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Friday, September 18, 2009
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80 comments:
Now here's a move-in ready seller that I can respect.
They bought in 2004 for $320k ($700 subsidy probably for things found in the inspection at that amount). At a price of $320k in 2004, I can guaruntee, none of the updates that are currently seen were there at the time. Not a chance. So they bought something relatively inexpensive and tricked it out to make it exactly what they wanted it to be and are now selling, listing only $5k above their purchase price without including any of the money they poured into updates. I sincerely wish these folks well. It's pricier than I'd be willing to pay, but I like their upgrades and I think someone else will to:
http://www.franklymls.com/FX7161087
Best of luck liberty bell sellers. I hope this sale means you've found a bigger and better home to stay in for the long term now that prices have come back down to earth.
Cara, that seller is on the redfin forums. Apparently some of the renovation costs were paid for with Jeopardy winnings! They said they have already received a full price offer w/no closing costs but are waiting to see if something better comes along. Also, interestingly enough, redfin wanted them to list at $270k, so they ended up going with another realtor.
Jason,
very very interesting.
Redfin was on crack-rock. Move-in ready has been going for over $300k all summer. Usually $350k (though not in this subdivision). I think the Redfin business model just doesn't do well with anything under half a million bucks. And that suggested list price was just a statement of we don't want your business.
JMO.
They might get over list. It could happen, but it's not listed at a bidding war price. I wouldn't wait too long if I were them and risk alienating a good solid buyer. I'd say give it the open house, request all offers by Monday afternoon and decide.
Hi all. Our house is under contract. 10k above asking and we had multiple offers. Only 2 were conventional (the others were FHA). Only contingency is the appraisal.
Any appraisal horror stories? Or success stories? Our place looks great and almost everything major has been updated in the last 5 years -- but very little has sold in our neighborhood so comps may be difficult. Also the houses that did sell around us were not as updated. I'm guessing it depends on the appraiser.
I thought "under contract" was supposed to be a happy time :) :(
Staying Put,
You thought under contract was going to be the happy time? :)
Best of luck. All you can do is hope, and remain flexible and constructive. If the appraisal comes in way low due to it just being crappy, be ready to assist by paying the $500 for a new one if allowed. If the appraisal comes in at list or only slightly higher than list, not the full contract, put some thought into how you're going to deal with that and meet your buyer part-way.
But Congrats! One hurdle done. And you can't get 10% over list unless someone puts in a contract for it, so be happy that you're at least getting an honest shot at that price.
WaPo on the state of the FHA and what they plan to do about it.
That the FHA reserve fund was going to go under the 2% required by Congress is old news. But here's the new news:
But Stevens, who became FHA commissioner in July, said these options are not on the table. "We are absolutely not going to Congress and asking for money for FHA," he said. "We're not going to need a special subsidy or special funding of any kind."
He stressed that the agency plans to take other steps that will help beef up the reserves. Some of these measures address fraudulent loans that can contribute to FHA's losses.
For one, he will propose that banks and other lenders that do business with the FHA have at least $1 million in capital they can use to repay the agency for losses if they were involved in fraud. Now, they are required only to hold $250,000. Second, he will propose that lenders also take responsibility for any losses due to fraud committed by the mortgage brokers with whom they work.
In an effort to reduce the risks faced by the agency -- and thus the potential for losses -- Stevens said he plans to hire a chief risk officer by the end of the year. The agency has never had one in its 75-year-history.
Though these changes were in the works before the FHA reviewed the new audit, he said the steps should help fatten up the FHA's loss reserves faster than projected.
Push-backs, that's their plan. Not a bad plan at that, if enough of the FHA loss claims can be denied.
Will it be enough to get them through this rough patch? Was the audit done with a realistically pessimistic scenario? I don't know.
Stayinput,
My mother had a bad appraisal experience about 18 mos. or so ago. Nothing had sold in the exact development (Reston at RTC) in the past six months. She had two offers in two weeks that were for almost the same amount.
Right after she had listed, a complete dump in the neighborhood went UC after about 200 days. It was the "bad" layout, backing to other units, a mess inside, etc., etc. Unfortunately for us, it closed 10days before my mother's place was to close and got included in the appraisal and was, in fact, the "best" comp.
New hardwoods, tile, carpet, paint, granite, lay-out, terrific large deck and beautiful walkout to stone patio and lot backing to trees were irrelevant. Having one unit that sat forever and another with 2 contracts in two weeks did not matter.
I told my mother she was stuck. Neither buyer would go above appraisal. Appraiser's were running scared. The (my?) concept of FMV went out the window. I doubted that a new appraisal would be much different - so she came off her price by 17K. If she didn't, chances are she would be facing the same thing on the next contract.
If the only "real comp" is a fresh one, two blocks away in the same subdivision, the seller is screwed.
That's great news, StayingPut. I hope your contract time is very short.
Jason, thanks for playing the role of anielarke today! It's a shame they will lose money, wherever it came from, on the deal, but they have plenty of company.
