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Friday, September 11, 2009
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92 comments:
Condo owner finds out he's been living and renovating in the wrong unit http://www.kdvr.com/news/kdvr-wrongcondo-030509,0,6904039.story
Hi-
Hopefully no one has the deed to his condo. It looks like he will probably be able to have the county switch the number from 5 to 4 on his deed assuming no one actually owns 4. Otherwise that would really suck if he got kicked out.
Cara-
Thanks for the numbers. It really looks like the high end houses are still really stagnant especially the 1+MM. I wonder if this is a financing issue or whether rich people just don't feel like they need to accumulate as many houses or keep moving to larger houses...
Cara to follow up on your comment yesterday, I dont know if I will ever go away completely, and I will come back if there are more fireworks, but yeah, I as a non buyer dont find it as interesting anymore.
Thus for the buyers out there, if and when the day comes where you buy, if I am not here to say so, let me wish you good luck and congratulations.
Its funny, 8 years ago today I remember looking out my bedroom window at the black smoke billowing out of the pentagon, and the military jets thundering overhead. It was the 4th day after escrow closed and I remember thinking "I have just made the biggest financial mistake of my life".
Little did I know I was buying in the area with perhaps the greatest income runup in the US over the last decade. And I there is a lesson there in that some things truly are unknowable.
Still, by and large, the buyers on this board are some of the most conservative, most educated buyers out there. Thus, I have little doubt many of you will do well when you decide to purchase (or not purchase if you think thats right for you). So again, good luck to you all and if and when the day comes, congratulations.
Duplicated post from yesterday's bucket for ease:
Collecting Cara's approximation of CRT's usual list for how the high end is fairing this August.
price, sales, actives, MOI
Alex
700-799 9 41 4.55
800-899 3 31 10.3
900-999 2 14 7
1.0-2.5 5 48 9.6
Arl Cty
700-799 13 62 4.77
800-899 13 44 3.38
900-999 7 28 4
1.0-2.5 15 125 8.33
FFX Cty
700-799 80 258 3.225
800-899 35 154 4.4
900-999 27 149 5.52
1.0-2.5 57 604 10.6
PWC, Manassas City + Mannassas Park (PWAR)
500-599 29 96 3.3
600-699 4 66 16.5
700-799 5 32 6.4
800-899 0 34 infinite...
900-999 1 22 22
1.0-2.5 1 37 37
LOU
700-799 18 115 6.39
800-899 6 73 12.17
900-999 5 60 12
1.0-2.5 5 142 28.4
I added a couple more bins for PWAR, because you can get a lot of house for under 600k in PWAR, so I felt the over 700k gave a unfairly pessimisstic view of the region.
Arlington and Alex seem to be doing great this August, a great ripe time to sell an expensive home. I say that the slightly high MOI in some brackets is just small number statistics. Those inventories do seem really small, though I haven't made a MoM or YoY comparison.
FFX County high end was hopping!! Wow! No small number statistics to fight there, and everything under a million dollars was under 6 MOI! and 10 MOI for 1-2.5 is really not bad for that price range.
Loudoun and PWC nice move-up market is doing great, but the ranches complete with space for horses, and tennis courts were just non-existant in sales. I'd day this mostly means this was not a good year to try to sell that product. There's definitely the potential for some pain there, but it really depends on how many of those sellers actually have to sell. There's definitely the opportunity for a couple good deals for the mega-rich to get the country estate if they don't already have one, from whatever fraction of these people become more motivated to sell. But I think if the stock market retains it's gains, and stays above 8500, the fear should drain, and these will start moving again.
housebuyer,
I'd have to go back and look at the inventory numbers for Arl/Alex to see if those sheer numbers indicate "stagnant", i.e. low volume.
As CRT pointed out, over 700k either requires more expensive financing which may not be readily available, or it requires putting down a goodly chunk of change. That Arl, Alex and FFX saw so many transactions that _had_ to have had well over 20% down in the high end, I think is actually a really "good" sign, given the economy.
LOU and PWC obviously has more sellers regretting their purchases than it has buyers ready to make the committment to the grand country home this year.
Prices on houses like these are beyond my ken anyway, so I am loathe to make predictions. But I do think most people with multi-million dollar homes are aware that it takes a long time to sell them. It wouldn't take that many more sales for these numbers to look perfectly reasonable again.
Cara-
That is a good point. I was thinking the Fairfax, Alexandria, and Arlington numbers were high, but you are probably right that they are always very high. For those of us buying a 3 bedroom TH everything looks pretty similar so we can choose one quickly. I guess if you are buying a 1+MM house there is a much wider variety of houses so it takes a longer time to decide exactly what you want.
reprinting from CRT's August 10th comment, July's numbers were thus:
Arlington
7-800K 3.4MOI
8-900K 2.7MOI
9-1MM 12.0MOI
1-2.5MM 8.0MOI
Alexandria
7-800K 3.3MOI
8-900K 4.3MOI
9-1MM 7.0MOI
1-2.5MM 9.5MOI
Fairfax
7-800K 4.1MOI
8-900K 4.5MOI
9-1MM 7.9MOI
1-2.5MM 10.9MOI
Loudoun
7-800K 7.7MOI
8-900K 10.8MOI
9-1MM 18.5MOI
1-2.5MM 72.0MOI
PWC
7-800K 12.6MOI
8-900K 21.0MOI
9-1MM Infinite (zero sales)
1-2.5MM 31.5MOI
So that's improvement across the board really. modulo that blip in Alex.
OTOH, these are probably the most brisk sales are going to get all year. So, using August sales to judge how quickly inventory is going to get absorbed may be mmm questionable.
So if things slow in the winter (as they usually do) we may still see some decent price drops amongst listings. Or rather, amongst the subset of listings that can afford to drop their price.
Cara,
Are you using the MRIS inventory numbers, like 5273 Actives for Fairfax County?
"Little did I know I was buying in the area with perhaps the greatest income runup in the US over the last decade. And I there is a lesson there in that some things truly are unknowable."
My story is similar as well CRT.
We bought our Fairfax Co house 2 Months after 9/11 - had already signed the contract & couldn't get out & were scared as hell.
Sold the house in '06 and have been renting ever since.
Yes, some things are truly unknowable !!
