Reinventing Our Communities

Warrenton and Culpeper have, for some time now, been considered bedroom communities. Basically the people who have been moving here were commuting to someplace far away to work each day and coming home to sleep.

As more and more families couldn't afford homes closer to their jobs, they came looking out this way. Often they put up with miserable commutes in order to get that new house for their family.

This was part of what fueled the boom in real estate in our communities. And, the end of that flock of commuters moving here has had much to do with the real estate bust, at a local level.

Even with the recent decline in the price of oil, a real long-term reduction in gas prices now seems unlikely. And, as long as gas is at or above $4/gallon, those commuters are probably not coming back.

So, what's next? Who is going to buy these homes?

It seems clear to me that both Warrenton and Culpeper are going to need to reinvent themselves. Whatever we're going to be in the future, it's probably not what we've been in the past.

It's probably unrealistic to think that we're going to bulldoze all those new subdivisions and go back to the sleepy small towns that we once were.

It's equally unrealistic to believe that the commuters are coming back and that we can thrive as a bedroom community.

So, who do we want to be? Clearly we're going to need to attract businesses that pay high enough wages that families can afford to buy homes. What kind of businesses do we want to attract? What's a good fit with who we are today, our history and who we want to be in the future?

I'm not sure our local governments have yet figured out that we need to re-imagine ourselves as something different. Although I see signs of hope in each community.

Warrenton is talking about turning trash into energy. Might this be the start of becoming a green city and a push to attract green industry?

Culpeper is building new condos downtown next to the train depot where they hope to soon have another train headed into DC. This could be the start of the new Culpeper.

These are clearly seeds of something new. Now let's start public discussion and brainstorming around this challenge and potential solutions. It's going to take years to figure this all out and to begin to make these changes. Let's get started now!

Feeding Fauquier's Hungry

Month	# of Families	Individuals	Under 18	Over 65
07/04	127	363	142	47
07/05	108	253	64	66
07/06	117	323	104	70
07/07	119	341	126	73

Culpeper Star Exponent Article

The Culpeper Star Exponent carried an update on the local housing market yesterday. If you've been regularly reading this blog you won't be surprised by most of what you read there! Wish they'd made the reference to this blog a hot link!

People charging money to "help" distressed homeowners with short sale and/or foreclosure information scum! This article over the weekend in the Washington Post talks about this racket.

Why I want to be the Rickie Lee Jones of real estate blogging!

Looking Deeper at Culpeper June Sales

The Culpeper numbers showed a healthy jump in sales year over year. I've been wondering what made up those numbers and so decided to do some additional analysis.

38 out of those 57 sales were foreclosures. That's two thirds of those sales.

While an increase in sales and a decrease in inventory always qualifies as good news, this probably doesn't warrant throwing a party to celebrate the end of the real estate downturn.

What this means is that two thirds of those homes sold at very steeply discounted prices. Here are a couple of examples:

This home was purchased brand new in October of 2005 for $345,000. It sold in June as a foreclosure for $149,000.

This home was purchased new in November of 2006 for $448,000. It sold in June as a foreclosure for $230,100.

Those are discounts of 57% and 48%. I analyzed 10 of these foreclosure sales. The average discount from the original sales price was 48.8%.

If your the guy who lives next door and you want to sell your home, how do you compete? Most homeowners can't or won't sell their home for half of what they bought it.

So, yes, it's good news that more homes are selling and inventory is shrinking. If they sell all the foreclosures, there's less downward pressure on pricing.

But right now, if you have to sell, be prepared to price your home very, very aggressively. The competition is based on price and it's vicious!

One quick note, I'll be in the Wildwood Forest subdivision in Amissville this Saturday afternoon from 1 to 3 p.m. If you've got a question on the real estate market in general, your home in particular or just want me to look into my crystal ball, let me know. I'm bringing free cloth shopping bags for everyone I talk to. Give me a call at 540-270-2742 if you'd like to chat while I'm in the neighborhood!

