Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Please post your local house search updates, MLS finds, on-topic ideas, and links here.
Housing shortage? Really? What are people's thoughts on this article?http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/believe-it-or-not-a-housing-shortage.aspx
Drschmid-I think their comment is correct that if we continue to make very few houses indefinitely there will be a housing shortage. My guess is that it will take longer than the 2012 time frame they talk about. I also think that housing companies will increase the amount of houses they make as we get near a shortage. It is very rare for companies in the US to sell less of something than they can. Historically if companies often try and grow faster than they profitably can (e.g. too many houses built during the bubble) So as housing gets tight I am sure these companies will ramp up building to increase their profits.
drschmid, hbWhat hb said. (although the generic timeframe was 4-5 years). It's sort of a stupid article. If we keep building indefinitely at the current depressed rate that is either a series low or close thereto, and the proper response to current oversupply conditions, then indeed, there will come a time when demand would exceed supply. Gee, no really? It's a mathematical tautology. But the assumption that current building rate would continue indefinitely into the future even in those places where demand and supply are currently balanced or close thereto is absurd. If current homebuilders go under due to the weight of bad investments and there's money to be made? New ones will take their place. But the article is just a long-winded version of the chinese proverb? "this too shall pass".
Cara-Agreed on your points and thanks for correcting me on the timing I skimmed through the article and apparently missed the 4-5 year part. Although maybe I should respond to the article by creating my own article that says as long as household formation continues to be negative we will always have too many houses no matter how many are built :) As you said even if housing companies fail new ones will pop up if there is money to be made. Barriers to entry are very low in the housing market so there is little reason to worry that a housing shortage would last more than a couple months to a year if one ever did happen
hb,chuckle.Indeed that was the other thought I had. They assume household formation will go back to historical levels. (Kids can't possibly stand to live with their parents into their 30s can they? hello Italy...), but that construction won't. No reason not to randomly pick the other extreme set of assumptions.
This price seems a bit ambitious. They bought the house in late 2003 for 270K added granite and new windows and are looking to get 525K now. I'm not sure they could get that price in 2006... vienna house
Blogger Ace said... Hey, TN, you nailed it! The architect does own the house (see Arl. Co. site linked to the Underwood listing I linked above). My guess is he won't stay in business long...It was just an educated guess. In a former life I used to have perform due diligence on building plans to weed out all that expensive useless fluff I see in those photos. Granted, it's probably staging, but the essence of that design is wide open space. Which isn't photogenic, and the architect invariably get paired with the stager and the result is a European-esque home (Stainless steel, modern, antiseptic, and cold).That home practically screams DINKS, kids stay away.Nothing homey or warm about that design IMHO.Perfect reality show home.
Take your bows, TN! I think most people would agree with you (otherwise, you would see more modern homes), but I don't find the house cold at all (I'm glad that not everyone sees things the same way). I love the wide open space - but want only about 60% of it. If the house were smaller, cheaper, and in a little more matching neighborhood with less road noise...I already have my mental plans for how I would change the things I don't like. I also think looks can be decieving about kid-friendly in modern houses. Previously we had a wide-open house (on the first floor) where an architect and nurse raised their daughters. He said he frequently got that feedback, but he had designed the house expressly for the kids, including a second staircase they could sneak down to get a snack when mom and dad had guests. The upstairs was quite conventional. Although I haven't seen the floor plan of this house, from the description this house also has many conventional features, such as big bedrooms for the kids, a big finished basement for the kids, a screened porch, a breakfast nook, etc. In fact, too much of those for most of us to afford...
A key use for all that space is to be able to host parties for friends or work colleagues without having to hope for a lot of "no" replies or having to think about how you can justify leaving some people out. That's why so many people want open plans, particularly the vast majority of Arl. buyers who do not have kids at home and don't plan to get them.In the smaller houses in Arl., this type of design is a HUGE benefit. Of course, it doesn't take as much skill to design it into 3600 square feet as into 2000...
Ace,Currently picturing how 13 people are going to fit in one room of my friend's townhouse for the baby shower (even after declines) and having a hard time visualizing it... Not that I can picture 13 people in my living room either, despite it being a spacious open space... Most parties people don't all have to be in one room though... Or sitting for that matter.Point being it will occasionally be an issue, even if you're not in the social class that requires "entertaining".
