Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Please post your local house search updates, MLS finds, on-topic ideas, and links here.
From Calculated Risk, but I decided to be snarky about it here rather than in the swath of commenters there:NAHB confidence index press releaseChoice tidbit:November 18, 2008 - Builder confidence in the market for newly built single-family homes plunged in November as worsening problems in the financial markets, job market weakness and overwhelming uncertainty about the economy continued to negatively impact consumer behavior, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI sank five points to 9, the lowest level recorded since the series was created in January of 1985. “Today’s report shows that we are in a crisis situation. If there’s any hope of turning this economy around, Congress and the Administration need to focus on stabilizing housing,” said NAHB Chairman Sandy Dunn, a home builder from Point Pleasant, W.Va.. “Tremendous economic uncertainties have driven consumers from the housing market, and it’s going to take some major incentives to bring them back. Beyond the work that is being done to help reduce foreclosures, Congress must immediately incorporate such incentives for qualified buyers in a new economic recovery package.” Excuse me? "Tremendous economic uncertainties have driven consumers from the housing market?" You mean the lack of certainty that they would get 20% appreciation a year every year on a 100% leveraged asset? "it’s going to take some major incentives to bring them back." How about financial sound and attractive prices? That works for me, how about you?Maybe the translation should be, we only want to work for really rich people who have lost all perspective on money, they're a really good deal for us, so yeah, re-incentize them for us...
Yeah, things were going so well with housing until the collapsing housing market triggered a financial crisis. If it hadn't, everything would be fine.Or something like that.
And to think that Bob Toll "never reduces their Base Prices" on homes they buildsee how long that keeps working for ya Bob...
Yeah, there is really no right answer if you are a home builder today. I mean what can you do besides cut your operation back to the bare minimum and hope that you are able to stay alive until things turn around? ... however many years that takes.
Leroy,pretty much.Take your lumps now, so you can free up capital and borrowing capacity to invest in cheap land in the near future to build on. Prune your operation to the bare minimum to ride out the storm while still being prepared to take advantage of the bottom in land prices, particularly land that's already been readied for construction by other builders who have now gone under.Or you could be like Las Vegas and tear down some MegaMansions to build smaller starter homes with higher markups per square foot, and try to pass those costs onto a larger number of buyers each with their own FHA loan...If you look at the chart on Calculated Risk, builder confidence is always lowest right before the end of the official recession, so if the confidence level would just hit zero, we'll be well on our way to recovery??? Oh wait, that assumes a "V" shaped recession, doesn't it? Too bad this one may be an "L"
WTF is going on? As much as I hate to admit it, houses are literally "flying off the shelves" in the Clarendon area in the past couple of weeks. It's like Spring 2005 all over again. Have people lost their minds? Why the sudden buying rush? Trying to beat the reduction in conforming loan limits? Why are people overpaying by so much?For example, a crappy little 2/2 house on Seventh St., complete with linoleum floors in the kitchen and bath, a slanting ceiling in the kitchen, a very small lot, and no closet space in the upstairs bedrooms just went under contract in it's first week listed (list price $740k). Here is the listing:http://franklymls.com/AR6920595It probably worth less than $600k.In addition, just down the block a super skinny new in-fill house just went under contract with a list price of $1.425m. By my estimation, this is about $500k greater than the builder's cost to build. Why the hell would someone overpay by $500k, or 50%?Several other houses that had been languishing also just went under contract. This is normally a slow time for sales, and with the economy and the stock market where they are, I'd think things would be even slower.Can anyone explain this sudden flury of activity and the high prices suddenly being paid?Am I losing my mind or is everyone else?
