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

N.Va Homes Sales Lowest Since 1998

Houston, we got a problem. The total number of homes sold year-to-date for 2007 is the lowest since 1998.

Here's what we've been hearing over the years: The best market happened in 2005. The year 2005 might be the best year as far as prices is concern, but not the number of homes sold.

click image to (+). data: NVAR

Looking back 10 years, we can see how the total number of homes sold between the period of 1998-2007 was actually peak in 2004 with 33,193 homes changed hands. Y-to-Y from 2004 to 2005 homes sold declined by 8% to 30,480 homes. The trend has been going downhill since then.

What's more, number homes sold this year were almost half from its peak in '04 to a low 16,843 in November. Between 2006 to end of November 2007, the total number of homes sold declined by a 'whopping' 32.8% from 22,377 to 16,843 homes, while prices remain flat.

This year monthly trends indicated that we do have a big problem at home. The number of homes sold in most of the jurisdiction in our backyard declined by steadily after the end of second quarter in June. [chart]

Entering winter season, the number of homes sold in Fairfax county declined from its peak of 1,423 in June (technically it's the end of Spring season) to 765 by the end of November. The same is true with other No.Va jurisdictions. In Alexandria, homes sold declined from 228 (June) to 127 (Nov). For Arlington, the total number of homes sold dip from 308 to 149 homes. Loudoun county also faced with the same problem. Homes sold there, declined from 466 to 285 homes.

click image to (+). data: NVAR

Reality Check

The challenges we have today, coming from different directions. The two big things are inventory and financing.  Speaking of inventory. Look at how long will it take to sell all homes at different jurisdiction in Northern Virginia from its current level at the current market absorption rate, without adding new listings and new homes to the pipeline.

data: NVAR, GCAAR

• Washington DC: 7.3 months.
• Alexandria: 10.2 months.
• Arlington: 8.3 months.
• Fairfax: 9.3 months.
• Falls Church: 17 months.
• Loudoun: 11.9 months.

The absorption rates pointed to an overwhelmingly 'strong' buyers' market for Northern Virginia...and Washington DC.

To reduce market inventory, sellers would need to help buyers buy their properties. As simple as that. Whatever works. One of the solutions would be to come down in prices. This is probably a 'wishful thinking.' Because of new mix of products like foreclosed properties, bank-owned, short sale - that were scarce during the heyday of housing market have already  started to blend in with the regulars.

The blending in of unusual products mix made the gap in prices vary widely. You have banks seeking to 'unload' their inventories pronto, like yesterday. Some of them already got burned with subprime. They need to move forward [read: sell now]. They are the type of sellers who are in the position to make deals happen. Sales of new homes hit the lowest in 12 years. That's why home builders have been offering all kinds of incentives along with cutting home prices aggressively to survive. They too, are also in the position to make deals happen.  And then, we also have sellers who are still 'dreaming' wanted get their home sold with 2005 prices. The latter is the slow mo group of sellers.

Going in to 2008. So, what's this market has in store for you?

With the glut of inventory, this current market condition is 'very' good for buyers. Somehow these homes need to be sold one day. These are opportunities waiting for those who are ready, willing and able.

Just make sure that you get the money part straighten up first before out shopping. Because things won't happen without the money thing.. unless of course, you have cash.

Moving on. Have a prosperous and healthy new year.

Technorati Tags: nvar,subprime,citibank,nahb,new homes,mris,gcaar,bank-owned,reo,foreclosed properties,short sale

Happy Holidays..

Wishing you and your family a Happy Holiday and great New Year.

Cost vs. Value 2007: Remodeling

To continue with the annual tradition of remodeling cost and its payback, Realtor and Remodeling magazine brought back the survey for 2007 remodeling costs from around the nation. Going along with the market trends, it shows that the value of remodeling trended down because of the same economic reasons facing housing: 1) Rising (remodeling) costs, and 2) Declining home values.

What they don't mention in the survey, is what is your return on investment if you just do some really basic minor jobs, i.e. painting,  replacing carpet to hardwood, etc. In reality, a good quality hardwood flooring 'wow' buyers more than carpet! The return on energy-efficient appliances still missing. There will come a day when energy-efficient appliances become the 'it' trend.

