What Do Current Foreclosure Numbers Suggest for the Economic Future of Arizona and the Nation?

May 24, 2010

The foreclosure crisis is still with us—and it is pulling down whatever economic recovery we may have seen. The number of bank owned properties, and the actual repossessions in the last quarter, is at an all-time high. As more and more foreclosures hit the market, it drags down the overall value of homes. And when house prices drop, as we have seen in recent years, the economy drops with it.

After all, why would someone want to pay $50,000 more for house A, a regular listing, than for house B, a foreclosure? If both homes are in good condition and everything else is equal, it’s pretty much a no-brainer. The very presence of house B will force the owner of house A to drop the price just to get an offer.

According to the Mortgage Bankers Association, the number of homes in the foreclosure process was at 4.63%, an increase of 5 points over the previous quarter and up an astonishing 78 basis points from a year ago. Homes considered to be in the foreclosure process do not include simple delinquencies.

The news is not all bad though. According to the same figures, the number of homeowners beginning to be in trouble with their mortgages has declined since the last quarter and compared to a year ago.

According to RealtyTrac, Arizona moved up to 2nd place nation-wide on the list of states with the highest number of foreclosures, however the actual number of foreclosures in Arizona has dropped significantly. The spike in place was due primarily to a much larger drop in California’s foreclosure rates. Still, the number of foreclosures in Arizona is nearly double that of the nation.

Another disturbing trend is the type of mortgages going into default. While the earlier problem-mortgages were the high-risk subprime variety, today’s foreclosures are more likely to be on mortgages that were not considered to be a significant risk.

Add to the economic mix the sharp decline in mortgage applications over the past few weeks since the Home Buyer Tax Credit ended. Potential home purchases, after a surge in the fall and winter months, are now at a 13-year low.

While it is still hotly debated whether the economic improvement in recent months is a temporary spike or a long-term upward trend, there is no denying that the housing crisis is far from over. The next few quarters will show us a more realistic picture of what the economy will do, with the housing market leading the way.

Whether you are looking to buy a home or facing a troubling mortgage situation, give the Curtis Johnson team a call. The Curtis Johnson Team is helping individuals who are facing foreclosure and those who are seeking their dream homes.

Go to www.CurtisJohnson.com or call 1-888-Curtis-J.

Will Short-Term Government Help Bring Long Term Good?

May 13, 2010

Government intervention helped many eager homebuyers to buy homes in the last year and a half, promising them an $8,000 tax credit if they did. This temporarily helped revive home sales, but is it a good deal in the long run?

The Florida Association of Realtors thought so and tried to lobby to expand the credit. Others, speaking from the real estate side, and the home building side, think that the long term credit could overcorrect the mortgage industry –especially since the Federal Reserve also bought mortgage –backed securities to keep interest low. The government also bailed out Fannie Mae and Freddie Mac, the nation’s two largest mortgage lenders.

Unfortunately, it seems as though we may be on track for the government to control all aspects of the mortgage industry. If our government had a record of accomplishment for managing money wisely, this might not be such a concern. However, we all know that isn’t exactly the case.  Of course, the long term impact of the credits is not yet known.

It may not have been the best time for some families to buy, but with the government dangling a carrot of extra money, many families gave into the temptation. Hopefully, these loans will remain stable and not become foreclosure statistics.

Any good effects the credit had on residential real estate did nothing to over a million commercial real estate loans that will end between 2010 and 2014, and it is clear that we are not out the woods. Florida—and Arizona—have some of the largest commercial real estate markets, so they will probably take some of the worst from this, just as they did in the residential market.

Are you interested in buying a home for your family, even though you may have missed the government’s cut off for a tax credit? If so, call the Curtis Johnson team today. The Curtis Johnson team will be here to help you buy or sell your home, and our help does not have a deadline. Go to www.curtisjohnson.com or call 1-888-Curtis-J.

Will Short Sale Save Your Credit Score?

April 30, 2010

If you’re facing foreclosure on your Phoenix home, you may have considered selling your house in a short-sale. A real estate agent you know tells you it’s better than a foreclosure. Your co-worker did it, too, and “heard” it would be better than a foreclosure (you don’t know if he’s bothered to check his credit since doing so, however). From what you keep hearing, you’d be better off selling your home in a short-sale than taking the massive hit to your FICO credit score as a result of a foreclosure. So, what should you do?  Will a short sale save you the consequences of foreclosure?

A short sale is considered an alternative to foreclosure for good reason.  On the positive side, it can give you and your family more control over the situation. You still list your home through a Realtor for a minimum price that the lender will accept. During the sale process, you can stay in your home and protect it from the damage that can occur when a foreclosed home is left vacant.  Ideally, during this time, you will still be able to make some payment.

