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Friday, July 3, 2009
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66 comments:
Accidental landlord?
http://tinyurl.com/m89ljf
[thanks to CR for that one]
Happy holiday weekend, everyone.
Here's another big, updated Arlington house in a primo neighborhood that sold for considerably less than assessed value ($1.162 mill.) and way below original asking (~$1.3 mill., sold $989K).
Country Club house
I'll wait for anielarke to provide the juicy details. But my 2 cents based only on the photos: here's a case where it would have been worth $50K or so to design and build a more appealing front of the house.
Hey Ace, are you shopping for a house like that or just observing the market?
I see places like that around here and wonder why people want all that space and stuff. If it were free, that'd be one thing but it costs to build/acquire; it costs to clean and maintain; it costs in annual taxes.
What's with the theater and that "relatively" small screen?
A theater was a big deal when a 40-something plasma was $10,000 but 43 inch LCDs are well under $1,000 and dropping.
The place doesn't seem that big to me.
What I don't understand is theater seats. What's the point? When I'm home watching a movie, I want to curl up with my Mrs., and I can't do that with theater seats.
@J@, I am shopping in that price range, but I don't want a huge house. I want to spend the money on a good location, good floor plan, a few big rooms rather than a ton of small ones, a great kitchen and baths, a garage, bright lot with good back yard. Unfortunately, in Arlington, it seems the supply of that type of house is very limited. As you say, there is a ton of big houses at that price and above, but with serious faults.
I agree, NovaWatcher, plus if you have a group over it isn't good for conversation.
NoVAwatcher, where you are looking, 3000 sq ft plus a finished basement isn't big, but in Arlington, it's big, and it's much bigger than we need. Currently living in a house < 1500 square feet.
Ace: we're living in a similar sized place and feeling really scrunched.
We're looking at 2000 sq/ft+ (excluding basement), and most of those around 2000 sqft feel really small.
A good chunk of that feeling is due to the layout/architecture, with center-hall colonials being the worst offenders for some reason. Is having a dinning room in which we can walk-around the table while seating more than 4 people really too much to ask?
http://tinyurl.com/n8gbt7
I think our threshold of comfort is around 2400 sq/ft. As for the center-halls, the ones that violate the standard layout (e.g. instead of living and dining being the same size, make the living room a small office/reading room and the dining room larger) seem to fare the best.
I agree, NoVAWatcher, I think a lot of the ~2000 square foot houses would work fine if better laid out, but they aren't.
We had a ~2600 square foot house designed by an architect for himself in another city. It felt huge (though due to passive solar and other features, the energy costs were quite low). So I originally thought 2100 square feet would be great but have felt exactly as you did.
We're even willing to do some work (pay someone else to do some) but there just aren't good candidates. I think a lot of it is that until recently what we wanted was too expensive, and now, prices are more reasonable, but sellers aren't listing if they don't have to.
Waiting has been frustrating but it has paid off so far. Several of the houses that might have worked have lost considerable value since 2006.
TBW-
I agree with you that there is little cost on the car if they are just taking Leesburg Pike rather than the toll road. Seeing that Leesburg Pike is normally a parking lot I just figured it would have added more than 5 minutes.
I made the same assumption that Jeremy did that they illegally took the airport road. If this is the case it probably adds several miles(5+) and only add 5 minutes because traffic moves better.
So if you are right they are already saving money if I am right they will be losing money either way. Ohh well we will never know, and it sounds like it makes the person happy to "save" the money so if she gets enjoyment out of it let her be happy :)
http://franklymls.com/FX7069973
I knew this one would go above list, but $405k from a $367k start point startled me a little. It was staged well, and the pictures were taken by someone who knows what they are doing, but the place certainly had faults. One bathroom, miniature kitchen, low ceiling basement, and every single window needed replacement. It is one of the few, if only, houses of the type around that area that has sold for anywhere near $400 w/o an addition. If we have a short-term topping out of the market, I'm pointing to this house and this time frame.
"big houses at that price and above, but with serious faults."
I agree. I know a guy with a HUGE house. It's big because it has too many rooms and the rooms are all too big. Bad layout. Bad proportions.
Rather than well designed, that is.
Hope you find something suitable.
I like that house Fred, but I haven't been in it.
That neighborhood is actually an area we were half watching for a while, but when we were looking at it that house would have gone for far more than $400k.
I can't really comment on whether or not 400k is a "good" price without having looked at it in person though.
Fred,
$400k and vinyl flooring all over the place, xpovos take note!
(yeah that price just seems like crack-rock)
Ace,
Yup it's the outside that killed them. Something other than factory generic white garage doors, some dark-wood or other feature over the stucco parts, some interest to the shutters, put together in a way that made it feel intentional and they would have gotten way more interest. These things are still fixable.
