Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
P.M. edition - Please post your local house search updates, MLS finds, on-topic ideas, and links here.
The United States Of Wusses
Quote:"Today, we are led by men like Ben Bernanke and Tim Geithner. Men who are so afraid of the consequences of making people pay for their profligacy and stupidity that they have restarted the debt bubble (free money and bailouts for Wall Street, FHA, cash for clunkers) and made Too Big To Fail a national policy."
Great article. Volcker is a hero. The guys running the show now don't give a hoot about our country's financial future. Just keep throwing cheap money after it, propping up bubble markets and kicking the proverbial can down the road.
But we don't have run-away inflation.....
Cara-I agree there is no reason to punish the economy and innocent people just to punish those who spent too much money. If we start to run into problems like inflation then I would hope the fed would raise rates, but as long as inflation is basically non-existent they may as well keep rates low. It also allows them to borrow cheaply, which would be necessary even without all of the bailouts due to lower tax revenues.
Commodities will kill what remains of the uptick in the economy. There is no free lunch - we got to pay our dues for the excesses and de-leverage. We left capitalism way behind somewhere. This is a phony economy driven by government & the fed colluding with the wall street. If you think printing money can create wealth - I have news for you - it actually doesn't....
can someone help a 'math challenged' fellow blogger?i'm trying to determine whether it makes sense to, in order to avoid PMI, borrow some money short term. for example, say i'm buying a 500K property but can only put down 80K, so i'm 20K away from not having to pay PMI. say i borrow 20K from somewhere to closing, so no PMI. then as soon as it's available, i refinance and take out 20K 'equity' to pay off the 20K borrowed money.i don't know if this is possible. and obviously the sooner it gets paid back the cheaper the cost of that 20K 'loan.' if this can be done within 6 months, i could even take advantage of credit card's cash checks which usually carry a <3% promotional rate for 6 months. thoughts? TIA!
Call me a wuss, I don't give a shit, as long as I don't lose my job and all of my money. Fuck you capitalist purists. Capitalism failed. Thank God we have leaders that understand the consequences of doing nothing and letting the economy run its course. I will if I need to, but I'd rather not be holed up in my house with guns and gold and only going out in the daytime to scrounge for food.
spider,Create wealth? The Fed's not trying to create wealth, it's trying to erase debt, and avoid deflation. In fact if you think of wealth as being held by the part of the lenders then it's actively trying to destroy wealth....You seem to be speaking from a playbook of economic truths that the rest of us don't know where you're coming from. I'm working mostly from Krugman and Calculated Risk. What are you working from?
MM,refinancing, in VA, is expensive, at least 1% of the loan amount, but others may be more expert.PMI through FHA has a time limit, not an LTV limit, but normal PMI dissappears once either the LTV is reassessed by the bank to be under 80% or you've paid back the loan to that extent. So you could just as easily refinance to get out of the PMI as you could refinance to take out more equity to pay off the other loan....Borrowed funds will not look good on your loan application. At the very least you'd need to age that money 61 days in your checking account before it's considered yours. Or it would have to be acknowledged as borrowed money in the loan application. Given that it's unsecured, that may be okay, you'd need to talk to a loan officer. Personally, if you want to buy now, but don't have the full 20% down quite yet, I wouldn't fret about the 2-3 years you'll be paying a little PMI if the underlying rate is 5% for the rest of the life of the loan.(but that's me who thinks that higher interest rates just diminishes transaction rates not housing prices)
MM, I don't have an answer to your calculation, but you will probably need more than the extra 20k in order to cover the other related costs of closing. That is to say that in order to have 20% on $500,000, you need $112,000 cash (illustrative) to close with a 20% down payment.
Jaime,eh, that's what seller paid closing costs are for. They only care about net. As long as you feel certain it will appraise for your purchase price with the closing rolled in, who cares?The seller has cash, you don't. Make the best use of it.(now I'm really going to get a reputation as a bull (or an enabler))
Cara,Thanks for the helpful info, as always. I'll have to read it a few times more to fully understand it.Jamie,Yes I'd need extra funds for closing cost, but as Cara said, the plan is to have seller pay for it.
BTW, today is a good day for me - 6 more months to pay off half of the remaining debt, and 12 more payments to total debt-free land!Here's to hope my circumstances won't change for the worse in the next 6-9 months, so that I could be ready to dig myself into the deepest debt hole for 30 years.
Robert said... "Call me a wuss, I don't give a shit, as long as I don't lose my job and all of my money. Fuck you capitalist purists. Capitalism failed."Wuss, go live in an anti-capitalist country and report back on how awesome it is. I don't know how on one hand you can drum up the wealth you've created in a capitalist system and then on the other hand call it a failure. Limousine liberal?
Va_investor, Texas Native, Ace, et al...Can you guesstimate the cost of this renovation (before, after)? I'd think it's much more than the 'profit' the seller appeared to be seeking (<$200K), but as Va_investor said just the other day that the costs could be lower for pros. Obviously this is way outside of my price range so it's purely for curiosity sake.
MM, I've never done a "popup" expansion (I've had several recent unbelievably high estimates from several highly recommended architects/builders for expansions that weren't popups, and haven't accepted them), so I'll defer to others. But I suspect you're right. My recollection of that neighborhood is a bit fuzzy but I wonder if the owner over-improved it compared to similar properties nearby and that's one reason why s/he had to keep dropping the price. Not to beat a dead horse re: prior discussions on bargain properties, but my comments were in response to Cara's noting that, *IF* all that was needed was a new kitchen it could be a good find, etc. I added that it appeared to me that many other things (besides a kitchen) would probably be needed in the particular house in question, but that one had to see the house and neighborhood to know.
