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Friday, August 28, 2009
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58 comments:
REO in Burke SFH split-level sold for under list despite multiple offers:
http://franklymls.com/FX7082757
Perhaps the appraisal pulled it back down to reality? Lucky buyer if so. Pretty lucky buyer anyway.
Funnily enough the 1999 sale was also a foreclosure. Unlucky house?
Speaking of deflation
"Japan issued sobering July economic data on Friday, including a record unemployment rate and the biggest decline in consumer prices in roughly 38 years. "
Market Watch
Deflation ramps up
The ministry also said Japan's core consumer price index fell 0.2% in July compared to the prior month. The core CPI result, which excludes volatile fresh-food prices, marked a 2.2% drop from the same month last year, the government said.
The fall represented fifth straight monthly decline and was the biggest drop since comparable data was first available in 1971, the Nikkei business daily reported.
Overall CPI was also down 2.2% on year, and fell 0.3% from June.
The preliminary core CPI for the Tokyo metropolitan area, widely seen as an leading indication of national trends, fell 1.9% to 99.7 in August, the government said. That decline also reportedly marked the biggest since 1971.
I know, I know, we're not Japan. But I have to say, I'm not convinced by that the graph someone posted the other day which showed deflation already turning around into inflation. I think we may have some more deflation yet ahead of us, despite the bumping along the bottom.
Cash is still king.
For anyone who can follow this argument: Richmond Fed says purchases by the Fed of MBS of ambiguous utility....
Or at least that's what I got out of it. He's discussing what the actual effect is of Fed MBS purchases on how banks manage their cash-flow. Basically that MBS purchases are a substitute for direct borrowing from the Fed. The consequences of this I couldn't really follow.
Cara-
That house makes very little sense to me. The person bought the house in 1999 took a cash out refi in early 2007 and tried to sell it in late 2007. Why didn't they just sell it in the first place.
Also what the hell did they do with the 300+K that they took out of the house. I guess maybe it was medical or something... Whatever bank the person used was an idiot. They let the person buy it for 169K and 8 years later they let them take out 300+K when it was clear the market was already starting to fall...
Housebuyer,
How can you tell when they took the money out?
There was an in-family transfer around then....
Cara, its a REO, a lower all cash offer will beat out any VA loan offer and most conventional even if they are higher. How do you know there were muliptles?
A good broken-out look at deflation/inflation prospects in the near term
Worth a look! It's conclusion is that the entire "deflation" in CPI we're seeing now is just because of last years bubble in energy prices, such that when January rolls around and we're comparing to sub-$2 gas, "inflation" fears will hit bigtime.
Arkey,
That's possible, it could have been an all cash buyer, that would be another explanation. The multiple offers is just from memory, it went in and out of contract a couple of times, so perhaps indeed the bank just wanted a no-financing buyer after the multiple run-arounds. Still, this is a lower price than a smaller split-level went for earlier this summer. (But that one was in a way cozier neighborhood, and didn't have a pool).
Las Vegas agent learns that telling a national new organization that you engaged in illegal practices just might throw you in hot water....
Another good read from Patrick.
Cara-
I always thought that when the tax records said the person sold the house to themselves it showed as a sale for 0 dollars. I may be wrong about this. Either way they must have taken the cash out near the top, because they paid 170K and could have easily sold it for over double that in 2007...
Housebuyer,
The $0 transfer was to another name, so it wasn't to themselves... I too, generally interpret $0 transfers as evidence of refinancings, but only if the name is the same.
Perhaps this owner didn't think the bubble was going to pop? And thus didn't try to sell when they could have gotten out of their debt? Or had no motivation to sell then when they had already gotten the money from the bank? So, I'd say it's pretty hard to tell how much they took out.
The in-family transfer may mean the original owner either lost their job, retired or was disabled. The person who took over may not have even been able to afford the taxes for all we know. Some people do go into foreclosure even when the amount of their loan is less than the sale price...
Cara -
I didn't notice the first name was different, I had just looked at the last name.
I assume that they did try to sell. If you look at the listing history it was listed at 535K for a year and a half starting in late 2007. I guess they didn't make payments and the bank kicked them out.
housebuyer,
Wow, $535k. Funny how a year and a half on the market didn't convince them to accept less. Maybe they did take out well over $300k. Insane.
I'm so glad we're past the days when houses like that "cost" a half a million dollars. Oh wait, they still cost that much or more in Arlington... Does Arlington have late 60's split levels?
