2/1/10
INFO THAT HITS US WHERE WE LIVE The week began with December Existing Home Sales dropping 16.7%. Some observers felt this was the result of uncertainty over the homebuyer tax credit, scheduled to expire at the end of November. The tax credit was, as we now know, extended into this year, but it wasn't announced soon enough to help December sales. Nonetheless, Existing Home Sales are UP 15.0% over a year ago. And the median price of an existing home is now $178,300, UP 1.5% over a year ago and the best year-over-year comp since 2006. Finally, inventories are now down to 3.29 million, their lowest reading since March 2006.
Wednesday, New Home Sales were reported at a 342,000 annual rate, down 7.6% for December. But inventories are now at 231,000, 59.6% below their mid-2006 peak and at their lowest level since 1971, when the population was two thirds its size today. The Case-Shiller index of home prices in the 20 biggest markets went up a seasonally-adjusted 0.2% in November. This was the sixth month in a row the index gained and prices increased in 14 of the 20 markets. The FHFA price index for homes bought with conforming mortgages went up 0.7% in November, its fifth advance in the last seven readings.
According to Freddie Mac's weekly Primary Mortgage Market Survey, mortgage rates inched down for the fourth week in a row. But prospective homebuyers and owners looking to refinance should note that the Fed reiterated its intention to end mortgage bond purchases on March 31. Experts feel this will make rates head up a bit.
1/18/10
INFO THAT HITS US WHERE
WE LIVE Our hearts go out to the people of Haiti recovering from
the terrible tragedy of last Tuesday's earthquake. We know everyone's thoughts
are with the Haitians. It has been inspiring to see the American people support
the relief efforts in so many ways.
Last week, housing market news was thin on the ground. It was good to see that
fixed-rate mortgage rates dropped again, according to Freddie Mac's weekly
survey of conforming mortgages, which came out Thursday. The report was
accompanied by encouraging words from Freddie Mac's chief economist Frank
Nothaft, who said: "The Federal Reserve recently reported positive news
in both the housing market and the overall state of the economy in its
January 13 regional economic report....Economic activity improved in 10
of its 12 districts. Home sales...increased due in part to the home-buyer tax
credit and house prices appeared to have changed little since its last
report." The bottom in home pricing appears to have formed in many
areas of the country.
1/4/10 Happy New Year!
INFO THAT HITS US WHERE
WE LIVE Last Tuesday the Case-Shiller Home Price Index for 20
cities came in UP a seasonally adjusted 0.4% for October. This was the
fifth consecutive monthly increase for the index. Year-over-year, prices are
still down 7.3%, but that's a less steep rate of decline than we've been
seeing.
It looks like home prices could be stabilizing, though well below their
peaks in most markets. This price decline, plus the dramatic drop in mortgage
rates, have made homes more affordable than they've been in a long time. A
writer for the Wall Street Journal compared home price index values, mortgage
rates and average weekly earnings going back to 1987. The finding? On
average, housing is as affordable now as it was in the mid-1990's, when homes
were a real steal. Of course, this conclusion is based on average prices,
so affordability may be greater or less in individual markets.
Christmas Eve, the Treasury lifted the limit on the money it can put into
Fannie Mae and Freddie Mac to keep their net worth positive over the next
three years. Some economists point out that Fannie and Freddie could now
replace the Fed as a big buyer of mortgage-backed securities to help keep
mortgage rates down after March 31. That would be great, but
nothing is certain. Smart buyers are taking advantage of TODAY'S low
mortgage rates AND the expanded tax credit that requires a signed contract by
April 30 and a closing by June 30!
12/21/09
INFO THAT HITS US WHERE WE LIVE We saw strong evidence last
week that homebuilders are well on their way to recovery. Housing starts
for November were UP 8.9%, to an annual rate of 574,000 units.
Single-family starts were 35.0% higher than their January and February
lows. The very volatile multi-units starts were UP 67.3% from the previous
month's cyclical low. And get this -- starts were UP in every major region
across the country!
