Loudoun County Real Estate Statistics and News

Good News for Loudoun County Real Estate Buyers

Several news items and current events have occurred in the past couple days that directly impact the real estate market here in Loudoun County.  More specifically, the environment for home purchasers has gotten better due to the fact that mortgage rates are in a free fall and the monthly payments for future home buyers has gone done considerably in the past 2 months. 

The rate for a 30-year fixed mortgage was around the 6.4% at the beginning of the month and yesterday they dropped below 6%.  This translate into more house for the money or less money for the same house.

Second, the unemployment rate continues to go up.  And you might think this is a bad thing but for the lucky few that are already in this area, this bodes well for you.  That is because as more jobs are lost throughout the country, the incoming Democratic government will create government jobs to offset the losses elsewhere in the nation.  And that will require more government employees, more government contractors and more government agencies, the majority of which will be located here in the Washington Metro area.  

I am currently working with a gentleman that is employed by a company that sells both to private business and to the government.  He works in the government sales division and reports year over year revenue growth of 70% during 2008.  This will continue at many companies in this area.

Third, the question as to who will be in the White House has been answered.  The economic advisors have been chosen and a lot of the uncertainty that hung over the country just a few weeks ago has been eliminated. 

What is Going On with Interest Rates?

Here is a link to a post I wrote regarding the current interest rate environment.  Interest rates are one of the only pieces of national news that will directly impact the real estate market here in Loudoun County.  It also talks about a potential change to the conforming loan limit that could help buyers get more affordable loans. 

T

Fed Meeting, Refinance and Foreclosures

A couple of items to watch for today:

Countrywide will announce its earnings today.  I wouldn't be surprised if they have a surprise. 

Federal Reserve Meeting is today and some say they will drop the Fed Funds rate 25 basis points.  That would make a full percentage point in 8 days. 

Because of the drop in Fed Funds Rates interest rates have been going down.  This has given many homeowners a chance to refinance their mortgages.  The refi business has gone up significantly since the beginning of November.

Also, there is a report that foreclosures increased 75% in 2007 versus 206.  Here in Loudoun County the number of sales that could be foreclosures, pre-foreclosures or other corporate sales increased from 198 in 2006 to 909 in 2007.  That is an increase of 459%.  These aren't exact numbers but they give you a good idea of what happened in 2007.

Update: Fed drops rate 50 basis points for a total of 125 basis points in just over a week.

Fed Makes Huge Drop in Rates!!!

In the face of a huge housing crisis that is threatening to drag down the entire economy, the Federal Reserver dropped the widely followed Fed Funds Rate .75.  This puts the Fed Funds Rate at 3.5o%.  The fear of a recession is obviously higher than the fear of inflation. 

This size adjustment was not anticipated by many.   Most people felt they would lower the rate by .25 or .50.  This was the first .75 point cut since October 1984.  With the stock markets around the world falling and our stock market deteriorating on the fear of a recession the Federal Reserve has decided to make decisive moves.

The timing of the rate cut was not anticipated either.  This was an emergency cut ahead of their regularly scheduled meeting. 

Will it keep us out of a recession?  Only time will tell.

T

Good News for Interest Rates

The Federal Reserve cuts the Discount Rate from 6.25% to 5.75%.  This is different than the Fed Funds Rate but it shows something very important for borrowers.  With this cut in the rate, the Federal Reserve has sent a message that they feel interest rates have been high enough for long enough and that a drop is necessary.  This is completely different than their stance just 2 months ago when they said that they didn't anticipate dropping rates in the foreseeable future. 

A drop of .25 basis points in the Fed Funds Rate is now anticipated in September and another .25 basis points in October.

The trend is now downward and this should result in a drop in mortgage rates for the remainder of the year.  Finally some good news for borrowers.

Thursday Poll - Guess the Interest Rate

On Tuesday the Federal Reserve held interest rates steady at 5.25%.  Actually, the only rate the Fed held steady was the Fed Funds Rate, the rate that banks charge each other to borrow money on a very short term, usually overnight.  The direct effect on the general public is virtually nothing, but the indirect effect is tremendous. 

