Tax Credit Local Impact

I could take a look in detail at the October numbers for Culpeper, Fauquier and Prince William Counties. But they don't show any shockingly different results or trends. And, I thought it'd be more interesting to take a look at the impact of the First Time Home Buyer Tax Credit in our area.

Obviously, without interviewing every buyer it's impossible to know the precise impacts. But I think it's fair to compare the pace of home buying in each county over the past few months and see how we were doing a year ago without the tax credit and how we've done this year with the credit.

Culpeper is first up. Here are the total sales May through October both in 2008 and in 2009:

Hmmm...if anything the volume of sales is lower in 2009 with the tax credit available.

How about Fauquier?

The evidence is more mixed here. Was the increase in August, September and October because of the tax incentives?

Here's how Prince William looked:

Clearly there was no help from the tax incentive in Prince William County.

I'll do Rappahannock County, just to be consistent, but I'd tell you the results there without even looking:

This is Rappahannock County. Trust me, there weren't many first time home buyers in that lot!

The overall picture is not one that suggests the tax credit had any appreciable impact at all. Were a few extra homes sold? Probably. Was it enough to make any appreciable difference in the market? It seems unlikely. The only argument you could make for that would be that the market would have declined significantly without the tax credits. I'd be hard pressed to find data to support that argument. We'd likely have been in the same relatively flat pattern we've seen for some time now.

So, how do you feel about the extension and expansion of the home buyer tax credit now? Is it worth your tax dollars?

2009 Predictions Updated

At the end of 2008 I made some predictions about what the real estate market would likely look like for this year.

We've now got enough data from the first half of the year to take a look at how accurate I've been.

First of all, I predicted that the Obama administration would intervene in the housing markets and that this intervention would make a difference in the real estate market locally.

I got this one partially right. They did intervene almost immediately with a moratorium on foreclosures. You could argue about how much it helped, but we did see some let up on the loads of foreclosures coming on the market in the 1st quarter. And I would argue that it gave some mortgage holders time to rethink their strategy. Some of them decided dumping large numbers of foreclosures in the same market at the same time was not all that smart!

But I also anticipated that the adminstration would use that extra time to put in place a real plan to reduce the number of foreclosures. Unfortunately, this administration's plans, like those of the Bush administration before it, have proved inadequate to the challenge at hand.

The one measure that I would say has made a considerable difference in this market is the $8000 first time homebuyer tax credit. There are homebuyers out there buying homes purely because of this incentive. Between that additional demand and the reduction in the dumping of scores of foreclosures, we have indeed, seen some bottoming.

I was partially right and partially wrong on the inventory question as well. I anticipated that while the overall trend would be down, year over year, that we'd see a rise in inventory briefly in early spring, 2009. This is a seasonal pattern and I expected to see what we've normally seen. I was wrong and the decrease in inventory continued, even through the early spring. There was a blip of an increase in Fauquier County. And Rappahannock continued it's tradition of bucking the trend with an inventory that continues on an upward trajectory. But overall, inventories have declined steadily throughout the year.

I suggested prices would stabilize during the summer months. I may still get that right, we'll see. What it looks like right now is price appreciation at the lower price ranges, price stabilization in the mid range and continued price declines in the upper price ranges. The average sold price is down 31% year over year in Culpeper County thus far. The median sold price is down just 11% (close to my prediction of 10%). In Fauquier the average price is actually up an astonishing 45%, with the median sold price down 8.69%. In both of these instances I'd pay a lot more attention to the median number. The average is too easily skewed by large transactions. In Prince William county the average price is down about 5% and the median down 6.67%. But anyone trying to buy a home in Prince William under $400K knows how tough the competition is. Prices are definitely increasing in that market segment.

The number of homes sold for the year looks like it will slightly beat my projections. We're slightly ahead of where I thought we'd be right now. Barring a large drop off, we'll beat my projections, probably by 5-10%.

At this point, nothing I said makes me look like an idiot, always a good feeling! But it's only August!

Want to go out on that limb with me? What are your projections for the rest of the year?

June Market Stabilization

There is nothing dramatic in the numbers for June. This is good news. The market is relatively stable at this moment.

With the exception of Rappahannock County, inventory remains almost unchanged from May. Rappahannock had a huge jump (for Rappahannock) from 89 to 100 homes for sale. But they also had another good month for sales with 6 homes sold.

