Date Archives February 2013

FHA Changes upon Us – More Expensive Loans, Fewer Buyers?

I’m often told that the information provided here is educational. Part of my own education is knowing the right people to whom I both direct my questions and clients. As such, I’ll have a few posts in the next couple weeks from lenders whom I trust. First up is Matt Hodges discussing how FHA loans (which require at least 3.5% down payments and comprised about 10% *of the closed transactions in our market** in the past 14 months are becoming far less attractive. Next week’s post should be an interesting one, too.

FHA does not want to be your first choice, period.

Since December, HUD has been anticipating changes to the FHA loan program. On January 31, HUD released a mortgagee letter which changes the program. To read the entire mortgagee letter, click here.

The first change goes into effect on April 1st – no fooling! Here’s what changes:

For loans less than $625,500 (which is everything in our market that uses FHA, as the high limit is $437,000 in the Charlottesville MSA), annual MIP increases 10 basis points (bps). This means that the $200,000 loan now costs $16/month more.

The June 3rd changes:

1. If one puts down 10% on a purchase, mortgage insurance premiums will last at least 11 years, which is up from the current 5 years.
2. If one puts down less than 10%, mortgage insurance premiums are PERMANENT, regardless of future loan to value.
3. 15 year loans with 78% initial loan to value no longer has annual mortgage insurance waived initially – you must pay for 11 years.

The threat of lowered interested party (seller, Realtors, etc) concessions from 6% to 3% of the sales price, has not materialized yet. Our belief is that could prevent the lower priced homes from being able to use the FHA program, which might be discriminatory. It is still being considered, and it might have a ceiling and then tiered percentages below that.

Keep in mind, these changes are for pulling a case number, NOT closing. So, as long as we get the loan application done by March 29th for the first change and May 31st for the second set of changes we will still be using the current standards.

4.   MIP = Mortgage Insurance Premium
5.   Basis points = percent of the loan amount that you pay the insurance on. For example, 10 basis points on the annual MIP = .1% of the loan or $200,000 x .1% = $200 / 12 months = $16.67 per month.

Basically, talk to a great lender early in the process.

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Monday Reading – 25 February 2013

A few things on my radar this Monday morning …

Gasoline Prices up over 50 Cents per Gallon since December – This matters, and my clients are starting to talk about gas prices again, much earlier in the conversation about what they want/where they want to live.

Housing: What if inventory keeps falling? – inventory in some market segments in Charlottesville is frighteningly low – bidding wars, offers in days and hours rather than weeks and months, while the other extreme has foreclosures, short sales, months of inventory (I showed a home this weekend that’s been on the market for 1800 days, and another 6000 square foot foreclosure).

Why Sequestration Will Hit Housing on Several Fronts – the rumors at DIA and NGIC are swirling; this is just the sort of uncertainty the Charlottesville real estate market doesn’t need. At all.

Homeowners Rise Above Water on Mortgages – More sellers are able to sell, but we’ve still got a long way to go before things are stable across the board.

They Bailed On Their Homes – Now They Want Back In – We knew this was coming. Strategic defaulting looks like it was a smart move for some …

When they Came for the Raw Milk Drinkers …

Why Obama Refuses to Kill the Sequester – I don’t care who does what; I resent being a pawn whilst the politicians “play politics”.

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City of Charlottesville Stormwater Management Fee

It’s a tax, but a useful tax.

The City’s infrastructure is crumbling (as is the country’s) and this is a reasonable way to address those concerns. There is so much old infrastructure in the City of Charlottesville (and Albemarle and everywhere else in the US) that at some point, it’s reasonable to start fixing it. If you live in an older home, you may want to consider thinking about the line from the house to the street.

Charlottesville Tomorrow reports:

Beginning Jan. 1, 2014, property owners will be billed a twice-yearly fee of $1.20 per 500 square feet of impervious surface on a site. The money will allow the city to increase funding for its water resources protection program from $945,000 a year to more than $2.5 million.

