Don’t wait too long!

The Mortgage Forgiveness Debt Relief Act of 2007 is due to expires at the end of 2012.  The way our Congress has been cooperating, we can’t count on this legislation being extended.  It excludes up to $2million of cancellation of debt secured by a principal residence from your taxable income.’

If you have been waiting for your mortgage holder to start the foreclosure process on your delinquent mortgage, you may want to seek a short sale of your residence soon.

It’s important not to wait too long.  A short sale often takes 4-6 months, sometimes longer, and at the end of the year there will be many short sales in play with everyone trying to meet the deadline.  Most lenders are understaffed for short sales anyway, so this could become a huge bottleneck.

Contact your accountant to learn what the downside is if you lose control of the process.  Ask a lender what happens if you do a deed-in-lieu or allow the foreclosure to proceed rather than completing short sale.

If you have done a short sale and receive a 1099C, it can be quite a shocker due to the large dollar amount.  If this was your primary residence, you will need to file the appropriate form with your tax return to show that the short sale was either on your primary residence, or that you were insolvent in the case of investment property short sale, to claim the exemption from taxation on the forgiven debt.

December 2011 figures are in for our MLS and I LIKE them!  Our local real estate market is looking different at the start of 2012 compared to last year.  Our inventory in the Phoenix area at the end of December was 42.37% lower than a year previous!  That speaks volumes…and prices rose 3.31% for the year.  The prices had remained fairly stable over 2011 but in the 4th quarter, prices rose 4.46%.

Nationwide, the Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending January 13 rose 23.1%, and refinance applications increased 26.4%.  Existing home sales rose 5% in December, and the inventory of unsold homes on the market decreased to a 6.2 month supply (down from 7.2 month supply in November).

Since new unemployment claims fell by 50,000 to 352,000 for the week ending January 14 (the lowest since April 2008) AND continuing claims for the week ending January 7 fell by 215,000 nationally.   Is it  wishful thinking to wonder if we have rounded a corner? Our economy has a long way to go, but housing market improvements are very important

Our real estate market appears to have rounded a corner.  At a recent meeting of Realtors and Mortgage Bankers REO department heads, we were told that there “is no ghost inventory”.  Now, the definition of “ghost inventory” varies, but we generally consider it to mean those homes that have been foreclosed but not yet put on the market for sale; while others consider homes with serious delinquencies but no foreclosure proceedings published to be included in “ghost inventory”.   We are certainly seeing property that has hit the market over the last 6 months that had gone for a year or years without payments being made.  The number of foreclosures has declined tremendously, although the number of short sales has risen.  The number of traditional sales has increased to a figure very close to the number of short sales.

Distressed sales of all kinds (foreclosures or short sales) dropped from 69.6% of the market share in 2010 to 59.8% in 2011.  Perhaps the best news in our local market:  From the November 2009 pending foreclosure number of 50,568, our December 2011 the number of pending foreclosures dropped 60.49% over this 2 year period.  This has been a continuing trend through the year. Pending foreclosures finished the year by breaking though the 20,000 barrier to cross the finish line at 19,979. “Foreclosures Pending” are homes in some stage of acquisition by the lender, prior to actual foreclosure (it’s usually a 3-month process to foreclose). Reduction in the number of foreclosures pending each month is a positive recovery metric.  Foreclosures in the 5,000 range are typical of a healthy market. and the glimmer of a recovery seen in this metric grows brighter each month.  This tremendous drop in foreclosures certainly contributes to our 2011 average price increase of 3.31%.

If you are a potential buyer waiting for a “better deal” to hit the market, you may be left out in the cold!

Let me know what you think!  I’d love to hear from you!

The Mortgage Indebtedness Relief Act of 2007 waives the tax consequence of short sales and foreclosure.  Previous to that time, owners had to consider the forgiven debt as taxable income, but this law waives that tax in many circumstances.  The law expires at the end of 2012, so anyone who is considering a short sale of their home should consider doing in in 2012 while the law is in force.  I have not heard of discussions to extend the law, although that could happen.  It doesn’t seem to be on anyone’s front burner at this time.

Congress’s recent $33 billion 2-month payroll tax cut extension is funded by a 10-year increase in guaranty fees that Fannie Mae and Freddie Mac charge lenders to guaranty their home loans.

