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Tuesday, December 15, 2009
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37 comments:
aSo the question of the day is are interest rates finally making a real step upward?
Interest Rates
Over the past couple of weeks the 10-year treasury has gone from 3.20% to 3.61%. I don't really think they are going to go screaming higher, but I do think that in the foreseeable future they will not go back to their recent lows meaning upper 4% interest rates may be going away for good.
12/15/09 9:20 AM
Agreed, the days of sub-5% rates are probably numbered.
From Robert's link of
Zillow's mortgage marketplace
the best of the mortgage rate deals locally (in time) was the week of thanksgiving. It's been slipping up since then. The mortgage bankers announcements have also generally included heftier and heftier points paid by consumers to get those low rates, so that's a sign that home financers think rates are going up. (build in your refinance now by buying the rate down).
Likewise I don't think the Fed will let them go screaming higher, but I'd put it at a 90% probability that we'll be above 5.25% by this time next year. I know that's a pathetically weak prediction, but I'm not good at guessing the government's choices.
I wish I could remember who was looking for a SFH near their current condo near Pentagon Row/Pentagon City Mall. Here is a newer listing that I think has a lot of potential, good space for the price in Arl., in the 700s:
943 26th St S
I don't know why the agent didn't mention that there are two metros less than a mile from this house, plus bus service to get you there.
Ace,
It could be waitingtoo but s/he's already bought.
A house in my old neighborhood has seen tax assessment's IMPROVEMENT VALUE dropped from 127K in '07 to 125 in '08 to 94 in '09, while the LAND VALUE remained the same. I believe the house's built in the mid-50s, and I'm pretty sure there's no addition or visible renovation, and a unfinished basement, so presumably all originals. I know this is little info, but how close/far off do you think the FMV and the tax assessment could be for a house like it? Also, would an appraiser's # be close to the FMV?
It's not listed but it's a rental so I might want to ask the absent owner if they plan to sell...
Thanks, MM, it wasn't waiting too, though she bought in the same neighborhood. I'm thinking it was a man - he and his wife were looking - and his google username may have begun with a J. He had also implied that this price range might suit him.
$100K subsidy? Gotta be a typo, right?
Here are more examples of what are probably easy, do-almost-nothing, for extreme profit, types of flips in Loudoun County, where, VA_Investor said, banks are offering foreclosures for purchase in bulk, and where there may have been plenty of foreclosures to find at the courthouse steps? I am assuming little was wrong with the houses when the banks sold them off, because they are all relatively new.
Almost all of these were purchased only months ago, and are already on the market, with a the hefty mark-ups described below:
From 381k to 489k
From 465,851 to 650k
From 483,001 to to 695k, to 665k
From 425,001 to 649k
From 415k to 674,950
In 10/08, sold for 433,750. Currently on the market for 560k
From 486,100 to 599k
From 344k, to 482k, to 460k
I wish that with so much bank-owned shadow inventory, that a "Wal-Martization" or something like it, could happen, to replace these middle man investors. By this, I mean that they might make it move-in ready at a lower price and not make so much profit-for-doing-almost-nothing. I'm not a big Wal-Mart fan, since lower prices seem to mean that in the end, everyone involved in any Wal-Mart transaction seems to have less (lower wages, fewer benefits, lower quality, fewer US jobs....) However, it seems that now that the retail consumer has ready access to information about what the prior price was, that should certainly have some effect on what people are willing to pay. And seeing all these examples, of homes that at some recent point in time sold at the courthouse steps within my price range, makes me think that none of these homes are worth buying at their market pricing. Even considering that investors have a tricky time at the courthouse steps in purchasing these foreclosures. I almost think the owner/RE agents trying to make up for the profits they haven't made since the boom ended.
REdeal, well said.
Matt -
That would be nice if there were a 100k seller subsidy, but I think the subsidy is not intended to cover anything more than closing costs.
REdealseeker,
Assuming these are priced similarly to comps... (big assumption) and that these sell for close to list (big assumption two), then there is indeed a big return to be made by those sticking their necks out at trustee sales. Or the banks aren't getting as much from the foreclosure sales as the homes are really worth. If there is money to be made? Money will go there, raising the prices at the auctions until the margins are cut too thin.
Arbitrage opportunities, even ones with huge risks don't have very long lifetimes.
On the retail side, I think the best you can do if you like these properties is offer them 10% under comps (i.e. ask them to share some of their winnings) and see where that gets you. If you "win" be very particular during the inspection, because I don't know about this whole concept that new homes are problem free homes, especially ones that have been vacant for any period of time.
