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.
Lynn: "I would be inclined to purchase a 2 bedroom condo somewhere relatively close to Metro. Thoughts? suggestions?"Use the Substitution Effect and move to Culpeper or Front Royal. Doug will explain how that works.
A year (give or take) after it was obvious here, Patrick has finally come around to noticing that many entry-level properties are below rental parity far enough to be cash-flow positive.I was starting to doubt that Patrick was capable of seeing anything that contradicted his bearish stance, but this is progress. (He's also semi-Seattle centric which didn't start its correction until much later than here and most of the rest of the country).Patrick's Landlord's Bargain Finder(seems especially appropriate since we've been talking about doomers and almost all our doomers are gone)
cara- I would love to be a landlord for the place at the top of the list. Cost 159K rents for 2,200/month.
cara: but will they cash-flow at these prices when interest rates rise?My hunch would be: "no".
Hey, reecon,Didn't you say that your sister was going to be selling in King's Park? There's only one normal seller there right now that's not under contract. Typical time to under contract has been under 14 days. I'd say strike while the iron is hot. Rambler's going under contract with lists at $430 and $435?? It's your call whether you want to get in now, before those show up as sales back down near $410 again, or if you want to wait in case those are new comps near list. One of them has the updates to merit it appraisal-wise, the other one I'm not so sure.Then again I'm the fool who helped assuage T's fears about finding a buyer last spring, only to have prices in his complex go another $5-10k higher later in the summer. But I'm just a bird in the hand kind of person.
NoVawatcher,If you're buying them to cash-flow as a landlord and you have a fixed rate loan do you care?And some of them will, $159k for 2,200/month is at break even on a 30 year loan with no money down at 10% interest, and $30k of upfront cash for renovations, plus one month of vacancy per year. As the investor, obviously you get to decide how much of a margin you need to feel comfortable about the depreciation risk.
(10% was chosen because that's the highest interest rate the WaPo calculator will let me do. That's also why I had to pull $30k out of the air to force a break even position. Numbers were for the first 3 years. Breaking even in the first year, obviously means you can't spend as much upfront).
Cara: yes, you do care.Maybe I was misunderstood. I don't mean that future interest rate increases would affect current buyers, but instead would affect future buyers. In that case, the properties might not cash-flow without dropping the selling/buying price.Yes, there were some extreme deals (such as the one I give), but when I look at my old neighborhood (back down to late-2002/early 2003 prices), they probably only cash-flow due to the absurdly low interest rates.
NoVawatcher,Agreed, in the sense that there is a margin needed. First of all it needs to cash-flow at 6% (?) anyway, because you can't get 5% as a non-owner occupant. Secondly, I'd guesstimate that at worst you'd want it to still cash-flow at 8% at today's rents, and for the area to have a good outlook for stable rents now, and increasing rents in the future, such that the higher rent will offset higher rates for that future buyer.Inherent in my statement is the gut feeling that rates won't be rising quickly, or that if they do, they will encompany inflation in which rent would be included. At the same time, the people who I know personally (having been their tenant) who are growing their landlord fiefdoms, only sell when there's an offer on the table that's way better than current cash-flow. So those people, literally wouldn't care. The goal is to buy something that's a steal when you buy it, and then you make money from it either way. Thus why Patrick is offering his service, to identify those things that are at that "steal" level. (except of course for the twit of a landlord who made the offer our good landlord couldn't refuse, who was just making the house into as many illegal apartments as he could fit in and shutting on and off our gas in the process without warning us, we who didn't have an automatic pilot on our stove, smart!)
Oh, and perhaps I was misunderstood as well, I didn't mean to imply that all entry-level properties were cash-flow positive, just that there were/are some really good deals. Moreso last year than this year from our feet on the ground Va_investor.
Pat - with regards to your inflation adjusted case shiller chart going to 100, here is a non inflation (nominal) chart you may want to take a look at.http://img527.imageshack.us/img527/4954/chartusa1900nominal.pngJust keep this in mind when you decide what nominal value you think of where CS will end up settling.
Pat - I should mention too, it looks like this chart is NOT set to year 2000 = 100 as per the typical case shiller but reset to year 1900 = 10. Therefore it is not correct to look at this and say "CS is at 375 today, but it should settle at 275", etc. The takeaway is simply, in nominal terms, the CS 100 year chart looks alot different than the one which is inflation adjusted at 100.
