Please post your local house search updates, MLS finds, on-topic ideas, and links here.
Saturday, November 28, 2009
Subscribe to:
Post Comments (Atom)
Northern Virginia Real Estate Statistics
REAL ESTATE SEARCH
County Assessment Websites
Buy/Sell Without an Agent
Local Real Estate Agents
Housing Economics Blogs
Local Interest
Housing Bubble Links
Eastern Regional Blogs
Western Regional Blogs
- Bakersfield Bubble
- Bay Area Real Estate Blog
- BubbleInfo (N. San Diego)
- Burbed (San Francisco)
- Dr. Housing Bubble (SoCal)
- Patrick.net (San Francisco)
- Portland Housing Blog
- Professor Piggington's Econo-Almanac
- Rancid Truth (Orange County)
- Sacramento Land(ing)
- Seattle Bubble
- SoCal Real Estate Bubble Blog
- Socket Site (San Francisco)
Real Estate Blogs
REAL ESTATE AUCTIONS
158 comments:
Case-Shiller Still Predicts Massive 45% Fall from Today’s Values
Linky
Spider-
You do realize how useless most of those charts are right? The first one draws a trend line from 87-97, which is basically the timing of the last downturn. I could just as easily draw the trendline from 97-07 and say housing prices should rise 50%.
It is also terrible math to draw a straight line on something that should be an exponential.
The first and third charts from your second link are at least somewhat reasonable ways to look at it. Both show that houses are a little overvalued, but several years of inflation could fix that problem.
Geez, spider, is that all you've got.
The history of financial bubbles is that they over correct, not return to the trend line. So, stick your neck out and predict an bust equivalent to the boom.
[Catching up from the long weekend. Responding to some day(s) old posts]
pat said
as for urban redevelopement the
trend was to the suburbs between the 50's and 90's, that trend is ending hard. Boomers are ending careers and sick of commuting,
and the Gen Y crowd likes the city, they hate driving.
This is a Robert-like statement full of opinion masked as fact. Do you have any numbers to back this up?
I am pretty sure that a majority of Gen Y lives in the VA or MD suburbs and not in the city. I'm not sure there is any end to development in the suburbs. Today's Washington Post Metro section has an article about a Silver Spring elementary school with almost twice the number of students than it should have.
All of the suburban school systems are still building new schools whereas Chancellor Rhee is closing schools.
I occasionally hear anecdotes about boomers retiring and selling the McMansions for a condo in the city. But I see little evidence of that here. Everyone I meet who is middle aged and older and lives in the city has lived in the city (or another city) their whole life (many I meet are foreign born who work at the World Bank or IMF). I don't meet anyone who used to live in Herndon or Bethesda or whatever. But as always we are just trading anecdotes and data would be helpful.
I'd like your theory to be true (or at least widespread fear of this happening) because then I could get a discount on a suburban home. Unfortunately, everyone knows that Arlington, Fairfax, Loudoun, Prince William, and Montgomery Counties are all going to be great places to live for the next 40+ years and America is not going to abandon the suburbs. Particularly as more and more jobs move out to the suburbs.
So the discounts are going to come because prices moved away from fundamentals. Not because Americans are tiring of the suburbs.
From the FHA article Harriet posted (which was pretty big news since it does seem Fannie/Freddie are *slowly* tightening lending requirements despite Robert's claim the gov't keeps loosening them):
Emily McCombie, a recent college graduate with good credit and enough saved for a decent down payment, was pre-approved for a $200,000 loan when she moved to Loudoun County from Pennsylvania in August.
McCombie, a teacher, started shopping for a townhouse immediately. But when it came time to buy, she was surprised to learn that her salary and her debts, mostly school loans, did not meet new debt-to-income requirements imposed by her lender. She was only able to secure $185,000.
"It was a big drop for me," McCombie said. "I did find a condo, luckily, and I bought it. But I felt like I had wasted so much time looking at a price range I couldn't afford."
Did anyone else roll their eyes at this woman? First of all it sounds like she's 22-24 so she should not be buying to begin with. Even those of you who bought homes as "babies" (22) were at least married when you did so. I'm not saying this teacher has to wait for a man but at least wait until you know more about the area, where your life is going, etc. People still have a lot of growing up to do in their 20s.
But anyways, I also think it's ludicrous because she could have waited 1-2 years and increased her savings and her salary would have gone up - although Loudoun freezing teacher salaries might be on the table. You can just tell she's going to regret the condo purchase soon enough.
First off, "Case-Shiller" itself can not predict anything, because it is not sentient and is simply an index. To say that it predicts anything is disingenuous and trying to ride the coattails of others.
Secondly, no intellectual support is given for fitting a trend from 1987 through 1997. Had they given one, I might give it a second look. But at this point, it looks more like ad hoc "I could fit a line here and it would look cool".
I guess it's better than "techincal" analysis, but not by much.
I agree with housebuyer that the 87-97 trend line is arbitrary. That being said I do think a 1960-2000 trend line (or a 1800-2000 trend line or whatever was possible) would show C-S to still be well above the trendline. Not 45% above the trend but probably 20-30% above.
NOVaWatcher,
Agreed. Case-Shiller does not predict anything. In part because we are in unprecedented territory. We've never had a boom as large as the 2000-06 boom. Never. We can look to the 87-97 boom, bust, flat period for guidance but that boom was dramatically smaller and shorter (as the graph makes clear).
I do think though that the chart raises the question of why anyone would think this will be resolved more quickly than the 87-97 market? Why would this be over before 2012-14? There's too much stickiness in the housing market even without gov't involvement for this go to quickly. And this time we have gov't trying to slow down recovery.
TBW-
That is basically what the first and third graph in spiders "Linky" link show. The drop for both of these are 13-20%.
HB
"A more comprehensive analysis of the 10-city index based upon a 120 years of data shows current values off 36% and a comparatively modest 20% fall ahead."
now say we get 4% inflation, thats' 5 years to get broke even, and
perhaps 2 more years of transaction cost covering.
but bear in mind,
all those Interest Only's and
ARM's are still tied to LIBOR.
if CPI goes to +4%, Libor will be at 5% and an Arm will be at 7.5%
that will accelerate failures for those people, also a 30 year fixed will be 9%.
Inflation causes all sorts of funny things,
Don't be wishing for High Inflation.
TBW:
http://www.msnbc.msn.com/id/30810275/
http://www.denverpost.com/ci_12020753
http://www.brookings.edu/reports/2009/03_metro_demographic_trends.aspx
http://www.ceosforcities.org/blog/entry/2501
High Energy prices have been moving the needle as much as demographics.
Urban dwelling consumes way less power then suburban dwelling.
that ultra commute from Hoodbridge or Fauqier to Tysons, Ballston or
Rosslyn is still expensive with gas at $3 or $4/gallon.
If you buy a place in Fairfax and can catch a bus to Vienna metro and ride into Rosslyn, it's easy on you and easy on the wallet.
Pat, here's a pgh from the Brookings link:
"The next decade promises massive growth of the senior population, especially in suburbs unaccustomed to housing older people. As the first wave of baby boomers reaches age 65 in less than two years, the senior population is poised to grow by 36 percent from 2010 to 2020. Their numbers will grow fastest in the Intermountain West, the Southeast, and Texas, particularly in metro areas such as Raleigh, NC; Austin, TX; Atlanta, GA; and Boise, ID that already have large pre-senior populations (age 55 to 64). Because the boomers were the nation’s first fully “suburban generation,” their aging in place will cause many major metropolitan suburbs— such as those outside New York and Los Angeles—to “gray” faster than their urban counterparts."
"Aging in place" supports TBW's statements.
