Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Please post your local house search updates, MLS finds, on-topic ideas, and links here.
Naval-gazing warning, no content of wider interest implied.So, I've been saying for a while that (1) we'd like to move in before Christmas, and (2) that if this short sale didn't happen we were going to hold out for a rec room. This weekend that shifted. Presented with an actual concrete example of a townhouse we might want to buy, we ran the numbers again. If we got our short for our contract price of $220k, the $200/month condo fee + slightly higher interest rates for it being a condo, would make the monthly payment equivalent to if we paid $30-$40k more. (that's after including the higher property taxes on the higher purchase cost, but not considering the tax deduction on the interest). Yes, the $200 covers aspects of the insurance, as well as maintanence of windows, roof, siding etc. But, it also means you're liable for the maintanence of everyone else's windows roofs etc even if they can't pay. Suddenly this means that if one could find a TH for say $275k which needed a similar or lesser amount of work to the piggy-back, you'd essentially only be paying an extra $15-25k more for a basement/rec room. (We don't want any substantial amount less above ground space, because bedrooms any smaller would start to be clausterphobic). $20k for a basement is both reasonable, and something we can easily afford. The turning point is two-fold, we've now saved up enough for a 20% downpayment and closing costs up to $300k (if we dont' have to do much work to it immediately). And there are two units in neighborhoods we think we like on the market. Suddenly it feels penny-wise and pound foolish to buy a 1360 sq foot townhouse-style condo with no basement and downstairs neighbors. Yes, if they allowed it to close at our contract price is would be ridiculously inexpensive living (within our other criteria), but we can easily, comfortably, on one salary afford up to a $240k mortgage, it seems foolish to settle for less than what our own ridiculously conservative standards will allow us to buy. I say suddenly, but it took all weekend for this transformation to occur.
In more generally relevant "news"from CR (I mean really who else do I quote?)Renae Merle at the WaPo writes about Bank of America's struggles to ramp-up their mortgage modification department: Racing the Clock to Avoid ForeclosuresThe following section probably requires more explanation: The company was also slow out of the box because it initially took a more conservative approach than some other banks, requiring that borrowers document their income and complete other paperwork before granting preliminary approval for a modification. In August, Bank of America softened the requirement and began authorizing some modifications without getting all the documents first. Read mort_fin notes: "What the article doesn't make clear is that what was changed was the timing of the income documentation, not the level. It used to be the case that bofa required full documentation of income before they would even run the numbers to tell a borrower that they qualified. Now they will give an answer over the phone and start a trial mod, giving the borrower a month or 2 to provide the docs. No docs, no permanent mod. A borrower who can't document their claims gets a month or two of reduced payments before getting kicked out."This is why it will be important to watch the number of permanent modifications over the next few months. The Treasury announced last week that 500,000 modifications have been started, but the Obama plan had produced only 1,711 permanent loan modifications as of Sept. 1. That number should increase sharply soon.
Cara, I think you are making the right decision. The costs of moving twice, after discovering the first place just doesn't provide what you want and need, far outweigh the small additional amount of getting closer to what you want now.
Well Thank GOD it did. Condos can carry very expensive unknown future expenses and they will make you pay. I don't know how much your condo insurance would have been, not the fire or typical homeowners but the one you have to purchase to cover these large expenses. I have heard around 5,000 but I'm sure that is based on the highend condo that have the pools and elevators and just hotel type stuff.
Arkey,The $200/month was indeed ridiculously low in a way. I suspect that the recent windows and roof and siding were all done by special assessment, but I haven't gotten the condo docs, so I can't say. Between insurance, street care, plowing, and gardening, I doubt $200/month would build up sufficient reserves to cover these big projects. (they were all done in the past 5 years, so won't be needed again soon, but fire-resistance roofs need replacing sooner than normal roofs).
Arkey,I see you are under contract! Congrats! Your open houses really paid off. So, where are you headed, and how soon?
Arkey, that's great news! Hope you move swiftly to closing.In other news, linked from patrick.net:foreclosures moving to higher price ranges
Congrats Arkey!!!!crossing fingers for you that everything else goes smoothly!
Cara, are you withdrawing your offer for the shortsale? I agree, why drop the 220k when you could get a brand new townhouse at Potomac Club in Woodbridge. I saw these personally, and the Lafayette or Saratoga models might be great for you and your overly conservative family (at yoru own risk)~~ Not lakeridge but on the better side of route 1 and near my hometown favorite Wegmans! (rochester NY)The difference between 20-60k on a mortgage is really not that big deal since you are coming up with a 20% down payment.Finally, I dont know why people like short sales when , the discount (and waiting time) is really not worth it if you can buy new, or get a foreclosure.My 2 cents, sometimes being overly conservative also means living with Ne'er de wells as neighbors. A costly investment when all thie figures you research, will never show these truths. Not race implied, but people implied.
