Northwest Arkansas Real Estate

Things are tough all over!

2008-12-18T13:57:00.001-08:00

Anatomy of a housing meltdown

The real-estate bubble blew up the Rockaways -- but the bust left the area strewn with garbage, broken windows and other signs of urban blight. Here's the story of one New York neighborhood's nightmare.

By David Koeppel, MSN Money

Five years ago, an area ridden with high crime and poverty seemed positioned to turn into a reinvigorated community by the sea, complete with new condos and co-ops. But the mortgage crisis crushed that momentum.

Today, a large swath of the Rockaway peninsula in Queens, N.Y., teeters in a vulnerable economic state -- like other neighborhoods across the country that had bought in big before the housing bust.

Meltdown in the Rockaways

"The last five or six years we've seen an unprecedented housing boom," says Jonathan Gaska, the longtime district manager of Queens Community Board 14, a city agency. "Homes were selling all over the Rockaways, and then last year the music stopped. And when the music stopped, many of these private developers didn't have a chair."

'Things were so hot'

An economic boom for one of New York City's poorest areas has turned into a bust, with hundreds of units sitting empty and potential buyers on the sidelines, unwilling or unable to make purchases.

The Rockaways are symptomatic of a larger national trend: runaway overbuilding. In November, the Department of Commerce reported that building permits and housing starts -- key indicators of home construction -- plummeted to record lows. Month to month, housing starts in October fell 4.5%, to 791,000 units, from September's 828,000 units. Compared with October 2007, those 791,000 units represented a 38% decline.

Residential building permits dropped 12%, to 708,000, in October from 805,000 in September. Permits fell 40.1% compared year to year.

Florida, California and Nevada have been among the chief offenders of the overbuilding, with thousands of private homes and condominiums in once-booming neighborhoods unsold. The decline in residential construction has taken its toll on local and state economies, according to a recent study by the National Association of Home Builders. In California, the NAHB estimates that the decrease in residential investment and home building accounted for $38 billion less in the growth of gross state domestic product between 2005 and 2007. The estimated loss in Florida was $29 billion.

In October, the average time it took to sell a home in Miami was 172 days -- longer than in any other major city in the U.S. -- according to a report by Altos Research. The city has had the slowest market turnover in every month since September 2007.

In the upscale neighborhood of Bayswater, at the eastern end of the Rockaway peninsula, several newly constructed houses have languished unsold for more than a year, says Edward Raskin, a zoning lawyer and resident who lives across the street.

Vacant lots next door

The developer demolished the original home, subdivided the property and built four homes on the same lot, Raskin says.

The homes have been repeatedly vandalized, he says. Copper plumbing that was installed during construction had been stolen, according to the developer, who eventually hired security to patrol the site. While vacant properties are easy targets for break-ins and thefts, burglary is part of larger problem that has afflicted Far Rockaway. The area's police precinct reports a 22.7% increase in burglaries since 2006 even as crime has fallen throughout the city.

"If you've got surplus housing, it drives down the price of everything," says Raskin, who for six years was president of his neighborhood civic association. "It doesn't do any good for houses standing vacant."

Gaska says that the vacancies in the neighborhood of Far Rockaway have also created a "whole host of problems."

Residents there say that many of these properties are poorly maintained, with broken windows and garbage-strewn sidewalks. The community is littered with unfinished "skeleton" construction, making some parts of the peninsula seem like a ghost town.

Several blocks from Raskin's home in Bayswater is the not-yet-completed 15-story Metroplex on the Atlantic, a beachfront condominium development that has had trouble selling its units, which start at $280,000 for one-bedroom plans and $420,000 for two bedrooms. The developer's 14% discount doesn't seem to be working.

Metroplex sales director Linda Wu won't say how many of the condominium's units have been purchased. She does say construction is expected to be completed by the end of 2008 and that new residents can begin moving in by January. But that may be optimistic. Wu admits that if sales don't pick up, the developer may consider reconstituting the property as a residential hotel or an assisted-living facility.