FWIW, I know of only one anecdote involving a couple who gave up the big place to move to the city; my other anecdotes are more like TBW's. And around here, some of us boomers (that's a 20 year span of ages, including our President; many of us won't qualify for retirement for a long time) are trying to find bigger places rather than smaller ones, which may force us farther out, even if we might prefer the amenities of being in the city.
Pat, one more thing - I don't have data other than anecdotes, but most women I know who are middle-aged and who might enjoy the stimulation of the city are quite concerned about safety, particularly if they are alone a lot of the time. While no place is entirely safe, obviously, many women (and men) play the odds and weigh the relative safety of some suburbs against the cheaper energy costs of urban living. So while younger males may be inclined to gamble on urban renewal, as you are, worries about crime may mean you have less female competition than you might otherwise have.
Pat-
I am not wishing for inflation. I am still looking to buy a place so I would love to see prices fall dramatically so I could get a place significantly cheaper. I also see no reason why housing needs to correct to fair value in 5 years rather than something like 10. If you look at 88-98 housing was basically flat that entire time.
Contrarian-
I agree that prices will be lower than they currently are. The difference between us is I think they will be down ~10 while you think they will be down way way more than that. As I have said I don't own a house so lower prices help, but I think your predictions are a little ridiculous.
For example I think there is almost no chance unemployment gets anywhere near as bad as the great depression, but if it does interest rates would still be at rock bottom. How do you predict massive deflation and high interest rates.
pat could be right if energy costs skyrocket.
We can now add pat and contrarian to the higher interest rate crowd.
My anecdotes are that people retire in place in the suburbs.
TBW said...
From the FHA article Harriet posted (which was pretty big news since it does seem Fannie/Freddie are *slowly* tightening lending requirements despite Robert's claim the gov't keeps loosening them):
Well, I think the government had been loosening them until now. Yet, at the same time they are doing
this:
A new federal program to support state and local housing finance agencies is expected to involve more than $29 billion in government support, Fannie Mae and Freddie Mac disclosed Thursday.
I believe that these loans will go to people that can't even qualify for FHA. Correct me if I'm wrong.
contrarian, is any of this going to happen before I die, because if it doesn't I don't care.
One of the theories floating out there is that eventually the USG is going to have to tighten its belt after the crisis is over and that will be deleterious to the regional economy and housing prices. Take a look at this proposal:
Democrats push $150B stock tax on Wall Street
If adopted, I think this could be the largest tax increase in history - $1.5T over 10 years.
Regardless, this is the direction the Democrats will take. They will not cut discretionary spending. We'll get some talk about spending cuts, like Obama's latest trail balloon about 5% cut in discretionary spending, but the deficit will be filled by 90% or more of tax increases.
Sorry Pat, but commuter/gas price argument is a joke. We went over this last year, and even did the calculations for what raising the gas price from $2 to $4 did.
In a nutshell, if you drive 20 miles each way, $2->$4 would cost an extra $1k a year (500 gallons a year at 20 mpg, and let's not pretend that commuting in the city is free, either). Do you really think people are going to shell out twice as much for half as much house? If folks can't afford an extra $1k a year, they certainly can't afford a place in the city.
Instead, you'll see what we saw last summer when my wife put her late 90s Civic on Craig's list: it was snatched up within hours by some guy who drove a Mercedes from Ashburn to Tyson's Corner. After all, a couple thousand for a Civic is a helluva lot less.
And a drafty prewar house is going to use a lot more energy than a new energy-efficient townhouse.
$4 gas wouldn't do it. Something higher.
It would need to be something like $10 gas to make the math make sense. If this happened people would start to buy natural gas powered cars. We have tons of natural gas so this is unlikely to skyrocket long term. If both of these became super expensive then maybe city living would make sense, although metro fairs would likely be higher if all fuel prices went up.
It is just speculation, but an interesting variable related to housing.
Am I the only one that would actually be okay with $10/gallon gas? I want to live in the suburbs and I drive 2 hours to visit family at least once a month. I just think it would be worth it to jump start the electric car industry and ween us off of foreign oil. Iran is threatening to close the Strait of Hormuz and could very easily (and cheaply) do it with a couple thousand mines. In fact, that may be how we get to $10 gas - but I'd prefer the government tax our way there so we can adjust slowly rather than in crisis mode.
Sorry for the non-housing rant. It just bothers me how dependent this country has become on others compared to the self-sufficiency we had circa World War II.
I did a very quick google search to show you guys I'm not crazy with the Iran thing.
Iran article
Can't vouch for the article source or anything, but it talks about the Strait of Hormuz and how strategically important it is. It even mentions mines in the last couple of paragraphs.
I work on mine warfare software these days (to clear minefields, not blowing people up), so I worry about these kinds of things on a daily basis.
Ace:
"The next decade promises massive growth of the senior population, especially in suburbs unaccustomed to housing older people. "
My take is the suburbs will prove to be very ill suited for aging seniors.
Yard and house maintenance will continue to suck. trips for all supplies, and doctors visits will become harder, and suburbanites will find it much harder to get homecare, then people in dense areas.
the cities have absorbed elderly people. I don't think suburbs will.
Ace:
High energy prices are more then Gas. It's also electricity and Gas.
When Gas is at $4/BBL, Gas is $10/MCF and Oil is near $120.
that means the pocket book gets hit by Utility bills as much as gas.
when i was in OKC during the oil spike i knew people paying $1000/month for gas bills and getting $500/Month electricity bills.
A small place in the city burns less utilities and saves you on the
gas bill.
What freaks people out is the $100 fillup.
Pat: Just as a reference point, I know of no seniors that live/lived/retired in cities. All of them were in the suburbs or small towns.
Yardwork was handled by the neighbor boy, or for the wealthier ones, professional landscaping crews.
House maintenance, if not handled by the retiree, was handled by a handy man or a local or visiting relative.
Drs visits were handled by cab. For a local perspective, when I lived in Loudoun, they used to advertise a bus service especially for seniors.
The last place any of the people would want to retire would be into the city. To them, that would have been purgatory.
I am not really that fond of electric cars unless we start using more wind, nuclear, or solar power. Right now most of our power is from coal, which is a fairly dirty way to get power to your car.
Pat, everything you say about the disadvantages (such as higher maintenance costs on some big houses, though our little house has cost a pretty penny in maintenance and utilities as well) is true (currently) at least for some people. But there are offsetting disadvantages of living in the city, such as the lack of greenery, space, privacy, security; greater (not less) travel time to doctors, stores, churches, etc., which the elderly may not want to change.
Perhaps just as important is that, in good communities, people become friends with their neighbors, and uprooting and meeting all new people (who may not be interested in meeting them) is a huge cost, particularly for the vulnerable. It's nice to have neighbors whom you've known for years and who keep an eye on you and/or your place while you're traveling.
Add in the transaction costs, and that some counties such as Arlington and Fairfax have been looking into improving services for seniors (perhaps paid for by less spending on schools) if the demographics change, and I think it gets easier to understand why there is, at least to date, less of a shift than some demographers have been predicting.
Remember that once people retire, they don't have the costly trips into the city to work every day. It may cost them less to stay where they are to get to the activities that they will continue.
Maybe one should differentiate by closer-in suburbs versus the farther out. However, my one bit of anecdotal evidence is that an elderly parent bought a house in one of the more far-flung suburbs to be near his/her children and grandchildren who lived there.
Hybrid cars are a good compromise at this time. They are big enough to meet many people's needs and get twice the mpg in some cases.
On suburbia/city debate, both represent completely different life style choices. I don't think you can substitute one vs. other.
Most people would like to raise kids in suburbs for obvious reasons. If you are young or don't plan to have kids, it's a different story altogether.
Ace-
You can also go with a diesel car. They are a lot cleaner than they used to be and also get similar mileage to many hybrids.
housebuyer,
We can argue about the significance of bubble that's left to pop. I agree that 45% projection in this article a little on the pessimistic side.
