3820 LIGHTFOOT ST #318
CHANTILLY, VA 20151
List Price: $249,900
Prior Sale: $430,000 11/22/2005
Listing Date: 09/21/07
-41.9%
3830 LIGHTFOOT ST #327
CHANTILLY, VA 20151
List Price: $279,900
Prior Sale: $425,000 04/24/2006
Listing Date: 06/26/07
-34.1%
416 PATRICK LN
HERNDON, VA 20170
List Price: $349,000
Prior Sale: $515,000 04/27/2006
Listing Date: 09/23/07
-32.2%
3830 LIGHTFOOT ST #237
CHANTILLY, VA 20151
List Price: $240,900
Prior Sale: $355,240 11/07/2005
Listing Date: 04/13/07
-32.2%
2208 COCQUINA DR
RESTON, VA 20191
List Price: $313,250
Prior Sale: $453,500 03/14/2006
Listing Date: 09/11/07
-30.9%
2216 COCQUINA DR
RESTON, VA 20191
List Price: $280,500
Prior Sale: $405,000 04/14/2006
Listing Date: 07/10/07
-30.7%
6815 FLOYD AVE
SPRINGFIELD, VA 22150
List Price: $386,000
Prior Sale: $540,000 11/03/2005
Listing Date: 09/20/07
-28.5%
4211 AMERICANA DR #102
ANNANDALE, VA 22003
List Price: $185,000
Prior Sale: $258,000 09/13/2005
Listing Date: 09/21/07
-28.3%
7583 ASPENPARK RD
LORTON, VA 22079
List Price: $296,000
Prior Sale: $400,000 05/10/2006
Listing Date: 09/07/07
-26.0%
5721 OVERLY DR
ALEXANDRIA, VA 22310
List Price: $399,900
Prior Sale: $530,000 06/27/2006
Listing Date: 09/20/07
-24.5%
4241 AMERICANA DR #101
ANNANDALE, VA 22003
List Price: $167,700
Prior Sale: $215,000 09/23/2005
Listing Date: 09/25/07
-22.0%
11338 WESTBROOK MILL LN #304
FAIRFAX, VA 22030
List Price: $319,900
Prior Sale: $400,000 04/03/2006
Listing Date: 09/25/07
-20.0%
8456 KIRBY LIONSDALE DR
LORTON, VA 22079
List Price: $515,000
Prior Sale: $640,175 01/24/2006
Listing Date: 09/25/07
-19.6%
8204 MCCLELLAND PL
ALEXANDRIA, VA 22309
List Price: $339,900
Prior Sale: $410,000 09/14/2005
Listing Date: 09/25/07
-17.1%
5605 ELEANOR CT
ALEXANDRIA, VA 22303
List Price: $348,000
Prior Sale: $410,000 04/23/2007
Listing Date: 09/25/07
-15.1%
14495 GOLDEN OAK RD
CENTREVILLE, VA 20121
List Price: $250,000
Prior Sale: $294,000 03/03/2006
Listing Date: 09/19/07
-15.0%
5339 BUXTON CT
ALEXANDRIA, VA 22315
List Price: $413,900
Prior Sale: $485,000 05/27/2005
Listing Date: 09/23/07
-14.7%
6721 ELDER AVE
SPRINGFIELD, VA 22150
List Price: $495,000
Prior Sale: $575,000 10/06/2005
Listing Date: 09/19/07
-13.9%
1210 SUNRISE CT
HERNDON, VA 20170
List Price: $450,000
Prior Sale: $520,000 08/03/2005
Listing Date: 09/22/07
-13.5%
1353 SHALLOW FORD RD
HERNDON, VA 20170
List Price: $499,900
Prior Sale: $575,000 11/07/2005
Listing Date: 09/22/07
-13.1%
6721 HOPEWELL AVE
SPRINGFIELD, VA 22151
List Price: $399,900
Prior Sale: $460,000 02/01/2007
Listing Date: 09/21/07
-13.1%
13034 MAPLE VIEW LN
FAIRFAX, VA 22033
List Price: $415,000
Prior Sale: $475,000 06/21/2005
Listing Date: 09/19/07
-12.6%
6465 MCCOY RD
CENTREVILLE, VA 20121
List Price: $395,000
Prior Sale: $355,000 05/24/2004
Listing Date: 09/21/07
11.3%
3314 WOODBURN VILLAGE DR #T2
ANNANDALE, VA 22003
List Price: $191,000
Prior Sale: $213,800 07/06/2004
Listing Date: 09/23/07
-10.7%
4726 FEATURE OAK WAY
FAIRFAX, VA 22032
List Price: $760,000
Prior Sale: $850,000 08/15/2006
Listing Date: 09/21/07
-10.6%
7501 ASHBY LN #D
ALEXANDRIA, VA 22315
List Price: $264,000
Prior Sale: $295,000 08/25/2005
Listing Date: 09/25/07
-10.5%
3920 PINELAND ST
FAIRFAX, VA 22031
List Price: $449,900
Prior Sale: $500,000 07/06/2006
Listing Date: 09/21/07
-10.0%
4000 GREGG CT
FAIRFAX, VA 22033
List Price: $419,000
Prior Sale: $465,000 01/27/2006
Listing Date: 09/19/07
-9.9%
5585 HOLLINS LN
BURKE, VA 22015
List Price: $370,000
Prior Sale: $407,000 05/25/2006
Listing Date: 09/22/07
-9.1%
14000 GRUMBLE JONEST CT
CENTREVILLE, VA 20121
List Price: $319,000
Prior Sale: $349,000 09/28/2006
Listing Date: 09/20/07
-8.6%
14746 WINTERFIELD CT
CENTREVILLE, VA 20120
List Price: $389,990
Prior Sale: $421,000 02/11/2005
Listing Date: 09/21/07
-7.4%
14262 GLADE SPRING DR
CENTREVILLE, VA 20121
List Price: $366,500
Prior Sale: $395,000 11/02/2004
Listing Date: 09/19/07
-7.2%
7734 DONNYBROOK CT #208
ANNANDALE, VA 22003
List Price: $174,900
Prior Sale: $185,000 09/25/2006
Listing Date: 09/19/07
-5.5%
2928 ROGERS DR
FALLS CHURCH, VA 22042
List Price: $619,900
Prior Sale: $649,990 06/02/2005
Listing Date: 09/24/07
-4.6%
7577 ASPENPARK RD
LORTON, VA 22079
List Price: $360,000
Prior Sale: $286,270 08/27/2007
Prior Sale: $327,600 08/27/2007
Prior Sale: $370,000 08/19/2005
Listing Date: 09/21/07
-2.7%
9016 FOX LAIR DR
BURKE, VA 22015
List Price: $535,000
Prior Sale: $543,000 11/14/2006
Listing Date: 09/20/07
-1.5%
411 PATRICK LN
HERNDON, VA 20170
List Price: $342,900
Prior Sale: $345,000 08/24/2004
Listing Date: 08/23/07
-0.6%
8548 BERTSKY LN
LORTON, VA 22079
List Price: $499,900
Prior Sale: $499,900 05/20/2005
Listing Date: 09/25/07
+0.0%
8548 TOWNE MANOR CT S
ALEXANDRIA, VA 22309
List Price: $310,000
Prior Sale: $283,000 05/24/2004
Listing Date: 09/24/07
+9.5%
Wednesday, September 26, 2007
Fairfax County -- On the Market
Posted by Harriet at 6:26 PM
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66 comments:
Jim Cramer of Mad Money said on the Today show this morning, "Do not buy a house now."
