902 BRANCH DR
HERNDON, VA 20170
List Price: $170,000
Prior Sale: $380,000 08/17/2005
Listing Date: 02/15/08
-55.3%
2141 ORAM PL
HERNDON, VA 20170
List Price: $182,000
Prior Sale: $350,000 12/20/2005
Listing Date: 02/13/08
-48.0%
8000 KIDD ST
ALEXANDRIA, VA 22309
List Price: $299,999
Prior Sale: $555,000 12/14/2005
Listing Date: 02/13/08
-45.9%
2235 CASTLE ROCK SQ #35/22C
RESTON, VA 20191
List Price: $160,000
Prior Sale: $293,000 07/20/2005
Listing Date: 02/15/08
-45.4%
7208 WAYNE DR
ANNANDALE, VA 22003
List Price: $499,000
Prior Sale: $900,000 12/14/2006
Listing Date: 02/08/08
-44.6%
See Same-House Sales document for more comparisons from this week's listings.
Links by FranklyMLS.com
Sunday, February 17, 2008
Fairfax County -- On the Market
Posted by Harriet at 11:21 PM
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42 comments:
Its not these particular homes that have me thinking, its seeing the same pattern again and again of homes sold for price A and now on the market is 55% of A.
No wonder the bond buyers of Fannie and Freddie have demanded new underwriting rules. No wonder that the 'jumbo' mortgages must be isolated into a 2nd bond pool under stricter guidelines.
Full doc high down payment jumbo loans will not re-ignite the bubble. Sales are destined to stay over one standard deviation below the mean. Its quite believable that they'll stay 3 standard deviations below the mean until prices adjust.
Got popcorn?
Neil
Not to continually beat a dead horse here but precisely zero of these houses are in the nicer portions of Fairfax (McLean and Great Falls).
Not to continually beat a dead horse here but precisely zero of these houses are in the nicer portions of Fairfax (McLean and Great Falls).
Then why did people pay so much for these homes two years ago? What do you think: fraud or stupidity?
Then why did people pay so much for these homes two years ago? What do you think: fraud or stupidity?
lol Exactly. Why did these homes trade for those prices.
The long term issue is who will pony up the funds to loan after the losses of the last few years? I'm waiting to buy until most, if not all, loans require a substantial down payment and strong income verification.
Got popcorn?
Neil
A combination of both, of course, and some of those are way over-valued, but if you look at the transfer records, especially for the far-out counties but even for 22204 in Arlington, hard to escape the conclusion there was some fraud involved.
Who is so elitist to make such a statement the first time much less again? McLean and Great Falls are full of people who are extremely wealthy or pretend to be. The latter category of residents are in debt to their eyeballs with 2/3 of the rooms empty. I know, I have visited some of those homes.
You, dear person, are most rude. There are many nice places in Fairfax NOT in McLean or Great Falls. Plus there are some abysmal places in Arlington, Alexandria and certainly in the District. The word squalor comes to mind.
The median income family can't consider most of McLean or Great Falls unless they inherit a bundle or are fools. Have you been through either lately? The "for sale" clutter the subdivisions, roads and curbs. There are people there can't afford to be there.
Hi Harriet,
Thanks for this blog! The amount of information you provide is awesome.
The property in Annandale seems a little fishy. 900K in '06? The '07 tax assessment is $442,330. If it really did sell for 900K then I smell some big-time fraud. I can't imagine anything in Annandale going for 900K.
Georgesalt,
I wondered, too. It was a remodel/add-on, and the county has it assessed for $812,100.
12/14/2006 $900,000
07/20/2005 $485,000
Tax history:
2007 $160,000 $652,100 $812,100
2006 $160,000 $652,100 $812,100
2005 $135,000 $216,040 $351,040
2004 $114,000 $172,995 $286,995
2003 $76,000 $147,140 $223,140
2002 $76,000 $118,035 $194,035
2001 $76,000 $86,235 $162,235
2000 $65,000 $79,995 $144,995
Not to continually beat a dead horse here but precisely zero of these houses are in the nicer portions of Fairfax (McLean and Great Falls).
