Scott MacDonald

What’s 2012 looking like?

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As we enter 2012, there is much speculation about real estate yet again.  Will there be more foreclosures?  Will housing values continue to drop?  How long will interest rates stay low?  When will lending guidelines reverse their trend of more restrictive policies?  Should I buy or wait?  Will short sale guidelines become more uniform? What will it take to improve the housing market?  Well, as I have said in the past, my crystal ball is broken but I can look at trends, read reports and provide some guidance.  Let’s take a look at what we have seen recently.

Will there be more foreclosures?  As the inventory of short sales decrease and the notice of trustee sales in the papers remain low, we will not see a tremendous amount of foreclosures hit the Northern Virginia market.  When we see an increase they won’t have a significant impact like they had on our market in 2008-2010.  The inventory will come when banks begin to evict people who have been living in houses mortgage payment and rent free for several months.  Additionally we will see some foreclosures come on the as people lose their jobs.  Again, the impact will not be severe in my opinion and will be absorbed as inventory levels are at 2 year lows in Northern Virginia.

As inventory remains low, prices will remain stable and in some areas they will increase.  If owners invest in their homes by upgrading kitchens, bathrooms, and updating carpets, paint etc. they will see the return when they sell.  Homes in the right condition, staged and priced properly see multiple contracts and often get bid up above list price.

Interest rates will remain low for the foreseeable future. The Federal Reserve has stated they will keep their rates in the same range through mid-2013 and as such, mortgage rates should remain low.  There are of course some outside factors that could change this such as the European debt crisis, and energy costs rising but overall we will be in the 3.75-4.5% range for mortgage rates.

It doesn’t seem that lending guidelines will restrict any time in the near future.  Underwriters continue to ask for last minute items, credit is being checked for a second time just before settlement, requests for obscure items are being asked for and when you think you’ve heard it all, you hear something new.  On the bright side, mortgage insurance companies are becoming more flexible in their requirements which is helping in some instances.  Unless it is mandated by the government through the GSEs, I don’t see guidelines relaxing for some time.

If someone has found a home that meets their requirements as far as location, size, price and affordability then yes, now is the time to buy!  Especially if it is for a long term hold, you need to buy now.  In a recent survey, 78% of Americans believe housing is a great investment.  As previously mentioned, rates are excellent and you need to take advantage of them as well.

We are dealing with fewer short sales in Northern Virginia today but they do seem to be closing at a higher rate than before which is great for both buyers and sellers.  We anticipate this trend to continue.

So what will it take bring the market back? In a two words, I say, consumer confidence.  How does consumer confidence improve?  Here are a  few ideas – job creation, lower energy costs, and more positive press on the economy.  Let’s see how this goes with the election coming up later in the year.

With a little more insight into the market, go help people make the right decisions when buying or selling houses.  Get it?  Got it?  Good!

Now, go sell something!

 

Real estate normal?

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What is the new normal in real estate:

Today I am going to share with you a few ideas that are going to help you get on to a successful year in 2012 – you will also hear a few ideas from other agents that they have planned to make this their best year ever as well. The important thing to remember is to only adapt 6 of the strategies. If you try to do too many, you will be overwhelmed and not do any. I recommend starting with 6 things you are not doing today and incorporate them into your business. Once you have mastered 6 add another one in until mastered and then add another and so on. In addition, it is important to set strategies for accomplishing what you set out to do and review them regularly. You are in business for yourself but not by yourself so partner with someone in the room and hold each other accountable – meet before or after training, before or after a real estate exchange – make it easy for you but the big thing is to just do it.

When looking at the strategies you are going to put in place, you need to be clear and specific about what you want to accomplish and write them down. Know what roadblocks and obstacles you will need to overcome to achieve what you want to do and then how you will overcome them. What will you need to do to develop the skills and instill the discipline within yourself to make them happen. You will need deadlines, detailed plans of action – 5 or so for each action item, and have them where you can review them regularly. Lastly, think about and visualize your end result and what it will be like when you have accomplished what you have set out to do.

