Yesturday's Economic Summit

Michael Fratantoni

-The true unemployment number is up to 13.3% (people who can no longer claim and still don’t have a job) but is report as 9.7% - it will peak midyear next year to a reported 10.2 % similar to the early 80’s
-No pressure on inflation –some deflation happening right now to keep it in check –as an example energy prices are down - a barrel of oil is in the $70’s when a price of $90 to $100 is normal
-Stock market losses $6 trillion slight rebound in Q1 & Q2
- New home sales lowest on record in 50 yrs
-Housing prices nationally are not going to rise until 2011 and won’t stabilize until mid 2010
-The Federal Reserve is largest buyer of MBS 60% currently and they hold $850 billion loans currently they have gone from 0% to 60 % this year and want to go back to 0% by year end. Will going to 0% add volatility to market? This is something to watch over the next 6 months when Fed leaves market increase in rates by .25 basis points – Just saw the Fed will buy MBS until March of 2010
-Theme things are looking up slightly but we have huge hole to climb out of
-FHA represented only 2% of loans in previous years. This year they represent 45%!
-National delinquency survey show 14% of borrowers are 90 day or more late 2.5 million loans
-Prime fixed rate loans 28 million and many of those are reaching seriously delinquency rates – more than 90 days
-Delinquencies & foreclosures are delayed or lag behind employment trends
-Delinquencies – we are up because of jobs being lost
-25% of option arms have been modified or foreclosed on not the problem media has mentioned and continues to mentions as the problem in mortgage market
-Watch bill HR 1728 – Barney Frank
-Allen Jones BOA SS expert is available to us about Short Sales and BOA
Allen.h.jones@bankofamerica.com

Frank Nothaft

-Its going to get worse much worse slower recovery than previous recessions
-After end of 1991 recession unemployment peaked 15 months later
-After end of 2001 recession peaked 19 months later
-Bernanke says we may be out of recession – the question is how long before we peak with unemployment after this recession
-$15-17 billion is the cost to extend tax credit. The challenge is too many politicians say they didn’t approve of spending gov’t funding to stimulate economy so even though they understood the need to extend they have politically painted themselves into a corner
-Freddie Mac National rebound of prices bottoms out in 2010 and it is 2011 before rebounding
-Lowest interest rate in 50 years
-Prime loans are performing worst since the 30’s – the depression
-Subprime 8 to 10% of loans represent over 35% of foreclosures
-9% of all loans are subprime but they represent 35% of foreclosures
13% of all loans are FHA and they represent 10% of foreclosures
15% of all loans are Prime/Arms and they represent 28% of foreclosures
63% of loans are Prime and Alt-A Arms and represent 27% of foreclosures
-4.2 million seriously delinquent 90 days behind
-To determine if loan is owned by Freddie Mac check out – www.makinghomesaffordable.com or www.Freddiemac.com

Lawrence Yun

No housing bubble it was a credit market bubble
We are overshooting bottom & need stimulus to nudge further back to make our market “normal” again
-From typical NAR survey 3000 responses - HVCC appraisal survey resulted in 30,000 responses1/3 had properties not close due to appraisals
Prices are below fundamental values
All cash purchases are 20 % of market typically low single digits 8 %
Foreclosures will rise because of toxic issues of unemployment & underwater buyers
Full builder recovery not until 2011
Our prices locally are down 20 % were 33 %
Stock market is at 1 year highs
Support tax credit extension - Wall Street got $700 billion whole economic stimulus $800 billion extending the tax credit will only be $15 billion
NAR is on FB why aren’t you?
See his presentation below!

Stephen Fuller

View his updated slides in the link below!
Look for collaboration amongst our peers share data share ideas work together get along
We in DC better at looking at bad news

Dr. Frank Nothaft
Dr. Michael Fratantoni
Dr. Lawrence Yun
Dr. Stephen Fuller

We’ve caught the 500 pound elephant…

The economy isn’t as bad as we think it is or as the media portrays it to be…especially in our Washington Metro Area. Dr. Stephen Fuller from GMU’s Center for Regional Analysis spoke to our office today regarding the current economy in our area including unemployment and the state of the housing market…and of course his forecasts for the future.

The future is uncertain. It always has been and as it should be. We can only predict so much. So Dr. Fuller believes that in 2010 and 2011 the housing market in the Washington Metro area is going to be out of control good or in his words it’ll go “gangbutsters”! That’s pretty optimistic considering the last batch of Alt-A loans (5/1 and 7/1 ARMS) are due to adjust in 2011, but he did say to that end that the majority of those loans have already gone into foreclosure.

