Phoenix House Talk

Analysis by Altos Research shows that home prices in most major U.S. cities have broken free of the downward spiral. The company’s 10-city composite index was up 0.2 percent in May – the first monthly increase recorded by Altos in nine months.

Another positive, Altos says readings of weekly price changes have continued to show modest seasonal increases for the past seven weeks, indicating that traditional home price metrics will soon show increases as well.

Altos’ 10-city composite is based on prices of single family homes in Boston, Chicago, New York, Los Angeles, San Diego, San Francisco, Miami, Las Vegas, Washington D.C, and Denver. But the company analyzes pricing trends across a larger pool of 26 major markets.

Asking prices last month rose in 18 of those 26 markets, Altos reports. San Francisco experienced the sharpest increase, with prices rising 2.4 percent, followed by Dallas and Washington, D.C. with increases of 1.4 percent and 1.2 percent respectively. The Washington, D.C. market also saw the largest jump over the most recent three-month period, with an increase of 6.2 percent.
The largest single-month and three-month declines occurred in Miami with prices falling 1.7 percent during May and 4.4 percent during the past three months. Prices were also down last month in Phoenix, Los Angeles, Detroit, Las Vegas, New York, Salt Lake City, and San Diego.

During May, the inventory of properties listed for sale rose by 2.6 percent across Altos’ 10-city composite markets. The increase was more pronounced over the past three months, which produced a 12.4 percent rise in inventory.

For-sale property counts increased in 22 of the 26 markets studied and declined in just four: Detroit, Miami, Dallas, and Minneapolis.

Altos says nationally, inventory is 10 percent lower than this time in 2009, but has been growing rapidly through the spring months. The housing supply increased at the fastest rate in Boston and San Francisco, up 5.9 percent and 5.5 percent respectively during May.

Inventory fell most sharply in the weak Detroit market, with listed properties dropping 3.7 percent in May.

The company notes in its report that market dynamics have been heavily influenced by the Federal Reserve’s mortgage-backed securities (MBS) purchase program which kept mortgage rates historically low and by the federal government’s home buyer tax credit.

The Federal Reserve program officially ended on March 31 and the tax credit will only apply to homes purchased through the end of April.

“The big question is the extent to which these programs may have pulled forward housing demand and how sharply demand could fall off with their expiration,” Altos said.

http://www.dsnews.com/articles/altos-index-shows-rise-home-prices-first-in-nine-months-2010-06-18

A new Arizona State University real-estate report shows home foreclosures may be leveling off, but the author says it’s unclear if the trend will continue because of the number of defaults and late payments still plaguing the market.

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.

The question remains whether the drop is a simply a blip, said Jay Butler, an associate professor of real estate who authors the study.

“We’re sort of at a break point,” Butler said. “Are we now going to see foreclosures decline, or is it simply for other reasons this is just a respite and we’re going to see an increase? Because we’ve not been here before, it’s hard to say which fork in the road we’re going to take.”

A number of issues will continue to affect the real-estate market, he said. Defaults and late payments remain at record levels, and they could be a precursor to additional foreclosures. Income may not increase enough for people to hold on to their current homes, especially if they are confronted with a change in an adjustable-rate mortgage that could reset in coming months, Butler said.

And he worries that this time of year may cause many people with high debt to walk away from homes with declining neighborhood values.

“A lot of people are looking at the end of school for their kids as a key point,” Butler said. “If they had gotten foreclosed on a few months ago, they would have had to leave and take the kids to another school. Now, they can easily move the kids, maybe without losing face or explaining everything, and move to another area.”

Arizona’s pending immigration law may also hurt the market, Butler said.

Still, there are some bright spots.

The number of new foreclosure filings against Phoenix-area homeowners fell in May to the lowest level since July 2008, according to the Information Market. Foreclosures also dropped last month to 4,090, their lowest since November 2009, the report said.

Butler’s research shows that, as a total, foreclosures added together with the sales of previously foreclosed-on properties still represented 60 percent of the recorded activity in the Valley housing market in May.

For the past year, about 42 percent of the traditional sales were foreclosure homes sold again with a median markdown of 15 percent from the foreclosure price, he said.

More than 3,200 single-family homes in the Valley were foreclosed on during May of this year. That’s down from almost 3,500 foreclosures in April but up from slightly more than 3,000 in May of last year.

The market is less busy but higher-priced this spring than last spring, the report shows. The number of homes resold was more than 6,400 in May. That’s down from almost 6,800 in April and almost 7,000 the previous May. The median single-family home price for resold homes $144,000 in both April and May, significantly up from $130,000 May 2009.

http://www.azcentral.com/arizonarepublic/business/articles/2010/06/10/20100610biz-resales0610.html

The risk of mortgage fraud is on the rise. According the quarterly Mortgage Fraud Risk Report released Tuesday by Agoura Hills, California-based Interthinx, overall mortgage fraud risk in the first quarter of 2010 jumped 4 percent from the previous quarter and was 11 percent higher than the same quarter a year ago.

