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Jingle mail should be a new phrase highlighted in William Safire’s column in the Sunday New York Times. This credit/housing crunch has produced some interesting words: securitized mortgages; jingle mail No, it’s not time for Christmas!! Actually, jingle mail is what lenders fear the most! Homeowners are returning their house keys to lenders at a rapid rate; thus, jingle mail. Mailrooms at loan servicers must be inundated with keys dropping from envelopes as homeowners become discouraged with the sinking economy and their rising debt.
Regardless of any Federal ‘bail-out’ for homeowners, some homeowners simply need to get out from under their situations and mailing keys to lenders is their way of doing so. Some homeowners are so upside –down in their mortgages, that even a bail-out cannot help them. Their options are to be foreclosed upon or simply to mail keys to lenders and walk away. Sometimes, it is more upstanding to simply let go of your house and move on.
Since I’ve only been a Realtor for 5 years, I have never known a cycle like this one. We all knew the bubble could not continue, but no one thought the bursting would be so painful and so deep. Are there lessons to be learned from this downturn? Oh, you bet!! Lending needed to be tightened; no more 100% stated income loans; Realtors need to be proactive and do their homework in advising their clients; appraisers need to follow their guidelines and not be pressured by lenders. In all, this will be a costly lesson for everyone, including homeowners. Jingle mail will continue; hopefully, it will not resound like the Salvation Army's bells at Christmas time.
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What Does the Well-Qualified Buyer Look Like?
Most of us can describe the perfect house; the perfect car; the perfect spouse. How many of us can describe the well-qualified buyer? Most of us don’t have a picture of what this buyer looks like because for several years, we haven’t had to worry about well-qualified buyers. With the proliferation of loan products and ‘easy’ money, well-qualified was not a concern of most lenders and Realtors.
Right now, to qualify for a conventional loan, a buyer must have at least a 660 to 680 FICO score; probably closer to the 680 figure. They must have verifiable employment (income) and at least 5% down payment.
FHA is not credit score driven. It is a product for first time homebuyers, but mortgage brokers are seeing previous homeowners obtaining FHA loans in this current market. In Maricopa County, the FHA loan limit is $346,000, which is considerably higher than the median home price; approximately $220,000. Sellers can contribute to buyer’s closing costs through both AmeriDream and Nehemiah programs, which are recognized charitable companies, handling sellers’ contributions for a fee.
So, what does the well-qualified buyer look like? She (he) is someone with 3 to 5% cash to put down, plus has money for reserves, has a decent FICO score and a verifiable job or source of income. Shades of my parents!! These were the same guidelines when they purchased a home, or when I purchased my first home.
Do these buyers exist? I’m sure they do!! I can’t wait to meet some of them!!!
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In Prescott, Arizona on Thursday, March 13th, I attended the AAR Winter Conference of Realtors. The first speaker was Jed Smith, NAR’s Director of Quantitative Research. He gave the Realtors an optimistic picture of the economy and Mr. Smith did not believe the Country would be in a recession and also painted a rosier picture of the Arizona economy than I had heard previously.
Dr. John Tuccillio, former NAR economist, then spoke and disagreed with Mr. Smith. Dr. Tuccillio believes we’re in a recession and one of his best comments was about the core inflation figures. Looking at core inflation, it appears that our inflation is within an acceptable range, “if you don’t eat or drive”. Dr. Tuccillio’s point was that with the cost of food and gas added to core inflation, you have inflation at an unacceptable level.
Also, Dr. Tuccillio gave the Realtors an overall view: the real estate market will bottom out between now and the end of 2009. How to determine when the bottom has been reached: decline in new listings from the same period last year; days on market begin to decline; and sales price to listing price does up.
The Man Bites Dog quote relates to the turn around in real estate and Realtors; inability to adjust to the new conditions and our inability to educate and appropriately counsel our clients.
It was good information and well received
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Interesting news and views
On the News Hour Thursday or Friday night (PBS Ch. 8 in Phoenix), Gwen Ifill was interviewing two senators, one from Arkansas and one from Georgia, regarding the stimulus package being worked on in the US Senate. The Georgia Senator, whose name escapes me, reminded the audience that in the 1970s our economy was in trouble, similar to where it is now, and that Congress passed a stimulus package which included a tax credit totaling $9,000 over 3 years, to anyone who purchased a home.
I don’t remember this incentive package. I do remember the 70s interest rates and horrible housing market, but I was not a Realtor and paid little attention to this segment of the economy.
I’m generally anti government ‘meddling’, but this incentive package, with a tax credit phased over 3 years, really intrigues me and I think (hope) it’s something that Congress will look into. The two Senators agreed that the stimulus package passed by the House would be a good step (perhaps with a little Senate tweaking), but that a further stimulus package might be needed to get this economy moving and the housing market off dead center. According to Phoenix Board of Realtors statistics, www.armls.com in December, we closed 844 units, both condos and homes, and we added 12,573 units, again both condos and homes. At that rate, we have 15 months of inventory on the ground. That’s not a pretty thought!!
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I’m so tired of the Doomsday News!! Every time I turn on the TV or read the newspaper, which I know I shouldn’t do, the economic news is bad, bad, and worse. I woke up this morning like the man on Network – the old movie: “I’m sick and tired and can’t take any more!! “. I checked my emails and there was a mortgage update which states: “Investor concerns about slower economic growth hurt the stock market but pushed mortgage rates to the lowest levels since the summer of 2006. Nearly all of last week's economic data indicated weakness in economic growth, which was good news for mortgage markets, since it generally means less future inflation.”
Mortgages rates at last summer’s level may not be a big deal, but it might help some of our wanna be buyers get into the market. Heaven knows, there’s a ton of houses for sale. The only way to eat up our inventory is like eating an elephant – one bite at a time; one house; one buyer at a time.
I know the reduction in mortgage rates is a small thing, but it makes me smile to think that there is some good news. 
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Recently, at an open house, I was asked by a buyer's mother what renovations would pay back the most. In a recent National Association of Realtors article, the 3 remodeling projects that return the highest amount at resale are: Basement remodel - 84% (in Phoenix, that's probably not a go); a minor kitchen remodel - 83%; a bathroom remodel - 82%. According to the article, in the Mountain States, a wood deck addition recouped 86% at resale.
A minor kitchen remodel would be to paint or refinish the cabinets, replace the existing hardware, perhaps install new counters, and replace the flooring. What I see in most homes, is that sellers do not understand how important the kitchen has become and they often neglect this very important room. I have a freid who refinishes counters and paints cabinets, and below is an example of her work. This would be a low cost, effective way to update and add value to your kitchen in a short time and for very little money. In these days of crumbling real estate values, refinishing counters and cabients would certainly bring seller a big bang for the buck.
Exterior-wise in my experience, landscaping pays the biggest bucks. Buyers do not want to landscape their new home. They prefer that project be tackled by someone else. Since there is a myth about growing plants and trees in Arizona - that very little grows here - buyers seem to be daunted by this task.
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