Robert,
Yes, I'm just taking them off the individual pages from the MRIS website for each county. So I don't know whether they count "under contracts" as actives or not, I assume not... but I haven't looked it up. These are the same source as CRT had been using.
Cara-
The waiting game the bank is making you play on the short sale might end up for the best. The 10 year is now at 3.28%, which is the lowest since May and its about 0.4% better than just a month ago(isn't that when you signed the contract). Hopefully they will get back to you soon and you will be able to lock in these rates :)
housebuyer,
Thanks. The latest is that the negotiator needed to get a new BPO, because the one from mid-July was now obviously out of date (which is true...). They should get that next week sometime.
I think that still leaves the getting an actual appraisal step before the bank can even consider what they'd be willing to accept. But who knows?
It's all good. The longer we wait the more money we have saved up to spruce up more things from the get-go. And I seriously doubt rates will go above 6% before we're able to lock.
But you never know we might indeed get lucky. I'd like to get luck on price, rate and timing, but I'll take what I can get. (well, obviously timing and price both have limits...)
I'm feeling better today because there were three properties yesterday that I would consider if this one fell through. They're all now under contract, but that's fine, I'm not going to buy them. I just start to feel trapped when I haven't seen good options in a while.
From the ABA. Unfortunately I cannot load the WSJ article so I can't give more than what this gives on the anecdote:
Law firm partners, CEOs, investment bankers and other highly paid individuals are earning less, helping shrink the income gap between top wage earners and those with more modest paychecks.
In 2007, the top 1 percent of U.S. families—those making more than around $400,000 a year—accounted for 23.5 percent of all personal income in the U.S., the Wall Street Journal (sub. req.) reports. That level was last seen in the 1920s.
Economists expect the percentage to drop, so that next year the top 1 percent will account for about 15 percent to 19 percent of income. The result may be less money for the federal government’s tax coffers, a drop in demand for luxury goods and fewer large charitable donations.
Among the big earners profiled in the story is Darren Tucker, a 36-year-old antitrust lawyer who was making $400,000 as of counsel at O'Melveny & Myers. Earlier this year, Tucker learned he wouldn’t have a shot at a partnership in the near future, in part because of a drop in business. Worried about layoffs, Tucker jumped to a job at the Federal Trade Commission, where he earns $153,000.
Tucker and his wife, Anne, had been spending about $100,000 a year on treatment for their two autistic children. Now the couple has moved one of the children into public schools, and Anne is looking for a job as a substitute teacher.
$400,000 to $153,000 is quite a drop. I looked up his name in the Washington Post real estate and it shows someone with his name buying a place in Bethesda in 1999. While it's gained a lot of value in these past 10 years, it seems unlikely he'll move up to Potomac or Chevy Chase or a bigger home elsewhere with the substantially lower salary. One wonders if with that excessive $100k per year for the autistic children he took out a HELOC.
Oh yeah....gonna be a bumpy fall for sure.
:-^
Did someone say sell?
It's hard to look at the crowd and think "Yeah, folks are feeling *way* better about the economy...time to buy.
DC may be pulling the strings now, but that Wall Street puppet is damn sure doing its own free market choreography still.
TBW, I wouldn't put alot of stock in high income wage earners suddenly making less money. Everybody knows and has know since November that between them and smokers, they will be paying the taxes for everything the Obama Administration passes. Next will be doctors, small business, dentist, anyone that can "officially" cut pay will do so one way or the other. Nothing new here, this was the way was before Reagan. No one will work long hours in a stressful job just to pay taxes when they can cut back on pay and stress and still have approximately the same standard of living or keep pay.
Cara,
that REO went UC today!
i need a drink...
CRT said,
Little did I know I was buying in the area with perhaps the greatest income runup in the US over the last decade. And I there is a lesson there in that some things truly are unknowable.
Let's look at some of the richest counties in America.
Fairfax County (2000): $81,050
Fairfax County (2007): $105,241
Increase: 29.8%
Somerset County, NJ (2000): $76,933
Somerset County, NJ (2007): $97,658
Increase: 26.9%
Nassau County, NY (2000): $72,030
Nassau County, NY (2007): $89,782
Increase: 24.6%
I suppose our income growth was a little higher than those suburbs of NYC but not dramatically so.
Arkey,
I know it is a novel concept for a president to want to pay for things that they pass. If Obama started an unecessary war that was costing our country billions of dollars, I guess that would be fine by you. The grown-ups are in charge now. People who actually understand what responsibility is.
Also, go find a political blog, this one is about real estate.
Here is an article from 1988. I think housebuyer and a few others are long timers like here and understand that this has always been a rich area. Perhaps this will help the johnny come latelys...
Loving County, Tex., is the richest county in the United States, according to a new Census Bureau data book on cities and counties, with an average per capita income of $34,173 in 1985.
But that's because the population of Loving, located in West Texas, consists mainly of cows. An area of giant ranches averaging more than 23,000 acres each, it has only 100 inhabitants.
After Loving, the five highest-income counties or county-equivalents, based on per capita income, were Falls Church ($20,669), Arlington ($20,094) and Alexandria ($19,783) in Virginia; Maryland's Montgomery County ($19,589) and Virginia's Fairfax County ($18,731).
Article
Actually our area is doing worse now in per capita income. Falls Church (#2) and Fairfax County (#6) are now combined in the rankings at #14. Arlington has gone from #3 in 1985 to #13. Alexandria from #4 to #12. Montgomery County from #5 to #15.
So we are no longer the dominant area we were based on per capita income that we were in 1985. But the larger point is that this has been a well to do area for a long time.
Arkey, Great point. Obviously there is a huge drop in income between $400k and $153k, but if you are earning $400k, that last $247k of income is going to get hit hard in the next few years as Obama "spreads the wealth around."
What's the difference after tax? Not $247k that's for sure. After Obama is done with him probably something $125k or so with all the phase outs.
When you factor the job security and the banker's hours working for the FTC, it's conceivably a decent trade off.
Arkey,
I have no idea what you are trying to say. That law firm partners are trying to minimize profits? First of all, most of the law firm partners in DC are Democrats. They were some of Obama's (and Hillary's) largest donors and bundlers. Many are now serving in the Obama administration.
Law firm profits are down because there is less legal work right now.
Side note -- none of Obama's proposals or the House/Senate proposals come anywhere close to putting taxes to pre-1986 Reagan levels. From 1982 to 1986 the top marginal rate was 50 percent.
