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Monday, August 2, 2010
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44 comments:
I am not a big fan of Aldie, VA but this is a great deal if the bank bites. I bought this same model for $1.1 in Leesburg about 2 years ago. I did have 5 acres though. It is a Winchester home and was built well.
http://franklymls.com/LO7287844
Did you notice the comments under "this home was reviewed?"
One reviewer says this home is a steal, the other says that the house is overpriced by 100k for the 2010 market.
The 2010 sales range from 611k to 706k, but if the square footage is accurate this is a 6142 sq ft home whereas the largest of the solds was 5517 sold for $655k. So $669k seems on the money to me or just a tad under to attract a contract. (the largest sold was also a short with a lower list than sold price).
(I think it's pretty, love the multiple solarium like rooms, not that I'll ever be in the market for that size home, so my opinion's pretty meaningless).
CR has posted a negative equity by state graph again in three bins.
0-20% negative equity,
20-50%
and > 50%
CR link
VA is amongst the weakest, with only 8 states in a worse total position.
approx 31% of mortgage holders in a negative position, broken down at about, 12% 12% and 7% by category. (If you ranked just by red bars we'd be about 12th, by eye).
Cara-
Clearly the red bar is the most important, because there is a very high chance of eventual default for these people, but the yellow bar is only slightly better. If you are 20%-50% underwater you know you are underwater and it will take a long time to recover. I think the blue bar isn't that important, because most people over estimate their houses value so they at least think they are at about breakeven. Making them less likely to foreclose.
hb,
Agreed. I was just being lazy. If you eye the top of the combined yellow and red bars I think we're still 9th or 10th, with Colorado being less badly off than us and Texas and possibly Indiana being worse.
The fact that our red + yellow bars are about 18% of mortgage holders, I'd like to compare this to the delinquency numbers rather than the foreclosure filings numbers....
CR May 2010 delinquencies by state
puts VA way down the list and at only a total of 8 or 9%.
So well over half of those with worse than a 120% LTV position are still paying on time (given that a lot of the delinquencies are going to be due to job loss and irrespective of LTV).
Things that make you go hmmm.
Yeah that house in Lenah Run is such a steal that it's been on the market for 436 days !!
It is a deal (not a steal) now at 669K
But be aware that before the 8K bribe most all homes in this 'hood were selling for the low to mid 600K's !!
Do yer research! Also lots of SS & FC's here too!!
Anyone familiar with Stafford County/Spotsylvania/Fredericksburg area? I had been following this blog but we just moved to that area due to jobs and wanted an assessment on housing there.
Seems to basically be all new construction?
Any thoughts on this house? I couldn't find a whole lot of comparables.
http://franklymls.com/FX7376264
Spunky
I don't disagree with what you are saying. I guess that house hits home because I had the same model and when I was buying it, I looked in Lenah Run at the time. People were camping out to buy that same house at over $900K to $1mil. I was just surprised to see that much price drop. I have not had the time or wanted to research Aldie/Lenah Run as that location off of 50 is brutal for commutes. I get alerts everyday and that popped up.
cara,
Can you show me a house that is in a -50% equity position in Virginia?
http://www.thetruthaboutmortgage.com/the-new-threat-sidelined-home-sellers/
By now, you’ve probably heard about the shadow inventory.
You know, the millions of homes either in the process of foreclosure, or already owned by the banks, which have yet to be placed back on the market.
If put on the market, these homes would obviously increase the housing stock and weigh down home prices, exacerbating an already fragile recovery (that’s if we’re actually recovering).
In fact, a recent study indicated that it would take 1.35 years to sell the seven million strong shadow inventory assuming no other properties were on the market.
And I’m not even sure if that factors in the terrible re-default rate expected on loan modifications, which is as high as 75 percent by some estimates.
Sidelined Home Sellers
As if that weren’t bad enough, a new threat has emerged, so-called “sidelined home sellers,” those who have been waiting out the storm to list their homes.
The new worry is that once things do turn around, these sellers will flood the market in the hopes of dumping their properties for an actual profit, or at least not a loss.
At the same time, applications to purchase homes are at their lowest level since 1996, so even if inventory is low, it’ll take a lot longer to clear it.
The only sliver of “good news” is that many homeowners are still in negative equity positions, so they can’t sell. Let’s just hope they continue making mortgage payments.
Robert-
Just a quick example 20+ miles from DC got screwed Zillow says the owner is down over 50%
If you look into a lot of the outer suburbs anyone who bought in 05-07 is down ~50%. There are also a lot of condos in the poorer areas of Herndon, Falls Church... that are down about 50% from peak.
