Newsflash: in light of recent atmospheric catastrophic events, this is probably not a good time to house-hunt or move. The early Spring market is hereby postponed.
Friday, February 5, 2010
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80 comments:
Yes, it usually starts in early February. It will be an interesting spring. I do hope that the demand and the 8k clears out the rest of the lower-end reo's. It's a win all the way around.
http://www.blytic.com/Player.aspx?key=965168e61110463983a6a2c4a6339d20
fannie mae default rate is racing up,
and that's all Prime Paper.
Technically the buying season already should have begun. I'm pretty sure this Super Bowl rule of thumb began pre-2002 when the Super Bowl came a week earlier. Remember how Super Bowl Sunday used to be late January and not early February? They moved the regular season start date from Labor Day Weekend to the weekend after Labor Day Weekend. There is your fun fact for the day.
On the other hand, if delaying the Super Bowl a week delayed when many people go home shopping then the realtors better make sure the Super Bowl stays where it is. The NFL is seriously considering making it a 17 or 18 game season and pushing the Super Bowl to President's Day Weekend. I think that might lower ratings though given a lot of people travel that weekend.
Didn't someone say that a week or two ago an open was overrun with buyers? Didn't I cite 20 offers on a place a couple weeks ago?
IMO, this bad weather will only increase the people out there looking. I doubt they are going away.
Not good news for those looking, but good news for the economy.
Do you see any irony here?
Mortgage bankers group sells D.C. offices at 50% Off
"Even the pros are taking a beating. The Mortgage Bankers Association, its membership expert in real estate, sold its $90 million headquarters in downtown Washington on Friday for $41 million.
The sale comes as commercial real estate troubles are rapidly multiplying in the Washington area. At least 20 percent of commercial properties in the region are worth less than their mortgages, experts say, compared with less than 1 percent before the recession.
The Mortgage Bankers Association moved into the building in 2008 just as the real estate market was crashing, and ended up paying millions of dollars more when interest rates rose. Moreover, the leasing market slowed considerably and the association had trouble getting other tenants into the 168,000-square-foot building.
The industry lobbying group has struggled financially in recent years, as the market collapsed and lending dried up, with members dropping out as they lost their jobs. Its membership fell to 2,500 from 3,000, officials said in 2008."
Imagine how many congressmen they could have bought with that money!
Spider & Leroy-
CRE is just getting its butt kicked. It is still difficult to find financing for these loans, so even if the building is full of tenants paying high rates CRE buildings tend to have a mortgage structure where they need to refinance every 5 years. So the lack of financing is just killing property prices.
Spider: another way to look at it is that DC commercial realestate is now going for half off!
But I thought commercial realestate here was booming, because every company wants to move here. At least, that's what several people on this board keep telling me.
In the meantime, as I travel through parts of Fairfax I haven't been to in more than a year, I'm stunned by all of the empty office buildings. Heck, just the other day, I realized that there was a see-through building near the corner of Waples Mill and 50, near the empty Circuit City.
Spider, it's delicious. An agent must have told them that they had to buy then or forever be priced out.
CRE is in the toilet due to ridiculously high sales prices in the 2003-2007 time frame and the double whammy of the servere recession.
It's my understanding that asset managers are selling the debt at enormous discounts rather than lender's (life ins. companies, etc) actually taking back the properties.
I'm not sure where the lending situation is except to say I doubt there is any $$$ available at more than 50% LTV.
This situation presents some terrific opportunities for astute groups with cash.
Many people saw CRE as the next shoe to drop. It's certainly no surprise to me.
Why do you think this weather will bring out more buyers?
Leroy, HB, NW, Ace,
Also, CRE has much less price stickiness compared to RRE. This gives us good insight into underlying valuations of this region's RE, and how much buyers might be overpaying for their emotions and american dream.
Yes, I see lot of stress in CRE - which still has not completely played out. CRE was overbuilt as much (if not more) as RRE.
Va-investor, you said "IMO, this bad weather will only increase the people out there looking. I doubt they are going away."
Why do you think that?
Va_Investor said...
I wouldn't hang my hat on some very foolish people who bought at the absolute worst time in decades. They would have been fine in 2003.
I wanted to comment on this post from the other day. You do realize that most of the people on this blog who frequently disagree with you all graduated from college around 2003? We certainly could not have bought anything in 2003.
You frequently argue that our expectations are too high for a first home. What is your opinion on when we should have bought, and what type of home?
I think the group of us looking at Oakton/Vienna are very reasonable considering how long we've been saving and that we're all debt free with good jobs. To be honest, the fact that we are still renting today looks to me to be the best possible outcome for someone who graduated when we did.
