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37 comments:
4-bedroom rentals in Gainesville and areas west are flying off the shelves, with multiple applications.
This is a summer of scarcity for newer McMansions, which hasn't been the case for several years. McMansions were the builder's choice in these areas, so their flippers were left holding them for a while, until they succumbed to short sales or foreclosures.
Newer McMansions are renting between $2,200-$2,800/month, and often are gone close to the first day of listing. I heard of a recent case where the listing agent for the rental held it off the market by putting a "no showings until X date" note in the listing. She then brought her own clients to see the rental, so no one else had a chance. It was gone in three days.
Rentals flying fast - yes
Resales & new Construction - not so much with the 8K gone
LoCo & northern PWC zips I watching not getting many Contracts in June/July...
just my observation..
At that rental rate, it sounds to me as if owners are likely losing money each month. The mortgage and tax payments, plus insurance and maintenance, would likely be more than that on a McMansion. A very good deal for the renters, though, as long as the owner does in fact maintain the place...
Spunky: " LoCo & Northern PWC zips"?
20176, 20175, 20166, 20143, 20169, 20155, 20148, 20147
Lots of "Under Contracts" from 2 Months ago are now "Back on the Market" as well
Ace-
I bet at the upper side of that range it is profitable to rent them out. Most of the houses sell for 400-450K so with a 5% rate and a 400K mortgage the payment including tax is ~$2,400. The addition $400/month should cover maintenance and insurance making the place cash flow neutral and profitable, because you are paying down the mortgage.
Obviously its no where near as profitable as some of the $100-150K places that have been discussed in Herndon, but it still is acceptable for some investors. Although to get the 5% mortgage the owner would have needed to claim it was going to be their residence.
MM and anyone else,
In contrast to the two $1.4 mill. houses we talked about earlier this week, here is a recent sale of an updated place with a huge lot, that sold for LESS than assessed value near that price range:
good deal?
HB, thanks, that's still a pretty tight fit to make $. You'd have to (a) forget that you were not earning returns on any down pt.; (b) make your tenants pay for all lawn and gutter maintenance, etc., because $400/mo doesn't go far, and hope nothing big breaks for a few years; (c) recognized that in the early years very little of one's payment goes toward principle, so there isn't much equity accumulation; (d) hope that the market doesn't decline further; (e) that your tenants don't damage the place significantly.
ps re: rentals, don't forget the 10% management fee or the value of your own time needed to manage the rental and deal with the midnight calls. Also, I don't know if this is the case in Gainesville but when we had tenants, we paid the utility (water and sewer) and security system monthly bills. That also eats into the $400 maximum available for expenses.
Ace,
wow that's a great looking house! i wonder how many newly minted $1.3MM home owners are kicking themselves right now.
i guess there's always going to be certain number of sellers who follow to the 'take the money and run' rule, while some will never 'give my house away.'
Yeah, MM, I'm sure the location near a busy intersection turned off some people and kept the price down somewhat, but I still thought it was a much better deal than the other ones posted.
"principal" not "principle."
http://www.washingtonexaminer.com/local/Foreclosures-drag-down-area_s-housing-market-1000828-98556214.html
foreclosures dog market
"With more than 27,000 properties seeing foreclosure filings in the first half of the year and about 30 percent of home sales coming from foreclosures in the first quarter, the Washington area's housing market is depressed -- dragging down sale prices and forcing homeowners to think twice about putting their house up for sale.
Read more at the Washington Examiner: http://www.washingtonexaminer.com/local/Foreclosures-drag-down-area_s-housing-market-1000828-98556214.html#ixzz0tsVFSSg8
"
glug, glug,glug :-)
Ace-
I think with current mortgage rates ~25% of your mortgage payment goes to principle. You are correct though that the numbers just don't work if you need to pay for utilities and lawn maintenance or a rental agency. Seeing that I was only talking about putting a 0-10% down payment and interest rates are low your not missing out on much lost income.