Lenders have not always been enthusiastic about short sales as they would prefer to collect their whole mortgage amount.  Given the current real estate climate, lenders are seeing the positives of the process: processing a short sale usually involves less cost to the bank than processing a foreclosure.  Recently, the Making Home Affordable Program mandated that banks process short sales more efficiently; major banks have countered with short sale plans of their own.  Both banks and borrowers can receive financial incentives under the federal program.

Naysayers about short sales note that a short sale isn’t any “gentler” on your credit score than a foreclosure.   CNN devised a hypothetical scenario in which two individuals with varying credit scores (680 & 780 to start) underwent similar hardships. While working with the credit scores (to see what would happen to the credit scores in various situations), it was determined that both a foreclosure and a short-sale had the same effect on a person’s credit score: both scores declined. Ironically, the person with the higher credit score took the bigger hit of about 140 points. However, many analysts would disagree with these numbers and say the credit score impact of a short sale is only about 50 points.

For most people in mortgage trouble, the impact on the credit score is not as big a concern as finding a way to either keep their home or move on with dignity.   If you are in a bad situation, the reality is that your credit is probably already on the downslide from months of being delinquent.  Not seeking the help that a short sale can offer is like telling the lifeboat driver on the Titanic that you will only take a red boat.

If you fearing foreclosure or are in over your head with your mortgage payment, a short sale could be your answer. It offers an opportunity to terminate your mortgage commitment with dignity and provide you with some cash to start planning your new life .    A HUD-approved credit counselor can help you determine the best route for you.

If you go that route, you will need the expertise of a trusted agent to list your home and follow through on the paperwork.  For more information about foreclosure alternatives or buy or sell a home in Phoenix, Mesa, Glendale, or surrounding areas, call Curtis Johnson Real Estate today to set up an appointment and get started.  The Curtis Johnson team is here to help! Go to www.curtisjohnson.com or call 1-888-Curtis – J

Don’t Bet the Farm on Rising Home Prices

April 21, 2010

The slight recovery seen in the housing market over the past year has given sellers hope. However, as the saying goes, “Don’t bet the farm on it.” While this upturn in housing sales has many buyers feeling hopeful again, it isn’t expected to last long at all–at least not yet. As more foreclosures are expected to hit the market again, especially in Phoenix, it’s not to exhale just yet. The index put out by the National Association of Home Builders (NAHB) predicts the rise and fall in housing prices. In 2005, this index peaked, indicating that home prices would peak–not too long before the big housing boom in 2006. In 2008, about six months before the down turn in housing prices, the index bottomed out.

According to Robert Shiller, the outlook, based on the current NAHB index, doesn’t indicate that housing prices are rising again anytime soon. However, this index isn’t the only basis upon which the expected outcomes are to be based. Possibly a better indicator would be inventory levels. When looking at the NAHB HMI compared side by side with single family housing starts, we can see that the NAHB does indeed hint at what we can expect, but it doesn’t tell the whole story. We need to take into account the fact that foreclosures are about to be on the rise–again–and consider that to be a heavier indicator of what the market will do.               

If you’re one of the families who may be affected by the repeated downturn in the housing market, or if you’re looking to take advantage of lower prices, call Curtis Johnson team help you. The Curtis Johnson Team is here to help you if you are looking to buy or sell a home. You don’t need to go to the government for help. Instead, go to  www.curtisjohnson.com  or call 1-888-Curtis – J.

Limited Loan Modification Success, Rising Foreclosures Mark Phoenix Real Estate Scene

April 17, 2010

Last year, President Barack Obama announced his plans for the Making Homes Affordable program–a program designed to help those on their way to foreclosure.  There was a trial period set up when this program began, and recently the number of those who made it to “permanent” status has increased. Homeowners from Phoenix were likely candidates for this program

However, the number of those who have actually made it to a permanent mortgage modification is still staggering behind those within the trial period. Why? It isn’t easy to qualify for the program in the first place; In addition, as with any “helpful” government program, those who do qualify must complete a slew of paperwork. Banks are behind  in processing the paperwork.  With the less-than-simple process toward loan modification in place, many of those who were in the process of completing the program have dropped out.

At the same time, the number of foreclosures continues to rise. Unfortunately, that cancels out any of the “good” that the president’s program has been doing. Regardless of how many people the mortgage modification program is helping, if there are still plenty of foreclosures (there are) and if that number is still increasing (it is), then it cannot  be said that this program is all that it’s cracked up to be.

Are you facing a possible foreclosure and in need of an agent to help sell your home fast? Have you been considering the mortgage modification program? Let the Curtis Johnson team help you. The Curtis Johnson Curtis Johnson Team is here to help individuals who are facing foreclosure. You don’t need to go to the government for help. Instead, go to  www.curtisjohnson.com  or call 1-888-Curtis – J.

