Just What We Needed! - NOT!

I found a flyer in my inbox today. It was headlined:

ATTENTION AGENTS

IT'S BACK

What is back, you ask??

100% LTV (Loan to Value). So, basically we're talking 100% mortgages. The flyer goes on to detail all the mortgage options available including no income, no asset, no employment verification and "no doc" mortgages.

First of all, I'm not opposed to a variety of mortgage options and even "no docs", mortgages where they basically run your credit and take you at your word for everything else, do have their place. In fact, several states have now outlawed no doc mortgages and I believe that's a mistake.

The problem is that these instruments have all been overused! There is a legitimate market for each and every one of these products. But they should be niche products, appropriate for a small subset of borrowers.

But the flyers mass delivered to real estate agents all over the area make me wonder whether we've really learned that lesson yet. I'll give them the benefit of the doubt and assume that they just want me to know that the products do still exist. I sure hope this doesn't mean that these products are still being widely offered.

Given what we've seen in the mortgage market in the last couple of years, if you're in the market for a mortgage choose your lender carefully both by the company's reputation and that of the individual. And, even then, remember that it's your responsibility to fully understand what you're committing to. Read the fine print and if you don't understand something ask more questions. If anyone says "trust me" or tries to push you into something you don't feel comfortable with, run for the hills!

So, we're all forewarned now. If we're paying attention there's no reason that we should still be seeing these horror stories a couple of years from now!

And I think I'm going to toss that flyer!

Previewing Homes

I went to preview a listing in Jeffersonton last week. When I got there the owner said she didn't understand the term "previewing". I gathered there hadn't been any yet. That's a little sad since her home had been on the market close to a month.

But I thought she might not be the only seller out there who didn't understand the term as it's used in real estate industry. So I'm going to give a brief explanation.

REALTORS go out to see homes that have been listed for sale, but without actual clients to show it to. So, it's just me coming through the house, or sometimes myself and another colleague.

We do this for several reasons. One is that part of our job is to be familiar with the inventory on the market. If I don't know what's for sale out there and how it's priced it's hard to accurately advise my clients on how to price their listing.

And we do it to help out our colleagues. It is an enormous help to have the opinions of other agents regarding both the price of the house and how well it shows.

And the third reason I do this is that even with all the great photos and virtual tours in the MLS these days, it's still not the same as seeing the home in person. Sometimes, going through a house will spark something in my brain. I'll think of a client who may not have been an obvious fit, but for whom the house could work. Those kind of things happen when you actually go through the rooms and see them for yourself.

I only wish that I, and my colleagues were doing more of this. I will admit that time is at a premium and I don't always get a chance to preview every listing I'd like to. That's especially true now with such a large inventory. Even so, I'm hoping that the owner I talked to last week wasn't typical and that plenty of sellers are seeing plenty of real estate agents roaming through their homes!

Here's the Challenge

So yesterday I got an e-mail advertisement for a listing in Hyattsville, Maryland. The home is a brick colonial on a 5000sf lot with an attached garage. It has 3 bedrooms and 1.5 baths and, as far as I can tell seems to be in decent shape. The listing says there are hardwood floors under the carpet. The house has a full, walk out basement. The house is listed for $399,900.

For those of you who don't know Maryland geography, this is within 5 miles of the MD/DC border and very near a metro station.

I wanted to compare what you get for your money here. I looked at homes in Fauquier County priced between $395,000 and $405,000 First of all, there are only four detached homes in Fauquier County that meet these criteria. Two are in Bealeton and two are in Warrenton. Two of the homes are four years old, one is 13 years old and one is 98 years old. They have either three or four bedrooms. Three out of the four have lots of about 10,000sf. One is roughly 20,000sf.

There is no doubt at all that the homes in Fauquier County are larger with larger lots. In three quarters of the cases they're much newer. But I seriously wonder how many people are going to want to make the several hours a day commute into northern VA/DC for the extra house and lot space they would gain.

And that's a big part of our problem in the current environment. Make no mistake; most of the people who have been buying homes in Fauquier County over the last 10 years have been commuters. Right now, we have a product that's not competitive. Long commute time, no mass transit, crowded roads and expensive gas make the decision between here and Hyattsville a no-brainer for a lot of families.

Part of the key to getting us out of our current housing market slump is to fix this problem. It's going to be tough to deal with the commute time, gas prices and road congestion. Guess what that leaves us to work with? Can anybody say price???

Silver Lining

Over the last couple of days we've heard a lot of really spectacularly bad pronouncements about the housing market by builders, CEOs of mortgage companies and economists. While it can seem overwhelming to hear people now talking about a housing recovering that doesn't occur until 2010, there is a silver lining here!

First of all, it's like an addiction, you can't get better until you admit there'a  problem. As long as we had so many "experts" saying "we've hit bottom" or "the housing recovery is just around the corner" there wasn't much chance that any of the real policy makers were going to move to change anything. Everyone from Congress to the Fed are now going to be looking at the effects of a long-term housing downturn on the economy. They're not going to like what they see and that may motivate them to try and help the situation.

