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Friday, May 29, 2009
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99 comments:
"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?My error, The Anonymous. It was one of the other technicians you criticized about 2000 (Y2K). "1991/92 was just as the S&L crisis unraveled. I know a widow who lost her savings in Jeffry Levitt's Old Court Savings and Loan.
My place in the Alexandria immunozone, lost about 10% in 91/92 and the appreciation was stalled for a decade.
Things were "made right" when prices began rising after 2000.
What some call "the bubble" was a coiled spring cut loose after 10 years under tension.
Now that prices have pulled back 10% again, will I see them go flat for 5 years and then jump up in 2016?
Who knows. Seems pointless to speculate when I have lots of work to do.
"Seems pointless to speculate when I have lots of work to do."
Then why are you here? To sit back and watch the fireworks display?
This sounds really cyclical to me. Traders are saying treasury yields going up means people won't prepay mortgages, so they sell treasuries causing the yields to go up... Hopefully this does not imply the cycle continues.
"NEW YORK (MarketWatch) -- Treasury prices dropped Wednesday, pushing 10-year yields to six-month highs and sharply reversing earlier gains, moves which traders attributed to investors adjusting their holdings in expectation that higher mortgage rates would extend the duration of their portfolio.
Duration is a measure of the sensitivity of the price of a fixed-income asset to a change in interest rates and is partially determined by maturity.
"When mortgage rates go up, people don't prepay their mortgages so a portfolio of mortgages extend," said Gary Pollack, head of fixed-income trading at Deutsche Bank's private-wealth management unit. "If it gets too long, you have to sell something, and you tend to sell Treasurys because they are more liquid.""
I was fooling around on Redfin last night, playing around with the "exclude short sales" checkbox. I guess I wasn't shocked that a decent % of the inventory in Arlington was from short sales, but what did somewhat surprise me was the complete lack of normal inventory in the lower price bracket, even in areas S of 50. In Arlington, setting these parameters:
detached SFR
<$500k
2+ bathrooms
not a short sale
There is exactly one house for sale north of Columbia Pike in the entire county. And that house is also listed as land and mentioned as a tear-down.
I wonder if we aren't going to see another massive dropoff in sales as the lower inventory gets sold off. And that could lead to a surge in median sales price simply due to a changing mix.
And that isn't even including the mortgage rate surge.
Fred,
yeah it's important to keep the mix in mind when interpreting the median. Thanks for checking on this.
housebuyer, these things are beyond my ken. One would think it couldn't possibly spiral because some other force will come along to push it back, but what that restoring force might be, I don't know.
Fred, the problem that Arlington has to contend with is that potential buyers will purchase further out at significantly lower prices. I can understand why someone wouldn't want to sell a house they believe is worth 600 or 700k for only 400k. This trend will probably remain for quite some time as people see these same 600k houses (which are really only worth 400k in Arlington) selling further out for 250k. Sure people want to live close in, who doesn't? But when you think of the reduced payments, the possibility of a 15 year mortgage, all the extra disposable income, etc I think a lot of people will stay away from the closer in areas as long as the price difference is so large and people are not so certain that these inner areas won't further deflate.
Hang in there, Fred, I just got another email from Zillow telling me my Arl. house's value has dropped another 1%. :-) I assume they haven't factored in a couple of houses in the neighborhood, which sold quickly at high asking prices, which surprised me. On the other hand, lots of "sitters" are still out there...when those finally sell, I expect #s to fall further.
Ace, well it sounds like you should sell your house now while prices are still high. Then you can come back in two years and buy the exact same house back as a foreclosure for far less and have the difference in the bank. :)
Fred: I did the same thing for Fairfax County.
Of the 482 results, 165 were short sales. That's 34% of the <$500k housing stock.
I then decided to look at the other price points:
<$500k 34%
$550-$650k 9.1%
$700-800k 3.4%
$800-1mil 2.4%
1mil-1.25 3.6% (!)
1.25-1.5m 2.4%
$1.5mil+ 1.9% (6 houses)
Haha, Jeff, you're right - I missed that boat already. I should have sold in 2006 when the place was worth a lot more! But too many dependents - renting was out of the question. So I would have been a knife catcher with whatever I would have bought back then.
seriously Jeff, don't knock Ace's plan. If it weren't for folks like him there wouldn't be any houses for sale in the future. When his target house finally reaches his target price (relative to the equity extraction still available), someone will be able to buy his current house.
;)
Ace-
You always could have tried to sell to someone with the contingency that they rented to you for the cost of the mortgage. There were plenty of bubble chasers who would have loved the deal :-D Although you would have needed to avoid putting that money in the market or you would have been in trouble.
For prudent buyers looking to move up like yourself the drop in housing prices is great since the move up house falls more dollars than your current house.
NOVA,
Good data. Arlington was always kind of a pipe dream for a first-time buyer of a SFR, so there is little doubt that FFX Co. is where I'll end up.
