Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Please post your local house search updates, MLS finds, on-topic ideas, and links here.
LOL, just read through the weekend posts and got a good chuckle from Leroy. Not only is he still pumping his "substitution effect" but is simultaneously claiming he knew all the time that inner areas would not suffer as much of a decline. Just admit you were wrong Leroy, you would have a LOT more credibility! Still not as much as the people who got it right, but at least more than NOTHING which you have now.
Shields proposes $0.20 Real Estate Tax Hike"Steep declines in real estate tax assessments and other impacts of the wider recession were pinpointed as the need for the measures.""Shields' proposed budget involves reducing the City's workforce by 16 positions to its lowest level since the mid-1990s and a combination of pay freeze and health and pension offsets that will reduce the take home pay of the City's 184 employees by 1.6 to 5 percent.""...In addition, the value of the median single family home in the City fell from $651,000 in 2007 to $587,300 in 2010."
Doug,What I'm amazed by is that the Arlington pumpers are still reading? Who knew? Why are you guys still here?Occasionally Leroy would get pushed to where he'd say things that were more extreme sounding than he really believed, but his self-portrayal is pretty darn accurate with respect to my memory. He's not Terminator-X or some of the others. Usually Leroy would come in late to the discussion as the voice of moderation and reasonableness. Or try to. Yeah, he got mad enough sometimes to get hyperbolic, I know I've been guilty of that.
Cara- I also find it funny that they deny laws of economics. The substitution effect is real. It does not mean that prices need to exactly follow each other, but instead it says that based on peoples different utility functions they will switch what goods they get dependent on pricing. So there are some people who would rather live in Arlington, but due to the prices they will instead live in some other area. It is a little ignorant to think people will give up everything to live in Arlington even though its price differential to areas like Falls Church increased significantly over the last couple of years. So yes some of the doomers were wrong from implying the substitution effect says everything must move together, but the pumpers are equally wrong for saying the substitution effect doesn't exist at all.
the sign of spring - quite a few fast UCs.surprised - DOM 3 @ $625,000. it's one-level, no update, and on busy street.DOM 2 @ $625,000. good location, smallish lot/yard, some updates.not surprised - DOM 3 @ $575,000. we saw it on Sat. nice location, clean home, no update.demand is strong under $650K, which translates to $3,500/mo @ 55.5% with 20% down, which matches 33% of pre-tax avg income in Arl. but maybe it's nothing new.
MM,Wow. That's um, fast. I like the second two that had been pointed out here last week, more than the first. But all are good homes. Still, that's insanely quickly that you have to act in order to even have the opportunity to have your bid considered. Is that 1/3 of net or 1/3 of pre-tax income? Qualifications are based on gross...The whole thing just boggles the mind. Here's hoping that inventory in that price point catches up with demand. I mean if you were retired and could sell your un-updated 1950's brick rambler for $600k and go build a mini-mansion in the country, with money left over to spare wouldn't you?
Doug hearts North Arlington.It's different there. It's the magical land where economic laws do not exist.
Before we go "ooh" and "ahh" about low DOMs, keep in mind that I sold my house in Kansas in 10 minutes.I kid you not, but the first day the house was on the market, a couple came to look at the house at 8am (Monday) and immediately offered asking price.
c said:"I like house hunting in the rain. Defects in roofs, gutters, land and foundation are more obvious."True that is. Some of the houses I'd seen last time had very obvious drainage issues which I was able to note because the snow was melting away. That said every house we saw on Saturday had drainage issues. Some more major than others, but I'm willing to give a pass to some of the smaller issues because this level of snow melt and then rain is clearly hurting everyone. Two of the houses we tried to view the Realtors had stolen keys from the lock box, so the best we could do was *squidge* around to the back and peer in the windows.One was still occupied. Very much so. The pity there was it was a nice house, just in need of so much work to recover from the previous family that the ask was out of line with reality. Which means their short sale seems likely to head towards a foreclosure.I didn't go in feeling optimistic, and I came out feeling worse. The market is moving very fast at the price range we're able to look at, and any property with serious potential, either current or imagined, is off the market fairly quickly, or less quickly, depending on price.As such, the ones that are left are not pretty. I felt OK about two of the homes, one was in a bad location for my commute, though and the other gave bad vibes to my wife. So both are non-starters. And even though I was OK with them, they are not good houses, and the only benefit to buying is the thought that this is bottom and to buy now, fix it up, build real equity, and hopefully move out 5-10 years later. I've been vehement against the move-up market for years, I'd be a little hypocritical to change my tune now. Doesn't mean I didn't run the numbers, though.These houses are definitely inferior goods. "Functionally obsolete" our agent called them.
