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Locking Your Interest Rate when Buying a Tucson Home

December 28, 2009

Getting a home loan can be a big deal. There’s a lot of news out there about interest rates being low – I remember my first interest rate on my home loan was 8% and that was a FABULOUS deal back in 2000. Generally, rates are even lower now; my past few clients have ended up with home loan interest rates between 4.5% and 6% (depending on the loan program they selected and their credit scores).

There comes a point when you buy a home in Tucson that you’ll decide to lock your interest rate. When you’re out shopping for a house, you get pre-approved for a loan and they’ll quote you rates as of that day – but rates can change daily, if not several times a day sometimes. So you don’t know exactly what interest rate you’re going to get until you lock it. And generally, you can’t lock it until you have a home under contract. You have to have an accepted contract on a house to lock that rate.

Contractually, if you used the typical purchase contract and loan approval form in Arizona, you’ve made a couple of declarations and commitments about your interest rate in the contract to purchase your home. For example, you’ll declare a maximum rate that you’re willing to pay for your home loan. If rates go above that maximum, then you’re not obligated to buy the home.

BUT – the pre-approval form we use in Arizona, called the LSR or Loan Status Report, says that you’re going to lock your interest rate in your inspection period. Or else you lose the ability to walk away from the home if rates exceed your stated maximum.

So timelines matter. You need to lock your rate within your inspection period or else you lose that contingency. Which gives you, typically, 10 shopping days to lock that rate. It’s not a huge window of time, but home loan interest rates can fluctuate often. And interest rate locks also often come with an expiration date – most rate locks are good for 30-45 days. Look at your timelines carefully. You want your rate lock to last until you close on the house. If you’ve got a short inspection period and a long contract interval, you need to make that locking decision carefully.

Northeast Tucson Real Estate Market Report – November 2009

December 23, 2009

The Northeast side of Tucson is an interesting little market segment.  The region covers a largish geographic area, but the housing is generally not dense – there are many older houses on large lots, acreage and horse property.  There’s nearly two separate markets in the Northeast – the closer-in newer track home communities and then the older homes on large lots that tend to be further away from the city.

You can see that effect if you look at the list and sale price distribution for Northeast Tucson – there’s a peak around that $250k mark and another around $500k.  Granted, those upper end sales have slowed considerably, but in a more normal market, there was a secondary peak of sales around that mark. 

For being a large area, there are generally few sales, given that the homes are pretty widely dispersed.  Overall, there is 10.3 months of inventory, still fairly high.  However, if you look at the $200k-$250k range, there’s only 4.3 months of inventory – roughly one in four homes on the market in that price range is selling.  That’s a whole lot different from 10 months of inventory.  4 months of inventory means houses are moving quickly and there’s demand for that price range.  Being able to look at demand for any given price bucket is why I create those list vs sale distribution charts every month.  To broadly proclaim "It’s a Buyer’s Market!" can be very wrong depending on what area and price range you’re looking in.

Which isn’t to say everything Northeast is roses and kittens.  Prices overall have been on the way down – check the average and median sales prices for homes in the Northeast.  There’s quite a bit of bounce in the chart; with only 30-50 sales on average, you don’t get quite enough data for smooth charts.  You can see the general downward trend, however. 

Out of the 45 recorded sales in Northeast Tucson November, 5 were short sales and 8 were bank owned.  Those distressed property sales ranged from $130k to $685k and are 28% of the market. 

In other words, a quarter of the sales are from properties that typically sell at a decent discount for being distressed sales.  If you’re a regular home seller in the region, you’ve got some tough competition and proper pricing will be essential.

You can always see the chart versions of this data too, at my Northeast Tucson Market page. (change to north)

The raw numbers:

	SFR		Townhome		Condo		All
	Value	%change	Value	%change	Value	%change	Value	%change
Avg LP	$578,644	-2.4%	$210,107	+11.8%	$80,670	-3.9%	$518,270	-1.3%
Avg SP	$332,960	-4.4%	$175,000	+17.2%	$75,000	-28.6%	$303,285	-5.5%
Med SP	$270,000	-12.9%	$180,000	+20.0%	$75,000	-28.6%	$253,000	-12.8%
#Listed	387	-2.0%	46	-4.2%	21	-12.5%	454	-2.8%
#Sold	37	+12.1%	5	+25.0%	2	+100%	44	+15.8%
MOI	10.5	-12.6%	9.2	-23.3%	10.5	-56.3%	10.3	-16.0%

Getting the $6500 Tax Credit as an Existing Home Owner

December 18, 2009

So if you read regularly, you remember that the former $8000 first time home buyer tax credit got extended and expanded so that now it includes those people who already own a home.