Just had an interesting update about a friend of a friend. Girl and her boyfriend are buying a new construction TH in FFX co. Everything I've heard about this would make people here cringe (totally overextending themselves). Well, I guess the they got to the appraisal point, and it came in at $50k under. And they absolutely can not come up with the difference, so they are trying to back out. But they ordered some upgrades in the new build, and I guess the builder wants them to stay on the hook for the cost of the upgrades. Is that even possible? (second-hand info, so my friend may have messed up some details)
Fred-
First I will say that I don't know the legal part, but I would assume that it is a non-asset backed claim so other than hurt the peoples credit scores the builder can't really get anything out of them. I mean if credit card companies can't get money out of people there is no way the builder will be able to.
Second, I am surprised the builder will not lower the price of the TH. If they don't the same thing will happen with every buyer in the development. There are virtually no buyers of TH that have enough money to put an extra 50K down in addition to the down payment.
Changing the american dream?Brilliant well argued case for why we don't have to live this way and some steps that could be taken to make renting sfh's more widespread(from patrick.net)
"Then why are you here? To sit back and watch the fireworks display?"I have equity in my modest SFH in the immunozone, about as much as my 401(k).
In other venues, I read in to and comment on factors that affect stock, bond funds, interest rates. This helps me think it through.
When people started yelling that I was about to "lose" money, it seemed worth my time to observe and occasionally comment.
After all, this is the "Northern Virginia Housing Bubble Fallout" Blog, not the coffee shop support group for renters to snipe at homeowners.
My expectation was that the immunozone might fall back 10% (very approximately) as it did in 1991/92.
Both here and in Bubblemeter, posts are appearing from bitter people who are tired of waiting for prices to collapse.
Here's a fascinating thread.The salient part:
"the fact that you are resorting to memes "its different here" is just sad. Guess what, EVERY PLACE IS DIFFERENT. THe reason Detroit is down at 95 levels is because of demographics. You have a dying city - homes for 800,000 people (1950s population), and 500,000 residents. That is "unique" or some would say DIFFERENT about detroit."and,
"Sorry to take this out on you. Ive been waiting patiently since 2002 for this to burst - Ive pretty much made a second career out of studying this thing. Im very upset because I am not going to see the things I want to see in my area - ive accepted that.""Still, it drives me nuts when others who are still drinking the bubble koolaid hook line and sinker. I want to prevent others from experiencing the same pain I have for 7 years now. Some areas will burst in absurdly spectacular ways - others will not."Arlington, Alexandria, DC, other select choice areas... the immunozone.
Life goes on.
@J@
Fair enough, thanks for the explanation.
It still sounds as if you're getting enjoyment out of listening to the snipers in addition to the more tangible benefit of the factual (or even early rumor) information that gets listed here. But so are we all. So are we all.
Just curious, is there a point at which you would consider selling to extract that equity? With such low inventories, you still have the opportunity to lock in some quite hefty profits (equal to your 401k!!!) Have you considered doing what many on here did and selling now and renting for a while while this all plays out? (they mostly sold before 2007, but if your market has only sunk say 10% off peak, you're still doing quite well, and face a rabid group of hungry buyers...)
Cara,
It's a nice idea, but it will take time to change people's minds.
I'm happy to have had the opportunity to rent for 3 years -- I have more sympathy for tenants now. We rented single-family houses as the writer is promoting.
The minuses we experienced:
(1) I had very few friendly neighbor attitudes when we rented. Some were downright rude, even though they grudgingly admitted that we were quiet and friendly. But we were "renters" (one called us that all the time). They worried about their neighborhood values.
I have a family friend who is renting and has a hostile couple for neighbors. The couple constantly writes bogus complaints to the HOA, which comes back to the landlord. My friend even saw the neighbor crouched in the bushes looking for infractions.
(2) Landlord inspections -- yuck. It was a frantic time getting everything white-glove. If you own you can let something slide for a while.
(3) Unresolved issues. Landlords aren't always good at a quick response, leaving you in a terrible lurch, especially if you have children. Try living with mud coming out of the water faucets for weeks on end with five family members. The landlord insisted we use bottled water, and they paid for some of it and dug a new well, but I would have preferred to be let out of the lease and had our next move paid for.
(4) Pets. Yes, it's possible to find places that allow them, but it can be complicated. And they are so often limited to one small pet. A lot of people seem to want more.
I agree than landlord/tenant rules need to be looked at harder. It's nearly impossible to win in court in Virginia if your landlord takes all of your security deposit, for example. (We had one pay for new siding with ours). It's much easier to win + damages for something like that in a place like Massachusetts.
Good overview of the situations with interest rates here:
http://www.msnbc.msn.com/id/30988937/
The Fed has many tools to bring rates down again. It could increase how much it intends to spend on Treasury purchases or mortgage-backed securities. It could also decide to simply buy longer-dated Treasurys, said David Ader, government bond strategist at RBS Greenwich Capital. Recently, the Fed has been focusing on buying shorter-term government debt.
But if the Fed buys more Treasurys, some investors worry the central bank's moves could have unintended consequences. That's because when the Fed buys the debt that the government issues, it is essentially creating money. And that can cause inflation and weaken the value of the dollar against other major currencies.
A plunge in the dollar and high inflation might scare away foreign investors from buying U.S. debt, said Mike Larson, a real estate analyst with Weiss Research. And that would cause Treasury yields to rise eventually anyway, he said.
