Pook's Market Message - 3/20/12

I've been telling you about the changes in the Phoenix area market for quite some time now.  Today, the market for properties, especially those under $300K, is a tough one for buyers... just not much left out there.  Investors are back and many properties are getting multiple offers, often full cash offers and often within hours of going on MLS, from both investors and ordinary folks looking for a home to live in.  The last three contracts I've written (in various price ranges) have all had multiple offers.  With demand outweighing supply, it looks like the Arizona real estate market has really turned around.  According to Michael Orr, Director of Arizona State University's Center of Real Estate Theory and Practice, and the author of The Cromford Report, the market hit bottom last August.  He says, "... supply has been soaked up and Phoenix is again becoming a seller's market where buyers must stand in line and move fast." 

Today's Topics include a CNN article about the turn-around in the Phoenix market and information about a buyer program called "NeighborhoodLIFT" that is going to be offering down payment assistance of up to $15,000 to qualified buyers during a 2-day event at the Phoenix Convention Center March 23-24. 

If you or someone you know is thinking about buying or selling, please contact me.  Now is the time to move ahead!

Housing Market at Center of Mortgage Crisis is Blooming Again

Source:  CNN
Article by Lisa Desjardins, CNN Radio
updated 4:30 PM EDT, Sat March 17, 2012
Link to Article: http://www.cnn.com/2012/03/17/us/housing-market-phoenix/index.html?iref=allsearch
Be sure to listen to the interview!

Phoenix, Arizona (CNN) -- Want a sign of economic hope? Look to a place where the housing collapse began: Phoenix, Arizona.

"We're talking about (home) prices being 3 to 4% higher than last year, which most people don't believe because they're used to bad news," said Mike Orr, director of Arizona State University's Center of Real Estate Theory and Practice.

Orr's new report on the Phoenix market shows a direct reverse of the situation that sparked a massive housing bubble. Monthly foreclosure starts have fallen 49% since a year ago. Home sales are up 8%. The result? What had been a market with far more housing supply than demand has now become a place where buyers have to act fast and beat out heavy competition.

CNN Radio's Lisa Desjardins reports on the turnaround in Phoenix

"It's no longer difficult to sell your house here," Orr told CNN Radio. "If you price it at market, it well sell quickly. The supply situation is unusually low."  Supply is down some 42%, Orr estimates, from September 2008.

Top 10 turnaround towns

That is a dramatic turnaround for an area that once had a massive supply glut. According to Orr's predecessor at ASU, Jay Butler, during the recession foreclosures hit an eye-popping 12% of the homes in Maricopa County, which includes Phoenix.

But now Orr's report indicates that supply has been soaked up and Phoenix is again becoming a seller's market where buyers must stand in line and move fast.

"(The listing) came out on the market on a Friday morning. We looked at it Friday afternoon and put a bid on it Friday night," said homeowner Tim Woodward of his new house. He and his fiancé, Susan Rust, are combining their two families, which includes five teenage girls who will all live at home.

"So we need space," Rust said. She and Woodward had already lost bids on other homes and decided to put in a contract on what would become their home while sitting in the driveway after their walk-through.

"According to the neighbors, there were 11 other couples who went through this house," Rust said. "So you have to be quick."

BofA to slash mortgage balances by $100,000 or more

Rust and Woodward got their five-bedroom, three-bath house in Tempe for $290,000, 40% less than the asking price a few years ago. But neither the homeowners nor the experts think buyers are getting bargains anymore. They believe prices have already passed their low point, hit their natural floor and are rising again.

This is not the housing market of a year, or even eight months ago. 

 "It's getting very, very tough to find a real bargain nowadays," said Mark Stapp, a Phoenix real estate developer who also teaches at the Center for Real Estate Theory and Practice at ASU's Carey School of Business.

The classic bargains, foreclosures and bank-owned properties, are drying up. According to Orr's new report, the number of homes reverting to lenders in the Phoenix area is down 62% since January 2011. Trustee sales of foreclosed properties are down 42%.

