Archive for August, 2012

Fairfax Realtor in the running for NAR Good Neighbor award

We're rooting for Trudy in more ways than oneRealtor Trudy Harsh of Fairfax is in the running for Realtor magazine’s 2012 Good Neighbor Awards — five Realtors “outstanding Realtors who volunteer time and energy to improve the quality of life in their communities.”

To be frank, it’s hard to beat what Trudy’s done.

Her daughter, Laura, developed a brain tumor when she was eight years old. After Laura survived surgery, Trudy spent the next 30 years caring for her, working tirelessly to get Laura — who suffered from violent outbursts and other emotional problems — an education and a place to live. She was never able to keep Laura in any one place for long; Laura died in 2006 at age 38.

After seeing firsthand the hurdles faced by anyone with brain damage (whether from injury or illness), Trudy — real estate expertise at the ready — founded the Brain Foundation in Fairfax. She raised funds, and with the help of $50,000 from Fairfax housing entrepreneur and a $450,000 loan from the Virginia Housing Development Authority, she purchased a four-bedroom townhouse in Fairfax County.

She arranged for property management and in-home mental-illness care for four people who moved into the house — “Laura’s House” — in April 2007. (They each contribute a percentage of their income to their care.)

But Trudy didn’t stop. The Brain Foundation continued to raise money and buy houses. Today it owns six of them, offering home, care, and independent living to 24 people suffering from schizophrenia, bi-polar disorder, or chronic depression. Three more are on the horizon.

Today, Trudy works to help other establish programs like the Brain Foundation’s — to help the people in their communities who can’t help themselves.

And now Realtor magazine has her in the running as a good neighbor — and we can’t think of a better one. (From the initial 200 nominations, 10 finalists, including Trudy, were chosen; the five winners will be announced in October.)

Click here to read Trudy’s story.

Click here to read a Washington Post story about the Brain Foundation.

Get yer CE here: VMLA real estate hot topics seminar

Virginia Mortgage Lenders Association are supporting an opportunity to earn 6 hours of CE credit from a seminar on real estate hot topics.  It will be at the Omni Charlottesville, VA on Tuesday September 11 from 8:30 am – 4:30 pm.  Lunch is included.

Topics include Mechanics Liens, Dodd-Frank Act and how it is impacting the industry, bankruptcy, foreclosure and the law, appraisals, industry updates including CFPB and recent Supreme Court cases, as well as real estate escrow accounting guides.

To register online:

Questions:  call Rose at 434-220-8067

(This is not a VAR sponsored event)

We all know the real estate market has been improving steadily for the past, oh, six or eight months. Here’s my prediction: It’s going to start improving much more quickly in the next two to three years.

Shadows can also be good things. The reason is simple, as you’ll see. But first…

U.S. homeownership is at its lowest rate in 50 years — so says National Mortgage Professional magazine. It looked at the official Census Bureau number (65.5% of households are in homes owned by one or more members) and then subtracted households that were 90 or more days delinquent.

The result: 62.1% of American households are owners, and the rest are renters or “renters in waiting.”

This isn’t good news, except for me. Because this low number means my prediction has a greater chance of coming true.

One: In 2004, homeownership peaked in the U.S. at 69% of households. Now it’s 65.5%. (I’m using Census Bureau figures for consistency.) So there’s that 4.5% who used to own but now rent. I bet a lot of them would like to own again.

Survey after survey confirms that Americans want to own their homes. It’s part of the American Dream and all.

So why aren’t they buying? Well, many of them don’t want to own. (Those surveys say that most people would rather own, not all.) Some simply can’t afford a down payment, or a mortgage payment, or plan to own once they’re ready to put down roots.

Considering how this is the best buyer’s market in a long time, it’s safe to say that most of them wouldn’t be buying today — August 2012 — no matter what the market was like.

What about the rest? The ones who do want to own? What’s with them?

Easy: A lot of them got clobbered by the bursting of the housing bubble, or one of the Great Recession aftershocks. They were foreclosed on, or had to sell short, or filed for bankruptcy. Ain’t nobody gonna give them a mortgage these days.

But wait.

I mean that — wait.

FHA won’t give a loan until three years have passed from a foreclosure. And foreclosures and short sales typically stay on your credit report for seven years. (Bankruptcies last for 10.)

That means that out there is the opposite of a shadow inventory: shadow consumers. These are people who want to buy, can afford homeownership (especially with today’s rates), but have to wait for their credit to improve enough to get a mortgage.

