The portion of the inventory that is considered distressed is still much smaller than it has been for years, and will continue to be that way.

If you look at the number of listings in the inventory, above, you will see that we had an increase in “normal” listings at the end of last year. That is because people who bought during the really low points or before about 2003 are putting their houses on the market. You see that January inventory is down a little bit.  I’m guessing this is because people think prices will go up, so they are holding off listing. But that’s tough to say –and it is a bit of a gamble for those folks who think they should wait.

Here’s why: while most folks think interest rates will stay where they are this year, I’m also hearing loan officers reporting that rates are starting to go up. You don’t want to try to sell a house while the interest rates are higher. It erases all of the price increase you were waiting for!

Still, you can see in this chart that the prices continue to go up, generally.

This is why you will see fewer investors in the market. First, their ability to get a super cheap house which they can flip up is going away in most areas. Second, it is more difficult to turn that house in to a rental and get cash flow when you bought it at a higher price.

I expect to see more “normal” buyers in the market, as those people who lost their credit scores recover and decide to pick up a new home.

If you are thinking about listing you home (even for short sale), please give me a call and let’s meet. If you are thinking of buying, let’s grab a cup of coffee and talk about your plans. We can build a strategy that gets you the home that you are looking for.

Call me at 602-456-9388.

Part 3 ended with the big question, “What are the home builders doing?” I’m going to end my four-part market analysis with this answer and what they tells us as we’ve crossed into 2013 and heading into February already.

At the same conference that was put on for realtors by old Republic, where Mike Orr spoke, the home builders got up on stage. There were five of them and they had this total love-fest among themselves talking about how proud they were, “We’ve got this land out by the San Tans and were going to put like 8,000 homes on it!” And “yeah that’s right! And every one of them is going to have a pool!” They were really proud of themselves because they’re really starting to build 424 a month, 704 per month, 805 a month and they just saw a great future for themselves.

This is where they used to be. And this is where they are now…

Back when I was working for the State Energy Office. We were trying to convince home builders to put energy efficiency improvements in their homes and they were like, “Don’t bother us. We’re too busy.”

This is where they were in 2006. They built 60,000 homes in a year. Way too many for us to absorb.

I think what these guys are going to find, in the next two or three years is that they will never reach that old demand for “sprawl” housing.

Bear with me. I’m going to pontificate a little bit here. As the United States gears up its economy,

and China gears up its economy,

and Europe gears up its economy,

the price for auto fuel is going to go up. I think, it will reach over $5 per gallon, and that is going to affect home buying decisions.

One of the things I learned back at the energy office when I was there is that the price per barrel to get oil out of the ground has only gone up year after year. You may be fracking for natural gas and all that, but you don’t drive a natural gas car, typically, from Ahwatukee to downtown Phoenix, or from Avondale or the San Tans to your job.

So these guys are going to continue building out in the ‘burbs, but they’re going to find, as I have found, that people are less and less enthralled with the idea of living so far out.

So what will that do to home buying decisions?

I think you’re going to see those zip codes that we talked about before continue with an even greater price pressure upward. I think you’re going to see more desire for infill. Unfortunately,  the big developers sitting on the stands, congratulating themselves only want to do 1000+ homes. They’re not interested in doing a little infill project with six homes (which is about the best you can do in central Phoenix). They’re going to have a really hard time putting in new condos until we can continue selling off the ones we built at like $500 per square foot back in the peak of all this.

That’s going to make central Phoenix even more interesting to people.

This is the outlook that Mike Orr presented:

…Because more folks are finding reasons to sell to folks who bought before 2003 and they feel safe to put it back on the market. They’re going to add to the inventory…

…‘Cap Rates’ are their ability to make money off of these investments. So the investors will slow down as those Cap Rates fall. You have to ask yourself, is that going to put me in a situation where we are going to have less and less of a possibility for renters to find a place? We’ll talk about that, shortly…

…and they’ll do it…

Now this is my speculation, which I’m going to separate to make it even clearer that I don’t represent what Mike Orr has to say here.

