Northern Virginia Real Estate Blog

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.

It’s a terrific time to buy a home, but not because homes happen to be affordable.

It’s a terrific time to buy because the variety of mortgage products available to home buyers looks poised to shrink.

Monday, Alt-A mortgage lender IndyMac Bank stopped accepting mortgage applications and it’s likely that other Alt-A lenders will likely follow suit.

Alt-A loans are ones in which borrowers can’t (or won’t) verify one of two major underwriting criteria:

• Evidence of income
• Evidence of assets

Since the Credit Crunch began last July, Alt-A mortgages have been a steady source of funds for “in-between” borrowers — those that are not quite prime, and not quite sub-prime. IndyMac was among the largest lenders of its type and had outlasted many of its peers.

Its position as a market leader and subsequent exit from lending means that the remaining Alt-A lenders will likely make one of two choices in the coming weeks:

1. Raise rates and fees because of greater Alt-A mortgage risk, or
2. Follow IndyMac’s lead and exit mortgage lending altogether

Both outcomes would be harsh for home buyers of all types because when any large bank takes mortgage-related losses like IndyMac just did, it tends to create major risk aversion in the market.

Risk aversion impacts everyone – even the “good” borrowers.

Banks have been nervous about lending for several months and so they’d rather pass on an “average” mortgage application rather than risk getting stuck with a potentially “bad” one. IndyMac’s exit may cause fewer mortgages to get approved.

In other words, buyers eligible for financing today may be ineligible tomorrow.

Therefore, if you’re a home buyer and you know your credit profile is less-than-ideal, consider writing a purchase contract sooner rather than later. Your mortgage options may be thinning, and the ones you have may be getting more expensive.

Last week, Forbes Magazine published a Top 10 list that should grab the attention of housing market bottom-feeders.

The Top 10 list of Increasingly Affordable U.S. Housing Markets shows that falling home prices and steady mortgage rates are providing a support floor in some of the country’s most beat-up regions.

The report’s methodology is simple:

• Take citywide income data as reported by HUD
• Match it against purchase prices from court records
• Run the math using “prevailing interest rates” from Wells Fargo

A city is considered “more affordable” if increasing numbers of “average families” can afford “average homes”. It’s not surprising, therefore, that the Forbes list is dominated by cities in which home prices have plummeted over the last year, and in which the economy is relatively sound.

This may suggest that a housing rebound is already underway in several of the cities listed as Increasingly Affordable U.S. Housing Markets, including:

• San Diego, CA
• Orlando, FL
• Riverside, CA
• Phoenix, AZ
• Las Vegas, NV
• and YES our very own Washington, DC metro area

The report noted that in the DC area 57% of homes are affordable for the median household. That figure compares to 37% in 2007. Of course the main contributor to the new found affordability in our area is the 13% decline in housing prices since the same time last year.

It’s a tough time for those that have to sell their homes now - but for those of you that have been complaining about the outrageous home prices in this area … here is your chance.

Read the complete study and its results at Forbes.com.

(Image courtesy: Memorable San Diego Vacations)

In the summer of 2005, sub-prime mortgage lending was at its peak. Rates were relatively low and lending guidelines were relatively loose.

At the time, the “standard” sub-prime mortgage product was the 3/27 ARM.

The 3/27 had a few basic traits:

• A fixed, 3-year “starter rate”
• Every six months thereafter, the mortgage rate changed
• The formula by which it changed was (4.999 percent + 6-month LIBOR rate)

If the loan was interest only, it usually converted to principal + interest at the first adjustment, too.

Because the summer of 2005 was the peak of sub-prime lending, it makes sense that the summer of 2008 is the peak of sub-prime adjusting.

For homeowners with adjusting sub-prime loans, there is some (relative) good news out there.

Today, the 6-month LIBOR hovers near 3.15 percent, meaning that an adjusted mortgage rate will be in the neighborhood of 8.15 percent.

This is versus the rate of 10.30 percent that sub-prime borrowers faced last summer when LIBOR was much higher than it is today.

Adjustments of any size can strain a household budget, though, so if you’re a sub-prime borrower and your pending adjustment will cause financial strife, be proactive — talk to your lender before you miss a payment.

Lenders are often more willing to talk with “current” borrowers than with delinquent ones.

(Image courtesy: Washington Post)

Neutralizing home odors is an important part of preparing a home for sale but it’s not always so easy. Every home has a unique odor that’s ground into carpets, walls, fabrics. Cooking at home plays a big role, too.

But just because a home is listed for sale doesn’t mean that the kitchen is off-limits.

