1st Southwest Realty

Happy Thanksgiving to our valued clients:

Scroll down to read the articles of interest. I hope you enjoy this monthly newsletter. Remember whether you are buying a new or resale home it is important to have a realtor to represent your interests. If you know of anyone who is thinking about buying or selling please let me know.  You can search the MLS from my website at www.greathouseaz.com.

If you have a rental property and need a property manager or if your Homeowner's Association is looking for a new management company please email Karen Van Vugt at ftr9558@cox.net. Karen manages over 400 rental units and several Homeowner's Associations in the greater Phoenix area.

I just posted some short three minute videos on my website explaining how to do a short sale.  You can see them at www.greathouseaz.com.

If you no longer want to receive this newsletter reply with remove in the subject line.

Sincerely,
Pat Hune
Broker
greathouseaz@gmail.com
1st Southwest Realty
www.greathouseaz.com
Search the real MLS from my website!
Cell 480-703-1976
Fax 480-304-9099

Things to be thankful for

Low interest rates and Prices -  Mortgage interest rates continue around the 4-5% range.  FHA loan rates were as low as 3.875% with 1% origination on November 23, 2011. These super low rates combined with low prices are proving irresistible to tenants who have good credit and do not plan on moving out of the area for the next few years.  These first time homebuyers are finding fierce competition in the $150,000 and below price range from fellow first time homebuyers and investors flush with cash. 

Loan Limits Increased - Congress giveth, taketh away and then giveth back. Congress restored the loan limits for the Federal Housing Administration (FHA) for two years on November 21, 2011. The reinstated FHA loan limit formula and cap change will help make mortgages more affordable and accessible for hard-working, middle-class families in 669 counties in 42 states and territories, where the average loan limit reduction after the reset last month was more than $68,000. The provision reinstates the FHA loan limits through 2013 at 125 percent of local area median home prices, up to a maximum of $729,750 in the highest cost markets, the floor will remain at $271,050. However, Congress chose not to apply the loan limits restoration to Fannie Mae and Freddie Mac. Fannie-and-Freddie-backed mortgages will remain at 115 percent of local area median home prices up to $625,500.

National Flood Insurance Reinstated - The Loan Limit bill also provides for a short-term extension of the National Flood Insurance Program through December 16, 2011. NAR will continue to press Congress to use the additional time to complete their work on a five-year reauthorization of the program, which ensures access to

affordable flood insurance for millions of home and business owners across the country.

Mortgage Delinquencies Drop, New Housing Starts Stable - The 30 day delinquency rate dropped in October 2011 to the lowest rate since 2007. Delinquencies and foreclosures make up 12.5% of all US loans.  Arizona's mortgage delinquency rate is down 32% from 2009 which is a bigger drop than any other state in the nation.  There is no longer a glut of future foreclosures looming over Arizona.  Home builders are being more bullish on housing because even though housing starts are the lowest they have been in many years the number of starts have stabilized. 

Refinancing Assistance for Underwater Homeowners - Many Arizona homeowners underwater with their mortgages are anxiously awaiting more information on how they can lower their interest rates and payments through the expansion of the government's Housing Affordable Refinance Program. But details on the program have been delayed. Information on which homeowners are eligible and how to apply was supposed to be released by now but will likely come out next week. However, government mortgage giants Fannie Mae and Freddie Mac have begun providing lenders information on how to handle the expansion of HARP. Only homeowners with loans held by those entities are eligible to refinance, no matter how much more they owe on their home than its actually worth.  From the new information sent to lenders, it's now clear not all borrowers with Fannie Mae and Freddie Mac mortgages are eligible. A loan-to-value ratio of 105 percent is still in effect for borrowers with mortgages that have longer terms than 30 years or adjustable-rate mortgages with terms of five years or higher.  While some borrowers can start applying to refinance as soon as Dec. 1, others with loan-to-value ratios above 125 percent will have to wait until at least February of next year.  But for people who want to stay in their homes, need to lower their payments, have a high interest rate and do not have 20% equity this may be just what they need to keep from defaulting on their loans. 