The Crash of CRE is what makes me believe RRE has a larger chunk to come down.
As big Commercial goes down, rents will get cheaper, and that means house prices fall.
I'm keeping a watch on 4 plexes, because those track CRE not RRE and are much better values.
HB
"The Median House has say 10 rooms"
so 1 room more is 10%.
Actually that's a pretty good number.
My Mom owns a 1930s house in Bethesda.
2.5BR 2 Bathroom (I added the one in the basement for her)
8 rooms plus a basement.
My 70's house in the midwest
was 10 rooms. 4BR 3 bath. no basement.
My apartment in Virginia 2BR 1 bath is 6 rooms.
The median is not as big as the NAR would like you to believe.
Jeremy,
My point was that you were talking about the plight of a relatively small group of people being "priced in".
Rather than being prescient about the market, one could argue that your cohort was simply lucky. A couple years older and you might have been in the same situation as the ones you refer to.
If you graduated 7 yrs ago that puts you close to 30. I believe that is about the age of most first time buyers. Are you saying that the era of the "move-up" buyer is gone?
It would be interesting to know how many first time buyers spend over 6 or 800K. Perhaps things have changed and people will save and wait for career advancement to buy their dream home.
Renting isn't a sin. It just wasn't something I wanted to do.
pat,
Bathrooms don't count.
sehr,
I just meant that there will be a bunch of people flooding out at the first warm weather. Not more buyers in total - just over a more concentrated time frame.
Va Investor & Sehr Buyers are out in Arlington in today's snowstorm. I just met my agent and saw 2 condos that just came on the market. Both were okay but not buying either. In 1 condo the tenants were there and said they had 3 people through today. The other place, the owners were hanging out in the lobby because they had people coming throughout the day. Also for reecon, that 1 bed you told me about in your building is already gone. Post if you hear of others. I am starting to like your building more than I thought. It has great space and the gym is good for a condo. Also the guy at the front desk told me that the pool is big and has a lap lane.
I actually graduated in '02, and will be 30 this year. I certainly could have bought in '05 with the same crazy loans everyone else my age was getting. I had many "discussions" with my now in-laws in '05-06 about the impending bust and how I felt housing was far too overpriced to buy. They were among the "buy now or be priced out forever" crowd. We see how that worked out.
So no, I don't consider myself "lucky." I made a conscious decision not to buy. My credit has always been good and I'm sure I would have qualified for it (since everyone else did). Many of my friends bought, and the only one that isn't underwater right now used an inheritance to put down a very large down payment.
The only "lucky" ones are people who graduated 2005+ who wanted to buy with a funny money loan, but were unable to before the bubble showed its true self and popped. My cohorts are all either screwed with a home they payed way too much for, or stuck renting an extra couple years more than planned while this whole bubble thing works itself out. The renters are better off financially - but we're still paying a time penalty for all the bubbleheads' stupidity.
Jeremy,
Because we were in a bubble, a lot of 20-something hurried up and bought when they should have not because in fact they did not qualify to buy a home. I could not believe they could be so stupid. Getting strapped in a bad mortgage (negative amortization, and the likes) is not indicative of having the money to buy a home. This is part of the reason why we have so many foreclosures now.
The average age for buying a house is not in the 20s but 30s. Most twenty something were never able to afford the house of their dream in this region. There is nothing wrong with renting until you can afford to buy.
The fact that your friends bought during the bubble is a very unlikely event at any other point of time. The bubble mentality pushed them to buy when they really could not afford it.
Also,
Buying a house in Oakton/Vienna has been expensive even for someone just turning 30 at any point in time.
Va_Investor said...
"I do hope that the demand and the 8k clears out the rest of the lower-end reo's. It's a win all the way around."
Why would you hope for that? Oh yeah. Bubble price clinger, wishing for 2006 to return.
Jeremy:
"The only "lucky" ones are people who graduated 2005+ who wanted to buy with a funny money loan, but were unable to before the bubble showed its true self and popped. My cohorts are all either screwed with a home they payed way too much for, or stuck renting an extra couple years more than planned while this whole bubble thing works itself out. The renters are better off financially - but we're still paying a time penalty for all the bubbleheads' stupidity."
I really couldn't have said that better myself. So true.
dc2 said...
Also, Buying a house in Oakton/Vienna has been expensive even for someone just turning 30 at any point in time.
Funny you should say that because the in-laws I speak of bought your standard Oakton 4 bedroom colonial in 1981 at the ripe old age of 25. One had an entry level position with the Department of Commerce and the other was an accountant with Long & Foster. Of course the basement wasn't finished yet (they all seem to be now), but it was the generic colonial you see all over Oakton - actually on a pretty nice lot too. So you'll forgive me if I don't believe you when you say Oakton has always been hard to buy into before your 30's.
