Of course, one of the three ended up exploding because the lender decided to foreclose on the home even though we had an offer at the approved price.  I am now waiting on that one to come back on the market as a lender-owned property.

The other 2 are slated to close within the next 2 weeks.  Yay for me!!!

But wait…that’s not the end of the story.  One of the deals involved an owner that decided to remove the beautiful appliances in the home and replace them with some old, broken crappy appliances, probably off of Craig’s list.  Funny how that whole situation transpired.  I show up at the home for the home inspection and as I’m looking around, I notice that things don’t look right.  I check the pictures on the MLS against what I was looking at the home and see that the gas stove, and microwave were replace and 2 ceiling fans were removed.  Needless to say, we had to halt everything and get the seller to put back the stuff he took out.  You see, the contract clearly states that the buyer is buying what he sees in the home at the time the offer is written (fixtures).  They are not allowed to remove and replace nice stuff with garbage.  Let that be a warning to you buyers out there.  Take pictures of the inside of the home and keep them as reference to make sure you’re getting what you pay for.  Buyer beware.

And here’s another little sneaky thing I found out being done by some buyers.  I had a client that put an offer on a short sale but it wasn’t accepted by the lender because it came within 7 days of the foreclosure auction.  The property was previously approved by the lender to be sold as a short sale for $113,500.  The property ends up going to auction and sold for $90,000.  I find out after the fact that the buyer at auction was none other that the buyer that dropped the short sale deal 1 week before auction!  They stalled the property until the last minute and then snuck in and bought it for $23,500 less than the approved short sale price.  My clients ended up buying it from this ‘flipper’ for $111,500 so they got a little bit of a better deal.  So who loses in this game?  Obviously the bank loses over $25,000 (legal fees) but the other loser is the property owner/seller who gets their credit destroyed.  I would never suggest my clients to play this risky game not only because it harms the seller and lender, but because it is really an unethical way of doing business.  But it’s good to know what the shysters are doing out there.

Keep checking back for more news and updates coming shortly.  I will be writing about the investment real estate market and the opportunities that are out there right now.  www.CanadiansBuyArizona.com

Why?  Hard to explain since our market is so depressed already, value-wise.  Only reasonable explanations are the end of the home buyer tax credit that had boosted new and existing home sales - especially at the low end of values, and the SB1070 legislation that has the Hispanic market spooked and is having a detrimental effect on our local economy.  At least temporarily.  Also I think with the severity of the recession, we’re seeing a return to ‘cocooning’.  this is a phenomenon whereby families consolidate into less housing - children move back in with their parents, parents move in with their children.  All in the interests in conserving money as family income declines.  The opposite was true earlier this decade where it seemed everyone was buying a home and the number of occupants per home was declining.  This phenomenon also has a negative impact on housing as it increases supply in a way that is difficult to gauge.  Another factor continues to be lack of financing availability.  We’ve gone from a gusher in 04-06 to a trickle currently.  The government and lenders will have to find a happy medium between those two polar opposites and something will have to be done about the decimated consumer credit that is out there right now.

I am including some links to some great housing market data from the last couple of months.  Take it all with a grain of salt.  Some of the data is upbeat while some is pessimistic. Raw data and commentary, provided by ASU:  http://wpcarey.asu.edu/realestate/upload/Press-Release-July-2010C-resale-homes.pdf

As of the end of July, total listings are up approx. 1266 from last month.  Total sales for the month of June were down approx. 1459 units over the previous month.  Please keep in mind that short sale volume as a percentage of total sales is on the rise - they represented 26% of the closed sales last month.  Given the increase in short sale  transactions and the length of time they take to come to fruition, this might be a sort of market correction that needs to compensate for more transactions in the pipeline that are taking longer to close.  We will see if that is the case in the coming months.

We currently site at a 6.1 month supply of homes Valley-wide which is high.  A stable market would be closer to 4 months supply.  94% of sales are below $400,000.

If you look at national housing and economic data, there is some positive news, so hopefully that spreads to our market sooner rather than later.

Stay on top of the market by checking my website regularly at www.CanadiansBuyArizona.com.

I wanted to share with you a little bit of information I gleaned from a recent seminar I attended.  It really resonated with me and tends to make alot of sense.  In these difficult times which are like no other in history in terms of what is happening to our economy and people’s struggles to stay afloat with everything that is happening, changes will need to be made in certain areas to allow the economy to recover more quickly.  One of those areas involves credit and credit scores.

