Thursday, March 26, 2009

Charlottesville Real Estate: Mortgage Information Spring 2009

A Q&A with Jason Crigler of Crown Mortgage LLC and The Mortgage Buzz Blog

It's the real estate buying and selling season here in the Charlottesville area, as it is nationwide, and mortgage rates are going down due to a recent announcement by the Federal Reserve. So as we have in the past, we turned to an expert to answer questions. For this edition of mortgage Q&A, we asked readers to submit queries.

Crown Mortgage loan officer Jason Crigler writes the blog The Mortgage Buzz, along with loan officer Michael Martin. It covers Central Virginia's mortgage landscape, but also has a regional take on the economy, in addition to noting and commenting upon global financial events.

Crown Mortgage is an "Upfront Mortgage Broker," which means they fully disclose their rates and approach before the mortgage is written. The association of Upfronts came about in response to concerns about mortgage brokers "taking advantage" of uninformed buyers during the Bubble; it's a consumer advocacy group.

Some of our earlier Q&As with Jason focused on the economy, credit freeze, availability and refinancing: October 2008 Mortgage Availability - December 2008 Mortgage Availability - January 2009 Mortgage ReFi's.

After the Fed's announcement last week, mortgage rates fell to lows "not seen in six decades," according to a Mortgage Banker's Association economist quoted in Housing Wire. Last week, refis were still the majority of new applications: 78.1%. Application purchases rose 4.2% for new purchases.

Just today, Housing Wire reported that rates are "lowest since the Eisenhower era."

Here at the Bubble Blog, as we've said in the past, we're not anti-buying. We're anti-bubble pricing. With low mortgage rates, an $8,000 tax credit for income-qualified purchasers, and a huge supply of properties, this area should definitively be a "buyer's market."
  • But will this season be the one that depletes the oversupply?
  • Will the First Time Home Buyers find properties that are priced for their income levels?
  • Will homebuyers looking to "move up" be able to unload their houses and find something in a desirable price range?
  • Will the luxury properties and farmettes start moving?
  • For how long will defaults and foreclosures, at all price points, continue rising in this area?
Or will 2010 be the year that the bubble correction takes place in this area and the sidelined buyers enter the market?

Questions, questions. We'll know part of the answer by July 1, when many real estate professionals believe the season is "essentially over." And we'll know definitively by September. Exciting times.

Among the readers who sent questions, several are buyers who are hoping to find something in the coming months; others are considering "moving up." Still others are devoted marketwatchers.

Jason was kind enough to take the time to answer the questions in detail. Bolding is ours.

1. Could you explain in layman’s terms what the announcement following the Federal Open Market Committee means for buyers?

The FOMC’s March meeting statement basically says that because of the recession and continual contraction of the economy, the FED will continue to support the credit markets to help foster recovery. The size of the support is staggering - $750 billion of additional funds will be used to purchase Agency (Fannie Mae & Freddie Mac) and Ginnie Mae (FHA, VA, USDA) MBS, the securities that directly influence mortgage rates. This $750 billion “investment” is on top of the $500 billion already pledged and partially used already this year. To say the least, the announcement was a bombshell and the MBS market reacted quite favorably to the news. Prices (demand) surged on the news bringing rates down about .25% on Wednesday.

Simply put, the FED is subsidizing the mortgage market in a big way to keep mortgage rates at all time lows, and they plan on doing it throughout 2009. The hope is that the low rates will incentivize home buying (as well as help folks refinance into more affordable mortgage loans) which will, fingers crossed, be one of the catalysts that stabilize the economy. Bringing an end to the decline (or at least precipitous decline) in home prices across the country is a critical part of shoring up confidence in our economy.

2. How low are rates expected to go? How long are they expected to stay (down) there?

As of Friday, the 30yr fixed was in the 4.5% range (with 1 point). A week ago it was a quarter percent higher. As I’ve mentioned in Q&As with the Bubble Blog before [links above], rates are currently where they are solely because of the FED’s activity in the MBS market.

They can’t set mortgage rates, but they can buy the securities that do and that’s how they’re keeping them low. As long as the FED does this (and the system complies – ie, other investors don’t dump them all at the same time), mortgage rates will continue to remain low. Are we going to see sub 4.5 or 4% rates? I don’t know, nor does 99.9% of the financial community. Most of it depends how the FED exercises the purchases - if they make very large purchases in a short period of time, we could see rates drop. But if they stagger the purchases out to make them last through the end of the year, then we may not see rates drop much below where we are now. So yeah, the FED could push them lower. But I think they have them in the range they want them and will keep them there as long as the money lasts.

3. From a mortgage professional’s point of view, do you have an opinion that you’d like to share on this kind of market subsidization?

There’s no question that over the last year our federal government has stepped into the financial markets in an unprecedented way. If one isn’t concerned with the government intervention and, may I say, market manipulation, one isn’t paying attention to what is going on. There are a number of things I agree with and a number I don’t, but I’m disturbed by all of it. Here’s my generalized backseat driver opinion on our current economic state – we need to stop spending (as much) and start saving (more). I’ll leave it at that :0).

4. Will this decision impact inflation? How soon?

The rate at which the FED & Treasury have been increasing the monetary base (pumping dollars into the system through lending & printing) would, under normal circumstances, have serious inflationary effects. But of course, we find ourselves in extraordinary circumstances at the present and they are doing everything they can to fight inflation’s destructive twin – deflation. I believe what FED chief Bernanke says, that inflation is nowhere near a problem in the short term (paraphrased, of course). But in the long term he suggests that the FED can reign in the money supply to stave off the long term inflation that would result in the vast expansion in the money supply we’ve seen. But just as it’s not that simple controlling deflation (easily), the same goes for inflation. I can only speculate and I’m not an economist, but I would expect inflation to tick up this year or next.

5. Do you expect even more refi activity, or does it seem like those who were going to refi have already “gotten the ball rolling”?

Yes, I do see continued refinance activity throughout 2009 while rates are low. While many have already refinanced since late 2008 we are continuing to receive calls and emails from past and new clients who have yet to refinance and plan to do so.