Kev,
There is a relationship between risk and reward, in case you didn't know.
Why not march yourself out to the Courthouse?
Cara,
At their market prices, all but two were out of my range. 10% under for most of those, still outside my range.
I know that the one for 560k is a bit overpriced in a neighborhood where the regular sales generally list at 525-550k.
The rest are probably at market value.
REDealSeeker,
"Subsidies" also cover items that arise during the inspection that the seller has agreed to cover. For example, in VA, the default contract says that mechanical systems are in working order. So if your inspector shows that the house you want to buy has an old, faulty furnace that should be replaced, the seller may give you a $3000 credit toward replacing it. So your $300K house is actually $297K.
Ace,
Thanks, I didn't know that. I learn new things on here all the time. That's why I've been following this blog so long.
yes, but that 100K is most likely a typo, wouldn't you agree?
Ace and others, any thoughts on my earlier question on the assessment vs FMV vs appraisal?
MM,
agreed it's probably a typo.
I have no faith in tax assessment's being accurate on individual properties anymore. An appraisal should get you closest to fair market value, but so would a really good comp search of solds only.
Anchorless appraisals, such as those done for refinances, are tending to come in below full fair market value these days, IMO. (from a sample of one refinancing friend...)
MM, I agree with Cara, with the caveat that it depends to some extent on which entity is doing the assessment, since their methods differ. You have to see the inside of the house. You could get a ballpark idea by searching frankly for nearby solds and comparing the size, location, photos, and general condition of the target house with those nearby, and comparing what they sold for relative to their assessed values. But since you're looking in Arlington, I know you know how much condition varies and price varies with it. So the updated ones not on busy streets, etc., will sell for more than assessed value, sometimes a lot more, and the neglected ones in bad locations -- with the same assessed values, may sell for a lot less.
I agree that, in addition to getting current comps., to get really precise, you should get an inspection, etc., especially if the house is more run down through years of neglect than others in the neighborhood.
Va_Investor said...
"There is a relationship between risk and reward, in case you didn't know.
Why not march yourself out to the Courthouse?"
What are the chances I can get a better deal at the courthouse than the MLS market with only a 10% down payment?
From 5/14/2009
Robert said...
About the $8k bribe: does anyone think the government will not continue with inducements? Didn't they just make PMI deductible? They expanded conventional mortgages to $729k, and on and on and on. The "bribes" will keep coming as long as the real estate market is soft. HOMEOWNERS ARE VOTERS!
kevin said...
Robert, the high employment in the DC region did nothing to stop prices from falling. I think your perceived bounce is just that - perceived and imaginary.
Also, it's possible that the Obama administration will look to eliminate a lot of defense contracts. Don't assume that regional household GDP will just magically jump up in the region.
By the way, I find it interesting that you're not talking about the 800 lb ape in the room: the foreclosure moratorium.
Why do you think this market is so hot? I'll say it again, because you dodge it like the plague: FORECLOSURE MORATORIUM. Three months worth of foreclosures pent up are going to hit the market. Additionally, we're seeing record new NOD's.
Robert said...
The other 800 ape is the on-going assistance programs from Barack Obama. I haven't even read about what he introduced today, but I'm sure it will be more of the same - support for the housing market. More to come.
Obama not the tax and spend liberal? We won't know until it is all said and done. Would you agree that the Democratic Congress is tax and spend? Do you really think they will "cut" programs? The government will expand. Look what Knight Kiplinger said. On the order of WWI and the Great Society.
kevin said...
Can somebody else please step in and either tell me I'm crazy or tell Robert that he's missing an obviously large part of the picture here? His ignorance about something that is very well known is frustrating me.
Robert again: "You are seeing foreclosures being easily absorbed right now, do you really think another 25% is going to tank prices?"
Maybe, but I'd sure like to hear why you think they are going to RISE amidst increasing foreclosures, which is absurd.
Seriously, this is as painful as debating David Lereah in 2005 about whether there is even a housing bubble. I'm going cross-eyed here.
CRT,
Novawatcher posted the article (for you, no less) about the impact of the moratorium lifting. It lags, so it hasn't happened yet, but will soon apparently.
Tsunami
CRT, do consider looking at those inventories that it's very unusual for the pattern we've been seeing over the past few months, particularly after the preceding several months of inventory declines. Every other year starting at 1 Feb or 1 March we see increases. But this year we see a decrease. For this to happen as defaults mount defies reality. I'm guessing it is the moratorium. I'm also guessing that (whenever) the end of the moratorium causes the unleashed flood to hit the market, it'll be very obvious.
