just came across something that is NOT a scam but is potentially misleading and in my opinion NOT in the consumers best interest.
I received a letter in the mail from my mortgage lender, National City Mortgage, inviting me to sign up for its "bi-weekly" mortgage payment program which would save me thousands of dollars over the course of my mortgage AND would reduce the payoff period of my loan.
The concept is legit and makes a lot of sense. The idea is that if you make a smaller payment (approximately 1/2 of your normal monthly payment) every two weeks then because the mortgage company gets its money sooner there is less accrued interest so you end up saving money. Also, because there are 52 weeks in a year you actually make 26 x 1/2 payments vs. 12 full payments (one per month) equalling two extra 1/2 payments per year thereby adding to the interest savings and contributing to a quicker pay off. The savings can amount to tens of thousands of dollars over the life of the loan AND a quicker pay off of 5 years or more. This in a great way to save a lot of money over the life of the loan without struggling too much financially to do so.
Well, I thought that was what I was signing up for. But instead it turns out the National City Mortgage has contracted with a third party company (i.e. Western Union Paymap hereafter referred to as WUP) because National City Mortgage is not set up to calculate OR receive mortgage payments on a bi-weekly basis. In other words they are offering a bi-weekly payment option but they can't really accept bi-weekly payments. Instead WUP collects payments every two weeks but makes the mortgage payment ONCE A MONTH just like I currently am. So I DON'T SAVE any interest expenses for making 1/2 of my mortgage payment early each month and even worse WKU keeps the interest it earns on my money during that two week period!!!
What's worse is that WUP charges a service fee of approximately $117 per year to boot.
This doesn't make any sense at all. It's wiser for me to continue paying the way I am but make one extra payment each year. I'll pay off the mortgage just as fast and save the same amount of interest PLUS make a little bit of interest on my money AND save the service fee.
There are normal bi-weekly payment programs offered by some lenders and again I think they make a lot of sense. Just be sure to know what you're agreeing to first as some of the programs are real squirrely.
Tempe - The City of Tempe reports having the best quarter for building activity ever for the fiscal year. This is mostly due to the new permits drawn for student housing and other construction projects along Apache Boulevard.
Borders Books on Tempe Mill Avenue is about to close but Dunkin' Donuts, several yogurt shops, a Vietnamese restaurant and Campus Scooters all recently openend on Mill.
Construction of the Hyatt Regency Hotel in the Hayden Ferry Lakeside multi use project at Mill Avenue and Tempe Town Lake has been postponed until 2010.
The City of Tempe is considering adding streetcars to the city's transportation system to link South Tempe and Chandler to the new light rail system. The idea right now is to run streetcars down Mill Avenue to Southern, and then east to Chandler. The City of Chandler is looking into ways to find funding to tie into any line and extend it to Chandler Mall. Since the federal government requires a two year study of all options before it will consider contributing funds to any such project, expect the possibility of many changes to the plan as it stands today.
Phoenix - Metro light rail will run trains later than normal hours to accomodate Phoenix Sun's fans leaving tonight's game which starts at 8:30 pm.
Nothing scientific but I truly believe that there are significantly more people walking around downtown Phoenix since the light rail opened. Also, we are getting more phone calls from folks wanting to buy or rent along the light rail. I have long said that the light rail will provide a focal point for the investment of time, money and energy. I believe that we are beginning to see this come to fruition.
Check out China Chile Restaurant at 3rd Street just south of Osborn Road. It has very tasty food at great prices.
CityNorthsuffers potential major blow when an appeals court judge ruled that a $94 million subsidy from the City of Phoenix is unconsitutional. CityNorth, located at 56th Street just north of the 101 (south side of Desert Ridge) is a huge mixed use project opening at an absolutely horrible time. Given the horrible market we wonder what losing the $94 million truly means?
Scottsdale - Completion of X (Ten) Wine Lofts on Osborn Road just west of Scottsdale Road has been stalled. The lender, Mortgages Ltd, and the developer, Grace Communities, are fighting http://www.azcentral.com/realestate/articles/2008/12/26/20081226biz-sr-realestate1227.html. The article reports that deposits for 64 condos have been returned to the buyers. In light of the current market we would expect the fight to drag on and on. After all, wouldn't you rather finish a building and sell it in a couple years rather than today?