Robert,
Do you understand the idea of a graduated tax system? Why don't you go look up the definition? I will wait......
You see when you go up to the next tax braket, your income is only taxed at an additional 4% or so. Going from 35% to 39%, doesn't actually increase your tax burden that much as opposed to the person in the tax bracket directly beneath yours. It should not affect your decisions on earnings, especially the way the tax system is set up now. The top tax bracket currently is the lowest it has been in all but 2 of the last 77 years.
Man that must be one hell of a burden for those high earners to be paying the lowest tax rates in the modern history of the united states.
I will repeat what I said before. Go find a politics blog, this one is about real estate. Also, try to bring something intelligent to the conversation if you are even going to try and bring up politics. Not the tired "he is a tax and spend liberal." At least he isn't a tax cut and raise spending conservative.
Oh Robert. Even you are not stupid enough to believe what you wrote.
Current proposals are to bring back pre-2001 income tax on anything above $250k.
So only the top $150,000 of the $400k will be taxed at a higher rate. $97,000 of the $400k-$153k difference would have been taxed the same.
Between $250k and $372k the marginal tax rate goes from 33% to 36%. From $372k to $400k it goes from 35% to 39.6%.
The additional tax is $4948.
If Obama lifts the income limit on Social Security contributions to all income and then raises the top marginal rate; when you add in state and local income taxes and subtract all of the phase outs you would lose, the marginal tax rate for someone earning $250k will easily be over 50%.
CRT, to clarify my point yesterday...
I see these absurdly low interest rates, the likelihood of shadow inventory, and this current madness over the $8k buyers bribes as temporary bubble reinflators in the market. I believe that without them, we were certain to see another 30% drop in prices in areas I am interested in buying in (22030, 22031, Vienna). Those areas have been slower to correct, so don't think I'm implying that PWC or Loudoun were going down that much as well.
Nothing that has happened so far has surprised me, but none of it does anything to change the long term valuation and how much I would owe then, or my equity situation if I were to buy right now. Maybe I'd only be underwater for a few years, maybe still only breaking even in ten years. That is absolutely not an option for me. I refuse to join the millions who mindlessly follow their delusions that they're "getting a deal".
So that brings us back to the unknowns: When will rates rise? What will they do with the buyers bribes? Will the banks start really dumping their properties onto the market? Will FHA increase their down payment requirements as their loans are turning into higher risks?
As I see it, fully leveraged buyers will have a 25% decrease in how much they can buy (borrow) if rates were to go from 5% to 8%. That translates (to me) to an inevitable decrease in values up to 25%. When might or will this happen? Probably not any time soon, but given the normal appreciation rate of houses, that's a long time for any ROI.
I really hope now that the bribe has turned the market around, Congress will let it expire (yay, the market is awesome again!). But, I am cynical and well aware that nefarious organizations like NAR are really pushing Congress to extend or expand it. Extending really won't do much, it'll just let the buying craze slowly die out over time. Expanding it only reinvigorates the market if it includes investors, which is what I'm sure they'll push for. And, because I'm cynical, I think Congress could go for that. We'll find out soon enough.
We've all talked at length about shadow inventory, foreclosure tsunamis, etc. My position hasn't changed, and I somewhat expect that to happen in the near future. But I would never bet on that alone, so we'll leave as be.
I would be much more inclined to buy if the buyer's bribe disappeared and FHA loans became more restrictive (ie 5% or 10% down payments). I would really like to see a lot of these not-really buyers that are out buying be put back on the sidelines where they deserve to be, and the freer market to dictate the prices as houses become far less scarce.
Bottom line is that I think buying now is extremely risky. Many of the same poisonous bubble elements are at play here. Are market is "rebounding" far sooner than it should be by any given regional index. Many other markets are seeing the same thing. Of course, as I said, this does zero to change the long-term value of any house. Short-term manipulation to screw any careless buyers out there, and I'll have none of it for now.
Sorry for the long rant and delay in response.
sorry MM,
it was a good house. I'm not surprised. There will be others.
Robert,
Obama has not proposed to Congress that it lift the social security tax ceiling. Here are his tax proposals:
http://www.pgdc.com/files/grnbk09.pdf
Side note -- the 39.6% top marginal tax rate does not even come into play until 2011 under Obama's proposals. So Arkey and your crazy theory is bunk because the lawyer is not even taxed at a higher rate on his $400k yet!
Robert,
You can get your panties in a wad about all of the fantasy proposals if you want to. That is the problem with republican arguments right now, they are all fantasy. You pretending like Obama has proposed massive tax increases and all kinds of different scenarios. Until something actually happens, why don't you hold on to your fake outrage. Keep calling him a socialist for no real reason, laugh about it to all your friends, and then post some moronic takedown of his policies on this blog.
The grown ups are finally in charge. Just keep making stuff up, it only makes your argument stronger.
Whoa, touched a nerve. Never fails when I mention the Messiah.
Anybody seriously believe Obama won't lift the income limit on Social Security contributions? Come on.
cpa1 said...
"The grown ups are finally in charge."
I don't know how you can refer to people that spend such ridiculous amounts of (non-existing) taxpayer money with such utter disregard for fiscal sanity as "grown-ups".
TN,
interesting find...
kevin,
How bad are prices there right now? How does rent and buy compare if interest rates were 5%, 7%?
Neither I nor CRT think there's any harm in waiting. But there could come a point where the savings versus renting can cancel out any expected downturn from rates increasing. I'm guessing Vienna's not there yet.
I don't know about this whole ROI thing. Housing is an inflation hedge, and an alternative to renting. In order for it to make you money, you either need to be a landlord or use housing arbitrage (move to someplace cheaper). Since you normally have to live someplace, housing staying flat for a very long time is actually the best scenario for sidewards or upward mobility.
signs that housing may in fact be bottoming:
1) Harriet and Tabitha bought a long time ago.
2) We're discussing politics instead.
seriously, can we cool it on that? One of the things I like about this blog is that there are many different political persuasions on here, yet we can still discuss an important topic (housing) in a civilized way. Can we table the tax discussion?
Robert,
I am just trying to use facts instead of conjecture. You silly Messiah thing is just childish. All the idiots who said "American love it or leave it" back in 2002 were 100 times worse the way they talked about Bush and he could do no wrong. Where are those people now, when you talk of Obama?