MM-If you were looking for cheap money that can be paid back a little slower I would look at credit cards. Rather than take the 0% rate for 6 months they often will let you take something like 4.9% until you pay all of the money back. I would think this would be a fair bit cheaper than paying PMI. There are a couple of problems with doing this. First if you borrow money it will hurt your credit score so you may end up with a higher mortgage rate. You are also left with no money, which is an issue if anything happens. Banks also like to see you have a decent reserve.
MM, in this new era of appraisers' caution/lack of familiarity with neighborhoods/whatever, are you at all concerned about whether the house will appraise at above the agreed above price (high enough to cover closing costs) and if it does, might you get outbid by another buyer? I know it's a buyers' market most places but I am not sure what will happen in the ~$500K market in North Arlington if the interest rates stay low. I just don't know whether all sellers are paying closing costs these days on this type of house.
"agreed upon", that was supposed to be.
ps I think it would be possible to research this using franklymls - closing costs (plus repairs) would show up as a "subsidy", if I understand how Frank does this. One could search for 2009 sales in the desired price range and zip or neighborhood to see what subsidies were paid.
MM,I'd never do that refi plan. It would be much more expensive than paying the PMI.I don't know about now, but in the past conventional PMI couldn't be cancelled within a certain time period. Once that time period passed, the Lender had to cancel if a new appraisal showed 20% equity.I shouldn't really comment because I haven't cancelled PMI since the mid-90's. At that time, the loan had to be "seasoned" for a period of time and we had to use a lender-approved appraisal. We could also have paid down the mortgage principal. Some lenders were claiming that was the ONLY way to cancel it or the appraisal had to show an LTV of 75% or some other such b.s.There was a big deal about and apparently with loans owned by fannie and freddie, lender's couldn't pull that crap. I got mine cancelled with a new appraisal.Perhaps a family loan that is paid off over time? I doubt a refi would ever make financial sense (unless rates dropped enough that you could buy-up the rate and have no closing costs).
MM,I have no idea what it would cost to pop the top. I would hazard a guess that this person is going to lose some $$$, big time.
I'm confused as to why a few of you (mostly @J@) are still using terms like "Immunington" or "Immunalandria" or whatever. I lurked on various blogs like this in 2007 and 2008 and when people said Arlington and Alexandria were immune to the bust they meant literally immune. In 2007 homes in nice parts of Arlington were selling for 100% of 2006 prices or more while homes further out were already seeing price declines. That's when people started arguing the areas are immune.But in 2009 homes in Arlington and Alexandria are definitely selling for less than 2006 prices. They may have dropped less than further out places but they still have dropped.Not dropping = immune; Dropping at a smaller rate than other places != immune [!= means does not equal]
Regarding the free market. To be fair even without the MBS buying program mortgage rates would be pretty low right now. For the past year or so investors have been very interested in Treasuries which has kept rates low. It's unclear if the MBS purchase program has lowered rates 0.5 or 1 percentage point. So gov't intervention has only kept it at ~5% instead of ~5.5-6%. What's always amusing to me is that Robert thinks the Dow going up, up will be good for housing. When in reality the better the stock market is doing (and the more people think it's a real rally) the less interest there will be in Treasuries. Which means higher Treasury rates which means higher mortgage rates. If there's anything that has helped housing it was the nosedive the Dow had fall 2008. This created humongous demand for safe investments. And there is almost nothing safer than Treasuries.Case in point from the WSJ: CHICAGO (Dow Jones)--Futures prices tumbled Tuesday, raising expectations for higher long-term rates as investors pumped their money into a soaring stock market.The renewed appetite for riskier investments, like stocks, occurred because traders weren't so jittery about the debt problems plaguing the Persian Gulf emirate of Dubai.The March 30-year Treasury bond futures price was down a little more than a full point as the 30-year cash yield equivalent approached 4.25%.The March 10-year Treasury note futures price was about a half point lower, lifting the 10-year cash yield equivalent near 3.25%.Similar to cash Treasury markets, lower futures prices equate to expectations for higher yields.Traders felt reassured that Middle East credit turmoil won't be too big of an obstacle for a global economic recovery. Overall, Tuesday's action represented a steepening of the yield curve--meaning the market predicted short-term rates would stay low while longer-term rates would move higher.Article
Wuss, go live in an anti-capitalist country and report back on how awesome it is. I don't know how on one hand you can drum up the wealth you've created in a capitalist system and then on the other hand call it a failure. Limousine liberal?It did fail. The only reason you didn't notice is that the same entities you whine incessantly about took action to fix it. You fashion yourself as the kind of guy that plays the hand he's dealt in life. Yet, the government is dealing and you are crying like a baby. Who's the real wuss?
"TBW said...I lurked on various blogs like this in 2007 and 2008 and when people said Arlington and Alexandria were immune to the bust they meant literally immune."TBW -- I gotta ask, with the exception of perhaps Lance, is that really the case -- has anyone on this blog ever uttered some area will be "immune"?My recolection is the posts back then would go something like this...Bull -- XYZ wont get hit as hard as ABC.Bear -- WHAT?!?!?! Are you saying that XYZ is IMMUNE!?!?!?!?Bull -- Uhh No, I said XYZ wont get hit as hard as ABC.Or maybe it would be like this...Bull -- XYZ doesnt have nearly as many crap loans as does ABC...Bear -- XYZ is not IMMUNE!!!!Bull -- Did I say that? I just said XYZ doesnt have as many crap loans...Either way, the common theme was some bull would comment how some area wouldnt get hit as hard as some other area. This in turn would cause great rage and furious anger amongst the bears, causing them to conjure up the word "immune".Again, I may be wrong, but I dont ever remember a single instance on this blog (other than lance) where any bull said "XYZ is immune". I welcome the chance for someone to show to me otherwise.
fha programs are the best things that happened in north virginia
TBW, agreed re: Arl. and Alex. Whether one uses frankly, Zillow, the county assessed values, the huge months-of-inventory number for the upper price ranges, or anecdotes, it's very clear that prices have come down. Certain neighborhoods seem to be doing better than others (e.g., Lyon Village) and there have been eye-popping exceptions (IMHO) for individual houses. But when I compare what my neighbor bought his house for in 2006 and what similar houses on frankly sold for recently...well, seeing how much my house has likely dropped has greatly reduced what I'm willing and able to pay for the next house. The Anon, check the thread just before this one, though one of the users of the term may not have meant it literally.
