Loudoun County Housing Inventory and Days On Market

Let’s take a look at Loudoun County’s housing inventory and average days on market (DOM). This is important to know because it gives you a sense of how to negotiate as a buyer and how to position your property as a seller.

Loudoun County inventory – new and active listings

There are just under 1500 active listings in Loudoun County, which is on the low side. To give you some comparison points…active listings hit a decade-low 1087 in December 2009 (seller’s market and values went up). And active listings hit an all time high of 4659 in the summer of 2006 (that’s when everything really hit the fan, prices started tanking and it was a buyer’s market).

Note: Yes, inventory has risen in the recent weeks. But that’s a yearly/seasonal thing called the “Spring market” when sellers believe they can get the most for their homes and put their home on the market.

Loudoun County average Days On Market (DOM)

The general rule of thumb in this area has been that when DOM goes above 4 months (120+ days), it signals a buyer’s market. If DOM is below 3 months (<90 days), it signals a a seller’s market. Right in between 90 and 120 days typically signals a balanced market. As you can see, DOM is below 80 and was even as low as 40 for a while there.

What does all of this mean?

For home owners that are able to sell their home at its’ present value, the market is on your side. DOM and inventory are low, two things that bode well for sellers.

For buyers, it means that your choice of homes is limited. In addition, you’ll see a lot of competition on the current homes on the market and even stiffer competition (aka multiple offers) on the homes that are priced very well and a great value.

Even though the signs point to a sellers’ market (and recovery), don’t get overly excited. Among other things, there is a lot of shadow foreclosure inventory to still get through and lending guidelines are making it harder and more expensive for consumers to get financing.

If you would like statistics about a specific town or community within Loudoun County, don’t hesitate to contact me.

FHA Loans Get More Expensive; LPMI Alternative

If Uncle Sam hasn’t made you dislike April 15 enough, the FHA will. As of April 15, new FHA loan guidelines go into effect which raise the cost of an FHA loan to borrowers.

How and where are the increases? In the Mortgage Insurance (MI) part of the equation.

How much is the increase? Let’s take a look at some examples…

Sales Price Loan Amount(Base) Old MI New MI

$200,000      $193,000     $144.75      $184.96 (+$40.21 per month)

$325,000       $313,625     $235.22      $300.56 (+$65.34 per month)

$450,000       $434,250     $325.69      $416.16 (+ 90.47 per month)

You may be wondering why the FHA is raising the cost of mortgage insurance (and the overall loan) to borrowers now. In my humble opinion…it’s part of their plan to recoup their past losses and protect themselves from future losses. The FHA is still licking their wounds (aka financial losses) from all of the foreclosures and general down market of the past 5 years.

It may also be a sign that the FHA and government in general believes that there is a recovery taking place and, therefore, the market (and borrowers) are able to absorb the added cost. (Whether they’re correct or not is not a debate I’m going to get into right now)

This isn’t good news if you’re an FHA borrower. But you may have an alternative.

It’s called Lender Paid Mortgage Insurance (LPMI). It’s a type of loan where, rather than paying monthly Mortgage Insurance, your interest rate is higher. There are pros and cons to LPMI though I think the pros outweigh the cons in most cases.

Here’s an overview of LPMI…

- LPMI is not an FHA loan product. It is a private lender program backed by Fannie Mae or Freddie Mac.

- LPMI generally requires a 5 percent down payment rather than 3.5 percent for an FHA loan. There are some 3 percent down LPMI programs out there, but they are more expensive for the borrower than than an FHA loan under the new guidelines.

- Even though your interest rate is higher with LPMI, your overall monthly mortgage payment is typically less than an FHA loan with a lower interest rate with Mortgage Insurance.

- Mortgage Insurance may or may not be tax deductible – there are strict income and other guidelines that the borrower must meet. But mortgage interest is tax deductible.

