I just got back from a vacation on the east coast. Part of the time I was there I stayed with family outside of Boston. Invariably, real estate and the real estate market was a logical topic of discussion, considering that one of my Aunts is also a real estate broker. In general, it seemed that a lot of people in the Boston area (which has historically had some of the highest real estate prices in the nation), view the market as being battered and beaten down by the current real estate down turn. "It will come back eventually, it's a cycle," said my Aunt who is a real estate broker in Westwood, MA- an affluent suburb of Boston. She also said, "Now is the time to buy. We have a lot of inventory, and the prices are very manageable compared with a few years ago." Interesting, I thought and agreed. It is a great time to buy, and buyers can afford to be choosy right now.
On the plane trip home, I picked up an article in the Washington Post, entitled "Where Short Sales Stumble." It was a remarkably well written and informative article that had an excellent perspective about short sales. I recommend anyone who is considering buying a short sale property, or anyone wishing to increase their knowledge of short sales to read this article. Considering that it's a buyer's market in most areas of the nation, many buyers are on the lookout for 'deals.' You can't blame them! That MLS listing of a 'short sale,' may not be as legitimate as it appears on the surface. Buyer beware. If the seller is upside down (owing more on the house than it's current market value), a short sale most likely will not be accepted by the bank- especially if the buyer is not behind on their payments. Don't let the seller fool you on this one! Most upside down owners should consider staying put if they can afford their mortgage and do not have to move. Banks are a for profit business, and they do not have sympathy that a borrower's house has dropped in value if the borrower can still afford to make their payment. Borrowers in this situation should be prepared to stay put, unless they have the cash to pull from their pocket or 401K to close a sale. So make sure that you are dealing with a legitimate short sale, not an upside down owner.
There are a series of questions that any prospective buyer of a short sale property needs to have answered before making an offer. These are the most important questions to get answers to upfront. Having answers to these questions, will (in my opinion) dramatically increase the odds of having your short sale purchase actually be accepted by the bank and close escrow.
1) How many banks need to approve the sale?
A- If it's more than one, the property will most likely fall short of being accepted as a short sale because it will require the approval of more than one bank.
2) Has the seller received a notice of default?
A- If so, the bank is probably ready to deal, but make sure that the foreclosure date is at least six weeks away- otherwise it's too short of a window for the myriad of paperwork and red tape that you will have to cut through to get the short sale approved.
3) Has the short sale been 'pre-approved' by the bank?
A- Do not attempt to make an offer unless this is the case. If the bank hasn't heard that the borrower is wanting to negotiate a short sale, it may be news to them, and you do not want to deal with the type of seller who is just hoping to dangle the 'magic carrot' in front of the lender. Do you want to be the guinea pig, and take a gamble that the lender will bite?
4) Does the listing agent have experience in negotiating short sales?
A- This is a very important question to ask up front. If the answer is no, consider walking away, as once again, do you want to be the guinea pig? If you're dealing with an aggressive listing agent who is experienced in negotiating short sales, you may be in luck. But make sure the the listing agent has the right person to talk to at the bank, and that they have initiated contact before you submit your offer.
Overall, the percentage of short sales that go to closing is only about 1 in 20. The key in successfully buying a short sale property is to work with an experienced Realtor, don't do inspections prior to approval of the short sale, and be prepared to walk away if it seems like more hassle than it's worth. Make sure you have all the facts before you make your offer- or it could be a really long (and costly) summer for you. And remember, there are plenty of great properties that are priced realistically to choose from that will not be so aggravating to negotiate with. That's the buyer's advantage in this market.
Please contact me with any questions about this article, or about the Tucson real estate market. I would be happy to be of service with your real estate needs.
Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Realtor with Long Realty
Direct: (520) 404-0544
sley@longrealty.com
http://www.sarahley.longrealty.com/
Sunday, June 15, 2008
Monday, April 14, 2008
The Tax Man & What does that have to do with Real Estate?
It's the day before tax day, and many folks are especially stressed out to meet the April 15th deadline. I was thinking that there is a connection about how people feel during tax season, and how buyers and sellers feel during a challenging real estate market.
It's that sort of market right now. A market that makes you feel like tomorrow is tax day. Buyers are anxious. There are so many choices. Prices seem to be all over the map. Many buyers want to 'wait out the market' until it hits the absolute bottom. But this strategy is flawed, and leaves out the fact that all the time they are waiting, they could have been getting some great tax deductions by owning real estate. They could have been saving money by not renting. Could of, would of, should of. It's that classic second guessing syndrome. It reminds me of watching a gorilla at the zoo and trying to guess which side of his cage he will go to next. You just never know, do you?
It's the same way with the real estate market. It could go any way the wind goes. None of us has access to that proverbial crystal ball. That being said, it seems logical that if you need to buy a house, you buy a house- no matter what the market is doing. This market will help buyers immensely, so score one more for the buyers' side of the fence. Buyers- here are the facts: Seller's are ready to deal. Prices have dropped. Interest rates are low. There are plentiful choices of homes for sale in all price ranges. Even if you don't get your first choice, you can move onto your second, third...tenth- well, you get the idea! Buying a home is like doing your taxes- when you gotta do it, you gotta just do it. Truly, there is no time like the present. For those who want to keep waiting...Well. What can I say, other than that is your prerogative. One of my favorite quotes is the following, "Life is what happens while you're busy making plans." So for all the buyers who are planning to hold out for the bottom, just remember the trade off from not being able to enjoy your new home. Why postpone your happiness, when historically real estate is the safest investment you can make?
Sellers have a different sense of anxiety than buyers right now. And buyers, in case you haven't figured it out yet- you've got it made, especially if you're not needing to sell a home before you buy. I have several clients who are in this situation that I term, "frozen equity." They must sell before they can buy. Given the state of the market, that's not an easy task by any stretch of the imagination. Many houses have been and are sitting on the market for what to many home sellers seems to be an exhausting and unbearable length of time. Some in excess of a year or more. Even great houses that I thought would sell in a heartbeat are still sitting on the market. Sometimes clean houses that are move in ready and have had big price reductions still fail to get buyers' attentions, and have sat without offers for great lengths of time. This can only be attributed to a glut of inventory, and a decline in demand by buyers who are waiting out the market, as mentioned above.
Bottom line is that in this market, buyers want to feel that they are getting "a deal." They want the best house on the block for the least buck! If you, Mr. Home Seller, are not comfortable selling your home in this sort of an environment, especially if you don't want, or don't need to sell- please don't put your home on the market right now. You'll just be setting yourself up for aggravation in an overcrowded marketplace. There is a huge amount of real estate inventory that needs to be cleared out before the market has any chance of becoming a more balanced market. It's no different than a department store after Christmas. Most shoppers are going ganga over the 50% off clearance holiday merchandise. The new shipment of Valentine items is (however beautiful and prominently displayed) collecting dust. It's just a case of simple human nature to try and get the best price possible, whether it's real estate or Christmas decorations.
When a conventional seller's property is competing with foreclosures in a neighborhood, the resulting environment is like a department store after Christmas. The element of deep discounting in a market with many foreclosures and excess inventory confounds the situation, creating a clearance sale mentality and lowering the perceived and actual market value of the community as a whole. Neighbors can try to help neighbors in an attempt to prevent further erosion in home values, however counter intuitive this type of action may seem. That way, we can help to get rid of the old inventory, bring in the new, and keep up the neigbhorhood in the process.
