| Arlington County | |||||||
| Year | Sales | Active Listings | Ratio | Median Sold Price | |||
| 2007 | 149 | 985 | 6.61 | $474,900 | |||
| 2006 | 221 | 1,007 | 4.56 | $510,900 | |||
| 2005 | 230 | 781 | 3.40 | $549,450 | |||
| 2004 | 283 | 242 | 0.86 | $441,000 | |||
| 2003 | 270 | 279 | 1.03 | $349,500 | |||
| 2002 | 252 | 413 | 1.64 | $286,050 | |||
| 2001 | 266 | 315 | 1.18 | $258,250 | |||
| 2000 | 243 | 265 | 1.09 | $234,000 | |||
| 1999 | 248 | 401 | 1.62 | $197,920 | |||
| 1998 | 238 | N/A | N/A | $206,700 | |||
| Alexandria City | |||||||
| Year | Sales | Active Listings | Ratio | Median Sold Price | |||
| 2007 | 127 | 881 | 6.94 | $450,000 | |||
| 2006 | 163 | 953 | 5.85 | $435,000 | |||
| 2005 | 204 | 755 | 3.70 | $450,000 | |||
| 2004 | 302 | 208 | 0.69 | $365,000 | |||
| 2003 | 218 | 245 | 1.12 | $367,500 | |||
| 2002 | 226 | 335 | 1.48 | $260,000 | |||
| 2001 | 221 | 245 | 1.11 | $215,000 | |||
| 2000 | 205 | 261 | 1.27 | $161,900 | |||
| 1999 | 183 | 474 | 2.59 | $190,904 | |||
| 1998 | 158 | N/A | N/A | $181,850 | |||
| Fairfax County | |||||||
| Year | Sales | Active Listings | Ratio | Median Sold Price | |||
| 2007 | 765 | 7,610 | 9.95 | $420,000 | |||
| 2006 | 1,054 | 6,691 | 6.35 | $462,750 | |||
| 2005 | 1,469 | 5,077 | 3.46 | $482,000 | |||
| 2004 | 2,033 | 1,403 | 0.69 | $395,000 | |||
| 2003 | 1,606 | 2,230 | 1.39 | $315,575 | |||
| 2002 | 1,474 | 3,149 | 2.14 | $265,000 | |||
| 2001 | 1,557 | 2,700 | 1.73 | $236,900 | |||
| 2000 | 1,476 | 2,078 | 1.41 | $210,000 | |||
| 1999 | 1,344 | 2,967 | 2.21 | $191,000 | |||
| 1998 | 1,282 | N/A | N/A | $186,000 | |||
| Loudoun County | |||||||
| Year | Sales | Active Listings | Ratio | Median Sold Price | |||
| 2007 | 285 | 3,455 | 12.12 | $405,000 | |||
| 2006 | 362 | 3,386 | 9.35 | $438,880 | |||
| 2005 | 485 | 2,864 | 5.91 | $480,000 | |||
| 2004 | 683 | 887 | 1.30 | $400,000 | |||
| 2003 | 503 | 1,121 | 2.23 | $305,000 | |||
| 2002 | 437 | 1,498 | 3.43 | $273,500 | |||
| 2001 | 445 | 1,391 | 3.13 | $242,600 | |||
| 2000 | 408 | 827 | 2.03 | $220,450 | |||
| 1999 | 303 | 973 | 3.21 | $177,000 | |||
| 1998 | 226 | 1,303 | 5.77 | $178,100 | |||
| 1997 | 164 | 1,479 | 9.02 | $180,000 | |||
| Prince William County & Manassas | |||||||
| Year | Sales | Active Listings | Ratio | Median Sold Price | |||
| 2007 | 388 | 6,488 | 16.72 | $310,000 | |||
| 2006 | 461 | 4,752 | 10.31 | $370,000 | |||
| 2005 | 824 | 3,426 | 4.16 | $389,450 | |||
| 2004 | 1,098 | 830 | 0.76 | $310,000 | |||
| 2003 | 778 | 1,296 | 1.67 | $230,000 | |||
| 2002 | 714 | 1,502 | 2.10 | $196,750 | |||
| 2001 | 707 | 1,185 | 1.68 | $164,800 | |||
| 2000 | 533 | 919 | 1.72 | $144,000 | |||
| 1999 | 389 | 1,599 | 4.11 | $128,900 | |||
| 1998 | 339 | 2,025 | 5.97 | $134,000 | |||
| 1997 | 254 | 2,332 | 9.18 | $126,950 | |||
| Fauquier County | |||||||
| Year | Sales | Active Listings | Ratio | Median Sold Price | |||
| 2007 | 36 | 746 | 20.72 | $325,125 | |||
| 2006 | 44 | 723 | 16.43 | $320,900 | |||
| 2005 | 79 | 495 | 6.27 | $434,000 | |||
| 2004 | 109 | 241 | 2.21 | $355,000 | |||
| 2003 | 62 | 348 | 5.61 | $310,603 | |||
| 2002 | 61 | 324 | 5.31 | $205,000 | |||
| 2001 | 79 | 312 | 3.95 | $235,000 | |||
| 2000 | 76 | 263 | 3.46 | $182,795 | |||
| 1999 | 82 | 323 | 3.94 | $171,625 | |||
| 1998 | 64 | 495 | 7.73 | $170,200 | |||
| 1997 | 59 | 610 | 10.34 | $149,000 | |||
| Culpeper County | |||||||
| Year | Sales | Active Listings | Ratio | Median Sold Price | |||
| 2007 | 38 | 796 | 20.95 | $280,000 | |||
| 2006 | 38 | 626 | 16.47 | $300,000 | |||
| 2005 | 62 | 447 | 7.21 | $312,788 | |||
| 2004 | 65 | 185 | 2.85 | $296,000 | |||
| 2003 | 42 | 189 | 4.50 | $202,450 | |||
| 2002 | 34 | 171 | 5.03 | $173,550 | |||
| 2001 | 44 | 169 | 3.84 | $159,450 | |||
| 2000 | 39 | 200 | 5.13 | $138,000 | |||
| 1999 | 37 | 257 | 6.95 | $125,000 | |||
| 1998 | 26 | 375 | 14.42 | $131,500 | |||
| 1997 | 30 | 393 | 13.10 | $114,250 | |||
| Stafford County | |||||||
| Year | Sales | Active Listings | Ratio | Median Sold Price | |||
| 2007 | 89 | 1,401 | 15.74 | $344,700 | |||
| 2006 | 128 | 1,351 | 10.55 | $377,450 | |||
| 2005 | 171 | 826 | 4.83 | $369,000 | |||
| 2004 | 233 | 228 | 0.98 | $299,900 | |||
| 2003 | 159 | 369 | 2.32 | $219,500 | |||
| 2002 | 150 | 408 | 2.72 | $196,975 | |||
| 2001 | 136 | 372 | 2.74 | $174,325 | |||
| 2000 | 130 | 394 | 3.03 | $151,000 | |||
| 1999 | 93 | 496 | 5.33 | $147,000 | |||
| 1998 | 95 | 624 | 6.57 | $149,900 | |||
| 1997 | 90 | 696 | 7.73 | $130,425 | |||
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101 comments:
The decrease in the number of sales is very significant. I take that to mean prices will decline significantly over the next year or two as people are forced to sell.
There are reasons that force people to sell (job loss, job relocation etc), there is never a reason to force people to buy.
The sales number is interesting. They've almost all reverted back 10 years.
Forbes says that Lance nailed it! Best Blue-Chip Real Estate Investments
Here's the text from Forbes.
"In Pictures: Best Blue-Chip Real Estate Investments
Washington, D.C.
Rock Creek Parkway And Massachusetts Avenue
Median Home Sale Price: $2.84 million
Price Growth Since 1990: 393%
Starting close to Dupont Circle, this neighborhood spreads as it climbs up Massachusetts Avenue and Embassy Row. On the edge of Rock Creek Park is where you'll find the District's largest and most expensive homes, including the vice-presidential residence at the Naval Observatory. Georgetown row houses are perhaps more famous, but the homes in this tree-lined neighborhood are much larger. While many sections of the District have experienced sharp growth curves in the last five years, the strongest sustained growth came in Northwest neighborhoods like the Rock Creek area.
