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Friday, April 29, 2011
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30 comments:
For those that recall, this is Keynes vs Hayek again, Round 2.
Video
My $0.02
nice video :)
contrarian,
Data center expansion is fast a furious in Northern Virginia. Defense cuts are where you should focus your energy if you want to make the bear case for NOVA real estate.
What is going on with these new builds?
1. 25th St
Asking: $1.295 (forever)
Sold: $1.15 (gross) - ($470K subsidy) = $680000 net.
A lot of the construction has been completed. It looks to me like another one of those situations where the seller was too dumb to offer the house for what it was -- such as $750 K but you have to finish it -- but instead stuck to the delusional price. I suspect they would have gotten a much better price if they changed the listing. But if that's right, why the high sold price with a huge subsidy?
2. Walnut
I visited this house before it was foreclosed on for $725K (listed at close to $1.15 IIRC). It was very cool, and big, with expensive green features, but poorly designed, immutably without huge expense. The foreclosure didn't surprise me (though the price did -- how is this possible? Why not list the house at $900K or something like that and let the price compensate for the bad design choices?), but why does the current owner think s/he is going to get $470K over asking, when the prior owner did not, and the house now has another year of aging?
Ace,
How is Walnut poorly designed?
As for price, perhaps there were other liens that made a lower price impossible.
AAAGH! Blogger has once again been "unable to complete my request" and destroyed my post after I typed a fairly long reply to VA_I. I wish they would fix this glitch. I have cookies enabled, etc., so I know it's not my problem.
So here goes again: VA-I, here are a few examples - see the realtor's comment about the garage--no back yard and no way to get a car into the garage; and all the green systems are in it and you'd have to pay to move them--they should have been put in the large basement in the first place. Shared driveway. Long hallway upstairs could have been redesigned to put more space in the MBR, which is small. Mbath is like a dark cave. MBR closet is tiny. Kitchen is way too small and they skimped on the # of cabinets. Cabinets are expensive but a lot of people don't like Euro-style. No fireplace (probably due to green requirements, but a lot of people really want one). No place to put a flat screen on a wall in the family room. Etc., etc.
A lot of functionally bad decisions in an otherwise nice (IMHO) house. If buyers want that style, and don't care about a garden, buyers probably can find a condo close-in for a better price and get a garage they can actually use and a lot of amenities.
I notice that the current Realtor is the Virginia Smith agency. A lot of their listings in the past have been pretty significantly overpriced and either don't sell or drop quite a bit.
I suspect this may be a case (both when it was first listed and again now) of something you've pointed out before - that they'd do better to figure out a good market price from the start and by overpricing end up getting less than they would have gotten.
VA_I, but if there were liens, how did this allow the sale of either of the house at the low sales/foreclosure prices? Were the liens discharged during foreclosure with nothing to the lienholder, but the seller was prevented from setting an asking price below what would cover all loans? How does this work?
just to clarify re: my criticisms of the garage - I should have said that, IF you decided to tear down the brand new garage, since you couldn't get a car back to it and to give yourself some yard, you would have to move all the green systems.
Ace,
Very strange about the garage. I did notice no fp's and thought this odd in such an expensive house. The other things seem workable/fixable (ex. skylight in master bath?)
As far as the lien situation; yes, junior liens are wiped-out by a foreclosure but would have to be satisfied in a sale. These liens can run the gammet (sp?) from 2nd and 3rd trusts to judgments from other creditors unrelated to the house, to IRS, etc. IRS has a right of redemption, but I doubt they would want this place.
Do you think 725K was a deal. I do.
VA_I,
I have to disagree that the other things are possible/easy to change. If you look at the photos, I think you'll see what I mean. For example, a skylight is not going to offset the massive amount of expensive dark slate in the bathroom. As another example, you could squeeze in a couple more kitchen cabinets where there is now just a wooden panel placeholder, but it won't be enough--and if you add more on the opposite wall, you have just lost an open dining room and gained an eat-in kitchen, which is not necessarily good for resale. As another -- tou can't wall in the windows in the FR without having to redo siding outside (expensive), and you can't add an interior wall without cutting off the FR from the rest of the house, again, the opposite of what buyers typically want. Etc., Etc.
I think $725 was a steal for this house. They would have gotten a massive bidding war going if they had put it on the market for that. It's in a primo part of Alexandria and it's big for that area, and a gorgeous place if you like modern. $900 (maybe more) would have been a good price to offset its shortcomings, but I am sure that is less than what the owner had invested in it, given the quality and the expensive green systems. It's one thing to buy an old fixer and replace cheap or worn out stuff; it's another thing to buy top of the line or high quality materials, which this house has, and have to rip them out, and many materials probably couldn't be recycled or resold as they would be ruined during demo. Most "green" buyers would probably rather die than do this--as would anyone who paid what the current features actually cost.
What makes this all tragic to me is that it could have been avoided with an architect who was more experienced with (or cared more about) what buyers actually want.
ps thanks for the info on the liens. I'll bet that you're right about why both of the houses went as they did.
I just can't stop myself -- another problem you can't correct is the shared driveway. If you have a great neighbor who is always considerate, this is no biggie. But all it would take is a tenant next door who insisted on parking in the driveway frequently, or his/her guests, to make your life miserable.
Ace says
"I believe fed. Income tax should take into account geographical differences in the cost of living, in setting tax rates on the same income level."
in high cost areas, people tend to make more money.
It's why houses are cheap in Kansas.
Pat, that may be true generally (though not for me personally), but what's your point?
DC area people are paying the same fed. tax rate on $100K as people in KS making the same amount (all other factors being equal), but in KS, that $100K buys a much higher quality of living. The progressive nature of the tax code is such that people who make a higher income should pay a higher percentage in tax. If you make $200K, you pay a much higher % of that $200K in income tax (all other factors being equal) as your peers in Kansas making half that, even though you likely can't afford a house like theirs even on your much higher salary, and their doctor bills, food, entertainment, child care costs (etc.) may be 20% less.