Several years ago, things seemed to be going swimmingly in the cluster of neighborhoods known as the Rockaways. Even city government got on the bandwagon, partly financing a development called Arverne by the Sea, which Gaska says sold well and attracted the kind of middle-class homeowners the community was looking for.

As in many other communities across the country, lax mortgage standards allowed buyers to purchase $400,000 or $500,000 homes that they previously would not have been able to afford. Certificates of occupancy more than tripled in the area, jumping from 266 in 2000 to 835 in 2007, among the highest of any New York City community, says Josiah Madar, a research fellow at the Furman Center for Real Estate and Urban Policy at the New York University School of Law.

But starting in 2005, the number of home-purchase loans slowed significantly. In 2006, there were 63 home loans made for every 1,000 properties in the

community, and in 2007, that number dropped 43% to 36 loans. The buyers simply stopped coming before developers filled the buildings.

What are landlords doing with these units that won't sell?

Some have started to rent them to unlikely candidates: low-income and formerly homeless tenants who receive subsidized housing vouchers from the New York City Housing Authority.

"By guiding them to this community, they're creating de facto housing projects," Gaska says. "These houses were built two or three years ago and already look like they're 15 years old. Many of the residents don't have jobs. It's destabilizing the neighborhoods."

Some residents are calling on the city government to act.

William Carbine, an assistant commissioner for the city's Housing and Preservation Department, insists the city will come up with an economic strategy but says it has no timetable to announce specific plans.

Gaska says many in the community would like to see big-box stores such as Wal-Mart and Home Depot brought in to secure jobs for residents and to ramp up the local economy. Next year, a supermarket will be part of a new retail plaza near the Arverne by the Sea development. But Arverne East, a housing development that was scheduled to begin construction in 2007 on 92 vacant acres, has been delayed because of the deteriorating housing situation.

Gaska is worried that buyers may hesitate to commit to the Arverne East project unless conditions in the surrounding neighborhood also improve.

The Rockaway housing and economic situation was about to turn a corner, Gaska says. "People were starting to get excited. We don't want to start going downhill again."

The end of No Down Payment Mortgages

2008-12-15T05:52:00.001-08:00

The end of the 0% down payment

That train has left: If you want to buy a house now, you'll have to put something into the deal. Here's what you need to know if you're looking to buy.

By Liz Pulliam Weston

Mortgage lending has changed dramatically in so many ways, but one of the most critical developments for homebuyers has to do with down payments.

Now you need one.

You didn't at the peak of the mortgage lending boom. Lenders were delighted to loan you the full purchase price of a house. Waiting to build up your savings seemed foolish because ever-rising home values in many cities could quickly price you out of desirable areas.

Today, as foreclosures skyrocket and home values tumble, lenders are demanding that borrowers have skin in the game, as I wrote in "Need a loan? Borrow like it's 1975." Though you can buy a house with as little as 3% down, a bigger stockpile can lower your payments and increase your mortgage options.

Here's how to figure out how much you need and where to get it.

To start, there are three break points you need to know: 3%, 10% and 20%.

The 3% option

Borrowers who can scrape together just 3% of the purchase price (3.5% starting Jan. 1) basically have one choice, but it's not an awful one: Federal Housing Administration loans. These loans:

Have somewhat higher rates. Recently the FHA rate for someone with good credit was 6.25%, said Matt Hackett, an underwriting manager for mortgage lender Equity Now, compared with 5.625% for a conventional loan with a 10% down payment.

Require mortgage insurance. FHA loans require an insurance premium worth 1.75% of the amount borrowed, which is typically rolled into the loan, plus an annual 0.55% premium that adds about $92 to the monthly cost of a $200,000 loan, for a total payment of $1,326.67, excluding property taxes and home insurance.

Are somewhat credit-sensitive. The lower your scores, the higher your rate, with those in the 580 to 620 bracket paying rates about 1 percentage point higher than those with scores higher than 720. With a conventional loan, however, your rate could be 2 percentage points higher, or more, with poor scores. That's why the lower your credit score, the higher the chances the FHA will be your best option, given other lenders' intolerance for risk.

Besides the extra costs of an FHA loan, the big problem with putting down 3% is that you're basically "underwater" the minute you buy the home.

