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Thursday, January 6, 2011
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52 comments:
Couple things caught my eye this AM. Fire sale at the white house -- better go and buy now...
http://news
.yahoo.com/s/yblog_theticket/20110105/pl_yblog_theticket/white-house-loses-nearly-a-quarter-of-its-value
Whoops, lets try that again:
http://news.yahoo.com/s/yblog_theticket/20110105/pl_yblog_theticket/white-house-loses-nearly-a-quarter-of-its-value
Also, 400K doesnt get you a nice SFH in the DC burbs anymore? Fear not, as it still will buy this nice tuna:
http://www.abc.net.au/news/stories/2011/01/05/3107009.htm
Virginia MLS has updated inventory numbers. The trend lines do not reflect a rising inventory in FX Cty.
I think spring will bring out enough purchasers to match any increase in supply.
While it may be a head fake, economic indicators have been encouraging as of late.
FX7506480
3rd one this month in the area I am keeping an eye on. Prices keep getting lower....and lower.
Sung to the tune of Rawhide:
Rollin' Rollin' Rollin'
Keep movin', movin', movin',
Though they're disapprovin',
Keep them doggies movin' Rawhide!
Don't try to understand 'em,
Just rope and throw and grab 'em,
Soon we'll be living high and wide.
Boy my heart's calculatin'
My true love will be waitin', be waiting at the end of my ride.
Move 'em on, head 'em up,
Head 'em up, move 'em out,
Move 'em on, head 'em out Rawhide!
Set 'em out, ride 'em in
Ride 'em in, let 'em out,
Cut 'em out, ride 'em in Rawhide.
...and yes, I am going to have that song in my head all day now.
Tex,
How do you arrive at your conclusion that prices keep falling?
Out of 7 homes available, this is the only reo and there is one short. Have you seen the interior?
The 3 most recent closed sales were above tax assessment and updated. Based on assessments (not always an accurate measure) this foreclosure is asking 5-10% below (in freezing early January) the 3 sales.
I don't see much difference in price from '09 sales based on assessments. I saw a nice flip - 330K to 500K last year.
You have boots on the ground, so perhaps you could provide some insight.
http://franklymls.com/DC7436601
33% down
VA_I,
The only REO Vienna detached?
http://franklymls.com/FX7485586
http://franklymls.com/FX7499573
http://franklymls.com/FX7501400
Kevin,
I thought we were talking about the area where Tex's cite was; Bowling Green, I believe.
If there are only 3 reo's in Vienna that is quite something. I referenced the active sfd's in his area of interest. There are 7. One is an reo (the one he cited) and one is a short. The others have been on the market for months.
Check Frankly for this info and recent sales.
There are many more REO's in Vienna, I was just picking a few detached/active ones.
The Dunn Loring area is pretty small, but given its proximity to Tysons and the Dunn Loring metro, it's typically more expensive than that. Just going from memory here and anecdotal evidence.
Kevin,
I checked all of 22180 and out of 124 "actives" (including TH's) I saw 5-10 reo's. Closer to 5 available, I believe.
Is this what you mean by many???
Kevin & VA-
Although most of the area near Dunn Loring is pretty expensive the small area north of 66 is the cheapest part. I think a lot of people dislike the cunningham park school and choose to go elsewhere. Also for some reason very few houses in this area have been torn down and rebuilt, so it is mostly fairly small older houses.
If you want a fairly modest house I think its a pretty nice area. I sometimes walk around there and the neighborhoods and people seem nice.
"VAI said...Tex,
How do you arrive at your conclusion that prices keep falling?"
Redfin Price Per Sq. Ft, and MRIS stats for that zip (22180) show they are rising over the last year or so. YMMV
23 reo's in all of Vienna. 12 of those are available. All Vienna zips and housing types.
It's unbelievable!!!
VA-
I agree. There are a decent amount of short sales though ~70 out of the total 400 sales. To me it sounds like most people in this area still can pay their mortgage, but those who bought in 2006 don't want to take the loss so they would prefer to do a short sale if possible. If the bank doesn't allow this it will be interesting to see if they become foreclosures in the future.
"Contrarian said...
This interview explains why prices will continue to fall, and fall far, for many years:
James Howard Kunstler Says the Real Estate Crash is Just Getting Started"
Hmmm - Lets see how Contrarian's source did for his predictions (numerical values so there can be no debate) last year:
KUNSTLER'S 2010 PREDICTIONS:
Prediction -- "I'll take another leap of faith and say that 6600 was not the bottom for the Dow. I've said Dow 4000 for three years in a row. Okay, my timing has been off. But I still believe this is its destination. Given the currency situation, and the dilemma of no-growth Ponzi economies, I'll call it again for this year: Dow 4000."
