Phoenix Urban Living News. Real Estate In Phoenix Arizona

The Housing Crisis is Over

The Housing Crisis is Over — Wall Street Journal

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won’t happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005.

New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50%, and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what’s going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.

The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.

Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.

In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.

The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in “months of supply” terms. That’s the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high — but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.

Inventories will drop even faster to 400,000 — or seven months of supply — by the end of 2008.

This shift in inventories will have a significant impact on prices, although house prices won’t stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they’ve been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.

Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages.

And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one’s income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today’s house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.

This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.

When the rate of house-price declines halves, there will be a wholesale shift in markets’ perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.

A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year.

Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets’ perception of risk related to housing, the financial system, and the economy.

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to sub-trend growth for a couple of years.

Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

Source: Wall Street Journal, By Cyril Moulle-Berteaux

May 6, 2008 Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York.

When buying a home in Phoenix metro area, or selling your home, you need a realtor who can market your home, has negotiation skills for buyers and understands the short sale process , foreclosures and REO processes. Contact Bette Zerba 602-791-1766 for exceptional and ethical real estate assistance. Search the Phoenix complete mls free at www.freephoenixmls.com, or www.centralphoenixliving.com

Instant Profits Run Bill Poulos Live Free Web Seminar

Instant Profits Run Bill Poulos Live Free Web Seminar - Limited Space Avaliable For May 9, 2008

34 year trading ‘vet’ spills the beans on Thursday…Worried about a portfolio ‘wipeout’? Watch this…Emergency trading web-seminar (#1 tip revealed)…

I seriously hope we’re not too late but we just got wind of this…

Someone convinced 30 yr. trading veteran Bill Poulos to spill the beans to a small group of traders in a LIVE web seminar, for NOTHING!

If you don’t know Bill, he’s one of the most well-respected names in trading education circles for teaching methods he himself uses and for his dedication to making his students better traders.

And since the release of his recent consumer trading guide, The Profit Button, Bill’s been getting hammered with tons of questions about the somewhat controversial findings in the guide…

* So, he decided to go LIVE on Thursday, May 9th at 9pm Eastern (New York Time) on a special one-time web-seminar where he’ll address all the controversy and also reveal the #1 trading secret to his simple but highly effective trading method (which is NOT in the report)… Click here to reserve your space!!!

Limited Registrations Available…
“In Just 60 Minutes, You Could Gain A Lifetime Of ‘Time-Tested’ Trading Knowledge, Straight From The Mouth Of A 30+ Year Veteran… If You Register Quickly Enough…”…this secret is the ONE thing too many traders IGNORE, and it can often result in a complete portfolio wipeout! You won’t want to miss this, so, reserve your spot now: Click here to reserve your space!!! (That will give you the private password to the web-seminar.)

If you can get in, you’ll also discover:

** The 4 simple steps successful traders know that you don’t…

** How to maximize your profit potential in any market…

** How to evaluate any trading method to see if it has a “Winnin.g Edge” (and why you should abandon it immediately if it doesn’t)…

** How a simple formula that an 8th grader could solve can determine the profitability of any trading method…

** …and, you can also take part in a rare, live Q&A with Bill…

This exclusive, live event is Thursday, May 8th at 9PM Eastern Time.

…BUT…

There is extremely limited “seating” for this event because the virtual seminar room can only hold so many traders. Honestly, registration may already be locked out (depending on when you get this message), but give it a try here:

Click here to reserve your FREE Instant Profits Run Webinar space!!!

If you’ve been wondering why some traders have success in the markets, while others continue to flounder again and again, this could be one of your best chances to get your trading “fixed”
once and for all.

About The Presenter Bill Poulos

Bill Poulos has been trading the markets since 1974. He’s a retired automotive executive who holds a bachelor’s degree in Industrial Engineering, and a Master’s degree in Business Administration, with a major in Finance.

In his over 30 years of trading experience, Bill has developed dozens of trading systems and methods. In 2001, he formed Profits Run, Inc. to impart his trading experience and wisdom to others so they could shortcut their learning curve and ultimately potentially skyrocket their earnings in the markets.

Bill now has thousands of students all around the world, from all walks of life, and at all experience levels. He prides himself on providing honest and realistic trading education, and is known for the continuous and ongoing support and follow-up he offers his students.

His partner in Profits Run is his son, Greg, who is responsible for marketing and all technical support. In addition, Bill also has a full-time operations staff to ensure his trading education is delivered and supported in a high-quality and timely manner.

