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By Kim, May 12, 2010

Here are the April 2010 home sales activity for Northern Virginia – including Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church and the towns of Vienna, Herndon and Clifton:

A total of 1,793 homes sold, 16% more than April 2009 home sales of 1,544 and the 21stth consecutive month of higher year-over-year sales. And for the 25th straight month, the number of pending home sales increased over the same period as the year before – 12% this month.

Active listings increased only sightly from last year, with 8,327 active listings in April, compared with 8,234 homes available in April 2009. The  “inventory,” as we real estate people refer to homes available for sale, is less than five months’ worth of homes. The industry generally considers anything under six months’ inventory to represent a “sellers’ market,” although I think it’s more balanced.

The average days on market (DOM) for homes in decreased to 45 days, compared with 85 days a year ago. More importantly for most sellers, more than 70% of homes sold went under contract in less than 30 days.

The average sales price in April rose by 12% from last year, to $455,686, while the median price rose 9% to $390,000. The year-to-date increase in average prices is on the order of 12%.

Now that the federal tax rebate programs have ended, let’s see where the market goes in May and June, usually the prime time for home sales. I would expect actual sales (closings) to go up, but I have no idea what will happen with pending sales. Will buyers keep on coming?

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By Kim, May 11, 2010

I’m sure all of you denizens of the Springfield, Virginia area are eager for news of what’s going on with the big project to redevelop Springfield Mall into a bustling multipurpose, mixed-use retail/hotel/office/residential complex, as advertised starting in about 2006.

And I wish I could tell you. I’ve been trying to keep up with this project, which is so critical to the future of the area, but . . . it’s . . . taking . . . a . . . lot . . . of . . . time.

My last post on the subject, about three months ago, included information from Supervisor Jeff McKay’s office to the effect that construction on Phase One, including a new food court, movie theater and indoor renovations, should begin in April or May. Not happening. I was there yesterday and  the only renovations to be seen are a small bit of torn up floor tiles, and a single set of the old off-white railings repainted grey, outside the interior Macy’s entrance upstairs. I’m told this work is preparatory to a test of some minor work planned for the rest of the mall interior.

McKay’s office remains confident that the project is on track because the various permit applications and meetings are continuing. The project received County rezoning approval last July, but McKay’s office says the various permitting requirements for a project of this magnitude are quite time-consuming.

The mall’s owner, Vornado Realty Trust, appears to be in strong financial condition despite the current state of the commercial real estate market. They are making a profit – unlike General Growth, the owner of Landmark Mall, who also had big plans but just went through the largest bankruptcy in US history.

However, Vornado has just this spring defaulted on mortgages for at least three projects – Springfield Mall ($164 million), High Point (NC) Merchandise Mart ($217 million) and The Cannery in San Francisco ($18 million). It is widely assumed that these defaults are strategic, designed to force the renegotiation of the mortgages for Vornado’s benefit, and that they want to continue to hold, manage and renovate the properties more or less as originally planned. That would make hardball business sense, I suppose, but it’s not the kind of dealing that would make me pleased to have Vornado as a major player in my town.

Update 5/12/2010:  A scenario for your consideration – Vornado’s mortgage on the Mall is nonrecourse debt, meaning Vornado is not liable for making its lenders whole if the property is worth less than the mortgage. This is different from residential mortgages in most places, where the lender can file a judgment against you if you default, and recover losses from other assets you might have or acquire.

So, commercial property goes into general decline (which it has), plus Vornado “manages” the property in such a way as to make it less valuable – i.e., by losing most of the tenants, which seems to have been accomplished. (Remember, the anchor stores – Target, Macy’s Penney’s – are not tenants; they own their stores.) Then, Vornado defaults on it’s now much-less-valuable property – or threatens to. The lender, faced with renegotiating the debt or taking a possibly even bigger loss through foreclosure and resale, is now over a barrel – even if it forecloses and sells the property to the highest bidder, the highest bidder could still be Vornado or some shell company they own.

Hmmm . . . .

More news as I get it.

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By Kim, 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.

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By Kim, July 14, 2009

From the Fairfax Times today:

A complete overhaul of the Springfield Mall and surrounding areas gained final approval July 13.

The Fairfax County Board of Supervisors unanimously approved turning the 34-year-old mall property into a more urban-style town center that the community hopes will once again make central Springfield a destination.

“Springfield Mall needed a complete transformation,” said Supervisor Jeff McKay (D-Lee). “We wanted a regional mall on par with other regional malls in the area that we could be proud of.”

The project includes upgrades to the mall itself, as well as construction of new offices, apartments, a hotel, movie theater and additional restaurants and shops. Mall owner Vornado has also promised to improve connections to the Franconia-Springfield Metro station for pedestrians, cyclists and buses; build a synthetic turf playing field; and contribute to area road and park improvements.

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By Kim, July 13, 2009

June 2009 home sales activity for Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church and the towns of Vienna, Herndon and Clifton:

A total of 2,169 homes sold, 14.2% more than  June 2008 home sales of 1,900 and the 11th consecutive month of higher year-over-year sales.