In reality it is basically a break even proposition now and you have to hope that either rents or housing prices go up at some point in the future to make it a good investment. The investment also works well if you used to live there have paid off most of the mortgage and are using it as a way to avoid/delay paying Realtor commissions
glug, glug,glug :-)
Pat -- did you take the time to read the stats associated with that article? YOY foreclosure rates by jurisdiction:
Arlington -12.04%
Alexandria +2.99%
Fairfax -17.49%
Loudoun -13.51%
PWC -30.20%
Basically, NOVA foreclosures were down across the line. It seems the only reason the foreclosures even matched up to last year was PG county being up +18.58%
Oh, and even worse for you? The winner in the most improved YOY foreclosure rate was DC, down a whopping -31.25% YOY!
So basically, thats great news for those who want to enjoy the bonanza over in PG county. For the rest of us, and especially for you, your article says you might as well kiss those foreclosures goodbye!!!
Well, HB, having been in that position, I have to disagree with you that it is a good position to be in. It is a position you only get into if you have no alternative.
You're not factoring in some very real costs and risks. Investors do not enter into these arrangements in order to barely break even at best--assuming the tenants pay every month. For example, the tenants at our place (who made over $250K per year, not your obvious low lifes, by any stretch) did over $20K worth of damage before leaving, part of which was caused by a troubled son who moved in and they didn't tell us about.
This is pretty clearly a situation where the McMansions are being rented strictly because the flipper couldn't sell them. They may not be losing as much as they could have, but they are not in an enviable position.
Ace-
I should have been clearer I was not trying to say it was a great investment. For example I would not even consider doing it, but I was just trying to find out whether if you were so inclined you could take on renting it without losing money. I am sure there are many people who expect home prices to hit 2006 levels over the next 4-5 years. For these people if they can buy a property and rent it out without a monthly loss they would think it is a good investment, because they will have a good pay day when they sell. I disagree with these people that housing will sky rocket, but this is just an example of an investor that may be fine with little to no cash flow.
Either way I do agree with you its not a good position to be forced to have to rent out the property, or to have properties that don't cash flow.
HB
"I am sure there are many people who expect home prices to hit 2006 levels over the next 4-5 years."
i am with you they are nuts.
absolutely nuts. internet stocks are still in the toilet a decade after the bubble.
Anon
yes i saaw that table my interpretation was the banks cut down on NOTS hoping people could sell.
the market is still very unhealthy, the key is why and how.
why is maryland up 56% on foreclosure and VA up 8%?
that tels me ther are jurisdictional issues
pat,
Due to the Judicial foreclosure process in Maryland it would not surprise me if they are a year or two behind us.
Spunky,
As a LL, I'm thrilled to see credit tightening combined with nervous wannabe buyer's choosing to rent and put upward pressure on prices.
It will be awhile before any new inventory comes on line. The 90's was a great decade for LL's.
DC seems to be the target destination for many new grads with good salaries.
cheryl
maybe MD is behind the pipeline.
doesn't DC use judicial foreclosures?
but natioally trouble is restarting
http://finance.yahoo.com/news/Home-Sellers-Slashing-Prices-cnbc-3365853413.html?x=0&source=patrick.net
"The trouble is that there appears to be a dangerous disconnect in the housing market right now: Housing starts are at an all-time low and yet the home vacancy rate is rising. The only way that can happen is if the number of households is shrinking more than we know. Add bank repossessed homes to that mix, and I'm guessing home prices will dip more than some are expecting. "
pat,
Frankly, I don't care about "nationally". Most of my money is on this area. I know, generally, that the foreclosure process in MD is much, much longer. The Lender has to go to court - not so in VA. I don't follow DC (tenant rights and all that b.s.).
Certain areas of the Country that had no run-up have been creamed (Memphis, Atlanta...?).
Do you honestly believe that rents will drop here? How much further price corrections do you anticipate (for both rents and home prices)?
I wouldn't want to wait another 5 yrs to figure it out. Who is now 50% underwater and can't afford to make a home payment? They are pretty much gone. If you have a home at an affordable cost, what is the big deal? Paper loss?
Sit tight and forget about it. It will be paid for eventually and prices WILL rise. This too shall pass. You can't expect to time everything perfectly and life is too short to "woulda, coulda, shoulda.
