I certainly hope not but it seems recently that the mood of people that I interact with is taking a slightly downward, more negative turn. I’ve recently heard about continued job strife, stock market uncertainty, more pending “shadow” and actual foreclosures( shadow foreclosures are assets that Bank’s are taking back but don’t yet want to put back on the market for fear of overwhelming the market) , real estate values continue to slip and people still have little confidence to begin increasing their personal spending habits. On the other side there are a couple of brighter spots such as “move-up” builders actively buying more finished lots to construct homes in the $250,000 – $ 400,000 range and seeing strong activity in the sale of foreclosed lots and homes by both investors and end users. Its confusing as the signs seem to be mixed right now.

As intrinsically an optimist, most salespeople are, I’m holding out hope that things will slowly start to change toward the positive. What a great time for some good news from our Government; either locally or National. Come on elected officials; pose some solutions, find some answers. As we say in real estate circles; we’re ready , willing and able.

Lo and behold, in the past couple of weeks I’ve received calls from local, Semi- Custom Home Builders who are actively looking for groups of finished lots on which to start construction. Although we’re not yet talking about higher end, custom home builders; the builder’s who are ramping up are serving the move up buyer. Specifically, they’re looking for land to support 1800-3000 sq. ft. homes with beginning prices in the high $200’s that will reach into the upper $400’s with added upgrades and lot premiums. To reach an acceptable profit margin, they will pay from $60,000 – 80,000 per lot. Additionally, they are expecting to purchase the lots on a rolling option basis. This is a structure that allows a builder to purchase a large group of lots at a predetermined price but actually close on them in a gradual way over an extended period of time.Thus allowing the Builder to purchase lots from the proceeds of sales and limiting the amount of money they have to borrow. As example, I’m working on a deal where a builder will contract for 20 lots with the first of those to close this August. They’ll immediately build a model home on it and begin their marketing program. They’ll then be required to , at minimum, buy another lot in February of 2011 and every 60 days thereafter. A structure that becomes a win- win for all parties; Builder, Developer and underlying Lender.

It’s a very positive sign that the lower to middle end of the new home market is becoming active again. If interest rates stay at or near the current record lows, I think it will only be a matter of time until we’ll see this trend continue and move into the higher end , custom home segment as well.

In the past couple of weeks I’ve experienced three, seemingly unrelated events that may actually be related. I’m not yet sure what , if anything these may signal but perhaps time will tell. The first was my reading a couple of articles indicating that Federal Regulators are getting tougher on Banks and scrutinizing more closely their assets, securities, practices, loans, etc. Secondly, I was working on two transactions whereby M&I Bank was negotiating discounts on non-performing ,land secured, loans to induce the sale of these assets to individual buyers. Abruptly, the negotiations were put on hold because, we were told , the FDIC was at their offices for an extended period of time and they would be focusing on internal issues for perhaps the next 45-90 days. Finally, I’ve noticed a distinct change in attitude about selling REO Assets from one of my client Banks. They have recently become more motivated, and thus aggressive, about pricing and selling their vacant land properties. A year ago they took the position that they were satisfied, if need be, to ride out the market and wait until their Tucson Land regained a good deal of it’s value before selling it. That seems not to be the case anymore.

Are banks pushing harder to get back to normalcy by moving out REO’S?  Are the Feds more concerned than we know about the amount of bad loans out there?  Do we have a lot more or a lot fewer land foreclosures than last year,  still in the pipeline? The answers to these and so many other related questions are not clear to me. But it sure is an interesting time in Real Estate.

I was asked some interesting questions by a Senior  Officer of a local Bank the other day. She wanted to know how many finished, custom lots we have throughout Metropolitan Tucson, priced at $200,000 and above. It turns out that there are currently 695 available lots in this category. I then was asked how many have sold in the last year and how many new custom homes are being built on these. Well, the first question was easy to research; a total of 56 lots above $200,000  market-wide have sold in the last year. Interestingly, they ranged in price from $200,000 to $1,350,000 but had an average price of only in the high $200’s.Clearly, the great majority of “high end” lots are selling under $300,000 with a large cluster just above $200,000.  In looking at new construction stats for the past 12 months; 134 homes have sold with the great majority of these being production homes on small lots. In breaking these down, only 9 of the 134 were built on lots located in custom home subdivisions; under 7% of the total.

So, there is a several year supply of custom lots out there; you better be priced between $200,000 and $300,000 to have a chance to sell, and the Builders and Architects specializing in custom homes still have plenty of time on their hands.

In the past year or two I’ve been repeatedly asked how Foothills Lots values have faired in  comparison with those in other areas. It also raises the question of where the values are now in relation to the highs of 2006/2007. Several trends have been clear during this downturn: There has been continued demand and sales of the lower priced Foothills lots and Land (the Best values in the Best areas are always ahead of the norm);  Foothills homesites have not experienced as severe a drop in value as some other areas; there have been very few foreclosures among foothill’s subdivided parcels thus we haven’t seen whole subdivisions being dragged down as we’ve seen in areas such as Stone Canyon , Saguaro Ranch; there is at least one subdivision, Pima Canyon, that has bucked the trend and remained relatively strong thru the downturn.

I had a conversation yesterday  with  the  Assessor’s Appraiser responsible for the Foothills area. After going through numerous examples, of  vacant parcels that sold in 2006/2007 and resold in 2009/2010, a trend became clear. The staff member concluded that lot prices were off about 25% from the market highs of a couple of years ago. I think that number may be a bit conservative, but not far off.