MM,Another quick "under contract" in N. Arlington:http://www.redfin.com/VA/Arlington/1047-N-Stafford-St-22201/home/11245133The house has been on the market for 5 days and I do think its a fair price given the proximity to the metro.Also, I was shocked by the final sale price of this house (it sold for above list):http://franklymls.com/AR7244723$710k for an Arlington colonial with no addition... Usually they go for low to mid $600's when they are renovated but have no addition. People are really willing to pay that much more for good taste?
"Use the Substitution Effect and move to Culpeper or Front Royal. Doug will explain how that works."Lol, but actually I cant explain it because Im not the expert, ask one of the "believers", lol.
BTW, I noticed a lot of long posts responding to me yesterday, sorry you all got upset about being wrong on your precious _theory_!Dont have time to read them though, have a real job unlike you guys!
Nova- If you are that worried about interest rates making it not cash flow in the future if you had to sell you could always get an assumable loan. That way the value of the loan would go up if you needed to sell and the house didn't cash flow any more with a new loan. Also as cara said if the rent is 2200 and the house price is 160 basically there is no way under reasonable circumstances it wouldn't cash flow.
Jewel,Interesting that they included a picture of how lame it looked in 2006 before they painted the brick yellow and added shutters. Guess they needed it to justify the $200k increase in price... Yikes. Those are either some expensive renovations or they made a goodly chunk of change.At $11k over list, I'm guessing there must have been a mini-bidding war with at least 2 "serious" buyers.
Jewel,Proximity? That's not just walking distance that's stumbling distance. Love the use of the overhead shot marked with the metro and home in question. Very smart.
Cara,RE: House on Harrison StreetI doubt they spent $200k on renovations since they didn't add on. They bought in 2006 and are presumably making a hefty profit 4 years later... I'm surprised it appraised for that much.RE: "Townhouse" on stafford streetI've seen several of these townhouses in person (they're technically condos because someone lives below you), it's a great alternative to living in one of the high rise condos in Ballston. I'm not surprised someone jumped on it.
Jewel,The second home sold for $650K in Jan 08. you can Google its old picture link. listing says the bath and kitchen were updated.Also that's the house that Tom said was swamped at OH after the first snowstorm. Some 200 groups of people showed up according to the LA.
Jewel,Sorry, wrong house. haha.this is the one I'm talking about.
I'm a little disappointed today. I was curious about how much condo's in my building go at auctions. So I decided I would go this morning, because as of 9AM the auction site claimed the place was still up for sale. They decided not to list the place. Ohh well.I also found it interesting that about half the time the places were listed for more than the original mortgage (I assume to account for penalties and additional owed interest). Obviously no one bid on these places since they were way over priced.The other places were listed at about half of the original mortgage. I wonder how the bank makes the decision about whether they actually want to sell it at the courthouse vs. just let it go to REO.
Hey everyone,I haven't been able to keep up with the postings the last few months, so I'm sorry if this is repetitive. I wanted to get your take on what you think the market will be like after the 1st time credit expires. I assume anyone that needs to sell in the near future (a year or so) is working to get their house on the market now. Which leads me to believe that after the credit expires, the only listings left will be junk houses (people who did nothing to actually try and sell like update anything), and the only listings that would be coming onto the market are foreclosures. Obviously life circumstances like divorce and death will factor into a handful of listings. Part of me is concerned that we've been looking for 3 years, and if we can't find something by the time the credit expires, there will be absolutely no good listings coming on after it expires. The other part of me is like Cara - wishing the credit would go away so housing can stop being manipulated by govt forces and prices can go to a level where they should be. I would love to hear your thoughts.
cara,Burke Center was profiled (sorta) in the Washington Post today. Article They were using it as an example of a community where people return their Census forms (and then picked a neighborhood in SE DC that had a low response rate.) I would like a Census t-shirt and/or reusable bag. I think it's unfair that only the communities where many people do not fill out the forms get them. Maybe I'll luck out and there will be some Census freebies at Potomac Yards Center.