"Realdeal said: And seeing all these examples, of homes that at some recent point in time sold at the courthouse steps within my price range, makes me think that none of these homes are worth buying at their market pricing. Even considering that investors have a tricky time at the courthouse steps in purchasing these foreclosures. I almost think the owner/RE agents trying to make up for the profits they haven't made since the boom ended."
Absolutely and you shouldn't. I posted this before couple of times - how investors are pricing out the real occupants. I say it again - we have to see the flippers scream & cry before it is all over. There is just too much bubble expectations still built into the current pricing.
pat,
Not trying to pick on you but someone forwarded me this and when I saw where it was I thought of you since you often post homes in that area. This appears to be only a few blocks east of where you tend to be looking.
DCist: Google Street View Captures Public Defecation on H Street
In fairness I'm sure some of the homeless in nicer parts of DC (or even some of the homeless you'll see around the Ballston-Rosslyn corridor) do this. Probably not in the broad daylight though.
I will be positive on our region's housing market, when I see investors stop believing that you can make a killing overnight in RE with the flipping. This is what caused the bubble - I still see this rampant around here.
I think we have some scientific evidence of an impending Tsunami. I recall video of the water being sucked out to sea just prior to a huge Tsunami. Here we have inventory dropping like crazy - being sucked out to sea (?). This can only presage an inventory Tsunami of Biblical proportions.
Kev,
Of course you can't buy at the Courthouse. That's life. I can't buy CRE at reo pricing, either.
Actually you could buy at the Courthouse if you got your act together. You will need some creative financing, that's all. The rest you can learn.
spider,
What you have said re:investors is the absolute opposite of what I have heard from the Courthouse people for 20 yrs; to wit, the best Courthouse deals are in a bad market.
The newbie, dummies are broke for the most part. It's the smart money now. But Cara is right. Once the margins get squeezed too tightly - game over. Well, not entirely over. There are always bargains for those who work hard enough at it.
TBW
Pretty funny, but I don't think the guy is taking a crap, i think he's
homeless, crazy and getting ready to take a wank.
But who knows.
The homeless are sad but they usually aren't the trouble, no, it's the criminal element, 17-25, with guns, testosterone and rage.
pat,
I agree the homeless usually are not trouble. I barely notice them anymore. However, I'm pretty sure the presence of the homeless lowers property values.
Robert,
I notice you did not answer my hypothetical. I'll assume that's because you know your numbers equal silly outcomes for an average family.
---
Thought you and others might like this info from Connolly's office:
Last year when Congressman Connolly was first running for Congress, he said that the number one job for our next Congressman was to make sure that Northern Virginia got it's fair share of transportation funding. Now he's delivering on that promise. The Appropriations Bill that passed over the weekend contained millions of dollars for badly needed transportation infrastructure improvements in Northern Virginia, including:
* $974,000 for the I-95/Fairfax County Parkway interchange in Newington
* $300,000 to replace the deteriorating bridge over Accotink Creek on Route 123 (Chain Bridge Road) in Fairfax City
* $584,400 for interchange improvements at Routes 1 and 123 in Woodbridge
* $500,000 for sidewalk and street improvements in the Town Haymarket
* $1 million for construction of a western bus maintenance facility in Prince William County for the Potomac and Rappahannock Transportation Commission
* $500,000 for the Richmond Highway public transportation initiative in the Route 1 corridor of Fairfax County
* $3 million for rail cars for Virginia Railway Express.
I think under Robert math these appropriations equal about 100 new $100k jobs. ;)
On a semi-related note, they opened a fourth lane to I-95 between the Ffx Co Parkway and 123 (the other fourth lane comes now). And there's 495 HOT lanes, Dulles Rail, and tons of other projects listed on VDOT's website.
http://www.virginiadot.org/projects/northern%20virginia/default.asp
I think traffic might just get better this upcoming decade. Or at least not worse. It will never be smooth sailing here but I'm pretty optimistic. Unfortunately some of the results are toll roads but at least something is being built and we'll have greater capacity.
REdealSEEKER said "Here are more examples of what are probably easy, do-almost-nothing, for extreme profit, types of flips in Loudoun County"
Not sure why you think these are "easy, do-almost-nothing, for extreme profit, type of flips". If it's that easy and doesn't require much effort or risk, we'd all be doing it. Maybe some of these guys spent 6 months trying to track down a deal and finally did. Maybe they won't make as much as they're asking, or maybe they put a decent amount into the house before marketing them. Even if they do make $100K on a flip, good for them.
