Article:

By S. Mitra Kalita in the Wall Street Journal

Sales in many vacation communities across the U.S. soared last year to levels not seen since boom times, driven by deep discounts, cash purchases and buyers’ rising stock portfolios.

On Mercer Island, Wash., waterfront sales nearly tripled in 2010, compared with a year earlier, reaching par with 2006 volume there. Sales on Hilton Head Island, S.C., rose 14% for the year. Palm Beach, Fla., experienced a 40% annual increase and a 54% increase in homes under contract, indicating an especially strong fourth quarter. Palm Beach sales volume now is comparable to its 2007 peak. These figures were gleaned by brokers in each locale.

.”The proverbial train has left the station,” said Ned Monell, an agent with Sotheby’s International Realty in Palm Beach. “We haven’t felt energy like this in a long time. Buyers sense that they’ve been on the sidelines long enough.”

The question now is whether the momentum will last. The strength of second-home sales paints a stark contrast to the overall housing market, which is expected to worsen in 2011.

Existing-home sales in November rose 5.6% on an annualized basis, according to the National Association of Realtors, a trade and lobbying group. Last month, the Case-Shiller housing index of 20 cities showed prices across the U.S. fell in October, and most analysts predict another 5% to 10% slide in the coming year.

Data for the nationwide vacation-home market aren’t tracked regularly. The National Association of Realtors conducts an annual survey of home buyers, but results for 2010 won’t be out till March.

Yet the market for vacation homes, based on local sales data, appears to be booming. The comeback, NAR economist Lawrence Yun said, has been helped by gains in the stock market and an improving economy, which have made wealthier Americans more upbeat about the future. “It also implies that prices in some markets have come down so much that people are fighting for those properties,” said Mr. Yun, noting that demand is strongest in areas close to stable labor markets.

According to the NAR, one in 10 real-estate transactions in 2009 was for the purchase of a vacation home. And though a small fraction of the overall market, it is significant because vacation homes are often big-ticket properties and attract discretionary buyers. Just four houses sold last year on Madeline Island, Wis., for example, but the island’s average dwelling sells at two to three times the price of the county average, said Eric Kodner, a realty broker on the island.

Sales of second homes are showing an uptick even in more-affordable communities. In some locations, prices are even inching upward. Cape Cod sales climbed nearly 9% in 2010 from 2009, while prices rose 7%. Monroe County, Pa., in the heart of the Pocono Mountains, saw a 3% decline in transactions, but its Lake Naomi resort community was up nearly 15%. A one-acre plot off Lake Naomi recently fetched $1.1 million, a record deal for the area.

Still, in most markets where demand has improved, prices haven’t. For Realtor Andy Twisdale in Hilton Head, S.C., it is too soon to rejoice; prices are down almost a third over the past five years. “People are buying at the very low end of the product,” he said. “The financing is very difficult. Banks are requiring 25% down and crystal clean credit.”

Buyers who qualify or can pay cash say this is the time to take the plunge. On New Year’s Day, the Makarewicz family arrived in Pocono Pines, Pa., to look for a vacation home. They already own their primary residence in northern New Jersey and own a property in Damascus, a northeastern Pennsylvania town along the Delaware River. But the family says the latter doesn’t offer enough things to do: Not enough shopping. Not enough activities for kids. Not even enough fish.

“How’s the bass here?” Joe Makarewicz, a vice president for sales at a financial-services firm, asked Re/Max Realtor Rob Baxter as the two looked at floor plans.

The family plans to sell the Damascus house, which would allow them to pay cash for one near Lake Naomi. The resort community at Lake Naomi boasts pools, tennis courts, a recreation center and a golf course—and is equidistant from New York and Philadelphia.

Some second homes had been stuck on the market because sellers wouldn’t budge on price; unlike owners of primary homes, they often aren’t in a hurry to move.

“Sellers have become aware that they have to price their homes accordingly,” said Harald Grant, a senior vice president at Sotheby’s in New York’s ritzy Hamptons region. “There’s a perk in the market because a lot of prices have come down to where they should be.”

