Phoenix Real Estate Blog

Phoenix Real Estate Blog: It’s Official! President Obama Signed the Homebuyer Tax Credit Extension and Expansion into Law Today

Bob Stahl (MyPhoenixMLS) — Fri, 06 Nov 2009 21:26:27 -0600

On Wednesday, the Senate voted unanimously in favor of a bill to extend and expand the homebuyer tax credit. On Thursday, the House voted 403-12 to pass the measure. Today, President Obama signed the bill – H.R. 3548 – into law. Totaling $24 billion, the law also provides extended jobless benefits for out-of-work Americans and tax cuts for struggling businesses.

The homebuyer tax credit provision, which was added to the stimulus bill by the Senate, extends the $8,000 first-time homebuyer credit through the end of June (for homebuyers who sign a binding contract by the end of April). It also expands the credit to include a $6,500 credit for existing homeowners to buy a new home (as long as they’ve lived in their current residence for at least five years). For more details on the homebuyer tax credit extension and expansion, check out yesterday’s post.

Supporters of the bill say that extending and expanding the tax credits are important to strengthen the fragile recovery that is taking hold in housing markets across the country. While housing market numbers have been strong of late, the unemployment rate is still high (higher than it’s been in 26 years) and consumer confidence is still low. This bill “is critical to maintaining the positive momentum we’ve been experiencing in the housing market and in the overall economy,” said one Realtors association.

What do you think? Do you plan to buy a new home and use the tax credit? Click on the “comments” link below and join the conversation!

Phoenix Real Estate Blog: Breaking News – Obama to Extend Homebuyer Tax Credit

Bob Stahl (MyPhoenixMLS) — Fri, 06 Nov 2009 13:04:45 -0600

Earlier today the House signed a bill that will extend (and expand) the first-time homebuyer’s tax credit and introduce a similar credit for people who already own their home but need to move. President Obama is expected to sign the bill into law on Friday.

Here’s what the law does:

Extends the $8,000 first-time homebuyer tax credit to May 1, 2010.

Creates a new credit of up to $6,500 for existing homeowners who buy a new residence if they have lived in their current one for at least five of the last eight years.

Expands both credits to include individuals making up to $125,000 a year and couples making up to $225,000 (the income limits used to be $75,000 and $150,000 respectively). After those limits are reached, the credits are phased out.

Experts estimate that the extension and expansion of the homebuyer tax credits will cost about $11 billion. The credit has been used in 1.2 million home purchases so far this year; according to the National Association of Realtors, 350,000 of those homes wouldn’t have been purchased without the credit.

What do you think? Is extending and expanding the homebuyer tax credits a good idea? Click on the “comments” link below and join the conversation!

Phoenix Real Estate Blog: A Housing “Mini-boom”

Bob Stahl (MyPhoenixMLS) — Fri, 30 Oct 2009 14:15:01 -0500

On Tuesday I blogged about the fact that home prices rose in Phoenix for the third straight month since August 2006. But there's more good news: the number of home sales was up, too -- across the nation, actually -- leading one real estate expert to dub this a real estate "mini-boom."

"There's a mini-boom going on in the housing market," said Thomas Popik, who conducts a monthly survey of real estate agents for Campbell Communications, a research firm.

Nationally, sales rose 9.4% in September - a higher increase than had been expected, according to the National Association of Realtors. Locally, sales were incredibly strong compared to last year - the number of homes sold in Phoenix was up 16% to 8,922. And the number of homes sold in Scottsdale was up 16.1% to 1,851.

The "mini-boom" is fueled in part by the soon-to-expire First-time Homebuyer's Tax Credit, as well as a still-increasing number of foreclosures.

According to the Arizona Republic, "The foreclosure rate has accelerated in more centrally located, often pricier neighborhoods while slowing down a bit in newer, more remote communities where the foreclosure floodgate burst in late 2007."

What does it mean for you?

If you're a buyer, the rapidly rising number of home sales means that we're moving ever closer to the point where demand and supply are once again in balance, and then to the point where demand outstrips supply and prices rise.

At the same time, with a still-high number of foreclosures on the market, there are great deals to be had, even in the centrally-located, established neighborhoods of Phoenix and Scottsdale. And, if you move fast, the homebuyer's tax credit is effectively an $8,000 rebate on the purchase of a home.

If you're a seller, the real estate "mini-boom" will afford you the opportunity to sell your home for a higher price, in less time. If Congress extends the homebuyer's tax credit, demand will continue to ramp up, and with the recession now "officially" over, consumers will likely soon regain confidence and loosen the purse strings.

What do you think? What's your prognosis for the "mini-booming" real estate market? Are you planning to buy or sell soon? Click on the "comments" link below and join the conversation!

Want to know more? Click here to watch my "October Market Update" video.

Phoenix Real Estate Blog: Phoenix Home Prices Rise for Third Straight Month

Bob Stahl (MyPhoenixMLS) — Wed, 28 Oct 2009 14:27:56 -0500

Home prices rose in the Phoenix area for the third straight month in August – a sign that the real estate market may well have hit bottom and caught the recovery wind.

According to the S&P/Case-Shiller Home Price Index, the median price of resold homes in the Phoenix area was up 1.6% in August compared to July. Prices rose 1.1% in June – the first time they increased since the real estate bubble began to deflate in August 2006.

Source: http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,2,1,0,0,0,0,0.html

Prices in most of the other markets measured by the Case-Shiller index rose as well, and were up 1% overall. And that’s a good thing, according to real estate professor Susan Wachter. “If the increases are consistent across the markets, this is key,” she told the AP. “Then we’re seeing the formation of a bottom.”

Relative affordability – the median price in August was just about the same as in May of 2001 – is driving buyers back into the Phoenix market in huge numbers. Local economist Elliott Pollack said that the residential real estate sector is “on its way to becoming a positive force in the economy” again.

What do you think? How have rising home prices affected you? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Are Buyers Buying?

Bob Stahl (MyPhoenixMLS) — Wed, 07 Oct 2009 17:12:39 -0500

In a word: Yes!

The anecdotal evidence

I’m listing a house for a friend in Queen Creek, one of Phoenix’s “bedroom” communities – hit particularly hard by the real estate crash. She’s short-selling her house because it’s worth about $150,000, but she owes $290,000.

When we were making a listing plan the other day, she asked how long she should expect the house to be on the market. We looked at the MLS for sales of similar houses in her neighborhood and found that two of the same model at about the same price had sold in the last week – one had been on the market for 12 days and the other had been on the market for 8 days.

That echoes the experience of many buyers and sellers in the areas hardest hit by the real estate crisis. In some Phoenix areas, buyers are once again entering bidding wars. One buyer I know entered 12 bids (all at market value) and was outbid every time.

So that’s the anecdotal evidence that buyers are once again buying. Do hard numbers back it up?

In another word: Yes!

The hard numbers

Active listings

Active listings is a measure of the number of homes currently listed for sale on the MLS. As demand heats up – as more buyers enter the market, the number of active listings falls. As the following charts show, active listings in both Scottsdale and Phoenix haven fallen dramatically over the course of the year. That’s great news!

Months supply

One indicator of the health of the housing market is “months supply” – basically the number of months it would take to sell all the homes currently on the market, at the current rate of sales. Months supply in Phoenix peaked at more than 20 months in early 2008 (as you can see from the chart below). Now it’s back to pre-boom/bust levels. In Scottsdale, months supply is down from its height-of-the-crisis peaks, but still a bit above pre-boom/bust levels.

