I was featured on REALTOR.com® again – they posted a blog I wrote called “Location and Economics are Keys to Stabilization.”
Go read the full post, but the gist was this: Reviewing the S&P/Case-Shiller home price indexes which were released on Tuesday, home prices fluctuated greatly from metro area to metro area. Why is this? Is the housing market completely reliant on the number one rule in real estate: location, location, location? Well, yes, partly. That and economics.
In the blog, I looked at the metro area that I’m most familiar with – Phoenix – and two other metros that are frequently compared to Phoenix: Las Vegas and Miami. Home values soared in all three cities during the early part of the last decade, then plummeted in the last few years. All three have struggled with high foreclosure rates.
Yet – according to the Case-Shiller numbers released this week – year-over-year statistics have home prices rising 7.2 percent in Phoenix, with a modest increase of 1.2 percent in Miami and a decrease of 6.5 percent in Las Vegas. Why the big difference in three metros that are otherwise so similar?
I go into the reasoning in the blog but essentially it’s because Phoenix has a healthier job market and lower unemployment. Jobs equal growth. Jobs equal a healthier market. Yes, location is important in the real estate market but also is the economics in that region.
Write in your own questions and stay tuned as I explore short sales and foreclosures more costly next month.
RealtyTrac® the leading online marketplace for foreclosure properties, released today its Midyear 2010 Metropolitan Foreclosure Market Report. The news was grim. It showed 154 of the 206 U.S. metropolitan areas with a population of 200,000 or more posted year-over-year increases in foreclosure activity – that is an astounding 75 percent.
Four states — Florida, California, Nevada and Arizona — accounted for all top 20 metro foreclosure rates. Florida led the way, with nine of the top 20 metro foreclosure rates, followed by California with eight, Nevada with two and Arizona with one.
The Phoenix-Mesa-Scottsdale metro area in Arizona posted the nation’s seventh highest metro foreclosure rate, with 4.28 percent of its housing units (one in 23) receiving a foreclosure filing in the first half of 2010.
Now we’ve seen some signs that the market is stabilizing and then we get this news. It can be really confusing and difficult to predict. What does it all mean?
Well, it’s good news if you’re a buyer interested in a distressed property. There were over 5,000 foreclosure sales in Arizona in June of this year. The average savings for the homebuyer was 25 percent below market. Not too shabby.
However, buying a foreclosed property isn’t always easy and can be a headache. But the savings can be substantial. What to do? First, you need to find a realtor who has dealt with foreclosures or short sales. You don’t want to enter this alone.
There are differences in buying a home at auction versus from the bank. If you’re not careful, you can pay too much – most foreclosures are sold at only 5 percent below market. And with mortgage rates as low as they are, there is a lot of competition for the same foreclosed homes.
Besides all that, it can be really emotional. It’s not always pleasant or joyful reviewing foreclosures. This is why I’m going to tackle some of the foreclosure issues here on my blog during the month of August. If you have any specific questions, let me know and I’ll make it my blog topic. But given the interest, demand and conflicting information about short sales and foreclosures, I thought it might be good to explore some of these issues more in-depth: one issue at a time.
I won’t completely neglect other topics but let’s take some time next month to understand the foreclosure process.
As always, contact me if you’re considering purchasing a distressed property. I’m here to help.
I blogged recently about short sales being up 600 percent from two years ago. I’ve also blogged recently about how – in my opinion – short sales are the new wave in real estate.
It made me think that anything with that much demand – whether or not you are considering buying a bank-owned property or selling your home in a short sale – is worth knowing more about. So I thought I would offer a quick overview of short sales. As always, please contact me if you have any questions or would like help in the process (either buying or selling a short sale). I am happy to help.
What is a short sale?
In brief, it is a sale of real estate in which the purchase or sale price falls short of (is less than) the balance owed on the home loan. What makes it different than a foreclosure is that the bank agrees to the sale, accepting a moderate loss versus the borrower simply walking away entirely. Additionally, the owner-borrowers are able to mitigate damage to their credit history.
