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Still value in home ownership!

June 18, 2020 By Administrator Leave a Comment

It is a time once again, when interest is at an all time low and millions of buyers are taking advantage of the American dream. The housing market in going crazy! Refinance is at an all time high and appraisers can’t work fast enough. That doesn’t mean your value is up.  The housing market often runs in tangents with the economy. Believe it or not many believe the economy of America is coming back- there still may be pocket weaknesses- rental markets, flipper market, value market, and now we add security and safety issues to our real estate.  Tucson over the years ( 60) has been quiet , growing off and on slowly and spread out. The community is receptive and open to new comers.

Perhaps our problems with Tucson are budget problems- zoning, and management of  affordable development. Construction increased nationally at 4.3 % in May and 14% more permits which was a very good number. National trends are very different than ours here in Tucson.

Tucson housing sales numbers increased and were quick to sell if priced correctly- 1% below sales price, 46 days  average time on the market.    5.7% increase on a house with a $200,000 list price , 1025 house sold.  Nationally the number of homes sold fell 22.7 %  and the number of homes listed for sale fell. Interest in single family homes- have popped because of coronavirus- privacy is an important issue, larger home with well designed spaces.  Renovations have increased because people are at home more- cooking, and hanging out. Also neighborhoods become important because of privacy, walking areas, biking paths, safety, and other amenities. People are rethinking what they need in a home.

Prices are up because demand is up- however not in all price ranges. We are a post pandemic migration destination city because homeowners realize the value of working remote. Tucson offers a variety of affordable housing, within a variety of locations across the valley where Tucson has expanded. You can get land in the city, horse property, a high rise condo, a duplex to add income, a single family residence in a parklike community, a pueblo adobe, a cabin on Mount Lemmon- just to list a few! We are a diverse cultural community.

Tucson will keep moving in its own cycle different than other areas because of our local interests and needs are different- Tucson has specific buyers!

Filed Under: COVID, Homeownership, House Values, Real Estate, Real Estate Sales Statistics, Tucson Arizona, Tucson Multiple Listings, Tucson Real Estate Appraisal

House Values 2020 BEWARE- COVID

May 13, 2020 By Administrator Leave a Comment

House values in pocketed areas are strong again. Interest is LOW, however the economy is trending downward as we wait for the solutions to the virus. Watch/ wait 6 months from now to see the real affects on the housing market. If you study it you will see lumber, materials, copper, and building are lagging,
Home depot and Lowes are doing well- why you ask? Because people are staying put, repairing and updating because the economy needs to rebalance. Houses may drop, if demand goes soft- it is, relatively speaking, soft now. Beware when buying , get the house you want at the price you want, don’t be emotional, don’t over buy.
This is a difficult time in the market for appraisers too.
We know our market, however open houses, market demand, viewing, and tours are down now because of COVID. It has become another market consideration, it has taken over home buying.
Buyer beware, and educated- watch the sunset a little bit longer right where you are!

Filed Under: COVID, Government policy, Homeownership, House Values, Uncategorized Tagged With: , , ,

Is the Housing Market approaching a Crossroad?

August 24, 2018 By Administrator Leave a Comment

Investors will be watching the markets for signs that the housing market is cooling-there are signs appearing.  Data on existing homes and new homes , have showed evidence of  slumping. Existing home sales slumped in June, for the fifth time in the first six months of the year, while new-home sales fell in June to the weakest pace in eight months.  Those worrying  see trends appearing, these are critical indicators of the overall health of the economy, tied into the housing markets.

Home builders have higher costs of materials and labor.  Mortgage rates have edged higher- these push some buyers to wait and push first time buyers out of the markets.  Home builders are  raising  costs, but demand MAY go down as prices go up.   Existing homes are slowing, even though they offer a better value. There are fewer available homes to purchase as owners stay. Home improvement chains like Home Depot and Lowes are  busy as owners upgrade instead of moving.

The projections seem to be an overall slowing market. Inflation will cause your home to go up, but remember you still need to have demand, a buyer that can qualify for a  mortgage, and be in an upward mobility community.

This may be the beginning of a slowing housing market, however pricing may continue to climb for a year or two especially if interest goes up slowly.  Remember market segments vary from area to area, and city to city due to local demands.

Filed Under: Homeownership, House Values, Interest rates, Real Estate, Tucson Multiple Listings, Tucson Real Estate Appraisal

Owning Real Estate learn to think like an accountant!