(my husband says it's fugly)
novawatcher, those were hilarious.
Thanks, @J@.
Cara, agreed. I also think that the semi-circle detail on this and other homes rarely looks good. Years ago in art class, the professor said that it is very difficult to make circular shapes appealing in most compositions, which I had never noticed but saw how right he was many times later. I think a version of that applies to this house.
To clarify on what I liked about that house...
The house itself isn't anything special, very very few houses in that area are. What is nice about it are the things that are missing, specifically no poorly planned and executed addition, swimming pool, decaying concrete patio or driveway, etc.
In short, it is small and nothing special, but that is what you get in that area. None of those houses are going to be architectural exemplars or anything. At least with this house you have a relatively blank slate to work with.
Yeah, that curve over the garage doesn't work at all for me, and is going to be the hardest thing to "fix" without simply riping off the facing and laying new brick-front over it. I don't like that particular entryway over the front door either.
The arch with the stucco really looks like an interior thing, that should be in a Mediterranean restaurant painted with a vista.
Yes, the garage would require an expensive change. I think they could pretty easily replace the portico with a more traditional-and-consistent-with-the-architecture triangular shaped gable, and similarly replace the gable over the window.
As your hubby accurately summed up, FUGLY.
Well, those who take us 'bubble heads' as a counter-indicator, take heart! I've decided not to buy right now. I'm going back to Europe for now and will look again in the winter.
Since I've haven't been looking in NOVA I've tried to keep my comments to a minimum-- except for the comparisons with Montgomery Co. which inevitably occur to me when people start talking immunozone here... but I keep an eye on my old neighborhoods in Alexandria and Arlington as well.
I like to use Zip Realty's map function for keeping an eye on the whole metro area, and lately, since I didn't have time to wait around for a short-sale, I've had it set to show only foreclosures.
What I see is this: the priciest neighborhoods-- Georgetown, Bethesda, McLean-- tend to have few or no foreclosures. However, adjacent areas are beginning to have a fair number of foreclosures- Southern Rockville and Silver Spring in Montgomery Co., Falls Church, parts of Arlington and Alexandria in NOVA, Cleveland & Woodley Park/American University in DC.
So how many people moving into the area with, say, a $200,000 family income would be willing to 'trade down' to, say, Falls Church instead of McLean or the pricier parts of Arlington? Considering that many of them may have been unable to sell their old homes-- and are probably coming from less expensive areas anyway-- I'd think it might be quite a few.
I do see some evidence for another theory, though-- that we are seeing a generational shift in attitudes towards the city vs. suburb question. With the exception of the farthest out stops and the more dangerous areas I see very few foreclosures within easy walking distance of metros. Since I've been a cheer-leader for this change for 35 years, I certainly hope it's so!
http://homes.longandfoster.com/Real-Estate/PropertyDetails.aspx?MlsCompanyID=2&MlsNumber=AR7092933&profileTypeID=1&Add=1932-LANGLEY-ST,VA-22204
1932 Langley St Arlington
It's apparently under contract, but this is starting
to be decent value.
Not the greatest location, but tolerable, at at 199K a decent price. I suspect more like these will hit the market.
http://franklymls.com/FX7100270
take a look at the listing price history and the prior sale.
2004 369K
2008 420K
2009 249K
if it sells now with transaction costs it's almost a 50% writedown.
looks like they updated the place after they bought it with cheap cabinets and cheap appliances.
I think Cara mentioned that places over $500K weren't selling very quickly. My search area is Ashburn (20147 and 20148), under $700K. Feels like 2005-light right now. Anything we show interest in seems to go under contract right away. Even places in the $600s appear to be going quickly.
20147 detatched under $700K
20148 detatched under $700K
It'll be interesting to see what percentage actually close. Three we were watching did close recently and got asking price (all over $600K).
Since we already own, aren't selling our existing place, and can deal with the limited space in our current place (for now), put us on the list of buyers putting our search on hold for at least a few months.
novahog, it's a local market thing, but if you limit that search to 400-700k? you get 38 actives and 89 listings in that first zip. For a spring market in the first year of semi-affordability, that's decent but not jumping like the under $350k market is.
I don't think there ever is that mythical time when well-priced, attractive housing doesn't attract serious buyers within a week or a month at longest. The only time that's true is when nothing is well-priced.
Contrarian, that's horrible. That store is always busy; someone would have to be pretty brazen to attempt a robbery, particularly at that time of day. I hope the employee recovers fully.
