An energizing market?

There's no question that the 2008 real estate market is slow. Within the Washington DC metro area, first quarter volume was about 27% below the same period in 2007. However, we're seeing contract volume pick up during the month of April.

Our chart shows the month-by-month real estate contract totals for the Spot Realty market area (Northern Virginia counties.) April volume is nearly twice January volume -- good news for home sellers. We think that this is a combination of spring seasonality, some pent-up demand among homebuyers, and a lessening of bad real estate news.

Despite this positive news, it remains a strong buyers' market, and pricing is key. Overpriced listings are largely failing to sell, while properties representing good values generate interest.

A slow December for real estate.

The numbers are in: December 2007 was the slowest month for DC area real estate transactions in 10 years. According to MRIS, 3,349 homes went under contract in December 2007 in DC, suburban Maryland counties, and suburban Virginia counties. This is down 35% from December 2006 levels and is down 51% from December 2004 levels. It's the lowest number of real estate transactions in the area since December 1997. The chart to the left shows the area's monthly transaction volume

This number is even more significant given the growth rate that the metro area has experienced over the last 10 years - our housing stock is much larger now. If you scale the comparison against areawide growth in home sales, Dec '07 was slower than Dec '97.

Seasonally, December is the slowest month of the year for real estate. But fear among homebuyers, concerns about home price declines, a high rate of foreclosures, and more stringent mortgage lending criteria have exacerbated the situation.

The Savings Speak for Themselves!

Home sellers who have chosen Spot Realty are definitely reaping the rewards of the FREE listing program. This program offers buyer's agents a typical 3% commission, but home sellers pay no commission to Spot Realty as the listing agent. In today's slower market when many sellers are trying to keep the costs of selling as low as possible in order to net the most money possible from the sale of their homes, the FREE Spot Realty program absolutely can't be beat! Look at the savings some of Spot's recent clients have realized and decide for yourself:

- Centreville 2 bedroom townhome: savings $9,870
- Leesburg 3 bedroom townhome: savings $12,075
- Alexandria single family home: savings $40,800 (unrepresented buyer!)
- Fairfax 3 bedroom townhome: savings $12,600
- Falls Church single family home: savings $12,300

The data strongly supports the proposition that the FREE Spot Realty listing program is the ideal solution to today's tighter real estate market, when many sellers have little equity to spend needlessly. The savings above are even more enticing because these sales successfully settled with zero surprises or delays. You are never on your own during a Spot Realty transaction; a licensed Spot Realty agent was available to these sellers at all times to ensure the transaction progressed smoothly and all parties benefitted at settlement.

Give Spot Realty a call today to discuss the FREE listing program and how we can make it work for you!

Is the Northern Virginia real estate market leveling?

George Mason University's Center for Regional Analysis reported this week on the local economy and provided their 2008 outlook. By any measure, their data showed that the housing market is weak. However, the report also included information that may be new to some readers:

- The local economy and housing market are doing better than many other cities.

- Strong job local job growth is helpful to the economy and housing market.

- August 2007 represented a low point for the housing market, in many respects.

- Housing prices are expected to be flat, overall, in 2008 (but individual areas could see values rise or fall.)

- The local economy should be slightly stronger in 2008 than in 2007.

You can download the report at the following URL:

http://www.cra-gmu.org/forecastreports/RealtorsMarketUpdateDec11.pdf

Spot listings sell faster than other listings!

Are free listings really better? Believe it!

You may think that Spot's free listings may take longer to sell than regular home listings. Not true. Here are the stats...

For Spot listings that went under contract in September, October and November, they took an average of 37 days to go under contract. By contrast, the average Northern Virginia listing took a whopping 107 days to go under contract (according to MRIS, the local MLS.) This statistic includes properties listed by all area brokerages that participate in the MLS, including traditional "full service" brokerages.

Amazing! Spot's listings sold in about 1/3 the time it took other listings to sell! And, Spot is free. How can you beat that?