Kevin,
The Bush tax cuts equate to something like $1.2 trillion dollars. He was the first president in the history of the United States to start a war without raising taxes. If you want to talk about spending money with utter disregard and doubling the deficit, look backwards about a year.
Obama is trying to use everything at his disposal to stop a recession. One of those ideas being that you have to make up for the lost production and decrease in GDP by increasing goverment spending. You can argue that this is bad policy or completely wrong, but I don't think you can call it utter disregard. He sees a problem and is trying to address it. Utter disregard is trying to start wars without paying for them, passing Medicare part D without any idea of how to pay for it. Allowing our heathcare system to sprial out of control without doing anything about it. I call those things utter disregard.
I will also point back to my original post.
Not a politics blog.
Real estate blog.
Hopefully that is simple enough for you to understand. I was just trying to point out your errors and move on, but I can keep whooping your ass all day.
Robert, the CURRENT marginal tax rates in that bracket, when all taxes are combined, are close to 50% already.
I'm with cpa1; let's have fact-based discussions and stick to housing bubble issues. There are plenty of political websites. In fact, you may stumble across some progressive websites that will offer you plenty of factual information you won't get elsewhere AND you may hear from some who believe that Obama is in the back pockets of big business and is doing far LESS than he should. Most people here are too smart to fall for baselessly scapegoating the current President for having to clean up the messes left behind by his predecessor(s), so those efforts are really not worth your time.
Now if anyone wants to rail again about the $15K credit for home purchases, I'm all ears...
Ace,
Now if anyone wants to rail again about the $15K credit for home purchases, I'm all ears...
I'm so praying that doesn't happen!!! I'm agnostic on the extension or lack thereof on the $8k, but please, please, no making it worse!!
A little bird told me (a commenter on IHB who says their realtor told them this...) that the FHA is planning to up it's downpayment requirements October 1st.
Now that would be music to my ears.
(file under the category of completely undocumented, unfounded rumors from untrustworthy sources)
But hey, if we're going to speculate why not speculate about real estate?
Cara, I admit I haven't read the "pro" arguments and may not have the ability to judge them if I did, but I have an aversion to the $15K and would like to see the $8K go away. I would like to see what would happen to sales and sales prices if the credits were removed from the equation.
Kevin, interesting rant about what will happen when the buyer's bribe expires.
I think many analysts, and persons here are wrong about stagnation (except for the winter housing market).
People need to recognize BRAC and the thousands of jobs that are being created in NOVA here within the next few years.
Couple this, with less and less stay at home Moms and you have dual-incomes becoming a necessity and prevalent (sadly this is not the case with me!)
Government employment is like a guaranteed mortgage payment. You cant lose your job, unless you are a total dirtbag, and fail drug testing or consecutive (not single ) DUIs.
Maybe someday our civil servants will have accountability. Until then, more government jobs and dual income leads us to reliable mortgage payments.
Of course, this frank caveat would not apply to the thousands of POS's in woodbridge and Manassas. Someone here said it best, lipstick on Pigs.
hey, look, i've found a piece of land to own in Arlingon 22207 for under 100K! endless possibilities!!! (to bad it's not near Metro...)
what would you do with it?
MM, I'm thinking you should build Arlington's first corn maze on a lot of those proportions.
cpa1,
Funny thing about people who defend outrageous spending that congress and the prez are raping taxpayers with: They use the Iraq war and George Bush as their first and only justification. This sort of partisan "one evil justifies another" nonsense is why nobody ever thinks their party is wrong, because the previous party was so much worse. And regarding the amount of spending that's gone on in the past year, Bush's irresponsible spending across eight years PALES in comparison. That 1.2 trillion in tax cuts is almost surpassed by the "stimulus" bill passed this year alone.
I'm well aware of the Keynesian theory about increased govt spending to make up for a sudden shortage of capital investment in the markets. What Keynes DIDN'T say is that while already under a mountainous debt, double down on it in the HOPE that it will fix the economy. The stimulus was crammed with every garbage agenda Congress has had on their minds for years, including ones that they just made up on the spot.
You really lowered the discussion by using Bush (of all people) to defend this outrage.
Cara,
Rent vs Buy is completely out of whack. I'm renting a 3BR SFH in Vienna for $1450/mo. Look at the listings and tell me if I can buy anything that falls remotely within that range. The govt needs to stop propping up housing prices and let the market correct. All they are going to achieve here is a Japan-style long slide downward, catching as many people as possible under what should be a quickly correcting market. I don't think the pain needs to be spread any more.
MM,
I vote for permanently parking an RV on it. I hear used ones are going for cheap these days.
cpa1 said...
"Hopefully that is simple enough for you to understand. I was just trying to point out your errors and move on, but I can keep whooping your ass all day."
I wonder who this was directed towards....
CPA1, grown-ups in charge? Are you refering to democrats? I'm confused by this because they have been in charge now for a few years, Presidents don't allocate money or funding, Congress critters do. If you object so much..take it up with the democrats.
TBW back to the lawyer. He wasn't going to make partner. Since the workload hours he carried was in anticipation of making partner, he proably didn't take much of a cut in pay as what it appears. Plus he has a demanding homelife, too. I read that as being a life upgrade for him, not a negative just because the dollars were different espically if those dollars are just going to flow back into Obamacare.
kevin,
that's a very inexpensive rental...
My 2bdr apartment in Kingstowne was $1604 before it got hiked up for the month-to-month...
Still, if ~$1500 is the basis, you need prices under $250k to run type of calculation I'm talking about where it saves so much money over renting that it's worth the risk of it falling further when rates go up.
One thing I've often wondered is around here, do rents go up with housing type at a reasonable rate? Because I've heard these low rents bandied about for SFH's before that aren't any more than apartment or townhouse rents, sometimes less. But I've always rented in metro-accessible areas, so perhaps I'm not pricing that in properly.
I'm not holding my breathe any more for the type of crash you speak of, but I will feel a lot more confident about any bottom forming once the props are removed.
Kevin,
How is talking about Bush, "lowering the discussion?" You mean using facts to combat your fake outrage? Let's talk about Saint Ronnie's expansion of the deficit. Where was the outrage then? Almost all of the deficit expansion has taken place under Republican administrations. I don't have to point to Bush alone as the torch bearer for those policies. The stupid teabaggers were fine with deficit spending when we had a huge war hard on, but if you want to use money to build infrastructure, that is blasphemy.
