After several years or record levels of commercial real estate investment, with soaring rents and building prices, the market has cooled off since the summer. With rising concerns of the credit market many recent acquisitions have dried up
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A much-anticipated recovery in Greater Washington’s housing market could face its next challenge from tighter mortgage lending restrictions.
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Immigrants are emerging as among the first victims of a growing wave of home foreclosures in the Washington housing market, as mortgage lending problems multiply locally and across the country.
Nationally, 375,000 high-interest-rate loans were made to Hispanic home buyers in 2005, and nearly 73,000 of them are likely to go into foreclosure, said Aracely Panameno, director of Latino affairs for the Center for Responsible Lending.
About 1.1 million homes in the United States are expected to go into foreclosure in the next six years, and many native-born Americans are likely to be stuck with burdensome home loans. But immigrants are getting hit first in part because their incomes tend to be lower and many have lost construction jobs.
Francisco Santos, his wife, Linda, and their children including Astrid, 5, are losing their Woodbridge home to foreclosure. “It’s difficult,” Francisco Santos says. “My wife, she says, ‘Why? Why?’ ”
Homeownership rates among immigrants surged in the first half of the decade, making their prosperity an economic success story. Now it is becoming apparent that many people managed to buy homes in an inflated real estate market by turning to unusual new mortgages only now receiving scrutiny from regulators and legislators. Many of these loans start with attractive low “teaser” mortgage rates - but feature payments that can suddenly increase.
Unfamiliar with the U.S. mortgage market, unable to speak or read English well and vulnerable to the blandishments of real estate professionals who told them property values always rise, many immigrants are struggling to deal with high home mortgage loan payments as their homes sag in value, making it harder to escape the loans by selling.
Tysons Corner mortgage broker Jose Luis Semidey, who has a popular Spanish-language real estate talk show on Radio Universal, is being deluged with calls from desperate owners who are falling behind on their mortgages. The calls started in late 2005 and have steadily risen; he now receives 40 to 50 calls a day from throughout the area.
“I see more coming,” Semidey said.
Panameno agreed. “I’m being flooded by phone calls from throughout the country from people begging for help,” he said. “The best I can do is refer people to attorneys to get assistance.”
Nahid Azimi, who immigrated to the United States from Afghanistan 22 years ago, recently stood in the upstairs hallway of her home in Loudoun County, silently sobbing as she removed the last of her personal items from the $410,000 townhouse in South Riding she bought with pride last summer. She said she was persuaded to buy the house by an Afghan real estate agent she considered a friend and by an Afghan mortgage broker who promised to get her a good loan.
Instead, Azimi, a cashier at Giant who makes $2,400 a month, found herself strapped into a no-down-payment loan with payments of $3,800 a month.
She knew it would be impossible to make the payments, but the mortgage broker promised to refinance her loan to make it more affordable. Azimi couldn’t qualify for the mortgage refinance, however, so she got a second job to try to cover the costs, borrowed money from her friends and tried unsuccessfully to sell the house. Then one day in November, she collapsed at work, in part because of the stress.
Today, she will call the loan servicing company and offer to give back the keys.
“I can’t do it anymore,” said Azimi, 44, a U.S. citizen. “I cannot afford it, and I don’t want them to come one day and put my stuff on the street.”
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The end of the condo craze is leaving real estate developers looking for other options.
Developers in the Washington housing market are dumping their proposals to build condominiums and switching to apartments as a glut of new and old condos slows sales.
In the latest move, a project in Takoma Park originally designed as condominiums, then canceled, is being reborn as an apartment complex.
Home builder Centex Homes started selling condo units for its Pavilions at Takoma in November, beginning in the low $200,000s for studios one block from the Takoma Park Metro station.
Last month, Centex Homes suddenly canceled the condo project, citing unfavorable market conditions and a lack of home loan demand.
The company sold the partially completed project Feb. 14 to Gables Residential, a McLean real estate investment trust.
“I guess the condo market got a little bit saturated,” said Ronny Salameh, Centex Homes’ division manager for Maryland and the District. “Until all that inventory goes away, it really slows down the condo market. It opens up for the rental market.”
When the housing boom peaked in 2005, condominiums made up 50 percent of the 354,000 new housing units being built nationally, up from 20 percent two years earlier, according to the National Association of Home Builders. This year, the association says condos will make up about 30 percent of new housing units.
Condominiums still are selling in the Washington area, but they are being bought by mortgage applicants who plan to use them as their primary residences instead of investment properties that offer a quick buck when they are re-sold a few years later.
“People are buying them for the correct reason today,” said Grant Montgomery, vice president of real estate research firm Delta Associates. “They’re a home first and an investment second. During the craze, I think that was inverted.”
