Market Rates Today-lowest since January!

Wk/End 30YR 15YR 1YR 5/1ARM
Nov 22 6.18% 5.91% 5.49% 5.99%


Bobbi Dickerson, Preferred Mortgage

'Turnaround Hinges on Pricing'

FRONT LINES: Economy

BY DAVID LEREAH

Turnaround hinges on pricing

Today’s home sales slide is something of an anomaly, since past housing downturns have been fueled by big hikes in mortgage rates and economic slowdowns. We have neither of those today; what we have instead are nervous consumers. Home values got high, affordability deteriorated, and buyers lost confidence.

Once property prices come down to more suitable levels, households and investors should get back into the real estate game.

That might not be too much longer.

Price growth (year over year) turned negative in the West and Northeast in July, and nationally in August. With luck, eased price increases will continue for the balance of 2006. If they do, we might find that the decline in sales bottomed out in July.

That makes prices key. Sellers need to abandon unreasonable expectations about the value of their home. After all, most home owners have enjoyed substantial equity gains on their property during the real estate boom years. Cutting prices by 5 percent or 10 percent won’t wipe out those gains.

Those of us involved in the real estate profession find ourselves in the unlikely position of favoring price softening. Practitioners are asking, or pleading with, sellers to accept market realities and reduce their listing price.

The housing sector and the U.S. economy need home-sale transactions more than home-price appreciation. Every time a home is purchased, other industries, such as furniture and appliance makers, are positively impacted. Economists call this the “multiplier” effect. You purchase a home; you then need to purchase furniture, appliances, and so on.

In fact, a healthy housing market impacts about 20 percent of the U.S. gross domestic product.

Any short-term pain from slower home-price appreciation will be more than offset by sales gains. Once sales pick up, housing inventories drop. That places welcome upward pressure on home prices once again. And the cycle of life in the real estate markets as we know it continues.

Lereah is senior vice president and chief economist for the NATIONAL ASSOCIATION OF REALTORS®.
This article was published on: 11/01/2006

"A Welcomed Correction"

FRONT LINES: Economy

BY DAVID LEREAH

A welcomed correction

The real estate market is off in formerly red-hot cities such as Phoenix, where sales have cooled 31 percent from the second quarter of last year, and Miami, where they’ve cooled 23 percent. Time on market in Phoenix is now 53 days, more than double what it was a year ago. Prices in many of those markets are still up, though, in some cases by double-digit percentages. But in the not-too-distant future, they should start falling—and that’s not a bad thing.

Certainly no one wants to see price adjustments dipping into negative territory—as they already are for condos in many markets that were seeing boom times a year ago—but we need cooling prices today to give buyers a chance to get back into the market.

Unlike previous housing slowdowns, which have come on the heels of broader economic weakness accompanied by job losses and rising interest rates, today’s slowdown comes amid an economy that continues to chug along at a respectable pace. The GDP stood at around 2.5 percent in the second quarter of this year. Continuing solid spending by consumers and businesses, steady government spending, a recovering stock market, and strong corporate profits are behind the steady growth.

Not surprisingly in such an environment, many metro areas are creating jobs, not shedding them. In Los Angeles, for example, more than 60,000 jobs were created over the past 12 months, even though the time that homes spent on the market there jumped from 34 to 54 days. In Dallas some 90,000 jobs have been added and time on market has dipped, from 67 to 65 days.

And in any case, sales remain on a growth curve in a good one-third of the country, largely in areas that didn’t fully participate in the boom of the past five years. In Boise, Idaho, time on market has dropped from 57 to 43 days over the past 12 months, and in Salt Lake City, sales have been strong and price appreciation has more than doubled.

The explanation for this seeming anomaly lies as much in the psychology of buyers as in their pocketbooks. This is a slowdown caused by high home prices and wavering confidence. Sales aren’t cooling because there are no buyers in the market; they’re cooling because buyers are waiting for prices to ease. I’m confident that once prices ease, investors and households will be back.

Lereah is senior vice president and chief economist for the NATIONAL ASSOCIATION OF REALTORS®.

Housing slowdown? Not in Alaska. Quarterly existing-home sales were up nearly 49 percent in this year’s second quarter compared with second quarter 2005. Many other states that never got red-hot during the boom over the past five years are also posting sales growth.

Business Confidence

Sellers hanging tight
Practitioners expect to see little change in seller traffic in the months ahead as buyers continue to wait on the sidelines. Projections for seller traffic are only a little below what they were a year ago, but buyer traffic projections remain down considerably. Practitioner confidence was surveyed in August and looks ahead six months.

Results are based on 449 responses to 3,000 surveys sent to large and small real estate offices. The survey asks practitioners to indicate whether conditions are strong (100 points), moderate (50), or weak (0). Responses are averaged to derive results.

