Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Please post your local house search updates, MLS finds, off-topic ideas, and links here.
Just got back from Easter with family and wanted to point to a few Post articles of relevance. The first one is from the Prince William section of the paper today; it is a front page article entitled "More Families Affected by Foreclosures." First sentence:"More than twice as many homes in the Prince William County area fell into foreclosure last month than in February 2007, a sign that real estate woes are worsening."Good bits of info:2/2008 306 PWC foreclosures2/2007 140 PWC foreclosures2007 3,334 foreclosures2006 282 foreclosures2005 52 foreclosuresPWC default rate: 5.5% of all housing in some stage of foreclosureLoudon default rate: 2.8%Washington Metro region: 1.7%Reason given for high default rate: large Hispanic immigrant populationWhich leads to the other articles. On page A1 today, there is an article about the demise of the Hispanic community in PWC, and that follows a similar from a couple days ago, which stated many Hispanic immigrants are moving to Maryland.And on March 22, there was an A1 article entitled "My house. My dream. It was all an illusion." I would recommend reading the comments under the online version of the article, all 270+ of them--many have good insights, though many are belligerant.
Washington Post article today about hispanics leaving PWC in droves.PWC is going to be a ghost town.Will we see years of back taxes never paid there with all the homes available?
look at the chart in this msnbc article http://www.msnbc.msn.com/id/23796366/another peak wave of loan resets in 2010/2011. those who probably 5/1 or 5/5 arm's in 2005/2006.And those people bought at the top of the bubble. We're in for another sloppy ride!I can't wait to hear in 2009 realtors saying "We've recovered!!" - bubble is over, blah blah blah..buhahaha
The perplexing thing about the bubble in No. Arlington is that there are micro-bubbles. The cost of purchase remains constant, sellers aren't willing to move off 2007 pricing and builders seem to be holding out for their 30%. I would have thought the tightening credit environment would spell a more flexible, buyer driven marketplace but we have been looking for six months, not as bottom feeders, and have yet to land on a desirable location that is within our pricing goals.
This was posted on yesterday's bits thread, but it is worth reposting. It's an article by David Leonhardt in the NYT regarding the price "stickiness" that results from home sellers' tendency to refuse to lower prices to meet current demand. A must read.http://tinyurl.com/3a55bt
"PWC is going to be a ghost town."I agree with you there. Those cheaply built homes are falling apart and people grossly overpaid for them. Even prime borrowers will start walking away when they see they are half a million in the hole, and their neighborhoods are turning into boarded up shanty towns. There might not be a price point low enough for people to buy there when it reaches that point.
Bleak home forecast until 2010Freddie Mac economist: 'likely to have worse news'Marilyn Geewax, Cox NewsFriday, March 28, 2008(03-28) 04:00 PDT Washington -- - The home foreclosure rate will rise for at least another year and residential real estate prices won't improve until 2010, said Frank Nothaft, chief economist for Freddie Mac, a federally chartered mortgage finance company."We're likely to have worse news" on foreclosures throughout 2008, Nothaft said Thursday in a speech to the National Economists Club. As a result, homeowners will see "huge increases in the average amount of time it takes to sell a house."http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/03/28/BUVSVRK4K.DTL
Wealthy Struggling, TooCrisis is hurting them because they didn't resist adjustable rate mortgagesBy JANE BIRNBAUMTHE ASSOCIATED PRESS last updated: March 28, 2008 04:46:01 AMNEW YORK -- They took out adjustable rate mortgages at the peak of the housing bubble to buy homes they would otherwise not be able to afford. Or they refinanced their mortgages to take cash out.And now, two or three years later, the day of reckoning is here.These are not lower- and middle-income borrowers, but more affluent consumers with annual incomes of $100,000 or more who are increasingly being ensnared in the home mortgage crisis.People in all income categories "are facing the shock of new payments that can be twice as much as previous ones," said Susan M. Wachter, professor of business and a real estate specialist at the University of Pennsylvania's Wharton School.Nor will falling interest rates help most of these homeowners, as