Looks as if Redfin wanted them to list low for a quick sale and a sweet, painless commission. Didn't they realize that Jeopardy winners are smart? Must've confused them with Deal or No Deal winners.
Ace,
Well, Redfin has a funny selling business model. Their commission is a flat rate regardless of sale price. Which sounds great, if you're selling a really expensive home. Except if they pull stuff like this. Because they literally don't care what your home sells for, just that it sells. And in fact, if they get contracts over list, they'll brag about that too. The fact that they get so many contracts over list is actually a sign that they are underpricing the homes, but no nevermind to them.
Seriously, good-condition REO's with no updates sold for near $270k in that complex. They're on crack-rock.
Cara, but that's why I am saying Redfin WANTED their business - they want selling prices set low for a quick sale, rather than to work hard for a commission.
Redfin was the dummy here for not realizing that the current listing price IS low for what the buyer would be getting.
Ace,
Fair enough.
I use the phrase "didn't want their business" in the sense of, obviously if they had really wanted the business, they would have put in enough thought to know that a list price of at least $315k was warranted and would still generate a lot of offers and possibly even a bidding war. And it wouldn't have been so insultingly low as to lose them their commision.
Cara, agreed.
Although it's obviously not true for all Realtors, it's true for a lot of them that I've run into: a RE attorney once said that RE agents know less about their profession than anyone else he'd encountered.
Ace,
LOL! Been there. There are very good agents and the other 95%...
Well, if the parents of a *celebrity* once lived there, maybe I should too! At least the unit doesn't have graveyard views.
AX7134480
.
Oh, I love this 'California' (whatever that means) contemporary house even though there's no interior pictures.
Do contemporary homes usually don't have a basement? I don't really care, just curious.
So if started with my bid at $500K I'm actually saying I would go as high as $533K, right?
MM-
Yes you are probably saying that, but if the house has only been on the market for a day you may want to come with a stronger bid. Because if they get a couple of bids above yours they will most likely not give you a counter.
Cara said,
The rest of your argument boils down to "if everyone in NoVa wanted what I want from my life then no one would buy where I don't want to buy." Count your blessings that they don't.
Actually one of my fears is that a lot of people on here seem to be looking where I want: central Fairfax County (Vienna, Oakton, Fairfax). There seem to be a lot of us.
I rambled so I was not very clear but I do think there is a lot of demand for urban (downtown DC) or semi-urban (Arlington, Bethesda, etc) life, especially among 23-34 year olds (much higher on the earlier end than latter end).
But it's a limited shelf life. With non-crazy lending standards (10% DP at least) most of the 22-34 years are years someone cannot buy. By the time they save up enough to buy and have enough job security/income growth they often are 27 or 28 or so.
And if they think *the only smart purchase is one that I will hold for 5+ years* (not a thought people had during the bubble), then many will say this 1 BR condo is too small for the upcoming 5+ years. So they don't buy it but buy a TH or SFH either then or later in life.
There are *some* of course who will be happy living in a condo from age 25-80. I think they are very limited in number. That's why I called it a niche, niche market. Most people are only willing to exchange that little space to live somewhere really exciting -- like Manhattan. Ballston and Clarendon are nice places but they do not have the cultural amenities that Manhattan has. And they are not oceanfront property.
Outside of crazy years, most people living in a condo are renting! I bet pre-bubble most of the condos in Fairfax County were 80% investor owned. I suspect slowly many of the condo buildings Va_Investor is looking in are becoming investor owned. This limits condo prices because investors are not going to bother unless rent covers PITI. Condo prices go up because rents go up. That's how it will work IMHO. Any Arlington condo who cost is well over the rent is going to go down in price.
Although it's obviously not true for all Realtors, it's true for a lot of them that I've run into: a RE attorney once said that RE agents know less about their profession than anyone else he'd encountered.
Because the barrier to entry is almost nil. High school drop-outs welcome.
Robert isn't kidding. I've known some that were all but illiterate. And no, that's not hyperbole.
Having said that, I've met some that are exceptionally intelligent.
Probably the best statement that could be made would be that the term Realtor (tm) should not be considered a stamp of quality assurance.
MM, housebuyer
I concur, if you actually don't want to pay more than $532.5k for it then either, you shouldn't be bidding in the first week it's on the market, or you should bid closer to your point of pain.
If the interior lives up to the description and the exterior, then it may go quickly. They've priced at exactly the 2009 tax assessment which seems a fair starting point.
A $500k bid, doesn't necessarily mean you're willing to go all the way up to the half-way point, but it does say that the highest you might be willing to go is the half-way point. Basically that that's the best they can have any hope of getting from you.
$510k or the nearest round number that's close to 10% off list, is probably the lowest that might get consideration early-on in the listing's lifetime. 5% off is more likely for the first week.
But go see it, see if it lives up to your expectations.
With the prospects of ever increasing energy costs do people on this blog ever consider the suitability (orientation, usable roof space) of a home to install a solar PV or solar thermal energy systems? How do energy efficiency improvements to the property compare in your decision?
