After a false start, details of the new program that allows home buyers to use the first time home buyer tax credit at closing have finally been released here.  Here are the major points:

The program can only be used on FHA-insured loans.  VA, conventional, and other programs are not included.

The credit cannot be used towards the required 3.5% down payment.  Closing costs, mortgage discount / origination point(s), and other closing costs can be covered by the credit.

So although you can’t get your new home with no money out of pocket, you can use the credit to “buy down” your mortgage interest rate and/or even possibly negotiate a lower price on the home by minimizing the amount of money you would have to ask for from the seller for closing cost assistance.

This is very good news!

I am often asked the question, "How’s the market?" by home sellers, home buyers and various local and national reporters.  Answers like, "Good" or "Not very good" - which are the type of sound bite answers TV and radio interviewers seem to thrive on - don’t really honestly answer the question.  Our market varies by city and it also varies by price range.

The short answer to the question above is:  really good (as in ON FIRE) if we are talking about any home under 350k and a bit sluggish above 350k (the current maximum loan amount for an FHA loan is $346,250) gradiently getting worse, the higher the price range.  In the upper, luxury market, inventory is so bloated that prices are indeed falling, even though homes in the one million plus market range are being sold, there are just so darn many of them.

Sales to investors - which were less than 5% of the market are now higher than 20%.  Correct, over 20% of all the homes being sold currently are being sold to investors.  That is more than an interesting "market indicator".  It is a loud shout that they believe today’s prices are a bargain and they are voting with their feet and their checkbooks, saying, "Yes".  Take a look at those stats from 2003 to the present.

The most meaningful and useful stat (although, not perfect) for looking at short-term price movement is Average Sales Price Per Square Foot.  Having been falling in our market for some time, that trend is now starting to reverse.  Just slightly, and it isn’t true yet on a valley-wide basis.  But it has happened.

Seeing a visual representation of lender owned properties (percent of listings and then percent of sold) can be eye opening.  Take a look, you might be surprised.  If you are a buyer, this is the very best opportunity you have ever seen.  Don’t miss it.  If you are a seller, a shift for the better has already happened in the lower price ranges.  As usual, I will keep you posted

This just released today and I am passing it along. It may not apply to you personally, but you may know someone who needs to see this – so please feel free to forward this blog post.

Five different companies have been accused of using deceptive practices to market mortgage modification and foreclosure rescue services and have been hit with enforcement actions by the Federal Trade Commission, with warning letters going out to 71 others. These companies often use copycat names or look-alike Web sites in an attempt to appear to be a nonprofit company or government entity, make deceptive claims about their success rates, and charge up-front fees, the FTC said in a press release.

The FTC announced it had filed complaints seeking restraining orders against three companies - Federal Loan Modifications Law Center,  Bailout.hud-gov.us, and Home Assure (doing business as Expert Foreclosure).

The FTC has also obtained temporary restraining orders and frozen the assets of two other companies, Hope Now Modifications LLC, and New Hope Property LLC, doing business as New Hope Modifications.

The official site of the Obama administration’s “Making Home Affordable” refinance and loan modification program is www.MakingHomeAffordable.gov.   An industry alliance of loan servicers provides assistance at www.HopeNow.com and through a toll-free hotline, (888) 995-4673.

Full details of the FTC press release here.

Some very interesting stat comparisons courtesy of Mike Orr at the Cromford Report.

Next you can see the Average Annual Price Per Square Foot - based on area:

And finally a "market snapshot" that illustrates some interesting comparisons.

Let me start this post by publicly acknowledging and thanking Jim Sexton, Designated Broker for John Hall & Associates, for his brilliant research (which you are about to see).  I am going to comment on and link to several charts.  In some cases I will show a small version of the chart in this post and in every instance I will provide a direct link to a full-size version of the chart.

