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33 comments:
Washington Post reports DC assessments dropping.
For the first time in recent years, the vast majority of residential neighborhoods in the District will see a decrease in their property assessments, with double-digit drops in seven communities, according to data city officials released yesterday.
I'll post this UVa study for what it's worth. It's likely an accurate reflection of what has happened, but -- the future? There are some pdf files in the "Additional Resources" section.
http://tinyurl.com/aaspqp
>...with double-digit drops in seven communities, according to data city officials released yesterday.<
Here's another the Post could have reported the data.
- There were increases in 7 communities.
- 10 communities saw less than a 2% drop.
The data isn't apocalyptic as the story's headline: Home Values in Broad Decline. I am glad, however, that the Post published a pdf with the data.
I find it hard to see "Home Values in Broad Decline" as apocalyptic. And since, over the years assessments have usually gone up, it's not strange that the article would focus on the ones that went down, especially considering that that' the overwhelming majority.
It's standard "man bites dog" coverage. It's not news when assessments go up since that's been the usual pattern in recent years. It is news when there is a broad decline in assessments across the city, which there was.
Also, note that the assessment chart is total assessment base, not average assessment. That means this is the decline even after any new building and renovation is added in.
From the UVA study:
"In the Washington, D.C. metropolitan area, for example, prices have barely changed in the District of Columbia, Alexandria and Arlington County, and parts of Fairfax County in Virginia. The largest price declines (more than 30 percent in 2008) have been in Prince William County, Va., but even there, the range of price declines in its six zip codes ranged from 49 percent to only 6 percent."
PWC has 18 zip codes. That's a rather large error.
Manassas and Woodbridge had over 6% of all homes in foreclosure as of last September, while Nokesville (a rural area) had only .5%. So yes, there is a range, a range in foreclosure rates and price drops, but that is a little disingenuous.
I need help please…
I have friends in the same situation so your help will be for multiple people.
$330,000 @ 5.25% Interest-only loan that resets to an ARM this year. (TH in Alexandria)
$60,000 @ 8% in student loans and currently no job.
I live rent free with family members while students rent out my place.
The rent currently covers almost the entire mortgage.
I'm not sure any loan negotiation is possible as long as I don’t have a job.
Is there anything expected to change in the laws that would help with my situation?
My wife has a job and some savings.
If I have to foreclose or even take out bankruptcy, our thought is that we could get into another house down the road with her credit and job.
Can my wife purchase the home from me just to get us into a fixed rate before Interest rates go up and the fees change April 1?
We could also take advantage of the $8,000 tax credit.
If foreclosure is the only option, I'm getting mixed signals as to whether Virginia is a non-recourse state.
Can the lender come after my future earnings?
Do they have 5 years to do this and if they don’t pursue me am I in the clear or will they just sell my information to a collections agency?
Has anybody had luck in the current real estate environment in doing a short-sale and getting the lender to agree to "payment in full without pursuit of any deficiency judgment?"
I've had some coworkers tell me about www.naca.com which helped them renegotiate their loan with the lender.
Does anybody have experience on how this works and if it’s a good idea?
Can you take out bankruptcy as an individual when you are married?
The debt was incurred before our marriage.
Does anyone have experience negotiating student loan interest rates?
Any help would be greatly appreciated.
I thought that the way the pdf pooh-poohed the price drops was a little disingenuous. McLean prices (4br+ SFH) have dropped at least 15% since the peak. That's an upscale community inside the beltway. And, to me, 15% is not insignificant.
jt,
I am not an expert on bankruptcy, so I'll just take on those I know the answer to:
1) you would not be eligible for the $8000 credit. It specifically excludes sales between spouses or family members.
2) Yes, your wife can buy a house in the near future on her income and her credit alone. You can be on the deed but not the mortgage note.
3) If renter's don't even cover the interest, then selling to your wife in order for her to get a lower rate won't help that much, because you'lll need to start paying principle.
First and foremost you need to worry about finding a job. Because even in bankruptcy, that student loan isn't going away.
