Not only have 30-year fixed mortgage interest rates been at or below 4% since November 3rd, they also hit an all-time low this past week at 3.87%.
 
Buying a median priced home a year ago:
   Price:  $180,000
   Interest Rate:  4.81%
   Monthly Payment:  $884  (assuming 80% LTV)

Buying a median priced home now:
   Price:  $174,900
   Interest Rate:  3.87%
   Monthly Payment:  $781  (assuming 80% LTV)
  

If you are in the market to buy a home, some of the properties you might be considering are foreclosures – but there are some distinctions to be aware of at different stages of the foreclosure process. It is possible to buy a home from the owner before they are foreclosed on even if they cannot pay off their mortgage – this is called a short sale.  Or, you might buy a property at the courthouse steps when it is being auctioned – this is called a trustee sale.  Finally, if a property does not sell at the auction, you can buy the property from the lender after they have taken ownership of the property – this is called a bank owned property or REO property.

SHORT SALES:  Some homeowners must sell their home, but market conditions won't allow them to sell it at a high enough price to be able to pay off their mortgage(s).  In this example, a homeowner might have a $250,000 mortgage balance but can only sell the property for $230,000.  As a prospective buyer, it is sometimes possible to purchase this type of a property through a process called a "short sale."  In such an arrangement, the homeowner petitions their lender to accept less than the full payoff of the mortgage and in return to still release the deed of trust so that ownership of the property can be transferred over to you, the new owner.  This can benefit the lender, as they skip the time delays and cost of the foreclosure process.  This can also benefit the homeowner, as a short sale will have a slightly lesser negative impact on their credit as compared to a foreclosure.  As a buyer, however, you must know that there are challenges to buying a property as a short sale.  The biggest challenges of late seem to be the uncertainty of the purchase and the time table.  Even if you and the homeowner agree to a price of $230,000, the homeowner's lender must still agree to accept that price – since it won't allow the homeowner to pay off their $250,000 mortgage balance in full.  This process of waiting to hear back from a lender, and then complying with all of their various terms can sometimes take 60 to 120 days – or longer!

Research potential short sales in Harrisonburg and Rockingham County online via www.HarrisonburgShortSales.com




TRUSTEE SALES:  If a short sale does not take place, and a homeowner is behind on their payments (or not making them at all), eventually the property will be sold by the lender on the courthouse steps.  Buying a property at a "trustee sale" can be exciting, and can be a great opportunity – but there are challenges as well.  If a property to be sold at a trustee sale is also listed for sale with a Realtor, you can usually view the property ahead of time by calling your Realtor.  Otherwise, you will likely not have the opportunity to see inside the property before the trustee sale, and thus you will not know too many details about the condition of the property. Furthermore, your purchase of the property at the trustee sale cannot be contingent upon viewing the property, or inspecting the property.  In this instance, you are purchasing the property in "as is" condition, regardless of what you then find out about the property.  It is also important to note that many times the lender will have an opening bid at the trustee sale that is close to (or sometimes higher than) the amount that they are still owed on the mortgage. Thus, in the example above, they might make an opening bid of $250,000.  As a result of this opening bid process, many (or most) properties available for purchase at a trustee sale are not great opportunities.  Occasionally, a property will be foreclosed upon that has had a mortgage in place for many years, whereby the balance of the mortgage is much lower than current market value – these are great opportunities for a buyer.

Research upcoming trustee sales in Harrisonburg and Rockingham County online via www.HarrisonburgForeclosures.com




BANK OWNED PROPERTIES:  If you don't buy the property before the auction (as a short sale), and don't buy it at the trustee sale, you'll have a third opportunity to buy it once the bank owns it.  These properties are called "bank owned properties" or REO properties ("real estate owned").  Oftentimes, the prices on these properties are quite realistic, if not under market value.  It would not be atypical for a house such as the one mentioned above to come on the market after the trustee sale at a price of $210,000.  In such an instance, you should expect to be buying the property in "as is" condition, and you will also be buying with a slightly different contract document.  Most lenders have a long standard contract or contract addendum that spell out a variety of additional contract terms designed to protect them from any future liability – and rarely will a lender agree to have these contract documents changed in any way.  As you can see above, oftentimes buying the property as an REO property is where the best opportunity lies.

Research currently available bank owned properties in Harrisonburg and Rockingham County online via www.HarrisonburgREO.com




When a home goes into foreclosure it is often for very sad and unfortunate reasons – such as the loss of a job – and I do not wish such circumstances on any homeowner.  However, if you are a buyer in today's market it is important to be familiar with different methods for buying a property when it will be, is being, or has been foreclosed upon.