Home Sales

Easing continues
A drop in NAR’s leading home sale indicator points to a continuation in the slowdown practitioners have seen in existing-home sales. Total existing-home sales, which include single-family houses, townhomes, condominiums, and co-ops, eased in July by 4.1 percent to a seasonally adjusted annual rate of 6.33 million units from a pace of 6.60 million* in June. The July pending home sales index, which was down 7 percent to 105.6 from 113.5 in June, suggests more cooling is on the way.

*Revised from the figure reported in the September issue.
†Seasonally adjusted annual rate, which is the actual rate of sales for the month, multiplied by 12 and adjusted for seasonal sales differences.

Find current economic data at REALTOR.org/research.
This article was published on: 10/01/2006

Northern VA October Statistics

Home Sales Statistics October 2006
REALTORS® Advise Buyers for a Value-Priced Home, Advise Sellers to Boost Appeal to Prospective Buyers
The Northern Virginia Association of REALTORS® reports on October 2006 home sales activity for Fairfax and Arlington Counties, the cities of Alexandria, Fairfax and Falls Church and the towns of Vienna, Herndon and Clifton.

Former Federal Reserve Chair Alan Greenspan recently said that housing prospects are looking up nationwide. “Most of the negatives in housing are probably behind us. The fourth quarter should be reasonably good, certainly better than the third quarter.” According to industry estimates, 2006 will be the third-best year on record for home sales. Given that our region has economic indicators exceeding the national average (i.e. employment growth, procurement), our market correction should be viewed favorably, especially for discerning buyers.

The region’s real estate market is entrenched in a stabilizing mode, as October data shows when compared to July, August and September. Such consistent stabilization signs will likely trend this way through spring. Supply continues to be high and demand ranges from moderate to low levels. House prices vary in some Northern Virginia neighborhoods, however existing inventory delivers a great selection for serious buyers. Mortgage rates continue to be steady.

Houses continue to take longer to sell. The average number of days on the market for October sales was 83, far longer than the 32-day average in October 2005.

In October 2006, 1,498 houses were sold, reflecting a 21 percent decline since October 2005, when 1,901 homes sold. Active listings grew by 46 percent, reaching 10,380 at the end of October, compared to 7,122 homes for sale in October 2005.

The average Northern Virginia sales price in October was $524,236, which is a 4.7 percent drop from October 2005, when the average price was $550,069.

The Year-To-Date average sales price of $539,059 shows a gain of nearly 1 percent compared to the Year-To-Date sales price of $535,174 one year ago.

Sales activity in Greater Northern Virginia (NVAR jurisdictions plus Prince William, Loudoun and the Greater Piedmont counties) for October tracks similarly with Northern Virginia.

The average sales price of $489,185 in October reflects a 3.19 percent drop from the October 2005 average sales price of $505,326. The Year-To-Date Sales Price gain is 2 percent up to $504,876 in October 2006 from $494,975 in October 2005.,

The number of units sold in the Greater Northern Virginia region was 2,499 in October 2006, reflecting a 31 percent decline from the 3,622 houses that sold in October 2005.

National review of Housing Market: Is the Worst Over for the Housing Bust?

Is the Worst Over for the Housing Bust?
Economists Say 'Yes' in New WSJ.com Survey
But Their Views on Home Prices Vary Wildly

By PHIL IZZO
November 20, 2006


Economists Say 'Yes' in New WSJ.com Survey
But Their Views on Home Prices Vary Wildly

By PHIL IZZO
November 20, 2006

, economists said by nearly 2-to-1 in the latest WSJ.com economic forecasting survey. But they still predict that the average selling price of a house will fall next year.

After several years of double-digit percentage increase, housing prices stopped soaring this year. The 49 economists responding to the WSJ.com forecasting survey expect home prices, measured by the government's Office of Federal Housing Enterprise Oversight index, to rise 2.8% this year and to fall by 0.5% next year. That contrasts with a 13.4% increase in 2005.

"We're nearing the end of the slowdown for most markets," said Ethan S. Harris at Lehman Brothers. Prices still have some ways to fall before they'll stabilize, but there are signs that most drastic parts of the downturn – marked by a sharp pullback in demand and new construction – have run their course.

The economists' predictions for home prices next year vary widely, from an increase of 7%, predicted by Kurt Karl and Arun Raha of Swiss Re, to a 10% decline, expected by Maury Harris of UBS. Mr. Harris, for his part, said he expects a large inventory of vacant newly constructed homes to push prices lower in the first half. Construction companies "built much more than were justified because of investor interest," he said.

