I appreciated receiving this March real estate letter from the William and Alexandra Lohr team of Long and Foster. It was written earlier this month, prior to the 2009 Prince William County assessment release.
It sounds like they're keeping busy!
Friday, March 20, 2009
Northern VA Market Update
Posted by Harriet at 7:27 PM
Subscribe to:
Post Comments (Atom)
32 comments:
"Homes less than $400,000 continue to sell briskly. Homes above $800,000 are selling at the same rate they sold last month. The good news is that increased sales have started to spill over into the mid range in the inner counties."
This doesn't exactly match my data for PWC, or it does in a way, in that high-end stuff isn't selling at all:
PWC February MOI
2.56 <$100K
5.14 $100K-$200K
4.36 $200K-$300K
7.73 $300K-$400K
10.32 $400K-$500K
12.60 $500K-$600K
26.33 $600K-$700K
39.00 $700K-$800K
48.00 $800K-$900K
I'm trying very hard to bite my lip right now with respect to that newsletter.
John,
Well, it's definitely a snapshot -- we worry here more about the coming pitfalls in the broader economy. It interests me to see this data. The first part tells us that bank pricing can be deceiving -- obviously we don't want to overpay, but the competition is certainly there for the "lower end". I have an acquaintance who's trying for her 15th contract. The bank-owneds are proving challenging for her -- they've all been in near-top condition and her bids aren't making it, although they've been at asking price.
This house that was highlighed with five contracts is right next to Route 29.
Here's Frank's list for Sully Manor. Average DOM is 37 days.
No wonder: it last sold for $763,290, and now the bank is asking for $475k, or 62% of the 2005 price.
The graph near the bottom is the most interesting part of that newsletter.
"Only about 5% of the homes sold in the last 10 days closed above 2008 tax assessment. Interestingly, if you lower the assessments about $100,000 you get a pretty good 1:1 mapping."
Gah!!!!!
What is wrong with people? Yes, the good REO's are going for 5-10% over list, that's been the closing prices since September around where I am. But stumbling over each other? Grrrr. All I can think of is that we still have fools out there, who don't understand that they can file an amended return, and therefore want to close before April 15th to get their $8k. But a bunch of banks and owners, who may actually understand taxes better who aren't in such a rush to put their homes on the market. I'm hoping for a serious slowdown in bidding after tax day.
Gah! One things for darn sure, I'm not giving up my right to an inspection contingency in this market, no ifs ands or buts, I can wait another year if I have to.
Cara,
The other factor right now is interest rates. While some of the guys in charge (Ben) and the deflationists think that they can keep rates down, most of the public only understands inflation and is fearful that printing money is going to lead to higher rates. Personally, my original timeframe for buying was going to be late summer/early fall, but we have actually started the serious looking right now.
Anecdotally, I saw an REO this week that had been off the market, but the contract fell through for some reason. Per a nosy neighbor (they are the best help when looking at a house) the original winning bid was 13% over ask. The bank only kept the second round open a couple of days and got several bids, probably from the losers the first time around. It was amazing, we drove by the place multiple times and visited it once, and there was somebody else looking at it every single time. Fact is, attractively-priced bank-owned properties in decent locations are going to be a hot commodity.
Unless the economy is in much worse shape than we already know about, I think it's pretty safe to buy these "cheap" reo's.
I've seen properties sell for 60 or 70% off peak (and they were not trashed).
A very cute TH in a close-in area of Loudoun recently sold for very close to it's 1991 "new" price.
Have you decided to return VA_Investor?
When last we heard from you you were still trying to explain how this was a normal cycle.
Personally speaking, I'm not buying a townhouse. I want a yard for my kid to run around in, not a cement slab just large enough for a couple chairs and a grill. Obviously you can get some very good deals on townhouses but I don't think most people are talking about buying those when they discuss prices. Why buy a townhouse when the recovery on a property like that is so much slower than that of a SFH?