Results: GLUG, GLUG, GLUG...
Prediction: "I even think the price of gold will retrace somewhere between $750 and $1000 for a while"
Results: GLUG, GLUG, GLUG...
No predictions of his for housing in 2010. However, given his track record above, Im sure he will nail this one, GLUG, GLUG, GLUG, GLUG, GLUG...
http://kunstler.com/blog/2009/12/forecast-2010.html
hb,
If the shorts become reo's it could portend falling prices. I'd be curious to see the portion of distressed sales in 2008, 2009 and 2010. I just wanted to know where Tex found data supporting his assertion of falling prices.
Kevin chimed in on the reo's, which was not really my question to Tex.
I used to live in Dunn Loring (off Oak St.) and it was very convenient and nice.
Is this what you mean by many???
"Many" is a subjective phrase, and yes 10 could be conceived of as "many" especially when talking about foreclosures in the dead of winter. Ten years ago even four foreclosures could be considered "many".
And FYI, I was talking about Vienna, which has the following zip codes:
22180
22181
22182
Kevin,
When I spoke of reo listings in all of Vienna I meant ALL 3 zips (I've lived in all of them at some point). And there are not 12 available; more like 5 or 6.
During the biggest housing crisis of all time, I would expect far more. There are over 400 listings in Vienna. Just my opinion.
Which is more important or relevant: reo's or prices? Trends or actual numbers?
The 70 shorts (available?) are a concern but the trend is down.
Here's another article citing survey evidence that boomers won't move to FL to retire. This one claims only 2% plan to relocate.
boomers anticipating retiring
An obvious point that the writer seemed to ignore concerns the role of health in determining whether people will continue to work past a certain age, such as 65. She notes that a large majority plan to work later, but that only about 31% actually do, and that the survey also shows many are very concerned about their health but doesn't ever put it all together. Past studies have shown this is because they experience some type of health related disability or challenge so they can't continue working as long. One implication for housing obviously is that they won't have as much to spend on 2nd homes or better places than they now have, or doing a lot of renovating.
VA_I,
Prices are all that matter to me. There could be zero or twenty foreclosures and it really wouldn't sway my opinion.
I focus more on the fundamentals to understand whether home prices are sustainable or not. For instance in Vienna...
Median household income in 2010 is $108k, up 26% from $85.5k in 2000.
Median home price in 2010 is $486k, up 122% from $230k in 2000.
I am noticing a massive disparity here. No arguments about population increase during this time (only about 5%) or increased borrowing leverage obtained through low (and temporary) interest rates explains how this happens. Nothing has fundamentally changed, and nothing significant changed except home prices.
The only thing that explains it is the housing bubble. The general lack of foreclosures you speak of in all likeliness is delaying an inevitable price discovery in Vienna.
Kevin.
I don't know how anyone determines fundamentals without considering affordability (ie. interest rates).
Median income affords a median house (with 20% down or even less).
You make the assumption that housing was appropriately valued in 2000 and that nothing has happened to make Vienna more in demand by purchasers.
I do not believe most first time buyers should expect to purchase a median priced home. But the bottom line is that median can afford median. If the general public considers monthly payment (as the time-worn 28/36 ratio's have for decades) then you will be waiting a long time for your intrinsic values to occur.
"Contrarian said...As the char shows, there will be brown-outs/black-outs, gas shortages, civil unrest, a complete collapse in the economy."
OOOOOOO! Sounds Scary! Yet also familiar - kinda like when he first predicted it as a result of y2K:
"Writing this in April of ‘99, I believe that we are in for a serious event. Systems will fail, crash, seize up, cease to function. Not all systems, maybe only a fraction, but enough, and enough interdependent systems to affect many other systems. Y2K is real. Y2K IS GOING TO ROCK OUR WORLD.
People will consequently suffer. I don’t know how much. Some people may lose their lives - but more likely at the hands of a disabled medical establishment than because of civil disorder, loss of power, starvation, bad water, or other projected horrors"
http://web.archive.org/web/20010211165926/kunstler.com/mags_y2k.html
Yep -- no fearmongering from this guy. Another A+ prediction from Contrarian's new source of doom!
GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG, GLUG!!!
I don't know how anyone determines fundamentals without considering affordability (ie. interest rates).
As I explicitly mentioned above, yes, it is a fundamental. The difference in rates between now and then comes nowhere close to covering that massive gap.
