qrm

Why has the real estate market slowed down?

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Why has the real estate market slowed down?  In my opinion, it is a combination of a few factors.

Why has the real estate market slowed down?

First and foremost, it is interest rates.  Over the last year, rates have risen nearly 1.5%.  A lot of people say they can’t believe with rates so low, how people cannot qualify for a mortgage.  Well this kind of increase will remove buyers from the market regardless of where the rates start and where they end up – 3.25 to 4.75 or 8 to 9.5.   An increase in interest rates like this is going to have an impact on the market.

Also, house prices have increased by over 17% the last 3 years in our area.  This price increase has also helped to eliminate buyers from the market.  Higher prices in any area of our lives – cars, restaurants, food, etc. will eliminate buyers – it is a natural fact.  Couple this with the interest rate increase and we have a slower market.

Additionally, there are fewer homes to choose from in the lower price points as well making it difficult for buyers to even find acceptable housing to purchase.  There are only 1,210 properties priced below $300,000 in all of Northern Virginia and only 271 are single family homes, the rest are town houses or condos.  If there are fewer options for entry into the market, there are going to be fewer sales thus slowing down the market.

The upcoming finance reform with QM, QRM, and Basel III the first of the year together with the easing of QE 3 leaves a lot of speculation about the future of rates and sequentially, the housing market.  Keep a keen eye on these developments to measure their impact.

So is the sky falling Chicken Little? 

Why has the real estate market slowed down interest rate increase

Well, let the numbers tell the story.  The housing market today is not substantially different than this same time last year and everyone was excited about the market then.  Funny how the brisk spring market with low inventory, low interest rates and multiple contracts has clouded the vision of some people.  Inventory is up just 6% over last year – not a terrible or scary number.  Sales are up in a week to week comparison to last year by 3.5% – a pretty good increase, right?  The 2.1 month supply of homes is virtually the same as last year’s 2.0.  Distressed property inventory has dropped 40% – which is a fantastic number.  This has resulted in a majority of the increase in homes for sale being arm’s length transactions – another good thing.  The last number to mention is properties that settled the last 30 days.  We are up 14% over last year indicating we are actually experiencing more sales.  So, if looked at from a long term perspective, our real estate market is actually doing pretty well.  All this being said, we still need to price properties properly as well as get them in the right condition to get them sold for our clients.

Keep a positive outlook on the market, good things will happen.  Now, go sell something!

Scott MacDonald

RE/MAX Gateway, LLC

Get in the Know…now!

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We recently attended the RISMedia convention in New York and have compiled notes that I will share with you on what was discussed and comment – occasionally how it will affect our business and ask that you do research on certain topics to inform yourself to give our clients the most up-to-date information so they can make the right decisions when buying or selling a house.

Finance update

FHA–

There have been two price increases on FHA loans recently – upfront MI and monthly MI.

-Lenders paid less on FHA loans.

-FHA loan amounts decrease.

-Potential increase in down payment requirements are also on the horizon.

-FHA Loans are 30% of the market.

-MI – 5% down training on MI is required for agents who want to stay in the know!

Additional facts on the market:

-2/3 mortgage applications don’t go through.

-Do consumers understand the process of obtaining credit – no – Agents are transactional

-7 million people have been out of work for 26+ weeks.

-19.8% of all prior mortgages are 90+days delinquent.

-Eminent defaults are on the horizon – stay tuned.

-60 million + people with less than 630 credit score.

Lenders are looking for point of sale contact with Realtors

-Want to help you grow your biz and attract more agents into their database?

The question is how?

-Training and education

-Shared marketing dollars

-Leads

-Exposure to listings through marketing ventures.

– What else can they provide?

GSE’s are stagnant on Capitol Hill and we shouldn’t expect progress anytime soon.  Too much else is on their plate.

270 points in Dodd-Frank bill – The lending industry WILL change.  We are expecting to receive talking points of the bill for you to share with your clients so stay tuned!

Do you know what Qualified Residential Mortgages are?  It is important to stay up on the trends.  QRM will push a 1/3 of Buyers out of market.  The comment period on QRM ends 6/10/2011 – get in the know and make your comments to your elected officials!

“Stuff” is thrown up against the wall right on Capitol Hill now to see what sticks

 – A tax on new home sales was proposed so that the existing home inventory could get absorbed and new home sales would subside as a result.

What is the HAMP Mod’s default rate within 6 months?  It occurs 60% of the time.

Average consumer has 13 credit obligations – 9 credit cards.

48% of college students leave school with bad credit

58% of college grads move home because of poor credit.

Ask your clients, “What is likelihood of you buying furniture, blinds, etc., if you do, can you really afford this house with this additional debt?”

Become a long term trusted advisor for your clients – provide valuable content – early and often.

Education is a continued effort so get educated.  Get it?  Got it?  Good!

Now, go sell something!

 

Help! Don’t allow Congress to hinder housing recovery!

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The Northern Virginia Real Estate market continues on it strong pace but there is legislation that can bring this to an end – and fast.  The legislation is known as Qualified Residential Mortgages.  NAR believes Congress intended to create a broad QRM exemption. Evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk, not high down payments. Proposals that require high down payments will drive more borrowers to FHA, increase costs for borrowers by raising interest rates and fees, and effectively price many eligible borrowers out of the housing market.

A provision in the Dodd-Frank Act requires that financial institutions retain 5% of the risk on loans they securitize. The purpose is to discourage excessive risk taking and create strong incentives for responsible lending and borrowing.

Congress came up with the QRM concept to ensure that banks were only putting up ‘safe’ loans for securitization. NAR supports this goal, but in practice, regulators have come up with draconian parameters for what constitutes a QRM.

NAR feels this will not only affect buyers, but would also affect the ability of home owners to sell their homes, since there would be fewer buyers who could qualify for home ownership.

NAR wants federal regulators to honor Congressional intent by crafting a QRM exemption that includes a wide variety of traditionally safe, well underwritten products such as 30-, 15-, and 10-year fixed-rate loans; 7-1 and 5-1 ARMs; and loans with down payments in the 5% to 20% range with PMI, where required, and with other features found in low-risk loans such as no prepayment penalties or balloon.  Implementing a new rule requiring a twenty percent or higher down-payments would stop the housing recovery in its tracks and we can’t have this happen to our fragile recovery in the housing sector.  Please contact your elected officials today and have them stop this in its tracks.  If you are interested in receiving a letter to forward on, please let me know.

 

I would like to thank NAR for allowing me to take their words and post this for you.

 

Now, go sell something!