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.
Purely anecdotal, but I saw one foreclosure in Arlington last weekend, and went to three open houses in Falls Church ($500-$550k range). As of this morning, all are under contract. Played around a little last night with Frank's new "sold" data. In the places I'm looking, the houses are selling for, on average, 90-95% of original list. A lot of variance though.
Fred,Yup, this spring is hopping. That's exactly what I'm seeing too. If you want to buy right now, you need to be decisive and quick. The "if you want to buy right now" part being the important caveat there.
Fred: I've noticed the same thing: houses are going very quickly but the prices don't seem to be bid-up. Although I suppose you could argue that prices would have been even lower if the government hadn't pumped the interest rates down.
This will likely be the last golden opportunity for sellers to profit from the bubble. Take advantage of the dead cat bounce, and get some stupid buyers to competitively bid for your overpriced house.
I think you're also seeing a couple of years of pent up demand. Smart people were concerned over the past 24+ months about falling prices and aware that interest rates might drop, so they wanted to avoid the knife catching game. So the # of buyers later this year may drop back to more typical levels after accounting for seasonality.
"So the # of buyers later this year may drop back to more typical levels after accounting for seasonality."I agree.Which translates to there still being more supply than demand.Also, looking through my local paper every day this week I have seen more foreclosures than at any time in the past 12 months....it's crazy.The first wave in my area was the upper end of the market...folks who paid too much and had a bad loan....these most recent appear to be folks who have been in their house for a while....looks like the unemployment factor is starting to kick-in.
"Ace said...So the # of buyers later this year may drop back to more typical levels after accounting for seasonality."Id say that a near certainty given the falling inventory. As I guessed might happen last month, Loudoun did indeed post its first negative YOY sales number in at least 10 months. PWC & Fairfax likely will soon break their streak of positive YOY sales as they run out of foreclosures to drive the sales figures. This gets back to my long posted question of what the inventory numbers "should" be. If the bubble never happened, if there wasnt a lack of homes during the runup and glut of foreclosures now, how many homes would be for sale if this was a normal late spring? Is this a high number of listings, or is it a low number of listings? Is the inventory decline still trending back to normal, or is it overshooting and we now have a shortage? Its a shame, we have plenty of info on sales rates going back two plus decades. I just wish we had more info on inventory.
Also, for some of the new crop of posters we have here, I am not talking about months of inventory, just the total number of listings per county that is typical in late spring. Of course you cant and shouldnt ignore MOI when looking at the entire market - its just this sub-segment the total number that I am curious about.
Ace said..."So the # of buyers later this year may drop back to more typical levels after accounting for seasonality."Or the Spring trend continues into the Summer (more likely because housing trends tend to have long cycles.)But, then returns to normal levels in the Fall. I don't know.Kevin can probably give you the exact date.
Hey Robert, when will we hit peak prices again?
Peak bubble prices, that is. According to you this isn't a market correction, just an anomaly. When will the market correct upwards to its appropriate peak bubble price?
Kevin,If the 90's are any indication (and I agree that this is a steeper correction), I would guess 8-10yrs.Condo's (even nice ones) dropped 40% in the early 90's. I had one at The Rotonda that dropped this much. My home at the time, in a nice area of Vienna, dropped 25%.CRT,As far as a "normal" inventory, certain adjustments would have to be made for population growth. In my mind, the Market started to take off in 2000 and 2001. I would say that 1998 - 2000 were relatively "normal".
Kevin,RE is cyclical and has boom and bust periods. Witness the late '70's thru early '80's and the late '80's thru early 90's.This may be worse, but clearly not the first "correction".I still believe that the worst of the carnage will be in the lower tier and the new developments. The amount of turnover from 2003 on is the best indicator that I can think of for predicting foreclosure numbers.Yes, unemployment is hitting some long-term owners. This would happen in any severe recession.
VA Investor,Agree completely on when the bubble started (~1998). But I think there is absolutely no way that it'll rebound to peak prices in 8-10 years. Let's say that prices were basically twice as high as they should have been sans bubble. The only way to reach that under a normal lending environment is for household GDP to increase double its current level. That might take 20 years.
