Please post off-topic ideas, your local house search updates, MLS finds, and links here.
Also, Calculated Risk has a Bear Stearns Saturday Update.
Saturday, March 15, 2008
Northern Virginia Weekend Bits Bucket 3/15 & 3/16/2008
Posted by Harriet at 7:09 PM
Subscribe to:
Post Comments (Atom)
26 comments:
I did go to the auction I mentioned earlier (see Monday's bits bucket). My wife and I arrived a few minutes before the auction was scheduled to start. There were 5 blue-blazered auctioneers, and a 6th official-type helping out. The house was open for walk arounds, so we did.
It was not in excellent shape, but 90% of the problems were simple cosmetics. Minor drywall issues, terrible paint choice and color schemes, etc. A lot of the place looked renovated to some extent, but it was also showing age. For a trained person, I would imagine 20K in repairs would make it shine.
The auction information provided on site gave a lot better detail about the spefics once you were there. $5K deposit due at bidding, balance due in 30 days, no contingencies granted. 10% buyer's premium. All gone over in detail before the auction started. The auctioneer also hinted that there was a reserve, but didn't confirm, nor elaborate.
About 20 people were on hand to watch the proceeding. I didn't get a chance to see any of the people who bid, so I don't know how many were actually bidding. Felt like only three, maybe four. The bidding did start at $50K, and very quickly jumped up to $125K. From there it was like pulling teeth. But the auctioneer slowly called out to up to $140K. No one went higher. Apparently this failed to meet the reserve, because the sellers (on hand) declined the top bid. $140K + 10% = $154K. My own limited knowledge suggests this was a fair, or even tad high price for the property in the condition it was given the current market. Sellers should have taken it, IMO. My wife, much less into the whole bubble market psychology agreed with me.
It was fun, and we were out of there 15 minutes after the auction started, so in total less than 25 minutes out of my weekend for a great educational experience.
xpovos,
Thanks for the story - I'm always amazed at sellers who go to the trouble of holding an auction with a secret reserve price.
Do the blue-blazered people get paid, I wonder.
I found this article in the Fairfax Connection paper at a local resturant I frequent. It talks about housing prices and foreclosures with some interesting statistics.
In Fairfax Co. the total foreclosures:
2005 the total was 198
2006 the total was 593
2007 the total was 4,527
Here's the link...
http://www.connectionnewspapers.com/article.asp?article=94591&paper=61&cat=104
So, I take it that a number of people here are opposed to federally backed deposit insurance? Deposit insurance was established during the Great Depression as a response to the repeated bank runs over the centuries. Basically, depositors would fear that a bank would be insolvent and would be unable to repay all the deposits, so everybody would attempt to withdraw all their money simultaneously, which would precipitate the very thing depositors feared. Today, depositor insurance is the state's guarantees that the federal government will cover any deposits up to $100K, and as a result bank runs have essentially vanished.
A pure free marketer would argue that this interference in the free market insulates incompetent depositors from their mistakes. And it costs taxpayers an enormous amount of money.
But the funny thing about depositor insurance is that in ending bank run, it saves depositors billions of dollars, since bank runs cause cascade failures throughout the economy...
Okay Gruntled, what does this have to do with the price of tea in China? FDIC insurance is for those with accounts with banks and credit unions and they insure each account up to 100K. If your account is more than a 100k, all you get is 100k. So what does this have to do with this blog site. Connect the dots please if you can.....
What I've been hearing for the past three days is, frankly, a bunch of ideologues carping at each other, with the major themes being that the only a pure free market will rescue us. My point is that FDIC insurance interferes with the free market. i would argue that's a good thing. Is there anyone who doubts it? If not, than you concede that there is room in a "free market" for government intervention. If you think deposit insurance is a "bad" thing -- beyond an ideological commitment to a pure free market that for some borders on religious fanaticism -- than I'd like to know why? And my point is, if the government can arrange deposit insurance without consigning us all to hell, why then can't the federal government intervene in the current economic death spiral to mitigate pain caused by people who *have not made any catastrophic economic blunders.*
Isn't deposit insurance a fundamentally different thing? People make use of a checking or savings account more or less as a convenient and safe place to hold their funds. It is also understood that by placing funds into such an account, I will see little or no appreciation in value. In some sense, a user of one of these accounts is not really participating in any market. The user hasn't purchased something which must be sold later to realize a potential gain or loss. No risk -- No reward.
