northern Virginia

Potential Effects of Sequestration on Real Estate

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There is a lot of optimism in the media about real estate.  It is refreshing after the last several years of negative press and all the pessimism surrounding real estate.  Here is some of the positive news about the market:

  • The number of people that are delinquent in their mortgage payments are down so as a result, short sales and foreclosures are less prevalent in the market.
  • Potential Effects of Sequestration in Real Estate scottymacsblog With less distressed inventory, prices are increasing giving many people equity in their homes.  Many people may not be aware of their position in relation to their home’s value
  • Fewer foreclosures results in less crime – fewer people are stealing appliances, HVAC units, cabinets, lighting, etc. from the foreclosed properties and there aren’t as many people squatting
  • Inventory is low as buyers are in the market purchasing properties
  • Sellers, in many cases are seeing multiple offers on their houses
  • Interest rates remain below 4%
  • Consumer confidence is up
  • New home sales are up
  • Builder confidence is up
  • The rental market is strong and will continue to increase which is good for investors
  • As the real estate market improves, so does the overall economy

It is great to see us getting out of the weeds but there is still a lot of work ahead of us.  Sequestration and the resulting budget cuts will impact thousands of people – how will this impact the housing recovery.  Lending guidelines continue to tighten and the cost of obtaining a mortgage is rising – will this prevent too many people from entering the housing market?  Appraisals are often times coming in low because of escalating house prices with multiple offers and low supply – will this prevent too many sales from happening?

As a professional Realtor, committed to our clients, we can help you with providing you with the right advice to help you navigate the real estate market.  Feel free to call us with any questions.

Scott MacDonald (703) 652-5777

Success as Appraisal Concerns Rise In Northern Virginia Real Estate

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Uh – oh some appraisals are low!
As we enter the spring market I have growing concerns over appraisals here in Northern Virginia. As we come out of the “slower” winter months, appraisers have fewer homes to choose from to help catch them up with the market today. We are seeing 20-30 people regularly at open houses which is rare for this time of year. There are only 3,081 houses for sale in all of Northern Virginia – a true supply issue for the number of buyers in the marketplace. As a result, it is rare not to see multiple offers on houses listed today. This is not an artificial “run up” of housing prices and we are not stretching prices as we are still below the highs of the housing bubble in many areas. The law of supply and demand should dictate property values in my opinion.
Here are examples of the last few appraisals we have come across. Two single family homes in the same neighborhood in Fairfax both recently came in low – one was sold at $850,000 and appraised for $847,000 – really? The other one sold at $877,000 and appraised for $811,000. How can these numbers be so far off from each other and where is the real estateAppraisal Concerns scottymacsblog market headed today? One of our agents listed a town house in Countryside for $320,000. They received 3 contracts in the first weekend – an obvious issue of supply and demand. Well, it sold for $326,500 and appraised for $300,000. The appraiser used a short sale that had closed several months prior to this sale at $260,000 as a comparable. Short sales are less than 8% of the market plus if it closed several months prior to this sale, because of the short sale process, the contract was written several months prior to closing – how is this truly a reflection of the market today? We also had an offer come in on a town house in Centreville recently which sold for $450,000 and appraised at $435,000. The appraiser used a new town house in a community down the street that settled in July of 2012. Again, as it was new build, the contract was written a few, if not several months prior to the settlement – is this a true indication of market value today? What’s worse is there was a closing in the same neighborhood which was a higher value that settled in December that was not used to support the price of our town house. Lastly, we had a condo in Sterling that came in low by $8,000. The sales price was $175,000 and it appraised for $167,000. I think you can understand our issue.
What can be done? First, provide information to your sellers and buyers early. Set the expectation that the property may not appraise for the sales price and discuss the potential options with them so they understand what the next steps would be for them. Let them know that the appraisers may have difficulty finding suitable comparable sales – this is where you must be diligent and provide solid comparable sales to the appraiser. If you are dealing with an FHA appraisal and the sellers of comparable properties paid closing costs for their buyers, let them know the appraiser will take that amount off the top of the sales price which could bring down your value. As there are many multiple offer situations, some buyer’s agents are putting in high offers to get an approved contract knowing they won’t get the needed appraised amount – let your sellers know this is the case and the highest price is not always the best offer. If you are selling a new home, most builder contracts do not have appraisal contingencies in them for their protection, not the buyers. As prices of new homes are escalating this becomes a concern for buyers today. Remind them that an appraisal is a snap shot in time based upon historical data that is already behind our escalating market.
In addition to providing information to your sellers and buyers, provide extensive details to the appraiser. Plus, don’t just provide them with information, meet them and discuss what you and they are seeing in the market – build rapport by sharing your stories and listening to theirs. Share with them your comparable sales and why they should be considered. Explain the Home Pricing Wizard to them in detail and how it helped you determine the market value. Provide them with copies of the competing offers so they can see it is a desirable property. Share with them your feedback from Showing Suite that shows other agents that visited the property how they felt the property was priced at market value – or below. Bring market data from RBIntel that shows the market is increasing in value, as well as, articles that point to this fact. You must be diligent in your representation of our clients and do all you can to get the houses to appraise.
The good news is not all properties are appraising low, but there are enough that are, so this is why you need to pay attention and educate our clients on what is happening in the market. This separates you from other agents and makes you a professional. Get it? Got it? Good!
Now, go sell something!

