Melissa Savenko's Richmond Real Estate Review

Great News in the Residential Real Estate World - Existing Home Sales Increase 10%

Sales of existing homes rose 10.1%, due in large part to the first-time home buyer tax credit.  Good news.  'Nuff said.

West Broad Village and the Commentary - Tripower, You Suck

So, I'm reading the commentary on the article about the West Broad Village bailout by this new local private equity fund.  Someone, screen name "j-reb," posts the following, the first comment:

I love the way they [the Developer] tried their darndest to make the project look like actual urban architecture.  Much in the same way that ‘traditional’ shopping malls mimic old-fashioned main streets.  God forbid anyone should go to the real thing, just a few miles to the east.

This is a perfectly legitimate comment, in my opinion.  The developer has tried to mimic traditional architecture.  All along, West Broad Village has been marketed as an excellent example of "new urbanist" development - an oxymoron if ever there was one, in my personal opinion.  

So, I'm merrily reading along, and BOOM!  I hit this response, Comment #5, which has just made my blood BOIL, posted by screen name "tripower":

J-Reb I think the reason people don’t want to go to the “real thing” is they want to be able to find a place to park (for free) and not get mugged.

Seriously?  I mean, SERIOUSLY?  You suggest that shopping in the City requires paid parking and will result in physical violence?  Have you ever even been to Carytown?  Yeah, it's really scary.  All those families, walking around with their kids, supporting unique local businesses rather than the "same old, same old" big box stores, enjoying ice cream cones at Bev's, watching $2 movies at the Byrd Theater, having fun at the Watermelon Festival or any of the other family-friendly festivals....it's freakin' FRIGHTENING!!!

Tripower, you are a douche.  You probably spend next to no time in the City.  You probably live in some cul-de-sac subdivision constructed sometime since 1980, work in Innsbrook, drive a minivan or SUV, and think Applebee's qualifies as fine dining.  I'm sure you supported getting a "Henrico" mailing address.  People like you make me almost happy suburbia exists, so you can live there, and I don't have to ever be around you.

I am stepping away from the keyboard before I really say something I shouldn't.  Deep breaths....

West Broad Village Bailout - A Project Pulled Back from the Brink?

Well, it seems West Broad Village, the "new urbanism" development on West Broad across from the Best Buy, has been "saved" for at least the short term with an infusion of capital from a private equity fund.  It also looks like the management of the project's rejuvenation is going to be led by local developers, partners in the equity fund, who have significant incentive to make this project succeed.

More commentary on this topic to come later....

Housing and Economy Headed for SUSTAINABLE Recovery

According to an article in RISMedia, per the National Association of Realtors' ("NAR") Chief Economist, Lawrence Yun, the housing market specifically and the economy generally are headed for a sustainable recovery. 

I personally think that "sustainable" is the key word.  In housing, Mr. Yun predicts that both interest rates and prices will increase in this 4th quarter and then steadily throughout 2010.

What does that mean practically?  Right now, between mid-November to mid-January 2010, is the best possible time to be a buyer.  It's the traditionally slowest selling period, even in GOOD housing markets, and sellers are willing to negotiate to get a deal done before Spring 2010.  Interest rates are at almost historic lows, prices have stabilized, but there are still deals to be had.

The statistics don't lie.  Inventories are down, the sales "velocity" has picked up, the percentage of closing price to list price is increasing.  If you are waiting for the housing market to continue to drop in the Greater Richmond Metropolitan area, in my opinion that ship has sailed.  So if you planned to buy, now is the time to do it.

Carry on.

Existing Home Sales Surge Q3, Prices Moderating as Well

This is an optimistic article from RISMedia, "Existing Home Sales Surge in Many States Third Quarter, Metro Prices Moderating."  Total existing home sales increased 11.4% 3Q 2009, and are 5.9% above 3Q 2008 sales.  Lawrence Yun, the Chief Economist for the National Association of Realtors ("NAR"), chalks much of this increase up to the first time home buyer tax credit.  Per Yun:

The decline in the national median price has moderated recently, and a shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas, but we need a steady stream of financially qualified buyers to further reduce inventory and get us to a self-sustaining market....Foreclosures will continue to come on the market, but rising sales from the expanded tax credit should stabilize home prices by next spring and help to stem future foreclosures.

What does that ultimately mean?  Well, for the buyers, particularly the first time buyers, out there waiting for more price drops, looking to "time the bottom," I think you've missed the boat in many of the most desirable Greater Richmond Metropolitan areas.  Inventory is down and days on market ("DOM") are declining.  If an entry-level home comes on the market priced right and in good condition, it's selling. 