Of all types of remodeling, minor kitchen job (ROI = 83%) holds its value in comparison to upscale remodeling job, like siding replacement using fiber cement materials (88.1%).

The remodeling costs also depends on which part of the country your home is located. For mid-Atlantic region, here is a sample of remodeling jobs with the return of investments. Using data from Remodeling and Realtor.

• Deck wood addition (85.6%)
• Minor kitchen (82.7%) vs. upscale major kitchen work (79.3%)
• Siding replacement using fiber-cement materials (89.4%) vs. upscale roofing (69.9%)

For Washington DC region DC/MD/VA. Upscale siding replacement pays back 87.4% of your investment at resale. Deck addition, surprisingly holds the highest return of 98.1%. Window replacement ROI 83.1% vs. minor kitchen remodel 81.9%. When you put value in the context, using the data,  a minor kitchen remodel would cost you on average $21,109 with payback at resale of 81.9%. While deck addition would cost you on ave. $10,260 with ROI estimate at 98.1%.

So- before doing any remodeling job, get your budget straight and weigh all options to determine which part of your house that would get the makeover first. The job that potentially has the highest potential returns for your money.

Depending on your location, to get the most bang for your buck, especially if you're selling, you might want to get some idea from region specific report, here.

Technorati Tags: remodeling,cost vs. value,reator,minor kitchen remodel,upscale kitchen remodel,siding replacement,hardwood floors,carpet,bosch,ge profile,energy star appliances

Regional Community News Roundup

* Md. To Add Toll to Ease BRAC Traffic [Examiner Baltimore]
"The influx of more than 10,000 households with the Base Realignment and Closure at Aberdeen Proving Ground by 2012 had some bearing on the expansion of Interstate 95 near White Marsh, according to one Maryland Transportation Authority official."

* Mass Transit Ridership up in Northern Virginia [WTOP]
"Fare increases, parking problems and crowded trains maybe forcing more Northern Virginians away from Metro."

* City Working on New On-Street Parking Plans Around the Ballpark, in Southwest, and on Capitol Hill [JD Land]
"here has been much discussion by residents and city officials over the impending "apocalypse" of traffic and parking congestion with the opening in April of the new ballpark. Residents not only in Near Southeast (all 400 of you) but in Southwest and on Capitol Hill have been waiting for the city to announce exactly how on-street parking will be handled during games, as there is great concern as to whether residents will still be able to park on their streets and won't have to deal with hundreds or thousands of cars circling the neighborhoods looking for free parking."

* Homes with a Bit of Homeland [Washington Post]
"Chuck Langpaul Jr. has been in the custom home business for more than a decade, so he thought he knew a thing or two about groundbreaking ceremonies: Hoist a shovel, snap a picture and it's done."

* FBI Probes Virginia Mortgage Scam [Washington Post]
"The sidewalks are still scrubbed and most lawns are neatly trimmed, but now the subdivision of townhouses off Route 1 in Woodbridge is pocked with empty windows and foreclosures. Federal investigators are poking around."

* Developer Pulls Back from Loudoun County Project [Washington BizJournal]
"A Loudoun County developer has withdrawn a proposal that would have brought nearly 1,000 homes to a property just south of Leesburg Executive Airport."

* Housing Boomerang [City Paper]
"By the end of September, Wilson Reynolds had finally run out of patience. For months, the Adams Morgan advisory neighborhood commissioner had pressured a landlord to make building improvements on two properties with broken locks, homeless squatters, and gang graffiti in the hallways."

Foreclosure Impact on Condo Association

RUNNING a condo association is like running a business. A condo association depends on the monthly fee collected from home owners to manage services for the homeowners and to maintain the upkeep of the building. Payments are collected to pay certain type of expenses, from basic master insurance policy, snow removal, landscape to a whole range of utilities.

What to do, what to do. If a number of condo units in the same boundary are foreclosed? It would create budget havoc. Now the board has to make do with less money.