Ace-
I agree you have to be crazy to rob that store in broad daylight. Also does the apple store actually have any cash. I would have to imagine that nearly everyone uses plastic.
housebuyer,
I agree it's unlikely her alternate route is Rt 7 because that would have to add more than five minutes. I imagine she is using back roads. Who knows which. Given there is congestion even on the DTR and Greenway, I can believe backroads might only take five minutes more.
The Clarendon shooting is very shocking. I will be interested to hear where the culprit came from as I suspect Arlington's crime rate often is tied to how well (or not so well) neighboring jurisdictions like DC and Alexandria are doing.
In other news, here is an article in today's Washington Post about how poorly Landmark Mall is doing
As Owner Struggles, Landmark Mall Languishes
"...not jumping like the under $350k market is..."
Probably true. Still, $500K+ seems to be moving out there.
"I don't think there ever is that mythical time when well-priced, attractive housing doesn't attract serious buyers within a week or a month at longest."
I guess i don't consider many of these houses "well-priced". This is not a normal market. Govt manipulation is working. Now, i just have to figure out how long that's going to last. Makes the decision to buy more difficult.
FYI, those 38 actives are now 37 (as of 11pm). Also:
* 43132 wintergrove is listed twice.
* At least 11 are short sales.
* A few are builder listings
* Another 2 or 3 are for a 55+ community.
Only scraps left. Pick a few from the list of actives in that search and let me know what you would consider if you were looking in the under $700K market :) I need a better selection if i'm going to drop at least $500K on a house.
Have a safe and happy 4th.
Can someone please recommend to me the sites you use to find homes for sale? I currently use Redfin because I really like being able to see them all on a map and scroll to new areas to look without knowing the zip code. My wife is convinced they don't have all the listings that the real estate agencies have though.
Hi Jeremy,
I use Redfin and sometimes FranklyMLS
As far as i know, they both give you all available listings.
www.sawbuckrealty.com has a nice mapping feature, it also allows you to search recent sales.
Hi Jeremy,
I completely back what novahog tells you. Redfin and franklymls.com are the only two sites that have current listings. All other sites that I have used don't remove properties that have gone under contract in a timely manner. On other web sites, you actually have to call the real estate office to ask if a property is still available. I suppose they think they are more likely to get your business if you have to speak to one of their agents. That's the reason why other real estate web sites seem to have more listings.
Since I've never posted on this blog, let me introduce myself. I would first like to make a disclaimer: I do not have a PhD...but I do fall under the category of people who have studied "impractial" subjects and have spent a lot of time working and volunteering for non-profits. I wasn't offended when someone recently on this blog made a comment about this "type" of person. As I tell my husband, what kind of world would we have if everyone were a software engineer?! :)
My husband, our small children, and I live off his one income in a nice 2k sq ft townhouse in Leesburg. We are hoping to move closer to DC, not too far from the toll road, to a single family home built no earlier than 1990. Neither of us can do house repairs, which is why we want something so new. "Closer" most likely means Herndon. Since we've been looking for quite awhile now, yes, I realize this is like looking for a needle in a haystack.
When I started looking in Fairfax County, my husband was hoping that we could get something in the low 400s. Of course, we saw nothing that met our requirements, so we looked for deals in Potomac Station, Balls Bluff, and Stowers, but hesitated at the thought of staying here in Leesburg. We then increased our price range slightly to 450k, so that we could actually have properties to look at. On the same day, we saw two properties, about a mile or two from one another, priced about the same. 1176 Bandy Run Rd off Fairfax County Pwy was 500k, and Cliff Edge Drive, off Dranesville Rd, was 499,900k. Talk about different worlds, and having different intentions behind the same price! We decided not to think about Bandy Run Rd again, because the real estate agent said there were million dollar homes in that neighborhood. That later sold for 600k, still a good deal for that neighborhood. We seriously considered the Cliff Edge Drive property (http://franklymls.com/FX6944810.) But when the listing agent told our agent he had three offers on the table, some much higher than 450, we were then too discouraged to even make an offer. We were shocked when I later found out that the buyer paid exactly 450k, and got a 15k seller subsidy.
We also missed http://franklymls.com/FX6931381, within a stone's throw of Cliff Edge Drive, because the listing price had been a scary 544k. I was quite surprised by the actual selling price of 477k.
Since I haven't found any deals like that since on newer Fairfax County properties, I've been relying upon this blog to assure myself it's good to wait; other deals might come. It's also a good dose of realism to understand that there are many people like us sitting on the fence, at a middle price range that might not move much because there are people moving up and down into this price range.
