Energy Efficient and Affordable

Marketplace aired a segment this last week on a new energy-efficient home for $100,000 in Philadelphia.

I think this is an exciting development! Many of the super energy efficient homes we've seen to date have been at much higher price levels.

So, would you find a 1000 square foot, energy efficient (energy bills 50% below average for this size home) home in an urban setting attractive? Let's say the home is in DC instead of Philadelphia. Are you tempted? How about in Charlottesville?

Ridiculous!

It seems incredible that at a time when this profession gets more complex each day, the Virginia Senate thinks once you've been a broker for 15 years you no longer need to learn anything new.

But I've ranted about the lack of educational expectations in the industry before. I'll let my friend and colleague, Jim Duncan, in Charlottesville state the case this time around.

For the record, though, this is an idiotic idea. The only thing more idiotic is that it passed unanimously. Is there something in the water in Richmond?

Your Next House

Here's a blog post on Jetson Green with information on a new survey by NAHB (National Association of Home Builders) and Better Homes & Gardens magazine.

I'll let you read the details, which I think are quite interesting. But the bottom line is that people are interested in smaller, more fuel efficient homes.

That's got me thinking and wondering? Has the current economic turbulence got people thinking differently about what they want in their next home? If you've got a very large home now, do you think you'd like to downsize and is that desire related to our current economic situation? Have your thoughts changed about where you live, city vs. country? Are you craving more land to grow more of your own food?

I'm curious whether people are deciding to make major changes in what they want in housing because of our current situation.

So tell me what you're thinking? How has how you think about your home, about buying or selling real estate, changed as a result of what's happening in the overall economy or in your own little economic corner?

I Can't Keep Up

...with the stupidity of NAR (National Association of REALTORS).

Read the blog and weep.

Seriously, if there is not a single REALTOR out there who believes home prices will either not appreciate or (gasp!) decline this year the public should definitely not believe a word we say!

Some days I beat my head against the wall. Credibility is hard to gain and can be lost in a second. I'm not saying NAR ever had any credibility. But I'd appreciate it if they wouldn't try and ruin any I've managed to build!

Pro Bono

After hearing some examples around the country of other real estate professionals pitching in to help some distressed sellers, I've been moved to do the same. I won't make a huge difference in our local real estate market. But perhaps I can make a huge difference in the life of a few local families.

So, effective immediately I'm going to be taking on one pro bono client each quarter. This will be a seller, someone with their back up against the wall. While I can waive my fee, I can't do the same for the cooperating broker. So this is not a transaction with no commission. But I'll waive my half.

If you know someone who's stuck, who feels hopeless, have them get in touch with me. This offer will only apply to owner-occupied properties, not investment homes. And, unfortunately, I'll have to limit it to one per quarter as I still need to make a living!

But I look forward to the opportunity to help!

George Soros Mortgage Reform Plan

George Soros has proposed a plan to clean up the mortgage markets, rescue the financial system and, theoretically, get money moving again.

The plan requires the elimination of Fannie Mae & Freddie Mac. It requires that banks hold much of the risk and do all of the servicing of their own mortgages.

And it would tie mortgages to bonds in a way that would keep a homeowner from ever deeply underwater on his mortgage.

This plan is based on a Danish model that's already up and working and seems to be functioning very well.

Take a look at the details for yourself. Do you think such a plan would work here? Is it worth a try?

I hope the Obama administration will take a closer look.

So Now What?

Today is the big day, finally. Washington, DC is filled with hordes of people. And a new president takes the oath of office today. I think he's got his hands full!

But once all the pomp and circumstance is over today; once all the tourists go home, what can we expect from this new administration with regards to the real estate market?

First of all, the President-elect's team has given every indication that they intend to intervene in the real estate market and will do so aggressively. So I expect quick, decisive action on this front. What kinds of things will we see?

• A plan to get the bad assets off the banks books. This now looks likely to happen in the form of a government-created, government-owned "bad" bank.
• A strong push and some serious arm twisting to get banks to begin lending again once those assets are off their books.
• A commitment to spend at least $50 billion in TARP funds on the real estate recovery.
• Additional tax credits for first time home buyers in an effort to stimulate demand.
• Additional efforts to stem the tide of foreclosures. This may take the form of:

Buying up second mortgages.

Strengthening the existing government programs to modify mortgages.

Allowing all bankruptcy judges to modify existing mortgages.

Temporary foreclosure moratorium.

And, the list is probably longer and growing.

What encourages me is the firm commitment to getting this done, to getting the real estate market stabilized, one way or another. If a real commitment is half the battle in any endeavor, you have to feel good about the future.

So, yes, I'm encouraged. I think we'll see some things happening in the next few weeks that could make a difference. I'm rooting for the new administration and I know I'm not alone.

I know they're going to keep trying until they get it done. I believe that attitude will make a difference.

Call me hopeful!

