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Saturday, April 12, 2008
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26 comments:
Great video from ABC news on historical housing trends.
http://cosmos.bcst.yahoo.com/up/player/popup/?cl=7333181
How much trouble are we in after watching this?
Best case, 2 more years of single digit declines, then flat for 5 years, then very modest growth.
Single-digit declines: as a nation, or do you mean DC metro?
DC Metro is my guess.(other places much worse, we just have too many jobs around here) But what do I know, no one knows. I do know that it will probably take 5 - 7 years to fully realize the entire impact. It's not like the stock market where there is a correction over a week or month, this thing is going to take a long long time.
http://franklymls.com/PW6711107
This realtor deserves a kick in the groin!
Check the comments, why would you state "vandalism"? Why would you RAISE the price?
I was curious, because steve said "two more years of single digit declines", which implies that we've been having single digit declines.
From where I'm sitting, we've had double digit declines in many parts of the region, and I see no reason why this pattern should not continue, as many of these locations are still overpriced by a substantial amount.
some bidding advice needed
Hey all,
I was reading this blog, soaking in all the interesting information.
I have been renting since I moved to NoVa in 1999. I originally had looked into buying around 2003, and kicked myself several times as I saw the prices escalate. With the bubble burst I don't feel so bad.
Like many here, it doesn't take a rocket scientist to realize that homes that were going for 250-350k back in 2003 that were going for 450-600k in by 2005-2006 were severely overinflated. And there was no way I was going to go ARM, and no way I was going to pay 500k for a house when I clearly couldn't afford it.
My wife and I now make close to 100k/year and were looking into some Manassas Park and Manassas properties in the Blooms Crossing, Roseberry, and Arrowood neighborhoods. I think we've come down to deciding on a few currently listed in the 300-360k range.
My question really comes down to what has become a fair bidding practice in depressed markets. I'm not just trying to lowball a seller and get a great bargain (not that I'm opposed to that concept), but I'm genuinely concerned that if I buy a house in the next month that I can expect it to continue to devalue as much as 20% in the next 2 years.
A lot of the houses I'm looking at were built in the early to mid 90s, are 4 bedroom SFHs, and sold for mostly under 200k. The assessors listings have the properties' growth (like most areas) into the 300s by 2003, the 400s by 2004, and the 500s by 2005-2006, and a 5-10% decline in 2007. But the 2008 assessments pretty much across the board have priced properties back down to 350-450, according to PW.
So even when I'm seeing sellers pricing their homes at 350k, my gut instinct tells me to offer at least 10% below that price, maybe even 15% as I could see many of these types of properties bottoming out just under 300k. While I still *intend* to live at the property for years, I'd rather not be dependent on it, should life take a left turn (for the better or worse).
Of the three properties I'm considering bidding on (all priced from 350-360). Two are in great condition (each about 2350sq. ft.), one of those two is offering closing costs. Only downside is that the basements are both unfinished, but they are both very clean. It appears both are being sold from owners no longer in the state who had purchased the house originally for 200ish. Both are vacant.
The third is in workable but worn condition and I think might be in short sale even though I can't seem to verify that. The house is more 'worn', but it's larger (2650sq. ft.) and has a 3/4 finished basement that still needs more work (missing outlets, floors need done, etc.) The deck needs fixed up and the kitchen is okay, but I'll eventually have to put some money in it along with some cash I know I'll have to put in to fix a few other things.
Obviously this is all without professional inspection.
Anyway, I've thought of bidding 315-320 on the the first two and closer to 300-305 on the third. Any thoughts or advice?
Thanks,
Sean
Just as a quick hit . . . I would go to MRIS website and look up the stats for PWC. They tell you for the month of March the average list price and the average sold price, and the ratio (i.e. 85% sold/list price-meaning a 15% discount off the list price). I would use that as my starting point. I would probably tack on an additional 5% off. If there is an average of a 15% discount, it means some people are prob. getting 20% off, and I want to be that guy.
After that I'd just start a shotgun, round robin approach, Frank at FrankRealty has got some great advice on how to to that. Personally, in PWC there is so much inventory you afford to be picky and demanding.
If you care about money, one of the worst things you can to is overpay for a house . . . then you spend the next 20 years of your life convincing yourself that you made the right decision, justifying that you will get the money back, blah, blah, blah, when deep down you know you screwed up.
