Want a Great Deal on a Foreclosure?

I was thinking about writing (again) about how buying a foreclosure home can be a great deal, but isn’t always what it seems. Then I found Realtor Amy Jones’s post about the same topic, complete with a picture (below). A picture is worth a thousand words indeed. Go check Amy Jones’s post about foreclosures out.

Foreclosure homes frequently have zero appliances. The owners take them on their way out the door. They often bang up the walls on their way out too. Frustrated and frightened people who’ve just lost their home and are (likely) moving to a dingy rental aren’t too careful moving big stuff through small hallways.

Foreclosure homes are almost universally dirty. The carpet must be replaced. The walls have shoe scuff marks on them. The ceilings have shoe scuff marks on them, which leaves one wondering…. The doors are outlined with magic marker. The door handles are missing. So are the the light fixtures.

Is that blood on the carpet? Or is it mushed-in dog poo? The counters have been cigarette burned, or are still sticky with jam and peanut butter. Don’t dare open the fridge if the power is off.  Whatever’s in there is about ready to climb out on it’s own! In a word, it’s naaaasty. A maid service is likely to charge you $400 or $600 to clean it all up.

I’ve seen bare concrete floors, missing cabinets and bathroom mirrors, three month old dinner still in the oven, unopened bills and court orders on the kitchen counters, missing toilets, mold so bold it nearly smacked me, and pools so green I thought I saw Nessie lurking beneath.

What haven’t I seen? Anyone other than sophisticated investors willing to buy in.

New Light Rail Photos

Shot a few quick pics of the light rail trains running up and down Central Avenue late last week. Used my cell phone so the quality isn’t super, but thought y’all readers would enjoy these.

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The smudges in the lower left frame of photo 2 are my dashboard. Didn’t have time to open the window, just shot right out through the glass. Me? I’m SO excited to see this project finally come to fruition. I got giddy and squealed like a school girl when I saw the train passing me. It was moving! I’d guess about 30 or 32 miles per hour. Drivers should be alert starting this Saturday.

I lived in Philadelphia for 12 years and visited Manhattan frequently while there. I missed my native Phoenix like a long lost boyfriend as I endured 2 truly horrible Northeast winters in the 90’s. I pined for good Mexican food, colorful sunsets and our oven-like heat. But one thing I always regretted is that we didn’t have public transit worthy of our stature as the country’s 5th or 6th largest city. My NYC friends never used a car, and I frequently got around Philly on public transit. It was easy, quick, and nearly everybody used it at one time or another.

For Phoenix, our upgrade to world-class public transit is finally here.  I refuse to listen to the naysayers who complain about cost, lack of appeal to the average Phoenician or anything else. I’m stoked!

The Phoenix Business Journal reports that 200,000 people are expected to take free train rides this weekend, during the Light Rail’s Grand Opening. The Grand Opening begins with a huge kickoff party, Saturday at 8:30 a.m. at the Metro Operations and Maintenance Center. That’s on 48th Street just south of Washington Street.

The Mayors of Phoenix (Phil Gordon), Mesa (Scott Smith) and Tempe (Hugh Hallman) will attend, along with outgoing US Transportation Secretary Mary Peters and Arizona’s Representatives to the US House, Ed Pastor and Harry Mitchell.

All three cities are going for the gold with their opening day celebrations. Local rock favorites Roger Clyne and the Peacemakers will play during the Saturday festivities in Tempe. Mesa is hosting the legendary Grand Funk Railroad.

Phoenix, it seems, couldn’t find or didn’t want to spring for the cost of musical entertainment and is instead combining the light rail event with the ribbon cutting ceremony at the newly renovated Convention Center. Nice job keeping an eye on our tax dollars at work, Mayor Phil!

All light rail train rides are free through December 31. What a great reason to head downtown to enjoy New Year’s celebrations!  Trains will run every 10 minutes, with additional buses on hand to move visitors from train stations back to the park and ride stations as needed.

“Several streets will be closed for the crowds, including Main Street between Sycamore and Dobson in Mesa; Third Street between Monroe and Jefferson streets; Washington Street between Second and Fifth streets; and parts of Third and Fifth streets and sections of College and Forest avenues in downtown Tempe.” (direct quote from the Biz Journal, as linked above)

Want more info? Get it straight from the source, Valley Metro Transit

Mortgage Rates in the 4’s

From The Mortgage Porter,

“Based on the “true conforming” loan limit of $417,000 with 740+ credit scores and 80% loan to value for purchase or rate/term refinance – owner occupied….drum roll please….