New FHA loan versus LPMI loan

Here’s an example of an FHA loan under the new guidelines versus an LPMI loan on a $400K purchase ($30K down payment, $380K financed)…

New FHA – 4.75% interest rate (based on a 720 – 760 FICO/credit score)

$ 2,002.08 Principal and Interest
$ 348.33 Mortgage Insurance
$ 343.33 Taxes
$ 70.00 Homeowner’s Insurance
$ 2,763.74 Total

LPMI – 5.375% interest rate (based on a 720 – 760 FICO/credit score)

$ 2,127.89 Principal and Interest
$0 Mortgage Insurance
$ 343.33 Taxes
$ 70.00 Homeowner’s Insurance
$ 2,541.22 Total

The difference in the total monthly mortgage payment is $222.52. This does not include the tax benefits of writing off the additional interest with the LPMI option.

New FHA -4.75% interest rate (based on a 680 – 719 FICO/credit score)

$ 2,002.08 Principal and Interest
$ 348.33 Mortgage Insurance
$ 343.33 Taxes
$ 70.00 Homeowner’s Insurance
$ 2,763.74 Total

LPMI – 5.75% interest rate (based on a 680 – 719 FICO/credit score)

$ 2,217.57 Principal and Interest
$0 Mortgage Insurance
$ 343.33 Taxes
$ 70.00 Homeowner’s Insurance
$ 2,630.90 Total

The difference in the total monthly mortgage payment is $132.84. As in the previous example, this does not include the tax benefits of writing off the additional interest with the LPMI option.

New FHA loan versus LPMI loan versus your credit score

The amount you save with LPMI financing is significant if you have a very good to great credit score. But that amount quickly decreases the lower your credit score is. The reason for this is that private lenders want to attract those with very good to great credit and protect themselves from those with mediocre and bad credit.

If your credit score is below 680, the the LPMI is most likely not for you because it requires 6 points (6 percent of the total loan amount) for the lender to even consider you as a candidate for LPMI financing. If you fall into this category, then an FHA loan is probably going to be more cost effective for you.

Is an FHA loan or LPMI loan better for you?

This is a very general outline of the changes and a general comparison between an FHA loan and an LPMI loan. There are lots of other details that come into play and everyone’s situation is different. You should speak with an experienced and honest lender that knows all of the “fine print” so you can make an educated decision about what is best for you.

I got my lesson about the new FHA and LPMI loan guidelines from the lender I’ve been working with for over 8 years now -  Darran Anthony of First Home Mortgage in Leesburg, VA. Darran is very experienced, extremely knowledgeable and will tell it like it is. Give him a call or send him an email to see which financing option is best for you, whether it be FHA, LPMI or one of the other financing options available. Here is his contact info…

Darran Anthony, Branch Manager – First Home Mortgage, Leesburg, VA – 703.443.1150 begin_of_the_skype_highlighting              703.443.1150      end_of_the_skype_highlighting ext 3410 – danthony@gofirsthome.com

Washington, DC Metro Area Rental Rates Rising

Rental rates in the Washington, DC metro area (including Northern VA and MD) are rising. They’ve risen so much that the Washington, DC metro area came in 9th in the list of metro areas in the U.S. with the greatest increase in rental rates.

Here’s the list in order…

1. Greenville, SC (+11.2%; $669 average monthly rent)
2. Chattanooga, TN (+10.4%; $726 average monthly rent)
3. Savannah, GA (+8.4%; $866 average monthly rent)
4. Portland, OR (+8.1%; $875 average monthly rent)
5. San Jose, CA (+8.0%; $1,716 average monthly rent)
6. Nashville, TN (+8.0%; $786 average monthly rent)
7. Tacoma, WA (+8.0%; $900 average monthly rent)
8. Denver, CO (+7.5%; $873 average monthly rent)
9. Washington, DC (+7.4%; $1,473 average monthly rent)
10. Raleigh, NC (+7.4%; $785 average monthly rent)

Good for landlords and investors

This is good news if you’re a landlord/investor because it’s more money in your pocket and a higher return on your rental property investment. For those that are renting their property out because they are upside down, but don’t want to or can’t do a short-sale, the rental rate may soon able to cover your mortgage rather than you losing money every month.

