836 GREENBRIER ST #111G
ARLINGTON, VA 22204
List Price: $191,900
Prior Sale: $345,000 2/16/2007
Listing Date: 05/14/08
-44.4%
5400 8TH ST S
ARLINGTON, VA 22204
List Price: $214,900
Prior Sale: $375,000 7/28/2006
Listing Date: 05/10/08
-42.7%
1311 POLLARD ST
ARLINGTON, VA 22204
List Price: $349,900
Prior Sale: $515,000 1/12/2006
Listing Date: 05/14/08
-32.1%
1903 EDISON ST
ARLINGTON, VA 22207
List Price: $394,900
Prior Sale: $550,000 4/18/2006
Listing Date: 05/14/08
-28.2%
4600 FOUR MILE RUN DR S #1118
ARLINGTON, VA 22204
List Price: $234,900
Prior Sale: $314,000 6/3/2005
Listing Date: 05/09/08
-25.2%
3354 2ND ST S #3354
ARLINGTON, VA 22204
List Price: $393,900
Prior Sale: $515,000 10/25/2007
Listing Date: 05/14/08
-23.5%
See Arlington County 5/21/2008 for more comparisons from this week's listings.
(Links by FranklyMLS.com)
Wednesday, May 21, 2008
Arlington County -- On the Market
Posted by Harriet at 9:13 AM
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77 comments:
More "isolated cases" ... of price drops that haven't really happened.
When the May numbers come out, I'm quite sure you'll see a decrease in PWC inventory because houses are definitely selling in Woodbridge, a lot of them within days or weeks. The nicer townhouses are going from the low to mid 200's and the smaller, older SFHs are going between 150-200K. It seems like prices have finally gotten to the point where they make sense to buyers, so they're getting back in the market.
duh,
You're absolutely correct. Things in the "right" price ranges are doing very well in PWC, and I mentioned in a prior post that the May sales are going to show a much lower inventory for PWC (probably 5 months' worth).
Which leaves me with a few questions: (1) Does this mean that prices will necessarily rise in PWC near-term; if so, to what extent; (2) Is this a short-term buying spree, and is there still a possibility of sales drying up until next spring; (3) How many of those contracts are non-contingent on a house sale, and how many contracts will fall through?
Here is one in correction-proof Clarendon:
3507 PERSHING DR
Arlington, VA 22201
List Price: $712,500
Prior Sale: $860,000 8/29/2005
Listing Date: 03/25/08
-17.2%
Leroy--what on earth are you talking about--that list is basically all South Arlington, I don't think there was anything north of 29 in the negative category.
John--I actually toured that house, was considering making a bid for investment purposes (i.e. renting it out). I am stunned that someone paid 860K for it in 2005, there are way better houses in AH and LP that went for a lot less even at the peak. If you check out the Arlington sales record for the house, it looks like some of the ones in 22204, which is rare for north of 50.
narl - You should be stunned that someone paid $860,000 for it, but that was the going rate at the time. The market didn't make sense then, and that is why it is slowly correcting now. I'd guess the fair value of that property is the low 500's, primarily due to the land value.
And just so you know, north and south Arlington are divided by Route 50, not Route 29.
John, I leave it to others who know more about that area than I do to correct me, but I would be beyond stunned if 860 was the going rate for a house like that even at the absolute peak. One of my associates bought a hours around there but a few blocks closer to the metro at the exact same time, paid around 50K less and the house is a lot better. As I said, I suspect there was something else going on.
And I have to laugh at the low 500s. I would put a lowball bid in myself of 650 or so except that it is bank owned and those take forever and are frustrating as hell. It will eventually sell for a teardown at around 625-675, like most other lots around there in the same size.
I personally am not going to get too excited about this in that Harriet posted a slightly worse "on the market" for Arlington last month, and yet it responded with a median sales drop of -2.06%.
Then again, if you see this sort of thing going on for many months...
Re: PWC uptick in sales. I'm still not seeing it. My anecdotal coverage area still has mostly short sales which aren't moving. Blame it on the banks, or something else. Some houses are selling, but the bank-owned are slow, if at all. That may speed up, and the prices may well be upwardly represented by the non-short-sale/foreclosures. I.e. someone who had equity bit the bullet and someone paid more for a house than the low price because the deal would go through, or the quality was higher.
But still to many short-sales means too much distress in the market here and too many bank-owned properties. This dam is still waiting to burst.
xpovos - I totally agree with you. Ive been looking for a townhouse in PWC for a few months now and I am seeing more short sales than ever right now. I'm getting the sense that the inventory is slightly coming down but the amount of short sales is actually coming up. Maybe its a case of the number of foreclosures coming down while the number short sales are actually staying steady (giving the market a higher % of short sales, and the perception that there are more short sales now than before), but it really seems like there are more out there than ever. Now if the number of pre-foreclosures is actually going up in PWC, I assume one of you smarter people will actually tell me what that would mean down the line :-)
narl said: "I leave it to others who know more about that area than I do to correct me, but I would be beyond stunned if 860 was the going rate for a house like that even at the absolute peak."
Well thank you. I live in the neighborhood and follow the market very closely. 860 may have been slightly over market, but it is in the right ballpark. And yes, it is absolutely nuts.
"And I have to laugh at the low 500s. It will eventually sell for a teardown at around 625-675, like most other lots around there in the same size."
It may in fact sell for 625-675, as the market does continue to price properties at irrationally-high prices. There are several other properties in the neighborhood that have sold for the low 500's or less, so you shouldn't think of an offer of 650 as lowball.
Heck, if you yourself say that 860 was a completely nutso price, then why would you consider 650 to be a lowball price? Seems like it should be more along the lines of:
860 - nutso
650 - somewhat reasonable
450 - lowball
If you believe California leads the nation, this article may interest you. Others, I’m sure, will argure that DC is different:
At the luxury end, home prices are falling
The region's most exclusive neighborhoods suffered big drops in April, data show. Median sale prices fell 13% in Beverly Hills, 34% in one area of Newport Beach.
The rich may indeed be like the rest of us. Prices of their homes are now falling too.
Gated mansions and hillside estates have held their own through most of the real estate slump, but data released Monday showed big drops in the region's most exclusive neighborhoods.
Median sale prices fell by 13% in Beverly Hills in April, compared with the same month last year. Rancho Palos Verdes dropped 18% over the same period, while Newport Beach's 92660 ZIP Code took a 34% hit, according to DataQuick Information Systems.
Experts say these areas and others are catching up with price declines that struck first in outlying suburbs such as the Antelope Valley and the Inland Empire, where many first-time home buyers purchased their properties with sub-prime loans.
"You can't have one market hugely cheaper than another forever," said UC Berkeley professor Thomas Davidoff, who specializes in real estate.
Davidoff and others say the time lag stems from the fact that affluent homeowners generally don't have to sell under duress, unlike struggling borrowers facing escalating mortgage payments. But wealthy homeowners are increasingly finding out that if they want to sell their homes, they will need to discount the prices.
. . .
Expensive markets often resist declines for several reasons. Sellers in high-priced areas often have a large amount of equity in their homes or own them outright. That makes them more able to sit on their houses and ride out a market downturn than people desperate to unload a house with a mortgage they can't handle.
But with the passage of time, sellers who want to move but have been waiting for a market turnaround grow weary of waiting, Berkeley professor Davidoff said.
"It's like being in a teakettle. People eventually want to get out," he said.
The weakening overall economy will be another likely drag on prices at the high end, said John Burns, an Irvine real estate consultant.
"Executives are now losing their jobs too," Burns noted.
Finally, tighter lending standards and higher interest rates for jumbo mortgages -- those for more than $729,000 -- are making it harder for some people at the high end to get loans, said USC real estate professor Delores Conway.
Conway believes "sales activity will go up if there is more liquidity."
But some affluent buyers say high prices, not tough credit standards, are keeping them from purchasing a home. It's simple, they say: Just as in the under-$500,000 market, buyers will come forward in expensive neighborhoods when prices fall.
Simon Lee, a commercial real estate investor who has been shopping for a house in Bel-Air, Pacific Palisades and Brentwood, said he believes that prices in those areas are still inflated in today's market.
"I think it needs a major adjustment, 25% or 30%," he said.
