DATELINE SANTA FE

Santa Fe Real Estate Blog

203K: Financing for Problem Properties

We recently attended a presentation at the Santa Fe Home Builder’s Association that provided good news for the housing market. The topic was the FHA 203K Loan program. Unknown here in Santa Fe, these loans have been around for over a decade but just recently exploded across the nation with 23,000 loans originated last year and a 700% increase in the last 4 ½ years. What makes these loans so exciting? These loans allow borrowers to add the cost of home improvements into a single mortgage package. Roughly one-third of the properties that are on the market today are considered distressed and buyers do not have the extra cash necessary to make improvements after closing. This is where the 203K Loan comes in.

The benefits to this program are numerous. For the buyers, it provides a single government insured loan at competitive interest rates. Currently, that interest rate is a quarter percent higher than FHA rates and allows for the standard FHA down payment which in some cases may be as low as 3.5%. For properties that are older and require work, these loans allow the sellers to market to a greater pool of potential buyers. Typically, an older home that requires a great deal of work will languish on the market until an investor comes along to scoop a deal. A recent study by Realty Trac showed that investors who pay cash are able to purchase a property for 34% less than an owner occupant. With the 203K Loan program, that seller can still obtain a fair market value for the property and allow the buyer to make the necessary repairs and renovations that work best for him.

The program has two tiers. The Streamline 203K is intended for uncomplicated repairs and improvements. The minimum loan amount is $500 up to the maximum HUD limits and may include new carpet, tile, kitchen renovations, roof repairs, and even window replacement. The Standard 203K is designed for more complicated projects and is a minimum $5000. Structural issues and projects that may require more time and permits would fall under this category and older properties may be required to be brought up to current building codes.

So how does this program work? Let’s say a buyer finds a property but it needs work, lots of work. The buyer has a team that includes the Realtor, the mortgage specialist and a contractor. Bids are created for all the work the buyer wishes to have done. A contract is negotiated between buyer and seller that reflect the value in current condition and a contingency will be necessary to allow for 203K Loan approval and additional repairs that may be required by the lender. The appraiser will factor in the value of the finished repairs and that is the basis by which the lender will determine the base loan amount. HUD guidelines have a maximum loan amount of $427,500 for a single-family home.

In Santa Fe there are many older homes on the market that would be perfect candidates for such a loan program. This is another great way to not only offer a buyer and seller more choices in this market but also to improve property values and revitalize older neighborhoods. Creating a good team that works well together and are familiar with these loans is important due to details and strict timelines. The 203K Loan is the perfect product for our local market so if you think this program might work for you, or you simply would like more information please give us a call or e-mail.

February 23, 2012 Posted by | Realtor 121 | , , , , | 1 Comment

2011 Market Review

In December, we were fortunate to have Dr. Lawrence Yun, Chief Economic Advisor for the National Association of Realtors, give a presentation of the housing market and his forecast for the future. Most of what he presented was a study of extremes: never before has home ownership been more affordable yet pending home sales have not picked up; home prices across the nation have been stabilized for 2 years yet most believe that values are still falling; interest rates are at unprecedented lows and yet a conventional mortgage has never been more difficult to obtain. In a phrase coined by a silly Saturday Night Live skit we ask, “What’s up with that?”

 

New housing starts are at a 40 year low and new construction inventory levels are at the lowest since 1963. The trend for multiple family housing is on the rise and it’s common for college graduates burdened by student loads to move back home. Consider the consumer price index which has increased 160% in the last 30 years and includes a 150% increase in the cost of food and a 700% increase in the cost of college tuition. Conversely, mortgages have only increased 17% in that same 30 year period due to the difference in interest rates available now versus then while rents have increased 200%. It is no wonder that investors are turning back to real estate as a viable commodity to place their cash.

 

In Santa Fe, the final fourth quarter did see continued improvement overall in our housing industry. Most notably, new listings have gone done from 3194 homes for sale at the end of 2010 to 2604 in 2011. Pending sales were down 9% from the previous quarter but year to date closed sales did see a modest increase of 2.4% over last year. The percent of original list price a seller can expect to receive has fallen slightly to 87.9% while the days on market improved slightly to 243 days. The median sales price has fallen to $320,443 down almost $10,000 from the previous year; however, the month’s supply of homes is down almost 24% to 15 months.

