INSIDE THIS ISSUE

Selling page 2
Buying page 3

FACT OR FICTION...REALITY IN OUR REGION

Since early 2009, we have been greeting callers banks obviously want to recover collateral
with “Real estate is great at CENTURY 21 pledged on non-performing loans; forensic ac-
New Millennium!” Our industry peer group counting will become a growth segment within the
likely thought we were incredibly optimistic, but lending industry; attorneys will represent more
looking back, that’s precisely when our market defaulting borrowers. Political positions have
began improving. The trend continues today. been staked out.
Every leading indicator remains positive with the
pace of improvement accelerating. On a national basis, foreclosed properties repre-
sent a little less than a third of all property sold.
Unfortunately, most media discussion pertains In our region, that number is significantly lower,
to the real estate climate on a national basis. and declining. The largest consequence of this
Many focus on statistics that relate only to the news cycle was to briefly undermine buyer confi-
most depressed markets in the country. Rest dence. The uncertainty lasted less than a week.
The Determined To Move assured, real estate is not great in Detroit or Las Foreclosures have resumed.
You Team Vegas.
The relationship between supply and demand
W ith Offices in Chantilly & Recently, housing news has focused on legal determines home values. Our responsibility to
McLean! issues relating to foreclosure and what impact our clients is to provide a factual basis for making
administrative irregularity might have on our good business decisions. When closely examined,
6629 Old D ominion Drive industry. While none actually dispute the validity statistics indicate that trending in the DC Metro-
McLean, VA 22101 of borrower defaults, due to bulk sale of mort- politan Service Area (MSA) is clearly positive.
gages in the secondary market, there are now Our biggest challenge as real estate professionals
C ell 703-402-7524 is to differentiate a national dilemma from our
challenges to the chain of ownership on some
www.G aetjenT eam.c om foreclosed property. robust and improving regional market.
markgaetjen@ aol.c om We will attempt to do so in this issue.
Motivation for various parties in this dispute are
703-657-0490 clear: Borrowers would prefer to keep their homes;

POLICY WILL BE THE PRIMARY MARKET

Please recall that this recession began when the “Housing Bubble” While legislators exerted pressure on banks to lend and modify loans,
burst. Lenders quickly found themselves under-collateralized with there were no provisions within TARP that allowed any to insist. The recent
an increasing velocity of non-performing loans. The nations largest dispute over the legality of some foreclosures will serve to strengthen the
financial institutions were at risk of failing; some did. The remainder administration’s position. We should see a more collaborative approach
were declared “too big to fail.” from banks.

To avert systemic failure, the federal government stepped in with While loan servicers are conducting internal reviews to verify they have
TARP, originally intended to remove the “toxic assets” from the balance the legal right to foreclose, state and federal regulators are putting
sheets of at risk banks. Instead, TARP funds acquired equity positions foreclosures under the microscope. They will undoubtedly find cases
in the financial institutions. This served to recapitalize banks, restoring where things were not done properly. This puts regulators in a position
solvency. Foreclosure activity in the past few years accomplished to levy fines on servicers, or perhaps even prohibit a lender’s ability to
liquidation of a portion of the toxic loans which TARP never dealt make insured loans through Fannie or Freddie.
with.
Pension funds, unions, mortgage insurers and other institutional investors
The hope was that banks would respond by lending, while sharing the will seek compensation from servicers if loan portfolios they purchased
administration’s priority of modifications for defaulting borrowers. were not as represented. It is estimated that the five major servicers could
Neither really materialized in the anticipated volume. The pace of be exposed to almost a trillion dollars in “buy backs.” This certainly gives
foreclosure accelerated, having a significantly negative impact on financial institutions greater incentive to cooperate with policymakers. The
home values. potential for a “Tsunami” of foreclosures seems remote. It is more likely
that pace of foreclosure will moderate.
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MARKET TRENDS

EMPLOYMENT TREND
While unemployment remains
over nine percent nationally, the
W ashington DC MSA enjoys a
remarkably positive jobs climate
with an unemployment rate under
six percent.. Of the fifteen largest
US job markets, our region faired
better than any. W e added a net
of 41,500 jobs in just the second
quarter of 2010.
Even more compelling is the
monthly trend shown to the right.
W e did not start shedding jobs in
our MSA until the fourth quarter of
2008, and returned to positive
employment numbers in the sec-
ond quarter of 2010.

VALUE TREND
Low interest rates, a robust jobs
climate, and population growth
have reversed the cycle of depre-
ciating home values. In the last
eighteen months, the trend has
gone from an annual depreciation
rate of twenty five percent, to a
modestly appreciating rate.
Low interest rates will continue to
spur demand. However, forecasts
indicate rates at today’s level will
begin trending higher in 2011.
W ith such positive data in our
region, it is clear that the only
remaining issue is consumer
confidence. Understanding the
facts will help tremendously.