TN-Good call on the house :)
Cara, that's exactly the kind of calculation I have to do--also, you usually can't invite people to bring spouses, kids. Some of the events at our house involve watching sports, and for those, yes, people do need to be largely in the same room. Also, small kitchens, esp. when cut off from the main rooms, are a major hassle, since guests like to be with you in the kitchen and/or help, and it's impossible to do everything ahead. You want to be able to chat with your friends, who are sitting in other rooms, while finishing kitchen work. Fewer, but bigger, rooms that are well-arranged, isn't just an architect's pipe dream or a passing fad. That plan is highly functional, and a good use of client $ when they aren't buying 3000+ square foot houses. Though the two story spaces are largely for looks...
The kitchen layout in the house looks a bit bizarre, though - three parallel surfaces, without much counter space on either? What will you do when you need to get something out of a fridge and wash it, carry it all the way to the sink across the room? I guess it depends on how much space there really is between these three.
NN, I think the distorted photo lens is the main problem here. If you look at photo 11, they appear fairly close together. There are also other photos at the designer site (with links to even more photos) that are less distorted.
Mortgage rates just cracked 4.5%, it really is impressive how quickly they have fallen. I guess the more important question is whether rates will go back up as quickly as they have fallen or are we starting a Japan like situation of super low rates for a very long time. mortgage rates
NN,Are you referring to the Underwood Street "eyebrow" house or the Vienna house? The comments seem like they fit the Vienna house kitchen with the sink and refrigerator separated by an island containing the range.(this is a slight editing of original post, now deleted)
Keith,The Vienna house. I guess you can't really judge till you see it.
Would very much love getting some advice with my current dilemma. We’ve been house-hunting for a couple of months and saw a FSBO in Pimmit Hills that we loved (unfortunately, no link because the owner is not advertising anywhere but a sign in her yard). Well, it would be more accurate to say we loved what it could become. This is what the house consists of:- A typical Pimmit Hill box house of three bedrooms, two bathrooms. One small bedroom has been changed into a larger bathroom so the original part of the house is really 2br, 2ba. The condition requires mucho remodeling as I don’t think it’s been changed in the last 20 years. By that I mean, remodel bathrooms, refinish wood floors, change plaster on walls (very uneven), lighting fixtures, closet fixtures, etc. The kitchen is also small and in need of remodeling.- An addition of a large, 450 sq.ft. (30 x 15) living room with huge windows and skylights. Does not require remodeling and this element of the house is why I am stupidly in love with this property.- An addition of what used to be a garage (29 x 14 ft), and has been changed into a two-story structure with the barest of finishing – still tile/brick floors on the first floor, threadbare carpeting on second, no bathrooms in that part. French doors from both first and second level into the garden and balcony upstairs. All three parts are joined together to give an impression of one house. - A garden and a swimming pool (both will require some work), total of 0.3 acres.- Total square footage is around 2100-2200 sq ft.We have toured the house three times and brought a contractor to get an estimate of repairs (he came back with 80-120K worth of work). Our current thinking is to transform the 2-story former garage addition into a master bedroom and bathroom upstairs, and a study/den downstairs. Obviously, it doesn’t have to be done at the same time and we can stretch it over time and probably do some work ourselves. Now the owner is asking 490K, which in my gut I feel is overpriced. We offered 425K. The owner countered that she already has the offer for 470K (with no commission) so the lowest she can go is 490K. I don’t think a remodeled 2200 sq ft house in Pimmit Hills can sell for 600K (490K plus 110K, which is a minimum it will cost to remodel). We are not buying to sell, of course, but the numbers do have to make sense. I mean, I really do love the house (potential) and the location, but should I expect to overpay for that fuzzy feeling?I would like to write a well-substantiated letter to the owner using present-day comps, making an argument that our price is reasonable, and that 490K is unlikely to pass appraisal, which means no mortgage and no deal. (I also think that she’s bluffing with the offer she allegedly has, because if there really was an offer, it’d be under contract by now.) Looking at Frankly MLS, I cannot find suitable comparables for the house. There are really two groups of houses that sold in PH over the last year: remodeled small ramblers with additions (like a FR or an extra BR) that generally sold for 420-450K, and big-ass mansions (of which there are only few) that sold for 650-720K. There is no comparable property of a big house needing work. So my dilemma is, how exactly do I compare a small, remodeled house with perhaps a small addition to a dilapidated house with larger additions? How do I make sense of these numbers? How do I reason with her? Please help me with sensible advice. I could probably prevail on my DH to pay 460K or so, but should we? Is this a good buy?
