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Sellers Offer Overnight Trial Stays

Luxury second-home communities are increasingly offering “try-before-you-buy” weekends to potential customers, including the opportunity to play a round of golf, use the dining facilities and other amenities – plus take a mandatory tour.

St. John Fisher College professor Kyle F. Reinson, a real estate specialist and consultant for residential developers, says these tours work in part because they require a certain level of commitment on the part of both the buyer and the seller. The buyer, he says, often gets a good price because the seller doesn’t want to let him get away.

At Encaterra in Queen Creek, Ariz., four-day, weekend tours that cost the potential buyer $299 for an all-inclusive package, results in 25 percent sales, the club reports.

Source: USA Today, Larry Olmsted (09/04/2009)

Optimism in the Market

While some economists believe home prices will remain low for the foreseeable future, other buyer-friendly incentives could disappear soon. If you've been on the fence about buying a home, here are some reasons to consider:

1 - Interest rates are at a record low. The average rate for a 30-year fixed mortgage was 5.12% last week, the lowest level since the end of May, according to mortgage giant Freddie Mac. The average rate for a 5/1 hybrid adjustable-rate mortgage — which offers a fixed rate for five years and then adjusts — was 4.57%, the lowest since January 2005, according to Freddie Mac.

While the credit crisis exposed the risk of short-term ARMs, a 5/1 hybrid is still a good option for borrowers who don't expect to stay in their home longer than five years.

"If you're a young couple purchasing a home, and in the next five years you'll need a larger place, or it's highly likely you'll be moving, it makes all the sense in the world" to use a five-year hybrid ARM, says Bob Walters, chief economist for Quicken Loans, an online mortgage lender based in Livonia, Mich..

These low interest rates are unlikely to last, says Lawrence Yun, chief economist for the National Association of Realtors. Rising budget deficits will likely push rates higher over the next few years, he says.

2 - The first-time home buyer's tax credit. The economic stimulus package signed into law provides a tax credit of up to $8,000 for first-time buyers who purchase a home before Dec. 1. Unlike an earlier tax credit, this one doesn't have to be repaid. The credit phases out for taxpayers whose adjusted gross income exceeds $75,000, or $150,000 for married couples.

The term "first-time home buyer" is a bit of a misnomer. If you haven't owned a home in the past three years, you qualify. If your spouse has owned a home in the past three years, however, you're not eligible.

The credit is refundable, which means that even if you owe less than $8,000 when you file your 2009 tax return, you'll receive a refund for the balance. This feature makes the credit a valuable tax break for middle- or low-income families who pay little or no federal income tax.

To qualify for this tax break, you must close on the home by Dec. 1.  It is very important to have spoken with a lender prior to viewing homes so you are set and ready to write up an offer.

That may seem like a long way away, but real estate transactions are processing very slowly these days due to many homes going through one or more banks for approval on just the purchase contract offer.

Additionally, lenders have tightened lending standards, which means it takes longer to get a loan approved. There is also the chance you will have that extra week or couple of weeks going back and forth trying to get documents at the last minute, which delays the loan and closing.

In the past, home buyers could usually close on the deal within 30-45 days after signing a contract ut today buyers need at least 60 days just in case.

If you are purchasing a home that's in foreclosure or is a "real estate owned" property (REO) — a home the bank repossessed after failing to sell it at a foreclosure auction – you will most likely need even more time.

"The window of opportunity is closing fast unless the tax credit is extended," Yun says.

The NAR and other real estate trade groups are lobbying hard to get lawmakers to extend the credit into 2010. However, there is no guarantee the credit will be extended.

One downside to the tax credit is that you cannot claim it until you've closed on your home, which means you can't use the money for your down payment. However, some state housing finance agencies are offering bridge loans to home buyers who qualify for the credit.

Some of these loans are interest-free; others charge a modest interest rate. Borrowers repay the money when they receive the tax credit. Some states require borrowers to contribute some funds toward the down payment.

The National Council of State Housing Agencies offers a list of agencies that offer loans at www.ncsha.org. Click on the link for "HFA First-Time Homebuyer Tax Credit Loan Programs."

Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays.

Cash is Speaking Loudly in the Valley's Home Market

Half-a-billion dollars in cash was spent on down payments and home purchases in metropolitan Phoenix last month.That amount does not include mortgages on homes. It's the pure cash figure buyers spent on existing Valley homes in July, according to Arizona housing analyst RL Brown. In his recent “ Phoenix Housing Market Letter,”  Brown uses the figure to prove the housing market is showing signs of life after last year's downturn.

Brown feels that the recovery in metro Phoenix housing is undeniable.

