Fairfax, Loudoun County Virginia -Residential Real Estate Market Blog : Buying a home

The Tide Is Turning

Ritu Desai — Tue, 09 Jan 2007 15:02:00 GMT

By Kenneth R. Harney
Saturday, January 6, 2007; F01

What's the shape of a post-bubble, post-correction real estate market? And more to the point: What does that mean for you?

Those questions are becoming increasingly relevant as the latest sales data show a small but unmistakable uptick in activity and declining unsold inventories. In late December, the National Association of Realtors reported that existing home sales were up by a hair in November, 0.6 percent, the second straight month of modest increases off the cyclical trough in September.

That same week, the Commerce Department reported that sales of new houses rose 3.4 percent in November over the prior month, while builders' unsold inventories dropped.

All of which suggests that the 18-month market correction that followed the four-year housing boom has just about run its course. From a national statistical perspective, we're somewhere near slack tide -- but no one's looking for another frothy high tide anytime soon.

Some local markets are moving contrary to the relatively flat national trend. Three dozen metropolitan areas -- primarily markets with moderate prices and solid employment growth -- were still racking up low double-digit house price inflation at the end of the third quarter of 2006, according to federal data. Dozens of others, primarily where unemployment has been a persistent and increasing economic drag, showed continued signs of modest deflation in home values, according to the same data.

In the main, however, the housing market appears to have weathered the correction phase of the cycle without the blood running in the streets that some bubble-bust bears had forecast. Median prices of resale houses have fallen 3.6 percent nationally year to year, and anecdotal reports of 10 percent to 20 percent asking-price reductions in formerly hyperinflated markets are commonplace. But that's what corrections are all about, as opposed to outright busts.

Moderate price cuts also eventually stimulate buyers who had been sitting on the sidelines wondering when the market might bottom out to wade back in and start shopping. That's where we appear to be at the moment, and where we are headed in 2007, absent unexpected economic jolts to the global capital markets that could send mortgage rates spiking. In that event, all bets are off.

So what are smart strategies in a slowly recovering real estate environment?

One good rule: Think baby steps instead of big leaps. Sellers shouldn't assume that with the trend turning positive they can suddenly price their house for what they might have commanded in early 2005. Forget about it. In most places, buyers still have the upper hand. There's plenty of inventory to choose from; shoppers are picky; and unrealistic pricing is a guaranteed route to sitting dead in the water for months, unvisited and unsold. Be real on pricing. And be happy there are buyers out there again.

On the other hand, smart shoppers should recognize that the game is changing, the spring buying season is just on the horizon and lobbing lowball offers at already marked-down properties isn't a winning strategy. If you are seriously in the market, be prepared to pay a price that may not be as low as you had hoped, but that just might be your last shot at a particular house before it sells for closer to the asking price a few weeks from now.

Shoppers also need to understand that today's prevailing mortgage rates -- a little above 6 percent for 30-year money, and the high-5 percent range for 15-year loans -- are less than a point above 40-year lows. They won't be around indefinitely, so a fairly priced house combined with a low-cost mortgage adds up to a potentially great deal.

A second essential for the emerging market: Smart buyers and sellers need to be well-informed. They need to plug themselves into all the key local information that shapes pricing and dealmaking: time on the market, inventory declines and increases, the overall pace of sales, and the average gap between asking prices and closing prices. Be in command of these numbers and you will be well equipped to play heads-up ball, whether as buyer or seller.

A lot of these numbers are available online and offline from real estate Web sites, regional or local multiple listing services, Realtor associations, and mortgage lenders and brokers. It's also available person-to-person from the front-line experts on any given micro-market: the real estate agents who work in specific neighborhoods or market segments. They make their living, in up cycles and down, by listing, selling and thoroughly knowing what's happening inside their target areas.

Loudoun County, Virginia-Buyer & Seller's Market Report

Ritu Desai — Wed, 03 Jan 2007 03:27:00 GMT

Employment increased by 1,785 jobs in Loudoun County during July and August. However, the number

of job seekers also increased. The combined effect of these two trends was an increase in the average

monthly unemployment rate from 1.8% for the second quarter to 1.9% in the first two months of the third

quarter. The solid job growth may help to offset the effect of rising mortgage rates on home sales.

Download the attachment for detail report.

A Toast to 2006 -- Two Toasts to 2007!

Ritu Desai — Wed, 20 Dec 2006 00:11:00 GMT

The year will end with existing-home sales 9 percent lower than in 2005 and home-price appreciation closing out the year essentially flat. The more cyclical new home sales are projected to finish the year 18 percent below that of last year, and post a reduction in prices.