Oh, here is the link for the second house I referred to:http://franklymls.com/AR6842652
John-Keep you eye on what those homes actually sell/ close for in a Month or so.That should be some good info to know!
john fontain,that is frustrating. I kinda like the little blue house, but you're right, not at that price I don't. (I actually like lineloeum because it's easy to clean and cheap to replace to get a nice fresh new splash of color, and easier to remove than wallpaper, but I'm wierd. And it doesn't belong in a 3/4 million dollar home.)Dead cat bounce? Or just those people who really really wanted to buy this summer, but were waiting for more price declines, looking at the increase in conforming loan limit and deciding they're not willing to hold off any longer.Either way, it will pass. A couple of weeks of brisk sales don't do that much to make up for a sluggish summer (relative to recent expectations). Let the knife catchers step up, it keeps everyone else's savings from evaporating entirely. (either through total collapse of the FDIC system, or continued stock market losses, or complete lack of return on government bonds)
cara said: "And it doesn't belong in a 3/4 million dollar home."How true. But also, how crazy is it that this is all you get for THREE QUARTERS OF A MILLION DOLLARS!!!Ten years ago, 3/4's of a million dollars would have got you one hell of a nice house. Now all it gets you is a 2 bedroom shack in clarendon. Pass the crack pipe folks, I need some of what everyone is smoking.
John,I don't see any "flying off the shelves" in the areas in Fairfax that I have been following. More homes that were listed as regular sales, but didn't get sold and were withdrawn, are coming back into the market as "short sales" with reduced listing prices.The funny thing is that people who bought their home for $300K in 2001are now listing at $500K as short sale. Having used their home as ATM, what else?But in Clarendon, it could be another story. I don't know if the new admin people are already moving in. You know some of them are very wealthy already and don't depend on government salaries for home purchase. For them, it is just public service and prestige. Such people may buy whatever is available now without worrying about future drops.
jf,agreed. I kept trying that argument that prices are inherently way out of whack with the arlingtonites and kept getting back that essentially arlington "should" be twice the cost of anywhere reasonable within the metro area. And since I have no plans to live there, as it's completely inconvenient for me anyway, I gave up long ago.Personally I'd say this house "should" cost no more than $300k even in a great commuter location with top quality schools. But people don't take kindly to my comparisons to Boston. But I mean really, my friend's sister just bought a comparable house on Cape Cod, fer x's sake, for less than $180k. Cape Cod, you know, where people vacation!!! With ocean and bays and sailing, and .... I second the call that you see if you can keep an eye on these two and check up on their prices when they hit the tax records.
Ted K said..."But in Clarendon, it could be another story. I don't know if the new admin people are already moving in. You know some of them are very wealthy already and don't depend on government salaries for home purchase."John - that was going to be my theory too, but Ted beat me to it. I know the WP has reported several times that the inaguation causes no bounce in the DC area, but those reports are for area wide (40,000 homes). I think you could see a bounce close in, (Arl, Alex, Bethesda, etc.,) especially because I assume these buyers would value proximity more than many. Further, suppose a total 250 families move in to the area (many from chicago & used to high prices). If 20 of them move into FFx, it isnt easily seen among the near 7,000 houses for sale - however if 20 move into Arl, it is much easier seen among the >1000 listings in Arl.That said, this is probably a one to two month phenomenon at most. After that (if this is correct), assume we go right back to your regularly scheduled housing correction.
John -- I saw that house on Sunday and it's pretty dumpy. Everything is old and cramped. Electric is a code violation (may be grandfathered, but needs redoing in any case). We literally scoffed at the price. $750k for a teardown!?! I guess Ron Cathell (the realtor, whom I overheard explaining that "now is a great time to buy") is laughing now. And add 906 N. Highland to the recently sold list (pics at http://arlingtonproperty.net/currenthomes.html, just scroll down). I think it was listed at $1.4m when it went under contract. And that house is crammed into a 5,000 sq. ft. lot. The county isn't yet showing the price for the Highand house or the skinny house on 7th, but since I no longer know what to think, I'll just assume they sold for over list. One more. 907 N. Irving St. just sold for $1.455m. At least that was a nice house, though too big for the lot it is on.At this rate, the next to sell will be this house on Washington: http://franklymls.com/default.aspx?m=C&h=ALL&s=AR6376720. It only has 581 DOM with no price drops and so must be a steal. I think I'll have to go and whack a few of my new neighbors. Cory
the anonymous : Chicago may be high-priced compared to Peoria, but compared to here it's down right cheap. I don't know where folks get the idea that new members of the administration will be wealthy enough to spend 3/4 of a million on a shack.
P.S. To be clear, by "whack" I meant whack on the head with a rolled-up newspaper, not "whack" in the Sopranos sense.
