First Quarter 2011 Unit Sales Up in Anne Arundel County Maryland

The number of homes sold in Anne Arundel County during the first quarter of 2011 is up 16% for the same period last year. In first quarter 2010, there were 909 homes sold compared to 1055 sold in first quarter 2011. Homes in foreclosure or that were sold short (“short sales”) accounted for 30% for the homes sold in both first quarter 2011 and last year during the same period.

Read for full article here: First Quarter 2011 Unit Sales Up in Anne Arundel County Maryland

What Buyers Want To Know Before They Purchase – From Bedbugs to Pending Foreclosures

I started this morning off by reading Quentin Fottrell’s article “10 Things Your Neighbors Won’t Tell You” on the SmartMoney.com website.  From bedbugs to pending foreclosures, there are lots of things your future neighbors won’t tell you about themselves, but there’s plenty they’ll tell you about each other.

National, state and local laws can prohibit real estate professionals from discussing many topics that buyers are interested in learning about a home, the neighbors and the neighborhood where they might consider purchasing their next home.  But there’s no law against buyers asking neighbors the questions that real estate agents might not be able to answer.

However, don’t rely completely on just what the neighbors tell you.  You don’t know their motivation for saying what they’re saying.  The neighbors are not likely to say anything negative about their best friends who are moving away after years of living next door and are not likely to say something that might jinx their sale.  But what will most likely be omitted from the conversation is what has gone unsaid between them for years, the verbal agreement between them over the … well, you fill in the blank (for example, that the shed encroaches on our property but we’ve never cared before!!!) … and you’re not likely to hear about that until after you’ve bought the house.

On the other hand, if the neighbors weren’t so friendly and not exactly the best of friends, while you’re just as likely not to learn anything good or bad about the house, the sellers or the neighborhood, you just might get disinformation about the sellers and their situation (for example, we heard they’re getting divorced, their basement leaks, and the like).  And while the neighborhood busybody probably knows a lot more than they’re saying, they don’t always have the rest of the story.

Ultimately, buyers should gather information from many different sources, from their real estate professional to the casual conversation on the sidewalk with the next door neighbors, and make their own decisions about whether or not they should buy a particular home.  Verify, verify, verify – good research means backing up the facts with the facts.  Informed buyers make better decisions.  Remember, you can pick the house, but, you can’t pick the neighbors.

Open Houses in Deale Maryland on June 12, 2011

Record heat in Maryland may not stop you from shopping for a new home, but, it is June after all.

There is 1 open house planned for June 12, 2011 in Deale Maryland 20751.  But there 86 open houses on Sunday June 12 with something open in almost every corner of Anne Arundel County, from Annapolis to Severna Park, from Harwood to Pasadena, and all points in between.

For a list of open houses this weekend follow one of the links below:

Open Houses in Deale Maryland

All of Anne Arundel County Open Houses

You might want to remember that the real estate agent holding the open house works for the seller whether or not they are the listing agent, that’s Maryland law concerning Agency. This is one of the most misunderstood aspect of real estate – who represents who at an open houses. No matter what the agent tells you, they represent the seller while they are holding the seller’s home open. If you are not yet rpresented by a professional real estate agent and would like buyer representation in the purchase of any home in Anne Arundel County, especially in Annapolis, Arnold, Crownsville, Edgewater, or Riva, please contact me to discuss your real estate requirements – I’d be happy to talk with you.

FHA Loan Limits Reset Looms On Horizon

The next blow to the weak real estate market is that the FHA temporary increase in loan limits is set to reset on October 1, 2011.  According to a recent article in the Washington Post the “effects will be felt before then”.  Sellers of expensive homes will start seeing the effects of the pending change perhaps as soon as July since it can take 30 to 60 days to settle the sale of a home.  This could provide an unexpected boost to sales in August if buyers are planning to use FHA financing and try to get in under the wire and settle before the end of September.  It also could result in a slump in sales in September and October when there is usually a season uptick in the metropolitan Washington DC and Baltimore areas which includes Annapolis Maryland.

