1st Southwest Realty

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 350 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


Good News

Record Low Interest Rates - The 30-year fixed-rate mortgage dipped below 4%, possibly triggering a refinancing boom for many of the same borrowers who already have taken advantage of rock-bottom interest rates. According to a survey by Credit Suisse on September 22, 2011, lenders were offering an average rate of 3.91% on 30-year fixed-rate mortgages to borrowers who paid "points," or fees, worth 1% of the loan balance.  Wells Fargo & Co. advertised on its website Friday afternoon a 3.875% rate on a 30-year fixed-rate mortgage, with fees of 1% on the loan..  Home prices seem to be stuck at 20+ year lows in most areas especially in the Greater Phoenix area.  This makes it a great time for renters to buy.  Most renters are paying more in rent than it would cost them to own a home.  The New York Times has an interactive chart showing when the value of home ownership will pay off for a tenant an allows you to change the assumptions like home value appreciation and rental increases.  In general buying pays off in year three assuming rents will increase 1-2 percent and home values increase 4%. This would happen faster if the home was under market value at the time it was purchased.  Click on the link below.

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

New California law - Banks can no longer require seller contributions on short sales. Banks can no longer hold short sale sellers in CA hostage forcing them to sign promissory notes or bring cash at close in order to complete the short sale.  As usual when any law changes the legislature was short sighted by not providing for short sales that were in the process of closing where the seller had agreed to the contribution.   So after months of work some short sales fell out and had to be renegotiated.  Personally I think this is great news as many of my short sales that failed were because the seller could not or would not contribute.  I hope to see a similar law pass in Arizona.

Bad News

Prices Still at Record Lows - The median sales  price for August was $109,900, showing little change from July’s $109,000. Average sales price declined in August from July’s $155,000 to $151,400, representing a 2.3% decline.  All  in all sales prices for the previous 12 months remain relatively flat on an anemic downward trend line.  Even though sales activity is robust, since most of the activity is at the low end, median and average pricing remain depressed.  New list pricing appears to have bottomed out fueling speculation on how soon they increase, rather than will they go lower.

According to a  Wall Street Journal article Economists, builders and mortgage analysts are predicting the weakened U.S. economy will depress housing prices for years, restraining consumer spending, pushing more homeowners into foreclosure and clouding prospects for a sustained recovery.  Home prices are expected to drop 2.5% this year and rise just 1.1% annually through 2015, according to a recent survey of more than 100 economists to be released Wednesday. Prices have already fallen 31.6% from their 2005 peak, as measured by the Standard & Poor's Case-Shiller 20-city index.

Articles
1) STAT Newsletter Link
2) The Cromford Report - Residential Resale and Rental Picture
3)  Did you just purchase a property with cash? Refinancing is now much easier.
4) California SB458 Bans Seller Contributions in Short Sales
5) Phoenix new home sales up 26 percent in August

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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.

http://www.armls.com/Libraries/STAT_and_PPI_2011/STAT-September-2011.sflb.ashx?utm_source=iContact&utm_medium=email&utm_campaign=Communication&utm_content=STAT+Sept+2011

(In case you are wondering what areas and property types are included in these statistics here are the details:  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. )

The ARMLS Pending Price Index™ is a forecasting tool unique to ARMLS which predicts the average and median sales prices three months into the future based on pending
prices of properties in the MLS system in the contract-to close phase of escrow.

http://www.armls.com/Libraries/STAT_and_PPI_2011/PPI-AUGUST-2011.sflb.ashx

Highlights from the newsletter are:

SALES - Total sales ticked up 3.9% in August to 8,717 units.  After July’s 24.6% decline, the upward turn in August sales is a small but welcome reprieve, and follows the wave pattern set
over the last ten months of 2011.  Sales were up 18.4% over the August 2010 figure. The 8,717 sales in August represent the third highest August sales figure of the decade, surpassed only by August 2004 (8,992) and August 2005 (10,031).

NEW INVENTORY - A total of 10,089 new listings were added to the market in August, a 10.4% increase over July. This figure is in line with the 2011 new listings average of 10,862 added to the mar-
ket each month. Even with the 10.4% uptick in August, the trend line for new listings has been downward for the previous twelve months.

TOTAL INVENTORY - Total inventory dropped again in August for the seventh month in a row to 26,983, 2.4% below July’s figure. The overall downward inventory trend begun in November 2010
represents a continuing reduction in overall market supply, and is seen as good news.

MONTHS SUPPLY OF INVENTORY (MSI) - Despite an uptick in July, August’s MSI of 3.1 continues on the downward trend begun in January. An overall market MSI is only a barometer of market health and not indicative of MSIs in smaller market niches. An MSI above 6 months is regarded as a Buyer’s market and below 4 months is regarded as a Seller’s market.

