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.
Here's an odd one, "WASHINGTON - Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks."Not exactly real estate bubble-talk but related in the sense of "the big picture".
The next paragraph is the key."Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds."
@J@Wow. Timing isn't everything, but boy is it important. At least I know who bought my 401(k) stocks when I went MM fund. It was me. In a more diffuse sense.
All those people working for the state and federal governments may find their pension benefits cut big time. Either that or we will have to inflate our way out of it so badly that they will be similarly worthless.
Doug, it's not government pensions, it's corporate pensions, like GM. If GM goes under, you, Xpovos, and I will be covering the tab.
So, predictions for March numbers?I predict an uptick in both inventory and sales for FFX, such that months of inventory goes down. Slight downward movement on the median price as investors and first timers dominate the market. MOI on the under 300k bracket at less than 2.
Doug,That ain't just gov't employee pensions. That covers (insures) the pretty much every pension of any American owed one by a U.S. employer. Now, they're not being offered as much anymore, but they're still around, particularly in the posession of some baby boomers and the current retirees. Should the backer of one of those pensions disappear (e.g. bankruptcy) PBGC pays out so that at least a significant fraction of that pension continues to go to the pensioner.So when GM and Chrysler go boom, PBGC is going to get hit upside the face with an ugly money stick. That they're in worse shape now due to perhaps the right idea, but at the worst possible time, means that PBGC is probably going to be insolvent itself. Not like we haven't seen insurance companies go insolvent because of bad bets recently.So it'll be up to the taxpayer to bail them out. And we will. And this is a bailout even I agree with. But there needs to be a scapegoat. Millard looks like the likely first choice for whipping boy.
Cara,I think a larger move on median than most people are expecting for FFX. You're probably dead-on for inventory.PWC will have a small or very small median move probably down. I expect inventory to increase significantly but sales to continue strongly so that MOI barely blips.
I dont agree with bailing out pensions. Those people were promised absurdly high benefits, ones they could never deliver. Why should I pay for that? If the fund is underfunded by 20%, give them 80& of their promised benefits, wont be the end of the world.
xpovos,you could be right. There's been a ton of activity at the cash-flow positive level for small unwanted houses, little old THs and cheap condos. Under 200k seems to be at less than half a month supply but still with plenty of inventory. This has the potential to skew the median strongly if the SFH market has cooled.
Hi Doug, That *is* what will happen -- usually the new pension will be a percentage of the older one and I believe there is a cap as well. What really bites is that the execs often have a seperate pension plan that is -- lo and behold -- somehow fully funded.
Cara, I agree on FFX.On Arlington (YOY), in the $700K and under range, prices will be down but sales up. In the $1M and up, only a handful of sales, prices unpredictable because with such a small sales #, a change in the mix of the new construction with high prices or completely renovated properties vs. existing property needing work could distort the picture. In between $ range - moderately low sales, moderate drop in prices.
ace,oh, yeah, I'm just thinking MoM again, so I'm practically just predicting that spring will happen. YoY prices are already gigantically down, and sales up, so that's no mystery for FFX.
See "http://www.pbgc.gov/workers-retirees/benefits-information/content/page789.html" for pension guarantee maximums by age.If GM goes bankrupt, I think that most employees are going to get less than 80% of their pension, especially the ones who took early retirement recently.
joelandsonia, "the execs often have a seperate pension plan that is -- lo and behold -- somehow fully funded."No-no-no! Please no!"Former General Motors Corp. Chairman and Chief Executive Rick Wagoner won't geta severance payment from the automaker, but he'll still get a pension and otherbenefits worth an estimated $23 million."Dear God, no!
With regard to inventory, im not so sure. If you use the first 26 days of March as a precursor to inventory, PWC inventory is likely down MOM and Fairfax, probably flat. http://www.recharts.com/nova/nova.htmlSales & prices? I have no clue other than PWC prices down in the -30s range, fairfax likely in the 20s to high teens. Otherwise its hard to say - C&C activity has been pretty good, in Arl, Alex & Ffx, but next to none of those seem to go through as completed sales. My understanding is the huge refi wave of the last 3-4 months has really delayed the settlement process, plus many wont qualify for financing and will wash out. If the backlog of C&C goes through, you could see 200+ sales in Arlington this month. If they still get clogged up you will see 100.