Kevin-
If the prices for low end properties are reasonable compared to renting (this may be true no one here is looking at low end properties) then it is beneficial to get people in houses that are empty before the houses start to seriously deteriorate. It also clears banks inventory, which should allow them to have more money to use for better loans.
If this is all the case it would be good if the 8K clears inventory. I don't really follow this market segment so I am not sure if people buying these properties are good for the people in addition to the banks.
the 8K doesn't clear inventory
it drives up prices.
if there were no 8K bribe prices would be lower and more people would be buying.
Jeremy said...
"Funny you should say that because the in-laws I speak of bought your standard Oakton 4 bedroom colonial in 1981 at the ripe old age of 25."
Yeah it's pretty much bullshit in my opinion that Oakton has always been prohibitively expensive. We moved here in 1985. A govt worker with a stay at home mom and 4 kids could buy a nice house back then. The equivalent now couldn't afford a condo at half the price. It's a joke. Oakton is stuck in 2006, and its evolution has been delayed.
Housebuyer,
Once foreclosures hit the market, they get scooped up really fast. There is no slow-down on the buyer's side. VA_Investor clearly wants a trickle-up bubble reinflation. Plain and simple.
And as Pat pointed out, the inventory is "fine". After all, you perma-bulls have been using it as a case for the bubble to have already been corrected for months now.
kevin
in 81 oakton was the far side of nowhere, much as fairfax was.
things were cheap there.
the reagan administration dumped billions into tysons.
Monthly Mortgage on Median Priced Home in Northern Virginia (In 2009 Dollars)
1975 $474.74 ($1,893.11)
1976 $496.04 ($1,870.28)
1977 $529.67 ($1,875.15)
1978 $609.71 ($2,006.22)
1979 $768.06 ($2,269.66)
1980 $1,056.55 ($2,750.84)
1981 $1,396.37 ($3,295.63)
1982 $1,396.93 ($3,105.63)
1983 $1,185.60 ($2,553.77)
1984 $1,269.99 ($2,622.33)
1985 $1,201.14 ($2,394.88)
1986 $1,087.11 ($2,127.97)
1987 $1,269.70 ($2,397.87)
1988 $1,470.21 ($2,666.23)
1989 $1,577.07 ($2,728.55)
1990 $1,549.18 ($2,542.90)
1991 $1,685.55 ($2,655.01)
1992 $1,541.55 ($2,357.23)
1993 $1,436.88 ($2,133.31)
1994 $1,601.13 ($2,317.82)
1995 $1,538.67 ($2,166.02)
1996 $1,542.74 ($2,109.46)
1997 $1,559.95 ($2,085.15)
1998 $1,515.32 ($1,994.43)
1999 $1,657.81 ($2,134.82)
2000 $1,860.64 ($2,318.10)
2001 $1,891.43 ($2,291.26)
2002 $2,026.56 ($2,416.74)
2003 $2,146.77 ($2,503.05)
2004 $2,600.32 ($2,953.23)
2005 $3,175.53 ($3,488.32)
2006 $3,367.12 ($3,583.19)
2007 $3,346.99 ($3,463.13)
2008 $2,773.06 ($2,763.19)
2009 $2,324.35 ($2,324.35)
Best To Worst Years To Buy (Based on Mortgage Payment in 2009 Dollars)
1976
1977
1975
1998
1978
1997
1996
1986
1993
1999
1995
1979
2001
1994
2000
2009 - $2,324.35
1992
1985 - $2,394.88 [Median]
1987
2002
2003
1990
1983
1984
1991
1988
1989
1980
2008
2004
1982
1981
2007
2005
2006
Of course, that was if you could find a home in 2009 that was 20% off peak like the "median home." I'm not sure how anyone did that in 2009 unless they dealt with short sales, foreclosures, or motivated sellers.
Jeremy,
Maybe the in-laws thought 2005 was a good time to buy because 1981 was also disastrously bad with 16.63% interest rates. Of course, by 1982 interest rates were 13.24% so they probably refinanced then or later (when the rates got even better). I wonder if they were house poor those first few years.
Or maybe they bought in 1981 using the assumable loan trick and got someone's late 1970s interest rate.
Jeez Jeremy, I wish I was as smart as your in-laws. We moved here in 1981 and all we could afford were the places in Pimmit Hills and those were going for 80K. I find it hard to believe that a 4 bd was going for that amount.
We didn't buy in Pimmet. It was just too depressing.
