Fairfax Living Real Estate Blog

Well, Maybe not completely down and out. Reed Sandridge has a mortgage on a D.C. condo yet he is giving away $10 per day to strangers in need. No strings attached. He says he learned of this generosity from his mother. Mr Sandridge is unemployed. How many people are willing to give knowing that they will be taken care of. thats giving away $3,650 over a one year period not knowing if you you will have a job or be able to pay your mortgage. You may not think $10 a day is much but it can make a difference. My bet is that the Washington Post article below will have employers wanting to talk to him. He's on the front page of the "Metro" section. Even if it doesn't, you never know when the $10 you gave to a CEO in need (maybe he left his wallet and needed subway fare) won't get you a referral in return. Its always better to give than to receive. The article from the Washington Post.

I read a short article in The Washington Post Business section this morning (from the Associated Press) that home prices are up in 40% of the cities in the U.S. in the last quarter of 2009. In the third quarter prices were up 20% over the third quarter of 2008.The increase was considered to have been caused by the home buyers credit.  The National Association of Realtors was noted as saying that 67 out of 151 metro areas in the U.S. were up over a year earlier with an overall increase of home sales up 27 percent from the same period in 2008.

Although it is clear that the home buyers credit has beefed up real estate sales, and especially during a traditionally slow time of the year, it is of concern to myself and my fellow real estate professionals what will happen after the home buyer tax credit disappears. Even more so what higher interest rates will do to the ability of persons to buy homes. Obviously, you work with what you've got and go from there.

The tax home buyer credit is due to expire at the end of April with a requirement to close by June 30th. This is not the only reason one should use in considering whether to buy a home or not. Buying the wrong home just to get in under the wire for the credit could be a costly mistake.

The real looming issue I see is the almost inevitable increase in interest rates for mortgages. It is likely that interest rates will up near 6% for a 30 year fixed mortgage by year end. It could be as soon as this Spring. The government has made it clear that they do not intend to keep buying mortgage backed securities. Add to that the likelihood that Fannie Mae and Freddie Mac are likely to be reincarnated.

For every increase of 1% in mortgage interest rates, the buyer is looking at about a 10% decrease in what they can afford. If you qualify for a $500,000 mortgage and the interest rates go up to 6%, you can now afford a $450,000 mortgage. In our area, it is tough enough to find a nice single family home for $500,000 and taking 10% off means the homebuyer is going to have to have less house, or put down more money. Another factor is that the inventory of homes for sale is very low in the D.C. area making it difficult to find a nice home. When you do, you can expect to pay the list price if not more (unless the home is overpriced to begin with) even in today's market. An increase in interest rates, and the expiration of the tax credit, is likely to cause housing prices to drop, or at least, keep them from going up (or being bid up) as fewer people will be able to afford the home. I haven't even mentioned the fear of unemployment. Although the unemployment rate is fairly low in Northern Virginia (about 5%), it is higher in other parts of the metro area (DC and MD) creating competition for what few jobs are available on the Virginia side of the river. Few employers are hiring or opening new positions adding to the fear.

The truth is that 2010 is going to be a tough, put your nose to the grindstone, year. If you are in a position to buy a home, and have a secure (government?) job, the current market is still a great opportunity for you to get in at what will be looked back on as historically low prices and rates. Even with the down market, houses are still almost twice as expensive as they were ten years ago in the D.C. area. Imagine what they will cost ten years from now.

A recent article in the Washington Post titled "Investors with Cash Frustrate Other Area Home Buyers" talked about investors bidding on short sales and foreclosed homes and shutting out would be owner occupier home buyers. The problem in the article specifically talked about the banks saw cash in many cases and took it now versus waiting to see if the sale made it to settlement through the normal mortgage process. In other instances, buyers bid above the asking price and still lost homes to investors with cash. You dont need to be an investor to pay with cash but I suspect most people that can afford to pay with cash are likely investors.

There are some pluses and minuses to this. First the pluses. Many of these homes would not qualify for an FHA loan as they have mold and other big issues that need to be taken care of before the house can be sold to a typical home buyer. In these cases, the investors actually make the repairs and "flip" the houses so that they do qualify, and of course, the investor generally makes a nice profit for the risk taken. Many times there are problems even a savvy investor does not anticipate.

On the other hand, The home buyer who is bidding on a home that needs only paint and carpet is being shut out by those in search of rental properties or they are anticipating that we are at the bottom of a future upward trend (uncertain due to the expected increase in foreclosures in 2010).

Fannie Mae has recently issued a new rule that states that it would not accept offers on homes from investors until 15 days after the listing of the property. I think this is a fair rule. Mainly because most of the properties that investors should be looking at are the ones that dont qualify for an FHA loan and by doing so, they are helping people buy homes by bringing them up to the standard at which they can qualify. In this case, investors are actually doing a service to home buyers by improving what are many times neglected and vandalized properties.

The Washington Post Article

Today's Washington Post  had an article on "Shedding the Light on Hidden Risks of Reverse Mortgages."

The main point was to ask friends and relatives considering a reverse mortgage to check out the new federal guidelines concerning reverse mortgages. The guidelines are designed mostly for banks and credit unions but point out some of the issues that persons considering a reverse mortgage should consider.