Donovan,We haven't yet, but we will be. Short sales are great IF you can get what you want anyway for 10-20% off market price.But there is a matter of down the road who is going to buy in this development if TH's are not that much more expensive? Sadly Woodbridge and Centerville (which others have suggested) is just longer of a commute than I'm willing to do. But we will be expanding our geography a bit in our renewed search, since even with our current 1 mile walk to the metro, my husband snags a ride with me every morning, and gets a ride home from a co-worker half the time in the evening... So the whole, we'll stick to one car and get something within walking distance to public transit is appearing more and more unrealistic to how we actually live.
Thanks everybody. I'm headed to Ar. we have the typical cont. to get through but expect to be home for Christmas.
Cara, Though I've tried to read this blog less, I've been interested in hearing the conclusion to your situation. I think your new analysis is wise. Part of my conclusion is based on a belief that we have a long period of (real) price stagnation ahead of us. This means that, I am not a believer in the "housing ladder". I would suggest purchasing in a way to minimize transaction costs. So, if spending a little bit more gets you a place that you can afford and might serve your needs for longer, it probably makes sense. That said- based on your past descriptions of your wants, have you looked at FX7178210? Seems like it meets your new criteria.
eponymous,Wow you're good. That's the listing that prompted this change of heart.
Geez Cara that's a nice place. It has a nice feel, end unit and looks to have plenty of parking.I'd jump on it. Nice size rooms to boot. The flooring and stairs appear to be in great shape and the paint/appliances is what you wanted to put your own stamp on.
Cara,I'd go with the TH. It's a better investment on many levels (no pun intended!).
Arkey,I think the flooring is new. The seller bought it out of foreclosure (marked as AS-IS but in good condition) in March of 2008 for $260k, about 10-15k more than shorts in the neighborhood were selling for. There was no mention of wood in the previous listing and he mentions that the tile in the kitchen is new, and I'm guessing the wood is as well. I'm not certain how cramped the parking is, because the units across the way spread further than the lot itself, so it's hard to tell if those are all visitor spaces in the middle (I hope so).I'm not partial to the yellow he did, but that's what primer is for, and I might keep the green-blue living room as that's almost exactly one of two colors we were considering (although not the one we had decided upon).I do like it, from the pictures. We'll see. Most likely someone else will beat us to it or be willing to pay more than we would be. But that's okay, there's no lack of TH's in Burke.
All aboard.The train has left the station, but there are still plenty of stops where you can get on.Choice quotes:Washington is a company town and its company happens to have very deep pockets and a determination to spend more money at exactly the moment the rest of the country cuts back. The Obama administration expects discretionary government spending to increase from 7.9 per cent of gross domestic product in 2008 to 9.8 per cent by 2010.Down the street, the W, another luxury hotel, has opened next door to the Treasury. Ed Baten, its manager, says he is relieved to be there. “If I had to open a hotel in any city in the world right now, it would be in Washington,” he says. The average hotel occupancy rate in DC is down 1 per cent so far this year to 76 per cent, according to Smith Travel Group, against a national 10 per cent drop to 57 per cent.Stephen Fuller, a professor at George Mason, says this period is bringing to mind the late 1960s when Lyndon B. Johnson, then president, was fighting an intractable war in Vietnam while expanding the government with his Great Society programmes. “Wash ington boomed, it just boomed,” he says.
Va_investor,Given that Woodwalk didn't increase in price from like 1989 until 2002, you're probably right. Mostly it's just, I think we're really going to want to have another room that we can escape to.There's making sure you can afford your housing on one salary (which we're doing) and then there's being impatient which we were doing. (i.e. buying something smaller just because that's all we had saved up, when it only took another 4 months to get to where we are now).
Cara, needless to say, your comparison analysis is pretty spot-on. I think you pretty much nailed the reason for not buying the condo. Hard to say what the market will be like in six months (govt intervention is anybody's guess), but if you don't mind holding off a little bit longer, you'll have side-stepped the move-up home and the absurdly large transactional costs. Trust me, if you were to do the condo then move up, you will blow a gasket at the closing table when you see how much of your money is going towards those leeches. So, what will you do if the short sale commences?
kevin,well the condo and the TH are both the same "level" of the housing ladder as far as I'm concerned, it's just that one of them is liveable for a lot longer. The plan was never to move -up anytime soon. We've contacted our realtor about issuing the put up or shut up letter to our seller. If they can't produce a lender's approval in 3 days the deal is void. Given that we still have another out, i.e. our 3 days to review the condo docs and leave for no stated reason, which they still haven't gotten to us, I don't see them fighting to keep us. Trust me, I'll let you all know if I have any problems.
