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Tuesday, October 27, 2009
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105 comments:
I can't believe I'm already contemplating going into another short sale.
Not that we've seen the place yet.
Am I a sucker or a cheapskate? I can't decide.
Cara-
Don't worry I continue to look at them also, although seeing that I have another 10 months on my lease maybe its not a terrible idea to try and get one in a couple of months. That way it will close when our lease is ending.
CS has DC prices up 1.4%, well below the 2.2% and 1.9% of the last couple of months. Seeing that the index uses a 3 month moving average I think this means August prices where basically the same(maybe up a couple of tenths of a percent) as July prices.
I find this encouraging that prices will likely at least stop going up and may start to fall by the time the October numbers come out.
I'm having a Kevin moment today.
We really like the look of this place from the pictures (not that that hasn't been deceiving before). But while there have been a few $380kish sales on thoroughly renovated larger end units in the complex this year, the truest comps went for $331k and $342k. This is a short, at $330k. Now, to be fair it is quite updated. (last year's low water mark $280k for an REO).
On the other hand. Dude! These went for $157k in 1999. No more than $180k in 2000. Based on that baseline this stuff has no business being over $300k.
If we like this, it's definitely going to take some serious soul searching. Is there really any hope for things to come down to where I think they should be? Do we care? Or are we willing to buy now, if this feels in person like something we would want to live in for the long haul?
I really think winter should bring the real sales of stuff like this down to $330k and under, but I've been wrong before.
Cara,
I'll bet the 1999/2000 price isn't that much different from the 1993 price or even the 1989 prices.
But, Cara, it doesn't matter. The house will appreciate over the next two to three years. Bank it.
Cara..is this an approved short sale or a potential short sale? $157 in 99..my quick cheat sheet rough estitmate..double in 10 would make it $314, reduce by 30%...and I come up with $220..Burke has gained back from the national 30% drop..so add 20% back in and a good short price is $280 then you have to consider the upgrades. I really couldn't determine the list price..was it $380?..then hell no its not a deal..
Robert,
I can't easily tell, tax assessments don't go back that far.
(I could click through all of them to find ones with the oldest sales...)
On the upside, $330k is less than a 2004 price pre-updates. So in terms of how was the neighborhood valued by buyers in recent years, it's not that unreasonable.
(I'm going to have to see if I can find out if this is one of the TH developments in Burke that was built with ZERO insulation..., If that hasn't been fixed then I don't really want to buy it, if it has been fixed it could explain a lot).
Cara-
I agree with Robert sometimes it is misleading looking at '00 prices, because housing had been flat for a decade at that point so it may have been undervalued. I think you should try and compare the mortgage with rent. If rent and mortgage payments are pretty similar than it will unlikely go way lower. If rent is substantially higher than the house may come down substantially.
housebuyer,
rent and mortgage are similar, but only with 20% down and at today's rates... If you put in only 3.5% down, and FHA rates with MI of more like 6.5% then it doesn't work out quite so well.
List price: $330k
going rent: $1600-$1800/month
Arkey,
list is $330k.
Oh wait, it was bought by a flipper in 2004 for $285k resold updated for $345k in 2004.
high-water mark in the neighborhood was...
drumroll...
$487k (very few paid close to that, the neighborhood had a hard time holding up $390k)
And Robert's right, it was essentially $150k since 1989.
It's "bank approved" back on market at a higher price after being under contract since February. Who knows what that means? If we like it Jeff will find out.
If they only paid $345k, unless they heloc'd I can't see why it would be a short at $330k.... Odd. I mean, okay with a VA or FHA loan, and transaction costs, it could be, if they literally saved zero money in the interim.
Cara-
Its possible that the price will fall some, but I think its highly unlikely you would see a price anywhere near the mid 200s, because that would be well below rent.
If they bought it in 2004 and are now trying to sell it my guess is they had a negative amortization loan and after five years there payments went up and they can't afford it any more. So they could easily be underwater by 30+K and transaction costs would be an additional 20K. If they can't afford the new payment they likely would not have anywhere near the 50K needed to get out of this house.
I think $250,000 at 5% 30 year fixed runs around $1600 a month.
Cara,
At least theoretically you're not fighting with the '$8K' crowd for it being a short.
Arkey, according to Bankrate, that would be a bit high, unless you are including taxes and/or insurance.
Doing a Bankrate search for $250K mortgage (excluding your 20% down) yields a range of monthly payments (30 year fixed) from about $1300 to about $1400, reflecting APRs of about 4.9 to about 5.4% (P&I only).
Arkey,
It's probably safe to assume that you'd get at least $350 back per month given the tax benefits of home interest payments. So that's like an effective payment of $1250/month.
I know some people quibble over maintenance costs off setting the tax advantages but in my mind it still comes down to cash flow.
My $0.02
housebuyer,
Agreed. I'm thinking more along the lines of the other real sales coming down to $325k, and distressed at $280k
All, T&I are real costs, you can't just ignore them...
But your math reveals why my husband and I are even considering the place. I've worked out that up to $325k buying still beats renting for us in a reasonable amount of time (including covering transaction costs with even a minimal 1% appreciation, 1% rent increase in 5 years).
That's including the tax deduction, including maintanence, T&I, the full deal.
NY Times rent versus buy
Cara said...
"I'm having a Kevin moment today."
LOL that's a good thing!
Robert said...
"But, Cara, it doesn't matter. The house will appreciate over the next two to three years. Bank it."
That's just weapons-grade stupid, Robert.
MM said...
"At least theoretically you're not fighting with the '$8K' crowd for it being a short."
Just my opinion...
Yes and no. Consider that for all the $8k crowd out there soaking up supply, that pushes demand and prices upward on everything in the area, even on houses that the $8k crowd is going for. So while they are out bidding up non short sales, that might be driving the non-$8k crowd to the short sales.
Cara, I was not suggesting T&I should be ignored. I was clarifying what the figures represented.
kevin,
Rising fundamentals of jobs and income growth will overwhelm any drop off from the expiration of the $8k. Obviously, I can't prove it, but it is the most likely outcome.
