Flagstaff Real Estate and Community News

Brief History of 3d Quarter Real Estate in Flagstaff

Mon, 13 Oct 2008 15:26:57 -0400

"Let's Do the Numbers" on Flagstaff residential real estate for the last five years

Every once in a while it's good to look back at the real estate market for more than a year. Here's the Flagstaff residential real estate market for the months July through September for the last five years. As you can see, we're still ahead in value compared to 2004. Whether that gain will survive the winter is, unfortunately, anyone's guess.

This data about Flagstaff homes reflects some of the development history in our town. Median prices dropped significantly from 2006 to 2007 because an entirely new product of lower-priced homes became available: the apartment-to-condo conversion. You can see that reflected in the drop in condo prices.

Another change was the completion of the Railroad Springs manufactured home development, which had pretty much finished by the beginning of 2005. You can see that demand for manufactured homes in that treed, in-town location made the prices jump as soon as the supply became limited. And the prices have held steady in spite of increased difficulty in financing manufactured home purchases.

All Homes

2004

2005

2006

2007

2008

Volume Sold

405

500

366

360

301

Median Price

$239,000

$314,500

$338,000

$290,000

$298,000

SFR^*

2004

2005

2006

2007

2008

Volume Sold

295

349

240

202

184

Median Price

$269,500

$352,500

$380,000

$373,500

$345,000

^*Single-Family-Residences

Townhomes

2004

2005

2006

2007

2008

Volume Sold

Median Price

197,000

282,000

289,900

278,750

262,900

Condos

2004

2005

2006

2007

2008

Volume Sold

Median Price

$132,750

$208,500

$219,000

$176,000

$146,500

Note: First apartment-to-condo conversions were sold in 4^th Q 2006

Manufactured

2004

2005

2006

2007

2008

Volume Sold

122

101

Median Price

$187,250

$233,450

$255,000

$245,000

$244,950

This data is based upon information from the Northern Arizona Association of Realtors^®and is deemed reliable for sales reported to the association, but is not guaranteed and does not include all sales in the market area. These numbers reflect a search of that database for all homes that have Flagstaff mailing addresses, whether they are in the city limits or not. So, this includes, for example, Baderville, Doney Park and Kachina Village.

Clearly, it is important to break out the different types of homes. For all Flagstaff home types, the median price rose from 2007 to 2008, but Flagstaff single-family-home prices dropped precipitously. Of interest, is that the single-family-home size has remained relatively stable over this 5-year period, ranging from a low median total square footage of living space of 1814 to a high median of 1915. The average size remained stable also in the slightly over 2000 sq. ft. range.

When you are ready to buy or sell, it’s important to look at the numbers in the specific neighborhoods and price ranges that are pertinent to your planned transaction. Particular neighborhoods and range of prices may not be entirely consistent with the overall trends. We at Team Heitland at RE/MAX Peak Properties are prepared to help you make the most informed analysis of whatever segment of the Flagstaff residential real estate market matters to you.

Reasons to Own Your Flagstaff Home

Sat, 11 Oct 2008 19:24:44 -0400

Warren Buffett decided two weeks ago that now is the time to buy – how about you?

Two weeks ago, the billionaire investor, Warren Buffett bought a huge chunk of a New York bank. Last week, he bought a huge chunk of General Electric. The radio show, The Motley Fool reminded us recently that the time to buy is “when there is blood on the streets.” For Flagstaff real estate, that may be now.

Last week, on a national basis, mortgage applications by homebuyers increased, indicating increased interest in buying a home. Interest rates were down. While we never know when the market will hit bottom, until it’s been going up for a while, we look at these signs that some homebuyers are thinking that now is the time to buy.

