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Monday, December 13, 2010
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12 comments:
SFD in my zip (20194) is up price wise in 2009 and 2010. DOM down to almost half of 2009. Only 13 actives. 3 over 1mil, 3 under 600K, the rest average over 900.
I'm sure we are decently off the peak, but the trend looks good - stable at least.
I attribute the lack of shorts/reo's to what I discussed a few yrs ago. High income/ high dp and net worth. Little turnover during peak liar/no down loans.
Contrarian-
Everyone knew this was going to happen. The banks take a long time to work through foreclosures. So throughout all of 2006-2009 the number of 60+ day delinquencies was growing. This was the first year that number has gone down, because fewer people are becoming delinquent and more people are actually getting foreclosed on.
I would expect 2012 to be at least as high as 2011 also as the banks continue to work through a huge stockpile of delinquent loans.
The question is how well can the market handle the additional volume. My guess is pretty well. I think prices will fall some, but not much. At some point I would think that you would realize that there has been bearish news for the last two years, but yet all of the predictions based on the information have been wrong.
contrarian,
I said yrs ago that investors would put the floor in. As far as I can tell, this is exactly what has happened and is happening in our region.
Last week I was up against 5 offers on one place and three on another. There is plenty of $$$ floating around.
I think it will be important to follow inventory, but imo the sectors hardest hit have investors ready, willing and able.
As for vacant units; where do you think the people who have lost their homes due to foreclosure are living? Many weren't unemployed, just overextended. What was once a $2,400 mortgage payment is now a $1,500 rent (for example).
When we start losing population I will start getting concerned.
Cheryl
The deal is how does that conversion from owning to renting affect prices.
The price. A2400 dollar mortgage is a very different price from a 1500 rent.
What is the appropriate GRM and yield?
Cash six, treasuries six, but, its also kind of tedious to be on a lousy cash flow.
Whats good? Heck if i know
Are there deals. Sure. I don't want to sound all doom and gloom but, they are all in places I don't want to be.
PG? Deals. PW deals? Loudon. Deals.
Me. I am Chilling.
pat,
I'm perfectly happy to be buying in N. Reston. Nice area, metro coming, RTC booming, office space in demand, jobs, jobs, jobs.
I happen to have a couple places on the Loudoun/FX line (in Loudoun). Very nice, modest TH development blt in the later 80's. Terrific cash-flow and up 30-40% so far. Didn't even lose the 8K, let alone more. I just tried to get another - the 5 offer reo.
I wouldn't paint an entire county with the same brush (except maybe P.G.).
To each his own.
Because properties above a certain $ cost tend not to cash flow for rental purposes, my inference is that most of what is being said on this particular thread applies only to one segment of the market - the lower end. I'm not sure that investors are much of a factor in certain areas of NoVA, particularly not for single family homes and higher end townhomes and condos in much of North Arlington, McLean, Fairfax Co., Alexandria, etc.
Ace
to me it's a unhealthy market.
Property should cash flow. If they don't it makes it cheaper to rent then buy.
if it wasn't for my desire to add Green Features, I'd keep renting forever.
if i can talk my Girl into it, i'd love to have a place in Baltimore.
http://bit.ly/dGRZnB
"Now that the tax credits have expired, sales have slowed considerably.
"November and October are not our biggest months, but this is way less than what I would consider normal," Sullivan said.
The federal tax credits were extended into the spring, but once they expired, sales slowed.
"
now this is the peninsula, but, we've seen a 20% slowdown.
That is the point Ace. How many distress sales are available to mid-upper end buyers?
What event will take that segment down? We've already seen the fall-out from the "new" developments in (mainly) outlying counties. The reason for the relative pummeling of those areas is the prevalence of brand new loans at peak prices and no underwriting. Neighborhoods delivered in 2003-2007 were ALL questionable with respect to underlying value and ability of borrowers to pay.
That scenario does not exist in the locations people here want to buy.
