Phoenix, Vegas and Florida; The Epicenter of Housing Crisis… although rental rates rise.

Stuck in Phoenix, the Epicenter of Housing Crisis

In metropolitan Phoenix, two-thirds of all residential mortgages are underwater. Of these, some 200,000 are 50% larger than the current market value of the properties. Many homeowners have come to doubt whether they’ll ever retrieve their lost equity.

In this city of 4 million, the 14th largest in the United States, the median home price is down 53% since the bubble peaked in 2006 to just over $120,000. Only smaller cities such as Las Vegas and Orlando have witnessed equally catastrophic drops.

Paul Hickman, the head of the Arizona Bankers Association, says for Arizona the current recession is worse than the Great Depression of the 1930s. “Then,” he told Cronkite News of Arizona State University, “our economy was young and we were just barely a state.” Now, he says, Arizona is suffering because it became excessively dependent on a “one-dimensional housing economy.”

Phoenix is no stranger to booms and busts. Home prices here fell in the late 1980s after the savings-and-loan debacle brought down several local developers, including the notorious Charles Keating of Keating Five fame. Now 88, Keating lives quietly in Phoenix, having served a 4½-year prison term for fraud after his Lincoln Savings and Loan collapsed in 1989.

The scope and severity of the current crisis easily eclipses that of the ’80s and ’90s. Phoenix’s population is now 45% larger and, as new suburbs encroached ever farther into the desert, residents have been squeezed by long commutes and the sharp run up in gas prices. Housing economist and retired ASU professor Jay Butler says of the current downturn, “nobody thought it could get this bad.” He foresees no significant recovery for two more years.

Some local realtors dispute that pessimistic assessment. They point to strong existing home sales in June, up 22% according to the National Association of Realtors. It was the second consecutive month of strong sales, with the June figure the strongest recorded since December 2006.

But while sales may be up, prices are not. The NAR report says the median price of a home sold in the Phoenix area in June was down 13% from the same month in 2010. Realtor Robert Holt expects prices to remain weak because distressed properties are accounting for 64% of sales. With Phoenix having an inventory of over 120,000 empty or foreclosed homes, Holt expects “a tidal wave of foreclosures” will soon hit the market. He says with “overall mortgage delinquencies double and foreclosures eight times higher than historical norms, there is not going to be any easy or quick fix to the housing crisis.”

Laurie Goodman, the respected mortgage market analyst at Amherst Securities, sees a similar problem nationally. Alarmed at what she believes is a 30-month supply of distressed properties overhanging the market, she told an American Enterprise Institute conference recently, “we’re not making enough progress in liquidating bad loans.”

Saying that only 30% of troubled loans have been resolved, she predicts that over the next six years as many as one out of every five mortgage holders in the country could lose their homes. With the number of distressed properties coming to market not keeping pace with a mounting inventory of troubled mortgages, and prospective buyers finding it hard to get credit, Goodman says the normal supply/demand function in housing is broken.

The result, she argues, is a likely boom in rental housing as strategic defaulters and evictees gravitate to cheaper rental homes. “Rental rates are rising,” she says, “because renting is the only way to absorb the overhang.”

In Phoenix, that is already happening. As home prices declined over the past year, rental rates rose 9%. Nearly half of the distressed homes sold over the past year have been turned into rentals. Michael Trailor, the director of the Arizona Housing Department, says “the shift from home ownership to rentals in the Valley will continue as home ownership shrinks more.”

Ironically perhaps, the shift to rentals is occurring while home affordability has improved. With home prices way down and mortgage interest rates very low, this is the best time in at least 20 years to buy. In Phoenix prices have slid back to the levels that prevailed in 1998 or 2000.

Adam Stankus, a hotel manager in Tempe, and his schoolteacher wife are in the enviable position of being prospective buyers in a buyers’ market. They hope to purchase the home they currently rent in the suburb of Buckeye for under $50,000. Lucky to have savings equal to a 20% down payment, Stankus believes their monthly mortgage payment will be well below their $800 monthly rent.

The unexpectedly severe downturn over the last five years shows that nobody really knows the future direction of the housing market. Gary Shilling, a respected forecaster, is predicting that prices could fall another 20% nationally, on top of the 30% decline that has already occurred. Mark Zandi, meanwhile, of Moody’s Analytics believes we’re already bumping along the bottom and that prices could begin to recover next year.

Robert Holt, the north Phoenix realtor, argues persuasively that there won’t be a price upturn in his market until the ingredients for a recovery are in place. These, he says, include population growth and an increase in jobs. Currently, that isn’t happening. The local unemployment rate is stuck at around 8%. While below the national average, only 4,900 jobs were added in the past year. Given all that, ASU professor Butler says the “housing recovery in Phoenix is likely to improve at only a glacial pace.

Regardless of the timeline to recovery, as things move along in a positive direction, agents and others promoting real estate are looking for an affordable and efficient way to stand out while saving money and reducing up front out of pocket costs. QRRealtyTAG enables Agents/Brokers, Businesses and Consumers a new easy to use more affordable way to promote all types of real estate in todays advanced environment. Consumers are becoming more savvy with new technology at their fingertips every step of the way. In 2010 50 percent of homes purchased were from first time home buyers, with the median age of the buyer in their early 30’s. Most consumers in their early 30’s are searching for information using modern technology. Mobile phones, Social Networking sites and major search engines like Google, Bing, and Yahoo. These new methods of due diligence give consumers all the information they could ever want in making trusted decisions in their real estate transactions. QRTag’s from QRRealtyTAG enable consumers to get immediate listing information about ALL your real estate listings by scanning a QRTAG, Sending a SMS Text message or using GPS in close proximity to your listings. With QRTag’s your listings will be working for you on and off the internet, linking all your listings and professional business information together in one convenient place for best SEO (search engine optimization) populating your listings first when consumers are performing their modern day search.

Make sure your listings are working for you on and off the internet; QRTAG’s enable you to promote your listings in print media, your real estate signs, flyer box, on your vehicle, business cards and within the World Wide Web, like your blog, twitter, facebook and website and blog. By using QRTag’s you ensure your listings are easy to view, enable consumers immediate information, like photos, video, price and your contact information,  ensure your listing informaiton is always current and relevant, and offer consumers easy access from their mobile phones, ipads, tablets and desktop computers.

QRRealtyTag makes using technology easy for both the lister and the end user requesting information. QRTag’s are affordable and offer great Statistics for additional real estate data collection, tracking and reporting of new customers and potential buyers. Try QRTag’s today and start creating your online real estate resume of important content rich data for great promotion of your brand and name for years to come.


About qrrealtytag

QRRealtyTAG is a software service for listing Real estate listings, such as Agent/Broker Residential, Agent/Broker Commercial, VRBO - Vacation Rentals by Owner, FSBO - For Sale by Owner, Apartments for Lease and Businesses for sale. QRRealtyTAG uses cloud computing for sustainable and scalable web growth while integrating mobile and tablet configuration for consistent User Interface and easability. Create your QRTAG for rich web history generation and future SEO (search engine optimization) -properly formating and creating ongoing high level search performace from major search engines such as Google, Bing and Yahoo.
This entry was posted in QRRealtyTAG, Real Estate and tagged , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s