Tucson Real Estate Blog

It has been a long while since economists have stated that they believe the nation’s housing prices are heading higher across the nation. A majority of the economists that were surveyed believe that the change in market conditions has already occurred with a few saying that it will happen in the very near future.

Those surveyed are encouraged by a variety of occurrences. First, there has been three straight months of increases in the “Home Price Index” nationally. Second, we have seen a pick-up in sales of existing homes and new home construction. Tucson is no different with single family home prices moving higher in comparison to last year’s (2011) prices in each month since February of 2012.

Another factor is the historically low mortgage rates which have recently reached all time lows both in Tucson, AZ and across the nation. Low interest rates seem to be here for a while considering the Federal Reserve has committed to purchase $40 Billion in mortgages a month for the foreseeable future. Forecasters are seeing life in a sector that has been flat for a number of years and this is a very good sign for the housing industry.

Determining when the housing crisis has turned the corner is important for more than home builders and real estate agents. Before foreclosures caused a meltdown in financial markets across the country in 2008, the housing market had become a significant drag on the national economy. Housing concerns continued to subtract from the nation’s gross domestic product right up through 2011. Now, we are seeing signs of change in all that.

According to those that study current real estate market conditions, this is a Great Time to purchase a home. This same “Buying Opportunity” is very definitely available in the Tucson, Arizona as well.

May 7, 2012 – The list of housing markets showing measurable and sustained improvement held virtually unchanged in May at 100, down from 101 in April, according to the National Association of Home Builders/First American Improving Markets Index (IMI), released today. The number of states represented on the list also held firm from the previous month, at 35 (including the District of Columbia).

The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. While 83 metros held onto their previous places on the IMI and 17 new ones were added to the list in May, 18 metros dropped from the list, for a net loss of one. Metros newly added to the list in May include such geographically diverse places as Phoenix, Ariz.; Bowling Green, Ky.; Bend, Ore.; and Lubbock, Texas.

“The fact that there are 100 markets in 34 states and the District of Columbia represented on the improving list illustrates that all housing markets are local, and that the national headlines often don’t apply to what’s happening in a specific metropolitan area,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “In places where employment is firming up along with demand for new homes, the main factors weighing down the housing market continue to be access to credit (for both builders and buyers) and the difficulty of obtaining accurate appraisals on new construction.”

“The overall number of markets on the IMI continued to plateau this month, with more than a quarter of all U.S. metros still showing signs of improvement,” said NAHB Chief Economist David Crowe. “Many of these are relatively small markets in terms of their population and building volume, which is why their improvement is barely registering on the national scale as of yet. Moreover, we are seeing some shifting of markets on and off the list primarily due to small seasonal house price changes in areas that have had flat, stable prices rather than a boom-and-bust cycle.”

“The fact that the number of improving metros continued to hold its own with 100 entries in May shows that there are many places across the country where confidence and consumers are returning to the housing market,” observed Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.

The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac, and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three areas for at least six months following their respective troughs before being included on the improving markets list.

A complete list of all 100 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in May, is available at www.nahb.org/imi.

Buying your first home is an important and exciting undertaking, but first time home buyers may be unprepared for the task. The real estate business can be complicated for someone who has never experienced it before. You should not begin your search without being prepared for what to expect. There are several things every home buyer should be aware of to avoid feeling stressed or overwhelmed by the real estate market.

Be Informed

First, understand real estate is different wherever you go. This is why different states require different certifications for real estate agents. You can find out about general real estate procedures from anyone, but make sure you talk to real estate agent to become familiar with the local market. This agent does not have to be your agent, just someone who is willing to talk to you. Ask about the following items:

• Home inspections: Know what they involve, how much they cost and when to do them.
• Expenses: Understand standard commission rates, local taxes, closing fees, etc.
• The local market: Inquire about the success rate of real estate in your area.
• Questions: Always be sure to ask about any concerns you may have.

You want to be fully informed as you begin planning for a major, life-changing decision. It is a real estate agent’s job to be informed and helpful; if you don’t feel an agent is satisfactory, try someone else.

Prepare Yourself

Before you begin looking for a new home, there are a couple of things you should do. First, find a helpful real estate agent who will guide you through the process. Make sure you get an agent who you trust to be knowledgeable and who makes you feel comfortable. Next, make sure all of your finances are in order. Check your credit report before you apply for your mortgage. Finally, make a list of what you want in a house: the price and features of the home. If you know what you are looking for, it will be easier to find what you want and to make a decision.