In Fauquier, Culpeper and Prince William Counties there was a change of a few properties in the overall inventory. But look at year over year and it's amazing how much we've improved. Prince William has roughly half the inventory it had a year ago. No wonder we're seeing things go under contract in days with multiple offers!

While Fauquier and Culpeper haven't seen the dramatic decrease we've seen in Prince William, each of them has at least 30% less inventory now than a year ago.

As you'd expect, the county with the lowest inventory, Prince William at less than 4 months, shows the most stability in prices. Culpeper and Fauquier both have roughly 8.5 months of inventory and prices still appear to be declining there. But the stats are a little misleading there. Year over year stats show a price decline of approximately 25%. And, while June stats show a price decline over May, the month to month numbers are not very reliable in this category. Because the volume of homes sold in any given month is relatively small, the numbers are easily skewed. Still, prices remain at bargain basement levels.

We are bouncing along the bottom in my opinion, maybe moving up a little in Prince William County. The big question here is still, how long will we stay on the bottom.

I'll be working over the next couple of weeks on a look back at my 2009 predictions and how I'm doing so far. Stay tuned for that and your chance to make fun of my skills as a prognosticator!

The Great Bank Conspiracy?

Fellow agent and blogger Danilo Bogdanovic just wrote a post on Agent Genius suggesting that perhaps the lack of inventory is actually a plot by the banks to all withhold their foreclosure inventory and thus drive up prices.

Danilo uses the word "Collusion". If you're a buyer right now you may find this persuasive. But I'm not convinced it's all an evil plot.

If the banks are fans of "Buy Low, Sell High" it makes sense for them to hold on to assets until prices improve. And, as inventory has gotten scarce prices are starting to improve.

A banker friend has also suggested that any publicly traded company would logically spread out losses so that they don't all show up on the balance sheet in the same quarter.

And, given what I've seen dealing up close and personal with banks on short sales and foreclosures for a couple of years now, I doubt most of them are capable of the planning that would be necessary for this level of collusion!

If you're a homeowner you're probably thinking this sounds like the best idea ever. If the banks put one or two foreclosures up for sale each year, your home might actually begin to appreciate again!

Either way, I suspect we're giving the banks way too much credit in thinking collusion is responsible for what we're seeing right now.

May Numbers

May proved to be mostly a month where the numbers went sideways.

Whether you're looking at Culpeper, Fauquier, Prince William or Rappahannock County, there are no dramatic changes.

There were some subtle signals that things have slowed down a tad in Culpeper county. Both new contracts and sales actually fell last month.

In Fauquier county inventory actually rose, ever so slightly (3 houses). But sales jumped month over month from 54 to 70, well above last year's pace at this time.

Prince William continued to shed inventory with only 3.7 months of inventory now available. I continue to see buyers discouraged with what they're finding available under $400K in Prince William.

Rappahannock County had the biggest jump in sales with 7 units selling last month. This being Rappahannock and the universe being so small, it appears to be a big jump (SALES TRIPLED!). But inventory is exactly where it was a month ago and we're unlikely to see any sudden movements in this quiet corner of the market.

Overall, signs would still seem to indicate we're at or very close to a bottom. Prince William still looks to be on its way back up with price appreciation. And, with a tiny amount of inventory available, prices there will likely continue to rise throughout the summer months.

The Bad and the Ugly

There have been some positive signs lately in the real estate market. And, being an optimist at heart, I probably tend to focus on those pieces of news. (Let's face it, it's easier to get up and do this every day if I'm optimistic!)

But I don't want to be an unthinking cheerleader for the industry. The news is truly mixed right now and I want to highlight a couple of pieces today that give you the other side of the picture.

Bloomberg has a piece today on the latest mortgage delinquence/foreclosure numbers. To say the numbers aren't pretty is to put a little too good a spin on it. The delinquency rate and the numbe of loans entering foreclosure are both the highest since 1972. And, these are not sub-prime loans. We're talking about the loans any lender, in any market, would have thought were good. These are foreclosures occurring because of a combination of a terrible economy and the huge decrease in the value of the homes. If you lose your job and your house is worth half of what it was 5 years ago; even if you put 20% down, there's a good chance you've got a problem. If you have to sell quickly there may not be buyers at a price that gives you even enough to pay off your mortgage. Foreclosures continue to drive prices down and they continue to come onto the market at an alarming rate. Even locally, whether you're talking Prince William, Fauquier or Culpeper counties, the foreclosures are a continuing problem.

Meanwhile, the Wall Street Journal (subscription required) takes a look at whether a home is even a good long term investment. The article is not exactly an encouragement to buy instead of rent.