Can you please point out to me the garbage agenda that was put forth in the stimulus package with dollar amounts? I would like to see what you consider garbage. Also, saying that a five trillion dollar expansion of the deficit pales in comparison to what Obama has done in one year is just stupid. I'm sorry PALES in comparison. It makes it true if you capitalize it.
You can't defend Bush, then defend Saint Ronnie. Why was he able to get away with expanding the deficit without people making so much noise? Why won't the Republicans let the Democrats pass balanced budget amendments, or laws that say they have to cut costs somewhere or raise taxes if they want to spend more money? It's because they like to say they are fiscally conservative and then not actually back it up.
I'm not pointing to the previous administration as a justification. I am pointing to it to show how fake your outrage is. Ultimately, I don't care what Bush did, history will judge him and his policies. Obama is in charge of cleaning up not only the mess he made, but the mess the other Republican administrations made. All Bush did was hinder Obama's efforts to fix things because the deficits he ran up. Al Gore really looks like a kook for proposing the lockbox back in 2000 doesn't he?
cpa1
In case you haven't figured this out, kevin (and many others on here) aren't Republicans they're Libertarians.
(sorry if I'm misguessing your affiliation, Kevin)
Cara, you assumed correctly. Libertarianish, but generally more conservative or liberal depending on who is in charge at the moment (in that case, I'm a contrarian more than anything else=)
Cpa1, these partisan arguments bored me even back in college. I'm not on "your side" nor against it. Go fight with someone else, this isn't the place. And congrats for "kicking my ass," as you so childishly put it. Sorry I even brought it up, just thought the "grown ups" comment was hilarious.
Cara, you're right that my rent is pretty cheap. When it comes to important (expensive) stuff, I am obsessive about shopping wisely. I bought my 4Runner last summer when oil was around $150 and everyone was hucking their SUVs. Paid $13k for a car I had been waiting for years to buy, but the price was always above $20k. I guess that might explain why I'm so obsessive about buying a house. The 30 year debt commitment shouldn't be taken lightly. It's scary to think that seven years ago I bought without a thought in the world about it.
I think it's possible for prices to come down to (close to) what I'm paying in rent. Pre-2004, the old style Vienna houses were all selling under $300k. Pre-1999 they were selling under $200k. No reason they should have climbed to a half million dollars, let alone stay there. A bit cheaper out in Fairfax, which is where I'll probably end up.
I have a pretty solid idea in my stubborn mind where prices should be and what would be a safe price. I think some areas are like Venus fly traps right now. People see "hasn't fallen by much" as a sign of safety and I think just the opposite is true. I might be wrong, but barring any true fundamental changes in the areas, I'm willing to bet 30 years of mortgage payments on it.
Cara,
I wouldn't want to go much over 200K on a rental for cash-flow reasons. I do have more expensive places, but I've always found that once you get above a certain price point the numbers just don't work.
I was getting $1,350 foor a TH in Vienna back in the early 90's. I ended up selling it (big mistake!) in 1995 for 230K.
Kevin should go back and research the rent/price scenario for the 80's and 90's. I had a home that we lived in and couldn't sell in 1994. It was in a nice section of Vienna (Wolf Trap Woods) and rented for well below what the carrying cost would have been.
I don't know what Kevin is renting, but I am getting close to that number for a condo in Sterling.
Kevin,
Have you gone back to look at historical price/rent ratio's for your price range? Is your $1,450 rental similar to the houses you want to buy?
Va_Investor,
My rent is nowhere near what even the slummiest of SFH's in Vienna are listed for. Don't know the historical rent prices in the area. Just know that people are asking for no less than 15% under peak prices on their houses listed for sale, which should be close to 50% under peak (depending on where you place the market on what prices WOULD be sans bubble).
I really don't want that old of a house though. Really I'd like to buy one of the newer townhouses in Fairfax Corner area.
MM-
I think we saw that lot before and someone said we should buy an ihome and park it there. That way you can live in Arlington for under 200K.
Kevin that is a pretty impressive rent. I have not seen a place for under 1800-1900 that is reasonable to live in. So I think it is unlikely you will end up finding a place that compares to that value. It is possible we will get to rental parity with a 1900 rent though.
housebuyer, it's really barely border-line reasonable. If I didn't live like a care-free bachelor, it would be an unreasonable place to live in. But the price is right. I know it is exceptional for the area, but I've also seen on craiglist one for $1600 (a dump) and $1800 (pretty decent).
I have a place on a 4,000 sq. ft. It's not impossible. In fact, much of the subdivision is 4k.
kevin,
Those are impressively cheap deals you've gotten on both the car and the rent. I bow to your superior level of cheapness, you have surpassed me.
I do think $300k ish is an obtainable level for TH's or smaller older SFHs. Depending on your assumptions for tax-bracket lost return on the down-payment, inflation, etc. $260-280k would be "rental parity" for 1900/month rent. (i.e. including transaction costs, you can break even after 4 years, after which its all gravy).
I'm curious what your multiplier or assumptions are for rental parity. Are you requiring it to be cheaper than your current borderline place that you couldn't possibly stay in in the long term?
I'm curious as to the story about this house:
http://franklymls.com/PW6888826
On Redfin, it shows as having been on the market for 344 days, but not on Frankly. When we were inquiring about it last winter, it had already been empty for several months, and the realtor told us the owners had been transferred and needed to do a short sale. It went under contract in the spring, but came back on the market.
The basement is unfinished, but I am just curious why it is sitting, compared to all the other houses in Victory Lakes. Anyone familiar with the neighborhood have a theory?
Ace: House with 13,000 sq.ft. lot in Lyon Village in Arlington listed at $1.4 M sold with multiple offers and above asking price to an enduser who is going to tear down existing house and build new.
Cara: The FHA down payment requirement is not going to change but the upfront mortgage insurance premium is going to increase from 1.75% to 2% and the interest rate spread between a 3.5% down payment and a 5% down payment is going to increase.
Arkey,
The lawyer implied but for the recession he was going to make partner. Nor I'm sure plenty of people who were never going to make partner are being told the recession is the problem when in reality even if it were 2006 they would not be making partner.