Start Looking

Start your search with the resources on this site homes for sale. Once you have found homes you are interested in, have your real estate agent make sure everything is in order with the home and make an offer. Many people are afraid to make an offer but shouldn’t be. Remember that your offer is negotiable. Also, try to stay relaxed through the home buying process. Problems often arise, but if you remain calm it will be easier to work through them.

Being a first time home buyer is a big step toward independence. Start the process off right by being prepared and knowing what to expect in the real estate market. Your future home is out there waiting; finding it is up to you.

Is seller on the hook for concealed flaws?

Barry Stone
Inman News
DEAR BARRY: We just bought a home and discovered a major undisclosed foundation problem after moving in. The seller insisted on an as-is sale, so we relied on the home inspector to find any serious problems.

In the basement, he noticed old water stains in an alcove that had been paneled and carpeted. We asked the seller to replace the paneling and carpet, but he refused to do any kind of work on the property. So we agreed to replace the stained materials after the sale in exchange for material costs.

But when we removed the paneling, we found a foundation wall that was crumbling and leaning. A contractor friend tells us that the patio will need to be removed and the exterior excavated to enable replacement of this wall. Do we have any recourse with the seller for nondisclosure? –Marci

DEAR MARCI: The seller had the right to an as-is sale, but he also had the obligation to disclose all known defects. The underlying question is whether he knew about the faulty foundation. If the paneling was installed during the time he owned the property, he was probably aware of the damage and should have disclosed it.

When you agreed to do the repair work yourselves, you should have removed the paneling before completing the purchase. That would have been part of your discovery process. Then the extent of the problem would have been revealed before you bought the property.

Home inspectors often recommend evaluation of concealed conditions prior to the close of escrow, especially where evidence of past leakage is apparent.

Now that the extent of the problem is known, you’ll have to decide whether to pursue the seller for nondisclosure or simply accept the outcome as a learning experience. A real estate attorney can advise you regarding the costs and likely outcome of pursuing the seller. In some cases, a strongly worded letter is all that is needed.

DEAR BARRY: My husband and I bought our home about a year ago. It was inspected and no major defects were found. The previous owner renovated the interior, including the basement, and installed a French drain system. We asked if there was ever a problem of water in the basement, and the seller said there never was.

But now we get water in the basement every time it rains. There’s no way the previous owner did not know about this, especially if he installed a French drain. Do you think he is liable for the cost of repairs? –Valerie

DEAR VALERIE: If your state requires seller disclosure, the seller should have informed you of this condition, especially if the question of drainage was raised at the time of the sale. You should notify the seller of your concerns immediately and ask that he address this problem. Communication should be made by certified mail so that you have documentation.

To determine the cost of repair, the problem should be evaluated by a geotechnical engineer or a licensed contractor who specializes in drainage repairs. If the cost of repairs is within the range of small claims court, you’ll have the seller in a vulnerable position. If legal action becomes necessary, be sure to consult an attorney.

Tara-Nicholle Nelson
Inman News

Book Review
Title: “The Urban Homestead: Your Guide to Self-Sufficient Living in the Heart of the City”
Authors: Kelly Coyne and Erik Knutzen
Publisher: Process Media, 2010; 330 pages; $16.95

My town, Oakland, Calif., claims to be the epicenter of the urban gardening movement. The urban part is pretty self-explanatory. What is surprising is that it’s an everyday occurrence to overhear conversations at Oakland neighborhood coffee shops about backyard beehives, chickens and goats.

Oakland ranks near the top of American cities when it comes to vegetable consumption. Wanna find the average 30-something Oaklander on a Saturday morning? Your best bet is the sprawling, certified-organic Grand Lake Farmers Market (though, admittedly, the popular Belgian waffle truck, the rotisserie chicken trailer and the knife sharpener stand are not, strictly speaking, organic “veg”).

My home sits on a quarter-acre lot; standard in middle America, but massive in my city — and an intimidating prospect to consider planting. I’m also borderline-obsessed with the idea of growing what I eat, sustaining a home-grown, organic, plant-heavy, waste-light diet, all just a few miles from the financial district of San Francisco.

It’s tough to envision and execute on converting my quarter acre of weeds into a quarter acre of orderly urban farmland. And then, there’s this: I was in my 20s before I realized you could make waffles at home. I’d only ever known the frozen. No joke.

So, how on earth was I going to go from that to the doyenne of where my dogs can run wild alongside bees, chickens and goats, where my compost nourishes my homegrown food, and where my own personal beehive pollinates my own plants?

So, I was excited to lay my hands on “The Urban Homestead: Your Guide to Self-Sufficient Living in the Heart of the City,” by Los Angeles homesteaders Kelly Coyne and Erik Knutzen, part of Process Media’s Self-Reliance Series.