How is the real estate market related to tax season, you ask? Well, like tax season, an artificial frenzy is created when money owed and deadlines come together. The current real estate market is also an artificial frenzy, created by previously artificially high real estate prices, and further perpetuated by the media to sell more newspapers. This artificial frenzy, like any artificial frenzy feeds on itself, and the hole deepens with each bite. If the market were left alone to its own defenses, buyers would buy and sellers would sell. But when you add the component of money and deadlines, fear is created, thus the cycle broadens. The real estate market will eventually even out and stabilize, it's just a matter of when. Like any other challenge in life, it's about a mind set. In order for a change to take place, a necessary perspective shift must occur. It's a psychological line in the sand that needs to be crossed in order to see it. Once buyers realize, "Hey, there really are some good deals out there. I need a house, therefore I'm going to buy a house." And sellers sensibly ask their agent, "Hey, I'm taking that job in Ohio. How low do I have to price my house to sell it in 60 days?" The market will come back. It really hasn't gone anywhere. Let us stop throwing the baby out with the bath water and allow the dynamics of the market do their own magic.
Written by Sarah Ley,
BSBA, ABR, CRS, CNHSA
Tucson, AZ Realtor with
Long Realty Company(520) 404-0544
http://www.sarahley.longrealty.com/
sley@longrealty.com
It's that sort of market right now. A market that makes you feel like tomorrow is tax day. Buyers are anxious. There are so many choices. Prices seem to be all over the map. Many buyers want to 'wait out the market' until it hits the absolute bottom. But this strategy is flawed, and leaves out the fact that all the time they are waiting, they could have been getting some great tax deductions by owning real estate. They could have been saving money by not renting. Could of, would of, should of. It's that classic second guessing syndrome. It reminds me of watching a gorilla at the zoo and trying to guess which side of his cage he will go to next. You just never know, do you?
It's the same way with the real estate market. It could go any way the wind goes. None of us has access to that proverbial crystal ball. That being said, it seems logical that if you need to buy a house, you buy a house- no matter what the market is doing. This market will help buyers immensely, so score one more for the buyers' side of the fence. Buyers- here are the facts: Seller's are ready to deal. Prices have dropped. Interest rates are low. There are plentiful choices of homes for sale in all price ranges. Even if you don't get your first choice, you can move onto your second, third...tenth- well, you get the idea! Buying a home is like doing your taxes- when you gotta do it, you gotta just do it. Truly, there is no time like the present. For those who want to keep waiting...Well. What can I say, other than that is your prerogative. One of my favorite quotes is the following, "Life is what happens while you're busy making plans." So for all the buyers who are planning to hold out for the bottom, just remember the trade off from not being able to enjoy your new home. Why postpone your happiness, when historically real estate is the safest investment you can make?
Sellers have a different sense of anxiety than buyers right now. And buyers, in case you haven't figured it out yet- you've got it made, especially if you're not needing to sell a home before you buy. I have several clients who are in this situation that I term, "frozen equity." They must sell before they can buy. Given the state of the market, that's not an easy task by any stretch of the imagination. Many houses have been and are sitting on the market for what to many home sellers seems to be an exhausting and unbearable length of time. Some in excess of a year or more. Even great houses that I thought would sell in a heartbeat are still sitting on the market. Sometimes clean houses that are move in ready and have had big price reductions still fail to get buyers' attentions, and have sat without offers for great lengths of time. This can only be attributed to a glut of inventory, and a decline in demand by buyers who are waiting out the market, as mentioned above.
Bottom line is that in this market, buyers want to feel that they are getting "a deal." They want the best house on the block for the least buck! If you, Mr. Home Seller, are not comfortable selling your home in this sort of an environment, especially if you don't want, or don't need to sell- please don't put your home on the market right now. You'll just be setting yourself up for aggravation in an overcrowded marketplace. There is a huge amount of real estate inventory that needs to be cleared out before the market has any chance of becoming a more balanced market. It's no different than a department store after Christmas. Most shoppers are going ganga over the 50% off clearance holiday merchandise. The new shipment of Valentine items is (however beautiful and prominently displayed) collecting dust. It's just a case of simple human nature to try and get the best price possible, whether it's real estate or Christmas decorations.
When a conventional seller's property is competing with foreclosures in a neighborhood, the resulting environment is like a department store after Christmas. The element of deep discounting in a market with many foreclosures and excess inventory confounds the situation, creating a clearance sale mentality and lowering the perceived and actual market value of the community as a whole. Neighbors can try to help neighbors in an attempt to prevent further erosion in home values, however counter intuitive this type of action may seem. That way, we can help to get rid of the old inventory, bring in the new, and keep up the neigbhorhood in the process.
How is the real estate market related to tax season, you ask? Well, like tax season, an artificial frenzy is created when money owed and deadlines come together. The current real estate market is also an artificial frenzy, created by previously artificially high real estate prices, and further perpetuated by the media to sell more newspapers. This artificial frenzy, like any artificial frenzy feeds on itself, and the hole deepens with each bite. If the market were left alone to its own defenses, buyers would buy and sellers would sell. But when you add the component of money and deadlines, fear is created, thus the cycle broadens. The real estate market will eventually even out and stabilize, it's just a matter of when. Like any other challenge in life, it's about a mind set. In order for a change to take place, a necessary perspective shift must occur. It's a psychological line in the sand that needs to be crossed in order to see it. Once buyers realize, "Hey, there really are some good deals out there. I need a house, therefore I'm going to buy a house." And sellers sensibly ask their agent, "Hey, I'm taking that job in Ohio. How low do I have to price my house to sell it in 60 days?" The market will come back. It really hasn't gone anywhere. Let us stop throwing the baby out with the bath water and allow the dynamics of the market do their own magic.
Written by Sarah Ley,
BSBA, ABR, CRS, CNHSA
Tucson, AZ Realtor with
Long Realty Company(520) 404-0544
http://www.sarahley.longrealty.com/
sley@longrealty.com
Sunday, March 30, 2008
The Mortgage Mountain- "Turning a Big Ship"
"An appeaser is one who feeds a crocodile, hoping it will eat him last." -Winston Churchill
This is a quote that I believe sums up in a nutshell how many of the nation's lenders are handling their responsibilities in today's credit crisis. Thus, my blog this week is of the editorial nature, as I'm not especially happy with the way lenders are managing situations they may have created by making bad loans to begin with.
I've been reading numerous articles about the deepening mortgage crisis, and I am continually saddened by the stories of individuals, families, and even small home builders who have been swept away by the ever increasing wave of foreclosures. I read one article that likened an individual homeowner attempting to work with lenders to negotiate alternatives for refinancing or freezing their monthly mortgage payment to be like trying to"turn a big ship." That's when I came up with the idea of calling this big ship that is collectively the lender "The Mortgage Mountain." For a lot of hard working people, their monthly mortgage payment seems like an insurmountable mountain that many of them will never get to the top of. I think that lenders owe borrowers a rope and some hooks to help them climb the mountain, rather than being of the mindset that they got themselves into this mess and they should be able to climb it alone.
While it's certainly true that the government seems to be making a concerted effort to stem the tide of foreclosures by offering one-on-one assistance to borrowers that may be in various stages of default on their loans with programs like Hope Now, lenders ought to step in and offer to help borrowers- without being told that they have no choice. After all, the lenders were the ones making loans that they in many instances had no solid idea if the borrowers would or could re-pay. The defining criteria of loan approval for these loans was based solely on the lender's own profit margins and bottom lines, not an ability to re-pay them, as it should have been based upon. These government programs that have been set up to assist borrowers in trouble need to make lenders accountable if they are going to achieve what they were supposedly established to achieve.