Another big drop in the low tier:Case-Shiller DCyear/month/low tier/middle/tier/high tier/aggregate2008 12 171.96 172.14 177.37 175.552009 1 161.4 168.46 175.43 171.97
PWC overall inventory: declining PWC median price: steadyPWC >$400K MOI: remains very high
Zerodown - I noticed that too. Its interesting because the tiered index suggests the rate of decline on the high end is slowing (YOY), while the rate of decline on the low end is now twice as bad as it was last year...This is pretty much exactly the opposite of what we see anecdotally and in local data (i.e. PWC) where it looks like the low end is firming up. Then again, it could be that high end sales just got that much slower, and the few that sold were able to get close to asking.
CRT, if you sell a house for 45,000 dollars because it's a rat hole and then your neighbor does the same and so does 100 other people, that tends to bring down the medium price quite a bit.
DougWhen a pension plan fails PBGC Penny Benny only covers a pension to PGBC's maximum benefit, so if your plan fails and you had a gold plated pension, PBGC will continue paying for their top pension but that will likely be substantially lower than your prior pension. Currently they won't payout more than $5400/mo (less if there are survivor benefits or you took an early out).
Something other than Pure Doom from Dr. Roubini (contrarian avert your eyes :)"Nouriel Roubini Sounds, GASP, Positive About Economy!Okay, not "positive," exactly, but certainly less negative than he's sounded over the past 18 months. NYU professor Nouriel Roubini, you'll recall, is known as "Dr. Doom," the most famous of the handful of economists who actually predicted the current debacle. A few days ago, after a speech in Italy, he was quoted as saying he might see some "light at the end of the tunnel." And he repeats a similiarly non-apocalyptic outlook on TechTicker in our interview here.To be clear: Roubini is NOT predicting an imminent recovery. He thinks that most economists are still way too bullish, that the stock market will retest its lows, and that unemployment will eventually rise over 10%. He just thinks that the quarter that is now ending, Q1, will be the worst rate of decline in the economy and that things will gradually stop deteriorating and then get better from here."http://finance.yahoo.com/techticker/article/222618/Nouriel-Roubini-Sounds,-GASP,-Positive-About-Economy!
BTW - interesting post from a San Diego realtor I follow. http://www.bubbleinfo.com/2009/03/1million-plus-market-1q-stats/He goes on to explain how their negative am/option arm loan percentages are only 5% of mortgages, far fewer than the blog community there expected. The reaction of the bloggers is a bit of shock and disbelief, or as more than one guy puts it "like a kick in the nuts"...Incidentally, THATS why I love this blog - thanks to Zerodown & CRT, we learned this same thing about our local ALT A percentages a year ago. Over here, weve had a year to adjust our expectations to reality -- OK option arms arent as big as we think -- what else can drive housing? Over there, the veil of ignorance has been lifted and the results feel like a kick in the nuts. Ill take reality over a kick in the nuts any day!!!
Yeah,I'm not worried about option arms. I would be far more worried about FHA loans that currently are a nice government-backed alternative to sub-prime lending. I can bet that most of their loans for 2008 are extremely risky, even in Arlington. not because of the credit quality (which is so-so as well), but just because of equity levels (essentially zero). PMI is there, but is it capitalized adequately?
Ace,Did you get to see this million-dollar home at the OH? It's of course out of my price range but from what I could see from the listing, the location, the lot, the house itself are just outstanding, no other <1.5MM listings come even close to it. thoughts?