Jim Cramer of Mad Money said on the Today show this morning, "Do not buy a house now."
That's a buy signal.
Done with your $20k worth of brick masonry already KH?
3920 PINELAND ST
FAIRFAX, VA 22031
List Price: $449,900
Prior Sale: $500,000 07/06/2006
It is bank-owned now.
This is a good location in a good HS pyramid, but the house on the lot was built in 1951. Most likely it will need costly renovations. I would say $300--325 K would be the fair value.
Looks like fire sales on Lightfoot and Cocquina streets. A number of listings, all with steep discounts.
I also notice that the two properties that I looked at on Lightfoot are in foreclosure. More to come I'm sure.
Actually the market is pretty good to buy right now - if you find a desperate seller. Still a lot of crack smokers ou there who think they can get more than they paid in 2005!
Most people will wait until the next boom to buy, and then pay too much. And then they will sell when its bad to sell, lol.
People are so stupid.
Doug,
"Most people will wait until the next boom to buy, and then pay too much. And then they will sell when its bad to sell, lol."
Even desperate sellers are not going below late 2004 prices. What we are seeing is the first wave of foreclosures. There will be subsequent waves. The bottom is nowhere in sight. With the level of inventory we have, if the next boom comes, it will take at least 3 more years.
"Even desperate sellers are not going below late 2004 prices. What we are seeing is the first wave of foreclosures. There will be subsequent waves. The bottom is nowhere in sight. With the level of inventory we have, if the next boom comes, it will take at least 3 more years."
If your home is purely for investment, then sure you should wait until the market has definitely hit bottom.
Prices will likely not drop to 2001 levels, because then it will be cheaper to buy than to rent. The bottom is likely closer than you think, perhaps next year at this time.
But prices in many areas are pretty good right now. If you are buying a home to live in with your family for the next 20-25 years, its a good time to buy, and not have to worry about competing for contracts or escalation clauses.
Once the market does turn around, true home buyers will once again be competing with investors, and many will get frustrated by losing out on their dream home to a speculator.
Doug: "Prices will likely not drop to 2001 levels"
True. But they are more than likely to fall to mid-2003 prices in most areas in NoVA. If you look at the county assessment history, for most homes the sharp rise started in 2003 and kept going up during 2004--2005.
How can we determine a fair value?
Taking 2000 (or 1997 if that was the bottom for an area) prices (or asssessment in its absence) as a baseline and adding 6% appreciation for every year since then is one way. If the location commands a premium (say close to Metro, top HS, close to employment centers, etc.), one can make the appreciation 7%--8%.
I would be inclined to pay more for a property that is very compelling according to my criteria and tastes. But without such reasons, it is foolish to pay much more than that fair value estimate.
All of this talk of a bottom is a little bit misleading.
The "bottom" will not take the form of a valley between two peaks.
The bottom, when it comes, will be characturized by a prolonged period of stagnant prices. There is little need to worry about identifying or timing the bottom because the bottom will last at least 5-7 years during which there will be minimal price movement.
I think the next 12-24 months will account for the vast majority of the nominal price drops. Once the worst has past it will be time to go bargain hunting. That could be as soon as 6 months from now in places like Manassas.
Doug: "Once the market does turn around, true home buyers will once again be competing with investors, and many will get frustrated by losing out on their dream home to a speculator."
False. Because credit won't be as easy to come by and the last memory everyone has will be of people getting burned on real estate quick investments, just as they did with the dotcom bust.
"False. Because credit won't be as easy to come by and the last memory everyone has will be of people getting burned on real estate quick investments, just as they did with the dotcom bust."
Actually you are false. :)
If there is money to be made, people will invest. Once speculators sniff bottomed out prices, they will buy. Maybe not every Tom,Dick and Harry will be able to get credit - but PLENTY of people made a killing in the boom, and are already scoping potential investment opportunities.
I agree that the mass speculation that fueled the last boom will likely never happen again, but we could very well see a return of 4-6% appreciation a year once the tide is turned.
"I agree that the mass speculation that fueled the last boom will likely never happen again, but we could very well see a return of 4-6% appreciation a year once the tide is turned."
That is very unlikely, that just isn't how housing markets tend to work.