Kevin,Are you factoring in the period of stagnation during the '90's? I may be too optimistic, I don't know but can only guess.We could always use the old standby of inflation plus 1 or 2%. Obviously, there are other factors particular to certain areas/neighborhoods (metro, redevelopment, job center creation, etc).Anyone buying now is clearly (with certain exceptions - notably N.Arl, Bethesda, etc.) not paying peak prices. So, unless one bought at peak I don't think it's too relevant to determine when we will be there again.
Kevin,If you go back to 1998-2000 pricing, you are really going back to 1990 pricing.For example, I am looking at an reo that sold new in 1990 for 111K.It sold in 2001 for 118K; then sold in 2005 for 259K.What should today's price be? I have the opportunity to pay close to 100K.
"VA Investor said...As far as a "normal" inventory, certain adjustments would have to be made for population growth. In my mind, the Market started to take off in 2000 and 2001. I would say that 1998 - 2000 were relatively "normal".Yeah - thats probably as close to normal as we are going to get. By that standard (and eyeballing for population growth), it looks like Fairfax and Arlington have a slight surplus to work off. Alexandria & DC are normal levels, and Loudoun & PWC have a shortage. I just wish we had a few more years to confirm 98-00 was normal. Then again, pre 1996 was still the flat period after the former bubble, so that may not be of much help either.
tbw,wow, yikes. It looks as if we're still in the getting worse before it gets better phase of unemployment... That's a lot of mass layoffs...
Contrarian,Given the fact that most here are looking to buy NOW, of what matter is it that it may take 10 or 20 years to reach the former peak?Do you expect hoards of people to walk away from their homes? First, it would only be those that bought post 2003. Second, even of those people, many are quite happily ensconsed in a home they can afford and will not be "walking".It's somewhat akin to the stock market; except it's there home.
tbwfor me 1998 is the end of the long-flat period that resulted from having to wait until fundamentals caught back up with the prices of the last bubble. 1998-2000 were when "normal" income-related appreciation finally started up again. And then all the myths cropped back up, that given the strength of our local economy, it would be impossible to loose money in real estate. And people started spouting the nonsense that in 1998 things were undervalued, and that the region was "due"/ripe for appreciation again to make up for not having gotten any for the previous 10 years. And then it was off for the races, as everyone who'd been stuck in the same place for 10 years finally saw the opportunity to take away a little cash and move-up the housing ladder.
So Cara,At what year do you think we need to go back to price-wise to have the "correct" pricing? I stopped buying (except for 1031's) in 2002. I started buying again in Nov or Dec 2008.
tbw,There was NO appreciation from 1990 to 1998. Are you saying that this should not be a factor in today's prices?
va_investor,It depends on the area. Some places didn't really lift off until late 2002. Generically? I would say 2000 levels + 4%/year. But individual neighborhoods and communities have changed in those 10 years. Some improving, some deteriorating, even within a given "town" (not that we have towns in NoVa). So it's not a hard and fast rule. Likewise, individual properties could be well or poorly maintained within that time-frame, so you can't apply that rigidly either.In the inner-outer suburbs, I would say 3bdrm <1500sq ft SFHs should "correct" to 3x median income. Further out, 2.5x median, further in 4-5x median. That's my prediction, but it may take inflation to get there.
va_investor:"There was NO appreciation from 1990 to 1998. Are you saying that this should not be a factor in today's prices? "That's correct, that's exactly what I'm saying. Why? because this lack of appreciation was because fundamentals had not caught back up. They got appreciation, plenty of it, just all in one go in the last bubble.
Cara,I can't agree with the 3x or 4x median. It was 2.5 to 3x when rates were 12%. I believe that the best measure is the "tried and true" ratio's of 28/36.I see that you, too, give zero import to the totally flat prices of most of the 90's. How do you justify ignoring inflation for that time period?
kevin, are you asking me about the return of peak prices because your mother wants to sell her house and you'll have to move out of her basement?
tbw,You are plain wrong. I bought 8 properties in 1988 and was under-water for many years.Perhaps you have an illustration showing prices didn't drop below 1988?
