Wednesday, August 15, 2007

Increased Interest Rates and Tighter Lender Requirements

The increase in interest rates, and the tightening of lender requirements, is hurting buyer’s purchasing power, which is creating less able to purchase buyers in the marketplace. While I think it is good thing that lenders are finally tightening up their requirements for loans to eliminate buyers that borrow ‘above their means,’ the resale market is hurting because there are fewer qualified buyers able to write contracts on homes. As a result, homes are staying on the market longer, or not selling at all, due to a limited number of approved buyers. We are also seeing homes that have contracts not going to closing because the lending requirements have changed and the loan that the buyer got approved for is no longer available.

The Washington Post touches on this issue in this article.

Thursday, August 09, 2007

American Home Mortgage Folds

The mortgage industry suffered a huge setback yesterday as 'American Home Mortgage' was the first large lender to fold in the market place. It's unfortunate for their employees and clients to be told on the last day of the month in July that they were not going to make payroll, nor fund the $400,000,000.00 of loans across the country that were due to settle on July 31, 2007. Unfortunately, this seems to be the first of many mortgage companies that are having financial troubles and are cutting-off their funding for popular loan programs.

Read the Washington Post article here.

Wednesday, July 25, 2007

Increased Grantors Tax Fees to Fund the Transportation Bill

I wanted to let all of you know about the changes to the tax fees for grantors. On July 12, 2007 the Northern Virginia Transportation Authority voted to increase the residential Grantor's Tax. Implementation is expected to begin January 2008. The Grantor's Tax rate will increase by $0.40 per $100.00, taking the total tax rate to $5.00 per $1000.00. The increased Grantor's Tax is one of seven fees that will fund transportation improvements in Northern Virginia. To look at the whole list of increases, look at NVAR’s site here.

HGTV’s Top Ten Ways to Make Buyers Bite

I was looking at HGTV’s website and found this article. Here is my quick summary:

1. Nice Entryway. Make sure your house is a pleasure to walk into. Fresh paint on a door, or setting up a sitting area can create an entryway which will catch any buyer’s eye.

2. Hardwood Floors. They never go out of style and everyone wants them. Consider using Pergo floors as a cheaper alternative.

3. Fabulous Fixtures. Fixtures are the little touches which can make a house immeasurably more attractive. Update your sink or the knobs on your cabinets for a more modern, put-together look.

4. Beautiful Baths. Even if you don’t have the newest features, such as a steam shower, updating the mirror and lighting can make your bathroom soar above the rest.

5. Counter Intelligence. Avoid grout lines and try to go for granite or Corian countertops. People want updated countertops, so try to steer away from tile or laminate.

6. Steel This Idea. Stainless steel appeals to the mass because it reflects a commercial kitchen, which makes people believe they are great cooks. Most importantly, your kitchen should follow a cohesive pattern, instead of just focusing on putting in stainless steel appliances.

7. Pre-Organized Closets. Just as with the kitchen, pre-organized closets and cabinets can make a buyer feel that they themselves are a better homemaker. Organization calms people, so try to make sure your closets, cabinets, and pantries are highly organized.

8. Light Up. Make sure your house has plenty of light so the buyer doesn’t have to try to figure out how to brighten the place up. Consider installing recessed lighting.

9. Built-In Bonus. Built-ins can be seen as free furniture. Some people may not find them appealing, however, so consider trying furniture or shelves which look built-in, but are not.

10. Grass is Greener. Don’t put in a concrete patio or a rock garden. Families with children will want the flat open yard.

Bonus Tip: Make your house feel homey when there is an open house. Don’t be afraid to stage the house by renting furniture if yours does not cut it.

Tuesday, July 17, 2007

The State of the Market

Unlike what we have seen during the bulk of the last five years, the Northern Virginia real estate market is great right now for buyers, but tough for sellers. The market has been sliding down since last year, primarily due to an oversupply of inventory (unsold homes) and increased foreclosure rates.

Looking at market statistics for the sales volume of June 2007, compared to the market in June 2006: there was an 11% decrease in sales in Fairfax Co, Arlington Co, Alexandria and Falls Church; a 41% decrease in sales in Prince William County; and a 14% decrease in Loudoun County. The average sales price to the 2007 tax value was about 94% in the Greater Northern Virginia area (this is a major difference from the ‘boom’ years when sales prices were often exceeding tax values by 15%).

Increased foreclosure rates are having the largest impact on our market. Not only do they increase the supply of unsold homes in an already flooded market, thereby forcing prices down, but also bank owned properties are often in disrepair and have to be sold ‘as is,’ so they sell for less than traditional resale homes which puts even more downward pressure on neighborhood values. The rate of foreclosed homes is much higher in the suburb areas than inside the beltway, and foreclosures are expected to increase through 2007 and possibly beyond.

