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Saturday, June 12, 2010
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48 comments:
My husband and I bought a SS townhouse in Nova about 16 months ago. We are considering selling in the next year and wanted to get some feedback. How difficult is it to sell by owner up here? Anyone know the best way to go about that (i.e. use for sale by owner or military by owner websites OR craigsist or some other avenue)??? Also, any thoughts on timing. We are currently planning on waiting until early next year to put it on the market to avoid capital gains taxes, but are a little concerned with the overall economy/market. Just looking for opinions, but what is your macro view as to northern virginia housing prices in the next 6 to 12 months? Thanks for any insights on either question you can provide.
nic-
I don't know anything about how to sell without an agent. As for timing, I personally expect housing to continue to fall ~0.5%/month. So waiting 6-12 months might cost ~5%. This is my opinion about the market as a whole, but there could be fairly large differences depending on the pricing of you TH and the area it is in. I expect areas with more expensive houses to underperform areas with cheaper houses.
nic,
As HB said, prices will continue to go down in next several months. I believe they will drop quite a bit more than 5%.
So, if I were you - I would rather cut my losses now. Given you bought SS and at decent price point given your timing, you may be able to break-even from price perspective. Unfortunately, transactions costs are very high, which will likely put you in the red.
Nic
If youmare worried about taxes, consider a 1031 exchange
Otherwise, sell because youbneed to move, houses are not speculative investments, you need to sell,sell.
If you don't don't.
Ibknow people who doFSBO I know others who say it hell
Get it 10000%ready to show, pay for an appraisal on site, list it on realtor.com, drop the price 5% every 21 days
I don't think that anybody that bought a house 16 months ago has to worry about paying capital gains taxes. Certainly not in a year from now. Good news is you can write off the capital losses=)
Actually, the THs that have sold in our neighborhood since we bought ours in early 2009 have gone for ~15% to 20% more (healthy sales that is of which most have been in our neighborhood since then). We got a really good deal on our short sale. We anticipate moving from NOVA in the next 12 to 24 months but are trying to determine if it might be better to sell now and rent this last year or so to give us a little more flexibility when we do move. In addition, I have concern that housing here may take another dip and we have no desire to get stuck. Wow, I ask a simple question about FSBO and people's overall view of the housing market and I get comments about how there's no way I could make money on my purchase and how housing isn't a speculative investments. Not looking for personal judgements, just thoughts on the two questions I asked from those versed in NOVA real estate. Thanks.
nic, is it your personal residence or did you rent it out? I think the 1031 exchange works only for rental/business property.
As kevin implied - how do you know that you will have a gain?
Since you bought right before the tax credit was enacted, there's a good chance you did get some new bubble appreciation from the temporary demand. If you definitely want to sell, I recommend you go throw a FSBO sign on your lawn ASAP. The market is getting crowded with inventory and the demand is largely depleted thanks to the credit and its expiration. Don't worry about capital gain taxes from selling now, it will be less painful than losses in a year from now.
nic,
OK, you answered my/Kevin's question just as I was submitting my earlier post.
Most people here are "versed in NoVA real estate" in one way or another - nearly everyone has bought or sold at least one home and some have done more, as personal residences or rental property. Many have been watching the real estate market for quite some time. So you will get some reactions you may not have anticipated, and you did open the door when you pointed out that you had concerns about the overall economy/market, which some here also share.
Most info I have seen about FSBO indicates that the majority of sellers here overprice their properties and end up dropping the price, going with a Realtor so they can access MLS listing service (because most buyers do not consider/look for a FSBO), or don't sell. So if you can avoid these pitfalls, you may have better luck.
nic, you may also want to indicate in your advertising whether you will pay the 3% commission to a buyer agent. Otherwise, buyer agents who find out about your listing would not be paid for bringing their buyers to you.
Sadly, Ace is right. These agents game the system for their own benefit and will intentionally avoid you if they think another property will bring them a higher commission, even if it's not a better deal than your house is.
I cannot express my contempt for a system that runs like this. Not to generalize, but Realtors are a self-serving pack of cockroaches. The billions of dollars these folks make per year at the expense of homeowners that slave to pay down their mortgages is just revolting.
Sorry for the rant.
kevin, I would second that. 6% commission is just atrocious on transactions.
Commission, closing and taxes brings you just about 10% underwater right off the bat. When you consider grossly inflated prices and likely depreciation - it makes me throw up at home ownership.
