Real Estate Update

May 18, 2009

Transcript:

Ted Simons:
Hello, welcome to "Horizon." I'm Ted Simons. According to Arizona state University's department of realty studies, April's existing home sales in Maricopa County were up, while foreclosures had been declining in recent months. Here with more on that real estate scams and news about financial help available to people facing foreclosure is Catherine Reagor, real estate reporter for the "Arizona Republic." Good to see you again. Thanks for joining us. The real estate market has it hit bottom? Is it scraping bottom? Are we looking back -- what have you got?

Catherine Reagor:
That's what every Arizona homeowner wants to know. Some parts of the valley it hasn't bottom -- has hit bottom likely. Home sales are up in areas like Queen Creek, Buckeye, Avondale. They're double what they were a year ago and the highest they've been since the boom. So that's a good sign. Prices may not have stopped falling in all those markets, but they've definitely declined less, which is a good sign.

Ted Simons:
Declining enough for first-time home buyers? Are renters -- can you now pay less in mortgage than in rent?

Catherine Reagor:
Yes. In some areas and those areas we just talked about -- queen creek -- kind of the edge areas, the communities if you drive until you qualify is what home builders do in those areas. They're the most affordable neighborhoods. They had the highest foreclosure rates, but they're rebounding and the foreclosure home prices -- there are homes for under $100,000. There are even new homes for under $100,000. And the average rent on is that with current low mortgage rates are less than $800.

Ted Simons:
So are we seeing a reawakening in those areas?

Catherine Reagor:
A lot of investors have purchased in those areas, so we're watching that to see if it is a reawakening, but definitely more activity, fewer foreclosures, more first-time home buyers.

Ted Simons:
So fewer for-sale signs as well?

Catherine Reagor:
Yes, and we're hearing bidding wars because they're such great prices. Investors, to buy a four-bedroom house, built two, three years ago, for $90,000 when it originally sold for $300,000 or more, great investment.

Ted Simons:
I want to talk about the investors, because that had a lot to do with what got us in trouble in the first place. It is the same scenario here, or how does it differ?

Catherine Reagor:
Investors became a very scary word. Some people differentiate between investors and speculators. We are seeing a lot of investors, particularly for the foreclosure properties. But the differences this time, they can't get the financing. Before where they could put 5% down and really didn't have a lot of in the house. Now most investors are paying cash. So are investors going to walk away from $100,000? Probably not. It's different away from walking away from a $5,000 -- plus, in the past, investors walked away because the homes were under water, worth less than when they purchased them for. What are the chances prices are going to drop that more? Really, what we're hearing, not a lot, particularly these areas on the edge.

Ted Simons:
You're saying bidding wars are happening. Are they between owner occupied folks and speculators, slash, investors?

Catherine Reagor:
Yes. Definitely. First-time home buyers have so many -- there are so many incentives to help them purchase. But investors have just jumped into the market, and in many cases they have the cash, they'd rather put money in real estate than the stock market now. In the past, lenders have taken the investor offers first in many cases, because it's cash. It closes quicker there. Are fewer contingencies. It's easier. So -- and as more investors come in and it's catching the attention of national investors, we're getting more, and there are fewer foreclosure homes out there. Supply demand.

Ted Simons:
What about supply demand when it comes to mid price and luxury homes? It doesn't sound like it's quite as pretty a picture.

Catherine Reagor:
The downturn in the high-end valley housing and other parts of the country really lag. But now those markets are feeling it. Paradise Valley has a supply of homes for sale that would take by the current market standards based on basic sales, seven years for them all to sell. And prices are dropping. We're still seeing million dollar home sales, the difference is, those are homes that would have sold for $3-4 million a couple years ago. So definitely seeing there tougher financing there, not covered by the Fannie Mae and Freddie Mac, tougher to refinance and some of those folks with those homes, the higher-end homes that have these mortgages that are going to adjust up, they're not the conventional mortgages, and towards the end of the year we could see rates on those loans jump and we could see foreclosures in those markets rise.

Ted Simons:
I want to get to the idea of some lenders holding back, maybe -- back to these mid price and the higher range homes, you said seven years for the whole stock in Paradise Valley. What about one home? Someone watching right now, they've got a home in Scottsdale, Paradise Valley, nicer parts of other areas of town, and they're up to a million and more. How long should they expect to wait?

Catherine Reagor:
For it to sell?

Ted Simons:
Yes.

