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Post-Easter Inventory Spike
Friday, 05 April 2013 19:57

The past weeks and months have been defined by low inventory; all the moreso when juxtaposed against the high level of demand in the market.  Not surprisingly, last week was a fairly low volume week as far as new listings went.  Easter being on a Sunday sets up to shift focus away from the usual flurry of open houses, and wiser agents tend to avoid the gamble of listing in advance of such holidays.

Going into this weekend however, the difference is night and day, with a huge spike in listings across the entire region.  Certain buildings and neighborhoods where a single listing may come on every now and again are seeing multiple listings over just the last few days.  What will be most interesting to see is a) whether this inventory gets soaked up as quickly as has been the case through much of 2013, b) whether this represents the beginning of a prolonged wave of new inventory, or c) whether it is a one-off event tied more to sellers that had been waiting for a certain moment to list, rather than a more general increase in the number of interested sellers.

Time will tell!  But for buyers nervous about a bleak future of rising prices and low inventory, this weekend may represent a rare window of increased options.

President's Day Weekend: The Unofficial Start to Spring
Tuesday, 19 February 2013 00:00

While the market has been quite active since the start of the New Year, it seems that this past President's Day weekend signified the unofficial launch of the Spring buying season.  Listings saw a modest bump in volumes... or at least that seemed to be the case in those neighborhoods in which I am currently working with clients.  Yet for whatever new inventory those listings brought to the market, it was far outstripped by the crush of new buyers entering the scene.

For attractively priced and attractively staged homes, multiple offers should well be expected, and planned for accordingly.  When putting in an offer in on newly listed properties, buyers looking to utilize FHA or VA loan programs may find their contracts passed over in favor of buyers using conventional financing or paying with cash.  The key reason for this is that for both of these programs, the additional emphasis and restrictions (and buyer protections) associated with the appraisal process can add an element of risk for the seller that they would rather just avoid entirely.  For buyers able to pay cash that might simply rather finance, consider making an all cash offer, settling in cash, and then immediately refinancing into a mortgage; your offer will have the strength and benefits associated with cash, and you will be able to take advantage of the still-low interest rates almost immediately after settlement.

Although without doubt it will usually be the case that exceptional properties go quickly, buyers playing a weaker financial hand may find their most viable options to be those properties that have been on the market for a bit of time.  Not all such homes will be dilapidated junk - homes that were priced too high at the outset but have had a price reduction or two, homes that were under contract and have since fallen out, and/or homes that were recently re-listed can all provide for "under the radar" options that might avoid the frenzy associated with newly listed homes.

Region Experiencing Inventory Crunch
Monday, 04 February 2013 00:00

For anyone getting ready to commence their home search in the greater DC area, prepare to experience firsthand what those already engaged in their searches have come to know: inventories are extremely tight (historically so), and you can expect a long, hard slog in the search for your dream home.  Where for several years in the aftermath of the financial crises the measure of an agent was, "how much off of the list price can you negotiate?", today it is which agent will be able to get you into that home when you are competing against five other offers.  And to be sure, price isn't everything - a skilled and experienced agent will help you navigate and structure for maximum attractiveness, while trying to protect your contingency inclusions to the greatest extent possible.  I am happy to say that I have helped several clients in coming out on top in a number of these situations since January, but I could not have guessed how strongly (or early) this dynamic would have taken hold this year.

Whatever news or data you read online or in a newspaper, remember it is all backward-looking, usually by at least a month.  The market is heating up beyond anything the journalists or data trackers will be able to put in your hand in a timely manner, and it is wise to go into this market expecting as much.

As for sellers with attractive properties and the rare ability to turn on a dime, this may be the perfect window of opportunity to act on.  Marketing is still crucially important in generating that initial spike in buzz that leads to multiple offers; the difference might be a sale for list price in five days vs a sale for $20K over in the same period.  Or more importantly, the difference between a sale in a week vs slipping off into multi-month limbo.  (I will note for a moment that multiple months was not considered limbo at all just a few short years ago... it speaks to where things are now.)

For many sellers, however - primarily those looking to buy themselves and move into new properties in the region - this market will prove to be as frustrating and mercurial as it is for the would-be buyers of their home.

FHA Mortgage Insurance Premiums Set to Rise
Friday, 01 February 2013 11:22

Yesterday, the Department of Housing and Urban Development announced that effective April 1st, loan applicants for FHA mortgages will be facing higher mortgage insurance premium rates (MIP) on new loans issued, as well as longer durations for how long they may be paying those premiums.

To refresh on two topics, mortgage insurance is an additional monthly expense associated with your mortgage, usually coming into play when a homeowner puts less than 20% down; an FHA loan is a special loan program which allows for putting as little as 3.5% down in order to purchase a home.  When conventional loans carry mortgage insurance (known as PMI when it relates to such loans), typically the borrower is able to remove the expense entirely once their equity in the home crosses the 20% threshold.  Under the old/current FHA MIP rules, most borrowers - those taking advantage of higher loan-to-value ratios over 30 year loan terms - would be able to remove the mortgage insurance expense after holding the loan for a minimum of five years and reaching 22% equity in their home.  With the upcoming change in rules, however, these same borrowers would be committed to paying MIP for the entire life of the loan.

In addition, the amount they pay will be increased slightly also.  Last year, the MIP rate for loans with loan-to-value ratios over 95% increased to 1.25% - this year they will be creeping up another ten basis points to 1.35%.  Using last years FHA loan example, this would mean that monthly MIP expenses for a loan on a $500,000 home purchased for 3.5% down home would be going from ~$503 per month, to ~$543 per month.  Recall that upfront FHA mortgage premiums increased last year as well.

At the end of the day the FHA loan program remains a great vehicle for qualified buyers who are looking to purchase a home for little money down.  Increasingly though, my advice would be to explore low-percentage down conventional loans, which can offer as little as 5% down, and in some cases, 100% financing.  Interest rates themselves will tend to be slightly higher right now with conventional loans vs FHA, but with those spreads narrowing and the ancillary costs of FHA loans continuing to increase, it is worth cross-shopping what lenders can offer you.  The possible exception in certain circumstances might be the purchase of condos that are FHA approved, where conventional financing might prove prohibitive and/or difficult to obtain with low down payments.

The full HUD document pertaining to the upcoming FHA MIP changes is viewable here.

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Coldwell Banker Residential Brokerage
4500 Old Dominion Dr, Arlington VA 22207
Phone: (703) 524-2100 Fax: (703) 524-9014