-----------
I just spent about 5 minutes and checked a dozen houses in Great Falls. Three of the dozen homes are listed for less than what was previously paid:
FX6569868
List $1,374,99
Paid Dec 04 $1,499,900
FX6588265
List $1,050,000
Paid in Aug 05 $1,100,000
FX6623240
List $1,095,000
Paid in Nov 06 $1,150,000
Only one of the others I checked was bought before 2004 and it was listed for the same price that was previously paid. Now that's not to say every house in Great Falls is losing value or the drop is going to be as bad as less desirable locations, but it also doesn't appear to be immune. At this point the percentage drop isn't that great, but anyone who has been visiting here for very long can remember when the numbers further out weren't all that bad either.
Not to continually beat a dead horse here but precisely zero of these houses are in the nicer portions of Fairfax (McLean and Great Falls).
Ok... then why the previous large mortgages? The fallout for the 'nice areas' is going to be a reduced qualified buyers pool.
Got Popcorn?
Neil
Harriet, thank you for all the work you do here. I appreciate it greatly, and check it daily. Hope I can afford to buy here someday.
Question for everybody - what happens to housing stock when election results return a different party president? Have not lived here through a change in party, but I imagine the multiplier effect is large, what with political appointees and their hangers on etc. going back home? Will it drive inventory up, or is this the product of my fevered imagination? Thank you for any thoughts.
Zapoteca,
You're welcome - I wish I could update more frequently but find time is difficult to find lately. I'm working on a big Arlington post next.
In my experience, which is 15 years here and hearing from other sources, the election won't affect the housing market very much, if at all. White House staff will find work in Congress or in other governmental agencies. Others who knew they were here temporarily tended to rent.
Harriet, Thank you very much for your thinking. Shucks. I was counting my pennies too soon.
FWIW, I bought a 2/2 condo at Willow Point in Falls Church in December, 2000 for $145K. I sold it in September, 2003 for $255K. (wasn't because I was prescient - had to leave the area temporarily and can't deal with landlording). I tiptoed out of the closing very quietly, hoping the buyers wouldn't change their minds. That unit is now on for $345K. It was a nice unit, and I wouldn't mind living there again, but that price is insane. The $250K price I got was insane, for owning several thousand cubic feet of air (once the building falls down). The bubble cannot burst quickly enough for my taste.
I am a tad ashamed of being so mean spirited. However, insanity is insanity. I am not willing to be a pauper in exchange for a roof unless I am dying of exposure in Antarctica and my life is on the line.
I'm working on a big Arlington post next.
Ohhh... I'm going to be very curious to see it!
Got popcorn?
Neil
"I just spent about 5 minutes and checked a dozen houses in Great Falls. Three of the dozen homes are listed for less than what was previously paid:"
Thanks for your research.
I've seen a similar pattern here but I attribute it to a couple things. In my area, the actuals are flat to slightly rising.
Some houses have been better maintained that others. Some were bought "too high" in 2004, 2005, 2006". Some owners have to get on with their lives, a job elsewhere or whatever. Others can take a little time and are fishing for top dollar.
Great Falls, McLean, Arlington, Alexandria, and yes, Lance's DC are not experiencing the same 30-40% price erosion of PWC.
I'm not saying that there might not be a pullback in the future. The close in prices look stable but anything can happen.
I'm guessing that we're close to or at the bottom. The reason which I've stated before, is that builders have stopped building and the Fed is lowering interest rates.
I don't agree that houses have to be affordable, at least not everywhere. The whole income, rent, buy computation is wishful thinking.
If you can't afford a desirable place in a nice neighborhood, live somewhere else. Do the best you can for you and yours.
Life is compromises and trade-offs.
I know a man who rides a vanpool from way out there. That's his compromise. At quarter to four, he walks out of meetings to catch his ride. Then he takes a nap for an hour and half, arrives home at 5:30, refreshed and enjoys the evening with his family.
When I leave directly from home to see my clients in Bethesda I take Georgetown Pike. In fact I travel it at least once a week for one reason or another. I have done this off and on for over 2 years.
