Real Estate News About Woodbridge Virginia and Surrounding Communities: January 2008

Watching some so-called experts parade in front of the news cameras this morning, it was funny to hear some of the comments.  

One "expert" said the Fed's recent cut (exactly one week ago) has had no effect on housing.  

This shows how little understanding some "experts" have about the way short-term rate changes have little or no impact on home loans.  

Do they really think that fence-sitting home buyers see the Fed cut, get in their car, buy a home, get a mortgage, and close within a week?

Next, an economist from Standard & Poors said, "Most mortgages are priced off the 10-year Note".  

So what?

I have no clue as to what that means to me or my buyer clients.  And oh by the way, I have a Bachelors Degree in Economics.

Do YOU know what "Most mortgages are priced off the 10-year Note" means to you???

Here are some facts that are refreshing.

The consumer is still feeling pretty confident as the Consumer Confidence index for January was reported at 87.9, which was stronger than expectations of 87.0.  

Adding further strength to the report is an upward revision to December's index reading from a previously reported 88.6 to 90.6.

WARNING: If the Fed does cut short-term rates to banks by 1/2 percent tomorrow as expected, the long term picture may not be so good for Mortgage Bonds.

So you, my gentle reader may wonder, "Why would a short-term rate cut be BAD for Mortgage Bonds?" 

Here is the logic as explained to me by my trusted mortgage banking maven:

First, he Fed has already cut the short-term rate they charge banks for funds by 1.75% since September 18th, bringing the Fed Funds Rate down to 3.5% from 5.25%.  

Second, add to that the 1/2% cut in just the Discount Rate back in August.  

Third, add in the President's Stimulus Package and another 1/2% cut tomorrow by the Fed and you have a whole lot of ammunition to boost the economy too hard and too fast.

When the economy gets boosted too hard and too fast, the potential for higher inflation soars like a rocket.

Inflation erodes a mortgage banker's Return On Investment (ROI).

If a mortgage bank makes a long-term loan now, like a mortgage loan, the bank will get 5.5%-6.5% ROI.

Next, if inflation rises later this year to 4.5%, the 4.5% inflation rate eats into the bank's yield such that the true, honest, after-inflation ROI to the bank would be just 1% from a 5.5% mortgage loan.

So what happens next?

Well, mortgage banks will pull back available funds and wait for higher rates, higher ROI to the bank.

Insurance companies and pension funds that fund a huge chunk of our mortgage loans will switch to investments in stocks as the stimulus package adds a boost to the economy.

With less cash available to home buyers, mortgage rates will rise rapidly.

This is a good time to get the message out to your friends who may be waiting on rates to drop further before getting a loan approval, and buying a home while prices are hovering around 2003 prices.  

As always, loan applications never peak at the lowest point for rates...they do so when rates start moving up and the average "Joe Sixpack" home buyer gets off the fence after the train has left the station.  

Warn your friends of this common error.  

It is wise to get your friends into a loan application now, especially those above $417k, but below $625K.  

This way they can pounce on the lower rates once the Conforming loan limit is raised by Congress to as much as $730,000 in selected markets.

Gentle reader, a final thought from one who has helped over 2,000 families buy and sell homes over the past 25+ years...

Skilled, experienced investors who know how to time the market buy on BAD NEWS.  (Falling home prices, dim economic forecasts, pundits preaching economic tragedies)

Consumers, "The Average Guy/Gal" tend to wait, and wait, and wait to buy on GOOD NEWS. (Home prices rising, home values improving, supply dwindling)

Some average folks lose out on opportunities because the say such nonsense as, "I'm waiting to buy until I think we've hit the bottom of the market".

How does the average Joe/Josie decide when the bottom hits???  When he/she is absolutely, positively, 110% convinced that rising values are here to stay, long after values have ticked upward.

They tend to follow the herd.

I call the folks who follow the herd "Sheep".

I call money-making investors "Lions".

