Please post your local house search updates, MLS finds, on-topic ideas, and links here.
Saturday, July 11, 2009
Subscribe to:
Post Comments (Atom)
REAL ESTATE SEARCH
County Assessment Websites
Buy/Sell Without an Agent
Local Real Estate Agents
Local Interest
Housing Bubble Links
Eastern Regional Blogs
Western Regional Blogs
- Bakersfield Bubble
- Bay Area Real Estate Blog
- Bubble Inventory Tracking (Western US)
- BubbleInfo (N. San Diego)
- Burbed (San Francisco)
- Calgary Contrarian
- Chicago Bubble Blog
- Dr. Housing Bubble (SoCal)
- Marin Real Estate Bubble
- Patrick.net (San Francisco)
- Portland Housing Blog
- Professor Piggington's Econo-Almanac
- Rancid Truth (Orange County)
- Sacramento Land(ing)
- Seattle Bubble
- SoCal Real Estate Bubble Blog
- Socket Site (San Francisco)
- Sonoma Housing Bubble
- Texas Housing Bubble
- Vancouver Housing Market Blog
Real Estate Blogs
REAL ESTATE AUCTIONS
About Me
64 comments:
The anti-arlington: Slideshow
Type: Detached
Style: Farm House
Year Built: 1900
Number of Bedrooms: 6
Baths: 3
Lot Size: 110.08 acres
Estimated Property Tax: $ 1,427
Listing
Hunting, dirt bikes, hiking. Makes you realize how little you get for your money around here.
paKa,
I also prefer a more urban lifestyle, and I'm not crazy about the neighborhoods close to the Vienna/Dunn Loring metros. Falls Church is okay, but I'd rather not live there.
It sounds to me that Metro is not really the reason you want to live in Arlington. It sounds more like the walking thing is icing on the cake. You've already admitted but for the schools you would live in DC. I think you just prefer a more urban lifestyle (hence you'd actually prefer DC to Arlington if the schools dysfunction was not there). So you were not forced into Arlington . . . you just do not want a suburban lifestyle.
homeowner,
We don't regret it but I suppose we should. Tabitha has addressed the many intangibles of owning versus renting much more eloquently than I can. I guess it just comes down to not always making the best economic decision but the best decision for your family which does not put them in economic peril.
Oh I totally agree that there are a lot of intangibles to home ownership. I just did not feel the ones you listed were those intangibles.
Anyways, because of the intangibles of homeownership if the worst I had to lose was say $20,000 of equity I would be buying right now. But for those of us looking in the above $400k market, I think the possible downside is still potentially up to $100k. A 20% loss on a $500k home is $100k. I just cannot risk that and I still do not think it's outside the realm of possibilities that some markets I'm looking at will not have another 20% of losses.
@J@,
Well a lot of you seem to have been talking to a lot of bubbleheads since 2002 or 2003. But I will just that ***not all housing bears*** told people to sell their homes they bought in the 1990s, pocket the equity, and rent for however many years it took to recover. Okay, let's play fair here.
Yes, some housing bears argued that but I would say a large segment of the "housing bears" camp (like myself) was of the mindset that **housing should not be an investment**. So we have never encouraged people to buy/sell homes like a stock.
@J@ -- say that your home has bottomed now (I disagree but whatever). You seem to admit that it will not go up in price again until incomes catch up which might take us to 2012 or 2013 or so. Wouldn't you agree that it would have been preferable for your home to have gained 3-4% a year instead of 20% a few years and negative or 0% growth many more years? If it had been a more modest 3-4% growth, then we would never have needed TARP, nor had this severe of a recession, nor would lots of families be severely underwater in their homes.
Novahog:
Don't forget Inbreeding, Meth and loneliness
pat, how can you be lonely if you're doing meth (and your cousin)?
Anyone out there have success with a short sale lately? Most of the places on my watch list that are under contract are shorts. Some have been UC for several months (one since Oct 2008).
I know housebuyer recently gave up on a short. I'm thinking many of these places are headed to foreclosure eventually. If so, i wonder how it will affect inventory over the next several months?
Haven't been able to find stats on % of shorts closing.
novahog-
I am pretty sure that our short would have gone through. It probably would have taken 5-6 months in total so if you are willing to wait you can get a much better deal(~5-10% off). I think we mostly decided that we would rather wait a little while longer and get a nicer place. My fiancee and I are pretty young (22 and 25) so we are more limited more by our savings than the monthly payments. So we figured if we saved another 6-12 months we would be a lot better off. We want at least enough for 10% down plus 4-5 months of living expenses.
We have the savings to buy a nice TH near vienna that is from the 70s. I think we decided we wanted a newer more open floor plan, these places tend to be bigger and have a garage. So it will take a little while longer before we can afford one of these.
So don't take my story as a short sale is not worth it. I am pretty confident we would have closed, it just would have taken a while and we realized if we had to wait that long we may as well get the a place we really wanted...
I have come across a blog that claims to have the data from Deutsche bank indicating that DC area has 51% of shadow inventory. Eventhough it's not as bad as CA, but it will definitly have a negative effect on the price if all of these houses are pushed out to the market.
http://sacrealstats.blogspot.com/2009/07/deutsche-bank-sacramento-resale-market.html
Even though the blog is about Sacramento housing but it has data for the other cities in the country. What do you guys think?
51% compare to the MLS listing.
"Wouldn't you agree that it would have been preferable for your home to have gained 3-4% a year instead of 20% a few years and negative or 0%"
No, not really. The reason is that I never intended to sell.
If I thought that the Immunozone would fall like Manassas, then perhaps it would have made sense to sell, rent, etc. I did not think that was a high probability.