Ace,
Yup.
all,
The real question is what to apply patience towards, another short, or declining prices for real sales? This place is priced at exactly what I think the real sellers should be listing at. Instead they're listing at 30-40k over that and some of them are getting it right now. I'm hoping the winter will bring more stagnation and capitulation by some sellers.
Given that this short was UC since February, either it's a cruel joke and had dissappeared down the rabbit hole of paperwork and chaos, or it's a golden opportunity with a fully finished bank price that the buyer couldn't accept.
If it's not the second, then I think our time is better spent in the cat-bird seat. Because if the bank/servicer/investors couldn't come back with a price in 10 months, why would they ever come back with a price?
Robert, a net zero change in unemployment will not cause housing prices to appreciate when they are already over-priced and due for a correction. Your argument could just as well have been applied to 2005 or 2006. Were you saying the same thing then too?
I'm confident that Cara won't go purchasing a house based on your delusional predictions of it being worth more in three years. Thankfully.
Cara, at the risk of sounding as though I am urging an "emotional" basis for your decision, which I most definitely am not, what I would suggest is this. You've done the math; you are as informed about the current market and likely future events as anyone could be. There isn't any way to reduce the risks beyond what you have already done, IMHO.
What I think you and hubby should focus on is: will the home in question meet your needs and make you really happy over the time that you expect to live there? Don't consider renting it later after moving up; chances are good, IMHO, that you will NOT want to do that - you will have a lot going on in your life and won't want to deal with the hassles AND you will want the equity from your house from the next one. Much better to buy now for future needs, including not only planned children, but social life, having out of town guests, etc.
So I would suggest that you to focus more on what you will really like to have and DON'T underestimate the costs of making the house attractive and comfortable--changes are more expensive than people think. Yes, it's only a roof, but it's also a place where you want to welcome friends and family. For example, does light and bright matter? You have to buy it, since you can't change it. You don't want to overpay for space you don't need, but you also don't want to be overly constrained over how many guests to invite because no room is big enough for more than 4 or 5, or whether you're going to be able to buy a kitchen gadget you really want because there just is not place to put it, etc., etc., etc. You want a neighborhood you feel really comfortable in, around people similar to you as well as diverse.
Just my one cent.
Speaking of Robert, one of the shorts I looked at a few weeks ago in the $6-$800k was owned by someone that works for SAIC. I thought all of the contracting money was going to come in and save us all?
okay, kev...
You know Cara's story. If she buys this TH, what is your guess to the value at the end of 2011?
All I said is that it will appreciate. So, 0.01% appreciation is "weapons-grade stupid." according to you.
Robert, there is nothing to support the argument that prices have yet fallen to fundamentally sustainable levels. Pull some of those plugs the govt is using to artificially inflate prices, and they'd drop at least another ten percent.
Of course I'm not saying Cara would be wrong to purchase, she obviously has thought a lot about the market, and has a thousand times the insight you possess. [note to Cara, I'm not saying you have zero insight, as 1000 * 0 = 0]
But I'm saying your claim that prices will be higher in three years from where they are now is fallacious. There is no quantitative model that could support such a prediction. By every measure, our region in general is overpriced. That doesn't lead to price increases in the near future.
You base this on stable unemployment. Again, were you judging the housing market in 2006 on this too? I'm betting you were very bullish even at the peak of the largest asset bubble in modern history.
And I'm not going to make predictions on what Cara's purchase would be worth in a few years. That's for her to worry about, and I give her the benefit of doubt on her judgment. She's not buying with pie-in-the-sky expectations like you would like her to. She's pragmatic, realistic, and prepared.
It would take me at least an hour to really research the property, town, and area to come up with a good future valuation. Even then it would depend on things like the interest rates and at what pace the market corrects.
Ace,
Yeah, that's basically where we're at. Giving ourselves permission to buy what we'll really be happy in, partially on the logic that $30k more now is a lot cheaper than transaction costs in 5-7 years and dealing with whatever prices our move-up house might be then.
The fundamentals you brought up hit the highlights of what we should be keeping in the front of our minds.
Kevin,
When does it become the right time to buy in your estimation? When renting is comparable to buying? Is there a "fudge factor premium" allowable to either side of that equilibrium point?
I was very bearish in 2003-2005.
I felt vindicated in 2006-2007.
I watched a lot of retraction and leveling in 2008.
I started looking in 2009.
My $0.02
mytwocents, I don't have an answer for that question. Personally I view anything priced at higher than 2002 levels to be a no-go, no-way, will not buy. Prices around that level will make me less concerned about future drops in prices.
Back a year ago when the pool of buyers seemed dry, I saw some very tempting listings, but didn't act upon them. I have no regrets as I'm certain they'll come back at some point, but we're experiencing the fallout from massive govt propping of prices right now. Could take until next summer for that to be undone and prices reach close to sane levels. Could take longer. It just depends on what the govt does to eff it all up. But those efforts never do anything more than change the short-term. They won't offer absurdly cheap interest rates forever, or $8000 buyers bribes. Take those away and the market is dead and prices will tank.
I'm less inclined to believe that interest rates have a serious first order impact on prices. I have seen no convincing data on this point.
The best reference point is the extreme interest rates in the late 70's early 80's. I don't recall reading anything conclusive that interest rate increases directly drove down prices.
Secondarily, an increase in rates would imply a greater expectation of inflation. Increased inflation will eventually result in increased wages - granted they will be last.
However, with increased incomes comes increased ability to pay a reasonable (30% or less) DTI for a housing payment.
Eventually, inflation/incomes will rise to meet stagnating or slightly falling home values. I think drawing a line in the sand at "2002 prices" is limiting.
My $0.02
mytwocents,
The only thing higher interest rates definitively do is drive down transaction rates.
Well we've already seen sub-2002 prices in PWC, so I don't see how that's a stretch.
Regarding the interest rates, your argument would be better fared if they kept rates low and inflation spiraled as a result. They raise the rates to combat inflation, not accompany it. I don't know what they have prioritized right now, but assuming it's inflation and rates go up to 8% to fight it, that would put a downward pressure on prices in a fully leveraged system by about 25%.
So you could have low inflation, low GDP growth, and houses still ratcheting down to meet that demand price.