For information about purchasing a property as a short sale, or purchasing a bank owned property, please e-mail me at scott@HarrisonburgHousingToday.com or call me at 540-578-0102.

A great question from a blog reader.  Any thoughts, other blog readers? 
 

Would you advise your Aussie friends as to whether they're getting a good deal on the house they're buying in Sydney?  Would you want to make sure they were gobsmacked about the price you were paying for a house here in Harrisonburg?

What about New York City?  If your friend was buying a condo in Queens, would you weigh in on what she should pay?  And would you wait anxiously to hear back from her about how how you should price your duplex in Dayton?

How about Richmond?  If your mom lives in Glen Allen, will she get the final call on the price you pay for your new single family home in Harrisonburg? 

I'm sure you have intelligent Australian friends, well-read pals in Queens, and astute parents in other areas of Virginia -- but I challenge you to:

• Remember that this local real estate market (Harrisonburg and Rockingham County) is quite different than all of the aforementioned housing markets.  The glut of foreclosures in Richmond that is driving down prices doesn't drive them down in Harrisonburg.  The deals that home builders are giving away in Northern Virginia doesn't mean that a builder in Harrisonburg will be giving away those same deals.
     
  
• Become familiar enough with the local market to be comfortable making decisions in consultation with your Realtor.  I have seen far too many buyers lead astray by well intentioned parents who live out of town and think they are doing well by their kids to advise them about what they should do and how they should proceed in a real estate deal.

Again, I am sure you have very well intentioned, well informed friends and relatives all around Virginia, the United States, and perhaps the world.  But at some point, we'll need to focus in on the nuances of the Harrisonburg and Rockingham County housing market and make the best decision in a local context.

I am ready to spend as much time as needed with you to help you understand our local housing market and how such an understanding could and should guide your real estate decisions.  Are you ready?

Many condo buyers would like to purchase their condo using an FHA loan, and some condo communities are no longer approved for FHA loans.  Here's the news from last month....



How might that affect you here in Harrisonburg?  Well, one of the newest and most exciting condo communities in Harrisonburg is Founders Way.  OK, yes, I do represent the developer and thus might be a bit biased -- but that's what we hear from the people who have bought at Founders Way too!  So, if you're interested in buying at Founders Way, can you get an FHA loan?



That's right folks, you can still (quite easily) buy at Founders Way using an FHA loan.  So if you're looking for an exciting new condo community in Harrisonburg, look no further than Founders Way, featuring:

• brand new one-level living at a low price point
• all exterior and grounds maintenance is performed by the condo association
• high speed internet and expansive cable package at a low cost through the condo association
• open floor plan (some with lofts) that provide a very different feel than a two-story townhome

To find out more about Founders Way....

• Visit the Founders Way web site 
• View photos of Founders Way
• View floor plans at Founders Way
• Come visit us on Saturday or Sunday between 1PM and 3PM
• Call me at 540-578-0102 or e-mail me

Yesterday I pointed out that monthly housing costs have declined 28% since 2007 because of modest declines in median sales prices and significant declines in average mortgage interest rates.  But let's make it a bit more specific....

The first townhouse pictured above was sold in 2007 for just $100 more than the median sales price at the time, and your monthly housing cost would have been $1,096 if you financed 80% of the purchase price at the average interest rate of 6.21%.

The second townhouse pictured above is for sale now for only $159,200, and would require a monthly housing cost of only $719 -- again, assuming you financed 80% of the purchase price at today's average interest rate of 3.99%.

This is quite a dramatic difference (-34%) in housings costs, and hopefully helps to illustrate the wonderful opportunities for buyers in today's market!
 

Cars, clothes, and computers all lose value over time as we use them and as they age.  Houses, however, typically increase in value over time.  While we don't get upset about cars, clothes and computers losing value, it can be quite upsetting if our houses diminish in value.   Home values in Harrisonburg and Rockingham County increased through 2008, but then declined 5% in 2009, 3% in 2010 and are on pace to decline another 3% in 2011.  But in many ways, today's home buyers aren't too concerned if home values drop even another 3% through next year!

If you are considering purchasing a home today, you should be planning to own it for at least four or five years.  As was the conventional wisdom of the past (as recent as ten years ago), home buying often isn't a great financial move if you are only planning to own the home for one to four years due to the costs incurred through financing the purchase and then selling the home two years later.  The transactional costs of buying and selling are too high, from many people's perspectives, to make it worthwhile to buy a home for a short time period.  Thus, if today's home buyers are planning to own their home for at least four or five years, a small decline in value over the next year doesn't, or shouldn't, bother them too much.