Of course the other market that got creamed was the low-end. The reasons have been discussed here at length.
pat,
Higher priced places do not cash-flow and haven't in the 30yrs I've been investing in NoVa. I feel like I am talking to a brick wall.
VA_Investor:
A few days back, you asked me for my opinion on the local/regional market. My participation on this board is sporadic and so I’m just seeing your question now.
Government intervention in the real estate market has been nothing short of drastic and desperate, i.e.:
• injecting billions upon billions upon billions of dollars into Fannie and Freddie;
• becoming the lender of last resort and financing the overwhelming majority of private sales (let’s face it, but for FHA, VA and Fannie/Freddie – would 90% of the sales in the last 3 years occur?);
• raising conforming loan limits to an astronomical level (the effect of this on our area cannot be overstated);
• forgiving the borrower for taxes owed on short sales;
• all of the various foreclosure prevention programs (too many to name – the latest involves giving hardship loans to unemployed people);
• $8K loan for first time buyers;
• $8K tax credit for first time buyers;
• change in accounting rules so that banks don’t have to account for true value of property until/unless the property is sold/foreclosed;
• letting investment banks park their bogus MBSs at the Fed so that they could participate at the Fed’s discount window, something that has never happened before
• lending money to the banks at practically 0% so that these same banks can earn their way out of the huge hole they dug because of crappy real estate MBSs and CDOs;
• Fed purchase of hundreds of billions of MBS in order to, among other things, keep interest rates and mortgage rates low;
• Fed’s willingness to risk hyper-inflation in order to keep interest and mortgage rates low; and
• Other schemes and mechanisms that don’t come immediately to mind or that we’ll only find-out years later, probably after they’re declassified and/or FOIA’d.
But for the above, the local/regional real estate market would be awful. I’ve seen you deny or make light of the above in terms the effect it had on SAVING, yes SAVING, you and all other real estate owners in this area and every other area. A failure to acknowledge this is a credibility failure.
OK, so given the above, where are we going? I have no idea. I don’t see “happy days” ahead over the short to mid-term. I’m not predicting a precipitous CRASH. But, anyone looking at the larger macro-economic factors facing the nation cannot seriously think that DC’s next big real-estate boom is right around the corner. Instead, I see storm clouds . . .
I think government contracting in this area will decline enough over the next few years that it will impact the real estate market. I think unemployment rates in this area will remain high enough that it will impact this area’s real estate market. I think the government salary freezes will not help, and will likely hurt, this area’s real estate market. I think government hiring freezes and reductions in budgets are just around the corner . . . . stay tuned. I think the number of people upside down on their house will grow and people will continue to walk-away . . . perhaps not a tsunami, but enough that it places downward pressure on the market.
On the other hand, I think mortgage rates will remain low for as long as the Fed can keep them there. They have very few tools left in their belt, so no more tax credits. Moody’s is already threatening to downgrade the US. With this in mind, is now a “good time to buy?” Maybe, maybe not. Will late 2011/2012 be a better time … probably. If I had to put a “number” on it, which I’m not inclined to do, I’d say 5-10% better. Is it cheaper to rent for now … for me, yes, there is absolutely no question about that.
Mike,
I haven't been saved in SW FL. Do you think the regional economy may explain the difference?
I have never claimed a V-shaped recovery. On the contrary, I have stated my belief that we would bounce along the bottom for up to ten years.
In ten years many properties will be paid for.
Perhaps things will get much worse. I don't think so but I am no soothsayer (or expert of any kind).
Did you foresee the MBS disaster? I saw a correction coming and expected 25-40% (regionally) depending on location, type of property, etc.
If you think it wise to delay a purchase (or not purchase at all) that is your decision.
I put no new money into re from 2003 until 2008. I did, however, complete some 1031's that gave me the two best deals of my life in 2004 and 2005.
Although I do believe that you make your money going in, I'm not so blind to see that things can get worse. That is the nature of being an investor - educated risk.
I trust my instincts.
I don't worry too much about the overall market - only what I have.
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