Sheep eat grass... lions eat sheep.

Need proof?

All I have to do is look at the REAL investors, the lions, who have been scooping up deals on homes at prices 80% of the 2005 market peak... homes that were purchased by sheep who followed the herd too late.

Not a sermon... just a thought.

Opportunities Are Everywhere...We Can Help You Find Your Dream Home.

 

 

 

 

 

Erick Blackwelder or Peggy James of Erick and Company - Exit 1st Choice Realty, Woodbridge VA. Realtors®, call 703-590-2252  list your property for sale or to  purchase a property in Lake Ridge, Westridge, Old Bridge Estates, River Falls, Middle County, Cannon Bluff, Meadowbrook Woods, Blooms Crossing, Manassas Park, Beaver Creek, Hunter's Ridge, Brittany,  Manassas, Montclair, Dumfries, Occoquan, Dale City, Nokesville, or anywhere in Prince William County.

 

Equal Housing Opportunity

 

 

 

All of my lender contacts are abuzz about what may happen this week if the loans that conform to Fannie Mae and Freddie Mac funding guidelines is raised over $600,000.

Rumors are zooming around like confetti in a tornado.

Some say, "Conforming money will go to $625,000."

Others say, "I hear $700,000 is the number!"

"Just wait and see... conforming will go up to $730,000!!!", say some.

If the conforming money increase is not a limited-time increase, and the decision makers choose to make the change permanent, we could see a MODEST increase in the pace of home sales.

However, if Congress is smart, and positions the loan limit increase as a TEMPORARY increase, with a sunset clause that rolls back the ceiling to a lower loan value at some future date, we could see a SIGNIFICANT increase in home sales.

Why?

The middle of the market in Prince William is stuck in the mud, going nowhere fast.

The low end is still moving as first-time buyers enter the market, and the high end is seeing a steady pace in luxury homes over $1 million.

It's the market in the middle, the move-up market that is stuck. 

The $500,000 - $650,000 market is suffering from a lack of affordable financing.

The heart and soul of the move-up market, a home-buyer's first shot at a single-family home with a 2-car garage, has traditionally been funded by Fannie Mae and Freddie Mac conforming home loans.

However, Fannie and Freddie have had their loan ceiling locked under $420,000 because Congress has been wasting time running a wictch hunt on the pair because a few cranky pundits denounced their complex accounting methods, "sloppy" or "fraudulent".

Congress has been laser-focused on raking Fannie and Fred over the coals, and forgot about their REAL job... keeping the conforming market in step with the middle-class home values.

Well, Congress has been kicked in the pants by current events.

"Wake up members of Congress!!"

Fan and Fred MUST be released from the Congressional holding cell, and charges dismissed so that all three, Congress, Fan, and Fred may return to their JOBS.... serving We, The People.

The urgency of NOW is upon us.

First, raise the conforming loan ceiling over $600,000.  Just pick a number and get it done now.

Next, make the higher loan limit a LIMITED-TIME OFFER so that home buyers sitting on the fence feel an urgent call to ACT NOW with a double-whammy of low prices AND bargain-priced loan money with friendly terms.

 

Opportunities Are Everywhere...We Can Help You Find Your Dream Home.

 

 

 

 

 

Erick Blackwelder or Peggy James of Erick and Company - Exit 1st Choice Realty, Woodbridge VA. Realtors®, call 703-590-2252  list your property for sale or to  purchase a property in Lake Ridge, Westridge, Old Bridge Estates, River Falls, Middle County, Cannon Bluff, Meadowbrook Woods, Blooms Crossing, Manassas Park, Beaver Creek, Hunter's Ridge, Brittany,  Manassas, Montclair, Dumfries, Occoquan, Dale City, Nokesville, or anywhere in Prince William County.

 

Equal Housing Opportunity

 

Have you noticed that new homes are rising out of the ground all over Prince William and Woodbridge in the middle of a "real estate slump"?

