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Tuesday, February 9, 2010
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68 comments:
They're calling for 10-15 inches now. Montgomery County, Howard, Baltimore are now predicted at more than 15 inches. Every time I check the weather, the snow predictions inch up for this storm.
So should I go out there and shovel ice/snow off my roof or is the danger not worth the chances my roof will fall in from over another foot of snow?
http://www.myfoxdc.com/subindex/weather
Jeff: It would depend on the pitch of your roof and the condition (cracked) of the underlying structural members.
http://www.cdaid.org/mod/userpage/images/RoofSnow.pdf
My apologies, I have the hardest time getting links to work here.
http://building.cdaid.org/images/Handouts/Shovel%20Roof%20Snow.pdf
If this link doesn't work, it is widely replicated as the best published guidance for homeowners. It is an information pdf published by the city of Coeur d'Alene and is titled "Should I Shovel the Snow Off My Roof".
Jeff,
Mine is 3 stories high due to an English basement. I figure that is what insurance is for. I hear there is plenty of room at the local hotels. :)
VA-
My parents spent Sunday at a hotel because they lost power for a couple of days and there house was freezing. They said that the hotel was actually pretty full, do to the power outages.
hb,
I have an "in", no pun intended!
Actually I know someone with about 10 local hotels and heard that (at least) they had plenty of rooms.
VA-
That works, I think everyone is also fine if they don't live near an area with a lot of power outages. I still have platinum status at a couple of hotels for another three weeks from all the travel I did as a consultant in 2008 so I can also get a room if need be :)
Wel, at least with the few days between snowstorms there was a chance for snow to melt/fall off the trees for the most part. I'm sure some will still fall, but hopefully not as many as would have if we hadn't had as much time between.
I don't know about you all. But, I am getting tired of more snow. My back pains so bad from sunday's dig out.
"gte811i said...
The bottom line being if it's a bubble it doesn't come back for a long, long time and the bubble item becomes extremely cheap especially when inflation is taken into account.
I'm staking out a few other places to live where I can buy a 5-10 year old 5bd/2bath 2500+ sqft home on .5 acre or more for under 100k 15-20 miles from a downtown and I will be buying with cash. Same thing here would cost 600k?? Forget that, incomes aren't that much higher here in DC."
Well said. Only correction is home you described would be way more than 600k here - more like a million or more - And yes, incomes definitely don't justify that.
This house has a very strange price history. It looks to have sold for $1.86m in September 2009 and now it has been on the market for 2 months at a price of less than $830k.
Wow! $100K seller subsidy!
2/5/2010 $730,000
3/31/2005 $899,254 (new)
Cash buyer strikes again! Great deals can be had, yes, even in N Arl walking distance to metro, but you have to have CASH!
Ooops. Here's the link:
LINK
http://franklymls.com/FX7247170
List Price: $529,000
09 Tax A: $479,120
Last Sale: $205,0000 (3/17/1999)
What a joke.
TBW-
I don't think the housing ladder is that great of an idea either, but I think you are missing two things. Over 10 years they have more than 45K of equity because they have paid down their mortgage. They also probably have saved some additional money. Also I think having their salary increase 2-3% a year is very low. This is basically assuming they get no promotions, and just get cost of living increasings. The total work force salaries go up ~3% a year, but this happens by individuals getting 4-5% increases and expensive people retire and are replaced by new workers that are cheap. Obviously they get different jobs, but this is what causes individuals income to rise faster than the average salary increase.
Does this make sense of
Kevin - Doubt the Vienna Woods house will go for $529K; a similarly sized house in the neighborhood recently went for considerably less (although it didn't have a 2-car garage, which is worth something extra in an area where many of the houses just have carports):
http://franklymls.com/FX7046443
TBW-
I agree I think a lot of the housing ladder idea was driven by interest rates falling. Although I am not so convinced salaries going from 70-130K is crazy. It will happen for most consultants, lawyers, finance, government... I think you are underestimating wage growth and also thinking of real growth not nominal growth.
Cory-
The $1.8MM number was by a bank. This means it was a foreclosure. So the price is the amount of the loan. So it looking like the guy spent a lot of money buying a house tearing it down making this house and now it is worth far less than he spent.
