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Wednesday, August 12, 2009
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108 comments:
The one real seller of the upper units (aside from the new listing with the terrible location) in "my" community is finally under contingency:
http://franklymls.com/FX7017335
Dying to find out what the contract amount is for. Bet you they're paying more than we'd be willing to. Gotta get that $8k though, can't afford to wait on the SS (which are in better condition than this one). It is possible though, that we "missed" our chance and this one will go for what we think it's worth ($215k tops! because of the condition of most of the inside). Seems unlikely. More likely someone thinks that the terrible job the current owners have done in fixing up the place for sale is sufficient to rent it out (which is probably true). Here's hoping for owner-occupants though, so we can get a loan.
(I know my scenarios are internally inconsistent)
Aw, Cara, "no photo available" ?
PS-Bee Sirirut is kind of grating, no?
There's photos at least of the outside by two realtors linked at the bottom. The inside was still lived in so no pictures.
This is the one where they painted over the wallpaper in the kitchen (making it infinitely harder to take down, if you were ever so inclined). The cabinets were painted white which is fine, but they're also like rusting and stuff, and the oven has this huge kick in it with rust running down, very odd, and there's a stain in the cieling of the living room where there had been water damage (not currently wet though), and the back stairs smell off, and there's this wierd inexplicable black spatters all over the outside door at the back. The whole place is just odd... and the fixes they've done have been so half-assed that I just don't trust them to have done whatever maintanence was actually needed. I mean just take a peak at the photo of the patio area.
Meshell,
Yeah he's trolling for buyers, but with non-discerning taste in properties. There's a couple of those posting pictures on Frankly. Jeff Royce is my realtor, he's with Frankly, and his comments tend to be more neutral, and more accurate. He has a good attitude, of it is what it is, and there's a right type of buyer for every place.
Arkey-
I decided to look at the most expensive houses in the zip code you mentioned. It really shows some people are clearly pricing wrong
http://franklymls.com/PW7125921
http://franklymls.com/PW7045932
The quality of the houses seems pretty comparable, but the first house is listed 200K below the second although it has an extra acre of land and is 6400 sq. ft. instead of 3700. I can't imagine spending 20% more money to get a house that is half the size in almost exactly the same location. Am I missing something?
Cara,
Nice work. I think the biggest legitimate difference the second house has going for it is that it's more modern. Built 20 years later, it's going to have more consideration for current utility needs, space requirements, etc.
But hands down I take the first house (assuming I could). The build is nicer, the location is slightly closer to the major roads, and it's more aesthetically pleasing to me. It's also cheaper, which is a win in my book.
If I could afford it, I'd take that house and property and deal with the annoyance on the commute. I'm clearly not the only one who thinks that way.
xpovos, housebuyer
I concur with xpovos, the best thing the newer house has going for it is that it's newer.
One can find WTF sellers everywhere, but this is a particularly dramatic contrast, housebuyer.
The only problem I can see with the first house is that you really would need a maid to live in the nanny suite to clean and maintain it for you. Preferably one married to your personal gardener and fixer person. So it has an intrinsically more limited market than a smaller slightly more manageable home.
Still, it proves the second seller is just nuts with that price.
Cara,
Sorry for taking your name in vain, I saw your name in front of housebuyer's post. Silly me.
Also, you're right, that house has additional costs. I showed it to my wife and she said she'd live there if I bought her a boat...
housebuyer,
Same as above, sorry for not giving you proper credit.
Well, one has a dock and is newer. I personally prefer Morningside because its actually a tad bit...well..settled..its older and bigger and it might be shallow for a boat where they have access. Morningside is the only other place I'd live except where I am in Bear Creek. Yes there might be additional costs but with newer construction or anything built from 2000 - 2007 I'd be leary. My house is sound as a dollar, quality means a lot to me or more than eye candy. I'd have to know the builder. I'll take good bones anytime over eye candy
I can't recall who brought this up yesterday, but I've been thinking about the idea that online RE sites should lower the "normal" MOI.
I think he/she has a point. Why was 6 months the magic number in the first place? It has to be the MOI at which the flux of buyers out of the system (through closed sales) and into the system (from starting their search in earnest) is equal. Given that the time from contract to closing is typically between 30 and 60 days, 2/3 or more of the 6 months must be explained by the "finding the right house" part of the equation. In a place like FFX with 3000 houses listed, it seems unlikely that it would take 4 months to find a place you were happy with if prices were right. In my entire search in Burke, at any given time there have usually been 2-5 properties that I would have been interested in if I were ready to buy and like those prices. (Though there were two 3 day periods in April and May with no listings of interest that made me very anxious). Admittedly this is for the fungible domain of THs. But a heck of a lot of our inventory is fungible THs, 60's SFHs and McMansions. So given the fungible nature of much of NoVa, the huge size of the total inventory, and the easy capability to search for it, I doubt most people would take more than 1-2 months to find a house they wanted to bid on. Thus 6 months provides for 2 whole months of losing bids and failing to get contracts even under the long scenarios of a 60 day closing and 2 months before you find anything.
Thus, I would contend that 4 months is the new 6 months. And 3 months amongst the truly fungible and tech-savy. Anything higher than that indicates that buyers are taking longer to find anything they're interested in because the price is the sticking point.
Now for the upper end homes, 6-8 months is still reasonable, because there aren't as many of them for sale at any given time, and that stuff is not as fungible, and you have every right to be picky (you can be picky in the low end too, it just doesn't take as long for the inventory to sweep by you with something you might like).
If, like some articles have been doing, you only count "actives" versus sales, then MOI in this environment should be even lower because you don't have to count the under contract time. That could be as low as 1 month for fungibles, and 2-3 months for differentiated stock and still not be "hot".
This is not the boonies, where 6-8 months is required before a seller finds an new buyer who's in his price range looking for that style home.
Cara, re MOI:
I read your last post, and realized I'm confused. I had thought that MOI was simply (# of inventory)/(# of sales), which can be broken down into price tiers, and thus didn't really have a time element (months) at all.