Lee said he was among a small group of bargain hunters scouring those Westside neighborhoods for homes priced under $2 million.
"I see the same people every week at the open houses," he said.
http://tinyurl.com/4ewgk2
----------------------January February March April
Northern Virginia Totals 2008
Total Units Sold 2008- 716 - 969 - 1,250 - 1,455
Total Listings 2008--8,937 - 9,497- 10,123 -10,699
Hope that didn't scroll out to look ridiculous. Data is from NVAR website for all of "NOVA" which excludes Loudon and PWC
Wow... that sounds really really similar to(as in virtually word for word) what people have been trying to explain to our local real estate pumpers/speculators...
The outer areas get hit first because they have the greatest percentage of marginal and recent buyers, but in the long run the bust will reach everywhere where bubble pricing was seen.(which is the whole region)
The inner areas are getting hit slower, but they are now feeling the bust and will ultimately see significant price declines.(Though not as much as places like PWC...)
May sales are going to show a much lower inventory for PWC
This could be a problem in PWC:
Foreclosures are also adding to supply pressures. The Realtors' inventory data include only homes listed for sale; many foreclosures are sold through auctions, and not on the multiple-listing service. The true inventory of homes on the market is likely understated.
http://tinyurl.com/6jty6b
Though not as much as places like PWC
Probably because the higher-tier properties did not increase as much, percentage wise, as the lower-tier proberties:
Case/Shiller Index (Washington DC):
Low tier index:
1/2002 125.46
7/2006 296.55
Low Tier Increase: 136%
High tier index:
1/2002 125.74
7/2006 222.78
High Tier Increase: 77%
http://tinyurl.com/3ljx23
Zerodown said...
"If you believe California leads the nation, this article may interest you. Others, I’m sure, will argure that DC is different:"
Funny you should mention that. Here is an article I found today that suggests DC is like every other major city with a central core, but that LA is the one that is different.
"Downtown: It's been among the safest places to hide from the housing downturn. And in big cities, prices in the central cores often fare the best....
L.A. is an anomaly. No real urban core exists. The area is just a sprawling string of suburbs that run together."
http://finance.yahoo.com/real-estate/article/105126/Where-Home-Prices-Are-Holding-Up
And therein lies the one thing that still perplexes me. Wealth alone is not the answer. If it was PWC would have fallen a while ago, but Loudon and Farifax would only now be showing serious signs of a downturn. The question then is, how much does having a real "core" matter?
Cities like LA, Phoenix and Las Vegas have no real core, so in a way its not surprising to me their wealthy areas are only now starting to fall. However, if areas within another large city with a core start to show serious declines, then it is clear all bets are off as far as DC goes.
Please dont take this as a cop out - I still believe prices will revert to the mean. I dont want to say Lance's new paradigm stuff is in any way correct, but in some ways, perhaps what we are seeing nationwide is a new meaning of what the "mean" is.
CRT:
It appears the WSJ article is using first quarter DataQuick statistics and Case/Shiller through February 2008, while the LA Times article is using April, 2008 DataQuick numbers.
From reading the LA Times article, I get the impression that the April numbers have revealed a bigger drop in higher priced houses than earlier months. The LA Times also mentions that, “The decline in the high end market can be seen” in San Francisco as well; however, it does not identify the high end San Francisco market with the city’s “inner core.” It would be interesting to see the First Republic Bank of San Francisco study referenced in the article.
I guess we will have to wait and see how it all plays out.
From WSJ article:
Consider the San Francisco Bay area. Overall, prices there slid 17% in the 12 months through February, the most-recent data available, and were down 8% over the first two months of 2008 alone, making it one of the worst-performing metro areas in the country, according to the S&P/Case Shiller Home Price Indices. Yet prices within the city of San Francisco are up 0.3% over the first quarter of 2008, according to DataQuick Information Systems, a San Diego-based real-estate-data firm.
From LA Times article:
Gated mansions and hillside estates have held their own through most of the real estate slump, but data released Monday showed big drops in the region's most exclusive neighborhoods.
Median sale prices fell by 13% in Beverly Hills in April, compared with the same month last year. Rancho Palos Verdes dropped 18% over the same period, while Newport Beach's 92660 ZIP Code took a 34% hit, according to DataQuick Information Systems.
. . .
The decline in the high-end market can be seen in both the Los Angeles and the San Francisco Bay Area markets, according to a study released Monday by First Republic Bank of San Francisco.
The weak economy suggests that prices will remain depressed for some time, said First Republic's president, Katherine August-deWilde.
Long time lurker, first time poster here.
Please dont take this as a cop out - I still believe prices will revert to the mean. I dont want to say Lance's new paradigm stuff is in any way correct, but in some ways, perhaps what we are seeing nationwide is a new meaning of what the "mean" is.
Can someone tell me what the traditional meaning of what the "mean" is, please?
I'm under the impression that the normal appreciation is somewhere between 3% and 5% per year. If that's true, a neighborhood I've been tracking in Leesburg for some time has already dropped below the mean.
Maybe my math is bad, but here is what I've noticed. A townhouse there sold for $140,000 in 2000. At the peak of the bubble, similar properties were selling near $400,000. Although some wishful thinkers are still asking in excess of $350,000, most listings in the neighborhood are now between $169,000 (foreclosures) and $199,000 (decent places).
If normal appreciation from 2000 is 3%, the $140,000 townhouse "should" be worth about $178,000 today. If normal appreciation is 5%, the $140,000 townhouse "should" be worth about $207,000 today.
Aside from the wishful thinkers, does that mean that we are back to the mean?
Thanks in advance.
Work:
It depends a lot on your starting point. Many believe the bubble started before 2000. It obviously was more in earnest between 2000 and 2005, but the effects of the bubble were starting in the late-90's.
You could do what I've done... I took all the data from the Washington Post for a single street for all sales on that street ever. Then I plotted them and threw in some Excel based regression formulas.
See for yourself.
Additional useful information. On that street right now there are two houses for sale that of which I am aware. One, foreclosure, for 265,000. One, short sale, $230,000.
Pretty telling.
Harriet, feel free to use the graph if you want, it's public data all of it, I just put it together. Just please copy it to the blogger server or sommat. If there's interest I can update the data or add different trendlines, etc.
Zerodown said...
"It appears the WSJ article is using first quarter DataQuick statistics and Case/Shiller through February 2008, while the LA Times article is using April, 2008 DataQuick numbers."
Thats correct. I first read about the high end LA area fall this morning and it was a bit of a surprise because it came really without warning and appeared to be so dramatic.
Whats more interesting to me is that it appears this dramatic fall happened without a huge imbalance in supply and demand. As far as I can tell, the south bay market only had about 8.5 months of inventory. I have always assumed Alr & Alex are safe from major declines in that they spent most of the last 3.5 years with less than 6 months of inventory. However, if it is true that supply & demand were only slightly out of balance in LA and yet huge price drops folllowed - then perhaps Arl & Alex could have big drops too.
It will also be interesting to see if this huge price drop is a one month phenomenon or if this becomes a repeat pattern. If it does - watch out below!
"A townhouse there sold for $140,000 in 2000. most listings in the neighborhood are now between $169,000 (foreclosures) and $199,000 (decent places)."
Work - my thoughts on this may not make me popular here, I think the matter comes down largely to risk tolerance. In my case, I bought about 7 years ago. I HATED renting. Thus even though there were some people telling me to wait until prices come down, I am willing to take some risk. As such, I pulled the trigger and havent regretted it since.
On the flip side, I have a friend who is very intolerant to just about any risk and really doesnt mind renting. He is so risk adverse that he has been trying to "time" his house purchase for the last 11 YEARS! The first thing I would want to know is where do you fall on this risk spectrum?
If you are more like me than my friend, these are the things I would consider if I were in your shoes:
1. I have to say I personally am shocked at that price it seems pretty damn low for what I think is the midpoint in this crisis. Thus, I would want to know, has anything changed in the demographics of that neighborhood that would have made prices rise or fall even without the bubble? If you are right in your pricing reports it seems to me that either (a) something has made the neighborhood worse than 2000 justifying a new, sub year 2000 reset price, or (b) your local market is alot closer to the end of this thing than many of us think.
