“Wake Up and Call John!” - John Wake, Associate Broker, HomeSmart Real Estate

I just stole this from a newsletter I receive.

Waiting Periods for BK/FC/SSale

A common question from borrowers and homeowners these days is how long they will need to wait to buy again if a negative item appears on their credit report. Different loan programs have different disqualification periods for Bankruptcy/Foreclosure/Short Sale. Once the automatic disqualification period has elapsed, the normal income/asset/credit requirements typically apply. It is also important to remember that if a mortgage account is included in a Bankruptcy, then foreclosure waiting periods apply with all loan programs. Here is breakdown by loan program:

Conventional Loans

• Bankruptcy = 4 years
• Foreclosure = 5 years
• Short Sale = 2 years

VA Loans

• Bankruptcy = 2 years
• Foreclosure = 2 years
• Short Sale = industry standard is 2 years

FHA Loans

• Bankruptcy = 2 years
• Foreclosure = 3 years
• Short Sale = industry standard is 3 years unless no mortgage lates in the past 12 months and buying in a different geographic location (out of state job transfer for example).

Ryan Halldorson
Smart Financial Mortgage
Senior Mortgage Consultant
3131 E Camelback #120
Phoenix, AZ 85016
Phone: 602.793.7204
E-Fax: 602.889.2258
ryan@hsmove.com

{ 2 comments }

PMI, the private mortgage insurance company, comes out with a list every quarter of areas they think have the lowest possibility of having lower home prices in the next quarter.

Areas Least Likely to See Lower Home Prices

• Fargo ND
• Grand Forks ND
• Cedar Rapids IA
• Killeen TX
• Ames IA
• Morgantown WV
• Iowa City IA
• Fayetteville NC
• Little Rock AR
• Bismarck ND

There you have it. If you want little downside risk to your home’s value, move to North Dakota.

P.S. The high temperature today in Fargo, North Dakota will be 31 degrees. Not bad but the forecast for Monday is a high of 12 degrees. Now that’s nippy!

P.P.S. My father was from North Dakota and he loved to call his friends and family back home this time of year.

P.P.P.S. Now that I think about it, the real downside risk is that you won’t enjoy living in North Dakota… unless you have an Arizona home too!

{ 3 comments }

My guess is that new homes in the United States will be smaller, with fewer walls (think of the openness of lofts) and in general, cheaper to build.

Below is an excerpt from this article;

Paul Cardis, CEO of AVID Ratings Co., which conducts an annual survey of home-buyer preferences, said there are 10 “must” features in new homes:

1. Large kitchens, with an island. “If you’re going to spend design dollars, spend them where people want them — spend them in the kitchen,” McCune said. Granite countertops are a must for move-up buyers and buyers of custom homes, but for others “they are on the bubble,” Cardis said.
2. Energy-efficient appliances, high-efficiency insulation and high window efficiency. Among the “green” features touted in homes, these are the ones buyers value most, he said. While large windows had been a major draw, energy concerns are giving customers pause on those, he said. The use of recycled or synthetic materials is only borderline desirable.
3. Home office/study. People would much rather have this space rather than, say, a formal dining room. “People are feeling like they can dine out again and so the dining room has become tradable,” Cardis said. And the home theater may also be headed for the scrap heap, a casualty of the “shift from boom to correction,” Cardis said.
4. Main-floor master suite. This is a must feature for empty-nesters and certain other buyers, and appears to be getting more popular in general, he said. That could help explain why demand for upstairs laundries is declining after several years of popularity gains.
5. Outdoor living room. The popularity of outdoor spaces continues to grow, even in Canada, Cardis said. And the idea of an outdoor room is even more popular than an outdoor cooking area, meaning people are willing to spend more time outside.
6. Ceiling fans.
7. Master suite soaker tubs. Whirlpools are still desirable for many home buyers, Cardis said, but “they clearly went down a notch,” in the latest survey. Oversize showers with seating areas are also moving up in popularity.
8. Stone and brick exteriors. Stucco and vinyl don’t make the cut.
9. Community landscaping, with walking paths and playgrounds. Forget about golf courses, swimming pools and clubhouses. Buyers in large planned developments prefer hiking among lush greenery.
10. Two-car garages. A given at all levels; three-car garages, in which the third bay is more often then not used for additional storage and not automobiles, is desirable in the move-up and custom categories, Cardis said.

{ 0 comments }

Do you ever see all those “For Sale” signs in front of other people’s houses and wonder, “Why the heck am I having so much trouble selling my home?”

Here’s your answer. In Scottsdale in 2009, only about 1 in 4 homes listed for sale by individuals actually sold.

