Category Archives: Finances

Look for prices to rise more slowly in 2014 and home building to push ahead of the housing market’s recovery.

This was a great article in USA Today…worth reposting!

The housing recovery hit high gear in 2013 with bigger than expected price gains and solid home sales. This year isn’t likely to be as exciting. Rising mortgage interest rates will price out some potential buyers. Instead of double-digit price gains, look for single-digit ones, economists say, while existing home sales remain at last year’s level.

Sound boring? “You want boring in the housing market,” says Svenja Gudell, Zillow director of economic research.

Here’s what’s ahead for:

• Home prices. They were the highlight of the 2013 housing market, up 12.5% in October year over year, CoreLogic says. Prices are now 20% off their 2006 peaks after falling more than 30%, shows the Standard & Poor’s Case-Shiller index.

Economist John Burns looks for a 6% gain in 2014. Many others see smaller increases ahead. Zillow forecasts just a 3% rise.

Prices will likely rise more slowly as more homes come on the market, fewer investors bid for homes and higher ownership costs — including interest rates and home prices — take a bite out of housing affordability, housing experts say.

Still, U.S. housing remains 4% undervalued when compared with other economic fundamentals, such as consumer incomes and the cost to rent, says Jed Kolko, Trulia economist. At their 2006 peak, home prices were 39% overvalued based on the same metrics, Kolko says.

•Existing home sales. They’ve started to slow. In November, they were down year over year for the first time in 29 months, National Association of Realtor data show.

The dip was driven by higher interest rates and a tight supply of homes for sale. It doesn’t mean the housing recovery has come off the rails, because home prices and housing starts continue to improve, says Capital Economics economist Paul Ashworth.

Existing home sales, which came in at a 4.9 million seasonally adjusted pace in November, are expected to be about 10% higher in 2013 than 2012 and stay about the same at 5.1 million in 2014, NAR forecasts. That’s roughly back to 2007 levels but below the inflated levels preceding the housing crash.

New-home sales, which make up a smaller part of the market, have more room to grow. They hit an annual pace of 464,000 in November, up almost 17% from a year ago but still below the 700,000-a-year pace generally considered healthy.

The new year will be different for home buyers, though.

Look for fewer bidding wars and a less frantic market, says Glenn Kelman, CEO of brokerage Redfin. Its data show bidding wars recently falling to one of two offers handled by Redfin agents, down from three of four at the peak in March.

Homes are taking longer to sell, and more sellers are also reducing prices to win sales, Kelman says. At the same time, the supply of existing homes for sale edged up to 5.1 months from 4.9 months in October, NAR says. That’s still below the six-month supply that Realtors generally consider to be a balanced market for buyers and sellers.

Supply should get closer to that level in 2014, Kelman says.

Donaee and Jeff Reeve hope he’s right. The couple sold their Seattle-area home in just 10 days amid a hot June market. They’ve been renting as they search for a new home with a few acres. Meanwhile, prices have risen. The lack of suitable homes for sale is “discouraging,” says Donaee Reeve, 36, a dental hygienist.

• Housing construction. This part of the housing recovery has been a laggard.

November’s data showed an improvement, with housing starts topping 1 million on an annual basis, the Commerce Department says. That was up almost 30% from a year earlier, but it’s still far below the norm. Starts averaged 1.5 million a year before the mid-2000s housing boom.

Construction won’t return to normal this year, but it will strengthen enough to be the main driver of the housing recovery as home price gains shrink, says investment manager Goldman Sachs Asset Management.

It sees housing starts increasing 20% a year for the next several years as household formation picks up with the strengthening economy.

More home construction means more jobs for construction workers, plumbers, civil engineers and others in the building trades, as well as related industries such as furniture manufacturing, it says.

Construction alone will add 300,000 to 500,000 jobs a year to the nation’s job base for the next three years, GSAM predicts. That’s up from about 100,000 in 2013.

“The construction revival is primarily a matter of when, not if,” says Tom Teles, GSAM head of securitized and government investments.

• Mortgage rates. Sarah and Andrew Katz know home prices are going up, and mortgage interest rates, too. But they’re still convinced it’s a good time to buy a first home. They’ve set their sights on spring.

“We’re banking on interest rates staying under 5%, but they are what they are,” says Sarah, 29, who works in public relations in Manhattan.

The couple better not wait too long, economists warn.

Average rates for a fixed 30-year mortgage will rise to 5.5% by the end of 2014, says Lawrence Yun, NAR chief economist. Rates have already risen about 1 percentage point in the past year as the economy has strengthened. They’ll be pushed up further as the Federal Reserve winds down its $85 billion monthly bond-buying program.

