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Wednesday, October 14, 2009
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62 comments:
In humorous real estate news, care of E. Razzi's blog at the WaPo and the WSJ
AIG headquarters to be converted to luxury condominiums for potentially a hefty profit.
Wow that is incredible that you could buy that office building for $105/sq. ft. I thought $100/sq. ft was what you paid for office buildings 30 miles away from a city not directly in the center of it. Ohh well good for him bad for all us tax payers...
22315 BRAC Bounce?
I'm a homeowner in zip 22315 and will do a corporate relocation to Chesterfield County within the next two years.
Most of the NoVa BRAC construction will not be done until late 2010 through summer 2011.
I could move in 2010 but may defer to 2011 if the "BRAC Bounce" in home prices in the 22315 zip once the NoVA BRAC relocations are complete is big enough to make a difference.
My tax assessment is $488k but 2 recent comps lead me to believe I could get $530k today.
Y'all got any thoughts on whether or not the completion of the Ft. Belvoir construction in 2011 will have a significant difference in the "easy commute" market?
Following on in the shadow inventory discussion, the people who make a living dealing with mortgage defaults seem to see a lot of shadow inventory:
http://www.dsnews.com/articles/new-housing-crash-looms-as-shadow-inventory-climbs-past-7-million-analysts-2009-09-25
Note that this article does not try to define away shadow inventory by only looking at properties already owned by the banks:
Banks, too, are contributing to the shadow inventory problem. Fearful of the added costs of acquiring foreclosure properties and trying to sell them, many banks have simply declined to foreclose on some of their most non-performing borrowers.
Shadow inventory is more than homes that have already been foreclosed on. It includes ones like those in the article above, and homes owners are keeping off the market, waiting for better selling conditions. "Debunking" is not synonymous with "finding a argument I feel is convincing."
In response to the unemployment issue, yes NOVA unemployment is low, but the "Simply wrong" remark referred specifically to a comment on DC unemployment.
Roger,
Right now we're in a 5% interest rate and $8k for first-timers bump.
One would think there should be some bump from BRAC, but most owners will just take a new commute rather than incur all the transaction costs of moving.
What will interest rates be then? What will prices in your new home area be then? There are just too many variables here.
KeithK
That article is referencing the same report that we've been discussing for at least a week? The kicker is, that for the DC area, they found next to no shadow inventory regardless of how they defined it (broadly enough to get the scary 7 million).
Oct 1 NVHBF
housebuyer said...
I was going through a document, which was claiming the shadow inventory was larger than the actual inventory. First I don't really believe their assumption, but even if they are right it looks like it will not be that bad here. They said that DC has one of the lowest shadow inventories of any major cities
shadow by city
There is always shadow inventory. Banks always have homes on the books. But, citing national article that contain NV, FL, CA, and AZ, just doesn't cut it. This is the, "Northern Virginia Housing Bubble Fallout" blog.
I cite numbers from Fairfax County and you cite numbers that contain Las Vegas.
Again, Fairfax County has 921 homes on the books owned by banks. That is down from 2000 at this time last year. PWC and LoCo show similar numbers.
Unemployment. If you think current unemployment or additional unemployment going forward is going to drive prices through the floor, then have at it.
What is going to happen is the EXACT opposite. Increasing employment going forward (IN OUR AREA) is going to drive demand for housing.
Cara, that's an interesting chart but I have hard time believing the true numbers of NODs for many cities (including DC) is actually 0. My guess is that they just don't have the data. Tampa, Miami, and Chicago would also be looking pretty good if their NOD #'s weren't included.
Cara,
The link to Shadow Inventory by City is more convincing than the one of the number of bank owned properties in Fairfax, but I don't see where they address the shadow inventory in the article I just posted - the properties banks are declining to foreclose on. (Though you could probably argue that that number would be lower in areas where foreclosures are low).
I also don't see where it addresses the number of houses kept off the market until selling conditions are better. This is a number that is pretty much unknowable, but is real. I've come across several while looking for a place to rent during construction at my current home. This number is clearly going to be higher after a big price drop than in more normal times.
It's still a little bit of a leap from making a convincing case for low shadow inventory in the DC area, to entirely "debunking" the idea.
As far as unemployment goes, I don't think it's high enough to drive prices through the floor, and I never implied that I did. I was just pointing out that the person who cited the record DC unemployment rate was pretty close to the truth (and given the lag in reporting and the changes made in the 1990s in how unemployment is calculated, may very well be right). To dismiss him as "simply wrong" didn't address his issue. He at least deserved an argument for why high DC unemployment was not relevant to most of the metro area.
Robert:
Please explain the apparent discrepancy in your posts. Yesterday: "shadow inventory already debunked." Today: "There is always shadow inventory."
