Monday, March 29, 2010

Mortgage Volume Has Dropped 42% From '09, Despite Historically Low Rates

That's quite an ugly chart at the bottom of this BI post.  Go here if chart doesn't reproduce on your browser.

Unemployment Rises to 7.2% As Virginia Sheds 32,600 Jobs in February

Virginia's loss of 32,600 jobs in February from January, the largest in records going back to 1983, was the biggest decline among states.

February's 7.2% (seasonally adjusted)  is up from 6.9% in January.  In the grips of the Great Recession, Virginia had a jobless rate of 6.1% in February 2009; the aftereffects keep rolling.

National unemployment remained at 9.7%.  Read more here.

Recently, local January 2010 unemployment  figures shocked the area: 
20 yr high: City of Charlottesville jumped to 8%
Albemarle County at 5.9%
Fluvanna at 6.6%
Greene at 6.7%
Louisa at 9.9%

Cville Metropolitan Statistical Area = 6.6%.  Some hope the City's number is a sampling anomaly.  Read more here.

Related Reading:
February Sales Down Locally, Nationally; Inventory Rises; Mortgage Rates Jump
9 Reasons Home Prices Will Continue Dropping in the Charlottesville Albemarle Area

Friday, March 26, 2010

Treasury Plan: Mortgage Principal Reductions for Underwater Homeowners, Help for the Unemployed

UPDATE:  Treasury Press Release. 
The press release also contains links to FAQ and various mortgage-debtor scenarios.

The Federal Housing Administration will take over underwater loans and reduce mortgage principal then reissue new loans, begining in September.   Read here. 

And according to the WaPo, the Obama Admin will order mortgage lenders/servicers to slash or suspend mortgage payments for those who are unemployed.

The mortgage mod program, Making Home Affordable (HAMP), was slated to help up to 4 million mortgageholders but has so far helped about 200,000.  A new Short Sale incentive program goes into effect April 5.

Related Reading:
Mortgage Rates Jump, Inventory Rises, Local and National Sales Are Down
9 Reasons Home Prices Will Continue Dropping in Charlottesville Albemarle

Thursday, March 25, 2010

Mortgage Rates Suddenly Jump Up - Inventory is Up - Local and National Sales Are Down

"Recovery" in 2010?  Apparently not.... Mortgage rates jumped from their lowest in 2010 to their highest on Wednesday, March 24, from about 4.8 to 5.125, impacting fixed as well as adjustable rate mortgages.  The last time there was such a jump, May 2009, it took about six months for the rates to get back to the lows that are now history.

Bad news for those under contract without a rate lock: the monthly payments will be higher than originally calculated.  This will cause some contracts to fall through.   This jump does not seem to be related to the Fed's expected exit from the mortgage market by March 31.


Read more about the rate jump at Mortgage News Daily. 

Additionally, locally and nationally:

*This blog recently chronicled 9 Reasons Home Prices Will Continue Dropping in the Charlottesville Albemarle Area. 

*Home sales were down in Charlottesville and Albemarle for February, as detailed in this post at RealCentralVA.

*Nationally, existing home sales declined in February, and new home sales were at a record low in February.


*Here's how one correspondent, a local mortgage professional, characterized the market:
What is telling to me is the CAAR site has about 250 more listings right now than last month, average DOM is up, median price is down.  Tax credit expiring in 5 weeks, USDA is out of funds, FHA will boost up front mortgage insurance from 1.75 to 2.25% on 4/5/10.  This year will be much harsher than last year in terms of actual sales and falling values.  We are in an L shaped recovery assuming we have hit the horizontal line....
(emphasis is BBs)

INVENTORY 

In addition to lower sales and confluence of reasons pushing prices down, with the arrival of Spring, local inventory has jumped over the past month.

In Charlottesville and Albemarle, there are 1367 offerings, including


Albemarle: 714 single family homes- 32 single family homes sold in Albemarle in Feb. 2010
Charlottesville: 240 single family homes - 5 single family homes sold in Charlottesville in Feb. 2010

Some data and visuals from RealCentralVA:

Charlottesville and Albemarle closed sales February, includes detached, condo, townhouses:

64   - 2010
79   - 2009
72   - 2008
105 - 2007
141 - 2006
124 - 2005
108 - 2004


Properties that went under contract in February.  How many will fall out of contract, due to higher mortgage rates (or contingencies)?

