Thursday, March 30, 2006

Picking the Right Time to Buy

The pundits are currently having a field day, speculating on whether we are in a buyer’s market, a seller’s market, or seeing a period of transition. This presents puzzlement to anyone contemplating the purchase of a home. Activity reports and trend predictions are as abundant these days as roadside litter, and only slightly more useful to prospective homeowners, to whom we offer the following counsel:

The truth is that the proper time to buy is ANY time when your “DNA” is right.

That’s regardless of what the experts say, particularly the harbingers of impending turndowns or stagnations. (Many doom-shouters predict four or more major market slumps for every one that actually comes to pass.).

Those last three words, incidentally, are significant ones, because all market changes literally come to pass; they never come to stay indefinitely. If you haven’t lived through these phenomena in the past, just ask someone who has.

Given the fact that real estate historically “goes up” in the long run, even those buyers who find that they’ve overpaid for a home need only wait for the price tide to rise in order to refloat their economic boat. Meanwhile, chances are good that the “bottom fisherman” who held off in anticipation of an elusive bargain almost certainly missed opportunities to own a desirable home and may later have to settle for something less and/or pay even more.

About that DNA reference: It is one of those acronyms (home-made in this case) that are so popular these days, but it’s in no way related to the crime show plots so prevalent on the TV screen. Rather, it points to three elements that, when they are present, not only suggest that a home purchase is appropriate, but mandate immediate action – notwithstanding negative news from the pundits:
  • The “D” stands for desire --- what you and your family really want in terms of lifestyle. A home is more than just an acquisition of land and building materials. It’s also more than just where your family lives. It is HOW you live as well. This sets homes apart from other forms of investment, wherein the price paid may be a paramount consideration. The “desire to acquire” a new lifestyle must be a major force in the purchasing procedure, and if it is present, it should be given the highest priority. Failing to do so will invite later regrets, which are much harder to live with than, perhaps, slightly elevated mortgage payments.
  • “N” means that the home must satisfy practical needs --- such as space, safety, community services, schools and creature comforts, including a reasonable degree of luxury. Don’t discount pride of ownership in this category! Human nature being what it is, when the desire is strong enough, needs will be either manufactured, rationalized or both, but the practical side should always be recognized.
  • “A” stands for an ability to pay for the subject property. Regardless of how passionately a home is desired or how badly needed, unless the price and terms are manageable, the transaction is simply not doable. That said, and getting back to an earlier comment, when the home is wanted with sufficient level of intensity, the budget will be s-t-r-e-t-c-h-e-d to the absolute limit. (A cautionary note: The “A” factor should be explored in depth before the actual house-hunting begins; do this to avoid the pain of satisfying both desire and need, only to find that the dream is beyond reach.)
If, when, and as soon as all three DNA elements have been identified, the time to buy is always --- that is to say without exception --- NOW!

Those who are persuaded by the pundits to “wait an see what happens” are in imminent danger of joining the forlorn (and crowded) ranks of those who now observe present prices with dismay, ruefully commenting, “why, I remember when I could have bought those places for (whatever $), or even less!” (Ah, but they DIDN’T --- and there’s the point!)

If you find yourself on the fence, be mindful of a genuine American pundit (and poet) names John Greenleaf Whittier, who wrote: “Of all sad words of tongue or pen, the saddest are these: “it might have been.”

Thinking about a change? Check out your “DNA,” then go for it!

Feeling Nosy about DC? VA? MD?

Ok, I know you're probably not planning on moving this very second, but here's this week's list of interesting-looking listings that have just come on the market. Mind you, they may not actually be my personal listings --- just intriguing properties I've come across that week.
If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!)