Yes, it takes time, and in all likeliness you just won't have many people buying. I wasn't around to witness it thirty years ago, but Shiller's historical home price graph shows a sharp drop right around then, followed several years later by a large upswing when prices went back down. So the question is, do you buy when rates are low and prices are high, or do you wait for rates to rise, buy then for cheaper, then refinance when they drop again and your house appreciates?
I'm not using this as a sole rationale for buying based on interest rates, as I agree they generally even things out in the end, but given how historically low the rates are right now, its' further reason for me to be adamant about not paying too much for a house.
kevin
We've seen it in PWC. Okay but they had a crazy amount of new construction, and hence recent vintage loans. Vienna/Oakton is not PWC.
2002 just seems incredibly arbitrary. Do you want a garage townhome for close to $350k? I can show you ones in Burke. I bet there are some in Herndon or Centerville too (not that I've looked). No you want your prices in your target zip code.
Does 2002 happen to be the year you made the decision to buy a condo rather than a townhouse? Such that selling at the peak, instead of clearing over 300k you only cleared, what, 100k?
You personally benefitted greatly from this bubble, stuck someone else with your overinflated condo, and now you're upset because you don't get a do-over, where you can buy the townhouse you should have bought in the first place for the price you passed up the first time around?
Renting and buying being a wash isn't enough for you. The above is the only thing I can come up with for why 2002 is some magic year.
You're right to not make the mistake again of buying something you don't really want. And it's entirely your choice if you want to wait until much further into the long slow flat period before buying, once some mix of inflation and depreciation has gotten housing prices into better alignment for your ideals. But don't expect it will happen evenly everywhere.
another handsomely done flip in Arlington seem to be rewarded nicely (even though the initial asking price of $749,000 on 4/2/2009 was delusional)
Date Net Price
10/26/2009 $645,000
SALES DATE SALES PRICE
12/26/2008 $400,000
i couldn't find the MLS listing for the 08 sales so likely it's never on the market. i guess most builders all have some kind of connections to find such properties to flip?
Wow Cara, I don't know what I did to you to deserve such a mean response. You're stooping to my level.
2002 isn't arbitrary, nor is it precise. That's a point where prices had risen nearly 50% from the bubble, which is (arguably) fundamentally possible at our current juncture given household income increases in the region. I see 1998 as the year the bubble began and prices became detached from the fundamentals. 2003 is the year that prices really soared away from reality and price increases were unsustainable.
As for my personal situation and your insinuations of greed and "passing off" that burden, you don't know the exact details of the transaction. I priced well below the current market value (competition) at the time, and the buyer thought he was getting a steal. If you think I should feel bad for that, then perhaps your own purchasing experience yields you the same result and you'll learn a painful lesson.
I'm not firm with this analysis and target, and I reconsider it all the time. But it's not a stretch, nor is it selfish. Criticize me all you want, but you're pretty much doing the exact same thing. You're just a little more tolerant about how much you're willing to overpay, and less willing (or more diplomatic) to call things as they are. No need to get nasty.
MM,
Not to get hung up on a detail in an otherwise nice looking home, but the chain link fence is not aesthetically pleasing to me.
My $0.02
kevin
It's nothing you said today obviously, it's just the accumulation of the things you've said on the blog over time. This is the picture of you that I've accumulated over time, and I finally decided to air it, so that you can refute it.
As to the details, no you don't have to feel guilty about it, but you shouldn't expect empathy either.
1998 was the year appreciation finally reappeared nova-wide. In many places that wasn't until 2000. If you're going to base off of any of these, I'd say you need to at least use wage-adjusted prices, not nominal ones.
Here's another subtlety. IMO, all housing prices are relative to some typical desirable house. Say the 4 bed 2.5 bath 2000 sq ft house. Anything underneath this only derives value as people are priced out of the chosen good by those who make more than them or have equity from a home in another state. So, "standard" SFH's rose first, and THs and even garage townhomes didn't pop up in value until some people got priced out of the standard good. People get priced out because of scarcity and competition. Many people moving to this area were not moving in at the bottom rung of the housing or the income ladder.
These prices get baked in. Not fully obviously. These new rungs get their prices partially baked in because they are seen as a good affordable alternative to the standard good. Which back in 1998, anyone would have have to have been crazy to think was true. Why by a TH in 1998 or even 2000 when SFH's were still within reach?
The question is where is it baked in, where is it not? Which rungs will hold onto how much? If nice move-in ready SFH's come down to a price first-time buyers can reasonably afford, you bet your bottom dollar THs are going to crash. But aside from the truly marginal SFHs that IMO are a worse choice than a TH, I don't see that happening.
Cara,
Robert said I'll bet the 1999/2000 price isn't that much different from the 1993 price or even the 1989 prices.
This is false. At least Fairfax County-wide. Prices definitely increased between 1989-1993. And prices got going again in 1997/98 or so.
Cara,
Here is how I heard about the vote on unemployment:
http://democrats.senate.gov/
scroll down and click on Senate Floor Calendar (right hand column)
http://democraticleader.house.gov/
Floor Resources on bottom right has similar info for the House.
The House gives info for the whole week. The Senate usually just gives day-to-day info but Reid helpfully laid out the week's plans (partly because they have a lot to get done this week before the current CR ends on Oct 31).
tbw,
It's a TH in Burke. On that property/property type, he's exactly right.
TH's in Burke didn't appreciate until people got priced out of the good SFHs. Condo's in Burke didn't appreciate until people got priced out of the townhouses.
If townhouses remain being seen as a good less expensive alternative to SFHs then 1998 or 2000 prices are not the right baseline. It's a big if, and it's the basis of much of the disagreement you and I have had.
It's also altogether possible, or even guarunteed that THs in Burke will stagnate a heck of a lot longer than the SFHs will. That I can live with.
tbw,
Neat-o!!! Thanks!
My $0.02,
agree completely. that's probably what the $10K subsidy was (partially) meant for :)
"mytwocents said...
I'm less inclined to believe that interest rates have a serious first order impact on prices. I have seen no convincing data on this point."
