National Housing Market News This Week

You have may have read earlier this week that the U.S. housing market is on the rise! That is good news for all of us and hopefully for our overall national economy. Some national housing experts seem to think the worst is now behind us. What has fueled the current housing market? Well in working with lots of buyers this spring and summer I can tell you some of the reasons:

• $8,000 first time home buyers credit
• Low interest rates
• Price affordability

The National Association of Realtors reported the sales of previously owned U.S. homes in July rose to an annual rate of 5.24 million units. This is the highest rate since August 2007 and a monthly gain of 7.2% over the previous month. The monthly sales gain was the largest on record for the total existing-home sales since 1999. The United States Department of Commerce Department has reported new housing starts for single-family homes have been up for five consecutive months. I attended a real estate conference in July out in Denver, Colorado. One of the hot topics of the session was whether the federal government would extend the first time home buyers credit and possibly increase the dollar amount. According to the National Association of Realtors chief economist Lawrence Yun, “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,” he said. So as things look up nationally, how are things locally?

Here are the July numbers for Prince William County:
New Listings 963
Closed Sales 710
Pending Sales 980
Median Sales Price $213,000
Percent of Original List Price Received at Sale 98.6%
Average Days On Market 59

Source: MRIS

Mortgage Rates Going Up

While the real estate market in the Northern Virginia area seems to be heading up lately, so do interest rates! I found the below article interesting and wanted to share.

Mortgage Applications Fall as Interest Rates Jump

June 10 (Bloomberg) -- U.S. mortgage applications fell last week to the lowest level since February as a jump in borrowing costs discouraged refinancing and signaled that Federal Reserve Chairman Ben S. Bernanke’s efforts to cap rates is stalling.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance dropped 7.2 percent to 611 in the week ended June 5, from 658.7 the prior week. The refinancing gauge fell 12 percent. The purchase index gained 1.1 percent.

Fixed U.S. mortgage rates jumped to the highest level this year last week, threatening to deepen the housing slump and sideline prospective home buyers. An improving economic outlook spurred an increase in rates even as a rising jobless rate is contributing to record home foreclosures. Still, lower property values are helping the housing market stabilize.

“We still have a long way to go before conditions are good,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. “We need to get this market back up and running more normally.”

Government bond yields, consumer rates and price swings are increasing as the Fed fails to say if it will extend the $1.75 trillion policy of buying Treasuries and mortgage bonds through so-called quantitative easing, traders say.

Rising Yields

The yield on the benchmark 10-year Treasury note rose to 3.90 percent last week as volatility in government bonds hit a six-month high, according to Merrill Lynch & Co.’s MOVE Index of options prices. Thirty-year fixed-rate mortgages jumped to 5.45 percent from as low as 4.85 percent in April, according to Bankrate.com in North Palm Beach, Florida. Costs for homebuyers are now higher than in December.

The mortgage bankers’ refinancing gauge issued today fell to 2,605.7, the lowest level since November, from 2,953.6 the previous week, today’s report showed. The purchase index rose to 270.7 last week from 267.7.

The share of applicants seeking to refinance loans fell to 59.4 percent of total applications last week from 62.4 percent.

The average rate on a 30-year fixed-rate loan surged to 5.57 percent, the highest since November, from 5.25 percent the prior week.

Borrowing Costs

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $572, or about $44 less than the same week a year earlier, when the rate was 6.25 percent.

The average rate on a 15-year fixed mortgage rose to 5.10 percent from 4.80 percent the prior week. The rate on a one-year adjustable mortgage increased to 6.75 percent last week from 6.61 percent.

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.

Construction companies continue to struggle. Toll Brothers Inc., the largest luxury homebuilder, and Hovnanian Enterprises Inc., New Jersey’s biggest builder, this month reported quarterly losses that exceeded analysts’ estimates. Revenue dropped at both businesses.

Among reports indicating an improvement in housing, figures from the National Association of Realtors showed the number of Americans signing contracts to buy previously owned homes climbed 6.7 percent in April, more than forecast and the fourth increase in five months, as lower prices attracted buyers.

The rise in borrowing costs in the face of record low interest rates, Fed purchases and a contracting economy is the opposite of the challenge Bernanke’s predecessor, Alan Greenspan, confronted when he led the Fed.