This shift became clear to K. David Hirschey, who runs a consulting business in Minneapolis, as he hunted for a home on Madeline Island.

After competing in a summer swimming competition on the island, Mr. Hirschey decided to buy a home there, perhaps to rent it a few years and maybe retire there eventually. The first offer he made was rejected, he recalled, because the seller said, “We don’t negotiate on properties here.” The same thing happened with his bid on the next house.

Then he found a third property—four bedrooms, three baths—that began as a sale by owner, was taken off the market, then relisted under one broker, then another. It had been initially priced at $1.25 million, and remained on sale for two years.

“When I saw it, it was listed at $687,000,” said Mr. Hirschey, a father of four children. He offered $530,000, furnishings included. “They wanted to negotiate and I said no,” he said.

The tactic—an all-cash offer—worked, and Mr. Hirschey closed on the house in November, just in time for his family to spend the holidays there.

Link to Original Article Here

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What does this mean?  Well, if you were waiting for a better rate, you’ve missed out. Or, at least this time. Rates are still at very low levels, but many think that those times are coming to an end.

For the past 4 weeks, rates have been consistently on the rise.  Average rates are up from a record low 4.1 percent to around 4.61% percent.  And just this past week, they went up somewhat dramatically (.2%)  These increases have been spurred on by Obama and Congress’ recent deal to not increase taxes for the next two years, and in some cases, decrease taxes. This has caused an increase in investors selling bonds, leading to higher interest rates.

As I mentioned, 4.6% is still pretty darn low. However, with rates on the rise, people waiting for lower rates have now missed the boat. One consolation is that home prices remain significantly low. And, as we see it, they will remain that way for some time in Santa Fe. The combination of tight lending and continued increases in foreclosures are still continuing to effect house prices. Neither of these items look like they are going to change in a positive way anytime soon.

The following is a link to a USA Today article about the rising rates and what it all means. It’s a quick/good read. Interesting stuff..

ARTICLE

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Long road to a short sale: Struggling homeowners turn to lenders for last-chance option
by:Anne Constable

Tenants feeling effects of volatile housing market

The house that Anna Bogaard-Hazen and her husband, Barry Hazen, bought on a cul-de-sac in Eldorado in 2005 had everything on their list of amenities — views, privacy, a pretty front porch.

In fact, when they first saw it, “Our jaws just dropped,” she recalled.

Because others were bidding on the property, the couple paid the owners their asking price of $389,000 for the 1,800-square-foot house.

When they refinanced in 2007, the appraised value of the property had jumped to $460,000 and they thought, “Oh boy, we made a great investment. We were thrilled,” Bogaard-Hazen said.

As someone who had moved a lot earlier in her life, Bogaard-Hazen was ready to settle down. “We expected to grow old in this house,” she said. And with her new teaching career and her husband’s promotion, they felt optimistic about the future.

Then the bottom fell out of the housing market. Like many other families around the country, the couple found themselves owing more than their house was worth — in this case nearly $50,000.

Then in April, Hazen lost his job and they could no longer make their mortgage payment, which was more than $2,000 a month.

Bogaard-Hazen, 41, said that as a level 1 teacher at Tierra Encantada, she makes $33,000, and it now takes her three paychecks to save enough money to pay the mortgage. She made the September payment in October but expects to continue falling further behind.

Hazen, 48, who worked for 30 years for a large, Denver-based company, now has two part-time jobs, one with the state Office of the Medical Investigator and a second with Double Take, a resale shop owned by a friend. But their combined incomes are not nearly enough to make their current monthly payments.

Last weekend, the couple began selling off their possessions at a garage sale (“We may even be willing to just give stuff away,” Bogaard-Hazen said in an e-mail) and put their dream house on the market for $340,000, $38,000 less than they owe the bank.

By holding a short sale, they hope to avoid foreclosure and protect their credit rating.