Median income affords a median house (with 20% down or even less).
It's actually not that simple since the income points include renters, etc. But regardless, this neither takes away nor adds to either perspective.
You make the assumption that housing was appropriately valued in 2000 and that nothing has happened to make Vienna more in demand by purchasers.
Well up until that point, housing was fairly correlated with income. So the argument that a market in which price mobility upwards is unrestrained when supported by the fundamentals is somehow "undervalued" has no hypothesis or reasoning that I'm aware of, nor one that you've been able to propose.
I do not believe most first time buyers should expect to purchase a median priced home. But the bottom line is that median can afford median.
I make roughly that median income. I cannot afford a median Vienna home. Eight years ago I made substantially less than the median Vienna income, but could afford a median-priced home in Vienna.
But this goes back to my point above which is that there's nothing about median income that says they should or should not be able to buy a median home in that area. You're excluding rentals. Again, this neither validates nor refudiates your point, but is a red herring.
If the general public considers monthly payment (as the time-worn 28/36 ratio's have for decades) then you will be waiting a long time for your intrinsic values to occur.
That's because you assume the median income will be purchasing a median-priced home. I'm not going to wait for Vienna. It's futile and the inevitable decline in RE values could span several more years. I do commend you though for trying to rationalize a doubling of home values with a 26% increase in household incomes. That's a feat of mental gymnastics that I'm not capable of achieving.
Kevin & VA-
Do either of you know how much larger the median home is in Vienna compared to 2000? I don't but obviously a ton of large houses were built as smaller ones were torn down. This obviously will not make up the entire gap, but I could believe that houses are 10-20% bigger so median to median isn't an apples to apples comparison.
contrarian - NEWS FLASH
Kunstler got rich writing about doom and gloom, not shorting the stock market.
Note the journalist that did the interview calls him, "entertaining."
That couldn't be closer to the truth. Kunstler is an ENTERTAINER.
Kevin,
I agreed with your point regarding median income to house values comparison. I moved here few years ago and always wonder how people afford to pay for ~500K home with just 100K income in 'Vienna' and 'Potomac/Chevy Chase/Bethesda etc' is simply beyond my understanding.
Another way to look at it is Rent vs. buy. For example, 101 Kingsley Road, 22180 is available for rent..
'Asking' Rent $2500
http://www.realtor.com/realestateandhomes-detail/101-Kingsley-Rd_Vienna_VA_22180_M63302-09657
Current Zestimates = 500+
Purchased in 2007 - 550K.
Assuming loan amount - 444,000K
Interest Rate - 4.2% for 30 years.
Property tax - 1.25%
PMI = 0.
Monthly mortgage = $2744.15
Maintenance = ?
How long the owner will continue to pay out of her/his pocket to make up the difference? I personally know at least 2 friends paying per month $150 and $350 out of pocket per month to keep the rental and hoping that market will turn around soon...I just wish them good luck.
Shawn
anyone familiar with Authentisign service offered by Instanet Solutions? it's RE contract in electronic form that saves some papers i guess. my agent is REMAX. tks!
HB, this is something I have considered and wondered about, but I don't know what the actual numbers are. How many houses were built in the past ten years in Vienna? Not many. How many are 50+ years old? A decent amount, but they aren't falling down (the shithole I live in likely won't be torn down any time soon).
So let's say that ten percent of Vienna's "low-rung" homes are torn down and rebuilt into homes that are worth double. That would have less than a 15% aggregate increase in Vienna home prices by my estimation. That's a possible partial answer, but less so than Vienna being drastically overvalued as a bubble hangover.
Another way to look at it is Rent vs. buy. For example, 101 Kingsley Road, 22180 is available for rent..
Shawn,
That's nothing, I'm paying $1000 less per month than that place.
But you are absolutely correct. If houses in Vienna are worth so much, then why are we able to rent them for half what it would cost to own them?
Fundamentals. Vienna is way overpriced and will fall one way (nominally) or another (over many many years, real-dollar terms).
Your intuition is correct. The denial from those that cling to "this area is special and will not depreciate" folks is based on the same non-existent logic as it was four years ago.
VA_I Says
"I don't know how anyone determines fundamentals without considering affordability "
Affordability is part of the calculus,
but Rent Vs Buy is the other half.
As Shawn points out Rents are just whack compared to mortgages.
In the Entire DC Metro Area, rents yield inadequately to Investment value.
Look, low interest rates make things affordable, but, if the yields suck that means the prices are still wrong.