• Be positive – have the right attitude and eliminate complaining from your life • I like the “theme” of the day – will you do it?

• You are going to have to work more focused and be more intentional

• You are going to have to sell yourself passively and aggressively – explain

• Training is going to be paramount – especially in financing – increase your skills by attending seminars, getting a designation, going to REIX, office trainings, you need to be good at what you do to build referrals

• Video is going to be important – Casey Anthony is doing video diaries – video houses, your listings, neighborhoods, how’s the market, etc.

• Networking is going to be critical – find a group, start a group, join a chamber, Rotary club, coach kids in sports, join a PTA, get involved in a charity, become involved in something

• Learning and interpreting market trends – you have to know your numbers such as inventory levels and types of inventory, prices, DOM, people love to hear this

• Stay on top of values by previewing – especially new homes as they will continue to have an impact on the market – this is a great way to start with video. Video your house of the week, your bargain of the week, or whatever you want to call it.

• Read blogs for more information, see what others are saying about the market. You have to know what your competition is up to and what better way to learn than to read about their thoughts

• Start a blog and of course add video. Write about neighborhoods, your listings, interactions with agents, clients, trends, your services, how’s the market?

• Set your personal business standard and stick to it. Write the personal notes, make the phone calls, stop by and visit your past clients or meet new ones and track your daily conversations.

• Hold open houses on the right houses

• Track your business, determine what gives you the best results and do more of it.

My Top 10 Predictions for 2012

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Credit unions in real estate – if the merger between Pen Fed and Prudential Caruthers is successful – and only time will tell – more credit unions will look to enter the market.  If the merger muddles along as it is now, other credit unions will remain on the sidelines.  This one will be interesting to watch as NAR and RPAC spent so much time and money keeping banks out of the business.

The Presidential election – Nearly 1/3 of voters say how the candidates view housing will impact how they vote.  The foreclosure crisis and 11 million people with negative equity are what concern so many Americans.  Next to unemployment, the stance they take on housing will drive the election.  Therefore, agents will need to get busy listing and selling houses the first half of the year as I see people going back to the sidelines after July to see who wins and what policy they will put in place for housing.

Interest rates – if they go higher, they will crush the fragile housing market which the Federal Reserve will not allow.  Unlike last year’s prediction where I predicted rates to get to 6% and was wrong, this year I believe they will stay in the 4 – 5% range but closer to 4% than 5%.  This is what will keep some people in the home buying mode.

New home sales locally will continue to rise.  The shortage of resale properties available, the fact that 20% of our market is distressed and buyers are tired of the short sale process will continue to drive buyers to new homes.  Price will continue to also play a role in the new home market.  Builders will have to stay within reason and not price themselves out of the market.

Land values in our area will continue to rise.  Fueled by lack of inventory and new home sales, land values will continue to increase.  We are seeing new signs popping up on vacant land already.

Existing home Sales forecast will stay flat.  Unemployment, the election, strict lending guidelines and the fallout from foreclosures will keep people at bay from jumping into home purchases.

Lending guidelines will stay strict and may get even stricter.  As such, it will make our job as Realtors even more challenging.  Both buyers and sellers need to choose a professional and only work with local lenders – not internet lenders.

Foreclosures in NOVA versus rest of USA – we will continue to see low levels of foreclosures in NOVA for the first 6 months of the year, at least.  Notice of trustee sales are down in the papers, short sales make up less than 14% of our market and as such, foreclosures won’t be as prevalent.  The rest of the country needs to be leery as unemployment and dropping values continue to put pressure on home owners and foreclosures will follow as a result.

Investor market and rents – as the inventory of houses shrink throughout Northern Virginia, people remaining leery of the housing market, and lending guidelines continue to tighten – our rental market will continue to be strong and rents will increase.  The good ole supply and demand theory of economics.  This will in turn bring more investors into the market.

