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Thursday, May 28, 2009
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135 comments:
I just do enough thought to tell me that the bottom is near if not in, and a tempting short sale comes up today... It's still more than I want to pay... but it has serious potential, nice layout, backs to woods (though owned by another property not actual parkland), 1300 sq feet above ground... $290k, which is a fair going price for it's size and location... Gah. I think this may be another, must go see it to feel better about passing on it. And the big 1700 sq foot above ground short-sale at $280k (that was not in our preferred location) just went under contract in about 2 weeks (not unexpectedly, it is the biggest TH I've seen listed below $300k)
All-
Does anyone know when mortgage rates are locked in? I put a bid on a house a week ago and got a contract so I had my bank put together a pre-approval for that property and they gave us a 4.8% mortgage rate. Since then interest rates have gone up by almost 0.5%. I am pretty sure that the rate is not locked in until closing, but am not entirely sure. Does anyone know the answer to this. I can still easily afford the higher interest rate, but it is obviously much nicer if I get to keep the earlier rate.
If they are locked in at closing do you think I have leverage to keep the rate low by being a pain in their ass and threatening to report them for consumer fraud for drastically changing the loan agreements after I put the bid in? Although I am buying much less house than I can afford I imagine their are many people that would struggle if rates went up 0.5% after they made a bid on a new house.
Thanks in advance.
OK I'll admit that I am somewhat addicted to bubble blogs. I started following Bubblemeter back in the day (2005) and it helped me to avoid some terrible decisions. Switche to following NVHBF with it's inception. I've recently put a house under contract so I'm trying to wean myself from the blog. I do have a couple of thoughts to share though.
1) My decision to buy is more about personal timing than market timing. I don't think it is obvious anymore what the market will do in nominal prices going forward. I do think that real prices have not yet bottomed. National price/rent, price/income seems to suggest we are ~70% finished correcting. Regional stats look similar. What is still not at all clear to me is where the additional 30% will come from. Given the disparity of drops across the region, will those regions that have already dropped the most continue to drop the most? It does seem that investors putting a floor under prices would prevent this, though with rents now dropping relatively quickly, perhaps the floor isn't where they thought it was. The only other alternatives are a) everywhere drops equally b) those areas that haven't experienced the same degree of drops yet will drop fastest (I know this brings up the Arlington argument yet again) or c) we will never return to historical ratios.
2) This is not meant to be critical of anyone else. I have noticed that this whole housing bubble/ economics thing is an enormous time sink. I'm not sure that the money I've saved through improved decision making has been worth the decreased productivity. I've noticed that some on this blog are enormously bright and talented, yet for the amount of time dedicated to this pursuit and the quality of analysis they could have gotten a masters degree (or another?) and boosted their earning power enough that they don't really care about whether 300K townhouses will fall another 10%.
I'm sorry if some of these comments are too much aimed at anyone identifiable, and again, they are not really intended to be critical. More they are insights into some of my own decision to buy. To some extent it seemed that; likelihood of further drops (50%) x magnitude of further drops (10-20%) < potential for increased productivity if I try to redirect my attention.
I'll probably still be around some, but I'm hoping to be around a little less.
housebuyer
Read your agreement. It will say "lock" on it. Rates are usually locked as soon as the particular property has been chosen. You should have gotten or should get soon the good faith estimate, it will say whether the rate is locked or floating.
eponymous,
well if it was aimed at me I already have a PhD. I'm just ridiculously frugal. And CRT's a lawyer (and already owns his house).
This is really amazing how quickly things have changed. About 6 weeks ago I made a list of 15 places I wanted to look at and all of them went under contract within a week or two. Finally 3 of them have closed (one was 3.8% under asking, the second was 1.6% under asking, and the final was 1.4% over asking). I find it amazing that basically every property I am looking at is selling for the full asking price. Also all of them sold for 10-20% over the 2009 assessment.
http://franklymls.com/FX7017241
http://franklymls.com/FX7040095
http://franklymls.com/FX7031083
housebuyer,
Yup. the things worth looking at are the ones already priced right, and those are indeed going for at near or above asking. It's exactly what I've been seeing in Burke. (though there are signs of things slowing a tad now)
This is also normally the case in the springtime, the ask-close spread narrows in spring in a normal market. Hence the common wisdom that spring is the time to sell your house and fall is the time to buy.
Cara-
The official agreement they sent us said market as per lock in. But later in the day he emailed us the rates, but they were not on an official paper.
eponymous-
I agree that we could all be spending our time more productively, but I think most people on this blog enjoy what they are looking up. So rather than thinking of it as a waste of time consider it a hobby. I doubt you would tell someone that they should not watch TV, because they could get a higher degree instead.
housebuyer
Email him then. I don't know how to interpret "market as per lock in". That's gibberish to me. But I highly suspect you actually do have a lock, that would be normal practice. If not, I'd say now's the time, don't risk it. (says the absurdly risk-adverse me)
Neither education nor earning power ends with a PhD. CRT doesn't seem to be worried about things, so really he/she only needs to decide whether he enjoys this more than fishing (bubble watching can make a fine hobby). On the other hand, you do seem worried,and much too bright to spend countless hours worried about 30K price fluctuations.
Here's what happens when one buys overprices foreclosures:
7400 Dorothy CT, Springfield, VA 22153County sales record for that property
eponymous,
but I have intentionally chosen a non-renumerative career path. Hence why it matters when I do things like switch my retirement contributions from pure governement bonds to partially stock market, and why it matters how much I pay for my housing.
The truth of the matter is much closer to housebuyers statement. I just love data. I just love being informed.
(the other things I might want to do are even less renumerative... hence why I'm trying so hard to keep costs down)
Cara-
I just talked with a banker and I can't lock the rate in since the final contract has not yet been signed. It is a short sale, so although I have a ratified contract with the seller their bank has not agreed to the price yet(normally takes a couple of weeks). I guess I can always use the rate change as leverage to have their bank fully pay for any small thing that needs fixing in the house.
Eponymous
In the time it takes to tell people here to stop wasting their time and get another degree, you could be studying for another degree.
eponymous,
I have learned so much good info from bubble blogs.
I started reading them in '05 and soon realized that it was time to sell my home in NoVa, which I did.
The proceeds from the sale of my home make reading these blogs seem like a real good investment of my time ...
housebuyer,
yuck, that sucks. best of luck. Take comfort in the fact that your rate will be near historic lows, even if it's not exactly at them.
Are you getting the loan through the same bank as needs to approve the short sale? If so, then I guess this may work as a basis for negotiation, if not, I don't see how it matters. (I'm a wretched negotiator, hence why I'm focusing on already well-priced homes).
Cara-
I guess that is true even a 5.5% mortgage is still very good. I am not using the same bank, but I can always walk away from the contract. Currently nobody is living in the house and the people have stopped paying on it. So if they don't sell it now it will become a foreclosure which will increase the banks losses. It really is in their best interest to sell the house immediately.
Because I have not been given the HOA forms yet I can always refuse the agreements and use that as a way to walk away from the home and still get my earnest money back.
housebuyer,
I'm confused, why would walking away help you? I mean, yes, I agree its possible and should clearly still be an option....
(we have this problem a lot don't we?)
Cara-
It doesn't help me, but it can be used to negotiate a better deal from the sellers bank. Basically my opinion was that the house was worth $360K at a 4.8% interest rate. If the interest rate becomes 5.5% the house is worth closer to $330K. So I will do whatever I can to convince the bank of this so that I am not in a worse financial situation because they were slow at looking at our paperwork.
housebuyer,
Got it. Makes sense. Best of luck!!!
