Comments (0)

February 8, 2010

A few weeks ago I blogged about the biennial budget proposal for the state of Virginia that would have frozen the Local Composite Index (LCI), a key component of the formula determining the distribution of state funding to schools. The LCI for Northern Virginia dropped relative to other areas of the state, which, by the formula used for decades, should have meant more money for those school districts. The proposed freeze would have done Northern Virginia out of $128 million in funding, of which Fairfax County’s share is $61 million.

The governor of Virginia has today decided to update the LCI, or at least to “support” updating it, which will require a change to the already introduced budget. It remains to be seen what actually happens in the legislature.

Governor McDonnell’s press release:

Governor Bob McDonnell announced today that he will support updating the Local Composite Index (LCI), the formula which determines state and local education funding responsibility, in the upcoming budget. The move will mean another proposed change to the introduced budget, which froze the LCI at its current level. The LCI has historically always been adjusted every two years to account for changing local economic conditions. The proposal to freeze the Index was unprecedented, and would have cost certain localities in Northern Virginia $128.3 million in state education funding.

Speaking about his decision, Governor McDonnell stated, “For nearly forty years, the Local Composite Index has been an impartial means by which to determine state and local responsibility for education funding in Virginia. The application of this Index has always been done in an objective manner, using the most recent fiscal data to most fairly apportion state resources. For many school districts, particularly in Northern Virginia, the biennial update of the Index has meant far less funding from the state than that received by school districts in localities experiencing lesser rates of economic growth. Accordingly, I will not support the proposed freeze in the budget introduced by the previous Administration. The Local Composite Index must be applied to all localities, at all times, in the same objective and fair manner by which it has always been utilized.”

McDonnell continued, “The decision to continue to update the Local Composite Index is one that I reached after extensive meetings with my finance staff, legislators, and local government officials. I thank all these individuals for their input and thoughts during the process. Ensuring that we have a fair formula that is implemented without regard to temporary or political considerations is the best means by which to appropriate education funding in the Commonwealth. Every time the Index is readjusted some school systems gain funding, while others receive less. This has occurred for nearly forty years, and local officials understand the routine and objective biennial implementation of the Index.”

In announcing his decision to undo the proposed freeze of the Index, McDonnell also identified specific budget savings to account for the additional state spending required. The update will cost the state $29 million in FY 2011. To cover this increased funding, McDonnell will recommend to the General Assembly the transfer of $13 million from Literary Fund balances; $8 million through the use of available balances in the Health Insurance Fund to reduce state health insurance premiums; $5.2 million will be found in Real ID savings and an available $3 million will be captured in additional Non-General Fund balances. Budget recommendations will continue to be made and communicated to the legislature in the coming days.

Bravo. Let’s see what happens next.

Comments (0)

February 4, 2010

From the Springfield Connection’s report on a Jeff McKay Lee District Town Hall meeting on January 30:

McKay gave an update on the Springfield Mall renovations, saying that the 10-year plan to rehabilitate the mall is underway and is making good progress. Phase one, which includes a new food court, movie theater and indoor renovations has been revamped, he said, and construction should begin in April or May.

“The news is good for the Springfield Mall,” McKay said. “The first phase is the most important part because what we really want out of the mall is quality retail and entertainment and that is what is going in, in the first phase.”

Further update – in his newsletter today, Supervisor McKay said,

Redevelopment of the mall has been a priority and we have successfully worked with the mall owner in planning a transformation into a modern, pedestrian-oriented mixed-use town center . . . The new mall and town center will include a grocery store, dog park, tot lot, athletic courts, fitness center, and state-of-the-art movie theater. Other community investments that are part of this case include an artificial turf field for Lee High School, financial contributions to the Lee District REC Center, Springfield Regional Road Fund, the TAGS circulator bus system, and improved access to Metro from the Mall.

More updates as I see them!

Comments (0)

February 2, 2010

I always tell my clients to be careful what they wish for when they get excited about a home with “no HOA!”  (homeowners’ association). I’ve seen many neighborhoods with incredibly ugly remodeling jobs, disgustingly messy and unkempt yards, and all kinds of commercial vehicles on the streets, including taxis and limos. Now Fairfax County has done something to at least help with the parked vehicle problems.

Yesterday (Feb 1) changes to Section 82-5-7 of the Fairfax County Code, which prohibits parking of commercial vehicles on streets in residential districts, became effective. The changes better define “commercial vehicles” and should improve parking enforcement of large/commercial vehicles parking on residential streets. (Parking in private driveways is not regulated by the County, but may be covered by homeowners’ or condominium owners’ rules or covenants.)