their low initial payments skyrocket and the worth of their homes erodes, said Allen Fishbein, director of housing and credit policy at the Consumer Federation of America.According to Loan Performance, a unit of First American CoreLogic, a real estate information company in Santa Ana, about 870,000 borrowers took jumbo ARMs -- mortgages of $417,000 or more -- from 2005 to 2007. In the fourth quarter of 2007, 8.10 percent were two or more payments late, it found, while 2.62 percent were in foreclosure and 1.35 percent had been foreclosed. All the numbers were up from the third quarter.Mark Zandi, chief economist for Moody's Economy.com, predicted that eventually 8 percent of these jumbo ARMs will be foreclosed. In the first quarter of 2008, "the delinquency and foreclosure rate will clearly be higher," he said.Today's ARMs were "designed to fail, so you have to refinance," Wachter said. "It shouldn't be surprising that values go up and down in this kind of situation. And when you most need to refinance you can't, the crux of the crunch." Jeffrey Conner, a San Francisco real estate lawyer, said he hears from clients "that lenders assured them they could always refinance." So what are these homeowners to do? Refinancing requires some equity. Even if homeowners put a substantial amount of money down, many have no equity because their homes are worth less than they owe. Richard Geller, founder of Mortgage Relief Formula, a for-profit venture based in Fairfax, Va., that counsels troubled ARM borrowers, said he has received calls from many affluent consumers in almost every major metropolitan area. Manhattan appears to be the only exception in the weakening market, Geller said. http://www.modbee.com/business/story/252291.html
"PWC is going to be a ghost town."Wow that is funny. You've got a county that is listed in the top 20 richest counties in the US. Top 10 counties in the US to get ahead. So it's going to be a ghost town because they are doing something about illegals. I'm thinking PWC didn't get that status due to illegals. It's the high end DOD contractors, and weathly DINKs that made it reach that status. There will be lower end neighborhoods that will probably suffer more than others. However it will be a short term hit for a long term gain. Not that I'm against immigrants. (My wife is legal immigrant). PWC is going down in value, probably more than other northern virginia counties, just due to this issue, however at least something was done to try and fix it.
PWC is getting hit very hard and the worst is yet to come, no doubt about it, but a ghost town? That isn't going to happen. PWC is a huge chunk of real estate and many new jobs are moving into that area. PWC is one of the biggest "winners" in the recent BRAC for instance. In the short term PWC's effort to control their illegal immigrant population will probably hurt prices but in the long run it may prevent the county from being overrun. Really what are their options at this point? Welcome thousands of people who can't be bothered to follow US laws? With tax revenue already shrinking because of falling RE prices the last thing the county needs is a larger free riding population on their services.As usual they would have been better off if the bubble had never occured and the area hadn't been so overbuilt. Since it is now too late to rewrite history they are probably doing the smartest thing they can.
Tina, same here. The sellers seem content to let their houses sit for months, maybe hoping that the market will turn around soon. In any case, the market is telling them they are currently overpriced.
ace/tina--my experience is as follows. First, builders have limits they simply will not go past. At this point many builders are willing to negotiate, but not a ton. Second, people who bought in 2004/2005 cannot reduce price by a lot because they would stand to lose money (that they don't have invested as equity) at closing. The people who are willing to reduce price agressively are the folks who bought more than 5 years ago and really want to move. It's sometimes hard to gauge the latter, but figuring out the former is pretty easy. Were I actively making offers right now, it is those folks (sellers that bought pre 2003) that I would focus on.The bigger issue for the NVA market is that there seems to be a large inventory of houses out on the market that essentially cannot be sold. The reason is that the owners either cannot or will not put themselves in a position to lower price sufficiently to move the property. The trick is to figure out a way to separate those folks from the sellers that are willing to negotiate fairly given current market conditions.