The increase is for all Fannie and Freddie loans starting at the beginning of the second quarter 2012.  As an example, this adds about $11 per month to a $200,000 loan, or about $4,000 over the life of the loan.  All lenders have to add this increase to their pricing by law.  They may either impose a one-time increase, or they may spread out the increase.  To avoid these increased costs, buyers will have to act very soon!

FHA and VA loans will also increase in cost due to this law, but the government hasn’t said when those fees will go into effect on FHA and VA loans.

June was really a remarkable month! The number of residential sales and executed single family leases crushed previous records. ARMLS (Arizona Regional Multiple Listing Service, Inc.) reported in June 10,868 sales surpassing the record of 10,252 in June 2005. The 2,280 single family leases signed in June beats the record of 2,002 signed in July 2008.
Most of the time the number of residential sales and residential signed leases have an inverse relationship or opposite effect, as more people are buying less are renting and vice a versa, but in this market both set their all time highs in the same month. The relationship between the high number of sales and leases is because of the effects produced by the high number of foreclosures and short sales: Foreclosures and short sales have pushed down home values and have turned previous owners into current renters.

Distressed Sales Analysis:

June statistics saw a slight drop in the number of REO/bank owned AND traditional sales; however, short sales increased by 5% over the month of May. Sellers and buyers need to monitor this trend to see how the market continues to respond to the current inventory.

Closed Sales Report Analysis:

Sellers:
The month of June saw a staggering increase in the number of closed sales of 13.4% over the month of May. Last month 9,879 homes closed – by far the highest amount of closings in the 36-month reporting period. As inventory continues to shrink, we are seeing buyer activity increasing. That means more competition for homes. The results? Sellers may have more control over pricing and terms when negotiating with potential buyers.

Buyers:
This type of activity means that buyers are competing for the best properties at record rates. We currently have less than 2 months of inventory. Buyers should expect more competition and higher prices as a result. When inventory decreases, demand tends to increase. Buyers MUST carefully work with their real estate professional to understand the market AND to understand how they can compete with the market demand and other buyers who may be in a financial position that is more appealing to the seller.

Active Listings Analysis

Sellers:
For the 8th month in a row, the number of active residential listings has decreased.
The drop in June was a dramatic 24% reduction! This is by far the lowest we have seen in the 36 month reporting period – it is nearly ½ of the available inventory just one year ago. Sellers need to make sure that they continue to watch this trend to determine how their homes should be priced in order to be competitive AND the terms that will need to be available for prospective buyers.

Buyers:
Buyers still have inventory to preview, but that amount is trending downward.
Continue to monitor this statistic, as it WILL be the statistic that indicates how much new inventory you will have to preview … the lower the number, the more likely the competitiveness for lower priced homes will remain part of the current market.
As always, market activity is local and should be researched with your real estate professional to determine the activity and desirability of the homes that are of interest to you.

Average sale price in Greater Phoenix (Maricopa County) has gone up for the second month in a row, by $2,291 in April from March. It was approx $167,000. This was the highest average sale price since October 2010. Non distressed (traditional) sales stand at 36% of the market activity, compared to 44% REO sales and 20% short sales. This is also an increase in traditional sales, showing market improvement.

April’s inventory was over 8% lower, and stood at 29,785 the lowest in 3 years.

Buyers might still have inventory to look at; but the number of available listings is trending downward! Now is not the time to wait for the market to drop further!

Another trend I’m noticing…. The REO properties and short sales which were being purchased by investors over the past year have been, in many casees, renovated and then returned to the market and sold for much higher prices.  This is pushed comparables up for appraisals.  GREAT news for those homeowners who have been waiting for prices to go up to sell their homes.  Check with your real estate agent for information on current value of your property!  I have noticed improvements of $10,000 or more in several neighborhoods recently, from January to current sales comparables!

Pre-foreclosures, the term for homes that are in default approximately 3 months and have had notice-of-trustee-sale filings,  fell to 4,200 in April.  This is the lowest level since December 2007.  That number is down 500 from March.    The total number of active residential pending foreclosures in metropolitan Phoenix dropped to 30,790; it was 30% higher a year ago.

This is fantastic news!

Gotta say folks – this market is MOVING.