During the May 25, 2011 Hearing in the House entitled “Legislative Proposals to Determine the Future Role of FHA, RHS and GNMA in the Single-and Multi-Family Mortgage Markets”, Michael D. Berman, Chairman of Mortgage Bankers Association, in his testimony outlines what will happen on September 30, 2011.

“The maximum loan limits for Fannie Mae, Freddie Mac, and FHA are currently $417,000 with a temporary limit of up to $729,750 for one-unit properties in high-cost areas. The temporary high-cost area limit was first set in the Economic Stimulus Act of 2008, and was extended in subsequent legislation. It expires on September 30, 2011. Without the extension, the high-cost loan limit ceiling would revert back to the limits established under the Housing and Economic Reform Act (HERA), a maximum of $625,500 in high cost areas.”

It is easy to research FHA loan limits by state and county on the FHA website.  For example, the current FHA mortgage limit for Anne Arundel County, in which Annapolis Maryland is located, is $560,000.  Across the Bay Bridge the limit in Queen Anne’s County is also $560,000.  In the pricier neighboring counties of Prince Georges, Montgomery and Frederick, the loan limit is even higher at $729,750.

The real effect of higher FHA loan limits has been to increase the share of government backed and insured loans made in recent months.  Insured loans have dominated the lending landscape for almost all of 2011 and much of 2010 too.  Since FHA loans offer the lowest down payment, as little as 3.5% of the purchase price, borrowers who are cash strapped for higher down payments are using FHA loans instead of conventional mortgages where the down payment is 20%.

If the sales price of the the home is at or under the limit, why wouldn’t a buyer use an FHA loan even if a borrower had the cash to put more down?  With ultra low interest rates, money is very, very cheap right now.  Fixed rate loan products lock in these low rates for years to come, so hording cash rather than risking it in housing market might be the very best and most conservative approach in today’s real estate market.

The bottom line is that sellers will continue to face tough market conditions for months to come.  Buyers can continue to be aggressive with offers.  Price will drive demand.  Sellers who aren’t properly priced positioned may miss out and fail to sell their home only to face a potentially weaker real estate market if the FHA loan limits reset in October.

Related Blogs:

Subprime Mortgages Are Poised To Make A Come Back

Tighter Lending Standards Results in Increased Mortgage Loan Rejections

Questions and Answers: What are Riparian Rights?

In Annapolis Maryland there are many waterfront homes.  According to the Anne Arundel County Planning and Zoning website, there are 533 miles of waterfront in the county.  I am often asked when showing waterfront homes along the Chesapeake Bay, the Severn River or any one of the other nearby rivers and creeks, if the riparian rights convey with the property.

From the Ninth Edition of Maryland Real Estate: Practice & Law by H. Warren Crawford and Donald A. White, page 59, comes the best description of riparian rights:

Owners of real estate bordering a navigable body of water in Maryland have the common-law right to make a landing, wharf or pier for their own use or for the use of the public, subject to state and federal rules and regulations.  However, regardless of whether the owners’ title extends beyond the dry land, the title to land below the mean (average) high-water mark of navigable waters, as well as the waters themselves, belongs to the public. Thus, an owner may legally own only the property up to the mean high-water mark.  High-water mark is defined as the high elevation of water in the course of the usual, regular, periodic ebb and flow of the tide, excluding the advance of waters above that line by winds, storms or floods.

There are many homes with true riparian rights while there are others where the community has retained buffer strips between the homes and the water but have granted rights to the homeowners to cross the community buffer and build piers and docks for water access.

In the photograph above, this owner purchased the land between the home and the water (about 2,000 sq. ft. of hillside that the community developer had retained), consolidated the lots into one parcel, in order to control the hillside location that ultimately allowed him to build the staircase and the pier, giving him 8-plus feet of water depth at the end and enough room to berth several boats, water toys, picknick table and more!

