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Phoenix sets pace in national real estate recovery

July 17, 2012 by · Leave a Comment 

This article from CBS News discusses the fact that the Phoenix real estate market is serving as a “beacon of hope” for other housing markets that were crushed by the real estate bubble.  Much of the success of the Arizona housing market in rebounding so quickly is being credited to the streamlined non-judicial foreclosure process, which has helped the inventory absorption rate.

Here’s the article:

PHOENIX — The Phoenix metro housing market is seeing a rise in home prices and a decline in the number of houses on the market, putting the area ahead of most other U.S. cities on the road to recovery, according to real estate experts.

Economists say the upward trend in the Phoenix area may serve as a beacon of hope for other cities across the nation that suffered when the housing bubble burst.

“The Phoenix market will be a benchmark city to monitor for residents in Las Vegas, the Inland Empire of California and … the Florida market,” said Lawrence Yun, chief economist with the National Association of Realtors.

The median price for Phoenix-area homes in May was about 30 percent higher than it was the same time last year, according to a monthly report released by the W. P. Carey School of Business’s Center for Real Estate Theory and Practice at Arizona State University. The report also shows there are about half as many houses on the market as there were the same time last year.

The Phoenix area market was one of the hardest hit in the nation in terms of distressed properties, but the state’s foreclosure system allows it to work through the backlog more quickly than states in which foreclosures have to go through the judicial process. Banks and mortgage companies have the power in Arizona to foreclose homes without a judge’s approval.

Nevada’s foreclosure system is largely the same. Nasser Daneshvary, director of University of Nevada, Las Vegas’s Lied Institute for Real Estate Studies, said speedy foreclosures are healthy for the market. Too many foreclosures can sink home prices, as happened in both Phoenix and Las Vegas, but Daneshvary said a return to the depths experienced during the housing collapse isn’t likely in either city.

Arizona’s job market, with an unemployment rate that’s down to 8.2 percent from its March 2010 peak of 10.8 percent, is also a factor in real estate improvements. Yun said other areas that have sluggish job markets are likely to see slower real estate recoveries, with fewer people able to buy homes.

Michael Orr, director of the Center for Real Estate Theory and Practice at ASU’s Carey school, said dwindling housing inventory, coupled with prices that are still relatively low, means sellers now hold the power in the Phoenix-area market, and receive multiple offers, many of which come from investors who are looking to buy and rent out houses.

“Now we’ve got too few homes. Everybody’s wishing the investors would go away and stop buying, but the investors are still here buying everything they can with cash, which makes it pretty difficult for ordinary home buyers to compete,” Orr said.

Sandy and Luis Solis said they found that to be true. The couple, who moved from Los Angeles to Scottsdale last year, said the rapid decline in homes available in their price range made them feel hurried to buy. They made offers on three homes but were outbid by cash offers twice, the second time by an investor. They’re in the final stages of closing on a house in Phoenix.

“We were kind of losing hope that we were going to find the right home for us,” Sandy Solis said.

Las Vegas and some cities in California are seeing similar situations. Daneshvary said investors who buy housing for the purpose of renting are better for the market than others in the past who have purchased houses just to flip them. He said by the time investors stop buying, the market will be healthy enough to remain stable.

With houses in short supply, the construction industry will step in to fill the void. Orr said home building in the Phoenix area is slowly beginning to pick up, but it will likely be stifled by a shortage of construction workers in the state. He said Arizona has lost “80 to 90 percent of that skilled workforce” in the last six or seven years because workers have gone elsewhere or left the industry altogether.

Orr said the Phoenix-area’s home market recovery will likely level out over the next few months.

“I just don’t want people to think the next quarter is going to accelerate at the same rate,” Orr said. “That’s not likely to happen.”

That, Yun said, is a sign that the market will recover in a more healthy way.

In the long term, some city’s housing markets may end up in better shape than they were before the housing market crash. Yun said parts of Texas, Oklahoma, Nebraska and the Dakotas didn’t experience huge housing market losses but are benefiting from widespread improvements in economies.