So the hard numbers do bear out my anecdotal evidence that buyers are once again – yes, buying.

What do you think? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Think You Don’t Need an Inspection on a New Home? Think Again

Bob Stahl (MyPhoenixMLS) — Fri, 02 Oct 2009 15:30:18 -0500

Imagine lying awake at night listening to your brand new, $357,000, golf course home cracking. Or needing to replace the roof on your new home even before you replace its light bulbs. Or being forced to move out – just months after you moved in – because of toxic mold growing in your new home.

These are problems that can arise, even in newly-built homes.

The solution? A home inspection.

Despite what many people think, a home inspection is a must, even when you’re buying a newly-built home. An inspection by a reputable, licensed home inspector will help you avoid buying one of the 17% of new homes with significant defects. Visit http://www.nabie.org/, the National Academy of Building Inspection Engineers, to find an inspector in your area.

The Wall Street Journal also recommends getting another home inspection (in addition to the one you get before you buy the home) just before the builder’s warranty expires, because some problems don’t show up until the home is one or two years old. That way, at least, any problems that have come up can be fixed at the builder’s expense.

(For more details on the importance of a home inspection, check out my free report, Home Inspection? Worth EVERY Cent!)

What’s behind shoddy construction?

Estimates suggest that more new homes had significant problems since the height of the real estate boom. Builders and sub-contractors wanted to build as many homes as possible to keep up with the red-hot demand, at times sacrificing quality in the process. “The furious pace of home building from the late 1990s through the first half of the 2000s contributed to a surge in defects, experts say.”

Fortunately, you can take steps to help ensure that you don’t buy a home with significant defects, by hiring a reputable, licensed home inspector before you sign on the bottom line – whether the home you’re buying is brand new or 100 years old.

What do you think? Have you been affected by shoddy new home construction? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Should You Continue to Pay for a Home When You Owe More than it’s Worth?

Bob Stahl (MyPhoenixMLS) — Mon, 28 Sep 2009 14:10:27 -0500

I know I just wrote a response to a Realtor.com “Hot Topic” – about what goes in to your credit score and how it affects you as a home buyer. But their most recent hot topic was too interesting to pass up. The question: “Should you continue to pay for a home where you owe more than it’s worth?”

I’ve blogged before about strategic defaults – where a homeowner, who can afford his mortgage, intentionally stops paying and either lets the bank foreclose or tries to negotiate a short sale. The posts generated a lot of attention – a firestorm, really. Some people thought that strategically defaulting could be a sound business decision for some people. Others found it morally reprehensible.

Zillow.com estimates that 22% of all homeowners in the U.S. have negative equity. In the Phoenix Metro area, 80% of homeowners with nonprime mortgages do. The average amount of negative equity (among subprime and Alt-A borrowers) is $73,314.

Does it makes sense for those homeowners to continue to pay on their homes, or should they walk away? I must sound like a broken record, but I have to say that I’m not advocating for strategic defaults; nor am I condemning them. That said, there are a number of factors to consider when thinking about “walking away”:

1) How “upside down” are you? One of my newest clients is trying to negotiate a short sale for her home, even though she can still afford her mortgage. She lives outside of Phoenix where the bubble and bust were particularly dramatic. She owes almost twice what her home is worth. If we assume that the market will return to a normal rate of appreciation in the next few years, it would take her more than a decade to get out of the hole.

Contrast her situation to one of a North Scottsdale homeowner who owes just 5% more than his home is worth. Again, assuming that the market will return to a normal rate of appreciation in the next few years, it shouldn’t take this homeowner more than a year or two to get right-side up again.

2) Do you have to move? Even if you owe more on your home than its current market value, that’s all on paper – unless you need to sell today. My new client, in addition to being way upside down, needs to move because her husband has a new job in Desert Ridge (which means a three hour commute every day right now).

If you don’t have to move – and you likely won’t have to move in the near future, staying put is probably the best thing to do.

3) Are you willing to accept the consequences of walking away? Even if you are able to negotiate a short sale with the bank, you’ll feel the ramifications of your choice for several years. First, if you’ve missed your mortgage payment in the run-up to the short sale, those late payment dings will hurt your credit score for 2 years. If the bank forecloses, that black mark will stay on your credit for 7 years, and will probably prevent you from buying another home for at least 4 years.

Clearly, answering the question, “Should you continue to pay for a home where you owe more than it’s worth?” is tough – and it should be. No matter your circumstances, a mortgage is a contract – a promise you made to the lender that, in exchange for the money to buy a home, you would repay that money as agreed. Breaking that promise, while it may be the right decision for some people in some circumstances, shouldn’t be taken lightly.

What do you think? Are there circumstances in which walking away is the right decision? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: What Affects a Homeowner’s Credit Rating?

Bob Stahl (MyPhoenixMLS) — Thu, 24 Sep 2009 14:28:24 -0500

Last week Realtor.com asked “Do you know what affects a homeowner’s credit rating?” It’s a good question – and an important topic – so I thought I’d blog about it today.

The most commonly used credit scoring method is the FICO score. There are 5 factors that are used to determine your FICO score, as you can see in the chart below. The percentages reflect the relative importance of that factor; in other words, payment history is the most important factor, but is only slightly more important than amounts owed.

Source: MyFICO.com

The whole point of a credit score is to offer lenders a quick and easy way to estimate the risk associated with lending money to you. If lending money to you is riskier, because you’re more likely than someone else to default, the lender will charge you a higher interest rate to compensate for that higher risk (or will simply not lend to you at all). So all of the factors that are used to determine your credit score are factors because they’re statistically relevant ways to estimate the risk you represent to a potential lender.

Payment history

The payment history factor is fairly simple to understand: it takes into account how you’ve paid your bills. After all, your history of debt repayment is an excellent indication of whether or not you’ll pay your debts on time in the future. It includes delinquencies, foreclosures, bankruptcies – as well as how many accounts were paid late, the amount(s) that were paid late, and how recent those delinquencies are.

Amounts owed

Almost as important as how you’ve paid your bills is the amount of debt you hold. That’s because the more debt you hold, the higher risk there is that you will become overburdened with debt and unable to meet your obligations.

In fact, when I spoke with a local real estate attorney about the topic of strategic mortgage defaults, he told me that there can be a trade-off between payment history and amounts owed, at least for people who have other non-mortgage debt. “If a person makes the decision to stop paying his mortgage, and instead puts that money to paying off other debts, then the credit hit that comes from the short sale or foreclosure will be partially offset by a credit boost from having less other debt.” (Not that I’m advocating for strategic mortgage defaults.)

Length of credit history

The length of time that you’ve had credit and debt is a good indication of your credit risk because the longer your history of on-time debt repayment, the more certain a lender can be that you will continue to repay your debts on time. If you’ve just begun to establish your credit history, on the other hand, the lender has less “past behavior” to judge you on.

New credit

Research has demonstrated to the credit companies that people who take out a lot of new credit at one time pose greater credit risks than those who have not taken out new credit lately. The “new credit” factor incorporates, for example, the number of recently opened accounts you have in proportion to older accounts and the number of times you’ve recently applied for new credit.

Types of credit used

This factor considers the types of debt you have – installment debt (like a mortgage) and revolving debt (like credit cards).

Why does it matter?

Your credit score will affect not only whether you’re able to qualify for a mortgage, but also the rate you can get. The following table is an example of how much less a person with a higher credit score might pay each month:

Source: MyFICO.com

On a 30-year fixed, $150,000 mortgage, a person with the highest credit score would pay $150 less every month – and $54,133 less over 30 years – than a person with a fair (620-639) credit score.