Green Drinks Warrenton

Earlier this week I attended the monthly meeting of Green Drinks Warrenton.

Green Drinks is an international organization designed to connect people involved in environmental causes. These monthly get togethers happen all over the world. And, now they're right here in Warrenton.

Deborah Williamson started the group after a friend from Maryland invited her to one there. She got excited about the concept and went online to find one nearer Warrenton. Unfortunately, the closest one she could find was in DC.

She attended a gathering there, but knew she didn't want to travel into DC all the time. So, she did the only sensible thing and decided to start one here.

The initial event took place in May and was very well attended. Warrenton's mayor, George Fitch, attended to tell us all about the plans for turning our trash into energy.

At this week's Green Drinks we had representatives from Brumfield Elementary School's PTO. They're working on an initiative to not only make Brumfield more green, but eventually, they hope, the entire school system. They're plans involve a lot of wonderful learning opportunities for the students. And, a splinter group from Green Drinks will be joining them to help.

Green Drinks is a great place to meet other like-minded people. It's a great place to kick around ideas. I throw out my wildest ideas for making Warrenton a greener place and find enthusiastic support for them! And, it's also a lot of fun!

As the group grows and matures I look for them to make a lot of very positive changes in our community.

If you'd like to come to the next meeting and check it out, you can contact Deborah directly to get on the mailing list. Her e-mail is gallentina@aol.com

Maybe More Banks Should Go Belly Up?

IndyMac was seized by federal regulators last weekend. They've just announced that they're stopping foreclosure on all their mortgages. This article in the Wall Street Journal details the takeover and this freeze.

Maybe we should be rooting for more banks to fail! If foreclosures fell significantly I suspect we'd see stabilization of home prices much more quickly.

If you're in trouble on your mortgage, start rooting for your bank to fail!

Fannie and Freddie

The bigger they are the harder they fall.

That statement definitely applies to Fannie Mae and Freddie Mac.  Unless you've been under a rock the last week, you've heard about the trouble they're in.

Fannie and Freddie are a big part of why your local bank can offer mortgages. The bank loans you the money to buy your house. But it's going to be a long, long time before they get that back. And, it doesn't take too many mortgage loans before they're out of money to loans. So Fannie and Freddie buy mortgages from your bank. Your bank then has money to make another loan. This keeps a lot more money available for buying houses. It also keeps mortgage rates lower.

I don't think anyone feels good about the steps the government is taking to shore up these two behemoths. This is not how the free market is supposed to work.

But Fannie and Freddie have never really been pure capitalism at work. They are an odd blend of a corporation and the government entity.

Something had to be done now to keep the real estate and financial markets from further imploding. But I think there needs to be a short term strategy, meant to keep the markets calm and functioning and a longer term strategy that looks at the functions performed by these two entities and how those functions are best performed.

My belief is that if Freddie & Fannie weren't allowed to buy any more mortgages, eventually, another entity (and hopefully 3 or 4) would be created to fill that void. So, long term, how do you begin to ease Fannie & Freddie out of the business or at least into a smaller role.

The biggest problem here may be the shareholders of these two corporations. But, given what their stock prices are doing, it shouldn't be long before they are easy pickings for an enterprise that's truly commercial.

Now, does the political will and the creativity exist to envision something different than our current mess?

June Numbers

The official June numbers have been released for this area of Virginia. Let's take a look, by county, at what they have to tell us.

First, Culpeper County. Compared to a year ago, inventory is down (732 now vs. 784 then). New contracts written have jumped (61 now vs. 47 then) and we see the same thing with solds (57 vs, 31). It's all good news! The only thing we see that isn't positive is that we're still adding new listings at a faster clip than I'd like. There were 130 new listings in June, compared to 113 a year ago. Still, when you look at year over year numbers, this is some of the best news we've seen in awhile.