"The market has tightened up substantially," Stapp said. "In fact, I know of investors coming to town and leaving very disappointed because they thought they'd find huge bargains and they can't find them."

The question is, will this trend last?

Orr, a self-professed data addict, says the numbers indicate a fundamental shift in the market.

"If there is a major economic crisis that we haven't foreseen, things can go back to square one," he said. "But this is not just a slight trend. This is something I see as being very significant. And it's starting to accelerate."

Down Payment Assistance of up to $15,000 Per Qualified Buyer

The Neighborhood LIFT^SM program is a collaborative program of Wells Fargo Bank, N.A., Wells Fargo Foundation, and NeighborWorks America, an independent nonprofit organization.  Through this program, Wells Fargo has $8,000,000 to give away for down payment assistance at the Neighborhood LIFT event being held March 23-24 at the Phoenix Convention Center.  This is a need-based program and, for those who qualify, it is an amazing opportunity to buy in the City of Phoenix!   At the event, consumers can find out if they qualify for the program and reserve their funds for 60 days, even if they haven't yet found a property.  Additionally, they can learn about finding and financing a home and managing the financial responsibilities of homeownership.  Anyone interested can (and should) register ahead, but you must attend the event to get down payment assistance.   Contact me for a list of the documents you will need to bring to the event in order to see if you qualify. Phoenix is the third city to participate in this pilot program, which has already been successful in Atlanta and L.A.

YouTube Video about the NeighborhoodLIFT program: CLICK HERE
http://www.neighborhoodlift.com/

Open Houses - It's In Your Best Interest To Be Represented By Your Own Agent

Here in the Valley of the Sun, the weather has been Chamber of Commerce perfect.  Perfect for Cactus League Baseball... perfect for golf... perfect for hiking...  perfect for getting out your gardening gloves and planting... and perfect for house shopping!  Wherever you go, you can't help but see all the "Open House" signs out there beckoning you to come in. If you are seriously looking to purchase a new home, I want to take a moment to explain why you need to either go to Open Houses with your agent or let Open House agents know that you are working with your own agent.  Many people don't realize that Listing Agents represent the Seller.  As a Buyer, it is in your best interest to be represented by your own agent, not the Seller's Agent.  Can an agent represent both the Seller and the Buyer?  Here in Arizona, yes, but this is called "dual agency" and both parties must agree to limited representation by signing a document that includes an explanation of the duties and limitations to both parties. If two agents from the same brokerage firm represent the Buyer and the Seller, this is still a dual agency situation, as the same Broker is representing both sides in the transaction.  On the positive side, most real estate agents are members of the National Association of REALTORS® and are bound by a Code of Ethics that requires professionalism in all transactions and has come to stand for "competency, fairness, and high integrity resulting from adherence to a lofty ideal of moral conduct in business relations."  Many people do not realize, however, that not all real estate agents are REALTORS® and some may not be bound by this Code of Ethics.  All that being said, as mentioned before, it is in your best interest to be represented by your own agent.

When stopping at Open Houses, there is something else to consider.  If you are working with an agent and that agent has worked hard for you and provided you with great professional service, be loyal to that agent and respect his or her time and efforts by not jeopardizing his or her ability to be compensated by the Seller, should you buy the house.  Going to Open Houses on your own without notifying the agent at the Open House that you are working with another agent can create a situation where your agent will not be compensated. 

So, what do you do when the weather is perfect, the "Open House" signs beckon you, and you're not out with your agent?  Be sure you have your agent's card with you to give to the agent sitting the Open House and notify your agent of your visit to the house.  Remember, should you decide to buy this home, you want YOUR agent representing you and you want him or her to be compensated for his or her efforts.

Enjoy the weather and give me a call if you or someone you know is feeling the urge to look for a new home! 
If you've got an agent, be loyal, but, if you don't yet have someone working hard on on your behalf, I hope you'll give me the opportunity to be your consultant, negotiator, and overseer of transactional details, whether you are buying or selling a home.

