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Monday, March 28, 2011
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32 comments:
If anyone is looking for a TH near Tysons this may end up being a good deal. The houses is probably worth mid to upper 500s, and the trust that is being sold is from 2004 and was 406K. The person probably had second liens, but as long as they are from a different bank the primary bank may be willing to sell for enough to get their money back. So assuming there isn't much investor interest I wouldn't be surprised if it goes for 15-20% below market.
The deposit requirement seems to suggest a bank bid of 470K, but you never know. In the old days you could call the trustee and they would give you an exact figure for the bank bid. Saved alot of time and trouble.
Still could be a good buy for an owner-occ. An investor (who plans to flip) has to figure transaction costs, holding costs, fix-up and profit.
btw - had a closing a couple weeks ago and the deed contained a transfer (sale) restriction for 60 or 90 days (can't remember). The settlement attorney said it was because of some fraud situation in Baltimore. I meant to ask more about this but forgot. It was an reo. This prevents a back-back settlement which was a sweet deal for an investor. Anyone know what specifically caused this?
Actually, that last transaction was a short (not an reo).
VA-
I agree with you you the bank bid is likely and I figured investors might be able to pay up to 490-500 and still make a small profit, but for an owner 500K would still be a good deal.
I am not sure about the transfer situation, but it could have something to do with agents not showing the bank all of the bids and having the lower priced buyer sell it to a third party immediately for a higher price. I am pretty sure I remember some fraud cases with similar details.
hb,
I'd bet you are right. The attorney did mention "straw" purchaser's now that I think about it. Probably all rigged by the LA and his/her "partners".
On the TH. I'd figure transaction costs in and out of at least 5 or 6% (more if a loan has to be obtained). Hard to guess fix-up without at least seeing the outside (and looking thru some windows). I didn't check FX CTY to see year built, etc. or mls to read description in last sale in 2004 (if this was a sale vs a refi).
If it goes for 470K and can be sold for 580K, there is some room. I don't think I'd want to tie up 500K for less than a "sure" gain of 50K min.
Generally, I allow a 10% ballpark for total transaction and carry costs. This is lower if I pay cash. If it gets up to 490 or 500K, then you are looking at 50K off the top plus reno.
I've had places require as little as 3K reno and others much more. It might make sense at 470K. Some investors will take alot less profit, but I'd want a "sure" 50K to even consider it.
VA-
I agree, this is why I don't think investors are likely to bid it up much. I walked by, but all of the windows had closed blinds so I couldn't see in.
New Paradigm...
"Long after Barry moved from the neighborhood in 1979, the blocks surrounding his old home were dominated by African Americans. As recently as 2000, the population was 84 percent black and 12 percent white, according to census statistics. But by 2010, there had been a dramatic retrenchment: Blacks made up 44 percent of the population, while whites accounted for 47 percent."
http://www.washingtonpost.com/local/marion-barrys-old-block-a-dc-neighborhoods-racial-evolution/2011/03/25/AFNjl2eB_story.html
hb,
I agree that it could be a great deal for an owner-occ. Tysons has a very bright future. Perfect for someone working in the Tysons/Dulles corridor.
Anon,
Saw the article on DC demographics. It has taken awhile but seems to be "steamrolling" now.
"VAI said...Anon,
Saw the article on DC demographics. It has taken awhile but seems to be "steamrolling" now."
Yep. And to think, as little as 2 years ago, we had people telling us that "nothing had changed" to make DC less affordable between the years 2000 and 2010...glug, glug, glug, glug...
Its a shame we didnt have the demographic info back during the "its moving in" days. I wonder if Neil, Leroy, Terminator X, John F., etc would have ever conceded the issue -- or if they would have run away regardless?
anon,
Got popcorn???
Yep. I would move to DC in a heartbeat if I could live without a smartphone.
:)
WaPo says DC Area Crime shows "alarming" rise for 2011
Changing demographics indeed.
You move to DC you don't change DC.
DC changes you...
(to paraphase an old saying...)
TN,
"Murder Capital", crack smoking mayor caught on video...ring any bells?
Property crime seems to me to escalate with a down economy. Maybe I'm wrong about that. It's not murder.
Maybe the well-off people moving downtown should hide their pricey devices.
I have no agenda regarding DC proper, but let's put things in perspective.
"Changing demographics indeed."
News flash, crime occurrs in cities!!! Film at 11.
In all seriousness, it is amazing how much safer DC has gotten in the last handful of years. I assume you havent lived here long.
Even with this "spike" in crime, its still down about 40-50% over what it was a mere 10 years ago. And if I got concerned about every spike, I would have left back in 2001 even though it has fallen another 20% since. Long term, the trend (decreasing for the past 21 years) is your friend.
Personally, I am somewhat glad there is still some crime in the city to keep prices in check. 10 years ago, my VA neighborhood was still an "up and coming" cheap neighborhood, due to the seedy element. Now the seedy element is gone, and I cant afford anything!