Nic-you must have gotten a screaming good deal if you are worried about capital gains taxes on a purchase from 16 months ago, because transaction costs take such a big chunk out of normal profit. Even if you can sell for 15% more than you paid, there won't really be so much left over after paying your buyers closing costs (pretty standard in this market right now) and assuming your buyers don't research what YOU paid and refuse to give you much more than that. (Unless we are talking million-dollar THs..)
I think there is no "macro" view--everything is so neighborhood and area specific (just ask Tom!). A townhouse in PWC is not going to have the same price future as a townhouse in falls church city, e.g.
That said, it sounds like a huge hassle to sell now and find a rental for a year--the costs of moving would eat into your projected profit.
You could research those realtors who will put your property on the MLS for a small fee but if you want buyers to come, generally you need to shell out the buyer agent fee. (UNLESS you have a very sought-after location and are going to price competitively.)
So-what's the general location?
"Nic said...Wow, I ask a simple question about FSBO and people's overall view of the housing market and I get comments about how there's no way I could make money on my purchase and how housing isn't a speculative investments. Not looking for personal judgements, just thoughts on the two questions I asked from those versed in NOVA real estate."
Nic, there is a bit of a "selection bias" issue where you ask for responses from a group that is generally pessimistic about housing. After all, right before the price declines evaporated, there was a sizeable contingent here who thought we were "nowhere close to the bottom".
Most of those people have now run away, but you still see this view expressed on this blog now and then. One poster who told you were going down alot more than 5% thought we were going to have a "stampede" of inventory in 2010.
As such, take everything you read here with a grain of salt. That said, I personally believe housebuyer has the most likely chance of being right.
The Anonymous said...
After all, right before the price declines evaporated, there was a sizeable contingent here who thought we were "nowhere close to the bottom".
Yet still eluding The Anonymous is the amazing coincidence of housing price upticks coinciding with the first time homebuyers tax credit. Don't bother mentioning that. I'm sure it's a coincidence. After all, we now have momentum in the market that can't be stopped!
"anon said..evaporated"
look around...
Everyone-
16 months ago was basic perfect timing in the sense it was right before the bounce. So excluding transaction costs most houses are above water. If it is a fairly inexpensive house it probably bounced more. Finally short sales were going for ~10% or more under market prices at that time. So Nic's comments about being 15-20% above water are reasonable. So even if commissions and taxes are 10% there would still be some capital gains left over.
Contrarian-
Do you ever get sick of making wrong predictions? How long will it be before you give up and admit that your old predictions are wrong. You have now been telling us for well over a year that the stock and housing market will tank. Since then the stock market is way up and the housing market is moderately up. I agree housing will fall some, but there is almost zero chance that my mid 2013 houses are cheaper (after inflation adjusting) than they have ever been.
I fully admit there are a lot of major problems with the US and global economies, but they aren't going to bring us back to the stone ages like you predict.
Kevin, ya gotta believe in that homentum!!!!
"Kevin said...
Yet still eluding The Anonymous is the amazing coincidence of housing price upticks coinciding with the first time homebuyers tax credit."
So what are you trying to say Kevin? You posted this in response to my noting the doomers said we were "nowhere close to the bottom" at bottom. I however, believe we are "close" to the bottom. Do you disagree?
Upthread, our resident permadoomer Contrarian said:
"Three years from now, house prices will be at least 50% below today's prices."
It looks to me like he thinks we are "nowhere close to the bottom". Is that your sentiment as well Kevin? Now that the tax credit is gone, give us your price prediction.
You posted this in response to my noting the doomers said we were "nowhere close to the bottom" at bottom.
I tell you what, I'll go ahead and bookmark this page so that down the road when we make up for those obviously artificial gains in the market and end up below your established "bottom", I can mock you in every thread for being wrong.
How can you call that the bottom with so much temporary govt manipulation? Do you consider yourself an intellectually honest person?
I don't speak for Contrarian, so don't project his statement onto me. I'm not going to make a specific pricing prediction because you have zero threshold for imperfect predictions made by anybody you consider bearish, and I'd rather not feed your already overfed smugness. I will say this though: prices in Fairfax county are up over 8% YoY, but that number is decreasing. We will fall back below 0% YoY by Thanksgiving, perhaps even as soon as August. We'll also fall below your established market bottom within the next year.
Or maybe you're right, that was the bottom and the sudden upswing in prices has little to do with the tax credit (assuming that is what you're saying, since you're carefully not providing any explanation). Maybe income in the area suddenly spiked 10% last year. Is that it? What's your explanation? I only ask because you don't seem to have any real insight or provide analysis into these market numbers. Fill in the blanks, my friend, show me you're capable of more than just telling people they're wrong all the time.