Today's extraordinarily low interest rates make today's home prices a great value for buyers even if they could buy the home at a slightly lower price a year from now.  It will cost you $664 per month (principal and interest only) if you purchase a median priced home ($175,000) at today's mortgage interest rates (4%) with a 20% down payment.  If, a year from now, prices are 3% lower ($169,750), but mortgage interest rates are a half a percentage point higher (4.5%) you will be paying more for your house -- $678 per month.  With such low interest rates, today's home buyers who are looking for a great deal are buying now to get a great (fixed!) interest rate rather than holding out for a slightly lower home prices with an interest rate that is not quite as favorable.

Home buyers realize that improving their quality of life today is worth an extra dollar per day.  Even aside from the leveling impact of low interest rates referenced above, most of today's home buyers decide that it is not worthwhile to delay buying and moving into the home that they love just to try to get a slightly lower price one year from now.  After all, a mortgage payment on a median priced home ($175,000) will only decline by $25 in the next year if median prices decline by another 3%, assuming a 20% down payment, and a mortgage interest rate of 4% both today and a year from now.  For most people, this potential cost savings of $25 per month isn't substantial enough to delay a home purchase and to live in a less than ideal situation for the next year.

If you're looking at the real estate market and wondering if you should keep waiting to buy a home because home values might decline over the coming year – just assume that they probably will.  But then consider that the many home buyers who are taking action today are seeing beyond a slight decline in home values over the next year.  They recognize that they are in it for the mid to long term, they don't want to miss out on today's low interest rates, and they don't want to delay improving their living situation.  Carefully examine your housing situation and finances, because if you will be buying a home within the next two years, it might make the most sense to buy it in the near term, even if home values decline a bit further after your purchase.

Click here to download my full market report (27 pages, 7 MB, PDF) or read on for highlights....



October was a relatively positive month for the local housing market:

1. Home sales increased 8% in October as compared to last October.
2. Year-to-date home sales increased 3% over 2010 sales levels.
3. Year-to-date median sales prices declined 3% as compared to one year earlier.
4. Average days on market increased by 8%.
   

Despite some negative trends (#3, #4 above) the positive trends (#1, #2 above) are an indication that we are likely in the early stages of recovery for our local housing market.



A strong sign of strength to come in the local housing market, October 2011 was a great month of buying activity, with 84 buyers committing to buy homes in Harrisonburg or Rockingham County.  This marks a 65% increase in buyer activity as compared to October 2010!



Trends are very slow to reveal themselves in annualized sales figures (shown above) because they are an indication of 12-month rolling averages.  That said, it seems that it may be a safe bet that home sales and home prices are on the mend when examining the graph above, which has now been showing increases in these long-term indicators for four months.



Some price ranges are recovering more quickly than others.  The graph above shows that the price ranges under $300K have been starting to see increases in sales over the past several months.  This should eventually roll over into the higher price ranges as buyers move up the price spectrum.



For an even more in-depth look at the Harrisonburg and Rockingham County real estate market, click the image above to download my full market report (27 pages, 7MB, PDF).

If you have questions about the report, or if I can be of assistance to you with real estate that you own, or that you'd like to own, please be in touch.  You can reach me most easily at 540-578-0102 or scott@HarrisonburgHousingToday.com. 
 

One of my buyer clients recently asked an excellent question -- whether I am really trying to get the purchase price as low as possible when I am representing a buyer in a transaction.  It's a fair question -- my compensation out of said transaction, after all, is based on the purchase price.  My client's concern was whether I would really be working hard alongside them in trying to get the price down as low as possible.  I reassured that this was the case, for two reasons:

1. I represent my clients fervently, regardless of how much compensation might be in it for me.  My clients have hired me to represent them, and do it well, and so I shall.
2. The amount of my gain for getting a buyer to buy at a higher price point isn't worth it AT ALL!

Imagine that my clients are buying a house in the low $200K's.  Perhaps the buyer only wants to go to $220K --- but I am hoping that my buyer client will go to $230K so that I will make more money on the transaction.  WAIT A MINUTE -- let's see if that makes ANY sense at all, by examining my extra compensation in manipulating my buyer client into paying $10,000 more for the house......

$10,000 increase in sales price leads to....
   $500 increase in gross commissions (based on 5%)....
      $250 increase in commission on the buyer side of the transaction....
         $125 increase in commission after broker/agent split.