How come builders are still selling when existing home sales SEEM to be stalled?

Price.

Builders price homes with their HEADS; too often, home owners price their homes with their HEARTS.

Builders set their prices based on market facts.  Some home owners set their price based on facts, but the vast majority of owners base their asking price on EMOTION.

Builders are selling a commodity.

Home owners are selling a comodity too, but most don't know that.  Most owners view their real estate as a prized possession...  

I popped in to see Beth at Victory Ridge today to find out how many homes she has been selling.

Beth is the new homes Sales Manager for NVHomes at Victory Ridge.

     

 

Beth has logged 3-5 sales per month over the past year.

That's an ideal pace for a cozy subdivision because the construction supervisor can start one new foundation each week; four new "starts" per month.

"But Erick, but Erick!!!  The builder down the road from MY house was selling houses in the $700's two years ago... now they are selling the same exact houses in the $500's.  Was he making a fortune two years ago, or is he losing money now?"

Gentle reader, the cost of sticks-and-bricks to the builder is roughly the same as it was two years ago.  However, the land developer has dropped the price for his building lots $200,000.

Builders gross profit (not net profit after overhead and taxes) is only seven percent (7%) or less.

"But Erick, but Erick... I thought all builders were greedy jerks who were toting huge sacks full of cash to the bank... and besides, I thought the builder WAS the developer."

Nope.

Developers develop land into finished building lots they then sell to home builders.

Developers dig dirt... home builders cobble sticks-and-bricks together.

Home builders are CUSTOMERS to a land developer.

If the developer's customer can find cheaper land down the road in a declining market, the builder will pack up and move.

However, the land developer can't move his land somewhere else where he can sell it for a higher price. 

Just try loading 210 acres of finished building lots onto a Ford F-150 pickup truck and drive on down the road...

So the developer eats the $200,000 price drop.

So, if you have been dreaming about getting a glorious new home, hook-up with your Family Realtor.

Your Family Realtor will help you save a ton of money when you get a new home with his/her "inside information" he/she can use to help you get the most new home for the lowest price.

And, if you have tried to sell your present home without success... take a look at your price and see if you are pricing it to sell at a market price.

Are you priced to sell, or are you being a little too greedy in a slack market.

Oh, and if you don't HAVE TO sell, don't.  Relax.  Your investment in your home is safe.  The long-term value of real estate climbs ever upward over time.

 

Opportunities Are Everywhere...We Can Help You Find Your Dream Home.

 

 

 

 

 

Erick Blackwelder or Peggy James of Erick and Company - Exit 1st Choice Realty, Woodbridge VA. Realtors®, call 703-590-2252  list your property for sale or to  purchase a property in Lake Ridge, Westridge, Old Bridge Estates, River Falls, Middle County, Cannon Bluff, Meadowbrook Woods, Blooms Crossing, Manassas Park, Beaver Creek, Hunter's Ridge, Brittany,  Manassas, Montclair, Dumfries, Occoquan, Dale City, Nokesville, or anywhere in Prince William County.

 

 

 

I moved to Prince William County in 1983 when most of the county was a vast wilderness, criss-crossed with windy two lane roads that ended in the middle of nowhere.

Fast forward to 2008.  Prince William County is now a lush, inviting place to live, work, and play.

I say lush, because the County still offers plenty of green space, while mixing in world-class communities.

One of my favorite neighborhoods is River Falls. 

     

River Falls is a young neighborhood surrounding the lush rolling fairways of Old Hickory Golf Club.

I have played golf at Old Hickory, and I can say without a doubt that it's one of my top ten favorite golf courses on planet Earth.

     

My golf instructor, Vincent, has kept my swing tuned just right at the exceptional golf academy at River Falls, Powerline Golf Academy.

Vince Natale, Powerline Golf Academy Instructor

River Falls offers Homes from the mid $600's, all the way up to stately mansions on the shore of the Occoquan starting at $1.2 million.

