Northern Virginia Real Estate Blog

Average Sales Price, Average Days on Market and Total Active Listings

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Average Sales Price, Average Days on Market and Total Active Listings

Click below for more detailed charts …

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Average Sales Price, Average Days on Market and Total Active Listings

Click below for more detailed charts …

Continue Reading »

Conforming mortgage guidelines are the Home Loan Rule Book, delineating between applicants that approved for a mortgage and those that do not.

Effective today, the rule book just got a little bit tougher.

According to Fannie Mae, homeowners converting their primary residence into a second home or investment property will be subject to additional underwriting scrutiny. Fannie Mae is leery of lending to people that may be over-extended.

The complete underwriting update is available at the Fannie Mae Web site but some of the more important points are summarized below, divided into Second Home and Investment Property.

Second Home Guideline Changes

• Without 30 percent equity in the second home, mortgage applicants must have 6 months worth of PITI (what is PITI anyway?) reserves for both properties in their bank accounts.
• With 30 percent equity, the PITI reserve can be reduced to 2 months.

Previously, there was no minimum reserve requirement.

Investment Property Guideline Changes

• With 30 percent equity in an investment property, 75% of the monthly rental income can be applied toward the applicant’s monthly household income.
• Without 30 percent equity, rental income may not be applied to the applicant’s monthly household income and 6 months PITI is required for both properties.

Previously, 75% of the rental income was allowable regardless of equity, and minimum reserve requirements were 2 months.

Even though just a small percentage of Americans own second homes or investment properties, the conforming mortgage guideline changes impacts homeowners everywhere.

This is because more restrictive guidlines lead to two separate, but concurrent, outcomes:

1. The demand for homes reduces because fewer buyers qualify for mortgages
2. The supply of homes increases because fewer sellers can refinance into more affordable home loan

Less demand and more supply places downward pressure on home prices.

Now, remember that mortgage guidelines continuously evolve and what’s accurate as August 1, 2008, may not be accurate six months down the road. In other words, confirm what you’re reading about mortgages online with your loan officer before making any real estate-related decisions.

Monday, President Bush signed the Housing and Economic Recovery Act of 2008 into law and the press jumped on the obvious storylines:

• First-time home buyers get a $7,500 purchase “credit”
• Conforming loan limits move to $625,000
• Delinquent homeowners get a lifeline from the FHA
• Local governments get federal money for buying and restoring foreclosed homes

However, tucked away on the last few pages of the text, in a section called “Revenue Offsets”, there’s an important tax implication. The new housing law changes the way in which capital gains exclusions are calculated on the sale of a residence.

Under the old system, a taxpayer was entitled up to $250,000/$500,000 of tax-free gains from the sale of a home if filing separately/jointly provided he lived in the residence for at least 2 of the preceding 5 calendar years.

Savvy homeowners exploited this verbiage, moving from home-to-home every 2 years to avoid paying capital gains.

The new law thwarts this tactic.

Capital gains exclusions are now calculated by taking the capital gains on the sale of the home and multiplying it by a ratio of how long a person has lived in a home, by how long that person owned the home.

In the example above, a person living in a home for 2 of 5 years would be entitled to 40 percent of tax-free gains on a home sale instead of all of it. As always, however, it’s best to talk with a qualified accountant about how tax code changes may impact you personally.

The new capital gains rules go into effect starting January 1, 2009.

Statistics won’t always tell the whole story, but they often provide good perspective.

The graph at right shows Existing Home Sales data going back three years. An “existing home” is one that can’t be called new construction; a “used home”, so to speak.

Note the steep decline from 2005 through late-2007.

Since November, however, Existing Home Sales have remained within a very tight range and appear to have reached a flattening point.

The Existing Home Sales data supports the word-on-the-street from real estate agents nationwide that buyers are returning to the housing market in search of good values.

But let’s not forget — demand is only half of the story. There is the supply factor, too, and the supply side of the housing market is showing the same leveling signs as the demand part.

Looking at the national inventory at left, the number of existing homes for sale has hovered near 4.5 million for the last several months. No change suggests strength.

Now again, statistics won’t tell the whole story but there are plenty of positive signals from the real estate market right now, just like there are negative ones, too.

This is one reason why real estate data causes so much debate — people want to take an either/or proposition about the state of the real estate and it doesn’t work like that. Real estate can be simultaneously strong and weak and when it is, buyers look for value.

Perhaps this is why the national housing data is beginning to level off after a 3-year slide. There’s good values to be had, and today’s home buyers know it.

(Images courtesy: Wall Street Journal Online)

Average Sales Price, Average Days on Market and Total Active Listings

Click below for more detailed charts …

Continue Reading »

Average Sales Price, Average Days on Market and Total Active Listings

Click below for more detailed charts …

Continue Reading »

Average Sales Price, Average Days on Market and Total Active Listings

Click below for more detailed charts …

Continue Reading »

According to RealtyTrac, the rate of foreclosures across the U.S. is slowing. Versus May, June foreclosures fell at a 3 percent clip.

25 states showed improvement month-over-month, led by many of the same areas that had fueled foreclosure activity in 2007.  Unfortunately, Virginia was not one of those states as it had a 9% increase from May to June.

A sampling of RealtyTrac’s data includes:

• California : Foreclosures down 4.54 percent
• Georgia : Foreclosures down 14.91 percent
• Arizona : Foreclosures down 0.07 percent
• Michigan : Foreclosures down 6.00 percent
• Illinois : Foreclosures down 15.65 percent

However, the improving nature of the data is not what is making news this morning. Instead, the press is reporting that foreclosures are up by half since last year and that bank seizures have tripled.

And while the annual data may be accurate, that doesn’t mean that it’s necessarily relevant to home buyers and home sellers across the country.

This is because people buying and selling homes don’t usually boast an “annual” mentality; when someone’s an active participant in the real estate market, the mentality is “right now”.

In other words, annual data fits an economist, but month-to-month data fits you.

June’s foreclosure data may be the start of a trend, or it may be a blip. It’s really too soon to tell. But the RealtyTrac data reinforces what real estate professionals already know — that markets all over the country are showing signs of life.