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How's The Market?
I use this space to discuss the current market and point out opportunities that you might otherwise miss.
Last week I spent two days in Phoenix at the Chader Event. This was the real estate industry's brightest and best coming together to talk about where our market is going. On of the most interesting speakers was Michael Orr, a mathematician at ASU. He began with a slide of the following myths:
1. A glut of foreclosed homes overhangs the market
2. Shadow inventory is big, scary and out to get you.
3. A new wave of foreclosures is coming.
4. Short sales take forever and rarely succeed.
5. Renting is cheaper than buying a home.
Then he went through these myths and used current information from the Phoenix real estate market to dispel each and every one of them. His bottom line? The shift to a healthy market is already well under way in Phoenix. Buyers who think they can offer 70% of list price and get a great deal are in for some painful lessons. REO agents who rely on a steady stream of foreclosures need to find a new source of inventory. Most of the foreclosures in the western US have already been sold. Its is mostly the eastern US that has a judicial foreclosure process that will need more time to clear them out.
So what does this all mean for the Prescott Arizona market? Since Prescott generally follows the Phoenix market by 6 to 12 months we now have a clear indicator of the shape of things to come. On of Mr. Orr's lines still rings in my head:, "Practice saying this to your buyers; You know those great deals that were everywhere? .. Well you missed them".
INFO THAT HITS US WHERE WE LIVE...Those of us who think we can participate in a housing market recovery sooner rather than later just got welcome support from some industry experts. As reported by Fortune on CNNMoney.com, "After four years of plunging home prices, the most attractive asset class in America is housing." Research firm Metrostudy, which tracks new-home inventories for 65% of the U.S. market, reports that the steep drop in construction over the last few years has reversed the supply glut, with starts now well below closings. The firm believes the low inventory should eventually lead to higher prices.
The Fortune posting also cited a new study from a major bank that found homeowners now pay only 9.8% of their income in after-tax mortgage, tax and insurance payments, down from 17.2% at the 2007 peak. This means it's now cheaper to pay a mortgage and the other major homeowner costs than it is to rent the same house in 28 out of 54 major markets.
Fortune further reports that where existing home inventories average close to seven months, a modest boost in demand will result in solid gains in home prices and new construction. This could happen quickly in markets now showing good job growth. Moody's Analytics forecasts prices going up three to four points faster than inflation over the next few years in virtually all such markets. They see home prices rising with rents, with apartments in short supply. Of course, the housing recovery still requires job creation and consumer confidence back to normal, but we finally seem headed in that direction.
2/7/11
1/5/11
If homes are selling in this buyers market, why isn't mine?
Homes are indeed selling in this buyers market, but many listings just sit there. Lets explore what mistakes sellers are making that prevent buyers from writing offers on the seller's home.
Just because your house is "On the market doesn't mean its In the Market".
Sellers need to keep in mind that buyers now have easy access to listings online. They can quickly narrow their search to a neighborhood and price range. Once they have identified a list of houses, they then quickly eliminate those homes that are overpriced and those in poor condition. A buyer may look at five or ten homes but will only write an offer on one. If you house earned a showing but didn't get an offer, chances are that you helped to sell the house down the street which was priced lower and was better staged. The graph above (from Jay Papasan, of Keller Williams) shows all the homes on the market. However only the homes that are priced competitively and well staged (shown in red) are "In the market" meaning they are likely to sell. Those in the grey are "Out of the Market" and will not sell. Many times I have watched sellers let their homes languish on the market until suddenly something shifts and they develop "seller urgency". When this happens the seller makes the necessary adjustments and the home sells quickly. The trick is to identify the urgency at the beginning of the listing process rather than waiting six months or a year while the market declines.
12/16/10
November 5th, 2010
The market that we are in right now is an awesome opportunity; It's without a doubt the best buyer's market that we've seen in our entire lives. The convergence of rock-bottom interest rates, record-high affordability, motivated sellers, willing lenders, and home prices that have started to inch back up after declining for more than two years means that NOW is the time to buy.
Steve Murray, editor of REAL Trends, couldn't agree more. During a recent conversation, he said, "We are about to see the most incredible buyer's market that we've ever thought about in the history of our lives."
The question is, do the buyers know this?
This Graph shows the cost of a mortgage payment as a percentage of median income. As you can see 2010 has the lowest cost in the last decade! Now more than ever is the time to buy a home.
