The American Dream of Homeownership

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Houses are more affordable than they’ve been for years, but buying a house can be challenging and some potential buyers are leery about jumping into the market. Hear what experts have to say about the current status of the American dream of owning a home.

Ted Simons: About 55% of Phoenix homeowners have a mortgage that's higher than the value of their house. That's just one indicator of a real estate market that's hurting, but as David Majure reports, it's a market that still shows signs of life.

David Majure: Moving in, moving up. Moving out. The great American ideal of owning a home has taken some hits in recent years.

Elliott Pollack: The American dream has taken some left to the jaw. It's taken lefts to the jaw that has left the American consumer dazed but not out of the game.

David Majure: But the game has changed. In 2005 at the height of the hyper market just about anyone could get a loan.

Elliott Pollack: The classic example is there was some guy in California who picked cantaloupes for a living and made $14,000 a year and he qualified for a $700,000 house. Insanity. That is what got us here. That type of insanity.

David Majure: With so many buyers, the supply of houses plunged, and prices skyrocketed.

Elliott Pollack: We are on the other side of that now, where qualification requirements are so difficult, that you really have to be qualified.

David Majure: But if you are qualified, have a stable income and good credit, now is a great time to buy. Interest rates are low, and so are prices.

Jay Butler: Definitely they are. You can buy nice, family homes that have a couple years ago were 400,000, in the 200,000 range.

Kristen Myers: I'm going to be showing a four bedroom, three bath, in the main house with a one bedroom, one bath Casita. At the peak of the market this would go between 450-500. We had it listed for 235 before we got a contract on the short sale. Upstairs we have four bedrooms…

David Majure: Kirsten Meyers, a realtor in the north Phoenix community of Anthem, is seeing multiple offers on homes in the area.

Kristen Myers: I've had them recently with four, five, and six offers. And it can be a challenge because most of the offers are above list price. Bulk of the inventory seems to be short sales and bank-owned properties. Back when the market first started to go down, our inventory went up over 800 homes. We are now down under 140 homes active on the market right now. And that's in Anthem country club and Parkside combined. That's all price ranges.
David Majure: Lori Blaine is trying to buy this house in anthem.

Lori Blaine: We're trying to upgrade a little. We filled up our house really quickly.

David Majure: Her family's current home is under water. Instead of selling and losing money she hopes to rent it and move into a bigger place it.

Lori Blaine: makes me nervous to do this, but you really -- I want to make sure I'm getting what I'm paying for and that the market is not going to drop any lower. It's a scary time financially as far as the real estate.

David Majure: The metro Phoenix real estate market is scary for a lot of people. Economic uncertainties make even highly qualified buyers a little leery.

Elliott Pollack: The reason they're leery is uncertainty in the job market, they probably saw their 401(k) hit, they saw -- they see the house they had or the house their parents own December mated in terms of value. And they're nervous.

Jay Butler: There's a group who believes the bottom has not been reached yet. And that they don't want to make that commitment. I'm convinced we're close to the bottom. If not at the bottom.

Elliott Pollack: If you take a look at this green line, which is housing prices, it went way up and came way down, housing prices have been flat for the past four to six months, which to me says we're probably at the bottom.

David Majure: Investors must think we're pretty close.

Elliott Pollack: About 40% of homes are being purchased by investors. They're really providing a need.

David Majure: In some cases they rent them out to victims of foreclosure or people who had to short sale their homes.

Elliott Pollack: Allowing people to stay in the same neighborhood, same school district, kid keeps the same friends, they're very stable people who were caught in a bad situation.

David Majure: A bad situation that will get better. And while the American dream has been bloodied and bruised, it's far from being down for the count.

Ted Simons: Joining me now to share her insights into the valley's housing market is Catherine Reagor, she's the real estate and growth reporter for "The Arizona Republic." Good to see you again. What do you see happening to the American dream of homeownership?

Catherine Reagor: You know, there are a lot of renters right now. And a lot more people who want to rent. Because number one, they don't know what their jobs, jobs are mobile. Homes are not mobile. So you don't know. But our homes are selling. We are more than 9,000 last month, which is up. Most of them are investors. And then they are renting them out. But seeing younger groups, not wanting to buy, holding back, so homeownership has changed. It's not what it was for us 10 years ago.

Ted Simons: And we've got how many, how long has this housing crisis been going on?

