Real Estate Information

Associated Press: updated 3:19 p.m. CT, Thurs., Dec. 6, 2007

 

As I reflect over the past year and the changing real estate market and look toward the start of 2008, I see many positive trends that have emerged as a result of our “market correction” the past few years. As I continue to look at both local and national market statistics and speak with Realtors from all areas of North America I notice several trends:

The initial transition from a sellers’ market to a buyers’ market occurred in 2006 in Arizona. This market was one of the first in the nation to decline, and it will also be one of the first to rebound. The initial shock is over and all the parties involved in a real estate transaction, buyers, sellers, lenders, appraisers, inspectors and Realtors are realistic in their expectations. 

Mortgage financing has undergone a transformation from ridiculous loan programs that financed more than the purchase price for buyers with problem credit histories to traditional lending programs at lower interest rates. If you have stable employment, a track record of paying your bills on time and handling financial obligations responsibly and are purchasing a home at the appraised value, you will easily be able to obtain a mortgage loan. There still are and will continue to be loan programs available to first time homeowners with minimal down payments but these will be backed by lending giants such as FHA, Freddie Mac and Fannie Mae, not predatory lenders whose exorbitant closing costs or adjusting interest rates virtually guarantee future default by the buyer. 

The pros are back! The wildly appreciating market of a few years ago enticed thousands to obtain their real estate license or become loan officers. Realtors became “order takers” instead of mastering their skills at marketing property, understanding values, negotiating, and preparing and understanding the legally binding contracts they prepared for their clients to sign. The days of taking a listing, planting a sign and placing it in the MLS, only to receive multiple offers within hours are gone.   Reputable loan officers who provide credible advice and loan options for borrowers won’t be competing with the shady lenders who took advantage of unsophisticated buyers.  Appraisers who were willing to match any price on a purchase contract are out of business and the appraisal experts who truly understand market conditions and are willing to take the time to properly evaluate a property are sought after by lenders.

Housing represents a home to live in again, instead of a commodity to be “day traded.” Yes, real estate is an appreciating asset and most of the wealthiest families in American have heavily invested in real estate as part of a long term wealth building strategy.   I’m happy to see the frenzy of unemotional commodity trading of real estate over.

Buyers have a choice of well priced homes in good condition. Inventories are leveling off with homes priced at realistic values, properly staged and in good condition.   Sellers are not only willing to negotiate again, but they understand that their properties must be in good repair. Buyers are no longer forced to overbid on a home and accept it in “as is” condition regardless of flaws discovered during the inspection. Interest rates are quite favorable and financing programs for solid purchasers are readily available.   Arizona is predicted to remain as one of the top ten states for population growth over the next several years and the growth of the golden corridor between the metro areas will continue. Interestingly, folks from outside the US see the opportunities in this market. Our office is currently working with several homebuyers and investors from Canada and Europe who see the opportunities in this market cycle.

While all these trends seem positive to me, I also see a few that are disappointing and hopefully short lived. There are always those people who find a way to profit from the misfortune of others and this market provides opportunities for new spins. Unfortunately two of these include preying on folks who are delinquent in their mortgage payments and possibly facing foreclosure. These scams include bogus foreclosure consulting firms and equity skimming schemes. It can be emotionally exhausting to deal with your lender and all the paperwork required when attempting working out a solution for a mortgage delinquency. Some consulting firms charge an upfront fee to negotiate on your behalf with your lender to avoid foreclosure. Unfortunately, many of these firms pocket the fee and do nothing more than you can – sit on hold and wait to speak with the customer service person at your mortgage company. Rather than pay a fee of $500 to $1500 to a third party, take the time yourself to speak honestly with your lender, and offer that fee as a partial payment toward delinquent payments. 

The second scam involves a buyer, usually an investor or company to buy your home, who will allow you to rent it back from them while you get back on your feet financially. The offer usually allows you to buy back your home directly within a year or two at a predetermined price. This all seems like a great solution. Unfortunately after closing the buyer skims off whatever equity you have in the property, never makes payments on the property and pockets the rent you’ve paid to them. There are many variations of these two scams and probably by the time this article is printed there will be new ones. I’ve always been told, “If it sounds too good to be true it probably is” and perhaps you can use that as your litmus test if you are tempted by offers such as these.

On behalf of everyone at Yost Realty Group and RE/MAX Casa Grande I’d like to take this opportunity to wish you and your loved ones a very happy, healthy and peaceful holiday season. 

There are still a limited number of tickets available for the 2007 Phi Theta Kappa Playhouse Drawing at Central Arizona College.

 

Tickets are just $5 each or five tickets for $20. Only 500 tickets have been printed for the drawing, which will take place at 2 p.m. on Thursday, Dec. 6.

 

Proceeds from the student-built playhouse will benefit PTK’s Play Pump Project and Relay for Life service projects.

 

The playhouse stands approximately six-feet-wide by eight-feet-long by eight-feet-high and is constructed of building material priced at more than $1,000.

 

The playhouse will be delivered free to all communities between Oracle to Kearny. Winners from outside that area will be responsible for delivery charges.

 

For more information or to purchase a ticket, please contact Chris Romiti at Central Arizona College’s Aravaipa Campus by calling 520-357-2812 or by e-mailing him at chris.romiti@centralaz.edu.

Economy best in four years, an article from CNNMoney.comhttp://money.cnn.com/2007/11/29/news/economy/gdp/index.htm, reports that despite a hit from the housing and credit markets, the nation's economy grew at a 4.9% rate in the third quarter, according to the government's latest reading.  That is up from the 3.9% growth rate in the government's initial estimate for the period.  The gross domestic product, the broad measure of the nation's economic activity, matched the consensus forecast of economists surveyed by Briefing.com.  New readings showed stronger exports, spending by individuals and growth of business inventory lead to the large upward revision.  The growth was the best rate since the same period of 2003.

