Please post your local house search updates, MLS finds, off-topic ideas, and links here.
Tuesday, April 22, 2008
Subscribe to:
Post Comments (Atom)
Northern Virginia Real Estate Statistics
REAL ESTATE SEARCH
County Assessment Websites
Buy/Sell Without an Agent
Local Real Estate Agents
Housing Economics Blogs
Local Interest
Housing Bubble Links
Eastern Regional Blogs
Western Regional Blogs
- Bakersfield Bubble
- Bay Area Real Estate Blog
- BubbleInfo (N. San Diego)
- Burbed (San Francisco)
- Dr. Housing Bubble (SoCal)
- Patrick.net (San Francisco)
- Portland Housing Blog
- Professor Piggington's Econo-Almanac
- Rancid Truth (Orange County)
- Sacramento Land(ing)
- Seattle Bubble
- SoCal Real Estate Bubble Blog
- Socket Site (San Francisco)
Real Estate Blogs
REAL ESTATE AUCTIONS
113 comments:
What is the foreclosure rate looking like in greater DC? Is it running ahead like the other areas?
Dataquick just came out with their California results and its staggering. Last time it was during year six that foreclosures peak. This is year two of the downturn...
There are enough foreclosures going in in CA alone to hurt the national mortgage market. With half of the jumbo loans being orginated for California... this could be scary for Freddie and Fannie. When you combine this with the data coming out of Florida, Las Vegas, and Phoenix, it implies credit will get very tight very quickly. Good luck getting a jumbo loan in nine months.
That just makes what I want to buy that much cheaper in 2010. ;)
Got Popcorn?
Neil
Neil said:
"There are enough foreclosures going in in CA alone to hurt the national mortgage market. With half of the jumbo loans being orginated for California... this could be scary for Freddie and Fannie. When you combine this with the data coming out of Florida, Las Vegas, and Phoenix, it implies credit will get very tight very quickly. Good luck getting a jumbo loan in nine months.
That just makes what I want to buy that much cheaper in 2010. ;)
Got Popcorn?
Neil"
HaHa ... you really do sound like a vulture ... hoping to profit off the misfortune of others. Foretunately, the lenders and the government itself have others plans. You see Neil, it's not either in the public interest nor in the private interest of lenders to see people profit off of the misfortune of others as you are banking on. I'm certain you won't be having the last laugh. Bad guys always lose in the end.
Normally I don't feed the trolls, but I'm making an exception for you, Lance. I've read Neil's posts on HBB, CR, and here and he's always been rational. I've followed your posts here and they've never been rational. The words you write remind me of a desperate used house salesman who hasn't figured out that his once-in-a-lifetime chance to get lots of money for doing little work has come to an end.
For a number of years people with no money have been outbidding people with large down payments in order to buy a house, which has resulted in unaffordable housing. If you think that's good for the U.S., employers, the economy, or the people (who really are what make up this country) then you're a idiot. The people who have profited are (1) those who sold and stashed the cash away and (2) executives who have received LARGE amounts of money. The former were smart. The latter are criminals, who are probably all politically well-connected and will never go to jail. They are the con artists who lent inordinate amounts of people who, for the most part, have no chance of ever repaying it, packaged those loans, lied about their quality, and sold them. Excuse me if I'm angry. America's economy over the last 13+ years has been based on providing easy money to crooks. But I digress.
No one who is not buying now is a vulture. People who are not buying now are enjoying the interest or dividends that their down payment is earning, however pitiful that may currently be. There's nothing wrong with saving. There's a lot wrong with taking on too much debt.
I feed the trolls more than I probably should...
As usual lance is doing little more than trying to smear the posters here for having the good sense to recognize the bubble for what it was.
Neil made a good point about the fact that credit continues to tighten and lance responds with... insults and strawmen.
Remember kids, only "bad guys" anticipate a declining market and prudently wait.
"America's economy over the last 13+ years has been based on providing easy money to crooks."
Maybe accurate but housing prices started climbing about 2001 around here and that wasn't very much at first. Call it 7 years or 6 or 5, depending on when you think the crooking started and when it ended.
Your call? Was it 13? If so what was the starting sign of the crooking?
Then there's the whole perception from your standpoint thing.
Neil apparently is out West somewhere and commenting on the Northern Virginia Housing Blog. I think he misunderstands this market.
Lance is across the river in DC. My opinion is that Lance has a good understanding of this area.
As for the vulture talk, that's Internet name calling and being cute. I don't care for it as it is not necessary. There were posters on the anti-Lance side who pull the same snide stunts.
Best to ignore them.
ralph, that's a phenomonally sophisticated and nuanced view of corpoate america that you have. If you actually beleive that our economy is actually run that way (and you should have seen the 80s!), I'm not sure why you would ever buy; you'd be better off renting in Toronto, eh?
Well, we're local and we agree more with Neil than Lance.
Vultures? Lance, if that's what you call wanting the best value for my *very* hard-earned money, then vulture am I and proud of it. Am I a vulture for picking up now crashed stocks from people buying at the highs because they were "always going up"?
BTW, which internet stocks purchased at the height in 2000 are you still holding? :-) And as for the government stepping in -- they are out to save the banking system, *not* individuals.
Housing is *cyclical*. Throughout the boom I constantly reminded my friends of this as they panicked thinking they were going to get eternally priced out. Welcome to the bust part of the cycle.
Are there local peculiarities? Sure. DC real estate got beaten to hell in the 80s and early 90s, started to come back in the 90s and has made a real turnaround in the past five years. So part of the run-up is deserved -- but the bubble was also real and it *will* have an effect. Loans will be harder to get, speculators are dropping out. At *best* I expect a flattening of prices for a decade from 2005. If you want a real bear perspective, I suggest itulip.com (which projected the dotcom bubble, housing bubble and gold soaring *well* in advance of just about everyone else).
Personally, I'm waiting to see how the Alt-A/Option Payment loans start falling out. Those were given to higher-income people, the type likely to buy inside the Beltway -- and DC. From what I hear that shoe is only starting to drop.
We're looking to buy 2010-12 timeframe.
Maybe Lance is right. Maybe Neil. Maybe something completely unexpected. Only time will tell and that's what makes all this interesting!
"Lance is across the river in DC. My opinion is that Lance has a good understanding of this area."
Right right... the idea of DC as the next Manhattan is attractive to someone who owns investment properties isn't it?
Lance has been consistently and stunningly wrong about virtually every aspect of this bubble.
You have been little better.
(Remember when "close in" meant inside the beltway? Seems like only yesterday...)
An observation.
From Harriet's Arlington posting, I found the following:
1050 STUART ST N #324
ARLINGTON, VA VA 22201
List Price: $419,000
Prior Sale: $420,000 7/15/2005
Listing Date: 04/15/08
-0.2%
This place was purchased right around the time the market was turning.
Now then, I'm going to use rough numbers because I'm doing this on the fly but I think it'll be close.
$420K for the property and I'll assume (generously) that the purchaser of this 1 bedroom apartment made a 20% down payment.
So, a loan in the amount of $324K is needed. At a round 6% interest rate on a 30 year fixed, every 100K costs $600/month so that's roughly $1950 for principle and interest. Throw in another $200 for condo fees and $325 for taxes (4K/12months) and you get a total monthly bill of $2475 for the privilege of living in a condo.
Now then, with $1950 in principle and interest, I'm going to say that $1800 was interest (roughly to make the numbers easy) and that a third of that comes back due to the tax mortgage deduction. So $600/month in savings back.
So $2475 turns back into $1875.
So, that's $1875 per month, for a 1 bedroom condo.
Now comparable one bedrooms were going for about $1300 in 2005, $1375 in 2006, $1450 in 2007, and $1525 in 2008. I'm just throwing out some numbers for better 1 bedrooms and allowing a generous increase. So an average price over that time is roughly $1412.50.
So this person has paid $1875 - 1412.50 = $462.50/month *more* than he had to for 34 months. That amounts to $15,725 more than a comparable apartment. Plus, they will need to pay another $25K in commissions to sell this place.
So this person is down $40,725 (and counting for each month he carries the place) versus renting.
That's an awful lot of money being spent (misallocated?) on housing costs in my opinion.
How many people out there want to spend an extra $13K/year after the mania over housing prices subsides?
My $0.02
Neil is a vulture not because he is hoping for lower prices but because he is hoping that he will get those lower prices because (1) people will not be able to afford their homes and (2) other potential buyers out there will be shut out from competing with him to buy because of tightening lending standards.