I realize that Virginia has very little in terms of incentives available to homeowners for these types of investments, however, times are a changing and energy is likely to become a increasingly important factor in the affordability equation for homeowners.
tbw,
Condo's historically are not the best housing "investments". That said, if the numbers work for me, they are terrific. Little maintenance worries and upkeep. The key, of course, is getting good long-term tenants. I've had people stay over ten yrs. This is the Market I target.
I don't worry too much about price fluctuations, just getting properties paid-off.
Some condo owner's are lifer's, others keep the place as a rental or sell to move-up. Condo's tend to get hit the hardest in a downturn and take-off in a heated market. There is a pattern to the madness, but one has to be prepared to be priced-in for years.
I can easily see a 25yr old staying for 8 or 10yrs. I can also see a 50yr old renting for 15+ yrs. I agree on the one bedroom. They are too limiting. I do have one that is rented to a single mid-50's person who is going nowhere anytime soon.
As for me, I'd go with living in a TH (all things being equal). But I'd look hard at condo's with rental parity or close to it.
Jaime,
I'd love to have the luxury to take such things into consideration, but you'd need more than a TH to do it, so it's out of my price range.
(my dream home would have geo-thermal heating).
tbw,
Yeah that makes a little more sense, but as Va_investor is saying (wow, what's going on we agree twice in one week!) a lot of people buy condos as soon as they are at or near rental parity with the plan of renting them out 5 years from now when rents are presumable higher, and starting their own mini-RE empire. If it's a really well located condo, it's not a bad plan. Which means they don't actually have to cash-flow positive at any given time to attract this type of investor.
So condos that are at rental parity, aren't exactly like the rest of the real estate market with respect to the 5+ years rule, because there are no new transaction costs, just landlord costs.
So, I would say that well-located desirable condos never have to get all the way down to "cash-flow-positive from day 1" in order to find a bottom. They may have to be cheaper than renting for renters to get fed up at paying more to rent than they would to own and therefore get motivated about becoming landlord's themselves, but it doesn't have to be by much.
RE agents are by definition retarded. I've never met anybody in any profession that lacks all self-awareness like that of an agent. I mean, if you go to buy a used car, there maybe a 50/50 chance that the salesman knows that his profession is not regarded highly, and all of the stereotypes played to it. Very few are like Bill Paxton in True Lies.
RE agents, on the other hand, are more like 1/10 having ANY self-awareness, and only a small fraction of those being aware enough that their industry is a complete scam and robbery of their clients.
The vast majority are cool-aid drinkers, and just repeat the rubbish that their capo brokers and NAR tell them. Any attempt to shine light into their empty skulls makes you a nasty and negative person. They are in their own universe, a bubble of protection around them because of groups like NAR and the cartel control of the industry they have.
TBW,
One thing I've heard you mention a number of times is that this area has always been wealthy. I don't disagree. If true, there must be a very high concentration of wealth in the area. I'm talking about net worth. Wouldn't that have a significant impact on home prices?
Aren't Silicon Valley prices high because of net worth and not so much as standard income levels?
Compare it to somewhere like Detroit, MI where workers are more likely to live paycheck to paycheck.
Va_Investor,
I can easily see a 25yr old staying for 8 or 10yrs.
With regular lending standards (even conditions I view as loose like 10% down payments), I just don't see many 25 year olds being able to buy a condo.
Let's use this condo as an example. $315k for a Reston Town Center condo (and it only gets worse the further in you go).
So 25 year old needs 10% DP -- $31,500. He/she graduates college debt free (parents paid for college) and works for SAIC for three years making $50k, $54k, and $56k (I think overly generous salaries for someone so early out of college.) There just is not enough give in those salaries to save up $31,500 over three years after taxes, rent, utilities, food, clothing, entertainment, furniture for the apartment, etc are taken out.
But it is theoretically possible. So 25 year old has saved up $31,500. Now he/she takes out a 30 year fixed at 5.2% interest and the monthly payment is $1557. Add on the $418 monthly condo fee. Add on about $275 for property taxes and you are naow asking for someone making $56k to pay $2250 a month which leaves very little money left over after that and taxes. Not sure why a bank would approve it or why anyone would make themselves that house poor.
--
And don't give me maybe the 25 year old is a law firm associate. (a) no one at DC law firms lives all the way out in Reston, (b) most law firm associates last 3-5 years and then go to lower paying jobs, and (c) law school debt eats up a lot of the extra pay.
Cara,
I don't think I said or meant to say condos need to be cash flow positive. Just have rents be close to PITI. I think the RTC condo I used as an example is not near rental parity.
What you described is exactly what I think will happen. Condo prices will go to around rental parity, investors will snatch them up, and rent them out. A few people might live in them for a couple of years and then rent them out.