I should have added to the first pgh. "and that prices may decline further" (since I had mentioned the MOI).
TBW, in one sense I agree with Robert about the stock market's possible effects, at least for neighborhoods like Great Falls. 2000-2008 were awful for investors - even without the huge drops in late 07-08, the returns were well below average for the period as a whole. People who put money there, as they were advised to do long term, have much less now that could be drawn out and used for housing, and they have less that can provide retirement income than they could have expected to have in a "normal" period of the same length. This greatly reduces what they can spend on housing while also having money for other needs and wants. If the stock mkt goes up over a long time, there will be more people with gains who can invest them in housing. So it depends on what you consider "good" for housing, but I do think there is a relationship for people who've been around long enough to have substantial assets in the stock market but aren't ultra rich.
I normally try to avoid these discussions because it is obvious I am not going to change anyone's mind... but a quick note on semantics."Capitalism" did not "fail."Capitalism has always generated booms and busts, these cycles play a crucial role in how the system works over long periods of time.Just because we are currently going through a down cycle does not mean that "capitalism" itself has somehow failed. The question is what role government involvement and regulation(or the lack thereof) played in the severity of this down-cycle and could play in possible exit strategies.
And the fact that government interference with true capitalism allowed for such a spectacular "failure" in the first place.
Fair point TBW.My reference is Warwick 22305. Currently Frankly shows two units, asking $445K and $439K.On 2/2009 211 Tennessee closed at $287.5K. Short Sale, bank owned, la-de-dah. It's moving in. The city logs related sales. Here's the relevant grouping.Recent Sales and Other Transactions, CY 2009Check it out. Sorting this years sales by price:$214,000 $287,500 $314,000 $315,000 $317,000 $319,500 $320,000 $329,000 $349,000 <--- 9 under $350K$358,824 $366,250 $369,200 $370,000 $379,000 $380,000 $380,000 $383,000 <---<< The middle? $405,000 $420,000 $420,000 $429,000 $430,000 $431,000 $432,000 $435,000 $437,000 $437,000 $439,000 $439,000 $439,000 $440,000 $445,000 $455,000 $459,000 $460,000 The prices are all over the place. My opinion is that the lucky two buyers who snagged a place for under $300K, got the deal of deals. The units under $350K are likely good buys but probably could use some fixing. With $25K, $50K, they'd have a nice place, worth, er, $400K? The rest of the places are not screaming deals. These were built in the 1950's and are basic row houses, 3 levels. The attraction is that they are close in.It is 2 miles to Crystal City and the Pentagon. It's a short reverse commute to the Patent Trade Mark office. BRAC is building about 2 miles away on 395 outbound. You can walk to the restaurants of Del Ray.I think of these places as "worth" $400K to maybe $450K depending on options and upgrades. This data suggests that Immundria is a correct name. The housing bubble thing is way overblown. There was a 10% pullback and a few distress sales but with a median price at $400K, there is nothing to see here.I have reports of people losing jobs, long term unemployeds. There are rumors of cuts coming in the IT business, that's in addition to the 2,500 at AOL. The local economy could get worse but I'm not going over the Contrarian side.
It looks like the FHA is going to start to be more conservative. They said they will likely increase their upfront fee, lower the amount a seller can give for closing costs, increase the down payment from 3.5% to 5%, and increase the credit score necessary to get a loan. For the areas we are looking it probably will not be a huge deal, but it will likely hit sales a little. It also is definitely a move in the right direction for the FHA so they stop bleeding so much. http://www.washingtonpost.com/wp-dyn/content/article/2009/12/02/AR2009120200025_2.html
It's interesting to hear the talk of Warwick. I had an opportunity in the early '90's to buy of package of 6 units that were headed to foreclosure. They were all owned by the same woman and the loans held by the same bank. The price was about 60K each.That was a decidedly mixed area at the time. Should, woulda, coulda...
housebuyer,Wow, it sounds like they might actually make some changes. That's definitely good news for the health of the FHA program. It might put some more downward pressure on the low end, or decrease the borrowing capacity of some of the buyers taking "advantage" of the insanely high current limits. Notice there was no mention of dismissing those...
"It did fail. The only reason you didn't notice is that the same entities you whine incessantly about took action to fix it. You fashion yourself as the kind of guy that plays the hand he's dealt in life. Yet, the government is dealing and you are crying like a baby. Who's the real wuss?"You are. You profit off of a capitalist system, brag about your wealth, then say it's broken. You're a hypocrite and a communist p.o.s.
Housebuyer, that is great news if it's true. I really wish they'd raise the down payment limit above 5%, but it's a start.
kevin,Dropping the seller subsidy down to 3% would fix my biggest gripe. The combination of 3.5% down and 6% towards closing costs, means a starting LTV of over 100% if you think about the net to seller. Given that the seller's only care about net... From a seller's viewpoint the fair market value is the net price. Such that all sales with subsidies are inherently dicey to appraise.
Cara, agreed. The biggest problem with the RE market right now is the "no skin in the game" conundrum which until now, Congress seemed to be cheerleading to increase prices and sales. It's horrible and must end.
