Anna-Lise Troup's Tucson Area Real Estate Update: February 2009

RISMEDIA, February 27, 2009-(MCT)-Mortgage rates are low, but getting them is going to cost you. New rules by Freddie Mac and Fannie Mae are upping the fees for borrowers with less than perfect credit, those in the mortgage industry say. Other increased costs reflect the uncertainty in the mortgage market, as lenders try to reduce their risk and anticipate rates.

“It’s an interesting time, in that mortgage rates are historically low,” said Amy Bohutinsky, vice president of communications for Zillow.com. “But at the same time, while rates are low, lending standards are still really tight. What that means is that people who qualify for these really good rates … fall under a strict and narrow set of guidelines.”

Even borrowers with decent credit aren’t immune to higher fees and mortgage costs. In general, to get the low rates that make the headlines, borrowers also are often paying more points, or prepaid interest, that bring the mortgage rate down.

If you look at where mortgage pricing was a year and a half ago, and where it is now, “there have been a slew of changes, mostly negative from a borrower’s perspective,” said Rick Allen, vice president of MortgageMarvel.com, a mortgage website.

The most recent changes started to show up in lenders’ rate sheets this year.

New risk-based pricing from Freddie Mac and Fannie Mae adds fees to mortgages based on a borrower’s credit score. In order to avoid the extra fees, borrowers need to have a FICO score of 740 or higher, said Dan Green, loan officer with Mobium Mortgage in Cincinnati and author of TheMortgageReports.com. The new rules take effect in April at Fannie and Freddie, but lenders incorporated them into rate sheets by the middle of January, he said.

The new fees, called Loan Level Price Adjustments, have been an unwelcome surprise for some homeowners interested in taking advantage of low rates.

“It has created a different pricing scenario from one consumer to the next,” Allen said. “What you see in the Sunday paper could be perfectly close for one borrower. The guy next door could be 1% higher.”

Charges have also gone up for those who extract equity from their home through a cash-out refinance, Allen said. Condo financing could also involve added costs, Green said.

According to Freddie Mac’s weekly rate survey, the average rate on a 30-year fixed-rate conforming mortgage was 5.05% in January 2009, and a payment of an average 0.7 point was required to obtain the rate. A year ago, the average rate was 5.76%, but it took less to get that rate-an average 0.4 point was required.

There’s an inverse relationship between points and rate; the more points you pay, the lower the rate becomes. A point is 1% of the mortgage amount, charged as prepaid interest.

“If the points are creeping up a little bit, it is a sign that lenders are looking for money up front as opposed to over time,” Allen said.

In general, government intervention in the mortgage market is making rates unpredictable, causing lenders to price more conservatively, said Julian Hebron, vice president and mortgage consultant at RPM Mortgage in San Francisco.

Before paying points, consumers need to decide whether the move makes sense for them, or if they’d be better off obtaining a mortgage with a higher rate while paying zero points. The decision hinges on how long the borrower plans on staying in the home, and how long it will take for paying points to pay off, said Ethan Ewing, president of Bills.com. The more time a homeowner plans on staying in the home, the more that paying points makes financial sense.

But Hebron noted that paying points gets borrowers a bigger discount these days.

“Historically, one point in fee gets borrower a rate that’s about 0.25% to 0.375% lower. Now one point gets the rate about 0.625% to 0.875% lower,” he said in a recent analysis.

Recently, Hebron could get a $417,000, 30-year fixed-rate mortgage at a rate of 5.625%, paying zero points. By paying one point (or $4,170) on the same loan, the rate went down to 4.875%, saving the borrower $261 per month in interest cost.

“At this monthly savings rate, it takes 16 months to pay back the $4,170 and everything from that point forward is benefit,” he said. “Traditional breakeven periods are double this.”

Other fee increases for borrowers today include those on underwriting and processing, which range from $300 to $400 on average. It takes more work and expertise to process a fully documented file than the no-document loans that were popular a couple of years back, and that is reflected in the higher charges, Hebron said.