Sure -- people like Va_Investor will always buy these places. And some 25 year old will rent it for three years. But then they'll buy their TH or SFH. :)
And maybe some non-custodial parent divorcee will buy a condo and live there 10+ years. These people exist. I actually think 90% of the people who plan to live in a condo long term are old, not young.
TBW-
I am pretty sure most consultants in this area are making more than that. This is definitely true for strategy consultants. My old firm starts at 60K and within 3 years you are making ~100K base + if the firm does well a decent bonus.
tbw,
Va_investor's recommendation was for places like Northgate. Here's one at $207k.
http://franklymls.com/FX7144355
With $20k in gifts or inheritance from the grandparents, lots of 25 year olds could chose to buy rather than "throw money away" on rent. Sadly, I don't think that meme is going to die.
A $180k mortgage with a $320 monthly condo fee and a $491 annual Reston fee would be rough for the first couple years on a $56k salary, but it could be done.
It does indeed take the down-payment being a gift, but if the home is "only" $200k a lot of grandparents/rich gay uncles can afford that, or do leave that.
tbw,
I am buying 2bd/2ba condo's for 210K across the street from RTC. I think my condo fee's are close to 300 and don't have taxes and ins. handy.
I just bought a one bedroom at Northgate for about 120K. Condo fee of $289 includes utiliites.
FHA only requires 3.5% down and then first timer's get the 8K. So the money required upfront is nowhere near your 31K.
2 bedroom condo's imply a spouse or roommate. Rents for a co-tenant would probably be 600-800.
So what sort of income does it require to buy a 120K one bedroom or a 210K two bedroom? There are reasons that I am not buying Market Street, Savoy or Midtown. There is a huge difference between a 1 bedroom for 315K and a 2 for 210K or a 1 for 120K.
kevin,
I'm in my own NVHBF universe, a bubble of protection around me and thinking I could get that contemporary home for < $533K.
MM,
uncontrollable chuckling.
You could get it for under $533k, housebuyer and I just don't think it's a good idea to offer that on day 1. Let the market silence speak for you.
Robert,
I know we are a high-income area. I don't know if we are a high-wealth area. Most wealth is inherited. It's very hard to build wealth from income because income is heavily taxed whereas wealth is narrowly taxed.
Earn $400k in salary but lose almost half of it in taxes. Earn interest income on a bank account lose almost as much as salary would minus the payroll taxes.
Inherit $400k from parent, pay nothing in taxes.
Earn $400k in long term capital gains, pay 15% tax rate.
Also remember that one person making $125k pays less in payroll taxes than a husband and wife earning $70k and $55k. And if you look at per capita numbers (where Fairfax ranks lower) it's clear we are high up mostly because there are more two income families here and less on how much people are individually making.
housebuyer,
Yes I'm sure there are places that pay better. But what percentage? I don't think a significant percentage of 25 year olds are making $100k + bonus. Remember that per capita income here is $67,909.
Also, how many people at your company are Dartmouth grads like you? How many people from UVa, W&M, UMD, GMU, JMU, VaTech, etc work there? Probably not many. Every time I meet someone from one of the few places that pays people with just a college degree a huge salary fresh from college it's Ivy League centric (like McKinsey). *Maybe* they'll hire 1-2 students from one of the public schools. Those jobs are not relevant for the median 25 year old here.
Va_Investor,
Sounds like you agree with me that the condos in Reston Town Center are still a little bubbly. So too are many of the Orange Line condos.
Cara,
Maybe my family is abnormal but I did not receive an inheritance when my grandparents died. They left their money to a surviving spouse or children. Not grandchildren.
Cara thanks for saying nice words about our house!
And yes, we were very disappointed with redfin. He never saw the house, just looked at comps. And unfortunately, we had a recent rash of REOs (later I discovered 3 of them were all one extended family that had to leave the country and basically ditched the properties).
When I tried to call back to talk with him about a higher start price, he never called back or returned emails. Very disappointing.
And yes, almost all the upgrades were within the last 5 years. We wee just getting it to where WE wanted it for ouselves when my husband got a job opportunity in the Baltimore area and that commute would be too brutal.
The last 3 months has been getting the painting done (all paint had already been purchased as we were about to embark on that anyway.) Updating the entry bath (again, something next on our list) and decluttering. We stored all our CDs, albums, cassettes and little things like coffee table, foot stools and a couple desks and a kid's craft table and some things from the kitchen.
The house wasn't a dump when we bought it, but we did put in over $25,000 into the house (probably more) in 5 years. My only regret is that we didn't get to enjoy it at the done stage. (have a little one while here didn't help with the speed of things being done, that's for sure).
Cara thanks for saying nice words about our house!
And yes, we were very disappointed with redfin. He never saw the house, just looked at comps. And unfortunately, we had a recent rash of REOs (later I discovered 3 of them were all one extended family that had to leave the country and basically ditched the properties).
When I tried to call back to talk with him about a higher start price, he never called back or returned emails. Very disappointing.
And yes, almost all the upgrades were within the last 5 years. We wee just getting it to where WE wanted it for ouselves when my husband got a job opportunity in the Baltimore area and that commute would be too brutal.
