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Bigger Houses Still the Rule

Date: Aug. 27, 2012
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Marketplace's Planet Money has an interesting graph showing that houses being built now are still surprisingly large. 

While it's true that you've been seeing articles saying home sizes are shrinking. And, that's true compared to, say 10 years ago. But if you look back, even to the 90s we're still living in enormous homes. 

My hunch is that the size keeps shrinking.

What's your hunch?

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Echo Boomers: No Thanks To Home Ownership

Date: Dec. 20, 2011
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How often have you heard the phrase "The American dream of home ownership" or something similar? An article in Forbes makes it clear that the Echo Boomers, the next generation of potential homebuyers, sees things differently.

I've talked before about what I saw in this group: closer ties to friends, preference for experiences over stuff and more ecologically conscience. They seem, in short, unlikely candidates for life in the suburbs, long commutes and trophy McMansions.

They are sure to change the future of the housing market.


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Flying Off the Shelves

It's been a long time since I've seen my buyers having so much trouble finding houses to buy. In some areas inventory (high quality, well-priced inventory) disappears almost as fast as it hits the market. The western side of Prince William county, including Gainesville, Bristow and Haymarket fit that description. The southeastern side of the county, not so much.

But even in places like Bealeton and Remington, in the lower price ranges there is very limited inventory for sale and the good stuff goes fast.

There is an increasingly steady drumbeat of press articles around this amazing buying opportunity, that might be part of it.

Meanwhile, the many reasons sellers don't want to sell if they don't have to haven't changed, which continues to limit inventory.

So, is it a great time to buy? Interest rates are low, prices remain low (although beginning to edge upwards a slight bit) and those are good things. The lack of inventory and continued economic uncertainty would suggest continuing to proceed with caution. Every situation is different. But if you're staying put over 5 years, I like your odds of at least breaking even when you sell.

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Worried about Nuclear Power Plants?

In light of what's been happening in Japan, some people are no doubt rethinking how close they want to be to a nuclear power plant.

Check out how close they are to where you live now and where you're thinking about living at this Greenpeace site.

Are you closer than you'd like?

We're 44 miles from Lake Anna.

I'm hoping the lesson learned from Japan isn't that if you're not near an fault line or a coast line there's nothing to worry about.

I hope we've learned that human brains aren't very good at predicting everything that could possibly go wrong and that failsafes often aren't.


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Need To Be Flexible?

I stumbled across this quote in a blog post by Richard Florida today:

But in an economy that revolves around mobility and flexibility, a house that can’t be sold becomes an economic trap, preventing people from moving freely to economic opportunity.

I'm a fan of Richard Florida's work. But I'm trying to decide to what extent I believe the statement above.

I'm definitely advising more buyers who are young and likely to transfer often that they should rent unless they'd like to become investors.

 So is owning a home too much of a risk in today's economy? What do you think?


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The Danger of Buying a Condo

As this article from the Chicago Sun Times makes clear, buying a condo can be a lot more complicated than other real estate transactions.

Lenders have been very cautious for several years now about mortgages on condominiums. The truth is that many condo associations are essentially broke. Since the owner only owns from the drywall in, all other maintenance falls to the association. If they've got no money that maintenance may not happen, causing all property values to fall.

The article talks about the other issue causing banks not to lend on condos, too many rentals in a building or development. Of course, if you can't sell your condo because no one can get a mortgage and you have to move, you're likely going to rent your condo out, exacerbating the problem.

Prince William county is where we see the most condos in the area I sell in regularly. But there are a few condos in Culpeper and Fauquier as well.

If you're thinking about buying a condo, start working with your lender early in the process. Have them check out any association you're looking at to make sure it's not on their blacklist. And, as with buying any property, do your homework!

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Buying A New Home - The Wrong Way

A cautionary tale, told by my colleague, Jim Duncan in Charlottesville.

Don't even think about buying a new home without representation!


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The Disappearing Tax Credit

The tax credit deadline is upon us. The $8000 tax credit for first time home buyers is only good if you can get to settlement by June 30th. There was legislation pending in Congress to extend this, but in the end, it died. It looks like that June 30th deadline is a hard and fast one.

There's been a whole lot of hollerin' about this in the real estate world in the last week. I remain unsympathetic.

One agent wrote that his client was being put in a position that he would have to withdraw from the contract. Nonsense! Everyone knew what the deadline was going in. Everyone knew, or should have known, that the odds of getting a short sale to close by June 30th were pretty awful.

If the only reason someone was buying that house was for the $8000 tax credit, that's a pretty poor reason for making a home buying decision. What are they going to do, wait for the next real estate crash to see if they can get one then???

All the moaning and rending of garments now seems a little suspect to me.

I've been a little cynical about the long term effects of the tax credit anyway. I'm not all that sorry to see the end of the whole thing.

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Buyer Beware

Date: Feb. 14, 2010
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There was a time when people had an expectation that other people, trusted professionals, would look out for their best interests. It was probably always a mistake to blindly trust anyone simply because of their profession. Even your doctor may have mixed motivations.