Whoops, another Oakton short sale:http://franklymls.com/FX7213299Bought in 2005 for $833k, listed for $675. This model in this neighborhood has been selling for around $625k, give or take $25k.
NoVa,This looks to be about 20% off peak; hardly a screaming deal.My main point is your straw. As far as I know, there has been no claim by anyone that any area will be immune to price drops.So, what is the "whoops" about?There has been a short in my neighborhood as well as a sale well below the purchase price in 2005. Heck, I bought my house on the Courthouse steps in early 2002 (a hot market).So; yes, but so what?
Va_Investor said..."This looks to be about 20% off peak; hardly a screaming deal."For Oakton it kind of is. Hence my point that towns like Oakton are in a fantasy bubble land that isn't sustainable in the long term, but lacks a price discovery compared to other areas because of a scarcity of foreclosures and short-sales. But still, I wouldn't buy a "deal" in Oakton or Vienna right now. That's very relative.
novawatcher,I'm a bit confused by what the "whoops" was as well. Whoops we way overpaid for this place? Whoops the short sale isn't even listed down at the price of recent comparable sales? Whoops, there do still exist people who are still living in homes they can't afford?
As far as I know, there has been no claim by anyone that any area will be immune to price drops.That's a little disingenuous.
Ace,I understand the notion that higher wealth via the stock market can lead to more money for housing in a neighborhood like Great Falls. What I meant though is bear market often equals very low rates (see most of this decade minus 2000, 2006-08). I think if we see a lot of stock market growth we'll see higher mortgage interest rates b/c there will be less demand for Treasuries. Given I think the current recovery is very dependent on low mortgage rates I think that is bad for housing.What happens over the next six years depends on whether the loose lending and low mortgage rates of 2000-06 becomes the new normal (as I think Robert is predicting) or ends up a fluke. Assuming it's a fluke we still have more price corrections to come despite the general strength of Northern Virginia's economy.
"Whoops", as in Kevin's (or was it someone else's?) father, who lives in Oakton, claimed that Oakton was immune, "because everyone wants to live there".The same claim for Vienna, McLean, Arlington, etc.
housebuyer,Great news about Donovan/FHA. I recall posting something a while back about Donovan hinting they might make some changes. What's interesting is not that long ago they were easing FHA restrictions (by allowing the $8k credit to go toward 3.5% dp) making Robert pretty haughty. Seems to me the administration realizes now that was pretty dumb.I can't believe FHA used to allow credit scores as low as 500. I know the article says many required higher scores but I'm sure that with the internet low credit score people easily found garbage like "Lend America" and others the FHA is stopping from doing future FHA loans.I think the allowance of 500 credit scores pretty much confirms the complaint that FHA was the new subprime.
NoVa,I think you are being a little disingenuous. Months ago, I pointed out a nice Vienna subdivision that had some sales at 20% off peak.People stating prices have not fallen are the one's who are slanting the truth.
Kevin- If Nova watcher is right and recent comps are ~625K then as a short sale you would expect it would go for something like ~575K, which would basically mean the house double from its sale price in 1988, which is probably about what wages did. I agree that 1988 was around the peak of the last bubble, but the fact you get great interest rates now may make it acceptable to pay something slightly higher than the historical average real price.So maybe some of the large houses aren't terrible deals out there. I think the problem is that smaller houses need to correct the most. In these areas a lot of small SFH or nice TH went from ~200K in 2000 to 600K in 2006 and are now at 500K. So I guess it may not even be the entire area is way overvalued, but just starter houses.
housebuyer,Here is the conundrum. Everything you say makes sense. I stuck $282k in 1988 dollars into the inflation calculator and it gives you $515k in 2009 dollars. Wages did increase slightly over inflation and there are lower mortgage rates (~5% now and ~10% in 1988). So I might say hey something in the high $500s makes a lot of sense. Maybe even low $600s because of that dramatic interest rate drop.BUT, here's the dilemma. Take the 1988 sale price of $282k in 1995 dollars and you get $363k. Do the same thing with adding for slightly higher wage growth than inflation and mortgage interest rate drop (~10% in 1988 to ~8% in 1995) and one could have concluded in 1995 that something around $400s was a very fair price.But it sold for 272k in 1995. How do you explain that? If it was a market failure (which sounds like a plausible explanation) why is it not also possible that in 2012-14 we will see similarly ridiculously overcorrected prices?I'm not saying anyone should sit out the market hoping for overcorrection. Even using your method this home still has an overpriced listing number. But your methodology which I find very sound does not explain the 1993-97 NOVa market.
housebuyer saidSo maybe some of the large houses aren't terrible deals out there. I think the problem is that smaller houses need to correct the most. In these areas a lot of small SFH or nice TH went from ~200K in 2000 to 600K in 2006 and are now at 500K. So I guess it may not even be the entire area is way overvalued, but just starter houses.Maybe Robert and Va_Investor are correct that a home like this Stuart Mill home is a move-up home and not a starter home. In that case the average buyer qualifies for it not from wages but from home equity from their starter home. If in 1995 most people had zero home equity or negative home equity (because they bought their starter home in 1987-91), then that left less money for the move-up home than in the usual market. Hence overcorrection?
tbw,housebuyer,Both well put. And that indeed is the conundrum.OTOH, 272/282 is less than a 4% drop. That's smaller than the amount you lose to commissions.So if this were priced under comps as it "should" be for a short sale, then the 1993-1997 experience would say that if you bought it for say $575k now, you won't lose that much money if you have to sell. ($20k for a drop to $555k).