The bank evaluates potential short sale transactions and, in doing so, determines how much equity is in the properties and what the probable selling price would be (usually taken from an appraisal). Because home prices have fallen a great deal, approximately 25 percent of homeowners are now under water. A short sale, when possible, makes a lot of sense for borrowers who owe a lot more than what their home is worth and for lenders who want to limit their risk to an amount that is less than what they would lose in a foreclosure. A foreclosure is not good, obviously, for an owner-borrower, but it is no panacea either for a lender.
Qualifications for a short sale
Lenders will be looking for the following criteria to be met by both the home and homeowners before considering a short sale:
- A financial hardship must exist and be proven. Loss of a job, loss of income, illness of the borrower(s), divorce, death or declining local market property values are examples of such hardships.
- Borrowers must be experiencing a monthly shortfall. Borrowers may be asked to provide a monthly profit and loss statement or complete a financial worksheet to prove that there is not enough income to pay all of the household bills.
- Homeowners requesting to be considered for a short sale must lack the means to repay the deficit. Lenders may request copies of tax returns or other financial statements to determine whether or not a borrower has other means besides income to pay off the short fall
As I mentioned before, hiring a real estate professional who has experience with short sales is extremely helpful. This was a brief overview and there is a lot more to know especially in regard to your specific situation.
Best of luck and let me know how I can help.
I wrote recently about clients of mine who are expecting twins soon. Their process for obtaining a mortgage was smooth but a New York Times article this week made me worry about future clients who are expecting and wanting to buy a home.
As if expecting parents don’t have enough things to worry about, now they have to be concerned about whether their new baby will make it more difficult to buy a new home . . . a new home they are most likely purchasing because of that new baby . . . a home they want to nest in, grow in, and create many memories in. And because of all that, they can’t get a loan?
The New York Times reported that pregnancy has become a potential deal-breaker when securing a home loan, even though – and I know I mention it frequently – mortgage rates are the lowest they’ve been in 50 years and home prices are falling.
The problem? The loss of income while a parent takes leave or the chance that a parent will not re-enter the work force at all. This makes lenders nervous and now they are asking couples who are pregnant to provide proof of income for three years out. Three years! Most people change jobs every two to three years. It takes quite a bit of stability and non-movement to provide evidence of income for three years from the time of closing (not qualifying).
But how would they know? While lenders cannot ask borrowers whether there is a pregnancy in the family, it usually is uncovered when families have to report projected income. Fannie Mae and Freddie Mac buy loan packages from lenders, but each is liable to require the local lender to buy back the mortgage if it is discovered the loan didn’t meet underwriting requirements.
What to do? Expecting parents are being recommended to qualify for a loan with just one income. This is the simplest solution to the mortgage lending dilemma. However, if that isn’t possible in your situation, get a note from your doctor stating when you will be able to return to work and a note from your employer stating your salary when you return to work and on what date you will be returning. Though this may feel like you are in elementary school all over again, it should be sufficient in getting the loan. Lots of fun, right?
I know this is a pain but try to keep your eye on the prize: a new home with your new family. That’s pretty exciting. Family is a journey to forever. Hopefully, the journey to your loan is a little bit shorter.
If you are looking to buy a home and want some advice, please contact me. I love connecting potential homeowners with a great place for their new family.
One of the great things about living in Arizona is the inexpensive heating cost in the winter. Having family who grew up in New England, I know they routinely spent over $600 a month in heating costs. This isn’t something we need worry about in the Phoenix area. However, during the summer when temps can reach 110+ our cooling costs can cause our wallet a bit of pain. Fortunately, there is something we can do about this. The same sun that heats up our house and our pool and makes it necessary to park in whatever shade we can find, can also be used to reduce our energy bills.
