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Saturday, January 22, 2011
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12 comments:
Renty,
Brought our attention to the WaPo article yesterday about people having difficulty selling their homes.
I think 3 of the 4 can be explained simply by location and a lack of urgency to sell.
Two are in PG County and one is in PW (Haymarket). I believe the seller in Haymarket indicated that her price was pretty much firm.
I'm sure that we are all in agreement that these areas are not particularly in demand. In fact, PG is still in the middle of reo inventory (possibly due to the judicial foreclosure process resulting in delays and a longer period of washing these thru the system) and a recent Court decision could excerbate this issue.
The abundance of land for new construction does not help this situation and in conjuction with the fact that most of these houses were delivered at peak when easy $$ was so prevelant assures more distress sales in the pipeline.
In addition to the Haymarket seller "standing firm" on price, one of the PG sellers seems to have the same mindset. Both stand to benefit from equally lower prices in their new home and may have not made this a factor in their pricing decisions.
As to the family in Kensington; it appears that the proper updates were not made. They are starting fresh with the assistance of an agent who was honest in what needed to be done to make the house appeal to prospective buyers and have even engaged a home-stager in this effort.
In the early 90's houses remained on the market for months, so it is no surprise that we are seeing this again. This go-around is, of course, far worse - particularly for far flung locations and houses perceived to need work.
I don't see their difficulties as anything unexpected or informative of demand in general.
Some here might find this interesting:
House vs. land value changes over time, 46 metro areas (including ours)
Metro area land prices
Va_I and Renty,
From the limited info and photos, it appears as if all of the sellers, esp. Dordal, have priced their homes as if they were totally updated and current. But the houses are simply nicely maintained. I'm not saying a perfectly functional kitchen with cheap cabinets, countertops, appliances, etc., that are 10+ years old should be changed. Instead, the seller has to price the house accordingly, and competitively with the market, if the seller wants to sell.
I've seen this frequently at open houses and am not surprised when the house sells for much less or is taken off the market.
All sellers having trouble selling--and whose agents have been actively working to sell the house--should force themselves to watch shows like Real Estate Intervention on HGTV, then decide if any of the tips could be useful for them. It sounds as if the Kensington family may have done this.
One thing I found slightly amusing was the implication that people would live like slobs if their houses were not on the market. I do understand what they meant - clean enough for every day is not necessarily good enough for showings - but hope their prospective buyers don't read the article and worry about what's under the surface.
Ace,
This is what happens when you deal with an inexperienced agent or one who lacks market knowledge or the guts to tell a seller what has to be done to move the property. Part of this may involve agents that want to "buy" a listing and will tell a seller whatever is required (price and other) necessary to accomplish this. The result is a "stale" listing and continual price drops - to the point where a house sells for less than it would have fetched had it been properly priced from the outset.
On the other hand you have unrealistic sellers. I believe that a "true" top agent would walk away from this type of listing.
Some sellers don't have the $$$ to even paint and these are the one's who will take it on the chin.
On a recent RE Intervention a couple trying to sell a TH in Alexandria were totally unrealistic even when walked thru existing competition.
As a seller, I have been in a position where a lister says that everything is fine, the house will sell quickly. I've known in my mind that I was dealing with idiots. I know what it takes to get a house sold quickly and for top dollar.
It's very easy to get a real estate license.
Look at this one:
http://franklymls.com/FX7517797
Listed today at 153% of Tax Assessment.
VA_I makes an interesting comment.
(One can buy an 1,000 SF house
in ballston, scrape it and replace with a 5,000 SF house to sell for 1.5M and make money).
funny I grew up in a 3/1.5 house with 2 siblings and I think the place was on the order of 1200 SF.
Who the heck buys 5000 SF houses?
it's part of what's going to kill the future growth, a lot of new properties were just monsters. As the monsters prove hard to maintain and operate, they will sell for less and depress $/SF prices.
Ted
Gorgeous but nothing special.
Cookie cutter subdivision,
outside the beltway,
well maintained and staged, but,
seriously,,,,
strikes me as a 450K place, but i don't follow Fairfax much.
Ted & Pat-
My guess is it will sell in the mid 500s
HB Says:
"Although the data is useful and fairly accurate I do have a couple of complaints about it. First on page 16 the data is fairly outdated. It appears that he picked the bottom for CS prices, seeing that CS claimed prices were going up in Q3 of 2009, but the graph claims % equity was falling while total mortgage equity was decreasing. So I assume this would help add a couple of percent of equity. More importantly though is the mortgage debt side. Since Q3 of 2009 the total amount of mortgage debt has fallen ~400B, while the population and number of houses has grown"
I'm not sure what you mean by page 16. if you mean Page 12, i suspect that was the best data they had then. Realize this presentation daes from Feb 2010. So i'm not sure
if 4Q09 was printed when they had to submit slides.
also what they call the $400B reduction in mortgage debt is write downs from foreclosures, that wasn't payoffs, it was just writeoffs.