I've followed this blog for a while off and on and lately I'm concerned about this tone which seems to be increasing that implies that people who are looking to buy at this present time are suckers or fools.
I've been following the market in this area closely for the last 18 months, primarily in the PWC, western FFC, and eastern LC.
My wife and I migrated here from Pennsylvania (like many others it seems) 10 years ago. We rented in Manassas because that's what we could afford. About 5 years ago, we wanted to get into the housing market, but were quickly getting priced out during the bubble. Since I grew up with the "30 year fixed" mentality, I had no interest in forcing myself into a home with one of these "creative" mortgage products.
So, I waited, patiently. It turns out it was for the better personally anyway because there was a period in 2005 and 2006 where my job was marginalized and I my income was primarily self-employed, and my wife was switching careers and was unemployed for a while. The last 2-3 years have been more stable and focused.
PWC SFHs in Manassas became affordable for us a year ago, so we started looking pretty hardcore. I was a little disappointed with the condition of the inventory considering many of the homes we were looking at were not more than 10 years old. I started researching property histories a lot as well as assessments.
The bids I did put on a few homes in the Manassas area were only ones that had built in "recession proof" offers because I had a strong feeling prices were going to come down another 20%. One offer was rejected. I bid 301k on a 359k list, which was assessed a year ago at 357k. The home later sold to someone for 340k. I warned it would fall under 300k in value. It did. The 2009 assessment is 285k.
Another home we got out of because we waited nearly 3 months for a short sale response. I'm glad we did as we chose ultimately to not look in Manassas anymore, period.
The last 6 months we've concentrated our search in South Riding, Chantilly, Centreville, etc. We were pretty stubborn about wanting a SFH, but were open to TH in the area if we found the right deal.
This has been an interesting experience. In the last 4 months, of the 4 properties we've moved to bid on, we've missed out on all of them, usually getting outbid. The quality inventory in our price range (under 375k) has been snapped up at every opportunity and in areas like South Riding and Aldie specifically, I think we've moved into "demand" outweighing "supply" at this point. Properties are going under contract quite often now in under 7 days, sometimes 1-3.
Two and a half weeks ago we found a very reasonable TH in the area and moved on it right away because of this. Our bid was accepted by the seller and property put under contract. It's a short sale, so we're going to have to live through that process, but I'm confident that the home we picked was well priced for it's condition and size and is low enough to still be able to withstand another 10% loss without hurting us.
I've also noticed, now that FranklyMLS has quick access to "Sold" listings, that an extremely high percentage of the properties have sold for very close to whatever the list price was at the time, rarely much below 10k, sometimes above list. This is what is going on here, at least in this area, these last few months.
So back to my original comment, I am not convinced we are being suckered or conned into making a decision now. The 8k "bribe" as it's been referred to has little affect on our buying decision, we were planning to buy anyway, but it will, obviously, most certainly help. The low interest rates won't last forever, imo. Another 10-15% reduction in home values over the next year or so could easily be offset by rising interest rates. So I do think this is a good time to buy for first timers, and I think there's many people like me in the area who have been waiting to buy but haven't.
housebuyer: I'm looking at a different market (price-wise), and I saw a similar trend, but it ended. That is, about two months ago, everything that came on the market sold, sometimes within a day. Then a month ago the fury stopped. Since then, I've seen at least 3 of those houses that were under contract come back on the market. It appears that the feeding frenzy is over.
Cara (or was it Tabitha): The house with the tree in the middle is back on the market. If it had a basement, I'd buy it. But, I guess you can't have a tree and a basement:
http://www.franklymls.com/FX7020021
P.S. I have a PhD, too. And I love data. I love playing with data. Yes, I actually find data analysis fun. So, this is not a chore to me.
Housebuyer,
We sound like we're currently in similar situations, but I'd be very surprised if a bank will consider any concessions because the interest rate has gone up between the period of bid and ratification.
I just looked at the 'solds' for South Riding townhouses, and they are selling at their late-2002 prices:
http://franklymls.com/LO7015943
And SFH are selling for what TH's sold for at their peak:
http://franklymls.com/LO6999934
scippylisp,
I'm sorry if you've gotten that impression. The area you're looking in, the starter home rung is within spitting distance of the bottom in terms of fundamentals. If you can grab a short sale (which tend to be underpriced for the hassle factor), then you can get a bottom price now, even if the firm bottom isn't here yet.
The question people have been asking and getting rude about is how big is the fence-sitter contingent and how does that group compare in number to the potential supply. I'll be working on a firm number this weekend. But I think it clearly depends on the area you're looking in. Once properties come under $400k they become accessible to a huge number of people, and the question we have to answer is, exactly how many people. I'll be looking at how many renters in FFX made over $60k in 2007, and the size of the lack of first-time buyers cumulatively up to 2007 (compared to 1998) to try to figure this out. It may very well be, that with the current pace of foreclosures, priced out buyers exceed potential REOs.
The other thing is, if now is the right time for you to buy, there's nothing wrong about taking the $8k buyer bribe. Our distaste for it is more correctly pointed at our government for manipulating the market in a way that is opposite of our personal best interests, for those of us who don't qualify or fear that this money is going directly to the seller (possibly amplified) and not really to us at all.
I bought cisco as a knife catcher, I bought a hybrid under the tax rebate. I made these mistakes with small amounts of money. I don't want to repeat them with a house.
Scippylisp-
I agree with you and have been pushing your last point that a drop in prices is likely to be more than offset by an increase in interest rates.
Although be careful lower interest rates only help you if you plan on staying in the house for a lengthy period of time. Either way this may not be the best time, but I find it unlikely that it will be a bad time. Goodluck I am in your boat and short sales cna be a mess dealing with the banks.
Too many PhDs on this blog, makes dangerous reading, because
1) PhDs take a little bit pedantic/academic attitude when analyzing problems.
2) Gives you are a skewed picture of the motives that buyers have, since PhDs are in general more rational and supposedly risk-averse (with their own money at least) than general population, this can get you in the too much of a contarian mood.
Re: housebuyer, "a drop in prices is likely to be more than offset by an increase in interest rates."
I actually see it backwards, that an increase in interest rates will be offset by a decrease in prices. That might sound just like two ways of thinking about the same thing, but I think in addition to a decrease in prices caused by rising interest rates there will continue to be declines (in some areas moreso than others, and with some housing types moreso than other) due to the general unravelling of the bubble and the recession.
Scippylisp-
I agree that the bank probably will not accept terms due to an increase in interest rates. I think they will negotiate if they think we will walk away, because this would cost them many thousands if not tens of thousands of dollars to relist and go through the whole process again.
Scippylisp,
In my opinion the market still has *plenty* of room to fall. Out today:
1.37% of all first mortgages in the U.S. entered foreclosure proceedings in Q1, a record jump from 1.08% in Q4 and the highest level on record. Mortgage delinquencies leaped to 9.12%, also a record. Total loans in foreclosure process also struck a new high of 3.85% from 3.3% in Q4.
That said, bonds took a serious hit yesterday and we may have seen the lows on rates. If you're comfortable buying for the price you got and have no problem staying in the place for several years, I think you'll be OK. If less than 3-5 years, I'd reconsider.
housebuyer,
Also now is spring. By the time you threaten to walk, it will be past peak time for them to remarket the property. Because actually taking it to the court house will take at least two weeks? (I actually have no idea, how long notice of trustee's sale to court house steps takes but you get the picture).
It's just that, you have to be willing to follow through. And while you may be able to get your earnest money back? You need to be willing to walk even if that never returns to you (or costs $400 to get back in small claims court).