"The Fed is really backed into a corner," Larson said.Interestingly, rates on ARMS have not risen as much as the rate on a 30-year fixed (per the table from bankrate). I wonder if that would cause more people to take out ARMs now that the spread is higher. It would still seem incredibly stupid to me to pass up locking in 5.27% and instead take a 5/1 ARM at 4.67% or a 7/1 ARM at 5.13% and gamble with where interest rates will be in 5 or 7 years, but I can see people doing it...
Harriet,
I could not agree more with your astute observations. I think there comes a point when you have children that you long for freedom.
#1 Neighbors
We always felt spied upon, because our (accidental) landlords asked (unhappy about renters) neighbors to "keep an eye on things." There are plenty of eyes on a family of nine to begin with, and that added pressure made us crazy.
#2 Inspections
If I had had one more pre-inspection frantic cleaning spree while hot and pregnant and hopeless about ever getting fingerprints off their flat white paint, I would have needed a straightjacket. The worst is the walk-through, when the landlord goes around with pursed lips and makes comments designed to make you cringe. Not to mention the times the landlord or his minions would "stop by."
#3 Issues
Our landlords have been universally awful about fixing things. We went without A/C for the summer, heat for the winter, water for a week, toilets for months on end. We had siding blown off for almost a year, a huge fallen tree over our neighbor's fence for five months, no garage door for seven months. It can be almost cute and romantic, I think, if it's just you and your husband, but add newborns or seven little potty-users and it's not funny.
#4 Pets
The prohibition on more than one pet (which I admit led to some creative pet-hiding sometimes) led directly to an accumulation of pet promises that resulted in us now having seven cats (our two, seller left her four, plus the promised kitten), a Shiloh shepherd puppy, two rabbits ("because we CAN, Mommy!"), a gerbil, a hermit crab, and a fish. With negotiations underway for chickens, maybe a goat or two. And a horse.
I still think there is great merit in renting, but for us, we had reached the end of our road, and our rope.
Has anyone read this book? I posted a link to some of its charts yesterday:
www.moremortgagemeltdown.com
http://activerain.com/blogs/jamnjohnny
Active Rain is a blog of real estate agents across he country. You get field observations of different market and conditions. Geez, Nv. isn't still in the dumpster like the media likes to think and the PW market bottom in the last quarter of 08..just as I said or thought..still just my opinion but I believe it. We have had 3 cons months of price increase and 13 months od decreasing inventory. Yes, its the bottom because everybody seems to agree its only first tier or under 400 than is selling so that has to be where the increaes in prices are
Yeah Arkey, RE agents are great market analysts. I don't think you can find more than one out of five hundred that understands their respective markets half as well as anybody in these threads understand ours. They've been continuously calling the market bottom for three years. Activerain is the biggest joke of a site ever. It's a whole lot of back-patting and realtor koolaid-drinking morons, and no actual quantitative analysis.
Go ahead and call the bottom, that's fine. Take a wild guess what will happen when rates go higher. Or when the record amount of current foreclosures hit the market. Or if the fallout from the moratorium floods the market.
Kevin, everybody likes a little butt but nobody likes a bitter butt. I'm not to keen on realtors either but I trust their everyday observations over people pouring over data and reading articles anytime. Cab drivers know where to party, bartenders know who is trouble and any doorman worth his salt knows where the game is. Buying houses from data is a hoot because data will never catch human emotions and humans drive housing markets. If a person has decided they want a home..come hell or high water, they will find that home. Ask Tabitha. I'm not so sure why you detest the people you say you wish to become, a home owner, or if you just detest everybody. You can be well educated but still ignorant. I really don't know what next month will be like much less a year from now and none of you do. This is something none of the experts have ever seen. It could turn on a dime or dive..who knows for sure..NOBODY..but I do know if a person is in the market to buy a home, they will buy a home when they find one that they like and can afford and that shouldn't make others bitter or be used to justify calling them names or looking down their noses for having some delusion of superior knowledge.
Hey,
Paul Krugman has an opinion piece on the inflation debate!!
NYTimes The Big Inflation Scarechoice quote to get you to read more:
" Is there a risk that we’ll have inflation after the economy recovers? That’s the claim of those who look at projections that federal debt may rise to more than 100 percent of G.D.P. and say that America will eventually have to inflate away that debt — that is, drive up prices so that the real value of the debt is reduced.
Such things have happened in the past. For example, France ultimately inflated away much of the debt it incurred while fighting World War I.
But more modern examples are lacking. Over the past two decades, Belgium, Canada and, of course, Japan have all gone through episodes when debt exceeded 100 percent of G.D.P. And the United States itself emerged from World War II with debt exceeding 120 percent of G.D.P. In none of these cases did governments resort to inflation to resolve their problems."I, for one, feel better now. Of course the fact that I believe pretty much everything Paul Krugman says, is, in and of itself, pretty questionable.
Arkey: I've had so many realtors lie to my face, especially, about market conditions, that I won't trust a realtor I don't know.
Would you trust a used-car salesman? Would you trust a used-house salesman?
Arkey, you could have just said, I'm in PWC, Kevin, the foreclosure rate here is dropping rapidly, there's less than a month of inventory under $200k, and buying a house is cheaper than renting the same (for the starter level stuff). That would have done it. And had the added bonus of actually being persuasive.