"
OK, so his place might not be worth $2.84 Million. It's a long way from Dumfries.
kh,
That's a good find.
Gentle reminder that the purpose of this blog is to discuss greater Northern Virginia real estate. It's not specifically about Lance's choice in D.C. proper.
Many of the contributors to this blog's comments are pinpointing Fairfax, Loudoun, or Prince William Counties for their future residence purchase. Dumfries real estate matters to them.
There's no question in my mind that there's value in the nicer historic areas in D.C. It's not valuable to those who would never consider making it their residence, though.
Sales are way, way down across the board. Sellers have capitulated in PWC and Loudon; the stare down there has ended and buyers have won. Prices are at 2004 levels with no end in sight.
Inventory in Fairfax is up to 10 months; about where PWC and Loudon were last year. And Alexandria and Arlington now exceed 6.5 months' supply, about where Fairfax was last year. Pattern, anyone?
"Dumfries real estate matters to them."
My recommendation is to look close in.
In the recent real estate market, close in has done best.
Gas isn't getting cheaper.
If your idea of a good time is mowing your lawn, then sure, buy a lot of lawn. I know a guy who has 200 acres, about half in grass.
Dupont Circle isn't for everyone and most readers might be priced out of that area, for all time.
There are places in Arlington and Alexandria that are relative bargains. I'm not referring to condos like the Eclipse.
There are well built homes and attractive neighborhoods in both cities. I fancy Del Ray.
The Mt. Vernon Ave strip is developing nicely. It might not be everyone's cup of tea. Check it out.
Wow, look at those selling/active listing ratios!
Nothing to see here folks...move along. Lance is right, prices simply cannot go down even with more supply and less demand.
alexa said:
"Lance is right, prices simply cannot go down even with more supply and less demand."
Please don't attribute things to me that I never said. I've always said that in "edge" areas prices WILL go down during a correction. Long term they -- like all other real estate in this growing metro area --- will rise again. So, if you are willing to live in one of these areas while it is still "edge" (and in stagnant "edge" mode) AND think you can time when it is best to buy AND you don't mind doing without your own place while you do all this waiting, then you really should wait.
I've always said that in "edge" areas prices WILL go down during a correction.
I've been reading your comments for about two years, and you never said any such thing.
You've been so wrong in predicting the housing market, that it's actually quite amusing.
Yeah, Lance really needs to go to (and stay in!) the inner beltway blogs, you know, his specialty region!!!
Lance-
go to http://www.dchousingprices.com/
you can argue facts/figures all day over there - but be warned - this guy knows his stuff!!!
kh,
Gas isn't getting cheaper
Then why would the dozens of people I know with high-paying jobs in Fairfax, Chantilly, Sterling, Manassas, and Warrenton wish to live in Del Ray?
Check out page 7 of this report on D.C.'s share of the Washington Area Economy, 1970-2005. I know I criticize the CRA-GMU center for their bad housing predictions, but I imagine they have numbers to support past revenue statistics.
Job Growth by Sub-Region 2002-2007
Page 22
More economic analysis for all you wannabe economists out there.
http://www.tcsdaily.com/article.aspx?id=121007A
Anyway, incomes are way up in my profession, and these people do not live beyond Fairfax County. Starting salaries are up to $160K and senior associates got even bigger raises. That being said, I don't think I'd go for the $1 Million house on the $170K salary as suggested by the author. What do you guys think a good income/home value ratio is?
Poor KH. Right after he talks about inner areas being so swell, Harriet posts the Arlington market numbers, which totally show what a blowhard KH is.
And poor KH, he keeps trying to talk up Lance, the guy who's already lost 150K since buying in 2005.
And poor 20009, Lance's zip code, which is down since 05, both average and median.
Don't worry, KH, keep trying! We're all rooting for you, we know you can do it! Yay, KH!
Since KH got beat so badly and can use a friend now, let me say something nice.
Depending on interest rates at that time, Fall '08 could be a decent time to buy in the inner areas. Based on Harriet's Arlington numbers, it looks like prices will be back to 04 levels by then.
See, KH, we still love you, and not just for comic relief!
Lance, prices will not just fall at the "edges". The effect will be across the board. More desirable is always more desirable, but it doesn't make them immune. Even in the most desirable places, I see massive price drops. You can't easily explain this away.
The income to home ratio is partially based on rates and how much cash you have. Long ago, I was told 3:1 (mortgage/salary). It seems a good indicator is keeping your monthly mortgage at < 30% of your before tax income. One would assume that that includes taxes and insurance too.
So, if you are making $100K, you should spend no more than $2,500 a month on housing. That equates to a loan of about $350K (30 year conventional)...will be less though because that doesn't include taxes/ins. Lo-and-behold, we are near 3x salary. :)
On the SFH market, the number of "on the market" sales declines from Great Falls and McLean is less than five, and in Orange Line Arlington areas is approximately zero (condos are a different story, I grant you). And new homes are still going for 1.6MM plus and 05-07 same house sales in good Arlington markets are flat or up. I readily grant you I would not be selling now unless I have to but in those markets which simply can't be replicated, there have not been any noticeable drops.
Most of my associates live in and like the suburbs. They work in the suburbs. Every once and awhile one of us has to go to the District on business, but of late, the District people have been coming to our offices. More spacious conference rooms it seems.
I am all over the place as a consultant, Rockville to Ft. Belvoir to Ashburn to Bowie. The District is nothing special. I don't like DC. In fact I don't like city-living. Have been there, done that and don't want to repeat it.
The husband of a co-consultant of mine makes over 1.5M/year. He works in Reston. They live in Great Falls. I asked her if they ever wanted to live in DC. "Absolutely not." How about Alexandia? "Never." I forgot to ask about Arlington...but I didn't need to. They have 14 grandchildren and believe me those kids and their parents take up a lot of space on the weekends and holidays. I have no need for a house like theirs. Wouldn't want one, but it works for them.
If you work in the District, prefer older homes that cost over $1M, then live there. Why would I or anyone here take issue with that? But for someone to presume that he or she knows what is best for the people who participate on this blog and are interested in Northern VA, back off. There are plenty of people who don't want to be you, have what you have and or live as you do. Heck most people don't want to live as I do. I could care less. Why is it such an issue for a couple of you? What is in it for you to keep going on and on about the District and close-in?
Quit trying to impose what you value on others. No one here cares where you live. No one. Good grief.
Bill,
I thought that was a really well-written article. Thanks! It doesn't mention interest rates or the "howmuchamonth" mentality but sticks to an assessment of the actual house price and the buyer's income.
I think his price to income ratio of six is unrealistic, though, and I think a price of three times annual income is more comfortable. He suggests that a $48,000 income could buy a $300K house. That doesn't seem feasible to me at all.
"What is in it for you to keep going on and on about the District and close-in?"
It is blog therapy. Some people want to believe the bubble equity they think they have has made them rich and it is never going away.
Nice writeup, kcwood.
BTW, it's "couldn't care less", not "could care less". You want to say you could not possible care less about something, not that you COULD care less about it. Sorry to pick on you, that one bothers me. :)
Obviously, if someone worked in Reston, they would live in Great Falls and not the District...that's just a straw man argument.
"Obviously, if someone worked in Reston, they would live in Great Falls and not the District...that's just a straw man argument."
It's cherry picking data out of anecdotes. An unverified wife of a millionaire prefers Great Falls to Alexandria? That's a sound reason for the BHs who couldn't scratch up a $50K down in 2003 to buy in Dumfries.
If I had a big money job in Reston, I wouldn't live in Alexandria either.
Even though it is a reverse commute from Alexandria to Reston, it is 24 miles from my place to RTC.
Even though I'd have unrestricted use of I66 and the perverse joy of seeing the 267 parking lot across the Dulles Access Road, it is still an incredibly long drive.
Fortunately there are more job opportunities close in, at least in my specialty.
Any moment now, a BH will mention a gated estate in Warrenton, the farmers market, their love of horses, or jobs in a tunnel under Mt. Weather.
Hey Bill,
I'd go with 4X.
From your article: "The concept of people owning homes worth ten times their income is a fantasy."