Not seeing much out there, I also look on Franklymls.com to see what short sales are under contract, and then I look at the redfin listings for those properties to see when their contingencies expire. After all, it's possible that they'll come onto the market again. Wishful thinking, I know. But it keeps me hoping.
REdealSeeker-
I don't think it is just wishful thinking that a short sale will come back. I am currently under contract in a short sale. The agent originally told us we would be able to close in July it is now looking like we will not hear back from their bank for another 2-3 months. I think the longer we wait the more we think we are settling on the short sale house. I think there is a pretty good chance we will cancel our contract.
Also you can definitely make bids on short sales. Although the owner may not consider the bid I am pretty sure the agent legally has to submit it to the bank. Clearly the bank will accept your offer if it is better than the offer that is currently on the property.
novahog,
Yes, by "well-priced" I meant relative to the current going prices. Which of course is not the same thing as what any of us think these houses are worth.
I too hope that prices will keep coming down. But I think you need to be prepared for the fact that as they come down, they are greeted by a larger and larger pool of buyers.
My target range is dropping into that gap between owner-occupant and cash-flow positive, where there actually is a no-man's land of prices where there aren't many new buyers. But for the over $500k stuff, I don't think there is a similar dynamic.
So, I think you need to prepare yourself for the reality that when prices finally do seem to line up with what you're willing to pay, they will also be aligning that way for many other move-up buyers. And there will also be fewer sellers willing to sell for that price, and hence lower inventory available.
But I agree fully that most of what's out there for over $400k, might as well not be listed at all as far as most of us are concerned, because it's not worth that. So in that sense, the truly "well-priced" inventory has only one direction to go, UP.
Happy 4th!!
REdealSEEKER,
Welcome! Thanks for sharing your story.
It sounds like you have a very nice livable TH, so are in a good position to sit like a hawk waiting for the right house to come along.
I'm assuming you've already done the following steps:
1) Checking out all possible commutes for your husband, and seeing what communities that would land you in, and which school districts.
2) Within those choices finding out how many new homes actually were built there and in what general price range.
3) Keeping an eye on what TH's in your neighborhood are selling for so you know how much to expect to either net or need to pay out, in your home-purchase calculation.
But in general, yes, the patient approach should be the best one, because while prices may or may not go down from here, they are not going up. And $400k is not really a starter home price (outside of hoighty-toighty neighborhoods) and hence the support for these prices will have to be eroding. Because buyers like yourself will need to be putting more income and less equity into buying them.
I like to think of "losing" out on certain houses this way. (1) We only need one house, so why is this one any different than the thousands upon thousands of other houses we don't own. (2) If they did get it for a price we would have been willing to pay, all the better!!! New comps for us! Every lower comp is more price discovery that helps convince a few more sellers that they need to lower their price to find a buyer.
Right now is tough, because there are only 1 or 2 houses that you'd even consider. But my opinion is? If there are only 1 or 2 houses you'd be prepared to buy? You're buying too soon. This year is not the year to raise your price point, let more settling occur first.
Cara,
We have addressed some of the issues you mention. My husband has clearly outlined where he'd like to be, and how he'd not like to be too deeply into a community, away from a main road, because that can add several minutes to your trip to work. Unfortunately, when we consider Ashburn and Sterling, we have seen that the very best schools in each area are located in the Western sections (i.e., Stone Bridge and Potowmack Falls). We wouldn't mind necessarily living in another part of Ashburn, but the prices are so high, and its location is such that we might as well stay in Leesburg. As for Sterling, we don't even think about gang-riddled Park View, and we really do not want to send our children to Seneca Ridge Middle school, which has the same problem. Plus, I don't think Seneca Ridge even has a web site (in this modern era and this high tech area!) Because that school district lies in the northeastern corner of Sterling, that's the best place to be in terms of the commute. If you live in the Western half and need to go East on 7, you're always going to be stuck in bad traffic until you reach Fairfax County Parkway. So, we've crossed Sterling off our list.
Since there's not much for us to see these days, and we've already driven around quite a bit, I've spent time checking out TH sales in my community. While there's not huge variation in size or quality--they were either built by Beazer or Washington Homes between 2001 and 2004---the variation in sale price seems indicative of the volatility expected in a market still "finding its way" down to affordable prices. In December 2008, one REO TH (1700 sq ft---basement unfinished?) went for 174k; in early March 2009, another REO went for 166k. The next day, there was a regular sale of a townhouse a block or two over for 487k! That is on the high end, and that's the only sale I've seen like that this spring. There was another bank-owned home very close to us, listed in the mid, then lower 300s, which recently sold in the 270s. So, when we're ready to put our home on the market, it would be valuable to know more about what special seller magic went into that 487k sale. On the other hand, we can only price our house as high as its worth in the current market, and expect to sell quickly. A townhouse in a premium tree-backed lot sat on the market a long time (over)priced at 399k. (We've seen several short sales of large, beautiful homes at that listing price--why even consider a TH at that price then?!). Somehow, that TH recently went under contract. Most sales seem to be between the high 200s up to about 350k. I don't know what percentage are short sales, but it's likely to be high.