All interest rates in the U.S. are affected by the Fed Funds Rate including mortgage rates.  More important than the actual rate is the direction of the rate.  The current rate has remained unchanged since August of 2006.  And the Fed has made no indication of lowering it or raising it in the near future.

Unlike the Fed Funds Rate that moves very infrequently, the rates on mortgages move daily.  This is because mortgage rates are directly affected by market conditions and market forces.   Therefore, in the course of a year when the Fed Funds Rate hasn't moved, mortgage rates have varied significantly.

Other factors that affect mortgage rates including the type of loan you get.  The longer the fixed length of maturity, the greater the fluctuation in rate.  A 5/1 ARM will typically vary less from day to day than the interest rate for a 30 year fixed mortgage.  Location of the loan is also a factor.  If the foreclosure rate of a location is increasing or unemployment is increasing you can expect rates to move faster in that location than an area with less risk. 

It is always good to know where interest rates are in your relative area.  Here in Loudoun County, the majority of homes will be purchased with a jumbo loan versus a conventional loan.  A jumbo loan is defined as a loan that is larger than $417,000.

And because of the backlash against ARMs, we are seeing a lot more families opting for a 30 year fixed rate mortgage.

So today's poll asks the question:

Follow this link to find the answer

Will Interest Rates Push Prices Down in Loudoun County?

The only national statistic that has any impact on the local Loudoun County real estate market is interest rates.  The national statistics that are quoted in articles are, for all intents and purposes, meaningless to our local marketplace.  But interest rates and their movements have a direct impact on the Loudoun County real estate market and could be argued to be the single most influential statistic when it comes to homes sales and home prices.

The reason they are so important is because they directly impact the amount of money a buyer can borrow and thereby the amount they are willing to pay for a home.  In a rising interest rate environment (like today), each increase in interest rates will eventually lead to lower overall sales prices.  The question is how much of an impact will they have and when will it occur.

The sharper the rise the sooner it affects our market.  A sharp increase in rates after a crisis occurred after Hurricane Katrina in September of 2005.  That spike marked the beginning of the market correction that we have been in for the last 20 months.  The impact was almost immediate with a 40% decrease in the volume of homes sold in October of that year. 

The effect on prices of an increase in interest rates usually takes 2 to 4 months to work its way into our market.  In March of 2006 interest rates began a move up and approached the 7% range in June 2006.  In Ashburn, Sterling and Leesburg the median sales price in the month of June dropped to $439,000.  This represented  a drop of $60,000 from the previous months median price of $499,900.

The latest interest rate run-up will more than likely be felt by home sellers in Loudoun County beginning in August.  If the rise continues the marketplace could see another wholesale price adjustment in the late summer/early fall.  Buyers will see the impact of the rising rates almost immediately and this will result in slowing sales and lower offers in the next 60 to 90 days.

Mortgage Rates Spike On News

Based on upbeat consumer sentiment and speculation that the Fed would not cut interest rates anytime soon, mortgage rates jumped this week. Comments from the Fed regarding inflation also played a part in the jump. According to Freddie Mac, the average rate on a 30-year fixed-rate loan jumped almost two-tenths of a point to 6.37 percent for the week ending May 24, up from 6.21 the previous week. Last year at this time, 30-year mortgage rates averaged 6.62 percent so we're still doing better than last year, but the jump in the rate and the forward prognosis is significant.

As a consumer, this will effect your buying power by forcing you to either increase your monthly payment for the same priced property or to lower your purchase price. One way to offset this effect is for property values to decrease, but they have plateaued/been flat in Loudoun County since the end of 2006.

For the full story on CNN Money, click here.

Interest Rates Getting Better for Home Buyers

Since peaking during the summer interest rates have continued to go down.  The drop in interest rates is being attributed to lower than anticipated inflation rates.  This bodes well for anyone in the market to buy a home especially here in Loudoun County. 

With prices down significantly in the last year, and interest rates at the same level as a year ago, the opportunity to buy more house for the same monthly payments exists, or the same amount of house for less per month.   

The buyers market that has existed in the last 6 months will slowly move to a balanced market during the winter months.  If interest rates stay low and inventories don't spike up significantly during the spring, there should be some stabilizing in prices during the first quarter of 2007.  The key piece of the puzzle will be how many people are waiting for the spring to go on the market and will they flood the market like this year.