At equal salaries of $100K, you are far from equally well off as your KS peer (not even close), yet you pay equal fed. income taxes (ceteris paribus).
Ace-
I founds this chart from Krugman interesting tax vs. income . Krugman is clearly very liberal and has an agenda, so it is feasible he pushed the envelope when coming up with these numbers. Assuming though his numbers are even remotely close I find it interesting that when you count all taxes the tax system is almost exactly even between regressive/progressive. His point is that also though the rich pay all the income tax, they only pay a small percentage of sales tax, property taxes, cigarette/alcohol taxes...
Also I don't know if you saw my last post in the previous bucket, but it said that my job also is not subsidized by the government, but I still get a lot of benefits like a subsidized metro when I go into the city, free museums, lots of attractions (cherry blossoms, zoo, monuments...) The city is also one of the cleanest major cities I have been too...
Hb, yes, I like Krugman, and I think he's got a good point. However it doesn't address the geographic inequities within the fed. Income tax system, because essentially middle class incomes in one area are treated as are upper middle incomes. My point is that within that system, that outcome is incongruent with the philosophy--and it is mathematically, though not politically easy to correct. Based on your prior comments, I suspect you may agree but were making a different point.
Thanks for the additional info about what for you offsets some inequity.
Here's an article (also available in .pdf form, but I don't know how to link that) from a U of Chicago researcher. I'll caveat this as HB did that economists and b-school people at this institution typically have an agenda too - they lean right.
The article argues that one reason that population is shifting to the southern areas is this geographic inequity, because “the nation is not only redistributing income from the prosperous to the poor (HB: my wording would be 'the nation expects those with more income beyond what is necessary to cover the basic necessities to pay more in income tax than do those less able to cover those necessities'), but from the middle-income residents of high-cost states to the middle-income residents of low-cost states.” In my view, the former of these has always been an accepted goal of the fed. inc. tax system (and arguments occur over the matter of degree rather than the goal itself), but the latter is an unintended, inequitable, and undesirable consequence on an individual level.
And, I would add - on a societal level, the subsidization of "red" states by "blue" (which typically are higher cost of living) is one ironic consequence. That's one reason why a political correction is unlikely.
U of Chicago article
Hurry, hurry! Price cut!
I think MM and others have rightfully made fun of this delusional seller/landlord previously. The house has an assessed value of $580K, the photos and description suggest little reason to believe it's worth any more than that, it's been for sale forever at $925K, and now the sellers have made -- a $1K price drop. Hey guys, here's a hint: the problem is NOT that your buyers just haven't found your unique property yet because they were searching the wrong price category online.
Taft
It's the oil heat and lack of air conditioning that pushes the price up...
Heehee, gruntled!
Here's a haircut in one of the hottest parts of Arlington (though we don't know the final selling price yet--but we know it was purchased in 07 for $1.375 m. and the current asking was dropped from $1.33 m. to $1.29 m.):
Daniel
Ace,
The Taft owners clearly have no urgency to sell. It looks like it might have been inherited?
Lack of motivation is what causes the frustration on the part of many buyers. There is little inventory - we are tracking below 2010.
Buyers say values have dropped and sellers should accept this fact and sell their homes. Fact is, many owners don't care that prices have dropped and are perfectly happy to live their lives.
Why would a price drop motivate anyone to sell?
The driver has to be distress and I don't see the reo's necessary to affect pricing/sales going forward. Where the heck is this big "shadow"?
As you pointed out a few days ago, there are a few deals at the Courthouse - but those are hard to find.
It might be worth contacting some "wholesaler's" to see what they have.
Cheryl says
"Buyers say values have dropped and sellers should accept this fact and sell their homes. Fact is, many owners don't care that prices have dropped and are perfectly happy to live their lives."
That's true, but at the same time, people put homes on the market for reasons.
it's too big, It's too small,
it's in the wrong place, they can't afford it.
Now if your job bracced down to Belvoir or Meade, sure, you can commute it, but it gets ugly.
if you are in the last 2 years of your career, is that something you want to do?
now if you have a starter house or condo and kids on the way, perhaps taking the loss is a wash if you
want to buy another larger place.
and perhaps it's just too damned big, and you want to tough it out,
but it's may now.
The bulk of the selling season ends in 6 weeks.
Do you want to wait another year?
Pat,
You miss my point. Sure there are people who really want to/need to sell, but they are few and far between around here.
The "shadow" argument has shown to be illusory. You can't "make" someone sell.
I agree with your trade-up theory - sell low, buy low. But I'm not seeing much of that. Prices are holding well. When do you expect the shadow inventory to crater the market? 2008 and 2009 have come and gone and I am not seeing significant shadow.
Va_I,
If the seller doesn't care whether s/he sells, why not just remove the property from the market? It's ridiculous to sit on property that is at least $300K overpriced, but if someone wants to do that, we should feel free to make fun of him or her.
And, I don't see any reason why a competent Realtor would waste time with grossly overpriced properties like this, unless s/he's hoping to pick up some clients for other properties at an open house.
ps, VAI - I am not the one who is looking at courthouse properties - maybe Pat?
Sorry,
Someone brought up the "green" house in Rosemont - thought it was you.
Feel free to make fun of over-priced homes. I don't care. I was only suggesting reasons for the ability to go on a fishing expedition.
Yes, I was the one who brought up the Rosemont house -- sorry, I didn't connect it with your courthouse comment. (The house was never listed on Frankly as a foreclosure, to my knowledge - the buyer/current owner is a Realtor.) Yes, it was a super deal at $725K, IMHO.
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