You are currently browsing the category archive for the ‘appreciation’ category.

So what is an absorption rate??

When I’m looking at a market to see if it’s leaning toward buyers, sellers — or neither — I look to the absorption rate. This means how long would it take to deplete the inventory at the rate that homes have gone under contract in the last 30 days. (Huh?) Read the rest of this entry »

The fall of every year has become the “buyers market” season of every real estate year in the past few. While inventory may still be tight in some of our markets in the DC area (the DMV), many purchasers have hibernated, thinking that if they wait till the spring, they’ll be able to have better luck at finding what they want.

Such thinking could cost you a brick of cash. Because = there’s another key component you overlook if you’re just keeping track of inventory as an indicator of when you should buy. It’s the interest rates. It could cost you thousands of dollars per year to wait when you consider where they are right now and what could happen by the spring of 2018.

Here are some simple calculations – if you’re buying a $500,000 house with 5% down at an interest rate of 3.5%, the payment is roughly $2,641 in Fairfax County, VA… When that rate moves up a percent to 4.5%, your cost goes to $2,915. Same house, same taxes – $3288 MORE per year…$16,444 over the next 5 years — more than $30K in 10 years.

Waiting could cost you. The smart buyer stops waiting and get’s in the game! Got a question or need professional help? Contact me here: http://www.anthonycarr.net/contact/. pmms_chart8.17

If you really want to know how a real estate market is going, look at the absorption rate. The absorption rate measures how long it takes to absorb the inventory of homes at the rate houses are going under contract. I.e., if there are 100 homes and 50 go pending in the last 30 days, then that reflects a 2-months supply (100/50=2).

Sellers marketsSlide1 are under 3 months; normal are between 4-5 and anything over 6 is considered a buyers market. The DC market is pretty much a seller market all around. I measure the DC and Northern Virginia counties surrounding DC.

For more graphics, click this link to the RealtyHacks.net Facebook page.

The latest headlines from the national media have caused a little confusion in the marketplace. Of course, the headline doesn’t tell the whole story (see this one for 2017ytdjanpendingsnvaexample: http://www.cnbc.com/2017/02/27/pending-home-sales-drop-to-lowest-in-a-year-down-in-january.html). And keep in mind…

NEVER MAKE A LOCAL DECISION BASED ON NATIONAL NEWS!

In the DC market, the pendings are NOT down. In fact, year to date in Northern Virginia – pending sales are up for the year +15.8%) , for January (+18.3%) and MTD for February (+14%), according to data from the local multiple listing service.
It’s a strong market in N. Virginia even though the inventory has shrunk since last year, sellers are finding multiple offers in some cases, and buyers have continued enjoying affordable interest rates.

 

The D.C. housing market has been a shining light in an otherwise tepid economic picture for the region. Home sales prices are set to finish up for 2012 over 2011 — which will be the fourth year in a row that the region has enjoyed value appreciation.

The chart below is for Northern Virginia home prices, which had a high average price of more than $525,000 for the summer and finished December out with more than $518,000. (The average home price includes all housing types – condo, townhouse and single-family).

The December price is only 8.1% below the highest December price on record, which was set in 2005. The tortoise-speed appreciation over the years is actually a very healthy road to recovery, rather than the sky-rocketing fashioned appreciation of the mid-2000s.

Most home sellers and 

Northern Virginia Average Prices 2012buyers have not even noticed the recovery and many buyers are surprised at the level of activity at open houses these days when they visit on a Sunday. (First opens are drawing dozens of visitors these days, instead of t

he usual trickle in open houses of the past).

 

Home sellers can be assured of good traffic and a strong sale if their home is priced appropriately. Buyers are continually blessed with excellent mortgage interest rates.

Give us a call if you need more information about your particular market. We can be reached at Weichert Realtors/McLean at (703) 821-8300.

You got to love when the media finally catches up to the state of the market – Washington Examiner reported today (January 17, 2013) that foreclosures in the D.C. area have “plunged over 2 years.”

Over two years? Forget that! They’ve plunged in the last year. Data gathered from the local multiple listing system (Metropolitan Regional Information Systems) shows that foreclosures and short sale listings are down 64.5% in January 2013 compared to the same type listings entering the market in 2012 at this time.

The Washington D.C. market has led the country throughout the recovery period and Northern Virginia has led D.C. While there are still many homes that are “under water,” the region has nearly recovered in the last few years its lost values. December 2007, the average price was $542,775 (the highest average price for December ever for the region). Last month, the average price was at $518,503, according to data from MRIS (see the data sheet here). That’s just $24,000 below the high average. Prices are on the rise and we can expect that many homeowners in the region who have been under water will recover sooner than later!