There are no easy answers. That is for sure! Even if all of the current sub prime and exotic mortgages were reset to 30 year fixed rate loans at lower interest rates, undoubtedly many borrowers would still be in over their heads. Currently, much of the problem may be attributed more to declining market values than bad loans. What incentive do borrowers have to refinance and stay in their homes when they are upside down on their mortgage and owe more on the house than it's worth in today's market? Plenty it seems for many borrowers. Pride for one thing. Pride of ownership, pride that when you make a promise, you keep it. After all, that's the American way. We were taught that you don't walk away from your obligations. It's amazing how tenaciously many homeowners are struggling to hold onto their homes rather than to take the easy route and walk away from them.
Thankfully, homeowners can find many resources to aid in their battles to keep their homes. Online help is available, in many forms. See this website for an example of one way that grassroots organizations are taking shape to offer creative advice and possible solutions to stave off the tide of foreclosures. Lenders should be thrilled at homeowners who are fighting to keep their homes. They should jump right into the ring with the homeowner to do everything they can to try and make it manageable for the homeowner to refinance at a comfortable rate, so they can stay in their home. In the long run, helping borrowers instead of turning their backs on them has the potential to save the lenders a huge amount of money and headaches by having fewer properties to foreclose on. Fewer foreclosures also means possibly preventing a further erosion of home values. A sea of foreclosures has proven to do nothing for the real estate market but weaken buyer demand and cause a deeper erosion of property values.
A foreclosure can be a life changing experience for many people. Some liken it to a death or a divorce. Surely a financial catastrophe of this magnitude must feel like their world is crumbling to many people. We as real estate agents often times are caught in the middle. Right now in Tucson, many homeowners are attempting to sell their homes in what is called a "short sale." A short sale is when a homeowner who is behind on their mortgage tries to sell their house prior to it foreclosing. In a short sale, the lender agrees to accept less than what is owed on the loan to avoid the expense that it would cost the lender to foreclose on the property.
Short sales are difficult for Realtors because lenders are not very communicative or direct. They usually take much longer to close escrow than regular transactions, leaving the buyer of the house feeling like they were left hanging out to dry. There is one agent in my office who has been waiting to hear back from a lender of a property that a client is purchasing as a short sale for eight weeks. I find this almost impossible to comprehend in today's era of modern technology. Messages can be sent across the world in a matter of seconds. How can a financial entity be this inept at dealing with its accounts? I can only pose that as a rhetorical question for obvious reasons! In many instances, lenders will try to avoid compensating the real estate brokers for their participation in a sale (or else they will drastically reduce their compensation without cause or explanation), simply because they control the money. I know many agents who have worked extremely hard on these types of transactions, only to be burned by the lender in the end.
Additionally, lenders have been know to say they will agree to a short sale, and then once the transaction is complete, they file a deficiency judgement against the borrower in default in an attempt to recover the money they are owed. I have heard from inside sources that the only recourse a borrower has in an instance like this is to file personal bankruptcy. In January of 2009, many people who were either foreclosed on or sold their homes in short sales may be in for a rude awakening when they receive 1099's saying that they had miscellaneous income on the forgiven portion of the loan, and they may owe the IRS income taxes on the forgiven portion of the loan.
All in all, it's a difficult time for many homeowners. There are two silver linings right now for buyers. One is that home prices have dropped considerably, much of the decline being attributed to increased foreclosures and the ripple affect of them. In a few depressed areas of the nation, prices have fallen as much as 40%. Here in Tucson, prices have come down as much as 20% in some areas from their 2005-2006 peaks. Buyers can get a home for much less money, couple that with the second silver lining- the return of FHA financing. The real estate market won't be able to turn around until three things happen: 1) the market must absorb the existing inventory, 2) buyer demand must increase, and 3) lenders must find a way to help distressed homeowners and prospective borrowers. The government should find a way to make lenders accountable for being part of the solution. Otherwise, the government will become the proverbial appeasing alligator too.
Please feel free to call or e-mail me with your questions and/or concerns, and of course if you would like more information about the Tucson real estate market, or are thinking about buying or selling a Tucson property.
Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Tucson, AZ REALTOR with
Long Realty Company
Direct: (520) 404-0544
http://www.sarahley.longrealty.com/
sley@longrealty.com
This is a quote that I believe sums up in a nutshell how many of the nation's lenders are handling their responsibilities in today's credit crisis. Thus, my blog this week is of the editorial nature, as I'm not especially happy with the way lenders are managing situations they may have created by making bad loans to begin with.
I've been reading numerous articles about the deepening mortgage crisis, and I am continually saddened by the stories of individuals, families, and even small home builders who have been swept away by the ever increasing wave of foreclosures. I read one article that likened an individual homeowner attempting to work with lenders to negotiate alternatives for refinancing or freezing their monthly mortgage payment to be like trying to"turn a big ship." That's when I came up with the idea of calling this big ship that is collectively the lender "The Mortgage Mountain." For a lot of hard working people, their monthly mortgage payment seems like an insurmountable mountain that many of them will never get to the top of. I think that lenders owe borrowers a rope and some hooks to help them climb the mountain, rather than being of the mindset that they got themselves into this mess and they should be able to climb it alone.
While it's certainly true that the government seems to be making a concerted effort to stem the tide of foreclosures by offering one-on-one assistance to borrowers that may be in various stages of default on their loans with programs like Hope Now, lenders ought to step in and offer to help borrowers- without being told that they have no choice. After all, the lenders were the ones making loans that they in many instances had no solid idea if the borrowers would or could re-pay. The defining criteria of loan approval for these loans was based solely on the lender's own profit margins and bottom lines, not an ability to re-pay them, as it should have been based upon. These government programs that have been set up to assist borrowers in trouble need to make lenders accountable if they are going to achieve what they were supposedly established to achieve.
There are no easy answers. That is for sure! Even if all of the current sub prime and exotic mortgages were reset to 30 year fixed rate loans at lower interest rates, undoubtedly many borrowers would still be in over their heads. Currently, much of the problem may be attributed more to declining market values than bad loans. What incentive do borrowers have to refinance and stay in their homes when they are upside down on their mortgage and owe more on the house than it's worth in today's market? Plenty it seems for many borrowers. Pride for one thing. Pride of ownership, pride that when you make a promise, you keep it. After all, that's the American way. We were taught that you don't walk away from your obligations. It's amazing how tenaciously many homeowners are struggling to hold onto their homes rather than to take the easy route and walk away from them.
Thankfully, homeowners can find many resources to aid in their battles to keep their homes. Online help is available, in many forms. See this website for an example of one way that grassroots organizations are taking shape to offer creative advice and possible solutions to stave off the tide of foreclosures. Lenders should be thrilled at homeowners who are fighting to keep their homes. They should jump right into the ring with the homeowner to do everything they can to try and make it manageable for the homeowner to refinance at a comfortable rate, so they can stay in their home. In the long run, helping borrowers instead of turning their backs on them has the potential to save the lenders a huge amount of money and headaches by having fewer properties to foreclose on. Fewer foreclosures also means possibly preventing a further erosion of home values. A sea of foreclosures has proven to do nothing for the real estate market but weaken buyer demand and cause a deeper erosion of property values.
A foreclosure can be a life changing experience for many people. Some liken it to a death or a divorce. Surely a financial catastrophe of this magnitude must feel like their world is crumbling to many people. We as real estate agents often times are caught in the middle. Right now in Tucson, many homeowners are attempting to sell their homes in what is called a "short sale." A short sale is when a homeowner who is behind on their mortgage tries to sell their house prior to it foreclosing. In a short sale, the lender agrees to accept less than what is owed on the loan to avoid the expense that it would cost the lender to foreclose on the property.
Short sales are difficult for Realtors because lenders are not very communicative or direct. They usually take much longer to close escrow than regular transactions, leaving the buyer of the house feeling like they were left hanging out to dry. There is one agent in my office who has been waiting to hear back from a lender of a property that a client is purchasing as a short sale for eight weeks. I find this almost impossible to comprehend in today's era of modern technology. Messages can be sent across the world in a matter of seconds. How can a financial entity be this inept at dealing with its accounts? I can only pose that as a rhetorical question for obvious reasons! In many instances, lenders will try to avoid compensating the real estate brokers for their participation in a sale (or else they will drastically reduce their compensation without cause or explanation), simply because they control the money. I know many agents who have worked extremely hard on these types of transactions, only to be burned by the lender in the end.
Additionally, lenders have been know to say they will agree to a short sale, and then once the transaction is complete, they file a deficiency judgement against the borrower in default in an attempt to recover the money they are owed. I have heard from inside sources that the only recourse a borrower has in an instance like this is to file personal bankruptcy. In January of 2009, many people who were either foreclosed on or sold their homes in short sales may be in for a rude awakening when they receive 1099's saying that they had miscellaneous income on the forgiven portion of the loan, and they may owe the IRS income taxes on the forgiven portion of the loan.
All in all, it's a difficult time for many homeowners. There are two silver linings right now for buyers. One is that home prices have dropped considerably, much of the decline being attributed to increased foreclosures and the ripple affect of them. In a few depressed areas of the nation, prices have fallen as much as 40%. Here in Tucson, prices have come down as much as 20% in some areas from their 2005-2006 peaks. Buyers can get a home for much less money, couple that with the second silver lining- the return of FHA financing. The real estate market won't be able to turn around until three things happen: 1) the market must absorb the existing inventory, 2) buyer demand must increase, and 3) lenders must find a way to help distressed homeowners and prospective borrowers. The government should find a way to make lenders accountable for being part of the solution. Otherwise, the government will become the proverbial appeasing alligator too.
Please feel free to call or e-mail me with your questions and/or concerns, and of course if you would like more information about the Tucson real estate market, or are thinking about buying or selling a Tucson property.
Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Tucson, AZ REALTOR with
Long Realty Company
Direct: (520) 404-0544
http://www.sarahley.longrealty.com/
sley@longrealty.com
Monday, March 10, 2008
Where do we go from here in Tucson real estate?
It seems to be the question flogging every one's mind these days- where is the Tucson real estate market headed? Let's face it, we are all affected by this down real estate market- whether we're looking to buy or sell a home in today's market or not. It affects consumer spending and consumer confidence, which in turn affects job creation and the overall economy. It's become an ongoing downward cycle, which is further perpetuated by sensationalized articles being churned out by our local media- whose goal is not to state the facts, but to sell newspapers. Yes folks, the real estate market (both nationally and locally) is a topic that's weighing heavily on most people's minds these days.
Consider this scenario, then consider the ramifications of it when you multiply it by the many homeowners here in Tucson (and nationally) who are faced with very similar predicaments. Joe (not his real name) bought his first house in the summer of 2005. It seemed to be a great time to buy. All his friends told him that owning a home was about the best investment decision a person could make. They also told him how easy it was to buy the home with no money down- he could even finance his closing costs. Why would he be so naive as to keep renting, when buying was a golden opportunity? His credit wasn't the greatest, but he could still qualify for 100% financing with a stated income, no doc, sub-prime loan. Even if something changed in the next few months, and he decided that the payment was more than he could handle- he could flip the home and make a lot of money. Everyone was doing it. It was so easy to buy and sell real estate.
So, as the story goes- Joe bought his first home. He paid $240,000 for it, which everyone said was a steal, considering that the house next door, which was the same floor plan just went under contract for $248,000. Joe's house was a 3BR/2BA, about 1,400 square feet in a popular neighborhood on Tucson's Northwest side. Prices were going up at the rate of about $5,000 a week with all the out of town buyers and investors from California. These real estate investors were coming by the bus load to buy 'investment properties' in Tucson- many of them utilizing 100% financing that was so ubiquitous. Joe saw himself as just plain lucky to get in on the action when he did.
Flash forward three years. Joe's 3/1 Adjustable Rate Mortgage (ARM) just kicked up to 10.5% a few months ago. In addition to his mortgage, Joe's expenses have gone way up, as inflation has caused prices to rise faster than wages. It's March of 2008 and Joe is in a bind. He can no longer afford his monthly mortgage payment. He talks to a real estate agent, only to discover that his house would fetch about $190,000 in the current market, and it could take six months to a year to sell it even at this price- given the huge inventory of homes on the market. This puts him in the hole $50,000 from what he owes on the house. Not to mention the closing costs and commissions involved in selling the home. How could this happen? How will he pay for this? What are his options? Who can he turn to? Joe is a very sad predicament, but a seemingly common one these days, as runaway interest rates and declining home prices are sending huge numbers of homeowners into a desperate downward spiral. These homeowners are upside down on their mortgages, many of them with no place to go- except foreclosure, and then personal bankruptcy. It's a horrible and sad spiral that is threatening to derail many homeowners, both here in Tucson and nationally.
Going from the microscopic to the macroscopic realm, nationally some estimates predict that mortgage losses may reach as high as $400 billion dollars over the next two years. It seems that about 40% of all people who did 100% financing between 2005-2007 are either in some stage of foreclosure or are behind on their mortgages. $400 billion may sound like a huge overestimate, but to put it in perspective, consider that there is a total of about $11 trillion in US mortgages that are outstanding. Our national and local economies are very threatened by this fact. The methods of this madness are detailed in a recent report stemming from the US Monetary Policy Forum's Conference on February 29, 2008. The title of this report by David Greenlaw et al. is, "Leveraged Losses: Lessons from the Mortgage Market Meltdown." The report basically arrives at the projected losses of $400 billion by using several different models. The first looks at the loan performance of certain sub-prime and other mortgage loans, adjusted for declines in home prices. A second model uses market prices to obtain a loss estimate based on current real estate values. While a third model looks to historical data in areas that have previously been hit hard by big real estate declines, i.e. California, Texas, and Massachusetts. The most noteworthy item about this report is that all three models arrived at almost the same prediction for losses- $400 billion.
There are many financial and economic implications here, but the biggest one, and the one that has the possibility to affect the market the most is that the rising tide of lender losses will further erode lender capital, and this will inevitably cause lenders to trigger further 'belt tightening' out of pure necessity. This means that it is going to become more difficult for buyers to get a mortgage, but also that lending institutions are going to be a lot tighter fisted with their lending practices then they ever were. Anticipation of this necessary belt tightening is one of the main reasons why last week FHA (a government backed loan product that requires only a 3% down payment) increased their conforming loan limits to $316,250. FHA is responding to the tightening and restrictiveness of mortgage lenders to try and prevent the economy from going into a tailspin. If lenders make it harder for borrowers to borrow money to get a mortgage, then the buyer pool is going to shrink. The Federal Reserve has been trying to step in with a remedy of appealing to banks to borrow money from the Fed to stimulate the economy. Many banks are not responding, and that's causing already stalling markets to stagnate.