Novawatcher -- I moved here from Evanston, which shares many of the attractive features of N. Arlington. Pricing is not even close -- a similar house in Ashton Heights is maybe 30% more than a comparable house in the nicer parts of Evanston (North of Dempster, east of Ridge/Green Bay).
Cory, 906 N. Highland went for $1.3 ($100k less than asking). http://www.sawbuckrealty.com/find/?la=38.886594&lo=-77.094726
"Novawatcher said...the anonymous : Chicago may be high-priced compared to Peoria, but compared to here it's down right cheap. I don't know where folks get the idea that new members of the administration will be wealthy enough to spend 3/4 of a million on a shack."OK - Ill be the first to admit, I dont know the first thing about Chicago. However, I did a very quick search and found 6,516 houses for sale for over 750K in the Chicago area. I think its safe to say this population pool is big enough for my 250 hypothetical families. Further - you say the new administration people arent wealthy enough to afford 3/4 mil - OK then, do you have an explanation? JF said houses are "flying off the shelf". If hes correct than what do you attribute that to? Could it not be that 20 of those families do make enough to afford 3/4 mil plus houses? Im not saying this is correct, but absent any other reasonable alternative, this sounds plausible doesnt it?
novawatcher,I haven't checked out what kind of homes in Clarendon are selling. but many like Rahm Emanuel are definitely wealthy and can afford to spend 3/4 million on whatever is available. Some of them may not move their entire family here, are too busy to do bargain hunting and can't wait, so may buy even what you call a 'shack'. It is just a possibility. If you don't think that is it, what do you think could be the reason for what he sees, at this time when people are talking about Great Depression #2?
the anonymous: Possible, but unlikely, considering that the election was only 2 weeks ago.cory: What's Ashton Heights? Is it nice? A dump?
Novawatcher - They would have been looking for more than 2 weeks. I think potential out of town buyers from either the McCain OR the Obama camp had their eyes on the DC housing market for weeks before the election. They certainly wouldnt want to be spending their precious transition time doing a bunch of house hunting. Thats why I think this could be the case - and also why I think it could be very short lived - minor sales bump, then back to normal downward trend.
I agree that it is surprising to see a possible uptick in recent sales in Arl. Here's another hypothesis: It's getting close to the holidays, people who have been househunting forever are getting sick of it, and a few are giving up and paying high prices so they can get moved in before Christmas or between semesters for the kids. Yes, Arl. is overly expensive but it really is a nice place to live, especially if you hate commuting to DC. Not all buyers are first timers and some have family money, so they don't have to have ultra high incomes to afford small houses. If you make friends here or put down roots, like any other community, you don't want to leave if you can afford to stay. And if the buyers are coming in to take political jobs, maybe they are less concerned about space or luxuries and more concerned about time, since they are likely going to work very long days. It doesn't take many of those with special circumstances to create what appears to be a sales rush in a community that has relatively few SFHs for sale.Novawatcher: Ashton Heights is a nice, mostly single family neighborhood close to Clarendon.
maybe frank can chime in whether the new admin is bringing 250 buyers in the 750K+ market. i'm sure there'd be all kinds of grapevine talks among the realtors that whos-who is looking/buying what and where.
Novawatcher -- Like Ace said: Ashton Heights is a nice mostly single family neighborhood in Clarendon, next to Lyon Park (borders are approximately Irving/10th/Glebe/50).Anonymous -- Just redfin the zip codes 60201 and 22201 to compare Evanston to Clarendon. In Evanston, you'll find lots of nice houses in the $600k to $900k range that are walking distance to the L and Northwestern. Walking distance to the Orange line in Rosslyn-Ballston, most of those would be listed at $1m to $1.5m (and, it seems, would sell).
John, while I agree $1.425 million is a lot of money, I don't know where you can find a builder who can and would build for $100 per square foot, let alone provide any upgraded materials for that. That house has 5000 square feet (including the lower level). The Arlington assessor's info for this location is strange. I don't know the builder acquired the land for less than $400K in 2007, which seems much lower than the typical Clarendon lot cost for that size in 2007. If you look at the house right next door on either side, with a similar sized lot, the land alone is valued at $520K.
