Buying Down Your Interest Rates

As interest rates have moved up slightly, more people are choosing to buy down their interest rates by paying points.  Typically that works by you, the borrower, paying 1% of the value of the mortgage at settlement in order to reduce your interest rate by .25%. However, it now turns out that most people should not be buying down their interest rates.

A new study by Abdullah Yavas, an Elliott Professor of Business Administration at Penn State's Smeal College of Business and Freddie Mac analyst Yan Chang shows that with very few exceptions, borrowers are losing money when they pay points.

Only 1.4% of borrowers who bought points held those mortgages long enough for that strategy to pay off. And, of those borrowers who didn't purchase points, only 1.5% would have been better off buying points.

The typical homeowner needs to keep that mortgage for five years in order to make it pay off. Most of are moving more often these days. And, even if you're not, you are likely to refinance that mortgage before the five years is up.

There are calculators out there to help you do the math and determine if you should pay the points. One source is The Motley Fool at http://www.fool.com

Before you refinance or buy your next home, do the math and save yourself some money!

2007 Forecast

Having taken a break for Christmas and for nursing of a very sick pet, it's time to get back in the swing of things in the real estate world!

I know many of you are wondering what the new year will bring for the real estate market. I don't claim to have a crystal ball and make no guarantees. Remember the old saying, "I don't make the news, I just report it!" That's how it works with the market as well.

There was an radio interview with Nicholas Retsinas from Harvard University's Joint Center for Housing Studies. The interview was to ask him about the outlook for 2007. Bear in mind that Mr. Retsinas has been pretty bearish on the markets overall and that no doubt remains true as he looks forward. He does agree that the market appears to have bottomed out. However, he sees it staying at the bottom for most, if not all, of 2007. He sees a year of continued slower sales and no increase in prices. According to his projections there may be a few overheated markets where we'll still see additional small price reductions. But for most of us, it will be status quo in the new year.

I don't know how accurate Mr. Retsinas' forecast is, but I don't see any economic factors or real estate market developments that would tell me he's dead wrong.

So, it's your turn to play prognosticator! What do you project for the year ahead?  Are you bullish or bearish? More sales? Higher prices, lower prices, or more of the same? What will 2007 bring for the No. VA housing market? I look forward to your input!

Special Guest Blogger!

For the first time today I have a guest blogger.  I'm delighted to welcome Joeann Fossland, Master Certified Coach and international speaker to my blog. Joeann is also an avid blogger and has brought her philanthropic drive to the blogosphere in an unprecedented Virtual Tour to raise money for CARE. I am pleased and proud that she is here to speak with us today and so glad to be a part of this wonderful effort!

Julie: What buttons do we need to push to make people understand that there is a dire need for help in so many places?

Joeann:  You make very salient observations about the real estate market. You stated recently, "... psychology  usually drives the market more than any hard, cold economic facts." I believe that is also true in terms of philanthropy. The cold, hard economic facts surrounding conditions in Darfur and many African nations, as well as many other regions of the world, have been stark and apparent for years. It is a question of outreach. We need to ASK for help. That is what we are doing on this Blog Tour. We are asking people for help. Help that will put food on people's tables. Help that will educate youngsters. Help that will empower people to make a living for themselves and their families. We invite your blog readers to visit our web site, make purchases through Amazon at our Book Club and Shopping Alliance site, or contribute directly to CARE. For your readers that are real estate professionals, there are some special premium packages that offer over $250 worth of tools for as little as $20. 

Julie: It is often hard for people in the United States to relate to the lives of people on other continents. It is hard to imagine what it must be like to live in some of those places.

Joeann: You are absolutely right. Again, there are clear parallels between our world and the Third World. One your previous guest bloggers said, "Housing is not affordable or sustainable if its occupants must drive far out of the community to find employment. Similarly, local employment is not sustainable if employees must come from far outside of the community to fill those positions." Imagine places in Africa and elsewhere where people have minimal housing, no jobs, and women must walk MILES each day just to gather water for their families!

Julie: You are a real estate coach and trainer. How does Web Women Giving Circle philanthropy relate to real estate service?

Joeann: You offer some good advice to consumers to consider when choosing a real estate professional. I would add one more question to that list: "What do you give back to the community?" There are many agents who make their philanthropic efforts a thrust of their message in their marketing materials. Philanthropy will earn you additional respect in your market!  Thank you for helping us spread the word about CARE in Northern Virginia today. Thank you very much for being a part of the real estate community that is helping to make a difference in the world!

November Average Sales Prices

There's lots of talk out there about what's happening in the housing market.  But let's look at some hard numbers for some of the local jurisdictions.

November '06 Average Home Sale Prices

County/Jurisdiction	11/06 Avg Sales Price	% Change from 11/05
DC	$497,291	-10.96%
Prince George's, MD	$344,956	5.84%
Montgomery, MD	$515,948	1.64%
Frederick, MD	$347,386	0.25%
Alexandria, VA	$485,757	-2.49%
Fairfax, VA	$521,353	-3,82%
Loudon, VA	$501,673	-6.38%
Fauquier, VA	$391,885	-23.31%
Warren, VA	$298,988	6.94%

As you can see, Fauquier County has been hit substantially harder than surrounding areas. I don't have Culpeper numbers right now, but I would speculate that they are worse than Culpeper. John McClain, senior fellow at the center for Regional Analysis, George Mason University says we've taken the brunt of this because of the large percentage of new construction on the market here. When existing homes are competing against that much new construction and the upgrades being offered for free often add up to $50K or more, existing homes lose!