Cape St. Claire in Annapolis Maryland is an example of a community that’s ringed by a community accessible buffer between the waterfront homes and the Magothy River.  Other communities, where developers held back ownership of buffer strips, have long since abandoned them and ownership may or may not have been deeded to the waterfront property owners.  Palisades On Severn in Crownsville Maryland is an example where some owners have consolidated ownership of the buffer land to secure water access rights, with a few owners going to far as to obtain lot consolidation letters from the county whereby they have aggregated two or more lots into one parcel of land.

A survey, not a location drawning (which is simply an illustration of the house and the property boundaries, any encroachments, but not much more), should clearly show whether or not the land is riparian.  Buyers considering purchasing homes along the water would be best advised not to assume anything about the parcel without seeing the community plat and/or having the land fully surveyed.  A survey can run a $1,000 or more dollars (were as a location drawing is only about $200) and will precisely locate the house, property boundaries, rights-of-ways, encroachments, and – of course – show the shoreline or any plot between the property and the water as well as clearly illustrate if the property has riparian rights.

Ultimately, should you have questions about riparian rights, you should consult with an attorney or the appropriate county, state or federal authority.

Other Questions and Answers

Water Access, Water View, Waterfront … What’s the Difference?

On Waterfront Homes Which Side Is The Front?

How Do I Find My Home On The Internet?

Do I Have To Use The Seller’s Title Company?

2008 Was The Bondfire of Wealth – New Book Reveals All

The Washington Post published George F. Will’s opinion piece “Buring Down The House” on July 1, 2011.  In it he opines on Gretchen Morgenson’s and Joshua Rosner’s new book “Reckless Endangerment” and outlines a carefully crafted series of players, decisions, and events that resulted in the 2008 bondfire of wealth.  His summary says it all:

“Reckless Endangerment” is a study of contemporary Washington, where showing “compassion” with other people’s money pays off in the currency of political power, and currency. Although [James A.] Johnson left Fannie Mae years before his handiwork helped produce the 2008 bonfire of wealth, he may be more responsible for the debacle and its still-mounting devastations – of families, endowments, etc. – than any other individual. If so, he may be more culpable for the peacetime destruction of more wealth than any individual in history.

The catastrophic effects from the run up in home prices, nearly non-existent lending guidelines, and investor and homeowner greed continue to have impacts nearly three years later and will in all likelihood continue to be felt until 2014.  The collective authors of the Wikipedia.com article “Subprime Mortgage Crisis” sum up the sustained impact of the bondfire of wealth in 2008 as follows (referring to The New York Times article “As Lenders Hold Homes in Foreclosure, Sales Are Hurt“):

In Spring, 2011 there were about a million homes in foreclosure in the United States, several million more in the pipeline, and 872,000 previously foreclosed homes in the hands of banks. Sales were slow; economists estimated that it would take three years to clear the backlogged inventory. According to Mark Zandi, of Moody’s Analytics, home prices were falling and could be expected to fall further during 2011. However, the rate of new borrowers falling behind in mortgage payments had begun to decrease.

While we continue to watch this slow-moving train wreck, the real effects of the 2008 destruction of wealth in real estate will not fully be understood nor impacts completely recognized for years to come.  Retirees for the next two, maybe three decades, will be impacted by the erosion of value in homes.  Where once we thought real estate was a safe investment for the future, the perfect storm formed as the new millennium rang in gaining strength for nearly eight years, until August of 2008 and in just a few days, resulted in the distruction of a trillion dollars or more in residential real estate wealth.

According to the last American Housing Survey by the U.S. Census Bureau there were about 111.8 million homes in the United States (2009).  If the average sales price in the U.S. was estimated at $271,610 in August 2008, then the total housing market could have had an estimated value around $30.4 trillion dollars.  In April, the S&P/Case-Shiller Home Price Indices for the 20-city composite was at computed to be 138.84, which translates into an estimated $259,511 average sales price for homes in the composite metropolitan areas.  The total housing market in April 2011 therefore could have an estimated value around $29.0 trillion dollars – down an estimated $1.4 trillion dollars from the bondfire.