Look here for historical data: http://tinyurl.com/35dbmb
(excel spreadsheet)
As you can see, the last boom in DC peaked in spring of 1990. (at ~93)
It fell to rougly 87 in spring of 1991.
It then stayed between 87 and 90 for the next seven years. (until summer 1998)
For a look at a worse housing cycle look at LA.
The peak was reached at 100.24 in summer of 1990.
By 1993 prices were down to a level of 79, a level they wouldn't return to until 1997.
In short...
Real estate markets don't just hit bottom and bounce. They tend to hit bottom and just sit there a while.
"That is very unlikely, that just isn't how housing markets tend to work. "
Depends on the Market. Look at New York, it does not follow your "rule" at all.
Growing cities will have a different pattern than cities that are losing population.
Even now there are markets with very nice appreciation over 2006 prices ( NC to name one ).
The home market as a whole may stay or lose value, but Speculators will find areas where they can turn a profit. If the population rapidly expands, like it did in Louden, they will be buying left and right - and they will be making money.
Leroy said:
"As you can see, the last boom in DC peaked in spring of 1990. (at ~93)
It fell to rougly 87 in spring of 1991.
It then stayed between 87 and 90 for the next seven years. (until summer 1998)"
Leroy, the numbers in and of themselves mean nothing. You need to look behind the numbers ... at what caused them. In the case of DC which you cite, '98 was the year the District got rid of Barry once and for all. It was also when the fed's restructuring of District organizations occured including the first benefits of the control board.
Is 1998 the same year the pan-global-economy steering-board designated DC a central-pan-global-node, triggering the new-paradigm effect and concomitant hyper-housing-hyphenated-perma-high-plateau-phenomenon?
The reasoning not to buy now was,
Housing prices are dropping, inventories are up,
and builder keep on building more.
"In the case of DC which you cite, '98 was the year the District got rid of Barry once and for all. It was also when the fed's restructuring of District organizations occured including the first benefits of the control board."
Non-concur from here Mr. Lance.
The assessments in Alexandria followed exactly the same pattern. It wasn't the Maximum-Mayor effect.
Alexandria was flat in the 1990's with one or two years going negative 1% to maybe 5%. (Note to Bubbleheads, it was the buying opportunity of a generation.)
I recall seeing my YOY assessment fall a few grand and thinking, "The world is ending! I better sell for whatever I can get!"
No, wait, that's not what I thought.
I thought, "Where's the cold beer in the fridge", "When does tonight's game start?", "Is that a gray hair?"
I thought about regular, boring, every day, life.
The earth moved around the sun. I mowed my lawn. Real estate going flat throughout the 1990's was not a problem. It did not make the news.
Then about 2000 or 2001, assessments started rising, "reverting to the norm".
A compound interest calculation shows my place undervalued today. That depends on what you pick as the starting date and the annual interest.
Starting at 1991, which is as far back as the city maintains records online, and using 7%, most residential real estate in Alexandria is underpriced.
Of course, if you start in 2002, it's overpriced.
I have some datapoints going back into the 1980's and 1970's. Graphing those shows about a 7% appreciation rate. That depends on what houses you pick and where you stop, 2006 or 2007.
I've been wonder how far the pendulum would swing back and how long it would last. My worse case scenario was about -5% to maybe -10% and the flat period lasting maybe 5 years.
These are my WAGs just like every manifesto that's been trotted out by Shiller and the Realtor associations are WAGs. No one knows what will happen.
The rantings from Cramer, Shiller, the WaPo, the Realtors, are not evidence and do not prove boo.
Whether it's a "reversion to the mean" or a "bubble", I've got equity in my place so I'm here wondering what's going on.
My neighbors have been fixing up their places, as I have been.
Since 2005's assessment, Alexandria has been flat. It looks like the early 1990's. It wasn't news then. Why is it news today?
"I have some datapoints going back into the 1980's and 1970's. Graphing those shows about a 7% appreciation rate. That depends on what houses you pick and where you stop, 2006 or 2007."
So basically, if you plot a line from the 70s or 80s to the top of the bubble years... then housing looks like it appreciates at a rate that justifies the bubble values and suggests values will continue to rise...
That is less than stellar analysis.
You have basically invented a self proving hypothesis. No matter where you start or stop your data sampling you will end up "proving" that the values at the end are justified.
Housing went from A->B during a certain period of time, therefor housing appreciates at an average rate that gets you from A to B. You will never get an answer that shows B is too high.
If you had done the same simplistic analysis 5-6 years ago you would have gotten a completely different answer showing a trend line roughly half as steep...
Why do you think your current answer is more valid than the answer the same analysis would have given you 5-6 years ago?
KH said,
(Note to Bubbleheads, it was the buying opportunity of a generation.)
Except, of course, for the one that is coming in the next 5-10 years. And the one that will follow 15-20 years after that.
Thanks for admitting that your prognostications are simply WAGs, because they are. In my view, they are based on your myopic emotional responses to anecdotal instances that don't reflect much rigor of thought or depth of analysis. But WAG works, too.
Nevertheless, I hardly think Shiller's analysis is a WAG. His ideas are based on substantially more rigorous and deep analysis of statistical historical data and economic principles.
I know you don't like sniggering on blogs, but I can't help eeking out a chortle or two when you put your suspect observations on the same par as Shiller’s which are, at minimum, highly educated guesses. The megalomania (read delusions of grandeur) induced by the run up in housing prices due to a confluence of historical and financial abnormalities is causing many self-anointed real estate geniuses to WAG themselves silly.
So, for the record, I’m calling bullshit. This kind of commentary is just a stink in the nostrils of Jesus.
Hey Caveat,
I've been away for a while but reading these blogs in the background. Good to see that you're still keeping people honest.
And Harriet,
This is an excellent blog! I for one appreciate all of the real information you manage to dig up and post. Thank you for your efforts.
My $0.02.
