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Monday, July 19, 2010
Northern Virginia Bits Bucket 7/19/2010
Posted by Harriet at 6:00 AM
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Not a perfect comparison, but "before and after the tax credit" sales of the same layout house on the same street:
http://franklymls.com/FX7166858
$536,680 in January
http://franklymls.com/FX7325565
$526,000 in July
Fred-
Are you trying to say that house prices fell after the credit, or are you trying to say they have basically staid the same. To me the second house looks marginally nice, has a slightly bigger lot and sold for 2% less. So I think that person got a ~5% better deal. The problem is with just two imperfect data points its really hard to draw much of a conclusion.
housebuyer,
I was just struck with how close the difference in sales price was to the $8k credit amount. Agree that the 2nd house has a nicer lot, the first one slopes upward to the elementary school property.
hb, fred,
I liked the kitchen eating nook better on the second one too.
It's an interesting juxtaposition. But I agree that there's so much buyer to buyer, seller to seller variation in what's an agreeable price that that probably swamps any meaningful conclusions about post and pre tax credit.
If it becomes a pattern, though...
Good catch, Fred. I agree with both of you. It really does look like a good example of a tax credit effect. I think these houses are very similar--much more similar than many comps are (notice the nearly identical FX assessment values and neither has significant updates, and both appear to be reasonably maintained.
I would bet that the second buyer used the first to negotiate a lower price given the expiration of the credit. Or, one seller may have felt more pressure to move.
It would be interesting to see if the same pattern occurred with other houses near there.
Hi there! Did anybody here buy a house from an auction? Would you recommend it? It seems to be a tricky process.
fred,
The listing agents give them as being in different school districts but I don't know if one of those is "better" than the other (or if that's accurate).
cara,
Hard to know. I think the general preference for elementary would be Shrevewood over the much more diverse Timber Lane. But TL is in the McLean triangle, while Shevewood is in Marshall's. Can't go too wrong with either, I don't think.
The other thing that ties the two together is that it is the same listing agent. He lives on one of the adjoining streets and has the majority of listings in the neighborhood.
Thanks Fred,
I was figuring when you didn't mention it, that this was probably one of those 6 of 1 half a dozen of the other comparisons between schools.
These two are definitely more directly comparable than any two houses of the same model that have sold in my neighborhood. Of course, while there are a number under contract post-tax credit, very few have closed in July yet. Still, even when they do close, I won't have any comparisons as similar as the two you found.
friendly,
I've never purchased a house via auction but I strongly considered it a few months back.
A few things to keep in mind (Every house and auction is different, so nothing here is 100%)
-You typically need 10% down in the form of a cashier's check at the auction.
-You cannot tour the home or get an inspection before the purchase, unless you are able to get permission (unlikely).
-The current homeowner may trash the house or refuse to move out. In the latter case, you may have to evict them, which could take months.
-You must have cash or be able to finance the house typically within 10 days after the auction. If you cannot close within the allotted time, you will lose your 10% deposit.
-You must ensure there aren't multiple liens on the house, otherwise you may become liable for these once you buy the house.
-Many auctions are cancelled ahead of time.
I would not buy a house at auction unless it was a very good deal. There are a ton of risks involved.
Timber Lane is considered much less desirable than Shrevewood because it has more poor, ESL students. I know a family in that neighborhood doing Catholic school for K-2 and then transferring into the GT center at Haycock for third grade. I don't know how the HS differences balance that out.
I would probably send my kids to Timber Lane but would prefer Shrevewood.
From yesterday's Parade Magazine on parents helping grown children:
But what’s really shocking is how much parents are giving—and for how long: According to a recent survey, 41% still provide financial support to their 23- to 28-year-olds. And it’s not pocket change. Researchers at the University of Michigan found that parents—regardless of how much money they have—give an astoundingly large average of 10% of their income to their adult children.
Article
My guess is in the DC area it's higher than 41% (although not including me and as far as I can tell none of the other regular posters here) and that has an effect on the rental/housing market. The 10% figure is much, much higher than even I ever imagined.
TBW-
I agree those are crazy high percentage both that 41% help out and the average help is 10% of their income. Although I guess this year I actually fall in that category seeing they helped pay for my wedding. Excluding something like a wedding where the parents want to spend money, because they see the wedding party as a reflection on themselves, I can't imagine why parents would continue to give their kids so much support. Can't they cut the cord!!!
TBW, I know this is a little different from the point you're making, but I have friends who have three kids in their 20s and early 30s, who periodically move "back home" when between jobs or residences. I have another pair of friends who have two in that age group who have never moved out (one has been fully employed for at least four years; the other has recently graduated from college after an extended time, and hasn't found a job). Both of these families have at least one parent born outside the US.