By comparison, according to the 2011 Investment Company Fact Book, “the U.S. mutual fund market – with $11.8 trillion in assets under management at year-end 2010 – remained the largest in the world, accounting for 48 percent of the $24.7 trillion in mutual fund assets worldwide.”  The wealth retained in housing is just under three times that of the wealth held by investors in mutual funds.

By most estimates there are million homes in foreclosure that could be valued at an estimated $259.5 billion.  While they will not sell anywhere close to the average sales price of homes, foreclosure sales get “baked into” the average sales price numbers.  With another 872,000 homes in the hands of banks – or another estimated $226.3 billion – the total foreclosure protfolio can be valued at about an estimated $485.8 billion – which is about 1.68% of the total value of the real estate market.

Realtor.com reports this morning that there are 3,518,710 homes for sale on their site which can be estimated at a value of $913.1 billion.  While 2008 was considered the bondfire of wealth by most accounts, should another $485.8 billion in foreclosed homes quickly hit the real estate market, it will be like pouring gasoline on a dying fire.

NOTES/COMPUTATIONS:

S&P Case-Shiller Home Price Index (Need S&P Base Value for 01/2000) Composite 20 (SPCS20R)

10/03 = 147.82
10/04 = 172.41
08/08 = 164.65
04/11 = 138.84

Average Sales Price (SOURCE: Average Home Price Tops $264,000 In October)

10/03 = $243,756
10/04 = $264,540
08/08 = $271,610 EST.
04/11 = $259.511 EST.

Total Housing Market Value

08/08 = $30,365,998,000,000 ($30.4 trillion)
04/11 = $29,013,329,800,000 ($29.0 trillion)

Potential Changes to Single Family FHA Loan Limits

I stumbled across a great paper on the HUD website portal that evaluates what might happen to single family FHA loan limits on October 1, 2011 if there is no action by Congress before then.  Intended as a guide for consumers, lenders and real estate agent alike, HUD’s paper discusses potential loan limit declines, including the location and impact on a nation-wide county-by-county basis.  According to the report:

Barring Congressional action, Federal Housing Administration (FHA) loan limits will revert
back to loan limits determined under the Housing and Economic Recovery Act (HERA) for loans
insured by FHA on or after October 1, 2011. As a result, FHA loan limits would likely decline
in 669 of the 3,334 counties or county equivalents that are eligible for FHA insurance.

There are 21 counties in Maryland potentially affected by a failure to extend the FHA loan limits.  All but one county will experience double digit percent declines in loan limits with Garrett County expecting the biggest decline at 38%, which translates into lowering this county’s limit by $166,450.  Anne Arundel County, for example, could experience an 11.7% decline in loan limits from $560,000 to $494,500, a $65,500 decline.  The avearge sales price in Anne Arundel County in May 2011 was $333,259, down 1.78% year-over-year and down 1.99% month-over-month.

Maryland counties that should brace for a decline in loan limits include:

• Anne Arundel County
• Baltimore County
• Baltimore City
• Calvert County
• Carroll County
• Cecil County
• Charles County
• Frederick County
• Garrett County
• Harford County
• Howard County
• Kent County
• Montgomery County
• Prince George’s County
• Queen Anne’s County
• Saint Mary’s County
• Somerset County
• Talbot County
• Washington County
• Wicomico County
• Worcester County

The chart (below) illustrates the FHA Loan Limit rollback by Maryland counties sorted highest current loan limit to lowest current loan limit.

BLUE = HERA Limits for CY 2011 (After October 1, 2011)
GREEN = ESA/CAA 2011 Limits (Before October 1, 2011)

There are only three counties in Maryland that are not likely to be affected on October 1, 2011 by changes in FHA loan limits.  Those counties include:

• Allegany County
• Caroline County
• Dorchester County

You can read the full report from U.S. Department of Housing and Urban Development, Office of Housing, Risk Management and Regulatory Affairs / Evaluation, on HUD’s portal by following the link below.  The report is 23 pages and includes the full list of affected counties organized by state.