2. Can you afford it using traditional methods of financing?
3. Are you willing to live there at least 5 years? ALso, given the possibility the market can still fall, could you live there 7-10 years. Also, if not, what would it rent out for?
3. I certainly think prices can go lower. Another 5-10% down is in my mind a distinct possibility. If you do purchase now and prices fall 5-10% how pissed will you be/can you financially withstand this?
4. I think it is unlikely (although conceivable) that prices could fall another 20% in your market. If you do purchase and prices fall up to 20% how pissed will you be/can you financially withstand this?
5. If prices are as close to 2000 levels as you suggest, you need to recognize that you are not the only person who is noticing this. As such, I think it is certainly possible prices RISE a quick 5% as bottom feeders come in. After that quick 5% however, I feel confident prices will not continue to increase for quite a while. If you do not purchase and prices do rise 5%, how pissed will you be, and can you still afford to buy if they do rise 5%?
Again, this sort of thought process may make me unpopular here in that so many decisions seem to be based on a pure dollars and cents calculation. In my mind, there is always a premium associated with ownership which dollars and cents cannot totally capture.
I am not saing buy in any market. Had this been 2006 I absolutely would have said wait, as the risk of a price increase is close to zero, and the risk of a price decrease is much much greater than zero. At the same time however, this is not 2006. Thus, with the prices you are reporting, I personally would be giving that particular market a very hard look.
Interesting article and comments.
I continue to believe that one unusual factor that is buffering Arlington and other close in areas is the rapid escalation in gas prices, combined with worsening traffic (with no end in sight). As long as this continues (all other factors held constant) I think it will keep close-in prices up relative to prices in more outlying areas.
I also believe that the LA article brought out another point that may be related to Arlington etc. Sellers who would like to move (for example, into the District, or to retirement in Florida) but aren't compelled to right now, may be holding their properties off the market because they have heard about the selling conditions. This decreases the supply of homes available and may keep prices from falling. And many others may believe this will blow over and they will put their houses up for sale later when they think they can get a better price. However, the tea kettle may boil soon.
Housing bill could be bad news for expensive mortgages
Senate housing agreement could mean higher rates for high-priced mortgages
NEW YORK (Associated Press) - A Senate bill aimed at reviving the beleaguered U.S. housing market could make borrowing for a home more expensive in high-priced markets such as California and New York.
If the bill passes, the limit on the size of loans that can be purchased by government-sponsored mortgage finance companies Fannie Mae and Freddie Mac will drop to $550,000 after spending 2008 at nearly $730,000.
. . .
However, some lawmakers warn that the mortgage market will be hampered if Fannie and Freddie are not allowed to hold jumbo loans. Fannie and Freddie have found few buyers for investments backed by these loans because of investors' skittishness about securities perceived as even slightly risky amid a global credit crunch.
Not allowing Fannie and Freddie to hold such loans on their books "would be a serious problem" that would "really crimp any recovery," in the U.S. housing market, Sen. Charles Schumer, D-N.Y., said Tuesday.
"Nobody really knows when we're going to get any sort of recovery. It's a healing process," said Keith Gumbinger, a senior vice president with financial publisher HSH Associates.
Jumbo loans' market share fell to 8 percent of all new mortgages in the first quarter of 2008, down from 15 percent in the quarter a year earlier, according to trade publication Inside Mortgage Finance.
Republicans are generally wary of adding more risks for Fannie and Freddie, and have resisted an expanded role for the two companies. Democrats, however, see the companies as a way to stabilize the mortgage market.
http://tinyurl.com/68kboj
xpovos:
Thanks for the input. I will have to put on my math goggles to fully understand the chart but I think what it shows is that the prices you listed ($265,000 and $230,000) are within reach of the mean.
crt:
Thanks to you as well. This link should take you to the listings.
http://franklymls.com/default.aspx?m=R&h=600K&s=smartts
It's for a neighborhood in Leesburg called Potomac Crossing. The one listed at $548,000 is not at all the same as the rest on that page (ranging from $350,000 to $154,900) because it is a much bigger, newer place than the rest.
I don't think the demographics of the neighborhood have changed....it's not a slum. In fact, it's a pretty desirable area.
The comments you made about risk spectrum shed an embarassing light on me......I have been sitting on the sidelines, watching and renting, for eight years. That's not quite as bad as 11 years but close enough. I haven't been trying to time the market, though. I have wanted to move to a lower cost of living area since the day I moved here and simply have not been able to commit to staying here, away from family and the lifestyle I desire, which I would have to do for at least several years if I buy. In retrospect, I'm a dope, I should have bought long ago, I just didn't expect to stay here this long.
I wrote before that that prices range from $169,000 to $199,000. That was based on some homes I've been tracking over several weeks.
The actual range of the link I posted above is between $154,00 and $350,000. This includes houses in the neighborhood that are outside of my tracking parameters. The average asking price of all the listings is about $221,000. Of course, the higher prices (over $300,000) are truly wishful thinking.
However, those are asking prices. Real sales data since the beginning of the year for those townhouses has been: $183,600, $246,480, $189,900, $230,974. That averages out to $212,738. This seems to indicate that the prices are back to the mean (depending where you start your timeline) and that the asking prices of over $300,000 are wishful thinking at best.
Sorry for not being clear before and THANKS for the feedback.
Zerodown said...
"The LA Times also mentions that, “The decline in the high end market can be seen” in San Francisco as well; however, it does not identify the high end San Francisco market with the city’s “inner core.”"
Zerodown - here is the answer:
http://dqnews.com/News/California/Bay-Area/RRBay080520.aspx
San Francisco proper (i.e. the core) prices are -5.1% yoy. Surrounding areas, (including the very high end but far away Napa County) things are much worse -11.4% to -34.2%. Again, things could change, but with cities that have a core, the price falls close in have been pretty mild even when compared to desirable areas outside the core.
A work in progress said...
"The comments you made about risk spectrum shed an embarassing light on me......I have been sitting on the sidelines, watching and renting, for eight years. That's not quite as bad as 11 years but close enough. I haven't been trying to time the market, though. I have wanted to move to a lower cost of living area since the day I moved here and simply have not been able to commit to staying here, away from family and the lifestyle I desire, which I would have to do for at least several years if I buy. In retrospect, I'm a dope, I should have bought long ago, I just didn't expect to stay here this long."
Work - this was not meant to pass a value judgment on your choice. All it was meant to do is convey that you have to do what is right for you based on your risk tolerance. For example, say you do buy, and because you are so risk adverse, it keeps you up at night. If so, is it worthwhile to torture yourself like that?
The good thing is you are aware that you are on the very intolerant side of the risk tolerance spectrum - not because the price bothers you but because the "life picture" if you will, is not right for you.
Now the "bad" thing for you is that you have to be aware that this means that as prices fall, the more risk tolerant persons out there (both to the right and the left of me but short of where you are) will continue to move back in to the market because they can stand the risk (i.e. they can stomach a downturn and/or their life affairs are in order to where it makes sense to buy). If the supply of housing is insufficient to meet your risk tolerance profile, prices will just simply not get down to the point where you say to yourself "buy".
I am not a psychologist, but if you are as intolerant to risk as you may imply you may need to increase your risk tolerance to the point that you are ok with the chance that prices fall whatever percent or that family obligations cause you to move (i.e. ok I lost 10K but I can afford it - yeah it sucks but thats life).
Now if this is not acceptable to you, the other matter is to simply be comfortable with the fact that you are renting. In my mind there is absolutely no shame or stigma associated with doing so - as long as what you are doing makes you happy.
Well in any event, thats my thoughts on the subject. Whatever you decide, good luck to you.
crt said:
Zerodown - here is the answer:
http://dqnews.com/News/California/Bay-Area/RRBay080520.aspx
Thanks for finding that -- interesting.
In re: Manhattan
Is Manhattan Immune from the Real Estate Bust?
For the time being, yes. But if Wall Street continues to struggle, that could change
http://tinyurl.com/5nwauk
"I think it is unlikely (although conceivable) that prices could fall another 20% in your market. If you do purchase and prices fall up to 20% how pissed will you be/can you financially withstand this?"
One way of looking at things is from the standpoint of diminishing returns.
A 20% fall from 500k is $100k.
A 20% fall from 250k is obviously half that...