This year is standing to be a huge year for home sellers and buyers in the suburbs of D.C. Foreclosures are nearly off the market (there are only 5 available in the Northern Virginia MLS at this writing). Need more info or to talk with a professional? Leave a message here or call (703) 821-8300 to Weichert Realtors in McLean.

 

As you see markets around the country drop inventory and increase pending sales, the question arises – is this for real? Has the market turned around?

In the shadow of Washington, D.C. – you betcha. While some observers may say it’s all about the home buyer tax credit and low interest rates – they haven’t been watching pocket markets around the country.

Northern Virginia is one of those markets that even if you doubled the inventory – it wouldn’t be enough in today’s market environment. Multiple offers (half dozen or more in many cases) are the norm; houses selling above asking price; prices moving up in zip code after zip code, month to month and year over year.

The absorption rate is dropping dramatically. (Absorption rates are measured by dividing the number of pending sales into the number of active inventory – any measurment under 3 months is considered a sellers market).

Absorption rates are pointing to a turning real estate market

While not all markets around the country have turned around at the rate here in the D.C. area – the sellers’ market has already arrived!

During the run up last time, interest rates were in the 8 – 9 percent range – so buyers aren’t afraid of rates nearly double today if they think they are buying in an escalating market. Which is starting to happen in market after market.

For more research, see www.MRIS.com and www.Realtor.org.

Until next time…

The Spring season has started! Following the 2009/2010 blizzards that hit the Mid-Atlantic region, buyers have come out with a vengeance. We’ve been processing a contract or listing a day in the office and there are no signs of stopping. As I reported last month, prices across the Northern Virginia (D.C. suburb) area have turned around. For December, the average sales price jumped 12 percent compared to December 2008.

Now, buyers and sellers alike are focusing on the Expanded Home Buyer Tax Credit passed by Congress Nov. 6, 2009. The expanded CREDIT (not deduction!) provides cash benefits to first-time buyers and to homeowners who are purchasing a second primary home.

First-time buyers are classified as purchasers who have not owned a home in the last three years; repeat buyers are those who have owned within three years or currently own a home and are moving into another home that will be their primary residence. For doing this, either person, if they qualify, can apply for tax credits (up to $6,500 for repeat buyers; $8,000 for first-time buyers).

These tax credits mean cash in the buyer’s pocket. The credit is applied to your tax bill as if you had actually paid it to Uncle Sam. Then it either comes back to you with a lower tax bill for the tax credit amount, or in the form of a check from the U.S. Treasury. The reason for these generous credits is that the federal government figures most home buyers will spend the money on the house – paint, carpet, windows, doors, appliances – thus creating product demand, and thus creating jobs.

The market is lining up to be a perfect storm for buyers and sellers in Northern Virginia:

  • price appreciation (the bottom of the market is passed);
  • historically low interest rates (in the 5% range);
  • tax credits to help fix up your home (up to $8,000).

So What? What does that mean to you? Here’s the catch – you must have a ratified contract by April 30, 2010 and settle on your new home by June 30, 2010. If you’ve been looking to buy a home before prices escalate, with cheap money and get back money from Uncle Sam – now is the time.

I was looking over the supply of houses on the market this week in Fairfax County, Virginia and it’s really getting dangerously low. Compared to May of 2008, we have 55% fewer homes on the market – and 20% more contracts written on them.

That leaves home buyers with only a 7-week supply of houses and it’s getting smaller. Officially – we’re in a sellers’ market. For pocket markets (townships, subdivisions, etc.) it’s as hot a market as it was in the peek of 2005-2006 – it’s just that the prices are much lower. Ergo – the opportunity. If you’ve ever heard about buy low, sell high – now is the time to buy low.

The same is true across the country. Pending sales are up all over Florida, in Seattle, Phoenix, Los Angeles, Las Vegas, you name it, and buyers are coming off the fence like they were stung by a bumble bee!

For a macro look at how this can benefit you – consider the suburban Washington DC market of Fairfax Countty. If you are sitting in a house purchased in 2000 or earlier, you’re most likely sitting on a lot of equity that could enable you to move up to a larger home with the upgrades you’ve wanted but couldn’t afford.

I know – this sounds like a sales pitch – but frankly – it’s just the simple truth. Sellers and buyers have a unique opportunity to purchase a house at prices that have been backed up several years and at interest rates not seen for decades (currently in the mid-5% range).

In fact – we haven’t seen these kind of rates since they’ve been tracking them at Freddie Mac (http://www.freddiemac.com/pmms/pmms30.htm).

The average price of a 4BR, 2BA house in Springfield, VA, for instance, sold for $235,665 10 years ago. Today, that same house sells at $371,549. While this price is down from the last five recent years, the pricing has leveled and starting to rise in pocket markets throughout Northern Virginia.