NEW LIST PRICES - Median new list price remains unchanged from July’s figure of $124,900.  The average new list price rose .2% to $189,200.  Both the median and averages figures are best described as flat lined, showing no inclination toward recovery in the immediate future.  New list pricing appears to have bottomed out fueling speculation on how soon they increase, rather than will they go lower.  Sales prices are following the same lackluster performance of list pricing.  The median sales  price for August was $109,900, showing little change from July’s $109,000. Average sales
price declined in August from July’s $155,000 to $151,400, representing a 2.3% decline.  All  in all sales prices for the previous 12 months remain relatively flat on an anemic downward
trend line.  Even though sales activity is robust, since most of the activity is at the low end, median and average pricing remain depressed.

FORECLOSURES PENDING -  Continuing on the same downward trajectory begun from a high in November 2009 of 50,568, August’s foreclosures pending were 24,061, a small decrease of 4% from July.  Even with the slowing rate of decline since July, the foreclosures pending are still on target to cross the 20,000 mark by the end of 2011. Foreclosure pendings feed the total
foreclosure pool which negatively impacts pricing.  Decreased flow from the foreclosure pending spigot is seen as a necessary precursor to mitigating the sizable influence of lender owned sales on the market.

LENDER OWNED SALES - Total lender owned sales remained almost unchanged from July’s 3,614, with 3,634 in August. Lender owned sales as a percentage of total sales decreased slightly to 41.7%, from July’s 43.1%.  This is in line though with the 12 month average of 44.5%.  Lender owned sales doggedly continue their negative pricing pressure on Valley pricing.

SHORT SALES - Distressed sales are a composite of short sales and lender owned sales, whose original owners were compelled to liquidate their property under duress either through
foreclosure or depleted equity plus lender debt abatement. The number of short sales in August rose 11.1% to 2,201, representing 25.3% of total sales.  Short sales and foreclosures combined (5,835) represented 67% of total sales.  This is consistent with the twelve month average of 67.36% of distressed sales relative to total sales.  STAT sees little change in the dominance of distressed properties on the Valley’s pricing landscape in the foreseeable future.

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2) The Cromford Report - September  2011
Residential Resale Picture - In the current market there is still plenty of negativity to go around. However there are always some bright spots in any market if you know where to look. In this page we highlight Good News as and when we discover it.  The following section features positive trends and strong statistical readings.

There were 2,914 trustee sales for single family homes in Maricopa County in the calendar month of August.

There were 2,701 similar sales in July.

You might think that this indicates trustee sales were increasing. However you would be wrong.

There were only 20 working days on which trustee sales could be held in July, while there were 23 in August. This means that we should have expected the August number to be 15% higher if the daily foreclosure rate was flat. In fact the daily rate of foreclosure fell by 6% from 135 per working day in July to 127 per working day in August, continuing the strong downward trend we have seen since March.  This indicates how overly-simplistic mathematical logic can send entirely the wrong message that foreclosures are increasing when they are not. Our calendar is a strange device that can distort our view of the market unless we take its idiosyncrasy into account. That's why we measure 7-day, 30-day and 90-day moving averages rather than relying purely on calendar month totals.

As of September 12 we have seen only 912 trustee sales recorded for all property types since September 1. This is an exceptionally low number. If trustee sales continue at this rate throughout September (with its 21 working days), then the total for September will be close to the total last November (with only 19 working days) when we had several institutions including Bank of America doing no trustee sales at all while they addressed the national robo-signing controversy. September looks very likely to be a very weak month for foreclosures, measured on both a calendar month and daily rate basis. In fact the 90-day average for the daily rate of foreclosure is today at the lowest level since July 2008, over 3 years ago.  When correctly measured, the rate of foreclosures is currently falling fast. Do not let the stories in the media mislead you!

Rental Picture - The percentage of people renting their home has increased significantly since 2007 because so many individuals and families have lost the house they once owned to foreclosure or short sale.  Although the majority of rental transactions happen outside of the ARMLS system, a significant number are advertised and conducted through ARMLS and their transaction database gives us a very useful sample of what is happening out there in the rental world, particularly for single family detached homes.
Demand:  On September 11, the rate with which leases are being signed is 2,828 per month. This compares with 2,553 on September 11, 2010 and 2,425 on September 11, 2009. A growth rate of 5.3% from 2009 to 2010 has doubled to 10.8% over the last year. These figures are for all property types. If we look exclusively at single family detached homes there were 2,222 per month in 2011, 1,900 in 2010 and and 1,891 in 2011, all measured on September 11. The growth rates were almost zero from 2009 to 2010 but nearly 17% from 2010 to 2011. Notice that single family detached homes were 79% of the total rental leases closed through ARMLS in the most recent month, up from 74% last year.

Supply:  On September 11, there are 4,893 single family detached homes offered for lease out of a total number active listings of 7,059. First we can see that the single family homes constitute only 69% of the active listings but 79% of the closed leases, suggesting that their turnover is faster than for condos and mobile homes. However that 69% has grown from only 58% at the same date last year. In fact supply of single family detached homes reached an unusually low number of only 2,852 on April 1, 2011 and has increased by nearly 72% since then. Clearly a large number of new rental homes are coming onto the market to meet the strengthened demand. In fact supply is growing faster than demand judging from the last 5 months, although this is coming off a period when supply was falling fast.