When supply exceeds demand, buyers have the upper hand, and that's where we are now! The current supply of homes for sale in the Prescott area stands at 10 months, meaning that at today's pace of home sales, it would take 10 months for the existing inventory to sell. Distressed properties (Bank owned and Short Sales) are now part of the mainstream real estate transactions. Nationwide they make up about 32% of all homes sold (in Prescott we are currently at 50% distressed properties). So now is the time for smart buyers who are looking for a deal to seize the opportunity!
October 25, 2010.
The chart above shows the ongoing Notice of Trustee's Sales from Jan 2006 through September 2010. After a peak in Yavapai County Arizona in June of 2009 we look to be heading for another peak of about 350 notice of Trustee's Sales per month. It is important to note that many of these future foreclosures may take 12 months or more, but it is plain to see that there is a huge volume of REO properties making its way to market. This will certainly impact the type of value of real estate sales in Yavapai County over the next 12 to 18 months.
Below is the split showing relative sales of Retail, Bank Owned, and Short Sales in Yavapai County as of September 2010. We are currently seeing a even split between REO and retail with Short Sales making a small dent in our market.
Housing construction performance unexpectedly rose last month, beating both the market's and analysts' expectations. The big surprise was initial home construction for September.
Construction starts on private homes in September ticked up to a seasonally adjusted annual rate of 610,000, which was 0.3 percent better than August's revised estimate of 608,000. Starts on single-family homes in September reached a rate of 452,000, which was 4.4 percent over August's revised figure of 433,000.
"The 0.3 percent monthly increase in U.S. housing starts in September, to 610,000 from 608,000, is better than it looks as starts were revised up in each of the previous two months," Paul Dales, an economist with Capital Economics, told the International Business Times.
That said, building permits for private housing in September dropped 5.6 percent below August's performance to a seasonally adjusted annual rate of 539,000. However, permits for single-family homes issued in September were at a rate of 405,000, which was 0.5 percent higher than August's revised figure of 403,000.
Builder confidence in the market for new, single-family homes rose three points to 16 for October, according the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), a survey of U.S. home builders. This was the first improvement registered by the HMI in five months, and returns the index to a level last seen in June of this year.
"The new-homes market is finally moving past the lull that occurred when the home buyer tax credits expired and economic growth stalled this summer," said NAHB Chief Economist David Crowe in a public statement.
The HMI tracks three indexes. Besides the October figures on the present market, NAHB/Wells Fargo's index gauging sales expectations for the next six months rose five points to 23, and the index gauging traffic of prospective buyers rose two points to 11.
The Arizona Housing Finance Authority has announced a new loan program for first-time home buyers. The MRB Plus combines the attractive mortgage rates of the Mortgage Revenue Bond loan with down payment and closing cost assistance. The MRB Plus will offer assistance in the amount of 5% of purchase price, that can be used as down payment or closing costs. This program can be used in Yavapai County.
What this boils down to is that qualifying first time home buyers can now purchase a home with as little as $1000 down. Here is a link to the MRB Plus Website.
Why Most Short Sales Fail
(And what to look for to insure success)
As you may know a short sale is a transaction in which a home is sold for less than the mortgage value and the remaining debt is forgiven by the lender(s). The easy part is marketing the home and getting an offer. The hard part is getting the offer accepted by the lender and getting them to forgive the remainder of the debt.
Let me walk you through the typical short sale you might find here in the Prescott area and describe to you why it has less than 20% chance of being successful.
First, the biggest challenge we have is with a listing agent that has no short sale system, training or support in place. The listing agent, along with his or her system and tools are the backbone of a successful short sale. So the listing agent (LA) takes the listing, puts a sign in the yard and prays for an offer. Usually the list price is significantly below market value in order to garner interest from buyers and get an offer submitted to the lender.
Next the property is eyed with suspicion by agents and buyers. They both are wondering if the list price is close to market value (that's what the lender will be aiming for), and more importantly does the LA know what he or she is doing. If the list price is crazy low or if the LA is not able to convince the buyer's agent that he is competent, both buyer and agent will very likely look for a more promising listing.
If the property does get an offer and the LA does not have the system and tools in place what happens next is a very long wait. Usually long enough for the buyer to get tired of waiting and to move on. Eventually the short sale turns into a foreclosure which leaves the buyer, seller and their agents disappointed.
Now let's look at how Keller Williams Check Realty excels at short sales.