March 2010 (thus far) has generated a few more contracts than February.  How many will fall out of contract, due to higher mortgage rates (or contingencies)?
Related Reading:
CNBC: Loan Volume Was Already Falling Fast, Before Rate Jump
CNBC: Video - Housing Double Dip Bloomberg: Obama Mortgage Mods May Extend Foreclosure Crisis
CNBC: Bank of America Doing Principal Write Downs.  Treasury Next?
NYT Economix Blog: The Housing Crisis and the Resentment Zone 

Thursday, March 18, 2010

9 Reasons Home Prices Will Continue Dropping in the Charlottesville Albemarle Area

Forget the Snowpocalypse.  It looks like a "perfect storm" is hitting Charlottesville Area real estate.  

It's Spring Selling Season, and transactions are happening.  But inventory is piling up, and buyers are wary of making money mistakes.  More than ever,  "asking" prices in this market are sellers' hopes that buyers will not fulfill.  2008 saw the slowest sales in a decade.  And then, 2009 ended with even lower sales.  2010 kicks off with Government subsidized mortgage rates and the Homebuyer tax credit.  Come April 30, it's anybody's guess how low sales volume and prices will go.

Prices are primed to continue dropping--and drop fast, in some cases.  The Virginia Housing Development Authority lays the groundwork for what to expect in the February 4, 2010 presentation to the local Realtors Association: "The Charlottesville area market is likely to remain weak in 2010 and into 2011."

These are the elements putting "downward pressure" on Charlottesville Albemarle area real estate prices right now:

  1. Short Sales
  2. Foreclosures 
  3. Shadow Inventory
  4. Lack of "short term"buyers
  5. Lack of "move-up" buyers
  6. Higher Mortgage Rates - 2(?) weeks away
  7. Expiring Homebuyer Tax Credit - 5 weeks away
  8. Declining Tax Assessments
  9. Unemployment
1. SHORT SALES
    "For every regular purchase, there's a short sale"  Is this anecdotal observation accurate? Half the market is comprised of sales where the bank has agreed to take less than what the mortgage holder owes?  Even if the number were one in four, it would be shocking.  

    Short sales come about due to unemployment, a mortgage resetting to higher interest rates, lacking enough equity to refinance, etc.  Starting in April, the Obama administration is giving homeowners and banks incentives to complete more Short Sales. 

    That this area has a lot of short sales is to be expected.  Charlottesville had a big bubble.  Many of these short sellers bought in the past seven years, when Charlottesville was the 64th Largest Bubble in the Nation (see "Appreciation," ca. 2007).

    Examples of short sales: here  and here.  

    2.  FORECLOSURES

    Foreclosures in the Charlottesville Area rose 57% from beginning to end of 2009. 

    There's an idea floating around that compared to the rest of the state, this area's foreclosures just aren't that bad.  Wrong.  Compared to the volume of overall home sales, the volume of foreclosures is staggering. (See "Shadow Inventory," below.)

    Currently, one in 10 Virginia mortgages are delinquent or in foreclosure.  Foreclosures at all price points, are not going to abate any time soon. The Virginia Housing Development Authority says, "Prices will remain depressed until inventories are reduced and the foreclosure rate declines." 

    When foreclosures come back on the market, they're always cheaper than what the bank paid, and much cheaper than how individual owners price their properties, and exert downward pressure on other listings' prices.

    Foreclosure examples: here and here. 

    More foreclosures will occur due to resetting loans, including interest-only and Option-ARMs.  From the VHDA: 


    3.  SHADOW INVENTORY 2009...and 2010

    All of these foreclosures create the large  Shadow Inventory from 2009 that's exerting downward pressure on prices.  These properties return to the market at lower prices than what the bank paid, and much lower than what individual sellers ask.  As stated in #2, this is an issue of volume. 

    What does "large" mean?  Consider:

    The Charlottesville Area Association of Realtors asserts there were  2,565 home sales in 2009.  However, there were 987 foreclosures in 2009That foreclosure number is 38% of the "sold" number. 
     
