Spring Market Keeps Going After Tax Credit ** Strategic Defaults

May 2010:

The tax credit expired almost 2 weeks ago and........ the market in Northern Virginia keeps going.  There are still as many people at open houses.  Contracts are being written on good properties all over the region.  There are very few available homes in the sought after subdivisions.  There are still multiple bids on some properties when they come on the market. 

Don't expect prices to rise too dramatically, but in a lot of neighborhoods prices have seen the bottom and have started to rise.   Buyers are still very cautious with their dollars.  They want to be sure that they are not paying too much.  While interest rates remain low, the banks have returned to fully underwriting their loan, which makes it difficult for some prospective purchasers to obtain financing.  It is good to see full underwriting again.  In some neighborhoods this means that better qualified people are moving in, fixing up the homes, and not over crowding the properties. 

For the mid & upper price ranges, buyers are better off if they can put down larger down payments as mortgage insurance has become quite expensive.  At the entry level, buyers can find financing through FHA, VA or VHDA.  These low down payment programs worked well through the '80s and '90s and they will help qualified purchasers buy today.  Cash transactions are a larger part of the market than ever before with almost 30% of the homes selling for cash in Northern Virginia.  You can read more details at this link Northern Virginia Housing Trends by NVAR

**Strategic Defaults**
Many in the industry feel like we are entering the third round of defaults and short sales.  The first two rounds of defaults and short sales were generally sellers who had trouble making their mortgage payments, due either to job loss or rising adjustable rate mortgages.  Now we are seeing some sellers who have seen the value of their properties drop by up to 50% in some areas, and while they still can make the payments, they are choosing not to.  You have to have a very long term view to keep paying on a mortgage of $285,000 when the properties around yours are selling for $150,000!!  The lenders are getting more realistic about their loan modifications.  The lenders will often write down the interest rate to 3% or even less, but they are very reluctant to write down the principal. 

Yes, things remain interesting in the local real estate maket.