NN,First things first:Given that you did the due diligence to get a contractor to walk through with you, I'm assuming you've pulled the permits on the additions to make sure everything is kosker? Is the former garage now permitted living space?You're right her main competition is the remodeled semi-original size houses at $450k. Given her much much larger space to work with I can see why she thinks your offer was unreasonably low. Updates to her seem like nothing compared to the time and expense of an addition (or two). Some of your changes are your personal choices, some are less so, so asking her to discount for the full brunt of everything you want to do to the house seems a bit unreasonable to me. Extensive additions or remodels don't generally pay for themselves dollar for dollar (maybe they do in Pimmit Hills, I don't know that area). So if you think your finished product could sell for say $550k, and you were to buy at $460k, that'd be $90k towards your costs or 82% recovery which seems pretty good to me.Yes, it sucks going into a house knowing you won't/can't recover your full investment. But if you were to take any of the renovated little guys and add on that beautiful living room, it could/would cost you more. So yes, her $490k may be a tad high. However, if you want to argue that the appraisal won't come in, hire an appraiser for $200, or it won't be plausible. That may be a good direction to take with a FSBO situation anyway, since possibly neither of you have gotten a professional opinion on the price.To decide whether it's the right move for you, try weighing the total final cost against what other homes you could buy for that amount and less hassle, even if you need to look outside that neighborhood to find them. If paying the full amount upfront is not an option for you then take that into account, that this house represents an opportunity to get what you want but on a staggered schedule. Compared to doubling up on real estate commisions to buy one house now and a nicer/bigger one later, the premium you're paying her may be worth it...(wow I'm such an enabler.... take all this with a huge grain of salt, I'm just throwing around ideas)
Oops, thanks, Keith, for clarifying that. I thought s/he meant the other one.
geeyou think rates are low now?word is the treasuy wants to float a trillion dollars of 3% 30 year mortgages to push a tsunami of refiand fluff income especially disposable income for republicans
re: the article about a future shortage.I believe that this is likely. After this total burn, financing is scarce and I doubt many houses will be built on "spec". They will have to be pre-sold.After the early 90's nightmare, many builders only optioned land this go around. It all depends on how long the memories of this episode last, how many builders have deep pockets and when lending will loosen.I think it will be a repeat of prior cycles and there will have to be a shortage and "real" demand (not flippers) before we see significant new builds.In addition, there is not much land closer in except for condo's and it takes years to get from stage one to completion.
p.s.Anyone want Historic Herndon. An reo popped up a few days ago. Built in 1925. Good location. Good size. Last sold in 2006 (?) for 700K. Bank asking 360K. Corner of Locust St. and Grace(?).I am sure it needs some work. I lived in that area for 8yrs and enjoyed it very much.
NN, Cara gave you the same advice I will. Get an appraisal. Then you will have a btter idea of what to offer based on what you can finance. You do not have to share the information with the homeowner unless you would like to. The home is obviuosly where you;ld like to live and you love it. Those 2 things are very, very important so don't under estimate their value to your long term happiness with your decision to buy a home. I'm not buying the 470 offer or she would have taken it..UNLESS..for some reason she needs that amount to close without bringing cash to the table. A lot of helocs paid college intution. You could consider making her a loan to close if thats the case. An offer to buy at 450,000 with a 20,000 loan @5% interest ( if you could swing it) would pay you more interest on your money than a bank.
VA-Investor, I agree with you that there could very well be shortages maybe not in Florida or Phonix but even today Las Vegas and Ca. markets are absorbing everything that comes on the market within a certain price range. When building does return it will be with entry level housing mainly TH.
pat-I agree there is a good chance the treasury tries to push things lower for a long time.Although in response to your 3% mortgages I don't see this happening. I have read several reports from credible investment banks that discuss how difficult it would be to do a program like this (most were discussing 4% rates not 3%) and how small the benefits would be of a program like this. Mostly the comments were based on most people not qualifying/ already having a sub 5% rate. So although it is possible I would be fairly surprised if mortgages rates actually got that low unless we have another significant bought of deflation.
Haven't seen this article posted here yet...An August Surprise from Obama?Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth.The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie.