Fauquier county presents a more mixed picture. The great news is Fauquier is inventory. A year ago we were looking at 865 homes on the market. Now we're down to 753. That's a 13% reduction in inventory. Good news! And the trend seems likely to continue. There were 128 new listings this month compared to 171 a year ago. The mixed part is the number of contracts and sales. There were 61 new contracts written this month compared to 65 a year ago. And 67 homes sold compared to 65 a year ago. Those aren't terrible numbers, but they're not telling as good a story as the other numbers.

Prince William County is where things are really hopping! This is the best news of any jurisidiction. And it follows the nationwide trend of this housing recovery happening closer to urban centers. Inventory is down from a year ago (5501 vs. 5703). But look at the contracts written and the number of solds! 987 new contracts were written in June. Compare that to last June when there were only 454. That's an increase of over 100%. And the solds tell a similar story. The numbers in June were 834 vs. 456 a year ago. The number of new listings is also decreasing 1448 now vs. 1539 in 2007. There's not a spec of bad news to be found in Prince William! Anecdotal evidence supports this. There are numerous examples of not only quick sales, but multiple offers on the most attractively priced properties.

Rappahannock remains in its own little world! Inventory is up from 79 to 85. New listings are almost identical to a year ago (17 now, 16 then). New contracts are down from 7 a year ago to 4 now.  Solds are exactly the same at 4. In other words things remain much the same in Rappahannock County.

This is the most positive report I've seen in a long time. There's no way to look at these numbers and not be optimistic.  I'm going to go out on a limb here and say that in Prince William County they may have seen the bottom. We won't know for sure until at least 6 months from now, but it's possible.

By the way, if you're a seller that doesn't mean you can raise your price! The properties priced CORRECTLY FOR THE MARKET are selling. There are still plenty of them sitting there!

Ben Stein Takes the Long View

It's always interesting to find someone who isn't caught up in the crowd and parroting whatever the conventional wisdom is. Ben Stein, I think, has it about right in this Yahoo column.

Ben says he's a buyer in this real estate market! (Although I'm betting a thoughtful, selective buyer!)

Maybe this will become the new conventional wisdom?!

Culpeper Train Gains Momentum

It's no secret that higher gas prices are one of the factors hurting our local housing market. Culpeper seems to "get" this in a way other local jurisdictions haven't yet.

They're hard at work at getting another Amtrak train. See this Culpeper Star Exponent article for more details. If you haven't gotten involved yet, this is worth your time! Sign the petition!

The Culpeper Rail Coalition, part of the larger Piedmont Rail Coalition is leading the local efforts. Opportunities to get involved are detailed on their web site.

Getting Into Your House

When I want to show a listing to a buyer, I use a lockbox to enter the house. Typically, in this area (Prince William, Fauquier, Culpeper, Rappahannock and Warren counties) that generally means an electronic lockbox that often looks like this:

To access this box and get the house key out, I use an electronic device that's been updated with a special code within the last 24 hours. It's an extra level of protection for the homeowner in case my "ekey" is stolen. Within 24 hours it's essentially worthless unless you know my passwords in order to get it updated.

The other advantage of this lockbox is that I know who has shown my listings. If something is missing, left unlocked, etc. I likely know who to track down to ask about the problem.

There have always been a few holdouts who still used combination (combo) lockboxes:

These boxes require only an alpha or numeric code in order to open them and access the key. If I know the combination I could, theoretically, give that information to someone else and that's all they'd need to access the keys to your home. It's a less secure method of access. The advantage in some agents' eyes is that if someone from outside our area wants to show the house, there's no problem if they don't use the same lockbox system used in this area.

With the large number of foreclosures in our area, we're seeing a big increase in the use of these combination lockboxes. Most banks will mandate that a combo box be used on their listings. I've had trouble coming up with a good reason for this. The only thing I can think of is that they want bank personnel to be able to access the property if necessary, without a real estate agent present.

I was troubled this week to learn that a local agent had mentioned that if he's unable to show a home when his buyer clients want to see it and he can't find any other agent to cover for him, he'll simply give his clients the combination and let them go in the house on their own.