Clearly, having a higher credit score pays off. At the beginning of the year, I blogged about how to boost your credit score. Check out those two posts to learn how to boost a poor credit score (or maintain a good one!).

What do you think? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: September Phoenix and Scottsdale Real Estate Market Update

Bob Stahl (MyPhoenixMLS) — Wed, 16 Sep 2009 14:32:10 -0500

I decided again this month to look to Trulia to help me give you a more a detailed analysis of what's going on in the Phoenix and Scottsdale real estate markets. A couple of notes:

Median sales price, recently sold, and foreclosures numbers are based on public records

Average listing price, homes for sale and open homes numbers are based on Trulia listings

Phoenix

The median sales price of homes in Phoenix during the June-August period was $97,448 (based on 10,200 home sales). That's up 4.8% from the May-July period, but still 39.9% lower than the same period one year ago. But while the median price is much lower than last year, the number of sales is much higher - up 40.2% over 2008. There are currently 19,293 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process.

Phoenix Recently Sold Homes

Scottsdale

The median sales price of homes in Scottsdale during the June-August period was $307,000. That's 22.2% lower than the same period one year ago, but still 2.3% higher than 5 years ago. And while the median price is lower than last year, the number of sales is higher - up about 16% over 2008.

Scottsdale Recently Sold Homes

Phoenix housing market analyst R.L. Brown said that, overall, "it is obvious from the data that we collect and analyze on the Phoenix metro housing market that the market indeed continues to improve in almost all sectors." Specifically:

"New home permits in July continued to show strength, and we expect this pace to continue as builder bring newly-positioned product on line and as spec inventories continue to decline."

"The resale market also continues at a strong pace, up 59% over the same month last year. Real estate investors and bargain hunters shop the bank owned offerings and "normal" sellers have become more realistic re-pricing their offerings to meet the market. Multiple offers are typical for the good properties and locations."

Those are the numbers. What's your view? Click on the "Comments" link below and join the discussion!

Phoenix Real Estate Blog: Now May Be the Time to Buy – Here’s Why

Bob Stahl (MyPhoenixMLS) — Fri, 11 Sep 2009 14:20:03 -0500

I’ve said it before and I’ll say it again: now may be a great time to buy a house in Phoenix. Have home prices stopped falling, for good? Will they rise again soon? I can’t answer those questions, but I can offer two great reasons to buy now:

Reason #1: The First-time Home Buyer’s Tax Credit Is Set to Expire on December 1

Congress is debating an extension of the first-time homebuyer’s tax credit, but as the law stands now, it’s set to expire on December 1. Part of the Housing and Economic Recovery Act of 2008, the tax credit gives up to $8,000 (10% of the home’s purchase price) for homebuyers who qualify.

You qualify if:

You purchase a principal residence (not vacation home or investment property) between April 8, 2008, and before Dec. 1, 2009.

You (and your spouse, if married) have not owned a home in the three years prior to a purchase.

Your income is less than $170,000 (for married couples filing joint tax returns) or $95,000 (for single filers).

You are disqualified if:

You sell your home before the end of the year.

You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.

You are a nonresident alien.

For more details about the tax credit, check out the IRS website.

The hitch, of course, is that you must close escrow on your home before December 1. And while that may seem far away (we’re not even counting “Shopping Days ‘Til Christmas” yet!) remember that the mortgage financing and home buying process can take a while.

“In the past, home buyers could usually close on the deal within 45 days after signing a contract to buy, says Lawrence Yun, chief economist for the National Association of Realtors. But these days, buyers should give themselves at least 60 days, he says. You'll need to give yourself even more time if you're interested in buying a home that's in foreclosure or is a "real estate owned" property (REO) — a home the bank repossessed after failing to sell it at a foreclosure auction. "The window of opportunity is closing fast unless the tax credit is extended," Yun says.”

Reason #2: Mortgage Interest Rates Remain Near Historic Lows

According to the Associated Press, “The average rate for a 30-year fixed mortgage was 5.07 percent this week, down from 5.08 percent a week earlier, mortgage company Freddie Mac said Thursday. Rates, while above the record low of 4.78 percent hit in the spring, are still at attractive levels for people looking to buy a home or refinance.”

But they may not be low (this low, at least) for much longer. “Rates should stay low for another month or two as government efforts to keep them low remain effective, predicts Michael Larson, an interest rate and real estate analyst with Weiss Research. . . But it won't last forever. Rates will eventually trend upward, Larson said, as the economy starts to turn around. . .”

What do you think? Are you planning to buy a home soon? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Will Credit Flow More Easily Again? Yes, But. . .

Bob Stahl (MyPhoenixMLS) — Wed, 09 Sep 2009 14:14:54 -0500

When I can, I like to respond to the Realtor.com “Hot Topic” which they typically refresh every week or so. This week’s is “Will credit flow more easily again?” My answer, in two words: Yes, but . . .

Yes

Last September, when the global credit markets went to hell in a hand basket, everyone realized (overnight, it seems) that mortgage lenders had grossly underestimated the risk associated with their mortgages (in other words, rates of borrower default, it turned out, were far higher than lenders and investors had predicted).

As a result, lenders of all kinds clamped down on lending. They had no idea what kind of catastrophe the next month, week, or even day would hold. They held tight to their money, not knowing if they would need the cash to shore up balances hit hard by defaults on their existing loans. Suddenly, even borrowers with credit scores of 700 and documentable incomes high enough to easily afford their mortgage payments were being turned down for loans, or charged much higher interest rates.

But that was a knee-jerk reaction that has since proved to be overkill. Credit has loosened since the end of last year, and will continue to, as real estate markets stabilize and we all begin to see the economy turning upward. When lenders once again feel confident in the stability of their current loan portfolios and the health of the economy in general, they will look to credit-worthy consumers to lend their money to.

Why will they do that? Because lenders make money by lending. They clearly got overzealous during the real estate boom, thinking they could make ever-more money by lending ever-more money to anyone with a pulse. Now they realize that was a flawed tactic. But it hasn’t changed the fact that mortgage lenders (as well as credit card companies, banks, investment companies, and others who are in the business of lending money) make money off of the interest they charge their borrowers.

But. . .

Credit will never (we should hope) flow as easily as it did during the real estate boom. I hate to say it, but there are some people who are simply not financially ready to be homeowners. Perhaps their incomes aren’t high enough. Or they haven’t established a history of repaying debt on time. Three years ago, those types of borrowers (really, anyone with a pulse) could get a mortgage loan. Today, banks realistically require enough income to pay the loan as well as other expenses (like, food) and a reasonable history of repaying credit on time.

(To learn about improving your credit score so that you can prove to lenders you’re a good credit risk, check out my post, 4 Steps to Better Credit.)

In other words, credit issuers (mortgage lenders, credit card companies, banks) have realized that they underestimated risk for a long time. With more realistic beliefs about borrowers' risk, they will necessarily issue less credit (or, at least, will issue credit to fewer borrowers) than they did during the boom. At the same time, as they "chill out" from the credit freeze and Depression scare, they will issue more credit than they have over the last year.

What do you think? Will credit flow more easily again? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Step 1: Market your home. Step 2: Market your home. Step 3: Market your home.