Now you have my Top Ten Predictions for the real estate market in Northern Virginia.  Let’s meet up again this time next year and see how I did!  Get it?  Got it?  Good!

Now, go sell something!

 

 

 

Got a plan?

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As you start to think about business planning this year I put together a few thoughts for you to review before our session begins.  Imagine starting a business – which you all have done by becoming independent contractors  – with only a vague idea of what kind of product or service you would sell or provide to clients.  You meet with potential investors and you say, we may sell IPad skins in Europe or set up a mobile dog washing service in the Mid-West, and let’s just see what happens.  How would they respond?  Not very favorably is my thought, how about you?  You should never start a business without a clearly defined business plan, set of goals, a plan of action to accomplish the goals, and numbers for you to track to keep you on target to get you where you need to go.  This is our objective today.  Help you assemble the framework to get you down the right road to the success you desire.

As we work through today, think about the following questions:

  • What are your goals as a Realtor?   Is it money?  Is it the number of satisfied clients you want to have by the end of the year?  Is it starting a team to get you more balance in life?  Whatever the goals are yours but they must be written out, reviewed and then acted upon.
  • Do you have what it takes to reach the goals you have set for yourself?  Do you have the knowledge, expertise, sphere of influence, time and/or desire?  Think hard before you write them – just don’t write something down because it looks good or you think it could happen.  Be realistic.
  • How will your goals be achieved?  What is your plan of action?  How will your day be structured to achieve these goals?  Are you in the right frame of mind to make it happen?  Your attitude is extremely important in this endeavor.  As Zig Ziglar says, stinkin’ thinkin’ doesn’t work.
  • Are you willing to be held accountable to tracking your KPI’s (Key Performance Indicators)?  Will you participate in Jason’s monthly review classes?  Will you meet with me one on one to review your progress?
  • Are you willing to put together a Gap Analysis being honest about where you are today, where you want to be next year this same time and what it will take to get you there?  As you do this, don’t compare yourself to others, compare yourself to you and who you are. 
  • Are you willing to make adjustments to make your goals a reality?  As we all know, the market changes, financing changes, regulations change – will you adjust your original plan to adapt?  Be open to constructive criticism about your plan?  And, be open to change?
  • As you go through today, think strategically.  Stephen Covey says, you must begin with the end in mind.  Write down you goals, then work backwards to make it happen.  Think of the people, tasks, time, and the number of communications it will take to make your goal a reality.  Then put it on paper to solidify it in your mind.

Are you ready to be all you can be and stop making excuses?  Then let’s get started!

Now, if you aren’t ready, perhaps you should consider a different career or continue to do the same things you have always done and continue to get the same results.  Get it?  Got it?  Good!

Now, go sell something!

Market, market, market!

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How’s the market – this is a question so many people want to know the answer to on a regular basis. My answer is, it depends.

Are you a buyer? If so, the answer is definitely yes. Interest rates remain at historically low levels, prices are stable in most areas and increasing in others. If houses are on the market now, the sellers are serious and you can negotiate a good deal. The monthly expense of renting is equivalent to owning in many cases, if not higher. In addition, each payment made for the home owner goes towards the loan balance giving the owner equity over time adding to the owner’s personal wealth. Renting only goes to making landlords wealthy. Other reasons to buy include pride in ownership, sense of community, stability and the ability to improve the property without permission from a landlord – just to name a few.

If you are a seller, what is the price range of your property and where is it located? Every market is different and each property should be looked at individually. There are pockets throughout Northern Virginia where prices are escalating but further out, it isn’t the case. In Centreville as an example, the average sales price of detached homes has dropped every month since July. In South Riding, houses priced between $550,000-650,000 have not had a sale in nearly 70 days. This is not the case closer in towards Vienna, Falls Church and Arlington. Houses are selling quickly and for top dollar. However, in these areas higher priced condos – especially one bedroom units are staying on the market much longer.