How does this affect today's home buyer, and to answer the question posed in the title of this post, "Where do we go from here?" In a March 9, 2008 Wall Street Journal article geared to first time home buyers entitled, "A Good time to buy a house- if you can," it states that today's mortgage lenders want borrowers to have no more than 28% of their income towards paying their mortgage payment and are expecting down payments of at least 5%. Some experts predict that in many markets, a first-time buyer will require as much as a 10% down payment. These changing standards are pulling many would be buyers out of the mix, creating what the Federal Reserve terms an 'adverse feedback loop,' or intensification of the factors causing the decline of investments and consumer spending . The Fed is meeting again on March 18th, and is expected to lower the funds rate by as much as 50 basis points to hopefully curtail an adverse feedback loop. Mainly, today's buyer needs to know- how does this affect me? So here goes- my two cents...
A few things to keep in mind if you are in the market to buy a home in Tucson right now.
1) Home prices have come down, in some areas as much as 20% from their 2005 peak, making buying a home in Tucson a lot more affordable than it was two to three years ago.
2) Interest rates are still relatively low, helping to keep your payment more affordable.
3) There is a massive selection of homes to choose from (both new homes and resales). The supply of homes on the market has the possibility to help you to get a better price and terms on your new home.
4) If you're buying the home to live in (your primary residence), and don't plan on selling it for 3 to 5 years, home ownership may make a lot more sense to you then renting, as you can take advantage of the tax savings on writing off your mortgage interest. You are not throwing away money on rent, and it will be your home, to furnish and stylize as you see fit.
5) Most importantly, get a professional Realtor to help you sort through the home buying maze!
In my opinion, it is a great time to buy a home, if it makes sense financially to you, and you're not trying to see your home as an investment. Remember, your home is a roof over your head. It's a place to live. It's not a piggy bank, nor should it be the only egg in your nest egg basket.
Please don't hesitate to call me with any questions about this posting, or about the Tucson market in general.
Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Tucson Realtor with
Long Realty Company
(520) 404-0544
sley@longrealty.com
http://www.sarahley.longrealty.com/
Consider this scenario, then consider the ramifications of it when you multiply it by the many homeowners here in Tucson (and nationally) who are faced with very similar predicaments. Joe (not his real name) bought his first house in the summer of 2005. It seemed to be a great time to buy. All his friends told him that owning a home was about the best investment decision a person could make. They also told him how easy it was to buy the home with no money down- he could even finance his closing costs. Why would he be so naive as to keep renting, when buying was a golden opportunity? His credit wasn't the greatest, but he could still qualify for 100% financing with a stated income, no doc, sub-prime loan. Even if something changed in the next few months, and he decided that the payment was more than he could handle- he could flip the home and make a lot of money. Everyone was doing it. It was so easy to buy and sell real estate.
So, as the story goes- Joe bought his first home. He paid $240,000 for it, which everyone said was a steal, considering that the house next door, which was the same floor plan just went under contract for $248,000. Joe's house was a 3BR/2BA, about 1,400 square feet in a popular neighborhood on Tucson's Northwest side. Prices were going up at the rate of about $5,000 a week with all the out of town buyers and investors from California. These real estate investors were coming by the bus load to buy 'investment properties' in Tucson- many of them utilizing 100% financing that was so ubiquitous. Joe saw himself as just plain lucky to get in on the action when he did.
Flash forward three years. Joe's 3/1 Adjustable Rate Mortgage (ARM) just kicked up to 10.5% a few months ago. In addition to his mortgage, Joe's expenses have gone way up, as inflation has caused prices to rise faster than wages. It's March of 2008 and Joe is in a bind. He can no longer afford his monthly mortgage payment. He talks to a real estate agent, only to discover that his house would fetch about $190,000 in the current market, and it could take six months to a year to sell it even at this price- given the huge inventory of homes on the market. This puts him in the hole $50,000 from what he owes on the house. Not to mention the closing costs and commissions involved in selling the home. How could this happen? How will he pay for this? What are his options? Who can he turn to? Joe is a very sad predicament, but a seemingly common one these days, as runaway interest rates and declining home prices are sending huge numbers of homeowners into a desperate downward spiral. These homeowners are upside down on their mortgages, many of them with no place to go- except foreclosure, and then personal bankruptcy. It's a horrible and sad spiral that is threatening to derail many homeowners, both here in Tucson and nationally.
Going from the microscopic to the macroscopic realm, nationally some estimates predict that mortgage losses may reach as high as $400 billion dollars over the next two years. It seems that about 40% of all people who did 100% financing between 2005-2007 are either in some stage of foreclosure or are behind on their mortgages. $400 billion may sound like a huge overestimate, but to put it in perspective, consider that there is a total of about $11 trillion in US mortgages that are outstanding. Our national and local economies are very threatened by this fact. The methods of this madness are detailed in a recent report stemming from the US Monetary Policy Forum's Conference on February 29, 2008. The title of this report by David Greenlaw et al. is, "Leveraged Losses: Lessons from the Mortgage Market Meltdown." The report basically arrives at the projected losses of $400 billion by using several different models. The first looks at the loan performance of certain sub-prime and other mortgage loans, adjusted for declines in home prices. A second model uses market prices to obtain a loss estimate based on current real estate values. While a third model looks to historical data in areas that have previously been hit hard by big real estate declines, i.e. California, Texas, and Massachusetts. The most noteworthy item about this report is that all three models arrived at almost the same prediction for losses- $400 billion.
There are many financial and economic implications here, but the biggest one, and the one that has the possibility to affect the market the most is that the rising tide of lender losses will further erode lender capital, and this will inevitably cause lenders to trigger further 'belt tightening' out of pure necessity. This means that it is going to become more difficult for buyers to get a mortgage, but also that lending institutions are going to be a lot tighter fisted with their lending practices then they ever were. Anticipation of this necessary belt tightening is one of the main reasons why last week FHA (a government backed loan product that requires only a 3% down payment) increased their conforming loan limits to $316,250. FHA is responding to the tightening and restrictiveness of mortgage lenders to try and prevent the economy from going into a tailspin. If lenders make it harder for borrowers to borrow money to get a mortgage, then the buyer pool is going to shrink. The Federal Reserve has been trying to step in with a remedy of appealing to banks to borrow money from the Fed to stimulate the economy. Many banks are not responding, and that's causing already stalling markets to stagnate.
How does this affect today's home buyer, and to answer the question posed in the title of this post, "Where do we go from here?" In a March 9, 2008 Wall Street Journal article geared to first time home buyers entitled, "A Good time to buy a house- if you can," it states that today's mortgage lenders want borrowers to have no more than 28% of their income towards paying their mortgage payment and are expecting down payments of at least 5%. Some experts predict that in many markets, a first-time buyer will require as much as a 10% down payment. These changing standards are pulling many would be buyers out of the mix, creating what the Federal Reserve terms an 'adverse feedback loop,' or intensification of the factors causing the decline of investments and consumer spending . The Fed is meeting again on March 18th, and is expected to lower the funds rate by as much as 50 basis points to hopefully curtail an adverse feedback loop. Mainly, today's buyer needs to know- how does this affect me? So here goes- my two cents...