I don't know about sell prices of Great Falls housing, but I can assure all of this: there hasn't been a "sold" sign or "under contract" sign on the streets I travel for over 1 year now. A couple of signs disappear, but I never see any movement. Some of the giants are empty. Most aren't. The sale signs have quadrupled in the last year. New estates and older ones, it doesn't seem to matter. Few of these houses are moving.
On weekends when I visit friends in Great Falls the sudvivisions have for sale signs almost every 4th house. The open houses that I have noticed aren't drawing any traffic. I am willing to bet there is very few of these pseudo-castles selling at all. Two of note have been half finished for 2 years and are real eyesores. Maybe the owners/banks are leaving the signs out for yard decoration. :-) Maybe not.
Like I mentioned before when I first moved to the Great Falls area were only a couple of "for sale" signs noticeable. Now there are literally hundreds and plenty of balloons beating about in the breeze for weekend open houses. Thus far few is any takers.
kcwood's historical look at a particular area made me think of a certain house in a neighborhood I like. It came on the market mid-fall, and since it was the same model of house as a different house we were interested in, we went to the first open house:
9409 NELSON LN
MANASSAS, VA 20110
At first, they were asking something like $580K, if memory serves. It's a little over 2000 sqft, built in 1969, original closet-sized kitchen, right off a main road, but with a nice sunroom off the back, fenced backyard. I looked at the online assessor's site, which listed its last sale as $549,900 in 2004. So it was clear they were trying to break even, and the realtor obviously knew it was overpriced, even though its 2006 assessment was $647,100.
It went down to $560,000, then a couple weeks ago, I saw it listed as a "new listing" for $550,000, but with the same realtor, same sign out front. Yesterday, I saw it listed at $549,000, with a different realtor, again as a "new listing."
The other, similar house one street over sold in January for $400,000. It is on a quiet street, with a half acre, level backyard, totally updated inside with granite/enlarged kitchen/etc. I think those buyers still paid too much, since there are half a dozen pending foreclosures on those streets.
Two questions:
I have seen this scenario over and over again in Manassas/PWC: houses desperately trying to break even, asking way too much, changing their listing "clock" to look like it's just starting when they've actually been for sale for months and even years. What is the end game for these houses?
Isn't it against "the rules" to make a house look like a new listing when it is not?
Tabitha, the end game for them is foreclosure unless they can renegotiate a short sale with their lender(s).
BTW did you get a ratified contract on that house?
Doug, we gave them a deadline of the end of the day today, so we'll know sometime today what will happen.
My guess is that they are not yet ready to come down to us, but that is fine, because then I can keep looking ;)
Tabitha,
Full circle huh? That's awesome that you gave the seller a deadline to respond. That's a complete 180 from the frenzy days of having to bid inside of 24 hours on a house with escalation and no inspection clauses.
This is a point some people gloss over. The insanity of spending so much money on an asset and then giving away your rights in the process because you "don't want to be priced out forever."
Perhaps you should have them write a note describing how they've lovingly cared for their home and maintained it?
My $0.02
Update on our offer:
Nationstar Mortgage rejected it.
Maybe it is true, and we are looking at houses that are "too nice" for us. But I think that in our neck of the woods, $400K should purchase a fine family house.
The search continues...
Tabitha - be patient and let prices come down to you (i.e., to reasonable levels). Tell the bank to call you if they reconsider. You never know, they just might.
Tabitha-
Keep this house on your list
The Bank is hoping for a high, "Spring" market offer
See if this house is still sitting unsold in July or August, then throw them another offer & don't come up!
[SIGH]
Our lease is up in June, so we need to move by then. That gives us a little wriggle room to wait out the spring, but not too much...
But if nothing works out at all, I guess we can rent again...
Im sure you will find something in time, and with the glut of rental homes you should be able to find a cheap 6 month lease to take advantage of the fall drop in prices.
Tabitha - why dont you just work something out with your current landlord - say a 6 month term, or even shorter 2 or 3 month term that automatically renews unless you send notice to the contrary?
Alternatively, unless your lease says something to the contrary, the general (default) rule is that upon expiration, a lease becomes month to month until either party gives 30 days notice from the beginning of the next monthly term.