    Deduct  2565 "sold" -  987 "foreclosures"  =  1,578 actual sales for 2009 

    Some of the 2009 foreclosures already came back on the market and were resold.  But the rest will pop up in 2010.   And the 2010 Shadow Inventory continues to grow: check out Google Maps for local foreclosures.  

    What else is in the "Shadow Inventory"?  One big component is homes that sellers would like to unload, but are holding off, waiting for the market to "come back."  

    4.  LACK OF "SHORT-TERM" BUYERS

    This market, with its declining values, is a perilous one for "short term"--under four years--let's be realistic and say seven years--buyers.   The now-dead "protected market" claim came from the idea that there would be constant fresh blood coming in, needing housing, due to UVA, Martha Jeff, and defense.  But many of those who have short commitments can no longer afford to buy without fear of $$$ loss.  Agent fees, closing costs, and just 3% annual upkeep adds to any downpayment that might be eaten by declining values.  

    5.  LACK OF MOVE-UP BUYERS 

    This area's lack of move-up buyers is a significant, and ongoing, problem.   See these posts.  The high end of the market remains slow.

    6.  MORTGAGE RATES 

    Rates are expected to rise in two weeks. If they do, it's more bad news for sellers.  Because look what happens to prices:  On a $300,000 loan, the difference between a 5 percent rate 6.5 percent is $300 per month.  That's nearly $100,000 over the life of the loan.  So if rates do go higher, those larger monthly payments will cause housing prices to fall.  The WSJ takes a look at the impact of the Fed's behavior after March 31.

    7. THE HOMEBUYER TAX CREDIT 

    This gift from a Socialist government  incredibly expensive attempt to prop up home prices judicious effort aimed at normalizing home sales expires in less than 6 weeks. With 58% of the current sales below $300k (as of early March), many buyers are using the tax cred as downpayment or for closing costs.  Take away "cash-challenged" buyers, and you take away the large part of this area's market.
     
    8.  DECLINING TAX ASSESSMENTS

    A tax assessment is not an appraisal.  But it is an indication of what a buyer paid last year for a similar property.  Tax assessments and asking prices are diverging now, sometimes wildly, not just in the tens but the hundreds of thousands.  Asking prices are often much more than assessments.   
    Buyers pay particular attention to tax assessments.  There has to be something extra special about a particular property for most buyers to pay more than the tax assessment.

    An extreme example of divergence at the high end is 1932 Blue Ridge Road, MLS #474114, Asking $2,485,000.  Assessed: $1,390,600.  
    And at the low end:  1421 Cherry Avenue, MLS #474721, Asking $224k.  Assessed: $157,500k.

    9. UNEMPLOYMENT

    Update: 3/19 - 20 yr high: Charlottesville City unemployment jumps to 8%; County at 5.9%; Fluvanna 6.6%; Greene 6.7%, Louisa, 9.9% stats from January, released in March.

    Unemployment doesn't need to increase in this area for prices to continue dropping.  (And then it did--Update March 19.) likely will rise, due to City, County, and State budget tightenings.  Virginia just bumped up to 6.9%.  Charlottesville's area unemployment doubled in the past year.  

    Update: Jobless rate rose in February, as reported in late March, to 7.2% seasonally adjusted.   Virginia shed the most jobs Jan-Feb of any state in the union.

    While some will take solace in the fact that unemployment rates are lower here than elsewhere, the glitch in that idea is that home prices are higher.  Somebody who is unemployed in this area has farther to fall, faster, than somebody who has a lower mortgage payment.  If folks here are paying 6x their income for a house, versus 2.5x historic norm...."look out below."


    In conclusion, here's an explication of the obvious, courtesy of the VHDA:


    Snowmageddon was a walk in the park compared to the maelstrom in this 2010 Spring market. 

    Images copyright/courtesy of Virginia Housing Development Authority and CAAR.  Click for larger views in new windows.

    RELATED READING
    Top 10 Homebuyer FAQ (most interesting part of post is comments)
    The VHDA Presentation on C'ville Area Housing Market, Feb. 2010 
    2009 Sales in Charlottesville Area
    Graphs and Charts of incomes, sales, prices, appreciation
    The Shrinking Pool of Local Buyers

    Wednesday, March 17, 2010

    Foreclosure: 501 Westmoreland Court - Carrsbrook - $218,900

    As quick as you can snap your fingers, this one will be under contract.  MLS# 474798, a 2,438 sq. ft. 4 bedroom, 3 bath brick lady in desirable Carrsbrook, a leafy subdivision off 29N, across from Walmart, but tucked deeply into woods.  Most recent owners paid $293k in '05, the bank got it back for $241k in Dec. 09, and it's assessed at $264k.