One could tell from scanning the 500 comments on the Washington Post article on illegal immigrants that a majority of readers weren't impressed with the article.The author focused on the new immigration laws in PWC, but I am convinced the exodus began before that, and would have happened anyway. It was the construction economy falling apart. Commenters noted that it was all too easy for the immigrants to walk away from their houses, and wondered what kind of work they would find in neighboring areas.
Leroy/steve-I think you guys are spot on. PWC will not be a ghost town, though there will be areas impacted very negatively. I bought in PWC near where the New Harbor Station development is going in, very close to the new golf course Jack Nichlaus is designing, and very early in the community development. There's also a proposed VRE stop going in, though I'm not sure how definite that is (If anyone knows, fill me in).The townhouses that are currently being built are selling for about 27k more than what I paid. Hopefully that holds up, but I think that communities like these will tend to hold their value a little more in general for a few reasons. 1. With the credit markets the way they are now, people who are buying in these communities will be more qualified with larger downpayments, incomes, ability to pay, etc., which will stem future forclosures in these communities2. This ties in with 1 - Many people (generally speaking) have a stigma about forclosures and buying into neighborhoods that have a lot of them. Neighborhoods like the one I live in will (hopefully for me) seem more attractive as they are better maintained, dont have vacant lots, etc. 3. Buying a place where future development and growth will occur helps to stem value loss and encourage value gain, though its no guarentee (especially in this market). Anyway, thas my 2 cents. I think at this point many builders are desperate, and if you catch them at the right time, will give up a lot in negotiations. If I were looking to buy, I'd research when the builder's fiscal year or quarters were ending and try to exploiut that knowing that they will probably be needing the extra nuymbers a those times. FWIW, I don't expect to strike it rich with my purchase. I just bought a place to live for my family and hope that I've done enough to where I wont have problems selling my house in 5 years for what I paid for it.
Well look at what a little research turned up. A little dated, but here's some info on that VRE station:http://www.harborstation.com/news/04-16-07.aspHopefully they'll have it running as planned by 2013, thats about the time I think I'll be trying to sell my house.
Bubbleboy said: "Were I actively making offers right now, it is those folks (sellers that bought pre 2003) that I would focus on."I don't disagree with that strategy, but is there a way to easily identify those homeowners who bought pre 2003 but have drained their equity?With regard to irrational pricing, I am close friends with an older couple who have owned a home for forty years who put houses up for sale just as the market tanked. My suggestion that they might want to cut their price led to some gentle eye-rolling on their part, as they explained to me that prices fluctuate all the time and they've seen the price on their home drop and rise over the years.What this suggests to me is that irrational pricing is due to the unprecedented nature of this decline for several generations. Unless you have a personal recollection of the depression or an academic understanding of that decline, the current economic decline is just totally out of your own personal experience. Add that general sense of American optimism and maybe a pinch of greed into the mix and you get boatload of homeowners who are convinced that the market will be willing to pay their price, if not this month, then next...I am also reminded of polical science research by a professor named Tom Kazee who talked to dozens of long-shot politial candidates, people who entered a race at the request of the party, for example, but were given no chance of winning. Nearly all of them were realistic about their chances, but also nearly all of them acknowledged that they secretly hoped some bizarre circumstance might give them a win, using the phrase, "lightning may strike," to sum up things like, maybe some awful information about my opponent will become public and the long-shot would therefore win the race by default. I would argue that many overpriced homeowners are themselves clinging to the hope that lightning may strike: That someone will see their home and perceive it as so perfect for their needs and in exactly the right location and will be so finanicallly secure that they won't care what the price is.
gruntled--I assume that your question was along the lines of how do I separate pre 2003 sellers not in financial distress due to a massive home equity loan from those that are honestly trying to sell?The first way (and this is personal opinion from what I have seen in Arlington) would be list price relative to tax assessed value. If someone is listing very close to or below assessed value, then this is a good sign. And indeed, these homes seem to be the ones that move. Second, if you have reservations about a particular property you can ask your realtor to contact the sellers' and determine why they are moving (hint, hint). They may not give much information up, but at least you can try.