Bob Stahl (MyPhoenixMLS) — Wed, 02 Sep 2009 11:20:04 -0500

No, my “paste” function didn’t get stuck on repeat. The fact is that marketing your home is the most critical factor that will determine whether, when, and for how much you sell your home. It should be steps 1, 2, and 3 when you’re listing a home for sale. (REALTOR.com periodically posts “Hot Topics” for REALTORS® to blog about. This week’s was about marketing.)

Question: As a real estate agent, how do you market your listings?

a) Newspaper ad

b) Single listing site

c) Featured home on my website

d) Other

Answer: All of the above!

Just as successful businesses don’t use one single marketing strategy to the exclusion of all others, so is it with real estate. Successful real estate agents use a number of marketing tools to market their clients’ homes.

That said, some are more popular than others.

Listing online

Once the mainstay of real estate marketing, newspaper ads have become dramatically less popular. With the rise of searchable home listing sites like REALTOR.com, Zillow.com, Trulia.com, and others, flipping through the pages of a physical newspaper is, for most buyers, so 1999.

And that’s the key in successfully marketing your home to sell – going where the buyers are. Sure, you can get a killer deal on a 1/4 page ad in the newspaper, but if very few buyers read it, what’s the point?

Another benefit of advertising listing online is the ease of measurability. You can easily measure the number of impressions your ad or listing received (how many times it appeared on a page that a web visitor was looking at), the number of clicks on that ad or listing, and more. That way, you can see what’s working – and what isn’t – and make smart changes in response.

A picture is worth. . . well, you know

It’s so cliché I hate to say it, but a picture is worth a thousand words. And a video is worth a thousand pictures. That’s why I often create virtual home tours for my clients’ listings and then post those virtual tours online (on the same sites where I post the listing).

How often have you caught yourself whiling away the afternoon viewing virtual tours on the web? (Admit it!) Therein lies the success of this strategy.

It’s all (or partly at least) about who you know

They say that most real estate transactions are the result of connections. That’s why the best real estate agents have extensive networks of other buyers’ agents and sellers’ agents – across the country – who act as one big referral network. That way, I can target my clients’ listings to buyers’ agents who help buyers in that particular neighborhood, for example.

Market, then market some more

At the end of the day, marketing – online, offline, through connections, with a yard sign, whatever – is how you’ll get the word out about your home for sale.

When interviewing real estate agents to help you sell your home, ask about their marketing strategies. Ask how much they spend on advertising and where they advertise. (How much money a real estate agent spends on marketing is not nearly as important as how he spends it.) Ask what kind of innovate technologies they use to market your home. And perhaps most importantly, ask to see the proof.

What do you think? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: First-time Homebuyer? The Market Is Your Oyster

Bob Stahl (MyPhoenixMLS) — Wed, 26 Aug 2009 15:20:59 -0500

There was an article last week in SmartMoney Magazine about how the housing bust has transformed the real estate market into a first time homebuyer's paradise. "In this market, first-time buyers are getting VIP treatment. Indeed, they're the star players in a nascent market revival."
Real estate market a buyer's paradise
In fact, according to the National Association of Realtors, in the first part of 2009 first-time homebuyers accounted for nearly half of all home purchases, which is far greater than in the past. There are a number of reasons why:

The new $8,000 tax credit for first-time homebuyers

Fewer homeowners are buying new homes, because depressed prices make it difficult to sell the homes they have

With prices as much as 30% lower than they were at the peak of the bubble, homes are now much more affordable for first-time buyers

Mortgage interest rates, for those who qualify, are still near historic lows

Down payment options
On the flipside, during the mortgage loan feeding frenzy at the height of the boom, many lenders were offering easy 100%, "no money down" loans. Those, among conventional lenders, at least, are a thing of the past. Today, conventional mortgage lenders have much more stringent credit expectations and require down payments of 10 or 20%.
But as I mentioned earlier this month, the FHA still guarantees loans with as little as 3.5% down. That's why, according to mortgage banker Matt Maret, that 90% of all new loans in Maricopa County right now are FHA loans.
The FHA's 203(b) Mortgage Insurance program "provides mortgage insurance for a person to purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD." Generally, to qualify for an FHA loan you must:

Meet standard FHA credit qualifications

Purchase a home priced within the FHA loan limits (currently $346,250 for a single-family home in Maricopa County)

Have a 3.5% down payment, which can come from a family member or employer. You'll have to pay an annual mortgage insurance premium

The benefits of an FHA loan
According to the FHA, the benefits of an FHA-insured loan include:

Easier to qualify - Because FHA insures your mortgage, lenders are more willing to give loans with lower qualifying requirements so it's easier for you to qualify.

Less than perfect credit - Even if you have had credit problems, such as bankruptcy, it's easier for you to qualify for an FHA loan than a conventional loan.

Low down payment - We have a low 3.5% down payment, and that money can come from a family member, employer or charitable organization. Other loans don't allow this.

Costs less - Many times, FHA loans have competitive interest rates because the loans are insured by the Federal Government. Always compare an FHA loan with other loan types.

What do you think? Click on the "Comments" link below and join the discussion!

August Phoenix and Scottsdale Real Estate Market Update

Bob Stahl (MyPhoenixMLS) — Fri, 21 Aug 2009 14:54:21 -0500

As you know, I usually get my monthly market statistics from ASU, but the Real Estate Studies director Jay Butler said they’re having some problems with their programs and the numbers will be a while. So this month I turned to Trulia, which offers detailed city-level market statistics. A couple of notes:

Median sales price, recently sold, and foreclosures numbers are based on public records

Average listing price, homes for sale and open homes numbers are based on Trulia listings Phoenix The median sales price of homes in Phoenix during the May-July period was $93,000 (based on 10,855 home sales). That’s 45.3% lower than the same period one year ago. But while the median price is much lower than last year, the number of sales is much higher – up 53.6% over 2008. There are currently 19,894 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process.

Phoenix Homes For Sale

Phoenix Recently Sold Homes

Phoenix Homes For Sale

Phoenix Recently Sold Homes

Scottsdale The median sales price of homes in Scottsdale during the May-July period was $310,000. That’s 26% lower than the same period one year ago, but still 3.3% higher than 5 years ago. And while the median price is lower than last year, the number of sales is higher – up about 6% over 2008.

Scottsdale Homes For Sale

Scottsdale Recently Sold Homes

Phoenix housing market analyst R.L. Brown said that, overall, “it is obvious from the data that we collect and analyze on the Phoenix metro housing market that the market indeed continues to improve in almost all sectors.” Specifically:

“New home permits in June reached the highest level in six months, and the pace is expected to continue upward as builder bring newly-positioned product on line and as spec inventories continue to decline.

The resale market also soars, with 9,947 resales counted in June, as real estate investors and bargain hunters shop the bank owned offerings and as “normal” sellers re-price their offerings to meet the market. Multiple offers are typical for the good properties and locations.” Those are the numbers.

What’s your view? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Survey Says, Homeowners More Optimistic About the Future

Bob Stahl (MyPhoenixMLS) — Tue, 18 Aug 2009 14:37:59 -0500

As I was driving to meet a client yesterday, I was listening to NPR and the story was about the economy. The central question, as it always is, was whether or not we’ve hit bottom. I won’t go into the details, I mention it only to recall what the interviewee said, “At the end of the day, you have to look at yourself, look at your neighbors – how are you feeling about the economy? Are you spending money?”

In other words, the economy won’t really begin to recover until consumers start spending again. And that won’t happen until consumers have confidence in the strength of the economy.

The same is true in the housing market. Real estate prices won’t recover until homebuyers (not only speculators) feel that it’s the right time to start buying again. Increased demand will eventually put upward pressure on prices. But it all starts with confidence.

