FHA, the federal agency that insures loans for millions of homeowners who have limited down payment, needs a cash infusion. FHA's reserves have been below the required level for several months, and they must figure out how to increase their reserves so they can continuing insuring loans. In July, 36% of the home buyers in Tucson who financed their purchase used FHA loans.
On October 4, 2010, FHA will be changing the Mortgage Insurance Premiums that they charge to borrowers using FHA financing. The Up-Front Mortgage Insurance Premium (UFMIP), which is added to the buyer's loan amount, will decrease from from 2.25% to 1.0%. On a $100,000 purchase, at the current 4.5% (!) interest rate, this will reduce the monthly payment by $6.11. So far so good.
The problem for home buyers is that the Monthly Mortgage Insurance Premium (MMIP) will increase from 0.55% to 0.80% or 0.90% annually. The exact amount hasn't been determined yet. If the MMIP goes to 0.9% annually, the net effect of the UFMIP and MMIP changes will be this: using FHA financing at current interest rates on a $100,000 house will cost $21.77 per month more.
Saturday, August 7, 2010
July Residential Sales Statistics
The Tucson Multiple Listing Service has released Residential Sale Statistics for July
While the average and median sale prices held steady from June to July, the number of sold units dropped 32% in that one month. Most buyers had to complete their home purchases by June 30 to qualify for the $8,000 tax credit. In July, we saw not only the usual lack of interest in summer home buying, but also the abrupt loss of one huge government subsidy for home buying.
FHA accounted for 36% of the financed sales. Changes are coming in September that will make it harder for buyers to use FHA financing.
Amazingly, 27% of the sales were cash. Many of the foreclosed houses are too damaged or neglected to qualify for financing. Investors are buying these sorry wrecks at incredibly low prices, renovating them, and reselling a few months later for twice as much. While the investor purchases drag down the values of neighboring houses, the resale of renovated houses to homeowners pulls the values up, and helps stabilize neighborhoods.
While the average and median sale prices held steady from June to July, the number of sold units dropped 32% in that one month. Most buyers had to complete their home purchases by June 30 to qualify for the $8,000 tax credit. In July, we saw not only the usual lack of interest in summer home buying, but also the abrupt loss of one huge government subsidy for home buying.
FHA accounted for 36% of the financed sales. Changes are coming in September that will make it harder for buyers to use FHA financing.
Amazingly, 27% of the sales were cash. Many of the foreclosed houses are too damaged or neglected to qualify for financing. Investors are buying these sorry wrecks at incredibly low prices, renovating them, and reselling a few months later for twice as much. While the investor purchases drag down the values of neighboring houses, the resale of renovated houses to homeowners pulls the values up, and helps stabilize neighborhoods.
Wednesday, August 4, 2010
Seller-Funded Down Payment Assistance Program
The home buyer tax credit program is history, and no one is really sure if the $12.6 billion investment was worth it. I myself have not seen any decline in home buying, probably because of the incredibly low 4.5% fixed mortgage rates combined with house values that in some cases are half what they were three years ago.
These guys at ThinkBigWorkSmall make a good point. Just a few years ago, we had programs that allowed sellers to contribute to the buyer's down payment. The down payment had to be laundered through a non-profit that skimmed some of the money for handling the paper work, but a lot of houses were sold to people who had no savings.
HUD decided that because the default rate on these loans was considerably higher than average, they had to put a stop to seller-funded down payment assistance programs. They concluded that when people don't have much "skin in the game", meaning their own savings invested in a houses, they are more likely to walk away from the house when they get into financial trouble.
But is this the reason for high rate of defaults on these loans? Maybe partially, but HUD needs to remember that many of these loans were made to people with no income and bad credit. Additionally, the unemployment rate has soared, and the glut of foreclosures had depresed property values, making houses impossible to sell or refinance. The defaults should surprise no one.
Almost immediately after the seller-funded down payment programs were eliminated, HUD came up with a new idea: $6,500 to $8,000 tax credits for home buyers. The problem with this is that instead of the home buyer having their skin in the game, now they have the tax payers' skin in the game. $12.6 billion of it. This doesn't seem like an improvement to me.
HR 600 is a bill that will restore seller-funded down payment assistance programs. These programs could help keep the housing recovery chugging along, and they don't cost tax payers a dime.
For the most part, lenders are no longer making loans to people who have no business buying a house. In fact, lenders have swung so far in the other direction, that I am now having trouble getting loans closed for people with perfect credit, savings and secure jobs. If the down payment assistance program could be used to help people who are actually qualified to buy houses, we would all benefit.
These guys at ThinkBigWorkSmall make a good point. Just a few years ago, we had programs that allowed sellers to contribute to the buyer's down payment. The down payment had to be laundered through a non-profit that skimmed some of the money for handling the paper work, but a lot of houses were sold to people who had no savings.
HUD decided that because the default rate on these loans was considerably higher than average, they had to put a stop to seller-funded down payment assistance programs. They concluded that when people don't have much "skin in the game", meaning their own savings invested in a houses, they are more likely to walk away from the house when they get into financial trouble.