"I can't help eeking out a chortle or two when you put your suspect observations on the same par as Shiller’s which are, at minimum, highly educated guesses."
Then do it yourself.
Here a start, a $295K 1/1. I think it's pricey. It's the kind of place bill was buying a few years ago but he was paying less, $70K? and he was shopping in a better location.
Here is the historic pricing. Fold in the sales price in 1979.
The details of the 1990's are here. $94K in 1991, $64K in 1999. Condo's do that. SFH's resist that.
Graph it out. Then do a few more. Use different starting points. Overlay the actuals with different rates of return.
Run the numbers yourself, in any way that you choose.
Where were the scary reports in the mid-1990's?
1328 MARTHA CUSTIS DR #525, ALEXANDRIA, VA fell 30%. No one noticed. No one cared.
Going forward from here, at what point would you buy?
Why didn't anyone buy then? I mean, other than bill, who will be a multi-multi-millionaire if this plays out like before.
Bill reminds me of the guy who was grabbing everything in sight when a 1/1 condo was $30K-$40K (early 1980s) and fighting with the banks.
I thought a 1/1 was overpriced at $30K but I had paid about that for a 3/1 townhouse a few years earlier. (those are $400+K today)
"Nevertheless, I hardly think Shiller's analysis is a WAG. His ideas are based on substantially more rigorous and deep analysis of statistical historical data and economic principles. "
Lets compare for a moment...
KH drew a line between some point in the 70s and the top of the bubble and from that concluded that housing prices today are justified.
A world famous economist from Yale has compiled decades of data from dozens of housing markets and subjected them to rigorous statistical analysis and concluded that we are in a bubble.
Who are we to believe? Really they are both WAGs right?
Basically, In KH I think we have found someone that simply doesn't understand what goes into sophisticated analysis of this type and thus can't distinguish the work of an actual expert from that of a sub-novice with an emotional agenda.
"Then do it yourself."
Lets see...
Sold in 1979 for 49k.
Sold in 1990 for 90k.
Sold in 1998 for 70k.
From that data you conclude that housing appreciates at 7% per year?
Over that twenty year period prices appreciated at a ~2% yearly rate...
How does that sound to you? It is the same sort of "analysis" you just did to reach the conclusion that housing appreciates at 7% per year. The difference is that it doesn't give you an answer you like.
Why do you think the data from the last 6 years is more valuable than that from the twenty years cited above? It is obvious to anyone with some critical thinking skills that you are simply believing what you want to believe.
Historically, housing tracks inflation. A 7% rate of appreciation results in a doubling every 10 years. You ought to be able to take one look at that number and know that it isn't accurate.
"1328 MARTHA CUSTIS DR #525, ALEXANDRIA, VA fell 30%. No one noticed. No one cared."
Of course people noticed, and cared.
"Why didn't anyone buy then? I mean, other than bill, who will be a multi-multi-millionaire if this plays out like before."
Many people bought. This city is full of small landlords, and they aren't all going to make millions and millions of dollars.
At some point your brain needs to kick in and tell you that you are being overly optimistic. I know you think you have won the lottery and all that, which must be a fun idea, but it doesn't change a thing in the real world.
Sold in 1979 for 49k.
Sold in 1990 for 90k.
Sold in 1998 for 70k.
Why that period?
Try a starting point of 1979 and 49K and a 7% annual appreciation through 2007. $325K
Try it with 6%. $250K
5%, $192K
8% $422K
Examine the range of possibilities.
What seems reasonable to you?
"Why that period?"
Sigh...
You really don't seem to be getting what I am saying.
What I am explaining to you is that that entire approach is worthless.
You can pick a time period that will show whatever you want.
Anything from huge yearly gains to significant yearly losses can be "proven" to be the norm with this method of "analysis." That is what I said to you when you first brought this all up.
The way you have set this up you are just proving your assumptions.
Housing prices are X high, therefor they must appreciate at a rate that gets them to X by this year, therefor they can't be overvalued because they are right on schedule!
"Try a starting point of 1979 and 49K and a 7% annual appreciation through 2007. $325K
Try it with 6%. $250K
5%, $192K
8% $422K
Examine the range of possibilities."
So you are saying that housing appreciated at ~7% per year if you go from 1979 to 2006.
It appreciated slightly over 6% per year if you go through 2005 and something less than 5% per year if you go through 2004.
If you go through 2003 it appreciated at about 4%..
HELLO? Alarm bells should be ringing!
If the result of your analysis for a long term trend line varies wildly depending which of five or so endpoints you pick there is something wrong with how you are conducting your analysis!
"What seems reasonable to you?"
That is the whole point isn't it?
You picked a dataset that gives you the answer you like.
You are aware that only by picking an end date between 2004 and 2007 can you "prove" what you want to believe.
Why don't you assume we are speaking in the year 2002 and the data for 2003 and on doesn't exist yet, what would you say the normal yearly appreciation of RE is?
~There is no long term trend showing what you want to believe~
If there were such a trend, you could do without the last few years of data because the earlier data would be part of the same trend. (Plot a bunch of points on a line, then erase the last few points. Has the slope of the line changed any?)
The only way for you to justify the currently inflated prices is to define the current prices as the end result and then solve the problem backwards to prove that the current prices are justified.
"What I am explaining to you is that that entire approach is worthless.
You can pick a time period that will show whatever you want."
... and Shiller has, what, a better approach or one that no one understands?
This "approach" puts all the data at your fingertips. Grind it yourself and come to your own best conclusion.
Then put your money down, place your bets; money talks.
Or, walk away from the table but do not call out, "you guys are loozers, just wait." That just sounds dumb.
The question isn't "what is the normal increase?"
It's "What was the average increase (or decrease) for Alexandria (and by inference DC, Arlington, etc) over the longest period that we have data for?"
Using this one place, a 1/1 condo, 1979 to 2007 comes out to something just under 7% but over 6%.