When buying, wise investors keep “the fundamentals” in mind. In these rough times, people who don’t own a Flagstaff home are wondering why they should. Here’s why, and how:

Arizona is one of the fastest growing states in the U.S. After you’ve spent a summer in Phoenix, you know you want a home in Flagstaff.
Flagstaff is one of the best places to live in the country, not just in Arizona. Our outdoor amenities and forward-looking city government make the future bright here, even if the present is difficult.
Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your home mortgage, property taxes you pay, and some of the costs involved in buying your home.
Value Gains. Between 2000 and 2006, local home prices increased at a rate far exceeding the rate you can get on a savings account at your local bank. While prices have fallen in the last two years, a Flagstaff home is still worth more than it was in 2004. While there’s no guarantee of appreciation, a 2001 study by the National Association of RealtorsÒ found that a typical homeowner has approximately $50,000 of unrealized gain in a home. And when you sell, assuming you’ve owned for at least two years, you can take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax – a tax break you won’t get on investment in the stock market.
Build Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
Savings. Building equity in your home is a ready-made savings plan.
Predictability. Unlike rent, fixed rate mortgage payments don’t go up over the years. Keep in mind that property taxes and insurance costs may increase.
Freedom. The home is yours. You can paint the walls any color and decorate any way you want.
Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.

Team Heitland at RE/MAX Peak Properties has several wonderful listings right now, in a variety of price ranges and in various Flagstaff neighborhoods. If our featured Flagstaff homes aren’t exactly what you are looking for, the market selection is wide and you can search for all homes for sale using our IDX connection to the Northern Arizona Multiple Listing Service. (The MLS search is free and requires no registration!) If that’s too confusing, give us a call and we’ll set up a personalized Client Portal to the Flagstaff MLS and give you personal guidance in your search for a Flagstaff home.

Pending Home Sales for September Show Uptick

Thu, 09 Oct 2008 00:27:43 -0400

Is this a change in direction for the housing market?

Nationally, home sales activity "surged" in September as buyers took advantage of low home prices and affordable interest rates, according to a NATIONAL ASSOCIATION OF REALTORS^®report released today. The Pending Home Sales Index,a forward-looking indicator based on home sales contracts signed in August, jumped 7.4 percent to 93.4 from an upwardly revised reading of 87.0 in July, and is 8.8 percent higher than August 2007 when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4.

This could be a sign of a turnaround in the housing market. Apparently, home buyers are responding to improved affordability. “What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island, and the Washington, D.C., region,” according to Lawrence Yun, NAR chief economist.

Flagstaff homes sales volume and home prices began to decline after most of the rest of the nation 2005. It seems likely that Flagstaff home sales recovery will lag the rest of the nation for reasons I’ve discussed in the past, but which largely have to do with the large piece of our market that is attributable to second-home ownership.

The cause of the national improvement in pending home sales is unclear. According to the NAR press release, quoting Yun: “The improvement reflects the drop in mortgage interest rates after the government takeover of Freddie Mac and Fannie Mae. It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales.” In other words, these contracts for sale may not result in actual sales if the credit markets are unable to provide the mortgage money upon which the buyers’ purchases depend.

In the NAR press release, Yun noted the unusual timing of contract activity in August. “Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie,” he said. “August shows some unleashing of pent-up demand before the credit crisis accelerated in September.” In other words, August could have been a good month because it was really making up for the month prior when markets were frozen by the credit crunch in housing.

Whether that credit crisis will make the August results a one-month blip is hard to know. Like the rest of the economy, housing is in uncharted territory and there is a long way to go to get back on course. It seems unlikely that we should be as optimistic as the National Association of Realtors^® given the continuing rise in unemployment and the number of ARM mortgages that still are due to reset over the next 18-24 months – as they reset at higher rates, there will be more foreclosures, although perhaps not at the rate we have seen so far because of the housing rescue bill that was passed this summer.

All we can say for sure is that Flagstaff real estate is in a buyers’ market right now. If you need a house, you’ve got an advantage in negotiating with the sellers and you’ve got a nice selection to choose from. Call Team Heitland at RE/MAX Peak Properties and we’ll use our expertise to find you the right home at the right price for you.

