The NAHB/First American Improving Markets Index monitors markets that are showing sustained improvement. Phoenix, which has not been on their top 20 list, shot to second place (behind Little Rock, AR) on its first appearance on the list.  NAHB Chairman Barry Rutenberg stated that their report shows that “…national headlines often don’t apply to what’s happening in a specific metropolitan area”.

Well, it doesn’t work QUITE that way. Costco actually offers the entire process on their website. They have partnered with several banks to offer a mortgage service where banks vie for applicants. Borrowers who input their information on the website receive offers from several lenders, with fees and rates listed up front. Reports are that closing costs are significantly less with Costco’s partner banks.

The company actually has been offering home loans for a few years through a different partner financial institution, but the relationship was terminated and the entire program retooled and rolled out. Costco plans to aggressively market the service to its members, with plans of adding additional financial services such auto and student loans.

Gives new meaning to one stop shopping!

The report also showed that prices have been increasing here for five months straight. Since Phoenix was one of the hardest-hit markets, this increase was touted as being a positive sign pointing towards recovery on a national level.

It’s always good to hear that things are looking up here in Phoenix, but even better when the nation finally looks to us as a sign that things are getting better rather than an example of how low the market can go!

There is no quick answer to the question. Rules state that the property must be the buyer’s primary residence for 36 months, which means you have to live in the house for that entire time. Even if you maintain ownership of the house, move out and you would have to repay the credit just like you would if you sold outright. And, the credit is repayable on the next tax return.

There are exceptions to the immediate payment requirement. Military and certain other personnel who must relocate more than 50 miles from the property are given consideration, as are those who must move out due to damage that makes the home unlivable. If a home owner is left widowed and chooses to move rather than remain, he or she is responsible for only half of the credit.

There IS a silver lining to the cloud if one has to move or sell before your 36 months are up.  Repayment is based on the home’s gain in value from the time of purchase, so it is possible that one may not have to pay back the entire $8000.

If you find yourself having to move after taking advantage of the Home Buyer’s Tax Credit, give me a call or drop me an email and let’s talk about what your options are.

HAMP is a federal program set up to assist qualifying distressed homeowners who can’t pay their mortgages to modify the terms of their loans. The idea behind the program was that the homeowner provided documents to the mortgage holder proving their inability to pay the current mortgage but an ability to pay a modified rate. The mortgage holder would then offer a trial period during which the mortgage payment was lowered. If the homeowner completed the terms of the trial period, the loan would be permanently modified and the homeowner would get back on track and current with their mortgage.  It all sounded so good, like a dream coming true.

Homeowner Lori Wigod found out the dream quickly turned into a nightmare. She met the terms for loan modification demanded by her mortgage holder, Wells Fargo but was denied a permanent loan modification. Lori tried suing the bank but the case was dismissed as the lower court held that a lender couldn’t be sued for not following through on administering a federal program.  That’s where the Court of Appeals stepped in and said that she does indeed have the right to her day in court.

Mortgage holders are, not surprisingly, unhappy with this turn of events. They say that if Ms. Wigod can sue for breach of contract it will open the floodgates and a whole lot of folks with similar experiences will follow suite and take their lenders to court too. The threat of lawsuit, they say, will slow down even further the already snail-paced system for negotiating loan modifications and will in fact scare lenders from participating in the first place.

I’m sorry, but I find this excuse laughable. The banks certainly didn’t have a problem writing the mortgages in the first place, and now they are saying they should be exempt from being sued for breach of contract? If Ms. Wigod’s experience were a rarity, I might have a bit more sympathy. However, I’ve heard too many similar horror stories from homeowners who were promised a permanent loan modification if they successfully completed the trial period, only to be told “sorry, we’re foreclosing” after meeting the terms of the agreement. To make matters worse is that they were also unaware that these "reduced payments during trial period" were actually considered missed payments and reported to their credit bureau as such. Late fees were also tacked onto the loan and for many their payments actually increased from the original payment (that was unaffordable) due to the late fees and behind payment since they were not making full payments. I have personally sat with many homeowners that this happened to frequently and they ALWAYS lost their homes. Then, even after they were given the hope of a loan modification and followed the rules the bank set for them, they were told "no" months and months down the road. The banks knew the loan would default and this was their way of getting the most money out of the homeowner before they gave up and walked away. They preyed on their emotions and desperation, plain and simple.

I am happy to hear that now this program will incur the scrutiny it so deserves after harming so many people with their false promises and just trying to squeeze extra money from the homeowner before foreclosing.

I have mixed emotions on this one. On the one hand, it would allow families to remain in their homes paying at or below market rent rates while they rebuild their credit in preparation for buying another home. With rental rates skyrocketing, this could be a major saving for many families. It could also stabilize neighborhoods in that homes that would remain vacant between foreclosure and sale would stay occupied.

However, I just can’t quite get past the “sweetheart deal” aspect, in that these homes would be sold, with tenant in place, to investors. It sounds an awful lot like the deal Fannie Mae came up with to sell blocks of foreclosed properties to big investors. The big mortgage lenders had a lot to do with the current state of affairs in real estate, and I’m just not sure I trust them to come up with a solution that is actually beneficial to homeowners and not to their own bottom lines.