Potential Changes to FHA Single-Family Loan Limits beginning October 1, 2011 from Implementation of the Housing and Economic Recovery Act of 2008

In summary, one of the U.S. Government major acts of intervention in the housing market essentially comes to an end in October of 2011.  Loan limit rollbacks will result in more loans requiring jumbo financing or buyers to bring more cash to the table to stay under lower loan limits.  While the bondfire of wealth continues to smolder, the Federal Government’s failure to act adds fuel to fire resulting in more wealth tied up in the housing market going up in smoke.

Related Blogs:

2008 Was The Bondfire of Wealth – New Book Reveals All

FHA Loan Limits Reset Looms On Horizon

Subprime Mortgages Are Poised To Make A Come Back

Tighter Lending Standards Results in Increased Mortgage Loan Rejections

Waterfront Home for Sale – 809 Bay View Drive, Deale, Maryland, 20751

Built With 40,000 Bricks To Withstand Almost Any Weather!
An unobstructed southeast view of the Chesapeake Bay,
an abundance of space to live and play.

When you wake up at Bay View you will see nothing but an expansive southeast view of the Chesapeake Bay. The water is always changing – it’s almost never the same when you glance out any one of the windows at Bay View.

The view is nearly unchanged since 1659 when Englishman Richard Gott marked off the 600 acres of Deale. In the 1850′s watermen traveled from the Eastern Shore to a huge natural oyster bar called Bay Shore Bar. At one time, most of Rest Haven was owned by Captain Bernard Franklin. Later the area became the Phipps farm and by the 50′s it was the McKibbon’s farm. Then later sub-divided and aptly named the area “Rest Haven”.

It is supposed to be a very good year for blue crabs in Maryland. Walk down to your private pier and pull your traps and harvest a dozen or so Maryland crabs to steam for dinner in the summer kitchen or start your own oyster pen.  If you’ve ever wanted to pull your own traps, then your dreams could come true at 809 Bay View in Deale, Maryland. This classic Colonial is located in one of Maryland’s best ranked places to live according to the Washingtonian Magazine.

Wondering if this home will stand the test of time in any weather? Consider the fact that it’s built from one run of 40,000 bricks. According to the owners who built the home it was easier to find a suitable waterfront location to build than it was to find all the necessary bricks. If you know construction, you’ll know the strength that comes building 12-inches on center. While there are no guarantees, this home can certainly withstand almost anything nature should throw at it.

There are windows onto the Bay from almost every room. The Master Bedroom has two sets of windows so no matter where you are in the room, the Bay is always in sight. The family room has a triple French door to the outside and a window near the fireplace. The formal living room and formal dining room may be located on the street-side of the house, but, where you live is nothing but expansive water views.

Use the summer kitchen off the sun porch when friends and family are around for steamed crabs from the Bay. You can enjoy eating or entertaining on the sun porch almost year-round.

Entertain in the well equipped main kitchen when you host those affairs where you might use the formal living room and dining room. Great your guests in a grand two-story entrance foyer.

Upstairs, you have the second floor hall for sitting or for display. There are two well proportioned bedrooms in addition to the master bedroom. The multi-function room could be divided into more bedrooms or used as very large game room or media room.

Bay View is almost due east of Washington, DC. It’s located at one of the closest points on the Bay from the city. When you look at a road map you’ll see that it’s almost a straight run and only about 30 minutes from the heart of the downtown. Annapolis, Baltimore, Fort Meade and BWI are just as close.

You might not need much more than what Bay View has to offer. But if you did need a boat ramp, there is a well maintained community ramp and pier just two doors down. Use it to put your center console fish boat or jet skis in the water in the spring and haul them out in the fall.

All this and more, modestly priced at $949,900 (AA7608022).  Contact me today to arrange for a private tour.