First, I meet with the prospective short seller to explore motivation and make sure they understand the process and to see if the relationship is a good fit.
Second the sellers have a no-cost consult with an attorney who specializes in short sale counseling. It is very important to have some legal representation for the seller to make sure they are going in the direction that best serves their goals.
Next I complete a broker price opinion of the house which I send of to our full time team of bank negotiators (who have successfully closed more than 600 short sales). This is actually the most important part of our system. So important in fact that I pay 50% of my compensation to this team to insure that the transaction is successful.
Finally we are marketing the property, receiving offers and submitting one to the lender with the help of the negotiating team. We only submit one offer because the banks just do a better job with one offer at a time.
We also require the buyer to commit to 60 days without canceling or refunding the earnest deposit, and we place the listing "Pending Taking Backups" on the MLS. This lets the lender know we have a committed and serious buyer and also rewards the buyer for a quick offer by preventing other offers from confusing the transaction.
There are too many details to list them all here, but keep in mind that we have developed a system that has a huge success rate and is now setting the market standard for short sales in the Prescott AZ real estate market.
Please feel free to call or email for more information from the Prescott Area Short Sale Experts.
Here is a link to my latest Blog post on Active Rain.
Short Sales Are Changing
Last week I spent two days in Phoenix at the Chader Event. This was the real estate industry's brightest and best coming together to talk about where our market is going. On of the most interesting speakers was Michael Orr, a mathematician at ASU. He began with a slide of the following myths:
1. A glut of foreclosed homes overhangs the market
2. Shadow inventory is big, scary and out to get you.
3. A new wave of foreclosures is coming.
4. Short sales take forever and rarely succeed.
5. Renting is cheaper than buying a home.
Then he went through these myths and used current information from the Phoenix real estate market to dispel each and every one of them. His bottom line? The shift to a healthy market is already well under way in Phoenix. Buyers who think they can offer 70% of list price and get a great deal are in for some painful lessons. REO agents who rely on a steady stream of foreclosures need to find a new source of inventory. Most of the foreclosures in the western US have already been sold. Its is mostly the eastern US that has a judicial foreclosure process that will need more time to clear them out.
So what does this all mean for the Prescott Arizona market? Since Prescott generally follows the Phoenix market by 6 to 12 months we now have a clear indicator of the shape of things to come. On of Mr. Orr's lines still rings in my head:, "Practice saying this to your buyers; You know those great deals that were everywhere? .. Well you missed them".
>> Market Update
QUOTE OF THE WEEK..."Whether you think you can or think you can't--you are right."--Henry FordINFO THAT HITS US WHERE WE LIVE...Those of us who think we can participate in a housing market recovery sooner rather than later just got welcome support from some industry experts. As reported by Fortune on CNNMoney.com, "After four years of plunging home prices, the most attractive asset class in America is housing." Research firm Metrostudy, which tracks new-home inventories for 65% of the U.S. market, reports that the steep drop in construction over the last few years has reversed the supply glut, with starts now well below closings. The firm believes the low inventory should eventually lead to higher prices.
The Fortune posting also cited a new study from a major bank that found homeowners now pay only 9.8% of their income in after-tax mortgage, tax and insurance payments, down from 17.2% at the 2007 peak. This means it's now cheaper to pay a mortgage and the other major homeowner costs than it is to rent the same house in 28 out of 54 major markets.
Fortune further reports that where existing home inventories average close to seven months, a modest boost in demand will result in solid gains in home prices and new construction. This could happen quickly in markets now showing good job growth. Moody's Analytics forecasts prices going up three to four points faster than inflation over the next few years in virtually all such markets. They see home prices rising with rents, with apartments in short supply. Of course, the housing recovery still requires job creation and consumer confidence back to normal, but we finally seem headed in that direction.
2/7/11
INFO THAT HITS US WHERE WE LIVE... There's good
news in the latest housing market forecast for 2011 from the National
Association of Realtors (NAR). After dipping 4.8% last year, sales of
existing homes are predicted to grow 7.9% this year, to 5.3 million.
The gain for 2012 is forecast to be a little less, up 4.5%, to 5.53 million.
The existing home median price went up 0.3% in 2010, a nice recovery from
the 12.9% price drop of 2009. For 2011, the NAR sees it rising 0.5%, to
$173,000, then another 2.4%, to $177,900, in 2012.
