus, we don’t know how long it will be until the economy improves enough to significantly increase prices. However, from a buyer’s perspective, it’s still a good time to buy if you’re patient and focused. After all, it’s hard to know when we will again see these extraordinarily low interest rates (hovering below 4%) coupled with the lowest prices in years.

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Action Packed Fall in Flagstaff!

There are so many great events coming up in Flagstaff this fall! One of the benefits of living in a place with four seasons is the variety of events we have year-round. Here are some hand-selected events between now and the end of the year. See the links in most items for more details.

  • Every first Friday of the month attend the First Friday Art Walk starting at 6pm and ending at 9pm. Located in downtown Flagstaff.
  • October 6th from 11am-8pm, join in for some yodeling, beer, brats, Mug Root Beer floats, and live music at the Flagstaff Oktoberfest held at Wheeler Park. Cost is $5 or donate a pair of glasses.
  • Oct 14th will be the last Sunday for the Flagstaff Farmer’s Market held in the parking lot of City Hall. Shopping starts at 8am.
  • Oct 20th the Arboretum will be hosting the Pumpkin Walk featuring nocturnal animal displays, plants, hot cider, fire pit, and kids craft. Come in costume! Fun is from 9am-4pm.
  • The Grand Canyon Railroad is now featuring The Pumpkin Patch Train going out to their secret pumpkin patch every weekend from Oct 6th-Oct 28. The train leaves at 11a, 1p, 3p. Tickets are $20 for adults and $15 for kids. Kids be ready to pick out your free pumpkin! For more info call 1-800-THETRAIN.
  • Bearizona is featuring its Howly, Growly, Owly Fall Festival with the Howl-O-Ween Express, Haunted Bear Cave, and Raptor Show. Weekends only October 6th-October 29th!
  • Halloween Harvest will be located in downtown at Heritage Square on October 31. There will be games, a pumpkin patch, costume contest and more! Little ghouls can do some trick-or-treating too! Starts at 4pm. Click here for more info.
  • Ride the Grand Canyon Railway’s Polar Express anytime between November 9th-January 5th (days, times, and ticket prices vary). Be sure to reserve your seats now as the trains fill up fast and space is limited. Go to their website to get your tickets today!
  • November 23-December 2 NAU Theatre presents Romeo and Juliet at the Clifford E. White Theater. Check out their website for times and ticket prices http://nau.edu/CAL/Theatre/Events/.
  • On November 24 Little America will be flipping the switch for the 18th Annual Holiday Lights Festival. Activities start at 3pm with the lights turning on at 6:30pm.
  • Winter Wonderland in downtown Heritage Square will begin at 6:30pm on Dec 7th to turn on the Christmas Tree.
  • 14th Annual Northern Lights Parade will be held on December 8th in downtown Flagstaff starting at 6pm. There will be twinkling floats and marching bands!
  • Christmas in the Mountains is a festive holiday concert of familiar carols the whole family will enjoy. Held on December 16th at 3:00pm at the Ardrey Auditorium on the NAU campus. Cost is $20 for adults, $8 for students with ID, and free for children 12 and under.
  • Ring in the New Year with the Weatherford’s Pine Cone Drop on December 31st at 10pm and midnight.

    • Make sure to check out the Flagstaff Convention and Visitor’s Bureau’s calendar here for additional events! Let me know if you’re able to enjoy any of these!

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1 in 3 Realtors Leaves the Business

As you would expect from this challenging real estate market, the number of real estate agents has really taken a dive over the last few years. At the peak of the market, people were joining the real estate industry in droves, thinking it was a glamorous business or that they could make a lot of money easily. As soon as the market started correcting downward, however, these agents realized just how difficult it would be to stay in business. In other words, only those who were serious about their career and committed to gaining the skills necessary to sell homes in this market were able to stay in business full-time.

This attrition has been just as true in Flagstaff as in the nation as a whole. There was a high of 656 Realtors* in northern Arizona in 2007 and it’s down to 401 Realtors in August 2012. That’s a reduction of over 250 agents or 39%! Essentially, more than 1 out of every 3 local Realtors didn’t make it through the recession.

Nationally, the drop was about 27% from a high of 1,370,758 Realtors in October 2006 to 998,983 Realtors in August 2012. This is a return to the same level as spring 2004 and marks the first year that membership has declined to below one million since 2004.