Hmmmmm! The number of reasons this is a bad idea is very long. The liability to the agent should anything go wrong, is huge. It could be that his clients are good people with the best of intentions but they have trouble getting the keys back into the lockbox. It happens all the time. It is, of course, highly unprofessional and, I'd suggest, unethical. The listing agent should definitely be making a phone call to the agent's broker at the very least, to protest this behavior.

By the way, when the agent was confronted with what a bad idea this was the response was "Everybody does it." I never got that one by my Mom. And, I'm not buying it now!

HOA Law Changes

Effective on July 1st there are a number of changes to the rules governing homeowner's associations in the Commonwealth of Virginia. The previous laws were so vague that it had become the wild west in terms of fees to sellers requesting HOA packets and inspections. So a number of changes were made.

First of all, they created the Virginia Common Interest Community Board to investigate complaints about community association managers. They also require that associations now publish their fees for certificates or packets either in paper or electronic format.

It also has mandated the maximum fees for the following services:

Inspection: $100

Disclosure Packet Copies:

    Hard Copies: $150 for 2

    Electronic Copies: $125 for 2

Additional Hard Copy: $25

Expedite Fee: $50

Update Fee: $50 (For packets produced in last 12 mos.)

These should, first of all, let sellers know what to expect when they're calculating how much it will cost them to get the documentation needed to sell their home. And, while these fees are higher than were allowed under the previous law, many associations were completely ignoring those fees anyway. So the practical effect may be lower fees overall.

The Virginia Association of REALTORS took a leading role in getting this pushed through and I think they've done a great job. This will benefit consumers, and, in particular, real estate sellers in Virginia.

When Will Things Turn Around?

The real answer to that question is, of course, that no one knows. There are some positive signs out there, but it's too soon to say if they're a trend or a blip.

But based on a current client situation, I'd have to say it hasn't happened yet.

I'm working with a buyer client who's also a licensed agent in a neighboring jurisdiction. This client is buying a home with other family members and there's a lot of nervousness about the future of property values in this area.

Here's the thing. This is a licensed agent. Agents get that this is cyclical. They get that if you're planning on staying in your home for many years (which is the case here) you're highly unlikely to lose any money. And, yet... there's a tremendous amount of concern.

We'll know the market has turned around when the agents aren't worried about buying!

This proves it's easier to be dispassionate about any market when it's not your money involved!

Short Sale Story

My first post now that I'm back from vacation and I thought I'd let someone else do most of the writing.

Besides, this story is just too good (and, unfortunately too typical) not so share with you!

Lenders still don't get it!

And, why do they keep proclaiming publicly what a good job they're now doing of helping consumers work these things out?!

Hogwash!

Agent Dust Up

If you've been reading this blog lately you know that I've been writing reviews of homes and adding photographs at FranklyMLS.com.

It's been a great experience and it's been educational. I've never noticed exactly how much differently I look at a house when I put on my buyer's agent hat. But I'm very aware of that now.

Earlier this week, however, an issue came up and I think it's worth talking about. I reviewed a house that's been listed for sale. It had no interior photos and so I took those, as well as additional exterior photos.

These photos got me in trouble:

In my comments I said there appears to be a mold issue here.

The agent strenuously (VERY STRENUOUSLY) objected to both my mention of the world mold and my taking photographs and posting them.

One of her arguments was that I am not an expert on mold. That is entirely true. I'm also not a doctor, but if I see a bone sticking through your skin I'm going to tell you it's broken, even if I'm not allowed to diagnose!

She had someone interested in the house and they saw the photos and the comments and changed their mind. (Again, what are they doing calling the listing agent?!)

What I'd tell a potential buyer is that there appears there may be a mold issue here. We'll need to get the home inspector to take a closer look at this. From what we see here we can't tell what kind of mold, whether it's dead or alive, active or inactive. There are many, many kinds of mold, many of them not harmful to humans. If you truly love a house, this shouldn't be enough of a reason to make you automatically walk away.

