Phoenix Real Estate — Anything and everything about it. Plus random musings… Now with Phoenix area MLS Listings Search!

The Canadian Dollar / US Dollar Exchange rate has taken a beating lately (from the Canadian perspective). At this moment in time, the Loonie is worth 0.9421 U.S. dollars.

This is off from a high of about $1.08 in November of 2007.

Here is a 3 month chart:

While the drop around the beginning of August looks precipitous, let’s keep it in perspective with historical exchange rates:

Even at $0.94, the Canadian dollar is still strong against the greenback (or the US dollar is weak, depending on your perspective).

Consider locking in exchange rates

None-the-less, when one is looking at the tens to hundreds of thousands of dollars a real estate transaction entails, a few cents in the exchange rate either way can have a pretty significant impact. Canadians contemplating buying US property would be well advised to keep an eye on exchange rates. 

One thing our northernly neighbors may want to consider is “locking in” the current exchange rate. Globex Foreign Exchange, based in Edmonton, Alberta, offers “forward contracts” that allow you to do just that. They also offer better exchange rates than banks due to lower markups. For information, give Snow An at Globex a call. Her contact info is here (at the bottom of the article).

From the Inbox:

Unfortunatley my wife and I bought a home in Maricopa at the height of the real estate market back “06″, moved from Long Beach, NY and are still here and are trying to get out of Az. We are misreable where we are. The builder we bought from still has aproxximatley 30 homes to build in our subdivison, Basically the construction stopped as soon as we moved in. If we rent it out it will not cover our mortgage payment. We totally feel stranded and are actually thinking of walking away. The hard part is we worked so hard for the excellent credit we have and do not want to throw that out the window. We keeping asking ourselves whats more important our happiness or our credit? Tough question especially in this day and age when credit is everything!
Any suggestions?

Maricopa is one of the hardest hit areas in the Phoenix real estate market (Arguably the hardest hit, along with Queen Creek).

Basically, you have six options:

Six options:
1) Wait it out
2) Rent it out
3) Short sale
4) Walk away
5) Foreclose
6) Loan modification

1) Stay where you are and wait it out. The question is, of course, how long until recovery? Unfortunately, no one can answer that question. Personally, I think we are heading toward market recovery, but I think we’re at least two years away from returning to a “normal market” (with gradual appreciation rates). It will probably be longer before your home value gets back to where you purchased. And I could be completely wrong on the recovery time frame.

2) Try to rent your home. This can be difficult in Maricopa due to it’s distance from metro Phoenix and the number of homes currently available in Maricopa (and elsewhere). Unless you put a significant amount down, it is unlikely that you could rent it for what your payment is (in other words, you’d be in a negative cash flow situation). There are some tax advantages to holding rental property that could offset some of the expenses. You should consult a tax advisor.

3) Sell the home. Without knowing more details (your purchase price, loan terms, down payment, etc) and the current value of the home, it’s impossible to say how viable an option this is. Given the time frame you purchased in, and the general condition of the Maricopa real estate market, it is quite likely that you are “underwater” on your mortgage (owe more than it is currently worth), perhaps significantly. This means you would be in a short sale situation. Whether the lender would even accept a short sale, assuming a buyer could be located, depends on many factors such as:

• Your loan amount
• Whether you have any secondary lien holders (a second mortgage, HELOC, etc)
• The purchase price and purchase conditions
• The investors in your loan
• The apparent whim of the lender’s loss mitigation department

4) “Walk away” — also known as a “Deed in Lieu”. Fold up shop and hand the deed over to the lender.

5) Let the home go to Trustee Sale (foreclosure).

6) Loan Modification. Another option might be to discuss a loan modification with your lender. SOME lenders are appearing to be more open to this. Typically it requires you to provide proof that you can not make the current loan payments. Just because you don’t like making them, or don’t want to make them won’t be sufficient reason for the lender to modify your loan terms. If you can prove financially that you can’t make the payment, the lender may be open to modifying your loan. Don’t expect them though to just lop off tens of thousands of dollars from your loan balance. In the lenders eyes, declining home values aren’t a reason to adjust loan amounts. They may however, adjust rates and terms to provide a lower payment. 