Read more: 

Articles

1) STAT Newsletter Link
2) The Cromford Report 
3) Apartment Buying Frenzy and  Rental Statistics

4) Predictions for 2012 from Chase, Bank of America, Wells Fargo and other industry experts

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1) STAT Newsletter Link - STAT is produced monthly  by the Arizona Regional Multiple Listing Service - the database realtors use to list homes for sale and that have sold.

www.armls.com/docs/stat-and-ppi-2011/stat-november-2011.pdf

The ARMLS Pending Price Index (PPI) is a forecasting tool unique to ARMLS, which uses the pending sales in the MLS system to predict the behavior of median and average sales pricing 30, 60 and 90 days into the future.  While the properties in the pending pool are dynamic, moving within and out of the pool through delays in the contract to close process or cancelations, its value lies in its overall trending which foreshadows pricing recovery or languor.  Naturally its predictive accuracy diminishes with time.  In September, the predicted median sales price for October was right on with the actual figure at $112,000. The actual average sales price for October was $153,400, .85% above the predicted average of $152,100.   

www.armls.com/docs/stat-and-ppi-2011/ppi-november-2011.pdf

The Rent Check is ARMLS's new publication tracking single family home rentals.  A higher number of distressed properties result in more tenants who need to rent and   more rental properties as investors buy properties to hold as rentals.  In October 2011 there were 3,146 rental closings as compared to 1439 in October 2005.   It is important to note that not all single family rentals are listed in the MLS but the numbers are an indicator of how much the single family rental market has increased.

www.armls.com/docs/rent-check/rent-check-november-2011.pdf

Highlights from the newsletter are:

Distressed sales, defined as the combined total of foreclosures and short sales, continue to dominate the Valley’s real estate horizon. Of the 7,563 total sales in October, 4900 (64.8%) were distressed sales.  This is slightly below the previous eleven month average of 66.7%. Foreclosures for October were 2,693, or 35.6% of total sales, while short sales represented 29.2% of total sales at 2,207.  For most of the past twelve months, the short sales and foreclosure trend lines have remained almost parallel. Since August the two trend lines have been moving closer together indicating that short sales are gaining on foreclosures in the distressed property makeup.  We can speculate on the underlying causes.  After such a long run at shorts sales, lenders may be getting the hang of it.  The FNMA Short Sale Assistance Desk (SSAD) has been instrumental in expediting many short sales where Fannie Mae holds the underlying first lien.  While the number of distressed sales remains too high, gains in the short sale totals over foreclosure means that more homeowners have been able to dodge foreclosure.  

Overall, October STAT is best summed up as “holding the line.”  While there were positive indicators, like increases in the median and average list prices, a one day decline in DOM and slight decreases in foreclosures pending; other metrics took steps, although minimal, in a backwards direction:  decline in median and average sales prices, increase in new and total inventory, decline in total sales and an increase in MSI.  The promise of recovery, fueled last month by the whimsical uptick in all four pricing metrics (median and average listing and sales prices), was not dashed in October, just not fulfilled 

Jobs remain at the epicenter of the Valley’s, Arizona’s and the nation’s recovery. While many are frustrated with political impasses on job creation, there are positive signs that indicate that recovery is in process.  In a report prepared by the Arizona Department of Administration, Office of Employment and Population Statistics in cooperation with the U.S. Department of Labor, Bureau of Labor Statistics, the unemployment rate for Maricopa County dropped in September to 7.9% from the high of 9.1% in January. In September, Phoenix was name #6 in the nation for new job growth, according to figures released by the U.S. Bureau of Labor Statistics.  Non-farm payroll employment increased 2.3% from September 2010 to September 2011 in the Phoenix metro area, and the 2012 Phoenix projection for average non-farm employment is expected to be 1.4%, according to the Arizona Department of Administration. 

Phoenix metro area lost over 220,000 jobs since 2007 according the U.S. Bureau of Labor Statistics.  It added 31,300 jobs between August 2010 and August 2011 which amounts to an annual growth rate of 1.88%, ranking Phoenix as 18th in the nation among 100 major metropolitan areas.1  Job gains now, while making up lost ground, simply have a long way to go.  Employment and recovery are moving in the right direction but at an impossibly slow pace. Like the proverbial child who pesters, “Are we there yet?” our market responds, “Not yet.” 