I don't believe either of these two events will happen to nearly the extent he is hoping for them to occur, but the irony is that while the first is wishing bad on many a current homeowner, the second is wishing bad on many a potential homeowner. Oh, I know, you all have lots and lots of money socked away, and of course you won't be one of those undeserving masses that can no longer get the loan they need. Of course not. Like Neil, you're special. Of course for Neil to get what he is wishing for, you can't all be that special. Neil's game is like musical chairs ... But you all think you're going to be sitting in that house when the game is done ...
A rising tide floats all boats ... not the doom and gloom which Neil (and more than a few of you from what I've just witnessed) are hoping for. Fortunately, those in a position to matter understand that and won't let happen the "winner take all",delusional scenario which Neil is so hoping for.
Lance: That "rising tide floats all boats" stuff is demonstrably false. From the NYT: The proportion of hourly workers earning at least $20 an hour declined from 23 percent that year, to 20 percent in 1980, to 18 percent in 1989, and to 16 percent in 2000.
Those are middle class wages that have been disappearing over the past two decades.
And this from the Wall Street Journal: "Middle-class incomes have been stagnant for several years. The well-heeled keep doing better, with the wealthiest 1% of U.S. families garnering the largest share of income since 1929.,,,Nationally, median household pre-tax income in 2006, though slightly higher than in 2004, fell to $48,223 from an inflation-adjusted $49,477 in 2000, according to the Census Bureau. Weekly wage figures from 2007 suggest the decline persists....Pressure on middle-class incomes pre-dates the Bush presidency. The seismic shifts in technology, trade, education, regulation and unions had eroded some workers' incomes as early as the 1980s. That decade also saw the changes in pay patterns that led to huge paychecks for athletes, rock stars and investment bankers while the inflation-adjusted value of the minimum wage declined.
"
So, in fact, the rising tide has been lifting the yachts; the rowboats have been taking on water.
As usual you completely misunderstand what is going on lance.
The bubble was only able to form because of the availability of extremely loose lending. All that we are seeing today is a return to something similar to historical norms.
Once the free money is no longer available the housing market will naturally return to sustainable levels.
Once it has done so anyone with the ability to show some discipline and save up some money before buying will be able to enter the market with ease.
You can spin and spin and spin, we have all seen that. You can't however change the facts of what is taking place, we have also all seen that.
What Neil is describing is no far-fetched scenario and appears well on its way to coming true.
Your theory of, "buy at any price and wait for endless appreciation to make you rich..." on the other hand isn't looking too well thought out at this point.(Not that it ever did.)
Ehh my2cents, rents are higher in 22201 than your quote for "nice" apartments.
If you are looking at Ballston or Clarendon, you would pay $1600-$2000 right now for any 1/1 that is 750 sq foot in 22201 like that listing is.
Also, that particular condo is really nice with an open floor plan and a high end ( granite/stainless )kitchen. You would expect to pay more like $2000-$2500 for an apartment that nice in that zip.
So you obviously skewed your numbers to prove your argument.
Try again!
mytwocents:
rent is in the $1600-1800 range for a 1/1 in this area so your figures are a little bit off.
especially if the place is nicely renovated. this place also has 2 parking spaces i believe.
doug:
at the same time you can buy a NEW 1/1 condo in phoenix or liberty towers for less than 420,000 with a better view and amenities. so i doubt that this listing will fetch 420k. i think it will be more like 390k. and you also have to assume that the downpayment (if it exists) has to be discounted for inflation and opportunity cost.
and somebody certainly can pay $2500 for the 1/1 condo in this zip, but this is only if somebody is not counting his dollars. if you can rent out your investment property as a corporate apartment, collect rent in cash/checks and does not declare it as income but get the mortgage deduction --- yeah, you can make some money out of it -- but not by selling the property after just 2 years.
Neil (mytwocents) lives in California and does not know Ballston from Clarendon to save his life, so what would you expect.
Hey mytwocents.
That is why I tell many people to rent. But sometimes they don't buy for monetary reasons. They buy for the warm and fuzzy and so that when their friends walk into their place they can say "Yes, I own it."
I then ask them if it is worth the extra $5,000 a year to have the privilege, and they say yes.
Frank- Broker FranklyRealty.com
"Neil ... does not know Ballston from Clarendon to save his life, ..."
Interesting. I've found dramatic price differentials between neighborhoods 100 feet apart.
No one here confuses E REED, with Warwick, with Hume, with Del Ray, with Beverly Hills, with MANSION DR. These are all in 22305.
An E REED SFH is overpriced at $300K. A MANSION SFH is underpriced at $3,000 K.
I have never seen a MANSION DR home for sale.
Then we have people in California writing about Northern Virginia Valuations.
Doug,
So pick the high end apartment, the number comes down.
Lower the down payment, the number goes up.
Highlight a better floor plan, the number comes down.
Add in closing cost help, the number goes up.
I told you it was rough math. The point is, it has been extraordinarily more expensive to own a condo than rent an apartment over the past few years. This large delta ($40K+) is a number that even the slow, subject to mania, folks will eventually figure out and it will continue to pressure prices down.
That is, of course, my opinion.
My $0.02
PS - I am not Neil and I am pretty familiar with 22201.
Leroy said:
"Your theory of, "buy at any price and wait for endless appreciation to make you rich..." on the other hand isn't looking too well thought out at this point.(Not that it ever did.)"
Another strawman? I never said anything even approaching this ...
Gruntled said:
"So, in fact, the rising tide has been lifting the yachts; the rowboats have been taking on water."
I know all this ... And what I am saying is that NEIL is a an advocate of this widening gap between rich and poor.
'Buying a home', because of affordable financing, has been one of the few areas where the relatively less rich could be on equal footing with the relatively more rich. Neil wants to see all this affordable financing disapear so that he, the relatively rich one (at least in his own mind), can have what he wants for cheaper. He's told us a thousand times how he could already easily afford to buy if he wanted to ... he just wants to pay less ... at the expense of hardworking people who under his scenario will be shut out from owning their own homes. He's elitist ... and a vulture.
Lets look at another example real quick:
3216 7TH ST S
ARLINGTON, VA VA 22204
List Price: $549,000
Prior Sale: $615,000 6/24/2005
Listing Date: 04/14/08
-10.7%
In early 03 places like this were going for like $380K. My boyfriend and I passed because we "knew" we were in a bubble and the place was really worth $360K. The smart money told me to wait until prices come down, so we rented, and waited, and waited, and waited.
3 years into the "bursting", prices are down but still 45% higher than the $380K everyone told me was just too high. 5 years later, I would kill to buy a place at $380K Anyone want to tell me when places like this in Arlington are going to get back down to the $380K mark again, much less the $360K "true" value?
Im not saying buy now or buy at any price, but lets keep a sense of perspective here. If after 3 years this is all the vaunted bursting in Arlington would give me, it looks increasingly likely I will never get back to my pre-bubble price.
The Anon,
What was the comparison to own versus rent in 2003 for those comparable properties?
My $0.02
Renting a house like that is more costly than just the rental price; those SFHs are often owned by mil or State folks who are liable to come back on 3 months notice and boot the renters out; while renting and waiting it out makes sense in some circumstances I would not advise it in the SFH arlington market b/c anyone who would rent like that has a family (most likely), and moving every year has a psychic cost.
What was the comparison to own versus rent in 2003 for those comparable properties?
$0.02 - honestly I have no idea, but in some ways that misses the point. Its not just a simple dollars and cents calculation - this is not an investment for me. Like others here have noted, there is an "intangible" premium that goes with doing whatever the hell you want, for as long as you want, and not being accountable to some whiny landlord that needs to be calculated in as well. That premium is different for everyone, but for me it is sizeable. As an investment we all know (or should know) residential real estate you plan to live in sucks. But then again, if we were all interested only in investing, very few of us would be on this blog looking to buy at some point.
That said, heres what I do know -
Back in 03, I could have easily afforded it while still saving an enormous percent of my income for retirement. but I didnt because I just "knew" if I waited 12-24 months I would get a better deal. Yeah renting sucks, but I could deal with it for that long.
24 months later, it was up to 600K. I could still easily afford it, but I was making a stand out of principal (dammit, this is a bubble - why dont you burst already)!!! I just knew the bubble was about to burst, the exurbs were already falling quickly at that point. I then figured I can wait another 12-24 months for it to go down mostly out of "principal" but also, why not save a few hundred K in the process?
Fast forward another 30 months. The exurban meltdown is in full force and 03 prices look to be a distinct possibility when everything is said and done. Here close in, things have finally moved down a bit but Jesus it is agonizingly slow. I thought surely things would melt down here too - Ive been lurking on bubble blogs for a long time now and was sure it would start in earnest any day now.
Well 6 months later my tune has changed a bit, suddenly I realize I have been renting for 5 freaking years and if I wait for mid 03 bubble prices to return I could easily be waiting another 5. In the mean time, the chances Arlington will get to that 03 level get smaller, and smaller and smaller. I still hold out some hope that THE fall will hit us close in but at some point I am going to have to say F it an move on with my life.