Spider said "I will be positive on our region's housing market, when I see investors stop believing that you can make a killing overnight in RE with the flipping. This is what caused the bubble - I still see this rampant around here."
Flippers didn't create the bubble. The bubble created flippers.
"I think traffic might just get better this upcoming decade."
Dude, traffic always gets worse.
Robert -- I wouldnt be too hard on Kev for the whole "tsunami" thing. Back then, he was still a recent refugee from Mr. Mortgage's glug, glug, glug institute of using CA analysis to peddle doom about the upcoming TSUNAMI for the entire US.
Notice too at the end of that thread he "got it" thanks to the tag-team analysis of Cara/CRT. Compare that to permabear Contrarian who (no matter how much evidence to the contrary, no matter how long "it" doesnt happen) is still convinced we are all going to hell -- now thanks to the defaults @ dubai world -- glug, glug, glug, glug, glug, glug, glug, glug.....
i spoke with my trusted lender today. it turned out he's only able to do 80% LTV + 5% 2nd. i had always assumed 10% down would be an option for me and use the rest of the cash to remodel (so that i could bid on fixer-uppers), unfortunately that plan isn't happening with this new reality.
FHA and $8K 'bribe' make more sense to me now in terms of stimulating home buying...
MM,
When I went to Wachovia about 6 weeks ago to see about a loan they were pushing a similar 15% down plus a 5% second after I told them I didn't want FHA or to pay PMI. Technically it was the Wells Fargo guy on the phone since Wachovia doesn't do mortgages anymore until the merger is complete.
MM,
that's curious... May I suggest trying other lenders? You could do the anonymous quote thing from zillow mortgage marketplace just as an existence check even if you didn't want to go with any of them.
Novahog,
I can see that an investor/flipper might have to wait months and months, and keep going back to the courthouse to land a deal, all along doing due diligence on all potential deals. And I can see Cara's point that a house that has been unoccupied for months on end could develop some major problems, especially if the sump pump had been turned off during a rainy period. But will all properties necessarily be problematic? Homes built only five years ago may have stained rugs (that seems to be the norm even in well-maintained homes) and marked-up walls in need of a fresh coat of paint, but other than that, there certainly isn't much need to update.
If the heating system wasn't working or there was serious water damage, and the flipper made solid repairs, then great, mark it up.
If the property was practically good as is, then, sure, that's a very smart investor, simply taking advantage of market prices, rather than causing broad scale market manipulation. I guess I can't blame the individual investor. The banks are responsible for large scale market manipulation. They lobbied the government to allow looser lending standards, and then they gave consumers bad loan products. This large-scale consumer exploitation is, in part, what fueled higher market prices.
But, as my husband says, we want to be smart consumers as well. Let's only buy if we know we're getting a good deal, something within reasonable proportion to household income. The market isn't giving us those deals, except, perhaps, for short sales, mostly way out in Leesburg.
As Elizabeth Warren so aptly describes, we live in an economy in which food, clothing, and electronics take up less of our incomes, and in which housing and heath care are huge, fairly inelastic expenses taking up disproportionate percentages of our earnings. If you shop at Kohl's, you know that a few times a year, Kohl's sends you a 30% off coupon. You can go to the clearance rack and get clothes for almost nothing. Those "discounts" aren't made readily available to the housing consumer. Then again, housing is produced right here in the US. Aside from things like bad Chinese drywall, in the US, we're not taking (unfair) advantage of global labor arbitrage in the housing market in the way that we are when we buy clothing.
Cara, thanks for the tip on the zillow thingy.
am i correct that all mortgage brokers can do FHA as well as traditional loans? the 'lender' i talked to is actually a broker. and he seemed to want to steer away my questions on FHA loans, including the 203k reno loans.
i don't mind talking to more lenders but just don't want too many of them to pull my credit.
MM,
Pulling credit is only a tiny ding, but if you don't want to check with a ton of people, may I recommend Jeff Divack at Intercoastal Mortgage ?
The experience working with him has been night and day compared to a big bank, or any experience I've heard of people going through a broker. And the rates are totally competitive. I'd seriously just give him a call and see what he thinks are the best options for you. I know mine is the most vanilla of all vanilla loans, so I'm not a good test case....
MM-
Lenders need to be approved to do FHA loans, so not now all of them can. As Cara said getting your credit pulled is only a small ding, I am also pretty sure that Fair Isaac, recently changed the rules so that if you get your credit pulled a bunch of times in a short period it only counts against you once, because they assume you are shopping around for a loan.
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