Lower Costs for Veterans

There is some good news for veterans that are going to use their VA entitlement to obtain a VA home loan. The funding fee that funds the government's ability to guaranty VA loans is going down. The fee is dropping .5% or even more in some cases. For regular military veterans using their entitlement for the first time, the current fee of 2.15% will be reduced to 1.4%. The fee for veterans that have used their entitlement prior will be reduced from 3.3% to 2.8%. The above chart compares the current fee compared to the new fee for loans funded after September 30, 2011.

If you want more information about VA financing, please call me at 480-305-8509. Thank you.

When Will Home Prices Rise?

Here is an article written by my friend Marcia Canady at Lone Mountain Development...

Have we hit bottom yet? When will prices RISE?






The two most common questions that all Real Estate Agents hear are:

"HAS THE ARIZONA REAL ESTATE MARKET HIT BOTTOM?"
and
"WHEN WILL PRICES START TO RISE?


NO ONE CAN PREDICT THE FUTURE....but we can take a look at Historical Data AND the Leading Indicators that help us to determine the state of the Arizona Real Estate Market.


Below is a Chart that shows THE PSYCHOLOGY OF A NORMAL REAL ESTATE CYCLE.



The next Chart shows how THE NORMAL REAL ESTATE CYCLE HAS CHANGED.

We had a DIP from 2010 - 2011, so we are in a bit of a pickle...instead of being in the "HOPE" area of the cycle, we digressed a bit. But read on..there is a light at the end of the tunnel!





The Chart below shows Average Sales Price per Sq. Ft. from January 2001 - August 24, 2011.



Although we were at the Top of the Market in 2005, in 2006 - there were NEGATIVE SIGNALS of the Leading Indicators (i.e. Increase in Inventory) that forecasted a drop in the market.

Right now - there are POSITIVE SIGNALS from the Leading Indicators outlined below.


LEADING MARKET INDICATORS THAT SHOW THE MARKET WILL GET BETTER:


**NOTE: # 1 - 6 have to be in a favorable position for Prices to Rise.


1. Cromford Report Index - this shows Supply & Demand.
2. Days Inventory - How long a home stays on the market before it is sold
3. Pending Listing Count - This is the number of Homes on the Market that have Offers and are due to close escrow. It is the best indicator of increased sales
4. Contract Ratio - 100 x (Pending Listings + AWC Listings (Home that has an offer but it is contingent on something)/Active Listings (contract ratio of above 50% is a "HOT" market)
5. Monthly Sales Volume Self-explanatory
6. Listing Success Rate - # of properties listed vs. # of properties that are actually sold
7. Pending $/SF
8. Sales $/SF


#1. CROMFORD REPORT FOR ALL OF ARIZONA - SUPPLY & DEMAND

**Michael Orr created the Cromford Index which measures Supply & Demand. It is adjusted seasonally and yearly.



SUPPLY & DEMAND: It's basic economics..when there are more Buyers (HIGH DEMAND) than Homes for Sale (LOW SUPPLY), PRICES RISE - SELLER'S MARKET.

When there are more Homes on the Market (HIGH SUPPLY) than BUYERS buying (LOW DEMAND), PRICES FALL - BUYER'S MARKET.


The Economy, Government, Interest Rates, the Ability to Secure A Loan, Emotions, Psychology of the Buyers/Sellers all affect Supply & Demand and therefore affect Price.

Each City/Area has a story..but overall, Arizona is in a SELLER'S MARKET.




THE GOOD NEWS: Supply is at 83% (LOW) and Demand is at 128% (HIGH) which computes to a Cromford Index of 154! It is at its highest since October 2005!


If we look at a more detailed Graph, we see that we have been in a SELLER'S MARKET since the beginning of 2011.


Prices don't start to rise for 12 - 15 months after there is a change in Supply & Demand. If we only look at Supply & Demand, prices will start to rise in January/February 2012.


NOTE: Prices dropped 12% in July 2010 because it was the end of the Buyer's Tax Credit.





#2. DAYS INVENTORY, - this is how many days it takes to sell a home. The calculation is: 365 x (Active Listing Count/Sales Per Year).


As we can see, the time it takes to Sell a Home has been decreasing at a very quick rate since October 2010...which coincides with the Cromford Report (Demand > Supply = Seller's Market).




#3. PENDING LISTING COUNT -


A good sign, Pending Listings are approximately 20% higher than 2010.




Below we are comparing Pending Listings of 2011 to 2004 & 2005 when the market was good...and 2007 & 2008 when the market was bad. Currently, we are way above 2004 & 2005...and sales in Arizona usually slow down during the hot summer months....but it looks like we are on a good trajectory.




