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.
I have a question I was hoping someone could enlighten me on. In my neighborhood since we closed in February, there have been 5 THs that have come on the market - 3 healthy sales and 2 SS. All five have contracts. The most recent one got a contract in 4 days. A few days ago, I saw 2 other THs in my neighborhood show up on Trulia - they were banked owned and going to public auction. My question is, why would the bank take these to auction? I assume they would get less at an auction - maybe I'm wrong on that, but as quickly as the THs here seem to be going under contract (at decent prices too from what I can tell - one closing this week is going for 20% more than what we paid for our SS in Feb - similar condition)why not list them? Thanks.
In more reporting of the obvious, the NYTimes gives us this: Credit card losses the next shoe to drop.dgg,Because banks don't actually make any sense? Either their cost to take the TH to auction may be substantially lower, or the auction may just be an opportunity for someone to buy it unrepaired, with the back-up being that the bank is who buys it at auction.Also, if it's an auction buy, it's not a valid and verified sale, so is less of a "comp" than if they fixed it up.But I strongly suspect the real reason has everything to do with a particular banks man-power and policies and that the banks are simply not watching the market that closely to know that spring has actually arrived in NoVa.
dgg,The auction is a step in the foreclosure process. There's a chance for the bank to be made whole there, which wouldn't happen with a SS. It might be a calculated decision by the bank that the foreclosure auction gives them a better shot at making money. Or it might be lack of communication. Banks can't generally do a SS without the 'owner' involved, so if the owner is uninterested, or has jingle-mailed, then the foreclosure auction is about the only option.
The green house asking price has dropped $100K:http://franklymls.com/AR7023985
ace,Cool!! Almost a 10% drop. How low would it have to go for you to be interested? Or is the location/lot so annoying that it's just not in the running for you?
ace,and I am moving more toward your wait a few more years strategy. Nothing on the market is inspiring me to buy. There's a short sale for $160k that would be way way cheaper than renting, but seriously the bank would have to be crazy to accept a price that low. (It's marked to one REO sale from the winter that was trashed out, whereas this one is supposedly totally redone, supposedly). For the $185k it would take to close the short sale, (and with the condo fees) it's way less attractive. In any case, it would take a definite switch to a buy, live-in and then rent out plan, because it's only 1200 sq ft. In terms of buying for 5-10 years, I'm just not seeing anything on the market right now in our current price range.Why buy unless you can get something that's better than where you're renting? So, at the moment I'm thinking we really need that 90-day rolling one month lease, so we can keep an eagle eye out on the market for a year or two, and buy when we're inspired to, because I just don't see the necessity of it.
What a weird house.
Doug,What is exactly weird about it except for the tiny lot? Or is it just the so much discussed prejudice against modern architecture?
Just an observation -- went to an open house this weekend in Fairfax Station (fx7053456). Nice, established neighborhood, pretty house, had obviously been professionally staged (or an interior decorator lived there!), good schools, etc. But still pricey in my book at $815k, as the house was actually smaller than it appeared from the outside (2400 sq ft above ground and a small area finished in the non-walkout basement). That, plus the fact some structural features were dated (puny MBR closet, just a shower in the MBA, albeit a nice one). That said, the open house was PACKED -- and it didn't appear to just be looky-loos like myself. There were probably a dozen cars parked outside and loads of people had signed in. The agent, of course, said the market has really picked up, and I have to say, at least in terms of foot traffic at this place, I would agree. Which leads me to wonder -- I know the conventional thinking is it's a buyer's market out there, but it seems to me it's actually a better time to be a seller (unless you bought at peak or live in a place that has been decimated by foreclosures). Anyone who bought 7-10+ years ago still stands to make a healthy profit. Heck, this house I saw yesterday last sold in 2002 for low 600-ish.In my book, it seems clear that low interest rates (and to a lesser degree, the 8k tax credit), have helped keep prices up in the "desirable" areas. So what happens next? With the govt so clearly investing so much in keeping home prices from tumbling, are we looking at a permanent reset in home prices/interest rates? With people continuing to buy, I just don't see how the fed can change rates quickly without causing more stress to the economy. We'd like to buy again at some point in the future, but honestly, seeing this open house for 800k+, as well as it showed, was quite depressing!