Those attempting a refinance can also expect to pay an appraisal fee-maybe $300 or so-up front, Hebron said. Mortgage rate lock fees are also becoming more common, though it’s not impossible to find a firm that will not charge for that service, he added.

“For title and settlement fees, the fees that we are seeing the largest increases in are the real-estate transfer taxes charged by cities and counties,” Ewing says. One tip for borrowers who are refinancing: Using the same title-insurance firm from your last mortgage will likely save money.

Title and settlement fees may also be on the rise, as firms have gone out of business and surviving companies can raise prices, Ewing said. One tip for borrowers who are refinancing: Using the same title insurance firm from your last mortgage will likely save money, he said.

In total, mortgage fees could cost you 3% or so of the loan amount, according to HSH Associates, a mortgage-information publisher.

© 2009, MarketWatch.com Inc.
Distributed by McClatchy-Tribune Information Services.

Foreclosures Remain Hot Topic

January and February have been filled with forecasting events in Southern Arizona. Foreclosures continue to be the HOT TOPIC for the real estate and financial industries. “Foreclosure Looms” is no longer a noteworthy headline for advertising a property whose owner needs a quick sale. Nor are foreclosures limited to residential properties – commercial, land, and industrial real estate are all affected with foreclosures streaming into the market. “Both new and resale will be competing with foreclosures for the next four years,” predicts John Strobeck of Bright Future Business Consultants. Yet to be known: the potential impact of the recently approved Stimulus Package!

There were 955 foreclosure filings in Pima County in January according to RealtyTrac, one in every 455 housing units. “Builders are not really competing with other builders or resale,” states Strobeck in his latest newsletter, “but with foreclosures”. R.L Brown, Housing Market Consultant from Phoenix noted in his remarks at the recent New Construction Forecast held in Tucson this month that the New Home builder must build to meet the competition of the foreclosure market which makes up 30%-40% of the residential market. We can say the same for resale sellers! An important trend to watch will be homebuilders creating new products that are significantly different in order to compete against foreclosures.

January statistics for TAR/MLS were published Wednesday, February 11, 2009 with the bright spot being an increase in pending sales – up 53% over December ’08. The number of new listings and active listings increased, but only slightly. Worth watching very closely.

In TAR/MLS Home Units Sold decreased 24.13% from December to January and Home Sales Volume decreased 21.07%. January’s Home Sales Units of 588 was a drop from the previous year’s figure of 621 and down from December’s number of 788. However, pending contracts increased 53.76% from 612 in December to 941 in January. That’s still down from last January’s number of 1,079.

Active Listings were up only slightly at .88% from December and were down considerably by 16.08% from January 2008. Total number of residential Active Listings is 7,694. Average days on market crept up to 84, breaking a four month down cycle.

The Median Sales Price dropped, from $167,900 in December to $163,250 in January. January’s drop is 19.58% from January 2008 and 2.77% from December008. Average Sales Price for January 2009 decreased in January 2008 by 21.51% at $208,133 – off from $265,178 from last year.

Foreclosures will continue to impact both the new home market and the resale market in Southern Arizona. Strobeck’s January Housing Market Letter reports 224 foreclosure home closings in January, up from 84 closings in January 2008. SFR permits were down from 215 in January ’08 to 102 in January ’09. There were 146 new construction closings in January ’09, down from 257 in January ’08. The median sales price for new construction was $215,000 for January ’09, down from $226,577 in January ‘08.

Here's some great news for first-time home buyers! Check it out.

The National Association of Home Builders (NAHB) has launched a newly designed website that provides detailed information about the $8,000 tax credit for first-time home buyers that is a key measure in the sweeping economic stimulus legislation signed into law today by President Barack Obama.

“The new tax credit provides a great opportunity for first-time home buyers,” said Joe Robson, NAHB chairman and a home builder from Tulsa, Okla. “Combined with today’s near record low interest rates, the large selection of homes on the market, and very competitive pricing, the tax credit should be the extra incentive needed to get prospective buyers who have been sitting on the fence into the market.”

