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Monday, December 15, 2008
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66 comments:
Here's a question for y'all.
What is a basement worth to you?
Let me throw out some possibilities:
1) unfinished, full basement
2) partially finished full basement
3) finished but partial basement (small) - maybe a garage takes up the other half, or it was under only the original part of an added onto house
4) no basement
Does 4) make you completely unwilling to consider the house further, or if you otherwise like the house, you make sure to offer ? less?
For us we wanted a fully finished basement so it can serve as an in law suite. This enabled both my wife and I to work while our kids were very young ( too young for childcare ) by having rotating grandparents visit.
For us, it was worth a lot of money.
Ace,
Do you have a specific listing in mind? I had the same questions when I saw a home.
Doug,
daycare for 2 is about 20K/yr for us. 20*5 yrs = 100K. that could be how much the basement in-law suite worth to you.
(cara, the Rockville contemporary beauty went under contract...)
A fully finished modern basement is a plus. But, since half the basement is going to be used as storage, a workshop, etc., fully finished isn't that important. It is the one area of the house where I can overlook funky panelling and shag carpet, since I plan to turn part of the basement into a loud room anyway (home theater, place where the kid can practice drums), and that will involve adding double walls.
On the other hand, an inlaw suite is a definite plus, whether it gets used by inlaws or not.
MM, yes, though you can't tell much from the listing, because the house is under construction/renovation:
http://franklymls.com/AR6927226
It's formerly a split level, and while the Realtor claims there's a "full basement" there isn't. All there is, is the lower level you see in most splits, and half of that is taken up by the garage you see in the photo. The Realtor is counting a 10X14 room next to it as the 5th bedroom, plus a full bath.
Thanks, everyone, for your comments. Very helpful. More comments are welcome. If you can put $$ values on your preferences, please let me know. There will be other houses in this situation too, so I'm very curious.
I really like having a basement, it offers some "free" space for building whatever rooms you want or need. It would be great if it was already finished but I wouldn't mind saving some money and getting a bare basement that I could work on myself. It often seems that people have lower quality work done in their basements which is another reason I'd prefer a bare one to start.
Right now a basement is a nice-to-have though, I wouldn't decide against a nice house because it didn't have one.
I don't really have a feel for the dollar amount I'd put on one. Has anyone paid for a full basement makeover before, can you provide a rough dollar amount?
Full Basement is necessary to me - for an in-laws suite, teenagers bedroom area (very important for their all-night gaming/movies/sleepovers!!)
You never know when someone will have to live/move in with you. (in-laws, single parent or returning kid)
We had a home in the mid-west that had a complete seperate apartment (with seperate garage & laundry even) It was great to have 2 kitchens, laundry - wish I had it now!
My father-in-law sold his SFH in Woodbridge in Jan. 2007. Just prior to that, he finished the basement which created a huge play area, a 5th bedroom and he put in a full bath. He paid approx. $15,000. I was shocked that it cost so little to double the usable size of your house.
The house we are renting now is significantly smaller than our previous house, but has a finished basement with a store room versus a completely open, unfinished basement. Having a finished basement has completely changed my life. "KIDS--GO DO THAT IN THE BASEMENT!" Priceless, really.
That being said, if we were shopping, I could go without a basement if there were an equivalent, such as a finished attic. My dream house is a Victorian with a creepy old uninhabitable basement but a fabulous creaky secret-passageway attic, with an in-law suite stuck somewhere along the back. (wistful sigh)
Totally unrelated question:
Is it ever OK for a realtor to erase DOMp for a house? And it is OK for a realtor to change the "copyright" date on pictures for a listing to make it look as though they were taken recently?
Great segment on 60 Minutes last night explaining why the bottom of the housing market is alot lower than most people think:
http://www.cbsnews.com/video/watch/?id=4668112n
70% of option arms will default! This will make the subprime mess look tiny in comparison.
Ace,
A basement is a must for me. Ths issue comes down to whether a home with an unfinished basement comes with the right amount of discount.
A few years back, a full finished basement, for a 2500 sq ft (excluding basement) home cost about $20,000. I am not sure how much it costs now.
