Save The Ta-Tas

2008 was a year in which I lost three more friends to cancer. Several more were diagnosed with the disease for the first time. And then there are the friends fighting a new bout with this old foe.

I hate problems I can't do anything about.

I can't cure any of these people. I can pray. I can hold their hands, lend moral support and do whatever else they ask. But what I really want to do is beat this disease.

So, I've once again signed up for the Susan G Kommen 3-Day Walk to raise funds to cure breast cancer. I'll be walking 60 miles in three days. And, yes, this is my second time and, yes, I must be crazy!

But I'm hoping some of you also want to do something to change the status quo. Are you looking for a big challenge for 2009? I'd love to have you make the commitment to walk with me. Or, since I've committed to raising at least $2,300, I'd be very grateful for your financial support.

I'll be posting an update from time to time throughout the year on how both the training and the fundraising are going. So watch this space for more news!

P.S. The first time I saw a "Save the Ta-Tas" t-shirt was when I did my first 3-Day. I just about fell over laughing!

Looking Ahead to 2009

How will 2009 play out? I can only speculate. In truth, this feels like one of the toughest years to predict. But I am undaunted! I'm going out on that limb to make some predictions.

I need to preface my predictions with a word about the overall real estate situation. There are two possibilities in 2009. The government could intervene in a meaningful way in the real estate markets. (Other than the Fed action earlier this month to say they’ll buy mortgage backed securities, federal intervention up until this point has definitely been NOT meaningful!) If they do that, the forecast, while not rosy, is for a market that’s beginning to stabilize. The other alternative is that the federal government does nothing about the real estate markets, the overall economy continues deeper into decline and there’s no end in sight. That produces a markedly more pessimistic forecast.

Rappahannock Price Conundrum

It can be difficult to figure out what the market is doing in Rappahannock. With 2-3 sales a month, most months, it's difficult to discern trends. And, given the enormous price ranges found in properties in the county, any snapshot is sure to lead to incorrect conclusions.

But I've had a couple of conversations this week with property owners in Rappahannock County that had me wondering about pricing overall. In several instances property owners said they knew their properties were overpriced but they had no intention of lowering the price. They said they weren't "desperate" and could wait out any temporary market downturn.

And, of course, they're no doubt correct. While most homes are both a home and an asset for most families. There are a lot of property owners in Rappahannock for whom the property is more heavily weighted towards asset. It's easier to wait this out if you don't have to sell your property here in order to move on somewhere else.

And, the dollar value of sales stayed relatively consistent this year. A total of almost $16 million sold in 2007. In 2008 that total was almost $14.5 million. What was down significantly were the number of transactions. There were 42 in 2007. It looks like we'll finish with about 30 total sales in 2008.

Meanwhile, inventory has risen pretty dramatically. There were 67 properties on the market at the end of 2007. Today there are about 98, an increase of about 30%. We hit a high at the end of October with 103 properties for sale.

Rappahannock took longer to feel the effects of this downturn. And, in a normal economy with a normal real estate slump, there may not have been much of an impact at all here. But the economic fiasco we find ourselves in nationally has not spared the residents of Rappahannock. There have been foreclosures here as well, with more likely to come. And there's an increasingly long list of people who really do want to sell their properties but can't (at least at their current price).

So, how long does the stalemate last? How long are sellers willing or able to wait for the market to recover. In the region overall I believe it could be 5-10 years before we see property values anywhere near what we saw, say, in 2005. Even if you're not "desperate" how long do you want to hold on?

2009 promises to be an interesting year in Rappahannock real estate! What do you think lies ahead?

Looking Back at 2008

If you had to sum up 2008 in a few words "ugly" would be right up there for sellers as well as for real estate professionals. If you're a buyer or potential buyer I think the word would be "opportunity".

The big change in 2008 was pricing. Prices have dropped dramatically year over year. The range is 35% in Culpeper to 40% in Fauquier and Prince William. Most of the drop in prices has come from foreclosures sales. In fact, much of the sales activity in general has been foreclosure sales. And what wasn't a foreclosure was, more than likely, a short sale.

Inventory continued to drop over the year in every jurisdiction. Inventory dropped because many homeowners gave up on selling. It also dropped because banks got better at pricing foreclosures and they started to sell.