Cara,Just read your post and have to say after yesterday's open house, we are also most likely to hold off a few years -- at least until we know we're done moving around! I also have not seen anything at current prices that makes me want to jump in and buy!
GiGi,It is not a buyer's market right now. It's springtime. It's the first spring in 5 years that anyone could even begin to rationally argue that it's a good time to buy. So, yeah, the buyers are out in droves. And while you are right that now's a great time to sell, all the long term owners who were interested in selling for profit, have already done so. Leaving only the normal cases, of death/divorce/retirement/job loss/relocation. So, yeah, in a lot of places the inventory is tight compared to demand.This will pass. Spring will end, those who have been itching to buy for years will do so, but life will still happen and people will still need to sell. This is the spring bounce of affordability. It too shall pass.
Cara, I think if the architect had placed the roof deck facing north (looking into people's green back yards) rather than south (looking into the apartments and their parking lot), I could almost talk myself into accepting the other things I don't like about the house (e.g., no fireplace, no back yard, too close to farmhouse, ugly IMHO kitchen), if it were closer to $1 mill. But when you add them all up, it just says "walk away" no matter how low the price goes. Someone else who might have been thinking about a DC condo won't mind those other things and will love that kitchen, and will buy it.Sorry that you aren't seeing anything that really appeals to you either. I agree that it makes no sense to buy if you can't get something better than what you have now, and I don't think prices will be going up in most neighborhoods any time soon.
Cara: "I am moving more toward your wait a few more years strategy. Nothing on the market is inspiring me to buy."Same here. With all the market manipulation going on, I'm almost completely disengaged from all of the "aspiring buyer" emotions. There is nothing financially sound in buying right now for me. Not at these prices.
Ace,I hear you. "Let someone who likes these things buy this house"That's my opinion on this one, that's the current best value on the market in Burke (IMO):http://franklymls.com/FX7043252SS $350k, 1651 sq ft. SFH, very very close to the VRE.I'm just not a country/fancy person, so this one's not for me, but with a huge front yard (with azalea bushes, such that it acts much like a back yard) and relatively lots of interior space (1651 sq ft), it's a great deal for someone if they can convince the bank to accept $350k. (though the lack of kitchen pictures are a strong hint of an old kitchen).
Cara, Interesting listing. That one has a huge lot so maybe the back yard is nice too. It's hard to tell from the photos of the interior, but looks as if the house has a lot of potential. It does look like a good deal for the right person(s).
Does anyone know how long it takes a sale to show up on the Fairfax County real estate site after it has closed? Thanks.
Kevin and Gigi,Interesting that so many of us are feeling the same way as Cara!
Gigi,I would also say that if the house was worth something like 608k in mid-2002, then it is not very surprising if it is priced for 815k today. It is about 35% price increase in 7 years and we have to remember that there was plenty of bubble appreciation past 2002, i would say most of it happened after that and we are not even close to mid-2002 levels in Fairfax. Also we need to see for what this house will sell eventually, given in tax assesment I wouldn't be surprised if it drops.
Gigi, that's a very pretty house. Also, it looks to me as if all 3 bathrooms have been updated SINCE 2002 (could be wrong about that), and the description implies other recent updates, so the owner has socked some $$ into it since buying.
GiGi, Ace,yeah, that is one pretty house... Not that that tells us how much it's worth, but it is a nice one... and may very well command over $850k this spring... Sigh.For those looking for an interest rates/ market dynamics discussion, there's a lively and well-informed one on irvine housing blog today:IHB: interest rates create temporary-affordability-and-the-third-foreclosure-wave.
Cara: "This will pass. Spring will end, those who have been itching to buy for years will do so, but life will still happen and people will still need to sell. This is the spring bounce of affordability. It too shall pass."Bingo. I have no way to quantify the fence-sitters or model how the supply/demand will work out other than just eying the inventory and the pace of homes hitting the markets. BUT, speaking from anecdotal evidence, there really cannot be that many people out there who have saved up for a down payment and can purchase at these bubbly prices. This 8k dollar buyers bribe is pushing what few people were on the fence off of it. So the spring months will see a bump in activity and probably prices too. Whenever this flurry of activity dies off and/or the banks get serious about unloading their assets, the downward trajectory will continue. Until then we'll have to endure the market pollyannas who of course will say this is all past us now and the bottom is here. They're the same people that were saying it last year too.