So if you saw 4 (non bank-owned) “For Sale” signs on a street in Scottsdale, realize that on average only 1 of the 4 actually sold in 2009.

Unless you’re a bank, your odds of selling a Scottsdale listing in 2009 were about 25% - normal sales 23% and short sales 26%. (If you are indeed a bank, your odds of selling were about 69%.)

My analysis of MLS data for Scottsdale shows that for “normal” single family detached home listings in 2009;

• 1,978 listings sold successfully,
• 4,104 listings failed to sell and were taken off the market, and
• About 2,421 listings were still in the MLS but were unsold on December 31, 2009.

How do you increase your odds of selling? That’s a deep subject. Give me a call at 480-463-4475.

{ 2 comments }

This is interesting, exploring legal and moral justifications for “walking away.”

“If you stop making payments, you’re not breaching the contract, because default and foreclosure are valid means of fulfilling the contract”

RECOMMENDED: Related NPR interview with a Phoenix real estate attorney Mary Kinsley regarding “strategic defaults” and “walking away.” She used to get callers crying and asking how to avoid foreclosure. Now she gets callers saying they haven’t paid their mortgage in many months, they’re tired of paying the property taxes and HOA fees, so how can they force the bank to foreclose on them? (They can’t force the bank to foreclose.)

{ 3 comments }

This real estate bust will be the worst time in many people’s lives, “Remember, when we lost the house in 2008 and almost got divorced?”

But for real estate geeks, the economic shock is exposing the inner workings of housing economics.

The video below compares how the real estate bust effected the median home price per square foot in three neighboring zip codes in the northwest Valley of the Sun. Sun City West is intriguing because it had very few foreclosures while the two other nearby zip codes had tons of foreclosures.

Video Comparing a Low Foreclosure Zip Code to Two High Foreclosure Zip Codes

Click Graph

Sun City West 85375 Boundary Map

Click + to zoom in

View Larger Map

Surprise 85374 Boundary Map

Click + to zoom in

View Larger Map

El Mirage 85335 Boundary Map

Click + to zoom in

View Larger Map

{ 1 comment }

All 124 zip code real estate charts available in the right-hand column have now been updated through DECEMBER 2009 with the number of home sales, the median home price and the median home price per square foot.

Video Comments - Phoenix median home prices by zip code through December 2009

Phoenix home PRICE trends - Generally flat

For the last few months the median home price has been generally flat in most zip codes in the Phoenix area. In some areas the price trend is clearly up.

Here’s the problem.

Some Phoenix area zip codes with flat median home prices still have below normal home sales.

Sure, home sales in the last few months of 2009 were significantly higher than in the last few months of 2008. That’s good news for home values

But still, the number of homes sold in the last few months of 2009 in many Phoenix area zip codes was significantly below a “normal” year like 2002. Until I see home sales in a zip code in the “normal” ballpark, I worry that prices are still too high to clear the market.

Certainly, the median home price in most zip codes is near or past the bottom but we could see more declines in some zip codes.

Other Phoenix home price downside risk factors include;

• A huge “shadow inventory” of homes in the foreclosure process in Maricopa County which haven’t been foreclosed on yet, and
• Scheduled option ARM mortgage interest rate increases which will trigger even more foreclosures.

{ 1 comment }

***Smart Financial Weekly Mortgage & Business Update January 29, 2010***

SHORT SALE/FORECLOSURE WARNING!  If you have done a short sale or foreclosure, are thinking about it or know someone who is consider the following. Banks have become increasingly aggressive in collection efforts against borrowers who do a short sale or foreclosure where a balance remains. The primary targets so far seem to be borrowers who did a strategic default (walked away from the home even though they could afford it). The banks are converting the secured debt to unsecured and then pursuing the borrower. According to the FDIC from January 2009 thru September 2009 banks collected $1.01 Billion or 48% more than the same period a year earlier. This is all bottom line profit folks! The banks are being very careful in the short sale agreements to preserve their rights. The good news is that Arizona and California have anti deficiency laws that protect the homeowner from collection activity but only on a primary residence. Given the huge number of dollars involved and the related risk if you are considering a short sale or foreclosure get the best advice you can.

Loan Modification Help: For homeowners with a Freddie Mac loan they can contact the City of Phoenix NHS office at (602) 258-1659 for assistance with their loan modification, debt counseling and other mortgage related matters. The service is new and it is free!

More Loan Modification: The Hope for Homeowners program is back in the news this week. Apparently the Treasury Department has finally figured out that lowering payments is fine but reducing loan balances is even better. Some 15 million homeowners are upside down in their homes and the concern is an increasing number of them may throw in the towel and move on. Yah think!

