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Saturday, October 25, 2008
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32 comments:
A Van Dorn Village townhome in Franconia (22310) was picked up by a tenant after a couple of weeks being listed. It is being rented at $1700 by a federal civil servant.
$1700 x 12 x 15 = $306,000. The median sales price in the townhome community is around $320,000.
Perfect example of a delusional, "sticky price" seller: I went to an open house for this home months ago. The problem is simply that it is overpriced. It's nicely decorated (if that's your taste) but the rooms are small and most are dark and feel cramped. It's not an unusual house. The seller wants a huge premium over last year's assessed value, but the improvement she's done could not have cost anywhere near that amount, and they aren't particularly recent. Why in the world, after all these months, doesn't she "get it?" This house should go in the low 800s. I'd be really tired of listing her house if I were her agent--or really incompetent, if I haven't showed her the comps by now.
http://franklymls.com/AR6762243
$1700 * 145 = $247000
I calculate that the monthly PITI alone (30-yr fixed, 20% down) would be $1900 for that $306,000 townhouse. I'm also assuming that there are no condo or HOA fees.
That means just to break even and cover maintenance, you'd need to rent it for at least $2100 (90% of that is $1900). If there are any HOA or condo fees, then rent would have to be more.
ace: This does make you wonder why the person is selling. A price in the low 800s or even high 700s would mean a hefty profit over this long term investment. It is hard to understand why they have stuck with such a high price. Retiree willing to wait?
Blacksilver, it is puzzling. I agree with you--but if I were in that position, I would take the house off the market and wait for better conditions in the credit markets, etc. It's a pain to keep everything clean and shining for so long. So my suspicion is that she really just thinks her decorating is so superior that the one buyer with the same taste will walk in one day, fall in love with it and give her her asking price. I would think that would happen only if you have a truly unique house that needs a truly unique matching buyer, since it's been on the market a long time and no one else has fallen so in love with it. Somene with the same taste can buy a $650K fixer-upper of the same size and neighborhood and achieve the same look for a lot less $ - and Arlington's assessor apparently thinks so too, since they say that house in average condition was worth about $750K last year.
Another possibility (suggested by a Realtor who said this is quite common) is that she's used the house as an ATM and so has little equity and can't afford to take a low price. If so, good luck finding a sucker who will pay for her mistake!
Novawatcher, it is 180 not 145. Where did I get that 145 figure? I found the 12 x 15 x monthly rental figure from this bubble website that has been featured a lot in the news:
http://patrick.net/housing/crash.html
Yes, the total monthly expense is $2000, but that includes about $275 in principal payment.
Here's another laff riot. I went by this $1.3 mill. place while doing errands:
http://franklymls.com/AR6899541
This house is right next to commercial property with a rusty quonset hut in the back yard, which is next to a used car dealer on Lee Highway. The house's back yard abuts the parking lot for a poorly maintained, old apartment building. None of these conditions appear to be likely to change any time soon. The rest of the area is a mix of that type of property and modest homes, many of which could be rentals.
How insane would you have to be to build a house like this on that property (let alone expect to get top dollar for it)? And it probably was begun well past the time when the bubble began to burst.
Anthony: 180 is based on the past, 145 is empirically derived.
Or to put it another (less smart-ass way): cost of ownership (PITI) should be, at most, 90% of rent. The multiple (whether 180, 145, or whatever) will change based upon interest rates and taxes.
Novawatcher, I'd say that 90% is too high. Cost of ownership is more than PITI; besides maintenance and landscaping, capital improvements cannot be postponed if the owner wants the house not to deteriorate over even the medium run. These costs are substantial, especially in high cost cities. In addition, the owner often pays the water bills and may have other fees.
Further, there is the value of capital (down payment) on which the owner could be earning a return if not used to buy the home, which is not included in PITI, since few rental owners could get a 100% loan these days. For example, if you put a down payment of $50K on a property, a rational rental property owner would expect to get an amount from the rental to cover the interest s/he could have earned on that $50k if it were instead in a CD.