They’re resigned to losing their home — and the many interesting, one-of-a-kind possessions that fill it.

Options for when you’re underwater

More and more, homeowners who are upside down are seeking short sales.

In the past, it was rare for lenders to agree, but because of changes in the real-estate market, they are more willing to accept less than the full balance of the loan at closing.

In February 2009, the Obama administration introduced the Making Home Affordable plan to stabilize the housing market and help homeowners get relief from mortgage payments they can no longer afford.

The goal of HARP (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program), two original components of MHA, is to help eligible homeowners at risk of default to avoid foreclosure either through refinancing or loan modification.

HAFA (Home Affordable Foreclosure Alternatives), which took effect in April, complements these programs by helping homeowners who were not approved under the refinance or modification options of the MHA program to avoid foreclosure through a short sale or deed in lieu of foreclosure (in which the homeowner transfers ownership of the property to the servicer). In a short sale, the lender approves the terms and accepts the payoff in satisfaction of the mortgage. And under HAFA, which will be effect until Dec. 31, 2012, the homeowner can receive financial incentives to help with relocation and other costs.

To qualify for a short sale, homeowners must be facing financial hardship, a shortfall in their monthly income and insolvency.

Recent statistics confirm the number of short sales is soaring.

They increased 42 percent in the second quarter of 2010 and were up 126 percent from a year earlier, according to the U.S. Treasury Department.

The Distressed Property Institute’s website says more than 96,000 homeowners in the first half of this year were saved from foreclosure by short sales, although they still represent only 26 percent of overall distressed property transactions. A majority of people end up in foreclosure, or worse, abandoning their homes.

In Santa Fe County, there were 23 short sales in 2009, but this year so far there have been 39 successful transactions, according to Peter Kahn of Santa Fe Realty Partners.

What he finds staggering is the number of short-sale listings that expired. “They indicated potentially that a Realtor undertook the responsibility of trying to help a struggling homeowner avoid foreclosure and failed,” Kahn said in an e-mail.

He recommends that property owners thinking about short sales should contact a qualified broker, preferably a certified distressed property expert. And homeowners should expect some very frank conversations with the agent.

Short sales are not easy, and they’re not really short. In fact, they should be called long sales, Kahn said, because “while the bank is getting shorted, they take longer.” It might, for example, be 60 days before the buyer or the seller gets a response from the bank to an offer, he said, and both sides need to be patient.

Fred Raznick, the agent acting for Bogaard-Hazen and Hazen, said he was representing a seller in a short sale that took so long that another department of the same lending institution foreclosed on the house — and then sold it for less than the offer on the table.

Foreclosure, he noted, “is not in the best interest of anybody,” as this story illustrates.

Buyers and sellers also need to be well informed about the differences between short sales and other real-estate transactions, said Kahn, who is currently involved in four of them, one on behalf of a buyer. For example, banks don’t lock in rates (not so much a problem now that interest rates are so low) and they won’t pay traditional sellers’ expenses such as tax on the sales commission, repairs or the cost of a septic permit.

And in New Mexico, banks can and do pursue customers for the difference between what they owe and the price their home sold for. It all depends on what they believe the homeowner can pay. Sometimes the deal requires the seller to sign a promissory note.

(If customers do not repay the lender, the money is considered ordinary income by the IRS and subject to taxes.)

Bill Enloe, CEO of Los Alamos National Bank, which has about $1.3 billion in mortgage loans and currently owns 52 properties, said short sales are a useful tool, both for the customer and the bank because they eliminate the costs of foreclosure or bankruptcy.

“If the instance warrants a short sale, we consider it,” Enloe said. “Usually what that means is that the owner has no ability to pay the deficiency. If we’re convinced that’s true, we will consider taking the loss up front.”

But the bank has to make sure it’s not dealing with someone who simply wants to get out of their house and take advantage of the lender.

He expects the number of short sales and foreclosures to continue rising. Three years ago, “everybody was churning money. But those times are over. Everybody’s learned a lot” since then, Enloe said.

