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.
Today's online Washington Post has two headlines juxtaposed: Deep Budget Cuts in Fairfax.Less so in ArlingtonArlington is in the immunozone and property assessments have not plunged.It also suggests that Arlington's services will not be cut back as drastically as Fairfax.
...or it just shows you that Arlington is better run than Fairfax.Jeesh, if assessments go down, just raise the mil rate so that people pay the same amount. It aint rocket science.At the same time, maybe Fairfax [under Conelly] shouldn't have spent like drunken sailors.
thanks @J@,I was feeling pretty comfortable with the sanity of the cuts in a downturn, until page two, when I read how many county employees will be cut: "524 full-time positions from the county's workforce of about 12,000 and 300 limited-term positions. Griffin said he expected about 200 of the affected full-time employees to be able to stay with the county in other jobs. And my least favorite cut:"Officers who work full time at Tysons Corner, Fair Oaks and Springfield malls would be reassigned."After the murders and beatings that occurred at malls this holiday season, I'm not happy with this one at all. I mean, honestly my friends car got keyed at Springfield Mall(for her being a jerk about a parking space) when there were officers on beat just nearby. I don't want to find out what they would have done if there had been no cops at all. Police presence preserve low crime statistics which preserves property values which preserves property tax revenue. Think people, think! (besides my main interest in feeling safer)
Meh. I thought that malls paid for their own security.
novawatcher,"I thought malls paid for their own security"usually one would think so...But currently Springfield mall has a fairfax county police station in it. I'm personally always wary of the psuedo-police forces. But it is certainly a good point that the 12 or so jewelry stores in Springfield Mall should have to fork out money for good cops if they want to (a) retain their merchandise and (b) retain their clientele.
I have a few questions and can use some help:The new FX Cty assessments were up as of Monday PM. I put an offer on a SFH on Friday (the 20th) and it was ratified on Sunday (the 22nd). We paid 5k over the 08 assessed value. Now the new numbers are out the 23rd, and the value in 09 has dropped 60k. The seller's realtor was pushing to finalize things over the weekend. Perhaps she knew the new numbers would be out on Monday?Was this a bad move to buy right before the new numbers came out? Would you expect the assessed values to lower the potential purchase price of this house (or its comps) a significant amount in a few months?I also need to sell my TH, and was going to list it for a few thousand under the 08 assessment. My 09 assessment has dropped 70k. Do I need to change the listing price?I am concerned that I am paying too much and then selling for too little, all because I bought right before these new assessments came out and am selling right after.As a novice, am I reading too much into these numbers for the sale and purchase prices of houses? I am wondering if I should have waited a few months to make this transaction. Many thanks.
T,Ummmm. yes?When you say "paid", you mean "offered" correct? You haven't closed yet, right? If so, look carefully through the contract for methods by which you can back out. For instance, that your financing must come through in order to close. If the bank assessment comes in lower, usually the final price will need to be renegotiated down to meet what a bank is willing to lend you.It is also well-advised in this market (i.e. a falling one) to sell your old place first, before buying a new one, unless you intend to become a landlord on the TH. There are many properties with listings above and below assessment. But if both properties dropped 60-70k in one year by the tax assessor, you are probably in a quickly falling market where it makes sense to price competitively (i.e. below assessment) in order to get a buyer before things fall even further. Take a good strong look at comparable sales and the list times around you and price accordingly. If it's priced well, it should get snapped up quickly from what I've seen in Franconia Springfield anyway ($137 per square foot, over 2000 sqft TH, gone in two weeks).
t--i am waiting for pwc assessments to come out next week, for this exact reason. assessments are expected to drop 20-40% around here from 2008.on the good side, it is unlikely your bank would approve your sale at the current price. i assume your contract had a financing contingency, as in, the offer is contingent upon you being able to secure financing. banks are cautious now. they know nova is a declining market, and that tax assessments often lag behind actual valuations. once they are aware of the lower valuation, that will most likely become the ceiling for their financing calculations.no matter what, you need to determine how you are going to void the contract. you do not want to overpay that much. the 2008 assessment was based on sales that occurred during 2007.cara's advice was dead-on: price your townhouse well, so it will sell quickly. then start writing contracts to buy.
Cara - yes, I offered an amount which went back and forth and then accepted by both parties. I have not closed and do have "outs" if I determine that is the best decision.I am just trying to figure out how much assessed values, particularly the 60-70k (large!) amounts we are seeing, play into sales price.I always thought it was very influential, and thus, I bought for too much now that it is 09 assessed for 65k less than I will pay. But is that correct thinking?And then on the other hand, my TH now has an assessed value much lower than before, so will I have to drop the asking price significantly?I agree, in a perfect world I would have sold and then bought. But the situation I was in necessitates a new house and a quick sale of the TH. As with everyone, I want to sell the TH for as much as I can but not let it languish on the market.My biggest concern: I lost tens of thousands on the purchase because my price was offered and accepted prior to the new numbers, and I lost tens of thousands on the sale price because I will sell it after the new numbers.I would be fine with buying for less/selling for less, but I think I may be buying for more/selling for less...Does the bank appraiser take into account the tax assessed value?
December Case Shiller -- DC: 176.34November: 180.27
t,You were probably typing at the same time as tabitha, but I second her opinion that, yes the bank's assessor will take the new tax assessment into account. If you're concerned that they won't, then bring it to their attention directly.Thus, you should still be fine. The final sale price on your new home will have to come down to meet the financing requirements. Now it's just a matter of being the first in your block to list your TH below the new assessments, and grab that buyer!!! Go get 'em!Best of luck. Just repeat to yourself, the bank is not going to let me overpay, the bank is not going to let me overpay. And then it's all good, because you get your new home, at a new lower price, and new lower monthly mortgage payment. The other question is, what percentage were you planning on putting down on the new home? If you were planning on say 30%, don't let them use that against you by dropping your LTV to 80% with the same amount paid out of pocket. That's not kosher, and there should be recourse to make sure that doesn't happen. Just because it's your money, doesn't mean you should be able to get swindled. If you're having this kind of problem, pay the $500??? to get a real estate lawyer on the case.