As you point out, there were higher and lower years in between. Would be interesting discover what the most extreme delta is from a straight 7% (or whatever you decide is normal)
There are other places in the database. I've run the numbers for a small random sample.
Occurs to me that bill said he has 7 rentals, if he's got $100K equity on each (very likely a low estimate), he's got 3/4 mill on the table.
I still think the max downside is about10%.
KH,
What Shiller has pretty rigorously shown is that the average increase in housing tracks inflation over the very long term.
There was only one significant deviation from this and that was the late 1940's with all of the returning GI's coming home to start families and launch the baby boom generation. There was a jump in housing prices that then settled back into a long term tracking of inflation.
So to show this, if you adjust for inflation, the real price of a home does not increase over time, it's a flat line.
At this point then, "best guess long term averages" are equal to inflation. Because housing has increased dramatically faster than inflation over the last 7 years or so, one can pretty confidently claim that housing is over priced.
Unless you think that, over the last 7 years, there has been an event that would be the equivalent of the late 1940's. A "it's different this time" sort of event. I do not believe there has been such an event. I'm not yet willing to concede that the information age and the internet account for such a jump. Especially not with a product that is so local in nature (housing).
For what it's worth, I do tend to agree with you that downside potential is rather limited at this point, maybe 10% further down or so. I haven't really run my own numbers lately. However, I expect prices to stagnate for several years while inflation eats away at the gains so that, in effect, housing does become much cheaper and reverts back towards the long term trend line of tracking inflation.
As always, this is just my opinion.
My $0.02.
"This "approach" puts all the data at your fingertips. Grind it yourself and come to your own best conclusion."
And therein lies your problem. You reason from your conclusion backwards. That's the wrong approach.
The scientific method (the correct approach) forms a hypothesis and tests it against data.
More or less, you'd want to develop a model based on incomes, rents, prices, whatever you thought mattered, and then actually estimate how those things drive housing prices.
You'd then estimate the model over a subsample of the data, then see how well the model predicted over another subsample. That way, you're actually testing your model, and not just fitting.
You would then make your predictions for the future, and see if they worked. If you believe in your model enough, then you should believe you can make money on the model by basing buy-sell decisions on the model.
In my case, I ideally would want a model that at least correctly sends a sell signal in 1990-1991, a buy signal in 1997-2000 and a sell signal in 2005-2006, since it's now obvious to everyone that DC housing was overpriced during 2005-2006.
"It's "What was the average increase (or decrease) for Alexandria (and by inference DC, Arlington, etc) over the longest period that we have data for?""
That would only work if you thought real estate prices followed a random-walk. Do you believe that?
"... and Shiller has, what, a better approach or one that no one understands?"
You don't understand it?
It is clear that you don't have much of a background here, but don't assume simply because you don't understand something that nobody anywhere does.
There is a reason the Case Shiller index is widely considered the best available data on housing prices.
"This "approach" puts all the data at your fingertips. Grind it yourself and come to your own best conclusion."
Uh huh... obviously you have come to yours...
Don't let your own inability to understand what is happening slow you down. Just find a way to "prove" what you want to believe!
"Using this one place, a 1/1 condo, 1979 to 2007 comes out to something just under 7% but over 6%."
Sigh... and as I have explained to you, what you are doing is sadly simplistic. Maybe you think you understand what you are doing but you clearly don't.
The way you are doing your "analysis" the answer will always be that the current prices are justified. It isn't possible to show anything else.
Pick ANY two years ANY distance apart and calculate an average rate of return based on those two points. Will the last data point ever be out of line with that trend? (no, it won't)
All the numbers between the start point and the stopping point might be out of line with your trend, but the end point will never be out of line with it. (It can't, because you used that point to define the trend.)
There are much more complex approaches that would allow you to calculate what you are looking for but I don't think you are going to be interested in learning how to do them.
"You'd then estimate the model over a subsample of the data, then see how well the model predicted over another subsample. That way, you're actually testing your model, and not just fitting."
Exactly...
All KH is doing is applying an extremely poor fit to two data points. You can do a better job with the regression functions on a graphing calculator. At least in that case you would be doing a proper fit to the data rather than using just two points.
KH's approach will always show that the end point value is appropriate and has zero ability to show when values are out of line with long term trends.
This blog tends to attract Noble laureate genuises in economics...not. Rest assured that a world-respected economist whose numbers and algorithms to arrive at those numbers is a far more reliable source of real information than a few homeowners in the DC area. Good grief, there certainly are some pompous and self-righteous non-experts here. If any made sound sense someone would hire the genuises to publish their findings for the world markets to revere. Uh, I don't think that is going to happen. This is their only forum to show everyone what they know. That should tell all of us something.
Stick to those with a proven track record whose business is to know their stuff. Mr. Shiller presents unbiased facts. His job is to present unbiased numbers unlike industry spokespeople. Please ignore the ramblings of the pseudo-economists who spend their evenings trying to justify themselves and their prior financial actions.
I go to bed each night safely knowing that our country and our world are not managed by those who pen the comments found here. We would be in far deeper trouble than we are now.
By the way where did some of the learned experts here get their Masters and/or PhDs in economics or finance?
Now can we stick to real facts from unbiased published sources? Keep it up, Harriet! It is your blog, isn't it?
My buying history is as follows:
1. 1997 - 3BR/3.5 BA in 22201 (has w/d, built in the '80s) - $215K, started renting in 2003
2. 1999 - 1BR/1BA in 22201 (has w/d, built in the '80s) - $107.5K
3. 2000 - 2BR/1BA in 22209 (old garden style by Iwo) - $105K
4. 2001 - 1BR/1BA in 22209 (old garden style by Iwo) - $120K
5. 2005 - 3BR/2BA in 22207 (Midrise in Lee Heights, was completely renovated with stainless, tile, the works) - $375K
6. 2007 - 2BR/1BA in 22209 (old garden style by Iwo) - $318K
The 7th property is my house. I own two of the investments outright and leveraged the TH to pay down mortgages of 5 and 6. So my equity is OK. I would have bought more in 2000-2001 but I didn't have the money (it was a lot harder for investors to borrow then). I started with I/O mortgages (except No. 2) but converted to fixed and 6 was fixed from the get go. On No. 2, I was cash flow positive right away and I took it from there. The Lee Heights place I regret, the building mgmt is awful.