Not good for renters

This is not good news for renters. It means more money and less negotiating power when getting a rental. For several years now, rental rates have been very low compared to mortgage amounts for the same property making renting a very attractive prospect. But that’s starting to change. For those on the fence about renting or buying, you want to start explore your options when it comes to buying. Rental rates are on the way up yet, prices are at realistic levels and mortgage rates are still very low (for the moment).

Note: This figure is for the general DC metro area – each specific area and subdivision is different. Contact me to find out what the rental market is like in your specific area or the area you’re looking to rent in.

H/T Bill Lublin

Camberley Homes, Boulevard at Brambleton Homesites Released

There has been much anticipation about Camberley Homes’ Boulevard at Brambleton community and the release of their homesites for sale. Well, the anticipation is over… Camberley Homes is releasing 8 homesites tomorrow, April 8.

They will have 8 homesites available – 4 Wilshire models, 2 Ventura models and 2 Lakeshore models. Base prices range from $390,900 to $410,900.

If you are interested in knowing more about Camberley Homes’ Boulevard at Brambleton Community, check out the community or purchase one, click here to contact me. I have helped a fair share of buyers purchase a home in Brambleton and would be happy to represent and guide you through the new home purchase process as well.

Related Reading

Why You Need Representation When Buying a New Home

Loudoun County, Brambleton; Record Level New Home Sales

Despite new home sales being way down as a whole across the U.S., Loudoun County, particularly Brambleton is seeing record level new home sales. In fact, Brambleton is the 8th top-selling community in the U.S.

Yes, you read that correctly (and no, this is not an April Fool’s joke).

Brambleton sold 352 new homes in 2010, the most new homes sold in one year in its’ 10 year history. On top of that, Brambleton is on pace to break that record in 2011 – and that’s without the first-time home buyer tax credit being available.

What’s so special about Loudoun County and Brambleton in particular?

- This area has always been ahead of the curve and leads the country by about 6 to 9 months. We were the first to see prices going up during the boom, the first to see them starting to come down and the first to see signs of stabilization and possible recovery.

- A large local presence of national and semi-custom builders who survived the market downturn and had money to start building once the local market showed signs of life in the second half of 2009 and into 2010.

- A shift in builders’ product lines. Builders are building more affordable and attractive products. This is drawing buyers in that were once priced out of the market and/or weren’t fans of the “same ol’” style of homes or huge McMansions. Yes, you can still find new traditional Virginia colonials/town homes throughout the area. But you can see and feel an urban touch to some of the new product lines and community amenities especially in Brambleton – one example is the Boulevard at Brambleton, by Camberley Homes.

- The local economy is one of the strongest in the U.S. This includes employment rates, new jobs being created and incomes. This helps create a strong housing demand and one that is stronger than most other parts of the U.S.

- Brambleton is a really cool, well thought-out and well built community (and their staff is dedicated and hard working). It has won GALA’s Community of the Year and countless other awards over the years. If you haven’t been to Brambleton in person, you should check it out sometime. (Contact me for a free tour of the Brambleton including the eight different builders within the community)

The rest of Loudoun County is in similar shoes. Other communities and builders are also selling new homes at a pace not seen for years, if ever. In speaking with builders’ sales staff and selling new homes throughout Loudoun County last year, I noticed that the sales staff had a smile on their face and positive attitude about them not seen since the boom market back in 2003, 2004 and 2005.

If you’re considering a new home but think that it’s out of your price range, you may be pleasantly surprised. As I mentioned, builders have revamped their product lines and price points. Give me a call or shoot me an email and I’d be glad to tell you what’s available in your price range throughout Loudoun County and show you around.

Related Reading

General information on Brambleton, LoudounScene.com