My guess was always a 10-15% drop followed by a flat period of several years, then prices will climb again.
Maybe GTE's Greater Recession will change things for the worse.
That's the wild card, not the hypothetical houses held off the market.
9.5% unemployment and rising, money lost from 401(k)'s, crooks on Wall Street, are the real problem.
@J@,
No, not really. The reason is that I never intended to sell.
If I thought that the Immunozone would fall like Manassas, then perhaps it would have made sense to sell, rent, etc. I did not think that was a high probability.
Did you even read what I wrote??? What you wrote is not at all responsive. You appear to be having a fake argument with no one. Who here is saying you should have sold three years ago? I think regardless of where we all see Alexandria going no one here is admonishing you for not having sold and rented. My whole point is that even though I think it will go down more I don't think you should have sold it.
I'm also not sure why you are happy you paid way more in property taxes in 2003-09 (and probably beyond) because of the boom-bust rather than what you would have paid with more reasonable growth. The localities cut some property tax rates but you still pay way more in property tax now than you would have if there had been more reasonable growth. Because of that fake boom the localities went on spending binges that would not have happened with more moderate and even growth.
People who buy homes now will cry like realtors when the whole economy implodes.
"Did you even read what I wrote??? What you wrote is not at all responsive. You appear to be having a fake argument with no one. Who here is saying you should have sold three years ago?"
... and she has been having it for years...
She claims to be happy in her home and never plans to sell. Yet she has been posting on real estate blogs for years using her current name or at least one other, seemingly for no other reason than to deny that her neighborhood is experiencing falling prices.
(Something several of our trolls/real estate pumpers have in common.)
The truth is I think she just likes talking about herself and trying to convince the world that she is successful. The common thread in her posting is not real estate, it is her personal finances. (which brings us back to nobody telling her to sell her house)
@J@ said...
I'd like to know what doomers like Contrarian see going forward and what everyone on both sides (BH and HH) expect.
I'm a broken record at this point. Freddie and Fannie will no longer exist. They are merely a shell at this point. Federal Home Loan Bank is worse off now than Enron before it imploded.
I have said you will see schisms break out between class, races, religions, politics, etc. Current examples include the recent civil unrest in Iran and Honduras. There are signs of unrest with the Uighurs in China's westernmost province. This should get worse here in the U.S., especially as unemployment increases. These disruptions should increase in frequency around the world.
Unemployment will far exceed 25% before this depression is over. U.S. citizens will probably be dissatisfied with their jobs going to illegal aliens. Sen. Schumer has recently taken a firm stand on this and Sec. Napolitano is now (allegedly) going to use E-verify on federal contractors and build a fence along the border.
Speaking of jobs, for those who are lucky enough to have one, find one, or keep one, their salaries will most likely decrease significantly over the next decade or so. We have to compete globally, China will start importing cars, driving down prices.
While I think the stock markets will eventually go somewhat higher over the next several months, the primary direction is still down, ultimately ending in a major collapse far below what most people believe is remotely possible.
I think thousands more banks will collapse and hundreds of billions in derivatives (think: Enron) that are waiting to implode.
The last 70 years has been a credit bubble. We are having a credit implosion. Before it is all over, 90% of the credit will dry up.
Large banking institutions are leveraged 35:1 and 40:1. Citigroup is currently trading around $2 per share. **Poof** Bank of America .... ***Poof*** General Electric, probably wont be around when the dust settles. GM will probably not last too long, then their employees will be dumped onto the PBGC.
Some money market accounts probably are not worth a dollar a share. Translated: some people may eventually learn that every $1.00 they have in a money market brokerage account (including 401(k)'s) is actually worth less than a dollar.
Housing has much further to fall, whether in Arlington or Manassas, whether on the east coast or west. As deflation sets in more, prices will drop everywhere, even in the Heartland.
Many cities and counties will file bankruptcy and flush their pensions down the drain, forcing many retired workers back to work, running down wages even further.
Some municipal bonds will probably lose most of their value. I wouldn't count on FDIC insurance. You see Ron Paul and other congressmen demanding the Federal Reserve be audited.
There will come a point where the government (Federal Reserve, Treasury, FDIC, PBGC, ABCD, EFGH, JKLMNOP, etc.) cannot bail everyone out. And, people who sat back and watched the financial institutions get bailed out by former and current Goldman Sachs executives in the current and former administration will most likely resort to civil unrest.
When the party is over and the hangover starts to set in, the only people who will be able to get credit will be those who already have the money to begin with.
There is going to be a huge baby boomer retirement over the next decade. These people will be downsizing their homes, adding more downward pressure on housing prices.
The baby boomer retirement will create a boom in elderly related things such as medical care, retirement homes and convalescent centers.
The $USD should go below $0.50, eventually.
Some may call that doom, I call it reality. :-)
"I'm also not sure why you are happy you paid way more in property taxes in 2003-09 "
I've mentioned several times that lower taxes would benefit HH.
You've mistaking my indifference to higher and lower valuations as happiness over higher taxes... don't get that strawman unless you are channeling L-the-troll of NVHBF. Don't speak its name and invoke the demon. ... leather wings flapping ... name-calling .... brimstone ... contentless fabrications ... shedding scales.
I have no plans to use my HE, however I know HH who do. Some will use the headroom for very, very limited situations, managing their debt well, converting absolutely necessary and unavoidable expenses to deductible loans. Others will burn up every cent of HE on dumb stuff like V-12 Mercedes, vacation cruises, and end up in trouble in the next down cycle.
Some HH may benefit from a couple hundred grand of HE. Personally, I don't like debt but that's me.
