The Phoenix Real Estate Advisor

I’ve asked a few people connected to the real estate industry to write a blog post that would help people understand buying or selling home better. It that vein, I have Shelley Martin from Suburban Mortgage as our first guest writer. Please feel free to contact me or her direct if you have questions about this post.

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Appraisals are a touchy topic.  Ask anyone who gets a copy of their appraisal and it did not give a value they thought it should! Let’s talk what is required of appraisers who create these reports and that these reports are intended to accomplish.

Appraisers are individuals who are licensed and highly trained in Arizona to help mortgage banks understand the asset securing their mortgage loan.  The report created by an appraiser tells the bank valuable information about the home.  The home is, after all, very important to the approval of a mortgage loan application.  In fact, it is just as important as the borrower’s financial and credit information.

Considerable research and collection of data must be completed prior to the appraiser arriving at a final opinion of value.  The condition of the property, the amenities, size, age, time the property has been listed on the market, previous/ historical sales data, economic health of the neighborhood, and consistency of the neighborhood are all pieces of information reported to the mortgage bank on an appraisal.

Using three common approaches, which are all derived from the local market, appraisers report a value.

The first approach to value is the COST APPROACH. This method details what it would cost to replace the existing improvements as of the date of the appraisal.   In other words, the land plus the cost of rebuilding minus any deterioration or obsolesce. 

The second method is the COMPARISON APPROACH, which uses other “comparable” properties to determine value. Ideally, the comps are in very close proximity (less than a mile or two) and have very similar sizes and amenities to the subject property.  This approach takes the appraisers research of tax records and the multiple listing service into great consideration.  This approach is often given great weight in our Arizona market.  Often, the appraiser can use anywhere from 3 to 6 other comparable homes to help the bank substantiate a value by comparing like homes to like home in very recent time periods.

The INCOME APPROACH is used in the appraisal of rental properties and has little use in the valuation of single family dwellings. This approach provides an objective estimate of what a prudent investor would pay based on the net income the property produces.

Appraisals are a snapshot of value for a property at a given time.  The manner in which an appraiser reports information is governed by the Uniform Standards of Professional Appraisal Practice (USPAP).  Their reports are uniform and standardized for mortgage lending. 

If you would like to discuss appraisals or any other mortgage topic further don’t hesitate to call me!

 Shelley Martin

Loan Officer for Suburban Mortgage

602.606.6784 direct phone

If you listen to the same media (local and national) that I do, you might be surprised to hear that prices have actually been climbing. Most of the stories surround the existing housing crisis, Freedie Mae/Mac and very little about any good news.

For the most part, YES we do have a problem and of course we need help getting out of it but what you might not be hearing is how the inventory-to-sales has gotten better. How the median housing prices have been climbing for 4 months straight.

Here’s the statement from NAR-

According to NAR statistics, the median home price has fallen from a high of $230,200 in July 2006 to a low in February 2008 at $195,600, a drop of 15%. Since February, however, it has risen steadily every month. By May the index (which will be revised on July 24) had risen to $208,600, up $13,000 and a full 6.6%. Another indicator, the mean home price (otherwise known as the average home price), has also shown strength and has risen from a low of $242,000 also in February of this year to $253,100, a rise of $11,100 or 4.5%. It, too, has risen every month since February of this year.

On my last Podcast I covered the market conditions here in Phoenix. Things have gotten better but we still have a ways to go so “Is now the time to buy?”. Should you wait to see what happens? All I can say is the media is always months behind the curve so your attempts to time the market should not be dependent on the media. Feel free to call or email me for more information on specific markets and watch for my next Podcast for more information!

We’ve heard a lot fromm people that “Investors” is what started this housing crisis. Most of us that work with short sales and foreclosure know this to not be true. We’ve understood that the vast majority are people like me and you that simply can not afford their home. Here’s an article from AZ Central that speaks to this subject: 

A group that works with people who “walk away” from homes instead of fighting to keep them out of foreclosure has released its first data. Almost 30 percent of the homeowners who contacted it from Arizona have other mailing addresses or own other homes, according to Carlsbad, Calif. You Walk Away. . That signals they are most likely investors. The figures, which have been compiled since the beginning of the year, show almost 50 percent of the people who are “walking away” in Florida are investors.  The top state for residents who contacted the firm is California. Then it was Florida, Nevada and Arizona at no.4. Those four states have much in common - the biggest speculator-driven home price run ups in 2004-05, and the fastest rising foreclosure rates now.

The firm tracking the trend says the figures show the majority of people considering walking away are primary homeowners, so the trend isn’t being fueled by speculators. However, the data is only from the beginning of the year. Some housing analysts believe speculators were the first to ”walk away” in Arizona when foreclosures started to really climb last summer. http://www.azcentral.com/members/Blog/CatherineReagor/26985

This means that 66% of the homes are owned by people that need help because they’ve gotten in over their head either by risky loans or loss of employement. This is why I’ve formed the group www.PhoenixHomeRescue.org, call us if you have questions 623.271.4234.

I would like to welcome a guest author , Jeremy House with The Vision Lending Group at CTX Mortgage.  You will be hearing more from him in the coming months, as he has lots of insight and news to share with all of us about the housing market and mortgages.

With all of the different legislation being proposed and voted on in Washington concerning the housing industry, it can get confusing as to what is what .  The problem is a lot of the Bills floating around relate directly to what you and I do for a living and we want to help straighten out the facts. 

I recently spent some time with a lead corporate attorney who is on the FHA commission board and has very tight knit relationships with folks in both the House and the Senate.  I begged her for some of her undivided attention and she was very gracious in granting me just that. Over an hour’s time she clarified much of what is happening on the Hill. 

There is an Omnibus Bill that is now known as The Foreclosure Prevention Act of 2008 hovering in DC that we all need to be aware of.  To add to the confusion this, is the 3^rd official name and the Bill originated as an energy Bill!  It now includes proposed legislation pertaining but not limited to:

1.       Final ruling on DPA (Genesis, Ameridream…)

2.       New loan limits (current loan limits are temporary)

3.       Tax provisions for new homebuyers (1^st timers getting a tax credit in 2008)

4.       Fannie and Freddie’s new regulator

5.       $300 billion FHA plan to assist distressed homeowners and where the money is coming from

6.       FHA modernization (including Down payment requirements)

7.       Risk base Mortgage Insurance Pricing on FHA loans

So as you can see there’s a lot on the table and when they get back from their summer vacation hopefully they will begin to tackle these important issues!

Your Trusted Advisor,

Jeremy House, Certified Mortgage Planner

The Vision Lending Group at CTX Mortgage

480.635.3326 or visit us at http://www.thevisionlendinggroup.com/

This morning the Pending Home Sales Report (Click for more details) blew away all expectations.  The experts were banking on the report indicating a -1% drop in activity when in fact the report showed a 6.3% increase!  This report is a leading indicator for existing home sales and can serve as a strong economic indicator.  Mortgage interest rates are continuing their battle with inflation and are trying to recover some losses from this morning.  As the wise turtle in Kung Fu Panda said, there is no bad news, just news.  With that in mind we need to focus on the news that will be coming out this afternoon.  Ben Bernanke is set to speak on the hottest topic in the market right now - INFLATION.  He is speaking at the Boston Fed conference tonight at 5:15pm Arizona time. 

His comments will certainly have an effect on mortgage interest rates.  If he has a worrisome tone, we can expect mortgage rates to lose some ground.  If Mr. Bernanke downplays the current risks of inflation, mortgage rates will respond favorably.  I will be sure to keep you posted.