(The areas and property types  included in these statistics are:  The figures shown are for the entire Arizona Regional area as defined by ARMLS. All residential resale transactions recorded by ARMLS are  included. Geographically, this includes Maricopa county, the majority  of Pinal county and a small part of Yavapai county. In addition, "out  of area" listings recorded in ARMLS are included, although these constitute a very small percentage (typically less than 1%) of total  sales and have very little effect on the statistics.  All dwelling types are included. For-sale-by-owner, trustee auctions  and other non-MLS transactions are not included. Land, commercial units, and multiple dwelling units are also excluded.  In addition very few new new home builders list their new homes in the MLS so these numbers are tracked separately in the RL Brown Reports. )

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2) The Cromford Report - Mid Month November Pricing Update and Forecast - November 14, 2011

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.  For the monthly period ending November 14, we are currently recording a sales $/SF of $82.36 averaged for all areas and types. This is 1.7% higher than the $80.99 we now measure for October 15. Our forecast range was $79.06 to $82.26 with a mid-point of $80.67. In a pattern similar to last month, this month the actual figure fell just above our forecast range by 10 cents. Pricing (as measured by $/SF for all areas and types) hit bottom in the second half of August and again in the first half of September but has been moving steadily upwards since then. We are now back at the level we last saw on July 3.  The current price level is 2.01% lower than last year on November 14.

On November 14 REO sales across Greater Phoenix (all types) averaged $62.95 per sq. ft. (up 0.8% from October 15). Pre-foreclosures and short sales averaged $72.25 (up 0.4%) while normal sales averaged $104.56 (up 0.6%). Normal sales gained market share, moving from 35.0% to 36.4% of sales, while REOs were the big losers, moving from 37.9% to 33.8%. Short sales and pre-foreclosures advanced once again this month, moving from 27.1% to 29.8% - another record high.  It is clear that the age of the REO is in decline while short sales and pre-foreclosures are becoming ever more important. As they become scarcer, REOs are getting more expensive. In addition the pricing for short sales and pre-foreclosures is no longer declining.

It is clear that the overall price movement (up 1.7%) is more than twice the movement of each individual component (REO up 0.8%, normal up 0.6%, short sales up 0.4%). This happens because of the change in the mix in favor of more expensive normal and short sales and away from the cheaper REOs.

On November 14 the pending listings for all areas & types showed an average list $/SF of $80.61, 3.0% above the reading for October 15 - so pending $/SF has moved upwards in a serious way for the first time in many months. This is a very positive signal, especially when all three sales components are moving upwards at the same time. Among pending listings we have a fast growing 30.5% normal, a sharply declining 28.3% REO and a steadily growing 41.2% in short sales and pre-foreclosures. The average pricing for pending listings on November 14 in each category were: $110.40 normal, $67.21 short sales & pre-foreclosures and $62.64 for REOs. Normal and REO are significantly higher but short sales and pre-foreclosures are lower than they were was last month. Together with the changing mix this tells us we are likely to see a further rise in sales price per sq. ft. over the next month.

Our new mid-point forecast for the average monthly sales $/SF on December 14 is $84.79, which is 2.95% above the November 14 reading, and we have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $83.09 to $86.49. A substantial change in the mix can still have a significant effect on the average price per sq. ft. and we are seeing considerable variation from day to day. However notice that even the lowest point in our forecast range is higher than today's reading.

It is now becoming very clear that our reading for September 15 - $78.54 per sq. ft. - will remain the low point over the near term. The lowest monthly average sales price is $150,503 and was also set on September 15. However the record low monthly median sales price is still standing at $107,000 and this was set nine months ago on February 24. Our current monthly median sales price is back up to $112,000, so median price changes have not followed the pattern of average prices or $/SF.

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3) Apartment and Bulk Condo Buying Frenzy and  Rental Statistics - Not 2007 by a Long Shot, But Sales Are White Hot

Distressed Sales Recede as Developers Find Willing Buyers

November 16, 2011

Going into the fourth quarter, multifamily sales have already bested 2010 total sales volume by more than $1 billion. The $33 billion in multifamily sales in the first three quarters are up 70% year-over-year compared to the first three quarters of 2010. And the momentum is not slowing down, said Erica Champion, senior real estate economist for CoStar Group in a presentation at CoStar's State of the U.S. Multi-Family Market - Q3 2011 Review & Forecast this past week. 

Still, Champion added, while it appears that the apartment investment sales market is white hot, this year's sales volume is still dwarfed by 2007 -- the peak year for investment activity. For example, in New York, Washington DC and Los Angeles, activity is only about one-third of the unusually high level of sales activity that occurred in 2007, Champion noted.  In addition, when looking at the annual sales volume of apartments compared to other commercial properties, it is actually tracking a similar share of sales compared to historical levels. 