    There's essentially no seller-owned house of this size, nor any Short Sales, that can compete with this price right now in Albemarle County.

    Poof!  This baby's gone.  But no worries.  There are more foreclosures just waiting to creep out of the Shadow Inventory

    Image via/copyright CAAR.

    Related Reading
    1001 Black Branch Farm
    Top 10 Homebuyer FAQ for Cville Albemarle
    One in 10 VA Mortgages Delinquent or in Foreclosure

    For Sale: Castle. In Ireland. $18M.

    Which do you want: One of these listings in Albemarle County, or one of The Queen's offerings for $18M?   It's a toughy. 
    Image: www.luxuryrealestate.com

    Monday, March 15, 2010

    Foreclosure: 1001 Black Branch Farm - Scottsville - 28+ Acres - $239K

    MLS #474718 - This new listing was sent in by several readers, at least two of whom initially thought the price was a typo.  Wells-Fargo re-po'd 1001 Black Branch Farm in Scottsville for $352k, it's assessed for $316k, and it can be yours for $239,900k, which is 32% less than what the bank paid.  Is this the Deal of the Week?  Month?  Year?   The 28.40 acre horse farm is about 10 miles south of Monticello (30 minutes to Downtown C'ville).  The 2,172 3 bdrm, 2 ba house is ca. 1990, and the property has horse rings, stalls, outbuildings; the house(by pictures) looks appealing.
     
    Caveat emptor: as with any property, but especially one so "cheap," buyer needs to know all about surrounding properties and the owners' plans: development? volcano? nuclear power plant?  airstrip?  Fortunately, Albemarle has a sophisticated property mapping system that helps discover information.

    Images copyright CAAR.  Click for larger images in new windows.

    Related Reading:
    Top 10 Homebuyer FAQ For Charlottesville Area (with an ongoing conversation in comments)
    One in 10 Virginia Mortgages Delinquent or in Foreclosure

    Buyers: Does It Matter If Your Agent Can't Afford the House?

    SFGate's On the Block blog wonders if it matters to buyers that many agents in the San Francisco area can't afford the houses they're showing.  Should this matter?  What else should matter?  What matters in this area?  Should it matter if your agent has had foreclosuresDelinquencies?  Is simultaneously trying to sell his/her own property?  Is a part-timer?  Used "exotic" mortgage products?  Bought at the peak of the bubble? Lives in a neighborhood where values have dropped significantly?  Still believes prices are "going up"Or...what else? 

    Read the SFG post here.

    (Note: when looking for an agent's ownership history, property records may be accessed here for City, and here for County; if the property is deeded to an LLC, ownership is more difficult to discern.  Lien info may be researched at the Courthouses.)

    Sunday, March 7, 2010

    Obama Administration to Pay Homeowners to Complete Short Sales

    The Obama Administrations Mortgage Modification Program (HAMP ) is unfortunately not reaching as many homeowners as originally projected.  And there's a growing national trend to "Walk Away" from underwater mortgages, with WSJ columnist Brent Arends recently exhorting certain "owners" to do so.  With 25% of homeowners estimated to owe more than their properties are worth, a high unemployment rate, and low national real estate sales, it's estimated there will be 3.5 Million foreclosures in 2010. 

    How to slow down the tide of foreclosures?   Foreclosures lose banks lots of money (oh, no) and can ruin debtors credit scores (lives).  Solution: offer financial incentives for a bank to accept a short sale (accepting less than the mortgage holder owes).

    This is further 'intrusion' into the housing market: the Federal Government currently owns or backs 90% of all mortgages being written today, new buyers and some re-sellers can get between $6,500 and $8,000 tax credits, and (at least until March 31) mortgage rates are historically low. 

    The program will get more "owners" out of drowning debt and on to their new lives, and it may help reduce "shadow inventory." In the hardest hit foreclosure areas, it will prevent vacant homes and vandalism.

