Please post your local house search updates, MLS finds, on-topic ideas, and links here.
Thursday, May 21, 2009
Subscribe to:
Post Comments (Atom)
Northern Virginia Real Estate Statistics
REAL ESTATE SEARCH
County Assessment Websites
Buy/Sell Without an Agent
Local Real Estate Agents
Housing Economics Blogs
Local Interest
Housing Bubble Links
Eastern Regional Blogs
Western Regional Blogs
- Bakersfield Bubble
- Bay Area Real Estate Blog
- BubbleInfo (N. San Diego)
- Burbed (San Francisco)
- Dr. Housing Bubble (SoCal)
- Patrick.net (San Francisco)
- Portland Housing Blog
- Professor Piggington's Econo-Almanac
- Rancid Truth (Orange County)
- Sacramento Land(ing)
- Seattle Bubble
- SoCal Real Estate Bubble Blog
- Socket Site (San Francisco)
Real Estate Blogs
REAL ESTATE AUCTIONS
71 comments:
Fraud Bill signed yesterday: a small example of Obama spending and what is to come:
The legislation authorizes $140 million for the FBI, $50 million for U.S. Attorney’s Offices; $20 million for the Criminal Division, $15 million for the Civil Division, $5 million for the Tax Division, $30 million for the US Postal Inspection Service, $30 million for the Inspector General at the Department of Housing and Urban Development, $20 million for the Secret Service, and $21 million for the Securities and Exchange Commission.
Postal Service HQ: Washington DC
FBI HQ: Washington DC
Housing and UD HQ: Washington DC
Secret Service HQ: Washington DC
SEC HQ: surprisingly Washington DC
Of course, a majority of the money is spent elsewhere, but all of the management and senior executives will be here.
More bad news for the housing bears. Fewer foreclosures as a result of new Obama bill.
From Jim Webb's website:
“The Senate today approved legislation to provide much-needed relief for homeowners and communities,” says Webb. “If signed into law, this measure will assist thousands of Virginians who are struggling to keep their homes by allowing lenders to modify their loans, cracking-down on disreputable lenders, and improving the availability of credit.”
The bill expands the ability of the Federal Housing Authority and the Department of Agriculture to modify loans, and authorizes the Department of Housing and Urban Development and USDA to give loan servicers the opportunity to modify loans, including: reducing interest rates, reducing principal, or stretching out the term of these government-insured loans.
$20 million here and $30 million there will make exactly no difference to the housing market. They probably spend that much on toner for the printer.
LJJ,
Mock all you like. This is simply and indication of things to come.
I'm not mocking. I'm seriously saying that that fact has no relevance to the discussion.
Your second post about the loan adjustments, on the other hand, could make a serious difference.
Robert, (re post 2)
Let's hope they finally put together a program that my friends who all bought at or near the peak are actually eligible for. Because really, that's who these things might help. Those who are responsibly paying on their loans anyway, despite having lost their whole downpayments (on paper).
However, the effect of reducing inventory? Nil. My friends are going to keep paying regardless, the effect it will have will just be to make their budget not quite as tight and allow them to put more of their income back into the local economy rather than towards interest to the bank. So it will have a second order effect on jobs, as well as lessening their desire to sell going forward, thereby slowing the trickle of inventory back onto the market during the L-shaped recovery.
And on the other side of the ledger, stands the people who own the mortgage securities, who don't want the government to give away all their money.
Mortgage securities have plummeted in value as growing numbers of homeowners have struggled to keep up with their loans. But if the mortgages behind those investments were renegotiated, the holders of the securities, particularly the low-rated investments, stand to lose even more.
William Frey, the president of one of the funds, Greenwich Financial Services of Greenwich, Conn., said that he was acting to protect the firm’s investments. “Any investor in mortgage-backed securities has the right to insist that their contract be enforced,” he said.
Last week there was a discussion about the Trump golf course in Sterling, and some people mentioned that this was going to affect local real estate market quite positively (sorry, I can’t remember exactly what was said). Anyhow, we happened to drive by the place on Saturday, and went in for a quick look. It’s a nice place, however, the initiation fee is $75000 (that’s right, $75K!), and monthly due is $560. I just can’t imagine that people would all of a sudden rush in the door to become a member just because Trump took over the place, especially not in a recession. There were about 60 to 80 cars in the parking lot at the time (Saturday morning), all high-end, but I would assume most of them belong to members that joined before Trump took over.