Alt-As, options disintegrating...
From Fitch:
The rating agency said it now expects average cumulative losses om 2005, 2006 and 2007 vintage Alt-A transactions to hit 2.72, 6.78 and 9.58 percent, respectively, up dramatically from expectations at the agency earlier this year.
http://www.housingwire.com/2008/12/15/fitch-alt-a-mortgages-deteriorating-more-rapidly-than-expected/
I'm not shilling for anyone, but mortgage rates have *really* dropped. Pentagon Federal is offering a 30-year fixed at 5.5%; Wachovia at 5.00%. I'm sure there are others out there that are similarly low.
Of course the question for all of us is, what about valuations? Can we actually get a loan at those rates?
I think the Option ARMs are going to be the nail in the coffin of housing prices.
The large majority of these loans have seen their balances grow month after month even while housing prices have fallen. When the resets finally hit the "walk away" factor alone will be certain to result in many defaults, even if interest rates are low.
I'm not counting on all these resets to really have much of an impact. A friend of mine just emailed me that they are considering refinancing at 4.875% (they bought early last year with a 80/10/10).
My mother-in-law forwards the USAA rates to me every time they send an update to her, here's the latest:
--------------------
The interest rates below are accurate as of Dec 12, 2008.
30 Year Fixed Rate
# 5.25% with 0.25 points and $0.00 premium pricing
# 5.125% with 0.375 points and $0.00 premium pricing
# 5.0% with 0.625 points and $0.00 premium pricing
# 4.875% with 0.875 points and $0.00 premium pricing
WW - Did your friend say how much their monthly payment would increase if they refinance? That's the concern with the resets, that people won't be able to afford their new payments. If people could afford a 30 year fixed when they bought a house they probably wouldn't have gotten an ARM, right?
My friend didn't say anything about monthly payments--it's going to cost them about $3,000 to do the refinance, but they'll make that money back in less than a year with the decreased amount of interest they will be paying.
And you're right, Jeff, in that ARMs are a different scenario. I am just literally amazed at how low the interest rates are now, and I think that will definitely lessen the pain with the coming resets.
It bears repeating how many "option ARM" loans there are in various areas in NOVA. These numbers are from Jan 2008 and are rounded to the nearest hundred:
Arlington - 400 Option Arm Loans
Alexandria - 300 Option Arm Loans
Fairfax - 2,900 Option Arm Loans
Loudoun - 800 Option Arm Loans
PWC - 1,400 Option Arm Loans
As of Jan 2008, about 35% of these had reset. Today is probably a little more than 40% of them have actually reset.
So there are the raw numbers. I will leave it to everyone else here to draw their own conclusions as to what effect 300 defaulting option arm loans (120 of which have already reset) will have on the Arlington housing market in the upcoming years...
CRT, can you provide a link to the source of your option ARM stats. Also, do you have stats on Alt-A loans?
And why the focus solely on option ARM's affect on Arlington? Did someone say they would have a large impact on Arlington?
CRT: What about Fairfax? 2,900 option arm loans? That is a lot more than I thought. Lest we descend into another Arlington discussion, what do you see happening in Fairfax? And will the now formally approved Silver line bring any benefits?
Crt,
Thanks for posting the Option ARM Stats. Like Fontain, I would also like to know the same for Alt-A?
I have to agree with those who think OptionARMs won't have as much impact on this area as the nationwide stats suggest.
Just because Whitney Tilson made one right call earlier, his word shouldn't be taken as gospel. I have doubts about his 70% defaults call given the low interest rates and the Obama admin's likely efforts at foreclosure prevention. Do we have any info on his historical records as an investment manager?
OptionARM and Atl-A are hardly late breaking news. I am more worried about how many Ponzi schemes like Bernard Madoff's are still to be discovered.
John Fountain - unfortunately, we no longer (past Jan 2008) have access to county by county data from the new york fed. Now it is just state by state.
http://www.newyorkfed.org/regional/States_AltA_2008_10.xls
That said, you can see there are now 8,758 Option Arm loans left in the state of Virginia. Using my January numbers, A good percentage of these (5,800) are found in Arl, Alex, Ffx, Lou & PWC.
