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Wednesday, October 29, 2008
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39 comments:
Just for fun, I did a case study of another Prince William County neighborhood, just built at the end of 2005/beginning 2006, about a mile away from the VRE. The numbers were not surprising, but they are worth sharing:
I just looked at the months of May-September 2008, and only at single family homes, not the townhouses. Of the almost 50 transactions recorded, only 3 were person-to-person, rather than bank-to-person, and the sellers lost $255K, $121K, and $75K, respectively. Eight of the transactions were banks taking over, the remainder were individuals buying from banks.
In 2005/2006, houses sold for upper $500Ks-lower $700Ks, and now they are selling for $300K-upper $400Ks. Nothing has sold over $500K since May.
The percentage discount from the original purchase price ranged from 25% less to over 50% less, with most falling in the 40-45% less range, which just so happens to be the PWC YOY drop in median price.
The thing that I found most intriguing was the ethnic aspect to these sales. The vast majority of initial sales--all but about 10--were to Hispanic surnames. Of the remaining 10, most were Middle Eastern or Asian names. Only 3 were white-sounding.
But the vast majority of recent sales were the exact reverse. Only three were to Hispanic surnames--all of the rest were to names that sound white.
What does this signify? My opinion, which may derive from my college education at a far-left school, is that Hispanics and other minorities/immigrants were victimized by predatory, unscrupulous lenders and builders.
Any thoughts?
"My opinion, which may derive from my college education at a far-left school, is that Hispanics and other minorities/immigrants were victimized by predatory, unscrupulous lenders and builders."
Tabitha - In my opinion, your view is probably not far off, but its not as clear cut as you might suggest.
I have a number of friends of El Salvadorean decent who describe the scene in PWC as "the spanish connection" (their words). Essentially, the recent immigrant community was more comfortable dealing with hispanic mortgage brokers who were bilingual.
They describe many of the 2nd generation hispanics as predators who prey on the ignorance of the first generation that cannot speak the language. To the extent that these guys were brokers (and there were many), they would tell the first generation, "sure come on in, you'll qualify for a loan, no problem." So the 1st generation relied on the 2nd and signed up, pernhaps not realizing it was an interest only or other junk loan they were destined to lose.
At the same time though, my friends say there was alot of complicity on behalf of the "victims". The first generation knew they were committing fraud, or they knew they didnt really qualify, yet they figured, hey if someone is going to give me free money, why not? Further, if they were here illegally, why not "buy" the place, and try to rent it out or flip it and make some cash? Their thought was, if it doesnt work, so what, its not like they have a credit rating to worry about in the first place...
So, yes there was plenty of preying on people of hispanic descent, but it was mostly done by people of hispanic descent. Also, alot of it was done with the full knowledge that long term theyll lose the place, but why not live large while you can!!!
I spent my lunch hour to look at some of the relisted homes in 22207 (<1MM).
All but one home dropped their prices for 5% or more. Could 5% be the new consensus between agents to spark renewed interests? they also all went down a 'price bracket.'
4/2/1 8,857sf Colonial in LEE HEIGHTS
DOM: 1(35)
List Price: $750,000
Original Price: $789,900
Price change: 5%
5/3/1 10,628sf Colonial in BELLEVUE FOREST
DOM: 3(34)
List Price: $875,000
Original Price: $925000
Price change: 5%
*BANK OWNED* 2/2/0 6,791sf Rambler in Cherrydale
DOM: 6(34)
List Price: $439,900
Original Price: $550,000 (5/5/08)
Price change: 20%
5/3/1 9,646sf Split Foyer in Country Club
DOM: 8(76)
List Price: $969,000
Original Price: $989,000
Price change: 2%
and you've got give props to this seller as s/he's really trying (not that s/he wasn't delusional 400 days ago asking 100K+ more).
4/3/1 5,174sf Colonial in Country Club
DOM: 19(394)
List Price: $850,000 (10/21/2008)
List Price: $900,000
Price change: 5.5%
List Price: $927,488
Original Price: $967,488
MM - I dont know about the price reductions, but with regard to the descriptions of the places - you do know the square footage numbers you are posting are for the lot and not the actual house, right?
