FHA Loans Make A Comeback?

I started in the real estate business at the height of the creative financing boom. 100% (and more!) financing was all the rage, and homebuyers were signing up for adjustable rate mortgages with low monthly payments. Stories floated around my office about buyers that walked into the closing with no money and walked out with the keys to a new home. In this environment, the old-fashioned FHA mortgage was rarely mentioned – it just couldn’t compete with the less expensive, more exciting loans that were dominating the market.

Now that exotic mortgages have largely disappeared from the landscape, the federal government is doing what it should have done years ago – reforming FHA loans to better reflect today’s homebuying reality. If you’re considering purchasing a home, it may be time to consider an FHA backed loan.

We’ve seen more buyers that have been qualified for an FHA loan recently. This should come as no surprise. While many lenders are now requiring credit scores in the mid-600’s and up, FHA borrowers may be able to secure financing with credit scores as low as 580. Lenders are also requiring larger downpayments of 5% or more, while FHA borrowers still have the opportunity to make a 3% downpayment.

The federal government is doing its part to make FHA loans available to more people, at least in the short term. As a part of the recently passed Economic Stimulus Act of 2008, the government increased the amount buyers can borrow with an FHA loan. The increase will expire at the end of the year, although it can be extended. The U.S. Department of Housing and Urban Development (HUD) has also been working on permanent changes to the FHA program.

Higher loan limits, low downpayments, and flexible credit guidelines – if you are shopping for a mortgage, an FHA loan should be one item on your list.

May 2008 Durham Public Schools Video Newsletter

Durham Public Schools has just published the May edition of their Parents Video Newsletter. On tap this month - graduation schedules, Summer Reading Club and other summer camps, and score reporting for end of grade reading tests.

See the video here.

New Listing - Research Triangle Park Townhome

We just listed this great RTP townhome - if you work in RTP and want a short commute, definitely check this one out.

A few details:
Beautiful end unit home with plenty of upgrades. All appliances are included - all kitchen appliances, plus washer and dryer. Upgrades include kitchen island, luxury master bath with garden tub and dual sinks, vaulted master bedroom ceiling, trimmed windows, columns, railing at top of stairs, berber carpet, fireplace with marble surround. This home backs to a common area, offering extra privacy and less noise. Close to all freeways. Pool table and bar in fourth bedroom/bonus room negotiable.

See more details at http://www.302hiddensprings.com/ or contact the listing agent, Bruce Hill.

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Location, Location, Location….Again

Two articles at the Wall Street Journal Online illustrate, once again, why the three rules of real estate are location, location, location. Holman W. Jenkins, Jr. writes an interesting op-ed on why the proposed mortgage bailout working its way through Congress will not actually solve the foreclosure problem.

Mr. Jenkins theorizes that the foreclosure crisis was created by speculation on the “drive ‘til you qualify” method of home buying. Most of the foreclosures in this country are concentrated in just a few areas, with the biggest grouping running from Sacramento to Las Vegas and Phoenix. His idea is that speculators bought up homes in developments on current or planned major commuter routes. As prices closer to urban centers continued to rise, buyers would continue to move further from these centers in search of affordable real estate, thereby driving up prices in these exurbs and providing a tidy return on investment.

A lot of these developments are oceans of cookie cutter development, with little recreation, infrastructure, lifestyle, or sense of place. These days, even bargain hunters aren’t looking to buy something with no inherent value. An investor that knows their property has very little value isn’t going to jump through hoops to continue paying the lender, even if they get a better deal on the mortgage.

Should Mr. Jenkins’ prognostication hold true, we’ll have a bigger problem on our hands. What in the world do you do with thousands of deserted and deteriorating homes sitting out in the middle of nowhere?

On the other end of the spectrum, Jeff D. Opdyke reports that major downtowns are weathering the storm much better. He offers a quick dissection of markets in Chicago, New York, Boston, San Francisco, and Los Angeles. The overall assessment of the markets? Slower than a couple of years ago, sure, but not abandoned in a field. High end real estate continues to rise ($10 million for a San Francisco condo, anyone?). The very best downtown locations are strong, but if you’re on the wrong street, or worse yet, more than a few steps from downtown in a surrounding neighborhood, it’s touch and go. Again, not perfect, but not mired in foreclosures either.

Both of these articles got me thinking about how the market is playing out in Durham right now. While we don’t have anyone commuting for hours just to afford a home, Durham has become even more about location recently when it comes to home sales. Our city has morphed over the past couple of decades into a new geographic identity. Rather than having one central geographic point where commerce, entertainment, and community all mesh, we have several. The downtown/Duke corridor, the Southpoint area, and RTP all feed different parts of our collective soul, and each has developed a sense of place that has supported home values.