As to why I focused on Arlington, I noted that contrarian said "there are a lot of option ARMs inside the beltway", so my response was with regard to his comment.
To be fair, my response should have included Alexandria, so if that 75% default rate comes true (which sounds good to me) assume another 225 or so will default in Alexandria.
I expect most of the 300 alt loans in Arlington are in South Arlington anyway.
crt said: "As to why I focused on Arlington, I noted that contrarian said "there are a lot of option ARMs inside the beltway", so my response was with regard to his comment. To be fair, my response should have included Alexandria, so if that 75% default rate comes true (which sounds good to me) assume another 225 or so will default in Alexandria."
Not to bust your balls, but the last time I checked about 50 percent of the land area inside the beltway in northern Virginia was Fairfax County. Therefore, a discussion of "inside the beltway" wouldn't be complete without consideration of at least a portion of Fairfax's troubled loans (and borrowers).
Blacksilver - yeah, 2,900 in fairfax. If you assume 75% will default (which seemse reasonable to me), 2,175 borrowers will default sometime between Jan 2008 and 2012 or so.
Ted K - regarding the Alt A universe (and again, these are Jan 2008 numbers rounded to the nearest 100):
Arl - 2700 Alt A loans, of which 1,300 are ARMs
Alex - 1900 Alt A loans, of which, 1,000 are ARMs
Ffx - 13,600 Alt A loans, of which, 8,100 are ARMs
Lou - 3400 Alt A loans, of which, 2,200 are ARMs
PWC - 6,000 Alt A loans, of which, 4,000 are adjustable.
Overall I agree with you, the Option Arm subset of this Alt A universe wont have much affect here locally, mostly because the percentage are so small. That said, this isnt the case nationally as there are over 371 K option arms out there. Even worse it looks like about 2/3 of all these (nearly 250K) are located in the mother of all meltdown states - CA & FL.
"John Fountain said...
Not to bust your balls, but the last time I checked about 50 percent of the land area inside the beltway in northern Virginia was Fairfax County. Therefore, a discussion of "inside the beltway" wouldn't be complete without consideration of at least a portion of Fairfax's troubled loans (and borrowers)."
I made the assumption that "inside the beltway" was used here in the coloquial sense to mean Arlington and Alexandria. Nevertheless, point taken.
ZipRealty has a cool new feature that allows you to 'vote' on the eventual selling price of home. When a home eventually sell, you get a score based upon how close your prognostication was to the eventual sales prices.
If you are already a Zip user, if you click on a home to examine it, the new feature will be on the right hand side of the window that opens up.
http://predict.ziprealty.com/
Tabitha, thanks.
I don't know the answers to your questions about DOMp, but it makes me wonder if someone ought to start a real estate show like Forensic Files on what was once CourtTV! It's as if we need to be detectives and scientists to track down the truth about some of these listings! As more info becomes available on the web, and/or as some sellers and their agents get more desperate, some seem to get sneakier and sneakier.
Ace -- my feelings about basement are mixed. Sure, it's nice to have the extra space, but after a number of battles with dampness and flooding, along with all the usual expensive fixes (French drains, sump pumps, etc.) I'm not sure I would be that disappointed by the lack of one in my next house.
With regard to the Alt-A question, as I understand it, the default rates are alarming on the whole Alt-A universe, not just option ARMS. The default rates, for that matter, are rising fast for prime.
That said, I don't think we'll have another Depression. I do think it will feel like one to those too young to have lived through a serious recession, but a little life experience can be a great empathy-builder. ;>)
Sarah is correct. Defaults are rising for prime mortgages as well. Calculated Risk as posted several times that the bottom won't be reached until the adjustable primes kick in. There were plenty of interest only primes, and the owners won't be able to refinance them (or even afford the payments) when the principal begins to amortize. Unfortunately, the NY Fed data does not set forth details regarding prime mortgages.
Ace, thanks for trying!
Sometimes, the deception is so egregious, I want to tattletale...but to whom do we tattle? Maybe Frank from FranklyRealty would know.