Interest Rates
At the Federal Reserve Board meeting this week the Board said it will maintain its position on rates for the foreseeable future. However, with respect to mortgage rates and its support of them since early last year which ends at the end of March, the Board said “it is prepared to modify those plans if necessary to support financial stability and economic growth”. Meanwhile retail rates hovered around 5% for most of the week. More and more analysts are suggesting that maybe we will not have the anticipated increase in rates and even if it happens it will not be as severe as previously thought.

When Rate
This week 4.98
1 Month Ago 5.14
1 Year Ago 5.10
2 Years Ago 5.68

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.
Source: Federal Reserve Statistical H.15.

Mortgage Industry Update
• The Treasury Department is working to help clear up the backlog of about 450,000 loan modifications that are in the Trial period and moving them to Permanent status. The Department issued new guidelines this week that it says will help speed up the modification process. In a novel approach Treasury is going to require that borrowers provide all forms and documents up front! Previously they had given servicers the ability to decide how they wanted to get the information. The new rule is effective June 1. Many of the homeowners in the Trial period have completed the required payments and are simply waiting to be notified that their loan has been permanently modified but servicers are still chasing paperwork.
• FHA has announced an update to its loan modification program by expanding it to include homeowners that are current or just 30 days delinquent (Mortgagee Letter 2010-004). A loan can be temporarily modified by verbal agreement with the servicer for up to 90 days or in writing for longer under the FHA-HAMP.

Good News
• Fourth quarter 2009 GDP was 5.7% the highest since third quarter 2003. Forecast was for 4.6%. Note that without a sharp liquidation in inventory the number would have been 2.2%. For the full year 2009 GDP was down 2.4% the deepest annual decline since 1946.
• The National Association of Business Economists survey showed 61% expect gain in 2010 GDP of 2% or more.
• The University of Michigan Consumer Sentiment survey for January was 74.1 up from 72.5 in December and the highest since January 2008. Also, the Conference Board’s Consumer Sentiment Index increased to 55.9 in January from 53.6 in December. This was the highest number since September 2008.
• The ISM Midwest Index of business activity rose to 61.5 in January from 57.4 in December.
• The National Retail Federation forecast retail sales to grow 2.5% in 2010 compared to a decline of 2.5% in 2009.
• Durable goods increased .2% in December but well below forecast of a 2.0% increase.

Statistics of Interest/Concern
• The Congressional Budget Office (CBO) estimates that FY 2010 deficit will be $13.5 TRILLION and that a new jobs bill and war funding requests could push the number higher.
• December existing home sales fell 16.7% in December the steepest monthly decline on record according to the NAR. For the year sales increased 4.9% while the average price fell 12.4% from 2008.
• Case-Shiller reported that home prices declined by .2% in November the first decline in 7 months. This is an improvement from a year ago when prices declined by 5.8%. Phoenix prices in November were up 1.1%.
• The Commerce Department reported new home sales were down 7.6% in December and finished 2009 down 22.9%.

Foreclosure Headlines
• The Orange County Register (California) reports that foreclosures notices in December were 10,513 which is double the total from March of 2009.

Job Market Headlines
• Initial weekly jobless claims fell 8,000 to 470,000 which were higher than the expected 450,000.
• The four week moving average of initial weekly claims rose 9,500 to 456,250.
• Continuing claims (measures only those on 26 week benefits) fell by 57,000 to 4.6 million however if you add in workers on extended benefits the total number of workers collecting benefits is 10.2 million!
• According to Fortune magazine the 22 best companies to work for have 87,500 job openings to fill.

Commentary/Observations
The International Monetary Fund (IMF) said this week in its updated Global Financial Stability Report that the global financial system remains “fragile” and that banks need to increase their capital and emerging economies need to be concerned about asset bubbles.

Wednesday the Greek 10 year bond yield surged to 10 year high of 6.7% (our 10 year yield is 3.60%) and the World Stock Index declined for the sixth day. The concern is that sovereign debt will derail the world economic recovery.

Japan’s bond issuance may climb in FY 2011/2012 from an already record amount planned for FY 2011. The increase is to fund rising welfare costs and off-set declining tax revenue. S & P has said that unless Japan produces a credible plan to control its debt and grow the economy it faces a downgrade in its credit rating. This of course would increase the country’s cost to borrow only adding to the problem. Currently Japans debt is about 200% of its GDP but the good news is that because of its huge domestic savings it should be OK for a few years at best. After that the risk of default becomes very real says S & P. Does any of this sound somewhat familiar?