VA_Investor,"Anyone buying now is clearly (with certain exceptions - notably N.Arl, Bethesda, etc.) not paying peak prices."I'd take issue with N. Arl.'s being an exception. Although there may be a few streets and/or price ranges where N. Arlington houses are still selling at peak prices, the vast majority of N. Arlington has dropped from peak. The easiest evidence (as opposed to tracking individual houses over a long time, which I have done) is found in the Arlington assessments. Despite their lagging the market by many months (i.e., Jan. 2009 assessments, the most recent, are based on July 1, 2007 - June 30, 2008 sales, with some adjustments in the fall of 2008), most have dropped since 2007, which, given the lags, might be the closest to peak for most N. Arl. homes. And, at least in some ranges, the recent sales have typically been below assessment value, in some cases that I've posted here, pretty far below assessment value, and these were non-foreclosures/short sales in neighborhoods with very few of them. In contrast, during the peak years, houses typically sold at least 10% ABOVE assessed value in N. Arlington.
tbw,What "theory" do you refer to? And I'm talking NoVa, not "the murder capital of the world".
OK Ace,You merely make my point (more accurate).
va_investor,It was already baked in! What part of that is hard to comprehend? That is my explanation. Inflation was needed to make things back in alignment again. Inflation is already part and parcel of my explanation. What's so hard to understand about that?4x median IS what 28% DTI and current interest rates give you with no other debts. With most people's car loans or student loans it's the 36% that's going to hit people and keep it down around 3x now. Hence why I think the inner areas will allow 4x-5x income because of desirability and move-up equity, and the true starter areas will be 3x and less. 2.5x median for PWC and the like because you HAVE to replace one of your two cars every 5 years, making that 36% back-end ratio a continual rather than temporary restraint.
Cara,No need to be insulting to me. If what you are saying is that 1990 prices were too high and it took 8 yrs to "catch-up", then that is something I can "comprehend".
Cara -I know how excited you get when there's bad news, but from the article:Showing up in the May unemployment numbers to be released next month will be Kaiser Permanente, which laid off 61 information technology employees in Silver Spring last week when it decided to contract the services to IBM.I'll bet most of those 61 employees went to work for IBM. Is that really a mass layoff?
Va_investor, "If what you are saying is that 1990 prices were too high and it took 8 yrs to "catch-up", "That was indeed my point. Sorry I got terse about having to repeat myself to be understood.
Cara,Well thank you. I'm sorry that your prior responses were incomprehensible.
TBW,Still agree jobs/income and real estate correlate very closely.However, on a month-to-month basis, I think you will see plenty of divergence, even in normal times.Certainly, you would admit that recent activity in the housing market -- 3 months -- doesn't track exactly to jobs being created. We have lost jobs in the first three months of the year and sales and prices are rising.My point is that right now there are working through a housing bubble, and then an overcorrection in prices, and now a pop back higher - no kevin, not to the peak.I think most would agree the number of fence-sitters jumping in and investors -- like NoVA Investor - are having a greater impact on the sales pace and prices than specific layoffs.So, waiting for unemployment to tick a few tenths of a point higher and expecting prices to flatten or decline as a result is not likely.
Robert,Picked any cherries lately? As I was pretty much unaware of any significant layoffs at all in our specific region, (the dealerships were impressive but can't be a very large percentage of the employment around here). I found that article pretty eye-opening.The threat is really that this area's recent prices require a constant stream of dual-incomes. Not everyone, of course, and some will find new jobs quickly, but still...As I've been saying for a while now, it's not the Alt-A, I/O or other wierd loans anymore that's the big problem. The big problem is that the normal reasons that people need to move (death, divorce, job loss, job relocation) are happening to home-owners who are underwater. So, even just 5% unemployment would still result in short-sales and foreclosures. It staying above 6.5% and threatening to go worse is pretty serious in both creating supply and sapping demand.
va_investorLOL, that was good. I deserved that one :)
Kevin, Although real GDP will likely take 20 years to double the nominal GDP will likely get their in about half the time. I assume inflation will be equal to or higher than GDP growth for a while. So if all someone cares about not being underwater on their house inflation will help this happen quicker. I also agree we may not be at the bottom of housing prices, but I think it is still a good time to buy because mortgages will likely go up seeing the 10-year treasury yields are going up almost every day.