I want someone to add an UNhappy house show to the lineup at TLC or HGTV...not that I watch any of those shows anyway, but from reading about them in the Post (Flip that House and such), they've contributed to the mess by giving and sustaining unrealistic expectations. I invite all the executives over there to my place in Manassas. I'll give them a foreclosure tour in my 15-passenger van. I'll pitch the idea ("My House Ruined My Life" or something). I'll be rich.
"I will leave it to everyone else here to draw their own conclusions as to what effect 300 defaulting option arm loans (120 of which have already reset) will have on the Arlington housing market in the upcoming years..."
Your unstated opinion is obvious enough. But if we add option ARMs, Alt-A's, other problem loans, borrowers who are underwater and are therefore disincentived to continue to pay their mortages, etc., and compare that number of potential mortgage failures to the inventory of homes already on the market**, we can see that there is a significant risk of big problems still ahead.
**It makes no sense to be dismissive of problem borrowers by comparing them to total housing stock when total housing stock isn't for sale all of the time. It does, however, make sense to compare problem borrowers to inventory. And when examined in this light, it is downright foolish for anyone to be dismissive of the potential problems that lie ahead. This attitude reminds of folks a couple of years ago who said, "Who cares about a foreclosure rate of X% in Fairfax County. Even if it happens, and it won't, it's only 1% of all of the houses in the county. Therefore it won't have any affect on anything."
I get the feeling I'm hearing the same thing once again.
And besides all that, we needn't have foreclosures to have prices return to afforable/rational levels. The market will correct itself regardless.
"John Fountain said...
This attitude reminds of folks a couple of years ago who said, "Who cares about a foreclosure rate of X% in Fairfax County. Even if it happens, and it won't, it's only 1% of all of the houses in the county. Therefore it won't have any affect on anything."
Come again? Whitney Tillson says 70% can default. I take it a bit further and say it will likely be 75% and I am being dismissive?
Remember the subject matter of this thread was Option Arms - no more no less. 400 loans can only do so much damage - even if 100% of them go belly up, you are still talking about 400 loans.
So you will excuse me if I dont worry too much about 400 loans which are going to reset over the next 36 months or so. As I see it, and as I went on about ad nauseaum the other day, Arlington has major major major potential problems right now, in that the buyers may be drying up.
Also concerning is the potential for job displacement - here you are talking potentially thousands of people. And this is a real and credible threat as I see it.
As such, you will excuse me for being dismissive of a very real, but very small problem in the total scheme of things. If the buyers disappear, or job displacement starts in earnest, the Arlington market will unwind so fast, 6 months from now, no one will care about Option Arm loans in the slightest.
The prediction feature is cool. It will be interesting to see if it actually attracts meaningful input.
In order for it to be a successful system it needs to find some way of increasing the weight it gives to users with a proven track record while ignoring the input given to it by new users or users who have a poor track record.
(Otherwise you will have people who do things like create new accounts just to vote on their house, or their client's house.)
Nova watcher,
Thanks for pointing out the zip realty feature. I am using it to enter "realistic" prices for houses in areas I am interested in. I haven't decided how many times I'll vote. I'm hoping that if owners see how others value their homes, it might induce more realistic pricing. I would encourage all to do the same.
eponymous : vote early and vote often!
All kidding aside, I highly encourage the readers to rate as many houses as they can. So far, I've ranked 30 houses, and only 1 of them has been ranked twice (i.e. by me and someone else).
"Remember the subject matter of this thread was Option Arms - no more no less."
The 60 Minutes piece which started this discussion is very clearly about both Alt-A loans and option ARMs.
And again, its the size of the problem borrowers compared to inventory that really matters. For example, there are 865 houses for sale in Arlington right now. Add a few hundred problem borrowers and we see a significant inventory spike in percentage terms.
And finally, nothing happens in a vacuum. Problems beget problems, creating a negative feedback loop.
Novawatcher,
Any idea how they are assigning me a "property IQ" when none of the places I have evaluated have a true selling price yet? How do they know how accurate I am?