Cara,Just a quick comment on the 'one-salary'-ness: even if it were to happen, freelance/contract jobs are there to be had. i think someone mentioned here a copy editor pulls in $12K/yr easy.Like I said before, I'll know we've hit bottom when Cara buys. :) Good luck.
Cara,Yes, the condo/hoa docs are a total backdoor out. That is why I don't mind signing these 3 mos extensions on my shorts.p.s. I keep hearing "6 more weeks". I actually think the spring market will be good (or bad, depending on your perspective), especially on the under 400K market.
MM,That was me that mentioned copy-editing. But it doesn't take a lot of reading of my posts to know I'm not suited for it. :)We have back-up career plans, but it's always good to know that in between jobs, we wouldn't have to dip into savings just to pay the mortgage.It's probably a bad plan to put too much faith in my timing, since my timing is most dictated by our own savings plan.
Cara: Okay, I have tried very hard not to give you advice, but you are such a sweetie, I have to finally say it: don't buy the condo at Woodwalk! The number one rule in real estate is location, location, location. In other words, there has to be something to make people want to be in a place. You have given all of your good arguments for why you want to move to Burke, and they are fine. But not for a two level condo in Burke, when you can better afford a 3 level townhouse and live much, much better. I recently went to a shower for one of the teachers at Robinson at Woodwalk. The teacher hosting the shower has a 2 year old, and it was total chaos with all the furniture and toys crammed on that small main level. You really, really, really need space if you plan to have a baby as you have said. Two levels are good in the right place, but you can do better in Burke and you should. Also, most condos don't cover windows -- you might check with Woodwalk to see if that is the case. Go for the third level!
tbw,Thanks. If they want list price they'll have to get a different buyer, but what we'd be willing to pay is indeed well over your prediction for where these will bottom.Since $260k would still be cheaper than renting even at 7% interest rates, I think you're being a bit more bearish than I'm willing to be. But yes, if we were willing to stick it out for another 2-3 years saving more money we could get a SFH. And perhaps after searching this winter, we'll get to a point where we say, hey, the huge TH next door (literally!) to our best friends is for rent, why are we doing this? We shall see.
TBW,That's some pretty bad advice you are giving Cara. I hope she doesn't take it.As far as LBJ, I have to weigh the commentators - you vs. Stephen Fuller.I don't have a copy of your resume, but I'll bet a steak dinner, Fuller's looks a lot more impressive than yours. And you know that Knight Kipplinger, a self-described voracious student of the DC economy - said the identical thing a few months back. And Kipplinger is no shill for the real estate industry.TBW thinks Fuller and Kipplinger are clueless.
Cara-If you are able to get the TH for 260K then even if it bottoms at 220K you are fine buying now instead of 3-4 years in the future. First, you said that if you max out your 401K contributions you should be able to get the 8K. So that brings the gap from 40K down to 32K. You also think your interest rate will be ~5% instead of 7%. This would save you an additional ~4-5K a year. So with both of these effects you should be fine moving in.Even if prices do fall further if this is cheaper than renting, rent should be able to still cover the mortgage a couple of years from now. So you can always be an accidental landlord for a couple of years. Not the more pleasant thought, but also not that terrible if housing does much worse than you expect.
I can't find a source of the survey cited in this article. You can see that MD, VA, and DC, are near the top in several categories, but I would be interested in the whole thing if anyone can find it.
housebuyer,I don't think we're going to find one for $260k,* but the points still hold. And are basically the math that you and I have been doing.tbw's broader point that if what we find we really want is a SFH, then given the unlikelihood of appreciation covering our transaction costs, it would be better to just wait 2-3 years.* They exist, they just either are smaller, in a less desirable location or need 30k or more of non-cosmetic work.
Cara--In that put-up/shut-up letter, I would recommend you remind them you still have the condo-doc escape route.I'm no pro, and it ought to be obvious to them and they ought to know their jobs, but I doubt it would hurt to cover all bases and set their expectations at the same time!
You know, that listing says "end unit" TH, but to me, it's not an "end unit" unless it has some WINDOWS on the end!Otherwise, I hope you aren't paying a premium for the "end" part of the description. I hope the previous owners were smart enough not to, too.