July 28, 2018 By Administrator Leave a Comment

It is a difficult plan to build immediate cash flow  in ownership, it COSTS money,  most of the time when people buy real estate as investments they don’t realize the cost of becoming a landlord. Often the money you put into the property does not come back in your pocket- keep itemized records. Between taxes, insurance, utilities and maintenance, often the cash flow just isn’t there. Be aware increased taxes  and/or  the sale of the property , often brings more losses if not carefully planned.  So, at least get some appreciation in the property- buy at the right time, and timing IS everything for a little mom and pop rental business. At the end of the year there should be cash sitting in your rental account checkbook, that is a good time for repairs and capital withdrawal.

Understand your MARKET area. Tucson is volatile and goes soft  quickly. Over the years of owning  properties , especially after 10 years, (unless you have managed to PAY OFF THE MORTGAGE) the cash flow may get harder.  Large repairs begin to occur then. Thinking back over the years with my experience, I almost wonder if it would of been better to sell after ten years- moving into something newer and use my equity to buy more. The more units you have the more cash flow, balancing of vacancies is easier, and perhaps greater equity growth occurs,  however  more knowledge is needed.   Money floating, carry overs,  expensive repairs, and  income accounting  are extremely important in managing your own units. Try to calculate your return on money: if you spend $ 100,000 on a unit can you get a 5% net return? $5000.00 a year. That means after mortgage, utilities, taxes, and expenses. It was EASY with 3% interest rates, now it is way more difficult,  because of insurance and taxes.

Real estate appraisers take income, leases, and  management into account when looking at the value for a rental property. If you are under rented on your unit  your appraisal could be less. If the rental neighborhood property price is less,  your property is worth less, even if you have spent a lot in the property.  Usually a cost approach is how an appraiser evaluate the value of the property. All costs are evaluated in the cash flow.

Sometimes holding isn’t a good choice if the neighborhood is changing. What is the competition out there? Watch for neighborhood gentrification. Tucson has seen a great deal of change in different areas of the city. Competition is a killer  sometimes good, sometimes bad.  Areas  often change by zip code, where DO students now want to rent? retireres? young families, young professional?

Know your target  market and how to be a landlord.  Watch your cost on updates- keep them in line with the neighborhood, keep informed of the community,  hire people you trust to do repairs, run credit reports, have strong leases that protect you, be an active landlord- it is your job!  Never buy a property unless it can cash flow from the beginning.

Remember: What do you expect to get in return for your particular property?

Filed Under: Real Estate, Real Estate Sales Statistics, Rentals, Renting, Tax consequences, Tucson Arizona, Tucson Real Estate Appraisal Tagged With: , ,

Be an educated buyer!

January 29, 2018 By Administrator Leave a Comment

Ten years ago the worst housing crisis occurred. About 2.5 million American buyers  still owe homes worth less than their mortgages. That is about double  what a normal housing market carries.  Many housing markets around the country  are now close to their 2006 values,housing markets however,are hard to image as cyclical.  The market timing is everything, be aware of the patterns that happen in your area and how fast and long they occur.  Usually they are within 7-8 years.

Each cycle will be affected by the relativity within the particular area- ie, jobs, general economy, government regulations, cost of money, building cycles (different) and area of demand. You can’t  control outside factors that control the values of housing only the intrinsic value.  Remember when you buy a property it is a huge investment that affects many aspects of your money.  The costs of housing often goes up as your mortgage may go down- taxes, insurance, utilities, repairs.  Sometimes ownership is NOT always positive , even rentals.  The costs outweigh the value.   It is  a good idea to buy the smallest house in a stable neighborhood, than the biggest house in a declining neighborhood. Be aware of how much money you reinvest in your house- not all of it returns. For instance new windows; no value there, however, cooling costs maybe lower, view better and quieter it makes for a quicker sale.  A pool will return 75%, a kitchen 89% and so on. Sweat equity is always a way to big value.

Another words home ownership has changed in the US.  Many people like to rent  rather than buy, they expect gardeners, midnight keys replacements, plumbing repairs at a phone call, and ften pay late. Many people ARE NOT great tenants or have any pride of ownership. These are the tenants that cost you money- often big money.

Be educated when you buy , keep a reserve of cash for repairs, chose your realtor carefully.  The internet is not the place to research, walking the neighborhood is, talking to neighbors, sitting in car and watching what goes on.  Understand all the complications of ownership and property management. Understand your escrow, watch the adjustments, and understand your local market and the local economy.