There have been some harsh words in this blog regarding customers who fail to keep up with their mortgage payments. This NYT account of the despicable practices of some of the mortgage companies is a look at the other side of the story. The United States Trustee, the Department of Justice unit that oversees the nation’s bankruptcy courts, is also investigating possible improprieties among lenders, mortgage servicers and the law firms that represent them in bankruptcy cases against homeowners.
c-
I think many people here are sympathetic for people who can't keep up with their payments. I think the bigger issue most of us have no sympathy for people who decide that since their house went down in value they will choose not to pay even when they can.
Agree with housebuyer. Deadbeats choosing to walk away should be castigated from society. Those that lost their jobs, my heart goes out to them.
I'll say up front that I don't condone people walking on their mortgages.
However, it's a business decision, not a moral one. Corporate America does similar things on a regular basis, and people nod their heads at the explanation of "sorry, the numbers no longer work".
A mortgage is a secured loan, the lenders have (or should have) a strong incentive to include loss provisions in their calculations (the historical "20% down"). If the lenders don't take into account the possibility of default, they probably should not be in the mortgage banking business (and, were it not for the various bailouts, a number of them no longer would be).
Soros Says ‘We Have Just Entered Act II’ of Crisis
"The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”
Soros, 79, said the current situation in the world economy is “eerily” reminiscent of the 1930s with governments under pressure to narrow their budget deficits at a time when the economic recovery is weak."
If someone can't make the mortgage payment - move on, sell/foreclose/whatever & rent. As much as I sympathize with unemployed, many involve people speculating on properties or buying what they can't afford thinking it will increase in value indefinitely.
Banks speculated heavily on mortgages, made fortunes, paid out millions in bonuses...when that stopped working - Don't bail them out, let them die.
Auto companies paid exorbitant amount of money in pensions/benefits, when they can't compete - Let them go bankrupt.
Greece can't keep its budget straight, everyone is on vacation half of the year and still make fortunes and don't pay taxes - Don't bail them out, let them default and restructure. Let those who lent money to Greece take the hit...
That's how it should work in a sane world...it isn't a one way street, friends.
I am tired of listening to the grand socialist ideas to solve all of our problems...let's get real.
"Kevin said...
I only ask because you don't seem to have any real insight or provide analysis into these market numbers. Fill in the blanks, my friend"
Kevin -- you and I have been over this one before. While I believe the tax credit had SOME effect on the market, I think you and some others far overstate it.
For example (second graph):
http://www.recharts.com/mris/mris_3.html
When the trend line turned, early spring 09, almost instantly all you heard was ITS THE TAX CREDIT!!! ITS A BUYERS BRIBE!!! ITS ALL ARTIFICIAL!!!
I admit, the timing is suspicious, but heres the thing (again 2nd chart):
http://www.recharts.com/mris/mris_6.html
Why no "buyer bribe" bounce here? Wheres the artificial stimulus that propped up PG prices?
The answer of course, is it isnt there. You know it, and I know it too. The tax credit did absolutely NOTHING to help PG and other markets that were still far far away from fundamentals.
Given this stark contrast, I developed the following rationale. If the tax credit produced a bounce in a market, it means it must be CLOSE to its fundamentals -- and if the tax credit did nothing in a market it must mean it is NOT CLOSE to its fundamentals. Do you disagree?
Second, I agree that prices even in N. VA will likely go YOY negative by this fall and winter as the effect of the credit subsides. The question then becomes, now that they are falling, will they fall long enough and far enough to smash through those prices we all passed on in early 2009? Here im not so sure.
Bottom line, your continued insistence on the effect of the tax credit sounds like a replay of early 2009. Back then, you were intensely focused on the "foreclosure moratorium" and were warning of the potentially spectacular results once those foreclosures were unleashed on the market later that year. We all know how that one turned out.
Dave said...
it's a business decision, not a moral one.
It's both. The suggestion that these two things are mutually exclusive is part of the metal poison that is turning people and businesses into soulless slimeballs.
Corporate America does similar things on a regular basis
I keep hearing this pathetic excuse "well corporations do it". Isn't that like a five year old using the local screw-up bad kid as his role model? Jesus, the moral equivalency here is just disgusting.
Anonymous said...
While I believe the tax credit had SOME effect on the market, I think you and some others far overstate it.
The numbers don't lie. Let's wait a few months and see how much they tanked in May and June. By my own numbers that I keep, it is looking pretty brutal.
Why no "buyer bribe" bounce here? Wheres the artificial stimulus that propped up PG prices?
PG unemployment = 8%
Ffx unemployment = 5.5%
That might have a lot to do with it.