They simply do not view this in the same way that my parents would have. Partly it may be a function of the times (hard to find jobs, but it was hard for me too, having graduated during one of the prior recessions; and college may be more expensive so more may live with parents and go part time for more years) but part may be a cultural difference.
In a third family, a child in that age group has a serious disability.
I wonder what proportion these families comprise.
ps I should add that the first couple always has at least one of the children living with them, so it's not a "Johnny's here for a few weeks" kind of thing.
tbw,
I know just me alone is not going to get us to 41% on this blog, but my parents have always chipped in when they felt me or my sister's needed help financially. From not feeling I could buy a "safe" car with the $4k I had set aside for it when I was in grad school (so they bought me a new Saturn) to paying for my niece (and soon my nephew's) Catholic High School tuition ($6k/year each) because well, the high school they'd otherwise go to doesn't get kids into the elite colleges, to buying my other sister a new washer when hers broke, and paying for 2 weeks of dance camp during school break when there was no daycare available for her daughters. And always paying for airfares home to see them (but my grandmother did that as well). Now my mom wants to give us each the "maximum" allowed by tax law every year of $13k rather than wait until she's dead and can't watch us enjoy it. (technically if she were willing to give money to our spouses as well she could double that, but let's just not go there for so many reasons). Now the plan is to do that for only 3 years, but still during these three years that's way over 10% of her retirement income. My husband and I are going to try to convince her not to give it to us, just to my sisters who are much more strapped, but in the first year with the baby? I doubt that argument will fly.
Do we need this help? Not really. Has it helped us avoid debt and made things smoother and easier, absolutely. I drove that Saturn into the ground, until the repair costs from coping with stop and go traffic on Connecticut Ave were such that a car payment every month was cheaper.
I'm not sure what my point is. Just a case study. Some parents just want to help out, want their kids to avoid the financial stressors they had themselves, whether their kids are perfectly capable of living independently or not. It makes Mom happy. And my sisters really do still need help sometimes, one because of her chosen low-paying profession, and the other I'm not sure why... so mom feels it's only fair to give to all of us evenly, whereas I feel giving to each as their need would be just as good of a principle.
Oh, and I'm the only one under 40 btw.
Sorry I only clicked "publish your comment" once. I swear. (the two deleted comments are pure duplicates of mine).
Is there any good source for housing starts by either county or city/MSA? Housing starts have been very low for a very long time. This is clearly a good thing for the housing market, because it will slowly get rid of all the vacant houses as more households are formed than houses are made. The one thing I worry about is whether enough houses are being made in markets like ours where the vacancy rate is still fairly low.
In theory home builders would be smart to build houses in places like DC and build nothing in Vegas so the market can heal. Unfortunately I think the opposite is being done because in the short term it is more profitable to make houses in places land and labor are very cheap.
Maybe people are willing to pay for their kids' stuff because they feel bad about the massive intergenerational wealth transfer that's going on. Collectively we've made a decision that we're not going to be a society where you can work to have things like education and homeownership -- you now have to be born with advantages. If you're going to allow the price of these things to expand many times greater than the rate of inflation, it has to come from somewhere. Can't get blood from a stone.
The one thing I worry about is whether enough houses are being made in markets like ours where the vacancy rate is still fairly low.
In theory home builders would be smart to build houses in places like DC and build nothing in Vegas so the market can heal.
Commentary: Washington area's housing problem is even bigger than you think
Snark aside, though. If you want grandkids, you are reducing your chances massively if you wait for a kid, starting from zero, to pay their way through college, professional school, then get a down payment for a house in a decent neighborhood. Realistically without help this requires saving tens of thousands of dollars out of declining salaries. No kid is going to pay their way through professional level education and save up for a house in a decent neighborhood by the time their in their mid-late twenties. Early thirties if the kid is pretty together. Oh and that might require them to move to another state. If your kids don't start thinking about it until 35-40 there is a great chance you end up with zero grandkids.
Catherine-
I agree about your comment in relation to paying for school. If you are saddled with student loans they can take a long time to pay off particularly if you don't go into a high paying field (e.g. finance, engineering, law...) For most people that I know the help is not covering necessities it is paying for vacations, iphones, stainless steal appliances... None of these things are helping the children learn how to be independent and manage their money. It also is not giving the necessities needed to raise children.
Catherine,
two totally secondary quibbles:
1) Ability to get any job at all may require them to move to another state.