Solar energy is a pretty hot topic right now and in Arizona we have a perfect environment to take advantage of our state logo. Okay, maybe it’s not the official logo, but we are in the valley of the sun, our basketball team is the Suns and it’s on our state flag. While an investment in solar can be a substantial upfront investment, there are a number of programs and opportunities to make it much more affordable and accessible
First, there are a number of rebates and tax credits available through the Power Company as well as the state and federal government. For example, the federal government has a tax credit of 30 percent of the cost of a solar electric panel or water heater . . . with no cap. The state of Arizona has a 25 percent tax credit for solar energy installations with a cap of $1,000. It’s worth noting that these are tax credits and not deductions, so you most likely will see all of the money, not just something to reduce your taxable income.
Second, there are a number of leases available – such as SolarCity – who will install solar panels for $0 down. Then instead of paying APS or SRP a monthly electric bill, you would just pay the lease on the solar panels. If you have extra capacity from your solar panels, you may even sell the power back to the power company.
Third, a number of households in Arizona have fairly restrictive HOAs. You may think that HOAs may have a problem with solar panels. However, Arizona is one of the states who have laws restricting the HOAs ability to limit solar installations.
While solar power may not be for everyone, it is gaining popularity especially in Arizona. With the stimulus tax credits for solar energy, there hasn’t been a better time to invest in solar. Plus while helping your wallet you will also be helping out the planet.
I know I blog about mortgage rates a lot. Partly this is because I just cannot believe how the rates have remained so low for so long. Mortgage rates were unchanged this week and were – yet again – at the lowest point in decades.
The Arizona Republic reported Thursday on the numbers Freddie Mac released that day. The average rate for a 30-year fixed loan is at 4.57 percent. The Republic wrote that “that’s the same as a week earlier and the lowest since Freddie Mac began tracking rates in 1971. The last time home loan rates were lower was the 1950s, when most mortgages lasted just 20 or 25 years.”
I’m sure you have read how the lower mortgage rates have had a very modest impact on home sales and have been more utilized by current homeowners to refinance. It is true that the housing market has slowed since federal tax credits for homebuyers expired at the end of April.
So why does the lower mortgage rates matter? What’s in it for you?
If you’re a buyer –With mortgage rates this low, it’s a great time to buy. For example: say you are interested in purchasing a home for $400,000. By cutting just a half a percentage point from a 30-year loan, you will save $45,000 over the life of that loan.
If you’re a seller – There is a general rule of thumb that every one percentage point decline in mortgage rates is the equivalent of roughly a 10 percent reduction in the home price for the buyer. This will make your home much more affordable to buyers and offer you an opportunity to sell your home for the price you really want. It should also equate to a larger pool of qualified buyers for your home.
If you’re a homeowner – I’ve said it before and I’ll say it again: if you haven’t refinanced already, think about it now.
And how are rates calculated in the first place?
The Arizona Republic put it like this:
To calculate the national average, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
If you have questions about mortgage rates or are interested in buying or selling a home, contact me. I’m happy to help.
Credit Suisse reported data this week putting numbers to something we already suspected: it can be less expensive to own a home than to rent.
In their research report, record low mortgage rates and home prices were credited for the percentage of median household income needed to pay the mortgage on a median-priced home being at a 30-year low. Really? A 30-year low! I know we are getting used to some of these record-breaking numbers but this is nothing to sneeze at.
Credit Suisse singled out Washington, D.C., California’s Inland Empire, Las Vegas and Phoenix as areas where it’s cheaper to own than rent.
This research confirms other reports, including pieces which I have blogged about this year. I went back to that New York Times calculator which figured that buying is better than renting after six years in a home. I made just one change – the mortgage rate. And I inputted 4.8 percent (even though rates have been lower) just because my most recent client locked in at that rate. This one change reconfigured the New York Times estimate to buying being better than renting after five years. The mortgage rate is hugely influential in what a great time it is to buy right now.
I know I’ve said it before and I’ll say it again: real estate is still a good investment. I’m not saying that we are necessarily out of the woods yet. However, with home prices stabilizing and the mortgage rates still incredibly low, it is a good time to buy a home. The inventory in Phoenix has been really good as well. Whether you’re looking for a single-family home on a golf course in Scottsdale or a two-bedroom condo in downtown Phoenix, there are many options out there.