As for your second point about finding out about how many newer homes are located within Herndon, we haven't been very scientific about that. We've driven through neighborhoods past houses I've seen on the market. I'm under the impression that most of the houses in Herndon are older (70s and 80s and much older), with pockets of newer homes squeezed in. Newer homes that sort of meet our criteria come priced at about 650. Which leaves something of a conundrum....since prices are expected to fall only about 10%, we'll have to wait for some extraordinary, deeply discounted December-February short sales. Or, we think about a really nice, big townhouse in a nice area south of the tollroad. We love Greg Roy Lane, and my husband would like a house there. I told him I don't see the houses there on the market for 619k coming down into our range. Housebuyer, there's a 399k, 3k sq ft th on Greg Roy Lane that I'm keeping an eye on, with a contingency expiration date of 12-31-09! Quite a wait---are there specific expiration dates for contingencies on the short sale you've put a bid on, or have you simply been told, "keep waiting"? I'm guessing bank approval date might not have anything to do with contingency expiration dates? Should I be following those dates on Redfin?
Cara-
I agree that 400K is not a starter home any many areas. I am not sure that I would agree that it is only a starter home in hoighty toighty places.
My fiancee and I are not looking at any of the most expensive neighborhoods(Georgetown, DuPont, N. Arlington, Old Town) yet there are many places we are looking where 400K isn't really an option other than condos.
Basically any starter home on the Orange line is in this price range or possibly higher. I guess it just depends on definitions of hoighty-toighty. I definetely agree that once you get more than 10 miles outside of DC 400K is well out of the starter home price range.
Redealseeker, It sounds like you and hubby need to sell. Did I read that right? Anyway, what I would recommend is ..get a good realtor...seriously, interview and select someone with plenty of years of experience and tons of contacts. Thats how property gets sold when inventory gets tight..realtor word of mouth about something new coming..Explain to them exactly like you explained it here and they will look for what you want and need. I wouldn't try to sell and buy in this market at the same time. I would sell first then look for the right property to buy. I really think they are going to extend the 8000 buyer bribe to Dec 2010 and expand it to all buyers without income restrictions. Since there are already 2 bills in Congress and T-Total hell being raised over the new apprisal system, look for it to be "suspended" until they get the kinks out. Both of these things are good for you and hubby if you need to sell. So wait, look and explore other areas. Does hubby insist on these locations because he can only drive to work? Dulles toll roads are going up and up for at least the next few years.
If I have said anything to hurt your feelings, I'm very sorry.
REdealSEEKER,
Seneca Ridge does have a website. I would be shocked if there was any public school in the metro area without a website.
Also, you should know that every FCPS middle and high school has gangs. That's why there is a Fairfax County Police School Resource Officer assigned to each one. Plus, all of the middle schools in Fairfax county have an after school program for not only academic help, but also to abate some of the deliquency problems.
housebuyer,
$400k is not a starter price. Whether starter homes are at that price or not, it's not a price that anyone other than dual income high-earners can start in on. (Unless like the couple on slate they've been saving for 15 to 20 years).
If you don't have equity or 15 years of rental savings in your belt, over $400k is just not a good idea for the vast majority of people even in the DC area. That's all I meant.
REdealseeker,
that still seems like an absurdly restricted area that you are limiting yourself too. I take it your husband works in Leesburg or somewhere else out near Sterling not in DC.
The 10% down prediction is for the entire region, not for any particular locality or any particular price point. If you're still seeing diversity in pricing of $100k or more? Then price discovery hasn't happened yet, and more downward momentum is very possible, because a lot of sellers are just looking for that lottery ticket buyer, and aren't going to find it. Keep your eye on sales, which you can track with either frankly or sawbuck.
Cara-
I guess that is fair, although there are definitely a lot of places in the Tysons area where starting salaries are $60-65K(many consulting/finance jobs). So within a couple of years these people are in their mid 20s making 75K each and spending 400K if you make 150K is very reasonable.
Of course you can also question whether these people should be paid that much, but that is an entirely different argument :-)
Arkey,
I'm not offended. That's the point of this blog; to determine what's happening to the market, to look at how people handle their real estate searches and transactions, and to advise accordingly.
