Gina McKinley, ABR, CDPE, CRS ~ Chandler, Gilbert, Mesa, & Scottsdale

During September, existing home sales in the greater Phoenix metro area increased a remarkable 81% year over year, bringing the number of transactions recorded last month to the highest level seen since June 2006 (near the peak of the housing bubble). Similar to recent months, this volume improvement continued to be stimulated by sharp declines in home prices and foreclosure activity, with Phoenix area median prices falling 28% year over year to $170,000. Compared to September 2005, when the median price stood at $260,000, prices have declined 35%.

* Inventory listings fell 6% year over year, but despite the increased sales activity, September's listed inventory level actually rose 2% sequentially from August. Specifically, listed inventory in Phoenix stood at 54,427 units, representing approximately 8.8 months of supply unadjusted for seasonality. Based on these data points, the Phoenix market appears to have reached a critical point in its local housing cycle, as large numbers of buyers are continuing to absorb the growing stream of heavily discounted foreclosures and bank repossessed properties - but inventory is not moving materially downward. Prices continue to slide because of the increasing mix of distressed homes, but the encouraging sign is that there are still buyers in the market with cash to invest - at the right price. Notably, Phoenix home purchases financed with cash comprised 17% of all sales this month, versus 11% a year ago.

* Moreover, with supply pressure from single-family housing starts at the lowest level since 1982, we believe the slightest sign that the level of new foreclosures and repossessions is beginning to wane could help fuel a rapid clearing of excess inventory and help stabilize Phoenix home prices sooner rather than later. In our view, we believe the government is likely to be increasingly proactive on this front.
Unfortunately, in the meantime, the foreclosure crisis in markets such as Phoenix still appears to be feeding on itself unabated in a vicious circular reference. As these distressed sales become the new neighborhood comparables, the risk of severe price declines dragging more neighboring owners into a dangerous negative equity situation continues.

* Also, while the September numbers are very encouraging on the surface, we must also acknowledge that much has changed in the financial and housing market landscape over the past three to four weeks since the Treasury Department's massive $700 billion bailout package was first announced to the public. We also note that while we envisioned many of these events transpiring, several homebuilders in the wake of the government's announcement unfortunately underestimated Congress' ability to create a political fiasco out of the situation and to thoroughly impair consumer confidence. With indications from homebuilders that buyer traffic has slowed to a virtual standstill in recent weeks, we believe data points from October will be more indicative of the new housing environment in light of the lingering credit crisis.

* It is possible that the MLS system is not necessarily capturing the entire picture. As increasing numbers of bank-owned properties are entering the market at deeply discounted prices, these homes are not always listed in the MLS system (and therefore may not be captured in this data). Accordingly, we will continue to closely monitor the inventory situation in Phoenix .

To commemorate the history of their neighborhood and create a scrapbook, several generations of Chandler residents gather for Hightown Family Day from 10 a.m. to 2 p.m. Sat., Oct. 11 at the City's McCullough-Price House.
Free and open to the public, the event brings together the descendants of the original families who settled and lived in the Pueblo Alto area, southeast of the intersection of McClintock Road and Chandler Boulevard. A hands-on children's art project is also open to anyone visiting.
"This event will be like a family reunion for many people, and we are proud to be able to bring them together to help us create a community history scrapbook that will preserve their memories of a very different Chandler," says Chandler Public History Coordinator Jean Reynolds, who manages the McCullough-Price House.
Currently, the McCullough-Price House is hosting an exhibit featuring the history of this predominantly Hispanic neighborhood, plus the works of local Latino artists whose art centers on the themes of neighborhood and home. The "Hightown/Pueblo Alto" history exhibit and the "Mi Barrio" art exhibit are on display through Nov. 26.
Hightown Family Day is co-sponsored by the City of Chandler Neighborhood Programs Division, and staff will be on site to provide resource information to visitors. The historic McCullough-Price House is located at 300 S. Chandler Village Dr., southwest of the Chandler Fashion Center. For more details call 480-782-2876 or access www.chandleraz.gov/pricehouse.

Food, crafts and entertainment are all available at the Downtown Chandler Farmers Market, which runs 3 to 7 p.m. every Thursday throughout the year beginning Oct. 9. Entertainment is also provided by Guitar duo The Better Half, performs from 3:30 p.m. to 6:30 p.m.
More than 20 vendors will sell everything from salsa and honey to jams and dips, in addition to fresh produce grown in Wilcox. A number of vendors will also sell handmade craft items.
"As the movement to buy fresh, local food continues to gain momentum, we want to provide this important service for our community, " says Eileen Brill Wagner, executive director of the Downtown Chandler Community Partnership, which sponsors the market. "We are looking forward to growing this market and showcasing our local vendors."
The DCCP is still accepting applications from vendors who want to participate in future markets, particularly those selling food items. There is no charge to join, but vendors must meet all licensing requirements.
For more information or to get a vendor application, contact the DCCP at 480-855-3539 or email dccp@downtownchandler.org.