While 20 economists predicted home prices would rise next year, 24 forecast a decline. Just eight of the economists forecast gains greater than 2.1%, which is their average forecast for consumer-price inflation through mid-2007. The Ofheo index, which is closely watched by economists, has never posted a year-to-year decline.

Richard DeKaser, an economist at National City Corp., a big mortgage provider, said he thinks the worst is over. "We're starting to see inventories topping out and possible declining," he said. Mr. DeKaser forecast a 4.4% increase in prices this year and a 1.8% decline next.

The housing market, of course, doesn't move uniformly across the country; some regions or individual cities often have price changes decidedly above or below the national average.

Mr. Harris of Lehman expects price declines next year to be confined to "bubble" markets, such as those in Florida, California and cities in Nevada and Arizona, where large numbers of investors have artificially inflated prices. "There's no reason for prices to be falling in areas without a bubble," he said. "People are just slowing down purchase decisions."

Allen Sinai, at Decision Economics Inc., believes the worst of the bust is over, but he feels housing remains a big risk to the economy. The housing sector subtracted 1.1 percentage points from third-quarter gross domestic product, according to preliminary numbers from the U.S. Commerce Department.

The economists trimmed their forecasts for fourth-quarter economic growth: Their average estimate puts gross domestic product growth at a 2.3% rate in the fourth quarter, down from the 2.5% rate they forecast in the October survey. They expect growth to remain at that rate through the first half of 2007 and then to accelerate later in the year. On average, the economists predicted growth of 2.8% during the second half 2007. GDP is the broadest measure of economic output.

The housing slowdown is expected to hit consumer spending, but the "consumer won't cave in and drive us into a recession," said Mr. Sinai. Steady interest rates, controlled inflation, stabilizing energy prices and a solid jobs market will support the economy, he said.

Indeed, new data released Monday indicated that weakness in the housing sector is being offset by other areas of the economy. The Conference Board, an industry-backed research group based in New York, said its composite index of leading indicators for October rose by 0.2% to 138.3, in line with expectations. September's reading was revised up to a 0.4% advance. The index is designed to predict activity in the three to six months ahead.

"People say all bubbles end in disaster, but this is a small bubble. Home prices are just about 20% too high. We need to take it seriously, but in the history of bubbles, this will go down as one of the smaller ones," said Lehman's Mr. Harris.

Among other findings in the survey:

• Economists expect a relatively happy holiday for retailers, forecasting a 5.1% rise in sales from last year.

• Some 57% expect Fed policy to be the biggest factor in the economy and markets over the next year, topping Iraq or the budget and tax legislation.

• Eight of 56 economists expect the Federal Reserve to raise rates beyond the current 5.25% rate before June 2007.

• Economists expect just 107,000 new jobs a month over the next year, down from 109,800 forecast in October and 179,400 at the high for this year's surveys, in February.

Waiting in the Wings

Washington, D.C., which boasts a healthy local economy, will likely need a smaller price decline to stop the sales bleeding than some metropolitan areas in CA where affordability conditions are forcing households to move to other locations.

David Lereah, National Association of Realtors Chief Economist
'Waiting in the Wings, www.relator.org, November 2006

Steady Growth over Long Term

According to GMU Center for Regional analyze John McClain & Lisa Fowler home owners in the Washington DC area can expect increase in their homes' value.
In the past 30 years, homes have had a yearly average home price appreciation of 7%.
The prediction is that in the Spring housing prices will resume their price appreciation. The average price of homes doubles every 10 years and every 9yrs in DC metro area.
NVAR Realtor Update, November 2006

Where is the Real Estate Market Now?

Is now the time to buy? To sell? To hold? How does it compare to last year, the year before?

So many people question our real estate market today as there have been many changes over the past several years.
I have created a presentation that includes an overview of our market today, where it has come from and where it is headed. Grab a friend and come hear where we're at and what to expect.

Contact me today to learn about our DC Metro area Real Estate market.

Mortgage Rates Today.

Wk/End 30YR 15YR 1YR 5/1ARM
Nov 2 6.31% 6.02% 5.53% 6.05%

Bobbi Dickerson, Preferred Mortagage

Our Market Today

Possible lower interest rate in our near future.

Even Freddie Mac economist, Frank Nothaft, was talking up the lower rate scenario, saying they were due, at least partially, to a slower than expected rate of economic growth. In fact, mortgage rates did ease slightly on the early bond news. The 30-year fixed-rate now stands right where it was one year ago. Whither they goest? Not surprising, you can take your pick of scenarios. One proclaims a continued weakness in housing, but with a soft landing, which leads to a soft economy and stable or lower rates. The other, seemingly the view of some Fed members, notes the low unemployment rate, smaller gains in productivity (which help offset costs) and a rebound in the economy next year.

Preferred Mortgage & Bobbi Dickerson, loan officer

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