That is, I thought MOI was simply a nice shorthand number to let you know what an area's market looked like. Here, it seems that Arlington and Alexandria's normal MOI is less than 2, while in other markets that normal number is 6 or so. And what the number actually translates to is how many people move into the area and buy a house, or decide to quit renting, etc. versus how many people move away, sell to move-up or rent, etc.
Am I wrong? Does MOI literally refer to months, as in how long transactions take?
Hmm, Cara, yeah I think that makes sense. And maybe in places like Facquier or Culpepper Counties 6 months makes sense as the standard for normal MOI. And I think a lot of the country is places like these counties. And I think even the core of other cities around the country is probably more like them because most places are not as transient as DC.
As to whether it should be different at the upper-end, I think that would depend on where your upper end is. I'm guessing that if you're looking for a really nice large house not a McMansion) in Manassas like Tabitha it takes longer to find what you're looking for and there's less to choose from. In, say, Great Falls or Chevy Chase, MD or Georgetown, though, since it's pretty much all high-end I'd think the normal MOI would be the same as in a place like Fairfax.
Jessica,
Your understanding of MOI is correct.
There are two subtleties I'm trying to pull out. (1) An equilibrium MOI at which supply and demand are equal. (2) how fungible/non-fungible, scarcity in general, and the internet might effect the equilibrium MOI.
The MOI at which supply and demand are balanced is determined by the flow of new buyers into the limbo of house shopping, the flow of new sellers into the limbo of being listed inventory and the flow outwards of closed sales which removes both a buyer and a seller. So months of inventory really is months. It's how many months it would take to sell all the inventory at the current rate of sales. If it's in equilibrium, then those sales will be replaced by new buyers and new sellers.
The 6 months was an empirical rule of thumb for the nation as a whole. But there must be some underlying reason for that to be the equilibrium number. I'm trying to justify that number by looking at how long it typically takes a buyer to find, bid on and buy a house. Or the aggregate effect of the distribution of those times.
Cara,
That was me who raised the MOI question. I think six months is just a national figure. Unfortunately MRIS does not go back further into the 90s but what little it shows of the late 90s implies even in a slow DC market we had less than six months MOI.
Hence I think a post like this is not to be taken too seriously.
Side note -- his number of available homes for every county is lower (by thousands in the case of PWC) than the MRIS numbers Harriet posted last month. So his MOI are all way lower than they actually are.
Cara,
FX7017335 is asking for way more than 2003 prices. Is this abnormal for the area of Burke you are looking at? I thought you said most of this part of Burke had gone down to 2003ish prices and hence you were not as frustrated as some of us (seeing buyers wanting 2006ish prices still).
I like the exterior of FX7017335. Given your description of the interior it sounds like they should not be calling it remodeled. If anything sounds like a "handyman special" to me. Painting over wallpaper is ridiculous.
Anon412,
Good point about the high-end. The other thing there though is I think the high-end just isn't as transient. CRT's high-end numbers for inventory are pretty small in an absolute sense.
TBW,
Sorry I dismissed this idea yesterday (in my head), but I think you're on to something. Most people just look at any given rule of thumb as "empirical" and then throw their hands up about the reason. But all things like rent to own ratios, price to income ratios, and even MOI have an underlying meaning from which we can discern why there are differences from the rules of thumb if we just think about them more. So I initially dismissed the internet as a driving force, but it really does cut down on the time needed to make a purchase, so could change the equilibrium MOI.
The other thing it does is allow people to shop for homes with little legwork and time, and wait until prices line up before really putting in effort. Thus, it may allow the market to turn on a dime faster in response to prices reaching buyer's expectations and needs. It also allows sellers to wait on the sidelines without going through the trouble of listing their homes. So I could easily see us going to a state of 3 MOI always regardless of price direction, and MOI becoming meaningless. As MOI decreases sellers would see this and list, as MOI increases buyers would see this and not buy.... The inventory just becomes a pipe with flow through, a pipe that can handle any price within a wide range....
I should shut up again.
tbw,
The condos in Burke are a special case. They stayed completely flat, no movement whatsoever until 2003/2004. 1989 prices and 2002/early 2003 were equal on nominal terms.
It wasn't until people got priced out of the "real" TH's that the condo's were seen as desireable less expensive options. And then they skyrocketed. went from the 120k-150k to $355k. Which was still 75k less than the TH's at peak.
So, I don't expect the condo-TH's to go all the way back to 2003/1989 prices. That was actually artificially low, and these have since gotten new roofs, fabulous new windows, and new vinyl siding.
I do think they will go back to $210k, what one median income person can afford, or two starter incomes. These are desirable for the value for your money and fixing your housing cost below the cost of renting.
Even at 7% interest rate, a $240k pricetage is equivalent to renting, including the condo and HOA fees, if you are putting down 20%. So, I think these will settle to something below rental parity, but not much so.
housebuyer,
Wow PW7125921 is hands down WAY better than PW7045932. The first one comes with a pool AND is closer to the river.
PW7125921 is gorgeous. It's nice to know that you still can get a fancy estate for $1M.
The only downside to this home is a long commute pretty much anywhere (except for a job in Manassas). But anyone looking in that area either is not a daily commuter or someone okay with spending 1+ hours commuting each way to have an amazing home like that.
TBW, RE: Hot, Hotter, Hottest...
Sawbuck shows the exact numbers in that post. I know you have an explanation why Sawbuck is wrong.
Robert,
I was comparing that blog's numbers to the MRIS numbers posted on this blog.
You explain why those numbers are wrong if you think they are.
Robert,
Even if his numbers were right, he's showing available not listed. Which should be at most 3 not 6, because the time under contract doesn't count.
There's many possible meaningful ratios:
1)sales/inventory
2)sales/"active" inventory
3)under-contract/inventory
4)new contracts/new lists
He's using (2) but quoting the rule of thumb that's for (1).
The best one is 4. Are the sales being replaced by new inventory? This is clearly seasonal, and the derivatives of both should be considered, but so far I'm seeing new lists come up at full replacement level. Other than seasonality this should work regardless of price-point, speed of transaction, speed of search. But it's not usually used because inventory itself is seasonal so it require doing a seasonal adjustment to evaluate it, and realtors just aren't into that. They want to hype every spring as the beginning of a bull market.