Sellers remained frustrated and in pain. They struggled to compete with drastic price reductions by banks. And, it didn't matter that most owner occupied homes are in much better condition than most foreclosures. Price, price and price were the top three criteria buyers seemed to be looking for. And newspapers everywhere felt the pain of less real estate advertising.

It's a year most of us, whether we're in real estate or not, won't be sorry to see the end of! Here's to a better 2009! More on that tomorrow.

Buyers began looking, but cautiously. Investors (the pros, not the amateur flippers) were out in force. Buyers wanted bargains, and they got them. It was a market made up primarily of first time buyers or those who were able to rent out their home in order to move up. Financing was trickier, but still available. And, the process was a lot slower and more painful as almost every transaction involved painful negotiations with banks.

Real estate agents left the business in some cases. But more often we saw them finding ways to supplement their income. You're now more likely to see your real estate agent at the checkout counter at Home Depot than in the local paper in a real estate ad.

Earth Craft Homes

At Green Drinks Warrenton last night I had the opportunity to talk with Anthony Palladino from Golden Rule Builders about Earth Craft Homes.

I was aware of the Earth Craft Homes but hadn't realized that Golden Rule was a certified Earth Craft builder. It's great to have local builders who are excited about green building!

Earth Craft Homes are homes that are, by design, more energy efficient and environmentally friendly. The standards and scoring system are different than the LEED standards. The Earth Craft designation comes in three levels, Earth Craft House, Earth Craft House Select and Earth Craft House Premium. You need a progressively higher number of points to achieve each certification. There's a worksheet on the Earth Craft web site that shows how points are accumulated.

Earth Craft homes can cost slightly more money up front. But weigh that against the energy cost savings you'll get every month for as long as you own that home.

I'm excited to see more and more activity around green building locally. And, if you haven't been to a Green Drinks meeting yet, you're missing out!

How Low Will They Go?

Mortgage rates are way, way down today. The lowest I've seen is 4.875% for a 30 year fixed with 0 points. That's truly incredible and probably the lowest mortgage interest rate I've seen in my lifetime.

The rates did not drop because of the Fed's drop of the Fed funds rate, but because of what else Fed Chair Bernanke had to say yesterday. He basically said he's going to do whatever it takes to get this economy moving again. And, he specifically said that can include buying mortgage backed securities. That's the big deal.

Because those mortgage backed securities are still sitting on the banks books. And regardless of what the federal government has tried banks still are not lending money as freely as the economy needs. The mortgage backed securities, which may, in fact, be worthless are a big part of why they still aren't lending. What the Fed did was signal that they will buy these possibly worthless assets and allow the banks to get them off their balance sheets. That should, finally, convince the banks to lend money again.

But, if you've been contemplating buying a home right now, your biggest question is probably, should I buy now or will rates go lower?

No one can answer that question for you definitively. But here's what I think. There's a fair chance that rates may go even lower. There are proposals floating around that would have the government subsidizing mortgage rates to lower them even more. No one knows whether any of these proposals will ever actually be implemented. But given the current environment and government's determination to get the economy fixed, it certainly could happen.

But, if you've found a home you love and the price is right and you can afford a mortgage with rates where they are, I'd suggest you move forward now. The risk of losing a home you want is higher than the risk of losing out on a slightly lower mortgage rate. Buy now, build a little equity and, if rates stay low you can refinance down the road.

If you're out there looking, I'd say keep looking. Inventory is lower than it has been in several years. These lower rates may actually make that worse as more buyers begin to make their move. Your selection isn't likely to improve in the short term and if you find something you'd like, jump on it.

If you haven't started looking yet, I definitely think you ought to at least be very closely monitoring inventory. You should know what's out there and what you get for your money in your price range. I can't tell you whether or not to wait for rates a little lower. But I can tell you that great rates now and a reasonable amount of inventory might be a better situation than even lower rates and buyers fighting over inventory. This is especially true in the lower price ranges where inventory has gotten very picked over.

I think it's shaping up to be a very interesting 2009!

November Market Statistics

The November numbers are out and there are a few interesting things to note.