There was an article in Washington Post today (page A1 and A16) about a country club in Pennsylvania struggling to survive in current economic condition. I know it’s not local, but the article also mentioned that “The National Golf Foundation has identified more that 500 clubs at serious risk of closing, and a recent survey of club managers showed that twice as many members resigned during the past 12 months that during a typical year”, and “a private Ashburn club opened to the public just last week”. Maybe I’m missing something, but I just don’t see how the fact that Trump bought a private golf course in Sterling is going to help local real estate market.
Thoughts anyone?
icg,
good point. I don't think there's some strange twist that you're missing.
Hey Robert, thanks for torturing Tony yesterday with your absolute inability to comprehend the market. As clearly and concisely as he explained what was happening (and is clearly supported by the market stats), you just don't get it.
That uptick in home prices we think we may be seeing this spring? May also just be a change in the mix towards people plunking down more money for more space:
Housing Wire, seasonal strength in home prices"House prices improved in 11 of the 25 major metropolitan areas studied for the report. Six of the remaining areas showed declines less severe than those seen in the previous month.
...
The Washington, DC market fell the farthest in terms of price per square foot, dipping 7.5% below February’s levels. The only other area to come close, Las Vegas, fell 4.3% from the previous month, while the other 12 areas that showed declines only fell less than 2% from last month.
"
Maybe the March numbers weren't quite as good as we thought they were...
Uptick in sales, but getting more house for your money? Sounds good to me!
Can anyone point me in the direction of information about historic home appreciation rates? I went to a first-time home buyer's seminar recently, and the realtor provided a lot of graphs (many were from the George Mason website that I think David posted yesterday?), but one was from NAR that showed an average appreciation of 4% per year.
I don't have the graph in front of me, so I don't remember how many years it went back, and I can't remember if this was a local or national chart, but it showed a black line tracing this 4% track, and then the bubble years went above the line, but as the realtor pointed out, "where we are now is right back where we should be" along that black line. She admitted some over-correction was possible, but as of last year (2008) we were back at historic levels of appreciation.
I don't really trust numbers that come from NAR, so I was wondering if anyone had any other sources of this type of info, just for my curiosity.
paKa, you're right to not trust NAR. Look up "case shiller housing" and you'll find data tracking 20 markets, including DC.
Alternatively, try this.
paKa,
sorry I'm too lazy to do the google search again for you, but the result of many discussion on this board looking at the charts we could find was that Case (or Schiller, can't recall which) says that historically home "appreciation" tracks incomes. And generally it is believed that the people behind the Case-Shciller index have been looking at this data harder than anyone. Since generally incomes have outpaced inflation, this means houses do to. Thus why we fall back on the laziness of saying the median house should be 2.5x the median income in order to determine if we've reached supportable prices or not. Local income data is available through the census bureaua on the american housing report? Anyway, more frequently than just the 10 year surveys plus extrapolation (they actually do a mini-survey for these conditions every 2 years in select areas).
So the argument from Robert comes down to..It's different here- Disney is (for some odd reason) building a hotel in the area, Trump is coming to town, and a minority of a couple million dollars is being distributed from us to some.
Thanks, Kevin. And Cara, that makes sense that housing prices track incomes. Maybe I'll do a little digging through Case-Schiller & the census reports this weekend.
paKa,
yeah I had this long-drawn out fight where I kept insisting that housing should only track inflation (I think I did this twice actually), until finally someone here pointed me to enough data to convince me that I was being too bearish and that all evidence pointed to housing and incomes tracking each other tightly.
Housing prices track incomes. Other fundamentals include interest rates (when they're low, prices go up; when they rise, prices fall), tax incentives and write-offs, and fluctuations of inventory compared to regional population. Interest rates and income are the biggest factors though.
FranklyMLS.com now has searchable MLS SOLD data. You can search for homes that sold in the last 3 months. Including seller subsidy data.
This is not tax records data (which can take months to show up).