Your advice to sell first is based on prices falling further? My husband talked about selling then renting back in 2005, right before I was about to give birth. At the time, it didn't seem like a great idea. I couldn't do anything more than getting through my day. The smaller bang we'd be getting for the buck now is not as exciting, but will prices fall to where they were when my husband bought this place in 2002? Our current plan is to buy in the dead of winter, when prices are lower, then put our house on the market during spring season. Our plan is founded on the seasonality of the market, rather than on its overall direction. I think your advice is to consider i the overall direction of the market. That makes sense, if we're willing to move to a rental, and then move again later. That's the kicker - we don't want to move twice, unless the difference in earnings from our TH sale would be significant.
I love this blog. You all have posted lot's of thoughtful comments and I've learned a lot just from reading. My question is, does anyone know of similar sites for DC and Maryland burbs as well? I haven't been able to find anything. Thanks in advance.
HayfieldGrad,
Thank you for pointing out Seneca Ridge's web site. I had read that somewhere online, and I'm sorry for perpetuating internet myths.
However, Riverbend looks like a much better middle school than Seneca Ridge, simply from a comparison of their test scores on schoolmatters.com. On the same note, however, Seneca Ridge's test scores compare favorably to Herndon Middle School, which means that it's better to be in the Oakton or Westfield School districts.
Cara,
We're not restricted to Greg Roy Lane. It's just high on our wishlist. And yes, my husband works in the tech corridor. For commuting purposes, a house in Herndon is ideal. Also, should my husband change jobs and/or I reenter the workforce in a few years, Herndon is better location than Leesburg. We could actually think about working in Arlington. We are also very concerned about tollroad pricing and the awful commute. That's why we don't consider Broadlands and Brambleton. We'd have to factor several dollars a day in tolls into our living expenses. We're too frugal to accept that.
housebuyer,
Yup that's exactly why $400k was the upper bound for starter home. Anything above $400k is not a starter home price.
Although, I have to say, buying a $400k home when you make $150k between two salaries is nuts. What about car payments or saving for the next car, what about maintenance, what about starting a family, what about saving for retirement, what about your health insurance premiums, what about life insurance? What if one of the two of you is between jobs for a couple months? Doesn't add up. Though I'm certain I've said this before, and just as I think these people are crazy, they think I'm a cheap-skate. Which, is true, I am a cheap-skate.
REdealseeker,
That's exactly the strategy T took this year, and it worked out beautifully for him. But, ummm, yeah, out in Sterling? Prices will most definitely be going back to 2002, if not 2001 for TH's. No it doesn't make sense because there are a lot of new high-paying tech jobs out that way, but if the $8k goes away (which is unlikely this year) and when interest rates return to more normal percentages like above 6.5% (also, not going to happen this year) then 2001 roll-backs will be the norm, not the exception in the semi-recent construction 'burbs. You've got to be prepared for the fact that many many people who bought in your neighborhood did so on ARMs, if not option-ARMs. And not all of them will have gotten the salary increases in the interim to pay at the recast rates.
So, yeah, if you don't have enough of an equity cushion to sell comfortably for what he paid in 2002? then this winter needs to be your target move-out date, and next spring your selling time. Though, if it were me, in a 2000 sq ft townhome, bought at only 2002 prices, already having paid down for 7 years, I wouldn't have any reason that I'd want to move. But as I said, I'm a cheap-skate.
Still renting,
There are DC ones linked to on the front page of the blog, but they are mostly winding down, and not as cordial as this blog. We've never found a good MD blog, maybe Sarah will pipe in. You could always start one and we could send people to you.
REdealSEEKER said...
We seriously considered the Cliff Edge Drive property (http://franklymls.com/FX6944810.) But when the listing agent told our agent he had three offers on the table, some much higher than 450, we were then too discouraged to even make an offer. We were shocked when I later found out that the buyer paid exactly 450k, and got a 15k seller subsidy.
Typical realtor speak.
There’s always another offer coming in, there’s always another couple looking at this listing this afternoon, and there’s always a lot of interest in the listing you’re looking at.
Still Renting,
Not a blog, but if you’re looking in MD, be sure to sign up for a password on mdlandrec.
The site will show you in great detail the loan documents on a house you may be interested in. ARM? Down payment? Interests only? The date of reset etc. etc.
Cara-
You should have no issue doing all of the things you mentioned and get a 400K house with 150K of income. Your take home would be about 8K a month after 10% towards 401K. With 10% down you would have a 360K mortgage. With a 5.5% interest rate the payment is $2,050 after HOA, PMI, Insurance and some maintenance it will be $3K total. This leaves 5K left over. I figure 1K for food, 1K towards savings for cars, 1K for everything else (clothes, vacations, gifts...) This leaves you with 2K a month of savings once basically everything is included.