In addition to being limited to first-time home buyers, the tax credit:

- Is equal to 10% of the home’s purchase price up to a maximum of $8,000.
- Is available for homes purchased on or after January 1, 2009 and before
December 1, 2009.
- Does not have to be repaid.
- Has income limits of $75,000 for single taxpayers and $150,000 for married couples.

The website, www.federalhousingtaxcredit.com, includes basic information about the tax credit and a detailed question and answer section. It also includes information about other housing-related and small business measures in the legislation and a number of home-buying resources for consumers.

For more information, visit www.NAHB.org

Target.com is opening their fulfillment center in Rita Ranch (Tucson, AZ) and is inviting local people to apply for employment. They are holding a job fair on February 9, 10, and 11 to take applications and they are also taking them online. Here is the pertinent information:

Pay: $12.50/hr to start with progression to $14.75/hr after 2 years

Where: Target.com Fulfillment Center, 8940 E Rita Park Dr, Tucson, AZ 85747 - This is basically at Rita Road and I-10

When: Monday, February 9, Tuesday, February 10, and Wednesday, February 11 from 10 AM to 7 PM

Phone number to call for more info: 520.344.6000 and select “Option 9″ for more information

To apply online:

Go to www.target.com/careers prior to attending the job fair

You can apply directly to the Fulfillment Center Team Member position by selecting “hourly” in Distribution Centers link under “Opportunities at Target”.

CASA DE LOS GATOS WINE TASTING EVENT


When: Sunday, February 22, 2009
Where: Cata Vinos
3063 N. Alvernon Way (One block South of Ft. Lowell)
Time: 4:00 pm – 6:00 pm
Cost: $20.00

Join us for wine tasting, cheese and crackers and entertainment provided by guitarist Joe Troup.

There will be a silent auction and gift items available.

Bring a friend and enjoy fine wine and good times while helping the kitties of Casa de los Gatos.

To contact Casa de los Gatos:
info@casadelosgatos.org
520-881-0900

Cost-Effective Tips to Sell a Home

RISMEDIA, February 5, 2009-In today’s real estate market, sellers need additional advice on how to cost-effectively prepare their homes in order to sell quickly. With an abundance of homes on the market, waiting several months to sell a home could leave many recession-plagued sellers in financial distress.

For example, in October 2008, the median existing-home price was the lowest since March 2004 at $183,200. This means that a homeowner who lived in his or her home for four-and-a-half years is seeing the value of the home as the same or less than when the home was bought (CNNMoney.com, November 2008).

The good news is that although some homes may need extensive upgrades or renovations, many may only require simple changes. For a limited cost, or no cost at all, home sellers can fix their homes to appear more appealing to prospective buyers.

Here are some quick and inexpensive fixes to sell a home more quickly:

Focus on outdoor aesthetics. Cut back overgrown shrubs and plants. Hose down a dusty, dirty house. Sweep the driveway, sidewalk and any stairs.

Cost: $0

Eliminate odors. Before showing the house, open windows to let fresh air in; use air fresheners or baking soda to rid odors; sprinkle baking soda on the carpet and leave it for at least 10 minutes to make carpets smell clean.

Cost: approximately $15

Wash windows. Purchase a window-cleaning product to avoid professional costs. Clean windows make a home look well-kept and outdoor views more crisp.

Cost: approximately $25

In addition, consider scheduling a prelisting home inspection, an inspection conducted prior to putting the home on the market. These early inspections aid homeowners in identifying problem areas that can be easily repaired. For example, existing electrical, heating, or plumbing systems may need to be upgraded, or mold growth in a basement may require professional advice on how to eliminate dampness.

The home inspector can also suggest additional work to be done and what could be postponed. And, remember, a home inspector is an objective, third-party consultant who does not stand to profit from work suggested. A good assessment of the current state of a home and its systems will allow for more accurate planning and estimating as homeowners prepare a home to sell.

Article by Dan Steward, president of Pillar To Post.

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