Record High Sales in Pheonix (6/11)

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					           Residential Focus

    June 2011 Preliminary Report
          May 2011 Report

The Real Estate Agent’s Information Source
 For Greater Phoenix Real Estate Trends

                   By
Preliminary Results: June 2011 Breaks ARMLS Record for Most Sales in a Month

At 2:00 p.m. on July 1, ARMLS reported 10,509 as the number of sales for June 2011. If this number holds it sets the
all-time record for most sales in a month through ARMLS (Arizona Regional Multiple Listing Service, Inc.). The
previous record was 10,252 sales in June 2005. The last time ARMLS reported over 10,000 sales was August of 2005
with 10,031.

The 10,509 sales is a preliminary number and will be adjusted up or down. Of the 10,509 sales 9,004 were reported as
single family sales compared to 8,322 in May. Single family sales represented 86% of all sales. There was a major
increase in the number of short sales in June. The preliminary median price was $110,000 in June up from $108,000
in May.


May 2011 Results

Residential sales in May reported by ARMLS were over 9,800. While the number of sales are high, prices are low.
This is the major reason for the high number of sales. ARMLS reported a median home sales price of $108,000 in
May. Page 5 compares the May 2011 median home sales price to May 2010 for all residential categories.

Page 6 breaks down by residential category the number of short sales, lender-owned sales, HUD sales and other sales.
Short sales, lender-owned sales and HUD sales accounted for 65% of all sales in May. Page 7 shows that 69% of all
single family sales had one or more special listing conditions reported in ARMLS. Page 8 shows a chart of HUD
sales. In February 2011, 2.5% of all ARMLS sales were a HUD sale, while May showed 6.2% of all sales as a HUD
sale for an increase of over 300%. What is a HUD home? A HUD home was a home that was purchased with an FHA
insured loan. The borrower defaulted, the lender foreclosed, and since FHA insured the property HUD then bought
the loan from the lender who foreclosed. The process of purchasing a HUD home is different. Buyers need a real
estate agent to submit bids online. You do not use the AAR Residential Resale Real Estate Purchase Contract, but the
HUD contract, and the closing process differs from a traditional transaction. For more information on HUD homes go
to www.HUDHomeStore.com.
Since 84% of all ARMLS sales in May were a single family home this paper puts an emphasis on single family trends.
Page 9 breaks down single family sales by price range, the estimated months of supply per price range, and if the sale
was a short sale, lender-owned sale, HUD sale or other sale (many sales that are categorized as other were recently a
lender-owned property that was fixed and flipped). While there are a lot more lender-owned sales than short sales,
once the price range is over $249,999 there are more short sales than lender-owned sales.

Page 10 breaks down how single family homes were purchased:

Cash              41%
Conventional loan 29%
FHA               24%
VA                 4%
Other              2%
                 100%

Investors are snapping up properties because of value and are either fixing and flipping or buying and holding. Why
buy and hold? Because of the demand for single family rentals. Page 10 shows 92% of single family sales sold under
$50,000 were purchased with cash.

Page 11 is the Rental Report. The hottest section of the real estate market measured by estimated months of supply
continues to be the single family rental market with 1.9 months supply up. Some renters are paying more to rent than
what they would pay monthly to own a similar home. Page 13 compares the monthly single family rental rate in the
City of Phoenix to what the monthly mortgage payment would be to own a similar home in the City of Phoenix. The
information shows that the monthly mortgage payment to own is lower than the monthly rental payment.

Other News: Estimated Effect of October 1, 2011 FHA Loan Change to $271,050 from $346,250

The number of FHA purchases that have closed through ARMLS from 1/1/2011 through 5/31/2001 is 8,574. I then
ran FHA purchases with a purchase price of $280,880 ($271,050 loan with $9,830 as a 3.5% down payment) and came
up with 416 purchases 416/8574 = 4.9%. If the FHA insured loan amount had been $271,050 at the start of the year
there would have been about 5% less FHA purchases.
                                                                  ARMLS
                                                         Monthly Residential Sales
                                                 All Eight Residential Categories Included
                                                              Greater Phoenix

