Show Appeal Realty Lending Market Updates regarding distressed property market, GFE & HUD 1, FHA Appraisal Requirements, & Tax Credit:

Below is a quick reference of recent changes that are effective as of now and those that will be in the months to come

• Effective December 23, 2009- FHA released a notice that Borrowers are eligible for new FHA mortgage if they pursued a short sale agreement on his or her principal residence or a short pay off when refinancing their home as long as there were current on their mortgage and other installment debts for the proceeding 12 months at the time of the short sale of their previously owned property and the proceeds from the short sale serve as payment in full. There are some overlays to prevent current home owners taking advantage of the lower market so please contact your lender regarding.
• January 1, 2010 – New RESPA good faith estimate and HUD 1 settlement statements have gone into affect. Both the good faith estimates from lenders and HUD 1 settlement statements from the title companies have changed. They have been revised to be more similar so the borrower can better understand fees and cost for a transaction on both documents. Once a property has been defined for the borrower and an application has been taken for the borrower a good faith estimate from the lender must be given to the borrower within three days. There are lots of changes and guidelines to the new good faith estimate and if you would like more details on this on how this will affect our future transactions please contact your title professional and loan expert regarding specific transactional details and then call me with any questions.
• February 15, 2010- FHA appraisal requirements will change and fall under the current appraisal requirements for conventional loans. This means that after Feb 15th all new FHA loans will need to have appraisals through appraisal management companies contracted through the banks.
• April 30, 2010- First time home buyers and move up home buyers must be under contract on a primary residence home to submit for home buyer tax credit.
• June 30, 2010- All contracts written on or before April 30th 2010 must be closed in order to submit for home buyers tax credit.

Please let me know if you have an questions or concerns over the above updates. I am not a lender or CPA, however these are very important details to know relating to the lending environment and buying real estate in Arizona in 2010.

The Phoenix real estate market might be starting to find a long trough in home values. This means two things:

1. Home values are starting to stabilize
2. Home values are going to remain stagnant for some time

I believe the market is in the initial phases of finding a so called ‘bottom’ and we could be on the cusp of seeing home values starting to stabilize. In some of the hardest hit areas of the valley where prices have fallen 70%, properties are selling fast with multiple offers. There are many investors and secondary home buyers that are paying cash, which is helping the appraised value of comparable properties. Also, if lending will loosen up a little bit and find a happy median between two extremes, we could really start to see more qualified buyers enter the market.

On the flip side, there are a lot of homeowners that are under water and are in preforeclosure. I believe this trend will continue for another 16-24 months which will more than likely keep any appreciation of home values at bay.

For first time homeowners, it is a great opportunity to take advantage of a $8,000 credit from the Gov. If you are an investor, cash flow is back for rental properties, but requirements of a minimum of 25% down is a little hard to swallow.

A key factor for many secondary home buyers and people looking to upgrade is to take advantage of the low interest rates. With so many dollar bills being printed, it is only a matter of time before inflation sets in and interests rates begin to creep up. I would expect this to happen by 4th quarter 2009 and into 2010.

Yes, it’s that time of year again here in the Phoenix Valley for the real estate market. Our market typically (the key word here is ‘typically’) starts to pick up in early to mid March as temperatures consistently start to hoover in the mid 70’s to low 80’s.

Am I seeing increased activity right now? Absolutely! It was been a busy past two weeks as buyers are starting to get off the fence and take advantage of the depressed market. This is especially true with bank owned foreclosures and short sales. I think this trend will continue through the spring, however the real question is if it is sustainable?

I am encouraged by what Bernanke said on the recession ending in 2009, Citigroup being profitable in the first two months of 2009 and also I’m starting to see the Obama foreclosure prevention plan limit the number of homes being foreclosed on. The first place these foreclosures show up is at trustee sales and lately the inventory has been slim with a lot of postponements. It is a simple supply and demand issue for prices to start going up…and if the supply is dropping and the demand is increasing, then prices will find the bottom.

Lastly, I think the Phoenix real estate market will start to recover before a lot of other areas in the country. This being because our market started declining before a lot of other markets (late 2005) and we now have builders that are not in play anymore as well as a consistent population increase…all good things.