POPULATION TREND

W ashington, DC has always been

“last in and first out” of recession-
ary cycles. Obviously, being
home to the federal government
is to our benefit during periods of
economic slowdown. The steady
increase in households since
2006 is a fundamental reason our
average value is trending so well.
More people need homes...pretty
simple. Experts expect this trend
to continue.

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MARKET TRENDS | BUYER CONSIDERATIONS

A COMPELLING CIRCUMSTANCE FOR PURCHASERS

Service /
Interest Payment per
Qualified buyers can now obtain purchase money of relatively little consequence. $1,000
Rate Thousand
with fixed rates in the low four percent range. W e’ve Now assume borrowers are willing to put $1,000 per Payment
seen recent dips to the upper three’s. Purchase month towards their principal and interest payment 3.00% $4.22 $236,967
money remains available with minimal, and in some when shopping for a home. If their timing is such
3.25% $4.35 $229,885
situations, no initial investment. that they purchase when a four percent rate is
available, their $1,000 payment will service a 3.50% $4.49 $222,717
There are two key variables which determine overall $209,644 loan. If their timing is such that the best 3.75% $4.63 $215,983
return on investment when purchasing a home. Far interest rate is now five percent, the same $1,000
4.00% $4.77 $209,644
too often, we see buyers focus only on price. payment will only buy $186,220.
Frankly, in most situations, terms of the purchase 4.25% $4.91 $203,666
will have more impact than will purchase price. Finally, if the same purchasers borrowed $186,220 4.50% $5.07 $197,239
at four percent, their payment would be $889. If 4.75% $5.22 $191,571
As an example, assume a borrower acquires a home they chose to pay the budgeted payment of
5.00% $5.37 $186,220
for $100,000 and finances the entire purchase. $1,000, they would then be paying down principal
Their monthly principal and interest payment would by an extra $111 per month. By doing so, their 5.25% $5.52 $181,159
be $477 at a four percent interest rate. The same home would be paid off in twenty four years rather
5.50% $5.67 $176,367
loan amount at a five percent rate would require a than thirty.
$537 payment. 5.75% $5.83 $171,527
Those contemplating purchase will be well compen- 6.00% $6.00 $166,667
The sixty dollar payment differential would amount sated for considering terms as equal in priority to
6.25% $6.16 $162,338
to $720 in additional payment per year. If they own price. Our region’s recovery is well ahead of most
the home for five years, they effectively have paid areas. W hen the national climate catches up, and it 6.50% $6.32 $158,228
$3,600 more; over thirty years, an additional is beginning to do so, artificially low rates will rise. 6.75% $6.48 $154,321
$21,600. Whether they paid $99,000 or $100,000 is Timing is everything!
7.00% $6.65 $150,376

OWNER’S PERSPECTIVE...THE TIDE IS COMING IN!

One Fore-
closure per
Number of
State The graph to the left demonstrates just how fortunate
House-
holds per we are in terms of foreclosure exposure within our
Month MSA. It also clearly reflects how difficult things re-
Nevada 183 main in other parts of the country. Collectively, fifty
Colorado 292 two percent of all foreclosures occur within five
California 389 states.
The chart to the right speaks to value trends by prop-
Georgia 457
erty type. Our region has clearly “bottomed out” and
Arizona 489 is now an appreciating market. Experts forecast we
Michigan 490 will enjoy an appreciation rate of five percent a year
Florida 511 through 2015.
Ohio 582 The graph below details the regional inventory trend
Indiana 583 by property type. At the height of the distressed
Illinois 625 market cycle, our region had almost twelve months of
18 Additional States inventory. W ith regulatory pressures on lenders to
seek foreclosure as a last resort, inventory should
Maryland 2,220
continue to fall.
7 Additional States
Real estate is local. Localities within our region are
Virginia 2,738 performing differently. W e track these key indicators
12 Additional States down to the zip code. If you would like this informa-
District of Columbia 54,969 tion specific to your property, please contact me.
Bottom line; it’s all good news...finally!
Vermont 294,382

3
CENTURY 21 NEW MILLENNIUM | REAL ESTATE NEWS

SUMMARY
If you are considering a real estate transaction, thorough analysis and competent representation are
essential. We are in a transitioning market. There is potential for profit, as is there risk of loss. If we
understand the underlying facts, we will make good business decisions; logically, and without emo-
tion. I am a real estate professional and accept responsibility for keeping my friends, neighbors
and business community informed as to all aspects of things affecting the real estate portion of
their holdings.

If you are currently listed for sale, this is not a solicitation. If you have a real estate question, I will be
happy to answer it, or find the answer. If you have a real estate need, I will appreciate an opportunity
to compete for your business. Our team is very good at what we do...our results demonstrate that. The Determined To Move
Don’t settle for less. You Team
Sincerely,
W ith Offices in Chantilly & McLean!

6629 Old D ominion Drive

McLean, VA 22101

C ell 703-402-7524
Todd Hetherington
www.G aetjenT eam.c om
markgaetjen@ aol.c om

703-657-0490