Even if you think prices will continue to fall another 10-15% from current(discounted) levels it might be worth asking yourself how much money that is and whether that is an amount of money you are willing to risk.
A work in progress, There are a lot of different ways to define the "mean" but regardless of which one you use there is nothing that says you can't go below the mean, just as prices went above the mean.
The "mean" is really just the long term trend line. In the short term it is possible to go below it.
Please note that I am not predicting anything with regard to any specific area. I am just observing that arriving at the "mean" doesn't necessarily mean prices are done falling.
"If the bill passes, the limit on the size of loans that can be purchased by government-sponsored mortgage finance companies Fannie Mae and Freddie Mac will drop to $550,000 after spending 2008 at nearly $730,000."
This would be a very good move.
There is simply no reason whatsoever that the federal government should be involved in housing in the >550K price range.
That has nothing to do with facilitating homeownership among those who who need it.
If you are buying a house more expensive than a half million dollars you should be able to pay market rates.
Leroy said:
"There is simply no reason whatsoever that the federal government should be involved in housing in the >550K price range.
That has nothing to do with facilitating homeownership among those who who need it."
But ... like you said the other day ... the mission of Fannie Mae isn't that simple. :)
It could be argued that the broadest mission of Fannie Mae is to provide stable money markets for mortgages. If that is the case, then there really shouldn't be any differentiation between "who" benefits. Even folks who can afford half million dollar mortgages are entitled to mortgages from stable money markets with standard underwriting conditions ... Especially since its mainly their tax dollars underwriting the government's involvement in it to begin with ...
John, to answer your question, at 650, with 15-30 K in cosmetic improvements, it could be rented out for maybe 3500/month (it does have 4 BRs) and would be cash flow positive in a few years; rates are historically low enough that the above could be a feasible plan.
At 450K, I would buy it, put up a 300K cookie cutter house by a slow builder that would do it cheap and then sell it for 1.1. Would not be pretty but would be profitable.
I'm generally of the opinion that any lot in Arlington that is a) either within .5 miles of Metro or is in the WB/YT pyramid, b) capable of holding a 3000K or above house and c) can be bought for 500K or less is worth buying; I know a couple of neighbors that have an SPV that now has like 6 of those lots, all bought within the last year or so and all with decaying houses just sitting there, waiting for the right time to build and sell (they are generally in the area right by VHC, I forget what that neighborhood is called). I myself might raise the above limit to 550K or so but you have to have a lot of cash to meet the mortgages while you wait for the right time to build and sell.
"But ... like you said the other day ... the mission of Fannie Mae isn't that simple. :)"
I said "federal government..."
If the government wants to explicitly say that it is not backing FNMA and that FNMA is on its own... then I have no problem with FNMA doing whatever the heck their shareholders think is a good idea.
The problem is that FNMA has a huge advantage on all of its potential competitors because of the government's implicit backing.
Without the government backing it enjoys FNMA would find that investors would demand far higher risk premiums because it is widely known that FNMA is conducting its business in a very risky way while doing some very very questionable accounting.
"It could be argued that the broadest mission of Fannie Mae is to provide stable money markets for mortgages."
It would be a stupid argument.
With the government's backing no private entity can compete with Fannie and Freddie, that is why they make up the vast majority of the market today.
Giving two companies an almost automatic monopoly on most mortgage lending and then allowing them to behave as for profit corporations is a recipe for disaster. At the very least they will abuse the heck out of their position.
A functioning free market will provide the best possible allocation of capital. Destroying that by turning it all over to Fannie and Freddie on a silver platter would be stupid and ultimately costly.
"Even folks who can afford half million dollar mortgages are entitled to mortgages from stable money markets with standard underwriting conditions ..."
BS, nobody is "entitled" to anything of the sort.
In lending, risk is money. If you are very low risk then you will be able to get money on favorable terms. If you are higher risk... lenders will demand a premium.
Work,
I tried figuring that out once, and ran into the problem of trying to figure out which year to pick as the starting point. I liked 1997, because it seems to have been the peak of affordability. Some people like to peg appreciation to inflation, but I like to peg it to income. After all, if inflation is high and incomes are flat, then the price of housing has no reason to rise (it actually should depreciate in inflation-adjusted terms).
I don't think a house should cost more than 2 or 3 times what one earns including the 20% down payment. I look at the median household incomes in the area and go from there.
Hope it helps. I though crt & others had good comments.
I think I need to put my two cents in today.
First of all, there is pretty much no "substitution effect". People buying in the exurbs are either first time buyers or don't commute all the way in...they are part of the "service economy".
What we are seeing is that a year ago the low-end first time buyer market got shut-in. This led to massive declines in those markets (exurbs). Now things are moving closer in, not because of a "substitution effect", but becasue all the potential move-up buyers from the exurbs are essentially shut-out. They cannot move up because exurb prices have dropped so much.
The effect moves further and further in as time progresses. You are probably not getting 20-something single family home buyers in the trendier close-in suburbs.
The data in LA supports this. Although LA is pretty sprawling, the economic centers are downtown or in Hollywood. Their are limited practical commuting choices for the prime jobs in these areas. These are isolated, expensive neighborhoods. The exclusive neighborhoods are now falling because no one is buying in them. The move up chain has been broken.
The other thing that is repeatedly overstated is the impact on gasoline prices on the exurbs. The data shows this is not occuring.
Think about it. You live in the exurbs (Manassas for NoVA, Riverside for LA). Gas goes up. What do you do? Sell your 200-K house? That costs 6% comission (12-K) and then you need to find something closer in. You are better off selling your SUB and buying a compact car for the commute. You are not going to move closer in and buy a 500-K house (or pay a significantly higher rent) if you can downsize your commuter costs. You can also carpool (slug) or try to telecommute.
The other thing that shows this is NOT happening is the uptick in sales (both LA and NoVA) in the exurbs......buy a 100-K house, and you can survive for another few years.
Anyways, the reason the inner (prime) areas fall last is that th e move up chain is broken, and impact of gasoline are pretty small compared to the cost of selling your house and moving closer in.
narl said...
"John, to answer your question, at 650, with 15-30 K in cosmetic improvements, it could be rented out for maybe 3500/month (it does have 4 BRs) and would be cash flow positive in a few years; rates are historically low enough that the above could be a feasible plan."
Narl - this got me thinking. Are people like you the reason Arlington is not falling farther? As Leroy has correctly pointed out many times Arlington doesnt have the income gains to support prices. However, are they being bought up not for their value as SF residences, but multi party rentals. For example you note that "it does have 4 bedrooms". I assume thus, your plan would be to rent it out to 4 individuals @ $900 a room?
If so, recognize what this could/would mean for demographics in the area. Austensibly, Narl's plan would cater to 4 individuals each making approx 40-50K per year. If so, what does that do to explain county demographics (i.e. small group of people making in excess of 150K a year).
Further, this could explain why Arlington & Alexandria could have such an absurdly low housing ownership rate (40%) compared to the outer counties (70%+)?
Finally, could this in essence establish a floor for residences, pricing them out to all but the highest earning individuals? For example, say a moderate to high income individual wanted to buy the house next to me. He might not be willing to pay more than 550K for a place to house him and his family to live in. However, before that place falls to 600K in price the Narls of the world snap it up for 650K and put it to its "highest and best use" in economic parlance?
If so, am I, the neighbor who uses his house as a SFH indirectly benefit from the Narl's coming in such that even though I (a family person) wouldnt/couldnt pay more than 600K for my place, it is now worth 650K?
Again, as with much of what I say, I am coming up with this on the fly. Thus, I open this up to comments/criticism. However, at first glance this could explain ALOT!
NARL: At 450K, I would buy it, put up a 300K cookie cutter house ... sell it for 1.1. ...
any lot in Arlington that is a) either within .5 miles of Metro ... capable of holding a 3000K or above house ... can be bought for 500K or less is worth buying; ... have an SPV that now has like 6 of those lots, ... decaying houses ...right time to build and sell ... I myself might raise the above limit to 550K
- shaking my head at the thinking process of a shark among the minnows -
This is another reason that prices are staying up.
My neighbor has a 2/1.5 SFH on 10,000 sqft. They keep fixing it up, making it nice. Yes, make the upgrades that suit you.
No matter how "nice" this house is, the NARL who buys it will knock it down.
