Taking Stock of who we are…
To say that 2012 was an incredible year for our firm would be an understatement. We are a locally owned and operated business trading as the most recognized brand in Real Estate; CENTURY 21®. Our firm footprint includes sixteen locations in Northern Virginia, Maryland, and Washington DC.
We proudly support the best agents in our industry and we accomplish great things together.
In 2012, CENTURY 21 New Millennium® became the #1 CENTURY 21 firm in the World. That means we serve our clients first and foremost, and we served more of them than anyone else in our brand. It’s because we work in an environment surrounded by agents and staff who care and are driven to exceed expectations. Our passion stems from working in a profession where you get to meet new families, learn their first names, and help them find a place to live. We contribute to our community and strive to be the best citizens we can possibly be.
Additionally, in 2012, CENTURY 21 New Millennium was awarded the prestigious CARTUS Broker Network Masters Cup. That means we demonstrated more market knowledge and more accurate initial valuation of sellers’ properties than our peer group. It means our listings were on the market fewer days which resulted in less expense for our sellers and when they moved, we did a better job of helping them find a home at their destination. We did all that while maintaining an unparalleled high standard of customer satisfaction.
Being at the top of the CENTURY 21® system is a great accomplishment. Receiving the most coveted award in the relocation industry is humbling. Being a part of this team is an honor, a privilege and a responsibility to our clients, our families, and to the other professionals who so proudly carry the New Millennium card. We aspire to, and achieve, a higher standard.
Despite any perceived impact of “sequestration,” job growth forecasts for the Washington metropolitan area remain strong. Frankly, the scaled-back role of the federal government as a major force in the metropolitan area economy began mid-year, 2011. Job creation in the private sector more than offsets contemplated and actual cuts in the public sector.
The regional economy is projected to add almost 300,000 jobs in the next four years. It is positioned to add as many as one million net new jobs over the next twenty years. Even conservative estimates reflect necessity for rates of new construction that are far greater than the current pace of housing construction.
Sequestration is, or will become, a personal challenge for those effected. For the rest, it is not expected to have market level impact due to the employment growth forecast in the D.C. Metropolitan Service Area. We are working with families at the local level to help them make the best of a difficult situation.
Our guidance; Assess reserves, define alternatives, then engage appropriate third parties to run parallel courses to replace employment and / or seek lender cooperation. Immediately is best.
Public Policy influence will diminish
Public policies, implemented to mitigate circumstances occurring in regions of the country where market conditions remain distressed, apply equally to our region. We have not been a “distressed market” for several years and yet we continue to benefit from programs intended to preserve and incent homeownership. These programs will expire or scale back as national housing conditions continue to improve.
We encourage clients to thoroughly evaluate their real estate strategies in 2013 and establish their long term positions. Monetary policy keeps interest rates low to encourage buyer activity in areas still under stress. Programs and assistance to help needy owners still exist. As the rest of the country continues to improve, these priorities will likely disappear.
Our best advice is to make a plan and act now.
Purchasers may feel challenged by a decline in the number of homes available. Inventory, however, has merely returned to a level more normal for our area. This trend is consistent throughout our region and is encouraging for those who own real property. Another positive indicator is the diminished role of distressed properties as a percentage of homes for sale.
Distressed inventory will continue to drop since the current rate of foreclosure in our region is minimal. While some owners remain underwater, appreciation is restoring equity, so motivation to stay the course rather than “short sell” is widespread. Moreover, distressed properties are not selling at any meaningful discount to market value.
Buyer-side demand will only increase. Universally, purchasers again are confident that a home will grow in value. Buyers need to understand that the incredible opportunity to finance an appreciating asset at today’s interest rate will not last forever.
Making the least of your debt
Obviously, value trends are positive in the housing sector and the availability of low cost borrowing remains a major incentive for buyers. The Federal Open Market Committee has pledged to keep short term interest rates steady through 2014. Since mortgage debt is “long term” financing, mortgage rates are beginning to reflect the anticipated increase in short term rates this year.