4.375% priced with 1 point (apr 4.605)

4.625% priced with 0 points (apr 4.705)

For credit scores of 720-739

4.500% priced with 1 point (apr 4.731)

4.650% priced with 0 points (apr 4.831)”

If you’ve been thinking about buying real estate in the metro Phoenix region, I think this is the beginning of The Time.

Prices are down steeply in many metro regions over the past 18 to 24 months. Especially in outlying areas like Surprise, Avondale and Queen Creek, prices are downright silly affordable. Try a 3 bed, 2 bath, 1100 square foot starter home at Waddell & Reems for $85,000. Or how about a studio sized vacation condo in a downtown hi-rise with a 180 degree view from the 7th floor…. for $38,000? $38,000!

Search for your next investment or your first home on my Search the MLS page.

One Up-Side: More Affordable Houses

This is an interesting graph. I found it via John Wake’s Arizona Real Estate Notebook (John found it on Seeking Alpha). Click the chart to enlarge, use back button to return.

It’s an oddly upside-down chart.

On all the charts and graphs we see in the media lately, lines rocketing higher to the right mean “Bad”. This chart is different.

Stand on your head or turn your display screen upside-down.  The line marching upward to the right here means “Good”. Houses are getting more affordable. Quickly.

This October’s index number (141.8) means that “a family earning the median family income had 141.8% of the income necessary to qualify for a conventional loan covering 80% of a median-priced single-family home” (quote from Seeking Alpha, but I suspect the language is NAR’s).

In English, the average American family can now easily qualify for a mortgage large enough to cover 80% of the cost of purchasing the average American house.

One problem, of course is that pesky 20% down payment that lenders are now requiring. Bad, bad lenders! <tongue in cheek> For cash-strapped Americans who’ve become used to spending every dime we make and then some, coming up with 20% of the purchase price of the average American home is next to impossible without winning the lottery or gaining an inheritance.

In Maricopa county, the median home price is somewhere near $176,000. Twenty percent of that is over $35,000. How long would it take you to save $35,000?? The disappearance of No Money Down home loans (and 80/20’s and 125% cash-out refi’s and all the rest of those “liar’s loans”) means that fewer buyers are actually able to buy a home now, regardless of how much of a mortgage they’d qualify for.

Another problem – arguably the overriding problem for the entire world economy right now – is the confidence factor. Americans lack confidence in their own (and the country’s) near-term financial future. Most of us are afraid things will be worse in 6 months, so we’ve all stopped spending. Of course I’m generalizing but you get the point.

As one commentor on Seeking Alpha put it, “Now that almost nobody can afford a tent, castles are cheap.”

An optimist at heart, I can ususally find something to be hopeful about. So, where’s the good news in this scenario? Here:

1. No matter your feelings about NAR and their statistics, houses are getting more affordable as foreclosure sales depress pricing.
2. Today lenders are making it harder to qualify for a mortgage, as they over-react to their own boom-years greedy practice of giving a loan to anyone who could breathe in and out. But eventually that pendulum will stop swinging wildly as lenders find ways to grant home mortgages to folks with less than 20% down.

All recessions end. I don’t know when or exactly how this one will end, but it will end.

When we get there, houses will still be relatively affordable, mortgage money will be flowing again to those who can reasonably afford it, and buyers will begin buying homes again in large numbers.

We won’t all qualify to buy a castle, but neither will we all be living in tents.

Housing Good News

Here’s a piece of good news about the foreclosure mess and the overall bad housing market. Good news in this arena is as rare as snowmen in the summer, so I wanted to pass it along right away.

An acquaintance called me some days ago to tell me he successfully got his mortgage company to renegotiate his mortgage loan terms.  Woot! Woot!

The Original Mortgage

• Taken out in 2003
• 5 year ARM, Interest Only payments at 5.875%
• Payments of 882.32 per month (interest only, not touching principle)

The New Mortgage

• 3.875% fixed rate for 40 years
• about $400 payment needed to start the new plan

This is phenomenal news! On your average $200,000 mortgage, this renegotiation brings the payment down from about $1183/month to $820/month.