That's if we're looking at another up-cycle. Some of the signs are there, some aren't. There is wisdom in posts by writers like Contrarian. I don't agree 100% with him but insight from the doom boards has proven good guidance in the 2005-present time frame, overpriced equities, fiat currency, PM (gold, silver, lead), home loans (Liar Loans, Alt-A), debt reduction, etc.
The value of our Contrarian is that the generic Doom-board tends to rhetoric and doesn't bring it around to homes.
Contrarian (and a few others here) integrate doom and gloom to practical home-buying/renting decisions, which isn't an academic debate for the fun of it (sorry troll). This is real money, real decisions. Buy, rent, or run away to another area?
To be clear, I am not happy about higher taxes, neither are my neighbors. One has paid off their place and pays almost $10K in RE taxes.
For clarity, renters don't escape RE tax, they simply don't get the deduction.
HTH
"Some money market accounts probably are not worth a dollar a share" ... "Housing has much further to fall"
Geezie-peezie, man! You're scaring me.
Speaking of MM - A doomer told me that you want your money in the 1st institute that fails because later in the collapse cycle, the FDIC will be broke, in disarray.
Seems contrarian-intuitive but there might be a point there.
There's a scam running where banksters offer both FDIC covered MM and MM sounding accounts that are not FDIC insured. They don't make it clear which is which.
"China will start importing cars," I know you meant Exporting but that is a good point.
Even around here, I'm seeing people lose their jobs and take lower salaries. That might affect houses.
Wow! Looks like @J@ and Contrarian have both swung so far to their respective sides of the pendulum that they're meeting in the middle...
For the record this 'doomer' is actually very optimistic our long-term prospects. There are some pretty amazing things going on in the world if you pull your heads out of your 'end-of-the-world' blogs and start looking, and thoughtfully considering some of the ideas here or here.
The world is changing big time-- and I think, generally for the better. If we're smart we'll probably look back on this time and realize that the crisis was the best thing that could have happened. We certainly couldn't have gone on much longer with the very broken models we have been using.
I like to think this is the start of breaking the stranglehold that a tiny elite has had on our institutions for the last 25 years and the crisis will eventually lead to a resurgence of the broad middle-class society on which any democracy depends.
I don't deny that things could turn out as badly as Contrarian is convinced they will. But it's far from the only possible outcome. I look to us all to be smarter than that-- and make a much brighter future.
Clearly the DC Region is not representative when discussing the "middle class". We have (I believe) at least 3 of the top ten wealthiest Counties in the Nation.
Wealth has become increasingly concentrated in the top 10% of the population over recent decades, but we still have a very broad "middle class".
I don't believe that wealth should be redistributed. If you were to examine the tax burden per income tier, I thiink you will find it quite progressive.
It will be interesting to see if current/future changes will leave us in a "Jimmy Carter" situation.
Disinsentivising (word?) prosperity is not the answer. Not everyone can live in Arlington or Great Falls. A very smart person told me from a very early age (2?) that "life is not fair".
Anybody have a good suggestion for a website that can do full title searches for a possible foreclosure purchase? THere are a ton of websites that claim to do this, but I am looking for somebody that is happy with what they ordered.
Thanks
Frank
va-investor-- Life may not be fair, but I've generally found that people ARE. And if they aren't, I'm certainly not going to do business with them. It's called 'tit for tat' and it's the strategy that succeeds best in both biologically and socially.
Sarah/Contrarian:
Forgive what may be a really dumb question, please...
I read all the different economic forecasts on here with great interest, because that is not my area of expertise, and I learn a lot from everyone. There is one issue I do read extensively about, however, and I very rarely see it mentioned in mainstream media: the aging of the world population.
I have a few personal theories for why this incredibly important issue is largely ignored, though the UN has recently been taking it seriously.
My question for you is:
When you make your assessments of what may happen to the world economy in the future, do you take the aging of the world into account? Do you think it is widely understood that the world population is not increasing because of births, but because people are living longer? How about all the first world countries (Japan, Europe, Canada) with below replacement birth rates that are facing an intolerable burden of old people in the near future?
I guess this is a little OT for here, but this is where I find so many nuanced arguments about economic trends, I thought I would be forgiven for asking. After all, the Baby Boomer retirements will affect housing...but what about the fact that there are fewer people being born? Will immigration and divorce keep the demand for new households strong enough?
Sarah,
Is the implication that the wealthy are not "fair"? Would you willingly pay more taxes for those who choose not to try or decide to have 5 kids by age 23 with no method of supporting them?
How about those that never save for retirement. Trips, dinners, new cars, etc. - and go on medicaid?
I don't know about you, but I save and live below my means. My reward? No college aid, phased-out of every possible tax break. I'll propbably not see any SS or Medicare - I've worked too hard and saved too much to "qualify".
By the way; I've helped plenty of people. So, let's not judge.
p.s. Sara
There are giver's and taker's - I've had plenty of experience with both.
I have said you will see schisms break out between class, races, religions, politics, etc. Current examples include the recent civil unrest in Iran and Honduras. There are signs of unrest with the Uighurs in China's westernmost province. This should get worse here in the U.S., especially as unemployment increases. These disruptions should increase in frequency around the world.
Since the beginning of recorded history.
There is going to be a huge baby boomer retirement over the next decade. These people will be downsizing their homes, adding more downward pressure on housing prices.
Wait. I thought everybody had to go back to work?
Sarah, thanks, er, I guess.
Here.
I mentioned helping friends with work w/ 503c shelters. I'm about done for this iteration but I've collected a car load of donations for them, computers, LCD panels, etc.
Will immigration and divorce keep the demand for new households strong enough?
