Northern Virginia & Washington, DC, Real Estate Market Update - September 2009

This is the monthly market update I provide to my clients. To be added to the mailing list so that you receive these updates as soon as they are available, please sign up using the box on the right hand side of the blog page.

The market doesn't seem to have slowed down very much this Fall.

There are plenty of buyers playing beat-the-clock, but the big news continues to be the lack of inventory in the greater NoVA area. The lack of homes for sale, primarily spurred by lower prices that are driving sales, is compounded by increasing new construction sales. KB Home has announced it intends to resume building in the DC area after curtailing operations in late 2007, as described in this article. The article notes that Toll Brothers has also started snapping up properties, now that listings for sale have reached their lowest level since January 2006.

Rumors abound about a potential extension of the $8000 tax credit currently scheduled to expire November 30, but no official word yet. Stay tuned. Given our lack of inventory, if the credit gets extended then we better hope that entry-level owners decide to sell or we will have even more frustrated buyers in our area.

On the lending front, FHA may be heading for problems. The agency, which is responsible for many purchase money loans given the current environment, recently announced its cash reserves will drop below its Congressionally mandated level. This sparked a number of program changes, including special appraisal rules, similar to the HVCC that was instituted for conventional loans a few months ago--so buyers and sellers should be prepared for even more appraisal headaches to come!

In other news, here are some good articles I came across this month: 7 New Rules for the First Time Buyer and Credit Scores: What You Need to Know.

As always, please let me know if I can do anything to help you or your friends with your real estate needs.

Northern Virginia Inventory Sees MASSIVE Drops

Update 5/9/09: Looks like I've got some investigating to do - the final MRIS numbers are published (updated graphs now available at my website here - click on the "Market Stats" in the left sidebar) and they aren't even close to the "live" data I ran on the last day of the month. Not sure what's going on -- seriously, how can hundreds of listings be not there on the last day of the month but then appear retroactively 9 days later? I'll look into it and post results here when I get them. The short story is that inventory didn't drop in most cases--just a tiny increase of about 2% over last month for NoVA, for example. Still surprising but not nearly the big story the initial data hinted at. Contracts are up about 12% over last month, so the buyers are definitely biting! Obviously with an increase in contracts disproportional to the slight increase in inventory, it still indicates a shift in the market, just perhaps not that dramatic a shift as originally indicated.

In the meantime, here are some excellent charts detailing real estate inventory levels that illustrate my points and appear to be using the "live" data just as I had.

Original Post:
This. Is. Big. News. Typically in the Spring (from February through June) we see run ups in inventory as sellers prepare their homes for market. The final numbers aren't out just yet, but I think both buyers and sellers are going to be shocked by April's real estate statistics.

Let's take a look at the Arlington numbers I ran from today's MRIS (the consortium that owns our area's multiple listing service.) The spring run up looks like this for January through April: 875 - 925 - 986 --------and 793 for April! What?! That is the lowest number of homes available since February 2007. A 21% DROP in inventory in Arlington?! During SPRING?

And Northern Virginia as a whole: 7545 - 7811 - 8069 ------ and 5435!
A WHOPPING 33% DROP and the lowest number of homes for sale in NoVA since August 2005! Remember August 2005? When buyers were running around bidding things up like crazy because there weren't enough homes to go around?

What's going on?? First, buyers are getting it! Low prices, the lowest interest rates in 50 years, and the $8000 first time buyer tax credit have them out in droves. Just in the past week I had 3 of 4 buyers who submitted offers get outbid on properties in various locations.

To add insult to inventory, potential sellers are waiting to put their homes on the market because they don't want to have to take low offers. Much of the inventory, especially in the suburbs, is "distressed" (foreclosures and short sales) and many are in such poor condition that they will not sell for a very, very long time. So the level of "good" inventory (that is, will realistically sell within the next few months) is even lower than the numbers show. Homeowners who are on the fence about selling don't want to be lumped in with distressed comps, so aren't putting their homes on the market.