The last 3 months has been getting the painting done (all paint had already been purchased as we were about to embark on that anyway.) Updating the entry bath (again, something next on our list) and decluttering. We stored all our CDs, albums, cassettes and little things like coffee table, foot stools and a couple desks and a kid's craft table and some things from the kitchen.
The house wasn't a dump when we bought it, but we did put in over $25,000 into the house (probably more) in 5 years. My only regret is that we didn't get to enjoy it at the done stage. (have a little one while here didn't help with the speed of things being done, that's for sure).
Cara,
Can you elaborate on this statement "but you'd need more than a TH to do it"? I've never made you out to be a defeatist on this board.
All you need is a roof and a friendly homeowners association. Solar thermal is not an expensive investment and can give the homeowner a payback inside <3-7 years. I can agree that PV is a totally different technology and price point, particularly given the current policy/incentive climate in Virginia. However, things are going to change in the near future once carbon has a cost associated with it. Energy costs will increase. As regular retail utility costs increase, PV and other technologies are going to look all the much better. I'm not talking about 10, 20, 30 years down the road either.
To tie this back into housing. I don't see too many people (buyers, sellers, RE agents) talking about variable costs associated with a building. I've seen plenty of people discuss on this blog the shoddy construction found in some homes in various areas, but never do people seem to connect those types of things to increased variable costs to own the home. The cost of the house is only part of the equation.
Here are the median starting salaries at various college. A list I believe housebuyer alerted us to a while back.
List
Duke $56,800
Georgetown $57,000
Washington and Lee $51,800
Va Tech $52,900
GWU $48,200
UVA $52,200
Johns Hopkins $57,800
William and Mary $46,900
U Maryland $51,600
George Mason $49,300
American $45,400
Howard $50,300
JMU $47,300
I think the $50k example was realistic. And I think the salary increases I put in were above average.
If the average college grad could be making $100k by 25 then who would bother with law school or medical school or other grad schools?
Jaime,
I don't think solar panels and similar items are going to make one iota of difference in a home price. Maybe in an area where it will be seen as trendy.
[And in many areas, if the solar panels are visible from the front yard it might lower the price for harming "curb appeal."]
MM,
If my place were already under contract I would probably bid on that California Contemporary house. If the interior was as good as they say, I would most likely bid 550K.
The reason? Walking distance to EFC, and top schools including McKinley Elementary which I believe the WaPo last year ranked #1 on their challenge index. Greatschools.net ranks it a 10. Also, it has a family room to stash the kids.
Downside, I want a 4th bedroom for visiting grandparents. But the pickings are slim in good-schools plus-close-to-metro-areas right now in the 550K range.
I'll be interested in seeing how long it stays on the market.
TBW-
I agree there are not a ton of places that pay that much and yes it is mostly ivy based/UVA/Duke/MIT. I thought places like booze paid their strategy guys 80-90K after 3 years, does anyone know if this is true? They have a ton of strategy consultants from a fairly broad range of schools.
More realistically I think the easiest way to get there is have two 25 year olds both making 50-60. Then they only need to save half as much each and saving is easier because costs obviously are not linear with the # of people in your family.
tbw,
I don't think we agree on condo prices at RTC. I think people will pay a premium to own at RTC that does not extend to rents. Hence, I am buying across the street (shorts) that are quite reasonable when put in perspective. I would suggest first-timer's take the opportunity to get a great place in a great location at a "distressed" price.
You have to pay to play. For many, across the street is close enough. In other words, imho, there is an imbalance in pricing which I am taking advantage of.
I hate to spam the board, but I know there are a lot of professionals here. Is anyone here senior management(director/partner) in the tax service area of a top 100 public accounting firm?
housebuyer, Booz is notoriously low-paying as consulting firms go.
For all in this discussion - don't forget that a lot of late 20s and early 30s people in this area have MBAs and earn a lot more than the 50K range.
"More realistically I think the easiest way to get there is have two 25 year olds both making 50-60."
Housebuyer: You do realize that the vast majority of 25-year-olds in the DC metro area are unmarried, right? The median age at first marriage nationally is about 25 for women and 27 for men, but that includes a lot of areas like the South where people get married young. Marriage age goes up with education, and DC is an area with a high percentage of college or graduate-degree educated folks.
Dated, but I can't find anything more recent or breakdowns of net worth by metro area.
183,900 "everyday millionaires" with net worth between $2M and $10M.
Here's a scathing commentary with some more quotes from the Washingtonian article which is the source of both of these links.
I think this explains high home prices and why income/price ratios are extreme locally.
Anon-
People do not need to be married to get a house together. I know many people dating or just two guys who get a place together(I think these are bad ideas, but I know several people who are doing this)
Of course, that's true you don't have to be married. I didn't think it was that common though for people buying a house together to not be at least engaged, or at least not very common anymore. I could be wrong though.
So, you guys are talking about me, and my peers. So I'll give you my situation, anecdotally. Extrapolate as you will.