Immigration can. You'll have to trust me on this, but I read a report a few years ago asking people if they wanted to immigrate to the United States. The conclusion was that 1 billion people WOULD immigrate to the US if they could. So, we won't have a problem, but certainly Japan is going to have a big one. Again, another report I read that by 2100, Japan will have only 50M people from 125M today.
rabbit. I did read your article.
Interesting.
The first question I would ask is whether there were previous reports from this character and what did they say? Did he correctly predict the Spring bounce he talks about, or was he gloomy six, twelve, eighteen months ago. I'll bet he was bearish 6 months ago and for the same reason -- shadow inventory.
Mortgage rates have risen by nearly 100 bps
This was true on July 1, but rates are already down 50 bps in two weeks.
Investor buyers are the most obvious manifestation, with investor participation in some markets already exceeding the peaks reached at the height of the housing boom.
This is really astounding when you think about it. So many investors were burned by the bubble.
DC Inventory is 48,000
Where does this number come from. Sawbuck has 26,000 and it's a pretty broad area. So, that makes me skeptical of all of his numbers.
The net effect of all of Uncle Sam’s booster shots was basically to level out demand for a few months; as their effect fades, we would expect demand to fade somewhat as well.
This made me laugh. The effects will fade.
If they do, guess what? We'll get new booster shots. They just expanded the refinancing plan to 125% of LTV last week. Does anyone think Uncle Sam is done with "booster shots." I don't. I can't tell you what the next one will be. There is discussion of $15k tax credit on every real estate transaction. Last week, Barney Frank wanted to use the TARP money to help homeowners.
Don't bet against the Fed.
VA_Investor,
I don't know about you, but I save and live below my means. My reward? No college aid, phased-out of every possible tax break. I'll propbably not see any SS or Medicare - I've worked too hard and saved too much to "qualify".
Barring the future looking like what contrarian has predicted, you will collect Social Security and Medicare. Whether you have to wait until age 70 instead of age 67 (or a slightly different age if you were born before 1960) for full retirement benefits is another thing.
As for college aid, I assume you mean for your kids? I think you are pretty fortunate. While a few snobs on this blog do not like the Virginia state schools, many do and they are relatively affordable. Tuition at the public universities is not that bad and all those college towns are affordable as well with the dorms below market rates.
If you want us to feel bad that the gov't is not subsidizing via financial aid the ability to send your kids to GWU I'm going to withhold tears. And even with financial aid (unless it's a full tuition) it's usually a bad idea for a low income family to send their kids to an expensive private school because either the student end sup with massive debt unlikely to be paid off any time soon after graduation.
Is the implication that the wealthy are not "fair"? Would you willingly pay more taxes for those who choose not to try or decide to have 5 kids by age 23 with no method of supporting them?
I saw someone like this while at the DC DMV (although three kids, not five). I did not for one second envy her. I mean come on, you don't really think someone like that is doing well or better than us because of TANF and other welfare programs?
I'm a broken record at this point. Freddie and Fannie will no longer exist. They are merely a shell at this point. Federal Home Loan Bank is worse off now than Enron before it imploded.
I have said you will see schisms break out between class, races, religions, politics, etc. Current examples include the recent civil unrest in Iran and Honduras. There are signs of unrest with the Uighurs in China's westernmost province. This should get worse here in the U.S., especially as unemployment increases. These disruptions should increase in frequency around the world.
Unemployment will far exceed 25% before this depression is over. U.S. citizens will probably be dissatisfied with their jobs going to illegal aliens. Sen. Schumer has recently taken a firm stand on this and Sec. Napolitano is now (allegedly) going to use E-verify on federal contractors and build a fence along the border.
Speaking of jobs, for those who are lucky enough to have one, find one, or keep one, their salaries will most likely decrease significantly over the next decade or so. We have to compete globally, China will start importing cars, driving down prices.
While I think the stock markets will eventually go somewhat higher over the next several months, the primary direction is still down, ultimately ending in a major collapse far below what most people believe is remotely possible.
I think thousands more banks will collapse and hundreds of billions in derivatives (think: Enron) that are waiting to implode.
The last 70 years has been a credit bubble. We are having a credit implosion. Before it is all over, 90% of the credit will dry up.
Large banking institutions are leveraged 35:1 and 40:1. Citigroup is currently trading around $2 per share. **Poof** Bank of America .... ***Poof*** General Electric, probably wont be around when the dust settles. GM will probably not last too long, then their employees will be dumped onto the PBGC.
Some money market accounts probably are not worth a dollar a share. Translated: some people may eventually learn that every $1.00 they have in a money market brokerage account (including 401(k)'s) is actually worth less than a dollar.
Housing has much further to fall, whether in Arlington or Manassas, whether on the east coast or west. As deflation sets in more, prices will drop everywhere, even in the Heartland.
Many cities and counties will file bankruptcy and flush their pensions down the drain, forcing many retired workers back to work, running down wages even further.
Some municipal bonds will probably lose most of their value. I wouldn't count on FDIC insurance. You see Ron Paul and other congressmen demanding the Federal Reserve be audited.
There will come a point where the government (Federal Reserve, Treasury, FDIC, PBGC, ABCD, EFGH, JKLMNOP, etc.) cannot bail everyone out. And, people who sat back and watched the financial institutions get bailed out by former and current Goldman Sachs executives in the current and former administration will most likely resort to civil unrest.
When the party is over and the hangover starts to set in, the only people who will be able to get credit will be those who already have the money to begin with.
There is going to be a huge baby boomer retirement over the next decade. These people will be downsizing their homes, adding more downward pressure on housing prices.
The $USD should go below $0.50, eventually.