$0.02. Thats because there is no data. You are very correct - if the rates rise due to expected inflation (which includes wages), then its highly unlikely nominal home prices will come down.
I think Kevin has his facts a bit confused as to what happened back in the 70s:
http://mysite.verizon.net/vzeqrguz/housingbubble/united_states_1890-2008.png
As you can see, the red line shows that on an inflation adjusted basis, home prices did go down in the late 70's. However, when looking at the blue line (nominal prices - the prices you and I pay when we pull money out of our bank accounts), prices just kept going up.
In practice, if you look at ofheo numerical values, inflation was running 12-13-14% and home prices were "only" going up 4-5-6% during that time period. Thus, homes were not doing as well as inflation, but prices were clearly moving up at a pretty respectable clip.
I think part of the confusion is people here are not differentiating as to why interest rates are rising. If interest rates are rising due to additional risk based pricing (i.e. a higher incidence of default) you have a good chance of seeing nominal prices drop. However, if rates rise due to inflation, there is a good chance nominal prices will not fall in the slightest.
I hesitate to bring this up as it will likely cause alot of angst and I dont have time to explain it right now, but the fact of the matter is Cara is right. The only thing that higher interest rates is known to do is decrease transaction volumes. As to whether increased rates will cause prices (nominally) to drop, thats not nearly as likely as many would like to believe.
Cara,
Did you put a link to the short? Although maybe it's best not to encourage any competition.
Anyways, I typed in Burke VRE in craigslist. Here is one of the first results:
Burke TH Listing
$2250/month. Is your short a similar PITI? Higher? Lower? The same? Is the short a nicer, similar, or lower quality home? My hunch is your short is not that nice and does not have that much space.
This looks pretty nice to me. Almost overimproved for a long term rental. So almost certainly people "waiting for the market to recover."
The old reason not to rent something like this was your landlord might foreclose or kick you out to sell it. But if they foreclose it sounds like it will take 12+ months for the bank to even put it up for auction and so on. And I suspect the owners might be waiting for 2006 prices so you can rent this for the next 2+ years.
Cara, prices started increasing consistently YoY starting in 1996. I think you are confusing the depreciation preceding that point with a correction afterward rather than that depreciation itself being the correction. Either point might be valid, but in a normally appreciating market, it would suggest that the occasional downward trend is in fact the correction, not the other way.
Still, I don't know what I said that got you all riled up like that. If my remarks about buyers not rationalizing their purchases because they're so happy to get their $8000 of free govt money hit a soft spot, maybe you yourself have been plagued by this bout of buyer irrationality.
Robert said...
"You can't have it both ways. You say Cara's analysis is sound. And you say people are fools for buying into this hyper-inflated, gov't supported market. The disconnect is pretty obvious. At SAIC, we would call that ass kissing."
I'm saying that people chasing the $8k bribes and paying more than they would have a year ago are fools. I did't think that's the case with Cara, but I guess I'm wrong given her little outburst. I've had friends who I thought "were smarter than that" then go on to make some of the stupidest decisions I've seen before.
Speaking about having it both ways, I never heard back from you about your rationale for prices increasing over the next few years in conjunction with the same analysis made three years ago. Should your silence imply that this has always in fact been your position, and you're a perma-bull? Your position is one based on jobs and jobs only, and is often exaggerated at that.
CRT, thanks for that. Good point.
The short would run 1800 PITI, I wouldn't buy in Kara Pl, because it's not my prefered school districts, but it is a great rental. It's newer construction, it's actually a bit smaller than the short in question, but "infinitely" closer to the VRE station.
I prefer the tastes of whoever redid the one I'm thinking of, but this would be a rental, so that's different.
There are definitely places we could rent to wait this out. And perhaps I'm unfairly low-balling the rental price on the one I'm thinking of (and intentionally not posting).
Cara,
I forget if we have discussed this before but have you ever lived in Burke before? My understanding is you currently live in Huntington. I'd put the odds very, very high that you'll love it. Burke is a very nice place.
But if you have not lived there before what is the harm in renting for a year before buying? The only argument against that would be if home prices were still going up huge amounts per year. And I don't think you think that's coming. You seem to be more of the the next year will be flat.
What if you rented in Burke for a year and decided you hated it? Or yes it's nice to be in walking distance of VRE but the trains make *so* much noise and you can hear it when you live so close (I'm not saying that happens I'm just coming up with a hypothetical problem.) So then you decide you'll live in driving distance of VRE since VRE doesn't charge for parking.
CRT,
Thank you for weighing in. Your analysis on the clearing of "risky loan products" in the Arlington market, was what pretty much helped me push past my remaining doubts on home ownership. I also can abide by the 3 simple (I think it was 3) questions you listed to determine whether one should buy a home.
I am typically a risk averse person but I think the downside at this point is limited to less than my down payment. Sure, it would suck to lose that but I plan to live in a home for 5-10 years.
A correlating anecdote, I have a friend who bought a foreclosure in falls church in 4Q08. It was relatively easy (the high water mark in inventory) for him to do that and it was not an absolutely gutted place. It was actually in very basic move in condition. From my observations, those opportunities have dried up and it's really only the professional investors and flippers in that segment now.
Anyhow, I believe I am seeing value in the Arlington market.
My $0.02
Cara,
How about this one? Only $1695/month.
I also wonder how much competition there is for these rentals. Maybe you can get them down to $1600/month.
kevin,
It's nothing you've said today. In fact I can't even recall the statement about the $8k buyers you brought up, because I often just tune you out when you get going on a rant. It's just the constant barrage of complaining. As I said, what I wrote was the picture I've compiled from your stories, and your opinion about prices.
You made a lot of money (how much you won't say) by selling near the peak, and now you complain bitterly about prices not being what you want them to be. That's the impression you give off, to me anyway. And Va_investor was the only person who was calling you on this, and some point someone else has to question it.
And now you've had the opportunity to explain the context under which you think 2002 is a good choice of "rational" pricing.
I agree absolutely that today's prices are due in extremely large part to the Fed pushing interest rates down to 5% such that today's buyers could manage to buy at these prices. And that the $8k is distortionary for the under X market. (where X is somewhere between 300k and 450k). However, I don't see how it then follows that prices must crash to your target level.