Each percentage point increase in mortgage rates makes homes about 10% more expensive in terms of higher housing payments.

Another factor could weigh on borrowers. Starting in January, lenders must make home loans that meet new federal qualified mortgage standards or face greater liability from borrower lawsuits, should the loans go sour.

At least 5% of mortgages extended in 2013 wouldn’t meet the new standard, Yun says. More than that will likely face additional scrutiny from lenders as they implement all parts of the new rule, says Brian Koss, executive vice president of lender Mortgage Network.

He says the higher rates and tighter rules will likely drive some home buyers out of the market or into lower-priced homes than they could have afforded last year.

“People have gotten spoiled,” Koss says. Higher rates and home prices will test the strength of the housing recovery in 2014, he says.

Originally posted by, Julie Schmit, USA TODAY

Red Light District a Cash Cow for the District of Columbia

A New Kind Of Red Light District

If you are traveling to D.C. over the holidays, be forewarned. The District of Columbia has expanded its arsenal of automated traffic enforcement cameras throughout various corridors of the city.

Starting on Saturday November 23, the District activated 100 next-generation traffic cameras, according to AAA Mid-Atlantic. Motorists will now have to pass through stop-sign cameras, intersection speed cameras and crosswalk cameras.  And all drivers will be subject to red-light cameras.

“The city is now awash in automated traffic cameras, including red-light cameras and speed cameras,” John B. Townsend II, AAA Mid-Atlantic’s Manager of Public and Government Affairs, said in a statement.  “The new cameras will nab drivers who fail to yield to pedestrians and cyclists. In addition, a battery of newfangled intersection speed cameras will ticket motorists who speed up to beat the traffic light.”

To prepare motorists, the MPD is publicizing the new camera enforcement locations around the city. The list includes:

  • 32 new portable stop-sign cameras located near schools.
  • 24 intersection speed camera units that target drivers speeding through an intersection to beat a traffic signal. The fines range from $50 to $300, depending on the clocked speed.
  • 20 gridlock camera units to identify vehicles that “block the box,” and fail to clear the intersection. The fine is $50.
  • 16 pedestrian right-of-way or crosswalk cameras to identify vehicles that fail to stop for a pedestrian. Failure to give the right of way brings a $75 fine.
  • Eight oversize vehicle cameras that ticket truck and bus drivers who drive vehicles on a residential street, such as the 1100 block of 4th Street NE or the 1300 block of Independence Ave. SE. Fine: $150.The fine for running a red light is $150.

    According to AAA Mid-Atlantic, the city generated $91 million from automated traffic camera tickets during fiscal year 2012.  During the year it issued 91,550 red-light camera tickets that generated $12.9 million in revenue.

    In its fiscal 2014 proposed budget, the mayor’s office announced policy initiatives designed to increase the city’s general fund revenue by $75.1 million, with more than a third of that total, $31.7 million, coming from additional automated traffic camera enforcement revenue the city hopes to get by expanding its network of cameras.

What do you do if your lender cuts off your equity line?

I have a friend who used the bonus from his law firm to pay down his Home Equity Line of Credit (HELOC). He and his wife toasted their fiscal responsibility for taking the windfall of extra money and applying it all to debt, instead of squirrelling it away or spending it on a vacation to Tahiti. They felt confident with this decision knowing if they needed the extra dough they could pull the money back out of the house through their equity line.

At least it sounded like a good idea a the time. Little did they know their bank would almost immediately reduce their equity line limit to a number only slightly above their outstanding balance. Read on for some helpful advice on what to do if your lender cuts, or even worse, cuts off your HELOC.

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Fairfax County Home Sales Surpass $1 Billion in June

Prices IncreaseHold on to your boot straps, it looks like the real estate market in Northern Virginia/Washington, DC is on the rise again!  At least inside the beltway in Fairfax County, Arlington County, Alexandria City, and Falls Church.

The Sun Gazette reports that in Fairfax County alone, Home Sales Surpass $1 Billion Across County in June . Sales for the month totaled 1,838, an increase of 18.8 percent from the 1,547 transactions reported in June 2012.  The average sales price was also up 7 percent.

Is this a good thing or too much of a good thing?

PenFed Announces 30-Year Fixed, Jumbo Loans

People oftentimes ask me what I like about being with Prudential PenFed Realty – being able to offer our clients awesome products like 3.625% on jumbo loans up to $4 Million is at the top of the list. Questions? Ask me! Want to know how to offer your clients these great programs? Call me!