Places around here, Del Ray, are running $250K(older condo), $400K (TH) to $750K (SFH)
Call it an average of $500K
4X would be $125K, which isn't that much around here. That's journeyman wages for a web or Unix server engineer.
Many in this area bought before 2003 at half the numbers above.
For them, 4X is $65K.
10X of $250K is $25,000/year salary.
As FD noted, "On the SFH market, the number of "on the market" sales declines from Great Falls and McLean is less than five, and in Orange Line Arlington areas is approximately zero."
That's exactly what I'm observing in Arlington's 22207 area code, in neighborhoods where you can walk to Metrorail. Sale prices in these neighborhoods are weathering the region's real estate downturn quite well, because, I think, these properties have something that can't be duplicated elsewhere: easy walking access to Metrorail. That particular commodity's value is going up as Northern Virginia's traffic woes worsen.
Right now my ratio is more like 2x. But if I leave my job at my firm, I'll take a significant haircut to go in the gov't or in-house, or even to a small firm. The one part of the run-up that has surprised me is how people are willing to trap themselves with an expensive house. High demand and incomes justify high home prices in this area. But at what point did people feel the need buy more house than they can clearly afford (i.e. 6-10x income).
@Tom
What neighborhoods of 22207 are walking distance to the Orange Line? Up by Sycamore and Lee (EFC)? Maybe I can move up there out of Ashton Heights and still have train access. Almost all of 22207 is north of Lee Hwy (29). The rental I own by Lorcom Ln. and Lee Hwy (Lee Heights 'hood) is pretty far (about 1.5 miles) from Metrorail.
@Bill:
22207 neighborhoods within walking distance of the Orange Line? There are not many (hence the hefty price premium associated with them), but one of the best examples is Waverly Hills, which is roughly bounded by Washington Blvd./Utah St./Glebe Rd./Lee Highway. All of Waverly Hills is south of Lee Highway, and roughly half of it is what I would consider within good walking distance of Ballston station (i.e., within 15 min. max walk at a normal pace). I'm familiar with Waverly Hills and have noticed how prices and sales in the neighborhood are faring very well even today.
3/1 sounds about right, 4/1 reasonable if you dont have kids.
I don't really consider Waverly Hills metro-walkable, nor insulated from the sales declines; nor do I consider most of Lyon Park that way. In my mind, if your house is not within .5 or at the most .6 walking miles from the Metro, you can't assume most buyers will consider it Metro walkable. Basically, if you draw a .5 mile radius around every metro station, that's what I am talking about. I don't doubt that there are people who walk 15 or 20 minutes every day to the metro but you can't assume that all buyers will view it that way.
Another way to look at it is, if I an a DINK family with a house at 1st street and Highland, I am going to have 2 cars even if I take the metro sometimes. But from my house at 6th and Nelson, I can have one car knowing I can easily walk the 5 min to the Metro or Ballston if needed. At a typical DINK lifestyle (i.e. the typical purchaser in Ashton Heights) that extra car costs $600/month (incluing insurance) over taking Metro, that is worth an extra $100,000 or so of mortgage payments. My math is rough but you get the drift.
All that is just a way of saying I think the significant price support provided by Metro is not for all of Lyon Village, Lyon Park and Ashton Heights but those houses within .5 miles of the Metro (of course, the streets those houses are located on are not as quiet and pretty as south of Pershing but you can't have it both ways).
If 3/1 is reasonable and the 2006 median income in fairfax is ~$100K, then the median home price should be $300K...$400K max. 2006 numbers from the fairfax gov site:
Median household income $100,300
SFH Detached Units $642,730
SFH Attached Units $420,757
Multifamily Units $306,010
Total Units $538,940 <--
SFH Detached Units 190,803
SFH Attached Units 97,398
Multifamily Units 100,619
That's > 5x the median income. Almost 50% of people live in detached SFH - lucky you if you bought before the boom. Wouldn't a 3/1 or 4/1 affordability index dictate the median home value should drop at least 25%? Lance seems to believe the whole drop will come from the "edges". Lance, what do these numbers mean to you?
Some more trivia : Household median income in 2000 was $82K. This means income is up 22.3% in 2006. Why has the cost of housing doubled since then? Is this really just "catch-up" for the basically flat decade of the 90s as KH suggests?
For the people who believe there won't be a correction of > 10%, please tell me WHY affordability doesn't matter anymore?
AlexA asked:
"If 3/1 is reasonable and the 2006 median income in fairfax is ~$100K, then the median home price should be $300K...$400K max."
As someone mentioned earlier, you're not taking into account several factors such as retirees who have no income but significant savings and move-up homeowners who can bring significant prior equity into the purchase transaction for the move-up home, people who have been in their homes forever and who have a mortgage payment that is low relative to their current income (even if it was relatively high when they bought 5, 10, 15 years ago.)
Comparing an area's median income to median home prices doesn't buy you much because of the reasons stated above AND because it contains the false assumption that there will always be just the right of homes needed in all the right places. I.e., no shortages or surplaces. Homebuilding is a slow process, and land is limited.
A better guage of affordability is simply comparing percentages of household monthly income to monthly expense required to get into a starter home. This was discussed on the Bubble Meter blog and it was found that while we are now near an alltime high in this regard in this area, we actually experienced a higher peak a generation ago back in the late 70s/ early 80s when interest rates approached 20%. I think someone said that today it took something like 45% of income while in that generation ago period it took closer to 60%.
Yes, KH is most likely right about the catch up in the 90s. But therer are other reasons as well specific to Washington such as the fact that it has made the leap from company town (government) to international city. Add to that the world changes occuring, we are probably lucky not to have to yet contend with the prices that people in places like NYC and London are looking at. Our housing here is relatively dirt cheap compared to those cities. And no, the average family income is not higher in these other places.
http://money.cnn.com/magazines/moneymag/bplive/2006/snapshots/PL3651000.html
//money.cnn.com/magazines/moneymag
/bplive/2006/snapshots/PL3651000
.html
@FD:
I think you're being way too strict to consider only a 5-minute walk to Metro as "walkable." Take a look at the sidewalks in Waverly Hills some weekday morning around 8:00 and you'll find them with plenty of residents walking to Metrorail in Ballston, all of them walking at least 10 min. and many more than that (I see this regularly as I cycle through Waverly Hills on my way to Ballston).
Defining "walkable" is a personal decision, of course. But I'd bet money that most people would put a higher number than 5 minutes on what they personally consider walkable. My guess is that if you took a poll, you'd find the bell curve topped out somewhere between 10 and 15 minutes.
When I lived in a group home in Arlington a few years ago, the walk for all three of us to Metrorail was 15 minutes. None of us thought twice about it; we were just grateful we lived within walking distance of an Orange Line station!
Alexa - that is not a valid arguement. Only 60% of the population own a home, so you need to first take the median of the top 60%. Then you need to pull retirees out of the equation.
If you do that, I imagine the median income of a northern VA homeowner is around 150k/yr.
Personally, I dont think you can live inside the beltway and own a home if you make less than that.
Ashton Heights south of Pershing is on a graveyard, maybe that is why it's so quiet. Everytime I look at a house over there I get freaked out because the backyards overlook the cemetery. I don't know about the DINK thing. I see a lot of empty nesters and old folks. I do see more unrelated people, not in a relationship (married or otw), banding together to buy homes. Or maybe one person owns the home and the other people pay them rent. I don't know and I'm not talking about the 20-somethings group home renters that are common in Arlington.
Most of the people who have bought houses in AH/LP over the past few years have been youngish lawyers, consultants or related government folks. As opposed to Lyon Village, say, which is generally older folks (partly because it is more expensive).
"Personally, I dont think you can live inside the beltway and own a home if you make less than that."
Only true if you ignore those who bought more than 6 years ago, which is most of the homeowners around me.
A $100,000-$150,000 salary goes a long way when you bought for $220,000 in 2001. Several of my neighbors have paid off their houses. One paid $127,000 for their place in 1984. A few years ago, they simply paid it off.
After 5 or 6 years, homeowners are not concerned about housing costs to salary ratios. That's when they start worrying about property tax.
