U r b a n T r e k k e r

Reconversion Condo

The reconversion of condo started to pick up, according to USA Today. These days, rental properties are on the uptick... because supply is low.

Via USA Today.

More and more developers are canceling or delaying condominium projects as home sales slow, construction costs soar and lenders balk at financing units that might not sell.

What's making the situation worse is a glut of high-priced condos and too few people who can afford them.

.........

Jack McCabe, chief executive of McCabe Research and Consulting in Deerfield Beach, Fla., said desperate developers with finished condos are offering incentives in South Florida.

Freebies range from one year's free mortgage to the use of a yacht or upgraded kitchen packages. McCabe thinks some developers might even sell condo units at cost if sales continue to weaken.

McCabe believes the condo market, especially the luxury end, is at risk of a crash. Over the next few years, he sees prices falling by double-digit percentages.

Wow, free falling in the luxury end market? Locally, a few developers decided to convert their apartment rentals (they bought) from condo to rentals at least until the market picks up again. These are not pricey condominiums but rather targeting upper low to middle high income buyers.

* Developers Nix or Delay Condo Projects As Sales Slow, Cost Rise [USA Today]

Real Estate Links

Here are the links to selected stories from around the Internet on real estate:

* Home Sellers Sweeten Deals [BBOL]
* Pride and Joy House [Baltimore Sun]
* Goldman Sachs on Housing Prices [Calculated Risk]
* GDP, Residential Investment and Saving [Calculated Risk]
* Five Tips on Getting Your House Appraised Before Selling [Real Estate Journal]
* Most Homeowners Are Choosing Electronic Gates for Their House [Real Estate Journal]
* Teardowns: Costs, Benefits and Public Policy [Planetizen]
* Why Is Washington Missing the Train [Planetizen]
* Alt-Dominion [Washington Post]
* Greenbelt Complex Attracts Top Designers For Ambitious Expansion [Washington Post]
* Don't Let Repair Cost Drain Your Savings [CNN/Money]
* Steep Drop in Florida Home Market [CNN/Money]

Pricing It Well Is Key

In the world of real estate, marketing plays a big role. Ask any marketers and Realtors around, how important is pricing? Most likely they would say, very important. The story on pricing your home in today's market from the Washington Post, is a must read for sellers. Forget about last year prices.. it doesn't exist anymore!

By the time, your home is listed, it becomes a commodity. It will compete with other properties in the market, within the same price range, neighborhoods and school districts as well as outside the county jurisdiction. So, if there are so many homes on the market -- how do you plan to make your property "stand out" among the crowd and get it sold. Gone are the days when homes sold in a blink. In today's market,  overpriced properties stay cold for long. The longer a property stays on the market, the harder it becomes to get it sold.

All homes on the market compete for agents and buyers attention. Buyers now are in the drivers' seat. Builders have been very aggressive in their efforts to sell their inventories. You should too. Another important component that makes a property attractive is its condition. It is true, that today's buyers want to have move-in condition. If you plan to sell your house As-Is, the price should be well below competition. After all, "As-Is" houses only attracted certain type of buyers, the DIYs or builders.

One more thing, be patient if your house is not sell quickly. If no traffic for weeks, it's time to have price redux. Thanks to the tax record, buyers know how much you paid for your home. So, be realistic with your expectations.

Oh, by the way, here is an idea for you. How about getting your home appraised and home inspection before selling? At least you know what to expect.

* Sales of New Homes Decline in June [Washington Post]
* In Slowing Market, Price is Only the First Step [Washington Post]
* Home Sales Statistics June 2006 [NVAR]
* After 5 Years of Growth Home Prices Drop [Washington Post]
* Five Tips on Getting Your Home Appraised Before Selling [Real Estate Journal]

Real Estate Links

Here are the links to selected stories from around the Internet on real estate:

* Housing Prices Stronger Than You Think [BW Hot Property]
* Georgetown Business Leaders Favor Removal of Freeway [Washington BizJournal]
* When Town Officials Are Bribed to Approve Sprawl [Planetizen]
* Small Towns Are Hub for Innovators [Planetizen]
* Mortgage Rate Rise Taking Back Last Weeks Gain [MND]
* The Most Inventive Towns In America [CoolTown Studios]
* Money Can Buy A Big House But Not Happiness [Inman News]
* House Passes Bill to Boost Home Ownership Under FHA [Inman News]
* High Priced Town: Maybe It's Time to Move [Realty Times]
* Residential Sprinklers Prove Their Value [WHG]

June New Home Sales Drop 3%

The Commerce Dept. said yesterday that new home sales dropped 3% in June and it was the first drop since February, according to Baltimore Sun.

Sales of new homes fell in June for the first time in four months, and the government also lowered figures for May, providing further evidence the high-flying housing market is losing altitude.

The Commerce Department reported today that new home sales dropped by 3 percent last month to a seasonally adjusted annual sales pace of 1.131 million units. It was the first decline since an 11.5 percent drop in February.

* New Home Sales Drop 3% in June, First Fall Since Feb [Baltimore Sun]
* Sales of New Homes Fall in June [Baltimore Sun]

Loan Approval Process

The approval of your mortgage loan is based primarily on three 
criteria, sometimes referred to as the three Cs; collateral, credit, 
and capacity. If you already have been approved prior to writing 
a contract, you have covered two of the threes Cs (credit and 
capacity) and have obtained your approval based on these two items. 

The loan officer pulled a credit report and you have already 
provided paystubs and bank statements that document your ability 
to afford the mortgage payment and cover your down payment and 
closing costs. The credit report has become the single most 
important piece of the approval process. Because the new automated 
underwriting systems are so dependent on credit scores and scores 
are widely used to determine mortgage interest rates, it is 
imperative that you are familiar with your credit report. 

High credit scores will sometimes overcome lower income or other 
weaknesses in your application. The third part of the approval 
process takes place after your contract has been accepted. It is 
the lender’s determination that the property you’re buying is 
sufficient security or ‘collateral’ for the loan. The loan officer 
with whom you have been dealing will generally turn over the 
documentation that has been collected to a loan processor. This 
will normally include a payment from you to cover the lender’s 
cost of hiring an independent appraiser to inspect your new home 
to determine fair market value. This appraisal serves two important 
purposes; it tells the lender if the house is worth enough to 
cover the loan and provides a third-party analysis to the buyer 
from someone without an interest in the transaction. 

In the event of default, the lender must be able to recover enough 
from the sale of property to make up for the unpaid balance of the 
loan.  The processor assists the loan officer and oversees the 
final approval process. The processor is responsible for 
obtaining documentation from you, credit bureau, the appraiser, 
your insurance company and others. Processing time can vary 
widely from lender to lender and can also be affected by complexity 
of your application. It is important that you respond as quickly 
as possible when you are contacted by the lender for additional 
information. This will expedite the process and help ensure that 
settlement occurs on time.

Sandra Potterfield
Intercoastal Mortgage
703-587-0498

Problems With Inflated Appraisals

WSJ first brought the story about the problem homeowners facing down the road with inflated appraisals. When market is hot, everything should be okay. However, when market is cooling off, suddenly the possibilty of all kinds of problems surface. (click to see larger image)

Via Real Estate Journal.

Most homeowners have enough equity in their homes so they don't need to worry much about whether past appraisals were realistic. But dubious appraisals are a risk for the hundreds of thousands of people who in the past few years have bought homes with little or no down payment, or used almost all of their home equity to finance home improvements or other types of spending. That has left these people with little financial cushion to deal with rising interest rates.

It's a catch 22 situation, for everyone involved in the process. For buyers, it is likely that the home they're buying is less than the sales price after closing, which for most people who intend to live in the house for a while wouldn't matter much -- because it's only on paper. No transaction takes place.. or no money changed hands. 

However, when still in the buying process, appraisal is something that can make or break a deal! The language in current regional sales contract (note: Virginia will have a new regional sales contract effective Sept. 2006) says,

"If the lender appraisal is not equal to or greater than sales price, the purchaser will have the privilege and option of proceeding with consummation of this contract without regard to the amount of appraised value."

