AZ Real Estate Newsletter

The Arizona Republic ran an article recently that quoted a report published by real estate data collector CoreLogic. According to the report, Arizona is #2 in price gains for February, posting an impressive 18.6% increase and placing us closely behind first place Nevada (19.3%) and comfortable ahead of third place California (15.3%)

As we’ve seen here in Phoenix, investors are still driving the recovery. The report states that the number of first time home buyers is still critically low, but I suspect that a major factor is that the price range they are most interested in (around $150,000) is experiencing a critical shortage, with cash-toting investors are competing in the same price range. It’s not necessarily that there aren’t enough first time home buyers who WANT to buy a home, but they are facing mighty stiff competition. In fact, according to the news story, resale home inventory on a nationwide level hit a 13 year low in January of this year!

The critical shortage will likely start easing up a bit though. Prices have now recovered enough in the Phoenix AZ market that many sellers who formerly were upside down on their mortgages can now actually sell for a profit. We are seeing this already as the number of non-distressed (ie short sale, foreclosure & auction) listings are decreasing and the number of traditional ones are increasing.

Hold on to your seats, folks, the government is at it again.

The latest bit of brilliance coming out of the White House is a plan to urge banks to extend mortgages to buyers with weaker credit. After the whole real estate bubble burst and mortgage crisis, banks have become a lot more wary about how they determine who they’ll give mortgages to. Now, President Obama is urging banks to ease up on their hesitation and use a little “subjective judgment”, ie hunches, in order to make more families home owners.

To clarify; the folks that would be getting these loans DO qualify, but are on the lower end of the credit spectrum. They have the resources to pay a mortgage, but due to economic reasons (such as their credit taking a hit during the recession) are not considered an optimal risk to lenders. There is only so much money to go around, so of course banks are going to favor borrowers who stand in a strong financial position, which leaves these folks out of the market. As a Realtor, this makes me happy because more families qualifying for mortgages means more business. But as a taxpayer, there’s WAY too much to this plan that makes me angry.

First of all, guess who is going to back these loans? That’s right; you, me, and all the other American tax payers out there. Yes, these loans will be backed by the FHA with hopes that Fannie Mae and Freddie Mac will jump on the bandwagon too. If the borrowers default, you and I get the honor to pay for it.

The banks were found guilty of predatory lending and other irregularities in their lending practices when federal investigators reviewed the business after the mortgage crisis. Although much of the “punishment” doled out by regulators to the banking industry is a joke, it DID make them a little more careful about who they extend credit to. THIS time the feds are giving the industry a “get out of jail free” pass. Under this plan, if a loan meets FHA guidelines but the borrower defaults, the bank will not be punished or face legal action. So let’s get this straight; the banks will be allowed to use “subjective judgment” and, if the loan tanks, they won’t face any loss; FHA will just smile, say “you did a good job, we can’t win ‘em all” and hand over the loan guarantee money to the bank. And we taxpayers just bought another foreclosed house. Haven’t we bought enough of those?

This whole plan smacks of a repeat of the entire real estate bubble and subsequent mortgage crisis, but this time it is explicitly supported by Capitol Hill. Maybe they should spend more time trying to fix what’s broken in the government before trying to fix what isn’t broken in real estate.