Or maybe you're a better actor than I, and you don't need to be totally serious to pull it off. But the level of seriousness may have an impact on how much of a concession you can get. Keep in mind, most buyers are viewing well-maintained foreclosures as infinitely more attractive than short sales right now, so they might be able to get a higher price.
Scippy,
I think part of it is that people here are looking in a wide array of areas. Those of us looking at Arlington may not be convinced there's a bottom but we're usually clueless about what's going on in Manassas. Sometimes people make remarks about buying right now without considering *where* someone is looking at buying. I'm moving to Vienna soon and I can already see a difference in market feel between the two places. Just do your own research, if you spend the time on it you should trust your own judgment.
I don't quite get your interest rate argument though. A rise in interest rates will lower the amount you can sell your home for. If the market has also weakened outside of interest rates you'll be hit with a double-whammy.
housebuyer said...
I agree that we could all be spending our time more productively, but I think most people on this blog enjoy what they are looking up.Given my local price declines, and using bubble blogs to help form my opinions, I figure I have “saved” at least $100K. Rather productive if you asked me.
I believe, given the public information now available, this is really the first time on a national and local level that one can somewhat easily track economic indicators of a certain market that just a few years ago would be very hard, if not impossible to do. This in turn is as much a social experiment as an economic one. Some folks either ignore or fail to seek the information and chose poorly.
robert,
and my friends, who haven't bought yet or need to refinance, all just defer to me to tell them when it's safe. Outsourcing. I've prevented two premature buyings so far in DC, and helped two refinances. (I think they're crazy to just believe me like that, but its not their hobby). The one person I can't advise is the one trying to sell her home for 1 million dollars in Rockville. She would not appreciate it, and has the means and intellect to reach her own conclusions. But she did do a 5% price reduction finally... And, heck, she'll be buying up in Boston which is just now entering free-fall, so why rush the sale here?
NoVaWatcher...
Just fyi, the sold you brought up for the South Riding TH is definitely on the lower end of the scale. The range is pretty wide given the different styles/sizes/amenities of course, but I'd say the typical sale in the last 6 months is more in the 345-395k range, with Stone Ridge and Aldie 325-375k.
Cara,
Sorry if my original post came off as standoffish. There's a lot of interesting information here that I've used over the months, so I didn't want to give the impression that I felt otherwise.
While I don't have PhD, you can put me in the camp that has always analyzed numbers as well. The scary thing, or should I say the humbling thing, is that without the financial or real estate background and ability to look at things within specific contexts, all that analyzing doesn't amount to much.
As such, there are a lot posts here that at least make me rethink my own opinions, and I see that as a good thing.
scippylisp,
yikes $325k and up for a TH? Those better be nice ones with 2000 sq feet, 2 car garages and the light from heaven shining down on them.
If so, um, no complaints I guess.
scippylisp,
ah, but that's why the frankly solds are so fabulous! And the zip code specific data on listings and solds in the MRIS, and the info on greatschools.net, and the topology maps!!! Gotta get the topology maps. There are also many sources for rough estimates of truly local data on income distribution, job location, time-of-ownership.
I think this blog helps a lot in getting a wider perspective on the region. Because while I may not be considering Huntington or Alexandria because of the schools, other buyers are. And while I may very easily get a mortgage, shocks to the financial system may make it much harder for everyone else.
(one other positive recent indicator for the economy is the declining volatility index of the stock market, in case people havent' picked up on that one yet).
Konstantin, you're not really Stephen Colbert and decrying the use of one's head and facts, vs. relying on one's "gut", when making huge purchases, are you? :-)
I don't think people are coming here expecting that posters are a representative set of buyers in general. I like this site because I like data too, and enjoy free riding on the hard work others have done analyzing those data, finding interesting articles, etc.
Cara-
I am pretty much exclusively looking at townhouses right next to the vienna/dunn loring metro stops. You basically can't get anything for under $325K and places like you described are closer to $450K.
It really is amazing how much more expensive places are when you get close to the orange line. Although I guess it makes sense there are a lot of people in our situation that don't like commuting and are willing to a pay for the convenience. It should also let us get rid of a car, which saves ~5K a year counting depreciation, insurance, taxes, and upkeep.
Scrippylisp: by "low end of the scale", do you mean price-wise or quality-wise? Quality-wise, I'd put that at mid-scale (1 car garage, vs. no garage or 2-car garage, decent width, 3br, ~2000 sq ft).
I can confidently say that in early/mid 2002, this:
http://franklymls.com/LO7015943
would have sold for ~$250k.
---
And this:
would have sold for ~$275k
http://franklymls.com/LO7023536
----
and this:
http://franklymls.com/LO6970935
would have sold for ~$300k.
Keep in mind that they were going for 10% more by late 2002. Either way, if you like the area, I'd wait until Fall, when the competition dries up.
You can also put me the camp that has mixed feelings about those who bought homes during the bubble.
Of the people I associated with who bought from 2004-2007, most of them did so thinking they were going to sell their home before their mortgage adjusted. While they felt compelled to buy at the time, they also got caught up into the whole attitude shift:
Before: "Buying a home is a good long term investment".
After: "Buying a home is a great short term investment".
This was bolstered by seeing some of their friends sell their homes from 2003-2005, taking their profits, and flipping other properties.
My big issue is that most of these people I know have one common thread: they all feel like they were screwed.
Most are now trying to get a modification, but feel they deserve it. They were victims, even though they willingly bought into the system. One in particular wants the nearly 6 figure HELOC he took out also modified or absolved in some fashion.
In a broader sense, I agree with them. I believe it's the responsibility of mortgage brokers, banks, and govt. regulation to turn down people who can't afford to buy a home or a home at a particular price. We all know that didn't happen.
If lenders were irresponsible in lending should the buyers be totally responsible in a market crash? It's up for debate I guess.
"Scippylisp said...
I've followed this blog for a while off and on and lately I'm concerned about this tone which seems to be increasing that implies that people who are looking to buy at this present time are suckers or fools. "
I sometimes worry about that. There can be an adverse attraction problem that arises. The permabulls like lance left years ago. As for the moderate voices, as more and more of them buy, they quit posting leaving only the "too bearish for reality" crowd as the ones on this site. I dont think that has happened here -- yet.
I think we all at some level know the bottom is coming into view. Thus, the "knifecatchers" call is maybe a bit of cognative dissonance more than being too bearish. Its kinda like driving on the highway. Everyone driving faster than you is a "maniac" and everyone driving slower than you is a "moron".
So yeah, there is a negative tone here, but I think its more rooted in frustration than our belief that buyers today truly are fools. As long as we can recognize this very well may be bottom (whether we like it or not), this blog is fine.
That said, if the day ever comes where the only posters here are any one of us and Contrarian -- its best we leave -- the bottom has long past us by!
Ace,
Nah, just trying to monetize my own degree and not sure that spending time on this blog helps (probably need to attend some sessions with internet addicts anonymous). So the eponymous has some wisdom in his words. Maybe half of the folks on this blog should start doing some real estate consulting on the side.
As an aside, my own experience shows that facts and numbers usually go through some strange filters in people's head when they make big decisions. They switch from being risk-averse to risk-seeking, jump from long periods of inertia to the rush of some spontaneous moves, etc. So it is so much easier to make serious money off some other people's money or small business opportunity (when you have a good idea/ability to manage it) than from actively managing you own portfolio, be it real estate or stocks.
housebuyer,
but south riding isn't near a metro is it? (hence my criteria for what it would have to have in order to command those prices) There is a premium for car-free living. Whether the current going rate for that premium will stand or not is another question, that I can't answer.