Tabitha, what is the responsibility of the former owners who abandoned their property in Prince William County? Is there incentive for them to just give it up without fear of being held for any financial responsibility?
Tabitha-
Have you had #7 yet? Or was it #6 - sorry I can't remember?
Are you all still renting or did you buy from your Landlord ?
Spunky
The Anonymous:
yes those are lot sfs. i happen to believe for SFHs lot sf is more relevant than interior sf which is also unavailable for many listings. others may think the opposite.
mm,
The Arlington Co. website has square footage for each house, if interested. Also, while I haven't run analyses myself, I believe a Realtor told me that there was a much stronger relationship between house size and price than lot size and price. But obviously each buyer is unique in what they want and what they are willing to pay for. If that Realtor is right, you should be able to find a nice larger lot with a small house and not pay as much for it as a larger house on a smaller lot.
anonymous:
I agree with you completely. Anecdotally, I noticed several transactions back in the bubble days that were Hispanic to Hispanic, Asian to Asian, Middle Eastern to Middle Eastern. The seller would have purchased from the builder, only to sell it two months later for $100K more, sometimes $200K and $300K more. I suspected those cases were 1st generation being sold out by 2nd generation.
Incidentally, when we were looking to buy earlier this year, we looked at several houses in that neighborhood, and they were all almost devoid of furniture. Maybe a big flat screen TV, maybe an oversized dining room set, but mostly empty. Very house-poor.
Thank God we did not buy; in early spring, some houses were still selling over $500K. Those same models are now asking $320K.
shamrock:
I also agree with you. I was a rebel at my school ;) And I think you can both be completely right, without contradiction.
spunky,
Kind of you to ask. I just had my six-week checkup today. He was born in our bathroom Sept. 14. We are still renting, and we really hope to buy the house we are renting sometime this winter, as soon as my husband locks down a post-Marine Corps job. Now that I gave birth here, I cherish this house and never want to leave! But shhh...don't tell our landlord.
Home sweet home...homeschooling...homebirth...we even had a rabbi come to do the circumcision in our kitchen! Just awesome. I wake up every day wishing I could find myself back in labor with my sweet boy--it was rapturous, the greatest experience of my life.
Oops...this is WAAAYY off-topic. My apologies.
Back to real estate:
A little gallows humor...
Noticed this listing on Redfin because it says it's been listed for 714 days:
MN6245949
Then I notice its original asking price was $629,900. For a 1955 rambler on a main drag.
But according to its description:
"Owner will to help with closing costs. Hurry this one will not last long!!!"
"My opinion, which may derive from my college education at a far-left school, is that Hispanics and other minorities/immigrants were victimized by predatory, unscrupulous lenders and builders."
I disagree. Here's why. One must ask who the victim is over the long-haul.
IMO, it's going to be the U.S. Taxpayer....think bailout, and the home owners who pay their mortgage on time and can't sell but must live in a neighborhood with foreclosures all around. What have they done to deserve this?
It would be interesting to know what % of the folks with Hispanic surnames who purchased property that they couldn't afford still reside in the U.S.
My gut tells me that if you were/are here illegally and you walked away from a mortgage you probably long gone.
Now, I am NOT saying that immigrants, particularly Hispanics, legal or illegal, caused the bubble to burst. They didn't.
But, I am saying that a system that allows people to break the law (illegal immigrants) AND then borrow a half a million dollars to buy a home and THEN walk away w/o any consequences IS broken.
I would challenge anybody with "white sounding" names to go to Mexico or Europe or the Middle East and try the same thing. It can't be done!
Face it, if your going to buy a home you need to have some skin in the game....that means bringing $$$ to the table when you want to buy.
"white sounding?"
what about hispanics that are white?
or, blacks and hispanics that have anglo surnames?
it's best to avoid race comments.
let's sue your college for your poor education and use the proceeds to help these people.
Nothing has sold over $500K since May.
Wow Tabitha... that's interesting.
"Owner will to help with closing costs. Hurry this one will not last long!!!"
Snort! LOL!