More Info from the 2007 NVAR Economic Summit

Additional information regarding the state of the local real estate market was provided by Dr. Lawrence Yun, VP of Research, NAR as follows (interpretations mine!):

- The DC Metro area is experiencing continued positive price growth but nowhere near the double-digit, 20%-plus appreciation common from about 2002-2005.
- While the price growth has been positive, there lingers continued apprehension and lack of confidence on the part of buyers. Nationwide, the number of sales (existing homes) is down 16% from 2005 to 2007 while new home construction is down 38% over the same period; while in Virginia, existing homes sales volume is off 32% from the peak in 2005.
- One huge factor impacting the national and local home market is the job loss in the construction field. The market slow-down has resulted less demand for homes and therefore job losses in the construction trades, which has resulted in less ability to buy homes along with foreclosure of numerous homes, which has further negatively impacted both sales prices and sales activity. A bad cycle indeed.
- An interesting observation is the current (starting in 2002) disparity between household income and home prices. Up until 2002, both were rising at approximately the same rate and keeping pace with each other. After 2002, and especially notable in 2005, the ratio between home price and income levels was clearly out of sync. Home prices took an abrupt upward turn while income levels also increased but at a much more moderate rate. It is this disparity which has resulted in the difficulty for most people to purchase a home.
- Another interesting observation is the comparison of mortgage obligation to income. In the DC metro area, this percentage is hovering around 27% which is manageable by most standards, considering that other major US cities such as San Diego are closer to 45%! This is certainly partially the result of mortgage interest rates remaining near 45-year lows!
- An additional outgrowth of the housing market is the rapid rise in average monthly rent now being experinced in the area due to the simple market factors of supply and demand.
- Despite the huge publicity that accompanied the rise in foreclosures of subprime mortgages, a lesser-known fact is that the foreclosure rate for prime loans has remained relatively unchanged.
- Experts are sensing a huge pent-up demand among homebuyers as household formation (new households) has levelled off. What this means is that young adults are remaining with relatives longer or more individuals are sharing housing. Once the apprehension of the market subsides, this delayed demand should re-ignite the housing market.
- FHA loans, which offer low or no down payment along with flexible terms and higher limits, will lure buyers away from the riskier subprime loans that have caused so much of the problems the market is now experiencing.
- Market experts anticipate that 2008 will be a stronger market than 2007 with prices stabilizing and even improving due to the current pent-up demand, continued low interest rates, and a healthy but not excessive inventory of homes from which to choose.

Stay tuned!

Interesting Info from Recent Economic Summit

Every year, the Northern Virginia Association of Realtors (NVAR) hosts an economic summit in which a review of economic trends, especially as they affect housing, is presented. This year's panel of speakers included such notable experts as Dr. Stephen Fuller, Director of GMU's Center for Regional Analysis; Dr. Frank Nothaft, Chief Economist at Freddie Mac; & Dr. Lawrence Yun, Senior Forecast Economist at NAR (the National Association of Realtors). The information presented by these individuals provided some much-needed explanation to the current housing market in the local DC area. I'd like to share some of their observations with you (interpretations mine!):
- the NAR "Affordability Index" tracks home-buying affordability based on 3 factors: mortgage interest rates, house prices & family income. Since interest rates continue to be low by historical standards and family income continues to rise in the DC area, that leaves the previously escalating house prices as the key factor causing falling affordability. This low level of affordability is primarily responsible for the recent price declines in many areas as the market for high or over-priced homes shrunk.
- The low affordability referenced above has resulted in lower demand for housing which has resulted in a dramatic (33%) reduction in new single-family housing (houses, townhomes, condos) construction starts. This current reduction in new construction will impact pricing in the future as demand eventually catches up with and surpasses the housing supply.
- Annual appreciation rates in home prices vary regionally across the U.S. as you can imagine, but they also vary pretty dramatically across areas within a region. In Northern Virginia, for example, the recent price pull-backs that we have experienced have been most pronounced in the outer suburbs (Loudoun & Prince William Counties) and less severe or even nonexistent the closer you get to DC (Arlinton, Alexandria & Fairfax).
- One huge factor exacerbating the already-tough housing market is the rash of foreclosured properties coming to the market, a relatively recent phenomenon here in the DC area where annual appreciation was running greater than 20% annually during the height of the housing market from approximately 2003 through mid-2005. A primary cause of these foreclosures is the more risky nature of loans (often "subprime") that were taken out at the height of the housing market that allowed many buyers to "afford" homes at the heightened prices. The interesting fact here is that subprime loans accounted for approximately 60% of foreclosures initiated in 2006 & early 2007 but they comprise only about 14% of loans being serviced. Job loss or curtailment of income was cited as the leading hardship reason among delinquent borrowers.