This 2-minute video from About.com offers a bunch of smell-related kitchen tips, including:

• Removing “the fish smell”
• Fighting the aroma from deep-fried foods
• Getting stubborn smells from hands

When your home for sale, the last thing you want buyers paying attention to is your dinner from the night before. Watch the video, read the transcript, and cook fear-free in your own home — listed for sale or just planning on company.

A Home Equity Line of Credit is bank product that grants homeowners access to the equity in their home at anytime, usually using checks.

Often called a HELOC, these equity-based credit lines function very much like credit cards:

• The rate is adjustable, tied to Prime Rate
• There is a minimum monthly payment
• There is a pre-set spending/credit limit

But different from credit cards is that a HELOC is “guaranteed” by real estate and with real estate values in question nationwide, many banks are exercising a little-known clause in the HELOC contract.

With alarming frequency, banks are reducing the pre-set spending limits on their active equity lines. Via USPS, lenders are notifying homeowner with $100,000 HELOCs that their new HELOC limit is $25,000, for example.

And the banks aren’t being discriminate based on payment history or local real estate conditions, either — it’s happening everywhere with equal force.

The good news is that banks will accept appeals on HELOC reductions on a case-by-case basis.

One way to appeal a HELOC reduction is:

1. Call your lender’s Customer Service line. Do not send an email.
2. Politely ask why the HELOC limit was reduced. Listen carefully to explanation.
3. Explain why you would like your HELOC reinstated. Acceptable reasons may include home improvement projects or improper home valuation by the lender.
4. Be prepared to write a formal letter, if asked. Address the issues explained in #2.

Banks will typically not reinstate a HELOC if a borrower has been delinquent on payments, or lives in a severely depressed neighborhood. However, because lenders rely on computer models to assess risk, it’s always a good idea to ask.

Sometimes the Human Element of an appeal can work in your favor.

Most homeowners make four housing-related payments each month:

1. Principal on a mortgage
2. Interest on a mortgage
3. Taxes on the real estate owned
4. Insurance for the real estate owned

Collectively, these payments are known by the acronym PITI but don’t let it fool you — a homeowner’s monthly expenses are still called PITI even if one or more of the elements doesn’t apply.

For example, a homeowner with an interest only mortgage does not pay principal each month.

Additionally, condo owners typically don’t pay homeowners insurance — they pay a monthly assessment and/or maintenance fees to an association instead.

But regardless for what it stands, determining a comfortable PITI should be every homeowner’s starting point when looking for a new home. PITI is the monthly housing cost, after all, and by knowing what fits in your budget, it’s a lot easier to compare homes and their related expenses.

It’s certainly better than asking the bank “how much home can I afford” — all that’s going to tell you is the P and the I. As a homeowner, you need to know all four.

PITI is most commonly pronounced pee-eye-tee-eye.

(Image courtesy: Contractor-Books.com)

In this 4-minute video, real estate maven Barbara Corcoran reminds us that homes are bought and sold within 8 seconds.

And, although the clip features a suburban home in New York, the Lessons of Good Presentation apply to every home looking for a buyer.

Some of the video’s key take-aways include:

• Let your home’s natural light shine in
• Your home’s hardware reflect the home’s condition
• Don’t replace your kitchen — clean it up instead
• Linen closets can sway a buyer’s attitude about your home

With excess supply in the market, making a positive first impression on home buyers can mean all the difference.

Preparing a home the right way can be the difference between getting an offer, or just getting lots of traffic.

A “Housing Start” is a new home on which construction has commenced and in May, Housing Starts fell to a 17-year low nationally.

At first glance, this may seem like a negative for the already-battered U.S. housing market.

It’s not.

Falling Housing Starts reflects the broader real estate market and shows us that builders are working hard to get their already-built homes “off the books”.

It would be foolish for them to build new homes now — each new unit makes selling the existing ones tougher.

So, when we look at the figure objectively, we can see that Housing Starts reaching a 17-year low is actually good news — real estate prices are based on Supply and Demand, after all.

With Housing Starts touching new lows, we can infer that there will be fewer new homes coming on the market in the coming months and that should help support higher home values nationwide for everyone.

(Image courtesy: The Wall Street Journal Online)

A jammed garbage disposal is one of the most common household plumbing issues and, despite its mechanical simplicity, fixing one can cost up to $300 in labor and parts.

Try saving some money next time by doing it yourself.

Courtesy of Expert Village, this short, 2-minute video walks you through the steps in troubleshooting your own in-sink disposal system, complete with safety steps.

Repairing most garbage disposal problems is as simple as turning a wrench, pushing a button, or both. There’s no “technical skills” or elbow grease required and you may save yourself a few hundred bucks.