In all of these markets, houses and town houses that have compelling prices, not necessarily the ones that are priced right or priced at market values, are the ones that are attracting multiple offers. For houses to sell quickly in today’s market, price is the leading indicator followed by staging, condition and location. Luckily, our distressed property inventory remains low relative to the rest of the country. We are not seeing the influx of foreclosed properties which definitely affects values.

Our unemployment rate is one of the lowest in the country in Northern Virginia – 4.9%, our wages are amongst the highest in the country and consumer confidence is higher here than elsewhere so we are anticipating a strong 2012 in the housing market.

As you can see, it is not a simple question to answer. Each person’s situation is different and therefore you should ask a Gateway professional for detailed information specifically about you. If someone answers, “unbelievable” or “great” be wary. Get it? Got it? Good!

Oh what a night…

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We had another great real estate exchange last night.   There was a lot of banter back and forth about our free trip to Vegas for the RE/MAX Convention in March and who was going to win the trip and how.  Great team building and networking as usual before the event.

Topics that were discussed:

  • Virginia home sales report published quarterly by VAR and the great information available through this report
  • Information on rental rates
  • The lobbying effort upcoming in the House on raising the high loan limits back up to pre-October 1st deadlines
  • Refinance activity
  • Home ownership rates
  • Appreciation rates nationally and locally – we are way ahead of the curve year over year but are down month over month, a trend we need to watch
  • The Bank of America penalties to Freddie Mac and Fannie Mae and why
  • Fannie Mae’s quarterly losses and the combination of losses between Freddie and Fannie and why were bonuses paid
  • Foreclosures on the rise nationally but so far, we don’t see it here and the indicators of why we don’t see them yet
  • Bechtel is relocating 625 jobs to Reston and they are leasing nearly 200,000 square feet
  • 4 ways to reduce your taxes and a reminder we have accountants coming to Chantilly to discuss tax planning for 2012 on November 18th at 10AM
  • And lastly, the National Enquirer portion of the show – celebrity purchases and sales plus incomes of the top CEO’s in the Washington Metro Area
  • Pat Cunningham updated us on HARP, the Italian debt crisis and what that means to mortgage interest rates and the value of HUD homes.

Enjoy the video but better yet – attend the next one in Ashburn at Clyde’s on the 16th from 1-3PM.  Get it?  Got it?  Good!

Now, go sell something!

Got to love great real estate minds….

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Wow, what Platinum Group today.  Agents are feisty, fed up and frustrated with lenders.  Issues were flying across the conference room fast and furious.  The question was asked – How’s the market?  Here is what came about – Financing problems are prevalent.  Some owner problems by not disclosing full details – not telling agent about businesses, tax situations or other properties owned.  But most seem to be lender problems – mainly, not telling the truth.  One lender didn’t tell the agent the Visa expired, said application was in all paperwork submitted and nothing was turned in – contract and lender letter said conventional then switched to FHA at appraisal time.  Lending guidelines are too strict, lenders are too ambiguous and regulations need to be relaxed to make well qualified, legitimate buyers home owners.  We are held accountable to performing at a higher standard and the lenders are not – it is a huge problem!  Lenders need to adhere to a business standard – develop one, make them sign it and if the lender doesn’t, don’t use them.  They have no skin in the game, no accountability and no repercussions.

Agents have buyers coming out of their ears.  Listings are being shown but there doesn’t seem to be any sense of urgency from the buyers.  Move up buyers seem to be lurking out in the market as well.

What prices are selling?  The lower price points are selling – mid price points are coming down and languishing on the market.  Prices are up year over year but are dropping month to month since July.  Keep an eye on this trend through the winter.  Prepare sellers to price competitively from the beginning or the house may not sell or you will end up chasing the market.

Are foreclosures coming?  Agents are not doing BPO’s, short sales are down, and notice of trustee sales in the papers is down so the answer is not now.  Asset managers don’t have any idea of what is coming down the road either.