Ouch...
AP
FDIC Shuts Down NetBank Due to Defaults
Friday September 28, 6:27 pm ET
By Alan Zibel, AP Business Writer
FDIC Shuts Down NetBank Because of Excessive Level of Mortgage Defaults
WASHINGTON (AP) -- NetBank Inc., an online bank with $2.5 billion in assets, was shut down by the government on Friday because of an excessive level of mortgage defaults.
It was the largest savings and loan failure since the tail end of the industry's crisis more than 14 years ago. Federal regulators appointed the Federal Deposit Insurance Corp. as a receiver for Alpharetta, Ga.-based NetBank.
Customers with less than $100,000 deposited with NetBank will be protected by FDIC insurance.
"So my equity is OK. I would have bought more in 2000-2001 but I didn't have the money "
Good god, man! It's not "OK", you're rich!!
The GS15 lawyer guy I mentioned was grabbing 1/1's and efficiencies for $30-$50K.
I think he would have bought bigger or more but the banks kept telling him that he "didn't have the money" either.
Every 6 months or so, he'd scrape together the down and grab another one.
"I started with I/O mortgages"
Which some believe is a sign of a clueless loser.
"I ideally would want a model that at least correctly sends a sell signal in 1990-1991, a buy signal in 1997-2000 and a sell signal in 2005-2006,"
Put the assessment prices from the city on the graph with the 6%, 7%, and 8% trendlines.
Leroy: "All of this talk of a bottom is a little bit misleading.
The 'bottom' will not take the form of a valley between two peaks"
I agree. My suggestion to arrive at a fair value by considering 6% (or even 7--8% in certain locations) annually, counting from the bottom, was to suggest that even if we calculate it so generously, prices still have a long way to go down.
"Unless you think that, over the last 7 years, there has been an event that would be the equivalent of the late 1940's. "
Maybe...
No cheap new places in the 1 hour/1 way commute ring.
iraq war spending.
price of gasoline/tolls.
the close in 'burbs have aged to the point they need repairs and maintenance.
aging population, kids at college, lets move to a smaller place, close in.
Metro/VRE limited options.
Extreme outer exurbanites are clogging our roads. Again, Manassas down 30%, Alexandria/Arlington flat to rising (In spite of what shills for book hawkers claim)
Does this explain what's happened? Maybe. Maybe it's something else.
Washington Post 9/30/2007:
http://tinyurl.com/3bmqel
This quote from the Post is telling:
"If there's anything real estate experts agree on these days, it's that you should not buy property unless you are willing to keep it for years."
That is the way it always was before. Your own home should not be viewed as an investment. You get a 30-year loan on it for goodness sakes. The fervor behind the boom (and the easy tax-free money) made people forget real estate basics.
"That is the way it always was before. Your own home should not be viewed as an investment. You get a 30-year loan on it for goodness sakes."
Agree, and put more than 20% down if possible. My place in Alexandria was flat for 10 years. It actually fell a few percent after rising a little.
Sometimes the rate on a 30 year isn't that great. Live with it and refi to a lower rate when it becomes available. It might take a while but eventually rates will/might fall.
Here's a story on the bubble.
US housing market in freefall dive
By Ambrose Evans-Pritchard
Last Updated: 9:42pm BST 28/09/2007
US housing market in freefall dive
Sign of the times: a foreclosure sign outside a house in Miami, Florida, this week
Sales of new homes in the US plunged in August at the fastest rate since modern records began, prompting fears the economy is sliding into a full-blown recession.
Total sales dropped 8.3pc on the month and are now down 21.2pc during the past year, a sign that the credit crunch has cut off mortgage funding for large numbers of people. JP Morgan now expects sales to fall by more than half from their peak before touching bottom well into next year.
"Freefall dive?" Is this a buying opportunity.
""Freefall dive?" Is this a buying opportunity."
Depends whether you want it to dive before or after you buy.
Most areas are still early on in the correction. The next year will be key.
Leroy said...
"""Freefall dive?" Is this a buying opportunity."
Depends whether you want it to dive before or after you buy.
Most areas are still early on in the correction. The next year will be key."
So, you're still betting that you can time it exactly when what and where you want to buy will be at its lowest possible price?
How long are you willing to put your life on hold for the lowest possible price? And what is the price to you of doing so?
Here's another weird story.
"Some in Fairfax Public Housing Make Six Figures
By Amy Gardner
Washington Post Staff Writer
Sunday, September 30, 2007; Page A01
Hundreds of families living in housing subsidized by Fairfax County taxpayers exceed income caps designed to ensure that only the neediest receive assistance, a review of county records shows.
In the most extreme cases, Fairfax is underwriting rents for families making well into six figures: One household getting help makes more than $216,000 a year; another, $184,000. Dozens of others -- making $60,000, $70,000, $90,000 -- exceed eligibility caps. And they do so with the tacit approval of county housing administrators, who do little to encourage occupants to move on when their fortunes improve. "
and
"In both the rental program and the senior housing program, the county has less latitude to push families out when their incomes rise: Many of the units are funded through federal programs that prohibit income-based evictions. One tax-credit financing mechanism allows tenants to be considered low-income until their incomes exceed 140 percent of the area median, or $132,300."
At that salary, they can pay bill-the-landlord $3,000/month and have plenty left over.
Bill: "That is the way it always was before. Your own home should not be viewed as an investment."