Ohh yeah not to mention a decent amount of people used negative amortization loans so even if the house has only fallen 30-35% they may be down 50% due to the loan type. Some people also used HELOCs to get loans worth well over 100% of the houses peak value.
Drschmid-
Lenah Run is one of my *watch* areas so I've been watching this house whittle down from the 800K's (even before it was a short sale) for a LONG time
There are new sellers in this 'hood that are listing in the 800's today - their RE Agents are doing them no favors!!
This is a large home probably already has a SS Contract on it for the 669K amount
That way, when it (finally) closes, it appears they "got" very close to list price for the sold price - an old trick
And yes, I know people were camping out for these homes, back in the-good-old-days
I have a pal that slept overnight for her lot in South Riding - now she's giving it back to the Bank (s)..wishes she never did it
I work less than 5 miles from here - so the commute would be hardly "brutal" for me ;)
Spunky
Keep me updated on what you see in Lenah Run. I appreciate the feedback.
So, I'm rude but nosy--drschmid, you are househunting now, but bought a giant house in leesburg two years ago? what happened to that house?
Poppy, you couldn't pay me enough to live that close to the interstate. You couldn't even open your windows or go out in your yard without risking hard-core lung pollution. And the noise pollution. Ugh. And with the current beltway construction, who knows how much closer it will get to the house?
Which reminds me, we drive by the recently denuded areas at the intersection of the beltway and 66 all the time and I always feel so depressed for the people whose houses are now right on the interstate. That would suck so much to have a decent tree buffer one day and the next...poof, nothing but you and the traffic.
Robert, hb,
Thanks hb for finding one for me.
Me personally? No. I have not personally run across any sales that are a full 50% off peak prices.
Frankly sold 4years Woodwalk FX* will show you a couple of the 2 bedroom units that sold at peak that would now fetch ~35% off (correcting up for condition).
Is 50% negative equity that much different than 35-40%?
The >50% chunk is the smallest of the negative equity buckets in VA, so it's likely that most owners who got that far underwater did so with HELOCs, not peak purchases.
Same concept as this:
http://franklymls.com/FX7400042
$335k SS price, 1999 purchase price of only $202k. That owner probably isn't 50% underwater, but they did manage to rack up at least half again as much debt as they started out with.
Cara
the important part of that CR Chart
is how close Virginia and DC are to California.
The California market is totally hosed, and the value destruction in the DC MSA approximates that.
Now why foreclosures are so much smaller here? 1) Unemployment is lower 6% vs 12% in CA/NV/AZ
2) Larger pools of resources (Savings, 401Ks, IRAs). 3) More penalty for foreclosure Recourse, security clearances, etc.
now will it inevitably hit here?
probably. more Short Sales, more Distressed Sales, more carry back finance.
pity really.
Poppy, Meshell,
Other than the direct proximity to the beltway that would eliminate it for myself...
Rose Hill's kinda nice and suburban in it's own way. Convenient commute depending on where you're headed. But there weren't that many rebuilds or tear-downs to use as comps. And all will be unique... Widen your comp search to the whole zip code, or continguous ones if need be. And then correct for neighborhood by using the percentage comparison to original homes that are similar. (i.e. a rebuild twice as large goes for 150% of an original home here, so should also go for 150% the original homes for the home in question, where 150% is a wild guess based on nothing and could just as easily be 300% for all I know.) The tax assessment seems to think it's a good price. You couldn't pay me to live that close to the highway, so I have a hard time getting past that bias.
pat,
That's another way to look at it.
VA LTV > 120% = 18% delinquent = 9%
CA LTV > 120% = 25% delinquent = 16%
So if our underwater owners were going delinquent at the same rate as the underwater owners of CA we "should" be at 11.5% not 9% delinquent. That doesn't sound as scary to me as the general, Why, oh why aren't all of them defaulting question. i.e. 18% horribly underwater is itself scarier than the 11.5% delinquent predicted by a "we are the same as California" model. And the two reasons you pointed out are good strong reasons why our default rate shouldn't be the same as CA for equal LTV.
Meshell,
I'm in complete agreement about the highway. Unfortunately, I know people who really want the house, so just trying to steer them towards getting as good of a deal as possible.
Cara,
Thanks. I don't know Alexandria that well, but I do remember seeing similar rebuilds in Springfield, so I'll start there.
Meshell
Time flys, actually I bought the house 4 years ago, dumped it 2 years ago. Lost alot of money. That is why that Lenah run house brings back bad memories or just memories. I got caught up in the madness. The memories of going to the model home in Lenah at 8am to see 30 people that had been up all night camping for the homes. Sold the house in Leesburg, now I am renting in Sterling.