Have you considered the VRE? would that work for your commute? Walking distance to the VRE is not anywhere near that price. It may not be a good option for you, however, depends on the work subsidies for transport and where you're headed.
(have I mentioned how happy I am about how much further our money goes in Burke? just kidding, I know I keep saying it).
NoVawatcher,
I suppose I meant a mix of quality and price. A lot of the TH selling in SR and Stone Ridge are closer in size in style to your third link (Bald Eagle)with the 2-car garage, brick fronts, etc. In fact, that particular home was anomaly from a price standpoint imo. I'd say the typical listing for that home over the last 6 months would have been 350-400k depending on the amenities.
A lot of those Golf View style THs are listing for 300-350k I think.
We've been looking more towards the size of the Bald Eagle home. In fact, I remember when that listing came up. We were going to go see it and it went under between the time we set up an appt. and the day we went.
Cara-
Yeah I don't know anything about the neighborhoods in discussion. I was just commenting that a lot of people on this blog look down on any TH in the 400+ range regardless of the location. I actually need a car either way because I work in Tysons and public transportation here is awful. The metro is for my fiancee. So the locations we were looking at work for both of us.
Contrarian,
I've seen the Dulles flight path map, spent a little time out there with some friends observing such, and work in the western side of Chantilly not too far south of the tip of the Airport boundary.
There are a few areas in SR that are apparently affected, but I've never noticed anything pervasive personally (like the house you're in or the ground around you shaking). From the path map, it seems the more potentially pervasive area is around Brambleton and southern Ashburn.
housebuyer,
yeah, I need a car too (anacostia). We're a one car household after selling both of ours and consolidating to a hybrid.
Depending on where she works, Burke and the VRE could still be an option. (although definitely every mile closer to Tysons counts big time!)
The problem along the Orange line is that those priced out close-in move out one or two stops and get added to the natural pool of buyers who would want Vienna anyway. This is definitely most severe along the orange line compared to blue or yellow or green as far as I can tell. Even red doesn't have this bad of an effect of pushing high income buyers out into the next stop, messing up the pricing there. (at least once you get out as far as the many stops in Rockville)
while the current market is almost healthy be aware the foreclosure tsunamai to come.
with alt-a and 5/25s still set to recast expect better deals soon.
Scippy,
I found your history with Manassas to be fascinating. Thank you for sharing. If only I had the time, I would share a summary of my own search in this area. I will say this, though: prices are not improving whatsoever. Curious. It's almost like all the bidders out there know where to stop, with very few exceptions.
Housebuyer,
What began as an information-gathering mission has certainly turned into something of an enjoyable hobby for me, now that we have bought, though my kids and husband keep me on an increasingly tight leash. As a political theory/history-type person who only passed statistics in college by taking it pass/fail, I never thought data could be so fascinating, but it is.
But I think it goes beyond personal satisfaction. Can you imagine if the American populace were anywhere near as informed as the brilliant and colorful commentators here? (OK, here comes my political theory side.) If only, IF ONLY more people "wasted" their "wastable" time dipping into intense discussions about economics and learning to think outside of the box. Where would we be as a nation if there were more independent thinkers, people capable of questioning reality?
Oh, and housebuyer, I know you have already resolved where you stand RE: interest rate, but quickly, you pay to lock in a rate. That is how you know you have done so.
I think significant portions of the market, those where volume has returned and homes other than foreclosures are selling in a timely fashion, are very near a sort of local bottom.
I say "local" because depending which way things go moving forward we may or may not see further declines.
In places where buying is similar or cheaper than renting and where incomes support current prices at the current interest rates there is nothing fundamentally unsound about the market, but those fundamentals may change.
If interest rates begin to rise again we may see the market return to its downward spiral, even something in the 6-7% range, while historically low, would have a lot of this region hurting again.
Other potential factors are the renewal or non-renewal of buyer's bribes by congress, the overall economy and the resumption of foreclosures.
One thing we can be certain we won't see is some kind of sharp "bounce" up from the bottom. It will probably be a minimum of several years of stagnation before we see any meaningful upward movement in prices.
Also, as others have already said. I don't really consider my participation on this blog to be in competition with my work or education. I enjoy watching things unfold and see this as a free time activity. (one reason I haven't been around much lately)
jason--
from yesterday, in regards to my friends figuring out what to do about their house, which is worth about $270K and they owe about $500K with a constantly adjusting rate:
you said there is no way they can get a principal write-down. if so, it is hopeless. do you (or anyone?) have advice as to the most orderly way they can give up on the house? deed in lieu? stop paying, but stay til the deputies show up? there are plenty of vacant houses for rent in their neighborhood. move into one of those now? under what circumstances could the bank pursue them for $?
i know a real estate lawyer could help, but i need to present options they could pursue so they get motivated to call one.
(and please know that i have my own reservations about the way they handle their finances, but that is neither here nor there now.)
Is anyone here familiar with the neighborhood just south of 50 just outside of the beltway? It is an area I looked at a bit before moving, but I never did a real serious investigation of it.
It is a bit farther out than I would like, but I like that many of the homes in that area have large lots by NoVA standards.
Here are a couple examples:
http://franklymls.com/FX7034221
http://franklymls.com/FX7046868
Scippylisp,
I have never said anyone buying in Manassas or further out places is foolish. I think those will be the first to bottom.
I actually think the tone of this blog recently has changed toward housing boosters. I feel like one of the few people on this blog who feels inside the Beltway still has much more room to fall.
It would be interesting to see data on the last bad market here in the early 90s. Everything I have read said that the outer suburbs dropped quicker than the inner suburbs. But ultimately every area dropped.
Leroy
LOVE those!!! Wow! Especially the first one, I'm a sucker for a red house, and for azaleas and it backs to a park. Over $600k still feels painfully expensive, but at least you're getting a house in what appears to be great condition and a beautiful lot... if that were $450k and a good commute for you, I'd say who cares about the neighborhood.
But no, sadly I know nothing about the neighborhood. Try greatschools.net to get an initial feel. (school quality as proxy for neighborhood quality)
Leroy,
I'm familiar with that area. It's very nice. The Woodson HS pyramid is one of the best in Fairfax County.
It's also coveted for being convenient to Rt 50 (drive to DC), Dunn Loring (Metro to DC), or driving up Gallows Road to Tysons.
scippylisp, congrats. I'm not judging, you, nor will I tell you it's a bad idea. You did your own research, and for that I'm sure you'll be fine. I don't know why it feels like you're lecturing us or seeking approval, but I wish you success nonetheless.
Given current rates of late mortgage payments at 12% and constantly rising serious defaults it is difficult to explain bottom happening now.
Even when you go to the local level --- inventory numbers are also a little bit difficult for me to comprehend. I did talk to a realtor who is my friend and she was telling me that all the good condos in arlington are gone, that there is no more good deals available. Did have an interesting discussion with anielarke couple of threads back and she has the same opinion. At the same time if you look at the solds data for major new condo building either on franklymls or arlington tax assessments website it seems that there is plenty of inventory there. I would agree though that if you look for a relatively cheap townhome/sfh, there is not much choice today.
Leroy-
I have looked into that area a lot. I am mostly in the TH market so I can't say much about the individual properties. The area though is nice and as an earlier poster said Woodson is a great school. Probably the second best high school behind Langley(a much pricier area). I can tell you that the TH are selling very quickly and generally for 5-10% above the assessment values. Both of the properties you showed are asking 20% above the assessed value so their might be some room to negotiate.