As you can see here, by trying to coerce my clients into paying $10,000 more for the house they are buying, I only stand to gain $125 (approximately).  As is probably clear, I'd much rather have $125 less in my pocket and have clients who are happy about the deal we were able to find for them!
 

Sometimes a house closer to your workplace might cost more, but, there can be significant cost savings in buying a house closer to work.  Click on the graphic below for the entire story.



Click here to view this entire (very interesting) infographic.
 

Despite starting to see some colder weather (and the first snowfall of the year) October 2011 was a strong month of contracts for Harrisonburg and Rockingham County.  These 84 contracts was a significant increase over last October's 51 contracts -- and at 84 was right in line with May (88), June (84) and July (86).  Wow!
 

Yesterday's Daily News Record had a thorough look at buying vs. renting from a variety of perspectives.  Here are a few (long-ish) excerpts....



HARRISONBURG — Chris and Kate Kelty had no plans of jumping back into the housing market a year after selling their townhouse.

The couple with three young children figured they'd remain renters for a few years while building back up money for a down payment.

Then they watched mortgage rates start plummeting. After a bit of number-crunching, the Keltys switched gears.

"We realized, oh, my Lord, it makes a lot more sense to start thinking about buying," Kate Kelty said. "It was kind of a no-brainer."

In August, the Keltys closed on a 2,500-square-foot home west of Bridgewater for $230,900.

Their mortgage is $1,300 a month through a USDA Rural Development loan. Kelty, 32, said that's about how much renting a similar-sized house in the area would cost.




A good deal on a home in the county near Rockingham Memorial Hospital enticed Chris Foster, 25, to buy his first house in early October for $220,000.

His mortgage payments are about $200 more per month than what Foster shelled out as a renter, but he doubled his living space while adding a garage and a finished backyard.

"I had a goal all along to purchase sooner rather than later," said Foster, a pharmaceutical representative. "This was kind of a perfect storm, so to say."




Record-low mortgage rates have made buying a more attractive option for some renters. Interest rates on the average 30-year loan are hovering around 4 percent.

"It would be difficult for renters to not strongly consider buying a home," said William Haithcock, chief executive officer of the Harrisonburg-Rockingham Association of Realtors.


Those were just some excerpts, so be sure to read the full article online if you have a subscription.  Of course, as usual, buying doesn't make sense for everybody, but it is becoming a much more compelling option for many these days.
 

There are plenty of ways to compare the opportunities of renting versus when buying.  For example, a tenant in Avalon Woods recently discovered that he is paying more in rent per month than he would have to pay for a mortgage in purchasing this fantastic townhouse.

This phenomenon is apparently also happening from an overall perspective as well, though, as median rental payments have now increased enough and mortgage payments have now decreased enough such that the median values are equivalent.  The extraordinarily low interest rates we're seeing these days definitely help!


As this insightful article points out, however, the up front costs of buying (closing costs) are typically much higher than those related to renting (a refundable security deposit).  Furthermore, it is quite a bit easier to decide to stop renting (provide notice to landlord) than it is to stop owning a home that you bought (sell it).
 

Click here to download my full, 27-page report on the Harrisonburg and Rockingham County real estate market, or read on for highlights....



The housing market in Harrisonburg and Rockingham County continues to show signs of stabilization and recovery:

1. September 2011 home sales (79) were 44% higher than in September 2010 (55).
2. 2011 year-to-date home sales are 2% higher than 2010 year-to-date.
3. Median prices have decreased 4% over the past year.
4. Days on market has increased 10% over the past year.

The positive indicator here is that the pace of home sales is (finally) starting to increase, even though prices are still on a slight decline.  Once the pace of home sales has been increasing for some time, we should see prices start to stabilize as well.



While contracts were down slightly in September (67 compared to 74 last September), contracts year-to-date are up 15%.  Yes, that's right, 15% more buyers have committed to buy properties this year as compared to last year -- indicating that we should see continued strength in closed home sales over the next several months.



Helping to balance the housing market, inventory levels have declined 14% over the past year.



After three years of declining sales pace and sales prices, both metrics are now increasing when examined from an annualized basis. 



If you have questions about the report, or if I can be of assistance to you with real estate that you own, or that you'd like to own, please be in touch.  You can reach me most easily at 540-578-0102 or scott@HarrisonburgHousingToday.com. 
  

Average 30-year fixed mortgage interest rates are now below 4.0%.  Wow!  I have shown houses to quite a few people over the past two weeks who are seriously considering a housing transition because of the extraordinary opportunity provided by these record low interest rates.
 