2) There is this crazy process called adoption... (but regardless of ability to have kids later in life, a parent might want to become a grandparent younger than 70, not that they'll have any say in the matter.)
hb,
If the help is not going towards necessities, then is it safe to assume those kids have the necessities parts covered?
Question for the blog:
So, we had arborists come out to assess the condition of our trees, 3 of which I had vague worries about of whether they should just be chopped down before they fall. (One inherently leaning red-oak and two less sturdy looking silver maples) All the arborists agreed that they were actually in good shape, and gave us signs to look for deterioration. But, as I could see for myself, all our trees could really use a good healthy pruning.
My question is, does anyone know if there are any permits I'd need to get from FFX Cnty for this? The quote contracts say that the owner is responsible for obtaining permits.
Cara,
It appears that the answer is "generally, no."
tree removal in FX
"Can I remove trees on my property?
There are no laws or regulations in Virginia that prohibit you from removing individual trees on your own property. Harvesting of timber on your property, however, is regulated by the Virginia Department of Forestry and any land disturbing activity (removing trees and stumps) on more than 2500 square feet of your property requires a permit from Fairfax County. In Fairfax County, some areas on private property are designated as Resource Protection Areas, Conservation Easements or Environmental Quality Corridors. In general, you are permitted to remove trees that are dead, dying or diseased in these areas, provided you remove them by hand and replace them with similar vegetation. In these situations, an Urban Forest Management Division representative will evaluate the tree(s) and determine whether it meets the criteria for removal, and then provide recommendations for replacement. If you want to remove a healthy tree(s) from these areas, you would need to be sure of the restrictions specific to your conservation easement or Environmental Quality Corridor. This information should be available in your property records. In the case of a Resource Protection Area, the Chesapeake Bay Preservation Ordinance provides information about tree removal restrictions in these areas. To find out if you have a conservation easement, Resource Protection Area or Environmental Quality Corridor on your property, use the Fairfax County Digital Map Viewer."
The best I can personally find is this:
FFX Cnty
which doesn't mention permits for trees on your own property anywhere... but could there be an easement? for instance next to the power lines running down the street?
PS, Cara, you can also ask the arborists to confirm this--they may tell you they aren't responsible for knowing about it, but surely they have worked for many homeowners in FX and know about any permit process.
Cara, why not call FX with your specific situation and say you just wanted to make sure you don't need a permit?
Ace,
Yup. We're planning on doing that too. I just don't ever trust anyone, so I like to know the answer ahead of time. Spending money makes my trust threshold drop to zero. (And these are 40-80 foot trees, 12 of them, so it's not a small sum of money).
Cara, agreed, but if all three sources (including the website) say "no", you're in good shape, esp. if you follow up the FX info with an email, so you have it in writing.
FWIW, Arl. didn't require a permit of my neighbor, and I would think their rules would be similar to FX's. The major issue is whether the arborist will require you to have the utility company(ies) disconnect, then reconnect, their lines in order for the arborist to be safe. As we know the utilities don't always cooperate with timing, which may mean you are without power or other service for more than the scheduled arborist work time. Also, this tree was not located along the street, as yours may be, though (it was in his backyard), and technically, I think Arl. "owns" the land between our sidewalk and the street, even though homeowners are responsible for maintenance.
HB
"While the younger generation has very cool toys, the amount they are spending on these is way down, compared to the Boomers or the Silent generation."
href="http://www.youtube.com/watch?v=akVL7QY0S8A"
watch this and be appalled at what Reaganism and the Conservative economic school has wrought.
http://www.youtube.com/watch?v=akVL7QY0S8A
is the link code, i have trouble with embedded links
Regarding financial assistance for kids....
My older siblings (we affectionately refer to them as the hippies in the family) thought it wise to deviate from the successful upbringing demonstrated by my Depression era parents. The oldest siblings had the most grand kids (3 each). The oldest lavished their kids in stark contract to their own modest upbringing. Those kids wanted for naught. The result of that experiment has been interesting to say the least.
My sister and I, the tail end of the train so to speak, came to respect and admire the system our parents used to raise us. We decided not to mess with success and emulated their methods.
The results have been remarkable. The oldest grand kids enjoy all the modern benefits of that indulgence. I particularly admire my nephew, the ivy league honors grad. His third wife really likes her home. As do her stepkids from the previous marriages. Holidays there are so entertaining. My niece and her wife are the cutest couple we've seen in some time. It's a second marriage for both. The avant-garde performance artist, the baby, still struggles for success, but living at home certainly allows her the freedom to explore her hidden artistic talents and allows her the much need time to maintain her hydroponic "herb" garden.
