Today’s meeting started from the alert to follow Tucson MLS Rules and Regulations. Apparently, not all the listing agents follow the procedure of changing MLS property status from Active to Active Contingent, within 2 days of accepted offer. This not only irritates the Buyers, who feel that the listing agent is soliciting back-up offers; it creates unnecessary inconvenience to the Sellers, whose house can still be shown by real estate agents; and of course it affects those real estate agents and potential buyers who might be interested in the unavailable property.

Another point of discussion – subdivisions’ rules for "Home For Sale" signs. The GALLERY at DOVE MOUNTAIN Homeowner’s association requested use of a special subdivision sign when an agent lists a home in their subdivision.

Short Sale resources for agents and homeowners: www.hud.gov. Click on “At your service”, then “Talk to housing counselor”, “AZ”, “Tucson”.  You will be provided web sites and non-profit companies that are funded by the government and will help in making a decision.  Homeowners delinquent on their payments may not have to sell their home.  The companies provided by this site also have better access to the lenders than real estate agents do, if the property ultimately needs to be listed.

And again, most of the agents were talking about Sellers’ needs. When are we going to see Buyers?

Quote: The optimist sees opportunity in every danger,  the pessimist sees danger in every opportunity.
Winston Churchill

Here is the list of tour properties:

MLS #:20748914: 5615 N Wilmot, Tucson, AZ 85750. Cimarron Foothills Estates. $1,299,000.
MLS #:20749125: 4507 N Placita Del Tio, Tucson, AZ 85750. Fairfield Sunrise East. $499,000.
MLS #:20748260: 5833 N Golden Eagle Dr, Tucson, AZ 85750. Ventana Canyon Golf Villa II. $749,000.
MLS #:20801734: 4904 E Oakmont Dr, Tucson, AZ 85718. Skyline Country Club Estates. $1, 695,000.
MLS #:20801028: 5920 N Placita Del Conde, Tucson, AZ 85718. Haciendas Catalina Del Rey. $415,000.
MLS #:20800985: 3540    E Calle Puerta De Acero, Tucson, AZ 85718. La Puerta on Hacienda Del Sol. $2,695,000.
MLS #:20801637: 7981 N Barrel Cactus, Tucson, AZ 85718. Pima Canyon Estates. $2,595,000.
MLS #:20802122: 5227 N 1st Ave, Tucson, AZ 85718. Mescal Place Townhouses. $369,500.

At today’s Long Realty meeting we brainstormed methods of increasing the visibility of homes for sale on MLS.

Our office manager made a case for the merits of range pricing.

Range pricing means sellers specify a range they are willing to except verses a static price. For example, instead of pricing a home at $800,000, a range price might be $780,000-$820,000

Even though range pricing is unpopular with both agents and Sellers, preliminary statistics suggest an increase in showings and a higher rate of open escrows.

The reason range pricing is unpopular is because in a seller’s market, the low price usually indicates the lowest amount sellers will consider, and the high price indicates "modest" expectations that include a somewhat reasonable market premium. Of course, a high price boundary doesn’t preclude a seller from taking a higher offer. On the other hand, in a buyer’s market, a high price is wishful thinking. Most sellers today would be happy to receive an offer considered low six months ago. In this market though, nothing will stop buyers from "going under" – offering less than the low boundary.

I am going to try this strategy on one of my listings, just to see for myself if it really does anything.

Here is the list of tour properties:

MLS #:20745725: 5338 N Paseo Sonoyta, Tucson, AZ 85750. Sunrise Presidio. $278,900. (Relisted 1/13/08. MLS: 20802341. $274,900).

MLS #:20800971: 6261 E Placita Del Nido, Tucson, AZ 85750. Alta Vista. $879,900.

MLS #:20745665: 4349 N Camino De Carrillo, Tucson, AZ 85750. Fairfield Sunrise East. $569,900. (1/10/08 – new price $549,000. 1/14/08 – Withdrawn).

MLS #:20800984: 6331 N Whaleback Pl, Tucson, AZ 85750. Whaleback Ridge Estates at Ventana Canyon. $278,900.

MLS #:2102203: 6570 N Placita De Tia Ro, Tucson, AZ 85750. Alta Vista. $1,195,000.

MLS #:20800983: 6551 N Longfellow Dr, Tucson, AZ 85718. Coronado Foothills Estates. $995,000. (Pending 1/15/08).

MLS #:20747697: 3333 E Cobblestone Pl, Tucson, AZ 85718. Cobblestone.  $2,950,000. (Relisted 1/17/08. MLS: 20803150).

MLS #:: 20801465: 7601 N Calle Sin Envidia, Unit 39, Tucson, AZ 85718. Villas at Rancho Sin Vacas. $279,500.

January 1, 2008.

I am starting a new series of posts – from the Long Realty Foothills Office Tuesday meetings. It will contain anecdotes and stories heard from other Realtors that indicate Tucson Real Estate market direction. If all the Foothills Office agents have home Sellers and none has home Buyers, it is easy to predict that Buyers’ market will force further price reductions. Meanwhile, if there is a sudden spur in the open escrows, it might signal market change. I will also include properties on Foothills agents tour with the updates on their status. It will help me to keep track of changes in the market inventory and provide unbiased statistics of Catalina Foothills Real Estate and homes for sale.