Jewel & Cara, on the one hand, $700+ for a <1200 square foot house without a garage does seem higher than is typical for Arlington now.On the other hand, that owner could EASILY have spent $200K on that house since 2006, without adding on. Just as a comparison, I have spent that much in the time I've owned my place and don't have a finished basement or as nice of a kitchen (I did a semi-redo for less than $10K). Lots of $ was spent on roof, HVAC and removal of old oil tank and other infrastructure change, plumbing, new fireplace liner, new electrical work, every room scraped and painted, tuckpointing, etc.--all that boring stuff that an old house requires and costs $$$ but isn't pretty. In addition, I got an estimate of $50K from one person to finish a small basement and $30K from another for a less elaborate (than the pictured house) basement, and someone else estimated $25K for a smaller kitchen (I thought all of these were high and decided not to do them, but you can see what these things might cost). Now, I don't know whether the house you linked was in as bad of shape as mine was, or whether that basement was done before 2006. But my guess is the owners did at least some of that in addition to all the pretty stuff you see, which also wasn't cheap.It's not just taste but also getting all this work done is a huge hassle that many people are happy to pay to avoid if they like the choices that the owner made.
MJC,1) What's your price range? Over $500k and the tax credit is mostly irrelevant. Even over $400k and it's not that much of a factor relative to the impact of 5% 30-year loans.2) People will always need to sell their homes. A lot of folks rushed in the fall to list before the first deadline, and yet there are still new listings appearing weekly now. There may be a brief time of picked over inventory. Is that worse than the time of bidding wars (i.e. now)? Even with a dip in listings post-credit, I'd say give it a few months and it will even back out.Inventory is finally, finally picking up for a spring season. This gives me hope that things are returning to "normal". Unfortunately they're returning to normal at much higher prices than the other wise would have if interest rates hadn't been held down near 5% for over a year, but you take what you can get.We bought a house in January. Enjoying living in it now, for about the same cost as our 2 bedroom apartment that was about half the total square footage we have now.Best of luck hunting!!
Our price range is up to $550K. I agree that $8K is a drop in the bucket for this price range, but we are also very particular about the type of home we want and there haven't been very many in 3 years that even meet our criteria. I'm more interested in the quality of the houses that are listed as a result of the credit, than the actual $8K credit.
Ace,I'm on the front end of your experience. I just bought a colonial (that's the cube brick style with bedrooms on the second floor right? I've been skimming past those discussions) in Arlington.Floors refinished and partially replaced where there were pet stains.Upgraded fusebox to circuit breaker panel.Fixed a sewage line problem and some minor plumbing.Had *painted over* wallpaper removed and the interior painted.That's just what I've already gotten accomplished or lined up.On the to do list is:New roof, trim, gutters.Redo bathroom.Redo kitchen.New fence.New windows.New heater.Half bath to full in basement.Refinish the basement.Granted not all of it needs to be done now but this will easily run $40-50k total when all is said and done. More if I don't do some of the stuff myself like I plan to.I'm enjoying working on the transformation though.My $0.02
"Use the Substitution Effect and move to Culpeper or Fron't Royal. Doug will explain how that works."Lol, but actually I cant explain it because Im not the expert, ask one of the "believers", lol. Unfortunately the "believers" understand substitution and know that's not how it works. You'd probably have better luck with the nonbelievers, where economics is just a matter of opinion.
They are just trolling... enough time has already been wasted on them.
Doug said...BTW, I noticed a lot of long posts responding to me yesterday, sorry you all got upset about being wrong on your precious _theory_!Dont have time to read them though, have a real job unlike you guys!I didn't reply to you yesterday, but it seems to me if you aren't going to bother yourself to read replies to what you post then you shouldn't post at all. That kind of posting seems more like spamming to me, or at least rude.
Mytwocents, I'm excited for you. I hope everything works out just as you planned. If those walls could talk...they'd probably say, "thanks!"
MM,That is a nice house - I can see why someone would pay $700k+ for that - bigger rooms, closer to metro, etc.Ace,I agree with you that renovations are a huge hassle... but a $200k jump in just over 3 years (they actually bought in Dec 2006)... with no addition?I actually laughed at this listing when I first saw it, I'm starting to think maybe I'm the delusional one ;-)
MJC,Haven't been many in the past 3 years? Hmm. That both meet your criteria and your price point, or that meet your criteria at all? How rare are such houses amongst the overall stock of existing homes in your target area?Where are you looking?At the $450-$550 price point, I think you more have the general thawing out of the market, the perception that the worst is over and springtime all working in your favor in terms of more listings coming up in the next few months. There may be some pent-up supply there of people with the type of home you want who have plenty of equity but who've been scared to list until now. Relative to those larger effects, I think the $8k is a blip for owners. I'd say, if anything the $8k will bring out the desperate owners who are borderline underwater praying to break even either with making their money back or not owing the bank anything. But mostly, for lists, and for sales, the pulled forward demand and supply were both last fall, not now.