TBW-
You are right there are a lot of industries that are not doing well. The average person working in retail also will have very little chance of getting these sort of raises. So I guess it just shows the housing ladder may make more sense for some people than others. If you are in the government you will definitely get decent raises from the cost of living and step increases just for showing up to work promotions would be an additional benefit.
tbw,
Your illustration is problematic for me. 70K can't afford 500 something right now anyway. A 15% housing increase in ten yrs may or may not be fair. An income increase of 20K or (30%) over ten years barely keeps up with inflation.
The ten year period from mid 20's to mid 30's or 30 to 40 should be a time a great career strides, promotions, income jumps, etc. At least in my mind.
Then there are the intangibles associated with owning your own place. You may not attach any value to these but many do.
Rents will also follow inflation and I did see something on the news this morning that stated rents in DC will far outmatch inflation over the next ten years. I can believe this, due to the dearth of new construction due to the CRE lending situation. Acquisition, zoning, construction, etc puts new supply well into the future.
If the idea is to leave the region, then yes, perhaps buying is not the right choice.
Over the weekend I met some young 30's on house number 3. It cost over a million. I guess everyone should gauge career prospects when considering whether "the ladder" is or is not appropriate.
Your 70K couple may be where they belong (a TH) if their advancement propects are what you indicated. In the alternative they can rent something nicer and not save or something lesser and save; or leave the area.
The 5% is an issue and I've stated that for quite some time. Not everyone needs move-up equity to buy the next home.
It boils down to personal preferences and some guess work about the future.
Either way, you'd still have more money if you rented a townhouse for cheaper until you were ready to move up to the SFH.
The housing ladder only worked during the bubble because it allowed some people to leverage minimal down payments into loans for hundreds of thousands of dollars. They made money with the bubble because prices went up faster than their interest rate percentage. In all but bubble times the housing ladder is for impatient suckers that can't do math.
People like VA_Investor didn't really use the housing ladder because they held on to each home when moving up to keep as a rental. That makes much more sense if you can afford it, since you're not losing 6% plus closing costs every time you switch homes.
Jeremy,
We did sell a couple. One put six figures in our pocket at 27 and the next even more at 28. Smooth sailing ever since and we never put more than 10% down until our present home (almost 20%). Cash is king.
TBW - I agree that the housing ladder may not make sense now. I started out looking at townhomes and now focus exclusively on SFHs which will probably, in all honesty, cause some uncomfortable tightness in my family's budget for the first few years. In addition to your thoughts on mortgage rates, these are some of the thoughts that moved me toward SFH and away from a townhome:
I think house prices are close to the bottom (probably 5% - 10% more to go but who knows how long that will take), but if I'm wrong and buy a townhouse that decreases in value, my family is stuck; some families do well in townhomes, I think Cara mentioned that she grew up in a townhome, but we plan to have four kids - four kids in a townhome? Ugh.
I also think that some of the rise in prices our area has seen in recent years can be attributed to an increase in paid consultants who are given fatter paychecks than the government would pay a government FTE. Will this reliance on contractors (and highly paid ones at that) continue to increase? Should I bet on it, and risk being stuck in a townhome with four kids?
In addition, I wonder how much of the increase in housing prices over the last decade or more has been due to the rise in double-income families. Even without the effects of a recession - and many analysts expect unemployment to remain high for years to come - do I believe that the number of families with two wage earners will increase in the coming years, thereby putting upward pressure on prices?
I couldn't bet on it. I could not in good faith bet on the housing ladder where my family was concerned.
VA_Investor,
If you go back to TBW's interest rate post you can see that you bought in at the peak of interest rates in 1981 and have been selling into a declining interest rate market ever since. Anyone trying to use the housing ladder today would have the interest rate as a headwind reducing the capability of that next borrower to pay for their home.
Do you still contend that the housing ladder is the best way to go for someone starting today?
TBW - In answer to your question, I've lived all over the DC area (DC, Arlington, Falls Church, McLean and Vienna).
