Feeling Nosy about DC? MD? VA?

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 this week.

Feeling nosy about the District of Columbia?
Feeling nosy about Virginia?
Feeling nosy about Maryland?

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!)

Housing: What the Experts See Ahead

An economist, consultant, academic, and fund manager try to locate the bottom of the market:

By Peter Carbonara and Lauren Young

Real Estate December 11, 2008

Everyone is worried about the real estate market, whether it's because they want to sell, buy, or want a sense of whether their homes will regain value. As proposals to help the housing market are debated in Washington, BusinessWeek turned to leading real estate experts for their reading of where housing is headed, and whether the proposals will help stabilize the battered residential sector.

JOHN BURNS
President, John Burns Real Estate Consulting in Irvine, Calif., which advises large builders and investors

The Outlook: No matter what sort of real estate package comes out of D.C., the woes of the broader economy will keep housing prices weak for some time, says Burns: "First we need to stabilize the banking system, and I don't think that has completely happened." He thinks banking problems are "worse than most people do—problems in commercial real estate, credit cards, and auto loans. Those are going to take at least two to three years to work out."

The Good News: For one, Burns says, "the affordability problem is no longer a problem." Also, housing inventory levels have been declining. For those with cash and a long-term horizon, he predicts 2009 will be an excellent year to buy. "The government is going to keep interest rates low, there will be various kinds of government incentives, and very low prices."

Favorite Market: Washington, D.C., "because the job market will remain strong and the affordability issue has essentially disappeared." San Diego and Denver are on his radar screen, though he expects them to have a tough 2009. "In all markets, the best school districts that are close to work will almost certainly recover first," he adds.

Washington Wish List: Burns wants government to encourage "responsible home buying"—buying by people with a down payment of 20% to 30% who intend to own for at least five years. He thinks legislation mandating loan modification is likely, and he's a fan of a proposal to double the mortgage interest deduction.

THOMAS LAWLER
Economist and founder, Lawler Economic & Housing Consulting in Vienna, Va.

The Outlook: Lawler says he's seen prices begin to stabilize in some places—Sacramento, for one, and even some areas outside hard-hit Las Vegas. He believes that if Congress and President-elect Obama launch a big economic stimulus plan on Day One and homebuilders bring no new inventory onto the market for six months or so, the national housing market could find its bottom by the third quarter of 2009.

Washington Wish List: Lawler wants "an $800 billion to $900 billion stimulus package, passed early in the year, that would put about $6,000 into the hands of every taxpayer and let them decide what to do with it—buy houses or cars or reduce debt."

MICHAEL FEDER
President and CEO, Radar Logic, which tracks residential prices in 25 major U.S. metropolitan markets

The Outlook: Feder doesn't have a crystal ball, but the RPX futures market, based on Radar Logic's residential real estate data, may come close. Increased buying of distressed homes on the West Coast signals some kind of stability, particularly in Southern California. "It doesn't mean we're at the bottom or in recovery—it means buyers have found prices that are attractive," Feder says. But California was one of the first states to declare a moratorium on foreclosures, so if that is lifted and foreclosures snowball, "price firming" could be reversed.

One-year forward pricing contracts—traders bet on the health of housing markets using derivatives contracts based on Radar Logic data—show home values will be 5% to 10% below where they are now, depending on the market. "In some cases residential real estate will be recovering; in some cases we'll be just beginning to stabilize," he says. Residential futures contracts show a recovery first on the West Coast in late 2009 and 2010, followed by stabilization in the Midwest. In New York City, "weakness in the financial sector is so important that the economy there will lag longer than other markets."

Washington Wish List: "I'd love to see our regulators and leaders find ways to give consumers confidence that their homes are worth something, as opposed to making it palatable to carry a mortgage," says Feder. "I don't think [lower mortgage rates] alone are the Holy Grail."

SAM LIEBER
CEO of Alpine Woods Capital Investors

The Outlook: Lieber thinks real estate can go one of two ways. The first he calls the "Doomsday Death Spiral," where more and more people get laid off and over a period of time won't be able to make mortgage payments. "They have to put their homes on the market and then drop prices because they have to sell their homes. Once they're renting, they tighten their belts and buy less, so consumption stays low, leading to more layoffs."

Lieber thinks the "Motivational Scenario" is more plausible because it's sparked by a likely drop in rates. Qualified first-time buyers and people who want to refinance put a floor under housing prices. "Everyone on the sidelines jumps in," he says. "The bad loans on the books of banks get cleaned up, and home prices rise. Banking stocks rise, so the Treasury [which has stakes in the banks] makes money. The American people make money, and banks start lending."