Are you considering a move?  Talk to a lender (ask me if you need references), and let's start exploring your opportunities.
 

Many of the new homes built in Rockingham County over the past ten (to twenty) years have been built just east of Harrisonburg, in an area bounded by Boyers Road, Route 33, Cross Keys Road and Port Republic Road.  Take a look...



These neighborhoods (shown above) offer quite a variety of housing options.  Click on a link below to browse currently available homes for sale:

• Barrington  ($366K - $540K)
  
• Battlefield Estates  ($325K - $575K)
  
• Bridlewood  ($609K - $660K)
  
• Crossroads Farm  ($365K - $800K)
  
• The Glen at Cross Keys  ($230K - $310K)
  
• Highland Park  ($500K - $650K)
  
• Lakewood  ($310K - $420K)
  
• Madison Village  ($280K - $340K)
  
• Magnolia Ridge  ($310K - $465K)
  
• Preston Lake  ($260K - $560K)
  
• Spring Oaks  ($230K)
  
• Taylor Spring  ($159K - $185K)

 

The following three features or attributes of a home are wonderful to have in a house, but I believe there is a disconnect between how much buyers want these things, and how much they they use them.



For many buyers, a whirlpool tub in the master bathroom is a must!  But I hear from a lot of sellers that they never used their whirlpool tub. 




Buyers are always impressed if the windows in a home can be tilted in to be cleaned.  But sellers often admit that they rarely (if ever) actually took advantage of that easy opportunity for cleaning.




If a backyard has a bit of slope to it, buyers start to shy away from it, longing for a perfectly level backyard for endless hours of sporting fun with their children.  But as a seller pointed out to me yesterday, they rarely see children outside in their neighborhood taking advantage of such a yard.

What do you think?  Are these three items essentials?  Are they overrated?  What else captivates a buyer's attention when they are buying a house, and then is quickly forgotten or taken for granted once they own the house?
  

Frank is renting a townhome in Avalon Woods, and is paying $875 per month for the privilege to do so.  He has thought about buying a home, but assumes he'd have to pay quite a bit more per month.

Well, maybe not!  If Frank were to buy a townhome in Avalon Woods (or Liberty Square, Beacon Hill, Harmony Heights, etc) he might pay around $140,000 for the townhouse --- or even less!

Assuming $140,000, here is an illustration of what Frank's mortgage payment might look like, with a ridiculously low rate of 3.875% (which one of my clients was quoted yesterday)....



Frank will still have to pay $40/month for the Property Owners Association on top of this mortgage payment, but his monthly housing cost is now going to be $775.

Wait a minute.......Frank is going to move from paying $875 in rent to paying $775 for a mortgage payment?  How could this be?

• extraordinarily low interest rates
• more townhouse sellers than buyers, driving prices down

The great news here is that if Frank decides he wants to move on after five years, he would have a fantastic opportunity to keep the townhouse and rent it.  After all, his monthly payment will still be right around $775, and his rental income will probably have increased to $900 or $925.

What are you waiting for?  If you're a potential first time buyer, let's talk through your situation to see if a home purchase might fit into your short term (housing) and long term (investment) plans.
  

Perhaps it doesn't always happen with such extreme price variations, but certainly you have had a seller who priced their home very competitively and then was shocked by an extremely low offer brought from someone locally.
 

Five (or so) years ago, there were LOTS of first time buyers purchasing $150K new/newish townhomes in the City of Harrisonburg.  Many of these buyers were young professionals or newly married couples.  At the time, 100% mortgages were readily available, and sellers frequently paid closing costs, so a buyer could get into a house with just about no money at all.  Buying a house was the cool and hip thing to do, so young people were buying houses/townhouses let and right.

Fast forward to today, and we find that things are a bit different.  People who would have bought five years ago are now renting because they would now need at least 3.5% of the purchase price as a down payment, and may have to pay their own closing costs.  They also aren't buying because home values aren't increasing at a pace that would allow them to sell the house in the next few years without taking a loss.  Thus, lots of the buyers of yesteryear are now not buyers at all --- they are deciding to rent a townhouse instead.

But wait......so if there are lots of townhouse sellers, and fewer and fewer townhouse buyers, what is happening, or what will happen?  In large part, many of today's would-be sellers are turning into landlords.  After not being able to sell their townhouse that they bought five years ago, they decide to try to rent the property instead.

This entire shift in who is (not) buying and who is (not) selling will likely take several years to sort itself out.  One interest side effect is that there will be lots of 30-somethings who will unintentionally end up owning an investment property when they hadn't been aiming to do so.