Interesting that 617 N. Jackson, which is a nice, updated 3/2.5 but nothing special (only 1800 sq. ft. and no master bedroom) just went for 875. Bill, I don't think it would have gone for much more than that even in 05, agree>
875K. Wow. That is an outlier. The old school 3BR/2BA like the one at 503 N. Nelson were going for low 800s in 2005. There has been problems selling those houses. If it's a Craftsman house, all bets are off, people go crazy about those things. I'll go check it out.
Lance, without going point by point, I'm simply just going to have to disagree with almost everything you said. It is interesting of you to acknowledge that we are near all time highs in terms of (un)affordability. And it is silly to compare it to the Volcker years where interest rates were 3 to 4 times higher than today.
Doug, the median is $538,940 for all housing. That is > 5x median. Upon thinking about what you said, you are partially right that you have to take out the salaries of renters which will generally bring up the median. Even if you run these compensations, we will still have a median home > 3x median salary. I have to think more on a good way to gauge affordability so it can be compared historically and to other locations.
With all that aside, I'm curious...I'd like to know the opinions of KH, Lance, and Doug. Where do you believe the housing market will go in NOVA over the next 2 years?
I've already come out and said 20-30% decline from peak (even on inflated dollars). Disclosure - I rent and sit on a wad off cash because that is what I believe is financially smarter. Gotta gamble one way or another. ;)
BTW Lance, thanks for reminding me about Bubble Meter. I'll check them out.
"With all that aside, I'm curious...I'd like to know the opinions of KH, Lance, and Doug. Where do you believe the housing market will go in NOVA over the next 2 years?"
Slightly falling
From the peak in 1991, I saw a 5% to 10% total pullback about 1993. This was after the S&L crisis and builders were going under. The Dulles corridor had "see throughs".
It's not as bad this time.
There are population and traffic pressures, listen to 103.5 FM at 5 AM. Inflation. People line up to pay four bucks for a cup of 2nd rate Joe. Professionals bill $150/hour, earn $200,000+. Web and server techs earn over $100,000.
3/4 mill is not a lot of money these days.
then Flat
From 1993 to 1999, prices were essentially flat. I'm speculating that 2008 might still be flat.
then the next boom
In 2000, the pendulum swung back, reverted to the norm. Here, that's called the bubble but it is simply business as normal.
When will it start back up? Beats me. I expected Alexandria's prices to fall some and it hasn't.
A few years ago, I expected about $75,000 to $100,000 off half million dollar places.
It would cost me $50K in expenses and another $50K in pure aggravation to move. It would make sense to sell and rent only if prices fell more than $100,000 on a half million dollar house, and I'd have to catch both the peak and the trough.
The comps, as listed on the Alexandria City website, do not show a price drop.
The calculus is different for a two million dollar Manassas mega-mcmansion. Selling one of those in 2005 was definitely a good move. Selling a small SFH in 2005 Alexandria was not. In between those extremes, the choices are not as clear.
I think the next boom is out beyond 2 years but there are signs that it's already starting. Mox Nix.
Not a craftsman--plain colonial with 3 BR upstairs but only 1 bath upstairs and no master BR
"My guess is that if you took a poll, you'd find the bell curve topped out somewhere between 10 and 15 minutes."
Sounds about right.
Alexa,
I think KH's assessment is on the money.
Now, why is it you think it is doesn't make sense to compare today's affordability to a period when mortgage interest rates were "3 to 4 times higher than today"? Are you buying without a mortgage and don't have to worry about the effects of interest on what your bottom line cost is?
Alexa,
You are all still forgetting the interest tax deduction in your formula.
I think you will find that someone making 150k can afford a 550k house for nearly the same price as renting.
For instance, a nice single or 2 car garage townhome currently sells for around 520k in Fairfax county. If you put 105k down, that brings your mortgage just under the conforming limit. Your 30 year fixed mortgage amount with tax and insurance would be around $2600. With the interest tax deduction, your effective rent would be around $1800, which is almost exactly what nice 3 bedroom apartments are renting at in Fairfax.
So I disagree that that house is not affordable for someone making 135k, and I also disagree that its a "huge" amount more than renting costs.
Here is the listing for 617 N. Jackson. It was upgraded a lot in 2005. It still has the whole 1BA for 3BRs problem upstairs but the Kitchen has been seriously upgraded. I found the Ron Cathell flyer this morning. He claims it sold in 15 days, closed in 20. FWIW.
http://www.roncathellteam.com/listings/listing_home.cfm?property_ID=4759516
Doug,
Good analysis. And before someone trots out the old "but you lose your standard deduction if you itemize, so there's no benefit to itemizing mortgage interest" rest assured there is no truth to that. The standard deduction is meant to approximate all those non-housing expense related deductions which you can simply itemize when you itemize deductions. The standard itemization deduction does not include approximations for housing related deductions.
Right--I agree--nice kitchen upgrade and nice basement which is unusual for some of the colonials but the 1 bath upstairs would be a real killer for many. Gotta admit 875 is an excellent price to get for that house.
"Interesting that 617 N. Jackson, which is a nice, updated 3/2.5 but nothing special (only 1800 sq. ft. and no master bedroom) just went for 875."
How big is the lot?
1,000 ft to the metro. 2,000 to Sequoia Plaza, Defense Communications Agency, Ft. Meyers. Walk or bike to the Pentagon.
Too bad some of the better restaurants have left Clarendon.
Lot is 6300 sq. ft., about average for AH.
Actually I really like the new places in Clarendon--Rest. 3, Liberty Tavern, 11th st. are all excellent, plus a new place from the owners of the ballroom and Tallulah. It is a different mix from the cheap ethnic places but the whole neighborhood has gentrified and gone upscale so the restaurants are in keeping with that.
You are all still forgetting the interest tax deduction in your formula.
The 3x guideline includes interest deduction, so that tosses that out. The formula is 3x your salary = what you can comfortably borrow.
I think you will find that someone making 150k can afford a 550k house for nearly the same price as renting.
For instance, a nice single or 2 car garage townhome currently sells for around 520k in Fairfax county. If you put 105k down, that brings your mortgage just under the conforming limit. Your 30 year fixed mortgage amount with tax and insurance would be around $2600. With the interest tax deduction, your effective rent would be around $1800, which is almost exactly what nice 3 bedroom apartments are renting at in Fairfax.
I already saw Lances post, so I will include that as well. You only gain from the interest deduction anything passed what you get for the standard deduction, which I think is now ~$9K. Obviously, someone paying that mortgage would surpass that, but you can't calculate you will be able to deduct it all because you would have been able to deduct ~$9K anyway. I like how you are comparing mortgage/rent to see if it's out of whack though.
Your calcs are wrong, BTW. If you get an excellent rate of 6%, your PITI would be around $2,900-$3,000 depending on how much insurance you get. You are forgetting maintenance and an HOA fee too (since we are talking about a TH). Let us also not forget the massive $105K down payment made. I don't need to elaborate on opportunity costs. Add to this the buying/selling costs, falling values, and lost flexibility and it doesn't look so rosey anymore.
Glad you made sure to be under the $417K limit, or it would have been worse. We'll just have to assume you meant a $110K - $115K down payment as you forgot the buying/upfront costs.
I'm not be bull headed, if the fundamentals are right now, please show me so I can look it over! I just hope all this easy credit goes away and home prices will come back in line with what I think are the fundamentals.
KH, read your writeup and I'm just not sure I can agree with it. The run ups from 2000-2005 are not seen anywhere in recent US history. You make it sound like it's normal. One place you can see this is the Shiller graph that I have posted many times now. If you need it again, I can tinyurl it for you.
Lance...those guys over at bubble meter are a bit rough on you. Glad you can stay in the game. :)
"KH, read your writeup and I'm just not sure I can agree with it. The run ups from 2000-2005 are not seen anywhere in recent US history. You make it sound like it's normal."
I agree, it was not normal but the flat decade of the 1990's wasn't normal either. I bought my place just at the start of the 1990's and watched it fall in price about 10%.
From 1993 until 1999, my place and all of Alexandria was essentially flat. You can see the numbers in the city's database.
All of a sudden, in 2000, it was like a coiled spring let loose, prices shot up. While BH's were yelling in 2002 that it was a bubble, it was the pendulum simply swinging back.
Some of the price jump was the delayed recovery from the S&L crisis and liquidity problems of the 1980's.