What happened to the housing market in 2008 is quite unlike anything we have ever seen before.  Starting in January of 2006, same month sales started coming in lower than the same month the year before.  Our boom was over.  Looking at number of homes sold, for 29 consecutive months we sold less and less and less.  January of 2006 was less than 2007, January 2008 was even lower, etc.  For 29 months this continued.  Then in June of last year that trend started to reverse.  From June 2008 onward we started selling more homes.  For the last half of the year, sales each month were greater than that month the previous year.  Here you can see Home Sales Per Month for past four years and here you can see Home Sales Per Quarter and Half.  It is in this 2nd chart that what happened starts to become visible.

More houses were sold in 2008 than in 2007.  But all of that upswing happened between June and December.  Sales were actually much lower in the first half of 2008.  But look what happened to prices!

Here is a larger version of the chart so you can look.  From the 4th quarter of 2007 all the way through 2008 the median price declined every month.  Every month.

Most analysts easily see the decline in the median price from 2006 - 2008.  It is yip-yapped about in the media almost non-stop.  But I don’t know of any (unless they just recently copied this research of Jim’s) who saw the decline throughout the year.  The median price for the year was 190k.  In January it stood at 220k but by December was 144k.

Please understand that - contrary to almost all economists “thinking” on this subject - median prices are not a reliable tool to track short-term price movement.  That is not what I am reporting here.  Median prices tell us what is selling (median price is the middle point, half of the sales are for more, half are for less).  In this case, foreclosures and lender owned properties.  Lots of them.  Average Prices suffered a similar fate.    Here is a look at how average prices breakdown and compare for the 1st and 2nd half of the year.

You can see a larger version of the Average Price Breakdown here.  Like me, you may be seeing a trend here.  Sales prices are sliding.  Rapidly.  Normally, in any market, sliding prices would be accompanied by falling sales.  But here we have the exact opposite happening.  Home sales are booming.  Well …. some home sales are booming.  Lender owned homes, or REO (Real Estate Owned) homes are selling and driving the prices for the entire marketplace.  Here you can see the relationship (and the current trend) between REO, open market listings and short sales.  The policy Arizona Regional Multiple Listing Service (ARMLS) had for indicating a Short Sale changed, so accurate data isn’t available for the entire year.  But let’s take a few facts that we do know: 34% of all valley home sales in 2008 were owned by lenders.  However, look at the trend: by December it was up to 52%.   See a larger version of that one here.  24% of all MLS listings are REO.  But over half of all the sales are REO.  The Pending Sales have an even higher percent of bank owned.

Why?

Short answer, price.  Look at the difference in asking prices vs. pending prices vs. sold prices.  Notice how the REO numbers are about the same in all three categories.  Contrast that to asking price vs. sold prices for all the other listings.

What does this mean to you?  If you are a buyer, affordability is back.  This is the best news you have had in years.  The very best.  Interest rates are at historical lows and prices are way down.  It has been a long long time since buyers have anything like this - if you are moving here from out of the area or buying your first home, welcome to Home Buying Heaven.  Interestingly, if you are selling and buying a larger or more expensive home - I will say the very same thing to you.  The extreme downward price pressure is not at all at the lower end - it is the higher priced homes that are taking the big price beating.  If you have a higher priced home (right now that is probably anything much above 400k) nothing I am writing here is good news.  It only works well for you if you are selling and moving up.  If you are in the category of selling a high end home and not replacing it, right now isn’t a very good time for you to sell.  Not trying to be negative here but wanting to treat you like I would personally like to be treated: give me all the relevant facts.

For everyone else, this isn’t simply good news, it is nothing short of fantastic.  I hope you can take full advantage of this golden opportunity.

Single Family Home Sales Year to Year Comparison by Price Range.  When comparing single family homes sales by price range for October 2007 to October 2008, homes sales have boomed in the under $200,000 price range. Home sales in every other category have declined.

Special thanks to Fletcher Wilcox of Grand Canyon Title Agency for the data.

Your house as seen by:

Just kidding.  Really. But I hope you enjoyed seeing it. 

Our grandparents and their grandparents have all seen this movie before.  It only seems new.

Thanks to Benn Rosales of AgentGenius for finding this jewel.