Housebuyer,Good point. A double from 1988 is hardly a bubble price, especially given that rates are about half what they were in 1988.I bought in 1988 in a certain Vienna neighborhood. I thought I got a pretty good deal at about 350K. We had a one-year arm at about 9% (IIRC). I've seen a few go recently for around seven. 700K at 5-6%, 20 yrs later? Hardly a bubble.We have also discussed the varying amount of price increases we have seen over the "bubble" years in different areas.I'll restate what I have been saying for 2 or 3 yrs; why would a house that only went up 25 or 30%, crash 50%? Turnover works both ways. You need it in bubble times to get those increases and you need it in bad times to get decreases.
Me? I'm not being disingenuous. You claimed that no one had ever said that certain areas would be immune. I seem to remember quite a few folks claiming that there were certain immunozones that would never see a price drop. Have you forgotten those comments already?
Va_Investor,Here is the answer to your question.If the Vienna home you reference went for $350k in 1988 and increased roughly 5% each year until it reached $700k I don't think anyone here would be complaining.Instead it probably was around $335-370k from 1988 to 2000. Then between 2000-06 it went from $370k to $750k and now has corrected to $700k.Side note you said why would a house that only went up 25 or 30%, This is all sorts of wrong but kevin and others have pointed out to you before that homes increased MUCH more than 30% so I'm not sure what else can be done to convince you of that.
[Oops sorry you didn't mean 5% annual growth but the current mortgage rate. Well whatever the annual growth over 20 years would be to go from $350k in 1988 to $700k in 2009. I could calculate it but I don't feel like it. :)]
NoVa,I thought that "one side" said it was a matter of degree and the other said "it was just delayed".I don't recall "no drop". Perhaps Lance was at one extreme and tooskineejs at the other?Then, again, the brain cells aren't what they used to be (just ask my econ stalker!).
NoVAwatcher said... "Whoops", as in Kevin's (or was it someone else's?) father, who lives in Oakton, claimed that Oakton was immune, "because everyone wants to live there".That's what everybody living there believes. What they can't seem to understand is that this is a fundamental that had existed prior to the bubble, therefore there's no reason the houses should double in value over six years. It's very hard to convince somebody this, as it's equivalent to saying "you're worth way less than you think you are," and could easily come across the wrong way.But time will prove this theory valid I believe. Another neighbor just took their house off the market. Couldn't find a buyer for the price they were asking, just "insult offers". I asked, are they waiting for prices to rebound? No, they just aren't going to move, I'm told. Uh huh.Va_Investor said... NoVa,"People stating prices have not fallen are the one's who are slanting the truth."Talk about being disingenuous. Nobody said that prices haven't fallen. HOWEVER what some of us have said is that they aren't finished falling and haven't fallen enough. Nice wordsmithing.
tbw,The Vienna house peaked in 1990 or 1991 at 400 to 420K and then we had a low of 308K. We had a peak of around 850+ in 2005 and now back to low 700's. I don't know what wage growth or inflation was over that approx 20yr time period.I certainly think a double (our house was a relo) since 1988 is reasonable. Take out interest rates if you think that is truly a reasonable thing to do.This was/is a destination location in my mind. I'd forget all the noise and move in at basically 1990 COSTS (given rates). Springhill Elementary, McLean HS, all cul-de-sacs, 3 minutes to tysons or the Toll Road.If I bought now, I'd be paying the same as I did in 1988. What do you guys want?
crud, I wish there was an easy way on Frankly to find houses that have been pulled off the market without selling.
Kevin (and other like minded individuals),If they aren't going to sell, they aren't going to sell. What can you do to change that? Absent reo's, you aren't going to get what you think is "fair".
Again -- if you look back over the comments from day 1 of this blog, im pretty sure that (with the possible exception of that fool lance) no one ever said "XYZ will be immune" as in it will see no price drops. Note, im sure that people did say that in the 05-06 period, but since this blog didnt start til 07 when price drops were apparent, you dont really see that here.Instead, as far as I can tell "immune" is just a strawman bears used to replace the "wont fall as much" argument the bulls made.Take for example, the story of Kevin's dad. As told by Novawatcher:"Whoops", as in Kevin's (or was it someone else's?) father, who lives in Oakton, claimed that Oakton was immune, "because everyone wants to live there".Did Kevin's dad really say that? Did his father utter the word "immune" in that conversation? More than likely the statement was:"Whoops", as in Kevin's (or was it someone else's?) father, who lives in Oakton, claimed that Oakton was not going to fall as much as (XYZ area) "because everyone wants to live there".Takes a lot of the "zing" factor out of the argument when you present it that way...
Hmmm...Now I'm trying to recall what was on the market, but is not market as a pending sale.There was the overdone contemporary in Miller Heights area. Nicely done, but small for it's $800k price. Then there was the neighbor two doors down. $100k less, smaller, but not updated. Then a month ago the heirs of their deceased neighbor put their house on the market. It too was updated, but was listed for $100k less. My guess is that they also have a lot of wiggle room.There was another place on St. Helena. It has the same problem as the STuart Mill house, in that the upstairs is small relative to the first floor. I never stepped inside, but the price was too high relative to comps.
Lance, Tom, a few others, IIRC.And yes, it was stated unequivocally that there would be no drop. Some even claimed that prices would continue to rise.
Va_Investor said... Kevin (and other like minded individuals), If they aren't going to sell, they aren't going to sell. What can you do to change that? Absent reo's, you aren't going to get what you think is "fair".no, nothing i can do to change that. but my hope is with more 'over-priced' listings rotting or getting pulled, new/returned sellers will want to price their homes 'closer to what i think is 'fair,' that's all.
Nova -- are you sure? IIRC Tom continued to say over and over and over again that homes in Arlington on the orange line near the metro were "doing just fine".Did he ever say what "doing just fine" meant? Maybe it was not decreasing at all (i.e. immune), or maybe it was a comarative statement (i.e. -5% here vs -40% in PWC).Again, show me a link.