That's the limit of the knowledge that I am certain of and more educated guesses is not what you need. Go to Michele Singletary's site on WaPo and look for recommendations on free debt counseling services.
jt,
Oh, but see if you can get forbearance on your student loan in the near term due to lack of employment. Since you're bleeding money right now, anything that might staunch that until you get a job is worth consideration.
jt
You may be able to request a forbearance from your student loan lender for a certain time period. You'd still be responsible for the loans and the interest during the time you are in forbearance, but if it's granted, you wouldn't have the student loan people breathing down your neck.
Also, spouses can gift unlimited amounts, provided you and your spouse are both US citizens. So, you could deed the property to her and have her refinance.
I second the forbearance approach. I did that for my graduate degree just after 9/11 until I could secure a job. I also consolidated my loans at about 3%. I believe under forbearance they add the interest you would have paid during the forbearance period back into the principle of the loan. At today's interest rates (assuming we aren't talking about high interest private loans) forbearance won't put you out that much and will allow you to reapportion the money to other causes, like your mortgage.
Jaime,
Who was willing to consolidate your loans? Did you have to wait until you had a job to consolidate?
These are great ideas everyone.
THANK YOU, thank you.
From Cara's idea I found a website that makes me thing the "Homeowner Affordability and Stability Plan" coming out on March 4, may give me some more options.
http://voices.washingtonpost.com/economy-watch/2009/02/the_white_house_this_morning.html
MJC's idea of "deed the property" to my wife may also be what we need to do.
jt,
You have my sympathy. Those student loans are killer, I know.
To the best of my knowledge, Virginia is NOT a recourse state unless your mortgage has been specifically worked or reworked to be recourse. Check the papers. Get a lawyer if you need. It's $500 you probably feel you don't have, but the alternative is even more you really don't have.
I'll echo the forbearance line. Though if you are looking to the bankruptcy option, it's in your best interest to max out any credit cards you have to live on while paying down that debt as much as you can. It's not the nicest thing in the world, but that student loan debt isn't going anywhere. The credit card debt you can get forgiven.
Lastly, if you're looking at foreclosure it seems unlikely that the place is market value close to $330K anymore. Otherwise I'd think you'd be looking at just a sale. How underwater are you there? That might make a difference.
Good luck, man.
jt,
I don't think you will be eligible unless you move back into the TH, which doesn't sound like an option right now.
From your link:
I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?
No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.
Student loan consolidations used to be standard and straightforward, and rates used to be down near 3-4%. I don't believe this is currently the case. I'm not sure it would depend on you having a job, but it will depend on you staying current on the student loans. My consolidation was from the aptly named "student loan corporation".
Also, at $330k for a TH, you might still be able to sell it for that price, it depends on what you mean by Alexandria...
As far as transfering the house, you'll need to look into how that would work, given that there's a lien on the property, and the point is for her to get a new lien on the property. If your credit's not trashed you may be able to simply add her to the title, and get the TH refinanced in both your names to pay off the existing mortgage... But I'm guessing you want to see if things can stay separated so that only one of the two of you could file bankruptcy if need be.
I'm not sure what a sale or deed transfer to your wife will accomplish in this situation, but that may just be due to lack of information on my end. Is your spouse's income enough to cover your living expenses and obligations and carry the refinanced mortgage (fixed and now paying principle). Is her savings enough to bring money to the table in the case of an appraisal shortfall putting you above loan to value ratios required by the chosen lender for refinancing? You may see many good rates right now, but a lot of times there are points that must be paid if it is above certain LTV thresholds (70, 80, etc)
If the answer is no as far as bringing money to the table, or no, rental and spouse income won't be enough to cover the newly fully amortized mortgage payment, or if you just really want to get rid of the house, then yes, pursue a short sale aggressively. Research agents that have had success in this area and pursue that.
If this house is just going to be too expensive, you may not want to risk your spouse's pristine credit.
What do comparable town homes go for in the area?
Good luck, hopefully you will have success in the job front as that would be the best solution.
