Trend Alert
February 3, 2012 by admin · Leave a Comment
Last month we examined the overall improving market in some detail as we believe a primary function of our “job” is to keep both ourselves and our clients informed on market trends and shifts. Trends are rarely formed in a month and so monthly news can often be repetitive more than informative. With that risk acknowledged, we still feel duty bound to report the latest in the market. Here are the latest trends:
Normal sales gained market share in January, moving from 40.9% to 41.40% of sales, while REOs were the big losers moving from 30.3% to 26.8%. Short sales and pre-foreclosures advanced once again moving from 28.9% to 31.8%. Any improving growth in normal sales is a positive recovery sign – although a cautiously optimistic one as a significant portion of these normal sales are investors doing flips.
Despite a severe imbalance between supply and demand, current pricing is fairly stable and slightly trending upward. However, a more significant upward price movement seems likely in 2012 or early 2013.
September 15, 2011 marked the bottom of price per square foot (the most reliable indicator of short term price movement) – coming in at an average of $78.81. The average price per square foot for all pending listings currently has moved to above $83 for the first time in over 11 months signaling stronger sales pricing for February.
Re-sale listings are coming on to the market at a very low rate. In the last month, 8,269 have come on the market which is 22% below the same period for 2011. This supports the tightening supply of homes for sale, which is the force behind the upward pressure on pricing. In fact, there are fewer single family homes listed for sale in Phoenix than in any year except 2006. However, in Anthem there are fewer single family homes listed for sale than in any time in the last 10 years!
HUD foreclosures are down 91% from this time last year. Trustee notices of foreclosures are down 61% from this time last year.
In short, all news continues to support the early stage of recovery is continuing.
Which brings us to another subject, if short sales now compose 31.8% of the sales and “normal” sales are up to 41.40% – the home seller (rather than the institutions) is once again the majority and retains control of the agent selection process handling their home sale. With that in mind, we believe it is time to revisit issues surrounding that important selection.
An alarming fact of any distressed market is that opportunists arise who seek to exploit the homeseller. One of the most obvious examples of this is “up-front fees”. We have seen numerous agents and attorneys alike charge large, non-refundable up-front fees for loan modifications, short sales, and consultations. In one case, a client of ours explained that a company charged $1,500 for a modification while stating to the client “this is illegal for me to charge this”. Then this” consultant” sued the owner for the balance of the payment due and won a judgment in small claims court, despite the illegality. Go figure! So, with that in mind, run, don’t walk from any agent or firm demanding up-front (or back end for that matter) fees to process a modification or short sale. Modifications belong in the realm of a free HUD counselor, and any legitimate short sale agent won’t require fees from the homeowner but will accept payment from the short sale bank. In our entire career, distressed market or otherwise, we have never charged sellers up-front fees. We don’t believe others should either.
Additionally, as foreclosed home sales continue to drop, another trend is emerging – the former REO agent now trying to become a short sale specialist. Of all the sales we handle yearly, the short sale is the most difficult and demanding of our skills. The mass migration of REO agents over to the short sale causes us much concern. We have been handling short sales since 2007 (well to completely date ourselves, we first handled them in the late ‘80s). Frankly, it has taken us years of developing systems to handle the complexities associated with these files and to make sure that our clients are protected from pursuit by their lenders. The sale of a foreclosed home is so vastly different from handling a short sale that we worry about the service and protection level that the average homeowner is receiving from these newly minted short sale agents.
In short, if you are facing tough choices about the sale of your home – whether “normal” or a short sale, we stand ready to serve you. In the meanwhile we will continue to report on the trends that cheer us as well as any that we believe should concern you.
Russell & Wendy
Short Sales vs. Bank Owned?
June 20, 2010 by admin · Leave a Comment
My, what a difference a year makes. In late 2008 lenders, as well as industry giants Fannie Mae and Freddie Mac dominated both the active listings and sales statistics with their foreclosure inventory. Rumors abounded about an additional looming “shadow inventory” of foreclosures which would further destroy our already decimated marketplace. The oncoming “foreclosure tsunami” was spoken of as a certainty. Fast forward to 2010 and one is met with a very different scenario than predicted. Thanks to the in-depth research done by Mike Orr at the Cromford Report we know all those industry “visionaries” were mistaken. In reality, the foreclosure (REO) market appears to have peaked in the first half of 2009. Since then the tide has steadily continued to turn from a foreclosure dominated market to a short sale market. Why?
Lenders have finally determined that an effective short sale process usually reduces their investor’s losses compared with foreclosure. In fact, one bank’s study showed an average savings of $38,000 on a short sale vs. a foreclosure. Additionally, new government incentives are now in place for lenders which reward short sales over trustee sales. For these and other reasons, many lenders are refining their short sale processes and making faster and better decisions.