Active listings decreased by 27 % from last year, with 7,617 active listings in June, compared with 10,440 homes available in June 2008.  The decrease in “inventory,” as we real estate people refer to homes for sale, is becoming somewhat alarming – that’s only 3 1/2 months of inventory.

The average days on market (DOM) for homes in decreased to 71 days, compared with 83 days in June 2008. However, more than half the homes sold in under 30 days.

The average sales price in June fell by 7% from June 2008, to $451,354, while the median price fell 6% to $392,367. These prices are, however, again higher than the preceding month.

And for the 15th straight month, the number of pending home sales increased 17% over the same period last year.

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Properties

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By Kim, May 18, 2009

Saturday’s Washington Post Real Estate section featured an article by Ken Harney entitled, “New Appraisal Rules Come With Costs,” in which he posits the following scenarios:

• The real estate appraisal that used to cost you $325 now costs $450, even though the appraiser doing the work is getting only $175 or $200.
• Your appraisal-related charges may now be subject to add-on fees – such as $50 to $100 extra in “no show” penalties if you get stuck in traffic and miss your appointment with the appraiser, or an extra $50 to $150 if the property is worth more than $500,000.
• Your mortgage loan officer requires you to pay for the appraisal upfront with a credit or debit card, rather than including the fee with the usual lender origination costs at settlement. Your card may be charged more than the anticipated cost of the appraisal – leaving debit-card holders in a potential overdraft situation.
• The person conducting your appraisal may be new to the field – willing to work for a cut rate – and may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience.
• If your mortgage application is denied by one lender, you could be forced to pay for a second full appraisal because the new lender may not accept the first one.

The “new appraisal rules,” which go by the name Home Valuation Code of Conduct, were imposed May 1 by Fannie Mae and Freddie Mac, and are intended to improve the accuracy of appraisals by eliminating pressure on appraisers from loan officers. The code pushes most large lenders to use third-party “appraisal management companies” that contract with networks of independent appraisers around the country who thus are not in direct contact with retail loan officers or mortgage brokers. The Code came about as a result of an agreement made between the Federal Housing Finance Agency and the New York State Attorney General. The intent of the agreement was made to enhance the independence of appraisers. The most relevant part of the code seems to be the following:

The lender or any third party specifically authorized by the lender (including, but not limited to, appraisal companies, appraisal management companies, and correspondent lenders) shall be responsible for selecting, retaining, and providing for payment of all compensation to the appraiser. The lender will not accept any appraisal report completed by an appraiser selected, retained, or compensated in any manner by any other third party (including mortgage brokers and real estate agents)

It used to be that a mortgage professional – whether working for a specific lender or as a broker – might have a “stable” of appraisers he or she could call on to provide services. Most of them just wanted a reliably thorough and competent job. However, and this is the reason for the new rules, some only wanted appraisers who were willing to find the right “comps” to hit a specific valuation necessary for the loan to go through. Under pressure to produce that number or perish, many appraisers buckled.

But are the new rules helpful or harmful to the more ethical mortgage lenders and brokers out there? Are they seeing big increases in appraisal costs? How about appraisal quality, now that they can’t choose one of their go-to guys? I asked several of the mortgage professionals I work with every day in Northern Virginia to give me their impressions about whether they find the scenarios suggested in Harney’s article to be happening here:.

We’ve actually been working under these rules for many years . . . All appraisals have been ordered through a 3rd party management company, and while we did have some communication with the appraiser (although not encouraged), we cannot any longer . . .

This is actually a good thing that is happening. Too many times appraisers have been bullied by agents, mortgage lenders and borrowers for not having the same opinion. This [code] will take that opportunity away. This does NOT mean that you can’t call the appraiser, still meet them at the home, etc . . . this is so that lenders cannot contact the appraisers directly – even for a status, as this is seen as undue pressure. These appraisers are professionally trained, educated and have to uphold ethical standards just like all of us; yet no one challenges our decisions like these people.

[The fees and time requirements] are the same, for now. I bet the appraisal costs will go up, and they should. The appraisers can’t live on a “cut” and they have been required to do so many more compliance checks etc . . [Turnaround times] are longer due to volume.

This won’t change the quality . . . if anything the quality will improve because the lenders and agents are now separated from any undue influence.

Jennifer Duplessis, Prosperity Mortgage

Interesting article and I am happy to say we have not had the issues mentioned. [Local] appraisers have only added $25.00 to their fees due to some additional addendums that required extra research. Appraisal fees have ranged from $350 to $375 and now are $375.00 to $400.00 for under $1 million sale price, and they have always charged more for above $1 million – that is not new. Yes, loan officers are no longer allowed to directly pick the appraiser – it is an automated random selection of a pool of known appraisers in our local area.