Scott’s Market Minute for Northern Virginia: Low Housing Inventory For A Hot Real Estate Market

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Spring market has sprung early this year. Thinking of selling your home? Watch Scott’s Market Minute every week. Scott provides real estate market information for Northern Virginia and his Market Minute offers a quick look into current market conditions, housing inventory levels, distressed property statistics, and market projections. If you want to know what’s going on in the Virginia side of the DC Metro housing market area, contact Scott MacDonald (703)652-5777 or follow his blog http://www.scottymacsblog.com

Top 10 Real Estate Market Predictions for 2013 -Northern Virginia and DC Metro area

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Prediction #10 There will be more real estate agents entering the business. As the housing market shifts for the better, some may see it as an easy way to make money. Applications for the sales person exam has more than doubled since last year. This is very important if you are looking to buy or sell a home or investment property; you need a seasoned agent, with the education, knowledge, and experience to help guide you in making the right decisions.

Prediction #9 Interest Rates. I believe mortgage interest rates will stay below 4% as the fed rates are expected to stay around 0.25%. The cost of ownership is drastically reduced when interest rates are down, as well as, making it a great time to refinance. Contact us and we’ll show you what the numbers truly are and how we can help you make the right decision when buying your next house.

Prediction #8 New Home Market. As inventory levels of resale existing homes have been down as much as 30% throughout 2012 in NOVA, we will see new home builders increase in activity and sales. You may want to consider looking at new home builder stocks, builders with strong fundamentals in areas where there is growth and opportunity, economic and jobs, and sustained growth.

Prediction #7 Existing Home Sales. The resale housing market inventory levels have been falling since 2006 and we have had extremely low inventory levels in Northern Virginia, this year in particular. When the market does come up it will most likely be distressed properties because of pent-up inventory.

Prediction #6 Short Sales & Distressed Properties. We will probably see fewer Short Sales on the market during the 1st/2nd Quarters of 2013 should the mortgage relief act run out. Home owners may simply allow homes to go into foreclosure if there seems no true benefit of the short sale process.

Prediction #5 Housing Prices. Housing prices will continue to increase based upon the inventory levels are at or near all-time lows; supply and demand. With lending guidelines and appraisal guidelines in place we will see moderate slow gains and stabilized growth in the housing market.

Prediction #4 Lender Appraisals. I believe we will continue to have appraisal problems in 2013, guidelines are strict, binding an appraiser to work harder. We have seen some ‘bad’ appraisals with com parables outside of neighborhoods, missing items such as bathrooms, bedrooms and even giving extraordinaire value for items. You need an agent that is aware and knows how to handle this process.