This is not an easy topic to deal with, because the answer varies based on where the condo is located. Benny Kass has his answer on the topic, he is a legal expert. Via Washington Post.

When a condo owner falls behind on monthly fees, the association should act. One step is to place a lien on the owner's unit. The lien puts the world on notice that the homeowner owes money to the association.

If the condo association is in the District, he says that there is some form known as super-priority lien. In layman's term, the lien takes priority over other type of liens. Via Washington Post.

In the District, if the lender's mortgage was recorded after March 7, 1991, and the owner being foreclosed on is delinquent on association dues, the foreclosing lender is required to pay the condominium association up to six months' worth of those delinquent assessments.

Now you know why some lenders probably want to pull out from doing business in the District. The consequences not good, especially when it comes to dealing with foreclosed properties.

The good news is, a new owner is not responsible to pay past assessments but only responsible to pay future assessments.

At the end of the day, those homeowners who sit on the board have the responsibility to review its finances, finding ways to cut expenses and maybe..raise future assessment to close the gap. Steps that a business running in the red would do to be back in the black.

Realtors, You Guys Read This?

The article from Bloomberg tells it like it is. No industry spin. Just the facts.

via Bloomberg

It amazes me to see how despite the fact -- that almost every day your turn around there's news on housing slow down --  a few fellow professionals out there still try to spin the news. Everyone knows about state of housing market. You have to live in a cave not to know about it. It is happening everywhere. It is affecting the economy and the major players of the industry: Bankers, mortgage lenders, Realtors, homeowners, and builders. Not to mention those who supports and services the housing industry, like contractors, construction workers, retailers and etc.

So, how do we prepare for '08? Read market indicators. The indicators are all over the place. And figure out ways to profit in this market.

Here is a few dollars and cents.

• All real estate is local. Prices in certain neighborhoods still holding on. Some hoods are in declining market. Within DC region, the farther away from the District, the higher the inventory and the slower the market. If you are looking to live closer, there are hoods on the declining market values (according to Fannie/Freddie) with ample supply of properties.
• There's no storm that last forever. The stormy weather certainly benefit those who have been waiting on-the-fence, like buyers, and investors. 
• Think like an investor. Always on the look out for opportunities even if the property is for you to live in it. If you wait until the market turns around (when?), it will be too late! Seize it while the 'opportunities' still in front of you. Successful investors buy low, hold long term and sell high! Forget flip. Current market conditions making it harder to flip. 
• Rental is strong. Ding, ding, ding. Because of declining prices, making it possible now to buy property for rental.
  
• For sellers, if you are seriously want to sell the house -- you have to come down to earth -- and deal with the price reality. No buyers want to preview 'overpriced' listings.
• For Realtors, use common cents business approach. Please stop taking 'overpriced listings.' It's not helping anyone. We all know that it only adds up to the already bloated inventory.

That's it. I rest my case.

Technorati Tags: NAR,realtor,fannie mae,lehman brothers,mortgage loans,housing outlook '08,builders,NAHB,mortgage bankers association

For DC Declining Markets, Buyers to Pay More Jan '08

If you are thinking about buying sometime soon, you will have to up your savings. Fannie Mae and Freddie Mac have changed their lending policies with regards to declining markets, including our area.

Email I received a few days ago from a lender.

click on image to enlarge

To determine declining markets (declining house values), the agencies use three different indicators: S&P Case-Shiller Index, NAR statistics, and Office of Federal Housing Enterprise Oversight [OFHEO].

Effective for mortgage loans with an application date on or after January 15, 2008, Fannie Mae restricts the maximum loan-to-value ratio and combined loan-to-value ratio for properties located in a declining market to five percentage points less than the maximum permitted for the selected mortgage product. [emphasis mine]

via Fannie Mae

What that means to you? If you are qualified for LTV 95/5 with 5 percent downpayment, and you are buying in a declining market, you will now have to "up" your DP from 5 percent to 10 percent. 

Furthermore, lower credit score buyers will have to pay points in addition to the higher DP - if buying in a declining market and financed with conventional loans (up to $417.9k).