"Bring Workers Home" Conference Today

Mon, 06 Oct 2008 20:01:23 -0400

National conference addresses issues relevant to Flagstaff housing needs

Today in Chicago, Illinois, national, state and local housing leaders, local and county government representatives and business professionals are meeting for the first national conference on Employer-Assisted Housing. As Flagstaff and the nation seek solutions to housing issues, employer-assisted housing is one tool among many, to retain productive, stable workforces and to revitalize the housing market. The availability of employer-assisted-housing programs is one more reason for Flagstaff to recruit and retain high-quality employers.

Some Flagstaff employers already provide housing assistance to recruit high-demand professionals. For example, Flagstaff Medical Center provides down-payment bonuses to at least some highly-qualified nurses. One of my Flagstaff home listings was sold this year because of the availability of this program.

Employers provide a variety of housing assistance to employees, ranging from free educational workshops to bonuses amounting to thousands of dollars in down-payment and closing-cost assistance. These programs often work with local, non-profit housing agencies, such as Flagstaff’s Bothands organization, to provide expertise that the employers do not have themselves. Employer financial assistance can take the form of forgivable loans, matched savings or outright gifts.

For many potential homebuyers, finances are not the only obstacle. Lack of understanding about the benefits and process of buying a home can be a barrier. This is where employer-sponsored educational programs can be useful. Realtors^® also play an important role in buyer education. One of the suggestions at today’s Chicago seminar is for employers to have local top-quality Realtors^® offer home-buyer seminars at the employers' sites.

Our Flagstaff real estate website offers a library of information for Flagstaff homebuyers. Each of the Realtors^® who are members of Team Heitland at RE/MAX Peak Properties has earned the designation Accredited Buyer Representative. We're selling more homes in Flagstaff this year than nearly any other team of Flagstaff real estate agents.

Give us a call! We’re happy to help you or your friends make your Flagstaff home buying experience a great one.

Quick Read on September Flagstaff Real Estate

Wed, 01 Oct 2008 23:07:42 -0400

Supply of Flagstaff homes still exceeds demand

Seventy-nine homes with Flagstaff mailing addresses sold in the month of September 2008, according to the Multiple-Listing-Service that is maintained by the Northern Arizona Association of Realtors.^® That leaves 991 Flagstaff homes offered for sale, giving an absorption rate of 12.54 months – up from just over ten-months’ supply of homes at the end of August. The median sale price for the month of September was $298,000. These numbers reflect all types of Flagstaff residential real estate – single- family-homes, townhomes, condominiums and manufactured homes.

The median price of single-family-homes sold in Flagstaff in September was $323,000. 53 such Flagstaff homes sold in September. As of October 1, 760 single-family-homes were on the market in Flagstaff, leaving over 14-months supply of such Flagstaff homes for sale.

Note: Statistics are based on data from the Northern Arizona Association of Realtors^® Multiple-Listing-Service, which does not include every Flagstaff home sale, but includes most. The report includes any home reported in the MLS with a Flagstaff address, even if the home is outside the city limits of Flagstaff.

Getting Inventive to Seduce Home Buyers?

Sun, 28 Sep 2008 22:06:19 -0400

Home sellers are in a price war and a beauty contest at the same time

“If you need a gimmick to get me in, there is something wrong with [the home].” That’s the assessment of one New York real estate broker about special events some other brokers are throwing to try to sell properties in the “down” market (well, not really down) in New York City. All of this is reported in this weekend in The New York Times in an article entitled: Getting Inventive to Seduce Buyers. Why do we care in the Flagstaff real estate market?