Catherine Reagor: Five years. It's our five-year anniversary of pain.

Ted Simons: And is there any end in sight of the pain?

Catherine Reagor: Well, a lot of the indicators are going in the right way. Pre-foreclosures are down, down significantly, like half of what they were two years ago. Foreclosures are down. The number of pending foreclosures in the system, down almost a half what they were a couple years ago.

Ted Simons: We've talked about this before -- are the banks hold OK to these things? Are we going to see a flood of this stuff coming later on?
Catherine Reagor: We were concerned about that. This funny word, scary word, shadow inventory, where homes that haven't been foreclose order that could be, and are in the system and the homeowners are behind. We are in better shape than Las Vegas, Sacramento, Orlando, for shadow inventories than those areas. So we don't have as much at that scare looming. And the number of homeowners under water is dropping because they're getting out. And that's how it is. It's not the home loan modifications that are saving us. It's that if you couldn't afford your home, you're probably gone by now, and you're renting.

Ted Simons: What is this doing to the renters' market?

Catherine Reagor: It is getting much more competitive. And boy, if you can -- those foreclosure sales on those -- the courthouse steps, they are buyers from around the world. Because they can rent. And they can buy a home for $60,000, rent it for $800 and make more on their money than they can make in the bank or in the course of the stock market.

Ted Simons: You mentioned $60-70,000, I think I heard jaws dropping in the studio. The median price, average price, both, are they still falling, are they -- what have we got?

Catherine Reagor: We have all these prices, and they're measured different ways. If you just look at the median price of used existing homes, it has held steady at 115,000, I know that's a sad number, but held steady for six months. That is the most stability in prices we have had in a long time. Now, some groups, including the realtors groups are saying we could dip again, and we could have a triple-dip. But the people who are looking at the numbers every day do not see that, and the investors buying those homes, at the foreclosure auctions, bidding wars. And we saw from the video, multiple offers. Homes selling for regular asking prices. And with all these other indicators going the right way, listings are way down. It doesn't make sense that we would have another big drop. It just doesn't. Who knew what was going to happen in '05-06, but this doesn't make sense for another big drop.

Ted Simons: With everything you're seeing, how does that impact the new home market?

Catherine Reagor: New home market is struggling. Boom 64 thousand now 13 thousand. Some interesting things coming out. Builders competing with foreclosures by smaller homes, and the new thing is, green homes. Environmental homes. And if you don't have to pay for the extras in an environmental home, and your utility bill is half of what it would be in a foreclosure home, people are buying. And home builders are seeing that. That's our new kind of trend niche. But it's going to be slow for a while. We've got to get rid of the home building for a while. We've got to get rid of the foreclosures.

Ted Simons: A couple things being kicked around in Washington regarding changes in policy, one involves the interest rate deductions, which have been a tradition for home buyers. And there is some talk, because of the deficit, to go ahead and take those away. How much of an impact would that be?

Catherine Reagor: Huge. And please don't do it. Don't you feel -- I feel like please don't do it. I need that. It would be huge. It would impact home buying, and the deficit is a horrible problem, but it would also impact -- how much money do people save on that? And when your tax refund comes back, and you're spending that money, and of course the realtors, the home builders and their powerful lobbyists are fighting it tooth and nail.

Ted Simons: Another idea was 20% down, requiring 20% down on home purchases. First of all, is that viable, and second, if so, what happens?

Catherine Reagor: You know, when I bought my first home I didn't have 20% to put down. Did you? I don't know, very few people did. It seems like a great thing to think you're getting a home -- they have a stake, they're not going to walk away 40. But on the other hand, how many people have 20% down?

Ted Simons: So bottom line here, I think I've asked you this almost every time you were on, are we seeing some sort of light at the edge of the forest?

Catherine Reagor: I think we are. The analysts I talk to say yes. If 115 is bouncing around the bottom, we're on the bottom, but the other indicators are improving. So that shows when I'm -- what I'm hearing, we could possibly see slight price increases this year.

Ted Simons: All right. Many let's see what gives. Good to see you. Thanks for joining us.

Catherine Reagor: Thank you.

Elliott Pollack: CEO, Elliot D. Pollack & Company; Jay Butler: ASU Real Estate Professor; Kristen Myers: Realtor; Catherine Reagor: Arizona Republic;

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