My sister and I are basically repeating my parents lives. Zero debt. Cash for everything. Save it all. Kids work. Correction...kids required at the end of a pointy stick to work. All are UT grads with the exception of the Aggie who now drives a rather expensive plane to work each day for the USAF.
Different strokes for different folks and all that.
My dad confided in me once that when he told me I could not return home after losing my first out of college job that he didn't sleep for a month over the anxiety of that decision. I was surprised. I cherish that moment in time because it was then that I realized my destiny was what I would make of it with my own hands.
I am not being critical of any lifestyle choices but the results in my family are as different as oil and water between how you raise kids and the decisions you make.
My maternal grandparents gave my parents a very nice hand-written card for their wedding in 1946. Inside was a brand new $20 bill. My mother still has it in her keepsakes box. "Just in case" she says.
FWIW.
TN,
So what you're saying is that if the only options are the two extremes... then the only results are also two extremes...
Whereas my family is more of a what happens when you try to take the middle road. Teach thrift, hardwork and independence (we all worked through high school and college) but help out financially on a case by case basis leads to kids whose financial futures are most dictated by their own personalities and goals. Of course maybe the fact that we were indoctrinated since birth that consumerism was immoral shaped us more than anything. I'm not kidding, we were told as kids that we weren't going to Disneyworld not because we couldn't afford it (which was also true) but because Disneyworld was an evil corporate opiate for the masses. My mother scoffs that she planted no such idea, but I got it from somewhere...
Blogger cara said...
TN,
So what you're saying is that if the only options are the two extremes... then the only results are also two extremes...
Nope. I would say that if we were both standing of front of a playground and each picked out a child and commented on their behavior we might agree on the causal factors behind that childs behavior based on superficial observations of how their parents interact with that child.
Life is the playground. It's filled with kids of all types. I just posted what happened with four of those kids. I think you were on the other side by the swing set. I was over by the monkey bars.
:)
TN,
So you're saying indulging kids leads to failed marriages and homosexuality?
Minus the youngest, you say nothing on whether these individuals are self sufficient or dependent on their parents. That was the point being discussed.
It sounds like you mostly just want to judge them.
My $0.02.
More than 40 pct. leave Obama mortgage-aid program
"Another 390,000 homeowners, or 30 percent of those who started the program, have received permanent loan modifications and are making payments on time."
"The average monthly payment has been cut by about $500 on average."
"as of mid-May only $132 million has been spent out of a potential $75 billion"
That's a cost to taxpayers of $338 per helped homeowner? Hmmm!
Pat-
I have seen that video several times and think it shows that if a family wants they can avoid having the second person work. Obviously this is not what she is trying to get across. She says the average man inflation adjusted makes almost exactly what his dad did so income is flat. There are a bunch of small purchases that are cheaper offset by large increases in housing cost, medical care, cars, childcare, and taxes.
She said in 2005 mortgage payments were ~70% higher than they were in the 70s. Seeing that housing prices have fallen ~30% since this and interest rates have fallen a couple of percent inflation adjusted mortgage payments are now as cheap as it was in the 70s. Medical care I agree is a lot more expensive, but at least insurance picks up a lot of the cost for a lot of families. She says cars are cheaper, but people have 2 instead of 1 car, because there are two workers. Well if someone stayed home this would switch from a big increase to a large decrease. She said taxes went up because the second persons income is all at a higher bracket. This is true, but if the second person didn't work this impact goes away and you are just left with the fact that tax rates are lower than they were 30 years ago.
Sure people spend less on clothes and TVs than they did 30 years ago, but they are still buying more and nicer TVs than back then. They could easily spend a lot less than they did 30 years ago by only having 1 TV and the same amount of shirts. You can increase you savings by cutting from any area you want. Just because we spend less on something than we did in the 70s it does not mean we can't cut our spending in these areas.
HB, you make a number of good points but:
1) many people (>40% of all households) are not "coupled" and there is no second income available to the household. They don't have those options.
2) many necessities that comprise most of a household's expenses have gone up in cost dramatically; it's the smaller luxuries that may be "cheap" today. Added to that that the decline in % of employers who offer traditional pensions, and that the stock market returns for the past ten years have averaged around 1% per year, when historically they have been 8%+ per year, and the savings that people and their employers put aside and invested for retirement are not even keeping pace with inflation, and you have a recipe for some tough times ahead.
I, too, believe that housing is no more expensive than it was in 1980 (big surprise!).
Boomer's have fewer kids and many more 2 income households. So there is more money available for the kids and toys.