Contrarian -Wow. That's pretty dire. I can't prove or disprove any of what you said. But, I don't think it will happen that way. Policy mistakes, unlike the Depression, will cause inflation, not deflation.Fannie and Freddie will get all of the money they need. Banks will be taken over and we will print new money to make the depositers whole. If 4.75% mortgage rates and $8k home buyer credit don't get housing moving, we'll try 3.75% and $16 housing credit.Mass layoffs in the Metro area? Please. Microsoft laying off 5000 people is a mass layoff. Closing 15 Chrysler dealers is hardly a mass layoff, or losing 61 employees at Kaiser Permanente.The stock market is up 30%.Yes, we were in in a vicious cycle, but it always turns around and we get into a virtuous one. It will happen this time too.
Contrarian-The article you sent out says it takes over 20 years of 7% gains a year to make recoup 144%. They are forgetting about compounding which almost cuts the time in half. 11-12 years is still a long time, but not nearly as bad.
Robert,take a look at:http://dshort.com/especially the new "real mega-bear quartet" and four bad bears.The stock market may be up 31.3% from the bottom but it's also still down 43.2% from the peak (in noninflation adjusted terms)These charts are in no way predictive of our future (i.e. just because in inflation adjusted terms we're now on-par with the Great Depression doesn't mean we're in one) and sadly he has no dividend-adjusted returns charts. (He does have interesting stuff on P/E ratios) But they're still worth a gander.
I lied! Doug Short has added graphs with the dividend re-invested returns!! Your wish is his command apparently!Go look it's way cool.
Contrarian-First I don't think housing prices are going up soon I am guessing they will be stagnant. I am only buying because it is similar in price to renting I have lots of disposable income and I would prefer to have my own space. Second it appears that almost everyone is saying housing prices will continue going down, so wouldn't it be contratian to say things will do better since everyone says they will do worse. Third I am sorry. Only time will tell whose predictions will turn out to be correct. All I know is I will be happy and looking for better things even as things get worse, while you will always be depressed that the end is coming. That really has to weigh on the enjoyment you can experience. So as I said I may be wrong, but that won't bother me at all. Even if I had your thoughts I would be unhappy even if I was right.
housebuyerIf I may interject, "everyone" on here thinks prices are going lower, that's hardly "everyone". And I think what contrarion means is not just the immediate expectation, but also the expectation that there will be money to be made. Most people still think housing is a good long term investment. Contrarian's not willing to change his tune until "most people" think buying a house is throwing your money down a black hole (like realtor's current opinion of renting). We're not there yet.But, if as you said, owning is cheaper than renting for now, and you get intrinsic enjoyment out of your house, there's no reason for you, personally, to try to force yourself into becoming a contrarian investor with respect to housing. And I do think you are correct that the average person doesn't think of their house in inflation-adjusted terms, but rather just in terms of, "do I have to bring money to the table to sell"? i.e. current pain. Everything else is just rent for home-owners.
contrarian said: "Oh, the irony."Applying abnormally low earnings multiples to temporarily low earnings is a foolish way to value businesses.
Contrarian-I am currently saving about half of my income each month so I am not likely to get myself in a financial rut anytime to soon. Out of curiosity were do you put your money. If RE is going down stocks are going down. Long term treasuries have been getting killed. Commodities are bad in recessions. Do you only keep cash?
