Affordable Housing

A recent study by George Mason University makes it clear what most of us here probably already know.  Local wages are not even coming close to keeping up with the increased costs of housing.  Given today's news about stagnant wages nationally, this can not be good news for the local real estate market.

Between 2000 and 2005 rents increased in the northern Virginia area 2.7 times faster than wages.  During those same years the cost of buying a home increased 12 times faster than wages.  If you don't see a connection between those numbers and the current slump in the real estate market I'd suggest you're burying your head in the sand!

Income for a family of four now needs to be as high as 94 to 115 percent of the median income in order to live and work in this area without any public assistance or subsidies.

Lest you think this is only a problem for the poor, let me suggest that it impacts all of us.  First of all, the teachers, firefighters, policemen, etc. that we depend on in our communities can no longer afford to live here. That's bad for all of us.

Secondly, the housing prices force families to move further and further out in order to obtain housing that fits within their budget.  This further increases the pressure on roads and mass transit, virtually guaranteeing taxes will have to rise to fix the transportation problems. Increase taxes enough and you'll make this area less attractive to businesses and the economy overall will suffer.

The economy will also suffer as employers are unable to recruit talented people because they don't want to pay the prices either in actual dollars or in the loss of family time commuting, that would allow them to afford to live here.

I'm not proposing solutions here today, although I plan to have another blog talking about possibilities down the road.  But I thought these numbers were shocking enough and important enough to warrant a discussion.

As always, your comments are welcomed!

Woeful Week for Sellers!

Unless you were on another planet this week, you heard an awful lot of bad news about existing home sales.  If you're a seller, or about to be, I'm here to talk you back in off the ledge!

It is certainly true that the documented evidence is now in to support what we've been seeing and feeling locally now for some time.  It is a full-fledged buyers market.  The numbers locally are worse than the national numbers.  But keep in mind that our appreciation was also higher than the national average for the last several years!

So, what should you do if you're home is already on the market?  First of all, reevaluate why you're selling.  There are people who don't need to sell in this market and who should not sell right now.  If you have a choice, I think there's a case to be made for waiting.  Now I'm not talking about waiting a month.  If you have to sell in less than six months you might as well sell now.  I don't think we're going to see a significant improvement in the market for sellers in the near term.

If you're on the market now and no one's looking at your house, it's overpriced.  It doesn't matter what the neighbor's house that wasn't as nice sold for last year.  Prices are falling and they're going to keep falling. You can drop your price now and actually get a buyer and get it sold.  Or you can hold on and eventually take a much steeper discount because prices have fallen further.  It's always your choice on how you price your home. But it's the buyer's choice on whether they bother looking at it and whether or not they put in an offer on it.  If you're overpriced in this market, neither is likely to happen!

If you know you're going to have to put your home on the market in the near future, consider the pricing very carefully.  I would suggest undercutting the price of the most recently sold comparable home by 5%. That's assuming your home is in similar condition.  Discount further if that's not the case.

You should also plan on doing a lot more to get your house ready to show.  It should be free of clutter.  It shouldn't smell like your dogs, cats or birds!  If you have animals you may not notice the smells.  Ask your REALTOR to do a smell test!  Think about hiring a staging professional. Statistics show that homes that are staged sell faster and for more money!

The bottom line is don't panic.  There are still buyers out there.  You just have to compete aggressively to get them.  Go prepare for battle and get in touch if you need reinforcements!

Good News For Everyone

The 30 year mortgage rates have now declined for four straight weeks! They finished this week at right around 6.5% on average, nationally. If you're a buyer, that's great news as housing continues to get more affordable! If you're a seller that's great news as some of those buyers sitting on the sidelines are going to be thinking about locking in these rates before they go back up!

Obviously none of us has a crystal ball, but it wouldn't surprise me to see a slight bump over the next couple of weeks in contracts written. In fact, if interest rates continue to fall, or even just hold steady, that could last more than a couple of weeks!

Keep your fingers crossed for no bad news on the inflation front!

Reducing Waste When Remodeling

Remodeling our homes is filling up landfills! Every year 136 million tons of construction and demolition materials are discarded. This accounts for more than half of all landfill waste! And much of the stuff that's discarded is perfectly usable.  Just because you tired of the cool black bathtub after one year doesn't mean someone else wouldn't give their eyeteeth to own it!

The good news is that we can do better! There are programs in place to help us all recycle what we no longer need and find recycled choices for ourselves when we're remodeling.

Habitat for Humanity now has Restores where you can shop. They take new, unused construction materials that are donated by builders and resell them to the public to help fund the organization's building programs. You can find more information on their web site at http://www.habitat.org/env/restores

You can also find a local Restore in Manassas.

Deconstruction services are becoming more popular throughout the country. Deconstruction is construction in reverse and is used instead of demolition. Materials can then be salvaged and reused elsewhere. There are potential tax breaks available for homeowners who donate materials to deconstruction services.

You can find a directory of deconstruction services at http://www.deconstructioninstitute.com

And, next month, watch for a list of resources on this topic on my web site: http://www.JulieEmery.com

For more information on this topic now, you can also pick up the September issue of Better Homes & Gardens. See the article "12 Ways to Waste Less"

If you know of other resources on this topic or are involved in deconstruction work yourself, please drop me an e-mail at Julie@JulieEmery.com so I can include the information on my web page.

It's easier and easier to make wise environmental choices in many areas. It's great to see the improvements in the home remodeling area as well!

Selling On Your Own

I wanted to devote at least one entry to that subject that no client ever asks me about, selling your house on your own.  This is commonly known as For Sale By Owner (FSBO) in the industry. And the reason no one ever asks me about this is because they believe they know my answer!