Novawatcher: "Jeesh, if assessments go down, just raise the mil rate so that people pay the same amount. It aint rocket science."Exactly! Raise the multiple, lower the assessed values. I don't recall them lowering the multiple when prices shot up, but homeowners expecting huge breaks in their property taxes have something else coming for them.
t-sorry, just saw your new post.i have had two appraisals done recently (ugh), and they do look at tax assessed value. it is part of the paperwork. each appraiser i spoke to warned me that unless we closed soon, the appraisal ordered by the bank would be lower, because a) prices are still dropping month-to-month and b) the new assessments would be out.any prospective buyer will see the current assessed value, because it will be on the listing. you will not be able to hide it, and their financer will know it. so you need to take it into account, but it is just a broad gauge. does your townhouse have significant upgrades that would make it exceptional in your neighborhood? the tax assessor knows trends, not specifics. be prepared to explain things. if you are able to price competitively by $/sqft, even with the lower assessment benchmark, you should sell quickly.think of it this way: if you price aggressively, you will get more looks than if you price hopefully, and more looks may mean more offers, and more offers may mean the price is bidden up to your hopeful price.use one of the excellent online resources to look at sales within the past three months for your neighborhood, like redfin or the county assessor's website. perhaps similar townhouses are still selling well above the new assessments, because your particular neighborhood has not taken as big a hit as your general area. that could be another way you prove that your higher price is reasonable. your bank will probably protect you from the seller. but the seller may try to play hardball and say they want you to pony up the money out-of-pocket to make up the difference if you still want to get the house. i would go running away screaming, but you can consider that, or you can point out that every other potential buyer will have the same limitations: i.e., their banks will see the same assessment, get the same appraisals, cap their loans the same way. so they can look for that miracle buyer who is so madly in love that they will throw $50K or $60K at them, or they can be happy that they are getting full current market value from an able buyer right now.best of luck!!
tabitha,I think the two of us need to replace the jokers at the WaPo real estate advice session...
zerodown,from CR it looks as if DC is down ~29% since peak. Even Charlotte and others are down 9% from peak. Wow.
Tabitha and Cara - thanks for the advice!I was going to put 20% down.I do have my outs right now, but after the homeowners inspection and docs, my time will run out. So likely by Mar 1. The appraisal won't be completed until after that time. So the two options I have (I think) are:1. Get out of the deal now and wait a few months until (maybe) the market adjusts slightly to the new assessed values.2. Stay in the deal, and bank on the bank's appraiser valuing the house in line with current assessed values.My worry w/ comps is that even comps from 2-3 months ago are not going to have considered the new assessed values. If anything sells in the next couple of weeks, they could. But unfortunately, my new house may be one of the first in the neighborhood to be sold (closed on) after the 09 assessments came out, and the appraiser won't have the comps that reflect the declined assessed values.Whereas if I wait for a few months and then purchase, likely there will be others out there which have appraisals and sales based (in part) on new 09 assessed values. So the big question I need to answer is, which option do I go with, #1 or #2?
Also, in general, what do people think of these new assessments. In the tax database, they go back to only 2000, and there is no other year that assessments dropped by such a large number than in 09. In both my TH and the SFH I have a contract on, in those 10 years, assessments only dropped 1 other year, and that was about 15-23k. Now they dropped 60-70k. Can anyone predict how much of an affect these assessed values will have on sales price the next quarter? I know next to nothing about correlation between the two. If regular sales were averaging assessed value in Jan and Feb (I don't know if they did or not, just assuming), would sales price in Mar, Apr and May decrease steadily towards 1/2 the difference between 08 and 09?Example: A house 08 assessed for 600k was selling for 600k. Now the house is 09 assessed for 520k (80k difference). Would it be crazy to think that house could drop 10k/month to a sales price of 560k by June? Is it more sudden than that? Could it eventually drop all the way to a sales price around 520k?These may be stupid questions, but I am a novice and really trying to figure out if I am doing the right thing or if I will be making a mistake (before I make it). Thanks.
"Just repeat to yourself, the bank is not going to let me overpay, the bank is not going to let me overpay."He can repeat it all he wants, but over the last 5 years this mantra hasn't worked out too well for home buyers. The banks can't protect themselves from themselves, let alone protect the home buyer. I know you know this from following your posts.T, No offense, but it sounds like from your posts that you jumped into this transaction without thinking it all through. You are now lucky enough to have some outs to avoid making a poor financial decision. You don't explain the immediate necessity of having a house over a townhouse, but unless it is absolutely necessary I would reevaluate. Don't be afraid to walk away from this deal if you feel you made a poor decision, overwhelmed or just don't think you understand all of the consequences. Good luck.
T,20% down, perfect. you can legitimately and cleanly use the bank's assessment as justification, because 20% is nice and standard and avoids PMI, etc. I think what we're saying is that you should be safe going with option 2. However, this advice was based on the assumption that you really want this particular house. If you're not particularly tied to this place, and are that worried about the bank's assessment, then go ahead an exercise option 1, based on something in the inspection being more expensive to fix than you anticipated. However, if you do that, you cannot expect to re-open a bid on this particular property. And again, consult a lawyer about proper execution of your "outs" if you have any qualms whatsoever.
Tax assessments are one data point that goes into figuring out how much a home is worth to a potential buyer, but it is just one. Many homes sell for more or less than the TA. Comparable sales (i.e., the actual market price) are much more relevant because a tax assessor doesn't go inside the house and look at all the finishes, features, etc.