KeithK
People waiting for a better market are the mechanism that creates the long flat period. Each time prices rise, new seller's enter the market. As each owner reaches stages in their life where they have to sell regardless of the market, or they've now paid down enough equity that the price covers their mortgage and gives them "enough" left over, they will sell.
For it to be true "shadow" (i.e. future motivated sellers) you need the accidental landlords who aren't making enough to cover the mortgage payments. I assume you ran across a few of those?
NYTimes
BREAKING NEWS 1:22 PM EDT Dow Crosses 10,000 for the First Time Since October 2008
wasn't that one of tbw's predictions? Or does it not count until it closes over 10,000?
Mike -
You want to nitpick, huh?
Shadow inventory debunked means nothing substantial to impact home prices. There is always one home somewhere in the banking pipeline, therefore, there is always shadow inventory.
Is that clear?
Show of hands:
Does anyone think any bank is holding a property in Arlington, Alexandria, Fairfax, Prince William, or Loudoun off the market until conditions improve?
Robert,
No. But I do think there are many "loan mods" in progress that will fail, in all of those places.
Dow 10,000 can't be good for housing bears, but they'll dismiss it for some reason or another.
Robert said...
Show of hands:
Does anyone think any bank is holding a property in Arlington, Alexandria, Fairfax, Prince William, or Loudoun off the market until conditions improve?
I don't know, Robert. Are you saying these markets have not hit bottom yet, so the banks will 'sell now'? But either way, wouldn't the banks look at each property, regardless where it is, then decide what to do?
MM,
This goes to the heart of the conspiricy theorists regarding shadow inventory: Banks are market timing the real estate market. Plus they are colluding with one another about "dribbling" out inventory. That would be illegal.
Fairfax County says the average time a foreclosure is owned by a bank is 4.8 months. Banks are slow. They are not market timing. They are processing these things as fast as they can.
Robert said
Dow 10,000 can't be good for housing bears, but they'll dismiss it for some reason or another.
One possible reason: maybe the fact that the Dow is up will make them decide that their rescue of the economy has worked, so no need to extend the $8k credit or artificially keep the interest rates low... causing prices to drop
Little Johnny-
They may use this as a reason to not extend the 8K. I really do not think they will raise interest rates though. They know keeping them low is a major reason the economy is improving and it also helps them. They are borrowing and refinancing trillions of dollars of loans. They are much better off keeping the interest rates as low as possible while doing this.
Why would Dow 10k be good for housing?
Why wouldn't it be?
The housing bubble propped the economy up for several years, so VA_Investor is half right that by re-inflating the bubble and keeping prices high, it would stimulate the economy. Of course, like the bubble, it would do it for all the wrong reasons and the fallout would be catastrophic. But what sort of rationale would you expect from somebody that thinks this market has over-corrected yet has no data to base this claim upon?
TBW-
First housing actually correlates better with 10 year treasuries, although the 10 and 30 basically move together so it doesn't really matter.
Second the fed can always print more money to buy up all of the treasuries on the market and keep the price at whatever they want. This obviously would be very inflationary so they will not do it, but in theory could happen...
Finally that is pretty pessimistic to think housing will be at 2002-2003 levels in 2012. If that happens housing will have basically doubled from 1987-2012. (1987 is as far back as CS goes and is towards the beginning of the run up in the 1980s). This would not only be a much smaller run up than wages, it would actually be a smaller run up than inflation.
Housebuyer said...
TBW-
First housing actually correlates better with 10 year treasuries, although the 10 and 30 basically move together so it doesn't really matter.
So why mention it?
Second the fed can always print more money to buy up all of the treasuries on the market and keep the price at whatever they want. This obviously would be very inflationary so they will not do it, but in theory could happen...
So why mention it?
Little John-
I probably did not need to mention the 10 vs. 30, but is occasionally is useful when the yield curve has an odd shape (either very steep or inverted).
For the second point I was saying it was unlikely they would buy every treasury to keep yields where they want. I do however think they will continue to enough to keep rates reasonable. More importantly if they ever started to lose control they would start buy more.
TBW-
I guess I was wrong on incomes over doubling, but by 2012 they will be within a couple of percent of doubling.
As to your comments about tuition and medical care eating up the wage differences. I would say both of those are in the CPI, which is slightly lower than wage growth over this time. Not to mention seeing that corporations pay for most of the medical care this means your wage growth was actually slightly higher than the figures show.
Mortgage rates also were cut in half over this time making housing affordable. After I say this I will also comment I do think the areas are are looking will fall but the DC area will stay flatish.
I do agree however that the Vienna will likely come down some in the next couple of years, I just don't see it being a whole Nova thing.
TBW -
Predictions: Why don't you tell us exactly how 2009 is working out for you?
Let's see:
higher interest rates: No
lower home prices: No
lower Dem spending: No hahaha
reduced gov't hiring: No
Virginia unemployment 8%: No
Maryland unemployment 9%: No
My favorite: Congress won't have enough time on the Fall legislative calendar to get to the $8k: No
And No in advance of the $8k being extinguished.