What's different this year is that more and more of the apartment sales involve nondistressed properties. The level of distressed apartment sales peaked in the first quarter of 2010 at about 29% of all sales being distressed. That percentage has dropped steadily. The total number of distressed trades has dropped off by one-third in the third quarter alone versus the second quarter. As of the third quarter, only about 16% of apartment sales were classified as distressed. 

New York, Washington DC, Los Angeles, Atlanta, Phoenix, Chicago and Dallas have already topped $1 billion sales so far this year and all are ahead of last year's pace. Boston, Northern New Jersey and Seattle are on pace to pass that mark this quarter. 

Some examples of apartment and bulk condo sales and new developments in the Phoenix area included:

Aventerra at Dobson Ranch - Special servicer LNR Partners LLC of Miami Beach sold Aventerra at Dobson Ranch at 1960 W. Keating Ave. in Mesa to Summit Aventerra LLC, an affiliated company of Summit Equity Investments Inc. of Los Angeles for $29.1 million. Tyler Anderson, Sean Cunningham and Asher Gunter of CBRE in Phoenix, along with Peter Stevens in the Philadelphia office, represented the seller. The buyer was self-represented in the sale of this 576-unit lakefront apartment community. Built in 1980, Aventerra at Dobson Ranch was 87 percent occupied at the time of sale.

Copper Square - A California real-estate investment group has purchased 74 unsold condominium units in the high-profile Summit at Copper Square project in downtown Phoenix for $12.7 million. That works out to about $171,000 each for the units that initially were listed for between $300,000 and $1.2 million. Still, Hadden Schifman, whose Scottsdale firm Vizzda tracks the commercial real- estate market in metro Phoenix, called the sales price "fairly strong." He noted that some documents pegged the liquidation value of the unsold units at $7.3 million.

Documents show that Howard Wu and Taylor Woods, both principals in Urban Commons LLC of Los Angeles, purchased the units from Scottsdale's Stearns Bank. Stearns foreclosed in July on an original $64 million note secured by the property. Norm Skalicky, CEO of Stearns Bank, called the sale a "win-win" for both parties. "The buyers got a great deal, and we were happy with the price," he said The buyers did not return calls seeking comment on their plans for the property.  The 23-story, multicolored high-rise development, just west of Chase Field, was completed in 2006 at an estimated cost of about $65 million.

Optima at Scottsdale Fashion Square - The developer of two luxury-condominium projects in the Phoenix area said it has secured land and financing to develop a new project near Scottsdale Fashion Square. The project will be called Optima Sonoran Village and will be located on nearly 10 acres at the northeastern corner of Camelback Road and 68th Street in Scottsdale, according to co-developers Optima Inc. of Glencoe, Ill., and DeBartolo Development LLC of Tampa.  Like its sister project, Optima Camelview Village, 7177 E. Rancho Vista Drive in Scottsdale, Optima Sonoran Village will be a multiphase residential project made up of tiered levels covered with greenery, the developers said.

West 6th in Tempe - The 22-story Centerpoint Tower in downtown Tempe, now called West 6th, welcomed its first renters, mostly Arizona State University students, in August 2011. Now, the tower is full.  Rates for studio apartments are beginning at $945; one bedrooms are beginning at $1175; two bedrooms are beginning at $1550 and three bedrooms are beginning at $1995. 

44 Monroe in central Phoenix - Developers of a high-rise in downtown Phoenix called 44 Monroe opted to turn the building's condos into apartments, which are now drawing tenants. The 34-story tower, Arizona's tallest residential building, is nearly 70 percent full. It has 196 apartments.

Baseline Mall Razed for Future Apartment Complex

- Crews are demolishing the strip mall that was Lake Country Village on Baseline Road, east of Rural Road, in Tempe so the owner can sell the land, which has been rezoned for multifamily housing.  Four businesses will remain but be moved within the site: Big Lots, Classic Pizza, Bug & Weed Mart and Soccer Master.  Two lots on the site have potential buyers, although the deals have yet to be signed, said a broker, Mike Mire of Cushman & Wakefield in Atlanta.  Most of the 26 acres will be occupied by multifamily housing, probably rentals, said Mire, who has been fielding calls from prospective buyers.