Saturday, March 25, 2006

Mortgage rate update

  • Mortgage bond prices fell last week pushing interest rates higher. Traders remained concerned about possible future Fed rate hikes in response to the expanding economy and inflationary pressures. However, the weaker than expected new home sales data Friday helped alleviate some of those fears and helped mortgage bonds recover a portion of the losses seen earlier in the week.
  • For the week, interest rates on government and conventional loans rose about 1/8 of a discount point.
  • The 2-day Fed meeting Monday and Tuesday will be the most important event this week. Foreign demand for the Treasury auctions, income, outlays, consumer sentiment, and factory orders data will also be important.
  • The United States central bank, the Federal Reserve, coordinates the borrowing and lending activities of federally chartered banks. The principal reason the Federal Reserve was created was to reduce severe financial crises. One way of accomplishing this goal is to control the amount of money that flows through the economy. By manipulating the US money supply, the Fed influences inflation, unemployment, and the level of US economic activity. The Fed has a variety of tools that it uses to control the money supply, but its chief policy tool is the manipulation of short-term interest rates.
  • The Federal Reserve can adjust two distinct short-term interest rates. The discount rate is the interest rate which banks pay the Fed for primarily overnight loans. Despite its name, the Fed funds rate is the rate banks pay to borrow from other banks. The Federal Reserve has direct control over the level of short-term interest rates, the Fed’s influence over longer-term interest rates is less certain.
  • The Fed is expected to raise rates again this week. Rates have gradually pushed higher over the past few months.

Now is a great time to take advantage of rates at the current levels and to protect against future rate increases.

Connie Echeverria, Loan Officer
Prosperity Mortgage Company
M4049-011
4400 Jenifer St., NW
Washington, DC 20015
202.364.1300 x6061 Office
202.285.3937 Mobile
202.966.4632 Confidential Fax
866.359.7205 Confidential eFax
connie.echeverria@wellsfargo.com

Thursday, March 23, 2006

Feeling Nosy about DC? VA? MD?

Ok, I know you're probably not planning on moving this very second, but here's this week's list of interesting-looking listings that have just come on the market. Mind you, they may not actually be my personal listings --- just intriguing properties I've come across that week.

If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!)

Thursday, March 16, 2006

Feeling Nosy about DC? VA? MD?

Ok, I know you're probably not planning on moving this very second, but here's this week's list of interesting-looking listings that have just come on the market. Mind you, they may not actually be my personal listings --- just intriguing properties I've come across that week.
If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!)

Wednesday, March 15, 2006

What's the deal with 13 SEER?

A nationwide Federal mandate recently changed the current Seasonal Energy Efficiency Rating (SEER) from 10 to 13 effective January 23, 2006.

Huh? What does that mean?

Well, SEER measures the minimum energy efficiency level for central air-conditioning systems --- similar to the miles-per-gallon rating for cars. The more energy efficient the air conditioning equipment, the higher the SEER rating. This legislative change is intended to result in a 30% increase in energy efficiency for air conditioners and heat pumps, hopefully resulting in cleaner air and environment.

OK. So what.

After January 23, 2006, U.S. manufacturers may only produce air conditioners and heat pumps units with a minimum 13 SEER rating. Units that are less than 13 SEER can still be installed ... that is, until inventories have been depleted.

Some pertinent details for consumers:

  • 13 SEER units will be LARGER and MORE EXPENSIVE. Consumer costs will be HIGHER for modifications, changes, upgrades, and labor.
  • Current parts (i.e. the condenser) may be INCOMPATIBLE with 13 SEER units, therefore requiring the entire unit be UPGRADED.
  • Coils are 3-4 inches taller. This may REQUIRE ADDITIONAL SPACE such as enlarging the current area or even moving the unit to a different area of the home.
  • Condenser units are larger and may require larger concrete pads or roof stacks.
  • 40% MORE FREON is required to operate a 13 SEER unit. Current freon lines may be too small and may have to be upgraded.

What this all means for real estate agents?

  • Real estate agents should prepare their sellers and buyers by encouraging them to have their existing units checked prior to heating season and air conditioning season.
  • Even during the winter months a licensed HVAC technician can determine the condition of the unit; promote this inspection in addition to a regular home inspection.
  • If the unit is "borderline", or can not be checked adequately, consider suggesting that buyers escrow funds for possible replacement of unit.
  • The value of coverage for your clients becomes more evident! Strongly encourage putting a home warranty policy on the home to help defray the increased costs associated with the 13 SEER mandate.
  • It is imperative to note that --- as is standard in the industry --- most modification work due to code non-compliance or changes in equipment size that is necessary as a result of the new standards will continue to be at the home owner's expense.

Additional information can be found at the Department of Energy's website.

2006 Real Estate Forecast

From Universal Settlements, this forecast for the local real estate market ...