Realtors (or good realtors) are good at rapidly reading their clients. Heck, Jeff Royce figured out stuff about our housing wants before we had even realized them ourselves. But this sense is highly tuned to judging pricing and wants in the current market, and has pretty much never been used to predict future market conditions.
Can we please all just back off the ad hominem attacks? They're not productive (and they're coming from both sides)
NoVawatcher..your calling realtors liars because they spend their time showing homes instead of reseraching markets and reading blogs? They really have very little control for what a house lists for or sells for..thats between a buyer and a seller. They don't ste interest rates, they don't have degrees in economics, they broker and handle real estate legal matters. Now, if you told me a number of realtors have lied to you about needing a title search, a home inspection, or things that they are truely responsible for, I might have a little more respect for your opinion.
arkey, you can't get a mortgage without a title search and home inspection... how could they lie about that?
You were the one that was positing them as market predictors, therefor that's the basis they're being attacked on...
Arkey: no, I call them liars because they lied to my face.
So what do folks here think about the buy/rent disparity in some parts (all parts?) of North Arlington?
A house across the street from me just went on the market for $625,000, and there are several houses on the street (inc mine) that rent for $1750 - $2200.
The last few that sold went from between $525,000 for a perfectly good though cosmetically shabby place, to $625,000 for a very nice one.
That means it's over $1000 a month cheaper to rent in the neighbourhood. This can't continue, right? Something's got to give?
Arkey: "Kevin, everybody likes a little butt but nobody likes a bitter butt. I'm not to keen on realtors either but I trust their everyday observations over people pouring over data and reading articles anytime. Cab drivers know where to party, bartenders know who is trouble and any doorman worth his salt knows where the game is. Buying houses from data is a hoot because data will never catch human emotions and humans drive housing markets."
I just would caution that building market analysis from collections of anecdotal evidence from not-very-smart (or honest) people particularly ones who are seemingly entirely self-serving is a rather scary way to guide your decisions regarding the biggest purchase in your life.
"I'm not so sure why you detest the people you say you wish to become, a home owner, or if you just detest everybody."
When have I ever said anything even vaguely implying that I detest homeowners? I do detest liars such as yourself. Now I challenge you to back that statement up. Figures that someone as dishonest and intellectually vacuous as yourself would take their market analysis from activerain, the pinnacle of market stupidity.
Cara..Don't tell me what I should post to keep kevin from frothing. Most of you aren't very selective in word usage feeling free to call people liars and implying stupidity on the vast majority. In case the numbers haven't come out yet..news blip..people are buying in record numbers.
Cara: "Arkey, you could have just said, I'm in PWC, Kevin, the foreclosure rate here is dropping rapidly, there's less than a month of inventory under $200k, and buying a house is cheaper than renting the same (for the starter level stuff). That would have done it. And had the added bonus of actually being persuasive."
The sad thing Cara is that I don't think it's stupid to buy a house there and might even have applauded Arkey for posting a comment like that. It's really sad when a person's insecurity makes them into nothing but a fight-picking jerk.
@J@,
The comment you quote about Detroit and excess capacity is interesting. It notes that Detroit had 800,000 people in 1950 and now about 500,000 residents.
According to Census data, DC peaked in 1950 at 802,178 residents. It hit a low in the 2000 Census at 572,059 and now is up a little to 591,833.
So where are all the excess homes? Maybe there are a lot of boarded up, empty homes in the bad neighborhoods?
I imagine the expansion of GWU ate up some residential space in Foggy Bottom. I think K Street and Farragut Square also used to have residential spaces? But that cannot account for the space those additional 200,000 took up.
I suppose there were many more families (and larger families at that) in the 1950s living in DC and that might make part of the difference.
Kevin and NoVawatcher...what have I lied about and exactly what lie has been told. You people need help. You sit on this blog all day feeding each other Bull hockie and justify attacking anybody that doesn't conform to your analysis. Active Rain is a realtors blog. I didn't think I needed to go into depth explaining that a realtors blog is just that to all you self proclaimed educated wonderkins. I didn't say that it was anything but a tool to read various blogs of markets across the country that doesn't jive with the bational media gloom and doom and I find interesting.
arkey
The second half of the comment was directed at the whole blog not just you. It's ramped up in recent weeks because of Robert getting everyone all in a tizzy.
We may be having a bit of a Catch-22 moment. "They're trying to kill me! They're not trying to kill you they're shooting at everyone! How does that mean they're not trying to kill me?"
My apologies for advocating a more collegial atmosphere.
To be more specific, you could say that either they lied, or didn't know their markets.
Just a few examples from memory:
-----------
Me: "Why should I pay $800k for this place, when I could rent a nearly identical place for $3k a month".
Realtor A: "You can't rent places like this for that cheap. Where did you see those rentals?"
Me: "Right on your web site".
-----------
Realtor B: "This model house has been selling for $800k" (she then shows me a listing of the same model a few blocks over in Vienna, and listing for $800k as proof that the house she is showing is priced right).
Me: "The last sales for this model occurred a few months ago at $670 and $730k, nearly $100k less than you claimed Not to mention that at least one of those backed to parkland, and they both were districted for Oakton, rather than South Lakes highschool. So no, it has not been selling for $800k. In fact, no model of this house has ever sold for that much."
