Finally some good news on the mortgage front. Today, FHA announced an increase in lending limits for both traditional loans as well as Reverse Mortgages.
Pima County limits were raised from $271,050 back up to $316,250. Maricopa was raised to $346,250. HUD's website gives limits for all other counties in AZ. https://entp.hud.gov/idapp/html/hicost1.cfm
Use of FHA loans has increased dramatically over the past 6 months due to low downpayment requirements (3.5%) and less stringent FICO score requirements. This increase in lending limits opens up a broader range of properties available for buyers in Pima County.
Wednesday, February 25, 2009
Fannie Mae and Freddie Mac - April Fools
It's a bit hard to believe, but in the midst of one of the worst housing crises to hit our generation, Fannie Mae and Freddie Mac have decided to make it even more difficult for home buyers to get financing come April 1. And some of the major lenders are already tacking on the significantly higher fees.
Under Fannie & Freddie’s new guidelines, even buyers who thought that their FICO score would get them a favorable interest rate will be charged more unless they can come up with a downpayment of more than 30% of the purchase price. A buyer with a FICO score of 699, even with a 25% down payment, will get now get hit with a 1.5% delivery fee. A buyer with a FICO score between 700 and 720 will have to pay a 3/4% delivery fee. Even someone with a 739 FICO score, always considered “A” credit, will get hit with a 1/4% delivery fee. To put this in perspective, if you're paying a 1% delivery fee on a $500,000 mortgage, that equates to bringing $5,000 more to the table at close of escrow.
Buyers of condominiums who can't come up with a 25% down payment will have a 3/4% add-on penalty regardless of how good their credit is simply because it is not a detached single family residence.
It looks like the only way you can avoid these penalties is to get an FHA loan, which may or may not result in a higher interest rate. Federal Housing Administration mortgages allow down payments as low as 3.5%, and credit scores are not as critical as those required by Fannie Mae and Freddie Mac. More on some positive changes in FHa loans in my next post.
Under Fannie & Freddie’s new guidelines, even buyers who thought that their FICO score would get them a favorable interest rate will be charged more unless they can come up with a downpayment of more than 30% of the purchase price. A buyer with a FICO score of 699, even with a 25% down payment, will get now get hit with a 1.5% delivery fee. A buyer with a FICO score between 700 and 720 will have to pay a 3/4% delivery fee. Even someone with a 739 FICO score, always considered “A” credit, will get hit with a 1/4% delivery fee. To put this in perspective, if you're paying a 1% delivery fee on a $500,000 mortgage, that equates to bringing $5,000 more to the table at close of escrow.
Buyers of condominiums who can't come up with a 25% down payment will have a 3/4% add-on penalty regardless of how good their credit is simply because it is not a detached single family residence.
It looks like the only way you can avoid these penalties is to get an FHA loan, which may or may not result in a higher interest rate. Federal Housing Administration mortgages allow down payments as low as 3.5%, and credit scores are not as critical as those required by Fannie Mae and Freddie Mac. More on some positive changes in FHa loans in my next post.
Monday, February 23, 2009
Tucson Market -More Localized Than Ever
While we had no big surprises in the overall Tucson Housing Market based on statistics just released by the Tucson Association of Realtors, we do have some interesting results from analyzing the local market data by zip code.
We traditionally have a slowdown during the December holidays that creates a dip in the number of homes that close in January. When activity picks up again after the holidays, we typically see an increase in pending sales in January. That’s just what’s happened in January with 504 units sold and 1287 units pending, an increase of 53.76% from December, 2008 but a decrease of 12.79% from one year ago. The average sales price went up by almost $10,000 to $208,133 from last month while the median sales price dipped about $5,000 to $163,250. Foreclosures and Short Sales represent almost 25% of all January sales.
At the end of January, the number of Active Listings was down 12.79% from last January. This is good news because it will eventually help stabilize our market by reducing the months of inventory, currently at 13 months for the overall market. Months of inventory is the number used by analysts to measure the health of the market and is determined by dividing the number of January closings (588) by the total number of Active Listings in January (7,694). The increase in pending sales in January should reduce this even further by the end of February.
The real telling numbers for Tucson could be found in breaking down the overall market stats for each individual zip code. In the higher price zip codes, supply continues to grow while demand is staying the same. Inventory is almost up to a 3 year supply, sales are nominal and average sales prices continue to decline. In the zip codes with more moderately priced homes, the ratios are almost at a “neutral” level, meaning that there’s just about the right number of homes for sale to meet the demand to buy so it’s neither a buyer’s market or a seller’s market.