I generally consider myself pretty cheap on most things but I would consider saving 25% a month after 401K and car savings fairly conservative.
Are any of these calculations too conservative?
Redealseeker, My advice was based on getting a loan or an offer accepted. Yes, you can make an offer on a re-sale based on a contigencey of a house sale but if your place isn't on the market few homeowners will touch it and you can forget a SS or foreclosure unless your place is rented with a full year lease and you have considerable amount of money to pay both places for at least 6 months. I honestly believe your townhouse will steady around 2004 prices between 2010 and in 2011 maybe moving higher. Md. and DC have farther to fall but NOVA outer burbs.."they be done with the drastic declines". PWC Woodbridge and 20112 might fall another 10% or less but thats it. Fairfax, I'd say this year they stablize, too. Houses are selling to briskly for them to lower the prices much further in the under 600-700 price range. This is just my opinion. I know we have buyers in the que in the county for the under 400,000 market. It's hot and a full time job to find one and get your offer in and accepted. Weekend lookers don't stand a chance.
housebuyer,
Is it just me or did you leave out taxes and SS and Medicare?
Not to mention what most 25 year olds would have student loans.
Cara-
I did leave out student loans, which may be a couple hundred a month. I did not leave out taxes, medicare and social security. I said that the take home for 150K couple would be 8K. There gross monthly income is 12.5K=(150K/12). This is 11.3K after 10% towards 401K. To get 11.3K to 8K I assumed ~30% of their income is taxes(7.7% social/medicare, 5% VA, these leaves ~17% federal which I think is about right after deductions) I may be off by a couple hundred dollars but I doubt more than that.
Lets also be honest very few people are putting 10% towards their 401K. So if I am off a couple hundred dollars you can just assume that they are putting 8% towards 401K.
I also just assumed taxes on the house offset the tax benefit. I think this is more than generous, in reality the tax benefits would be slightly higher than the property taxes.
housebuyer,
Your numbers are right. Within a hundred or two. And I know this, because that's what me and my husband make combined, and if you add together our rent and our monthly down-payment savings you get $3200, which is slightly more than your PITI.
Which is precisely why it doesn't work. Your numbers are too exact, they don't have enough slack. In this environment if one of the two of you loses a job, the new job may not pay as much.
What if your young couple wants to have kids? Either, they'll need to set aside $1000/month for daycare and diapers and such, or they'll need to cut out one of two incomes.
And some months we put more than $1500 into the downpayment savings but other months we need/want to actually see our families, neither of whom live in the area, both of which require plane flights and possibly car rentals. Right now, there's the slack to simply put less towards savings that month. If it's obligated to the house, not so much.
But really the big one is kids. Your scenario is a dual career household with no kids until one of the two is making considerably more. Since most of the 75k + jobs require more than a BS to land, this is not just youngin's we're talking about. Not everyone wants kids. But most of the people I know who don't want kids have some other expensive hobby, like world-travel or race-car driving or law-school (which is not a hobby, I know).
Hence why I stick strongly to my contention that $400k is the absolute upper limit for 1st time buyers (aside from trust fund babies, or the truly affluent, or the incredibly stingy long-term renters). Because only for a few people is $400k towards a house going to make sense even on a dual income of $150k.
Cara-
I agree that kids cause a huge problem with my numbers. I guess I am thinking about younger people who are not planning on having kids for 5+ years. I know a lot of 22-25 year olds that have no intention of having kids until they are in their 30s. If this is the case they are on career paths and will likely have a much higher income by then. The big problem is obviously a 24 year old may say he has no intention of having kids, but when he is 27 who knows.
So because of the uncertainty you are right and people should probably more conservative. Also your comment about job loss is key. If you are in industry rather than the government this could be a big problem. This is why I don't want to stretch myself. My career is not the safest so I would only go for a house that I could afford with a different job immediately(probably would cut my salary by 40-50%)
But if someone is young, still getting raises, and doesn't have kids for 5+ years they will have 6 figures saved up before they have the first kid which gives a pretty nice cushion.
housebuyer,
To get $75k from the government you absolutely need higher education than a BS, so we're not talking 25 yrs old. So you can either have youth, or job security, not both. And the current job market is not one in which assuming raises in the near term is a reasonable plan...
And really, the younger you can have kids, health-wise and risk-wise the better (says me, whose wanting to start a family sooner rather than later at age 34).
But I think the point that Ace and others made is even more relevant. The hypothetical couple you're considering is an absolute best-case scenario. Really the couple you're talking about should be buying that new condo at Clarendon. They are the target market for it.