Also new for 2008, Risk based pricing for conventional products.  Borrowers with lower credit scores will experience an add-on to the points as follows: 

Below 620 (..or missing score)	2.00%
620-639	1.75%
640-659	1.25%
660-679	0.75%

There you go. It's back to basic: Save more money for your home and maintain good credit score.

Technorati Tags: fannie mae,freedie mac,conventional loans,ARMs,risk based pricing,lenders,bankers,mortgage bankers association,max LTV

DC Blue Chip Neighborhood

Forbes has come up with the list of blue chip real estate investments. The criteria for the selection is "..well establish neighborhoods that have held on to and increased in value over a 17 year period."  They're looking at data dates back to 1990. The return derived from using long term investment strategy of buy-and-hold. The criteria buy-and-flip don't apply here.

Washington DC Rock Creek Park and Mass Avenue neighborhood is part of the list. Via Forbes.

Georgetown is not included on the list, because the homes in Rock Creek/ Mass Ave. hood are "much larger." That's it.

MRIS data shows that there are 2 properties on the market for a 'cool'.. $10M. Yep. 10 million dollars, that is. One property is located on 3154 Highland Place NW. Listing reads that 'this is probably one of -- the last remaining large pieces of land -- in Cleveland Park.' Hm, that's interesting. Another one is located on 2425 Tracy Pl. NW. For this one, you get 2 block of street for the price.

In terms of prices, the two properties above hardly beat this one in McLean --636 Chain Bridge Road sits on 2 lots on the market for $13,500,000 -- making it the most expensive property on the market in Washington DC region.

Sold: $175 Million

Holy smoke! Just read it on the Wealth Report, that Moore Capital hedge fund founder, bought Forbes family property in Colorado for.. $175 million. Yes, 175 millions, that is.

According to this article in the Aspen Daily News, hedge-funder Louis Moore Bacon, of Moore Capital, has purchased the 171,400-acre Trinchera Ranch from the Forbes family for $175 million.

via the Wealth Report

Whew.. I wish I was the one selling this property! I could just do 'blogging' for many many years :-)

Real Estate News Roundup

Subprime Freeze Plan: Who's Left Out [CNN]
"Distressed borrowers looking for relief from the recently announced White House foreclosure prevention plan may be in for a disappointment."

* Yule Pay Less [MarketWatch]
"Every December, homeowners string up outdoor lighting displays and utilities see a seasonal spike in electricity demand. But a growing number of power companies are asking customers to trade in old strings of holiday lights for more efficient, energy saving light emitting diode (LED) lights." 

* America Big Fat Housing Inventory [Business Week]
"Houston, you have a problem—with housing inventory. And as the number of homes for sale in the country continues to creep upward thanks to waning demand, many other major U.S. cities are dealing with the same issue."

* With This Housing Scene, It's a Rental Market [MSNBC]
"This past week, Robert Kiyosaki, author of "Rich Dad, Poor Dad," one of the best-selling personal finance books of all time, dropped by my radio show to talk real estate."

* Best Blue Chip Real Estate Investments [Forbes]
"While gambles on up-and-coming neighborhoods and new developments paid off for many real estate investors during the boom, housing markets across the country are now awash with unsold condos and suffering from sluggish sales." 

* Home Sales Rise, So Do Recession Forecast [CNBC]
"Pending sales of existing U.S. homes rose modestly in October, bucking Wall Street forecasts, but the decline from a year ago was the third largest on record, a reminder of how far housing has fallen."

* Many Homeowners with ARMs Stand to Gain [USA Today]
"The biggest beneficiaries of the Federal Reserve Board's rate cut will be borrowers with adjustable-rate mortgages linked to one-year Treasury bills, says Greg McBride, senior financial analyst for Bankrate.com." 

* Hedge-Funder Breaks Record on Expensive Property [The Wealth Report]
"A friend in Colorado just sent me this news of a new record set for U.S. real-estate purchases. Surprisingly, the record-setting property isn’t Prince Bandar’s place, which was recently pulled off the market."