Thankfully the latest unemployment report released today, Feb. 5th showed an improvement in the overall job market.
Unfortunately the stagnant economy and elevated unemployment numbers will have an impact well beyond the point when we return to full employment (approximately 4.5% unemployment).
The reason is, many of the people who will be hired over the next couple of years will be hired at a fraction of what they were earning prior to this economic meltdown.
Which leads me to the title of my blog post.
Here in the Phoenix area we have seen home prices plumet 53% on average from the peak of June 2006. Which means that anyone who bought, refinanced, or took out a line of equity on their homes since about 2001 is underwater on their loan. That is a lot of homeowners!
And it will take years, if not decades to recover the lost value on their homes. If you simply use the rule of 72 (an accounting trick where you divide 72 by the expected rate of return on an investment to estimate the time it will take to double your money) at a historical national average rate of appreciation of 6% for home values, it would take 12 years or more for most homeowners just to reach a break even point. And that's if we have 6% appreciation. The outlook for the next year or two is very little to no appreciation in home values here in Phoenix.
So in order to sell a there home, most Phoenix home owners are going to have to conduct a short sale.
Luckily Congress has stepped in to try stem the tide of foreclosures and give home owners a better option other than just walking away from their homes, thereby perpetuating further price declines in home values.
The program is the Home Affordable Foreclosure Alternatives Program. Or HAFA for short.
HAFA doesn't take affect until April 5, 2010 and ends December 31, 2012 but here's what it is required and what the program offers for homeowners who wish to conduct a short sale:
- The property must be your principal residence;
- The mortgage loan is a first lien mortgage originated on or before January 1, 2009;
- The mortgage is delinquent or default is reasonably foreseeable;
- The current unpaid balance is equal to or less than $729,740 (the maximum unpaid balance limit may be $417,000 in Maricopa County. This has yet to be clarified.);
- The borrower's total monthly mortgage payment exceeds 31 percent of the borrower's gross income;
- Provides financial incentives: $1,500 for borrower relocation assistance, $1,000 for servicers to cover administrative and processing costs, and up to $1,000 for investors for allowing a total of up o $3,000 in short sale roceeds to be distributed to subordinate lien holders.
If you are in a short sale position or need more information about short sales please contact us here at Arizona Premiere Living. We have conducted dozens of short sale transactions over the past few years. We won't claim to be successful 95% of the time. But we know what we're doing, and we'll give you a fair and honest assesment of your situation.