Finally, the 'moratorium' on foreclosures in the first quarter contributed to a lack of new distressed inventory coming on the market. But if there's another wave coming, it's not in the pipeline yet: a review of "preforeclosure" filings in Arlington listed just 73 properties, and Fairfax County showed 1000 (a big number, no doubt, but not enough to make up for the 2500 drop in inventory from March to April.)

What are the implications of this?

Buyers: Unless there's a big wave in May, you're going to have a lot less to choose from, especially if you want something that is 'move in ready.' Less inventory means more competition for the 'good' listings -- expect to pay closer to list price for those, and be ready to move quickly when you see one you like. Chances other other people are circling it too. Hope for a big bump in the coming weeks - otherwise it may be a tough road if you're trying to buy before November 30 to take advantage of the tax credit. Typically inventory peaks in June, with another much smaller bump in Sept/Oct.

Get started with your search:
Sign up to attend a free first time home buyer class or search the MLS

Sellers: If you are on the fence about selling, go ahead and get it on the market asap, especially if your home is a good option for a first time buyer. Make sure you put your best foot forward with some sprucing up, staging, multiple photos taken by a professional, a home warranty, and an extensive web presence as part of a comprehensive marketing plan. And it still needs to be priced right, of course. If you're wondering what the comps are for your neighborhood, contact me or visit my sellers resource center.


Source for all data: MRIS as of 5/1/2009. Data deemed accurate but not guaranteed

Washington DC Regional Market Updates

Existing home sales across the nation took a surprise jump in December, but most experts say that trend (nationwide) is unlikely to continue given further economic decline. Moody's, however, is optimistic: claiming that 2009 is the "bottom."

Our local economy and flow of investment dollars continues to outperform the nation's averages.

Forbes recently named DC as one of the best places to buy real estate right now, and the Association of Foreign Investors also named DC as #1 on its list of top global cities for investment.

Where there is money and investment, there are jobs, and where there are jobs, there are people that need homes, whether rental or purchase. Here are some of the headlines this month indicating continued investment in our area.

• Hilton Hotels just "checked in" to Fairfax, bringing investment and jobs with it.
• Northern Virginia is prepping to aggressively go after its share of stimulus dollars with its lengthy list of "shovel ready projects"
• The Montgomery County Council moved another step closer to building the Purple line linking Bethesda and New Carrollton

Ready to start your search for a home in the DC or Northern Virginia area? Consider attending one of my free first time home buyer classes - details are here. Or start searching for homes in the MLS here.

Thinking of selling? Contact me to to discuss the impact these developments might have on your home's value!

December 2008 Market Stats Available

MRIS (the consortium that owns our regional multiple listing service) has published the December 2008 stats, and I've updated graphs at my website (click on links below).

Arlington Market Stats - Arlington continues to post strong numbers. Only 4.91 months of inventory available, and of the homes that sold in December, an amazing 40% sold in under 1 month! Days on market held steady at 70, and average price increased slightly from the prior month.

Northern Virginia Market Stats - Of note here is the 37% increase in sales in December vs November, and an 8% decline in inventory, bringing the months of inventory down to 5.09 (6 months is considered a balanced market.) December 2007 was a 7.3 months inventory level.

DC Market Stats - Average price dropped significantly from prior month and prior year, which perhaps contributed to the amazing 34% increase in sales in December over November. And when it's good, it's good...almost 40% of the homes that sold in December had contracts in under one month.

Montgomery County Market Stats - MoCo continues to be a strong buyer's market, with the average price almost 20% below the same month in 2007. And the buyers responded--sales increased 22% over the prior month.

The big picture: Still a buyer's market in terms of price and selection, but drops in inventory and huge increases in contracts means the buyers are out there, circling, and ready to jump on good properties quickly if necessary.

If you're thinking about listing your home for sale, contact me to discuss how we can make your home one of those that sells in 30 days. Or sign up for a free Selling Your Home class.

If you're a buyer, give me a ring to talk about the stats in the specific neighborhoods you're looking. Or sign up for a free first time home buyer class.

Search the MLS

Buyers May Not WANT Condo Docs for Short Sales & Foreclosures

I was quoted in the Washington Post yesterday for my recommended strategy of NOT asking for condo docs on a foreclosure or short sale.