Cara- About the 260K I was confused I thought that you were saying this is the price you were thinking of. Either way as you said the math still holds. As to Scott's point I don't think it hurts, but my guess is that they will just let you out of it. I know when we gave our 3 days notice they basically thanked us for our time, knowing that trying to hurry the bank doesn't work.
housebuyer,$260k is what I think the lowest it could reasonably go at "the bottom". I'm keeping mum on what we'd be willing to offer. :)I'm hoping our seller/LA will do likewise. They don't stand a chance of keeping the escrow money, so I don't see why they'd make trouble. Though I feel vaguely bad for Jeff, this will be the second non-deal with this same broker in like 3 months. (the LA was the selling agent on an unsuccessful offer on a house Jeff was listing).
tbw,Things have been hot, but oddly? Three out of four closed sales that I see, went for 5-10% under list despite the fact that they were under contract in under a week. Sure, there are still ones at list, and there are still bidding wars (there was a doozy of one that came in today). But this was the other factor that came into play with us deciding to start looking more seriously nowish.The speediness means that buyer's right now also have the tell me in 2 days or the offer's off kind of clause.The fact that every buyer can see that the seller paid only $260k for it a year ago, and has done at most $10k of work, may factor in to what they're willing to bid.Or not.
isn't time running out for the $8K rush anyway? is it still realistic to expect a new contract to close by 11/30, which is exactly 7 weeks away? i know it used to be 6 weeks but thought it's harder (=longer?) to get a loan?
tbw,The article linked by Robert suggests that rents are not decreasing in this region. Are you hanging your hat on higher interest rates precipitating lower house prices? Higher unemployment? Shadow inventory? Lack of financing? I'm just wondering why you are so certain that 300K TH's will be cheaper in 3-5yrs. Do you also believe that 400K sfd's will be cheaper?
Mm,one would think. in most areas it has already died down. Of course I also think it will be extended, but either way, I refuse to have it enter into my calculations for how much we're willing to offer.
tbw,I know. This particular one all depends on their motivation for selling. If they're a flipper they'd be awfully slow, so I'm assuming it's some other reason. If you count transaction costs on both ends and the money they put in they need $288k to "break even". So, personally I doubt anyone would do a $300k transaction just to pull out $12k. Thus I'm guessing they are either hoping for a bidding war, or have other pressing reasons they need to sell. If they need to sell for other reasons? Then seriously, who on this green earth thinks they're going to realistically break even after owning for only 1.3 years? So, that would make anything over purchase + improvements a reasonable price.But yeah, there's not just one TH in all of Burke for the next 4-5 months...
speaking of schools, we bought the Washingtonian and read the fluff article on TJ. two tidbits:Alexandria doesn't allow it's students to attend TJ. That was a news flash for meRobinson and Lake Braddock are the only two FFX HS's with more state sports trophies than TJ since 2000.
Cara,Wouldn't it be the same if you asked for an additional $8000 seller subsidy in case the tax credit never got extended? I think you should factor that in because most others do, and you yourself believe it'll get extended.
Cara-When I was at TJ there were fights in Alexandria about whether they should send people. Basically in the end it Alexandria didn't want to have to pay Fairfax County and TJ couldn't let individual families pay for the students because it is a public school.As too the sports point TJ has always been very dominant in "rich white people sports." At least while I was there we won a couple of state titles a year generally in swimming, crew, and sports like that. We obviously were not winning football or basketball trophies, but there are a lot of very strong athletes there.
Hey Cara-I am not a numbers person at all, but it is so nice to have a big rec room for toys and the little kids to run around and play. Also, you can keep your main level living space slightly more grown-up. If all you have is one living room, trust me, it will look like you are living in the Fisher Price show room. I was also wondering why no windows on the open side of that TH, though?
tbw,My guess is that homes re-districted to S. Lakes got whacked immediately and will always be lower than they were (with or without any "bubble").As I have always maintained they would, investors have put in a floor on the low end and up to any price point that will cash-flow. I'm not certain what that number is and it will vary by neighborhood (as rents vary). Cara has indicated rental parity at close to 300K for Burke TH's.I see little risk in 300K TH's in N. Reston. I know that these are not your market. There is a short close to me (in a very nice neighborhood) asking 749K, which is darn close to 2002.I do think that once the distress inventory gets absorbed, prices will increase. The reason you aren't seeing the drops you expect, in my opinion, is the lack of forced sales.People who traded up with alot of equity aren't going anywhere. They are home. People living in higher end houses (for the most part) have assets to tide them over in the event of a job loss, etc. People with responsible jobs and kids aren't going to strategically default. Why would they? Someone here (perhaps you) mentioned that a law partner bought a house where the price was only a year's salary. I owe less than that as I'm sure many upper income people do. The wealthier you are, the less of your net worth tends to be tied up in a personal residence.In the past, I have put out my theory that defaults are directly correlated to turn-over in that particular community. Afterall, the no-down, liar loans and 125% heloc's only came into play in the early 2000's. This doesn't mean zero distress sales in these neighborhoods, just not the volume to cause huge decreases (ala Manassas and parts of Herdon. There is a broad brush and collateral damage, but it works both ways.