That’s three to seven years after foreclosure.

Foreclosures peaked in, oh, late 2008 to mid-2009. (And they were pretty high before and just after that, too.)

Which means that starting in late 2011 those people will be eligible for FHA loans. And starting in 2015 their foreclosures will be gone, period.

When did the market start recovering in a big and noticeable way? Why… late 2011.

Getting the picture?

We’re entering the peak of ‘former foreclosures able to buy again.’ These are people who we know want to own — they already did and were forced out. (Sure, some may have been permanently turned off from ownership, and others never should have owned in the first place, but let’s play the percentages here.)

Between now and 2015, a lot of people are going to become eligible for FHA loans, and then for traditional mortgages. A whole swath of former owners will have their chance again.

I’m betting they’ll want to buy.

So instead of worrying about shadow inventory bringing the market down, think about the shadow consumers in the pipeline, waiting for their chance to own again.

Another view on the Case-Shiller price gain

Writing on Barry Ritholtz’s The Big Picture blog, real estate and mortgage researcher Mark Hanson has a different view of what a 0.5% rise in Case-Shiller’s quarterly report on home prices means.

Background: That half-percent year-over-year rise is the first one since September 2010, and that’s good news, especially because every market Case-Shiller surveys saw price gains.

But Hanson has a different view. His take is that even this small across-the-board gain is exaggerated.

When you (or, rather, when Case-Shiller) compare July 2012 to July 2011, you’re comparing today’s figures with the “severe hangover period from Feb to April 2011.” (July closings = February to April contracts, you see.)

Why the hangover? Because that was just following the home buyer tax credit. Hanson believes that the credit drove sales and prices (artificially) up, and the expiration caused a “hangover” that drove them (artificially) down.

Thus, comparing July 2012 to July 2011 gives you an overly optimistic number. And if 0.5% is optimistic… well, that doesn’t bode well for the reality behind it.

Add to the mix 1) the fact that low interest rates mean people today have a lot more purchasing power, and 2) distressed sales are a much smaller part of the market, and you would think today’s number would be higher.

As Hanson put it

a YoY 15% increase in purchasing power and 25% decrease in foreclosure resales and still the [Case-Shiller price index] only managed a 0.5% gain over last year.  To me, normalized, that means real house prices are still falling.

Of course, his argument is predicated on there being an unnatural slump in July 2011, and that’s hard to be sure of. Yes, July ’11 numbers were lower than July ’10 because of the 2010 tax credit. But how much of a post-tax-credit ‘backlash’ was there in 2011? You can’t say what would have happened.

Which is why I’m not entirely convinced by Hanson. Was July 2011 a normal year, an artificially lower year, or maybe even an artificially higher one? The answer to that question (which can’t be answered) tells you whether today’s numbers are too hot, too cold, or just right.

WSJ claims rising prices come from fewer distressed sales

In a Wall Street Journal piece, Nick Timiraos says he thinks rising real estate prices are a result of fewer distressed homes (short sales and foreclosures) on the market.

Prices have risen this summer for a simple reason: more buyers have chased fewer properties. But the drop in supply and the boost in demand isn’t the only reason that Case-Shiller is now turning positive. Another related factor is that the share of non-distressed home sales is rising and the share of distressed sales—foreclosures and short sales, mostly—is falling.

As we’ve covered recently and repeatedly (e.g.), distressed homes are making up a smaller and smaller share of the market; in MRIS territory (which covers a lot of Virginia), total distressed sales were about 20 percent of the market in July 2012 — down from more than 25 percent the year before.

That’s good news for a lot of reasons. Although distressed sales don’t hurt property values these days the way they did a few years ago, they’re still not as good as a traditional sale. And the shrinking number of foreclosure/REO/short sales — despite the resumption of the foreclosure process by the big banks — is an indication that the “shadow inventory” everyone was worried about really isn’t a problem.

Timiraos’s argument has its weak spots, though. Saying rising prices come from lower supply is a gimme — that’s obvious. But it’s not likely that fewer distressed sales have have that much of an impact. Unlike a “normal” market, these days foreclosures and short sales aren’t priced that much lower than traditional sales. Reducing their number doesn’t mean a major boost to pricing averages. (If your baseball team has hitters with batting averages of .400, .398, .395, .397, and .392, getting rid of the .392 guy isn’t going to raise the team average all that much.)

Still, fewer distressed sales probably have some impact, as do many, many other things, from consumer sentiment to unemployment to the stock market to the weather. So no complaints.

