By Spencer Marker
I look for February to be marginally better than January. The "Stimulus Package" was just signed, rates have dropped noticeably and there are some hard to beat values in the market. As we get closer to determining who our choices will be in the presidential race we should see consumer confidence improve slightly.
I also expect that once the weather gets a little warmer our activity will improve some more. I expect relocation to start trickling into our marketplace any day now. Relocation will help all price ranges.
I expect that despite the best efforts of the powers that be our foreclosure problem will get worse. The work outs & the ability to refinance is simply too little too late. If you bought your home in 2005 or later then your value has dropped and if you financed 100% of the sales price in the beginning you cannot refinance. Period. The property will not appraise. If you can’t make your payments; 30 day delays, extended amortizations and other such efforts will only delay the inevitable. So foreclosures will be a fact of life for probably at least the next couple of years. This will have an impact on all price ranges. The lower levels will have to compete on price and the higher levels will not have as many move up buyers.
I would expect that just like it was in the early 90’s many move up buyers will opt to become landlords instead of selling their existing homes. Buyers will still control the marketplace and those who are focused only on value will be able to find it although it may not be the best "home" for them.
I look for rates to stay low for the coming months and start to inch their way up as we get closer to the election. For those who are on contract with the government there may be a concern as to whether their contract will continue depending on who our new president is. Overall I expect our market to go much like last year short of the fact that we will have better financing options in the coming months as we will work our way through this sub prime mortgage mess. As our market continues to unfold I will, as usual, keep you informed.
Tuesday, February 26, 2008
Thursday, February 21, 2008
Beware The “Short Sale”
If you have been looking at the real estate market lately then you have seen the term "short sale." A short sale happens when an owner can no longer make their payments on a home and the sales price of the home is not sufficient to cover the costs of fully paying off all the liens on the home.
In certain circumstances the lender will agree to accept a payoff for less than what is owed and forgive the rest of what is owed on the mortgage. The key words here are "certain circumstances". The seller must be in default and the seller must meet rigid financial guidelines. If the seller is not in true financial distress and is just simply not making payments then odds are they will not be approved for s short sale. In fact less than 20% or so of short sale applicants do get approved and the process can take weeks if not months to negotiate.
While many homes are advertised as short sales and look very attractive in pricing they are in reality not going to qualify and odds are they will be foreclosed on before the process can be completed. In addition these homes are often in disrepair as any one that cannot make their payment typically cannot afford maintenance costs and they are sold as-is. Bottom line is that while they look enticing on paper they are always frustrating and typically a fruitless waste of time.
In certain circumstances the lender will agree to accept a payoff for less than what is owed and forgive the rest of what is owed on the mortgage. The key words here are "certain circumstances". The seller must be in default and the seller must meet rigid financial guidelines. If the seller is not in true financial distress and is just simply not making payments then odds are they will not be approved for s short sale. In fact less than 20% or so of short sale applicants do get approved and the process can take weeks if not months to negotiate.
While many homes are advertised as short sales and look very attractive in pricing they are in reality not going to qualify and odds are they will be foreclosed on before the process can be completed. In addition these homes are often in disrepair as any one that cannot make their payment typically cannot afford maintenance costs and they are sold as-is. Bottom line is that while they look enticing on paper they are always frustrating and typically a fruitless waste of time.
The Front Line
So far 2008 has lagged behind 2007 substantially. Single family home sales in Centreville dropped by 19% to 21 and townhome sales were down by over 50% dropping only 40 sales! Inventory also increased by 50% in the townhome market to 299 but only 14% in the single family homes to 138. What that means though is that we sold only 15% of our available single family homes in the month of January compared to 22% in 2007.
Our townhome market fared much worse selling only 13% of available listings compared to 53% in 2007. Not a good start to the year.
Those numbers do not tell the whole story either. More than HALF of all the January sales were bank owned homes offered at below market pricing. Not only that but they did not generate a move up buyer stopping the buying chain in its tracks. (Normally each condo that sells means that the seller will then buy a townhome and then that seller will buy a larger home until finally the end seller buys a condo in a retirement community. The real estate circle of life!!).
Now with 25% of our available inventory being foreclosures and 15% or less of the available listings selling you can see that it does not bode well for our pricing.