Congrats on the baby! :)
Got Popcorn?
Neil
agile, I do apologize. I truly meant no offense.
I'm biracial, married to a man of a different race, and I normally hesitate to label races, as I live daily with the world's need to neatly classify human beings in ill-fitting categories. In fact, I have always refused to check "Hispanic," or "white," or "other," on forms, although I could check any of them, because I find such categorizations annoying. (Funny thing is, when I said that to the bank employee who was processing our mortgage loan application, she said I had to choose or they would not process our application.) Truly, I am capable of better sophistication when it comes to issues of race.
In this case, the data only offered up so much information, and I had to roll with it. I honestly believe there is a huge racial component to the northern VA housing bubble, and I wish someone with better brains than I would tackle the issue.
I wish we could squeeze some money out of my college for a greater purpose. I find the place insufferable, mostly full of sad, loveless people who don't know the meaning of life, completely obsessed with issues of race/gender/sexual bias. But somehow, someone along the way deemed my classmates Ivy League material and chose them to become the next generation of elites. Puzzling, to be sure.
Tabitha, one way to check the data is to view the Fairfax County real estate online records. Perhaps you can go through and actually tally first names starting with Mohamed for certain neighborhoods around Springfield and Franconia. For first names (such as "Ahmed") you don't recognize to determine its likely ethnicity (Muslim?). This is not the type of research that the Washington Post would perform, but perhaps you can identify certain tangible trends like foreclosure rates.
"agile, I do apologize. I truly meant no offense."
Don't worry about him. Some people just like to be offended and will invent whatever excuse they need.
There was nothing wrong with what you posted.
People have no business demanding others play blind or dumb to avoid seeing a truth they don't care for.
You didn't say anything we haven't already seen described many times in articles on real estate in PWC.
It is a well known fact that minorities, particularly those of hispanic descent, have made up a disproportionate number of the foreclosures over the last couple years.
Ponzi schemes always involve preying on the ill-informed, less-educated, and the less fortunate.
And the housing bubble, especially in it's final throes, when prices had already gone up 20%/year for 2 years and it was obvious that such a rise was not sustainable, and the prices had long since exceeded what people could afford to pay down, was no exception. The difference was that it wasn't just previous buyers that made money in the ponzi scheme, there were the leeches of brokers and banks and agents that milked money out with no skin in the game either. (not to mention transaction taxes and property taxes whereby states and localities benefited).
Where there were new immigrant populations to exploit for their greed and unsophistication, that was the target, where there were few immigrants then the low-credit score limping up out of poverty were the target, where there were none of those, they just sold HELOCs to credit-card addicted existing owners.
But I guess the disheartening thing is that at the end of the crash, the prices should be low enough that some of those who were exploited before to sustain the bubble, actually could have easily afforded to buy something in the near future if they had only waited.
They were talking about the possible home-owner bailout this morning on NPR. And they mentioned, is it fair that your neighbor gets his payment reduced and yours doesn't. And my response is that it's no less fair than that your neighbor who bought in 2001 has such a lower payment than you who bough in 2003.
Keeping prices sustainably cheap. That is the only fair thing going forward.
Cara, you wrote:
"Keeping prices sustainably cheap. That is the only fair thing going forward."
Keeping prices cheap? How does one do that? And after you purchase your home, do you still want that axiom enforced? I am saying there is a conflict of interest with your posts because you are a bargin home shopper.
Tabitha - those taking offense to the to "white sounding" comment likely would have been placated if you had said "anglo" or "European descent".
That said, those of us who have been long time commenters here realize you had no racial animus with your comments. Cheers...
Yes, I will still be in favor of it going forward. Keeping prices lower helps move-up buyers too, and anyone who has to move for a job, etc. (then again, I am kind of a socialist...)
How? Well, start with requiring debt to income ratios of 28%/33% (or some other reasonable standard) again? Documenting income. Qualifying people based on the fully amoritizing payment not the teaser rate. Eliminating DAPs and other government funded down-payment assistance. Requiring 3.5% down for first-time buyers and 10?20? for non-first-time buyers. Regulating the circumstances (such as bridge loans between houses) where piggy-backs are allowed. The market should do most of the rest. Some of these are already happening, but they need to be enforced. Basically I favor something like the solutions put forth by Irvine Renter's The Great Housing Bubble chapter on solutions.