Building permits are the future of homebuilding and guess what. They
were UP 6.0% for November, to an annual rate of 584,000 units. This was
above expectations and the fastest rise in a year. Single-family permits
were UP 5.3%, registering their best pace since September 2008, when the economic mess began. Overall, homebuilding is UP in Q3 and many experts anticipate another gain in Q4 and even bigger increases in 2010-2011.
Mortgage rates continue at attractive levels, though they're creeping up.
Fannie Mae's survey for the week ending last Thursday showed 30-year
Fixed-rate mortgages averaging 4.94% with an average 0.7 point
(including the origination fee) for 80% loan-to-value (LTV) ratio loans.
Last week the Fed confirmed they would end their purchase program for
Mortgage Backed Securities on March 31, 2010. This is expected to
cause mortgage rates to keep inching up. One more reason for buyers
to act now!
12/12/09
How often has this happened to you?... After much market research, driving around and conversations with your agent (and often many others) you find the REO home you were looking for. Its only been on the market one day and you know its priced below the market and within your approved budget. Your agent calls the listing agent only to find out there is already one accepted full price offer and two more back up offers.
This has been my experience way to often in the last few months so I found a creative way to get my buyer's offers first in line. Its all about building relationships with the AZ REO listing agents. Just as they had to work to build relationships with the lenders and the asset management companies, Arizona REO buyers agents need to invest time and effort into relationships with the people who can help them.
I spend a lot of my time on the phone with Prescott AZ REO agents working to find out which prime properties are about to be listed and at what price. Often I can can even get my buyers into them several days before the listing. Last week I was able to successfully get an offer into the lender the day before the listing went active. By the time the listing went active the next day, I already had an accepted offer and the listing went pending immediately.
As Buyers agents in the foreclosure market, its important to be looking for new, more effective ways to represent our client's interests. Building good relationships with the agents who have what we need just makes good sense.
Dave Conners enjoys figuring out new ways to make his clients happy! He works with the Stephanie Woods Team in Prescott Valley AZ.
Thanksgiving is past, but I'm still grateful today. There are a hundred things (and people) I am grateful for, but I want to write about challenges of the Prescott AZ Foreclosure Market and the problems that go along with it. First I should back up and explain about problems and in particular "High Quality Problems". In real estate the worst problem to have is no clients. No clients equal no problems which of course is the worst one to have.
As I wrote a few days ago, the Prescott AZ REO market has shifted from moderate to red hot. Today's new bank owned listings often get multiple offers the first day on the market. That brings me to my first problem (that I am ever so grateful for). The time between a new listing going public and getting a good offer submitted is very short. So the key is either searching the listings several times each day and running off with my buyer's several times each week. Or... having information about listings that are not yet listed.
The process of listing a foreclosed property takes time. We average about 40 to 60 days between the initial assignment from the bank to the time the listing goes live. During this time which we call "pre-marketing" the property is cleaned and repaired if necessary. Several BPO's (broker price opinions) are ordered by the bank. Negotiations take place between the bank and the listing agent to arrive at an initial list price. Marketing is prepared.
Also during pre-marketing the some houses can be shown if the listing agent knows he has a buyer looking for that particular type of home and the buyer is already educated on the Prescott REO market and ready to roll. I mention the last part about buyer education because it would not be appropriate for somebody who is just starting the home shopping process to jump into a situation where timing is crucial. All the pieces need to be in place. Buyer needs to know the market, have a loan status report or proof of funds ready to go with the offer and be ready to write an offer.
So I am grateful that the current market conditions require me to move fast, know the REO market inside and out and have clients who appreciate the service I offer. Sometimes its hard. It can get crazy. It can be a problem, but its a High Quality problem.
Dave Conners is feeling a little crazy with Prescott Arizona's REO market. He is also very grateful for it:)
11/23/09
WASHINGTON - Home sales surged for the second month in a row in October, climbing to the highest level in 2 1/2 years as first-time buyers rushed to take advantage of an expiring tax credit.