As with pretty much any problem in a house, there's a fix. The question in each instance is: is the fix worth the time and/or money involved.

By the way, the offensive photos and comments have been removed. I have mixed feelings about that and I'll take that up in a future post.

Meanwhile, I'm off on vacation! This space will be quiet for the next week and a half. I hope you'll have having as much fun as I am!

Who's Protecting Who?

I had an interesting incident with another agent recently. I wrote about that in another post. When I wrote it I promised to reflect in a later post on some of the larger industry issues involved.

In many professions there's a tension between the desire to protect the public and the desire to protect the members of that profession. And so, while the Hippocratic oath has doctors promising to "First do no harm" there is also a very strong taboo against criticism of other doctors.

It's really no different in real estate. (Although the stakes are a lot lower!) Part of our code of ethics says that we'll speak no ill of another agent. And, most agents are careful to adhere to that. I have no problem with not indulging in idle gossip about my peers. And, it's certainly much too easy in a very competitive industry to decide it's your job to cast aspersions at those you deem less "professional" than yourself.

But you can carry this too far. It's a thin line you walk and I think we've leaned too far towards protecting our colleagues at the expense of protecting the public. When another agent thinks I have a greater responsibility to protect her and her business than to be honest with the consumer, I think it's a problem.

The thinking in the industry is that my responsibility is to clients who have hired me. The agency relationship with them obligates me to put their interests first. However, even to a customer (otherwise known as the general public) I still owe the duty of honesty.

You can ask whether "honesty" is defined by answering direct questions with honest information or whether it obligates volunteering information for which we weren't directly asked. I'm going to suggest that splitting such hairs is the kind of behavior that makes real estate agents rank very poorly in polls that gauge trust by profession.

As I said, the line is thin. But I think it's time to start leaning the other way!

Amissville/Jeffersonton Price Per Square Foot

A recent lunch with a banker friend got me curious about current prices per square foot in specific local subdivisions. Apparently a builder had recently told my friend that he couldn't build a house (including land acquisition costs) for as little as the current price per square foot on existing homes. If you're a builder, that's trouble!

So, I'm going to do a series of posts, not necessarily sequential, looking at several subdivisions in a local area and what the average sale price per square foot looks like.

First I should define a few things. I'm looking at specific subdivisions because they are more uniform. It's easier to make comparisons without having to factor out the amount of land. They are usually built at about the same time. All in all, they are more likely to result in more accurate comparisons.

The sale price that I'm using is the sold price as taken from the Multiple Listing Service (MLS) minus any money paid by the seller to help with closing costs. So, it's a net sales price.

The square footage information is taken from the tax records. That means that occasionally the square footage is going to be inaccurate if, say, a homeowner finished the basement without getting the proper permits.

All that said, let's take a look at three subdivisions in the Amissville and Jeffersonton area.

South Wales had the largest volume of sales of the subdivisions I looked at with five sales since 1/1/2008. The average price per square foot of the homes sold is $118.89.

Quail Ridge had four homes sold. The average price per square foot there is $110.50.

Wildwood Forest showed only two homes. That makes the data more suspect here as the two homes had enough differences that I don't view this number as very useful. But, for what it's worth, the price per square foot, on average, was $125.91.

I wanted to look at two additional subdivisions in this area, Deerfield and Erinbrook, but there weren't even two sales in either of these (at least per the MLS).

If you live in the Amissville or Jeffersonton area and have a home for sale, you might consider taking a look at how your home compares with these numbers. Is it time for a price reduction?

If your a buyer, keep these numbers in mind as you look for the house you want, then compare the listing price to these numbers.

Selling Agent Bonus

A client of mine who is selling his house has decided to offer a bonus to the selling agent. These are becoming quite common in the Virginia real estate market as sellers look for a way to sell their homes quickly without giving up too much money.

I strongly dislike these bonuses. Here's why:

1. It's not about the agent! Buying a house is supposed to be about what's best for the buyer. At least if you're an agent representing the buyer. It's never supposed to be about what's best for you!

