Patrick Schutte, Prescott Arizona REO Specialist

It's getting old to say, BUT, the distressed real estate market in the Prescott area was busy on the listing AND closing sides this week. Identical to last week, eighteen new foreclosed or short sale homes came on the market, about one in every five homes being listed in the Prescott Arizona Area MLS system, and just over one half of the closings, or 12/25, were distressed sales in Prescott, Prescott Valley, Chino Valley, Dewey-Humboldt and the outlying areas of Yavapai County.

The difference between what newly listed traditional homes and Prescott foreclosed/REO and short sale properties per square foot remains large at a 39% discount compared to 40% discount last week.

The market down in the valley is continuing to show progress and that's good news for us as many of them buy second homes and/or move to the Prescott area.

See: Metro Phoenix housing market finally emerging from ashes

The percentage of foreclosed/REO/short sale new listings on market remained the same at 19% this week. Last week 45% of the pending sales were REO or short sales, and this week they made up ff% of the deals going into escrow. The amount of REO/short sales that closed last week went from 44% last week to 52% this week. REO/short sales also sold about 47% faster than traditional resales.

See the full report on our main web site.

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Fico Scores/Reports

I've been posting for a couple of weeks about cash buyers are starting to make up the majority of my clients and how they feel it is time to buy. They have been buying a mixture of foreclosures, estate sales, and traditonal resales (all at bargain prices) in downtown Prescott, Talking Rock cottages, and income properties in Prescott Valley.

Now the numbers are starting to come out of the valley and according to the Arizona Republic this morning, "for the first time in years, there's good news coming out of metropolitan Phoenix's housing market."

The article, by Catherine Reagor their real estate guru, goes on to say that March saw several firsts:

1) Home sales rose to 2005 levels;

2) Foreclosures fell for the first time in a year; and

3) Several Phoenix neighborhoods saw prices stabilize.

She goes on to quote from a Phoenix real estate pro:

"The affordable end of the Valley's housing market could finally be at the bottom looking up," said Mike Orr, a real-estate agent and analyst who publishes the Cromford Report. "Homes priced for $150,000 or lower are selling fast and even getting multiple offers. My money is on home prices in many of those neighborhoods being slightly higher by June."

If sales continue to climb in other metro Phoenix communities this month and in May, there's a good chance home prices in the Valley's most affordable communities could tick up in June.

"April will be the turning point for the housing market," Orr said. "People are beginning to perceive we are at the bottom, and there's no reason to wait to buy anymore."

See the whole article here: Promising signs from Valley housing data

People who know me can tell you that I am a realist over an optimist. Right now I think reality is that if you are waiting on the sidelines and keeping stats, circle today and then if you haven't gotten a deal in escrow in 90 days, check this space to see what the average price has gone to in the Prescott area. I bet it is up.

For the latest quarterly report of Prescott Arizona area foreclosures and short sales,
see this post: Prescott Arizona area foreclosure market report for Q1 2009

The first quarter of 2009 is thankfully over and we are seeing buyers starting to take advantage of the pricing in the real estate markets in Prescott, Prescott Valley, Chino Valley, and Dewey-Humboldt. Foreclosures and short sales have driven prices come down to levels seen before the "boom." Historically, prices have increased at a modest 3% - 5% range, and I would imagine that if normalcy comes back to the real estate market, we could anticipate similar growth in the future. We just have to cycle through some of this foreclosure inventory first.

Speaking of foreclosures, according to latest data from Zillow, the Prescott area averaged only about 4.1% in foreclosure transactions in the previous 5 years. For 2008, we averaged 23.9%!

To see the full report on Zillow

The Zillow data compares fairly closely with the Prescott MLS data below. On the listings side, there were 274 residential single family residence that were listed as foreclosures or short sales, about 22% of the total amount of listings on the market for Q1.

However, on the sales side, foreclosures and short sales made up 34% of the total sales. This is probably due to the 22% discount off of "retail price" that distressed home buyers are getting in the Prescott AZ area.

This discount is driving down the amount that tradional sellers are willing to take for their homes to 76% of their asking prices on average. Banks are getting 13% more, or 89% of their asking prices, on average.

The time it takes to sell a home is decreasing, but tradional sellers are having to wait a little over 6 months, or 92 days, and REO and short sales are taking about 4 months, or 124 days, on average .

(Replaced orginal chart with image)

Prognosis for Q2: Prices will stabilize at the low end and tradional sellers will continue to have to drop what they get to match the foreclosure comps that appraisers are going to be using. When homes don't appraise, buyers either get a discount or will walk most of the time.

Sign up for the Prescott Arizona Area Foreclosure and Real Estate Market Report to stay on top of the Quad-Cities area of Northern Arizona including Prescott, Prescott Valley, Chino Valley, and Dewey-Humboldt.

Is anyone else skeptical of Chase Bank's newest efforts to do loan modifications for up to 400,000 of their customers? Call me a stick in the mud, but I have a hard time believing that banks are doing this for their client's benefit. To me it seems like they are doing this for their bottom line and their shareholders.

In this morning's Arizona Republic, Russ Wiles wrote about the opening of a Phoenix homeowner center to allow Chase Bank to "get up close and personal with troubled homeowners." Chase is going to "help" 400,000 of its customers stay in their homes. This includes homeowners facing foreclosure in Prescott, Prescott Valley, Chino Valley, and Dewey-Humboldt. See the whole article.

The problem I have with Chase's plan is that many homeowners are going to be stuck with homes that are going to be underwater for years and it's unlikely that many of them will emerge stronger financially. And most of them will fall into foreclosure anyway in the long run because banks are focusing on reducing the interest rate of loans rather than reducing the principal. See Bloomberg article.

But any delay in the foreclosure, even by a few months, adds cash flow to the bank, mitigates their immediate loss, and allows them to issue press releases on how they are taking care of their customers.

The bottom line is that banks know that its in the bank's best interest not to have the homeowner walk away from an upside down home. Depending on what study you read, it costs a bank about 20% - 25% of the cost of the loan to foreclose on a home, and in a declining market, even more:

According to mortgage financier Freddie Mac, the typical foreclosure cost is nearly $60,000. And officials at HSBC, North America, parent of HSBC Bank USA, HSBC Mortgage Corp. and HSBC Finance Corp., say their average loss on sale at foreclosure is 20 percent to 25 percent of the loan's value.

"We truly believe that foreclosure is the worst alternative for all parties concerned and go to great lengths to avoid foreclosure," Brendan McDonagh, CEO of Illinois-based HSBC Finance and former chief operating officer of HSBC Bank USA in Buffalo, said in March testimony to Congress. "Financially, it is our worst alternative."
via The Buffalo News

I personally believe that foreclosure and short sale are the cleanest ways for people to get out of their upside down homes if banks are not offering a reduction in the principal. Don't let the bank turn you into a mortgage slave.

See: Loan modifications create mortgage slaves

I made the plunge and have integrated Twitter into my Web 2.o strategy. If you haven't heard of Twitter, you are not alone, but it is beginning to define itself in the marketplace as a new source of news and views.

Here are some resources that will help you get an idea of what Twitter is and why you might want to use it in your business to network more proficiently:

5 Ways to Use Twitter for Good

The Three Stages of Twitter Acceptance

Why Use Twitter?

Why Your Company Needs to Be on Twitter

The Top 5 Ways Smart People Use Twitter

I'll continue to add more methods of communication and networking to my Web 2.o strategy. If you have more ideas, please let me know.

Follow me at: http://twitter.com/prescottreos