Selling costs typically eat at least 6% of a home's value, so you wouldn't be able to sell the home for what you owed -- at least not until home prices start rising again, which isn't going to happen soon. (Some optimistic economists predict we'll hit the bottom for real-estate prices next year, while others believe recovery won't begin until 2010 or beyond.)

Owing more on your home than it's worth is no big deal if you can wait it out. But if you lose your job or otherwise have to sell, you'll have three bad options: Come up with extra cash to pay the lender, try to get the lender to accept less than it's owed in a short sale, or submit to foreclosure.

The 10% plan

If you can scrape up at least 10% of a home's purchase price, your options improve quite a bit, said Cameron Findlay, the chief economist for mortgage quote site LendingTree.

You'll find more lenders competing for your business, which can mean lower rates and fees, Findlay said.

You also start the game with at least a little equity. Yes, that could be wiped out if real estate in your area continues to tumble, but at least that wouldn't happen as fast as it would had you bought with less money down.

You'll still have to pay private mortgage insurance because you aren't putting 20% down. The annual premium of 0.52% would add $87 to your monthly payment for a $200,000 loan, for a total of $1,217.81.

The 20% solution

If you can pay a fifth of a home's purchase price, you should be able to ride out the real-estate swoon without losing all your equity.

But a bigger down payment doesn't translate into a lower interest rate. Recent rates on conventional loans with a 20% down payment were 6.125%, half a percentage point higher than those with a 10% down. But you won't have to pay private mortgage insurance, so your monthly payment to borrow $200,000 will be about the same as with a 10% down, or $1,215.22. (I'm assuming you'd use the bigger down payment to buy more house. If you instead used the payment to reduce the amount you borrowed to $180,000, your payment would be $1,093.70.)

A 10% down payment gets a slightly lower rate because lenders are somewhat better protected with private mortgage insurance, Hackett said. PMI protects lenders against losses down to 75% of a home's value.

You may not always have much of a choice about how big a down payment to make. If you're seeking a so-called jumbo loan, for example, lenders may demand down payments of 30% or even more, said Michael Moskowitz, Equity Now's president. (Any loan above a certain dollar amount can't be sold to mortgage agencies Fannie Mae and Freddie Mac. The limit varies by region, but as of Jan. 1 any loan over $625,500 will be considered a jumbo.)

Continued: Get out those magic beans

Get out those magic beans

So, how do you get the extra money to make a bigger down payment? Here are the three ways I like best:

Savings. Building your down payment from your current income can be slow going, but it has a definite advantage: You learn to live below your means, a helpful skill when you're going to be a homeowner. The discipline of controlling your spending can help ensure you keep the home you finally buy, particularly if you make sure to have at least two months' worth of payments left over in savings after you cover the down payment and closing costs, which typically run 2% to 5% of the loan. These days, there's not much penalty for waiting because:

Home prices will continue to fall. We're not done with the foreclosure crisis by a long shot. So if you wait, you might get a better deal.

Rates aren't going to shoot up. At least not anytime soon. The Fed is clearly on a mission to drive mortgage rates down, said mortgage expert Dick Lepre of LoanMine.com. Of course, once the economy improves, all that money that's been injected into the financial system could lead to inflation and higher interest rates. But that's not going to happen for a while.

Selling assets or nonretirement investments. Selling an extra vehicle or that stock Grandma gave you years ago could plump up that down payment quickly. You're giving up the future returns you might have made on those assets -- maybe that car will be a valuable antique someday or the stock will suddenly shoot up in value -- but you may decide homeownership is worth that risk.

A gift from your folks or other relatives. If they have the cash to spare, a gift from a loved one can get you into a house more quickly. A gift is far better than a loan, by the way, since any borrowed money affects your debt-to-income ratio and could reduce the amount of mortgage for which you can qualify.

Less desirable sources of funds include:

A 401(k) loan. The loan can become an inadvertent withdrawal if you lose your job and can't pay the money back quickly. In these uncertain times, with the risk of unemployment high, that's not a chance I'd recommend you take unless you're one of the few with a rock-solid job.

