2009 KME “Made In Loudoun” Award Winners

Back in January of this year, DullesSouthOnline.com and KME announced a “Loudoun Business Challenge – Help Stimulate Loudoun’s Economy in 2009.”

Why? Because, as DullesSouthOnline.com stated so eloquently, Fairfax County and neighboring counties through the DC metro area are “eating our [Loudoun's] lunch in their ability to attract business investment via the Internet.”

Ain’t that the truth! If you know anything about the Loudoun EDC and Chamber of Commerce, you know that their on-line presence is dismal to almost non-existent. Hence, the Fairfax County Economic Development Authority and those of other counties are not only eating our lunch…they’re eating our breakfast, dinner and midnight snack.

So here we are a year later and the 2009 KME “Made in Loudoun” award winners have been announced. You would think that the Loudoun County Economic Development Commission would have paid attention and gotten their act together, right?

Well…(here’s an excerpt – highlights are mine)

After a year, it’s become evident that the only local industry (besides Online Marketers like us) most actively, aggressively and successfully promoting the core economic values of Loudoun County is the Residential Real Estate industry. This is probably to be expected, for by promoting Loudoun and its work/life values, real estate property is therefore more valuable.

It was, however, interesting to discover that the Loudoun business community, aside from Real Estate, simply does not actively and voluntarily help to promote Loudoun online to the outside world – rather, it relies on the local EDC and Chamber of Commerce.

…real estate agents and brokerages are most actively using the Internet and Social Media to cover and distribute Loudoun-centric hyperlocal news and information…

And, in no particular order, the winners are…(drum roll please)

• Heather Elias (Century 21 Redwood Group)
• Kelly Gaitten (Carter Braxton Real Estate)
• Marilee Murphy (Long & Foster Real Estate)
• Tony Arko (Market Advantage Real Estate)
• and, yours truly, Danilo Bogdanovic (Market Advantage Real Estate)

Though it’s flattering to be named as one of the 2009 KME “Made in Loudoun” award winners, I’m disappointed at the same time. I hoped that the Loudoun EDC and Chamber of Commerce would have done something this year to turn things around and increase their on-line presence in order attract businesses (and tax revenue) to Loudoun. Had they done so, some of us would not have been on that list (which is fine with me).

But they did not.

Is there hope for Loudoun?

There may be… Lawrence S. Rosenstrauch, Loudoun County’s EDC Director just resigned on Dec 4 and the county is on the search for a replacement. While praising Rosenstrauch’s service, Loudoun County Chamber of Commerce President Tony Howard said the county now has the opportunity to be “more competitive in the battle to attract new business investment” (via The Washington Post).

Thank you to DullesSouthOnline.com, KME Internet Marketing and all of you who read LoudounScene.com and LoudounForeclosures.com. And congratulations to my fellow winners and REALTORS!

This Month’s Special: 58% Off Greenvest Land in Loudoun

Vienna-based Greenvest LC used to own 4100 acres in the Dulles South area of Loudoun County. That all changed two days ago when the land, valued by some at $165 million, was auctioned for $69 million.

iStar Financial, the company that originally lent Greentvest $130 million for the land, foreclosed on the land. The land was auctioned off this past Tuesday at the Leesburg courthouse steps.

The winning bidder?

iStar Financial (they sure love spending money, don’t they?)

What led to the foreclosure auction?

Greenvest was hoping to have the land subdivided into four communities — Greenfields, Lena, Broad Run Village and Arcola. But the public outcry against further intercounty development and the congestion that would come along with it led to the county denying requests to rezone the land. And that left the development dead in its tracks.

Last year, Greenvest tried to sell 100 of those acres to the Loudoun County school system, which wanted the land for future schools. The Loudoun School Board rejected the idea over concerns that the $20 million price tage was too high.

With no chance of moving forward with the development, Greenvest defaulted on its $130 million loan. That led to foreclosure proceedings, Tuesday’s auction and iStar Financial, the company that originally lent Greenvest the $130 million, buying the land back for $69 million.