Home sales nationwide are now up nearly 36 percent from their bottom in January, dataMonday showed, though they are still 16 percent below the peak in autumn 2005. At the current sales pace, there is only a 7-month supply of homes on the market and in some areas there are bidding wars.
Joey Wilson, 53, and her husband made unsuccessful offers on 20 Las Vegas homes since midsummer before closing on a four-bedroom, $136,000 home this month.
"It's insane," said Wilson, who relocated from Kentucky. "I've never seen a market like this before."
The National Association of Realtors said home resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September. It was the biggest monthly increase in a decade, and far above the 5.65 million pace expected by economists, according to Thomson Reuters.
Without adjusting for seasonal factors, sales were up 21 percent from a year earlier and were up in all four regions of the country. The gains were led a 26 percent increase in the Midwest. Sales were up 25 percent in the Northeast, 23 percent in the South and 10 percent in the West.
The housing recovery is being driven by lower prices combined with federal programs to lower mortgage rates and bring more buyers into the market. The median sales price was $173,100, down 7 percent from a year earlier and off roughly 2 percent from September.
The tax credit of up to $8,000 for first-time owners was originally set to run out on Nov. 30, but Congress renewed it earlier this month and broadened its reach. People who have owned their current homes for at least five years can now claim a tax credit of up to $6,500 for a home purchase. To qualify, buyers must sign a purchase agreement by April 30.
The Realtors' report on October home sales reflects offers made before buyers knew the tax credit would be extended.
"The incentives really did get people to go out and buy," said Wells Fargo economist Adam York. "The question is: What does the trend look like when the credit is over with?"
Home sales are likely to drop over the winter as buyers hibernate for a few months without the looming tax credit deadline.
The new deadline means "we're going to see some good activity coming out of the spring," said Pat Lashinsky, chief executive of online real estate brokerage ZipRealty Inc.
But the government support can't last forever. For example, the Federal Reserve is likely to curtail its effort to push down mortgage rates next year. If rates then rise too high, it would make home purchases less affordable and dampen housing demand.
11/18/09
Prescott REO Homes and the New Tax Credit
Prescott Arizona REO properties are still a large part of the Prescott housing market currently accounting for about 35% of the sales with only 10% of the listings. Many bank owned properties come with perks such as home warranties or seller paid closing costs which make the deals even more attractive. On top of those, President Obama has signed a bill that extends the existing tax credit for first time homebuyers into the first half of 2010. The extension continues the existing tax credit for 10% of the purchase price up to a maximum of $8,000 for first time homebuyers (anyone who has not owned a home in the last three years).
In addition, the new bill also opens up opportunities for others who are not buying a home for the first time. For buyers who have owned a home for five of the last eight years and are purchasing a new primary residence they will receive a tax credit of 10% of the purchase price up to $6,500. They do not need to sell their existing residence to qualify, but they must move into the new home as a primary residence. This expansion of benefits to non-first time buyers is particularly helpful for a large segment of the Prescott area buyer's market. We all know what a great place Prescott is to live in and we are not alone. Most Prescott agents have an extensive list of prospective buyers who intend to move to Prescott in the future. This $6,500 incentive seems almost tailor made for this traditional Prescott buyer base.
In both cases, buyer income caps apply. There are other details of the bill that may impact individual situations. Ask me to recommend local mortgage brokers who will be happy to consult with the buyer's CPA to determine exactly what their credit is likely to be.
Both tax credits apply to purchases under contract by April 30th 2010 and they must close before June 30th 2010. This give Prescott REO buyers approximately five months to find a home and write a contract. Additionally, Federal Reserve bond purchase programs that have helped keep rates low over the last year are currently winding down. Many forecasts suggest rates in 2010 will average more than half a percentage point above current levels. Local appraisers are telling us values are stable in almost all of Yavapai County and do not show signs of continued decline. Combine the short window on the tax credit, the likely rise in rates and stabilization of prices and its hard to imagine a better opportunity for buyers than right now.
