Featuring Joseph Maggiore
Phoenix Business Journal, Aug 2009
House flippers and real estate investors are coming back to the Valley and looking to get rich off the housing crash and anticipated rebound.
While many Valley homeowners and buyers are sidelined by underwater values, damaged credit scores and tightened mortgage lending, houses are selling as the market looks toward recovery.
Cash-ready investors — many of whom were blamed for the real estate bubble and crash in markets such as Phoenix — are back, buying up bargain-price foreclosures. There also are some first-time home buyers looking to snatch up deals. First-timers benefit from an $8,000 federal tax credit and are not saddled with existing mortgages and homes they can’t sell.
Outside influences
Eric Wright, a senior loan officer with CNN Mortgage in Scottsdale, said investors — including those from California, Canada and overseas — are creeping back into the market buying homes to rent or flip.
“Investors have cash,” he said. “A minimum down payment of 25 percent is needed, and many are paying cash for the properties.”
Wright said about 40 percent of the investors he is seeing are local, 25 percent are from California, 10 percent are from Canada.
Gary Drew, the broker-owner of Coldwell Banker Daisy Mountain in Anthem, said some investors are buying blocks of foreclosed homes from banks, and others are buying single properties and trying to flip them. He noted a lot of Canadian buyers and investors are coming into the Valley, buying second homes or investment properties.
“My client base is over 50 percent Canadians for buyers,” he said.
Drew said he has nine Canadian clients actively buying and 10 prospects who came to him via the Internet or referrals.
Part of Arizona’s appeal to Canadians is that the exchange rates have been fairly level between the U.S. and Canadian dollar. A Canadian dollar is worth 92 American cents, according to X-Rates.com.
‘Smart people with cash’
Signs remain mixed as to whether the Phoenix housing market has bottomed out and is starting to recover. The S&P/Case-Shiller Home Price Index released Aug. 25 shows Valley home prices were down 32 percent for the second quarter compared with the same period last year, but improved by 1.1 percent from first-quarter to second-quarter 2009.
Existing-home sales have been buoyed by trustee sales on foreclosed homes, according to Metrostudy research. In June, single-family existing home sales rose to an annual rate of 75,204 homes, a 62 percent increase from June 2008, according to Metrostudy. Other recent housing indicators also find bank sales of foreclosed homes fueling Valley home sales.
Jordan Rose, managing partner of Scottsdale-based Rose Law Group PC, which specializes in real estate, said those with ample cash are taking advantage.
“Smart people with cash are buying high-end properties and getting amazing deals. We have seen $4 million-plus homes on the market for $1 million,” she said.
Sheri McBroom, a Realtor with Re/Max Integrity Realtors, has purchased a handful of investment homes. That includes a recent buy of a three-bedroom, 1,200-square-foot home in the northwest Valley. She bought the home for $130,000 and is renting it out for $950 a month.
McBroom hopes the market will improve soon, but she does not intend to flip the house. She’d like to buy more investment properties, but said there are some limitations on the number of loans she can hold because more restrictive rules were established after the housing bubble burst.
‘Financing is tough’
Investors bought houses in markets such as Phoenix, Las Vegas, Northern California and San Diego during the housing bubble, and many got caught when the market tanked. The difference now, though, is that much more cash is required up front, and creative or adjustable-rate mortgages are much more difficult to get.
Joseph Maggiore, a Realtor with Realty Executives in Scottsdale, said many of his clients are buying one investment home at a time, doing the repairs and then flipping it for a decent market value.
On the other end of the spectrum are first-time buyers buoyed by federal tax help and unburdened by existing mortgages.
Wright said most of the first-time buyers are in their 20s and 30s, have a credit score of at least 620 and a debt-to-income ratio of less than 41 percent, and can put at least 3.5 percent down to qualify for Federal Housing Administration-backed loans.
“There are a lot of challenges out there right now for first-time buyers, though,” Maggiore said. “Financing is still tough.”