In the early 2003, as the market was recovering from the dot-com-bubble-burst, money was cheap and real estate looked like a safe haven. After all, people always need a roof over their heads. “Buying and renting” transactions with the mortgage being paid by the tenant became extremely popular, especially after property values began to meteorically rise. All over the States (with a few exceptions), especially on the Coasts, homes were being snapped-up by hungry investors.

Tucson got into this mad “real property fever” by the end of 2004. Some, who were challenged to pay their monthly rents in normal times, were acquiring primary residences with a 5%, 3% or even 0% down loans. The others, fortunate enough to own a home, were buying an extra one, two, or more…; getting as creative as their imagination and lender would allow.  They agreed to negative amortization mortgages, 1, 3 and 5 year ARMs (adjustable rate mortgages), multiple loans and lines of credit, etc. Sooner or later that had to have an end… and it did.

One day, investors began to unload their properties… It could be for multiple reasons:  ARMs were getting adjusted and the inventory increased, the price got too high, interest rates were rising. The fact is – one day the real estate market began its inevitable march south.

I still remember that meeting at Long Realty in September of 2005, after returning from vacation in Europe. Before I left, Tucson real estate was going berserk – the rare new properties hitting the market were priced higher and still were getting multiple offers on the first day. All agents had buyers; a lucky few had sellers. Then suddenly, the utterance, “Buyers’ needs” – and the room was quiet. I couldn’t believe it. Almost overnight agents were flush with sellers and not a buyer in sight.

As the chilling breeze of the fading Real Estate boom began reaching investors and sellers, more and more properties sported “For Sale” signs. The number of homes for sale in Tucson tripled within a year, which paled in comparison to the horror stories of Phoenix, Las Vegas, Miami and multiple Californian cities. The lucky ones got out first…

Over two years later it is still clearly Buyers’ market. The average number of days of inventory for Tucson has increased from just slightly over 50 days in 2005 to a record 404 days in September of 2007. The number of Active listings is fluctuating around 10,000, while the number of closed sales has gone down to under 1,000 a month.

Sellers of luxury homes are now inspired to include creative add ons like: a free cruise to Alaska, vacations in Rocky Point, a new Lexus, a $10,000 gift card to Home Depot.

If you’ve got your eye on that special home and need some lumber for your woodshop, now may be the time.

We don’t know how many people are currently in foreclosure and mainly judge by the articles in the newspapers, stories on the Internet, signs on the street where we live and what we see in the neighborhood. Our view really depends on where we live.

Apparently, all those foreclosures are not random events happening to random people.  They are happening every day and snowballing. The more properties on the market, the less percentage of them selling and the lower the prices buyers are willing to pay. More frequently, the sales price isn’t covering the investment.

People who got in in 2003-2004 with 3 year ARMs are now hit with the higher payments they can’t afford. The 5 year ARMs are coming next. Stated income loans and no income verification loans, that were given to the public by many mortgage companies now constitute a pool with a significant rate of default.

In my opinion, this situation is somewhat similar to 1998 Russian Default prompting Emerging Markets crisis and 2001 Enron collapse causing liquidity crisis in the energy markets. In both cases, the defaults drastically increased the spread over Libor / Fed Funds Rates or short-term borrowing rates, causing the ripple-effect on the economies and markets.

In a similar way, mortgage companies that don’t have access to the short-term financing are going bellies-up. So far, 70+ mortgage companies went out of business in the last few months.

This exacerbates the problem in the real estate market, creating a vicious circle.

In 2000 I graduated from NYU with a Masters in Mathematics in Finance. I was eager to go to Wall Street and make money. I cared less about mathematics and more about real life.

At NYU we were given plenty of formulas. Our everyday language included: derivatives… random walk… stochastic processes… Monte Carlo simulation… Black-Scholes model… I was intrigued, but skeptical. “How can I make money with it?” – was my signature question those days.

After a graduation, I interviewed for multiple positions, but leaned toward returning to Credit Swiss First Boston where I had summer Internship.  During the ten weeks rotation program within Fixed Income, I got attracted to Credit Derivatives and Mortgages.

Back in 2000, Credit Derivatives were a relatively new market with lucrative opportunities, while mortgages were as old as my husband’s grandparents could remember, yet had a fresh start in a developing area of CMO (collateralized mortgage obligations), IO (interest only) and PO (principal only) structured products.

Both of my picks tightly connect to the current Subprime defaults and Mortgage crisis. Ironically, I actually went to work as a Trader of Weather derivatives – another exotic product – at Williams Company, that was later struck by an “after Enron” liquidity crisis and barely escaped bankruptcy by borrowing from Warren Buffett at 30% annual rate. Now, I run my own Luxury Real Estate business, which in a wild twist is also related to the mortgages – the lifeblood of many real estate transactions.