Within the Northwest area zip code 85741, there’s only a 4.7 month supply of homes. This zip code includes neighborhoods such as Hartman Vistas, Countryside and most of the Mountain View High School District. Homes in this zip code typically sell for $150,000 to $200,000. Within zip code 85718 in the Catalina Foothills, there is a 33 month supply of homes. One year ago, the average home sale price in this area was $745,000. Now it’s $535,000.
Most are concluding that the market for affordable homes in Tucson is on the rebound. The luxury market continues to suffer with a 63 month inventory of homes over $1,000,000. And the worst of all is the condo market. While inventories are finally coming down, condos still aren’t selling. There were 467 condos for sale, with only 12 being sold in January. The primary reason for this is financing. Local lenders say there just isn’t any since most condo developments don’t qualify for the most popular loan out there today, FHA.
We traditionally have a slowdown during the December holidays that creates a dip in the number of homes that close in January. When activity picks up again after the holidays, we typically see an increase in pending sales in January. That’s just what’s happened in January with 504 units sold and 1287 units pending, an increase of 53.76% from December, 2008 but a decrease of 12.79% from one year ago. The average sales price went up by almost $10,000 to $208,133 from last month while the median sales price dipped about $5,000 to $163,250. Foreclosures and Short Sales represent almost 25% of all January sales.
At the end of January, the number of Active Listings was down 12.79% from last January. This is good news because it will eventually help stabilize our market by reducing the months of inventory, currently at 13 months for the overall market. Months of inventory is the number used by analysts to measure the health of the market and is determined by dividing the number of January closings (588) by the total number of Active Listings in January (7,694). The increase in pending sales in January should reduce this even further by the end of February.
The real telling numbers for Tucson could be found in breaking down the overall market stats for each individual zip code. In the higher price zip codes, supply continues to grow while demand is staying the same. Inventory is almost up to a 3 year supply, sales are nominal and average sales prices continue to decline. In the zip codes with more moderately priced homes, the ratios are almost at a “neutral” level, meaning that there’s just about the right number of homes for sale to meet the demand to buy so it’s neither a buyer’s market or a seller’s market.
Within the Northwest area zip code 85741, there’s only a 4.7 month supply of homes. This zip code includes neighborhoods such as Hartman Vistas, Countryside and most of the Mountain View High School District. Homes in this zip code typically sell for $150,000 to $200,000. Within zip code 85718 in the Catalina Foothills, there is a 33 month supply of homes. One year ago, the average home sale price in this area was $745,000. Now it’s $535,000.
Most are concluding that the market for affordable homes in Tucson is on the rebound. The luxury market continues to suffer with a 63 month inventory of homes over $1,000,000. And the worst of all is the condo market. While inventories are finally coming down, condos still aren’t selling. There were 467 condos for sale, with only 12 being sold in January. The primary reason for this is financing. Local lenders say there just isn’t any since most condo developments don’t qualify for the most popular loan out there today, FHA.
Tuesday, January 20, 2009
Foreclosures Dominate Tucson Market
The leading story in the residential real state market as we head into 2009 has foreclosures in its headline. Pima County experienced a 65% increase in the number of foreclosures for 2008 over 2007. It’s important to put this in perspective since this is a relatively mild increase compared with the 171% increase in Maricopa County foreclosures in 2008. In Pima County, 1.2% of households are in foreclosure compared to 4% of Maricopa County households.
Foreclosures have impacted both the new home market as well as the resale market in Southern Arizona. The fourth quarter of 2008 will be the lowest on record since 1990 for the number of new home construction permits issued in Southern Arizona. There were 248 new construction closings in November, so far the fewest of any month in 2007 or 2008. The median sales price for new construction was down from $210,000 in October to $201,035 in November.
In the resale market, the Median Sales Price dropped to $167,900 in December, down from November’s $178,000 and the February, 2006 high of $279,900. December’s drop is 20.05% from December 2007 and 16.04% from November 2008. These significantly lower prices undoubtedly reflect the large number of foreclosed homes on the market.