The frustration of negotiating with lenders

For Hazen and Bogaard-Hazen, who expect to be rebuilding their bank accounts, a short sale makes sense.

But Bogaard-Hazen said she spent much of her summer vacation on the phone with lenders. Figuring that lowering their interest rate from 6 percent would help them stay in their home, the couple looked into refinancing. But they soon learned no bank would take a chance on them, even though they had previously paid on time. A local broker agreed there was “no way,” but added, “let me know (if you succeed) because I’m in the same situation.”

They notified CitiMortgage of their shortfall and applied to HAMP, the federal program that provides eligible homeowners the opportunity to modify their mortgages to make them more affordable. They thought they’d be a shoo-in. More than a million households have supposedly gotten relief from the program, but not Bogaard-Hazen and Hazen. They were turned down, Bogaard-Hazen said, because “Barry’s job loss is no longer considered a sufficient hardship.”

“The truth is,” Enloe said, “most people don’t qualify.” In some cases, homeowners have assets the feds believe they should commit to the mortgage, and in other cases homeowners are unable to make even a reduced mortgage payment.

“Very few people are able to successfully modify their mortgages,” Raznick confirmed. “That process needs to be streamlined.”

On the advice of CitiMortgage, Bogaard-Hazen and Hazen applied to the lender’s traditional loan-modification program and were told that process might take six months. Bogaard-Hazen’s question was, “What do you expect us to do? Do you want us to go into foreclosure?” Eventually they learned they’d been turned down by CitiMortgage as well, although they never received a notice in writing.

Through sheer persistence, Bogaard-Hazen finally got in touch with the secretary to the director of the department that handles loan modifications, and a decision-maker from the short-sale department called her back. Working with Raznick, the lender agreed to a short sale and the couple listed the house recently. Bogaard-Hazen said it would have been better to put the house on the market earlier in the year, however, when more buyers were shopping for homes.

Although Bogaard-Hazen and Hazen are determined not to be shaken by saying goodbye to the trappings of their old life, Hazen said he resents the attitude of the lenders. He and his wife made all their payments on time, he said, “But the minute you get in trouble, they turn a blind eye to you. It doesn’t matter how you got there.”

Bogaard-Hazen added that she understands they made mistakes, too. “If we’d followed the traditional rule of thumb (20 percent down) we might have been better off. But we wanted this beautiful house, and we were greedy.”

Financial distress rising

Many other homeowners in Santa Fe are obviously in distress. Reports from RealtyTrac for the third quarter of 2010 show that there were 293 properties in the county for which there were filings — either default letters, auction notices or bank repossession. (That compares to a total of 68 in the first quarter of 2008.)

The general manager for the Eldorado Community Improvement Association recently sent out an e-mail to residents asking for their help in identifying possible foreclosures and abandoned homes in the community.

While there are some vacant homes, Raznick, the agent working with Bogaard-Hazen and Hazen, said that he doesn’t know of any that have been abandoned. But there are 90 homes on the market — a bit higher than normal — and another 13 under contract. Of those, he estimated six might be short sales and three or four are foreclosures.

“I think a lot of them have to do with speculation,” Raznick said. “People from out of state bought, thinking they were going to be instant real-estate barons.”

Another Eldorado homeowner facing foreclosure showed up at Bogaard-Hazen’s estate sale last weekend — to commiserate and to shop. She said she feels angry and misled by her lenders. In 2007, at the height of the real-estate market, she and her boyfriend, a contractor, bought a house on a greenbelt for $460,000. Today it’s worth only $330,000.

The original lender (Countrywide) was “very pushy” and the couple agreed to an interest-only mortgage, figuring “You can’t go wrong with real estate.”

Turns out, of course, that you can.

The couple never missed a payment even though the mortgage was close to $3,000 a month. But then the contractor broke his leg and wasn’t able to work. And her income was sporadic.