That being said -- but for massive layoffs he might have stuck with being a counsel. Plenty of people make a career out of it and are happy making $400k. But even counsel are on the chopping block.
So I think the recession caused him to consider the FTC job.
Most people who flee law firms do it before they become counsel. I think he's someone who would have stuck with the counsel role in a strong economy. I actually think once the economy recovers this guy will ditch the gov't and go back to a firm as opposed to make a career with it. As opposed to someone younger who leaves and becomes a gov't lifer.
Robert asked,
Anybody seriously believe Obama won't lift the income limit on Social Security contributions? Come on.
I actually wonder what will happen with social security. There is no bipartisan spirit on universal health care and I think the Republicans might sit out any social security reform (unlike the congressional Democrats who worked with Reagan in the 1980s the last time they reformed it.)
I just can't imagine Obama + the Democratic majority in Congress wanting to push through some combination of payment decreases + any tax increase + increasing the retirement age all by themselves. Unfortunately I think they will kick the can down further. There's still decades time before social security cannot pay full benefits.
Donovan said,
People need to recognize BRAC and the thousands of jobs that are being created in NOVA here within the next few years.
I think last time I saw a chart a lot of the BRAC jobs were either intrastate (Crystal City to Fort Belvoir or some other VA to VA combination) or MD to VA.
I suppose on the margin a few people might move from MD to VA but I'm skeptical of that given how congested the American Legion and Woodrow Wilson Bridges are during rush hour.
anielarke,
cool thanks, I wasn't aware of either of those, turns out the rumor (which I was mostly throwing out there for fun) was actually just a restatement of something we knew already which was that as of Oct 1, HUD was going to re-evaluate the compliance of all condo projects. HAve you heard anything about how that's going to be implemented or how it will effect condo loan completions around that time?
(in Cali, their assumption was that none of the condos would re-qualify and hence that 15% would be required under other auspices)
Still, making a higher interest rate for the minimum downpayment is definitely a step in the right direction, I think we can all agree.
Still, making a higher interest rate for the minimum downpayment is definitely a step in the right direction, I think we can all agree.
Well most of us at least. :)
Here's my armchair theory based on anecdotes (talking to some friends). If starter homes in the area were still in the $200k range as they were pre-bubble they would be okay with saving up 20%. Saving up $40,000 is hard but doable. Many people can save up $10k a year ($833 per month) for four years (or $8k for five years ($666 per month) and so on.) Many will come up short every couple of months because "life happens" but after 4-5 years they will probably get to at least 15%.
But when many starter homes are in the $400k-500k range (although thankfully fewer in the $500k range these days) it just feels hopeless. They don't see much hope in saving up $80k-100k. So they don't even bother.
Change your definition of starter home.
Finally, this must be the real estate crash everybody has been waiting for.
Cara: Oops, forgot to mention the condo piece. The entire condo will now have to be approved so that there can no longer be spot approvals for individual condos in a non-FHA approved building or community. However, the lenders are now going to be able to do the paperwork for the condos so this should speed up the process. This info is from a former colleague who is working with FHA on the changes. I think there is something bigger afoot with some type of uber-agency be created from Fannie, Freddie and FHA/Ginnie Mae which will pull Fannie and Freddie back into tighter government control. I use to follow this more but now just hear bits and pieces of info.
My rent is nowhere near what even the slummiest of SFH's in Vienna are listed for. Don't know the historical rent prices in the area.
From January 2007 until June of this year we could not find a decent SFH for rent in the Vienna area for under $2400/month. Vienna means Tysons along 123 but before Oakton.
We looked at over 75 homes. Two were acceptable to our criteria. The old rent was $2500/Mo for a split level in Tyson's Green. It was only available for one year. This year we found a deal. Less than two blocks from the W&OD, 3BR/2BA for a longer term lease. The area is inside Vienna town limits. Since we signed, four more home under 2K/Mo. have popped up in the same general area.
One is a dump. It hasn't been lived in for more than 6 years.
So yeah, rents are falling and I have the same fundamental issue as Kevin. Pay rent and save, or buy and enjoy a >70% increase in montly output to change over to owning a +40 year old home vs. renting.
I've planted my flag. There is no way I am risking my families financial future at this point on giving someone else equity that should rightly be for the buyer, not the seller. That's what skewed here in this area. The equity transfer is future equity that was brought forward by 10 years give or take if you believe the Shiller data, and I do.
My opinion.
Finally, this must be the real estate crash everybody has been waiting for.
Robert, I can't tell if you're being facetious. But, tell me, who is going to lend that money at 4.97%?
Cheap money is cheap money. But if I were a bank and looked over the RE landscape of America I would have to say to myself "I think I am done lending money at 4.97%".
Haven't there been enough articles about TARP 1 money not making its way to distressed homeowners? If banks won't lend to bail out upside down mortgage holders what makes us think they will open the floodgates of lending to step back in the market when rates are even lower?
Or am I missing the forest for the trees?
I thought the point was to lend money at the highest possible rate, not the other way around. Haven't they hit a home run with all those Alt-A & Option ARM suckers out there?
Don't comment much anymore due to time . . . but it's good to see some others of like minded ideas (umm kevin). Not sure how long you've been on board, but I think just along those same veins. I thought about buying an SUV last year . . . but I just couldn't convince myself I needed it.
I am a libertarian also so I'll jump in on the political commentary (just a few). I find it interesting that cpa1 is the one who makes comments about keeping politics out of the board and yet seems to go on and on about politics while most others write a short blurb and move on.
I agree w/ kevin, if (when) we as a country wake up and realize both major parties have sold us down the river while trying to convince their followers the other side is worse, we might actually be able to fix some of the major problems with this country vs. passing it onto the next president/generation/sucker. But I'm not holding my breath on that one!
On RE (warning, warning bull trap ahead, bears going in!!!). Okay not really, but I did a little bit of fundamental analysis today and my conclusions were interesting.
1st off, I think there is no way in hades that RE overall has bottomed. However it might be possible that some of the lower end in some areas is at it's nominal bottom, and that fundamentally some of those places might have value at their current price.
I'm seen some places in the areas I'm looking at that are reasonable and some that might have value at their price. If the 8k buyer's bribe wasn't in place, I'd be a little less worried. There are a couple of things that really prevent me from going much further than that .. . and I'm still worried.