Perfect Timing

There are a lot of potential buyers out there, sitting on the sidelines, waiting for the RIGHT TIME, the "perfect time", to buy.

But one person's perfect is another's missed opportunity.

If you want the most inventory to choose from because your requirements are very, very specific, your perfect time was fall of 2007 if you were buying in Culpeper. But if you were in Fauquier County you'd have waited too long by then. Inventory there peaked in May of 2007. Inventory has continued to decline since then.

If you wanted the lowest interest rates odds are this is your magic moment.

If you want the lowest prices and don't care as much about the inventory or the interest rates, anytime in the next year will probably work just fine.

But, if, like most people, you want it all, it's a little tougher to figure out.

I suspect your best combination of all three was probably mid year 2008. Inventory remained high enough that there was a great selection. Interest rates had gotten much lower, but even at the lower end of the market there wasn't yet a huge upsurge in buyers yet.

I believe a lot of buyers are waiting for the "right time" without defining what that means for them in their situation. The answer can be different for different families in different situations.

What's your perfect combination?

Virginia's First LEED Condos

More energy efficient housing options continue to pop up in Virginia.

Here's a blog post on Cromley Lofts in Alexandria.

They look beautiful. One of my criticisms of much of the energy efficient new construction I've seen is that it's all very modern in style. I don't dislike modern, but we need more variety if this is going to go mainstream. And, while ultra modern may be a hot sell in California, there's a lot less demand for that look in The Old Dominion.

I look forwad to checking these out in person soon!

Anyone want to go along?

Local Service Options

Monday, January 19th has been designated a National Day of Service as part of the inaugural events. Whatever your political persuasion hopefully we can all agree that people stepping up to help in their communities is a good thing.

I've got two events posted for Fauquier County. I believe they're the only two events listed locally.

To find out about helping with the Fauquier County Food Distribution:

To find out about helping with a local food drive:

I'm disappointed that there aren't more local activities. Surely there's enough work to be done locally that no one should have to drive to Chantilly, or Sterling or Leesburg to participate!

So, if you know anyone involved in a local charity and think they may be able to find a way to use this even, please encourage them to get it on the website.

If they need a little help figuring out how to do that I'm happy to lend my services.

And, I hope lots of you will participate in one of the events!

Warrenton Foreclosure Sale

This is the story of a house in old town Warrenton. It's in the historic district and is a beautiful house set on a quarter acre lot.

The house has beautiful hardwood floors and an updated kitchen. It has three bedrooms and 1.5 baths. It was built in 1939 and is within walking distance of old town.

This house was sold in 2003 for $165,000. It was sold again in August of 2006 for $353,999. The owner who bought it at that time eventually lost the home to foreclosure.

In April of 2008 the bank listed it for $369,900. It's hard to know what they were thinking, but clearly they didn't have a clue what had happened in the local real estate market. No improvements had been made to the home since the last sale.

Not surprisingly, the house didn't sell at that price. They eventually lowered the price to $319,900 before withdrawing it and listing it with another real estate agent. In September it was listed with the new agent, still at $319,900. Eventually the price was lowered to $249,900.

It finally sold last month for $137,800, roughly 16% below what it sold for six years ago.

This is a house that was not trashed by the last owners. It was in as good a condition when they left as when they bought it.

That sales price is 61% below what it sold for in 2006.

The lessons here:

There are some incredible deals out there.

• Banks lose big time when they over price foreclosures.
• 61% price drop in 2.5 years is astonishing.
• Don't be afraid to make a lowball offer to a bank. Sure, most of the time you won't get it. But, it does happen.

No one can tell you for sure what will happen with prices this year. But to compete with this kind of deal, most sellers will have to cut prices much more than they have thus far.

December Market Statistics

The recent market trends continued in December without much significant change. Prices and inventories continue to fall, this month even in Rappahannock.

Prince William county stands out as inventory there is now down to four months' supply. That's astonishing given the state of the overall real estate market, the economy and how many foreclosures there have been. With only four months of inventory it's hard to see prices falling much more in Prince William. But there are probably still some owner occupied properties there that are overpriced.

Leaving Rappahannock aside for the moment, Fauquier has the biggest inventory problem at the moment. They're still sitting with 12 months of inventory. There have been fewer foreclosures there and sellers of non-foreclosures have been unwilling to make the necessary price cuts to compete with what's going on in surrounding counties. But prices in Fauquier are unsustainable, even at current levels. If you can buy a townhouse in Manassas or Gainesville for the same price, or cheaper, than one in Warrenton, you're likely to choose the shorter commute.

Culpeper's inventory continues to drop, slowly but surely. Inventory there is down to nine months. While we continued to see bidding wars on foreclosures in lower price ranges in early December, there's some anecdotal evidence that traffic has slowed in the last two weeks. It'll be interesting to see if January's numbers show any change to current trends.