The neighborhoods around Duke and downtown (especially those providing equal access to both) are continuing to hold value. But I also draw a conclusion from Mr. Opdyke’s piece – there’s downtown, and then there’s downtown. The west side of downtown, encompassing West Village and Brightleaf, and extending to Duke’s East Campus, is our version of downtown Chicago’s Gold Coast. A great example of how the real estate market has developed is the Bullington Warehouse condominium on N. Duke Street. It was developed in the 1980’s, before construction prices went through the roof. It’s no frills construction has enjoyed gradual upfit over time by condo owners, meaning that a pretty nice condo can still be had for under $300,000 – and the seller can actually turn a profit. You can eat, drink, and be merry to your heart’s content just by crossing the street. Or marvel at an office of the largest advertising firm in the world. Or walk by the building holding one of the largest Porsche collections in the country. Bullington Warehouse condos are selling fast and for at or near asking price. West Village is almost always completely leased up at higher than market rents. In short, this is downtown Durham’s location.

A twin corridor is taking shape on the east side of downtown, traveling roughly along Mangum Street. As Kevin Davis reports on Bull City Rising, the area is taking shape, albeit at a slower pace than was expected a couple of years ago. It appears to have the makings of a location, with some great new restaurants, the opening of the Durham Performing Arts Center, and planned residential development. If the Wall Street Journal musings hold, it will it need to mature naturally over the years as the Brightleaf area has done, developing its roots and sense of place, and proving its value to the community. Forcing development to fill some ethereal “need” won’t do it (sure, we can sell you an affordable condo – you know, people in Manhattan would kill to get their hands on 600 square feet for $200,000!).

The second market driver in Durham is the Southpoint area. Since opening in the early part of the decade, The Streets at Southpoint mall has served as a hub for residential and commercial development in the southern part of the county. This year, this area has been one of the two most active real estate markets in Durham, according to the Triangle Multiple Listing Service. While downtown has grown and evolved over many years into its current incarnation, Southpoint was a seemingly overnight sensation based on a different theory of location. The mall was built in a prime but underutilized location – it sits just off a major Triangle thoroughfare, I-40. This highway and its offshoots will eventually connect you to almost everywhere in the Triangle and points beyond.

As a marketing assistant for Belk during Southpoint’s grand opening, I got the full tour and story. Apparently, the developers had looked at downtown Durham and its history. They knew that downtown had once been home to the best department stores and restaurants in town, with crowds filling the streets for holiday shopping and nights on the town. They wanted to bring that feeling to the Southpoint area, and designed a retail destination that incorporated some of the feel and look of Durham’s tobacco town heritage. Their idea created a location in southern Durham, one not quite matched by the more generic Triangle Town Center (music will ensue if you click this link) built around the same time in Raleigh. TTC has all the stores, but not the sense of place that Southpoint has.

The up and coming corridor is the Hwy 70/98 area leading into Research Triangle Park. RTP is a major driver of employment for the entire Triangle. Its zoning has always made residential development (and public transportation) there a non-starter. As commuting to RTP from Wake County becomes more onerous, people are looking at the Durham County side of the line, and developers have taken notice. Once Brier Creek settled in, bringing restaurants, entertainment, and grocery stores, the sense of place was developed for Durham to RTP commuters.

This corridor is the other most active real estate market in Durham this year. The east part of Durham bordering Wake County is anticipated to be the fastest growing Durham submarket over the next decade.

So here in Durham we have a truly diverse, multi-node city. One hub founded on history. One founded on history removed to a new location (and with The Cheesecake Factory!). One founded on the draw of jobs and shopping in another county – go figure.

Remodelling to Sell? Keep it Simple

In today’s real estate market, home sellers must be smart and economical when preparing their homes for sale. Since many buyers have visited new home communities during their home search, they will compare older homes to the perfect, beautifully staged model homes in new home communities. Sellers must put the best face on their homes to compare – but with home prices leveling off or declining nationwide, a smaller renovation budget may be necessary.

Here are some tips for making your home desirable to buyers without breaking the bank.

Curb Appeal Is a Must

Buyers form an instant impression of your home before they ever get out of the car. Expensive landscaping isn’t necessary to make a good first impression. Rather, make sure that your lawn and house appear neat and clean from the curb.

For the lawn, keep the grass cut and edged, especially around any walkways and driveways. Trim any shrubs. If you have flowerbeds, keep them filled with seasonal flowers and plantings, and use mulch to complete the look. Freshen up your driveway and walkways. For concrete, a good power washing works wonders. For gravel, put down a new layer. To complete the look, a new mailbox and freshly painted mailbox post at the curb is an added touch that shows buyers you have paid attention to the details.

For the house itself, newly painted trim will make your home stand out. Take a good look at the front door – if it needs a new coat of paint and a new lockset, do it. If buyers reach your door and find dust, dirt, and a sticky lock, it’s like saying to them, “We really don’t want you to come in.” If the home needs new siding, paint, or power washing, you will want to do these as well. If your windows are on their last legs, and you can afford it, you may even want to replace them. Buyers are now looking more closely at the basics in a home, and are willing to pay for items like new windows as opposed to cosmetic upgrades.

Keep the Interior Clean, Simple, and Modern

Kitchens and baths still sell homes. In older homes, these rooms may not be as big as in new construction. Older homes can compete by keeping these rooms as light and bright as possible. New cabinetry may not be necessary. If you are on a budget, you’ll have to sacrifice quality to get new ones, and buyers are likely to notice. It may make more sense to refinish and paint the existing cabinets in these rooms. Light colors are popular – white or a light yellow or green will work in most kitchens. If countertops and flooring are old and stained, you’ll need to refinish or replace them.