[See the Housing Wire link in the intro. Refi's apps surged on the Fed's announcement. Folks seem to be doing refi's in order to "improve their household balance sheets," as Calculated Risk would say, rather than to take cash out and spend it on "stuff." Commenter Nalle added this link, which indicates that new equity extraction has declined by minus $77 billion, or negative 2.9% of Disposable Personal Income for Q4 2008. ]

6. Are there people not qualifying for conforming loans who were one, two, three years ago?

Conforming/conventional loan (Fannie Mae & Freddie Mac – “the Agencies”) guidelines have definitely become more restrictive over the last year to year and a half. The Agencies have implemented a number of changes to their guidelines over this time, such as credit score and LTV (Loan-to-Value) requirements, that are disqualifying borrowers who would have previously been qualified. For instance, the Agencies eliminated their 100% LTV purchase program just last year – any borrower who would have needed a program like that to purchase a home no longer has the option through a Fannie Mae or Freddie Mac (USDA & VA are the last 100% LTV programs left). That’s one aspect.

The other is that now more folks have mortgage balances that either put them underwater (loan is greater than the value of the property) or close to it. As values were rising 3+ years ago and homeowners continued to “build” equity in their home, many qualified for refinances to payoff a 2nd mortgage or other debt. Now there are fewer who are qualifying for those refinances because their property has declined in value and their LTV is too high. (The Making Home Affordable refi program is meant to address some of this since the refinance program allows 80-105% LTV).

7. Could you give a couple of real time mortgage mod examples?

Modifications vs. Refinances:
Loan modifications are when the rate, term or balance/principal are changed by the loan holder (lender/bank) or servicer to make the loan & monthly payment more affordable to the borrower, without going through the refinance process. Since they are not newly originated loans, loan originators like myself aren’t involved with the modification process. The Making Home Affordable (MHA) plan has a two pronged approach – modifications and refinances.

The refinance part of the plan is where we come in. The Obama Administration is using Fannie Mae and Freddie Mac to help refinance those who have their respective mortgages to refinance into a lower cost (lower rate) loan. The MHA refinance program is still in the process of rolling out, but we’re getting interest in it and expect to start several of them soon.

8. Do you have any info on local default rates or know where to get that data in this area?

The Federal Reserve Bank of New York maintains a dynamic map of mortgage delinquencies (90+ days late) for each county: Credit Conditions Map.

I don’t if there’s a source for finding servicers in particular areas. Even if a list existed with a government agency or private company, I doubt it would be public info (in the private company’s case, they’d charge you a significant sum to access it).

9. Are people who purchased 2 years ago at 80pct ltv with conforming rates able to refi into conforming rates without having to put up additional equity? ( ie do banks/appraisers think values in this area have gone down yet?)

Values have definitely come down over the last 18+ months – current sales (and appraised values) show that. If a homeowner’s loan is over 80% of the value of their home, they can still refinance (up to 95% for a rate/term refi under current guidelines, 105% under the Making Home Affordable program) but without having to bring cash to the closing table – but mortgage insurance will be required (Making Home Affordable has one exception), and that’s an idea that makes most folks cringe. But cash out refis (where you're taking out cash to pay off debt, etc) go to a maximum of 85% LTV.

10. For jumbo purchase prices (houses over $520k or so) are buyers putting up more equity to get conforming rates, or are they content to pay higher jumbo rates? What are jumbo rates this week?

Jumbo rates, I am happy to say, have come down quite a bit for us. For several months in late 2008 and early 2009 jumbo products were being cut back and rates jacked up. As of Friday, our jumbo 30yr fixed rate was 6.0% with .75 points. Compared to the mid/upper 4% range for the conforming 30yr fixed, that ain’t cheap. But previously they were in the 7%+ range.

Agency jumbo, which is for a loan between the conforming limit of $417k up to $437k for the Charlottesville MSA, is about one ¼ % higher than the conforming fixed rate. Jumbo mortgages are for loan amounts above $437k. Our jumbo programs go to a max LTV of 80%.

I don’t think buyers or homeowners are happy paying higher rates for jumbo loans, but the fact that they’ve come down to 6% is certainly helping those who are buying or refinancing.

11. What kind of jumbo spreads are typical for this area today vs. bubble time [2006]?

Looking at a rate sheet from March 2006, the prevailing 30yr fixed jumbo rate was 6.0% with 1 point. So the jumbo rates were about the same 3 years ago, but we also have to consider the fact that banks are borrowing money at a fraction of the cost. The FED funds rate is currently 0-.25%. In March 2006 it was 4.5%. Lenders are charging MUCH more for jumbo loans today, comparatively speaking.

12. What's the level of re-finances in the area? I would be curious to understand if people are actually refinancing or if they aren't, why not? How many applications are being denied by the appraisers. . .how many people are just waiting for a better rate. If you refinance you can stay. . if you have an ARM and can't refinance. . . you will be forced to sell. Is this correct?

Over the last 3 to 4 months the mortgage lending industry has been very busy with the refi boom that started when mortgage rates dropped late last year. Our area is no exception to the national refi surge, and many local homeowners have been taking advantage of the low rates by refinancing their higher rate loans. To give it a rough number, we have seen refinance activity increase by 300 to 400% compared to last year. Even folks who purchased a year or two ago are considering refinancing, since their current rate is in the high fives or more.

The role the appraiser plays in the lending process is to issue an appraisal report and value. Appraisers are independent of the decision to approve a loan, but their reports/values have a significant impact on whether or not a loan is approved. An underwriter has the final say on loan approval (based on established guidelines according to the loan program). How many apps are being denied? Tough to say exactly, and I’m not sure if that information is fully aggregated and/or available.

A large part of my job as a loan officer is to qualify/pre-approve borrowers based on the guidelines underwriters use, so by the time the loan file goes to the underwriter it’s already been vetted. It’s very rare for us to see a denied loan. But I guess about 10% of those who come to us looking for mortgage financing do not qualify. It seems that most folks, by the time they contact us, already know if they are in a position to get financing.

There are quite a few people waiting for a specific (better) rate. When you hear about 4% rates in the news, but in reality they’re not there, many think it’s just a matter of time before rates come down and that the government has more control over rates than they really do. Unfortunately for them, time doesn’t guarantee anything (except change) and the FED can’t just set mortgage rates.

