MyPhoenixMLS Blog

On Wednesday, the Senate voted unanimously in favor of a bill to extend and expand the homebuyer tax credit.  On Thursday, the House voted 403-12 to pass the measure.  Today, President Obama signed the bill - H.R. 3548 - into law.  Totaling $24 billion, the law also provides extended jobless benefits for out-of-work Americans and tax cuts for struggling businesses.

The homebuyer tax credit provision, which was added to the stimulus bill by the Senate, extends the $8,000 first-time homebuyer credit through the end of June (for homebuyers who sign a binding contract by the end of April).  It also expands the credit to include a $6,500 credit for existing homeowners to buy a new home (as long as they’ve lived in their current residence for at least five years).  For more details on the homebuyer tax credit extension and expansion, check out yesterday’s post.

Supporters of the bill say that extending and expanding the tax credits are important to strengthen the fragile recovery that is taking hold in housing markets across the country.  While housing market numbers have been strong of late, the unemployment rate is still high (higher than it’s been in 26 years) and consumer confidence is still low.  This bill “is critical to maintaining the positive momentum we’ve been experiencing in the housing market and in the overall economy,” said one Realtors association.

What do you think?  Do you plan to buy a new home and use the tax credit?  Click on the “comments” link below and join the conversation!

Earlier today the House signed a bill that will extend (and expand) the first-time homebuyer’s tax credit and introduce a similar credit for people who already own their home but need to move.  President Obama is expected to sign the bill into law on Friday.

Here’s what the law does:

• Extends the $8,000 first-time homebuyer tax credit to May 1, 2010.

• Creates a new credit of up to $6,500 for existing homeowners who buy a new residence if they have lived in their current one for at least five of the last eight years.

• Expands both credits to include individuals making up to $125,000 a year and couples making up to $225,000 (the income limits used to be $75,000 and $150,000 respectively).  After those limits are reached, the credits are phased out.

Experts estimate that the extension and expansion of the homebuyer tax credits will cost about $11 billion.  The credit has been used in 1.2 million home purchases so far this year; according to the National Association of Realtors, 350,000 of those homes wouldn’t have been purchased without the credit.

What do you think?  Is extending and expanding the homebuyer tax credits a good idea?  Click on the “comments” link below and join the conversation!

On Tuesday I blogged about the fact that home prices rose in Phoenix for the third straight month since August 2006. But there’s more good news: the number of home sales was up, too — across the nation, actually — leading one real estate expert to dub this a real estate “mini-boom.”

“There’s a mini-boom going on in the housing market,” said Thomas Popik, who conducts a monthly survey of real estate agents for Campbell Communications, a research firm.

Nationally, sales rose 9.4% in September - a higher increase than had been expected, according to the National Association of Realtors.  Locally, sales were incredibly strong compared to last year - the number of homes sold in Phoenix was up 16% to 8,922.  And the number of homes sold in Scottsdale was up 16.1% to 1,851.

The “mini-boom” is fueled in part by the soon-to-expire First-time Homebuyer’s Tax Credit, as well as a still-increasing number of foreclosures.

According to the Arizona Republic, “The foreclosure rate has accelerated in more centrally located, often pricier neighborhoods while slowing down a bit in newer, more remote communities where the foreclosure floodgate burst in late 2007.”

What does it mean for you?

If you’re a buyer, the rapidly rising number of home sales means that we’re moving ever closer to the point where demand and supply are once again in balance, and then to the point where demand outstrips supply and prices rise.

At the same time, with a still-high number of foreclosures on the market, there are great deals to be had, even in the centrally-located, established neighborhoods of Phoenix and Scottsdale.  And, if you move fast, the homebuyer’s tax credit is effectively an $8,000 rebate on the purchase of a home.

If you’re a seller, the real estate “mini-boom” will afford you the opportunity to sell your home for a higher price, in less time.  If Congress extends the homebuyer’s tax credit, demand will continue to ramp up, and with the recession now “officially” over, consumers will likely soon regain confidence and loosen the purse strings.

What do you think?  What’s your prognosis for the “mini-booming” real estate market?  Are you planning to buy or sell soon?  Click on the “comments” link below and join the conversation!

Want to know more?  Click here to watch my “October Market Update” video.

Home prices rose in the Phoenix area for the third straight month in August ­ - a sign that the real estate market may well have hit bottom and caught the recovery wind.

According to the S&P/Case-Shiller Home Price Index, the median price of resold homes in the Phoenix area was up 1.6% in August compared to July.  Prices rose 1.1% in June - the first time they increased since the real estate bubble began to deflate in August 2006.