TBW, why wouldn't this be an accurate distribution or something close to it of federal government hiring throughout the country?
You said...
I think you see $3 billion to the National Science Foundation and think all that money will be spent at HQ in Ballston. That money is being distributed to universities across the country in research grants. Not to hire 1000 new people in Ballston.
Link
Robert
*postings does not equal jobs
Right there at the top of the page.
In terms of distribution of the money that stays within the fed aparatus you may be right.
But are you actually disputing how NSF money is allocated between headquarters and grants? That would be the relevant question..
Cara,
In Feb 2008, the owner refinanced and took out a deed of trust for $439,200.
You find me some article showing hard data (not speculating!) about how many DC area workers were hired because of ARRA and I'll listen. If you can find me some proof that it's the insane numbers you predict, I'm all ears. I just don't see any agency conducting a hiring binge.
I can't. Can you find me hard data that they aren't hiring? That employment levels are the same or declining because of your theoretical belt-tightening?
Are there others on this board that subscribe to TBW's analysis on local hiring? That the net effect of Stimulus, Health Care, Energy, Treasury, and Education won't result in job creation in the area?
Robert: NSF and NIH money is going to be distributed to labs throughout the US. The only increase in local hiring you might see would be at GMU, UMD, GW, etc. as they hire more post-docs and grad students.
A lot of research funding was cut or went stagnant during the Bush years (or misallocated in the case of NIMH).
http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=2633074
MJC,
Thanks, I take it this is information that you had to pay for access to?
There were a couple of >500k sales on that street in 2004-2006 but they were all much bigger, with one $450kish sale of a similar size home that could have justified the refi amount.
As I've said time and time again, it's not the bubble buyers*, it's the refi'ers. All those foreclosures in waiting that should have happened during the bubble, but were postponed through refinancing.
We have a lot of accumulated financial misery to recover from. And we're just starting into the miseries that have been stacking up from this recession...
*The weak hands bubble buyers are already flushed, except for the option-ARM stragglers. (but most option ARMs were refinances themselves not purchases)
Robert,
"net" hiring? No. not enough to counteract the job losses in the private sector.
And all agencies that I am personally connected with are in a hiring freeze.
On the positive side, I recieved my first credit-card offer (for a new card) in months! So, perhaps the banking sector is truly starting to unfreeze.
(this is compared to 5/week during 2001-2008).
Cara said...
Does Arlington have late 60's split levels?
1963
1964
1957
there's quite a bit of them actually...
Potential short sale near EFC Metro.
Bought in 1974 for $52K, and now listed at $700K...for a short sale. Doesn't look like there were any drastic renovations, either. Ridiculous.
Saw this on a listing:
"Try FHA 203 financing for home improvements."
Googles says it means FHA Section 203(k) program. Does anyone have more knowledge or personal experience on this program?
Robert,
"net" hiring? No. not enough to counteract the job losses in the private sector.
Ditto what Cara said.
I looked at a sample of agency budget requests for FY 2010. Unlike FY 2009, they are all requesting pretty sizeable increases in employees. However for many sizeable means 100. And I hope you agree with me that DOJ requests for more people to "secure the southwest border" are not going to be DC area jobs.
Anyways, I did find this which gives us more data. Here is a hiring binge -- not sure how many acquisition personnel will be in the DC area:
Insourcing and Acquisition Workforce. Under the fiscal 2010 budget request, the
department will begin reducing its reliance on support service contractors from the current 39
percent of the workforce performing administrative and advisory services to the pre-2001 level
of 26 percent. Contract personnel will be replaced with approximately 13,800 government
employees, including 2,500 acquisition specialists. In addition, the department will increase the
acquisition workforce by another 1,580 government employees, for a total of 4,080 in fiscal
2010. By 2015, the acquisition workforce will grow by about 20,000 people.
So that's a lot of new DoD employees between now and 2015. However, I think we all agree if this passes that is bad news for SAIC, Boeing, et al. I see that as resulting in a lot of non-renewed contracts and a lot of disruption for the area.
Pre-2001 levels of contractors? I almost feel like contrarian on how low that could cause Northern Virginia home prices to go if Congress agrees to that.
MM,
yup I could just type AR7* split level into Frankly couldn't I?
http://franklymls.com/AR7130878
Here we go, but you'll notice that in Arlington even the intrinsically uninteresting split levels have been renovated so they look nice. Still $639k... Yikes. I know, it's not the house, it's the land... And that's a list not a close. But man do I feel sorry for you guys looking in Arlington. Yikes!