Here's the heart of their argument:

Yet look at the numbers. Since 1987, when the Case-Shiller index of 10 major cities begins, it's risen from an index value of 63 to 151. Annual return: Just 4.1% a year. During that period, according to the Bureau of Labor Statistics, consumer prices rose by 3% a year. Net result: Home prices produced a real return of just 1.15% a year over inflation over that time.

Critics may point out that the analysis is unfair -- after all, it starts counting near the peak of the 1980s housing boom. Fair enough. Look at the performance since, say, early 1994, when home prices were near a historic trough. Surely someone who bought then has made a bundle.

Not necessarily. Since then the ten-city index has risen from a value of 76 to 151. Annual return: 4.7%. Inflation over that period: 2.5%. That's still only a real return of 2.2% a year above inflation.

They go on to add that a home could cost you an additional 2% in things like property taxes, insurance, repairs, maintenance, etc.

I'm not saying I agree with their analysis. They admit that focusing on these 10 cities is not necessarily a representative sample. But I do think that not everyone should own a home and that it's important to think it through carefully before you buy, especially now.

National Price Declines Don't Tell the Whole Story

The nationwide numbers out today show that, year over year, home prices continue to decline. That decline was over 18% nationally. Because everyone hears national numbers, rather than local, the tendency is to assume that whatever you're hearing is also the situation locally.

Year over year, our numbers look worse than the national average. The latest numbers available from the local multiple listing service show year over year price declines between 23-32%. But that's only one piece of the picture.

If you're buying a foreclosed home or possibly even a short sale, you may not feel the pricing power you were led to believe you'd have. You see, all the buyers are looking in the same price range. So, even if there are 25% fewer buyers than there were a couple of years ago, if they're all looking at properties, say, on the western end of Prince William County under $350K there is little or no buyer leverage.

So, the pricing picture is considerably more complicated than what you hear in the national press. I'm not blaming them. You can't write a coherent article about prices everywhere! Just be aware that the picture here is a little more nuanced.

The other piece of information in the home price report was that prices nationwide are now at 2002 levels. I suspect we're not quite that low yet. But I haven't yet had an opportunity to do an analysis. I am seeing people who've been in their homes five years or more still under water.

And, if you're wondering when we bounce back up, this Bloomberg article wasn't particularly optimistic:

 “There are very few V-shaped recoveries in the history of real estate, and this one is likely to be even slower because of the size of the bubble,” said Robert Shiller, the Yale University professor who, with economist Karl Case, created home price indexes in the 1980s now used by Standard & Poor’s.

In short, don't expect any rebound in prices soon. I believe from a price perspective we'll bounce along the bottom for quite some time, perhaps a couple of years before we begin very slow appreciation.

If you're looking for a ray of sunshine, one analyst on CNBC suggested yesterday that we could fix the housing problem any time we wanted by increasing the number of immigrants.

April Market Numbers

April results are in and for the first time in quite awhile we're seeing a small uptick in inventory in most counties. It's not large enough to be a concern at this point. In fact, given that we're in the busy spring/summer season, it's surprisingly small.

In Culpeper there are currently 494 homes for sale. That's still less than we had in January. And it's a huge improvement over the 800+ homes for sale there a year ago. Sales remain strong with 62 homes sold as opposed to 48 last year at this time.

Fauquier remains flatter. Inventory also rose slightly here. There are 569 homes for sale here now as opposed to 556 a month ago. And we're still much better off than April of 2008 when there were 764 homes for sale. But sales aren't much better than a year ago. 54 homes sold in Fauquier County in April. 49 were sold in this period a year ago.

Prince William was the exception to the increase in inventory. It continues to shrink there; good news for sellers, not good news for first time home buyers. There are 2944 homes for sale in Prince William county, roughly half of what was for sale there a year ago at 5880. Sales decreased very slightly month over month: 741 this month vs 750 last month. But homes are still selling much faster than they were a year ago when only 639 sold in April.

Rappahannock County showed a very large jump, from a percentage point of view. There are now 89 homes for sale here vs 76 last month. 27 new properties came on the market, a lot for this small county. That's the highest number of new listings coming on the market in one month in the last four years. But the number of contracts written also jumped to 5 even though sales fell to 2 last month. Large jumps in inventory in Rappahannock previously have resulted in a subsequent withdrawal of many of those listings as people tested the market and then changed their mind about selling. We'll see if the same scenario plays out this time around.