Lower-Rate Logic: Lieber says mortgage rates will drop. Traditionally, the gap between the 10-year Treasury bond and 30-year mortgage rates is 1.5 percentage points. Now it's 2.75 percentage points. How low will rates go? "A 30-year fixed rate of 4.5% for a mortgage is likely, and 4.25% is possible," he says.

Carbonara is a senior writer for BusinessWeek. Young is a Personal Business editor for BusinessWeek.

Feeling Nosy about DC? MD? VA?

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 this week.

Feeling nosy about the District of Columbia?
Feeling nosy about Virginia?
Feeling nosy about Maryland?

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!)

David Stevens Sits Down with Washington Business Journal

Recently Long and Foster appointed Dave Stevens as the new president and COO for the company. Dave sat down with the Washington Business Journal for an interesting interview about our brokerage and the real estate market that I wanted to share with our clients. Here it is:

Friday, December 5, 2008
David Stevens waits for the bounce
Washington Business Journal - by Mara Lee Staff Reporter

This is not a good time to make a living off of real estate. David Stevens, who recently rose to president and chief operating officer of the region’s dominant residential real estate company, The Long & Foster Cos., talked frankly about how we got here and what’s happening now. And — with trepidation — he takes a stab at predicting the future.

How many agents does Long & Foster have in the region, and how has that shrunk since 2006? Something in the range of 10,000 agents. Since ’06, we’ve shrunk a little over 5 percent. What happens when you’re going through a market correction like this is some agents [who] can’t be successful at it, give up their licenses and go do something else.

With Realtors’ incomes declining, how does that affect Long & Foster’s profits? Clearly our revenue is down. This is our 40th anniversary as a company. We’ve never lost money. And this year it’s hard to say how it will exactly finish out.

What’s keeping the market from bouncing back — down payments, job anxiety, inability to sell? Yes. In certain markets, where average income standards are lower, the down payment has become an issue. This recession has spread well beyond housing. Our opinion here is it’s a consumer confidence crisis, first and foremost. Second [is] credit availability to homebuyers. Savings is actually third. Even those people who have down payments are waiting on the sidelines. We go on two core fundamentals. Anybody who owns a home wants a nicer one. And anybody who doesn’t have a home wants a home. And the only thing holding them back right now is confidence — and some credit issues. And not everybody should have a home. Heck, we learned that clearly through the last cycle. But there’s a gap right now of people who could be buying and should be buying.

When do you think prices will stop falling in Prince William and Loudoun counties? Those were the first markets to correct. Those are the markets where we’re seeing significant increase in unit sales over previous years. They have the most distressed sales, but it also tells you there is an elasticity point where those properties do get purchased. So price matters. And the price levels of those markets have come down. Many of us think those markets are pretty close to stabilizing. We’re seeing sales prices not change much month to month right now. Our data says that the existing inventory is being sold at a faster rate in those markets than it is in closer-in markets.

Do you think mortgage underwriters, brokers, Realtors and consumers share responsibility for the bubble and foreclosure crisis? Yes. There is absolutely no question in my mind having looked at this for decades, I think most consumers did not understand the depths of the terms, particularly around adjustable-rate mortgages. What they didn’t understand were the subprime 2/28s. They didn’t understand the neg-am ARMs. And that disclosure process was too complex. [A 2/28 mortgage is an adjustable-rate mortgage with a 30-year term and monthly payments that change after two years. Negative-amortization mortgages allow buyers to pay nothing toward the principal, not even enough to cover the interest, so the balance grows rather than shrinks.] And the question is, who’s at fault? Caveat emptor. Buyer beware. Buyers thought they could never lose; it was their way to make their riches. We saw books written on it. We saw national speakers going out talking about how to get rich buying real estate. And investors, even the most sophisticated investors ... they just didn’t build into their forecast models enough default risk. Buyers should have known they were stretched. Lenders should not have created terms that allowed you to finance 100 percent of the value of the property, particularly with stated income, and qualify them [based] on starting rates on ARMs. Real estate salespeople shouldn’t have gotten people overly consumed with buying one, two, three, four, five properties because you can make more money on more than just the house you have.

Zillow reported that 38 percent of sales in the metro area in the last quarter were lower than the previous purchase price. How does a Realtor manage sellers’ expectations? It’s very tough. The challenge is showing the seller what their home is worth. Some agents are encouraging the seller to get a real appraisal on the home before they put it on the market to give them a reality check.

