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Saturday, July 26, 2008
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24 comments:
Ahhh... but does your house come with radioactive granite!!!..
http://www.nytimes.com/2008/07/24/garden/24granite.html?_r=1&oref=slogin
I can see it now... zombie homeowners..
Or i stopped paying my mortgage because ... the house is unsafe...
random question -
anyone else also tracking THs near Ballston metro? there're three THs in the 22201 zipcode of Ballston, all on the same street (can't remember was it 11th or Utah or Randolph etc) with house #s in the low 4000s, and all were priced close to each other at or around 600+. If I'm not mistaken as recent as earlier this week they were still active, but today there were ALL GONE from MRIS! I find it hard to believe that all three could be taken off the market/sold in the last few days. I can't do much searching now because I don't remember their addresses. But I'm just curious what happened to those listings.
BTW, FWIW, three other 22207 listings I've been tracking went under contract. One TH had been active for at least 6 months...
OMG
*Two* perfectly pleasant houses on my block near Ballston were knocked down last week. Based on the fact the developers have also removed all the large, magnificent trees off those tight little Arlington lots, I'm guessing they;'re going to shoehorn in another couple of 4000 square foot behemoths. It's just amazing to me; don't these morons read the newspaper?
So I have a question about the new housing bill. Supposedly the bank does a new appraisal on homes to determine market value and writes a new loan for 90%. I'm guessing they will use appraisers that value on the high end to recoup as much money as possible. Will these "new" loans create artificial comps and prevent surrounding homes from continuing to drop to their true market value?
Will these "new" loans create artificial comps and prevent surrounding homes from continuing to drop to their true market value?
First the banks have to be willing to forgive the difference. Even if the home didn't drop, some neg-am mortgages are at 110% of *original* LTV. In too many cases, if the bank complies, they are insolvent. This act does nothing to rewrite the contracts with the bond buyers...
They're only expecting about 350,000 loans to be modified...
This act will not change a thing.
Got Popcorn?
Neil
Fannie and Freddie:
"too big to liquidate quickly"
http://tinyurl.com/5kckju
gruntled, I completely agree with your sentiments.
I believe that if they would build 2000-2500 square foot houses that fit better on those lots (where they don't already have perfectly pleasant houses on them), those houses would sell quickly even in this market. Can't builders see how long these behemoths have been sitting (and the price drops necessary to sell the few that have sold)? I can understand the miscalculation that may have occurred in 2006 when those were built, but not now.
I talked to a builder about a year ago and he told me that many of the "fixed costs" for small houses are the same as for large ones. I am sure what he said is true for permits, inspections, etc., and that other costs might not be proportionate to the size, e.g., you might pay a plumbing subcontractor $10000 for a small house and $15000 for one twice the size. This thinking is in some ways rational, and probably accounts for some of the builder decisions.
But I don't believe that these are the major factors. I think greed, in the hope of large profit margins, and the belief that there is an unlimited # of people who can afford and want huge houses on tiny lots in Arlington, a more important factors. If I'm right, I wonder how long it will take builders to figure out that the rules have changed? All they have to do is check out franklymls to see what's selling quickly and what isn't. The carrying costs surely ought to make this decision very different.
"are more important factors", not "a more important factors." Sorry.
jeremy,
You can look at me, sarah and robert discussing this a few threads ago, but that may be less than enlightening.
My take is that no, it will not create new comps, because it does not create new sales. Yes, the banks will try to get high appraisals, for those they let happen at all, they will need the high appraisals to minimize losses. Since there is also a requirement on final DTI, these will still be by definition affordable after modification, hence likely to remain performing loans.
The only way this effects prices is by keeping a few more people out of foreclosure and lessening the distressed sales. Given that only the smallest eligible modifications are likely to happen, this will only "reward" those who bought at the wrong timing, but with relatively conservative choices. All others the bank write-downs will be too large for them to be willing participants.
Cara,
re: open house at the modern/contemporary at 1922 Quantico
Lots of people attended the OH.
Upsides: It has a great open "feel" with high ceilings. Floor plan is perfect for entertaining although the trapezoidal living room feels small. It's green. It's big. The unusual windows' (Pella) triangular ledges offer a great little place for a cat to sit and look outside. It has a nice little yard though the other Sagatov house looms right over it-no privacy. Although you do have to bend to the low cabinets in the kitchen, there are a lot of drawers, with are easier to use than standard cabinets.