(see also excerpts linked to on his blog Preventing the Next Housing Bubble page 173)
Now admittedly, there have been plenty of housing bubbles before. But generally these were more contained to things cheap enough to speculate in (even with your own money) like condos.
Anthony Darmiento said...
"Cara...you are a bargin home shopper."
what does it mean to be a bargain home shopper?
MM, Cara wrote that she wants to buy only when it is very attractive instead of the buying opportunity being fair or feasible. My interpretation is if she wants to buy an equivalent condo, then she wants to have monthly payments that are less than the monthly rent, and still have the same level of service. I suspect she will at least put 5% down.
But I'd let Cara elaborate more on her expectations.
A.D. MM
"she wants to have monthly payments that are less than the monthly rent, and still have the same level of service. I suspect she will at least put 5% down."
that part's accurate, though I don't necessarily expect to be able to find the same level of service, I just want the loss of the service priced in.
I'm not sure how that translates to "bargain home hunter" for A.D.
As far as "very attractive to buy", I didn't mean me, specifically, I meant that the price bottom won't be set in this economic upheaval until buying is truly attractive. I am reasonably comfortable, and may well buy before then if prices reach parity with renting including all the additional expenses of owning.
Really, I think "bargain home hunter" really refers to anyone who happens to be lucky enough that the timing in their life ended up with them not being able to buy before now, and yet being in a position to buy soon. And "bargain" in the sense that in most metropolitan areas house-buyers have generally counted on increased future income when buying within recent memory. Hence, rent-to-buy was not what was being considered, only "affordability" as defined, often, by what a bank would qualify you for, rather than your own calculation.
I, in particular, end up in this position because I started looking around at housing as soon as we started building up the downpayment, and to some extent even before that when we were eliminating our other debts, as a way of motivating myself to stay on this crazy savings plan. Thus, I've read an absurd amount of advice and blogs, and so am now demanding rental parity, rather than just affordability. However, honestly they come out to almost the same number in the near term if we're lucky enough to get pregnant and have to start paying day-care. Infant day-care is like rent on a 1-room basement apartment.
At a guess, a slightly larger percentage of buyers in the current market are equally informed about rent-versus-buy calculations and the true costs of owning than would be the case in either a pre-internet or non-bear market.
(By this fall we'll have 20% down plus closing costs, but I reserve the right to not funnel it all into the house if PMI isn't too expensive)
Tabitha: When I read your "white" comment, my thought went to the fact that there aren't really "black"-sounding surnames...I think "anglo" might be your best bet to the future. Why am I even commenting, you might ask. When I sold my townhouse, I had a 2nd "gen" broker doing some shady things with the first buyer. Long story short: My realtor and I filed a complaint against the buying agent b/c we thought he was defrauding the buyer (not me). The second deal feel through b/c a broker got a loan for a buyer that didn't pan out (black). The final deal was 2nd gen eastern european.
I'm fascinated about the labor induced euphoria....how could you want to redo labor? (I've not done it)
Mercer condos at Reston VA going on auction -
http://www.mercercondoauction.com/
I looked at the places and even made an offer last February for a one bedroom unit for $242K. The sales people laughed at me.
Now the one bedroom is going for $155K.....The condo is very nice, but the condo fee (around $400 a month) is a killer.
I'd add to Cara's list of solutions-
1) Eliminate home mortgage interest deduction
2) Eliminate Cap gains real estate exclusion
the anonymous: Spaniards are of European decent.
Anthony: Yes, I would still want prices to stay cheap, even after I bought. In my last neighborhood, you could tell the places that were owned by folks that had bought in 2001 or earlier: the yards were nice, clean, and with healthy landscaping.
The places that were bought 2004 or later had unkempt lawns with dying bushes.
Moral to the story: it's good for everyone for housing to be affordable.
amy: I don't think the term 'anglo' is any better. Italians, Poles, German, Swedes, Russians, and Scots (and Irish) are not Anglo.