TBW,That was a good dig on Stephen Fuller.I'm still waiting to see how these play out so we can compare your prognostication ability to Fuller's (although it is always much easier to make 30 day predictions that 12-18 months.):Here are my predictions (watch me go 0 for 3 on these):* $8k housebuyer credit is not extended* FOMC Meeting Nov 3-4 ends with Fed Funds rate staying 0-0.25%* DJIA breaks 10,000 some time during the month
No windows= cheap builderBuilders are some of the cheapest, penny-pinching groups I've ever encountered. I've done hundreds of Builder closings and some of the stuff they pull is unbelieveable.
Fuller has a history of being overly optimistic. A grain of salt is called for.
tbw,RE: TC Williams /TJ that's pretty accurate.the brunt of the article was aimed at scaring people that the true motivated talent was getting drained to go to TJ. I say, given their acceptance rate of only 16%, and entering classes of only 480, I'm not too worried.
Oh Cara,Tabitha and faithful readers.we have run across another reason why contracts fall out on home inspection cont...Get this..our buyers realtor scheduled inspections on Thursday at 8am, great...well not exactly. They want the house 4 hours unsupervised..yep, no homeowners or our realtor present..duh..when cows fly. Just whomever he brings in to inpsect the house, fireplace and pool..so, anywhere from 3 to 4 complete strangers with 4 hours. I've never heard of a homeowner being kicked out for a home inspection. Anyway, just giving you guys a heads up on why I might be back in the market on a home inspection because you guys always speculate on what happened.
Arkey,When my mom sold her house she wasn't allowed there during the inspection either, and they had like a 3 hour window. Lock your valuables, and don't worry about it. It's not as if they are asking no one to be present during an open house.
No way in hell Cara am I turning my house over to people I don't know for 4 hours unsupervised.. No way in hell.
Arkey,Have you considered a stake-out?
tbw,You make my point. Perhaps the foolish first time buyers are the ones going down. Not really perhaps, more like fact. Do you really want a 500K condo?These are exactly the cohort that bought with loose underwriting and most probably comprise the bulk of "strategic defaults" in CA and other non-recourse states. I doubt it's my generation.I may be around 50 now, but when I was 30 we bought in a neighborhood of 40 and 50 yr olds.Have your smart, high earning friends defaulted now that they are 100K or more underwater? I doubt it. It's the dumb specuvestors who are going down with those condo's.You basically give examples of first-timer's who bought at peak with no money down and no clue - despite their IQ.My explanation of why certain areas have held their values is valid.Look at other places that got whacked. What were they? NEW subdivisions that were bought and financed in 2004-2006. Loose lending and peak prices and stupid option ARMS. I've already explained the low end stuff which also had a huge percent turnover.
Cara, they have a new realtor, they are out of state so they will not be here. It's there realtor and whoever he lets in. If they wanted unfethered access you should at least give me the courtsey of letting me know who exactly you are letting into my home. We have been on the market for awhile. Do you honestly think any of our neighbors would question a moving truck being loaded up? Anyway in 4 hours you can do alot of damage. You can't lock everything up and its an unreasonable request. We have done this a few times before and never have we been asked to leave for a home inspection. I can't think of any service industry that will come to your home without you being present. They didn't even want my realtor here..what does that tell you.
1. There is another wave of option arms/Alt-A resets, just as big as the first. It’s reported that DC-area is #4 for these types of loans. Many of these loans are underwater (even if prices remained flat) b/c of the “pick-a-payment” option. 2. unemployment at record levels, even in DC. This will lead to standard foreclosures, i.e., no job = foreclosure. 3. commercial real estate is widely expected to be the next bubble to burst. This will further dampen any quench for real estate. It will further dampen credit for real estate.4. despite what the MLS says, supply is not dwindling; shadow inventories exist. Ppl who haven’t made a mtg payment in more than 1 year are being allowed to stay in their homes. 5. most loan modifications are not getting principal forgiveness. They are simply lowering interest rates and extending the terms of the loan. Thus, ppl remain perpetually “under water” on their loans. Ppl that are underwater on their loans default at astronomical rates. I’ve seen reports that 40-60% of loan modifications so far have defaulted again. So, many of the loan mods will ultimately result in additional supply on the market. 6. Interest rates are artificially low. The gov’t will start to cut-back its interest-rate subsidies in March 2010. I expect rates to increase sometime around there. When rates rise, home prices have historically fallen. 7. FHA is experiencing outsized losses on its loans. It’s creating another bubble by permitting loans with a meager 3.5% down. And, in some cases, ppl can use the $8k buyers’ credit as part of the 3.5%. The point: they will eventually be forced to require more than 3.5% down. This will dampen credit availability, demand.8. Foreclosures on high-end homes are accelerating. This will have negative consequences for prices of high-end homes as well as ALL homes. Despite all this, local real estate websites have “count-down” clocks, where the number of days, hours and seconds tick away until the $8K buyers’ credit expires. When it gets extended, I guess the NAR/NAHB will have to figure-out another reason to buy. Hurry, buy now or be priced-out forever! Nevermind that it took Japan over 10 years for its housing market to recover. Hurry, buy now!!
