If you’re looking for a home in the Phoenix area, you already know it’s tough to find the right Phoenix home for sale. Guess what? More government meddling in the housing market is about to yank about 4400 homes off the “available” list, even though potential buyers are wrestling over the slim pickings available right now.
In a post I wrote last week titled "Why is Finding the Perfect Phoenix Home So Difficult Right Now?", I told you just how hard it can be to find the right Phoenix home for sale. There are about 4,400 REO properties –real estate industry jargon for repossessed homes – in the Phoenix area. There’s a good chance these homes have already cost government agencies dearly. (By extension, that’s you, Dear Reader, because your taxes help fund government spending, along with what is borrowed each year.)
Rather than leave these properties on the market, where they could potentially be sold for something approaching fair market value, our Fearless Leaders have decided to rip these 4,400 properties off the market, and sell them to investors at fire sale prices.
Here’s how it will work: Investor groups (these could be individual real estate investors, and others with huge amounts of cash to invest in “can’t-miss real estate deals”) will be able to purchase blocks of these REOs. Because these properties will be bought in bulk, these investor groups will get a heck of a deal, possibly paying as little as 30%-50% of fair market value (not counting what it might cost to rehab them).
Special rules included in the fine print of the program will require these investor groups to rent the properties out to the general public for a yet-to-be-determined period of time. Where will these investor groups come from? Anywhere with investors with money to spend. This could mean investor groups from across America – or even foreign investors with enough cash to profit from the pain of others. One thing is certain: These ownership groups will be less concerned about maintaining the fabric of life in Phoenix neighborhoods as they will be raking in as much cash as they can.
As the taxpayer, you get hosed in multiple ways because:
- Any loss the government experiences on the sale of these properties is picked up by you, the taxpayer
- Property values will fall once these properties are sold to investors and turned into rental units
- Phoenix residents are deprived of available housing stock at a time when we desperately need it
- Corporate property owners will take the profits from these deals out of Phoenix, depriving the local economy of needed revenue
I’m not saying that Phoenix can’t use more rental units – it can. But this isn’t the best use of available properties at this time.
What should be done instead?
It’s simple, really. Let the Phoenix housing market absorb these properties. In the last 30 days, 2,355 sales have closed – not total sales, but rather homes valued at less than $200,000. The overwhelming majority of the REO properties I’m talking about in this article fall into that category.
Let that number sink into your head for a minute. In the last 30 days, 2,355 sales have closed. Right now, there are only 2,755 homes on the market. What this means is that Phoenix currently has only enough available housing to make it through a month or two, not counting other properties that come on the market in the meantime.
If these properties are left on the market to be purchased individually, families who desperately need affordable housing to purchase in Phoenix might buy them. At the same time, real estate investors could still conceivably buy them, too.
They just won’t get fire sale prices as part of the bargain.
Taxpayers won’t be on the hook for the massive losses associated with selling thousands of Phoenix properties at way below market prices. Property values won’t take a nosedive. There will be more Phoenix homes for sale. Individual real estate investors who purchase some of these properties will likely keep more of their cash in the local economy.
In short, Phoenix wins. The Federal government wins. The taxpayer wins. The only real losers would be the big money bulk property investors who stand to profit from the pain and misery of the masses. For them, it’s not really a loss either. It’s just an unrealized gain.
So why not call your federal representatives in the U.S. House (and The U.S. Senate) and let them know that government meddling in the Phoenix housing market is a bad idea. Tell them this idea is too little, too late. While this might have been a good idea two years ago, today it’s a disaster. A disaster the Phoenix real estate market doesn’t need… and can’t afford.