TBW-It looks like no change to the fed language. I was a little surprised that people thought they would change the languauge seeing how tame inflation has been. I think they will keep rates as low as possible as long as possible so unless we get inflation rates could stay low. Particularly since they just ended the QE
Ace, Jewel,Even painting the exterior can be a large expense, if you have it done professionally, even the new shutters aren't free. So, I could tally up $80-100k easily amongst the visible changes only. No way to really know where it is between $100k and "$200k" (I'd subtract off transaction costs personally). But lack of hassle is a big deal.
Well, Jewel, I thought I had explained how quickly these costs could rack up. But here is more detail. If you have had experience with older houses, maybe you have been lucky or bought one that was well-maintained over the years, but if you have never owned one, you may just not realize how much work is needed and how costly it is to fix/replace/add stuff. But the people who bought that house probably do. Since I can't provide you receipts online, I don't know what else to say to convince you other than to give you a few more specific examples, such as: an entirely new roof, installed, medium quality, even on a small house is $5000 and up. New gutters - at least another $1000. Floors sanded and refinished or partially replaced, for about five rooms, and stairs, $5K+. Replace faulty electrical outlets, at least $25 per. Wiring - count on $50 or more per hour of electrician's time; ditto for plumber. Plumbing -- have probably spent $3000 at various times, not including normal maintenance.Here's more: Replace HVAC with high efficiency gas furnace, remove dangerously neglected oil furnace and partially filled underground tank, $4500 and up. New extended life water heater: $900. High quality windows, installed, can run anywhere from $8000 to $20000, even in a small house. A good quality cedar privacy fence is at least $5000 (plus annual sanding and resealing). How about: Install stainless steel liner in a neglected chimney, $3600. Replace an unsafe, ugly old brick patio with a small stone patio laid in concrete, $17000. Take down large trees - anywhere from $300 to $1000 depending on the size and location of the tree. Install French drain and sump pump system after landscaping fails to solve basement water problem, over $4000. As Cara said - professional exterior scraping, prep, and painting (even though my house is mostly brick)-- several thousand.I could go on and on. And none of these are things that make buyers go "Wow!" like a new kitchen, baths, or nicely finished basement. Obviously, if someone likes to do this work himself/herself and has the tools and skills, or if s/he can get volume discounts or is willing to settle for lower quality materials, he/she can do it for much less than what I paid. But for many of us, it is worth it to do our own jobs at our pay rates and to pay a professional to do these jobs much more efficiently and effectively than I could do them.So while I obviously don't know how much of this was done in the house you linked, I think it's very likely the sellers of the house had to do at least some of this in addition to spending a lot on the things you can see in the photos. If they did, I can completely understand why a few buyers were persuaded to spring for it. And that's part of why a lot of those houses some of you think are crappy in Arlington cost as much as they do.
Ace,I can see how $200k can get spent on all these things in 2 years if they have been neglected. And thus how if the buyers are truly sure that all the major things to get the house back up to well-maintained condition have been done, that the buyers could feel it's worth it.My question is where is the line between maintainence and improvement? Houses cost money to maintain. It's part of the costs of ownership. Roofs, fences, gutters, patios, sidewalks, driveways, siding, all have lifetimes. Having done them recently definitely adds value, and saves the new owner money. But there are costs along the way that are just costs. That I don't think most housing markets allow you to get back from the next buyer. Our future buyer isn't going to care about plumbing repairs we have done, or even notice the new ciruit breaker, I think some things just get sunk. And if you're lucky inflation or market related appreciation covers these costs for you.Buying a well-maintained, or even new house won't prevent the buyer from running into the unexpected problem as time passes.