What now?

iStar Financial will try to sell the land in order to recoup some of the money lost (and spent) throughout this whole ordeal. But they face some serious hurdles:

• previous requests to rezone the land have been denied
• tightened lending/financing guidelines
• a weak local and national economy
• increased proffers (click here for more on that)

On a related note, the $165 million valuation seems to have come from Loudoun County itself – probably for tax revenue purposes – and is most likely not the land’s true market value (just look how much it actually sold for at the auction).

At $16,829 per acre, it may seem like quite a bargain. But it may be a while before iStar sees a return on their purchase. As one real estate developer who attended the auction said, “I don’t buy green bananas.”

Loudoun Increases Cost of New Homes for Builders and Buyers

While neighboring counties and their officials are trying to help developers, builders and consumers weather the recession, Loudoun County is doing the opposite. In doing the opposite, Loudoun is taking money right out of the pockets of buyers, sellers and homeowners.

Here is what neighboring counties are doing:

• The Montgomery County Council is considering delaying a proposed 3.5 percent increase in impact fees
• In Prince George’s, the County Council has lengthened the life of development approvals and held off increasing impact taxes
• Fairfax County has reduced the amount a developer must put up in surety bonds to guarantee a project’s completion
• In the District of Columbia, lawmakers are allowing regulators to lengthen from two to five years the time developers have to begin work on projects in southwest Washington

What is Loudoun County doing?

• Loudoun just raised proffers (the amount of money a builder must the county to build a home) by as much as 22 percent – $59,470 per single family home. The increases per type of property are $5,000 per apartment/condo; $11,000 per town home; $13,000 per single family home)

Who bears the brunt of these decreases and increases?

In the end, it’s consumers.

Here’s why…

If it becomes less expensive for a builder to build a home, the builder may offer greater incentives and/or lower base prices to create increased demand for their homes. The consumer wins and sales pick up.

If it becomes more expensive for a builder to build a home, the builder will most likely increase the base price and/or decrease incentives to make up for the additional cost. The consumer loses and sales slow down.

Sales picking up is better for homeowners and sellers. Sales slowing down is bad for homeowners and sellers.

Loudoun claims that the increase in proffers in necessary to pay for schools and public facilities. Ok…I get it. You need to pay for those things.

But why must those costs fall solely on the shoulders of home buyers? And why would Loudoun “OK” an increase in proffers (aka increase in the cost of buying a home) at a time when everyone and their mother is trying to lower the cost of buying and selling a home in order to stimulate the housing market?

Seems a bit backwards to me…

P.S. Supervisor Eugene Delgaudio (R-Sterling) was the only board member to oppose the motion.

On a side note, the increase in proffers is only for Eastern Loudoun. The proffers in Western Loudoun remained relatively unchanged. Hmmm…interesting.

Loudoun County – Where the Jobs Are

Congratulations to Loudoun County for coming in fourth on CNNMoney.com’s top 25 list of counties that have experienced the greatest job growth in the last 8 years. Loudoun’s job growth rate went up over 75 percent from 2000 to 2008.

Interesting fact: Over half of the Loudoun’s residents work within county lines. (As the Dulles Greenway and Toll Road tolls increase, we’ll probably see even more people working within Loudoun County lines)

This makes it two years in a row that Loudoun has come in fourth on the list.

Northern Virginia Leads DC, MD in Housing Recovery

The Northern Virginia area is ahead of Maryland and Washington, DC when it comes to the housing market (including a bottom and an eventual housing recovery). This is according to an article in the Wall Street Journal by Thomas A. Lawler, founding member of Lawler Economic & Housing Consulting, LLC.

In the article, Mr. Lawler cites statistics that show that Northern Virginia's housing market hit a peak and started its downturn ahead of the rest of the DC metro area. 