This really is good news for both the full-time agents who are serious about their real estate career and for consumers who are better served by a knowledgable and professional agent who has experience in this type of market.

*Realtors are real estate agents who are members of the National Association of Realtors and their local board, such as the Northern Arizona Association of Realtors.

Source for national membership numbers: http://www.realtor.org/sites/default/files/reports/2012/nar-membership-count-by-month-1970-to-current.pdf

Local stats provided by the Northern Arizona Association of Realtors.

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Increased Demand But Prices Remain Unchanged From A Year Ago

Interestingly, despite the flurry of home sales we’ve had in Flagstaff this year, the trailing average price is about the same now as it was a year ago. We saw prices bump up a little bit this summer, but those increases seem to have faded over the past couple months.

One would think that with demand being up and supply being down, prices would continue to rise. However, the balance of supply and demand has just barely reached a normal level. In other words, there are just enough sellers and buyers to keep the prices steady; there’s not enough of an under-supply to dramatically increase the prices. One explanation could be that the demand exists only because of the lower prices and that as buyers face the prospect of paying more for a home, some just change their mind about buying.

Fortunately for those Flagstaff buyers who stay in the market, the combination of exceptional prices and historically low interest rates make this an incredible buying opportunity. And for those needing to sell, the balanced market has made the conditions for selling better than they have been in years.

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Could You Be A Real Estate Investor?

Many people may have a misperception about the typical real estate investor. They often think you have to be very wealthy to invest in real estate. Fortunately, that’s just not the case. It turns out that many real estate investors are your average, everyday people. It may be your neighbor who owns one or two rental properties or a friend who moved into a new home and kept their old one as a rental. And, in reality, it could very easily be you if you wanted.

Real estate investors are just those who have chosen to utilize real estate as a way to diversify their investments and build wealth.

The most common reasons my clients invest in real estate are to diversify investments, save for their kid’s college education, and to create wealth for retirement. Think about this: wouldn’t it be great to have renters pay off your mortgage for the next 15-30 years and then have a cash producing asset that you now own free and clear, just in time for retirement? Then at that point, you still have the rent payments coming in but without the mortgage!

Still not sure if you could fit the profile of a real estate investor? Consider that the median household income of those who purchased investment property in 2011 was $86,100, which doesn’t compare that much differently than the median household income of those who bought primary residences – $72,400. Plus, the median age of investors last year was 50, with half of investors under the age of 45.

Here are some other interesting facts about investors:

  • A large portion of investors purchased in their own community – 38% of investors bought within 15 miles. However, it’s fairly common for investors to buy in other areas – 30% of investment purchases are over 100 miles away from the investor’s primary residence.
  • 27% of all residential real estate purchases in 2011 were investment property, up from 17% in 2010.
  • Almost half of investment properties were purchased with a mortgage. So, yes, there is financing available for investment property.
  • The median length of time an investor expects to hold onto a property is five years, but a significant percentage plan to hold on even longer than that.

Keep in mind that most people’s attitudes on investing are different now than at the peak of the market. Most investors are now looking for longer term opportunities that bring in a positive cash flow.

Another interesting tidbit is that 78% of investors surveyed believe that now is a good time to purchase real estate. This, of course, explains why so many of them are doing so!

Think Flagstaff is too small for investment opportunities? You’ll find it interesting that 37% of investment property purchases were in small towns or rural areas. Plus, having a steady flow of students from NAU contributes to the strong rental market in Flagstaff.

There are good investment opportunities in this market and now may be a good time to learn about diversifying your investments with real estate.

All statistics are from the Investment and Vacation Home Buyers Survey 2012, ©2012 NATIONAL ASSOCIATION OF REALTORS®. All rights reserved.

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June Market Update – Are the Days of Foreclosure Deals Over?

Are the days of foreclosure deals over? Or at least the days of foreclosures greatly impacting home prices? I suppose the answer to that question depends a lot on what the economy does from here, but one thing is clear – foreclosure listings are currently making up a much smaller number of the homes for sale in Flagstaff.

Currently, only 13 out of 498 active listings in Flagstaff are foreclosures (bank-owned). Last year at this time, 35 of the 748 active listings in Flagstaff were foreclosures. (As you can see, active listings have gone way down as well.) In May, only 17 of the 99 sold listings were foreclosures compared to 25 of the 77 total MLS sales in May of last year.