Can anyone briefly explain the difference in taxes between Fairfax City and Fairfax County?
The City of Fairfax website gives an overly simplistic explanation:
12.How do City of Fairfax tax rates compare to Fairfax County and other surrounding jurisdictions?
A. Taxes in the City of Fairfax are lower than most other surrounding jurisdictions in Northern Virginia.
I'm looking for actual tax rates.
If 6 MOI were still accurate then MOI would be the better metric because it naturally averages over the seasonality to a great extent.
Given that 2-4 is more typical here, we'll always have the problem of MOI in summer being "hotter" than winter because the averaging isn't spread out over enough time. (i.e. people start listing in February to sell in April, so MOI will be off because you really want to compare December's inventory to February's sales, and February's inventory to April's sales, which is not typically done, and would need to be iterative or just use a correlation coefficient with a fitted lag).
MJC,
Fairfax County's rate I believe is $1.05 although I'm sure that's either been raised or will soon.
Fairfax City's rate is $0.88 with the same caveat.
I think the city usually has a lower property tax rate. Perhaps partly because of the larger percentage of commercial properties in the tax base. Also I think it saved a lot of money by paying some amount of money to continue with Fairfax schools and a library rather than making its own system (and administration) a la the City of Falls Church.
Cara,
What is the difference between inventory and "active" inventory? Are Robert, sawbuck, et al not counting inventory on the market more than 90 days or something like that?
tbw,
re: active vs truly active.
I just checked a couple of neighborhoods that I am interested in. Lots (10 or so) actives that are actually shorts and under contract. I have a contract on 2 of them! Remarks don't even mention that!
btw - I mentioned what I thought was a great buy in Reston 20194 a few days ago. 10+ offers (including mine). Asking was 250K; I offered slightly over 260K, cash and 15 day closing (no contingencies) and didn't get it.
This is hardly "trash". 1/4 mile to RTC. Yuppy area. Very decent/upgraded condition. Best school district in Reston.
Do I expect that we will revisit the low's in this neighborhood? No. But, only time will tell.
CNBC just reported that 1/3 of Q2 sales were to first time home-buyers.
TBW - I think the reason the "active" is so much lower than the raw inventory number is that "active" excludes all houses that are pending or otherwise under contract. Thus, as you note if someone just compares actives to sales, it shows a much better number than inventory vs sales.
Since a decent amount of properties under contract do not close, I always like the total number versus sales that harriet uses.
Incidentally on the 6 month rule, I kinda gave up on that a while ago. Whoever it was who made the point about the internet speeding things up made the most compelling argument to me why this 6 months rule doesnt apply.
For me the "higher is worse"/"lower is better" is what I go by. The 0.5 to 2 MOI we saw early in the decade was an abberation - it led to 20% a year increases and should never be seen again. Likewise, areas like Lou & PWC which swelled into 10+MOI for months or even years on end, have suffered more than the closer areas that never got as bad.
So where is the "normal" number? Honestly, I dont know other than to say its somewhere between 2 and 6. But aside from that, its hard to say.
FWIW, Sawbuck shows 100 listings for Burke. When I go to realtor.com, Burke shows 167 listings. Clicking on a few houses in Burke shows that a number of these have the status, "Contingent w/ no kickout".
Cara,
Agree, new contracts/new listings would be a good metric to show direction.
I'm with CRT; I think it makes the most sense to use actual closed sales because of the number of contracts that never close. If you count contracts, when one property goes under contract multiple times you'd be double counting.
Anon412,
Point taken, but I don't agree that it is meaningful based on my experience.
There is a short I know of that has been on and off a few times. I even had a contract on it at one point. So there is some support for your contention - but not much.
This place is a total pig-pen. Only investors would take a run at it. I may go back in 10K lower than my earlier offer. It's a short and the owner was there lying on the couch watching TV while hundreds of cockroaches ran around the discusting kitchen in broad day-light. It takes a certain type of purchaser that would take that on. I would certainly want to be well compensated for that piece of trash - although it is in a very decent neighborhood.
various,
So apparently sawbuck only shows you "active" listings, which is defined by those without a contract or contingency on them.
Burke has been showing 50-60 sales, 70ish new contracts/contingencies, and 70ish new listing each month since about April. Which imples only about 1/5th of the contracts aren't closing in a reasonable time.
New contracts/contingencies counts the number of truly active buyers, ones willing to bid a price that can be accepted on a house that's available,
New listing counts the number of sellers willing to test the waters.
Sales counts the number of buyer/seller pairs that are able to close the deal.
So my metric 4 new contracts to new listings is only a slight improvement on just raw total inventory. Where the difference is you can then tell whether you're losing inventory to seller's taking their home off the market, or whether you're losing inventory due to sales outpacing new listings.
In any case, I mostly agree with CRT, the extremes tell you something. Anything between 2 and 4 (inner areas) and 4-8 (outer areas) is plausible however for an equilibrium point.
Whoops,
meant "disgusting" - not my new term (discusting)!
Va_Investor,
btw - I mentioned what I thought was a great buy in Reston 20194 a few days ago. 10+ offers (including mine). Asking was 250K; I offered slightly over 260K, cash and 15 day closing (no contingencies) and didn't get it.
Maybe you did not get it because you did not have $8,000 "extra" dollars like some of the other bidders. Do you know how much it ultimately went for? Do you have a link btw?
Cara, et al,
The only way to know what is "active" in many cases is to contact the lister directly. IMO, actives are far lower than MLS shows.
va_investor
all the more reason to look at new listings versus new contracts instead. If willing sellers and willing buyers match then supply/demand itself isn't going to change price. Price momentum might, or changing interest rates, but not supply/demand.
Want to list some Reston zips and someone can check the MRIS over the last few months to see how new listings is fairing versus either sales or contracts?
The committee is meeting Tuesday and Wednesday, and will release a statement announcing its decision about 2:15 p.m. Wednesday. The most immediate concern is what to do with a program to buy $300 billion in long-term U.S. Treasury bonds. The purchases, designed to lower long-term interest rates and improve functioning of credit markets more broadly, are scheduled to end in the middle of September, unless the Fed expands the program.