Look, my story is not for everyone everyone has to make their own determination to move in when they can afford it and when the time is right for them. At the same time however, I am a good example of what can happen if you wait for the "perfect" time to jump in. Maybe some day prices will get back town to where they were I thoutght they should be 5 years ago, but was waiting on the sideline that long worth it. For me, the answer in hindsight is an emphatic hell no.
There are a handful of small homes in S. Arlington under 400k listed right now on the MLS.
Looks like they are selling like hotcakes though.
Check out these 2 listings...
AR6702995
AR6725408
A realitor's website that I sometimes visit made me chuckle. He was searching properties for a client when he says he found a listing with these remarks:
"You can enter the property through the front door, but you will need a drill or crow bar to remove the board from the front
door. Please nail the board back up when you are finished. A flash light is also required."
Can anyone say curb appeal?
Inflation in the DC area between 2003 and 2008 for non-housing costs exceeded 17 percent. That means a house priced at $400k now would be more like $340k in 2003. Or $380k in 2003 would equate to about $445k now.
The Anon:
"Some day prices will get back town to where they were I thoutght they should be 5 years ago, but was waiting on the sideline that long worth it. For me, the answer in hindsight is an emphatic hell no."
Back in 2003, the inventory was very small and it was probably becoming even tighter. Now it is just the reverse. The FED's action to keep the interest rates too low for too long prevented a rational outcome. But the widespread myth prevalent then, that real estate prices either stagnate or rise, but never fall, has been exploded. Prices have fallen and will continue to fall because of the rising inventory.
Just because your decision to wait did not turn out good for you, you should not despair.
You will have your chance soon and in the long run, what you think you missed out will not matter.
Consider this: I lived in Toronto in the late 1990’s and early 2000’s. Everyone there was moaning about the C$ falling to 0.62 US$ and how their standard of living had fallen much compared to the U.S. But by 2005, the situation had reversed and C$ has reached parity and briefly gone even as high as US $1.10.
People didn’t have to do anything other than simply move between currencies in a money market account to get good returns. Likewise, those who beat themselves over ‘missing out’ on the bubble will have their chances to increase their wealth. Those who think they won the lottery during the bubble will see that the falling asset values and the law of averages will catch up with them. Of course, a few of the lucky ones might have cashed out and then invested their profits in something that continues to make them richer. But for the majority of the people, reversion to the mean is a basic fact that they can’t escape. It is not worth to brood over what in hindsight might seem a missed chance.
Also, read today's Post column by Steven Pearlstein--what he describes sounds very plausible to me.
File under what the hell were people thinking:
TRUSTEE SALE 1072 Shain Court, Great Falls, VA 22066
TRUSTEE SALE 1072 Shain Court, Great Falls, VA 22066 Fairfax County In execution of a Deed of Trust in the original principal amount of $1,050,000.00, with an annual interest rate of 10.25% ARM from Richard R. Mackey and Stephanie S. Mackey dated March 28, 2006
A million dollar mortgage with a 10.25% ARM. Brilliant.
bubbleboy said...
"Inflation in the DC area between 2003 and 2008 for non-housing costs exceeded 17 percent. That means a house priced at $400k now would be more like $340k in 2003. Or $380k in 2003 would equate to about $445k now."
Very good point! So, the person who bought it back in 2003 and locked in their payments now has a $445K house for which they are only paying $380K! It really doesn't pay to wait ... unless you're waiting for the kind of place nobody else wants either.
tedk, It sounds like you're talking about a financial investment ... and not what it costs to have a home. There's a difference you know. With an investment you can buy, sell, day trade ... with the end goal being to make as much of a buck as possible by being flexible. Being flexible in your living arrangements (to be able to buy, sell, day trade) is 180 degrees counter to the objective most people have when they look to provide themselves and their families with a stable, safe, and desireable home environment.
I don't know why, but often when I hear a BH explain their motivations for waiting, I swear I am hearing a flipper sans cash talking.
The Pew Charitable Trusts predict that 1 out of 27 DC homeowners will be in foreclosure over the next two years:
http://tinyurl.com/5943o3
Go to the chart on page 10.
"I don't know why, but often when I hear a BH explain their motivations for waiting, I swear I am hearing a flipper sans cash talking."
It probably has a lot to do with your inability to understand basic economics and a fair bit of mirror imaging...
On the one hand you go on and on about what a brilliant investment you made. Then you turn right around and claim that anyone that patiently waits before buying into a declining market is a "bad guy" trying to take advantage of other people's suffering.
The only things you are consistent about is that the time to buy is now and that your little neighborhood is special.
And during that same period (2003 to 2008) the S&P 500 adjusted close increased by 62 percent, far greater than the rate of inflation. Therefore, someone with, say $25k to put down in 2003 likely would have done far better to stash it in an index fund, take the capital gains tax hit, and then buy inflation adjusted housing now.
And, indeed, if everyone bought index funds, you might be right, but neither the world nor this board is made up of perfectly rational economic actors.
Mytwocents: I rent in Ballston and pay 1990 at the Meridian (900 N. Stuart St. 1/1) plus 50 for a car and 30 each for two cats. I know you were doing the numbers on the fly but I’m paying this now so wanted to update your numbers. Also, Meridian isn’t luxury. There is no stainless, no stone, and the tub is plastic (my personal pet peeve).
Lance, I don’t know if you are a sociopath but there is a word for what you describe: Schadenfreude means pleasure from misfortune and is German.
All: Since I purchased a townhouse in 01 and sold it in 05, I had some bubble money to invest in a house. My husband and I did purchase a place (for that warm/fuzzy feeling and babymaking) and we are very happy in it. We placed a value on all 7 houses that we made offers on. We had 6 contracts rejected and not a single counter offer (It’s that part that still astounds me). You all are so good that I don’t want to mention any other details b/c I fear you’ll put the county data up for discussion! Anyway, my point is that I think a purchase can be made in a bubble and still be a fine decision. We are planning to live here for a long time and only time will tell if I’m right.
Finally, yes, I have a mortgage and a lease agreement (up in May). We factored that into the price we offered…and here’s my favorite part: Purchase price = 28% off original list within walking distance to orange line.
bubbleboy said...
"And during that same period (2003 to 2008) the S&P 500 adjusted close increased by 62 percent, far greater than the rate of inflation. Therefore, someone with, say $25k to put down in 2003 likely would have done far better to stash it in an index fund, take the capital gains tax hit, and then buy inflation adjusted housing now."
Notwithstanding the obvious problems with treating your home as a stock to be bought and sold, your analysis is off. If you put $25K in stocks in 2003 and got a 62% return, you'd now have $40.5K (before taxes.) I.e, you'd have made some $15.5K (less taxes). If instead you had used that $25K as a downpayment/closing costs for a home, you'd have saved yourself far more than that $15.5K in that that same house would cost you perhaps a $100,000 more to buy today.
"And during that same period (2003 to 2008) the S&P 500 adjusted close increased by 62 percent, far greater than the rate of inflation. Therefore, someone with, say $25k to put down in 2003 likely would have done far better to stash it in an index fund, take the capital gains tax hit, and then buy inflation adjusted housing now."
Bubbleboy - I still dont think you are seeing my point. Taking your reasoning, I would be even better of waiting 10 years, or even 20, or even never. As I said before residential real estate sucks as an investment. Your calculations do nothing to recapture my intangible "cost" of having a less desirable living situation for the last 5 years.
Put another way if you want to try and capture this cost in dollars and cents, would you spend 5 years in prison for $1? No? OK - how about for Ten Billion? Yes? OK good. Nearly everyone has their price, where it falls between $1 and $10B will vary by person, but it is a cost that needs to be accounted for, but is not covered by your examples.
Now, I am not going to equate renting to prison but you see the point dont you? I choose a less desirable living situaiton for the last 5 years in the hopes that I would be "compensated" for it via falling prices would fall. Had I known I would have been $10 Billion better off for renting for 5 years, I would do it all over again. Had I known I would have been only $1 better off for renting for 5 years I would never do it again.
Where is my break point for the 5 years of less desirable living?Certainly more than 25K certainly more than 50K, but beyond that I dont know - maybe $150K? Is there an extra $150K in those calculaitons I am not seeing? If not, no matter how you slice it, for me I am certainly "worse" off.
The Anon,
I see your point. And I deal with the same issue. For me, the less desireble rental hasn't gotten to be so bad that the price differential is worth it. But it's starting to get there and, as you say, that point moves differently for everyone.
On the other hand, I did not want to bid on a house and need an escalation clause. I did not want to bid on a house and need to waive my rights to an inspection. I did not want to bid on a house after looking at it for 60 minutes.