I'll give hard numbers... what do I care, it's the anonymity of the internet.
I'm 28, so is my wife. I'm the first of my peers to get married (@26 & 27 respectively), but the rest are not far behind. One is getting married next year (29), and the rest are settled and may not get married but are effectively so. Common-law here we come.
We have a 13 month old baby, which has been an interesting mark on the family finances...
I graduated from VT in 2004 with a B.S. in Chemistry and a B.A. in Political Science. My first job out of college paid $10/hour. After about two months of that I got a 25% raise, boo-yah. However, current salary is frequently based on previous salaries even when hopping jobs, so I still make significantly less than my peers. Though I've been getting percentage-wise closer with time. I currently make 55.35K/annual. I told you'd I'd give hard numbers. My wife makes more than I do, but it's fairly close. So between us we have a net gross of over 110K.
We pay a tidy $1200 to rent a nice TH in Woodbridge. It's a good rate, others in our neighborhood are up for rent asking $1500, but they're all unfilled. $1300 would probably get it done. That's what ours was asking almost 2 years ago when we moved in. We asked for $1200 and have been there since, no increases.
We pay so little rent relative to our income because with a baby, and possibly more on the way my wife (the higher income earner) may become a stay-at-home mom quite soon. Additionally, her contract expires and she may be terminated after that. So we prepare for our finances as if I'm the only salary. $1200 rent makes a lot more sense now.
I graduated debt free (work and parents). She graduated with $40K+. Add a car payment ($360) and a large chunk of credit card debt (thankfully whittled this down to a meager $21K) and you can see where most of our money goes: servicing debt. I've pushed most of that to extremely low rates: Huzzah for a very high credit rating.
My peers don't have the same level of student loans or credit cards we do, but many have them. Some who don't bought condos, as they 'could' and were involved in the mania of 'buy now or be priced out forever'. None has been foreclosed on. Closest is the girl getting married next year who is thinking of a willful walkaway on her TH in Baltimore.
Others bought more recently. TH in Columbia. TH in Fairfax (off the Parkway near Fair Lakes). TH in Centreville. Most had minimal down payments. One used his stock proceeds to fund his d.p. but even that was only ~$30K, and most of it was hard-saved from his salary anyway.
Some of them are making $70-$90K now. I doubt any of them have cracked $100K on their own. I could be wrong, but I doubt it. Most graduated from VT, some from UVA. Some have Masters degrees in addition. None of this warrants buying anything more than a $400K house, which given this area means a TH.
These guys are all doing significantly better than the average person my age. Most of my HS buddies are in terrible shape. They're pulling the median down. But don't worry, they're priced out of buying in this area. Some of them live out past Warrenton, most double or triple up and rent.
I'm sure there are a number of people my age who are doing way better than we all are. But most of my peers are doing pretty well. They're just not buying SFHs anywhere around here. Maybe they'll trade up in 10 years.
So, housebuyer, if your old firm starts at $60K and pushes $100K in three years, hook me up. That's not the reality I'm living in.
Housebuyer, I think you're missing the point that society cannot run on 100% of households being dual income. What's next, four salaries per household? It is a sign that prices are unsustainable if a single person making median salary in this area can only afford a starter home. Those $500k houses in Oakton, Vienna, and Fairfax will one day be $300k homes.
For TBW,
My roommate and I were both UVA grads back in 2002 and landed jobs with AMS (now called CGI) in Fairfax making upper 50's. I'd say we were both upper 60's by age 25. Neither of us inherited or were gifted down payment money (although I do know someone who did get that), and neither of us has bought a place yet. The bubble really screwed over the 02-ish graduates who just didn't have a down payment yet and refused the funny money loans. Now it looks like the ones that took the loans are the ones that really got screwed.
Anyway, my point was going to be that right out of school many people want a new(er) car and need to buy at least some furniture, TV, etc. I doubt many have a real down payment by 25. Dating is expensive, a wedding even more so. If my wife didn't make an equivalent salary to me, there is no way we'd be able to buy right now. My old roommate is a grad student at Maryland now and his wife makes just okay money. They're looking at condos, we're looking at a SFH this year or Spring 2011.
Va_Investor said,
I don't think we agree on condo prices at RTC. I think people will pay a premium to own at RTC that does not extend to rents.
So basically your theory is that people who buy condos in RTC are morons and people who do not buy in RTC are not morons. I don't buy it.
Thanks Xpovos and Jeremy. Good examples of everything I've been discussing here.
Ace -- re MBAs, JDs, MDs, etc -- you end up with a lot of student debt. Also...
JD - minimum graduation age is 25, takes you to 27 to have two years of work experience (what lenders wanted until the bubble) and even longer if you want to pay down the student loans first.
MD - medical school is four years (age 26 minimum), then residency is at least three years. So minimum age of 29 before making the big doctor bucks. And saddled with student loans.
MBA - top MBA programs require you to have a real job as an admissions requirement. So at least 24 when you enter, two years at business school, 26 when you graduate.