Holy cow. I was just doing a random search on Zillow for a place where I used to live in California, just to see how it was holding up. It's one of several properties I set up as a kind of benchmark, I guess, to see what the market is doing. Amazingly, while this property had seen a modest decline for much of the past year, *in just this month, Zillow reports a 12 percent decline in value*. Now, granted, Zillow isn't the most accurate way to calculate these things, but this is somewhat supporting what I've been seeing for the past year: a long term struggle against gravity, and then, wham, a sudden catastrophic price drop (likely brought on by neighborhood foreclosures or short sales). Makes me much less sanguine about my currently safe environs here in 22207...I think an overnight evaporation of equity might lead to panic selling on the part of other people in the neighborhood, further depressing prices, then people who are underwater just decide to walk away, further depressing values, and so on. I guess the positive spin on this is it looks like it's possible that home values aren't quite as sticky as they have appeared; they may just moves in big jumps, rather than gradual declines, which means this mess could indeed bottom out by the end of this year....
Gruntled said:
"I think an overnight evaporation of equity might lead to panic selling on the part of other people in the neighborhood, further depressing prices, then people who are underwater just decide to walk away, further depressing values, and so on."
These are homes ... not stock investments. People don't just "decide to walk away" from their home because they fear it might be valued by Zillow today for less than it was valued by Zillow yesterday. For starters, where would they walk to? Are you anticipating vast tent cities on our national forests?
Where would they walk to?? Seriously? According to the Census Bureau, the United States has esentially the highest vacancy rate in both rentals and homeowner properties since statistic started being kept in 1960.
http://www.census.gov/hhes/www/housing/hvs/qtr407/q407tab1.html
In seems *possible* in such an environment that one might be able to get a pretty good deal on a place to live.
I swear Lance, if I didnt know better I'd think Harriet writes in your name just spin traffic up (no offense meant Harriet).
"Any thoughts or advice?"
Don't worry about asking a certain percentage below asking.
You need to look at each house and ask yourself what it SHOULD cost. (If you know the market well you should be able to estimate it yourself.)
If it is 10% over what you are willing to pay for it, then bid 15% or so and make sure you don't go over its value in negotiations.
It doesn't matter what they ask, what matters is what it is worth.
If I asked a million dollars for a house worth about $300k then an offer at 25-30% of my asking is reasonable...
"These are homes ... not stock investments. People don't just "decide to walk away" from their home because they fear it might be valued by Zillow today for less than it was valued by Zillow yesterday."
Actually, quite a few do. With no down payment money at risk it makes financial sense to do so in nonrecourse states, and many people are taking advantage of that.
Of course that probably doesn't happen in whatever world you live in.
Uh right gruntled, 22207 is going to see a wave of foreclosures and short sales by the law firm partners, lobbyists and CACI EVPs who live there. Come on.
These are homes ... not stock investments. People don't just "decide to walk away" from their home because they fear it might be valued by Zillow today for less than it was valued by Zillow yesterday.
Complete neighborhoods in Texas & Louisiana walked away during the 80's oil Crash- read the history or google it...
There are already tent cities sprouting up in parts of Cali right now
sean,
I have been looking to buy in the same area, same neighborhoods for more than a year, so I know precisely what you are talking about. We actually have an offer pending on a short sale in Bristow, though we may withdraw it soon.
I agree that you should look at the MRIS website for guidance (Manassas Park and Manassas have been showing 15% below asking for some time now), but you need to look at each specific house and its value, not just trends. And don't forget the concessions that might not be reflected in that figure.
Manassas assessments dropped 20% this year, and are projected to drop another 20% next year. The foreclosure rate for this area is currently double what it was last year, so there are plenty more houses coming on the market soon.
The only way that we will have any peace about buying now--if we do buy now--is if we are absolutely comfortable with our offer being close to the real value of the house TO US. You will still be handing a healthy profit to the sellers who bought back in the day, probably, but protect your family before all else.
If you want more specifics, email me...I have accumulated way too much data this past year, and I know those neighborhoods like I know my own kids.
fd said: "Uh right gruntled, 22207 is going to see a wave of foreclosures and short sales by the law firm partners, lobbyists and CACI EVPs who live there. Come on."
Dude, there's been a walkaway *on my street*. Nice family who had obviously been struggling for awhile; house is not in good shape. But even if you assume that sort of thing will be an extreme anomaly in 22207 going forward, do you really think all the people in this zip will sit here with their $1.5 million mortgages with no equity in 2009 if they can get an identical house in the Ballston / Clarendon corridor for $800 K? You don't think they might at least consider buying that house across the street and just letting the bank take back the overpriced McMansion they picked up for no money down after a six-way bidding war in 2005? We don't need to see a wave of cash-flow induced foreclosures in 22207 to see a wave of foreclosures; the people you're talking about are by definition bright strivers so why would they throw away half a million in payments on a mortgage that will likely be paid off long before that home returns to that value?
i think in foreclosure process they can come after the individual's other assets until unless files for backruptcy chapter7
"i think in foreclosure process they can come after the individual's other assets until unless files for backruptcy chapter7"
That depends on the laws of the particular state.