And if you’re wondering if the market has turned around consider this – the average days on market for that house in Springfield is down to 18 days. That is not a misprint – NOT 180 Days, but 18 Days – a little over 2 weeks. Many other towns in the area are in the same situation.

So what?

  • Inventory is beginning its dip downward because buyers are coming off the fence, the foreclosure rate in the Northern Virginia area has been cut nearly in half (see www.CRA-GMU.org) and
  • Regular owners have not yet decided to place their homes on the market yet.
  • We are experiencing multiple offers (7 – 10 is not unusual, we’ve seen upwards to 35)
  • Escalation offers are back – one of my team members lost a bid after escalating $75,000!

Just remember DON’T MAKE A LOCAL DECISION BASED ON NATIONAL INFORMATION!

by M. Anthony Carr

Many sellers in today’s market are bemoaning the fact that prices have stabilized or are falling in their communities. While year-over-year numbers regionally and nationwide have demonstrated strong appreciation, the latest month-to-month declines in some markets have made headlines and struck fear in the hearts of homeowners everywhere.

Despite very robust long-term housing appreciation, many observers of the market and prognosticators write scary reports about how appreciation has slowed, prices have dipped, etc.

Stories from the field go something like this: The seller won’t accept a $150,000 lower offer on his $1.2 million listing because he’s already dropped it $200,000 from his original asking price. When asked how much he bought the house for 15 years earlier, he answers, “That has no bearing on my situation now.”

The real answer is that the seller actually bought the house for around $400,000 15 years ago and believes the roughly $600,000 gain on the property is not enough — since last year the same type home sold for $1.4 million.

My dear sellers, sell in the market you’re in, not the one you wish it could be. This particular seller’s story (and stubborn attitude) could be blocking a great opportunity for him to take advantage of the current market instead of the market taking advantage of him.

The mindset goes something like this: “I’ve already lost $200,000, why would I give up another $150,000 to sell my house?” If we’re going to talk about how much has been lost (on paper) and how much as been gained (once you sell the house), then let’s look at the real cash gain on the above property. In just a moment you’ll see how many homeowners are sitting on more than 1,000 percent gain in their homes — they just haven’t realized it yet (nor will they) until the house is sold.

Let’s use the above example. The homeowner bought the house for $400,000 and is standing in front of a $1,050,000 offer that could net him more than $600,000 if he signs the bottom line. So what’s his gain?

At an initial glance, it looks like his house has grown in value by 162 percent, thus he’s gained a 162 percent return on investment, right? Actually, while the asset has grown by 162 percent, his return on the investment of his actual dollars is much higher.
Here are the assumptions:

Purchase price: $400,000
Down payment: $40,000
Mortgage amount: $360,000
Sales price: $1,050,000
Cost of sale: 8 percent (commission, closing costs, seller subsidy, etc.)
Net gain: $606,000

With the above numbers, his $40,000 investment several years ago has resulted in a net gain of 1,515 percent. That’s right — one thousand-five hundred-fifteen percent.

My question to the seller is: “How much is enough?”

According to the Office of Federal Enterprise Housing Oversight reports that the average quarter over quarter appreciation (for 2Q 2006) for housing was more than 10 percent over the same period a year ago. Of course, the report itself and the media jumped on the statement of, “The quarterly rate reflects a sharp decline of more than one percentage point from the previous quarter and is the lowest rate of appreciation since the fourth quarter of 1999.”

Now, that sells newspapers and gets the “email this article” link a hefty workout. What wasn’t reported everywhere is that the average appreciation nationally has been 298.85 percent since 1980. In the last five years, the nationwide average has been 56.49 percent in appreciation. Where it really comes down to a level of importance is what has happened in your state or community. For instance, in my home state of Virginia, the 26-year appreciation has been 360.29 percent; the 5-year appreciation has been 83.38 percent.

Now let’s look at the latest appreciation/depreciation in my marketplace — down about 1 percent compared to the same month a year ago. Ouch. That smarts. (I will point out though, that also in my market area, sellers have been overpricing to the tune of 13 percent higher than their counterparts from last year, while they are selling at 5 percent less than asking price. It’s not so much a loss in “value” as it has been an overpricing of the inventory.)

Regardless of price, the basic investment strategies still apply here — buy low, sell high. It’s just all relative. If the seller thinks he’s “losing” tens of thousands of dollars because 1) that’s what the houses were selling for last year; and/or 2) that’s how much he’s had to reduce the asking price, then he has a long emotional row to hoe.
On the other hand, the seller could look at the numbers calculated above and start dancing all the way to the bank with his ROI of 1,515 percent. So, again I ask, “How much is enough?”

The biggest challenge a seller has to face in today’s market isn’t the market, it’s actually the person he’s looking at in the mirror.

Published: October 6, 2006

Archives

Categories

Tweet RealtyHacks.net

%d bloggers like this: