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Wednesday, June 3, 2009
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81 comments:
Big earner in New York about to lose house.
.
"Last month, for the first time, the Arayas didn't make a mortgage payment. Their savings are almost depleted. The mortgage, taxes and fees for the family's condo cost $6,200. Combined, he and Denise bring in $4,000 a month. Three months ago, he and his wife applied to restructure their mortgage. The bank told them it is still processing the request. They fear foreclosure and bankruptcy."
So much for the idea that hoorah! Washington is the next New York.
@J@
That one actually brought little tears to my eyes. But the thing is if the story is accurately depicting the family, the girls would be totally supportive about whatever needed doing. The piggy bank is not "Daddy I Must stay in this house" it's "don't worry Daddy I can help". If they had just admitted reality sooner, and listed the property and gotten out from under that insane mortgage, they wouldn't have needed to drain their emergency fund.
But that's the thing about an emergency fund, sometimes it allows you to put off the inevitable longer, and in this case take even more of a hit in a real estate market that is still falling, and now possibly also a hit to your stellar credit.
They need to move to a rental apartment that fits their new combined income. Then, from a place of security financially, he can truly explore new career options that might pay more than 25k/year.
Foreclosures and the Home ATM: Calculated Risk nails it again.
Money is fungible, but a general guideline is to match the term of the debt with the useful life of the asset. A 30 year loan for a house. A 5 to 7 year loan for a car. Pay cash for lunch.
Then - if the useful life and debt term match - when it comes time to replace the asset, the debt will have been retired. But this article provides an example of buying lunch on your credit card, paying off the credit card with a larger mortgage and essentially financing lunch for 30 years!
Cara-
I actually find it interesting how many people are strongly apposed to using credit cards for lunch. Those same people who think they are being responsible are just leaving free money on the table.
It it much better financially to use a rewards credit card if you pay the balance in full. You will pay no interest to them, but they will give you 1-2% cash back and let you borrow the money for 30 days where it can earn interest in an account.
I don't think that particular method raises the specific objection that CR was pointing out.
If you're paying it off in full, you're not financing it at all. It's just like a debit card with points.
The issue with paying for lunch with credit is that it makes it less painful to buy lunch rather than bring it from home (which is also not free, my dad seemed to think it was...) and that you're less aware of the money you're spending at the point of sale. Statistically, this makes people spend more than they would with cash.
Now, since many cards do a nice job of separating your charges out by type, I found paying for absolutely everything other than bills on a credit card was actually a really useful way to determine how much we were spending on what. Now that I know what those numbers are, I prefer to use cash for small transactions.
Housebuyer,
I agree, everything possible goes on a card. I wish I could pay my mortgages that way! I tried to charge a car once, but they would only put 5K of it on the card (due to their fees).
My husband travels alot and uses miles for upgrades.
Araya should move to this area. He'll find his choice of high paying jobs with Treasury, the Federal Reserve, or the SEC.
Irvine Housing Blog
has a thought-provoking discussion today of why banks will continue to foreclose rather than ever agree to principal reductions. He also concludes that these previous owners will be kept out of the market for a long time.
Quote
At the bottom of the astute observations, there was this gem from grabasnorkel:
IR you and others have mentioned the choice the banks face -> either mod the loan to X amount or foreclose and get the same X amount.
Seems like equivalent options, but they are not. The threat of foreclosure has to be backed up with real foreclosures, if that threat is watered down, it becomes less of a stick they can use with other loans. We see some of that in the marketplace right now because many people are expecting a loan mod and have therefore stopped paying on their mortgage.
It’s like a loan shark. When loans aren’t repaid, they have to break bones, even if the borrower is broke. Even once in a while the borrower is found dead - this has the purpose of keeping the threat real.
If you f#%k a mafioso over hard, and skip town, he’s still going to come after you to kill you even if he can’t get his money back. Why is that?
Or a credit card company. They don’t HAVE to ding your credit if you default on a card, but they will. If they don’t then they won’t be taken seriously and that leads to more defaults.
Two years ago a guy at work told me the banks would be reluctant to foreclose because they wouldn’t net anymore than they would by working with the borrower.. He was wrong then, and is wrong now. Think about it for a moment.
I have been thinking about this comment for a couple of weeks, and I have come to the conclusion that grabasnorkel is right. The political behavior of lenders lends evidence to this same conclusion. Besides the lobbying for watered down legislation I mentioned above, consider the Bankruptcy Abuse Prevention and Consumer Protection Act passed in 2005. The main purpose of this major legisltation was to make it more difficult to obtain debt forgiveness. When you really think about it, lenders will do just about anything to avoid debt forgiveness even if the short-term costs are higher. Hence, we have loan mods that do not forgive debt (but do create lifelong homedebtors) and we have foreclosures.
It's hard to feel sorry for someone who bought a million dollar condo and $200 bottles of wine on a 200K salary.
We make a heck of lot more than that and I've never ordered a $200 bottle of wine.
My folks charge everything from a single gallon of milk to a boat on their cards. They pay them off each month and have traveled for years mostly on points/rewards. Shopkeepers hate them but I don't think they care.
Housebuyer
I think some people feel that the temptation not to pay it off is imprudent. In their mind it's something akin to Ghandi laying with the nubile girls, while he may be able to resist the temptation, the risk is too great for them to choose it prudently.
va_investor,
There is that. I hadn't done the math on his price-to-income. A factor of 5 is high, but was probably considered normal to conservative when he bought. I bet he has a 10/20 I/O loan though, and was using any commision based compensation to justify that and actually pay down the loan.
On the thread of will the $8k be extended, I'm leaning more and more towards definitely yes.
Here's the thing. The $8k has been incredibly effective in Burke's low end at bringing out new owner-occupant buyers. So far this has prevented the best of the developments from dropping to cash-flow positive levels. Those that were already on their way down are going there regardless. But, if there are REOs being held back, or only slowly becoming ready to market? It would be disasterous if all these hit after September when it will be hard to close before Nov 30. Now, Burke itself may or may not have that many more REOs. But places like it throughout the US do. And the banks know how many. They won't necessarily lobby publicly in support of the continuation of the $8k, but behind closed doors or through closed chanels, you bet they will.
If enough of the big banks still have REO inventory to sell after September (which they surely will in the foreclosure hot-spots), the credit will be extended.
Cara,
If you factor in the condo fee and the rest of his lifestyle (dinners at The Palm are a strong indiction), he was living way beyond his means. One should always have a fall-back plan. We do.
For example, you could keep your TH and lease it when you move up. That way you will always have a cheaper place to go.
Va_investor,
No argument from me, he was definitely imprudent. Working with vast sums of money seem to do that to some people.
As for your example back-up plan,
yeah that's definitely in the back of our heads for the future. We'll have to see what the condo docs say about leasing, but I can't imagine all of them are owner-occupied, actually I know for certain that one of them was rented out during the bubble based on a recently under contract listing. By the time we'd be renting it out, after owning it for at least 4 years or more, it should definitely cash-flow. Whether we'd do it is a question for a much later day.
Adam-
Although your comment about shopkeepers not liking people who use cards is true for small shops most larger places actually prefer cards. For larger stores it makes book keeping easier, there is less cost of transporting money, cashiers can't make mistakes, and most importantly they are less likely to get robbed since they have way less cash.
-Va_investor
I am the same way. Last year I was traveling 4 days a week. At the end of the year I cashed in the points (credit card, amtrak, hotel) for $2K in cash and $4K in pottery barn/william senoma gift cards. At the time I was just getting a new apartment so it really helped with the decorating budget :)
Housebuyer,
Those gift cards sound terrific...perhaps my husband should travel coach...
Cara, good post about why the banks would rather foreclose. It really irks me when people suggest they just lower the principal balances on the loans. That is SO unfair to the majority of the non-deadbeats out there that have worked hard all their lives to pay back their debt. Rewarding the idiots is like spitting in everyone else's face. Not only based on the matter of principle as well as the incentives the blog pointed out, there is also the bottom line.
Say like three out of five of your risky loans will default and you'll take a loss. They're all risky, but some of those people can make it through by liquidating their 401k, accepting large sums of $$$ from family (inheritance for example), or selling some of their bubble purchases (the Cheyenne, the Lexus, etc). Or maybe a non-working spouse will join the workforce again.
Anyway, the point is that you will have people out there with some financial options to remedy their situation. Would they accept principal modifications instead? Of course, because they can then keep their goodies. It's like winning the lottery. So if instead of letting three out of five default, you write down the principal on all five out of five, how does that benefit your books?
Principal reductions are a four letter word. Probably nothing infuriates me more than the suggestion of letting people keep their houses and having someone else pay off their balance.
I have no idea if they'll extend or increase the $8000 buyer's bribes. I find it abhorrent and manipulative, but ultimately inconsequential except at the taxpayer's expense, of course. But one thing is certain to the point that even the legislators know it: when the buyer's bribe disappears, the market will suffer a heart attack. Everyone will buy before it ends, and all but the move-up crowd will not purchase for a long period (several months at least) after it expires. Sellers will become desperate again, and prices will fall. They could extend it for another five years and it won't stop the inevitable from happening. If they increase the amount or increase who it applies to (non first-timers), the impact will be greater and spread all throughout the spectrum (higher-end housing).
Cara,
The difficulty most people have on the move-up is the need to cash-out for the DP on the new place.
Earlier on, we went with alot of 5 or 10% loans so we could keep the old places without spending too much savings. You have the benefit of cheap owner-occ financing on what will, in a few years, become a rental.
I know rentals aren't everyone's cup of tea, but they are a good way to accumulate wealth and diversify. Many of my tenants have been in place for years (some over ten) and I rarely hear from them. Meanwhile, the mortgages are getting paid off.
Kevin,
Don't you believe that prices have fallen sufficiently in many markets? Your thesis does not comport with what happened in the 70's when a similar plan was in place.
va_investor,
Duh. Wasn't thinking about that, because if we move up, ours will be an income based decision. I find saving up money before buying things to be a very satisfying method in and of itself. (Just because we still pay on credit cards to get the points and then pay them off that month is not the point.) But yes we would have to plan ahead on that plan in order to do it easily.
Cara,
p.s. I went to LS at night and worked full-time. Not fun! I was jealous of the gov't workers because many of us felt that they had the opportunity to study at work!
Va_investor,
Not where my husband works. He's got to keep meeting his production and work-flow schedules or they'd drop the law-school subsidy from underneath him. Hence why we like our new more modest plan so much.
GT,
To respond to your response from yesterday. I did not mean anyone here was hoping to spend $750k. I was saying that there are people here who are looking at places that went from $800k to $750k. I should have added these are places that used to be $400-450k pre-bubble. So where this ends up makes a big difference to a lot of us.
There was a long period of time where the exurbs were not the only affordable place to buy a decent SFH in a good school district.
tbw,
What areas went from 450 to 800K and are still 750K?
p.s. if it was you that I insulted about the Silver Line, I apologize. My take on the Silver Line is somewhat more informed due to professional affiliations.
I wasn't talking pro's and cons of riding to the airport. I was talking commuters. The line will be built to the Airport and the Loudoun stops regardless if FX County taxing districts object to the "cost" of the Reston/Herdon stations. IMO those will get built - it's all a negotiating ploy for increased density around those sites.
Va_Investor,
I don't know which area tbw is referring to, but parts of 22203 (North Arl) went from $300(ish)k to $650k, and places are still asking, and getting, $620+k
Mr. Araya should have sold that condo in 2007 or early 2008 once it became clear that another Wall Street job was not coming any time soon (say six months after he was fired). Also, he probably could have sold that condo in 2007 for more than he paid for it in 2005.
Also, he was 34 in 2005 and started working in 1992. Why did he wait so long to buy? Even more potential profit.
Robert -- as for a federal government job, I think many would ding him on the lack of a college degree. And the resume gap probably does not help either.
VA_Investor: "Don't you believe that prices have fallen sufficiently in many markets? Your thesis does not comport with what happened in the 70's when a similar plan was in place."
Sure, but I'm talking about the cash reward to buyers (really to sellers). If your 30% off coupons expire today, you're going to do your shopping today not tomorrow. If everybody's coupons all expire on the same dates, chances are they won't be making a purchase on that item any time in the near future.
This will mean substantial price drops in still-bubbled areas, and at least a stagnant atmosphere in those where price discovery has occurred. But I'm pretty convinced that the majority of nova hasn't met its fundamentally supported levels, particularly the inner areas that people are calling "crashproof".
Va_Investor,
Little Johnny Jewel is correct. I'm thinking about SFH and TH communities near the Orange Line in Arlington. Those went dramatically up this decade and have only partially gone down. The condos on the Orange Line seem to have gone down more (partly because some of the new condo buildings are being more aggressive in selling the last units.)
As for the Silver Line, I agree with you that the bulk of its use will be commuters.
Actually, I would add that tons of areas I look in do not have the $500k to $300k price drops. In addition to North Arlington, I have only seen modest price drops in McLean, Vienna, Oakton, Fairfax, and nice parts of DC.
A large portion of the price drops for Fairfax County have come from the SE portion (Annandale, Franconia, Alexandria) and far west portions (Centreville, Chantilly, Herndon). The remaining portions have not gone down that much.
tbw,
I would add Falls Church City in the first group, and even much of Falls Church FFX co north of Lee Hwy and south of 66.
In the second group is Pimmit Hills, and Falls Church FFX S of 29 and especially S of 50. I was looking at comps for a place between Lee Hwy (29) and 50 in FC FFX (which is actually quite easy with a lot of sales and streets and streets of the same exact house). At the top, mid-$500s were common. Now there is a wide range, with foreclosures as low as the $200s, normal sales of unupdated homes in the mid-upper $300s, and completely renovated places in the upper $400s.
Fred,
Correct. Falls Church City also has not moved much.
Basically it's one of two factors usually at play: (1) bad school district and/or (2) far away from jobs that has led to quicker price drops.
City of Falls Church has a well regarded high school and I believe the portion of unincorporated Falls Church you mentioned is in the McLean HS district.
Some will argue the places with good schools, closer in will never go down as much. But that raises the question, why would Centreville be 20% cheaper (or whatever it was) than Vienna in 1999 and now 40-50% cheaper in 2009? If gas were $6+/gallon I could understand it (maybe).
tbw,
You have to account for turnover during the bubble years. Many of the closer-in established neighborhoods have long-time residents or move-up buyers with decent downpayments and other assets.
Newer stuff and/or a large % of new owners during the liar loan/bubble period is being wacked due to foreclosures and job loss with no other assets to tap.
p.s. I'd look at new construction in c-ville vs Vienna.
yeah,
much sympathy to the trader who did not finish school and has no skills except for pushing people around in the trading pit (it pays well and you have to be good at that, but these skills are not easily portable into other high-paying jobs). it is kinda a common place knowledge that you have to diversify your skills a little bit.
unless you are extremely wealthy your human capital is most of your wealth when you are relatively young.
i mean there is nothing nice about loss of a job, it hurts everyone, but i would feel more for the person with the law school debt who lost a job, or a managing director in structured products group at some wall street company with much more skills and experience who will not be able to get the same income as he had --- ever. or construction worker who never had a chance to get the trader-type salary (and a chance not to ruin his finance somehow).
"TBW said...Some will argue the places with good schools, closer in will never go down as much. But that raises the question, why would Centreville be 20% cheaper (or whatever it was) than Vienna in 1999 and now 40-50% cheaper in 2009?"
2 reasons - First, fundamentals have improved that much more inside the beltway. Most of the area had a 30% median HH income gain. The only areas that did significantly better were Alexandria +39% and Arlington +43%
Certain areas in FFX may have experienced this disproportionate increase in HH income, but we wont know til the 2010 census comes out (it will detail income gains by zipcode).
Second is the inner areas inability to continue building to match demand, meaning that the highest income brackets will effectively price out lower ones. We know for example there was a shortage in Arlington, and near equilibrium in Alex & Ffx. By contrast, there is a massive surplus in Lou & PWC. In these areas, there is not nearly enough high income HH to sop up all the excess housing built. Thus, prices must fall (or a huge number of new high income HH must come in) til a new market clearing price is met.
Va_Investor,
That just is an explanation for why there are more foreclosures in those areas. The question is do foreclosures speed up finding the bottom or do they lower the bottom?
I think they speed up reaching the bottom. It sounds like you believe it just lowers what the bottom is.
VA_Investor,
So it is not much hassle to deal with the tenants in the areas where housing is kinda low-end (i mean cheap relative to the NOVA in general)? Easy to get tenants with good credit, paying on time, reliable, etc?
CRT,
I crunched the numbers and you are right that Arlington County's median household income increased at a higher rate between 2000 and 2007 than Fairfax County or Loudoun County. That is probably the most compelling argument I've heard.
I think you actually do yourself harm with your "let's just look at $200k+ people" argument though. I find that one to be just some random measure you use.
One variable is what percentage of Arlington residents are lawyers. Anyone know where to find this? Salaries at law firms in DC EXPLODED this decade. Now law firms are laying people off and cutting salaries. This could affect Arlington (and DC) pretty heavily if lawyers are a sizeable percentage of the workforce.
Seems to me I've heard the argument that banks don't want to recast mortgage balances because it means immediately realizing the loss on their books.
Do foreclosures draw out the process more? And, when the bank finally ends up with the house, must they book the current lower value of the house, or can they continue to fantasize? I don't know this stuff that well...
Weighing in on credit cards, I put a lot of stuff on my credit card, including any lunch over $10 or so (which used to be the level at which shopkeepers frowned anyway due to transaction fees.)
But, I almost always live below my means, monthly and long-term strategically, and almost never fail to pay the balance in full. (A handful of times when my cash reserve was smaller I took two months and a couple of times took three months, just to make sure my checking account kept enough between paychecks.)
However, I would modify that "match the term of the debt with the useful life of the asset" guidline. In additional to living below your means, you should always MATCH OR BEAT the useful life of the asset.
For example, I use a bicycle to commute to work. I expect my commuting bike to last 6-10 years. Should I finance it for 6 years? Heck no!
My last TV lasted about 16 years--should I have financed my new one for 16 years? Heck no!
Use credit for points, for cash flow, for budgeting records, and to keep less cash in your wallet when you are out and about. But, HAVE the funds (savings or current income) to pay the balance (LBYM).
If you can, avoid paying interest on depreciating goods (and services) which provide no interest tax deduction.
But with education and housing debt, you benefit from leverage, tax deductions, and an interest rate often cheaper than what the cash balance would throw off in yield. In that case, carry some debt and keep the cash for yield and cash flow stability (emergencies.)
cara, just curious if your husband's agency recently let go of the law school subsidy program?
Scott,
Sure. But I think the rule of thumb is intended to be an upper limit on the amount of debt serviced and interest paid. If you exceed this limit, you're no longer just living beyond your means, you will fall further behind because you'll have to replace the item before having paid off the first loan.
So I don't think this is intended as a standard to live by, but as a danger line not to be exceeded.
The fact that at the height of the bubble people were rolling their old car loan into their new car loan, rather than using the trade-in as the downpayment illustrates just how scary lending got. Who even knew you could do this? Good thing very few knew, or it would have gone rampant.
GT,
they periodically get into funding issues and decide not to fund it in any given year.... This year may have been those years. Don't know.
got a mailing from my neighborhood (condo TH's) realtor about the condo market and upcoming difficulties. seems there are many restrictions now with fha loans (as most are now), as well as conventionals, for condos. not sure if these requirements are new but the realtor seemed to indicate it was very bad for sellers.
http://www.fhainfo.com/condos.htm
Thanks GT,
Hmmm any links for conventional loans? We told them it was a condo in our pre-approval...
But in any case this is still relevant and would partially explain why these well-priced units are taking longer to sell, namely that their audience is limited or scared away. I don't think I'll know about any of the requirments until I get the condo docs...
But this definitely strengthens our bargaining position. Because it drains their potential buyer pool quite a bit, even if just by discouraging FHA buyers from condos.
Thank you! I'm not sure how I'm going to use this information yet. (possibly by simply delaying putting in an offer to let them learn for themselves how few truly eligible buyers are out there).
"TBW said...I think you actually do yourself harm with your "let's just look at $200k+ people" argument though. I find that one to be just some random measure you use."
TBW - as I said before, that ties into an old argument - the idea was if most of the income gains responsible for that +43% increase came from say the 100-150K category, you might actually drag down very high end housing (which is true). The reason I bring this up is/was to counter that. All 3 of the upper income categories increased (in percentage and numerical terms), but the biggest increase of all was in the +200K group.
GT,
so I used the approved condo search thing to try to find out if it's approved or not, and it looks as if no one has tried an FHA loan approval under this system yetfor this development, because no condos in Burke or 22015 appear in the list.
HUD approved condos
I can't decide if that's reassuring that no low-money-down loans are in the place, or if I'm dissappointed that I can't find out whether it meets the minimum criteria or not...
Does anyone follow their Zillow value? What is your opinion of how Zillow tracks your residence?
I ask because my Zillow value has finally stopped falling after 2 years and is now rising. It has risen ~ 3% since January which seems to be consistent with the sales uptick in the spring. In the past I thought the value tracked my house pretty well. It is still showing about 2% below my 2009 assessment.
David-
I think the trends are correct for Zillow, but sometimes the value is off(either high or low by up to 15%). It obviously doesn't know what the inside of your house looks like. It isn't perfect, but I have found its trends are pretty solid.
today's a down day for my feelings towards the condo/TH we're thinking of putting in an offer on. It is partly lack of sleep, partly PMS, it could just be the way things fade with time, or it could be "real".
negatives. Our upper limit is currently being limited by how much cash we want to have on hand for emergencies and renovations. This was why we were thinking later in the summer, we're just moving on this one because I don't want 2 months of difference to stand in our way of getting some place that meets 90% of what we want very well.
I do know myself well enough to know that I would be happy in this place. I'm a pretty happy person (believe it or not), and making this a home and ours will make it into a great retreat from the world. But really at what price? There definitely is a price above which that home-ness will be replaced with resentment if things go rapidly downhill if/when the $8k goes away (or other forces impact the price more than we're comfortable with)
Good news. I don't have to make a decision.
They've pulled it off the market indefinitely. So, if it comes back when we're truly ready, great, but for now we have the answer to the 6 versus 12 months lease question and we're good to go.
Two notes:
1) I know of someone who was just turned down for a loan (condo, maybe TH) because she could not get PMI because this area is considered a "declining" region.
2) AOL has no reason for existing anymore. Broadband + internet killed AOL.
[deleted previous version due to typos]
Novawatcher
yeah, that's the thing, that's been bothering me today (or part of it). If you can buy a TH (most of the low-end Burke market) with only 10% or even 15% down, and get PMI, but need 25% down to avoid paying fees on a Fannie or Freddie backed loan on the condos, then a lot of buyers are going to go for whatever they can get a loan on. While, this won't necessarily make condos fall to half the price of THs (same amount on hand -> 10% down versus 20% down) because there are other buyers like ourselves who have the downpayment, it could make it crash quite a bit. Given that the 1200 sq ft. downstairs units are already going for about half of what a 3 story TH would go for, maybe this is not so far fetched. Ouch. I think it reaches cash-flow investor levels first before it reaches half of a TH price, but who wants a bunch of landlords in your condo association?
(no offence Va_investor!!! we just had some really really terrible experiences growing up in a TH/condo grouping, and my friend from school had a similar experience in his condo association more recently)
Cara and others-
Since you said you lived in a condo do you understand why they are so expensive. From what I have seen it looks like 1200 sq. ft. condos are the same price as 1800 sq. ft. townhouses in the areas I looked. The condo fees were also ~$500/month more. I know they give you free utilities and a pool, but can that possibly justify the fact that you are paying significantly more each month for far less space and you have more noise from neighbors?
I guess I am just confused about why they are so expensive, is there something I am missing?
Um, that's not the kind of condo I lived in, nor true of the ones I'm looking at, so I can't rightly say. I'm guessing it's some mixture of amenities, services, insurance and the fact that the reserves need to cover maintenance and repairs. But if, after all that, it's still more expensive, I'm guessing it's some form of cachet.
I guess I hadn't really thought about maintenance, that could definitely be part of it. I guess you also get a better view if you are in a high rise. I guess I don't really value either of those as much as having my own space, but other people may.
"housebuyer said...
I guess I hadn't really thought about maintenance, that could definitely be part of it."
Thats almost always a part of it. By law, most condos are supposed to keep "adequate capital reserves" to pay for various common area expenses (i.e. the roof, the pool, sidewalks, etc.)
Some of these condo complexes that have low condo fees are severely underfunded -- meaning that if something like a new roof comes up, there is a good chance every condo owner will get hit with a "special assessment" of 5K, 10K or more.
Bottom line, always look at the condo docs before you buy.
Contrarian...They won't stop...
Investors should buy 4.5 percent and 5 percent Fannie Mae- guaranteed securities because the government is likely to ramp up purchases as interest rates on 30-year loans have climbed to more than 5.5 percent, having an “adverse impact on the housing market,” Ohmsatya Ravi and Ankur Mehta, New York-based strategists at the bank, wrote in a report yesterday.
“Any decline in dollar prices of agency MBS from their current levels would possibly require the Fed and the Treasury to abandon their agency MBS purchase programs altogether, which we think is very unlikely,” they wrote.
Notice that "Alexandria, Arlington, & Falls Church" has exploded. Last time I posted this AA&FC were fourth, now second...
Local USG Jobs..
Total local listings is 13,300 jobs.
And what were the rates last year? 4 years ago? 8 years ago?
Oh, novawatcher...just say you are afraid of the "Jobs Tsunami" that is rocking the DC Metropolitan area.
Just the tip of the iceburg. Check out monster.com and careerbuilder.com. Look at the disproportionate number of job listings for the area.
Of note, I did browse jobs at monster and careerbuilder and no more than 5% of the jobs required security clearances.
Robert: unless you put it in context, it means nothing to me. Are those less than normal, more than normal, or about the same?
"Bernanke Warns U.S. Budget Deficits Threaten Nation's Financial Stability"
Robert,
If you want to look at jobs and have any real trend, you should be looking at the help wanted index. DC remains a better performer than almost all of the nation, but it's not nearly as hot as it had been.
They look at unemployed/ads, and while DC is 1.6 in May (better than other leading US metros that are in the high single digits), it along with most the country was below 1 even last summer.
And while the index was a newspapers were the genesis of the index, it now looks at online postings, as well.
Robert, these spot reports on job listings are completely useless unless we know a whole heck of a lot more about the data.
Simply listing some numbers and saying "wow, these are big numbers" isn't helpful by itself.
CONDO DOCS
Important note! By law the buyer has three days to review all the condo docs and can walk away for no stated reason if they are not to their liking.
These will not only tell you the reserves but the percentage owner occupant and whether there are any lawsuits or liens pending against the association. So, they have to be current ones or they're mostly useless.