That was in 2008
"is there a point at which you would consider selling to extract that equity? "
That's a hard one but perhaps this is the answer.
About April of 2008, I began moving my 401(k) and SEP-Ira money from the wild-n-crazy growth stock funds to the interest type accounts. This was as the DJIA dropped through 12,500 from the peak of over 14,000.
I watched from the sidelines, sitting on cash (earning .5% in some cases but better than losing 30%) until April of this year.
Since April, I have made small investments in equities and am now about $30K ahead, that's in 2 months. I did not catch the peak nor the bottom.
Since I don't want to move my stuff, prep my place for sale, even if I knew that prices would fall 20%, it would not be worth my time to prep, sell, move, rent, find another house, buy, move again. Loans, lawyers, paperwork, realtors, accountants. Not worth it.
Why would I torture myself and for what? 20% is about $120,000 on my place.
I would have to catch the peak exactly right and buy exactly at the trough, and if I didn't buy again on schedule, I either pay taxes or lose a future deduction.
50% would be different. What would cause the immunozone to fall to half or a third, all predictions that people have made and made loudly.
The reality is that prices are firm to slightly lower in Arlington/Alexandria/DC. I'm seeing about a 10% drop.
I don't expect anyone to agree but my guess is that this is the bottom. We'll have a few years of flat prices, then the coiled spring will break loose.
Tabitha and Harriet,
We had some renter families in our neighborhood when I was a kid back in the 1980s who were bad neighbors. One let the grass in his yard get up to four feet high. As you can imagine, not popular in suburban Virginia. ;)
Of course we also had good renter families. I think most people separate the bad renters from good renters.
"what have I lied about and exactly what lie has been told"
Well we can start with the one posted 37 minutes ago:
"I'm not so sure why you detest the people you say you wish to become, a home owner, or if you just detest everybody."
5/29/09 1:32 PM
Read Cara's post about what kind of comment you could have made if you weren't so ignorant and insecure that you couldn't resist lashing out at me. Listen, I know you're seeking some kind of reassurance. Fine, go read activerain til the cows come home. I'm not saying those RE agents are wrong, but I am sure I'd get a more honest and accurate portrait from people working in my barber shop, and I wouldn't be so shameful as to post them here as anecdotal market evidence. The tune hasn't changed one bit from those agents. They were chasing people into a bubbled market for years. I've watched it the whole time, wondering in horror how many ignorant people might read their "opinions" and not actually consider how self-serving and dishonest they can be. I've now confirmed that the number stands at at least 1.
NoVAWatcher,
I agree with you that realtors are big liars. One wrinkle though with one of your examples is that under the Fair Housing Act realtors are not supposed to comment on the relative strengths of schools.
So while you know and she knows that Oakton has a much better reputation than South Lakes, the realtor can get in trouble if she were to admit that.
It's one of the most idiotic rules I have ever heard of. Especially in this day and age of school rankings and tons of information provided by schools on websites.
Cara,
Thanks for the inflation article by Krugman. That one will be fun to bring up later if he's wrong. ;-)
Tabitha,
The absolute worst thing that happened to us as renters -- we rented a new house built by the landlord, who left all the bolts off the septic system lids. Thank Heaven my Dad discovered it while helping us a few weeks after move-in. (He's the sort to investigate things like that). Terrifying. It was right next to where 7 kids were playing (including the LL's own grandchildren).
Little Johnny Jewel
That is the $300k question now isn't it?
Do things have to come down to rental parity? Sadly that answer is no. Buyers with more money can choose to keep buying. This creates a city-like market where transient and lower income folks rent, and more permanent and wealthy folks own. That may happen in Arlington. It just depends on how many buyers there are that make or have saved enough money to support elevated housing prices there and choose to do so.
Rent-vs-owning parity is one equilibrium state, and is the proper equilibrium in stable areas with room for expansion and no particular hot-spots of popularity. Does that sound like DC to you? In a way yes, in a way no.
Possible mechanisms for reaching that equilibrium again. DC had more first-time buyers during the bubble than it did in 1998. These people have little paid-down equity and are more vulnerable to job losses (by virtue of being newer). If that pulls down prices in cool areas of DC that will pull away some of the Arlington buyers. If job losses start hitting Arlington, that would create more motivated sellers who might price lower than the market to make a quick sale. If more trouble happens in the jumbo market the >1million stuff will fall, making the 600k stuff even less appealing.
There are possible mechanisms that might still occur that could bring N. Arlington into better alignment with rent. But they aren't guaranteed to happen unless you are contrarian.
Some states may not be the global minimum, but can still be meta-stable.
@J@,
If there are enough rich families in the area such that the inner suburbs only have a 10% price drop from the peak of the bubble then like Jeff's comment earlier today I will just acquiesce and move to Fairfax County. I really like Fairfax County anyway -- I grew up there.
If I can barely afford the neighborhood (or not afford it at all) I should not move there. Not only is it bad for your finances but it is bad socially. If the neighborhood is superrich then I'm going to be the outcast whose family goes to Ocean City instead of the Caribbean. And my children will be mocked for wearing clothes from Fair Oaks Mall instead of Tysons Galleria.
Cara,
DC definitely has some neighborhoods that are hot and neighborhoods that are not. I would say there's more hot-not differential in DC than Northern Virginia.
