Tom Robinson

Just when it starts looking a little better it seems the government is going to step in and tighten up eligibility to obtain a mortgage through possibly requiring higher credit scores and larger down payments for FHA loans.

If this actually happens , it could be devastating to real estate sales (in my opinion) as half of the FHA loans in their current portfolio were initiated in the past year.

Read this link from marketwatch.com

I was looking at the Outlook section of The Washington Post this morning to what appears to be an ongoing series "The 5 Myths of...." Today's topic was the "5 Myths About Home Sweet Ownership." Some I agree with but at least one I do not. To recap the article, linked below, The Five Myths were 1. Housing is a Great Long Term Investment. 2. The Homebuyer Tax Credit Makes buying a House More Affordable. 3. Homeownership is Good For Society Because Owners Make Better Citizens. It's Safe To Buy A House With A Very Low Down Payment. 5. Owning A Home is Cheaper Than Renting One Because You Save On Rent. Number Five is the one I disagree with wholeheartedly. I disagree with the assumption that paying rent long term is a good deal. Perhaps if you live in a rent controlled apartment in NYC or D.C. or you may not be in the area very long (usually less than three years but today's market may justify a longer term for renting). In my experience, and I am a real estate investor, renting long term is just absolutely stupid in most instances. Although the article may be applicable to many home purchasers, if you plan your purchase carefully, and run the numbers carefully (even if you are a homeowner), you can make a fortune in real estate. Not to brag, but as an example of why this article is so wrong especially on #5, I am still $300,000 ahead today on my primary residence in a down market which I have only owned for 10 years. I made $50,000 on an investment property the moment I went to settlement this past Summer and I plan on doing it again and again and again. The article takes a short sighted view of real estate. It goes to show that you shouldnt necessarily believe everything you read in the paper. Read the article and tell me what you think.

The Washington Post

A few days ago, I was asked by a relative to do some comps on what their home might be worth. I had a fair idea as I had shown homes in the neighborhood, although not similar, they were in the same zip code but were smaller and older. I ran the numbers, found few comps as this was a newer home in a 100 year old neighborhood. I then looked at the tax records as a guide to whether I was on track. I assumed the tax records were about 80% of the resale value which normally seems to be the case around here. Here are the numbers that jumped out at me. In 1967, the home sold for $27,950 and in 1994 for $183,000. The house today taxes out at about $450,000. Local comps and the 80% tax formula rule put it somewhere between $550,000 and $600,000. Makes sense based on homes in the neighborhood.

Looking at the numbers:

$27,950/$550,000 - Thats 5% of what the house would likely sell for today. In forty two more years the house would sell, using the same formula, for $11,000,000. Put that in perspective, real estate is a solid investment, despite the down market. Sure $11,000,0000 in 42 years will be a lot less than it is today and the dollar may not be worth much overall but to achieve the same growth in the stock market you would have to earn around 7 or 8% consistently over 42 years. This does not count rental receipts assuming if this were an investment home. This tells me that real estate should be in everyone's portfolio whether it is your primary residence or an investment property.

This morning I headed out to get what I thought might be a soggy Washington Post and Wall Street Journal. My carrier(s) were nice enough to double bag them which kept them nice and dry. Both papers had articles going into some detail on the recent extension of the Home-Buyer tax credit. By now, perhaps you are tired of readiing about this but I found the aricle in the Wall Street Journal "The Lowdown on the Home-Buyer Tax Credits" detailed and informative. Just click on the article link.

Every day, I pick up the Wall Street journal and the Washington Post as I head out to walk the dogs. Some days I am excited about what I read but most days lately I wonder why I pay to be tortured like this.

A few days ago, I received the October Statistics from the Northern Virginia Association of Realtors (NVAR) for October. There are some uplifting stats in the newsletter. This morning I read in the Wall Street Journal that companies are slowly ratcheting up hiring but not nearly fast enough to wipe out the high unemployment. Still, more positive than the usual gloom and doom.

Here are the NVAR stats for October. Sales activity for Fairfax and Arlington Counties (just outside Washington, D.C.) and the towns/cities of Fairfax, Falls Church, Vienna, Herndon, and Clifton show a 10.09 percent INCREASE in homes sold above Octover 2008 with 1,604 homes sold in October 2009.

Active listings are down by almost 22 percent and avarage days on market (DOM) decreased to 58 days from 94 days in October 2008. Sales prices were slightly lower at $424,510 versus $427,502 in October 2008. The median price was down slightly to $356,800 from $359,000 last year.

"NAR (National Association of Realtors) economists estimate that the current tax credit has contributed approximately $22,000,000 to the general economy."

An exerpt from Prashant Gopal, Business Week Reporter

"The recession appears to be over and America's job market recovery should get under way next year (assuming theres no double dip downturn)."

October Market Statistics: http://www.nvar.com/MarketStatistics/MonthlyReports/2009/October2009/tabid/572/Default.aspx

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