Matt,
Yikes. Reverse mortgage maybe?
2010 DOD Budget Proposal
page 5
You know, instead of endlessly speculating on who, what, where, when hiring; there are actually some DC area stats out there to look at:
http://www.cra-gmu.org/current-indicators/USandWashingtonAreaEconomiesAug26.pdf
Page 14 shows we are indeed into a "net negative" condition when it comes to hiring - albeit slight compared to other metro areas.
Page 15 shows what sectors are net hiring, and which ones arent. Biggest gainers to date are
-US govt (no surprise)
-health & educaton services (supposedly recession proof sector)
-professional & business services (lawyers, accountants, consultants) and
-Local govt (kinda surprising). All the rest are big time negative.
True, we dont know how much these are changing, but Robert/TBW, etc you can start tracking this yourselves month by month and see.
Cara,
Re your inflation/deflation article. I wonder how they calculate the cost of apparel and how much they take into account sales price versus list price.
Sure maybe clothes are 3% more in July 2009 than July 2008. But if most Americans are all going to less expensive clothing stores, shopping when the store has a sale, shopping from clearance, etc -- aren't clothing prices down in some sense?
Just anecdotal but I know my clothing costs have gone down. The sales are much more aggressive than anything I've seen in the past five years.
It's like rentals. Sure on paper they might seem to be asking the same or 2% more than last year but with all those 1-2 free month deals they actually are asking much less for rent.
The Anonymous
Thank you!!!!
Very informative.
Did you see later on how badly DC and Maryland are now faring average price-wise? Yikes!
Re: reo's and shorts coming from cash-out refi's.
I wonder how the numbers break-out on these vs. purchase money mortgages.
I noticed a new listing in my neighborhood and looked it up (inquiring minds, and all...).
Well, it's a short. The seller's bought it in 1990 for the upper 400's and it's a short at 799K. I don't have access to Land Records to determine when the refi occured.
I can't imagine how people get themselves in this situation at their age. I'd guess that they are late 50's. Their kids were in college when we moved into our house nearby (7 years ago).
How the heck do you reach 60 and have no assets? I think the husband worked for the former administration because he was picked up every morning by a driver in a black sedan.
It's clearly not an over-the-top house and I never saw anything fancier than a volvo wagon in the drive-way.
Man, that is so not going to be me!
Gee, The Anonymous--
Looking at the date on that slide set--you couldn't have found anything dated more recent than that? Geeez, it's already the 28th, for cripes sake. ;)
VA_Investor: I've seen a couple of those in Vienna and Great Falls. It's a short sale, but they bought 6+ years ago for half of the short price. The only thing I can figure is that they heloc-ed themselves out of house and home.
Here is an interesting listing:
http://franklymls.com/AR7140057
"Charming brick bungalow on double-size lot with second house in rear (rents for $1,150). Let your tenant help pay your mortgage! Long backyard and convenient alley in back."
And here is where the listing gets weird...
"No showings until sept 1st due to disgruntled tenant/imposter heir. This is an estate and is sold "as-is"."
There has to be a good story behind this one!!
But, NoVawatcher,
How the heck do people with (presumably) brains and high incomes end up like this? I've never thought that IQ meant "smart" and this type of thing proves it.
John,
"difficult" equals possible deal in my book. At least a look!
Va_investor,
I've seen data on the break-down of cash-out refinances versus purchase money mortgages going into SS or foreclosure, but only for California. In CA some whopping percentage (that I can't recall) were cash-out.
The way I look at it is this. If back in 2002-2007 you were getting into trouble financially, what are your possible outs? (1) Go through a sale to realize your gains and either rent or downsize, (2) get a heloc to refinance your obligations. (3) bankruptcy etc...
The financially savy did (1). The unsavy did (2). In a lot of cases it seemed like the right thing, if you've wracked up $30k of CC debt at 22% interest a 7% HELOC sounds like a blessing. People don't want to admit that the $30k itself meant they were already living beyond their means. They wanted to think that if they just reduced their interest expenses it would all work out fine. And really? Move? just to pay back those evil credit card companies? That doesn't seem like a measured response...