As to the Vienna Woods neighborhood (in the Town of Vienna), there may be a subset of buyers who expressly prefer older, smaller, relatively well-crafted homes from the 1950s to newer, larger properties. However, I don't think that characterizes most homebuyers, even in the "Age of the Prius." Instead, for the most part, the houses in Vienna Woods go for more than you might expect given their exterior appearance because (1) they are close to Tysons and the Vienna metro; (2) the Town of Vienna is considered a comparatively walkable area for NoVa, and one with good services; and (3) they are among the most affordable homes in the highly regarded Madison HS district (which really doesn't include any lower-income areas).
It's the traditional adage that it's better to have the least expensive home in an expensive area than a luxurious property in a marginal area. If you took one of these houses, and relocated it to a Springfield or Alexandria neighborhood where most of the housing stock was also 1950s ramblers, there's no doubt that it would go for a good bit less.
@ tbw,
I'd rather not disclose where I'm looking, but doing a quick <2 min. search @
http://www.realtorsblvd.com/dallas_homes_for_sale.html
for homes in the DFW area max 100k 2000 sqft min and came up with 91 properties on the little map I had. There may only be 1 or two that fit my criteria exactly, but all it takes is one :-). The point being that a similar home here is so far out of line with the increase in incomes it's still ridiculous. Where I'm looking in DC not so much out of line but for a huge chunk of the metro area it is. As an Anecdote, a coworker's dad does construction in TX. According to her TX construction costs at a max $50/sqft brand new FWIW.
tbw/Jeremy
Much of your argument is based on two assumptions.
1. No meaningful move up the career ladder.
2. No increase in home prices and/or move up at same level as TH and thus costing more due to rising from a higher base.
There are quite a few places that are at rental parity that I would consider starter places. When considering principal paydown and fixed prices (vs. possible/probabable) rent increases AND the desire to own and not be forced into several moves due to LL's wanting to sell. etc., the choice becomes more complex.
I've long acknowledged the 5% rate issue and have put forth a couple of ideas (FHA and turning it into a rental).
I think an earlier comment by me on this thread adequately sets forth my opinions on the ladder. There are people who want to stay in this area, can afford a TH in certain areas and may not be able, ever, to move up. Should they rent or own their house some day?
Your desired house and location is nothing more than a dream to many.
GTE hit a real key fact.
You can build for $100-150/SF so
figure land and then a design cost,
that's the marginal cost of construction, these condos were selling for 3-400 dollars/SF
that was a huge money machine, which
is why so many developers were
building all at the same time.
Specuvestors were then financing on
crazy rates.
i see lots of empty footage in residential, retail and commercial,
and despite the best hopes of Robert, I don't think Obama can suck all that up in an instant.
When the bubble burst in 91, it took a good 8 years for things to get rolling again. Internet stocks are still below their peak 8 years ago.
TBW said: "I think Va_Investor, Tom, and a few others should stop judging people for wanting a single family home. If you are bullish and are right it is fair to say "hey if you want the middle class lifestyle you'll have to move to another area; it's expensive here."
I don't believe I've ever said or implied that anyone shouldn't want a SFH.
That being said, the second part of your critique -- that it's too expensive here ("here" being N. Arlington) for most folks to afford a SFH -- is correct. As I've noted many times, N. Arlington has permanently moved up to a price level that's beyond the reach of the average American family. The analogy I use is Manhattan compared to Queens. Does everyone have a right to be able to buy real estate in Manhattan? Of course not. Ditto N. Arlington and some other areas around the greater Washington region. I'm attaching no value judgment in this -- just noting the reality.
VA_Investor (or anyone else who has knowledge of trustee sales),
I am bidding on a house at a trustee sale, does the bidding usually start at the foreclosed loan amount?
I am paying a title company to run a search to ensure there are no secondary liens on the property.
(And yes, I realize these sales usually get cancelled at the last minute, but I can't make a half million mistake by not doing my homework.)
All the houses in NoVa are going to be buried...looks like there's going to be 18 inches of snow. I hope everyone has a shovel.
When looking at a foreclosed home, by the time the bank has listed it, is the condition reliable? Or is there still a chance of the owners removing things and destroying it?
Also, when putting an offer on foreclosed property, how did the bank arrive at the amount they are asking? Can a person presume that it is already as low as will get or can come in much lower? How does it work?
Thanks!
"tom said...As I've noted many times, N. Arlington has permanently moved up to a price level that's beyond the reach of the average American family."