Well, I've discovered another great restaurant, this time in Gilbert. Old World Pizza Kitchen features true gourmet pizzas, like a Veal Marsala pizza and a Vodka Sauce pizza. The restaurant is owned by a retired Brooklyn New York fireman. He learned to cook and experiment in the kitchen while being a fireman and has certainly come up with some fantastic combinations. We tried the Asparagus appetizer, which featured fresh asparagus wrapped in prosciutto, drizzled in balsamic vinaigrette and service with mozzarella and roasted peppers. Hmm..mm, it was to die for! We next tried the Veal Marsala pizza. That too was excellent, cooked to perfection. The veal was very tender, the sauce favorful and not overwhelming and the mushrooms added just the right flavor to complete the dish. Highly recommend trying it. Lastly we finish off dinner with cannolis for desert. The cheese filling was firm and tasted freshly prepared and the cannoli tubes were crisp and not soggy. Definitely some of the best cannolis to be had here in Phoenix. It's great to find good food, in a friendly atmosphere that is not a chain.

Old World Pizza kitchen's decor is a must see as well. The restaurant features pictures of fireman painted by the owner, Tim Donnelly, himself. The paintings are wonderful; Tim is very talented. The restaurant has a New York theme with Tuscan touches. The decor features faux brownstones also designed and painted by Tim. The restaurant has an open friendly feel with seating at the counter or tables.

Give Old World Pizza Kitchen a try. They are located at 323 S. Gilbert Rd, Gilbert Arizona 85296 in the yellow Victorian shopping center. The location is on the corner of Gilbert and Rawhide Roads

October 1st Date Imminent, But Lenders May Not Participate In FHA Program.

As has been documented, with part of the massive housing rescue bill passed by Congress in July, troubled borrowers will be able to refinance their home loans with the backing of the Federal Housing Authority starting on October 1, 2008.

There is only one little problem, with just over a week left until the programs implementation, the FHA has still yet to release their final guidelines for this new program. And even more troubling, lenders don't seem terribly enthusiastic about the program, dubbed Hope for Homeowners.

The new FHA backed program calls for lenders to voluntarily refinance delinquent mortgages by reducing loan balances to 90% of a home's current market value. The new loans will be backed by the FHA, and will receive 5% of the new loan balance as a payment from the lender. "I think lenders will be enthusiastic about the program but they have other things they'd like to do before they do a principal write down," said Brian Montgomery, Assistant Secretary for Housing at the Department of Housing and Urban Development.

So what are some of the major lenders saying as we approach the initiation date of this program?

CHASE

Marguerite Sheehan, Senior Vice President for JPMorgan Chase Home Lending testified about the drawbacks of Hope for Homeowners.

"Under the Program, [investors in the loans] will take a loss when the principal balance is written down," she testified, adding that they won't have a chance to make up that loss if home prices recover. Sheehan added that Chase can make borrowers' monthly payments affordable simply by reducing their interest rates, rather than loan principle.

She added that JPMorgan Chase will use the program when it is deemed to be the best option for investors and borrowers, but that investors would prefer to use alternative loan workouts that give banks and investors the chance to share in any future home price appreciation. That's similar to the program recently announced by the FDIC for Indy Mac Bank.

Bank Of America (Countrywide)

Bank of America managing director Michael Gross said that the new FHA program was just one of many loan workout options that the bank is employing.

And he stressed that the bank's own efforts to save troubled loans, especially those B of A inherited when it bought Countrywide, have been successful. He said that the bank increased its loan modifications by 450% this past August compared with August of 2007.

When asked whether the program would be considered a last resort by lenders, all the members of the panel, including Gross, agreed that it would be.

WELLS FARGO

And Mary Coffin, speaking for Wells Fargo testified that relatively few of her bank's borrowers owe more on their mortgages than their homes is worth, meaning they would be unlikely to benefit from the FHA's refinancing and write down program.

"We estimate as many as 30,000 to 40,000 customers who ... may qualify for Hope for Homeowners," she said, and committed to using the program in those cases.

INDYMAC (FDIC)

Even Sheila Bair, who heads the Federal Deposit Insurance Corporation, praised the FHA program but said that few borrowers with Indy Mac, the bank that the FDIC took over in July, would use it.

She said that her responsibility to maximize profits for the investors would probably limit the number of Indy Mac borrowers who would take advantage of Hope for Homeowners.

On its own, her agency has been very aggressive in heading off foreclosures at the troubled bank. About 60,000 of Indy Mac's more than 740,000 mortgages are more than 60 days past due, according to Bair. The FDIC has already offered 7,400 of them workouts. Some 1,200 workouts have been completed, giving borrowers an average monthly savings of $430.

Bair also said that she thinks the FDIC's programs could be used as a model for other lenders to use in their workout efforts

WHAT OPTIONS WILL HOME OWNERS HAVE?

As we approach the October 1st, 2008 date and many home owners begin to realize that the latest program may not be the magic bullet it was initially seen as. The question then becomes, what do we do now? The answers are, it really depends on your situation, but here is where to start.

1) Contact your existing lender and attempt a loan modification to change the terms of your current loan. While principal reductions are a last resort for most lenders, many will adjust interest rates, terms of loans or work out a forbearance to defer mortgage payments for at least a few months.

2) Consider a short sale on your home. This is a very viable option for some-one that cannot afford to stay in the home. It is also the best option for the homeowner regarding their long-term credit. A Short Sale will allow the homeowner to purchase again in only 2 years and only late payments will show, effecting the credit score by only 50 points if all other payments are made after a 12-18 month period.

3) Explore a deed in lieu of foreclosure. Some lenders may be willing to take the home back if it is evident the home owner can't afford it and they will end up with it anyway. This option is just like a foreclosure and will have long term effects on the homeowner's credit history.