I know that my place is a goner.
Sidelined: You live in the exurbs (Manassas for NoVA, Riverside for LA). Gas goes up. What do you do? Sell your 200-K house? ... You are better off selling your SUB and buying a compact car for the commute.
Good suggestion but that's a little too linear.
What actually happens is, as gas crosses $4.00, $5.00, and so on, the person who is way out thar, becomes stranded.
Their place falls in value faster than they can figure out what's happening. They're stuck but will muddle through.
Sorta like the Viking's Greenland colonies.
Who's buying close in? Some are opportunists who appear on the scene with a half mill in cash; they glance at the landscape and pick their landing zone, DC, Arlington, Fairfax, etc.
Others already are here. They're renting and after a few years decide it's time to buy.
The dollar cost and time cost of commuting does affect prices and price trends but it doesn't uproot people from PWC and move them to Arlington.
It's more subtle and complex than that.
"What actually happens is, as gas crosses $4.00, $5.00, and so on, the person who is way out thar, becomes stranded.
Their place falls in value faster than they can figure out what's happening. They're stuck but will muddle through."
lol... it really seems there is no way to explain things enough for you is there?
Gas prices are an issue, but they aren't nearly the issue you WISH they were. Sorry, but you aren't going to come close to justifying maintaining bubble pricing in close with gas prices.(and it obviously wasn't gas prices that created the bubble pricing in close either.)
People notice gas prices no doubt, but they aren't going to spend an extra $250k to save a few thousand on gas.
Sidelined said...
"The effect moves further and further in as time progresses. You are probably not getting 20-something single family home buyers in the trendier close-in suburbs."
Sidelined - not sure I agree with this analysis of the DC market - especially with regard to this statement. The quintiscential stereotype of the close in market is DINKS and singles. DC for one has been openly and actively seeking them in that they pay taxes but do not use much in the way of services (i.e. schools).
Further, DINKS are amenable to the housing available - tiny pre WWII era housing stock which is not very well suited for families larger than perhaps 2 parents and a dog.
According to the stereotype, if and when the singles get married or the DINKS decide to have kids, it is at that point they trade in the tiny close in neighborhood for a house in Loudon county which is 3times the size, but for the same price. Thus, the move up market if you will is often not the "out moving in" but the "in moving out".
Mind you, these are the stereotypes that seem to have been at work around here for a while. However, there is some evidence - often touted by Christopher Lemberger, Richard Florida, Jim Kuntsler etc. who argue that the suburbs are/were a 50 year experiment, exclusive to this country, which now may have reached their peak and have started a long slow decline (this is a debate I will leave for another day).
I do however agree with your analysis as to gas prices in that I think they have indeed affected the exurbs, but the impact is a bit overblown. As you noted, between telecommuting, more economic cars, etc. there is just too much low hanging fruit to write them off completely. At the same time however, part of the implicit promise of the exurbs was a lifestyle it sold. Around here it meant a HUGE house and a HUGE car - and it sold to those who craved that lifestyle. However, to ditch the SUV is in effect asking them to compromise on their lifestyle - and if the prices are any indication, this may be easier said than done.
"there is just too much low hanging fruit"
Exactly...
There is simply huge room for improvement in relatively simple ways. Obviously higher gas prices favor shorter commutes, which to some extent favors the close in neighborhoods.(Though there are many high quality jobs outside DC despite the claims of our little squad of cheerleaders.)
What I don't see happening is people who want the suburban lifestyle with the big house and big yard suddenly trading all that in so they can buy a house half the size for twice as much in close.
If it comes down to the suburban or the house the suburban will take the hit before the house the vast majority of the time.
Shoot, for those that simply MUST drive an SUV there are now a number of hybrid versions that are reasonably efficient. (for what they are...)
KH said...
"This is another reason that prices are staying up.
My neighbor has a 2/1.5 SFH on 10,000 sqft. They keep fixing it up, making it nice. Yes, make the upgrades that suit you.
No matter how "nice" this house is, the NARL who buys it will knock it down.
I know that my place is a goner."
Not necessarily KH. The NARLs of the world may not realize it yet, but there is a diminishing marginal return associated with that activity. One of the many reasons this area maintains its vitality is that it is unique. It is not filled with the cookie cutter garbage that poisoned placess like Leesburg (except for its tiny downtown which is still pretty cool). The hope is, they will eventually see the errors of their ways - few close in residents object to the "Mansion" part of the McMansion - it is the "Mc" part that truly gives people heartburn.
Now the flip side is not all housing is worthy of being saved alot of that WWII era GI housing in Arlington has little asthetic appeal. It is hoped however, that when the first generation stuff is torn down it is replaced with something that will be better built, and more appreciated down the road.
Case in point, do you know that all those wonderful old houses you see in old town Alexandria are not originals? Most originals were built circa 1740-1790. It was ugly, flimsy, and mostly forgettable. At the same time however, when the 2nd generation renewal came 1820-1860, they built the beautiful federal and victorian period architecture we see today. Thus, not all teardowns are necessarily bad - the question is what are you tearing down and (more importantly) what are you putting up we will all have to look at for the next 50 years?
As a side note, NARL if the house you propose to tear down is not WWII GI housing but perhaps a 1930's bungalow, no offense but you are way too obtuse to see the value of what you have (ever heard of the Sears houses and the premium they obtain)? Long term, your actities will destroy the motivation of many of the high income individuals who pay a premium to live there.
OK - Ill get off my soapbox now.
Leroy said:
""It could be argued that the broadest mission of Fannie Mae is to provide stable money markets for mortgages."
It would be a stupid argument."
From Fannie Mae's Webpage:
"Fannie Mae provides stability, liquidity, and affordability to the nation's housing finance system under all economic conditions."
Now it's starting to be obvious that you really are a kid just out of school ... an argumentative one who doesn't show the proper respect to his elders on top of it. Yeah ... you'll go far!
crt,
I am following up on the previous discussion.
>>... However, in response to the lack of buyers, the market has responded with diminishing inventory YOY.>>
But such an action by the market cannot keep prices up. I mean, if condo conversions reverted to apartments, that will cause rents to fall, which will impact housing prices. If private homeowners take their properties off the market, sooner or later they will realize they can't get their wishing prices and will be forced to drop prices. If builders hold off on new construction, they have carrying costs--so if they dump land, land prices go down.
So markets cannot simply 'respond' by diminishing inventory at will and expect to have no effect on prices. The effect is always there on prices in one way or another; it is just a slow process.
>>Do you know of any situation where there has been less than 6 months of inventory, and even in spite of supply and demand being in balance, prices HAVE fallen significantly? >>
Even after the bubble burst and prices dropped in Fairfax County, during the spring months over the last 2 years,inventory sometimes came down to less than 6 months. Prices still fell at a normal rate. But within a couple of months, inventory rose to 10--11 months; prices did not drop sharply even with high levels of invenotry--just continued to fall slowly the same way when inventory was 6 months.
However the total price drop has been high after 2 years.
The general view that with less than 6 months of inventory prices can't fall much, applied to normal markets where buyer psychology was influenced by inventory and the expectation that housing prices rarely fell.
But in the context of a huge national (and perhaps international) bubble bursting, with sharp drops in many, many places, more and more buyers will hesitate to commit. Price drops will happen by gathering momentum, not just because of inventory. Of course, higher inventory tells people that there is no hurry to buy; but that is not the only thing affecting buyer psychology.
John, to answer your question, at 650, with 15-30 K in cosmetic improvements, it could be rented out for maybe 3500/month (it does have 4 BRs) and would be cash flow positive in a few years;
With 20% down, my rough estimate is that it would be ~$400 cash-flow-negative form the start (excluding an improvements). Seems like a pretty lousy investment to me.
Initial expenses: $3661 a month.
Expenses should be no more than 90% of rent: rent needs to be $4068 a month.
Or to paraphrase Sidelined: the plankton is dying -- eventually it will move up the chain to the whales.
Good point about DINKS. I pretty much ignore them, I've got a wife and kids.
It's quite the same here (in LA). However, families and DINKS typically compete for very different housing choices. With kids, I like good schools and a yard. I would not consider a condo. I would not consider a 2-bedroom house......I'm on the margin even with a 3-bedroom house.