Will winter happen? Yes. But if much more than winter happens, I'm pretty certain the Fed will keep being the sole buyer of MBS to keep housing from crashing further than it has to. Given that our unemployment picture is amongst the best if not the best in the US? That means reinflating the housing market here.
I don't disagree with your main points, I just don't see the "how" part for NoVa. Not in the entry-level range.
(aside from an exaggerated seasonal decline by 10% or so).
I want you to be right, kev. I want our hard-saved money to mean something which it would if interest rates weren't so low, and if everyone else didn't get $8k of their DP refunded to them (okay us too but we don't need it). I just don't see what the mechanism is, so I don't have your faith.
In Burke in 2008 some TH's transacted at 2002-2003 levels. But I bet you anything that when people were buying things at those prices in 2002 and 2003, they weren't run-down dumps that had been rented to frat boys for 20 years...
tbw,
Kings Park/Kings Glen are elementaries that have more similar demographics to elementary schools found in the South County, Hayfield, and Lee school pyramids. I am surprised in all your research you don't know this. Cara and her husband, I suspect, would rather live in a cardboard box than have their children attend or associate with any children that attend these schools. I am surprised that Lake Braddock parents haven't tried to get these kids out of their schools.
TBW said...
"Or yes it's nice to be in walking distance of VRE but the trains make *so* much noise and you can hear it when you live so close (I'm not saying that happens I'm just coming up with a hypothetical problem.)"
Train noise is not hypothetical. I lived in the Chase Commons apartments for two years, which has a walking path through the woods to the VRE station. The noise never bothered me, but my wife (then fiancee) often complained about the trains waking her up or keeping her up when she stayed over.
CRT,
While higher interest rates did not result in *lower* home prices between 1976-1983, they did lessen home price growth.
In 1976 the average home in Ffx Co went for about $66,000 and then in 1983 it was about $100,000. That's a growth of about 51.5%. Amazing in light of the fact that interest rates went from 8.87% in 1976 to 16s% in 1981-82 and 13.24% in 1983.
But here is why it was not devastating. Here is the median HH income chart for Fairfax. It lists median HH income in 1979 at $30,000. Unfortunately it does not go back further but I think it's safe to assume it was lower in 1976. Let's guesstimate it was $25,000 in 1976. In 1983, it's $42,600. So between 1976-83 incomes in Fairfax County grew 70.4%.
So exploding wage growth in Fairfax County offset the massive rise in interest rates.
---
Look at the diminishing income growth rates for Ffx:
1979 $30,000
1989 $59,300 (97.6% incr over 10 yrs)
1999 $81,100 (36.7% incr over 10 yrs)
2008 $107,448 (32.4% incr over 9 yrs)
Maybe once we get 2009 info it will match the 90s.
Cara, given what we agree upon here, I don't know what your beef is then. You too complain about prices. Does that mean that they aren't what you want, or they aren't what you would pay for? There is a difference, you know.
Are you upset because I accidentally profited off of the bubble and didn't lose it all? Would that have made you happy? Does my having made a dollar somehow discredit me from wanting prices to correct so I don't overpay for the only home purchase I'll be making in the next ten or twenty years, all while flippers are profit-seeking at every corner?
We're watching the govt waste taxpayer dollars to prop up bubble prices which is futile, wasteful, and harmful for those that dig in. That merits more complaining than I myself could do in a lifetime. You yourself have complained about this many times. I'm sorry if you are having to tune me out on my rants, but you and I have been civil up until this point. You didn't hear me complain about having to tune you out on your boring house-hunting tales.
And not that my personal details should be of your business at all, but the truth of the matter is that I didn't make that much money. Half the profit went into closing costs and agent fees. I learned a lot from it really, and have some really mixed views on real estate in general.
tbw,
If you are worried about gangs and kids getting beaten up than you should be concerned about Middle School not High School. This article in today's Post talks about how gangs are a growing problem in Middle School not High School. WTOP had a link to the fullreport in their story. The fact that you believe that dozens of kids are getting beaten severely everyday in high school is false.
Cara was the one that said she did not like those elementary schools. Those elementary school look a lot like Halley, Newington Forest, Lorton Station, and Gunston which feed into Hayfield and South County.
TBW-
Isn't most of the income growth of the 80s just due to inflation. Other than feeling good seeing larger checks year after year wage growth through inflation isn't that great. I guess it is nice if you own a home, because you can inflate away your debt...
Why is it that school discussions come up so often here?
First off, if a particular school district is noteworthy, it will be built into the price. Is that a premium you want to pay? Yes or no. That simple.
Secondly, does anyone really think the school is primarily responsible for how successful of a student your child will be? Parental education and involvement are, in my mind, way more important to the development of a child than their school district.
This constant bickering over racial demographics and free lunches is silly.
My $0.02
mytwocents,
I agree. That's why it frustrates me to no end when so many people here keep saying that any of the High Schools are dangerous and that the teacher are not good. The teachers are not better at Lake Braddock than they are at Lee or Hayfield. They think that very few kids from Hayfield or Lee get into 4 year colleges, which is not true. Funny that so many of my classmates went to Virginia Tech, all 3 military academies, Brown, and UVA. This same stuff was said 20 years ago and things have not changed.
Why are home prices so high? Because the fundamentals support them.
mytwocents, that's a subject that is over-covered in my opinion too. Talk about posts that you just have to glaze over. It's what I like to refer to as a fundamental creation of value. That is, for all the pointless pondering done, it's taken years for the different schools to have their impact on prices. Only recent changes in the schools and boundaries needs careful consideration. It's like a house backed up to parkland. Of COURSE it will cost more, and likewise will sell for more some day.
Robert said...
"Why are home prices so high? Because the fundamentals support them."
That says nothing about whether home prices are fundamentally supported. You sure have a funny way of analyzing the market, I have to say. It's like you're watching the weather in Chicago to determine the weather in Syracuse.
So now that I've asked you three times, I'll take your lack of an answer as a confession that you thought in 2006 that home prices in this region were sustainable because of jobs. Good predictions, Robert.