New home sales are forecast to come back more briskly, up 17.7% in 2011,
following their 15.5% drop in 2010. The 2012 projection is for a strong 51.1%
sales gain, to 565,000 homes. The median price for new homes, which gained 2.2%
last year, should go up another 1.8% in 2011, to $224,700, then 1.9% in 2012,
to $229,000. The NAR's chief economist says this rebound in home sales does
depend on an improvement in the jobs market. Affordability also matters and
in Q4 of 2010 housing was the most affordable on record, according to NAR
numbers going back to 1971. The NAR feels the current situation of low home
prices along with low interest rates should continue.
1/5/11
If homes are selling in this buyers market, why isn't mine?
Homes are indeed selling in this buyers market, but many listings just sit there. Lets explore what mistakes sellers are making that prevent buyers from writing offers on the seller's home.
Just because your house is "On the market doesn't mean its In the Market".
Sellers need to keep in mind that buyers now have easy access to listings online. They can quickly narrow their search to a neighborhood and price range. Once they have identified a list of houses, they then quickly eliminate those homes that are overpriced and those in poor condition. A buyer may look at five or ten homes but will only write an offer on one. If you house earned a showing but didn't get an offer, chances are that you helped to sell the house down the street which was priced lower and was better staged. The graph above (from Jay Papasan, of Keller Williams) shows all the homes on the market. However only the homes that are priced competitively and well staged (shown in red) are "In the market" meaning they are likely to sell. Those in the grey are "Out of the Market" and will not sell. Many times I have watched sellers let their homes languish on the market until suddenly something shifts and they develop "seller urgency". When this happens the seller makes the necessary adjustments and the home sells quickly. The trick is to identify the urgency at the beginning of the listing process rather than waiting six months or a year while the market declines. 12/16/10
Huge majority of Americans still want to own homes
According to a study by Fannie Mae, the housing crisis hasn't quenched the homeownership thirst. More than 51% of people said the bust did not change their willingness to buy a home and an additional 27% said it actually made them more likely to do so. The report, the first close analysis Fannie has taken of consumer attitudes about the rent-or-own decision, found that qualitative reasons -- like having the ability to remodel or to send the kids to a better school -- have overtaken financial considerations as the primary motivators for homeownership. Although trillions of dollars of equity were wiped out by the housing bust and millions of people will lose homes to foreclosure, nearly two-thirds of people surveyed believe purchasing a house is a safe investment. More than half the public also thought buying a home was a good idea financially even if they plan to move out in less than three years. Further, a huge majority, 86% of those surveyed, cite income-tax benefits --
mostly the mortgage interest deduction -- as a big reason to buy.
November 5th, 2010
The market that we are in right now is an awesome opportunity; It's without a doubt the best buyer's market that we've seen in our entire lives. The convergence of rock-bottom interest rates, record-high affordability, motivated sellers, willing lenders, and home prices that have started to inch back up after declining for more than two years means that NOW is the time to buy.
Steve Murray, editor of REAL Trends, couldn't agree more. During a recent conversation, he said, "We are about to see the most incredible buyer's market that we've ever thought about in the history of our lives."
The question is, do the buyers know this?
This Graph shows the cost of a mortgage payment as a percentage of median income. As you can see 2010 has the lowest cost in the last decade! Now more than ever is the time to buy a home.
When supply exceeds demand, buyers have the upper hand, and that's where we are now! The current supply of homes for sale in the Prescott area stands at 10 months, meaning that at today's pace of home sales, it would take 10 months for the existing inventory to sell. Distressed properties (Bank owned and Short Sales) are now part of the mainstream real estate transactions. Nationwide they make up about 32% of all homes sold (in Prescott we are currently at 50% distressed properties). So now is the time for smart buyers who are looking for a deal to seize the opportunity!
October 25, 2010.
The chart above shows the ongoing Notice of Trustee's Sales from Jan 2006 through September 2010. After a peak in Yavapai County Arizona in June of 2009 we look to be heading for another peak of about 350 notice of Trustee's Sales per month. It is important to note that many of these future foreclosures may take 12 months or more, but it is plain to see that there is a huge volume of REO properties making its way to market. This will certainly impact the type of value of real estate sales in Yavapai County over the next 12 to 18 months.
Below is the split showing relative sales of Retail, Bank Owned, and Short Sales in Yavapai County as of September 2010. We are currently seeing a even split between REO and retail with Short Sales making a small dent in our market.
Housing construction performance unexpectedly rose last month, beating both the market's and analysts' expectations. The big surprise was initial home construction for September.