Arkey,It's quite common that neither the owner nor lister be present for the inspection.
Mike:1. some, but minimal impact2. simply wrong3. isn't happening here and won't, building prices changing hands at near peak prices.4. shadow inventory already debunked. we all just got tired of hearing about it. Faifax County foreclosures running 50% YTD LESS than last year.5. known fact, nearly irrelevant here6. if you know what interest rates are going to do, go open a brokerage account and make a million dollars. You don't!7. bailout of FHA, so what?8. some consequence, not drastic. Feel free to explain how a $3M house in McLean will affect a $300k TH in Burke.
Robert: Any one of the 8 things could lead to drastic consequences for DC prices going forward. I'll start and end with your response to number 1: "some, but minimal impact." Wow, that's deep, dude. Please explain why another bust, this time uniquely focused on DC-area, will have a minimal effect.
2. simply wrong Maybe, but close enough to still matter. http://www.washingtonpost.com/wp-dyn/content/article/2009/09/30/AR2009093003185.htmlDC unemployment at 11.2%, the highest since July 1983.Also, I missed when the shadow inventory was debunked. Who decided that?
Arkey, I side with you on the unrestricted home inspection. I just have an apartment, but maintenance doesn't come in if I'm not here. There is no way I'd let random people in my home unsupervised. There are tons of shady people out there, even (or especially...) realtors.
"4. shadow inventory already debunked. we all just got tired of hearing about it. Faifax County foreclosures running 50% YTD LESS than last year."Might be true in the boonies. Inventory is drying up and prices are strangely high in my zip code.Of course, everyone wants to live near me.
Va-investor, the house isn't empty and my son doesn't leave for class till 8:30, my husband is there. I wouldn't be there anyway. That's not the point. There is a reason I have and use locks on my door and security on my computers. Owners that want to open their homes to anyone without supervision or over sight are taking a risk. When we lived in Springhill KS we had 2 neighbors totally cleaned out. One 2 weeks after her open house the other just because she put up a for sale sign. The crooks came in full size moving vans and stripped their homes of everything, even the toilet paper while they were at work. People did see what was going on but did nothing because they thought they were just moving out. If you want to come into my home, you better at least identify who you are. Fireplace guy can only come at 8am ok but what in the heck is he planning on doing to my fireplace if he doesn't want the owner there? I'm not an open store, you break it, you fix it. We still don't have his name or know if he is insured/bonded, zip zada.
Mike, RobertDC's level of unemployment is indeed still at worrisome levels. But that's for residents of DC. If I heard NPR correctly this morning, the one revenue stream in Virginia that is not down YoY is income tax revenue from paychecks.We've looked in detail at both the actual numbers of ARM's option ARM's etc here before. The reason the DC area ranks fourth is because it's a large metro area that did indeed experience a price run up and a buying boom. However, "concentration" is only true in terms of raw numbers, not of percentages of homes. In all of NoVa the worst ARMs get is 2.X%. And the New York Fed maps have NoVa in the middle of the road. There will continue to be foreclosures coming to the market. That is true. But if you look at delinquencies (which is what you're describing when you're talking about people staying in their homes for a year without paying), the number of delinquencies is smaller than the number of homes for sale right now. Given that they won't all get dumped in one month, but rather will be trickled out as each one is finally given up on? Yes, they will make up a good share of the homes for sale, but it has yet to be shown that they will outstrip demand. Not at today's goes-in-goes-out absorption rate for the under $400k properties.The effect of the $8k should indeed wane. As should summer. Okay, fine. but we saw a 5-10% run-up over the summer (for the low-end properties). Yes, I think the waning demand will erode that or even erase that, but until the prices drop below what they were last January? I'm calling it seasonality, not a new ratcheting down.
I guess we can take these one by one.Unemployment:NoVA - 4.7%Fairfax County - 4.5%Arlington 4.1%Something may wreck home prices, but it will not be unemployment.Here's the difference between Wall Street and Washington. Lehman fails and the parts are sold off and half the people are fired. Freddie Mac goes bankrupt and they.....hire more people.
