no hassle listing blog

A select group of buyers are waiting longer than necessary to re-enter the housing market after a short sale or foreclosure.  This is understandable as most loan programs require a minimum wait of 3 years after a foreclosure and some up to 5 years!  The one exception has been if the borrower did a short sale and remained current at all times (some lenders will not allow this in a short sale in order to “punish the borrower”) they possibly could get an FHA loan more immediately.

That is now changing.  The market place is responding to the times and there are new “portfolio” loans (loans made by a bank with their own money – gasp) that are now available to those who wish to return to the housing market sooner after a foreclosure or short sale.  While these “Second Chance Loans” are not perfect for everyone, for some this new program can solve a problem – allowing the buyer to jump back in to the market place quickly while values still remain aggressive.

Here are the primary criteria:

Must have a minimum of 25% down

The housing payment must be under 50% of their income

Borrowers must demonstrate the ability to make the loan payment

Interest rate based on total circumstances (expect above market rates)

Your “troubles” must be behind you (financial troubles)

Think this might be a loan that you or someone you know needs?  As always it is best to speak directly with the lender.  Simply email us so that we can connect you at Russell@nohasslelisting.com

It may be a bit early to call, but the greatly constrained supply of homes in the valley has started to ease a bit.  For those who follow the actual real estate trends in the valley (not the usually misstated national news) this year began with supply dropping precipitously.  The effect of the constrained supply without an equally corresponding drop in demand contributed to a huge pricing push.  But the third quarter typically brings seasonal adjustments in demand – and this year is no exception.  The local news and real estate community has overall done a decent job on getting the word out that values are up and supply down.  That has encouraged sellers to consider moving from bystanders to players again.  So more traditional sellers have re-entered the market while demand has done the seasonal slowing.  This is encouraging news for buyers who have been experiencing huge frustrations on trying to buy a home.  Now, easing supply does not mean that it is a cake walk for buyers.  It simply means that the tightened supply has eased a bit.

One last comment on pricing, while the price rise has momentarily slowed due to the supply and seasonal adjustments, it would still appear that prices are likely to rise next year.  Particularly in new builds (the current solution for frustrated re-sale buyers) builders are anticipating next year’s pricing to be up close to 20%.  So the mantra remains the same for the year – if you want to buy, do so now.

The two biggest and most tenacious rumors in the valley’s real estate market appear to be:  foreclosures are rising and there is a “shadow inventory” of foreclosed homes the banks are waiting to release.  These are false – despite all the news reports that tend to support such nonsense.

Foreclosures are down significantly in the valley and while we still get the occasional tiny blip up now and again, the trend has been consistently and dramatically down since the start of the year.  Comparing the number of foreclosed homes for sale in January of 2012 to January of 2009 – the supply is down 92%. Yes there will always be foreclosures, as sadly the number never goes to zero.  However, the numbers are consistently dropping and dramatically with nothing indicating that trend will not continue.

That leads us to the second rumor – shadow inventory.  Shadow inventory is defined numerous ways, but the most common definition is homes that the banks have taken back and are holding off the marketplace. The banks in Arizona do not have some “secret stash” of houses they are holding back.  Why can we state this as fact? The beautiful thing about real estate is that changes of ownership cannot occur in secret – they require a public recordation to transfer ownership. So this persistent rumor is more attributable to errors in counting and tracking foreclosures than anything factual.

“The market will never come back”.  How many times have sellers told us that in the last five years?  The problem with that sentiment is that it’s untrue.  All financial cycles are just that – a cycle.  But for the last five years homeowners were justifiably gloomy about the great American dream.  It is very hard to describe something as a “dream” when its value is plummeting below not only what is owed but the sheer cost of the commodities that make it up (i.e. the concrete, plumbing, roofing, etc.)  Once the mindset of the consumer shifts to gloom, it can be very hard to shift back to sunshine.

However, the current strong recovery that is underway in the Phoenix market should encourage sunshine.  In light of that, we’ve put together some reasons that we believe might make now a very good time to consider selling.

1.  Because you CAN sell your house and you might NOT be a short sale. Values are moving up at a very strong clip – as quickly and strongly as the 2005 market.  So much so that the pace is not sustainable long term.  Sellers who couldn’t sell in years past, now with the increase in value, can finally come to market.  How can you tell if you now have equity or can sell?  Simple.  Ask us for a free market analysis.

2.  If values haven’t risen enough  and you must sell, short sales are both easier and faster than ever.  Although we would not describe the banks as efficient on processing short sales (of course they are not that good at banking either) – it still has gotten so much easier to complete a short sale.  The success rate only a year or so ago was probably at 50% as an industry and now the rate is closer to 90%.

3.  Low Interest Rates.  For those looking to sell and buy, the most important factor in the timing of the sale is interest rates.  Since the house you’re selling and the house you’re buying are appreciating at approximately the same rate – then the primary impact on affordability becomes interest rates.  Right now rates are amazingly low.  But, again, low rates will not be with us forever history says.