The second silver lining here is that first time buyers who were sitting on the fence thinking they would wait until they were sure the market had hit bottom, may stop waiting. It's one thing to say we can squeeze the three kids into the two bedroom apartment for another month or two. It's another thing to think they'll wait out the downturn for several years. This may move some of those buyers into the market sooner rather than later.

And, finally, some sellers are going to get it that the price of their home has to drop. No more thinking that if they hold on for just another month or two the market, and prices, will rebound. It will likely be years before prices rebound. If you want to sell, get aggressive about pricing or forget it.

I've sounded too pessimistic for some people over the last year. But when everyone in the whole world gets pessimistic that's when we'll start to see some light at the end of the tunnel!

Random Good News Bits

OK, enough of the bad news stuff. Here are the bright spots out there!

Interest rates are down! Not a lot, but then we were already near historic lows! A slowing economy could keep rates low for the near term.

Incredibly low unemployment rates. The unemployment rate for the DC/No. VA metropolitan area is 3%. The nationwide average is 4.5%. People need good jobs in order to buy houses and there are lots of them out there.

Charlottesville is the fastest growing MSA (Metropolitan Statistical Area) in the Commonwealth of Virginia. That's on a percentage basis. Ultimately I think this will be good news for Culpeper.

There's discussion about bringing Amtrak from Culpeper to Charlottesville. Again, potentially very good news for Culpeper.

Virginia continues to rank at the very top of states in terms of business climate. If businesses relocate here and bring jobs with them, more homes are bought.

That's what I've got for good news. What can you add?

Title Insurance?

A colleague of mine has contributed the blog post for today. Michelle Hale forwarded this story to me:

Dead Farmers Markets?

Seth Godin is one of my favorite author and his blog is a great place to go to get a shot of adrenaline for your brain!

He's got a blog post about The Death of the Farmers' Markets. It's not really so much that the markets themselves are dying as that many of them have been so wildly successful that they've gotten very large and very commercial and now have no room for actual farmers! The farmer's spot has been taken by people selling packaged foods, of course!

I'm happy to say that he's got it wrong in this area! Our farmers markets are still pretty small, local affairs. There are still local producers of local foods there. I hope that will be the case for a very long time. Maybe that's one of the advantages of living in a more rural area!

And, if you're on the lookout for local food sources you might want to check out the page I've added to my web site with sources of local foods, directly from the people who have grown them. If you've got additional sources that I'm unaware of, please let me know and I'll be happy to add them!

California Got It Wrong!

The Southern California Multiple Listing Service just announced a decision to no longer provide consumers with the "Days on Market" information. The days on market indicator tells you how long a home has been for sale.

The rationale given by the SoCAL MLS is that this number needs interpretation and that the public can't understand this without the use of a real estate professional.

I don't know about you, but I'm deeply offended by that. No organization has ever prospered by telling their clients they just aren't smart enough to understand. While I value the input of professionals to interpret data, I don't believe they should hide the data under the premise that I can't understand or properly interpret what I'm seeing.

If we as real estate professionals won't provide that information, other organizations and/or web sites will. We're deluding ourselves to think that we can be the gatekeepers for this info. And to the extent that someone else is the source of that data, we lose!

 OK, that's my two cent rant! How do you feel? As a consumer, is it important to you to be able to see that number? Are you OK with only being able to get that from a real estate agent? If there is another source of that data online are you more likely to look at listings there?

2008 Predictions

A Higher Standard

I was in a training class recently, actually a required course for license renewal, and there was a discussion about the duties owed to the consumer on the other side of the transaction. I like to think that there was wide understanding of what the duties are to our actual clients. But there was clearly a range of knowledge, understanding and interpretation as far as our duties to consumers.

It was an interesting discussion and a good exchange of ideas. The part of this discussion that struck me as especially interesting was when we talked about the difference between our legal duties as laid out by the Commonwealth of VA and our duties as REALTORS under the REALTOR Code of Ethics.

I don't believe the general public understands yet that REALTORS are different from real estate agents. While all of us are bound by the laws of the Commonwealth, REALTORS also agree to be bound by the National Association of REALTOR's Code of Ethics. We are, quite simply, held to a higher standard. Actually, we choose to hold ourselves to a higher standard!

I believe in this higher standard. We all know that there can be a big difference between what is legal and what is ethical and moral. That's certainly true in real estate as well. The Code of Ethics is a living document that does change. But at its heart it's trying to define ethical behavior in the real estate industry, whether we're dealing with consumers, clients or other real estate professionals. I'm comforted by the idea that we're constantly re-examining how we do business and striving to do better!

Of course, whatever the rules, whatever Code of Ethics anyone agrees to abide by, we are all fallible human beings. And so the old "trust but verify" still applies as well. For the sake of my clients I can't always assume that the REALTOR on the other side of the transaction is living up to the Code we espouse.

