A Look Back and a View Forward Symposium by Fidelity National Title 1/13/2010

I attended this real estate symposium hosted by Fidelity National Title. A panel of who’s who in the local Phoenix real estate market shared their perspective on local market conditions. Their market area covers Ahwatukee, Chandler, Gilbert, Mesa, Tempe and the rest of the Phoenix metro area. In 2009 their real estate firms sold over a thousand Short Sales and Foreclosed homes. The panel included:

Mike Orr, founder of the Cromford Report;

Realtors Lester Cox, Don Matheson, Scott Gibson, Sandra Wilken, Kenny Klaus, Curtis Johnson, and Mark Parris;

Lenders Tracy King from Wachovia and Mark Morrison from Bank of America;

Reginald Givens, the Dept of Housing; and Irving Hymson, Real Estate Specialist Attorney;

The symposium was narrated by Steve de Laveaga, Senior Vice President, Fidelity National Title

Some Notable Notes:

Mike Orr gave a very detailed account of the 2009 real estate market. His background is in mathematics with work experience at IBM and Fujitsu, so he knows his numbers. His firm takes input daily from the local MLS, county records and other sources to compile an extremely comprehensive document called the Cromford Report. The number of homes sold in 2009 was the 3 rd highest on record. He showed statistically how the median home sale price hit bottom in April and has climbed each month ever since. He illustrated how this recovery is shaped like the Nike swoosh, very sharp down trend over the last 2 yrs with a slow upward recovering trend. The starter home price range is further along in recovery because the increase demand created in 2009 from both the 1^st Time Home Buyer Tax Credit and investors buying homes. The mid-priced homes are beginning that upward trend and the higher priced homes have leveled off, not increasing or decreasing.

 Mike is predicting the following for early 2010:

1. The number of Short Sale transactions will continue to increase;
2. Pending foreclosures will start to go down;
3. More 3^rd party investors will buy homes at Trustee Sales;
4. Traditional sales are slow until March;
5. Sales pricing will be flat to slightly higher (long, slow increase). Remember the Nike swoosh;

In the rental market, the number of homes available has decreased a startling 18%. Obviously, investors have not flooded the rental market buying homes with the intent of renting.

For the “View Forward” Steve de Laveaga, ask the panel for their insights by asking, if we were playing a baseball game, what inning are we in and what’s the score?

 It was interesting, the responses ranged from the 1^st inning to the 7^th inning and the relievers are pitching. We are slightly ahead. Acknowledging the Cardinals are in the midst of the playoffs, Lester Cox couldn’t relate to baseball and gave his own football analogy… “We’re on our own 38 yard line advancing the ball slowly with a possibility of a 15 yard penalty.”

It seems as though the market is as diverse as these respected Realtors. Their comments seem to be related to their location of where they do business, the price range they are working in and their client base. There is a direct correlation with these elements to the Nike swoosh recovery model.

 Additional information, included the announcement Bank of America Processing Center in Chandler has hired 1200 employees to shore up the Short Sale Dept to help reduce the lengthy process.  Tracy King from Wachovia indicated they had studied the cost factor for Short Sales vs. Foreclosures. They determined on average it was $38,000 more expensive to take a home to Foreclosure than accepting a Short Sale.  All of this is encouraging banks to work harder in completing a Short Sale, in a timely manner so there will be fewer Foreclosures.

So what does the 2010 Phoenix real estate market look like? Regardless of whether (or how much) the economy or unemployment improves, there will still be buyers looking to purchase homes. First time home buyers will be looking to cash in on the extended tax credit. Move-up buyers may see opportunity to keep (and rent out their existing home) and buy another home at much lower pricing than a few yrs ago. Buyers from out-of-state & Canadians will see this as a great opportunity to acquire a 2^nd home for spending winters here in the sunshine. Investors are buying for positive rental cash flow or to fix and flip. With banks becoming more Short Sale oriented we will experience a higher Short Sale market and fewer Foreclosures.