Some may call that doom, I call it reality. :-)
Your dire predictions are not "reality". Most of what you write is just your opinion of what might happen in the future, and completely discounts any positive developments.
My question to you is how do you intend to make money off of your doomsday theory?
Tabitha,
Will immigration and divorce keep the demand for new households strong enough?
Was divorce ever increasing demand for housing? At least in the past 15 years? I think the divorce rate peaked in the 1980s or sometime around then and has been going down for a while. The divorce rate is in the 40s (despite the hackneyed claim that 50% of marriages fail.)
The divorce rate in Northern Virginia probably is lower than the national average. People who are educated, well to do, and marry after age 25 have much lower divorce rates than those that are not.
As for immigration, I await the ACS data for 2008 and beyond. I think we may see for the first time a decrease in the number of immigrants in Fairfax, Prince William, and Loudoun Counties (although it might take until 2009 for that trend to begin.) While DC area immigrants are in a lot of industries, a large number of the most recent immigrants were in housing market related industries and many of those jobs are gone. Those more recent immigrants are much more likely to head home in a bad recession than people who have been here 10+ years.
One more note for Va_Investor,
Clearly the DC Region is not representative when discussing the "middle class". We have (I believe) at least 3 of the top ten wealthiest Counties in the Nation.
I dispute the notion that a lot of people here are wealthy. People here on average have high incomes here but because of the high cost of living that does make many of those people middle class where in another region they would be wealthy.
Look at this stat from Fairfax County:
A family with two adults, a preschooler and a school-age child would need a combined hourly wage of $31.48 or an annual income of $66,504 to meet basic needs for self-sufficiency in Fairfax County. This is nearly three-and-a-half times the federal poverty guideline for a family of four.
If our version of the poverty line for a family four is $66,504 then I hardly think a family making $100,000 is wealthy. That stat is from 2006 so housing price declines hopefully have lowered that $66k number.
County Releases Data
"Your dire predictions are not "reality". Most of what you write is just your opinion of what might happen in the future, and completely discounts any positive developments."
Reread Contrarian. Each individual point is not that far over the edge.
It depends on how things break.
Think back a few years, we were buzzing about houses but who saw Chrysler and GM going down? The GM crash was November 2007.
I better save that graph before it vanishes.
Reread Contrarian. Each individual point is not that far over the edge.
My question for Contrarian is how he intends to profit from his doomsday predictions. I'd like to hear specific examples on how he's positioned to make money if his "reality" occurs.
"My question for Contrarian is how he intends to profit from his doomsday predictions."
I don't buy the whole enchilada but I am hunkered down. I am in defensive mode. If Contrarian has a money making approach, I'd like to know it too.
I try to help the least fortunate. It is not enough.
@J@,
Reread Contrarian. Each individual point is not that far over the edge.
I agree with him that Fannie and Freddie and related are in trouble. I think most of us agree on that. But 25% unemployment? That is a pretty extreme prediction.
Think back a few years, we were buzzing about houses but who saw Chrysler and GM going down? The GM crash was November 2007.
I think many saw their days as numbered. They were continually losing market share to imported cars. I was not shocked when Zenith fell apart and we no longer had any US based TV manufacturers.
If you want us to feel bad that the gov't is not subsidizing via financial aid the ability to send your kids to GWU I'm going to withhold tears. And even with financial aid (unless it's a full tuition) it's usually a bad idea for a low income family to send their kids to an expensive private school because either the student end sup with massive debt unlikely to be paid off any time soon after graduation.
She didn't say anything about GWU, you did.
And here we go again. She didn't say that welfare moms are doing better, you did.
I saw someone like this while at the DC DMV (although three kids, not five). I did not for one second envy her. I mean come on, you don't really think someone like that is doing well or better than us because of TANF and other welfare programs?
Why don't you just carry on a conversation with yourself. You're just making stuff up anyway. No need to attribute it to anyone.
I dispute the notion that a lot of people here are wealthy. People here on average have high incomes here but because of the high cost of living that does make many of those people middle class where in another region they would be wealthy.
Uh, if they aren't wealthy here, then where are they wealthy?
"25% unemployment?"
I agree that's extreme for an overall, nationwide number.
For some areas and sectors, it's not that extreme. Examples are Michigan, auto, real estate, construction, finance.
This is anecdotal but I am seeing underemployment in this area. $100K workers are taking $60K jobs.
Web-rumors say that PhD's are working at some McDonalds but I have no direct knowledge of that.
Contrarian makes bold statements. He might be right. I see some, not all, of his statements playing out already.
I also know people who are doing very well.
@J@,
"25% unemployment?"
I agree that's extreme for an overall, nationwide number.
For some areas and sectors, it's not that extreme. Examples are Michigan, auto, real estate, construction, finance.
This is anecdotal but I am seeing underemployment in this area. $100K workers are taking $60K jobs.
I agree that some subsectors of the economy could reach 25% unemployment. I also agree that there is a lot of underemployment in this area (and would add nationally.)
Robert,
Try this tool:
Cost of Living Comparison
You'll see we live in a high cost of living area with very few areas that are more expensive.
I dispute the notion that a lot of people here are wealthy. People here on average have high incomes here but because of the high cost of living that does make many of those people middle class where in another region they would be wealthy.
Uh, if they aren't wealthy here, then where are they wealthy?
The midwest.
2 GS-14's here is 220K household income, enough
to make a stab at a smaller older house in Bethesda, Central arlington, fairfax,
2 Computer programmers, can easily make 200K
family income and still not afford a house in NW.