True, but that standard advice about staying '5 years' is not valid close to the peak of a bubble. A couple of my friends who bought in mid-2004 have seen prices falling this year below what they paid. They were planning to move, but with prices continuing to fall further, they feel they will be stuck in their homes till at least 2011.
Lance,there will not be a valley between two peaks that buyers will have to time. It will be more like a long low plain like the land between the Appellations and the Rocky mountains.
"So, you're still betting that you can time it exactly when what and where you want to buy will be at its lowest possible price? "
I wouldn't say reading comprehension is your strong suit lance.
Why bother responding to a post if all you are going to do is make up some lame strawman argument?
"A couple of my friends who bought in mid-2004 have seen prices falling this year below what they paid. They were planning to move, but with prices continuing to fall further, they feel they will be stuck in their homes till at least 2011."
What?
That's like saying, "I bought some Microsoft stock, it fell, I can't sell it."
You can always sell for the market price.
If they want to sell and move, then sell and move.
Of course, if they had bought inside the beltway, odds are that their place went up in price. In that case, they might not want to sell.
I could say, "My place didn't go to a mill-five like I wished it would. I can't sell."
"What?
That's like saying, "I bought some Microsoft stock, it fell, I can't sell it."
You can always sell for the market price."
Depends how much cash they have. If they are upside down on their mortgage they may need to bring cash to closing so to speak. With many houses in the area already showing six figure declines from their previous sales that might not be possible.
If a short sale is approved they may end up on the hook for the difference between the loan balance and the sale price or the bank may just give up on collecting the money. If the bank does that however... the IRS treats it as income and will tax you on it. (which could be tens of thousands of dollars)
So no, it really isn't like stock. With a stock your potential losses are limited to what you put in.
Lance,
If you bought stock on margin, which is essentially how we buy houses, then your loss is not so limited. What about uncovered calls? You can leverage all sorts of ways to trade stocks. Isn't your I/O loan similar to a margin account? Wasn't this bubble caused in part by new financial instruments that allowed buyers to leverage themselves beyond their means?
In this market, the margin calls have come due. Just go ask Mortimer and Randolph Duke.
"Lance,"
It's Leroy who doesn't understand writing naked calls.
Bubbleheads don't know the Wall Street saying that no one rings a bell at a market bottom.
Neither do they follow the guidance to stick to basics, buy quality when there is blood in the streets, accumulate slowly, hold for the long haul.
Apparently they don't realize that the Vig/spiff on a house is 15% or more.
"It's Leroy who doesn't understand writing naked calls."
I'm sorry, the way I read things you said:
"That's like saying, "I bought some Microsoft stock, it fell, I can't sell it.""
...and as I explained the first time... if you buy a stock your potential losses are limited to the value of that stock. You can't lose more money than you put in.
It is a pretty simple concept for most people to understand.
The stock can go to zero, but it can't go lower than that.
Now, if you don't understand the difference between buying a stock and making a naked call, then you ought to go out and educate yourself or risk continuing to look like a fool.
If you didn't mean to say what you actually said, then perhaps you should retract it and explain what you really meant to say, rather than trying to defend what was clearly a pretty ignorant assertion .
Leroy,
You're digging yourself in deeper. As Bill and KH explained, stocks can be (and usually area) financed in the same way as houses. Investors "margin" their stock purchases. This means they put down something like 10% (or less) of its value and borrow the rest at "interest only." That way they can make far more than 100% returns ... even if the price of the stock goes up in value by as little as 10%. Now, if the value of the stock goes down, then they end up owing more than they ever invested in the stock. E.g. If they bought a $100 share of stock on 10% margin, they invested $10 and borrowed $90 at interest only. If the value of the stock falls to $60, when it comes time to pay "the margin" (i.e., "the loan") they must pay up the entire $90 that was borrowed ... even though they can only sell the stock for $60. That means they are out the $60 plus $10 they put down plus whatever interest they paid to carry (i.e., "finance") the margined stock.
I think you owe Bill and KH some apologies. Educating yourself on financial matters wouldn't hurt either. Then perhaps you'd understand why a "bursting bubble" is never gonna happen.
correction ... I meant to say:
"That means they are out the $30 ($90-$60) plus $10 they put down plus whatever interest they paid to carry (i.e., "finance") the margined stock.
Wow lance, even by your standards this is a pretty poor showing.
First, KH said "bought some Microsoft stock."
What about that is unclear to you? Buying a share of stock is not the same thing as making a naked call.
I am not debating about what someone somewhere might do as an investing strategy. I am talking about the example KH actually made.
Second, stocks are absolutely not "usually" "financed the same way as houses." There isn't any more to say on that subject except to say it simply isn't true.
"I think you owe Bill and KH some apologies. Educating yourself on financial matters wouldn't hurt either. "
lol, I am going to get my pan-global-economic-node degree just as soon as I can.
"Then perhaps you'd understand why a "bursting bubble" is never gonna happen."
Sure lance...
Keep saying that, obviously no one can stop you. You can make yourself look like as much of a fool as you would like.
Everyone's talking past each other here.
My impression is that Bill's stock scenario comes true more often than the forced sales of houses. That's not the issue.
Even underwater on houses or stock, you can always sell. You may not like the results.
Sometimes it's better to cut losses and move on, than to stay in a bad situation.
"Even underwater on houses or stock, you can always sell. You may not like the results.
Sometimes it's better to cut losses and move on, than to stay in a bad situation."
You still don't seem to understand what I am explaining.
Imagine you bought 10 shares of a stock for $100/share.
If the stock drops to $50/share, can you sell? Of course...
If the stock drops to $10/share, can you sell? Of course...
If the stock drops to $0/share, can you sell? It's academic...
The point here is that even in a worst case scenario you can't lose more money than you put in. You can lose all $1000, but you can't lose more than that.
Housing is different... if you bought a house for $500k with zero money down for instance...
If the house drops to $400k can you sell? It depends...