Source: http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,2,1,0,0,0,0,0.html

Prices in most of the other markets measured by the Case-Shiller index rose as well, and were up 1% overall.  And that’s a good thing, according to real estate professor Susan Wachter.  “If the increases are consistent across the markets, this is key,” she told the AP. “Then we’re seeing the formation of a bottom.”

Relative affordability - the median price in August was just about the same as in May of 2001 - is driving buyers back into the Phoenix market in huge numbers.  Local economist Elliott Pollack said that the residential real estate sector is “on its way to becoming a positive force in the economy” again.

What do you think?  How have rising home prices affected you?  Click on the “Comments” link below and join the discussion!

I decided again this month to look to Trulia to help me give you a more a detailed analysis of what’s going on in the Phoenix and Scottsdale real estate markets. A couple of notes:

• Median sales price, recently sold, and foreclosures numbers are based on public records
• Average listing price, homes for sale and open homes numbers are based on Trulia listings

Phoenix
The median sales price of homes in Phoenix during the July-September period was $95,000. That’s down 38.3% compared to the same period last year (when the median sales price was $153,964) but it’s up 9.2% ($8,000) from the previous quarter this year. The number of homes sold was up 16% – to 8,922. There are currently 19,366 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process – up slightly from the June-August period.

Phoenix Recently Sold Homes

Phoenix Recently Sold Homes

Scottsdale
The median sales price of homes in Scottsdale during the July-September period was $305,000. That’s 14.1% lower than the same period one year ago, but still 3.1% higher than 5 years ago. And while the median price is lower than last year, the number of sales is higher – up about 16.1% over 2008 (at 1,851 homes).

Scottsdale Recently Sold Homes

Scottsdale Recently Sold Homes

Phoenix housing market analyst R.L. Brown sounded downright optimistic in this month’s Housing Report:

• “For the first time since late 2008 we see new home prices rising in Phoenix.”
• “New home permits in July continued to show strength, and we expect this pace to continue as builder bring newly-positioned product on line and as spec inventories continue to decline.”
• “Phoenix resale home prices continue modest improvement also.”

Those are the numbers. What’s your view? Click on the “Comments” link below and join the discussion!

For a few months, I’ve been reading scattered reports that bidding wars are back in some areas of the Valley — where prices have made homes so affordable that investors are once again flooding the markets and sparking bidding wars for the best properties.

We’re in no way back to the boom-time days of getting a dozen offers on a property, each a spectacular show in one-upmanship.  But, in some real estate markets around Scottsdale and Phoenix, low prices and plentiful supply have re-heated the market and we are seeing multiple offers, once again.

That begs the question, then: As a buyer, how do you write the offer that the seller will accept?

Clearly, the offer itself reigns supreme.  The buyer will choose the highest bid.  But beyond naming the right price, there are some other steps you can take to up the chances that yours will be the offer the seller accepts.

Step 1: Remember that sellers are people, too

While you definitely don’t want to be cheesy (think singing telegram) or overbearing (think calling, and calling, and calling. . .) or, heaven forbid, creepy (think midnight serenades), trying to relate to the sellers on a personal level is a great strategy.

Last year I blogged about writing a personal letter with your offer, to explain to the sellers why they should pick you to buy their house.  A couple of tips:

1)      Always speak directly to the letter’s recipient.  Don’t just talk about your offer, talk about how it will benefit the seller.

2)      Include relevant information to make your point.  Use housing market statistics to make the case for your offer.

3)      Get emotional.  The house is, after all, the sellers’ home; they probably have a personal attachment to it, and would like to find a good “steward” to pass it on to.  Explain how you’ll be that steward.

Step 2: Dot your t’s and cross your i’s

If you leave any work to the seller - or make accepting your offer more difficult than the next guy’s, chances are that, all else being equal, the seller will pick that next guy’s offer.  That doesn’t mean you should ignore things like requiring a home inspection; it does mean that you should make sure that all the details - like any contingencies - are in order when you submit your offer.

Step 3: Early birds catch the worms

Of course you don’t want to rush into a decision to buy a home - probably the biggest financial decision you’ll ever make.  But if you spend too long hemming and hawing every time a home you like comes on the market, you may never see an offer accepted.  Instead, do some upfront prep work.  Talk with your real estate agent about the things you a) need in a home; b) want in a home; and c) pie-in-the-sky, wouldn’t-it-be-grand dream home features.  Make a checklist that you can compare each new market listing to.  Decide in advance how much you can afford to spend on a home, and get pre-approved for a mortgage.  Don’t look at homes far outside your price range.

Armed with a checklist and a pre-approval, you’ll be ready to pounce when your dream home comes up for sale.  And the quicker you pounce, the quicker you are to get that juicy worm.

What do you think?  Do you have a “secret” for getting an offer accepted?  Click on the “Comments” link below and join the discussion!