10/26/09
Earlier in the week, Housing Starts for September were UP 0.5% to an annual rate of 590,000 units. The consensus expected more, but the drag on the number all came from a drop in those volatile multi-unit starts. Single-family starts were up a strong 3.9%, their sixth gain in the last seven months and UP 40.3% since the January-February bottom. The rate of building is well below underlying demand, which some put at about 1.6 million units per year, based on population growth and the need for replacement because of fires, disasters and knock-downs.
The Mortgage Bankers Association reported that for 30-year fixed-rate mortgages, the average contract interest rate was 5.07% with 1.13 points (including the origination fee) for 80% loan-to-value ratio loans to borrowers with good credit. First time buyers have just five weeks to get in on these still great rates AND the $8,000 tax credit set to go away at the end of November.
10/23/09
WASHINGTON - Home resales rose in September to the highest level in more than two years, beating expectations, as buyers scrambled to complete their purchases before a tax credit for first-time owners expires.
The National Association of Realtors said Friday that sales rose 9.4 percent to a seasonally adjusted annual rate of 5.57 million in September, from a downwardly revised pace of 5.1 million in August. Sales had been expected to rise to an annual pace of 5.35 million, according to economists surveyed by Thomson Reuters.
The median sales price was $174,900, down 8.5 percent from a year earlier, and slightly lower than August's median of $177,300.
The inventory of unsold homes on the market fell about 7 percent to 3.63 million. That's a 7.8 month supply at the current sales pace, and the lowest level since March 2007. Nationwide sales are up nearly 24 percent from their bottom in January, but are still down 23 percent from four years ago.
Sales rose around the country, especially in the West, where they grew 13 percent from a month earlier. Foreclosure sales are booming in cities like Los Angeles, San Diego and Las Vegas.
First-time homebuyers and investors are snapping up those homes and taking advantage of low mortgage rates. These buyers can also take advantage of a tax credit of 10 percent of the sales price, up to $8,000, if the sale is completed by the end of November.
The tax credit is so important to some buyers that they are adding a clause to their contracts, allowing them to back out if the sale doesn't close by Nov. 30.
While home sales and housing construction have risen steadily after hitting bottom earlier this year, most economists believe that the worst isn't over for home values.
Prices could see a double dip because rising unemployment is causing more foreclosures. The jobless rate, currently at 9.8 percent is expected to rise as high as 10.5 percent next year, causing more people to be unable to afford their monthly mortgage payment.
With concerns about the housing market still prominent, Congress is considering several proposals to extend the tax credit for first-time buyers. Senators Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., want to extend it through June 30, and expand it to include all home buyers, at an estimated cost of $16.7 billion.
Realtors and homebuilders are pressing lawmakers to do so, arguing that the tax credit is crucial to get the housing market back on its feet.
"We are not there in terms of removing the consumer fear factor," said Lawrence Yun, the Realtors' chief economist.
One potential roadblock, however, emerged this week. There are concerns that some of the 1.5 million applications for the tax credit are fraudulent.
At a hearing on Thursday the Treasury Department's inspector general for taxes questioned the legitimacy of some 100,000 claims for the credit, potentially including some illegal immigrants and 580 people under 18. The youngest taxpayers to apply for the credit were 4 years old.
10/19/09
10/12/09
Americans Are Still Delusional About House Prices
Henry Blodget
The recent upturn in house prices from April to July (3.6%) is the sharpest change in direction professor Robert Shiller has ever seen. And Shiller, the dean of house-price analysis, has seen a lot.
The upturn could signal a v-shaped recovery in house prices. Or it could be the "mother of all head fakes," as one investor has described it.
Unfortunately, Robert Shiller's recent survey of Americans' attitudes about house prices suggests it's probably the latter. The survey also suggests that Americans are still delusional about the long-term trajectory for house prices.
In the survey, Shiller and his partner Karl Case ask Americans what they think home prices will do over the short and long term.