Having an ARM (adjustable rate mortgage) does not mean you have to sell, or refinance, or anything else. With an ARM, the rate is fixed for a particular period of time (such as 3, 5, 7, or 10) and then it becomes adjustable for the remainder of the term. For instance, if you have a 5/1 ARM, your rate is fixed for the first 5 years and adjusts once a year on the anniversary date each year thereafter for the remaining 25 years of the term (30 year term). The adjusted rate is based on an index (usually LIBOR) plus a margin (ie. 2.25% or 2.75%, etc) and contains a rate cap (ie. 5/1/5 – max 5% up or down in the first year, max 1% thereafter, 5% max up or down over life of loan).

Many people with ARMs don’t like the idea of getting to their adjustment period and letting the rate adjust, so they want to refinance or sell before that happens. And if the soon-to-be adjusted rate is higher than the borrower’s fixed rate, the increased cost of interest could make it difficult for the borrower to make mortgage payments. But in a low rate environment like we’re in, sometimes the adjusted rate can be less or close to the prevailing market rate. Although the adjusted rate can often be higher, it’s not necessarily always the case. Fixed rate mortgages are ideal for those who want (or need) the safety of a set rate for the life of the loan, and now with sub 5% 30yr fixed rates, it’s a no brainer for those who are refinancing or purchasing.

13. Is the pipeline overrun with new loans/refinancing given the recent FED downward pressure on interest rates? Will lenders lock rate and for how long?

I wouldn’t say “overrun”, but the process has definitely gotten longer. Prior to the refi boom underwriting turn times were less than 24 hours. Now we’re looking at up to a week or more. Appraisal turn times have also increased from around 2 days to sometimes a week. You can definitely lock a rate, and 30 days is still a sufficient lock period, but you want to get rolling on it quickly after you lock (if for 30 days).

We suggest that you work with your loan officer to get an appraisal done, in some cases even before application is made (in the case of a refinance) – if LTV could be a problem, an appraisal will let you know early in the process. If you know there are going to be delays, or if the purchase/refi is a bit more complicated, you may want to lock for a longer period. Locks are available for 30, 45, 60, 90+ days (30 days is standard and there are fees associated with extended locks).

14. How long is the estimated wait for approval and closing of a new loan? What are the average terms conventional borrowers can expect in regards to points, fees, fixed rate loan period, etc.

A normal purchase or refinance can easily close in 30 days, which is the typical lock period for quoted rates. Extended locks are available for additional costs.

The rates/points combination for a particular loan program depends on the mortgage company with whom you’re working. The terms, if you’re looking at a conventional (Fannie Mae & Freddie Mac) or government (FHA, USDA, VA) loan, will be the same no matter who you use. A 30yr fixed conventional loan is the same at Company A as it is at Company B. So shop around, and ask your friends and family who they recommend.

15. Given the difficulty with lending institutions, are there preferred lenders out there that process more efficiently?

We work with a number of banks and mortgage lenders and we choose among them for various reasons such as rates, program offerings and underwriting turn times. And yes, since banks/lenders are made up of people (and their processes), there are those that are better at some things and not at others.

16. [A First Time Home Buyer asks....] I've always been confused by bank appraisals. Are appraisals in this area higher like the assessments, or are they more reflective of the general economic market? In other words, are recent comps used for appraisals as well? I think that the whole "recent comp" song and dance is muddying the waters.

Though I’m no appraiser, I do know that comparables (comps) are an integral part of the appraising process and are critical to the final value given by the appraiser. In the mortgage lending world, appraisals are performed by an independent appraiser (so technically they’re not “bank appraisals”) and the report is provided to the bank/lender for evaluation by the underwriter. Recent comps (0-90 days) are very important since they help establish a value for a particular house. In real estate markets where values are not steady over 3-6 months, recent comps are much more useful and accurate than older comps.

[From the Bubble Blog point of view, prices are starting to fall here and should continue to fall, just based on supply and demand, as well as the fact that this is now one of the most priciest areas in the state based So if a Realtor offers a comp pre 9/08? Or even pre 1/09? Is that older comp really something a buyer is going to want to use as a pricing tool? Is that older comp something a seller should use as a realistic pricing tool in a market that has such an oversupply of properties? See this post.]

17. [A responsible homeowner who bought before the Bubble and made a 20% downpayment, as in the good ole days, and now looking to move, asks....] Are appraisers doing anything differently in this market given they contributed to the bubble prices to the same extent as homeowners, Realtors and mortgage companies?

The mortgage, real estate and certain financial industries shoulder much of the blame. If that point of view is the same as the buyer’s, than we’re in agreement.

I can’t speak for appraisers or the appraisal industry, but I think their goal is to remain as independent of the lending process as possible. Appraisers need to be in a position where they are not pressured or manipulated to perform (arrive at a certain value). If it means more (or less?) regulation to be effective, so be it. The ideal appraisal system, like mortgage/financial system, is one where there is no fraud and people follow the rules (there are plenty existing ones). How we get there and stay there, I don’t know.

18. Charlottesville is designated a "declining market" by some private mortgage insurance companies, but not all (Genworth, RMIC, for example). Some, like RMIC even have downloadable economic reports. Why is there a difference? Are the rates different?

MI companies maintain their own policies regarding what they consider declining or distressed markets. MGIC and PMI don’t list Albemarle as “restricted” or “distressed”. But RMIC shows Albemarle as declining, according to their own policy. I don’t know if it’s about the losses they have incurred as much as it is that they’re trying to avoid future losses. I assume that information (why have the policy they have) is not made public. Each MI company has different rates, particularly at higher LTVs (90%+) but it’s not unusual to find similar rates at different companies.

[Private Mortgage Insurer RMIC economic for Charlottesville MSA is available here. State overview is here. Link to 100 markets here.]

Many thanks to Jason for taking the time to answer questions. He'll be checking comments for additional questions or to follow up on data.

Related Reading:

Jim at RealCentralVA has posted localized market data from the Virginia Housing Development Authority, presented at the Charlottesville Area Association of Realtors Ecomic Summit today, March 26.

Wednesday, March 25, 2009

Census Bureau Releases New Home Sales Numbers for February 2009

The Census Bureau today released the data for single family new home sales during February 2009. January 2009, was the single worst month for home sales since the CB began keeping records in 1963.