Good Trading

REO (Real Estate Owned) Phoenix Sales

REO (Real Estate Owned) Sales: REO is just a fancy term for “Shucks, I still own this property because I couldn’t sell it at auction” that the banks have. Many foreclosure properties aren’t selling at auction because the amount owed on the mortgage is as much or more than the market value of the home? Well, when the property doesn’t sell, and the bank has evicted the owners from the home, it goes to REO status. This is where we think a lot of the value to buyers is, because the bank at this point must sell the property. It’s vacant, and the bank has no hope of getting any mortgage payments while it sits vacant. Plus, REO properties are handled much like traditional sales, where you are not pressured to move fast (like you would be in an auction setting). You can take your time, perform your inspections, and make sure this is truly the property you want.

Sometimes, the owner still lives in the property even though it has been foreclosed upon. In those cases, the bank often offers the owner a “cash for keys” agreement where the ex-owner is paid a sum of money - between $500 to $2,000 - to leave immediately, and give them the keys. The bank figures this is cheaper than evicting someone.

Post-REO Auction: If the banks can’t sell their inventory as REO inventory, they use a private auctioneer to auction it off (often at hefty discounts). These auctions can be tempting, but you face risks here as well. One issue is you usually cannot inspect the interior of the property before bidding on it at auction. It can also be difficult to obtain financing for these types of properties, since you can’t perform the usual inspections & contingencies to ensure the property is in livable condition. The properties are also sold in “as-is” condition and you have to pay a premium above the final winning bid price (usually 5% to 10%) to the auction house.

Looking to by REO for sale homes…never do it without the help of an expert realtor. Bette Zerba can show you these availble REO sales throughout the Phoenix metro area and help you through the buying process for a smooth, stress free transaction. Call Bette Zerba GRI Realtor Re/Max today at 602-791-1766  Or visit www.freephoenixmls.com

Ballet Arizona 2008 - 2009 Performance Schedule

A Midsummer Night’s Dream
Playful spirits and fantastic creatures
Performed at Symphony Hall
with The Phoenix Symphony
Oct 31-Nov 2, 2008Ib Andersen’s The Nutcracker
“The finest that can be found anywhere in the world.”
Performed at Symphony Hall
with The Phoenix Symphony
Dec 12-28, 2008

Visit the Ballet Arizona Web Site for info and tickets

Looking for a new home, condo, townhouse in near the ballet in central Phoenix? Call Biltmore Bette GRI Realtor  with Re/Max at  602-791-1766. Or search the Phoenix MLS free at www.centralphoenixliving.com

‘Short Sale’ An Option To Foreclosure in Phoenix AZ

Troubled homeowners are finding a new way to sell
‘Short sale’ an option to avoid foreclosure

A growing number of homeowners behind on their mortgage and facing foreclosure are finding a way to sell despite the glut of Valley homes for sale.

They are turning to “short sales,” which are similar to regular home sales except a deal is worked out in which the lender accepts what the house is appraised for or what it will currently sell for instead of what is owed on it.

So a homeowner would sell the house to a buyer willing to pay the current market value of the home, and the lender takes a loss on the rest. advertisement  

Short sales are the latest trend for metro Phoenix’s slowing real estate market, and housing advocates are advising struggling homeowners to contact their lender about a sale before falling into foreclosure.

As foreclosures rise, lenders are more motivated to do the sales because they at least get most of what they are owed.

Homeowners don’t get any equity from the sale, but they also don’t get a nasty foreclosure mark on their credit record. And although lenders lose out on money they’re owed, a short sale lets them avoid a costly foreclosure on the home.

“Short sales are the buzz in the market now,” said Tom Ruff of Information Market, a research data firm based in Glendale. “With foreclosures climbing and homes prices falling, short sales are bound to climb.”

There is no way to track the exact number of short sales closing in the Valley because they show up on public records as a regular sale between a buyer and a seller. But real estate market watchers say they are seeing an uptick.

For the Valley’s housing market, a short sale means one less foreclosure at a time when the number of people defaulting on their mortgages has tripled from a year ago.

It also is one fewer hit to Valley neighborhoods, where foreclosures are pulling down housing values.

Short sales lower an area’s “comps,” or comparable sales prices, too, but not as badly.

For some homeowners, they are the best option.

