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Tuesday, January 12, 2010
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73 comments:
Hmm it looks as though the feds programs have made huge profits ~$45 Billion in addition fighting off a depression. Maybe this will get people to stop crying over how unfair TARP and the MBS program are and how they are screwing over tax payers. I doubt, but who knows. record fed profits
Someone asked me yesterday about the 22 offers on the lower-end (150+K) reo. I don't know the exact divide between investor and owner-occ, but I got the impression it was more owner-occ than investor. There definitely, imo, was no room to flip and the rent numbers would not be that attractive. I wouldn't have paid more than 150K. It wouldn't gave gone for 135K a year ago.
There was another I heard about from the same source. TH reo in FX Cty. Priced at 250K. 19 offers.
Based on data from the Department of Tax Administration, the number of county-wide net remaining foreclosures in Fairfax County was 899 in October, down from 981 in September, reflecting 237 properties coming out of foreclosure, partially offset by 155 additional properties added to the foreclosure list. This is the lowest number of net remaining foreclosures since April 2008. On average through October, properties that have been re-sold
were in active foreclosure status for 4.6 months.
Using these numbers as a guide, we can make a pretty accurate estimate of the number of REO's available this Spring, or up until 4/30/2010 for these calculations.
For Fairfax County that number is close to 800 based on the 4.6 month holding period.
If Arlington/Alexandria/ Loudoun/PWC have similar numbers, and combined represent a similar population to Fairfax County, the number of REO's available between now and April 30th, 2010, should be in the neighborhood of 1,600.
If new listings this Spring are identical to last Spring, we should see 3,200 new listings/month + 400 foreclosures. Note: new listings last Spring were 4,000 per month that included 800 REO's.
So, foreclosure listings would represent 13% of new listings up until 4/30/2010.
Foreclosures would have been approximately 25% of new listings last Spring.
Robert-
I think the interesting question will be whether banks continue to push short sales rather than foreclosures. shorts vs. reo This is just Sacramento, but the trend holds true nationwide. Banks have realized it is much cheaper to do shorts than go through the foreclosure process. If banks streamline the process at all the total distressed inventory could be as high next year as last.
Obviously this hinges on banks continuing to want to do shorts.
If anyone is following the Arlington condo market, a new building near my condo in Rosslyn just had a seminar at my condo for people who want to invest in the new building. Last year they decided to rent the condo rather than sell it. Now the owners are trying to sell the units to investors or blocks of investors so they can get out of the building. The prices are pretty attractive (about $375,000 for a 780 square foot 1 bedroom). They say they can have something like 40% investors and still get FHA approval to finance non-investors. A friend told me that a building near him in Virginia Square is doing the same thing.
I wonder why the remarks says this house has over 3000 sw.ft when the tax assessment it has 4000 above ground feet and it has a basement. 3000 isn't that big and his house looks enormous. under construction
I guess its not really relevant I don't think building the insides of a house is really any of our specialties. Although it can probably be done for 200-300K leaving a large profit if you can sell it for anything close to this comp , which looks like a reasonable comp.
HB,
That's interesting. So, shorts are making up a larger percentage of distressed sales.
That would certainly explain some/all of the drop off in REOs.
And I assume shorts get to market faster. That could easily make shorts+REO's similar this Spring from last Spring.
reecon-
I would be surprised if investors are happy with that. With a 5% mortgage $375K costs ~$2K/month. Once you throw on another $300 for taxes and ~$300-$400 for a condo fee the place would cost ~$2,700 ignoring maintenance and other such costs. I doubt you can get over $2K in rent so the investors would be losing $700/month assuming it was always rented and their is no maintenance. So unless they were going to flip the places it doesn't make sense. If they are able to flip the places I don't know why the original owner doesn't just sell the units to these people instead of the investors in the first place.
Robert-
I don't really know this is happening in Nova. I know it is nationally, but we have so little distressed inventory and Va makes it easy for banks to foreclose. So I assume it is happening, but don't have any hard facts. I figured I would put it out there at least as an option. Personally I think it is great if banks move towards short sales, because people are far less likely to trash than house compared to when the bank is kicking them out of "their houses"
housebuyer,
I, too, heard that Banks were switching over to shorts and mods. It's all going to be a matter of supply and demand as far as pricing goes.
CA is an entirely different animal. There is still a massive amount of distressed property compared to us. This is what I heard yesterday from a good source who talks to asset managers daily.
What to expect here? Higher-end reo's is what I hear. I have no personal knowledge, but have reason to believe the source.
The question of course, is how many vs. demand. Despite what many here believe, few people will sell without a serious reason. I know of no one that will run for the exit at the first sign of an uptick or downtick.
Take Cara, for example. Is she going to "bail" if her house drops in value?
Would I move? Not unless some life-altering event occured. So the reliance will be solely on distress sales; while we have buyer's who have been sitting on the sidelines for 6 yrs or so. Plenty of demand to soak up supply; especially bargain-priced homes.
Now, if we have some shock to the economy all bets are off. But isn't/wasn't this always the case?
Va_investor,
Thanks. It will be interesting to see if the pattern you're seeing in the under $300k price point can also hold for the SFH price point.