Congratulations Tom!

The homeowner in this case had suffered both a medical disability and a job loss. Both these events are typically “qualifying events” for almost every mortgage company. Experiencing a qualifying event means you’re eligible for the mortgage company’s renegotiation plans.

Haven’t had a job loss or medical disability? It’s still worth contacting your lender if you’re struggling to make the current payment, or if you know you soon will struggle when the adustable rate (ARM) adjusts in the future.

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Further good news on the credit card front –

Another friend of mine fell 2 months behind on credit card payments. He had a 5 to 15 year good payment history on the various cards. He’s 100% commission in a profession related to the housing industry, so times are tight.

Bank of America contacted him and offered their “Hardship Program” –

Old Payments

• Card 1 — $382.00 per month at 28.99%, payoff time about 40 years
• Card 2 — $213.00 per month at 15.22%, same

New Payments under B of A’s “Hardship Program”

• Card 1 — $200 per month at 4.75%, payoff time 60 months
• Card 2 — $168 per month at 4.50%, same

If you’re falling behind on or struggling to pay any of your consumer debt, call the servicing company today! They’re as scared of the word “recession” as we all are, and they’re agreeing to reduced payment plans to avoid writing off the bad debt entirely.

Downtown Phx AZ’s 2nd Best

In a recent statewide survey of small business owners, Phoenix was ranked 2nd best downtown, behind Tempe.

I lifted this graphic from the Downtown Voices Coalition blog (original post here) which is a really great resource for local news.

Downtown living has boomed in the past few years as various revitalization plans have taken root. The Arizona Republic reported that 10,000 new residents have put down roots in the downtown area since 2000.

Surely the current economic slowdown has put a pause in that growth pace. But the December grand opening of the Metro Light Rail system should boost interest in and visits to the downtown corridor. The Grand Opening is Saturday and Sunday, December 27 and 28 and all train rides that weekend are free. Read all about Light Rail on the ValleyMetro website.

Interested in housing prices downtown? Hi-rise condos are especially popular. You can search for downtown Phoenix hi-rise condos for sale here.

Help for Homeowners

Today’s Fed announcement marks another step towards getting the housing market un-slumped. Finally, Hank and Ben seem to be getting it: the world’s financial meltdown started in the US housing market and the solution should begin by focusing on housing.

Recently, mortgage industry heavyweights Countrywide (now Bank of America), JP Morgan and Citigroup announced a foreclosure moratorium to help struggling homeowners stay in their homes. Citi especially said their efforts would be aimed not only at homeowners behind in their payments, but those who’s credit profile reveals they might get behind.

Today’s new Fed housing stimulus package should make mortgages more affordable by pushing long-term mortgage interest rates down as much as a half-point. This should help new homebuyers jump into the market. (click the link for a breakdown of program details)

Some expect rates to fall to 5.50% soon. The National Association of Realtors (NAR) estimates that each 1-point drop in mortgage rates spurs 500,000 new home buyers into purchasing a home. NAR says it’ll keep pushing the Fed to enact programs and policies that will eventually get mortgage interest rates down to 4.50%, a rate not seen since well, not in my lifetime.

Here’s a chart of the history of mortgage rates, courtesy of my broker The Phoenix Real Estate Guy (see his post with many more charts here).

It’s interesting to compare the recent history to the truly historic data, based on a chart posted at The Financial Forecast Center. Seems like rates haven’t been at 5.50% since sometime in 2004, and haven’t been at 4.50% since about the late 1950’s.

Our housing problem is generally twofold – (1) too many homes for sale and more hitting the market daily due to swelling foreclosures, and (2) not enough buyer interest.

The Fed’s announcement today, combined with the foreclosure moratorium announced recently gives me real hope that the kinks might start working out soon.

Banks working to keep homeowners in their homes means less foreclosure homes going up for sale. The Fed making substantive moves to coax new homeowners into the marketplace means eating up some of the excess inventory of homes for sale.

This? Could be the beginning of real change.

Tune in tomorrow for a breakdown of the local Phoenix housing numbers, and how we’ll know we’ve begun to turn the corner towards recovery.