Unemployment in our area is down. It’s up around the rest of the nation and according to Dr. Fuller will go up to 10.2 nationally by April of next year before we see it start to come down again. As of this last month, there is a 3.5 point gap between the national unemployment figure and the figure in our region. He noted that as a country we are losing 200,000 jobs per month and in order to keep employment where it is currently, we would have to accrue 100,000 jobs per month – again, we are losing 200,000 per month. Employment won’t return to pre-recession numbers until 2014. That’s a heck of a lot of jobs! And half of those job losses are in the retail sector. Thanks to amazon.com and all of the other internet retailers that offer goods for discounted prices. Store front retailers can’t keep up, end up in bankruptcy and leave buildings and strip malls vacant along with any customer service that might have been associated with it. Big box retail shopping centers may get rezoned to accommodate housing short fall – stay tuned.

Dr. Fuller did comment on inflation and whether or not it will happen in the near future due to all of the spending our government has been doing lately. Will we have to endure a hard inflation period to “pay it all back”? His answer is not likely. Unemployment is a major factor affecting our economy, but it’s not enough to put pressure on the economy to spark inflation. He noted that manufacturers are not struggling as hard as they would be during an inflationary period. This is in large part because of all the products you can purchase online. They costs of not having a physical store, employees, etc. allows for the lower cost product and thus more profit in the long run. Therefore, if they continue to produce the goods, they continue to sell, then inflation shouldn’t occur…but that doesn’t mean another recession won’t occur. Dr. Fuller said another recession is inevitable, but when is the question.

A recession is defined as a period of an economic contraction, sometimes limited in scope or duration or as Wikipedia says it’s when the GDP falls or when we have negative growth. We have experienced this negative growth for the past 18 months and things are finally looking upward. As is the housing market!

The real estate market in the Washington Metro area is hot and soon to get hotter! At Gateway our sales are up 4% over last year, but our volume is down by 5%, thus showing that prices have come down quite a bit from last year. Dr. Fuller predicted that builders will start building more spec homes about springtime of next year. He commented that we need to have 25,000 new homes (not resales) to accommodate just the new residents in the Northern Virginia area, compared to 1 million nationally. Currently in our Northern Virginia market, inventory is slowing decreasing. This week we see 5,984 active listings on the market…that’s down 56% from this time last year. Just goes to show it’s a great time to sell and with the $8,000 first time home buyer tax credit and low interest rates, it’s also a great time to buy.

Prince William County market update

Jason Smith’s comments:

Inventory levels up slightly but everything else is staying steady so the market is going strong! We are just under a 2 month supply of houses in

Prince William County. The active inventory has 36% of the market as distressed sales. Nationally, inventory levels are up 7.6% in July – here we are down – houses continue to sell which is great news for us. There was a home with 20 contracts on it in Piedmont priced under $350,000. It is still a very competitive environment for us in the first time buyer price range. New construction activity is up as well and KB Homes is coming back to our area – stay tuned on where as we haven’t heard yet.

Loan modifications aren’t working with a majority of the lenders – anywhere. The push to modify from the government hasn’t yielded results from what we’ve heard.

There are very few FSBO’s on the market as well. Auction activity only showed 3 houses on the “block” in October – other auctions previously featured 100’s of houses…the tide is changing – inventory is getting absorbed prior to auction.

Scott’s comments:

Career Night, September 24th: Bring an agent and get into a drawing for a designation and your guest agent gets thrown into a separate drawing for a designation at the end of the night. We’d love for you to invite those agents that would be a great fit for our company.
Business planning retreat…Pat Cunningham is one of our wonderful sponsors. Friday starts with golf, spa, cocktail party, and business planning starts on Saturday. It’s going to be a different format this year with tons of interaction to help jump start your 2010! The location is easy to get to and it’s a beautiful resort – the Hyatt in Cambridge be sure to sign up today.

In today’s Market Watch, our monthly market update you will see that there is not much to talk about this month. For the first time in a long time, there is nothing earth shattering. It’s been relatively quiet. There is nothing new that we need to be concerned about - yet. There is a lot coming down the pike so stay tuned. So what’s next? Is the loan limit going to stay $729,750 or is going to be cut back to revert back to $629,650. Is the first time buyer tax credit going to be extended or will it go away? When are rates going to go up and how high? When is the government going to dismiss the FED’s advice to continue to purchase mortgage backed securities. If inventory levels go up by a thousand houses – BOA foreclosures in

Northern Virginia - it’s not going to affect the market too drastically.
Right now we are at May of 2005 inventory levels. We need more homes to sell!

Pat Cunningham agrees that there is not much has been going on the mortgage front. Rates are awesome – ARM’s are coming more into favor because of better education and lower start rates.
A year ago I remember the mid September of last year and we were literally in a financial firestorm and one of the things I was thinking then is about the fact that that Fannie & Freddie were going out of the business and lending institution having a hard time making loan and wondering if there will there be a credit freeze.