The good news is that some of that inventory is starting to be absorbed. With numbers this low, I believe we will not see substantial continued decreases in prices, at least in the outlying counties.  But don't hold your breath for a quick rebound either! There are still a lot of empty new homes out there!

Increased Activity This Weekend

I can't explain it. And I'm not certain yet that it's more than a blip. But there's been a definite pick up in buyer activity over the last couple weeks.  It was especially notable this weekend, but it's been going on for awhile.

I've had more showings of my listings in the last week than in the previous three months. I received one offer on a listing and a call saying another one may be in the works. I wrote one offer this weekend and have several other buyers who will likely write in the next couple of weeks.

There are many reasons that could be behind this. Or it could be nothing at else. But I believe psychology usually drives the market more than any hard, cold economic facts. And, it may be that there's been a subtle shift in the psychology out there in the last couple of weeks.

If you're an agent, are you seeing any signs of this? If you're a buyer, have there been any changes in your thinking recently? And, if you're a seller, are you seeing increased showings of your home?

I'd love to know what you're all seeing and hearing!

Washington Post Article

Tomorrow's Washington Post will contain an interesting article. The author has tracked a local broker's prognostications on the real estate market over the past couple of years.

While the broker in question has been consistently wrong and consistently overly optimistic and may deserve some scorn it's probably fair to point out that there were economists on both sides of the fence on this.  This broker has lots of company across a wide range of professions.

But it does raise an issue of when does dogged optimism become a disservice to your clients? While I can't tell you what the answer is, I can tell you it's something I wrestle with on a regular basis. If you're not optimistic by nature you probably won't last long in this business. But that may mean that we need to work harder at taking off the rose-colored glasses in order to serve our clients by giving them a true picture of current conditions.

Read the article for yourself.

http://www.washingtonpost.com/wp-dyn/content/article/2006/12/08/AR2006120801682.html?referrer=emailarticlepg

What do you think? Should the broker be run out of town on a rail? If you're an agent, how do you balance optimism and realism when trying to give your clients the best advice?

Slowing Growth

Three local jurisdictions made moves yesterday to limit growth as a way of controlling the increasingly out of control traffic in our area. Or, in the case of Loudon County and Prince William County in Virginia, they hoped to send a message to the Commonwealth that the time has come for action on the issues of traffic, infrastructure and mass transit.

Loudon County and Prince William County are two of the fastest growing counties in the nation. You'd be hard pressed to find a local who feels good about that.  From the increase in gridlock to the higher taxes to pay for infrastructure, local residents are yelling "enough already"!

The question isn't whether a problem exists. It clearly does. The real question is whether their efforts to slow that growth by delaying future housing development is going to fix it. By itself, these moves won't do much of anything. Passing these pieces of legislation won't take a single car off the road tomorrow or next month or even next year. It may slow down how much additional traffic is added in future years. But with infrastructure already years behind current needs, that's small comfort.

The only way these measures are effective is if they produce action in Richmond to remedy this situation. Odds of that aren't great, despite clear signs in the most recent elections that in Northern Virginia this is a pressing voter issue. But Virginia's delegates don't always agree on either the problem or the solution. Compromise will be needed by all parties and it's yet to be seen whether either political party has the sense to put aside partisan bickering and get something accomplished.

What do you think? Will these latest measures to slow or limit growth make any difference? What are the effects likely to be, intended or otherwise? I look forward to your input!

Bottoming Out?

Toll Brothers came out with earnings reports today that looked pretty ugly! Their net income feel 44% last quarter. And their forward predictions weren't all sunshine and daffodils either! Now, I'd be the first to say that doesn't sound like news.  We've heard one bad news story after another in the housing sector. Everybody's earnings look terrible!

But the interesting thing today is that Toll Brothers stock actually went up after their press conference. The market wasn't looking at last quarter, it was looking at what Toll Brothers was saying. And what they said is that they believe they're seeing the bottom in some markets. Most notably for us they specifically mentioned the DC/Northern VA area as one of the places they're seeing that bottom. That would be terrific news!

It should be noted that seeing a bottom does not indicate a big rebound to what we were seeing a couple of years ago. In fact, it doesn't indicate price increases are in the works at all. But if it's true, it would mean an end to falling prices in the near future. It would mean buyers would be a little more comfortable buying again. And these are all very good things!

The question here is how reliable is what Toll Brothers is saying. And it's hard to know. Certainly they have a reason to want to be optimistic for the sake of a higher stock price. But companies who mislead the markets typically get hammered later and most reputable companies don't want to risk that by puffing up their estimates. In fact, often a company would prefer to downplay future expectations.

So, there is reason to be optimistic there. And a little optimism in December never hurt anyone!