However, no matter how you look at it, you can't deny the significant downside risk from here. I am getting even more bearish seeing the real-time charts of seller expectations getting back to almost bubble levels.
I think another factor that is a bit strange in DC and that keeps more suburb-to-city transition from occurring is that in many areas in DC, there may be restaurants and bars, etc., but the more mundane needs of the residents aren't as well met, e.g., grocery choices (vs. one grocery if that), Home Depots/Lowes, department stores.
I see tons of license plates from DC and even some from MD when shopping at the Pentagon-area, Clarendon, etc. stores' parking lots. So, many people have to drive or take the metro or cab for day-to-day stuff, rather than fully live in their neighborhoods in the city.
I don't think this is really a debate about city vs. suburban living so much as an attempt to describe why people don't or wouldn't move the city as the kids leave and they age and may need less space.
Robert said - The history of financial bubbles is that they over correct, not return to the trend line. So, stick your neck out and predict an bust equivalent to the boom.
Robert - the point is simple. It has always corrected back to the trend line and many cases over-corrected. I don't see how this can be different this time around given that it was one of the worst bubble ever.
As C-S comes out for November & beyond, you will see for yourself that we are far from done. In the mean time, celebrate the flat prices!!
Not sure how the Straight of Hormuz could be closed on anything more than a temporary basis. Iran would face the force of a couple of carrier groups and the whole thing would be paid for by Saudi Arabia and the UAE.
spider, I feel you are waffling a bit, kind of like you did when you refused to give an inventory number to Anonymous. If you feel this is the greatest financial bubble in history, then the bust should be commensurate.
If we drove 80% above the trend line, then we should drive 80% below, correct? So if trend for CS is 100 and we hit 180, then CS should go down to 20, correct? So, basically the median price in Fairfax County should touch $100,000 from $360,000 now. All figures are approximate.
If this is not going to happen, show me a financial bubble that corrected back to the trend line and the followed the line from there.
if you look at the C-S data,
You will see bubbles followed by a return to the 100 index line. Real estate is sticky and because there is a robust investor community for rental properties it is unusual to see a reduction below the index. However after a bubble one sees an extended flat time.
I would expect a decade long flat era or another 15% drop followed by a five year plan era.
As for trends bringing people into the city it appears there is some confusion between the urban boundaries and the Metropolitan statistical area. I believe there is a strong trend of families whose children have grown up and gone to college who are moving inside the Beltway as they tire of extended commutes. For someone in their 50s spending a quarter of their life driving 66 in from Warrenton becomes significantly less appealing. Many of them are purchasing condos in eastern Fairfax or Arlington and Alexandria. I tend to consider the the service area of Metro as part of the city.
"Robert said-If we drove 80% above the trend line, then we should drive 80% below, correct? So if trend for CS is 100 and we hit 180, then CS should go down to 20, correct?"
C-S going to 20...are you out of your mind? Why don't you go back and read little more about previous busts and what everyone has been saying. You just say things out of thin air without any relation to anything what-so-ever.
Well, one reference point would be the Florida land boom of 1924-25. Prices went up 300-400% and then crashed to rental values less than the taxes and insurance on the properties. What real estate boom/busts are you using to predict home values?
You are impossible to pin down, so I'll stop here.
Two interesting calculated risk posts that should not get lost in the shuffle:
Permanent mods few and far between
CR
The real dirt on foreclosure litigation
guest post from albert
Say you believe that RE will stay flat for up to 10 yrs; what would you do? Buy now or continue renting for that time period? And what would be the basis for your decision?
I suppose that it is much more complicated if you believe a meaningful drop will occur. Under what circumstance would you buy?
I wish I could see into the future, but I can't. I can only act based on numbers and what makes sense from an investment standpoint. If I required absolute certainty (of anything in life), I'd be frozen.
As far as a personal residence, the decision process is a little different. Initially, I just wanted something that I could come home to after work and not be depressed. I wanted to make sure I could get out whole if we needed to sell quickly. I wanted something that I thought would appreciate. I wanted something where we could add value well in excess of the cost of improvements.
Since it seems most here won't "settle" (no pun intended) and the concept of "starter" is no longer applicable; my question is whether you will simply wait until you are 35 or 40 and are able to get something that you are completetly satisfied with and skip the intermediate rung?
Some actually knew that after '03 prices became absurd, other's just lucked-out by being unable to afford to buy or otherwise not in a position to buy. I don't know what the breakdown here would be if everyone was truly honest.
Stating that bubbles always (a) over correct, or (b) correct back to the trendline isn't quite right. If you look at the history of the last bubble, you see cases of over correction, return to trendline, stagnation waiting for wages to increase, and everything in between.
Cara,
Frankly, I find the litigation somewhat boring. The important point regarding this type of litigation is the frequency. I would imagine it is, and will remain, miniscule (sp?) in the scheme of things.
The Notary screwed up? Give me a break! I read some of the BFP stuff, but not much.
It all boils down to greed and the mania caused by it. And the greed goes from top to bottom; bottom being the purchasers.
va_investor,
I think you're right about the totally insignificantly small frequency of judgments like those profiled. In fact, I'd be willing to bet it's a good factor of ten or a hundred fewer than the number of "permanent" loan mods.
However, the combination of the two articles, and the reasonableness of the courts (IMO) tells me that if one actually wanted to "do something" to keep people in their homes that they can't afford, then allowing bankruptcy judges to modify loans is the way forward. Not gonna happen, though, so it's moot.
(back to packing fragiles)
VA Investor,
I think your question is what is the emotional value for someone to own vs renting an equivalent property? For me, the difference is marginal - it could be different for somebody else however. Renting keeps me mobile, saves me headache related to maintenance.
Housing is pure investment decision and probably the biggest one that most of us would make in their lifetime. Even if someone believes that prices will remain flat for a while as the best case scenario, it seems very hard to not continue to rent until things are sane. Because the appreciation (in real terms) will be negative in next few years.
Having said that, in the short term - an investor might be able to make money by leveraging people's emotional decisions including motivation to get the bribe at any cost - as an example.
spider,
Since your only consideration is investment, why not buy a rental? You seem extraordinarily interested in RE and I believe you agree that the low end has fully corrected, why not put your knowledge to work?
Here's a property that just came up on an alert.
FX7212350
1124 Treeside Lane
Herndon, VA 20170
$244,900
How is this not a perfectly acceptable home at a very affordable price? It sold for over 500K in 2005.
VA Investor,
I have considered multi-family rental properties just as a passing thought. Beyond that, I never thought of rental investment seriously as it isn't everyone's cup of tea. It requires quite a bit of energy/time/willingness to deal with renters & other problems. I don't know enough about it as well.
Even though low-end (like the one you posted) might be close to reasonable value, I don't think they will appreciate much in near/mid term. Plus, I wouldn't want to venture anything in rental properties, until I can own one that I live in.
VA Investor, Let me ask you something, given that you do this for living.
How would someone go about getting a bargain from banks or sellers using all-cash deal?
spider,
The "low-end" house I posted in Herndon is not really low-end in my definition. I posted that as a real example of perfectly decent/nice housing stock on the Market. If everyone here is too good for Herndon, then I'd really not expect to hear anymore about the "average" family can't buy a house b.s. Obviously, those here aren't average, young families.
I suggest you join an investment club if you want to learn "the art of the deal". In your mind the world is ending; why would you care about a cash bargain when prices are going to drop 45%?
I never said 45% - you didn't read my prior post. I post it again here:
Spider said: "I agree that 45% projection in this article is a little on the pessimistic side. "
Va investor said: "the "low-end" house I posted in Herndon is not really low-end in my definition. "
"You also said - I believe you agree that the low end has fully corrected, why not put your knowledge to work?"
You seem to indicate yourself that the listing you are posting is low-end, not me.