It comes back to basic economic fundamentals. If an artificial ceiling is placed on a good a shortage in that good develops, if an artificial floor is placed on a good a surplus of that good develops. Generally, once a ceiling/floor is removed the market can clear it pretty quickly b/c most goods are extremely consumable (i.e. only good for a short amount of time). Now in this case you are giving people money, who of course are leveraging up . . .etc. I do find interesting that the increase over the past 4 months or so is ~2.5% (don't have the exact #s), but it roughly equaled a little more than 8k! There ain't no free lunch! The lesson learned here is that when a stimulus comes out ("free money") either be the 1st in line or wait until it goes away.
In addition, in the history of bubbles, once the bubble burst the good that was bubblized?? becomes extremely cheap and for long periods of time. The most basic reason is that a good portion of the price increase was due to speculation and caused more supply to be brought online than was really needed. Did that happen here . . . only time will really tell, but man I've got to imagine so b/c some areas look like the homebuilders were building as fast as they could build to sell them . . . and people weren't moving here THAT fast!
A huge discrepancy also exists between mid-range and the low end. Where I am looking it is quite dramatic (i.e. mid-range people are trying to sell for '05-06 prices while low end has dropped at least 30%. Seriously out of whack.
I also did an analysis on a location that was last sold in '78! Using CPI's inflation adjusted calc. they were still overpriced by a good 60k and this was even after a 30% drop. Sorry folks homes depreciate the only thing that could possibly appreciate is the land . . . and land in that area isn't that much more desirable. I won't mention the other analysis I did, but after working the #s even I was shocked w/ how massively huge this housing bubble really was.
As for rents . . . well my goal here has always been to rent for <1k/month and I've always done that and rents have gotten cheaper over the past 2-3 years. And no I don't live in a crackhouse (although before my son came along it was debatable).
VA, I'm sure you know what you're doing, but if rents in Herndon/Reston don't drop by 10-20% I would be shocked. I actually considered buying a place and renting it out (a renter landlord. . . weird), but I don't want to be in that business. For me, there are better ways to make money . . . . However, if I had bought, one of the 1st things I would have done would have been to undercut the 1350 3/2 bath condo market by 100-200. I'm just saying, I hope you've got some cushion, b/c some of those "investors" have got at least a 100-200 cushion to slash rents.
The biggest ? for renters and what some renters have not/did not grasp is when you rent, you rent as cheaply as you possibly can stand and bank your savings . . . wisely!
And finally, unless you are investing for cash flow . . . why in the world would you want HIGH home prices. Isn't that like saying you want high car prices. I mean really, really think if housing cost 10% of the median income . . . my goodness you could do so much more with your money . . . go on more vacations, retire earlier . . . buy more crap! Only in our perverse universe do we think high home prices are good and high stock prices are good. We want high prices so we can pass on our stuff to the next sucker who comes along and cash out. . . a perpetual ponzi scheme . . . when if we had just saved our money and bought what we needed we'd all be better off vs. leveraging up to sell our overpriced crap to the next sucker. Instead of actually trying to be more productive we try to make our wealth off a structure that rots! //rant off
I see that I missed the political part of the thread... but I just want to take a second to state clearly for CPA1 what exactly he/she did to make themselves the fool of the day.
You have fallen into the standard cheerleader view of politics.
"Your" team versus "their" team seems to be the only way you can discuss or conceptualize issues.
"Your" team might be doing something wrong but "their" team is always worse.
etc etc etc blah blah blah
Just imagine for a moment that there might be people who are neither "Republicans" nor "Democrats" and do not feel an obligation to leap to attack or defend either party with/from a laundry list of past transgressions...
Perhaps there are people out there that oppose irresponsible spending by EITHER party. I know I know... hard to believe, but try to stay with me here...
What if there were people who thought Bush was wrong to vastly expand deficit spending but ALSO believe Obama is wrong to vastly expand deficit spending?
Is it possible? Could there be such people?
No, probably not... Anyone that disagrees with Obama must necessarily have loved Bush and agreed with all of his positions.
Sarcasm off for a second... I am at a loss to understand what either party has ever done to engender such fanatical loyalty from some people.
Both parties include a bunch of absolute dirtbags and this kind of partisan thinking doesn't even fit the US political system. The US isn't a parliamentary system. You aren't voting for a party! You are voting for individuals in single member districts.
Why is it so hard for people to recognize that? Is it so crucial to some people's identity for them to have a "team?" Are they simply unable to form opinions on a case by case basis?
Personally I believe it is primarily a failure of civics education and of our media. Too few people understand that their interests are best served by actually thinking and coming to informed positions rather than just viewing everyone/everything on the basis of its party affiliation.
Anielarke, I guess we are both surprised that someone would pay so much, since builders and you all passed and it was priced well above comps. Someone must be planning to build him/herself quite a mansion and REALLY wants a big back yard, maybe for a pool.
I have noticed that ramblers on big lots have gone for relatively high prices over the past couple of years. I think Arlington may have to revise the stance they usually take, with regarding to valuing (non-subdividable) larger lots only a little bit higher than smaller lots.
gte,
I am very impressed with that rent. Can I ask where you found such a rent?
I agree with your concept in principle, but I couldn't execute it. I needed to rent something "nice" enough and convenient enough and large enough that I didn't hate it every single day. I needed to be comfortable enough that I didn't feel compelled to buy for the wrong reasons.
Then again, what we'll be buying is something that if we ever have to drop back to the 30 year payment will be a good $400/month cheaper than renting. And even the 15 year payment is one that we can very comfortably handle on one salary (since its lower than our current rent, and my husband's whole take-home paycheck goes into savings right now).
So this bottom for the low end properties has been created somewhat by the manipulations, but for the property we're buying I think a lot of other people will see the same value in it that we do, and it won't drop too much further when those supports are removed.
I'm with you all the way on the concept that housing only costing 10% of takehome would be fantastic. The place we're trying to buy is the minimum that will suit our needs and that we won't feel compelled to leave ever (barring life events that we can't plan for). But what it represents? The best thing about it? Is financial flexibility, the freedom to spend our money where we want to, the freedom to go part time, or switch careers, go get more degrees for whatever reason, and most of all keep saving like demons.
We could get something even cheaper, it's true. But you do have to like where you live.
thanks for the inside scoop as always anielarke.