In my neighborhood, there's a couple of LLC's that got in over their heads and are needing to sell their recent REO purchases quickly, i.e. before the 3 months required for FHA has passed. Without going in them it's impossible to tell if they actually are good deals (for owner-occupants) or not though.
I'm not sure what the consequences of the profits for flipper's getting too thin are going to be though. It could be a sign that organic resales are heading up (or that flippers think they will), it could be a further and more effective drag on organic sellers prices if the owner-occupants don't have to compete with cash offers, i.e. have some other options. Or there could be fewer owner-occupants who want fixers than we think, and the REO's could fall enough to be good flips again.
I can't think of any quick way to distinguish these possibilities...
Robert, housebuyer
Good analysis, Robert.
There are so many shorts that are still on the market either under contract or not since last spring, that I don't see them as an effective loss mitigation stategy... Except for the generic math that banks want to take their losses slowly, and shorts are definitely one way to put them off for a good long while.
what do you look for when physically checking out an unfamiliar neighborhood? this morning i drove through a couple of streets and blocks near a home i'm interested in trying to 'get a sense' of the neighborhood which i'd never set foot in till today. now i've got the 'first impression' of the houses and streets, what else should i pay attention to on my next stakeout? and what to look for at different times of day? days of week?
TIA!
Non-Current Mortgages Hit Record High 13.2%: LPS
http://www.dsnews.com/articles/non-current-mortgages-hit-record-high-132-lps-2010-01-11
Cara,
My only comment on shorts is that I am quite pleased with the time-lag as market values increased during the lag-time. I only have one more (and another where I am a back-up) that I am waiting on. It's been 6 months. Prices have gone up 20%. I'll probably close if they get approval. I clearly don't see a 20% drop. I see a new floor.
Cara-
I don't think that the banks are trying to uses shorts as a way to delay losses. First, almost all of the underwater loans have been rolled up into MBS and the servicing banks tend not to own the MBS. Second, short sales tend to take ~6 months, which is at least as fast as waiting for someone to become several months delinquent starting the foreclosure process, converting it to a REO, finding a buyer, and going through closing.
I think the actual reason they are going for shorts is it helps their recovery. Over the past year loss severity has been ~10% higher for REOs than shorts. Sorry I can't share the paper this came from.
I'm posting this for Robert:
CNN: America's new financial capital is ... Washington
Robert
AOL is laying off 2500 employees,
that almost nuetralizes the gains from
Northrop moving here.
what do you look for when physically checking out an unfamiliar neighborhood? ...what else should i pay attention to on my next stakeout? .... days of week?
Here is my list, purely unscientific, personal, trademarked, copyrighted and non-inclusive:
1. At least 10 to 15 drivethroughs at staggered times of day and week. Half on weekdays, half on weekends.
2. The ratio of cars to SFH homes. One or two homes on a street with a high numbers of cars to home is ok, a street filled with same is a personal warning sign. The relative age of cars on a street is another good sign. All old, not a good sign. Nice mix, ok. All new, +++++++.
3. The general appearance of homes, unrelated to age of home. A well cared for home is a responsible homeowner. Cars parked in the front yard on dirt is a warning sign.
4. Cross check the zip code database against the area. Use the zip code analyzer to see the averages for income, and other socio economic factors:
22182 Example
22209 Example
You can also look by city name:
McLean
Woodbridge
Washington D.C.
5. Playgrounds that are filled with happy smiling kids and attentive parents on the weekends is always a good sign. Playgrounds that are camping sites for adults is never a good sign. Condition of the equipment is another good indicator of the area. A community that invests in good playgrounds and parks has a thriving economic base...normally. The other corollary are the businesses in the nearby strip shopping center. I call it the Pawnshop/PayDay Loan to Starbucks sign. Pawnshop on a corner opposite a payday loan place vs. a Starbucks on one corner with a Dry Cleaners is another good indicator. You want the latter in your neighborhood.
6. Don't be afraid to call things for what they are. If you see a scumbag, call it a scumbag...not a "temporarily deprived person of domicile".
7. And last, every single time I have moved I have sought out a mid to upper career law enforcement professional who works the local beat. I buy them lunch, they tell me where the bad people live. It's worked 100% of the time so far. Cops know where the good places to live are and aren't bound by some federal reg that says I can't know about the neighborhood I am about to plunk down $500K for a home.
All the info you need is still pretty much on the Internet. Before I moved to NoVA I had a darn good indication of what was a good place vs. a bad place just by searching the databases on the Internet. That research was borne out by visual cues after I moved here.
MM, if you can and want to private message me, please do.
Some of the things I look for (physically, as opposed to research on the web, which you already do, I'm sure) in an unfamiliar neighborhood:
1) how far is it to the grocery store at which I want to shop?
2) are there sidewalks? Are people walking on them - in a leisurely fashion, with kids, alone--or exercising together? All good signs.
3) (duh) do people maintain their properties well, including landscaping?
4) are people out in the early evening and on weekends?
5) if you see neighbors out, see if they will talk to you about the neighborhood--if you are a woman in the car alone or with a child, this is usually easy to get them to do once you tell them you are interested in a specific house. This might be harder if there are several adults in the car.
ps - obviously in very cold weather only the exercisers will be out, probably--so this part of the advice may not help until March. If you never see any exercisers, that MAY suggest the neighborhood feels unsafe.
