FHA Loans-Squeezing Buyers.

The goal of home ownership for first time home buyers, minorities or buyers suffering some slight credit blight may have just gotten a bit harder. As this segment of buyers look to home ownership with renewed interest, available loan options are starting to become significantly more costly and may put home ownership out of reach for many prospective buyers.

Interest rates may be at the lowest in recent history but some loan type options have the potential to become cost prohibitive because of new restrictions and rules-case in point, the proposed new rules and cost for obtaining an FHA loan. FHA loans provide loan guarantees primarily for buyers who are first time home buyers, have slight credit issues or lower credit scores, lack enough money for conventional down payments or have some other qualification issues required by other types of loans. In 2012, nearly 50% of black and Hispanic borrowers took out FHA loans.  FHA’s low down payments have long lured first time buyers, and 77% of FHA buyers in 2012 were purchasing their first home.

According to the National Association of Realtors survey, “Profile of Home Buyers and Sellers 2012”, 39% of all buyers nationally were first time buyers and regionally first time home buyers comprised 37% of all home buyers. These numbers are up slightly from last year and are indicative of the growing number of people returning to the idea of home ownership.

So, what impact will the proposed new FHA rules have on first time home buyers, minorities and other higher risk buyers? Let’s quickly look at the current cost of an FHA loan. Although, the down payment requirement for an FHA loan is only 3.5%, the MIP (Mortgage Insurance Premium) fees can be a major hurdle buyers have to contend with. Currently, MIP fees for an FHA loan have an upfront charge of 1.75% of the total loan amount and a 1.25% monthly MIP (mortgage insurance premium) fee. The 1.75% can be rolled into the loan amount but this raises your monthly payment and coupled with the 1.25% monthly MIP can add hundreds to your monthly mortgage payment. Thus effectively reducing the amount of home you can afford and the number of buyers that can afford the loan.

As an example, on a $200,000 loan, the 1.75% upfront fee is $3500. The current monthly MIP (Mortgage Insurance Premium) is 1.25% of the total loan amount or $208/mo. The upfront charge of 1.75% will stay the same but one new proposed change is to raise the monthly MIP to 1.35% thus making the MIP $225/mo on that same $200,000 loan.

In addition, the monthly MIP fee of 1.25% currently drops off when a borrower reaches 22% equity (and at least 5 years of payments).  In a typical 30 year loan, the mortgage insurance lasts for a little over 10 years.  After that, it’s assumed that the homeowner is unlikely to default, and the insurance is no longer charged.  HUD announced, however, that borrowers will soon be charged mortgage insurance for the entire life of their loans, meaning a $200,000 loan no longer costs  $225/mn (with gradual decreases as the loan size drops) for 10 years.  There will soon be MIP each month as long as they have their loan regardless of the amount you have paid down the principal and will cost thousands more over the life of that loan.

When you consider first time home buyers constitute 37% of all buyers in our region and 77% of these buyers used FHA loans, the impact will be significant. Also, these numbers do not necessarily include minorities or higher risk buyers since they may not be first time home buyers.

As the housing market continues to rebound, some buyers will have to explore other loan options if they wish to become part of the American dream and Realtors and lenders will have to figure out ways to make this happen. The American dream may be a little harder to obtain, but it’s still out there!

Home Buyer Seminar

The Housing Market Is Back!

If you’ve been waiting for good news regarding the housing market, the recent news reports and articles portrayed lately in the media show definitive progress in the rebound of home prices across the nation. The most recent report of the S&P/Case-Schiller Housing Index shows a YOY increase of 1.2% in home prices for the month of July in the top 20 major metropolitan markets and of the top 10 largest major metropolitan markets the increase was 1.5%. This would have been the the 4th month in a row that prices have increased if Detroit did not have a .06% dip in April. Some major markets are still struggling but overall great news for the housing industry and home owners in general. Low interest rates coupled with some of the lowest inventory levels in years has had a direct impact on the housing price increases we are now experiencing.