Corey,
TN would live in a guilded cage and justify it as being prudent.
My $0.02
I think the rise in property crimes is a direct result of the Medical Marijuana law.
DC legalized medical marijuana which slashes income of dealers, and suddenly street corner kids need a new gig. iPhone swiping seems like the next best thing.
During the Crack Wars in the late 80's, you could leave a $100 bill on the seat of your car and nobody would break the glass for it. Too much work and hassle compared to selling crack.
But that's just my Theory.
I thought the Freakanomics guy said it had to do with abortion.
Corey,
TN would live in a guilded cage and justify it as being prudent.
My $0.02
LOL. Heck yeah! Have you seen the price of gold lately?
My perspective is 12 years, 11 months of holding my fellow citizens hands and hearing over and over again "How...how could this happen? I thought this was a nice neighborhood?"
Criminals prefer victims, not adversaries. DC has lots of fresh victims every year thinking they are going to walk between the raindrops.
Which is why I left the old career.
To each his own. Were people to start following the advice of folks like me a lot of my old co-workers would spend the day parked on a quiet curb writing jaywalking tickets instead of other less desirable activities like trying to find the husband's phone number in the recent call list since we can't ask the person under the sheet what the number is.
Life is cheap in DC. Always has been, always will be for some time.
I will stay on this Virginia side of the Potomac thank you.
Interesting hypothesis, pat, but apparently incorrect.
"TN would live in a guilded cage and justify it as being prudent."
Indeed, we once had a discussion about this and his basic maxim was to "eliminate risk". Thats great and all, but depending upon how far you take that, its not much of a life.
In all cases we are talking about some pretty small risks here. You have basically a 0.02% chance of being killed in DC versus a 0.002% chance of being killed in Fairfax. Is it worth it? For those who are more risk tolerant, the answer is yes.
But not everyone has the same risk tolerance. Nor should they. For example, I went to Spain during all the ETA bombings. Doing so, I was increasing my risk of dying in a terrorist attack from say 1 in 10 million in the US to 1 in 1 million.
For my grandmother, who was so risk intolerant that she was basically a shut in, this was unacceptable. She was terrified of the bombings she saw on TV could never understand why I would go to such a "violent" country when I could "just go to the DE beaches".
As it was, it was the trip of a lifetime, well worth the 10X higher risk of death. Thus, for me if that 1 in a million chance came up, so be it. Such is life.
So again, one needs to understand that ones personal risk tolerance is not right for everyone.
TN thinks its foolish for some here to consider DC, and perhaps he is right. Still, I can guarantee you there is someone out there more risk intoerant than TN who is laughing at him right now, wondering why he would be so foolish as to live near the worlds #1 target for a well placed "dirty bomb". After all, why would he risk the near certainty of radiation poisioning when he would be so much safer back in Texas???
Again, to each their own...
I just looked at housing futures for the first time in 6+ months and was surprised there is almost no differentiation between markets. Almost every market is expected to fall the same ~10% over the next year. I don't really believe the futures, but I did think it was interesting...
TN thinks its foolish for some here to consider DC, and perhaps he is right.
Interesting. I don't recall thinking that.
I do recall thinking:
1. DC is a great place if you are a criminal. High population density, lots of easy victims, low prosecution rates, criminal friendly judicial system, non existent victim support system. IOW, ideal conditions if you're a young thug looking to harvest cash and valuables from 20 and 30 somethings who try to walk between the raindrops.
2. There is a world of difference between real estate investors and people trying to raise their kids or establish a career. Those interests are rarely aligned along any subjects, from crime to investing.
why he would be so foolish as to live near the worlds #1 target for a well placed "dirty bomb". After all, why would he risk the near certainty of radiation poisioning when he would be so much safer back in Texas???
LOL...Yeah, I love herring too.
:-)
The CS numbers just came out and yet again DC stays flat while the rest of the country get crushed. We are up 0.1% (low tier -0.29%, mid tier -0.54%, high tier up 0.17%), while the rest of the country fell 1%. DC was the only positive market the next best was Boston at -0.3%.
I continue to find the disconnect between the tiered index and actual index a little odd, but the point remains that DC is clearly standing out compared to other areas. (For those who don't follow the tiered index the values are low tier= 174.1, mid tier = 180.9, high tier = 181.7, but somehow they combine to an average of 183.7)
hb,
Those are some nice charts.
Since you know about futures, etc., could you tell me how much one would have made by utililizing c/s options to short the market here in 2006? Say you had a 100K to spend.
What did the futures show 1 year ago?
TN said..."DC is a great place if you are a criminal. High population density, lots of easy victims, low prosecution rates, criminal friendly judicial system, non existent victim support system. IOW, ideal conditions if you're a young thug looking to harvest cash and valuables from 20 and 30 somethings who try to walk between the raindrops."