Anyone familiar with Stafford County/Spotsylvania/Fredericksburg area? I had been following this blog but we just moved to that area due to jobs and wanted an assessment on housing there.
Seems to basically be all new construction?
Wunderbar-
I don't know the area very well, but I don't find your statement surprising. In general the areas expanded quickly during the housing booms, because people couldn't afford closer houses. So a lot of housing from 02-07 would make sense
Maybe I'm missing something, but isn't Drschmid's story exactly the type of thing that some on here have been claiming never happens? I don't know how many times I've read Va_Investor say that it doesn't matter how underwater someone is if they can make the payments - that no one would sell if they would lose money on the deal. That seems contrary to Drschmid's story, and to a couple of articles posted recently about people bringing money to the table to close a sale so that they could move on and buy a dream home while prices are down.
CARA
i agree our rates of foreclosure/delinquency speak to
the difference in environments but i believe it's just adding lag.
in the DC MSA people will go to the end before quitting.
but underwater is underwater.
you may be willing to hold your breath and empty the tanks but,
still it will shw up someway.
Contrarian-
Wow that person is using bad math. He is assuming that of the 6-8 million houses that will be lost none of the people have more than one home, and no new buyers will enter the market. Personally those sound like pretty outrageous assumptions. In addition there is no reason to expect banks will increase the speed that they are foreclosing houses. So I would continue to assume that this happens at a slow trickle causing homeownership rates to fall at a similar rate. So by 2012 they will likely be 65-66% not the 61-62% the author thought.
Saved without comment in lieu of inevitable deletion:
"contrarian said...
The housing market is going to crash...
Here is a chart showing the homeownership rate since 1965 from CR.
From today's USAToday:
Homeownership rate continues to slide
Millions of houses on the verge of foreclosure threaten to send homeownership to its lowest level in 50 years, according to new industry estimates.
Fresh projections say the rate could plummet to about 62% as early as 2012 and almost certainly by the end of the decade. Homeownership rates haven't been that low since they hit 61.9% in 1960.
/...clip.../
"Anybody who knows anything about housing thought it would be flat in the second quarter," says John Burns, CEO of John Burns Real Estate Consulting, a national housing market analyst based in Irvine, Calif. "Homeownership fell during the quarter when government was offering a tax credit (to first-time homebuyers). What do you think is going to happen now that there's no tax credit?"
The continued decline — 0.5 points lower than the same time a year ago — points to a fast plunge, he says.
Burns estimates that 6 million of the 8 million homeowners who are behind on their mortgages will lose their homes to lenders in the next two years. This "shadow inventory" could push ownership rates down to 61.7% within two years, he says.
Crash & Burn!
8/2/10 9:30 PM"
Jeremy,
Where did I say that no one would ever sell if it would mean they lost money? Why do you find it necessary to continually misrepresent me?
Currently, and in certain times past (ex. the 90's), some people have to bring money to the table IF THEY WANT/HAVE TO SELL. My point, which you failed to grasp, was that a mere loss of equity would not drive people to bail out of their home.
You completely missed my point or intentionally misrepresent it.
Robert,
I have seen many distress sales at more than 50% off prior purchase price. It's not all occuring in only distant or sub-par areas.
Sehr,
I am sitting in my weekend place 10 mins or so from F-Burg. The Market for Stafford and south still seems very weak from my observations.
Drschmid,
Your situation seems odd. Perhaps you could expand on why you sold or lost your prior home and would now buy again. This info may be of a personal nature and it's understandable if you do not want to share.
All,
There is a difference between being upside-down on your mortgage and underwater on your purchase. To most of us the distinction is not relevant.
There are also some nuances (sp?) that I believe Jeremy is quite aware of but attempts to game with.
For example (his example) if I found something that I could buy at a steal, I might sell my home at a loss. I've done alot of buying and selling and I would very well sell something for 50k or 100k or 300k "loss" if the new place was 500k undermarket.
Of course there are many reasons that people would sell at a loss to relocate or downsize or upsize. This is discretionary. And Jeremy knows it. Just like dumping some stock to buy that beach house you want...etc.
I doubt many people would sell their family home merely because the value has dropped. There was a guy on craigs list (and I think Bubble Meter) who thought he had a crystal ball and sold his N. Arlington home to move to a rental. His plan was to buy back in 2007 or 2008 when prices had dropped 40%. Even if someone really thought this would occur, would they uproot their kids and move to a rental to capitalize?
There are instruments for day-trading and one's home is not one of them.
VA Investor
I prefer not to devuldge much of my personal life. But, it was by no means to sell and buy my dream house. I was in my dream house. It was more around life circumstances. I will leave it at that.