While these trends and statistics indicate a not-so-healthy market for the most part, homes that are considered ‘good value’ to qualified buyers are still selling within 60-90 days. Price and showing condition are what determine whether or not a property is good value. Buyers understand that they have choices, and they will not even look at an overpriced home if there is a high supply of homes for sale in that particular area, which is typical of almost every local market in the greater Northern Virginia area. A home’s condition and its upgrades are also very important factors to consider in determining a home’s value; buyers prefer homes that have been cosmetically upgraded and well maintained. Thus, a property that is in disrepair, or one which needs thousands of dollars of upgrades, should be priced lower than the competition to be considered ‘good value.’ Buyers will not even consider a house that is outdated yet priced similar to updated homes when there are so many other homes to choose from.

It is, therefore, more important than ever to price a property competitively, while taking into account the current competition and the most recent sales data, and to make sure your home is as close to ‘model home condition’ as possible. This is the best overall strategy to command the maximum price the market will bear for any particular property.

If you would like to talk further about current market conditions, selling strategies, or any other matters concerning real estate, please don’t hesitate to contact me.

Thursday, July 12, 2007

30-Year Interest Rates Decreasing

The Washington Post reports that the rates on 30-year mortgages are continuing the trend of slowly sinking down an averaged 6.63 percent last Thursday, down from 6.67 percent the previous week. As the rate continues to creep down, it will cost purchasers less money to borrow the money they need for real estate. With this trend, hopefully buyers will be spurred into the market, creating more activity in theses summer months.

Read the article here.

If you have an adjustable rate mortgage, now is the time to consider refinancing to a 30-year fixed rate. Rates are anticipated to begin to increase again in the late summer or early fall. Do not miss this chance.

Sunday, July 08, 2007

How Foreclosures Affect the Market

It has been a while since I have updated this and I wanted to share with you how the number of foreclosures is affecting the NoVa real estate market. As many of you know a foreclosure happens when a bank repossesses a home because the borrow is delinquent on mortgage payments. While there are many reasons a borrower can become delinquent on their mortgage the most common reason in this market is due to borrowers obtaining a ‘teaser loan’ that starts adjusting upward after a certain period and the borrower is unable to keep up with the higher mortgage payments.

The increased rate of foreclosures in the market is leading to a higher supply of homes on the market and putting downward pressure on prices. When the supply of homes for sale in a particular neighborhood or area is high then buyers have many homes to choose from and sellers have to make sure their house stands out as the ‘best value’ for that area based on price and condition. When you add foreclosures, or bank-owned properties, into the mix you have even more supply for for buyers to choose from and often the prices on bank-owned properties are lower than traditional resales. There are two reasons for this: 1) bank-owned properties are usually in bad condition, need work, and are being sold ‘as is’ and 2) the bank has held the property longer than they wanted and they slash the price to get it off of their books. This increase in the number of homes for sellers to compete with, and the lower prices attached to bank owned properties, forces prices down.

If you are a seller trying to sell in a market where you are competing with bank owned properties you need to make sure your house shows better than the bank-owned properties and is priced competitively compared to all of the competition.

If you are a current home owner facing foreclosure contact your lender immediately and try to renegotiate your loan terms. This is becoming more common as the rate of foreclosures increase. Remember that banks don’t want to foreclose on your house because it costs them a lot of time and money to do so.

Read the Washington Post article about suburbs seeing a rise in foreclosures here.

If you would like to discuss this topic further please contact me via email or phone.

Monday, April 30, 2007

Builders and In-House Lending

The Washington Post article “Beware of Builders Bearing Gifts and Pushing Lending” warns buyers against solely looking at lenders which builders push onto them. While the incentives can seem nice, the buyer needs to make sure that it isn’t coming at a higher cost.

“Taking out the wrong mortgage can be a very expensive mistake over the long term. An expensive mortgage could cost more than the real value of steam jets and granite counter tops. And you wont know if the preferred lender’s offerings are overpriced, whether in terms of interest rates, prepaid interest (known as points) or loan-related fees, unless you’ve already talked to outside lenders.” Read the article here.

The only true and complete way to compare lenders is to get one or several Good Faith Estimates from local lenders. With the Good Faith Estimate, a buyer can go into the model home knowing what their interest rates and payments would be with the outside lender, which provides valuable comparison to the in-house lending companies. With this comparison, a buyer can make sure that the incentives offered by the builder are actually worth using their preferred lender. Even before you look at the model homes, get a Good Faith Estimate.

Monday, April 09, 2007

HGTV's 10 Ways to Increase the Value of Your Home

HGTV lists ten ways to increase the value of a home. Watch the videos here.

Here's a summary I put together of each video:

1. Plan out your remodel. Make sure you balance what you want and what you need so that your remodel doesn't get out of hand.

