Hello Thomas, Kevin and Rickson
Thomas ` I saw you speak at the Vancouver REIN meeting and made copious amounts of notes. You are one smart guy. You inspired me...
One chart is just a page in a story book and must be studied as part of an overall plan before moving forward. I wished to start a discussion and my goal was achieved. I will be posting other charts every day over the next week to assist others in gauging what the market is doing. Whether you choose to invest or not is immaterial. I am just providing information of what I see here in Phoenix while living and breathing real estate.
REIN people are much more inclined to do research and study a market ` Thank you Don Campbell.
Others can get themselves in trouble very quickly. Three problem areas I am seeing:
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[*]Vacancy rates for various valley cities
My previous post `median rents for 26 cities in greater Phoenix` shows problems in the market. Realtors are visiting Canada and telling us all about the cheap houses. Cheap is a relative term. Vacancy rates (month`s supply) are very different all over the greater Phoenix area and range from 6% all the way up to 30%. Better know your area and the rates before purchasing.
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[*]Home pricing
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Some unscrupulous Realtors are showing homes to Canadians which are overpriced. As many second home people are paying cash (HElOC) there is no appraisal. I am aware of a home which was recently purchased for $210,000 and appraised at $175,000 ` a $35,000 difference. The purchaser did not find until it was too late.
Mortgages
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A Canadian can get one mortgage for a personal second home property in America. It cannot be a rental property. If you purchase a rental property before your personal residence you cannot get financing. Financing is only available for Second homes ` not third or fourth homes! It is a FHA product with terms of 30% down and 4.25% interest. The interest rate will not change for the 30 year period and there is typically not a prepayment penalty. People often buy rental properties first and then try to get the financing for their personal property. Can not do!
I will stand with Kevin on the opportunity side of the American border. There are very good renters (homeowners) who have been displaced from their homes, need to rent for three years, clean up their credit and then repurchase. Homes are below replacement value, cash flow is at 12% and the tax laws and American people like Canadians!
A worry...how much shadow inventory is out there? Unknown at this time but consensus is it is less than originally forecast. Many ARMS (Adjustable Rate Mortgages) reset at a lower interest rate to the previous one due to the lower interest rates thereby easing pressure on home owners.
The banks are stating they will do more short sales than foreclosures. Short sales are up around 13% and foreclosures are down 13%. REOs are also down and traditional sales are flat.
Stay tuned!