Well, the details have been released and guess what… it offers practically NOTHING. Supporters are singing about how about 1 million homeowners are going to see principal reductions on their mortgages, and about 750,000 more will be able to refinance their mortgages at a lower rate. Sounds pretty good, until one figures that there are about 11 MILLION homeowners who are underwater, and around 3.5 MILLION people who have already lost their homes. And the clincher… the only loans eligible for principal reduction are the ones still held by the banks and aren’t federally backed by Fannie Mae or Freddie Mac. Granted, HARP 2.0 offers refinancing for Fannie Mae and Freddie Mac backed mortgages (it excludes all others) but is it really fair that these loans aren’t eligible for principal reductions?  Of course not, but when has the government ever been concerned over what’s fair for the little guy? There was enough legislative double-speak to make the people THINK things were being done, but in the end this whole thing is nothing but a slap on the wrist to the banks. Just the usual pre-election year spouting of empty promises…

You can read more here, on CNN.com.

I’ve written in the past that we are in a position of not having enough homes to satisfy buyer demand. To me, and probably a large number of Realtors and real estate market experts, when demand exceeds supply and prices go up, it means the market is improving. Now, this program is removing from the market homes that buyers desperately want to buy and selling them to big player real estate investment companies. How is that helping the Phoenix market? I still haven’t figured out that logic yet.

And, to make things even more mysterious, the companies purchasing these properties in bulk have to sign confidentiality agreements so they can’t discuss the terms of the sales. How convenient.  Whatever happened to transparency in government? Don’t the American taxpayers have the right to know the terms of these sales, especially since it is our tax dollars that backed these mortgages and are bailing out Fannie Mae and Freddie Mac?

There’s something just a little to disconcerting about this whole deal. Remember awhile back when bad mortgages were being written (and backed by Fannie Mae and Freddie Mac) and then batched for resale? When that system fell apart, it contributed a great deal to the mortgage crisis. It’s not mortgages this time, it’s houses that are being batched and sold to big investors, and the same folks involved with the last fiasco are involved with this supposed rescue plan.  And who benefits the most? My guess would be those big investment firms that are buying large quantities of federally-controlled homes, at terms that no one can discuss.

And, best of all, Phoenix did NOT make their top 5 list of states with the most non-current mortgages. The states that made this dubious honor are Florida, Mississippi, Nevada, New Jersey and Illinois.

Remember back in December when Congress extended the payroll tax cut for an additional two months? Well, there is one truth in life that pretty much applies to everything, and that is “there is no such thing as free.” Although this bill might have had some good intentions, you just know that the money had to come from somewhere. And how is the government going to fund the two month extension? Not by reducing the budget, but by making homeowners pay for it, of course.

There is a new fee for homeowners who utilize Fannie Mae and Freddie Mac backed loans. In order to fund this two month extension, for the next ten years all loans and refinances that are backed by Fannie and Freddie will be subject to a fee that is currently 1/10^th of 1%. This fee remains in effect for the life of the loan, and can amount to several thousands (even tens of thousands) of dollars over the life of a mortgage (especially since it can possibly be increased.) And, you won’t ever see this fee broken down on your loan documents because it is built into the interest rate.

To top it off, the money collected will go into the general fund where Congress will be free to spend it on whatever they want, rather than into the Social Security fund to replace the payroll taxes that weren’t collected. Slick, isn’t it?

This year, that 125% limit has been removed. HARP 2 as it is called will provide assistance to distressed homeowners, no matter how far upside down they are, as long as they meet the rest of the guidelines (one of which is the loan has to be backed by Fannie Mae or Freddie Mac.) This tweaking of the program may actually help accomplish the goal of keeping families in their homes!

If you want to know if your loan is Fannie Mae or Freddie Mac backed so that you may be able to participate in this program, contact me via phone or email to do a loan look up for you!

Now, one thing we need to keep in mind is that this report covers an entire year, but doesn’t take into account changes that take place month to month. Let’s look at this report based on what has been happening in our market the last several months. Foreclosures ARE decreasing. Maybe not as fast as we’d like, but they are going down. Home prices may have been lower the end of 2011 than compared to the previous year, but those end of year prices were higher than they were in previous months. It’s pretty easy to find a silver lining to the cloud in this case.

An interesting question posed by Jay Butler, author of the report, is what the role of owner/occupants will be. Investors have been quite active recently, and they are getting more involved in purchasing foreclosed homes at auction rather than waiting for them to come on the market as bank-owned listings. This in effect further reduces the number of homes that come on the market (at least in the short term as many investors buy properties to fix and resell).

2012 promises to be a pivotal year in Phoenix area real estate. We may be on the road to recovery, but it remains to be seen how robust that recovery might be.

On a national level, it might seem like a good idea. After all, there are plenty of national statistics that show the foreclosure crisis has really taken its toll on real estate values. Many markets are still experiencing decreases in home values due to the large number of short sales and foreclosures and a small pool of buyers.