Average days on market decreased for the fourth month in a row in December, down to 75 days. Active Listings decreased 4.61% from November and were down 12.41% from December of 007. Total number of Active Listings of 7,627 is down from November’s number of 7,996 and represents 10.5 months of inventory, down from 12.5 months in November. This reduction in inventory is a bit of good news for Sellers since inventory is seen as an indicator of housing demand. When inventory levels go down, many experts believe this is an early indicator that the housing market is primed to improve.
The Tucson Association of Realtors report that Home Units Sold increased 22.05% from November to December and Home Sales Volume increased 13.08%. December’s Home Sales Units of 775 topped the previous year’s figure of 753. However, pending contracts decreased 9.60% from 677 in November to only 612 in December.
So, is it a good time to buy? Interest rates continue at historically low levels, deals abound and the decrease in inventory support a possible bottom of the housing market. If you have stable employment, a good FICO score, enough cash for a substantial downpayment, and take your time finding the right home at the right price, many feel that it’s the right time to buy.
Is it a good time to sell? Homes in “model home” condition, priced right and located in desirable neighborhoods continue to sell quickly. Take the time to get your home in tip top shape, be realistic with your asking price and sell your existing home before you buy a new one so you don’t experience the pressure of two mortgages.
Foreclosures have impacted both the new home market as well as the resale market in Southern Arizona. The fourth quarter of 2008 will be the lowest on record since 1990 for the number of new home construction permits issued in Southern Arizona. There were 248 new construction closings in November, so far the fewest of any month in 2007 or 2008. The median sales price for new construction was down from $210,000 in October to $201,035 in November.
In the resale market, the Median Sales Price dropped to $167,900 in December, down from November’s $178,000 and the February, 2006 high of $279,900. December’s drop is 20.05% from December 2007 and 16.04% from November 2008. These significantly lower prices undoubtedly reflect the large number of foreclosed homes on the market.
Average days on market decreased for the fourth month in a row in December, down to 75 days. Active Listings decreased 4.61% from November and were down 12.41% from December of 007. Total number of Active Listings of 7,627 is down from November’s number of 7,996 and represents 10.5 months of inventory, down from 12.5 months in November. This reduction in inventory is a bit of good news for Sellers since inventory is seen as an indicator of housing demand. When inventory levels go down, many experts believe this is an early indicator that the housing market is primed to improve.
The Tucson Association of Realtors report that Home Units Sold increased 22.05% from November to December and Home Sales Volume increased 13.08%. December’s Home Sales Units of 775 topped the previous year’s figure of 753. However, pending contracts decreased 9.60% from 677 in November to only 612 in December.
So, is it a good time to buy? Interest rates continue at historically low levels, deals abound and the decrease in inventory support a possible bottom of the housing market. If you have stable employment, a good FICO score, enough cash for a substantial downpayment, and take your time finding the right home at the right price, many feel that it’s the right time to buy.
Is it a good time to sell? Homes in “model home” condition, priced right and located in desirable neighborhoods continue to sell quickly. Take the time to get your home in tip top shape, be realistic with your asking price and sell your existing home before you buy a new one so you don’t experience the pressure of two mortgages.
Monday, December 15, 2008
How to Sell Your Home FAST!
In this market, pricing the home correctly is the number one thing to do to get your home sold as fast as possible. Don't forget that you're competing with every foreclosure and short sale out there and the price your neighbor sold for 6 months ago just isn't the price you'll get now.
Before you put your house on the market, there are five tips I can give you for selling the home quickly.
Before you put your house on the market, there are five tips I can give you for selling the home quickly.
- The pre-market appraisal: Nothing is more frustrating to a Seller than getting a contract to purchase their home, going through inspection and possible repairs and then finding out that the home did not appraise for the purchase price. And since our Purchase Agreement Contract here in Tucson (and most everywhere else) contains a contingency that says the Buyers can walk away from the purchase if the home doesn't appraise at purchase price, this is truly a critical piece to examine early on to avoid any last minute gliches. Find a good appraiser and tell him or her that you're putting your home on the market and want to make sure it will appraise for the purchase price. These people really know what they're doing and it's well worth the $300 average cost. It doesn't mean that you need to start out with a price the same as the appraisal since you may want a little bit of wiggle room when the house first goes on the market. But let me be clear. I said a little bit of wiggle room and by this I mean no more than 2 - 4%. The pre-market appraisal will save a significant amount of heartache in having to re-negotiate a price or even put your house back on the market if the property fails to appraise at purchase price.
