So, what is my property worth anyway? Is the market up or is the market down?  Whom are we to believe?

It seems as if you can take your pick of economists to whom you listen. Some say we are coming out of the doldrums. The big announcement today said the recession ended in June…and yet other economists say the other shoe is yet to drop, they foresee another 18% drop in home prices.

Part of it is political, it’s almost believe what you want to believe at your own peril. Caveat emptor prevails!

That leaves the home seller/homebuyer in a real quandary. Don’t believe the national media, they are slanted to whatever political perspective they subscribe. The markets are regional, areas which did not see the escalating increases in prices between 2003 and 2008 and remained fairly stable, are still stable.

Areas like Arizona which saw a 45% plus overall increase in housing prices within three years are still reeling from the deflationary impact.

But, there are parts of Arizona, and in particular Tucson, (which is the market I serve) that are harder hit than other areas.

In order to truly value a home, one has to look at what is happening locally, and that is by zip code, and sometimes by subdivision. Those subdivisions which faced overbuilding during the frothy times of 2003-2008 are in far worse shape than areas where homes are older and do not turn over rapidly.

I took the better part of an afternoon to compute the numbers of bank owned properties and the numbers of short sales in every Tucson zip code as of August 30, 2010. I then computed the percentages of each and the combined percentages and found that more than 50% of the homes on the market in some zip codes are distressed properties.

Generally these are places where large master planned communities were being built; Gladden Farms, Star Valley, Rancho Del Lago, Sahuarita, Quail Creek, the Irvington Road/Escalante area, Cortaro Farms near the highway, and Corona de Tucson.

And there are areas where there are less than 20% of the properties in distress; the 85704 area which includes some of Oro Valley and the Casas Adobes area, the center of town near the university in 85716 and 85719, the Diamond Bell Ranch area, Saddlebrook and Catalina,  Mount Lemmon,a portion of the Catalina Foothills, some of Green Valley, and the prize goes to 85646, Tubac with only 7.143% of the homes underwater.

When you are pricing your home to sell, make sure your Realtor® knows the numbers and knows the trend in the area in which you live. I priced three homes today and pulled the numbers from the last six months for the zip code. The pricing differential in all three areas was significantly different. One was in 85747 where 43% of the homes are distressed; one was in 85704 where 19.5% of the homes are underwater, and one was in 85745 where nearly 35% of the homes have problems.

You as the buyer and or seller need to know this because the appraiser is obligated to take distressed properties into consideration when appraising your property.  As someone once said, “the distressed property in this area is the market” and unfortunately everyone suffers whether or not they are in the same predicament.

   Don’t  believe what people say.  Look at the empirical evidence.  The stimulus package was signed into law by President Obama on February 13 of this year.  Human nature attests when people do not know or understand  what is transpiring , they often do nothing.  This certainly has been true of the real estate market since the August presidential conventions.  Once the stimulus bill passed, the Tucson market began to emerge from hibernation—not because of the stimulus bill, but because people understood government action.

The chart below shows the total unit sales for each month between January 2009 and June 2009.  There is an 85% increase in total unit sales from the January numbers to the June numbers.  Putting the numbers further into perspective, this represents more units sold in a month since July 2007 when 1182 homes closed escrow.  Althought on one hand, this is good news, we will see tomorrow,  prices have declined dramatically.  The monthly inventory in June is 18.5%  + less than January.  Each month, inventory  has been steadily decreasing.  Decreasing inventory bodes well for a stable market.

Total new listings also decreased almost 20% since January.  Pending contracts have risen by 52% from 941 in January to 1432 in June.  These numbers further indicate the housing inventory is gradually decreasing.

This is all good news for the Tucson real estate market.

                          

 

	January	February	March	April	May	June
Total Unit Sales	613	693	923	931	1024	1139
Total Units on Market	7694	7532	7415	6890	6506	6261
Total New Listings	2361	1799	1989	1703	1704	1892
Pending Contracts	941	1020	1208	1345	1302	1432

 

According to the Tucson Multiple Listing Service, the monthly comparision of the types of properties which sold, is as follows:                 

 

Type of Property	Jan-09	Feb-09	Mar-09	Apr-09	May-09	Jun-09
Single Family /New Construction	518	577	771	774	851	968
Town House/New Construction	44	53	74	80	80	84
Condo/ New Construction	16	34	30	30	45	54
Manufacture Single Family	28	24	39	29	33	28
Mobile Homes	7	5	9	7	15	5

 

Once again we see an increase in the sale of single family homes, townhomes, and condominiums.  Manufactured homes and mobile homes are a much smaller part of the housing inventory.  Sales remain steady at the January levels during the subsequent six months.

Tomorrow:  Pricing

Resources:

Tucson Association of Realtors – June 2009 Residential Sales Statistics

 http://www.tucsonrealtors.org/tar-v2/MLS_Stats_June.pdf

Statistics come from the June housing report produced by the Tucson Association of Realtors prepared by Scott Weidamoyer.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     I picked up the Arizona Daily Star this morning and read the headline “Tucson May Charge Fee on New Home Sales”,  had a gut reaction, hastily poured my cup of coffee, then sat down to read the article so as not to prejudge.