Doing "just fine" implies that prices are not falling.first google hit: http://novabubblefallout.blogspot.com/2008/01/real-estate-live-highlights.html#comment-8233576464740518661http://novabubblefallout.blogspot.com/2008/12/decade-of-november-sales.html#comment-6240016280026146053
Va_Investor said..."If they aren't going to sell, they aren't going to sell. What can you do to change that?"Nothing, just pointing out how stupid it is. The only thing I can do is not reward their stupidity by paying what they want. Given that the market isn't restricted by people like me but rather the ability to finance, there's nothing the seller can do about it. Not my problem, theirs. Like trying to sell a car for 30% more than blue book. If they were serious about their intentions of selling and weren't so greedy, they'd lower the price and stop wasting people's time.Again, this comes back to what I was telling you last week about price stickiness. It's an economic phenomenon that occurs mostly in wages/salaries and in housing. Houses aren't like stocks, they don't have a tangible value attached to them, merely what one is capable and willing to pay. The housing bubble implanted in these owners' heads that their houses were worth $2 million (or whatever they think they are) even though they just bought them for $1 million seven years prior. It's insulting to them to suggest that they're not even worth $1.5 million. It's just a waste of time. They'll just have to learn the hard way.The Anonymous:""Whoops", as in Kevin's (or was it someone else's?) father, who lives in Oakton, claimed that Oakton was not going to fall as much as (XYZ area) "because everyone wants to live there"."Yes, that's more accurate. He's not really very defensive about the issue as his house is mostly paid for. He's just defending his neighbors who are clearly delusional (my words not his). He empathizes with them when I scoff at their typical seller mentality, that they deserve close-to-peak prices. So he's really only a conduit to this mentality that I am challenging. "Oakton is nice" "this neighborhood is nice" and "that's just what they'll sell it for, and no less" are some of the stupidest defenses I've heard, but hear often. If you (the delusional seller) is actually trying to move for personal or professional reasons and this mental roadblock has set you back a few futile years (while you wait for the magical market rebound that will never happen, at least not to your liking). You're doing yourself and your family a disservice with your ignorance. Imagine if people started trying to sell their cars for close-to-peak value. Not a perfect analogy, I know, but the reaction to them is analogous to how I feel about delusional sellers.
Econ 101 (do I dare say it?)willing buyer and willing seller equal Fair Market Value.
"willing buyer and willing seller equal Fair Market Value."Hence you will not sell your house for it's fantasy price and are wasting people's time, especially your own.Hence, this is why housing prices don't automatically correct, something you needed an explanation about just a couple of weeks ago.
Not you specifically, but the sellers, that is.
Va_Investor said... Econ 101 (do I dare say it?) willing buyer and willing seller equal Fair Market Value.or fraud.
MMVa_Investor said...Econ 101 (do I dare say it?)willing buyer and willing seller equal Fair Market Value.or fraud. Or a Ponzi scheme.
Nova -- 2nd link doesnt prove anything, but the first one most certainly does (where he says if you are looking for drops "forget it"). Yes its not the actual word "immune" but the functional equivalent thereof.Either way nicely done. I was wrong and you were right. I have to add Tom to my list of delusional immune posters...
the Anonymous/novawatcherTom and Lance were the big ones by the time I started reading. @J@ used to say things vaguely similar but has recently come over to the dark side of actually looking at the sold data.Perhaps it's just that true "immunity" was disproven a year or two before "it's moving in" could be disproven. Which we've replaced with "it's moving up" slowly, very slowly whether by inflation or nominal drops, but it will happen....
Tom said: "in that they possess a rare and increasingly valuable commodity: walking convenience to Metrorail."LOL that's what I'm talking about. A fundamental of a house's value that was there before the bubble explosion. The stupidity in thinking that the house will keep that imaginary value is jaw-dropping.
Another from Tom: "As a N. Arlington homeowner, I'm not astonished. My numerous previous postings offer numerous outside commentary that explain Arlington's real estate price strength. I see no sign of that changing."Pretty much saying that prices won't drop because Arlington is special. Again, pre-existing conditions that were present before the market went haywire. If they had just built the metro there, that statement might have validity. Unfortunately many owners just look at the numbers going up and correlate it with something positive about the area. The "niceness" of Oakton or the metro accessibility of Clarendon. Are these things that are new? No. So how does it change the fundamental value of a property when everything there remains the same? What force is at work to keep prices at bubble heights other than psychological delusions and stubbornness from sellers? Sure there will be an occasional buyer that will believe these things too (or simply won't do their homework), confirming the psychological delusions by over-paying for the house he buys. Then he's the one that's stuck with a long-term loser as the price discovery spreads out over several years.
Just google or wika Fair market value.It will explain alot of what we have seen AND not seen.
"Cara said...Perhaps it's just that true "immunity" was disproven a year or two before "it's moving in" could be disproven." Yeah - if this blog had been around back in the 05-06 period before prices started falling, I bet there would have been alot more of that -- perhaps even the actual use of the word "immune" by a bull.
Which we've replaced with "it's moving up" slowly, very slowly whether by inflation or nominal drops, but it will happen....Cara, but isn't "up" correlated with "in"?
Cara, but isn't "up" correlated with "in"?Only somewhat. There are high end areas in PWC that havent really come to terms with prices yet. Likewise, there are low end areas of arlington that have long since come to terms with reality.
Novawatcher,Yes. It is correlated. But there are conceptual differences. You need to invoke stickiness and things like what tbw pointed out today about future move-up buyers not having th equity to pay as much, thus preventing future appreciation in the higher rungs. And you have all regions moving in consort just to different degrees. In fact given the much much larger overhang of high end inventory in Loudon than in Arlington/Alexandria one might reasonably expect the next stage to act unevenly as well.