4.  Condition and the overall look of your home is NOT all that important right now.  The condition of the home always impacts pricing, but in some markets the condition determines if you can sell at all.  Right now regardless of condition, we can probably find a buyer for your home.  Additionally, thanks to the last few years of “as-is” distress sales, many sellers can sell their home in “as-is” condition avoiding costly and aggravating home repairs.

5.  Speed of sale – less time on market, less intrusive to sell now.  In a strong buyer’s market, sellers might expect the average marketing time to be around 5-7 months.  That’s a lot of bed making and potpourri.  Now most sellers will secure a buyer in 3 weeks or less.

7.  High percent of cash buyers.  While all sales are “cash” to the seller at close, the fact of the matter is buyers who need financing are part of any normal market.  Currently we have an unusually high number of transactions that are cash sales.  This is good news for sellers because the issue of low appraisals (the most common problem in a rising market) is eliminated with cash.

8.  Easier for seller to dictate the terms of the offer.  Higher purchase prices of course are what most sellers focus on as a benefit in a strong seller market.  But just as important is the evaluation of the terms.  Issues like the right to take certain fixtures, the ability to dictate the close of escrow date, the right to rent back, these are all benefits available to sellers in today’s marketplace.

9.  You can afford to hire an agent.  It sounds strange that this would be a benefit of today’s market, but it is.  In a strong seller market, a great agent can actually attract enough buyers to effectively pit them against each other.  It is not unusual for a skilled agent to jump the pricing by strategically bidding the offers against each other more than offsetting any cost of commission.  We have seen many a seller sell to a neighbor or friend to “save the commission” only to forfeit the commission amount and then some through the elimination of competitive bidding.

Hopefully we have given you a reason or two to think “sunshine”.  If you would like market information on values, please let us know.  As always, we will keep you informed.

 

Russell & Wendy Shaw

(Mostly Wendy)

Residential real estate has always been more of an emotional business than fact based one – probably due to the fact that buying and selling a home ranks high on the stress list.  So the battle in a recovery is one of the mind more than the realities of the market place.  Reality shifts first and eventually the mind follows.  Here are a few of the fallacies we hear from both sellers and buyers and even more surprisingly agents (gasp!).

Myth number one: The banks have a large “shadow” inventory they are waiting to release

This is probably the number one falsehood that is bandied about at dinner parties and even by the media.  We have been hearing this rumor for years now and each year it proves to be unfounded.  What causes such a persistent rumor?  Our guess is twofold – one, conspiracy theories always rise over fear.  When something seems out of control or unpredictable it seems that human nature forces an invention of “facts” when the facts seem unconfrontable or unknowable.  Secondarily, the argument  for shadow inventory arises due to the “reported” foreclosure numbers vs. the foreclosures that can be traced through resale methods.  Because the “reported” numbers are so much higher than the foreclosures that can be traced, it prompts the belief that the banks are strategically holding back  a “shadow inventory”.  The fact of the matter is that reporting methods for foreclosures are routinely filled with errors.  Here are just some of the errors that lead to the erroneous belief that a shadow inventory exists.  Some properties have multiple lots with only one home, but are reported as if each parcel was a foreclosed home.  Some reporting sources count the notice of default as well as the actual foreclosure – which alone doubles the number of “foreclosures”.  Even worse are the sources that count each notice of default as a “foreclosure” – which is ludicrous considering that ten notices to the same house (and believe me delinquent homeowners usually receive at least 7 certified notices of default) does not equate to ten foreclosures.  One delinquent homeowner is still one foreclosure – even if ten notices were sent!  Also, notices of default are sent to homeowners who are mid-modification or mid- short sale.  These are often resolved without foreclosure – but are counted as a “hidden foreclosure”.  The examples of errors are numerous – the point being this is often behind the reporting of hidden inventory.  Recently a Wells Fargo local representative confirmed publicly that Wells “has no shadow inventory”.

Myth number two: Prices are still dropping  This is not only untrue, the opposite is true – overall the Valley home prices are rising and rapidly.  Yes it is going to take time to dig out of the hole from the crash of 2007-2011, but the recovery is underway.  The luxury market and the 55+ communities did not see the same level of drop in pricing and therefore are not experiencing the same leap in pricing as we are seeing in the lower price ranges.  But as inventory levels are lower than demand, pricing is moving upward.  We expect this trend to continue through the year at least.

Interest rates will stay low forever because the government will make it that way

Yes, there are people who believe this even though there is no basis in fact for this idea at all.  In the first place, long term rates (10 year bonds and mortgages) are not “set by the government” in any way, shape or form.  The government can’t control these long term rates (up or down) even when they have tried to do just that.  The government (via The Federal Reserve Bank) sets short term rates.  Overnight rates – the rates that bank charge each other.  Not long term rates at all.  The “rental rate” for money (current interest being charged) is set by the market – supply and demand.  Money is a commodity.  How much it will rent for is based on how much is available and how great the demand is at that time.  Long term rates are “regulated”, if you will, by what investors believe is going to happen with future inflation.  So what does this mean to the homeowner?  Our belief is that the currently low interest rates will not last indefinitely.  This is a signal to buyers and the move-up seller to pull the trigger on any purchase sooner rather than later.  Interest rates will impact the monthly payment for a home far more than minor pricing fluctuations.