That's the other side of the coin. For how crazy this market got, one could easily be stuck in a place and have some serious regrets.
I believe patience will be rewarded and that the next 6 to 18 months represents a great time to start buying again.
My $0.02
twocents, I think your position is eminently rational. Although, as I have said many times, I don't think there has been any perceptible decline in livable SFHs within a 10 minute walk of the metro, nor will there be any significant increase in the next few years, and to the extent you can wait to buy and are willing to put in a number of lowball offers, you can likely get a good deal. THe only possible flip side would be that if somehow this recession is mild (i.e. over by Q109) and McCain wins, the combination of tax cuts and military spending is likely to send Arlington prices higher again. But I'm not sure I'd bet on that.
People still respond to Lance? I just ignore him.
FD,
We mostly agree but personally, I see those perceptible declines. It's been very flat to modest in terms of declines, granted, but the pressure is now right on top of Arlington. Falls Church along route 7 and route 50 just inside the beltway is experiencing some tremendous pressure with foreclosures. That will, I believe, continue to lure buyers on the fence out of more desirable Falls Church areas, and in turn, get a few Arlington purchasers to move out to the better Falls Church areas.
That's why I say 6-18 months. You need the next 6 months to push through the effects of the rt 7/rt 50 foreclosures, that will bring down demand/price in the nicer Falls Church areas (6-12 months out), which will in turn put pressure on Arlington (12-18 months out).
Mass real-estate market psychology, (with the continued lending crisis and foreclosure stories) should keep the market from really pushing forward again in the prime areas for the time being.
So all this downward pressure meets an upward slope. The upward slope is the greater likelihood of financially stable buyers in the prime areas. No need for distressed sales. Plus the gradual increase through inflation that buoys prices in the prime areas. So long as they don't have to sell, they can wait out the change in market mass psychology.
We shall see which slope does the driving.
My $0.02
twocents, I just don't see any connection between Arlington and the "county" part of Falls Church (as opposed to the City of Falls Church) which is where the trouble has been. Bad schools, crime, yucky shopping, etc. Having lived in the area for many, many years, there is a connection between Arlington, CoFC, McLean, Great Falls, Vienna and Oakton. And there is a connection between the FFX part of Falls Church, the FFX parts of Alexandria, Springfield, etc. But they really run in two parallel worlds. I literally do not know any family who lives in North Arlington or CoFC who would EVER consider living in the FFX part of FC (except on the lake). I think a much bigger issue for Arlington is that there are great deals to be had in Oakton and Vienna if you look hard enough, as well as in McLean and GF outside the beltway; this is tempered by the fact that most wealthy folks want to minimize their commute, but that itself is countered by the growth of Tysons and Reston, which pushes jobs further our. Obviously, if I worked in Tysons or Reston, there would be no reason to live in CC Hills (and in fact that would make no sense whatsoever). But the meltdown that is Fairfax County government is starting to really hurt Tysons and to a lesser degree Reston, to the benefit of parts of Arlington (really just Crystal City, R-B corridor is all full) and, more realistically, the RTP area of NC.
there are great deals to be had in Oakton and Vienna if you look hard enough
Likewise, they are greater deals in Franklin Farm/Herndon, and they aren't as hard to find.
Or, to not be so obtuse, those areas put pressure on Oakton/Vienna, which puts pressure on Falls Church, which puts pressure on Alexandria, etc.
Um, you must not have read what I wrote. In a lifetime of living in the area I don't see many people, if any, moving from Oakton to the FFX part of FC or the FFX part of Alexandria. They just fit different niches.
"Um, you must not have read what I wrote. In a lifetime of living in the area I don't see many people, if any, moving from Oakton to the FFX part of FC or the FFX part of Alexandria. They just fit different niches."
You generally seem to be one of the more rational posters here, but that is simply nuts.
Of course various parts of Falls Church/Fairfax County compete with Arlington and Alexandria. This is not exactly graduate level economics here. They may be imperfect substitutes but they do compete.
To assert otherwise is little more than wishful thinking. Do you really think people won't move a few blocks to save some money? You don't know people very well if that is the case.
Every house competes with its neighbor only a few feet away. It takes time for market corrections to work their way through the system but in the end the whole region is connected. Northern Arlington on the Orange Line is not a little island with miles of ocean all around it.
The idea is more that adjacent neighborhoods affect eachother. For example, prices have fallen sooner in Herndon than in Oakton, and for the sake of argument, lets say that that a house in Oakton that traditionally costs 10% more than the equivalent house a few blocks over in Ox Road/Franklin Farm area now may cost 30% more. In that case, the house in Herndon suddenly looks much more attractive than the house in Oakton.
Herndon->Oakton->Vienna->McLean/Falls Church (my local geography stinks, but you get the picture).
Call it a domino theory, or call it hedonic adjustment. The idea isn't so much that Herndon affects Alexandria directly, but more that it affects Alexandria through a chain of events.
Leroy: I agree that some people will be delighted to move to save money; others will be delighted to pay more for easy access to things they value, including a better commute, a homogenous (or heterogenous) neighborhood, higher quality schools, etc.
My point, which I'm sure you agree with because it's so obvious (which is likely why you didn't bother to mention it) is that there are a ton of things that can have a significant effect on the demand curve within a neighborhood beyond the price o the house.
I would argue that it's this amorphous set of attributes that makes predicting how prices will move in neighborhoods difficult. I was very much surprised that both the houses on my street sold within a month of each other, one (in really fine condition, just remodeled) for slightly less than the asking price (which was waaaaaaay too much in my opinion, as a nicer, cheaper house could have been obtained two miles West in Falls Church) and the other, in poor condition, after a markdown. Both sat on the market for about five months.
So it looks like
1) There are still banks making jumbo loans.
2) There are still people willing to pay what the seller is asking, for a location / amenities they value.
3) Some people may not believe that prices will fall in places like 22207.
4) Some people may feel that if prices fall in 22207 that won't get burned too badly, unless they have to move in five years before the market has recovered.
Obviously some areas are more desirable than others.
That doesn't change the fact that various areas compete with each other.
Lets say we are talking about a house 500 feet from the magical Orange line and a house a mile from the Orange Line.
Do the two houses compete with each other? Of course they do... If the difference in price between them is large enough the more distant house becomes more desirable.
What is the appropriate price differential? That is for the market to decide... and it is something markets are very good at deciding.
Houses compete with their neighbors, but those neighbors have neighbors too.
This is something anyone should be able to work out for themselves if they think logically.
Why not sell small condos near the orange line for $110,000,000 each? They are near they Orange Line aren't they? If I put up a building of such condos right on top of a metro stop how many would I sell?
I suspect I wouldn't sell a single condo.
People would just buy similar properties across the street for a fraction of the cost.
What if I opened a condo building 10 blocks from an orange line metro stop but priced each condo at $1.00. How long would it take me to sell out?
Obviously these $1.00 condos would be less desirable than many closer in properties but at the right price... I would have a line of people around the block begging for a chance to buy.
There is no neighborhood in this city that is an island.
I am not trying to say that all land in the city will eventually be worth the same because this is of course not true, but trying to argue that _______ neighborhood just isn't affected by its neighbors is nothing more than ignorance or wishful thinking.
Wow, lots of stupid posts and wishful thinking on the part of bubbleheads.
The whole "moving out for more house"
thing is decades old but it still hasnt started eating away at the higher values closer in.
Explain - why should this change now?
Answer - it wont. There will always be a price premium to live near public transportation, and closer to the city.
Leroy's idiotic simplification is absurd, as is his theory that there are no niche markets where people pay more to live.
Face it - even though your logic is flawless Leroy, real estate values will not follow your logic just because it makes sense!
I am familiar with substitution effect All I am saying is that for the vast majority of people who work in DC and live in Arlington/McLean/GF/Oakton/Vienna, Herndon/FFX parts of FC and Alexandria/Annandale are simple never an option. Is it irrational, snobbery, stupidity, whatever you want to call it? Sure. But it is simply a fact. People would not move a few blocks to save money when those few blocks mean an entirely different school pyramid. In my experience with NOVA parents you really can't overstate this enough.
Wow doug, I have to say that even by the low standards you have established that is a pretty poor showing.
I said explicitly in my post that not all the land in DC will ever be worth the same and that people will pay a premium to live in certain areas.
Then you write your post and claim that I said the exact opposite. Do you really think people can't scroll up one post and read what I wrote? While we are on the subject, did you read what I wrote?
My point, which should be within your ability to grasp, is that while some areas will always be worth more than others that doesn't mean they don't compete with similar areas nearby.
