Republicans have a draft bill in the House that will raise the minimum down payment on FHA loans from 3.5% to 5%. Under the bill, the maximum FHA loan amount will drop way down to 125% of the median sale price in the county. I don't know what the median sale price in Pima County is, but the median sale price in April in the Tucson Multiple Listing Service, which includes all but the most rural parts of the county, was $132,000. In March it was $125,000. When FHA sets a loan limit based on median sale price, the loan limit sticks for quite a while, and does not adjust to market changes on a regular basis.
A housing expert says there is no evidence that an additional 1.5% down payment requirement will significantly decrease the default rate among FHA buyers. It could, however, decrease the pool of FHA buyers by 40%.
Friday, May 27, 2011
Tuesday, May 24, 2011
Tucson Residential Sales Statistics
The Tucson Association of Realtors has release the Residential Sale Statistics for April.
The average sale price continues its bumpy trend. From December 2010 to January 2011, it went down 10%. Average sale price was up 9% in February, down 10% in March, up 6% in April to $173,981.
With 6,269 listings divided by 1,152 sales in April, we have a 5.44 month supply of listings. A six month supply is considered a balanced market, with no advantage to buyer or seller. So by this measure, this could be a seller's market for the first time in years.
But who are the sellers who are in charge of this market? Banks, mostly. When I search the Multiple Listing Service for sales in April, I find 1,235. I don't know why it's more than is reported by the Tucson Association of Realtors. Of those sales, 502 were Real Estate Owned, or REO, meaning they are owned by a bank that foreclosed on the previous owner. Short sales, where the seller owes more than the house is worth, and needs his lender's approval to sell the house, accounted for 110 sales. So REOs and short sales accounted for 50% of the sales last month.
We used to call a sale where the seller had equity and we didn't have to deal with an uncooperative bank a normal sale. The new normal is REOs and short sales.
Forty-two percent of the sales were under $120,000 and 74% of the sales were under $200,000.
The average sale price continues its bumpy trend. From December 2010 to January 2011, it went down 10%. Average sale price was up 9% in February, down 10% in March, up 6% in April to $173,981.
With 6,269 listings divided by 1,152 sales in April, we have a 5.44 month supply of listings. A six month supply is considered a balanced market, with no advantage to buyer or seller. So by this measure, this could be a seller's market for the first time in years.
But who are the sellers who are in charge of this market? Banks, mostly. When I search the Multiple Listing Service for sales in April, I find 1,235. I don't know why it's more than is reported by the Tucson Association of Realtors. Of those sales, 502 were Real Estate Owned, or REO, meaning they are owned by a bank that foreclosed on the previous owner. Short sales, where the seller owes more than the house is worth, and needs his lender's approval to sell the house, accounted for 110 sales. So REOs and short sales accounted for 50% of the sales last month.
We used to call a sale where the seller had equity and we didn't have to deal with an uncooperative bank a normal sale. The new normal is REOs and short sales.
Forty-two percent of the sales were under $120,000 and 74% of the sales were under $200,000.
Moving for the Last Time
The Arizona Daily Star doesn't seem to have caught on, but Realty Executives Phoenix filed chapter 11 (reorganization) bankruptcy a few weeks ago, taking the three branch offices in Tucson down with it. A new Realty Executives franchise is forming in Tucson, but I need a company with more stability. I just went through this last year with the previous Realty Executives franchise. As W once said, "Fool me once... shame on... you... fool me twice... uh... Ya can't get fooled again!"
My clients and I need a real estate company that has a local presence strong enough to stay in business. But I do not think the main purpose of a real estate company is to generate corporate profits. So the logical fit for me is Tierra Antigua Realty. Started by real estate agents 10 years ago, it has grown to be the second largest real estate company in Tucson, with over 800 agents. Its sales are 10% of the Tucson market. I have been warmly welcomed, and I am impressed with the focus on agent and client satisfaction.
I was with Long Realty for eight years, Realty Executives for eight years (with an unplanned three-month detour to Keller Williams), and I am planning to stay at Tierra Antigua for at least the next eight years. Maybe after 24 years in real estate, I'll be ready to move on to the next adventure. But today, I am open for business and feeling optimistic about the future.
My clients and I need a real estate company that has a local presence strong enough to stay in business. But I do not think the main purpose of a real estate company is to generate corporate profits. So the logical fit for me is Tierra Antigua Realty. Started by real estate agents 10 years ago, it has grown to be the second largest real estate company in Tucson, with over 800 agents. Its sales are 10% of the Tucson market. I have been warmly welcomed, and I am impressed with the focus on agent and client satisfaction.
I was with Long Realty for eight years, Realty Executives for eight years (with an unplanned three-month detour to Keller Williams), and I am planning to stay at Tierra Antigua for at least the next eight years. Maybe after 24 years in real estate, I'll be ready to move on to the next adventure. But today, I am open for business and feeling optimistic about the future.
Friday, April 29, 2011
Dove on the Kitchen Window
As I came home last night, I caught the changing of the guard over the two mourning dove eggs on my kitchen window. The male dove sits on the nest during the day, and the female takes the night shift. The female perches in a nearby tree during the day, and has performed the broken wing ploy to distract me from the nest. 
Sellers: Thinking of Renting Until the Market Improves?
Many people who want to sell their home become discouraged with the low-ball offers and the difficulties buyers experience getting financing. Over half of the sales in Tucson are foreclosures and short sales, and these sales must be used as comparable sales on the buyer's appraisal. The result is, non-distressed sellers are seeing their property values dragged down by the ongoing flood of distressed sales.
