With Congress tied up at the moment, it doesn’t seem like anyone is paying attention to the fact the temporary high-cost loan limits are set to expire on September 30, 2011. When that happens, conventional and FHA loan limits will move to permanent loan limits established under the Housing and Economic Recovery Act of 2008 (HERA).  The maximum high-cost county loan limit of $729,750 for 1 unit properties will be reduced to the current max loan limit of $625,500.   Now is the time to begin the dialog around this issue.  We need permanent high-cost loan limits in place now or the delicate recovery will face another bump in the road.  I’m already carsick and would prefer a smoother ride this winter.

Many of our buyer clients are tense right now because despite accounts of a buyer’s market, and desperate sellers, the reality on the ground can seem much different.  A number of buyers are experiencing multiple offers, and very few options.  Why is this? Two big reasons:

  1.       The normal life cycle of someone’s active use of their home runs 3-5 years, after which life changes and it is frequently time to move on.  Because of equity loss, many sellers since 2005 are unable to list their property without writing a very large check, or short selling and destroying their credit.  They are therefore staying put, or renting – pulling thousands of opportunities (listings) from the hands of anxious buyers.

 2.       The foreclosure process in many jurisdictions has halted due to new mediation requirements which has stalled that pipeline as well. This translates into very few buyable opportunities for most buyers in many market categories.

If you’d like more information, contact me.

March and April sales statistics are showing a decent bump in sales volume which is excellent news for the market in most areas of the country.  We are also seeing a decrease in inventory making it extremely competitive for some classifications of properties.  Take a look at this site for Washington DC homes:  http://gcaar.com/toolkit_ektid1592.aspx  This does not hold true everywhere of course, so look at your individual market stats to see what is happening.

Has the market turned around?  There are three things to watch which will give us a better indication of where we actually are on the recovery line.

1. Foreclosure mediation initiatives.  Currently many banks are forcing parties to mediate before foreclosing and this is causing a halt in inventory for buyers who want to remodel homes – causing dramatic bidding wars and price escalations in many cases.  My personal belief is that mediation is simply delaying the inevitable and the majority of those homes will eventually hit the market.  What happens then?
2. Price decline lines.  Many markets are seeing a nice increase in activity because the prices have, and in some cases continue, to decline.  We need to see that line flatten out soon, or we could spook the new pool of buyers in the market right now.  Will that trend turn this summer?
3. Financing of condos and investor ratios.  If you own a condo and your investor ratio is more than 50% it can be incredibly difficult to sell because you need at least 20% down.  If you’re in a 1st time home buyer market, that can be difficult to find which dramatically lowers your buyer pool, pulling your values down.  The issue here are mortgage insurance companies who will not insure mortgages under these circumstances.  Will the MI companies relax their restrictions on investor ratios?

One thing is for sure, this summer will be one to watch in the story of the largest real estate correction ever.

Whenever I have a new listing I always inquire about the investor ratio, and unfortunately a recent listing of mine is coming in high.  Anything above 50% investors makes anything less than 20% down extremely difficult.  My new listings is likely geared to a 1st time home buyer – and how many 1st time home buyers do you know that have 20% to put down?  Not many…  The issue at hand is mortgage insurance.

Anything less than 20% down requires mortgage insurance and right now there are few – if any – mortgage insurance companies willing to “insurance” loans for condos with more than 50% investor owned.

If you’re a seller, understand this will impact your value and your marketing time.  What’s the impact?  Probably about 10% of the value or more, and possibly triple the marketing time.

If you’re a buyer, with at least 20% down payment, you can find a great buy!  This situation won’t last forever and so when it changes, you’ll have instant equity.

I read this article today in Realtor magazine and thought I’d repost.  Can you imagine a market without a 30 year fixed mortgage?  That is a difficult thought and I hope we don’t have to figure out how it would actually change the market.  I believe we are in the process of a delicate recovery and we must stay the course on that recovering.  Sales figures are up in most of the DC area, though the pockets of activity are most impressive close to the metro.

