Released June 1, 2009
Eagles,
It has nearly been two years since the first mortgage company failed. Remember American Home Mortgage? It was near about that time that the real estate credit markets became "disjointed". In "normal" market times, our home mortgage interest rates price out around 150 to 180 basis points from the 10 year treasury bond.
We have not seen our mortgage market and the 10 year bond pricing in line since then - UNTIL NOW.
Yes, we are seeing "normalcy" in our Mortgage market now. This happened with the moves last week in the markets, and the Fed is allowing this progression to play out - they took a sideline roll last week - which did surprise investors and we did not fall off the cliff. Look at our Jumbo interest rates, they are more in line now with the conforming loan market.
Normalcy!
Our company sales over the past couple weeks has really JUMPED! It was in September 2005 when we really began to feel the market downturn. Prior to this time, our Eagles produced on average - 2 to 3 transaction sides per month. In September 2005, we fell below an average of 1 transaction side per agent, per month. We have only been above this 1 transaction per agent per month line twice since then - July and August 2008, hitting a high in August of 113 transaction sides. Last month - May 2009, our contract activity JUMPED - tracking near 2 transaction sides per agent per month with 150 transaction sides. WOW!
Again, a return to "Normal"
I know I keep hearing agents talk about the next waive of foreclosures hitting the market - DON'T COUNT ON IT! Yes, we do have a lot of BPO activity in our market, but most of this is part of the short sale process. Most banks now are wanting to approve short sales vs. taking a property in foreclosure.
The word for the next phase of foreclosures involve the option ARM loans. Yes, we may see some homeowners in trouble when these option ARMS adjust, but many will not be in trouble. My personal house is financed with an option ARM. That ARM adjusts next year, and under its terms, I pay $250 and my current 5.5% mortgage rate will adjust to whatever the current market interest rates. Guess what, right now, I would likely get the same rate I currently pay for the balance of my loan.
Let's take this idea further - the biggest issue that is creating foreclosures is home prices. The Fairfax Median List price is already up by 15% from the bottom. Loudoun is up more than 10% from the bottom. As these prices rise, there are fewer foreclosures and FEWER SHORT SALES.
Again, a return to "Normal".
You must now focus your business to running in a normal market. Working expired listings, previewing homes, and networking with your database is necessary. Brian Buffini's 100 Days to Greatness program is the program to follow! Much of our area population has no idea just how are market has evolved over the past few months. You need to spread the word of our current market conditions. Foreclosures in our market, will begin now to decline, short sales, while they will still be in our market for some additional time, will begin to take up less and less of our overall market. We are now seeing more Sellers who are not upside down, and as prices continue to increase, again, fewer Sellers will be in an upside down position.
Watch your new homes market. When a builder can build at a profit, this is when we will see a real shift in our market. This will be the point of full stabilization in our market. Reports now are many of the projects in the Prince William market are now sold out till November/December delivery dates. There is new construction activity and sales returning to the market, but this will remain limited till prices hit the point of profitability.
As always, please contact me with any question or comment you have. I want to help and support you in you in any way I can. Part of this is keeping you informed of our market changes - and trust me when I say in my near 25 years experience in this industry, I have NEVER seen a market adjust as fast as it has in this market cycle.
Thanks,
Chuck