And, here's fresh evidence that you should not trust your real estate agent if you're a buyer, especially if you're in North Carolina.

I was taught from the beginning that you disclose EVERYTHING! You especially disclose anything of a financial nature that even has the appearance of influencing your behavior.

You should know if one of the homes I'm showing you pays me more than the others. You should also know if one is offering me less than my fee. Then you can make a rational, informed decision.

North Carolina real estate agents who are fighting to keep their buyer clients in the dark ought to be ashamed.

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Cash Wins Bidding Wars

Sunday's Washington Post had an article on how cash rich investors are the bane of first time home buyers.

The example they use is in Prince William County but it's happening throughout the region.

Cash is kind, there's very limited inventory and deals with mortgages often fall through.

If you were a seller, what would you do?

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Newsweek Wants You to Buy a House

Date: Dec. 11, 2009
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Don't blame me for the headline, but Newsweek says:

If You Don't Buy a House Now, You're Stupid or Broke

The headline is a bit of hyperbole. Lots of us who aren't buying now are neither stupid nor broke!

However, he's got a good, detailed analysis of what the lower interest rates will likely save you on your mortgage. And, I believe he's right about interest rates rising, probably as early as next year.

As always, the decision to buy a house is about you and your family and what's right for you right now. But this is worth thinking about!

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Smaller Houses

Date: Nov. 22, 2009
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There's more and more data to support what I've been seeing with my clients for several years. The pool of people interested in McMansions is rapidly shrinking. Overall, homebuyers are opting for smaller, more efficient homes.

As this article in the San Francisco Chronicle says the average home size is shrinking.

From a recent Wall Street Journal article:

"More often than not, builders say, post-crash buyers of new homes want smaller and simpler. The average new single-family house peaked at 2,507 square feet in 2007 and has since slipped to 2,392 square feet, according to Census Bureau data."

I believe that trend had already started before the recession as the next generation of home buyers a more urban lifestyle w/more experiences and fewer posessions. Will that change as their kids get older, as it has with previous generations? My hunch is that there will always be families who make that choice of the large house in the further suburbs. But I see it as a shrinking demographic. I think the future of energy prices will likely reinforce the tendencies that we already see in the younger generation to forego the McMansions.

But ask me 10 years from now when this recession is a distant memory and we'll see if I'm right!


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Let it Expire

Date: Oct. 22, 2009
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I am going to annoy, anger and irritate a lot of my fellow real estate agents with this.

Let the $8000 first time home buyer tax credit expire at the end of November. Congress should not vote to extend it.

It is not that I want the market to slow further, prices to drop more or the real estate market overall to get worse than it currently is.

I do have several reasons for my belief that we should let it go...for  now.

1. Deadlines are good!

The credit was out there a long time before people really started to focus and pay attention. What got them to pay attention was a deadline! An indefinite tax credit does very little to help the market. Human nature is to procrastinate. Deadlines give them a reason to stop procrastinating.

2. Fraud

Apparently there have been a fair number of people claiming the credit who are not eligible for it. These are people who are either not first time home buyers, or who never actually even bought a house. The IRS is not requiring proof that you qualify for this tax credit and so there are some people taking advantage. If you're tempted, be aware that there are now over 100,000 tax returns flagged for an audit because of this and one tax preparer is already headed to jail!

Let them work out these issues before they give another tax credit or extend this one.

3. Assess

There are a multitude of arguments both for and against extending this tax credit. Each side has their economists with their data. Let's take some time to assess how much good this is doing and whether to extend it and what form that extension should take. Should it be more or less than $8000? Should it apply to more than first time home buyers? The current guidelines are not because data showed this was the best solution. It was a political compromise. Why not look at actual data now, analyze it and determine what makes sense?

I'm not anti-credit. I'm pro a thoughtful approach to this.


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Another Opinion on VA Real Estate

Date: Oct. 12, 2009
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You've heard what I think about the area's real estate market. Here's the view from 30,000 feet from a real estate investor.

He's definitely also optimistic, with some mid-term concerns about Northern Virginia.

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Tick, Tick, Tick

No, it's not another tribute to Don Hewitt who founded "60 Minutes". I'm talking about the end of the first time homebuyer tax credit.

The $8000 one time incentive expires at the end of November. That may seem like a long time away, but for a lot of people it's almost too late to jump on this bandwagon.

Here are some scenarios where you're running out of time on this:

New Construction: Sorry! On this one you probably are way too late. You have to close on the house before the end of November and most builders, in most communities have little or no inventory that can be delivered before then, barring a cancellation. If you're set on buying new construction, you may have to do it without the incentive.

Short Sales:  The typical short sale is still taking 120 days. That's four months! Do the math, that puts settlement at the end of December, a month too late. You could get lucky, some of them are closing closer to 90 days, but you'd better rush out there now if you're buying a short sale!

Foreclosures: Foreclosures are taking 45-60 days to settle. This means you have a little cushion here. But first you have to find a house you want to buy. And, given the shortage of inventory, especially in the lower price ranges, you'll probably need to write several offers on several houses. There went your cushion.