The "good" news is that (as one might expect) there was a slight rise in sales--4.7%-- from January 09 to February 09. The bad news is that this is a 41.1% decline in February 2009 from February 08. As January 2009 was the worst January on record, now February 2009 is the worst February on record. There were 12.2 months of inventory on hand.

New home data does not include condos; therefore, areas with higher condo construction (or conversions from apartments to condos) will have higher inventories.

Locally, a search of the MLS indicated that there are currently 110 single family homes on the market, built between 2007 and 2009. This search did not include "proposed" construction; otherwise, the number would be higher.

And there are some "older" properties, new construction built in '05 or '06 that have never sold; they're rentals or still available as well; but not included in this number.

The number of "new" properties built between 2007 and 2009 for sale rises to 316 when you combine condos and attached townhouses. Again, we did not use "proposed" properties during this search.

We don't have the data about how much "new home" sales have dropped off YOY in this area. (Perhaps somebody will add the number in comments; perhaps not). Clearly, the YOY declines in general have been significant:
  • 59% in Cville, 49% Albemarle for single family homes;
  • +/-29% in Cville and Albemarle when the numbers of single family homes, condos, and townhouses are combined
And that Biscuit Run has been put "on hold," Belvedere, Waterhouse, and other projects are "stalled;" and builders have faced personal ruin and their companies have faced mass foreclosure all indicate how slow the market has been, if the massive inventory itself weren't enough to do this.

Nowhere for sales to go but up. And nowhere for prices to go but down, in order to clear out the overbuilt inventory.

Here's David Crowe, Chief Economist of the National Association of Homebuilders. Refreshingly candid and honest answers to the hard questions:

Related Reading:
New Home Sales - Calculated Risk
New Home Sales Numbers - Housing Wire
Will the local Economy Stop Construction? Rachana Dixit, Aug. 08, DP
Waterhouse Project Scaled Back - Chiara Canzi, Cville Weekly
Biscuit Run on Hold - Real C'ville
2008 Construction Down in Albemarle - Real C'ville
Feb. Nat'l Existing Home Sales Fall & Some Local #'s - Real C'ville
Median Home Prices in Cville, Alb, 20 Cities - Real C'ville

Tuesday, March 24, 2009

National Existing Home Sales Fall 4.6% & Prices Down 15.5% YOY in February (With an Aside About Local Numbers)

The National Association of Realtors (NAR), the largest trade association for real estate agents, has just released numbers for existing home sales in February 2009. The title of their Press Release is "Existing Home Sales Rise in February."

Which is true, there was a small rise from January 2009 to February 2009. But Barry Ritholtz of The Big Picture points out this year, as he has for the past four years, that sales always rise between January and February. And February and March. And March and April...rising to a plateau in July/August, since many folks tie their home purchases to the school year. (This rhythm may be even more obvious in this area, where the largest employer is actually a school).

An interesting piece of data that comes from the NAR press release is this:

In the South, existing-home sales...are 11.2 percent below February 2008. The median price in the South was $146,700, down 10.0 percent from a year ago.

Compare this to local numbers:

January & February Charlottesville: 26 fewer single family homes sold in '09 than '08, which is a year-over-year decline of -59%.

BUT in Charlottesville, 4 more houses sold in February 09 than January 09, which is a 36% increase.

January and February Albemarle: 34 fewer single family homes sold in '09 than '08, which is a year-over-year decline of -44%.

BUT in Albemarle, there was 1 more sale in February 09 than January 09, which is a 5% increase.

The numbers of sold houses and properties going under contract will continue to rise here, as elsewhere, from April-July (August). Not only do people need places to live, but interest rates are low and, for income qualified buyers, there's an $8K tax credit.

This doesn't mean
the market is suddenly "sanely" priced, nor that the market will suddenly find its bottom--no, and no. There's just too much inventory (let alone sellers who continue to buy the dream, evidence to the contrary, that this a "protected market" or "have" to make a certain amount).

It just means that there will be sales. And of course, some of those sales will be purchases where buyers overpay, IOHO.

Nationally, the oversupply is 9.7 months; in this area, it's about 3 years (or more, depending upon calculations). Nor does it mean that "affordability" has significantly changed. While many properties that have been on the market 120 days or longer are seeing price changes, these tend to be in the $15K range. Properties that went off the market and came back on this month, however, tend to have more significant drops, though whether these drops will get the house sold is another story....There are also more properties that start with "2" this year rather than "3" (that's a casual, not a scientific, observation). But there are also many 4 bedroom homes in the $600K - $1.5M range aimed at the "average" buyer...that will be harder to move, especially when buyer needs 20% down for a jumbo.

But back to the national numbers, via The Big Picture:
  • -Single-family home sales rose 4.4% to a seasonally adjusted annual rate of 4.23 million in February. They fell 4.6% from the 4.95 million-unit level of February 2008;
  • -Distressed properties accounted for 45% of all sales;
  • -Home foreclosures were up 30% in February from a year earlier;
  • -The national median existing-home price for all housing types was $165,400 in February, down 15.5 percent from a year ago.
  • -The median existing single-family home price was $164,600 in February, down 15% from a year ago
  • -Total housing inventory at the end of February rose 5.2% to 3.80 million existing homes available for sale, a 9.7-month supply at the current sales pace.
  • -The absolute number of homes for sale rose to 3.8 million from 3.6 million
  • -The West continued to see the biggest drops in prices due to foreclosures.

Related Reading:
Existing Home Sales Fall 4.6% - The Big Picture
Press Release - NAR
February Sales, March Inventory - Real C'ville
Median Prices in Cville, Alb, 20 Other Markets - Real C'ville
RealCentralVA: charlottesville-down/ [apologies; can't get link to work otherwise]

Monday, March 23, 2009

Dow Up 500 Points On Treasury's Toxic Asset Plan

The day ended at 7775.86. The plan is here. Read Treasury Secretary Tim Geithner's WSJ piece "My Plan For Bad Bank Assets."

In short, the plan will take over nearly $1 Trillion in bad mortgage securities. Tim Geithner, and the Obama Administration, have some significant critics on this, including recent Nobel winner Paul Krugman in "Financial Policy Despair," and other voices found at The Opinionator.