Macro Markets, LLC is a company that studies housing prices. Since 2010, they have been publishing a Home Price Expectation Survey. They asked 110 housing industry experts from across the industry to project housing prices through 2016. The most recent 2012 study shows that experts predicted prices to remain relatively flat (so the S&P/Case-Schiller report has been a pleasant and welcome surprise) through 2012. These experts then predict home prices to rise reaching a cumulative appreciation of over 10% by 2016.

So… what does this really mean for the housing market in general? We all know that a strong housing market is one of the major stabilizing factors in a healthy economy. In addition to creating jobs and infusing money into the economy, it puts some homeowners once underwater in their homes in a position to sell their homes and move on to the next chapter in their lives and start rebuilding the wealth and assets needed for long term strategies-ie: retirement, opening a business etc.

In our local market of Alexandria we have been experiencing home price increases and unit sales at an accelerated rate for some time now. Record low inventory, the abundance of ready, willing and able buyers (unemployment just 4.6%-July), and record low interest rates are driving full price, multiple offers on desirable properties as well as significantly reducing the days on market (DOM). As you can see by the tables below, homes prices have risen at levels 2-3 times the national average over the past couple of years. In some specific zip codes, prices are at or exceeding peak home prices prior to the housing meltdown. The peak avg price for all of Alexandria was $474,000 in Sept 05.

Housing Sold Summary-Alexandria City, VA

(22301,22302,22304,22305,22311,22312,22314)

Jan-Aug YTD	2012	2011	% Change
Sold Dollar Volume	$703,332,990	$662,092,608	+6.23%
Avg SoldPrice	$491,154	$473,939	+3.63%
Median Sold Price	$460,000	$430,000	+6.98%
Units Sold	1,432	1,397	+2.51%
Avg Days on Market	62	75	-17.3%
Avg List Price for Solds	$501,879	$486,125	+3.24%
Avg SP to OLP Ratio	96.4%	94.9%	+1.61%
Attached Avg Sold Price	$435,054	$415,899	+4.61%
Detached Avg Sold Price	$719,934	$721,866	-0.27%
Attached Units Sold	1,150	1,132	+1.59%
Detached Units Sold	282	265	+6.42%

Year Ending-2011-2010	2011	2010	% Change
Sold Dollar Volume	$926,849,757	$871,271,998	+6.38%
Avg SoldPrice	$469,529	$454,024	+3.42%
Median Sold Price	$430,000	$415,000	+3.61%
Units Sold	1,974	1,919	+2.87%
Avg Days on Market	74	59	+25.4%
Avg List Price for Solds	$481,563	$466,955	+3.13%
Avg SP to OLP Ratio	95%	95.2%	-0.24%
Attached Avg Sold Price	$414,931	$400,800	+3.53%
Detached Avg Sold Price	$711,017	$703,878	+1.01%
Attached Units Sold	1,610	1,582	+1.77%
Detached units Sold	364	337	+8.01%

All signs indicate a strong housing market through 2012 with potentially explosive growth in 2013. Homeowners in Alexandria that have been sitting on the sidelines waiting for prices to increase for various reasons (financial, election, job uncertainty etc) should be thinking about taking advantage of the coming opportunities our local market will present in the early spring 2013!

The Selling Edge-for the latest statistics and up to date local market information, please visit our website or Facebook page for more information or to learn how we can help.

www.facebook.com/thesellingedge

https://mysellingedge.wordpress.com

Information and pictures courtesy of RBI, KCM and RIS Media

Northern Virginia Real Estate Market Snapshot

As the Northern Virginia Real Estate Market continues it’s climb back to full strength, we’re seeing home prices rise and available (active) properties inventories continue to decline, making this a perfect “sellers market”. In addition, the median sales price has almost come back to pre-crash prices and are once again moving toward peak prices. The graphs below show market data over a 5 year period.

Having the right information and agent can make all the difference in the world in  successfully navigating any real estate transaction. The Selling Edge provides that expertise.

Home Price Expectation Survey

Looks like the national housing market (value) is definitely on the rebound. Our area continues to perform well above the national averages in both sales and prices. Check out this survey conducted by 110 leading housing experts. If you have questions about the local market conditions, please feel free to contact us!