Robert said... "kevin, are you asking me about the return of peak prices because your mother wants to sell her house and you'll have to move out of her basement?"Cute. Since you decided to bore us with your boastful life story the other day, I'll return the favor. I work for your former company. I bought my old place in 2002, sold in 2007, and have been renting/waiting for this disastrous market to return to reality. At a time that you were likely telling people they were being priced out forever if they didn't get into real estate, I not only sold the place, but also re-allocated my 401k away from stocks (back when the Dow was at $13.5k). Do I live in my mom's basement? No. My mother is no longer with us, but did I move out of my Dad's basement when I was 23 and bought my first property.
Anyone notice that the 10-yr is now at the highest levels since November? We'll see how much Ben and Timmy can do, but any surge in mortgage rates is bound to throw some ice on this market.
Fred-Yeah I brought that up when I was telling contrarian treasuries are doing poorly. As the banking sector heals the spread between treasuries and mortgages may go down. This could help, but yes it is scary how quickly the yield has been going up
tbw,I am quite surprised that anyone in the Hospitality Industry is hiring. Business is awful across the board and so many groups paid waaaaay too much a few years ago.There will be some great bargains for those with enough cash. Price per key is falling off a cliff. The problem is that lending is all but frozen.
Short term t-bills are safe long term treasuries are very risky. As long as you spread out money at major banks so you are under the FDIC limit it is safe. In addition the feds will not let on of the top 10 banks fail they have already said so, which basically makes any deposit there as safe as a treasury.
Hilton Hotels Press ReleaseNot only did they choose the Washington DC area, but the chose Fairfax County over DC and MD.Those are going to be some nice paying jobs. Only a blip, but shows you what goes on in corporate boardrooms across the United States. Too bad for the bears that NoVA is such a great place to live and work.
300 jobs? Big deal. FCPS is laying off over 800 staff next month. It would have been a few hundred more but some employees had contracts reduced and the federal stimulus saved a few other jobs.
Hayfield,I don't think anyone is arguing that unemployment is bad or that the economy is bad. We have been down this road before. Early '80's, early 90's. That's as far back as I was paying attention.Are you claiming that DC will not weather this recession better than most areas?
Contrarian,If everything goes the way you think it will, your distinction becomes meaningless.
It is in all their budget documents. There are 739 school based positions and 73 non-school positions being eliminated. Most of the school based positions were not classroom teachers.
Some of you who seem mystified by Contrarian's idea of how bad it will get should understand he believes in the elliott wave named after their messiah, the late Ralph Elliott.Elliot wave guys have a penchant for being wildly doomish. Their current high priest, Robert Precther has been calling for the dow to hit 400 (yes you read that right) since 1990.Apparently some wavers believe we are at the end of a grand supercycle, meaning we are going to enter into a period of unmitigated doom for several hundred years - perhaps much longer. These wavers for example expect the upcoming downturn to be "worse than the bubonic plague" which hit in the middle ages. http://www.gold-eagle.com/editorials_99/mbutler120299a.htmlAs is common, these guys completely whiffed on their prediction -- they believed Y2K would put us into this "worse than the plague" correction. Oops.Still, many true believers like Contrarian are undeterred by all the wrong calls of doom in the past, and belive the wave of doom will come, its just that prophets like Precther were interpreting the sacred texts incorrectly -- but this time, its coming, honest! So you now understand where Contrarian comes from when he says we are going back to dow 400 and average home price of 40K. Not saying he is wrong mind you -- you just need to understand where he is coming from if you choose to debate him.
Cara -You said the unemployment rate was 6.5% and threatening to get worse. I just checked and it's 4.7% in Fairfax County. I googled it, but I can't find the unemployment rate for those with a BA/BS. I've seen it before and it is always below the overall unemployment rate. Point is, those are the folks that have mortgages, not some college kid home on Summer break that happens to answer the phone when the data collectors call.TBW, Cara can tell you. Cara, are home prices up for TH's in Burke?TBW, $16k + 3.75%. I would predict the opposite. Next year there will be no $8k and interest rates will be 5.75% and prices will be higher.
