Archive for the 'Market Trends' Category
The Mortgage Crisis - A Boon For Homebuyers?
August 5th, 2008 categories: Market Trends, Real Estate News
Home buyers must feel a bit dizzy these days. As they say, “so many homes, and so little time!” Well, maybe that’s not exactly what they say, but you know what I mean. As the market’s downturn has continued, the proverbial “seller’s pain”, is definitely the buyer’s gain.
CNNMoney’s news last week of the most recent S&P/Case-Shiller Home Price Index told us something most of us already knew; home prices are continuing their decent. As the article reports, the good news is, according to Mike Moran, chief economist for Daiwa Securities America, the new sales numbers may mean that the market is starting to stabilize.
But, while there may be hints of market stabilization, many believe the mortgage/housing crisis is far from over. With foreclosure numbers increasing weekly, home prices won’t be on the mend anytime soon.
Simply put, home prices are subject to market forces. Home foreclosures drive down home prices. So, until we hit the foreclosure critical mass, recovery can’t begin. And, since as we aren’t there yet, don’t put you’re worry beads away yet! But, hopefully, as the Home Index Report suggests, we’ve begun to see positive signs.
One of those signs for buyers is the increased number of former short sale properties that are now foreclosures. Properties that formerly seemed impossible to purchase, even with the best of terms (the lender seemed ignore), now can be had, oftentimes, very rapidly, at bargain prices!
Stafford & Spotsylvania County’s most recent sales figures through June are indicative of this:
|
STAFFORD 2008 |
2007 | % Change | |
|---|---|---|---|
| Total Sold Dollar Volume: | $ 46,221,188 | $ 61,893,991 | - 25.32 % |
| Average Sold Price: | $ 302,099 | $ 375,115 | - 19.46 % |
| Median Sold Price: | $ 278,900 | $ 363,000 | - 23.17 % |
| Total Units Sold: | 153 | 165 | - 7.27 % |
| Average Days on Market: | 110 | 114 | - 3.51 % |
| Average List Price for Solds: | $ 336,553 | $ 399,342 | - 15.72 % |
| Avg Sale Price as a percentage of Avg List Price: |
89.76 % | 93.93 % |
SPOTSYLVANIA
| 2008 | 2007 | % Change | |
|---|---|---|---|
| Total Sold Dollar Volume: | $ 42,932,318 | $ 59,331,500 | - 27.64 % |
| Average Sold Price: | $ 286,215 | $ 339,037 | - 15.58 % |
| Median Sold Price: | $ 262,450 | $ 310,000 | - 15.34 % |
| Total Units Sold: | 150 | 175 | - 14.29 % |
| Average Days on Market: | 138 | 98 | 40.82 % |
| Average List Price for Solds: | $ 318,932 | $ 356,727 | - 10.59 % |
| Avg Sale Price as a percentage of Avg List Price: |
89.74 % | 95.04 % |
For those looking moving to the Stafford and Fredericksburg area, the market continues to make buying a home an inviting choice. While more than a few may opt to rent instead, you may be passing up a golden opportunity that you won’t see again for many years to come.
With low prices, as well as mortgage rates still around 6 percent, how can you pass up the chance market professionals long for; buying low, to later sell high. It almost sounds too good to be true. But in this case, it’s nothing more than smart buying!
| Discussion: No Comments »
Do You Like To Play Dominos?
July 14th, 2008 categories: Finance, Market Trends
“IF you can keep your head when all about you
Are losing theirs…”
While the weekend past didn’t witness the height of the current mortgage crisis, the announcement of the financial troubles of Fannie Mae and Freddie Mac resulted in both to lose half their stock value, and more than a bit hand wringing by the Treasury Secretary, Henry M. Paulson. Fortunately, despite the government’s longstanding claim of not backing the debt of both these agencies, in the midst of a near financial stroke, Mr. Paulson seemingly did a “one eighty” by announcing on Sunday that the government would not let either of these agencies fail. One could hear the loud and long sigh of relief from Main Street to Wall Street upon hearing Paulson’s words of assurance. Unfortunately, the weekend’s news came on the heels of IndyMac Bank’s collapse and subsequent takeover by the Federal Deposit Insurance Corp (FDIC) on Friday. Predictably, the mortgage crisis dominos continue to fall with little relief in sight.