Inspection for Perfection or Concession??

The real estate selling season is well under way with home sellers and buyers both trying to maximize what they get for the price of the home. Sellers try to minimize costs while buyers still try to extract everything they can from sellers in the way of price and concessions. Unfortunately for buyers, unprecedented low inventory levels, pent up demand and a surplus of buyers have squarely put the seller back in the driver’s seat when it comes to the negotiating process. The days of multiple full price offers, low or no days on market and certain contingencies being waived are back with a vengeance! All to the seller’s long awaited delight!

Buyers are discovering, to their dismay that homes they wanted to see or possibly buy have already been snatched up before they even get a chance to see or make an offer on the property. This area’s unprecedented low inventory levels-22314 inventory levels down 35% over last year and all combined zip codes in Alexandria down 28.3% to last year based on MLS housing numbers for the month of April 2012-are slowly driving up home prices and making sellers reluctant to cede little if any concessions to buyers. Realtors are warning (or should in some cases) buyers to be prepared to act that day if they are interested in a property.

Now that the negotiating pendulum has swung back to the seller’s favor-what’s a buyer to do? Some buyers may think that using the Home Inspection as a bargaining tool is a way of wresting some semblance of control back from the seller. Make sure you, as the buyer are utilizing this important contractual tool for it’s intended use. Home inspections are an important part of the selling and buying process for several reasons. It insures the home is in good structural and functional working order, provides for the repair of items that impact the home and is an avenue for both parties to void the contract based on compliance issues or non agreement of repair items.

It is not a tool intended as a bargaining chip to reduce selling price or negotiating concessions but to properly address the safety, security, foundational and financial issues that arise during any normal inspection. If reduced sales price or repair costs are a part of the negotiated outcome, fine but the buyer should not expect to “make money” on this part of the transaction.

Frivolous repair requests by the buyer (hoping for concessions) or recalcitrant sellers unwilling to repair legitimate items can send the deal into the proverbial trash can of failed contracts. Instead both parties should be negotiating this element of the buying process faithfully for a mutually acceptable outcome. Some buyers may not be aware that the seller can refuse any and all repairs requested by the buyer. Be aware that your lender may also require certain repairs as part of the funding process.

In order to prevent some home inspection surprises, buyers and their agents should take some steps while touring homes of interest. Rugs, pictures or furniture that looks out of place should be moved (only if possible) and examined for stains or damage. Sellers may sometimes try to hide a defect by covering it up with one of these items. When viewing the home, look at the condition of the water heater, furnace, A/C etc to get a better idea of any repairs that might be obvious or of concern. Check for cracks or stains in the foundation (when visible), walls and doorways for excessive “settling” or potential water leaks in the home. These simple steps, along with other tips your agent might provide can help prevent contentious repair requests later on.

After all, part of moving into a new home is the confidence you have that the right steps have been taken for you to thoroughly enjoy your new home!

The Selling Edge is a program specifically developed to help home sellers navigate the selling process and maximize the financial outcome when selling their home. For other helpful tips and articles, please visit us at https://mysellingedge.wordpress.com/

Home Projects with The Best $$$ Return

Spring has sprung and nowhere can this be seen or heard more loudly or seen more visually than in all the hammering, sawing and landscaping going on in our own neighborhoods. Spring-time of blooming trees, blooming flowers, children’s laughter, longer daylight hours and great weather! For some of us, however, it means keeping the promises you made to yourself and your significant other about that home improvement or update you’ve been dying to start or complete.

You want your home to look great from the outside but you know the interior could also use some updating. Maybe you’ve been really wanting a new kitchen or wanted to update the bathrooms or perhaps add that sun room but just aren’t sure which project you should tackle first or which one will return the most money when you go to sell your home. Let’s see if we can help.

According to the 2011 National Association of Realtors “Profile of Home Buyers and Sellers” survey, 73% of all buyers drove by the home they eventually purchased prior to visiting that property through an open house or with their agent. Curb appeal was a key factor in drawing the buyer into the home itself. A new front door or screen door can make a big difference in the appearance of your home and is relatively inexpensive. But some projects can cost significantly more and knowing the general cost and the return you might expect can be determining factors and aid in the decision making process.