Ace: "Interesting that so many of us are feeling the same way as Cara!"It's good to know I'm not alone in how I perceive this market. There is some powerful manipulation going on here. It's very disheartening to those that would like to buy an affordable house and have to wait even longer now.
Ace, Cara, Konstantin --It definitely was a pretty house, very well staged and nicely decorated. My big issues with it (price aside), was that it was actually smaller than it appears in the pictures with very small secondary bedrooms and teeny tiny closets. And the master bath, while nicely updated, lacked a bathtub -- the only tub was in the upstairs hall bath. And for 800+, I'd prefer not to bathe surrounded by the kids' rubber duckies and bath toys ;-).All that said, it shows very, very well and that's a lovely neighborhood, so I'd be surprised if they don't get a contract. It'll be interesting to see -- I'll be watching that one, just out of curiousity.
Kevin,This question isn't meant to be antagonistic so please don't take it as such, but what do you consider is manipulation taking place right now. Perhaps the $8K tax credit, but what else? I don't see banks sitting on inventory as manipulation. Any business should try to maximize its profits or minimize its losses. If a bank believes it will recoup more by sitting on houses for a while and slowly releasing them as opposed to dumping them all on the market at once, then that sounds like good business sense as opposed to manipulation. I am curious as to what specifically you deem manipulation. Again, not trying to pick a fight here - genuinely curious as to your take on this. Thanks.
Oh, and Kevin, I agree the market's current pricing is being supported by the fed's artifically low interest rates (I don't think the tax credit is as big of a deal, just a little extra). My big question/concern is how does the govt/fed move forward from here? If a sudden rise in interest rates makes purchasing unaffordable again, will the fed raise rates? What happens if they don't? Are we destined to become (even more) a nation of forever debtholders?
dgg,(not Kevin) but I believe the other main driver he's refering to is the buying of MBSs and Treasuries to keep interest rates below what risk premiums in a falling market with increasing unemployment might otherwise dictate. Well, that and the proliferation of FHA loans and dictating to FHA that they shall back more loans, gosh darn it, whether it makes sense to their continued solvency or not.One could view these as the government stepping in to temporarily replace private buyers in a time of confusion, or as market manipulation to allow knife catchers to save the banks from themselves. Your choice. I think it's a bit of both.
dgg: "This question isn't meant to be antagonistic so please don't take it as such, but what do you consider is manipulation taking place right now. Perhaps the $8K tax credit, but what else? I don't see banks sitting on inventory as manipulation. Any business should try to maximize its profits or minimize its losses. If a bank believes it will recoup more by sitting on houses for a while and slowly releasing them as opposed to dumping them all on the market at once, then that sounds like good business sense as opposed to manipulation."Really low interest rates, the buyers bribe, and the slowing of foreclosures are the manipulation. Banks are accumulating more houses than they are releasing on the markets. Maybe that is prudent for them, but at a minimum I see it as a way to get buyers to pay more than they should. A free market would provide people with affordable housing. I see the banks as robbing that opportunity from buyers and therefore manipulating the market. Kind of like DeBeers does with diamonds.But the more temporary manipulation was the foreclosure moratorium enacted last winter. An essential halt of foreclosures will obviously manipulate the market, as we're seeing now.Gigi,They cannot keep rates low forever. Any increase will push prices lower. It's beyond my ability to forecast what they will do, but keeping them low like this is just going to prop prices up in the short term.
New listing! Hurry, this one's going fast!!!http://franklymls.com/AR7054323Just kidding.I think we saw this sad-looking hovel on the market last year. Now it's the bank that wants nearly $1.1 mill. for a place assessed around $680K, with no photos suggesting it's worth even that.
You think the 8k tax credit is bad? Here's what I found on the WP's Local Address blog on Friday:The Century 21 real estate company is asking Congress for more help boosting the real estate market. Tom Kunz, Century 21's president and chief executive, stopped by The Post Thursday morning. He and some of the company's franchisees had just made the rounds on Capitol Hill, asking lawmakers to boost the current, and temporary, $8,000 first-time-buyer tax credit to $15,000 -- and to make it available to anyone buying their principal home. He also thinks government should push 30-year fixed mortgage rates down to 4-4.5 percent for about a year.I guess the realtors feel the "move-up" market needs some help. Hopefully, Congress will blow them off.
