CATCH 2010 — NOW is the Time to Buy in Northern Virginia
The Outlook for 2010 is Quite Positive!
According to Christopher Kennedy of Compass Analytics & Dr. Stephen Fuller, PhD, Dwight Schar Faculty Chair & University Professor, Center for Regional Analysis, George Mason University — NOW IS THE TIME TO BUY!
I’ve summarized the highlights of their reports: “The Washington Area Economic Outlook” & “2010 Mortgage Outlook; The Search for a New Normal”
Prepare for Rising Interest Rates – estimated AS HIGH AS 7% by Q4 2010
- Current rates on 30-year Mortgages via Freddie Mac Survey 5.04% (Last year at the same time it was 4.96%) http://www.freddiemac.com/dlink/html/PMMS/display/PMMSOutputYr.j
- 30 year Mortgage Interest Rates have averaged 5.41 over the last 5 years.
- Rates are going higher once the Fed MBS program stops – estimated as high as 7% by Q4 2010
Expect more Bank Failures this year and REO opportunities
No one quite knows how many foreclosures are in the pipeline, but a huge number are expected to enter the market (referred to as a “tsunami”) !
Why? Negative Equity & Loan Modification
- 25% of all mortgages are under-water; some estimate 40% by 2012
- In 2009, 2.8M foreclosures filed on US properties, despite government efforts (RealtyTrac)
- 90+ (Days on Market) Delinquency properties (future foreclosure pipeline= 2.4M)
- 600k REOs (bank-owned) — and growing every month
- Negative Equity is still a HUGE problem
Think about it: If a homeowner is under water by 50%, the home price has to go up 100% just to get back to even.
Regarding Recessions
Our most recent bad economic downturn in the US was 1982 – lasting 16 months. Inflation was 12% & interest rates were soaring at 14%.
This most recent recession began December 2007, and ended about June 2009 – lasting 19 months – longer & deeper than 1982. Now that we are 6 months into recovery…
- Most companies are now making money, but they need more demand.
- Most indicative – layoffs have decreased — 444,000 layoffs over 700,000 this time last year
- US unemployment rate in Nov/Dec 2009 was 10%; Washington DC metro area was around 6%
- Arlington, VA, has an incredibly low rate of unemployment — 4.5% (although double what it was).
- Currently, in Arlington County, Virginia, there are less than 5 homes on market for every sale. Therefore, the bidding for homes is increasing and homes less than $750,000 are extremely tight! So prices are beginning to move up in this range.
Interesting facts on how the DC area economy stacks up to the National Economy
- Our economy is the 2nd largest in country, other than New York.
- Washington DC is one of the 15 largest job markets in the country.
- Although we lost 47,000 jobs from Nov 2008 to Nov 2009, we added 28,000 in the strongest (higher wage) sectors: professional services & federal government jobs.
- Both sectors are growing faster than nationally, while some sectors, which are not “important” to the NOVA market, went negative (manufacturing, retail, hospitality, construction, transportation, etc.).
- Sales in the NOVA market have been up for 4 consecutive months. (Not so in DC or suburban MD)
Contract Kick-out Rates (cancellation rates):
This is an interesting statistic to review & quite telling. This is when something goes wrong with the contract — e.g., when buyers, who are predisposed to buy a home, find out that they can’t get the financing they need, and the contract falls apart.
In 2005, this rate was as low as 4% — when “anyone who could click a pen was able to get a loan.” However, this rate stabilized in Q3 2009 to 10-11%; which is considered normal.
If you’re ready to buy or sell, I’m ready to serve you — throughout the entire process. And if you have any questions or comments, I’d be happy to hear from you — or provide you a copy of Dr. Fuller’s full report). Contact me ANYTIME @ 703.919.7761 — JoanS@LNF.com - http://www.Elevate-RealEstate.com
Joan Stansfield, Realtor, Long & Foster, McLean, VA 1311 Dolley Madison Blvd, McLean, VA 22101 703.790.1990