That makes a lot more sense than the take the examiner had on the condo approval change. The examiner thought, oh, now that the banks will be doing it themselves, they wont' want to be held responsible, and will just drop doing condos altogether. Which seemed, mmmm, unlikely to me. I think it makes a ton of sense that an entire project should be judged compliant or not, because the values and added costs will all be tied together.
Hey Robert,
You're going to keep keeping an eye on that for me, right? If you're not too busy, can you keep track of which lenders have the lowest rates for condos in VA, conventional 30 year? That would be awesome. Just finding a couple of lenders who stick close to that zillow national number would be excellent. :)
Ace: Shocked is more like it. I stick to lower end Arlington flips and condos, so I had no idea this was such a special chunk of land. It was brought to me by someone who knew the owner, so I never asked my agent about it. When I asked agent to get the info about it when it was mentioned here and then told her I passed on it, she went crazy that I didn't take such a great deal. Live and learn....
Well, anielarke, it's possible we've learned it's a special piece of land, but it is also possible that someone is a real chump. We've seen many instances of the latter over the past few years.
ps anielarke, I wonder if anyone's asked Arlington about a pipestem approval. The lot looked deep enough for that although I don't know if they allow it anymore. If they do, the new buyer could build 2 big houses, one for him/herself and one to sell, which might account for the premium price ($650K-$700K for a 6500 square foot teardown or lot is not out of line for Lyon Village comps).
Lyon Village seems to have shot way ahead of other parts of N. Arl. this year, though until this sale the difference did not seem nearly so big. But again, this particular sale could be an anomaly.
That same $1.4+ mill. might buy you this nice house on a smaller lot, a few blocks away but still seemingly in a good location within Lyon Village:
http://franklymls.com/AR7122601
Ace,
Darn you and your drool-worthy houses!!
(who's list price is like 8 times what we're willing to pay for a roof...)
Cara,
I don't know if you'll find this interesting, but it is a counter for people requesting mortgage quotes on the Zillow site (look to the right):
Zillow Real-time Mortgage Quotes
Haha, Cara, you know what's funny? If you and hubby don't spend most of your $ on family over the next x years, you could easily afford a house like that then. More easily than a lot of people probably currently looking at it.
Robert,
Those are some really great quotes....
Is it silly of me to be wary of getting a mortgage broker in Atlanta for a home in NoVa?
Am I just being silly?
Because those are really good, and quite a bit better than the quotes from any bank that we already have a relationship with...
BRAC:
I agree that the total long-term employees moving to Belvoir will be mostly cross-county moves. Still, the near-medium term stimulus to the region because of the construction is significant. The total cost of the program is $5B and they have to complete it by 9/15/2011.
Cara,
Well, we live in the Internet era, so buying a mortgage on-line to save money only makes sense. Since on Zillow it says they work with 3000+ lenders, I doubt they do any screening at all. That would make me uncomfortable. I'm sure you've been researching it already. If you ask me, any 30 year fixed rate mortgage with a 4 as the first number is pretty incredible and who knows how long it will be like that.
Robert,
30 year with a 4 in the front is totally amazing. For our case with a condo, there were only a few quotes starting with a 4.
I haven't researched it much actually. (I know penny wise and pound foolish) But the loan amount is so small, and rates are so good now historically that I was just going to try simple first and go with a bank I know and trust.
There's no point in locking now, before hearing back from the seller's bank, since we have no idea when we might close.
But it's definitely time now to do the legwork, such that one the day we hear back, we're already ready to go with requesting quotes. And zillow seems like one darn good way to do it.
Cara,
did you check amerisave or something like that? Given the fact that you will most likely prepay your mortgage very fast you can get a really nice deal there with a 5/1 or 7/1 arm, it is something like 3.25% for the fixed period (is your bank covering closing costs?), can be very good deal for you.
Cara,
did you check amerisave or something like that? Given the fact that you will most likely prepay your mortgage very fast you can get a really nice deal there with a 5/1 or 7/1 arm, it is something like 3.25% for the fixed period (is your bank covering closing costs?), can be very good deal for you.
konstantin,
I looked into 5/1 7/1 ARMs and the rates are indeed tempting. But bringing it up with my husband he thought I had been replaced by an alien. The security of being able to fall back to the 30year payment if necessary without potentially opening ourselves up to huge interest rates later while still carrying a large balance, is the right trade for us. No amount of me running the numbers was able to convince him otherwise.
If I felt confident that we were definitely going to trade up in 7 years I'd do it. But I think we're more likely to live here for the long haul and save up for a vacation/retirement home.
Cara,
Your thoughts about a weekend place are well worth considering. Ours has been such a big and wonderful part of our lives for the past 18yrs that I really couldn't imagine our life without it.
We made some trade-off's (living below our means house-wise, ect.) but we had already made many in accumulating the rental properties.
FWIW; our first place (1987) was about 3.5 hrs away and the drive home was a killer. We found Sunday useless due to the packing and driving. We decided to get something closer to home.
We got a 50 mile radius map of DC and proceeded to check out every body of water within that distance.
We have a commute of 1.5 hrs max and it makes all the difference in the world. I can't fathom driving to the Outer Banks, Ocean City or Smith Mountain Lake as many of our friends do.
We certainly aren't in The Hamptons (in fact, we call it the Red Neck Riviera), but the people are friendly, there are lots of kids and the view is to die for.
Va_investor,
Yeah we haven't decided mountains or water yet. But keeping the drive under 1.5 hours, 2 tops is key. Otherwise it can't be a weekend place, only a vacation spot. We'd definitely consider the plan my parent's friends did of renting it out in season for the first ten years of ownership to pay off the mortgage before really taking advantage of it ourselves. It depends on the prices of buying and renting when the time comes to consider buying.
(we can always carve out part of the season for ourselves)
(I think our kids are going to want to kill us for being such cheap-skates)
Cara,
We had that mountains vs. water thing going on for a couple years. I grew up on the water and I am a pisces and, yes..well, I won that argument. My husband wouldn't go back, ever, to his thoughts of the mountains. We both love the water.
As far as your rental plan, we were fortune enough to be able to afford our "cottage" outright. We did, however, buy a place down South (Naples, Fl) as a future retirement place. It has been rented for 16yrs (in season) and trips down there are tax deductible.
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