Jeremy
I really don't know how you came up with any conclusion of what happened with me. All I said is that I lost alot of money and you come up with a theory. I do agree with you that many people are selling and losing money but usually have no choice due to things that happen in life.
pat,
If there is a difference between what the two of us are saying, I don't think it's a very big one. I'm saying the 18% who are over 120% LTV is in and of itself a very scary number, i.e. I don't understand what the thought process is that they're not all defaulting now. We know what the market looks and feels like with a 9% default rate, but it "should" by all rights be twice that PLUS all the people who are not that far underwater but who no longer have the income to support payments.
OTOH, there is a legitimate question to be asked. Is it as you say just a matter of time, just a lag until inevitable default for all these folks, (and if so how long will that be spread over). Or does the disconnect between the 18% heavily underwater and the 9% defaulting (or 11.5 if we were at CA rates) reflect a sustained willingness of borrowers with the means to do so to uphold the financial obligations they entered into regardless of "paper" losses. Just because you owe more money than your house is worth doesn't mean you can't afford the payment. It just means you're throwing good money after bad if renting is a viable and significantly less expensive option. (not everywhere are the rental options as good and plentiful as they are in the inner suburbs of DC).
I'm surprised no one's surveyed the attitudes of underwater borrowers yet to see what their plans/goals are. Maybe no one wants to be the one to point out to even some small sample of 2000 borrowers or so that they're that far underwater. Or maybe this was already in those studies of default as a function of LTV that have been done (not that I can find them now...)
So I guess there is a difference after all, you think it's a fait accompli, an unstoppable train wreck coming to happen, I think we can't know that until either it arrives or looking back 5-10 years from now.
And Robert's question brought up an interesting point about my neighborhood. Sure, we're not Arlington, but even if you bought at peak here, with not a penny down, the furthest underwater you could be is 15%. I couldn't find any worse than that. Given that most would have put down at least 10% at the time, peak buyers are not far in the amoritization schedule from having a little equity. (they may "never" be at break-even). So it's really a question of what happens when the rungs underneath us collapse from the weight of the 120% + LTV owners?
Cara-
Don't forget there are probably some people who either had negative amortization loans or went HELOC crazy. SO I am sure some people are more than 15% underwater, but this is probably pretty few people so it probably is not a big problem. A couple of REOs in a neighborhood with a thousand houses just doesn't matter much. Also don't forget in VA you can come after peoples assets, so it is not necessarily chasing good money after bad. Plenty of people have the assets so a bank in theory could come after them to get the extra money. The only reason these people aren't paying down their house is that it is a cheaper loan than they can get elsewhere.
hb,
Well the neighborhood's been having a good steady stream of SS's and REO's since 2007, how far underwater any of those folks actually are/were is hard to say. That they could no longer afford whatever debt they had taken on is clear. I'd be surprised if we ran out of new distressed sellers before 2012 at the soonest. Neg-am's were not that common in FFX though, so outside of fraud it's hard to get your balance above the peak price for the neighborhood, although many may have managed it without doing all the upgrades that garnered the peak price and thus are indeed more than 15% underwater.
From my observations the HELOC's and refinances are the largest source of current distressed sales. And they don't have to be more than 106% LTV to end up distressed, just people who had postponed the inevitable by taking on a larger loan when struck with financial difficulty in the past. The scam buyers of 2005/2006 have already washed through. So it's HELOCs and peakish buyers who have to move for work or orders or who lost income.
The point I was trying to get to is that the heavily underwater borrowers are not evenly distributed, and will hurt the most the same places and price points that have already been whacked. Which is kind of obvious.
I wonder how long it will be before some insurance company offers "underwater" insurance, which would pay your mortgage if the market value slips below your mortgage value for a certain period of time. I guarantee they would be more careful than the bubble era mortgage companies when it came to screening applicants and setting premium rates. I suppose the fact that no one's done this suggests that there is no money to be made on it.
Ace - sounds a lot like PMI to me, and there is definitely money in that.
Jeremy, good point--though I was thinking of a policy that would benefit homeowners rather than lenders, enabling them to stay in the home.
Ace,
Case-Shiller options were the way to "hedge" losses in 2006 thru 2008. To short the market thru options, etc. would have locked gains at a very low cost.
I wanted to do this but could not convince the other half having been completely burned in the stock market at an earlier time.
Ace-
It would be very hard for an insurer to do this. How would they determine the value of your house. I sure wouldn't trust that their appraiser was giving me a fair price on my house when they claimed I was above water. In addition it would convince you to never do any maintenance on your house. This would be a waste of money if your insurance company would pay you based on how little your house was worth.
I think at best you could get insurance based on average prices over an entire city rather than your house. This would work reasonably well although obviously in DCs case some areas fell way more than others.
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