Why is it time to Buy a Home !!!!

3 Reasons Why Real Estate is Superior to Stocks

Foreclosures

Phoenix,Gilbert,Goodyear,Avondale 60K-150K

Real estate and stocks are two popular investment vehicles. It is always important to have a balanced portfolio, therefore it is worthwhile to invest in both. However, if you are trying to decide between the two, you might find that real estate provides the better returns more consistently.

Here are the top 3 reasons I believe real estate is a better investment than stocks:

1.) Real Estate is a Tangible Asset. It is a physical investment that you can see and touch. Shares in a company are nothing more than a piece of paper giving you an interest in the underlying company. Although a company’s shares can be valuable, because real estate is tangible it generally provides more value because people can use it in everyday life, and more importantly it is essential!

People must have homes to live in and businesses must have places to operate from. You can live in a house or an apartment, but you cannot live in a share of stock from Google. You can operate a business in a retail shopping center or an office building, but you cannot open and operate your business just because you own stock in Wal-Mart (unless of course you bought the stock way back when and your capital has increased 20X!).

2.) Real Estate allows for Leverage. Now leverage can be a double-edged sword, and over-leveraging a property can cause your asset to become a “money pit” faster than you can say “Bubble”. The over-leveraging of properties coupled with greed is the primary reason why we are experiencing the effects of the recent real estate market crash.

However, responsible leveraging can allow an investor to put up 20-30% of the purchase price of a property and borrow the remaining 70-80% of the purchase price. This leverage will generally allow the investor to realize gains much higher than that of the stock market. For example if you have $100,000 dollars to invest in real estate, you can generally leverage that into a $500,000 property. So your $100,000 will serve as a 20% down payment on a $500,000 property and you will get a mortgage for the remaining $400,000.

If the property appreciates at 5% ($25,000) over the course of a year, that is an unrealized gain of 25% on your invested capital of $100,000. In addition, if the property was generating a positive income, which is always advisable, then your returns would be greater.

Now just to be straight forward, this is the broad view of the investment. It doesn’t take into account closing costs, loan costs, illiquidity of the investment, etc. So there are more costs that would be associated with this investment that would take away from that 25% return and you would still have to sell or refinance the property to realize that 25% return, however, over the course of a few years with responsible leverage, real estate returns far outpace stock market returns. Feel free to contact me if you would like me to justify that claim in more detail. :-)

Stocks can generally only be leverage at a 50% – 100% ratio if you are trading on margin. So if you have $100,000 to invest, you can generally purchase $150,000 – $200,000 worth of stock. Assuming you purchased $200,000 worth of stock and it appreciated 5% ($10,000) over the course of a year, that is an unrealized gain of only 10% on your invested capital of $100,000. And similar with the real estate investment you still have additional fees that will take away from this gain, primarily brokerage fees and interest on the borrowed capital in your margin account.

3.) Real Estate allows for more Control. When you invest in real estate, you generally have control in how that investment is to perform. You can implement strategies to operate the investment more efficiently in order to maximize returns. Unfortunately, with stocks you really don’t have any control in how the company operates in order to maximize your returns on your investment. At best you can submit suggestions to the board of directors, and maybe they will implement some of your suggestions….MAYBE! Great article by Khary Reynolds

Phoenix Housing Numbers - Here are some great numbers

I was out with a client yesterday from CO who feels  the home prices are going to drop another 15-20% and really feels he should hold off a few more months..  this puts the housing market into perspective. THXLW-  Don't Drag you feet, it is a Good time to buy.

We talk to countless people who really want to buy an urban condo but are afraid. They worry that prices are going to go down further and hurt them as the eroding market has hurt so many others.
Here are some great numbers that put the current Phoenix real estate market into perspective. This data is for real estate in general, not urban high rises and lofts specifically. However, the numbers reinforce our opinion that with all things considered (i.e. the very real possibility of higher interest rates, the very real possibility of inflation, and a real increase in buyer interest among our clients) that now is a good time to buy. Please understand that our optimistic opinion does not apply to all high rises and lofts. There are definitely some risky situations out there. But in general things look much much better.
 The numbers below show what has happened since January 2002 in the greater Phoenix real estate market.