So I was thrilled when I got back to the office last night and read that Zillow.com’s Homeowner Perception Survey had revealed that 30% of homeowners here in the West believe the value of their home will increase in the next 6 months. 51% believe home values will remain the same, and only 19% believe that home values will continue to fall over the next 6 months. Nationally, 34% of homeowners believe their home’s value will increase; 47% believe it will stay the same, and 19% believe it will fall.

But. . .

While Zillow’s news is great news, and could bode well for the economy, we have to read it in context. In the same survey, Zillow found that homeowner’s perceptions of the current value of their homes is still distorted.

While 83% of all homes across the U.S. lost value in the second quarter of the year, only 60% of homeowners believed their homes had lost value.

While only 4% of homes had unchanged values, 19% of homeowners believed their home’s value had not changed.

While only 13% of homes gained value, 22% of homeowners believed their homes had increased in value.

In the Phoenix metro area, though, optimism (at least that prices won’t continue to fall) seems warranted. Price declines in the Phoenix area have been less steep over the past months (comparing prices to a year ago), which is a clear signal to many experts that the market has bottomed and is turning around. Yes, prices are still down compared to last year, but they’re down less -- and that’s the road to eventual price increases.

According to housing market analyst RL Brown, “It is obvious from the data that we collect and analyze on the Phoenix metro housing market that the market indeed continues to improve in almost all sectors.”

Onward and upward.

What do you think? What’s your perception of housing prices and home values in the Phoenix area? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Selling? Price Your Home Right from the Get-go

Bob Stahl (MyPhoenixMLS) — Fri, 14 Aug 2009 14:35:14 -0500

Trulia reported today that as of August 1, 26% of Phoenix home sellers had made at least a 1% reduction in their original asking price. The average reduction is 13% for a total of $84,109,665.

“The reality is, today’s sellers need to price aggressively to avoid reductions. Consumers are looking for value and when they find a good deal, they are taking advantage of market conditions,” said Trulia’s co-founder & CEO Pete Flint.

Erring on the side of pricing your home too high might seem like a good idea -- after all, if you don’t see any interest in your home at the original price, just cut it, right? Well, not really.

The fact is that buyers’ real estate agents know the market values in your area. They know the ballpark of your home’s value. If you price your home above that, they’ll discount your listing and move on. And they won’t come back, even if you lower your price later.

How to price your home right from the get-go

If you’re working with a real estate agent to sell your home, he should tell you what the market value of your home is, so that you can set a competitive price right from the beginning. If you’re not planning on working with an agent -- or at least not yet -- you can visit www.MyPhoenixMLS.com for a free market snapshot to estimate your home’s value.

Consider pricing your home no higher than the middle of the range for homes comparable to yours. And if you need to sell your home quickly, you should consider pricing your home among in the bottom 25% of comparable homes.

. . .But don’t be afraid to reduce the price

Absolutely you should price your home competitively from the start. But if you’re still not getting any nibbles of interest, you should consider reducing the price.

And you should do it quickly. 90 days on the market is about average in Phoenix right now, so give it at least 30 days before you make a price reduction. But don’t delay beyond that. Homes that languish on the market for much longer than average often are forced to make one price reduction after another, as buyers and real estate agents may begin to question why the home has been on the market for so long.

What do you think? Have you been trying to sell a home? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Are You a Buyer-Customer or a Buyer-Client?

Bob Stahl (MyPhoenixMLS) — Wed, 12 Aug 2009 14:28:40 -0500

You think your real estate agent is working for you. But is he?

Maybe. Then again, maybe not.

While it seems intuitive that your real estate agent would act in your best interests -- and only your best interests -- when helping you buy a home, that’s not necessarily so. In fact, if you haven’t established a buyer-client relationship with your real estate agent, he could be working for the seller’s best interests -- steering you to particular homes or encouraging you to make a higher bid than you would otherwise.

That’s why it’s so important to understand, first, what it means to be a buyer-customer and buyer-client, and second, to talk with your agent (or prospective agent) about which relationship you have. The chart below -- from the Real Estate Buyer’s Agent Council (REBAC) website -- highlights the differences between buyer-customers and buyer-clients.

I think that it’s always the best idea to have someone working for you, and only you, when you’re buying or selling real estate. If you agree, and want to make sure that you have a dedicated buyer’s representative working for you, talk with your real estate agent. Ask:

· Do you represent buyers, sellers or both?

· What services are provided to (or excluded from) me, based on my status as a buyer-customer or buyer-client?

· When does representation begin? When does it conclude?

· If I’m not ready to commit to your normal term, can you offer me a one-day buyer agency agreement or a 24-hour opt-out clause?

· How is dual agency addressed in your firm?

Dual agency is when the same real estate brokerage firm represents the buyer and the seller in a transaction. Imagine that you’re working with a dedicated buyer’s representative. The house you fall head-over-heels in love with is listed by the same real estate brokerage that your buyer’s rep works for. How can the brokerage be completely, and exclusively loyal to both you and the seller? Firms address dual agency differently, and laws vary by state. Talk them over with your buyer’s rep.

One great place to find buyer’s representatives in your area is the REBAC website, http://rebac.net/index.cfm. REBAC awards Accredited Buyer’s Representative (ABR®) designations to real estate agents who have completed specialized training in delivering the best in buyer-representation services. (Side note: While I’ve worked as a buyer’s representative for many years, I recently earned the ABR® designation.)

What do you think? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Buyers, Should You Treat Foreclosure Listings Differently? The Answer May Surprise You. . .

Bob Stahl (MyPhoenixMLS) — Fri, 07 Aug 2009 21:52:58 -0500

A huge percentage of the existing home sales in the Phoenix area these days are foreclosures. Some need heavy-duty repair work, others are practically move-in ready. Some are in blighted inner-city neighborhoods. Others are in master-planned communities with swimming pools, tennis courts and golf courses.

Wherever you look, whatever your price range, there are great deals to be found in foreclosed (often called bank-owned, or REO) homes right now. But it will pay to know what you're getting yourself into -- to look before you leap, if you will. Because the fact is that buying a home that has been repossessed by the bank is different -- even if not completely dissimilar -- from buying a home from the owners who are relocating, moving up, whatever.

When you buy a foreclosure, you'll have to play by slightly different rules. And, you'll have to be even more vigilant about the inspection -- unfortunately, foreclosed homes are often damaged but are nearly always sold by the bank "as is."

So here are some tips to make your bank-owned home buying experience a great one:

1. There are a number of assistance programs designed to help homebuyers purchase foreclosed properties. The last time I checked, programs were offered by the state, by Maricopa County and by the cities of Phoenix and Chandler.

2. A home auction can be a great way to find a foreclosed home at a good price. But know that while the Arizona Department of Real Estate does require home-auction companies to have a real estate license, it doesn't regulate the auction process itself, so even manipulative tactics are not illegal (though "frowned upon" by above-board auction companies, according to the Republic article).

If you're thinking about bidding on a home at auction, consider these six tips first. As I always say, Knowledge is Power!

Auction Tip #1: Read the Rules

Auction Tip #2: Do Your Homework First

Auction Tip #3: Come With Financing

Auction Tip #4: If It Looks Too Good To Be True, It Probably Is

Auction Tip #5: Get Help

Auction Tip #6: Caveat Emptor

3. Know your market. If you don't already live where you plan to invest, make sure you get to know your investment market well - what neighborhoods you should stay away from, where great hidden deals might be, where the hottest new development is, etc.