Example: A house 08 assessed for 600k was selling for 600k. Now the house is 09 assessed for 520k (80k difference). Would it be crazy to think that house could drop 10k/month to a sales price of 560k by June? Is it more sudden than that? Could it eventually drop all the way to a sales price around 520k?The tax assessments are based on the sales prices. Just like comps are. So, I would contend that the 09 assessments should already have been "priced in" to the final sales prices on those sales near the end of 08, start of 09, because the sales are what created that low assessment. Thus, a house listed at $600k and newly assessed at $520k, should have sold for near $520k either before or after the assessment if the buyer's knowledge of the comps was thorough, and the assessment was accurate. Since niether of those things are generally true on individual properties or individual transactions, expect a large amount of scatter in a rapidly moving market.And I agree with Zmonet, that it sounds as if you lept into this underinformed, which in and of itself means that you will get a better deal in the future if you take a step back now and get out of this contract.zmonet,touche! Yes, my statement is only true to the extent that banks are being conservative, and holds no water whatsoever in the runup. In fact it is fair to say that people's trust in the bank's evaluation of both how much money they should be allowed to borrow and the value of the collateral contributed greatly to the irrational exuberance and price hikes in the bubble run-up.
t,also if your concern is wanting to move into your new home before moving out of your old home, have you looked into contigent sales? I.e. where you make your offer a contingent kick-out with the sale of your TH (over a certain price) being the contingency? This are becoming more accepted (again) as they become more necessary in today's market. Ask your agent.You can also consider only accepting long closing times on your TH. (but be careful as assessed values may drop in those time-frames complicating closing).Oh, and of course the assessment's since 2000 have never gone down that much, that was all the bubble run-up years. So, indeed in this time horizon, this has never happened, but tax assessments do need to accurately reflect home sales prices and prices have indeed fallen after the last few bubbles. (though the speed may be unique).
Despite government efforts, home prices may end up falling as much as 42 percent from their peak just to bring them back in line with rents, said Carl Riccadonna, senior U.S. economist at Deutsche Bank in New York. That number could be larger if unemployment continues to rise, he said."The government is taking bold steps to try to curb the problem with foreclosures, and I'm in favor of that, but I don't think the plan will be successful to the point that we would change that forecast," he said.http://www.reuters.com/article/businessNews/idUSTRE51N2VV20090224
Hi T,I'm a long time "lurker to chuckle" but your post finally pushed me to post. The questions you have should be directed to your realtor. Now, for some grainy hard nosed truth from a seller in PWC. I went on the market at the end of Jan 09. I live in a very nice neighborhood but that is beside the point. My home will probably be reassessed down another 20% for the 2009 assessment year. I'm currently listed at 95% of 2008 and will not drop my price very much lower. Why? Because I don't have to sell but mostly because between the drop this year plus the 18% that I've already been lowered the total is about -40% in 3 years. My home only increased in assessed value approximately 30% since 2004 What goes up 20% in one year (06) and down 20% in 2(07 & 08) years will not be sold at a 40% reduction in 09. Land values, labor and material dictates this as foolish.Those of you fully expecting to find homes at or below 09 assessments will soon find there will be a very limited number of sellers as most of the county is already upside down. This comes real close to putting a 97 buyer with only one helog at the break even point with the cost of selling. No new construction, no sellers and interest rates increasing means we all stagnate until land, labor and material costs catch up with buyer expectations of 2001 home prices. I can't sell here at 2001/03 price and buy or build anywhere else. I'm stuck. Lucky for me I'm stuck in a wonderful place.
Arkey:What you say may be true, but not every seller can wait it out. As long as there are foreclosures and short sales, there will be inventory and sales at the current market price.
arkey,thanks for taking the leap to join in the discussion.The reality is, in many places, that indeed, no owner will sell into this market. This is part of why 92% of sales in PWC were REO or short sales. But, with almost 1 in 10 homes in PWC going into foreclosure in those same years? There's plenty of inventory to choose between. Yes, buyers are in a stare-down with "sellers" if by that you mean owner-occupants. But buyers don't have to buy from home-owners, whereas sellers do have to sell to buyers. Or, if they can't handle the payments or need to move for some other reason, they will have to transfer the keys to the bank to sell to the buyers...Also, it's simpler to compare actual numbers than percent increases or decreases as those compound and are valued from different starting points. That said, best of luck selling your place. Hopefully for you, some buyer will see the same things in your house that you do, and agree that the assessments are unrealistic. If you like your home, and are content to continue in the stare-down, I'm not sure I understand why you've listed it at all. I'm sure we'd all be curious as to your motivations. Other homeowners here, like Ace, aren't going to list their current houses until their dream-homes come down to prices they "like" (I don't know what Ace's criterion is exactly). Why have you chosen to list now?
t--prices started their crazy ascent in this area around 2000. here's just one example of how dramatic of a turn-around there has been in some places:20110 (Manassas) Median sale price1/06: +25.61% YOY1/07: -10.31% YOY1/08: -35.05% YOY1/09: -33.05% YOYEven so, assessments only dropped a smidge in 2007, 20% in 2008, and are expected to drop between 20-40% when they come out next week. If they came crashing down as fast as they went up, local government would not be able to function.And people can assign any asking prices they want--what they actually sell for is what matters. Any savvy buyer will cross-reference the asking price against many factors, including the current assessed value.And it is true that a bank will not necessarily protect you from yourself. Only you can know how vital it is for you to purchase this particular house. Do stop and breathe and take in as much information as you can before you take the next step, either to turn away or to plow ahead. You have a very healthy downpayment. It would be a shame to lose it all in the first year of "owning," although, if you are going to be there for a long time, that is a paper loss.
Onion: Housing Crisis vindicates guy still living with parentsGood for a chuckle in case anyone missed this.
Hi Zerodown..our under $300,000 market or shorts/foreclosures are at 2 months inventory since the end of 08 and have remain fairly consistent at 2.1 - 2.4 months of inventory since then. As far as the future well I'm not one to believe they will let ARMS readjust to create thousands more. Obama is not a republican. A simple executive order could feeze arms in place for 3 years. We do not have an unemployment problem, we have an interest rate lending problem.