Jim-I hadn't seen that before. That would be absolutely terrible. Although it may buy the votes of the 20% of people it helps I would imagine the other 80% of people would be unhappy about effectively paying for other peoples houses. It would also run up the deficits several hundred billion dollars at a time when people are concerned about the deficit.
Jim, All I can say is ..If that were to happen, I can't think of any reason why anyone with a conventional upside down loan would continue to pay. I sure the hell wouldn't..
Jim,Calculated Risk says its hogwash. I trust CR....
Has anyone else noticed on franklymls.com that TTR/Sotheby's is now demanding that Frank (?) remove any info about their listings?I would hate to see others following suit. Franklymls is a great source of info. Seems more than a little anti-competitive. And it probably doesn't represent the best interests of sellers.
Thanks, Cara, for quickly and thoroughly getting the facts out there.
Ace, someone commented on it the other day. Someone could email Frank and ask what's going on. It seems very anti-competitive and strange, but all I can figure is that Sotheby's doesn't like the idea of all his links to outside information, like quick comp look-ups and the tax assessed value and you know, all that stuff that helps a buyer make an informed decision. (obviously irrelevant at Sotheby's price points...)But I could be wrong.
Thanks, Cara--and I hope you were sarcastic about anyone's not needing the info.Also, you may want to retry your link.
Ace,Yup that was sarcasm.Woops...NY Fed link to credit conditions.2010Q1 90+ days delinquency rates:Arl 1.9Alex 2.8FFX 3.7Loudoun 3.9Fauquier 4.6Montgomery 4.6DC 5.0Stafford 5.1PWC 7.1Charles 8.0Prince George's 12.1This includes stuff in the foreclosure process.(reposting info so I can delete the one with the random link ...)
Blogger NN said... Would very much love getting some advice with my current dilemma. We’ve been house-hunting for a couple of months and saw a FSBO in Pimmit Hills Go back and look at the rest of the neighborhood with fresh eyes. Take a stroll on the weekends. Visit during the day on a weekday. Ride up and down all the streets, not just the want you want to buy.Pimmit Hills is a very interesting three layer cake kind of neighborhood with a nice think layer of frosting on top. No way to see what's inside until you cut off a slice and examine it closely.We looked at Pimmit Hills when we moved here in 2008. I couldn't make the numbers work anymore than you can in 2010.Now I want cake.FWIW.
Cara and Arkey, thank you very much, excellent advice. Cara, you ARE an enabler! (but in a good way :))
Contrarian-Haha that is hilarious
Hi Texas Native,I appreciate the metaphor but it may be too subtle for my dense self..do you mind being a bit more specific?
Blogger NN said... Hi Texas Native, I appreciate the metaphor but it may be too subtle for my dense self..do you mind being a bit more specific?I don't mind but others will. Buying a home in any neighborhood you have to do a 360 degree evaluation. You aren't simply buying a home. You're also buying your neighbors and their tastes. You may also want to sell one day so you may want to look again at the neighborhood with the eyes of a seller vs. a buyer.What is the trend for that neighborhood in 5, 10 or 15 years? Are the older ramblers being replaced with McMansions? Or just updated? Which way is the neighborhood trending? Are the yards well taken care of? Any 50lb pit bulls as neighbors? Any neighbors will the "endless renovation" syndrome?(read skeletal framework up so long the wood is beginning to rot) Ratio of cars to homes. Relative age of cars. Etc...etc...etc...Sometimes a fresh set of eyes (someone who isn't buying) is your best input on the "feel" of a neighborhood. If no alarms ring for you then I would say you have done due diligence and you should feel free to invest in that area.You asked about a neighborhood I did my own due diligence on.For me, and I am speaking for me only, Pimmit Hills failed a number of tests I have for investing in a neighborhood. Your mileage may vary.
TN,NNI first investigated PH's in 1982. It was very sketchy back then. Given it's locale, I would have expected more of a transformation in the almost 30yrs. that have passed.I haven't looked around in there in quite some time, so I can't say what is happening now. I think that there are better neighborhoods in that price range.
I appreciate everyone's comments and some of what you said rings true. We did tour the 'hood many times and decided that we like it and want to target it. It does not have the air of uniform affluence that surrounds other nearby burbs like Dunn Loring, Vienna or Tysons. But we like the wide space, the big lots, the greenery, the fact that you can actually walk around it, the schools, and think the new metro will result in higher property values. There are many new and fancy houses next to little boxes and we hope the trend will continue. I understand that a few years ago it was considered sketchy.