    12000 10252                                                                                                                993393319882
    10000                     8552 928493509096803879158143                  8969926190779290                     8401
                          7628                             74407657                               7358676465936786
     8000                                                           57896594
                                                                                              7100                     65417157
     6000         47425474                                                      ..
     4000     2912
     2000
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                                                                ARMLS
                                                         Greater Phoenix Sales
                                                         2005 Compared to 2011

                                              10000


                                               5000


                                                  0
                                                      Jan     Feb     March    April   May
                                               2005   6632    7781    9987     9600    9890
                                               2011   6541    7157    9933     9331    9882
                                                   ARMLS
                                               Greater Phoenix
                                 Monthly Residential Median Home Sales Price
                                    All Eight ARMLS Categories Included
                                           (numbers in thousands)

300 265
250
200     130 125 120 116 120 125 125 126 130 128 130 127 125 125 128 127 130 127 125 119 120 120 115 110 110 109 110 110 108
150
100
 50
  0
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                                                  ARMLS
                                              Greater Phoenix
                         Median Home Sales Price Comparison: May 2010 Compared to May 2011
                   Residential Category          May 2010 Median         May 2011 Median        Percentage Difference
                                                    Sold Price              Sold Price
                   Single Family                    $138,000                $116,000                   -16%
                   Townhouse                        $130,000                $108,000                   -17%
                   Apartment Style/Flat              $80,000                 $62,500                   -22%
                   Manufactured/Mobile               $50,800                 $41,820                   -18%
                   Patio                            $142,000                $131,000                    -8%
                   Gemini/Twin Home                 $100,000                 $76,000                   -24%
                   Loft                             $210,000                $180,000                   -14%
                   Modular / Pre-Fab                 $76,500                 $30,500                   -60%
                                                            May 2011
                                        Sales Breakdown
                           What Type of Residential Properties Sold?
                       All Eight ARMLS Residential Categories Included

      Category             Total Sales   Short Sales   Lender Owned         HUD              Other               Totals
                           No.     %     No.      %     No.     %     No.          %       No.     %   (total may be 99%-101%
                                                                                                            due to rounding)
Single Family Detached 8,322      84% 1,784     21% 3,176      38% 511            6% 2,851      34%               99%

     Townhouse         706         7% 138       20% 301        43% 59             8% 208        29%            100%

 Apartment Style/Flat 494          5% 97        20% 190        38% 19             4% 188        38%            100%

Manufactured/Mobile 154            2% 14         9%    65      42% 19         12% 56            36%             99%

        Patio          122         1% 14        11%    30      25%    4           3% 74         61%            100%

 Gemini/Twin Home      64           *    7      11%    20      31%    2           3% 35         55%            100%

         Loft          16           *    3      19%    4       25%    0           0%   9        56%            100%

  Modular / Pre-Fab    4            *    0       0%    3       75%    1       25% 0             0%             100%

        Totals         9,882     100% 2,057     21% 3,789       38% 615           6% 3,421       35%           100%
                                              May 2011
                                              ARMLS
                                Sales: Single Family Detached Only
                                     Special Listing Conditions

                           Special Listing Conditions

                                       n/a                          2568
                          short sale approval required      1894
                             preapproved short sale          259
                                 pre foreclosure             398
                                     probate                  46
                             lender owned property          3798
                              HUD owned property             615
                                     auction                  82
                             court approval required          22
                                   owner agent               521
                                 age restriction             523
                          relocation approval required       54
                                    exclusions                21
                                                            8233

              2,568 / 8,322 = 31% of single family sales had a special listing condition.

5,754 / 8,322 = 69% of single family sales had a special listing condition with many of these properties
                           having more than one special listing condition.
                                      HUD Sales
                     Number of HUD Sales by Month and Percent of All
                                     ARMLS Sales


           700                                                                             615
           600
                                                                         466
           500
           400                                            330
           300
                   152               178
           200
           100            2.3%             2.5%                 3.3%            5.0%             6.2%
             0
                    Jan-11            Feb                  March              April          May




                                 Number of FHA Purchases by Year
                                        Data from ARMLS