Fannie and Freddie to Step it Up

October 14, 2008 by · Leave a Comment 

According to REAL Trends, Fannie and Freddie notified bond traders last week that each company needs to purchase $20B per MONTH in underperforming mortgage securities.  Their efforts are separate from the $700B bailout deal that was ratified last week.  It will be interesting to watch the 2 companies, themselves laden with under-and-non-performing debt, bloat up even more on subprime paper…


Hopefully we’ll begin to see some positive results from the efforts in the Phoenix real estate and Scottsdale real estate markets in the next 4-6 months…

Real estate doom and gloom…NOT!

October 6, 2008 by · Leave a Comment 

With all of the negative press that we’re exposed to throughout the day, we need to remember that the real estate market, at least, is still alive and well.  Since the government’s ‘sudden recognition’ that it was broken, changes have been made to push the industry in a healthy direction.  That is, by making affordable mortgage money available to the masses…at least those who meet modest guidelines & can PROVE IT!


FHA and VA programs are still great for home buyers with less-than-stellar credit who have 3% in savings to put towards a down payment.  (Note this amount is expected to rise to 3.5% in Maricopy County by the end of the year.)


And you remember the $7500 tax credit for first time home buyers (or those who have not owned a home in 3 years)?  It’s still there.  It’s basically an interest-free loan equivalent to a 3% down payment on a $225,000 house.  How cool is that?


My point is that, while everyone’s nervous (at a global level!) about what’s going on in today’s financial markets, we need to keep at least the real estate piece in perspective.  The lending landscape is going to continue to evolve more rapidly than normal in the upcoming months, but I believe in a direction that supports sustainable, healthy, & responsible housing markets.


If you’re looking for Phoenix real estate or Scottsdale real estate, a good Realtor can connect you with a reputable lender who can give you more guidance and input on the various mortgage programs that may be available to you.

US government to take over Fannie and Freddie

September 8, 2008 by · Leave a Comment 

According to the Associated Press, the federal government is set to acquire Fannie Mae and Freddie Mac tomorrow.  The move is designed to supersede the very real possibility that one or both could go bankrupt, leaving the American public in a very expensive and unfortunate predicament.


Here’s the full story:


The Bush administration, acting to avert the potential for major financial turmoil, announced Sunday that the federal government was taking control of mortgage giants Fannie Mae and Freddie Mac.


Officials announced that the executives of both institutions had been replaced. Herb Allison, a former vice chairman of Merrill Lynch, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.


Treasury Secretary Henry Paulson says the actions were being taken because “Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe.” 


The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious.


“A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance,” Paulson said.


Both companies were placed into a government conservatorship that will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie.


The Federal Reserve and other federal banking regulators said in a joint statement Sunday that “a limited number of smaller institutions” have significant holdings of common or preferred stock shares in Fannie and Freddie, and that regulators were “prepared to work with these institutions to develop capital-restoration plans.”


The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.


Be sure to consult a qualified real estate agent it you’re thinking about purchasing Scottsdale real estate or Phoenix real estate.

Fannie Mae hammered by $2.3B loss. What now?

August 10, 2008 by · Leave a Comment 

On Friday, Fannie Mae which, with Freddie Mac, holds or guarantees about 1/2 of all outstanding mortgages, declared a $2.3 billion loss.  Analysts had expected a loss of about $0.68/share, a fraction of the reported $2.54, which sent shares of FNMA falling 9% for the day.


The huge blow is largely attributed to a surge in foreclosures.  As if anyone needed confirmation, sub-prime (or Alt-A) holdings, which account for 11% of Fannie Mae’s portfolio, were to blame for more than half of the repoted losses.  The company issued a statement that it believes the worst may be over by year end, but many industry analysts expect to see defaults continue as a result of the Alt-A lending that was done well into 2007.  Risky financing + falling property values = foreclosures.