Filed Under: Homeownership, House Values, Interest rates, Market stablization, Property Value Consultation

Home Rentals go corporate!

August 18, 2017 By Administrator Leave a Comment

Are you ready to compete with BIG business? Rentals have been taken over in America by corporations and they can compete.  The buying spree was a big bet that home ownership was trending downward and the rental market looked good for take over.Currently home ownership is at a five-decade LOW and will stay that way for awhile as rents continue to rise.  Investors are also wagering that many people no longer see home ownership as an essential part of the American dream- specially the mellinnials.  People are realizing houses are NOT necessarily the best way way to gain wealth.

For many years the rental home business was owned by mom and pop and small business investors, most of whom owned one or two properties.  Big investment firms concentrated on other types of property- that all changed in 2008 and the financial  crisis. Swaths of suburbia were sold on courthouse steps- big investors were there waiting too- with lots of cash to make quick deals. Big investors accumulated thousands of houses across the country, they built renovation companies, property management firms, and other companies that could be directly related to  the rental business. Bulk buying brought millions of properties back to life in good neighborhoods that could be affordable to buy, but easy to rent. Many companies now  offer an “aspirational living experience”. Change has quietly come to the rental market and few see it. It has become harder to manage small properties to compete with floating cash from big corporations.  Approximately 200,000 homes are corporate rentals since 2010, with the top market in the country for rentals being Atlanta with 24,075 probably more now. Phoenix is third with 13,300.  Tucson’s market has changed too , especially since money is still cheap, investors are STILL buying and the prices are softening in specific areas. Watch for signs, rental signs stay up year round. People start to place many ads in several locations, people stop putting money into their properties in certain areas. These are visable signs, rents go up at first like crazy, unreal – then a lull- then begin to drop unless you are in a community with a lot of jobs to support higher prices.  Average increase in rents is 3.5 % a year for tenants renewing and larger for new tenants.  It is always a cycle weather you realize it or not a 7 year housing cycle. Then absorption begins, we are not there yet in Tucson.

Think carefully about who is going to manage the properties and how much CASH FLOW really exists. You are in BIG business now.

Filed Under: Foreclosures, Homeownership, Real Estate, Real Estate Sales Statistics, Rentals, Renting, Tucson Arizona

What about University RENTALS?

July 11, 2017 By Administrator Leave a Comment

The rental market has been a tough one in the University of Arizona’s  targeted area. Several large high rise towers have been built over the last 5 years and MANY Mom and Pops have gone in purchasing a couple units, especially since interest has been so low. Now we are going through absorption and rents have dropped, this in turn LOWERS resale value too. If cap rate is affected the sales price is affected too- beware- selling isn’t always a good idea when units are hard to rent. Many people both in 2005-2006 and now can barely cash flow, between insurance, taxes, water, maintenance, security, and several other costs it has been growing harder and harder. Properties begin to look poorly maintained, , neighborhoods go downhill, crime increases-

I decided to drive around the U of A area to see really what was going on- on every block there is at least 2-3 rental signs- not good! Now the prices are by the bedroom, when did that start? With the towers $600- $800 a bedroom, sounds like California pricing to me.

When did college kids get so rich?  We have managed units for 30 years,  and it has become BIG business, it is tough if you have 2 or 3 units and hope to compete. Vacancy rates are high, college kids are hard on the property , turnover rates are high too, on top of that utility rates keep going up- sewer, water, electric. Good luck for the next couple of year while absorption happens.

Buy in  a GROWING part of the city, watch the price factor, cash flow, and location. Northwest might be a good place. Remember single family homes for middle class people is a good category. ONE refrigerator, stove, oven, AC unit, is cheaper to repair. Make a lease that protects you , check out your prospective tenants very thoroughly. You don’t always make monthly money owning a rental, however, for now, you get a tax right off. You may not make appreciation owning rentals a long time either, costs are high and so is management. Sometimes I think equities are better, ha, ha, ha, at least over 25 years they tend to average 6%.

Just remember it has turned into a BIG business in University areas! Be prepared to wait it out and lower your rents, fix up properties that are empty, or sell at a loss. Be prepared to compete with commercial management teams and  facilities that offer swimming pools, bus pick up, game rooms, happy hours/bars, weight rooms and A LOT more.

Filed Under: House Values, Market stablization, Real Estate, Rentals, Tax consequences, Tucson Arizona

Keep more of your money!