Well, if I get my 15k bribe and 30-year fixed rate at 4%, I will definitely buy something. No question about that. Will buy and stay there for a long time. But at this level it will probably start some craziness in prices.
That will be hilarious if the offer $15k. Everybody that bought before the $8k bribe was so pissed. Of course, the receivers of the bribe thought they were geniuses, but they will be SUPER pissed if that goes up to $15k.
I would love to see them do the $15k bribe. Not because I'd get it as much as for the LOLZ when the already-homeowners throw a shit fit. In fact, I think they should follow-up then with a $30k bribe. Keep doubling it just to punish people enticed by the previous bribes=)
but the NAR's 15k would be for all buyers, so you could just keep buying more and more properties, collecting 15k each time, so what that you'd have to pay back the 8k for not living there long enough?Yeah, not seeing that happening (I hope!!!)
"I would love to see them do the $15k bribe. Not because I'd get it as much as for the LOLZ when the already-homeowners throw a shit fit. In fact, I think they should follow-up then with a $30k bribe. Keep doubling it just to punish people enticed by the previous bribes"Yeah, it'd be like when the iPhone dropped over $100 in price after being on the market for less than a year. They gave out gift cards to the iTunes store to appease people who bought early. Maybe the gov't could give out granite countertops.
Its weird because of the skewed front overhang, and the non-rectangular rooms. Just looking at the pictures gives me a headache.
Okay - so there is manipulation out there. I guess when it comes to interest rates and tax incentives, that kind of stuff has always been out there but just to a greater degree right now. I don't see banks sitting on inventory as manipulation though. Their number one obligation is not to people looking to buy a home to make homes as cheap as possible - their obligation is to shareholders to maximize profits and minimize losses. If holding inventory until the market recovers is in the best interest of the bank and its shareholders, then that is their perogative. I don't see it as manipulation, but possibly good business sense. If collusion is happening between banks, well that is a different story.
That was awfully nice of Tom Kunz (wonder if it's pronounced like the German 'z' -- "tset"?) to ask Congress to manipulate the market and potentially bankrupt the country just so he could get a commission.What a scumbag.
As a prospective buyer it really is feeling like a sellers martket. I put an offer on a house in Vienna that had been on the market for three days to find out that there are already 9 offers on this house.
dgg: "If holding inventory until the market recovers is in the best interest of the bank and its shareholders, then that is their perogative."Depleting inventory to create an artificial inflation of prices is manipulation. It's like being the only one on an island with food, and selling it at a minimum quantity possible while your inventory is growing and rotting so you can overcharge the starving people on the island. I'm not saying it isn't financially prudent or wrong or whatever, but it is textbook market manipulation. And I am sure there is collusion between the banks. Either that, or it's entirely unintentional because they lack the resources to process the assets. Either way, the number of assets on their books keeps growing by the day. I'm going to cross my fingers and hope that they start mass-processing them soon, bringing prices back to reality.
Real Quest from First America Core Logic now lets you do a search for foreclosed homes with no fee: foreclosure searchof course this didn't pull up the MLS REO listing I know of, so I don't know whether it works all that well, but, sharing anyway.
Is there anyone else out there that thinks some of this recent demand is coming from outside investors? Let's suppose you were even a small time real estate investor, rather than the large types mentioned in the article, where in the US would you buy property right now? Link textGovernment spending is set to soar and a little, sometimes big, slice of all Federal programs streams through the D.C. area. But seriously, if you had a couple hundred thousand dollars to buy a rental property, what market in the United States do you think would do best over the next 3, 5, or even 10 years?RSC
Ace wrote New listing! Hurry, this one's going fast!!!http://franklymls.com/AR7054323Just kidding.You beat me to the punch on posting this one. What a piece of junk, and on a small lot, too. I watch close-in NVA fairly closely and I think this one gets my award for most ridiculous listing. Even the $680k appraisal seems way too high.They must think it's comparable to this house, which went under contract pretty quickly: http://www.redfin.com/VA/Arlington/714-N-Irving-St-22201/home/11256186Even this silly house, which has been on and off the market for 2 years, is better than the new listing: http://www.redfin.com/VA/Arlington/606-N-Hudson-St-22201/home/11256513
tiredbubblewatcher said..."Does anyone here actually think the $8k bribe is going away any time soon?"It's set to expire at the end of the year, and I believe it was funded by the "stimulus" package. Does the govt want to create another entitlement program? Who knows. But you're right that if it goes away, it'll kill the housing market. Whether it goes away at the end of the year or not doesn't impact housing prices in the long term. Price discovery is inevitable. All these screws they are putting in to prop up prices will have to come out at some point.