30,000                                                                                              27,203
                                                                                                             24,417
25,000
20,000
                                                                                          15,469
15,000           11,048    10,568
         9,777                       8,340
10,000
                                                  4,412
 5,000                                                          692    673        1,384
    0
         2000    2001       2002     2003         2004      2005       2006       2007    2008      2009     2010
         year    year       year     year         year      year       year       year    year      year     year
                                                     May 2011
                                                    ARMLS Data
                                  Single Family Detached Sales Only By Price Range
                                  No Other ARMLS Residential Categories Included
                            (Some percentages may add up to 99% or 101% due to rounding)

                                  Active    Estimated                               Lender-       Lender-     HUD     HUD
Residential Sold Price           Listings   Months of      Short        Short     Owned Sales   Owned Sales   Sales   Sales   Other   Other
       Range             Sales   June 13     Supply     Sales (No.)   Sales (%)      (No.)          (%)       (No.)    (%)    (No.)    (%)    Total

Under $50,000             813     1,702        2.1         162          20%           484          60%        101     12%       66      8%    100%
50,000 to 99,999         2,600    5,152        2.0         580          22%          1242          48%        329     13%      449     17%    100%
100,000 to 149,999       1,947    3,980        2.0         407          21%           758          39%         67      3%      715     37%    100%
150,000 to 199,999       1,067    2,713        2.5         247          23%           343          32%         10      1%      467     44%    100%
200,000 to 249,999        618     1,772        2.9         141          23%           152          25%          3      0%      322     52%    100%
250,000 to 299,999        389     1,483        3.8          83          21%            80          21%          1      0%      225     58%     99%
300,000 to 349,999        237      875         3.7          54          23%            45          19%          0      0%      138     58%    100%
350,000 to 399,999        161      810         5.0          23          14%            22          14%          0      0%      116     72%    100%
400,000 to 499,999        170      964         5.7          33          19%            12           7%          0      0%      125     74%    101%
500,000 to 599,999         95      583         6.1          16          17%            14          15%          0      0%       65    68%     101%
600,000 to 699,999         60      403         6.7          16          27%             6          10%          0      0%       38    63%     100%
700,000 to 799,999         37      351         9.5           4          11%             5          14%          0      0%       28    76%     100%
800,000 to 899,999         23      262        11.4           5          22%             3          13%          0      0%       15    65%     100%
900,000 to 999,999         12      223        18.6           1           8%             2          17%          0      0%        9     75%    100%
1,000,000 to 1,499,999     47      489        10.4           9          19%             4           9%          0      0%       34    72%     99%
1,500,000 to 1,999,999     18      310        17.2           1           6%             2          11%          0      0%       15    83%     100%
2,000,000 to 2,999,999     18      272        15.1           2          11%             1           6%          0      0%       15    83%     101%
3,000,000 to 3,999,999      6       97        16.2           0           0%             1          17%          0      0%        5     83%    100%
4,000,000 to 4,999,999      2       36        18.0           0           0%             0           0%          0      0%        2    100%    100%
Over 5,000,000              2       23        11.5           0           0%             0           0%          0      0%        2    100%    100%
        TOTAL            8,322   22,500        2.7        1,784         21%          3,176         38%        511      6%     2,851    34%    100%
                                                May 2011
                                              ARMLS Data
                     How Single Family Detached Homes Were Purchased By Price Range
                             No Other ARMLS Residential Categories Included
                      (Some percentages may add up to 99% or 101% due to rounding)

                                   Cash       Cash                             FHA                           VA
Residential Sold Price           Purchase   Purchase     Conv.       Conv.     Loan      FHA      VA Loan   Loan   Other   Other
       Range             Sales     (No.)       (%)     Loan (No.)   Loan (%)   (No.)   Loan (%)    (No.)     (%)   (No.)    (%)