Contrarian said...Maybe so, but we are nowhere near a bottom. Therefore, it should take many more years to recover. As a contrarian, the bottom will be in, when people think it will only go lower. As long as people remain optimistic, prices have not bottomed.In my life, I have never seen so many people that were afraid to purchase real estate. Whatever the metric is, it is at an all time high.
contrarian said: "Cash is not safe. When you walk into the front door of a bank to deposit your money, they turn around and loan your money out the back door. Your money does not stay in that bank.""When you purchase T-Bills, you own an asset, dollar-for-dollar, in return for your deposit. And, it is backed by the federal government with no FDIC limit."contrarian, yes a bank makes loans using deposits. but what do you think the government does with the money that you loan it when you purchase a t-bill? do you think they store it in a vault or something? no, the money you hand the government is spent by the government (i.e., it's gone) to service our country's debt or to pay for expenditures.this is not to say that buying a t-bill or a t-note isn't safe. in fact, it's probably one of the safest places to invest if all you want is a return of capital (albeit at the cost of erosion of value in real terms).it should also be noted that the FDIC IS the federal government in practical terms, and deposits within FDIC limits are therefore as safe as t-bill or t-notes.because one can obtain FDIC insurance on bank deposits for up to $50 million, there is no practical difference between putting your money in the bank and buying t-bill or t-notes (other than yields, transaction costs on the latter, and price risk on the latter).
Robert,I would tend to agree with you except I believe that sentiment was last year (2008). I sense a different "feeling" about the economy in general. I think we are off the absolute "panic" mode of last year and people have become adjusted to the recession.People are definitely still worried about jobs, but I don't sense some of the "terror" that was abound last year. It's more of a "we'll muddle through this" instead of the sky is falling.
Anonymous -He's keeping short-term borrowing costs down for the Federal Government. Let's be nice to him.
NoVa a great place to live? An Ok place. A so-so place. But hardly a great place.The only people I know who think it is a great place either haven't lived anywhere else or have been here for 30+ years.
TBW,You are correct to use a comparative number. But, there has always been a surplus of jobs for the well-educated in Northern Virginia. More jobs than people to fill them. It's coming more into balance right now.I'll ask you this: Do you know anyone that has a mortgage payment and live in Fairfax County that does not have a job? I don't. Seriously, I don't. No family, friends, or neighbors.
tbw,I saw 20% annual increases from '85 to '90. I had several places that doubled. I flipped many properties, too. One house doubled in 2 yrs., another went up 50% in the 6mos we owned it (new construction), another we owned for 2wks went up 25% (again, new build). So, it has happened.And I think you would be hard pressed to find that every neighborhood went up 20% per year this go-around. Mine sure didn't - but it hasn't cratered either. Do you suppose there is a correlation?100K dumps went up to 300K. 900K homes went to 1.2 or 1.3.
Contrarian, I was researching the dead sea scrolls last summer and came across a holy text I believe to be authored by Mr. Elliott himself. For some reason, he wrote it in Ahramaic, but I will try to translate (my interpretation is the stuff in parenthesis). "lo, be it know that at the end of this millennium, a great web of world ideas (the internet) shall arise. It shall be created by a jurist from Tennessee (Al Gore), and intended to transport pornography, stock quotes, and pleadings from Nigerians asking for help in releasing funds.And be it known that in the first years of the new millennium, a great inflation (the bubble) shall occur in fee simple estates (housing). The unwinding of this great inflation shall be debated by prophets on the web of world ideas. I am here today to tell you that the prophets are FALSE and NOT to be believed!The false prophets do not understand the power of the government man from the sky ("Helicopter" Ben Bernanke). The government man from the sky shall hover over the land and drop gubbamint cheese (money) in quantities never seen before to control deflation.And further, be it known, that the actions of the government man from the sky will successfully establish a perimeter around the government (Arlington, Alexandria & parts of Fairfax) that shall be magically protected (immune). It is these areas, together with heatless sun energy (cold fusion) and amphibious larvae (tadpoles) that shall be the best investments in the new millennium."If you dont believe me, I have given the sacred texts to hal turner to hold for safe keeping!contrary one shall not understand
tbw,I was associated with RE industry at the time. There were multiple offers; certainly not on the scale we saw in this latest frenzy.Check out the tax records for The Atrium Condominium. Stuff was flipped left and right. People were making 100k or 200K or more.Check out the sales when Northgate went condo. Investors were flying in from all over the Country buying 5 or 10 units at a time. Same thing with Cardinal something or other.New construction was being flipped. Builders were using any tactic they could find to cancel a contract and re-sell for 50K more.The REAL money was in the Land flips. Millions were made. The trick was to get a parcel under contract with a feasibility study period and then flip the contract.It was nuts. I was there.The difference is that you didn't have the zero down/no doc/liar loans.I got a few no-doc loans, but I put 20% down and had great credit.