Downsides: I think it's pretty substantially overpriced because it's near Wash. Blvd. and the house is out of scale (and costs) with the houses in the neighborhood everywhere except right on Wash. Blvd. It has a green (but steeply pitched???) roof - the first in Arlington, which requires maintenance. It will be really hard for the new owner to re-sell it later because so many people will rule it out for either the design choices or concerns about the green features (who knows how to maintain the roof? how much will they charge? etc.) Why in the world would the builder put in oak floors (I consider oak rustic) in a sleek contemporary and stain them black in a green house - it looks completely unnatural and incongruous? Sustainable bamboo, maple or cherry would have worked SO much better from a design standpoint. Why put a white finish on maple cabinets in the kitchen (which they did)? They look cheaper than they are, and unnatural - and will look "beat up" in no time. The builder skimped on the square, fake-o block patio bordered with pressurized lumber. This doesn't belong on a $1.45 million house. It's so small -- how much more would it have cost to provide a much more attractive, gently curved flagstone patio?
Sorry to go on and on. I really loved the feel of the place. It's a great house, even though Homer Simpson apparently had a say in some decisions. I realize beauty is in the eye of the beholder.
PS One other major downside for most buyers - you enter in the "basement", and walk up to the main level, sort of like some bi-levels.
Ace,
Thanks for the report.
I actually really like dark wood floors, I think it keeps with the upscale look, but yeah, it doesn't do anything for the green theme. The white-wash cabinets are going to look dingy that's true, and I personally, don't like drawers too much because they end up being too constraining in terms of what fits in them. (you can move shelves, you can't change drawer heights)
You enter through the basement?? Even from the front door? That's weird.
Yes, the front entry is on the lowest level (the lot slopes up toward the back).
The cabinets are solid white rather than whitewashed, from the manufacturer (Fine-line). The description says they are solid maple; I would have preferred that finish rather than the painted over look, especially with the dark countertops. Overall, the look is faintly high school chemistry lab--almost trying too hard to look "cool" or un-green?
Because the house is elevated above most in the neighborhood, the interior does get a LOT of light from the many windows and there is a bit of a view from some 2nd floor windows. These are very nice features. One more mixed feature - it's very close to the Sycamore St. entrance to 66 and the East Falls Church metro - great if you don't mind highway or Wash. Blvd. noise.
PS Cherry floors would be naturally dark, especially as they aged. They would have been beautiful in that house and much more in keeping with the sleek look than oak.
re: why such large in-fill houses are being built in Arlington -- look no further than the lot cost to have the correct answer. lots are going for so much that the builder would never recovery their costs if they were to build a moderate sized house and sell it for the price of a moderate sized house.
this, of course, is a chicken and egg situation because maybe if the builders stopped focusing on such large in-fills the lot prices would sink, thus allowing moderate sized in-fills to be profitably built.
John, that's a reasonable hypothesis, but I don't think it's true. I think there are a lot of people who would pay $1 mill for a nicely done 2000-2500 square foot house on the same size lot on which builders are trying to sell $1.5 mill, 3500+ square foot houses now. (Both my sq. ft. estimates did not include basement space.). According to one Realtor I talked with last fall, there are a LOT of buyers interested in this type of home (and I have a friend who has a contract with a builder to do it), but very few available homes. The builder could make money on the smaller home. However, the profit margin for the builder is much lower than for the big home -- IF the big one sells at that price.
PS - I completely agree that land prices are extremely high in Arlington. But there are tons of older houses that are much smaller than 2000-2500 square feet that now are selling for $700000 or less.
I guess it all depends on what you consider a moderate price.
And, if the sellers would start lowering the unsold high end house prices, it would be very interesting to see what trickles down.
Cara said...
jeremy,
You can look at me, sarah and robert discussing this a few threads ago, but that may be less than enlightening.
My take is that no, it will not create new comps, because it does not create new sales. Yes, the banks will try to get high appraisals, for those they let happen at all, they will need the high appraisals to minimize losses. Since there is also a requirement on final DTI, these will still be by definition affordable after modification, hence likely to remain performing loans.
Jeremy, I came to the same question, sort of, and we ended up talking past one another on that previous thread. I say, that there should be a way to track these loan restructures in that a $400K neighborhood is no longer a $400k neighborhood if a certain percentage of those have had loan-restructures, and those re-structures should in some fashion be used as “comps” to show a decline.
I’ll admit, I haven’t thought this completely through (the thread mentioned above proves it) but I smell a rat.
Sarah and Cara made some good points and raised a few more questions, but I think it’s too early to spot all the loop holes, and to speculate how wide spread the bill will be. To be sure, there are those in the MSM trying to get a toe hold on it, but I don’t even think the banks/lenders have a good idea of the number of “troubled” mortgages.
robert, jeremy,
What Robert just added makes a fair summary of the conversation, or the conclusions thereof. Sarah and I were just being a bit more literal, and questioning the mechanics of how such a "should" (which I agree with) could actually get implemented.
Cara-- I agree. And the whole question of comps becomes very complicated in a falling market. For instance, they are not supposed to use short sales and foreclosures as 'comps'-- but in some neighborhoods there are very few other sales. And at some point if there are too many of foreclosures in a neighborhood, the value of the houses really does go to something close to zero. Nobody wants to live in a place full of boarded up windows, trash, crime and all the other symptoms of high-foreclosure neighborhoods.