The quarter-to-quarter surge brought the fraud risk index to a value of 151. This, Interthinx said, is the first time since 2004 that the index has exceeded 150.

On state-by-state basis, the report found that Arizona, with an index value of 246, had the highest mortgage fraud risk in the first quarter, surpassing California which was ranked No. 1 the previous quarter. Interthinx said the rise in fraud risk in Arizona was likely due to a migration from neighboring Nevada, similar to that which occurred in 2004 to 2006.

Nevada remained in second place with an index value of 237, and California dropped down to the No. 3 spot with an index value of 216. Florida stayed in fourth place with an index value of 202, and Michigan was again ranked fifth with an index value of 178.

The Mortgage Fraud Risk Report also included indices for the four most common types of mortgage fraud risk, including property valuation fraud, employment/income fraud, identity fraud, and occupancy fraud. The findings showed an increase in all indices, except for the occupancy fraud index.

After a brief dip in the last quarter, property valuation fraud risk resumed its upward trend that began in fourth quarter of 2007 and rose 4 percent in the first quarter of this year. Interthinx said this type of fraud remains the primary driver of the overall mortgage fraud index and is perpetrated by manipulating property value to create “equity,” which is then extracted from loan proceeds by various means.

Identity fraud, which is frequently used in mortgage fraud schemes in order to hide the identity of the perpetrators and/or to obtain a credit profile that will meet lender guidelines, soared nearly 10 percent in the first quarter. This notable increase followed a small decline in the identify fraud risk index during the previous quarter.

In addition, employment/income fraud, which occurs when an applicant’s income is misrepresented in order to qualify for a loan, surged 11 percent. Interthinx said the rise in employment/income fraud risk seems to strengthen evidence that this type of fraud is starting an upward trend after a long period of decline. However, the company said it is still unclear whether this uptick portends a rebound in employment/income fraud risk or whether it reflects a temporary “blip” associated with schemes involving the federal homebuyer tax credit that expired on April 30, 2010.

The only type of mortgage fraud that showed no increase in the quarterly report was occupancy fraud, which is perpetrated by investors who falsely claim the intent to occupy the purchases property in order to obtain a mortgage with a lower downpayments and/or interest rates.

According to Interthinx, the occupancy fraud risk index actually plummeted 11 percent in the first quarter, erasing much of the 16 percent increase seen the prior quarter. Still, the company said, it is likely that this index will trend upward in the near future, fueled by plentiful inventories and the expected release of “shadow” foreclosure inventory.

Going forward, Interthinx projects that while interest rates remain low, the predominant fraud type will continue to be related to property valuation as speculative investors return to the market and as consumers attempt to refinance their mortgages under the Federal Making Home Affordable program despite reduced equity in their properties. The company also expects that the overall fraud risk index will continue to rise through 2011 as a wave of adjustable-rate mortgages, the majority of which contain negative amortization features, recast for the first time.

http://www.dsnews.com/articles/mortgage-fraud-risk-index-reaches-highest-level-since-2004-interthinx-2010-06-08

The Arizona Department of Housing (ADOH), one of five state housing finance agencies (HFAs) slated to receive federal funding through the administration’s Hardest Hit Fund, has submitted a proposal to the U.S. Treasury Department detailing how it plans to use its expected allocation.

According to RealtyTrac, a real estate data firm, Arizona’s foreclosure rate is currently second in the nation. In 2009, the greater Phoenix area experienced approximately 52,000 foreclosures, and through the first quarter of 2010, this area is on track to experience an additional 52,000 foreclosures.

While many early foreclosures were a result of over-speculation of single-family homes by investors and resets on adjustable-rate mortgages, numerous Arizona households are now facing foreclosure due to job loss or reduced income as a result of an ailing economy. In addition, many households are choosing foreclosure rather than remaining in homes where the amount owed far outweighs the current value of the property.

Taking into consideration the causes of foreclosure across the state, ADOH created a detailed plan of how it will use the financial aid made available through the Hardest Hit Fund. According to the proposal, the funding has the potential to assist approximately 4,000 Arizona households and will be used for permanent mortgage
modifications, second mortgage settlement, temporary mortgage assistance, and homeowner advocacy through HUD counselors.

ADOH plans to use the bulk of its funding — $90 million of its $125.1 million allotment — to reduce loan balances for heavily underwater borrowers, the Wall Street Journal said. For a principal reduction, the principal balance must exceed 120 percent of present market value of the home. The homeowner could then qualify for a maximum contribution of $50,000 that is matched by the lender and forgiven over a period of time.

According to the Wall Street Journal, the HFA also plans to use around $7.5 million to help extinguish second mortgages, another $12 million to help subsidize monthly mortgage payments for unemployed borrowers, and $10 million towards housing counselors.

In designing this proposal, ADOH developed a set of guiding principles to ensure that it assists homeowners who have demonstrated “personal responsibility” in their home purchase choices. It is the state’s intent to assist those who, through no fault of their own, are facing the potential loss of their home due to the current and unprecedented economic conditions.