Robert,
So what if 11% of households make more than 200k? 50% of households likely make less than 120k. So are you saying that households that make 200k should drive the market and be the only homeowners?
http://franklymls.com/FX7191909
I was looking through houses today and thought this was one of the more unique houses I have seen. I don't really care for it, but will find it interesting whether people with really eclectic tastes struggle to sell their houses. My guess is this goes for at least 100K below the current list price and says on the market for many months.
It sounds like they're expanding the buyer's bribe to move-up buyers as well. Boy, NAR is working overtime to hurt our country and fill their coffers.
link
By the way, if anybody here is concerned about housing prices and wants them to rise, you're really not going to like what Congress is proposing with move-up buyers. I'm LOLing rather hard at the notion that NAR is pushing them to spur supply now that demand has been tapped. We've talked in the past about whether the market could overcorrect or not. Well, this could do it.
housebuyer, I understand what you're saying, and it's not my taste either, but I don't think it will go that low, for two reasons. First, it will take several coats of primer and paint, but the dark colors in the new baths can easily be changed. Second, in this price range, there may be some would-be hipsters who can afford it and they may like something like this. The mid-century modern stuff is all over Crate and Barrel these days. Also, from the assessed values, it appears this neighborhood hasn't lost as much value as some others near there.
Kevin, oh, I'm jumping for joy at the prospect at possibly getting in on the "free" money.
Kevin,
I'm not quite sure I follow the massive drop you're predicting? Presumably a move-up buyer will be selling one home to buy another.
The only way I can see this being bad is if it spurs a bunch of people with huge equity stakes to sell since they can undercut the current homes on the market.
But I still find it dubious that the $150k-$250k couple crowd is going to be swayed by 7200 bucks.
My $0.02
$0.02,
This should kill prices on the lower and middle ends. They're bribing people to sell-and-buy. Considering that this comes on the end of a dried up pool of buyers, expect to see something wild. The taxpayer cost will be massive, but there's no denying what a massive flux of artificially generated supply will do to the market, just as what happened with demand recently. As a taxpayer, I find this atrocious. As a speculator, I think it's hilarious.
TBW,
Fair enough. I most likely won't be bringing it up again.
Kevin,
I read that Bloomberg article from CR and find this to be more horrifying:
"Lawmakers are also considering pairing the new homebuyer credit with a broader tax benefit for businesses with net operating losses, and passing that as a separate bill. The tax break, a priority for homebuilders, would allow companies to apply losses incurred in 2008 and 2009 to amend up to five years worth of earlier tax returns to get a refund of taxes paid in years when they were profitable. "
We'll just start giving companies back taxes they've paid on profits they've made in the past. No biggie. Sheesh...
My $0.02
housebuyer said
Isn't most of the income growth of the 80s just due to inflation.
No, I don't think so. I think inflation played a role but I also think that the jobs growth of the 267 Corridor (the Dulles Toll Road did not even open until 1984) and the creation/completion of massive infrastructure projects (I-66, Metro out to Vienna, etc) encouraged many who otherwise would not have considered living in Fairfax County to consider it.
HayfieldGrad said
They think that very few kids from Hayfield or Lee get into 4 year colleges, which is not true.
Strawman. No one has ever said this. Or at least I never have said this. I have college friends from all over Northern Virginia.
This article in today's Post talks about how gangs are a growing problem in Middle School not High School.
Actually it says this: In 2007, according to the report, middle schools accounted for about 35 percent of gang offenses in the area's public schools, compared with about 27 percent in 2003.
That means (assuming a negligible amount of gang activity occurs in ES which seems a safe assumption) that 65 percent of gang activity in 2007 occurred in high schools. So high schools still have plenty of gang problems.
I've never denied there are gang/behavioral issues in middle school.
HayfieldGrad,
With all due respect, I don't think anyone has ever brought up Hayfield. I think you are the one always bringing it up that specific school.
You sort of took outrage when none had ever been directed specifically at your school.
tbw,
It wasn't you, but Cara and that T guy who used to live in Burke are the ones who have said Hayfield was awful. According to T, Hayfield was the worst school. You have made specific comments about Lee. I know someone who works at Lee and it is not Gang ridden. If you really have friends from all over Northern Virginia, do you have the courage to talk smack about their own high schools to their faces that you have been writing here?
housebuyer,
If FX7191909 got $495,000 ($100k less than list) for that home, that is a huge victory. The '09 assessment is $437,270. $57,730 over assessment in this market? In this part of the year? Realtor of the year IMHO.
Ace said
Also, from the assessed values, it appears this neighborhood hasn't lost as much value as some others near there.
They informed the tax office of these "improvements" hence the assessment has barely dropped since 2006. The next door neighbors (2853 Marshall St) have seen their assessment drop 14.3% instead of 3.5% from peak like the one housebuyer found.
[Of course, only dropping 14.3% from peak is silly but w/e.]
kevin -
My bullish/bearish feelings are a little more complex. Of course it doesn't matter what I say, you won't believe it.
In 2004, I thought Clifton was tapped out. I sold my house for a 168% gain. You know that. In '04, I thought Great Falls hadn't seen nearly the same kind of appreciation and therefore thought the risk/reward was greater in that price range. Check the stats in my neighborhood. See what my next door neighbor paid for a similar house 12 months after I bought.
In the Fall of '05, I had Penny Yerks out to my house because the numbers were huge and I was considering taking the profits and renting. I/we decided to wait until the last house owned by the builder sold. It didn't. Now, check the MRIS. I listed my house for sale in March 2006, but I wasn't eligible for the tax exclusion because I had just used it in 2004. So, I priced it too high thinking once we hit July 2006, I would lower it. Nope. Took it off the market late in '06 as inventory ballooned and prices started to fall.
So, I was bearish as early as September 2005. I was going to sell and rent. I was bearish in 2007 and 2008. It wasn't until Inventory started dropping that it was obvious that prices were going to start climbing. And that is when you first see me on this board back in March. Again, I was right as I've said on this board since March. Prices will rise and they have.
Now, I'm bullish and believe prices will rise easily over the next three to five years in ALL market segments. For some segments, it will take a little longer, but the tide will take everything up.