Ace--- "It's getting close to the holidays, people who have been househunting forever are getting sick of it, and a few are giving up and paying high prices so they can get moved in before Christmas or between semesters for the kids. "I concur. I don't think you need anything more extravagant than this to explain a major uptick in a single neighborhood, or even a minor uptick in a larger area.And whomever said, "didn't want to waste precious transition time house-hunting" uh, what about precious campaign time??? I agree that many who won't be moving their families here will settle for something convenient that seems to be priced at the going level. But yes, shortly we will be back to our regularly scheduled price declines.
Agree, Cara. In looking at franklymls, I'm not sure whether we have anything more than the sales of two or three houses in one area. It looks as though the vast majority of Arlington houses in the higher ranges are still sit- sit- sitting without price drops.
ace - i believe the builder paid 375k for the lot. the reason for the "low" price is that the lot is super skinny (thus the ridiculously skinny house). it probably cost the builer about 500k to build the house. thus, total cost basis of about 900k. a reasonable profit margin might put the sales price at $1.1m or so. and yet we have people overpaying by hundreds of thousands of dollars for skinny houses on odd shaped lots. amazing!
Um, driving from Evanston to the Loop is NOT the same as driving from Ashton Heights to 18th and K....most, though certainly not all, of the folks who buy the really expensive houses in Clarendon are going to be driving downtown for work (notwithstanding the proximity of the metro)...
fd: I agree. It is hard to compare Chicagoland with the DC Metro area, but if anywhere is like Evanston, it is Oakton/Vienna or Reston. To all predicting price decreases in Arlington: SFH prices in very hot areas like Clarendon or Georgetown may not go up much, but there is too little supply for prices to go down more than a few % points. The value of the land alone will preserve this even for teardowns.Orange line locations further out and even condos in Clarendon won't be so fortunate.
blacksilver2000,Evanston to Reston???? Lake Forest to Reston, maybe, Evanston's way too close to Chicago to be compared to Reston...I think however the inherent difference between the geographic structures in the two cities makes price comparisons by neighborhood nearly impossible. Chicago has ritzy high-rise neighborhoods that DC just doesn't have, DC has very livable surburban feeling dowtown areas that Chicago doesn't have, Chicago's established suburbs go north along the lake and were intentionally built far away so that striking workers wouldn't be able to walk that far if they rioted in Chicago.... So, if we're going to do a meaningful comparison, perhaps it would be best to stick with Case-Schiller metro areasClarendon and Georgetown in the same breath? Are you kidding me? What's next, Alexandria and Capital Hill? Perhaps we should keep the neighborhood machismo out of this as much as possible...
Vienna is a better comparison. Reston is, indeed, too far. Vienna is roughly as close to K street as Evanston is to Wacker. Not sure about driving times. The inner Arlington suburbs don't really have comparisons in older/northern cities. Obviously places like Buckhead, Park Cities, etc. are similar.
"Clarendon and Georgetown in the same breath?"What's the problem? The point made about them is certainly valid: they're unlikely to experience significant price drops for the reasons stated.
John, I just don't think a builder around here can build a 5000 square foot house for $100 per square foot plus the cost of the land (which is what you're saying they would do) - and that excludes fancy cabinets, appliances, granite, etc. At least I haven't met one who will - I haven't found a good one willing to build for twice that rate - most want $250 and up. But I agree with you that it's not an attractive house.
ace - they may be counting the square footage of the basement in measuring the size of the house, but when a builder prices a house for you it's quoted at a cost per square foot not including the basement (i.e., the basement is free). Trust me, it didn't cost Russell more than $500k to construct that house.
Cara, blacksilver2000,Heard this story on the radio yesterday (not sure if it's new news or rehashed news) - D.C.-area condo prices holding up better than housesfrom Washington Business Journal"...The quarterly report says the average price of a single-family home in the Washington area was $332,700 in the third quarter, down 24 percent from the average price of $438,000 in the third quarter of 2007. Washington-area condo prices averaged $263,000, down 11.2 percent from a year ago..."maybe it's different in Clarendon...