Cara, I'm not in a stare down. I would like to retire. My husband has already retired and would like to move on. Its not a matter of stare down. Its a matter of underlying value. @ homes in my neighborhood sold within 97% of their 08 assessment in Nov 08, one foreclosure sold at 76% with a shared drive and zero updating. What I'm trying to convey is that the county is crunching mass numbers with the majority being forclosures in very undesirable areas and applying those losses across the board. 09 assessments will have very little value in assessing true market value or pricing.
arky--are you around manassas? maybe i'm trying to buy from you ;)i see your point. the median price here is half what it was last year. does that mean every house is worth half what is was last year? no. it means the median is being dragged down because almost ONLY low-end places are selling.and average/median prices are, in fact, down to 2001 levels--recently, even lower. does that mean every house is only worth its 2001 price? no.it does mean only those sellers who MUST sell are putting their houses on the market--hence, for now, lower inventory. those are your competitors. sounds like your house is very special. that is good. if there is a reason for its higher price, buyers will see that. the worst of the worst are not going to ruin the best of the best.as a very hungry buyer in PWC, though, let me share my outlook: if i see a listing that i like, but the asking price is higher than i'd expect, i go to the courthouse and pull all the records on it to see if there are helocs or 2nd, 3rd, 4th mortgages on it. if there are, i do not pursue it, because it is not likely to come down. it can't. if it is "clear," and the owner is at least potentially financially capable of selling, i may look into it, but even then, i will hesitate, because i will assume the seller has unrealistic expectations, and will be too stubborn to work with.i have a great deal of empathy for sellers. i cannot imagine how frustrating it must be to know your neighbor pocketed a quarter of a million dollars tax-free two years ago, and now you just want to hold onto your equity. but try to have some empathy for buyers. we don't want to lose OUR equity within months of moving in. it's tricky.seriously, if you live in a nice neighborhood around manassas, just say the word. i don't have an agent! ;)
arkey,An executive order, unilaterally re-writing mortgage contracts, to kick-the-can down the road for 3 more years? That's your solution?I'm pretty sure that would go beyond the powers granted to the executive. Or the legistlature for that matter. The courts? maybe. But they tend to be pretty conservative, in the sense of not wanting to set such a sweeping precedent. They're trying to let everyone refinance into a fixed rate mortgage at today's rates now. That's as good as you're going to get, and has a legitimate mechanism to accomplish it. But those waiting to keep their neg-am teaser rates of 2% with principle continuing to acrue, are going to be sorely dissappointed.
Tabitha..that crazy ascent in 2000 was the catch up from the great fall in the 80's. I'm an old plug with a long memory. When we bought in 97 we were upside down on our home by a few thousnad. We didn't get assessed above what we paid till 2000. In the late 80's we have a big bubble and burst. Same thing. I wasn't here I sold and moved to New Orleans but this market was much hotter in the mid-80 to late 80's.It pooped in 89/90. Crashed and burned before a recovery started in 1999/2000. Only this time there isn't any new housing so a housing shortage is very possible with prices for rent and homes going through the roof
Cara..Lord Knows that isn't my solution but paying others mortage isn't, either. Im saying Obama is different and nobody has the "manhood" to take on this president...geez, whitehouse reacts to something a trader rants on TV..scarey as hell if you ask me.
arkey,(re: retiring and mass assessments)Thanks for stating your reason for selling. That makes sense. As there's no way to know the timing of the market where you live now compared to where you'd like to move-on to, there's no way to guaruntee maximum purchasing power in your retirement home (or maximum liquidity, or something in between). Thus, you may as well list now, and see if there are any buyers, but you can equally well wait, because where you are moving to may also become more affordable if you wait. And if they are not the same geographic area, it can be really difficult to decide when exactly is the best time. (assuming you don't want to rent on the other end, which is always an option if you find a buyer quickly here).And yes, it is possible that the assessor is unfairly distributing the losses. Have you considered challenging the assessment with comps from your neighborhood to have it revised up? It might be worth looking into, but be quick about it, the timeframes for such requests are short. I suggest this because the bank's assessor will be looking at it, and you don't want your buyer's financing to fall through if you're lucky enough to snag a buyer.
arkey,I was referring to point 1 of his 3 point plan which just allows refinancing with Fannie and Freddie up to 105% LTV, which I think is a good plan. Point 2 in his plan which includes the $1000/year handout is a terrible idea, I agree. I think however, that this is another instance of a plan being floated that won't actually come to pass because of the adverse reaction.I'm confused, where do you live that there's no new housing?? And rents in the area are going down, not up. My boss tells tales of his rent in the 90's going up by more than his raise each year for years on end, but that's not what's happening going forward.
Arkey said:"Only this time there isn't any new housing so a housing shortage is very possible with prices for rent and homes going through the roof"I have to disagree, Arkey. I recently rented a TH and all the landlords I spoke to were negotiatble on the rent. In fact, I have a dog and many that posted "no pets" were even amenable to changing their policy. There is plenty of inventory out there being offered by "investor" (aka housing gamblers) who got stuck with their home or TH as well as the large corporate run apartment complexes. Rentals have been coming down, even in NYC.
arkey, you know your neighborhood well, but no new housing? in my neck of pwc, there are half-built new neighborhoods everywhere, new neighborhoods that haven't even started being built, builders begging and pleading, condos whose signs have changed to "leasing now" from "selling now," townhouses half-built next to muddy empty lots...and the rental market is glutted. drive around manassas and bristow, and "for rent" signs are EVERYWHERE.as for starting out underwater...i may, if i love the house enough. but it's not something i'll try to do. sellers need to understand that transaction costs make recovering your own equity a bonus.
Cara..I didn't mean to imply just this minute..but..as we speak..new home loans are impossible to get. Builders are not building and land owners are refusing to sell below 07 prices/Hell yeah..right now its a buyer or renter candy jar. But things have a way of averaging out. I remember President Carters presidency. Yes, 22, 23% interest rates. Who here would feel joy at 9 3/4 interest on 30 year fix rate? If you find a home you like and can afford, buy your home. That is what I always did. I bought a home, not an investment.
Arkey's argument seems to be a variation of "It's different here" except in this instance it is someone who is reaching the threshold of losing equity versus someone in say Arlington trying to justify the lack of home price declines. For your sake Arkey, I hope you're right, but remember that just because you say so doesn't make it the case. If you're ok with staying in your home for the long term, then you don't have any problem. Also, at your break even point you basically have a put on your home in that you can walk away or short sale if it goes much lower and your loss is likely "just" the damage to your credit.I think one of the big reasons a lot of the higher end homes are holding up is because that the home owner can still afford to make their payment. If unemployment goes up in this area, I expect that to change.If you don't mind me asking, why do you want to move anyway if you like your home so much?
Chris..NYC still have rent control? That was a big fight around here a couple of decades ago..renters demanding it but never got it. They did get some traction in Arlington but not much.