 

If you want to get a steal rather than a deal, you will still have some opportunities to purchase in the foreclosure and/or short sale market.  HOWEVER, buyers of these types of properties need to be willing to compromise on amenities, condition and location.   Do not expect to find the Holy Grail of distressed sales, a great property in a great location in great condition at a crazy price.  And if such a property DOES come up, you won't get it.   First time buyers, you cannot compete for these "steals" with the investor-buyers, who come to the table offering all cash, no contingencies, no inspections, closing in 14 days.

 

So be realistic.  If you want to buy, now is the time to do it.  Know what's most important to you - location, condition, price, or some combination of all three.  Find a house.  Do the deal before April 30, 2010.  Get a check from the government.  And make that house a home.  That's really what the first home purchase is all about, folks.  Not the money or the value or the investment.  Those things matter.  But it's your first HOME, where you'll live, where you might start your family.  Don't lose sight of that.

FHA Cash Reserves Down Sharply

This is not good news.  The Federal Housing Administration ("FHA") has lending programs for higher risk borrowers, which provide minimum 3.5% down payments and allow extremely low credit scores.  FHA guaranteed loans to extremely marginal buyers in 2007 and 2008 (average credit scores of 633).  10% of 2007 FHA loans and 12% of 2008 FHA loans are seriously delinquent, meaning borrowers are more than three (3) months late on their payments.  The FHA now has only 0.53% cash reserves, well below the 2% minimum required by Congress.

As a result:  FHA is tightening lending standards.  While this is a prudent fiscal move, as a public policy move it runs the risk of stopping the tentative housing recovery dead in its tracks.  Right now first time buyers, who typically have less cash to put down and often lower credit scores, are the drivers of this housing recovery.  They are just about the only folks buying right now.

Move up buyers aren't buying, they are sticking tight in hopes that they will recover some of the home value they have lost over the last two years.  Investors' hands are tied, but for the few who have cash, because banks aren't lending money for acquisitions or development, which is unfortunate.  Getting the undervalued distressed property - short sales and foreclosures - out of the housing inventory would allow for a stabilization of prices and a more robust, rapid and sustained housing recovery.

It's been a weird "glass half full or glass half empty?" kind of year, hasn't it?  Good news followed by bad news.  I'm going with a "glass half full" prediction.  I predict that the next 6 weeks will be slow, until after the holidays and the New Year.  I predict that January-March 2010 will be very busy, as first time home buyers rush to take advantage of the $8,000 tax credit.

Here's hoping I'm right!

First Time Home Buyers - The ACTUAL Dollar Cost of Waiting to Buy

I suck at math, which is why I went to law school rather than business school, a decision I still periodically regret.  So I am eternally grateful to Charles Dailey for posting this link to HIS post on one of my comment pages.  It QUANTIFIES the cost of waiting to purchase a $125,000-$250,000 home, assuming that the buyer (i) misses the tax credit window; and (ii) the interest rate on the mortgage increases 1/2 point, such as to 5.5% from 5.0%. 

Ouch.  I knew it wasn't a small number, but $13,928.74 to $19,857.47 is a lot of money.  Like, buying-a-car-kinda money.  And this just assumes a 1/2 point interest rate increase.  If the interest rate increased more than that, we'd be getting into high-performance-German-car-kinda money.

So don't miss the chance because you think you have plenty of time.  No time like the present, folks.

Building a Real Estate Business and "Social Media" - A Yes or a No?

This is an interesting article on the value of social networking sites like Facebook, Twitter, etc. in developing and building a stronger real estate business.  Here's the author's, Mike Parker's, opinion:

Social media is a sinkhole that absorbs time, effort,  and money that could be better spent on finding listings and selling houses.  Social media is the new blogging.  It too will peak, then decline, with one very large exception: affinity group business communication.

Mr. Parker says a strong Internet presence is necessary to attract buyers and sellers.   I absolutely agree.  According to the National Association of Realtors' ("NAR") Profile of Home Buyers and Sellers (2008), 87% of ALL home buyers, and 94% of home buyers between 25-44, used the Internet to search for their home. 

But why don't Facebook, Twitter, blogging, or any of these other social media tools that Mr. Parker seems to disdain count towards developing and maintaining that "strong Internet presence?"  Social networking is great for keeping up with family, friends, clients, and colleagues.  Again according to NAR, 43% of home buyers, and 38% of home sellers, found their real estate agent through a referral from a friend or family member.  In the case of home sellers, another 26% used an agent they had previously worked with to buy or sell their home.  Facebook and Twitter are great ways to stay in touch with your family, friends, and past clients - your best referral sources.  And in my personal opinion, blogging is a tool to (hopefully) demonstrate the depth of your knowledge and expertise as a real estate agent.

So, I'm not sure why Mr. Parker is so down on social media and blogging.  Aren't these platforms additional tools to establish the strong Internet presence he advocates?