Jeff,
The (townhouse) acquaintance of mine has a husband with a mortal aversion to yard work. I know plenty of smart people like that. I, on the other hand, am a glutton for yard punishment. If you could see the state of ours at present you would understand. We bought a foreclosure whose backyard hasn't been touched in 20 years . . .
Lots of compost for the new garden, though, once we get it all shredded.
Leroy,
It's nice to be remembered. I'm sure you also remember my predictions of price declines of 25-40% regionally. I doubt many foresaw the economic tsumnami coming - certainly not me.
I did, however, have a clear memory of RTC and the RE Market devastation of the early 90's; hence my price predictions.
I don't recall anyone (except me) talking about the economic fall-out of the housing crash predicted by some. Stocks, jobs...these were not contemplated by the pennies on the dollar crowd. As I recall; the devastation would be contained to housing prices.
Perhaps it's time to move forward and evaluate the market as it is today.
Jeff,
I am buying rentals, where cash-flow and maintenance headaches are a priority. Relative "recovery" time-frames are not my main focus.
That said, the concept of "starter house" seems to have been lost over the past 6 or 7 yrs. There is nothing wrong with buying a condo or townhouse as a first-time buyer.
VA_Investor,
Well, nice to hear you're still kickin'.
I called this blog "fallout" two years ago -- I really, really, really don't remember the containment claim you're making, but I'm sure you did hear from some who claimed so. (I recall more gold and ammo stories then pennies on the dollar thinking).
I bought a starter house when I was 23. Worst. Decision. Ever. I don't recommend it for everyone. I'm proud of someone like Tabitha for keeping her head down and finally buying the house of her dreams.
Harriet, I'm flattered.
Just for fun...I'm thinking someone made a mistake somewhere in this listing:
http://franklymls.com/PW7010326
va,
welcome back. . . now all we need is lance back and we'll be back to the good 'ol days.
I really don't remember 25-40%, I'm too lazy to look it up, but the most I recall the don't worry it'll all be fine crowd was at most -5-10%, but I could be wrong and it really doesn't matter to me.
I don't know about the pennies on the dollar crowd, but over the past 3-4 years I'd say I've done alright on preparing. I didn't invest in the stock market . . . way too high. Housing was a bubble didn't go there. I did invest a decent amount in silver/gold. I've done so, so there, I got in before they spiked and then tanked and I could easily sell all of it for more than I entered into them . . . .
I've made sure I've saved 6+ months of living expenses + 20%+ downpayment.
But that was the easy part, now comes the hard part . . . where to go from here-I've been struggling w/ that for the past 3 months or so. So many different conflicting trends and strands which one is prevalent now and which one wins out?
Stocks . . . nah-still way too overvalued . . . housing . . . IMO still too overvalued but getting closer. Notice I said overvalued not overpriced. If the gov. stayed out they would have a lot further to value numerically. The gov. is hell-bent on propping up prices, but a number doesn't mean value-i.e. housing, stocks are still overvalued in comparison to everything else no matter what the numerical value is.
The idea is to buy what is undervalued. So what is fundamentally undervalued . . . when compared to everything that is the question.
I would go with cash (we are such a credit/debt based society) that cash-i.e. money w/ no obligation to it-is undervalued. Unfortunately, the gov. is hell-bent on printing as much as possible to get credit back again.
Buying a house could be a good long-term move right now, but in a recession/depression you want to be able to pick up and move, so if you have a house you want very little debt on it so you can sell it and move w/ no problem-besides fundamentally it's still too high-although I have seen some places that aren't bad and would prob. buy if the stars aligned properly :-).
I'd love to hold cash, but the gov. is making it darn near impossible to do so. Maybe it's more of the same . . . glod/sliver . . . interesting times that's for sure.
Fred,
interest rates are a wash if you don't have the downpayment to get the best ones.