Rock-on and peace and all that...
Ah, we were 23, but it sounds like your in-laws were that age too.
Actually Jeremy,
Give me one neighborhood in Oakton where you could get a 4bd home in 1981 with no move-up equity and making median income. I'll wait.
Deleted two posts above b/c gave too much personal info. Here is the revised version:
Their house was on a side street off Vale Road near West Ox. They were 25 with one kid already and the second born in soon after. Almost all of the mother's income went to child care until the first child went to school. They paid under 140k for the home. If they put 20% down then at 16% interest their payment would have been about $100 over the 1981 median that TBW posted. That certainly seems doable when you consider significantly fewer families were dual income like them in 1981 than today.
I'm not arguing prices and median income in 1981 with you. I'm just telling you what one family I know for certain did in 1981. Neither came from wealthy families so I doubt much down payment money was gifted to them - but for all I know they were drug dealers in college and had a giant down payment from that. The father did work while in school. I do know they were very house poor in the beginning from my discussions with my father-in-law about the housing market, and it worked out for them. That was probably one of the reasons they figured we should borrow so much to buy during the bubble. I just can't go back to living paycheck to paycheck like I did during/right after college.
I think it was Pat who had this right - Oakton in the 70s and early 80s was viewed in the same way that Centreville is considered today. Oakton HS was built in the 1960s and was considered the school for the "country bumpkins" from Western Fairfax well into the 1980s when the expensive housing started getting built off of Vale Road, etc. The total population of Fairfax County has expanded considerably since 1980 (595K) to today (1,015K), so suggesting that most families in their 20s with a single wage-earner ought to be able to afford a home in Oakton or Vienna today is wishful thinking.
Very interesting numbers, TBW; thanks for posting. I'm bookmarking this thread.
Kevin-
Wait was I hearing you right in classifying me as a perma bull. I am pretty sure that you can't find a single post from me that says prices in the next couple of years will be higher. Generally I say they will be lower with price stickiness in some many areas. I wouldn't really call that a perma bull scenario.
TBW-
Thanks for the info. Obviously this gets back to the issue we have discussed to death. What is more important mortgage payments or housing price. The answer of course is some of each, but although mortgage payments are good now there is obviously a large risk if rates normalize. Ohh well it appears most people care only about payments, so likely prices will continue to be elevated as long as interest rates are low.
Mozart, Pat & Jeremy: Oakton was considered pretty far away from anything in the early 1980s. Tyson's Corner was a shopping center (which replaced a gas station) but the edge city office buildings were not there. When my wife was teaching at Louise Archer Elementary in the 1950s and 1960s, I believe Oakton was the only elementary school for the town and it was a very small school. From Jeremy's description of his in-laws' house and the general location, their $140k house is now worth around $600K. If they were 25 today and had a 20% down payment of $120K, their monthly P&I payment for a $480K mortgage at 5% would be $2577. Add another $500 for taxes and insurance to bring it to $3077. If they used 35% of their gross income for PITI, they would need a $105,000 annual income. If both were in the entry level jobs Jeremy described and paying child care for even one child, I am just not sure they could swing that payment. Plus they would have to come up with the $120,000 down payment from savings alone. Today, I think people with this financial and age profile do buy but in Centreville or Loudoun Co., maybe as far as Leesburg.
Mozart,
Langley HS also opened around that time period. If only the county had been more forward thinking and realized how many people would move out west. Both schools should be further west.
Instead they were plopped right down near another school (Oakton is right by Madison and Fairfax; Langley close to McLean). This means a lot of the kids in the western edges of those districts have to wake up very early to get to school.
I'm somewhat surprised you think Centreville is "country bumpkins." Have you visited Centreville in the past 20 years?
housebuyer,
Agree that interest rates are key. There's just no way to reach bottom in price, let alone price gains, without the government keeping interest rates around 5% for the next three years or so.
Any large rise in rates will reduce mortgage affordability which will lower entry level home prices which lowers move up buyer equity which lowers move up home prices which lowers entry level home prices by the substitution effect which lowers move up buyer equity . . . endless spiral (although each step takes a while since the housing market moves slowly.)
TBW - I understand your point about the school locations. It's been a continuing source of concern for people in western Fairfax, who have been redistricted many times. The Oakton HS district has such a strange configuration that no one in the western part of the attendance zone should have any comfort that they'll still be in the Oakton district in 5-10 years.