If this tax is actually applied to upgrading water and sewer infrastructure and is sunset after a reasonable period of time (10 years?) it makes sense to have property owners (churches have impervious surfaces, too) contribute.

For those who own or are contemplating owning property in the City (may I suggest 1507 Gentry?) go to the City of Charlottesville’s nifty new GIS page and look at the bottom for an estimate of how much your storm water fee will be.

City of Charlottesville GISViewer.jpg

(note: the “click here” goes here)

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Match Day 2013 – Will UVA Residents Buy?

Match Day 2013. Will this be the year that incoming UVA medical residents buy instead of rent?

For most people, (Match Day) is just another day. But for medical students, it’s Match Day, the day that determines not only where they will work after medical school, but what kind of doctors they will become.

For the first five years of my career, Match Day was a big thing for the Charlottesville real estate market – UVA Medical Residents would buy homes. In 2005 (the first year of this blog), I wrote:

This past Thursday was Match Day, the the new Residents find out which Medical School they will be attending. Most importantly, these Residents are a built-in market that comes about each year. Good for real estate.

You know what? At that time, UVA medical residents (and law students and Darden and other short-timers in Charlottesville) were a significant portion of the market.

Then the Zero to Five buyers went away.

The buyers who would buy and sell in a zero to five year timeframe are gone. In other words, the stepping stone of the “buying a home” lifecycle has been pushed further.

Which brings us to 2013.

Are the UVA Medical residents going to buy homes this year?

Answer: Maybe. Maybe more than last year. I’m hoping/expecting to see more quality inventory coming on the market this year than we’ve seen in some time, which should provide

Butstudent loan debt is a massive challenge.

From NYTimes

“It’s become normal now to take out loans to get anything of value,” said Dr. S. Ryan Greysen, an assistant professor of medicine at the University of California, San Francisco, and lead author of a fascinating study published this month on the historical and social factors that have contributed to rising medical student indebtedness. “Getting a medical education has become similar to getting a mortgage on your house.”

There is a lot of positivity in the market right now, and a lot of buyers who are buying now are buying with the intent to rent that house when their stint in Charlottesville is over. (this is a fantastic resource for real estate investors)

– Closed home sales are up in Charlottesville and Albemarle (where UVA Residents tend to live – as it’s within their ~20 minute distance threshold)

Inventory has been down, and remains down.

– Prices in some market segments are seeing upward pressure for the first time in years.

– Buying can be less expensive than renting. (ask a good lender about options)

– I rarely actively solicit business here, but for those incoming residents, I’m taking on new clients.

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Verify your School District Before you Buy a Home

There’s nothing worse than buying a home, a large part of that buying decision being the school district, to then find that you’re not in the school district you thought. (hopefully before you close)

It happens.

“School District” is one of the most important criteria identified by my buyer clients searching for homes – school districts matter. Better schools = higher home prices.

Bad data entry happens. To all of us.

Trust. Then Verify.

A client emailed me the other day about a new listing … great home, great location, great school district … just not the current great school district; it was marked as being in an adjacent school district, pre-redistricting.

So – Check your school district before you buy a home. Seriously.

I tell my clients that I trust the Charlottesville MLS about 83.875% of the time … it’s greatest flaw is that it’s run by humans, humans, many of whom don’t give a second thought to the value of accurate data.

Here’s what happens when a realtor in Charlottesville inputs a new listing into the MLS:

Charlottesville Area Association of REALTORS® © 2013 LIST-IT-1.jpg

– Cloning is more efficient.

– Double-checking is not.

If a property last sold 7 years ago via the Charlottesville MLS, there’s a darn good chance that the school districts have shifted.


Search the MLS for homes by school district.

– Assume it’s accurate.

– Verify for your own self whether it is accurate.

– Check the website of the school system to verify whether your house is in X school district.

– Call the school system to verify. (take notes and names)

Proceed. 🙂

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