tbw,Care to address the more meaningful (timely) portion of my earlier post.Dumps went from 100K to 300K.Upper end in no way went up 20% per year. Any conection to the disparity in price decreases we are witnessing?
"Out of curiosity were do you put your money. T-Bills"Contrarian, if you are so convinced the market is going to tank, why not invest your money in something like a profunds ultra bear fund (2x short the S&P 500). Doesn't make sense to be invested in T-Bills if you are so sure the market is going down significantly.
robert,My number was just the Virginia one from the article quoted, FFX data is more relevant of course.However, this leads to another local belief, that DC is the place to come if you are a dual career couple, because you'll always be able to find another job. It's this 1-2% unemployment that was the norm here that led to much complacency over allotting your full 2-income salary to your mortgage application. Now, I still think it's true that DC is a great area for that reason, I just think it's prudent not to take on a mortgage amount that couldn't be covered under one of the two for at least a short period of time. Of course, that's partly because my husband and I make almost identical amounts, so it's not entirely fair as a standard to apply to everyone.(and yes, indeed as I've said before TH's in Burke have gone up this spring, kinda like the stock market, now they're only 30% down from their peak not 40%. This too will pass)And contrarion, I know you think we'll have deflation not inflation, but have you considered hedging a bit with 10-30% in TIPS (I know, they're at minimum 5 years which is a long commitment, but it might be worth hedging a bit)
I'm seeing a bubble in comments. This tells me that interest in housing is rising from one year ago.
Cara -We both agree that home prices have had something of a pop off of a Winter bottom. Call it what you will. I think that pop is actually 20%, maybe you think it is 10%. Go back in history and look at examples where home prices hit an inflection point and move 10% in the opposite direction. What you will find is that 9 times out of 10, once prices started moving the opposite direction of the trend of at least 10% -- either higher or lower -- they continued in a multi-year trend in that exact same direction.But, maybe, this is the 1 in 10 shot.
Cara,I am not 100% sure that your comment "this too shall pass" is anything more than a guess. Time will tell.Care to comment on the change, if any, in consumer sentiment over last year?I'm not feeling the doom and gloom (must be in my manic phase!). Last year we sat around with friends talking about moving to the Farm if everything went to hell in a hand-basket.Currently, our same group is worried about jobs and, for the small business owners, not getting invoices paid for work they have done. Clients are going under. But I don't sense the desperation.As we all know, consumer sentiment is a huge part of the equation.
Cara,Also; I've lived here since 1981 and it's always taken two incomes to afford anything decent - unless you married a K Street Lawyer.Some people become very successful and can afford lots of things, including a stay at home spouse. This is hardly the norm and to buy based on one income will certainly limit your choices. Fair or unfair, it's an expensive place to live.
In 1982, my parents purchased their SFH in Springfield on only my Dad's Navy salary. You could purchase a 2000+ sq ft home in Springfield for the low 100s. The smaller 1700-1800 sq ft homes in the neighborhood sold for less than 100k. Most of the families in the neighborhood survived on one salary and none were high paid attorneys.