Yes, I've been to Centreville recently, and it's fair for you to point out that it's not exactly the "country" these days and hasn't been for a while - but that only underscores my point that the equivalent neighborhoods to Oakton in the early 80s are now found substantially further away from both DC and the Tysons area. I can recall when the old (since torn down) "Applachian Outfitters" store on Chain Bridge Road in Oakton used to seem well-situated precisely because there was so little development in the surrounding areas. Those days are long gone.
I just find that there are a ton of whinners on this site. The housing market is doing what is doing because there are market forces driving it. There is no conspiracy to deny anyone from their dream home. Some can afford now and some don't. If you cannot afford now, wait until you can or have a better strategy (buy a foreclosure/short sale, fix it, etc.).
I bought my first property when I was 34, married, double income, and both of us with graduate degress. This was in 1999, when presumably housing was the cheapest in a while.
I wish I could have bought in the 80s or ealy 90s but I couldn't. I continued working, renting, and saving. There was no conspiracy against me. I was no victim. I just did what I had to do to get there, work and save.
I would have been dreaming if I thought I could buy anything in my 20s. A condo is probably the only thing I would have been able to afford with one income.
So, please let's talk about market forces, trends, best time to buy, best time to sell. Neighborhoods with increased value added because of real changes/investments. But don't make the current housing market the "devil" that is not, and don't play yourself the victim because you are not. You have the power to decide when buying a property is best for you. I also know millionaires who lived with children in condos all their lives too, so please some perspective.
reecon,
I think you have a lot of good points but are overstating it. Let's look at one crucial fact: Jeremy's in-laws paid $140,000 for a home in 1981. In 1981 the median home price in Northern Virginia was $100,000. That means his in-laws paid 40% more than the median home. So clearly Oakton (and this particular home) had some cachet in 1981 or else the market would not have dictated such a high price.
I think we should look at this another way. Jeremy's in-laws bought in a bad year (1981) because of monstrously high interest rates. My guess is had they bought in the late 1970s or later in the 1980s their same salary would have been able to afford McLean. Or a larger home in Oakton. They should have waited to buy. Which is what many people did in 1981-82 -- the recession was especially deep in the housing market.
In 1979, NOVA's housing market had $1.8B in sales. In 1981 it had $1.5B and in 1982 it had $1.2B in sales. I bet a lot of realtors, mortgage brokers, developers, etc went out of business or had some lean years.
I think the early 1980s is just another example of price stickiness in the housing market. Clearly home prices should have gone down to account for the high interest rates. But instead a lot of sellers and buyers sat out the market and prices were sticky.
My parents were lucky to have bought when they did. So too were many people who bought in the mid to late 90s. I suspect down the road many will be jealous of those of us who bought between 2011-13. If history repeats itself we are destined for some really good years to buy a home.
Mozart,
Actually, as part of the deal for Chevy Chase Bank to get that lot they agreed to pay to have that building moved to a small park in Oakton off of Hunter Mill Road.
dc2,
I accept the market for what it is. I do think though I was a victim of other people's bad behavior because of the bubble.
SO many people thought in 2003-08 they were giving you good advice to buy right away and leverage as much as possible.
Renters, even those in their early or mid-20s, were treated like the 30 something woman who has not married and/or had kids where everyone think it's their business to remind them to have a kid before they can no longer have one. In that same vein everyone was like "better buy before you are priced out forever."
It's gotten better though. No one is encouraging me to buy anymore like they did from 2006-08. And many of my friends who did buy now admit they wish they took my advice.
dc2,
I think you may also be forgetting that market forces alone are not creating today's situation. In addition to the artificial forces operating during bubble years that are extensively documented elsewhere, currently the attempts to bolster prices through manipulation of interest rates and money supply, as well as tax policy, seems to be playing an important role.
If you hang around long enough, you'll also see a diversity of opinions here both about the past and current state of affairs, and the future projections.
Reecon and TBW: You both make good points. One thing reecon referred to was the cost of child care which is very high in this area. We have a combined salary that would allow us to buy a million dollar plus house, but child care costs take such a huge part of our take home pay that we don't want to be house poor. I plan to go part time or leave my firm for a few years when we have more children which will eliminate some child care costs but it will also eliminate some income. For TBW: I think you need more info from Jeremy to conclude that his in-laws bought at the wrong time because of high interest rates. He said that a second child was on the way and that is always a pressure to buy. Although interest rates were high in 1981, they could have bought down the interest rate so that it was more affordable. Once the rates declined, they could have re-financed. Maybe they did not want to wait to buy a bigger house in Oakton or a house in McLean when interest rates were lower. Maybe they just wanted a nice house in Oakton because of their growing family, relatives or friends lived there, it was a good commute, etc. My only point is that people buy houses for reasons that might seem irrational to others (not having to run up and down steps in a townhouse was my reason to love our new old rambler in Arlington). We could have stayed in our rental townhouse, moved to another rental and continued to save, but our family circumstances and lower interest rates made it seem like this was a good time to buy despite the low inventory in Arlington and the high housing prices. I honestly think that if we waited another year to buy, housing prices would be about the same in Arlington but interest rates would be higher and we would ultimately pay more for the same house.
dc2 is right on.