I think that as you watch those historic neighborhoods that are a walking distance to the light rail (typically considered as between the 7’s; Seventh Avenue and Seventh Street), you’re going to see those prices continue to go up. That’s because builders are in the ‘burbs, not in central Phoenix and the inventory downtown is limited. Like Tempe, it’s landlocked. I think we’re going to see more of that.

Investors: the Cap Rates are going down, so if you’re thinking of investing, I think the window is closing for your potential to get an investment.

Home buyers: the prices will continue to go up, though we don’t know where the interest rates are going to be.

Home sellers: when you look at the charts above, and you think, “Great! The prices are going to continue to go up!” But we think that interest rates are going to stay low for another year, but if you are a home seller and home buyers interest rates go up, their ability to buy your house goes down. You have to keep an eye on that. In other words, this might be a good time for you to sell if you’ve been waiting.

Mike Orr also said that we can expect a rush this month (January 2013). I want to say something about that. Typically, if agents don’t get their sales completed by August, September, or October, they’re going to have a really bad Christmas/Hanukkah. The reason is because it’s slow during the holidays. The last two years, I have hardly had a day off during the holidays because it’s just been so busy. I think Mike could tell you that we don’t expect to have a whole lot of free time, because it is going to stay busy during Christmas.

Having said that, what always happens is that people finally shake off the left over Christmas tinsel at the end of January and say, “Oh, yeah, weren’t we talking about buying a house back in October? Must’ve forgotten about it because of how Halloween and all those other goings on.” And then you get that big rush of buyers. I think that this drastic upward momentum they receive is going to continue until the end of January 2013.

Moving forward

I would love to see my friends and my clients and the folks who are supporting downtown and central Phoenix getting some good information. I have access to all of this data from Mike Orr’s Cromford Report and it can reveal so much.

Please tell me, how helpful you folks think this market analysis series has been to you? What areas would you like me to zero in on?  Are there listing conditions you’d like me to do some research on?

If you have questions about buying or selling your home, please call me at 602-456-9388. I can help.

The folks at Co+Hoots have been temporarily working out of monOrchid for a couple months while their new office digs are finished, further downtown.

We’ve had a great time together, but when they leave there will be a few coveted spaces open around here. This is a great place to work.

I should know, I work here. We have a coffee shop, inexpensive but urban-hip office space, access to specialists in all fields and other amenities.

Check out this PDF document with the expected upcoming vacancies and the prices.

Give me a call at 602-456-9388 for information.

If you owe a debt to someone and they cancel or forgive that debt, the canceled amount may be taxable. Same goes for mortgage debts. Hence, the creation in 2007 of the Mortgage Debt Forgiveness Relief Act. The IRS explains the concept surprisingly well. This act expires in 96 days, the end of this year, after the holidays; much sooner than you realize.

People have been opining this whole year about the possible extension of the $1 billion mortgage debt forgiveness relief provision at the end of the year. I’ve been hearing the following:

“Should I short sell before the end of the year?”

“Can I count on the hopeful January 1 extension?”

“The $1 billion mortgage debt relief provision allows me to avoid paying taxes on mortgage debt forgiven by my lender, but it expires at the end of the year! My chance to short sell and still seek tax relief is disappearing quickly!”

“But I hear these holiday months aren’t as slow as one might think. Oh, no! I’m almost out of time to avoid the tax repercussions of selling my home short!”

Let’s be clear on what the act does.

The 2007 Mortgage Debt Relief Act allows taxpayers to exclude up to $2 million of forgiven debt on their principal residence in calendar years 2007 through 2012. With one caveat: The discharge of debt must be directly related to the decline in the residence’s value or in the financial condition of the taxpayer.

The Mortgage Forgiveness Debt Relief Act was originally going to expire at the end of 2010, but lawmakers decided to extend it until the end of 2012. If it does expire, anyone who receives mortgage forgiveness on day one of 2013, or after that, will have to face paying income tax on a forgiven debt.

Isn’t it in the President’s budget?
Didn’t it pass the committee level in the Senate?