The city is definitely displaying its growth! The new Promenade at Casa Grande mall is having a Grand Opening Celebration on the 16^th of November. A long list of events and performances are scheduled for the weekend of the grand opening! Check out all the information on the Promenade’s website.

The mall will be offering over seventy shops, not to mention the restaurants that are scheduled to open for the area. The retail stores that are currently open include Kohl’s, Target, JCPenney, Staples, Dillard’s, and PetSmart. The next to open will be Harkins Theatres this weekend. Retailers that are coming soon include Bed Bath & Beyond, Cost Plus World Market, Payless Shoe Source, Ross Dress for Less, Sports Authority and Ulta.

“What’s the market going to do? Are prices still going down?    Should I buy one of those houses at auction? Should I try to buy houses that are in foreclosure?”

I wish I owned a crystal ball that provided answers that were perfectly clear! Several times over the past year the statistics I watch have indicated that we were at the “bottom” of this market cycle and things were starting to improve. But then some economic news would be released that stalled the rebound. Keep in mind that by the time the statistics actually prove the market is cycling up again, we’ll be about 60 to 90 days past the bottom of this cycle.

What are the real indicators of the bottom of a market cycle? I watch for several things, such as the number of sales increasing monthly (after taking into consideration the seasonality of our market,) days on market decreasing, available number of listings starting to decrease, and generally how fast the market is absorbing the available inventory of listed homes. One of the factors that I cannot account for is new construction sales, as not all the builders report their statistics through the Arizona Regional Multiple Listing Service (ARMLS.) Another indicator is when investors start buying properties again (and yes, that is happening.)

It seems that everywhere you turn these days, newspapers, TV, magazines and the internet are all spouting doom and gloom. I guess you’d say that I am an eternal optimist. In fact, rather than see the glass as half full, I typically see it as full and spilling over. In contrast to the negative housing predictions here are some factors that I interpret as positive: 

Interest rates have dropped due to the Federal Reserve Board’s aggressive rate cut and all indications point to another rate cut at their next meeting. That should help ease some of the interest rate increases and resulting payment increases for folks with adjustable rate mortgages as well as make monthly house payments for homebuyers in the market now even more affordable.

Congress is working on legislation that will eliminate the tax penalty that results when a lender accepts a short sale. The IRS recognized the forgiven debt as income and collected taxes on the amount of the principle reduction. With this penalty eliminated, more struggling homeowners will avoid foreclosure.

Jumbo loan relief may be coming shortly. Congress is working on increasing loan limits to allow conventional loans over $417,000. Financing for high value loans became much more difficult with the “subprime” lending debacle and this artificial limit has had a severe impact on people who live in areas where home prices exceed this amount.

FHA loan changes are coming. Years ago, the majority of homes in this area were financed by FHA, which evaluates credit history rather than just using a FICO score. Unfortunately, very few FHA loans are used today because their loan limits haven’t been adjusted to accommodate the higher sales prices in most areas of the country. FHA is also taking steps to disallow many of the first time homebuyer down payment and closing cost gift programs. At first glance this may seem like bad news, but I believe it will make real estate values more stable in the long run. Frequently sellers increased the sales price of their home by 3 to 6% and gave those funds to a charitable organization who then gifted the homebuyer with the amount of the down payment and closing costs. In some hardship situations this is a beautiful thing to do. However, if a homebuyer has no savings, no cushion to fall back on and runs into financial trouble without having any cash investment of any kind in their home, they are more likely to default and face foreclosure. After Oct 31^st there will be only two loan programs available that will accept seller funded down payment and closing cost assistance programs. Anyone considering taking advantage of these types of loan programs would be advised to utilize them by purchasing now rather than waiting because those programs could be eliminated entirely in the future.

The auction of the abandoned and recently completed homes by Turner-Dunn is a good thing! These properties have been languishing in our market for quite some time. We all know that the production builders have been overestimating the demand for new housing for some time. Reducing the inventory of excess spec homes helps to bring the supply of available homes more in balance with demand. 

If you compare home values in our area over the last several years you will note that prices have continued to move upward. The figures listed below were obtained from statistical reports compiled over the last several years by ARMLS:

Year	Average Sold Price	Number of Homes Sold	Average Price of Homes for Sale	Number of Homes for Sale
2003	$99,200	802	$114,500	478
2004	$112,200	1078	$129,400	170
2005	$150,100	1581	data not available	data not available
2006	$169,200	971	$226,000	667
2007	$172,877*	564*	$221,811*	829*

These statistics indicate a 74% increase in the average sales price in our area in a mere five years. When you factor in the additional tax benefits of owning real estate, plus the fact that you LIVE in your investment, I don’t need a crystal ball to predict the long term trend of real estate appreciation.

The “golden corridor” between Phoenix and Tucson will continue to grow due to our excellent weather, the desire of baby boomers to enjoy an active lifestyle and employment growth in Arizona. The real estate value “correction” the nation is experiencing is a result of the overheated housing boom and transfer of money from stocks and bonds to investment real estate during the past few years, as well as long needed reform of lending practices. This cycle was absolutely predictable. If I had a clear crystal ball I believe it would predict long term steady appreciation in real estate values in our area.   Debbie Yost, CLHMS, CRI, GRI is the broker/owner of RE/MAX Casa Grande and can be reached at Debbie@YostHomes.com.