Overall, the market appears to continue to recovery. The only worry here is the seemingly unending stream of foreclosures coming on the market. Between foreclosures and short sales there appears to be no likelihood (except in Prince William) of price increases any time soon.

Gainesville Dying?

A Reuters article this week suggests that Gainesville is a dying community.

I think the article gets some things right and others wrong.

Gainesville home sales are jumping. And in the lower prices we're seeing bidding wars and/or multiple offers. That doesn't signal to me that the entire community is dying. And, yes, there are still a lot more foreclosures to come. If they come at a measured pace the market will quickly absorb them.

On the other hand, I continue to see buyers less willing to do the long commute. So, unless the pool of jobs within a reasonable driving distance of Gainesville increases, the community has some tough times ahead.

And, the further out you go (think Fauquier County) the more commuters have opted out.

Are new, good jobs going to be created in these communities? Or, are we simply going to be smaller?

March Market Numbers

Prince William county continues on its headlong pace towards a seller's market. There's now only a four month supply of inventory in Prince William county. And, that's not because there's no inventory coming on the market. 1116 new listings were added last month. Meanwhile, 1200 went under contract. We are seeing many fewer new listings added than a year ago at this time. 1631 new listings were added in March of 2008. Meanwhile, closed sales were at 750 in March of 2009 compared to 502 a year ago. Meanwhile, the average sold price crept up from last month's $204K to $210K this month.

I'm not expecting big leaps in pricing in Prince William county. But given the short supply and the increasing demand I think we'll likely continue to see small gains in prices throughout the spring/summer season.

I'm thrilled at the progress we're making in Culpeper. We're down to 8 months of inventory there. Last year at this time there were over 800 homes for sale. This month there are only 464. Last year in March we sold 42 homes, this year 58. There is a March jump in new listings in Culpeper and the other counties, but nothing like the jump we've seen in recent years. And, as long as the net result is still declining inventory, the indicators seem pointed in the right direction.

Prices are still falling in Culpeper County, but I predict we'll see some stabilization by the end of the season. There are already signs of that in the bidding wars on properties priced under $300K.

Fauquier is moving in the right direction, but more slowly than Culpeper or Prince William. We've still got almost 13 months of inventory in Fauquier County. As in the other counties, the lower priced tier of homes is moving pretty quickly. But there's an awful lot of inventory above $350K that's just sitting. There are fewer foreclosures in Fauquier and, in some sense, that's hurting the market. Many of the buyers out there are bargain hunters. And, the bargains are harder to find in Fauquier County.

Still, the inventory is down to 556 as compared to 734 at this time last year. But unlike Culpeper and Prince William County, Fauquier's inventory actually rose this month compared to last month. That's not unusual for March, but is unusual compared to what's going on around us. Last March 35 homes sold in Fauquier County. This year in March it was 43. Again, we're headed in the right direction, but slowly.

Prices are still falling in Fauquier. The average sales price is $224K now as opposed to $318K a year ago. Fauquier is the hardest county to make a case for price stabilization this year. I don't anticipate stabilization in prices until we get a lot closer to six months of inventory. We may hit that level if we have an extraordinary spring/summer season. For now, my bet is that Fauquier prices remain the most likely to continue to fall.

Rappahannock County shows inventory rising slightly (76 compared to 71 a year ago). New listings were 17 in March of this year compared to 11 a year ago. There was 1 new contract in March and 3 closed sales. Those are typical Rappahannock numbers. This is the county that tends to be more sheltered from the real estate trends in the rest of the area. Prices do seem to still be falling in Rappahannock, although it's hard to identify by looking at the overall trends. And, Rappahannock residents continue to take their properties off the market rather than suffer the loss in value.

Disappearing Shadow

In the tough seller's market of the last few years a lot of sellers have tested the waters by putting their house up for sale, and, in the end, retreated. All those houses that will theoretically come back on the market when the market improves are called shadow inventory.

We're looking at two basic kinds of shadow inventory. The first is individual owners. They want to sell, maybe even already tried and are just waiting for the right moment to put their home on the market.

The second kind of shadow inventory is foreclosure inventory. The banks are reportedly sitting on 600,000 homes nationwide that they've already foreclosed on, but aren't yet putting on the market.

Both of these categories have the potential to dramatically increase inventory, which has been steadily dropping for at least a year now.

The thing is, I'm not overly worried and I think the danger has been exaggerated.