A brother and sister from California recently approached Phoenix real estate agent  about their house here in the Valley. The pair paid $597,000 for the investment home in Tatum Ranch at the height of the housing market in 2005. Now, they can no longer afford to keep it. And with a record number of Valley homes for sale, their chances of selling the home for what they paid are slim.

“I ran the numbers, and the house won’t sell for more than $495,000 now,” said Barry. “They didn’t put any money into it. They have an interest-only loan. They could only rent it for about $1,800 and month, but their payment is $3,500.”

He told them they could do one of two things: Work out a short sale or call the lender and hand over their keys.

Lenders can benefit
Most lenders prefer short sales because foreclosures cost them time and anywhere from $30,000 to $50,000 per house in legal, appraisal, marketing and servings fees. A short sale gets a home off their books and typically costs a lender less than a foreclosure.

At a recent foreclosure-prevention town hall meeting in Phoenix, the director of National Initiatives for mortgage giant Freddie Mac encouraged housing advocacy groups and lenders to steer people toward short sales if their only other option is foreclosure.

“We have an investment to protect as well as a moral responsibility to help people avoid foreclosure,” Christina Diaz-Malones said.

A few years ago, most Valley homes to go to the foreclosure auction block enticed multiple bids from investors. But now, lenders are taking back 80 percent of the homes they are foreclosing on. Investors have stopped bidding on many houses because they can’t make money on a resale.

To be eligible for a short sale, homeowners must prove they can’t pay their mortgage because of some type of hardship such as a job loss, medical expenses, death of a spouse or, sometimes, too much debt.

But homeowners should be careful about confusing a short-sale plan with a foreclosure rescue scheme.

Once a homeowner misses a payment or two, a lender files a notice with the Maricopa County Recorder’s Office to start foreclosing.

Many groups track those filings to try to buy foreclosure properties. But recently, some groups have begun preying on people about to lose their homes.

Many of the offers of help are thinly veiled schemes to get homeowners to sign over their house to groups that strip away any equity. Often, the homeowners then are required to pay rent until they can refinance and get their house back. But the rent is usually more than their old mortgage payment, and they wind up getting evicted.

Joann Hauger of Community Housing Resources of Arizona said groups that really want to help homeowners don’t typically solicit them. More housing advocates such as Hauger are advising people to seek a short sale now instead of losing their home to foreclosure.

“Almost everyone we are seeing now for default counseling owe more than their house is worth,” she said.

The hit homeowners take on their credit score is much less on a short sale than on a foreclosure.

A homeowner involved in a short sale will see an 80- to 100-point drop on his or her credit score. A foreclosure is a 250- to 280-point hit.

“Banks don’t advertise they are open to short sales, but banks don’t want to take the homes back,” he said.

People who are able to do short sales will have a tax hit.

The difference between what a homeowner owes and what the bank gets for the house is typically treated as income for the seller. That’s taxable income for the homeowner that will show up on a 1099 form from the lender.

The lower sales price from a short sale won’t please too many of the homeowner’s neighbors. It will show up like any sale and often will be a considered a comp for the area that other buyers and sellers use as a benchmark for home prices.

But housing market watchers say a lower comp or short sale is much better for a neighborhood than a home repossessed by the bank at a foreclosure auction.

“Foreclosed homes can quickly turn into empty eyesores with green pools, yards full of weeds and debris when lenders take them over,” Barry said. “A short sale means a new owner for the home and one less foreclosure black mark for the neighborhood.”

Bette Zerba GRI Realtor Re/Max has taken special training in selling Phoenix area homes with a short sales. Let her understanding of the short sale process and exceptional real estate marketing skills help you at this difficult time. Let Bette take the stress off of you and call her today at 602-791-1766.

Phoenix Real Estate Short Sales Facts

A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, the advantages include avoidance of having a foreclosure on their credit history. Additionally, a short sale is typically faster and less expensive than a foreclosure.

In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount.

Lenders have a department (typically called a loss mitigation department) which processes potential short sale transactions. Typically, lenders do not accept short sale offers or requests for short sales until a Notice of Default has been issued or recorded with the locality where the property is located. Lenders have to approve of any buyer’s or listing agent’s commission in advance, a primary reason for non-brokered short sales with a specialist or facilitator to save on the margin. Many of these facilitators work with a private lending party for their financing, such as a partner or syndicate.