The median price of condos rose 57 percent nationwide between 2001 and 2004, according to the National Association of Realtors. Single-family homes rose 25 percent in value in the same period.
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SOURCE: The Washington Times
A few weeks ago, we praised the DC housing market for its impressive home price appreciation. Sellers in the region were certainly grateful this was the case.
But it no longer is.
After years of leading the nation in housing appreciation, the Washington housing market has fallen all the way out of the top 10.
A quarterly report from the Office of Federal Housing Enterprise Oversight says Maryland home prices were up 9 percent from year-ago levels last quarter, which places the state 12th among states for price gains.
D.C. ranked 18th, with annual appreciation of 7.54 percent, while Virginia ranked 19th with an annual appreciation of 7.46 percent. Such figures don’t bode too well for sellers, but they do mean home mortgage loan applicants may be able to swoop in with lower offers.
When viewed as a metropolitan statistical area, the Washington area had fourth-quarter year-over-year price appreciations that averaged 6.31 percent.
Nationwide, year over-year-price gains posted the smallest increases since 1999, up an average of 5.87 percent from the fourth quarter of 2005.
Utah, Wyoming and the Idaho housing market led the quarterly list, with average home prices up from 14 percent to more than 17 percent in the past year.
The Fannie Mae Foundation, which since 1979 has spent more than $1 billion to increase the supply of affordable homes nationwide and improve the quality of life in D.C., is shutting down.
The foundation’s sole funder, D.C.-based home mortgage financing giant Fannie Mae, is consolidating its philanthropic efforts into a new office of community and charitable giving. The new office will be part of Fannie Mae, while the foundation was a separate entity.
The foundation will close down the bulk of its operations by April 30; at that time the majority of its 60-person staff will be laid off. Fannie Mae spokeswoman Christina McHenry says some of these individuals may end up working for the new office.Washington Business Journal reported in May 2006 that the foundation, consistently one of the area’s most generous corporate philanthropies, was running out of money, hurt by Fannie Mae’s roughly $10 billion earnings restatement.
In the past 10 years Fannie Mae had pumped nearly $764 million into the home loan foundation, mostly in the form of corporate stock. But Fannie Mae’s stock has been hurt since news of its accounting troubles surfaced in the fall of 2004, squeezing the foundation’s finances and casting into doubt its ability to remain one of the region’s major corporate givers.
The new office will direct its support toward three areas:
“This effort is part of the overall re-evaluation and restructuring the company is undertaking, and embraces our core principles of service, reliability and value,” says Fannie Mae President and CEO Daniel Mudd in a statement.
For 2007, philanthropic grants and projects will be funded through a combination of the foundation and company resources as the foundation begins to close down.
Establishing the new office allows Fannie Mae to “speak with one voice,” McHenry says. “We will create more comprehensive partnerships and … grow our commitment to the District.”
They remained quiet for most of 2006 - but home mortgage borrowers are starting to creep back into Greater Washington’s housing market as the new year gets underway.
Although purchases were still down in some jurisdictions in January, sales volume rose in the District, Montgomery County and a large chunk of Northern Virginia that includes Arlington and Fairfax counties. Washington, DC home prices remained flat or declined slightly in most parts of the region, while prices rose in Montgomery and Prince George’s counties.
Continued low mortgage interest rates also are getting more buyers into the game, says Jill Landsman, spokeswoman for the Northern Virginia Association of Realtors. The association’s territory covers Arlington and Fairfax counties and the cities of Alexandria, Falls Church and Fairfax; sales volume jumped more than 10 percent in January in that sector.
“A lot of people who wanted to sell their house last year had expectations that they could get prices from 2004 or 2005,” Landsman says. “That’s just not realistic right now, and as a result you’re seeing more give and take. The other advantage to buying in January is that it’s a slow time. You can get a better price.”
Nationally, home sales and/or demand for mortgage loans appeared to hit the bottom of their lull in the fourth quarter of 2006, according to a recent forecast by the National Association of Realtors.
In 2006, 6.48 million existing single-family homes were sold, the third-highest total in history. The association’s forecast says about 6.44 million existing single-family homes will be sold this year, and 6.64 million existing homes will be sold in 2008.
Many economists and real estate market watchers say that the DC housing market will bounce back sooner than the rest of the nation’s, due mostly to the region’s strong economy and continued job growth.
Greater Washington added 71,200 jobs in 2006, and the region’s labor force is expected to add another 261,900 jobs from 2007 to 2011, according to the Center for Regional Analysis at George Mason University.
Sellers in the Greater Washington DC housing market haven’t faced facts yet.
Prices in most local jurisdictions fell again in December, according to data compiled by Metropolitan Regional Information Systems, but many sellers weren’t ready to come down on their asking prices.
In D.C., the average list price of homes for sale was $538,175, and the median actual sales price was a paltry $388,250.