Across the board, the number of new listings coming on the market is down, inventory is down and sales and new contracts are down. It's not unusual to see a little drop in new inventory coming on the market in November. But I believe that part of this is that we're seeing fewer foreclosures hitting the market. We do not necessarily see a similar drop in contracts and sales in November. So, there are probably non-seasonal reasons for this. One possibility is that fewer foreclosures on the market means fewer properties of interest to the buyers out there. Another possibility is that all the bad economic news out there has some buyers waiting to feel better about their own financial future. A combination of these is the most likely culprit. And, while you may have heard about the recent surge in mortgage apps, most of those are refinancing applications and may not affect sales here in the next month or two.

Culpeper is showing a further drop in inventory to 592 units. That's the lowest number we've seen in over 2 1/2 years. Only 75 new properties came on the market and only 40 were sold. 42 new contracts were ratified. It's interesting to note that the last time inventory was at this level in April of 2006, there were 67 properties sold and 70 new contracts ratified. The inventory in Culpeper is actually a little overstated. There are two new condominium developments in Culpeper that are showing a lot of individual units listed in the MLS. But since there aren't any actual units built yet, the housing units actually in existence is a little smaller. You don't see this in most of the other counties.

Fauquier County shows an inventory decline as well, down to 631. Sales dropped from 49 to 35, but contracts written stayed steady. In Fauquier as well, it's the lowest inventory number in 2 1/2 years.

In Prince William County we're back where we were, in terms of inventory, in early 2007. There are currently 3919 properties on the market. As in Culpeper, all numbers dropped this month, new listings, new contracts and solds. Since Prince William had also been seeing large numbers of foreclosure sales I suspect the decline in those listings is having an effect.

Rappahannock County, having weathered much of the real estate downturn without dramatic changes, is still seeing stubbornly high inventory. It's edged down from its peak of 103 last month to 98 this month. But I expect that we may be stuck around 100 for a few months, at least. Since sales in Rappahannock remain slow, it will take a very long time to get down to a more rational inventory level.

The Lockbox Mess

There's a change coming.

The local REALTOR associations have negotiated new lockbox agreements with various suppliers.

If you're not familiar with what lockboxes are, it's what a real estate agent puts on your front door to allow other agents access for showing your home when it's for sale. There are a variety of these devices out there and, of course, they're completely incompatible.

For the last few years, all associations have used the same equipment. So, if I was based in Warrenton and had clients who wanted to see a home in Leesburg, there was no problem showing them that house.

All that changes in the next few months. The association I belong to GPAAR (Greater Piedmont Area Association of REALTORS) has chosen one system. The Prince William Area association and the Northern Virginia area will be on the same system. The Dulles Area and Blue Ridge Area associations have gone in a different direction.

It's not that agents won't be able to show homes in both areas. They can buy both sets of equipment and still be able to show anything, anywhere. But in a tough market where every cost is scrutinized, not every agent can or will foot that bill.

And, so, on behalf of my fellow REALTORS, I apologize to you our clients. This is clearly a disservice to all of you. I believe we need to keep out clients in mind as we make decisions and clearly you all were not our primary focus here. In a market where it's already hard enough for the average seller to get a buyer to come and look at their home, we've just added another obstacle.

I'm not pointing fingers at anyone association or at any group of individuals. We all share the blame here and should have found a way to get this right.

So, a big "I'm Sorry" and a promise to my clients that I'll do everything I can do to protect you from this mess!

Bad Real Estate Photos

A little fun, first of all today. It's BAD real estate photo day!

Warning: This house may make you dizzy! At least looking at the photo could!

I wonder what they didn't want me to see? Or was this taken by one of those nocturnal real estate agents?

"Red sky at morning, Buyer take warning?"

While these are so ridiculous they're funny, they're a lot less funny if it's your house! It's almost impossible to over emphasize the importance of good photos online. It can be a tough market to sell your home. Having photos like these is shooting yourself in the foot!

And, lastly, a bit of blatant self-promotion.

The Fauquier Times Democrat ran a story today on my new property management business, as well as my thoughts on the local market.

Housing Affordability Index Way Up

The housing affordability index is at it's highest point in 20 years. Since they don't seem to have been measuring this much before 1988, you could say it's at its highest point ever. I'll stick with the 20 years figure.

That's very good news as one of the biggest problems in the real estate market for the last three years has been that home appreciation had completely outstripped the increases in wages. For most first time buyers, the starter home had become unaffordable. That will take the air out of a market in a hurry.