So, get access to the MRIS and check it. I have not been an uber-bull. Also, as you may know, I was able to convince my mother to sell her TH in Burke in March 2006. She is renting an apartment in Burke with all of the gains in CDs.
That's all the proof I have. Like I said, you won't believe it regardless.
thanks, TBW, let's keep an eye on that one.
TBW-
Below is an inflation calculator.
http://www.westegg.com/inflation/infl.cgi
It says that inflation between 1979 and 1989 was 71%. Income grew 97% so the non inflation growth was 1.97/1.71 -1= ~15%
For 89-99 inflation was 34%and income growth was 37% so real income growth was ~3%
For 99-08 inflation was 28% and wage growth 32% so income growth was ~4%.
So you are right that real income growth did grow about 1%/year faster in the 80s than either of the next decades, but real income growth was slightly faster this decade than the last decade.
Robert, I'll take you at your word. I've long since forgotten your personal information to look that up. Nor would I care to. But your repetitive clinging to jobs numbers rather despite all other market fundamentals begged the question of whether you thought anything else mattered. Apparently it used to, but doesn't any more.
kevin -
You make it seem like I'm out here on an island by myself. I can post expert after expert that says WDC is going to see significant job creation over the next few years. Yet, I can't find anyone other than TBW that says the jobs numbers are going to be flat or negative.
Robert, that's between you and TBW. The fact that I am indifferent towards jobs in this region should suggest that I don't think it's a big deal, at least compared to the off-paired fundamentals and current prices.
I'm neither gloomy about unemployment nor think there are a buttload of jobs coming that are anywhere near high-paying enough to absorb this overpriced market.
If you're doing the happy dance in your great falls mansion thinking that some extra GS-8 hired at the EPA is going to help saturate your market, then all the best to you on that dream.
We are renting a garage townhouse near Dunn Loring Metro at $2,400/mo. Landlord just notified us to renew lease expiring 12/31 for 1 year rent goes up to $2,700/mo or we can go month/to/month at $2,700. We have been casually looking to buy in Springfield & Burke but think it makes sense to go ahead and not do rent increase. Any opinions of Japonica and Westhaven in Springfield and Cardinal Glen and Burke Station in Burke? A few good short sales there now & we might be willing to pay higher rent to wait for short sale. We are doing FHA with 10% down so rates are good now so might skip the shorts & just try to buy a reg. sale. Are shorts worth the wait & higher rent or do just buy a regular sale?
kevin -
I've posted that I'm not going anywhere until maybe 2015.
Also, I hardly think SAIC relocating its corporate HQ is the equivalent to a bunch of GS-8s. The top brass at SAIC will probably be some of the wealthiest in the area. BTW, there are 171 homes for sale in Great Falls.
There is a fundamental shift taking place here. WDC is becoming the center of business, technology, and of course, government. Ten years out you will see the profound transition.
Robert,
Don't misquote me. I have long said we are going to have a recovery here and one long before many other metro markets. I just think it's going to take before the job creation offsets all the job losses from the recession.
And I have agreed with you that Obama's spending will help the region. Oddly enough, very little attention is being given to the FY 2010 appropriations. These are mini-stimuli. And much more effective stimuli because they might just be permanent growth whereas AARA had a lot of temporary measures.
Recall that FY 2009 approps were not changed by Obama and they just used Bush's numbers. Bush stopped drastically expanding spending in his last few years. So there were very few new fed gov't jobs in FY 2009. FY 2010 has TONS! And I suspect FY 2011 will have even more.
Hopefully this gov't excess can profit me personally for once and I can get a nice, cushy 9 to 5 gov't lawyer job. I am regretting not signing up for this directly from law school.
Robert,
Regarding the personal history you gave. I think you are implying you called everything right. Well, you called Clifton peaking in 2004. And that was wrong. Clifton kept increasing in price after 2004. You would have gotten more for your Clifton home in 2006 than 2004.
I also do not think Great Falls increased more than Clifton between 2004-06.
The only potential plus of having moved was getting a more expensive home. A 20-40% increase on a $1M home is a lot more gain than a 20-40% increase on a $500k home, particularly taking the leverage of mortgages into account. But, on the other hand, a 20-40% decrease on a $1M home is a lot more painful than a 20-40% decrease on a $500k home, particularly taking the leverage of mortgages into account.
TBW,
I wasn't right about everything. Clifton did continue up through 2006. But Great Falls had its biggest increase of the bubble from summer '04 to summer '05. And it has had it's biggest correction from August 2008 through today. The stock market dude!!!
Just an update on my brother-in-law who was laid off from HP Consulting in Detroit.
Well, he got a job with SAIC. He lies about everything but said he is making $150k. That might be possible because he does have an MS and and MBA, but probably more like $100k. Anyway, he rents a condo in Springfield and lives with his wife -- who is unemployed.
He told me that more than a few people he is working with are from out of town. Folks from Florida, South Carolina and Illinois. They have left their family back in their hometown because they can't sell their homes.
kevin - you have your boots on the ground. Anyone from out of town working in your Division, Operation, Group?
Yeah, TBW, I didn't realize that the government was centered in WDC until you pointed it out in your post. WTF?
Well, I guess we are going to have to disagree. Middle schools are going to have greater discipline issues. That's because of the age of the kids.
I don't think any schools in this area are medicore. I think they all offer classes and opportunities to students of all abilities. I think the reason you feel these schools are medicore is due to not having experience with schools elsewhere in this country. You and your friends have no idea how privileged you were to have textbooks, computers, free bus service, lockers and classroooms without leaky roofs. The last high school I attended before Hayfield did not have enough textbooks, did not have lockers because prior students had set them on fire, and a murdered young woman's body was dumped next to the school's tennis courts. I don't know any high school in this area that has to operate under such conditions. We also had to pay school bus fares and work in the school cafeteria which took away instructional time.
I really don't care where you chose to send your kids. I feel really sorry that your friends feel that their lives would have been better if they had attended a Langley or Oakton like school. They truly are ungrateful.
Robert Zero sum on jobs or not?
kevin said:
"Only recent changes in the schools and boundaries needs careful consideration."