Yes/But… We don’t know the outcome of the election in November and nothing is moving in Congress for the next 6 weeks. This time bomb very likely won’t be voted on before the end of the year, what with their attention consumed with the nation’s budget crisis.

Furthermore, given that it takes 3 to 6 months to close on a short sale…Are you really willing to take the risk that the act will be extended?

What’s the bottom line?

List now and be more certain that you will avoid that tax liability. I strongly advise you consult with a tax attorney!

[referee photo: compujeremy] [house photo: surprise truck]

Nobody has any idea. But I predict that, while it won’t be as dramatic as our last, it may go on for a while.

Here’s the analysis:

After the presidential elections in November, regardless of the winner,  prices will continue to move upward. How do I know this? And why does this sound like a weather report prediction?

It’s because the coming change in home-buying patterns is showing evidence of a refreshing rain moving our way. After a six-year long summer of dry, cloudless skies, we’re beginning to smell the change in the air. A break from the scorching heat is a ‘comin.

To say it without the weather analogy, the increase in buying will continue, in part because a lot of companies are holding off on major projects and hiring until after the elections’ fallout. However, that upswing won’t be dramatic because our national debt and energy prices will continue to be a drag on our economy.

In regards to prices, we don’t see where new inventory in our Phoenix market will come from, especially in CenPho. Tight inventory means higher prices.

Mark Zandy, one of the nation’s preeminent housing analysts was on the Diane Rems Show yesterday morning talking about prices and how they are continuing to move upward as distressed properties are going away.

In Phoenix house prices have gone up 30% from last year. Yes 30%.

Take a look at the graph below, showing the Monthly Average Sales Price Per Square Foot. You can’t see the wind, but you can tell how and where it’s moving by watching the things it affects.

This chart shows a snapshot of four years worth of housing prices on the move. The brown line on top, the one with the greatest upward spiking is 2012.

My expert conclusion?

The heat is unbearable and so many people are walking around with sunburned proof of the long, hot summer. If you’re thinking of buying, make your move and buy now.

I want to say this very clearly: while prices will be going up for the foreseeable future, they won’t return to 2007 levels for years. So, if you are thinking to BUY, do it now before you lose another 30% of your buying power. If you think you want to hold off SELLING until you hit 2008 prices again, don’t expect to see that again until 2020.

If you want more information, please contact me at 602-456-9388.

Please spread the word. We have two open houses this weekend.

Saturday from noon until 3pm – 4729 N 76th Pl. in Scottsdale
This is a great single level home in Villa Monterey. Corner unit with rare side access gate to backyard. 2 bedrooms plus bonus den area. Updated kitchen with granite counter tops, built-in oven, smooth cook top, and eating area. Expansive living room huge window overlooking private yard. Huge master suite with updated bath. Private backyard with covered patio and mature citrus trees.

Drop by and say hello to Michelle Conley, the newest Get Your PHX team member.

Sunday from 11am to 2pm – 140 E Coronado Rd.

Villa del Coronado is one of the most sought after and unique co-op communities in Phoenix, steps away from museums, light rail, health clubs and restaurants. This 2 bedroom, 1.75 bath home has seen numerous improvements over recent years: opening up the living and dining rooms, UV protecting on the windows, renovating the kitchen a installing a beautiful master bathroom. Don’t miss the huge 5′ x 24′ living room balcony and the 5′ x 14′ off the master bedroom. Located in an elevator building, this unit is one of the few with a permitted full size washer and dryer and a detached garage! Cash buyers or seller may carry. All utilities and property taxes are included in the monthly HOA fee. This is perfect for refined downtown living.

Our go-to gal, Nova Home Loan’s Sr. Loan Officer, Jeannie Bolger,  mentioned Reverse Mortgage’s the other day and I thought you’d all appreciate some insight into them.

Like the name implies, a Reverse Mortgage is a product that allows you to convert some of your home’s equity, from all those mortgage payments you’ve been making over the years, into cash without the need to sell your home or pay additional monthly sums. The only point of entry is age: You must be 62 or older to be eligible for a reverse mortgage. And if the state of your credit is on the rocks because it has “issues”? Get this: no credit check required.