Home Buying Trends Changing

April 11, 2010

Looking for a home in Phoenix?  Like fashion, trends in home buying and selling are changing–again. This time, though, you may have a greater chance of benefitting if you play your cards right.    

Several factors are impacting these new trends:

  • Distressed home prices are perhaps attracting more buyers, especially with the government’s home-buying incentive program. However, they’re also having a negative effect on those who are trying to sell their homes on their own. With more than 3 million homes expected to go into foreclosure this year, sellers have a lot of competition. Owners who are making purposeful decisions to walk away from their mortgages impact this trend even more.
  • Larger homes are no longer the most sought after. On the contrary, in these hard economic times, buyers are less interested in having a roomy abode and more interested in living within their means–a smart move, given the trend in foreclosures, particularly in the Phoenix area.
  • The government’s “helpful” mortgage-backing program was set to end last month. As a result, economists expect mortgage rates to rise to between 5.3% and 6% by the end of the year. This is expected to be a gradual increase, though. Anything else, and the Federal government will be back in the mortgage business.
  • It’s particularly hard to get financed for a condo or investment home. At this point, you may need a down-payment in the neighborhood of 10%, a credit score of around 720 and payments may be maxed out at no more than 31% of one’s income. Naturally, this shoves many of us out of the market for these financial investments.

What does all of this mean for you? Whether you’re in the market to buy a Phoenix home or to sell one, you’re going to need an agent to help you. If you’re of the thousands expected to go into foreclosure this year, let Curtis Johnson help you sell your home. Consider doing a short-sale to avoid the impact on your credit score that a foreclosure will have. The Curtis Johnson team is here to help you. If you’re looking to make the commitment of buying a home and want to be sure to pick a home that is within your means, call Curtis Johnson and let him help you find the right home for you!

Go to www.curtisjohnson.com or call 1-888-Curtis – J

Too Little, Too Late: Latest Government Housing Help Misses the Mark

April 8, 2010

foreclosuresPhoenix homes are rapidly going into foreclosure these days. Once again, the government has taken it upon itself to “remedy” this situation. This time, they are offering loans through the Federal Housing Administration that alleges to help those who owe more on their mortgage than their properties are worth. Some feel that this is a huge risk for our government, especially since they aren’t exactly known to have been frugal with our tax dollars.

There’s a catch, though. Borrowers must not be behind on their mortgage payments. The problem with this is that most who are not behind on their payments probably neither need nor want the government’s help. While no one is happy about being upside down on his or her mortgage, that’s just par for the course–it happens sometimes in this economy.

This program would likely only appeal to those who are behind and are in trouble. Unfortunately, this program won’t help them. In addition, this program should have been unveiled years ago, when the problems first began. These days, so many people are so far gone in their mortgages that a program designed to help only those who are caught up on payments won’t be of much help.

If you’re looking for some help in selling your home, perhaps because this new program won’t be of any help to you, call Curtis Johnson today! Curtis and his team will gladly help you get out from being underwater and get back on track. Curtis Johnson’s team specializes in helping buyers and sellers in the Phoenix area, and the team will gladly assist you today!

Go to www.curtisjohnson.com or call 1-888-Curtis – J

Lose the Deed, Save Your Phoenix Home

April 2, 2010
It’s no secret that many Phoenix-area homeowners are going into foreclosure these days. With the boom in the number of defaults on mortgages, it’s understandable why many homeowners may think they’re next. If Fannie Mae guarantees your loan and you did not qualify for President Obama’s loan modification program, help may be more available than you think!

One approach Fannie Mae has developed is the Deed for Lease Program. For homeowners in danger of losing their homes to foreclosure and ineligible for loan modification, this program will be a lifesaver. The Deed for Lease Program moves homeowners into the category of tenants.  Homeowners will have to give up their deed and begin making rental payments, but they will be able to stay in their current home. This is excellent news for those who have been concerned about an imminent foreclosure.

Homeowners must live in the homes as their primary residence, and some leases may be renewable on a monthly basis (instead of on an annual basis). If you’re renting a home and your landlord’s home is eligible for the program, you may also be able to participate. However, in either circumstance, you must be able to prove that the current rental market rate is no greater than 31% of your gross income.

Naturally, people will have questions about this program. Fannie Mae expected this, so they’ve put together a FAQs page that addresses issues such as sub-leasing, pets, tenant issues, and renter’s insurance.

Even in light of new programs just announced to help people keep their homes, Deed for Lease could have its place.  Not every homeowner at risk of foreclosure wants to keep their home.  They may love the house, but know that they can’t afford the other costs of ownership.  Deed for Lease allows homeowner to plan for their family’s future while paying rent on their old dwelling. The success of this program hasn’t been released yet, but FHA must be onto something; recently mortgage giant Citigroup announced a pilot program in some states to try out their own version of Deed for Lease.  From that standpoint of the bank (or FHA), the advantages are that the home would be occupied even as the bank might try to sell it and the costs would be less than foreclosure.