Arizona is one of the top 10 states for delinquent loans

A couple years ago this would have been true as Arizona was number four out of all the states for delinquency.  Now Arizona ranks at number 33 – and our delinquent loans are now at only 6.6% (compare that to over 12% in February of 2010 when we were number 4 in the country).  In fact, our delinquency ranking is the most improved in the last 2 years, another signal that recovery is underway.

So again, we stress that our market is in recovery.  For sellers this is good news; the home that once may have felt like an anchor dragging down homeowners, may be on the road to becoming an asset again.  If you have been waiting to sell, feel free to contact us to see if current pricing allows that to become an option for you once again.

Thank you as always to Michael Orr of the Cromford Report and our loyal friends and clients.  We are better for you in our lives!

The problem with national housing news is that housing has always been a local market issue – never a “national” one.  Home sales in Georgia have very little to do with home sales in Arizona.  So when the chief economist for Zillow, Dr. Stan Humphries states on April 25^th “For people who have been waiting to time their home purchases close to the market bottom, it’s time to start shopping” – is it really time? 

The answer depends on where you live.  For those of us dwelling in the valley, the time to buy “at bottom” passed in October of 2011.  Does that mean that it is a bad time to buy now?  Of course not – in fact with prices going up at the moment at around 3% per month it would be beyond wise to shop sooner rather than later!  Combine that with historically low interest rates and affordability is unlikely to be this good for years and years.  So buyers, if you can and wish to buy – do so immediately.  Supply is continuing to drop and prices are continuing their crawl out of the deepest and longest hole we have personally ever seen.  Sellers, this is the time you have waited so long for – the return of price appreciation.

Last month we covered the remarkable shift the market has taken recently, shifting from a neutral market over to an overheated seller’s market.  The shift occurred in reality much sooner than it has taken to show up in the minds of both buyers and sellers.  However, the shift HAS occurred creating the best selling environment for sellersPhoenixhas seen since 2006.

What is behind this shift?  The short answer is “limited supply”.  The supply has tightened severely and no easy fixes for additional supply are on the horizon to ease the problem.  In fact, January had the lowest number of new listings for a January in the Greater Phoenix area since this statistic began being monitored in 2001.  Ditto for February.  Even 2005 – the pinnacle of the frenzied seller market – had more new listings than 2012.  Plus, there are other factors missing in the current supply of homes pipeline that were present in 2005 – builders and for-sale-by-owners.  Both of those are missing in the 2012 marketplace.  As previously discussed, builders have only just begun to trickle back into the market as the cost to build couldn’t even come close to the pricing of the distress sales. Foreclosed homes (REO) are being added to the MLS at the slowest rate in 5 years.  Even trustee sales, which used to rarely sell at action and therefore ended up on the MLS, are now being sold to investors instead. In fact, 2 out of 3 homes at trustee sales are going to private purchasers leaving very few to show up on MLS. The only segments of the market that are not reflecting these severe imbalances on supply are the 55+ communities and the luxury market.

This imbalance in supply and demand is finally having an impact on prices.  Until the traditional seller and builders come back in to the market, there are no factors at play to ease the supply shortage.  Therefore, sellers, at long last, can once again sell as they face little competition.

The real question is when should a seller sell in a rising market?  Long-term predictions have failed miserably in the last 8 years, so we are loathe to break out our crystal ball.  What does seem clear is that if you have been putting off selling because you have been waiting for values to rise or because you believed there were no buyers for your home – now is the time to sell.  The economy, interest rates, financing, builders and lending policies can all throw a damper on the real estate market.  At the moment, none of these factors are impacting the strength of the seller’s market.  Now may be the time to act.

As always, our thanks to the genius Mike Orr for the insightful numbers provided; and to you our friends and clients, we thank you for your continued loyalty.

Today’s answer to the question would be a much different answer than a year ago. In fact for the years 2008-2011, the bargain in the market place was most definitely bank owned foreclosures. Fast forward to today, and the very best bargain in the marketplace is unquestionably short sales. Why? Well, first, the bank owned foreclosures are lower than they have been for years. The rule of supply and demand applies here – little supply with lots of demand for the foreclosures is causing them to be bid up in price taking them out of the realm of a bargain. That leaves the “other distressed sale” – short sales (does this sound like the pork ads – the “other white meat”?). In fact short sales typically give the benefits of the equity sale (homeowner still maintaining the home) with the bank pricing that used to be part of the bank owned sales.

Why has it taken so long for short sales to become the purchase of choice? In short, the past performance of the banks. For far too long the banks floundered and failed to get their short sale processes in place to expedite these sales. At long last, improvement has come in the form of more approvals in better timeframes. At last we can truly recommend them to both our sellers and our buyers.