The Anonymous,very interesting"That’s it, 1,600 out of 29,488, or about 5.4% of the properties have either a neg-am, or option-arm.They confirmed that they read every single trust deed and ARM rider that gets recorded, whether it’s a purchase or refinance transaction.There were 10,268 adjustable-rate mortgages, so the remaining 8,668 must be mostly the interest-only, 3-year to 10-year mortgages, the ones that lenders are modifying."Okay so sure only 5% are truly losing ground mortgages, but half yes half of all properties (all with mortgages?) are some form of ARM including I/O. That's still pretty scary. Yes, if they can refinance now then these owners should all be fine. But what about the I/O folks, who have built no equity? One needs those numbers too. And even if it's only 1 in 20 homes foreclosing, that's a lot of weight for these high end neighborhoods where in normal times it takes over a year to sell.So, perhaps even in CA people's expectations for the next wave were out of whack for the high end, but it still looks like some serious potential for pain.But yes it is a good thing we have known here for quite some time that these would be a non-issue in our area.
Good find anon. You mean to tell me Mr. Mortgage was playing up the issue? Im shocked I tell you shocked!!!Contrarian ALT A mortgages by zip gives a bit of a biased view because it doesnt account for density. For example, my zip in Alexandria has 14,000 housing units, whereas zip 20148 in Ashburn only has 1,235 housing units - less than 1/10th the density. Thus I think the more appropriate view is the number of junk loans per county, as related to the number of housing units per county.
While on the subject NY Fed just released their Feb 09 ALT A data. Unfortunately while we no longer can track county by county data, if you extrapolate from our old data, you can see the tsunami like effects of pay option arms. For example, back in Jan 2008. Reset rate in VA was 5.3% in the next 12 months. Now one year later the reset rate for all of 2009 will be 6.5%.Applying this to the 400 Pay Option arms ever issued in Arlington. Last year a grand total of 21 of them reset. However, thanks to the tsunami effects of this Pay Option Arm crisis, 26 of them will reset in 2009 bringing their full force and fury down on the Arlington marketplace!!!
Contrarian - funny. Does anyone know what happened to Mr. Mortgage? Hes been awful quiet for a long time now.
Hi, MM, it's cute. I remember seeing it listed at a higher price and not selling; looks as if the owner became very realistic and so it was snapped up this time. It is much smaller than most houses in this price range (but with a nice big lot, which some people want and others don't). The rooms (esp. bedrooms) are a bit small (typical of houses built when it was built).
The Anonymous,I don't read his blog, but I'm a big fan of Jim the Realtor's youtube vids. I don't like realtors, but he is smart and funny.
Would one or more of you figure out PWC alt-a for me? My neighbor has one and had been in a panic but she called and talked to whoever and they said or gave her an estimate reset and it wasn't anything she couldn't handle. She can't refin..upside down..she bought in 05/06 when our houses were selling for 785 and up.
CRT: "Does anyone know what happened to Mr. Mortgage? Hes been awful quiet for a long time now."Last I heard he was joining another site and would send an email out when that was rolling.Gotta say, Mr. Mortgage really started to piss me off the past few months with his "solution" to the mess. Suggested massive principal writedowns. Not just for those in trouble, but EVERYBODY that bought in the bubble. He said we need to reduce all loans to current market value. That idea effing outraged me beyond what words can express.
thanks tiredbubblewatcheryesterday I was all excited about buying this year, today I'm all down again. This time on the realization that unless its truly move-in ready for $250k or less, we won't be putting down 20% this year, and in fact even then 20% is calling it a bit close for closing in July. So, we'll see what the mortgage brokers say as far as how much worse our rates will be for only putting down 15% so that we have the cash for small things like new flooring/paint. Because I'm not overly optimistic about finding a truly move-in ready TH in a location we like in the right school districts with the bones to feel happy in for 10+ years for under $250k. That just seems a tad far-fetched. Sure, we could choose to make it happen. But it would be so much simpler after yet another year's accumulated savings.Still, we'll see what mortgage people say, and take a look at our options this year.