Nah, I'm thinking this is the wave of people who've been waiting since 2003 and earlier to buy. The question is, how many are there? How many months supply of financially prudent people are there that didn't get caught up in the bubble but are chomping at the bit to get their own house? 2 months? 4 months? 6 months supply? And how does that compare to the years of supply of over-stretched borrowers? Not very well in most places.
Yes well priced houses are selling quickly, that's a good thing. That lets sellers know what "well priced" means. This frenzy will end, when the pent up demand is spent, long before the pent up supply is gone. Wait until April and May when the "normal" sellers want to list to close and move house during the summer. This too shall pass.
Cara said...
Nah, I'm thinking this is the wave of people who've been waiting since 2003 and earlier to buy. The question is, how many are there?
You have to wonder when just a short time ago home ownership rate was ~70%
gte811,
Congrats on avoiding the massive equities fall-out. I, too, am concerned about where to hold cash where it won't be devastated by devaluation of the dollar. I've heard many conflicting ideas!
The idea that a job loss would necessitate a relocation is a valid concern with unemployment increasing and should be a factor in a home purchase. The "old" rule of remaining in place 5 yrs (if not longer!) in order to break-even on transaction costs is certainly the "new" rule.
Having been in the DC area since 1981, I am seeing an inexpensive market (very inexpensive in some locales). As I mentioned, I am buying rentals and am 99% sure that we won't be relocating. A relocation would not be a terrible outcome for most investors in any event - as it would merely add a management fee to our costs.
Harriet,
While I certainly respect your opinion vis-a-vis "starter homes", I must disagree. We bought our first home at 22 and moved 8 times in ten years, most times keeping the prior residence as a rental. This was our "plan", but rentals are clearly not everyone's cup of tea.
In the awful Market of 1993, we found a terrific home that we wanted to buy and move in to. After an unsuccessful attempt to sell our existing home, we leased it out quite quickly. Twelve years later that property was sold via 1031 and we traded into a wonderful (future) retirement home.
Ugh. I bought a starter home in 1993 and sold it in 1997. I can't imagine still holding that starter home today as a rental, as it is half way across the country.
Also, your statement about homes here being inexpensive compared to historical prices (vis-a-vis income and interest rates) doesn't hold water and only applies to certain types of homes in specific areas (e.g. Manassas townhomes).
Cara,
Thanks for keeping the faith. I, too, think there is still a lot of fluff to be wrung out of the system in close-in area pricing.
Basis: the old engine, people moving here for jobs, does not apply as before. See WSJ piece -
http://tinyurl.com/dkj34v
I hope I can refrain from joining this resurgence of madness.
NoVAwatcher,
"ugh"? I did say that rentals aren't everyones cup of tea.
On the other note, the last time I saw housing so reasonable was 1998. And, I don't refer only to Manassas, etc. Do you have data showing a "baseline" housing cost for DC going back 30yrs? That would be very interesting to see.
It's my understanding that the affordability - as far as median income qualifying for median price - is quite good at present.
"Zapoteca said...
I, too, think there is still a lot of fluff to be wrung out of the system in close-in area pricing."
Zapoteca - I dont know if you saw it, but the post has a similar article & whats happening locally.
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/18/AR2009031803523.html
Unfortunately, I dont like what this has to say. As long as these inner areas have net positive migration, I think the fluff is going to be run out more in terms of stagnation (while incomes catch up) rather than significant price declines.
Still, now that the price differentials are huge, one can hope we see more movement from "inside to outside" than we have seen in the last 2-3 years.
http://novawatch.blogspot.com/
Scroll down.
The Anonymous: as one of the WaPo posters pointed out, "Probably doesn't help that people in their condos inside the beltway are underwater after buying a 1 bedroom for 450k in 2006 with zero down. Three years later when they are married and pregnant they can't sell and move to the 'burbs."
Pretty hard to have outward migration when you've got a ball-and-chain of debt around your ankle. Looks like the 'starter home' (i.e. condo) was a bad idea.
NoVAwatcher,
I am assuming (perhaps mistakenly) that your "starter home" comment was directed at me.