A few things to keep in mind if you are in the market to buy a home in Tucson right now.
1) Home prices have come down, in some areas as much as 20% from their 2005 peak, making buying a home in Tucson a lot more affordable than it was two to three years ago.
2) Interest rates are still relatively low, helping to keep your payment more affordable.
3) There is a massive selection of homes to choose from (both new homes and resales). The supply of homes on the market has the possibility to help you to get a better price and terms on your new home.
4) If you're buying the home to live in (your primary residence), and don't plan on selling it for 3 to 5 years, home ownership may make a lot more sense to you then renting, as you can take advantage of the tax savings on writing off your mortgage interest. You are not throwing away money on rent, and it will be your home, to furnish and stylize as you see fit.
5) Most importantly, get a professional Realtor to help you sort through the home buying maze!
In my opinion, it is a great time to buy a home, if it makes sense financially to you, and you're not trying to see your home as an investment. Remember, your home is a roof over your head. It's a place to live. It's not a piggy bank, nor should it be the only egg in your nest egg basket.
Please don't hesitate to call me with any questions about this posting, or about the Tucson market in general.
Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Tucson Realtor with
Long Realty Company
(520) 404-0544
sley@longrealty.com
http://www.sarahley.longrealty.com/
Monday, February 25, 2008
Managing your real estate expectations
We've all heard the old saying that "Change is the only constant." It's so ingrained in our brains that we may not even know who said that line in the first place! I seem to recall that it was my old friend, Winston Churchill. Good old Winston! He was probably the biggest pragmatist who was also an optimist. It certainly helped that his intellectual capabilities gave him the wherewithal to topple the Axis powers, and prove himself as one of the greatest military leaders the world has ever known.
How can we apply Mr. Churchill's overwhelming sense of pragmatic optimism to the real estate picture we are faced with today? Well, first and foremost, I believe Mr. Churchill would say that you have to stake your own claim in the real estate jungle. Cease capitulating to the 'herd mentality.' If you are in the market to buy or sell a home, first and foremost- figure out where you are going, and then devise a plan on how to arrive at your destination.
A recent article in Time suggests that we should ignore the headlines. I subscribe to this idea. In fact, I think if we could ignore all the media hype circulating like flies on a warm July day, we'd all be one step ahead of the game. By now, I believe we all know the causes of how the nation got in this predicament. I don't feel the necessity to reiterate what caused the real estate debacle in the first place, because I don't want to bore you. Why continue to beat a dead horse? No, the name of the game from here on out has got to be, "Where do we go from here?" Figuring out what your situation is should be the first step in devising a plan that is right for you in the current real estate market. From understanding your situation, you can go to a plan of attack on ascertaining a solution.
Let's review several different scenarios for buyers and sellers in the market right now.
The first time home buyer. There isn't a better time for you then right now! If you've been a renter for as long as you can remember, this is the time to jump into the housing market with both feet. Interest rates are low. Inventories are high. You can call the shots right now. Sellers are ready to deal. Builders are ready to throw in a lot of incentives to get you to buy. The only caveat you need to concern yourself with is the type of loan you will obtain, and how much money you'll need as a down payment. Talk to two or three different lenders to get an idea of the loan programs they offer, and what you'll need to do to qualify for the loan. If you don't have a lot of money for a down payment, ask about FHA financing. It is making a comeback right now, and you may only have to come up with 2-3% for a down payment. This is a great time for you, Mr. first time buyer. Get a professional Realtor, and go stake your claim on owning a home! Check out this article from Smart Money for some good tips for first time buyers.
The move up buyer. The move up buyer is somewhat stymied right now, as many move up buyers have to sell their existing homes in order to buy a larger home. Due to the high inventory levels, it could take quite a bit longer to sell your home. Make sure that this is something you are committed to doing, that you are motivated, and that you understand the odds of selling. It could be a long process (as long as six months to a year). In order to keep your sanity, make sure your home is priced aggressively, and presented to its best advantage. What you stand to lose on one end, you can more than make up on the other end by getting a good deal on the house that you purchase. You will want to hire an agent with a proven track record for negotiating, as it is critical for you to sell your home for as much money possible, and to purchase your new home for the best possible price and terms. A professional Realtor will have many recommendations for lenders, title companies, insurance companies, home inspectors, repair technicians, and more. Ask your agent whom they recommend, as your Realtor is usually well connected to the best people in the industry. Using companies that offer 'one stop shopping' with in house lenders, title companies, etc. can not only save you money, but can also streamline the process for you, making it as hassle free as possible.
The crisis seller. You are behind on your mortgage payment. You are a home seller in crisis, and you are what is known as 'upside down' on your mortgage. You may have bought your home at the top of the market, and financed it with a subprime mortgage. Now it's worth considerably less than what you paid for it, and you owe more on the home than it is worth in today's market. You have no choice but to try and get out from under the mortgage that has become impossible for you to maintain. The first thing you need to do is to talk to your lender to figure out what your alternatives are, and how the lender can help you. The lender does not want to have to foreclose on you. Lenders lose a great deal of money in a foreclosure, so talk with your lender. It is possible that if you had an exotic loan product (negative amortization, adjustable rate, or interest only) your lender may either freeze your interest rate (usually at a rate that is higher than the going rate, but lower than your current rate) or assist you with refinancing options. It is possible that you may be able to refinance and stay in your home. If you refinance or get an interest rate freeze and can afford the payment, then you should consider staying in the home. If that is not an option and you must sell, then get a Realtor who understands short sales, as this is probably your only opportunity to avoid foreclosure.
The unmotivated seller. This is not a market for unmotivated sellers. If you are an unmotivated seller, then you have no business putting your home on the market. It's that simple. If you aren't motivated to sell, then stay put. If you put your home on the market at an inflated price, all you are going to do is create frustration for yourself, and enable your neighbor (who is priced with the market) to sell his home. Three years ago, a lot of unmotivated sellers were selling their homes. A seller's market will allow for unmotivated sellers. But there is no place for you in a buyer's market. So, save your time and aggravation, and if you don't need or want to sell your home, then don't waste your time putting it on the market.
The moving out of town seller. Usually you are a motivated seller, as more than likely you need the equity from your current home to buy your new home (see move up buyer above). If you have to move before your house sells, talk with your agent about staging the home. Vacant homes are more challenging to sell than owner occupied homes, as buyers are visual, and many times they need to see furniture placement to be able to picture themselves in the home. If your home is vacant and on the market, make sure that you have an agent who will be checking in on your home on a weekly basis. You'll also want to make sure that you have a landscaper and a cleaning person keeping the home in top condition, as it needs to be presented in its best possible light in order to stand out from competing properties. This article from Yahoo has some great tips for you to consider.
The investor. The investor buyer and seller has dried up a lot since the air came out of the market. If you are in the market to buy an investment property, there are several factors to consider. 1) Cash flow. Don't buy the property if it doesn't have a positive cash flow. Many 'investors' (who were really speculators in an investor's clothing) bought at the peak of the market, banking on appreciation only. Appreciation is a bonus! If you're going to invest in residential real estate, make sure you have the stomach for it. Some of the things you are going to have to deal with include vacancies, problem tenants, repairs, repairs, and more repairs! If you aren't up for this sort of investing, you may prefer to stick with the stock market. If you're selling your investment property, make sure that you are being realistic as far as pricing, property condition, and showing. This is a good time to buy an investment property if you find one that you like for your portfolio. Just remember that it needs to have a positive cash flow! This blog has some great info for would be first time investors.