Student loan consolidation is not a very workable scheme right now. At least it wasn't the last time I tried on my wife's. Tried to add myself as a co-signer so my credit rating would factor in. They were happy to get us a lower payment, but by extending the loans for a new 15 year period... and raising the interest rate a half a point. We naturally declined. Frankly, I was stunned when I saw hers were a combination of loans at 7.5% and 8.0%. I thought student loans were all supposed to be in the 3-6% range. Even the private ones. Shell shock. I'm all the more grateful for my in-state tuition at a quality university.
jt,
Consolidation is likely not the answer if your student loan debt consists of private loans. The consolidation company buys your loan(s) from the lender, thus buying the ability to get future interest payments from you. This is helpful to you if the interest rate goes down and you would only have to write one check to the consolidation company each month rather than a check for each loan to each loan company each month. However, it's my understanding that you cannot consolidate private loans into a fixed interest rate. So, there's no point if the interest rate is variable, and the consolidation company passes its overhead costs onto you, the borrower, usually through the interest rate it offers which is less competitive. They can offer a low interest rate to begin with to get you to consolidate, but once you consolidate, it's variable so they can raise it the next quarter.
I consolidated my federal student loans, but fed student loans are able to be consolidated into a low fixed rate.
So, consolidation is likely only helpful if you have federal student loans.
jt,
My only advice if you are going to let the property be foreclosed is to follow the golden rule with your tenants and do unto them as you would have them do unto you (i.e., let them know as soon as possible so they have time to find a new place rather than having the sheriff show up at their door one day and toss their things out to the curb).
Good luck.
J/F
hear, hear.
(although the sheriff'd post a notice i think four weeks prior to eviction)
the tide has certainly changed in terms of financing. here's a reply from a loan officer i knew from the past:
"... A lot has changed in the lending world over the past several months. More and more buyers are finding that they cannot obtain the financing they thought they were getting.
While the document is in no way "contractually binding" I ask that you only fill it out if you are a serious buyer and are interested in working with me. If you're just interested in a "rate quote" I would politely ask that you call another lender...."
can't even get a rate quote from a lender now. tough break.
i also wonder if this fuels the recent contract activities if qualified buyers worry of losing financing if waited too long?
Cara,
Incomes have not stagnated in the Washington DC area in the past 10 years. The Federal Government has increased salaries for all Executive Branch employees on a yearly basis during the past 10 years. The Federal Government is a big chunk of the economy here as you well know. Granted the income increase is not the same increase as we have seen for housing, that is why prices are going down. We agree on that.
I have seen graphs before of long-term appreciation of homes and my recolection was between 5-6 percent on a yearly basis. Housing prices long term go up by more than the cost of living, 1-2 percent, if I am correct.
So, ok, you can use the 5 percent benchmark on a yearly basis. I used 6 percent because housing prices were undervalued in the area in 1998.
But honestly, do you believe that a newly built home that sold for $300,000 in 1999 inside the beltway in Fairfax will go down to $366,00 (this is a 5 percent appreciation yearly since 1999) I do not think the market will go down to those levels unless we go into a Depression, then everything will be a foreclosure.
Also you say that REOs are the market. That is the case for some areas. But I am looking at close in Vienna, McClean, Arlington, and Alexandria. Homes are selling in those areas particularly this year and these are not REOs.
Vienna is holding better than Springfield because of its proximity to Tysons Corner (the 2nd largest busines district in the area) and because of its excellent schools. McClean and North Arlington for similar reasons, and proximity to DC (for Arlington).
I have not studied the Springfield market so I cannot speak to what is happening there. I have noticed the REOs but have not spent time looking into that market. Perhaps there were too many subprime loans in that area. Also I do not know how good schools are in Springfield compared to Vienna, McClean, and Arlington schools. Maybe you can let me know.
Outer suburbs (Prince William) are in a different category. There is still too much land there to build, immigrants left the county and you have lots of vacant and new homes. I do not think Prince William will ever recover (not in the next 10 years) to be honest. Look at homes as far as Stafford County and these also appear to be at 10-year low levels.
Correction from my previous post.
I mixed my formulas.
Number for the newly built house inside the Beltway that I quoted should have been $488,000 (which is a 5 percent appreciation since 1999). I think that is pretty close to the bottom for inside the Beltway.
dc2,
housing prices historically grow by the same amount as gdp per capita does, on average. any deviation is reverting to the mean in the long run.