Another strange quirk in the "predict it" feature-- So, a house listed at 589 has 2 predictions. 1 voted 500, other person predicted 565. " Community Prediction is 0.1% above below List Price, based on 2 predictions." -588. That is very strange. I hope this isn't skewed to just try to reinforce existing owner misconceptions.
Yeah, I don't get the "Property IQ" either. So the farther away from the list price I vote, the lower my IQ? We'll see.
SOLD DATA IS HERE! And that includes seller subsidy! (which the tax records don't show)
And now in one sort you can sort and see ALL of the homes that have dropped the most since their previous purchase price.
Try it out. Search for Manassas Active
And then sort by List$/Sold (drop down sort).
And there you can see the top 50 real time biggest droppers.
Let me know what you think!
Frank
Owner FranklyMLS.com
Frank, you are awesome.
John - I apologize in that I didnt see the 60 minutes piece. I was speaking only to option arms.
With respect to option arms you really are speaking about a severly toxic product - first in the type of borrowers it attracts (flippers who are very likely to walk away) and second in its terms (the recast feature is a killer).
Because of these features, these could have the highest default rate of any product of any grade. However, it is not correct to think you are going to see that in all types of ARM loans.
Also, with regard to this comment:
"And again, its the size of the problem borrowers compared to inventory that really matters. For example, there are 865 houses for sale in Arlington right now. Add a few hundred problem borrowers and we see a significant inventory spike in percentage terms."
I honestly dont think many people are thinking about these things the right way and the differences between the way they reset. Take a look again at subprime today:
http://www.newyorkfed.org/regional/States_ABS_2008_10.xls
In column 55-57, you can see how many reset in a very very short period of time and how they tail off quickly. This spring, over 40% of them were due to reset in the next 12 months, now its down in the 20% range It is very accurate to describe them as a Tsunami - they rushed in quickly and left quickly.
Now, take a look at columns 55-57 in Alt A:
http://www.newyorkfed.org/regional/States_AltA_2008_10.xls
In the next year, in VA, a mere 5.1% of these will hit. Next year, it will be 11.8, and then sometime in 2+ years, the final 44%.
So notice how slowly these things move. This is not a tsunami, it is a slowly rising flood. It is highly highly unlikely, you are going to be able to point to anything in the inventory rolls, or foreclosure rates and say, "here they are", or "here they come" its a slow moving flood, so slow, its hard to really notice the difference from one moment to the next.
Recall too, that we are about 40% done with Alt A. That is 40% done today. Everyone speaks of Alt A as if it is an event still to come. The fact of the matter is, its here and we are dealing with a good bit of it as we speak.
Yeah, the property IQ thing is kinda goofy.
Your IQ is based on group estimates, excluding you. If there is only one estimate (you), then it is based on the sale price.
I think the IQ is only meaningful once the house is sold. Until it sells, it's basically an estimate of your IQ.
Also, I keep getting a message at the top of the screen that they are try to send me a confirmation email. No matter which computer or browser I used, I always get an error when I click to resend.
I take that back: I dunno what the IQ is based on.
For example:
25811 Mandeville Dr, Chantilly, VA, 20152
Me: $410k
Player 2: $410k (kinda cool that we guessed the same)
List: $430k
Community: $429,342
Huh? The list price has 29x the weight of the other player, or 60x the weight of both players?
Frank,
I don't know about other people, but I'm more interested about the seller subsidy on recent sales, not on sales that occurred years ago (the last time the house was sold). Since your website takes down listings very quickly after the sale has been completed, there is no way to look at this information. Is there any way you can retain data on sales that happened within the last three months (or year) like Sawbuckrealty does?
Thanks, love all the information on the website.
Well, looks like the Fed decided it was better to shoot the last of their ammo all at once rather than draw it out a bit...
crt,
Thanks for posting Alt-A stats.
Contrarian - lets be clear about what we are talking about here. I am talking about the ALT A universe of loans - Option Arm, Interest Only, 3/5/7/10 year, all of them.
Lets look at everyones fave, the old Credit Suisse chart:
http://bp3.blogger.com/_pMscxxELHEg/RxzD0s_7EYI/AAAAAAAABB4/ljDSXZhMG3o/s1600-h/IMFresets.jpg
This chart makes it look like we will see 2 waves of action, one in 2008, a lull in 2009 and then another big one in 2010/2011.
