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Watch out for the 'noise'
What is the “noise”? It is the clutter that keeps us from making good decisions when we buy real estate. We already know all real estate is “local.” What is happening in Detroit has no effect on our market in Loudoun County. There are numerous markets where prices have continued to rise for the past few years.
Conversely, there are markets that did not increase in the boom years, and probably no markets that were identical.
When you listen to the media in its many varieties (radio, TV, Internet, etc.) you will hear reports such as the latest statistics on home sales from the National Association of Realtors. Do you really care? Only if you are buying stock in real estate-related ventures! If you are buying or selling a home in Loudoun County, all you should be concerned about is what is happening here. Unfortunately, our news is not of much interest to the rest of the country.
Here is where the “noise” enters. Although the reports we are bombarded with may be very interesting, they confuse most of us when we try to use sound judgment about a very important decision. A perfect example occurred while I was watching TV the other night. I was channel surfing and found two spots for the evening news on different stations. The first said gas could be headed to $2 a gallon -- watch News “X” at 11. The next said gas could be headed to $7 a gallon -- watch News “Y” at 11. Drama sells, but it also confuses us.
Remember to ask the next time you hear a news story, “Does this really apply to me?”
We have had one of the more difficult markets in the entire country for the last year or two; however, our core strength remains solid. After the shock wears off, Loudoun County should be one of the most stable real estate markets in the United States. Our demographics, business climate, location and services are unmatched.
Don't be misled by reports that do not apply to Loudoun County. If you look at the Washington, D.C., area, you will see dramatic differences in all of the different markets. Make the choice that best suits your needs and that of your family.
What's happening here?
May was a good month! We have been looking for some positive numbers, and we got them. My survey results were very positive. The number of transactions (sales) was 20 percent above May 2007. The sales volume was up slightly, and although the average sales price declined by 16 percent from last year, we actually had a 1 percent increase from April to May!
The most significant change was the increase in the number of transactions. Our transaction volume declined 35 percent from 2005 to 2006, yet prices continued to rise. There was nearly a two-year lag between declining sales and declining prices.
Now we are seeing a significant increase in sales volume. Does this increase mean prices are going to start back up?
Probably not anytime soon; however, if this trend continues, we will have a stable market and, as I predicted last month, we are at the bottom. It will be critically important to review these statistics in the next few months to ensure that these trends are continuing and not a fluke.
Interest rates are a potential danger ahead. With all the price increases in oil and other commodities, it would seem logical that interest rates will also increase, and in fact they have. A 0.5 percent rate increase on a $400,000 mortgage will cause the payment to go up $130. This can be a deal breaker for a purchaser. If you are looking to buy, delaying could freeze you out of the market or force you to change what you can afford. The combination of sales price and interest rates will probably not get any better than this.
The statistics
I use sales statistics from the Metropolitan Regional Information Service (MRIS – the Realtors' MLS). They include the sales offices in Ashburn, Leesburg and Sterling. My sources include the U.S. Census, the Department of Housing and Urban Development and other similar sources. I always use the same criteria when developing my numbers to present information as accurately as possible.
Jim Stakem is the broker and owner of RE/MAX Select Properties in Ashburn. Call 703-547-0650.
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