Prediction #3 Lending Guidelines. Look for lending guidelines to become more stringent as the Qualified Residential Mortgage (QRM) and Quality Mortgages (QM) along with the required documentation, double and triple checking credit scores and employment verification. These precautions are the result of the housing boom and are now in place as a prevention method, helping ensure a safer housing market and growth.

Prediction #2 Investment in Real Estate. Investors have been the big player in real estate for the last 3-4 years and will continue. The rental market is extremely tight and rental prices continue to climb. Home prices have been low, making excellent returns for the Investor and allowing one to pick up distressed properties, fix-up and rent or resell. The need of rental housing has also increase as previous owners of foreclosed/short sale homes recover financially.

Prediction #1 REMAX Gateway in 2013. As I look into my crystal ball for 2013 for REMAX Gateway I see we will continue to grow and serve our clients. Currently we have 4 office locations: Lorton, Brambleton, Gainesville, and Chantilly; in 2013 we will be opening our 5th location in Arlington County, Virginia. As our agent count increases, we will continue to have the best and brightest agents, the most productive and educated, and we will continue to serve our clients better than any others!

Wishing you the best in 2013!

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Prediction #3 Scott MacDonald TOP 10 Predictions 2013

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Scott MacDonald counts down his 2013 Top 10 Predictions for Northern Virginia Real Estate PREDICTION #3 Lending Guidelines, Mortgages, and Lenders affect on Housing Market projection for 2013.

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Prediction #4 Scott MacDonald TOP 10 Predictions 2013

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Scott MacDonald counts down his 2013 Top 10 Predictions for Northern Virginia Real Estate PREDICTION #4 Resale Residential Housing Values & Appraisal Issues projection for 2013.

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Prediction #6 Scott MacDonald TOP 10 Predictions 2013

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Scott MacDonald counts down his 2013 Top 10 Preditions for Northern Virginia Real Estate PREDICTION #6 Short Sale & Distressed Properties projection for 2013. scottymacsblog.com

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Scott MacDonald TOP 10 Predictions 2013 Prediction #8

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Scott MacDonald counts down his 2013 Top 10 Preditions for Northern Virginia Real Estate PREDICTION #8 Resale/New Home Building projection for 2013. scottymacsblog.com

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#10 Scott’s TOP TEN Predictions for 2013 Northern Virginia Real Estate

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Northern Virginia Real Estate TOP 10 Predictions for 2013 – Scott MacDonald shares his insights as to what the real estate market will hold in the upcoming year. View Past Predictions: https://scottymacsblog.com/2011/12/28/my-top-10-predictions-for-2012/

RE/MAX Gateway Economic Conference & Real Estate Market Update

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We had the honor of having Dr. Stephen Fuller from George Mason’s Center for Regional Analysis at our Quarterly Meeting.   During our time together, we discussed several topics which are covered below:

Our conversation began with the recent article Dr. Fuller was featured in the Washington Business Journal article in which the headline read;   “Sage or shill”.  The article discussed his position on development throughout Northern Virginia over the years and how he is revered by many and unliked by some.  It brought to light his perspective on bringing to the table the developer’s opinions and reasoning for bringing Metro to Loudoun.  It took into account the long term economic effects on the county “with or without” the expansion of the Metro into Loudon. Essentially, it comes down to an estimated 40,000 job difference, the economic consequences over 30 years, and the difference as to the growth being that of office space or shopping centers.  Office space brings higher paying jobs, more educated residents and the county tax base is better off as a result of the Metro.  It also covered his conversation which may have swung a Board of Supervisor’s vote when he spoke with one of their assistants at a Fairfax Chamber of Commerce event.  He recalled as he sat in among other Fairfax Chamber meeting attendees this fall, he happened to sit beside an assistant of an Administration Supervisors and had a very brief discussion with the fellow. When Dr. Fuller asked what his Supervisor thought -the response from the assistant was that he ‘was not for it’. Dr. Fuller simply asked -and you? The assistant considered it a ‘no brainer’. Some thought this was Dr. Fuller lobbying for the Metro, as the Supervisor would have a ‘vote’. Dr. Fuller said he often will discuss things he feels important like cookies, and thus the reason cookies were served at today’s meeting.