If you have any mortgage or related questions I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.

{ 2 comments }

Although mortgage interest rates haven’t really increased since the Fed started to reduce it’s purchases of mortgage backed securities, we’ll likely see more upward potential on mortgage rates after the Fed ends the program in the coming months. Fed purchases are running about half of what they were at the peak last spring.

The Fed plans to stop purchasing mortgage backed securities in the coming months. It was very unusual for the Fed to buy such securities. The Fed’s goal was to keep mortgage interest rates low to help the housing market.

{ 0 comments }

Fannie Mae delinquencies rise sharply in November.

This suggests a lot more foreclosures are coming down the pike putting a lot more downward pressure on home prices in the United States.

But the United States is not Arizona. Arizona residential real estate may start to recover while the United States residential market as a whole is still falling.

{ 0 comments }

Even though November is traditionally not a strong month, Case-Shiller data show that metropolitan Phoenix homes appreciated over 1% from October to November 2009. The (expected) end of the $8,000 first-time home buyer tax credit was no doubt an important factor in pushing up Phoenix home prices in November.

Phoenix Homes Appreciation Increases in November

Greater Phoenix home prices appreciated 1.1% between October and November compared to appreciation of 0.8%, 1.6%, 1.8%, 1.1% and 1.3% in the previous 5 months, according to my analysis of Case-Shiller data.

Phoenix home price appreciation has been strong for the last six months. 1.1% appreciation in one month is very large and we’ve now seen 7.7% appreciation in 6 months, that’s a good year’s worth of appreciation right there. (The rate of home price appreciation is different in different areas of Phoenix.)

The Case-Shiller Home Price Index for Phoenix is where it was in February 2002.

{ 2 comments }

***Smart Financial Weekly Mortgage & Business Update January 22, 2010***

FHA Update Number 1: Changes: This week FHA announced the much anticipated changes to its lending policies. The changes include an increase in up front mortgage insurance from 1.75% to 2.25% of the loan amount, establishment of a minimum credit score of 580 for 3.5% down payment and requiring a 10% down for scores less than 580 and reducing the Seller Contributions from 6% to 3%. See Mortgage Update section below for more details.

FHA Update Number 2: Anti flipping rule waived: FHA has announced a new policy effective February 1, 2010 that temporarily waives its previous 90 day anti flipping rule. The new policy applies to HUD owned, bank owned and privately owned properties and will no longer require a 90 day waiting period from change of ownership before a buyer can use FHA financing. There are certain conditions that apply for the property to be eligible for the waiver. The new transaction must be an arm’s length one and there cannot be any identity of interest between the buyer, seller or any other parties to the transaction. In addition, if the new sales price exceeds the sellers acquisition cost by more than 20% the increase in value must be documented by the lender. Further, a property inspection may be required by the lender to strengthen the case for the excessive value. Finally, no pattern of previous flipping such as multiple sales in the past twelve months can exist.

Interest Rates
The PMI Group Housing & Mortgage Market Review has forecast that rates will gradually rise and average 6% by the end of 2010. Tuesday both India and the UK said they expect higher inflation in their countries and for the world economy as a whole. Typically as inflation heats up rates increase as well. Besides inflation rates usually increase as the economy grows and there is a more positive outlook for the economy. Offsetting the inflation news was the sharp decline in stocks this week which helped keep rates low. Retail rates for the week remained in the low 5% range and within a narrow range.

When Rate
This week 5.15
1 Month Ago 5.05
1 Year Ago 5.12
2 Years Ago 5.48

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.
Source: Federal Reserve Statistical H.15.

Mortgage Industry Update
• As mentioned above FHA has introduced some changes to its lending policies. Note that the increase in up front mortgage insurance will be effective April 5, 2010 and the credit score/down payment and Seller Contribution changes will be effective this summer. FHA took these steps because its share of the market has grown from 3% to over 35% with the resulting adverse impact on its reserves which have fallen to .53% well below the minimum of 2.00% required by Congress. Thru third quarter 2009 FHA delinquency was at 14.36% compared to 9.64% for all loans. Note that FHA is expected to ask Congress for authority to increase the annual mortgage insurance premium which if granted will result in the lowering of the up-front mortgage insurance payment. Typically a borrower pays a one-time up-front fee for mortgage insurance plus an annual insurance premium that is paid with the monthly payment.
• Loan modification update: The Treasury says that thru December 2009 there had been 66,465 permanent modifications up from 31,382 in November. There are another 46,056 homeowners whose permanent modifications are pending. In the same report Treasury noted that the best performing lenders were Citi, GMAC, Saxon and Chase while the worst performing were Bank of America, Litton, American home Mortgage Servicing and Wachovia.