A buyer has three (3) days to think it over and make the decision whether to go ahead or void the contract. On the other side of the transaction, the language for sellers says,

"If the purchaser does not make the election, it will be the sellers option to lower the sales price to the appraised value and this contract will remain in full force and effect at the lower sales price."

If both parties can't agree on something, then the contract becomes void. In a market where sale prices changed so fast, it is not easy for the appraisers to come up with the home valuation. There are so many variations that could affect the transaction.

* New Headache for Americans: Inflated Home Appraisals [Real Estate Journal]
* No Smoking Gun: Appraisal Inflation is More Widespread than You Think [Matrix]
* Putting Off the Mortgage Pain, Until... [Calculated Risk]

Real Estate Links

Here are the links to selected stories from around the Internet on real estate:

* Housing Markets On The Way Up and Those on The Way Down [Real Estate Journal]
* New Headaches for Americans: Inflated Appraisals [Real Estate Journal]
* No Smoking Gun: Appraisal Inflation is More Widespread Than You Think [Matrix]
* After 5 Years of Growth, Home Prices Drop [Washington Post]
* D.C. Developer Sways the City With Big Bucks and Big Ideas [Washington Post]
* After a Road Cuts Through It, They Plan to Forge it On [Washington Post]
* Credit Scores Are Ever Changing [Realty Times]
* HOA Powder Problem [Realty Times]
* Town, County Back Arrington Knolls Annexation Plan [Clarke Times-Courier]

Hot Trend: Green Living

Going green is happening all over the place and affects some aspects of our living style.  Take a look around -- everyone is talking about the high energy prices (or complaining about it!) and building energy efficient homes is trendy among builders.

Via MSNBC/Newsweek.

All over America, a post-Katrina future is taking shape under the banner of "sustainability." Architects vie to create the most sustainable skyscrapers. The current champion in Manhattan appears to be Norman Foster's futuristic headquarters for the Hearst Corp., lit to its innermost depths by God's own high-efficiency light source, the sun.

It's going to take sometime for home resale market to catch up with the trend. Right now, the market is dominated by builders entering to build energy efficient homes. What else? Wholefoods is one of the companies selling the lifestyle and very popular. It is so popular that people beg them to open up store in a community. People believe, that somehow it gentrify a community. Moreover, dotcom millionaires, i.e. Steve Case, are busy looking for the next generation of businesses doing green living business for their portfolio. How about this -- Walmart is into green.

* Green America: Why Environmentalism is Hot [MSNBC/Newsweek]

Baltimore, Here We Come...

If you don't mind the commute from Baltimore to your place of work, Baltimore might be the place to be. It's easy access to transportation. According to Washington Post, thousands of city dwellers moved to Baltimore in search of affordable homes. Via Washington Post.

"The migration has been aided by Live Baltimore, a largely city-funded nonprofit that since April 2002 has spent about $350,000 to market Baltimore to Washingtonians, quietly luring prospects with nearly monthly free happy hours in and around the District."

Smart moves by the City. That was 2002, when prices still affordable, and been slowly on the rise. A friend of friend bought a three bedroom Victorian in Baltimore a couple of years ago, when it wasn't popular to live there.. paid some low amount in the neighborhood of $65K. Not sure how much she had to put in to make her place kept up with today's living style. Okay, that was then. What about now? No more $65,000 homes!   

Do you know that there's a possibility that over the long run Baltimore face housing shortage? Baltimore Sun did an analysis of how the housing market for Baltimore and its five counties will look like by 2030 when they add 200,000 jobs to the area. The forecasts showed that in the next four years, Baltimore could have shortage of some 20,000 houses. And fast forward to 2030, the number grows to 100,000 homes. That's why they're searching for solutions to fulfil the demand. In the meantime, how is it going to impact prices? Going up fast.. a remainder of what happened last four years for Washington DC Metro. You think -- maybe this is where "the next boom" is? Possible.

If you are not convinced yet, the last prime space in Inner Harbor was sold to developers who plan to build up -- 50 story condominium and a hotel. That will be Baltimore next skyscraper. Baltimore's Inner Harbor has that advantage.. harbor view.

* Prime Sold for Skyscraper [Baltimore Sun]
* The Coming Housing Crunch [Baltimore Sun]