That is the bad news. The good news is that much of the "low hanging fruit" I referred to in our last issue is being "plucked" off the market. Buyers are getting frustrated with dealing with banks and if all things are equal or close to it they will buy resales.
We have seen multiple offers on four of our last townhome sales and properties positioned properly for the market and presented properly to the market are getting sold.
Many (at least half it looks like) of the buyers have enough money to qualify for the mortgage but would prefer to buy a home in move in condition that is priced a little higher than buy a home that they will need to put money into immediately that is at a lower price.
Our townhome market fared much worse selling only 13% of available listings compared to 53% in 2007. Not a good start to the year.
Those numbers do not tell the whole story either. More than HALF of all the January sales were bank owned homes offered at below market pricing. Not only that but they did not generate a move up buyer stopping the buying chain in its tracks. (Normally each condo that sells means that the seller will then buy a townhome and then that seller will buy a larger home until finally the end seller buys a condo in a retirement community. The real estate circle of life!!).
Now with 25% of our available inventory being foreclosures and 15% or less of the available listings selling you can see that it does not bode well for our pricing.
That is the bad news. The good news is that much of the "low hanging fruit" I referred to in our last issue is being "plucked" off the market. Buyers are getting frustrated with dealing with banks and if all things are equal or close to it they will buy resales.
We have seen multiple offers on four of our last townhome sales and properties positioned properly for the market and presented properly to the market are getting sold.
Many (at least half it looks like) of the buyers have enough money to qualify for the mortgage but would prefer to buy a home in move in condition that is priced a little higher than buy a home that they will need to put money into immediately that is at a lower price.
Tuesday, January 22, 2008
Fed's Rate Cut
We wanted you to be the first to know that this morning the Fed lowered the discount rate by ¾ of a percent. This is the rate that has a direct impact on mortgage rates. We expect this change to have a substantial impact on the real estate market. Already today we have seen one lender offering 5 ½ % rates with no points! We look for even more aggressive pricing as the day progress’s.
Last July when the sub prime market crashed it “froze” our market leaving many sellers lowering their prices below actual market value and creating a lot of “low hanging fruit”. We expect that the Fed lowering the interest rates will jump-start our spring market early. The lower rates and the “low hanging fruit” mean unprecedented opportunities for the “early bird” buyers.
We have all been reading tales of doom and gloom regarding our real estate market and, it certainly has been better for buyers than sellers. However, while 2007 was certainly no 2004, it was still the 4th best year on record for real estate sales.
Our thinking is that this action may be politically motivated meaning that these lower rates may not be around for long. In addition, the “low hanging fruit” we spoke of will be plucked off the market quickly by savvy buyers. Bottom line, those that act early will reap the greatest rewards.
Spencer
P.S. More good news – Northern Virginia is ranked #3 for new jobs created in the nation – this is what sustains our local market and why our market does not feel anywhere near the pain that other states are feeling. Real Estate is a local business!
We update our local market stats monthly as we compile the information – check them out on our website under Local Information/Stats
Last July when the sub prime market crashed it “froze” our market leaving many sellers lowering their prices below actual market value and creating a lot of “low hanging fruit”. We expect that the Fed lowering the interest rates will jump-start our spring market early. The lower rates and the “low hanging fruit” mean unprecedented opportunities for the “early bird” buyers.
We have all been reading tales of doom and gloom regarding our real estate market and, it certainly has been better for buyers than sellers. However, while 2007 was certainly no 2004, it was still the 4th best year on record for real estate sales.
Our thinking is that this action may be politically motivated meaning that these lower rates may not be around for long. In addition, the “low hanging fruit” we spoke of will be plucked off the market quickly by savvy buyers. Bottom line, those that act early will reap the greatest rewards.
Spencer
P.S. More good news – Northern Virginia is ranked #3 for new jobs created in the nation – this is what sustains our local market and why our market does not feel anywhere near the pain that other states are feeling. Real Estate is a local business!