Frank
Frank,
Sweet! Thanks Frank.
If you know anyone with good credit who is trying to get out of a bad mortgage have them check out Penfed.org
They raised their LTV today to 90% and 95% with another lenders 2nd. You would have to have a good FICO and pay mortgage insurance, but it might be a good option.
They usually have good rates and anyone can join with a $25 donation to the National Military Family Association.
Thanks David I'll pass that on!
They still have some equity, but they're afraid that after you add on mortgage insurance they won't be able to get a rate under what they already have. but it's still worth suggesting since they're in a 10/1 IO/balloon (and paying at the fully amoritizing rate).
Frank, you are amazing. :) Thanks!
Another way to track home values is the median value/median rent. From what I have seen the historic number is 15 times is fairly valued ie a home that rents for $2k per month should sell for $360k.
I have not found exact data for our region, but if you use NVAR sales figures the median sale for Northern Virginia was $356k in April. I could only find an average rent for FFX County which was $1,921. That would be a ratio of 15.44. That would indicate that the market on a whole is coming back into balance because home prices are falling while rents are rising.
It would be more valuable if you could break it into SFH vs. Condos vs. townhouses, but it is something that you can apply to specific properties to help you decide the value.
I believe that in the bubble the ratios were 20+ so there has been quite a correction here.
For a really long look see this chart from Robert Shiller:
http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
for home appreciation since 1890.
One of the main lessons I see in this chart is the irrelevance of long term appreciation rates in making a decision. You see periods with no gains over many decades, and prices rising dramatically over a few years. Buy at the wrong time and you see no gain in your lifetime. Buy at the right time and you see the home value double in a few years.
You can't really look at it as a random process where some years housing goes up and some years housing goes down, but in the long run you'll get an average return of about x% per year. Even in the long run you can lose big or win big.
If you have to consider appreciation in your decision, find a good fundamental analysis of the housing market (sorry, I have no recommendations on where to find one). You might have a better chance of guessing which "long-term" the next couple decades will emulate (e.g. 1910-1935 vs. 1980-2005).
Otherwise, you can play it safe, buy only what you need and you're sure you can afford, knowing you might risk missing out on big gains. Or, you can swing for the fence and hope it goes well. I favor the first approach, leaning more towards fear in the fear vs. greed motivational spectrum. If we are near the bottom, and if inflation is about to take off (thereby paying off a big chunk of your real mortgage each year) the "greed" side that says buy as much home as you can to capture the appreciation could work out.
David
This is something I have read too, and it makes a lot of sense -- though isn't it sale price = 150 x rent?.
By this estimation, the area I live in in N Arlington is still out of whack - houses rent for about $2000 (and usually less), but sell for at least $500,000.
Rents should be $3333 at that price.
150x is a rule-of-thumb, but a pretty sloppy one. Because interest rates vary (and could make it 130x or 180x rent), a better measure is that house payments (PITI + HOA, etc.) should be no more than 90% rent.
Like all averages it has problems.
A crack house that you can buy in Detroit for $20k and rent for $500 a month has a great return.
A rule of thumb we used to have was if the rent was 1% of the value per month then it was a good deal. I think this works in the Midwest pretty well. You would cash flow positive at that rate. Areas like DC have a lower % so on average across the country it is 15x.
I think that NovaWatcher has a more practical approach in light of the Schiller data. If you can buy for a little less than rent then you will turn out OK even if you do not hit a period of good appreciation.
However, I think most people in this area will take the gamble on appreciation and pay more. Maybe not today, but in the future which is why we have the more dramatic cycles.
I was just playing around with franklymls sold data and fairfax tax records.
A house is shown as sold on MLS
3/27/2009 for $320k (no comps)
The tax records show a sale date of 3/30/2009 and sold for $368k.
Which one is right?
KeithK,
I agree with you. Appreciation isn't relevant my (our) decision-making process. I was just curious about finding numbers other than those spouted off by NAR.
Obviously I don't want to buy a home that is overpriced, but we intend to stay in the same home for 7-10 years, so I'm hoping that length of time will allow us to at least break even and possibly do a little better, and seeing these kinds of up and downs play out historically helps me feel a little better about being able to survive the next decade, which none of us can predict, only guess at.