Arkey:Many loans, including alt a loans, were securitized and sold to investors. I don't think Obama will be signing any executive orders overriding these private contracts. At best, certain borrowers may get a cram down at the bankruptcy court, if that provision is approved. Of course, the trip to the bankruptcy court is costly. The trip will certainly be reflected on the borrower's credit report and the borrower will likely have a five-year payment plan, pursuant to chapter 13, before any debts are discharged. The amount of any cram down will be treated as an unsecured debt, subject to the repayment plan.Alt A, option arms, and even prime arms will prove to be a big problem.
Zmonet..I'm fine finacially. What I'm trying to convey to you guys, don't be a pennywise and a pound foolish and lose out long term. If you find a home you like and can afford, buy it. It's a home, not an investment. Just put in the offer based on the home appraising at that value and quit worrying yourself over what might happen.If you are in the home 5 or more years, its a waste of time. Nobody saw this fiasco 5 years out.The housing markets do this..on a regular basis..
Assessments are a snapshot of the past. My impression (overlaying assessments over sold values) is that Fairfax assessments lag by 18 months.For example, a house I looked at last year sold for $660k. It was assessed in 2008 at $736k and the new 2009 assessment is $672k. I'm certain it will be even lower next year.
kevin: I think they lowered it from 1% to 0.9%. as a way to provide some relief in the face of rising assessments.But, planning ahead and fiscal responsibility seem to be foreign concepts to NoVA governments.
@novawatcher: Gerry Connolly sure picked the right time to get out.My FFX assessment (Falls Church) dropped 21% this year and is now below 2005 level.
Arkey, Others are being nice and tip-toeing around the obvious, but the truth is that aint nobody going to buy your house. I'd be a fool to buy your house if I can get similar (or even nicer ones) for much cheaper. Secondly, I don't see why you think there is a housing shortage. Inside and outside the beltway, the creation of new housing has outpaced the increase in population. Heck, rents are even decreasing around here. Owners refusing to sell below 2007 levels? I'm seeing folks sell for below 2003 levels. Folks, not banks.
Arkey,I agree that it's a good idea to stop worrying. But buying a house may not be such a good advice.For the remark on 'housing markets always do this' i agree. And there is a hell of a difference between a net worth of an individual that entered the housing market at the bottom and the peak of the marker. Also I think this particular cycle is common in its magnitude.I would say if you buy after 40% correction in the neighborhood where there are no boarded up houses it will be ok long term. But if you buy something for half a mil or more and then this nabe becomes crime-ridden and a lot of empty houses are there --- you definitely won't be ok.That's why so many people on this blog wait for arlington to come down a bit and not really interested in outer areas.
arkey,In interest of full disclosure, my husband and I will be talking to banks next week to get pre-approved (or pre-qualified, or whichever it is you need to put in an acceptable offer) and working with Jeff Royce at FranklyRealty to buy a home this year. So, in general I agree with your sentiment that one should listen to your own timing when buying a house. But as you noted, the bubbles can make those decisions into horrendously bad ones. That's why we intend to buy a home well under our means so that we can absorb a loss if need be. And, no one saw this 5 years out? Talk to Anonymous who's still wailing that prices haven't come back to those he passed up in 2003. He saw the bubble back then, and decided to wait it out. These things aren't that hard to diagnose, it's just the "when" that's difficult, both for the top and for the bottom, it's easier to see them in the rear-view mirror. 9.5% interest rates? Great! I could start actually earning money on my down payment fund again. And buy for cash. Bring it on! (I don't think it will happen quickly because of the collateral damage to the economy and the fact that our government currently needs its own low borrowing costs).
The townhouse we are closing on tomorrow in Fairfax County was assessed at a little over $300K for 2009. We are paying $290K - does that seem reasonable???
Arkey-I am old too, and know how the RE markets play out and have "done this all before" , just like you.That's why I sold my Clifton home in '05, when I knew that prices were too good to be true.I understand that you all want to retire, but you must admit, you missed the boat as far as when to sell your home.There is no housing shortage & the Builders are still building. I work with one, so I know. Yes, it has slowed down, but homes are still going up.I also wonder about your first post stating that you put your home on the Market in Jan 09?Help me out - isn't that a bit down the road?
dgg,yes. to all, see? I told you that 2009 tax assessments were already priced in by savy buyers.
tbw,For something as big of a commitment as buying a house, both financially and geographically, I don't think waiting, even 10 years, is that bad of a thing. Family friends bought their first house when in their 40's and rented it out for 10 years to pay off their 15 year mortgage before renovating it entirely and moving in. They're happy as clams.More realistic point being, that as you wait and accumulate a bigger downpayment, your perspective changes, your needs change, your income changes, such that if you have to wait out a bubble to buy, you're more ready to do so, and less likely to be throwing your money away, because you've already lived through accumulating it. I'm extremely grateful that my life circumstances precluded me from buying with a low-money down loan back in 2003. One of the luckiest things so far in my life.
Cara,You call me a "savy buyer" now - I just hope you still think I was a savy buyer in 5 to 7 years if we have to move and put the TH back on the market. I'm ready to buy and make a home here, but even still a little concerned regarding where prices are going and how long they'll remain there.
Hi, Arkey-What neighborhood? Just curious becuase I grew up in PWC/Manassas.T, no offense but you would be crazy to go through with that contract. Are you a huge risk-taker? I am not so the idea of *having* to sell my TH within a certain amount of time OR carrying two mortgage payments makes me want to puke! Can you carry both houses indefinitely? If not, you need to sell what you are living in first. Its worth it even if you have to move twice (out of your first house and into a rental for a few months before you close on second house). Seriously, why put that kind of stress on yourself when it can be avoided?Cara and Tabitha-I've been lurking in this blog for awhile and you all put those Post RE flakes to shame.
tbw,I know, isn't it great!! That's why CRT convinced me that we needed to wait until our emergency savings was up to at least 3 months before buying and giving up that fabulous cushion. Because, seriously right now we have a full year of take home pay for one of the two of us saved up, and are only living off of one income anyway. It rocks.(says the incredibly risk-adverse Cara)
Cara,I would say that being risk-averse is not a bad idea in the current situation. Just keep in mind that there are some intangibles that are sometimes more important than disposable income --- i.e. commute, schools, the view from your window. i won't be surprised that in couple of years from now townhouses in arlington will be selling for 400k and you'll definitely be able to afford it given both of your jobs are in place.