2. Keep all projects manageable, tackle only one room at a time.

3. Improvements to both d├ęcor and fixtures can increase the value of your home. Updated furniture and fixtures show buyers an inviting atmosphere.

4. A clean, clutter-free place not only feels good, it can mean dollars in your pockets when selling a home.

5. Curb appeal counts. Small inexpensive changes to the outside of a home create excitement and interest for buyers.

6. Updated kitchens translate into the maximum return on your money when selling a home.

7. Beautify your bath; minor bathroom remodels will yield major returns.

8. Evaluate your needs. Compare the costs of remodeling your current home vs. buying a new one. Some projects might not need to be tackled.

9. Hire a certified home inspector. You don’t want to run into any unexpected challenges when fixing your home, think of it as a check-up for your home.

10. Paying down the principle on your mortgage now will mean cash in your pocket at closing.

Mortgage Rates Creep Forward for 30-Year Fixed

The Washington Post reports that mortgage rates crept up slightly this past week. Thursday reported an average percentage of 6.17 percent for the week for 30-year mortgages, up slightly from 6.16 the week before. Despite the raise, rates for 30-year fixed-rate mortgages remain close to the low for the year. The stability points towards financial markets trying to decide the direction of the country's inflation and economic growth.

A year ago, mortgage rates were 6.43 percent for 30-year fixed rates.

Read the entire article here.

Tuesday, April 03, 2007

Foreclosures Force New Charges for Buyers

As foreclosure rates are increasing because of the subprime mortgage meltdown, first time borrowers can face new charges. The new charges, which can include an additional 1-2.5 percent on interest rates, affect 100% loans only for those whose credit score is under 700. Tom Halfpap, a branch manager at National City Bank, warns that if realtors have customers who are already approved for 100% loans, they must check to make sure that the loan can still be done, and if so, the interest rate needs to be locked immediately.

Subprime mortgages, loans given to buyers with risky credit histories, have lead to sky-high amounts of foreclosures across the country. Not only are these foreclosures flooding the market, which creates massive competition for sellers, but now it is affecting the loans which buyers can procure. Loan companies seem to be less willing to risk lending to buyers with 100% loans, and therefore are adding additional costs to said mortgages.

I would like to take this time to reiterate that if you personally have a subprime mortgage, refinancing is an important step to take in order to avoid the sharp increase in payments once the interest rates of your loan changes. Avoid the risk of foreclosure; lock into a 30 year-fixed mortgage rate, if possible.

Monday, March 26, 2007

February 2007 Homes Sales Increase

I found an article in the Washington Post which sights unexpected jumps in the sales of existing homes in February 2007, the largest jump since March 2004. Read the article here.

Personally, I have seen an increase in buyer showings, and contracts on my listings. There are more buyers in the market. Statistics from NVAR (find the statistics here) says that there was a 6.87% increase in February 2007 sales of single family homes, townhomes, and condos compared to February 2006. In February 2007 there was actually 3% more inventory on the market for sale than in February 2006. The reason, I believe, that sales have increased 6.87% is because buyer demand has increased while interest rates are decreasing, despite 3% more homes on the market.

Monday, March 19, 2007

Hi-Tech Home Upgrades

Looking for the latest and greatest home products? From a fingerprint scanning deadbolt, to an oven which can cook a 12-pound turkey in 42 minutes, to residential elevators, MarketWatch.com listed ten new products which caught their attention at the 2007 International Builders’ Show. Click here to take a look at the list that would make any homeowner jealous.

Thursday, March 15, 2007

Substaintial Risk with Subprime Mortgages

Subprime Mortgages, mortgages given to home buyers with risky credit histories, allowed buyers to purchase homes in the craze of the market boom of the last few years. The effect? Foreclosure rates are increasing, more than two dozen subprime mortgage companies are closing their doors for good, and home buyers with subprime mortgages are facing significant risk. According to an article by the Washington Post:
“4.95 percent of all home mortgages were delinquent, meaning they were at least 30 days late. The most dramatic rise among subprime borrowers. The survey also showed that lenders initiated foreclosures against 0.54 percent of borrowers – or about one in every 200.” read the complete article here
In my opinion, subprime mortgages are significantly risky for buyers who stretch themselves to the max to do a 3-year interest only ARM. While short term interest only ARMs are wonderful short term deals, buyers face serious danger if they do not refinance before the interest rate jumps. If you are in this situation, I strongly urge you to try refinancing to a 30-year fixed mortgage while rates are still low (around 6.25% today).

Also keep in mind that foreclosure rates are increasing, meaning that there is a higher supply of “bank owned” properties. Bank owned properties compete with sellers when they are selling their home, making it a much more difficult market for sellers.