Some of the new condo buildings in DC have a few short sales. It will be interesting to see if I'm seeing a few flukes or the beginning of a large chunk of them. A lot of neighborhoods in DC (West End, Logan, U St, Columbia Heights, Chinatown) had a lot of new condo buildings built in the 2005-07 era of 0% down, ARMs.
Law firms (which employ a lot of this market) are doing tons of layoffs right now. It's unclear how many but looks like it will be a large percentage.
tbw, (re DC condo shorts)
green shoots! (or our version thereof)
Cara, red flag alert (not that you need one, I just can't help myself):
I love azaleas too. But when buying a house, multiple photos of big azaleas all over the lot means that the house may have little to offer (otherwise, why not instead show more interior photos?) and definitely means the lot is very shady. If you want a bright house, that's not good.
Also, azaleas are easy to grow here, if you put them in the right spot and make sure you water them when needed. You can buy little ones at Lowe's etc. for low prices. So spend your $$$ on a nice house and grow your own :-)!
Leroy, the lights on route 50 often are not timed (maybe they never are), so commuting to the District from that location can be a pain, with a lot of stoplights. Sometimes it's smooth sailing.
Ace,
LOL. See, that's part of why I keep coming here. When I actually find a house that I love, I'll need you guys to provide some realism. Because I can be just as irrational as anyone else.
(I do still love that tree house with no basement).
Tabitha,
I've had several friends go through this.
Based on their experience, the banks refused a short sale. Foreclosure was inevitable. They decided to move before being forced to find a place fast.
But I think I would consider staying and saving the cash, however, until actually foreclosed on, as long as I had everything mostly packed up in the basement/sold at a yard sale/moved into storage, etc. (That NY Times guy has been living free for 8 months).
I do believe a deficiency judgment is possible. But it's difficult to find solid evidence that it's taking place. Here's a discussion Frank Llosa had on the subject.
Here is a "Walk Away" calculator.
I think they should definitely make phone calls to see if they can get a better interest rate, etc. Something worked out might be better in the long run.
Leroy,
The area you describe is Mantua. It is a forest-like area with large lots. Congressman Connolly lives there.
It looks like a significant % of owners are retirees who are staying put.
Doug (who used to argue with you here on substitution effect) said he used to live there and that it is one of the most desirable areas of NoVA. The schools are said to be excellent.
Some of the homes with large lots I have checked on Prosperity road were built in the 1950's with septic tank, well-water and oil heating, and such properties are staying unsold for several months.
I also hear that because of the big trees in the area, when there is a storm, power companies may take longer to fix outages--sometimes 2--3 days.
Cara said: "The problem along the Orange line is that those priced out close-in move out one or two stops and get added to the natural pool of buyers who would want Vienna anyway. This is definitely most severe along the orange line compared to blue or yellow or green as far as I can tell."
Agree. The premium one pays to buy within walking distance of the Ballston-Rosslyn Metrorail line is hefty and isn't going away. If anything, I expect it to go up as the region's ceaseless traffic nightmares intensify.
While I agree with Leroy? that we may just be in a local minima (as opposed to a global one, mathematically speaking), I do think that with respect to national housing data and news we need to be cautious in applying those to the DC area.
As this graphic from the NYTimes shows, the timing of both the peak and the decent from positive to negative appreciation, is different in every market. While DC is close to the national timing, the descent was a bit sooner, and the ascent may likewise be a bit sooner. No way to tell, other than to continually ask, do these national numbers reflect what's going on locally or not. If we're doing better than the nation in unemployment, we should also fare better in terms of foreclosures... Though those delinquency rates are jaw-dropping.
Ace,
If you know of any way to commute from Fairfax County to DC by car that is not a pain I would be very, very, very interested. :)
Obviously the stoplights on Rt. 50 are a pain if you keep hitting them. But isn't that a problem on Rt. 29, Little River Turnpike, Braddock Road, Old Keene Mill Rd, and 123?
I mean unless you have someone to carpool with or a hybrid car (and I imagine they will eventually lift the hybrid exception on I-66) you are stuck dealing with stoplights or Metro.
But again, if you know some good backroads I'd love to hear them.
Tom,
Actually the most recent study shows the region's traffic has gotten better:
"Even more striking than the decrease in vehicle miles traveled was the drop in the amount of congestion measured during the morning and afternoon rushes. The report found congestion during those three-hour peak travel times declined 24 percent, to levels not seen since 2002."
http://www.washingtonpost.com/
wp-dyn/content/article/2009/05/
19/AR2009051903534.html
Also if businesses in Tysons and Reston really embrace the Rosslyn-Ballston style (moving offices toward the Metro stops, eliminating open air parking, charging for parking), then a lot of Northern Virginia's traffic will go to the Metro. Someone living in Loudoun might be incentivized to take the new Silver Line in 2015 rather than drive down the Greenway or Route 7.
housebuyer
Also if you need the orange line, have you considered buying in Reston and taking the shuttle bus to Vienna (I know, not you, your fiancee) for a few years until the metro comes out your way? It might be slightly painful for a while, but could pay off in equity in the long run...
I know, now is not the time to be giving these suggestions when you already have a bid in. But just in case that deal becomes untractable, I wanted to present other options. (says me that never listens to anyone else's recommendations, just hardens my own opinions on areas to live)
Thanks for the info everyone. That all matches up pretty well with what I thought I already knew. I wouldn't have to worry about making my way all the way in to the District often, so it could potentially be a good area. Although I haven't actually visited either of those houses they appear nice, but still somewhat over priced.
If you are interested in taking on a lot more work there is always this one:
http://franklymls.com/FX7031507
I am nowhere near buying as it will likely be at least a couple years before I return to the area, but it is interesting to look.
TBW, ha!
My "solution" to the Fairfax and farther out commute (because there is no metro stop near my employer) was to buy a fixer upper house in Arlington before the bubble really took off. :-) Not very helpful, I know.
Cara,
I think it will be great when the Wiehle Avenue Silver Line stop opens. I suspect Vienna Metro's parking lots will no longer fill up at 8:30 AM. Of course, Metro will react to this new capacity by quadrupling the number of reserved spaces to create false shortage.
Thanks for the NYT link. I did not realize that Phoenix and Vegas had years with 50% increases! That is clearly one reason for the huge crash -- not just the overabundance of land in those areas. They must have really been trading those houses like stocks in those cities.
tbw,
oh, you hadn't seen that? Oh man, my dream job would definitely be working in the NYTimes graphic department. It's stunning, isn't it?
I keep telling my friends who brought $150k of equity from Connecticut to their Reston TH off Wiehle (only to watch at least $75k of it disappear so far), that it'll all be okay because the new metro line will bring their house price back up and then they can pay cash for a nice SFH next to me in Burke. A little wishful thinking, perhaps, but what are you gonna do?
The Orange Line is packed to capacity now. I shudder to think what will happen when the the Silver Line comes.
I've taken to walking to work (Arlington to DC) more often, even though it is 4 miles each way, because Metro is often so horrible.
paKa,
Awesome! And here I thought my definition of less than 2 miles equals walking distance was a bit batty. (I love encorporating exercise into my routine, because I hate exercise for its own sake).
Cara, most people look at me funny when I tell them that I try to walk to work once a week, so it's nice to get a positive reaction. Besides, it's a really lovely walk--across the Key Bridge, through Georgetown, past the White House, etc.
Unfortunately I only do it in the Spring/Fall, so the summer nastiness will force me back underground every day to sweat with the masses.