Because this weekend, a bunch of Flagstaff real estate agents, with the financial help of one of the title companies, staged an elaborate and showy series of open houses to create a tour in the Southeast Region of Flagstaff. Why get the title companies involved? As a broker quoted in the New York Times article says, "“It’s got to be a free co-sponsored thing. We’re not paying for this.” Why not? Because real estate agents know open houses don’t work. WE KNOW IT! The statistics from the National Association of Realtors^® prove this to us every year. The paucity of open house ads in the Arizona Daily Sun (Flagstaff’s local paper) proves it. You can believe that brokers would be spending money on print ads IF THEY WORKED!

According to the article, another New York broker had an open house with 500 people coming through, and not one interested buyer. They came for the food and the featured entertainment. (A spectacular view of tree-lighting at the holidays). Why do real estate agents have these open houses?

Because they are afraid to have an honest conversation with their seller clients about what does work. Price reductions! Real estate markets have become very efficient with the advent of the internet. Most buyers start looking for homes using the internet and end up connecting with a Realtor^® who uses the internet to help them find the right home. With the huge number of homes on the market, serious buyers will not go to see them all. How do they narrow the search? Price.

Of course, if they get into the home and it stinks (literally) they won’t buy it. Buyers are likely to see 7-8 homes before making a decision. Those 7-8 will be roughly comparable in price. The choice will then be made on appearance. That’s why staging is extremely important in this market. Almost (but not quite) as important as price.

Hall F. Willkie, president of Brown Harris Stevens, essentially agreed, saying that slow markets called more for price cuts than showmanship. “I’ve never been to an event that sold a property,” he said. “If it’s overpriced, an event is not going to sell it.” I agree.

What can your real estate agent do for you: (1) Understand the market and explain it in a way that gets you to the right price. (2) Create a smashing online presentation of your home. (3) Work with as many buyers as humanly possible to get the market moving again. (4) Be honest with you about what will sell your home. (5) Not waste precious time at open houses.

For professional and effective real estate advice in Flagstaff, AZ, contact Team Heitland at RE/MAX Peak Properties.

Featured Flagstaff Home

Thu, 25 Sep 2008 19:09:50 -0400

Elegance from the Victorian era with all the comforts of the 21st Century

This home is impressive from the moment you glimpse it as you approach the very special Skyline neighborhood. The yard is lush and the wrap-around porch inviting. Inside, the home exudes elegance from the Victorian era and offers all the modern features a family could want.

The Skyline neighborhood is one of Flagstaff’s most desired neighborhoods because of access to National Forest Service trails at the base of Mt. Elden and the proximity to Flagstaff Medical Center and downtown. A block from this home is a Flagstaff Urban Trail entrance to this very accessible, yet – if you choose the right path – potentially challenging, network of popular hiking and biking trails, beginning with the National Forest Service Pipeline Trail.

When you enter the home you will immediately appreciate the luxury of a welcoming foyer and convenient powder room. Adjacent to the entrance, you’ll find the formal Victorian parlor (known to us in the 21st Century as a formal living room). Next comes the formal dining room – perfect for entertaining -- and then the very modern kitchen with a casual eating area joining the kitchen work area to the large, comfortable family room. All of that living space, plus a rear deck with breathtaking views, complete the main floor of the home.

Down a level, you’ll find a recreation room (or second family room area), and playroom and a guest suite, including a bedroom, full bath and large walk-in closet. In the rec room, you’ll have a wet bar and small refrigerator for the convenience of your guests or yourself! This room also opens onto the rear patio and yard – a charming, private, calming place. The upper level contains three bedrooms and two baths, including a large master suite with vaulted ceiling and a private deck with stunning views.

Recent upgrades to this 3200 square foot home include wood flooring on the main level, new carpet on top and lower levels, new plumbing fixtures, countertops, tile work and custom paint. You’ll have to see this Flagstaff home to believe the value!

For more featured Flagstaff listings, visit the Featured Homes section of our Flagstaff real estate website.

For details on this beautiful Flagstaff home, click here: Flagstaff Featured Listing.