#4. CONTRACT RATIO -

The Contract Ratio is how many homes on the market get offers vs. how many homes remain active.


The higher the number...the HOTTER the market.

A Normal Ratio is 30 - 40. Currently, the Arizona Market is at 95 and has been in a HOT market since March 2011. It doesn't SEEM like we are in a HOT market, right? It is because there was such a huge inventory of homes AND, most of the homes being purchased are at the lower end of price scale (i.e. foreclosures/short sales etc.). Again...it takes 12 - 15 months from the change in Supply & Demand (January 2011 is when we stepped into a Seller's Market without dipping back down to a Buyer's Market) for prices to increase.




#5. MONTHLY SALES VOLUME -

If we compare 2003 to 2007, we see that Sales Volume rose to record levels in 2004 & 2005 and dropped in 2006 & 2007.



Sales Volume was down at the beginning of 2008, but rose to 5,000 by the end of the year.

The beginning of 2009 and 2010...volume reached a high of 9500 and didn't drop below 6500 the rest of each year.





In 2011, we are at around the same volume as we were in 2004 & 2005. We dipped below 2004 levels during the summer...but all indicators say that we should hold steady.






#6. LISTING SUCCESS RATE - this is the number of homes that are listed by a Realtor and then Sell.

As you can see, in 2008, only 1 in 4 homes sold that were listed. TODAY, 3 in 4 homes (approx. 75%!) are selling.

The historic norm is 65%!

People "in the know" are Buying in Arizona. They know we have reached the bottom and prices will start to rise soon.





#7 PENDING PRICE/SQ. FT. - this allows us to forecast sales about 30 days ahead with reasonable accuracy.




WHAT? PENDING PRICES/SQ. FT. HAVEN'T RISEN AND IT LOOKS LIKE THEY ARE FALLING????

Let's RE-CAP:

1. There are More Buyers than Sellers. HIGH DEMAND + LOW INVENTORY = Seller's Market

2. The Number of Days it takes to sell a house is way down

3. Pending Listings are 20% higher than 2010

4. The Contract Ratio is at 95%....a hot market is above 50%!

5. Sales Per Month are at the same levels as 2004 & 2005

6. 3 out of 4 listings are selling compared to 1 out of 4 in 2008...


So why haven't prices risen?

It takes time for the market to recover...just as it took time from the top of the market...and negative indicators in 2006 - for prices to hit bottom. Again, most of the homes being purchased are the lower priced homes..plus the foreclosures and short sales need to be bought up.

Currently, there are approx. 4,500 foreclosures on the market and 8,000 Pending Foreclosure Sales. In a normal market, there are approximately 1,200 foreclosures at any one time....so we are not far off from Normal!

Prices are at the lowest level ever. Investors know this and are Buying up the market (35-42% of Buyers are CASH Buyers)....

All indicators say that the Arizona Real Estate Market is recovering and prices start to rise in early 2012, so if you are thinking of
BUYING... THE MESSAGE IS:

BUY NOW!

All of the information presented above focuses on Maricopa County.

Scottsdale is one City that has held its prices better than other Cities. Its Cromford Index is at 166.9 (indicating a Seller's Market)..much higher than the 154 for Maricopa County.

So, if you want to Live in Scottsdale....BUY NOW!







FROM MICHAEL ORR OF THE CROMFORD REPORT (AUGUST 16, 2011)

The Main Trends we currently see are:

* Banks have increased their asking prices for REOs (Lender Owned Properties) as they become scarcer

* Short Sales are getting cheaper and easier to close, though far fewer remain Active without an Offer

* Normal sales include a higher proportion of "flips" rather than owner occupier sales and therefore Average Prices are falling

* HUD homes are selling like hot cakes (which also brings pricing averages down)

So we shouldn't expect to see good news from pricing numbers for a while yet (i.e. January 2012). For those who would like some good news here is a selection:

* Pending Listing counts dipped after the Spring Peak but remain strong for the time of year
* Expiry and Cancellation rates are very low
* Active Listing Counts are moving sideways whereas they would normally be increasing at this time of year
* The Supply Versus the Annual Sales rate is lower than at any time in the recent past with the exception of the bubble years 2004 and 2005.

Blog Post Created by:

Marcia K. Canady
REALTOR®
Lone Mountain Development, LLC

Tel: 602.515.1161
Email: Marcia@MKCLuxHomes.com
www.MKCLuxHomes.com

Refi Out of Reach

Recently there have been some headlines suggesting that the Obama Administration is working on a program to help underwater homeowners refinance to lower rates. These news stories have made the phones of thousands of mortgage loan originators ring. Unfortunately most of the calls end with, "I'm sorry there is nothing I can do to help you right now."