"Kevin said...Pretty much saying that prices won't drop because Arlington is special. Again, pre-existing conditions that were present before the market went haywire. If they had just built the metro there, that statement might have validity."Kevin - you are looking at only half the argument (i.e. the supply side). True, something may have "always been there" but has appreciation of that thing (i.e. demand) always been there?Take for example the market for something with a very restricted supply - like western US indian artifacts I believe. The number of artifacts is stable - basically a few thousand have existed for the last 100 years or so.Yet, IIRC the prices for these artifacts went up tenfold or more in recent years. Why? Because while earlier collectors didnt care much about indian artifacts, they suddenly became hot to a larger and larger pool of collectors. Since the supply of artifacts didnt really increase, the only way to make up for exploding demand was rapidly increasing prices.So while the metro was "always there", was appreciation for the metro also constant? Walkability was "always there", but has the desire for walkability increased? I dont know if it was metro, or walkability, or a combination of this and other factors. However, we do know that desirability for some has increased far more than supply. The 2008 census survey confirms what we have long suspected - demographic groups that used to flee Arlington for decades (specifically high income whites) are now returning to the area by the thousands each and every year.This does not explain vienna (or any area in FFX where the data is less clear). Also, it does not mean that it is a permanent change. If the demand for indian artifacts returns to earlier levels, prices will go back to pre boom levels. Likewise, if demand for metro/walkable areas wanes, then pre boom prices will return. However, til there is evidence of waning demand, it is reasonable to assume the paradigm shift of the last decade or so (at least for Arlington Alex & DC where it is most pronounced) will continue.
CRT, I'll believe that is an explanation, but only part of the reason. I would find it peculiar that Arlington prices reacted exactly to the bubble as did other areas - by the same amount, over the same time period - due not to the bubble but to a sudden and swift demographic change. I'm not saying the prices recession will be as great because it's been proven that the household income has increased by comparison, but nowhere near enough to sustain those sorts of prices.Again, I'm not saying the drops should be equal, I just don't see how a lack differences in fundamentals can be utilized to justify this bubbleness. If gas prices were $20/gallon then maybe, but things aren't that much different from a decade ago.
CRT,if you're still reading, have you looked at The 2008 census survey for DC and perhaps Bethesda (or MoCo)? I'm curious if the census data supports their 'bubble gains' as it does for Arl/Alx.Tks!
"Kevin said...I would find it peculiar that Arlington prices reacted exactly to the bubble as did other areas - by the same amount, over the same time period - due not to the bubble but to a sudden and swift demographic change."Actually, I think the main reason for the extent of the rise WAS the bubble. Absent a bubble, prices in FFX & out would have risen say 50% and prices close in say maybe 60-70% (these are hypotheticals, but recognize the point)However, my thought is that (thanks to the bubble) as prices farther out rose 120-130%, it helped also push the closer in areas up by that same 120-130% amount. Thus, as the bubble portion was removed only then did it become apparent how much farther outer areas had to fall to reach fundamentals)."Kevin said...Again, I'm not saying the drops should be equal, I just don't see how a lack differences in fundamentals can be utilized to justify this bubbleness. If gas prices were $20/gallon then maybe, but things aren't that much different from a decade ago."You might be underestimating the extent of change in certain areas. For example, in my hood I recently learned that transvestite prostitutes were common til the mid 1990s. All things being equal, I think its reasonable to assume the presence of transvestite prostitutes depressed home prices to below what fundamentals will support. Likewise, the sudden abscence of transvestite prostitutes will lift that drag on home values, even with no change in the fundamentals of an area's homeowners.Clearly this doesnt explain all areas, the least of which was arlington which never really had a crime problem (but did have a seediness problem). However, for the N. Arlington buyer who feared Clarendon would being populated with pawn shops and se habla espanol car dealerships, its reasonable to assume he would pay more once it became clear those seedy elements were on the way out.
CRT: "I think its reasonable to assume the presence of transvestite prostitutes depressed home prices to below what fundamentals will support."Or so you would think....
I do agree with your first post though. If I understand the market changes in different areas, those are good numbers. I know it was hypothetical, but do you really think it's possible that Arlington prices would have gone up 70% over that time period (say from 1999 to 2006 or 2009, take your pick)? Did household income go up that much in such a time period? I'm guessing not.
kevin/CRThow do you know that transvestite prostitutes aren't the earliest signs of urban renewal? Ala the Castro.
I should reiterate: Not only would household income in Arlington not have risen that much over the years, but same with the hypothetical Fairfax&out number. Just sayin'.
MM - I did look at DC but not at Bethesda (I believe it is agglomerated with all of MoCo which makes it harder to track).Anyway, with regard to the change in fundamentals, DC is coming in 3rd behind Arl & Alex for those with the greatest change. Income here is increasing more than in FFX & beyond, but not as much as Arl & Alex.Likewise, whites are moving back in after decades of fleeing, but its not a rout the way it is in Arl & Alex.So the question in my mind is how/why have DC prices increased more & declined less than just about anyplace else?Not sure, but part of it is the disparity in timing. Arl & Alex suffered their worst burndown in 08 along with the rest of NOVA. However, when you look at inventory and sales, its clear that DC is only now (perhaps) coming out of its peak period of burndown.But even with that, DC peak burndown probably wont be enough to unseat it from its perch as "most improved" pricewise from 2000-2008. So what else is there to explain it.Here again, my best guess is expectations of an area and how that will affect prices. Up til say 1998, buyers had no reason to believe the extreme crime & seedyness would abate - as such, the prices reflected the assumption, "this neighborhood will continue to get worse as it has for the last 40-50 years". That expectation of worsening conditions has been removed and (given the overperformance of incomes and positive demographic trends), its now reasonable to assume those drags on housing prices will no longer be a factor.Dont get me wrong, DC (and Maryland) are clearly in for more prolonged pain than whatever is left to hit NOVA. Still, at the end of the day, it looks to me that DC will retain the greatest percentage of bubble era gains than anywhere else in the region.