The thing that Lance calls Pan-global was a factor. Sleepy Washington woke up and became an international city. Remember the ads for the bank, "Right on the Money."
The increased population was another factor. In the 1980's, you could drive from Fairfax to the district in a reasonable amount of time. You could find cheap farmland, build some quick-ups, and there you are.
There is no more cheap land; it's all been sold and built on.
A gallon of 69¢ gas got you from Leesburg to DC.
The world has changed. My neighbors all know it. I've played the BH, asked them if they're afraid of a price drop if they're forced to sell.
All of them have said that they will never sell, "where will I go?" and "Forced to sell? I've paid my place off. I live here cheap."
I bring up other BH points, the jobs in Manassas, their company might move. That brings more laughs.
"I have a choice of hundreds of other employers."
"I might just stop working and live off my investments. My mortgage is $540/month."
"Commuting outbound against traffic is a lot easier that across county or in bound."
"It is a different mix from the cheap ethnic places but the whole neighborhood has gentrified and gone upscale so the restaurants are in keeping with that."
I prefer the cheap eats dives.
Mt Vernon Ave still has some cheap places.
fd,
You like the 11th St. Lounge? P-R-E-T-E-N-T-I-O-U-S. And Tallulah? Bring back Whitey's and their free hot donuts. Clarendon jumped the shark when Cheesecake Factory moved in; now it's South Bethesda, with the traffic and self-important creeps to go with it.
Doug says:
"For instance, a nice single or 2 car garage townhome currently sells for around 520k in Fairfax county. If you put 105k down, that brings your mortgage just under the conforming limit. Your 30 year fixed mortgage amount with tax and insurance would be around $2600. With the interest tax deduction, your effective rent would be around $1800, which is almost exactly what nice 3 bedroom apartments are renting at in Fairfax."
I'm surprised that this hasn't received a reply. I'll first discuss price/rent ratios, then I'll post separately about Doug's analysis of cash flow.
A house that rents for $1,800/mo is not worth $520K. Doug's example sets forth annual rent equal to 4.15% of the purchase price. Who would want a 4.15% yield from an asset with carrying costs as high as real estate's when one could get a higher risk-free rate of return from bonds without carrying costs? It's simple: one who purchases a house with a 4.15% rental yield isn't purchasing the house's intrinsic value as a dwelling unit, which is what rent represents; rather, that buyer is purchasing anticipated appreciation (not rental earnings, mind you, but sell-to-the-Greater-Fool appreciation), which is the mentality that causes asset bubbles in the first place. That some buyers fail to make this calculation is why houses get overpriced in good times, and underpriced in bad times.
Another way of saying that the yield is 4.15% is to say that the capitalization rate (or price/rent ratio) is 24. i.e. 4.15% represents 1/24th of the cost. According to this CNN article, price/rent ratios in the DC area for the past 15 years have averaged 15.9:
http://tinyurl.com/3yj3la
Using a capitalization rate of 16, a house that rents for $1,800/mo should be valued at $345,600. Or maybe I'm wrong and the rent is exceedingly undervalued and will soon spike. With a recession looming, I doubt it.
Turning now to Doug's cash flow analysis, Doug says that buying at $520,000 with a $105,000 down payment will yield PITI of $2,600 per month, which, after taxes, is about the same as paying $1,800 in rent. I disagree.
First, I assume that Doug is referring to an interest-only fixed rate product, because a $415,000, 30 year, fully amortizing mortgage at the best current rate (6%) would yield a monthly payment of $2,488, and that's before property tax and insurance.
The renters' rental expense is $21,600 per year, less the $5,000 interest they've earned on the $105,000 that Doug assumes they have saved for a home purchase. Their net expenses are $16,500 per year.
By contrast, the owners who pay $2,600 in monthly mortgage, taxes, and insurance must also pay for maintenance and repairs, which should be 1-2% of the home's value, or $6,000 per year. The tax benefits would be the amount of the owners' itemized deductions (interest, charity, state/local taxes) in excess of the standard deduction, times their marginal state and federal tax rates. In Doug's example, mortgage and taxes, less insurance, would be approximately $2,500/mo or $30,000 per year. If the owners earn $135K without kids, Virginia taxes will be approximately $5,500. If charitable contributions are $1,500, then their total itemized deductions are $37,000, or $26,300 more than the $10,700 standard deduction for federal joint filers in 2007. The owners' marginal tax rate is 33.75% (28% Federal plus 5.75% in Virginia), but their $5,500 in Virginia income taxes are not deductible for state tax purposes, so their annual tax benefit of owning versus renting is $8,560 i.e., (($20,800 x .3375) + ($5,500 x .28)). Consequently, the owners' net expenses are $31,200 (that's $2,600 x 12), plus $6,000 for maintenance, less $8,560 in tax savings, or $28,640.
So the renters pay $12,140 less per year, but hey, they can't choose the pain scheme or bathroom fixtures, and they can be evicted, so maybe it comes out even. It also comes out even for the owners if they pay $345,600. Do the math at a 6% mortgage.
"Or maybe I'm wrong and the rent is exceedingly undervalued and will soon spike. With a recession looming, I doubt it."
Pan-Global. (not sure what that means exactly, I admit it.)
In most of the world, people pay a whole lot for not very much in the way of accommodations.
Compared to most of the world, our area rents are exceedingly undervalued.
Eventually it will reduce to "I can rent a nice place for not much money but then my choices are drive 2 hours to work or find a job at an employer in the boonies and compete with others for the job.
Or I can live close in, gain back 2 or 3 hours of my life and have my pick of better paying jobs.
If you bought close-in in 1999, you have a small mortgage, short commute, and pick of better paying jobs.
The catch is, you'd had to have jumped on a place in 1999, when a $850K Arlington SFH was $300K.
Terminator-X...you spent more time than I did, thank you. Like me, you saw the incorrect PITI, missed maintenance, and missed opportunity costs. There should also be an HOA cost in there as well.
I believe we need to give Doug some credit though...the TH mentioned would probably rent for closer to $2,000...though it depends on location. He used $1,800 for a 3BR apt as comparison while I think you and I would use what the place would rent for.
AlexA and termin-X,
your analysis is good but it's static, it's a snapshot in time.
Most HH's around here bought before the price rise and have much, much lower monthly expenses.
Glance over the stats in this Blog, 200,000 people moved to PWC, Loudoun, and whatever that other place was, between 2000 and 2006.
Monthly sales in the close in areas run a couple hundred homes.
Builders and condo-converters are shutting down.
The population is increasing and places for that population to live are not increasing.
You can do all the analysis you want about affordability and the minutia of the tax code, that doesn't overcome the reality that not everyone will have a home.
Look at the numbers again.
200,000 people moved here.
About 1,000 places for sale in relatively large areas like Alexandria or Arlington.
While the majority might not want to live 10 minutes from thousands of jobs, enough do that there are not enough places for even a fraction of the people.
AlexA said:
"I already saw Lances post, so I will include that as well. You only gain from the interest deduction anything passed what you get for the standard deduction, which I think is now ~$9K. Obviously, someone paying that mortgage would surpass that, but you can't calculate you will be able to deduct it all because you would have been able to deduct ~$9K anyway."
Again, this is one of those false statements that keeps making the rounds ... just like a lot of the other false assumptions which underlie the belief in a "bubble".
The standard deduction is an average of "all non-housing related deductible expenses" which the govt lets you take. You use it so that you don't need to go out and keep receipts and remember all the non-housing related deductible expenses you had during the year. It doesn't include housing-related deductible expenses such as mortgage interest and property taxes ... which is why you don't want to use it when you have these kinds of expenses IN ADDITION TO the non-housing related deductible expenses. Hence why you itemize your expenses. You still get the benefit of the non-housing related deductible expenses ... you just need to itemize them. So, when you itemize you get to deduct ALL the mortgage expense PLUS those expense which you otherwise wouldn't have to list out (i.e., itemize) but now do. So, it's not just "the difference" above the standard deduction that you get ... unless for whatever reason you don't feel like itemizing out your non-housing related deductible expenses.
kh,
I'm not quite sure I understand your point. Valuations are snapshots, per se. What, again, is you criticism? I was just using the numbers that Doug provided.