Kevin,
Vienna may fall or may not. You can use that exact same argument for Arlington where median incomes and median house prices do not match so perfectly either. Parse it by zipcodes, 22207 for example, for an even greater disparity gap. I have yet to see prices falling significantly in that zipcode.
So desirability for an area such as Vienna or Arlington does matter. It attracts people with a higher income who want to live there and pushes median income up in those areas.
Also, the median income is a blunt measure since it includes people who rent (and make a lot less) and people who are retired (less income) and bought their homes long ago.
A more meaningful measure would be median income of those who bought 10 years ago, for example, versus median housing price at the time. This ratio compared to median income of those who bought last year versus median house price last year. Then check if the housing market was balanced (buyer/seller market) 10 years ago compared to last year about the same.
Your argument that you could have bought a median home price 8 years ago but not today although you made less or near median income is faulty, because it denies the desirability for the area and the fact that people with higher incomes may be buying or moving into that area.
So your conclusions are not conclusive. Again prices may fall down but not necessarily because of your comparison of median income versus median home price, which is very rough and therefore faulty.
Kevin,
Personally, I'm not willing to pay 101 Kingsley owner $2500 due to the fact that there will be another owner who has purchased her/his property in/before 2000 and can rent it at reasonable price with better likelihood of entertaining maintenance requests.
I came up with my own rule based upon historical data analysis, that best I can pay for a property - in a 'desirable' area such as Vienna, McLean etc - is twice the amount of tax assessed value in 2000. I know, one may argue that - tax assessed value may not be the best reflector of the 'market value', though I agree to that, I still think it was a not far from market value back in 2000.
Even with the above rule, I was considering I must live in that property for next 10 years to break even (i.e. historical trend of last 40+ years that shows, doubling of property values every ~20 years, and we are only 10 years into that, starting from 2000).
It's just amazing how people forget (and some perhaps intentionally deny) basic fundamentals.
Shawn
Perhaps, another way to look at DC market is....
DC market is up when:
inflow happens due to FED hiring, rest of the country unemployment is high, interest rate is low.
DC market can be down/flat.
outflow happens when FED layoff/or do not hire, rest of the country has low unemployment, and interest rate is likely to be higher.
Nothing can go up forever, otherwise, over time, a small coffee shop can be bigger than world economy.....
shawn,
It usually doesn't make financial sense to buy a rental that costs above median. $300/month neg is not much. After depreciation, losses, and principal paydown it's probably even.
I did this for about 12yrs when $300 was worth more. The payday was worth it. (plus I had great embassy tenants with no down-time or commissions).
I had come across a great deal on another home and couldn't sell my house, so I leased it. Sold in 2005.
It's just amazing how people forget (and some perhaps intentionally deny) basic fundamentals.
Were it not for that, where would the world find its suckers, its daydreamers, its "past results are an indication of the future" people? I hear it most from baby boomers that implore me to believe in the rainbow of gold, that which yields multiples that you put in. I believe their account manager is a man named Ponzi.
For those who like to compare median income with median home price in a more meaningful way, look at the median home price for a larger area (not just a zipcode). For Washington DC area, which includes MD and VA, that is $274,000 according to housing tracker. At the peak of the bubble it was $500,000,(45 percent decline to $274,000). The chart no longer shows this price which happened in 2005. Site is at http://www.housingtracker.net/asking-prices/washington-dc/
Median househld income in DC metro area in 2009 was $$85,198. See http://money.cnn.com/2010/09/28/pf/household_income_report/index.htm
This median household income more than covers the median home price in the Washington metro area. Therefore home prices and income are balanced in the area. This comparison is more meaningful, but still not perfect than looking at only one zipcode.
When you look at only one zipcode such as 22180 you deny incomes from people moving into the area to buy the house from other zipcodes and other states.
Kevin,
Why don't you get a raise or move to a mansion in the exburbs (well, maybe not a mansion)? Quit with the whining. There is alot of money around this area. Get used to it.
You always sound completely miserable and bitter. Did you play the lottery? I haven't seen the personality traits that make people successful. Sorry.
Although, implementation of telework bill is at its infancy, impact on local housing market is likely,
http://undress4success.com/federal-telework-bill-passes/
Some agencies are already allowing workers to telework for sometimes now.
Nova,
I agree it could impact real estate if telework is implemented across tbe board. However, areas with good schools and closer to entertainment, etc. would still remain pricier than those in the xburbs with nothing around them.
People would still want to have a good quality of life and live in the best area possible they can afford.
dc2,
I agree that demand for certain areas is likely to be somewhat strong just like any other major city. However, "commute factor" in selling is likely to diminish over time....