We are most definitely treating our home purchase as, well, a home and not an investment. :)
the wapo and the nytimes both have good rent to own calculators for comparing the total costs.
Then there's always the question of which rent? The rent you're paying now for an apartment that adequately meets your current needs? Or the rent you'd have to pay if you tried to move into the house you can envision living in for 10 or more years? My claim is that the correct rent to use is the one for an adequate apartment for now, if you don't actually need that space yet (just want it). Very few agree with me that that's a reasonable metric though, but I think it helps cover you in this current situation of potential continued declines.
Because the only reason you'd use the rental amount on the same property is if you were intended to rent it out, in which case it needs to be cash-flow positive, and on which you'll pay a higher mortgage interest rate, which will give an even more stringent requirement on the upper price limit for the house.
Everyone can throw stuff at me now. But I'm seeing it come true in Burke, so long as I use my rent from Kingstowne ;) . $1600 rent on a 2 bedroom with metro walkablility is coming into par with prices on small SFHs and large THs that are walkable to the VRE.
Oh, and don't assume rents are going up. Look at Calculated Risk today. They're going down and there's further downside risk in terms of lack of "tightness" in the rental market.
"David said...
Like all averages it has problems.
A crack house that you can buy in Detroit for $20k and rent for $500 a month has a great return."
Yeah - the flip side of this is a crack house in DC (or other central city) that no renter would rent for more than $500 a month, yet a developer would pay $600K because he can demolish it and turn it into a mid rise condo. I guess thats why it averages out to 150X.
Anthony,
The MLS shows any seller concession while the tax records only show the contracted consideration.
That is a big difference though. Could just be a typo I guess.
Very true, Cara. Even in this perfect DC economy, rents are being slashed and some complexes are offering up to three free months of rent.
During these times, people consolidate. That could mean renting out two rooms in your house to help cover the mortgage, renting one of those rooms for much cheaper than an entire house/apartment, or families bunching in together. The number of persons per household is at a record low. Expect it to increase after this past decade of excess and imaginary wealth creation. Empty rental properties will have to be competitive. A 20% reduction in rent is worth it not sitting empty for three months.
Contrarian,
I had the same problem the first time, but when I checked the box again and hit "go", it worked.
Frank,
Another masterful job. Only one small, funny little issue. I am only interested in SFRs. So I pulled the data for 22046 and since I don't always trust the listing agent to label the property properly, I just sort by the lot size. But when I exported the data, the only column that was missing was lot size.
And for anyone that cares, SFRs in 22046 (Falls Church City and a small part of adjoining FFX co.) that closed in the past three months sold at an average and median of 94% of original list.
The NAHB/Wells Fargo Housing Opportunity Index (HOI) is a metric for tracking price to income ratios. It's released quarterly. The latest release if 18 May--practically hot off the presses.
Frank, in case this is an old feature, I apologize, but I just saw it: the button on the side that pops open the tax assessment page for the house... fantastic!
ralph
good link (I've found NAHB to be much more reliable and data based than NAR)
This shows that the overall region was above an affordablility index of 70 all the way up until Q1 2002. (and the bubble was already starting then). (and we used to be consistently in the top 50 areas for affordability) We've just now finally had one quarter with affordability of above 70. (as I've said before the spring bounce of affordability). The caution here is that we're just talking medians, and given the huge shift of activity to the low-priced housing, the median can actually fall further than the price of any individual house (see CR the other day). And since first time buyers usually have only 90%? of the median income (just a remembered bumber not a reliable one), and they are by far and away who's buying now, I'd say we still have a little way to go, even as an overall region disregarding local trends.
ralph NAHB affordability
Actually I take some of that back. The affordability index is the point in the distribution of solds that could be afforded by the median income household at 28% DTI, 90% LTV and current average rates. So, while it still has the mix of what's selling strongly entering into the picture, it's not "just a median". What this really says is that right now 78% of what's selling is the "cheap" stuff. (assuming I did everything right, 100k median local income -> 400k home at a DTI of 28%, $40k down, 5.5% APR and no other debts)
That 78% of homes in the DC area that are currently selling are selling for less than 400k is not surprising at all.