I had hopes for a basic guide that rendered this daunting task a whole lot more doable; “The Urban Homestead” did not disappoint. It also became very clear from the jump that Coyne and Knutzen were writing for me, but not only for people with a big yard in which to plant their food.

Urban homesteading, by the authors’ reckoning, is definitely a real estate issue, but they exhort readers to be flexible in how they think about the real estate it takes, reimagining apartment windows, front yards, vacant lots and even fire escapes as their own urban farms: “The truth is that you can grow a hell of a lot of food on a small amount of real estate. You can grow food whether you’re in an apartment or a house, whether you rent or you own.”

But it’s not only about real estate and food — Coyne and Knutzen include generating your own water, power and even self-reliant transportation in their broader definition of what homesteading can be. At the same time, they invite readers to take as much — or as little — of their homesteading advice as they like, explaining: “we homestead at our own pace, to suit ourselves.”

Chapter 1 — Start Your Own Farm — offers basic concepts, strategies and practical principles for growing your food in an urban setting, both on small (container gardening) and large (guerrilla gardening in vacant lots, for example) scales, and everything in between.

Chapter 2 provides detailed, user-friendly instruction on Essential Projects for the new urban gardener: starting a compost pile, outdoors if you have the space; or with worm bins if you live in an apartment or condo; mulching; installing drip irrigation and raised beds and controlling pests organically, to name just a few of the many projects covered.

This lengthy chapter is so meaty in substance (although perhaps fruitful would be a more appropriate descriptor!) and answered so many beginner’s questions I didn’t even know how to articulate, it is well worth the cover price of the book, several times over.

Urban Foraging — looking for and eating wild-growing food in the city — is the subject of Chapter 3, which also covers the fine art of dumpster diving.

Chapter 4 is all about that holy hallmark of the serious urban homestead, Keeping Livestock in the City (hint: think chickens, not cattle). Oh — another hint that is also a real estate knowledge tidbit: Roosters are illegal in most urban areas (due to their crowing), but you don’t need them unless you want chicks — hens will lay without a rooster.

Chapter 5 — Revolutionary Home Economics — is much less socialistic than it sounds; it’s all about preserving foods, making homemade beer and wines, breadmaking and housecleaning — all with natural, homemade products.

It also offers a fabulous section on house and apartment hunting for the wannabe homesteader. The final two chapter names are utterly descriptive: Be Your Own Utility: Water and Power for the Urban Homestead, and Transportation.

“The Urban Homestead” is a wonderfully simple, entertaining and plain English guide to the need-to-knows and what-not-to-dos of running a self-sufficient household in an urban area. It is beautifully designed and compact in a way that belies the massive amount of utility it contains; very like the small carbon footprint of the joie de vivre-packed lifestyle it describes.

I imagine my copy will sit on my kitchen counter for years, and I visualize that it will probably collect a smudge of soil here and there, or a drop of strawberry preserves over time. And that, I’d suspect, is just as the authors would have it.

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Borrower fears payments will skyrocket in 2011

Benny Kass
Inman News
DEAR BENNY: I have a hybrid mortgage that is fixed for the first five years at 4.25 percent, and is tied to U.S. Treasury securities. The loan document notes that the index value is 2.1 and the margin is 2.75. The first change date on the loan is Dec. 1, 2011.

My loan documents say that on the first change date my interest rate could be as high as 9.25 percent or as low as 2.75 percent, with no more than a 2 percent increase in any given year thereafter.

Given the current fixed interest rates, is it advisable for me to refinance the loan now or continue to take advantage of the low rate I am paying for another year? What is the likelihood that the “index” could reach 6.5 percent in a year raising my interest rate to 9.25 percent? –Molda

DEAR MOLDA: That used to be a tough question, but with mortgage interest rates currently at the lowest in history, I think there is only one answer: refinance. You may actually be able to get a new rate similar to your current one.

However, if you plan to sell your house within the next year or two, then it probably does not pay to spend money on a refinance loan. There is no guarantee how long these low rates will be with us, so I suggest that you contact your mortgage lender to start the refinance process.

DEAR BENNY: I recently learned that my home, which I purchased new in 1988, was constructed with Quest pipes. I wasn’t aware of the lawsuit that was created during that time. I was told that I have a leak in a pipe and the plumber would have to cut into several walls to find the leak. Do you have any current advice for property owners like me who were unaware of these pipes being used in their homes? –Linda

DEAR LINDA: Unfortunately, where a class-action is resolved, it usually relieves the defendant from further liability. You might want to talk with your attorney to see if he/she would be willing to pursue another lawsuit, although I seriously doubt it.