This WSJ article on what people do before leaving their foreclosed properties is interesting. The video and slideshow are worth extra points.http://tinyurl.com/2rr5fj"Light switches, outlet covers and thermostats were smashed. There was what looked to be crowbar damage along the staircase. A large pool of paint had hardened on the living-room carpet. It appeared that someone had dripped motor oil in a trail that wound its way through every carpeted room. The appliances were gone, as were most light fixtures. A cabinet door had been removed and left soaking in a full tub of water. Not a wall was left without a hole the diameter of a closet rod, including the pink child's room once carefully decorated with a floral wallpaper stripe. It's damage that Mr. Carver described as "a vengeance-type thing.""
I'm in and watching PWC. Several different neighborhoods catch my eye. The one my parents live in (and have lived in for getting on thirty years), the one my wife and I live in, and Montclair. I tend to scan Manassas (in-laws) and eastern Woodbridge as well just to keep up.I've seen massive price reductions. Repeatedly. To the point where they're almost scaring me sometimes, and I'm looking forward to decreasing house prices.But the fact that shocks me the most is that nothing is moving. I watched a house directly across the street from my parents get put on the market at $499K. Obviously overpriced by anyone's consideration. Eventually he lowered to $450, the lowest he could go to break even. Still overpriced for the neighborhood. The man bought to renovate and flip. He renovated, sunk thousands of dollars, but had grossly overpaid for the property. Bank comes in and agrees to do a short sale. They put it on the market for $299! The house right down the street, which had been going for $299 sees this and drops their price 10K. Eventually the bank forecloses on the property. It stayed off the market for about three weeks during that process; now it's back on asking for $265K. Across the neighborhood another REO has had to drop to $190K to generate interest, while other owners are still holding out for $400+.Naturally none of them are selling. But neither are any of the REOs. Same story across all of the areas I'm watching. 25-50% price drops, no action.I was positive the place across the street from my parents would sell once the short-sale was set-up. The house is nice enough. A corner lot, old enough to be quality, but new enough to have modern amenities. It's big enough for a decent family, too, and $299 is a price point a lot of people in PWC could afford, legitimately.There must be absolutely no buyers out there if it's still not moving after another 10% reduction.Sorry for the length of the post, but this complete absence of sales has me flummoxed. Where are the buyers, or if you're pessimistic enough, where are the knife-catchers?
xpovos,There is no action on those houses because banks have tightend leaning standards. The number of people who can put 20% down on a house is limited, with all their past Credit Card debt, also no one can sell their current house to even walk away with a good down payment amount. People need to sell, people don't need to buy.People who bought in the last 4 years have either been foreclosued on, can't sell their current houses, or are underwater with their equity.Wish it wasn't so bleak..
"Where are the buyers, or if you're pessimistic enough, where are the knife-catchers?"there are some knife-catchers out there.though i am always shocked when sales numbers come in...the sales numbers are >0 and i'm thinking, why is a SINGLE person out there buying???? the sales numbers she be ZERO, but i guess some are finding 'real good' deals, okif they're semi-smart they're at home depot looking for gloves.if they're like most on these blogs they're waiting for the chainsaw sale.what is the 2001 price for that 265k house in PWC? i'm betting not 265
xpovos,I agree with Steve. The buyer pool is tiny. And many sellers who have dropped their prices five, six, ten times have still not fallen into the range of reason, because they can't or they won't. In my neighborhood, several houses have been for sale for two or three YEARS, vacant, and they are STILL asking in the $500Ks-$600Ks. They are old folks' homes, fine houses with good lawns, but they are old and dated and the folks who own them want their retirement money, I guess. And they keep getting tax bills that say their homes are worth their asking prices, which is absurd, but it keeps the dream alive...or they are younger and bought at the height and can't bring money to the table but aren't destitute enough (yet) to convince a bank to do a short sale.But if you are a buyer with a 20% downpayment for a half a million dollar house, why in God's name would you buy a dated house in a neighborhood bordered by ghettos when you have your cherry pick of a zillion new McMansions?SIGH.We still haven't heard anything on our offer on the short sale house. The banks only have two more weeks to think about it...and then we will start looking at rentals...kind of hoping that is what happens...