We update our local market stats monthly as we compile the information – check them out on our website under Local Information/Stats
Monday, January 14, 2008
Out On A Limb
An election year is always difficult to predict and this year is compounded by the changes in mortgage lending. I expect mortgage rates to drop slightly in the spring and then rise slightly later in the year. The big problem is the changes in lending practices. They have tightened dramatically and many of the more creative and hence riskier loans have disappeared. Stated income loans are virtually gone, 100% financing still exists but credit, income and debt ratios have to be stellar before a buyer will be considered for that type of loan. More documentation is required and self employed people will have a higher degree of difficulty in many cases. FHA loans are regaining popularity as are VA loans and even VHDA is making a comeback. Long story short the flow of easy to obtain money is slowing to a trickle.
Rates are still great and in fact at this writing are below 6% and there is plenty of money to lend BUT credit needs to be good, income needs to be good, debt needs to be marginal and credit scores cannot be a low. In other words people that should not have been buying homes are now not able to buy homes. This will affect our market to a certain degree in Centreville but will not bring it to it’s knees.
Likewise the influx of foreclosures in our area does affect our level of inventory and has been responsible for downward pressure on our pricing but conversely it has created opportunities to many first time buyers and investors. Currently 17-19% of our available inventory is bank owned and that is low compared to surrounding areas. Prince William county is hit especially hard by foreclosures. I look for the foreclosure market to stay steady throughout 2008.
I also expect demand to stay consistent with last year and inventory to bump up slightly overall. The election will have an impact but I do not think it will be as significant as in previous years. This is because a large part of our local economy is driven by government procurement and given that the war in Iraq and Homeland Security are the big drives at the moment I do not expect that to change substantially. Certainly any change in administration will affect things somewhat as some budget items are cut or uncertainty keeps folks out of the market but I do not see this as having a huge impact on 2008.
Overall I see 2008 being more of 2007 just without the devastation of the sub prime collapse. But that is the reason that I title this column Out on a Limb. I am going out on a limb in giving you my opinion. I have been wrong before but I have been right much more often. At the end of the day well priced, well staged homes in good condition and good locations will sell. Those that don’t meet that criteria will not. As our market unfolds over the new year I will continue to keep you informed.
Rates are still great and in fact at this writing are below 6% and there is plenty of money to lend BUT credit needs to be good, income needs to be good, debt needs to be marginal and credit scores cannot be a low. In other words people that should not have been buying homes are now not able to buy homes. This will affect our market to a certain degree in Centreville but will not bring it to it’s knees.
Likewise the influx of foreclosures in our area does affect our level of inventory and has been responsible for downward pressure on our pricing but conversely it has created opportunities to many first time buyers and investors. Currently 17-19% of our available inventory is bank owned and that is low compared to surrounding areas. Prince William county is hit especially hard by foreclosures. I look for the foreclosure market to stay steady throughout 2008.
I also expect demand to stay consistent with last year and inventory to bump up slightly overall. The election will have an impact but I do not think it will be as significant as in previous years. This is because a large part of our local economy is driven by government procurement and given that the war in Iraq and Homeland Security are the big drives at the moment I do not expect that to change substantially. Certainly any change in administration will affect things somewhat as some budget items are cut or uncertainty keeps folks out of the market but I do not see this as having a huge impact on 2008.
Overall I see 2008 being more of 2007 just without the devastation of the sub prime collapse. But that is the reason that I title this column Out on a Limb. I am going out on a limb in giving you my opinion. I have been wrong before but I have been right much more often. At the end of the day well priced, well staged homes in good condition and good locations will sell. Those that don’t meet that criteria will not. As our market unfolds over the new year I will continue to keep you informed.
The Year In Review
What a year we had in 2007. The first half of the year was a definite improvement over 2006 as far as the number of listings that were selling. By all early indicators 2006 was going to be the bottom of the market and we were on our way up. Inventory was shrinking monthly and was 20-25% below 2006 levels. Each month we were selling the exact same or slightly more than we did in the same month in 2006. So our number of sales rose slightly in the first half but our percentage of listings sold rose noticeably.
All that came to an abrupt end in July when the sub prime mess rose it’s ugly head. Inventory spiked, sales dropped, contracts fell out, lenders disappeared and consumer confidence hit rock bottom.
By October though the shock had worn off and our number of single family home sales came back into line with last years numbers although townhomes were still down by 25-30%. This is based on Centreville stats only. This varies by county and varies within the county. (We post all the stats monthly on our web site so you can review by area by visiting www.seln4u.com.)