Links in my previous post didn't render well. The first is to AR7032614 and the second is to AR7010570.
tiredbubblewatcher, I think the difference between 6-7% and 4-5% is actually pretty big. One percentage point causes about a 10% decrease in the monthly payment. So with rates where they are today a $480,000 house will have roughly the same monthly payment as a $400,000 house did in 2006.
I don't disagree, but I wonder how far they really will go when it comes to subsidizing homeowners. That could be really expensive, and quite unnecessary.
"A free market would provide people with affordable housing."Depends on how you define "affordable," of course. But the simple fact is that the market is currently providing housing at all price points. What it doesn't provide is relatively inexpensive housing in upscale, closer-in neighborhoods. Such neighborhoods will always command a hefty pricing premium.It's the same difference between Manhattan and Staten Island.
Cory, yes, that one on Hudson is next to a parking lot and I think a school or church. But the pricing doesn't reflect the bad location. I think that's why it hasn't sold.I don't know why some sellers who bought their houses at a discount due to the location don't believe they will have to give the discount to the next buyer as well!
tiredbubblewatcher,Yes, the foreign investors in that article would be commercial investors -- multi-family, shopping malls, office buildings, industrial buildings, and hotels. There is not a one-to-one relationship between commercial and residential, but I would guess there is a correlation. I can't see really cheap housing and expensive hotels and high end shopping malls.The premise of what I was trying to say is that the DC area is very likely to show job growth over the next few years. Take it from those foreign investors. I'm going to guess they do a lot more due dilligence than you or I. And at the margin, commercial and residential do compete - over land. Thus driving prices higher.Also, don't you see the small time investor. Say someone with a portfolio of $2M looking to make an investment in residential as a diversification strategy. He would look at DC as a prime area.From watching housing closely, I don't think there is as much intrinsic buying going on in the market. There just aren't that many primary home owners to support what's going on in the market right now. I would guess it's 1/2 investors and 1/2 of those are from elsewhere - other parts of the US and probably some from foreign countries.
Cory, Ace,Regarding that million dollar shack in Courthouse:http://franklymls.com/AR7054323The price is ridiculous however you look at it but I think the discussion here a few months back was on its value as a teardown. If someone paid that price they'd be doing it so they could demolish it and build a skyscraper McMansion there. The location is a pretty nice one.
Tom,certainly there will be a difference between the up-scale close-in neighborhoods and the galaxy far far away (PWC?). But the only reason that modest-size houses, on tiny lots in n. arlington sell for $1m+ is that their buyers believe that they'll sell them if need be for at least the same amount. If people get a little bit more reasonable and start thinking whether they want to spend 5k a month on such a house for the next 30 years --- prices may drop substantially. It is certainly a popular trend among almost all the income brackets in this area to get rid of their disposable income buy stretching themselves in terms of real estate (add couple of expensive cars) but I'm not sure that this tendency will prevail in the long run. And I really hope that most of the current buyers of $1mil+ houses have incomes of 300k+, otherwise i really feel sorry for them.
Konstantin, I agree with you about the assumptions of people who buy the +$1 million places in N. Arlington: they expect they can make their money back, and more, when they sell.Thing is, plenty of people who buy in N. Arlington do have the money and do have that assumption. And given N. Arlington's enduring appeal, I can't disagree with their assumption. In particular, as the metro area's traffic nightmares intensify, N. Arlington's prime location will probably add to is already hefty price premium.