With many analysts indicating that failed banks are “lagging” and not “leading” indicators, how much more ”road kill” will the mortgage mess deliver? Will the next casualty be another national bank like Wachovia or Wells Fargo, or, is it the local banks who are due to walk the sub-prime gangplank? And, just who caused this mess in the first place? A sample line-up of likely suspects would probably look something like AJ Nisen’s list:
-
Sub-prime Mortgage Brokers
-
Banks
-
Rating Services (Standard & Poors, Moody’s, etc.)
-
Wall Street Investment Banks
-
Bond Insurers
-
Government Agencies (The Federal Reserve, Congress, Federal Trade Commission, The Accounting Regulatory Agency, just to name a few)
While his list is fairly comprehensive, what about the borrower? Was the borrower asleep when the lender was explaining the loan options to him? Does the borrower have a responsibility to do a risk assessment/analysis at some point prior to committing to the loan? Or, are they blameless?
What about the borrower’s real estate agent? What are their fudiciary duties? Since many of us don’t “pre-qualify” our buyers any longer, can we look after their best interest in what loan vehicle they choose? Or, do we simply take the word of the lender, even one we aren’t familiar…you know, the internet kind.
Well, enough of the finger pointing. Where we sit is the reult of a journey chock full of bad choices by many of those involved. It didn’t happen overnight. As Robert Louis Stevenson said, “Sooner or later in life, we all sit down to a banquet of consequences.” Little did we know that in this case, the meal just happens to be gruel!
| Discussion: No Comments »
What’s “short” About A Short Sale - Part II?
June 29th, 2008 categories: Finance, Market Trends, Real Estate News, Repairs
So, despite the promise and benefits of a “short sale“, why do they seldom work? Why does there seem to be such a huge disconnect between the seller and their real estate agent, and the lender?
Unfortunately, there are a number of reasons for the general failure of the short sale process.
1) One of the biggest obstacles to a successful short sale is the lack of communication between the listing agent and the lender. Coordination between the real estate agent, who has listed the property, and the lender, or the asset manager handling the property is crucial for a successful transaction. Communication between the asset manager and real estate agent is problematic at best. In almost all short sale cases, attempts to contact the lender’s loss mitigation department or asset manager are rarely successful.
As any agent whose handled a short sale transaction will tell you, in a transaction whose success depends on coordination, frequent and easy communication with the asset manager handling the transaction is rarer than rare. Despite agent’s best efforts, it’s normally a struggle (and that’s putting it midly!) to contact the lender’s point of contact. Building this bridge between the listing agent and the lender is crucial to the success of any short sale. Without this relationship, the short sale is destined to be Dead on Arrival (DOA).
2) The asset managers are overwhelmed by their case loads. Like most of America, lenders were blind sided by the subprime mortgage mess, and are in the crisis management mode attempting to stop the financial bleeding. In other words, the lender’s employees, especially those in loss mitigation, are peddling as fast as they can.
3) The real estate community, much like the lenders on the other side of this short sale joy ride, are, in most cases, lacking the preparation needed to properly market the property in coordination with the lender. To begin the process of coordiation with the lender, the listing agent must compile a full package with supporting documentation from the seller. Rarely, if ever, will the lender even begin to listen to an agent without a complete short sale package in front of them. This short sale submission package should include, among other things:
1. A synopsis of items enclosed.
2. Completed financial disclosure.
3. A hardship letter, preferrably hand written. Remember, this the opportunity to relay the seller’s “story” to let the lender know why they’ve missed payments and won’t be able to make them in the future.
4. Purchase contract.
5. Net sheet or HUD1.
6. Proof of income for the last two pay periods.
7. Copies of last two bank statements.
8. Copies of last two years tax returns with W-2s and 1099s.
9. Third party authorization form.
Some additional items that may be helpful include, a Broker Price Opinion (BPO) or Comparative Market Analysis (CMA), neighborhood foreclosure stats & proof of active listings in the area that are priced low but aren’t selling. All of these will assist you in presenting the seller’s case to the lender.
Pricing the property correctly is another must. A simple method is to take the low end of the comparables, and price the property $10,000-$20,000 lower. It’s important to price the property to peek interest, but the pricing needs to be realistic as well.
An opportunity for a short sale is beneficial to both the seller and lender. For both parties, it’s an escape from a difficult financial predicament. The seller unloads a property they can no longer afford, as does the bank, with minimal damage to the credit rating they need for future investments. The bank, unlike a foreclosure, can avoid managing a property, and unload one on much better terms than if foreclosed.