 ACTIVE LISTINGS

• Currently there are 6,314 properties actively listed for sale on the Phoenix MLS.
• The highest number of listings since January 2002 was 11,591 in November 2008; almost twice today's number.
• The lowest number of listings was 1,190 in March 2005.
• The number of active listings has dropped steadily since November 2008 until July 2009 where they have staid pretty steady at 6,000.

CONCLUSION - Inventory, the number of properties currently for sale is at the level of a "normal market." This means that the number of buyers and sellers are relatively equal. This means that the days of "beating up sellers" are probably over so we expect prices move up.

DAYS ON MARKET

• The number of "days on market" for properties actively for sale in Phoenix is currently 110 days.
• The high was 484 in June 2008.
• The low was 19 days in March 2005.
• During the "normal" market of 2002-2004 properties took an average of 100 days to sell.

CONCLUSION - Days on Market are way down to a level seen in the "normal" market of 2002 to 2004. This supports our opinion that the number of buyers and sellers have reached parity or balance. However, we do believe that today's number is heavily influenced by the very high number of foreclosure properties which are selling very quickly. Nonetheless, one can see that the number of days to sell has come way down and supports our optimistic outlook.

PENDING SALES

• Currently the number of "pending sales" (properties which have a buyer but the transaction has not yet closed) is at 2,598.
• The high was 3,272 in May 2009.
• The low was 530 in January 2008.

CONCLUSION - The current number of pending sales is significantly higher (25 to 50%) than the numbers in 2004 and 2005 which is a great thing. Please note that the number of pending sales is down today vs. May of this year. However, please know that real estate sales in Phoenix are almost always slower in the fourth quarter of the year vs. the first two quarters of the year. I'm sure you'll agree that few people want to shop for a home and move during the holidays.

CLOSINGS

• Currently the number of properties that close each month is 1,761.
• The high was 2,380 in January 2009.
• The low was 404 in January 2008.
• Current sales velocity is equivalent to 2004 and 2005.

CONCLUSION - Yes the number of closings today is lower than January 2009 but again understand that few people want to shop for homes or move during the holidays. Sales are almost always lower this time of year. Expect a nice jump in the number of sales in January 2010.

AVERAGE SALES PRICE

• Currently the average sales price in Phoenix is $146,598.
• The high was $343,229 July 2007.
• The low was $102,845 in March 2009.

CONCLUSION - The average price has GONE UP 43% in the last eight months and today's average prices are almost 15% lower than those in 2002. Buying at 2002 price levels means nothing IF prices are still going down. But if prices are going up, which the data suggests AND you can buy at 2002 levels then now may in fact be the time to buy.

AVERAGE SALES PRICE PER SQUARE FOOT

• The current average price per square foot is $83.06.
• The high was $185.29 April 2007.
• The low $64.40 per square foot in May of 2009.

CONCLUSION - Current prices per square foot are up approximately 29% since just six months ago but still approximately 18% lower than in 2002. Again, prices are going up but you can still buy at or below 2002 prices.

STATE OF THE MARKET
So there you have it, data that suggests that we "hit the bottom" in real estate in early 2009 and that prices and sales activity are going up. You can believe what you read in the newspaper and see on the evening news OR you can form your own opinions based on the numbers. Fitz and I have been pretty conservative in our opinions of the real estate market during these tough times; certainly more conservative than any of our peers. We have NOT been banging the drum telling everyone to buy, buy, buy just so we could make a commission. We have instead been very skeptical of a "recovery". However, we now see things differently. We believe the numbers. We believe that prices have bottomed and are going up. We believe that the worst is behind us. We also truly believe that interest rates will be going up soon. We also truly believe that inflation is on its way. If we are right then, in general, now is the time to buy.
I say "in general" because we believe that there are exceptions to this statement. Some high rise and loft buildings are still very risky and are many months, if not years, from recovering. YOU STILL NEED AN EXPERT ON YOUR SIDE to help you find the good "buys" and to identify the stable high rise and loft buildings. Don't trust your investment to a part time agent or one who does not specialize in the urban living. Talk with  AZprideProperty.com  Linda
RE-Blog  - WeknowUrban Thanx