Yes, there are a lot of homeowners who still want to sell. But it's not just the low number of sales that keep them from trying. They also don't want to sell at these prices. And, if they're going to wait for prices to recover even a quarter of what they've lost, I think they're looking at waiting several years. Some of those homeowners will have changed their mind by then. They'll remodel the house to suit their needs and they'll stay. Those that do still sell will not do so in one huge mass. Some will have a higher tolerance for lower prices and will sell sooner. Others will likely wait a year or two or three. I don't believe there will be some magical month where all this "shadow" inventory pops onto the market at once.

The foreclosure properties are a bigger concern. But I'm still not convinced it will be a huge problem. A lot of those 600,000 homes will be in CA, FL, NV and MI, places hit harder than we were. So, the numbers will likely be smaller than people anticipate. Secondly, the bulk of these are likely to be at the lower price ranges. We've actually got a shortage of inventory at those price levels. In places like Prince William County and even Culpeper County, a lot of inventory would be absorbed very quickly by first time buyers. And, I believe the banks are deliberate spreading out the foreclosures in order to manage their losses. It's not in their interests to dump everything on the market at once.

So when someone tries to scare you with all the shadow inventory waiting to hit the market, take it with a grain of salt. It may not be all that bad!

Bottom!

I'm going to do it! I'm calling a bottom!

You can tell me I'm crazy. And, I won't entirely disagree. Bottoms are unknowable when you're there. You know it's the bottom after the fact when the statistics confirm it. So, anyone who tells you this is the bottom is, at best, guessing.

And, I will admit that this is an educated guess. But I look relentlessly at the numbers, day in and day out. I watch for trends. I study this stuff as though I was prepping for a final exam.

And, everything I see makes me believe we're at a bottom here. In places like Prince William I think it's clear we've already passed the bottom and all those people who are still waiting had best hurry up! Prices are already starting to rise.

In places like Fauquier and Culpeper it's much less obvious. There's still too much inventory and we have a ways to go to get to "normal". But the trend is solidly in the right direction. Even now, at the end of March when there should be tons of new inventory coming online for the spring market, inventory is still dropping. But new buyers are coming out.

Let me add one note and one caveat.

This is a sales bottom. I don't believe we'll see sales numbers fall from here, other than the seasonal dips we would ordinarily see. This is not a price bottom everywhere. In Prince William I believe prices have bottomed as well. I think you'll see small appreciation in Prince William this year.

In Faquier and Culpeper I believe you're still looking at a very small downward adjustment this year, perhaps flat if we get very lucky.  And we will not bounce off the bottom quickly. Expect relatively flat prices next year as well.

And, the caveat is, this assumes that we are not, in fact, entering another Great Depression. It assumes that the recession lingers through much of this year but that there is some recovery in 2010.

And, if the plan Republicans are introducing today for a $15,000 tax credit should become law, we could even see more price appreciation than I'm currently predicting. A note that this new tax credit is predicated on the buyer being able to put 5% down on the house.

Happy bottom!

Pricing Strength in Prince William

It's not only the Days on Market and number of offers and volume of sales that are improving in Prince William. I'm also seeing some strength in pricing there.

The sale price as a percentage of list price has risen year over year from 87.64% to 90.97%. While it's true that much of this strength is in the lower price ranges, the fact remains that inventory is selling and prices are firming up. And, in the under $350K inventory, the pricing strength is even more apparent with very little selling much below asking price.

And since we're still not seeing the typical early spring flood of new inventory, prices, so far, seem likely to continue strong.

There's some indication of firming of prices in Fauquier, although it's too small to assume there's anything in the way of a trend here yet.

And Culpeper prices remain soft at best, probably still declining.

The question continues to be whether higher prices and lower inventory in Prince William and east will push people further out as the peak sales season approaches.

February Market Numbers

Final February numbers became available today. There are no startling changes to current trends. Inventory continues to decline. Sales continue to look pretty strong.

Culpeper's absorption rate indicates that current inventory would be entirely absorbed in just under 13 months. That's the best that number's looked in a very long time.  In fact, for the first time in several years Culpeper's absorption rate is higher than Fauquier County's rate. Fauquier County's absorption rate shows it would take almost 16 months to get rid of current inventory. Prince William County stays at an astonishingly low 5 months. And, Rappahannock continues to move along at its own pace!

The biggest surprise to me in this month's data is that we did not see the big jump in new listings that I expected we'd see. Typically this is when you see sellers trying to get a jump on the spring market and inventory starts to climb. And we did see small increases in the number of new listings in a couple of counties. But they were very small increases and sales increased enough that there was no impact to overall inventory.