While their credit was good enough to buy the house, she pointed out, six banks were not interested in refinancing their loan to a more manageable rate. And in July, the HAMP program turned them down too. A lawyer advised them to stop making payments, or partial payments, so that the lender (now Bank of America) would take them seriously.

The whole experience has been mind-boggling, the woman said. She wondered, “How can you say you’re turning us down because we can’t afford our house? Where were you in 2007?”

She said she kept getting conflicting information; paperwork was lost or misplaced and had to be refiled. In August, Bank of America finally said, “We have to tell you you’re in foreclosure now.”

Ironically, like Bogaard-Hazen and Hazen, she said she and her partner could have afforded a payment under the HAMP program, but at this point she said, “I don’t know what our recourse is. We’re exhausted. And we’re kind of in denial.”

Next: Housesitting

Holding a short sale is, of course, no guarantee of a buyer. Although Bogaard-Hazen and Hazen are pricing their house aggressively — at $349,000 it is well below the median price for the community of $379,000 — at the current absorption rate it might take five or six months to sell.

But if the short sale works, Kahn said, it does “far less damage to your credit, which could be repairable.”

Meanwhile, they’re looking for a housesitting gig for the winter while they get back on their feet.

BY THE NUMBERS

7 million: Mortgage loans delinquent or in foreclosure process in U.S.

11.5 million: Number of U.S. homeowners in danger of losing their homes by end of the year

1 million: Homeowners who have gotten help from federal HAMP

39: Number of short sales in Santa Fe County in 2010

293: Total default notices, auction sale notices and bank repossessions in Santa Fe County in the third quarter of 2010

 Link to original article here

We have been involved in both foreclosure and short sale proceedings in the past year. These types of sales happen in all price ranges (the short sale we dealt with was a property valued at over 1 million), and on a more and more frequent basis. What is most important in buying a foreclosed or short sale property is using agents that know how to navigate the often complicated processes involved in these transactions. Contact us for more information regarding the short sale process and/or to find your Santa Fe dream home.

Contact Ryan Bolton and Matt Desmond

The ranking report, performed annually, rates five factors with all of the top producing real estate agencies.  Those five factors are Agent/Salesperson, Variety of Additional Services (i.e. in-house mortgage broker, in-house title companies), Real Estate Company Office, Real Estate Company Marketing, and Overall Satisfaction.  Prudential ranks well in every category, but most importantly ranks the highest when it comes to Overall Satisfaction.

There are many different real estate companies in Santa Fe, and this is just one more great reason that we are proud to call Prudential home.

Link the the website ranking report here

Contact Matt Desmond and Ryan Bolton

So are people taking advantage of these low rates? Based on our obeservations……not really.  Buying activity is currently down, as is applications for loans. There are probably many factors involved here (which could take up another 40 or so blog posts), but the fact remains that rates are historically low.  However, we have witnessed an extreme tightening of funds.  Basically, even though rates are low, it’s hard to get financing.

Our advise…….if you can, refinance on your current loan. If you’ve been waiting, wait no longer.  In our opinion, rates just aren’t going to get much lower. Or if you are in the market to buy, get to the bank, get prequalified, and look for a great deal. As we all know, there are many great deals out there.

For mortagage information in Santa Fe you can contact the following people.  These are people we know and trust.

Superior Mortgage (Nancy Armstrong and Jim Gay)

Wells Fargo Mortage in Santa Fe (Sherry Finney)

Cheers,

Matt and Ryan

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one of those is the Dale Ball trail system. In Santa Fe, unlike the other fitness “meccas”, you can access the trails within five minutes of downtown. The Dale Ball Trails are 17 miles worth of city own and maintained trails in the foothills of the rockies. This trail system also provides access to the Santa Fe National forest, and endless miles of  hiking, biking, running, snowshoeing, etc.

So please, join us in celebrating and personally thanking Dale, for the gift he has given Santa Fe.

So, now what happens?