In a word: Yes!

The anecdotal evidence

I’m listing a house for a friend in Queen Creek, one of Phoenix’s “bedroom” communities - hit particularly hard by the real estate crash.  She’s short-selling her house because it’s worth about $150,000, but she owes $290,000.

When we were making a listing plan the other day, she asked how long she should expect the house to be on the market.  We looked at the MLS for sales of similar houses in her neighborhood and found that two of the same model at about the same price had sold in the last week - one had been on the market for 12 days and the other had been on the market for 8 days.

That echoes the experience of many buyers and sellers in the areas hardest hit by the real estate crisis.  In some Phoenix areas, buyers are once again entering bidding wars.  One buyer I know entered 12 bids (all at market value) and was outbid every time.

So that’s the anecdotal evidence that buyers are once again buying.  Do hard numbers back it up?

In another word: Yes!

The hard numbers

Active listings

Active listings is a measure of the number of homes currently listed for sale on the MLS.  As demand heats up - as more buyers enter the market - the number of active listings falls.  As the following charts show, active listings in both Scottsdale and Phoenix haven fallen dramatically over the course of the year.  That’s great news!

Source: CromfordReport.com

Source: CromfordReport.com

Months supply

Another indicator of the health of the housing market is “months supply” - basically the number of months it would take to sell all the homes currently on the market, at the current rate of sales.  Months supply in Phoenix peaked at more than 20 months in early 2008 (as you can see from the chart below).  Now it’s back to pre-boom/bust levels.  In Scottsdale, months supply is down from its height-of-the-crisis peaks, but still a bit above pre-boom/bust levels.

Source: CromfordReport.com

Source: CromfordReport.com

So the hard numbers do bear out my anecdotal evidence that buyers are once again - yes, buying.

What do you think?  Click on the “Comments” link below and join the discussion!

Imagine lying awake at night listening to your brand new, $357,000, golf course home cracking.  Or needing to replace the roof on your new home even before you replace its light bulbs.  Or being forced to move out - just months after you moved in - because of toxic mold growing in your new home.

These are problems that can arise, even in newly-built homes.

The solution?  A home inspection.

Despite what many people think, a home inspection is a must, even when you’re buying a newly-built home.  An inspection by a reputable, licensed home inspector will help you avoid buying one of the 17% of new homes with significant defects. Visit http://www.nabie.org/, the National Academy of Building Inspection Engineers, to find an inspector in your area.

The Wall Street Journal also recommends getting another home inspection (in addition to the one you get before you buy the home) just before the builder’s warranty expires, because some problems don’t show up until the home is one or two years old.  That way, at least, any problems that have come up can be fixed at the builder’s expense.

(For more details on the importance of a home inspection, check out my free report, Home Inspection? Worth EVERY Cent!)

What’s behind shoddy construction?

Estimates suggest that more new homes had significant problems since the height of the real estate boom.  Builders and sub-contractors wanted to build as many homes as possible to keep up with the red-hot demand, at times sacrificing quality in the process.  “The furious pace of home building from the late 1990s through the first half of the 2000s contributed to a surge in defects, experts say.”

Fortunately, you can take steps to help ensure that you don’t buy a home with significant defects, by hiring a reputable, licensed home inspector before you sign on the bottom line - whether the home you’re buying is brand new or 100 years old.

What do you think?  Have you been affected by shoddy new home construction?  Click on the “Comments” link below and join the discussion!

I know I just wrote a response to a Realtor.com “Hot Topic” - about what goes in to your credit score and how it affects you as a home buyer.  But their most recent hot topic was too interesting to pass up.  The question: “Should you continue to pay for a home where you owe more than it’s worth?”

I’ve blogged before about strategic defaults - where a homeowner, who can afford his mortgage, intentionally stops paying and either lets the bank foreclose or tries to negotiate a short sale.  The posts generated a lot of attention - a firestorm, really.  Some people thought that strategically defaulting could be a sound business decision for some people.  Others found it morally reprehensible.

Zillow.com estimates that 22% of all homeowners in the U.S. have negative equity.  In the Phoenix Metro area, 80% of homeowners with nonprime mortgages do.  The average amount of negative equity (among subprime and Alt-A borrowers) is $73,314.

Does it makes sense for those homeowners to continue to pay on their homes, or should they walk away?  I must sound like a broken record, but I have to say that I’m not advocating for strategic defaults; nor am I condemning them.  That said, there are a number of factors to consider when thinking about “walking away”:

1) How “upside down” are you?  One of my newest clients is trying to negotiate a short sale for her home, even though she can still afford her mortgage.  She lives outside of Phoenix where the bubble and bust were particularly dramatic.  She owes almost twice what her home is worth.  If we assume that the market will return to a normal rate of appreciation in the next few years, it would take her more than a decade to get out of the hole.