New Home Sales and Construction August Statistics

Thu, 25 Sep 2008 12:21:53 -0400

More statistics on the real estate industry in the news today

Reports this morning indicate that new homes construction continues to fall, which, long-term, is a prerequisite for recovery in the housing market. The headline this morning by CNN was given to the drop in new home sales. Sroll down in the article and you’ll see that new home inventory also continues to drop.

Read why this is good in an earlier post here, with some perspective on the Flagstaff real estate market.

Of course, in the long-term, we're all dead, as one of my ironic professors used to say. Meanwhile, construction workers continue to hurt.

August Existing Home Sales Report From NAR

Thu, 25 Sep 2008 01:13:23 -0400

Existing Home Sales fall from July and compared to August 2007

The National Association of Realtors^®released its existing homes sales data for August on Wednesday, blaming tight mortgage availability for a slowing of sales from July and the drop of 10.7% from August 2007 volume. Sales rose in the Midwest and South but fell in the Northeast and West. Nationally, existing-home sales – including single-family, townhomes, condominiums and co-ops –declined 2.2 percent to a seasonally adjusted annual rate of 4.91 million units in August from an upwardly revised pace of 5.02 million in July.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., claimed that “the pendulum in the mortgage market has swung too far.” Although interest rates have already declined, he said, “there is a serious question as to whether a cash infusion by the U.S. Treasury into Wall Street would help consumers by improving mortgage funding.” According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.48 percent in August from 6.43 percent in July; the rate was 6.57 percent in August 2007. However, last week the 30-year fixed had dropped to 5.78 percent.

Lawrence Yun, NAR chief economist, said the recent drop in interest rates is an immediate impact of recent government action. “August sales reflect higher interest rates before the government takeover of Freddie Mac and Fannie Mae, and the sudden drop in mortgage interest rates over the past couple weeks is improving housing affordability,” he said. “With higher loan limits and a beefing up of the FHA program, all the mechanisms have been falling into place to increase mortgage availability. Yun said. “Historically, housing has led the nation out of economic doldrums – there will not be an economic recovery without a housing recovery.”

The national median existing-home price for all housing types was $203,100 in August, down 9.5 percent from a year ago when the median was $224,400. Areas that have had sharp price cuts are seeing a turnaround in sales. Sales volume is “rising very fast now in parts of California, Florida and Nevada,” according to Yun. The median existing single-family home price was $201,900 in August, down 9.7 percent from August 2007. The median existing condo price4 was $212,600 in August, which is 7.2 percent below a year ago. In Flagstaff, condos are typically less expensive than single family homes, but these national numbers represent the dominance of condos in more expensive, urban areas of the country.

For regional numbers and information about the statistical basis for these numbers, see the full press release from NAR at Realtor Newsroom.

Home Price Reports

Tue, 23 Sep 2008 18:41:41 -0400

Keeping all the home statistical reports straight is not always easy

Today, the Office of Federal Housing Enterprise Oversight said that home values in July 2008 were down 5.8% on a national basis from July 2007. I'm sure that the drop year-to-year will get the headlines. Five pages into the news release, you would find the graphic shown here with the note that the home values are were they were in October 2005. I prefer to follow this national trends on a quarterly, rather than a monthly, basis. You can see the latest report, including Flagstaff homes data, at this earlier post on the second quarter OFHO report.

Tomorrow, the National Association of Realtors will release its data for August resale home sales. Watch this blogsite for a summary of that information.

Meanwhile, you've had both months' reports for Flagstaff home sales and prices available on this blog for weeks: July Flagstaff Home Sales and August Flagstaff Homes Sales Data.

For professional advice regarding Flagstaff residential real estate sales, contact Team Heitland at RE/MAX Peak Properties.

Flagstaff Paper Reports Home Values Better Than Phoenix

Sun, 21 Sep 2008 20:57:04 -0400

That's small consolation for either sellers or buyers of Flagstaff homes

Home prices in Flagstaff have dropped, but so far not as far as in Phoenix according to Flagstaff’s local paper, the Arizona Daily Sun, on its front page today. Not news. The Daily Sun article reports that sales are easier to make if your home is priced under $350,000, but the numbers they give still make it a “buyers’ market.” Over six months’ supply is a buyers' market and the under $350,000 category is reported as 7 months supply. The over $350,000 market is reported at 17 months supply. Also, not news.

