August 21st, 2007 — Finance Sector News, Consumer Resources
A headline from the Arizona Daily Star’s “Breaking News” section - “First Magnus Financial Corp. has filed for Chapter 11 bankruptcy, the company announced today.” The seemingly overnight meltdown of First Magnus last week was just the latest consequence of the loose lending practices by banks the past few years. Now, there are whispers of Countrywide Home Loans having financial issues and Capital One just closed their wholesale mortgage unit yesterday.
How did this happen, you ask? Here is the short and sweet of it: When banks began loosening their lending standards several years ago, allowing “no-doc” loans and option ARMs and Interest Only mortgages, everyone was happy. After evaluating a potential buyer’s ability to repay the loan, and if the lender’s criteria were met, the buyer was given a loan. The primary lender may then hold onto the loan itself in it’s portfolio, but more commonly they sold the loan on the “secondary market.” They then used the profits from the sale to continue lending money to other potential buyers.
The secondary market is simply a marketplace where investors can buy the loans. For example, Freddie Mac is a large investor in the secondary market. They buy up mortgages from primary mortgage lenders do a few things with them:
- package those loans into securities, and
- sell the securities to investors on Wall Street.
For the past few years this cycle has been a very fruitful one; with interest rates at historic lows and practically everyone qualifying for a loan, the housing market experienced an absolute explosion in growth. Investors were happily investing their money in the secondary market and primary mortgage lenders continued lending money. But then… home growth slowed. More houses came onto the market, whether by investors trying to quickly unload a home or actual homeowners deciding it was time to sell. New home builders were suddenly left with excess inventory. And what happens when inventory goes up? Prices go down!
Investors no longer had the rabid interest in the secondary market that they did when the housing industry was booming. Primary mortgage lenders suddenly found themselves holding millions, or billions of dollars worth of loans that they could no longer sell. Essentially, this is what happened to First Magnus. Whether through risky lending practices or decreased activity in the secondary market (maybe both), First Magnus is the latest casualty in the mortgage industry. Keep in mind, there are other factors involved in the lending industry causing these effects (take a look at Asset-Backed Commerical Paper (ABCP)).
Will I Be Affected?
.. It depends..
- If you are scheduled to close on a home purchase in the next few days, be sure to stay in constant contact with your lending institution. It seems lending standards are changing almost overnight and there is nothing worse than showing up for closing and then having a nice surprise like “The lender would like to have at least 10% down” sprung on you.
- If you are currently shopping for a home and are pre-approved from a lender, be sure to check with them to ensure that they still offer whichever mortgage program you originally qualified. Many institutions (including Coldwell Banker Home Loans) no longer offer 100% piggyback loans.
- If you are a homebuyer, be aware that it will become more difficult in the coming months to buy a home for certain groups of people. If your credit is questionable or if you don’t have any down payment you may find your financing options limited.
I truly feel sorry for all of those employees left in the dust by First Magnus. Thankfully the blow has been softened somewhat by community assistance in the form of a job fair co-sponsored by Stewart Title, the National Association of Professional Mortgage Women Tucson Association, the Arizona Association of Mortgage Brokers and the Southern Arizona Mortgage Lenders Association. More information on that job fair here.
I’m curious, is anyone else seeing the same types of events with local lenders?
Technorati Tags: loose lending practices, Countrywide Home Loans, Freddie Mac, First Magnus, Stewart Title, First Magnus Bankruptcy, Tucson Mortgage, Tucson Real Estate
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August 13th, 2007 — Tucson Real Estate
The Tucson Association of Realtors, (TAR), has not officially released has released the Tucson housing sales report for July 2007 (should come out in a couple of days) and here are the numbers for last month:
Sales Analysis
Average and Median Sales Price Decreases
Average and median sales price both decreased in July 2007. Average sales price fell slightly to $269,227- down 1.7% from July 2006 and down almost 10% from last month. Median sales price also decreased $11,200 from June 2007.
Active Listings Continue Declining
Active listings have been falling slowly since April 2007, reversing the increases we saw between January and April of this year. The number of active listings fell 3.1% from June 2007, to 8,614 active listings in July.