Under these guidelines, a foreclosure must be imminent, meaning resources will only be utilized for households who have exhausted all options in remaining current on their mortgage payments. In addition, resources will only be utilized for primary residencies, and households must prove that their income is at or below 120 percent of the area median income.

Applicants must also demonstrate an approvable hardship, such as reduced income due to underemployment, a medical condition, divorce, or death. Homeowners who have “self-inflicted” wounds, such as refinancing to take out equity, will not be approved.

Resources will be made available statewide. However, geographic set-asides will be devised to assure distribution commensurate with foreclosure rates.

http://www.dsnews.com/articles/arizona-plans-to-assist-4000-households-with-hardest-hit-funding-2010-04-28

This article was written in two fold, both for Arizona Realtors and for the buyer. 

Many buyers out there want and need our help, buyers of all price points. 

REALTORS:  From a buyers perspective, I know if an agent picks up the phone and we are willing to give a few minutes of our time, it is greatly appreciated.  In a very competitive market right now, it is simple…communicate.  Not rocket science…answer your phone, spend a few minutes with a potential buyer and next thing you know, you have a buyer that values your time and wants to partner together to find a home.

 The Internet can only get buyers so far…it does not allow them access to our homes for sale.  I think buyers realize after calling agent after agent after agent from the sign or Internet, they will see that it is easier to just work with one agent to answer all their questions.

I only have seven listings (availble) and get at least 5-7 buyer leads per week.  So if agents out there are not busy, I am not really sure why.  All my buyers may not be purchasing half a million dollar homes, but they are live buyers with a pulse, waiting to take advantage of low home prices!!

Here is a snapshot of sales from 2009 in Maricopa County, separating short sales, foreclosures and “regular” sales.  Sales have increased by approximately 30% from 2008 to 2009.  In 2010, short sales and foreclosures will continue to dominate the number of sales.  In looking at the graph below, short sales picked up dramatically and were almost 1/4 of our sales in December.  I expect the number of short sales to rise even more this year and make up perhaps half of all sales!  Pricing has been flat the last several months but if the foreclosures and short sales continue to dominate the market, some areas have not seen the worst of it (whereas areas like Old Town Scottsale may continue to remain flat).  I like to be positive and think 2008 was the worst of it!!

Many homeowners think if they go to foreclosure they “wipe their hands” from their lien and will never hear from their old lender again.  Often, homeowners will avoid a short sale because they think they will have to re-pay part of their mortgage yet think if they go to foreclosure, they are “free and clear.”  Contrary to this belief, in many states the lien holder has 5-6 years to contact the homeowner for deficiency judgment.  With a short sale, a good listing Realtor will ask the bank upfront if the seller will be held liable for a future deficiency payment.  Banks are sending these unpaid liens to credit agencies, so it is not rare, both with short sale and foreclosure, that a creditor will be calling a seller that went to foreclosure.

For more info, visit this article from CNNMoney.com.

Last month, FHA released yet another mortgagee letter clarifying FHA’s position regarding borrowers who recently had a short sale on a primary residence and want to purchase a new primary residence using an FHA loan.

 Summarized below are a few of the key points:

1) These changes are effective immediately

2) Borrowers are not eligible for new FHA financing if they pursued a short sale agreement on his or her principal residence simply to:

•  Take advantage of declining market conditions, and
• Purchase ,at a reduced price, a similar or superior property near the residence they completed a short sale on (this is a key point)

3) Borrowers are eligible for new FHA financing if:

•  All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and
• All installment debt payments for the same time period were also made within the month due, and
• The proceeds from the short sale serve as payment in full (another key point)

4) Borrowers whose mortgage was in pre-foreclosure status at the time of short sale are not eligible for FHA financing for 3 years unless they qualify for an exception

So yes, this means if you just sold your home via short sale you COULD qualify to purchase another home through an FHA loan (if eligible based on the requirements above) without waiting 2-3 years.

If you have questions or want to see if you are eligible, contact Kelly Zitlow at Suburban Mortgage, kzitlow@submort.com or 480-355-8105.

Kelly Zitlow, Suburban Mortgage, BK #10123

In 2010, expect short sales to be even more mainstreamed than 2009.  What a change in 2009!  According to the AZ Republic and real-estate analyst Mike Orr, “pending short sales, including all of the deals under contract, reached 9,343 in October, compared with 1,448 in January. Almost 40 percent of the homes currently for sale in the Phoenix area are properties homeowners are trying to sell to avoid foreclosure.”

Short Sales are expected to rise in 2010 while foreclosures are on the decline.  The chart below shows a slight increase in short sales toward the end of 2009 while REO sales are slightly down.

In terms of negotiations, most short sales are averaging less than 3 months to get a decision, whereas some banks will respond more quickly and others take even longer.  The federal government has been incenting banks for over six months to close short sales, similar to the monies the banks were receiving for homes that were foreclosed.

As we enter this new year and an expected increase of distressed homes, we need to put our faith in the banks to help close more short sales and loan modifications.  More short sales and less foreclosures will help our market rebound more quickly.