>>I find it hard to see "Home Values in Broad Decline" as apocalyptic.<<
On the bus tonight I saw the Examiner headline on DC tax's assessments. It read: DC’s residential property values drop less than 4 percent
The Post could have written that headline, and reported that story, a dozen different ways. The Examiner's headline is more soothing. I'm tired of the endless gloom; it feeds on itself.
Kostantin,
The home appreciation measurement that you are quoting may be national which is not the same than for Washington DC area. What would be the percentage of GDP per capital on average, 1.8? I do not know, that is why I am asking.
I found a chart with historical national home price appreciation. I did not make it so I do not know if it is correct.
It looks to me that it is about 5 percent annually over a 20 year period between 1975 and 1995. This is a national chart, local markets may behave differently.
See the link
http://mysite.verizon.net/vzeqrguz/housingbubble/
Latham is the first V10 Law Firm to announce big layoffs:
http://abovethelaw.com/2009/02/latham_lays_off_440.php
More to come from other firms. BigLaw associates won't be buying houses for the foreseeable future.
But I thought DC was immune, and lawyers were going to prop up house prices?
NoVa,
Yes, it's comforting to believe that one's "special" circumstance immunizes one from the laws of economics. When I first raised the issue of BigLaw layoffs a year ago, I was told that law is countercyclical. Oops. [I'm not happy about this, mind you, since I have many friends at large firms.]
Latham laid off 12% of their associates, for now. The other 88% won't be buying a house any time soon. And partners in unprofitable departments must be quaking.
novawatcher,
yes, dc is immune. their prices shot up 3x in a decade, just like PW county, but they are surrounded by a magic bubble of hope and change. people that buy into dc right now will watch the bubble implode on them just like bubble buyers in outer areas did.
"But I thought DC was immune, and lawyers were going to prop up house prices?"
No place is immune, but I dont see how this is a bad thing for DC area lawyers.
http://biz.yahoo.com/ap/090111/boomtown_usa.html
dc2,
According to case of case schiller, historically, prices in any given region keep up with incomes. The cost-of-living increases for federal jobs in the DC area, have been 2-3% for this whole decade. So, it's only people getting actual raises that would have allowed them to exceed inflation at all.
The starting salaries have only been keeping up with inflation, not exceeding them.
So, I still call BS on your percentage. And the underpriced in 1998 is a load of hooey as well. Just because the last bubble deflated by a long slow stagnation, does not mean it ever reached underpriced. Nothing of the sort.
I haven't compared Springfield/ Franconia schools to Mclean or Vienna or anywhere north, because those locations would add 40 minutes to my commute, so those aren't relevant to me, just as Springfield is not relevant to you. But Springfield is a significant improvement over both Alexandria proper and Huntington, the two places that would make our commutes better. So it's the best of close-in options to Pentagon, the Patent Office, NRL, the Boiling Airforce Base...
Take a look at the stock market. We are in a depression. We're back to 1996 in prices. And that's without inflation adjustments that would just make it look even worse. So, yes, I do think your projections are rose-colored, and reflect neither the reality of the housing market as it unfolds, nor the seriousness of the economic meltdown.
Now that people signing onto loans do so with the knowledge that they personally will have to pay them back, that it will not happen any other way, the willingness to take on an onerous amount of debt will disappear, and with it, over-priced houses. It will take time, but it will happen. And half a million dollars, is just not a reasonable price for a house. For a custom built mansion, tailored to your every whim? Sure. But not a just a house.
The Anonymous,
The Yahoo article you linked to quotes David Rubinstein of Carlyle as saying this could be "boom times" even as it says Carlyle laid off people. Therein lies the problem. With the slump and possible boom occurring at the same time, no one has precise details on which will be stronger in the end.
There are indications that while many new jobs will be created, they won't pay as highly as the jobs lost. And Obama has put a cap on pay raises to Fed workers. Lobbyists are almost certain to find it not as lucrative as in the last decade, and there will be more scrutiny now. And lawyers in the private sector who get laid off, will have to find relatively low-paying Govt work.
So the high-end housing will suffer and that will spread to the low-end. But it is reasonable to assume that, because of the stimulus, the price drops won't happen as quickly as would have been the case without the stimulus.
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