Arkey,I understand your situation, and I'm not trying to be harsh here, but I can't afford your house. And if I can't afford your house, neither can most of PWC's potential buyers. In other words, you have a very small pool of potential buyers; that's not a good thing right now. You need someone who is well enough off to afford your house, but not so well off that they're 'above' living in PWC, even a nice portion.On top of that, you aren't actually directly competing with foreclosures, sure. But they are a significant portion of the market around here right now. Trying to insulate yourself from them isn't going to work. If I could afford your house, I could also afford a foreclosure and have a good spot left over for professional renovation to suit my tastes.Perhaps I'm being too pessimistic. I do see sales being recorded at prices that I find unfathomable based on local income stats. Those have to be the folks like you. So there are buyers.And your right-on about the prices not supporting the labor and materials costs. This housing boom will be paid for by taking it out the hides of the homebuilders and labor market for years. It's incredibly overbuilt in PWC, as you surely must know having lived here for a while. How's the traffic doing for ya around town? The Parkway: a blessing or a curse?Been here since the early 80s myself. And I have to disagree, this was not a runup from a 'fall' in the 80s. In some ways we had a real estate crash in the early 90s, but most of Dale City was built on the cheap as a bedroom community. That's not something that's built to increase in value.I've posted this before, but I've updated it... I figured another year and a half's worth of data would be useful.In that time every single new sale has not just broken the bubble but fallen well below all three trendlines. Fun stuff!
[everything i know, i've learned from cara/crt/basically all the regular posters here. would be lost without them!]xpovos, you said it very well. there is a tiny sliver of buyers for big-bucks houses in pwc. why live here when you can live in clifton? (if you care about things like schools and bragging)that is why this is what's happening with high-end (over $500K) properties:20111 sold-for saleJan09 0-12Dec08 0-12Nov08 3-12Oct08 0-16Sept08 0-18Aug08 3-23July08 2-26June08 2-2920110 sold-for sale1-30-40-80-90-100-120-120-1620112 sold-for sale2-501-634-717-595-809-895-9112-89
xpovos cool chart!! where again is this? konstantin. true, for us that intangible is peace of mind. We're looking in Kingstowne, which has pretty good schools and is commuter friendly for us, and has some totally reasonably priced TH's. (at or below rental parity). Having lived through debt, having lived through un-employment, and grad school salaries, financial well-being is very important to us. My parents overleveraged themselves to get us into the best school districts every time. But my sister's high school went down the tubes by the time she got there. And we lived every summer with maxed out CC, and us kids paying for the groceries from our full-time summer jobs(Mom was on a 9 month salary). So, when I say "living under our means" I'm not talking about maximizing our disposable income. I'm talking about contributing to our kids 529 and our nieces and nephews education for that matter, and being able to be a fall-back position for our parents if need be. Ideally we'd like to be able to house our parents if needed, but at this rate we could pay for full nursing care easier than we could afford a house big enough for that.
I am not really a risk taker, especially when it comes to my family. I can afford paying both mortgages for a little while, but I would be in a negative cash flow situation. For a while I looked at foreclosures and short sales, and wasted a lot of time, finding legitimate reasons to back away from all of them. Finally I decided it was best for my situation to buy a house that is "move-in" ready, and beyond that, one that has its big ticket items paid for years to come (windows, roof, siding...). It is a house I plan to live in for 5+ years, but probably not for more than 10. The big question is, could I get this house or similar (in the same neighborhood/area) for tens of thousands less in 6 months? That is what I am wrestling over. If I can buy a similar house in the same neighborhood in 6 months for 30k less than what I am heading towards paying in a month, I would absolutely choose to back out, wait a few months, put my TH on the market, sell it, and then buy the SFH in the neighborhood I want. I just don't know how much impact this 09 assessment will have on the sales price in 3-6 months. I know I can sell my TH if I price it competitively, but the big question is, from a sellers perspective: what is competitive? From comps and 08 assessment, I thought I knew what would be competitive on Sunday.With the new assessments, and the price having dropped 70k, I no longer know what is competitive.
DGG – let me offer you my patented 3 step system on whether it is OK to buy:Step 1. Can you afford it? If so go to step 2, if not wait.Step 2. Do you plan to live there at least 5 years or more? If yes go to step 3, if not wait.Step 3. If prices go down further are you going to be OK with it (i.e. can you sleep ok, or will it cause you to needlessly fret)? If the answer is you will be OK, go ahead and buy – if the answer is no, wait. Mind you, I wouldnt be saying this a few years ago. At that point, the momentum had turned, it was clear there was a good chance for healthy losses and in a short period of time. Today, the picture isnt so clear. As I see it, (and this is just my gut feeling): - There is a good chance prices will decline yet recover such that they are essentially flat 5 years from now. - There is a decent, but not as good a chance prices could be down 10% 5 years from now. If this happens, could you accept the fact you had to wait (or rent), or pay down the principal? - There is a decent, but even less likely chance, that prices will be UP 15% 5 years from now (Bernanke & his printing presses). If that happens, will you be ok with it if you decide NOT to buy?Note, the top 3 scenarios cover 90-95% of the outcomes as I see it. There is always a chance that prices crater because the government decides to move 500 miles away. There is always a chance that prices explode because of hyperinflation. I cannot live my life accounting for every contingency. Thus, as I see it, buying at this point is an acceptable risk.Good luck whatever you choose.