With the attractions of the short sale option, we can only hope the practice gets much better before the window of opportunity for this “bargain” creeps closed. There’s work to be done on both sides of the transaction. For lenders, establishing a routine and regular avenue of communication with the real estate agent listing the property is a necessary first step. For agents, taking the time to learn the steps necessary to comply with lender requirements might make the coordination process on the other end a bit easier to navigate. In either case, progress is measured in dollars, not finger pointing. So, what are we waiting for?
| Discussion: No Comments »
What’s “short” About A Short Sale?
June 24th, 2008 categories: Market Trends, Real Estate News, Repairs
During the past couple of years the real estate community has been up to its proverbial eyeballs with short sale properties. But, for many, at first “blush”, the term short sale didn’t mean much other than another transaction opportunity with real estate. However, as many Realtors & their clients alike have learned, dealing with a “short sale” can be anything but short.
According to REALTOR.ORG, a short sale is, ”when the net proceeds from the sale of a home are not enough to cover the seller’s mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner’s commission.” In other words, the proposed sales price is short of what is required to pay off the home loan or mortgage. You might ask, “why would the bank/lender allow a home to be sold for less than what is owed. To put it simply, short sales are normally done prior to a home going into foreclosure in order to save money. Yep, to save money. According to the Virginia Association of Realtor’s special counsel, Lem Marshall, outside of the loss incurred to pay off the mortgage, lenders spend approximately $65,000 dollars on foreclosed properties. So, as you can see, to begin with, it makes sense for the bank to consider a short sale in order to head off further expenses resulting from the expenses of a foreclosed property. But, the benefits of a short sale aren’t simply financial. There are other benefits as well.
In the communities plagued with foreclosed properties, neighborhoods often begin to go downhill in a hurry due to the lack of attention to the foreclosed properties. Since these properties are no longer occupied, they are often neglected and rarely properly maintained. Often, they are vandalized.
Remember, banks aren’t in the property management business, nor do they want to be. But, unlike foreclosures, in the case of a short sale property, the occupants inhabit the house, and are there to look after the property. While they may have ceased making their mortgage payments, in most cases, the owners or tenants remain in the house until it is sold, or when repossessed by the bank in the case of a foreclosure. A short sale is also in the best interest of the home owner.
Homeowners facing a possible foreclosure can avoid the stigma, embarassment and credit problems a foreclosure entails. By opting for a short sale, homeowners not only can remain in their home, but the damage to their credit score is small compared to the penalty they face if their home is foreclosed on. Most lenders report “settled” upon successful closing of a short sale instead of the term “foreclosed.” Recent reports indicate the owners who complete short sale proceedings (who have missed 2-5 mortgage payments) have their credit score affected by only 30 to 60 points. Conversely, for those suffering through a foreclosure, their credit score will be penalized 140 to 200 points, or more. That’s a huge difference. So, as you can see, a short sale in lieu of a foreclosure makes sense for all parties involved. But, if that’s the case, why are so few short sales successful? Why is it so difficult to get to a Win-Win scenario? Who is to blame? More importantly, what remedy is their for a process designed to prevent property foreclosure, yet rarely does? We’ll leave those questions for Part II of our short sale discussion.
| Discussion: No Comments »
Buying Your Next Home With the End Game In Mind
May 28th, 2008 categories: Market Trends, Real Estate News, Relocating, Spouse Stuff
Purchasers, any purchases for that matter, are often done with one thing in mind. Specifically, possession of the object being bought. In simple terms, we found something we like, something we want to possess, and “having it” is a MUST. But, what about the cost, or the long term value of what is probably our most expensive asset, our home? Is it important to consider what its value might be, three, five, or ten years down the road? Similar to Wall Street’s most successful investors, is buying for the long term, or at least taking a value based approach, a recipe for success when it comes time to sell?
In one of the 1990’s best selling books on leadership, The Seven Habits of Highly Effective People, Steven Covey outlines key principals of personal development that lead to success in our personal and professional lives. One of his Seven Habits, the second, emphasizes the importance of “beginning with the end in mind” when making choices in life. Simply put, this means working backward from where you want to end up and making choices that will get you there. So, as a home buyer, what does that mean? How can you benefit from Covey’s advice?
For many home buyers, especially those in Northern Virginia, relocation is a way of life. Many are Department of Defense (DoD) employees, or employed with contractors doing work with the federal government. Moving and selling homes are something that oftentimes comes much too soon. But, even in a buyer’s market, forethought and considering an exit strategy or end game when making the purchase, can make the goodbye a few years later much easier to handle financially, and more importantly, emotionally.