Look we came through the largest credit side bubble in the history of humanity and every cocksucker in the media is screaming "Green Shoots", wonders, Beautiful day, etc.
Look, we had 4 trillion in equity wipe out when NASDAQ imploded and america hardly noticed, we had $400 Billion in Subprime implode and it almost destroyed wall street.
And, there is $4 trillion in bad paper still out there.
How that unwinds, not even God himself knows.
as for increases in dwellings, i'm guessing it's mostly finish outs of projects with financing, that had to go through. MFDU starts are happening again, which is good, people need cheap apartments.
"Finally although I don't have these these numbers for DC, but I am 99% confident that the numbers look better in Nova than the country as a whole."
I suspect NoVa looks like DC.
which is Slide 110. 50% of buyers in the last 5 years are underwater.
seems about right.
Even though DC wasn't a hotbed of ReFi action, there was enough here.
neg equity
Figure that out, maryland and Virginia are worse then DC.
DC is right in the national average.
is NoVa more like Virginia or more like DC. Place your bets.
Now how does Negative equity get resolved? Inflation? Bankruptcy?
Workout?
Inflation is misery all around.
Bankruptcy is misery on about 10%,
Workout is a long decade in a miserable rain. Funny, we've been there for 4 years already.
Much of the 90's was the miserable
workout of the reagan excesses.
Look Whitney tilson is very smart, so is Gary schilling, they both argue for a nasty headwind in real estate and equities, and, frankly
they are not considering the baby boomers.
The oldest boomers are now starting in on Social Security. They discovered that equities haven't returned much the last decade, and their houses aren't worth as much as they thought. What happens when we have a bunch of 70 year olds fighting to keep their jobs.
My Mom is a good example, she's 73, been fighting to keep her job because she did a crappy job of managing her retirement savings.
Great.. So we have a bunch of boomers now doing the same thing.
eventually the millenials will get into the house buying thing but they are awash in debt. A mountain of debt rides on them.
Will they add from college debt, to massive house debt? or will they opt for another course. These were the people who grew up in sterile suburbs and big houses, will they opt for smaller apartments and condos? Will they opt for a more mobile lifestyle?
pat,
I don't think you can hang your hat on Gary Shilling. I don't know his past or whether he is some sort of perma-bear. For every prediction like his, you can find an equally persuasive article stating that now is the time to buy (WSJ's SmartMoney, Suze Orman, NAR, Warren Buffet, etc.)
As far as a family of five growing up in a 3 bed, 1.5 ba, I would suggest those days are behind us. Do you think we will retreat to that size home? McMansions may have grown out of favor for some but I haven't seen the actual data on this and many factors come into play. Certainly, the loose lending that allowed many to purchase these homes is gone (for now) and others have realized that a 90 minute commute from the hinterlands is not the American Dream they thought they were getting.
I think you also have to consider that we live in the wealthiest area of the Country and a million bucks is affordable to many.
I don't think your characterization of boomer's unable to retire reflects a significant percent.
I do believe that many gen y & X are postponing marriage and kids and that this will affect demand for different types of housing.
Although many studies indicate that the vast majority of boomer's will retire in place, those who downsize fall into different categories. Many will buy second homes, while other's will downsize out of economic necessity. What the ratio is, I don't know.
I am a "boomer" and have a far better outlook than my parents. I expect that many of us do.
Pat-
Yes you are correct that Whitney Tilson was probably using the best data that he had at the time. I was just trying to say that things have improved over the year and will continue to improve. You are also correct that a large percentage of the $400B is from foreclosures (although people are also paying down debt at a quick pace. Particularly revolving debt has been falling at 5-10%/year since 2008). Foreclosures will continue to happen, which will continue to improve the debt to equity ratio. Prices have been fairly firm throughout the last year even with the foreclosures. Sure some of this is from government support and I do expect a modest correction, but with foreclosures being a slow trickle I just don't expect prices to fall dramatically. If it looks like prices are about to start cratering the government would likely start rumors of QE 3 to try and push rates lower.
I think Tilson & Shilling are correct there are strong head winds. This is why I don't expect prices to increase, but I just don't see enough distress in this area to cause prices to really start falling.
As for is Nova more like DC or VA I would respond it is better than either. When I say Nova I am talking about listings that start with FX, FA, & AR. These places have much less stress than the further out suburbs (PWC, Loudoun), VA Beach, or the parts of DC you are looking at. They are probably more like Dupont, Georgtown...
You are probably correct that the millenials are not about to rush out to buy huge houses, but most of the areas I am talking about have few McMansions compared to reasonably sized houses and condos.
Va_I, do you have a link re: Suze Orman's saying it is a good time to buy? I watch her show whenever I can and find her generally to be appropriately conservative about home buying, and that she tailors the advice to the individual's situation.
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