"I can afford paying both mortgages for a little while, but I would be in a negative cash flow situation. "If by this you mean that you would be dipping into savings (or credit) to pay one of two mortgages then don't do it. Period, sell the TH first so that you fully know your financial situation before buying a new home.Finally I decided it was best for my situation to buy a house that is "move-in" ready, and beyond that, one that has its big ticket items paid for years to come (windows, roof, siding...). That's a good plan. And something most of us want. It may or may not be viable in this market. But, spring is coming, and with that more properties "should" come to market. Once you fully understand your financial picture, you will be in a position to jump on one.The big question is, could I get this house or similar (in the same neighborhood/area) for tens of thousands less in 6 months? That is what I am wrestling over. There is no crystal ball. But given that tax assessments are a lagging indicator it seems likely that sales prices will be at them soon enough.I know I can sell my TH if I price it competitively, but the big question is, from a sellers perspective: what is competitive? From comps and 08 assessment, I thought I knew what would be competitive on Sunday.With the new assessments, and the price having dropped 70k, I no longer know what is competitive. The seller's perspective? I'm not sure what that means, so I'll give you a buyers perspective. Look around at all the TH's for sale in all the nearby neighborhoods (within say 3 miles). See which ones were built within 5-10 years of yours and have square footage within 300 sq feet of yours and the same parking situation (garage/street/assigned). List yours 10k below the lowest comparable TH currently listed or 5% lower than the last sale of a comp, whichever is lower. That should be competitive. If, however, there exists a lower rung beneath yours that's smaller, older, but slightly more convenient, make sure your list price is no more than 10-20% above theirs. Right now in Kingstowne, you have a bunch of Amberliegh's sitting at or above $300k, when there's Windsor Park right next door (closer to the metro and better construction but noticeably smaller) for $200k. Thus, I would contend that nothing in Amberliegh's bracket is priced "competitively". And recent sales pace confirms it. Windsor Park, picked up nicely in January. Amberliegh? Diddley-squat.TH are fungible. You should be able to price them. No more than 20k for an extra bedroom, no more than 20k for a finished walk-out basement, no more than 30k for a 1car garage, no more than 50k for a 2 car garage. And these features are not strictly additive. It's kind of like a "bundle" from Cox.
Thanks CRT and Cara for your feedback. This whole buying experience has been a little nerve racking given the economy/housing market. CRT, I can answer yes to all your questions, which is why we decided to move forward with the purchase several weeks back. Given that it would cost us $100 to $200 more a month to rent something comparable (including taxes, insurance, hoa fees), we feel good about the purchase. At this point I would be perfectly content with breaking even in 5 to 7 years if we had to sell - I feel that is a more than reasonable hope. Thanks again.T - for what it is worth, I agree with Cara. Sell your current home first. It might not be ideal, but I promise you'll sleep much easier at night knowing you can afford your payment without slowly wiping out your savings. Also, you'll have a better idea as to what you can afford once your TH settles. Based on my experience, peace of heart and mind is worth the little inconveniece that you might experience.
DGG - I should say, I only feel that its "OK" because you are buying in NOVA where inventory continues to really decline. I would not be saying this if you were looking elsewhere in the US. Or really even in DC and Maryland burbs where inventory is at or near a record peak. As I see it, MD looks alot like NOVA did a year ago. There is just so much inventory to work through, I think its highly likely that MD needs a serious price correction to work it back down to manageable levels. Thus, if I was looking to buy in MD, I would wait for at least 6 more months to see how that inventory situation resolves itself.
Cara,The chart graphs the listed sales price (source: WaPo) for all houses along a single street in Dale City (22193). The only data points I left out were $0 transfers, and one foreclosure where the bank bought back the house for the equity value ($25K or so). Other than that, every sale recorded for almost 30 years is on that chart.It's not a precision tool. Despite being a long-enough street with a sizeable number of houses, any given year there will be more or less sales. (0 in 2007, 3 in 2008). And there's no real reason why the houses on the street should be identical in price. Wear-and-tear conditions over 25 years adds up to a lot, and half the houses are one design style, and half are another design style which is more spacious. But those factors don't really seem to show up in the chart, probably because the whole thing is such a low number of property transactions.If I had enough time I'd add the rest of the data from other streets in the neighborhood, but building the first graph was a matter of several hours. Updating it is pretty painless, at least. Whee! Excel!
CRT - Those are my thoughts as well regarding MD, which is the market I'm following. I mainly lurk in this blog with the hope that MD will soon be going through some of the same corrections PWC has. I can't find a similar level of user interaction and community insight from any MD specific blogs lately.
"Randy said...I mainly lurk in this blog with the hope that MD will soon be going through some of the same corrections PWC has."Randy - with the possible exception of PG, I doubt you will see PWC type corrections in MD. However, I think alot of areas are in for a Loudoun type correction. Can I ask what county you are looking at?
Looking at Howard County primarily, but we're open to other areas. East of the BW Corridor feels too congested / crowded for some reason, so we've kind of narrowed in on Howard, Southern Carrol (bordering Howard). Schools are an additional motivation.I'm definitely not expecting a PWC type of correction in any of the areas I've been looking at, and we've some movement in prices. Of course there are the occasional hold outs that still have the same price from over a year ago.
I wish you hadnt said Howard. Of all the counties I look at in MD, it is the one that most baffles me. On the one hand, inventory and sales look alot like Loudoun, making me think you will get a Loudoun like correction. On the other, its ability to "hold up" relatively well while other parts of MD crash, reminds me more of Arlington (i.e. a much more moderate correction).Of the counties I track, I would rank them, (worse to best) as follows:PGFrederickMontgomeryAnne ArundelCharlesHowardGun to my head, I would say PG median prices will be down 20% to 30% YOY, and howard prices down 12% - 20% YOY. That and 25 cents will get you a cup of coffee!
Arkey, You may have a very nice house, but I am afraid that doesn’t mean squat. Let me guesse you are asking between 350-450k. Unless you are talking some serious land WITH water frontage on something like the Occoquan, your lost, toast, no chance. Here is why:350-500 Gets me a house in:Viena,Oakton,Other nicer parts of Herndon,CliftonFairfaxFairfax city.Ect, etc, etc. – Fill in the nice suburb of your choice. (Except my favorite McLean, saw a nice property for for 445k but that is it) Now, excepting if your house comes with serious land (1-5 acres in PWC is NOT serious land), water frontage or other significant amenaties/atractions– and feeling that your house is ‘very nice’ just does not cut it – to quote a friend in the antiques buisness “Everyone thinks their crap is valuable” – WHO in their right mind would buy in PWC when they could live in say Viena for the same price?-King
CRT, I'm interested in the reasons behind your MD county ranking. I live in Va but I'm looking in MD. For similar neighborhoods (McLean vs. Chevy Chase) markets have behaved similarly so far (maybe slightly greater losses in McLean). MoCO is quite spread out and losses up-county have been much greater. Then again, FFX county is similar. I wonder why you would think that buying in ARL or FFX might be safer at this point than MoCo given similar demographics, proximity? Not an argument, just curious.