In February 2005, Greenspan said in the text of his testimony to the Senate Banking Committee that a decline in long-term bond yields after six rate increases was a “conundrum.” At the time, he was trying to keep the economy from overheating and sparking inflation. Now, Bernanke may be facing his own.

Latest First Time Homebuyer Tax Credit- A Unique Buying Opportunity

With the passage of the latest stimulus package, I was disappointed with the final home buyers tax credit that was eventually passed. The original proposal in the Senate was a $15,000 tax credit for any owner occupied home with no income limits. What ended up passing was an $8,000 tax credit for anyone who has not owned a home in three years, which is essentially a first time home buyer. However, something is better than nothing and we’ll take what we can get. This presents a unique buying opportunity while home prices are VERY attractive.

So here is what you need to know about the credit:
• This credit is $8,000 or 10 percent of the purchase price of the home and applies only to first-time home buyers and principal residences (i.e. owner occupied home). The earlier $7,500 home buyer tax credit had to be repaid…this one does not!
• A "first-time home buyer" is defined as someone who hasn't owned a principal residence for three years before buying a house.
• This is only for 2009 buyers only. The only persons eligible for this tax credit are those who purchase a principal residence on/after January 1 and before December 1, 2009.
• There are income limits to this tax credit. The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit with a modified adjusted gross income of $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.
• If you file your 2009 taxes and owe $0, you will get $8,000 back. Because the tax credit is "refundable," qualified buyers can take advantage of it even if they don't owe any taxes.
• Lastly, you have to own the home for at least three years in order to capitalize on the credit. Selling before then will cause you to return the credit to the government.
• All material above is deemed to be true and accurate based on my reading and research. Please consult your tax advisor or financial advisor regarding eligibility for the tax credit.

MAINTAIN YOUR VALUE BY MAINTAINING YOUR HOME--PREPARE YOUR LAWN AND GARDEN FOR WINTER

• Maintain your lawn at 2.5 in. as long as it continues to grow. Seed your lawn with premium grass seed for a thicker lawn that will crowd out weeds when spring arrives.
• Apply a winter care fertilizer approximately four weeks before you expect frost.
• Pick-up fallen fruit to prevent disease and insects from overwintering.
• Remove dying annuals and spent flowers on perennials.
• Fertilize acid-loving plants like camellias, azaleas and rhododendrons.
• Plant tulip, daffodil, narcissus, colchicum, crocus and hyacinth bulbs and feed them with bone meal for welcome blooms in the spring.
• Add mulch and/or raked leaves to protect your flowerbeds and shrubs from the cold temperatures.
• Drain water from all hoses and coil and hang them properly to avoid freezing and splitting.
• Clean all of your gardening tools, spreaders and implements. Apply penetrating oil to metal parts to prevent rust and lubricate axles. (Check with the Virginia Cooperative Extension for more information)

What is an Accredited Buyers Representative?

A REALTOR® is a real estate professional who is a member of the National Association of REALTORS®, (NAR), the world’s largest professional association. A REALTOR® with the ABR designation has taken Accredited Buyer’s Representative training, offered by the Real Estate Buyer’s Agent Council (REBAC). ABR REALTORs® know the dynamics of the local market and understand the special needs of buyers.

Buying a home is one of the largest single investments YOU will ever make. Traditional real estate agents are hired by sellers to represent their best interests in the sale of their property. As an Accredited Buyer Representative (ABR), I am responsible to YOU and YOU alone.

I’m not selling you a house
I’m finding you a home

As your Buyer agent, I will:
• Represent you and help you find the right community
• Listen to what you want and not waste your time
• Help you negotiate the best price and terms
• Protect your confidentiality on all matters
• Spot problems, investigate issues, counsel you on the market and the area
• Preview properties and advise you on future salability and any potential problems
• Run a market analysis and advise you on a recommended offer
• Charge you NOTHING for my representation!

FORECLOSURES…BARGAINS?

Buying a foreclosure used to be just about a guaranteed bargain. Buyers would go to the courthouse steps and make a bid on a property purchasing it directly from the bank’s representative. The home may have needed repairs and the bidder may have had to evict the previous owner, but nearly always, the home was selling below market value and the new owner would have instant equity.