NOVAwatcher, good point about having a sense of responsibility. From what I have read from various sites such as Patrick's, coincidently 2004 was clearly the line of demarcation in regards to the proliferation of sub-prime loans.
I wasn't implying "sense of responsibility" so much as disposable income. Keeping your place in shape takes time and money, and those that are stretched to the limits financially often don't have enough money or time to keep their place in shape.
eponymous
Absolutely! How did I forget those?
although I'd like the "capital gains" portion to be structured such that it only applied to appreciation equity above CPI for that time frame for those downsizing, and still had the old exclusion that allowed you to apply previous gains to a new house purchase without penalty(which has the same effect of keeping up with inflation)
Novawatcher - very true. There is a situational aspect to it. When I was in the UK, any time a hispanic surname was heard, it was assumed they person was from Madrid or Malaga. However in the us, it is presumed the person is from somewhere in central america.
Still, point taken. Spaniards are indeed of european descent.
cara, I must say that your posts on this thread have been exceptionally astute. Thank you!
Now everyone who is here for housing talk avert your eyes momentarily, please--this is direct to amy, totally off topic:
This was my seventh natural birth, my first home birth, and what I have learned along the way is that birth truly can be an ecstatic experience. Not pain-free (though some women say that is possible, I have not experienced that), but mind-blowingly, profoundly fabulous, the greatest high imaginable, with pain one little part of it. Our society perpetuates certain ideas about childbirth that trap women in a mindset of apprehension and dependence. Women deserve so much better.
This is not to say that there are risks and challenges with childbirth, but think about it: natural birth is a bodily function, not a medical procedure. It is not meant to be excruciating, and the pain serves a purpose: it guides the mother to change positions to help the baby come out, for example.
The problem is, we have medicalized the mystery and profundity out of childbirth. I only wish all women knew that they deserve to be treated with love and respect and deference when they are in labor. If they really were, if they were offered the kinds of support that help make it an ecstatic experience (massage, water, warm compresses, cool cloths, sips of water, fanning, encouragement, position changes), they would realize getting the baby out should be just as much fun as getting the baby in!
If you ever do have children, please, please, find a natural childbirth instructor/advocate who can help you release any preconceptions you may have from TV/movies/horror stories, because fear and anxiety and tension do make the energy of birth seem overwhelming. The sensations of labor and birth really are the prize of womanhood--enjoy!
Now back to your regularly scheduled housing discussion...
"bargain home hunter" = smart buyer
Really, who wants to pay more for the same thing?
If a little patience or research allows you to buy your home for less, then that is just being smart plain and simple.
I don't want to assume too much, but I took the connotation of "bargain home hunter" to be negative. If that was intended then I couldn't disagree more.
OT
amen tabitha. we had our first child 2 weeks after your last one. it really is insane/scary how much it is pushed that child birth is this painful, unnatural procedure that must be medicated; that people are shocked you arent just having a planned c-section. we did hypnobirthing, and while we did end up having to use some pain reliever, we do not regret it
thanks tabitha!
(on the birth topic)
Thanks for your story and the further illumination. It's nice to have counter-examples to the horror stories my own friends have recently lived through. I still plan to have my first child in a hospital, for the reason that if complications occur, I'll already be in the hospital, but if my child-birth is as straightforward as my mother's, my dad's sister's, and my sister's were, then I might change that decision in the future.
still OT:
GT, congrats!! The Hypnobirthing book is in my birth library, and while I did not use its exact techniques, I completely love its philosophy. My friend had her fifth two weeks after me, and after two scary shoulder dystocia deliveries, she was terribly anxious, so she took the Hypnobirthing course and hired a doula, which led to a quiet, peaceful, fear-free delivery of a strapping boy. She credits the beautiful birth to Hypnobirthing and the doula. Whatever works to preserve the power of a woman's body!
cara, I had lovely non-interventionst births in the hospital, so you can, too! Just make sure you have someone to run interference with the hospital staff :)
Congratulations, Tabitha, I wish you and your family the best (and may you find the perfectly priced perfect house for all of you)!
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