Hi NN-IMO, that neighborhood is still a little sketch, and if it didn't transform during the last bubble I don't think it ever will.I also think any price appreciation due to the metro coming through is already baked into the prices--since it is common knowledge. But you could always look at similar kinds of neighborhoods pre and post metro and try to do some kind of analysis. It sounds like your costs would be way over-improving per square foot compared to the other comps in your neighborhood. Sorry to be all debbie downer.
Meshell-I agree its still a little sketchy, but it is improving. An old neighborhood can't improve that fast, because you need the old people to move out and new people to move in. There are a ton of large houses that have been built in the past 5 years, which likely are not sketchy. The problem is that it could take many decades to get rid of most of the 900 sq.ft. box houses and make the neighborhood less sketchy.NN-If you like the neighborhood I wouldn't worry that some people think it is sketchy.
oh, and cara--my friend hosted about 20 women for my bridal shower at her condo and it was just fine. Being hugely pregnant skews ones perception of how much space a body needs ;).
NN,I have been to the Pimmit Hills area, and I know some handymen from El Salvador who own ramblers there (looks like multiple families/home). I have to agree with VA_Investor that there are many better areas at your price range. Some say the new Metro line to Dulles will make the area better. Also, the area looked reasonably clean to me and it may not be bad on safety issues. It could still be better than certain low end areas of Falls Church and South Arlington. But for something that may cost you more than $550K, you can easily find ones at more desirable areas, where the schools are much better and the commute shouldn't be very different.See this link
Allow me to step upon my soapbox and address the crowd:The ability to see things as they are vs. as we wish them to be is a skill not easily acquired and always underrated.Western Union will not deliver a telegram to our door after the fact precisely outlining each and every mistake we can make in a situation. Life just does not work that way.All we can do to approximate that telegram is to pay attention to clues. Clues lead to trends. Trends lead to a direction. And if the clues point North and we decide South is our destination then we win all the glory that goes with that decision.Me, I carry a compass. And I frequently pay attention to clues. I can spot a trend from three blocks over. And if in doubt, I ask.I still make mistakes, but they have become fewer and farther apart and less repetitive.That's all I am going to say about choosing your neighborhood to buy and live in.
So I don't know how many of you this will help, but the FranklyMLS homes that are blocked by TTR Sothebys aren't really blocked - they are just hidden. All the data is on the page you get, but inside the html there is a line near the top that saysdiv id="wrapper" style="display: none;"If you use a tool such as firebug to delete the "display: none;" part the page shows up normally. If you don't know what firebug is, then your best bet is probably to complain to Frank.
http://www.washingtonexaminer.com/economy/real-estate/first-time-buyers/Prices-rise-on-Metro-area-condos-as-inventory-dwindles-1002900-99202374.htmlmy BS meter is twitching
http://www.washingtonexaminer.com/economy/real-estate/Area-home-prices-climb-in-May-95573024.htmlthe happy talk is high
PatIt irritates me when I see articles like this. Notice they are all using May numbers. I don't buy any of the hype as I watch the market very closely. Even the new home sales people are using these articles to justify why you should buy right this second. I live in Sterling VA and houses were moving quickly here a few months back. I have seen a drastic slow down in sales. House that normally wouldn't last a month have been sitting for 60 days plus. I feel like the agents think they can hype their way out of this.
I couldn't get the link to work but did read an article I assume was the same one on the web site. I think what caught my eye was that sales of foreclosure dropped from an average of 40% of sales to 15%. A 10% increase yoy to me isn't fudging the numbers since in our new area FT. Smith saw a 10% increase. This area didn't have a big boom and bust cycle either..they did in the NW area somewhat but I think they rebounded around 7%. I know in PWC in our heydey I think foreclosure sales were closer to 100% in late 08 and early 09. A re-sale was rarer than hen teeth. So, this this tells me that with more healhty sales than foreclosures means more move up buyers in the market and that means stable or increasing values.
Arkey, the article Pat cited noted a drop in the foreclosures as a % of total sales from 41.8% to 27.8%.One reason why people are doubtful that the May #s suggest a trend are that those #s were heavily influenced by the temporary tax credit, esp. in the price ranges focused on in the article. Once the data start reflecting sales occurring after expiration, people will be able to more clearly see where things are heading.
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