The implications of this situation are huge.  First of all, Alt-A financing will all but disappear.  For buyers of Phoenix real estate and Scottsdale real estate, at least, so-called stated loan options are generally relics of the past.  Now buyers that qualify can still leverage traditional FHA and VA programs, which only require 3% down, but fewer and fewer ‘private’ programs are available for buyers who have less than 20% to put down.


The huge losses are also bad news for homebuyers.  Since the losses continue to mount, the government is stepping in to assist the mortgage giants.  To make up for the losses, FNMA is increasing its rates, which will be passed along to the homebuyer in the form of higher interest rates.  Anyone who understands the theory of amortization realizes that a rise in interest rates has a much more significant impact on the cost of a loan over its lifetime than even a substantial reduction in purchase price.


Many of the prospective home buyers who are sitting back to see if prices continue to fall may miss out on their best opportunity to purchase.  They may find they no longer qualify to purchase or, worse, may end up paying more than expected due to higher interest rates. 


While the numbers lead me to believe we’ll continue to see prices lower, in my opinion it is an excellent time to buy.  Inventory remains high, from Scottsdale luxury homes to Phoenix condos, and interest rates are still low in a historical context.  No matter how much prices fall, if average buyers either cannot qualify for a mortgage or if the cost of borrowed money rises, buyers will lose.  Pundits will argue that they’d expect a Realtor to say that, but I’d say that uncertainty is the greatest risk of all.  We could see all of the people left holding the bag by trying to time the top of the market joined by those who tried to time the bottom.

Local Bank is the Latest Sub-Prime Lending Casualty

July 25, 2008 by · Leave a Comment 

First National Bank, the largest AZ bank that specialized in sub-prime lending, was shut down by federal regulators today, the latest casualty in the mortgage meltdown mess.  Mutual of Omaha Bank, a subsidiary of Mutual of Omaha, has stepped up to acquire the assets and holdings of FNB so existing customers should be minimally affected.


The current housing slowdown affects all homeowners, from Scottsdale luxury real estate to Phoenix condos and all points in between.  In fact, the breadth and depth of the crisis becomes clear when you consider that FNB was the first AZ bank to fold since 2002, and only the 2nd in the last 16 years! 


More are sure to follow…

Critical Housing Bill HR-3221 Passes the Senate – Headed to Congress

July 23, 2008 by · Leave a Comment 

Here’s an important update from our friend Glen Reiley over at Bell Mortgage regarding HR-3221, a bill that will have far reaching consequences in the housing and mortgage lending industries.




Important Legislative Update


It looks like HR 3221 – has passed the Senate and is headed back to the House of Representatives. If passed, the President could be seeing this Bill very soon.

This is an enormous bill and contains more provisions than I can tell you. There are some favorable provisions and some not so favorable provisions in this bill.

The obvious issues facing us in the near term would be:

1)       Increased FHA Loan limits (could be raised to $417,000 or even higher in some areas)

2)       Elimination of the Seller funded Downpayment plans i.e. Nehemiah

3)       Could allow Tax exempt bonding (MHFA, CityLiving, Maricopa County) to include certain refinance transactions

4)       Much, Much, Much More!!!


You can view a summary of this legislation at:


If the bill is passed we do not know how quickly these provisions will take place. It is assumed that HUD would need to digest the bill and issue Mortgagee letters to make the changes. HUD could already have these Mortgagee letters drafted and we could see implementation quickly. We just don’t know for sure.


We need to remain flexible and nimble as the changes could come quickly – for example – HUD could eliminate Seller funded DPA’s immediately and we might not have a Nehemiah option – this could happen in days or it could be weeks.


We will do our best to keep you apprised of the status and possible passing of this bill.