But Dallas, OKC, Kansas City, Cleveland, Pittsburgh. That's living large.
in Silicon Valley at $3Million net worth, you are
comfrtable but small potatoes, with a nice
house in SF. In Eugene or anchorage, or
wichita, or milwaukee, a $3Million dollar man
is a community leader, on the board of every museum, and, pushing society's agenda.
In DC, $3M makes you a law firm partner.
@David,
I'm not exactly sure what will happen, but I do know that the current path we are on is completely unsustainable.
I believe that absent gov. approach, the natural solution to the mess we are in is a deflationary environment like 1929-1933. After 1933 the gov. devalued the dollar and snap deflation was stopped. Unfortunately, I believe that gov. interventions to stop the natural solution will just make the inevitable outcome much worse.
I personally believe that we will have a major currency event, the Chinese or whomever finally decides they no longer want to finance our debt and unload it. Unlike the 30s where the US had control over the devaluation b/c we were tied to gold there will be no controlling this event when it rolls.
I also don't think we will see inflation like the 70s where wages went up with a lag vs. prices.
My illustration, take a look on the back of just about anything you buy except for food and housing. Made in China. China's reimbei is artificially pegged to the dollar (at 12:1 I think??). When the Chinese decide to let that peg go and float it, the ratio could go to 4:1 or 2:1 and you would have an INSTANT 100-200% increase in the price of anything made in China.
If you don't think the costs of goods from China are artificially low, try going buying the same type of goods from anywhere else and it will cost you a ton (sure labor cheap . . . but it's not that much cheaper + transportation costs). Shoot my son's story books are made in China! There are plenty of 3rd world countries w/ cheap labor but none of them have the political or economical will to maintain an artificially low dollar peg.
Wages however could not increase b/c the wage pressure inside the U.S. wouldn't be there from high unemployment. It is possible that food prices could also do the same b/c they are traded worldwide, but I would think there would be more lag there.
So as far as making money? Well, there are only a couple of sure fire ways to make money, 1) be employed and/or 2) build/create/have a service/business/etc that other people want.
I don't particularly care to make money, I just don't want what I have to get obliterated. And I guess the interesting thing is that if everyone else is losing money and you're not, you are sort of making money . . . . weird huh.
So for me . . . I've hedged my bets, I'm cash (for deflationary impulses, like now), and gold/silver (for future inflation/devaluation). Actually, I save my cash to buy in deflationary impulses.
I believe buying RE to protect against inflation is a sucker's bet. 1) Housing is tied to income, so when you buy RE to protect against inflation you are saying that incomes will rise w/ inflation. 1a) If you think that incomes must rise w/ inflation live in a 2nd/3rd world country for an extended period of time, inflation is rampant, wages do not come close to rising with inflation-not fun. 2) In a high inflation, high unemployment situation (again if you think that can't happen look at south america) long-term loans are exceptionally hard to get with exceptionally high rates-that doesn't exactly translate into price pressure on houses.
Buying a house to live in, good idea, to hedge yourself, not so much.
If you want to "invest" in the stock market, then I would suggest making that a full-time job and learn how to do it the right way. You can make a lot of money in it, but very few people have the right mindset and makeup in order to make it happen. One of the biggest shams ever sold to the public is the buy and hold mentality and the just invest in the stock market and after 30 years retire mentality.
Anywho, making money . . . shoot I learned long ago in life that as long as I have food in my (family's) belly, cloths on my (family's) backs, and a roof over our head and no dirt floor I have it better than prob. 80% of the human population and that ain't bad. Doesn't mean I don't want nice things, but there are more important things in life than making money, and I've learned I can be very happy with very little.
--Although a frigging paid for house would be nice someday :-).
China's reimbei is artificially pegged to the dollar (at 12:1 I think??). When the Chinese decide to let that peg go and float it, the ratio could go to 4:1 or 2:1 and you would have an INSTANT 100-200% increase in the price of anything made in China.
The reason they don't "let it go" is that it would cause mass unemployment in China.
China needs to create 20-30 million jobs a year to keep pace with the current migration from the farms to the cities. They need a very cheap currency so that their products are cheaper than anyone else in the world can produce.
Mass unemployment in China would have people turning to the government and might destabilize the current corrupt regime.
It's all about keeping political power in China. Making money is secondary.
TBW,
Why is housing so expensive here? Answer, because the home prices have gone up. Well, who owns the homes? Teachers, Firefighters, lawyers, etc. Many have gotten rich -- by living in a high cost of living area.
My mother, a single parent and a school teacher in Fairfax County, bought her house in 1974 for $44k. She sold in 2006 for $375k. I'm going to guess she's doing a little better financially than her counterpart in Kansas.
And going forward the same will be true. DC prices will go up at double, triple the rate of Topeka.
Sure, in the short term, you get a bigger house in Kansas, but 10, 20, 30 years it is an order of magnitude different in wealth creation to live in the big cities.
I believe buying RE to protect against inflation is a sucker's bet.
It hasn't been for the last 1000 years.
I didn't realize that the wealth is concentrated in the midwest. I've got to broaden my reading list.
Robert,
You like to focus on the federal gov't role in increasing home prices. But surely you admit private jobs played a role in recent decades particularly for Fairfax County. What drove them here? Let's look at an interesting article:
MOBIL RELOCATING NEW YORK HEADQUARTERS TO VIRGINIA
Published: Saturday, April 25, 1987
Article
Mr. Murray also said the company had experienced difficulty attracting younger executives to the New York region because of the high cost of housing and the difficulties of commuting.
Herbert Schmertz, a Mobil vice president, said the company had chosen northern Virginia for its new headquarters because it offers "the kind of environment our people want to live in without traveling an hour to get to work."
Hmmm, high cost of housing and long commutes. Sounds like our region now. And now we are shedding some employers to lower cost areas?