Arkey - 1 year ago, probably just about at the height of the ALT A loan issuance. PWC looked like this (rounded to the nearest hundred):Total ALT A loans - 6,000Of these, the number that were adjustable - 4000Of these, 1400 were pay option, and 3,100 were interest only.At the time, 1400 had reset, so the other 2,600 or so were still in play. A word of warning, especially as it relates to PWC - these numbers are so old they are of little relevance anymore. For example, the number of foreclosures we have seen in PWC since the date of this report exceeds every subprime and ALT A loan combined. So that just tells how big the problem once was. As for whats left? I really have no idea in a place as dynamic as PWC.
"reduce all loans to current market value." nah. I'm as much as housing bull as anyone but we're all big-boys. My small place is in the imuno-zone and is holding value OK. I bought a while ago.
CRT..thank you very much..die-damit is PWC..It's such a big county. When I spoke with the assor office she indicated we had burned thru and was done..no more decreases expected in the 20110,20111,20112 zips...but..just about every new housing development went into foreclosure and/or short sell status..I'd estimate 90% of Blooms Crossing..they sold new for around 600/660..and really only worth about 300/350 new..that's what they are going for now. Those houses will never recover their orginial value. Ellis Planation were a million plus..never really worth more than 850 tops..you know the type of labor used?..giggle..snort..and no I'm not a snob. And then remember old Manassas Park..those tiny shacks built in the 40's worth about 30,000 tops...they were selling for $300,000. Thats why I keep trying to warn people to pay attention to statistics to specfics. 20111 appears to be down on average $184,000 and 20112 $84,000 BUT when you get to mid-range homes you can get screwed royally because 20111 is safer to buy than 20112, we just don't have many left..those new homes in 20112 lost value between 100 and 200,000 on 09 assessments on everyone I've checked. They should be selling in the mid 300's just like Blooms and a few others in 20111not mid 500's..IMHO
Glad you folks are catching on to this pension thing. I've been telling people about the coming MASSIVE NATIONWIDE PENSION BLOWUP for about 5 years now.You see, all the baby boomers have been getting there incomes SPIKED HIGHER in their last few years before retirement, in order to pad their pensions.There are articles about this. This happens in corporate pensions, state, local, transportation authorites, etc, etc. I know people who have gotten this golden retirement gift.Trouble is, our economy is hollowing out, and as these people retire and start living off the economy's wealth instead of helping create it, it will only hollow out more.And interest rates are down, which means the funding OBLIGATONS of all the above entities to PAY IN MORE to keep the pensions properly funded is a continuing burden--another reason GM is hurting so bad right now. (Lower interest rates forces pension admins to assume less growth to meet future obligations, so they have to shovel more cash in NOW.) There were articles about this also during the low interest rates of the 2002 tech bust.And, no, putting pension funds in stocks is NOT the "right thing to do". EVER. It's the VERY LAST THING you should do, EVER, because when stocks crash, interest rates also fall (due to bond bull markets) or are pushed down (by the Fed), so now, not only do your pension's funding obligations go up due to interest rates, you ALSO have to put in MORE because you lost EXISTING funds. IT'S THE LAW.(You can't "mark to future wishful thinking" like the banks have tried to do with mortgage-backed investments.)Pensions and PBGC absolutely should NOT be in stocks, and neither should social security, most insurance providers, most annuity providers or most any other provider of financial products that work like annuities and MUST NOT FAIL.The guy at PBGC that did this is a total idiot, buying at the TOP, and Keith Olbermann called him out on it last night. (But at least now I know who I sold my stocks to!)We are really in for it--I've been saying it for years (even before USA Today put it on their cover: there's a financial Perfect Storm coming in this country, and the tech bust and housing bust were only the first stiff breezes.
BY GEORGE I think I've got it...the wave hit 20111 before 20112.I just spot checked another 20112 listed like me 95% of 08 for 595...checked 09 and its 439,000 they didn't fall like 20111 did in 07 and 08..and of course 09..this is their first year assessment decrease.
