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

Assessment is Not What the House is Worth

Some people mistakenly believed that assessment is the same as appraisal, including my neighbor who came by the other day. He thinks that assessment is appraisal. It is not. It's two different thing. Assessment is what the local government assess of the value of a property based on a formula - for tax purposes. It could be mass appraisal, not independent appraisal, like when you want to get financing from your lender. You get to how much your house is worth, usually after an appraiser is sent out to preview your house, at the request of a lender. If you are selling, lender put the order on behalf of buyer. Based on what the appraiser sees (including improvements), recent comps, the appraisal would then give his/her professional opinion on the value of that property (either use for financing or refinancing).

Though, if we look at the example below, Arlington County's formula for tax assessment is directly linked with how much the house would sell. Assessments are made at 100% of value. However, for some other jurisdictions, like the District of Columbia, it is a different story. DC uses a different formula than Arlington. They use what they call the 'assessment ratio,' which is the assessed value/ sale price ratio. To me, DC's formula it's kind of complicated to figure it out. There's so many different average variations they use. (You can read here for more). The assessment ratio is then used to get to the estimated fair market value.

Here's my interpretation..

Assessment vs. Appraisal

Resources:

District of Columbia FY Assessment Ratio Report

Arlington County Real Estate Assessments

Feds Pulls Out of Mortgage Market

Just in time before the Spring season, the Feds is pulling out of the market. This will affect home buying. The mortgage lifeline is drying out. The Feds been propping the housing market in keeping interest rates low for awhile. But, market haven't fully recovered yet. In Washington DC, 2009 home sales was definitely better than 2008, but it's total number of homes sold still lower than 2004.

These dissenters also warn that mortgage rates could shoot up, perhaps to 6 percent or higher, because private investors buying securities would demand a greater rate of return than the Fed. To reach it, lenders may have to raise rates for consumers.

[via Washington Post]

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• Rates on 30-year home loans fall to 5.06 pct (seattletimes.nwsource.com)

DC October Home Sales Up 40.58%. Ave. Home Price off 16.76%

According to MRIS data, Washington DC October '09 home sales inched up to almost 41%. Sales up because prices are down in single home and townhouse/ rowhouse market. The total number of homes sold up from 414 units to 582 units while the average sales dips -16.76% from $398,450 to $380,000. The median price (50/50 up or down prices) off -3.66%, down from $394,450 a year ago to $380,000.

This is where the segment of the residential market got hit the hardest: single family home (that includes rowhouse). Average home sales off -34.84% from $1,020,059 to $664,710. Ouch! The townhouse/ rowhouse segment, also see the average sales price down -14.35% from $545,562 to $467,279.

On a month to month trend from '08 to '09, the number of homes under contracts is the highest over a year span. The number of homes went under contract is a little bit above the 450 units mark. The trend is encouraging, but looking at the data (listings and under contracts), DC still have more than a year of homes supply. Home inventory for single home and rowhouse stands at a bit over 14 months! A *strong* buyers' market. Motivated sellers are willing to talk to you.

 
image: GCAAR

Condo sales last month is better than in '08. October sales up 25.9% from 189 units to 238 units with average sales around $412,983. The median price (usually use in comparison) is at $355,000 down from $360,000. The number of active listings also decline -18% from 1,459 units to 1,197 units. Condo inventory shows that it is still a buyers' market. It stands at 6.52 months.

Seventy-eight percent of condo sales is under $499,999! First-time home buyers? This trend corresponds to the type of financing use to purchase homes. One-third of purchases were financed with either FHA or VA loans.

Here's the breakdown:

Conventional     268

FHA                  173

VA                     12

Assumption        32

Cash                  85

On all types (single home, rowhouse, townhouse, condo, co-op), we are seeing a trend that inventory is down. Maybe sellers are decided to stay put. They are not selling their homes at this market, unless they're forced to make some life changing decision..

Getting Graphic: August 2009 Foreclosure Rate by Zips Wash-Arl-Alex

For larger view click here

Not so good Friday news. Foreclosure rates in August have increased for the Metropolitan Washington DC .

"... for the Washington-Arlington-Alexandria area, the rate of foreclosures among outstanding mortgage loans is 2.45 percent for the month of August, an increase of 1.29 percentage points compared to August of 2008 when the rate was 1.16 percent.* Foreclosure activity in Washington-Arlington-Alexandria is lower than the national foreclosure rate which was 2.86 percent for August 2009, representing a 0.41 percentage point difference.

Also in Washington-Arlington-Alexandria, the mortgage delinquency rate has increased. According to First American CoreLogic data for August 2009, 6.85 percent of mortgage loans were 90 days or more delinquent compared to 4.13 percent for the same period last year, representing an increase of 2.72 percentage points."

[via First American Logic]

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2 Out of 3 Short-Sales Never Close

So that's the ratio.

