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Saturday, January 2, 2010
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18 comments:
Happy New Years all!
This may be a surprise to some, but for this New Year I am seriously considering purchasing my first home. My decision not to do so has always stemmed from a point of logical and fundamental financials, but as I hear more and more evidence the fact is that one of the following two things seemed to have happened:
1) Either over this time the nova area has turned into one of those areas that defy financial fundamentals and costs a lot more, due to jobs, demand, etc. ( just like Manhattan in NY).
OR:
2) People in this country have lost their minds and logic and wisdom no longer apply to our major financial decisions.
I have to admit, I am leaning towards number 2, but I think both apply. :)
Just this week I helped a client (government contractor) close on a $10 Million deal, another close a $2M, and am in the works of bidding on nearly $100M in deals for my clients. It astounds me how much money there is now in this area, and with the lack of inventory in housing I just cannot seem to come up with any logical reason why prices will go down any more.
So if anyone has any reasons why I should not buy a home now (or to confirm that I am making the correct decision) I would love to hear them; because though I am about to do this I do not really feel as happy about it as I would have thought, considering I have wanted to own my home for years now.
Ace,
Not an ideal comp, but this sold property might explain why this listing I posted the other day hasn't gotten a contract yet. But I agree it's close to market price. Perhaps there're some flaws not shown in the pictures.
Beer Chugger, number 1 is the correct response. The NOVA market is always higher than other areas in Va., I moved from the Norfolk area to Arlington in the mid-80's and my mouth dropped at the price differences, sold moved around a bit them came back in the the mid-90's. Prices were still considerably higher then La. and KS. but cheaper then CA. I think buying is the right decision for you because you stated that you really would like a home. I don't think you will lose money if you buy at a reasonable price point. I happen to think anyone that spends in excess of 700,000 is a nut job. It amases me the number of people willing to spend that on an older, smaller home and lot. Choose carefully with future growth in mind and try to keep it under 600,000 if you don't want to risk losing any money or under 800,000 if you are willing to risk 10% but I wouldn't touch anything listed over 800,000 because the buyer pool just shrinks to damn much. I could have afforded that but I wouldn't expend that much on an existing home, I would custom build in that price point.
Ace: You don't want to buy one of those fake Craftsman houses. They are located behind the very busy George Mason post office and underneath a radio tower with about 10 cellular dishes and next to a Bank of America.
Arkey,
You always seem to make alot of sense. It could be that we are of the same generation and have seen how things have unfolded over a few decades.
We, too, had complete sticker shock on moving to this area.
The WaPo article today was an interesting one. I believe that the "bottom" in the median range has come and gone. I, like you, would never spend anymore than 700 or 800K on a house, regardless of my income (unless i was rich, rich, rich). There is only "so much house" one needs. I'd rather have the weekend place and other options.
After watching Warren Buffet and Bill Gates the other day, I feel better about my beliefs on the future economy.
Beer Chugger -
Obviously, I think you are making a good choice.
The jobs and incomes in the regional economy support home prices and the regional economy is all about the Government.
The federal budget rose 18 percent this year to $3.52 trillion and is projected to grow to $5.3 trillion by 2019, according to the Treasury Department.
We will rise and fall based on how much money the Government spends.
I hope you like politics!
Arkey & VA_investor, surely you realize that other people might think some choices you would make (e.g., a second house) are "crazy" -- for themselves. For example, living in Arkansas or the hassles and expense of a second home--or buying an $80K car or traveling 6 months of the year, etc.--may not work for others. Judge not, lest ye not...and all that.
MM, it will be interesting to see what it sells for.
reecon, thanks, doesn't surprise me--as homeowner pointed out recently, many houses even in that range have significant location or other flaws. Amazing but true.
BC, Arkey
The issue isn't that DC MSA housing is always higher then other areas,
that's like saying Boston housing is way more expensive then Northampton,
the issue is how DC housing is doing relative to DC.
http://mysite.verizon.net/vzeqrguz/housingbubble/washington.html
I was around for the 80's bubble and the long misery down trend,
this bubble is far worse.
Even with the big spending, and trust me, there were some enormous spending bills in the late 80's and early 90's too. I also knew people writing then hellacious 20K checks to sell their townhouses, and this was after putting 20% down.
If JimTheRealtor is right, there will be 600K foreclosures from BofA next year. Subprime has cleared but, there are lots of condo's sold on goofy IO mortgages headed into the shredder.
when 5 year IO's Recast,
those will all go NOD/NOT right away.
yes maybe it's 1-2% of the market,
but it's a lot of the sales.
When I google foreclosures onto a map the DC area looks like a map of cholera in London in 1827.
Right now affordability is being driven by low interest rates not low prices, a 1% jump in rate knocks 8% off of price.
Was a 4.7% mortgage a sensible rate?
Heck no. Is 7% more standard?
Is the unit affordable at 7%?
If so, then sure, but, if it's a stretch now, it's going tobe worse later.
Ace,
Of course you are right. Different strokes and all...
Any guesses on how much FX County Assessments will drop?
We've only had 2 sales in the immediate neighborhood (one being a short), so I'm hoping for 15%.
15% is fine with me.
VA-
I think it will really depend on the location. I have seen some houses that are a couple of blocks apart where one went down 5% last year and the other one fell 30%. Although both areas had sales this year that were more like 15-20% off the 2008 assessment.
Beer Chugger,
I replied to your post earlier with my thoughts. I am not going to dwell on it again. People make their own choices and buying home in a bubble market (NoVA or even NY for that matter) at this point could very well turn out to be an ugly one in the hindsight when we look back. Throwing around reported budget numbers has nothing to do with making sense of the fundamentals, i.e. median income in low 100s.
Ownership will have some emotional value that you could derive to help you overlook the paper loss. Be careful with how much you pay and make sure you have quite a long term plan to stay. Good luck either way you go.
My 2 cents.
Ace,
What do you think of this CHERRYDALE FARMHOUSE? It's last sold for $1.165M in '06 and now listed at $1.177M. Does not appear to have any updates since '06 (built in '00). I like the kitchen.
BC
glad your clients are winning work but
be aware that may not be "new work"
the feds oftentimes run a zero sum game.
Beerchugger,
Don't buy unless you're happy with it. Don't pay one cent more than you're willing to pay. Don't make compromises that you'll regret.
If you can find a home you love, with "room" to "grow" (whether that's updating more, adding on, building a garage with an in-law suite, whatever), for a price you find sensible, and that won't push your budget at all, allowing you all the financial freedom that renting has (but possibly at a slightly lower savings accumulation rate). In a place that's a good commute for you. Then go for it and be happy.
I see this as a good winter to buy, but not prices worth compromising for.
We were in absolute agony at the thought of paying 400k, despite easily being able to afford it. Why? because we had started with the idea of under $250k and a 15 year mortgage we could afford on one salary. But anyway, what I'm trying to say is I feel your pain. But when you find a house that you can easily happily picture yourself living in for 20 years, that pain will go away, so long as you don't have to pay too much for it.
MM, too expensive for me -- way above the top of my range. That would mean even if the seller went down in price, I wouldn't be able to afford the changes I would need/want.
It does have a nice yard and location.
For me a major minus is that this house lacks a garage; and the right kitchen (and baths?) for you (and many others) is absolutely the wrong one for me! I don't like black in interior decorating, particularly not paired with white or grey on cabinets and tiles. Although it's called a "farmhouse" it still has a lot of the Craftsman features the builders put into Arl. new builds. Just my taste, YMMV.
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