I have been inundated over the last week with conflicting market news.

The Wall Street Journal saw the Case-Schiller Index and feared a possible double-dip. The best quote from that article tells the story of why people are waiting to buy: they are nervous from hearing bad news, feeding a self-fulfilling prophesy. “You’ve got a whole bunch of people who are sitting, waiting in the wings to get into house buying because they know it’s cheap, they know interest rates are low, they know it’s a highly subsidized investment,” said Wellesley College economist Karl Case, who developed the house-price index with Yale University economist Robert Shiller. “If they stay out because they’ve become a little bit more nervous, it can mean the whole market moves.”

But at the same time, AZ Central is reporting that people are doing a better job keeping up with their mortgage payments. Fewer people locally and nationally are behind at least 60 days on their mortgage payments. Certainly this is a precursor to a stabilizing in the market.

Then I turn around again and my broker, Jim Sexton is pointing to lower prices in July, partially due to the very small number of “normal” sales (non-foreclosure, non-short sale) in August.  As my real estate mentor, Leif Swanson, likes to also point out, the huge number of super-cheap, cash-only condos that sold recently have dragged prices down, to0.

So, what is one to believe? For me, it all comes down to a couple simple, but true facts.

1) People hear bad news about the economy and they are holding off on that big decision until they feel more confident that their job will be there 6 months from now. This too shall pass –specifically once we get about a month of improving jobs numbers.

2) A home is not the stock market, as pointed out in this great article. If you need a home, these are the lowest prices in a quarter century and the lowest interest rates in 40 years. Don’t buy a home because you think you will make a killing tomorrow. Buy because you need a place to live and it is better to pay yourself to live there than a landlord.

One of the things that I like about being a real estate agent is the tough code of ethics.

It is true that some agents play fast and loose with this. I’ve had one particular agent here in town (who was later profiled on “3 on Your Side”), whose repair contractors painted over termite damage and did not do the work promised in the contract. This guy had so many foreclosed homes on his roles, that he could not handle the details.

Anyway, the Real Estate Commission governs how an agent advertises themselves and even what incentives they can give clients.

This is all there to protect the home sellers and home buyers from people who know the rules of the road better than they do. Nobody wants to be taken advantage of by an agent. Buying a home is too big a deal.

So, I’m happy to see that the state (due to federal initiative) now requires mortgage brokers to be licensed. One of my broker friends was complaining earlier this year that she needed to take the test and be licensed. But she agree with why.

Check out this article in the Republic for more. This article actually gives me hope for our future housing market here in AZ.

Some really interesting points:

• “So far, 4,336 people have applied to be loan originators in Arizona and 2,413 licenses have been issued.”
• “Licensing advocates tried four times over a decade to get lawmakers to pass the new requirements.” So, there is our legislature again, protecting the home buyer!
• “Arizona ranks among the top 10 states for mortgage-fraud cases, according to the FBI.”

There was this very interesting article about “Vultures”, those investors who buy up very cheap property and fix them up. This article centered on the Phoenix market.

On its face, vultures are a bad thing. They are doing well because somebody lost their home to foreclosure. One could argue that if too many of them are just doing fix n flips, then they will just drive the market back upward needlessly (and possibly flood the market with bad renovations).

The other perspective is that, just as in the wild, they are part of ….. (wait for it) …..the circle of life.

So, you have this home that was on the market in 2007 for $300,000. In the process of foreclosure, it was beat up and damaged. It was sold to a vulture for $100,000. They come in and fix it up at a cost of about $30,000.

As the article points out, many vultures are fixing and sitting, rather than fixing and flipping. This can be a stabilizing thing. If they fix and flip at $150,000 that can be good if (1) they did a good job at the renovation and (2) some family gets a like-new home. Its much better for the neighborhood than a home sitting empty.

But it is equally good if they fix the property and get somebody in to it for the long term. This means they are not driving prices recklessly upward. It also means some stability in the neighborhood. It all depends on who they rent to, I guess.

It all moves us back to a stable market.

I think you will see more of this going on, even in the condo market.

Well, you decide if you think it is good or not. I don’t think this story is over, though.

Earlier this week, I posted a quick note about how the Arizona Republic took a national report and drew some sweeping conclusions about the Arizona market. Their headline sent many people to their phone, computers or social networking spaces to comment in fear that the Phoenix market was about to tumble all over again.

See how this AP story takes the same story and concludes completely different news:

“Yet over the past year, while home prices rose 7.2 percent in Phoenix, they ticked up only 1.2 percent in the Miami and fell 6.5 percent in Las Vegas. Part of the reason is that Phoenix has a healthier job market than the other two cities. Its metro area had an 8.7 percent unemployment rate in May, one point lower than the national average.”

They still predict nation-wide drops in prices due to the end of the tax credit and a slow economic recovery. But at least they recognize the difference in cities.