Shadow inventory. Once the moritorium is lifted by the banks there will be a flood of REO's hitting the market depressing home prices. Not.Moritorium lifted and home price went UP!Fairfax County has 921 bank owned homes as of August 2009.921 homes, out of 300,000.How can you have a flood of shadow inventory if the banks only own 921 homes????Holding them off the market is BS. There is zero evidence this is happening. The ONLY reason banks aren't foreclosing faster is they don't have enough people and the procedures are long and tedious.Besides, it's different here. We have the strongest economy of any of the big metro areas. Our gross metro product is at an all-time high.
Option ARM/Alt-A -Never understood why these two are grouped together. They are very different animals.Option ARM's will default in large numbers, but Alt-A won't, and certainly not here.Of course Alt-A's are 5-10 times bigger than option ARM's. I guess that's why the scare mongers put them together.Alt-A's reset to LIBOR or COFI + 2-3%. You're talking about 2.5% to 4% interest rates. Most Alt-A payments will go DOWN.Get back to me when interest rates are 3,4,5%. I'm talking about LIBOR and COFI. Then you may have something to talk about.
Arkey: When we sold our condo a year ago and moved to a bigger condo in our building, our agent had the home inspector give us a copy of his insurance and license before the inspection and said he always asks for this info. We were asked to be out during the inspection which for our 3 bedroom condo did take about 3 hours. The buyers did not come but the agent was there. Our agent stopped by toward the middle of the inspection to make sure all was going okay. Obviously it is easier to monitor what is going out of a building with a front desk person and security cameras everywhere, so there was no concern about them taking big items. We were motivated sellers so we may have been more willing to bend a little bit as our home inspection was also a 8 am.
Here's the size of the option-ARM problem NATIONWIDE:Fitch Ratings, which rates mortgage backed securities, estimates there are about $200 billion worth of option ARMs out there, with nearly $30 billion scheduled to reset in 2009 and $70 billion in 2010.Some blabbering about DC being #4 in option-ARM loans. Well, doesn't DC have the 5th largest economy? So, big dealAnyway $30B total this year and $70B next year?If the US mortgage market is $12T+, what percentage is $30B? Right less than 0.25%.Plus, half of option ARMs will not default.So, how is 0.125% of the mortgage market going to destroy home prices???
Thanks Reecon, I appreciate the input. I guess with the child planning a law enforcement career and my intelligence and security background plus years of long distant moves (4 with this hubby) behind me, I'm not so trusting. Today theft is sneaky, most of the time you don't know you've been had until its way to late. There is zip a homeowner can do to effect a home inspection. It either works or it doesn't. As far as the fireplace goes we keep it maintained and we know what kind of prep needs to be done before you start poking around. The pool has already been winterized, you fire up the pump you dump anit-freeze into my water, its covered, how would I know..my home, my investment,my responsibility. We know some of the security people at Walmart, it's unbelievable.
tbw,Sure, all the prices in 20194 have gone down, just not by the amounts you predicted. Some condo's are down about 25% (perhaps this is the average?). I never said Reston was immune and I did believe (even back in 2005) that we would see drops in condo's, generally, of up to 40%. I thought the average single family drop could be 25%.I have bought some at 40%+ off peak in some terrific locations. I do follow 20194 and think that the really good deals are in the past. It's only a guess; but one I'm fairly confident of.I was hoping that the 4 level, elevator, roof terrace places would drop from their high 800's prices (as one of these could be a future "trade-down"). Well, they haven't dropped much at all. And, as far as I can tell, Midtown had held up quite well.I'm really not in the Market for expensive condo's or upper priced SFD's. They make no sense for a Landlord.My comments to you were about why you may not see the drops in your desired neighborhoods. It's just my theory, but I think it holds water.I'm not talking so much about my neighborhood; but, generally about "established neighborhoods". You don't think my comments about new subdivisions, where everyone bought at peak (in Hells' Half Acre) have any validity?I know there was some turnover in closer in, nicer areas, but clearly not 100% as in new subdivisions. 100% at peak, loose lending, etc.As a micro example; between 2002 and 2007, 4 0r 5 homes changed hands here. What percent were "no down"? We had 2 homes sell in 2008 for 5-8% off peak. Now we have one house for sale.I still maintain "turnover" at peak is an important (the most important) indicator of defaults, and, hence, price declines.