Tax considerations may be important as well. Many owners cannot deduct losses (because Congress limited these as your other income increases) even if they are active (as opposed to passive) managers of the property.
So I think PITI must be much lower than 90% of the rental income for the owner to make money from renting the property. Otherwise, his/her only hope is that the property value increase each year by well over the rate of inflation.
NOVAwatcher and Ace, yes I see the rationale for PITI being 90% or less of rent given the risks. And your 90% figure includes safety margins for maintenance and emergency repairs (i.e., $4000 new heat pump).
135 times monthly rent is the very long term historical average.
I've posted about this house before. Although I haven't been inside, the pictures online intrigue me:
http://www.franklymls.com/FX6422287
Price history:
05/25/07 -- $899,900
06/11/07 -- $849,900
07/16/07 -- $799,900
08/08/07 -- $798,777
10/19/07 -- $750,000
10/31/07 -- $725,000
11/15/07 -- $700,000
02/20/08 -- $650,000
10/24/08 -- $599,000
The price recently changed, so I decided to look at the listing again. It now has this interesting statement: "8 offers at this price w/o 3rd party sign-off. Bank now ready to work w/offers."
Novawatcher, nice house. A lot of buyers around here will not consider a house without a basement, no matter what, though, so bidders should keep this in mind for resale.
ace: that's what killed it for me. If it had a basement, I might consider it, but no-basement is a deal-killer for me.
One more thing to think about:
Fairfax County is considering reassigning some of the properties that are currently in the Oak Hill High School district to South Lakes High School. Depending on where the property is located, this may also affect the value as well.
Ace -- That Bryan house is nuts. I went to an open house 2 weeks ago there and listed to the realtor (the owners changed realtors) explain that the house is now $250k off the previous price, as if that were a sign of a great deal now rather than prior lunacy.
I suppose that having Lee Highway and a 7-11 a mere 200 feet away adds a certain convenience that one would otherwise have to move into an apartment to obtain.
And speaking of oddities, I posted about this house a while back: http://tinyurl.com/62wxjz. As I recall, the price went down to $1.1m and it sat for a while. Then it jumped down to $800k or $900k, with a note in the listing to "bring all offers by 4/13" (i.e., basically an auction).
I checked the county records a few times since then but no sale ever showed up.
Now it's back at $1.4 million! I guess the owner decided that the economy in general and the housing market in particular have so improved since April that now is a good time to relist it at a higher price than before.
A.D.
Clarifications?
Do you know what price it went for, or did you just multiply the known rent by 180?
You said, picked up by a tenant, I assume you mean the current fed tenant bought it from their landlord? Or did you mean that one landlord sold it to another landlord complete with an existing tenant agreement?
Just curious. Van Dorn Village is definitely amongst the developments we'll be looking into next year.
Novawatcher:
I still love that house, even if it has no basement. Too bad there's nothing like it in my area. (there are a couple 60's style houses, but they're in a run-down neighborhood practically underneath the mixing bowl.)
Cory: "I suppose that having Lee Highway and a 7-11 a mere 200 feet away adds a certain convenience that one would otherwise have to move into an apartment to obtain."
LOL!
And re: the Clarendon townhouse - there seems to be a pattern here among some sellers/Realtors: "If it's in or near Lyon Village or Clarendon, people will pay anything!"
Cara, you said "Do you know what price it went for, or did you just multiply the known rent by 180?
You said, picked up by a tenant, I assume you mean the current fed tenant bought it from their landlord? Or did you mean that one landlord sold it to another landlord complete with an existing tenant agreement?"
The house was recently rented. The owner opted to rent it for $1700/month instead of selling it. I read on patrick.net's site about the monthly rent x 12 x 15 = home value.
I have read sage advice that PITI should be no greater than 90% of rental income.