All in all, considering that 'change is the only constant,' it isn't as grim in the real estate jungle as you may believe after reading the plethora of media naysayers. The main thing is to grin and bear it, and don't believe everything you read in the media. Keep your chin up, keep a positive attitude, and more than likely everything will fall into place, should you decide that a move is in the cards for you this year. Please call me if you have any questions about this article, or about the Tucson market in general.
Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Tucson Realtor with
Long Realty Company
(520) 404-0544
http://www.sarahley.longrealty.com/
sley@longrealty.com
How can we apply Mr. Churchill's overwhelming sense of pragmatic optimism to the real estate picture we are faced with today? Well, first and foremost, I believe Mr. Churchill would say that you have to stake your own claim in the real estate jungle. Cease capitulating to the 'herd mentality.' If you are in the market to buy or sell a home, first and foremost- figure out where you are going, and then devise a plan on how to arrive at your destination.
A recent article in Time suggests that we should ignore the headlines. I subscribe to this idea. In fact, I think if we could ignore all the media hype circulating like flies on a warm July day, we'd all be one step ahead of the game. By now, I believe we all know the causes of how the nation got in this predicament. I don't feel the necessity to reiterate what caused the real estate debacle in the first place, because I don't want to bore you. Why continue to beat a dead horse? No, the name of the game from here on out has got to be, "Where do we go from here?" Figuring out what your situation is should be the first step in devising a plan that is right for you in the current real estate market. From understanding your situation, you can go to a plan of attack on ascertaining a solution.
Let's review several different scenarios for buyers and sellers in the market right now.
The first time home buyer. There isn't a better time for you then right now! If you've been a renter for as long as you can remember, this is the time to jump into the housing market with both feet. Interest rates are low. Inventories are high. You can call the shots right now. Sellers are ready to deal. Builders are ready to throw in a lot of incentives to get you to buy. The only caveat you need to concern yourself with is the type of loan you will obtain, and how much money you'll need as a down payment. Talk to two or three different lenders to get an idea of the loan programs they offer, and what you'll need to do to qualify for the loan. If you don't have a lot of money for a down payment, ask about FHA financing. It is making a comeback right now, and you may only have to come up with 2-3% for a down payment. This is a great time for you, Mr. first time buyer. Get a professional Realtor, and go stake your claim on owning a home! Check out this article from Smart Money for some good tips for first time buyers.
The move up buyer. The move up buyer is somewhat stymied right now, as many move up buyers have to sell their existing homes in order to buy a larger home. Due to the high inventory levels, it could take quite a bit longer to sell your home. Make sure that this is something you are committed to doing, that you are motivated, and that you understand the odds of selling. It could be a long process (as long as six months to a year). In order to keep your sanity, make sure your home is priced aggressively, and presented to its best advantage. What you stand to lose on one end, you can more than make up on the other end by getting a good deal on the house that you purchase. You will want to hire an agent with a proven track record for negotiating, as it is critical for you to sell your home for as much money possible, and to purchase your new home for the best possible price and terms. A professional Realtor will have many recommendations for lenders, title companies, insurance companies, home inspectors, repair technicians, and more. Ask your agent whom they recommend, as your Realtor is usually well connected to the best people in the industry. Using companies that offer 'one stop shopping' with in house lenders, title companies, etc. can not only save you money, but can also streamline the process for you, making it as hassle free as possible.
The crisis seller. You are behind on your mortgage payment. You are a home seller in crisis, and you are what is known as 'upside down' on your mortgage. You may have bought your home at the top of the market, and financed it with a subprime mortgage. Now it's worth considerably less than what you paid for it, and you owe more on the home than it is worth in today's market. You have no choice but to try and get out from under the mortgage that has become impossible for you to maintain. The first thing you need to do is to talk to your lender to figure out what your alternatives are, and how the lender can help you. The lender does not want to have to foreclose on you. Lenders lose a great deal of money in a foreclosure, so talk with your lender. It is possible that if you had an exotic loan product (negative amortization, adjustable rate, or interest only) your lender may either freeze your interest rate (usually at a rate that is higher than the going rate, but lower than your current rate) or assist you with refinancing options. It is possible that you may be able to refinance and stay in your home. If you refinance or get an interest rate freeze and can afford the payment, then you should consider staying in the home. If that is not an option and you must sell, then get a Realtor who understands short sales, as this is probably your only opportunity to avoid foreclosure.
The unmotivated seller. This is not a market for unmotivated sellers. If you are an unmotivated seller, then you have no business putting your home on the market. It's that simple. If you aren't motivated to sell, then stay put. If you put your home on the market at an inflated price, all you are going to do is create frustration for yourself, and enable your neighbor (who is priced with the market) to sell his home. Three years ago, a lot of unmotivated sellers were selling their homes. A seller's market will allow for unmotivated sellers. But there is no place for you in a buyer's market. So, save your time and aggravation, and if you don't need or want to sell your home, then don't waste your time putting it on the market.
The moving out of town seller. Usually you are a motivated seller, as more than likely you need the equity from your current home to buy your new home (see move up buyer above). If you have to move before your house sells, talk with your agent about staging the home. Vacant homes are more challenging to sell than owner occupied homes, as buyers are visual, and many times they need to see furniture placement to be able to picture themselves in the home. If your home is vacant and on the market, make sure that you have an agent who will be checking in on your home on a weekly basis. You'll also want to make sure that you have a landscaper and a cleaning person keeping the home in top condition, as it needs to be presented in its best possible light in order to stand out from competing properties. This article from Yahoo has some great tips for you to consider.
The investor. The investor buyer and seller has dried up a lot since the air came out of the market. If you are in the market to buy an investment property, there are several factors to consider. 1) Cash flow. Don't buy the property if it doesn't have a positive cash flow. Many 'investors' (who were really speculators in an investor's clothing) bought at the peak of the market, banking on appreciation only. Appreciation is a bonus! If you're going to invest in residential real estate, make sure you have the stomach for it. Some of the things you are going to have to deal with include vacancies, problem tenants, repairs, repairs, and more repairs! If you aren't up for this sort of investing, you may prefer to stick with the stock market. If you're selling your investment property, make sure that you are being realistic as far as pricing, property condition, and showing. This is a good time to buy an investment property if you find one that you like for your portfolio. Just remember that it needs to have a positive cash flow! This blog has some great info for would be first time investors.
All in all, considering that 'change is the only constant,' it isn't as grim in the real estate jungle as you may believe after reading the plethora of media naysayers. The main thing is to grin and bear it, and don't believe everything you read in the media. Keep your chin up, keep a positive attitude, and more than likely everything will fall into place, should you decide that a move is in the cards for you this year. Please call me if you have any questions about this article, or about the Tucson market in general.
Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Tucson Realtor with
Long Realty Company
(520) 404-0544
http://www.sarahley.longrealty.com/
sley@longrealty.com
Thursday, February 14, 2008
The Buyers have it!