However, many economists and market observers say the local market will bounce back quicker than the rest of the country due to continued job growth and increased confidence among prospective home mortgage loan applicants who have been sitting on the sidelines.
“Things should look much better in D.C. in the spring,” says Lawrence Yun, a senior economist with the National Association of Realtors. “People will say, ‘I had the financial capacity two years ago, but I got outbid on a lot of houses.’ In 2006, they lost their confidence. But now an improving market for buyers will restore their confidence.”
Median housing prices in most jurisdictions fell roughly 3 to 6 percent in December compared with the same month in 2005.
In Loudoun County, the median single-family home price was $440,000, down more than 13 percent on an annual basis.
Prices should rise close to 5 percent on an annual basis by the end of this year, says John McClain, senior fellow and deputy director of the Center for Regional Analysis at George Mason University.
By 2008-09, prices should get back to the standard 7 percent increase that the region has seen historically. Therefore, those contemplating a home purchase loan application should get started before this rise takes place.
In real estate market analyses, of which there are plenty these days as the market is mired in uncertainty, you often hear days on market (DOM) cited as a telling statistic.
This means just what you think it does: the number of days between when a house goes on the market and when the closing takes place - when a seller accepts the buyer’s contract.
The Washingtonian, which features DOM in its recurring Real Estate By the Numbers feature, says that for those looking to buy or sell real estate, DOM is a very important statistic.
In a buyer’s market, the average DOM will be higher because inventory takes longer to sell; conversely, in a seller’s market, the average DOM is lower because homes are snatched up quickly.
This statistics below compare the average DOM in eight Washington-area counties from December 2005 to December 2006. It doesn’t take a genius to see the trend in all eight counties.
The length of time has virtually doubled, which goes to show why Virginia mortgage and Maryland mortgage activity are both down, as are home sales and prices in the areas of both states nearest D.C.
If you are in the market to buy a home, this means you can probably afford to take your time. The days of rapid home price appreciation when buyers put down offers on the spot are long gone. If you are trying to sell, you may have to be patient.
Of course, there are always exceptions. In the greater D.C. housing market, the good locations (read: close in) never seem to go out of style. Here’s a look at eight counties in the area and the DOM change in the past year.
The following Washington Post story focuses on a man convicted of swindling banks and investors in an elaborate mortgage scam in the District. He has been sentenced to 24 years and five months in prison and ordered to pay more than $6 million in restitution and forfeitures.
Charles E. Hall Sr. of Accokeek was sentenced last week in U.S. District Court in Washington by visiting U.S. District Judge Sterling Johnson Jr., who said “the community must be protected from Mr. Hall, who is a predator.”
Hall, 37, was convicted in August of eight felonies, including bank fraud and money laundering.
According to the U.S. Attorney’s Office, Hall targeted more than 30 District homes in 2002 and 2003 in a flipping scheme, in which homes are resold quickly at inflated prices.
In the end, Hall bilked banks out of $5 million and investors out of tens of thousands of dollars. Six other people - a real estate agent, two home loan underwriters, a real estate settlement agent, a bogus appraiser and a property speculator - have pleaded guilty in the scandal.
Hall’s attorney, James W. Beane Jr., said his client was trained by his employer to conduct business in a certain manner, which included paying adjusters and other people to expedite matters. He said his client had no idea what he was doing was illegal.
The scam began in about 2002, a few years after Hall was released from prison for mail fraud, according to court documents.
After lying about his criminal record, Hall landed a job as a loan officer at Guaranty Residential Lending, a mortgage company and subsidiary of a Texas bank, court documents and authorities said.
Hall recruited friends as “straw buyers” to purchase homes in the District neighborhoods of LeDroit Park and Eckington. He then submitted home loan applications for the homes, which had been appraised at falsely inflated prices.
Hall then paid two mortgage underwriters to approve bogus home loans totaling $14 million, which Hall controlled, the U.S. Attorney’s Office said.
A real estate property speculator bought the homes at true value and often resold them at inflated prices the same day to a straw buyer. The sales generated profits of up to $450,000 on each home.
Authorities said that the straw buyers who were friends of Hall were unaware of the scam, which left a series of abandoned homes in the Washington D.C. housing market. Some friends didn’t put up any money, but others invested about $5,000, which they lost, the U.S. Attorney’s Office said.
The banks eventually resold the homes, but collectively lost about $5 million.
“This type of real estate flipping can damage neighborhoods by taking middle-class houses out of circulation and leaving them run-down, vacant and neglected,” said Assistant U.S. Attorney Virginia Cheatham of the fraud and public corruption unit.
“By targeting houses in just a few D.C. neighborhoods, Charles Hall concentrated his impact and left behind abandoned properties which hurt the health and security of the entire neighborhood.”