As Novawatcher said earlier, you can think of it as a certain premium. Perhaps a nice condo on the Orange line is worth 30% more than a condo a mile away. That 30% price difference may never go away, but that doesn't mean the properties don't compete.
People WILL substitute similar properties if the price differential is large enough. This is BASIC BASIC BASIC economic behavior. We aren't talking about Arlington vs Manassas here, we are talking about neighborhoods that are right next to each other.
Let me say it one more time so I can be sure you got the message.
Many of the areas we are discussing have always been relatively expensive compared to their neighbors, there is no reason to expect that to change.
That said, if the price difference is large enough people will compromise. (That is what the imaginary example from my earlier post was intended to show you.)
If it still isn't clear, look at it this way...
I am currently shopping for a nice apartment in the city I am moving to.
I have a set budget in mind.
Where should we do our looking?
I can afford any neighborhood in the city, but I won't get the exact same thing in each.
Obviously I am going to be looking for the best blend of location, size, price, and everything else.
That is what virtually everyone does.
doug said "There will always be a price premium to live near public transportation, and closer to the city. "
I would say this is mostly true, but not always. I know for my wife and myself we don't want to live near any public transportation. If you look at places without public transportation they are generally nicer neighborhoods. I know, radical overstatement, but from where we look in monkey county, md this holds true. You have a lot more crime and riff raff around metros. Guess maybe thats why the georgetown area has been blocking the proposed metro stop for a long time.
FYI. Lance argues so much because he got a 30 yr loan, where the first 10yr is IO then it converts to a 20 yr fixed on something like 800k. Oh, and he did this all at age 50! Why might you ask? Whether he admits it or not he was hoping that prices would continue to rise and he could sell at retirement age, right before his balloon payment kicks in, and travel off into the sunset.
So, I find it interesting that he calls people vultures when he was the real vulture in all of this.
I realize I may have been a little obtuse above, so let me be clearer. There is virtually no price cheap enough for a parent who has 3 kids in the Oakton HS pyramid to decide, yup, for 300K less let's put them in the Mt. Vernon HS pyramid. It simply NEVER happens. That's not to say there are not people in Mt. Vernon who could afford Oakton, it is just to say that people make different choices and there are different frameworks of looking at this and someone who has chosen Oakton would never consider MV.
"Whether he admits it or not he was hoping that prices would continue to rise and he could sell at retirement age, right before his balloon payment kicks in, and travel off into the sunset."
He admits it, perhaps not the selling when he reaches retirement age part, but he has been going on about how DC is the next Manhattan for years.
He bashes people for trying to get a good deal, then turns right around and tries to convince everyone he has made a fortune on his house. (Which is pretty obviously not the case if you look at what other houses in his neighborhood are asking/selling for.)
The Anonymous
Thanks for the clear thinking. There has been much "wishing" and repetition of church of Shiller mantra.
A bubble busted in 2005, that's obvious on the graphs for many areas.
Lance's BH pals don't want to give up their past dreams and accept that there wasn't a "bubble" in close in, premium neighborhoods.
I track 22305, the North End of Alexandria. Marginal properties, such as you'd not consider living in, have fallen from a hypothetical peak.
Fantasy properties, my example is a $2.2 M spec house on RUSSELL RD, are not selling. There's only one like it in this entire zip code.
Last year (10/2007), a close by similar house sold for $1.4 M, up about 38% from the assessment AND from the 2005 sale price of $1.03 M.
Here, in 22305 and probably in other close-in neighborhoods, properties are holding their value and will probably continue to do so.
Very few people are interested in selling, ever. Several neighbors have said, "Where would I go?"
Are prices in 22305 (or similar close in areas) out of line and about to plunge?
Almost 4 years (2005, 2006, 2007, 2008 to date) of huffing and puffing by BH haven't blown these house prices down.
If I look closely, I think I can detect a 5% or 10% drop in some specific market segments.
Commodity TH's are listed for $400K down from $450K. I recently saw a 50 year old 1/1 garden apartment at $180K instead of $200+K.
On the other hand, nearby 2/1.5 and 3/2 SFH have sold for $600+K, which seems high and is higher than 2005.
Don't beat yourself up over missed opportunities. At least prices have not continued to run away.
BH fantasize that any day now, prices will collapse in the premium areas.
If Beverly Hills/Northridge (22305) SFH drop from $600K to $350K, what happens to Fairfax, then Manassas and PWC? Those places would have to fall to half or a third.
That's if there were a "substitution effect".
Yeah, right. Two neighbors have paid off their places. One drives 2 miles to work in Crystal City.
Sell! Sell your overpriced house and rent in Manassas so you can drive 3 hours a day.
fd said...
“Renting a house like that is more costly than just the rental price; those SFHs are often owned by mil or State folks who are liable to come back on 3 months notice and boot the renters out;”
Sure fd, a 3 month lease in your neck of the woods that common?
Leroy said...
“Remember when "close in" meant inside the beltway? Seems like only yesterday..”
From:
Not in NoVa
Not in DC
Not Close in
Not in my zip code
Not on my block
Not on my street
I think we’re on “Not on Lance’s house…”
What’s next…..valuating individual rooms???
Obviously not a 3 month lease, but a renewal previously thought safe but pulled at the last minute b/c of a Pentagon rotation, all the time.
kh . . .
I call bs on the "no bubble in Arlington" crap.
From: http://www.recharts.com/
mris/mris_7.html
Loudon Co:
Inflation adjusted median sold price
2000 2005 %increase
250k 550k 120%
Fairfax Co
2000 2005
~275k ~550k 100%
Price William
2000 2005
~175k 425k 142%
FAAR
2000 2005
175k 375k 114%
GPAAR
2000 2005
~180k 400k 120%
PWAR
2000 2005
~180k 420k 133%
Alexandria City
2000 2005
~275k 480k 75%
Arlington
2000 2005
275k 550k 100%
I used inflation adjusted and the numbers are approximate, regardless every single area except Alexandria went up at least 100% in inflation adjusted values.
Arlington and Alexandria did not go up as much, but they still participated in the bubble.
So unless you believe that DC, specifically Alexandria and Arlington are under a "new paradigm" where 100% increase is justified I don't see how they won't fall by a good chunk.
Your arguments are trite and worthless. We've only been in this housing downturn/bust 3 years. That's it 3 years!! Normal housing market declines are 7+ years. You're arguing that Arlington won't go down anymore when we're not even (according to historical standards) 50% done?? Helloooo . . . that doesn't make much sense to me.
I don't know if prices will nominally decline or not . . . but I have a strong idea that they will get close to their inflation adjusted values, maybe not exact, maybe 10-20% above, but it's not going to be 100% above them.
Personally, I'd do the following:
If I know I'm going to be here for a while, I'd compare renting vs. buying within my income.
If I can rent a lot cheaper than I can buy, I rent, if renting vs. buying is about the same, I'd buy.
Housing is tied to incomes, unless you can show where incomes went up 100% inflation adjusted, then the values are unrealistic, it's just that simple.
To anon:
Personally, I hate renting . . .but in the time I've rented vs. buying I've save up at least 33% of what it would cost to buy a house outright-and that's only renting after 3 years. I rent on the dirt cheap, save, and sock money away.
If you are renting but not saving a lot more and just waiting for prices to come down-even though they will-you are not taking full advantage of the situation.
Debt is not wealth and you want to get out of debt and not pay interest as soon as possible. lance is prob. one of those people who feels he needs a new car every 5 years, or as soon as its paid off.
I think the difference between Leroy and FD is not the substitution effect, but the severity of a drop you must see for it to motivate people.
Case in point, an urbanite on another blog posted his experience driving through PWC with some of his city dwelling friends. They came across a new McMansion development - monolithic KB homes in the "Low 400s", with the only hope of retail being some strip mall filled with usual suspect chain stores.
The question was asked of all of them, how cheap would these places have to go for you to sell your house and move there? For like 6 of 8 of them, the answer was $0! Question then was, same house but in Fairfax? A few would pay like 300K, but for a majority the answer was like 50-100K.
For the majority who would not pay more, the reasons were all over the place (1) dont want the long commute (2) like walkable communities (3) will not live in soulless McMansion dine in McCulture chain restaurants, (4) environmentally insensitive to live in a big house, etc, etc. The point is, for these people, the substitution effect would have to be MASSIVE to motivate them.
This seems nonsensical to many suburbanites whose primary concerns are enough space for the family, a yard for the kids, etc. For them, it makes a ton of sense to move 10 minutes further out to live in a similar house, similar way of life, similar opportunities for their kids, etc. For them, the prospect of living in a condo near the orange line has little to no value.
Now if this is correct, it could have serious ramifications for the substitution effect. For many urbanites (not all but many), there are very, very few places the would consider living. For them, 10 minutes further out may not really be an option.