Ace/Texas Native
If almost everyone out walking either looks like they're walking home from the VRE/bus, or has a dog, does that still count as walking?
Man, and here I just went by Christmas decorations. Just kidding. Those are really good concrete suggestions. I did all of those by gut (other than talking to a policeman), but wouldn't have been able to list them.
Wow I don't know if any of you watched the 1948 is the great depression clip on calculated risk, but I found it funny. The fox news guy can't specify what the chart is, miss speaks about the date several times, and then compares the current unemployment to 1948, and says that look this recession is far worse than the great depression. You would have thought he would at least known the great depression was before WWII not after
pat said...AOL is laying off 2500 employees, that almost nuetralizes the gains from Northrop moving here.
I anticipate the layoffs to be worse than the gains from Northrop. Besides the AOL layoffs are immediate and the NG relocation isn't going to be completed until the summer of 2011.
But, since you brought up jobs:
May. 20, 2009
In 2009, 9,800 new jobs are projected. In 2010, 34,100 new jobs are projected. In 2011, 42,400 new jobs are projected.
Whoops! Underestimated.
December 9, 2009
According to the Delta Associates report, a net 40,400 new jobs have been added in the Washington region since Jan. 31.
Maybe these had something to do with it:
The report, called "Where the Jobs Are," focuses on 273,000 "critical needs" positions that are necessary for the operation of the agencies -- 45,000 of which would be located in the Washington area.
If projections bear out that the federal government will hire up to 120,000 people for jobs in the region over the next few years, the Washington area economy could be on its way to a rebound faster than most of the nation.
Jeffrey Neal, the personnel chief for the Department of Homeland Security, has a major challenge on his desk: helping DHS hire 65,700 employees by the end of 2012.
the Defense Department is looking for 50,000 contracting and acquisition officers as part of President Obama's plan to reduce outsourcing.
By 2011, another 82,000 new jobs will relocate from other states to military installations in the region through the Base Relocation and Closure Program
Hmmmm. Jobs beget jobs:
For every new federal job, economists predict there will be one to one-and-a-half new government contracting jobs created. And many of those folks also will be coming from elsewhere.
Non-federal:
SAIC - 1200
NG - 300
Hilton - 150
Construction of the high-occupancy toll (HOT) lanes on the Capital Beltway between Springfield and the Maryland border is expected to create 11,800 jobs and inject $2.7 billion into the local economy between now and 2013.
The planned Department of Homeland Security headquarters in Southeast Washington will generate 38,000 jobs, including some in the private sector, over the next eight years, according to Del. Eleanor Holmes Norton (D-D.C.).
$5B Silver Line to Dulles
$5B BRAC by September 2011
Many of the 50 colleges and universities in the area are booming, said Ward, as people seek new credentials or career paths.
Firms such as Fidelity Investments, BNY Mellon and even Goldman Sachs, which has prospered in the crisis relative to many other banks, are opening additional offices or bulking up their staffs in the capital.
The massive research venture, spearheaded by 20-year geneticist Dietrich Stephan, aims to swell into an ambitious 300,000-square-foot campus where up to 500 scientists from around the world would report for work.
Microsoft Corp., which will officially open its new Chevy Chase office on Thursday, plans to bring 500 new or relocated jobs to Montgomery County in the next 18 months.
What does that mean for the housing market:
Analysts said they expect the new jobs to drive demand for housing in the region, accelerating recovery of the market.
Hyperlinks available on request.
Since we were doing the "evaluate our predictions" thing in a couple of the earlier threads I thought I would dig up one of my old posts that had a lot of verifiable predictions. I think everyone here will be able to recognize where I was on target and where I was off target. Personally I believe my biggest error was in overestimating how quickly the bust would move.
Note also that this is from 22 Sept, 2006... prior to the "subprime crisis" and most of the talk of bad loans. I feel I was more or less dead-on with my predictions there.
"I am confident that in the aftermath of this downturn the proliferation of these new mortgage "products" will be recognized as one of the primary contributors to the unjustified run up in prices.
There is a clear correlation between the use of more "exotic" and risky mortgages and decreasing levels of affordability in bubble markets.
The further above an affordable level the markets rose the more people were driven to make their purchases with these loans, not because they were sophisticated investors, but because there was simply no other way to make a purchase.
Within DC proper the use of interest only loans peaked above 55% of total purchases as per the most recent data I have seen. Without a doubt some of those purchasers were savvy investors who understood the risks associated with their decision, but the overwhelming majority of those relying on exotic loans were doing so because there was simply no other way they could afford to "buy" a house.
In previous bubbles the inevitable decline has come when affordability forced price growth to stop. This makes the market unattractive to speculators and they leave the market. Mentalities shift, prices stagnate or drop slightly, and then eventually prices start to rise again.
The problem with the exotic lending products is that in this bubble when affordability was maxed out instead of the market experiencing a normal correction, which would probably have been in 2004, the market continued to accelerate as more and more purchasers utilized exotic loans to enter the market. This has significantly increased the upward side of the bubble's growth and in my assessment will contribute to an unusually sharp downward slide.
The use of interest only loans was WIDELY justified on the grounds that with housing prices rising as fast as they were the most important thing was to simply get into the market. (this is Lance and VA_Investor's favorite "buy or be priced out forever" line)
I don't doubt that there were some honest lenders who were not relying on such scare tactics to sell these products, but the truth is that a huge number were. After all... when it comes time for the loan payments to balloon you can simply refinance or sell right?"