T, never posted on here but here goes. Do not believe that the bank will take care of the value. I bought a house in July 08 for 615k. Appraised at exactly that. It was over the assessment by 50k but we loved the house (still do). We can afford it (3x on one income) and knew we would be in the house 10 years ideally. We figured it would drop.Did refi 2 weeks ago. House assessment dropped 30k since we bought. The appraisal came in at exactly the assessment 535k. Now, in roughly half a year the appraisal was now exactly the assessment. Thus an 80k drop in the appraisal, vs. 30k on the assessment. Same company did the appraisal, but now would not make allowances for the covered patio, landscaping etc. The market did not drop this much in our area. Luckily we had made a huge down payment and were able to go ahead with the refi.
"Eponymous said...I wonder why you would think that buying in ARL or FFX might be safer at this point than MoCo given similar demographics, proximity?"Eponymous - as you noted, the key is "at this point". As I see it, and as the inventory build (and subsequent decline) seems to bear out, NOVA was one of the first areas in the US to go belly up. I honestly belive it was the 05 & 06 losses in places like NOVA, Boston, Denver, & a few others, that caused the banks to restrict credit in 07 giving us the credit crunch. Thus, you will note that in 07places that were only experiencing mild pain (such as maryland) started seeing a serious inventory build. Conversely, most of NOVA continued to shed it away. Again we were the leaders, they were the followers.Now, given how much inventory MD has left (especially in relation to NOVA) it looks alot like NOVA did last year before the big fall came.In fact, you will note that Montgomery recently started rivaling Fairfax & Loudoun in the intensity of median price drops. In fact, Mo Co median price was down 22% in January, surpassing every place in NOVA except PWC. In sum, at the end of the day, I think Mo Co will end up very much like fairfax in terms of price drops. However, given (a) how much inventory is left in Mo Co (and much of suburban MD) to work through and (b) the recent wratcheting up of price declines in MD (versus a possible softening in NOVA), it just looks like they are a year or so behind in this whole thing.
Eponymous - I should mention too, (and I know this for a fact), unlike VA, Maryland is painfully slow in processing foreclosures, and it was foreclosures (or more particularly REO) that really brought NOVA down.VA has a very fast foreclosure process, meaning much of the early foreclosures has worked its way through the system. One needs to look only at the huge jump in REO sales in PWC to see evidence of this.By contrast, in MD, the notice periods, rights of redemption, court preferences, etc, all favor the borrower. This has a tendency to drag out the process, meaning alot of the potentially REO inventory out in MD, has yet to be offered for sale.I think its out there now (hence inventory in MD is rising). I think now its just a matter of banks dropping prices low enough to attract buyers which looks to be only starting now.
Thanks CRT. It is still hard for me to believe that two similar neighborhoods that have behaved similarly so far will behave so disimilarly in the future.
"Eponymous said...It is still hard for me to believe that two similar neighborhoods that have behaved similarly so far will behave so disimilarly in the future."Which ones do you mean, Ffx & MoCo or Ffx & Arl?
I don't really mean whole counties. I mean neighborhoods within counties. It seems to me that within FFX, McLean is very different from Centerville, but McLean is similar to Bethessda or Chevy Chase. Centerville on the other hand is perhaps similar to Gaithersburg. These similarities are in terms of pricing, proximity to jobs, mix of employment in the community, income, etc. I might believe that Gaithersburg is behind Centerville along it's trajectory, but it would seem to me that Chevy Chase is then on or behind McLean's trajectory, which has not been that bad so far. While I think is is possible, or even likely that McLean, Arlington, Bethesda and Chevy Chase might all fall (don't mean to start another round of arguing over Arlington), or, less likely none will fall, I don't think it is likely that McLean and Arlington are finished but Bethesda and Chevy Chase have a way to go. They are too similarly priced and compete for the same buyer pool. Thanks for your thoughts.
"Eponymous said...I don't think it is likely that McLean and Arlington are finished but Bethesda and Chevy Chase have a way to go. They are too similarly priced and compete for the same buyer pool."I think we disagree. I havent looked at CC & Bethesda too specifically (more just MO CO as a whole), but my presumption is that Bethesda and Chevy Chase ARE a year or so behind Arlington & McLean in their price decline trajectory.I just checked out zips 20184, 20815 & 20817 and combined their sales/listings, and sure enough it is like I expected. For the last 2years:Jan 08 50 sale/369 list (7.4 MOI)Jan 09 38 sale/502 list (13.2 MOI)In a years time, sales dropped by 1/3, inventory increased by 1/3 and MOI essentially doubled. This does not look good for CC & Bethesda.By contrast heres Arlington:Jan 08 94 sales/859 list (9.1 MOI)Jan 09 119 sale/875 list (7.5 MOI)In a years time, sales are up 25%, inventory up a mere 2% (its now down YOY as of todays date), and MOI down from a concerning 9.1 to a more manageable 7.5.So again, it just looks like they are on different trends, even the best part of the MD side is looking worse YOY, and going in the wrong direction. I just dont see how that ends well.Now, if places like Bethesda, CC, Howard, etc. can reverse those trends, knock down MOI & total inventory without big price declines, then fair enough. However, til we at least see things going in the right direction as they are in Arl, Lou, PWC, etc. I think its too premature to judge their fate.
Well, your data trumps my anecdotal observation. Thanks for the thoughtful response.
"Eponymous said... Well, your data trumps my anecdotal observation. Thanks for the thoughtful response."Dont give me too much credit now - I thought last spring when sales jumped in PWC that might mean the pace of declines would lessen. We all know how that prediction turned out :)
CRT: Did you not include 20816? That's also Bethesda.
MM - whoops. I forgot that one (im not that familiar with MD).Adding 20816 in we now haveJan 08 57 sale/426 list (7.5 MOI)Jan 09 47 sale/583 list (12.4 MOI)Helps out a bit, but the problem is still the same - rising inventory and increasing MOI - at a time when NOVA is headed in the same direction. Also, Eponymous, I should say, I dont think any of them are done declining. I think its a near certainty that Arlington & McLean go down more in 09. My guess though is (if MD is one year behind) the severity of declines in 09 will be worse in MD than they are in NOVA.
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