2. In too many cases, they're not disclosed. Agents must tell the buyers about these bonuses. To not disclose this information is unethical!

3. If it is disclosed, it's surely evident to the buyer that this is money that could instead have been taken off of the listing price and that, therefore, the house is overpriced. It's like the "buy the house, get a car" gimick. Any savvy buyer figures our immediately that this means the house is overpriced by at least the value of the car. (Usually more!) As a buyer's agent I'd tell my clients to knock the amount of the bonus off of the price when we make an offer.

3. If it works, what does that say about the ethics and professionalism of the agents? Would they really show a house that's unsuitable for their client, in hopes of getting the cash? Would they try to influence their buyer's decision in order to cash in?

4. Many of these bonuses come with deadlines. "Good for offer before July 1st" for example. Really?! So, if the house isn't sold by July 1st you're going to be less desperate to sell than you are now? I'm betting I can get that money out of you after that date, one way or another!

5. I don't believe it works. Bottom line, it's another gimick and these almost never work. Sellers are dealing with the savviest, best informed buyers ever, thanks to the internet. Very few are going to be taken in by this kind of thing. Let's be honest, you're offering the bonus because your house is overpriced and you don't want to lower the price. You're not fooling anyone!

Behind the Numbers

Every month in this space I give you the statistics on what the market is doing in Culpeper, Fauquier, Rappahannock and Prince William counties. (With Warren thrown in occasionally!)

What I haven't really talked about is where this data comes from and what inherent flaws there might be in this data. It now seems like I'm overdue for that discussion.

Each month the data I use as the basis for my analysis comes from the Multiple Listing Service (MLS). The MLS that serves our area is called MRIS. The data in this system comes from what the agents input. They input their listings and they input the information when it gets sold.

So, here's the first weakness in the system, the human factor. People forget, get lazy, get busy, etc. It's the same problem with every system, anywhere, run by people!

There are brokerages that still don't list properties in the MLS. They are few and far between, but a few of them still exist. (By the way, if you really don't want your house to get sold, just keep it out of the MLS!)

Builders generally don't list every house they have for sale in the MLS. They'll list, perhaps, one of each model they have. So the MLS always understates the total inventory and seriously understates new construction inventory.

While many For Sale By Owner (FSBO) properties are now in the MLS, many more are still not, relying on the handwritten sign in the yard. Again, this understates inventory.

But for whatever flaws there are, the MLS is the best system we've got. It's as close as I can get to getting a total snapshot of the market at any given time.

Too Much Inventory - May Numbers

There's a constant refrain here. And, I know I sound like a record stuck in a groove. But May numbers continue to reinforce that we've still got too much inventory.

Culpeper County shows we're only eight units off where we were last year at this time. The good news is that sales jumped substantially this month. And, I'm not using month over month comparisons, but year over year. Both new contracts and closed sales took a big jump. But that pace is going to need to continue for months in order to start to see the reduction in inventory we need in order to stabilize prices.

In Fauquier County last year at this point in time we hit our highest number ever for inventory. Unlike Culpeper, we've come down substantially. A year ago there were 867 homes for sale and now it's only 764. The contracts written and the sales closed are both also up, if not quite as much as in Culpeper.

Prince William County actually has a large increase in inventory. While contracts and sales are up, the increase in inventory means no firming up of prices there any time soon. Since Prince William County is one of the hardest hit counties in Virginia for foreclosures, this will likely take some time to resolve itself. But bargain hunters are out there.

Rappahannock County remains a place apart. The market is almost exactly where it was a year ago. Days on market are longer there as well, inventory is higher than it was several years ago. But it's a very different market than what we're seeing in the other three counties.

Our numbers reflect the national numbers pretty well. New contracts are up across the nation. The numbers you hear from NAR and from most of the national media are primarily comparing May, 2008 to April, 2008 and of course the numbers are going to go up. The more meaningful number is always year over year.

We've got some good signs out there. There are buyers out there. They're looking for bargains. They've got the right market for it.