Location location location – some things never change…

30-yr-mortgage.pdf 

The real estate market is just now starting a recovery from a near death case of pneumonia and so I’m worried to hear congress is thinking of sending us back to the hospital with real estate related budget measures like eliminating the mortgage deduction provision of the tax code.  I think there may be some wisdom to this long term but now is not the time to touch this.  Real estate is the back bone of our economic engine and has lead our country out of every recession – except this one.  Eliminating the mortgage deduction provision, or Fannie/Freddie right now would create a massive hole in our market momentum and would surely have a disastrous effect on values, destroying our recovery.

NAR is increasing Realtor dues by $40 to fund a nationwide effort to protect real estate related budget provisions.  I support this 100%.

To learn more about the initiative to here  http://naractioncenter.com/

It has been raining all week here in Washington and I’ve been touring houses seeing signs of water in basements, windows, in corners and on ceilings.  I did a little bit of research thanks to Dave Moersen of Home Check Home Inspections and the stats are telling.  Only 600 sq feet of roof space sheds approximately 800 gallons of water after only 2 inches of rain.  4 downspouts emptying water at 4 different locations would each discharge 200 gallons of water.  Most water seepage into basements is less than 20 gallons!

90% of property condition issues I see are water related so if you’re a home owner (or potential seller) look carefully for signs of water infiltration.  During the next heavy rain that lasts more than a few minutes, walk around the inside and outside of your home – during the rain – with a flashlight and watch where and how the water flows.  This will tell you want you need to do to maintain proper water flow on your property.

If you’re a buyer, look for staining, rotten wood, musty smells, and damp areas of the house.

For more information about property condition signs to watch for, please contact me.  Brandon@BrandonGreen.com

This March has seen a dramatic increase in buyer traffic in many areas of the country which has resulted in multiple bids on the best deals, giving some power back to the sellers who are asking buyers waive appraisal contingencies.  As a buyer, does this make sense?  It depends…  Are you planning to put a lot of cash down?  The bank will give you a loan based on the contract price or appraised value – whichever is lower.  If you’re putting more than 20% down, the appraised value is less important because you probably have the cash to accommodate.  If however, you’re buying with an FHA loan putting 3.5% down, you have no room for error and a contingency would be very important.  Here are my two simple rules for waiving an appraisal contingency.

1. Putting more than 25% down – YES, waiving should be fine as long as you are comfortable with the value.
2. Less than 20% down – NO, it can change the terms of the loan dramatically causing you to lose the house.

As always, consult with your Realtor to determine what the best approach is for your situation.

The ebb and flow of the real estate market is fascinating to me and calls into question “timing the market”.  What is it about spring that causes people to move into a decision now that they couldn’t make in February?  Who knows, but what I do know is now is a very good time to sell if you have the equity to price right.  Inventory across several market categories is lower than it has been in a long time and buyers are scraping for good deals.  Quick tips - Sellers: be aggressive (low) with your price – you’ll probably get more than one offer and with good terms.  The market will bid it up if it is too low.  Buyers: move fast.  The best deals are done in 2 days – are you prepared to move with lightening speed?  If not, it will be hard to lock up the best deals available.

This time last year the real estate industry was celebrating the return of the buyer as our transactional volume spiked as the expiration of the tax credit loomed.  We didn’t know how much of that was due to the tax credit, but we soon found out when the volume fall through the floor into the summer – and stayed that way – until now.

This spring is also proving to be busy, but what is more exciting is the fact we don’t have any programs artificially propping up the real estate market.  Instead, it seems real buyers are buying for real life reasons – which is hopefully a sign of things to come.

Houses from $400,000 to $800,000, near the Metro, are moving fast, yet condos are still moving relatively slow.

We’re not out of the woods yet, but perhaps we’ve turned a corner.  Stay tuned as we move through 2011 and see if this is a blip on the radar, or a new trend.  Keep an eye on interest rates.  They have been so low now for so long, they seem normal.