For the full scoop visit

Seller Contributions and Non-Allowed Lender Fees

Questions?  Call Maxine for answers! 703-836-1464

Questions? Call Maxine for answers! 703-836-1464

Did you know that FHA and VA loans both contain fees that a borrower cannot, by law,

Yep.  It is a fact.  In order to facilitate settlements you will find in most of our DC Metro Area contracts contain clauses in the VA and FHA Finance Addenda that state that the “sellers agree to pay any fees that the borrower cannot, by law, pay.”

If you have a contract with seller contributions, the fees the borrower cannot pay are first deducted by that same concession (i.e. If you have $500 in fees the buyer cannot pay and have
$1000 in seller contribution then the $1000 first pays the $500 for the buyer
and the remaining $500 is provided to offset other closing costs.)
Remember no closing costs assistance can EVER go towards a borrower’s down

But what if you have $0 seller contribution?  Again, as
most of our local contracts read, the seller will still be responsible for
paying those fees that the buyer cannot pay.  For Presidential Mortgage
Services, Prudential PenFed Realty’s affiliated lender, this amounts to $760 on a VA loan and
$85.00 on an FHA loan.  For other lenders it could be significantly more.

Please be aware that if you are a listing agent and you agree to an FHA or VA
contract that $0 seller contribution, does not necessarily mean $0 from your

On the Mortgage Horizon

I just got this from a lender we frequently do business with regarding the new Qualified Mortgage rule expected from the Consumer Financial Protection Bureau …it is an interesting read.

Mortgage questions?  Call us for answers! 703-836-1464

Mortgage questions? Call us for answers! 703-836-1464

This week CNN discussed the new Qualified Mortgage (QM) rule the Consumer Financial Protection Bureau (CFPB) is likely to release.  The new QM Rule is not expected to become effective until January 2014.

The new Qualified Mortgage (QM) rule is designed to establish new lending rules that will move us between the footloose times of no documentation loans and the current strict credit standards.  The QM proposes that borrower’s total debt to income ratios be capped at 43% of their monthly gross income.  It would also limit the risky products offered by lenders.  Such as, no more loan terms greater than 30 years, mortgage loans can’t have a balloon payment due, no loans in which the principle due increases over time, and interest only loans would go out the window as well.  Homebuyers who choose adjustable rate mortgages will no longer be qualified on low introductory teaser rates, but rather the fully indexed rate.

The QM rule is designed to help lenders determine the borrower’s ability to repay the loan by evaluating all aspects of their credit profile.  Such as current income and assets, employment history, credit history, the proposed mortgage payment to include insurance, real estate taxes, HOA dues, mortgage insurance and a borrower’s total monthly debt to income ratios.

This is not designed to alter the housing market’s recovery and assist consumers who can’t meet the 43% debt to income ratios, the agency said it was establishing a second, temporary category of qualified mortgages that meet most of the new guidelines and would qualify to be purchased or guaranteed by Fannie Mae or Freddie Mac.  Federal Reserve Chairman Ben Bernanke said, “The legitimate concern is that this will cement the tight mortgage underwriting standard that we currently have in place, and most people agree that they are too tight.”

Mary Ellen Podmolik of the Chicago Tribune reported:

Under the new rules, lenders who make qualified mortgages to well-qualified borrowers that carry a lesser chance of defaulting could be shielded from lawsuits from these prime borrowers who say the lender did not satisfy the ability-to-repay requirements.  Riskier, subprime borrowers could challenge the lender’s assessment of their ability to repay the loan but borrowers would have to prove that a lender didn’t adequately factor in the living expenses and other debts.

Diane Thompson, of counsel at the National Consumer Law center said, “They appear to favor lenders’ interest above consumers.  You have to prove what’s in the creditor’s records.  It may be that no homeowners are able to challenge it.  Otherwise, you’re relying on regulatory oversight, and we say how well that worked.”

In summary, the QM rule is designed to protect consumers from irresponsible mortgage lending and protect taxpayers from having to bail out Fannie Mae and Freddie Mac.  Lenders will be restricted from offering risky products to the consumer and charged with the task of responsible lending.  CFPB director Richard Cordray explained, the ability to repay rule is a common-sense answer to curb the borrowing and lending behavior that led to the financial crash.  Cordray says, “When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford.  Our ability to repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes.  This common-sense rule ensures responsible borrowers get responsible loans.”

ABCs of Closing Costs

You have found your dream home, the seller has accepted your offer, your loan has been approved and you are eager to move into your new home. But before you get the key, there’s one more step-the closing.

abcAlso called the settlement, the closing is the process of passing ownership of property from seller to buyer. And it can be bewildering.