My very first real estate trainer told me that the REALTORS are simply "a group of nice folks". I hope we're all nice (although it seems unlikely in a group of over 1 million!) But mostly I hope we're all working every day at living up to the Code of Ethics!

Utility Bills

A growing number of buyers seem to be interested in seeing a history of the utility bills for a property prior to making a decision to buy. If you're a seller currently, it's a good heads up to start finding that information so it's readily available.

I think part of the reason for this is the dramatic increase in home heating and cooling costs we've seen over the last couple of years. And, of course, there's no reason to expect any large decrease in costs any time soon.

If you're contemplating selling a year or two down the road, I think I'd be looking now at ways to lower those utility bills. That may mean adding insulation. Or maybe you need to replace those 30 year old windows. It can't hurt to put in the new compact fluorescent bulbs. Any appliances you buy in the next year or two should, at the very least, be Energy Star appliances. And, if you really want to take a look at what you can do, I'd consider getting a home energy audit. It will give you a list of ways to make your home more energy efficient. You can decide which ones it makes sense to implement.

As a side benefit, you can enjoy some energy savings now yourself. And when you get ready to sell your house you'll be only too happy to hand over the list of utility costs! Sounds like a win/'win to me!

June Market Numbers

Generally I've been creating a seperate post each month for the updated numbers for each county. But since the changes are very slight I'm incorporating them all into one post this month. I'm sure you're tired of reading several posts in a row each month with those ugly numbers!

The one note I'll make this month is that almost across the board we're seeing a leveling off of new inventory. That's not big news because you'd expect that to start showing up mid-summer. But it seems like it may be happening a few weeks earlier than usual. It's too early to make definitive statements on that with only one month's data to support that premise. I'll let you draw your own conclusions from the rest of the numbers!

I'll also go out on a limb and predict that we're going to see a leveling off and probably a dip in the new contracts within a couple of months. It'd be nice to see a corresponding dip in inventory!

Culpeper County June Market Stats

MONTH	ACTIVE	NEW LISTINGS	NEW CONTRACTS	SOLD
02/06	465	133	65	49
03/06	556	204	74	58
04/06	592	177	70	67
05/06	689	226	72	65
06/06	738	183	53	64
07/06	759	140	48	43
08/06	751	151	43	40
09/06	723	138	64	44
10/06	705	121	32	44
11/06	625	81	39	38
12/06	612	80	30	38
01/07	640	165	41	19
02/07	623	91	48	36
03/07	643	145	54	52
04/07	740	211	53	32
05/07	788	165	37	40
06/07	784	113	47	31

Fauquier County June Market Stats

MONTH	ACTIVE	NEW LISTINGS	NEW CONTRACTS	SOLD
02/06	489	149	64	54
03/06	610	296	91	61
04/06	692	254	94	77
05/06	732	237	107	87
06/06	781	218	78	90
07/06	816	190	62	54
08/06	823	206	79	79
09/06	794	162	62	61
10/06	821	197	51	55
11/06	723	105	59	44
12/06	643	71	36	54
Warrenton Virginia Homes For Sale, Fauquier County Real Estate, Whites Mill Pulte Subdivision I got an e-mail a couple of days ago from Pulte Homes regarding their White's Mill development in Warrenton. They're nearing the end of the development and have 7 homes either completed or nearing completion. The e-mail was to make me aware of the deals available to me with these 7 homes. According to the e-mail the homes each include free finished basements, free granite countertops, upgraded cabinetry and free hardwood flooring. The prices start at $479,900. And, if you're one of dozens of homeowners having trouble selling your own home in order to buy theirs, they'll give you six months without mortgage payments! Oh, and, by the way, their paying 4% commission to the buyer's agent! This brings us back to that same old discussion about the downward pressure on prices in this market. If the builders will sell you a new house that includes all of the above for $479,900 and assure you of no mortgage payments for six months, it becomes much harder to sell your almost new house in that same price range where the basement isn't finished. Let's get specific. In White's Mill as I write this there are 7 homes listed in the MLS as currently for sale. Two of those are part of the seven that Pulte still owns. That leaves five other owners competing against that offer we just talked about. Only one has a finished basement. True, some of them are brick fronts, but they're also listed for considerably more money. The lowest priced listing in this development right now is a home owned by the builder listed for $490,000. The most expensive is listed at $635,000. Some of these homes have no hardwood other than the foyer, an unfinished basement and they're still asking mid $500s. Of course, when you paid about $600K it feels like you've come down more than enough on your asking price! Builders are looking to clear inventory! They'll do what they need to in order to make that happen. Unlike the typical homeowner they're unsentimental about either the home or the listing price! So...if you're a homeowner in this subdivision and you absolutely have to sell now, how do you compete with the builder? Price is probably you're only weapon and it's a bad one in this situation. This looks like war and one side seems likely to lose badly. If you're in this subdivision I'd be looking to rent my house out and bide my time for a couple of years if there was any way at all to make that work. If you're a buyer, count your blessings!
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