In the original article here, the author discusses the fact that:

Virginia law requires sellers or their real estate agents to get a presale financial disclosure packet from the association and give it to buyers. Buyers have three days to review the financial disclosures and rules governing life in the association and can back out of the deal if they don't like what they see. In Maryland, buyers have seven days in which to review the documents and cancel the purchase. In the District, buyers are allowed three business days.

The challenge with short sales and foreclosures is that the sellers either can't or won't provide these documents (which come with a charge of several hundred dollars.) This leaves buyers in a tough spot -- they don't know whether there are any problems with the Association's finances, for example, because they never received the packet. Sometimes buyers can pay for the pack themselves, but often Associations won't give them to anyone but a current owner.

BUT, there's an upside to this frustrating situation: Buyers who never receive the packet retain their right to back out at any time up until, and for 3 to 7 days after receiving them (depending on jurisdiction). See my quote here:

Katie Wethman, a real estate agent in McLean, pointed out a way to game the system. "It can be a strategic choice not to ask for the documents," she wrote. "Buyers retain a right of rescission up until, and for three to seven days after, the receipt of the documents. If the buyer is concerned about timing, financing, finding a better deal, or just getting cold feet, they may wish to delay receipt of those documents as long as possible. They may forgo them altogether in an attempt to keep their right to walk away right up until settlement."

So talk to your agent about your situation and whether it makes sense to try to obtain the documents or not...you may come to regret having asked for them.

Scared about taking on a short sale or foreclosure home because of the rehab work involved? Consider purchasing one using an FHA 203(k) loan, described in my blog post here.

Relocation Guide for the Incoming Administration

Welcome to Washington!

No doubt you’re excited about what the next four years holds for both our country as well as your own relocation. Washington, DC, Northern Virginia, and suburban Maryland are fantastic places to live, as you will soon discover. Obviously there are lots of other factors to consider in choosing a new neighborhood: schools, taxes, amenities, and lifestyle just to name a few. There are lots of great places to live in DC, MD and VA. Here are a few other tips to get you started:

1) Decide whether to rent or buy. If you’re looking for rental resources, check out my web page here. But I’d seriously considering buying if your expected time frame for living here is four years or more. Prices are lower than they’ve been in years, interest rates are low, and opportunities abound. Washington, DC, and Arlington were just named two of the top ten places to live in a recession, and the recent bailout is expected to be a boon to our local economy. This area is often pegged to be one of the first to “recover” and prices are expected to rise in the next two years.

If you’re thinking of buying in the District and meet certain income requirements, you’ll be entitled to a $5000 tax credit! This might also be a good opportunity for you to take advantage of the $7500 tax “credit” (really a loan) recently passed as well.

2) Carefully consider your commute time in choosing where to live. Most transferees to our area are shocked by the commute time—it can easily be 30 minutes to go just 3 or 4 miles, so don’t just look at a map and decide “it’s not that far.” This area’s congestion is among the worst in the nation. Our public transportation system is very good though; our subway system (known as Metro) is fantastic, though very expensive to live near. And don’t forget VRE and MARC trains. If you’re willing to commute by rail, you can get a lot more for your housing dollar. Commute times also vary widely based on whether you choose to live in the District proper, Maryland, or Virginia.

3) Get ready for sticker shock. Despite the national downturn in housing, prices in the Washington, DC, area have held up much better than other parts of the country, especially in close-in areas with under-an-hour commute times or along a metro line. For example, a one bedroom condo in North Arlington along the orange line will run you in the high $300s. But there’s some good news: there are definitely some pockets of under-valued homes right now—areas that were hit disproportionately hard by foreclosures and short sales in recent years, and in my opinion are primed for a comeback due to their proximity to public transportation and/or area demographic and employment trends. Keep in mind, though, that foreclosures and short sales, while attractive in terms of pricing, come with a host of other challenges that may be particularly difficult for someone on a tight timeline.

Looking for more info on area schools, government, crime stats, or cultural events? Check out my web page here. There’s an amazing array of activities and events in this area. I send out a list every month as part of my monthly real estate newsletter. (You can sign up on the right hand side of my blog here.)