How are short sales progressing?  One has been in process 2.5 years – has had 6 contracts and still not approved – it is a Bank of America deal…no surprise.   We had one agent had 3 short sales drop out last week.  Another one has 10 under contract and they are languishing on the market.

Is the loan limit reduction hurting your business?  It has had only a limited effect on the agents in the group.  Only one deal has had an impact with 10 agents and multiple transactions in process.

Agent’s years are about the same as last year.  Their volume is up but units are down but overall, income will be the same – we will see how the loan limit reduction will affect us next year.  How will 2012 be for you?  Spring is going to be strong.

All the agents agreed that this was one of the best meetings we have had which is great.  The energy was high, there was lots of passion and everyone left with enthusiasm.

Now, go sell something.

Are foreclosures really coming?

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The foreclosures are coming, the foreclosures are coming…that’s all we see in newsletters, emails and hear about in real estate circles.  Well, is this really the case in Northern Virginia?  Here is a quick update on foreclosures and short sales in the five largest market areas in Northern Virginia and how we buck the national trend.  It will be revealed why I don’t believe our foreclosure problem will be as great or as devasting as the rest of the country. 

It is truly amazing how many Americans are behind in their mortgages and for how long they have been behind.  The number of people who are delinquent has dropped but it is still at a phenomenal number – 6.373 million – 1.844 million are more than 90 days late. What and how does this mean to our region?  Only time will tell but if you look at what, in my opinion are leading indicators, we may be more sheltered than the rest of the country.  As I see it, trustee sale notices are one leading indicator as they inform the public when an auction will take place on a property where the home owner is delinquent.  Second is short sale activity and as you will see, we have, as a percentage, a very low number of short sales on the market currently and as many of us know in the business, many short sales do not get approved which eventually lead to foreclosures.  In addition, if waves of foreclosures were to hit the market, could they be absorbed and as you will see from our month’s supply of houses, we are in pretty good shape.  And lastly, distressed property inventory makes up just over 18% of our total inventory but it makes up just over 35% of our total sales which reflects people want a perceived bargain and find distressed properties as their avenue to take advantage of this buying opportunity. So let’s take a look at the numbers.

In Arlington County there are currently 11 foreclosures, 20 short sales and there is a 2.9 month’s supply of homes.  I would say that Arlington is safe from an onslaught of foreclosures as the number of distressed properties is minimal and the absorption rate of properties is extremely strong.  We need more inventory of all properties in Arlington so bring on the foreclosures. 

In the City of Alexandria we have 20 foreclosures, 38 short sales and a 2.9 month supply of homes.  Is this market primed for more inventory, of course it is and investors love the location and amenities of Alexandria so absorbing any foreclosure inventory should not be a problem.

Now, let’s look at the Fairfax County, our most populated county in the region.  The numbers are 168 foreclosures, 336 short sales and a 2.6 month’s supply of houses.  Very low numbers in the overall scheme of things, don’t you agree?

Let’s wrap it up with two of the outer counties, Loudoun County and Prince William County.  Loudoun has 60 foreclosures, 139 short sales and a 3.2 month supply of houses.  Their month’s supply of houses is creeping a little higher but overall, it is still a seller’s market and properties are moving.  Prince William has 106 foreclosures, 237 short sales and a 6.8 month’s supply.  Again, all are manageable numbers except for the month’s supply of properties which indicates a buyer’s market but from a National perspective still in better shape. 

Let’s review, fewer trustee sale notices + fewer short sales = less foreclosures.  Until the trustee sales in Northern Virginia pick up, I don’t believe our market will have to endure a rash of foreclosures but if it does, we can absorb the inventory.  The only wild card that I see is what the banks have foreclosed on that they don’t have on the market and/or are letting people live in mortgage payment free that they haven’t evicted yet.  Is this number big one or a small one?  Only time will tell.  You have to know your numbers to paint the picture properly to your clients.  Get it?  Got it?  Good!

Now, go sell something!