    A 1% (One Per Cent) transfer fee on all new home sales is being proposed by  two city Council  members, Regina Romero and Karin Uhlich.   The purpose is that the city’s housing trust fund,  be “used to pay for such things as home repairs and down payment assistance for low-income residents”, according to Rob O’Dell, who wrote the front page article.  

                      ” The new fee, recommended for approval by a council subcommittee on Sept. 15, would apply to any house or condomium unit where a builder has entered into a development agreement with the city.”

according to O’Dell’s article.

    (I would like to provide a link to this story so you, the reader, can have the opportunity to read it verbatim.  The Star, however, now requires a person to register in order to read the article.  If you want to read the article, register at:  http://www.azstarnet.com/metro/259724.php  and then pull up the article).

       This would not apply, as I read it, to development in Pima County.  

       My reaction was/is visceral.  I haven’t had such a physical reaction in months to anything.  This is being proposed by our elected officials in Tucson. 

     The Arizona Association of Realtors is working to get Proposition 100 passed by the citizens of Arizona which will prohibit, by Constitutional Amendment, a real estate transfer tax at the state level.  To do this, voters must vote YES on the Proposition.  A  copy of the proposition is at Jan Brewer’s website, Arizona Secretary of State.     

             http://www.azsos.gov/election/2008/General/ballotmeasures.htm

        Arizona, like many states, is in a budget crisis, as is the City of Tucson. Were Arizona to pass a 2% transfer tax on the sale of real property, and the City of Tucson were to pass the 1% tax, and the average price of a home in August was $238,504, the total transfer tax would amount to an additional $7155.  I think that is a lot of money!   There is nothing to prohibit the city from passing a transfer tax even if the state has a transfer tax.  

       (My cynical question is, do we mark up the price of the house by that amount so that the 3% fees can then apply to the more than $7,000 added,   and then house then becomes priced at $245,659 – and the tax is an additional $200.+.!   Does this make housing more affordable for the Average Joe?  Granted this is worse case scenario but I remember when Social Security was paid on the first $32,000 of a person’s income!)

     I understand this is not called a tax, it is called a “fee” – but it is not voluntary and therefore it is a tax!  

    Two other issues galled me when I read the proposal by Romero and Ulrich.  The huge bailout, okayed at midnight by Congressional leaders for which taxpayers are now on the hook, was partially necessitated by the lax standards and no money down mentality which had it’s origins in Lyndon Johnson’s New Society.   The guidelines of the Community Reinvestment Act, over the years, became looser and looser. Congress embraced the idea that the American Dream of homeownership should  apply to all Americans, regardless of ability to pay.   Both sides of the aisle are equally responsible.  Where else could you purchase something for $300,000 with zero down?

    The second source of irritation is the amount of money which was approved by Congress in the much touted Housing Bill which was supposed to help people in distress to prevent foreclosures.  That bill gave millions of dollars to towns and cities for the expressed purpose of low income housing, to buy up abandoned or foreclosed houses, or to build new low income housing for people within the low income, extremely low income, and very low income brackets.   I have read the nearly 700 pages of the Federal Housing Bill and have written extensively about it in this blog.  I suggest both Council people wade through that document and ask the federal government for what is Tucson’s just due.

     Affordable housing is an issue, to be sure.  Adding fees onto those people who are struggling to save ten percent to purchase a home in order to provide down payment assistance to low income residents just doesn’t resonate.  A family of four earning $60,000 and purchasing a property at the average price of a home in Tucson in August, with a 3% transfer fee -(assuming both city and state) would then fall into the low income category after than transfer fee is paid.   Other sources of revenue are proposed and listed below and I have provided resources below regarding low income housing and the income points.

Resources:

http://www.tucsoncitizen.com/daily/local/77415.php 

http://www.library.pima.gov/research/guides/helphomepurchase.cfm 

http://www.hud.gov/offices/cpd/communitydevelopment/programs/neighborhoodspg/ 

http://www.tucsonrealtors.org/public/fairandaffordablehousing.html 

 

http://www.tucsonaz.gov/csd/Housing_Programs/public%20housing%20programs10.html#TopOfPage 

http://www.tucsonaz.gov/csd/Housing_Programs/Rental/THTF%20M%20&%20C%20Subcommittee.html#TopOfPage

 From the Report of the Tucson Housing Fund Trust – January 2008

Revenue Recommendations:

The current sources of funding are not sufficient to support an ongoing meaningful effort to address housing issues in Tucson. The CAC has prepared some preliminary recommendations to the subcommittee for future funding sources to support the THTF. We are prepared to work with the Mayor and Council to obtain other community input toward successful adoption of these or other sources of revenue the Mayor and Council wish to consider more closely.