The average LIST PRICE for ALL single family homes sold in CENTREVILLE in 2007 dropped to 602,293 from 663,621 in 2006. For ALL townhomes it dropped to 366,140 in 2007 from 391,827 in 2006. The total number of townhomes that came under contract in 2007 dropped to 648 from 826 in 2006 and 1,278 in 2005. The number of single family homes that came under contract actually increased to 279, up from 271 in 2006 but down from 434 in 2005.
The average number of single family homes that were available on the market in 2007 dropped (this is a good thing) to 151 from 172 in 2006 but still was almost double 2005’s number of 78. Townhomes did not fair quite as well averaging 274 active listings in any given month in 2007, down from 293 in 2006 but more than double the 127 in 2005. The real disparity comes in how we begin the year in 2008. With single family homes we are starting the year with 128 active listings up only slightly from the 118 of 2007 and 112 of 2006. Townhomes however are starting with 255 active listings compared with 153 in 2007 and 170 in 2006. This is primarily due to the changes in mortgage lending and availability of no money down loans and a higher percentage of foreclosures than in single family homes. Again these numbers are for Centreville only and we will not have the overall Northern Virginia Stats available until next issue. We will post them on our website as soon as we have the information properly formatted.
Overall 2007 will go down as the 4th best year on record at the NVAR and while it did not seem like it the only reason for that was that it is compared to 2003-2005. We sold all of the homes we listed (excluding those we still have on the market) and our days on market averaged just under 41. As this year unfolds we will continue to keep you informed.
All that came to an abrupt end in July when the sub prime mess rose it’s ugly head. Inventory spiked, sales dropped, contracts fell out, lenders disappeared and consumer confidence hit rock bottom.
By October though the shock had worn off and our number of single family home sales came back into line with last years numbers although townhomes were still down by 25-30%. This is based on Centreville stats only. This varies by county and varies within the county. (We post all the stats monthly on our web site so you can review by area by visiting www.seln4u.com.)
The average LIST PRICE for ALL single family homes sold in CENTREVILLE in 2007 dropped to 602,293 from 663,621 in 2006. For ALL townhomes it dropped to 366,140 in 2007 from 391,827 in 2006. The total number of townhomes that came under contract in 2007 dropped to 648 from 826 in 2006 and 1,278 in 2005. The number of single family homes that came under contract actually increased to 279, up from 271 in 2006 but down from 434 in 2005.
The average number of single family homes that were available on the market in 2007 dropped (this is a good thing) to 151 from 172 in 2006 but still was almost double 2005’s number of 78. Townhomes did not fair quite as well averaging 274 active listings in any given month in 2007, down from 293 in 2006 but more than double the 127 in 2005. The real disparity comes in how we begin the year in 2008. With single family homes we are starting the year with 128 active listings up only slightly from the 118 of 2007 and 112 of 2006. Townhomes however are starting with 255 active listings compared with 153 in 2007 and 170 in 2006. This is primarily due to the changes in mortgage lending and availability of no money down loans and a higher percentage of foreclosures than in single family homes. Again these numbers are for Centreville only and we will not have the overall Northern Virginia Stats available until next issue. We will post them on our website as soon as we have the information properly formatted.
Overall 2007 will go down as the 4th best year on record at the NVAR and while it did not seem like it the only reason for that was that it is compared to 2003-2005. We sold all of the homes we listed (excluding those we still have on the market) and our days on market averaged just under 41. As this year unfolds we will continue to keep you informed.
Wednesday, January 2, 2008
Fair Market Value
What is the best price for a piece of real estate? Mortgage lenders, appraisers, and real estate brokers use what is called the "fair market value" (FMV). FMV has been defined as "the price that a buyer is willing to pay and the seller is willing to accept, when both parties are knowledgeable about the property and neither is under any time pressure to buy or sell". Sounds great, but how is this price determined? The starting point for determining a fair price may be an opinion of the value or "comparative market analysis". Such an analysis uses information on similar properties which are: 1) currently for sale, 2) already sold, or 3) expired properties (those which did not sell). Local, national and international trends and market conditions must also be evaluated.By comparing similar properties in each of the three categories and the market conditions, appraisers, lenders and agents come very close to the maximum price that buyers would be willing to pay for a house.
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