The Latest Trends in Arizona Real Estate Investing (September 2008)

Real Estate has seasons. Most agents will be able to tell you when the buyers tend to show up and when they tend to slow down.

The market has fluctuations. Sometimes we're in a buyer's market- other times sellers are in the driver's seat.

Then there are the trends that come and go. These trends can vary by market and in many cases by neighborhoods.

Let me use this opportunity to share with you the investor trends I'm seeing in the Phoenix metro area market. First let me qualify this post. This is what I'm experiencing. Other agents may be focusing on other sectors.

1. The fix and flip is back. With the increase in foreclosures prices are starting to fall as banks are more willing to accept lower offers than they were in the previous months. Speculators are beginning to purchase distressed properties from short sales, via auction or through bank-owned listings. For a while many properties would go through auction without any bids. Now the bidding is picking up as the potential margins look very good. This is the way to pick up properties well below market... sufficient to profit from the fix and flip.

2. New home builders are having trouble competing against bank owned properties. For much of the previous year new home communities were priced well below the existing home market. There were also too few bank owned properties in nice enough condition to be considered a viable option for the home buyer. Now there are quite a few distressed properties that require little fix-up. Though purchasing short-sales and bank owned properties is very much a needle-in-the-haystack pursuit the "pickings" aren't as thin as they used to be.

3. The rental market is great or terrible. Some areas have so much competition for rentals that the investor will have trouble finding a nice cash-flow property. Other areas have less competition. As credit tightens, and with financing options going away there are more people who have sufficient credit to make for a good renter but insufficient credit or down payment to purchase a home. Investors who purchase new homes tend to compete well against existing homes... people want to live in a nicer home. Of course, the buyer has to purchase at a price below the existing rental rate... which is still possible.

4. The commercial market is feeling the pinch. It's becoming easier to fine commercial properties. Commercial real estate troubles tend to lag residential. We're seeing more pricing pressure on commercial properties... rental prices are going down as vacancies increase. Also- commercial buildings are starting to hit the short sale and foreclosure phase in increasing numbers.

5. Buyers are avoiding short sales unless the properties are close to foreclosure. Banks have been slow in accepting offers. They are much more motivated when the foreclosure date approaches. Cash buyers are snapping up properties around 2-3 weeks before foreclosure date. By this time the bank may have already found their price. By purchasing before foreclosure the investor can take the property off the market.

6. The carrot and the stick still exist. The people who wanted to buy at sixty cents on the dollar soon wanted fifty... then forty. It appears that no matter what the price, the investor always wants a better deal. This is to be expected. We'll see less of this when prices begin to go up. Judging by our investor activity as of late I can only say this: we're seeing many more investors jump back into the fray in the past couple weeks. That's one of the signs we look for in the pricing equation.

That's my report from the Phoenix metro area- what are you seeing?

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Chuck Willman is a real estate agent based who helps investors, first time home buyers and persons wishing to relocate find properties in the Phoenix metro area. He's available at 480.292.0600 or email: chuck@AZvest.com.

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Photo "Investing 1" by the very talented Thomas Picard