In many states the laws and contracts are such that the house is the collateral and it is the only collateral.
The bank has no right nor any means to go after a a borrower once they have foreclosed on the house.
Leroy @ 9:58PM,
You're correct. People are walking away from their homes rather than continuing to service the mortgage. This makes sense economically (arguably not morally) if the debtor has little equity in the house and could rent comparably for much cheaper than the mortgage payment. It's a particular problem in Nevada and California, which are non-recourse states for purchase mortgages, i.e., the bank can only take your house upon default and can't go after your other assets. In this regard, there's a service to help people just "walk away":
http://www.youwalkaway.com/
fd @ 6:59:
"Uh right gruntled, 22207 is going to see a wave of foreclosures and short sales by the law firm partners, lobbyists and CACI EVPs who live there. Come on."
22207 is a great zip code, but law firms and lobbying firms are subject to the business cycle, just like everyone else. I doubt there will be mass foreclosures, but prices can drop there, much like they dropped in Manhattan in the early 1990's. So the argument isn't whether it's a nice area; the argument is whether the forces that have set prices there (high paying jobs, confidence in job security, confidence that house prices can't go down in "special" zip codes) will remain in place. Keep your eyes wide open. There's plenty of anxiety among Big Law attorneys about how the ongoing financial crisis will spill over into law firms:
http://tinyurl.com/43ztbv
"Best case, 2 more years of single digit declines, then flat for 5 years, then very modest growth."
Someone denied this this from Steve.
That's the BEST CASE. We are NOT seeing the BEST CASE SCENARIO.
It's definitely 10-20% for 2 more years ..and then definitely flat growth for 5 years.
sean, there is no real rule of thumb as I found out in my search. Your agent should be able to guide you. In my case we offered 7% less than asking plus $5K in closing on a bank owned property. I wanted to offer about 12% below in keeping with a couple other properties we had seen. But the place I am due to go to settlement on later this month had between $10K and $25K worth of improvements over these others.
What to bid depends on whether it is a owner property or bank owned. If a owner is selling low-balling can have a negative effect. I know that one unit I was looking at was priced at $145K; know that they had had offers at the time for $95K and $135K.
The seller out right rejected the $95K offer with no counter. If they buyer "blinked" with their own counter offer it probably would have been rejected out right.
IMO the the $135K (7%) offer they had gotten was a fair price compared to the one I am closing on at $157K given what I would need to do to make me comfortable (the baths need updating in a bad way - I figured about $10K minimum). That doesn't include that my condo will have all new windows and appliances!
By paying $22K between what I think this one place is worth and what the bank accepted on the one I am going to closing on later this month - I am financing EVERY upgrade that I could ever want out of a home from the get go for just $5K more out of pocket than I had planned. And in the end I am looking at at least another $15K I have saved for doing what I really wanted out of my home.
The point being is that I started out wanting to see if I could find a place 10-20% under my budget of $150K. In the end I found out what my agent was trying to tell me about letting the owners "finance" the upgrades is true. May have missed out on an acceptable property in Foxcroft in Fairfax City because I didn't fully understand that.
In the end I gave up connivence to Metro from Foxcroft; but ending up with a home that offers the park lands of Reston. IMO a fair trade off.
gruntled, about zillow - I found them worthless for the communities I have lived in or looked at - including the property I am closing on at the end of the month.
The property I will close on zillow says it is worth $208K, the max is $225K. The reality is that they are trending towards the $180K range.
My old TH in Herndon is showing as $320K verse the $350K I sold for - but many units are going for less on the MLS. It is about a willing buyer and seller to come to terms.
I do hope that zillow is right in the long term. i will have an instant 20% equity. In the short term I hope that I can break even if I have to sell in two to 5 years - with minimal out of pocket expenses.
But I am one of those that am buying not to make money in the short term. I look at as a roof over my head, a place to make my own. Sort of what my parents did. For me it was the difference between the pride of owning verses the costs of renting. For the quality of the place I could not get the same for the $1100 a month that I would have spent on rent.
I do wish I could have found a 3 br unit that I could have been happy with. The 3rd br is next to the master br; just begging for a french door to a sitting room, or maybe taking the wall down to make a super master suite.
Thanks for the responses. I've started to move towards making a few bids. I put in my first one today. I intend to bid with the future in mind and see who bites.
Since you guys are talking PWC in the "Spring Market Over?" thread, I'm going to comment further there.
tabitha said:
The only way that we will have any peace about buying now--if we do buy now--is if we are absolutely comfortable with our offer being close to the real value of the house TO US.
Great words there! Buying a home should be about that - buy a home to live in. Not somethings that you think will bring you big profits.
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