But the truth is always more complicated than is comfortable. It's heresy to say this in the real estate world, but I believe there are occasions where it can be perfectly sensible to sell your own home without the involvement of a licensed agent.  Furthermore, before I ever became a REALTOR or even thought about it, my husband and I sold our first home on our own. We had a ratified contract in less than 48 hours for more than asking price and, in fact, had a bidding war. So, I know it can be done!

Let me also say, that, generally, it's not for everyone. Most people who decide to sell their own homes do so without little or no knowledge or preparation. That's probably why statistics say that on average, FSBOs sell for 16% less than homes sold by a licensed agent.

One of the reasons our experience was good is because I chronically over-prepare! I bought just about every book there was about selling your own home and then did just about everything they recommended! We were also in a very hot sellers market in a very desirable neighborhood where there was no other inventory currently for sale. And we knew this going in because we did our homework. The odds were in our favor! Obviously, that's not always the case!

So, here are some questions to ask yourself if you're contemplating doing this on your own:

1. Are you willing to invest the time to research current market conditions so you can set the price properly?

2. Are you willing to educate yourself about the process and follow the advice of the experts?

3. Do you have a good real estate attorney to assist you with the settlement and perhaps help you review the contract?

4. Are you able to make your home available to potential buyers seven days a week, at least 10 hours/day?

5. Are you (and your spouse!) able to conduct negotiations in a calm, business-like manner and set aside your emotional attachment to your home?

6. Are you able to wait longer for your home to sell than one listed by a real estate agent?

7. Are you comfortable with a higher degree of legal risk?

8. Is the current market one where you will only need minimal market exposure in order to sell?

If all of the above are answered in the affirmative, it may be worth it to try the FSBO route! But don't tell any other agents I said that!!!

Good Faith Estimate

As a buyer, you're entitled to a Good Faith Estimate from your lender. By law the lender must deliver this to you within three days of getting a copy of the ratified contract.

So, first of all, make sure your agent gets the contract to the lender as soon as possible once it's ratified! Then, make sure you hold your lender accountable for providing the Good Faith Estimate and getting it to you in a timely fashion!

This estimate, while it is an "estimate", should be very accurate. What should absolutely be written in stone on this are the lenders fees. Barring you're agreeing to a different program later on in the process, these fees should be absolutely accurate.

The GFE should go with you to settlement. In fact, you and your agent should compare it to your HUD1 as soon as that document is available. (The availability of HUD1s will have to be a whole 'nother blog!)

If the lenders fees do not agree with what you were given on the GFE stop and talk to the lender and make sure this gets fixed immediately. Do not sign the HUD1 without making sure those numbers are accurate!

Market Timing

While the sellers out there are in a fair amount of pain, buyers aren't feeling completely warm and fuzzy either!  It is true that they've finally got some negotiating leverage, really for the first time in years.  But there is also a lot of uncertainty among most buyers about whether to buy now or wait.  Will the market get even softer?  Will there be even better deals down the road?

My advice is generally that if you want to buy a house and you plan on staying in that house for three years or more, this is a great time to buy. The economic conditions are not such that we seem likely to see a prolonged market downturn or steep price declines over years. In fact, one reason the rental market is so overheated right now is that there are still tons of people moving into the area.  The economy here is strong and growing and most of those people coming in really do want to buy houses!

So eventually, this market will turn around.  What I can't tell you (what no one can tell you) is when!  You've probably heard what they call someone who tries to time the stock market....BROKE!  The experts can't do it in the stock market.  And I'll tell you that the professionals in real estate can't guarantee anything either!

You may save a few thousand dollars if you wait.  But you may not. The next economic report may push interest rates back down. Interest rates are already still at a relatively low point historically.  If rates start drifting back down again, the market is likely to respond to that with higher prices.  If you've been watching your dream house, waiting for it to get cheap enough to buy, you just might see it getting more expensive and out of reach!

So, if this is a home for your family and not an investment you're intending to flip, I'd say find what you want, use your agent's negotiating skills to negotiate a tough but fair deal, and buy the house you love.

For those investors out there, if you're buying to rent and hold for the longer term, there are some great deals right now.  That's why my phone is ringing with more investor calls these days!  But if you're buying to flip I'd say you need to sit on the sidelines a bit longer!

What NOT to Buy

I've just gotten back from vacation!  And while vacation is wonderful, it's also great to be home!

Recently some clients who are almost ready to buy a home sat down with me to talk about what they should look for and what they should avoid in a home.  In my opinion, not enough buyers take the time to do this kind of planning. While it may not seem to make much of a difference up front, knowing what to avoid in a home can make a difference when you're ready to sell. As I tell my clients, if you plan to live in the home for the rest of your life, no need to worry about resale.  Otherwise, though, it's important to give this some serious thought.

So, a quick list of what you'll want to avoid when buying a home. Note that this list is based on our area of Virginia.  Real estate is always, always local!  The list will be different in other localities and other states.

Avoid properties on busy roads.

Avoid split foyers.

Avoid properties with wood/cedar siding.

Avoid homes with less than 3 bedrooms (4 is even better).

Avoid homes with less than 2 bathrooms.

Avoid homes in areas with undesirable businesses. (Don't buy a house next to the landfill!)

These are the basics. If you're in the market to buy and you'd like to sit down for a longer discussion of this subject BEFORE you get that big mortgage, give me a call at 540-270-2742 or e-mail me at Julie@JulieEmery.com  I'd love to hear from you!