What does this all mean? First it means there’s less downward pressure on pricing for those homeowners who need to sell. For the past few years, it’s been difficult for homeowners to compete with the pricing of foreclosures. It also means that neighborhoods aren’t as plagued with the downsides of so many foreclosures. Can buyers still expect great deals? Yes, in many cases, but it wouldn’t be wise to limit your search to distressed properties. Not all great deals are foreclosures, and really not all foreclosures are great deals. On the flip side, for buyers wanting homes that don’t need a lot of work, it’s encouraging that their choices aren’t as slim as they were in the past few years when so many of the available homes were distressed.

What About Shadow Inventory?
With such low inventory this year, many people are waiting to see if the banks flood the market with shadow inventory. There’s great talk and speculation the the banks have a backlog of homes that they’ve foreclosed on but haven’t put up for sale, and that when they do it’s going to cause another oversupply of homes. The good news is that the shadow inventory (especially in places like Arizona) has been decreasing – lessening the chances of this happening. The reality is that the banks generally want to get rid of property they own as soon as possible because it’s a drag on their balance sheet. Oftentimes, if they haven’t put a home on the market, there’s a problem with the title or the property that they have to clear up first.

Click here to read more on the shadow inventory levels.

Will There be a Short Sale Wave?
One interesting question is whether there will there be a short sale wave. Congress passed the Mortgage Debt Forgiveness Relief Act in 2007 which waived the tax liability on forgiven mortgage debt for many people, whether through a foreclosure or short sale. Unless Congress extends it, this Act expires at the end of 2012, so it’s conceivable that many people who have been considering a short sale may try to do so now to get it done by the end of the year.

Source for Statistics: Northern Arizona Association of Realtors MLS – Flagstaff area residential home sales.

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Time Running Out for Tax Relief on Forgiven Mortgage Debt

As it stands now, this will be the last year that many financially distressed homeowners will be able to do a short sale or foreclosure and not get a tax bill for the forgiven debt. In the past, if someone had any debt forgiven, it was treated as income on their taxes. In 2007, Congress passed the Mortgage Forgiveness Debt Relief Act, which waived the tax liability on forgiven mortgage debt under certain circumstances. This was renewed once, but is set to expire at the end of 2012.

Considering that many homeowners are under water $10s of thousands or more, this tax liability could really add up for anyone who waits too long. See the video below for an example.

What does this mean for homeowners? As mentioned by Alex Charfen at the Distressed Property Institute, if someone is considering a short sale, they need to take action now. Short sales can take a number of months to get approved and there will be a huge rush at the end of the year. For anyone who’s uncertain about their options, it’s a good idea to talk with a real estate agent who’s knowledgable about short sales, as well as an attorney and CPA.

Sources:
http://www.irs.gov/individuals/article/0,,id=179414,00.html
http://www.cdpe.com

As a disclaimer, this is for informational purposes and not intended to be legal or financial advice.

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Are Fences Allowed in Continental Country Club?

A question I often get is whether fences are allowed in Flagstaff’s Continental Country Club. For the most part they’re non-existent. The general feel of the Country Club area is that of being in the forest, which is appealing to many residents as well as vacation homeowners who prefer to feel like they’re coming to Flagstaff to be in the pines and enjoy the natural landscape, which is far different than that of the desert. A lack of fencing also better conforms to being on a golf course – it would really take away from the scenery if the fairways were surrounded by wood-plank fences and large walls. Lastly, the openness of the yards allows and encourages the flow of forest animals. It’s always a pleasure to look out your window and see a herd of deer or a magnificent elk in your yard.

That being said, many people mistakenly rule out the Country Club area thinking that they can’t have a fence. Whether you want a fence to keep your kids or pets in the yard, or to add some privacy, it’s likely very possible to have your needs met while working within the guidelines of the Country Club’s covenants.