And, by the way, a homeowner is defined as someone who has owned and used a home consecutively for at least 5 of the 8 previous years. 

There’s a little confusion though with the wording.  Because you don’t actually have to sell your existing home to get the credit.  Michelle Lind, general counsel for the Arizona Association of REALTORs explains.

Q: I’m already a homeowner. If I buy a replacement home after Nov. 6, 2009, to use as my principal residence, do I have to sell my home to qualify for the homebuyer tax credit?

A: If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home to use as your principal residence. The requirements are that you must buy, or enter into a binding contract to buy, the replacement principal residence after Nov. 6, 2009, and on or before April 30, 2010, and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive-year period during the eight-year period that ended on the date the replacement home is purchased. For example, if you bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. (11/17/09).

(h/t to my friend Dru Bloomfield for the find)

Just remember – to take advantage of the $6500 credit, you need to be under contract on a home that is to be your new principal residence by April 30, 2010 and close by July 1, 2010.  The credit applies to homes priced up to $800,000.  Income limits for couples are $225k and $125k for singles, with an additional $20k phase out.

And the rule that didn’t change: if you sell the home within 3 years of buying it – or stop using it as your principal residence in those 3 years – you gotta pay back Uncle Sam for the full amount.

There’s an excellent IRS Q&A on the Tax Credit here.

North Tucson Real Estate Market Report – November 2009

December 17, 2009

North Tucson is full of luxury homes and communities – Pima Canyon, Catalina Foothills, Cobblestone, Alta Vista, and others.  There’s also a ton of condo conversions – apartment complexes converted into ownership units.  Neither of those markets are doing so well at the moment.  The luxury home market in Tucson has generally come to a halt, and the condo market is flooded.

In fact, in November 2009, only two homes sold over $700k.  And when the average list price in the area for a house is $920k, you know there’s lots of listings on the high end that are just sitting there.  And will continue to sit there for a long time.  There’s just not much demand for that price bracket right now.

The homes that are selling in North Tucson are largely under $350,000.  For that, you can get a basic smaller home in one of the track home communities, a decent town home, or a couple of condos.  The typical house will set you back $439,881, townhomes were $233,876 on average, and condos $137,423.

More condos and townhomes sold in North Tucson in November than houses.  Again, those condos and townhomes are lower price brackets, so they’re tending to sell better than single family homes.  Typically, inventory starts to ramp up in the area over the winter – if that happens, a larger glut of homes on the market in North Tucson isn’t going to do good things to home prices in the region. 

I often talk about areas like the Southwest being hit so hard with foreclosures and short sales – but the North is not excepted from that.  Of all the sales in November, nearly 30% were distressed property sales: either foreclosed properties or short sales. 

The average price of a single family home in North Tucson took a huge dive in November.  For most of the year, a typical home cost somewhere in the low to mid $500ks.  This month, the average was at $439k.  There were also only 60% of the usual home sales – only 29 units instead of the high 40s.  Typically, home sales slow a bit in winter – we’ll have to wait until February or so to see if those numbers start to climb again.

You can always see the chart versions of this data too, at my North Tucson Market page.

The raw numbers:

	SFR		Townhome		Condo		All
	Value	%change	Value	%change	Value	%change	Value	%change
Avg LP	$920,457	+0.4%	$305,938	+3.5%	$159,055	-6.4%	$665,953	-3.4%
Avg SP	$439,881	-18.6%	$233,876	-20.8%	$137,423	0%	$308,095	-38.1%
Med SP	$409,000	-10.2%	$208,000	-11.1%	$115,000	-9.8%	$270,050	-20.6%
#Listed	489	-3.0%	119	-7.8%	161	+30.9%	769	+1.7%
#Sold	29	-37.0%	17	+183.3%	15	0%	61	-9.0%
MOI	16.9	+53.9%	7.0	-67.4%	10.7	+30.9%	12.6	+11.7%

Northwest Tucson Real Estate Market Report – November 2009

December 16, 2009

Our first area report!  I’m not in love with this format – let’s see how this works this month and go from there.  My raw numbers are in a chart at the bottom, along with the percent change from last month.  You can always see the chart versions of this data too, at my Northwest Tucson Market page.

Northwest Tucson covers such a large geographic area – including Oro Valley and Marana.  There are huge track home communites and high end luxury communities.  Looking at averages here doesn’t always quite cut it, but those averages can start to give us some insight as to the housing market in the area.