I also hate exercising for exercising's sake, and that's why I sign up to run races. Fear is a powerful motivator. :)
http://franklymls.com/FX7043252#remarks
All the well priced SFHs in Burke are coming back onto the market after going under contract. WTF?
The above one is my "best value in Burke" Below is a lesser contender:
http://franklymls.com/FX7032759
and this one has come back out and gone back under
http://franklymls.com/FX7037835
is it too evocative to call this a market that's barely keeping it's head above water? Hmm, shouldn't let analogies persuade judgement.
Cara-
We looked out towards Reston for a couple of days, but most of our friends and family are in Vienna/Fairfax so the slight cost savings didn't appear worth it to us.
I am also the one doing most of the house hunting and telling the fiancee that she would just need to deal with the commute just doesn't sound like a winning way to start a marriage.
She already thinks we should be spending more. Most of the places we have been looking at are less than 2X our income. I just don't want to go much higher, because I can not replace my salary if I ever lose my job.
paKa,
yeah that's a gorgeous walk. I'd totally do it at least once a week if I were you. I take it biking is too dangerous-feeling there, and there's no easy showers at work?
People here bike as much as 15 miles to work everyday in all but the dead of winter. They're crazy, and I'm starting to worry about their weight loss, one of them's getting frighteningly skinny.
Given what I have read about Metro's plans this should be a win for Orange Line riders. Fewer far away people parking at Vienna or West Falls Church and more trains running between East Falls Church and Rosslyn.
That should remove some of the "Orange Crush."
The people being hurt is anyone who takes the Blue Line to Foggy Bottom or Farragut West. Half of the Blue Line trains are becoming Yellow Line trains. They have to do that or else the Rosslyn Tunnel would be too packed during rush hour.
housebuyer,
Yeah. Arguing that she needs a to deal with a terrible commute to save a few hundred a month on the mortgage when she already thinks you're being too conservative? Yup, not going to win that one.
I assume you've also considered our method of putting down a larger chunk of change to keep the mortgage to within 2x income but get a nicer house. It involves more waiting and accummulating, but less potential for devasting risk, while fulfilling her wants for a nicer place.
TBW, I hope you are right about it bringing relief to the Orange Line. I'm not holding my breath, though. And I don't mean to sound like I don't want Metro to go to Tysons--I certainly do. Driving there is pure hell.
Cara, I'm scared of bikes, both riding on them and driving next to them, or I would consider it.
paKa,
me too, I only like to ride bikes on real honest to goodness bike paths. With a helmet.
(yes, this whole risk-adversion thing is part of my whole personality, not just monetary)
contrarion,
that's through Mish, but it's ultimately from our friend Mr. Mortgage.
I'll let you all know how my mom's goes but so far they've been incredibly quick (as well they should for a client with 40% equity even after declining prices).
Contrarian said ...The negative consequences of 5.5% rates are enormous.
Funny, I don't remember you saying 4.75% mortgage rates would have enormous positive consequences.
Still, you have hit the mark as the most significant factor driving home prices up or down -- not shadow inventory, tsunami of foreclosures, mass layoffs, etc.
So I heard about Google coming to the area in an article noting Hilton and Volvo. I wondered why it did not receive similar fan fare but I guess it's the small number of employees (also not the new company HQ). But anyways, still interesting:
Fairfax County is welcoming the latest arrival to its tech corridor. Google has opened a new office in Reston where it will offer services to 10 different cabinet agencies of the federal government. The office is brightly colored and environmentally friendly, like all Google offices, and has exercise balls and patio furniture mingled with sleek computer terminals and glass conference rooms.
The new branch will bring a modest 30 jobs to Fairfax County, which has lost several thousand jobs in the past year. Officials say Google's name will build Reston's reputation and attract many more businesses in the future.
contrarion
True, true!
My issue with this particular analysis is he's discussing refi's, and taking about people who put in all their paperwork and are waiting around until they can lock 4.5%. To which I say, really? How many people play the lottery with their house? (okay, outside of the bubble mania) If 4.75% wasn't a good enough rate to make it worth your while to refinance why were you bothering? And isn't this only going to be the kicker for those with enough equity to be in normal refinances?? Who shouldn't be in danger of foreclosure anyway (without job loss)
His other argument about people trying to close on houses and being disqualified at the last minute due to the rate change is slightly more plausible, but again, given that the 36% back-end DTI is the most stringent criteria for most people right now, and allows you to put a goodly chunk of your monthly net pay towards your mortgage, how many people are really buying on that hairy edge right now? Why would you in a downward environment be stretching yourself to pay even more interest on your house? Seems like the marginal players in both cases to me.
Although, yes, 5.5% would definitely re-adjust most people's search criteria.
Seriously, Robert? You think interest rates are a bigger driver than employment perspectives?
I can't wait to see what this house goes for. It was on the market for about a week I thought about putting a bid on it, but I just couldn't justify having a house that big. It just didn't appear worth all of the work. It has now been under contract about a month so it will probably close this weekend.
http://franklymls.com/FX7040878
Cara said...My issue with this particular analysis is he's discussing refi's, and taking about people who put in all their paperwork and are waiting around until they can lock 4.5%. To which I say, really?
This guy says alot of things. I remember when he said the 8K credit would cause all the sidelined sellers to re-list their properties, causing inventory to explode.
Here he is 6 months ago explaining how 5.5% isnt really the going rate because next to no-one will qualify for rates that low.
http://mrmortgage.ml-implode.com/2008/11/28/mr-mortgage-in-depth-look-at-mortgage-rates55-is-not-a-reality-for-most/
Now he is back saying if rates go all the way up to 5.5% (a rate he told us none of us could get anyway) it "could be as bad as you can imagine"!!!!!!
Contrarian, Not to quibble, but the Dow went higher in 2007 than its 2000 level.
Cara, Robert, I'm sorry I can't provide a link, but I recall seeing refereed empirical research that employment levels and related variables were a more important predictor of housing demand than were interest rates.
Contrarian,
The NASDAQ includes only a narrow basket of industries (e.g., tech-related). Neither it nor relationships to gold are what most laypersons and probably, most economists, think of when they are thinking of measures of "the stock market." The S&P is a much broader index but it is correlated with the Dow in results.
Contrarian-
I don't know very much about Prechter, so I decided to see what comes up when I googled him. The first video he basically talked about the massive amount of inflation that we incurred during the this decade when everything is priced in terms of real money(gold).
This immediately made me lose respect for him. He claims that dollars are a fake currency and gold is real. I can agree that money is fake, but it is no more fake than gold. Gold has some minimal uses, but mostly has value because people think it has value(exactly the same as money).
If he wanted to make his point he should have at least picked something that has real value(oil, steel, grain, meat...)
So I am going to agree with the anonymous although I have very few facts about the guy.
Ace-
If you want the whole market use the russel 3000 or the welshire 5000. Both of these also went up over that time frame. The dividends they paid were close to inflation so the returns are basically real returns if you ignore both effects. Yet again pricing things in gold makes no sense.
I could show you a graph of everything priced in microchips or something far more useful than gold and it would show the exact opposite picture, because microchips have fallen dramatically in price. Every year you get better chips for less money...
Here's an url to an article re: indexes.
http://www.businessweek.com/investor/content/jul2007/pi20070716_449585.htm
HB, I agree with you. I was taking issue with using unconventional measures of stock market performance to argue that the SM had hit a peak in 2000 vs. 2007.
I made a comment about Mr. Mortgage and now there is this strange tangent about stock market peaks and Precther calls of peaks and bottoms. Did I miss something?