(Continued in next post)
"What we are going to see over the next couple years is the truth behind the saying... "There is no such thing as a free lunch." With housing prices falling instead of rising large numbers of homeowners will be forced into bankruptcy. This happens every time a market falls, but it will be more pronounced this time as a result of the unusual extent of the bubble and the exotics loans that have financed it.
The home owners will not blame their own bad judgment of lack of foresight... they will blame the loans, and I predict that the media will as well.
Over the next couple years the media will hammer home the message to anyone who will listen what a mess these loans got people into and the popularity of these loans will drop as it becomes "common knowledge" that exotic loans are a bad idea.
This will force home prices even lower as without the widespread reliance on these loans a lower price level will have to be established.
What are we going to see in this area?
In the short term, the next 12 months, I expect a continued sharp decline in prices. We are currently somewhere around -8% YoY but that will get worse as this fall selling season goes on. I expect this fall/winter will be the period when prices will decline the fastest.
Sometime after the next spring season I expect things will have stabilized and that while some areas will still decline, the decline will be much slower and more orderly. As always Condos and the outer suburbs will be hit the hardest. I think over the next five years median prices in this area will drop 30-45% with about half of that coming from inflation. Following that period another 5 or so years of a stagnant market would normally be expected but I am not going to pretend to be able to see that far out as inflation, the economy and everything else plays a role in that." - Leroy 22 Sept, 2006.
and of course the link...
http://bubblemeter.blogspot.com/2006/09/mortgage-bankers-association.html
Leroy-
That was a pretty solid prediction as you said it was basically correct other than it took two years to correct rather than 1. CS says at the trough we were down about 33% now we are down a little less than 30%. With inflation we are definitely into your range of minus 30-45%. So as long as prices don't go up much over the next year or two your 5 year prediction is looking good.
Leroy-
You still seem pretty bearish, seeing that we are already down about as much as you originally predicted. Is this because you didn't see a huge recession so we should fall further or why are you still so bearish? Or did you always think it was going to be closer to 45% down and you were just hedging your bet a little with the 30% down scenario?
Leroy,
Pretty impressive Leroy. I think it's most interesting to look back at which things happened differently and yet had the same effect. I wasn't on any bubble blogs pre-burst, nor even aware of housing prices until 2007 really, so I don't think I could dig up any usefully solid predictions, if I could even think what to search for....
Mostly I've done analysis of available data and month to month stuff.
"You still seem pretty bearish, seeing that we are already down about as much as you originally predicted. Is this because you didn't see a huge recession so we should fall further or why are you still so bearish? Or did you always think it was going to be closer to 45% down and you were just hedging your bet a little with the 30% down scenario?"
I don't think I am as bearish as you think I am. I think most of the area is well into the stagnation phase of things.
In 2006 it was easy to say "this is a bubble, you are taking a huge risk buying right now..." Things aren't nearly so clear-cut at this point.
I think the biggest remaining question is what will happen when the government intervention is scaled back and interest rates rise. There is still some down-side risk... but not nearly to the extent there was in 2006.
Leroy-
I guess in my mind I was lumping you in the Spider camp. It sounds like you are much closer to TBW/me. Where we see some downside see CS down slightly but probably not more than 5-10% although some areas will obviously do worse than others.
I must give people the wrong impression.
This isn't the first time someone has gotten the idea that I am on the fringe of things but I feel like I have been clear enough in my predictions.
Leroy-
It is probably the fact that I just remember you having a couple of arguments with the bulls, so in my head I thought of you as bearish. I think my mind is just not working very well :)
Overall that was pretty good Leroy. On a macroeconomic scale no complaints.
On a micro level, thats where we started having problems. It is/was too easy to take that 30-45% down and say "well that means Arlington etc. will be down that much too".
By 2007/2008 that argument was on a roll -- it was working perfectly for Lou, PWC & even Fairfax eventually -- so I guess I can see where its moving in got its genesis (afterall if it hit all those places, why didnt 30-45% hit Arlington too)?
I think Lance is to blame for alot of things too. Lance was a very incendiary character, so when he pointed out (in hindsight correctly) that certain minute areas werent experiencing anything like that, it was far too easy to respond "just wait, its coming for you too". I was a bigtime glug glug gluger back on David's blog, posting anonymously at Lance/KH.
In my estimate however, it was getting pretty obvious that something was terribly terribly wrong by early 2008 when the bulk of the USA was going down hard, and yet Arlington, Alexandria, etc. were just sort of sitting there, levitating above the fray down only a scant 5-10%. Yet, the consensus here was just wait its moving in, your area isnt special, (you know the drill).
In that regard, you were as guilty as anyone. In fact, im not sure if you arent still thinking "its moving in" has a chance, and suddenly Arl/Alex, parts of FFX, etc will have a quick -20% drop and prove its moving in was true afterall.
I guess the real writing on the wall was this spring when its moving in was clearly a bust and nearly everyone else who believed doom was coming to Arlington ran away. To your credit, you are still here, willing to reash your old posts, so perhaps I should give you a bit more benefit of the doubt.