Lenders have a varying tolerance for short sales and mitigated losses. The majority of lenders have a pre-determined criteria for such transactions. Other distressed lenders may allow any reasonable offer subject to a loss mitigator’s approval. “Red tape” is very common in short sales, similar to REO and HUD properties, requiring potentially multiple levels of approvals and conditions. Junior liens, such as second morgagees, HELOC lenders, and HOA (special assessment liens), may need to approve of the short sale. Frequent objectors to short sales include tax lieners (income, estate or corporate franchise tax - as opposed to real property taxes, which have priority even unrecorded) and mechanic’s lien holders. It is possible for junior lien holders to prevent the short sale.

While it is frequent if not common for a lender to forgive the balance of the loan in question, it is unlikely that a lien holder that is not a mortgagee will forgive any of their balance. Further, it is common for a lender to omit updating the zero balance and settlement option on the mortgagor’s credit report, or even flat refuse to do so “due to their financial loss.”

The Mortgage Forgiveness Debt Relief Act of 2007
When the lender decides to forgive all or a portion of your debt and accept less, the forgiven amount is considered as an income for the borrower and is liable to be taxed. However, after the signing of The Mortgage Forgiveness Debt Relief Act of 2007 by President Bush, amendments have been made to remove such tax liability and allow the borrower and lender to work freely together and find a common solution that is beneficial to both the parties.

Bette Zerba GRI Realtor Re/Max has taken special training in selling Phoenix area homes with a short sales. Let her understanding of the short sale process and exceptional real estate marketing skills help you at this difficult time. Let Bette take the stress off of you and call her today at 602-791-1766.

Selling Your Phoenix Home For Less Than You Owe

Selling Your Home For Less Than You Owe - The Short Sale

If you’ve taken out a large mortgage, and perhaps refinanced to cover remodeling or other expenses, you may find yourself unable to keep up with your mortgage payment after a layoff, divorce or illness. More and more people are finding they need to sell their homes for less than they owe on the mortgages, known as a “short sale.”

Selling short is definitely better than foreclosure, which stays on your credit record for ten years. But it’s best to try to work things out with your lender before going through the embarrassing and laborious process of selling your home on a short sale.

Tax Issues
Before you put your home on the market for a short sale, it’s best to talk with a tax advisor about possible tax repercussions. It’s likely the IRS will consider the difference between the value at which you sell your home and the mortgage balance as “income” on which you’ll have to pay taxes.

An exception to this rule is if you can prove that you were “insolvent” - that your debts were bigger than your assets- before your mortgage lender agreed to a short sale of your property. A tax advisor will be able to tell you for sure whether you’d be considered insolvent by IRS standards.

If you can’t prove you’re insolvent, and the tax bill on a short sale would be more than you can pay, you may have to let the mortgage lender foreclose, or declare bankruptcy.

Be Upfront With The Real Estate Agent
If you find selling you house for less than you owe on the mortgage is an option short of foreclosure or bankruptcy, you’ll want to find a real estate agent who understands your situation. Agents typically take a much lower commission on short sales, and it often takes much longer to actually close the sale once the seller accepts an offer. But many agents sympathize with financial problems brought on by unexpected circumstances, and may want to help.

Convincing Your Mortgage Lender
The buyer will need your help in negotiating a short sale approval with your mortgage lender.

Your bank will have to be convinced that you deserve to be approved for a short sale. You’ll need to tell your mortgage lender about your financial hardships, including layoffs, divorce or medical issues.

While this may seem obvious, now is not the time to rack up the purchase of luxury items, like fancy cars or jewelry. Your lender will see these debts on your credit report and become convinced you’re a loose spender who doesn’t deserve a break.

It may also be necessary to provide the lender, either directly or through the buyer or buyer’s agent, documentation of your financial hardship, such as paystubs, bank statements and so forth. While this may seem like an invasion of your privacy, try to think of it as the fastest way out of an otherwise overwhelming debt.

Short sales take much longer to close than more conventional sales, so plan accordingly. If it works, you’ve avoided bankruptcy and an ugly mark on your credit report. If it doesn’t work, you’ll know that you’ve done everything you could to avoid foreclosure and/or bankruptcy. Source: Lawyers.com

Bette Zerba GRI Realtor Re/Max has taken special training in selling Phoenix area homes with a short sales. Let her understanding of the short sale process and exceptional real estate marketing skills help you at this difficult time. Let Bette take the stress off of you and call her today at 602-791-1766.