Real estate is local, but it is not an island. If DC’s unemployment is above 11%, do you really believe that things in the suburbs are just fine? With unemployment rising in DC and elsewhere across the country, would that not make most ppl think, “Gee, maybe I better not make one of my largest financial commitments right now.” Cara: you can’t have an honest conversation about “demand” when the government is doing everything within its power to manipulate the market and create demand (artificially low interest rates, $8K buyers’ credit). To be sure, we can’t even have an accurate conversation about “supply” when so many homes remain off the MLS. Not that long ago I raised the issue of townhomes/condos that are not listed in the MLS; the builder instead lists just one or two of the units. In response, you or others (can’t remember) stated that “well, these types of units were always off the MLS so it’s a wash.” Sorry, that’s nonsensical and circular to me: because the area’s MLS was inaccurate before and remains inaccurate now – it’s a wash. No, it’s not a wash – it’s inaccurate, maybe in the same way as before, maybe not. Robert: you miss the whole point about shadow inventory when you focus on the number of foreclosures. Banks are purposely NOT foreclosing (many explanations offered, pick your favorite). That’s the point; that’s what makes it a shadow inventory. And seriously, you are unaware that the government is purposely trying to keep interest rates low (http://www.newyorkfed.org/markets/mbs_faq.html) and that the it recently signaled an easing to this practice? Regarding your response to number 3, here’s where I return the favor and say, “simply wrong.” Ask the Watergate Hotel (http://www.washingtonexaminer.com/local/Watergate-Hotel-poised-for-second-coming-8381331-64145362.html), ask the owners of Tyson’s Corner. Commercial vacancies, while the second lowest in the nation, are (1) up; (2) continue to rise; (3) “much worse” in suburban Virginia and Maryland (http://washington.bizjournals.com/washington/stories/2009/10/05/daily61.html). I could go on and on and on, but I really must go back to work . . . I continue to believe that any one of the factors I listed could have serious consequences for DC-area homes. You believe that NONE of the factors, in isolation or as a WHOLE, mean nothing for DC-area home prices. Real estate is local, but it is not an island. It’s good to be optimistic, but not to the point of naivety.
MikeCan't have a discussion about supply and demand with "artificial" things effecting the market? Really. For my opinion on this I refer you to the much better writing of Rich Toscano.The theoretical market in which none of these existed is irrelevant, only the reality we are actually living with.Could the things you listed have an impact? Sure, hypothetically they could. But I've been waiting and watching long enough for the "foreclosure tsunami" to happen. I'll believe it when I see it.Government policy is not honed to our local market, it's an attempt to deal with the nation's problems as a whole. Hence it's quite likely that our problems will be long gone and a new mini-bubble created before these interventions are unwound.Yes, we will see price drops this winter. I'm guessing just like this summer's highs were atypically large, this winter's lows could be too. And if you want something really scary to focus on? Focus on the march of prime loan defaults. Or what percentage of 2009 FHA sales are going to default? (but notice again the extended timeline)And if you're talking about metrics, and that metric is biased in exactly the same way in two time periods, then the comparison bewteen the two time periods is itself fair. You can call me naive til you're blue in the face, but you're not presenting any information which I don't already have, haven't already evaluated, and watched unfold over the past ~2 years. If you've got something new, share it. If not, this is just a difference of opinion.Yes, if things go really downhill various forces could make TH's in Burke slide down to rental parity at 7% interest rates. I'm prepared for that. How much more prepared would you suggest I be?
Cara: the majority of my comments were aimed at Robert; I thought I was clear. In any event, I’ll respond to your points: Perhaps you believe that the government can forever manipulate the market. I do not. Japan tried it – it led to stagnation of the market for over ten years. You don’t need a “foreclosure tsunami” to negatively affect DC home prices going forward. You’re arguing against a strawman and you’re smarter than that. What you need, in my opinion, is anyone of the 8 factors to be true. If you’re inclined to dismiss any one of these factors, then please view them in the aggregate. Now, close your eyes and imagine that we just got done with the largest housing bubble since the Great Depression. In terms of metrics, the bias is that it is inaccurate. If there were more units *not* listed on the MLS today than 2004, please tell me why the comparison of the MLS supply between these dates is “fair.” Truth is, we don’t know how many were *not* listed then and we don’t know how many are *not* listed today. Might today’s builders see more of an advantage by *not* listing today than in 2004? The only conclusion to be drawn: the MLS is inaccurate. I believe you’ve been more cautious than most. Still, that doesn’t mean buying now is sensible for all or even most (and, I don’t think you’ve ever said that). I believe you are prepared for the “long-haul” – if you stay in that TH in Burke long enough, you’ll eventually recover what you paid (regardless of what the market does). Please consider, though, that rents may go down. Your situation is not my situation. Your thinking is not my thinking. My question is: “Is it better to buy now or wait?” Nothing has convinced me that I need or should buy now.
MikeMy question is: “Is it better to buy now or wait?” Nothing has convinced me that I need or should buy now. agreed. There is no particular reason to expect, especially for SFH's, that prices are going up anytime soon, and there's considerable reasons why they might fall. I personally think we are now at what I have wanted all along, a time when you can choose to buy based on your own financial and personal timing. But that's not true of all tranches.
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