If you need help with your relocation, please contact me to discuss the local market and your needs. Put my local knowledge, experience, and consultative background to work for you. I'm licensed in Virginia, Maryland and the District of Columbia, and I’d be happy to help you with your real estate needs!

Relocating to the area? Check out our new blog for military PCSing and relocations: www.militarymovetovirginia.com

How will the election and relocating administration staff impact the Washington, DC, area real estate market?

I’m often asked whether the market will pick up after the election, with the incoming administration. Whether the Republicans or Democrats win, a wave of new junior staffers and senior officials will sweep into Washington, DC. My guess is that the impact on the real estate market will be positive—by which I mean positive for sellers--for this reason: people who make a career of politics often don’t leave once they’re here.

What I mean is this: many of the current administration won’t leave, so it’s not a one-for-one swap in residents even with a complete turnover in administration. Some will have fallen in love with the area, some will have kids in schools or other local commitments that they don’t want to give up, many will be absorbed into local lobbying and law firms. So 100% of the current administration won’t be leaving. Of course there will be some houses put on the market, but I’m guessing not many.

On the flip side, though some of the next administration will undoubtedly already be living locally, there will be definitely be an influx of new residents as staffers and administration are relocated here from other parts of the country for their new appointments. Those people all need a place to live, whether it’s renting or buying. Junior staffers will undoubtedly rent, but senior officials and their families could just as easily look to buy—especially when they absorb the sticker shock of high rental prices in this area. They’ll likely decide this is certainly a good time to buy, with historically low rates, relatively high (though shrinking) level of inventory from which to choose, and their new four-to-eight year time horizon. The District and Arlington, after all, were recently named two of the top ten places to live in a recession, and our local real estate market has held up relatively well versus most of the country.

Since most of these new residents will be working in the District, I expect the real estate market to tighten in the District and close in, metro-accessible areas like Arlington, Alexandria, Bethesda, Silver Spring, Falls Church, and Vienna. Outer areas like Prince William likely won’t see a bump, but that’s okay—their current uptick is coming from the investor community.

Time will tell, but I predict that the incoming administration will cause a tightening of both the rental and purchase markets in close-in areas.

Are you a member of the new administration looking for help in understanding the local real estate market? Confused about where to rent or buy? I’m licensed in DC, VA, and MD and would love to help you. Contact me for an overview of the area and the local real estate trends.

DC & Arlington Named Best Places to Be During a Recession

Worried about the economy? Here's a bit of good news: DC and Arlington were named by Business Week as two of the top ten places to live during a recession. Cities with a focus on health care, law, education, energy, and government rose to the top. The article notes:

Government towns tend to be relatively stable because—even though budgets are slashed—the public sector still must pay the salaries of politicians, building inspectors, police officers, military personnel, and tax-authority employees. Cities that we think might benefit from government employment include Chesapeake, Va., near the massive Norfolk Naval base, and the state capitals of Baton Rouge, La.; Lincoln, Neb.; and Madison, Wis.

And another piece of good news for our local area: the bailout will be a boon to our local economy. The Washington Business Journal notes:

...the most massive government takeover of private capital in U.S. history likely will bring economic activity to the region’s economy, in much the same way the tragedy of the 9/11 terrorist attacks spawned a new homeland security sector, the panelists said. The savings and loan crisis of the late 1980s also led to another government boon, the creation of the Resolution Trust Corp., which maintained office space in downtown D.C. for a decade to deal with fallout from the S&L insolvencies.

“It’s going to create a whole new industry of services for all of us, for the banking sector, for commercial real estate, the advisory and brokerage sector, legal and accounting,” said David Kessler, a principal with the accounting firm Reznick Group P.C. “We’re going to see a boost in the local economy as a result of that.”

Another boon from the bailout: the $5000 tax credit for DC first time home buyers was included in the bill! (Not buying in DC? You can still take advantage of the $7500 first time buyer "credit" (really an interest free loan) until July 9, 2009.)