A $10,000 IRA withdrawal. You can bust up to $10,000 out of a regular individual retirement account for a home purchase without paying early withdrawal penalties, but you will have to pay applicable income taxes. If you're in the 25% federal tax bracket, that could set you back up to $2,500, plus any state and local taxes -- a pretty stiff price. You can take the money tax-free out of a Roth IRA, provided you've contributed at least as much as you're withdrawing (any excess would be considered taxable gains). But remember that taking the money now can cost you later. A $10,000 withdrawal now can cost you $100,000 in lost future retirement income, assuming 8% average annual returns over 30 years (and yes, Virginia, that's a reasonable assumption considering historical returns).

In either case, you should talk to a tax pro before taking any money from a retirement account.

Also, I should make the point here that you don't want to commit every cent you have.

Having an emergency fund is important in any economy but particularly so now. Lepre urges his customers to make smaller down payments and accept private mortgage insurance, if a larger down payment would deplete their savings.

With recession and rising layoffs, he thinks homeowners should have up to 12 months' worth of payments in an emergency fund.

"You don't want to take all your reserves and throw it into a house," Lepre said. "Don't let this house become a burden where (you're worrying), 'How are we going to make the payment?'"

NWA- still the place to be!

2008-11-11T09:07:00.001-08:00

The Best Places to Raise Your Kids 2009

by Prashant Gopal
Monday, November 10, 2008

Welcome to BusinessWeek's second annual roundup of the best places to raise your kids.

This year we are going state by state. Once again working with OnBoard Informatics, a New York-based provider of real estate analysis, we selected towns with at least 50,000 residents and a median family income between $40,000 and $100,000.

We then narrowed the list of towns using the following weighted criteria: school performance; number of schools; household expenditures; crime rates; air quality; job growth; family income; museums, parks, theaters, and other amenities; and diversity.

We weighted school performance and safety most heavily, but also gave strong weight to amenities and affordability.

Bear in mind with this list, the organizing principle was affordability. While the median household income varies by state, we purposely weighted the results to prevent pricing out most readers. That's why, for example, Greenwich, Conn., with its good private schools, low crime, and abundance of cultural amenities, was left out. It simply costs too much to live there. Of course, there are other places that are great for kids which did not make this list. In many states the competition was extremely close.

Moreover, we looked for communities that scored well across the board. So, while there might be places that offer more culture, better schools, etc., other factors such as crime or a high cost of living knocked them down. So, read on to find out which are the best places to raise your kids in every state.

Who knows? You might already live there.

Arkansas

Springdale

Nearest city: Fayetteville

Population: 56,499

Median household income: $53,385

Springdale in northwest Arkansas has its own minor-league baseball stadium, parks, a major rodeo event, and nearby hunting and fishing. The headquarters of Tyson Foods is also in Springdale.

Runners-up:

Conway

Fayetteville

Foreclosures continue to rise...

2008-10-23T07:24:00.001-07:00

Foreclosure activity rises 70 percent

Huge jump in the third quarter over the same period last year

The Associated Press

updated 7:18 a.m. CT, Thurs., Oct. 23, 2008

WASHINGTON - The number of homeowners ensnared in the foreclosure crisis grew by more than 70 percent in the third quarter of this year compared with the same period in 2007, according to data released Thursday.

Nationwide, nearly 766,000 homes received at least one foreclosure-related notice from July through September, up 71 percent from a year earlier, said foreclosure listing service RealtyTrac Inc.

By the end of the year, RealtyTrac expects more than a million bank-owned properties to have piled up on the market, representing around a third of all properties for sale in the U.S.

That’s bad news for anyone who lives nearby and wants to sell their home. While foreclosure sales are booming in many areas, those properties are commanding deep discounts and pulling down neighboring property values. “It has a pretty significant impact in terms of pricing,” said Rick Sharga, RealtyTrac’s vice president for marketing.

RealtyTrac monitors default notices, auction sale notices and bank repossessions. More than 250,000 properties were repossessed by lenders nationwide in the third quarter, 81,000 of which were taken back last month.