I don't care that much if my neighborhood is trendy, or if the restaraunt on the corner is particuliarly good. I care about local parks.
I seriously doubt a couple without kids will be competing with me on housing.
Back to the commuting question, you can sell your explorer and buy a 91 geo prism for a lot less than moving. You can carpool for even less.
Just takes a little ingenuity. And the folks getting foreclosed in Manassas...they probably aren't moving to Arlington. They are staying in Manassas and renting. Or moving in with mom. Or cousin bob.
So has it come to this?
Soaring Foreclosure Numbers Mean More Prey for Vulture Funds
Banks Desperate to Unload Distressed Properties Turn to Private Equity Firms
As more homes fall into foreclosure, banks are packaging pools of foreclosed homes and wholesaling them to private equity “vulture funds” for pennies on the dollar.
While the phrase vulture fund conjures up cold-blooded opportunists, the funds are buying assets that banks are desperately trying to move off their books to free up capital.
Basically, anyone in the market with $3 million to $100 million or more to buy a block of REO, or real estate owned, properties could be called a vulture fund.
National investors such as The Blackstone Group and Lehman Bros. Inc. have reportedly purchased billions of dollars of foreclosed properties through private equity funds.
http://tinyurl.com/5a8t5v
Investment opportunity or fraud?
Las Vegas, NV - May 19th, 2008: BPVWest recently announced that their investor group has raised the necessary capital to purchase a $2.5 million dollar bulk REO portfolio directly from a major bank. The notes were purchased from the bank at a remarkable rate of just eighteen cents on the dollar. This particular bank was so impressed by the urgency in which BPVWest acted that they've come to them again for a similar offering of $6.4 million dollars, again at 18 cents on the dollar, but gave them only 3 weeks to fund the entire deal.
"Our situation creates an enormous opportunity for both the small and large investor, especially in these recessionary times", said BPVWest affiliate Ron Costa. "Because so many investors in the group took part in the original $2.5 million package, the group is now looking for additional investors to take the new package down", he added.
http://tinyurl.com/4habdy
Here's another guy . . .
May 15 (Bloomberg) -- The way out of the worst U.S. housing slump since the 1930s goes through Angel Gutierrez.
Gutierrez buys bad mortgages a dozen at a time for a fraction of their face value from lenders overwhelmed by the highest number of defaults in 23 years. When he goes door to door to negotiate lower payments for homeowners or pay them to move so he can sell the house, he's speeding up the recovery by establishing a price for the homes and flushing out the least reliable borrowers.
``You buy the mortgage for pennies on the dollar, carry the big stick, tell the homeowner how it's going to be, then double your money very easily,'' Gutierrez said.
Gutierrez and his wife Brenda, based in San Diego, are a two- person shop in an industry that is attracting deep-pocketed investors such as BlackRock Inc., which manages $1.36 trillion in assets. While Gutierrez said he can buy up to $300,000 of bad loans with his own money and has funding sources for about $1 million, New York-based BlackRock plans to raise $2 billion to invest in discount mortgages.
``At this stage of the game they're playing a very small role, but I expect that that role will accelerate as more people are willing to accept reality,'' said Sam Zell, the billionaire real estate investor who's called ``the grave dancer'' for buying distressed assets. ``The single-family market has to be cleared. No market works unless it clears. If banks can't clear, they can't make new loans. Anything you do to keep people who can't afford it in their houses is another way of delaying the market clearing.''
http://tinyurl.com/66fu5q
>The other thing that is repeatedly overstated is the impact on gasoline prices on the exurbs. The data shows this is not occurring.<
What data?
I don't think you can overstate the energy problem if you don't know where it ends and if it ends.
Goldman Sachs is projecting something in the range of $148 a barrel by year end.
People in outlying areas aren't selling their houses because of high energy cost. They aren't selling because they can't sell. There are people who would love to sell their SUVs but can't.
But anyone who buys a home today, even if that person is a 24-by-7 telecommuter, has to consider the cost of a commute future resale.
If there's any conclusive data about the impact of gas prices it is in mass transit ridership trends. Mass transit ridership is increasing, which likely means that living near mass transit is becoming more desirable, not less.
Increasing mass transit may be the first step toward a fundamental shift in how people live in the United States.
Europe has been living with high fuel prices for a longtime, and people have adapted, live closer to work and in higher density housing areas. Why we would be any different?
KOB: People in outlying areas aren't selling their houses because of high energy cost. They aren't selling because they can't sell. There are people who would love to sell their SUVs but can't.
But anyone who buys a home today, even if that person is a 24-by-7 telecommuter, has to consider the cost of a commute future resale.
Yes.
Not everyone is looking that far ahead but enough are to bias the market.
CRT: As a side note, NARL if the house you propose to tear down is not WWII GI housing but perhaps a 1930's bungalow, no offense but you are way too obtuse to see the value of what you have (ever heard of the Sears houses and the premium they obtain)?
I am certain that the NARLs are quite aware of unique houses.
Unfortunately, the market has not set the price bar high enough, yet.
Houses here are small, older SFH on relatively large lots for this area.
Down the street, a NARL knocked down a cut block stone house and is building a McMansion. It had to happen, the stone house was small, ugly, and poorly sited.
""From Fannie Mae's Webpage:
"Fannie Mae provides stability, liquidity, and affordability to the nation's housing finance system under all economic conditions.""
Gee, from Fannie's webpage?
Do you think there is a possibility that perhaps they are a little biased?
Never!
"Now it's starting to be obvious that you really are a kid just out of school ... an argumentative one who doesn't show the proper respect to his elders on top of it. Yeah ... you'll go far!"
lol
Kid?
You really have run out of ideas haven't you?
Seriously, you might as well call me "fat" or some other schoolyard bit of creativity.
As for "proper respect" I took the time to explain to you quite a few things only to see you continue to troll this board and flaunt your ignorance. Sorry, but my respect isn't given freely.
"If private homeowners take their properties off the market, sooner or later they will realize they can't get their wishing prices and will be forced to drop prices. If builders hold off on new construction, they have carrying costs--so if they dump land, land prices go down.
So markets cannot simply 'respond' by diminishing inventory at will and expect to have no effect on prices. The effect is always there on prices in one way or another; it is just a slow process."
I agree... there is a lot of evidence to suggest homeowners are avoiding putting their homes on the market. (obviously with sales at decade+ lows, and inventory remaining low, even with all the new construction that has taken place over the last 10 years...)
...but just because those homes aren't on the market doesn't mean they aren't inventory. If the owners WANT to sell and are only holding off because they don't like the prices, well they are in denial every bit as much as the people who list their houses at bubble prices only to see them sit on the market for a year.
Eventually they will have to become realistic.
Novawatcher: Initial expenses: $3661 a month.
Expenses should be no more than 90% of rent: rent needs to be $4068 a month.
Not exactly. The pro's like the NARL's think longer term than the BH. $400/month negative? 10% is an acceptable cost of doing business in some leagues.
They don't calculate on a month or even a year. They run the numbers for decades.
This is the reason that the mantra, "the bubble busting must move in" has not proven to be true.
Meanwhile, Lance and others kick back. It's playing out as expected.
Contrast that with, for example, Tabitha, who did her homework, invested serious time and effort, did everything right, and ended up frustrated by the market.
Note well NARL's comment that he might go an extra fifty large to make a deal go. This guy is a shark and we are minnows.
-kh chum-in-the-water.
They don't calculate on a month or even a year. They run the numbers for decades.
I know this is McLean, not Arlington, but fairly close.
I wonder how far out they ran the numbers on this one? According to Fairfax County, a builder purchased this house in December 2007 for $730,000, presumably to tear down. In May, the property is put up for rent at $2,600 per month.
http://tinyurl.com/6ro2tw
KH said:
"They don't calculate on a month or even a year. They run the numbers for decades."
The problem is we have here some BHs whose post-puberty experience is barely a decade at that. How can we expect them to be capable of thinking in decades ... seriously?
kh: once you average in the years of losses with the years of profits, appreciation, depreciation, increased maintenance, then it becomes readily apparent that, outside of a speculator market, that would be a lousy investment. In many markets with price:rent ratio is much smaller than .9. Heck, it would make more sense to buy rental properties in a small college town and rent them out for a big mark-up (rental prices in college towns are always much higher than in the surrounding areas).