Thanks again @J@
Yeah, it's a much better play with liquid assets like stocks. You did quite well.
I don't think there's a chance in Hades that N. Arlington, Alexandria nice mid-level homes are going to drop a full 50% from peak prices. First of all I don't think the upper tiers even inflated that much, did they? (would have needed to have doubled OVER inflation to fall 50% now...).
The only problem is that by the time it's obvious that the correction is going to be well over 20% (if that were to transpire) everyone else would also be scared off housing and expecting further declines in the former immunozones. Which would make selling challenging.
But you did so well timing the stock market, that you really don't "need" to also push your luck with your housing which is a whole lot more of a pain in the butt.
tiredbubblewatcher : you're right, but my point was more that her market analysis consisted of the the one other listed house (list price), rather than of recent sales. So, they weren't selling for around $800k, they were selling for around $700k (this was in 2008, so we were in declining market). The better school district was just the icing on the cake.
tbw,
just to clarify, my concept was that the hot-not hot disparity serves to break up the equilibrium condition under which rental parity actually occurs.
@J@,
What did you mean by:
"I would have to catch the peak exactly right and buy exactly at the trough, and if I didn't buy again on schedule, I either pay taxes or lose a future deduction."
If you sell what qualifies as your personal residence (as opposed to rental property, etc.), there is no requirement that you buy within a certain time to avoid capital gains taxes. You of course can't deduct interest and property taxes as a renter, but you lose that as soon as you begin renting. But maybe I misunderstood what you meant.
Oh, and everybody? Wish me luck? We're going to actually look at 3 or 4 townhouses this weekend. Mostly this is just a scouting mission to determine (a) whether we think we'd actually be happy in a TH with 1400 above ground square feet or less. (b) and therefore if so, to help us decide whether to pay an exorbinant amount ($300/month, can you believe it! $#%@!#ers) to go month to month in September or sign a 6 or 12 month lease (need to decide by the end of June).
It's also, of course, a chance to get a better feel for those particular complexes.
novawatcher, that would infuriate me. Glad they didn't dupe you, but I fear that for every person smart enough to see through their garbage, there are probably two people that fall for it. I give them the benefit of doubt in saying that they probably don't even mean to lie, they're just really stupid. Unfortunately, this system rewards them for pushing people into houses, particularly more expensive ones. They'll say anything to get you to buy, because that's an inconceivably awesome $24,000 commission they get if you do. It's terrible that RE agents are regarded as market experts by some. They are the LAST people I would ever solicit market information from. It's like asking a known child molester to babysit your kids because he has experience with children.
PS thanks to those who paid me compliments about my "savvy" :-) move up homebuying strategy.
I figure that if I ever actually find a house we like AND can afford AND buy it, THEN you can decide how savvy I am.
Not wanting to fan the flames, but if I had listened to Realtors over the past few years, rather than to many of the people on this blog who shared very helpful information and opinions, I would have lost more than $100K in net investment in a new house that would have lost that much value by now. Although it's just one anecdote, I believe it's true for many people.
And FWIW, the attorney who handled a closing for us years ago said, "I don't know of another occupation where the people know LESS about what they are doing than real estate agents." A generalization like that obviously doesn't apply to some outstanding agents, but it certainly has been consistent with my experience during and since that time.
It's like asking a known child molester to babysit your kids because he has experience with children.That made me chuckle!
Good luck, Cara! And Jeff must be a great Realtor for you to feel so positively about him.
And by the way, I'm a her and not a him. :-)
I don't think Arl. did escalate nearly as much during the bubble than did other areas (didn't someone post data to that effect here?), and some of its escalation (relative to areas comprised primarily of far newer housing) is due to homeowners' greater investment in updates, as opposed to bubble faux increase.
Cara,
Best wishes! I hope it's educational.
Ace,
oops. sorry I default to everyone being a him. Kinda like cats are female and dogs are male.
Jeff is good (translation, in my family that's the highest level of praise ever doled out on a person). It's clear both why he's been a successful realtor for so long and why he was savvy enough to move to Frankly. He is really really good at both judging people, reading them and adapting to whatever style they want (either that or our styles just mesh really well, hard to say)
Arlington may not have increased as much as some places, but it sure did increase
this place...
http://franklymls.com/AR7060208
...sold in 2003 for $350,000 and then in 2005 for $630,000
end of the month, lots of closings today (low pre-paid interest)
Note to current owners:
http://franklymls.com/FX7031492
TH $365k.
It's not the back to woods, or the paint, or the nicely redone kitchen. Nope, sold in 3 days at asking, why? It's the little mosiac blue tiled shower!!! That is the secret! Now, this secret is limited time use, as once everyone has caught on, it will fade in value, but if you plan on selling soon? And want to spend some cash? Dude, definitely the blue shower will close the deal.
(see don't I sound stupid when I give advice on anything other than market conditions?)
Cara: I thought it sold so quickly due to "WORLD CLASS LUXURY!" If there's anything you can't beat, it's world class luxury.
[having said that, it does look nice inside]
novawatcher
yeah at first I read that and laughed, that's not possible in a TH, no matter what they did, how absurd, and then I saw the blue little tiles and forgot all about the audacity of the listing. It's not so much that I think they achieved "WORLD CLASS LUXURY", as that I was too enticed to remember they had said it...