To see the graph in larger format, go to

Commercial Real Estate in Charlottesville: For Sale, For Lease Signs Spring Up Like Daffodils

The DP is reporting on what anybody who has walked the Downtown Mall lately, or taken a drive up 29N, has noticed: "For Lease," "For Sale," and "Available," signs are everywhere.

Sunday's story is entitled "Agents Note Bargains as Property Market Slows."

What the story doesn't mention is current numbers from the MLS:
  • 155 commercial properties available for sale, from $6.5 Million down, large buildings to small office spaces.
  • 248 commercial properties available for lease, everything from small stores to massive warehouses.
The properties for sale in the City include:
  • 111 East Main Street on the Downtown Mall, $2,950,000. Current home to Blue Whale Books, some other store fronts, and 12 apartments.
  • 901 E. Market Street, $1,600,000. The Gas Station/C store/Cafe formerly known as Fuel, owned by the Patricia Kluge holdings.
  • Various condos/office spaces at 250 West Main, the "Lewis and Clark" building across from the statue and near the Federal Courthouse.
Additionally, there's lease or purchase availability at, among other places, these locations:
  • Retail/Office on Timberwood Parkway in the Hollymead area
  • Site at Old Trail in Crozet
  • Office/retail space in Berkmar Crossing behind Shopper's World
  • Doctor's offices at Sachem Place (out Hydraulic Road; close for both City and County)
  • Peter Jefferson Parkway (home to new MJH digs)
  • The DP building
In the The DP, Ivo Romenesko, President of the Appraisal Group, Inc., says that six months ago, the local vacancy rate was roughly 8 percent. He expects that figure will climb into the double digits.

Did we see an "office space" sign in the building that contains the Blue Ridge Home Builders Association? There are signs at Barracks Road, Seminole Square, Albemarle Square, on the Corner, Downtown, Rivanna Ridge--you can't go a mile without seeing RE signs or plate glass windows covered in paper.

The DP always gives a positive spin to its stories about the slow RE market. Perhaps because it relies on so many print ads from real estate agencies for revenue? One RE professional has an optimistic hope of a market turn by the end of 2009; there's no local or national data to support this.

And of course there are quotes saying it's a great time to renegotiate a lease--which actually may be true. And that it could be a great time to buy if somebody can get their hands on financing--which could also be true.

In The DP article there's a suggestion that the incoming employees of NGIC will give the area a boost. The influx will impact in 2010 or 2011, if struggling businesses can wait that long....

Read Brian McNeill's story here.

Sunday, March 22, 2009

Charlotesville Real Estate Open Houses: Sunday, March 22, 2009

Below are just a few of the 44 single-family open houses scheduled for Sunday, March 22, in Charlottesville and Albemarle County. Check for the complete list and to verify times.

MLS 449160

763 Belvedere Boulevard

Charlottesville (Albemarle County) 22901

Open house: 1-5pm

3 beds, 2.5 baths, 2384 sq. ft., 2007

DOM: 405
Original Asking: $499K
Now Asking: $375K, a "drop" of 25%

Belvedere was supposed to be a major "green" development in the County with certified Earthcraft construction, a community organic garden, the new SOCA community soccer fields and headquarters, plus a "town center" with stores, coffee shop, apartments.

Buildout of the entire development has been significantly delayed by the bubble-popped housing market and builders going into mass foreclosure or builders trying to sell their stakes in the project. The area has been denuded of old-growth woods; there's a lot of red clay and naked construction sites.

From Trulia: "All of the style and detail you have come to expect from this quality home builder."

MLS 462975
2303Greenbrier Drive
Charlottesville VA 22901

"New" listing; open 1-4pm

4 beds, 4 baths
2260 sq ft, 1965
Asking Price: $339K
Assessed: 2009 $260K
Last Sold: 1998 $133K
10 year "increase" of $206K or 154%

Greenbrier Drive is heavily traveled; it's one of the "cut through" streets that the Meadowcreek Parkway will eventually replace. An asset of this property is that it has a gentle hill. A realistic element of this part of town is that, unlike other parts of the City, such as Fifeville, the Greenbrier area actually had declines in assessments this year, as properties have been selling for less. Similarly sized properties on quieter streets are priced in the $200's this year.

MLS 425529
6 Riverside Avenue
Charlottesville VA 22902
Woolen Mills neighborhood next to Riverside Park

Open House: 1-4pm

4 beds, 2.5 baths, 2277 sq. ft., 2009
Unfinished lower level; flexible floorplan.

Asking Price: $535K

The listing names the architect, the builder, even the interior decorator who concocted 'no VOC' paint, and extols the virtues of the possibilities of floorplan and unfinished basement that may be used as office or extra aparmtnet.

The lot on one side overlooks Riverside Park, a playground with the Rivanna River running on its eastern edge and access to the Rivanna Trail system, which runs around the City of Charlottesville.

On the other side of the house the view is significantly different: it's extremely bleak duplexes. Not that there's anything "wrong" with duplexes: we're all for "mixed neighborhoods" in terms of soci0-economic status, race, gender, sexual orientation, size of houses, etc. But aesthetically? Any kind of duplex can benefit from landscaping--bushes, flowers. This is of course not mentioned in the listing. It will take a special kind of buyer who can overlook the view--or maybe one who will want to help others landscape their yards.

MLS 457987
919 Club Drive
Keswick, VA
Keswick Estates

3 Beds, 3.5 Baths, 1995
3300 Sq. Ft./2 Acres
Back yard view of 4th Hole

"Beautifully renovated and redecorated."

DOM: 128

Original Asking: $2.1M
Current Asking: $1.9M

Last Sold: 2007 $1.2M
Assessed: 2009 $1.3M
Two year "increase" of $700K or 58%

There are currently 84 properties available in the Keswick zipcode of 22947, which equals millions and millions of dollars and thousands and thousands of acres. A property has to be extremely "well priced" to sell in this market.

UPDATE: 10a.m.

3009 Indigo Road in Crozet has had a price drop of 9%, for an asking of $360K.

Open House: 3-5pm.

Find the link here.

At the link you'll also check out Nest Realty's new signs: which give price, photos, details, contact info. Xeroxed flyers are so 20th Century! These signs make sense: often the intersection between prospective buyer and house for sale is an accident; if the flyer box is empty, the buyer has to be really motivated to go back to find one. Sure, buyer could call; but often doesn't.