It's that time of year- the busy season in residential real estate! The National Association of Realtors (NAR) states that 60% of all buyers move during March through June. This year in particular, buyers have a lot of incentives to take advantage of. High inventory levels, low interest rates, lower prices, builder incentives. It's plain to see that buyers are really in the driver's seat right now. There are currently about 9,300 resale properties on the market in the Tucson area, not to mention new construction choices. So if you are thinking of purchasing a home, there is no time like the present! The best thing you can do to help yourself have a positive and smooth real estate transaction is to hire a professional buyer's representative. There are many reasons to call a professional Realtor when considering your Tucson home purchase. One of the main reasons you need a buyer's agent is that you will have an expert set of eyes working on your behalf. Negotiation, coordination of properties that meet your search criteria, property showings, and assistance with selection of affilated companies (i.e. insurance, title, and mortgage). It is never more important to have representation than in a buyer's market. There are just too many choices of properties for sale for a buyer to be able to narrow down the search on their own. Additionally, your agent will help you negotiate the best price and terms for your new home, as well as recommend cost saving alternatives for repairs, insurance providers, and mortgage lenders. NAR recently published results of a satisfaction survey. The results were that the majority of home buyers and sellers who worked with a professional Realtor in their home purchase or sale were overall very satisified with the results.
Some of my home sellers were recently asking me, just who are the buyers right now? We currently have a lot of visitors in town for the gem & mineral show. Starting next week more visitors will arrive for the golf tournament at Dove Mountain. Many people who visit Tucson decide that they really like it here, and they want to purchase a home. Second home buyers account for about 20% of the Tucson marketplace, and our economy is quite dependent on our winter visitors. There are currently plenty of condos, townhomes, and homes in gated communities available for sale in all areas of Tucson. So if you are considering purchasing a second home in Tucson- sellers are ready to roll out the red carpet for you. There is a significant increase in traffic and pending contracts in the last week or so. Yet, some buyers think that trying to 'wait out the market' until asking prices go down is an effective strategy to follow, and they'll just low ball enough sellers until they find one that accepts their offer. The caveat with this strategy is that it is possible that you may lose your window of opportunity because someone else will not be waiting, and will buy that home that you have been eyeing. The lesson here is that if you are a serious buyer, once you find a home that you want (assuming that it is priced fairly for the market), then there is no time like the present to submit your offer, and a reasonable offer at that. Overall, the second home market remains strong due to retiring baby boomers flocking to Arizona. Because of our temperate climate, reasonable real estate prices, and accesibility to cultural events and amenities, Tucson is positioned to become one of the most desirable locations for migration of retiring baby bomers (purchasing both second homes and retirement homes) in the nation. Because of this factor, our market has the potential to remain strong despite declining economic indicators, and declining markets elsewhere. What this means is that your investment in Tucson real estate is probably a lot more safe than other previously speculative markets.
Back to the types of buyers in the market right now, there are also many buyers considering a 'move up' purchase because of lower interest rates. Rather than refinancing a smaller home and staying put, many homeowners are realizing that they can trade up to a larger home that has additional amenities they desire, and actually end up with a comparable mortgage payment because the interest rates have come down so much from a few months ago. The current 30 year fixed rate mortgage is running about 5.875%. If you're thinking of moving to a bigger home, and you want to take advantage of lower interest rates- it can be done, even in this buyer's market. Once again, it's very important that you have a professional Realtor on your team, as there are a lot of additional factors to consider when both selling your existing home and purchasing a new one. The majority of these homeowners have what is called 'frozen equity,' meaning that they need the equity from their existing home to purchase their new home. This can be tricky if you don't know what you're doing. All the more reason you need a professional Realtor to assist you with your sale and purchase. I would be happy to answer any questions you may have about second home purchases, move up purchases, and/or the Tucson real estate market in general. Please don't hesitate to contact me. Thank you & enjoy all of the great events going on about town!
Written by Sarah Ley,
BSBA, ABR, CRS, CNHSA
Tucson Realtor with
Long Realty Company
(520) 404-0544
sley@longrealty.com
http://www.sarahley.longrealty.com/
Some of my home sellers were recently asking me, just who are the buyers right now? We currently have a lot of visitors in town for the gem & mineral show. Starting next week more visitors will arrive for the golf tournament at Dove Mountain. Many people who visit Tucson decide that they really like it here, and they want to purchase a home. Second home buyers account for about 20% of the Tucson marketplace, and our economy is quite dependent on our winter visitors. There are currently plenty of condos, townhomes, and homes in gated communities available for sale in all areas of Tucson. So if you are considering purchasing a second home in Tucson- sellers are ready to roll out the red carpet for you. There is a significant increase in traffic and pending contracts in the last week or so. Yet, some buyers think that trying to 'wait out the market' until asking prices go down is an effective strategy to follow, and they'll just low ball enough sellers until they find one that accepts their offer. The caveat with this strategy is that it is possible that you may lose your window of opportunity because someone else will not be waiting, and will buy that home that you have been eyeing. The lesson here is that if you are a serious buyer, once you find a home that you want (assuming that it is priced fairly for the market), then there is no time like the present to submit your offer, and a reasonable offer at that. Overall, the second home market remains strong due to retiring baby boomers flocking to Arizona. Because of our temperate climate, reasonable real estate prices, and accesibility to cultural events and amenities, Tucson is positioned to become one of the most desirable locations for migration of retiring baby bomers (purchasing both second homes and retirement homes) in the nation. Because of this factor, our market has the potential to remain strong despite declining economic indicators, and declining markets elsewhere. What this means is that your investment in Tucson real estate is probably a lot more safe than other previously speculative markets.
Back to the types of buyers in the market right now, there are also many buyers considering a 'move up' purchase because of lower interest rates. Rather than refinancing a smaller home and staying put, many homeowners are realizing that they can trade up to a larger home that has additional amenities they desire, and actually end up with a comparable mortgage payment because the interest rates have come down so much from a few months ago. The current 30 year fixed rate mortgage is running about 5.875%. If you're thinking of moving to a bigger home, and you want to take advantage of lower interest rates- it can be done, even in this buyer's market. Once again, it's very important that you have a professional Realtor on your team, as there are a lot of additional factors to consider when both selling your existing home and purchasing a new one. The majority of these homeowners have what is called 'frozen equity,' meaning that they need the equity from their existing home to purchase their new home. This can be tricky if you don't know what you're doing. All the more reason you need a professional Realtor to assist you with your sale and purchase. I would be happy to answer any questions you may have about second home purchases, move up purchases, and/or the Tucson real estate market in general. Please don't hesitate to contact me. Thank you & enjoy all of the great events going on about town!
Written by Sarah Ley,
BSBA, ABR, CRS, CNHSA
Tucson Realtor with
Long Realty Company
(520) 404-0544
sley@longrealty.com
http://www.sarahley.longrealty.com/
Friday, January 25, 2008
Tucson Real Estate- Open House on Sunday, January 27, 2008
Please stop in and visit me this Sunday. I will be hosting an open house at a great property that is priced to sell in the Catalina Foothills. If you click on the above link, it will take you directly to the listing information for this property. I've been a bit under the weather this week, but will be back in the next few days with a new blog article. Enjoy the beautiful Tucson weather & the beautiful lower interest rates! As always, don't hesitate to call me with any real estate questions or issues you may have regarding your Tucson home.
Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Tucson Realtor with
Long Realty Company
(520) 404-0544
sley@longrealty.com
http://www.sarahley.longrealty.com/
Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Tucson Realtor with
Long Realty Company
(520) 404-0544
sley@longrealty.com
http://www.sarahley.longrealty.com/
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