New FHA Financing Rules for Condominiums - Thank Goodness!

On November 6, 2009, the Department of Housing and Urban Development issued new guidance relaxing the financing requirements for condominiums.  For condominium developers, listing agents for condominium projects, and condominium buyers, this is GREAT news.  Basically, an individual buyer may now get FHA financing in a project that qualifies.  What's so great about FHA financing?  It allows the least amount of money down (3.5%), has lower credit score requirements, and allows a "non-owner occupant co-borrower," which is fancy HUD-speak for a cosigner on the loan.

So what does this mean practically?  Someone starting out could buy a $200,000 property with $7,000 down (3.5% of the purchase price), a 620 credit score, and mom and dad co-signing on the loan.  This someone would need to come up with another $7,000 or so dollars in closing costs, but most sellers in this market are willing to contribute at least some of the closing costs to get a deal done.  So let's assume the closing costs were covered.  Then, the buyer could amend his or her 2008 taxes to claim the 2009 First Time Home Buyer Tax Credit of $8,000, and could essentially end up getting PAID $1,000 to buy a condominium.  If your monthly payment is the same or similar to your rent, why wouldn't you do this? 

Sounds like a pretty good deal to me.  And I've got some GREAT condos to sell, the Windsor Court Condominiums, in the heart of the Historic Fan District, located at 1608-1614 Grove Avenue.  You can't buy a house in the Fan for $200,000 - an entry-level house is going to cost you about $300,000 minimum and will require work.  I've got units priced from $194,900-$239,900 that have all new kitchens, granite, stainless steel appliances, refinished hardwood floors, the works.  AND there is dedicated parking.  There is even the option of a garage at no additional charge, available on a "first come, first served" basis. 

Here's the website - www.windsorcourtcondominiums.com - check it out.  There is a virtual tour on the website, for even more eye candy.  If you see anything you like, give me a call at 804-986-3993, or drop me a line at melissasavenko@gmail.com.  I'd be happy to show you around.

***** DISCLAIMER:  Because I am an uptight, although non-practicing, lawyer, I feel the need to state the obvious, which is (i) I am not a mortgage broker; (ii) I am not a mortgage lender; (iii) this post is not intended to be any type of professional advice. *****

Top Five Reasons Buyers Should Buy NOW

Well, the first time home buyer tax credit has been extended until April 30, 2010.  And a NEW credit for purchases of primary residences has been created, also with an April 30, 2010 deadline.  If you buy a new home, after selling your old home, you were in your old house at least five years, and you meet some income and timing restrictions, then you get $6,500 free dollars from the feds.

BUT....traffic through listings seems to have slowed considerably.  We're going into the traditionally slowest selling season for real estate, from November through February.  Are all those buyers who might benefit from these two credits just going to sit on the sidelines until Spring?  Will there then be a rush to buy and close from February through April?

Well, for self-evident and selfish reasons, I sure as heck hope not.  I'd rather have a steady push from now through April.  So, I am going to try to give you some convincing, compelling, and ultimately indisputable reasons why ANY buyer out there, not just beneficiaries of these credits, should BUY NOW, before Spring 2010.  Let's see if I am successful.

1. Buyer Leverage: Buyers have more leverage than they will have for the rest of the year between now and February.  Any seller with property on the market is aware of the traditional sales downturn from November through February.  If their house isn't under contract SOON, as in the next few weeks, it's quite possible that house is going ot be on the market for at least four more months.  If they NEED to sell, that's a lot more mortgage payments to carry.
2. LOW Interest Rates:  Interest rates continue to stay at historic lows.  However, at some point, those rates are going to have to go up.  Why risk missing a 5% fixed rate mortgage?  A half point difference could cost you literally hundreds of thousands of dollars over the life of the loan.
3. 2009 Tax Deductions:  If you close before the end of 2009, you can get not only a $8,000 or $6,500 tax credit, if you are eligible, but also the tax deductions for any interest, points, and closing costs you incur in the transaction.  First time buyers, that could mean BIG dollars back from Uncle Sam.
4. Excess - but Decreasing - Inventory:  Inventory is high, but dropping.  Dropping inventory means - sooner or later - rising prices.  Buy now while there are still great deals to be had.  If you have enough cash to put down 10%-20%, and you've ever considered owning a rental property, now is a great time to start investing in real estate.
5. Long Term Investment Value:  Buying versus renting makes sense if you have a stable job and some money to put down.  Real estate is a smart investment.  And unlike your 401(k) portfolio, it's got practical value - you can live in it!

So, hopefully I have made compelling arguments and the fence-sitting buyers are going to come banging down my door NOW.  You know where to find me. [;)]