Its too bad your "economic laws" dont actually work in reality guys!The data simply does not support it, so you were wrong! BTW, an "economic law" is about as sound as our true understanding of subatomic physics. Which is to say, some very very smart people still dont really understand why their "laws" dont really work in the real world.
Novawatcher,Was that part of a trend? Was the house priced at or under comps? Was the market healthy or failing at the time?Short DOM is not an atmosphere everyone is comfortable making decisions in. I for one, need to sleep on all decisions. Then again if I had been in the market for that $575k one, I would have insisted my realtor take me to see it the day it was listed, because it was clear that would go fast.
Cara: it was at comps, healthy (not too hot, not too cold) market. At the time I was surprise at how fast it went.
Doug believes in magic and mojo. It's different there.
Right. Substitution doesn't happen. When people believe something is too expensive, they never buy something else instead. And nobody who ever wanted to live in Arlington ever decided to live somewhere else because they thought Arlington houses were too expensive for what you got. After all that would be "substitution."I bet these people in the substitution cult fall for that "supply and demand" relationship stuff too.
"Before we go "ooh" and "ahh" about low DOMs, keep in mind that I sold my house in Kansas in 10 minutes."JoCo?
Novawatcher,Seems reasonable. In a normal market, some sellers who have done their part in pricing correctly do get a little bit of luck on the speed side.Yes, these were just three houses, and in order to really see this as a hot market or at least one in which quick decisions are mandatory, one would need to see the average DOM for solds be less than February's 55 for condos in Arlington, and 72 for SF detached. (from the NVAR monthly pdf write-ups). It'll be interesting to see if this drops a lot in March. Of course by then the info will be over a month out of date. I'm still thinking that more sellers are in the pipeline getting their homes ready to bring to market in the next few months. And thus that average DOM shouldn't drop dramatically.If someone wanted to follow up more closely the MRIS zip code data breaks up DOM into bins so you could see how many sold hyper-fast. Arlington as a whole 1-30 DOM was 62 out of 134 sales. Too bad they didn't feel the need to break that down more finely.
Good guess, but it was Douglas county.
cara,pre-tax/gross. i think avg is $110K and 33% is about $3,300 give or take.though i can't imaging writing a $3,300 check EVERY month for 30 years!
MM,I think that 33% is the extreme side of safe. Don't (or I guess I should say "didn't") most planners argue for 25-28% for housing? Also, that $3300 check has to cover all parts of the PITI, not just P&I.Still, it does show that the median salary for a lot of this area can in fact support a quite substantial house price. Using your 33% and a rough estimate for T&I I get ~half a million.
Doug- I know several people that would have bought in Arlington that instead bought in Tysons, because it was ~20% cheaper. So yes as I said it is not a 1 for one correlation, but Arlington prices either would have risen or at least not fallen if it wasn't for the fact that many surrounding areas fell.
MM, Xpovos,Thanks. 33% is pushing it by financial planner advice, but well under the 55% (?) still allowed by FHA and GSE guidelines. (most banks will have their own more stringent limit).It's a lot of money. Slightly over half of the sales in Arlington in February were condos or attached, so it's possible that those buying the SFHs are above the average income. If some are also not first-time buyers, or have extensive savings from years of a nomadic life, that could explain some of the strong demand at this price point. Although I suspect that your implication is right, and that the typical buyer for the houses you posted is of average income, and is just sacrificing disposable income in order to buy a house now.I don't think I could stomach it. Luckily I don't have to.
So Doug... the "substitution effect" doesn't work in Arlington huh?What kind of car do you drive? Surely it must be a brand new Ferrari or Bentley right? Obviously you wouldn't consider anything less because that would be that highly debatable substitution effect thingy you aren't subject to in Arlington. How about when you go out to dinner? Do you ever find yourself looking at the various numbers printed on the menu with the dollar signs next to them? Oh wait, why would you? With no substitution effect you will always go to your first choice restaurant and always order your most preferred entree and the best available wine regardless of cost. I suppose you probably do some shopping in Arlington. You obviously buy nothing but the finest hand tailored clothing because nothing less could be substituted in its place right?Are you going on vacation sometime this year? I assume you will be going first class all the way to your five star penthouse suite... oh wait, that vacation might take place outside of Arlington leading you to substitute (and even be happy with) something that doesn't cost $10,000 a night...The "substitution effect" is fundamental economics, not sub-atomic physics. Any time someone is comparing two possible choices and weighing their merits and costs you are talking about the substitution effect. Even within the mythical fairyland of Arlington the substitution effect can be observed. Imagine a family looking at two similar houses, one six blocks from the metro and another only one block away but twice as expensive. How much is greater proximity worth to that family? Which house do they choose?That is the substitution effect.This isn't that complex a concept, though as I have explained this to you before I expect you will choose to remain ignorant... ...but hey, as they say......you can lead a horse to water, but you can't make him think.