You also seem to touch upon a housing shortage in close-in areas. But such a shortage will also be reflected in rents. That is, where there is a shortage, rents and prices go up at a similar rate, and I think you'll agree that that hasn't necessarily happened in parts of NoVA.
Which brings us to Del Ray. I agree with your favorable comments about Del Ray (and Mt. Vernon Avenue), which is where my family currently owns (yes, owns) a house. It was a rough area 20 years ago, so the recent run up in prices has been accompanied by an increase in rent. Our place could now rent for twice as much it could in 2002.
The cheap eats places in Clarendon may have been "cooler" but the newer, more upscale places are more reflective of its role as a Bethesda-like suburb, which to the families in the SFH neighborhoods there is exactly what they want.
Lance, I believe you are missing the point Term-X and I are trying to make. It is irrelevant why they came up with the standard deduction. A renter can deduct $5,150 (this is per person in 2006, sorry about the $9K estimate). Someone with a mortgage can obviously deduct ALL their interest, property taxes, whatever, but when you are COMPARING the two, you must remove the $5K. And this is for 1 person. If two people are paying in, you have to remove $10K.
So if my families total deductions as a mortgage owner is $20K, it doesn't mean I am $20K ahead of the renting family, I am only $10K ahead. In essence, you are getting some money back from money you are "throwing away" on interest/taxes. It is true the government is giving advantage to mortgage owners, but it all gets incorporated into the calculations anyway.
If all of this is calculated and it is still cheaper to rent, then one must consider that. It is up to the person to weigh the other non-financials.
BTW Lance, would you be willing to disclose your situation? I have already done so...just curious to see where you sit. Of course, you have no obligation to do so.
KH, it's obvious that not everyone can buy a home and yes, we are looking at snap shots. I think looking at historical numbers would further support the argument. :) I'm not sure I understand why you want to discount all the numbers. Maybe 200K people moved here (source?) and a ton of homes sold, but they aren't selling much now. It is hard to argue with this :
Year Sales Median Sold Price
2007 149 $474,900
2006 221 $510,900
This is a 7% drop. Add inflation, and it's near 10%. The number of sales is pretty bad too at > 30% drop. Where is this demand you speak of? Maybe it's there, they just can't afford it. ;)
Alexandria's numbers are something to ponder over. It suggests pricing has leveled...though sales numbers are way down. Anecdotally, I see price declines. You and I can keep our eye on that. :)
The impression I get from you is if you bought before 2003 (like you did), than good for you. If you want to buy now - tough luck. I also sense a whiff of elitism about living inside the beltway. Trust me, many disagree with that belief.
PWC and Manassas sales and price down 16%. Ouch.
"A renter can deduct $5,150 (this is per person in 2006, sorry about the $9K estimate). Someone with a mortgage can obviously deduct ALL their interest, property taxes, whatever, but when you are COMPARING the two, you must remove the $5K. And this is for 1 person. If two people are paying in, you have to remove $10K."
Alexa, you know from my past posts that I am the first to incessantly mock Lance for his continuous moronic pronouncements, but here we are witnessing a true miracle: Lance is right about this.
In addition to your mortgage interest and property taxes, once you're itemizing, you can deduct things like state and local taxes, certain types of business expenses, charitable donations, etc., that you don't deduct when you're not itemizing.
In fact, as Lance rightly points out, the standard deduction that renters can take is roughly equal to the same deduction a renter would end up with (based on state and local taxes, charitable donations, etc.) if they itemized.
Thus, it probably is best, as a rule of thumb, to treat the mortgage interest deduction as a net gain, because all the other things you'll itemize in addition to mortgage interest and property taxes will roughly equal the standard deduction that you were getting before.
Clearly, it is best of all to calculate all your itemizable expenses in the absence of mortgage interest and property taxes, and compare them to your standard deduction, and then calculate the difference. Given state and local taxes around here, I'd be surprised if the standard deduction was much more than itemized deductions, even without mortgage interest and the like.
As a side note, I looked into living in Del Ray. Not my cup of tea. I still don't believe the hype about it - prices are high and the living is not what I am looking for.
$470K for a 2BR/1BR 1,050 sq ft home (AX6373855)? Yeah, I don't think so. Let me add some insult to that injury :
07/14/2004 $455,000
02/12/1999 $163,500
04/23/07 -- $539,900 to $529,900
09/19/07 -- $529,900 to $515,000
10/09/07 -- $515,000 to $499,000
10/24/07 -- $499,000 to $489,000
11/07/07 -- $489,000 to $479,995
12/12/07 -- $479,995 to $469,000
Once it actually sells (for less than asking), that family will lose money. I didn't cherry pick this...it's one of the few detached homes for sale in Del Ray under $600K. Of course a 178% gain for the guy who bought in 1999 and sold in 2004 is justified, right guys? :)
Sorry, couldn't help myself...
Keith, I clearly understand what you are saying. I serviced a mortgage for over 5 years and did my own taxes. I know that you can add extra things in because your interest and property taxes make it feasible. So if you can gather an extra $5,150 ($10,300 if married) itemized deductions on top of your mortgage interest and property taxes, it is an advantage over renting. I went over my 2004 taxes just to see - I was able to put ~$4K on top of it. Because I filed single, that worked out pretty well. So it seems the advantage depends on the situation.
I can definitely concede to that. :)
AlexA,
What I'm trying to make understood ... and which is hard to convey ... is that when you itemize there are lots of other things (other than housing related deductible expenses) that get to get listed in your itemization. So the %5,000 of "std deductions" that you say has to be minused out to compare like to like, actually gets added back in in the way of OTHER deductions such as sales taxes you paid when buying a car or losses you incurred because of a fire or theft or any of many other deductible items which you can't use when you are using the standard deduction. The standard deduction is an "average" meant to be used by people who only have these other deductible items and don't want to go to the trouble of keeping receipts etc. People who have a house can use the standard deduction too ... but it just doesn't make sense because when they itemize they get to include things that non-homeowners don't ... and that pushes them above the "average" deductible amount which the standard deduction is meant to approximate.
I'm a homeowner ... have been for a while and have "moved-up" several times. Getting into my first home wasn't easy ... nor was getting into my 2nd home since I had a gap of some 10 years in between the two during which I was a renter. Staying in my second home longterm and making it through the "no vacations and no dinners out for a few years while you watch every penny" I got to the stage that KH is talking about when he says: "in 5 yrs you stop worrying about the ratios". Unlike rents, mortgage payments are far more predictable ... even the ARMs which I personally have stayed away from as I am risk-adverse.
AlexA,
I forgot to mention one big deduction that you don't get to take if you use the standard deduction, but that you do get to take if you itemize: your state income taxes. So, if you paid $5,000 in state income taxes in one year ... If you itemize, it gets added to the mortgage deduction, property tax deduction, etc. (i.e., $5,000 state taxes + $10,000 mortgage interest + $5,000 property taxes + ?) If you don't itemize, you only get the benefit of the standard deduction which you said is about $5,350 this year if you are single (or married filing separetly.)
Lance....yeah, after looking more closely, I did concede to more than likely being able to overcome the ~$5K difference. I used my 2004 taxes as an example.
AlexA,
Yes ... I noticed that ... after I'd already posted. I considered deleting my comment but left it up since this issue comes up a lot.
All,
Good discussion! Good points
To clarify my position.
By 200,000 people I don't mean right here in Alexandria but that over a half decade or so, a lot of people move to this area. They have to live somewhere.
There are about 2,000 places for sale in Arlington and Alexandria. While that seems like a big number, it is small compared to 200,000.
I'd guess that 80% of the places are too big, too small, needs too much work, next to a sewage plant, etc.
The result is that a lot of people contend for a few choice homes.
That doesn't mean that prices will double in the next 5 years. It doesn't mean they won't.
Sitting on the sidelines is betting that prices won't increase.
This is a 7% drop. Add inflation,
Since 2002, 2003, I expected a pullback based on what happened in the late 1970's and early 1990's.
The 7% drop (so far) is in the noise.
if you bought before 2003
Most of my neighbors bought before 2003, many (from looking at the City's records) bought in the 1990's and 1980's.