It's also interesting to note that banks have a lot of additional foreclosures sitting, waiting to be put on the market. I suspect they're still trying to spread those losses over multiple quarters. But it's hard to determine how bad the foreclosure problem still is when you know there's another shoe out there, waiting to drop.

Rappahannock's inventory declined spectacularly in December. Some of that may be people taking their homes off the market during the holidays. And, there were 6 properties that went under contract in December. So, January's numbers may give us a better feel for what to expect going forward in Rappahannock.

The other thing to watch in the next month is what steps the government takes, if any, to intervene in the real estate market. Check this space next month to see what those impacts were.

Real Estate Depreciation

The economic analysts have been talking a lot lately about deflation and the dangers it poses for our economy. I'd like to suggest we've been seeing deflation at work in the real estate market for a long time.

Deflation is when prices decrease. Economists are currently worried about a deflationary spiral where prices continue to decrease, consumers, knowing prices will decrease, wait for a better price, and so those with goods to sell are forced to discount their prices in an ever deepening loop. Of course, as goods are sold for less, the people who make those goods must decrease their costs, lay off people and creating more deflationary pressure.

We seem to be in this cycle in real estate and have been for some time. Buyers are waiting to see how much more home prices are going to drop. After all, no one wants to get a bad deal on one of the largest financial transactions they'll ever make!

And, so, sellers are forced to continue to drop prices. That reinforces buyers opinion that they should wait as prices are still dropping.

But, of course, ultimately this path leads to ruin, whether you're talking about real estate or the overall economy. If real estate assets continue to plummet in value, all of us are poorer. Even if you're not selling your house, you're impacted. Local governments are impacted as tax revenues fall. If you've got kids you know the schools are impacted.

So, how do deflationary spirals end? The problem is no one seems to have a good answer for that. Wars have ended them as the government created massive spending and hiring programs, as in World War II. Japan's tried everything you can imagine to end their deflation problem, without all that much luck.

President-elect Obama is about to get his crack at it. Let me say that one reason we're here is that we've had a government who did not believe that a deflationary spiral in real estate was possible. And, when they did, belatedly wake up, they still didn't believe that the effects of that would spill over into the rest of the economy.

The good news is that I believe that even the government now gets it. In one way or another I believe addressing this problem will be one of the first priorities for the new administration. I've got my fingers crossed that they get it right!

VA Compromise Sale

Thanks to Lenn Harley at Homefinders.com for bringing this to my attention.

For those homeowners with a VA loan who find that they owe more than what they can sell the home for, the VA has what's called a Compromise Sale.

From their web site:

If the borrower is unable to sell the property for an amount that is greater than or equal to what he/she owes on the loan, including closing costs, VA may pay a “compromise claim” for the difference in order to allow the private sale to go through. The borrower can sell the property to a buyer who gets his/her own financing or to a buyer who wants to assume the loan. However, with a compromise assumption, the lender does have to agree to have the amount of its guaranty reduced by the amount of the claim payment.

 This program does not automatically relieve the borrower of all obligation for the shortfall. However, they may be able to wrap the deficiency, closing cost assistance for the buyer and the real estate commission into a loan at a very favorable interest rate.

There are detailed instructions for both the homeowner and the real estate agent on the web site. It may not be the perfect solution, but it'll be the help some families need in order to move on.

Chemistry Matters

This is another in a continuing, occasional series on how to choose a real estate agent.

Previous posts have focused on more concrete, measurable things. But I think the softer side of this equation also merits some focus.

Perhaps one of the most important elements in choosing a real estate agent is to get one with whom you feel comfortable. You need to "click". The process of buying or selling a home is stressful, even under the best of conditions. And, heaven knows our current market, even if you're buying, can be tough. You want that interaction to be as comfortable as possible.

I know that "comfortable" is going to strike many of you as too soft and mushy. So, let me see if I can help you with a little better definition.

You want someone you can communicate with directly and honestly. You don't want to worry about hurting their feelings. You don't want to worry that they'll dismiss your fears and worries without listening. This stuff is important and you need to be able to talk openly what you're worrying about, where you have misgivings. If things things stay bottled up you can make a mistake because you didn't ask the right question. And, all those unsaid things can definitely poison a relationship!

There are people out there who take stress in, amplify it, and pass it on to everyone they meet. Then there are others who are good at taking the stress, absorbing it and killing it. They pass along their calm to those they come into contact with. You definitely want the latter as your real estate agent. When the little road bumps occur you don't need someone telling you the sky is falling!

Comfortable also means you have a good fit in terms of communication styles. If you love e-mail and hate the phone make sure your agent feels the same way. (Or at least is willing to modify her style for you!)  And, if you want long, chatty phone conversations and all you ever get are e-mails, there's probably a communications mis-match. It's a good idea to indicate early in a relationship how you like to communicate and making sure that works for everyone.

The soft stuff really does matter. Pay attention to this and the rest of the real estate experience will be much better!