There are far more areas of life where those words have as much meaning. Clearly security clearances are very valuable. Many here know that and understand how being in debt compromises a person in many ways.
You point out properties that you feel are over-priced (as other's do) and then the place is sold.
If you think prices are too high, the easy answer is : don't buy. Put your money elsewhere.
"You point out properties that you feel are over-priced (as other's do) and then the place is sold."
lots of them stagnate UC, and don't appear to be closing.
i think the market is just messed up,
rates are at some 60 year bottom yet sales continue to slow.
HAMP is now putting people into 40 year mortgages.
The other hazard i have is i am looking for a home which means my GF needs to be onboard 100%
and thats really hard.
If you think prices are too high there is always a solution to it
"Anon
yes i saaw that table my interpretation was the banks cut down on NOTS hoping people could sell."
Of course thats your interpretation. When in doubt, doom is always the correct answer huh?
What you may have missed is that MD enacted a statewide foreclosure moratorium that lasted for about 9 months. Maryland (and Massachusetts) were the only states to do this. Added to the fact that as VAI noted, MD takes about 2X as long as VA does to process foreclosures, its no surprise they are far far behind VA in hitting its peak.
Anon
I believe most prices will revert to the 2002 price and the long term appreciation rate of 4%.
That homes from 96 should price out to 60-75% price growth, not 10-15%.
That if you bought in 2006 you should expect a loss
The word annual needs to go after ten to fifteen percent
pat,
I'll take a leveraged 4%. What other investment would you suggest?
Also; any guesses on my prior questions re rent and price movement for the DC area?
friendly,
Prov. Village short UC. No surprise. Lots of dumb people out there (?).
I'm bored and thinking of taking on a project. Outer ex-urbs, but an area I know well.
2 buildable lots with a shell on one. It's roughed-in as far as electric and plumbing. I'm throwing in an offer subject to feasibilty (cost of finishing the structure - a few studs and a second floor is all that is there).
OT-
Husband in London restaurant and Chef Ramsey just walked past his table. I want a Picture! He refuses to approach him.
cheryl
a leveraged 4% isnt bad depending what interest rates and cash flow is.
where do i see rents going. honestly i think rents will continue stagnating or slide a few percent a year. due to the oversupply of condos MFDU rents will continue sliding.
i see people renting condos in falls church close to the metro that were supposed to be flips.
cheap money is keeping these affordable but i still see lots of vacancy and CRE will slide.
some of that CRE may become housing or light industrial.
i don't see inflation, what i see is a decadal long slump.
This listing popped up in my search results this weekend and in my opinion the seller is his own special kind of stupid. Apparently their remodeled kitchen is the reason they think someone should pay them 80k over the price they paid at the peak of the largest housing bubble in US history - so they put two pictures where you can partially see some of sides of the kitchen in their listing.
We drove by the house today and it did not look nice from the outside. The paint is literally peeling off the garage and it is the first house on an awkward pipe stem. We will not be attending Sunday's open house.
Jeremy,
Everything else looks nice enough - roof, etc. I am surprised they didn't want to showcase the new kitchen in the picture - weird.
You would think an easy and doable coat of paint would go a long way . . .
I think there's a good chance it will fetch $750K, though, as long as there aren't serious mechanical issues.
Here's the most recent sold neighbor's house.
Other solds for Oakton Vale.
Yes, Jeremy. Keep us posted. Looks like a fair price to me.
http://mysite.verizon.net/vzeqrguz/housingbubble/
the worst of the bubble is over
despite massive government intervention
the issue is if we get a long dragged out trek or a drop and recover.
the good thing is the good inventory should start coming out.
is there any way to get stats on vacant husing units?
"pat said...
Anon
I believe most prices will revert to the 2002 price and the long term appreciation rate of 4%."
I uesd to believe that too. I believed that in 2003, 2004, 2005, 2006, 2007... 7 years later in life, and missing out in $350,000 in appreciation, I quit believing.
anon
i've been paying 1000/month in rent vs 3000/month in condo payments, i have no idea what appreciation i may have missed, i know i've saved close to 175K, so i'm happy.
i know i'd have slit my wrists chasing a 3K mortgage on a condo, vs my rent here.
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