On the cash-deal, I was just curious as to how this works. I am not making any deals in the current market (cash or no cash) This was just for my own knowledge to understand how all-cash deals work and affect the markets overall. I have come across some really under-priced bargains that never got listed - not sure if they were all-cash or not.
I will tell you, world won't end and prices won't go to zero. At the same time, if someone sells me a property at 600k that was sold for 300k 5 years back - I won't touch that either. You can say I am crazy as an investor or RE agent. But, I am just being realistic.
spider,
p.s. that house may be "close to reasonable value"? What do you suppose the piti is on that? I give up.
spider,
My "low-end" remark was in an entirely different post from the house.
Low-end depends on area. In Herndon it was the stuff that dropped below 100K.
To begin with you said it was sold for over 500k in 2005. I see it at 450k.
Second, I don't know 20170 area well enough or have analyzed the price action during the bubble to say if it's valued correctly or not. So, "close to reasonable" was a first passing thought seeing that it is 33% below the assessment.
PITI on a 244900 House.
Assume 30 year fixed mortgage, 0% down, 4.625% APR
PI is 1259.
Assume taxes of 1% 2400/Year or 200/M
Assume Insurance of 1%.
Figure PITI of 1500/month.
Not bad for a house, really.
"My "low-end" remark was in an entirely different post from the house.
Low-end depends on area. In Herndon it was the stuff that dropped below 100K."
Well, then I didn't understand you well - reading two of your posts together. Personally, Herndon doesn't work that well for our commutes. So, we never considered it. Schools in 20170 don't seem to get good reviews from what I hear.
spider,
450K - my bad. Too lazy to scroll thru the listing again. Not too dissimilar Herndon homes were going for 150K-180K a year ago on Realtybid.
va_investor,
Assuming that all that needs doing is finishing ripping out that kitchen and simply replacing the cabinets, counters and appliances, for say $20k, that's a screaming good deal.
One would have to visit in person with a contractor to see if there are other major expenses, but still one would guess a final price tag of well under $300k. Nice find.
Well, I knew the school stuff would come up. We can't all live in McLean, can we? Herndon feeds into Herndon Middle and Herndon H.S. - same as my nabe!!!!
And does it really matter if YOU want this location? My point is that there is perfectly acceptable affordable housing stock for sale. Dispute it. Argue we are not at affordability for good housing. I want to live on the beach in most exclusive area of California. If I can't afford it, it must need to correct, right?
"My point is that there is perfectly acceptable affordable housing stock for sale. Dispute it. Argue we are not at affordability for good housing. I want to live on the beach in most exclusive area of California. If I can't afford it, it must need to correct, right?
I am sure there are areas that have corrected to where they should be. There are still many that haven't yet. Your point doesn't explain why the areas that haven't yet corrected much (if at all), won't. What someone can afford or not is besides the point.
spider,
I've stated, many times, why different areas have adjusted to different degrees. I really have little more to say on that issue.
Hey, did everyone see the cool new feature on Franklymls - the chart on the middle right that shows the values in the zip over time?
Re: FX7212350, from the description, I would guess that EVERYTHING in the house is original to 1973 (e.g., because there is no description of updates, the photos suggest everything else is old, it's "as is", and heat pumps were popular the due to the energy crisis). So I would count on having to replace HVAC, roof, etc., in addition to the kitchen, baths, and so forth. I notice that the assessed value has also plummeted. So, like Cara, I would have to see it with a good inspector and obviously I know nothing about the neighborhood so have no idea what a good price would be for it.
"popular theN"
Also, notice that house doesn't appear to have a basement (the FX assessment site is contradictory). Big minus for a lot of folks in this area.
Ace,
Obviously, I haven't seen it either. I can't guess about what is original or not.
If I were going to the Courthouse to bid sight unseen (inside, that is), I would do the following:
Drive out there and do a walk around (even if it was still occupied). From that you can tell roof, windows, siding, new or original cac, wood rot, deck condition, etc. Often the exterior tells you alot about the interior.
In this case, I would allow a rough guesstimate as follows:
roof 4-5K
HVAC 5-6K
Interior paint 4K
Interior carpet 4K
Kitchen 12K
refinish hardwoods 4K
bath work 10K
misc 10K
worst/worst 50K
visuals could reduce this. I used to look in windows or enter if vacant and an unlocked door, etc.
In this case, you can inspect it and have some real good numbers.
Then you run the comps.
One other thought - the 2005 listing could provide some insight re: updates. But, you are not buying sight unseen as you would at the Courthouse.
Ace,
I suspect bedroom number 5 is in the basement, but why would you nit-pick 245K?
You realize what is happening/going to happen in the 267 corridor. Out the neighborhood, take a lft on Sterling Road and you end up at the 28/267 future metro or go north to another nearby metro.
VA_Investor, you and I have a very different definition of "nit-picking." Having done multiple renovations of older houses here and elsewhere, I know what high quality materials and skilled labor cost and how much time certain renos take.
And, I don't think you read my post very carefully. I specifically did NOT make a statement about whether $245K is or is not a good price because of not knowing much about the neighborhood or exactly what changes would be needed.
However, if you think it's a great price and that the bank will sell it for that, why don't you bid on it?
Ace,
I've done over 20 renovations, maybe 25+. Five in the past year. I don't know what kind of "high quality" materials go into your ave 250K house, but we aren't talking Viking and Woodmode or marble. Skilled labor is quite cheap right now. There is nothing wrong with Home Depot or Lowes "stock" cabinets. Tile isn't that expensive, light fixtures are cheap as are many perfectly adequate and attractive upgrades.
So, yes, talking about a basement (which is probably present) in a 245K single family 5 bedroom, brick front colonial IS nit-picking.
VA_Investor,
There does not appear to be a basement:
http://franklymls.com/FX7212350
There's no mention of a basement on frankly, and the 5th BR is described as being with the others on the 2nd level. As I said before, the FX site is contradictory.
Now I AM beginning to think the $245K price is not necessarily a bargain, but I will keep my caveat stated earlier about not knowing what it's worth without having a contractor and a look around the neighborhood. The house was listed at $254900 from Sept. 1 to whenever the $10K drop occurred, I presume in the last few days. If it's really worth $244900, I am quite surprised someone didn't bid that since Sept. 1, since that's within spitting distance of the 3 month old asking price.
I'm not going to get into a petty argument with you about nit-picking. You like the house - buy it. I am pointing out the realities of the market as I see them.
Ace,
Your price info is interesting. Was it ever under contract? Maybe I'll take a spin by it tomorrow and see what the deal is.
Frankly, I wouldn't expect a basement at that price. 5 bedrooms up?
Do you agree with my ball-park reno numbers?
I am sure there are areas that have corrected to where they should be. There are still many that haven't yet. Your point doesn't explain why the areas that haven't yet corrected much (if at all), won't.
Here and here is why.
Robert - I get the stimulus spending - you do realize it only goes downhill from here. I am sure you know there is an expiry date to this call option.
Robert, plus - what does the stimulus have anything to do with the relative insanity in correction for different areas which are not too far?
Robert - I get the stimulus spending - you do realize it only goes downhill from here. I am sure you know there is an expiry date to this call option.
It'll be replaced with reckless spending by the administration on health care, energy, education, and finance.
Robert, plus - what does the stimulus have anything to do with the relative insanity in correction for different areas which are not too far?
Jobs, wealth, and very few speculators or underwater mortgages. Also, too many buyers. Maybe you have a plan to chase away the buyers? They're relentless.
"Robert said - It'll be replaced with reckless spending by the administration on health care, energy, education, and finance."
If your wish comes true - that will be armageddon for our economy. I am sure you heard - there isn't any free lunch or for that matter wealth created out of the thin air. Be careful what you wish for.
Fortunately, for this country - I don't think it will come true.