And then there's the slew of people who did it intentionally. A lot of those never considered the idea of cashing-out their housing gains (for real) if it meant "gasp" renting, or worse, downsizing. The mantra was to move up, and thereby protect your gains from the storms that can sweep through the lowly starter tiers.
In the case of the huge house up the street, my guess is that their kids have finished college, but the parents had taken on onerous parent loans that they refinanced into the house. While possibly also pulling out enough equity to pay for a second home someplace for vacation/retirement.
I think that "presumably" may be your answer right there.
(I don't think IQ is all that highly correlated with income anyway)
Some people are also just born in the right place at the right time.
And others get where they are through a lot of "drive" which is a kissing cousin with "greed". Not everyone with drive is greedy and not everyone who's greedy has drive, but the Venn diagram shows a good overlap.
The heloc money was free money.* And there's an infinite demand for free money.
* as long as you never planned to pay it back through wage income.
Cara-
I think the spread is very high so not every smart person is rich/rich person is smart, but there appears to be a lot of data saying they are correlated when you aggregate them.
http://contexts.org/socimages/files/blogger2wp/Methods-Zagorsky00-RelationshipbetweenIQandIncome.png
http://farm2.static.flickr.com/1169/1114002952_88e5644be1.jpg
housebuyer,
Human eyes are not very good at judging density in scatter plots. But the main branch of that scatter looks almost horizontal, with a definite clump of low-IQ low income, but the peak of the distribution for even high IQ's still occurring at maybe 40k? There's definitely more scatter (and more potential for high incomes) with higher IQ.
The upper left panel is definitely less populated than the upper right, especially in comparison to the density in the lower left. But still the scatter shows that on an aggregate basis the relationship is meaningful, but not on an individual basis.
housebuyer
(which of course is exactly what you said) Thanks for the plot by the way.
Cara-
No problem. Basically it is not a particularly surprising result. On average having an IQ is beneficial, but there is tons of noise.
I wish they had adjusted for schooling. Because I can almost promise you that on average smarter people get more schooling and the more schooling you get the more money you make. The question is once you adjust for school does a smarter person still market more money. I would think the answer is yes, but probably not nearly as much as the chart shows.
Because I can almost promise you that on average smarter people get more schooling and the more schooling you get the more money you make.
I can almost promise you that the richer your family already is, the more and more prestigious your education will be and the more important and connected and ambitious your friends and professional contacts will be, and therefore the more money you will have the access, opportunity, and reputation to make.
Here's a summary of a study that might interest you:
Intelligence and socioeconomic success: A meta-analytic review of longitudinal research
Tarmo Strenze. Intelligence. Norwood: Sep/Oct 2007. Vol. 35, Iss. 5; pg. 401
The relationship between intelligence and socioeconomic success has been the source of numerous controversies. The present paper conducted a meta-analysis of the longitudinal studies that have investigated intelligence as a predictor of success (as measured by education, occupation, and income). In order to better evaluate the predictive power of intelligence, the paper also includes meta-analyses of parental socioeconomic status (SES) and academic performance (school grades) as predictors of success. The results demonstrate that intelligence is a powerful predictor of success but, on the whole, not an overwhelmingly better predictor than parental SES or grades. Moderator analyses showed that the relationship between intelligence and success is dependent on the age of the sample but there is little evidence of any historical trend in the relationship.
housebuyer,
Because I can almost promise you that on average smarter people get more schooling and the more schooling you get the more money you make.
Yes and no. The main caveats I am thinking of are
(1) The guy/girl you meet who is on his/her second or third post-college degree. They can't make up their mind as to what they are going to do with their life, amass debt (some are spending their parent's wealth), and many employers are turned off by the wishy-washyness.
(2) Ph.D. programs are on average more years of schooling than MD, JD, and MBA programs. But the latter on average make more money than the former.
(3) Some really, really smart people go into academia which on average pays less than the private sector. Also, succeeding in business often involves a lot of people/life skills which some very smart people lack (although it's overstated how many geniuses are social goofs). So some really smart people are forced into more isolated/academic lower paying jobs and some choose it because they don't want to deal with sucking up or being under someone less intelligent than them.
The nine very smart Supreme Court justices make about 1/10th to 1/20th of what many private sector lawyers of similar seniority and schooling make.
But yes on average post-college degree makes more money than college degree who makes more money than high school graduate who makes more money than high school dropout.
Oh my Supreme Court example reminds me that the intelligence/income correlation probably is really screwed up in DC with so many highly intelligent people in coveted political posts within administrations. Of course many earn tons of money once/if they leave those positions but probably they are not making enough to offset the lost earnings of the years in gov't.