LOL
Keep it coming KH...
I don't know if you are trying to be funny or not, but regardless this is some of your best material to date.
New theory:
The bubble will not burst in close because investors who don't care about losses will simply buy the properties up and wait decades for inflation to bail them out.
As for lance's..."expectations"
Let me put it this way:
"Chances are that there will be buyers at higher prices now that we're past "the bottom". David L. was right, David J. wasn't. We've bottomed out and prices are on the move up. This makes no difference to us homeowners who already locked in ... But all those BHs who held off waiting for magically drastically lower prices? They're screwed ..."- lance April 5 2007
"That's right that's right ... That tiny speck of the market that was only buying the cheapest of places to begin with is going to be soooo missed ... You bubbleheads will grasp at any straw, won't you. Your theory is over. It was debunked the minute the big investment firms revealed how very little the default of a few subprimes was going to affect them.
...
It's just a regular business cycle. And we've indisputably aready bottomed out. Where does that leave you with your far fetched theory?"-Lance March 22 2007
"The window of opportunity for those who have been sitting on the sidelines waiting to purchase is quickly slipping away, however I suspect most bubbleheads will miss it. I just hope they are on here a year from now explaining why they are still "waiting it out." The justifications will be interesting to hear." - lance, Sept 25 2006
"Robert ... open your damn eyes! I looked at a couple open houses today in the District. Prices are up by a high degree. Houses that last year were going for $1.0 to $1.2 million are now just under $2.0 million ... That is a HUGE increase ... in only a 12 month period. And we aren't talking about McMansions ... just your average rowhouses in nice areas. And no, I'm not saying these homes are for everyone ... just that the "leading indicator" properties are going through the roof in price ... imagine what that means for "median" home prices. The Bubblehead theory is dead ... without question. And those that listened to David and waited are now screwed."- Lance March 25 2007
"How many loans are sub-prime loans, does anyone know? Is it something like 5% of all loans? 3%? less than 1%? I can't imagine it can be all that many with all the "loose" credit out there I've been hearing about on this blog. Just so we have our terminology correct, aren't sub-prime loans those loans made at a very high interest rate to people who are considered a very bad risk? i.e., these aren't intended (or used) by the typical borrower ... What is going to be the default rate for regular (i.e. "prime") loans?"- lance Dec 20 2006
"kh: once you average in the years of losses with the years of profits, appreciation, depreciation, increased maintenance, then it becomes readily apparent that, outside of a speculator market, that would be a lousy investment."
Exactly... what KH describes is at best incredibly simplistic.
Losing money on a property for years not being a concern to a "shark?"
You have got to be out of your mind. We aren't dealing with a high yielding investment in the first place.
Losing money for a few years may not be a big deal to a technology start-up... but housing? The applicable phrase is:
"You make your money when you buy."
Leroy said:
"You make your money when you buy."
You're lecturing KH? This is hilarious. KH has a long history of success in investments ... many going back to before you were even born. You're 3 years out of college with a "traditional downpayment" saved up for that house you're going to buy "someday" (i.e. you've scraped together $20,000 to put down on that $500,000 home you think you're going to get for $100,000) ... This is really hilarious. LOL
"KH has a long history of success in investments ..."
How do you know that?
KH is one of the worst trolls on here.
Pay attention to the keywords she uses.
"$20k in brickwork"
"My tiny lawn"
"My group of informal investors"
I call BS.
This "group of informal investors" is an invention so she can type "golly gee, I keep looking and looking for these low prices the BH's keep talking about, but, gosh, I just can't seem to find them."
If you had a limited amount of money to invest in real estate, you wouldn't be spending it in this area. As another poster said, there are real estate investment bargains to be had in many areas, such as college towns.
If KH is truthful about trolling her neighborhood all the time and bugging her neighbors constantly about real estate, they probably think she is insane.
All I believe is that she bought a house many, many years ago. It went up in value and she croons about it on this website. Holy smokes, a regular Warren Buffett there!
"You're lecturing KH? This is hilarious. KH has a long history of success in investments ... many going back to before you were even born. You're 3 years out of college with a "traditional downpayment" saved up for that house you're going to buy "someday" (i.e. you've scraped together $20,000 to put down on that $500,000 home you think you're going to get for $100,000) ... This is really hilarious. LOL"
Wow, that is more lies than usual for you, at least in one post.
What exactly is KH's "history of success in investments?"
Shoot, until recently KH lied continually about his/her motivations for posting here in the first place claiming only to be an interested homeowner worried about higher taxes on their modest SFH...
Now KH is some kind of investing guru? An interesting change... Especially in light of the fact that KH clearly doesn't have the slightest idea what he/she is talking about.
Some history on KH...
"I'm getting worried.
You renters can always rent somewhere, I don't have a choice about paying my real estate tax.
Maybe you can cough up an extra $2,000, no problem."- kh 10/10/07
"No crowing from this blackbird.
If prices plunge 50%, my taxes will drop, so be it, great, thank you very much.
I don't believe that prices will drop more than 10% in my area and I would be quite pleased by a 15% drop."- kh 12/7/07
"How can I get my well deserved tax break if places keep selling for more than the previous year's assessment?
How can I grab a rental at a bargain price if places are selling for higher and higher prices? " - kh 1/30/08
"I wanted his opinion on something. It looks to me like we crossed the bottom and prices (assessments and TAXES, drat!) are going up." - kh 10/8/07
"Homeowners, in for the long haul, do not benefit from a price rise.
Wishing that I do not get a big tax increase, will not stop that from happening.
It "looks" like the increase will be substantial but we shall see."- kh 10/8/07
"I bought ten years before that. In the 1990's, prices were flat. That was 10 years of up 2%, then down 1%. My assessment in 1990 and 1999 were about the same.
Then in 2000, prices started up and over the whole term, 1990 to now, my average appreciation is about 7%.
Until I sell, it only means higher taxes."- kh 10/9/07
I think that is a sufficient tour through the record of our local investing guru... lol
As for "traditional down payment," yes, I mean 20%... but I am talking about at current pricing levels.
and as for the $100k bit? Another of your now famous stawmen... an unusually poor one.
"This "group of informal investors" is an invention so she can type "golly gee, I keep looking and looking for these low prices the BH's keep talking about, but, gosh, I just can't seem to find them.""
Exactly, I am not even convinced KH is a real person, at least not the person KH claims to be. Lance clearly thinks he knows more about KH than KH has ever said here...
Here is a perfect example of what you said above:
"A couple partners and I (we're house heads with some $ in CDs) have been looking to pick up a rental or investment place.
According to the BH's here, prices are plunging. Well, no, they're not.
We're seeing some prices off a little but when there's a $100K discount (on a $400K place), there is a reason." kh 11/27/07
...and here is more on KH the modest homeowner... who is also apparently a big time successful real estate investor...
"I've got a nice place, as I gather you do. It suits me fine.
Close in, SFH, garage, yard, I can walk to a couple grocery stores and several good restaurants, live entertainment too.
It's not as lively as some DC neighborhoods but not bad.
Like you, I owned a place before and rolled equity into this one. I bought both at the peak and watched values go nowhere for a while.
If I came to this area today with, say, a hundred grand and my current salary, which is pretty good, I'm not sure that I would be in this house.
Do I think it's worth the current assessment? I suppose.
Could I afford it today? Sure.
Would they loan me the money? Donno.
Would I want to pay this much? Donno.
If I didn't have this place and wanted to buy, I'd be wishing for a price pullback too. " - kh 9/9/07
So either Lance is lying, or KH is lying...
"So either Lance is lying, or KH is lying..."
This is where just rapidly posting anything to refute theories one doesn't agree with gets you.
Keyboard slappers. Just throw up anything to take up blog space.
Maybe they get paid by the post?
My new name for "lance" is "K.B. McSlap."
come on Domenic ... The keyboard slapper here is obviously Leroy. Just scroll up and you'll see. I mean, how many posters do you know who save other posters postings and then pull them out to just slap them up out of order and out of context?
It's actually kind of strange that he would be saving what we're typing ... Don't you think?
"It's actually kind of strange that he would be saving what we're typing ... Don't you think?"
Actually, there are quite a few people out there who are so intellectually dishonest that you have to track what they say today because later they'll say the opposite.