With so many homeowners and investors defaulting on their mortgage payments, the average credit score is plummeting like a stone.  As a result, it is leaving a much smaller and constantly shrinking pool of potential new home buyers to gobble up the incredible real estate deals that are out there.  Even if you have the financial ability to afford the new lower priced homes after the correction, most people cannot buy them because their credit is shot for 1-7 years.  Something will need to be done to stimulate the housing market and recovery.

I think we are going to see the government step in and take measures to adjust either hoe credit scores are calculated or credit score requirements to qualify for a mortgage loan.  It is just a matter of time until this happens, in my opinion.  The government has shown time and time again that they base their decisions on the masses (voting public) and the masses are now burdened with crappy credit.  Keep in mind that this is only my opinion, but it seems to be shared by many mortgage lenders and credit experts.

The other important consideration to this recovery is a loosening or credit and money by lenders.  Right now, too few lenders are lending and the ones that are lending are taking forever to approve and fund loans which is slowing down closings and scaring sellers from accepting offers subject to financing.  This trend must end as well.

Should these things happen, it should have very positive affects on home sales across the country which will, in turn, aid the eventual recovery.  We’ll just have to wait and see what happens.

Visit my website at www.CanadiansBuyArizona.com for the latest news and updates about the real estate market in Metro Phoenix.

It’s a great book about a conservative, long-term approach to investing in real estate to create inflation-proof retirement income.  It’s a great resource to have in your library and is an important way to look at investing in real estate to counter balance all the get-rich-quick real estate schemes for sale on TV and through books and other media.  I encourage you to pick up a copy of this book.  It will definitely open your eyes on another way to evaluate and look at real estate as an investment.

Help me get my book recognized on Amazon.com and move it up the list of best-sellers.  Log on and pick up your copy today!

Thanks for your support in reading my blogs and using my services.  I continue to look at innovative ways to keep my readers and clients up to date with the latest Phoenix market information and investment advice.

Remember, these are CASH buyers.  So there is quite a bit of money finding its way into our real estate market searching for deals.  While there are many ‘C’ grade properties for sale, there is a much lower level of interest on them which is why they have plummeted in value.  The better quality buildings in better areas with more stable income are what these cash investors seem to be targeting.  And all asset classes.  I was previously of the opinion that apartments would be the first to recover followed by office/industrial/retail.  Now it’s looking more and more that they will be stabilizing together.  I still think there will be plenty of trouble, distressed assets that come up for sale because there has to be a correction in valuation of the properties based on lower income.  But I don’t feel like there will be fire sales happening with them because they will be gobbled up fairly quickly are more reasonable values.  For a firesale to happen, there would have to be a glut of properties sitting on the market for a prolonged period of time where each new listing keeps weighing down the overall values.  That does not appear to be the case.

So if your plans are to grab some smokin’ deals, I would suggest that you start taking a serious look right now or you may be left on the curbside.

Stay up to date with market data and news at www.CanadiansBuyArizona.com

Total listings are down from April to May while total sales are up over 500 units.  Overall, sales are down about 2% compared to May 2009 probably due to lower inventories and the expiration the federal home buyer’s tax credit.  Short Sales continue to represent an increasing portion of total sales and now represents 21% of the total sales in the Valley.  We currently have a 4.4 month supply of homes across the Valley. A bit high, but a good portion of that represent the $400,000+ market that is much more stagnant.  The under $200,000 price range is turning over very quickly.  If you’d like to view some excellent graphs which show market activity, click HERE.

 Distressed property sales and volume appear to be down across the board from April to May.  New notices filed is down 500, active notices of default are down 2,500, sold to the lender at auction is down from 2,100 in April to 700 in May, and new foreclosures dropped from about 7,300 in May to 2,000 in June.  What is this telling us?  That foreclosures are down even more so, meaning that short sales are becoming the norm and more and more lenders are taking that route with distressed properties than going through the foreclosure process.  This is even more true as default rates across the US and in Arizona have gone up in the past 10-12 months.