Pending Contracts Up Over July 2006
Pending contracts in July 2007, totaling 1,777, rose 63.18% when compared to last July’s total of 1,089. While down from last month, July still had the second largest amount of pending contracts for the year - which we should see translate into sales units next month.
Days on Market Holds Steady
Average time on market holds steady, with 64 days being the average time for July 2007, same as June 2007.
Home Sales Snapshot
|
Home Sales Units
Decreased 10.51% from 1,227 in July 2006 to 1,098 in July 2007.
|
Average Days on Market
Increased 23.5% from 49 days in July 2006 to 64 days in July 2007. |
Average Sales Price (all residential types)
Decreased 1.7% from $273,717 in July 2006 to $269,227.00 in July 2007.
|
Active Listings
Decreased 3.1% from 8,955 in July 2006 to 8,614 in July 2007. |
Median Sales Price
Decreased 2.7% from $225,000 in July 2006 to $218,750 in July 2007.
|
New Listings
Decreased 3.52% to 2,776 in June 2007.
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Compared to the Tucson housing statistics from June 2007, July figures are very similar. The Days on Market (DOM) remained steady at 64 days. Median sales price fell to $218,750 from $229,00 in June. The number of active listings hovered around the same level, down slightly from 8,665 in June to 8,614 in July.
As I wrote in my previous post (Tucson June 2007 Housing Report), median prices finally saw a noticeable dip in July, down $11,200 from June. I believe this can be attributed to a couple of things:
- a slower summer selling season (alliteration is fun!)
- buyer’s having more leverage in the market
- seller’s pricing their homes more realistically
More likely than not we will see a few more months (at least) of declining median prices as the Tucson real estate market slowly corrects itself to a more normal level. With the recent mortgage industry fiascoes the repercussions are already being felt in the market; just last week Coldwell Banker (company I work for) stopped offering their 100% piggyback loans to consumers because of all the recent defaults and foreclosures. Buyers with a down payment and decent credit aren’t really affected but the buyers who are trying to sidle into a home with little to no money down and with less than stellar credit will start finding it more difficult to secure financing as the rest of the year wears on.
So there you have it, Tucson real estate news for July 2007. If you have any questions or are in the market for a home in Tucson please feel free to contact me on my Tucson Real Estate website!
Technorati Tags: Tucson Association of Realtors, Days on Market, Tucson real estate news for July 2007, Tucson Real Estate, tucson real estate blog, tucson real estate news
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July 24th, 2007 — Tucson Attractions
Colossal Cave Mountain Park is just the place to go if you want to enjoy some of Southern Arizona’s natural beauty or if you want to spend quality time with your family! Abundant in wildlife, Colossal Cave Mountain Park is a natural sanctuary to hundreds of species of birds, reptiles, mammals and infinite butterflies, beetles, moths and numerous other invertebrates! Some of the mammals that can be spotted in the park include Pack Rats, Spotted Skunks, Ringtails, Foxes, Bobcats, Raccoons, and Mountain Lions and of course, bats…hundreds of bats!
One of the reasons Colossal Cave Mountain Park is so popular with everyone is because of its remarkable diversity in such a small area. The reason for such variety in flora-fauna and wildlife can be attributed to the Park’s location. Situated in the “Sonoran-Chihuahuan transition zone,” the park has a large number of desert species that can’t be found anywhere else in the entire Tucson valley.
Fortunately for us, the Park is riding high along a path that has been witness to transitions of time from ancient to contemporary with respect to plants and wildlife. Over the centuries, flora and fauna population have migrated in response to the multi-layered changes in the climate, further enriching the flora of the Park.
According to the official website of the Colossal Cave Mountain Park, today the park’s plant list accounts for almost one thousand species of wildflowers, trees, shrubs, cacti and the famous desert spring ‘blooms’!
Continue reading →
Technorati Tags: Colossal Cave Mountain Park, Colossal Cave, Sonoran-Chihuahuan transition zone, Tucson
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