This pie chart shows that 45% of homes for sale in the Phoenix Metro Area are distressed!

This does not factor in homes that are not put on the MLS and go into foreclosure. Therefore, the number of homes that are distressed in Phoenix Arizona is a lot higher than what I can quantify. FYI: Here are the actual numbers:

• 28,372 Traditional For Sale
• 11,412 Short Sales
• 11,798 Bank Owned

The so called ‘housing bubble’ has been deflated to reflect a housing boom that never did happen between 2003 and 2006. If you follow the graph below, you will see that today’s prices reflect home values in the second quarter of 2003.

Also, it looks like that the peak of  the Phoenix housing market occured in the second quarter of 2006 with the median home price of $265,000. That’s a 40% drop in housing prices! It’s great news for Phoenix area home buyers.

Recently I have seen an increase in showings on one of my listings in Ahwatukee. This home has been on the market now for almost two months and it looks like there has been a sudden increase in the number of buyers viewing the home. Here is a graph to illustrate the activity over the past month:

As you can see, in the past week I have had 10 showings on the home. It’s no secert that the month of December is a slow month for real estate here in the Phoenix Valley and I think turning the calendar to 2009 has a huge impact in consumer confidence (compared to 2008). I have that feeling that I will get an offer sometime soon on this Ahwatukee home. I will keep you posted…

The big question for real estate professionals in 2009 is when the current Phoenix real estate market is going to hit the bottom? The reality is the Phoenix housing market has dropped 41% from the peak in June of 2006 to October 2008. Yes, 41%!

This question is challenging to answer because to predict the market exactly is more of an educated guess as opposed to a known fact. There are also numerous external factors that will help determine the course of the entire US housing industry in general that are still unknown.

The point here is, that the bottom of the Phoenix housing market will be attributed to a number of different variables that have to align properly for the market to start to recover. Here are some of those factors:

• Declining Number of Foreclosures
• Interest Rates Remain Low
• Improved Consumer Confidence
• Investors Back in the Market
• Buyers Get Off the Fence
• Positive Media Spin
  
• Ease of Financing Options

I have a poll going about when the Arizona real estate market is going to hit the bottom, in which you are welcome to express your thoughts.

You will probably being hearing this a lot, if you haven’t already, about the second wave of foreclosures to hit the real estate market. Most people thought that all the foreclosures are credited to the subprime mortgage meltdown and, while this is currently true, there is a second toxic mortgage product ready to bring in another wave of foreclosures.

This second mortgage product is called an ‘option adjustable rate mortgage‘ or ‘option ARM’. Most people who got option ARM loans did so to keep their monthly payments low and were banking on the continuing rise of property values. Option ARM’s allowed borrows to pay only a small portion of the interest on their loan every month which if it’s less than the accruing interest, there is negative amortization, which means that the unpaid portion of the accruing interest is added to the outstanding principal balance. Simply put that these people are screwed because their equity is (or has) disappeared and their monthly payment is not enough to pay off the interest.

These option ARM’s are projected to start resetting in April and will in most cases result in higher mortgage payments while the homeowner’s equity has disappeared. This could easily result in fueling a self-sustaining cycle of foreclosures that will continue to drive down property values.

If you don’t know exactly what kind of mortgage you have, PLEASE ask! It’s inevitable that these option ARM’s will bring a new wave of foreclosures to the Arizona real estate market. However, there are options for homeowners to minimize the effect, for example; mortgage modifications, short-sales, bankruptcy, and more.

I thought it would be interesting to illustrate a chart of homes for sale in Gilbert Arizona. This will show you what percentage of homes that are bank owned, short sales and traditional for sale.

Wow, 47% of homes on the market in Gilbert Arizona are distressed! I will follow these statistics and give an updated report in March of 2009.

I just wanted to get everyone’s thoughts on when the real estate market in Arizona is going to bottom out. My crystal ball is probably just as good as yours, so let me know what you think. Seriously, it only takes 1 second.

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You can only vote once, and the 2020 date, just simply means that it is going to be a lot longer. You will also be able to see this real estate poll on the right sidebar. Thanks for voting!