But despite the diversity of the Northwest, there’s still some clear indicators. 

The lower end of the market is still fueling sales in the Northwest – in the $100-$150k price bracket, there are 5 months of inventory.  There’s only 4.5 months of inventory in the $150-$200k price range.  Those are fairly low numbers, nearly teetering into seller’s market conditions. 

Which isn’t to say prices aren’t continuing to drop, despite increasing sales units over the last 4 months.  Take Continental Ranch for example.  In June 2009, the average home in Continental Ranch cost $197,193 (median $190,476).  November 2009, that same average house cost $192,536 (median $180,400).   

Compare that to 2 sales in November in the $1.0mil+ market – and a total of 96 homes listed in that price range.  Luxury sales are still stagnant, but there’s no shortage of inventory.

Townhomes and Condos remain tough markets.  For the price of an average townhome, you can get a basic free-standing house and yard.  The higher priced townhome sales tend to be in the age restricted communities – Saddlebrooke, Vistoso Village. 

The $400k+ market is where the months of inventory goes to double digits and stays there – the drop off in sales starts in the mid $200ks and just slows down even more from there.  If you’re trying to sell in that price range, you’ve got a lot of competition.  Unless you’re the best priced in the best condition, chances are you’ll be sitting on the market for a long time. 

The raw numbers:

	SFR		Townhome		Condo		All
	Value	%change	Value	%change	Value	%change	Value	%change
Avg LP	$403,398	+1.2%	$223,026	+12.8%	$139,338	+10.3%	$384,108	-1.0%
Avg SP	$243,680	-2.5%	$173,469	-12.0%	$164,125	+185.4%	$240,042	-2.0%
Med SP	$205,000	+2.5%	$178,450	-13.0%	$159,750	+177.8%	$205,000	+2.5%
#Listed	1736	-5.1%	138	-21.1%	46	-14.8%	1920	-1.5%
#Sold	248	+11.2%	8	-46.7%	4	+100%	260	+8.3%
MOI	7.0	-14.7%	17.3	47.9%	11.5	-57.4%	7.4	-9.1%

Who Do You Pick To Sell Your Home?

December 14, 2009

I was very painfully dragged through a thought exercise the other day by my friend Rob Hahn.  He likes to ask tricky questions and then turn them around on you and act all innocent like he didn’t mean to start a ruckus.  But he totally means to do exactly that.  Trust me.

Anyway.  The question was thus: Who would you pick to sell your home, assuming you can’t sell it yourself?

It was a harder question to answer than I anticipated.  Who do I pick?  The person who sells the most homes – because they spend all day getting more clients instead of taking care of the ones they have?  The girl who makes her sellers feel good but may not negotiate all that well?  The woman who seems to have a lot of clients but then trashes them in the back office rooms when no one is looking?  The guy who has a lot of listings, but they take forever to sell because they’re always priced a little too high?

Who, in my market, would I pick to sell my own home?

And then, once I answered, I had to answer why I picked that person.  It was hard to pick.  Oh man, it was hard to pick.  I really really really wanted to sell it myself, according to my own standards of how things should be done.  In an ideal world, I really wanted to pick myself.  But that was against the rules of the game.

For me, in the end, it came down to two things: integrity and market knowledge. 

I picked the person who I knew wouldn’t be gossiping about me to coworkers or other clients.  The person who I thought would always be telling me their complete and honest opinion, even if it wasn’t exactly what I wanted to hear.  The person who would take the time to listen to me, to understand my goals and needs, and would tailor their approach accordingly.  The person who had demonstrated clear market knowledge, by pricing properties correctly.  Who I knew could discuss housing conditions in my area clearly and with confidence and substance and real market data to back up their answers.  The person who would tell me what to fix now and how to best prepare my home for sale.

Other than myself, of course.

It was an interesting exercise to determine what I believe makes a good agent.  What criteria would you use to pick an agent to sell your home?

I Always Knew Tucson Was Better Than Phoenix

December 10, 2009

Just because I can’t pass up an opportunity to taunt my Phoenix friends…

Forbes thinks Tucson is better than Phoenix.  As if we didn’t know that already.

Okay, so Tucson only ranks 62nd on the list, but at least Phoenix is lower than us at 82nd.  Points in our favor were for the percentage of homes that are actually occupied, which is a sign of stable inventory.  Tucson also ranked better for having a lower percentage of foreclosures of total housing units. 

Travel time weighed in Tucson’s favor as well, saying commutes were generally shorter here than in Phoenix. 

AND – U of A beat ASU this year in their annual football rivalry.  That makes Tucson’s superiority conclusive, right?