Experts have differing opinions regarding the 2006 Real Estate Environment. While some see a significant slow down in the market due to rising interest rates and other market conditions, others, such as David Lereah, the National Association of Realtors chief economist, suggest that, "the slow down amounts to a tapping of the brakes on a hot market," and that conditions will remain favorable for housing, albeit not at the torrid pace of the last couple of years.

Freddie Mac is predicting that fixed-rate mortgages and i-year adjustable rate mortgages will average around 6.5% and 5.5% respectively in 2006. While housing starts and total home sales are expected to decline somewhat compared to the past year, both will be at a very healthy pace again in 2006, but at a more normal and balanced rate than in the previous few years. Hopefully, Sellers will adjust their expectations for double digit increases in value, thus encouraging Buyers to continue to purchase at a historically high pace.

With the continuing aging of the Baby Boom Generation, it is expected that the purchase of second homes and retirement homes will continue to be strong. While some experts have expressed concern about possible decrease in property values in some of the hotter markets such as Las Vegas, Miami and many California cities; others, such as those at Merrill Lynch, feel that most of those markets will, in fact, not experience price or volume declines due to factors such as migration, limits on supply and job growth. The Washington, D.C. area, with its unique set of job, economic and demographic factors, appears to be positioned for another positive year.

Overall, real estate should continue to be strong in 2006, but returning to more normal market conditions, which should benefit Buyers.

Tuesday, March 14, 2006

Zillow.com: All the science of pricing ... but little of the art

Within the last few weeks, several of my former clients sent me links to Zillow.com, a new website that purports to provide "instant valuations and data for 60,000,000+ homes."

I wondered how accurate these estimates (or "Zestimates") could be. I did a quick test using my current DC address. No luck. When I clicked further on my search results, I got the following message, "County transactional data for this home is insufficient so we cannot calculate a Zestimate." I tried another few DC addresses. Turns out, Zillow doesn't have data on recent sales for any addresses in DC.

If you live in DC, Zillow is useless.

I then did a few random searches for properties in Maryland and Virginia and had better luck. But I wanted to try a more scientific approach at ascertaining the accuracy of the data that Zillow was spitting out, so I did a quick search in the MLS for any property in Montgomery County, Arlington County, Alexandria City, and Fairfax County that had settled in the last 48 hours. I then compared the original list price, the final sales price (less any seller contribution), and the Zestimate that Zillow produced for the same addresses. The results are in the chart below (click on the chart for a more readable version):



You'll see that in some instances, Zillow was uncannily accurate. In others, it was way off base. Additionally, in some cases (noted in the chart above by an asterisk in the Zestimate column), Zillow either couldn't locate the property, or couldn't produce a Zestimate at all.

My sense is that in newer neighborhoods where many of the homes were constructed at around the same time and are of similar size, style, and amenities, Zillow will be able to produce a Zestimate that is in line with the actual sales price a seller could expect to realize. Likewise, in neighborhoods where properties were built at different times and have different styles and features (or have been updated at different times), Zillow will have a more difficult time producing an accurate Zestimate.

But guess what. Those issues are the exact same issues that actual human real estate agents must contend with. However, a good real estate agent will have the benefit of being able to see the other listings on the market, know the local pricing customs and strategies, and understand the mindset of the prospective buyers for a particular property.

In the end, any property is worth ONLY what a real, flesh-and-blood purchaser is willing to pay. Period. My advice: if you are looking to buy or sell a house, you may want to try Zillow for fun, but don't necessarily bank on the estimates it provides.

Meanwhile, REALTORS should be prepared to respond to valuation questions from buyers and sellers who have first been to the Zillow site and have their own idea of a property's worth. REALTORS may find themselves in the position, for example, of having to explain why Zillow's valuation missed the mark.

Good REALTORS should have no problem with that.

Montgomery County Predatory Lending Law Suspended

On March 8, Montgomery County's Predatory Lending Law was scheduled to go into effect. As a result many lending organizations in the area declared that they would limit their lending in the county. On March 7, a Circuit Court Judge granted a 12-day stay to keep the law from going into effect. Several lending companies have filed a lawsuit asking that the law be repealed and a trial hearing date has been set for July 6 of this year. Credit Suisse has already announced that it will attempt to close all impacted loans in Montgomery County by July 6, a trend that is expected to continue with other lending institutions.

Thursday, March 09, 2006

Feeling Nosy about DC? VA? MD?