All I worry about is what the "gubment" will do in an attempt to "fix" the housing crisis. We'll all be worse off when they are done messing around. We need to get involved in government locally and nationally to stop a government "intervention."Please consider joining your local party, (dem or repub or whatever), talk to people, educate them on finance, history with this issue (japan 160% GDP dept), etc. Please do write/call your congressmen (202) 224-3121.
Gruntled & bubbleboy, thanks. I agree with you that there are some examples of each of what you are describing in Arl. From what I have seen (and I have been watching this for several years), however, there aren't many new homes (except in the very high price ranges), and most of the cases of overpriced houses sitting and sitting involve sellers who have owned their homes for more than a few years and whose investments in improvements appear to be modest at best. In other words they appear to be making the choice to keep the house at the current price.In any case, even the homes that would create a loss if the selling price were cut involve carrying costs, unless the owners are occupying them and are simply hoping to move elsewhere but don't have to, in which case they would incur those housing costs anyway. All this makes me think that, in most cases, Gruntled is right that many sellers simply don't understand or believe what is happening right now is happening. It will be interested to see whether they become more realistic if the spring selling season passes and conditions don't change.
The Puzzle of PricingSetting the right price for a home can be an angst-ridden process. So many factors are beyond the seller's control. There are the number of competing homes on the market to consider, the motivations of the sellers who own them and perhaps an uptick in foreclosures that might drag down prices in some areas. That makes it critical to scope out the competition: homes that are on the market in your neighborhood when you're ready to sell, as well as comparable homes that have recently sold. That's what will determine how much a house sells for, not what you paid or what your neighbor got three years ago. Traditionally, sellers and real estate agents have used comparable sales dating back six months. But the market is so fluid now that many agents say examining a three-month window is more realistic. "The value of a home is determined by what else people can buy when they're ready to go shopping," said Jane Fairweather, a Coldwell Banker agent in Bethesda. "Value is a moment in time. It's that simple." http://www.washingtonpost.com/wp-dyn/content/story/2008/03/28/ST2008032802293.html
Connolly: Fairfax Should Buy, Sell Foreclosed HomesBy Amy GardnerWashington Post Staff Writer Friday, March 28, 2008; 11:37 AM Gerald E. Connolly, chairman of the Fairfax County Board of Supervisors, today will propose using county funds to purchase foreclosed properties and sell them at below-market prices to working families.http://tinyurl.com/ys36urSomething tells me we are going to have 2 diametrically opposed opinions on this plan by the Bubbleheads. While all BHs want to see all house prices drop precipitously, some want that and for it to be tougher for the less qualified to buy so that they can get their houses even cheaper. While other BHs, can probably see themselves as the beneficiaries of these programs ... which will concurrently stop prices from falling further. Opinions?
zerodown, from the same WaPo article you linked to:---------------------------------- Denise Newman said the price cuts have been palatable only because home prices in the Montgomery neighborhoods they're interested in also have dropped. "We're getting shortchanged here," she said. "But we'll make up for it on the other end, hopefully." ---------------------------------You can see how prices outside the city in areas where good schools draw people to raise a family put downward pressure on prices inside the city.
This time it IS different, and not in a good way:en.wikipedia.org/wiki/Image:Cshpi-peak.JPGThis graph should make quite a few current homedebtors CRY.
gruntled: I wonder if I know the house you are talking about? Bought in 1976, very nice house, but equivalent houses are listed 150-200k less. Heck, the identical model with a tennis court and swimming pool down the street just sold in foreclosure for $150k less than this house's listing price.I liked the house (I went to the open house), but the asking price was way out of whack.