On the commercial front, it is reported that lenders took back $10 billion in assets nationwide in the first 5 months of the year and have only disposed of $2.6 billion of them.  Analysts are further claiming that there is now $28 billion of commercial REO inventory from this market cycle.   That means that there is a huge ’shadow inventory’ as we call it, lying in wait.  We’ll have to see if this inventory is dumped on the market or more wisely, released slowly to allow effective absorption without a wholesale fire sale.  This does bode will for commercial investors lying in the wings but I can tell you that there is quite a bit of investment capital chasing what few decent investment opportunities are out there.  I know first hand as I have a few investors attempting to acquire distressed assets and we’re running into a boatload of competition - all cash buyers.

Stay abreast with market new and dat via my blog and website at www.CanadiansBuyArizona.com.

And how is the market doing as we move into this more active time for real estate?  Sales and values seem to be picking up and you might be surprised to find that now CANADIANS form the LARGEST group of out-of-state homebuyers, supplanting California for #1.  That is the first time CA has been knocked out of that position ever (or as long as I have followed the market here).  There are still a ton of distressed properties for sale in the market but more and more, these are turning frombank-owned REOS to short sales so please exucate yourself on how to go about purchasing short sale properties.  I have a ton of information at my website and on my blog posts on that subject to keep you informed on the regular changes.

And what’s going on with the Canadian dollar?  It’s fluctuating like a yo-yo - but still in a very positive range very close to par with the US$.  For those of you planning on a real estate purchase, keep you eyes DAILY on the exchange rate because it can move pretty quickly in either direction and when it gets to a number you feel is positive (close to par), CONVERT!  I have provided some excellent foreign currency exchange companies at my website, www.CanadiansBuyArizona.com.  They typically provide better rates than the banks so check them out!

Before I get into the state of the distressed home market, let me give you first an overview of the entire market as a whole up to April of this year:

Real Estate market is strengthening yet again.  This time has alot to do with normal seasonal fluctuations as the Metro Phoenix real estate market improves as spring moving into summer.  Total listings are down 1268 units from last month.  Total sales for the month of April were up 5% over the previous month at 8496.  All the numbers are heading in the right direction for a recovery.  Valley wide we are a 4.6 month supply of homes.  The luxury market still continues to be the worst segment of business at a 26.8 month supply BUT THERE ARE SIGNS THAT EVEN THAT PART OF THE MARKET IS IMPROVING.

Months of Supply by area are as follows:
Awhatukee 5.1
Apache Junction 4.2
Buckeye 3.1
Cave Creek 8.1
Goodyear Litchfield and Avondale 3.4
Central Corridor 7.9
Fountain Hills 6.2
Glendale and Avondale 3.4
East Valley 4.1
Luxury 26.8
Northwest 3.9
Paradise Valley 16.3
Scottsdale 7.5
Peoria and Glendale 4.0

Short sale closings are higher than they have ever been and represent 40% of the listings and 21% of closings for the last month.Click HERE to view all the market data graphs which clearly depict the state of the market in different area of The Valley.

Now…back to the distressed home market.  Bank owned properties and short sales accounted for 59% of the sales in the month of April.  So as you can see, our market is still very distressed-property driven with a continual number of defaults hitting the market for sale.  The difference has been a shift from bank-owned (REO) to more short sales.  We can only hope that this shift will cause the lenders involved in the short sales to be more accommodating and efficient in handling the process (not to mention the real estate agents!).

So here’s an interesting question I get alot from homebuyers…So how many homes are in default and just not yet on the market?  This has always been a tough statistic to guage but there is a way to do it and this number is referred to as ‘Shadow Inventory”.  In other words, homes that do not show up in the inventory list of the MLS system but are expected to be coming up for sale within the next 2-6 months.  The important thing to track with this number is if it is INCREASING or decreasing.  If it is increasing, we can see that the market is getting worse.  If it is decreasing steadily, we can start to see the end of the long dark tunnel.  The number itself is meaningless.   Through April 2010, the number of properties that are in Notice Of Default stood at 51,000.  That is down from 54,000 a few months ago.  the trend seems to be down which is a good overall sign for our real estate market.

Here are some additional statistics that begin to show that the market is on the mend:

These stats are pretty telling….less distressed sales as time progresses and short sales are becoming more normal.  You can start to see that the market is improving so if you’re in the market to purchase a home in Arizona, get in while the getting’s good.

Market updates are posted monthly on my website as well at www.CanadiansBuyArizona.com.  Check back there regularly for what’s happenin’.