Related Reading:

Mortgage Rates Going Down
Median Home Prices In Cville, Albemarle, 20 Cities
16 Million Homeowners Owe More Than House is Worth in 2009
Comps in a Declining Market
February Sales, March Inventory
January Sales, Feb. Inventory

Friday, March 20, 2009

Charlottesville's Alleged Ponzi Suspect John M. Donnelly Taped By FBI

The DP reports that local alleged Ponzi suspect John M. Donnelly had phone calls recorded by the FBI.

Donnelly's wife, Deborah, is the Executive Director for UVa's Curry School of Education Campaign. She has been named as a "relief defendant," but has not been charged with wrongdoing.

Donnelly appeared in court on Thursday, March 19, but his lawyer, John E. Davidson, did not ask for a bond hearing until he and federal prosecutors are done "swapping" information. Donnelly will remain in the Regional Jail until an unspecified date in the future.

Brian McNeill reports:

In a Feb. 9 phone call, federal investigators recorded a phone conversation between Donnelly and someone identified only as “Victim #2.” Donnelly denied losing any of the investor’s money, but confirmed that he no longer possessed the money because it had all been redistributed to other investors in the form of interest payments, according to an FBI affidavit.

The affidavit quotes Donnelly as telling the investor: “I have to leave the horror at what I feel … I can’t apologize to you enough … I just have to fight to get everything back for you and I’m gonna do that.”

Two days later, another investor — identified as “Victim #1” — met with Donnelly at his office on Water Street in downtown Charlottesville. Unbe-knownst to Donnelly, the FBI was secretly listening to the conversation.

According to court filings, Donnelly owned and operated three investment companies — Tower Analysis, Nasco Tang and Nadia Capital — that collected money from at least 31 individuals who believed Donnelly was investing their money and bringing home lucrative returns. In reality, the government alleges, Donnelly conducted almost no securities trading. He was instead defrauding his investors by paying some investors returns out of principal paid by other investors, according to filings by the FBI and other federal agencies.

During the past three years, Donnelly paid himself $1 million in salary and expenses out of his investors’ money, according to court filings.

Along with the federal wire fraud charges, Donnelly also faces civil complaints by the U.S. Securities and Exchange Commission, as well as the U.S. Commodity Futures Trading Commission.

Related Reading:

FBI Taped Calls of Ponzi Scheme Suspect - Brian McNeill,
March 19 Court Appearance - The Newsplex
Donnelly's Wife Charged as "Relief Defendant" and Assets Frozen -
Real C'ville
Madoff Lite: Feds Claim Charlottesville Ponzi Scheme by Lindsey Barnes, The Hook
SEC Press Release
SEC Complaint Against John M. Donnelly
US Commodities Futures Trading Commission Press Release
SEC Press Releases - The SEC received heavy criticism for failing to stop Bernie Madoff years ago; now it seems the SEC finds Ponzi and Real Estate schemes everywhere.

Thursday, March 19, 2009

"Making Home Affordable" Website

The Obama Administration announced the "homeowner bailout" last month, with further details rolled out on March 4th. But it's only today that the program's own website has gone live.

There are two different kinds of help available in the "Making Home Affordable" program:

Home Affordable Refinancing

"Many homeowners pay their mortgages on time but are not able to refinance to take advantage of today’s lower mortgage rates perhaps due to a decrease in the value of their home. A Home Affordable Refinance will help borrowers whose loans are held by Fannie Mae or Freddie Mac refinance into a more affordable mortgage."

Home Affordable Modification

"Many homeowners are struggling to make their monthly mortgage payments perhaps because their interest rate has increased or they have less income. A Home Affordable Modification will provide them with mortgage payments they can afford."

If you are delinquent on your loan payments and need immediate assistance call 1-888-995-HOPE (4673)

For Central Virginia assistance, contact the Piedmont Housing Alliance. Click here for their website, or call 434-817-2436

To find a HUD (Housing and Urban Development) Counselor, click here.

Materials you will need to talk with a counselor and for modification/refinancing include:

  • Information about your first mortgage, such as your monthly mortgage statement.
  • Information about any second mortgage or home equity line of credit on the house.
  • Account balances and minimum monthly payments due on all of your credit cards.
  • Account balances and monthly payments on all your other debts such as student loans and car loans.
  • Your most recent income tax return.
  • Information about your savings and other assets
  • Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources.
  • It may also be helpful to have: A letter describing any circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.) if applicable.
For all the information you need, including eligibility, FAQ, essential links, go to:

Wednesday, March 18, 2009

Mortgage Rates Going Down

Mortgage rates are going down--and no doubt will stay down for some time to come.

The Federal Reserve announced today that it will continue to buy Mortgage-Backed Securities in an effort to force and keep mortgage rates down. Not only will this help some new buyers come into the market--especially those who take 30 yr. conforming loans--it will help mortgageholders to refinance at lower rates. This will contribute to economic stimulus by adding billions to 'household balance sheets,' allowing consumers to use their money in other ways.

So how soon will we see 4.5% mortgages? Or 4%? We'll be asking our friends over at The Mortgage Buzz, and look forward to a Q&A with them early next week on all things mortgage.

Meanwhile, if you want background about why mortgage rates have already been at historic lows, read our earlier Q&A here and for Re-fi's, here.

Related Reading:
Federal Reserve Press Release
Fed Pledges Another $1.2T to Support Housing Market - Housing Wire
Economists React to Fed's News - WSJ
Creating Vast New Sums of Money Out of Thin Air - NYT

Tuesday, March 17, 2009

Construction Down in Albemarle: "This is considered 'news'? Seriously?"

The title of this post combines both a headline from the 3/16 DP and the only comment that appeared after the article.

The facts:
  • Residential construction permits dipped to their lowest levels of the decade in 2008.
  • 403 building permits were issued for 418 residential dwelling units in 2008.
  • 741 building permits for 831 dwelling units were issued in 2007.
  • That's a YOY decrease of 45% for building permits.
  • There were no permits issued in the county last year to convert apartments into condominiums.
  • For fiscal 2008, the county brought in $262,000 in cash proffers for rezoning permits, compared with nearly $2 million in 2007.
Executive VP of the Blue Ridge Homebuilders Assoc., Jay Willer, says he's not surprised. Builders "don’t want to add to their own inventory while they still have houses that need to be sold."