Cara-
I thought for my ideal couple they could have one CIA worker that gets paid more for knowing Arabic and a couple Asian languages. Ok maybe thats a little fake.
To be realistic you are probably right there are not that many people in my ideal couple. Just based on where I live and my job I happen to know a lot of these people. I think most of my friends are also from the suburbs or rural areas so they want more space. Thus the condo's in Clarendon are a bad idea. You can get about twice the size for the same money if you movie to Vienna.
You are right though that there are not that many couples like this and job security really is a big issue for many/most of them.
My wife and I are pretty close to "that couple." 29 and 27 with a little over 150k and no desire to live in a condo or townhouse. We want kids in about 2-3 years and have that figured into our budgets. (1k per month x 2 kids) The problem is we think we won't be moving again for probably 20 years once we buy our first home, so we're extra picky. Everything we like right now is in the 650k range and out of our budget, so we're still waiting and saving $3500 a month while renting. Should have 100k saved by the time our next lease is up in Feb 2011 and hopefully we can find something in the Oakton-Reston-Tysons triangle area. One of us commutes to Tysons and the other to Fairfax Hospital.
Right now looking at houses still just makes me angry. With the jobs and income we have we should be able to afford something really nice, but sellers are still asking twice what they paid in 2002. We both plan to keep working when we have kids. Is it unreasonable to think we can afford a 500k home?
Jeremy-
It really depends who you ask. I personally think that you will be fine with a house at that price range. You will not be able to live a lavish lifestyle and obviously your savings will fall considerably once you have the two kids. But as long as interest rates are at current rates you should still be able to save 1.5K/ month(far more than most Americans). So it really is a personal choice. As long as you don't want expensive meals out and to own a couple of BMWs you should have no issue buying a house that is 3 times your income.
You should also have no issue getting a loan for this amount. One of my friends and his wife make 160K and he was approved to spend up to 750K. Although he only want to spend 500K
Jeremy-
One comment that I would also have is make sure you are being honest with yourself about your savings. You said you would have 100K saved 20 months from now and you are saving 3.5K a month. This implies you are 29 and have only saved 30K. So if you just graduated recently from med school this makes sense, but if you have been working for several years with 30K of savings assuming you will save 70K in under two years may be difficult.
I am not saying its not possible, you obviously know your situation better than any of us, but just make sure you are being realistic.
Jeremy,
If you're fine with renting until you've saved up 100k, and that won't be until Feb 2011, I would say, try not to worry about today's prices. By 2011, it should be pretty clear what the prices for various areas really are. And then you can pick your trade-offs between commutes, schools, house-size, neighborhood, proximity to a good day-care, whatever else matters to you. Just keep a lazy eye on the YoY declines, when YoY prices are no longer down in the areas you're looking in, for 3-4 months in a row, we might actually be at a bottom. And there will probably be very little inventory because very few sellers will want to sell at those prices, so from there on out selection should only rise, as owners accumulate the equity from paying down the mortgage, and get the salary raises such that they can move on. But that's going to be slow.
If you're thinking for the long-haul, I might recommend Ace's plan of finding something with good bones, that can be expanded, but that you would continue to do work on over the years, rather than pay for all at once up front.
But I hear you completely on the I make X, I should be able to afford Y without breaking the bank. It may not be true now, but it may be true by 2011.
Thanks for the input. I think that our savings goal of 100k should be attainable since we only started saving less than 2 years ago (paid off all student debt before then) and have since used those savings to pay for a wedding and pay off her new Jeep (my 2004 car is already paid off). We have ~35k in our savings now and without any other debt are putting away $3500 a month. That is how I come up with 100k by February of 2011. Our AGI is going to be ~170k this year, so maybe we were "that couple" two years ago. We just weren't married yet.
I know our possible move date seems far away, but to me it seems that to be able to move by Feb 11 I will have to start really looking next summer, which feels very close to me anyway - especially when it seems like we can't afford the houses we like right now.
Jeremy,
That time-line is about right. But similarly when I started looking last spring, Tiny two-bedroom condos in Kingstowne were asking (and not getting) $275-$300k. by this spring they were asking and getting $180-$210k. A lot can happen in a year. You're looking at what in this area is a move-up market, nice longterm livable SFHs. Market dynamics there will be delayed because the impact of the loss of equity in the move-up buyers hasn't hit yet. It will take longer to play out and may bottom later than the true entry-level. (which I don't think is done quite yet either in most of NoVa)
Jeremy-
It sounds like you are doing a great job planning forward. Goodluck with the process and don't worry it will start to seem 2011 is far away when you start going to open houses week after week and everything starts to look the same :-)
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