Under either circumstance, you would get more flexibility with your stay at your current place. Plus while they may whine a bit, most landlords are reluctant to aggrivate a prompt paying, responsible tenant - especially in a falling rental market such as this.
Thanks, CRT, but our landlord is coming back to live in their house. They are military, like us, and will be stationed in D.C. for a year. They figure they can fix the house up for selling purposes during that year, and are hoping the market will have rebounded by the time they sell.
I think they are wrong, but it is their house...
Tabitha,
You'll find a bank that will budge. Perhaps an outfit like Deutsche Bank that's taking on the most listings (as an example). Don't give up - listings are piling on out there. I think it's quite rational to offer less than asking.
Thanks, Harriet.
They immediately came down $50K, but then were only moving in $2K increments. Again, the frustrating aspect is that we told them BEFORE we put the offer in writing what our max was, and had the pre-approval letter to prove it, and THEY still begged us to actually make the official offer. I guess they were hoping we loved the house and had a magic wand that could make up the $80K difference between our top and their bottom.
I am pretty sure that if we had met them halfway, this would have gone through, but we couldn't change our ceiling if we wanted to, and we don't want to...we really thought any more than our best offer was not safe.
It's just hard, because no matter how cold you try to stay, you have to try to see yourself in the house, and wow, there was a lot of room for our family there. But, you know, we have some time still, and we need to stay cautious.
Thank you for this wonderful blog, where I can turn for excellent advice every step of the way!
Tabitha - Gotcha. If you do end up going past June I would suggest you offer terms similar to this to your new landlord - and do it from the very start of the negotiaitons as it will make sure you and the Landlord are on the same page - at least in principle.
I think you will find that private homeowner/landlords will be willing to entertain something reasonable like this, especially in this market.
Good luck no matter what happens.
KH provies entertaining once again:
"Great Falls, McLean, Arlington, Alexandria, and yes, Lance's DC are not experiencing the same 30-40% price erosion of PWC."
Hey, that's quite a long ways away from when KH was claiming that Lance made $80000 and we should bow to him in his tophat. Now, KH is down to "He hasn't lost 30%."
"The whole income, rent, buy computation is wishful thinking."
Yes, relating the price of a house to its rental value is total fantasy. It's not, like, real estate economics or anything.
Oh, wait. It is.
http://www.frbsf.org/publications/economics/letter/2004/el2004-27.html
Poor KH.
""The whole income, rent, buy computation is wishful thinking."
Yes, relating the price of a house to its rental value is total fantasy. It's not, like, real estate economics or anything.
Oh, wait. It is."
It is easy to be dismissive of something you just don't understand.
"Any sufficiently advanced technology is indistinguishable from magic"- Arthur C. Clark
I have noticed that most of the remaining real estate pumpers/trolls have a very poor grasp of even basic economics and probably don't even understand how foolish they look when they try to discuss things that are over their head.
This same lack of understanding is almost certainly playing a part in their dismissive treatment of serious analysis of the housing market in favor of various bits of anecdotal evidence or emotion based arguments.
Lance, your friends. Harriet, this is your blog, I ask that you bear with me.
Here's a fable.
A person bought a condo for $40K in 1978. Put $8K down and rented it out for 30 years. The valuation in 1978, $40K and the rent $400/month, heck, they lost money.
10 years later, 1988, the place was worth $110K, the rent did not sustain the value of the place. Especially if they cashed it in and did the PV, FV calculations. Of course, there were condo fees, taxes, and special assessments for this and that.
10 years later, the valuation is $250K.
Then another 10 years later. 2008. The place will sell for $450,000. The rent? $2,100. It does not sustain the value.
The place provided a positive cash flow after the 1st 10 years.
2008, it's paid off so the $2,100, less condo fees, taxes, is a purely positive return. That's also not a great return on a four hundred and fifty grand asset.
At no time during the 30 years did the rent ever sustain the price.
The wise renter always "took" the dumb landlord, every year, year after year.
The wise renter? Thirty years of rent receipts, $4,800 the first year, forking out $25,200 a year near the end. Call it a hundred grand for the last 4 years.
