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Tuesday, April 12, 2011
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15 comments:
Foreclosure hotspot in NoVa
"And when we hear that one of the nation’s hot spots for foreclosures is Prince William County, we nod knowingly, thinking of the vast tracts of huge new homes and the dreamers who drowned in them.
But the other day, I met some of the folks who lost their homes or are fighting with banks to try to keep them. And McMansion isn’t what comes to mind.
“We still have the ’80s carpet in the house; we never refinanced and remodeled. We really saved, and we were careful,” said Susan Reed, who is trying to figure out whether to pay her health insurance premium or the mortgage on her family’s Manassas home this month."
Pat,
Something is fishy with that story. I poked around on the Manassas and PWC assessors websites and found those homes sold for 60k-140k from the late 80's to the early 90's. After 17 years of payments they should have some decent equity and a low payment in general.
Sure, the banks aren't winning any personality points but those aren't particularly moving sob stories either.
My $0.02
$.02 I was a little surprised about that also, but who knows.
Banks do some nasty stuff, these days
you skip a payment and they hit you with a $50K fine.
If the value of the Reeds' home has dropped to approx. $40K, as the article stated was true for homes in the neighborhood in general, they *may* not have any equity in the house after 17 years. That's pretty likely, if they bought in 1994 at $140K, put down $10K on a fixed 30 year mortgage, never paid extra on the principal, and never refinanced to get a lower rate than the minimum of 7.5% prevailing in 1994.
If you use these assumptions, the amortization calculator at bankrate.com, after 17 years, shows that their balance is over $90K.
To follow up on something we discussed recently, here is further proof why pointing toward high vacancy rates as a sign of impending DOOM is pure stupidity:
http://finance.yahoo.com/real-estate/article/112463/american-ghost-towns-21st-century-247wallst
#4 on their breathless list of "Ghost towns of the 21st century" is here in our own backyard -- Worcester County, Maryland with a (gasp) 60% vacancy rate!!! THE HORROR!!! THE HORROR!!!
Of course, if the WSJ had actually stopped to think before they put this piece together -- they might notice that Worcester Co. is the home of Ocean City & other beach towns. As such, the vast majority of the homes there are rented on a weekly basis by people like us who live in the DC area and are looking for some R&R. Thus by definition, even when fully rented, these homes are deemed "vacant" because the occupants live elsewhere.
Further, while 60% vacant sounds bad, before you conclude this is a sign of impending doom, you might want to ask -- what has the vacancy rate been historically?
Turns out, the 60% vacancy rate has been the standard there for a while. In fact, the ACS Census data tells us that the current rate of 58.2% vacant is actually DOWN from the year 2000 vacancy rate of 58.4%!!!
When looking over this article it seems like the majority of these "21st century ghost towns" are all resort areas that likely have had extremely high vacancy rates for years. You would think that a reputable institution like the WSJ would do a little more research before letting their name be attached to a shoddy piece of journalism like this.
The Anonymous,
That's pretty good. The WSJ phones it in again.
MoneyRates.com says VA is one of the best states in which "to make a living."
We're #3
oops - should have been "we're #4"
Ace -- I saw your old "gables galore" place just recently sold -- at 95% of list price no less:
http://franklymls.com/AR7363890
While I agree with your critique of this place, its amazing how well these things sell.
Seems like a fairly easy racket. Buy a shoveover ARL home for 460K, build a new faux craftman & sell it for a cool 1.4 Million bucks in under 2 years time.
Of course it helps that his timing was nearly perfect -- buying right at the bottom and such. After subtracting building & carrying costs, I wonder how much money these guys made on this thing?
"contrarian said...
I posted a response yesterday to Bozo, er, I mean Anon, explaining why the whole economy is still going to collapse, and someone (Harriet?) removed my comment.
4/13/11 4:45 PM"
Sure about that? Youve gotten very efficient with your deletions lately. Perhaps you were able to delete what you wrote before it was even written?
The Anon.,
Agreed. What looks good to your eyes and mine isn't necessarily the same as what appeals to many people.
It also helps if you can buy at that price in Clarendon/Lyon Village, which has probably seen the biggest price increases that have been retained in Arl.
http://www.ritholtz.com/blog/2011/04/case-shiller-100-year-chart-2011-update/
I think the US national market has some room left to fall.
Now where it all ends, who knows?
Reversion to Mean is a bitch though.
Pat,
Falling to an inflation adjusted long term average doesn't mean nominal prices will fall. Remember, prices are sticky.
I also don't think we can completely rule out that there isn't a fundamental change to that baseline equivalent to the post WWII boom. (It's different this time!)
Back in 2002-2003, I was willing to grant that the advent of Internet based banking, making more loan products available to more people, allowing the widespread use of 80/15/5 style products, wouldn't bump up home prices by about the 20% down payment. My thinking was that there really was a fundamental change in the way the masses could bank, and that may lend itself to increased prices given the majority's risk tolerance.
At the time, I was trying to see if I could justify the price run-up to myself to make myself comfortable enough to buy. By the time mid 2004 rolled around I said, "if this continues for 18 more months, I'll consider it an official game changer." Fortunately for me, things started imploding in July of 2005. So I was right! (let me just pat myself on the back there...)
Anyhow, having seen the fallout and abuse of those loan products, I think my attempt at justifying price increases was mostly wrong. However, the Internet, and easy online access to tax, prior sales, comparables, etc, is truly a "it's different this time" impact on the housing market and I think that could result in a deviation from the longterm mean - much like post WWII.
Time will tell.
My $0.02
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