Decline in Available Rental Properties while the Demand for Rentals Increases

People looking for family-size houses to rent in Phoenix-area neighborhoods have far fewer choices.
Since September, the number of available rental homes in metropolitan Phoenix has dropped by 40 percent, and probably even more than that when it comes to three- to four-bedroom homes in desirable neighborhoods.

The sharp drop is another ripple effect of the foreclosure crisis.
At first, foreclosures increased the number of houses in the rental market. And people who lost homes to foreclosure or short sales, or who just walked away from underwater mortgages, found they could rent similar-size houses, often in the same neighborhood, for less than their mortgage payment.
In many of the region's newer neighborhoods, even tenants with bad credit could negotiate lower rents and how long they wanted to stay.

But in the past few months, as more of those former owners became renters, demand for those three- to four-bedroom rental homes climbed. And as lenders foreclose on more homes but are slow to resell them, the number of available houses has dropped. When houses do come on the rental market, rents are rising and landlords of family-size homes are receiving multiple offers and filling houses in days.

"The demand for single-family rentals is clearly outstripping the supply, causing an unprecedented fall in the inventory of available rentals," said metro Phoenix housing analyst Mike Orr, who publishes the Cromford Report. "The trend shows no sign of stopping."

Orr said many Phoenix-area apartment complexes still are having a tough time attracting tenants, but rental agencies managing homes have waiting lists.

Rental search

Melissa Flores is a mother of three who lost her Avondale home to foreclosure in January. Ever since then, she has been looking for a house near her children's elementary school. Flores has made offers on more than a dozen three-bedroom homes in Avondale and Surprise. But each time she lost out to other renters who were either willing to pay more or had better credit records.

"I knew people who lost homes and rented houses blocks from their old home," she said. "I thought at least I could keep my kids close to their school and friends."
Eight months ago, according to Orr, there were 5,460 rental houses listed on the Arizona Regional Multiple Listing Service. Now, there are about 3,100. Not all metro Phoenix rentals are listed on the MLS, but market watchers say rental activity on the Realtor-run site is representative of the overall market.
"The rental market is really tight for decent-sized homes now," said HomeSmart real-estate agent Brett Barry.

Barry recently searched north Phoenix for a family who lost a home in the area to foreclosure. There were only four houses available with monthly rents that the family could afford. Six months ago, Barry said, the family would have been able to choose from at least 20 rentals in the area.

The rental market isn't nearly as competitive for small houses or condominiums, market watchers say.

Dave Zundel, co-owner of Phoenix rental-management firm HomeLovers, said many investors immediately opt to buy lower-end homes, thinking those houses will draw the most renters.

In fact, he said, the upper- to middle-income type of home currently is considered the rock-solid investment for landlords.

"We don't have enough of those homes available for rent now," Zundel said.

Forecast

Metro Phoenix foreclosures and short sales hit a record in March. But the number of rentals available for the displaced homeowners from those deals isn't climbing at the same pace.

Flores heard that more three-bedroom homes may soon be up for rent in her old neighborhood as investors like the one who bought her home turn houses into rentals.

A year ago, investors were buying a few thousand homes each month and turning them into rentals. But now, lenders are holding on to more of their foreclosure homes as they work to catch up on a backlog of delinquent mortgages. So, the number of houses in the pipeline to possibly become rentals has dropped.

What had only recently become a pattern among displaced homeowners - renting in their old neighborhood - is now far less of an option. And even when houses come on the rental market, rents are now running close to or above comparable mortgage rates.

"If the rental inventory continues to fall in this way," Orr said, "it is very likely that average rents for homes will start to rise in the not-too-distant future, something that hasn't happened for a very long time."

Keys To Qualify For A Home Purchase Loan: What You Need In The Current Market

With home prices having decreased significantly, and the lowest interest rates in a generation, home affordability has dramatically increased. As a result we have seen a tremendous increase in the amount of new buyers ready to purchase a home now. However, the main question that many of them have is what do I need, in order to be able to purchase a home in the current market?
This answer will vary slightly, but here are a few things that everyone will need to be able to qualify for a home purchase currently. This is a good starting point to gauge your ability to purchase now or you need to get a few things in line before you make the move.
1) DOCUMENTED INCOME: In the current marketplace you will need the ability to document your income. If you work a regular job where you receive hourly or salaried pay, one month's pay stubs and your last 2 years W-2's will suffice. If you are self-employed or receive commissions as part of your salary, then expect to have to provide your last 2 year's full tax returns. The bottom line however is that in the current market lenders will want you to be able to document and fully prove any income you state you receive.
2) 620 Credit Score: While credit standards are still more lenient on programs such as FHA financing or VA financing for Veterans as opposed to conventional financing, the minimum is now a 620 credit score. This is a practice that many lenders have implemented and will soon be an across the board requirement. If you score is below this level, you will be best served to begin the process of evaluating and repairing your credit score, prior to being able to purchase a home.
3) DOWN PAYMENT: While there are a select few programs that will allow for 100% financing (Veterans Administrations Loans, USDA Rural Housing), the majority of all purchase loans will now require a minimum of a 3.5% down payment for FHA financing or 5% for conventional financing. This number increases if the property is a second home or investment property.Therefore, down payment must be saved up for most buyers prior to purchasing a home.
With home buying on the rise, these are just some of the many items to consider when purchasing a home and qualifying for a home loan in the current market. There are many good home loan programs available and if you are prepared and ready, then purchasing a home in the current market, may be easier than you think.