He also states that the amount of depreciation in home values that Northern Virginia has seen is greater than the rest of the DC metro area. In fact, he says that DC and MD have a ways to go before dropping as much as Northern Virginia already has.

Mr. Lawler explains one of the reasons for the difference in local markets:

One reason why reported sales prices have declined more rapidly and sales have rebounded more sharply in the northern Virginia area is that the area has seen a much greater increase in distressed sales — in part because Virginia is a “non-judicial” foreclosure state while Maryland is a “judicial” foreclosure state. The typical timeline from when a borrower stops payment to when the home is actually foreclosed on is longer in Maryland than in Virginia. As a result, the Maryland suburbs have a much larger overhang of loans that are currently in some stage of foreclosure than is the case in Northern Virginia…

Just goes to show that you can't even look at a regional area as a whole anymore – you need to look closely at the "hyper-local" real estate market you're in. What the mass media says about the U.S. housing market as a whole or even a large geographical area such the DC metro area doesn't always apply to you and your specific area.

P.S. Yes, I know…Mr. Lawler was senior VP for Fannie Mae through 2006 which is not necessarily a good thing for the resume right about now…but the statistics and his points are valid.

Related Articles

"Where are all the homes for buyers to choose from?!"

"Loudoun is a seller's market? Are you crazy?!"

It’s Official – Metro Rail is Coming to Loudoun County

That's right…it's official. The Federal Government gave a formal commitment yesterday to bring the Silver Line of the Metro Rail out to Loudoun County.

Phase One – Tyson's Corner – should be completed by 2013. Phase Two – Reston/Dulles/Ashburn – should be completed by 2015. Total cost? $5.2 billion.

Here's a map showing the stops along the Silver Line (click on picture to enlarge):

 

Though the end result of having the Silver Line come out to Ashburn will be great for the area, there will be some growing pains along the way…

…those who live, work or drive near the corridor also must focus on another reality: six years of debilitating construction that will further slow Northern Virginia's busiest thoroughfares. Although some light construction began months ago, the coming weeks and months will bring an entirely new level of din, dust and general havoc to McLean, Vienna, Tysons Corner and beyond.

Though those growing pains will be less than fun, I feel that they're a necessary evil to bring the rail and it's future benefits including less congestion, more businesses, jobs and additional tax revenue to the area.

Now that the the Dulles Metro Rail/Silver Line is official, I wonder if the Moorefield Station project will start moving forward…

Loudoun County Neighborhood Stabilization Program Update

Loudoun County held a meeting last Friday to discuss the Neighborhood Stabilization Program. Loudoun invited a select handful of folks to answer questions and provide feedback on putting together an RFP in order to apply for the Neighborhood Stabilization Program funds and how to most effectively use those funds.

Those in attendance included local bank representatives, a Dulles Association of Realtors staff member, a couple of Realtors (including myself) and various Loudoun County government staff. The Neighborhood Stabilization Program will be a collaborative effort on the part of those in the county government and lending and real estate industry so it was important to hear from people representing each of those areas.

Here are some of the Loudoun County Neighborhood Stabilization Program highlights and updates…

• Loudoun is fighting an uphill battle – Fairfax and Prince William Counties already got approval for the Neighborhood Stabilization Program ($2.8M and $4.1M), but Loudoun didn't get a dime
• Because of not already being approved, Loudoun has to submit an RFP (due January 30, 2009)
• Loudoun is shooting for the minimum – $2 million per allocated neighborhood
• Loudoun has already determined the required 3 neighborhoods that meet the requirements of the program, but the county is not releasing which 3 neighborhoods they've selected (?)
• Loudoun has determined that the types of properties within those 3 neighborhoods that qualify under the program's rules are town homes (no condos, single family, etc)
• There are some issues with legal language of contracts that need to be addressed prior to the RFP being submitted (don't ask me for details – it's all lawyer lingo)
• Loudoun is shooting for the minimum – $2 million per allocated neighborhood
• After surveying properties throughout the county, Loudoun determined that the majority of properties need "minimal to moderate" rehab costs
• They're going to be using some, if not most of the money to buy, rehab and flip properties