4. Develop an investment strategy. Foreclosure investing is like any other type of real estate investing - develop a strategy for what you want to accomplish, the risks you are willing to take, and how long you plan to be investing and then stick to that strategy.

5. Develop your best practices. There are a lot of foreclosure buying techniques out there. Decide which is best for you, given your investment strategy.

6. Be a bit skeptical. Just because a home is in foreclosure doesn't mean it's automatically a good deal.

7. Ask for help. Foreclosure investing takes a lot of work. Invest in the help of a trustworthy team.

8. Make friends with mortgage lenders. Often, you'll get the best deal if you can negotiate a good purchase price with the seller and get the lender to forgive a portion of the debt (the difference between the sales price and the loan balance, for example).

9. Move fast, but not too fast. You'll need to act quickly once you find a foreclosure property that you want to buy - before other investors beat you to it. At the same time, you don't want to be too rushed or you may make a decision you'll regret later.

10. Know the law. There's more legalese involved in a foreclosure transaction than in a traditional home sale. Plus, foreclosure laws differ from state to state. Read up on your state's foreclosure laws and ask your real estate agent to recommend a good real estate attorney with experience helping people purchase foreclosed homes. According to U.S. News, a detail as tiny as the wrong font size on your documents could hold up the transaction or -- worse -- land you in legal trouble.

What do you think? Have you invested in foreclosure properties? What's your experience been? Click on the "Comments" link below and join the discussion!

Phoenix Real Estate Blog: “Strategic Defaults” – A Mortgage Lender’s Perspective

Bob Stahl (MyPhoenixMLS) — Thu, 06 Aug 2009 14:48:58 -0500

I blogged the week before last about strategic defaults -- when a homeowner decides to default on a mortgage (typically through a short sale or by letting the bank foreclose) even though he can still pay the mortgage. Typically, a homeowner does a strategic default because of negative equity -- when the mortgage is more than the home’s market value.

On July 24, I talked about the recent academic paper citing that 26% of all mortgage defaults are strategic. On July 27, I wrote about the nuts and bolts of a strategic default -- include the process and its consequences. Yesterday I had a long chat about it with my friend Matt Maret, a mortgage banker with Bell Mortgage. It was fascinating to get a mortgage lender’s take on this trend toward “strategic” defaults.

Matt echoed the real estate attorney’s statement that Arizona’s anti-deficiency laws protect a homeowner’s other assets (besides the home) in the event of a default. But Matt qualified that the anti-deficiency protection, as of September 1, will apply only to primary residences, not to second homes or investment properties. (In other words, if the home is not a primary residence and the owner defaults, the bank can seize other assets, garnish wages, etc. to satisfy the balance owed.)

Matt also elaborated on one option I talked a bit about last week -- the short sale. He said that the FHA will lend to a person who has a short sale on record (even if it was yesterday) -- as long as there are no late payments on the person’s credit (and that person is otherwise qualified, of course).

I have heard from clients that banks will reportedly not entertain the idea of a short sale if the homeowner is not in default. Matt, though, said that all it takes is a good real estate agent to “help” the bank understand that the choice is 1) accept the short sale offer; or 2) foreclose on the property. “The lender will always choose the short sale,” Matt said. Why? “Because they’re not going to be able to sell the home for more than market value anyway and they’ll accrue upwards of $50,000 in legal costs to foreclose.”

Even if the home is foreclosed, Matt said, a person could qualify for an FHA loan 2 years after the foreclosure. And while FHA loans fell out of popularity during the real estate boom (because FHA didn’t allow “funny business” like no-document loans) they’re immensely popular now. In fact, Matt said that 90% of all loans originated in Maricopa County now are FHA loans. That’s in part because of tighter requirements for conventional loans and in part because the FHA will still make a loan with as little as 3.5% down (conventional lenders are now requiring at least 10%).

At the end of the day, Matt said that often the economics of a strategic default just make sense. Moral considerations, that’s another story. . .

What do you think? Have you thought about a “strategic default”? Click on the “Comments” link below and join the discussion!

I have to say that I am not an attorney and none of the information I’ve presented here should be construed as legal advice. If you have questions about foreclosure or “strategic defaults” or are thinking about defaulting on your mortgage, consult with a legal professional.

Phoenix Real Estate Blog: Neighbor’s An Eyesore? What You Can Do About It

Bob Stahl (MyPhoenixMLS) — Tue, 04 Aug 2009 14:14:10 -0500

They’re a growing problem, especially in those Valley neighborhoods most heavily affected by foreclosures. They’re unkempt yards and houses, and they can wreak havoc on the values of homes in the neighborhood.

If you’re a buyer, of course you’re going to consider the condition of homes near the one you’re considering to buy. First, who wants to live next to an ugly house or yard? Second, if you ever plan to sell the home, you could have difficulty because of eyesore neighbors. Finally, the kind of neighbors who don’t keep up their homes and yards are the kind of neighbors who can be problematic in other areas -- loud noise, strange company -- too.

For those reasons, if you’re thinking about selling your home and there’s an eyesore nearby, you’ve got to do something about it. After all, it’s still a buyer’s market and competition is still tough for sellers. To maximize the chances your home will sell, for the most money, you want your neighborhood (or at least your closest neighbors) on their “best behavior.”

What you can do about it

. . . If the home has been foreclosed (or is being foreclosed and the homeowners no longer live there)

If the eyesore house has been foreclosed, then it’s owned by the bank, which has responsibility for maintaining the home – at least to your city or homeowners association code. Your first step should be to figure out what’s specifically allowed and not allowed according to the code.

Most bank-owned homes will be listed for sale by a real estate agent. A good first step may be to call the listing agent and point out the problem. If that doesn’t work, file a complaint with the HOA or city code department.

Seeing a complaint through to resolution can take time, though. If the problem is the yard, the quickest (and most likely easiest) way to resolve the problem might be to take care of it yourself, or get a group of neighbors together to do it. Remember, of course, that you should get permission first as you’ll be on someone else’s property.

. . . If the home is owner-occupied

If the homeowner lives in the house, addressing the “ugly house” problem can be more difficult. Start with a high level of tact and diplomacy. Go to the neighbor’s home and talk face-to-face. Offer a solution to the problem. For example, if the lawn is overgrown, bring the name and number of a great lawn service.

Explain why the state of your neighbors’ home or yard is important to you. Explain, even if it’s not yet true, that a buyer was interested in your home, even to the point of making an offer, but expressed concern about the neighbor’s home/yard. (This is the old “blame it on Mom and Dad” trick that really works. You can also blame it on your real estate agent. Whatever works.) Say “I really have to sell my house because . . . and would really, really appreciate your help.”

If your appeal to your neighbor’s kinder side doesn’t work, file a complaint with the HOA or city code department (again, assuming that the problem is an infraction of the code). Most HOAs take those kinds of complaints seriously and will work hard to resolve the problem (but you’ll probably alienate your neighbor, so try diplomacy first).

What do you think? Have you dealt with an eyesore in the neighborhood? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: My 317st Blog – Taking a Look Back

Bob Stahl (MyPhoenixMLS) — Thu, 30 Jul 2009 14:51:16 -0500

Today will be my 371st blog. Wow. As I was reading in the New York Times about the roller-coaster ride that has been our housing market over the last several years, I thought, “Wouldn’t it be cool to celebrate my 371st blog with a look back at what I’ve been talking about since I began MyPhoenixMLSBlog.com in October 2007 – about 3 months after the Phoenix real estate market peaked and prices began declining?”