    Details from David Streitfield The NYT:
    Taking effect on April 5...Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.
    Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”
    Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.
    Read the entire article here. 


    Related Reading:
    One in 10 Virginia Mortgages Delinquent or in Foreclosure 
    So...The Homebuyer Tax Credit Costs A LOT Per House

    New Listing: John M. Donnelly Residence - 1520 Church Plains Road, Crozet - $679k

     The home of incarcerated Ponzi schemer John M. Donnelly has finally been listed for sale: MLS 474381.

    Donnelly was sentenced in November to 7 1/2 years in Federal prison for stealing more than $5.4 million from 21 investors.  He was also ordered to pay restitution, and Court officials estimate that $275k has already been seized to pay the victims, according to The DP.

    Donnelly's prison pay will also go toward restitution: $25 per month (50% of prison income) and $200 per month for three years during probation, after his scheduled release date in 2016.  He is being held in a federal prison in Morgantown, WV.  

    During sentencing, one victim noted Donnelly lived a luxurious lifestyle.  1520 Church Plains Road was built in 2001, and is a 5 bedroom, 6 bath, 4,850 sq. ft. house on 3.4 acres in Crozet's Church Hill subdivision.  The house was purchased in 2003 for $440K; it is currently assessed for $597,700 in 2009 $578k in 2010  (picture above from County records).

    Wife Deborah Donnelly is Executive Director of UVA's Curry School of Education Foundation  UVa's Senior Development Officer for Research and Innovation (updated thanks to commenter).  The house, which is titled jointly in both names, was purchased after the alleged Ponzi scheme began.  While Deborah Donnelly was initially named a "relief defendant," she was not found to have engaged in wrongdoing.

    Additional assets include a Hummer, 64 acres in Fluvanna, and multiple motorcycles—all of which have or will be liquidated to help repay victims.  The judge was excoriating during sentencing: Norman K. Moon expressed disgust for the crime that bilked Donnelly's friends and motorcycle racing teammates.  He referred to Donnelly as "evil" and was dismissive when Donnelly's defense attorney asserted Donnelly was apologetic for the pain he'd caused the victims. 

    Related Reading: 
    Donnelly Sentenced
    The DP's coverage of sentencing 
    Wife, UVA Fundraiser Deborah Donelly, Charged as "Relief Defendant" 
    SEC Press Release
    SEC Complaint Against John M. Donnelly
    US Commodities Futures Trading Commission Press Release
    SEC Press Releases

    Thursday, March 4, 2010

    One in Ten Virginia Mortgages is Delinquent or in Foreclosure

    The Bureau of Labor Statistics just released average annual state unemployment rates, and Virginia is at 6.7%.

    CalculatedRisk looked at the correlation between unemployment rates v. percentage of mortgage loans that are delinquent or in foreclosure.  Virginia's rate is 10.2%.

    According to RealtyTrac stats via the Virginia Association of Realtors, foreclosures in Virginia increased 33% from 2008 to 2009.

    In the Charlottesville Area, foreclosures increased 57% from Q1 2009 to Q4 2009.  See numbers below, from VAR via RealCentralCA.

    See Unemployment and Mortgage Delinquencies/Foreclosures for all states here.

    Related Reading:
    WSJ: When It's OK to Walk Away From Your Mortgage
    How to Walk Away From Your Mortgage
    Top 10 Homebuyer FAQ

    Monday, March 1, 2010

    Top 10 Homebuyer FAQ for the Charlottesville Albemarle Area


    10.  Why are there so few job prospects in this area? 
    9.  How's the economy reflected in the Downtown Mall, and how do residents feel about the local economy?
    8.  How are the schools in Albemarle County?  How are the schools in Charlottesville?
    7. How's the fiscal health of Albemarle County and its services?
    6.  What about the libraries? 
    5.  Is there support for the arts and humanities?
    4.  What's the nicest hotel?
    3.  What's fun to do in Charlottesville?
    2.  What's going on over at UVA?

    1.  Why is the Charlottesville Albemarle area "the least affordable real estate market in Virginia"?


    Related Reading
    Mid-February News in the Local Economic Downturn
    Budget Woes Everywhere Ya Look
    To Buy or Not to Buy?