You just discovered the bad pipes, so any statute of limitations would normally begin at the time of discovery — and not when you first bought the house.

But, unfortunately, you will have an uphill legal fight. You could contact your homeowners insurance company and see whether it will provide any coverage. Otherwise, you will have to “bite the bullet” and pay for the repairs out of your own funds.

DEAR BENNY: Both of my parents died last fall, leaving behind a reverse mortgage that they also borrowed equity from. I am the administrator for their estates though our probate court. They did not leave wills.

I do have an estate bank account in my father’s name, which I am using to pay off some of his credit cards and real estate taxes and homeowners insurance. However, the estate owes a lot more debts than I will ever be able to repay from this estate account. My father receives a monthly annuity settlement check, which I deposit into the estate account, and these checks will continue for two more years.

The home will not sell for what is owed, because it needs many repairs. I don’t want the home to go into foreclosure, so I want to buy it as an investment. However, I qualify only for $119,000 on a second home. My siblings aren’t interested in the property because they have no income.

Can I use funds from my father’s estate account to pay towards the equity he borrowed before I buy it, so the home won’t cost me as much? By the time I buy the home, the settlement costs will be much higher than if I refinance through my own lender. I received a good faith estimate in March of about $125,000.

The home is appraised at about $135,000. The payoff to date is $116,000, but they will add servicing fees and settlement costs, which will put me way over the value of this home. What are my options? –Diana

DEAR DIANA: You should talk with an attorney who understands probate law. His/her fee may be a preference (a priority) under your state law so some attorney should be able to assist you.

You confused me with your question, and I suspect you are also confused. Your father died last year; are you sure that the estate is still legally able to collect annuity checks?

You also have siblings. And although they may not be interested in the house, they have the right to share in any proceeds that the estate will generate. They do have the right to disclaim any inheritance, but that’s a complicated legal issue that needs guidance from an attorney.

The bottom line: The reverse mortgage must be paid off. If your siblings agree (and subject to possible court approval), you may be able to use some of the estate funds to pay down that mortgage.

My suggestion: You may want to consider selling the house to a third party instead of burdening yourself with a second home. But please talk with professionals before any final decision is made.

DEAR BENNY: We purchased a condo four years ago and for the last two years we’ve had a problem with our upstairs neighbor. Their floor above our bedroom squeaks when they walk on it. We can tolerate it during the day but it is ruining our lives at night because we can’t get any sleep. The noise seems to be a problem only during the summer months when it is humid.

Our neighbor denies that there is a problem and the association did nothing to help us last year. According to our documents, quiet time is from 11 p.m. to 7 a.m. We have had enough of this and need to solve the problem.

My questions: Who is responsible for repairing the floor: the condominium association or the upstairs neighbor? And can we demand that it be done? We have a new board of directors and a new management company and they seem to be more sympathetic. –William

DEAR WILLIAM: Unfortunately, you are not alone. Too many new developments that were built in recent years have acoustical problems. And I suspect that your association legal documents define the floors as “units” and not “common elements.”

Do you have proof of the noise? While board members will not like this advice, I recommend that when you hear the noise in the middle of the night, call your property manager — and your board members — and invite them to visit your unit and hear the noise themselves.

Some boards will be cooperative and arrange to hire an acoustical engineer to provide a written report. The report will contain two things: (1) a summary as to the extent of the noise and (2) a recommendation as to how to correct the problem.

If your board of directors is unwilling to pay for this report, you will have to do it on your own.

I am sure that your condo documents contain language prohibiting noise in the units. Once you have the proof (and the engineer’s report), confront the board and remind them that they have a fiduciary duty to enforce the legal documents of your association.

You should also provide a copy of the report to your upstairs neighbor so that he is aware of the problem.

Often, the noise problem is resolved simply by putting carpeting throughout the unit. Suggest to your neighbor that before you get involved in a legal battle, he should understand your concerns and be cooperative.

Ultimately, you may have to retain legal counsel to assist you. Hopefully, however, now that you have a more sympathetic board (and property manager) you will all be able to resolve this problem amicably.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

For existing owners, liquidation can be bittersweet

Steve Bergsman
Inman News
Some 1,500 condominium units in Greater Downtown Miami were sold from April to June this year, reported an associate of mine, Peter Zalewski, a principal with Condo Vultures LLC in Bal Harbour, Fla.

All those units represented 1.8 million square feet and reduced the number of new condos under developers’ control to a mere 5,100 units.