If the tax credit produced a bounce in a market, it means it must be CLOSE to its fundamentals -- and if the tax credit did nothing in a market it must mean it is NOT CLOSE to its fundamentals. Do you disagree?
No, I agree. But let's say we only had another 10% drop to go, and prices shot up say 10% more from the credit. That means we would have a 20% drop coming. That's significant.
Bottom line, your continued insistence on the effect of the tax credit sounds like a replay of early 2009. Back then, you were intensely focused on the "foreclosure moratorium" and were warning of the potentially spectacular results once those foreclosures were unleashed on the market later that year. We all know how that one turned out.
You mean before the tax credit was signed in February 2009? Yes, how foolish of me not to have taken something into account that wasn't even announced yet. You really got me there.
If I were to bet on who wins the Nationals game today and the game were rained out, you'd be running around saying "you were wrong". Quite the spinmaster you are.
When a borrower borrows money to purchase a house and does not pay the mortgage for whatever reason, this is not your business. This is the business of the borrower and the lender. That is why the contract has clauses that deals with this type of situation. This is as much your business as when someone in your neighborhood decides to give away their home for no money affecting every comp in the neighborhood. I understand it is irritating, but the homeowner has the right to sell a property for whatever money they want.
I am tired of all the righteous criticism of borrowers. If they pay or not, consequences follow according to their contract, plain and simple.
I think some people on this blog really have no life and try to project onto others, or are jealous, or whatever.
Having said that I never missed a mortgage payment, thank God, and don't plan to. But if others do, what does that have to do with you. This is a business transaction for which lenders prepare in their risk analysis. Why do you think lenders charge higher interest rates when you do not put 20 percent down.
You should worry more about not falling on the hands of lender predators, not paying excessive fees, having a good credit which would benefit you personally, saving money so you can put that 20 percent down, etc. etc (in essesnce, what is truly your business.)
"I am tired of all the righteous criticism of borrowers. If they pay or not, consequences follow according to their contract, plain and simple. "
I am with you if it was allowed to play like that.
The validity of such contracts has been in thrown out of the window many times over by HAMPification and such. Government has consistently been meddling in private matters to an extent that it almost seems to many like business as usual.
DC@: payment, thank God, and don't plan to. But if others do, what does that have to do with you.
My govt is spending billions to stop foreclosures and hundreds of billions to cover the losses of banks. If someone goes into foreclosure BY CHOICE because they're unhappy with their home's current value, as a taxpayer that's entirely my business. If the govt were hands off and this wasn't fucking up the economy, then that's one thing. When they are intentionally exacerbating something our dear leaders are spending ruthlessly to end out of pure greed, then I and everybody else should pass judgment on them.
Just because there are non-recourse provisions doesn't mean it's ethical and it doesn't make the borrower one iota less of a deadbeat.
Is anyone else also concerned with the number of listings popping up were the last time they were sold was around 2008. espicially given that they are listed at or slightly above what they went for less than two years ago. If you factor in 6% commissions and the fact that they were paying roughly ~5% interest for the time that they were living there, most likely they are selling at a loss, but is this a sign that these people were just trying to capitalize on a quick profit thinking housing was going to quickly rebound like the stock market or is it for other reasons such as having to relocate or whatever else. Just doesnt seem right to me that you would decide to buy if you didnt plan to live in the home for < 5 years, also if they are first time home buyers under the guidelines for the old $7.5k tax credit, if they sell under 2 years they need to pay it back, but maybe thats why a lot of them waited until the two years were up before listing them back on the market.
if anything i feel its a bearish sign for whats to come
"Kevin said...
You mean before the tax credit was signed in February 2009? Yes, how foolish of me not to have taken something into account that wasn't even announced yet. You really got me there."
Kev -- lets get serious here. It was becoming increasingly obvious at the time that the "tsunami" had been called off, and that the "drip, drip, drip" of foreclosures would win the day. Besides, this isnt the first time you posted a big swing and a miss -- remember the "Arlington is a PWC in waiting" right before it started going up?
Tell you what. If you want to call me out on being wrong, just put your end all be all bottom line number out there. In case shiller, I said we get back to 170. Spider says we hit 155 in the next year or so. Contrarian has us hitting 85 in 3 years.
Post your predictions (both time and price) and show us how prescient you are.
Mark me down for 150 by next June.
Funny how you don't think those gains from the tax credit will be completely erased. Then again, you completely ignored the links I posted which showed the large disparity of unemployment between Fairfax and PG counties, why not keep ignoring the impact of the tax credit as the results start pouring out on a weekly basis? I eagerly look forward to the next CS report.