In summary, the Credit Suisse report is more good news, especially for the Phoenix market. Looking at it that way, this might be a good time to buy a home, after all.
If you are looking to buy or sell your home, contact me. I love connecting homebuyers to their dream house and helping homeowners sell and relocate.
And – remember – stay cool out there! It was another warm day in Phoenix.
Money Magazine released yesterday its annual edition of the 100 Best Places to Live, and two Arizona cities have made the top 100.
The list focused on the nation’s small cities (those with populations between 50,000 and 3000,000). They looked past the average American town which is cash-strapped with unemployment hovering around ten percent and Money Magazine found a whole list of outliers. They paid special attention to the cities’ job opportunities, fiscal strength, affordable real estate, good schools, low crime, solid health care, activities for kids and adults alike, and many other factors that help make a town great for raising a family.
The large population of Phoenix ruled it ineligible for the ranking but two suburbs did make the list.
Gilbert, Arizona ranked 36th.
Money Magazine described the city this way :
Whether grabbing something to eat at the famed Joe’s Real BBQ restaurant, shopping in the Downtown Heritage District, or hitting the greens at the Trilogy Golf Club, residents of Gilbert are never at a loss for things to do.
Scottsdale, Arizona ranked 71st on the list.
Money Magazine described the city this way:
Its hot, dry climate and proximity to the Sonoran Desert and McDowell Mountains make for terrific hiking; aging snowbirds flock here each winter. And its proximity to Phoenix means plenty of culture and a variety of jobs.
This is great external recognition that Phoenix, Arizona is a great place to live. Despite the heat that we’re experiencing right now, Phoenix offers a ton to do, with great health care facilities, a solid economy, and affordable real estate, among other amenities that make it a desirable place to live. And this further emphasizes what I’ve said before: that owning Phoenix real estate is a great investment.
If you’re interested in buying a home, please contact me. I’m here to help and am happy to discuss which area of the Valley might be best for you.
See the full list from Money Magazine.
One of my clients is a great couple who are about to have twins and will be moving into a North Phoenix home. I recently gave some moving tips here but they asked me for some additional advice specifically about moving while expecting. I thought I would share these ideas with all of you in case they come in handy. And please chime in with your own tips as well.
My first advice is, as best you can, plan to have at least one to two months for packing and other preparations. This will put less emotional and physical stress on the mother-to-be.
- Start packing at least a month before your move.
- Don’t try to pack it all at once. While you are pregnant, you need to work slowly with rest breaks. So, pack a little bit each day.
- Pack things that are not used often or which are in multiple sets like winter clothes (or clothes you won’t wear again until after your pregnancy), dishes, towels, sheets, cleaning supplies etc. As you approach your moving date, leave out only a weeks’ worth of essentials and pack the rest.
- Put labels on each of your packed boxes so that you (and your moving company) know which room to put them in.
- On moving day, have those who aren’t pregnant carry everything. Remember, moving furniture while pregnant – or moving any other heavy items during pregnancy – might put you and your child at risk. Don’t let the pile of boxes overwhelm the mother-to-be into action.
- Things that do not require heavy lifting, such as making labels and cutting packing supplies like tape are very helpful and not strenuous on the mother’s body. Try focusing on these projects.
- Take breaks on moving day and make sure the mother-to-be doesn’t feel guilty about sitting down for a while.
- Drink enough water and other fluids. Water and rest, water and rest, water and rest. It cannot be overemphasized.
- Once you move in, try and set up the baby’s (or babies’) room early on. That way if he, she, or they come earlier than you expected, you’ll be ready. This will help with the mom’s nesting instinct too.
A move is a change and transition enough but moving while pregnant is taking on a couple of life changes at once. Just remember to ask for help when you need it, rest, hydrate, and focus on what you can do. And enjoy your new home which will have many wonderful memories for you and your children. Congratulations all around!