I dunno where you are looking, Robert, but I haven't seen anything close to a 20% pop off of a winter bottom.[I'm monitoring 4+br SFH in Vienna/Oakton/Oak Hill]
NoVA watcher, no 20% bounce in Vienna/Oakton.Cara -- an irreconcilable housing bear -- says there has been a 17% bounce off of the Winter bottom in townhouses in Burke, VA.
robert,Since you asked, why I think this too shall pass, I'll give you these observations from the ground (which was also what I based the now things are selling for a good chunk of change more than they did in the winter).These are all way to preliminary to constitute a trend, and it's definitely premature to say that the spring bounce is abating but this is what's become clear over the past 3 weeks.1) What used to go under contract in under 1 week now takes 2 or 3. Why is this important? Because under 1 week means it probably had multiple bids and went for over asking. 3 weeks, it probably had 1 or 2 bids and needed some negotiation, hence sold for list or less.2) What it takes now to get sold in under a week (which was very common back in late March early April) is a price that's either 10-20k under the last comp, or an upgraded, move-in ready place being priced equal to a trashed out (but non-defective) REO. That's beyond what I'd call "competitive;y priced" that's what I'd call a steal.3) Buyers appear to be insanely, nit-pickily price sensitive. Recall that $290k SFH that went under in a weekend? Well there's another one of the same size but with a 2 car garage closer to the VRE, that's just sitting there for 4 weeks at $319k. WTF? Sure I can come up with reasons why I liked the $290k one better (I preferred it's neighborhood that has many of the larger homes as well as the tiny ones, as opposed to the $319k one that is instead only mixed with THs) but come on, it has a garage and it's closer to the VRE and arguable in the better elementary school district (same high school). Really, is no one willing to low-ball this and take it off the market when clearly the $290k one must have gone for at least $300k?4) The other 3 SFHs under $300k, one needs a lot of work and has been sitting for 3 months now, the other two took 3 weeks to go under contract, and one of those just came back out to active, even though it had had multiple bids (supposedly according to the listing). What happened to those other buyers? Did they all breathe a sigh of relief that they didn't end up in that tiny house and drop out? Or were none of those bids even close to the winning bid?5) Communities that have been pummeled with REOs have been continuing to slide. and sit. Bac in March both Keene Mill Woods and Greenfield Farms got 1 or 2 buyers to come back above the $200k mark. (Had had $150k during the winter, don't know the condition of those) What happened since then? 4 more listings of desperate sellers or REOs have come up, all with list prices under $210k, and they are sitting. That one dumb buyer was apparently all there were.So, while it's incredibly premature to call the end of this spring rally, and transactions are definitely up, I think there are already signs that it may end sooner rather than later. My take on this is that those buyers who were willing to bid up houses? Have already "won" their new house. Those who are left, for the most part, aren't willing to do that, and are acting much more cautiously (which of course is why they have been beaten out until now).You asked.Va_investor, why is this anything more than a guess? Just because of my belief that the normal market for THs is threefold, couples making under the median who want their long-time home cheaply but with reasonable room and the feel of a house, people looking to move-up the housing ladder seeing the TH as their first step on the gravy train, and cash-flow investors. All of which says that THs "should" be priced below 3x the median income. Right now they're right at 3x the median, and hence they still have a little ways to settle down. Because, the whole ladder method is not looking so good right now as a means of "getting into" a SFH by appreciation equity in your TH, so that segment of the normal market is weakened. That's what makes this more than just a guess.
Cara -You are one of the most analytic home buyer's I think I have ever come across. You do all the hard work. You know Burke better than any realtor I've ever talked to. I think you have very little downside risk from here. You seem very risk averse. You probably should wait for the uptrend to be confirmed. I hope you know what that looks like.
robert,Thanks Robert, I'll take that as a complement. Unfortunately I will probably miss the bottom regardless, waiting until we have enough downpayment to skip the bottom rung of the housing ladder and just go straight for the small (but not tiny) SFH. The bottom will probably be well passed by then, as I expect that to be this October-January for Burke.
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