"given N. Arlington's enduring appeal"Wasn't N. Arlington a dump 15 years ago? If so, then that doesn't look like an enduring appeal.
Konstantin, I am not sure that I agree with you that they need $300+ in income. Most of these buyers have had homes before the bubble started so they are sitting on several hundred grand of real estate gains they have made over the past decade. This would make their mortgage payments $5K, which is easy to handle with just over 200K. Around here 200K is not very high, if both people in the house work and one is high in the government 200K is almost guaranteed
NoVAWather, you are correct Arlington was really bad 15 years ago. I expect it will stay nice though. 15 years ago traffic was not that bad and there was lots of land available in Fairfax, so there was no appeal to live near the city. Now that almost all the land has been developed and traffic is really bad people will continue to want to live close in.Unless you think the population around DC will shrink you can bet traffic will stay bad and location will continue to be important
Jeff B., the land value is nowhere close to $1.1 mill.; per Arlington's assessors, it's closer to $525K. It's only .14 acre and Arlington's zoning laws are now pretty strict about the size of house you can squeeze onto such a lot. Developers are still buying teardowns in Arlington; they just aren't paying anywhere near that much for them. I predict a very long wait for the bank, if it doesn't drop the price a lot, quickly.
housebuyer,first, it is not such a great population of people, who have several hundred grand in equity, who have 200k+ income etc. not an average household, not a median household. this area is rich, but not that rich.second, it is not uncommon to have two earners with grad degrees who each make 100k+, but for them to buy an $1 million house, i.e. paying 5k is still a lot of money and quite frankly, those of my friends with this type of income (circa 200-250k) who have kids and houses in $1mil range usually live from paycheck to paycheck. it's not that they cannot afford their house, or their cars, or their kids daycare/schools, but they are far from having any disposable income. and it is very likely that a job loss for one of the earners in the family means financial difficulties. so a decision to buy a dream home for $1mil (and in Arlington it is not a real dream that you are getting, honestly), spend a lot of money on keeping it in shape, utilities, cleaning, landscaping, etc --- with a 200k income does not look that great unless you expect further price appreciation, major inflation, etc.it can be of value to the people who love to entertain, who prefer to spend their vacations at home (to busy to have vacations), people without kids who love furniture and need space to set it up nicely, etc.
Konstantin, I basically agree with you -- there aren't nearly as many households with this level of income and assets as some Realtors, pundits, etc., think. (and that $1 mill. still doesn't buy you a "dream home" in Arlington!). But I would add this. People don't build equity just through bubbles - if you have been paying extra on your mortgage for a long time, especially if you are a person who doesn't take a lot of vacations or spend money on fashions, cars, etc.--and you didn't go for the $1 mill. house initially but bought a house well below what you could afford --you can accumulate over $500K in equity. It's not easy, but people do it. And there are a few people out there with family money, and other folks who bought in Country Club 30 years ago who spent $75K and now have a house worth $900M+ and may want to buy a smaller house but well-located. If you have built a lot of equity, your monthly mortgage on a $1 mill. house would be less than $5K and buyers with a $200K mortgage would be in basically the same position as young couples just starting out who want a $600K house with a $120K down payment, for example. Again, I'm not saying that this is by any means the majority of people, or that everyone who is in this position is out there looking for expensive houses, but there are people in this position, in addition to the $300K per year earners.
woops - I meant "buyers with a $200K per year income" not mortgage.
As another example of how to get to that position, I know a couple who are earning a bit less than $200k and who have been living rent-free in a tiny apartment owned by her parents, for a long time. They have no kids and unless they are spending it all on gambling, drugs (just kidding) they have accumulated tons of savings. When they are ready to buy, they can get just about anything they want. Lucky, but also living well below their means.
a $5k mortgage payment for someone making $200k? Yeah, it's doable, but dumb. In fact, I wouldn't say that it is 'easy' to handle with that income, unless you like eating Ramen and wearing second-hand clothes.The wifey and I make around that much, and we are shooting for a mortgage payment of not more than $3k, preferably less. And that's just the mortgage payment, excluding prop-tax and insurance.Yeah, we could go higher, but then I'd have to look my son in the face a tell him that he won't be going to summer camp this year because his folks bought too much house.
tiredbubblewatcher, everyone's definition of a "dream home" is his or her own. Features you must have may not be "must haves" to other people, and vice versa.I have kept a close watch on ALL of Arlington (not just N. Arlington) and know the inventory. I don't care whether the house is on the Orange line or not - though other people may.If the houses in this price range were generally considered to be dream homes AND good values, I am sure they would have sold a long time ago. And a few of them HAVE sold.