We were quite upset that our parents had 6% mortgages and, in driving past the Vienna Country Club to the grocery, thought we would never be able to afford such nice houses.
Well, you guys have it no worse than we did.
I agree that the discussion should be forward, not backward. There is alot of money here compared to other areas
Enough of the "poor us".
Ace,
Those are all market forces. You decide to buy based on your situation. If you accepted bad advised and did not do your homework that is your fault. Interest rates, price, assumption that prices will go up or down, availability of credit, tax policy, tax incentives, etc., etc. Supply and demand are affected by all of those factors. Or do you think that the ability to deduct your interest rate from taxes does not affect supply and demand?
I have been here long enough. I have been watching the market since 1999. I knew it was a bubble in 2003, 2004, and 2005, when it imploded. But the bubble was the market. People were willing to buy at those prices.
tiredbubblewathcer,
You were a victim of "keeping up with the Jonhsons." You wanted to buy because others did regardless of your situation. I understand youd did not and were smart about it, but some of your friends bought into the mentality of "keeping up with the Jonhnsons."
p.s. Who on God's green earth had 30K in 1981 at 25yrs old with a baby? 30yrs ago? Please.
Sorry, I had a lot of misspelled words in my last two posts. I was typing too fast.
Yea CAPS!!!!!!!!!!!!!!!!!!!!!!!!!!!
DC2 said: "I just find that there are a ton of whiners on this site."
You're quite right, DC2, and right on with your other comments. I would say the whiners and conspiracy theorists here are steadily getting fewer. Two years ago, this site was full of panting homebuyer wannabes who were beside themselves over the prospect of significant price declines in the most desirable areas such as N. Arlington. When that didn't happen, many of them started going through the classic stages of coping with disappointment/tragedy, starting with denial. A few are still in that stage, but most seemed to have progressed, and a few have reached acceptance.
TBW-
That interesting less people want you to buy now. No one wanted me to buy until now, because prices are "20% off" and interest rates are great.
DC2-
I am generally against people complaining about what the government is doing, but if you are claiming this is market forces not government intervention you have to be kidding. If this was an open market people would not be being paid between 6.5K-8K to buy a house. Seeing that a lot of people here are not eligible for these amounts they are clearly at a disadvantage to buy these properties. Also it is not open market for the government to be buying $1.25 Trillion in MBS to lower interest rates. So I am fine with telling people that there is nothing they can do to fix the market so they should deal with it, but it is absurd that you are trying to claim this is open market forces. The government is definitely intervening, making it no longer a capitalistic open market.
dc2, I don't mean to be condescending, but you need to take Econ 101 if you define governmental intervention as part of market forces. It most definitely is something separate.
I bought a house in Arlington in 2000. So I think you are drawing the wrong conclusions about my motives and those of most other people here.
dc2, just to clarify, when I was referring to your hanging around here, what I meant was at this website.
DC2 said...
I just find that there are a ton of whiners on this site.
I think you and VA_Investor are confusing whining with people giving their reasons why they believe certain housing is overpriced. If you don't agree that is fine, but why stoop to name calling?
To VA_Investor, I need submit a correction. Found out today from the wife that the in-laws were 28 & 29 when buying the Oakton house. I had thought all along they were the same age as my parents. That should make the 30k down payment more believable.
As for the Oakton home's value, they finished the basement and remodeled the kitchen over the years. They sold it for over 700k in 2007. The assessment is much lower today than when they sold it. For the record I would be very happy in a home just like theirs, although I think I prefer the contemporary style homes in the Cobb Hill neighborhood to the colonials. The interior of those homes seems more open and space efficient to me. Just a personal opinion though.
Ace,
I have been reading this website before Cara even started writing.
In fact she was wrong on a number of accounts that I corrected. She was smart enough to check the facts. So yes, I have been around reading this website for 2-3 years or more. I cannot remember when I started reading it, and I make comments ocassionally.
I took Econ 101. I have a business degree and a masters degree. If you are going to say that current tax policy which allows you to deduct your interest from your mortgage is not some kind of government intervention/subsidy then you are wrong. What is an open market for you? We are all used to the government subsidy, aren't we? Would you consider an open market then, only when the government does not subsidize your home. In that case we have not been under that open market you crave for in a long, long, time.