Kevin,
Ok. I am with you regarding how those who do not pay for their mortgages are exacerbating the situation. But wouldn't you do somehting if you were seriously under water paying the bank a mortgage that is way higher than the value of your home. I can understand if they do not want to pay the mortgage and prefer to return the house to the lender. I also understand this makes a situation worst. But I do understand the perspective of the "home debtor," even if I wouldn't do the same. They have a right to return the home to the lender, per the contract they signed. And yes, they will still owe the difference to the lender, and it is the lender's job to collect that difference. Do you want to take that right away?
Next time lenders should be less greedy and more careful with their lending and derivatives bundling practices. I hope this whole mess creates a healthier investment, lending and housing market.
dc2:
But wouldn't you do somehting if you were seriously under water paying the bank a mortgage that is way higher than the value of your home.
Yes, I would do something. I would pay my bills and honor my debt. Most of my friends that own are severely underwater. Their focus is on paying down the principal and eventually building equity, not passing their poor investment losses onto other people.
While I have no disagreement that the dumb selfish lenders should pay for their mistakes, I think it's poisonous if we were to allow bad decisions to be rewarded at the micro level.
Just because you cannot score an immediate profit from your house doesn't give you the moral grounds to shift the burden of debt onto someone else.
I find the whole "corporations do it, so you should too" rationale revolting. That's really my biggest beef with this issue. If somebody can walk away and have hundreds of thousands of dollars in debt erased for a slap on the wrist, I understand the appeal. But it takes a person with values as low as those corporations that we're comparing them to to do it.
I just hope that the govt starts cracking skulls and making strategic default so painful that these people will regret it for the rest of their lives.
"Kevin said...
Then again, you completely ignored the links I posted which showed the large disparity of unemployment between Fairfax and PG counties."
Thats because there are plenty of counterexamples. For example, PWC
Unemployment = 6.5%
Bounce = Huge
Charles county, MD.
Unemployment = 6.4%
Bounce = None
http://www.recharts.com/mris/mris_19.html
So what happened here? Are you suggesting that if Charles Co, Md could reduce their unemployment rates by a mere 0.1% to match PWC could they turn that unrelenting home price decline into a massive bounce just like PWC?
Sure, if you just ignore the inflation-adjusted price levels for those respective counties. You know, the same adjustment you used to try and prove your theory earlier.
Nic,
I second Meshell, we couldn't possibly have your answer on prices without knowing a more specific location than NoVa.
In a year you'll avoid 15%?? capital gains tax on ~15% of the close price (or 2.25%), but you risk at least 5% of the close price due to potential slumping in the market. Given that transaction costs can be deducted from your gains, the capital gains tax you're talking about is probably less than 2% of the total price. So, take a known 2% cap gains hit now, + double moving costs, for freedom and flexibility when it comes to moving to your new location, or risk a 5 to 10% lower price a year from now. I think one thing we could agree on here is that a higher price one year from now is extremely unlikely in most all of NoVa.
Honestly? I don't think it's possible to know which is the better course of action now. Do the one that gives you the most piece of mind and fits with your risk tolerance. I doubt selling into the post-tax credit lull in buyers could possibly be that much better than selling a year from now. Selling in March might have been better, selling now? I don't think it makes much difference.
If you do go FSBO, I recommend you pay the fee to get listed on the MLS, and state explicitly that you are willing to pay the "normal" 3% buy side commission. You want full exposure to buyers.
Depending on price point you could also consider listing with redfin or other set fee listing agents such as http://www.virginiamls.com/. I've never done either so cannot make a true reccomendation.
Things that would make the above untrue:
Your TH is well above the tax-credit incentive price level (or where it has most effect, below $450k).
Your neighborhood was built after 2005, thus has most other occupants potentially underwater and definitely below break-even. Distressed sales going forward now that the incentives are gone and buyers are thinking the worst is over have the potential to pull the real sale prices lower.
I do think the caution someone put out about buyers being unwilling to pay more than the previous owner did is real. It's definitely been the case for 2008/2009 SS buyers in my neighborhood that have resold. A longer hold time _might_ mitigate this effect. Having done real improvements certainly should.
My govt is spending billions to stop foreclosures and hundreds of billions to cover the losses of banks.
I've found it's those that quite literally worship the Almighty Dollar who see "strategic default" as some sort of moral failing. Sorry, but there's no moral component whatsoever to declaring bankruptcy--it's the house and several years of poor credit. That is all.
If you don't like your government's policies, you should work to get a different set of politicians elected.
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