It's All Out There

This was in the Washington Post as part of a Q&A with one of the local REALTOR associations.

We are listing our Cascades townhouse next month and were wondering about pricing. We have lived there nine years and paid under $200K in 1999. This information is available to anyone accessing the Loudoun County Appraisal District Web site. Should we expect buyers to know this information and, if they do, should we also expect to get "low-balled" more than someone who doesn't have as much equity? Will we have to adjust our price/expectations accordingly?

I don't believe you need to be concerned with the public records and how much you purchased your home for nine years ago. The biggest issue is how big your mortgage is, and no one knows that but you and your bank. Contact a Realtor and have them do a comparative market analysis and take their advice on pricing your home to match your home type and area.

This was part of a longer article and many of the answers weren't particularly good. But this one in particular seemed worth commenting on.

First of all, you should always assume that buyers will have all publicly available information in their possession. Even if the buyers haven't thought to search out this information for themselves any decent real estate agent will be pulling the tax records and showing that information to their client. Sellers who assume they can hide some information from potential buyers are always asking for trouble. In the age of the internet, everybody knows or, at least, can know, everything!

Secondly, the buyers should not base their offer on what a seller bought the house for. Regardless of what you paid for this house, in a falling market, you are likely to get a low ball offer. The buyers know, and certainly their agent knows, that a year from now there's a good chance that the value of that home is less than it is now. It might not be worth a lot less. It's certainly possible we're near a bottom. But with that kind of uncertainty all buyers will lowball an offer and all sellers should expect to have to deal with that.

The other point I'd make here is that REALTOR associations should not have non-REALTORs answering these questions!

HOA Blogs

I had lunch with a friend this week and she was telling me about the blog about her community. There are some issues that have come up in the association including major repairs needed that will result in large assessments to homeowners.

The blog has this information as well as much speculation and much complaining. The HOA management is very upset about the negative publicity for the community. Their feeling is that potential buyers are reading these blogs and that it's discouraging sales in the community. I suspect they're right on that front.

This raises several points. First of all, I doubt the HOA has any recourse or any way to shut down the blog or all the people posting to it. Their concerns are valid but, as we said at home, that horse is out of the barn. What they should consider is their own official blog with actual information to help discourage speculation. They should also do their best to resolve issues quickly as that will be the best way to prevent this kind of uproar.

If you're a buyer it makes a lot of sense for you to Googe any community that you're considering. There may be a blog, official or otherwise. There may be a web page, official or otherwise. Either way you're likely to learn things you might not have known otherwise. But, also understand that anything unofficial may also be unreliable. If anything you see there raises concerns work with your real estate agent to get the real story.

And, lastly, everyone should have figured out by now that it's tough to keep a secret these days. If there are problems with your community they are likely to show up sooner or later on the internet. And, savvy buyers are going to be looking. Disclose known problems up front. What you really don't want is a deal that blows up at the settlement table!

Does your community have an official blog or web site? How about unofficial? If you're a buyer is this a tool you're using in your search for a home?

A Primer on Wells

Changing Attitudes Towards Debt?

This is far more interesting than anything I could write today.

I can't get this out of my head.

When is the right economic decision for your family the wrong moral choice? Is that even possible?

I agree that the conversation is starting to change. And that's a very good thing.

I'm not sure all the ramifications are a good thing!

Has the conversation changed at your house? Was Christmas spending different this year? If so, was it a fluke or a real change of lifestyle?

I think this reinforced my opinion that McMansions are in big trouble! Are builders thinking about the long term implications of all this?

Update (1/31/08): This blog explores this topic further and makes some interesting points. I've got to admit, I'm troubled and torn on all this.

Don't Try This At Home

I ran across an ad for rental property in a Front Royal paper this past week.

The ad states:

"Rent to Own - Problem Credit OK - Earn Rent Credits"

Then it asks "Why should you rent to own?"

And it answers:

• It's fast and easy (move in days)
• You don't need a 20% down payment
• No bank qualifying
• You don't need good credit
• No fees, commissions or closing costs
• Earn Equity faster than purchasing

Some of these points are clearly true. Renting is faster than buying, generally. A bank is generally not involved is another true statement. And, no one asks for 20% of the purchase price up front for a rental. (But how many people put 20% down on a home these days?!)

The "don't need good credit" is disturbing. If you're a seller and can't sell so decide to go the rent to own route, you're setting yourself up for serious problems down the road if you don't care about the renters credit. And, if there is a credit check and people with low credit scores are turned away this is very misleading.