Let me clarify something, in case you aren't versed in pensions--Lifetime pension payouts tend to depend on your last year's salary, or last five year's salary, or some such.So when your employer comes to you and says, "we're going to spike your salary so it's 30% or 50% or some such higher at the end, so your pension is more like a full time salary rather than a fraction of it",what they are really saying is: "we're going screw future employees, investors, customers, and taxpayers, so you can afford that beach house, boat, whatever, for your retirement." All perfectly legal as far as I know.Who wouldn't take such a deal?The only good news is, some of those same recent retirees are getting SCREWED by the dual housing/stock crash, and will be SCREWED AGAIN, DEEPER, by the coming MASSIVE inflation, property tax hikes, etc.
(And you wonder why I don't support big bonuses for already-rich financial employees that have become America's newest federal employees.Take their bonuses, and while you are at it, TAKE THEIR JOBS or put them on the federal G-nn pay scale!Or, go ahead, let them have all the tax money they want, and don't come crying to me when the dollar crashes and you have to sell your car to afford a week's worth of inflated food.)
Yay! The bears are here.Anyone more of a bear than I am is wearing a tin-foil hat.Anyone more of a bull than I am is a Pollyanna.
Beyond AIG: A bill to let Big Government set your salaryWow, if that isn't a bunch of disingenuous propaganda. What the headline implies has nothing to do with the article.Seriously, if we own you, we get to set your pay scale. If you don't like that, then don't ask for a bail-out. Personally, I think they should be reduced to g12 payscales.
This just in, my dream of a move-in ready TH in Burke for $250k is possible!! Take a gander at this comp:http://franklymls.com/FX6960884So-wee-eet.It's kind of a hike to the VRE, but do-able, and it's in one of the best elementary districts. And it sold for $250k + $6k subsidy off of a $274,950 list price.Okay, so someone else got it not me, but I think it proves that it's possible to get this year.This is my new "comp".
Cara,We bought a bit of a disaster in October. We were able to paint ourselves (with family help) in about two weeks -- so the labor was free. The paint was a few hundred dollars. We needed to carpet about 2,000 square feet -- we decided not to to agonize about hardwood just yet. Lowes had a team out of Fredericksburg come in -- the cost was $5,000 for everything (labor plus upgrded pad and carpet), and it's a nice nylon carpet.We also had to clean up grease, dirt, and dog hair like mad. Simple Green was our friend.But . . . it was then "move-in ready". Just to give you an example from our own experience FWIW.
Cara,Nice. Quite decent, but looks overpriced to my PWC eyes.On another note: watch out for those galley kitchens! The place we're renting now has one. It saves space, and all, but sheesh! You literally cannot open the oven all the way. It hits the fridge. And if the pantry door is open, neither the oven nor fridge opens. Dishwasher? Don't ask.So, when you're doing walkthroughs, test out the kitchen. Even if you're not going to be using it for a lot of cooking, it's important that you be able to open multiple things at once. Also, as always with townhouses, check noise levels from the neighbors. That brick wall looks lovely, but if it's not well insulated you might get carry-over.
xpovos,I prefer not to have a galley kitchen, but I've cooked a ton in the ones I've had and never had such absurdities, so it's a good tip. Of course, I open everything anyway... Harriet,Yeah something on that order was our general plan too. But it means we need to set aside ~$6k for that which needs to either come out of our repair fund or our downpayment fund. This year we'll be able to get that back from the Fed once they process our amended return, but still... it's calling it close unless we allow ourselves to go down to 15% down to keep a little more liquid breathing room.
Cara,Another reason not to like galley kitchens -- you can't see what the baby's doing unless he/she stays put on either end (which isn't likely once they start moving around), or unless you have a window of some sort. It's really nice to have an open floor plan to be able to get some cooking/dishes done and still watch the kinder.