Over those 30 years, there were years when the valuation of the place fell. There were also years when the landlord had to cut the rent to keep a renter.
The boys are welcome to think what they wish. Perhaps they are correct. Maybe I have it wrong. I guess this high finance is above my head.
Lance?
Tabitha, this might not be you but I knew a BIG guy who had good furniture and didn't seem to mind moving.
He got great deals by living in places that were languishing on the market.
Vandals and troublemakers wouldn't trash a house that he was living in. His furniture made the place show well.
He just had to be willing to move every 4 or 5 months and let people drop in while he's watching TV.
kh, that is brilliant.
But I am afraid that we would not fit that mold well...most of our furniture is from garage sales and Ikea, and with the seventh little one on the way, we would make the nicest place look bad ;)
But again, I admire the genius.
"Here's a fable."
and that about sums it up...
Nobody here is advocating renting for 30 years, even so your "fable" was extremely poorly thought out.
The fact that you still seem to have trouble understanding what people here are talking about says a lot about you.
"I admire the genius."
Surprised me when he explained how it worked. Turned out that his family was into real estate and he had his license.
He had it down such that he could move in a day. He had his pick of nicer houses, dirt cheap.
You know the type, 4 good suits, 4 pair of polished shoes, starched custom shirts and $50 ties, nothing is ever worn out or out of place. His Friday outfit was designer/label too.
I'm sure buyers looked in the closet and half bought because of his clothes.
No way I could do that, with my junk, tattered clothes and, hand-me-down furniture.
"$40K and the rent $400/month."
That's a cap rate of 12%. That's pretty damn good.
The 30-year fixed rate in 1978 was about 10%, so their cap rate was 2%above the fixed interest rate.
Now their cap rate is 5.6%, below the 30-year fixed-rate of 6%.
Basically, in order to be as good a deal as it was in 1978, that condo would need to be $315,000 today, given current interest rates and rents.
So let's decompose their gain. They gain $410,000.
Their rent growth from $400 to $2100 explains almost half their asset gains. At a 12% cap rate and $2100 rent, that condo would cost $210,000. There's $170,000.
Then, the fall in interest rates explains about a quarter of their gains. At $2100 rent and 8% cap, that condo would be $315,000. There's another $105,000.
So rent and interest rates account for $275,000. We have gains of $410,000.
So there's about $135,000 in value that looks difficult to justify, although you might try to hang your hat on some expectations of futre rents story. That looks tenuous at best.
Maybe, at the most extreme end, you can try to justify a 6% cap rate on price. That would yield $420,000. If you believe 8% makes more sense, you get $315,000.
So the condo is between 7%-30% overvalued.
Minor correction: I referred to the "cap rate." Actually, I was using the gross rental rate.
Keith,
Well done. A high rent mulitplier often indicates a disconnect between the intrinsic value of using the property to live in (i.e., the rent) and the purchase price. I've tried to explain this to people, with glassy eyed responses. High rent mulitpliers indicate that the buyers aren't purchasing the value of the dwelling unit, they're speculatively buying future expected appreciation, which is the root cause of asset bubbles. There are exceptions: high multipliers may be justified if rents are expected to spike (e.g., a new Metro station opening down the street) or if there is special value in the property from which owners, not renters, can benefit (e.g., oil/mineral rights).
"So the condo is between 7%-30% overvalued."
Excellent job.
For the last 30 years, the price of this place has not made any sense, strictly as a rental.
There are local conditions that constrain what people can afford to pay, that causes high risk of new construction as well as limits rents.
The local conditions are poor salaries and job opportunities as well as limited available land.
That dynamic has led to 30 years of too high prices for condos and rents that are high but not high enough to trigger more building.
I doubt that rents will ever make sense, except for areas that allow unlimited construction.
People adjust to too high rents by doubling up, tolerating a killer commute, or living in less than fine accommodations.
Those who can afford to buy, stretch themselves to the limit, some go beyond.
Pretty much what we've observed.
You've made good points and have helped explain why things are the way they are.
I have no issues with your methodology.
"For the last 30 years"
heh...
http://tinyurl.com/2utzvd
Magic right?
I think you completely missed the point again...
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