Under $50,000             813      751       92%           32          4%        26       3%          0     0%       4     0%
50,000 to 99,999         2,611    1,284      49%          507         19%       711      27%         62     2%      47     2%
100,000 to 149,999       1,956     593       30%          578         30%       650      33%         96     5%      39     2%
150,000 to 199,999       1,062     273       26%          367         35%       339      32%         66     6%      17     2%
200,000 to 249,999        613      145       24%          249         41%       168      27%         44     7%       7     1%
250,000 to 299,999        389      101       26%          174         45%        87      22%         24     6%       3     1%
300,000 to 349,999        237       57       24%          121         51%        45      19%         11     5%       3     1%
350,000 to 399,999        161       52       32%           95         59%         8       5%          5     3%       1     1%
400,000 to 499,999        170       57       34%           97         57%         4       2%          5     3%       7     4%
500,000 to 599,999         95       26       27%           68         72%         0       0%          0     0%       1     1%
600,000 to 699,999         60       22       37%           35         58%         0       0%          1     2%       2     3%
700,000 to 799,999         37       14       38%           22         59%         0       0%          0     0%       1     3%
800,000 to 899,999         23        4       17%           18         78%         0       0%          0     0%       1     4%
900,000 to 999,999         12        7       58%            4         33%         0       0%          0     0%       1     8%
1,000,000 to 1,499,999     47       30       64%           17         36%         0       0%          0     0%       0     0%
1,500,000 to 1,999,999     18       10       56%            7         39%         0       0%          0     0%       1     6%
2,000,000 to 2,999,999     18       15       83%            2         11%         0       0%          0     0%       1     6%
3,000,000 to 3,999,999      6        4       67%            2         33%         0       0%          0     0%       0     0%
4,000,000 to 4,999,999      2        1       50%            0          0%         0       0%          0     0%       1     50%
5,000,000 and over          2        2       100%           0          0%         0       0%          0     0%       0     0%
        TOTALS           8,332    3,448      41%         2,395        29%      2,038     24%        314     4%     137     2%
            Rental Report: Data from ARMLS


 Category       Inventory       May         Estimated
                 June 20    leases signed   months of
                                             supply
Single family     3,684        1,955            1.9
  detached
 Apartment        1,057         279            3.8
  style/flat
 Townhouse         759          281            2.7
    Patio          180           60            3.0
   Totals         5,680        2,575           2.2
                                 Number of Leases
                                 Data from ARMLS

                              All Residential Leases         Single Family Detached Leases
2001                                  5,451                              4,149
2002                                  6,687                              5,113
2003                                  8,710                              6,853
2004                                  11,605                             9,463
2005                                  17,147                            14,082
2006                                  17,985                            14,143
2007                                  22,502                            17,845
2008                                  25,429                            19,928
2009                                  27,410                            21,275
2010                                  28,951                            21,875
Total                                171,877                           134,726     78%


                         Number Single Family Rentals by Year
                                  Data from ARMLS

        25000                                                               21275   21875
                                                                    19928
        20000                                               17845
                                            14082   14143
        15000
                                     9463
        10000                 6853
                4149   5113
        5000

           0
                Year   Year   Year   Year   Year    Year    Year    Year    Year    Year
                2001   2002   2003   2004   2005    2006    2007    2008    2009    2010
 Would my monthly mortgage payment be more or less than my monthly rental payment if I owned a
                                similar single family home?

               Comparing a Monthly Rental Payment to a Monthly Mortgage Payment
                                             By


Most real estate agents before they start showing a buyer homes want the buyer pre-qualified with a lender. Since the
PQF (AAR Pre-Qualification Form) addresses monthly payment this is an opportunity to compare the monthly rental
payment of the potential buyer to what their monthly mortgage payment would be to own a similar home.

Below is the mean single family monthly rental rate for the city of Phoenix and the mean single family purchase price
in the city of Phoenix. The data is from ARMLS.

                May 2011 City of Phoenix                   May 2011 City of Phoenix
                 Single family rental rate               Single family purchase price

                           $1,332                                   $127,651



Question: If the monthly rental payment of $1,332 for a single family home turned into a mortgage payment,
would $1,332 support the purchase of a $127,651 single family?
If a Buyer qualified for a loan and they purchased a
single family home for $127,651 would the monthly
 mortgage payment be more or less than a monthly
             rental payment of $1,332?

              FHA Purchase Scenario

            $127,651 purchase price
      FHA loan includes mortgage insurance
       3.5% required FHA down payment
               4.5% interest rate
                  30 year fixed


                       $742

       Is the monthly payment for principal,
      interest and FHA mortgage insurance.

