Front Lines

August saw the market shift very subtly. The number of new listings coming on the market in each category was less than the same month last year, which is good. There were fewer sales in each category compared to last year and last month, which is not good. Sales of both town homes and detached single-family homes dropped a solid 25%. Inventory virtually stayed the same with 49 town homes currently listed as compared to 51 last month and 46 single family homes compared with 48 last month. It is still great compared to last year in the same time frame when we had 213 available town homes and 129 available single family homes. One good sign is that the number of new listings coming on the market is still well below 2008 levels for the same month. Since a large majority of the new listings are distressed properties (foreclosures and short sales) I consider this a good indicator. We have seen consistent improvement in our marketplace for the last year but as I said in the beginning we have been seeing an almost imperceptible stabilizing in the last 30-60 days in both categories. This could be attributed to any number of factors including the typical summer slow down we used to see the marketplace 20+ years ago. Given how fast the summer seemed to fly by, that may very well be the case. If so we should see a little burst of activity as our fall market begins. The bigger concern is the threat of the foreclosure tsunami I mentioned in last months "Front Lines" It is a good thing that we have not seen an influx of inventory come on the market, as that would indicate that the forecast was coming true. Our market is strong and if it continues at the pace that it has for the last year then we should be able to absorb a sudden increase of inventory in the town home market very easily. If the slower pace of August continues we may have difficulty if indeed that tsunami does come. I have always maintained that it is a bit "if" as to whether or not we get that next wave. Unfortunately that may not be an "if" at all. I am a member of a group that has access to some of the highest of the higher ups in the mortgage business and we have seen some stats that are specific to our local market area. There is one specific lender that is one of the if not the largest on a national basis and certainly the largest in our marketplace. Within his company the number of existing foreclosures (those already foreclosed upon) is less than half of what it was at the peak in fall of last year. That is the good news. The bad news is that the number of home owners that have received notice that they are beginning the foreclosure or are going to a trustees sale has more than doubled from the low point and is up 70-80% over the months preceding the high point of active foreclosures. This is the largest national lender. This is their number and you have to assume that all the other ones have proportionally the same numbers. This is specific to our market. This is not Florida numbers or Nevada or California; it is Northern Virginia numbers. So that tells me that the next wave is indeed going to impact our market and there is no longer question that it is coming. The question now becomes is if our strong (relative to the rest of the country) marketplace can absorb these and keep on gradually moving forward. It is important to note that the reason for this increase in foreclosures is due to one particular type of loan that is now adjusting to higher rates and payments. These loans were typically used by those that are stretched financially anyhow and have the least ability to absorb a higher payment rate. They cannot refinance because their home no longer appraises at the value necessary to support their loan amount. So the only option is a short sale or letting the home go to foreclosure. The next few months should be interesting as usual I will keep you informed as our market continues to unfold.