Real Estate Information

Realtor Magazine reports that an estimated 4.5 million homeowners owe more than their home is worth. That number is expected to rise to 5.1 million in June, affecting 10 percent of homeowners and increasing the chances of them walking away.

Consultant at Oliver Wyman calculated that in 2008 17 percent of owners were defaulting. Some chose to default despite that they could afford the mortgage. This trend is increasing as homeowners realize it will take ten to twenty years, sometimes more to break even on their homes. For those close to retirement, they are thinking walking away is their best option.

First American estimates that it would take $745 billion, the same amount as the first stimulus pacakge, to restore all underwater homeowners to the break even point.

A big complaint about "bailing" out homeowners are from the homeowners who are current on their mortgage and are not likely to walk away. They feel this is unfair to them. However, according to Michael Barr, Assistant Treasury Secretary for financial institutions, doing nothing would be another blow to the already fragile economy.

Source: The New York Times, David Streitfeld (02/022010)

A forecase from RealtyTrac projects a record 3 million foreclosures in 2010. In comparision, 2009 has 2.82 million foreclosures. They project over 4.5 million households in 2010 will have a foreclosure filing. A filing is an intent by bank to foreclose but they have to wait State required time periods to foreclose or postpone due to short sale or loan modification activity. In contrast, 2009 saw 3.96 fiilings last year.

Government programs aimed at helping homeowners stay in their home have failed. Only one percent of the four million loans have been targeted for loan modification. It appears the government has all but given up on trying to get banks to modify loans. Starting April 2010 the Treasury has implemented timeframes to expediate short sale approvals for select banks.

Please visit www.ishortsaleaz.com to read about avoiding foreclosure and helping you answer your questions on what's best for your family.

Home prices in the Phoenix metro area are declining at more modest rates than they did in 2009. If the trend continues, prices might stop falling and level off. That’s the assessment of the Arizona State University - Repeat Sales Index, which compares changes in average home prices from year to year.

However, home prices are still dropping to some degree, according to ASU. The year-to-year declines have been going on for a record 32 consecutive months. Home prices peaked in mid-2006.

Of course, this is good news but is all depending on the economy and job market. If employment continues to slide then home values could continue to decline.

Arizona Republic, Catherine Reagor - Economist predict that Arizona's housing will not recover until 2014, two years later than they previously expected. Metro Phoenix home prices aren't expected to reach the highs of 2005 again until after 2014.

Without new jobs to draw more residents to fill almost 80,000 area homes left empty by the recession, home prices will remain depressed. The State is not expected to see pre-recession employment levels for another four to five years.

To read the full article click here:http://www.azcentral.com/business/realestate/articles/2010/01/21/20100121urbanlandonline0122.html

For those lucky homebuyers who are eligible to receive up to $8,000 tax credit to buy a home, you may have to wait awhile to get the money. Due to a high volume of fraud and scams homebuyers can no longer E-file and receive the tax credit. Therefore, you now have to fill out your tax forms and mail the forms and your closing documents to prove you purchased a home to the IRS. This is causing up to a four month delay in receiving the money. The good news is you will eventually get the money, the bad news is you will have to wait a little longer to get it than those who did last year.

In a move that could make foreclosed properties more attractive to investors and increase the number of homes available to first-time buyers, the federal government is temporarily lifting a prohibition against providing FHA mortgage insurance for homes that are resold within 90 days.  The waiver on the purchase of flipped houses with FHA mortgages, which begins February 1 and is effective for one year, “will give FHA borrowers access to a broader array of recently foreclosed properties,” HUD said Friday in announcing the change.  Conditions attached to the waiver are expected to prevent what HUD called “predatory practices” by investors. 

Freddie Mac Chief Economist, Amy Cutts predicts interest rates will increase to 6% by end of 2010. Her predictions are bearing fruit, this week interest rates creeped over 5% from a 4.75% low just weeks ago.

She statest that "extraordinary resources have been put into keeping rates down and it's hard to imagine they can go lower than they are now. Anything you get under 5% now is a gift at this point."

USA Todayreports that 1.7 million homeowners are on the verge of losing their homes. This inventory, referred to as "shadow" inventory will continue to weigh down prices in the upcoming years. One year ago this number was 1.1 million and this shows that lenders are not stemming the tide of foreclosures through modifications and workout programs. Economists expect the 1.7M number to rise in the next year.

Markets are getting pounded with homeowners walking away from their homes due to unemployment, hardships, or extreme negative equity. It's a mixed bag of good and bad news with home prices showing stablizing or minimally gaining to understanding that we are in the eye of the hurricane and still need to come out the other side.

If you have questions on foreclosure, loan modification or short sales please visit my site at www.ishortsaleaz.com for all the information you could want and more.

While we have seen temporary loan modifications (90-day loan modifications or trial modifications) soar there has been little permanent relief for troubled homeowners. Only 4% of troubled homeowners have been approved for a permanent loan modification per the Treasury Department this week. This news has prompted the Obama administration to start pressuring servicers to do more for stuggling homeowners. Bank of America has only converted 98 homeowners into permanent loan modifications versus 4,000 from JP Morgan Chase. However, those are only a small fraction of applicants who are trying to get moved from trial loan modification to permanent.

Although foreclosures dropped from October to November housing experts expect foreclosures to ramp back up in the coming months. Even if the Treasury succeeds in getting more homeowners into permanent modifications a larger question remains. How many modified borrowers will go delinquent after being modified? More than 50% have defaulted on their modified loans so the success rates have been dismal. Why? Because negative equity is not being addressed. The programs implemented are addressing the wrong issue. The issue is the historic NEGATIVE equity people have in their homes. Negative equity is very tempting for homeowners to just walk away even if they can afford their home. Twenty percent of homeowners are underwater and no servicer is reducing principle to address the "real" issue. Most experts agree the foreclosure program rolled out by the administration is destined to fail because it does not address negative equity.

Gone are the days when you all you had to do to get a home loan was be able to fog a mirror. However, I speak with potential buyers each day who don't get the reality that you truly have to qualify financially for a new home loan. We are getting back to the basics folks and here is a new guideline that will obviously make some buyers unqualified to buy a home.

Effective December 12th, 2009 Fannie Mae will require a minimum credit score of 620 regardless of other loan factors and your debt to income ratios (mortgage payment + auto payment + student loans + monthly credit card payments divided by your monthly pre-tax income) to be no higher than 45%. Currently your debt ratio can be 55% of your gross income.

Fannie Mae is government owned and one of the largest investment backer of loans being originated today. This will affect lots of homebuyers. In addition, lots of other lenders follow Fannie Mae's guidelines so expect other investors/lenders to follow suit.

If your credit score is too low then start paying off credit balances to get your credit lines under 50% of the max. Don't be late on payments. You can also contact me and I can put you in touch with a company who will help you repair your credit. Remember, if you want to buy a home, DON'T rack up other bills and credit card debt. One last thing, do not let a bunch of creditors run your credit. That too will reduce your credit score.