Kevin - to answer your question, re median income gains, so far for the decade are as follows:DC +41%Arl +53%Alex +52%Ffx +32%Lou +37%PWC +34%In my estimation this is a "worst case" amount of gains you could ever expect to see. I expect the eventual gains per area to be a bit higher thanks to stickiness, change in expectations, etc.
how do you know that transvestite prostitutes aren't the earliest signs of urban renewal? Ala the Castro.Cara - funny. BTW, I recently caught up on reading to learn of your progress on the house. So far so good?In any event good luck!
CRT,Thanks. I had no doubt that DC will retain the gains but was just curious what data says. My view has been closer-in will not fully touch bottom until DC bottoms out, but perhaps that won't be the case. The *ONLY* reason we moved away and bought in Arl was because DC was out of reach while deals could still be had in Arl.But after the bubble transformation Arl now has established its own 'identiy' and is no longer just a 2nd best choice anymore.What Arl has and DC and Alx don't is public schools. I've been amazed that how many families living in 1.2MM+ houses send their kids to public schools (at least for lower grades).
CRT,Yup, so far so good. The husband is very very happy at the prospect of a single family home with a screened in porch and 0.29 acres, and me quitting my obsession with real estate.:)
According to the VA Department of Education's membership counts Alexandria's school population has increased at about the same rate as Arlington's. Here are the population counts for Alexandria, Arlington, and Fairfax in 1996, 2003, and 2009.1996Alexandria 10,156Arlington 17,546Fairfax 143,2662003Alexandria 10,900 Arlington 19,158 Fairfax 164,235 2009Alexandria 11,661 +14.8%Arlington 20,268 +15.5%Fairfax 171,967 +20%Hasn't DC's school population declined since the mid-1990s? Clearly, Alexandria is not DC. Families with children must be moving into Alexandria and enrolling their children in the public schools.
CRT, thanks for that data. You are good. Definitely the only housing "bull" that make a good point with data (I say bull only jokingly, of course). Those are fundamental changes to demand that definitely have a huge impact. Interesting though that those income increases really aren't that high though. Certainly higher than other bubble markets, but not much beyond the rate of inflation. Does this perhaps warrant the case for using inflation-adjusted price indexes for the region?
Texas Native, good numbers on your part too. This is the fun part about market analysis and bubble corrections, trying to determine what's risky and what's sustainable based on the hidden data.
CRT -- good info as always. It does help to sometimes step back and think of how much things have changed in the last decade.I just got a postcard from a realtor -- he just sold a place in Chatham Square for 1.022 million bucks.Think of that for a second -- Chatham Square was one of the torn down HUD projects that was replaced with a "mixed income" complex where they all look the same from the outside yet some are million dollar houses and others are section 8 rentals.The idea that there are people willing to pay over 1 million in late 2009 to be in a mixed income project really is amazing. Never underestimate the power of demograhics to remake an area.
CRT,Where generally speaking do you live in Arlington? I've never heard of anything in Arlington that used to have any type of prostitutes walking the streets let alone trannie prostitutes. Clearly this doesnt explain all areas, the least of which was arlington which never really had a crime problem (but did have a seediness problem). However, for the N. Arlington buyer who feared Clarendon would being populated with pawn shops and se habla espanol car dealerships, its reasonable to assume he would pay more once it became clear those seedy elements were on the way out.Well it never had a huge crime problem but it was and is higher crime than Fairfax County. It has closed the gap -- I posted the stats a while back. I think it went from something like 3x Fairfax's crime rate to 2x. I suspect there are buyers out there where that made the difference in whether they felt comfortable enough buying.
"Hayfield grad said...Hasn't DC's school population declined since the mid-1990s? Clearly, Alexandria is not DC. Families with children must be moving into Alexandria and enrolling their children in the public schools."Hayfield, yes. I suspect though, DC's school demograpics are following those of Arl and Alex.I dont have it here handy, but the latest stats clearly show the majority of new kids in attendance in arl & alex are due to the incresed number of whites returning to these areas. DC is experiencing a white population return as well, however given its status as a "majority minority" city, the increase does not register as the minority families, with more kids generally, leave en masse (the ACS survey does not break down attendance by race). In other words, the return of 10,000 white families with 500 new kids enrolled, is washed out by a 10,000 minority family exodus, with a loss of 3,000 or more kids. Kevin - given the extent of the declines seen so far, I see a inflation adjusted home gain as roughly akin to a worst case scenario. More than likely, its going to be income, combined with a increase in premium due to increased desirability. I say that largely due to what we have left in terms of the inventory cycle - its way too far along to expect a large loss from hereon out. However, if the inventory rises, this bears reassessing.TBW - not in Arlington. Old Town Alex is where I live. I never did see the tranny prostitutes personally - but I did still see the occasional bum sleeping in the alley in the early days (circa 1999-2001) of living here.Your point about the crime is well taken. Arl never was as bad as Alex, which was never as bad as DC. Arl has transitioned itself into areas now generally deemed "safe". Alex (which at one time was 6X as dangeous as FFX, now down to like 3X according to FBI stats) is on its way too. DC is likely headed that way too, but it has a ways to go to get there.
HayfieldGrad,I know nothing about Alex schools so FWIW I hereby amend my earlier claim to "What Arl has and DC doesn't is public schools."
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