"We're getting a tremendous amount of interest; I've received no less than 10 unsolicited calls on the property for all different types of uses, not just multifamily residential," he said.  The site is zoned for up to 605 housing units, 200,000 square feet of retail and a maximum building height of 50 feet. That's not to say buildings will rise that high, but the city has authorized it.  The owner, Lake Country Village Inc., has had the property since the 1980s.  No asking price has been set. Brokers will let the market dictate the sales price.  The property has passed 100 percent retail use because the layout and design were outdated. Part of the mall is being torn down now, and the rest will be razed in the future.

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4) Predictions for 2012 from Chase, Bank of America, Wells Fargo and other industry experts

November 3, 2011

Pat Hune, 1st Southwest Realty

Executives from three major banks and other real estate industry experts met at the Tempe Center for the Arts on November 3, 2011 to offer their opinions on where the Phoenix real estate market is headed in 2012 to an audience of 600 Phoenix area realtors.  Joining JK Huey, Sr Vice President of Wells Fargo REO and Short Sale Division were Bill Borda, senior vice president of BofA’s short sale, deed in lieu and REO group; Stephanie Whittier; the REO manager for Chase Banks western region; Reginald Givens, foreclosure assistance administrator with the Arizona Housing Dept.; Brent Taggart, senior vice president with REO assets management firm Green River Capital; Alex Charfen, president of Charfen Institute that trains agents to handle distressed properties; Bruce Spowart, vice president of sales at data firm CoreLogic.

Key predictions for 2012 included:

Short Sale Approvals Will Increase - All banks said they would try to approve more short sales in 2012. Pressure from the government for banks to approve short sales versus foreclosing will increase since 2012 is an election year.  The top two reasons why short sales fail are buyers canceling and the contract price is too low.  Other factors include:  1) Seller will not provide the requested paperwork; 2)  Buyers are not qualified to buy. For example the maximum contribution towards closing costs if the seller's loan was FHA is 1%.  The buyers have to come up with the balance;  3) Junior Lien holders want more than the Senior Lien holder will pay and the seller and buyer cannot make up the difference. Wells Fargo said they are increasing the amount they pay the Junior Lien holders.

Strategic Default Short Sales Will Not Be Approved -  Short sales will not be approved just because the seller owes more than the house is worth. Realtors should not take short sale listings if there is not a true hardship.  This brought up the question if the seller is going to default anyway would it be better to approve the short sale versus getting the property back through foreclosure?  The consensus was it would be better to approve the short sale but the seller would probably have to bring money to the table. The key thing to remember is a short sale is settlement of debt not just a real estate transaction.  

Short Sale Processing Time Will Decrease - Bank of America has increased their staff to 3,000 employees just to handle short sales.  They are trying to get investors to let BoA make the decision on a short sale, called delegation. BoA is going to make it easier to substitute buyers if the contract terms are the same.  BoA's 2012 goal is to approve short sales in 20 days!  Wells Fargo is working with the MI companies to have preset limits that Wells can approve.  Wells is also working with Fannie Mae and Freddie Mac to reduce the amount of paperwork required for a short sale.  Chase has implemented an escalation phone number and two home ownership centers where customers can walk in to help with short sales.

Short Sale Volume Will Be Flat or Increase Slightly from 2011 Levels - All panelists agreed short sales will continue to be a major part of the real estate market in 2012.  JK Huey expects short sales to continue at the same pace as 2011 as does Bank of America and Chase. CoreLogic thinks the volume will increase.  

Alex Charfen predicted at least 2 to 3 years before short sales decline significantly.  One key factor Alex noted is the expiration of the Mortgage Forgiveness Debt Relief Act of 2007 on December 31, 2012.  Normally when a lender decides to forgive all or a portion of a borrower's debt and accept less, the forgiven amount is considered as income for the borrower and is liable to be taxed.  There is a difference of opinion among real estate experts on whether or not this will be extended again. Due to the uncertainty on the extension it will be in the home owners best interest to do a short sale in 2012. 

Banks and the Government Will Pay Home Owners to do a Short Sale - Bank of America has a pilot program in Florida that will pay home owners up to $20,000.  The State of Arizona has a program called Save Our Home AZ.  It will pay up to $5000 to the seller and provide 3% to the buyers closing costs.  Qualification requirements can be found at the website below.  HAFA will pay up to $3000 for relocation assistance, $1500 to cover administrative fees and  $6000 to junior lien holders. 

www.azhousing.gov

http://www.azcentral.com/members/Blog/CatherineReagor/147802

Pat Hune