Unfortunately for those who have spent more on a home than they could afford, no such guarantee has ever been made. Homeowners have purchased something which must be sold to a willing buyer before any gains or losses are realized. I think many folks believe that an attempt to modify this market behavior will have negative consequences.
FWIW, some folks really consider the irrational increase in home prices to be the death spiral you refer to -- not the current correction we're seeing.
You've fallen into my trap :-). While deposit insurance is allegedly directed at individual depositors, the real beneficiaries are the banks, who now no longer have to worry about periodic panics draining their coffers and putting them out of business. This government intervention is in fact good for the economy. Beyond the theological objection to such intervention promoting "bad" banking practices, there's not a lot of downside.
gruntled,
I am not someone who takes a rigid free market view; in fact my views would probably make me a centrist democrat who sees a role for government regulation. But such regulation should have acted in advance against easy credit policies by lenders.
I am against bailouts now.
There are several reasons for it.
You cannot have something working by a set of rules and then suddenly change the rules midway to beneift certain players.
People glorify capitalism when they make oodles of easy money, but demand socialism when they lose it. It penalizes those who played by the rules and saved money and refused to overpay for homes.
And I don't agree that there are no downsides to such bailouts. In increasing the money supply, the FED is stoking inflation. People complain about the cost of gas, gold, etc. but the low interest rates and falling dollar also cause that. And in the end, bailouts continue to penalize responsible savers, diminishing confidence in the system while aiding the undeserving.
TEDK said:
"It penalizes those who played by the rules and saved money and refused to overpay for homes."
But the didn't "play by the rules". They waited in anticipation of an economic castrosphe to reverse where the free market had brought prices. If they'd done but the simplest of research, they'd have known that the government has a track record of intervention in the market when it is falling. These folks were making their own rules. They were clicking their heels and wishing upon a star that this time the government wouldn't do anything ... but just let the economy decline.
tedk said: "It penalizes those who played by the rules and saved money and refused to overpay for homes."
That's my point exactly, although you're arguing that federal intervention is somehow going to prop up the price of homes. That's completely impossible; the vast majority of people simply cannot afford to purchase houses with their current income; houme prices must drop; it is inevitable, and no amount of external intervention can stop it.
What is not inevitable, however, is a general economic conflagration. That really will hurt everybody who played by the rules. Government intervention to prevent a general economic collapse is both warranted and practical.
Would I like it if the jerks at places like Bear responsible for this mess lost everything they owned and maybe went to prison for bit? Sure, but that's not the way the world works.
Swooping In From Overseas
Cheap Dollars, Weak Housing Market Mean Bargains for Foreign Buyers
By Dina ElBoghdady
Washington Post Staff Writer
Saturday, March 15, 2008; Page F01
www.washingtonpost.com/wp-dyn/content/article/2008/03/14/AR2008031402054.html
"The increase in that kind of buyer has been exponential. I've gone from zero to 10 nibbles since the beginning of the year," said Scanlon, who recently held a class for prospective home buyers at her Rockville office -- in French."
Gruntled,
The government already has programs for those people. Those programms are called bankruptcy, forecloser, welfare, foodstamps, subsidized housing, etc.
I did not buy with the hope of a economic downturn, that thought is asinine.
I did not buy in 2005 because fools were overbidding each other on dumps. I pity fools. A fool and thier money were soon parted. If the government adopts a bail out, then the money should come from the people who sold those homes and HAVE the money. We could charge the sellers with FRAUD. It would not bother me a bit.