SRP Rebates for Old Fridges

Hat tip to Aaron V for pointing out this program to me. SRP will come pick up your old fridge and haul it away, recycle up to 95% of it and send you a $30 check to boot. I think it applies to SRP customers only.

Here are some of the program details:

• SRP electricity customers are limited to recycling two appliances per account per year.
• Refrigerators and freezers must be 10 cu. ft. to 30 cu. ft. (interior measurement).
• Appliances must be on the SRP account premises, clean, empty and in working condition (plugged in) at the time of pickup.
• A $30 check will be mailed to your address within 30 days after pickup.
• Appliance recycling requests are reviewed on a first-come, first-served basis.
• SRP reserves the right to change or terminate this program without prior notice.

See further details on SRP’s Appliance Recylcying program here or call SRP at (602) 236-4225.

Related Post – Recycle When You Remodel with Stardust Building Supplies

Fannie and Freddie Not To Blame

As a follow up to my October 4 post, I present the following chart created using Federal Reserve data.

This chart is a screen capture of the original which appeared on the Mark Thoma’s blog The Economist’s View. See the original chart and post accompanying it.

Thoma has waaaay more understanding of this than I do. He’s got the nifty cool graphs and charts to back up what I tried to say on October 4.

Namely, Fannie and Freddie did not cause the foreclosure crisis. As the chart shows, The Two F’s got out of subprime loans in 2002 before things got really crazy. Watch the pink line – see how it dips sharply at the sime time the dotted light blue line makes a jump shot? That’s Fannie and Freddie getting the heck out of dodge, because the loans the market started demanding felt way too risky. The light blue line is “asset-backed securities issuers,” namely entitities like the investment banks that have failed so spectacularly of late.

The Two F’s were still giving out some loans more risky than their standard fare. But as Thoma explains (and my personal experience proves) Fannie and Freddie largely did 30-year fixed rate loans. They weren’t doing the “exotic” liar loans that have caused so much pain.

Thoma says, “There is no excuse for the actions of the management of Fannie and Freddie, and I’m not trying to defend them or their choices, but the idea that Fannie and Freddie caused the general credit crisis is wrong.” (emphasis mine).

By the way, I’m still browsing through Thoma’s blog, trying to study up on all the intricacies he and his colleagues discuss about economics in general and the housing/financial crisis in particular. It’s not for bare beginners, but is an excellent resource if you’ve done some reading on the basics elsewhere. Check it out!

Sheila Bair Stole My Homework!

Well, not really. But that headline might get you out of your feedreader.

Sheila Bair is way smarter than me by any measuring stick you can think of. But this week Bair endorsed a loan workout program that’s remarkably similar to a plan I proposed back in April.

Sheila: “The FDIC has initiated a systematic loan modification program at IndyMac Federal Bank to reduce first lien mortgage payments to as low as 31% of monthly income. Modifications are based on interest rate reductions, extension of terms, and principal forbearance. A loss share guarantee on redefaults of modified mortgages can provide the necessary incentive to modify mortgages on a sufficient scale, while leveraging available government funds to affect more mortgages than outright purchases of specific incentives for every modification.” (emphasis mine)

Me:

“…lenders [should] do the following: (1) write down principal, (2) lower interest rates and use fixed (not adjustable) rates, (3) lengthen loan terms, and (4) use the homeowners’ credit score from before they missed their first mortgage payment to calculate the refinance terms.”

and me in September 2007:  Why is the 30 Year Mortgage Sacrosanct?

So Sheila, anytime you need to bounce some ideas around, gimme a call. ‘Kay?

My Boss Highlighted in National Media Outlet

Today my broker (my boss) Jay Thompson was featured in a short article at Inman.com, a source for all news related to the real estate industry.

Even if you don’t click over to the article, if you’re browsing this real estate blog, chances are you’d enjoy browsing some homes for sale online. I have a Search the MLS feature that’s free and doesn’t require registration. But Jay Thompson has a waaaaay cooler interface to the same data on his site, PhoenixRealEstateGuy.com.

Related Posts

1. NorthPhoenixAgent Quoted in USA Today
2. The Butter Homes Guy (Chris Butterworth) on Channel 3 News

Getting “good press” is always a great thing in real estate. You might be the most knowledgeable Realtor in the entire universe, but if nobody knows about you, you’re going to want for business. As my mentor once said, Realtors who don’t market themselves have really skinny kids.