Geez, watch a few episodes of House Hunters International and I'd say any market here state side is a steal. Maybe population growth projections would be a better gage of future housing costs than past statistics
Hey Spider -- just for the record, are you going to predict the inventory count to constitute your "stampede" next summer? So far, it seems like you are ducking it...
I said we hit 10,000 units in greater northern va by next summer (plus or minus 20%). This will put us right where we were at the beginning of 09 when we were screaming for the "shadow inventory" to hit.
So whats your number???
Anonymous,
I will stay away from predicting specific inventory numbers given many unknown factors - specially the outcome of the mortgage modification program and "shadow" becoming "not-so-shadow" inventory.
I know it will be much higher than what we have now - you will notice it once C-S slides.
What's up with listing agent changes
on REO's?
do the LA's get pissed or the
banks want to swap them if they don't move them?
I'm with spider on this one. I see nothing happening from preventing real estate continuing to drop even in this area.
Lock in your current rates, and rent your next place. That's what I'll be doing while j6p enters bidding wars with extended bribes.
va_investor,
Every single one of those estimates is low by 1-5k compared to what I priced out in order to make an informed buying decision.
The difference, I believe, is between what one would buy if you're trying to maximize profit rehabing someplace to flip, and what one would buy if you're planning on living there for 10-25 years.
Thus, just one more way that an owner-occupants costs will be higher than an investor's costs.
Now, given the success of Capital Investments LLC, clearly many many people are happier with the choices an investor would make than they would be if they had chosen it all themselves. Thus one could argue that an owner-occupant "shouldn't" spend any more money than they absolutely have to either. In which case, other than the roof (which is $3k less than my friends just paid in Reston for a townhouse roof replacement) and the low-ball on the HVAC, your numbers are about right. Still, 14k for the kitchen.... It's 1k for formica counters alone, and 1.2k for a white frig, dishwasher and oven.... I don't think many are going to get away with 14k total.
Personally? I'm guessing the best price for a future owner-occupant? Would actually come from a rehabber buying and fixing it up. In my neck of the woods anyway (I know, I generalize from this too much) most buyers would rather buy a $330k place that's been totally redone than a $245k place that still needs all the work.
Cara,
I'm pretty confident with my numbers. I probably don't pay as much as a regular one-time homeowner customer would pay.
I actually believe that the number could be far less and the property flipped for 340K this spring. Perhaps a winter project? I don't want any more rentals.
As there are only 2 places for sale in that extended subdivision (this being one of them), I don't think it will last long. Since DOMm is 1 and DOMmp is 14, I can't figure out the Sept. listing (which doesn't show #of days).
My point was not specific to a "steal" vs very decent affordable housing.
Why do you think that the kitchen would "need" to be ripped out immediately? Why wouldn't a couple just take their time and upgrade over the years?
Va_investor,
At a minimum there is no frig, no dishwasher I could see, and the banged up stove may or may not be functional. (probably just needs a $10-$30 part). The bottom edges of the cabinets showed either removed glue or signs of serious deterioration. You'd have to see it in person to know if the structure of the cabinets are fine, and refacing down the road is the best plan, or if they need to come out now.
I'll just point out that even at my guestimated renovated flipped price of $330k (or yours of $340k) I'd say this was a good price for a SFH in this area. Although, if it really doesn't have a basement, it's going to be a tough sell later on (though, IMO that makes it a better REO purchase, no basement, no basement to get flooded and moldy and disgusting. That's a win).
I would say regardless of exactly how much it costs to renovate it does show VAs point that the median family can live in a decent house. After all renovation is done it still will be less than ~300K, which is affordable for the median Nova family. This house may not be amazing, but it is definitely better than just functional.
housebuyer,
agreed. This is most definitely a reasonable, affordable single-family home, in one of the growing suburbs of Fairfax County, with a commute that is convenient for many.
I think we'll see more opportunities like this one throughout the winter, spread out over the county. If you want to buy and fix up an REO, I think last winter was better, but this winter should have more of them than next winter.
Cara,
The basement issue is already priced in. After I looked at the Frankly Comps and saw the subdivisions included, I remembered that a relative lived off of Crestview at Builder's Road and that none of those houses have basements. I'm not sure about some of the other neighborhoods included with the comps. People seem to make-do with the garage for storage.
Anywho, I just ran into some neighbors at the coffee shop. They had TG dinner with a L&F Agent in Great Falls. One topic was the RE Market. The agent told of a recent flip. It was on the market for 1.2 and didn't sell. Bank foreclosed and listed it for 750K. Investor bought and did paint, carpet and minor crap. Listed for 1.2 and sold immediately. Annectdotal, of course. I bet the investor put in less than 25K.
Va-investor,
Great Falls real estate is moving again? That IS news. Should be music to Robert's ears.
Yup some people make a killing some of the time flipping houses. Guess they're not sharing the stories of the three houses before that where they hadn't timed the market so well. (the carrying costs and transaction costs probably exceeded the renovation costs in that particular case).
Cara,
That story was told by a disinterested party. Of course there are idiots out there, just as there has always been. You've seen enough recent flips to know that the smart money IS making money.
It's the one's who insist on "turn-key" that aren't making any money (equity).
va_investor,
Yeah there were a number of townhouses we looked at that I didn't want to buy, basically because what they looked like right now? Was the best they were ever going to look. No room for improvement whatsoever. Absolute top-dollar right now.
Our appraisal came in!! The appraiser seems to think we got a deal! I agree.
just the termite inspection left to go, as far as I know...
Anecdotally, there are tons of old people in north arlington. We are the only family with children still at home on our whole block. Oh, and the only renters. Everyone else is oooolllld.
Nice find, VA Investor. Not sure about that school pyramid, though.
Cara, I loathe packing! How is it going?
Hmm, just read the rest of the comments. What's a realistic estimate for a kitchen re-do if you don't have insider connections like VA investor? 14k seems really low to me. Just curious. Not high-end, just regular-people stuff.
Meshell,
Just made a dent. Filled all the appropriate boxes we kept on hand. I'll have to go buy more. (These particular fragiles are worth paying for boxes, sentimentally anyway). My mom's china all stayed packed from the last move.
Giving away three kitchen-sized garbage bags of clothing, one box of books, and moving another box of books to my husband's work helped too.
With the holidays we'll be finding any little chunk of time we can to pack. It feels really good this time being the last time though.
Spider said...
"I will stay away from predicting specific inventory numbers given many unknown factors"
Just so you know -- its common practice around here to be vague so people cant call you out when your prediction is wrong. Hopefully thats not the tact you are trying to take.
"I know it will be much higher than what we have now - you will notice it once C-S slides."
CS should start sliding next month as it does every year as part of its seasonal pattern. Surely you dont expect any of your stampede to start before the spring do you?
Anonymous,
You changed your tune already dude? You said prices were going to be flat for years. Now you are saying it will go down...it is seasonal...later you will say ..oh now interest rates went up..blah blah blah ....so prices are sliding..I am at least not predicting something that I will have to eat - which u seem to do on a daily basis.
For the records, I already predicted 155 for C-S for this region. Let's see who is right..your original "flat" forecast or mine.
Anonymous - I would also like you to look up "stampede" word in dictionary...
Anecdotally, also over TG dinner, a cousin got a $470K loan for 4.75% for a new purchase. Not sure points or DP.
Robert said
Regardless, this is the direction the Democrats will take. They will not cut discretionary spending. We'll get some talk about spending cuts, like Obama's latest trail balloon about 5% cut in discretionary spending, but the deficit will be filled by 90% or more of tax increases.
Tax increases lead to gov't spending cuts or more limited growth. People start to remember that gov't spending will affect them.