Some built large additions. The other places look original which suggests they have very small mortgages, if they owe anything at all.
The point isn't to lord it over the renters, it's to express that over 5 and 10 years, owning is a winning strategy.
Over very large areas and over very long time periods, the gains tend not to be dramatic. Cheap land in the sticks and property in failing cities goes against the trend. Examples are Manassas and Detroit.
"I looked into living in Del Ray. Not my cup of tea. I still don't believe the hype about it - prices are high"
Del Ray prices are high because Del Ray is close to the Metro, has many interesting bars and restaurants, is 3 miles to hundreds of thousands of jobs in Crystal City, Pentagon City, the Pentagon, Old Town, Alexandria-Masonic Temple, and the homes are quaint.
"$470K for a 2BR/1BR 1,050 sq ft home (AX6373855)? Yeah, I don't think so."
I looked at the pictures. Except for the tarted up kichen, there isn't much to it.
On the other hand, it is very close to the Metro and Los Amigos and the lot is large enough to support an addition.
kh said:
"On the other hand, it is very close to the Metro and Los Amigos and the lot is large enough to support an addition."
What gives life to the false bubble theory is a seeming inability by some to understand that while it may be difficult to get into a house of one's own, once in it gets easier and easier as time goes on. Yes, renting is easier ... but while owning is difficult at first and gradually gets easier and easier, renting gradually just gets harder and harder. It's like deciding whether to take the plunge to get into a cold swimming pool. Yeah, it's a lot easier to wait around for the weather to warm up and heat the pool, but it's really rough having to look at the bold people who jumped in and are having a ball while you're still on the deck waiting for the pool to warm up. No, it's not "buy now or be locked out forever", but you also can't ever regain that time you wasted waiting it out.
Latest MRIS stats out.
Lance's Zip code, 20009, down in both median and average since '05.
wow, I take off on a little trip and when I return...
"The point isn't to lord it over the renters, it's to express that over 5 and 10 years, owning is a winning strategy."
Who on earth are you arguing with? Nobody here is debating whether owning or renting is preferable over a long enough timeline. People here are talking about whether or not to buy now or wait while the bubble finishes popping.
The outer areas are already getting hit hard while even the innermost areas are showing signs their market is rapidly transitioning. (lowest sales in 10+ years, largest inventory in 10+ years...)
"What gives life to the false bubble theory is a seeming inability by some to understand that while it may be difficult to get into a house of one's own, once in it gets easier and easier as time goes on. Yes, renting is easier ... but while owning is difficult at first and gradually gets easier and easier, renting gradually just gets harder and harder. It's like deciding whether to take the plunge to get into a cold swimming pool. Yeah, it's a lot easier to wait around for the weather to warm up and heat the pool, but it's really rough having to look at the bold people who jumped in and are having a ball while you're still on the deck waiting for the pool to warm up."
It is a lot more like showing a little discipline and patience in order to get a better deal rather than rushing into a huge purchase and costing yourself tens if not hundreds of thousands of dollars.
Your advice in general can be summed up as "buy now don't wait!" the only thing that changes is how you justify it.
Sometimes you have claimed that people need to buy now or risk being priced out forever.
Sometimes you have said that only by buying can you become a "true" citizen and that everyone else is second class.
Sometimes you have claimed that prices are about to race up again.
Regardless... you always claim that the best thing to do is buy now even though the market is rapidly falling and no one with any credibility is questioning the existence of the bubble anymore.
"No, it's not "buy now or be locked out forever", but you also can't ever regain that time you wasted waiting it out." - lance dec 16 2007
"A class of perpetual renters will have been created where its members can never work their way out of their condition." Lance June 23 2006 (on bubblemeter)
Which is it lance? Are you finally admitting that your earlier statements were wrong?
kh,
The restaurant "Los Amigos" closed down last month; "Los Tios" put it out of business. Now, if "Whitey's" were to reopen in the spot where Los Amigos vacated, I'd be a happy man.
"The restaurant "Los Amigos" closed down last month; "
Oh no! This is a disaster!
In warm weather, I used to take a sidewalk table, order Margaritas, enjoy conversation, spicy food.
We could walk home from there.
"Who on earth are you arguing with? Nobody here is debating whether owning or renting is preferable over a long enough timeline. People here are talking about whether or not to buy now or wait while the bubble finishes popping."
Arguing? Debating? You define why everyone is here?
I don't think so.
show of hands, who expects 40% off places in Arlington and Alexandria that are walking distance to the Metro?
"show of hands, who expects 40% off places in Arlington and Alexandria that are walking distance to the Metro?"
Wow...
It has only taken a few months for the real estate pumpers to go from denying the existence of a bubble to ...
Will there be 40% declines within walking distance of an Arlington or Alexandria metro?
hah
40% declines in homes within walking distance to Metro? Are you crazy?
Those places will, at a minimum, hold their value just fine, as they are doing now. But I expect they will actually gain in value as measured by sales prices, simply due to the hefty location premium they command as Washington's traffic nightmare grows worse.
Keith said...
"Latest MRIS stats out.
Lance's Zip code, 20009, down in both median and average since '05.
12/16/07 12:03 PM"
Keith, for the upteenth time. When you post this you are again showing your ignorance about any and all matters related to real estate. Zip codes mean nothing in a city for determining value as the areas covered by zip codes are just too large to have any meaning for any one area or any one neighborhood or any one street or block ... as areas are defined value-wise in a city. 20009 stretches from the near-ghettos of Columbia Heights to almost the front lawn of the White House. Any average you derive from there apply to none of the specific multiple areas contained within that one zip. To use those averages to justify one area or block is tantamount to saying "the average for the area containing West Virginia and Virginia is down, so a particular property overlooking the Washington Monument in Roslynn must also have fallen in value." No wonder you are so lost in regards to being able to buy a home of your own. You haven't a clue as to how to determine real value.
Poor little Lance; he can't handle the data.
In addition, poor little Lance, the price drop is greater for the average price than the median in 20009, which indicates that the pricier parts on 20009 are taking the bigger hit. If it were the more marginal parts of 20009 driving the decline, then the median would decline more than the average. But with the average declining more then the median, that indicates the bigger hit is being felt on the higher end of 20009. So you lose.
In addition, 20009 inventories of homes in the 1-2.5 million range are 17 months. So you've still got more pain in your future, Lancie-poo.
That's why KH has given up on you, and instead focuses on Arlington. Even he knows you're a lost cause. He's just too lame to admit how wrong he was.
"Those places will, at a minimum, hold their value just fine, as they are doing now. But I expect they will actually gain in value as measured by sales prices, simply due to the hefty location premium they command as Washington's traffic nightmare grows worse."
I think so too. Arlington, DC, Alexandria (the real Alexandria, not the realtor's Alexandria), Chevy Chase, Georgetown, Dupont Circle, Capital Hill, and so on.
Anything on the Metro, places close to jobs, walking distance to good restaurants, lively arts, and so on.
For Alexandria, it'll be interesting to see the City's report in a month.
The whole bubble thing was blown way out of proportion.
I'm not ruling out a complete collapse of the global economy but barring that, bird flu, or a giant meteor, it'll play out as you say.
The places at the end of 1 to 2 hour commute will sag as they have. The places that are close in will do well.
Keith said...
"Latest MRIS stats out.
Lance's Zip code, 20009, down in both median and average since '05.
You mean to tell me that prices this year are lower than last!?? That if someone waited, one could have a comparable home for less this year than the year before??!! Brilliant!!
One major difference between Del Ray and Lyon Village/Lyon Park/Ashton Heights is that while all have somewhat questionable middle schools, the elementary schools in the Arlington locations (Key, Taylor, Long Branch) are significantly better than Mount Vernon, which is the Del Ray ES.
The "real" Alexandria, not the "realtor's" Alexandria?
lol
Why don't you just save some time and proclaim that everything is different on YOUR block and it doesn't matter what happens anywhere else in the region?
Just a few months ago you were going on and on about things inside the beltway... then you narrowed that to Arlington, Alexandria and DC... now you are working to trim that down to just "real" Alexandria. (As defined by who? You?)
Next I suspect you are going to start trying to disqualify the various parts of the District that are already showing significant declines....