The article does say that when seniors have been properly informed and understand the reverse mortgages, they can be beneficial in providing income in retirement. It mentions that regulators say that often senior citizens are poorly informed and do not really understand the details of the mortgage. Often the direct mail marketing and sales brochures promise one thing and deliver another in the fine print including, in some instances, claiming to be a "government benefit" which they are not.

Other problems of concern were add on products with high profit margins that were inappropriate or unnecessary. In many instances the banks and credit unions had failed to point out the "cons" of reverse mortgages including borrowers responsibilities which may include paying property taxes and insurance directly .

 Here is the article from the Jan 02, 2010 Washington Post.

Yahoo has an article running today about Seven flags to watch out for when purchaing a home. With todays foreclosures and short sales, its likely the home was not well maintained by the previous owner and was likely kept in a holding pattern once the bank took it over (REO). In the case of a short sale (60+% of the business in parts of our area), if the homeowner is nto paying the mortgage, do you think they are paying for pest control, or the repair of a leaky basement. Doubt it...

Here is the yahoo article..

As I mentioned earlier in a blog, the Real Estate Section of the Washington Post was abuzz with Great articles on the Homebuyer Tax Credit, etc. Under a sub section called Real Estate Matters, Ilyce R. Glink, and Samuel J. Tamkin answer readers questions on the Homebuyer Tax Credit. I have provided a link here for you to  The Washington Post web page.

The Washington Post

Tom Robinson Team, Keller Williams Realty, www.tomrobinsonteam.com

The average 30 Year Fixed rate on record was reported by The Washington Post at 4.71%. If ever there was a time to refinance or buy a new home this is it. Rates have nowhere to go but up. The previous record was in April 2009 at 4.78% for a 30 year fixed rate loan.

Here is the link to the article in The Washington Post

Tom Robinson Team, Keller Williams Realty, http://www.tomrobinsonteam.com

I keep thinking of the song "night moves" by Bob Seger. "little too tall, could lose a few pounds." Bob is right, most of us could lose a few punds. I have been a member of the sargents program  here in the D.C. area for just over a year now. If you want to know more about it check it out at sarge.com. If I recall correctly, the program is somewhere between 15 and 20 years old. It usually meets in a park (there are groups spread all over the area, but mostly in D.C. and Maryland). About 5 years ago I was challenged to run the Marine Corp Marathon in D.C. I never run any significant distance in my life. I remember the day i was told we would run three miles in training and i said "What..k 3 miles...I cant do that."My instructor said "Oh yes you can." i did it and from there, I have done alot of things I thought I couldnt do.  I was 44 years old. remembering a quote from Henry Ford from, I thin, the 1938 book by Napoleon Hill "Think and Grow Rich", I now realize that "if its up to be, then its up to me (not the Henry Ford Quote BTW). The henry Ford quote was (and maybe I am paraphrasing " You can do it or you can't do it"...both are correct. After nearly two thirds of my life has passed, I realize that America did not become a great country by just getting by. I think I realized this previously as my father told me when he worked for NASA in FL in the late 50s through 1986, he said.."we  thought Kennedy was crazy when he said we would go to the moon by the end of the decade and return safely (again a paraphrase)." We can do whatever we want to do. That is Gods gift to us as humans, It has nothing to do with where you live or who you are. It has nothing to do with where you came from. Tim McGraw (and I mean no offense) was the bastard child of Tug McGraw and grew up in near poverty to be a superstar.

I am doing the Jolly Fat Mans run on the Capital Crescent Trail December 12th for charity. i have run the trail many times. I bet I have run 1000 miles on that trail over the years. The point is that despite the intense competition for listings and business, if you do it right you will succeed. Hang in there, think beyond what everyone else is doing and use your God given talent to succeed.

Tom Robinson, Keller Williams Realty, www.tomrobinsonteam.com

I had just read an article in the Washington Postthis morning about a lady and her four kids who were sold a $689,000 townhouse in Clarksburg, MD (outer DC suburb) with an income of less than $15,000 per year. The seller was a mortgage broker who got her "qualified" for the loan and made $203,000 on the sale of the property in only 22 and a half months.

I suspect the FBI is so overwhelmed with other things but shouldn't these fraudsters be thrown into our already overcrowded prisons. Who qualifies for a $689,000 home when they make less than $15,000 per year and are, by the way, already on food stamps.

Later in the morning, I received an e-mail from an investor, whom I will be meeting for lunch on Tuesday, to discuss being his agent in Northern Virginia for his real estate investment purchases. The e-mail was about Standard & Poors statistics showing that "93% of option - ARM buyers chose the worst, most irresponsible option." The premise was the the house would go up in value. Nearly all of these 350,000 borrowers are under water and about to go down when the five year reset kicks in any time now. This will raise mortgage payments more than 100% from their entry rate and causing a wave of foreclosures likely to wipe out the recent upward trend in the housing market.

Opportunity: If you have money, investors can buy up these properties and flip them (depending on the area and market) or hold them as cash flowing rentals (Cash flowing is the key).

The article was very long and very detailed but you get the picture. One other note was that in order to turn things around, many economists agree, that it is not a matter of if, but when, the United States adds a VAT (value added Tax) which will disproportionately slam the middle and lower income classes. The government knows they will have to do it but no one is ready to tell the consumer that it is coming. I think much of the population already realizes that.

Gold is being hyped up right now. Every time you turn on the TV, there is someone either trying to buy or sell you gold. Be careful, these are the same hucksters that were trying to sell you "liars loans" in 2005.