About the only disquieting news in all of Condo Vultures’ data was that gross sales amounted to $584 million, or just $333 per square foot. The reason for the low pricing was that most of those units were sold at bulk sales. Or as Jay Steinman, a Miami attorney who has been in the middle of many condo sales, said, “That would be one guy buying 200 units, another buying 50 units, that kind of thing.”

The question is: Are bulk condo sales a good thing? The answer is, generally, yes, but it depends on where you live, what you own and how willing your bank is to let you be market-competitive.

Miami isn’t the only city with major bulk condo sales. In 2005, the last year before the real estate downturn, there were only eight bulk condo sales in the country with a value of $162 million, reported Real Capital Analytics. By 2009, the numbers jumped to 84 with a value of $856 million. Through June of this year, bulk condo sales reached 47 with a total value of $918 million.

“We have already hit the full year’s total of 2009 for bulk sales, but I was surprised there (weren’t) even more,” said Dan Fasulo, a managing director with Real Capital Analytics.

“So many of these things are caught up in foreclosure or distressed situations that sometimes they get re-capitalized or transferred to a new owner and we don’t see it. Other times, where a lender does a workout, the developer in some cases will lose the entire equity stake and then act as a reseller.”

In Greater Miami, bulk condo buyers are paying between 30-40 percent off the height of the marketplace for “A” properties, usually near the intercoastal waterway or oceanfront. Much bigger discounts — 50 percent or more to the height of the market — can be seen with properties further inland.

Mark Pordes, whose company, Pordes Residential in Aventura, Fla., negotiated the largest condo bulk sale in South Florida earlier this year, 146 units on Singer Island in Palm Beach County for $120 million, also did the 25-unit bulk sale at the high-profile Fontainebleau Sorrento in 2009 for $8 million.

“There are two kinds of bulk sales,” he explained. “The first is where you take all inventory down, everything that is remaining, and that is a close-out. The other is a carve-out. Let’s say a building has 100 units left to sell, but the developer or lender will do a mini-bulk of, for example, all the remaining two-bedroom units, leaving behind the one-bedroom or three-bedroom units. That’s done so there is no internal competition in selling the remaining units.”

Of course, if you were a unit owner in a building going to condo bulk sale, you are going to see the value of your investment reduced. That’s the bad news. On the other hand, your investment will get no appreciation until all the units in your buildings are sold, and that’s going to happen only if the remaining units are recapitalized at a lower price.

The other advantage to an existing condo owner is if you are living in a building with many unsold units, in a worst-case situation homeowners association fees could escalate ridiculously since there are few contributors or your condominium association could go bust.

A second unkind consequence of a bulk sale is the investors will put their newly acquired units back into the market at a percentage of the old market price, and that could put pressure on unit prices in what was once healthier condo buildings in the immediate market area.

This is where things get tricky, so much so that a logjam in condo sales has developed in specific markets.

“A little factor called ‘your lender’ comes into play,” said Steinman. “The lender expects to get its debt paid off through condo sales.”

If you as an owner want to severely reduce prices, the lender can’t get out of its loan. As a result, the condo seller can reduce unit sale prices only to levels that would be satisfactory to the lender.

“Lenders are saying, ‘I want you to sell at X plus Y so I can get paid off,’ but borrowers/developers are saying I can only sell at X,” said Steinman. “That’s why you are seeing so many bankruptcies. The banks are being adamant in that they don’t want the units sold at a low price.”

Nevertheless, most observers and participants believe bulk condo sales are a good thing because it sets a clearing price. For about two years, the problem in hard-hit markets was there were few deals because no one knew how to value these empty condos. Every new deal gives a clear indication of what prices should be.

“Everything was at inflated value,” said Steinman. “If that unit … originally marketed for $300,000 … is sold at $150,000, all of a sudden the price is meaningful. It is a price that can be financed and for the new owner it is at a price where the unit can be rented at a value that can cover debt service.”

Individual buyers following the ping-ponging of condo prices in bulk-sale situations shouldn’t be deceived into thinking they are going to get the same deals.

“If you think a buyer off the street is going to be able to pick up one of these individual units at the same price that an investor who bought 100 units did, forget about it,” said Fasulo.

“You can get something in South Florida at a significant discount to the height of the market, but you are not getting the investor discount, which is what many had hoped for and it is creating mass frustration among buyers in the market.”

Steve Bergsman is a freelance writer in Arizona and author of several books. His latest book, “After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade,” has been ranked as a top-selling real estate investment book for the Amazon Kindle e-reader.