                        Or

       $590 less than paying $1,332 in rent

            $1,332 (1,332 - 742 = 590)
                             Some Other Costs Associated With Owning

In addition to the monthly principal, interest and mortgage insurance the new owner will pay, they will
need to pay property taxes and homeowner’s insurance. Let’s estimate the monthly costs for property
taxes at $150 and $50 for homeowner’s insurance. Adding these two costs to the monthly payment of
$742 brings the monthly payment to 942 (150 + 50 + 742 = 942).


                                                    $942

                Is the monthly payment for principal, interest, FHA mortgage insurance
                      and an estimate for monthly property taxes and homeowner’s
                                              insurance.

                                                     Or

                                                    $390

                                      less than paying $1,332 in rent

                                            (1,322 – 942 = 390)

                                Additional Costs of Home Ownership

Not all single family homes have a monthly HOA fee, but many do. The buyer needs to find out from
their real estate agent if they will have to pay a monthly HOA fee. The buyer will also have to factor in
maintenance costs.
                                  The Next Wave of Buyers
                          Are Currently Renting Single Family Homes

Many single family renters have been through a foreclosure or short sale. Before a buyer may obtain
a loan and purchase again there is a waiting period (see chart on page 17). The waiting period
depends on if the renter went through a foreclosure or short sale, and if they filed bankruptcy and
depends on the new loan type. Many single family renters once they are through the waiting period,
cleaned their credit, have the down payment, the funds to close, and are employed will purchase
again. This group represents a future home buying boom.

                Monthly Rental Payment versus Monthly Mortgage Payment

Renters should meet with their real estate agent and loan officer to determine their waiting period and
to find out how much home their rental payment would buy if their rental payment turned into a
mortgage payment. As single family rental rates go up, it may make more sense to own.
                        Waiting Period Matrix for Post Foreclosure, Short Sale, Bankruptcy and Loan Type
                                                          New Loan Type
 Did any of the              Fannie Mae                           FHA                                VA                         USDA Rural                      Jumbo*
events take place
    below?




  Foreclosure       7 Years from completion date    3 Years from completion date        2 Years from completion date     3 Years from completion date   5-7 Years from completion
                                                                                                                                                        date



                                                    3 Years from completion date
   Short Sale       2 Years with max 80% LTV                                            No specific information on       3 Years from completion date   5-7 Years from completion
                    ratio                           **Per FHA ML 09-52, FHA             this yet, assume foreclosure                                    date
                    4 Years with max 90% LTV        financing can be obtained in less   rule of 2 years.
                    ratio                           than 3 years under certain
                    7 Years – LTV per eligibility   conditions.*
                    matrix


CH. 7 Bankruptcy    4 Years from discharge or       2 Years from discharge date         2 Years from discharge date      3 Years from discharge date    4-7 Years from completion
                    dismissal date                                                                                                                      date



                                                    1 Year of the payout must elapse    1 Year of the payout must
    CH. 13          2 Years from discharge date     & payment performance must be       elapse & payment                 3 Years from discharge date    4-7 Years from completion
  Bankruptcy        4 Years from dismissal date     satisfactory; buyer must receive    performance must be                                             date
                                                    permission from the court to        satisfactory; buyer must
                                                    enter into a mortgage               receive permission from the
                                                                                        court to enter into a mortgage


          The chart is subject to change. See your loan officer for more details. Special thanks to Kelly Zitlow of Cherry Creek Mortgage for the
                                                                             information.
                        What if Values Go Down But Interest Rates Go Up?

Maybe a potential buyer is hesitating, thinking prices may go down. Prices may go down, but happens if the
interest rate goes up? Let’s change the interest rate in the previous financing to 5.5% from 4.5% and
decrease the purchase price by 10%.

$127,651
10% reduction in purchase price
12,765

127,651
- 12,765
114,886

New Scenario                                 Previous Scenario

$114,886 purchase price                     $127,651 purchase price
5.5% interest rate for 30 years             4.5% interest rate for 30 years
Monthly payment: $742                       Monthly payment: $742
(Principle, interest and mortgage           (Principle, interest and mortgage
insurance).                                (insurance).

The above monthly payments are identical. There will be almost no affect on a monthly
payment if the price decreases 10% but the interest rate increases 1%.

				
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