Sometimes what I see on a particular day is more striking than numbers. Today I was out showing properties in Prince William County. I showed four properties. The first one had already gotten one offer in today. At another property we were greeted by an agent and her clients who informed us that the bank had already accepted their offer. At the third a property that had just gone on the market this week already had cards from 21 agents that had shown it. And, our showing was interrupted by another couple right behind us.

The only property of the four that didn't appear to be overrun with potential buyers was one that clearly had water issues and possibly even foundation issues in the basement.

If you're looking at properties in Prince William County that are under $350K we're back to multiple offers, bidding wars and potential buyers tripping over each other in houses.

Overall, the market seems healthier and I'm pretty optimistic that the number of sales overall will be substantially above 2008. I still don't anticipate a big jump in prices. However, prices in Prince William are likely to increase this year if current trends continue.

Sellers have reason for optimism. Buyers still have a great market, but there's definitely a sense of urgency if you're buying in Prince William County.

Manassas is Hot!

CBS news makes it official. Manassas is the hot place in the region for getting a real estate bargain!

And, no wonder! There are currently 324 properties for sale in Prince William county for less than $100,000. That's incredible when you consider the prices just a few years ago.

And, while the rental market has softened as the economy has softened and the inventory has risen, it hasn't softened so much that you can't make a profit at those prices!

For those who say housing prices have to fall alot further this year, I'd say, not in Prince William! Obviously I'd be an idiot to declare a bottom, especially with so many economic difficulties still ahead. But if this isn't a bottom in Prince William, we're awfully close!

And, in general, I see some firming up of prices in this area. Note I did not say I see any appreciation. And I don't expect any this year. But it seems like some kind of bottom is in the process of being established. Depending on what happens with the rest of the economy it may or may not hold. But for now, there is reason for optimism.

January Market Statistics

It's time to take a look at what the market results for January had to say. And, once again the picture remains positive if you're looking for good sales numbers.

In Culpeper the sales for January dropped by about 50% from the previous month. But lest you think that's a negative, that's still about 30% higher than at this time last year. Inventory continues to shrink, down to about a 16 month supply right now. And, based on the number of contracts written, things continue to sell. This is all good news for sellers. The bad news remains that what is selling is primarily foreclosures and they're selling at a steep discount. The average sales price fell about 40% year over year. And, as long as the foreclosures continue to hit the market, pricing will remain depressed. More on the picture later.

In Fauquier County we see the same kind of patterns with inventory falling to a 15 month supply. Sales fell there in January as well, but again, that may have more to do with the holidays than with any specific market forces. And, the number of contracts written remains strong. In Fauquier sales prices were more stable in January, falling only 4% year over year. That's one month's data so it's too soon to tell if that's an anomaly. With 15 months of inventory I'd be surprised to see any significant strengthening of prices in the short term.

Prince William County is the place to be if you're a seller, but may be becoming problematic for buyers. We're down to a five months supply of inventory. That indicates we've got a pretty balanced supply of inventory there. And, my experiences there bear that out. As I was showing homes this weekend in Prince William, a smaller percentage of what I showed were foreclosures or short sales. But prices are still down significantly, 34% year over year.

Rapphannock County also saw inventory shrink this month, falling to 73 homes for sale. That's a pretty fast turn around from the high of 103 we saw in October. Some of that is attributable to sales, but much more of it is from properties being withdrawn from the market. And, even in Rappahannock County there are foreclosure sales. One occurred just down the road from my house this month.

The real estate market may be about to see some changes, however. In anticipation of the President's announcement on Wednesday of a plan to help the real estate market, many banks have now announced foreclosure moratoriums. The banks include giants such as Citi and Bank of America. And Fannie Mae and Freddie Mac had already announced foreclosure moratoriums of their own. With only five months of inventory available now in Prince William County we may be on the verge of seeing some price stabilization at the very least over the next couple of months. Depending on what happens after the moratorium there's even the potential for some price increases.

If I were buying in Prince William county I'd be tempted to jump sooner rather than later. As I believe this is the best combination of inventory, prices and incentives you're likely to find for the next several months. In Fauquier and Culpeper inventory levels are high enough that I think you could justify waiting a couple of months to see what will happen. And, in Prince William, it's possible that next fall the edge would go back to the buyers again. But that's a little too far out to predict without knowing what actions we'll take from DC.

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?

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?

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.