How many are doing that? Ten percent or less at this point. It’s something we’re recommending. I highly encourage it. In fact, I’m looking to buy a home right now, and I’m getting an appraisal on a home myself because it’s really hard to tell what the real home value should be.

Are you selling too? I will at some point. But not at the same time.

How many of your buyers use Long & Foster’s subsidiary, Prosperity Mortgage, and what’s your goal for that number? We get approximately one in five of every purchase transactions. That’s up significantly. When I first came here, it was about one out of six or one of out seven transactions. I’d like to see us grow to a third of all sales transactions.

Will the 6 percent real estate commission model still be with us in 10 years? [Laughs.] You can’t buy and sell homes over the Internet. You can see homes you want to buy over the Internet. I don’t think truthfully the 6 percent model will change all that much. We’ve seen discount brokers make their attempts in the market, and they’re having a very difficult time surviving right now. When the Internet first rose, everybody predicted the demise of the 6 percent commission and the full-service brokerage business, and, quite frankly, I’m seeing the opposite.

Feeling Nosy About DC? MD? VA?

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 this week.

Feeling nosy about the District of Columbia?
Feeling nosy about Virginia?
Feeling nosy about Maryland?

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!)

Michael was recently quoted on UrbanTurf.com

Michael was recently quoted on the DC real estate news blog UrbanTurf.com. Here is the article:

Condo Auctions: Where the Deals Are?
November 14, 2008
by Mark Wellborn

This weekend, DC-area residents will have the opportunity to get a $300,000 condo for just below half price.

On Sunday, at the Hilton in Rockville, the remaining condos at The Ashmore in Germantown will be auctioned off. The 400-unit development was built in 2006, and sits about 25 miles northwest of downtown DC. The starting bids for the auctioned units will be $140,000, a dramatic discount from their list prices. The prices they actually sell for, though, is of course based on how high the bidding goes.

The condos have been on the market for months and the developer, Fairfield Residential, has decided to cut its losses and auction off the remaining forty-five units in the development, a sign that builders are willing to resort to extreme measures to get rid of their existing inventory. (The Mercer at Reston Square is auctioning off its remaining inventory on November 23rd.)

The auction will operate rather simply. Those who wish to bid on properties will register, bid on the condo that they want and, if they are the winning bid, close on the condo within a month. The units have been open to the public for the last two weeks and will be open tomorrow, November 15th, from 11 am to 3 pm.

Potential bidders should not be fooled by the $140,000 price tags, though. The developer will only guarantee that 15 units will be sold subject to the minimum bid of $140,000 which means that just one-third of the units have a guaranteed minimum price of $140,000. A “reserve” has been placed on the rest of the units which means that the developer does not have to sell them below a certain price. In other words, even if a property starts out at $140,000, it can have a reserve price of $200,000 which means Fairfield will not sell it below that price. This information is available on the auction’s website.

“Generally what auctions do to lure people in is that they have some units that will be sold with ‘no reserve’,” Michael Dillon of Long and Foster told UrbanTurf. “‘No reserve’ means that a unit can sell for the minimum bid. So, even if a property is valued at $300,000, it will sell if the final bid is $150,000.”

One of the other traps that people fall into at auctions is a combination of getting caught up in their emotions and always feeling like they are getting a good deal.

“Getting the deal means more than just showing up,” Dillon said. “Some people get into an auction situation and they lose their self control. They just want to win, so they keep bidding up. You can’t do that and expect to get a deal.”

To avoid this type of situation, the bidder should make sure that they have their finances in order and have a dollar amount in mind that they will not exceed. While the buyer has a month after the auction to close on the property, he or she does not want to get into a position where they cannot afford their winning bid.

“You have to pay your own closing costs at auctions, as there is no closing assistance,” said Dewita Soeharjono, an agent with Weichert Realtors and author of the Urban Trekker blog. “You should figure this out before you bid and make sure you can you afford it.”

Soeharjono also pointed out that most auctions are just a tool to sell a development’s remaining inventory quickly (the case at this weekend’s auction), so there is no negotiation period between buyer and seller.
“In a typical real estate transaction you negotiate until a price is agreed upon,” she told UrbanTurf. “At an auction, that is not the case.”
While there is no negotiation between the buyer and seller, at many auctions, a lot of negotiating goes on among the bidders.

“It sounds strange but at some auctions, there is almost a compassionate negotiation that goes on,” Dillon said. “There was a small auction for a building in Friendship Heights and a single mother was there indicating that she really needed to get a certain unit at a low price. The other bidders all laid off and let her have it.”