Cara, the IRS has spelled out pretty well what constitutes "maintenance" vs. "capital investment/ expenditure." I think it's in one the taxpayer publication on buying and selling your home.Buyers vary in their awareness of what things have to be done and what they cost. When buying an older home (I can't speak about new homes), they had better be pretty savvy about this, or they will likely be outbid by someone who is more savvy (for a house with a lot of new, well-done stuff), or they may buy a "cheap" place and then be shocked (or worse) at what it really costs them. Obviously if you put on a roof with a guaranteed life of 20 or 30 years (for example) and you own the house for 25 years, your use of the roof has used up most or all of the value of your expenditure. But if you put on that same roof on THIS year and sell the house, at least some buyers will understand what value that has for them and factor that into their preference and willingness to pay for your house vs. another. It's absolutely true that buyers will not pay dollar for dollar for many capital improvements, even if brand new, but it isn't true to say that they have no value or that people will pay nothing for them, even if several years old. We know for example that people will not(yet) pay anywhere close to what most "green" improvements cost, in particular, which is why you don't see many green houses on the market. And it is probably true that buyers pay a higher % for flashy kitchen remodels than for infrastructure. But look at what people are paying for brand new houses in Arlington (just to hold the neighborhood constant) and for completely updated ones, versus the run down ones.
and I should have added that, although my example of the roof describes the extremes, the same argument holds for the continuum of the age of repairs, e.g., if the roof is 5 years old out of an expected life of 30 years (if you used the good shingles, etc.), and if other improvements in the house are in this range, your house is more valuable than if the roof, furnace, windows, etc., will have to be replaced soon. Good quality stuff, installed correctly and maintained properly, has a long life.
housebuyer,Yes, I'm quite disappointed in the Bloombergs and other news sources who implied they would ditch the extended period language. It was not even a close vote:Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability. Perhaps Hoenig implied or thought he had more allies than he did.At least they did not back away from ending the MBS program at the end of this month:To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month.
Cara I was waiting until tomorrow's home inspection to let you know about my sister-in-law's house in King's Park. We were getting ready to put it on the market this Sunday at $425,000 and one of the neighbors got wind of that and asked if a friend could see it. Another neighbor heard about it and asked if her friend could see it. We had a slight bidding war between the two. We don't expect any problems with the home inspection as the house was cared for and we updated the kitchen and bathrooms, painted it and refinished the floors. If it doesn't work out, we will go to the other buyer or put it on the market. I will let you know in a few days.The next house to do is for another sister-in-law in Orange Hunt. That house is bigger so will sell for more, but we want to get it out there by the summer. for Va Investor the St. Patty's Day party starts at the Quarterdeck at 3 p.m. tomorrow. My buddies and I will be the old geezers at the corner table.
anonthanks for the charts. Awesome.Good Data beats any BS Table pounding.The thing that kills me is the shortage of good data.now what should be kept in mind is that little wiggle in the lines between 85 and 90. It may not seem like much but housing went to 200 while in the same period CPI went from 150 to 175. That was the 1990 Real estate bubble that led to the S&L Crisis.800 S&L's went bust, the country went into a pretty deep recession and we elected Clinton instead of the War Hero Bush.Then Guys like me look at that huge bubble, and just say "Wow, we have a lot of damage headed our way".Look am I more Doomer then Boomer? yeah. I am. However I'm also extraordinarily skeptical of the banks, balance sheets, the Auditors and the future.i see that big wave letting go, and who is screwed? not a lot of people. Not compared to what it should be. Not unless they got ugly.The Fed has taken extraordinary and it appears judging by the press criminal measures to try and keep the damage down. How that changes things, I can't guess.Certainly the press is now muttering about lowering the US Bond rating, so, if so, I hope theyimpeach Geithner and Bernanke.Obama was a fool to reappoint Helicopter Ben. Certainly there seem to be good deals, i have an offer hanging on a foreclosure. Wil there be better deals? yes.With 10% of prime mortgages now defective, It can't be good.
Lynn Writes"Lynn: "I would be inclined to purchase a 2 bedroom condo somewhere relatively close to Metro. Thoughts? suggestions?"Use the Substitution Effect and move to Culpeper or Front Royal. Doug will explain how that works."Use teh Substitution effect and move to PG County. It will be explained to you how, it's worth a million more to live in Arlington.
reecon,Sounds like those two sister-in-laws have similar housing/neighborhood/school tastes as many of us on here. They are one of us, one of us, one of us. :)
Final countdown has begun for the death of 8k credit - as it stands today anyway. Fed also confirmed today the obituary of trash purchases by end of March. Now, we wait and see how much of this was real, unless of course fed/treasury loses confidence in the market again and throws in the towel with more stupidity. I think they are running out of options. But, who knows..My recent dream - night after I filed 2009 taxes:It is kind of crazy. But I literally saw my recent 2009 IRS tax payment getting sucked into a large black-hole that ends somewhere into wall-street banker's Swiss account. In return, I hope to get junk MBSs in the mail.