John, if you can find a builder who will include a "free" basement in Arlington, then you are a much better detective than I am. I was quoted, years ago, by a moderate quality builder I had already worked with, $250 per square foot including no extras, and approximately 1/3 of the addition square footage was for an *unfinished* basement garage. The builder said "it all averages out." More recently $300 is the minimum I have heard PLUS architects' fees, plus appliances, cabinetry, upgrades, etc. Obviously this includes their profit margin but I stand by what I said earlier. I've never run into any reputable builder who would put up a 5000 square foot house including a finished basement at a cost to him/her of $100/sq. foot.
PS the "free basement" builders I'm aware of are the big tract McMansion pushers outside the beltway, not custom builders in Arlington.
An architect I know recently told me the going rate for a high-end new build was about $180 to $200 per square foot (square footage for pricing purposes measured by all above ground levels, with that price per square foot including the basement being finished for that price). He also said that because business is so slow he wouldn't be surprised if quotes were less than that. And this is for a high quality home with very nice finishes.And by the way, the county tax records show the square footage for that property as 3,600. Subtract a third for the basement, multiply by $200 and the result is $480,000.
mm: that's interesting - i admit I expected Nova to be more like Baltimore. DC metro is a big area though - I'm not venturing opinions beyond NoVA.I also think year over year comparisons are misleading in this environment. How do condos and SFH look vs. 2005 instead of 2007? Examples:Condo under contract:http://franklymls.com/AR6821444Asking is -12% vs. last sale according to Zillow.Condo under contract:http://franklymls.com/AR6894711-27% asking vs. last saleCompare with this... http://franklymls.com/AR6920595+114% since 2001. I can find more.SFH close to Clarendon: low supply. Condos? big supply, low sales.
Keep in mind that medians can be misleading. IIRC, the median for Vienna/Oakton/Herndon (that strip from the beltway to 24 wedged between the toll road and 66) is relatively unchanged to a slight drop (92-95%) since their respective peak prices from several years ago.However, if you look at resales, or norm the prices by some measure of quality (I used 2006 assessments), you find that prices are 80-85% of their peak (e.g. prices peaked at 110% of 2006 assessment and now are in the low 90%s). Anecdotedly, my wife and I are noticing that homes listed in the 650-800k range are much nicer than they were a year ago.For a dated illustration, see the charts here:http://novawatch.blogspot.com/Anyway, that was a long-winded way of saying be careful of median (or mean) statistics.
mm,very interesting. This meshes well with what I'm observing around Franconia Springfield. SFH's went through the roof for p.o.s. 1950's itsy-bitsy ranch homes in dumpy areas with no obvious improvements. Since these went as high as $550k, that gave them a lot more room to fall than condo's which mostly never went above $350k. (TH's of course are another beast). Think about it, there's the strongly held wide-spread belief that SFH's are inherently more crash-resistant and appreciate more than condos. And that this belief was held avidly during the bubble moon-launch. This means that speculators turned to SFH's earlier and more often than condos or THs. Anyone who could speculate tried to do so with SFHs. Only the small-timers and late entrants tried it with condos. I know these aren't the actual numbers given by MM, but think about it, a 150k condo can only lose 150k, and is unlikely to lose more than 50%, whereas a $550k SFH p.o.s. could easily also go down to $137.5k, (75%) maybe lower. There's just more funny money there to lose.That said, it could also be the case that it's stil the outlying areas (with the near-outliers included like FS and Vienna) that are actually seeing this weakness in SFHs and that it hasn't hit Clarendon yet.Oh, and Ted, my objection is, Georgetown, beautiful historic district, Clarendon? convenient nice neighborhood, total apples and oranges. I mean what's next comparisons to Paris because of DC's similar street layout and good public transit and residential feel? Which is Monmarte, Adams Morgan, Dupont Circle, Eastern Market or Old Town Alexandria??
cara: I agree that in areas further out like Franconia there was more speculation in SFHs than condos. The ratio of SFH to condos is higher there. The issue closer in was there was a lot of speculation in the pricier "luxury" condos in the nice metro areas. The markets are different.The most extreme price craziness was in SFH in the outer areas, as you say.As to Georgetown vs. Clarendon, I don't want to take my comparison all the way to Paris. My point, as Tom said, was the general SFH shortages in both areas provide resistance to price declines there that is not being extended to the condos. As a market, Georgetown and Clarendon have more similarities than Clarendon and Franconia-Springfield. Geographically closer too.
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