Ok, I know you're probably not planning on moving this very second, but here's this week's list of interesting-looking listings that have just come on the market. Mind you, they may not actually be my personal listings --- just intriguing properties I've come across that week.

If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!)

Tuesday, March 07, 2006

You can appeal your increased property tax assessment

If you find yourself as surprised at your most recent property tax assessment as the folks in this recent Washington Post article ("Property Tax Assessments in Northern Virginia"), there may be hope.

Maryland assessment notices go out to one-third of all property owners, on December 30. Those owners have until Feb. 14 to appeal with the local tax assessor's office. If the local office determines the assessment was in error, the homeowner will get a revised assessment about a month later. Homeowners then get 30 days to appeal the revised assessment to county property tax appeals boards, made up of three local residents and an alternate appointed by the governor for five-year terms. Those who are still not satisfied have another month to appeal to the Maryland Tax Court.

In Virginia, homeowners can appeal to either the local assessment office or the local Board of Equalization, groups appointed by officials in each county. The boards generally have later deadlines for appeals than the local assessors. If not satisfied, the homeowner can go to the Circuit Court.

In the District, homeowners appeal first to the assessor assigned to the property. If the assessor's decision does not satisfy the owner, he or she has 30 days from the date of notice of final determination from the first level to appeal to the Board of Real Property Assessment and Appeals. A property owner can then appeal to the District's Superior Court.

Below you'll find instructions on how to appeal a property tax assessment:

If your property's been on the market 90 days, you're gonna get low offers.

OK. I don't want to be mean or anything, but sometimes it's difficult to be civil. This past weekend, I wrote an offer on a property for some really nice buyers of mine. The property, a renovation in an up-and-coming neighborhood in the District, had been on the market for nearly three months. The buyers' offer was roughly 10% below the listing price. I prepared the offer and delivered it to the listing agent, who presented it to the seller. Shortly afterwards, the listing agent called me to tell me that the seller was rejecting the offer without making a counteroffer. The seller was "disgusted," DISGUSTED by my clients' "low-ball" offer.

Help me out here.

Your property is on the market almost three months, and you're DISGUSTED by the FIRST offer you receive? Huh? OK, so it wasn't a full-price offer. It was an offer ... your FIRST offer in three months. C'mon. A buyer takes the time (three or four hours, minimum) to get preapproved for a loan, preview your property (twice), and craft and submit an offer in good faith. Make a counteroffer, for cryin' out loud. If it's not gonna work, it's not gonna work ... but at least you'll have closed the loop in a courteous, professional way.

Perhaps another three months will bring this seller in line with reality. Perhaps.

Do you own a rental unit in Maryland? Read on...

Rental property owners across Maryland have passed a crucial deadline for proper leasing of their units built prior to 1950. The Maryland Department of the Environment (MDE) reminds rental property owners that as of February 24, 2006, all units constructed before 1950 must have had at least one lead hazard risk reduction treatment. Failure to comply with this law may result in a fine of $250 per day. Although the February 24, 2006 deadline --- known as the 100% Rule --- is part of Maryland’s lead law that has been in effect for the last decade, Governor Ehrlich’s initiative passed into law last year added the important measure of setting the standard for initiating intervention when a blood lead level of 10 micrograms per deciliter is found. Mandatory remediation of lead hazards in the home upon a single blood lead level test of 10 micrograms per deciliter is the most protective level in the nation, and --- along with implementation of the 100% Rule --- is intended to reduce the incidence of childhood lead poisoning while maintaining an acceptable stock of affordable housing. For more information on Maryland’s Lead Poisoning Prevention Program or the February 24th deadline, call the Lead Poisoning Prevention Program at (410) 537-3942.

Thursday, March 02, 2006

Feeling Nosy about DC? VA? MD?

Ok, I know you're probably not planning on moving this very second, but here's this week's list of interesting-looking listings that have just come on the market. Mind you, they may not actually be my personal listings --- just intriguing properties I've come across that week.
If you know someone who might be interested in this list, please forward it on to him or her. And if there's a listing that you're curious about yourself, just let me know ... and I'll show it to you ... just for the hell of it ... no obligation ... *I promise*. Really. (One of the perks of being the friend of a real estate agent ought to be that you get to freely snoop around other peoples' homes!)