Or, to put it more bluntly, some people truly were "priced out forever"
"TBW said...Robert appears to have left the blog. I presume because he realizes his predictions are not coming true"
I noticed that too. Pity as I really looked forward to throwing his far too bullish case shiller predictions back at him.
TBW,
I am in the same boat as you. I want to buy in N. Arlington, but I find myself at the bottom of the SFH range - ~$600k. We've considered moving as far west as Dunn Loring, but the savings does not seem that significant.
TBW: point taken.
Acceptable commute times are obviously a personal decision, but for me 45 minutes would be OK. It's the "quality" of the commute that matters to me. In that spectrum, driving for 45 minutes, whether it's an easy drive or bumper-to-bumper, is at the "bad" end of the spectrum. Riding a train (Metro or VRE (the latter I've never experienced)), seated, and reading a book or fooling around on the internet with my iPhone, is at the "good" end. I also want to have at least ten minutes of walking, preferably 15, in the commute because I enjoy the exercise.
My commute into DC from Arlington runs around 35 minutes, using a combination of walking and Metrorail. For me, it's just right. Living farther west, especially REALLY far west, would be a nightmare, personally. At the same time, I realize other folks might value a bigger house so much that a longer commute in a car would be acceptable to them.
""TBW said...Robert appears to have left the blog. I presume because he realizes his predictions are not coming true""
Well that's a signal to buy,
it's a bottom when the last bull
gives up
tbw,
The answer is the erosion of the American family.
But, I think that it might be that instead of following the plan, more and more people got in and as always when you send a committee to construct a horse you end up with an elephant (or something like that the cliche goes).
Why is CASH a better offer than a mortgage and a seller would discount more of a price if the buyer is paying cash? Does cash mean exactly what I think it does, the person is paying with a check from their own account?
I believe the housing ladder works best in a flat market, not a bubble market. This is true particularly if you are in the age range when most likely will get promotions 20s to 40s. The housing stock remains about the same in price, but your wages and savings have gone up during that time. Therefore you are able to easily afford the more expensive move-up house.
I actually think that the housing ladder during bubble times is a lot more difficult to accomplish because the more expensive home you want to move up to becomes a lot more expensive to afford during a bubble. This is ture regardless of the greater equity from the current home.
So if you think that the housing ladder works well during the bubble, it surely should work great during a flat market.
serwunderbahr
CASH is often preferable to a bank
or a motivated seller because after the inspection period the deal will close.
If the deal is based upon financing,
the appraisal may not hit, the borrower may turn out to not pre-qual, the rate may fail to lock.
if someone wants to sell, but is not in a rush, a financed offer for max price is best.
If you want to TTFO, a Bird in hand may be better then 2 in the bush.
I think Cara posted recently a great analysis of the housing stock, and how there are not that many SFHs, compared to condos and townhomes. So this fact dictates that not everyone will be able to buy a SFH, like it or not.
People who are in dead-end jobs without promotions and they do not get a better job with a raise or improve their financial situation, probably will not be able to move up to a more expensive home. Doesn't that make sense? What is wrong with that?
I recently read a special from National Geographic which showed if the rest of the world consumed goods at the level we do here in the states, we will need 5 extra Earths to sustain our consumption. Think about that!
Jewel said...
VA_Investor (or anyone else who has knowledge of trustee sales),
I am bidding on a house at a trustee sale, does the bidding usually start at the foreclosed loan amount?
I went to an auction a few weeks ago. the bank (opening) bid was $560K+ while the first loan was $500K+. Va_Investor said the bank bid usually includes fees and owed interests etc.
I believe Va_Investor also said there's no need for title search but I forgot why.
FWIW.
If the auction is Friday, I think I know which home you're bidding. Please report back if you do go. Good luck.
MM,
Thanks for the response. The house I'm interested in isn't up for auction on Friday, but I'm actually going that day just to "observe" the auction. Should be interesting.
There's no need for a title search? I read that its possible to do this own your own, but didn't want to take the risk, considering it's only $150 for a professional to do it for you.
BTW, we seem to be in a similiar price range and looking in the same area. I've been very frustrated with the lack of inventory and greedy sellers as of late.