Whiff, whiff, whiff.
housebuyer,
The ACS numbers are garbage. TBW's 1987 to 2008 comparison is apples to oranges.
More still, take a look at mortgage rates in 1987.
Income is more than double and borrowing power is nearly double.
Kevin,
Please. I said nothing about "re-inflating" a housing bubble. What don't you understand about an L shaped recovery? Look at CS, medians are well off peak. Where did I ever say that they will zoom back up?
And please stop distorting my comment that the "low-end" has overcorrected (no longer. however - that train has left the station) and twisting that to THE MARKET has over-corrected. Games are for children.
And many things are cheaper too. What did you spend on your last computer, TV, furniture, socks, whatever?
TBW-
I am not sure about health care. Between being young and healthy and having a generous employer I pay very little, but know this is not normal.
I think your comment about crazy loans kind of shows the impact of mortgage rates. People only care about their payments in the first month, they aren't very good at thinking ahead. So in the 1980s mortgage rates fell, which pushed housing prices up. In the 2000s rates fell some, but more importantly banks allowed people to get crazy loans so the first monthly payments were very low, so this increased housing even more.
I don't have any data on the relationship, but you are right that it is likely less than one to one.
TBW, post my address if it'll make you feel better.
Fine, some markets will be lower for 2009, but the composite and most home prices are higher.
Anybody remember the legislation giving a $500k capital gains exclusion to married couples on the sale of their personal residence - EVERY TWO YEARS?
That was huge. Drove a lot of money into residential property.
tbw,
I'll agree with your take on health insurance and raise you. "Employer's" don't pay any of it; workers pay for it in lower wages. Also, consider the removal of the wage limits on payroll deductions for medicaid/medicare and the increases on Social Security Wages. How about the stealth taxes: AMT, taxing 85% of SS, phase-outs of personal exemptions, other phase-outs.
Your "strawman" that prices haven't dropped is getting old. I doubt anyone here has claimed that their assessment did not drop. Hell, I'm pissed that mine only went down 5% last year which resulted in a rise in my overall tax bill. I am hoping to see a good 10% next year.
I just hope the gov't doesn't mess with dividend treatment, capital gains, or the home sale exclusion.
Pass a law that says all investment in the NYSE are free from capital gains taxes and the market will go up 20% the next day.
Since the law is still in effect - the $500k exclusion - 20% of the increase in home prices is permanent simply from that legislation.
You said I gave Cara bad advice to wait on this home. I will be very interested to see where it assesses in 2010. It's 2009 assessment equals the 2005 assessment. Will it go even lower next year? Many of you feel this is it's bottom. Will a more systematic approach by the county assessor office agree?
I don't know about the assessment, dude, but let's take a look at that neighborhood after next Spring.
We went into last Spring with the Dow @ 7000, inventory at 11,000 and consumer sentiment in the toilet.
With most of the Stiumulus in 2010, the housing credit extended or expanded, low interest rates, high stock prices, and much less inventory, what do you think is going to happen?
Okay, lower capital gains tax rates lead to lower asset prices. Go figure.
tbw,
Assessments tend to lag by a year; on the way up and on the way down.
You can cherry-pick areas that you think relevant and dismiss others (such as Manassas), but how would you evaluate data provided by CS and other sources?
It's the same as someone saying DC unemployment is 10% and dismissing NoVa. If you are going to use apples to apples, you have to be consistent. Don't expect Vienna to catch up (correction-wise) to areas that went nuts, got slammed, and you wouldn't want to live in anyway.
Robert you better not give out your address. We have seen TBW bypass the Orange Line corridor condo in 2009 for a house in Vienna in 2012. His ultimate plan is to buy your house in Great Falls in 2017 at 1993 prices when US has socialized medicine, the DJIA is a 99, no one can use any computers because of electric shortages and socks cost a nickel. Only problem for him will be that Great Falls Elementary, Cooper Middle and Langley High will have 100% free lunch children through government-mandated free school lunch programs with no potato chips or pizza allowed.
TBW: I always think that a sign of maturity is that someone can understand a joke. I seem to recall that you did say you were originally looking to buy in the Orange Line Corridor and then you switched your sights to a single family home in Vienna/Oakton or Fairfax. However, you were waiting a few years until you thought prices had leveled off in Vienna -- I think that would put you at 2012 to buy there. If you did not say those things, I apologize. The other comments were poking fun at your comments to Robert and your over-concern with the number of free lunch students at schools. In addition to experiencing a little bit of life by actually getting off your computer and looking at things first hand, you really need to develop a sense of humor. In my 73 and a half years, that has done more for me than taking myself much too seriously. If you don't watch yourself, I'll start praying for you again.
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