Here is a summary of the changes:

• All taxicabs and limousines must be licensed and registered in the Commonwealth of Virginia as a taxicab or limousine, and only one may be parked by each household.
• “Commercial vehicles”  include:
  • Any vehicle licensed as a common or contract carrier or limousine (except as above).
  • Vehicles that exceed any of these size and weight limits:
    • 21 feet long, or
    • 8 feet high including appurtenances (e.g. ladders), or
    • 8 1/2 feet wide, or
    • weighing 12,000 pounds.
    • Vehicles exempted from these size and weight limits are: commercial vehicles used by public service companies (including cable), vehicles for propane gas service, watercraft or motor homes, school buses, vehicles driven by or used for transporting persons with disabilities, moving vans (for 48 hours). These vehicles can park in a residential area unless restricted elsewhere in the Code, e.g., boats and motor homes are not allowed to park in areas that are Community Parking Districts.
  • Vehicles carrying commercial freight in plain view.
  • Trailers or semitrailers except camper, boat or single axle utility.
  • Any vehicle with 3 or more axles.
• Where a service road is adjacent to a residentially zoned area, parking restrictions apply to the side of the service road that is adjacent to the residential area except as otherwise provided in section 82-5-37(5). This allows prohibiting commercial parking on that side of the street which is zoned for a use other than residential to further the residential character of the abutting community.

The restrictions do not apply to commercial vehicles when temporarily parked while performing work or service.

Useful Links:

• Approved Code Amendment
• Notable vehicles that exceed the new restrictions (some 2009 pickup truck body styles exceed the restrictions).
• Notable vehicles that do not exceed the new restrictions.
• Field Photos: Examples of vehicles that do and do not exceed the restrictions.

Comments (0)

January 21, 2010

The Federal Housing Administration (FHA) just announced a set of policy changes to strengthen the FHA’s capital reserves, which have declined to dangerous levels. FHA will take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce maximum seller concessions to 3%, from the currently allowed 6%; and implement measures to enhance enforcement of FHA policies on lenders.

The changes directly impacting home buyers and sellers using the FHA program include:

• The mortgage insurance premiums (MIP) will be increased to build up capital reserves.
  • The first step will be to raise the up-front MIP by 0.5% to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge. If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP. This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing. The initial up-front increase will go into effect on April 5, 2010.

• Update the combination of FICO scores and down payments for new borrowers.
  • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%. This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well. This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

• Reduce allowable seller concessions from 6% to 3%
  • The current level exposes the FHA to excessive risk by creating incentives to inflate the appraised value of the home. Private lending standards have limited seller concessions to 3% for many years. This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

The increased enforcement on FHA lenders includes, for example, publicly reporting lender performance rankings, enhanced monitoring of lender compliance with FHA guidelines and standards, and enhancing  the enforcement of indemnification provisions. This would require all approved lenders to assume liability for all of the loans that they originate and underwrite.

What does all this mean for homebuyers? Well, first off, if you don’t want to pay the higher mortgage insurance premium, buy before April 5! Check with your lender, but my understanding is you have to have a property identified before a FHA case number can be assigned, and that’s the critical action to beat the April 5 deadline. As for the FICO score minimum of 580 to get the 3.5% down payment, most FHA lenders already require scores of 600 to 620. And, allowable concessions from the seller being reduced to 3% really just reflects the realities of the Northern Virginia market – sellers are not going to accept such an offer, because they know that the appraisal will be too low to support the higher sales price they would have to get to compensate for it. And if you need a low down payment, you probably don’t have the cash to waive the appraisal.

Comments (2)

January 21, 2010

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD and FHA announced a policy change that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. This is great news for both buyers and sellers.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales (known as “flips“). This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities. FHA borrowers have often been shut out from buying affordable properties. This action will enable more buyers, and especially first-time buyers, to take advantage of this opportunity.

As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers. But with certain exceptions, FHA has prohibited insuring a mortgage on a home owned by the seller for less than 90 days. Often, and especially in Northern Virginia, these are homes acquired by investors through auctions, bank resales, or “short sales,” that have been upgraded and repaired with the intention of making the investors a profit on the resale.

FHA found that acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of the sellers/investors to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The waiver begins February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices where non-rehabilitated properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender can document the improvements and repairs justifying the selling price.

Other details of this new policy are in the text of the waiver, available on HUD’s website.

This is likely to further increase the use of FHA over conventional mortgages with less than 20% down, because most lenders still have the “flip rule” on their own minimum down-payment programs.

Comments (0)

January 21, 2010

1,349 homes sold in December 2009, an 11% decrease from December 2008 home sales of 1,510. I believe this was the result of two specific circumstances: (1) there was a huge push for buyers to complete their purchases by November 30 under the $8,000 tax credit act (which was extended at a very late date to the end of April 2010) and (2) the available homes for sale (“inventory”) is astonishingly low.