Let’s fast forward to today, its business as usual. We’ve gotten out of the toughest financial market of our time. Interest rates are at historic lows. PMI may require anti-flipping rules to be enforced and will be scrutinized heavily on 91-120 days be on the lookout for changes in this arena.

All is quiet on the Western Front

All is quiet on the Western Front – all is the same over the last month or so – same issues with short sales, foreclosures, etc

Agents are being more demanding and asking for shorter timelines – short sales are bringing out the worst in other agents. Agent’s frustration over short sales are carrying over into other transactions. Agents have an all gloves off mentality. Buyers and sellers are also frustrated because of timing of getting deals done, HVCC, TIL, etc.

Nip unprofessionalism behavior in the bud. Track all conversations in writing with agents.

First time buyers are antsy – wanting deals to be done so they get the tax credit, get rates locked in, and get closed.
Notice of trustee sales is at an all time high

The highest month of foreclosures were September of ’08 – trustee sales today are 30% higher than that

Market is slowing – sales are down because inventory levels are down
Commercial market is about to tank – financing is gone – only sources are pension funds, insurance money and conduit lenders are the only avenues. No new construction can be financed either. Churches and schools are building but back log is diminishing. Commercial market is in directly opposite of residential market. Death, divorce and relocation are our salvation as well – people have to move!
Titanium is in control of 31,000 people in our area who are in one form of distress – not foreclosed on by the bank yet.

The attached article was also discussed.

Outlying areas are coming back strong – we are doing better than other counties – including Maryland.

That’s it – go sell something!

Interesting Market Update

It is an interesting time in the market right now. For the first time in a long time, there are not a lot of changes in our market to report – it is the same ole story – which is kind of nice. Over the last several weeks, we have reported shifts which were affecting our industry and we were on top of for our clients and agents alike. Last month we talked about short sales, foreclosures and those trials and tribulations. Right now everything is flat in terms of news. The inventory levels are down, buyers are still out looking for homes, the hot price ranges remain hot and we are ready to help!

What makes me wonder is, is now the calm before the storm? As we’ve been speaking about over the last several weeks, many questions have been raised that we cannot answer - yet. Many of our questions include the short sale process, inventory levels, release of foreclosures by banks, and other concerns over distressed properties still have not been answered. Additionally, we have impending issues we are dealing with such as the first times tax buyer credit coming to an end on November 30, …will that be extended with all of the billions of dollars being spent by the government? When will interest rates rise…is looming on our horizon - how soon will that happen? Foreclosures are slowing being released…will they be released all at once and will that have an impact on our values? How much can the government spend to buy mortgage backed securities against the Federal Reserve’s advice and how will this impact us going forward. There are a lot of questions that need to be answered and only time will tell what the outcome will be for the housing market. So, for now, there is nothing turbulent to write or speak about today. All’s well that ends well I guess will be the theme of this month’s update. Mortgage rates are great, buyers are buying, houses are selling, and we are still working to make it all happen for our clients. Let’s hope we get more of the same going forward!

Thinking of Remodeling?

Whether you are thinking about putting your home on the market or you are concerned about increasing your home’s equity in a time of depreciating house values, knowing which remodeling projects yields the best return on investment, is critical.

Not all home remodeling projects are equal in terms of ROI, however. Here are the National Association of Home Builder’s suggestions for the best ways to add value to your home:

• A Home Office Remodel
With more and more people telecommuting in today’s difficult business climate, home offices are becoming less of a luxury and more of a necessity. Creating a state-of-the-art space for potential teleworkers is a surefire way to increase your home’s value.

• Renovate or Add a Family Room
A family room is an excellent way to make existing homes more like new construction. Take into account what homes in your area are like. People like to purchase homes that blend with other homes around them.

• Replace the Roof
The roof is one of the first impressions people have of a home. Replace an old roof or change the character of your home by looking into architecturally styled roofing tiles.

• Landscape Your Yard
Landscaping is also an integral part of your home’s first impression. A professionally landscaped yard adds value to your home and increases your living space.

• Replace Old Windows
Thirty percent of a home’s energy is lost through its windows. Replacing old windows with energy-efficient ones ups the overall quality of the house and saves you money on monthly utility bills.

• Remodel Your Basement
Do you have space that serves as a black hole of unused items…like your basement? Remodeled basements make excellent game rooms or guest suites, adding value to your home without adding space.

• Paint, Paint, Paint
It’s been said over and over but can’t be emphasized enough. Hire a professional if you need help and keep the colors neutral if you’re looking to sell.

• Remodel Your Kitchen
Kitchens sell a home, and in this case, size does matter. But a kitchen remodel is a long-term investment; you’ll see payback 10 years down the road. Sometimes doing it yourself can save money, but always bring in a professional for the big jobs.