Novawatcher, you may not be responding to me, but if you were, I certainly was not advocating that a person with a $200000 income take on a $5K per month mortgage. My point was that there are people with that income who do NOT have to take on a $5K mortgage in order to buy a $1 mill. house, because they can put down a large enough down payment to reduce the balance due substantially. Even at 6%, for example, a person who puts down $500000 and finances another $500000 would have a mortgage (P&I) of less than $3K (per bankrate.com calculators). And someone who can put down more than $500K will have an even lower payment. Whether a $3K mortgage payment would make sense obviously depends on each buyer's priorities, other savings, other expenses, etc.
Wasn't N. Arlington a dump 15 years ago? If so, then that doesn't look like an enduring appeal.No, North Arlington was not a dump 15 years ago. Where did you get that idea? I've lived in North Arlington since 1987, and it's always commanded a significant premium in that time.
True, the property at 1019 Edgewood St. (AR7054323) is overpriced but it is a two family property and generates great cash flow - not enough to service the debt on a $1 million buy, but not bad.And for novawatcher and housebuyer who thought Arlington was a dump 15years ago -- some parts of it were a little seedy, such as Clarendon. The forward thinking Ellen Bozman (bless her recently departed soul) was chair of the Arlington County Council when the Metro subway system was being planned, and she made sure that 11 Metro subway stations were located in some of the dumpy areas of Arlington. Those dumpy areas are now home to some of the most expensive real estate in Arlington. The political and economic power in Arlington has also shifted from zip 22207 (Country Club Hills) to zip 22201 (Lyon Village, Lyon Park, Clarendon).
N. Arlington might as well be on the moon, or in Texas, as I rarely go inside the beltway, so the area is terra incognito to me. Maybe I'm misremembering, but I thought it was Tom (?) who kept going on about how North Arlington has gentrified over the last 15 years, implying that it used to be a dump.
Novawatcher - that may have been me. Not N. Arlington specifically, but Arlington in general which was on the decline 15 years ago as the white population continued to decline (replaced largely by hispanics) over the years: White population growth.1970-1980-2,5721980-1990-5851990-2000-2,5972000-2007+14,795This and the +43% median household income growth in the last census - growth 13% greater than any other county, save Alexandria (which also was a bit of a dump). Areas like Lyon Village may have continued to hold their value as the rest of the county went down hill - I dont know. However, I do know that the type of people attracted to Arlington now are far whiter and wealthier than they were 15 years ago.
housebuyer,Neglecting the other assumptions,$5k towards PITI on 200k income???Are you nuts?Scaling down to something I can understand that would translate to $3.75k/month on $150k of income/year. Dude, combining our rent and our crazy rate of downpayment savings only gets us to 3.1k and half that money's not tied up in a house payment. That only really leaves $500/month of funny money that can go to car payments/ daycare etc. I know, I have an expensive health care plan, decent cable, good insurance, put 10% to retirement and dont' currently get either the mortgage interest deduction or the kid deduction, but still, I can't imagine that math is going to work out. Other than, as Novawatcher said, living from paycheck to paycheck. A $200k income should not involve living that way. What's a high income good for if it doesn't offer some financial safety net?So unless these are trust fund babies you're talking about, you need to tick up that income requirement.
TBW, once again, I am not *advocating* that people do anything. I'm simply pointing out that there ARE people who have the means to buy these houses. For some of them it makes perfect sense--as much sense as buying a vacation home at that stage in life. Having a substantial down payment is at least as important in affordability as having a high possible future income. And there is no need to pay off a mortgage before you die unless you plan to give kids a huge inheritance, bigger than an already big chunk of equity. My point is that people often think of home buyers as people in their 20s with kids and the hope of uninterrupted high income, but there are people of other ages who have lower income (and others with higher!) but much more accumulated wealth.
