The Forecast for the AZ Real Estate Market

Here is the latest forecast for the AZ market from Michael Orr at ASU’s WP Carey School of Business.

March 18, 2020
The Forecast for the AZ Real Estate Market

A number of people seem to assume that we are heading for a recession and that home prices will fall. The first assumption is quite reasonable. The second assumption is based on fear and has little analytical data to back it up. Obviously anything can happen in a uncertain and disrupted world, but a fall in home prices is still looking very unlikely from today’s numbers.
In 2005 the housing industry started to sicken because homes were being used as speculative commodities not for places to live. In 2005 I met a man in his early 20’s who owned 12 homes in the Phoenix area, all with no occupants. How had he been able to buy them? 100% loans from unscrupulous lenders who went bust between 2007 and 2010. The housing industry (and more particularly the lending industry within it) was the cause of the 2008 recession. Phoenix was a hot spot for the cause of the problem, as was Las Vegas.
In 2020, housing is an innocent bystander to a probable recession caused by a pandemic. It has supply at extremely low levels and most homeowners have a large amount of equity. Even if they lost all their income and could no longer pay their mortgage, they could quickly find a buyer to release that equity. There is little likelihood of them facing foreclosure because the lender can be paid off with the sale proceeds. Only when demand collapses do the banks have to foreclose to get their money back. At the moment demand is still well above normal and has only shown very tiny signs of easing. In 2006 demand fell off a cliff yet home builders continued to build even more new homes because lenders continued to write ill-advised loans in huge numbers.
In 2020 builders are probably going to have to build fewer homes than they wish because of shortages of labor and materials. We are unlikely to see a glut of homes on the market for a very long time. A successful vaccine for the novel corona virus is more likely to appear before a surplus of homes could possibly develop.
Because the virus has not been contained yet, except in several parts of Southeast Asia, we are likely to see a lot of people out of work. We do not yet know how long it will take to get control of the pandemic in Arizona, but many people may be out of work for quite some time. These people are more likely to be renters rather than homeowners. Landlords may find it much harder to collect rents and the yields from their portfolios are likely to fall. Some may decide to evict tenants and sell their properties. At the moment the extra supply would be welcomed and receive multiple offers, even in these troubled times. The evicted tenants still exist and therefore still represent demand for shelter of some sort. There will be hardship, but not a flood of homes with no-one to live in them.
Housing demand is created by the existence of people and increases when more people turn up and decreases if they go away. In 2005 the people we were building new homes for were largely imaginary. In 2020 they are very real and migration trends have been very favorable with families and individuals moving to Arizona from other parts of the USA.
All the indicators for the Central Arizona housing market remain very healthy at the moment and we will report any change as soon as we spot one. There is no cause for panic and if you are delaying a purchase because you think the price will come down, you are probably making a poor decision.
Michael Orr, Chief Economist
Arizona State University
WP Carey School of Business

Wire fraud in real estate transactions is on the rise!

We’ve all heard the horror stories about hackers infiltrating real estate transactions to steal closing funds. As fraudsters become ever more sophisticated, we all have to be vigilant to protect ourselves.

What are the latest tactics?
Fraudsters create emails that appear to be from an escrow officer—known as “spoofing”—and  ask you to re-route funds needed to close their transaction. And, because they know responsible settlement professionals have begun using call-back procedures to validate and verify emails regarding wiring of funds, thieves also may try calling you using prepaid “burner” phones and applications that can spoof the caller ID of any phone number the caller chooses—even valid phone numbers of actual businesses.

How do they get the information?
The fraudsters hack and monitor non-secure communications between agents, buyers and sellers to gather information about the transaction. They then copy an email template and pose as the escrow officer in a message to clients. They may even add publicly available information about the “sender’s” personal identity that can be found on flyers, company web pages and social media to help make the message appear legitimate to the unsuspecting recipient, who then acts accordingly not realizing that their response is being routed to a hacker who is trying to steal their funds.

What can you do to help prevent this fraud?
While you can’t stop hackers from impersonating parties in a transaction, you can minimize the likelihood that you might act on fraudulent instructions.

  • Make sure you (or anyone you know) who is buying a home understand that a title company’s wiring instructions should never change. If you are ever asked (via an email) to change the wire information, it’s probably a scam. Contact your title company to verify the wiring instructions and verify that your lender has the proper information to wire funds to your title company.
  • Many title companies use encryption to protect confidential information going back and forth through email. However, be aware that if you forward that email through an unsecured method, the encryption—and hence the security of the information—is lost.
  • If you suspect an email account has been spoofed, pick up the phone and speak with your escrow officer directly. Don’t use email for any communication if you believe an account has been compromised.

Buyers are prime targets for fraudsters, but title companies, today, have established a number of procedures to help keep them safe.

Make sure you are aware of this latest scheme so you can avoid becoming an unwitting victim.

 

Lack of awareness of low down payment programs is slowing down many buyers.

The article, Down Payment Ignorance Persists, from www.realestateeconomywatch.com, reports that Despite FHA, more than 2000 down payment assistance programs are available.
These are available from Fannie Mae, Freddie Mac and private lenders ranging from Wells Fargo to Bank of America!
Yet, most consumers don’t realize they can buy a home with less than 10 percent down today.

Here is the link to the entire article:  http://www.realestateeconomywatch.com/2016/09/down-payment-ignorance-persists/