After reading this information in the paper this morning, I ran some numbers on my own, using the Northern Arizona Association of Realtors^® Multiple-Listing-Service. I found there were 119 homes actively for sale in the over one-million dollar category. Only two sold in the last thirty days. That means there is nearly a five-year supply of million-dollar-plus Flagstaff homes. In the $500,000 to $999,000 category, there are 259 Flagstaff homes for sale, and 14 sold in the last month. Yes, I checked, none of them were listed at over $1 million before they sold. That’s an 18 month supply – still pretty bleak. My conclusion: We won’t be seeing any builders doing “spec” homes in the over $500,000 range for a long time. Surprised?

The Daily Sun seems to report statistics based only on homes within the city limits of Flagstaff. I do statistics based upon Flagstaff mailing addresses so that my numbers include all of what is generally thought of as the greater Flagstaff area, including, for example, Doney Park, Timberline, Fort Valley, and Kachina. Looking at those numbers for August, the median sales price was $300,000 instead of $340,000 reported by the Sun for the privilege of living in the City. At the peak of the market, the difference in the rural area prices and the city prices narrowed to nearly zero. With higher gas prices and more options within the City, that has definitely changed. Right now, if you want a bargain, look in Doney Park or in Kachina if trees are more to your taste than views.

Another Flagstaff Realtor^® was quoted in the Sun as saying, “I wouldn’t be surprised if prices go into double-digit drops.” Neither would I, Steve, but Flagstaff’s home price drop won’t be caused by a housing crisis, but because of the other factors discussed onlyy incidentally in the Sun article – like the debt crisis, for one. And what about the energy crisis – that one was overlooked in the article, I guess, because it’s last week’s “news.” The Sun reports that home prices are not the only thing that have fallen in Flagstaff – restaurant sales, hotels and campground occupancy, auto sales, and, of course, construction are down from 2007. (Anecdotally, though, I can say that restaurant prices are up as the price of food is up for restaurant owners as it is for all of us.) Still, the changes in Flagstaff are infintessimal compared to other parts of the U.S.

The major, national economic upheaval is affecting Flagstaff, and it’s hitting some people very hard. But overall, Flagstaff has so far been insulated from the worst effects of the economic crisis facing the country -- so far. The problem did not start in Flagstaff and it can’t be cured in Flagstaff, in my opinion. We can do our part by improving our educational system – that was the subject of today’s Daily Sun editorial, for which I congratulate the Editorial Board.

Financial Crisis Hard to Comprehend

Thu, 18 Sep 2008 12:47:20 -0400

Where Did the Crisis Begin? Not with Real Estate.

The stock market is in greater turmoil this week than it’s been since the “Great Depression.” (Ok, I said the words, even though I know they are scary). Lots of people ask why. Lots of people say it started with real estate. Not so, I think.

First, why were the 1930s called the Great Depression? To distinguish them from the other depressions! Yes, there had been one about 1908. And there had been several in the 19^th Century. The regulatory agencies created in the 1930s and the powers granted to the Federal Reserve were supposed to stave off further depressions.

Then along came the 1980s. Yep, over 20 years ago. “Deregulate!” was the cry of the day. “Too much government!” The result: “irrational exuberance,” in the words of Greenspan. First, a mini-stock market tumble in the late 1990s, then a real estate bubble, now this. I’m grateful that there is still enough regulation that the SEC could send its troops into Lehman’s offices Friday night to prevent the funds from the solvent brokerage side of the business from being transferred to the irrationally exuberant, bankrupt side – saving the investors who had put their IRAs and 401(k)s in Lehman’s hands. Of course, the stock in those funds may not be worth much for the next few years, but at least it’s there.