CRT is right about the demographic shifts in Arlington. In one year, one school near Ballston went from 14 ESOL teachers to 2 ESOL teachers. So much of the school population was lost because old red brick rental apartments were re-developed that the school is becoming a magnet school to try to attract students from overcrowded schools in the more northerly neighborhoods favored by middle to upper income families.
Cara,I don't think you can simply "scale down" like that - there are certain things that are going to be fixed, baseline costs for virtually any family, and a amounts of income above that level could be used for all sorts of things. For example, a family making $50K and spending $15K a year on housing (same ratio) is going to struggle a lot more to get by on that $35K-taxes than the family making $200K, obviously.Not saying that a $5K monthly payment is smart on a $200K income, but if you're lucky and aren't burdened with lots of student loan debt, etc., for a married couple that works out to be about half of their take-home pay once you figure in the mortgage interest deduction. So there's another $5K per month for car, child care, food, blah blah blah. Not ideal, but not completely unmanageable.
Matt,Notice that my example was not down to $50k, but was from $200k to $150k? Not exactly a stretch. This family has $50k more a year, pre-tax, that's ~$36k more post-tax, or $3k more a month.If they were to live exactly as frugally as we do, going from our $3.1k in housing (including downpayment money which is liquid) to a $5k house payment, that would leave them with $900/month to play with. That's not exactly the ramp-up in lifestyle or freedom I would envision with a $200k income, especially since some of that $900/month will need to be set aside for repairs, maintanence, and the level insurance you need since that's based not on your mortgage but on the replacement cost of your house.Not to mention life insurance sufficient that your spouse won't lose the house if one of you passes away.And the need to factor in that your property tax will go up based on a larger cost basis than your income is...At $300k in income $5k/month shouldn't be a problem, or with as Ace said, a lot more equity brought in, even a $200k income a $1 million house becomes tenable. But here's the thing. If we're positing that N. Arlington has a bunch of these owners who owe little to nothing on their homes, guess what that means? It means, they don't have to sell them for their current values. So what happens when some descendants of them decide they don't want to wait 1 year, or even 6 months to get their inheritance? They can drop the price and get it sold now. Then what happens to those that are leveraged into these homes? In particular any builders with CRE loans coming due? This is what's playing out on the North Shore of Chicago for those of you who followed my link last week. (Lake Forest, IL) It's way more true of the $5million and up homes, than it is of the $1million homes, but those with real money and the urge to move, can unwittingly destroy those who have CRE loans in the same market. Maybe this is more a McClean scenario than a N. Arlington one. I don't know. But if you're counting on people with a lot of equity to save you, you should also be wary of the inherent danger in those same folks. If it's your money, you can chose to realize those paper losses in order to liquidate the rest of the cash.
I think Cara said it best: what's the point in making $200k a year if your spending $5k a month on housing?
Huh.Well, since we are exactly one of the descriptions (250K, lots of equity, no kids) I'll kick in here.I was looking for places about 15 years ago (and yes, I-66 was the divider, Clarendon was a mess) and decided on Reston (I'm a techie, and lots of tech companies here).DC was a disaster then although one of my friends did buy in Eastern Market and did very well -- but he was a Latino and told me *not* to buy there. Interesting how the times change.End-1996 (when I bought) was the tail-end of a downturn. The townhouse I bought had been on the market for a year. A couple of FHA (?) houses were around the corner. I remember going to foreclosed houses and being the only person there.When I bought, even I told people I didn't expect to make money on the place, I just liked the idea of having my own place. It was a lifestyle choice, not an investment.These days, people still think they can make lots of money on housing. There *does* seem to have been a reversal of sorts -- my neighbor put a house on the market and got two offers in one week barely below asking, but her house was pristine.We occasionally kick around the idea of selling this place and buying something closer in, but the prices are insane in our opinion. Also, we travel a fair amount and we are very aware of the prices in other cities. And for what people want here we could get a *lot* somewhere else. We don't work for the government so we don't have to be here. So, we're holding out and waiting. Because we can. I see no bargains inside the Beltway, the psychology has not reached a tipping point (RE bites as an investment) and prices are still going down.It may be fast, or it may be death by a thousand cuts, but I think there is still a ways to fall.
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