To that end, Remodeling Magazine publishes an annual report, “cost vs value” that breaks down the specific home improvement costs and expected returns on the investment. It does this for both a “Mid Range” and “Upscale” remodeling project. Click on the logo below to download and view this report. Northern Virginia is considered to be a “South Atlantic” market and is also incorporated into the greater Wash DC market.

For those that might be considering selling your home in the very near future, here is a list of items that can be helpful in choosing the most impactful items for the greatest financial return and appeal when preparing your home for sale. Choosing the right upgrades and improvements can give you more time to enjoy all Spring has to offer-barbeques, baseball and possibly a cold beer!

The Selling Edge-specifically designed to guide home sellers through the home selling process! Before putting your home on the market, check us out at https://mysellingedge.wordpress.com/

The Housing Bracket-Seller Concessions-On Their Way Out?

As March Madness spins into high gear, many teams dread hearing certain words -namely that of the team name they would be playing in the first or second round of the tournament. Hearing the words North Carolina, Kentucky or Lehigh can strike fear into the hearts of those teams hoping to advance further into their respective brackets. But all teams know that being prepared, working to eliminate their weaknesses and putting forth their best effort can go a long way toward getting to that final four and perhaps beyond…

Likewise, as the real estate selling season spins into high gear and sellers contemplate putting their homes on the market, they too dread certain words buyers utter with foregone expectation; seller concession! Seller concessions can take the shape of many forms-money towards closing costs, escrowed funds to fix or update certain elements of the home, inspection items that seem to nickel and dime the seller into a state of restrained fury and on and on. Although, we’ve seen seller concessions become somewhat commonplace over the past few years, the current markets momentum is starting to put the ball back into the seller’s court!

Seller monetary concessions, although still being utilized are shrinking in size and what’s even more promising-seller’s are refusing or greatly reducing the amounts they are willing to concede to buyers in their counter- offers. Seller monetary concessions for Februry 2011 averaged $6,905 vs $3,866 for Feb 2012 (Old Town 22314), a drop of almost 56 percent to LY. In fact, we’ve seen a 17 percent drop in overall average seller monetary concessions from January 2012 to month ending February 2012 in all of Alexandria. I surmise this might be the trend going forward however, there are some steps that you and your realtor can take to mitigate concessions from the very beginning.

Your realtor should know precisely what the average monetary concessions and the trends of these concessions were over the past several months so you know what to expect. Secondly, do everything you can to eliminate the buyer asking for concessions by:

1. Pricing your home right-the key element that will eliminate almost all need for concessions.

2. Repair anything in the home you know needs attention-even the little details.

3. Do the basics well-paint, clean, de-clutter while paying close attention to areas that really have an impact i.e.: bathrooms and kitchens. Don’t forget the curb appeal!

4. Consider offering a home warranty-some realtors may even pay for these as part of their marketing. They’re a great way to put a buyers mind at ease and coverage can begin while you’re still in the home!

5. Consider having a home inspection done before putting the house on the market-often any repairs that may be discovered are much less expensive than finding out about them when the buyer does the home inspection.

6. Have a prepared strategy with your realtor about responding to concessions with price and concession ratios.

In the coming months, we may even see specific new regulation on FHA loans that decrease the amount of seller concessions that a buyer may currently get for FHA loans-6 percent today, with talks of it being cut in half in the very near future. All of this points to the possible end of the “buyer” dynasty over the past several years and the re-emergence of the seller in the game of real estate!

Thinking about selling your home, let us show you the benefit of using “The Selling Edge” to market and sell your home!

FHA Home Loans: Changes You Need To Know About

FHA loans, introduced during the Great Depression, are a type of federal assistance and have historically enabled lower income Americans to borrow money for a home that they otherwise would not be able to afford. Now, FHA primarily serves people who do not have the cash for a down payment on a conventional loan. (FHA requires only a 3.5 percent down-payment for borrowers who meet the credit criteria.) It also appeals to folks with a few dings on their credit history as it is more forgiving of bankruptcy and foreclosure than conventional mortgage programs.