That any first-time buyers are getting hit with the front end ratio not the back end ratio is highly unlikely...
tbw,
Robert's in Great Falls, David's in Centerville.
Robert gave his life history of housing purchases yesterday, on which everyone politely remained silent (except for a few non-commitally positive words). Given that we don't know anything about the rest of his financial picture or life I suggest we keep it that way.
For those who are interested, I believe the 15X rule of thumb applies to annual rent.
For example, if the rent is $2000, annual rent would be $24000, and $24000 x 15 = $360,000
Arlington is still way out of whack!
contrarion,
I don't know, it works fine for me, without clicking twice or anything... (explorer on a windows box)
icg,
yes. which is why it's 150-180 rule of thumb for monthly rent.
What's interesting to me was running what 28% DTI 10% downpayment and current interest rates gave, which was 4x income for purchase price. Yikes. So if people don't have other debts and just take as set in stone what a "conservative" banker will pre-approve them for, they really will end up house poor. (or is that house-rich, cash-poor)?
Cara-
I agree at 4X they are a little house poor, but all of the old rule of thumb ratios that get tossed around(2.5X or 3X) were based on much higher interest rates so it really is the same.
I am looking at buying something a little over 2X our income, but I think we would have no issue handling payments on something that is 4X.
Maybe we are more frugal than most, but we put 10% into 401Ks and are still saving 50% of our take home income with our rent equal to the mortgage we are looking to get. So if we doubled this we would still save 25% of our income...
Contrarian
I agree I think it is a great site, but it also slowly kills my firefox browser. After looking at houses for 30 minutes the browser is using over a gig of memory and things start to run slowly
TBW,
I watched the video - Denver #1, Raleigh #2, Austin #3, Seattle #4, and SF #5.
I like her picks except SF and I agree generally with her criteria.
She said jobs and real estate values are "kissing cousins." I agree with this 100%. History shows it's jobs, jobs, jobs. And, of course, the higher paying the jobs the better.
Jobs, growing population, weather, and first-time homebuyers were her top #4 variables to support real estate values.
I'm surprised she didn't pick DC. It seems to fit her criteria.
TBW,
Both Microsoft - 5000 - and Boeing -- 4500 -- announced layoffs. The lady cited both of these companies as reasons for optimism in Seattle.
TBW,
Lady cited tourism for SF. Washington DC is the #3 most visited tourist destination in the US, SF #7.
TBW
Just wait for Global Warming. I am hoping to retire on beachfront property without moving :-)
Think of the appreciation potential.
Cara,
Rents are going down nationwide, that does not mean they are going down in the DC area. Where is the data to prove that? I would like to know.
Re: your rent of the apartment vs. price of SFHs in Burke as a base for price to rent ratio could not be more out of whack. You are comparing apples to oranges. You should know better than this!
The comparison is between what that particular house in Burke can fetch in rent vs. the price. You need to look at comps of houses rented in that area.
housebuyer: "I agree at 4X they are a little house poor, but all of the old rule of thumb ratios that get tossed around(2.5X or 3X) were based on much higher interest rates so it really is the same."
They were also based on a time where it didn't cost 1000 bucks for gas and food every month, let alone another 500 for internet and utilities. Cost of living, going up.
dc2:"Rents are going down nationwide, that does not mean they are going down in the DC area. Where is the data to prove that? I would like to know."
where is the data to disprove it? i've cited anecdotal cases about slashed rents. up to three months free. search craigslist. they aren't marketing ploys, as in jackin up the rate 25% then offering 3 months free. if you actually pay attention to the trends, you can see it. the burden of proof isn't on cara. it's a very common thing during tough economic times. do your own homework, cara isn't your kindergarten teacher.
ICG said: "For those who are interested, I believe the 15X rule of thumb applies to annual rent.
For example, if the rent is $2000, annual rent would be $24000, and $24000 x 15 = $360,000
Arlington is still way out of whack!"
Arlington is "way out of whack" in the same way Manhattan is "out of whack" with Staten Island. There are real reasons for Arlington's price premium (quality of life, close-in, access to Metrorail, etc.).
"Rents are going down nationwide, that does not mean they are going down in the DC area. Where is the data to prove that? I would like to know."