Now, in fact, what we're seeing is all the activity at the lower end of the market. Investors and first time buyers are buying foreclosures and competing to get them.

Here's my only small concern with the affordability index. It measures the ability of people with income to buy a home. Given the increasing number of layoffs, there are a lot of people who are suddenly without income or with a lot less of it. And, people worried about their jobs don't go out and buy homes, unless they're downsizing.

So, while I still can't tell you that this means we've hit bottom, it's a very good piece of good news. And, there's been a little more of that in the last month or two!

Shifting from Carbon to Green

I was fortunate enough to hear Glenn Tecker give a speech about leadership last week. It was a terrific speech, but one piece in particular has stuck with me.

He talked about how we are moving from a Carbon Economy to a Green Economy. The path looks like this:

He views the end state here as about a decade away.

And, of course, I got to thinking about what this means for real estate.

First of all, if you're a buyer, you should be looking for energy efficient/green homes. That's not just for your own short term financial/health well being. It's because when you sell that home down the road it's likely to net you significantly more money.

What that rules out, of course, is a McMansion. I'm not saying no one will ever buy a McMansion again. I'm saying the market for those monstrosities is going to be so small, and the existing supply is so large, that you need to seriously consider the financial implications of such a purchase.

If you recently bought a home and are thinking about doing some upgrading/updating, every item you think about improving, add a green filter to that decision making. Ask yourself if what you're doing will make the house more appealing in that future green economy.

And, if you're contemplating selling any time soon, start thinking about what energy efficient qualities your home has already. Talk to your agent about how those can become part of the marketing plan. And, if you're doing any upgrades before selling, factor this into your plans.

One word of caution here. If you're selling in the short term, do NOT invest a lot of money in "green" or any other kind of upgrades. You will not get a good dollar return.

The pain in the diagram above will be unavoidable for the economy as a whole. But some smart planning may help you avoid it in terms of buying and selling real estate.

Confessions of A Predatory Borrower

Here's an interesting blog post by someone who can sympathize with those caught up in the foreclosure crisis.

"There but for the grace of God..." comes to mind often these days.

Once again, here's another example of the shoddy job we're doing of financial education for our youth.

Another Bailout?

Another week and another groveling industry seeking their turn at the trough filled with taxpayer dollars.

But this week it's the homebuilders, which hits a little closer to home.

First of all, let me say, that this is one bailout that actually could put some money in my own pocket. (Never let it be said I didn't property disclose!)

And, having said that, let's look at the merits (and downsides) of this plan.

First of all, an outline of the plan as found in today's Wall Street Journal:

The plan calls for a $250 billion stimulus package titled "Fix Housing FIrst".

The first part would be a tax credit for home buyers of 10% of the home's value, up to $22,000. Unlike the earlier $7500 credit, this one would not have to be paid back.

The second part of the plan would have the government subsidizing interest rates. A 30-year fixed rate mortgage would be 3% if you bought in the first 6 months of 2009. The rate would go up to 4.5% if you bought in the second half of 2009.

The good news here is that at least someone is addressing the root of the current problem, housing. We've heard of lame plan after lame plan to help homeowners in trouble. This one won't help homeowners much either, but plenty of others will feast at the gravy train.

Here are the problems I see. First of all, why should the taxpayers be helping out the homebuilders and related industries, such as real estate? While I'm not opposed to attempts to increase my income, I see no reason my neighbors' tax money should support my real estate habit. If it was a bad use of taxpayer money to bail out AIG, it's equally bad to use it here.

The homebuilders are in trouble. There's a good reason for that. There are too many homebuilders for what the market will support in the next 20 years. Yes, it will be painful for many individuals and families to see some companies go under. But the end result will be a healthier industry.

This has the potential to produce another unsustainable bubble.  What happens to home prices in 2010? At some point there has to be a balancing of supply and demand. You can artificially influence that, but only for the short term.

And, again, it does nothing for homeowners losing their homes to foreclosure.

The Wall Street Journal article does mention other suggestions that would allow current homeowners to refinance to lower interest rates with the government subsidizing the difference. That actually does have the potential to help, depending on the details.

Meanwhile, I'd say let's stop spending taxpayer money like a drunken sailor, with no oversight or accountability. How can that be in anyone's long term best interests?