Actually, my friends live in DC; it's a wonderful location, and they have a great proposal in place for the property, but they're looking for a lot of money. I think it's possible that, perhaps, some embassy might look at it and think, "Hey, that's perfect," but how many times does that happen?
i saw Connolly's proposal on fox5 news.unbelieveable.the other guy interviewed said they should stay out of private housing market.i don't think it'll go any where for connolly.fox5 said fairfax has 1300 foreclosures this year or something.
Gone, in 10 days.Well, maybe a little longer, check it out 10 W GLEBE, bank owned, $359K, garage TH in 22305.The pictures look a little tatty. This is an 9 year old place, set back a little from busy Glebe Road. It's across from a fine restaurant but 2 blocks from E REED, the armpit of Alexandria.10 W GLEBE resembles the $499K THs that they are building at 0 W GLEBE which is about a mile away. Places priced realistically are selling. That's decent SFH in the 600K range, THs about 400K, small garden apartments about 200K. Fantasy prices (higher than 2005) are languishing, ie, SFH over 900K, older TH over 450K, etc.22305 (Northridge, Hume, North Del Ray, etc) appears to be coming off the bottom. Won't know for certain for another year or two but 22305 has not plunged into the abyss of PWC.Hey Lance, what's happening in your area?
kh asked:"Hey Lance, what's happening in your area?"I was glancing through the Post this morning and apparently the DC median price is still rising. There was also an interesting article about pricing a home. Interestingly enough, in pricing the home the owners turned out to be right in wanting to price it higher than a bunch of 10 real estate agents did. (They had come out to view the place and give the listing agent ideas for pricing the listing.)My experience has shown me that agents have a BIG incentive to underprice a listing and not overprice it as I keep hearing on the blogs. Correctly pricing a place ... and this means pricing it at the margin where that one last buyer is willing to go ... means an agent having to put in far more work that underpricing it and dealing with multiple bidders. This happened when I sold my last condo. The agent I had originally planned to use had recommended listing it at about $185K less that it eventually sold for. It didn't sound right to me in that similar condos is far less nice neighborhoods were going for far more. When I did list it, I listed it for about $125K more than he had suggested. It sold in one weekend. I had 11 bids on it and the escalation clause brought it to the $185K higher than what that original real estate agent would have listed it at. I left the settlement table happy having bought into the real estate mantra that one should price low and "lte the market bid the price up". My neighbor who had a similar place (and was selling her place), had discussed the matter with an out of state relative who was a real estate agent, and she had come away from that conversation that "bidding up" was only good for the real estate agent ... and not for the seller. As she put it "yeah, that'll bring in a lot of low bidders, but who wants low bidders ... you just want that one high bidder willing to bid more than all the rest". Accordingly, she listed her unit at what mine at sold for, and while it took her a month to sell it (vs. my 1 weekend), she ended up selling it for $100K more than I sold mine for. Next time I sell, that will be my strategy.
"I was glancing through the Post this morning and apparently the DC median price is still rising."Interesting but I was asking if you've walked your neighborhood or checked on the actual sales. I've posted links to SFH and TH sales in my area. The SFH and TH are selling if priced right. The link is a mix of the recent sales and the currently available homes.Priced right seems to be about $600K for smaller, older SFH, $400K for an older TH, and $200K for a garden apartment. 10 W GLEBE was offered at the low end but it sold in 10 days.Places over $800K have stalled. I've been watching that $2.2 M place for a year, that's a fantasy price for this area.
bubbleboy said... “gruntled--I assume that your question was along the lines of how do I separate pre 2003 sellers not in financial distress due to a massive home equity loan from those that are honestly trying to sell?”Maryland shows most loan documentation online:http://mdlandrec.netYou’ll need a password but it’s free. They scan and publish the documents sighed at closing.
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