Ok -- this PBGC thing is being misreported, I think.I tried to find CR's blog post on it, but has he taken it down? I was almost sure he had a post up a little while ago.The new Assistant Treasury Secretary nominee Alan B. Krueger wrote this in December:"Third, earlier this year the agency’s board (the secretaries of labor, commerce and the Treasury) adopted a new investment strategy that took on more risk. Instead of investing around a quarter of its assets in equities and most of the rest in bonds, as it had been doing, the corporation’s board decided to allot 45 percent of the portfolio to public equities (both American and international stocks), 45 percent to fixed-income securities (a mix of corporate bonds and government bonds), and 10 percent to alternative investments (real estate and private equities). The decision to move a large share of the portfolio out of safe assets like Treasury bonds and into riskier but possibly higher-paying assets like stocks has been controversial. The decision would have proved catastrophic had it been immediately acted upon because the stock market has fallen so far. Fortunately, P.B.G.C. has been slow to act on its new policy. By my back-of-the-envelope calculation, had the agency fully adopted its new investment policy at the start of last year, it would have lost around 12.2 percent of its assets by September 2008. Instead, it lost “only” 6.5 percent, or $4.2 billion.*"
Here's an article from the Washington Post from October 23, 2008:"PBGC spokesman Jeffrey Speicher played down the decline, saying it was a 1.2 percent drop from Jan. 1 to Aug. 31, compared with a 12.6 percent decline in the Standard & Poor's 500-stock index. "Our prudent diversified approach to handling our investments over the past year has resulted in losses that are far smaller than those suffered by most other market participants," wrote PBGC Director Charles E.F. Millard in a follow-up e-mail to The Washington Post."And regarding the new policy I mentioned above:"The shift has not yet happened, [as of October 2008] however, with 70 percent of the portfolio still in fixed-income. The new asset allocation, agency officials said, would produce a more diversified portfolio and work better for long-term investing."
For you Arlngton watchers waiting for March 2009 numbers. There may be a few more sales which haven't been posted yet in MLS, and these numbers are for contracts actually accepted in the month as this is the most immediate indicator of market activity. For single family houses, in March 2009, 81 contracts were accepted; in February 2009, 62 contracts were accepted; in January 2009, 40 contracts were accepted. Compare to January 2008: 53 contracts were accepted; February 2008: 72 contracts were accepted; March 2008: 75 contracts were accepted. Also for MM & Ace the million dollar house mentioned as a good deal started in June 2008 at $1,279,000, was taken off the market for a few months and came back on at the right price and sold quickly. The house has an awkward floorplan, but the big problem was with the 3/4 acre lot which has a creek and is protected under the Chesapeak Bay Preservation Act. This means it would be very difficult to expand the house and it needed expansion to make sense at the $1.2 million range.
Cara,last year the asking prices seemed stable over winter, but once the spring selling season didn't kick off they really started dropping. You may still be able to buy with 20% down later in the season. Be patient.Ralph
Cara,to continue from yesterday's (the day before's?) thread: there's a slug line very close to the place you ID'ed below. In fact, it's between the townhouses I live in and the one you listed. Didn't know if you knew that--it may be an alternative to the vre...Ralph
MM: Wow! Based on that front photo, that would qualify as a $100k home elsewhere. Is that a double-wide, or a single-wide?I'm glad I don't work inside the beltway.
ralphI haven't investigated where the slug lines are. (I'm not sure I know what it means, in the SF Bay area that means where you pick up passengers to use the HOV lanes).I expect this spring's sales to be a bit brisker than last, but there's definitely still room for price movement. We shall see. There's always next year.
http://www.slug-lines.comI mentioned slug lines only to provide you with an alternative commute (assuming you heading into DC). No idea whether they'll work for you or not. Best of luck in your search.
Ace, anielarke, NoVAwatcher,Thank you for your comments. To my un-trained lower-tier buyer's eyes the home is flawless, but it's always interesting to know what others see the values vs flaws.
Tiredbubblewatcher - The main two examples of FCPS high schools whose reputation improved over the past 20 years are Oakton and Marshall. Oakton used to be a HS that students from the less educated, rural parts of the county attended; Marshall's reputation used to be largely tied to the Pimmit Hills area of Falls Church, which was considered a bit rough. Over the past 15 years, there has been lots of new housing built in Oakton, Vienna and Dunn Loring, and the reputations and test scores at both schools improved. That type of improvement in a school's reputation is probably less likely if the school is located in an area that is already pretty heavily built out.
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