Case-Shiller reports home prices rise across the board

The June S&P/Case-Shiller home price index shows that home prices have risen nationwide — in every one of the 20 metro areas covered by the index. Nationwide it’s up a half percent. That’s not much, until you consider that this is the first time since September 2010 that it increased — and 9/’10 was smack in the middle of the homebuyer tax credit bump.

Also: This is the second time that every city in the index has shown a month over month gain.

Writes CNBC: “The increase is the latest evidence of a nascent recovery in the housing market.” At this point, I think we’re past using the word “nascent.” The recovery has been going on for quite a while, even if CNBC didn’t notice it till recently.

Click here to read the story.


NAR: Commercial growth is sorta OK

The latest quarterly commercial real estate forecast from NAR has zero surprises (and that’s just fine). It says that yes, the CRE market is recovering with the rest of the economy, “but a slowdown in job creation and ongoing tight loan availability has tempered growth in some areas.”

Hard to argue.

Jobs are growing, but never as fast as we’d like.  Loans are available, but lenders are still cautious, and that caution is making it harder for businesses, especially smaller ones, to get loans.

Vacancy rates are declining, but they’re still high (“above historic averages”). Here in Virginia, uncertainly over whether Congress can get undeadlocked and avoid huge spending cuts — which would disproportionately affect the Commonwealth — has some businesses holding off on hiring.

So bottom line: CRE is improving, but slowly.

Click here to read NAR’s press release about the report.

The growth of the suburbs might eliminate a government no-down-payment loan option in some areas of Virginia, pricing some buyers out of those markets.

With all the hubbub about Fannie Mae, Freddie Mac, and the FHA, one zero-down-payment government loan option hasn’t got much attention: USDA loans. The Department of Agriculture will guarantee a 30-year loan with no down payment for rural buyers with “reasonable credit.” It’s called the USDA Rural Development Single Family Housing Guaranteed Loan Program.

Here’s the catch: The point of the program was to get people to move to rural areas. Every 10 years, when it finishes parsing the US Census data, USDA tweaks its maps of what’s rural and what isn’t.

The latest changes are set to take effect in October. Here are the parts of Virginia with areas that will no longer be eligible for the USDA loans:

  • Cave Springs
  • Centreville
  • Chester
  • Chester CDP
  • Christiansburg town
  • City of Fredericksburg
  • City of Front Royal
  • City of Radford
  • Great Falls
  • Hollins
  • Huntington
  • Lincolnia
  • Madison Heights
  • Short Pump
  • Timberlake
  • Vinton
  • Waynesboro city

It makes sense for areas that are no longer rural to no longer be classified as rural, of course. Suburbs can grow, and farmland can be paved for growth. But really, USDA? Now? Don’t you think the timing could be just a bit better — maybe wait to implement the changes till the recovery is a bit further along?


Click here to see if a particular property is eligible for a USDA loan.

This year’s CNN Money list of “Where the Jobs Are” named our own Loudoun County as the number-one job-growth region of the country, with employment opportunities jumping 86 percent from 2000 to 2011.

Two other places — Prince William County and the City of Suffolk (mistakenly identified as a county) — also made the top 10.

  • Loudoun County (#1): “With its expansive fiber networks and a swarm of tech workers, it’s a major traffic hub on the East Coast.”
  • Prince William County (#8): “Prince William County takes the crown when it comes to offering enticing perks to businesses.”
  • City of Suffolk (#9): “Suffolk is located close to the Port of Virginia, and like many of the places on our list, quality of life is a big selling point here.”

Check out the whole story here.

Five Virginia communities named “Best Places to Live”

Money magazine’s 2012 list of 100 best places to live (in the U.S., anyway) includes five from the Commonwealth — and one of them made the top 10.

Reston (#7): “Activities come in all stripes too, from an über-urban downtown to 55 miles of bike paths, 52 tennis courts, and 15 pools.”

Centreville (#17): “…strikes the right balance for those who want to escape big-city life without sacrificing big-city job opportunities.”

Ashburn (#30): “Ashburn has a high median income thanks to its abundance of well-paid technology jobs, but housing in the area is still relatively affordable.”

Arlington (#45): “…with the Pentagon and a wealth of other employment options located right in Arlington, a commute across the river isn’t always necessary.”

Dale City (#46): “The Americans in Wartime Museum, a $110 million project, is under construction. Its opening will bring additional jobs to the city, whose residents mostly commute to Washington, D.C.”