The expectation for long-term price changes hasn't changed much since before the bubble (it's now down to 11% a year appreciation). This outlook is more reasonable than it was at the peak of the bubble, but it's still extraordinarily optimistic. This happy outlook suggests that Americans still regard the last couple of years as a freak anomaly -- even though house prices are just now hitting the range of "normal" on key price ratios like price-to-rent and price-to-income.
The outlook for short-term changes (one year), meanwhile, has changed a lot in the past year. Specifically, it has gone from negative a year ago to 2% this summer. Thus, Americans are expecting a near-term housing recovery -- in part, perhaps, because of the recovery from April to July.
Shiller thinks this change suggests that buyers are now trying to time the housing market by getting in at the bottom. This could be contributing to the surge in prices we've seen over the last few months.
It's always possible that Americans are right, that we've passed the bottom and are on the way up. If so, however, this would mean remarkable foresight on the part of the average buyer.
Around major changes in market direction (the peak of the housing bubble, for example), there is widespread agreement about what future prices will do -- and this consensus is usually 100% wrong. If the consensus is right this time that we've just passed the bottom, therefore, it will be because the average American has suddenly gotten a lot smarter that usual about what the future holds.
9/27/09
There's more to indicate that the housing recession has hit bottom than Thursday's dual announcements that housing starts rose 1.5 percent from July, and new jobless claims dropped by 12,000 last week.
Homeowners looking to sell are also putting the brakes on the trend of aggressive price cuts, indicating that the real estate market may be closer to salvation than previously thought. In 20 major U.S. housing markets, the percentage of homes that have suffered price reductions is dropping.
Thirty-nine percent of for-sale homes in 20 major U.S. metros have had their prices reduced. That's a drop of six percentage points, from 45 percent at the beginning of the year, according to data provided to Forbes by Altos Research. That the number of for-sale homes with startling cuts has dropped is a sign that the real estate market may soon reverse its downward slide.
Believe it or not, this is all good news. While shrunken quotes like these crop up far more frequently now than they did two years ago, these are only a few standouts in major metro areas that, by and large, are starting to see a reversal of the price-slashing trend.
Behind the numbers
To find out where home prices are showing signs of recovery, Forbes used data produced by Altosresearch.com, a Mountain View, Calif.-based research firm that tracks the percentage of homes on the market that have seen price reductions. Altos watches these numbers for 20 Metropolitan Statistical Areas: geographic entities defined by the U.S. Office of Management and Budget, for use in collecting statistics. These MSAs were chosen based on the cities used for the S&P/Case-Schiller 20-city home price index, which is used to track U.S. residential real estate trends.
Although the numbers are still high — 40 percent of Phoenix homes have been discounted, compared to single-digit numbers in previous years — the dramatic reduction in price cuts here is a sign that buyer demand is rising to meet the excess of supply that was caused by irrationally exuberant building practices earlier in the decade.
The cities with the highest number of reduced-price homes are Minneapolis, Seattle and Portland. Although the percentage of on-sale homes in these cities has dropped by 7 percent, 6 percent and 4 percent respectively since Jan. 1, these metros have price reductions on nearly half of all homes on the market.
While in Minneapolis, this may be a product of deeply rooted economic troubles facing manufacturing economies in general, in Portland and Seattle, the high number of priced-to-sell homes more likely reflects the excess housing inventory that the housing bubble brought to the West Coast. While Portland and Seattle were included in the Altos analysis, they were not among the ten cities with the biggest improvements in the percentage of home price reductions.
9/14/09
INFO THAT HITS US WHERE WE LIVE Last week mortgage applications surged 17%, according to the Mortgage Bankers Association. And it wasn't just re-financings taking advantage of the latest dip in our already low interest rates. Applications for purchase loans were up a very healthy 9.5% from the week before. According to the MBA, the average contract interest rate for a 30-year fixed-rate mortgage was down to just over 5%, with average points inching up to 1.23 (including the origination fee) for 80% loan-to-value mortgages. These rates are of course for prime borrowers with 20% downpayment.