Construction starts on private homes in September ticked up to a seasonally adjusted annual rate of 610,000, which was 0.3 percent better than August's revised estimate of 608,000. Starts on single-family homes in September reached a rate of 452,000, which was 4.4 percent over August's revised figure of 433,000.
"The 0.3 percent monthly increase in U.S. housing starts in September, to 610,000 from 608,000, is better than it looks as starts were revised up in each of the previous two months," Paul Dales, an economist with Capital Economics, told the International Business Times.
That said, building permits for private housing in September dropped 5.6 percent below August's performance to a seasonally adjusted annual rate of 539,000. However, permits for single-family homes issued in September were at a rate of 405,000, which was 0.5 percent higher than August's revised figure of 403,000.
Builder confidence in the market for new, single-family homes rose three points to 16 for October, according the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), a survey of U.S. home builders. This was the first improvement registered by the HMI in five months, and returns the index to a level last seen in June of this year.
"The new-homes market is finally moving past the lull that occurred when the home buyer tax credits expired and economic growth stalled this summer," said NAHB Chief Economist David Crowe in a public statement.
The HMI tracks three indexes. Besides the October figures on the present market, NAHB/Wells Fargo's index gauging sales expectations for the next six months rose five points to 23, and the index gauging traffic of prospective buyers rose two points to 11.
The Arizona Housing Finance Authority has announced a new loan program for first-time home buyers. The MRB Plus combines the attractive mortgage rates of the Mortgage Revenue Bond loan with down payment and closing cost assistance. The MRB Plus will offer assistance in the amount of 5% of purchase price, that can be used as down payment or closing costs. This program can be used in Yavapai County.
What this boils down to is that qualifying first time home buyers can now purchase a home with as little as $1000 down. Here is a link to the MRB Plus Website.
Why Most Short Sales Fail
(And what to look for to insure success)
As you may know a short sale is a transaction in which a home is sold for less than the mortgage value and the remaining debt is forgiven by the lender(s). The easy part is marketing the home and getting an offer. The hard part is getting the offer accepted by the lender and getting them to forgive the remainder of the debt.
Let me walk you through the typical short sale you might find here in the Prescott area and describe to you why it has less than 20% chance of being successful.
First, the biggest challenge we have is with a listing agent that has no short sale system, training or support in place. The listing agent, along with his or her system and tools are the backbone of a successful short sale. So the listing agent (LA) takes the listing, puts a sign in the yard and prays for an offer. Usually the list price is significantly below market value in order to garner interest from buyers and get an offer submitted to the lender.
Next the property is eyed with suspicion by agents and buyers. They both are wondering if the list price is close to market value (that's what the lender will be aiming for), and more importantly does the LA know what he or she is doing. If the list price is crazy low or if the LA is not able to convince the buyer's agent that he is competent, both buyer and agent will very likely look for a more promising listing.
If the property does get an offer and the LA does not have the system and tools in place what happens next is a very long wait. Usually long enough for the buyer to get tired of waiting and to move on. Eventually the short sale turns into a foreclosure which leaves the buyer, seller and their agents disappointed.
Now let's look at how Keller Williams Check Realty excels at short sales.
First, I meet with the prospective short seller to explore motivation and make sure they understand the process and to see if the relationship is a good fit.
Second the sellers have a no-cost consult with an attorney who specializes in short sale counseling. It is very important to have some legal representation for the seller to make sure they are going in the direction that best serves their goals.
Next I complete a broker price opinion of the house which I send of to our full time team of bank negotiators (who have successfully closed more than 600 short sales). This is actually the most important part of our system. So important in fact that I pay 50% of my compensation to this team to insure that the transaction is successful.
Finally we are marketing the property, receiving offers and submitting one to the lender with the help of the negotiating team. We only submit one offer because the banks just do a better job with one offer at a time.
We also require the buyer to commit to 60 days without canceling or refunding the earnest deposit, and we place the listing "Pending Taking Backups" on the MLS. This lets the lender know we have a committed and serious buyer and also rewards the buyer for a quick offer by preventing other offers from confusing the transaction.
There are too many details to list them all here, but keep in mind that we have developed a system that has a huge success rate and is now setting the market standard for short sales in the Prescott AZ real estate market.
Please feel free to call or email for more information from the Prescott Area Short Sale Experts.
Here is a link to my latest Blog post on Active Rain.
Short Sales Are Changing