"No fees, commissions or closing costs" is another misleading item. There may not be the closing costs associated with purchasing a home, but there is almost certainly a deposit. And some of the rental deposits can be very large, up to three months' rent.

The last one is laughable. "Earn Equity faster than purchasing" the ad says. With a rent to own situation typically some of your rent each month is going towards an eventual down payment. The ad says up to $400 in this instance. But depending on the house and the situation there's no automatic guarantee that you're earning equity faster. There are people getting great deals on short sales and foreclosures where they are getting thousands of dollars in immediate equity. And, each month when they make their mortgage payment their equity is increasing as well.

Of course, there are also plenty of people in this market whose equity is decreasing right now.

But the point is that whoever wrote the ad can't possibly guarantee anything with regards to equity.

If you're looking for a rent to own situation, be careful of ads like this. The actual property for rent may be a great one. The deal may be terrific. But you should be on full alert given the lack of honesty in the ad!

Townhouse in the Ocean

This one is fun!

While I was looking at the Culpeper townhouse market yesterday I stumbled across this map, helpfully pinpointing the location of the townhouse...

I have a feeling this is not really ocean front property!

It does make an important point. Sellers should take a look at their listing and make sure there aren't any obvious problems. It matters that the information is complete and correct.

Buyers have a multitude of homes to look at. They use all kinds of things to narrow their search. You don't want them to eliminate you because of incorrect information.

And, the commute from this townhouse in the middle of the Atlantic is likely to be way too long!

Counter Tops

For those who are planning on some remodeling this year, there are more and more counter top alternatives that are easier on the environment. And, in many cases, they're also better for your health. It's funny how often those two things line up!

One of the new products I've been looking at is Icestone. The product is made of mixing cement with recycled glass. As you can imagine, it's very durable. It's also good for the environment as it's made up of 70-75% recycled materials. For those sensitive to VOCs (Volatile Organic Compounds) and outgassing, there are none with this product. And, best of all, it's gorgeous! And, it's customizable so you can get just the right colors.

Another new product is Toscana Stone Designer Marble. This is made out of recycled marble chips. In addition to being gorgeous as a countertop it can be used as flooring or on walls, say, in the bathroom. And, again, there are lots of beautiful colors available.

If you're looking for a website to give you some other green countertop options check out http://www.greenable.net. It's a Philadelphia resource for green and sustainable products. Even if you don't choose to buy from them their web site is an excellent educational tool.

And, if you're looking for a more local source of information on green products and services, drop me an e-mail or give me a call. There's so much out there, even if you're not finding it in your local homebuilding store. I'm happy to help!

Pets Need Help

I saw today that a TV station in Charlotte, NC did a story on how the real estate market is increasing the numbers of homeless pets. As families are forced to leave their homes they often can not take their pets with them. Sometimes that's because they have to move into a rental that won't accept pets. Some families are moving in with family members and the home can't accomodate any more pets.

I've got calls into the local shelters to try and get a feel for whether we're seeing that same effect here locally. My suspicion would be that we are.

If you're thinking of getting a pet it's an excellent time to check out the local shelters. Here are links to some of them.

Rappahannock

Fauquier

Culpeper

Warren

Too many pets end up here in the best of times. In hard economic times it gets worse. If you can adopt a pet or just help them out with a donation, now's the time.

What a Day!

It's certainly been a dramatic day. It started by waking up to the news of Asian markets showing dramatic downturns over fears of a US recession. Then, before our markets opened, the Fed cut both the Fed funds rate and the discount rate by 3/4 of a point. That's dramatic for two reasons. First of all the size of the cut is larger than anything seen in about two decades. Secondly, it's highly unusual for the Fed to cut rates outside of a scheduled meeting. That's especially true when the meeting is only a week away!

It was nice to see the Fed mentioning concern about the housing market as one of the reasons behind today's cut. Having the Fed continue to focus on this industry can only be a good thing for homeowners.

Now, the question is how will it impact our current market. The place you're likely to see an impact first is on home equity lines of credit. Those rates will probably move down pretty quickly. Mortgage interest rates in general, as I've mentioned before here, aren't directly linked to either the Fed funds or discount rates. So we'll have to watch and see what happens to mortgage rates. But the size and timing of this cut do have the potential to have some impact.

One thing to keep your eye on is Wall Street's reactions. Since inflation worries can and do impact mortgage interest rates that will play into the equation. The fact that oil prices continue to fall today is good news there.

There are some hopeful signs here. And I suspect there will be some buyers influenced to make a move now. I've certainly seen increased activity on my attractively priced listings. There seems good reason now to expect that to continue.