Am I the only one here who has gone from not buying because of the bubble to not buying because of the recession?
We are having layoffs where I work. It does not feel like a safe time to buy even ignoring the bubble. You never know when the next round of layoffs may come.
It's for this reason I hope Robert is right that the federal government is going to hire a lot of people. I'm trying to flee to safety there.
Cara,
How does one walk to the VRE station from your posting? It looks like a huge swath of trees are in the way. But I'm not as familiar with that area (nor the exact location of the Burke Centre VRE stop).
walk down to and then along Burke Center parkway, and then up Roberts to the one that's on premiere court. It's 1.9 miles, which is a hike, but is within my "walking distance". From the top of that Coffer woods area you can actually cut through the woods on paths, it also runs down along between the two housing sections if that's faster.
Ace - regarding Arlington (and other areas) escalation in prices - here is what median prices did 2000 to peak:
DC +165%
Arl +129%
Alex +134%
Ffx +130%
Lou +132%
PWC +182%
Heres what theve done peak to end of 2008:
DC - 5.21%
Arl - 9.02%
Alex - 8.02%
Ffx -22.55%
Lou -27.84%
PWC -43.41%
Adding the runup and rundown together, total performance 2000-2008 was:
DC +152%
Arl +107%
Alex +116%
Ffx + 78%
Lou + 67%
PWC + 60%
Jury is still out for 2009, but if the first 4 months are any indication, we will see approx 10% drop close in, 15% in Lou & PWC, and 20-25% in PWC.
Obviously this is just medians and can be skewed down by the low end foreclosures. Also, this tells us little about high end/low end performance by area, but its better than nothing!
TBW: I also wonder what (if any) benefit to the region will be in hiring a bunch of people below the median salary, meanwhile having all those high-up boomer GS-15's and SES's retiring. Isn't it possible that there's a demographically phased decrease in household GDP on the rise?
I don't trust ANY commissioned salesperson if I'm buying something.
If I have to "work with" (or through) them, I will.
But they are not working FOR me. They are ADVERSARIES. I try to behave as though I'm in a poker game with them, and try to stay poker faced, tight-lipped and non-committal.
(I've done the same with "psychics" and palm readers, and BOY does it piss THEM off, because they can't use their standard tricks off what I say!!)
A realtor SELLING my house is a SLIGHTLY different story, but, still wary.
Re: Krugman, I like him, but he does conveniently neglect to mention that the U.S. Dollar HAS LOST 95% OF ITS VALUE IN THE LAST FEW DECADES.
Perhaps HE doesn't call that inflation, BUT I DO!
I do, because otherwise, I'd have trouble understanding why I can't still by a house for $6,000, a soda pop for 5 cents, or a new car for $900. And no, it's not just because they come with granite countertops and air bags now.
And one of the reasons it takes two salaries to live the way you use to on one is that, BY GOVERNMENT DESIGN, entitlements and CPI-indexed wages (fed, state, etc) have not nearly kept up with this "non"-inflation.
I wonder if Krugman would be so dismissive of inflation if it were still Bush in office, spending like the current leadership has in the past few months. He's become too blinded by political ideology for me to take what he says seriously.
CRT - thanks for that info, very useful.
Only down another 10% or so in
Arlington?
Prices have come down about $100K from the peak, I was hoping for another $100K...
That would still leave those houses overpriced in my opinion.
Cats are female, dogs are male: HEY I have that problem too!
"Ace" DOES sound like a handle a guy would pick...
TBW --
One reason DC population was so high in the 40's was that we had thousands of troops living in tents on the mall, among other things. But not 200K I suppose.
Also, with all of us wanting more space for our toys, etc, a given small city-house is going to now have fewer people in it than it did in 1950--perhaps have as many.
Also, 1950 population includes 5 years of post war boom babies, almost all of whom (except one of my brothers, GRRR!) hopefully got out of the parents' houses by age 20 or so.
haha - would you prefer Acette?
Ace was the nickname of a beloved male cat (RIP). So now the mystery is solved, except for the armchair psychologists who want to talk more about it! :-)
Thanks, CRT, I should have remembered!
Kevin--
spending money you don't have, which is what the Republicans did in most of their recent administrations, is more inflationary than spending and taxing to pay the debt.
Maybe he thinks Obama/Dems will be more taxy and less inflationary? I don't buy it, though.
Gold price more than tripled under Bush; I bet it will at least come close to doubling in the next 4-8 years, (along with all kinds of other prices, except maybe houses.)
Gold prices go up when people believe world events suggest catastrophes are occurring or may occur. It's not the only factor that influences gold prices, but it's one of them.
Contrarian, certainly you took a took a look at the 10 year note today before you posted that? It was down 13 basis points today, and now down 29 basis points from the high.
Average household size in the United States has dropped steadily from 3.67 members in 1940 to 2.62 in 2002.
$5.3B Massive Infrastructure Project in Fairfax County to create Thousands of Jobs...
More HOT Lanes down I395 = Thousands of More Jobs
Interestingly, Laffer is a cut-taxes conservative, because the Laffer Curve he invented says excessive taxes hurt growth.