Stephen Fuller and Scott MacDonald

Dr. Stephen Fuller & Scott MacDonald at the RE/MAX Gateway 3rd Quarter 2012 Meeting

There was an Economic Summit last week at the National Conference Center which was mainly about Loudoun County and the developers were mixed on Class A office space – one optimistic, one not, one in the middle – in all of NOVA, where do you see the Class A office market heading?   You can’t chance a county’s economic growth by just one type of use, like a strip mall.  Class A is based on mobile access. As the economy shifts from a 40% federal dependency, NOVA is positioned to become a global business center, much like Tokyo or London. Western Fairfax and Loudon will be seen as a “regional labor shed”. When businesses ask themselves, “Where should I be?” the response will most likely be, tied to the Metro.  The Metro expansion through Tyson’s, Reston and out to Loudoun will position this region for Class A space and job growth as a result.

In the past you have mentioned and actually may mention it today that we are expecting 1 million new jobs in our area.  As a result, more housing will need to be built to accommodate the increase in employment – where do you see the new homes being built with Loudoun’s zoning issues as well as Fauquier’s view on no growth?  We will see higher density in the areas where development is already approved for housing – especially near Metro stops and give a more urban feel to those areas.

I know you have slides that are going to tell us downside and upside of the fiscal cliff and sequestration but based upon what you hear, read and discuss with others, what do feel is really going to happen?

With regard to the economic ‘fiscal-cliff’, it is like NASCAR we are going around in circles under a yellow flag.  When it all gets resolved – there will be give and take – the green flag will wave, there will be debris on the track but we will see growth in the economy.

It has been said and is in your slide later that Virginia will lose 207,000 jobs – what will the number be in NOVA?  Where will our unemployment be at that time?  NOVA is generating more jobs in spite of a slower federal growth.  An estimated 24,000 Federal job loss in 2015 by 2020 this will equate to a stronger economy in the private sector and less government-based jobs so sequestration may not be a bad thing for our region from a long term perspective.  If total sequestration occurs, which I don’t believe it will, there will be compromises made, Northern Virginia will see 75% of these jobs lost.

Real estate has always been a stable investment option (when compared to the stock market) and a lot of investors have entered the real estate market, what do you believe is the Outlook for 2013? Will people continue to invest?  What is the window of opportunity for investors?  Rental market will be strong. There will be a large influx of the 25-35 year olds and they are not in a hurry to buy. There will be a temporary backlash of the perception as to the 2005 market and it will be seen that purchasing a home is ‘not a good investment”. We will see a pent-up need in 2015/2016.

What is your opinion on mortgage interest rates – how long with they stay low?  Interest rates will stay around 4% for 30 year fixed rates for 2013/2014; they will rise to 5% in 2015. Money will shift globally as the Asian market ramps up and Europe recovers.  In the next six months: Republicans will give in; There will be revisions in Social Security and Medicare; Things will tighten up in the financing arena; Incentives will fade out over the next two years with regard to payroll tax and other taxes incentives. With regard to the economic ‘cliff’, it is like NASCAR and we are in a ‘yellow flag’ economy – eventually the green flag will wave and the economy will take off.

Do you have any ideas on what the future of the GSE’s will be?  Who will be the next player in the mortgage market if GSE’s are phased out?  When would phase out occur and how long will it take to accomplish?  The GSE’s may merge into one entity.  The market needs a government backstop with some type of guarantee so they will not entirely go away.

How about MID?  What is the future?  There will be a cap for mortgage interest deduction. There is currently a cap in place it will just be reduced and it will probably be to $250,000 in deductibility.

Mortgage debt relief, will it make the fiscal cut and why or why not?  Distressed properties nationwide will continue to decrease and therefore some type of program will need to be in place. It won’t happen right away as Congress will have to re-evaluate.  Something will be put in place and in all likelihood it will be retroactive to the beginning of the year?

How will these areas affect housing and our market in the future?  There won’t be much of an impact because of job growth over the next 20 years, lack of inventory, no spec building by builders and low interest rates for the next few years.