When was the last time we got serious about gov't spending? After the 1990 and 1993 tax increases. When did we last go nuts with gov't spending? During the 2001 to present period. Do you think maybe people are/were blase about runaway spending because the last tax hike is now a distant memory (1993) and we've also cut taxes many times since then (modest changes in late 1990s and then large tax cuts in 2001-03).
A lot of libertarian/fiscally conservative organizations point out that part of why we have runaway spending is because very few Americans are feeling the cost of high gov't spending.
Va_Investor,
I thought the Herndon house was a good find. I am not sure why there are so many negative comments about the schools. Herndon High and Herndon Middle are very representative of what the FCPS student population actually looks like.
pat said
My take is the suburbs will prove to be very ill suited for aging seniors.
Yard and house maintenance will continue to suck. trips for all supplies, and doctors visits will become harder, and suburbanites will find it much harder to get homecare, then people in dense areas.
the cities have absorbed elderly people. I don't think suburbs will.
If we are talking the 60-80 age range then I think most Americans (even people not that healthy) can handle suburbia and driving.
As for yard work -- many people in their 30s and 40s pay people to mow the lawn. Anyone who has retired can afford to pay for lawn care. And I've seen men in their 60s mowing their lawn as well.
When people start to get really old or frail that they cannot drive anymore or handle basic tasks they are probably not meant for suburbia or urban living but an assisted living community. Or sometimes living with a child.
Anonymous,
If you think winter will bring seasonal adjustment (don't disagree) - what makes you think this summer wasn't a seasonal move flat to up. That would mean the trend is still down, which means bottom isn't in. This means your prediction of flat prices isn't a good one. I think you seem to be conflicting yourself one more time!!
Va_Investor asked
my question is whether you will simply wait until you are 35 or 40 and are able to get something that you are completetly satisfied with and skip the intermediate rung?
Some actually knew that after '03 prices became absurd, other's just lucked-out by being unable to afford to buy or otherwise not in a position to buy. I don't know what the breakdown here would be if everyone was truly honest.
I was too young to buy in 2003. I was not in a position to buy until late 2007.
I will own a place before 35.
I can currently afford homes I like in areas I like. I think they will continue to go down in price. I view the savings as securing an earlier retirement. :) Or perhaps I'll spend the same amount but get more square footage.
va_investor/tbw
I think everyone already knows my situation. Luck. Given that I used to often lament how all of my friends and family bought during the peak, it should be evident that I recognize it as luck of fate that I wasn't in a position to make the same mistake. (although none of them have been seriously hurt by it yet...)
Wasn't in a position to think about buying until 2006 due to the inherently transient and mobile nature of my career up until then. Will turn 35 not too long before closing. Am shucking out the $80k of saved funds to skip the housing ladder.
Va_Investor,
FX7212350 looks nice to me and I'm on record liking Herndon HS. If I were going to spend a career in Tysons Corner or Reston or Dulles than I would very much be seriously considering Herndon. However, barring a change in where most legal jobs are located I'm going to be spending most of my career in DC. That means that anything west of Hunter Mill Road is pretty tough to justify.
I have encouraged some of the Tysons workers here to look further out. I'm not sure why they want to compete with DC and Arlington workers in Vienna/Oakton etc. I'm willing to put up with a 45-60 minute Metro commute. I am willing to put up with that long commute for a house. I can't afford a house in North Arlington or McLean (where I probably could get the commute down to 30 minutes or even less in some parts of NArl).
Ultimately we all decide what we are willing to put up with. In fairness, some of the Tysons people on here (like kevin) are looking at TH instead of SFH so they sacrificed size of home for shorter commute.
I think if you've been reading the comments here that no one here is demanding commute, size of home, school pyramid, etc all be 100% what they want. I don't see any evidence anyone has demanded all of that be in their first home or even their 30 year home. So I think you are just wrong to say no one is settling.
Cara,
already decided against the FHA assumable loan?
MM,
Yes. For a number of reasons. First and foremost because for it to be useful, you need two conditions. (1) home prices to be lower than now, (2) rates at the time of sale to be higher than 6.5% to cover the premium you're paying for the FHA insurance.
I'll take the self-insurance of a DP and a lower monthly cash outlay.
Besides, we wouldn't have won the bidding if we had been another FHA buyer. So we reduced our purchase price by some unknown amount (probably no more than 1%).
For this purchase amount we would need to be allocating more than just my salary to cover the monthly nut if we had put less than 20% down.
More government intervention.
A quote from the original Terminator - I replaced a few words:
Kyle Reese: Listen, and understand. That Government is out there. It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever, until Housing Bears are dead.
Robert - again, there is no free lunch - there never was, there never will be.
If your wish comes true - Dollar will crash, commodities skyrocket - economy will be in a dumpster. Even if that's what you want, housing will be the last thing on anyone's mind.
If anything, housing bulls should want deficits reduced and economy to get better. That's the only chance you have to get the long term fundamentals of housing to get better.
spider,
How is the federal government "shaming" banks into making livable loan modifications going to create higher federal deficits or turn our economy into toast?
Robert,
I like the terminator reference, but I didn't see a lot of meat there in terms of what the Government was actually going to do. To misquote the Holy Grail, "what are you going to do? bite my knees off?"
Cara - Banks get paid for every modification they make - not a lot..but it adds up.
But, more than that, my reference about economy was related to robert's following quote:
"Listen, and understand. That Government is out there. It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever, until Housing Bears are dead."
Original plan was $75 billion. Some of the incentives are like:
Cash incentives: To encourage participation, servicers will be paid $1,000 for each modification and will get an additional $1,000 payout each year for as many as three years, as long as the borrower continues making payments. Borrowers, meanwhile, can get up to $1,000 knocked off the principal of their loan each year for as many as five years if they make their payments on time. Neither party can receive the cash incentives until the modified loan payments have been made for at least three months.
spider,
So you were responding to a humorous vague threat with a totally serious doomer threat.
Yes, there is indeed money involved. However, given the expected success rate, the likelihood of any servicer actually recieving three years worth of $1000 payments is pretty small. If in the same time, the local governments are actually recieving their $3k in property taxes, then net to the government as a whole it may be wash. In fact if you believe the federal government would step in to help the states, which help the localities, then if this can actually prevent "unnecessary" defaults and declines, this could be a very effective method for maintaining tax revenue...
Loan modifications of prior mortgages are mostly irrelevant. Delaying foreclosures just delays the inevitable. I'm patient so I don't really care.
What really matters is gov't intervention in the current mortgage market -- lowering mortgage rates and having FHA mortgages that serve as the new subprime loans. How long that continues is what matters.
What's interesting though is that FHA has been around for a while and was always sorta subprime. It would be interesting to see why they were rarely used in the past. From what I've read so far they sorta had a social stigma of being for the poor. I guess that stigma is now gone.
Ace,
I was driving along Glebe Road the other day. A little north of the intersection of Glebe and Old Dominion they are building something that is gables overload. I couldn't tell if it was someone's new house or something being built for Marymount University. Not sure if this had been brought up before but thought I'd note it since you've mentioned gables overload in some newer construction.
Here's hope that at least some people in power are preparing for the day that fiscal sanity is restored.
Fed moves to drain some money out of economy
I was driving down 28 this weekend and saw this building. If there is a monument to the housing bubble of 2005, this would have to be it, in our region anyway. Big "For Lease" signs underneath the Long and Foster signs.
One other point for TBW, as I was going through the toll booth at 267 and 28, I noticed a Cadillac Escalade parked outside. I always see one car parked there and assume it is the booth operator's.
Cara,
Certainly the teeth the Treasury is putting in the mortgage mod program is not very significant. But, it reinforces the strategy of the Fed/Treasury/WH/Congress to stop the bleeding in the housing market. Listen, for all I know, the 10 year treasury could spike to 7% tomorrow morning, putting an end to all of these actions. But, as long as investors are going to keep buying our paper, the USG is going to attempt to stop deflation by any means possible.