If you're only interested in buying a home that doesn't fall into any of these categories, you can be a little less pressured, theoretically. Of course, if you exclude these three categories of homes, you may have a heck of a time finding a house you want to buy!

Remember, that $8000 is taken directly off of what you owe in taxes! That's a great deal. (Wish I was eligible!)

If you're looking to beat the deadline and get that tax credit, let me know if I can help. And, if you need more details on the tax credit and whether you qualify, give me a call or send me an e-mail.

Tick, tick, tick!

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I Lost My Job

There are still plenty of people losing their jobs. So, if you lose your job and you are under contract to purchase a home, what happens?

First of all, don't panic. There are several options that may allow you to exit the contract without penalty, if that's what you want or need to do.

But first, consider having your agent talk to the seller's agent and discuss the possibility of delaying closing to give you some time to search for a new job. This doesn't always work, but if the sellers have the ability to be flexible and you believe your prospects of securing new employment are good, it's worth a try.

Now let's look at your options for getting out of the contract if that's what you need to do.

Hopefully, the contract was written with a financing contingency. This allows you an out if the lender will not give you a mortgage to buy the house. The financing contingency, like all contingencies, has a specified number of days in which you can exercise this option to get out of the contract. Hopefully, this contingency has not been removed when you lose your job. If this is still open, a letter from your lender declining your application, along with an explanation of your job situation should be enough to release you from the contract. Because there is no default, hopefully the sellers will sign the release and agree to release your earnest money deposit. But remember that this is never automatic.

As a buyer there are typically several additional "outs" in a contract. One of them is the home and/or radon inspections. If those have not yet been done you can use those as a reason for withdrawing from the contract.

And, if this is in a Homeowners's Association, you may be able to use the three days you have to review the HOA documents as another out.

If it's late in the game and you're close to settlement, it is possible that none of these options may be available. At that point, your agent should immediately talk to the seller's agent and lay out the situation. I'd like to think that people of good will could work something reasonable out. Hopefully, you can even still get your earnest money deposit back.

But better to lose that money than to buy a house you already know you can't afford!

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Zero Down Payment

The on again, off again, opportunity to use the $8000 tax credit as a down payment is back on again. At least if you get a VHDA loan.

The guidelines for the program are here. The program utilizes a second mortgage to make this happen. That second mortgage requires no mortgage payments for the first year and has a 0% interest rate during that year. You have multiple options on how to deal with the second mortgage after that first year.

It's worth taking a look at this program if the only thing keeping you from owning a home is coming up with a down payment.

If you need help finding a VHDA lender, let me know. I'd be happy to help!

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Your Mortgage is Paid

A real estate firm in Ohio is offering clients a sweet deal. If you buy a home using their agents and their mortgage company, they will pay your mortgage for six months if you lose your job.

By now you've probably seen the car companies doing something like this. And, I know of some builders with similar programs. But I've yet to see a real estate firm try this.

In Ohio, this is not a small commitment. The unemployment rate in Ohio is one of the highest in the country and will likely continue to rise given the number of auto-related jobs in the state.

So, hats off to Real Living HER for taking this gamble! I'd love to see a local firm in Northern Virginia step up and try this. It's far less of a risk here and this market could definitely use a little more innovation! And, with 90%+ of the real estate agents locally telling you it's a great time to buy (for at least the last three years!) I'd love to see them put their money where their mouth is!

I don't know that someone who wasn't going to buy is now going to because of this offer. But if you're going to buy a house anyway, seems like you'd be crazy not to use this brokerage.

LATE UPDATE: My apologies to the local firms who have already stepped up and are offering similar programs! (Google let me down on this one!) Long & Foster and REMAX Regency (Warrenton & Manassas offices) are now offering this type of program. Kudos!

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$8000 is Back

If you remember, a couple of weeks ago HUD announced that the first time homebuyer tax credit of $8000 would now be allowed as an upfront loan that could be used as a down payment. Because of concerns over no down payment purchases in general and down payment programs in the past, that announcement was recalled almost as fast as it was put out there.

The new and improved version is now out. The $8000 can not be used as a down payment. However, you can get taht $8000 up front, rather than waiting and using the tax credit on your 2009 taxes, provided you use it for closing costs.

The details are in a HUD letter on their web site. I'm a little skeptical that this will be a huge boost to the market. Most sellers were already paying a substantial portion of the buyer's closing costs. But I do appreciate that the government continues to look for ways to backstop a tough real estate market.

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HUD Rethinks

The HUD announcement that it would allow the $8000 first time homebuyer tax credit to be used for a downpayment didn't last out the week. All mention of it was pulled from HUD's home page.

Apparently the program as orginally discussed looked too much like the down payment gift programs that were essentially eliminated last year because of the higher foreclosure rates associated with those programs.

NAR (National Association of REALTORS) says HUD is retooling the program and that there will still be a way to do this.

Stay tuned to this space for updates.

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