If you have $100k on hand you can certainly sell, but you would have to bring cash to closing.
If you were approved for a short sale you could also sell, but then you would either have to continue to carry the $100k difference as debt, or pay taxes on it as income if it is forgiven.(Which would likely be tens of thousands of dollars)
Without a doubt there are going to be cases of homeowners that are left with no choice but to be foreclosed on or declare bankruptcy. So no, you can't "always sell."
Leroy said,
"Housing is different... if you bought a house for $500k with zero money down for instance...
If the house drops to $400k can you sell? It depends...
If you have $100k on hand you can certainly sell, but you would have to bring cash to closing."
I think this example shows that the leveraging available with house finanving, like stocks, can expose you to some serious risk. The buyer lost 100K more than they put in. The buyer would likely hold because they can't afford, or don't have the cash, that kind of loss (this happened a lot in CA in the early 2000s, people could afford their payments but not the cash loss). My only point was if you invest in a home the way you do a stock, expect to be exposed to some serious losses in view of your investment. If you can make 100K on your 5K investment, then you can probably lose that much too. I know nothing about any pan-global economy.
"I think this example shows that the leveraging available with house finanving, like stocks, can expose you to some serious risk."
Unlike the bubbleheads, I think it's rare in houses. It does happen but it's rare.
Most of my neighbors have been here a while and probably have substantial equity.
It's like the big stock market boom and crash a few years ago.
Remember day traders? They're like flippers.
The sub-primes, no-docs, refi 125%ers are like the go-go, margin investors who lost big when the dot-coms crashed.
Big potential for complete losses and ending up underwater with the tax man looking for his share.
Someone with a 401(k) portfolio that's 1/3 in CD's, 1/3 in conservative funds, and 1/3 in growth may have had a few bad years but overall, they are doing well.
Same with a person who put down 35% on their conservative, close-in place, and did not take equity out.
I wonder what percentage has paid off their places, what percentage has 50% or more equity (easy if you bought 5 or more years ago and didn't refi), what percentage has between 20% and 50% equity.
And what percentage has less than 20% equity?
Just a wild guess but I'm thinking 95% of the owner occupants around here, have more than 20% equity and of the other 5%, most can easily make their payments.
Houses don't turn over that often, at least not here. Out in the boondocks, in the new neighborhoods, there was less time to build equity.
I've seen a mantra on the bubblehead boards about "Not in my city, not in my zipcode, not on my street, not my house". It's supposed to be "cute" and suggest the pathetic hopeless pleadings of a fearful househead.
I can't imagine my neighbor who has paid off their $650K place worrying about that. Someone with $350K equity in a $1M place isn't worried either.
Wonder if there's any way to find out how much equity is in an area.
""I think this example shows that the leveraging available with house finanving, like stocks, can expose you to some serious risk."
Unlike the bubbleheads, I think it's rare in houses. It does happen but it's rare."
So you have gone from saying "you can always sell" to "it does happen but it's rare."
I guess that is sort of like admitting you were wrong...
"Most of my neighbors have been here a while and probably have substantial equity."
Without a doubt that is true in all but the newest neighborhoods.
The thing to remember is that only a small percentage of the total housing stock is available for sale at any given time.
If even a few percent of the people in a neighborhood get into serious trouble over a relatively short period of time that can add to the available inventory by a large percentage. (because only a few percent of the existing homes in an area are likely to be for sale at any given time)
No one is suggesting that people who have been in their houses for 5+ years are suddenly going to lose them. The issue is that increasing foreclosures will speed price declines as the bubble pops.
"I guess that is sort of like admitting you were wrong ... "
There's that healthy pushing and shoving, I'm right, no, I am right, stuff again.
As a homeowner who's been here a while, I have real money on the table.
My guess was a 5%, maybe a 10% pullback of close in assessments, followed by, perhaps 5 flat years. Even 15% would be fine.
My estimate was that it would take more than a 15% fall to make selling, moving, and buying back, a break-even proposition.
That's predicated on hitting both the peak and the valley, and finding a suitable place, gaming the tax consequences, and missing out on the gains from my fun repairs. (I get calls from pals to fix botched $60K kitchen upgrades. I decline most of those jobs.)
So far, there's no evidence that Alexandria has gone down.
If a lunatic builds a duplex on E REED and asks $600K for it, which is more than I think my SFH is worth, and the lunatic can't get his ridiculous price, it makes no difference to me. Flippers too, who cares about them.
I will worry when a close in, quality but small, SFH on 5000 sq ft in a nice 'hood sells for $400K, or TH's are $250K, or older 1/1 Condo's are $150K.
Until I see that, the bubble talk is just talk.
"There's that healthy pushing and shoving, I'm right, no, I am right, stuff again.
As a homeowner who's been here a while, I have real money on the table.
My guess was a 5%, maybe a 10% pullback of close in assessments, followed by, perhaps 5 flat years. Even 15% would be fine."
LOL...
Have you forgotten what we are talking about or are you hoping I did?
Lets review:
"That's like saying, "I bought some Microsoft stock, it fell, I can't sell it."
You can always sell for the market price.
If they want to sell and move, then sell and move."
Now, to reiterate... in a declining market like what we are currently experiencing there are many people who are basically trapped in a house because they can't afford the financial hit they would take if they sold.
Understand now?
"there are many people who are basically trapped in a house because they can't afford the financial hit"
My point is that I expected maybe -5%, maybe -10%, worse case about -15%.
My place is up, what, 100%, 150%? Ditto most of my neighbors in close-in Alexandria.
Maybe it's dumb luck but there're tips about finding a good place, put as much down as you can, not buying beyond your means, don't get nuts and take out equity for big cars or vacations.
I don't think any of my neighbors feels "trapped".
Still don't see a declining market. I'm not saying it couldn't happen but after years of bubble talk, it hasn't happened in Alexandria.
It may be different at the fringes but I don't get out there.
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