Good thing is, the last vestiges of the glug glug glug doom is coming to Arlington evaporated by last May, so it wont be much longer that I do an occasional "what were you thinking one year ago" posts like I am doing now. Plus I may soon buy and in all likelyhood disappear myself. I know there are alot of people (especially those who dont care about the immunozone) here that cant wait for that day :)
The Anonymous,
I think another thing that happened, for me at least, was that the prices in the entrenched zones are more similar to California prices than they are to the rest of NoVa. Sure there are $1 million dollar homes in all counties (I assume) but in terms of price per square foot, N. Arlington looks a lot more like Irvine or Silicon Valley than it does like Reston or Burke.
Given that most bubble blogs are California based, many assumed that the prices there were similarly delusion-based. This was prior to the point at which CRT provided us with the actual ARM data showing that Arlington had very very little in the way of toxic financing, and in fact NoVa in general had very little option-ARM exposure relative to the total housing stock. Once our actual toxic mortgage exposure was clear, that was the nail in the coffin for me on any moving in theory.
Similarly high priced areas of California are in fact different, because of the mass psychology of the buyers. People there really did stretch more than people did here. So the analogy that N. Arlington is to PWC what Irvine is to the Inland Empire is tenous at best. And while the shadow inventory piles up there, and the toxic asset percentage is much higher, Irvine still hasn't seen the anticipated drops for any of it's desirable housing.
Anonymous-
To be fair he did specifically state that the outer suburbs will be hit the hardest. This was back in September 2006 where Arlington hadn't really shown its true "levitating ability". How much do you think Arlington is down ~15%? If you throw on another 5% for inflation, because he said inflation was baked into his numbers, then I would still say he was not far off. He also has another 2 years so if Arlington falls another ~5 and you get 2%/year inflation than it would be very close to the 30% he predicted
I saw this place, it was a sort of
goofed up remodel.
They took a very small odd shaped home
redid it and still screwed up the
floorplan. It's a good price
for what it is, but, my GF is very tall and banged her head on the stairs.
but it went UC after 57 days
and now it's back active.
http://franklymls.com/DC7157647
down 40%
I know everyone is totally bored with reading that WDC is the best Commercial Real Estate market in the country. So don't read this report.
MM said...I'm posting this for Robert:
CNN: America's new financial capital is ... Washington
We live in interesting times. Our city is going through a transformation. Some of us can see it, but others ignore the obvious - we're just any old city with a housing bubble that hasn't deflated (spider, pat).
The change in the financial world may be the largest of all. Health Care and Energy won't be far behind. Technology and Education I would put on the third tier. And many other smaller changes - consumer finance, executive pay, auto industry, etc.
But, it's not just the public sector that is changing. The private sector transformation will be just as profound.
It will be clear when the Great Recession is in the history books, but much of what is being done in Washington - good or bad - will endure.
Here is a blog post along the same lines about Finance.
do most here still think it's a bad idea to have the listing agent 'represent' both sides?
If anything, it does not sound good for this region long-term.
Flushed you out. You are a bear on Washington DC long-term. You are on an island, my friend.
If you are betting that US is going to become communist country at the same time China is becoming capitalist - it is a wishful thinking.
How can a complete takeover of Finance, Health Care, and Energy not be considered communist-leaning. It is.
China may have to do the same thing. They certainly are not becoming more capitalist. They seem to increase regulation daily.
Robert,
Government has taken over certain sectors of private enterprises already. They will unwind given country's precarious deficits. If anything, it does not sound good for this region long-term.
Be careful what you wish for. If you are betting that US is going to become socialist at the same time China is trying to be capitalist - it is a wishful thinking. If that ever happens - god save us - I am moving out of USA & better stay away from RE anyways.
Robert, I think much of our problems with your incessant jobs postings are that most of the impact will be coming years in the future. Most of us on the blog want to buy this year or next. Your articles make us all feel better about our decision to buy here, but don't help to figure out when, what, or where specifically to buy. None of us would even be considering buying here if we thought it was the next Detroit.
Robert says
CNN: America's new financial capital is ... Washington
We live in interesting times. Our city is going through a transformation. Some of us can see it, but others ignore the obvious - we're just any old city with a housing bubble that hasn't deflated (spider, pat).
Robert Don't confuse the hype for the reality.
While the treasury is printing trillions and the future of wall street is being fought out on Pennsylvania avenue and on Capital Hill, that by no means they are moving.
The future of GM was determined in an office in the west wing, that doesn't mean 50,000 manufacturing jobs are moving to DC.
Wall Street is wall street, the money roars up in train loads from here the there and is spent on champagne, hookers and blow in
Manhattan.
The $60B to GM went to detroit, cleveland, etc...
What will affect DC is spending on the Beltway Bandits, Spending on the
DC HQ workforce and on the
headcount here.
DHS is growing because they are spending more, they created TSA out of whole Cloth in 02.
But, ultimately that is a big effect because DC is a smaller area.
Why is the NRO here? They could move to California, leavingonly a HQ.
DISA is moving to Aberdeen.
Lots of stuff can move out leaving behind just HQ staff.
Robert, I think much of our problems with your incessant jobs postings are that most of the impact will be coming years in the future. Most of us on the blog want to buy this year or next. Your articles make us all feel better about our decision to buy here, but don't help to figure out when, what, or where specifically to buy. None of us would even be considering buying here if we thought it was the next Detroit.