I've been intrigued by the popularity of the light rail.
Recently thirteen of us boarded a train at about 10:00 am and rode it to various high rise and loft condo buildings along the route. During the three plus hours we toured we got on and off the train four times. And I kid you not every single train during the three hours was full; standing room only.
I took the opportunity to ask my twelve tour partners why they thought the light rail was so much more popular than the bus. After all, buses in Phoenix are notoriously empty. Here are some of the answers I got:
City buses suffer a stigma that the light rail doesn't share.
The light rail is easy to use while buses require knowledge of routes and connections.
Light rails stop more frequently and consistently which may make taking a train bearable even during the summer (we'll see about that).
All thirteen of us wants to live on the rail and think that condo values will appreciate better than non-rail condos.
There have been a tremendous number of naysayers but I don't think anyone would argue that at least for now the light rail popularity is remarkable.
We just took a detailed look at Home Owner Association fees at all Phoenix high rise condo buildings for the last five years. For the most part you will see a gradual increase in the older established buildings while increases were somewhat extreme in the newer buildings. A cynic might believe that the reason the newer building HOA fees jumped so much was because the developers underestimated operating costs in order to promote sales of its condos. Of course an optimist might explain that HOA fees and operating expenses are very difficult to predict for a building that does not already exist. I'll leave it to you to decide what makes the most sense to you.
Please know that I pulled the numbers from the MLS. HOA numbers on the MLS are compiled by real estate agents prior to their listing individual condominiums for sale. So the data, although pretty accurate may not be exact. Minor discrepancies may be statistical errors or anomalies. However, the numbers should be reasonably accurate to determine trends and general costs.
Here's the data stated in dollars per square foot per month:
Buildings with a "-" did not exist during the time period.
I heard recently that historically Americans pay 26% more to own property than to rent it. As I didn't know whether this was true or not I did a little digging and found a site called www.economicpolicyjournal.com with the following:
"After two years of rapid home-price depreciation, the relationship between the cost of rental payments versus after-tax mortgage payments is tilting toward ownership in a number of metropolitan areas.
Over the past 18 years, after-tax mortgage payments have averaged 26% more than rent payments, according to Green Street Advisors, a real-estate consultancy based in Newport Beach, Calif. In 2006, at the height of the housing bubble, mortgage payments reached as high as 66% more than rent payments. But by the end of 2008, average monthly rent for the largest 50 metropolitan areas was $1,045, compared with after-tax mortgage payments of $1,300, assuming a rate of 5.5% on a 30-year fixed mortgage. That means mortgage payments averaged just 24% more than rent payments, the narrowest gap since 2001.
In more than half of the top 50 U.S. housing markets - including Los Angeles, northern Virginia and Las Vegas - the ratio is now below its 18-year average. In Los Angeles, for example, mortgage payments averaged 60% more than rent payments between 1990 and 2008. Now, those payments average 30% more than rent...
A separate report by Moody's Economy.com also finds that home prices relative to rents are more in line with their historical relationship...The report notes that home prices relative to rents remain well above historical levels in 30 markets, including Philadelphia; Portland, Ore.; and Virginia Beach, Va."
OK, so of course I had to check this out in relation to high rise condos in Phoenix. I spent a large part of the day first trying to figure out how to pull relevant data from the MLS and then how to build it into a useable format. I picked Optima Biltmore Towers because it was definitely a product of the boom, it has a lot of rentals, and it has enough sales to provide adequate data for the study. A number of complications presented themselves. For example in 2006 property taxes hadn't been established so I used the numbers from 2007 instead. Also, since I relied on MLS data that means that my numbers are only as good as the data that was inputted into MLS by all the various agents. In some cases agents did not list the square footage of their condo listings so I had to drop those properties, in other cases they did not include the HOA fees so I had to drop those. Also, for two different quarters there weren't any sales at Optima Biltmore Towers so there is no data point for those periods. And finally, the article above mentioned that the rent vs. own difference was based on after tax dollars. I adjusted the principal and interest "mortgage" amount by 20% to adjust for taxes. Argue with me all you want about it; I just needed a number and I figure 20% is conservative. And after all I'm just trying to see a trend not have a bullet proof statistical analysis.