Woot, woot, Thompson’s Realty agents!

Credit “Repair”? Not Likely.

NPR did a great little piece this morning on how many Americans are being sucked in by various credit repair advertisements.

Most of these firms promise to raise your credit score by hundreds of points in a just a few days or weeks. They claim to do this by disputing the incorrect information on your credit report. Many of them even dispute information on your report that you (and they) know for a fact is true. These credit repair “experts” claim that they’ll continually question everything on your report, and eventually the credit reporting agencies will “just get tired of dealing with it and remove the information from your report,” thus raising your score.

You can listen to the NPR audio here. (Click on the little “listen now” icon at the top left, near the headline)

The highlights of the NPR audio:

• These firms don’t do anything you can’t do yourself
• No one can raise your credit score by hundreds of points in mere weeks
• It’s illegal to ask you to pay an up-front fee to “fix” your credit
• If the information on your credit report is factual, it cannot and will not be removed

As I’ve written before, these firms are almost always a sham and a scam.

Instead of falling for credit repair scams, consumers worried about their credit report and score should consult a nonprofit credit counseling service through the AICCCA (Association of Independent Consumer Credit Counseling Agencies). Find a credit counseling service near you.

Related Posts

1. Credit Repair on the Roadside
2. I Can’t Pay the Mortgage, Help!

GMAC Mortgage in Trouble

The New York Times reports that the mortgage group GMAC is in trouble, posting it’s 5th straight loss in 3rd quarter 2008. CEO Alvaro de Molina indicates GMAC is attempting to become a bank holding company in order to take advantage of some of the US government’s $700 billion corporate handout package bailout fund.

What’s it mean? The credit crisis is probably frar from over. Or rather, the fallout from the credit crisis is far from over. The LIBOR continues to improve (2.51% today, down from 4.82% in October), indicating increased liquidity in inter-bank lending, which is after all what we’re told was the real crisis.

What if you have a GMAC mortgage? Don’t worry or panic. Your mortgage payments are still due on the usual dates. If/when GMAC is sold off or absorbed, or whatever, you’ll get a letter in the mail from the new owner of your mortgage loan. They’ll tell you where to send your payments (believe me!). Until then, keep making payments on time, to the address you’ve always sent them to.

What if you’re a GMAC employee? Polish the resume.

Vote, Arizona!

Today’s a historic election day in the US, no matter how you look at it.

I hope all registered Arizonans get out there and do their civic duty.

If you’re in the metro Phoenix area, the Maricopa County Recorder’s website has just about everything you need to know about elections, registering, voting and the whole crazy thing.

Today image courtesy of Woodsy over at StockExchange

Downtown Phoenix Block Party

logo shamelessly borrowed from CopperSquare.com in order to help promote the event via this blog post.

The 2nd Annual “Happening” is happening this Saturday, November 1, 2008, from 10am till 2am.

The event is sponsored by the Downtown Phoenix Partnership in conjunction with the Phoenix Community Alliance, the Mayor’s Office, and the Greater Phoenix Chamber of Commerce. The Happening is designed to highlight the growing array of living and entertainment options in the 90-block area that makes up downtown Phoenix.

The event includes a loft and home tour, a pub crawl, the What’s Happening Street Expo, the third annual Parade of the Arts and the first It’s Happening sweepstakes. Get more detailed information on the Street Expo, pub crawl, Parade of the Arts and sweepstakes here, at the CopperSquare website.

The skinny on the Loft and Home Tour:

• Runs 10:00 am to 4:00 pm
• Event begins on 5th Street, between Roosevelt and Garfield streets (map below)
• You must check in on 5th between Roos & Garf to get your wristband and tour book
• Free shuttles will run up and down the tour route during the event
• Admission is $8 pre-paid and $10 on the day of the event
• Tickets are available from the Copper Square website ticketing page

Properties on the Tour:

• Century Plaza
• Portland 38
• Portland 2
• Chester Place
• 44 Monroe
• Summit at Copper Square
• 215 E. McKinley

again, logo shamelessly borrowed from the It’s Happening website, in order to help promote the event

Get out there Phoenicians, and find out how funky-cool our downtown is becoming!

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