There were 1,108 new Valley home-building permits issued in July, making it the second month since December that permits have climbed above 1,000, according to his report.

More good news!!  According to the latest S&P/Case-Shiller home-price index , Phoenix is not leading the nation in home-prices declines.  Las Vegas is No. 1 with a 32.4 percent drop from June 2008 to June 2009. The Valley came in at No. 2 with a 31.6 percent decline. Detroit was No. 3 with a 25 percent drop.

Phoenix has led the index for home-price drops during most of the past six months. However, the Valley's median home prices have started to move up in late April. Phoenix was one of the 20 cities tracked by the index that saw price declines improve from May to June. Las Vegas and Detroit both experienced bigger decreases in home prices.

The Arizona Republic

Market Update & Supply Information

The market overall is sitting at a 4.2 months of supply. Traditionally this would be considered a balanced market. However, we have areas that vary are very much a seller’s market and others that are very much a buyer’s market! Still 94% of the sales for the last month are under $400,000. Distressed Properties, Short Sales and REO’s, represent 69% of the sales for the last month!

The months of supply by area are below:

Goodyear, Litchfield and Avondale: 2.8

Peoria and Glendale 3.0

East Valley: 3.6

North West Valley 4.1

Apache Junction and Queen Creek: 5.1

Cave Creek: 7.8

Fountain Hills: 9.4

Scottsdale 9.7

Paradise Valley 15.6

Luxury $1,000,000: 26.7

New Home Sales Statistics

Sales of existing houses and condos in the Phoenix area rose in June to the highest level for that month in four years, with the non-foreclosure market continuing to account for a greater portion of sales. The modest shift away from lower-cost lender repossessions enabled the overall median sale price to edge higher than the prior month for the second month in a row.

In June, 60.8% of the Phoenix-area houses and condos that resold had been foreclosed on in the prior 12 months, down from 64% in May and the lowest since such foreclosure resales were 58.6% of all resales last November. Foreclosure resales hit a high of 66.2% this March, according to MDA DataQuick (A San Diego firm that tracks real estate trends nationally via public property records).

A total of 10,731 new and resale houses and condos closed escrow in the combined Maricopa-Pinal counties metropolitan area in June, up 12.2% from May and up 40.4% from a year ago. Total home sales have risen on a year-over-year basis for six consecutive months. However, sales of existing houses and condos combined have risen on a year-over-year basis for 12 consecutive months, and the June resale total of 9,720 was the highest for any month since March 2006.

Last month's year-over-year gains in house and condo resales offset a 50% annual decline in sales of newly constructed homes. New home sales are still lagging behind.

Thestreet.com

This Month's Snapshot of the Market ~

Currently, 94% of the sales for the last 30 days are under $400,000. The $1.0 Million Plus market is still slow with a 2.4 years of supply. The total numbers of homes on MLS are at a 3.6 months of supply. Bank Owned homes have dropped down to 55% of the total sales for the last 30 days.

Here is a view of the months of supply of homes in different areas of town:

Goodyear, Litchfield, Avondale 2.0

Peoria and Glendale 2.6

AJ and Queen Creek 2.8

Single Family Valleywide 3.1

East Valley 3.2

Northwest 3.9

Ahwatukee 4.1

Fountain Hills 7.3

Scottsdale 7.5

Central Corridor 10.4

Cave Creek and Carefree 10.4

Paradise Valley 25.9

Arcadia 28

Luxury Valley wide 29.0

Recovering Market…It’s possible!!

There are more positive signs from metropolitan Phoenix's housing market.  We don’t want to say it IS recovering BUT it doesn't appear to be deteriorating any more.

Home sales were up again in June to reach 9,614, according to the Information Market/Cromford Report survey. That's an 11 percent increase from May's home sales. June is the sixth straight month home sales have climbed in the Valley.

The median Valley resale-home price also climbed in June, the first monthly price increase since late 2007. Last month, the median ticked up to $125,000 from $122,000 in May.

Foreclosures also rose in June after dropping off for a few months. There were 5,149 trustee sales or foreclosures in the Valley, compared with 3,809 in May.

Pre-foreclosures, or notice of trustee sales, continue to hold around 8,700.

So far, the additional foreclosures aren't creating an oversupply problem for the housing market.

Also, the average price per square foot of foreclosures sold by lenders during June climbed to $65.64 in June from $63.77 in May.

 

Arizona Republic

Pending Home Sales Rise Again

Pending home sales are now showing a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.

Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing.

“Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he says. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

The Effects of Appraisals
The NAR President, Charles McMillan, says the appraisal issue is complicated. “We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” he says. “In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise.”