I think the worst [problem] is the extreme pressure the appraisers are [receiving from the lenders] to include the foreclosures and short sales when determining values. During the recession In the early 90’s foreclosures and short sales were considered distress sales and discarded as [comparable to a] homeowner selling their property. In my opinion, this change in [guideline] has escalated the erosion of home prices. They should have allowed for an adjustment upward on the distress sale, but they did not, they are requiring the appraisers to use them thus providing for lower and lower values – how unfair to the normal seller is that?

Shirley Jones, First Savings Mortgage

I haven't experienced any true horror stories yet, but the new system will definitely change things. I think the appraisers will feel empowered to bring in property values at whatever they feel the value is, regardless of what it may mean for the transaction. The old system had a conflict of interest where (I believe) appraisers didn't want to ruin too many deals with a low appraisals since they were hurting their referral sources (potentially their future income) by bringing in the low appraisal. This new system will potentially change that, which ultimately will be a good thing, but could be painful. I think that will be the biggest change. I believe we will see more low appraisals (meaning appraisal comes in below contract price).

In the past we could choose appraisers and go with ones that we felt were "good appraisers." We now have less of a say. It also adds a layer to the process which usually means more time. I do agree with what the article said about the costs of the appraisals being higher. Mortgage brokers definitely kept costs down with the old system. Appraisals have gone up by about $100 over the past year I believe. I haven't noticed a big difference in the quality of appraisal, but it is still early in the process.

Overall I don't love the new system but the old system definitely had it's flaws also. I'm not sure I would want to go back to the old system even if we could.

Kevin Haddon, Wells Fargo Home Mortgage

So on balance, it seems, in the Northern Virginia area the new rules are seen in an overall positive light by people who I believe to be in a position to know. Yes, costs my have increased slightly, and there may be a somewhat longer turnaround – especially as the system gets established – but I think the horror story scenarios drawn by critics are not reflected in the actuality. I do agree with Shirley's view about separating the distress sales from the normal sales – it's unreasonable, but it's not a part of the new rules, just a lender-imposed requirement. Appraisers should be able to reflect adjustments for condition, given the lousy condition of most foreclosures, but it's unlikely to fill the gaps.

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By Kim, May 15, 2009

April 2009 home sales activity for Fairfax and Arlington counties and the cities of Alexandria, Fairfax and Falls Church and the towns of Clifton, Herndon and Vienna:

• A total of 1,544 homes sold in April 2009, an increase of 6% over April 2008, and the ninth consecutive month of higher year-over-year sales. Terrific, but look at this – pending home sales, based on signed contracts, are 2,692, up 25% from last year! Pending sales have been up double-digits year-over-year for 13 consecutive months.
  
• Active listings – homes on the market – decreased by 23% from last year, with 8,234 active listings at end-April. Fewer homes on the market usually means prices are poised to start rising. The supply of homes remains in the less-than-six-months “seller’s market” range.
• Another sign of strong activity – the average days on market (DOM) for homes in April 2009 decreased by 15% to 85 days, compared with 100 days in April 2008.
• Sales prices continue to remain lower than those realized last year. The average sales price in April fell 16% percent from April 2008 to $405,514, while the median price was $356,750, a decline of 14%. The average and median sale prices are again both higher than last month, however.
• Agents continue to see a lot of multiple-offer situations on attractive well-priced homes in good condition, particularly in price ranges under $475,000. If you are looking for such a home, be prepared to act decisively.

It’s Good To Have A Friend In The Business®

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

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By Kim, May 7, 2009

Special Education Teachers in Demand – washingtonpost.com.

I bask in the reflected glory of my friend and neighbor Beth Curtis. She truly is “a natural.”

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By Kim, April 15, 2009

March 2009 home sales activity for Fairfax and Arlington counties and the cities of Alexandria, Fairfax and Falls Church and the towns of Clifton, Herndon and Vienna (this sounds like a weather alert, doesn’t it?):

A total of 1,384 homes sold in March 2009, an increase of 11% over March 2008. That’s great, but look at this – pending home sales, based on signed contracts, are 2,306, up a fantastic 33% from last year!

Active listings – homes on the market – decreased by 20% from last year, with 8,069 active listings in March, compared with 10,123 homes available in March 2008. Fewer homes on the market usually means prices are poised to start rising. The supply of homes has again fallen into the under-six-months “seller’s market” range.

Another sign of strong activity – the average days on market (DOM) for homes in March 2009 decreased by 18% to 89 days, compared with 109 days in March 2008.

Sales prices continue to remain lower than those realized last year. The average sales price in March fell 17% percent from March 2008 to $395,512, while the median price was $335,000, also a decline of 17%. Interestingly, though, the average and median sale prices are both about 5% higher than last month.

Agents are reporting a considerable number of multiple-offer situations on foreclosures, and on attractive well-priced homes in good condition, particularly in price ranges under $425,000. If you are looking for such a home, be prepared to act decisively – and, if the home is right for you, don’t let yourself be outbid.

It’s Good To Have A Friend In The Business®

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4.5% Listings with First-Class Service — Cash Back to My Buyers!