So, last night I got a series of cartoons from one of my friends purporting to explain the mess we are in. One of the selections from the series is displayed here. The problem with the series is that it started with a local loan officer explaining about “liar loans” and buying homes without down payments. That is NOT where it started. It started in the offices of Wall Street where investment bankers and their lawyers cooked up the idea of “securitizing mortgages.” Not a bad idea at first. Investment banks would buy groups of mortgages and make more money available for additional mortgages to expand housing availability. The problem is that they got greedy and there was no government regulation to keep that greed in check. Wall Street ran out of good loans to make, so to keep the investment fees rolling, they created loan “programs” that would allow people who weren’t really ready to be homeowners to get home loans. And since no one in the securities regulation business (i.e. the federal government) was looking over their shoulders and blowing the whistle, they pushed these programs on the local bankers and brokers (who, of course, eagerly, in most cases pushed them to potential homeowners). This summer, it all began to collapse.

In response, the Treasury got Congress to pass the Housing and Economic Recovery Act at the end of July. There were a lot of tidbits for the small guys, and President Bush threatened to veto it, but ultimately, he signed the bill into law. The big piece of the Act, which Treasury had insisted it would not really need, was authority to nationalize Fannie Mae and Freddie Mac. A month later, it happened. The Treasury has replaced the management of both companies and will presumably oversee their operation. The only interpretation of this desparate decision by an "anti-government" administration is that the mortgage market and the institutions to make it operate are broken. But there are other broken pieces also, and they broke for the same reasons -- lack of proper government regulation.

Fannie Mae and Freddie Mac were created as “quasi-government” institutions to help the housing market. They were to guarantee mortgages (provided those mortgages met certain standards), and were able to fund these guarantees by issuing their own debt, which was in turn kinda-maybe-backed by the government. In principle, these companies were supposed to use the government guarantee to reduce the mortgage cost to the homeowners, but some at the Federal Reserve and others have argued for quite a while that this hardly occurred. Instead, Fannie and Freddie used the funding advantage to rack up huge profits and squeeze the true private sector out of the “conforming” mortgage market. There were no small companies to compete and drive out the crazy, worthless loans. And no government regulators around to say these loans made no sense. The result is government deregulation and government subsidies run-amok. (The links in this paragraph were grabbed from the NY Times column -- I don't do that research myself!)

As the Freakonomics guys said in their guest NY Times blog this morning:

“Fannie and Freddie were weakly supervised and strayed from the core mission. They began using their subsidized financing to buy mortgage-backed securities which were backed by pools of mortgages that did not meet their usual standards. Over the last year, it became clear that their thin capital was not enough to cover the losses on these subprime mortgages. The massive amount of diffusely held debt would have caused collapses everywhere if it was defaulted upon; so the Treasury announced that it would explicitly guarantee the debt.

"But once the debt was guaranteed to be secure (and the government would wipe out shareholders if it carried through with the guarantee), no self-interested investor was willing to supply more equity to help buffer the losses. Hence, the Treasury ended up taking them over.”

So, that’s the story of the housing contribution to where we are – it was just a middle-man for the transfer of a crisis that started in Washington and Wall Street back in the 1980s. To prevent the problems in the future, what change do we need? Who can lead us to rational regulation? That’s up to the voters in November.

Featured Flagstaff Home Listing!

Wed, 17 Sep 2008 12:20:24 -0400

Log Cabin on 5 acres of scenic land just outside Flagstaff, AZ

Are you looking for a log cabin in the pines? Here it is, on nearly 5 acres, with fabulous views and fabulous features.

For those who are looking for an eco-friendly home, this is it: A passive solar log home constructed using standing dead timber only. No trees were killed to create this house! The use of standing dead logs means there is less settling and checking in the logs since they were already dry when cut. The solar room and the heat storing fireplace significantly reduce need for conventional heating (which is available through a high-efficiency forced-air-gas furnace). Windows are low-e argon gas, dual-paned, Marvin windows.