As a buyer, you will sign what seems like endless piles of documents and will have to present a sizeable check for the down payment and various closing costs.  It’s the fees associated with the closing that many times remains a mystery to many buyers who may simply hand over thousands of dollars without really knowing what they are paying for.

As a responsible buyer, you should be familiar with these costs that are both mortgage-related and government imposed. Although many of the fees may vary by locality, here are some common fees:

· Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.

· Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.

· Loan Origination Fee: This fee covers the lender’s loan-processing costs. The fee is typically one percent of the total mortgage.

· Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.

· Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.

· PMI Premium: If you buy a home with a low down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure.  Once an owner with a conventional loan has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.

· Prepaid Interest Fee: This fee, also known as interim interest, covers the interest payment from the date you purchase the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.

· Escrow Accounts: In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus two months worth of homeowner’s insurance premium will be collected. In addition, taxes equal approximately to two months in excess of the number of months that have elapsed in the year are paid at closing. (If six months have passed, eight months of taxes will be collected.)

· Recording Fees and transfer taxes: This expense is charged by most states for recording the purchase documents and transferring ownership of the property. Make sure you consult a real estate professional in your area to find out which fees-and how much-you will be expected to pay during the closing of you prospective home.

Also, keep in mind that depending on the market, you can negotiate these costs with the seller during the offering stage. In some instances, the seller might even agree to pay all of the settlement costs.

If you have any questions please do not hesitate to call or email your Alexandria Homes specialists and someone on our team of agents will be delighted to assist you!

The Fiscal Cliff and the Real Estate Market

I came across this article about what could happen to the housing market if we fall off the fiscal cliff…(Huffington Post 12/19/12)  While I cannot say I agree with everything this article says, it does make for an interesting read.

Everyone agas portrayed by CBCNews.comrees the economy will falter if we go off the fiscal cliff, but how will the tax increases and spending cuts it will trigger impact the housing market?

  1. Reduced housing demand and construction: Most experts predict the combination of tax increases and spending cuts will push the economy back into recession. This means both new construction and demand for existing housing will wane, quickly reversing the six-month old housing recovery.
  2. Dramatic reduction in short sales: Failure to reach a budget deal could mean the elimination of the Mortgage Debt Relief Act of 2007, which allows borrowers to avoid paying taxes on the amount of forgiven debt. If eliminated, homeowners who complete a short sale would have to pay income tax on the amount of debt relief. This would deter banks from approving short sales and could weaken home price gains and slow the housing recovery.
  3. Less capital flows to real estate: If lawmakers don’t act, the capital gains tax will increase from its current 15% to 20% at the start of the year. This increased tax would affect profits made from property sales, a possible deterrent to investing in real estate. The sale of primary residences is exempt from this–up to $250,000 for individuals or $500,000 for a married couple filing jointly.
  4. Increase in mortgage insurance costs: On January 1, this mortgage insurance tax deduction is set to expire, which will slightly raise costs for those who put less than 20% down and are required to purchase mortgage insurance.

Even if Congress and the President can make a deal on how to reduce spending and raise revenue before the end of the year, it doesn’t mean the real estate market is off the hot seat. Much will come down to the specifics of the agreement, and the challenge for lawmakers will be finding a way to reduce the federal deficit without stunting the housing and economic recovery.

The primary concern most homeowners have is how lawmakers will deal with current tax deductions for interest on home mortgages. Once considered untouchable, elected officials appear to be considering reducing it or eliminating it. Getting rid of it entirely would provide the federal government with an additional $100 billion in revenue a year, which is still a fraction of the 2012 deficit of $1.1 trillion. By comparison, the president’s proposal to raise taxes on the wealthiest two percent of Americans would raise about $160 billion per year for the next decade.

A home owner with a $100,000 mortgage would receive about $520 in tax savings the first year and $15 in the final year of a 30-year mortgage with interest at 3.5%. For someone with a $1 million mortgage, the savings would be around $9,714 the first year and $282 in the final year. For an estimate of how much you’d save, check out the handy calculator at Yahoo Homes.

The mortgage deduction unquestionably supports the housing market by making home ownership significantly cheaper, especially in the first few years of a mortgage. However, critics argue the bulk of the money saved is by wealthier homeowners and little of it ends up in the pockets of the middle class. Consider it a microcosm for all the disagreements in Congress right now, which is exactly why no one is quite sure how an agreement will be reached or what the future holds for the housing recovery.