Financial analyst Meredith Whitney forecasts double dip in the housing market"The US housing market will face another retreat while mortgage-backed securities and Treasurys are likely to go through a "material" correction, Meredith Whitney, CEO of Meredith Whitney Advisory Group, told CNBC Tuesday.""The housing market surely will double dip," Whitney told "Worldwide Exchange."Government programs to support housing have been "murky" and when the modifications caused by them come to an end, a lot of supply may come to the market and that's when the real-estate market is likely to go down, she explained.
Reecon,Haven't been to the Quarterdeck in years! I'd be there for sure if I hadn't had major surgery Friday. Hoist one for me!
HB, tbw, In light of what caused the crisis in the first place - I can't believe Hoenig is the only one who believes: "...exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability."
"Rent 2200 and the house price is 160"Where? I have seen most going 3 times that anywhere I look - it makes no sense on price/rent basis, let alone cash flow positive...
Spider- I agree that housing will likely continue to have a double dip, but not a huge one. I wonder for the MBS prices whether she is talking about agency backed or non-agency. My guess is she is talking about non-agency and if that is the case I am less convinced there will be a material correction. As for the government leaving the market. The impact from the MBS program will likely be felt for years to come. I don't expect to see a normalization in either mortgage rates or spreads over treasuries for the next couple of years.
Spider- I agree the price to rent for SFH or TH are way out of wack although condos are pretty close to where the should be. I just keep patiently waiting as prices trickle down ever so slightly, hopefully after the stimulus is gone we will see some weakness and decent deals.
OK, Jewel and Cara and anyone else, you think that $710K was too much for a nicely renovated (apparently) 1200 square foot house? Here's one that's <1000 square feet for $850K. Every photo gives me claustrophobia. http://franklymls.com/AR7280350
Hey, VA_investor, sorry to hear about your surgery but hope it went well. Reecon, sounds like you deserve a few cold ones for all the help you're giving to family.HB, can you elaborate on why you say this?"Spider-I agree that housing will likely continue to have a double dip, but not a huge one. I wonder for the MBS prices whether she is talking about agency backed or non-agency. My guess is she is talking about non-agency and if that is the case I am less convinced there will be a material correction. "
Ace, That is beyond WTF - it is a joke..List Price: 850k 2005 sold price: $671,000
Why Ace, it looks perfectly fine to me. For 570,000. Okay, maybe 620,000 given the Arlington location even if it is on a busy road. Arlington tax records say that the interior is less than 1000sq ft, though it does have a porch and garage.1/1 on DOM. Lets see how long it goes at list.
quarterdeck? 3 PM?I may be able to come later or may just stay there after lunchI have to be on the hill at 4:30
c, spider, and only about 2 miles from the nearest metro!
Ace- I am not sure which part you want me to elaborate on, so I will elaborate on all of it. For the double dip part I have said several times I think the downward trend we started last month will continue to hold and we will see the CS in the 165-180 range. So this would be up to a 10% drop in housing prices. I think nationally we will see something similar, although I don't have as defined of a range. For MBS there are two types. Most are guaranteed by Fannie and Freddie so even if someone defaults the owner or MBS is paid in full. I do not think these are what Meridith Whitney was talking about. Instead I think she is talking about the ones where if people default the owner of the MBS gets less money. I was also saying that because many of these are selling for pennies or at least quarters on the dollar that the owners can afford for the housing market to deteriorate and still make money. When someone defaults its not like you lose everything, you still get to sell their house and keep the money. So obviously if the housing market totally falls apart these owners are screwed, but if it is a mild double dip they will be fine.