By contrast, for many suburbanites (not all but many) there are a number of decent substitutable housing arrangements 10 minutes further out, further north, in another county, etc. Thus for them, the number of substitutes, and therefore the substition effect, is greater.
I pretty much came up with this as I was typing so feel free to poke holes in this or point out things I am missing. However, at first glance, this might explain alot of the difference in attitutdes and prices we are seeing.
KH, in what years did you buy your investment properties?
I think the answer to that question will explain a lot...
"For the majority who would not pay more, the reasons were all over the place (1) dont want the long commute (2) like walkable communities (3) will not live in soulless McMansion dine in McCulture chain restaurants, (4) environmentally insensitive to live in a big house, etc, etc. The point is, for these people, the substitution effect would have to be MASSIVE to motivate them.
This seems nonsensical to many suburbanites whose primary concerns are enough space for the family, a yard for the kids, etc. For them, it makes a ton of sense to move 10 minutes further out to live in a similar house, similar way of life, similar opportunities for their kids, etc. For them, the prospect of living in a condo near the orange line has little to no value."
Your reasoning is sound, but I don't see this as an "urban" vs "suburban" question. The bust has now moved into the close in areas. Portions of Alexandria, Arlington and DC are already underwater.
Obviously the bust hit faster in the suburbs and I suspect you are right that those seeking a suburban lifestyle are probably more flexible about their specific living location, but the same rules apply in the "close in" areas.
Moving back to something FD said earlier about schools being an issue...
...obviously schools play a large role in many people's decision making process but they don't factor at all into other people's decision making process.
Markets are set at the margins, even if a certain percentage of the buyers will only consider certain school districts(and there are options) that doesn't mean that other buyers won't be more flexible. Any net loss of buyers in an area will affect its market.
Besides, much of DC has extremely expensive housing despite the District having arguably the worst schools in the country.(Which puts them among the worst in the western world.)
CRT,
Good Post, did any of your friends have kids? I have a toddler, one on the way in 2 months and 2 big dogs. Unless I could get SFH,2 car garage, .25 arce, in a decent neighborhood for under 500 k I'm not moving inside the beltway.
However if I'm single guy/girl, there is no way I would even think about living in my development. (Tons of kids running around, quiet, no night life).
I bought in mid 07, and plan on staying put for the next 5 - 7 years. I have zero expectations that my house is going to go up in value during that entire time. I would be happy if I only lose 10% after 7 years. This is not an investment for me and my family it's a place to live.
"Whether he admits it or not he was hoping that prices would continue to rise and he could sell at retirement age, right before his balloon payment kicks in, and travel off into the sunset."
Ding Ding Ding - we have a winner!!
Someone has figured out Lances' thought process/angle in this.
Heck I'd be worried too if I'd done something like that at 50!!
I always figured Lance was a cocky 30-something thinking his homepurchase would let him retire at 45 when he sold the place...
NOT! (in your best Borat voice)
Virtually everyone in expensive houses in NW DC sends their kids to private schools. Same thing with Manhattan. Not really applicable to our conversation here.
fd said "Virtually everyone in expensive houses in NW DC sends their kids to private schools. Same thing with Manhattan. Not really applicable to our conversation here."
virtually every person in maryland is a billionare.. See, I can make up things to. Where is your evidence backing this up. I know several couples in DC who all amke in the 200k/yr+ range and they do not send their kids to private schools. Private schools cost 30k/yr+. Maybe the problem is in your definition of expensive.
Let me change your nonfactual statement.
Everyone with 20 million dollar homes sends their kids to private schools. This is probably true.
Did you even read what I wrote? I highly doubt there are many couples living in expensive houses in NW who make 200K per year. If they do, and they choose to send their kids to DC public schools instead of moving to Arlington or Bethesda, well, it's not my place to judge.
another thing, anyone who compares DC to manhattan really demonstrates how little they know about this country.
Manhattan, chicago, LA, these are major cities.
DC is more in line with Dallas/ft worth.
DC does not equal Manhattan no matter how much you want this to be true.
Leroy said:
"Besides, much of DC has extremely expensive housing despite the District having arguably the worst schools in the country.(Which puts them among the worst in the western world"
... and some of the best private schools around. It shouldn't be a given that all parents depend on public schools.
DCBob said:
"DC does not equal Manhattan no matter how much you want this to be true."
I guess that depends what circles you travel in. I suppose if you're happy with being able to find an IHOP on every corner, then perhaps you'd rate DC with Dallas ... actually, you might even rate Dallas higher up on the scale.
Leroy said:
"He bashes people for trying to get a good deal, then turns right around and tries to convince everyone he has made a fortune on his house."
I don't bash peole for "trying to get a good deal". On the contrary, I encourage their doing just that!
What I bash people for is their thinking the good deal will simply fall in their laps without their having to do anything to get it ... other than, of course, just wait for a bubble to burst.
The fact that I've been able to buy a home that most importantly serves my needs but also is now worth more than I paid for it at the supposed "height of the bubble", proves me right.
I'm just glad I wasn't reading this blog back when I was looking ...
"I guess that depends what circles you travel in."
lol, and what, "circles do you travel in," lance?
We have gone around and around on this and you have never been able to provide even the slightest shred of evidence that DC is somehow comparable to Manhattan.
On schools, DC may have good private schools... but that goes for any major city if you have enough money to throw at the problem. The fact that anyone serious about seeing their kids educated at a level above that seen in Appalachia has to resort to private schools is not a good thing.
As for your typical small-minded attempt to slam Dallas... you aren't helping yourself in the slightest.
"I don't bash peole for "trying to get a good deal". On the contrary, I encourage their doing just that!"
lol, so long as you buy now Now NOW! Right?
The bubble is bursting, nobody is waiting for a deal to "fall into their laps" they are simply exercising a bit of patience and prudence with their money.
I don't know why I bother trying to explain things to you anymore. It is more than obvious you have no interest in actually learning.
"I suspect you are right that those seeking a suburban lifestyle are probably more flexible about their specific living location, but the same rules apply in the "close in" areas."
Leroy - Perhaps urban versus suburban isnt the right term, but it is probably something along similar lines. As to your statement above, I dont think I can agree when you say the "same" rules apply in that there is a difference in the degree of the downturn. Specifically, if the suburban areas have more choices, there will be a greater substitution effect. If the urban or close in dwellers have less suitable alternatives, there will be a lesser substitution effect. Mind you, both places feel it, and prices go down in both places, but not to the same degree.
Steve - as to your question about kids, it was not me in that example, but it might as well have been. If I use my block as an example, it is about 75% singles and DINKS (of all age groups), 20% one kid (half of which are trying to stick it out) and 5% more than one kid (most of which want to move out to suburban areas).
"DC does not equal Manhattan no matter how much you want this to be true."
DC Bob - if I may, what precisely was so objectionable about FD's statement? Seems to me he is comparing the 2 school systems of Manhattan and DC. Perhaps he was saying both places have high income and poor public schools (I dont know if that is correct about NYC or not, but it seems plausible) I dont think he said anything about the lifestyle being the same, or wishing it was like Manhattan. Now, had this been Lance, I think its fair to fire away, as he has a long history of believing DC is the next Manhattan - and if FD has a history of this that I missed, fair enough. But unless FD has a similar track record as Lance, I think its a bit much to impune someone as soon as they utter the word.
Leroy said...
""I don't bash peole for "trying to get a good deal". On the contrary, I encourage their doing just that!"
lol, so long as you buy now Now NOW! Right?"
Again, this same strawman ... I've never said "buy now, now, now".
Like I've said many a time, there are many reasons why people may not be in a position to buy now, or shouldn't buy now, but waiting for the market to miraculously hand you your dream home for pennies on the dollar shouldn't be one of them. You're more likely to win the lottery.
"but waiting for the market to miraculously hand you your dream home for pennies on the dollar shouldn't be one of them. You're more likely to win the lottery"
But some how this is different then taking an IO loan at age 50 and hoping your house doubles so you can retire rich..
pot says, hey kettle... your black.
" Seems to me he is comparing the 2 school systems of Manhattan and DC. "
I think the notion that someone could compare DC to manhattan in any way shape or form in ludicrous. We have family friends there who live in probably a 10million dollar row house, who knows what its worth. But its alot. They have so much money its sick, they are like most people that have family in manhattan, uber rich. DC, does not have that same dynamic. DC has uber rich, but the middle class far out weigh the uber rich in DC.
But DC does have a lot of wannabe uber rich. So maybe that is what he meant. I am sure DC has alot of people who are heloc the crap out of there homes so their kids can go to private school.
Lance,
If you bought your house for $400K and sold it for $2M, how would that no be 'profitting from the misfortune of others'? Because "found a bigger fool" sounds better?