More to follow soon!

Spot Continues to Beat the Odds!

We have another example of Spot Realty beating the odds with this immaculate Centreville townhome going Under Contract in just 32 days! What led to this successful sale? Three important factors in today's market:

- Realistic Seller expectations regarding pricing & other contract terms;

- Model-home condition & features;

- Professionalism through all stages of the transaction.

If your goal is getting your home sold in the shortest amount of time possible with a true "win-win" experience for both Buyer & Seller, give us a call at Spot Realty!

Spot listings double in one month.

More sellers than ever are joining the Spot bandwagon. We're pleased to report that Spot's listing volume has doubled over the last month, with many more listings in process.

Thanks for spreading the word about Spot. And, we'd especially like to thank those sellers who have allowed us to publish their feedback and to serve as references. We know that to many people, Spot's value proposition sounds too good to be true. We're pleased that our past and current clients have let folks know that "Spot's the real deal!!!"

Thanks again for your support, and we look forward to more growth in the months ahead.

Big price drops spur buyers.

There's no question... these are tough times for the housing market. Although it's been a buyers' market for a while, August was particularly slow, with transaction volume down over 30% from a year ago.

Here in September, we're seeing a new phenomenon. In neighborhoods with many active listings, a few individual sellers are dropping prices dramatically... and getting their houses sold. It can be a bit rattling to a home seller when a neighbor cuts their price by 15 or 20%. It's definitely going to affect what price you will get for yours.

For these sellers, the strategy is working. Anecdotally, we're seeing a lot of cases where this type of big price drop occurs, and a buyer then steps in and writes a contract. Two weeks ago, a condominium complex in Alexandria, Virginia had 31 active listings, and nothing there had sold since early July. In September, four homeowners dropped their price more than 15% and all four went under contract.

So, if you're thinking about dropping price, don't wait. Get ahead of the price curve by implementing your price cut ahead of your neighbors.

Under Contract in Just 35 Days!

This Robert Jordan-built townhome in the Kincaid Forest neighborhood of Leesburg went under contract in just 35 days! It features a gourmet kitchen with new stainless steel appliances, hardwood floors throughout the entire main level, an enormous master suite with soothing soaking tub, and a huge, finished lower level perfect for cozy nights or entertaining the gang! Easy access to Rt 7 and the Dulles Greenway and the nearby shopping outlets complete the package. Another proof that a great house priced well is attractive to homebuyers even in this slower market!

Things get crazy in the mortgage market.

Seasonally, August is the second-slowest month for home sales. But this August is abnormally slow.

Quite simply, certain parts of the credit market have simply imploded. A few facts:

• A large number of mortgage companies have folded. Over 100 major companies in the last few months.
• 100% or 95% financing is nearly impossible to find. A year ago, you could come by it easily.
• It's hard finding a mortgage if your credit score is under 680. Last year, 620 was more typically the cutoff for many mortgage programs.
• The interest rate spread between conforming and jumbo loans has grown dramatically (the cutoff is $417,000). It used to be that the cost of jumbo loans was nearly the same as confirming. But at many lenders, jumbo loans are now costing a full percentage point more.

For Spot sellers, this means that the pool of buyers has shrunk, as fewer people can get mortgages at reasonable terms. And some of those buyers who can get mortgages are holding back -- they're concerned about the market and choose to wait it out.

We are hopeful that the credit markets will settle down a bit, and that some normalcy will resume in a month or so. It's still going to be a big buyers' market, but the mortgage market isn't going away. We think there's been an overreaction to the issues in subprime.

Spot sellers... be patient. We'll keep you posted on the evolving situation.