 

The median sales price continued to decline in all areas of Santa Fe but two: the Northwest quadrant had an increase of almost 20% over 2010 for a median price of $627,500. The city Southeast north which includes the Railyard and South Capital saw an increase of 11% with the median price here at $579,000. Hard hit areas include Tesuque and Pojoaque whose prices have declined 42% from 2010 but sales here did increase 120%.

 

Most areas did see gains in the total amount of sales for 2011. The one exception was the Southwest County including Rancho Viejo and the Community College district out to La Cienega and Highway 14 which saw a decline of 20% of total sales for the year. For land sales it was a yet another tough year with a total of 35 lots reported sold with the average lot price at $125,000 up from the previous year’s average of $110,000.

 

So what is going to change for 2012? There are many signs that our economy is improving but we believe it is up to us to continue to pressure our government and financial institutions to put forth the initiatives that will bring further improvement. And while they are doing that it is incumbent upon us to keep our own sense of hope and optimism alive. The missing piece of the puzzle is consumer confidence so keep sight that our economy is improving slowly everyday and our continued appreciation of that can be contagious. Together we can make 2012 a confident year!

February 16, 2012 Posted by | Realtor 121 | , , , , , , | Leave a Comment

Rabbit Rabbit Rabbit

February 1, 2012 Posted by | Musings | | Leave a Comment

Let’s have a nice new year

The holiday season in Santa Fe is the best time. The snow-covered streets, the smell of piñon wood burning in the fireplace, the cold mountain air. With the holidays come good feelings toward humanity and hope for world peace. And then, before you know it, it’s January and it’s freezing outside, the cold wind keeps blowing, the roads are slick and icy, and that warm feeling of comfort and solidarity slips. But the most notable difference of all is what happened to all those nice people?

During the holidays they were everywhere. People were greeting friends and strangers alike with the warmest of salutations and everybody was nice, really nice. Even old Scrooge was wishing everyone well and merrily going about his way.  So what changes in January? Is it because we start thinking about elections, taxes, what we aren’t doing that we should be doing, and all those yucky kinds of things?  So instead of focusing on that, why not make this year different, why not make it a nice year? For those who make New Year’s resolutions and even for those thinking about making one here’s an idea for how we can all start the year off right. Resolve to be nice, that’s it just be nice.

If you have already made your New Year’s resolution you can simply take what you already have and attach the words “and be nice” to the end of it. For instance, I will quit smoking and be nice. I will lose 15 pounds and be nice, I will read more books and be nice. See how easy it is?

It seems that our generation has grown up believing the unfortunate myth that “nice guys always finish last. We have heard it said by our grandparents, our parents, and maybe you’ve even caught yourself saying it.  So it’s no wonder we don’t make resolutions about being nice. Unfortunately this notion has crept deep into our culture by way of the subconscious mind. Maybe that’s why Clint Eastwood doesn’t play nice guys. So before the next generation grows up believing in such fairy tales we think its time to debunk this untruth and replace it with a more positive message.

No matter what area of life we’re talking about it all gets better by adding niceness on top.  How do we achieve all our personal goals? Simply identify what your goal is, focus on it daily, and be nice.  All you need to do to make the world a better place is build a great family and be nice.  It’s really kind of simple if you think about it. To make a difference in the world today, all you need to do is give, care, share, and be nice.

Who knows, maybe in a generation or two we will hear the young folks say something like “Only the nice come out on top”.  The heart is really what’s at heart of the holidays. The heart opens our senses to appreciate everything from the cold air, to the snow-covered streets and most importantly, to appreciate each other, so let’s keep it open year round. On behalf of the Carson family we wish all our Santa Fe friends and families a healthy, prosperous and nicer New Year. Be marvelous, be brilliant, be inspired, and be nice.

February 1, 2012 Posted by | Musings | , , , | Leave a Comment

   

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