Source: New York Times

It’s painfully clear from the blog headlines over the past year and a half that no one saw coming what has become a giant mess of a housing market. I wish I had, but I certainly wasn’t alone in my inability to predict the future – no one did. That said, someone once said that those who do not learn from history are doomed to repeat it. So let’s take a look back. . .

October 8, 2007

What’s behind the foreclosure crisis – and what you can do about it

October 22, 2007

Investor opportunity: Phoenix named 1 of 10 lowest-risk real estate markets

November 21, 2007

The Phoenix economy’s undercurrents remain strong – solid employment numbers are just another example

December 3, 2007

National Association of Realtors Phoenix Market Report, Part 2: Three of Four Forecasts Show Positive Price Growth in 2008

December 5, 2007

Experts at the Economic Forecast Luncheon: Arizona Is One of the 10 Least Distressed States in the Country

January 14, 2008

Arizona Republic columnist suggests that the housing market may have corrected

February 1, 2008

The Latest Fed Rate Cut Makes History

February 9, 2008

Economic stimulus package includes help for homeowners

February 9, 2008

National Association of Realtors predicts pick-up in 2nd half of 2008

February 14, 2008

ASU data shows that the Phoenix-area market may indeed be poised for comeback

February 19, 2008

Through Project Lifeline, Mortgage Lenders Reach Out to Struggling Homeowners

March 31, 2008

Once Upon A Time: The Story of the Housing Bust, Subprime Meltdown, and Credit Crunch

April 6, 2008

Feeling "trapped" in a housing market that’s on fire – and not in a good way

April 24, 2008

Forget saving money, is walking away the right thing to do?

April 24, 2008

Arizona ranks 4th among top 10 foreclosure states

April 25, 2008

The value of home ownership: the power of leverage

May 12, 2008

Phoenix Real Estate Blog: Are we there [at the bottom] yet?

June 4, 2008

Phoenix Real Estate Blog: How the Foreclosure Crisis Has Spread through the Housing Market

June 28, 2008

Phoenix Real Estate Blog: The Pain at the Pump is Spreading

July 16, 2008

Phoenix Real Estate Blog: More Woes in the Mortgage Market – Office of Thrift Supervision (OTS) Closes IndyMac Bank, the Second-largest U.S. Bank in History to Collapse

July 24, 2008

Phoenix Real Estate Blog: The Housing Bill and What it Means for You, Part 1

August 3, 2008

Phoenix Real Estate Blog: Explaining the Housing and Economic Recovery Act

September 11, 2008

Phoenix Real Estate Blog: Government Takes Over Fannie Mae and Freddie Mac

September 18, 2008

Phoenix Real Estate Blog: On October 1st 100% FHA loans will be a thing of the past

October 3, 2008

We Can’t Save Main Street without Saving Wall Street

October 4, 2008

Phoenix Real Estate Blog: What the !@#$ Just Happened?

October 6, 2008

Phoenix Real Estate Blog: What Caused This !@#$?

November 4, 2008

Phoenix Real Estate Blog: Nearly One-Third of Arizonans Are “Underwater”

December 1, 2008

Phoenix Real Estate Blog: It’s Official – We’ve Now Been in a Recession for 12 Months

December 2, 2008

Phoenix Real Estate Blog: Am I An Idiot?

December 12, 2008

Phoenix Real Estate Blog: Experts Say, “It’s Going to Get Uglier Before It Gets Better”

December 20, 2008

Phoenix Real Estate Blog: 53% of Modified Mortgages Re-default After Just 6 Months

January 8, 2009

Phoenix Real Estate Blog: Good News and Bad News for Arizona Real Estate Markets

January 14, 2009

Phoenix Real Estate Blog: For Homeowners in a Bind, Help May Be on the Way

February 10, 2009

Phoenix Real Estate Blog: Getting Honest About the Market

February 19, 2009

Phoenix Real Estate Blog: Can the Stimulus Bill Save Real Estate?

March 8, 2009

Phoenix Real Estate Blog: How the “Making Home Affordable” Plan Might Affect You

March 25, 2009

Phoenix Real Estate Blog: National Homeownership Survey Generates (Surprisingly) Optimistic Results

March 27, 2009

Phoenix Real Estate Blog: Nationwide, Home Sales Jumped Unexpectedly

April 7, 2009

Phoenix Real Estate Blog: Want Some Good News? You Got It!

April 23, 2009

Phoenix Real Estate Blog: Phoenix-Area Luxury Home Market Foreclosures to Crest this Summer, Experts Say

April 29, 2009

Phoenix Real Estate Blog: Good News in Phoenix-Area New Home Sales

May 8, 2009

Phoenix Real Estate Blog: Housing Inventory Has Fallen Dramatically – That’s Great Sign!

May 12, 2009

Phoenix Real Estate Blog: Looking to Buy a Foreclosure? The Federal Government May Help Foot the Bill

May 20, 2009

Phoenix Real Estate Blog: Are We at the Bottom? What Will Recovery Look Like?

May 27, 2009

Phoenix Real Estate Blog: Obama Expands Making Home Affordable

July 7, 2009

Phoenix Real Estate Blog: Home Affordable Refinance Program Expands – Will It Help You?

July 10, 2009

Phoenix Real Estate Blog: Edith Macefield Wouldn’t Walk Away

July 16, 2009

Phoenix Real Estate Blog: Near the Bottom of the Housing Market in Phoenix?

July 21, 2009

Phoenix Real Estate Blog: Reading the Tea Leaves, Now May be the Time to Buy

July 24, 2009

Phoenix Real Estate Blog: 26% of Mortgage Defaults Are “Strategic”

July 27, 2009

Phoenix Real Estate Blog: The ABCs of “Strategic” Mortgage Defaults

371 blogs. It’s been quite a ride. . .

What do you think? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: The ABCs of “Strategic” Mortgage Defaults

Bob Stahl (MyPhoenixMLS) — Tue, 28 Jul 2009 14:42:15 -0500

Last Friday I posted on the fact that 26% of all mortgage defaults are “strategic” -- where the homeowner can afford the mortgage but chooses to walk away, most often because of negative equity (when the homeowner owes more on the mortgage than the home is worth).

I ended with the question “What can you do about it?” To answer that question, and to get the inside scoop on the strategic default trend, I talked with a local real estate attorney. Here’s what I learned:

Credit score implications

Most mortgage lenders won’t lend to people who have had a foreclosure within the last 4 years; so if you do a “strategic default” plan on renting for 4 years.

While you may be able to get a mortgage in 4 years, the foreclosure stays on your credit report for 7 years.

Interestingly, it’s not the foreclosure or short sale that does the most damage to your credit report -- it’s all the late payments you rack up as you move toward foreclosure or a short sale.

Fortunately, those late payments will be off your credit report in 2 years.

Legal implications

In Arizona, there are two “anti-deficiency” statutes that protect the homeowner’s wages and other assets from the bank. In other words, if you default on your mortgage loan, the bank can take the collateral for that loan (the house) but has no other recourse. Not every state has those anti-deficiency statutes.

If you have a second mortgage, as long as it was used as “purchase money” -- to buy the home (as in an If you default, the bank has two options: 1) it can sue you in court; or 2) it can foreclose through a trustee sale. The second, as the cheaper and faster option, is the most common.

