Education & Social Service Budget Cuts / AZ Real Estate Market & Foreign Buyers
The latest round of state budget cuts are certainly not the first, and are far from being the last. Here's the problem state lawmakers and Governor Brewer are trying to solve: the state is scheduled to spend $2 billion dollars more than it's taking in. Only, unlike you and me--well, okay, me --they don't have credit cards to pay for expenses when the cash runs out.
What to do? Only two things. Spend less or raise more money. Lawmakers actually did both in this past legislative special session. They approved $144-million in cuts to Arizona's K-12 school system and $155-million from the Department of Economic Security, which is where people turn to for government help. Lawmakers also approved a bill that allows state agencies to increase fees. While they are safe to campaign saying they did not raise taxes, let's face it, revenue is revenue--whether it's in the form of a tax or fee.
So, we have on the show one of the most respected people in the state when it comes to school finance--Chuck Essigs of the Arizona Association of School Business Officials. He'll explain how the just enacted budget cuts affect schools and what else you need to know about past and proposed budget cuts.
We also have on Neal Young, not the singer, but the director of the Department of Economic Security. He'll explain what programs are impacted by the legislative budget cuts and what will happen if the governor has no choice but to cut agency budgets by 15%.
If that is not dire enough, we then delve into Arizona's real estate market. The Wall Street Journal reports 47.9% of Arizona homeowners with mortgages are upside down--meaning they owe more money than their home is worth. The report comes as new data shows home sales and home prices are up in Arizona. But so too are foreclosures. ASU real estate finance professor Karl Guntermann joins Greg Swann of Bloodhound Realty to discuss what's going on and what all this means. BTW, we had Greg on Here in Now back in August of 2006 talking about the real estate bubble beginning to burst. And boy did it!
We also have realtor Sheila Espinoza join the real estate conversation. A British native, Sheila specializes in helping Canadians and other non-US citizens buy homes here. She'll join Greg to talk about what they are seeing, why so many foreign home buyers are snatching up homes, and some of the complexities involved.
Please post any comments or questions you have for our guests. Thanks for being a part of our show! Paul
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Paul Atkinson - Here and Now Producer at
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I work for the police and fire departments. We get called to assist people when they have no other resources. Mr. Young might like to chose words like deadly instead of difficult. Az's most vernable populations die when they don't have servies. This inclueds our elderly population and our children. We need to let the citizens of AZ know people will die without this assistance.
The reality is way better than reported as the data being referenced is already 30 to 180 behind the facts on the ground. Consider this: the sale that recorded today was signed 30 to 90 days ago.
There are significant leading indicators that tell us as sustained trends, that the market has been moderating from a bottom in home sales volumes (March 2008) and Values (late Q'2 2009.) The MLS (s) inventory data shows the Phoenix MSA is currently at about a 3 month supply of homes at the current sales rates. This is total inventory and ignores price points. When these are considered the data is even better. This 65% sample of total housing inventory has shown a constant and improving absorption trend since Nov 2007 (max inventory height.)
The great news for part of the buyer market (informed investors) is the fact that all of the received wisdom is driven by data that is 30 to 180 days old. The experts reporting is akin to driving through the rear view mirror. Investors understand this. Retail homebuyers do not.
This means competition with investors from retail homebuyers for investment grade or low to median priced properties is minimal.
Then there are the institutional buyers like CBI, Dalton, Westward and others that are buying 10s to 100s of homes at a time with the expectation of profiting from a flip to retail (first time) buyers or packaging as performing buy and hold investments for investors. They benefit and trade on these out of date and dark headlines.
The recieved wisdom from recorded data sources and retail real estate agents misses much of the current action in Phoenix.
We are a market that is unique in the World. We are predicting a V shaped recovery for well located homes. A shallow U for remote neighborhoods as they don't make great rentals or first time home buyer opportunities becuase of (the very ignored, especially by home builders and realtors) total cost of ownership measures.
An informed buyer can make an unnaturally good deal now. Any supposed wave of new foreclosures is not showing up as the real data in terms of bank recoveries and we have nearly stopped building new houses. We have lost little population so net demand will remain constant while supply is approaching an all time low. Demand will exceed suplly and spike values three to six months from now as the precipetous inventory drop of 75% year (2008) over year (2009) shows.
Andrew Waite - Publisher Personal Real Estate Investor Magazine
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