Rio de Flag runs through the property providing a scenic valley at the south edge of the property. On the north and west, you’ll find fabulous mountain views. Click here for pictures of these exterior views as well as a glimpse inside the house. You really need to see it to appreciate the views, the value, and the location -- give us a call!

The kitchen cabinets are custom mission-style and you’ll find beautiful wood and tile flooring throughout. The master suite has a private balcony from which you can greet the sun each morning and a Jacuzzi tub to relax with at night. The living room is truly a great room with vaulted ceilings and a loft overlooking the main floor. Click here for pictures of these exterior views as well as a glimpse inside the house.

The property includes a large barn (pictured at left), fencing, pasture and storage sheds as well as a pond and raised garden beds. There are so many features that we have a two page description – give us a call and we’ll send it to you, or click here and you can download it yourself!

Offered by Team Heitland at RE/MAX Peak Properties. Ann Heitland is EcoBroker Certified^®

Financial Market Turmoil Spells Homeowner Jitters

Mon, 15 Sep 2008 18:52:00 -0400

If my bank goes under, what happens to my house?

A Flagstaff homeowner asked me last night, will my mortgage have to be repaid immediately if the bank that holds it goes under? If this question had been asked in 1932, the answer would be, “yes.” Back then, your house was an asset of the bank until you paid in full. If the bank went under, the bank’s creditors got the house if you couldn’t pay the balance immediately.

Nobody liked that situation – the creditors wanted their money and you wanted the house. So mortgages (or, in Arizona, trust deeds) were created that made the asset the income stream from your house payments instead of the house itself. If a bank goes under these days, the mortgage notes (homeowners’ promises to pay) that it holds are the assets transferred to bank’s creditors, who are usually other banks. The value the creditors get from the mortgage notes is based on the “present value” of your future payments.

If the bank holding the note secured by your mortgage (or trust deed) goes under, you are in no danger of losing your home as long as you continue to make the payments. You will be notified that you should send your payments to the new owner of the mortgage. (This is probably familiar to many people because mortgages are bought and sold routinely even without the current owner filing bankruptcy.)

What if you have a brokerage account, and IRA, or your life savings with Lehman Brothers? It’s also safe, but for different reasons: What Lehman's collapse means to you.

Bailout of Mortgage Giants

Tue, 09 Sep 2008 00:11:40 -0400

Will there be help for the Flagstaff real estate market - or anywhere else?

The Housing and Economic Recovery Act, passed into law in late July, authorized the take-over of Fannie Mae and Freddie Mac, which finally happened over the weekend, but it also included a number of smaller, more personal measures of interest to Flagstaff homeowners or first-time home buyers:

First-Time Home Buyers Get Encouragement

Provision would eliminate privately-financed downpayment assistance -- good news or bad news?

The recently passed Housing and Economic Recovery Act provides some temporary relief for property tax for some homeowners

New Housing Act Creates Tax Hit for Some Flagstaff Homeowners

The only thing certain about the Housing and Economic Recovery Act is that it’s not written in stone. The downpayment assistance provision, in particular, is being hard-hit by lobbyists and will likely be the subject of a new proposal in Congress as early as this week. Likewise, the Treasury take-over plan announced in the last few days envisions reducing the mortgage bond portfolio held by the U.S. government. “Good luck on that,” said the Chair of the House Financial Services Committee, saying it wasn’t going to happen. See full story of the take-over by the Wall Street Journal.

Monday, home loan interest rates were dramatically lower because the mortgage bond markets reacted favorably to the take-over. Late Monday night, news from the Asian financial markets indicates that the trend may move in the other direction soon. See Bailout Optimism Fizzles on MarketWatch tonight. Keep your eyes on the news tomorrow if you are thinking of buying, selling, or refinancing your Flagstaff home.

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