Market is Up - Inventory WAY Down - Prices Holding Steady - Rates Down

2008 was the Year of Recovery in Northern Virginia and it will continue in 2009, but this time, with a vengeance! Northern Virginia continues to outperform the region, the state and the nation. Buyers face low inventory, competing with multiple buyers and even paying at or higher than asking price. If the market is divided by price ranges, there’s the Hot Market and the Not Market, thus, property condition is as much a factor as price.

Properties priced under $400,000 are snapped up by first time buyers, move-up sellers, and investors. Between $400,000 and $600,000, the houses are still selling that are priced right and in good condition – usually to first time buyers with plenty of cash and some move-up sellers. Above that range and it’s a tougher market. Many homes are priced right, but there are just no takers. The question of “how low can you go?” keeps being asked of sellers.

Inventory in Northern Virginia (from the border of Washington, DC, to western Fairfax County) is down 26% over the same period last year. Combine that with Pending Sales up 27% and you have buyers battling each other for the well-priced houses in good shape. Enter the all-powerful Interest Rate to home prices that have dropped over the last three months and you have a perfect storm for the advent of a Sellers Market.

Power of Interest Rates
Many times, consumers miss the importance of the interest rate. As of this writing – you can buy a home (or refinance) for 4.875%. These are rates that our grandparents haven’t even seen! What this means is thousands of dollars of savings per year on the mortgage today, compared to just a few months ago. When rates were around 7% mid-year in 2008, a mortgage of $350,000 would have run $2328. Now, it would be $1,852. This gives a buyer two choices – buy the same house for a smaller payment or move up the price range by almost $100,000. Fixed rates are tracking even LOWER than adjustable rate mortgages.

So what? Inventory is slipping – we need more houses on the market to meet today’s demand. Buyers are competing again for houses that look good and priced right. Consider two choices – 1) make the move up (or down) now, while prices are stable and interest rates are low; 2) invest at a time when the rent will cover the monthly payment.
While the local papers and television stations report on a dropping market nationwide, it’s not the case for the real estate market surrounding the White House. The market continues to respond to the job growth adjacent to the nation’s capital (+28,000 new jobs in the DC area in 2008 over 2007).

What constitutes the "bottom of the market"?

I get this question all the time: have we hit the bottom yet? Market by market, that's what's happening across the country. I've been tracking "hot" markets for RealtyTimes.com (http://realtytimes.com/rtpages/manthonycarr.htm) for the last year and I'm seeing very healthy markets across the country in state after state.

The strongest market in the country is nearly any county in Texas. As far as comeback markets, where ever the foreclosures hit the hardest is where you'll see the biggest come back. Prince William County, Virginia (outside Washington, D.C.), many markets in the state of Florida, Los Angeles, Las Vegas, all are in the middle of a recovery.

Now, recovery doesn't immediately mean increasing prices. So when I refer to a "recovering" market, I'm looking more at pending sales; list to sold price; the level and direction of seller subsidies; and sustainability of the market, such as job growth and the housing inventory.

When inventory begins to drop, with pending sales moving upward - that's the beginning stages of a recovering market. That's what's happening all over Northern Virginia, for instance, in the shadow of the White House. In Fairfax County over the last month, pending sales have jumped above last December's levels by more than 50%; sales are up in the 30% range and inventory has dropped by about 35%. This has been happening for most of the year (2008).

Does the mainline media pick up on it? Of course, not, because they think a recovering market means one thing -- prices. Unfortunately, by the time you put in a contract on a home when prices are moving up - your chance for a great deal have already disappeared. Most likely, you'll pay at or above asking price and must bring your own money to the table without the benefit of seller closing costs to help you keep your own cash for redecorating, fix ups, etc.

I recently competed on a foreclosure property in Springfield, Virginia against four other investors. My buyer won, only because we came in closer to asking price more than anyone else and asked for no closing costs at all. We got a good deal, as the houses are selling for more than $100,000 more than what we pulled in on the property -- of course, it needs fixing up.