Analysts are expecting the Fed to allow the program to expire, which would be the first of its extraordinary interventions to support the economy to be curtailed. (Several special lending facilities still exist but have fallen into disuse as financial markets have improved.)
I'm crossing my fingers! Might this mean after the program expires in September we will definitely see at least 6% mortgage rates by year's end? And dare I say 7% during 2010?
Normally I wouldn't cheer this on but I think it will spur more than the 15% price drops housebuyer calculated that would make monthly payments break even. This plus end of $8k tax credit would be a dream come true.
tbw,
I posted it and then took it down because I decided to write a contact.
I don't have the link. I have a very bad habit of writing stuff on scraps of paper. The address is 11947 Hollow Wind (Hollowind?) Court, Reston 20194. I don't have the MLS.
My agent em'd this am that they took another offer.
Don't use realtor.com if you're looking for an inventory count. They'll have listings that haven't been active in weeks.
tbw,
Keep in mind the 1.2 trillion of MBS purchases is still ongoing through December? So, while this could illicit some change in mortgage rates post-September, the real rises would be gradual and taking into greater effect after December. Could be a perfect storm.
Or, or, the economy really has recovered enough that private investment will pick up the slack, and housing prices are close enough to the bottom that MBS purchases will be considered good safe investments again. But perhaps MBS investors will start demanding more borrower "skin in the game" (i.e. a larger first-loss position for the owner). This could have a similar chilling effect on prices while keeping interest rates themselves low for us goody-two-shoes borrowers.
Yeah right. What would be best for me, that's what's going to happen...
TBW-
If they let it end they will be keeping an eye on rates. I am pretty sure they do not want to let home prices fall 15%, so if this causes a huge decline in home prices I am pretty sure they will continue their efforts in some new way
Cara,
A little OT, but I am looking at the Starwood OPO; the next 2 or 3 yrs are going to show some great Commercial RE deals. I believe this lags residential - but, who knows?
I hear (from people that know) that tremendous deals are around the corner for cash buyer's. Lending is frozen. ????
Cara-
I haven't looked at it very much, other than to see it is going to be a large REIT created by a private equity firm. Do you know if it is related to Starwood Hotels (which owns Sheratin, Westin, W, Four Seasons...)
Va_Investor,
06/24/2009 $269,000 MOBIN PAYAM DEUTSCHE BANK NATIONAL TRUST COMPANY
06/21/2001 $166,000 MOBIN PAYAM
Crazy that she foreclosed! She must have gone HELOC mad earlier this decade. Otherwise she could have sold this year for a profit.
Looking at the tax records you are saying this home will bottom at a price between 2003-04. Why? Because of the Wiehle Ave Metro stop? I suppose that's worth something -- it will definitely make an Arlington or DC commute MUCH more convenient for someone in Reston. But an extra 20-30% as compared to neighboring areas? Not sure I buy that.
Maybe over the next 3-7 years you see 20-30% gains in Reston south of Baron Cameron (zoned to a school I'll avoid naming) as the Metro stops, growth of RTC, Sunrise Valley, Sunset Hills business centers entice a lot of home purchasers.
I'd say there's a chance that the North Reston vs. South Reston divide becomes a thing of the past.
Va_Investor -- why aren't you investing in South Reston? I think if any area has the possibility of large gains over the next 10 years it's that. Don't you usually make the best real estate gains by investing in an area that is not hot and becomes hot? Obviously there is a lot of risk there -- some not hot areas never become hot. But I think we've all agreed on here there's a lot of potential future growth for South Reston.
It's confuse everyone with Cara day. Who knew?
:)
I know nothing about CRE other than if lending is really freezing the economy will have bigger fish to fry. Especially the impact on small banks and the FDIC reserve. But yes, in this coming calamity there should be good deals to be had for cash investors who can either choose well, or have enough cash to spread out their holdings and get some winners with their losers.
tbw,
Every REO or short I've looked at in the past month has been purchased for well under current prices. Every last one. Most had to have borrowed between 100k and 150k over purchase price to have ended up underwater. Only a few were purchased in 2003/4 and have excesses small enough to be explained by NegAm or multiple attempts at modifications with the encumbant late fees and such.
Heloc's are the issue now. At least in Burke. The speculative/flipper foreclosures are SO 2008.
housebuyer,
I agree that the gov't would not want a W recovery which is what would happen if higher rates started blowing up the market again.
But here is the kicker -- how many areas have not already bottomed out? I mean Phoenix, Miami, a lot of California, Vegas, Detroit, etc all did their bottoming pretty quickly Prince William County style. But maybe they have the same low end/high end bifurcated market we do.
So the question is if the only places losing 20% are the upper end Acela line areas then does the U.S. Gov't still act? The players are clearly biased (Geithner, Bair are trying to sell homes in that price range/region) but after a while Congress hears less outrage from the constituents because their homes are not dropping anymore. And so why should the nation risk inflation and further huge deficits so that a few fatcats in the NYC and DC areas don't get price drops in their homes?
Cara,
Heloc's are the issue now. At least in Burke. The speculative/flipper foreclosures are SO 2008.
Your lips to God's ear. I just hope most of the investors buying up properties (a la Va_Investor) have the income/wealth such that these are bought for long term purposes and the numbers do not only make sense if they can sell it at a profit in 2-4 years. Otherwise we'll see all these properties foreclosed upon in 2010-12.
When are people going to learn that HELOCs have to be paid back? If you want to get "free money" out of your home you sell it and move to a lower cost area. The difference in sales price and new home price equals "free money" for your family's European vacation or whatever.
Note I'm not saying Va_Investor is a speculator/flipper. I'm just saying I worry some people doing what she is doing are speculator/flippers. I don't think speculator/flippers are out of the market. There's always room in a healthy home market for investors who buy long term and expect to rent for a while and make a profit after a while.
tbw,
This place is not South Reston. The recent "comps" suggest 330K+ vs asking of 250K. Note; upper-end upgrades to baths and kitchen.
No, I don't really like S. Reston. I know that there is money to be made - but I've always had the "would I live there?" test.