I think you are the one who needs to take a refresher of Econ 101. You are describing socialism or communism where the government sets the price of your home. That does not happen here.
An 8k or 6.5K incentive is hardly setting the price of homes. It pushes people who were going to buy anyways to buy. It has been criticized by well regarded economists for it ineffectiveness and cost.
Regarding things that I corrected Cara with, who by the way I respect her because she is smart and checks facts. She thought for some time that incomes had not gone up in this area, like many of you continue to post. I had to print the salaries of federal government workers in middle of the road GS-12 positions and demonstrate that since 1999 these have gone up 50 percent, from $50,000 to $75,000. This year it must be higher. And yes, this area is influenced by the large chunk of government workers who happen to buy homes around here.
The other point I corrected Cara about was that she said that Vienna needed to go down to the level of Springfield or at the same rate. Well she did accept that we were not talking apples to apples. From Tysons being a top working district nationwide, to the better schools, to the history of higher cost in Vienna.
Anyways I just point these comments as history of me having being on this site, but I have been reading it for a lot longer. I do not read every day, because frankly I get bored and have a lot of things to do. But ocassionally I have to refute all the whinning that goes around here.
By whinning I mean people who feel they deserve their dream home at the price they can pay today and in their dream location. Many of these people are planning to buy with one income and/or are in their 20s. Yes, they are whinners.
I agree some homes may still be overpriced, but for the most part the bubble has corrected. Do I believe prices could go futher down? Yes, but not by a lot at this point and depending on the location, price range etc.
Do I care if prices go down further? Not really. I bought when I could afford it, and not because I believed prices were going to double or I would be able to retire based on my home equity.
Would we experience another bubble in the future? Absolutely. People's memories are really, really short. We repeat the same mistakes all the time.
dc2, you are completely misreading my posts. Please go back and review them, if you aren't too busy. I don't hold any of the views you ascribed to me. And Cara has been one of the most valuable posters here, IMHO.
And, it's "whining", not "whinning."
Ace,
I do not think I misread you. I am talking about what transpired today. You are criticizing me for saying that the market we have now, is the market, regardless of what peoples assumptions, government incentives there are to buy, etc. You are saying it is a fake market. I am refuting that. It is as "open" as it has been since government subisidies have been part of that market for a long, long, time.
Regarding market drivers, check this site for market drivers driving today's housing market,
http://moneywatch.bnet.com/saving-money/blog/ask-agent/zillow-economist-stan-humphries-on-six-drivers-of-the-housing-market/1087/
Listed among market drivers is the $8K incentive on the demand side.
DC2-
I agree that the 8k is not huge in some market segments, but it is very big in other segments. In all segments interest rates are very important and these are driven by over a trillion in government spending. Do you not consider this intervention an open market? I don't think Ace was talking about deducting taxes. This has always been the case so its current impact is no different now vs. years past.
I also don't think I am complaining about the market. I think prices will likely fall in the area I am looking ~10%, but I am happy waiting another year so I can increase my DP fund from 20% to 40%.
dc2, I am not going to play games with you. Pick someone else.
Comparing the Oakton HS district of the early 80s to Oakton HS district today is an apples-to-oranges comparison. Even through the first half of the 1990s, the Oakton area was pretty much squarely in the middle of Fairfax high schools in terms of performance and, therefore, its perceived exclusivity. South Lakes HS frequently had higher SAT scores than Oakton HS during this period.
The school districts that have remained top-performing for two decades have been Langley, Woodson, McLean and Madison, and only those. Over the past decade, some high school districts - most notably including Oakton, Marshall and Chantilly - have become higher performing. Others - including Lake Braddock, West Springfield, South Lakes, and Lee -have slipped in relative terms. Still others - including Robinson, Herndon, Centreville and West Potomac - have pretty much held their own. The closest equivalents today in terms of buying in a Fairfax neighborhood similar to the Oakton of the early 1980s are probably Herndon, West Springfield, Centreville and South County (Lorton).
I'm not convinced that the improving school system caused the price of Oakton/Vienna homes to go up, or if it was vice-versa. People get all worked up over it, but I'm pretty sure school districts with higher incomes generally have better test scores for whatever reasons.
My personal opinion is that the traffic in this area is much more responsible for the price run up in the convenient areas than the school systems. The school system improvement came along for the ride with the increase in home values (tax income) and median family income.
All I know is that of the houses I looked at in Oakton that were bought ~2000, they cost around $325k. By 2009, they were going for around $700k (down from high 7s/low 8s).