McMillan says sellers shouldn’t hesitate to speak with an appraiser about their home. “Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood,” he adds.

“Also, if recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out. It wouldn’t hurt to put all this in writing, especially if an appraiser is not familiar with your area. "

Affordability at a high
NAR’s Housing Affordability Index remains at historic highs. The affordability index fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. “Under these conditions the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” Laurence Yun says.

A median-income family, earning $60,800, could afford a home costing $296,700 in May with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of what a median-income family can afford. The affordable price was significantly higher than the median existing single-family home price in May, which was $172,900.

The first-time buyer tax credit also is benefiting the market. “Strong activity by entry-level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun says

Existing-home sales should trend up through the end of the year, with normal local market differences. “The big question is how much the appraisal issue will impact the ability of contracts to go to closing,” Yun says. “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”

— NAR (Realtor Magazine)

Here's the Latest Overview of the FHA rules:

Units in condo hotels are prohibited. The same is true for units in time share or "segmented ownership" projects, houseboat condo developments, and projects where there are multiple dwellings inside single condominium units.

FHA will not insure units in condominiums where more than 25 percent of the total space is allotted to commercial uses, such as retail stores or offices. In fact, the agency made a point of emphasizing that it will reject loan applications from any property that it deems not "to be primarily residential" in character.

FHA also will not insure condo loans if more than 10 percent of the units are owned by investors. This is a much stricter standard than Fannie Mae's, which permits up to 49 percent of units to be investor owned.

The agency will not endorse loans from projects where less than 50 percent of the total units already have been sold, or where less than 50 percent of the units are owner-occupied or sold to buyers "who intend to occupy them."

FHA does not want to insure loans on units located in buildings with heavy concentrations of units that are FHA-financed. If more than 30 percent of the unit owners in a project took out FHA-backed loans, the agency does not want any more business in that condominium.

FHA is abandoning its current one-year mandatory waiting period before considering loan applications on condo units. This is a concession to rental apartment projects who were converted into condos and sold.

Lastly, FHA will not insure units in buildings located within a thousand feet of a major highway - it wants to avoid adverse noise pollution impacts on property values - or within three thousand feet of a dump, landfill or EPA Superfund site.

Published: June 29, 2009 Realty Times

 

New Information on Loan Modification and Short Sale Options

Thanks to new efforts by the Obama Administration, now mortgage modifications can include second mortgages,not just first mortgages, and cash incentives are making short sale deals more desirable.  

More information on Second mortgage modifications:

Loan modifications are designed to make the home loan more affordable, typically by reducing the interest rate, extending the term of the loan and, less often, by reducing the principal. They are not refinanced mortgages, which pay off the old mortgage with a new mortgage.

Under Making Home Affordable’s new second-lien program, borrowers whose first mortgages are modified will automatically have payments reduced on their second mortgages as well, provided the first and second-mortgage lender participates in the program.

Twelve mortgage servicers are currently doing this. Among them are large banks including, Bank of America, Wells Fargo, Countrywide, Citibank, Chase and a few others.

The stipulations for homeowners looking to modify their first mortgage are these:  The homeowner must be an owner-occupant; have an unpaid principal balance that is no more than $729,750; have a loan that was originated on or before January 1, 2009; have a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31 percent of their gross monthly income; and have a mortgage payment that is not affordable, perhaps because of a significant change in income or expenses.

Under the new second mortgage program, in addition to lowering the payment, lenders can also choose to erase a borrower's second mortgage in exchange for a lump-sum payment from the government.

There are new short sale incentives also.  These are:

Short sale incentives are a recent refinement to the Obama administration's housing rescue programs.

In a short sale, the lender closes the mortgage in return for whatever sale price the homeowner can net. However, the difference is sometimes considered income for which the selling homeowner may be taxed. That is why it is so important for the homeowner to have a discussion with a tax professional.

Under the new short sale incentive, lenders can receive a $1,000 payment from the U.S. Treasury for allowing the owner to sell the house for less than the amount owed on the mortgage and for accepting the proceeds as full repayment, rather than treat it as a short sale.

Lenders can also receive $1,000 for accepting a deed-in-lieu transaction, in which the deed is simply transferred to the lender instead of going through a costly foreclosure.

Homeowners who agree to short sales or deed-in-lieu deals can receive up to $1,500 in closing costs. To help stop second mortgages from blocking the deal, the Treasury will pay second lien holders up to $1,000 to relinquish their claims in such transactions.

There are constant changes to the home mortgage dilemma at this time so make sure you are working with a Realtor who knows the "ins and outs" of these transactions.

 

Realty Times