TBW-
For the scatter plots I was showing the smart people in political posts would not really skew anything. They are very intelligent and are making a ton of money. Most of them are probably making 100-150, which few of us think of as a lot of money, but compared to the average person it is 3X.
Also on average PHDs make more than JDs and MBAs. You are thinking about JDs and MBAs from top 5-10 schools. Once you get passed the best schools the degrees are not as valuable, vs. PHDs are valuable across the spectrum. If you want I can find data that supports this. Also MDs are basically as long as PHDs, although the schooling is 3 years you have a residency after it which is basically still schooling
Cara-
Going back to your early comments about deflation. I agree I don't think it is clear yet whether inflation or deflation will happen. In the short term all you can really see it changes in oil and maybe food. The better question is what will it look like in 3-4 years. I still think inflation, but we will just have to wait and see.
I don't see how, but TBW, can you spin this negatively for me?
Link
I was just looking at a prime rate forecast, and it forecasts the prime rate going from where it is now at 3.25 percent, speadily rising to 8.25 percent in 2015, and NEVER GETTING BELOW THAT IN MY LIFETIME.
What will this do to house prices? I was also reading articles trying to equate interest rate changes to house prices through mortgage payment affordability--a favorite topic on here I think--and if you buy into that, it seems like a couple percent of interest rate increase in the next few years could mean $150,000 grand impact on price to get the same buyer, unless wage increases cover it.
If you have no downpayment, maybe locking in the interest rate now might be good timing. But if you have a good amount of money to put down, you don't want to see that dissappear with a house price drop, while at the same time interest rates rise which increases the monthly amount you are losing in interest income from the spent money!
That slide show shows forecasts of higher oil prices in the next 2-3 years and positive CPI for the same years. Doesn't sound like deflation to me.
I STILL say---PRICE SHOCKS (supply/demand shocks) is what we've seen briefly/lately, **NOT** deflation!
People seem to be resuming their house, car, food, etc consuming ways, and corporations haven't gone dark due to falling demand much more than any other recession. And NONE that I know of have cited falling prices as the reason for going dark.
On the other hand, I'm listening to Greenspan's book and there are some parallels with '87-92, so perhaps if the Fed ever tries to start raising rates again, perhaps we'll eventually see the cascade of weak bank failures that some on here have been warning about.
housebuyer: be careful. If we're thinking of the same data, they lumped JD's, MDs, and *clergy* together. That is my hunch as to why that group was lower than PhDs
Scott -
Nobody knows about interest rates. Nobody.
In July 2008, I predicted they would eventually eliminate mortgage interest tax deductions.
So, you are wrong. I predict "eventually" the sun will blowup into a giant gaseous bulb and swallow the earth.
I'll save this post and re-post after it happens.
contrarian, for society and for me personally, I hope they pass it. The societal benefits are obvious so no need to articulate them. The benefits for me: I think it will push down the prices of properties over $800K or so (maybe lower).
However, I think that this type of legislation has been before Congress throughout my lifetime and has never passed. So what are its odds this time around?
The current economic situation is more dire. The need for tax revenue is high, but there will be pressures from the real estate lobby and from certain homeowners NOT to do anything that could reduce demand for housing, i.e., if people can't get the loans they need for those $800K + houses, then they won't buy or pay as much for those houses, and there may eventually be price pressure on lower priced houses as well.
So I predict a greatly watered down version of the bill, but that one will pass, but don't feel confident in this prediction. What do you think?
"Robert said...
So, you are wrong. I predict "eventually" the sun will blowup into a giant gaseous bulb and swallow the earth."
Robert -- timing has never been a critical factor for Contrarian or the other Elliott Wavers who have been predicting the Dow goes 400 for 20 years now.
Another example, in addition to his usual glug glug glugging of the doom aid, in September 2008 Contrarian predicted:
"Home prices will not stabilize for quite some time as suggested by others above. Many, many years in fact."
https://www.blogger.com/comment.g?blogID=4787878578920468587&postID=8709089638581741921
I'm going to respond to the tax discussion in the next thread. I suggest we all move it there so people do not miss it.
Robert,
bursting out laughing. Did you put that in there just for me?
Anyway, that's not a prediction that's known. I'm pretty sure that G-type stars in older systems have already done that. If not, A's and F's anyway.
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