I wouldn't call $325k affordable, but it was far more realistic than what people were paying 5 years later.
http://preview.tinyurl.com/y8l6tqe
Nova,
I really don't think using 2000 forward is a fair representation. This has been discussed before, but I think you have to go back to 1990 to get a fuller picture and also factor wage growth and interest rates.
I know that many here think interest rates should cause one to discount today's prices because rates are "artificially" low. That may or may not be the proper evaluation, but many buyers will look to payment rather than price. This is true across the board. I doubt many buy with the idea of selling any time soon. Whether this is wise or not is another question, but the reality affects market prices.
I'm not getting worked up about a particular school district, so much as providing some additional school-related data that suggests that a 30-year-old who states that, if the market were rational, he could buy a SFH in the Oakton HS district in 2010 because someone his age was able to do so in 1981 is failing to fully appreciate some of the changes in the region over the past 30 years that occurred regardless of a housing bubble.
Well Mozart, that wasn't the argument being presented. The point we were discussing was the statment made that, "Buying a house in Oakton/Vienna has been expensive even for someone just turning 30 at any point in time."
I fully understand that Oakton is more desirable today than it was in 1981. Whether or not it the same (albiet 30 years older) home should be priced more than 4 times the inflation adjusted 1981 price is another debate altogether.
Va_Investor, I really don't think using 1990 is a fair representation. This has been discussed before [ad nauseum -- there will be a quiz next time, so pay attention], but I think you have to go to 2000 to get a fuller picture and also factor wage growth and interest rates.
So, was it that Oakton was always expensive? Or was it that Oakton was in the boonies and cheap? Why 1990? The tech corridor had taken off by 2000 -- people were making more money in that area than in 1990. Make up your mind and stick to a story.
Nova,
Some time ago, I went to great lenths to set forth an example of Vienna prices (which I believe was at the same level of "desirability") in Vienna 22182 (previously, Vienna 22180) during the late 80's.
We bought a home in a nice subdivision of Vienna in 1988. The house was built in 1978, so it was ten yrs old. The price was 355K. The neighborhood peaked at about 420K in 1990 and dropped to under 325K for our model. The 325K had a double lot which was spectatcular, a beautifully finished basement and a brand new kithchen. Ours had none of that. I'm not aware of any distress sales. MLS was not readily available to me at the time.
Although our house sold in May of 2005 at 850K (after brand new everything, a finished basement, deck, etc), I have seen homes going in the 700's. I'll have to pull comps again to update my info.
So....355K to 750(?) from 1988 to 2009 is not reasonable?
Perhaps Oakton exploded in some drastically different manner during that time frame. We were always in the McLean School District.
This is MY STORY and I'm sticking to it!
fwiw, my current nabe in Reston 20194 sold in the high 400's-low 500's (depending on model) in 1992-1994 (a market trough). The two most recent sales were approx 700K (SS) to 815K. The 700K sold for 490K new and I believe the other about the same.
These homes (the smaller of the models here) peaked at 975+-.
I don't see any bubble left here or in the Vienna nabe.
WOW!
Some sales under 600K for my old Vienna nabe!
1988 was during the late-80s bubble (see graph above). Heck, I knew folks in Great Falls that bought in 1988 and admitted, during the mid-2000s, that they had bought near the top of the last bubble, only to see home prices stagnate for the next 10 years.
Heck, TBW's post above shows 1988 to be one of the 10 worst years.
Ace said...
dc2, I don't mean to be condescending, but you need to take Econ 101 if you define governmental intervention as part of market forces. It most definitely is something separate.
Quoted for truth.
Govt is spending hundreds of billions of dollars trying to keep the Titanic afloat. It hurts my brain to read people's remarks that this is cyclical, normal, or that today's low interest rates are a trade-off for having to pay a half million dollars for a p.o.s. townhouse. It's insulting.
dc2 said....
An 8k or 6.5K incentive is hardly setting the price of homes.
If you believe that, then you should have taken more econ classes when you were being all businessy as a student. Demand is a powerful weapon of price influence. Beyond that, LEVEREGED demand is like a nuclear bomb in its market price influence.
Go grab a random econ book at the library focusing on elasticity and demand influences of the markets. It's stunning what happens when you increase demand by even 5%. On the lower end of RE, which the shitty credit targeted, I guarantee it was way higher than that.
These are not market forces, they're the cold hand of the govt wielding its power to prop prices up.
dc2 said...
"By whinning I mean people who feel they deserve their dream home at the price they can pay today and in their dream location."
Correct me if I'm wrong, but which whiners on this site have ever sought anything more than a townhouse or a 40 year-old rambler? Your derision is insulting. Prices are completely out of whack in certain areas.
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