Good News
• The Producer Price Index (PPI) rose for the third straight month in December by .2%. the annual rate in 2009 was an increase of 4.4% in line with forecasts.
• New housing permits increased by 10.9% in December to 653,000 the highest number since October 2008 yet for all of 2009 permits were down 36.9%.
• The Philly Fed report of manufacturing expanded in January for the fifth consecutive month although declining slightly from December.
• The Conference Board’s Index of Leading Economic Indicators rose for the ninth straight months suggesting a strong first half of 2010.

Statistics of Interest/Concern
• The Financial Times reports that 260 publically traded companies defaulted on their corporate bonds in 2009 the most ever recorded.
• The U.S. government collected $219 billion in revenue in December 2009 but had to pay out $311 billion. December was the 15th consecutive month in which a deficit was record a national record.
• New housing starts fell 4% in December to an annual rate of 557,000 the forecast was for 580,000.
• U.S. home builder sentiment fell to 15 in January down from 16 the previous month and the lowest level since June 2009.

Foreclosure Headlines
• First American Core Logic LLP says that about 12% of loans over $1,000,000 are late which is three times what it was a year ago.
• According to an ASU report lenders foreclosed on 41,000 single family detached homes in Arizona in 2009 the most in any year on record.
• Moody’s has revised its loss projections for jumbo loans originated between 2005 and 2008 saying it now expects higher delinquencies which will increase through 2010.

Job Market Headlines
• Initial weekly jobless claims increased to 482,000 from 446,000 the previous week.
• Four week moving average for initial jobless claims was 448,250 up 7500 from previous week.
• Continuing claims came in at 4.599 million down 18,000 from previous week.
• 43 states had an increase in the jobless rate in December according to the Labor Department. This was an increase over 36 states in November.

Commentary/Observations
The Treasury Department has been unable to get any lenders holding home equity debt (second mortgages) to participate in a program announced eight months ago. The lenders hold just over one TRILLION dollars in debt which may be nearly worthless. These second lien holders are not working toward solving the housing crisis according to the government. Frequently they delay or effectively cancel short sales and can be an additional hurdle in loan modification. It has been estimated that some of the big banks carry their second liens at more than $150 billion above the real value.

If you have any mortgage or related questions I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.

{ 0 comments }

This is cool! You can see live auction results from the Barrett-Jackson Collector Car Auction in Scottsdale.

Barrett-Jackson Schedule of Events.

Barrett-Jackson in Scottsdale goes full throttle through Saturday, January 23, 2010.

{ 2 comments }

(”MLS Listings” are measured at one point in time, usually the 15th day of the current month. “Median Price” of homes sold and the total number of home “MLS Sales” are for the entire preceding month.)

Video Analysis

Price (green line)

After its surprise jump from $118,000 in April to $135,500 in September, the median price in metro Phoenix for single family detached homes sold via the MLS was $134,900 in December.

The fact that the median single family home price was essentially flat in December was a sign of strength in the residential resale housing market. The median home price often falls in December.

Sales (blue line)

The number of single family homes sold increased in December. That surprised me.

After the strong sales in October and November caused by the expected end to the first-time homebuyers’ $8,000 tax credit (the program was subsequently extended and expanded), I thought sales would fall in December.

Phoenix area home sales in December 2009 were 32% higher than in December 2008. December 2009 single family home sales were more than double December 2007 single family home sales.

Listings (red line)

Single family detached homes listed for sale on January 15 were down 29% compared to a year earlier.

The inventory of single family homes listed for sale in December was in the normal range with the equivalent of a 5-month supply of homes for sale.

A year ago, in December 2008, we had an 9-month inventory. The inventory peaked at over 17 months in November 2007.

This autumn, the months supply of homes available for sale is similar to what we saw in the autumns of 2000, 2001, 2002 and 2003. That is, we had a pretty normal supply of homes for sale.

Be aware that the supply situation varies tremendously within metro Phoenix depending on the geographic location and the price range of the homes you’re looking at.

Conclusion

It’s been a pretty strong autumn for home sales and median home prices for the Phoenix area MLS.

The strong autumn suggests a strong high season, February-May.

However, if the Fed stops buying mortgage backed securities as planned, mortgage interest rates could increase which would, of course, put downward pressure on home sales and home prices.

Another downside risk is the huge overhang of homes in the foreclosure process in Maricopa County. If the banks release more foreclosed homes onto the real estate market, that would, of course, put downward pressure on home prices as well.

{ 0 comments }