Since when is a 450K 1 bedroom condo a "starter home" in any size, way or fashion?
A young relative of mine just bought a "starter home". A 2 bedroom, 1.5 bath condo for 81K. It will easily rent positive cash-flow when she decides to move-up in a few yrs. She is 24 and will have a roommate.
"Novawatcher said...
Pretty hard to have outward migration when you've got a ball-and-chain of debt around your ankle."
Sure, but that didnt stop the thousands of migrations we saw outside the beltway via shortsales & foreclosures.
If anything, these close in homeowners are probably longer tenured (greater chance to have equity via payments), and thanks to the lack of large price declines, are probably least likely to be underwater.
You would thus assume that these guys perhaps more than others would be able to outmigrate - and yet they sit sit sit.
VA_Investor,
You're leaving a huge factor out of the equation: kids.
You simply cannot uproot them 8 times in 10 years just for investment purposes. I can completely understand your process -- yes, it makes a certain amount of logical sense. It's a lifestyle. But a person can buy an investment property at any time if they save up enough cash.
The danger/risk of getting stuck in a house is very high when you're 21-23. If you're married, you absolutely have to consider your spouse. If you're both on board with moving, moving, moving, great. But not all couples want do things the same way. And if you're stymied (tied to a house) in a financial or emotional sense, you can't easily take a new job across the country or even across the region. It's not always such a good plan for a person just starting out.
Our realtor told us we should buy the most expensive townhouse we could afford, with 3 bedrooms "just in case". We really didn't need so much room, and it was "only" 1,400 square feet. But coming from dorm rooms you forget how to use a kitchen or a living room. AND, in spite of an inspection, there was a hideous water leak in the basement and other costly improvements to waste our money on. And finally moving out was very expensive and such a pain, but by the time we had kids we really wanted a yard and a safer street for them to ride bikes and play. So it was a complete waste of our time and money. Yes, I suppose we could have rented it out but we had other things going on and didn't want the bother.
I know some young people who are hopelessly stuck in a very expensive 2005 condo and upset about it. Paying too much is another danger. I would hazard a guess that most 23-year-olds don't have it all together in the assessment of risks.
I can understand a smaller 81K condo. When we were looking in 1993, Realtors and friends were terrified of condos and we were listening to their advice, having no life experience of our own.
Harriet,
I suppose that I am different from many here because I started my early 20's with a specific plan in mind for acquiring real estate.
We were married almost ten yrs before we started a family. There was grad school, career building, etc. So we didn't uproot any kids.
In fact, by the time my son was 15 mos. old I was able to retire from my day job (lawyer).
I live and breath RE; so I guess I am the oddball here.
Do you think a 450K 1 bedroom condo is a "starter" (never mind the thought process that went into such a purchase in 2006 when the writing was clearly on the wall)?
I find the example put forth somewhat absurd.
Yes, it is absurd, but I know folks, including grad students in this area, who thought that they *had* to buy a starter condo a few years ago. Thankfully, I was able to talk some of them out of it. But I know others who are stuck.
When my daughter graduated from college in late 2005 and got a job, everyone in her office told her that she should buy a house or condo right away because ''real estate can never go down in price". She did some research, saw what was beginning to happen in CA, and signed a lease on an apartment. Her co workers said she was crazy not to buy. She was 22, they were in their 40's and 50's.
Sometimes young people know more than their elders.
"Yes, it is absurd, but I know folks, including grad students in this area, who thought that they *had* to buy a starter condo a few years ago. Thankfully, I was able to talk some of them out of it. But I know others who are stuck."
I know people in the same situation, and they weren't idiots, they just didn't question what they were being told sufficiently.
They were told over and over again that it was "time" for them to buy a home, and that while it seemed expensive... just wait a few years when they had all their "equity" and then they would see what a wise decision they had made. Afterall, it worked for everyone 10 years older than them...
Post a Comment