Industry statistics indicate that over sixty percent of current home owners would lower their monthly mortgage payment by refinancing at today’s rates. There are myriad programs available to address diverse credit profiles, loan to value ratios, and financial situations. If your current interest rate is at or above four and a half percent, you should consider refinancing now. The window of opportunity is closing. Act now.
Trends in Lending
The current administration recently unveiled their plan to slowly consolidate Fannie Mae and Freddie Mac. The proposal is intended to reduce the government role in mortgage lending by creating a system that relies far more on private money. Exactly how far the government’s role in mortgages would be reduced was left to Congress to decide. Together, these entities own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans.
This spring, FHA increased monthly premiums and upfront costs on mortgages. New FHA pricing makes room for conventional lending to become the more cost efficient alternative for many borrowers. This incents transition in mortgage lending back over to the private sector. For those needing more leveraged financing, private mortgage insurance companies will insure the lender for a portion of the loan.
Conventional lenders and private mortgage insurance companies typically impose higher qualification standards than FHA requires. While a 620 credit score is acceptable for FHA, the conventional lender may require a minimum of 680. If you are considering a purchase, it is essential to consult a loan originator now to determine your qualifications. Understanding what you can do to meet conventional standards will save a borrower significant dollars in both the short and long term.
If you are considering a lending transaction, please let us know. Our lending professionals can provide you feedback on your current status relative to qualification. If any criteria does not fall within the lending standard, they can detail what needs to be accomplished in order to qualify for the loan product best fitting your needs.
Upgrading, downsizing, or just staying HOME
If our clients are already living where and how they want, we encourage them to refinance to today’s low rates and simply enjoy their home. If a property no longer fulfills a desired lifestyle, we encourage clients to weigh the alternative of converting the property to a rental versus listing the property for sale. In most cases, either of those can position an owner to acquire a property better suited to their needs at some point in the future.
While market bias has certainly turned to favor sellers, there is no irrational activity going on within the buyer pool.
Appraisers set the upper limits of value…so market value is the most any seller should hope to achieve. Lenders thoroughly qualify the borrower and the property before making a loan.
Due to the competitive nature of our market, sellers who become buyers will complete both transactions at market value. While there may be significant lifestyle benefits motivating the move, the financial advantage will be most apparent in the interest rate differential between the loan on the home being sold and the home being purchased. Unless the owner refinanced recently, there will be considerable savings in the cost-per-thousand on the purchase dollars borrowed.
Strategically dealing with negative equity
Some homeowners remain in a negative equity position despite the recovery of values to date and are faced with circumstances beyond their control. Resolving default before it occurs is always a more favorable alternative. In some cases, lenders have internal programs available for borrowers that do not qualify for any of the Administration options.
Loss mitigation guidelines are complex and subject to alteration on short term basis. Getting a lien released for less than the amount owed is only the tip of the iceberg. The contingent liability exposure to deficiency judgment and tax liability can be potentially devastating if unresolved.
If appropriate, consider a loan modification before pursuing a short sale. In an appreciating market, lender preference may be to get some performance from a loan rather than writing off the loss immediately. A year from now, the collateral will be worth more to both you and the owner. Qualification standards have become very flexible, so even if you’ve been turned down in the past, another attempt may be productive.
If a short sale is the likely outcome, explore your options now. Legislation which exempts qualifying forgiven debt from income tax is likely to expire at the end of 2013. Owing the IRS is substantially more restrictive than owing a bank. Let me know if you’d like information about your specific options or if you’d like information regarding availability of other lender programs or practices.
If you are considering a real estate transaction, thorough analysis and competent representation are essential. We are in a transitioning market. There is potential for profit, as there is risk of loss. If we understand the underlying facts, we can continue to make good business decisions logically and without emotion. I am a real estate professional and accept responsibility for keeping my friends, neighbors, and business community informed as to all aspects of things affecting the real estate portion of their holdings.
If your home is currently listed for sale, this is not a solicitation. If you have a real estate question, I will be happy to answer it or find the answer. If you have a real estate need, I will appreciate an opportunity to compete for your business.
Our team is very good at what we do. Results demonstrate that now more than ever before. Don’t settle for less.