If you’re still reading, you’re eligible, you know someone who’s eligible, you’re not so far from being eligible, or I’m just a captivating blogger who you read because you know you’re gonna’ hear something good. Whatever the reasons, having extra money for home improvement, taking care of healthcare expenses, paying off your current mortgage, or adding to your retirement income are all common reasons why people apply for a Reverse Mortgage.

Word on the street, is that there are numerous restrictions on how someone who qualifies for a Reverse Mortgage can use the funds, but Jeannie Bolger gives us the facts:

“The senior can use the proceeds anyway that they wish with one exception: they cannot pay someone simply for advising them to get a reverse mortgage. Seniors can use the money for:

• Medical expenses
• Travel
• Pay property taxes or insurance
• Purchase an equity or long-term health coverage
• Large purchases (RV, a second home, etc.)
• Early inheritance distribution
• Normal household expenses
• In-home health care
• Home repair or improvement
• Eliminate an existing mortgage payment
• Anything you want or need

And according to the Department of Housing and Urban Development’s FAQ on Reverse Mortgages, “Unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage.”

You can receive additional free information about reverse mortgages in general by contacting the National Council on Aging at (800) 510-0301 or   downloading their free booklet, Use Your Home to Stay at Home, a guide for older homeowners who need help now.

The Federal Housing Administration’s HECM reverse mortgage eligibility guidelines require that you:

• Be a homeowner 62 years of age or older
• Own your home outright
•         or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan,
• You must live in the home.
• Your home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. (HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.)
• You are also required to receive consumer information free or at very low cost from a HECM counselor prior to obtaining the loan.
• You can find a HECM counselor online or by phoning (800) 569-4287.

The difference between a reverse mortgage and a home equity loan.

“With a second mortgage, or a home equity line of credit, borrowers must have adequate   income to qualify for the loan, and they make monthly payments on the principal and interest.  A reverse mortgage is different, because it pays you – there are no monthly principal and interest payments.  With a reverse mortgage, you are required to pay real estate taxes, utilities, and hazard and flood insurance premiums.”

~ HUD

The Federal Trade Commission (FTC), the nation’s consumer protection agency, wants you to understand how reverse mortgages work, the types of reverse mortgages available, and how to get the best deal. See this link and Get the Facts before Cashing in on Home Equtiy

See Jeannie Bolger, Sr. Loan Officer for your direct connection to a Reverse Mortgage.

Licensed Mortgage Consultant #194387
Nova Home Loans
2850 E. Camelback Road, #270
Phoenix, AZ 85016
602-550-8674  Mobile
602-385-4812  Office
602-464-7322  Direct Fax
jeannie.bolger@novahomeloans.com
http://www.novahomeloans.com/jeannie.bolger

First, a quote from our resident expert, Sr. Loan Officer of Nova Home Loans, Jeannie Bolger:

Effective June 11, 2012–for  any FHA note that was endorsed by HUD on or before May 31^st, 2009–qualifies for reduced MIP on a Streamline Refinance (No Appraisal).  Upfront MIP goes to .01% and Annual MIP will be .55%. Current upfront MIP is 1.75% and the Annual is 1.25%. HUGE SAVINGS.

What? You don’t speak Klingon or Mortgagease?

This may help.

The Federal Housing Administration (FHA) is a branch of the Department of Housing and Urban Development (HUD). The FHA was developed during the Great Depression as as an effort to stimulate the real estate housing market. The main purpose of the FHA is to encourage home ownership in the United States. To accomplish this, the FHA insures mortgages against the default of borrowers. 

Do you have a current FHA loan (note) that was endorsed (or closed) by HUD prior to May 31, 2009? If so, your FHA loan qualifies for a significant reduction in your upfront Mortgage Insurance Premium (MIP; an insurance policy that compensates lenders/investors for losses in the event of a defaulted mortgage loan) on a Streamline Refinance (No Appraisal).