In Sunday's Washington Post

The real estate market was front page on the Washington Post again yesterday. And, there are a couple of interesting lines that say a lot about our local market here.

Special Appeal

I've written here before about the Fauquier County Food Distribution and the work they do to feed the hungry here in Fauquier County. They're facing a real food shortage this month. Here is the situation and what you can do to help, directly from them:

December Numbers

2007 is behind us and the December numbers are now available. And there's plenty of good news. In every county I looked at, inventory continued to decline. Culpeper moved down to 783 homes for sale. It was at 796 last month. And, at its high hit 823.

Culpeper is representative of the surrounding counties. Rappahannock, Prince William, Fauquier, even Warren, all saw reductions in inventory. I'd like to say it's a trend, but given the circumstances it's still too early to say that. November and December in an average year will see a reduction in inventory as people take their homes off the market during the holidays. If January and February numbers continue to show a decrease I'll officially declare a trend!

We also saw fewer new listings across the board. Again, good news if it continues. With spring coming this is one I think we can safely say is not a trend. That's especially true if we look at year over year numbers. A comparison between December '06 and December '07 shows a sizeable increase in the number of new listings.

The number of new contracts and solds was down across almost every county with the exception of Prince William. That may have something to do with the fact that Prince William is showing some of the most aggressive price cutting.

I also compared the new contracts and solds to a year ago. In Culpeper we're significantly lower, in Fauquier close to breaking even. And, while Prince William is up month over month, it's down year over year.

All in all, December was a mixed bag. As with most statistics, we'll have a better idea what they mean a year from now!

Northern VA Market

An assortment of tidbits today.

Here's an interesting overall look at the Northern VA real estate market. It only comes out as far as Loudon and Prince William but you can extrapolate from there.

Bank of America appears to be set to buy Countrywide. This is good news. Countrywide appeared to be headed for bankruptcy which would have been unbelievably disruptive to the industry.

Zillow has announced that the number of homes it covers and the accuracy of it's estimates are greatly improved. You could have fooled me. When I took a look at where I live there was no Zestimate at all for our home or any of our neighbors.

This blog post if right on in pointing out that REALTORS should be the first ones objecting to NAR's absurdly rosy predictions. Credibility once lost is hard to regain.

Ben Bernanke appears set on cutting interest rates again this month. A half point cut now seems entirely possible. The effect on the mortgage interest rate remains to be seen. However, LIBOR, a rate used to set interest rates on adjustable rate mortgages fell this week. Good news if you've got an ARM due to reset soon!

Homestead Exemption

The Virginia legislature is taking up the matter of a homestead exemption this year. This was originally proposed by Governor Kaine in his election campaign. With higher property taxes across much of the state there is great interest in any relief that might be available to homeowners.

A homestead exemption was originally the exemption provided to protect a primary dwelling from creditors, and especially provide protection for a surviving spouse and children. By the way, Virginia's existing protection is a joke. Currently $5,000 of the home's value is protected.

But the homestead exemption has been expanded in some states as a way to provide property tax relief. Basically, some portion of the value of the home is exempted from property taxes.

The proposal for Virginia is that the maximum amount exempt from taxes is 20% of the value of the home or farm. This would be applicable only to primary residences. Localities would be allowed to set the terms and conditions. This would allow them to potentially target specific populations, say the elderly, and also to take into account local budget needs when they decide how to use this.

The bill would seem to stand a decent chance of passing. Since the local jurisdictions can determine how it is implemented it's impossible to predict what the impact would be on local homeowners or on local government budgets. But this is one to watch.

Low Interest Rates

The recession fears are overwhelming any inflation fears at the moment. And that means good news on mortgage interest rates. The 30 year fixed rate right now is hovering right around 5.5%. That's great news for buyers and if you're looking to buy in the next 3-6 months it's worth crunching some numbers to see if this might be the time to jump.

But today I wanted to focus on refinancing. It's not something I touch on much, because I don't typically get involved when my clients refinance. Once awhile they'll call for help in recommending an appraiser or finding some papework, but generally a refinance doesn't require a real estate agent's involvement.

However, if you've never done this before and are looking for some help. Here are a couple of hints.

1. Try an online mortgage calculator. A Google search will provide a slew of them. Be careful of the ones that are too basic. And make sure it tells you how many months it will take to recoup your costs. There will be fees associated with refinacing. While you may save money each month with lower interest, if you move in six months and it takes a year to break even based on the fees you haven't really gained anything.