So out of curiosity, what would you say of those 20 and 30 somethings who are walking between the raindrops. Are they "foolish" in your opinion?
TN said..."LOL...Yeah, I love herring too."
Its not herring, its black swan. Just because it hasnt happened yet means it could never happen? Good luck with that. Im sure the 112K people exposed to radiation in Goiania Brazil thought that it couldnt happen to them either.
http://en.wikipedia.org/wiki/Goi%C3%A2nia_accident
My point was, I dont worry about the dirty bomb scenario much. And neither do you. You and I both calculate that risk, and then decide to whistle past that graveyard every day.
Still, those more risk intolerant than us do think about those things, and they laugh at us for foolishly living so close to the
#1 target in the world.
Again, to each their own...
Yeah, to each his own, but I smell the subtle sense of superiority in your posts.
VA-
I don't think the futures existed back in 2006, I am pretty sure they were made in 2008. If they did exist I don't have the data for how much they would have costs so sorry I can't help you. Although if they did exist and were pricing in not much volatility I assume you could have made several hundred percent if you pick the right option and time it expired.
Robert-
I don't have that many old pictures of housing prices, but on 1/20/10 the CS index was ~180 and was expected to fall in the first half of the year to a little below 170 before rebounding back to ~180 by now. So in general it was a little too bearish.
Also I just noticed it appears that CS had a pretty significant adjustment to DC prices compared to last month. Last month it claimed the November/December readings were 185.6/186.2 now it claims they are 183.9/183.6. I wonder what happened to make CS restate the numbers by over 1%
"HB said...I don't have that many old pictures of housing prices, but on 1/20/10 the CS index was ~180 and was expected to fall in the first half of the year to a little below 170 before rebounding back to ~180 by now. So in general it was a little too bearish."
I used to track these. I will see if I can find them and post them (versus what actually happened). My recollection is you are right in that they are too bearish generally.
"HB said...Also I just noticed it appears that CS had a pretty significant adjustment to DC prices compared to last month. Last month it claimed the November/December readings were 185.6/186.2 now it claims they are 183.9/183.6. I wonder what happened to make CS restate the numbers by over 1%"
I saw that too. Last month, I suggested the index (which was unusually up MOM) could be subject to later revision, and it looks like that is what happened.
This looks like it actually isnt that uncomon. CS will post a value, and then later revise it without mentioning it again. IIRC, we had 3-4 months of revisions 2 summers ago.
I have no problem with them revising the numbers to make them more accurate. I just wish they would reference the subsequent revisions so we could keep better track of whats going on.
"Robert said...
Yeah, to each his own, but I smell the subtle sense of superiority in your posts."
Its more smugness than superiority, but close enough. Good nose...
HB says
"I continue to find the disconnect between the tiered index and actual index a little odd,"
Hence my concerns with the market.
it's actually a bifurcated market.
Fairfax,Alex,Arl,Mont, NW DC do well.
PW,LO,FQ,PG haven't done well at all.
if the GOP really starts slashing defense spending, or local spending it may change
http://patrick.net/forum/?p=654677
Chain of Mortgages:
funny but sad.
When we bought our house we pulled about $120k combined, now we are at about $140 - $150, and have two kids.
In March of 2006 we bought our house for $325k. We had some cash in the bank, so we were able to put 10% down. Per the recommendation of my Uncle who is an accountant, we chose a 7 year balloon loan from my credit union. It amortized on a 30-year schedule and had a “guaranteed” refinance into a 23 year loan at the end of the term. This type of loan saved me .5% at the time, and I figured it was low risk as we would likely want to move before seven years. Navy Federal Still offers this type of MortgageClick here, and click other. I do not think this is a government backed loan, and I do think this loan is kept in house.
Fast forward five years:
We now rent this house out to a family who have been mostly reliable tenants for 6 months. We have moved about 80 miles away to York, PA for a job and a little more “wholesome” atmosphere to raise our children in. We are renting our current house. In fact there is a chain that looks like this:
My tenant owns a home in Maryland, they rent it out because they are upside down in equity and cannot sell. These people rent my house, because it is upside down in equity by about 50k and I cannot sell. I rent a house in Pennsylvania from a couple who moved back to Baltimore, and is upside down in equity by at least 75k and cannot sell. This couple (my landlord) rents an apartment in Baltimore.
Who knows if the chain go on longer than that? This my personal perspective on the shadow market, it is real, it is huge and it will take a long damn time to wind down. None of us wanted to be landlords, but we are because our families needed to move on from our boat anchor properties. None of us paid more for a home than we could reasonably afford by most recommendations.
Pat-
That is not what I was talking about, sorry if I wasn't clear. I was discussing the methodology that Shiller is using to calulate low vs. high tiers. Somehow all three tiers are below the composite index, so unless they are messing around with what is in each of the tiers this shouldn't happen.
It does not bother me at all that the low tier is up 74% vs. 81% for the high tier over the past 11 years.
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