In 2009 the federal government rolled out the Home Affordable Refinance Program (HARP) which is designed to do what the current headlines propose. A homeowner can be as much as 25% underwater on their current loan and still be eligible for a refinance, but only if their current mortgage is owned by Fannie Mae or Freddie Mac. There are some discussion of a new program that expands the HARP guidelines, but there doesn't seem to be anything of substance at this time.

Something that needs to be addressed are adjustable rate mortgages or ARMs. There are a lot of homeowners that can only afford their home because they have an ARM today, and that rate has adjusted so low (sometimes below 3%). However, their interest rate will begin to adjust up in future years. No one knows exactly when, but Fed Chairman Ben Bernanke states that rates will remain low through 2013.

For discussion sake, let's say that rates drive up several points by 2014. Those ARM homeowners will see their payments shoot up, and they better have increased their income by then in order to keep up with their payments. Also, many of these ARM loans are not owned by Fannie Mae or Freddie Mac, so a program that allows them to refinace can help to avoid future defaults down the road. If the government wants to avoid more foreclosures, then this is something they should implement.

The Henderson Application

The Henderson Application
by: cmozilo

U.S. Debt Downgrade & Mortgage Rates

As the stock market tumbled this past week, mortgage rates rallied. Rates for home loans fell to the lowest level of the year on Thursday. On Friday, rates gave back some of their gains, but after trading hours the really big news hit the wire. Standard and Poor's (one of the big three rating agencies) believes that U.S. Treasury debt is no longer safe enough to deserve the top credit rating.

How does this news impact mortgage rates? We won't know for sure until the market opens on Monday, but logic tells us that rates must rise. If Treasury securities are now more risky, then investors will demand a higher yield. Treasure rates which are the benchmark for other bonds will rise. Investors that buy debt should also demand higher yields on corporate bonds and mortgage backed securities.

We'll be anxiously awaiting investors' reaction on Monday morning when the market opens.

June Home Sales Set New Record

Sluggish economy and unemployment be damned. In June more homes were sold in the Phoenix metro area than ever before. 10,868 homes changed hands which surpassed the prior record of 10,252 set in June 2005 (the height of the market).

The median price of $111,000 is well off the peak of the market, but has been stable since the beginning of the year. Despite the high volume of activity, homes are still very affordable.

Renters are becoming owners and owners are becoming renters. Renters have recognized that it is in many cases cheaper for them to buy a home than to rent one. At the same time, many owners have experienced a foreclosure or short sale and must wait a few years to qualify for a mortgage again, thereby forcing them to be renters. The rental market for single family homes is also very hot. The 2,280 leases signed for single family homes in June exceeded the prior record record set in July 2008.

Other June 2011 Housing Stats for Phoenix market (Maricopa & Pinal Counties):

• Single Family Detached (excludes condos, attached homes, 2-4 units) sales accounted for 9,340 transactions. With 16,968 active listings there is a supply of 1.8 months.
• 41% of single family homes were purchased with cash
• Lender and HUD owned sales accounted for 42% of single family transactions
• Short sales accounted for 25% of single family transactions

Thank you to Fletcher Wilcox of Grand Canyon Title Agency for the data. If you have any questions or desire more details about these figures please contact me at 480-305-8509 or cmozilo@homeownersfg.com.

FHA Loan Limits to Decrease October 1

Barring Congressional action, FHA loan limits will decline on October 1 in 669 counties across the country. Current limits, which are high relative to median home prices, were established via three federal laws enacted in 2008 & 2009.

Historically, FHA loans exist to serve low and moderate income home buyers. Without the housing meltdown and financial crisis they would typically be capped at 115% of the median home price for a county. The median price in Maricopa/Pinal counties (Phoenix MSA) is around $120,000. However the FHA loan limit in that same MSA is $346,250. These extra high FHA limits, inflated by laws designed to hold up the housing market, will go away on October 1.

Fortunately they won't drop to 115% of the median price, because there is a floor for FHA loan limits which is 65% of the conforming loan limits (for Fannie Mae & Freddie Mac). The conforming limit is still $417,000 so here in Phoenix the maximum FHA loan is expected to drop to $271,050.

Other notable AZ counties:

Coconino (Flagstaff & Sedona) will drop from $450,000 to $333,500.

Pima (Tucson) will drop from $316,250 to $271,050.

For my friends and relatives still in Los Angeles County, those FHA limits will drop from $729,750 to $625,500.

If those drops in maximum lending limits don't seem so bad, consider this... If Fannie Mae & Freddie Mac drop their limits, or those entities disapear, then FHA limits can fall much further.

If your thinking about buying a home in the high $200,000 to mid $300,000 range in Arizona, I would move to make that purchase this summer.

Here's a link to FHA's announcement and a list of all the affected counties across the country.