As of the end of February, there were 8739 closings for the month, up over 40% from January. WIth 26,332 homes available for sale, that gives us a market supply of only 3  months. Pending sales continue to increase and now sit at more than 1/2 of available supply.  That’s BUSY, folks!

Last month, an Analyst from UBS said that he thought we are about 2/3rds of the way through the bank backlog of “shadow inventory” we keep hearing about.  Once that inventory is cleared, within the next 1 1/2 years, it’s very possible we will start to see steady gains in housing prices once again.

I am not sure about the rest of the agents out there, but to find a home in good condition, that is well priced, is extremely difficult.   There is a lot of inventory that is just plain “junk”.  Abused by negligent homeowners or tenants, do-it-yourself improvements done poorly or unfinished, not maintained; most of the REO properties fall in to this category.

For homes that are in good condition and well priced, whether owner occupied or bank owned, they sell in a few days and often have multiple offers.

SE Valley-specific: Inventories are down 10% from the previous month. Total of 5651 active listings with 2087 closings in the last month. About a 2 3/4 month supply.

In my experience, having been through 3 of these recession/market adjustments, you never know you have “hit bottom” until a month or two later.

The only thing that could change this would be that the snowbirds are soon heading home; and they have been absorbing a huge amount of the inventory.   If local demand isn’t significant enough, we will see inventory rise again.  But I don’t think it will be what it was last year!   Time will prove me right or wrong.

Man does not live by real estate alone!   So here’s a new recipe I found on the GE site – affordable, yummy.

MINUTE STEAK  (I believe you could use ground beef if you wish)

Ingredients

By Measure

4 pieces minute steak 4-6 ounce average
1 cup Spanish onion, sliced
1 cup button mushrooms, halved or quartered depending on size (bite size)
6 ounces ESB (Extra Special Bitter) beer or pilsner
2 cups chicken stock
1 bay leaf
2 tablespoons olive oil
1 tablespoon unsalted butter
1 tablespoon AP flour
Salt and pepper to taste

The dredging mixture
1/2 cup flour
1/2 teaspoon salt
1-teaspoon black pepper
pinch cayenne pepper
1/2 teaspoon thyme
1/2 teaspoon oregano

Preparation

1. Start with a preheated medium-hot large skillet. Combine all of the dredging ingredients. Dredge/Coat each portion of beef in the dredging mixture. Add the olive oil to the skillet. When the olive oil is hot gently add each piece of minute steak into the skillet. Sauté each side to brown. Remove the steak to a plate when browned. We will add the steak back to the mixture to complete the cooking process later.
2. To the same skillet add the onions and saute until translucent. Add the mushrooms and continue to cook for 3 minutes. Be careful not to over brown the brown bits being created in the skillet. Add the butter allowing it to melt then add the flour. Stir for 20 seconds then add the garlic. Cook the garlic for 20 seconds then deglaze with the beer. Rub the bottom of the skillet to lift the brown bits from the skillet. Push it as far as possible without burning. A deep brown is best. If you get too much browning early, deglaze with the beer to save the dish. (This method takes a little touch. The browning helps create the deep flavor we are looking for.) Reduce the beer by 1/2 then add the chicken stock and bay leaf. Bring the mixture to a boil then reduce to a simmer. Add the beef to the mixture in the skillet and cook covered at a low simmer for 20 minutes. Adjust seasoning with salt and pepper. Serve. Makes 4 servings.

In November 2010 the Department of Housing and Urban Development (HUD) reorganized both the upfront mortgage insurance premium and annual mortgage insurance premiums for FHA loans. The result was a lower upfront premium paid when closing on a loan with FHA financing, but a larger annual mortgage insurance premium which is split up on a monthly basis for borrowers.

What this did is slightly decrease initial loan amounts for borrowers, but increased monthly payment for homeowners obtaining an FHA home loan. Unfortunately, there will now be another increase to the annual mortgage insurance premium coming in April 2011, which again will mean slightly more expensive payments for borrowers obtaining an FHA loan. Thank goodness for the time being, interest rates continue to remain low.

In general, the annual mortgage insurance premium (MIP) for FHA loans will rise another quarter of a percent (0.25) for single family FHA loans starting next month.

The changes will apply to most FHA loans that are insured after April 18, 2011.