I thought Detroit was spider's favorite market because CS is 73 vs. 180 for Washington. No more room to deflate.
Sorry, I can't be more helpful with your decision to buy. But, what a crazy market:
Lower 1/3 is rising
Upper 1/3 is falling
Somewhere in the middle 1/3 it is absolutely flat - I don't know where.
Then you have the end of the MBS purchase program and an $8k tax credit that expires 4/30/2010.
That's a lot so sift through. You have my sympathy.
HB
the fed made record profits the same way Lehman made record profits in 06.
Huge risk.
The fed has made $45 Billion on 13 trillion in credit default swaps.
They are claiming profits on TARP but the delinquent parts are not being written off.
The good parts paid off, the mediocre are struggling and the
bad parts are just being extended and pretended.
Pat-
Where are you getting that they own 13 trillion in credit derivatives I have not seen this. I am pretty sure they have everything in TARP marked to market, which shows a small profit. This may turn into a small loss (due to GM/Chrysler which are main street not wall street), but it will not end up being that big.
Most of their "profits" are from the fact they printed money to buy agency backed MBS and treasuries. So they paid nothing for the money and in turn are being given ~3-4% a year interest. Sure they are effectively monetizing the debt, but if they can get away with it and not create inflation good for them. I would love if they somehow could pay off the debt and not create inflation in the process. Obviously they will need to end up removing the money at some point so inflation doesn't come, but in the mean time why not make a healthy profit compared to what it would have costs if we needed China, Japan, and OPEC to finance our debt.
pat -
To be clear, Washington does not surpass NY as a financial center. Washington does not surpass Houston as an energy center. Washington does not surpass Silicon Valley as a technology center. But, #2 in all of those sectors.
Nitpick the rest, but note, Obama has been in office less than a year.
I guess you are right, some people think we may be the next Detroit. However, I doubt anything you post will ever sway them otherwise.
Nobody is going to tell you what, where and when to buy. You've had years to figure it out. If you are still stumped, I think that you have your answer.
Robert,
I never said Detroit is a good market to buy. I also never said & don't believe our market will correct anywhere close to Detroit or Vegas in terms of %. You know quite well - I am in the camp correcting back from irrational exuberance of last decade - nothing more, nothing less.
Housebuyer, pat,
Don't believe the hype about the profit. The fed profit that got reported is just a game to reduce the public anger about the bailout. Profit is only realized when assets are actually sold. And we all know they are totally worthless at this point in time if they are sold. So, no there is no profit & there is no real MTM. Those assets are crap!!
Wall street sold taxpayers tons of worthless crap that our kids will end up paying.
Saving the fat cats was one of the worst crime performed in the history. I still can't believe Bernanke, Geitner & Larry Summers still have jobs!!! In reality, I would rather see them in jail, to be honest.
I won't forgive myself for voting Obama in - what a marvelous team he created to manage our economy!!!!
spider
I concur, the Fed just behaved
like the worlds largest I Bank.
The only good part is they don't get a bonus this year, bernanke has to wait a year or two to sneak off
like kashkari and collect his 30 pieces of silver.
as far as the Fed guaranteeing Trillions, look at all the liquidity facilities where they took things onto their books and they are heling guarantee the AIG paper and the cruddy Fanie/Freddie paper.
that was A2 paper and they made it AAA by fiat. that made a lot of their crudier paper worth more, until the day the fannie paper crumbles.
Bernanke went all in, to protect asset prices, with the crap he's got Marked to Purchase not to market, when he tries to sell the first tranche the price will collapse.
Nobody wants that stuff, that's why bernanke bought it.
Va_Investor said...
"Nobody is going to tell you what, where and when to buy. You've had years to figure it out. If you are still stumped, I think that you have your answer."
Correct, and that is why we haven't bought yet. So far that decision has worked out very well for us. We could be sitting 100k underwater in a "starter home" and unable to break even on it for years if we had bought back in 2006-7 when we got married. Now we are looking at move-up homes instead, and with 15-20% to put down to boot.
"I think Lance is to blame for alot of things too. Lance was a very incendiary character, so when he pointed out (in hindsight correctly) that certain minute areas werent experiencing anything like that, it was far too easy to respond "just wait, its coming for you too". I was a bigtime glug glug gluger back on David's blog, posting anonymously at Lance/KH."
That wasn't what Lance was predicting... lance was of the "it is a new paradigm, real estate has a long way to rise, just look at Manhattan," camp. It was only in his last year or so of posting that he was forced to narrow his statements to the few pockets where declines hadn't yet been seen.
"In that regard, you were as guilty as anyone. In fact, im not sure if you arent still thinking "its moving in" has a chance, and suddenly Arl/Alex, parts of FFX, etc will have a quick -20% drop and prove its moving in was true afterall."
I have provided you with quotes ranging from 2006 to 2008 in which I stated quite clearly that I didn't expect the same thing in close in areas as I did out west. If that isn't good enough for you I expect nothing will be.
Why should I feel obligated to prove myself to someone who doesn't appear to be capable of reading my posts?
I doubt it will help, but here is yet another example of my thinking on the subject, this time from 2007, how do you think my advice would have worked out?