Catherine Reagor:
Really depends on the area. That's with the valley we're such a neighborhood by neighborhood have grown so large. North Scottsdale, homes are selling. But there are parts of north Scottsdale where homes $3 million homes are going into foreclosure, and selling for a million. So it just really depends. In Paradise Valley it's how you price it. And if you're priced to sell and you drop your price, it would probably sell. But it's taking nine, 10, 1112 months for the higher-end homes to sell.

Ted Simons:
So many homeowners are saddled with these jumbo loans. They're getting hammered?

Catherine Reagor:
Yeah. It's tough to refinance, there's no market for that, and there are some private investors stepping up doing some of those loans, but they can't refinance, and that could be a next step the federal government looks at with the housing plan, because those higher end loans adjust up, they're worried about foreclosure, they may have to expand. But they're going to have to get the lower market.

Ted Simons:
You mentioned federal plans and federal ideas. Are people being assisted here? I know a lot of folks couldn't even qualify.

Catherine Reagor:
It's -- there are two parts of the federal housing plan. One is to help do loan modifications for people facing foreclosure. The deal is, there you still have to have is a job or income. If your spouse lose as job and you're working, you're supposed to be able to qualify, you're supposed to be able to be able to go to makinghomesaffordable.GOV, there are a lot of stipulations. But those call for the lender making it -- getting the loan payment down to 31% of a homeowner's income. They're starting to work. We're seeing lenders work on cutting interest payments and principle to get that payment down. For people who have a job and can make that lower payment. But it's been slow. It's a complicated process, and not all lenders are signed up, but the Federal plan, they're pushing it.

Ted Simons:
Not all lenders are signed up and not all lenders, it seems like they're waiting. They don't know what to do. They want to see what's happening. Doesn't that suggest we could see a flood of foreclosures?

Catherine Reagor:
It is a concern. We've seen foreclosures drop the past few months, which is great. We've seen cancellation of foreclosures. Lenders have extended the moratorium on foreclosures until mid June based -- the federal government has pushed them to do that. But these foreclosures -- preforeclosures have climbed. So if that moratorium goes away the loan modifications don't work and we see the flood of foreclosures coming, it's going to hurt the market again. But it's going to hurt lenders too. The last time that happened, that's what pushed prices down. They can't reset home, they're losing more.

Ted Simons:
There's so many aspects of this and so many ways people could or could not qualify, and so much money coming in from various areas. A lot of real estate scams going on?

Catherine Reagor:
Unfortunately now this loan modification has become this household term. And it's -- something to help people keep their home. And now firms are popping up everywhere you see the stick signs next to the freeway, call us, we'll modify your loan. And the thing is our housing counselors backed by H.U.D. and paid by the federal government, where you can get free help. Call the Arizona foreclosure hotline, go to Arizona housing department web sites, get a list, go to H.U.D., you can get a list of the Arizona attorney general's website, of these H.U.D.-backed housing counselors who will give you free help. Sometimes people -- there are other people offering help for a fee. They're very good at it. They're former loan brokers, they are attorneys, they are accountants, real estate agents. But really -- President Obama warned this, the scams are getting so bad, don't pay before you get the help. Just -- the attorney general said last week that scams on loan modifications are up 30% in Arizona.

Ted Simons:
All right. Bottom line, home sales are up, home prices are leveling off, and we're heading into a time of the year when folks like to go out and look and maybe even buy something.

Catherine Reagor:
This is the season. And after the strong sales in the past few months, pending sales are at the same level. So we should see hopefully in the next few months that sales remain high. This will help prices and hopefully some areas by June might even see these queen creek and these various areas farther out might see an up-tick in prices.

Ted Simons:
Is Phoenix such a unique market that most models don't apply? Or can you say because we were so hot and we crashed so hard, we might be the first to show signs of life?

Catherine Reagor:
It's interesting. You could, because it's interesting, Las Vegas climbed very high and crashed, and Florida. But what's different is, our growth, even though we have job losses, our growth, we continue to attract people, and our housing affordability and our economy is more diversified. And Florida had more speculative -- so there are housing analysts saying that. If we get back to the affordable prices, that's helped us. That's been our calling card.

Ted Simons:
Last point here, the wild card is the economy and jobs, and furloughs, and all this kind of business. You put all that in there, and folks will still be lowering the prices of those homes.

Catherine Reagor:
Jobs are the lagging indicator, housing is the leading indicator. So we'll see. But how low can prices go in some of those areas? If we're seeing a tick up now --

Ted Simons:
It's good to have you on with some relatively encouraging news this time. Last couple times you've been on it's been doom and gloom.