With the tax factor/incentive out of play, many predict that the market will see a bit of a hiccup.  In fact, only two weeks after the expiration, national home sales have shown significant declines.  While it’s still to early to look at the entire month of  May statistics, we’re pretty sure there are going to be down ticks across the board.  Showings and pendings have also slowed a bit, both good indicators of what if going on.

These happenings are topped with the highly tumultuous mortgage market.  With the big crashes on Wall Street last week, (and, wow, I just looked at today’s Dow and it’s down at least 100 points) mortgage rates are a 2010 lows again.  However, we also just read that mortgage applications have dropped off 27% since April.  Thus, even though rates are low, not many people are applying. Interesting signs indeed.

In summary, the tax credit has passed but home prices remain incredibly low, which still makes this a great time to buy. If you can lock in a great rate and find a nice place, you just may find yourself a fabulous deal. 

Link the AP Article on April Home Sales Here

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Of course, it talks about Santa Fe real estate, the local economy, and the views/thoughts of locals.

Here is the article:

Bigger Projects

1) Re-stucco your home: Nearly every home in Santa Fe has a stucco exterior, and ALL stucco exteriors need routine maintenance.  Parapets need re-stuccoing often, and cracks all around the house should be repaired when needed.  For a larger project you can re-stucco your entire home. This will certainly add value to your and keep pesky leaks and drafts out.

2) Remodel your kitchen: O.K., this isn’t the easiest task, but it will increase the value of your home significantly.  It will take a bit of a budget, and it will take a bit of time, but if needed, it is well worth it. If you do enter into a kitchen renovation project upgrade as much as you can.  Home buyers don’t like to see a brand new kitchen will all new appliances, except for the beige fridge from the 1980s.

3) Remodel your bathroom(s): See kitchen (above).  Another good “bang for your buck” project.

4) Install new windows: Green is in, and even if you’re not into that, saving money is! Windows continue to get more and more efficient, saving significant amounts of energy and money in the winter and summer time.  If your budget is low, consider doing this one room at a time.

Smaller Projects

1) Landscape: It is incredible what improvements to the outdoor spaces can do for a home.  Often times just adding a few plants, a few pots, and a tree can make a huge difference.  This is a great way to add significant value and curb appeal without breaking the bank.

2) Maintain your roof and canales: At 7000 feet the sun really can take a toll on your roof. Every year clean debrit off the roof of debris and unclog canales. Repairs on both of these items should be addressed immediately as well.

3) Install a water catchment system: This can be easier than you think.  All around Santa Fe you can buy water catchment cisterns at reasonable prices.  Full blown water catchment projects require burying cisterns and installing pumps, but it is also possible to find portable ones that a hose can be hooked up to.  This is a great way to conserve water, provide irrigation, and add value.

Happy Spring!

Contact Ryan Bolton and Matt Desmond

The United States Commerce Department announced that national housing starts rose in January to their highest levels in 6 months.  Starts were up 3% for the month, seeing increases in 3 of the 4 nationwide regions.  The only region that did not show increases was in the Midwest. Here in the West starts were up 9%, whereas in the South they were up 1%, and in the East, 10%.

The most recent quarterly report (4th quarter 2009) for existing home sales and condos showed a 14% increase in sales over the previous quarter. Trasactions increased in 48 of the 50 states, with double digit increases in 32 of those states.  Promising numbers, indeed. Once again, here in the West some of the highest numbers were seen, with a 16% increase over the previous quarter.  Contrary to the housing start data, the Midwest showed a sales increase of 15%. The South showed a 14% increase in sales and the Northeast, 11%.

Of the 151 housing markets followed by the National Association of Realtors (NAR), 67 showed higher median prices. 16 of the metro areas in the survey actually showed double digit increases in median prices. Another sign of a recovering market.

Here in Santa Fe the market seems abuzz with activity. We are seeing buyers in all price ranges, but particularly people looking to cash in on the first time home buyers credit which ends on April 30th (unless it gets extended). Hopefully, the market will continue to recover and thrive.

Contact Ryan Bolton and Matt Desmond