This is actually a concern for my and maybe TBW (although I think he is looking closer in to Vienna than me). FCPS redrew the school districts in the last year or so and many homes that used to be Oakton/Madison are now South Lakes. I have the updated district lines saved on my desktop so I can double check what is listed for school information on homes. Most homes that do not list it in my search area are the ones that now go to South Lakes. All the Oakton and Madison homes make sure to include that info on their listing, many times right in the home description at the top.
Waiting too
Townhouses in those communities look like they top in price around $375,000 (except for a few shorts). With your 10% down payment and an FHA loan at 5.25%, your monthly principal and interest for a $375,000 purchase would be $1781. Subtracting this from your current rent of $2400 leaves $619 for taxes, insurance, mortgage insurance and homeowner association fees. From a price standpoint, it looks like these communities would make you a little better off than renewing your lease and paying the higher rent. They are farther out and older than garage townhouses in Dunn Loring area, but you have probably considered that in looking at Springfield and Burke. I would say buy now if you find something you like and do not pay the higher rent. With short sales, if you have your lender do an appraisal of the property and send that to the first trust holder, you can sometimes expedite the process. Particularly with an FHA loan, the appraisal for a specific property is good for six months. Even if you have to wait, your appraisal will be good for longer than the typical non-expedited short sale. You have a couple of months to work on a short sale while still paying $2400 per month. Good luck.
Robert: "you have your boots on the ground. Anyone from out of town working in your Division, Operation, Group?"
I work at your former company, I know a lot of people, and I cannot think of anyone that is a transplant. While the sense is that we're going to grow since HQ is moving here, we also know that if this administration ever finds a pair of scissors, they'll be cutting on our end of the budget first. No high expectations for future profits, and they're getting stingy with the spending for things like tuition in anticipation that revenue and profits will be decreasing. Probably not what you want to hear, but I have friends in competitive companies that are seeing the same things. Different govt agencies are trying to transition different consulting positions to in-house govt jobs.
waiting_too,
Everything anielarke said. Buying right now in those places is a wash with renting.
The short I was discussing was in Cardinal Glen. The master-bath is a rip out because the owners have allowed the tiles in the shower to come completely free. I don't know how much damage showering in there for another year or more has done, but it's not really a $330k place, its $330k + whatever redoing that shower costs you.
I like Cardinal Glen itself alot though. Japonica's also nice. Haven't been in the other two yet. Check out the sex offender registry if it matters to you, that eliminates two of the garage townhome complexes.
We went to the other one on Heathwick Ct last night too. It's in immaculate condition. The storage space is lacking, especially the bedroom closets, and the kitchen and wood flooring are both too country for us, such that we're not going to move up our timeframe just to buy it, but it's a beautiful place, and if we were prepared to pay $350k right now (which is not the list price) then we'd seriously consider it. It is _so_ well maintained. (and I looooved the master bath) The inspector will have to investigate the signs of past dampness in the laundry area.
Hayfield how many times do I have to tell you, it's not that Hayfield is a bad school (and that was a total strawman on the percent of students going to college, dude, who the heck thinks that?) it's that Robinson and Lake Braddock and West Springfield are "better" AT LOWER PRICES FOR SIMILAR HOUSES!!!! If I wanted bang for the buck I could get it by being near Huntington Metro, but the whole point of Kingstowne/Springfield/Franconia is being near the metro and it carries a larger premium than I'm willing to pay and is lacking the idyllic wooded setting you can get with a little more drive.
Kevin,
I'm just pointing out what I see as hypocrisy. You're mad about the $8k, but I'd bet you cleared a lot more than that. If you didn't, you would have said so.
It would be very interesting to see how a wider $8k would effect supply. I can see your scenario happening. That would be hilarious. That'd be freaking awesome. But I don't have enough trust that that's how it would play out to hope the House goes along with such a waste of money. It's definitely amongst the things that could happen. I'm just of the opinion that lots of things can make sense without being true. But it could indeed make for a really interesting February.
How's that hypocrisy? I'm against the credit because economically it's stupid. There's no defending it. This is yet another thing I think you'd agree with me on. I was against Isakson's plan to up the amount to $15k and make it applicable to my salary range. I think that's sort of the opposite of hypocrisy.
It sounds like they really do want to extend it to move-up buyers. I guess I have been wrong about their primary goal being to prop up prices. It's always been about keeping sales volume high to help the industry make boatloads of money. That's it, simple corruption, nothing more. They will flood the market with houses if they give this credit to move-up buyers. The taxpayer cost will be atrocious, but the market will be fantastic to watch. Who knows how that would play out.
kevin,
Thanks. I think I am satisfied from your answers that my picture in my head of you was wrong. Which IMO is a good thing to have gotten cleared up.
Dude who wrote that thing? Unbelievable! What you bought during the boom? No soup for you! Who came up with 7290? What's going on with the 5 year thing? How the heck is the IRS going to police this? Unbelievable. Just a complete mess... But yeah, as you said, and as CR said, confusing activity with accomplishment. I still have my fingers crossed that someone stops this boondoggle.
Probably the most perplexing part of it is the income limits. Follow this:
# Income eligibility for first-time home buyers stays at $75,000 for individuals, and $150,000 for couples.
# For move-up buyers, income eligibility is $125,000 for individuals and $250,000 for couples.
WUT? That makes no sense. I mean none of the credit makes sense, but there's something contradictory here. It's like they really are pushing the supply end now rather than the demand.
Kevin-
It is possible that they think the low end housing mark has rallied too much and the rest of the housing market is still frozen. If this is the case the move up credit will create some supply in the low end market(I think everyone here will agree there is a lack of supply in starter houses). It will also create some demand for more expensive houses, which I think we can also agree has too much supply and too little demand right now.
I don't like the credit either, but there could be a reasonable justification. It also doesn't really impact me I am mostly looking at houses that are on the boarder of starter/move up so it will probably create an equal amount of new supply and new demand.
Depending on how the bill is worded, another result (unfair IMHO) is that individuals (singles? single parents?) will have even more trouble competing for the same priced house as couples (married?).
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