Below is a recent excerpt from a Housing Association Website:


“As we last reported, the Senate passed a version of this bill (H.R. 3221) late on Friday, July 11, and sent it over to the House for its concurrence. If you remember from our previous report, the Senate leadership had hoped to pass a version of the bill referred to as the “managers’ amendment,” that included refinements to the bill made after it was reported out of committee. However, due to procedural maneuvering by a couple of Senators, the managers’ amendment could not be brought to the floor for a vote. Instead, the prior version of the bill, with the language exactly as it was reported out of committee, is what was brought to the floor and passed.


The House has several items it wants to amend in the version passed by the Senate, including some items of concern to House members and other items that would have been included in the managers’ amendment had it been passed. In addition, after the Senate passed its bill last weekend, the White House called for a plan to provide financial support for Fannie Mae and Freddie Mac. The White House plan requires Congressional action on a few of its provisions. Congressman Barney Frank, chairman of the House Financial Services Committee, is incorporating these new provisions providing financial support and supervision to the GSEs into the version of H.R. 3221 that he is planning to bring to the House floor on Wednesday.


It is expected that the House will approve this bill fairly quickly and send it back to the Senate, which could follow suit and act quickly, as well. That means it is quite possible that this major housing bill could be sent to the President sometime this week. That could bring us to the end of this saga – unless the President chooses to veto the bill, a threat that he has made on and off again throughout the deliberation on this bill.”


Please check it out as you will want to know what your Government is doing to fix the “housing crisis”.

Many Homeowners “Buying and Bailing”

July 11, 2008 by · Leave a Comment 

We’re seeing a rising number of Phoenix real estate and Scottsdale real estate owners take advantage of a tricky loophole in the home loan industry.  Faced with a home that’s worth less than what’s owed and with a plethera of lower-priced, more attractive alternatives, many homeowners today are purchasing a second home while their credit is still good and then defaulting on payments for their original home.


Once they quit making payments on the original property to finance the new one, they are served with a notice of default.  Whether they’re successful with a short sale of the first property,  where the lender agrees to accept a sales price that’s less than what’s owed, or they end up being foreclosed upon, they acquire a superior property at the same or even lower monthly payment, in exchange for a temporary black mark on their credit.


Some people I’ve talked to call this loan fraud while others call it smart economic decision-making. 


What do you think?

Builders Hurting Phoenix Housing Market (again)

May 3, 2008 by · Leave a Comment 

Ironically, the Phoenix real estate market is being hurt (again) by homebuilders in a sort of pendulum back swing effect.


The run up in the Valley’s housing market in 2004-2005 was exacerbated by over-building coupled with irresponsible lending practices by the builders themselves. Many builders sold double-digit units to investors who were clearly poised to either re-sell or rent their units out upon completion of construction. Neither high resale inventories nor high percentages of tenanted homes helps local property values.


As with many lending institutions, some builders’ financing arms were overly lax with application approvals, putting some homeowners in risky programs that we’re seeing play out in today’s market.


For an interesting article on how homebuilders contributed to today’s crisis by jumping into the mortgage business, click here.


Now we see builders, in a desperate play to generate cash flow and “hit their numbers,” slashing prices so steeply that they’re hurting their own customers, many of whom are experiencing such huge losses in equity that it will be a decade or more of historical appreciation rates before they can even hope to break even.


When builders slash prices, they do accomplish their goals, but they hurt surrounding homeowners in other ways, too. By lowering sales prices, they affect ‘comps’ values. Comps are used in most appraisals to determine fair market value for a given property. So properties that sell at fair market value in the eyes of the buyer and seller, but not in the eyes of the bank, won’t close escrow unless the buyer and/or seller ‘take their lumps’ and compromise. Either the seller lowers the price or the buyer comes up with cash, if they want the deal to happen.


Furthermore, homeowners who have responsibly accrued some equity in their homes and want to pull some out through a refi may not be able to do so.


And all surrounding communities that have already been built out, suddenly find themselves competing with the builders if they decide to sell.


To the builders, this is business. To homeowners, it’s intimately personal. Unfortunately, the builders have the advantage of deep pockets and being able to control the game, at least within their communities. The homeowners are the ones who suffer in the long run.