That's because they'll make opposite arguments in support of the same conclusion, because all they care about is always reaching the same conclusion every time.
"I mean, how many posters do you know who save other posters postings and then pull them out to just slap them up out of order and out of context?
It's actually kind of strange that he would be saving what we're typing ... Don't you think?"
heh,
Lance, I don't maintain a bunch of quotes... I just run searches. Your record is so consistently bad that it almost doesn't matter what I click, I will end up with something amusing.
BTW, are you planning on calling the bottom again any time soon? Oh wait, mentioning your countless false statements is taking them "out of context..." lol
I notice you don't have any answer to the obvious lies KH and/or you have been telling.
Do you think people don't realize you are trying to spin your way out of trouble... again?
Which is it lance?
Is KH a successful real estate investor that we should all be taking advice from?
Or is KH living in a house she isn't even sure she could buy today, worried about her rising taxes, and hoping for a decline so her assessment will drop?
Leroy said:
"Or is KH living in a house she isn't even sure she could buy today, worried about her rising taxes, and hoping for a decline so her assessment will drop?"
Where on earth is this coming from? You make it sound like KH is holding on by a thread and is depending on falling property taxes to make it through. That's not what I read in your out-or-order and out-of-context quotes. Perhaps you're reading it differently because you are reading her words through your circumstances ... I.e., "falling property taxes" (like "falling house prices") determines whether you can make it through or not. I doubt KH was saying that that way.
You do have a terrible habit of seeing everything through your pitiful circumstances.
"Where on earth is this coming from? You make it sound like KH is holding on by a thread and is depending on falling property taxes to make it through. "
I am going by what KH said... for instance:
"Here's another set of recent sales in Alexandria.
First dollar amount is the 2007 assessment, last dollar amount is the sale price.
1204 STONNELL PL 032.04-07-15 $956,517 07/30/07 A $980,000
425 SUMMERS DR 052.02-07-09 $1,332,004 08/29/07 A $1,516,000
500 SUMMERS CT 052.02-06-33 $1,237,332 03/15/07 A $1,450,000
502 SUMMERS CT 052.02-06-34 $1,279,721 03/26/07 A $1,625,000
I certainly can't buy there but someone can.
I'm getting worried.
You renters can always rent somewhere, I don't have a choice about paying my real estate tax.
Maybe you can cough up an extra $2,000, no problem."- kh 10/10/07
http://tinyurl.com/4yh85l
Or this little gem from our local real estate investing guru...
"I can't afford the district. None of my friends would call me "happening" or "exciting". "-kh 10/9/07
Hey, if that conflicts with the KH you "know" then maybe we agree she is a liar.
"You do have a terrible habit of seeing everything through your pitiful circumstances."
My my how you get nasty when you paint yourself into a corner. You have no one but yourself to blame for looking like a fool lance. As the quote goes...
"Tis' better to remain silent, and have the world assume you are a fool, than to open your mouth and remove all doubt."
Nobody is twisting your arm and forcing you to say the stupid things you do.
Leroy,
Cut out that last post of yours ... put it somewhere that you don't go to often (safe deposit box?) ... and then pull it out 10 years from now and read what you wrote. Like the rest of us here, maybe it'll by then be obvious to you too that kh isn't purposely misleading you ... or even lieing to you ... but instead trying to impress on you some important lessons in life. His/her words have little to do with her "situation" but is instead an attempt to pass on to you his/her "experience". You're just too immature yet to understand or appreciate it.
"His/her words have little to do with her "situation" but is instead an attempt to pass on to you his/her "experience". "
LOL
Translation... he/she is a liar and even you know it. Hilarious...
Hang on while I get a notepad so that I can jot down some of the "wisdom" being passed on to me by an obvious liar on the internet.
I am so glad the liar has decided to pass on their wisdom to us by... well... lying...
Really lance, is that the best excuse you can come up with?
I have an alternate theory...
I think KH is basically a nobody who decided to get into real estate speculation near the top of the bubble.
Then, like you, she eventually found her way here and has since cooked up various sophomoric theories designed to pump real estate...
Sorry, but her attempts to "prove" real estate's "normal" rate of appreciation is 7%/year come to mind... sadly poorly thought out, obviously flawed... and of course designed to pump real estate.
If that is what you call wisdom... well...
Lance: You make it sound like KH is holding on by a thread and is depending on falling property taxes to make it through. That's not what I read in your out-or-order and out-of-context quotes.
Hanging on by a thread?
Not exactly, I'm basically cheap and rather not waste a buck. I earn a good income and shelter as much as possible. I am hoping that the city doesn't jack up taxes as was just announced for Montgomery County.
property tax increases of about 13 percent for the average homeowner
I can handle larger mortgage but it gets dicey up around a mill, which is what a 3/2 SFH on a quarter acre runs around here.
I basically bought my place the same way that you did. I owned a TH before this SFH, rolled my equity forward. My mortgage has been "about" the same as renting. Early on it was a little more; after a few years of inflation, it's less. Exactly as you've said.
I don't know if it's their fear of being priced out or envy towards those who have taken the risk but there is a sad, pathological sense to your BH pals.
Did they pick up on what NARL said, John, to answer your question, at 650, with 15-30 K in cosmetic improvements, it could be rented out for maybe 3500/month (it does have 4 BRs) and would be cash flow positive in a few years;
at 650,
cash flow positive in a few years
You and I know exactly what NARL is saying, "I can afford to drop over a half mill and will tolerate a negative cash flow for years because in the end, I will gain much more."
It went right over their heads, just as most of what you've said.
Maybe a cultural or class thing. Certain people here do not realize that BigLaw pays $150K to start, that Defense money is even bigger, that there are "investors" with serious checking accounts.
It can't be, they say, the price falls must start soon. Maybe it will.
If it does, I'll revisit the idea of buying an investment property.
If not, I guess Alexandria will follow Montgomery County's lead.
lol
More "expert" real estate advice...
Buy now before the high dollar lawyers and "Defense" people buy up all the houses!
Oops, somehow all those super high earners don't show up in the statistics. They must be hiding!
Still not willing to discuss your real estate speculation KH?
Lance seems really convinced that you are quite the expert... of course since lance is more or less the poster child for ignorance I don't know what his opinion is worth.
Lance said...
“Leroy,
Cut out that last post of yours ... put it somewhere that you don't go to often (safe deposit box?) ... and then pull it out 10 years from now and read what you wrote.”
Lance said...
robert said:
"Please, enlighten us with any data that shows trends of sales increase, an inventory decrease, a reduction in foreclosures, and/or a reduction in the number of ARM’s resetting."
again, for whatever reason Robert, I have learned that won't cannot see the forest for the trees ... even if it jumped out and bit you in the face. you keep looking for validation of your position in numbers that I and others have gone round and round with you explaining why they mean NOTHING ... absolutely NOTHING ... but yet you persist ... and I am not playing this game with you.
July 21, 2006 9:09 AM"
Lance said...
" ... The numbers you are watching are fine and dandy if you are a flipper and looking to make short term gains. They mean little if you are a long term invester such as Va_Investor and absolutely nothing if you are a homeowner ... or wannabe homeowner as some of the bubbleheads are. (Others, such as yourself, are probably just looking for validation of their choosing to rent over buy for underlying reasons that are really unrelated to the affordability of buying.) In brief, if you are looking to buy a home, the thought of resale value shouldn't even cross your mind. All you should worry about is (1) does it suit your needs and (2) can I afford it longterm. (An investor looks to see whether it is profitable longterm and doesn't care about ups and downs in shortterm). So, as one other poster aluded to, YES I do believe that for a prospective homeowner (or longterm investor) there IS no bad time to buy ... just incompetent buyers looking to blame the economy for their inability to listen, understand, and learn from those who have successfully acquired themselves a place to call home that will be affordable into the longterm come h@ll or highwater. 'nuff said. We've gone through all this before ... please make yourself a note and put it on the fridge so that you don't have to ask me again. Thanks.
July 21, 2006 1:34 PM"
What do you all think about the properties listed in the 22204 zip code? Especially the two condo communities of George Mason Village and Fredrick Courts. I've seen lots of listings in those two divisions for well under $200k. Some REO/bank owned, and some are not, but they state "subject to third party approval". Any insight?
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