In 2012 year to date, FHA loans account for 17 percent of all home purchases in Alexandria.

Anyone considering a home purchase (or sale) should be aware of several changes to FHA loan requirements. Many changes are now in effect and more are scheduled to take effect soon. These important changes in FHA rules affect not only the cost of FHA financing, but also how an FHA loan can be applied for and approved.

“It’s going to make fewer people qualify” for the loans, said Michael Moskowitz, the president of Equity Now in New York. “It’s the equivalent of a quarter-point increase in interest.”

In its announcement, the FHA said the upfront PMI will increase from 1 percent of the loan amount to 1.75 percent of the loan amount. In addition, its annual mortgage insurance premium will increase by 0.10 of a percentage point for loans under $625,500, which would now cost 1.25 percent of the loan amount, up from 1.15 percent. The increase will amount to an extra $500 for every $100,000 borrowed. For comparison purposes, if a borrower purchasers a $650,000 home, the PMI increase will amount to an additional $191 per month in annual PMI alone.

There have been many recent proposals to change the limit for seller concessions on an FHA insured loan. Currently, a seller concession of 6 percent is still allowed.  The Federal Housing Administration is revising last year’s proposal for limiting seller concessions related to single-family residential mortgages it insures and is accepting comments from the public until March 26. To read more about the proposed changes, see the Federal Register.

Finally, the most important change for sellers and buyers to understand is the higher loan limit. New FHA loan limits are in some cases higher than the loan limits set by Fannie Mae and Freddie Mac. The FHA publishes a list of the loan limits to help borrowers understand how much potential borrowing power they may have in their area, assuming that they qualify for the loan.

For calendar year 2012, the maximum FHA loan remains at $729,750 in the highest cost cities and counties of the contiguous U.S and this includes most counties in Northern Virginia. Conventional loans, or jumbo loans, have a limit of $625,500.

Although the increase takes effect April 9, home buyers who are currently under contract can have a case number assigned to have the previous PMI rate applied.  Borrowers with any questions can call the FHA assistance center at 1-800-CALLFHA.

Here is a great video with the details.

Weather is here, and the market is beautiful!

Weather is here, and the market is beautiful!

This crazy late winter weather has sparked an early spring buying spree in our local housing market. Have to love that!  People are out running, biking, golfing, shopping and yes, looking at homes-not only looking but buying! The weather has certainly played a critical part in the strong housing activity we‘ve seen in the first two months of this year. So strong in fact that you will find most realtors complaining about the “lack of inventory” to sell. Buyer confidence is back in a big way and we are seeing this with buyer turn out in the open houses (great weather) and more importantly in the sale of homes in Old Town and the surrounding communities. Seems like buyers have awakened from their proverbial “funk” and are beginning to open their wallets in a big way.  Multiple offers on properties and significantly shorter selling times are just one aspect demonstrating the strength of our market. Slowly rising home prices, continuing economic improvement and healthy housing forecasts are driving buyers into the market who may now see the market “at the bottom” and want to get in before it costs them more. 

 All of these factors are turning this late winter market into what could be a bountiful and auspicious spring market.  As an indication of how strong the market is, the numbers say it all. Sold and pending contract numbers from 1/1/2012-2/28/2012 vs the same time frame in 2011 are as follows.

 Old Town Alexandria:

22314, 106 vs 93 up 12.3%.*

Ft Hunt areas:

22307, 52 vs 27, up 48%.

22308, 28 vs 13, up 54%.

22309, 95 vs 56 up 41%.

As you can see, we are on a spectacular pace and I predict it will get even “hotter” during the true spring selling season. As buyers continue to foray into the marketplace, sellers really need to take advantage of the tight inventory levels and pent up demand to profit from the current day market. So..the message is clear-Seller’s quit hibernating and get that home on the market today! You could be sipping cold drinks on a new patio this summer (or spring?)

*Numbers are in units sold and reflect both sold and pending contracts for stated time frames. All inventory numbers are Jan numbers, feb numbers not available as of this date.