In the past couple weeks several banks across the country have halted foreclosures and suspended settlements with buyers of their foreclosure inventory in order to review the paperwork.  What does this mean to you?  The short answer is – nothing good. 

If you’re facing foreclosure yes, this means it could be pushed further down the road – which might be helpful, or it might simply delay the inevitable and therefore lengthen the pain you’re facing during this difficult time in your life. 

If you’re contracted to buy a foreclosure – don’t expect to go to settlement anytime soon.  The bank’s addendum with you likely gives them the right to suspend settlement at will.  You can attempt to challenge this through the attorney general’s office – or through your attorney – but don’t expect to get anywhere fast.

If you’re a homeowner, this might cause your value to rise temporarily, but the rise is unlikely to be sustainable.  Eventually the foreclosures must be sold and so if we hold back the tide now – it will simply flood the market with distressed inventory later making things worse in 2011 and 2012 when we hoped to be well on our way to “recovery”.

I’m disappointed to see the banks suspend the process across the country.  I agree – there are a lot of issues with the entire foreclosure process but stopping the entire system throughout the country is not the solution.  Our country will not recover until people who cannot afford the homes move on with their lives and people who can afford the homes move in to the properties.  Nothing could be more important to our economic recovery than the speedy disposition of distressed assets. 

DC Condos/Coops:
September saw a leveling off of prices across the city for condos and coops and a 5.1% increase in contracts in comparison to Sept 2008.  A 12.6% decrease in inventory means the competition for condos and coops is getting tighter across the city.  Zip codes 20001-20016 are moving quickly and inventory that is well priced is commanding multiple offers and in some cases escalation.  We are still challenged by lenders who aren’t getting documents to the table on time and a very large majority of contracts are FHA. 

It is a tale of two cities in DC however, as many of the condos in 20017, 20018, 20019, 20020 zip codes continue to see a dramatic decrease in price of nearly 30% from this time last year and a decrease in contracts of 10%. There is almost no owner occupant market in those zip codes right now and so the majority of offers we see are from investors.  Complicating matters are bankrupt condo associations with high foreclosure rates making it nearly impossible to finance many condos in those zip codes.  This pushes us back into the cash market where investors are buying at $.50 on the dollar.  

DC condos/coops: http://gcaar.com/uploadedFiles/PDF/ToolKit/Research/Home_Sales_Statistics/DC_Condo_Coop/dccc0909.pdf

DC Houses:
Inventory for DC houses is down 18.5% in comparison to this time last year, and contracts are up 20%.  The average price is down nearly $100,000 and seems to have reached a level that is peaking the buyer’s interest.  Again, it is a tale of two cities however as houses in 20017-20020 zip codes aren’t moving much at all.  Prices continue to fall dramatically in those zip codes.  If however the listing is in 20001-20016 then multiple offers will likely ensue.
 
DC houses: http://gcaar.com/uploadedFiles/PDF/ToolKit/Research/Home_Sales_Statistics/DC_Single_Family/dcsf0909.pdf

There is some indication that the fall market might be setting in.  Traditionally activity begins to slow as we move into November and our “on the ground” reports indicate the last couple weeks are much slower than the previous several.

Keep an eye on interest rates as we move into the winter.  If they remain around 5% the market will likely rebound into next year, even if the tax credit is not extended.

For more details or analysis in your area, call me, I’d be happy to look at your individual situation. 

We all agree in my office the real estate market has seen a noticeable bump in activity and a slight bump in price in the last 45 days.  Perhaps it is spring, or perhaps it is low interest rates, but who cares – we’ll take it!  Not all segments of the market are moving unfortunately.  It seems the “hot” activity is concentrated in the lower price point of each market category.  There are multiple mini markets in every market and all the buyers are on the trail of only a handful of very well priced homes.  Buyers would be wise to make offers on homes – even if they don’t feel they are well priced – before the seller drops the price and the buyer has to then compete with three other buyers.

Multiple offers are common place for foreclosures and short sales throughout the area.  A recent client of ours bid on a short sale with twelve other buyers in Centreville, VA (we won) – and another had a similar experience in DC.

It is too soon to call the end of the real estate recession, yet I suspect we will soon look back and determine the lowest point in the DC Metro market was October and November of 2008.

This Newsweek article is a great summary of some post-election options for mortgage relief.

Of course, having both a president and a president-elect (as well as an outgoing and an incoming Congress), might further complicate a bailout.

Seriously, it matters who you choose to represent you in the sale of your home.  If you ever had any doubt, check out the following blogspot which oh so accurately catches the lousy photos permeating the real estate world.   A friend of mine pointed me to this site and I think it is spot on!  http://lovelylisting.blogspot.com/

Why do realtors post such bad pictures or none at all?  My sense is it is for one of the following reasons:

1.  A photographer costs money - it is cheaper to use a digital camera and most Realtors aren’t professional photographers.
2.  Some Realtors simply don’t understand yet that the buyer rules out properties immediately with no photos or bad photos.
3.  There is nothing good to photograph!  Foreclosures are especially in bad shape.

Our philosophy is to portray the home for what it is.  There is a buyer for every piece of real estate - at the right price.

Credit for this blog is given to GCAAR.  www.gcaar.com

Fannie Mae will no longer require borrowers to put up an extra 5% down payment when purchasing homes in areas deemed “declining markets.” Fannie Mae had been hearing concerns from REALTORS® and others for months that the policy was bad for housing because it discouraged consumers from buying in markets hardest-hit by foreclosures. NAR met several times this spring with Fannie Mae officials and sent letters reflecting members’ unease with the policy. Under the policy change, borrowers can get loans up to 95% loan-to-value, even in markets in which prices have been falling. Prior to the change, borrowers could only get loans up to 90% to give lenders a 5-percentage-point cushion to protect against possible price declines in the future.

The new policy takes effect June 1, and Freddie Mac has said it will also scrap this policy

With the recent pick-up of foreclosure activity in the DC area, many of our clients are calling to ask if this is a buying opportunity for investment properties. It’s common knowledge that you can get a great deal in a foreclosure sale, right? The current market might prove that common knowledge isn’t always right!

In a Washington Post article on February 2nd, a foreclosure auctioneer was followed through several auctions held in northern Virginia. He stood on the front steps of the county courthouse in Prince William, and auctioned off many houses. One in Woodbridge went for $380,515. A house in Manassas went for $244,000. It was a lonely job that day - no one showed up at the auction. Not the bank, not investors, not even a curious pedestrian! The houses went to the bank for the balance of the mortgage. And therein lies the rub!

Many homes bought at the very top of the market with 90% or 100% financing are under water - in other words, the house isn’t worth what is owed to the bank. Typically, the bank will buy the home for the mortgage balance, and then hire a Realtor to sell the home at market value. In the end, the market still relies on real estate professionals to price, market, show, and finally settle these homes.

If you hear about a foreclosure on a home you are interested in, either as a new primary residence or a rental-income opportunity, please give Brandon Green Companies a call to review the different strategies available to purchase foreclosed homes.