Look at all those buildings in south arlington with the Move In special signs.
dc2: our rent went down.
dc2,
If I use the rents on THs in Burke the rent is less than my current rent. There aren't enough SFHs for rent to make a reasonable comparison. So if I'm buying a TH, using Burke rents I need to wait for even lower prices. Just because some fool paid $2000/month for a lease a year ago, doesn't mean I'd find another such fool if need arose.
And the reason my alternative logic makes sense is because of which decision I'm making. I'm choosing between giving up the great commute I have now, for one that's still fine, but not the same, in order to get better schools (which I don't need yet), a place I can picture living in for at least 10 years (which one never needs renting) and the stability to paint, and grow my own herb garden (I've moved dirt before, not doing it again). Thus the correct decision tree is does this make sense now or not? I don't need these things now, and could instead keep saving up more money for a bigger downpayment, why buy now, if it worsens my cash-flow and liquidity, unless it's for something considerably better? Money is money, it's just what do you want to spend it on?
Regarding Rents - the latest info I have from a client who manages a few thousand properties in NOVA:
Arlington +0.4%
Alexandria +1.5%
Fairfax +1.1%
This is the rate change on a year over year basis. I have no info on Loudoun & PWC, but I heard they are down.
Also, their stock is primarily condos & townhouses. They seem to be doing ok, because its a cheaper substitute for those who were former homeowners.
That said, I hear that there are thousands of single family houses, especially outside the beltway, where prices are falling.
crt,
well, and a less than 2% increase is pretty much the same thing as flat. Is anyone really going to notice a $20 difference in monthly rent? If that's all the increase that a business that's doing well can get, then things are pretty darn flat.
(but thanks for the concrete numbers, as always)
Cara,
got to be careful here,
let's agree that the slightly increasing rents are somewhat different from dropping and even flat.
Tom,
whatever, if you start thinking, then you realize that manhattan home prices are in general connected to rent with the same 180 rule or something in that region, the only disruptions happen when wall street doing exceptionally well/housing bubble happens in manhattan. after it bursts prices realign with rents.
konstantin,
Yes, care is warranted. To make my rational for my earlier statement clearer, I'll expound a bit.
Flat to me means anything that is within the measurement error of zero. Since this was just one property management firm and thus not sampling the whole area, I'd say that +/- 1% is a generous assessment on how accurately it can be viewed to be as a reflection on the market as a whole.
Now, if he had listed the total number of units and the 1 or 2 sigma distribution on the rent changes such that we could judge from the measurement itself, that would be different.
But, an apriori assignation of at least a 1% error on the measurement seems reasonable to me. Which then makes everything other than Alexandria flat. 1.5% up in this economy (even with unknown uncertainties and spreads) is certainly not indicating any weakness in that rental market.
CRT, good point. The rent drops I've noticed were apartment complexes. They've been a bit high for years now compared to houses that are rented out. Personal example: i rent a SFH within walking distance to the metro for only slightly more than a 1BR apartment in that area rents for.
Flat is a pretty fair assessment in my book. 3 quarters ago, he was showing slight negative numbers and this is only the second quarter where all 3 were positive. Still, its so slight and no real trend to me so flat isnt too off the mark.
I will say however, I see little evidence they are "down" as a whole. Some buildings are getting creamed, others are doing very well. Average them all together - especially over the last 3 quarters - and "flat" isnt a bad way to describe it.
About Manhattan housing: Just heard from an old client who moved from Arlington about 5 years ago and sold his 4500 sq.ft. 3 year old house for $1.1 million. First stop was Hong Kong where he lived in a 3000 sq.ft. high end rental apartment for about 2 years. Then to NY where he bought in 2007. The buy was into a loft in Chelsea with about 1200 sq.ft. for $1.7 million. He is now negotiating privately with someone in the building to sell him an 1800 sq.ft. loft for $2.7 million. In turn, he has a buyer waiting in the wings to buy his place for $2 million. So a lot less square footage but a lot more interesting place to live than Arlington. He says that the real estate market is not as affected in Manhattan as the luxury art, jewelry and car market. He is in the insurance biz so has no worries about his job security...
Post a Comment