- The pre-market inspection: Lots of Sellers make the mistake in thinking that the "little problems" that plague every resale home won't make a big difference to someone purchasing the home. They sometimes think that these things didn't really bother them the whole time they lived in the home so why would they bother a Buyer. In a Seller's market, this thinking is ok, but in a shifting market like we're seeing here in Tucson, it's important that a home be in excellent repair prior to placing it on the market. Buyers have thousands of homes to choose from and tend to want the homes that appear to be well maintained and in perfect move in condition. The pre-market inspection will identify all the little nitty things that may not be working properly in the home. It will also identify any safety issues like a lack of GFCI circuits near sinks and tubs or leaky faucets or outlets that don't work. My advice is to find a good handyman and give them the inspection report. Most of the time the cost to repair these items is no more than a day of your handyman's time. It's well worth it.
- De-personalize your house: Buyers want to be able to imagine themselves living in their new home and may get caught up in looking at family photos or awards or other items that personalize a home. This doesn't mean you have to take the personality out of the house .... just take the person out of the house, and it will sell more quickly. Remove all photos and any items that put your signature on your home.
- Clear out clutter: I can't count the number of times I've shown a home to a prospective Buyer that appeared 500 sq. ft. smaller due to all the clutter. Clutter just doesn't mean papers and knicknacks and toys and stacks of magazines. When I talk clutter, I'm also referring to the numerous appliances we all tend to keep on our kitchen counters, the excess pots and pans we keep in our cabinets, the walls filled with too many pictures and the rooms that have too much furniture. Take the time to go through your home room by room. De-clutter it once and then again and again until Buyer's can appreciate the size of the rooms and the extra cabinet space. Buyers will open all your kitchen drawers and cabinets and pantry. Get rid of the cans of soup you've been keeping for the last 3 years and the almost empty household cleaners under the sink. Box up everything you don't need and store it neatly in the garage. Take those shoes you haven't worn since your niece's wedding and give them to Good Will. Your home will show better and that's what it's all about.
- Work on the Curb appeal: The last thing you want is for prospective Buyers to drive up to your home and make a quick u-turn without coming inside. Take an objective look at the front view of your home. Are there oil stains all over the driveway? Does your front entry way look welcoming and inviting? Are there dead plants in the landscaping? Spend a day ensuring that Buyers don't do a u-turn by cleaning up the front landscaping and adding some colorful flowers to the front entry way. Spiff up the front door and make sure the door handle looks new and shiny and that the door opens easily with the key. Buyers usually spent a good minute standing at the front door while their agent gets the key out of the keysafe and opens the door. A little work will make sure that their first impression is a good one.
Monday, November 24, 2008
I Hate My Realtor
I was sitting with a friend the other day and she and I were talking about the pros and cons of working with various real estate agents. A friend of hers had chosen a well respected local agent to list her home and was struggling with her opinion that this agent wasn't doing enough to get her house sold. After sitting on the market for 5 months, the Seller mentioned that the agent had finally decided to do an open house. When I asked some more questions, I found out that the home was still filled with clutter (including a number of personal photos) and that despite a number of showings, no offer had come in.
OK, then, so what's the problem?First of all, some houses just take a long time to sell. Perhaps they have a unique design or floorplan. Or maybe they're not in the most desirable neighborhood or located on a busy road. What I can tell you about these types of homes is that they do eventually sell . . . if the price is right. But let's say that the home just doesn't show well. Perhaps it's poorly decorated. Or filled with clutter. Or it needs new paint. Or there's an odor from the kitty litter box that just won't go away. Or there are weeds in the yard, oil stains on the driveway and dirty dishes in the sink. The closets may be overflowing and the kitchen counters are cram packed with the latest gadgets.I won't begin to try to say that's it's an easy job for an agent to give honest feedback about a home, particularly to a friend. But it's our job and any agent who avoids having these tough conversations is not only the type of friend you don't need when you're trying to sell your home. This type of agent isn't doing their job.
If your home has been on the market for some time and it hasn't sold, I know it's easy to blame your Realtor. I've often heard said, "My Realtor hasn't done her job. No open houses and she hasn't brought by one single buyer who's made an offer. I need someone else to sell this house". Now I'm not saying that all agents are created equal. But if your Realtor is properly marketing your home by creating inviting descriptions, posting great photos on MLS, showing the home to anyone who inquires about it in a timely manner, following up with agents who have shown your home, then chances are she's doing a good job and you need to sit down with her, have a frank discussion about why the house hasn't sold and consider taking her advice.
OK, then, so what's the problem?First of all, some houses just take a long time to sell. Perhaps they have a unique design or floorplan. Or maybe they're not in the most desirable neighborhood or located on a busy road. What I can tell you about these types of homes is that they do eventually sell . . . if the price is right. But let's say that the home just doesn't show well. Perhaps it's poorly decorated. Or filled with clutter. Or it needs new paint. Or there's an odor from the kitty litter box that just won't go away. Or there are weeds in the yard, oil stains on the driveway and dirty dishes in the sink. The closets may be overflowing and the kitchen counters are cram packed with the latest gadgets.I won't begin to try to say that's it's an easy job for an agent to give honest feedback about a home, particularly to a friend. But it's our job and any agent who avoids having these tough conversations is not only the type of friend you don't need when you're trying to sell your home. This type of agent isn't doing their job.
If your home has been on the market for some time and it hasn't sold, I know it's easy to blame your Realtor. I've often heard said, "My Realtor hasn't done her job. No open houses and she hasn't brought by one single buyer who's made an offer. I need someone else to sell this house". Now I'm not saying that all agents are created equal. But if your Realtor is properly marketing your home by creating inviting descriptions, posting great photos on MLS, showing the home to anyone who inquires about it in a timely manner, following up with agents who have shown your home, then chances are she's doing a good job and you need to sit down with her, have a frank discussion about why the house hasn't sold and consider taking her advice.
Tuesday, October 28, 2008
Buying a Tucson Foreclosure
While buying a bank owned property is a bit easier than buying a short sale, it still has its challenges for the agent and the buyer.
I recently represented a buyer in making an offer on a bank owned property. It reminded me of better times a couple of years ago when any listing brought in multiple offers, typically on the first day.
My first time buyer wanted to find "a deal". When a low priced listing came up in the area he wanted, we took a look at it on the first day of the listing. The comps showed us that even at full listing price, the home was a screaming deal. We submitted our offer immediately at full price with minimal conditions.
When I checked in with the listing agent the next day, she let me know that she'd received 9 other offers. She told me that the asset manager would respond with a request for a "best and final offer" the following day.
To make a long story short, it took us 2 weeks and 4 more offers to get an acceptance. The bank required the buyer to sign the dreaded standardized addendum the contradicted many of the buyer protections in our standard Arizona Purchase Contract. The Bank would do no repairs. The Bank would offer no disclosures. The Bank would warranty nothing. Scary stuff, but with 8 other ready and willing buyers competing with us, the Buyer decided that with a thorough inspection of the home, he was willing to forfeit some of the protections in the standard agreement.
You can imagine the comments he heard from his friends. "What do you mean you paid more than listing price in this market?" and "Tell the Bank to stuff it". But the good news is that the Buyer had the logic and patience needed to succeed in getting that good deal.
He's closing on the home right before Thanksgiving and despite all the hoops he's had to jump through, he's grateful that he had the fortitude to hang in there.
I recently represented a buyer in making an offer on a bank owned property. It reminded me of better times a couple of years ago when any listing brought in multiple offers, typically on the first day.
My first time buyer wanted to find "a deal". When a low priced listing came up in the area he wanted, we took a look at it on the first day of the listing. The comps showed us that even at full listing price, the home was a screaming deal. We submitted our offer immediately at full price with minimal conditions.
When I checked in with the listing agent the next day, she let me know that she'd received 9 other offers. She told me that the asset manager would respond with a request for a "best and final offer" the following day.
To make a long story short, it took us 2 weeks and 4 more offers to get an acceptance. The bank required the buyer to sign the dreaded standardized addendum the contradicted many of the buyer protections in our standard Arizona Purchase Contract. The Bank would do no repairs. The Bank would offer no disclosures. The Bank would warranty nothing. Scary stuff, but with 8 other ready and willing buyers competing with us, the Buyer decided that with a thorough inspection of the home, he was willing to forfeit some of the protections in the standard agreement.
You can imagine the comments he heard from his friends. "What do you mean you paid more than listing price in this market?" and "Tell the Bank to stuff it". But the good news is that the Buyer had the logic and patience needed to succeed in getting that good deal.
He's closing on the home right before Thanksgiving and despite all the hoops he's had to jump through, he's grateful that he had the fortitude to hang in there.
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