""I am curious to find out how the market is in Georgetown for single family homes. My sister owns a 3 bed/3bath rowhouse there and she is thinking of selling it this spring. She lives abroad and asked for my opinion. I stumbled upon this web site and thought perhaps some of you might know if prices have gone down or are still stable in Georgetown (compared to last year). Thanks," [this is what I was responding to]
Prices in Georgetown have been stable, and may actually be slightly up from last year. The lowest end of the housing market is getting hit first, and it will get hit the hardest in the end. A SFH in Georgetown is going to be a relatively attractive property regardless of what the market does and it is not going to get hit nearly as hard as condos or far out suburban houses.
If she wants to sell for her own reasons then spring won't be a bad time to do it.
If she is interested in selling because she is worried there will be a huge price drop and she will lose money... I would advise her not to... with one important assumption. That is that she has a mortgage she can sustain indefinitely. Georgetown may lose some value, but it won’t be anything like what will happen to condos and she just isn't likely to come out that much ahead. If she plans to return to DC one day and buy again, she is likely better off simply keeping her current house.
Now, about that assumption from above… If she has a mortgage that will become unmanageable in the next several years and she needs to sell for that reason then obviously she should sell and it will probably be easier sooner rather than later. In that case she should try to make sure her house is ready to go on the market by early spring if possible, mid-late Feb. She should also honestly look at what houses in the immediate neighborhood have been selling for and price her house realistically. If she overprices her house it is likely to just sit and sit and sit."- Leroy 17 Jan 2007
http://bubblemeter.blogspot.com/2007/01/nytimes-buyers-scarce-many-condos-are.html
Is that clear enough?
You have to differentiate my expectation that declines would be seen in all areas, from an expectation that declines would somehow be equal in all areas. Honestly now... these old posts are not somehow ambiguous.
HB asks why i say the fed invested $13 Trillion
From the Daily Herald on the Fed’s secrecy:
Today, nearly $13 trillion in taxpayer dollars in bailouts and loans threaten every aspect of our lives. Our constitutional principles and freedoms are being assaulted at every turn. More bailouts, trillion-dollar “stimulus” plans, huge new debt burdens for our children, simply printing money to cover our failed policies and mask our dire economic situation – I could go on and on.
You and I both know President Obama is going to keep going and going unless the proper controls are put into place.
Just think about the magnitude of our spending: The massive, outrageous amount of dollars committed to the economic bailouts in recent months totals more than the New Deal, more than the entire Iraq debacle, more than the 1980s savings and loan mess, more than the Korean War … COMBINED.
The basic premise of examining any problem is determining root cause, which means starting with the Federal Reserve. However, the Federal Reserve is shrouded in secrecy. Their meetings and inner workings are off-limits to the public. And just recently, the Federal Reserve told Congress “NO WAY” when asked to account for $2 TRILLION in taxpayer-backed loans!
http://www.geldpress.com/2010/01/cnn-misguided-on-federal-reserve-profits-aka-fake-profits/?source=patrick.net
Bethesda, MD-based Hanger Orthopedics confirms move to Austin.
Before deciding on Austin, Hanger considered the greater Washington DC metro area
The company is offering all 130 headquarters employees the opportunity to move with the company if they choose.
Whoa! I guess you win some and you lose some. This would be one I would like to keep.
Was it Texas taxes? Austin corporate incentives? Closer to customers?
Interesting that of the 100 largest metros, Austin is the #1 fastest growing and WDC is #2.
Leroy said...That wasn't what Lance was predicting... lance was of the "it is a new paradigm, real estate has a long way to rise, just look at Manhattan," camp.
The office market in Washington, D.C., is poised to topple New York as the nation's most expensive, reflecting the declining fortunes of the nation's financial center and the government expansion under way in the U.S. capital.
Couldn't resist posting this even though Lance didn't foresee the collapse of NY.
Texas Native and Ace,
Thank you so much for sharing the tips. They are really great.
It's not a very 'walkable' community (can't walk to a Starbucks:)) but I did see a couple of dog walkers when I drove by, so it's a positive sign.
I checked the sex offender registry and there three offenders in this neighborhood. None on the same street, but are a couple of blocks away...
Ace,
It is Barcroft. Do you happen to know about the neighborhood personally?
spider said...Saving the fat cats was one of the worst crime performed in the history. I still can't believe Bernanke, Geitner & Larry Summers still have jobs!!! In reality, I would rather see them in jail, to be honest.
Well, they didn't save the fat cats at Lehman. How did that work out?
It was after Lehman the Fed was in the position of having to guarantee all of the money market accounts. The Fed learned their lesson. Going down the path you recommend would have made a Great Depression almost certain.
Pat-
I was pretty clear in my comment that I was looking for credit derivatives and the Fed. Your response was that there are 13 trillion in bailouts and loans. For sure most of these are not credit derivatives they are simply loans and securities that the fed bought. Second this is not entirely the fed I am pretty sure they are also including the treasury, FDIC, Fannie Freddie... Finally I am pretty sure that number is significantly outdated and is counting trillions in promises that the fed has already taken back. e.g. Backing all of Citi assets, Bear Stearns assets, money markets, TALF/TARP loans that have been repaid.