June 13, 2016 By Administrator Leave a Comment

People think that owning a home is a great way to save money, or should I say that the house goes up wildly in value, and there will so much equity - just is NOT true. It costs so much to own a home, maintain it, insurance, taxes, utilities and repairs. Most average buyers have NO idea of the costs of owning and don’t have enough money saved for a household emergency. Most buyers have no ideas what it costs to sell their house and what to do to keep more of the money.

Selling your home- if you do sale your home how much can you keep? Sometimes gains goes right into Uncle Sam’s pocket, however most of the time the tax rules on your primary residence are favorable. Only large capital gains , over $500,000 for  married couples, and $250,000 for singles are taxed if you lived there for at least two of the last five years before the sale date. This isn’t a one time event either. You can claim the profit exclusion each time you sell a principal residence if the requirements were met and not more frequently than once every two years.

WHY did you sale the home affects the tax outcome also- Work related move- 50 miles or more away from home, or  your old work location, you begin a new job 50. Spouse is included in this move  or change of job.

HEALTH related exceptions- you moved for several medical reasons , to obtain, provide or facilitate diagnosis. Get a doctors note confirming the exact details.

Rolling equity into another residence-NOPE,  You can’t defer or eliminate capital gain taxes by simply selling the house and rolling over the proceeds into another home that costs as much or more, that law changed in  the 1990s.

What happens if I sell my home for less than I paid? Can I deduct that  loss as a long-term capital gain loss?  NO, You can’t deduct a loss on the sale or exchange, of personal  use property, including your home.  You may be able to deduct property used for trade or business.

EXCESS above exclusions- the amount over the exclusion is taxed as long term capital gains- investment income, for purpose of taxation- 3.8% tax on net income.

What if my spouse dies?? You have two years to sell after the spouse’s death and you haven’t remarried ; as of  the sale date.  You can count any time your spouse owned the house as time you owned it, you also can count any time your spouse owned it as your residence.

Are there special exceptions for the disabled? Yes, there is a break for those who have a disability and can’t take care of themselves. You only need to show your residence was your primary for 12 months out of the 5 years, prior to the sale.   Also, any time you spend living in a care facility counts toward your residence requirements, as long as the facility has a license from that state.

Appeal your taxes (county assessor) if your taxes went up unusually high, you had an issue with your home or property  that could affect the value of your home(a flood, termite damage, settlement, law suit) or your taxes are way higher than your neighbors. Hire a professional.

Appraisal-Get your house appraised before you list the property, so you have a professional idea of what similar  properties SOLD for in your  area. Listings aren’t  an accurate indicators of value, don’t count on Zillow or online values, they can’t take into account, views, additions, upgrades, stigmatized properties and so on.

Be an educated buyer, read local papers, talk to neighbors, sit in the neighborhood at different hours of the day, buy where you know, chose a realtor who has a track record for your type of property and location. Understand YOUR housing market in your city. You get what you pay for.

Don’t think every upgrade is going to return money dollar for dollar. A new Pool, green or solar  upgrades less than 50% value, watch costs! Maintain your house;  new appliances,  AC, water heaters, roof, landscaping, exterior and  interior paint. Kitchens and bath remodels have the best return – often NOT money, but the house will sell faster, saving YOU monthly payments.

Average mortgage deduction(2014) for a $50,000- $100,000 property  $7,216.00

Average mortgage deduction for a $100,000- $200,000 property   $9,140.00

Understand average  inflation in the housing market is 3% in Tucson and NOT all areas have that.

Every little bit helps! Keep more money!

Filed Under: Government policy, Homeownership, Real Estate, Tax consequences, Tucson Arizona, Tucson Real Estate Appraisal

Supporting Market Conditions, it is harder than you think!

December 31, 2015 By Administrator Leave a Comment

Supporting market conditions is a very important part of the appraiser’s job- it is mostly misunderstood by sellers, and often miscalculated by realtors. It takes many  years to understand the foundational  value of a home.