But he fails to get that this very point means tax-and-spend has a practical limit, whereas Republican spend-and-debt with tax cuts has no practical limit, and not even a clear pain threshold, until soc sec is broke, Medicare is broke, the military is broke, and every worker is broke, through inflation and crushing high-interest-rate debt.
Cara wrote,
(b) and therefore if so, to help us decide whether to pay an exorbinant amount ($300/month, can you believe it! $#%@!#ers) to go month to month in September or sign a 6 or 12 month lease (need to decide by the end of June).That just flat out sucks! We got our yearly rent notice yesterday. Went from $1430 to $1460. However, if we signed back to a 12-month lease they'd knock $10/mo off. I think we'll stay on month-to-month.
Why all this Krugman hate?
Writes Cara
>Of course the fact that I believe pretty much everything Paul Krugman says, is, in and of itself, pretty questionable.<
Writes Scott
>he does conveniently neglect to mention that the U.S. Dollar HAS LOST 95% OF ITS VALUE IN THE LAST FEW DECADES.<
Kevin
>He's become too blinded by political ideology for me to take what he says seriously.<
and others ...
He was spot on in 2005 (long before a lot of bubble blogs were created I bet).
Krugman's hissing sound/2005And who attack Krugman in 2005?
And why?
Whatever.
"kob said...
Why all this Krugman hate?"
Kevin hit the nail on the head --
"He's become too blinded by political ideology for me to take what he says seriously."
Yep - Rahm Immanuel once said (something like) never let a crisis go by without remaking the political landscape. Krugman seems cut from the same cloth.
In the fall, some right leaning economists were OK with the democratic leaning policy of Govt intervention. This impressed me. These righties were willing to do something their party doesnt like because they believe its in the best interests of the country.
If the shoe was on the other foot, and the recommended policy action was right leaning, there are alot of left leaning economists who would get behind it. Do you think Krugman would be one of them? I dont.
As Kevin said, I believe he would recommend something that not in the best interest of the economy so long as it helped bolster the long term democratic agenda. Thus, I cannot trust him.
Ace,
I'm happy to be reminded of my favorite gal "Ace":
Ace
:-)
LOL, Harriet!
"If you sell what qualifies as your personal residence (as opposed to rental property, etc.), there is no requirement that you buy within a certain time to avoid capital gains taxes."
Ah. I haven't been keeping up. Thank you.
"Before 1997, if you sold your home you had to buy another one within 2 years. Worse yet, it had to be a more expensive home. Otherwise, you get smacked by the Capital Gains Tax. Now the basic rule is that if you profit $250,000.00 or less... "
"Do things have to come down to rental parity? Sadly that answer is no. Buyers with more money can choose to keep buying. This creates a city-like market where transient and lower income folks rent, and more permanent and wealthy folks own. That may happen in Arlington."
This has already happened in a number of neighborhoods in N. Arlington. I don't see anything wrong with it. In Manhattan, people have been renting for many decades without any hope of being able to buy -- because Manhattan is so desirable that purchase prices are simply beyond the reach of many people. There's nothing unnatural or "wrong" about this situation. The same thing has happened in a number of neighborhoods in NOVA and DC -- and, again, there's nothing wrong about it. It's a natural evolution.
Tom hearts North Arlington.
"Tom hearts North Arlington."
Kinda makes you wonder why he hangs out on a bubble blog doing nothing but saying some variation of
"Arlington is doing just great! Ignore the data!"
over and over and over again...
Leroy said: "Kinda makes you wonder why he hangs out on a bubble blog doing nothing but saying some variation of "Arlington is doing just great! Ignore the data!"
Just trying to reign in the berserkers!
Jeesh, Tom, every sentence you write contains "North Arlington." We can be discussing Manassas, or North Korean nukes, and you reply with a sentence about North Arlington.
Anon -- If you don't trust Krugman because you believe he works in the service of an agenda and not from the courage of his conviction, then you're basing your objections on character and not on the merits of his arguments. If that's your argument, make sure you apply it everyone.
Novawatcher said: "Jeesh, Tom, every sentence you write contains "North Arlington." We can be discussing Manassas, or North Korean nukes, and you reply with a sentence about North Arlington."
"North Arlington?" No, no -- I write "N. Arlington."
(still scratching my head about N. Korean nukes).
Tom, Novawatcher.
Can't... stop chuckling...
And btw. I didn't mean anything was wrong with the Manhattan system, I just said "sadly" because it's not what the questioner wanted to hear.
If you think Krugman is in the pocket of the administration, you haven't been reading his blog. (Or his books). The article I posted mainly sites the historical counterexamples to massive inflation in the case of debt exceeding GDP, but on the blog he had detailed exactly why in macroeconomic terms.
You'll need to skim back over at least a year to catch all of the argument though, so it might be faster to pick up a book.
(and kob, my own comment was just self-deprecating, in that every time I read Krugman it all makes sense to me, which makes me question whether it's true or if I'm just over-confident in my own intelligence and ability to comprehend economics)
oh and @J@
Dude if you didn't know that, then I'd say being on this blog has been extremely useful to you. I guess if you haven't sold a house since 1997, why would you know? If I had known you didn't know that I would have said something... Sorry...
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