More wisdom from Lance (from bubblemeter), explaining the reductions in the average prices:
"That said, the District recently experienced a big glut of relatively inexpensive condos coming on line. (Relative in relation to the existing housing stock.)"
This may explain the dichotomy of viewpoints. Lance, bill, fd, doug, and others, notice that prices are not plunging on specific places. Although prices are off in the greater Washington metropolitan area, which extends from someplace in West Virginia to Southern Maryland.
If your neighbor raises chickens
your place took a lickin'
Out thar in Dumfries or the hollars of Manassas, prices are off. The BH mantra is that this is just the start.
Dichotomy of views.
It's not "working its way in." Lance nailed it.
About 5 or 6 years ago, builders discovered that they could slap up waferboard and staple tyvek on cheap farmland. Sell the places to people who bought into the illusion that a big house on a road that no one plows, made up for a commute from hell.
About a year ago, there was more than enough of these places to meet the demand.
So they had a sale. Prices of Mcmansions way out there, fell.
This has nothing to do with SFH inside the beltway or other quality places.
kh,
Look again at the stats that Harriet posted. Months' supply in Fairfax is currently at where PWC was last year; month's supply in Arlington and Alexandria is currently where Fairfax was last year. That's the data -- not anyone's "gut" feeling about what "should" happen. It tells me that the correction is moving in; the question is how much of a correction will occur.
"wisdom from lance"
heh...
You two should form a slapstick duo sometime. Between lance's "wisdom" and your theory that DC is the world capital and that London, Paris, Tokyo, etc "pay tribute" to DC, tickets would be a hot commodity.
Of course... you might have to travel more than 6 blocks from home to tour, which you would probably find a scary experience.
"This has nothing to do with SFH inside the beltway or other quality places."
You act like continuing to repeat this tired old BS will make it come true. Inside the beltway does not automatically equate to "quality" nor does outside the beltway automatically equate to country living. Most of DC along with significant parts are inside the beltway NoVa areas are anything but quality.
Look at the leading indicators. Sales inside the beltway are way down, inventory is way up... prices will continue to fall.
So basically what I'm hearing is if you live in a "posh" neighborhood near a metro or inside the beltway, the value will stay steady or rise while all the poor suckers who have "traffic issues" may fall? It seems the debate has shifted over the years!
What would happen if the prior places started to fall too?? :) The data/history is more on the side of BHs...time will tell.
What gives life to the false bubble theory is a seeming inability by some to understand that while it may be difficult to get into a house of one's own, once in it gets easier and easier as time goes on. Yes, renting is easier ... but while owning is difficult at first and gradually gets easier and easier, renting gradually just gets harder and harder. It's like deciding whether to take the plunge to get into a cold swimming pool. Yeah, it's a lot easier to wait around for the weather to warm up and heat the pool, but it's really rough having to look at the bold people who jumped in and are having a ball while you're still on the deck waiting for the pool to warm up. No, it's not "buy now or be locked out forever", but you also can't ever regain that time you wasted waiting it out.
An emotional argument for sure. It shouldn't be "rough" to buy a home, it should be within your means and with a down payment. I truly feel sorry for first time buyers as they can only really afford a run down or tiny place and this was NOT the case 5 years ago. The even sadder part is they may buy in and very soon have a mortgage greater than the value of their home. Lance, you have to accept the fact that now may NOT be a good time to buy and that prices can fall...and not just in the "crappy" areas.
AlexA said:
"Lance, you have to accept the fact that now may NOT be a good time to buy and that prices can fall...and not just in the "crappy" areas."
Alex, I don't disagree that there are easier times to buy and harder times to buy. 5 years ago it was definitely easier to buy as the pendulum had only started to swing back in the direction of "hard to buy." What I am arguing against is that you change all your life plans to try to "catch that bottom." As BHs themselves have expressed, the real estate cycle (with its peaks and valleys) can straddle many years. In the span of those many years there are many many bargains out there for homes that will satisfy your needs (vs. your wants) which you will miss out on if you are sitting around just waiting for the optimum buying time to come around instead of accepting "what is" and dealing with it.
In short... lance doesn't want to see anyone try to get a good deal by simply exercising a bit of patience.
For whatever reason it is very important to lance that everyone buy into the real estate pumper hype and buy as much as they can right now, even when they know they will be able to get more for less in a few months.
It doesn't matter if better deals are showing up every month. Don't wait! Buy!
Leroy,
No, the long and short of it is that chances are you will get a better deal today just by doing your homework than you will by trying to catch that elusive bottom. AND you'll be miles ahead because you won't end up being the "40 yr old virgin" always waiting for something better. What you are advocating isn't patience ... it's laziness coupled with delusion.
"No, the long and short of it is that chances are you will get a better deal today just by doing your homework than you will by trying to catch that elusive bottom."
Well there is a false comparison if I have ever heard one. What if I do my homework in a few months when prices are lower still?
Of course a buyer can "beat" the market by some percentage by "doing their homework," but that doesn't mean they won't be able to beat a better market by a similar amount later.
Besides, as we have already explained for you more times than should have been necessary, the "bottom" will not be elusive. It will be years in breadth during which prices will be mostly stagnant.
"AND you'll be miles ahead because you won't end up being the "40 yr old virgin" always waiting for something better."
Sure sure... my whole life is on hold because... you said so I suppose? Much better then to run out and do something foolish with a lot of money...
It is sad how quickly this country's ethos has swung from "a penny saved is a penny earned" to "Buy now even as prices fall" or "throw away hard earned money to avoid having to wait."
I am a young guy, closer now to 30 than 20... but closer to 20 than 40.
Time is money lance. I am making money by being patient. I sleep easy knowing that had I taken your advice when I first saw it I would have lost literally hundreds of thousands of dollars for having done so.
"What you are advocating isn't patience ... it's laziness coupled with delusion."
Sure sure... a responsible person buys without paying attention to price right? The important thing isn't to get a good value for your money, the important thing is to buy buy buy! Now if not sooner! Afterall, delayed gratification is gratification lost forever isn't it?
Please lance, spare us your predictions. We are all well familiar with your track record.
Alex, I don't disagree that there are easier times to buy and harder times to buy. 5 years ago it was definitely easier to buy as the pendulum had only started to swing back in the direction of "hard to buy." What I am arguing against is that you change all your life plans to try to "catch that bottom." As BHs themselves have expressed, the real estate cycle (with its peaks and valleys) can straddle many years. In the span of those many years there are many many bargains out there for homes that will satisfy your needs (vs. your wants) which you will miss out on if you are sitting around just waiting for the optimum buying time to come around instead of accepting "what is" and dealing with it.
Well, if you it makes you feel any better, I didn't "change my life plans" just to make a buck. I thought it would be interesting to live somewhere else in NOVA and I had a feeling about what was going to happen - so I got out. Now I'm willing to wait it out some to see the pendulum swing the other way. Financially, I don't think I'm missing out and honestly, I feel fine in a month to month rental contract that is cheaper than mortgage/tax/HOA/maintenance/etc.
BTW, the "easy to buy" thing was around for quite some time. The pendulum is not supposed to swing SO WIDELY. :)
Lance said...
“What I am arguing against is that you change all your life plans to try to "catch that bottom."
Well that’s refreshing. All this time you have been arguing with yourself; no one has proclaimed “catching the bottom” as the number one goal. There’s no need to time the bottom.
Judging by the stats (which we all know you find irrelevant), simply waiting patently has paid off, with no indication that prices will rebound anytime soon. So even now, there’s no hurry, plenty of inventory to choose from and we have mitigated the possibility that we may be underwater on a mortgage.
Change our life plans? If you’re a FB that bought at the top, there’s not much you can change.
503 Nelson sold for 775; 508 Kenmore for 1.25.
Poor little Lance. His place took a beating since he bought. I showed him the stats for 20009, and he pulled the lame "my place is different" line. So I showed him, as I always do, that the higher-end places in 20009 did even worse, and he's got nothing.
Poor little KH. He shows what a loser he is by trying to pump up Lance, even though Lance keeps making a fool of himself time and time again. KH could just be a man and admit he's wrong about one little part, and still have an okay argument on inner suburbs near Metros with good schools, but he's still too juvenile to face the truth. Poor poor sad little man.
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