Ok….I have to admit it….I’m surprised by this month’s numbers.  Since April of this year we have been sitting very close to a 5-month supply of homes on the market.  I our current economic context I have been very excited by the 5-month number.  It means that 20% of the people who are trying to sell there home have been successful each month.  This is not a great, but not a horrible number.

But look what happened in October.  Our government told us we were in a global financial crisis.  Stocks fell through the floor.  Large companies declared bankruptcy.  There was a bailout plan announced that seemed to give no confidence to investors or others in the United States or around the world.  What would you expect would happen to our local Real Estate market in Northern Virginia?  I expected numbers to be down quite a bit because of the fear people were showing regarding their finances.

The numbers did go down slightly, but much of that can be attributed to normal seasonal changes in the market.  There are many bright spots in these numbers.  The raw number of sales was up more than 30% from the previous October, while listings were down 15% during the same time period.  In October 2007, there were 8.4 months worth of house sales on the market.  In October 2008 that number was reduced to 5.5 months.  This tells us that our market stayed very strong through a very traumatic month for our nation’s economy.

One note about my spreadsheet below:  I’ve added a column this month called “absorption rate.”  This is the rate the real estate market is “absorbing” homes, measured in months.  In other words, this how long it is taking to sell a typical home.

The spreadsheet shows the data from October 2005 through October 2008 for Arlington County, Alexandria City, Fairfax County, Fairfax City, And Falls Church City.

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Written by Jeff Royce of RE/MAX Choice Real Estate, Fairfax, VA,  571-482-7817

The City of Fairfax continues to lag the Northern Virginia market as a whole in October.  Last month 15% of the homes on the market sold in Fairfax City.  This is slightly lower, but in the same ballpark as the numbers from a year earlier.  I added a column to the statistics spreadsheet which I’ll explain in my Northern Virginia Market Report.

Here are the numbers from December 2005 through last month:

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Written by Jeff Royce of RE/MAX Choice Real Estate, Fairfax, VA,  571-482-7817

A good relationship with a loan officer is vital for someone wanting to make solid decisions on the purchase of a home. As a Realtor advises you on the physical, transactional, a lifestyle aspects of your purchase, a loan officer advises you on the financial. A good loan officer will ask you a lot of questions about your personal situation to assure that:

1) You are not buying too much house for your budget.

2) You are using the type of loan that will minimize both expense and risk in your personal situation.

Before you make a home purchase you should personally analyze your budget and do some soul searching. Ask yourself what priority the purchase of your home should be in your life and finances. How much of your budget are you willing to spend on your home? What things are you willing to give up in order to own a home? What are (realistically) your future financial prospects?

When you meet with a loan officer for the first time, go with a good idea of the amount of money you are willing to spend upfront and on a monthly basis in order to purchase a home. You may tweak these numbers later, but go in with a ballpark figure. Be open to answering questions from your loan officer. They should ask questions like: How long do you plan to be in your new home? Do you expect your income to rise over the next few years or remain steady? Is your income stable or does it vary from month to month? Are you comfortable taking a risk that your payments will go up down the road in order to save money now, or do you want to make sure your payments are stable?

Any loan officer (or lender web site) will tell you how much you qualify for and give you an array of loans to choose from. A good loan officer will listen to you, then help you choose the loan that best meets your needs. A good loan officer will also give you an opinion about the best loan for your situation based on years of experience working with many buyers.

Choose a loan you are comfortable with, that you qualify for, and that you can actually afford before you ever go out and look at a home. It is very difficult (and discouraging) to find a home in your price range if you have been out looking for homes that cost 20% more. Know your price range before you start looking and you will save yourself a lot of frustration.

In choosing your loan officer get a recommendation from someone you trust, preferably your real estate agent. Most loan officers are commission based and get most of their business from 3-6 real estate agents that they work with regularly. This can benefit a buyer substantially. If a substantial portion of a loan officer’s livelihood comes from your agent, the loan officer is much more likely give great service to you. You are much more likely to have commitments honored. You are much more likely to have the money there the day you have committed to close on your purchase. (Note to first time buyers: Though it is hard to believe, some lenders all too often take loan applications, process your paper work, make you find obscure financial information, then don’t have the money there on the day of closing.)

After you meeting with a loan officer, you should take with you a good-faith estimate showing you all of the costs (upfront and monthly) involved in purchasing a home, and a pre-approval letter stating exactly how much you can afford to borrow and the total price of a home you could purchase. This will allow you to move into the next steps of the home buying process: finding the right home and negotiating the best price.

One more thing: read this perspective of a loan officer from a loan officer. It is a little scary, but very true.

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Written by Jeff Royce of RE/MAX Choice Real Estate, Fairfax, VA,  571-482-7817

In today’s Washington Post Kenneth Harney wrote:

Loan terms and credit underwriting standards have been toughened up, but you can still put down 3 percent (3.5 percent after Jan. 1) on an FHA-insured mortgage and 5 percent on certain Fannie Mae and Freddie Mac loan programs with private mortgage insurance. The FHA’s credit standards are generous and forgiving — the agency exists to help people with less-than-spotless credit histories.

Despite the general gloom in the financial markets, money for mortgages is still readily available.  And buyers, taking advantage of historically low rates and low prices are getting back into the market.  Again according to Kenneth Harney:

Home prices — pushed by foreclosures and short sales — have rolled back to 2003 and 2004 levels or lower in many of the former boom markets. As a result, growing numbers of buyers are coming off the sidelines, making offers and writing contracts. The pending home sales index jumped by 7.4 percent based on purchase contracts signed in August, according to the National Association of Realtors. The heaviest increases — pointing to higher closed sales in the coming two to three months — were in California, Florida, Nevada and the Washington metropolitan area.

Read the whole article here.

The housing rate in Northern Virginia (defined as Arlington, Alexandria, Fairfax County, Fairfax City, and Falls Church City) sold at a rate of 19.5% in September.  This number is down slightly from the previous month, but almost double the 10.5% rate from September of 2007.

The statistics continue to show an improving market.  The real test for this market will come next month when the statistics for October are released.  How is the market handling all of the turmoil in the global financial markets?  We will find out next month.

Below is a spreadsheet showing the number of homes that sold each month along with the number of homes on the market in that month along with the percentage of homes that sold over the last several years.