"I think the notion that someone could compare DC to manhattan in ANY WAY SHAPE OR FORM is ludicrous." (my emphasis added).
DC Bob - are you sure about this? I could easily compare them in terms of age, hubs of importance in the USA (the #1 financial and #1 political hubs), geographical proximity, etc. You yourself seem to focus only on uber-rich as the main criterion. If we are talking per capita, are they really that different? I happen to know someone who lives in DC who owns one of the very small Brittish Virgin Islands. I happen to know another person who is a member of the old course in Scotland. Would they qualify as the uber rich?
OK - Now I am being stupid and picking on you unnecessarily to emphasize what I am trying to say. If the criterion was uber-rich, I would certainly concede the point. (and if that is what FD was going for, and I missed it, I apologize up front). Heck there is a very good chance the 2 examples I mention have houses in Manhattan as well.
My point was, it really irks me whenever Manhattan is mentioned, more often than not, the barbs come out in full force. In point of fact, if anyone wants to use an example of a big city (for any metric), odds are most people will use Manhattan because it is perhaps the quintisential BIG CITY (Gotham for gods sake)! Whenever Lance says it, it is 100% justified to rip, because we all know where he stands. With the rest of us, if you have any doubt I think its worthwhile to double check what they mean first.
Thanks and sorry for being so critical.
crt, I get your point. I know a family that has a 6 million dollar home in potomac. Its there small house. Sick rich. I think that most people who try to compare DC to manhattan are somehow thinking the prices in DC were justifiably high, like manhattan. Just not the case.
As an example, did you know that Milwaukee Wisconsin has one of the highest per capita 100k salary jobs? Its ridiculous. I am from Wisconsin, I would have never guessed that. But, would I compare Miwuakee, WI to DC just because there is soo much money there? NO. Would I say that real estate in Milwaukee should be has high in DC? no. This is whats missed by the Housing Heads. They think because there are alot of high paying jobs here we must have high realestate prices, just like manhattan. The reality is, its just not the case. DC prices are only high because 30% of all properties bought from 2003-2006 were investment properties and 50% of all properties purchased over that same time period were interest only. (this data is from the washington post and has been posted many times, I didn't make it up)Thats it. They will come down, just like they are.
Superboy lance even took an IO with the dream of getting rich quick.
No doubt Bob - there are a very select few places that justify uber prices. New York, London, Paris (debatable) Tokyo (very debatable) Chicago, LA & Hong Kong (very debatable but conceivable). And maybe one or 2 others - I may even be too generous. DC cannot sniff their jock shorts.
One caveat, you will find pockets of uber rich here but they dont necessarily call this home. In a way its like the uber rich in Frankfurt, or Brussels very few want to be there of there own accord, but many have to for one reaon or another.
Incidentally, does anyone else have any comments about my post a while back about the substitution effect being different depending upon where you live? I really was throwing crap against the wall to see if it sticks and was expecting someone to point out something I hadnt thought of. As you can probably tell, the difference in price fall is sort of a pet fascination of mine, and I am still trying to figure out what exactly made it happen to date.
http://www.npr.org/templates/story/story.php?storyId=89803663
Link above is to today's NPR story on how close-in neighborhoods are escaping declines in real estate values -- precisely what I've been saying about much of N. Arlington. Article even includes a picture in Clarendon!
Hey thanks Tom! The BH won't like the report from their high priest:
David Stiff, chief economist for the company that produces the Case-Shiller Home Price Index, saw the trend in other cities, as well — including Los Angeles, San Francisco, New York, San Diego, Miami and Boston.
Stiff recently matched home resale values against commute times and found that in most of these major metropolitan areas, the trend is the same. The longer the commute, the steeper the drop in prices.
...
Stiff says buyers are now asking different questions: "What is the cost of gasoline? What is the cost of my time?"
As I said, one neighbor who has paid off their house, a 2/1.5 SFH on a lovingly landscaped 10,000 sqft lot in 22305, drives 2 miles to work in Crystal City.
It's over. The word is out. You can buy cheap but you'll pay the price in your commute.
Those two $600K SFH that sold a few months ago in 22305 were bargains. (my opinion)
Hey GTE, look closer!
Alexandria City
2000 2005
~275k 480k 75%
Arlington
2000 2005
275k 550k 100%
I used inflation adjusted and the numbers are approximate, regardless every single area except Alexandria went up at least 100% in inflation adjusted values.
Arlington and Alexandria did not go up as much, but they still participated in the bubble.
So unless you believe that DC, specifically Alexandria and Arlington are under a "new paradigm" where 100% increase is justified I don't see how they won't fall by a good chunk.
22305 is in Alexandria.
CRT asks about substitution.
My opinion - this is a game of the BH's.
You said, This seems nonsensical to many suburbanites whose primary concerns are enough space for the family, a yard for the kids, etc. For them, it makes a ton of sense to move 10 minutes further out to live in a similar house, similar way of life, similar opportunities for their kids, etc. For them, the prospect of living in a condo near the orange line has little to no value.
Now if this is correct, it could have serious ramifications for the substitution effect. For many urbanites (not all but many), there are very, very few places the would consider living. For them, 10 minutes further out may not really be an option.
The problem is that, way-out-there, isn't 10 minutes away. It really is, way-out-there.
Another aspect is that the price crash happened, way-out-there because that's where land is cheap and it was easy to overbuild.
It's much harder to overbuild close in, although people will try. They can build high-rises and row houses but it is very hard to build a sea of SFHs close in.
SFH's end up as a scarce commodity.
Exactly as expected and as recognized by the report in NPR.
kh . . .
I'm not sure what your point is???
If it's that I typed Alexandria and earlier type Alexandria City . . . I'm sorry, I was talking about the same in both. I was also going from the numbers from the website I posted.
So what is your point?
Can you refute that everyplace has recorded huge inflation adjusted gains, while incomes have not kept up.
Please show me where incomes over the past 5 years have gone up 75-125%. I would love to see that. Shoot I would love to see data showing incomes have risen 100% since 1995. Even in Arlington prices are not justified by incomes.
Total comp for large law firm associates went up 75% in the past 5 years, and have more than doubled since 1995. Total comp for partners has increased even more. Same for lobbyists, association execs, etc. Not true for the region as a whole, of course, but the last 10 years have seen a huge jump in income disparity to the benefit of the upper earners. Forget about the numbers, if you don't see that you are either not traveling in those circles or not keeping your eyes open.
FD, I posted recent income numbers for Arlington county.
There simply hasn't been the massive growth in incomes you claim. The very top income bracket did grow faster than the population as a whole, but incomes didn't come CLOSE to doubling.
All of these stories about lawyers or whatever are little more than anecdotes, Arlington's population in general is only marginally better off than they were in the late 1990s.
"kh . . .
I'm not sure what your point is???"
KH just honestly doesn't understand what is going on. That is why he/she keeps resorting to calling economics a religion and various economists priests...
If KH can't grasp what is going on then KH assumes nobody can.
We have one real troll on this blog and it isn't KH. I think KH really just can't get a handle on what is happening. (and is obviously hoping for the best because of his/her real estate investments)
Leroy, all I can say, and I mean this with all respect, that if you haven't seen the massive income growth in the upper brackets in the past few years you just aren't traveling in those circles. Just walk into BLT Steak at 1 pm any weekday. A place like that (or CPS) was unimaginable in DC 10 years ago.
Note that I don't think this is a good thing for the country, just a fact. And none of this has anything to do with "average" income.
Or just compare the American Lawyer from 10 years to today.
fd . . . .
Yeah and CEOs pay has quadrupled, your point?
I'm sure that everyone that lives in Arlington is a lawyer or a lobbyist.
What kind of rocks you smoke?? I need some of that. Both Loudoun and Fairfax have higher median household incomes than Arlington, yet Arlington is protected b/c of lawyers . . . okay . . . if you say so.
Can you not admit prices are out of whack with incomes not matter how you slice it?? Or are you in denial?
I give up on this thread. I really think some of you have spent no time in the places you are writing about. Because, of course, if you go to PieTanza or the Yorktown LAX game on a friday night, it's not like you are going to come upon any fathers with important jobs downtown...nah, of course not.
FD, here is the relevant information from my post a few weeks ago:
======================
Here is a great breakdown of household incomes in the area:
http://www.arlingtonvirginiausa.com/statistics/_22.pdf
49% of Alexandria's HOUSEHOLDS(note these are not individuals) made <60k in 2005.
In Arlington's case the number is 44%.
Add in the households that made between 60k and 100k,(26.7% in Alexandria and 27.3% in Arlington) and you get ~76% of households in Alexandria and 71.3% of households in Arlington making 100k or less.