1) Doug, we got you. You are lucky/smart/wealthy/winner whatever. Keep paying property taxes that pay for my kids education, thank you.2) Substitution effect exists. However, how it demonstrates itself is a different matter. When prices in areas surrounding Arlington do fall it puts a downward pressure on Arlington, controlling for other effects, that can in turn put upwards pressure on Arlington prices. What we see here is the net effect, seems to be pretty flat prices for last 3-4 years.
Konstantin- I agree with you that the substitution effect is just one of the things that impacts price. I also find it funny that some people deny prices have gone down in Arlington. Sure they are not down 40% like PWC, but ~10% is still down. Unless I missed them memo that no one cares about ~50-100K, because it is just a rounding error
The Fed is meeting tomorrow. Most commentary predicts the Fed will drop its low rates for an "extended period" language. That would imply they may raise the Fed Funds rate later this year.Commentary also predicts they will announce they are still ending the MBS purchase program at the end of March. Given mortgage rates have slightly declined the past two weeks it looks like we might end March with rates still hovering around 5%. Where will rates by in April? May? June? Hard to tell but hopefully going up.
tbw,On a semi-related note, I just got mail the other day that one of the GSE owns my mortgage. Guess now it can be sliced and diced into an MBS. Possibly too late to ever be owned by the Fed. So sad, but it may just get in under the wire to be directly owned by me and all the other tax payers. It's kind of like a giant involuntary credit union...I'll be doing my end of paying my mortgage. Not planning on refinancing or moving though so some longevity risk there. (Not the right name for that, sorry). And starting in year two we'll probably keep our payments increasing at the same rate as our income so it'll underperform in terms of interest too... Ah well. I the taxpayer won't make as much money from I the mortgage-payer.
Did any of you watch 60 Minutes last night? The guy that wrote Liar's Poker has written a book about the housing bubble. Really fascinating stuff. Nothing has changed.
housebuyer, Konstantin"...some people deny prices have gone down in Arlington. Sure they are not down 40% like PWC, but ~10% is still down..."here's an example of such decline:this house sold for $1,009,530 on 3/2/2010, while the house next sold new for $1.5M in 2005.less than 10% to go to reach PWC's 40% mark!
I just learned that my federal job, located in central FFX county, is very likely to relocate to Arlington or the District within the next two years.I was planning to refinance my current home in Western FFX county in order to get my STBXhusband off the mortgage. I am now rethinking this strategy and considering that we would be better off selling now. I could use my share of the equity as a downpayment on a home closer to DC. I am not a commuter.I am willing to put my stuff in storage and rent a room while looking, if I have to...just not sure which direction I should take. I would be inclined to purchase a 2 bedroom condo somewhere relatively close to Metro. Thoughts? suggestions?
cara,in the good old days, one only needed to make ~$95K to afford a $625K house with 5% down and 5% rate and 50% LTV!we've come a long way.
Lynn- If I were you I would probably sell the house unless you were really attached to it. That way each of you can get your share of the equity and you don't need to estimate this and get under/over paid. It also gives you more freedom to move if you need to.
Lynn, how long will the job be at the new location?
Washington Business Journal: Northern Virginia Homes Median sale prices climbed 13.21 percent in February 2010...In the area that includes Fairfax County, Arlington County and the cities of Fairfax, Alexandria and Falls Church, 999 units sold in February, a 6.3 percent drop from the year prior. Median sale prices climbed 13.21 percent in that time to $360,000, and the total dollar volume climbed 1.9 percent to $413.4 million. Those homes saw an average sale price that was 95 percent of the average list price. In February 2009, average home sale prices were just 90 percent of the average list price...
Lynn,I agree with housebuyer. Selling now and renting will greatly simplify your home-hunting process and your financial division from your ex-husband. Plus, it will mean you don't have to buy now while your job is still at its current location, and the future location is uncertain. Whether you do this now or a year from now I guess depends on your equity situation and how much he's pressuring you to get himself off the mortgage now. (or what the deadline is). As far as where to be, others could answer better than me about Arlington. But I would suggest finding some buildings you like and looking for a rental in them after the house is sold. This will make the shopping more convenient in the future as well as give you a stronger preview of whether you like the area/lifestyle/building. I for one, personally doubt condo prices will rise even near the metro in Arlington, in the next year or two. But stranger things have happened. If condos are going to rise anywhere it will be near the metro in Arlington, Alexandria, Bethesda and DC. Just saying you need to keep aware of the trends, not that there's any reason to worry now.
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