For the rest of the house, good floors and paint rule. Your carpet and hardwoods may only need to be cleaned and refinished. If they need to be replaced, it is probably worth the money. Fresh paint on the walls will also give your home an instant makeover. New switch plates and light fixtures can usually be found inexpensively, and will make the home look more modern and updated.

A white glove cleaning and thorough decluttering is the finishing touch to the inside of the home. Hire a professional cleaner to clean the home, including windows and light fixtures. Remove any items you do not use everyday, and anything you can do without for a few months. Rent a storage unit if you need space off-site for your belongings.

In the interior of the home, it may be necessary to hire professionals to do the work. Always think “model home”. Buyers will spot the signs of amateur work and will deduct from the price of the home. Painters are especially important. Make sure they do a thorough job and pay attention to detail; when they finish, you shouldn’t see paint dripped on doorknobs or floors, or poor trim work.

Follow these tips and you’ll be ready to take on the competition and sell your home.

Historic Cleveland-Holloway Neighborhood Home Tour

The Cleveland-Holloway neighborhood just east of downtown Durham is hosting a home tour this Saturday, May 17. The tour starts at 1pm at 406 Oakwood Avenue, a 1920's Craftsman bungalow currently being renovated.

The cost is free, although a $5 donation to the neighborhood is greatly appreciated. For more information about the tour and available home in the Cleveland-Holloway area, visit http://chhomes.blogspot.com.

The neighborhood also garnered a cover on this week's Independent Weekly. See the article here.

Directions: From downtown, go 1 block east on Holloway. Just past the library, take a left on Queen Street and then a right on Ottawa. Go one block to Oakwood Avenue.

First Quarter Market Trends

TMLS has released the market trends report for the first quarter of 2008. Here are the highlights for Durham County:

• Job growth continues, although it has slowed throughout the Triangle. From Feb. '06 through Feb. '07, job growth was 3.1%. From Feb. '07 through Feb. '08, the growth fell to 1.2%. This slowdown tells the tale of the Triangle housing market better than just about any other measure. Our real estate market has traditionally been fueled by people relocating to the area for work or school. When there are fewer jobs being created, there are fewer reasons for people to come here.
• Inventory is up, sale prices are down. Inventory has increased by 6%, and sale prices are down 5%. The average sale price in the first quarter was $194,400.
• Property is still appreciating. This is probably the biggest bright spot. While many areas of the country are seeing property values collapse, we are still seeing overall appreciation. The average appreciation for resale housing in Durham County was 4.22%. Appreciation can vary widely by neighborhood. Based on MLS data, Duke Park saw the best run, with an average per year appreciation of 13.72%. Duke Forest and Hope Valley rounded out the top three. At the bottom of the positive scale was Eno Trace, with .85% average appreciation. The MLS list was comprised of about 30 neighborhoods. There are obviously more neighborhoods than that in Durham, and I’m very curious about the rest of the list – are we looking at negative appreciation in some neighborhoods not listed in the report?
• Pending sales are off. There is now lots to choose from, but buyers are not taking the plunge. Pending sales are off 22%, and closed sales are down 21%. Durham County fared slightly better than the rest of the Triangle, where pending sales and closed sales were down 27% and 24%, respectively.
  The right homes are selling. Combined with the appreciation we’re seeing, the homes that sell are selling faster than they were last year – 87 days on the market compared with 94 days for the same period last year.

Top 10 Selling Developments

1. Woodcroft
2. Hope Valley Farms
3. Grove Park
4. Keystone Crossing
5. Parkwood
6. Duke Forest
7. Grandale
8. Hope Valley
9. Stratford Lakes
10. American Village

Top Appreciating Subdivisions

1. Duke Park
2. Duke Forest
3. Hope Valley
4. Finley Forest
5. Falconbridge
6. Downing Creek
7. Woodlake
8. Chancellors Ridge
9. Parkwood
10. Wyndcross

Construction Almost Complete at 907 Exum

Seed and sod are down at 907 Exum, a sure sign that construction is winding up. This is the newest home from the Durham Community Land Trustees, and continues their mission of building affordable, energy efficient homes that honor the architectural heritage of southwest central Durham. For more info about DCLT, check out my previous post. This bungalow is a spot built home in the Burch Avenue neighborhood. Three bedrooms, two baths, living room, dining room, and kitchen, and an easy walk to Duke and downtown.

With a list price of $104,000, this home is a great opportunity for first time homebuyers. Buyers will need to be first timers and owner occupants (sorry, no investors).

This home has energy efficient design, and was built to specific efficiency standards under the SystemVision initiative from Advanced Energy. SystemVision homes are built using rigorous quality standards; inspectors are active from the outset with input on the design of the home, and inspecting the construction site to ensure that standards are met every step of the way. Advanced Energy guarantees the results of their process - for the first two years of ownership, they guarantee that heating and cooling bills for the home won't exceed a certain amount.
For even more info, check out the home website at http://www.907exum.com/.

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