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Wall Street meltdown today.
(H/t CR).
"The collapse of Lehman, which listed more than $613 billion of debt, dwarfs WorldCom Inc.'s insolvency in 2002 and Drexel Burnham Lambert's failure in 1990."Over the weekend, the Washington Post talked about how Fannie and Freddie bought off Congress (and where was the Washington Post all these years?):
"And when they couldn't massage, they intimidated. In 2003, Richard H. Baker (R-La.), chairman of the House Financial Services subcommittee with oversight over Fannie Mae and Freddie Mac, got information from OFHEO on the salaries paid to executives at both companies. Fannie Mae threatened to sue Baker if he released it, he recalled. Fearing the expense of a court battle, he kept the data secret for a year. Baker, who left office in February, said he had never received a comparable threat from another company in 21 years in Congress. "The political arrogance exhibited in their heyday, there has never been before or since a private entity that exerted that kind of political power," he said."
22 comments:
Hi, This is the first time to post though I have been reading this blog for a few months now.
I was wondering if anybody knows where I could find data that shows the annual appreciation or depreciation of a specific area? Maybe with data from the late 1980s to now. I think I saw a link about this information some time ago, but cannot say for sure.
Thanks for your help, Liz
Liz,
All the country assesment sites where given in the mail page of this blog. Scroll down a little bit and you will see all the county assesment sites. This is a good point to start with. Every county is different.
- Leo
Are you referring to the Case Shiller indexes? http://www.homeprice.standardandpoors.com/
From NOVAWATCHER
"My first impression is that if that was my best choice, I should seriously sit down and reconsider my career choice that has drawn me to this area. Life is too short to pay a million dollars to live in something that looks like that."
This is what I think nowadays. All the houses I like are above 500,000. I do have very decent down payment. Decent job. But do I need to spend this much on Housing? Why don't I move to somewhere (North Carolina) and buy a decent home with less price. This mess was created by some folks. they lent to people who cannot afford first of all. They inflated the prices and here I am. All the properties I am seeing were in less than 350,000 in 2003 but today 150,000 more purely bcos of the mess created. What should we do sit and watch till it settle down.
I am commuting to Rosslyn everyday from Baltimore. 4 hrs travelling door to door(Both way). Think of moving to Fairfax. Should I wait or move some where so I don't need to worry about this mortgage mess. What you guys think?
Thanks Leo for pointing out the County assessments. And thanks Shamrock for the link to the standard and poors Case Shiller indexes.
Both of these resources will be helpful, however the data I am trying to find had percentages. I just wish I could remember more about to describe it better. I am trying to find it again, becuase I remember seeing that in 1987 and 1988 that real estate was still increasing in value in the teens, like 15 or 18%. This was even with the tax laws changing and that eventually led to the real estate crash in the early nineties. I just want to review that data again, and cannot remember where I saw it first. I thought it was this blog...
leo: rent in FFX -- that's what I do.
e.floyd: there was a much smaller bubble from 87-91 or so. You can see it in these charts (scroll down):
http://novawatch.blogspot.com/
Thanks for the help.
leo james
I second novawatcher. Rent in Fairfax, see if you like living there first, but ditch the crazy commute ASAP.
(says Cara with absurdly sore arms from moving fragiles down to VA this past weekend)
Speaking of crazy commutes - a co-worker with an isane commute - Shenandoah valley to Arlington - told us she's quitting today - with $3+ gas the main culprit. She's been here for at least ten years - maybe more. And - she's been able to work at home once or sometimes twice a week. The DC-area money was worth the commuting time - but not worth the time+expense for her.
And - rent in Fairfax and get well-aquainted with the market. You may not be able to time the exact bottom of the market, but you should be able to get a pretty good sense of when the worst has passed. Plenty of baragins a year or two or three from now, I expect.
Nova,Cara & Zeropoint,
Thanks for advice. Let us take the scenario of renting. If I rent for two years in FF. It would cost me 36,000.(Ava 1500 rent).
Or if I buy now for 500,000 then I save 36,000 + 10,000(Tax saving for two year approx). So it is almost 46,000 I will be lossing if I don't buy now unless the house price is going down close to 425,000 or something within next two years. Do you all think that will happen? Even if the house price go to 450,000(10% drop) after two years all I lose is 4,000. No need to mention I have low interest rate now which may not be available after 2 years. Who knows?
Other interesting aspect I have to share is friend of mine bought a townhouse near fairoks Mall in 2004. He paid 412,000. The houses there still selling around that same price. In my view he already saved
1500 * 4 * 12 = 72,0000
plus 5k each year for tax saving = 20k
According to me he is gaining even though his house price didn't go up.
Any thoughts?
- Leo
Cara,
Moving is good workout. Yeah arm sores that is why I am avoiding renting again in FF and move again.