Oh..and revisions to my book, ‘The REAL Retirement Income Edge’ are almost complete.  It should be re-released shortly so please stay tuned for that

(1) Higher Taxation

(2) Increase money supply (which is another form of hidden taxation)

I don’t see much more taxation happening for the foreseeable future as there is already a form of revolt going on against the current government in various forms like the tea party movement.  In addition, there a plenty of hidden taxes that are hitting us right between the eyes as many of the tax reductions implemented by the Bush administration lapse (like capital gains, mentioned in my previous article).  Too much taxes and the people revolt against the government and with elections coming up and the democrats already in trouble, I don’t expect them to rock the boat further.  I won’t even get into the idiocy of the Obama tax the rich strategy which is the equivalent of long term economic suicide.

So where does that leave us?  Increase the money supply.  How?  Easy! PRINT MORE MONEY!!!!  In fact, it has already been done in the hopes of getting more money out into the economy for loans and mortgages but up until now, it has had little effect.  the banks are not releasing the money because they have their own #$^% to deal with.  But mark my words, when this money hits the market, inflation will be the result. 

So what’s the big deal with inflation?  Well…that loaf of bread you buy today for $1 will soon be selling for $1.50 and then $2.00.  The costs of goods and services across the board will rise.  How bad can it get?  Well, hyperinflation is really, really bad inflation and no-one knows what will happen.  But even MODERATE inflation will cause interests rates to rise and the standard of living to fall.

There is a way to protect your assets against high inflation - invest in commodities and goods.  Anything from foodstuffs and products to precious metals.  The problem with buying food is that it is perishable and doesn’t last long (and takes lots of space to store).  Precious metals is a viable option and I think everyone has seen the commercials an adds touting gold and silver as a safe haven for your wealth.  There is another way you can protect your net worth in an inflationary period.

REAL ESTATE.

Real estate has always been one of the greatest storehouses of wealth and when you can buy it at a time when prices are depressed in advance of a potential inflationary movement in the markets, you can not only protect your assets, but actually INCREASE your wealth. 

In light of what is happening around the word today - Greece financial collapse and revolt, EU turmoil, Japan economic troubles,terrorist threats/attacks against the US -  I encourage everyone to take solid measure to protect their wealth in a variety of ways.  And one of the key ways should be real estate - in depressed markets like Phoenix, Arizona. 

If you’d like some assistance with buying distressed real estate like short sales and bank-owned REO properties, please visit my website at www.CanadiansBuyArizona.com or contact me at ron.cuttler@pruaz.com.

By the way, I am making solid progress towards the completion of the revisions to my book - The REAL Retirement Income Edge.  Stay tuned for more information about its release.

sssshhhhhhh!!!!!  Obama doesn’t want anyone to know.  Another hidden tax increase aimed a the wealthier income earners and business owners in this country that create the majority of the jobs and sustain the economy.  (can you detect a small amount of my cynicism?!?)

BUT WAIT!!!!! There’s more……

Beginning in 2013, the national health care reform legislation that became law in March 2010 imposes a new 3.8% tax on certain investment income.  This new tax will apply to the highest income earners with incomes of over $200,000 or married taxpayers with over $250,000.  In general, this new tax will apply to investment income that is subject to income tax, which includes capital gains - not to mention income generated from rental properties, so long as the filer’s income is above the $200,000/$250,000 threshold.

The net effect of these increases is a new 23.8% tax rate for higher earners - the highest rate for long term capital gains since 1997.  Projected cost to taxpayers? over $30 Billion annually.

As many of you know, I am not a fan of taxation - especially taxation on income.  I believe in a simple, flat consumption tax.  The government’s intention with all these tax increases is to increase revenue but all it does is decrease investment in this country, force jobs and companies overseas and pushes the wealthiest few that are paying the bulk of the tax bill to leave and live on some sandy island somewhere…..

How does this affect you?  Well, if you live in this country are part of the wealthiest 5-10%, you must plan for this additional tax grab in some fashion.  For many of clients that are from Canada, I don’t think this will affect your net returns - you will have to compare the US tax rates to those you are paying in Canada and how they interact with one another.  For that, you may need a cross-border tax advisor.  But only if you are investing substantially in the US.

A way around this for real estate investors is the 1031 tax deferred exchange which works very similarly to RRSP in deferring taxable income until final liquidation.  I will be blogging about this in the future for those of you unfamiliar with this system.

Stay in tune with the latest happenings in Phoenix Metro real estate at www.CanadiansBuyArizona.com