"And speaking of oddities, I posted about this house a while back: http://tinyurl.com/62wxjz. As I recall, the price went down to $1.1m and it sat for a while. Then it jumped down to $800k or $900k, with a note in the listing to "bring all offers by 4/13" (i.e., basically an auction)."
Cory,
Are you sure this is the same house that was going for $800K-900K. I've been to a couple open houses here in recent weeks (3-8 weeks ago), and the price was in the $1.5 M range. (The reason I went is that I'm working with the same architect on renovating my house, and wanted to get ideas).
A.D.
Ah, okay, I had totally misunderstood.
For the sake of the owner, let's hope $1700 at least covers their carrying costs. Which, if they bought earlier than 2002 or put down a large downpayment (which, I know, they're lossing money on), it easily could.
There have been a number of nice new listings for townhomes in the area, or price reductions to near sane levels, and going into the winter slow season, I can see why it could seem better to hold off and not compete with that if renting the property out will cover your costs. Meanwhile, I'm looking at these listings and wondering if I want to hold off until this time next year rather than deal with the heady summer market. It really did take until the last two weeks before anything new and well-priced came up that hadn't already been at that price all summer.
Keith wrote, "Are you sure this is the same house that was going for $800K-900K. I've been to a couple open houses here in recent weeks (3-8 weeks ago), and the price was in the $1.5 M range. (The reason I went is that I'm working with the same architect on renovating my house, and wanted to get ideas)."
==> Yes, I even posted about it in the comments here. It wasn't "really" listed for $900k. They dropped the asking price to that level and then said they would take the best offer (so it was more of an opening bid for an auction). It appears they didn't like the offers they got. Prior to that, it had dropped to either $1.15m or $1.25m.
Cory,
If you say you wrote about it before, then I'm not going to try to contradict you.
I might have an explanation, though: degree of completion. When I first went to look at this, based on the architect supplied list of projects, they hadn't finished construction. I think this was back in April or May. (If I took a picture of it, I'll be able to tell you the exact date.)
Follow on to previous post:
As of May 4, construction was still underway. Exterior was mostly done, except for porch stairs and material around bottom of house. Driveway and sidewalks were not done, and garage door and interior weren't complete. I can't tell what the interior condition of the house is, but I'm pretty sure it wasn't ready for occupancy before June and maybe much later.
KeithK --You're completely right. Somehow I linked to the wrong listing.
This is the one I posted about before and that I meant to link to: http://franklymls.com/AR6905338!
Not sure how that happened.
Cory
What's with the sideways gas fireplace trend? Just because it can be done, doesn't mean it should. That one in the living room is just randomly sticking out from an otherwise attractive built-in bookcase. WTF?
Who thinks these things are a good idea? And forces them on all the rest of us (if we ever buy a house from this era)? I have seen them in places where they make some sense. This is not one of them.
Sorry for the semi-off-topic rant.
Cory: Ah, yes, the place with no front or back yard and the deceptive photo that suggests it has a huge side yard (it's really the neighbor's).
Isn't that house 10 ft or so from a busy road?
sidewise gas fireplace? Didn't we tear this place's interior apart a few months ago? For example, the fake flu over the oven that doesn't attach to the ceiling.
Cory & Keith,
John Fountain posted on this a thread or two ago.
It was offered at $999999 or close a few months ago, apparently to try to spur on a bidding frenzy that did not ensue.
Also, note that the seller claims it is in Lyon Village, which is among the most premium neighborhoods. In fact, it is across a busy street from Lyon Village and has nothing in common with that quiet, older neighborhood (other than asking price). It is legally in "Kirkwood Terrace." Not sure whether the seller really believes his claim. But he might ask his Realtor to try to find a comparable home on a comparable street and see what it's sold for. I guarantee it is nowhere close to $1.4 mill.
The house is big but a lot of bad choices were made about placement of windows (can't put up a big flatscreen in the family room) and the quality of materials and workmanship is lacking. It is out of scale with the rest of the houses on Kirkwood, and remember what your mom and dad told you about never buying the biggest house on the street.
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