Six states — California, Florida, Arizona, Ohio, Michigan and Nevada — accounted for more than 60 percent of all foreclosure activity in the quarter, with California alone making up more than a quarter of all U.S. foreclosure filings.

Detroit and Atlanta were the only cities outside California, Florida, Nevada and Arizona to make RealtyTrac’s list of the 20 hardest-hit metropolitan areas.

The combination of sinking home values, tighter mortgage lending criteria and an economy that many economists think has already slipped into recession has left hundreds of thousands of homeowners with few options. Many can’t find buyers or owe more than their home is worth and can’t refinance into an affordable loan, with the global credit crisis making loans far less available.

For those who can qualify for a loan, or have cash to invest, there are bargains to be had, especially in ravaged markets like Nevada and California. Last month, foreclosure resales accounted for more than half of existing home sales in California last month, as home sales jumped 65 percent from a year ago, while the statewide median home price fell 34 percent to $283,000, according to MDA DataQuick.

RealtyTrac, however, reported foreclosure filings in September were actually down 12 percent from August. But much of that decline was the result of new state laws that delay the foreclosure process. In California, for example, lenders are now required to contact borrowers at least 30 days before filing a default notice. A similar law in North Carolina gives borrowers an extra 45 days.

Still, that’s not likely to be enough to save homeowners who owe more on their mortgages than their homes are worth. Nearly 12 million of the 52 million Americans with a mortgage — that’s 23 percent of them — are in that position, according to Moody’s Economy.com.

It remains to be seen how much the government’s intervention will stem the housing crisis. Earlier this month, the Federal Housing Administration launched a program that aims to prevent foreclosures by allowing homeowners to swap their mortgages for more affordable loans, but only if their lender agrees to take a loss on the initial loan. The bill is projected to help about 400,000 households.

Meanwhile, the Federal Deposit Insurance Corp., which took over Pasadena, Calif.-based IndyMac Bank over the summer, has been aggressively modifying troubled home loans since August in an effort to stave off foreclosures. Congressional Democrats are calling for that approach to be expanded as the Treasury Department buys billions in troubled mortgage debt as part of a $700 billion financial industry bailout.

Agent Headcount follow-up

2008-08-13T06:02:00.000-07:00

The agent headcount for the Metro board is now 1269. We lost about 100 agents...

The skinny on a "short sale"

2008-07-09T07:14:00.000-07:00

There is so much talk and "hype" out there in the market about foreclosures and short sales. There are tons of opinions one thing I can tell you is that they are probably more popular than they should be. Short sale is the new “buzz” word for foreclosure or distressed sale. A short sale is basically when a house is sold for less than what is owed on it and the proceeds from the sale fall “short” of retiring the debt and encumbrances on the property. In order for the sale to be approved and eventually closed, the seller, and more importantly the bank have to agree on all of the terms and conditions of the sale. It is a slow and aggravating process a lot of times but there are some deals that can be had out there on a short sale.

I have been involved in short sales on both sides of the transaction- I have represented buyers and I have represented the bank as the seller. The reason a property gets involved in a short sale is the same reason for a foreclosure. Generally, the current owner can’t make the payments and a short while back this would have led to foreclosure. However, with the high number of foreclosures, banks are letting owners stay longer and they are trying to short sale the property out from under the owner as they would rather take a one time loss from a short sale rather than go on to and eventually through the foreclosure process- it’s really a short cut! This ultimately leads to one of the pitfalls and that is owners/sellers that are getting booted out through a foreclosure or short sale sometimes run down the property and even if you get a “deal” the home may not be in decent condition. Furthermore, banks are generally reluctant to do repairs or give repair allowances thus leaving you, the buyer responsible for getting the house “up to snuff”. One more thing is that due to the negative stigma of the foreclosures and short sales, a lot of them are not disclosed openly and you have to dig to find them.

I have found that in this market, if you are patient you can find deals out there in all types of purchases. You don’t have to seek out short sales and foreclosures just to get a house below market and in addition, the transaction has a lot less hair on it! I have been surprised at some of the transactions that I have been involved with and it is a great time to buying a home period.