Freddie Mac's weekly survey of conforming mortgages showed rates dropping to similar levels, which is very nice considering a 30-year fixed-rate conforming mortgage averaged 6.35% just a year ago. The benefit to the real estate market is clear. As Freddie Mac chief economist Frank Nothaft put it, "Low mortgage rates are helping to keep housing very affordable." First-time homebuyers enjoy even more affordability, thanks to the $8,000 tax credit, but be sure to remind them they need to close by November 30!
Prices may even be stabilizing. The listing and valuation site Zillow.com reported buyers are getting smaller discounts off seller's listing prices. July purchasers paid just 3.3% below list price vs. an average of 3.5% for June and 4.6% back in January.
July pending home sales rise to 2-year high 9/1/09
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in July, rose 3.2 percent to 97.6, the highest level since June 2007, from 94.6 in June. Analysts polled by Reuters had forecast pending home sales to rise 2 percent in July. Pending sales were 12 percent higher in July from the same period last year. There is a one to two month lag between a contract and a done deal, so the index is a barometer of how sales completed this month and next will turn out.
Housing recovery...or not?
The good news: Home starts have risen for five straight months, while sales of new homes recently hit their highest level since last September. Prices are up as well: the Case-Shiller index of national house prices rose 2.9% in the second quarter, ending a three-year decline. According to Toll Brothers’ chief executive officer Bob Toll, “declining cancellations and more solid demand indicate that the housing market is stabilizing." The bad news: According to many skeptics, things are not so rosy. Mark Hanson, who runs a California real estate research firm, attributes the much-ballyhooed recent house price gains to a shift in the types of properties changing hands. At one point earlier this year, as many as half of all transactions nationally were resales of foreclosed properties, largely at low prices. Since then, so-called organic sales (those not involving distressed properties) have risen while foreclosure sales have remained stable. This improved mix, togethere with cheap financing and a couple of popular tax incentives, helped to revive prices in some hard-hit areas.
But with schools opening up again and the summer home-selling season winding down, sales by nondistressed sellers are likely to fall in coming months, Hanson said. Adding to the pressure on prices, the end is in sight (or already here) for some popular housing subsidies. An $8,000 federal tax credit for first-time home buyers is due to sunset at the end of November. A $10,000 California tax credit for buyers of newly constructed houses expired last month. Says Hanson: "This summer is shaping up as the gateway into the next move down."
Are banks holding on to bank-owned foreclosed properties?
With all the rumors flying around, it’s hard to tell what’s going on with foreclosures, but Diana Olick decided to look a little deeper. In response to her question, Bank of America (BOA) pointed out what we’ve reported here before…that foreclosures have been down because banks have been waiting for the Making Home Affordable program to kick in before going through the final steps of foreclosure. Now that the program is operational, BOA anticipates a spike in foreclosures. In BOA’s words: “We do not hold foreclosed properties off the market.” According to Ted Jadlos of LPS Applied Analytics, “Based upon foreclosure and REO timelines, it’s going to take at least 18 months to flush the system of our current problems. But to flush the problems in only 18 months, more problem loans need to leave the system relative to the new problem loans of today and tomorrow. That does not appear to be the case right now—we aren’t clearing faster than new problems
are emerging.”
New home sales rise 9.6% in July, the highest in 4 years 8/26/09
The Northeast saw a 32% rise in sales, while the South saw a 16% rise and the West saw a 1% rise. Sales dropped 7.6% in the Midwest. There were 271,000 houses on the market last month, down 35% from July 2008 and the fewest since March 1993. At the current sales pace, it would take 7.5 months to sell all homes. Unemployment continues to remain a concern for the housing market. Analysts say that housing recovery could be hit if unemployment continues to rise.