Do the blue-blazered people get paid, I wonder.
Always. But not as well as if there was a sale.
Darren said:
In Fairfax Co. the total foreclosures:
Yikes! Those are San Diego like numbers.
The government already has programs for those people. Those programms are called bankruptcy, forecloser, welfare, foodstamps, subsidized housing, etc.
Ok, I am normally a free market proponent. But I happen to agree that the government has to do something on this downturn to keep it from being horrid. Will that keep us from being able to buy homes far more afford ably? No. Prices are declining. My wife and I are presently surprised to see homes we like selling for $250k less than what they were one or two years ago. In many cases the same home! :)
Feddie and Fannie are having trouble selling bonds. That wasn't some odd prediction of mine. The bond buyers were very vocal about it ahead of time (and Calculatedrisk blogged it). We'll see higher down payments and a slightly lower DTI to appease the bond buyers.
The government can do a lot of things, but forcing liquidity is not one of them.
We will recover. This will only be a recession. Now if they'd only wake up and realize what we need is infrastructure. (e.g., the rail to Dulles, both new runways for Dulles and the expanded terminal).
Got Popcorn?
Neil
Harriet,
Neil hit it on the head. The auction team gets paid, but it's probably a pittance compared to the effort they put into it. I'm sure they'll make the owner's pony up a few thousand at least, though.
But if it had sold, I'm pretty sure the bulk of that "buyer's premium" of $14K would have gone straight to the auction team.
A disappointing day for the sellers to have to come to grips with the fact that their house isn't worth as much as they'd want, and a dissapointing day for the auctioneers. A 10% buyer's premium makes a real estate agent's 6% look pretty good.
Xpovos said...
"A disappointing day for the sellers to have to come to grips with the fact that their house isn't worth as much as they'd want, and a dissapointing day for the auctioneers."
I wouldn't put much store in an aution properly valuing a home. The pool of buyers who attend auctions tend to be "looking for a deal" ... they're not your average pool of buyers ... They're either potential homeowners who can't really afford the house or investors looking to get it for cheap enough that they can flip it for it's true fair market value. I actually don't feel sorry for the sellers who didn't sell this house. I feel good for them, 'cause now they'll hopefully realize that if they want full, fair market value for it, they need to go a more conventional route to sell it. And if the market is bad now ... they can just rent it out till the market improves.
I don't know the specifics on that house that went to auction but I think it is a safe bet that the seller is the bank or lender, not the home owner. They are setting a reserve price because they are trying to minimize there losses.
I find it interesting that the preverbial pendulum is now swinging back the other way now. Lenders are requiring a higher down payment and lower DTI before they approve someone for a loan. Now if they had just been somewhere in the middle, all this mess wouldn't have happened.
" And if the market is bad now ... they can just rent it out till the market improves."
Yeah, good luck with renting the old POS - remember this? :
"It was not in excellent shape, but 90% of the problems were simple cosmetics. Minor drywall issues, terrible paint choice and color schemes, etc. A lot of the place looked renovated to some extent, but it was also showing age."
Yeah, this is what people want to rent - NOT!
Maybe for 1/3 of what their Monthly note is...only AFTER they spend the 20K is fixes/upgrades..
Tell me again how their going to make money on this deal ????
John: This is not about whether or not you own a house. My point is that if the government does not do whatever it can to mitigate the inevitable economic crisis we're heading toward, everybody -- that would be you, me, homeowners, non-homeowners -- is going to take it in the shorts big time. Not enough policeman, not enough firefighters, not enough safety inspections, not enough infrastructure maintenance, not enough medicine, not enough hospitals...the list of bad things that happen to YOU in a significant economic downturn that are unrelated to the price of any house you own or may buy in the future is infinite. You were smart, you followed the rules, why should you suffer?