Contrast her situation to one of a North Scottsdale homeowner who owes just 5% more than his home is worth.  Again, assuming that the market will return to a normal rate of appreciation in the next few years, it shouldn’t take this homeowner more than a year or two to get right-side up again.

2) Do you have to move?  Even if you owe more on your home than its current market value, that’s all on paper - unless you need to sell today.  My new client, in addition to being way upside down, needs to move because her husband has a new job in Desert Ridge (which means a three hour commute every day right now).

If you don’t have to move - and you likely won’t have to move in the near future, staying put is probably the best thing to do.

3) Are you willing to accept the consequences of walking away?  Even if you are able to negotiate a short sale with the bank, you’ll feel the ramifications of your choice for several years.  First, if you’ve missed your mortgage payment in the run-up to the short sale, those late payment dings will hurt your credit score for 2 years.  If the bank forecloses, that black mark will stay on your credit for 7 years, and will probably prevent you from buying another home for at least 4 years.

Clearly, answering the question, “Should you continue to pay for a home where you owe more than it’s worth?” is tough - and it should be.  No matter your circumstances, a mortgage is a contract - a promise you made to the lender that, in exchange for the money to buy a home, you would repay that money as agreed.  Breaking that promise, while it may be the right decision for some people in some circumstances, shouldn’t be taken lightly.

What do you think?  Are there circumstances in which walking away is the right decision?  Click on the “Comments” link below and join the discussion!

Last week Realtor.com asked “Do you know what affects a homeowner’s credit rating?”  It’s a good question - and an important topic - so I thought I’d blog about it today.

The most commonly used credit scoring method is the FICO score.  There are 5 factors that are used to determine your FICO score, as you can see in the chart below.  The percentages reflect the relative importance of that factor; in other words, payment history is the most important factor, but is only slightly more important than amounts owed.

Source: MyFICO.com

The whole point of a credit score is to offer lenders a quick and easy way to estimate the risk associated with lending money to you.  If lending money to you is riskier, because you’re more likely than someone else to default, the lender will charge you a higher interest rate to compensate for that higher risk (or will simply not lend to you at all).  So all of the factors that are used to determine your credit score are factors because they’re statistically relevant ways to estimate the risk you represent to a potential lender.

Payment history

The payment history factor is fairly simple to understand: it takes into account how you’ve paid your bills.  After all, your history of debt repayment is an excellent indication of whether or not you’ll pay your debts on time in the future.  It includes delinquencies, foreclosures, bankruptcies ­ - as well as how many accounts were paid late, the amount(s) that were paid late, and how recent those delinquencies are.

Amounts owed

Almost as important as how you’ve paid your bills is the amount of debt you hold.  That’s because the more debt you hold, the higher risk there is that you will become overburdened with debt and unable to meet your obligations.

In fact, when I spoke with a local real estate attorney about the topic of strategic mortgage defaults, he told me that there can be a trade-off between payment history and amounts owed, at least for people who have other non-mortgage debt.  “If a person makes the decision to stop paying his mortgage, and instead puts that money to paying off other debts, then the credit hit that comes from the short sale or foreclosure will be partially offset by a credit boost from having less other debt.”  (Not that I’m advocating for strategic mortgage defaults.)

Length of credit history

The length of time that you’ve had credit and debt is a good indication of your credit risk because the longer your history of on-time debt repayment, the more certain a lender can be that you will continue to repay your debts on time.  If you’ve just begun to establish your credit history, on the other hand, the lender has less “past behavior” to judge you on.

New credit

Research has demonstrated to the credit companies that people who take out a lot of new credit at one time pose greater credit risks than those who have not taken out new credit lately.  The “new credit” factor incorporates, for example, the number of recently opened accounts you have in proportion to older accounts and the number of times you’ve recently applied for new credit.

Types of credit used

This factor considers the types of debt you have - installment debt (like a mortgage) and revolving debt (like credit cards).

Why does it matter?

Your credit score will affect not only whether you’re able to qualify for a mortgage, but also the rate you can get.  The following table is an example of how much less a person with a higher credit score might pay each month:

Source: MyFICO.com

On a 30-year fixed, $150,000 mortgage, a person with the highest credit score would pay $150 less every month - and $54,133 less over 30 years - than a person with a fair (620-639) credit score.

Clearly, having a higher credit score pays off.  At the beginning of the year, I blogged about how to boost your credit score.  Check out those two posts to learn how to boost a poor credit score (or maintain a good one!).

What do you think?  Click on the “Comments” link below and join the discussion!