1. Increase the Bed Tax by $1.00 per night. Dedicate this new revenue, estimated at $2 million a year, to the Trust Fund. There is a compelling argument in using revenues from visitors to support housing for Tucsonans. The employees of the hospitality industry are among many families that would benefit from the availability of more affordable housing options.

2. Pursue a change to the Model Cities Tax Code that would allow the City to implement a Residential Rental Tax on units that rent for $1,000 or more to support the THTF.

3. Request a voluntary contribution to the Trust Fund from all housing disciplines (Builders, Realtors, Lenders, Title Companies, etc.) at the closing of every home sold within the City.

4. Support state legislation that would dedicate interest earned on rental Security Deposits and earned interest on Escrow Funds from home sales within city limits to the City of Tucson Housing Trust Fund.

 

Program Criteria and Evaluation Considerations:

— Housing must be within the City limits
— THTF is limited to households that earn under 100% of the area income (see chart)
— Housing can be in the form of ownership or rental
— Proximity of proposed housing to employment or mass transit
— Leverage ratio of THTF funding to that of the employer’s
— Recapture policy
— Homebuyer Education/Counseling component

Household Size	Income limit
1	38,500
2	44,000
3	49,500
4	55,000
5	59,400
6	63,800
7	68,200
8	72,650

 

 

 

 

 

 

 

 

 

 

     The Housing and Economic Recovery Act of 2008 contains goals for residential low income, very low income and housing for families residing in low income areas. These goals will be set by the Director of the Federal Housing Finance Agency within a “reasonable time table”.

    The legislation describes the goals as a percentage of single family money market mortgages financed.  Targets are determined by national housing needs, economic, housing demographics and conditions, and the peformance and efforts of the lender.   Mortgage financing of one to four owner occupied units will count towards these goals as will multifamily housing financed by tax exempt or taxable bonds if they meet certain requirements.

    Multi-family affordable housing units includes mortgages for very low family income housing and housing which is eligible for assistance from Section 42 of the Internal Revenue Service tax code.  Additionally, smaller units and those units 5 to 50 units may be eligible for up to $5,000,000.

   Owners of very low income owner occupied units cannot have income more than 50% of the median income level of the area.  The same applies to rental units with adjustments for family size.  However income must be at least 30% of the median level for the area.  Extremly low income is considered not more than 30% of the median income level of the area.

   According to the legislation, there is a duty to serve underserved markets which include; very low, low, and moderate income families.  Fannie Mae and Freddie Mac are expected to purchase securitized mortages which may not carry the same rate of return as other mortgages. 

    In an effort to provide very low, low and moderate income housing, new products are to be developed for the secondary market for manufactured housing with flexible underwriting guidelines, as well as affordable site built housing.  These guidelines will also apply to Section 8 housing, below market interest rate mortgage programs, housing for the elderly, the disabled, the homeless and rural rental housing.

     Provision is made for monitoring, enforcement and compliance of these housing goals.  The Director determines whether each enterprise (Fannie Mae, Freddie Mac, Federal Home Loan Banks and/or affiliates) have met the goals.  If not met, the Director can issue a cease and desist order, issue civil monetary penalties, or require the enterprise to submit new housing goal plans.

   For each dollar of unpaid principal balance of new total business, Fannie Mae and Freddie Mac must set aside 4.2 basis points.  (A basis point is 1/100th of a one point.)  Translated, this means that on a $100,000 unpaid balance, 4.2% must be set aside or $4.20.  A total of 65% will go to the Secretary for HUD to fund the Housing Trust Fund and 35% will go to the Capital Maget Fund.

    The purpose of the Housing Trust Fund is to increase the supply of rental housing for low, extremly low, and very low income families including homeless persons, according to the legislation.  In 2010 and subsequent years, grants to state housing finance agencies, housing community developments, and tribally designated housing entities will be awarded on a needs based formula.  A minimum of $3,000,000 will be awarded to each state.

      Grants can be used for production, preservation and rehabilitation of housing with no less than 75% of the funds going to extremly low income families and 25% going to very low income famlieis.  Down payment assistance, closing costs, and interest rate buydowns are permitted for extremely low and low income buyers.

      The Capital Magnet Fund is designed to attract private capital for increased investement in affordable housing for extremely low, very low, and low income families.  Funding may be given for community service facilities such as day care centers, workforce development centers and healthcare clinics to stablilize or revitalize low income areas or underserved rurual areas.    Provisions are made for the Secretary of the Treasury to report to Congreess and the public.

Resources: 

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3221eas2.pdf

Section 8 United States Housing Act of 1937        

Section 236 of National Housing Act

Section 221 (d)(4) National Housing Act                

Section 202 of Housing Act of 1959

Cranston-Gonzalez National Affordable Housing Act    

 McKinney-Vento Homelss Assistance Act

Rural Rental Housing Program SEction 515 Housing Act of 1949

http://seattletimes.nwsource.com/html/opinion/2008082463_broder31.html

Next:  Financial Education and Counseling, HUD Employees, and Critical Capital Levels