Buyers have increased their willingness to buy short sales. Benefits to buyers include the reduced competition for short sales vs. REOs – as well as the ability to purchase with financing instead of the cash which REOs so often demand. Despite the patience required to wait out the months long short sale process, buyers can obtain homes generally in far superior condition to REOs and usually within 1-2% of the cost of an REO. In short, buyers have wisened to the value proposition short sales offer.
Sellers. A large proportion of homes in the valley have negative equity as most sellers either purchased after 2002 or have refinanced. Owners wishing to sell in this circumstance either need to bring extra money to the close of escrow or must attempt a short sale. The latter option is by far the most popular with sellers for obvious reasons. Therefore, short sales comprise an increasing share of the active listings while lender-owned homes are on a downward trend. While the total number of active listings has fallen by 23% since January 2009, the number of short sales offered for sale has grown by 50%.
Sellers have finally accepted that a short sale’s impact on credit ratings will usually be less than in a foreclosure. Additionally a new government program released on April 5th HAFA (Housing Made Affordable Foreclosure Alternatives) offers qualifying sellers cash incentives of up to $3000 to participate in a short sale.
We can see that short sale listings are most dominant in certain low to medium priced areas with a high proportion of new homes – particularly in the west valley. They are least prevalent in high priced areas and in those targeted at the over-55 market, where normal sales are still the majority. It is not the outlying location that is important, since we see that Rio Verde, Gold Canyon and Wickenburg are all near the bottom of the short sale league. It is not necessarily the cheapest areas either, since some of the lowest priced areas of the valley, such as parts of west and south Phoenix, show pretty ordinary rates of short sale listings (e.g. 85009 -34%, 85033 -39%). Homes in these areas are more likely to be foreclosed without an attempt at a short sale.
Conclusions
The end of the REO market is certainly not here yet but in the last few months we have seen a significant drop in the flow of new Notices of Trustee Sales suggesting that REO inventory will fall back to more normal levels over the next two to three years.
However the situation that creates short sales (negative equity will not be a quick fix. It seems very unlikely that Phoenix real estate will more than double in price anytime soon, which it would have to do to match the peak price levels seen in mid 2006 and eliminate all the negative equity created by the subsequent collapse. It also seems unlikely that sellers bringing cash to the closing table is going to ever become a popular option. So for now, and for the foreseeable future, short sales are here to stay.
Thanks to Mike Orr for what is really the heart and soul of this article.
Wendy & Russell Shaw
A Late Christmas Gift For You
December 26, 2009 by admin · Leave a Comment
I haven’t been blogging much lately (for some months) and needed an easy one to get myself started again. The gift to me is being able to post this here now. The gift to you is a really (really really) cool book from Seth Godin you can download for free, here.
I think you will really like it. I know I have.
Merry Christmas to everyone!
Foreclosures Surge?
This was just now posted on AzCentral with the headline, "Foreclosures surged in July. This is what passes for "reporting" by most media about the real estate market. June foreclosures were 5,149. July’s numbers (per the article) were 5,316. A difference of 167 foreclosures or 3.24%. And that is being called a "surge".
I wonder if anyone’s paycheck went up at an annual rate of 3.24% they would ever consider it a surge?
This isn’t to suggest that the number of foreclosures going up is ever a good thing – just that reading past the headlines and actually looking at the numbers might shed a bit of light on the subject.
If anyone cared to truly examine some relevant market statistics for the Greater Phoenix area here are a couple I personally find quite interesting: The current "success rate" for all listings in ARMLS is 64.8%. You can see that (along with some other very interesting numbers) here. But since most of the sales occurring are lender owned properties, that number doesn’t mean too much to me. Let’s break it down.
Scroll down on this page and you will see the breakdown, based on types of listings. The success rate (percent of all listings of that type that sell) for lender owned is 91.4%. Not very surprising – at least not in our market. But look at the comparison between "normal listings" and short sales. The numbers are almost the same! Normal listings success rate is 50.2% and short sales success rate is 49.4%.
I know, I know, the normal listings stat surged way ahead. 
8,000 Reasons
June 11, 2009 by admin · Leave a Comment
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!
FTC Press Release
April 7, 2009 by admin · Leave a Comment
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 Stats
February 25, 2009 by admin · Leave a Comment
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.
Bailout Completed – Stock Market Crashes
October 10, 2008 by admin · Leave a Comment
And yet the earth continues to spin on it’s axis. Perhaps we will survive even this?