Here are some of the issues I have/see…

• When Loudoun surveyed the properties, they never once went inside any of the properties. With the majority of the necessary rehab work being on the inside of foreclosure properties, Loudoun has no idea of what the true costs of doing rehab on these properties will really be 
• Because they have no real idea of what the true costs per property will be, they're whole plan and budgeting of the money will be off 
• Rather than flipping a total of maybe 12 to 15 properties ($2M divided by average cost of property + rehab), why not focus on helping out the community and residents in ways to reach more people (how about 50 people) and those such as teachers and firefighters who can't afford to live in the same county they work in…(more to come on that in a future post)
• Loudoun must have dropped the ball or pissed someone off in Richmond because Fairfax County and Prince William County had no problem getting money for the program, but Loudoun didn't get any an now has to apply for the bare minimum (I have four words for you conspiracy theorists – "opposition of Grantor's Tax")

• Rather than flipping a total of maybe 12 to 15 properties ($2M divided by average cost of property + rehab), why not focus on helping out the community and residents in ways to reach more people and those such as teachers and firefighters who can't afford to live in the same county they work in…(more to come on that in a future post)

Though no process nor government program is perfect and most have some flaws, I think that the Neighborhood Stabilization Program is a good thing overall.

But Loudoun must make sure that it spends the money wisely and in the best interests of the neighborhoods and people it's supposed to serve – not for the self interest of Loudoun County government or revenue. This is especially true when you consider that $2 million is a drop in the bucket for a county that has $62.7 billion (with a "b") in total real estate values and hundreds of foreclosures on the market at any given point in time.

Related Articles

"Loudoun appeals to Richmond for funds" – Washington Business Journal

2009 Loudoun Residential Property Assessed Values Set to Drop 12.8%

2009 Loudoun County residential property assessed values are estimated to go down an average of 12.8 percent, according to a Jack Brown, Economist for Loudoun County, during a presentation he made at the DAAR Economic and Housing Forecast Summit.

Mr. Brown did say that these were preliminary estimates from the Loudoun County Assessor's Office and that they could change. But I doubt the average percentage drop will be much different once the 2009 assessments come out early next year.

Wonder what the Loudoun County tax rate will end up being with a 12.8 percent drop in assessed values…Loudoun residential taxes are already the highest in Virginia.

Reasons for Loudoun County Economic Woes, Budget Shortfalls

Many of you already know about the economic woes that Loudoun County is facing -  a budget deficit of $176 million for 2010, the possibility of not being able to issue municipal bonds and running out of money for projects. But do you really know "why"?

Here's what Jack Brown, Economist for Loudoun County, had to say about "why" during his presentation yesterday at the Dulles Association of REALTORS Economic and Housing Forecast Summit:

• Loudoun building permit revenue down to $8.1M in 2008 from $14.9M in 2005
• 2009 residential property assessed values are estimated to be down 12.8 percent from 2008  (flat for commercial properties)
• Loudoun hotel revenue is up from 2007, but is expected to weaken in 2009
• Increase in international travelers made up for decrease in domestic travelers at Dulles Airport, but weakened over the last two months and is expected to weaken in 2009
• Auto registration way down from 2007
• Loudoun sales tax had significant growth from 2007 to 2008, but will be flat from 2008 to 2009
• Low home values good for buyers, but bad for county revenue
• Possibility that Loudoun will reduce workforce in 2009
• Loudoun did not qualify for money from Bush's Housing Recovery Act of 2008
• Loudoun "Alt-A" and "Option ARM" data and numbers have not been closely looked at
• Loudoun is working on getting grant money from Virginia, but it'll be tougher than expected

Is $176M on the low side?