This has been one of my considerations in thinking about that Georgetown neighborhood close to Old Town Manassas. How do you judge if a place is reached the point of no return and is going to turn into a slum? $50,000 for a 3 bedroom, 2 bath townhouse near the VRE would be a pretty darn good deal for a place I wouldn't mind living in myself. On the other hand, it would be pretty expensive if it turned into a neighborhood where I had to put bars on the windows and watch my step outside. And 'become a slumlord' is nowhere on my bucket list.
Sarah said...
For instance, they are not supposed to use short sales and foreclosures as 'comps'-- but in some neighborhoods there are very few other sales.
“They” are not? Who’s “they” and why not?
I’ve heard this before several times Sarah, and each time I can’t believe it when I hear it. Comps are comps, whether short sales, foreclosures, arms-length, non arms-length, all are valid transactions that must be accounted for. Auctions/foreclosures are very informative of market conditions, perhaps more so than any other, especially given the lack of the “just had another couple look at this home yesterday/better put an offer in” power spiel from a realtor. You can't find a much better gauge of a market like an auction.
Let me guess who the “they” are….Those in the REI? Why stop at short sales and foreclosures? Why not disregard any sales showing a greater than -xx% decline in the market?
Robert-- I'm talking about comps used in appraisals. Of course if you're buying, you want to know all of the prices paid in recent transactions-- but in that case I would think you'd want to use average or median housing prices (which will include all sold houses) as a start-- and then figure out how fast prices are rising or falling and increase or decrease your offer accordingly.
On the other hand, if the appraisal is for refinancing an existing loan-- or for that matter for a purchase loan, you would obviously prefer that distress sales not be included in the comps. For one thing, distress sales are almost always 'as is', so a house in good condition, and subject to inspection is not really a fair comparison. Nevertheless, if short sales and foreclosures are the only things being sold, that's probably what will be used. If the neighborhood is full of foreclosures it really doesn't matter how pristine and beautiful a property may be-- the fact that it's surrounded by foreclosures will drive the value down to pretty close to the same level as the trashed out hulks.
About.com has a pretty good article on the appraisal process.
Sarah said...
Robert-- I'm talking about comps used in appraisals.
An appraisal not using all market factors is not an appraisal.
From the article:
Yuke has been in the business since 1996 and says,“If I do use a foreclosure, I explain why I used it. I say it’s not a good comp and don’t give it a lot of weight.” He says foreclosures do not represent market value, and he can always find regular sales to incorporate into his appraisals. "If there are only foreclosures in an area, then that affects market because it becomes the value," Yuke warns.
“He says foreclosures do not represent market value” What? They most certainly do represent market value, it was/is on the market isn’t it? If we continue to accept what those in the REI want us to accept, especially given the housing bust, what have we learned? Sounds like not much.
My anecdote. And I’ll make it quick as I can. I was about to purchase a home a few years back. Started the negotiations asking for comps. I received “comps” from the sellers agent via MY realtor. MY realtor agreed with those comps 100%. The numbers didn’t seem right to me and long story short, the “comps” were from the next neighborhood over, larger homes, bigger lots and 5 years newer. Of course I did not go any further and did not contact “my” realtor again.
Now, here I have an “expert” opinion from a realtor that these where valid comps. Who am I to argue? After all, I’m just some Joe off the Street, who am I to question this professional? Yea right.
Mr. Yuke gives neither rhyme nor reason why foreclosures do not represent market value. He just says so. If he were to try to explain, at some point he would have to explain and define “party under duress”. Foreclosure? Sure that’s duress. Seller with an ARM re-set and can no longer keep up with payments, sounds like duress to me. Seller with an ARM re-set, can’t keep up with payments and is unemployed, I’d call that duress. Seller with an ARM re-set, can’t keep up with the payments, unemployed, and is competing with a foreclosure down the street priced $50K below his asking? Duress anyone? According to Mr. Yuke, thus far, only one of those scenarios is a “party under duress”. The others represent “willing sellers”
For one thing, distress sales are almost always 'as is'
Lets think back just two years ago. Remember folks camping out on the sidewalk, multiple offers, bidding wars. Anyone remember? Those homes being sold were just as good as being sold “as it”. Hardly anyone would risk “losing” a home for sake of a home inspection.
On the other hand, if the appraisal is for refinancing an existing loan-- or for that matter for a purchase loan, you would obviously prefer that distress sales not be included in the comps.
Sorry but no. When I’m ready to buy I’d prefer, demand even, that distressed sales are included. Why would I purposefully try to justify the sellers asking price? “Sorry Mr. Seller, big bad bank sez your home is worth $XXK less than what you’re asking, guess I’ll move on unless you drop the price.”
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