Tuesday, November 22, 2011

Save Our Home AZ Program

On September 22nd I blogged about a new program that was in the works from the AZ Department of Housing, that is supposed to help upside down homeowners. Recently, I have been hearing more about the program, including this flyer that makes it sound really good. So, I decided to call in to get the scoop - how can this program help homeowners looking to do a short sale?

When I called the hotline, the gentleman who answered the phone was nice enough, but could not for the life of him explain anything about short sales. All he could tell me, was that a struggling homeowner is expected to go to the Save Our Home AZ website, and take the Self Assessment. From there, he will be contacted by a HUD certified counselor, who could discuss their options with them.

Fair enough, I am all for a definitive first step. So, I went ahead and called Take Charge America Mortgage Foreclosure Counseling, which is one of the counselors who sees these registrations. The person there also didn't know much about short sales, but was at least honest enough to tell me that he hasn't seen a single person helped through a short sale (to be fair the program IS fairly new), and that their most popular program is the Unemployment and Underemployment Assistance.

In other words ... short sale is a possibility, but how and what ... is really uncertain. And in my opinion, the last thing we need more of in a short sale transaction, is uncertainty. There are many other good programs available now, like the government HAFA program and the Chase incentive program, which are far more popular and which work. Not to mention that regular short sales plain WORK - to accomplish the main goal, which in my opinion is to avoid foreclosure and to permanently dispose of a burdensome debt. 

On September 22nd, I said "Interesting program, but much like other programs, its success is linked directly to its ability to enforce." That remains true ... any program is only as good as its execution. And while I wish the best for Save Our Home AZ program, and still think that its intentions are good - I am not impressed by the execution.

Monday, November 21, 2011

State of the market - 11/15/2011

Notice the continued increase of short sale transactions.

From Cromford Report (Mike Orr):

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending November 14, we are currently recording a sales $/SF of $82.36 averaged for all areas and types. This is 1.7% higher than the $80.99 we now measure for October 15. Our forecast range was $79.06 to $82.26 with a mid-point of $80.67. In a pattern similar to last month, this month the actual figure fell just above our forecast range by 10 cents. Pricing (as measured by $/SF for all areas and types) hit bottom in the second half of August and again in the first half of September but has been moving steadily upwards since then. We are now back at the level we last saw on July 3.

The current price level is 2.01% lower than last year on November 14.

On November 14 REO sales across Greater Phoenix (all types) averaged $62.95 per sq. ft. (up 0.8% from October 15). Pre-foreclosures and short sales averaged $72.25 (up 0.4%) while normal sales averaged $104.56 (up 0.6%). Normal sales gained market share, moving from 35.0% to 36.4% of sales, while REOs were the big losers, moving from 37.9% to 33.8%. Short sales and pre-foreclosures advanced once again this month, moving from 27.1% to 29.8% - another record high.

It is clear that the age of the REO is in decline while short sales and pre-foreclosures are becoming ever more important. As they become scarcer, REOs are getting more expensive. In addition the pricing for short sales and pre-foreclosures is no longer declining.

It is clear that the overall price movement (up 1.7%) is more than twice the movement of each individual component (REO up 0.8%, normal up 0.6%, short sales up 0.4%). This happens because of the change in the mix in favor of more expensive normal and short sales and away from the cheaper REOs.

On November 14 the pending listings for all areas & types showed an average list $/SF of $80.61, 3.0% above the reading for October 15 - so pending $/SF has moved upwards in a serious way for the first time in many months. This is a very positive signal, especially when all three sales components are moving upwards at the same time. Among pending listings we have a fast growing 30.5% normal, a sharply declining 28.3% REO and a steadily growing 41.2% in short sales and pre-foreclosures. The average pricing for pending listings on November 14 in each category were: $110.40 normal, $67.21 short sales & pre-foreclosures and $62.64 for REOs. Normal and REO are significantly higher but short sales and pre-foreclosures are lower than they were was last month. Together with the changing mix this tells us we are likely to see a further rise in sales price per sq. ft. over the next month.

Our new mid-point forecast for the average monthly sales $/SF on December 14 is $84.79, which is 2.95% above the November 14 reading, and we have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $83.09 to $86.49. A substantial change in the mix can still have a significant effect on the average price per sq. ft. and we are seeing considerable variation from day to day. However notice that even the lowest point in our forecast range is higher than today's reading.

It is now becoming very clear that our reading for September 15 - $78.54 per sq. ft. - will remain the low point over the near term. The lowest monthly average sales price is $150,503 and was also set on September 15. However the record low monthly median sales price is still standing at $107,000 and this was set nine months ago on February 24. Our current monthly median sales price is back up to $112,000, so median price changes have not followed the pattern of average prices or $/SF.

Monday, November 7, 2011

The shift to short sales.

Arizona Republic published an article about something I have been discussing for a long time on this blog - the shift to short sales. However, I disagree with one of the premises of the article - that the lenders changed their mind. The entire reason they started short sales, is that they net more money for the servicer and investor. Do not be deceived - a bank is a corporation, whose goal is to increase the profits and decrease the losses for their investors. EVERYTHING they do can be explained using one of those categories.

So, it isn't that they woke up one morning this year thinking that they want short sales, it's that their process is finally to the point where they can do them more efficiently. The other factor, is that the real estate industry finally has the skills and the knowledge to get short sales done. Back in 2006, when I first started doing short sales - I wanted to do them, and the banks wanted to do them. It's that neither of us had it figured out. Five years later - we still have much to figure out, but much progress has been made as well.

Let's keep working at it!

Read the full article here.