I guess you really have to know the neighborhood. I'd never buy anything where I don't know the neighborhood. Are you sure that you know know "Whisperhill", as opposed to the similar nabe in South Reston?
tbw,
Check out the irvine housing blog. Or Bubble info (Jim Klinge's blog, "I'm jim the realtor..." ) The move-up market in CA is still at totally insane prices.
People will never figure that out about HELOCs. Banks will have to cut them off. Banks might actually start thinking about the possibility that RE can go down, such that today's assessment that implies a sale could satisfy a loan is no guaruntee that the borrowers will sell in time to make that happen. Obviously they didn't in the 00's. It's pretty clear to me that HELOC's somehow got disjointed from the qualifying the borrower part of the underwriting.
But think about it, if the borrower already owes 30k in CC debt at 18% that might sink them financially, why not take those interest payments for yourself? The borrower's just as much of a liability either way, and with the HELOC at least you're the one getting paid.
Sick sick world.
HELOC's REO's are 2009/2010, ARMs are what will hit when the Fed's fund rate goes up again and time has run out on people's 5 year terms, that will be 2010-2012, and then today's speculators will hit.
Yup no lack of foreclosure inventory in the foreseeable future.
TBW-
Are you sure those are have hit their bottom. I am pretty sure CS that most of the areas you listed are still trending down. Maybe they will have a harder bottom, but I don't think there is evidence of a bottom there unlike some regions(dc included) that have had prices up the last couple of months
Va_Investor,
Because I am risk averse I would use the "would I live there" test as well. But that means lower possible returns.
I never said the home you highlighted was in a bad area. I agree the home on Hollowwind is a very nice area.
Well, if you think the home will be in the $300s any time soon I guess we disagree even more than I thought. I don't think any home that was in the $100s until 2002 or so is going to be $300s any time soon. I think the home will bottom out at high $100s regardless of what they do to the inside.
When are people going to learn that HELOCs have to be paid back?
But, TBW, the sellers Cara is seeing aren't learning that, right? They aren't paying the HELOCs back...they got to keep their free money. Maybe we're the suckers ;).
housebuyer,
I admit not knowing the details of those markets. I just have heard the headline about how much prices have dropped in those areas. In many areas the prices are back down to 2000 price/income levels.
At some point the gov't has to stop meddling. It either chooses to stop or nations buying up debt don't buy any debt without higher yields (which raises interest rates as well.) I don't buy that for the next 10 years the gov't can keep interest rates around five percent and have homebuyer tax credits. At some point the jig is up and home prices fall accordingly.
Hot off the presses...
WASHINGTON -- The Federal Reserve is delivering a vote of confidence in the recovery, saying economic activity is "leveling out." The central bank also signaled that it would soon end one of its programs aimed at propping up the economy.
The Fed said it would gradually slow the pace of its program to buy Treasury securities so that it will shut down at the end of October, versus September. The program is aimed at lowering rates on mortgages and other consumer debt, a move to spur Americans to spend more.
tbw,
I guess you would have to look at the rent vs purchase equation. Those places were going at close to 400K. 250K to 300K is quite a haircut, while looking at what as happened to RTC in the interim. Throw in the Silver Line - and make your own conclusions.
back to WWW vs MOI...
does the internet also make (lead to?) sellers react to the market faster? i believe it does, as the internet has made listings go stale sooner.
pre-internet, or more precisely, pre-MLS data was made widely available on the internet, there's a delay when a listing was 'discovered' by a buyers agent and then forwarded it to his/her client and then did a pre-inspect on the property on behalf of the client (they did that, didn't they?) and then scheduled a showing, all that effort to figure out whether it's a waste of time on all parties. So, it made sense to for sellers stay put for sometime before the inevitable.
It used to be that a listing is considered stale after 90 days (funny how that coincides with the most common listing contract period). Now? I'd say it's much shorter, but by how much? I have no clue.
Well, all this is from a buyer's perspective. Any (would be) sellers want to chime in?
Va_Investor,
Yes, like everything in the area the home prices more than doubled this decade. I expect "quite a haircut" everywhere. I don't think RTC or the Silver Line lets your part of Reston keep a huge percentage of the bubble gains that the rest of the region does not.
I am seeing foreclosures in Reston. Look at the tax records for the Midtown at Reston Town Center (11990 Market St). It's a very nice condo building in Reston Town Center and going through the tax records you will see plenty of foreclosures, short sales, etc. Heck -- you just bid on a foreclosure.
Here is a unit in the Midtown:
05/08/2009 $470,000 JO CHI YON US BANK NA TR
11/13/2006 $837,840 MIDTOWN CONDOMINIUMS LLC JO CHI YON
Looks like a pretty big haircut to me. The 2006 prices were silly and nonsensical.
Oops that was a price listed when it went foreclosed and not really a sales price.
It listed for $536,300 and is under contract.
http://franklymls.com/FX7082132
So $837k to $500s is a huge haircut. These huge haircuts are going to happen over and over. Imagine the assessment that is coming from Ffx Co next year looking at those sales. They'll offset it somewhat as a foreclosure sale but not completely.
tbw,
I know you were just being hyperbolic, but I don't think anyone thinks the mortgage rate can or will be held to 5% for the next 10 years.
However... the problem areas that need "supporting" while the knife catchers soften the blow to the banks during the fall in housing prices are not here. CA and FL both have way more ARMs, with crazier terms than here. The question is will the Fed try to keep mortgage rates low for long enough to soften the blow in CA/FL at the risk of reinflating a bubble in areas like DC. It's going to be a difficult balance. But since our economic recovery is likely to be amongst the best in the nation, I'd bet that the Fed will be watching the rest of the nation more than it does us, thus creating the low-slow flat period here at an inflated price that only inflation will overcome. If things really tank elsewhere, we might even experience our own W shaped housing recovery.
The "best" I think we can hope for is a return to 6%-6.5% rates in the spring of 2010. That would be a nice, modest gradual approach, that they might actually pursue. I don't think we'll see 7% mortgage rates until national unemployment is back under 7%.