Pricing:  The average rental rate across the ARMLS territory for single family homes is currently between 68c and 69c per sq ft. Last year at this time it was 66c to 67c so we have seen a slight increase in rental rates over the twelve month period. This continues a trend from 2009 since we were measuring 64c to 65c back then. It remains to be seen whether this pattern will continue now that supply seems to be on a strong upward trend.

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3)  Did you just purchase a property with cash? Refinancing is now much easier.

No Seasoning on cash out refinances after cash purchase

Borrowers who purchased the subject property within the past six months are eligible for a cash-out refinance if all of the following requirements are met:
1) The new loan amount is not more than the actual documented amount of the borrower's initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV, CLTV, and HCLTV ratios for the transaction).

2) The purchase transaction was an arms-length transaction.

3) The purchase transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property.

4) The source of funds for the purchase transaction can be documented (bank statements, personal loan documents, HELOC on another property). Any loans used as the source for the purchase transaction will be required to be repaid on the new HUD-1.

5) All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.

Note: The preliminary title search must not reflect any existing liens on the subject property. If the source of funds to acquire the property was an unsecured loan or HELOC (secured by another property), the new HUD-1 must reflect that source being paid off with the proceeds of the new refinance transaction

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4) California SB458 Bans Seller Contributions in Short Sales

On July 15th, the CA Legislature passed SB458 imposing the same recourse bar on junior lenders as with first place lien holders plus they barred any lender from requiring a money contribution from the sellers including promissory notes.  These law changes created and then amended California Code of Civil Procedure Section 580e.  Reaction to SB458 was immediate. Proponents claimed it a victory for upside down homeowners while many Realtors thought it would be a disaster and kill further short sales.  Indeed many short sales quickly died and pressure started mounting to undo the damage.  But there wasn’t much data to go on as to its actual overall effects.  So last week a Survey was sent out to Realtors asking for input on what they were actually experiencing in their short sale deals.  The responses were unclear.  Of those whose short sales were impacted, just over 50% said it hurt while fewer than 50% said it helped.  Most responders were unclear on what the impact would be.  CA Association of Realtors found the numbers more positive than negative but again, like us, too little actual numbers to give a clear picture.

The conclusion at this point is that there is still a lot of uncertainty in the market, particularly amongst lenders trying to understand and respond to SB458. However, here are the main benefits we see emerging:

1.  SB458 forces junior lenders to evaluate right now whether or not they could collect from a borrower if they waited for the first lender to foreclose and then sued as a sold-out junior lien holder.  Prior to SB458, the junior lender could get some money in the short sale while holding out for recourse on the balance.  They could then wait this out for several years and hope the borrower becomes solvent.  Not any more.  Clearly this makes the borrower’s hardship application and net worth statement even more important in the decision making process.

2.  SB458 appears to have brought an additional liability protection for borrowers who agreed to a prior short sale withdeficiency recourse.  The first Paragraph of the new short sale law begins: “No deficiency shall be owed or collected, and no deficiency judgment shall be requested or rendered…..” Nothing in SB458 states that it only applies to short sales after July 15th.  Meaning that homeowners who completed a short sale on their mortgages prior to July 15thcould reap the benefits of SB458 retroactively.

No doubt there will be a lot more debate and analysis and litigation concerning SB458 and its impacts. As with any law, it will be subject to judicial review in the courts and further change, expansion, and clarification by the Legislature.  But for now, CCP580e is the law of the State of California.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you have specific questions about dealing with upside down loans or real estate, be sure to contact a real estate attorney in your State.   If you need a referral send me an email at greathouseaz@gmail.com

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5) Phoenix new home sales up 26 percent in August
Phoenix Business Journal
Jan Buchholz
September 19, 2011

New-home sales improved in August, according to the Phoenix Housing Market Letter produced by RL Brown Reports. There were 632 new closings in August, compared with 500 in August 2010.
The numbers were down for the year to date, however: There were 4,186 new home closings from January through August, compared with 5,657 for the first eight months of 2010.  The same trends held true for building permits. They were up from 504 in August 2010 to 692 in August 2011, but for the year to date they were down from 5,170 to 4,612. As for the most active builders, Pulte  closed escrow on 65 homes, including its Del Webb    and Centex   divisions. That was followed by D.R. Horton, with 62 closings, and Blandford Homes, with 47.  Other builders with strong sales included Shea Homes, Meritage Homes, Fulton Homes, Taylor Morrison, Lennar Homes, K Hovnanian, Beazer Homes  and Richmond American.

RL Brown also tracks resales, including homes not listed on the Arizona Regional Multiple Listing Service. Resales were up for both the month and the year to date. There were 8,605 resales in August and 67,804 for the year to date, compared with 6,623 last August and 61,730 for the first eight months of 2010. The median price for new-home sales in August was $210,244, compared with the median resale home price of $109,000.