So as you look around for that "great deal," look at the underlying numbers that reveal the bottom of the market - not the sales price which tells you nothing more than the fact that the bottom's already hit.

NEWS ALERT: Fixed-Rate Mortgage @ 4.75%

Hey Folks – I don’t normally send emails out to my whole database, but today’s news is unprecedented from the mortgage field. You can refinance your mortgage on a FIXED RATE 30- or 15-year mortgage at 4.75%. For most mortgage holders, this could save you thousands of dollars per year.

I just wanted to pass this on to you and for you to do whatever you want with the information.

To calculate your savings, you can visit http://www.mortgagecalculator.org/. If you need a loan officer I can connect you with someone at our sister company Weichert Financial Services.

That Bounce Sound Was the Bottom of the Market

I met up with a potential buyer last night at a well-priced listing that is seller owned and completely fixed up inside. She was worried the price was too high, we hadn’t hit bottom yet, things could get worse, etc., etc.

She was not unlike many buyers out there in markets across the country that have already started to show signs of recovery. In Northern Virginia – the bottom was hit months ago. It’s a challenge of Myth vs. Reality.

(See this piece from Mortgage News Daily on foreclosures dropping: http://www.mortgagenewsdaily.com/12112008_realtytrac_foreclosures.asp)

For instance, in Fairfax County (just a few miles from Washington, D.C.), the inventory is down 23% while pending sales are up a whopping 60% over the last 30 days. In addition, average prices have leveled off for months now at pre-2004 levels and starting to rebound.

Buyers are now competing on foreclosures with multiple offers and escalating their offers over list price.

Prices are still thousands higher than they were in 2002 and previous. The good news for homeowners who want to move up is that if they purchased before 2002, more than likely, they can sell for a profit and move up for a lot less than they could have just a couple years ago.

The concept that “My house has lost money” is only important when you’re selling. What the consumer should look at is the purchase price vs. the sales price – not the height of the market value vs. today’s value. If you bought for $275,000 and sell at $375,000 – there’s $100,000 in profit – regardless of the fact that your house swelled in value to $450,000 three years ago. Such a seller has NOT lost $75,000, instead, he’s profited $100,000. In addition, he’ll be moving into a good deal in today’s housing and financing market.

FW: Fuel Assistance Program Extended until December 1

Hello Friends – If you or anyone you know needs assistance this winter with your heating fuel, please see the program below. My wife sent this to me and I wanted to pass this along. There is an online screening process for applicants to complete. Note the deadline – December 1.

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From: DFS PIO [mailto:DFSPIO@fairfaxcounty.gov]
Sent: Monday, November 17, 2008 12:05 PM
To: DFS PIO
Subject: Fuel Assistance Program Extended until December 1

The application deadline for the federally funded Fuel Assistance program has been extended until December 1. The original application deadline had been set for Friday, November 14.

The Fuel Assistance program helps eligible low-income households with the costs of heating their homes.

Applications are also available on the Web from the Virginia Department of Social Services at www.dss.virginia.gov.

FairfaxCounty residents who wish to apply are encouraged to call the Department of Family Services’ energy assistance phone line at 703-324-7604 (TTY: 703-222-9452) or visit any of the department’s four offices:

• Fairfax - PenninoBuilding, 12011 Government Center Parkway
  703-324-7500, TTY 703-222-9452


• Falls Church - 6245 Leesburg Pike (Route 7), Falls Church
  703-533-5300, TTY 703-533-5316


• Reston - LakeAnneOfficeBuilding, 11484 WashingtonPlaza West, Reston
  703-787-4900, TTY 703-707-9346


• Richmond Highway/Alexandria - SouthCountyCenter, 8350 Richmond Hwy (Route 1)
  703-704-6353, TTY 703-799-3435

The Department of Family Services offices listed above are open from 8 a.m. to 4:30 p.m., Monday–Friday.