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How Your Credit Score Is Affected By Short Sales & Foreclosures

Missing mortgage payments will hurt your credit score, that is a given. However, as the number of short sales and foreclosures has increased over the past few years, the question has been just how much missing payments on your mortgage affects your credit score.


In a recent report from Fair Isaac, the company that developed FICO scores, estimates were revealed for some of the point score declines following various mortgage delinquency scenarios.

Here are the average hit your credit will take in each of these scenarios:

30 days late: 40 - 110 points

90 days late: 70 - 135 points

Foreclosure, Short Sale or Deed-In-Lieu of Foreclosure: 85 - 160

Bankruptcy: 130 - 240

The reports indicate that even one missed mortgage payment can have a significant impact on the credit score of a borrower, but the real tipping point comes when accounts get to 90 days or later past due, as statistics show that this is when accounts are least likely to ever be paid current again.

Of course, other factors come into play as well. As someone with limited credit will be hurt more, then someone with a large amount of accounts and a good long standing history may be affected differently as well.

In addition, someone with a less than perfect credit history and a lower score may also have less room to drop then a person with a higher credit score as well.

In addition, in a note interesting to the current state of the market, it was revealed that even if a borrower were able to walk away from their home with a short sale or deed in lieu of foreclosure and not necessarily miss many payments, their credit score could still be hurt significantly. That is because if it is reported that the account was settled for less than the full balance, a serious delinquency is calculated into the person's credit score, regardless of how many payments they missed.

Of course, the absolute biggest effect on credit score occurs in cases of bankruptcy as the credit bureaus treat this with the biggest impact on credit scores.

While none of this news is information that may come as a major surprise, this is the first release of estimates of the affects of foreclosure and short sales on borrowers credit reports. For those that unfortunately have to deal with these hardships it will definitely take a major toll in the short term on credit. However, like with most things, with the proper management, you credit score can rebound with solid financial planning and responsibility going forward. After a hardship home ownership can occur within just a few short years with the right planning.

Call us today for more information at 480-889-1424 or e-mail us at MyAzHomeTeam@aol.com

Rebound Forecast in Valley Housing Market this Year

The Valley's new-home market is on its way to recovery, according to a University of Arizona forecast.

The UA Economic and Business Research Center report predicts that new-home permits in metro Phoenix this year will jump 54 percent from last year to 13,320. Then, permits will more than double to 28,060 next year.

That is still a long way from the Valley's peak building years of 2004-05 when close to 60,000 new homes were built in each of two straight years.

The university's forecast predicts that new-home permits will fluctuate from 35,000 to 40,000 annually from 2012-16.

That would appear to be a more sustainable number than 60,000 permits annually, especially with the Valley's expected population growth.
Cassidy Turley/BRE Commercial, in its latest Phoenix Housing Market Report, notes the metro area will grow from 4.2 million this year to more than 5 million in 2015.

Longer term, Arizona is expected to grow to 16 million by 2050. That is up from 5.1 million in the 2000 census.

Cassidy Turley's report also notes some strengths as well as concerns about the Valley market, including foreclosures, job losses and low appraisals of homes.

On the plus side is affordable housing. Six out of 10 homes sold in the fourth quarter of 2009 were affordable for families earning the Valley's median income. That is much better than in California but less affordable than in other Sun Belt markets, such as Albuquerque, Dallas and Houston.

Office market coming back

The Valley's office market is on it way to recovery, but it has a long way to go, according to a first-quarter report from CB Richard Ellis.
Office vacancies in the quarter were up nearly 3 percentage points from a year ago to 25.6 percent. That is the highest rate in 19 years.

Plus, the vacancy rate has been climbing for 11 consecutive quarters.

But for the second straight quarter, the office market has had positive net absorption, meaning that new tenants have taken more space than have been lost by tenants leaving office buildings.
Office development, meanwhile, has come to a halt.

Scottsdale vacancies high

Scottsdale's office vacancy rate is 28.4 percent, nearly 10 percentage points higher than downtown Phoenix's rate.

However, Greg Mayer, CB Richard Ellis senior associate, said Scottsdale is on the rebound.

"It's arguably the hottest submarket we have," he said. "Vacancies are high but have been falling for three quarters."

Scottsdale had net absorption of 315,570 square feet of office space in the first quarter. Only Phoenix's central business district had more absorption at 438,725 square feet.
Among the major new tenants in Scottsdale are the global shipping company APL and Yelp, an Internet site that allows consumers to review businesses.
APL took 70,000 square feet at the Max at Kierland building, 16220 N. Scottsdale Road. Yelp is leasing 28,000 square feet at the Galleria Corporate Centre, 4343 N. Scottsdale Road.

Scottsdale's average lease rate was $23.62 per square foot, slightly higher than the Valleywide rate of $23.36.

Mayer said tenants should be locking in their leases.

"You don't want to be late to the market," he said.