Eventually every frustrated potential seller considers the idea of renting their house until the market improves. They usually hope this will be in two years or less.
I won't pretend to predict whether we will be through the huge backlog of foreclosures in the next two years. Some prognosticators claim their crystal balls say we will. Others state just as convincingly that we won't.
Suppose prices are still bumping along the bottom two years from now? At that point, the homeowner becomes ineligible for the waiver of capital gain tax on the sale of their home.
Currently, if a person or couple has lived in a house for two of the past five years, they enjoy tax-free capital gain up to $250,000 for a single person, and $500,000 for a married couple. Once the house has been a rental for two years, any capital gains will be taxed at whatever the capital gain rate is. Currently, it's 15%.
While the house is a rental, the sellers will probably have expenses for repairs and maintenance. They may also have no rent in months when the property is vacant or the tenants aren't paying the rent.
Waiting for the market to improve may be a viable strategy, but sellers need to consider that the risks and expenses may outweigh the potential benefit.
Eventually every frustrated potential seller considers the idea of renting their house until the market improves. They usually hope this will be in two years or less.
I won't pretend to predict whether we will be through the huge backlog of foreclosures in the next two years. Some prognosticators claim their crystal balls say we will. Others state just as convincingly that we won't.
Suppose prices are still bumping along the bottom two years from now? At that point, the homeowner becomes ineligible for the waiver of capital gain tax on the sale of their home.
Currently, if a person or couple has lived in a house for two of the past five years, they enjoy tax-free capital gain up to $250,000 for a single person, and $500,000 for a married couple. Once the house has been a rental for two years, any capital gains will be taxed at whatever the capital gain rate is. Currently, it's 15%.
While the house is a rental, the sellers will probably have expenses for repairs and maintenance. They may also have no rent in months when the property is vacant or the tenants aren't paying the rent.
Waiting for the market to improve may be a viable strategy, but sellers need to consider that the risks and expenses may outweigh the potential benefit.
Sunday, April 24, 2011
New Flood Plain Maps Coming in June
New flood plain maps will take effect on June 16. Some homeowners who didn't need flood insurance in the past will now be required to buy it if their mortgage is federally-insured.
Check this article for more info.
Homeowners who buy flood insurance before the new maps take effect can get a significant discount for the first few years.
To cut to the chase and see whether your property is affected, go the the maps here.
Check this article for more info.
Homeowners who buy flood insurance before the new maps take effect can get a significant discount for the first few years.
To cut to the chase and see whether your property is affected, go the the maps here.
Wednesday, April 20, 2011
Mortgage Interest Deduction in Peril?
I received a YouTube video from the president of the National Association of Realtors imploring me to write my Congresswoman and beg her not to eliminate the mortgage interest deduction. Apparently, MID is on the chopping block in an attempt to increase tax revenue.
Nowhere in the video was the truth about the threatened MID disclosed. I had to click on a link to get the rest of the story. NAR says:
Individuals are permitted to deduct mortgage interest paid on mortgage debt of up to $1 million. Mortgage interest on up to $100,000 of debt on home equity loans or lines of credit also qualifies for the deduction.
As part of its FY 2011 budget, the Administration has proposed limiting the value of the MID for upper income taxpayers by, in effect, converting the deduction to a 28% tax credit for those individuals who are currently in the 33% or 35% tax brackets. Individuals with incomes below $250,000 would generally not be directly affected by this proposal.
The mortgage interest deduction (MID) is a remarkably effective tool that facilitates homeownership. While only about 30% of all taxpayers in any given year itemize their deductions, more than 3/4 of homeowners utilize the deduction over the period they own their home.
NAR opposes any changes that would limit or undermine current law.
Currently, taxpayers in the 33% and 35% income brackets are able to reduce their taxes through deductions for mortgage interest payments, charitable contributions, local taxes and other expenses by 33 and 35 cents, respectively, on the dollar. Under the Administration’s proposal, these individuals would only be able to reduce their tax bill by only 28 cents on the dollar. The Administration estimates that the change would raise $318 billion over the next 10 years.
So the MID remains untouched for most of us. People who earn more than $250,000 do not need the MID to "facilitate home ownership".
Nowhere in the video was the truth about the threatened MID disclosed. I had to click on a link to get the rest of the story. NAR says:
Individuals are permitted to deduct mortgage interest paid on mortgage debt of up to $1 million. Mortgage interest on up to $100,000 of debt on home equity loans or lines of credit also qualifies for the deduction.
As part of its FY 2011 budget, the Administration has proposed limiting the value of the MID for upper income taxpayers by, in effect, converting the deduction to a 28% tax credit for those individuals who are currently in the 33% or 35% tax brackets. Individuals with incomes below $250,000 would generally not be directly affected by this proposal.
The mortgage interest deduction (MID) is a remarkably effective tool that facilitates homeownership. While only about 30% of all taxpayers in any given year itemize their deductions, more than 3/4 of homeowners utilize the deduction over the period they own their home.
NAR opposes any changes that would limit or undermine current law.
Currently, taxpayers in the 33% and 35% income brackets are able to reduce their taxes through deductions for mortgage interest payments, charitable contributions, local taxes and other expenses by 33 and 35 cents, respectively, on the dollar. Under the Administration’s proposal, these individuals would only be able to reduce their tax bill by only 28 cents on the dollar. The Administration estimates that the change would raise $318 billion over the next 10 years.
So the MID remains untouched for most of us. People who earn more than $250,000 do not need the MID to "facilitate home ownership".
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