New Rules Have Lenders Checking Credit Reports the Day of Closing

As of June 1, mortgage lenders began re-pulling credit reports of borrowers just before a loan closes. Lenders are looking to make sure the applicant has not incurred any new debt prior to closing the loan. The change in procedure is part of Fannie Mae's Loan Quality Initiative (LQI). The LQI encompasses many aspects of mortgage underwriting. Basically, FHA as well as Fannie and Freddie are making an all out effort to improve their loan quality for mortgage backed securities.
Why check credit? When someone buys a home, they also find themselves in the market for a new refrigerator, washer/dryer,  furniture ,ect. .                                                                                                                     Search Homes
  
Sometimes these purchases are financed with credit cards. When this happens the balance of the applicants credit card rises which will change their monthly payment and possibly their credit score. The already approved loan will have to go back to the underwriter to make sure they still qualify with the higher debt. Sometimes purchases for furniture and appliances are financed with a store credit card, or "12 months same-as-cash." These are still debts that show up on a credit report and may impact qualifying.
None of us want to find out the day of closing that a previously approved applicant no longer qualifies because they went on a shopping spree. Please advise your homebuyers that they should not be making any purchases with credit or acquiring any debt before their mortgage closes.
Dan Shaw,  People's Mortgage Company

if you are looking for that 2nd home call Linda Wieczorek AZhomes4u@gmail.com

Can I Purchase A Home If My Spouse Does A Short Sale?

Via David Krushinsky (Mortgage Professional - Phoenix, AZ - NMLS 202115):

Short sales, in most cases, are one of the most economical solutions for all parties involved when a borrower can no longer afford their home.  The bank typically incurs a smaller financial loss than would result from an ultimate foreclosure or continued delinquency on the mortgage payments.  Borrowers may be able to soften the overall damage to their credit, and potentially settle future deficiency judgments. The big question on hand is.......What is life like after a short sale?? 
If you're married and your spouse has recently had a short sale, you may still be able to purchase a home. 
For the majority of married couples, their homes are purchased together using joint credit, income and assets. This article will address the following situations; the spouse purchased a home before the couple was married in his/her name, or the spouse purchased a home, qualified on his/her own qualifications and the other spouse disclaimed their interest in the property.
Let's take a look at an example of what a typical scenario might look like for a typical borrower.
Mr. Smith bought a home in 2002.  He was forced to do a short sale in 2008 because he lost his job and could only find employment that paid 50 percent of his previous income. When Mr. Smith purchased his home, he was able to qualify on his own and Mrs. Smith was not included on the loan.  Mrs. Smith signed a disclaimer deed at the closing.  Mrs. Smith has since graduated from medical school and returned to the workforce.  Mr. Smith and Mrs. Smith would like to purchase a new home together. Unfortunately, Mr. Smith's credit will not allow him to be part of the loan due to the short sale.  Even if Mr. Smith's credit score has rebounded from the effects of the short sale, Mr. Smith still must wait 2-3 years before he can buy using most traditional financing.
Mrs. Smith can qualify for a home on her own even though Mr. Smith had a short sale less than 2 years ago, provided she meets the standard qualification standards.  Mrs. Smith would like to purchase the home with a FHA loan.  In community property states, such as Arizona, Mrs. Smith can still purchase the home even though the lender will review Mr. Smith's credit history.  However, any additional debts which appear on Mr. Smith's credit report will have to be included in her qualifying ratios.  As long as she can qualify on her income alone, she will be able to purchase a home.  Mr. Smith will have to sign a disclaimer deed, relinquishing all of his rights to the property.
Please note: This article was written per Arizona State laws and other states may differ.  Please consult your mortgage consultant to discuss the laws and regulations applicable to your state.