"During the second quarter, 14% of all home sales were short sales and they were made primarily to first-time buyers who may have more flexibility to deal with the long wait times, according to a survey by Campbell Communications. The sales volume could be much greater. Two out of three short sales never close. “In general, you have to have three offers for every completed short sale,” said survey designer Thomas Popik. “The first offer, the buyer walks before they get a yes or no. On the second offer they walk a good part of the time. The third offer is the charm because it’s been in process long enough at the lender that the lender knows they want to do this."

[via RIS Media]

Read full story here..

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Real Estate Feeds on Alltop

Just finished putting together feeds of real estate and econ news on Alltop. Alltop is pretty cool. You can now read news from the top sources out there on one site, here. And this will save your time from checking out different sites for updates.. 

Buyer's Pressure

First time home buyers: act now. The November 30 deadline to claim for tax break is approaching quick.

If you are a first-time buyer and you are interested in the credit, you need to act now. Finding and closing on a house is a complicated process these days and it could easily take 12 weeks or more to complete, pushing you right up against the deadline. And you'll need to make sure you and your house -- a newly built home, for instance, is only considered "purchased" on the day you occupy it -- qualify for the credit in the first place.

[via MarketWatch]

The last line is important, especially if you are buying a new home: home is delivered and occupied.

Credit Conditions can Dent Market

It's so true.

image: via NVAR

Northern Virginia Inventory Drops to Under 4 Mos. Supply, in August

Image by Getty Images via Daylife

For the month of August, inventory of homes in Northern Virginia declines to 3.87 from 5.07 months. Below 5-6 months supply is clearly seller's market. Sellers don't get your chin up yet, because lower priced homes 'still' dominate the sales. 

What's interesting is this: the sub-$200k no longer dominate the sales. Twelve percent of all homes sold is in the sub-$200k. However, about thirty-nine percent of homes sold in August was in the $200,000 to $400,000 range. So, prices inched up a bit.

A total of 1813 homes was sold in August, up by 1 home from the same period last year. Days on market gets shorter, from 87 to 63 days. The average sales price sales price declined by 3.17% from $473,183 to $458,172. Using the point of reference above with more sales happening in the $200k-400k, the median price also up by 1.31% from $389,000 to $395,000.

On the other hand, year-to-date sales was up by 9.83% from 11,683 to 12,831 homes. Average sales price, still in negative territory. It's down 11.07% from $481,280 to $428,011.

Real-time data via MRIS:

Active listings         4,233

    Under $400k       1,374 

Under contract       4,315

Distressed properties still dominate the listings under $400,000. Of 1,374 actives, about 557 or 40% of listings is distressed properties (in foreclosure and short-sale). The number of short-sale homes on the market actually 3 to 1 foreclosures.

So long as foreclosures and short-sale are still around and dominate the market, pricing properties will be an uphill battle for regular sellers...

data: NVAR, MRIS

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Stumbling Blocks to Condo Purchase

Today's buyers market is very populated with either investors or first time home buyers. The two groups are bidding each other out in some transactions, especially in buying distressed properties, i.e. foreclosure.

Here are two big stumbling blocks to condo purchase:

1. Down-payment.

Most investors got an advantage in terms of funding. Often times, they come in with cash. So, they will have no problem with down-payment. However, on the downside for investors, they are not really 'welcome' in condo developments that have already higher ratios of investor to owner-occupied.

Solution: if you live and work in Virginia, VHDA can help you 'bridge' that. (if your finances fall within their limits).

2. Financing.

Banks are reluctant to lend to condo borrowers since foreclosure and short-sales tend to be concentrated in the lower priced homes. Unless condominium building is FHA-approved, which requires only a minimum 3.5% down-payment. It will be a big challenge for first-time buyers, if condo is not on the approved list. Sometime your lender can do on the spot loan, but, that is kinda up in the air. 

A write-up from Lisa Fowler with GMU Center for Regional Analysis:

It has become increasingly difficult for condominium buyers to find financing. Since foreclosure rates nationally have been higher for condominiums, lenders have been more hesitant to lend. Also, Fannie Mae and Freddie Mac have been more cautious about insuring loans made to potential condominium buyers. Compounding that, Fannie Mae now requires up to 30 percent down to avoid an interest rate surcharge on a loan for a condominium, and it will only insure loans to people buying new condominiums in projects where at least 70 percent of the units are sold or under contract to owners.

The FHA, which is one of the only alternatives for buyers without a 20 percent down payment, will provide loans only to condominium buyers purchasing a home in an FHA-approved condominium project. (emphasis added)

The 70/30 ratio is a big, big challenge for new condo projects unless they can get FHA to approved their projects. Velocity condo in DC told reservation holders, who are using either VA or FHA, "..to ante up their DP to 20% for it's extremely difficult to find a mortgage lender until building is 51% sold." (building is less than half sold).

Resale condos might not have problem with the 70/30 ratio, though it might have another challenge, which is the investor to owner ratio...

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