However, our Phoenix real estate market is actually growing. Buyers are snapping up homes almost as soon as they come on the market. We currently have approximately 2.5 months’ worth of inventory; to support the buyer demands, we should have 4-6 months. If the government sells the federally backed foreclosures to investors with the provision they be converted into rentals, we will likely see the inventory drop dramatically. Now, on the surface this looks like it could be a good thing. Low inventory and lots of buyers would mean prices go up. However, there’s a dark side to this equation. The demand is artificial; only a few big firms would be buying all these homes, pushing out individuals who might want to purchase a home to live in themselves. Right now we have lots of investor activity on the market, but there are very, very few investors that would be as big as the big companies that would be working with the government to acquire these homes. These large companies would in effect control a significant portion of the real estate market, and not just on a local level since it’s likely that the companies chosen to participate would be national.

I just don’t have a good feeling about this at all, and think that the government needs to quit this “one size fits all” approach to solving the mortgage crisis. What might work in one market may not work here in the Phoenix area, and may in fact stall out what looks to be the beginnings of a recovery for us.

According to data research company CoreLogic, November Phoenix area home values were down 5% from what they were November 2010. If distressed (ie short sale and foreclosure) sales are removed from the equation, that percentage jumps to 5.3%. This indicates that non-distressed properties experienced the biggest drop in value, which comes as no surprise. Short sales and foreclosures have been setting the price of homes for a while, which is why many homeowners who don’t have to sell aren’t putting their homes on the market. Or, if they DO sell their homes, they have to price them to be competitive with the distressed listings.

However, this report doesn’t take into consideration that prices have been gradually edging upwards. Prices may be lower from last year at the same time, but they are up from what they were a few short months ago.  Buyers are still going to find good deals and historically low interest rates, but it appears that they will be paying more to buy the home of their dreams. And, as buyers absorb the short sales and foreclosures, more sellers will find the increasing prices and demand for homes attractive enough to put their homes on the market.

One effect of our troubled real estate market is that foreign investors are being attracted by the historic low prices. According to an article “Snowbirds flock to U.S. Bargains” in the Montreal Gazette, Arizona comes it at fourth place in the markets that attract foreign investors (behind Florida, Texas and California.) According to Credit Sesame, a US-based company, the largest number of foreign home buyers of US properties come from Canada, followed by Asia and Europe. These buyers are purchasing primarily single family homes under $100,000.

Many folks point to the frenzy of investing that helped push the real estate balloon to it’s bursting point a few years ago, and fear that this current interest by investors could create a similar situation in the future. However, a good point that this article brought up was that we have a large inventory of homes available for sale, and that our economy may remain sluggish until that excess is absorbed. Investors, whether foreign or domestic, are indeed snapping up the good deals our market is offering and as the number of available homes decreases we are seeing prices edging upward. It remains to be seen as to what the future implications of investor-driven sales will be, but this article shows that interest in the Phoenix market extends beyond our borders. It also shows that there is competition for good deals, and folks who are thinking about purchasing a home might be well-advised to take advantage of the historically low interest rates and the low prices before both disappear.

I hope that you and your loved ones have a wonderful holiday season!

But these last several months have given me a flicker of hope that things may really be turning around for our hard-hit market. Earlier this month, the Arizona Regional Multiple Listing Service released data that indicates the percentage of home listings that are distressed is dropping. The outlying areas seem to have the greatest numbers of short sale and bank owned listings, while the cities towards the center of the metropolitan Phoenix area have the least number.

Although I think it’s still too soon to tell if we’re seeing an honest-to-goodness recovery of the Phoenix area real estate market, things are sure looking a lot better than they did this time last year!

Other parts of the report, in fact, are quite positive. The number of active listings on the market continues to decrease. Although this too is likely to be in part due to seasonal fluctuations, it is good news as far as price goes. With historically low interest rates and home prices, buyers have been snapping up well-priced homes as soon as they come on the market. Back before the bottom fell out of the real estate market, we would have expected home prices to go up due to the demand and sometimes fierce competition among buyers. However, this hasn’t been the case until recently. Despite the increasing demand, home prices continued to creep downward until lately. For the past several years, buyers have had a wide selection of properties to choose from, and if an offer on one home wasn’t accepted, they could easily find another.  It appears that the number of available listings has dropped to a point where buyers don’t have quite as wide a selection, and in order to make a purchase they have to come to the bargaining table with more money. And, this is what we see on this month’s report; the average price per square foot is edging upward.

Are we on the road to recovery? It’s still too soon to tell, but this is a unique time for both buyers and sellers. Although prices are going up, there are still plenty of great deals available for buyers. And sellers who price their properties well are finding willing buyers. If you would like to take advantage of our unique market, give me a call or send me an email and let’s talk about how I can help!

Still, overall the Phoenix market looks to be on track for a much-needed recovery. After all the bad news about our real estate market these past few years, I’ll take any bit of good news as signs that we’re on our way back up.