Here's something I don't get. Robert and others say "it's different here." But what is going on in DC is really no different than what is going on in most markets. DC boomed from 2000-06, saw a bust in 2006-09, and then recovered slightly in 2009. If you look at DC's Case-Shiller on a graph it's not notably different from the 10-City Composite or 20-City Composite.
According to Case-Shiller the following cities saw their C-S index go up between July and August and/or August and September:
Atlanta
Boston
Chicago
Dallas
Denver
Detroit
Los Angeles
Miami
Minneapolis
New York
Phoenix
Portland
San Diego
San Francisco
Seattle
Tampa
Washington
The city that went up the most is not Washington but San Francisco. Here are the only cities that did not improve in either two month period:
Charlotte
Cleveland
Las Vegas
So pretty much ALL of the nation's major housing markets are slightly recovering. I must also stress that the strongest housing market recovery is in San Francisco which is in a state with one of the highest unemployment rates, state gov't practically bankrupt, and losing jobs left and right to here (although the ones we've noted were from LA or SD although note those markets also are going up).
So you can quote Stephen Fuller all you want but that does not explain why Phoenix, San Fran, Chicago, Boston, etc are doing well too. There is probably a Stephen Fuller in every market (and a Robert) explaining why "it's different here."
tbw,
r u referring to these?
i seem to remember at one point they're listed as shorts but my memory has been failing me recently so FWIW...
Robert, I hate that building. Glad L&F is getting a dose of their own. The building is just hideous and I agree, it is the poster child of the housing bubble and arrogant industry that profited so heavily from it.
Did anyone notice real-time chart on franklymls? Something similar to Redfin, but more recent data it seems.
For many zip codes in this region, we seem to be almost back to March/April lows. I am curious to see the C-S come out for November.
Robert said
I was driving down 28 this weekend...One other point for TBW, as I was going through the toll booth at 267 and 28
I can't get past the notion that you waste money by taking the toll road on the weekend. I can't think of anywhere you would be going where the toll road would be noticeably faster than Route 7 or other roads. Since you live in Great Falls you get to Route 7 well before you get to 267.
Even during rush hour I'm not sure I understand it. But perhaps during rush hour the toll road would be quicker than Rte 7 or Georgetown Pike. Although I doubt it.
Linky
MM,
Yes! That is it. Someone on this blog always knows the answer.
Perhaps it will look less crazy once built but in this quasi-constructed phase it's in now it just looks like gables overload. I guess because unconstructed it looks like one massive home (instead of four attached homes).
I think it's just a weird place to build expensive homes like that. You have somewhat busy Glebe Road right in front and then Marymount next door. I think the land is better used for more faculty/student housing (although I don't know much about what's going on at Marymount so who knows if they need that.)
TBW and MM,
Gablemania has struck! That drawing of those houses on Glebe is hilarious - or sad - or both.
On the other hand, remember those contemporaries in Falls Church that looked like blocky apartment buildings? They have been very hard to sell. Maybe a few gables would have helped them.
Spider -- Sorry you are getting a bit tweaked because I called you out on your stampede comment. I figured you wouldnt be able to define it. So, as expected, you backed off.
Nothing to be ashamed off. Its just the way things go around here -- vague predictions about a "stampede" of inventory, without
any real numbers to back it up.
I hope these graphs will help you understand. DC has held the most bubble gains. San Fran was hammered worst than any city listed, so not surprising that they would pop a little more.
Anonymous,
I don't think that's correct. I am posting it for your benefit from dictionary.com:
Stampede: a sudden, frenzied rush or headlong flight of a herd of frightened animals, esp. cattle or horses.
This doesn't have to necessary lead to enormous increase in inventory - it could occur with a sizable increase and additional motivation to sale at lower prices with the realization of investment thesis going wrong.
You seem to be only stuck in your 10k inventory number with nothing else to point at.
As far we are pointing each other out on numbers - I said 155 or lower on C-S next year. What's your number? This seem to matter much more to most of us than your other number.
Spider
I don't know when but it will return
to 100 on C-S.
it did that for 50 years, it will again.
good thing we are at 300 to 155, so
3/4ths of the way there.
Will it overshoot? well it depends if the depression gets worse.
"it depends if the depression gets worse."
That's the question more that any reading of the Case-Shiller entrails.
While all the parts of the economy are interconnected, it seems provincial or shallow to focus on the cratering mcmansions of Manassas as the problem or opportunity.
Similarly, noticing that Immunington and Immunidria are holding value doesn't help if you worked at Bearing Point or Freddie Mac and lost a half million from your pension.
I don't think the answer is gold (sorry contrarian). It seems that a total fiscally conservative lifestyle package is the answer.
Perhaps I watched "It's a Wonderful Life" too many times but renting a shack in Potterville isn't the answer either.
I like the "cutest, little home you'll ever see" built by the Bailey Building and Loan.
Current state of NOVA housing market: Not as strong as I thought it would be considering:
#1 Tax credit extension & expansion
#2 4.5% 30-year rates
#3 Dow Jones 10,500
Maybe it is seasonal or maybe inventory is so picked over that the only homes that remain are priced 10% over recent comps or so totally unlivable most buyers are balking.
Spider -- from what you are saying now, the so called stampede could be a small disparate group of sellers who are suddenly struck with fear and panic (a,la a stampede). If thats all you were predicting from the start, you are predicting essentially a non event which likely will have little impact on inventory levels, much less prices.
In re: what I think will happen, I believe the CS will trade within a range of 160-180 (low in the winter, high in the summer) for years to come -- essentially a sawtooth pattern. So we may not be that far apart if you concede the idea that the bottom may be 155 (if I unerstand you correctly)
"Pat said...
Spider
I don't know when but it will return to 100 on C-S.
it did that for 50 years, it will again."
Wow -- It just amazes me how misinformed people are even this late into the downturn.
Pat -- Just so you know, that assertion of yours is just flat out wrong. That graph you see showing CS at 100 for 100 years is INFLATION adjusted -- it is not representative of the nominal number posted on the CS index.
Look at the DC number Harriet posted a few days ago. In 1987 DC was at 69.79, and traded below 100 for 13 years. Yet, compare that to the inflation adjusted "always at 100" graph, and you will see a different story.
So again, absent a catastrophe, DC will never ever have a CS value of 100 again. If you expect to see that -- an actual value of 100 posted next to DC, you will be sorely mistaken.
Spider-
If you look at page 67 it has two charts of housing prices. Both claim the national adjustment in housing prices should be 5-10%, which is much lower than all of your previous graphs. This presentation was made by Whitney Tilson who has been a housing bear, so I don't think he is being overly optimistic.
http://www.moremortgagemeltdown.com/download/pdf/T2_Partners_presentation_on_the_mortgage_crisis.pdf
Housing bulls and L-shaped theorists...spider is irreconcilable. You are wasting your time.
Robert said...
"Maybe it is seasonal or maybe inventory is so picked over that the only homes that remain are priced 10% over recent comps..."
I agree here. Inventory is seasonally low now, and what is out there is picked over and 10% (or more) priced over comps. Only the delusional sellers are still left holding the bag, as reasonably priced homes are selling. Now if only there were a way to get across to these sellers that they are delusional other than waiting them out, then I might actually get into a house this Spring.
Robert: "Current state of NOVA housing market: Not as strong as I thought it would be considering:
#1 Tax credit extension & expansion
#2 4.5% 30-year rates"
That's because you're overestimating the fundamentals. I'm not going to disagree with you about unemployment (a caveat I feel I must make in every comment so you don't derail the discussion). But consider that those drastic means have been made to manipulate the housing market, they are temporary, and a slight bump is all they have given us. This is because prices are still way too high and there are very few buyers out there with a down payment.