But there is good news: the market has essentially already bottomed. The pace of existing-home sales is expected to rise in the first quarter of 2007 -- on a seasonally adjusted basis -- from its current 6.2-million-unit pace to 6.3 million. Home prices, which have been falling since August, will follow this positive sales trend and begin to strengthen by the second quarter. By this time next year, sales will be higher by 5 percent, with home prices rising 2 percent. That is good news for real estate professionals. Business commission revenue, hence, can be expected to rise by 7 percent.

Watch for the "Uplifting Trend"
It is true that on a year-over-year basis – which is the preferred method of reporting by the media, particularly at the local level -- sales will continue to be negative well into the first half of 2007. In some hard-hit markets like Florida and Arizona, home sales have been compressed drastically in 2006. The constant reporting of 30 to 40 percent sales declines by local media has dissuaded many sideline home buyers from making an actual purchase. Fortunately though, that same compression means a lower base with which to compare in 2007.

By the late spring of 2007, the media will likely begin reporting positive “uplifting” trends. Statistical momentum says that will inevitably happen. Many potential buyers at that point will regain the confidence to enter the market. Some smarter buyers will see the herd of impending buyers over the horizon and will want to get a jump start.

The orderly decline and, in my view, the bottoming out of the housing market was helped immensely by the Federal Reserve. The Federal Open Market Committee ended its interest rate hikes and remained “neutral.” (The Fed funds rate had risen from one percent in mid-2004 to 5.25 percent in June 2006). With no further worries about further rate hikes, the bond market has paid more attention to job growth and inflation -- both of which have been weakening and thereby signaling that the economy is not overheating. The average 30-year mortgage rate has fallen from 6.8 percent in July to 6.1 percent in early December. Low rates in turn have begun to stimulate demand. Mortgage purchase applications were 11 percent higher in early December (as this is being written) compared to July on a seasonally adjusted basis.

Should the level of mortgage applications hold at this level, a similar rise in home sales will mean a home sales pace of 6.7 million existing home sales and 1.1 million new home sales. While some of those applications will not directly lead to a home sale (some would-be buyers will change their minds), the double-digit rise in mortgage applications is certainly a good news.

The stock market also is agreeing that the worst of the housing slowdown is over. Stock prices of the home-builder companies have been rising nicely since July. For example, Toll Brothers and Pulte Homes were trading at around $25 in July and in early December are at better than $30. Lennar, KB Homes and DR Horton have made equivalent gains.

Interestingly, builders themselves are partly responsible for bringing about a turnaround in their stock prices. Seeing a surge in inventory buildup, builders have been cutting back production sharply. Single-family starts in October were 32 percent below their level a year ago. And with the housing slowdown, the last thing the housing market needed was a prolonged oversupply condition that inevitably -- and unnecessarily -- depresses home prices for an equally prolonged period. Therefore, the sharp cutback in builder production is a healthy adjustment for the housing market.

Follow the Buck
One final piece of economic news: the fall in the dollar. This was somewhat overdue given that the United States has been running up a sizable trade deficit for quite some time. Sluggish U.S. economic growth, in combination with stronger-than-expected growth in European economies, was the apparent catalyst for the weakening dollar. U.S. properties are now trading at a larger discount (about 40 percent compared to five years ago) from a European perspective.

Furthermore, a strong price gain this year in the sunny Spanish resort areas will undoubtedly push German and British vacation home buyers to think about Florida and other sunny U.S. destinations as purchase locations.

So, we can all feel good that the year is over. Housing has weathered the storm, and down the road, it will be back to health.

-by Lawrence Yun, Senior Forecast Economist

Why Real Estate Markets Will Improve in 2007!

Ritu Desai — Mon, 18 Dec 2006 00:44:00 GMT

There are reasons to be optimistic about real estate next year, a BusinessWeek Online analyst says.

New and existing home sales might slide further in 2007, but there won’t be a sharp decline like there was in the early ‘80s and ‘90s. Why? Because the overall economy is in good shape.

Some markets will become much more affordable, making a home purchase possible for people who never could have afforded one previously.

Speculators who drove up housing prices will move on to speculate on something else.

Fewer new homes will be built, and surplus inventory will be absorbed, so prices will stabilize.

Mortgage rates will remain at relatively low prices and could go even lower if the Federal Funds Rate falls, which it might.

Source: BusinessWeek Online, Maya Roney (12/12/2006)

Mortgage Fraud: Recognizing the Signs

Ritu Desai — Fri, 08 Dec 2006 15:09:00 GMT

Mortgage fraud has been a problem for the lending real estate industry. The National Association’s Risk Management Committee created a brochure for the to help Realtors, buyers and sellers identify and explain the issue. The warning signs in a transaction.

Please find attached brochure. If you have any questions on your mortgage please consult an attroney. For all your home purchase and sell I am just a phone call away at 703-625-4949.

Happy Holidays

Ritu