Going forward, the Sprint Nextel headquarters will be in Overland Park. The Overland Park campus by far is home to the largest number of employees, more than 13,000, of any Sprint Nextel location in the country. It is centrally located to our nationwide employee base, and we own (vs. rent) the facility. The Overland Park campus also can accommodate significant growth, and I intend to get our company growing again in the future.
Yogi Berra once said when asked about his favorite hangout, "Nobody goes there anymore; it's too crowded." We won't have that problem in Overland Park.
CEO E-Mail on Move
Maybe the teacher in Overton Park, KS is going to see a greater percentage return on her home in the next 30 years than the FCPS teacher who buys this decade and holds for 30 years. We are certainly going to do fine in this area but see the same momentous growth we saw in the past 30 years? I doubt it. That sort of growth is going to come to somewhere we probably would never predict it.
Actually, I am pretty bullish on Northern Virginia because I think home prices will go back to reality. If it did not happen I think many of the local companies would be just as dispirited as Mobil, Exxon, and AT&T were when they moved out of Manhattan in 1987 for housing price/commute reasons as noted in that article.
gte811i -
I just checked the current official Chinese renminbi/US dollar exchange rate on xe.com. One dollar can get you 6.8 RMB.
I lived in China for different periods through the 1990s, when the official rate was between 1:5 (early 90s, when they gave foreigners their own special Chinese currency--FEC--because foreigners were not direct participants and beneficiaries of China's socialist system) and 1:8 (mid/late 90s, by which time, the FEC had been abolished). Unless you felt like a scaredy cat, you exchanged on the black market. And if I did it, then everybody did it. I remember getting 8 RMB in the early 90s, and 13 RMB in the late 90s. So, I wouldn't be surprised if today's black market rate was 1:12. But wouldn't a black market rate be reflective of actual demand, and less "artificial" than, say, the official exchange rate? I understand that China has artificially lowered the value of its currency to make its exports more attractive, that is reflected in the fact that in the late 1990s, while per capita GDP was relatively low, purchasing power parity was quite high. It also seemed true that there was a great demand for all things American: goods, currency, language, and cultural information, this demand due to pent-up desire to peek into a world that had previously been closed to them under Mao, and, of course, to line their own pockets! If you know American culture, you can make American money! Ordinary people were ready to pay. Since I'm not an economist, I'm not sure I understand the relation between these seemingly conflicting phenomena. The artificial rate to me always seemed to be the official bank rates.
When I left the US in '92, there weren't (m)any Chinese imports, but it seemed that when I came back in '93, Chinese goods had flooded the US consumer market. That may explain why the exchange rate was so low in '92, but much better (for the foreigner in China) in the mid and late 90s.
"2 GS-14's here is 220K household income, ...
2 Computer programmers, can easily make 200K. ..."
Calling an Apples and Oranges comparison!
The problem is that it's harder to make GS-14 in the hinterlands but relatively easier here where Agencies have their HQs.
$100K programmers? Washington might not be the best place for programmers but there are hot-spots and there are cold spots and Washington is warmer than most.
This is Robert's point. Higher salaries, more opportunities, more job churn from the revolving door, long term job security, jobs at HQ's and on K Street, tend to concentrate the wealth and the home buying at the center.
Even though there are good jobs outside of the Beltway, Say NIST on I70, a person at NIST might transfer to NSF for a step up. That speaks for a place in .... ta-da ... Arlington.
After a stellar career, they might retire to a policy job on K-Street.
Again, Arlington.
@J@: actually, it's pretty darned easy to make that much money in the 'hinterlands' (as you call them) as long as you have the skills. A lot of big companies are headquartered in the interior (KC, Indianapolis, Houston, Dallas, Atlanta, Nashville, Denver, etc.).
Heck, wasn't the meme in the 1990s all of the company headquarters that were leaving the expensive NorthEast for cheaper places like Jacksonville, Charlotte, and Dulles?
As many of us have stated, we've had problems recruiting people. To sum up a lot of their responses "10% larger salary and triple the cost of housing? No thanks."
Oh, and I knew programmers making $80k in KCK in the 1990s. And frankly, some places in the interior are much more cultured than the DC area (this area isn't exactly known as cutting-edge).
How is a teacher (or anyone else) wealthier for having sold a house bought for $44K for $375, unless s/he is planning to move in with a relative and have no housing expense? If you sell a house, usually you have to buy or rent another one. Even if one retires to a cheaper area, I'm not aware of anywhere that has a zero cost of housing/maintenance,/utilities, etc.
$375K, that is.
Also am I doing my math wrong or is $44k to $375k over 35 years a ~6% rate of compounding interest? That's not exactly stellar...
Jeff-
What sort of rate of return are you looking for in appreciation of a house? Just as an example of why you should be impressed with 6% over the long haul. There are a lot of stories how the dutch stole Manhattan from the Indians by only paying them $24(It was actually $24 of blue beads).
Manhattans land is currently valued at ~$200 Billion, which gives is a 6.2% annual return. So I would be hard pressed to not see how turning a couple hundred pounds of blue beads into one of the most valuable cities in the world is not a good trade.
I think you are also trying to compare 6% to a stock market return. This is not a fair comparison because the house returned 6% if it was paid off. (If there was leverage involved to ROI would be higher than 6%). So if the house was paid off it also delivered free rent which is probably another 3-5% a year. So you are left with a 9-11% return which beats stock market returns and it was substantially less volatile.
I'm getting ready to go back to Europe in a few days, so can't spend too much time on this blog, but I just wanted to answer Tabitha's question as best I can (without writing too much on a subject that has always interested me, but may not be of the same interest to many here.)