So with regular lending standards, some debt repayment, etc most of these people are not buying until 30 or so. And I don't think they are thinking 5+ years in a condo.
Heck, dare I say some people didn't go to law school, medical school, or business school to live in a condo in the suburbs.
Robert,
I'm not really following your point. I'd guess many of the partners at my law firm are in the $2M-$10M net worth range. I looked at the houses of the ones I've met/worked with bought (address is public to us.) All but one spent less than $1M on their home.
Maybe some spent more than $1M if you include their home and their ex-spouse's home. ;)
None of them are landlords nor do they have the time for that. They are already working 60+ hours a week and work vacations etc.
Remember most wealthy people are very, very busy. The larger the home/lot the more paying someone to clean the house, mow the lawn, or heat-A/C it costs. If you are not really going to enjoy another 2,000 square feet of home why bother with it?
Most wealthy people don't go nuts with housing. They might have a vacation home. Otherwise that wealth goes toward: country clubs, nicer cars, nicer clothing, nicer food, eating out a lot (at expensive restaurants), and private schools for the children. Some are philanthropists. Some *gasp* save a lot of money and just like becoming richer and richer.
staying put: I sold a couple of flips earlier this year when there were no comps except for short sales. Both times my agent met the appraisers gave them the best comps she could find and explained the comps. In the one case, where I did have two offers, the agent told the appraiser. Also, be sure to have your agent give the appraiser a copy of the contract you accepted and be prepared to give the appraiser copies of the other offers you received. Both of my properties sold with FHA loans with 3.5% down payments and required two appraisals each. Having my agent provide info and explain the info seemed to help. I agree that there are many, many, many bad agents out there, and I have seen them do horrible things to buyers. I consider myself very lucky that I have worked with a great agent for years. She tells me that most of her problems are created by other agents, not by buyers or sellers.
For MM: "Wanting to Move" is absolutely right. The best thing about the California contemporary is its location. Those houses were very poorly built in the late 1960s/early 1970s and are put together with spit and chewing gum. As I recall they don't have basements because there are springs in the area which guarantee perpetually wet basements or over-active sump pumps. If you do buy it, be prepared for lots of maintenance.
TBW -
No question that some do, but a lot of MBAs do NOT have a substantial amount of debt when they graduate.
Notice also that in my earlier post I referred to MBAs as people in their late 20s and early 30s. That's what most of them are, after graduating from top schools and elsewhere.
I don't disagree with your main point about that making $100K+ a year with a huge down payment for a $600K home, etc., etc. in one's 20s is not typical, or that the media often mis-portray it. I just pointed out that many in this area have graduate degrees (and are not necessarily saddled with $100K in debt), so it's important not to forget them when reviewing only the mean earnings of people with bachelor's degrees only.
tbw,
I fear you miss my point entirely. I give up. No one making 40-60K per year can afford anything but a slum.
Ace,
Oh sure I agree with all of that. My point was just I don't think many people who are ready and able to buy under non-insane lending standards (i.e. at least 10% down payment, two years work history) want to buy a condo if they think "will I want to have this for the next 5+ years."
Most of this decade the question was not "will I want this condo for 5+ years" but "how much $$$$ will I make flipping this condo in a year or two."
As condos go from an investment to a home most people will realize they don't want one. They want a TH or SFH because they are 30+, married, have dog(s) and/or cat(s), want a garden, want space, have or plan to have kids, and so on.
Va_Investor pointed out someone 25 could meet the 5+ year test. I agree that I can easily see someone living in a condo from 25-30. But then I went into what the average 25 year old is making and the vast majority will not have made it.
Honestly I can't tell you how many condos I've seen advertised as "current owners love the condo/building but need more space for child" or something similar. And many of these condos were bought a year or two ago!
In an article in the Washington Post yesterday they noted 40% of homes in America have a dog. I can't find what percentage have a cat but read that 63% of homes have a pet. Perhaps some of that counts fish but anyways more than a majority of homes probably have a dog or cat. Assuming DC does not substantially differ from the national average, I think that's a lot of people who would feel cramped in a 1 br condo with a dog. I know, I know, some people make it work.
But my point is just it's not just people with babies/kids who might want more than a 1 br condo.
Random anecdote -- some of my friend's parents who are empty nesters now have pets. And MORE of them. Maybe filling the void? But point being they aren't downsizing from their SFH home in Fairfax to a condo with four dogs!
I also know empty nester couples who have no pets, no kids, etc in the home. Just them. And the wife's lots and lots of shoes. And lots of lots of clothes. And a lot of furniture they can't part with. And so on. They would never want to downsize in a million years.
About three sets of friends parents have basements full of junk, er I mean treasure :) One or both parents are packrats. One parent has about 1000 books in the basement (allegedly read them all).
Great Falls Zip Data
Here is Great Falls (22066). Full of huge homes and probably zero condos. According to the chart in the middle a about half or a little more than half of the people in this zip code do not have kids.