For instance, once I was motivated to go as far as Polesville or Sandy Spring, md where schools are just fine but did not make a move due to 'commute factor'. Now, I can move there without much trouble...even one day telework can impact my decision.
Quit with the whining. There is alot of money around this area. Get used to it.
I gave you empirical data, and you think that is whining? The "money" is almost always reflected by income, even if it's somebody that does nothing more than live on their trust fund (ever hear of capital income?).
Why don't you get a raise or move to a mansion in the exburbs (well, maybe not a mansion)?
Hey, I'm just looking for a modest detached house. I can't help it if there are too many delusional, selfish boomers out there. People who believe their house is worth double what it was worth ten years ago. You can't justify it and won't admit it's a housing bubble (just like you didn't know the housing bubble existed when it was right under your nose), so go ahead and make it a personal attack on me.
You always sound completely miserable and bitter. Did you play the lottery? I haven't seen the personality traits that make people successful. Sorry.
I asked why housing prices would more than double in a decade when incomes remain (by comparison) the same. That's enough to make you lash out at me. So exactly who here is miserable and bitter?
Are you angry at me for pointing out the fallacy of your "median income ought to afford median house" bullshit? I was pretty kind in saying that it didn't take away or give to your argument. If I were less kind, I'd emphasize how stupid it was for you to assume that one should absolutely indicate the other (as you put it, a median income should afford a median home price). That's the sort of rationale one would expect from maybe a teenager, somebody thinking out loud without much world experience. Yet you're the queen of RE investments.
I tried to be diplomatic despite your ignorance and selfish delusions, but I obviously didn't coat it with enough cherries. Note to self: no more empirical evidence, only speak in unicorns and with magic sprinkles/
Kevin,
I agree VA investor owes you an apology. This is not the first time she gets really personal, hits below the belt. Not sure why she does that.
dc2, I am not above being a jerk myself, but I've tried to engage her a few times in the last year on a "serious" level where she does exactly this. Obviously something I've said or something I continue to say really jars her. Maybe it's reality, I don't know.
Kevin,
I stand by my remarks. You come across as bitter and a major downer.
You can't afford what you want in Vienna. Get over it. You exclaim your cheap rental is a @#$# shack. Have you ever said anything positive? If so, I can't recall.
DC2,
I try to maintain my temper, but don't suffer whiner's well. When someone implies that I don't know RE history and, basically, live in a fantasy world I think they should be called out.
Kevin can't afford what he believes he deserves. He refuses to factor-in obvious changes in demographics and interest costs. He starts at yr2000 (arbitrary) vs 1990.
He is a negative personalty. He aggravates me. I'm not always willing to ignore the bs.
I don't think he has the smarts or drive or risk-taking ability to get where he wants to get.
All I hear are complaints that he can't afford Vienna. Sorry, but I am tired of it.
I offered empirical data amidst an economic debate/exchange, and you act like a childish brat. I'm in no way insecure about my finances or the market, nor are my remarks today different from those that one would make at the peak of the bubble. Yet you resort to nastiness and name-calling to avoid valid points.
You have made many remarks over the past months that are somewhere between bragging and utter glee of profiting from nothing. Out of respect for the forum I didn't call you out for being the worst kind of boomer there is: high off of ill-gotten gains, and willing to rub it in everybody's face.
I have never once claimed to deserve anything. Ever. I've lived well below my means and watched selfish idiots swim in pools of money that don't belong to them. I come here and offer comparative circumstances for thought, and you make it entirely personal, without warrant, like a fucking bitch.
I'm sorry I tried to engage with you in an intelligent discussion.
I just re-read this entire thread to see where things went off-track. Yes, I was rude to Kevin and for that I apologize. Reading the entire thread I think you can all decide for yourselves when the snipes and swipes started and where they eminated from.
There is some history here and thinly veiled insults obviously directed at one person are not much different than citing someone's name.
Now, rather than research reo's and price declines in Vienna, I think I'll go count my ill-gotten gains and reflect on my greedy boomer behavior.
"contrarian said...
Oh, my....
CR is now posting propaganda about declining cities.
1/7/11 12:41 AM"
Sadly for you, there is no mention of Washington DC - probably because it is experiencing an influx of affluent individuals, and the first outright population rise in 50 years.
Actually, there is one mention of DC on page 57. With regard to DC they say:
"The results suggest that proximity to stronger neighborhoods, a robust metropolitan housing market and inflows of higher-status home buyers are key predictors of home price growth in disadvantaged neighborhoods."
Translation -- Pat is going to be a millionaire.
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