He also added, “This is a wonderful time to buy a house. There are great houses out there, well-priced. Interest rates are kind of interest-rates-of-a-lifetime.”

Hmmmm....Are there going to be even more "well-priced" houses around the middle of the summer as sales sag because buyers expect pricing to become more "realistic"?

Supply is still too high in this area for the low demand. Even with low interest rates, and an $8000 tax credit, there's just too much inventory.

The DP article doesn't mention the numbers of local builders going under, facing mass foreclosures, putting projects on hold, and/or trying to sell off their properties. Why would it? This isn't new "news,"; it would just be a "reminder."

Meanwhile, in national news, the housing-obsessed reader may have seen this headline: "US Housing Starts Rebound in February." "Um, no," The Big Picture's Barry Ritholtz points out.

Current Number of Properties Available*:
Active Listings: 3450
Sold this month: 47
Median Price: $247K
DOM: 134

*Does not include REO, foreclosure auctions, and FSBO

Past 7 Days, number of properties that have come on the MLS:
Charlottesville: 21
Albemarle: 64
Fluvanna: 13
Greene: 9
Louisa: 11

Related Reading:
Construction Down in Albemarle -
Waterhouse "Scaled back" - Cville Weekly
Foreclosure Auction: 4886 Dick Woods Road
Biscuit Run "On Hold"
Hauser Homes Seeking to Sell Belvedere Stake
Median Home Prices Cville, Alb, Elsewhere
Market Update: Feb Sales, March Inventory 2009

Monday, March 16, 2009

Foreclosure Auction: 4886 Dick Woods Road

One of today's foreclosure auctions, scheduled on the steps of the Albemarle County Courthouse at 3:35 pm, is 4886 Dick Woods Road. This property in Ivy is owned by a Realtor and a general contractor.

2004 Purchase - $469K
2009 Assessment - $544.4K
Mortgageholders Owe - $750K

In the comments after C-ville's Weekly's "A Tale of Two Foreclosures," which discussed the travails of local Realtor Doug McGowan, ex-CAAR President and RE/Max Broker Judy Savage said, "Many of us have seen our incomes fall 75% from just a few years ago...[he] is only one of many facing foreclosure and bankruptcy."

In the comments after The Hook article, and on this blog, readers were surprised that housing industry professionals could be in this position, expecting that those who advise others on large purchases would be financially sound. However, foreclosures occur at every price point and are due to a variety of circumstances. But if you as a buyer are concerned about this, include it as part of "interview" questions when you're searching for a buyer's agent. If the Realtor declines to answer your questions, you may wish to seek other representation.

Details on the auction are at The Hook. Foreclosure auctions are subject to change without notice. Curing the delinquency or making arrangements with the lender is an option until the "last second." A mortgage of this size cannot qualify for any modification under the Obama plan, as much more is owed than the house is "worth."

Jumbo Mortgage, Jumbo Headache - WSJ
Median Prices in Charlottesville, Albemarle, 20 Other Markets
332 Minor Ridge Road: Foreclosure

Wednesday, March 11, 2009

John M. Donnelly Charged With $11 Million Ponzi Scheme; Wife Deborah is "Relief Defendant"

A Charlottesville man, John M. Donnelly, has been arrested and charged with a Ponzi scheme, according to documents released by the Securities and Exchange Commission and local news sources.

Donnelly created limited partnerships to solicit investors' money: Tower Analysis Inc., Nasco Tang Corporation, and Nadia Capital Corporation, which have all been named as Relief Defendants. A relief defendant is defined as "a person or entity who has received ill-gotten funds or assets as a result of the illegal acts of the other named defendants."

The SEC Complaint names Donnelly's wife, Deborah, as a "Relief Defendant."

The Hook reports that Deborah Donnelly is the Executive Director of UVA's Curry School of Education Foundation, which is responsible for garnering charitable donations.

The Complaint requests the Court "Order the freezing of Defendant and Relief Defendants' assets...." which includes the house pictured above, on Church Plains Road in Crozet. The house was purchased after the alleged Ponzi scheme began.

The 5 bedroom, 4.5 bath, 3,000 sq ft house
is on 3.4 acres in the Church Hill subdivision. It was purchased in 2003 for $440K; it is currently assessed for $597,700.

The SEC's complaint additionally lists Deborah Donnelly as a Relief Defendant because
"On at least one occasion, funds were wired from a joint account in the name of John and Deborah Donnelly to a Tower Fund investor to satisfy a withdrawl request." Tower Investments is currently thought to have assets of $190,000.

The Hook reports, "Reached at her office this afternoon, Ms. Donnelly claimed it was the first she’d heard of the alleged Ponzi scheme run by her husband, but did say her husband had been arrested this afternoon."

The SEC filed the complaint in the United States District Court, Western District. The Complaint states in Allegation 3, "During the relevant time period, Defendant Donnelly represented to investors that he would pool their funds to trade in, among other things, stock and bond index derivatives and claimed to generate annual investment returns of as much as 22%."

On February 9, Donnelly confessed to an anonymous party, identified in the complaint as "Investor B," that he did not have the assets. "Investor B" notified the SEC. As it turns out, Donnelly had done no trading since 2002.

This is bad, serious stuff, to put it mildly.

We can't help but wonder, of course, if any of her husband's "investment entities" "contributed" to the Curry School Foundation?

And we wonder if any of the "31 investors" from whom Donnelly is alleged to have solicited millions will be here in the Charlottesville area?

This is going to supercede The Landmark Hotel for media coverage in the coming weeks.

Relevant Reading:

Madoff Lite: Feds Claim Charlottesville Ponzi Scheme
by Lindsey Barnes, The Hook
SEC Press Release
SEC Complaint Against John M. Donnelly
US Commodities Futures Trading Commission Press Release
SEC Press Releases - The SEC received heavy criticism for failing to stop Bernie Madoff years ago; now it seems the SEC finds Ponzi and Real Estate schemes everywhere.

Tuesday, March 10, 2009

Charlottesville Real Estate Market Update - Feb. Sales, March Inventory 2009

This Charlottesville Real Estate Market Update will cover single-family home sales and inventory in Charlottesville and Albemarle County. Condos and townhouses will be displayed in another post. The following info covers January and February sales plus current inventory.