Think about it, just 10 years ago, most purchasers made a down payment. Mortgage payments not only paid interest but also paid the principal down as well. And because the market was appreciating, the property would probably have appreciated from the time of purchase .

Fast forward to 2008, where home values are either stagnant or in decline. Recent owners often bought their homes with no money down and interest only loans. Many refinanced and took out their home equity. Many of the homes currently in foreclosure are upside down in value.

When I am asked “Do you do foreclosures?” The answer depends on what you mean by foreclosures? I cannot help you make a bid at an auction or at the courthouse steps. But I can help you look at foreclosures that are now a Real Estate Owned property (REO). Today, most foreclosures will end up under the bank’s umbrella as a REO, using realtors to market the properties through the MLS. I have access to those properties. Many are listed at significant discounts and are worth going through the hurdles that working with a REO entails. There are incredible opportunities out there, but now more than ever, it’s important to work with a buyers agent who can help you navigate the ins and outs of this current market.

Radon in Your Neighborhood?

The EPA says RADON is the second leading cause of lung cancer, estimates up to 22,000 eaths per year from RADON, and that approximately 1 in 15 homes have dangerous RADON levels. Several homes in a neighborhood I have serviced have been found with unacceptable levels of RADON. The transactions went through when the danger of the radon was mitigated.

RADON is an odorless, tasteless, radioactive gas found in rocks, soils, and water. It is generally harmless outdoors where it mixes with air. Indoors, it can collect in greater concentrations by seeping through cracks in a home’s foundation and joints. Lower levels of the house are more vulnerable. The EPA standard is 4 pCi/L (pico curies per liter of air), so they recommend taking steps to reduce any higher reading.

HAVE YOUR HOME TESTED NOW!
It's Easy and Inexpensive
The U.S. Surgeon General and EPA recommend that all homes be tested. You can test your home yourself or hire a professional. Test kits and detectors are available online or in most home improvement stores with prices ranging from $9 to $125. Professional prices usually range from $100 to $200. Fix your home if you have a radon level of 4 pCi/L or more.

Select a qualified Radon-Reduction (Mitigation) Contractor to reduce the radon levels in your home. Any mitigation measures taken or system installed must conform to state regulations. Test again after the radon mitigation work has been completed to confirm that previous elevated levels have been reduced. EPA recommends that the test be conducted by an independent qualified radon tester. Radon levels can be readily lowered for $800 to $2500 (with an average cost of $1200).

For more information go to: www.epa.gov/radon

HR 5140, The Economic Stimulus Package and You!

Some people I have talked to lately have being doing the math and checking it twice…trying to figure out of they will be receiving their $600 rebate check in the mail. Well the Economic Stimulus Plan is much, much more than just a rebate check. For a high cost housing area such as ours, it means lower rates and the easing of jumbo loan rates. I believe that relief is coming to the Northern Virginia area. We all just have to be patient for the next couple of weeks and see how everything “shakes out.”

The stimulus package is expected to be signed sometime next week by President Bush. Specifically, the stimulus package temporarily raises the size of mortgages that government-sponsored mortgage companies Fannie Mae and Freddie Mac can buy and market as securities. The rate will go from the current threshold of $417,000 to as high as $729,750 in higher cost areas. Eligible loans must be made by December 31st of this year when the limits would revert back to their existing levels unless Congress extends the cutoff date.

What does this mean for our area? Well, the U.S. Department of Housing and Urban Development will be the government agency that decides what loan limits apply in various parts of the country. In our area of Northern Virginia, it's VERY likely that higher limits will apply.

This change to a higher “conforming loan” limit will allow more homeowner or prospective homeowners to buy homes and refinance their existing loans at a lower interest rate. Anyone wanting to buy a home with a loan amount that is higher than $417,000 currently has to typically sign up for a “jumbo” loan, which means a higher interest rate and very stringent qualification requirements with high down payments.

This will hopefully encourage buyers to take advantage of the large inventory of homes on the market. This will also help home sellers as more buyers enter the market and take advantage of the new financing provisions. Bottom line…if you live in Northern Virginia and have a house to buy or sell, hopefully things will be getting better real soon.

I am currently working with a family that is hoping to take advantage of this stimulus package and buy a home in the western Fairfax County area. Home they could not look at last month may become available to them next month! They hope to be one of the first home loans under this new stimulus package!