The current upfront MIP is 1.75%. Let’s say your FHA Streamline Refinance of your home is for a new $100,000 mortgage. The FHA will charge you $1,750 upfront on the mortgage insurance premium (MIP). You pay this at closing and the $1,750 payment  automatically rolls  into your new loan balance.

On June 11, the new upfront MIP will be  .01%  This is a HUGE SAVINGS. Using the $100,000 new mortgage example above, you would only pay $1 !

Also beginning June 11, 2012, the FHA will reduce it’s 1.25% annual MIP ($1,250) to just .55 % for certain FHA borrowers (or $550)–more than a 50% savings!

This is one way that FHA can make a real difference to help homeowners who are doing the right thing, paying their bills on time and want to take advantage of today’s low interest rates. By significantly reducing costs for these borrowers, we can make certain they cut their monthly mortgage burden which will benefit the housing market and the broader economy in the process,” said Federal Housing (FHA) Commissioner, Carol Galante. Read the full HUD Press Release here.

Read Jeannie Bolger’s quote at the top of this post, again, and you’ll be amazed at how much Klingon Mortgagease you speak!

REMEMBER: For home loans endorsed by HUD before May 31, 2009

PLEASE NOTE: Loan application may be started prior to June 11^th, but FHA case # must be ordered after June 11^th, 2012 to qualify for program and reduced MIP.

Call Jeannie Bolger, Sr. Loan Officer Nova Home Loans, for more information:  (602) 550-8674

[Photo: Images_of_Money]

You may have seen my previous stories about the effort to put historic trollies on Grand Avenue as an economic development project. This low-cost project would help encourage new businesses along Grand Ave between Van Buren and Roosevelt –a trend that is already under way, but which could quicken and bring new income to Phoenix.

Since writing these stories, I joined the Grand Avenue Rail Project (GARP) board and we are working to get recognition of the great return on investment this represents.

It came to my attention this last week that the folks at the Trolley Museum, where they house the historic trollies which we hope to use on Grand Ave., have received a proposal from a neighboring city to take our trollies and add them to their local museum.

From what I am hearing, the Phoenix Trolley Museum folks, not getting a particularly warm feeling from City of Phoenix, are seriously considering taking this other museum up on their offer. From what I hear, some in the City really want to take back the trolley museum building at Margaret T. Hance Park so they can use it for other things. They have gone so far as to encourage the Trolly Museum to move, but they have not provided a viable place for them to go.

The sad part is that there is a very viable option, which the Museum folks and GARP founder Robert Graham have been advocating for: put the trolly museum on Grand Ave., along with an accompanying trolly line that will encourage new business on Grand.

Thus their frustration.

Here is my concern: if the Trolley Museum moves to some other city, it will be even more difficult to see the GARP idea through and it will represent yet another Phoenix stab at historic preservation. Even sadder is the fact that the city does not need to lay out much money to make this happen. They just need to partner on proposals to the federal government for transportation dollars, which can be used for this purpose.

The estimated cost to build the infrastructure, outfit a new museum on grand and operate the system: $10 million. I believe that the resulting new home sales, infill development and business starts along grand will be worth ten times that.

Please contact your city councilmen and let them know that you support the Grand Avenue Rail Project.

Phoenix homeowners have kept a close watch on the housing market with a certain air of disappointment. Chances are they had high hopes for their homes. For most people the idea behind home ownership is to buy a home, live there for as long as the location and characteristics of the home suit their lifestyles, and sell the home years down the line while pocketing a little extra built-up equity — or using it to buy a better home. Time is running out to short sale and avoid possible tax liability.

Prices on Downtown Phoenix homes have been steadily rising for the past year. When inventory goes down, prices go up (you probably learned that in your high school econ class) But, that’s not bound to last. Home builders are ramping up quickly. So, the rising prices will level out a little later this year.  People are buying in the late spring and summer for job relocations and to close in time to get kids in to new schools, etc.

So if your looking to sell your home, now’s the time. I truly enjoy helping people make smart real estate decisions. Call today