To which I say, if you are thinking of buying, now is still a great time. If you want to wait for this predicted price drop, any savings could be eliminated by interest rate increases. As I said in the last post, home buying is not the stock market. You are not day trading here.

If you buy generally when prices are low, and sell generally when prices are high, you will be in good shape. Buy now at incredibly low prices and interest rates. Purchase modestly. Have a home that makes you happy and expect to live in it for a few years. That’s the simple model.

Here is this week’s updated list of the best deals in the ‘hood.

1) This expertly updated ranch in CenPho (now only $149,500) is walking distance from Light Rail and convenient to all the CenPho attractions. You can walk to Lux, Pane Bianco, Copper Star and all the shopping on 7th. That’s heaven!

You should see the upgrades: triple-pane Pella windows in the living room, a block addition to the master bedroom, with bath and a lush back yard. This 2br/2ba home is a great first home, its roomy and move-in ready.

2) 2-Bedroom, 1.75-Bath Easy Livin’ Condo. You’ve heard me rant about this little 1950s complex. It is shady, inexpensive, picturesque and built as sturdy as a fallout shelter. This 1,100 square foot place came on the market last week at $41,500. I’ve not seen many people look at it. It does not help that the carpet needs to be ripped out and replaced (what were those people eating?). But I think this price should come down in to the high $30s. I’d rip out the carpet for that price!

3) 1-Bedroom, 1-Bath Starter Condo. OK, there is a theme here, I know. But these places are so inexpensive, it blows my mind. They are listing this one, at 846 square feet, at $31,000. I’m telling you right now, I think this place should go for about $3,000 less. It is HUD-owned, so they have a different bidding process. I can help you with that. But if this is your first property, you can’t beat the price. Your monthly costs would be less than $500, assuming you are paying a loan back to your uncle Albert. (You are not likely to get a home loan for this low, so these are cash deals only.)

Call me at 602-456-9388 for more information.

The Arizona Republic reported this morning that housing prices are due to drop again by 10%; such that they could be cheaper next summer than they are today.

Now, I can’t read tea leaves any more than Lady GaGa would be seen wearing a polyester polo shirt from WalMart.

But there are parts of this story that you should, you know, take with a grain of salt the size of a BP oil spill.

Here is why:

#1. Using nation-wide statistics and applying them to Phoenix is like saying that the average elevation in Phoenix is 3,000 feet because that is the national average. (Note: I don’t know if there actually is a national elevation average, but you get my point.)

#2. This is not the first time that I’ve seen this narrative from the Arizona Republic. In fact, you can pretty much count on seeing an article in the next couple weeks hinting at how there might be a rebound. You know, when I was younger I had a friend who’s dog got so excited every time we came over he could not decide whether to run around or eat his food. So, he spent a half an hour trying to do both. Kinda reminds me of this.

#3. They cite Mike Orr of the Cromford Report, whom I respect as an analyst, saying that prices will go down in August. I think that is probably true. But did you notice how they jump from Mike’s very local and specific analysis of one month ahead, to Moody’s very speculative analysis of next year’s prices in other cities?

#4. CenPho is not Vegas. While I work all over the valley, you know that I spend most of my time on historic neighborhoods in the central corridor. I am not seeing the same trends here that you see elsewhere. CenPho is marked by people who want to get out of the suburbs and experience a more diverse and interactive lifestyle. The price of fuel will continue to go up and people are preparing for that and choosing to live closer to work. So, this article should not lump every community together.

#5. The article says that 13% of mortgages nation-wide are late by one payment. That may be true. I don’t know. But they don’t discount how many of those folks will find work by next year and they present a worst case scenario.  I don’t know about you, but when I’m making decisions, I want to know a range of likely outcomes.

So, I don’t know what will happen 6 months from now any more than these folks do. But what I can see is that more people are calling me every day wanting to find a house. They recognize that prices are still historically low, rates are under 5% in most cases and houses are not staying on the market very long.

On thing to keep in mind: buying a house is not like playing the stock market. Don’t buy if you just want to sell tomorrow. Buy because you need a place to live and you want to build equity over time.

If you think you will stay in Phoenix for the next three years, then I would definitely feel confident that you can buy something now and probably be able to sell such that you “pay yourself rent.” Prices are so low now that the likelihood of prices going up is much greater than what Chicken Little is telling us.

There has been a lot of talk recently about how short sales are getting closed with greater success. The data is mixed on that.

On the whole: if you are buying a home on and considering making an offer on a short sale, talk with me first. The speed of your closing depends on who is selling, who is lending and what paperwork they have completed already. It is best to build a strategy around approaching the sale.

Now, on to the data.

Below is the standard market distress dashboard put out the the Cromford Report. On the left, you see active listing; those that are still on the market. On the left you see that 44% percent of the market that are short sales (“pre-foreclosures”). The average sale price is $84.64 per square foot.