Ace,You're over-interpreting my opinion. I don't live in these places, so have stopped commenting on their prices, they're all inconcievable to me, because they're not based primarily on the house but on the location, and I don't have the level of familiarity needed to calculate that in.I just wanted to know what Jewel thought those improvements would cost and what her opinion on the price difference was. Because I could see $100k without even walking through it, and she seemed incredulous.First time buyers will not have read the IRS tax code on which costs are maintainence and which are improvements. So part of the disconnect is that houses similar to the one in question that are not in Arlington are generally sold to first timers, who won't give you as much return as the improvements deserve, whereas since these houses are in the half a million and up range in Arlington, a larger portion of the buyers aren't first-timers and therefor will value the improvements higher. Thus I think there is also a threshold effect, of once it gets over a certain price, those buyers both have a greater awareness of the total costs AND probably value their time and lack of hassle higher. The same improvements that might get you dollar for dollar (or depreciated close to properly for the 2-8 years of use) in Arlington, will only get you 50 cents on the dollar somewhere that people expect to do more of the work themselves, and have no prior experience. The other complication is that because those improvements don't give you dollar for dollar out here where first timers can actually buy houses like this, you also can't trust the quality level that someone else chose. Whether it's a flipper or an owner, given their cheapness or lack of wealth, corners may have been cut that you wouldn't cut yourself. The (warranted) skepticism reduces the return on investment as well. It's just different beasts if a large chunk of the buyers have owned before and most owners have the money to have things done right, than if most of the buyers are newbies and most owners need HELOC's to pay for maintainence. (as opposed to chose to finance it that way).Out here it's better to have the philosophy that you're doing what needs to be done for yourself while living in it with the quality level you want, and be pleasantly surprised to the extent that your efforts and concientiousness are rewarded. It's not as if they're not rewarded, the listings with new HVAC 2007, new windows 2005, new roof 2009 on them do go for more, just not to the same extent.
Cara, I largely agree with many of your points. I think though that assessing the quality (though harder when it's something with which one doesn't have experience, and probably all of us who aren't in construction trades lack at least some knowledge/experience relevant to at least some parts of houses), while tricky, isn't impossible. A good inspector can be helpful, and knowing the brand names and model #s of things that have been installed (e.g., furnace, windows) goes a long way.I also agree with your earlier point about transaction costs, i.e., that the seller of the $710K home in question would have had to put in a lot less than $200K to avoid a loss because of the transaction costs.
Ace,So, would you then reccommend arranging for an inspector before putting in a serious bid on any house over say 10-20 years old? That would certainly be an option...Yeah, a possible $42k of realtor's fees alone is not chump change. Does the 3% each taper off above some price point to becoming more typically 2.5% each or even 2% at higher prices? One would think it would.... Still, they would have needed to have done less than ~$160k worth of both the evident work and the "hidden" work to stand a chance of having made any money on the rehab.
reecon,Wow. Just wow. It's hard to buy a house in King's Park. I can see it though. Once I convince my sister to move back east and to DC where her qualifications should get her a way higher paying job than she has now, I'd definitely be doing the same thing as your sister's neighbors. It's just kind of bizarre, it's a highly desirable neighborhood because of the neighborhoodness, and the relatively affordable houses, and yet I think partly because so many of the deals are done through these types of informal channels, the prices don't rise too fast, which keeps is an affordable neighborhood, which IMO is a good thing. Debbie Dogrul keeps sending out fliers, because she does get top dollar for these homes, and yet people keep going the no-agent or the Susan Metcalfe easy sale route. We're collectively crazy. But if you can sell your house that easily to someone you know will want to live there, and at a fair market price, why not?
Cara Our agent is from Long & Foster in Vienna and we have used her for all of our transactions. She told us we would probably get more money if we put the house on the market, and she is probably right. However, my sister-in-law was in frail health which necessitated her move to Greenspring Village. Her neighbors in Kings Park were very kind to her by doing things such as bringing in the newspaper, taking out and bringing back her trashcans and making sure someone looked in on her several times a day. She thought bringing in someone's friends to the neighborhood continued the nice tradition. Both of the other buyers had agents too, so we did pay commissions. But we were okay with that because we know how hard our agent worked in helping us get the place ready, and both of the other agents really were good in acting quickly to get complete offers in with letters from the buyers' lenders. Our agent said that she would put the sale in the MLS so that the sales price would be available for appraisers. Since both the people had ties to the neighborhood, we are all looking for a place for the other couple. So if you hear of anything post it, and I will let the neighbors know.
reecon,Sounds like the perfect deal all around. I will keep an eye out, but I don't really know that many neighbors yet. There was a moving van the other day at either 8659 or 8661 Cromwell Drive. But that could have been for any number of reasons other than moving stuff out for staging pre-listing (it wasn't a large truck).So really, I'm no better than a frankly search email with FX* King* Park 22151. But if I do hear anything I will post it. Sadly I can't go to the PotLuck, which sucks because I do want to meet people and the first year we're here would make the most sense...
reecon, that is really a nice story. There are some great neighbors in NoVA.Cara, personally, I would get an inspector even if buying a brand new house. New builders screw things up too, according to the gospel (HGTV).
Ace,Of course you get an inspector, you always need an inspector, the question is before or after putting in a bid?
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