• Remodel or Add a Bathroom
A bathroom remodel can mean making the most of your current space by upgrading fixtures, flooring and lighting. Or add a bathroom and automatically increase the value of your home.

For more information on adding value to your home, visit www.nahb.org/remodel, or in Canada, www.chba.ca.

Do you know if you qualify to refinance your home?

Do You Qualify for the Expanded Home Refinance Program?

The Home Affordable Refinance Program, or HARP, established by the Obama Administration, has been expanded, raising the maximum loan-to-value ratio from 105% to 125%. As a Member of the Top 5 in Real Estate Network®, many clients are asking me if they qualify for the HARP program. If you can answer “yes” to following questions, you may be eligible:

- Are you the owner of a one- to four-unit home?
- Do you have a loan owned or guaranteed by Fannie Mae or Freddie Mac?
- Are you current on your mortgage payments?
(“Current” means that you haven’t been more than 30-days late on your mortgage payment in the last 12 months.)
- Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?

Open to homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac, and covering first mortgages only, the HARP expansion means that an eligible homeowner with a $375,000 mortgage loan may now refinance if the house is worth at least $300,000.

The expansion is aimed at making refinancing available to more people whose homes are now worth less than the amount of their mortgages. As always, the borrower must meet income requirements and be able to afford the loan. Homeowners must also be current on their mortgage payments.

As a homeowner, you may be eligible if:
1. You obtained your mortgage before January 1, 2009
2. The home is owner occupied
3. The primary mortgage is less than $729,500

According to the Federal Housing Financing Agency, the higher loan-to-value refinancing will allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates. HARP borrowers will be able to combine a lower mortgage rate with a faster amortization schedule, which will enable them to get “above water” on their mortgages more quickly.

The program also provides borrowers with an incentive to reduce the term of their loan from 30 years to a shorter-term, fixed-rate mortgage, enabling them to pay down the principal more quickly and reduce lifetime interest payments.

For more information on the HARP program, visit www.makinghomeaffordable.gov or e-mail me. If you know of others who can benefit from this information, please feel free to forward this email to them.

How to protect yourself from mortgage fraud?

10 Ways to Protect Yourself from Mortgage Fraud

Many of the challenges homeowners and home buyers are confronting today are the result of unscrupulous mortgages extended over the past several years. Help protect yourself during the home buying process with these tips from the American Homeowners Foundation and the American Homeowners Grassroots Alliance, www.AmericanHomeowners.org, or in Canada, with tips found at www.genworth.ca:

1. Deal only with reputable mortgage bankers or mortgage brokers. Get recommendations from neighbors and friends who dealt with them as customers. Check on the mortgagor’s record with the local Better Business Bureau and state licensing authority. As a Member of the Top 5 in Real Estate Network®, I can also provide you with many credible mortgage resources.

2. Ask how long they have been in the business, and be wary of working with someone with less than five years experience, no matter how reputable their employer may be.

3. Unlike professional real estate agents like myself, mortgagors owe you no fiduciary duty. While it is in the long-term interest of mortgage lenders and brokers to treat consumers fairly, for many, that doesn’t stand in the way of charging higher fees or interest rates. Always get quotes from at least three mortgage lenders and/or brokers, and make sure each one knows you are doing so.

4. Since you’ll be providing them the most comprehensive personal financial information you’ll ever provide any company, ask the lender to describe their data security policies, both online and offline.

5. To reduce the likelihood of overpaying for a home, make sure that you review recent selling prices for similar homes in the same neighborhood before you make an offer. I can provide you with a detailed analysis of the homes in our communities.

6. Set aside some extra money for closing costs. One of the vexations of real estate financing are the differences in estimated settlement costs on the Good Faith Estimate (GFE) forms, and the actual settlement costs, which very often include several hundred additional dollars worth of previously undisclosed and creatively named fees.

7. Pick the right kind of mortgage. Interest rates are higher on 30 year fixed rate loans than on 15 year fixed rate loans. Adjustable rate mortgages are always a gamble. You may well save money over the first few years if interest rates are dropping, but predicting their direction further out is very speculative. Prepayment penalties can more than offset any savings if the rates go up after that and you want to refinance.

8. Get pre-approved for your loan. Even though there is a glut of homes for sale in most areas right now, a mortgage loan pre-approval is essential to many sellers, and gives a big negotiating advantage to buyers in almost all cases.

9. It is important to review loan documents in advance and understand all the terms. Don’t be afraid to ask questions. Try to avoid loans with prepayment penalties if at all possible.

10. Save all the copies of all documents you receive and/or provide mortgage lenders or brokers.

For more advice on how to secure the best mortgage in today’s challenging economic times, please e-mail me directly. I can help you make sense of the current mortgage landscape and the ever-changing credit standards. Also, if this information can be of benefit to your friends and family members, please feel free to forward this email to them.