As per my commute is concern i use Metro and MARC train. I don't drive. So I have big relief there. But trains in DC area sucks. They don't come in time. It irritates me so much. If you read the Examiner a month ago there was an article how bad the train schedule in MARC and VRE. If you miss the commuter trains in morning and evening it is litrelly a nightmare. I used to wait an hour some time to just board the train. This is one of the reason I wanted to move close to work.
This is a WEIRD one - sold for $264,000 in July and is now $419,000 in September? What? Anybody have any ideas?
http://www.franklymls.com/FX6861067
Leo James -
Move to NC or rent.
What I am hearing is that even with 20% down it may be hard to buy, especially if the 100k down payment keeps you in a jumbo loan.
Things are different, much different TODAY then they were yesterday.
On another note, you are probably losing money by driving that far. The govn't reimbursement rate(tax deduction) is 0.58/mile and you know it's probably more than that since depreciation is difficult to factor.
Also, if AIG fails it's going to be a Katy Bar The Door situation for everyone!
Don't worry, the gov't is going to try and inflate this problem away by continuing to lower the interest rate. What was $1 today now costs $2. Problem solved.
Am I wrong or is the loosening of the standards as to what they'll accept at the credit window just a backdoor bailout? If it isn't, why not?
As per my commute is concern i use Metro and MARC train. I don't drive. So I have big relief there. But trains in DC area sucks. They don't come in time. It irritates me so much.
Leo, don't take offense, but this sequence made me laugh. Not driving is a relief but taking the trains irritates you so much. Personally, I would rather be irritated in traffic than by waiting for trains to come take me where I don't need to go. But luckily, I live less than 1/2 mile from work.
Leo - the cost of interest alone on a 400k mortgage (assuming you have 100k to put down) will be well over 2,000 a month. Add in principal, property taxes and insurance, and 1,500 a month rent looks like a bargain.
The tax deductability of interest is largely cancelled out by the cost of your annual property tax.
You should do a more extensive rent vs. own comparison, including all the costs. Apologies if I'm misreading your math.
"The tax deductability of interest is largely cancelled out by the cost of your annual property tax."
Property tax is also tax deductable.
Property tax is also tax deductable.
Tax deductable, so you get 30% back but you still pay 70% net. Not to mention homeowner's insurance, HOA fees, and maintenance costs. Rent is such a better deal right now, and houses are cheap as buyers can't sell their overpriced homes. Perfect time to rent while you wait for better prices in a year or so.
Leo, rent in Fairfax. Use the free time to cruise around to neighborhoods. Use Redfin, Ziprealty or one of those services to check out what's for sale. Personally, I see lots of SFR in the 300s that I would not mind living in.
But those same houses are going to be $100K less in a year.
I'm waiting.
"Leo - the cost of interest alone on a 400k mortgage (assuming you have 100k to put down) will be well over 2,000 a month. Add in principal, property taxes and insurance, and 1,500 a month rent looks like a bargain."
to add to this, $1500 a month would get you a ~$257k mortgage assuming a 5.75% interest rate at 30 years. This excludes property taxes, insurance, etc. I'm not sure how you think you can get a $500k place on that.
"Or if I buy now for 500,000 then I save 36,000 + 10,000(Tax saving for two year approx). So it is almost 46,000 I will be lossing"
I don't think people realize that paying interest expense is exactly the same as rent, with the only difference that is that interest expense is tax deductible. Using the example above, in year 1 & 2 of a 30yr mortgage (@ 5.75%/$1500 a month) $29,191 of the $36,000 is interest expense, you've only built $6,800 in equity.
leo james,
2nd to everyone who says your math is wrong. But to be more constructive, if you want to get the math as close to right as possible, go to Ginnie Mae's rent versus own calculators and they'll break it all down for you.
Rent versus Buy
Since interest payments are essentially equivalent to rent, and equity losses due to declining prices are also equivalent to rent (i.e. money down the drain), I've found that buying a house would have to be for less than ~$250k in order for it to make financial sens over renting at 1500/month. Run the numbers yourself on the Ginnie Mae calculator, go to Irvine Housing Blog's analysis post on rent versus own
IHB Rent versus Own
to get a more detailed breakdown, but however you slice it, pay no more than 160 x your monthly rent, if you want to actually come out ahead. Your realtor is feeding you kool-aid math if you are hearing anything else.
And yes, definitely yes, houses listed at $500k today will be $400k in two years or fewer. At $1600 rent, my husband and I are currently socking away another $2000/month towards a downpayment. Interest free equity, can't beat that. Furthermore, no way on this green earth that we'd be willing to put the sum of those two into a mortgage payment without the current financial freedom to interrupt our insane savings plans if times require it.
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