The short answer is yes, I think about population size-- and even more important, population structure, in trying to imagine the direction things might take in the future. Most economists also have at least some exposure to demography (it was one of my mother's main subjects), so it is much discussed in economic circles-- and of course in countries with a below-replacement fertility rate it's the subject of much public debate.
One of the reasons I think the current economic models are broken is that they are based on the idea of continual economic growth-- and in the past that growth has often come from population growth. Actually, much of it still is, since I think Japan is the only country where the population is actually beginning to decline (as opposed to just being expected to decline if current trends continue).
Just a brief recap to make it clear what we're talking about here: worldwide, fertility rates are still well above replacement rates, but have been in a fairly steady decline since the '60's. If they continue to decline at the current rate, world population will stabilize around 2050 between 10 and 11 billion.
Currently US fertility rates are right around replacement levels, but due to immigration population continues to increase. We are in a better position to deal with declining population since our culture is traditionally more welcoming to immigrants than most.
--continuing--
-continuing-
More important than population size is the question of population structure-- particularly what's called the dependency ratio-- the number of children and elderly dependent on the working-age population sandwiched between them. When that's high-- because of high birthrates, a large elderly population, a small working-age population, or some combination of the three it places a heavy burden on the 'in-between' generation.
Of course having relatively large numbers of elderly people in a population is still a very new phenomenon that the world is just now learning how to cope with. We made a start when old age pensions came in, relieving families of part of the burden for caring for the elderly and the pressure to have more children so as to assure that enough would survive to care for their parents in old age.
One thing countries that have below-replacement level fertility rates are beginning to do is develop better systems to deliver the often relatively small amounts of targeted care people need to remain in their homes.
I think we would probably be better off to stop thinking of this as a problem of old age and realize that it is really a problem of disability-- with the understanding that the chances of being disabled increase as you get older.
Then we would be able to develop systems to care for people at any age who needed it-- from the severely autistic teen who requires constant monitoring, through the 30-year-old stroke victim and the 90-year-old with the broken hip.
And we would recognize that many people are able to remain productive and active for a very long time-- and some never need care at all. Remember, too, that by the time it reaches an age where many of its members require care, any generation, no matter how large it started out as, is going to be small.
As for how population-- and generational size-- affect housing, I think that hard to draw any conclusions on. The more important question is about housing preferences. The biggest factor in post-WWII housing in the US was the preference for suburban living. With smaller families, longer commute times and lower crime rates will people begin to prefer the cities again? Will telecommuting become a normal form of work so that they can live anywhere? Will families deal with financial pressure by doubling up? Living in smaller places?
I think we're unlikely to see anything identifiable in generational terms -- at least in the case of the baby boomers-- partly because we're such a diverse group-- even in terms of age-- currently ranging from about 42-62.
In 20 years that will be 62-82 -- remembering that the older age range will be small in number, since average life expectancy is 77. Those in their early 60's will mostly be part of the active, working population-- probably helping their young adult children get well-started and perhaps taking care of their own elderly parent or parents. Among those who are ready and willing to make a housing change I think the range of choices and decisions will be wide.
Well, I seem to have written a small opus despite my best intentions. Good luck with your own housing decisions one and all-- and Tabitha if I've forgotten to say it many congratulations on your wonderful new home! I will probably be back next winter-- and hopefully be making a purchase of my own.
Looks like $44k in 1974 to $375k in 2006 is closer to 7% annual return. Either way, 6% or 7% appreciation is really good as an average of over 30 years. But she sold at the peak. If she were selling today, at say $286k (25% decline from peak), it would be 5.5% annual appreciation. I expect that by 2012 people who are selling their houses will see closer to 4% appreciation over the long term.
Ace -
She rents a 2BR condo in Burke on one level, her primary objective in addition to me telling her to SELL NOW. She wanted to stay in Burke with friends and doctors.
My grandmother also stayed in Arlington long after she retired and my grandfather died, 1982. They bought right after WWII and my grandmother sold in 1992. At 85, she went to Fairfax to a place called the Virginian. She died at 95. Also, had an Uncle that worked for the Feds his entire life. Retired and lived in DC until he was 90.
Seeing my mother's friends and how many of them stayed in the area long after retirement, makes me skeptical of all the boomers leaving and selling after retirement.
I think it will be just the opposite. Boomers will retire and new workers will come in to replace them, but a lot of the housing stock will continue to be held by the boomers. If it was just my experience it would be 80%, but my guess is 50% minimum.
Boomer retirement therefore would actually put UPWARD pressure on prices if you follow the logic.
nice place Novahog. finally a REAL home not an overpriced, rat infested, stinkhole in Arlington/Alexandria/Northern Virginia/DC. There's more meth heads, illegal aliens, incestuous perverts, ugly scenery here than anywhere I've been (except New Delhi). Folks this is not a nice area we live in. If you think it is you have serious issues. If you're raising children here then stop and think about what you're doing. Actually on second thought stay here. We don't need city dwellers defiling the beautiful part of America.
Robert, I think that you're responding to (or making) a different point than the one I was making. My point is that as long as one decides to remain in the same (high cost) area, to buy after one sells, then whatever apparent "gain" is made on the old property is eaten up because the new property has also gone up in value during that time. One isn't "wealthier" because the new cost of living is much higher than the old one. I am not criticizing anyone's decision about remaining in a high cost area, whether for friendships or any other reason. That would be the pot calling the kettle black, since I'm doing the same thing (plus I have to stay due to job). And I am also of the belief that there are many good quality of life reasons that people are willing to pay more to live in certain areas than in other locations where they could get "more house for the money."
Post a Comment