Phoneix Home Prices Level Out?

The good news for most people who are upside down on their homes this last year is that we have seen a steady increase in housing prices. This means that people who were only a bit upside down a few months ago might actually be back in the green.

The bad news however is that according to recent statistics we might be seeing prices level off. Most of this is probably due to a natural slow down in the market around holidays but the bigger reason might be the fact that banks and home owners are taking advantage of the higher prices and marketing properties out of the range for many first time home buyers.

iDeal Realty & Management

9051 W Kelton Lane, Suite 10

Peoria, Arizona 85382

(623) 201-3544

www.idealrealtyaz.com

Housing Prices Rise Mortgage Loans Fall

Is now a good time to buy a house? Yes, if you’re able to do so. For the third month in a row the price of the average house in most regions of the country moved higher, albeit not by an impressive amount. When it comes to the number of home sales, the picture didn’t look so bright last month. Sales of new single-family homes fell 0.3% in August to an annual rate of 373,000, the Commerce Department said on Wednesday, September 19th. The pace of sales last month was less than what most analysts had expected. Economists polled by Reuters predicted sales of 380,000. July sales were revised higher to 374,000 units from 372,000 units — the fastest pace since August 2010.

U.S. home prices continue to rise. In July, home prices rose 1.6% following a 2.3% increase the month before, according to the latest S&P Case-Shiller data reported. The reported data through July 2012, released by S&P Dow Jones Indices for its S&P Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed average home prices increased by 1.5% for the 10-City Composite and by 1.6% for the 20-City Composite in July versus June 2012.

For property managers it means the supply of residents who can only qualify to rent homes and apartments will continue to rise for the foreseeable future. Let your owners and best clients know that the inventory of rental properties is low in many areas, and now may be an auspicious time to buy more rental homes. There are more families than you might realize who’ll need a home to rent in the year ahead.

iDeal Realty & Management

9051 W Kelton Lane, Suite 10

Peoria, Arizona 85382

(623) 201-3544

www.idealrealtyaz.com

Surviving the "Cold Snap"

Those of us who live full time in the Valley of the Sun rarely get to see temperatures that are below freezing for any length of time, but this last week has been rather unusual as it has been below freezing for multiple days in a row and to top it off the High Temperature has been about 20 degrees cooler than normal.

Here are some tips to help you deal with this cold snap

1. Water pipes can and generally will freeze in any temperatures below 32 degrees, especially here in The Valley of the Sun, where most pipes are exposed to the air out side of the house. However there are some simple steps that you can take to keep the pipes from freezing. First of all it is a good idea to wrap them up in an old towel or jacket to keep them warm especially of the night time temperature is going to be below 25 degrees and there will be a slight breeze. The second thing to do is to keep the water running just a trickle at one of the faucets generally the one furthest from the main water line. This will keep a small amount of water flowing and moving water is harder to freeze then water that is standing still.
   
   
   
   
   
2.   Plants need protection from the cold also. Most of the plants that are planted in the valley are chosen to be able to survive the extreme summer time temperatures and as such are not well equipped by nature to survive extreme cold. To help your plants survive the cold it is important to make sure that they are kept as warm as possible, this means making sure the roots have substantial ground cover, you can do this by mounding up some extra soil a the base of the plant. Another step to take in extreme cold is to take an old bed sheet or blanket and drape it over the plant to help protect it from the cold. If the plant is small enough you might want to bring it inside until the outside temperature warms up.

iDeal Realty & Management

9051 W Kelton Lane, Suite 10

Peoria, Arizona 85382

(623) 201-3544

www.idealrealtyaz.com

How To Project Cash Flow and Return on Rental Property

If you are thinking about buying some rental properties as investments, you should probably understand how to project cash flows and evaluate the investment returns you hope to achieve on your hard earned invested cash equity.

There are really two types of returns that we can earn on investment property, first is appreciation in value which is the most common hoped for return. Secondly, and much more important but generally overlooked by investors, is the cash flow picture the property will generate.

The vast majority of investors buy real estate with the hope that it will go up in value. This is really a big mistake because many properties, particularly the prize “location, location, location” properties have corresponding negative cash flows on operations that may negate any true increase in wealth from one’s long term appreciation in value.

So a savvy investor needs to look at the cash flow picture and buy properties with positive cash flows, not negative cash flows. As an example of this in Scottsdale, one could buy a nice condo for around $500,000 which would rent for about $2,300 per month. That rent, minus all the maintenance expenses, HOA fees, insurance, property taxes, and mortgage payment would have a deficit on cash flows of about ($1,000) per month, or ($12,000) per year.

So while a buyer is hoping some appreciation in value will earn him or her a fair rate of return, that appreciation has to additionally compensate for all the money he has to take out of his savings to cover the negative cash flows. Those negative cash flows, on this example, could span several decades and hundreds of thousands of dollars before the property turns positive.

Alternatively, there are many properties that cash flow positive from day one as an investment. A moderately priced house, only a little ways away in the $150,000 price range, might generate $1,300 per month in rent and positive cash flows of $325 per month. That’s $3,900 per year of positive cash flow. As a side note – the appreciation in value, over the long term, will probably be similar on both properties anyhow. So why not go for cash flow plus appreciation in value!

To calculate a cash on cash return, we divide that $3,900 positive cash flow by the cash equity we invested, maybe $40,000 on the $150,000 property for a cash on cash investment return of 9.75% on our money. And that’s a really good deal! Especially compared to the fancy prize condominium that might generate a negative (8.5%) return on our invested equity.

iDeal Realty & Management

9051 W Kelton Lane, Suite 10

Peoria, Arizona 85382

(623) 201-3544

www.idealrealtyaz.com

I'm Back

That's right like the NHL I am back to do some more blogging for all of my readers. I apologize for being away for so long, unlike the NHL it was not a labor dispute that kept me away for so long, but things just got crazy for a little while with the explosion of real estate prices at the end of last year. But now with a new year ahead of us I am back and will try to post some good information one a week or so. I hope you will all still find my information relevant and helpful.