Here is Oakton (22124). The zip part that is almost all SFH and low density. About 70% households without children.
Empty nesters, single people, DINKs don't all live in condos. Maybe, just maybe, I'm on to something here that successful people regardless of having kids or no kids like suburban SFH. Maybe, just maybe, they don't want to live in a condo.
I bet you in 1980 those zip codes had more families with children than they do now. And yet they remain as popular as ever. BECAUSE successful people want a home.
tbw,
I am confused. You cite recent grads making 50K. I say condo's seem reasonable. You say a 25yr old doesn't have the income. I show that 120K can get you a condo in N.Reston. You say RTC is bubbly. I say for very low 100's Rolling Ridge is very nice. These have 2 levels and fenced yards. You say there is nothing affordable? You talk about 1 bedroom condo's for 315 + 400's condo fees; I say Parc Reston 2bd 2ba for 210....you ignore...rinse and repeat.
tbw,
OK, I get it. You are successful and want a HOME. Should prices fall to meet your needs or your salary increase? How much further would be appropriate (for either)?
Va_Investor,
My point was that the various condos will have bottomed when it makes sense for an investor to buy there. So when PITI + condo fee = what you can get in rent. If they have then what you have found might be a good deal as rents are probably going up in Reston over the next five years (they might dip in 2009-10 but I think they will certainly be up by 2014).
I think by 2013, 80% of the units in condo buildings in or around Reston Town Center (and Ballston-Rosslyn, Pentagon City-Crystal City, and so on) will be investor owned to be rented out. The condo buildings will remove investor caps and some condos may even become apartment buildings.
Va_Investor,
There are plenty of SFHs in areas I like that I could buy now. I don't need prices to fall further but as they fall further I can get a bigger home or nicer neighborhood. I've been right so far in waiting and I believe I will continue to be right in waiting. When prices have bottomed I will buy. My current guess is 2012 but it might come quicker than that.
Why buy a hamburger now when I can have kobe beef in three years? And if I can only have steak in three years I'm fine settling for steak.
You have the wrong attitude about us. We are not entitled. We just believe (quite correctly for the past four years I might add) that prices are going down. I have long admitted that since 2008 or so many homes in foreclosurevilles bottomed and maybe even overcorrected. I remain confident that Oakton, Vienna, Fairfax SFH are still going down in price. The Fairfax County Manager agrees with me. So too does the County Board. No one is predicting home assessments to go up next year.
TBW, I definitely agree with your main points, that most people do not want to live for long periods in condos. I've known a few people in all age ranges who do - but they are living in 3 BR condos in very nicely maintained buildings with good amenities, in a good location, etc. Definitely not the 1 BR starter home that some people think of when thinking "condo." And you are right that in implying that the "SFH" name is really a misnomer. Many people who do not have children and may not have or want partners want a detached home with a yard for the reasons you give. They may also want a sense of neighborhood that they may not be able to get in downtown condos.
"kobe" steak? Hmmm...expensive taste. I'm having some wings tonight!
tbw,
What are you basing your theory that 80% of condos will become rentals and some will be converted to apartments on? Do you have some hard evidence to back this up?
Quick thought - in reference to home mentioned above:
35 year TH in suburbs selling at over 320k is a clear sign that bubble has not burst yet in NoVA - not even close. By the way, this was sold for 190k in 2001.
When the tax credit and summer euphoria ends, we will see the reality. My 2 cents...
TBW: Do you think older condo buildings like mine in Rosslyn with 400 plus units and now less than 30% investors will also go to 80% investors or just the newer buildings in the orange line corridor? How do you think Fannie, Freddie or FHA will handle the owner-occupied requirements for financing? How will the Commonwealth change its laws for condos? Do you think blocks of investors will buy the units or individual investors? I am on the board of our condo and this is something we might have to address
tbw,
There's an old saying, wealth doesn't stand 3 generations. My parents got their down payment for their first house when my dad's father died and his mom dispersed $20k to her two kids. My oldest sister, the land was a gift from her father in law, my middle sister the $60k downpayment was an inheritance from my sister-in-law's grandmother. We're not getting any help but my parents paid for half of my college tuition, and we don't need it, so I'm not asking for it.
Yes, inheritance goes to the spouse first and the kids second, but my family doesn't live as long as most. But I would hazard that most middle class families, especially if they got monetary help from their own parents, will try to do the same for their kids. But yes, every family has its own micro-culture for what constitutes help.
sweet mellissa,
Thanks for following me over here. Best of luck. Congrats on the new job! I'm sorry you didn't get to enjoy the finished product, it really looks great. Your agent is a lucky person, that place sells itself.
Virginia unemployment:
June 7.2
July 6.9
August 6.5
TBW, you said you thought VA unemployment would top out at 8-9%. Given that unemployment appears to have turned, do you still believe that?
The rich get richer. Let's hope Tim Kaine didn't give away the farm on this one, because my guess is that it would've happened anyway.
Robert - responses in today's post.
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