In the first quarter of 2006 we see that purchases ran about 61% more per month (after any tax benefits of owning) than comparable rentals just like the article mentions. But we see that the gap grew larger throughout the rest of 2006. I'm not surprised by this. Investors went really crazy for high rise condos largely because they liked the extended build time, thinking that they would "ride the appreciation" that much longer for extra profits. Because of this sales prices of high rise condos probably "boomed" more than other market segments and will probably "bust" harder as well.
Eventually I'll get around to posting more of the data but for now, know that the gap for the first quarter of 2009 is at approximately 25%, slightly better than "historical norms." And again, this number may be artifically high as I only used a 20% factor for the tax benefit. Regardless, it seems that the gap between buying and renting condos at Optima Biltmore Towers is starting to make sense again and may warrant further looking into a purchase.
You asked for it so we went out and got it. Short term rentals that is. In the past we turned away many people who needed help finding cool condos in downtown Phoenix because there flat out wasn't anything available, until now. We now have access to VERY nice furnished one and two bedroom high rise condos right next to the baseball stadium downtown. These condos are available for as short as one night and for as long as six months. Each condo comes fully furnished, with complete kitchens, wi-fi, Direct TV, and even room service from a local restaurant. Enjoy the "A-Cabin" amenities including the fifth floor pool and spa, professional fitness center, sauna, roof top entertainment room and patio, attached garage, conference room and more. All this, walking distance from Phoenix Convention Center, Chase Baseball Field, US Airways Basketball Arena, three live theaters, multi-screen movie theater, shopping and tons of great restaurants and bars like: Pizzeria Bianco, Sens, Pasta Bar, Hannys, Coach and Willys, Rose and Crown, Tufts and more. Also, with a light rail stop 1000′ feet away ASU and all of Tempe are open to you.
Walk to professional baseball, basketball, great restaurants and bars. Stay in the heart of downtown Phoenix.
So if you are relocating to Phoenix and need interim housing until you buy something or if you're visiting for conventions or athletic events, give us a call and we'll hook you up with a great downtown Phoenix condo rental.
I want to buy now but I'm afraid that prices may go down further and I don't want to miss a better deal later. What should I do?
Answer: You're not the only one. Many prospective buyers are "sitting on the fence" and not buying now for this very reason. But, more and more people are pulling the trigger. Here's why.
The United States housing market just wrapped up its best season in three years and prices are up 3.6% since April.
Talk of a new "wave" of inventory about to hit the market may be exaggerated. We believe that the vast number of homes that are expected to come to the market as foreclosures are already on the market as short sales. This means that the majority of these homes are already counted and will not contribute to a flood of new inventory. "Authentic new "supply" (housing starts) currently hitting the market is actually quite low. In fact, it hasn't been this low since at least 1959 (and probably a lot longer, but we don't have data prior to then). This year, builders will begin construction on somewhere around 620,000 units, a number that's about 32% below the old record low of 906,000 set-you guessed it-last year" (Home Prices: Sustainable Bottom or Dead Cat Bounce? By: Morningstar Monday, October 12, 2009 7:38 PM).
Most of the urban condos built early in the boom already "busted" meaning they sold as short sales or foreclosures. In many of these buildings we are seeing price stabilization and/or price gains.
In some urban condo communities sales prices are low enough for investors to buy and rent the property out and net a positive cash flow. We have seen an absolute flurry of buyers in some of these recovering buildings. Competition is hot for the right condo in the right community.
We expect interest rates to go up and soon for two reasons. First, it is very likely that the US will experience high inflation in the not too distant future. Interest rates go up during times of inflation. Secondly, interest rates are currently artificially low due to US government influence. Investors (other than the US government) are not buying mortgage backed securities because the rate doesn't support the risk. In other words would you yourself loan money today for someone to buy real estate if you were only going to earn 4.5 or 5% for the next 30 years? Probably not. But that's the going rate today. Would I feel better about loaning money if I was going to earn 8 or 9 or 10%? Probably. The problem is that mortgage interest rates are half that. So "investors" like me aren't loaning money for such purchases. The US government can not loan money at these low rates 4.5 to 5% forever. When the US stops loaning money rates will have to go up enough to attract other investors. So, expect interest rates to go up for this reason and with the coming inflation.