Either way, while on the subject of Precther (one of MY favorite subjects), Contrarian, I do not criticize him for calling peak in 2000 if he did, good for him. What I DO criticize him for is calling (in 1990) for Dow 400 and Great Depression II to hit in 1991 or 1992 -- how can you possibly take seriously someone who has been oh so wrong for oh so long?
Cara said: All the well priced SFHs in Burke are coming back onto the market after going under contract. WTF?I saw the same thing in Oakton (22124) and Oak Hill (20171 east of FFX County Pkwy): a bunch of houses that were under contract came back on the market.
cara/nova,
my daily updates are mostly houses coming back on the market after being under contract out here, too. what is driving this phenomenon?
"Cara said...No way to tell, other than to continually ask, do these national numbers reflect what's going on locally or not. If we're doing better than the nation in unemployment, we should also fare better in terms of foreclosures... Though those delinquency rates are jaw-dropping."
I agree Cara. Regarding that staggeringly high 12+% delinquency rate, it says here our local (Virginia) rate is 4.4%. It would be nice to know if this was higher or lower than before.
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/28/AR2009052801712.html
It's the new apprisal system created where you pay 400 or more for an apprisal..its open ended..you have to give your CC number to them and then they charge whatever they determine is the final cost of the apprisal and they are coming in low and people are walking. I do know one house on Davis Ford appraised higer (twice) than than the apprisal after May 1 by thousands. It had appraised at 500+ for the original loan but the people messed up their paperwork and it fell thru at closing..the May 1st apprisal came in at 470,000 and sellers refused to reduce sale price. It had already been reduced to 87% of 08 assessment.
Saying you shouldn't price things in gold, or saying you should price things in oil or computer chips is missing the point.
Almost no gold is destroyed or used up in manufacturing, and very little is mined compared to the current existing inventory, making it a store of value.
(Oil is used up at a prodigious rate, and is being replaced at near-peak levels in recent years, but the supply fluctuates with price, profit and demand incentives. These factors make it a very poor store of value. Ditto computer chips.)
Gold is a store of value, because countries and SAVERS around the world view it as such and view it as a hedge against inflation--a hedge against your governments STEALING YOUR MONEY through printing more paper money.
Paper money doesn't even require any paper anymore, only a key press on a computer at the Fed.
So if the balance in your retirement accounts on Jan 1 2000 was $400K and you've managed to keep it at $400K today, you've actually LOST A LOT OF RETIREMENT WEALTH, because the spend-and-debt republicans and now the bailout-Dems have TAKEN it from you to help the rich, the war profiteers, and now the clueless high-lifestyle homedebtors, housing gamblers, arrogant domestic car company execs, greedy auto unions, and foolish, greedy banks.
If you are a fellow SAVER, and/or hope to someday have some kind of non-poverty retirement, you should be ANGRY, and you should be looking at the DOW PRICED IN GOLD.
Prices of a whole array of items starting with food, cars, gasoline and overseas vacations, are MUCH more expensive now than in 1999, and barring a New Depression, will probably be permanently so.
(If China somehow decides to divest it's U.S. dollar holdings, I hope you like the TV, stereo, or foreign car you have now, becuase it might be the last one you can ever afford to buy.)
So, the money you kept in the Dow/S&P/Nasdaq since 1999 has likely permanently lost a big part of its value as a resource for your retirement spending--and in the meantime you've lost about 9 years of time before retirement in which to make up the gap.
The housing crash only increases this pain, for owners who didn't get out. The job offshoring in recent years and the job cuts now also have only increased the pain.
This is the first reason some of us savers watch Dow/Gold and invest in gold/silver. America is broke, and it's showing in the dollar and all denominated assets, like Dow stocks.
Among the other reasons is the fact that the Dow/Gold has dropped from 42 to 9 in recent years--and the last two times it did this, it only turned around at between 1.0 and 3.0. As in, maybe this time the turn is at Dow=4000/Gold=4000, Dow=4500/Gold=1500, etc.
Interestingly, house prices didn't go up all that much when priced in gold, but since Americans don't get paid in gold and don't collect much gold, this didn't provide much pain relief.
But Chinese and Indians DO collect gold for wealth, which is why the Chinese might get the excellent idea to use all the dollars they are holding to buy up all the American real estate and corporate assets they can. If they can beat the Oil Arabs to it.
World War III fought without guns but using our own currency as weapons against us. That is the most likely way our aging empire will end.
cnn has this poll:
Quick Vote
Would you buy a home now?
Yes, housing prices have hit bottom.
No, the real estate market still has further to drop.
Can you guess the results? over 32,000 votes, and it's a 50/50 tie.
Tabitha, I can expound on my Manassas experiences as the topics present themselves. I remember reading some of your various comments during your househunting experience.
Oh, and I had a property I was interested and put a bid on (but was outbid from my understanding) also go from under contract to active today after being under for two months.
I just assumed the buyers fell through or got tired of waiting. It was a short sale. The thing is, I wonder why we weren't called as we were essentially the 2nd offer.
Very interesting to hear about other properties going back to active status.
Cara, I found two polls on cnn,
one I think was from early in the year, and it says 87% not yet or not even close and 11% yes buy.
The other one say 67% yes buy, and 33% not yet.
I don't think either of these is what you saw!
oops, scott, I was the one who cited the cnn poll. it was on the same page as an article about troubled mortgage rates increasing:
http://tinyurl.com/muqk3f
but here is a gem, lots of charts and graphs for those who love data:
http://tinyurl.com/kojo2r
i don't know anything about the businessinsider.com. but i liked the charts.
.
Cara:
I have noticed your frequent use of words: "risk adverse" and "risk adversion".
Perhaps your Ph.D. is not in English lit ;)
The words most people use are "risk averse" and "risk aversion".
P.S.: I'm just a techie who spends most of the time in crunching numbers ;)
Have a wonderful evening!
.
Alex,
my undergrad was a double in English and physics, but I am also dyslexic.... Thanks for the correction, we'll see if I can add this to my list of things to watch out for when I write...
Scott-
I think you are giving too much power to China. I agree they own all of our debt and they have a lot of gold. I still contend if the US and Europe told people gold it was worthless than it would be. So there is no way other countries will use their gold to buy our real assets.
Second, if you think China can use our money against us you are mistaken. What do you think would happen if we stopped buying their products. Their GDP would fall. The stability of the country is already being called into question when the growth slowed to 5%. At negative growth the government might even fail.
China will also have a lot of trouble in the coming decades as their population ages seeing they don't have enough youth to replace the workers.
When people say China will take over the world it reminds me of when everyone said the same about Japan.
I may be wrong, but I really doubt it. Either way the risk of this is why I only have half my saving in US assets and the other half in foreign assets.
"I think you are giving too much power to China. I agree they own all of our debt and they have a lot of gold. I still contend if the US and Europe told people gold it was worthless than it would be. So there is no way other countries will use their gold to buy our real assets."
The gold bugs should please explain the Free Silver debates. FDR confiscated gold and it went away for 70 years
"When people say China will take over the world it reminds me of when everyone said the same about Japan."
When I hear stories about the Chinese 'swooping' in to 'snatch' up baragains, I think of the Japanese buying Rockefellar center and getting their ass handed to them on a platter years later.
Heck, now that we're on the 80s, when I saw all of the leveraged buy-outs and private equity crap happening in the summer of 2007, I thought to myself 'holy late-80s, Batman, time to sell!'. And I did.
History doesn't repeat itself, but it sure does rhyme!