Options 3, 4, and 5 will all have a negative impact to your credit score. The actual change in your FICO score is impossible to know. The general consensus seems to be that you will not be able to get another mortgage for at least two years if you complete a short sale, three years for a deed in lieu and five years for a foreclosure. These are very general time periods and are dependent on many factors including your current credit history, future credit performance and future lending requirements and regulations. 

What is more important, your happiness or your credit? That’s a really tough question — and one I can’t answer for you. What compounds the difficulty is that for many, your credit is a component of your happiness. 

Seller-financed Down Payment Assistance programs (DPAs) are slated to end on October 1 due to the “wisdom” of bureaucrats in Washington.

Some argue that those buying homes using Ameridream, Nehemiah and other such programs are more likely to default on their mortgage. While my personal experience with Ameridream users is minute compared to the grand scheme of things, without fail every single buyer we’ve helped that used Ameridream is still in their home and making timely payments. Others report similar experiences.

Fed about to shut down Down Payment Assistance Programs

There is a bill currently being discussed that could resuscitate DPAs. Here is a video that is making the rounds as the campaign for H.R. 6694 builds steam. HUD says they could regulate and control the program, but instead the powers to be have chosen to just lop it off at the knees, let it bleed out, and eliminate it.

Well that makes perfect sense. . .

I will freely admit that if more people had their own money invested in their homes we might not be bogged down in the current mess that is the housing market. And of course some people abuse DPAs. But to cut off a program that helps tens of thousands first time buyers get into a home (and helps tens of thousands sell their home) just seems incredibly short sighted. While I am not a fan of government regulation, I’m even less enthralled with government ineptitude.

See the economic impact of DPAs in Arizona.

(Other states are available here)

Here are some links for info on ways to support H.R. 6694 
Ameridream’s grass roots site.
Nehemiah’s grass roots site.

Edward Gately, the new real estate reporter for the East Valley Tribune, called me yesterday to discuss the latest Arizona State University – Repeat Sales Index (ASU-RSI) report that was released Tuesday.

Not having read the report, but always willing to chat Phoenix real estate, Edward and I had a nice discussion.

Gately wrote, Sellers struggle as Valley home prices down 21%, published yesterday in the Tribune where he rehashed the ASU-RSI report, with some added thoughts by yours truly.

In a nutshell, the report states that home prices in the Phoenix metro area declined 21% from May 2007 to May 2008 — the 15^th straight month of price declines.

ASU reports Phoenix home prices decline 21% YOY

This is, of course, news not many want to hear.

The report author, ASU Real Estate Professor Karl Guntermann, indicates that foreclosure properties are a significant driver of real estate price declines. While this may fall under the “no brainer” category, it is a point many seem to either fail to realize, or want to believe.

The bright side (if you want to call it that) is that the rate of price decline seems to be slowing, though as Guntermann correctly points out, there isn’t enough data out there to say if this is an aberration, or a true trend.

Another point that is often lost (particularly on the mainstream media) is that despite 15 consecutive months of YOY price declines, home prices have not fallen as much as they increased in the boom (and insane) days of 2005 – 2006. To both Guntermann’s and Gately’s credit, this factoid is mentioned in the Tribune article.

As an aside, I was sad to hear from Edward that East Valley Tribune real estate reporter Misty Williams had moved on. I tracked Misty down to Atlanta, where she is now the Industry Focus Editor at the Atlanta Business Chronicle. I’ve always enjoyed talking to Misty as she seemed “fair and balanced” and didn’t mangle quotes like some other MSM reporters I’ve worked with. Edward seems like a really nice guy though, and I look forward to talking to him as well (and for the record, he didn’t mangle a single quote either).