River Falls is tucked away from the hustle and bustle of busy streets, yet it's convenient to the Prince William Parkway, County Center, shopping galore, restaurants, and so much more.

Click here to search homes for sale in River Falls, or any other community.

 

 

Opportunities Are Everywhere...We Can Help You Find Your Dream Home.

 

 

 

 

 

Erick Blackwelder or Peggy James of Erick and Company - Exit 1st Choice Realty, Woodbridge VA. Realtors®, call 703-590-2252  list your property for sale or to  purchase a property in Lake Ridge, Westridge, Old Bridge Estates, River Falls, Middle County, Cannon Bluff, Meadowbrook Woods, Blooms Crossing, Manassas Park, Beaver Creek, Hunter's Ridge, Brittany,  Manassas, Montclair, Dumfries, Occoquan, Dale City, Nokesville, or anywhere in Prince William County.

 

Equal Housing Opportunity

 

Driving around Prince William County, you will see new homes going up as fast as builders can pour foundations, and get those houses framed.

New home sales in the county are strong while resale home sales are down 20% compared to 2006.

What's going on?

Have we fallen into some spooky time-warp in which home buyers have been hypnotized by aliens and sent forth like zombies to new homes sales offices?

No.

New home builders like NV Homes, and Stanley Martin have slashed prices to undercut the sellers of existing homes.  Builders are giving more features, more value, for less money.

Owners of existing homes often cling to the highest price the market will allow, and often OVERPRICE their homes because they let their EMOTIONS get in the way of proper pricing.  "Our home is special".  "The house up the street sold for a zillion dollars two years ago, so that's what we want too".  "But we neeeeeed the money". 

Builders, on the other hand, apply facts, statistics, market research, and common sense when they undercut the resale market.  No emotions.  It's just business.

A community of new single-family homes just off the Prince William Parkway in Manassas had a big sign at the model homes that said, "Priced from the low $500's" last fall.  Over the holidays, a new sign went up saying, "Priced from the $380's" for the same models.

"Ah hah!  Those evil builders were gouging buyers at $500,000!  I knew it!!!", is a comment I heard at a party last night.

I can understand how one might come to that conclusion.

Just ask folks at random, "How much profit does a builder make from building a $500,000 house". 

I've asked that question from time to time.  I've heard a wide range of margins, and the average answer given to me is 30-40% of the price.

Try 7%.

"How do you know, Erick?"

Well, my wife's side of the family works in some facet of the home building industry.  My university, Trinity University offered a Bachelors Degree in home building back when I was a student. (Trinity later dropped the home building degree program)  So I have numerous college friends who own, or work for some of the large production builders.  So, I have the inside scoop on home building economics.

"So Erick, how can builders drop their base prices over $100,000 and not go broke if they were making only 7% profit at $500,000+?"

Believe me, the builders aren't sucking-up the loss.

 So who is?

The land developers who sell the finished building lots to the builders.

In days of old, a builder might develop the land by clearing and grading, then running water, sewer, electric, curbs, and streets through the comminity.

Not now.

In today's market, land developers buy raw land, build the streets, and run the utilities.  They create ready-to-build lots that they sell to builders.

Builders are the developer's only customer.  If the builder/customer stops buying more lots because the market rejects the price, the developer has to choose between no income to recoup their investment in infrastructure, or cut prices and keep their builder/customer in business.

Buyers beware.  When you buy a new home alone without a Realtor working for you as your buyers agent, you are at the mercy of a sophisticated selling system that builders have perfected into a machine that designed to reap the most profit from your pocket.

An experienced buyer agent who has years of experience working for buyers buying new homes.  A seasoned agent can steer you around the pitfalls that can suck thousands of dollars out of your bank account.

Best of all, you pay nothing extra to have an agent working for YOU because, by custom, builders pay your agent's fee.

One of those few chances in life to get something for nothing.

Erick