On the right you see what is actually closing and at how much. Only 24% of closings are short sales and they are averaging $81.74 per square foot.

I find it interesting that some folks think short sales are such a great deal, but notice that foreclosed properties are actually cheaper. Yep, they are harder to find, but I’ve noticed something in my clients: while we are waiting for the short sale to close, they many times see a foreclosed property that they would rather have.

So, bear with me a little more as I geek out on the speed at which short sales are selling, and the price. See the chart below and compare today’s information with the column for last year. The active listings, and sales per month are all up. In the case of sales, they are double. Look further down the chart and see that the sold price per square foot is actually down from last year.

So, what is happening here? Well, the listing agents who are listing the short sales are getting better at negotiating the banks’ processes. The banks are getting better at clearing the short sales and they are more likely to negotiate a lower price. Even the time needed to close (days on market) has come down.

All of this points to one conclusion: short sales are worth the risk if your agent (me, hopefully) can get a good sense of the players in the deal and whether they are likely to close on time. I can help you with this analysis. Call me at 602-456-9388.

For those of you who are thinking you might short sale your home, you need to know about HAFA, Home Affordable Foreclosure Alternatives.

This is another attempt by the Obama administration to stem the tide of foreclosures, thus far with poor results.

Basically, the program will give the home owner $3,000 to encourage them to stay in the home and short sale rather than foreclose. It gives the bank $6,000 if they short sale rather than foreclose.

If you are thinking to short sale, let’s talk. Thus far this program has not been working. It has doubled the paperwork required to short sale and it has slowed down a process which is already taking too long.

I am hopeful that they will work out the kinks. But it is more likely that the market will clear of short sales and foreclosures before that happens.

Learn more at this Arizona Republic Article.

You may have heard in the news about an extension of the tax credit for first time home buyers. I’ve not really covered this because it really only applies to people who are in escrow.

I don’t think the media was clear enough about this: the only thing they were extending was the time you have to close. Remember the tax credit two-step? You had to get an offer accepted by April 30th and the house closed by June 30th? Well, all they are extending is the deadline to close.

So, basically, of the 17,000 properties that are in escrow right now in Maricopa county, fewer of them will cancel because somebody found that they were not in time for the tax credit.

Oh well June still has, at this time 9,083 closed, that’s basically the same as May, but down about 3% from June 2009. REO and Short Sale (SS) trends continue, namely REO’s are dropping (36%) in number and SS are increasing (25%).

According to my broker, Jim Sexton, the number of foreclosures, at 6,170, is the lowest number since 4/08. The change in the Pending Foreclosure numbers was the largest drop on record at 2,673, the lowest since 3/9.

In other words, the market is beginning to clear of the foreclosed properties, slowly but surely. This is for two reasons. First, banks and brokers are getting faster at selling short sale properties. Second, the number of distressed properties may be simply going down.

This picture is not completely clear yet, but we will see soon.

This supports what we are seeing: that sales prices are inching upward as the market clears. We are back at 2001 levels, on average (but better in most Central Phoenix or historic neighborhoods.)

This is still a great time to buy a house, with rates still hovering at or below 6% APR.

It is a bit too early to see if there has been a massive drop in prices, as predicted by some of our more speculative and sloppy reporters.

But we can see a couple other trends that your might find interesting:

#1 The Number of Foreclosures in the Market is Starting to Drop. According to this article in NuWire, an investment newsletter, “Last month they (foreclosures) represented 50.5 percent of the resale market, compared with 64.9 percent a year earlier. The peak for foreclosure resales was 66.2 percent in March 2009.”

The Arizona Republic, usually happy to predict the end of days every time the wind changes direction said “Foreclosures were 33 percent of the market’s recorded activity in May, down from 40 percent in March, according to the latest realty-studies report.

This does not mean that the market it out of distress. The number of short sales is edging upward as sellers, banks and agents get better at selling homes before they go to foreclosure. See below. What does this mean? It means that if you are looking to buy, you are more likely to want to look for short sales and leave yourself plenty of time for the deal to close –3 to 6 months.

#2 Prices Per Square Foot Are Going Up. So, this means that regardless of the size of the home, people are willing to pay more. Not a whole lot more, but they are edging upward.

So, what does this mean? I think it means that once all of the dust settles from the tax credit, we will be on a steady, slow upward climb back to normal and that it will take a couple years. If you are looking to sell, hang tight unless you are looking at using the low market to trade up. If you are looking to buy, you should be looking now because a 5% increase in the home price can me $100 more per month, depending on the home.

This also means that closing on a home is a little different than it used to be. You are more likely to have to deal with a bank and you may take longer to close. But, that is why you ask me to help you! I protect you from the difficulty of dealing with banks and represent your interests.