Figuring a monthly payment

2008-06-23T10:15:00.000-07:00

Here are a couple of couple of things that will help you determine your monthly payment when buying a home.

Principle and interest- For every $1000 that you finance you will pay approximately $6 per month. This is figured on a 30 year conventional at 6%. Today, you can probably get a lower rate but it will not change your payment very much.
Taxes- A general rule in Washington County / Fayetteville is that you will incur a total of $9 per year in taxes (or so) for every $1000 in home value.
Insurance- I would allow $50 per month ($600 annual premium) for insurance. This may be a little low but if you choose a condo, you will not have to carry the same coverage and your rate may be lower. Again- if your premium changes $100 or so it will not affect your monthly payment very much.
POA / ASSN fees- This will apply almost exclusively to a condo. Most homes here do not have POA’s unless you are at a higher price point. If you do get a condo the ASSN fees can be anywhere up to $200 per month (on the high side)

So, there are some general guidelines. If $1200 is your comfort level I would look to the following:

On a condo with a $150 per month ASSN fee you will have $1050 left for PITI (Principle, Interest, Taxes and Insurance). Take out another $50 for insurance and you are working with $1000 for Principle Interest and taxes. That number will put you just below the $150,000 range for your top end.

The breakdown would be $150 (000) X $6 per month gives you a principle and interest payment of 900 per month. The taxes would be $150 (000) x $9 or a total of 1350 per year in taxes – 112.50 per month. TOTAL: $900 in Principle and interest, $112.50 in taxes, $50 for insurance and $150 in ASSN fees for a grand payment of 1212.50.

On a home w/ no monthly fees or dues you would be looking at the $170 range as your top end. $1020 for Principle and Interest, $50 for insurance, and $127.50 for taxes ( $1197.50 total).

Hopefully this will give you some idea of where you will want to be. Again, this is simply a guideline!! If you want to get the skinny get with your lender!!!

Agent Headcount

2008-06-17T12:30:00.000-07:00

As of today there are 1354 Real Estate agents belonging to the Metro Area Board of Realtors. This is the main agency for Fayetteville Based agents. Yearly fees are due this month and I will report in July how many agents failed, or declined, to renew their dues.

Monthly market report

2008-06-15T19:21:00.000-07:00

Click the link to view the Coldwell Banker monthly market report. Valuable information but it is still a buyer's market. Sellers, hang in there!! It will get better..

Monthly Market Report

Market Statistics

2008-06-11T07:30:00.000-07:00

Just a few stats on the NWA market..

9056 Current Residential listings in the area
1141 Current Residential listings in Fayetteville
1415 in Rogers
697 in Bentonville
1032 in Springdale

8666 SOLD Residential listings in the area (past 12 Months)
1101 SOLD Residential listings in Fayetteville
1004 SOLD in Rogers
692 SOLD in Bentonville
854 SOLD in Springdale

130 Listings in Fayetteville between 400k and 600k
57 Sold in Fayetteville (12 months)

59 Listings in Springdale between 400K and 600K
25 Sold in Springdale (12 months)

118 Listings in Rogers between 400k and 600k
59 Sold in Rogers (12 months)

As you can see there is more than 1 year of inventory in EVERY city in NWA. In addition, there are more than TWO YEARS of inventory in the 400k to 600k in the three main cities. Although this seems bleak, we still have transactions taking place!

Activity on $300K and up inventory

2008-06-09T20:11:00.000-07:00

This chart says it all. This is the activity report on a listing in Rogers. It is priced at $339,000 and is a great home- priced at market. The internet activity on this home has dropped off sharply and corresponds with among other things gas prices! I have several listings in the $300k + price range and they all look like this. Granted, banks have tightened up and there are other pressures on the housing market but there seems to be a direct correlation between the increase in gas prices, and for that matter, the overall lack of confidence in the economy and the amount of activity a listing is receiving. The good news is homes in NWA are still selling. The prices have held fairly steady with the big change coming in the form of extended time on the market. Hang in there- at least we still have buyers and there are still transactions taking place!!