2. Don't choose your mortgage lender solely on rates. It should be clear to everyone by now but not all financial institutions are created equal. Go with someone reliable! Get recommendations from people you trust.

3. Read the fine print. This should be obvious by now as well, but make sure you undestand the mortgage you're getting. Ask whether there are pre-payment penalties. Make sure you know if your rate is fixed or adjustable. And, if you choose to go adjustable make sure you understand completely how that adjustment process works and what your payments are going to be two years or three years or five years from now.

All that said, it's a great time to take a look at your mortgage and see if it makes sense to refinance.

Republicans Housing Market Plans

Clearly I should have done more research before starting on my two post series on where the candidates stand on real estate issues.

While I pulled the Democrat's positions off their web sites, none of the major Republican candidates have anything related to real estate on their web sites. (The exception is the Fair Tax proposal put forward by Huckabee and mentioned here a couple of days ago.)

What I have done is send an e-mail to each candidate with the question about their policies related to real estate and the current market conditions.  I'll let you know what response, if any, I get from each of them. (Huckabee gets points for being the only one to acknowledge my request!)

In the meantime, I think it's worth speculating on why the issue is on the Democratic candidate pages and not the ones of Republicans. The only explanation that seems to make sense to me is that the Republicans don't consider this a big issue for their core constituency.

But I think they are wrong there. I think real estate and home ownership issues are important to everyone, regardless of party affiliation. Just ask the Republican with a subprime ARM!

I suspect the answers that Republicans and Democrats want from their candidates are different. And, I'd hoped to see that reflected in their statements. I'll let you know what I hear.

For now, I'd be interested in any speculation on why you think the Democrats are all addressing this and the Republicans are not.

Democrats Housing Market Plans

 The beginning of the political primary/caucus season seemed a good time to take a look at each of the candidates political positions as it relates to real estate. Today we do the Democrats. Tomorrow we'll do Republicans. These are taken directly from each candidate's web site.

• Create a Universal Mortgage Credit: Obama will create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.
• Ensure More Accountability in the Subprime Mortgage Industry: Obama has been closely monitoring the subprime mortgage situation for years, and introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama’s STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity.
• Mandate Accurate Loan Disclosure: Obama will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow individuals to easily compare various mortgage products and understand the full cost of the loan.
• Create Fund to Help Homeowners Avoid Foreclosures: Obama will create a fund to help people refinance their mortgages and provide comprehensive supports to innocent homeowners. The fund will be partially paid for by Obama’s increased penalties on lenders who act irresponsibly and commit fraud.
• Close Bankruptcy Loophole for Mortgage Companies: Obama will work to eliminate the provision that prevents bankruptcy courts from modifying an individual’s mortgage payments. Obama believes that the subprime mortgage industry, which has engaged in dangerous and sometimes unscrupulous business practices, should not be shielded by outdated federal law.

Fair Tax and Real Estate

Good News Recession?

For some odd reason there seems to be a class of real estate pundits out there who believe that a potential recession is a good thing for the real estate market.

It's an odd line of thought. But I understand their logic. The belief is that if the economy continues to look like it's headed for recession the Fed will have no choice but to lower interest rates. Lower interest rates will get all those buyers who are currently sitting on the sidelines to jump in and buy a home. And, voila! the market improves.

There are some serious logical flaws in this argument. First of all, even with some data suggesting the possibility of recession, the Fed's in a tough spot. While they'd no doubt like to lower interest rates to bolster the economy, there are also plenty of worries about inflation. Oil hit $100/barrel this week. Rising oil prices impact the prices of almost everything in our economy. It's hard to see how continued high oil prices aren't inflationary. And, food prices are rising fairly rapidly. While this is not included in most official measurements of inflation, it is certainly something that will be watched by the Fed. So, maybe they cut interest rates. Maybe they hold steady. There's not enough data to provide an answer right now. And, the truth is you never know for sure until the Fed meets.

Secondly, as I've mentioned here before, a lowering of rates by the Fed is no guarantee of lower mortgage rates. Again, inflationary worries often have more of an impact on those rates.

Next, recessions are not good for real estate! People insecure about their financial prospects do not go buy new homes! If you're worried about losing your job you don't look to move up. You look to hold on to what you've got. Time to batten down the hatches!

And, lastly, there is no quick turn around for real estate. And, that's certainly true here locally. There are not enough buyers waiting on the sidelines to completely turn around this market in the short term. It took time for us to dig the hole we're in. It will take time to fill it back up! I'm hopeful we'll see a bottom in 2008. Anyone expecting much more than that has got some serious rose colored glasses!

Green Homes Go Mainstream