For Housebuyer: To lock in an interest rate you must have an accepted offer. Sounds as if the bank on your short sale has not accepted your offer. If you decide to proceed with this purchase, when the offer is accepted you can tell your lender to lock in the interest rate. Typically an interest rate lock is good for 30 to 60 days. You can sometimes pay a point to lock in for a longer period, but you would have to determine if it is worth the money for the security of the lock. You should actually sign a document called a "Lock in Agreement" which shows the interest rate you are agreeing to. You can then e-mail, fax or deliver that document to your lender, but you should not just rely on an e-mail telling the lender to lock in the rate. Keep the lock in agreement and bring it to settlement with you to make sure everything is as you agreed to. Not to muddy the waters, but you might also want to talk to your lender about a "float down." This means that you have a one time chance to float down to a lower interest rate up to about a week before settlement. Again, get everything in writing from the lender. Lenders are reluctant to do the float downs, and it takes vigilance to continue to monitor rates but it could be worth it. If you end up with a higher rate and want to negotiate a price with the short sale lender, you should go directly to the lender. Your settlement company will be in contact with the lender because the short sale lender will have to provide documents to the settlement company. Find out who the contact person is and work your way up the chain until you find a decision maker.
For Leroy: Three of the properties you mentioned are under contract. Two of them are on Prosperity Avenue which is a single lane cut-through road between Little River Turnpike and Lee Highway. it gets very backed up during rush hours so it might not be that appealing. However, the houses are on very large lots and mostly sit off the road, so they could be nice. The one at $400,000 is an acre lot and is being marketed as a tear down -- it is pretty grim. The house in Mantua is nice and that is a good area with an interesting recent history. About 20 years ago the Texaco gas tank farm on Pickett Rd. had an underground gas/oil leak. Some of it got into the Mantua area and about 20 to 30 houses were affected by the spill. Although few houses in the large Mantua community were affected, the spill really caused the Mantua housing market to tank (pun intended). As part of its restoration and clean up work, Texaco donated a huge amount of money to Mantua Elementary School for extra teachers, computers, etc. This really put the elementary school on the map and attracted people back to the neighborhood. It is a very appealing area now. The overwrought house in Parklawn (FX7040878) is a short sale and is under contract after about 9 months on the market. It is the typical contractor McMansion with bits and pieces of other jobs he was working on making up a very strange house. Let's hope it will be a teardown too.
And for Konstantin: I haven't had time to quiz the sales offices at the condos I bought but will see what I can learn. I basically bought short sales in Arlington last winter, flipped them and did well enough to upgrade to the 7 Orange Line condos. I am looking for a townhouse now in North Arlington, not necessarily near a Metro. For under $700K, there are only 9 townhouses on the market and 16 (including 2 I missed) are under contract.
I was too bored to finish my PhD but my spouse did, so I don't get as thrilled by the data as others on this site. I have amassed a nice assortment of rental properties and done well with flips by following my gut. So if Scippylisp and others want to follow their guts about the right time to buy, I encourage them to do so.
anielarke-
Thanks for the advice.
Contrarian-
If your timing is off by a decade it doesn't matter if you are right or wrong. If you miss-time an investment thesis buy a decade you will lose all of your money. Imagine what would have happened to you if you bought gold in 1990 and shorted the stock market at 1990. You would have lost everything so who cares if your thesis plays out in the future.
Finally, if you wait long enough basically any thesis will proved right. Of course if you wait long enough you will have a bear market. Guess what I can say we will have a new high on the S&P. It may take a long time, but sooner or later I will be proved correct.
Contrarian -- the reason the wavers seem correct is because there is one of them calling for doom pretty much all of the time. Then, when doom hits, the wavers go back and find the prophet who predicted it the best and anoint him the new chosen one.
Housebuyer is correct in criticizing the timing issue -- off by a decade -- ehh no matter...Harry Dent predicted dow 40,000 in 2008. Give him enough time, he will be right too.
And if off by a decade is acceptable, imagine how bad its going to suck for the homebuyer who uses the wave to predict 90% off all homes. Exurban homes are 50% off now. If they stagnate for a few years then move higher starting in 2013 the 90% off waver will assume this is a dead cat bounce and wait...as they move even higher in 2014, 2015, 2016. Still, if off by a decade is acceptable they may wait even longer as prices move higher in 2017, 2018, 2019. Their adherence to the wave will cost them tens if not hundreds of thousands of dollars. How sad...
arkey,
I'm not sure that the new higher price and it being paid upfront is the issue, but definitely, the new appraisal rules are an extremely likely suspect. If the new rules have in some way made whoever's doing appraisals now more cautious about covering their own butt, and less dependent on repeat business, it could have quite a disruptive affect. Given this anecdotal yet widespread evidence of properties coming out of contract left and right, I'd say you've hit the nail on the head.
(especially problematic if the buyer was only able to put 3.5% down... they have no wiggle room to spare, for someone with 20 down, they could still chose to buy it with less bank-recognized equity, though clearly be less happy about it)
Arkey and Cara: The problem with current appraisals is not an excess of caution but rather a lack of comps. If you have bought in area of short sales which were 20 to 30% less than a "normal" sale, it is very difficult to come up with 3 to 6 recent sales in the price range needed. I could have had the problem with the short sales I flipped in Arlington and found it best to choose buyers wisely. I priced the properties so that I could get more than one offer and avoid the FHA 3.5% down and VA no money down buyers. Many of the buyers who were looking for bargains were cautious and had saved for a 20% down payment. They were more willing to buy a lesser property with their 20% down than a better property with 3.5% down. Their decision, but it worked to my benefit. Also, when flipping a property FHA requires a 3 month period between the original purchase and the re-sale. I was not willing to wait for 3 months (the renovations did not take that long) to settle on the flips. I did not have any appraisal problems on 9 flips because all were sold with conventional financing. The FHA and VA buyers are eager to grab the bargains but they don't have the money to get to settlement if the appraisal can't hit the numbers needed. Originally, I got the best of the short sales because the VA and FHA buyers could not compete with me. Timing the market is an interesting paper exercise, but actually getting into the game brings better results. You have instincts for a reason.
thanks anielarke.
The properties in question where I was looking were all short-sales or REOs themselves. Any thoughts?
Though, your argument may still apply, because there have been ridiculously few sales (of any kind) of this low-end 1000 sq ft single family home housing. The short, I'm guessing fell through because the bank baulked at the low number.(it was a slightly bigger property with more available comps).
anielarke
and kudos for being savy enough not to take simply the highest bid, but actually the surest one for funding. The VA and FHA buyers are in a bind, they need to bid higher in order to be more attractive than those with more money and less stringent criteria, but the higher they bid the less likely the funding is to come through based on the appraisal. Such that even if they "win" they won't be able to close.
So, have you had any appraisals since the new rules went into effect? Notice any secular changes at all?
anielarke,
good job! it seems that you have very good management skills.
are you buying properties on orange line as long-term rentals? or think it will be possible to flip them in near term (i seriously doubt it).
still cannot believe these salesmen at liberty/phoenix/hawthorn telling me that they only let people rent if their job is relocated, etc. not that i believed them, but lying so brazenly is not exactly great business strategy.
also just wondering --- is RE your full-time job, or a side gig?
Gold did not "go away for 70 years".
The government just decided that it was so valuable, that only the government should hold it, not REGULAR americans.
And by the way, you could still buy all the gold you wanted in the form of collectible coins and jewelry. Just not bullion and gold/silver backed paper certificates. Because the government wanted your wealth to GO DOWN and it's wealth to go UP when it debased our currency. Which it did right after it took the gold.
And, this didn't affect any other country, so they went right on accumulating gold for wealth.
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