It is time to understand the appraisal and the job of the appraiser.  The appraiser must support the current market conditions. This has always been a Fannie Mae requirement.  It is also a Collateral Underwriters(CU), and  Uniform Standards of Professional Appraisal Practice (USPAP) requirements. These requirements satisfy the most demanding reviewer.(AMCs, lenders, and underwriters)

Data is from local MLS markets, however back up data is  graphed and calculated  for specific requirements. This takes very specific information compiled from  the appraiser.  The extra work (and your costs) money, is  well spent- it saves the  reviewers time- enough exhibits to establish the current market value.  The analysis uses median prices rather than average or modal prices.  The Appraiser uses the one that makes the most sense in that particular market area. This requires analyzing information and comparing several things. All three factors- mean, mode, median,  are reviewed then the most accurate information, or the most reflective, is used.  This is not the price  the seller may want- he only understand his value, not the markets fluctuating value. Remember a seller can put any PRICE on his home, it isn’t a VALUE.

MARKET INFLUENCES

SR 1-2(3) (requirements)  – requirse the appraiser to identify the “physical, legal, and economic attributes…” which influence a properties value and current marketability. Part of the analyses behind this is the study of marketability, submarkets, and how the market changes, is  its current  influences.  The market is always under influences related to supply and demand, the buyers ability to pay and a sellers ability to sell.  Even in a stable market( Tucson is not) there are forces at work that could unsettle the market any a moment.  Increase in interest is one of these forces- sometimes it becomes cheaper to remodel, stay, or do nothing.  Moving costs money, moving up costs money, and selling a property costs money. Often consumers are unaware of all the costs to sell a property and are shocked at how little they really get to keep!  When markets have a lot of buyers – buyers are at a disadvantage, finding themselves in bidding wars. The only way to get a property is to overpay- in markets like these the price is clearly the issue, the value is another! It doesn’t mean the price is equal to the value- it means YOU paid too much!  The buyer is bidding to overcome the real estate shortage in THAT particular submarket, at that particular time. Be aware!  Your bid(price) represents a non-real estate component.

Filed Under: Homeownership, House Values, Interest rates, Property Value Consultation, Real Estate, Tucson Arizona, Tucson Multiple Listings, Tucson Real Estate Appraisal

Buy or Sale? and rent? Where are the buyers?

June 23, 2015 By Administrator Leave a Comment

It may be time for many of you to think about buying or selling, the national markets are busy- however, be careful of how and what you buy in Tucson. It is a different market all together. Tucson tends to be affected by employment, Tucson lacks the availability of good paying jobs. Tucson has a low resale market value, in fact many cities are experiencing this- an increase in the rental markets, less interests in purchasing.

Taking the plunge requires stability, jobs, good increases in home values, and disposable income. Some people who have lost their homes, went through short sales or foreclosures are now able to buy. They have repaired their credit, saved money, have the capability of getting(or got already) a good job.  Foreclosures that occurred between 2006-2010 may be able to buy now- but what is happening – few are interested in a purchase. They are happy to rent, save money and NOT spend income on repairs.  Boomerang buyers are a strong part of some national markets,but participating in Tucson in smaller numbers. WHY, because jobs are narrow and limited in Tucson.

The Tucson rental market has changed serving a variety of tenant needs by increasing  small upscale individual houses, with amenities,  building more apartment  complexes, and becoming family and pet friendly. Many people have stayed in the rental markets. Eliminating  expensive costs of utilities, repairs and taxes. This type of market is here to stay- so it puts pressure on the pricing of the resale housing market. Tucson is a less sophisticated market with downward resale pressure and upward housing costs.  It is unrealistic to maintain this type of environment without good increasing jobs.  This market in Tucson is under pressure and still has areas that are considered downward trending.  The prices in Tucson WILL NEVER be as high as 2005-2006 again. Values can’t be compared to those prices any more- they are off the radar as comparable sales. Realize the new  resale prices are your neighborhood comparables. You can list your house for whatever you believe your house is worth, but consumers are wise careful buyers, they now judge the market in new ways and have everything at their fingertips to compare old  prices, interest costs, and taxes. Buyers can check the property histories- see your loan balances, know what the old house looked like. They know if it is a quick fix up or a careful remodel.  Sixty days is the average selling time for most homes (depending on price). If you don’t get an offer within six months , you are over priced- lower it. Keep lowering your house until you begin to see interest, don’t waste time and money. The market dictates the price of your house, NOT your realtor.  Sometimes you will get a great salesman, but not a SALE.  Remember with many people continuing to rent, you still have to be proactive to sale your house. At strong rental market is here to stay.  This is the last componet of the 7 year real estate cycle.

Filed Under: Homeownership, House Values, Market stablization, Real Estate, Rentals, Tucson Arizona, Tucson Real Estate Appraisal
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