You know its not going to be like that right? You know about how CS updated the Option Arm part of the graph to account for recasts right?
For those that dont know, thanks to the declining property values, recasts are way earlier than thought. As such, that second "wave" peaking in 2011 has been flattened and pushed to the left - essentially filling in the trough in 2009.
While I shouldnt do it, if we want to continue the "tsunami" and "wave" analogy, the CS chart shows the first wave crested at 35BB in loans (it was actually closer to 38BB thanks to recasts). Now, 3 months later, (Nov 2008) the US is at about 32BB (again, thanks to recasts). In 2009, the water will recede to about 25BB, peak in 2010 at 30BB, recede then peak again in 2011 at 28BB.
So again, thanks to the recasts, the height of the water now (32BB) will never be reached again. That peak in 2011 at 35-40BB is now gone, pusing much of the 2009 trough up to about 25BB vs (the 15BB stated). Thanks to the recasts are no more "waves" left in the "Less than prime" universe. Thanks to the recasts, the one and only wave hit, and its still way way above our head. Yet it will never be as high as it is now.
Also Contrarian, that CS chart is the national picture - it is all loans all across the country. As with all things, we should ask, what will the impact of this be here locally?
As luck would have it, I finally found the text version of the 60 minutes article.
http://www.cbsnews.com/stories/2008/12/12/60minutes/main4666112_page3.shtml
I find this quote particularly insightful on page 3:
"It's getting worse," Egan says. "There are some statistics from the National Association of Realtors, and they track the supply of housing units on the market. And that's grown from 2.2 million units about three years ago, up to 4.5 million units earlier this year. So you have the massive supply out there of units that need to be sold."
Hmmm - so on the national scale the inventory of homes is increasing and this is making the problem "worse".
What about here? Well MLS indicates that area wide, we peaked at about 21,000 listings in the summer of 2006. Today, we have less than 13K of those left.
To be sure, much of that is the seasonal nature of inventory. Still, if the current trend holds, its unlikely we will get much above 15K next summer.
So Contrarian I have to ask, the experts tell us the problem is getting worse on a national scale because the inventory keeps building (I agree with them 100% by the way).
That said, our inventory here in Nova is declining. What does that tell you about the scope of the problem here locally?
CRT: Housingtracker.net shows that the metro area peaked in May 2008. Depending on which one you use (new or old), inventory peaked at either 41,526 or 13,743. I'm not sure why there is a discrepancy with the MLS, as housing tracker mined the MLS database.
"Novawatcher said...
CRT: Housingtracker.net shows that the metro area peaked in May 2008. Depending on which one you use (new or old), inventory peaked at either 41,526 or 13,743. I'm not sure why there is a discrepancy with the MLS, as housing tracker mined the MLS database."
Thats correct Novawatcher. However, as was pointed out this summer, housing tracker tracks the entire DC area which includes all of the MD metro area. As we also know, MD inventory is at peak now - not 2 years ago like NoVa but now. MRIS stats bear this out.
crt said: "That said, our inventory here in Nova is declining. What does that tell you about the scope of the problem here locally?"
I'm not sure what it tells us, if it tells us anything at all. For example, inventory of houses in Fairfax County declined by 15% on a year over year basis in November. At the same time, median prices fell by 24%. It's far too simplistic to suggest that certain absolute inventory statistics are accurate gauges for the direction of house prices. Demand must also be accounted for, and even months of inventory may not accurately predict house prices.
One of the biggest factors affecting house prices is one that can't be measured by any statistic - prospective buyers attitudes and perceptions about the value of houses. The buy-at-any-price, real-estate-can't-lose attitude that was largely responsible for peak prices is now quickly disappearing. People are sobering up now that the party is over. They are becoming conservative again. They are looking at downside risk again, rather than just dreamy upside potential. It is this intangible factor that everyone is overlooking as they attempt to scientifically measure and forecast the future.