Warren Buffett: It’s Time to Buy Real Estate

Courtesy of Keeping Current Matters/the KCM Blog
Posted: 29 Feb 2012 04:00 AM PST
Warren Buffett appeared live on CNBC’s Squawk Box this week. During the interview, he was asked about the current real estate market and whether he felt now was the time to buy. His response was rather emphatic and has been used as a headline in hundreds of articles since the interview:

“If I had a way of buying a couple hundred thousand single-family homes I would load up on them.”

However, throughout the interview, he addressed the market from a few angles. Here is what he said:

Why invest in real estate now? 

“It’s a way, in effect, to short the dollar because you can take a 30-year mortgage and if it turns out your interest rate’s too high, next week you refinance lower. And if it turns out it’s too low, the other guy’s stuck with it for 30 years. So it’s a very attractive asset class now.” 

Is buying your own home better than investing in stocks right now?

“If I knew where I was going to want to live the next five or 10 years I would buy a home and I’d finance it with a 30-year mortgage… It’s a terrific deal.”

 Should we buy multiple houses?

“If I was an investor that was a handy type and I could buy a couple of them at distressed prices and find renters, I think it’s a leveraged way of owning a very cheap asset now and I think that’s probably as an attractive an investment as you can make now.”

Over the last couple of months, there have been more and more financial analysts coming to the same conclusion: It’s time to buy real estate.

Post Foreclosure, Bankruptcy & Short Sale Waiting Period Matrix for Purchasing

Courtesy of Dean Wegner, VP of Mortgage Lending at Guaranteed Rate

HUD Increases Costs Effective April

Courtesy of Keeping Current Matters/The KCM Blog
Posted: 01 Mar 2012 04:00 AM PST

In a move to increase their financial standing (and to get the FHA back into required capital requirements), on Monday, HUD announced their anticipated increases in the premiums they charge borrowers. Simply stated, the cost of borrowing is going up.
FHA loans, by design, are more liberal in their underwriting guidelines than most conventional loan products (in terms of credit, income ratios, required investment from the borrower, and maximum loan amount). HUD is not a lender. Rather, it is a federally-insured insurance company. They insure lenders against default on loans underwritten in compliance with their published guidelines. It is because of this insurance that lenders approve and close loans with more liberal guidelines.

As an insurance company, HUD charges two types of premiums on the FHA mortgages:

• The UFMIP (Up Front Mortgage Insurance Premium) will be raised effective April 1, 2012 from its current 1% to 1.75%. One advantage to the UFMIP is the fact that it is typically built into the loan amount and does not require additional cash outlay at closing. However, the increase in loan amount does impact monthly payment and cash flow.
• The MMIP (Monthly Mortgage Insurance Premium) will be raised 10 basis points on April 1, 2012 to cover the requirements of the payroll tax extension approved last year. This is a direct increase of 10 basis points in the borrower’s mortgage payment, and has the effect of a 10 basis point increase in interest rates. As a kicker, loans over $625,000 will be bumped 35 basis points from today’s levels effective June 1, 2012. This bump is substantial, as you can see in the chart below.

For a larger version, click on the image.

On a loan amount of $300,000, we are seeing an increased payment of $36.41, which doesn’t sound too bad. However, we know that home buyers buy homes comparing what their monthly payment will be after they close. This hike in payment is equivalent to borrowing an additional $7000. Starting next month, it’s as if the home became $7000 more expensive. What is the result? Buyers are going to have to pay more OR they’re going to have to offer less to the seller (to maintain the same mortgage payment they were comfortable with today). A $7000 lower offer is like another 2.5% decline of home prices. Not good for anyone.

Advice:
Sellers, price correctly and get into contract in March.
Buyers, today is the cheapest mortgage you are likely to see in your lifetime (all things considered)! Get off the fence and buy NOW!

P.S. – Rumors are strong that FHA is looking to reduce the allowable sellers’ concession from 6% to 3% in April as well. This move will have a huge impact on how much cash will be needed to buy (especially in places like NY with the NYS Mortgage Tax).  Hurry—get in the game!