My parents didn't buy a "new" car until I was 26. Btw cara, I bought my first car (with my savings) at 16. It cost $350 and was a corvair ("unsafe at any speed", according to Ralph Nader). My parents were a little more hands off than yours, I guess.
You are very fortunate to get 13K per year from your mom. We've never gotten a cent (absent my undergrad degree) and there will be no wealth transfer. In fact, we bought my in-laws a retirement home about 12 yrs ago.
My mother still shops at thrift stores and worries about running out of money (like her mother).
I support my sister alot financially and practically put a niece thru college.
I didn't live at home after sophmore year at college. I worked full-time and went to night school for my graduate degree. This didn't prevent buying a house at 22 and 23 and having a kid by 30.
Va_investor,
Yes, my sisters and I are fortunate and grateful for that and many other reasons.
Ace-
I was just trying to talk to Elizabeth Warren's arguments about how the typical 4 person family (mom, dad, 2 kids) is so much worse off than they were 30 years ago. I agree for many people the points I made don't make sense, but I am just trying to talk about this "typical family" that she talks about.
Her argument really did rely on housing prices being very high in 2005. Nationally housing prices are much lower so that is no longer true and with housing down the rest of her arguments hold a lot less weight.
Personally I actually think its much better that employers do 401Ks now instead of defined benefit plans. Way too many major companies fail/failed to have the system work well for defined benefit plans, which were usually underfunded. Also yes returns were terrible this decade, but they were incredible the previous decade so people who were close to retirement age should have benefited from the 90s bull market. I agree that people who only invested in the 2000s got screwed, but they should have plenty of time to catch up. I think the bigger issue is that tax rates will need to go up in the future to deal with our countries deficits, which will put more pressure on a country that is already struggling to save any money.
HB,
I understand that you are talking only about the spouses + 2 kids family, which she also focused on, but my point is that her central thesis is that the middle class is under serious threat today. Because single parent and single person households are a much larger proportion of the middle class today, not only do those suggestions for how to cut back do not apply to many in the middle class, and they have no "safety net" of another income earner in the household, her reliance on this comparison provides a very conservative test of that thesis. Once we factor this in as well, we have even more reason to agree with her.
I haven't done all the calculations, but I am not sure that the numbers actually do work out to suggest that the same house has the same overall costs today (inflation adjusted) as in 1970. Among other things, Warren noted that the typical house purchased by the equivalent family is 25 years older today, because new homes are being built for the highest income groups vs. the typical family of 1970, and there are much higher repair and maintenance costs associated with these.
Health care costs are substantially more, the proportion paid by employees and non-employees is much higher, and the services people get for the $ as substantially lower, as she noted.
The question of whether defined ben. vs. defined contribution plans are better is a complex one but is a bit different from the one that is part of Warren's central thesis. (I have different views from yours about what is best for society). But in any case, the point re: Warren's thesis is clear that the family in 1970, which was much more likely to have either a defined benefit plan or a defined contribution 401(a) plan that provided for greater employer funding than the typical 401(k) does today, was better off on this important part of family income than the matched family of today. They must make more current income, and set more of it aside, to have the same lifestyle, all other factors equal--and they have greater risk.
On the tax issue, note that she is considering all taxes -- not just income. I believe sales tax rates are higher; SS rates are higher and paid on a higher proportion of income (though many people receive more benefits too); other S/L tax rates may be higher. Property taxes may be lower as a % of assessed value, but because the assessed values have climbed, I don't know whether the overall burden is greater.
So I think that while people can certainly take issue with this part or that part of Warren's data and arguments, she makes a pretty strong case overall. YMMV.
HB, ps, I really disagree with your reasoning on investing. The gains from the 90s did NOT make up for the "lost decade" of the 2000s, who were putting aside money all during that decade as part of their retirement plans, etc., particularly for those who lost a lot in 1987 and had to regain that. It simply isn't true that everyone has a long time to make up for 10 years of less than 0 returns (inflation adjusted), and surely you don't believe that the signs currently indicate that the upcoming years will be bullish.
There are many public sector pension plans that are cutting back or are considering cutting back on vested benefits for people nearing retirement because returns have been so far below actuarial projections, for so long.
HB
Housing prices are down 30%, true.
However, interest rates being down cuts both ways, the hosue is more affordable but your savings doesnt rpoduce any income. that means while you can buya house, you aren't building a retirement package.
Also, Unemployment is murderous.
we have 10 million people benched,
its somewhere between 10-25% unemployment depending upon how you want to cut the numbers.
So, that median family is still under terrible pressure.
DC is littered with Feds with stable incomes, but in the real world, it's Ugly.
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