For more information about foreclosure alternatives or buy or sell a home in Phoenix, Mesa, Glendale, or surrounding areas, call Curtis Johnson Real Estate today.  One call will convince you that Curtis’s proven techniques will work for you.

Out of the Shadows in Phoenix – Part 2

March 30, 2010
 
We recently discussed the specter of shadow inventory, a large supply cheap homes that could overwhelm any progress in the Phoenix housing market if released in a short time frame.  It’s a fair question as to whether this inevitable or whether the homes can released in the market in a less devastating way.

Banks can be more helpful…

shadow

Will the shadow inventory come to pass?

Currently, homeowners who want to keep their homes are applying for loan modifications, but banks are reluctant to give meaningful modifications that decrease the principle.  Many who apply do not qualify under bank proposals or federal Making Homes Affordable guidelines fall into foreclosure.  Those who succeed often fall behind again, either because the modification don’t reduce the payment enough or because of unemployment of other subsequent changes in finances.

Banks are currently more likely to process the foreclosure than come up with a workable modification plan.  If banks decide to take the hit and reduce the principle and work toward meaningful modification, many properties will remain in the hands of homeowners rather than become foreclosure statistics.

Underwater homeowners can stay put…

Troubled homeowners may have less control over their circumstances, but today, many underwater homeowners decide to walk away when they owe more than the home is worth rather than pay their mortgage.  (This is less true for people who owe up to 20% more than the home is worth who tend to ride out the housing cycle unless they need to sell.)  Some with excessive negative equity debate the morality of strategic default, but the idea is now discussed openly in mainstream circles. 

Widespread foreclosure is not the only possible outcome.   Fewer people would think of sending jingle email to their banks if there were better options to refinance or have some of the principle decreased.  A new plan just released by the government on March 26, 2010 addresses underwater homeowners by doing just that cutting principal.

Investors don’t rush to sell…

Investors are another wildcard.  Phoenix could be in trouble if a large number of investors decide to sell this year.  At the moment, housing analyst Mike Orr’s Cromford Report claims that there are about 42,500 homes on the market in metro Phoenix, 2,500 more than in December.  Prices have fallen to a median price of $127,000 since mid 2009, when the median stood at $130,000.  An influx of cheap “shadow inventory homes” could further drop prices.

Since many investors paid bargain prices in cash, they might be happy to keep renting until they can foresee selling for a better profit.  Current statistics show rental prices are falling, which could be incentive to see.  However, since loans are harder to get for prospective buyers these days, investors may capitalize on a captive rental market. 

For more information about foreclosure alternatives or buy or sell a home in Phoenix, Mesa, Glendale, or surrounding areas, call Curtis Johnson Real Estate today.  One call will convince you that Curtis’s proven techniques will work for you.

Out of the Shadows in Phoenix, Part 1

March 29, 2010

Arizona real estate - out of the shadows

The elephant in the room of Phoenix real estate is shadow inventory, a stockpile of homes pending foreclosure, homes reclaimed by banks but not put on the market yet, homes awaiting auction  by banks that are likely to wind up with investors who will resell them, homes that will fall into foreclosures after their owners walk away an abandon them.  In a market where home are already down 22%, the prospect that the market could be flooded with countless numbers of budget homes is frustrating when the prices are just showing signs of recovery.  No one knows the day or the hour – or even the number.

But is it expected to come.  According to Arizona housing analyst RL Brown, “Phoenix’s shadow inventory is very real and very scary when you think about all the homes that could flood the market. Some people are in denial about the area’s shadow inventory, but by being informed on what could impact the market, we can all make s better real-estate decisions.”

 

What makes analysts so sure that the shadow inventory is out there? 

•     A minimum of 5,000 foreclosures have not hit the market.

•     Many unsuccessful loan modifications are expected to lead to foreclosures, while adjustable rate mortgages that will  reset this years, as much as doubling house payments, are expected to lead to more.

•     Homeowners, some in danger of foreclosure and some with so much negative equity in their homes that they are at risk of deciding to “strategically default” for economic reasons, will increase the numbers.

•    50,000 investors who bought up the foreclosure bargains with an eye to flipping for a quick profit rather than to acquire rental property could try to resell them at any time.

What is less clear to analysts is the impact.  Tom Rugg of the Information Market says he doesn’t even think “Phoenix’s shadow inventory will cause another crash, but the housing market’s recovery is going to take longer and will be more drawn-out than many expected.”  Other analysts are not so optimistic.  How many hit the market and when depends on what homeowners, banks, and investors decide to do. 

For more information about foreclosure alternatives or buy or sell a home in Phoenix, Mesa, Glendale, or surrounding areas, call Curtis Johnson Real Estate today.  One call will convince you that Curtis’s proven techniques will work for you.