We believe that there is pent up demand for properties. In many cases people stopped buying in 2005 or so. Those folks have been sitting on the sidelines waiting for the dust to settle before they will buy. However, there's a point where people don't want to wait, or can't wait, any longer (i.e. pent up demand) and they buy. There is strong evidence to suggest that things are getting there. In downtown Phoenix, condo sales far exceed the supply (see chart below). You'll see that in 2008, inventory (the number of condos for sale) far exceeded the number of buyers so prices dropped and dropped and dropped. In February 2009, the line representing inventory and the line representing the number of buyers intersected meaning that the numbers of buyers and the numbers of sellers were about equal. Since then, dramatically more people are buying than people are selling.
Gang, there are always exceptions to any rule. But it is our opinion that there are great deals out there for those who know where to look AND who meet certain other criteria. If interest rates do go up, and I strongly believe they will, then you might want to take advantage of today's low rates, take advantage of the many sellers who really do need to sell (at lower prices), and get yourself a great urban condo now rather than later. Don't be one of those folks who years from now say "boy I really wish I had bought when I had the chance." Call us at We Know Urban Realty and get our help. We don't sugar coat stuff and we know where the deals are and can show you why they are good deals.
I am hearing more and more stories from renters of high rise condos and lofts who are getting cheated out of rents and deposits when their "landlord" stops paying the mortgage and the bank forecloses. These poor folks sometimes have to move in a matter of days or weeks. Talk about disruption!
If you do not know how to protect yourself from this then you really should be calling an experienced real estate agent to represent you. Yes, I emphasized "experienced" intentionally. Believe it or not there are few agents who are experienced in condo rentals and even fewer who know how to protect their clients from the nightmare I describe above. The agents at WeKnowUrban get 20-30 inquiries from renters who want our help. Because of this volume we have the experience and knowledge to protect our clients. Take advantage of this experience and knowledge and call us. It won't cost you anything (the landlords pay us) and you might save yourself thousands of dollars, a lot of aggravation, and the stress of moving out on short notice.
I have read in the recent past that some properties had been built using contaminated sheet rock manufactured in China. But I had not heard or read that any of this bad sheet rock made it to Phoenix. This article suggests that some of the contaminated product did make it to the Valley. The article mentions that a watch dog group believes that some of the product was used in local high rises. I sure hope that it was not used in any of the residential high rise condos. Can you imagine the impact this would have on an already very unstable high rise condo market?
We first reported the problem a two weeks ago as it related to a deal we were working at The Vale Lofts in Tempe. Fannie Mae used to underwrite conventional loans in condo communities if 51% of the condos were either already sold or under contract with legitimate buyers. The new rules increases that percentage to 70%. So think about it. You are a major investor who is considering buying the bank note on a high rise condo building that is in trouble. You figured that you would have to offer seller financing to prospective buyers until you reached the 51% mark. Then, in one fell swoop Fannie Mae changes it to 70%. So in a building like Century Plaza the developer might have to finance an additional 30 condos before any buyer could get regular financing. I would imagine big investors have a trick up their sleeves but I don't know what it might be.
Another whammy is that any buyer, regardless of how good their credit score, will have to pay a .75% premium when buying a condo in a high rise building. This won't be a deal breaker for a lot of people but it might persuade some to buy elsewhere.
Yet another challenge? Fannie Mae has also stated that it will no longer do loans in condominium communities where 15% or more of the homeowners are behind in their HOA fees. As we stated in our aforementioned blog post this will be a bigger and bigger issue in condo communities. This particular rule won't affect buildings like Century Plaza or Safari Drive or one of the other failing buildings because the new owners will bring a large influx of cash to properly "fund" the HOA but it will adversely affect the communities where the developer has already moved on and the HOA is in financial trouble because of foreclosures (e.g. Landmark on Central, The Vale, and others).
So, although we are hopeful that the pending failures of several local buildings will bring much lower prices, renewed buyer interest and potential market recovery we are very concerned that Fannie Mae's new guidelines might unravel everything.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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