Robert,
Here is an interesting map:
Stimulus Jobs
Most are not in the DC area. DC is receiving an estimated 12,000 stimulus jobs. California 396,000.
Unfortunately it does not break down VA and MD by subareas of the states. Given the high numbers in every state it seems reasonable to believe a large chunk of the VA jobs are outside of Northern Virginia.
Clicking on the per capita map shows that the per capita number of stimulus jobs per state ranges from 0.01 to 0.02. Looks like the stimulus was pretty even handed and we are not getting a disproportionate chunk here.
tbw,
So you think that snagging an REO at 30%+ off is a risk? Is that what you are saying? Prices will drop further than reo pricing? I've bought 2 at approx 200K, that sold for 380K; should I be worried or happy?
tbw,
So you think that snagging an REO at 30%+ off is a risk? Is that what you are saying? Prices will drop further than reo pricing? I've bought 2 at approx 200K, that sold for 380K; should I be worried or happy?
Cara,
Looks like the Fed's announcement shows that they are at least for now planning on getting out of manipulating long term interest rates by the end of October. Maybe they'll push that date certain back at the next FOMC meeting (Sept 22-23) but if they were queasy about it they could've waited until that meeting.
Looking at CNN Money's stimulus jobs map that I posted above . . . I don't know if it's certain we will have an economic recovery among the best in the nation. Top 25% of cities? Probably.
Robert also likes to cite health care. Well it's not clear Obama passes a huge health care program. But let's say he does. Do all those jobs necessarily come to the DC area? No.
The Centers for Medicare and Medicaid has 4,100 employees and 2,700 are at the HQ in Woodlawn, Maryland. That is in Baltimore County. The remaining are spread among 10 regional offices and some are in the HHS building in DC.
The CMS employs approximately 4,100 employees, of which 2,700 are located at its headquarters in Woodlawn, Maryland. The remaining employees are located in the Hubert H. Humphrey Building in Washington, D.C., the 10 regional offices listed below, and in various field offices located throughout the United States.
It'd be nice to have the breakdown between DC and 10 regional offices but even if we assigned 50% to the DC office and 50% among the 10 regional offices (quite generous IMHO) that's 1,400 DC Medicare/Medicaid employees. Even if universal health care tripled that number that's only 2,800 new jobs. Eh. And given how the stimulus jobs were divvied up and the federal-state cooperative nature of these programs, I expect a lot of powerful senators to get their home states many of these new jobs.
Va_Investor,
If you bought a place that went for $380k for $200k then you got it 47% off peak price. Sounds safe to me.
If you bought it when it was only 30% off (that would be $266k) then yes I see further price drops.
Your question/example do not match up.
TBW,
The only stimulus jobs "saved" are the transfer payments that went out to the states and counties. That should be pretty even across the country. I read somewhere that 15% of the Stimulus was spent, 14% was the transfer payments. The rest of the Stimulus will show a heavy concentration in the DC Metro area.
All of Medicare is administered by 4,100 employees? That doesn't sound right.
tbw
The treasury buy-backs are the tip of the iceberg its the 1.2 trillion in MBS and agency that are still ongoing, with planned end date in December/January.
On CR the peanut gallery is saying that the FOMC just doomed this stock market rally to fizzle a bit to get more buyers for treasuries. I don't understand the mechanism behind that, but there is most definitely more than one way to skin a cat.
And we're not going to do better economically because of the stimulus itself. The stimulus is by it's very nature short term and transitory and hence no help for owner-occupied housing. I'm thinking more about our educated worker-base, proximity to government, emerging tech-sector, etc. The same things that have been the engines of growth around here for a while. (aside from the contractor system which should be getting a big hit). These have kept our unemployment low, and will continue to do so.
Robert,
That's because it's a federal-state cooperative program. The federal government does not do it all by itself. It does it in partnership with employees in Richmond, VA; Annapolis, MD; Albany, NY; Austin, TX; Sacramento, CA, and so on.
It's not all run by a gov't bureaucrat in DC. Right wing demogaguery makes people think all gov't programs are run that way hence a lot of people don't realize Medicare is a federal program.
And CMS does not just run Medicare. It runs Medicaid, SCHIP, and HIPAA compliance.
Cara,
And we're not going to do better economically because of the stimulus itself. The stimulus is by it's very nature short term and transitory and hence no help for owner-occupied housing. I'm thinking more about our educated worker-base, proximity to government, emerging tech-sector, etc. The same things that have been the engines of growth around here for a while. (aside from the contractor system which should be getting a big hit). These have kept our unemployment low, and will continue to do so.
Oh I agree with that. I think the *private sector* in Northern Virginia will remain strong and help our local economy. That's why I think going back to full recovery here will take until 2011-12 because it's really going to be up to the private sector. Obama is not going to create a ton of new federal agencies like FDR did (SEC, FHA, Social Security, etc) and expansion of existing agencies particularly those related to the war effort. Nor will we see all the new Cabinet level agencies we saw between Truman and Carter (DOD [combination of old dep'ts and increased size], HHS, HUD, Transportation, Energy, and Education.
well, the stock market likes the news (don't fight the tape).
tbw,
I'd rather not quible about numbers. I've seen 30-70+% percent off peak. It's up to you to determine what is a "fair" price. I have my idea and you have yours. Whatever.
That house I looked at last weekend with all the Realtor cards on the kitchen and lots of people there went under contract in 5 days. I am definitely interested to see how much it closes for.
Va_Investor,
I'd rather not quible about numbers. I've seen 30-70+% percent off peak. It's up to you to determine what is a "fair" price. I have my idea and you have yours. Whatever.
The point is that some REO opportunities are not opportunities but knife catching. Obviously anything going for 70% off peak is a good buy. There is a huge difference between 70% off and 30% off. One is a no brainer, the other knife catching.
tbw,
Yes, it's a bet. I'd go with location, location, location.
If you haven't seen 30-70%, you haven't been out there.
Obama is not going to create a ton of new federal agencies like FDR did (SEC, FHA, Social Security, etc) and expansion of existing agencies particularly those related to the war effort. Nor will we see all the new Cabinet level agencies we saw between Truman and Carter (DOD [combination of old dep'ts and increased size], HHS, HUD, Transportation, Energy, and Education.