Robert-
I completely agree with you. Somehow most of main street thinks if the banking system collapsed all the rich investment bankers would be screwed but nothing would happen to them. In reality you are absolutely correct that if the banking system collapsed we would be in the middle of the great depression with 20+% unemployment with all of our savings destroyed either when the banks failed, when the stock market collapsed, or in some other painful collapse
Was it Texas taxes? Austin corporate incentives? Closer to customers?
Taxes? Yes.
Incentives? Possibly.
Closer to customers?. No idea.
My thoughts:
If they are based in Bethesda and moving to Austin Texas, they are going to enjoy a greater than 40% increase in spending for homes and other expenses. Texas has no personal income tax, but property taxes are steep(er) than other places.
My personal opinion is that No Income tax combined with homemade Tex-Mex Food, Bar-B-Q, Drive Though Beer barns, wide open 70mph+ freeways, and rolling hills is not a bad place to spend a life.
The Texas Hill country is purty...purty.purty.purty.
I envy them folks.
MM,
What you don't want to do is have essentially a double agent without knowing it, like two agents in the same firm. No matter what you do, you need to be cautious about what things you tell even your own agent so you don't lose bargaining power.
Using the LA as your agent on a particular transaction gives the LA twice the incentive to make you the winning bidder. Does that allow you to get it for a better price? It could. But given that the owner is going to possibly be suspicious of such an effect, the LA may try to wring as much out of you as possible to make sure yours is the most attractive offer.
You need to think through what are the motivations of all parties involved. As long as you have a strong and firm maximum price that you won't regret paying, I don't see the real harm in dual agency, but I'm not a professional, so there could be subtleties here I'm missing.
I liked having the double layers of filters between myself and the selllers. Actually I was filter number one between my husband and our agent, who was the filter to the LA, who was the filter to the sellers. But then again, I was also ridiculously honest with Jeff, so... on the other hand having Jeff, who's competency I knew and trusted and had vetted working for me, helped hugely on the piece of mind. The LA was fine, but a bit of a flake.
I believe the common wisdom here was that going with the LA eliminates some of the LA's incentive to maximize the sale price, but given that the seller knows this too, I'm not sure it gives you a better deal. The best deal you're likely to get is if you are the only bidder and your agent can effectively bargain. If there are even 2 or 3 bids, all buyers will have to show their cards, and essentially each buyer will put forward their best acceptable offer. Thus the seller doesn't have to attempt to negotiate to figure out what that point of pain is. So if there are multiple bids anyway, maybe the LA is the best route.
me, prevaricating as usual.
"Leroy said...
You have to differentiate my expectation that declines would be seen in all areas, from an expectation that declines would somehow be equal in all areas. Honestly now... these old posts are not somehow ambiguous."
That post you provided is not ambiguous. And neither is this one which says pretty much the opposite...
"Leroy said...
Obviously the bursting of the bubble is not affecting the entire region uniformly. (Just as it is not affecting the entire country uniformly.)
In DC's case the bust is moving from the outer areas towards the inner areas.
It is certainly worth noting, but it doesn't at all call into question whether or not the inner areas will eventually feel the bust.
The inner areas experienced the same 100%+ increase in prices that was seen around the edges of the city. This price increase was not supported by any sustainable fundamentals.
This increase in prices was the product of risky exotic lending and a classic market mania. Lending standards are now returning to sanity and the market's mentality is shifting.
Nice houses in nice areas are the quickest to rise when the market is good, and the last to fall when the market is bad. The market is always set at the margins.
The worst house in a neighborhood doesn't compete directly with the best... but it does compete with the houses slightly better than itself, and they in turn compete with houses slightly better...
This is a process that will take a long time to unwind. When all is said and done traditional ratios will be restored. (or close to it)
There is no "new paradigm." The "new paradigm" was that 54% of buyers in DC were using interest only loans at one point..."
Leroy -- 3/26/08 6:56 PM
There are many other posts like this one.
Cara,
I agree most of what you said, especially "...The best deal you're likely to get is if you are the only bidder and your agent can effectively bargain..."
The house I have in mind has DOM of 75. If it's like most listings the contract could expire in 15 days. So I'm hoping: 1) i'm the only bidder, 2) seller wants to sell, and 3) the listing agent wants a deal, and 4) the saving of 2% commission or whatever makes the difference.
MM,
Re: Barcroft, not as well as to be helpful to you. I did do some volunteer work with someone who lived there and had the impression that it was one of the nicest neighborhoods south of 50 and west of 27.
MM,
You mean the contract with the LA? Hmmm, that is an interesting angle, indeed. At 75 days, you should be the only bidder one would think.
"There are many other posts like this one."
I think I can see what is confusing you, but I am honestly not sure it is worth trying to dig into because I just don't think you are interested in what I was actually saying.
The short version is that that post was not vaguely predicting something I explicitly predicted the exact opposite of on numerous occasions including both before and after that post.
That post was prompted by one of lance's classic idiot posts in which he claimed a new world order was to blame for rising real estate prices.
My response was imprecise and certainly shows the wisdom of careful wording, but you are most certainly misreading it, I suspect intentionally.
That post wasn't intended to say "All areas will fall equal amounts at the same pace," something I had, and would subsequently explicitly predicted the opposite of.
What that post was saying is that the bubble was not limited to the outer suburbs and neither would the bust.
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