Anonymous,
I always maintained double digit correction in 2010 & C-S 155 as the bottom. This is far from your flat estimates - c-s is at 180 right now.
You do realize that 155 is a dip below the earlier false bottom, I assume. This isn't a flat forecast if you almost agree with me. Don't forget - national C-S will have to correct much more and the impact on stocks/commodities will be significant.
Spider,
I think you need to break-out your preditions by price tier. My belief is that anything under 300-400K is done, done, done. In this tier, I believe there was an overcorrection and that we will maintain "the bounce". Perhaps wishful thinking on my part, but rental parity is hard to argue with.
I've seen many, many shorts fall-out only to come back on (and go under contract) at higher prices.
My guess is (absent the foreclosure tsunami - which is a longshot) the mid-tier will drift lower and upper tier may just freeze.
Kevin,
Absolutely, prices at this level can't be sustained when the life support is pulled.
Also, even though the inventory is low - homes are not selling unless priced reasonably and at a sizable discount in most cases.
Va_Investor,
With the downward trend - Don't you think there will be some impact across the board - may be not as much on below 300/400k.
So, let's say for argument's sake, mid/high range properties come down by let's say 100k (just as an example) - lower priced properties will have hard time maintaining the current bounce or the prior bottom. I guess it will also be different by areas - as they corrected in different ways.
spider,
You fail to account for the fact that the vast majority of foreclosures ocurred in the lowest tier. Would you not agree that distress sales are/were the most heavily discounted? I'd be very surprised if we revisited the lows in that tier. I've watched prices steadily increase since last winter.
Anon
You can't talk inflation and then
C-S in the same sentence.
C-S is inflation adjusted.
If you use the DC Realtor or OFHEO index those aren't inflation adjusted.
C-S reflects gravity, which shall ultimately prevail.
Spider
There are three markets (Lo, Mid, High)
Lo was Outer burbs,exurbs, condos, townhouses.(100-300K)
Mid is beltway burbs, luxury condos, townhomes, old small SFH
(300-700K)
High is Desirable neighborhoods
(G Town, Palisades, bethesda,
North Immunington,Old Imunandria,
Bigger houses, luxury townhomes, 700K North)
Now the low was lots of subprime,
lots of bubble (80K TH going for 240)
The Mid was bubble from people moving up (Sell the hoodbridge
Townhouse for 240, net 160 buy
a 400K SFH in west fairfax or
loudon with 160K in get 240K
IO Mortgage)
The High was Mid people moving up
(Sell the Old SFH in Fairfax city
for 600K, having bought at 200K
in 1994, buy Million dollar McMansion, put proceeds in,
move from 200K Mortgage to
400K mortgage IO)
So the low had zip equity, went underwater immediately. when payments increased, or merry go round stopped, mail in keys, or get
foreclosed. Rent cruddy apartment,
be freeloaders with family.
The Mid have seen their equity
vanish, are still struggling with
payments, but are wiping out
savings, hoping for hope.
The High have seen equity vanish
but have stronger incomes and
can support payments.
The mid are wiping out retirement funds to pay mortgages, at some point that will stop.
we are already back to prices of 2004, we should retreat to 2003,
perhaps 2002.
When the game ends, it ends.
Given that the $8k only really affects the lowest tier, I'm going to have to disagree with VAinvestor that the low tier is done.
Pat-
CS has an index that is inflation adjusted although it is for the entire US and is not updated very often. The index that everyone here talks about is the DC index, which is not inflation adjusted. So the index that is 180 is not inflation adjusted.
pat,
This one isn't inflation adjusted. 2003 puts us at about 155 - what I think we will get to at the least.
Pat, that's actually a very good generalization of the different tiers. I think the middle tier though probably has a lot of people that didn't transfer all of their equity over, and spent it in large part on b.s. Therefore, I wouldn't assume they're doing as well as you're suggesting, not that being underwater is doing well. I think a lot of them are severely underwater.
novawatcher, totally agree. It's ludicrous to shout the end-game of the lower tier price drops when the future demand has been soaked up like this. More room to fall, no doubt.
(sorry for the repetition...)
which part of the low-tier?
The stuff VA_investor is looking at and has been pointing out for months is cash-flow positive. How much more incentive could one possibly need than that? If landlord investors can make more money buying these condos and townhouses to rent out, than they can with other investments, then you have a very solid bottom.
To undo that you'd need a much weaker rental market than we're actually seeing, or a lot higher interest rates. Keep in mind that non-owner occupants can't get 5% now anyway, so going from 6.5% interest to 7.5% interest isn't going to be as much of a payment jump per 100k borrowed as going from 5% to 6% is because of the amoritization schedule.
So for stuff that's at or near rental parity, there's a real investor based bottom that's not that far beneath there. If there's money to be made, money will flow there, don't worry about it.
I know, most people on here who are even thinking about the bottom tier are thinking about the highest end of the bottom tier where cash-flow positive hasn't been met, and rental parity may be still elusive. But let's be clear, there is a segment of the market that really doesn't have any more room to fall. (without rapidly attracting investors to bring it back up again).
Cara, correct, I'm not talking about the <$100k stuff. I'm talking $300k/$400k which is more like lower/middle tier. Mostly cash-flow negative with room to fall, but affordable for most first time buying couples out there. But I think you're right about the really cheap stuff, that will continue to get snagged up by investors and single first-time buyers (what few actually exist, that is).
kevin,
In that 200k gap you left open...
Some of the stuff up to 200k is also cash-flow positive, maybe even higher in Arlington/Alexandria. Much of the stuff between 200 and 300k is at/near rental parity, such that if an owner-occupant wants to buy it, it "beats" renting and there's a limit to how much equity they could lose (due to the potential investor floor).
But given the variance across all of NoVa, I do see why you made your categories extreme such that they'd have a chance of being more universally accurate. (as opposed to my Burke/Springfield centric view of the universe)
Cara, I often forget to caveat the areas I'm talking about when I'm using examples. For the uber-cheap stuff I'm talking about, it's mostly in PWC and lower-end Cville like this: http://franklymls.com/FX7005833
for $130k, you'd be paying less than $1000/mo and could easily rent out a 3BR for more than that. Closer in, no such deal.
"Spider said...
I always maintained double digit correction in 2010 & C-S 155 as the bottom. This is far from your flat estimates - c-s is at 180 right now."
Spider -- I never said CS flat at 180. Ive been saying flat at 165, 170, 175, etc -- the assumption being there is normal seasonality but not much in YOY increases or decreases. Again, since we are talking numbers, I will go on record, years of 160-180 range.
"pat said...
Anon
You can't talk inflation and then
C-S in the same sentence.
C-S is inflation adjusted."
Pat -- I was going to give you a hard time as you continue to be wrong about this, but I see that several others have piped up in the intervening hours and confirmed what I was saying.
Again CS that shows DC at 180 is NOT inflation adjusted. Hopefully, that gets through to you this time.
Certainly Investors help establish a bottom as properties have a Cap Rate that establishes some value.
The key is, looking at what future
discounted cash flow is and what the
market holds.
With all those condos and apartments sitting vacant on wilson and calrendon BLVD, i'm not sure condos have a great future, until it's absorbed and, until the
condos prove to be stable...
A big MFDU 200-800 units is great business. have a full time super, have a live in night super, have a
contracto crew to do big jobs, like screen changes or filter changes.
have a full time rental agent
and a manager, that's good business.
owning 3 condos in ballston?
depends, if a unit goes vacant for 5 months sure can mess up your cash flow.
owning houses? it's okay if you live nearby, but it's sure lame
if you have to travel.
I wanted to get a townhouse for cheap in hoodbridge last year for 60K, but my Girl said "You will go insane on your 5th trip to woodbridge to show the place"
and she was right.
I'm watching arlington and the
transition zones of DC because that's what we know and where we want to be.
everything else will be lame.
Post a Comment