But is this the reason for high rate of defaults on these loans? Maybe partially, but HUD needs to remember that many of these loans were made to people with no income and bad credit. Additionally, the unemployment rate has soared, and the glut of foreclosures had depresed property values, making houses impossible to sell or refinance. The defaults should surprise no one.
Almost immediately after the seller-funded down payment programs were eliminated, HUD came up with a new idea: $6,500 to $8,000 tax credits for home buyers. The problem with this is that instead of the home buyer having their skin in the game, now they have the tax payers' skin in the game. $12.6 billion of it. This doesn't seem like an improvement to me.
HR 600 is a bill that will restore seller-funded down payment assistance programs. These programs could help keep the housing recovery chugging along, and they don't cost tax payers a dime.
For the most part, lenders are no longer making loans to people who have no business buying a house. In fact, lenders have swung so far in the other direction, that I am now having trouble getting loans closed for people with perfect credit, savings and secure jobs. If the down payment assistance program could be used to help people who are actually qualified to buy houses, we would all benefit.
Sunday, July 18, 2010
June Residential Sales Statistics
The Tucson Association of Realtors has published the Residential Sales Statistics for June. Average and median sale prices are down 9.4% since June last year. From May to June this year, average price declined 2.9% to $189,231 and median price declined 1% to $149,450. This is the first time the median has been below $150,000 since January 2004.
Once again, 87% of the sales were below $300,000. With 5,979 listings under $300,000 and 1,015 sales under $300,000, we have a 5.9 month supply of listings in that range. This is below the six month supply that is considered a balanced market, so the advantage is tipped slightly toward the seller for an appropriately-priced house in this price range. However, sellers are being asked to contribute to buyers' closing costs and make repairs.
Overall, we had 7,997 listings and 1,170 sales in June, for a 6.8 month supply of listings in all price ranges.
Once again, 87% of the sales were below $300,000. With 5,979 listings under $300,000 and 1,015 sales under $300,000, we have a 5.9 month supply of listings in that range. This is below the six month supply that is considered a balanced market, so the advantage is tipped slightly toward the seller for an appropriately-priced house in this price range. However, sellers are being asked to contribute to buyers' closing costs and make repairs.
Overall, we had 7,997 listings and 1,170 sales in June, for a 6.8 month supply of listings in all price ranges.
Friday, July 16, 2010
Your Opinion Needed on FHA Plans
FHA temporarily increased the amount that the seller can contribute to the buyer's closing costs from 3% of the sale price to 6%. Now they are thinking of reducing it back to 3%.
This is another example of the government getting in the way of a housing recovery. FHA is looking for opinions on this proposed change. Remember, as the government makes home sales more difficult, more houses will stay on the market and home values have to drop. Even if you aren't buying or selling in the immediate future, vacant houses affect you because of 1) the loss of property tax revenue to the city and county, resulting in reduced services, 2) the blight of vacant houses and 3) the reduction in your home's value, potentially making refinancing impossible.
Make your comments here.
This is another example of the government getting in the way of a housing recovery. FHA is looking for opinions on this proposed change. Remember, as the government makes home sales more difficult, more houses will stay on the market and home values have to drop. Even if you aren't buying or selling in the immediate future, vacant houses affect you because of 1) the loss of property tax revenue to the city and county, resulting in reduced services, 2) the blight of vacant houses and 3) the reduction in your home's value, potentially making refinancing impossible.
Make your comments here.
Thursday, July 15, 2010
10660 E Rusty Spur Drive
This is the Arizona Dream. Horse property out in the country, with miles of riding trails in the wash across the road.
Extensive remodeling in 2005 raised the living room, foyer and kitchen ceilings to almost 12 feet.
Lots of wildlife and native vegetation.
Serenity next to your diving pool. Family fun on the basketball court and playground. 
Dinner parties on the deep back porch. 
Cozy fires in the family room.
An eye-popping view of the Catalinas from your airy living room, with its huge arched window. 
Custom-built painting studio with beautiful north light. Check out the interactive floor plan.
10660 E Rusty Spur Drive was offered at $299,000. This was a fabulous opportunity. Sadly, the bank refused to accept a reasonable short sale offer. AARGGGHH! This is part of the reason why the housing market is such a mess.
Thursday, July 1, 2010
Back Home Again
I started my real estate career in 1995 with Long Realty. In 2003, I moved to Realty Executives, and thought I would stay there forever. In March this year, the local Realty Executives franchise became Keller Williams. In the following weeks, about 70 of the agents from the old Realty Executives moved to a new Realty Executives franchise in Tucson. Along with 230 of the old Realty Executives agents, I transferred my real estate license to Keller Williams, because I could stay with my mentors from the old Realty Executives, and I wouldn't have to leave my sweet private office on River Road.
After four months with Keller Williams, I concluded it wasn't a good fit for me. Amazingly enough, the new Realty Executives signed a lease on an office building at 2251 E Grant Road last week. I called just minutes after the lease was signed to inquire about a private office, so I had my pick. Serendipity! This is a beautiful Southwestern style building in a great Central Tucson location. Bookman's! Ragin' Sage!
You walk past the white stuccoed walls with their vigas and rusted gates into a pleasant, leafy court yard. My office has French doors going out to another court yard. Needless to say, I am thrilled to be home and to have lucked into this wonderful office.
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