The values of the highest end lots( those above $1 Million) have probably dropped 30+% but in general I concur with the Assessor on this. In other areas I ‘ve seen that number as high as 50 % and even 70% in some extreme examples. I’ve always thought that the most desirable locations tend to hold value more than lesser areas and I think the Foothills Lots example supports this notion.

I’m selling a foreclosed 3.3 acre parcel in a gated community to an Investor who is planning to quickly put the lot back on the market at a significantly higher price to achieve a strong yield in a short period of time. He was concerned that his sale will establish a new comp for the area and thus drag the market down to his price in the neighborhood preventing him from reaching his investment objective. That’s a great point to consider. This is a community where lots were selling from $375,000 – $450,000 when sales stopped a couple of years ago. There are 3 or 4 lots currently available for $295,000 – $395,000 but no signs of recent activity. At the price he is purchasing his lot, he will be able to market it at $230,000 and achieve his investment goal. In a community with few if any foreclosed properties, an individual distressed sale will not have the impact on comps that one might fear. Furthermore, bringing 1 lot on the market at a significantly lower price than the others will provide a huge advantage to that lot. Especially when it’s at a price point that is showing a strong increase of interest marketwide, ie. custom lots under $250,000. In a community that is filled with foreclosures and distressed sales, his point is a valid one. In that community you must buy a really good lot at a distressed price, not just any lot to protect your future investment.

I’ve seen a huge upsurge of activity lately in end users and investors picking up tucson foreclosed lots. We must sell off this inventory before we can see a recovery of more normal sales  take place. The quicker these sales happen, the sooner recovery comes. I’m feeling fairly optimistic that the system is working and we’re moving in the right direction.

In the past 3 or 4 weeks I’ve been hearing many Realtor’s talk about how busy they have become. This is mostly agents who represent Buyers and Sellers of Single Family Homes. And I’ve been hearing it about the lower end market (below $300,000) as well as the upper end (above $800,000).  Part of this probably can be traced to the soon to end  Homeowner’s  Tax Credit Program and the inching up of interest rates but it may go beyond that. In my own business, I too have been busy representing many Investor/Buyers who have been taking advantage of the many land foreclosures currently available . However, I’ve noticed something else. I’ve spoken to 2 Builder’s in the last couple of weeks who have contracted to begin new Custom Home Projects for clients. These are the first new custom home starts I’ve heard about in quite awhile. Matter of fact many of my Custom Builder friends have taken different positions, some real estate related and some not, to pay bills during this downturn.  On top of that, this past week, I was contacted by another Builder with a request for a lot in the Foothills in a particular elementary school district to build a home for a client he had. We found a lot and are currently negotiating a contract on it; at a price I would characterize as “retail”.  The clients had recently put their current home on the market, it had sold quickly and wanted to begin a new home project immediately. Additionally, a small new Subdivision of finished lots came on the market this week. I haven’t seen any new finished lot inventory for perhaps 3 years.

My sense is that this increased activity may be the very beginning of a real estate turnaround. Believe me, I’m not yet jumping for joy and I fully expect the balance of 2010 to be a shaky, fits and starts type of market. But something positive is happening in Tucson. Let’s see if it continues.

I just completed a transaction where I represented a Buyer who wanted to  purchase a Bank Foreclosed lot in the Wildcat Pass Subdivision at Starr Pass Resort. The listing agent, an excellent , experienced agent, had done her homework and upon my first inquiry, provided my Buyer with all the Subdivision Documents, and explained how the Bank’s Asset Manager responded and handled  all offers. We knew what to expect from the onset. The agent explained that when she received offers or counter offers, she would enter them into the Bank’s computer system and generally if she did that in the morning , she would get a response back that same day; sometimes even a matter of only an hour or two.  It was clear that the Bank made quick responses and  my Buyer and I agreed that we needed to establish a quick response, phone relationship while the negotiations were taking place in case there were competing offers.

We wrote our first offer and within a day got a response back. We were still quite a distance apart and considering our counter offer  when I found out that another offer was received by the listing agent. We went into high gear and over the next day  went back and forth with the Bank three times by having immediate availability to talk to my client and quickly email responses. I could see we were and remained a step or 2 ahead of the other offer and eventually got the property because of that.

My client was highly motivated and thus made himself available to me on a moment’s notice. In this case, it proved to be the reason he successfully got a great lot at a price well below the current market.

This week I was contacted by a Lender I had done quite a bit of business with several years ago who told me about a new Lot Loan Program she now has available. Of course that got my attention as currently there is only 1 Lender in Tucson providing what I consider a viable Lot Loan. And that loan has a 20 year amortization which pushes the monthly payment much higher than many of my clients would like. So I was anxiously awaiting the details of this new program.

When I got the details I have to say I was pleasantly surprised, although we’re not back to where we were as recently as 18 months ago when land loans were still abundant and thus very competitive. On the plus side, the loan can be used for new purchases or refinances, has a choice of 15 or 30 year amortizations and can apply to finished lots or unimproved lots where utilities are close by. By the way, this is the first program I’ve heard about in a long time that is available for unimproved land. The best part is the rate as of today is 5.5%. I mention that with a little caution as I don’t  yet have all the fine points of this program, but will shortly. The loan has a maximum 70% Loan to Value, requires a minimum credit score of 680 and has a 3 year balloon. I’d like to see LTV’s a bit higher and balloon’s a bit longer. For someone planning to build their own home 3 years is more than sufficient but for an investor, it is the bare minimum.

So this loan is not perfect but may be the best we now have in Tucson. More importantly,  I hope that it is an indication that Lenders are re-thinking their participation in Land and Lot Loans and that we may be at the very early stages of a return to a more normal mortgage climate.