The bottom line is this: house prices in many of the close in areas are still well above underlying values as determined on a discounted cash flows basis as compared to historic averages. Until prices become more closely aligned with their historical relationship to underlying values, prices will continue to erode. I've yet to hear one person successfully explain why valuation metrics won't revert to the mean. But I'm all ears.
"John Fountain said...
I'm not sure what it tells us, if it tells us anything at all. For example, inventory of houses in Fairfax County declined by 15% on a year over year basis in November. At the same time, median prices fell by 24%. It's far too simplistic to suggest that certain absolute inventory statistics are accurate gauges for the direction of house prices."
John, with all due respect, this isnt what I am getting at. I am trying to focus on the minutae of the ALT A problem. The 60 minutes article suggests that total inventory goes up, the problem ALT A problem is getting worse. That makes sense to me. After all, if more and more people are going to be hit with resets, more and more will at least TRY to sell before they walk away. That said, if our inventory is going down, what does that say about the scope of the Alt A problem here?
"John Fountain said...
One of the biggest factors affecting house prices is one that can't be measured by any statistic - prospective buyers attitudes and perceptions about the value of houses. The buy-at-any-price, real-estate-can't-lose attitude that was largely responsible for peak prices is now quickly disappearing. People are sobering up now that the party is over. They are becoming conservative again. They are looking at downside risk again, rather than just dreamy upside potential. It is this intangible factor that everyone is overlooking as they attempt to scientifically measure and forecast the future."
I agree with you, and I dont think I am overlooking this at all. As I noted several times in the in the decade of sales article, buyers may be disappearing. Again though, this is a BUYER issue. This has nothing do with Alt A loans which by and large is a seller/inventory issue...
"The bottom line is this: house prices in many of the close in areas are still well above underlying values as determined on a discounted cash flows basis as compared to historic averages. Until prices become more closely aligned with their historical relationship to underlying values, prices will continue to erode."
Again, this is true but it has little to do with the ALT A issue - specifically as it relates to the 60 minutes assertion that the problem is getting worse because the inventory is growing. Housing prices can go down for a number of factors, and right now there are a TON of factors weighing heavily on this market, but mostly on the buyer side. That said, as I see it, there is little evidence to suggest the problem for this market is ALT A.
crt - Fair enough. I understand your points.
Our agent said that a basement is worth $25,000.
I heard this afternoon that mortgages will very soon be available at an interest rate of 4.75. Several talking head types agreed with this figure. We can wait to re finance at that rate!
Ace,
I really prefer an in-law suite over the garage. Basements flood. They can be a good thing, but there's a reason they don't count as square-footage, finished or not. I want more real-non-moldy bedrooms for guests, and more square-footage and a yard. I am not a pack-rat, in fact am the anti-pack-rat, so, I don't really want more storage space to procrastinate with. If I had a basement, yes, I'd use it, maybe to brew beer even, but I'm not paying more for it. Oh, and I have been in split levels that have real-full sized basements underneath them, back in Jersey. So perhaps some around here have that to.
Haha, Cara!
Yes, I see no reason why a split couldn't have at least a partial basement under the main level of the house, as well as the split part that is partially below grade. The expensive listing posted above didn't have a basement under the main house. That's (together with the fact that half of the partial basement was a garage) what makes me think it's puffery that the Realtor was claiming there was a full basement.
It sounds as if there are some people who wouldn't consider a house without a basement, but for most other people they would expect a lower price ($25K or more less) if there is no usable basement.
As for basements, I should qualify my statement by saying that I'm looking for a place with a walkout basement. This serves two purposes:
1) The basement rooms in the back of the house get full light.
2) with the backyard sloping below and away from the house, basement flooding is unlikely.
I've lived in two houses like that, and neither flooded. Actually, I've lived in a third that did not have a walk-out basement, but it was at the top of the hill. None of those three had sump pumps, and none of them flooded in the 20 collective years I lived in those houses.
On the other hand, I did have a house on a prairie (no walk-out basement) that had a sump pump that went all the time. In that location, the surroundings were flat and the water table was high. In that location, it wasn't unusual to have two sump pumps (one was a backup).
novawatcher,
I am also all in favor of a walk-out basement.
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