My he won't create federal agencies, per se, but I believe the spirit of what you are saying is the Obama Administration will not expand the Federal Government by anything measurable and more specifically in the local area.
That puts you in a small minority. I can post 10 articles by various authors saying the polar opposite.
http://franklymls.com/FX7104315
Un-freaking-believable. They found a sucker. $267k for this P.O.S. I'm stunned, Simply stunned. I don't want to compete with this level of idiocy.
So T, there's your answer, a 3 bedroom with lipstick on a pig went for $267k net, at the absolute peak of the season. I think this verifies that your timing was just fine.
Still, I'm amazed at what people will pay, even now, to own something that is just a glorified apartment with a crappy parking situation and terrible curb appeal. It is the right school districts and the right walking commute to the VRE (through a path) but still, this boggles the mind.
OK,
Anyone want to be honest here? I, for one, am glad to think the worst may be over. Please don't argue whether I am right or wrong - that is a different argument.
Would you be glad or sad to see a turn in the economy (and hence, housing)? Let's also not argue about economic policy and future debt.
Hmm, Cara, well the kitchen looks nice, and maybe they had some of that wine to drink before they wrote the offer :)
But yeah, it is amazing how much of a different cosmetics can make, but I guess not surprising when if someone really wants a nice kitchen but doesn't have the cash, they'll finance it at a higher cost...
Robert,
My he won't create federal agencies, per se, but I believe the spirit of what you are saying is the Obama Administration will not expand the Federal Government by anything measurable and more specifically in the local area.
No. I am saying that you overestimate the amount of jobs that end up in the National Capital Region (as the gov't calls it). I think you fail to appreciate that a lot of federal gov't jobs are out there in "the heartland."
I also think you overestimate how long the average person is willing to commute. For the Ashburn market the availability of federal jobs in DC is WAY behind in importance in the number of jobs in Tysons, Reston, Fair Lakes, Dulles, Route 28, etc.
I recommend this David Brooks op-ed to you from 2004. Key quote:
Ninety percent of the office space built in America in the 1990's was built in suburbia, usually in low office parks along the interstates. Now you have a tribe of people who not only don't work in cities, they don't commute to cities or go to the movies in cities or have any contact with urban life.
I don't think you appreciate how many of the suburbs we discuss are in essence suburbs of suburbs. Not suburbs of cities.
There was an era where the federal gov't was considering moving more federal buildings out to the suburbs. That era is long over. They are moving buildings back to DC in places like the new DHS HQ in St. Elizabeth's. Or the new ATF and EEOC HQ at the NY Ave metro stop.
The agency has been at 18th and L streets NW since then-Chairman Clarence Thomas blocked Reagan administration efforts in 1989 to ship it to the suburbs. The downtown location also houses the Washington field office, which is where people go to file discrimination complaints.
EEOC Is Moving On; Fast Food and a Dicey Neighborhood Await (Actual WaPO Headline)
Cara,
I'm showing 11 houses with under contract dates August 11 and August 12.
With 98 houses available, 11 contracts in less than 48 hours is ridiculous.
Burke is insane.
Cara,
There sure are a lot of knife catchers.
Va_Investor,
IMHO we would have had a V recovery if the gov't had not played around with the housing market by trying to have low, low mortgage interest rates and $8k housing credit. We now might have a W recovery because we tried to stop the inevitable.
Some argue that this recession has been so horrible in part because we allowed the housing bubble to get us out of the 2001 recession quicker than we would have otherwise. It's been bubble (tech boom/stock market) after bubble (housing bubble).
Unfortunately, too few Americans appreciate that the road to wealth is paved with hard work. I wish they'd go back to buying $1 lottery tickets instead of gambling with borrowed money from a bank they could never really pay back if necessary.
TBW,
To be clear, I really don't do much of my own thinking. Obvious to most I know. How can I possibly estimate the amount of jobs that will be created by legislation that doesn't exist? I can't. I rely on others. To say the consensus is that Obama will expand the government and the National Capital Region will capture it's historical share is an understatement. You are the only opposing source to much of the information I find on the subject.
RE: suburbs of suburbs vs. suburbs of cities:
Okay, I read the David Brooks article. How exactly does someone living in Ashburn and commuting to Tysons Corner differ from someone living in McLean and commuting to the District of Columbia? Brooks says this is a totally new animal. Not. If you looked at these families in Mclean and Ashburn, their lives would be nearly parallel.
I don't believe the "era" of moving anything in the Federal government to either suburbs or cities has changed very much recently. On the margin perhaps, but no paradigm shift whatsoever.
TBW,
What adjective would you use to describe the housing market in Burke, VA?
Anon412,
In person it doesn't look so nice. It's tiny the pergo is way cheap, the cabinets are just facings with nasty interiors, and that's just a cheap counter.
Robert,
Burke is all about its schools. That plus the 8k means it's do or die time in Burke right now. But yes, Burke is freaking hoping, of that boom of listings over the last two weeks something like half are already taken. But given that listings are still replacing closings I'm not too worried. There are also some recent comps that are totally in line with what I think things are worth in the current market, this one was the aberration.
Va_investor,
If we get a real recovery, with slow steady job growth and no W shaped fall, I'll be tickled to death. There's too much pain going around.
TBW,
I think you aren't using the term knife-catchers correctly. Suckers is okay, if that's what you think. But, prices are rising in those areas you reference, so knife catchers is not the appropriate term.
Cara said...
Un-freaking-believable. They found a sucker. $267k for this P.O.S. I'm stunned, Simply stunned. I don't want to compete with this level of idiocy.
So T, there's your answer, a 3 bedroom with lipstick on a pig went for $267k net, at the absolute peak of the season. I think this verifies that your timing was just fine.
Still, I'm amazed at what people will pay, even now, to own something that is just a glorified apartment with a crappy parking situation and terrible curb appeal. It is the right school districts and the right walking commute to the VRE (through a path) but still, this boggles the mind.
At what point can we declare a mini-bubble?