Did you see this one?
http://www.redfin.com/VA/Arlington/725-N-Edison-St-22203/home/11242453
Fantastic location - within walking distance to Ballston. The house isn't in the best condition, I counted 7 different types of flooring material. The sellers half-heartedly attempted to update the kitchen with brand new fake wood cabinets and black granite countertops. I don't think it will sell for $599k, but there's seems to be a steady supply of buyers for even the overpriced listings, so I could be wrong.
BTW, I am terrified about bidding at auction. I have financing lined up, but there's always the "What if...".
Jewel,
I did just that and posted my observation and some questions in Jan 22nd bucket if you're interested.
Our price range is lower and don't have financing (that can close in 15 days) lined up yet. I'm waiting for the $8k credit to expire.
Regarding the Vienna Woods ramblers (FX046443) I don't disagree with the assumptions regarding the lowest priced home in the best neighborhood, but I've inspected quite a few of the homes as they popped up for sale. FX046443 was on the market for 9 hours. I remember that home well. In general, most of those older homes have larger lots than what you might get today with new construction, so that is some of the appeal.
But, for the most part, many people focus on the old adage of
"location, location, location" in regards to these 40+ year old homes and try not to focus on the age of these homes, which is a serious drawback in my book. Every one of these ramblers I inspected had endemic problems unique to that area. More than a few had drainage issues as the lawns have increased and changed the original slopes causing new problems or exacerbating existing drainage problems. I called it the Clorox rule, if I smell clorox in the basement, check for mold or past evidence of flooding or drainage issues.
Almost all of the homes with 42" crawl spaces had overhead joists that looked to be 8" or 10" joists, leftover from the older building codes of the 1960's and 70's. 40 years later you end up with sagging floors.
I could go on, but almost all of those homes I looked over in Vienna woods that were older than 35 years had some warning signs that turned me away.
Some buyers don't mind "project" homes, but I do. That and the 1960's floor plans make it nearly impossible to get modern functionality. Who decided that the basement entrance needed to be opposite the driveway?
Of all the homes I inspected only two met muster. Both had serious updates and additions professionally constructed. But they sold for premiums well above assessed value.
Texas Native,
Would you buy a house built in the early 1900s? Is the maintenance a never ending nightmare?
MM,
Are you by chance referring to this listing?
http://www.redfin.com/VA/Arlington/5520-3rd-St-S-22204/home/11258714
Don't know how much you care about basements, but they refer to the basement in this house as a "cellar" in the description.
http://franklymls.com/DC7224370
wow, these guys bought for 165K
2 years ago, fixed the place up and want to get 3X?
In crackton?
""TBW said...Robert appears to have left the blog. I presume because he realizes his predictions are not coming true""
I imagine it is something like that.
He was never here trying to better understand the market, he was here trying to influence the market by being a cheerleader.
"I believe the housing ladder works best in a flat market, not a bubble market. This is true particularly if you are in the age range when most likely will get promotions 20s to 40s. The housing stock remains about the same in price, but your wages and savings have gone up during that time. Therefore you are able to easily afford the more expensive move-up house."
The housing bubble had a huge effect on people concept of the "housing ladder."
Rather than people expecting to be able to buy a nicer house as their earning power grew and as they became more established in life they began to expect housing prices to out-perform earnings.
That was the root of the whole "buy now or be priced out forever" scenario but it also influenced the thinking of people who were already in the market.
People got the idea that what they really needed to do was buy something, almost anything, and that rising prices would carry them up with the market. How many times did we hear people say some variation on "Good thing I bought in neighborhood X! I could never afford to buy here today!"
Additionally, we have seen an unprecedented multi-decade long slide in interest rates. I suspect there are many people out there that are "climbing the housing ladder" primarily by taking on more and more debt, albeit at lower and lower interest rates. (Here I am primarily talking about the baby boomers.)
Rather than seeing their debt decrease as they approach retirement I believe many are simply trying to keep their payments affordable, and consequently seeing their debt hold steady or increase at a time when it would have been traditionally expected that people would be looking forward to imminently burning their mortgages.
Perhaps Robert is sunning himself on some beautiful beach?
I'd be happy to discuss Trustee sales. Ask on the new thread.
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