To say this is a "buyer's market" is like saying "the sky is blue." And yet, sales remain painfully slow due to the economy and because buyers expect, in this "new" economy, that prices will reflect realistic property value declines. In the City, the lower end of the market has some movement; a problem, however, is that there's not a quality selection of "starter homes," defined as one in which a couple could reasonably house themselves and 1-2 children for 7-10 years (as opposed to the "starter home" that is a 700-900 sq. ft. single-person, +/-$200K cottage). Many analysts suggest that 5-7 (some suggest as long as 10) years is the amount of time a buyer will need to stay in a house in order not to himself take a loss when selling. If "starter homes" were more "price sensitive," there might be more action. Many sellers are unable to adjust their asking prices, however, because they'll take a loss; they also hope taking a losss is avoidable if they "wait out the market."

Properties that need Jumbo loans are are having an even harder time moving; Jumbo loans require higher FICO, 20% down, and have higher interest rates and fees. The second home and luxury and estate or farmette market is essentially a gigantic iceberg in Albemarle County (and not to be thawed by the change of season).

There are currently 3408 properties on the market in Central Virginia. In Charlottesville and Albemarle, the current total for single-family homes, condos, and townhouses is (March 8) 1231. This number changes daily; it typically rises.


11 homes sold during February 2009
The average sale price was $338K
The average DOM was 127

Compare with:

7 homes sold during January 2009
The average sale price was $238K
The average DOM was 116 days

February had 4 more single-family home sales than January = +36%, and a rise in average price of $100K.

In January and February 2009, a total of 18 single family homes sold.

Compare with previous year:

In January and February 2008, a total of 44 single family homes sold.

26 fewer single family homes sold in '09 than '08, which is a year-over-year decline of -59%.

Prices for February Sales:
$249,999 and below = 8 sales
$350,000-$399,999 = 4 sales

January Contracts: pending, 9; contingent, 14. Total: 23
February Contracts: pending, 10; contingent, 20. Total: 30
23% increase in contracts in February from January

Currently on the market:

Active Listings: 190 single-family homes

Average list price: $375,351
Average Days on Market: 165


22 homes sold during February 2009
The average sale price was $520K
The average DOM was 166

Compare with:

21 homes sold during January 2009
The average sale price was $465K
The average DOM was 123 days

February had 1 more single-family home sale than January.

In January and February 2009, a total of 43 single family homes sold.

Compare with previous year:

In January and February 2008, a total of 77 single family homes sold.

34 fewer single family homes sold in '09 than '08, which is a year-over-year decline of -44%.

35% of sales in Albemarle County this year were priced between $250-$350K.

January Contracts: pending, 21; contingent, 30. Total: 51
February Contracts: pending, 8; contingent, 40. Total: 48
-6% decline in contracts in February from January

Currently on the market:

Active Listings: 611 single-family homes

Average list price: $980K
Median list price: $450K
Average Days on Market: 6 months

Note: Short sales or foreclosures and "For Sale By Owners" may not be represented by these numbers. There are also properties that remain unsold and are currently rentals; in addition, there are sellers waiting for the weather to shift further into Spring before listing. All of this equals the "shadow inventory."

In the News Now:

The Dow goes still lower: 6,547
AIG: Failure will cripple banks, hedges
Realtors "win," Bankers "lose"

Related Posts:

This Is Not What Potential Buyers Want

332 Minor Ridge Road: Foreclosure
Sellers Trapped In Their Homes
Market Update: January Sales, February Inventory

Sunday, March 8, 2009

This Is Not What Potential Buyers Want

This is what potential buyers fear. It's very simple. The above graphic. The number of mortgages "underwater," meaning a mortgage for which more is owed than the property is now worth, is expected to rise to 16 million during 2009. According to First American CoreLogic, that's about 20%. If prices fall just 5% more, the figure will rise to 25%.

Prospective buyers fear closing on a house that will further decline in value. This fear is often countered with the assurance that the "loss" can be made up with 5-10 years ownership. There is absolutely no guarantee of this. The economy, and housing, are in absolutely uncharted territory here. We're all Lewis & Clark now.

This is also what buyers fear: each week the news gets worse. While there was talk that the "Recession" might bottom in 2009, even the Fed is now saying it looks more like 2010.
And this doesn't include the "housing market."

Here's a recap of this past week's news:
The market plunged this past week; GM faces bankruptcy; and AIG's bailout money seems to be going to Goldman-Sachs and other Wall Street banks.The national unemployment rose to 8.1% as of Friday, March 6. This is the worst number in 25 years. And the FDIC, Federal Deposit Insurance Corporation, which allows you to sleep at night by guaranteeing that if your bank fails, your cash is still available, itself could go broke if it doesn't get $500B.

Economists React included Stephen A. Wood of Insight Economics, who said, "The recession is intensifying and the economy is rapidly shrinking. We are staring into the abyss."

This is the national environment in which the local/regional buyer finds himself.
Is now a good time to buy? That's a personal decision. One thing local buyers don't have to worry about: supply. But what about rates? Since mortgage rates are at historic lows, there's the fear that "Mortgage rates might go up." Sure, 30 yr. conformings went up a touch this past week. But the Fed is still buying Mortgage-Backed Securities.

As HousingWire reports, Bankrate’s Holden Lewis said mortgage brokers and lenders say their clients keep holding out for even lower rates. But considering mortgage rates have hovered around 5.5 percent, give or take a quarter of a percentage point, “it doesn’t take Sherlock Holmes to deduce that the feds have mortgage rates right where they want them."
Read here. But don't take our word for it (or, for that matter, a Realtor's opinion). Check with your own mortgage professional.

And as one commenter recently put it,
"...if a buyer isn't paying 100 grand too much for a house, a rise to 6 from 5 in interest rates isn't going to deter a sale."

Related Reading:

332 Minor Ridge Road: Listed at 37% Less Than Bank Paid
Cville/Alb January Sales and February Inventory
January Pending Home Sales, Nat'l, Regional, Local

Why Aren't You Buying Right Now? - RealCentralVA
A Mad Mad Real Estate World - RealCentralVA
Stealing A Home - Dirt Around Grounds