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 2^nd 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