So to dispel the myth that fences are prohibited in the Country Club, here’s the exact wording from Paragraph 3f of the Continental Country Club’s CC&Rs (Covenants, Conditions, and Restrictions) regarding the installation of fences:

“Solid fences, walls and hedges around the perimeter of the lot will not be permitted under ordinary circumstances, and in no event shall a fence, wall or hedge be erected, installed or maintained nearer than 25 feet of any property line bordering on a golf course property as designated by the Association. As regulated by the rules and regulations, the following fencing may be approved by the Architectural Committee:

i. Split rail fences for landscape purposes.
ii. Privacy fences for purposes such as: dog run, private courtyards and storage.
iii. Privacy screens as detached landscape features to block or screen views.
iv. Ornamental wrought iron fences, if consistent with other landscape features. All other types of metal fences, such as chain link or wire, are prohibited.“

Did you notice that dog runs and private courtyard are possible? Also, please take note that it says, “may be approved…” The Architectural Committee will have to approve any fencing proposals, so there’s no guarantee they will approve what you have in mind. However, there are many examples of these types of fences in the Continental Country Club that have gotten approved. Here are a couple examples:

As you can see, there are many possibilities here. You definitely won’t be putting up a wood-plank fence around the perimeter, but with a little creativity, you can likely achieve what you want and, therefore, still be able to include the Continental Country Club neighborhood in your home search.

Disclosure: I am just passing along public information – this is in no way a guarantee for your specific circumstance. Also, these covenants are changed from time to time, so they could be different when you’re reading this. When it comes time to purchase, “it’s always a good idea to seek legal counsel if you have questions about the governing documents or rules” as stated by the National Association of Realtors.

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Flagstaff Market Continues To Heat Up!

The real estate market in Flagstaff has continued to heat up! This is mainly due to continued low inventory. Compared to last year, the available inventory is down 32% – over 200 fewer active listings! There’s also been a 23% increase in the number of sales from April of last year.

Believe it or not, half of homes under $250k in Flagstaff are under contract! This is compared to a third of homes under contract in the entire Flagstaff market, which is already a high figure.

The average sales price has actually dropped slightly, but it likely has more to do with the fact that there’s been a run on homes in the lower price ranges.

The number of foreclosures for sale is extremely low at only 18 bank-owned active listings.

This summer will be very telling as to the recovery of the market!

Source for Statistics: Northern Arizona Association of Realtors MLS – Flagstaff area residential home sales.

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5 Key Times To Get Your Home Inspected

If you’re a homeowner, you can save yourself a lot of headache by knowing when to get a professional home inspection. Most people mistakenly think of a home inspection as something you only do when purchasing a home.

Unfortunately, I have seen numerous occasions where a home inspection would have been well worth it for the homeowner. Professional home inspectors find things that even the most observant and savvy homeowner may not notice.

Here is my take on key times to get your home professionally inspected:

1. Buying a home – even a new home

It goes without saying that you should get a home inspected when buying a resale or used home, but it’s just as important when buying new construction. Building a home is very complex, so even when working with a very reputable builder, issues can come up. I always recommend people get a home inspection on new construction and I have yet to see a perfectly clean inspection report. There is another huge benefit to having an inspection done at this time: you can take all the items found and give it to the builder as a punch-list for your final walkthrough.

As a side note, another thing buyers sometimes don’t realize is that they can have a real estate agent represent them on the purchase of new construction (so we can advise you on things like this).

2. Before your builder warranty is up on your new home

New construction typically comes with a builder’s warranty – a period of time during which the builder is responsible to repair any defects. If you didn’t do a home inspection before moving in, it would be a good idea to have one done before the end of this warranty period. There could be latent problems that don’t become obvious until after the warranty period.

3. After a major renovation

Similar to new construction, there may be things that got missed by the contractor on a major renovation. It’s best to know about these things right away so you can call the contractor back out to take care of them.

4. Pre-inspection before listing your home

The most important reason to do this is that there are likely problems with the home about which you’re not even aware. Being able to address the problems ahead of time increases the chances that everything goes smoothly with the buyer’s home inspection and that you make it to the closing table. You can also use the fact that you’ve had a pre-inspection as a selling point to prospective buyers.

5. Have owned for many years

It’s possible that problems have crept in over the years or that you’re on the verge of needing repairs. Plus, there may be updated safety standards since you purchased and a home inspector can point these out to you.

All of this boils down to the fact that it’s far better to know about a small problem or potential safety issue as soon as possible. Finding out the hard way can either mean a much larger repair bill or losing a sale when a major unknown item comes up on an inspection report. Don’t wait for a problem to occur – usually preventative maintenance is a lot less expensive.

In Flagstaff, you can find reputable home inspectors who will do a full inspection for a few hundred dollars (depends on the size of the house) and provide you with a very detailed report. This is money well spent. Having seen countless home inspections during my real estate career, I have never seen a home inspection come back with nothing wrong.

Featured image ©iStockphoto.com/malerapaso