|
There has been a simple, easy to follow “rule” for my entire Real Estate career, Location Location Location! It is an easy way to emphasize that the single most important consideration is location. This has been true and will be more so in the future, however things are no longer as they were in the past. We have benefited from a massive movement of “Baby Boomers” for the last 60 years. They have affected everything in this country as they have advanced through the years but nothing more than our housing trends beginning in the mid 1960s as they became adults. Initially came the starter homes in places like Levittown, Bowie, Silver Spring, Arlington, Alexandria, Annandale and 1000s more across the US. Then along came the move ups, vacation homes and finally the “McMansions”, they were on a role!
So what is going to be important now? Location will always be a prime consideration, but we will have to add to that the current population, what age group they are in and what the projection is for that area. Some areas are much more top heavy in “Boomers” than other areas. Most of these people will retire in place and this will seriously change the nature of the neighborhood. In the past only 65% retired in place, now I would guess that number will increase to about 85%. The continuing recession has seriously eroded their ability to move and they have no prospect of replacing that loss of equity and income. Other areas have very strong employment trends, Northern Va. for example, and others like Detroit have to re-invent themselves. You can drill down in your local area and actually make a pretty accurate assessment yourself. It will be vitally important that you consider the population and employment trends in your decision to buy or sell. Although a home is not really an “investment” it can become a valuable asset if you make the right decision.
I will be comparing Fairfax and Loudoun in my next article. There will be some surprises!
|
I can only hope that January is not an indication of what's to come for the rest of 2010. It was the weakest month in my survey since January 2008! Let's take a look at the numbers (remember that my survery consists of the offices and Realtors located in Leesburg, Ashburn, Sterling and Dulles). We had 290 sales with an average sales price of $323,000 this year. This compares to 320 sales and an average sales price of $454,000 (this was early in the price decline) in 2008! Although I expected the the drop in sales price, we are painfully aware of that, the declining transaction numbers are a shock. If these numbers do not improve we will continue to see seriously eroding market values of our homes.
Lets compare these numbers to December 2009 and January 2009. In December we had 450 transactions and an average sales price of $384,000. This was a much stronger December than I had expected but this is a shocking drop from December to January. If you look at Janurary 2009 with 393 transactions and an average sales price of $322,000 it would indicate that values have remained steady, however there was still an alarming drop in the number of transactions. If we do not have a significant improvement in the “Velocity of Sales” we are in for a very difficult year in both the Real Estate industry and property values. The January 2009 to January 2010 comparison is the best for comparative purposes because they take into account seasonal adjustments.
There is really no place to blame for this stagnant market. Home owners who do not have to sell are sitting on the sidelines waiting for the prices to improve. The majority of our sales are people who have no choice or distressed properties. This continues to drive the prices down. We continue to have lots of buyers and multiple contracts, however until we have a significant increase in non-distressed sales prices will not increase and will probably slowly decline. If you are thinking of selling you will probably get the best price today that you are likely to get for a while and if you “buy up” you are buying at a great price.
|
|
For those readers who regularly receive the Stakem Report in the mail, we will be discontinuing that service in an effort to be more Eco-friendly. We will continue to mail to the media and anyone else who specifically requests that service. If you wish a paper copy please call 703 786 1532 or e-mail jim@stakem.us. You can also find The Stakem Report on the web at stakemreport.com. This includes more information and is updated regularly.
|
It looks like we are going to have another difficult year in Real Estate. There are so many variables that could go wrong and any one of them will cause major problems for us. If we have more problems with the banks we will see a greater tightening of credit, making it harder to sell properties. The FED is backing away from purchasing mortgage backed securities and the housing credits will expire. As we begin to see the end of the “subprime” crises we are entering into the “prime” crisis, this consists of the ALT-A loans and smilar weird products that were used to purchase homes a couple of years ago. Over the next 18-24 months we can expect to see the “short sales” and “forclosures” move from the lower end of the market into the upper price ranges. If we can find a way to avoid all of these problems we may have a good year and I hope we can!
My Predictions:
The number of homes sold will decline to 5,400,000 nationally this year. We will decline about 10% locally.
Average and median sales prices will increase substantially.
Housing prices will decline about 5% with the upper price ranges declining more and the lower fairly stable.
Mortgage rates will increase as much as 1% and then decline to the 4.5-5% range.
Short sales and foreclosures will increase in the more expensive properties.
The number of agents will continue to decline.
|
If you have a mortgage commonly referred to as “Alt-A”, you may have a problem in the near future. Many of these loans had features which will cause financial hardship for the homeowner. They are generally adjustable loans which were designed to reduce the monthly payment of the borrower under the assumption that prices would continue to rise. As we all know that was simply not true and because of these and other questionable loans the demand for residential property was artificially stimulated and the “bubble” was created.
If you have one of these loans you will probably have a very large increase in your monthly payment in the next 18 months! In many cases it will be overwhelming and you may be facing financial disaster. Do not wait until you have a panic situation! Your best first step is to contact a Realtor who has been trained to handle this kind of problem. Look for Realtors with the (CDPE) Certified Distressed Property Expert designation. There are over 14,000 of them and we have over 40 trained CDPE's in our REMAX Select Properties, Inc. offices!
|
If you are one of the millions of homeowners whose adjustable rate mortgages are about to be adjusted you may have a problem. Many of those adjustments are going to make your payment unaffordable. If that is the case take action now to avoid as much pain as possible.
Adjustable rate mortgages are getting a bad name and they are really not a bad deal. The problems with adjustable rate loans were in the trick loans which took something good and ruined it. A traditional adjustable rate loan would be amortized over 30 years and adjusted every 1-7 years depending on the loan. During this period you would have a reduced interest rate which would be adjusted by a standard index at the appointed time. You would pay both principle and interest and the amount of your loan would gradually be reduced. If you had taken out a 5 year adjustable rate loan in 2005, when your loan adjusted this year the interest rate would have gone down and it would be recalculated on a lower principle with the end result being a much lower payment!
So what happened? Mortgage companies began offering loans with a “twist”. These loans were made with the belief that property values would continue to increase, and when they didn't there was trouble! These “twists” were ideas like interest only loans, loans that allowed the homeowner to chose how much they wanted to pay with the difference added to the principle, no documentation loans (liar loans as they are now called) and a host of other bad ideas. These are the ones that will be the problems soon!
What should you do if you're in the position that you will no longer be able to pay? Start with your lender and ask for a modification, if that doesn't work consult with a Real Estate Professional. Many agents are now very well trained and can guide you through the process. Make sure they have the certification to help you, the best are CDPE designated agents; most of ours are. Prepare for the problem before it becomes a problem is the best advice I can offer you!
|
|
|