I find myself frankly arguing against my own self interest. Yes, if the economy collapses, my family will have the opportunity to scarf up a fantastic amount of assets at bargain basement prices, given that we saw the writing on the wall some time ago and took steps to insulate ourselves from a severe economic dislocation. Put another way, we skipped the whole leverage frenzy that everybody has been involved in for much of the past decade, meaning the value of our assets did not increase tenfold as many of our neighbors did, however we are not now looking at the value of our assets decreasing a hundredfold on the way down (leverage is a bitch when the wind changes direction). Yeah, I could become seriously, seriously wealthy in five years if I started buying assets at rock bottom. But, man, why do I want to see my family, friends and neighbors hit rock bottom? Them taking a hit is inevitable; them recovering relatively quickly thanks to government intervention in the markets aimed at preventing a complete meltdown is something that i find pretty appealling.
Spunky said:
"Yeah, this is what people want to rent - NOT!"
Spunky, you sound like you've never been in a rental. Aren't you a renter?
For the most part, rentals are usually just whitewashed with a coat of off-white paint and some new really cheap wall-to-wall carpetting. That's all this house needs.
spunky asked:
"Tell me again how their going to make money on this deal ????"
It's certainily not by giving it away as you are advocating. The temporary illiquidity caused scares such as those coming from bubble believers won't last forever. Eventually people smarten up.
Lance,
rentals are usually just whitewashed with a coat of off-white paint and some new really cheap wall-to-wall carpetting.
It's been a renter's market for a while, depending on where you live.
I viewed a crazily upgraded house complete with home theatre, mahogany bar, viking range, outdoor grill, and big kitchen with granite counters for rent for $2,300, and the asking price to buy it was $800,000. It didn't have the right walk-out to the yard we wanted, so we turned it down. Heh. (Pretty silly to think of renters being that choosy, but that's been the market).
Spunky--
Were you the one who mentioned the Lake Manassas subdivision to me? If so, do you know the story behind it? Seems like rarely a day goes by that another new listing doesn't crop up there, and the prices are so crazily all over the map, I am intrigued as to the reason why. Why is everyone leaving/trying to leave? Why is no one buying?
(FYI, Lake Manassas appears to be a gated golf course community just off the 29/66 interchange. Houses were selling new for well over a million dollars a couple years ago--now asking prices start around $600K and go up from there, and many places have been for sale for hundreds of days. I don't live out that way, but I'm just incredibly curious as to what the story is there.)
"It's certainily not by giving it away as you are advocating."
Sorry Lance, it's a renters market, it's already being "given away" as one can tell by Harriets example as well.
I am a renter in a decent house in a gated community. It is not white washed with cheap carpet.
Tabitha-
Lake Manassas is the perfect example of what happens to a neighborhood when it starts to go bad with too many foreclosures. (I've seen it before & I'm seeing it again!!)
The foreclosures start to make the comp prices and it drags the whole neighborhood pricing down the toliet with it.
Sure - they still have a few living the Viva loca thinking they can still get/list a Million for their 2004 home.
But right across the street is the foreclosure (that's bigger & nicer for $625)
Which one are you gonna buy???
Me? uh, I'll be lowballing the $625
Which ones are actually selling now??
gruntled,
I didn't mean to imply that the bailout would directly prop up home prices. Only that the resulting inflation will have a negative impact on buyers. If people wait too long, they may end up paying high interest rates, etc.
The latest news is that JP Morgtan is buying Bear Stearns for $2/share. Wow!
Darren said...
"I don't know the specifics on that house that went to auction but I think it is a safe bet that the seller is the bank or lender, not the home owner. They are setting a reserve price because they are trying to minimize there losses."
The sellers were not a bank or lender. Middle-aged couple. It looked like the house had already been being rented out for a while, hence the mis-matched carpets and wall colors, and some of the tell-tale drywall damage. It was repeatedly stated that this was not a distress, foreclosure or other word for a lender-backed auction. Not a short sale, even. Without knowing where to look I can't say whether they're free and clear on the house, but it was quite possible.
These folks were just looking for profit.
Post a Comment