Only 10% of Alexandria households and 12% of Arlington county residents make more than 150k
Check out this chart for even more detailed information:
http://www.arlingtonvirginiausa.com/statistics/_24.pdf
One interesting thing that does stand out to me is that there is some truth to the anecdotal reports that there are increasing numbers of very highly paid individuals in the area.
Households making 150k+ in Arlington more than doubled in the 15 years between 1990 and 2005. That is a very impressive number, if you are lucky enough to be among those then it is not surprising that you would believe the whole area is getting rich, but the data tells another story. Outside of the top couple income brackets the rest of the chart looks much as it did in 1990.
===========================
Now what about that is unclear? It is great that lawyers have been doing well lately, but they are a tiny percentage of the population.
Perhaps you are lucky enough to be among those in the top income bracket where there has been some growth, if so I suspect you need to broaden your horizons a bit.
There are some rich people in Arlington, but Arlington in general is only marginally richer today than it was before the bubble.
The run up in prices seen during the bubble was not supported by incomes. No number of anecdotes will change that.
fd
There are some incredibly wealthy people in arlington and dc. However, I will give you a secret. Many only appear wealthy and give the illusion of it. If you really look at their finances they are in deep crap, the moment they lose their job or something happens they are in a world of hurt.
Making tons of money != wealth or being rich.
One thing I know, having a median household income of 87k (2006) does not justify median housing prices of 500k.
Leroy, exactly what percentage do you think SFH owners in 22207, Lyon Park, Lyon Village and Ashton Heights are of all of the people who live in Arlington? I'm serious. I have no idea but I'd be shocked if it was more than 20%. So I'm not sure we are disagreeing actually.
I don't have any idea what percentage of them fall into those criteria... but I can tell you for sure that $150k is nowhere near rich in this area.
Knowing the way bell curves work the large majority of those 12% making $150K+ are going to be making less than $250k.
I am unaware of any statistics that will give us an answer here.
Can you refute that everyplace has recorded huge inflation adjusted gains, while incomes have not kept up.
My point was that Alexandria at 75% was below 100% which was your original low end. You corrected that in your later post, which is fine. I accept that.
Second, as FD (and Lance) have pointed out, salaries are very high in this area and are rising. More accurately billing rates are very high.
Lawyers? They do O-K but there are many, many specialists and non-specialists who earn high numbers too.
You may have noticed that there are two wars being fought. People who provide vital support, sell essential goods, work on provisioning systems, command good rates. Many of them work in Crystal City, Pentagon City, Rosslyn, and near by DC.
The wars started on 9-11-2001, by 2002, DC housing prices were raging.
Coincidence? Maybe. Secretaries with special building passes can earn $150K/year as opposed to $50K in places like Atlanta, LA, etc.
gte said:
"Yeah and CEOs pay has quadrupled, your point?
I'm sure that everyone that lives in Arlington is a lawyer or a lobbyist."
The point is that it doesn't matter if not everyone's pay has gone up. Those who have the cash have more of it ... and are willing to put down more of it to get that limited commodity called "inclose, desireable real estate". And oh, incidentally, there are a lot lot more of these folks around now than there were pre-Bush administration.
"The point is that it doesn't matter if not everyone's pay has gone up. Those who have the cash have more of it"
It's a new paradigm!! It doesn't matter that most incomes haven't risen b/c those whose income did rise will just swoop in and buy up all the houses from those who can't afford to buy . . .okay. . . please pass the pipe!
kh . . .
uh yes two wars helped, but interest rates at 1% for 2 years helped even more. Of course now that multiple government agencies are not hiring or cutting back it will work in reverse.
Of course don't forget we're in a load of crap right now financially b/c of two wars and Easy Al's 1% interest rates . . . or don't you read the financial news?
"Secretaries with special building passes can earn $150K/year as opposed to $50K in places like Atlanta, LA, etc."
I would be interested in you providing an example of such a secretary.
Even if there is one, and there might be in the right specialized niche, the comparison to Atlanta is pure BS...Secretaries in DC are absolutely not making 3x what their equivalents in other major cities are making.
That is the whole point of providing the statistics I did. DC is not half as rich as you and the rest of the speculators wish it was.
Do you really think you can just make things up and people will believe you?
uh yes two wars helped, but interest rates at 1% for 2 years helped even more. Of course now that multiple government agencies are not hiring or cutting back it will work in reverse.
Of course don't forget we're in a load of crap right now financially b/c of two wars and Easy Al's 1% interest rates . . . or don't you read the financial news?
I 100% agree w/ you, GTE. There are signs of cuts in war spending. Won't go into the Obama-McCain-Clinton puzzle other than to say that the election will affect jobs and real estate prices.
How do you measure the affect on close-in housing of the war doubling or tripling salaries and billings since 9-11-2001? This market (22305), Arlington, DC, is thinly traded.
It's not just salaries. It's bonuses; it's job retention; it's profits for companies that are supplying goods and services to the war.
This might be one reason that RE has held up close in, 3, 4 years after the collapse, way-out-there.
Part of our load of crap is gasoline going from $1.29.9 to $3.59.9 (Shell Station, Route 1, Crystal City).
I'm not saying that a $600/month gasoline bill is the reason to move from way-out-there to 2 miles from the Pentagon but it will cause a few people here to value their close-in place.
... the moment they lose their job or something happens they are in a world of hurt.
I agree with you on that. You're describing what happens when a major funding stream closes down. Sorta like what AOL is going through now. Should be more bargains around AOL soon.
"How do you measure the affect on close-in housing of the war doubling or tripling salaries and billings since 9-11-2001? "
Why not look at the actual statistics instead of just making things up?
Oh wait, those numbers don't show anything like a doubling or tripling of salaries...
Funny how that works isn't it?
"Part of our load of crap is gasoline going from $1.29.9 to $3.59.9 (Shell Station, Route 1, Crystal City).
I'm not saying that a $600/month gasoline bill is the reason to move from way-out-there to 2 miles from the Pentagon but it will cause a few people here to value their close-in place. "
Who the heck has a $600/month gasoline bill?
Do you even stop to think before typing the stuff you do?
$600/$3.60 = 167 gallons of gasoline, PER MONTH.
At 30mpg that is 5k miles of driving per month, or enough for 170 miles of driving, per day, for 30 days a month. (250 miles per day if you only count the 20 work days)
Yeah yeah, I am aware there are a handful of people who commute in from crazy distances but a 100+ mile commute, each way, is pretty exceptional.
Another way of looking at things... take your 167 gallon per month number and compare what it would cost at $2 and $3.6 per gallon.
That works out to $334 or $600, a difference of $266 per month.
That is roughly the difference between a 400k mortgage at 6% and a $445k at 6%.
So even in the case of someone who is using a simply absurd amount of gasoline this isn't going to come close to supporting bubble level pricing in close in neighborhoods.
There are now plenty of cars on the market that will get 40 or more miles per gallon. Why on earth would people want to buy a new house and change their style of living when they could just buy a more efficient car?
40*167 is 6680 miles per month on that much fuel. Do you drive 80k miles a year?
Leroy asked:
"There are now plenty of cars on the market that will get 40 or more miles per gallon. Why on earth would people want to buy a new house and change their style of living when they could just buy a more efficient car?"
Uh ... maybe because what started off as a 40 minute commute when they bought out there 5 years ago is now an hour and 40 minute commute now that everyone else has bought a house out there ... ?
There are, of course, no suburbans or tahoes in Loudon that get 12 MPG...
"Uh ... maybe because what started off as a 40 minute commute when they bought out there 5 years ago is now an hour and 40 minute commute now that everyone else has bought a house out there ... ?"
That is a completely different issue as we are clearly talking about gas prices...
Do you have any information on how much the average commute has increased over the last five years or did you just make that number up again?
If you actually have some real data this time it would be interesting to see.
"There are, of course, no suburbans or tahoes in Loudon that get 12 MPG..."
Of course there are, but which is easier? Buying a new car or moving?
Assuming the person in question is otherwise happy living where they are, gas prices are certainly not going to force them to move.
A Honda Fit or a Toyota Yaris will set you back less than $15k brand new and get ~35mpg.
If you simply must drive an SUV then there are several now on the market that will get ~30mpg.
Obviously if someone chooses to drive a ridiculously inefficient vehicle then they will use a lot of gasoline. Large SUVs make poor commuter vehicles.
Uh ... maybe because what started off as a 40 minute commute when they bought out there 5 years ago is now an hour and 40 minute commute now that everyone else has bought a house out there ... ?
It's this. The same mindset that buys a McMansion on 2 acres, takes out equity to buy a 3500 crew cab for commuting.
They won't sell the house or the "car" because they are upside down on both.
It's very common.
You are commenting on the "mindset" of someone in a made up example?
Post a Comment