(I didn't know this til Frank Llosa and Jeff Royce told me, so I'm passing this useful tidbit along)
Cara-
I am pretty sure the same is true about HOA docs. I was told that if you are looking into a short sale/foreclosure and that these docs are the easiest way to walk away from the agreement.
housebuyer,
HOA as well. Exactly.
Actually Cara,
I've bought many properties located in HOA's (4 recently) and the reserves are included as part of the budgets. One even had a recent engineering firm report as to the adequacy of reserves. I've gotton on the phone with 2 property managers to delve futher into these numbers. They are that important. Live and learn. A few years ago, I got stuck with hefty special assessment due to underfunding.
So, I respectfully disagree with Frank. It's my belief that these numbers must be dislcosed as part of the "package"
I've also make telephone inquiries as to % of renters.
Va_investor,
The sooner one can find out these things the better, absolutely!!
My point was simply in the worst case scenario, the buyer is still protected, in that if this information is not disclosed earlier, as a buyer, you always legally have the option of opting out at the point in time when it is disclosed.
However, I fully agree that the sooner you can find out any of this the better. So, from your experience how does this usually transpire? What does "package" mean exactly? Would this be before or after you put in a bid? Newbie here, remember. :)
Cara,
The "package" refers to the resale docs from the HOA/Condo Assoc. No, you don't get these until you are under contract.
Perhaps I misunderstood, but I thought you were saying that you were told these docs did not include reserves in the budget/financials provided in these docs.
Va_investor,
No the negative in my original statement was that old versions of these docs may not help you. In that there could be new liens or other issues that have come up in the meantime.
Cara,
Old versions might give you a good idea of reserves. But until you have a contract, you won't know of violations pertaining to that unit and new special assessments, lawsuits, etc.
I remember a time when Worldgate at Herndon sales were all but frozen due to litigation - but all the agents knew this.
As an aside, many large development now have current stuff on-line, so it is possible to get a more up-to-date picture by accessing their site.
Before buying my condo (which was a first ever house purchase for me also) I looked at all the online articles I could find on home buying, condo buying, financing, etc. There are many articles on "you should avoid condos for these reasons:" (including non-pro management by a board, underfunded reserves, etc) and many less negative articles about "how to buy a condo" (including, the advice about looking at reserves and walking during the 3 days).
When I got the condo docs, I poured over them, and also called the condo board president and asked questions until she had to (politely) get rid of me.
I saw that the reserves in the bank were VERY low for a condo of that size and age (they were a fraction of a year's annual budget) AND, the delinquencies were very HIGH (they were letting some owners get way behind on their monthly condo fee, to the tune of nearly two months' monthly fees.) Also, the common areas of the building clearly needed work.
I still bought the place, but with the knowledge that there might be a series of special assessments--which you typically have 30 or 60 days to pay in cash or take a loan to get the cash. And in fact, I knew a hefty special assessment was already being planned.
And sure enough, in the next five years my special assessment obligation was up to $6000 EACH YEAR--that's another $500 A MONTH effective cost of ownership. I was ready for this because I made sure I was well informed, and it wasn't as hard on me as it was on all the new owners buying behind me who had no idea, and also got less of the price boom, and on the older retiree-type owners. But the condition of the building did drastically improve, the board played hardball and got nearly all caught up on the delinquencies, and by playing hardball on the budget and increasing monthly fees as well, the board also built the reserves to a more respectable level that later helped defray part of the later special assessments.
If was really tough on people to try to do all three things at once: improve building, build reserves, and balance the budget/rightsize the monthly fees--I think the board only survived under the cover of the value boom those years, and the visible quality of life improvements that were happening.
If you buy a condo, DO WATCH OUT for this--remember, monthly and special assessments aren't tax deductible like mortgage interest, so it's more like rent, and you might or might not be able to bump up your property's cost basis by the amount of a large special assessment for capital improvement (consult your tax advisor, I dunno, I never tried to do it.)
There are lots of materials out there, info and advice for buyers but also info and advice for condo boards--including a wealth of material in the Reading Room of the Condo Association Institute -- caionline.org.
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