Active listings decreased by over 29% from last year, with 5,421 active listings as of December 31, compared with 7,688 homes available in December 2008. In fact, it’s the lowest end-December inventory we’ve seen since December 2004’s ridiculous 1,645. And I suspect, with the tax credit extended (and a new credit available for move-up buyers), we are going to see hot sales and low inventory numbers for the next 4 months at least. If interest rates (see historical chart) stay under 6%, buyers are going to be facing even more multiple-offer situations than we have now, which would be saying something.

The average days on market for homes in December 2009 decreased by 38% to 57 days, compared with 92 days a year ago. No surprise there. And 58% of homes sold in under 30 days.

Sales prices rose compared with last year. The average sales price in December increased by about 12% to $474,104, and the median price also rose in December to $385,000, an increase of 13% from last December’s $340,000.

I cannot emphasize this strongly enough – those who need or want to sell must get their homes ready and on the market no later than March.

Comments (4)

December 28, 2009

From the Connection Newspapers:

COMMENTARY: Funding Formula Doesn’t Add Up

Governor’s proposed budget freezes Local Composite Index to detriment of Fairfax Schools.

By Sen. Chap Petersen (D-34)

Monday, December 28, 2009

On Dec. 18, Gov. Tim Kaine (D) announced the proposed state budget for the next two fiscal years. The press focused on the governor’s proposal to finally end the car tax and replace it with an additional 1 percent income tax enacted at the local level.

One thing less noted but more insidious to Fairfax County was the governor’s proposal to “freeze” the Local Composite Index for funding public education in Virginia. This is a terrible idea that will specifically take money away from Fairfax and break a promise made to all localities that education funding is based on “need” and not politics.

First, a word of background:

The Local Composite Index is a mathematical calculation which purportedly represents a locality’s “ability to fund” public schools. It measures that by tracking the following public statistics: real property assessments, retail sales and personal incomes.

That aggregated wealth number for each locality is then divided by the number of school age children. The final figure is ranked on a sliding scale from 0 (poorest) to 1 (wealthiest).

The state then funds public education in each locality in inverse proportion to its LCI rating. In other words, if a locality has a 0.20 LCI, then the state funds 80 percent of the basic costs of education. If the locality has a 0.80 LCI, then the state funds 20 percent of the basic costs of education.

For the past couple generations, localities in Northern Virginia have rated high on the LCI, which means we’ve been short-changed on state funding. For that reason, I have contended that the LCI is a pretext that simply enables Northern Virginia’s money to be dispersed around the state for public education.

The process peaked a couple years ago when Fairfax County — the state’s largest school division — reached a .77 LCI, which meant that the state was only funding 23 percent of its base costs to the system educating 170,000 students. Due to our size, nearly every other school division became a beneficiary under the LCI system.

Then a funny thing happened. The real estate market crashed in Northern Virginia and personal incomes also decreased.

For 2010, the LCI is re-balanced. And, shockingly, the numbers were tilting more favorably to Fairfax and its neighboring localities.

For example, Fairfax dropped from .77 to .71. Loudoun dropped from .67 to .58. Prince William fell from .44 to .40.

These marginal increases represent large amounts of money. For Fairfax, the 6 percent change represents nearly $60 million in annual spending for K-12 education — or enough to preserve all-day kindergarten and elementary school music.

That was good news. It was not entirely unexpected. And it was not undeserved. Our localities have been short-changed for years. It was only just that we gain ground.

Then the bad news.

In his Dec. 18 speech, Gov. Kaine stated that his proposed budget would “freeze the LCI” to its present levels in order to give localities “certainty” for budgeting.

Hogwash. In my years in the legislature, no one has ever proposed freezing the LCI before. No other region in this state would let the governor or General Assembly get away with altering a state formula — if it caused them to lose money.

The most infuriating part was the governor’s claim that “seventy-nine school divisions” would benefit from the freeze. Of course, that’s because the big loser is Fairfax County whose size equals all the smaller divisions added together. And our schoolchildren apparently don’t count the same.

Fairfax legislators can embrace the governor’s logic or simply pretend the issue doesn’t exist. Or they can stand up for the schoolchildren and taxpayers of Fairfax County and reject this discriminatory treatment.

Comments (0)

December 14, 2009

Sales continued to be brisk in the Northern Virginia housing market in November. The problem is that inventory – the number of homes available to sell – continues to decline as sellers aren’t getting the word that it’s time. Inventory is down to less than 4 months’ worth of sales. I only can see it getting even shorter as we hit the holidays and cold months (brrrr!) – but will there be an explosion in March/April as the tax credits reach their inevitable end?

Comments (0)

December 10, 2009

Better bus service part of Fairfax plan to clear gridlock – washingtonpost.com.

Fairfax County DOT is proposing a plan to increase bus-only lanes as one step to improve transportation services.

The likelihood of more rail service is low. We have roads, and people like their cars, and buses are relatively cheap. So – any chance of this succeeding?

Read the article and discuss!