If you decide to do a strategic default, you’ll probably have about 6 months from when you stop paying until the home is foreclosed. 10 months is not uncommon. But the only time guarantee is that the bank is required to notify you 91 days in advance of the trustee sale (the date the home will actually be foreclosed).

Tax implications

There is a “forgiveness of debt tax” but it doesn’t apply as long as you’ve lived in your home for at least 2 of the last 5 years and the mortgage was used entirely as “purchase money” -- to buy the house.

There is an additional form you’ll have to submit to the IRS. Talk to your accountant.

Other options

If you make the decision to do a “strategic default” you should be sure that you’re comfortable with foreclosure as a possible end result. That said, there are some other options you could pursue with the lender.

One alternative to foreclosure is a short sale. You sell your home as you normally would, but the bank has to agree to the purchase price -- which will be some amount less than what you owe on the home. The bank takes a loss on the difference between what you owe and the proceeds of the sale.

A short sale will still be a negative mark on your credit, but not as negative as a foreclosure.

In some cases, you could negotiate with the bank not to report the late payments (those payments you miss between the time you default on the loan and when the short sale goes through) to the credit bureaus.

Another option is to negotiate down your mortgage principle. If you’ve decided already that you’re willing to accept a foreclosure, if that’s the end result, you could call the bank and ask them to reduce the principle you owe on your mortgage to the market value (or close to). If you no longer have negative equity (or as much negative equity), that should eliminate the reason you decided to do a “strategic default” in the first place.

What do you think? Have you thought about a “strategic default”? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: 26% of Mortgage Defaults Are “Strategic”

Bob Stahl (MyPhoenixMLS) — Mon, 27 Jul 2009 16:04:11 -0500

It feels like I posted just yesterday on the topic of walking away from a mortgage, but I checked and it was in fact 2 weeks ago -- how time flies! Nevertheless, I’m not a fan of belaboring points, but this one just keeps rearing its head -- in the blogosphere and in the mainstream news. And since most Phoenicians are, in one way or another, affected by foreclosures, I thought it appropriate to address the issue again.

This time, I have a name for what I’ve been referring to as “walking away” -- it’s apparently called a “strategic default” -- at least according to the folks in the University of Chicago economics department. Several professors there released a paper earlier this month revealing that a whopping 26% of all mortgage defaults are strategic -- meaning the homeowners are defaulting even though they can afford to pay their mortgage.

The professors make some interesting points. Among them:

No household would default if the equity shortfall is less than 10% of the value of the house. (Calculate the equity shortfall like this: house value - mortgage = equity shortfall. So if a house is worth $165,000 and the mortgage is $181,500 then the equity is -$16,500, or 10% of the value of the house.)

17% of households would default, even if they can afford to pay their mortgage, when the equity shortfall reaches 50% of the value of their house. (So if a house is worth $165,000 and the mortgage is $247,500 then the equity is -$82,500, or 50% of the value of the house.)

People who know someone who defaulted are 82% more likely to declare their intention to do the same. In other words, in communities where foreclosure rates are very high, strategic defaults are more likely.

In contrast to defaults that occur because the homeowner’s mortgage rate adjusts to an unaffordable level or because of an unexpected event like illness or job loss, strategic defaults are almost entirely due to negative equity -- when a homeowner owes more on the mortgage than the home is worth.

Zillow.com estimates that 22% of all homeowners in the U.S. have negative equity. In the Phoenix Metro area, 80% of homeowners with nonprime mortgages do.

But, as the professors point out, it’s not so much the fact of being underwater as it is the magnitude of the negative equity. According to a study by the Federal Reserve Bank of New York, among nonprime borrowers (subprime and Alt-A) in Phoenix the average amount of negative equity is $73,314 (in other words, the average home is worth $73,314 less than the mortgage on that home).

In many areas of the Valley the equity shortfall approaches 100%. For example, a friend of mine in Queen Creek owes $290,000 on her house that is now worth $150,000 -- her equity shortfall as a % of her house value is 93%.

Okay, so those are the numbers. What can you do about it? Stay tuned for next week’s post The ABCs of “Strategic” Mortgage Defaults.

What do you think? Do you know someone who has “strategically” defaulted? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Reading the Tea Leaves, Now May be the Time to Buy

Bob Stahl (MyPhoenixMLS) — Wed, 22 Jul 2009 14:18:29 -0500

The Associated Press reported today that the gap between the monthly mortgage payment on a median-priced home and the median monthly rent has shrunk from a $777 difference three years ago to $221 today (in other words, today, monthly rent payments are, on average, $221 less than monthly mortgage payments).

That phenomenon, which is owed primarily to rising home affordability (not rising rents), combined with the $8,000 first-time homebuyer tax incentive, the usual mortgage interest tax deductions, and relatively low prices make Phoenix-area homes look mighty enticing to would-be buyers.

As more and more first-time buyers enter the market, though, we’re once again seeing bidding wars on those properties that combine desirability with a low price tag. Yesterday morning, in an article titled “Low-priced foreclosures incite bidding wars,” Arizona Republic columnist Jonathan Cooper talked about how low prices for bank-owned properties are sparking bidding wars.

“Experts say the environment is strikingly similar to what they saw at the height of the real estate bubble. ‘This market is about as abnormal as the hypermarket that we came out of a few years ago,’ said Jay Butler, director of the Realty Studies program at Arizona State University.”

As buyers snap up properties, the inventory of unsold homes in Greater Phoenix has fallen dramatically. Today, about 32,000 homes are on the market in Maricopa County -- 30% fewer than in January.

What’s the message in all this? Now may well be the time to buy -- get in while the gettin’s good. If you’re looking to buy a home or investment property in the Phoenix area, check out the must-read article, Six Steps That Will Save You Thousands on Your Next Home. And check out my last blog posts on investing in short sales and foreclosures.

What do you think? Is now the time to buy Phoenix real estate? Click on the “Comments” link below and join the discussion!

Phoenix Real Estate Blog: Near the Bottom of the Housing Market in Phoenix?

Bob Stahl (MyPhoenixMLS) — Fri, 17 Jul 2009 15:04:05 -0500

I don’t really like to do two posts in a row about market statistics -- because it just feels too wonky. But a recent news article about a possible light at the end of the tunnel forces me to do two statistics blogs in a row. The day before yesterday, I wrote about what home sales volumes and prices did in June compared to May. Sales volumes and prices were up month-over-month -- good news, of course.

More good news came in the Arizona Republic this morning as ASU real estate Professor Karl Guntermann said that we may be at or near the bottom. When the folks in the “Ivory Tower” say we’re at or near the bottom, I really listen (they have a good view from up there!).

Guntermann told the Republic that the rate of decline in housing prices has begun to level off since May. “While the housing market is still quite volatile, it may turn out that the low point in terms of price was in May,” he said. Housing prices in Metro Phoenix were still down significantly in May and June compared to May and June 2008, but they were down less than in April.

“The Valley-wide, year-over-year average price decrease eased from 37 percent in February and March to 35 percent in April, and preliminary data show it smoothing out even further to 33 percent in May and 31 percent in June.”

There is no doubt that housing prices in the Phoenix area will rebound, and eventually return to some trend level (where prices increase, maybe 5 or 8% a year). You can see in the chart below, from ASU, the huge price bubble when we shot up from the trend line, and the huge bust afterward. As the market continues to equalize, that trend line will change of course, but expecting 5-10% appreciation a year is reasonable.

Source: ASU W.P. Carey School of Business; Center for Real Estate Theory and Practice

Data Provided by Ion Data Express

What do you think? Click on the “Comments” link below and join the discussion!