The $176M budget shortfall estimate was back in the summer of this year, but many of the current numbers and statistics listed above are worse than what Loudoun County may have previously estimated and taken into account.

In addition, the concept of "Alt-A" and "Option ARM" loans resetting and bringing on future foreclosures, short-sales and downward pressure on home values was probably never factored into the equation. I say this because all three economists that spoke at the Economic and Housing Summit yesterday (including Jack Brown) couldn't comment on the topic because they hadn't thought much about it nor analyzed any such data.

Click here to view Jack Brown's PowerPoint presentation from the DAAR Economic and Housing Forecast Summit.

2009 Loudoun Economic and Housing Market Forecast

Ahhhh..the $64,000 question, "What's the Loudoun County housing market going to do in 2009?" Well, I just got back from the 3rd annual Dulles Area Association of REALTORS Economic and Housing Forecast Summit to talk about just that. The purpose of the summit was to review current national and local Loudoun County economic and housing market conditions and hear 2009 forecasts (and beyond) from respected economists.

There were three economists who spoke at the event, each giving their own take on things. They were,

1. John McClain – Center for Regional Analysis, George Mason University
2. Jed Smith – Managing Directory, Quantitative Research, National Association of REALTORS
3. Jack Brown – Economist, Loudoun County Government

What happened and why…

All three were pretty much in agreement with what happened and why. The usual culprits and names were brought up:

• Loose lending guidelines
• Highly leveraged economy
• Mortgage-backed securities and liquidity issues
• Weakened lending institutions
• Excessive spending and unrealistic expectations
• Decline in household wealth (housing prices, stock market, etc)

• Over-supply of homes

Current economic and housing market conditions…

All three spoke about how the DC metro economy, including Loudoun County, continues to be better off than most other places in the country. They cited overall job growth in the area and that the jobs being lost were being replaced by higher paying jobs, which is better for the local economy (more household income means more money to spend on consumer goods, higher tax revenue, etc). They also agreed that the supply of homes has come down and has plateaued while demand has increased - a good thing.

Another main point they agreed on was that things could be worse. Not only are we better off than a lot of other places in the US, the numbers and overall economy were much worse during the Great Depression and other times since then. We're still at about 93 percent employment and the folks who bought their homes about 7 years ago or later should still be up in their home's value.

They also said that one reason why it's not as bad is because the Federal Government stepped in. Personally, that worries me because we're putting all of our "recovery eggs" in the "Fed basket" – one wrong move and it could all collapse right on top of us. (Hopefully, our country's leaders and economists are smart enough to know what they're doing and not let that happen)

2009 (and beyond) Loudoun County economic and housing market forecasts…

Though they agreed on a lot of things, there were some differences in their forecasts. One economist said that we're looking at a recovery beginning in the summer of 2009. Another said that it may be later in 2009. One wouldn't really comment as to when, but talked about what signs to look for to see the recovery coming.

Though the DC metro area including Loudoun County is better off than most of the rest of the country, I'd say that the summer of 2009 is an extremely optimistic outlook. Even the later part of 2009 seems a bit optimistic. In reality, we still have a bunch of foreclosure inventory to get through and I think there may me a second wave coming soon.

They all said the numbers were getting better or at least slowing their increase. This includes "sub-prime" loans, many of which have already reset. But, none of them could comment about the "Alt-A" and "Option ARMs" that are just now starting to reset and may have a similar negative effect on the housing market as "subprime" loans have over the last few years. (They said they're "working on gathering Alt-A and Option ARM data as we speak")

Conclusion…

I'd sum up the economic and housing market summit in a few sentences,

• We may know where we are, but we're not sure exactly where we're headed nor when
• Though things are bad, they could be worse
• The economists were moderately optimistic about the Loudoun housing market in 2009 and 2010
• They should have looked at all the data before making a forecast

We'll see what happens…

Click here to to view each economist's PowerPoint presentation from the DAAR Economic and Housing Forecast Summit.

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