How Mistakes Affect Your Credit Score

December 8, 2009

Interesting article about credit scores from my lender friend Justin McHood in Phoenix. 

FICO (the people who created the industry standard in credit scoring) released information on how much your credit score may go down when something bad happens – something like maxing out a credit card, having a late payment, or having a foreclosure on your record.

You’ll notice that the higher your score, the more you get penalized.  For all but one of the credit mistakes listed, the minimum smack-down for people with high credit scores is more than the potential maximum for those with lower credit scores. 

FICO says that’s because a lower credit score already reflects riskier past behavior.  One more risky behavior is not quite as significant to those with lower scores than to those with high credit scores.

But if that is true, then having a high credit score means you have a history of non-risky behavior.  So shouldn’t having one of these credit mistakes happen be considered an exceptional event?

Tucson Market Statistics and Report – November 2009

December 7, 2009

The Quick Numbers:

• Single Family Home Average Sales Price: $205,020
• Single Family Home Median Sales Price: $170,000
• Single Family Home Units Sold: 743
• Single Family Home Months of Inventory: 7.2 months

• Townhouse Average Sales Price: $140,944
• Townhouse Median Sales Price: $129,000
• Townhouse Units Sold: 71
• Townhouse Months of Inventory: 8.6 months

• Condo Average Sales Price: $111,838
• Condo Median Sales Price: $100,750
• Condo Units Sold: 36
• Condo Months of Inventory: 12.9 months

• Citywide Average Sales Price: $195,721
• Citywide Median Sales Price: $165,000
• Citywide Units Sold: 850
• Citywide Months of Inventory: 7.6 months

Hello November!  The holiday season is upon us – bringing the yearly slow down in home sales in Tucson. 

If you look at the seasonal trends in the number of homes sold in Tucson citywide, you can see we traditionally peak around May and have slow winter sales.  I don’t expect this winter to be any different.  Sure, there’s a tax credit that might be an incentive for some, but there’s no urgency to move over the holidays for that – the deadline isn’t until the end of April 2010.

The average sale price dropped below $200k again, for the second time in 2009, coming in at $195,721, while the median is basically unchanged for the year.  Compared to the start of the year, the average sales price is down about 10% while the median sales price is the same. (Okay, it’s $250 less.  I’m calling that insignificant.)  Since the average is heading down and the median is holding steady, that tell us the lower end of the market is still moving and the higher end luxury homes are not.  There are more sales in those lower price brackets, enough to keep the median fairly steady, while the lack of sales of higher priced homes brings that average down.

The number of homes for sale were down a tiny bit, pending sales were down, and sales were down in November.  Pending sales went from 2060 to 1747 – but we expected that, right?  Remember, when that tax credit first came out, you had to close by the end of November.  It would make sense that there’d be a huge push to close those pending sales by the end of November.  Overall, sales were down 55 units, to 850.

We had 7.6 months of inventory at the end of November.  Compare that to 13.4 months in November 2008 and 11.4 months in November 2007 – overall, 2009 has been kinder than 2008.  Not that we’re out of trouble yet, but comparatively we’re making some improvements.

And, I’m happy to announce, the market reports for each area of town are ready to go.  If you read the blog, you’ll see those reports coming up in the next few weeks.  If you subscribe via email to only the market reports, then you won’t see those area reports unless you go looking for them here.  If you want any of those specific area reports via email, you can sign up for that on each area’s page.

This is the Central Tucson page, for example.  There’s no report yet (coming in a week or two), but the charts are all live, and you can subscribe to just the Central Tucson reports via email, if that’s an area you’re interested in.  So, for example, you can see the difference between the price of homes on the market and the price of homes that actually sold in Central.  Or the absorption rate for only single family homes in Central.  Or you can just look at townhomes in Central – see the number for sale versus the number sold. 

You get the idea.  And there’s one for each of the 9 major areas of Tucson: Northwest, North, Northeast, West, Central, East, Southwest, South, and Southeast.  If you find errors, have comments or suggestions, please let me know!

Data gathered from the Tucson MLS and is deemed reliable but not guaranteed. Figures quoted here include only single family homes, townhomes, and condos in the 9 areas that make up the Greater Tucson Area: NW, N, NE, W, C, E, SW, S, and SE.

Pay No Attention To This Post

December 4, 2009

Hi there! I’m working on adding those market reports for the 9 areas of town. This is just a test to make sure things are working properly. Pay no mind.

No really.

Nothing to see here.

Move along.

(but come back on Monday when I’ll have November’s market stats posted!)

Next Page »

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