One of the most important questions to consider when purchasing a home is, “What would prevent buyers from wanting to live in this home?” While that consideration may seem to be apparent, believe it or not, it is often more of afterthought. Instead, we concentrate on the positives, and minimize the drawbacks of the property. But that’s purely part of human nature, don’t you think? Clearly, the attractive features are important and shouldn’t be minimized. But, it’s wise to consider the drawbacks, especially those that might be deal breakers.
What sort of drawbacks are we talking about? What might prevent prospective buyers from choosing other homes instead of yours?
- Location - there’s lots to consider here. The obvious is proximity from schools, shopping, and other area attractions. Is the property hard to get to? How about traffic patterns? Is it located on a street where there’s a high traffic volume? Does the traffic make it difficult to get in and out of the driveway?
- What about the particular lot. Is it level? And, if not, does it matter. How steep is the driveway? As one blogger mentioned on their site about the a driveway concern, “Basically the only thing that is keeping us from signing the purchase and sale (which we have to do some time today) is our ambivalence about the driveway - the one thing we really can’t fix.” Where does the water concentrate or run off to when it rains? Does it drain away from the house or towards the house causing excessive wetness next to the house? These are questions that need to be considered before purchasing any property.
- What about the basement. Is it a walk-up, or preferably, a walk-out? You can bet that most buyers prefer an outside entrance/exit to the basement. With walk-outs, the additional outside light these provide are another attraction.
- Room sizes. While we don’t expect the normal home to provide us the extravagance of a luxury home, the homebuilding trend has been one of a bit more room in both the kitchen and the bathrooms, especially the Master bathroom . Remember, you can always upgrade what’s there, but it’s much more difficult to make rooms larger once the home is already built. That goes for the bedrooms as well.
- Subdivision amenities/fees. While all homes aren’t necessarily in a subdivision, or part of a Home Owners Association (HOA), when they are, they can be an important attraction, or, at times the reason for hesitation by the buyer. Some of the attractive features include swimming pool, bike/walking trails, sidewalks, and a community clubhouse, among others. For some, this package of community features is enough to tip the balance when two homes are competing for a buyer. On the other hand, HOA fees and restrictions can be the deciding factor between two competing properties. If fees are too high, and restictions too onerous, buyers can turn to many other appealing choices. Most of us just don’t need the expense and headaches.
There are many important issues home buyers consider in their search for a place to call home. While each of us tends to focus on the attractive home features, we need to consider the flip side of the equation as well. What are the drawbacks? Home buyers, at some point, become home sellers. The last thing you want to thinking when it comes time to sell is, “shoulda, woulda, coulda.” As a buyer, use some forsight and ask the critical, discriminating questions before you buy. While a home’s ”bells and whistles” can be awfully attractive, make sure you notice the blemishes as well. It’ll sure help when it gets to the end game and its time to pack up for another assignment.
| Discussion: No Comments »
Finally - The Housing Crisis is Over!
May 6th, 2008 categories: Finance, Market Trends, Real Estate News
Yes, folks, that’s right. According to today’s Wall Street Journal (WSJ) the housing crisis that’s been upon us since 2005, is at an end. Kind of, anyway. The article’s author, Cyril Moulle-Berteaux, is a managing partner of Traxis Partners LP, a hedge fund or investment advisory firm based in New York city. He cites a number of indications that the worst of the housing “crunch” is behind us, and that current trends indicate we’ve bottomed out, or, as he puts it, “is bottoming out.”
Moulle-Berteaux mentions the market indicators include:
- Homes sales peaked in 2005. New home sales are down 63% from peak levels of 1.4 million.
- Housing starts have fallen more than 50%, and adjusted for population growth, are back to 1982 levels
- Many that were priced out of the market during the downturn can now afford to get back in. Three primary factors have contributed to this:
- Home values have fallen
- Mortgage rates have decreased
- Personal income has increased
Home construction deline is another indicator cited by the author. New home inventories peaked in July of 2006 at 598,000 homes. That figure had declined to 482,000 by the end of March. This decline is due to a drop-off in home completions which have resulted in an increase in the rate of undershooting new home sales. This “under supply” will reduce the inventory. He expects a seven month inventory supply by the end of this calendar year. Once we reach the five month supply mark, which Moulle-Berteaux predicts will occur in ‘09, home prices should hit bottom.
And, while the WSJ’s news is welcome, these views aren’t shared by all, as evidenced here.
Forecasting the long term direction of any market is risky at best. I don’t know about you, but, at this point, I’ll take Mr. Moulle-Berteaux at his word.
| Discussion: No Comments »