Robert,
Agreed, in 20/20 hindsight, I say the mini-bubble in sub-250k properties in good school districts started in June. It will survive until the $8k gets taken away or the interest rates rise to above 6.5% whichever comes first. (possible stagnation/peaking of said mini-bubble at 5.75% and higher).
What you've got to understand is that if you work at the Pentagon or the PTO, and want good schools and a good value, Burke is it. Nothing competes. Everything else is further, has lesser schools, or is way more expensive. So sure, there's a frenzy in Burke right now, there darn well should be it's the best value in NoVa. It's TH's are 100k under Vienna or Reston, It's SFH's likewise or even moreso. Fairfax Station has some beautiful custom large homes for 600-800k. Combine with arguing to get your kids into Robinson? Try to beat that for a deal right now.
Yes, everyone questions why I want to live in Burke. Simple, if it's the right commute for you, it's the best bang for your buck out there at the moment. Not that also has public transportation.
Sure if you want even more house you should go further out the VRE line. And people do. But for a lot of folks Burke isn't a trade-off it's the sweet spot of rolling hills, lakes, trees and "cheap" prices.
I'll second that. I liked Burke when I lived there (Burke Shire Commons apartments) and I would prefer that area to most of Fairfax County if it weren't for the commute to Tysons from there. Great parks and wooded lots that are only bested by the MUCH more expensive Great Falls area. I'll admit I'm a little jealous that the commute works out for you Cara, seeing as how I could actually afford houses I like in Burke right now.
To say you've done your homework on Burke is an understatement. Great analysis of competing areas. Obviously, a lot of others are coming to the same conclusion. You may be sitting in an undervalued section of Northern Virginia.
It's impossible for me to see Burke objectively. I lived there from the time I was 3 until 16 - when my mother kicked me out for getting arrested again. Went to live with my father, but returned after college and lived with my mother for a couple of years when I first started working.
I guess Burke is in the process of getting bid up to the point where it is on par with Reston, Fairfax, and Vienna as far as commute and community features. At this rate, it won't take long.
Robert,
I think you missed my point about Ashburn. After the dot com crash we had huge levels of CRE vacancies in Northern Virginia. Even during peak economic conditions we there always was a lot of vacancies in Northern Virginia CRE. It's only in downtown DC that you saw single digit vacancy rates.
You keep pointing to the federal gov't as what will save the area. My point is that the federal gov't is not putting its jobs in those further out areas. What saved the further out CRE areas (and linked residential areas) post-2001 recession was a massive growth in defense/homeland security contracting. They ate up a lot of the vacancies left by the dot com crash.
Obama and Gates are saying they are going to not be as keen on contractors. I'll be ecstatic if we can even keep the number of gov't contractor positions we currently have in Northern Virginia. I don't see an expansion.
The recovery of the Northern Virginia economy is linked to private sector growth. I'm thankful we were able to bring in Hilton Corp and Volkswagen.
Btw, the Wars in Afghanistan and Iraq are not going to last forever. So that will ramp down DOD spending. I think we may go back to a peacetime feeling (a la the 90s post-fall of the Soviet Union) by the mid-2010s.
robert says ;
"All of Medicare is administered by 4,100 employees? That doesn't sound right."
sounds about right to me. Medicare has very low overhead, they are way more efficient then private insurers.
they don't have a marketing division, they collect
through the IRS and the rules are written for one big program.
That's Single Payer for you
Robert,
Are you trying to say Burke is now better desired? It's always been considered a nice area at least as far back as I can remember (the 1980s).
Burke was #31 on the Best Places to Live 2008 and I'm sure it's been on such lists many times before (like Vienna and other local areas). It's always had one of the higher average incomes in the area.
The only drawback to the area is the commute. While it works out well for Cara for the average resident I think it's going to be a slightly longer commute than other similar areas. The homes come with a corresponding discount.
"Contrarian said...
It means shortly after the program expires, the entire economy is going to collapse ... expect a depression worse than the one of the 1930s."
Yep -- thats it -- doom baby DOOM!!!! Glug, glug, glug....
Freud was a fraud
contrarian,
I don't think places will shut down. They will just do this: Safeway Cuts Prices to Lure Frugal Shoppers
Same with various clothing stores. The places that will shut down are the ones that refuse to cut prices -- Abercrombie & Fitch is often cited as a company refusing to do that. It's sales are down 25% or so.
The companies do not go under when this happens. Their profits just go down. Many of these industries sell products for 5x-15x cost. Selling for 2x-10x cost will not put them out of business.
In the end this just means the execs of these corporations make a few million less. No big deal. Our country was doing fine in the 1960s when CEO pay was much smaller:
Over the past 40 years – and especially in the past decade – there has been a tremendous explosion in executive pay in this country. In 1964, the average chief executive's salary was 24 times the average salary of workers within their companies. Today, it is estimated to be between 275 and 430 times the average, depending on who's counting.
Okay, I guess the private jet companies and yacht companies might go out of business. ;)
tbw,
I think it's wishful thinking on DOD expenditures. Those wars may or may not end, but we've got jap subs cruising the cost, a new cold war with the Soviet's, and God knows what else.
p.s. Remember "carry a big stick" - times haven't changed.
"Those wars may or may not end, but we've got jap subs cruising the cost, a new cold war with the Soviet's, and God knows what else."
WTF ?
lol
I thought contrarian was going to have the nuttiest post of the thread hand down, but then this came along.
Data center projects planned for Santa Clara, Calif. are now taking a back seat to the red-hot northern Virginia market, where the Obama administration’s stimulus funding and focus on cloud computing are expected to boost data center construction.
Link
TBW, this okay for private investment? Don't think it will rival new home construction, but it's hard to deny this is significant. These are real people with real money investing along the lines of my themes.
Robert,
Right now Burke isn't "undervalued", it just has a limited supply of potential residents for whom the commute is preferable. However, if I were investing in new facilities in NoVa, I'd park them right between Manassas and Burke where my employees could get good housing "cheaply", and the well-educated spouses of those who work at the PTO or pentagon are already there easily attracted to jobs that are closer to home. Why pay for the Silver Line extension, and compete for the residents of Reston and Ashburn, when you have an untapped educated supply of workers along the VRE line?
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