Clarendon Named One of Nation's 'Great Streets'

Congratulations to the Wilson-Clarendon Blvd area, which was named one of the Top 10 "Great Streets" in America.

The area is one of Arlington's famed "Urban Villages" along the Orange line which combines public transportation, business centers, retail, and residential buildings into a walkable AND livable mini-city. The concept, ground-breaking when it was introduced, has transformed Arlington into one of the most highly sought after places to live and work in our area. North Arlington, in particular, epitomizes the best of both urban and suburban living.

Are you thinking of buying along the Orange Line? Check out recent condo prices in my post here, and contact me to discuss current market conditions and how to get started.

Buying an Investment Property in Northern Virginia

The Washington Posts' Express paper had a special Home Buyer's Guide this past Wednesday, and I was honored to be asked for my thoughts on buying investment properties.

During my conversation with the author, I noted that prices inside the Beltway--areas that are optimal for finding renters--have not dropped to the extent people may think, and thus finding an investment property that is cash flow positive is difficult. Having said that, it's not impossible to find a good property with long term potential, and if you're looking out side the Beltway, there are deals to be had in terms of price (though finding renters may be more difficult than with close-in areas). The challenge right now is in obtaining financing, as I and Will Gaines, of Access National Mortgage, noted here.

» DOUBLE DOWN: Expect to break the piggy bank open — wide open. "You usually need a minimum of 15 percent down for an investment property, and, ideally, for good pricing, it should be 20 percent," says Will Gaines, senior loan officer with Access National Mortgage in Reston, Va. "To get your very most competitive pricing, you really need to have 30 percent to put down."

» DOUBLE TROUBLE: Don't blame the banks for tighter restrictions. "The private mortgage insurers got burned so, so bad in the past few years, and they're reluctant to provide insurance," warns Katie Wethman of Long & Foster. She says they're especially wary of insuring rental properties because "if a borrower falls on hard times, they're more likely to skip a payment on an investment property than one they live in." That said, she advises borrowers to come up with a big chunk of cold, hard cash to sweeten the deal; the less credit you need, the more likely you are to get the loan you want.

» DOUBLE UP: Count on your friends. "I see more younger people going in together to buy investment properties," Gaines says. "That way, they can share the down payment and spread out the risk if they're without a renter for a period of time." Be sure to have a game plan for buying each other out in case one of you is ready to cry "Uncle!" before the other.

If you have the cash for a larger down payment, and the patience to ride out the downturn, there are investment opportunities out there. In particular, being flexible on timing and having a bit of cash for repairs makes short sales and foreclosures more of an opportunity for investors (versus someone who has to move before their lease is up: read more on my foreclosure risk post on timing a transaction.)

What else do you need to consider when searching for an investment property? Long term demographic trends, price to rent ratios, competing inventory (i.e., apartments), cash flow, and a host of other factors. If you're considering an investment property and need an advisor for your transaction, contact me to set up a meeting.

Northern Virginia Real Estate Statistics - June 2008

June's Northern Virginia (Arlington, Alexandria, Fairfax, Fairfax City, and Falls Church) inventory and home sales proved to be an interesting story: Despite the spring timing, inventory dropped (slightly) for the first time since December 2007...



While sales simultaneously rose for the 5th consecutive month.



For the second month in a row, inventory has dropped below the "balanced" level of 6 months. Is this just a seasonal bump? Whether yes or no, a drop in inventory means fewer choices for buyers, and I can tell you from first hand experience that a lot of the inventory out there is junk that most people would never consider buying. So the market may present fewer choices than you think if you're serious about finding a home.

With the Fall right around the corner (though it's 90 degrees out as I write this), we can expect lower prices, but we can also expect even fewer choices. So you might get a great deal, but on a home that's already been picked over by all the Spring buyers.

There's a 'sweet spot' in the early Fall though, where there are homes on the market with sellers who are getting increasingly anxious about the end of the season -- I believe buyers will have a lot of opportunity and leverage in the August October timeframe. Contact me to discuss whether this is the right time for you to begin your search, and whether the neighborhoods you're interested in have rising or falling inventory.