Consumer confidence rises in August
According to The Conference Board, its confidence index rose to a reading of 54.1 in August -- after 2 consecutive monthly declines -- following a reading of 47.4 in July. The Conference Board's measure of present conditions rose to 24.9 from 23 for the prior month. The gauge of expectations for the next six months rose to 73.5 from 63.4. About 45.6% of survey respondents said that the business conditions are "bad," and 45.1% said jobs are "hard to get." About 22.4% said they expect an improvement in business conditions over the next 6 months, in contrast to 18.4% last month.
The proportion of those expecting income to increase rose to 10.6% from 10.1%. Approximately 5.2% of those surveyed said they planned to buy a car in the next six months, up from 4.8%, and 39.0% said they expect to take a vacation, up from 37.1%. The index "appears to be back on the mend" after 2 consecutive monthly declines, said Lynn Franco, a director at The Conference Board. "Consumers were more upbeat in their short-term outlook for both the economy and the job market in August," said Franco. The survey is based on a representative sample of 5,000 U.S. households.
Existing home sales rise in July at the fastest pace in 2 years 8/21/09
Negotiations 8/12/09
When making an offer on a house, how low can you go? A poorly delivered low ball bid can offend a seller. But that doesn't mean you can't drive a hard bargain. Overpricing is common due to what behavioral economists call the endowment effect: The mere fact of owning something tends to make one overestimate its worth. That means there is room for negotiation, if you can bring the seller around to your point of view. Which raises another principle of market psychology: fairness.
Consider the following actual experiment: A test subject is given $10 on the condition that they offer some of it to a second person. If the offer is accepted, they walk away with the cash. If it's rejected, neither gets a thing. Classical economics predicts that the second person would accept any offer, it's free money, after all. But time and again, offers of less than 30% are summarily rejected and neither party gets a dime. "People routinely refuse offers they think aren't fair, even if it hurts them." says economist Dan Ariely, author of Predictably Irrational. The fact is, many sellers would rather hang on to something they no longer use than accept less than they think it's worth. In that light, negotiations aren't about besting the seller, they are about finding agreement on what's right. Therefore a good negotiator works on changing perceptions.
A few guidelines: Don't low ball without providing a solid rationale. Negotiate in the most personal medium possible. And play to their reactions. "A counter offer should tell your opponent that you respect their view, "says Yale University economist Keith Chen.
Great Programs 8/5/09
Of course short sales and bank owned properties are driving the market lower at the moment. However several other factors are very important as well. One factor that I think is overlooked is pent up demand for homes. During the last two years I know of many "buyers" who decided to wait until the declining market reached a bottom and / or interest rates hit the bottom. Some buyers have been waiting due to job uncertainty or credit issues. Whatever the reason a very large percentage of the buyers market has been waiting and that demand had been growing and now we are seeing the fence sitters jumping in with both feet!
The other main factor I see creating activity is the wealth of great financing options and government programs in conjunction with the lowest prices we have seen since about 2003. I think most people know about the $8,000 first time home buyer's program. However I want to talk about another more significant program called "Your Way Home AZ".
This program is designed to help sell bank owned homes and uses stimulus money from the Federal Government. Arizona decided to use $121 million dollars to more quickly sell bank owned homes. Here's how it works: Administered by NACOG, the program is driven by lenders who must be registered to participate first. The idea is for the state of Arizona to give they buyer a free 22% downpayment with 0% interest. So using as an example a deal I have in escrow right now we find a bank owned home which would list for about $200K. However because it is bank owned they will list it and sell it for less. I was able to get the bank to accept $155K. The buyer is using FHA loan for his primary mortgage. He must come up with 3.5% which is $5425. The state of AZ puts in 22% or $34,100
That makes his mortgage just over $115K for a $200K house with only $5425 down! During the 15 year period of the "silent second" mortgage there are no payments and the best part is that after 15 years the buyer gets to keep the state's money. If he sells prior to the 15 years the 22% simply comes out of escrow and goes back to the state.
I think the only problems with the program are that very few people know about it and the money is going fast. There is no way to know when it will run out so call me today and I'll help find you a bank owned home!