 

Foreclosure prevention - Foreclosure Resources for Homeowners

Arizona Attorney General Terry Goddard cautions homeowners about foreclosure prevention scams and encourages those facing foreclosure to consult with free housing counseling services.

Fannie Mae Increases Penalties for Borrowers Who Walk Away

Fannie cracking down on walkaways

'Strategic defaults' can lock buyers out of market for 7 years By Inman News, Thursday, June 24, 2010.
Fannie Mae says it will get tough on borrowers who engage in "strategic defaults," or walk away from a home that's worth less than what's owed on the mortgage even if they can afford to keep making their payments.
Economist Mark Zandi of Moody's Analytics has estimated that 9 million homeowners are "underwater" by more than 20 percent, making them more likely to consider a strategic default.
Fannie Mae said Wednesday that it will not only refuse to guarantee another loan for seven years if it has evidence that a borrower chose to default on their loan, and will seek to recoup losses in court through deficiency judgements in states that allow lenders such recourse.
There's a carrot-and-stick aspect to the new policy. Troubled borrowers who work with their servicer on foreclosure alternatives such as loan modifications, short sales, or deeds in lieu of foreclosure can be eligible for a new loan in two to three years if they can show extenuating circumstances such as job loss, illness or divorce.
"Walking away from a mortgage is bad for borrowers and bad for communities, and our approach is meant to deter the disturbing trend toward strategic defaulting," said Terence Edwards, Fannie Mae's executive vice president for credit portfolio management, in a press release (http://www.fanniemae.com/newsreleases/2010/5071.jhtml).
"On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time."
Under policy changes announced in April, borrowers may be eligible for a loan guaranteed by Fannie Mae within two years of a short sale or deed in lieu of foreclosure.
Those who can demonstrate extenuating circumstances such as a job loss will be required to make downpayments of at least 10 percent, and those who cannot must make 20 percent downpayments.
Fannie Mae usually requires five years for borrowers who have been foreclosed on to reestablish credit, but those who can demonstrate extenuating circumstances may qualify in as soon as three years.
Next month, Fannie Mae says it will instruct its servicers to begin monitoring delinquent loans facing foreclosure and issuing recommendations for cases that warrant the pursuit of deficiency judgments.
While Fannie Mae won't be able to obtain deficiency judgements against borrowers who default on their first loans in "non-recourse" lending states, in some of those states it might have recourse to seek deficiency judgements on refinance and home-equity loans.
In the 1930s, many states including California passed laws that barred lenders from suing homeowners who defaulted on their mortgages for losses above and beyond what lenders were able to recover when foreclosing on and reselling the borrower's home.
California lawmakers are considering a bill that would extend some protection from deficiency judgments for borrowers who refinanced their mortgages.

Phoenix, Arizona Newest foreclosure information* Maricopa Only May.2010

 Arizona Newest foreclosure information

• New notices filed are approximately 7300 for the month of May. Dropped from April of 7800.
• Active notices of default in the foreclosure process are approximately 50,500. Down from last month 53,000.
• New foreclosures dropped from approximately 7300 units in May to 2,000 units in June.
• Sold to the lender at auction was approximately 750 in May compared to 2100 in Apil.
• Sold to a 3rd party at auction was approximatley 400 in may compared to 1000 in April.
• $ per sqr. ft. for properties sold by the lender was $83.07
• $ per sqr. fit for properties sold by owner to owner was 101.73 
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• Foreclosures  Chart

What is going on!?!?! I do believe that short sales are still going to be the strongest ticket in the future...Better than a foreclosure!