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Tuesday, May 3, 2011
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30 comments:
This house is a trip down memory lane for me:
http://franklymls.com/AX7553566
I remember looking at in in 2006 when it sold for 735K, thinking "boy its gonna suck when this guy has to sell it a few years later for 450-500K". Never could I imagine that it would be under contract 5 years later for 790K...
Sorry, I hit post too early. Anyway, what I meant to also note was its sale history:
http://realestate.alexandriava.gov/detail.php?accountno=50325600
Can you believe that back in 1981, a house like this, in this location sold for 55K! Had this place just merely kept up with inflation, it would only be worth 135K in 2011.
To be fair, im sure its much nicer and obviously been upgraded with modern appliances, etc. Still, if this place "only kept up with inflation" you would expect it to now sell for 200K, tops.
Anon
Cute place.
Any improvements?
How much would it rent for?
I recently sold my home in NoVA as a result of divorce (house was too big for just me).
I am renting a room from a friend while deciding what to do next - rent or buy. I work in both Fairfax and Crystal City. I have been looking in Falls Church, Arlington, Merrifield...
I am undecided..thinking about a condo in the 300-400 range...anything less seems to be located in less attractive areas.
I know we can't predict the future, but if you were me and in this situation - what might you do? I can wait a bit, but don't want to wait too long.
Thanks
The Anon., I understand and agree with your point, and your caveat, but I really think it's an unfair comparison. The description says "expanded master suite" so I am guessing there was an addition after 1981. If you look at the photos, there has been *substantial* investment in visible upgrades. I am sure that, in a house that age and with the visible upgrades requiring infrastructure, they have also put a lot of money into upgrading expensive systems that you can't see as well. My guess is that all in all, well over $300K (maybe $400K) has been sunk into that house, and in the hardscape/landscaping since 1980. In comparison, we have a house that is younger than that one (and sadly neglected when I bought it). We have put well over $200K into it and the yard in a shorter time, but do not have a big new kitchen or baths like that house. You just can't dismiss these improvements the way you could a set of kitchen appliances for $5K.
Terry, I think you are in a great position. If I were you, and if I believed I would be in the same area for at least 8-10 more years, I would figure out my priorities list, and jump in when I found something that matched the top of the list. Since I don't know your priorities, it's hard for me to be more specific.
Pat re: improvements since 2006? Not any that I could tell. The place was pretty much updated in 06 -- and appeared about the same now.
Regarding rent, I would say it would go for 3K a month.
Ace, point taken on the cost of improvements since 1981. I wasnt considering anything major like additions and such. So yeah, clearly you are talking about real money here.
Still, the land itself, even if raw is probably worth 300K. That in and of itself throws the whole "housing matches inflation" meme out the window.
In any event, the other thing which affected its value since 1981 that I forgot to consider was its location. In the early 1990s this area was gangland central. So it was probably pretty down and out in 1981 which certainly affected its value in a very negative way.
Of course, its hard to think of that since its now a very nice fashionable place to live.
The Anon., yes, someone (owner just prior to this one?) definitely rolled the dice on the land/location and I agree that it paid off in this case - though I haven't calculated the real change since 1981. It always amazes me when I hear people talking about Del Ray as if the only problematic part of it ever, was either right on Rt. 1 or in Arlandria. I like Del Ray, I think it's come a long way, but there is still lots of "turning" to go before it's uniformly "nice."
Even with that, being right on Mt. Vernon (as opposed to a block or two away, or more) is a bit undesirable to a lot of people. I didn't check the zoning but I wonder if it's zoned business and residential.
Terry
Generally i dislike condos but there
are certainly some good deals in
Reston, western fairfax.
if you can get a deal on a place close to the silver line, it may not be a bad commute to some cube in fairfax or Crystal City.
If you can get a place in southern alexandria outside the beltway, that's also got potential.
Me personaly i hate condos, the ability to rent them outis a real problem if the buiding is already
heavy with tenants. FHA gets real nasty if you have too many tenants.
but here's my general prediction.
Outer areas outside the beltway have already taken a big wallop and will tend to stagger along for the next 5-10 years. Inner areas still are overpriced, and will decline some 10-20% over the next year or two.
Now i have to caveat that. If Bernanke lowers interest rates to negative or starts drving inflation, it may alter things. Also if macro trends everything from Default to Japan sinking can drive phenomena.
Personally, i wouldn't recommend buying a condo, i just dislike those. See if you can find atownhouse, at least you can control the space better.
Terry -- in case you cannot tell, we get a few colorful characters around here.
Before you listen to anyone here, you might want to go back and check their track records. Specifically, what were they predicting back in early 2009, back when prices were 5-10% CHEAPER than they are now?
In Contrarian's case, most of his old posts have been deleted because he is embarrased at me pointing out how utterly wrong they were. By and large, they were from sites like this one he brings us today -- basically the masturbatory fantasies of doomers attracted to ideas the world will collapse in a matter of years.
In Pat's case, he is probably a little too bearish for his own good. He conveniently ignores things like inventory which is at multiple year lows, and absorbtion rates which are now 2 to 3 times as good as they were at the absolute worst in 2008-2009.
Also, keep in mind that in the past 5 years combined, median prices in Arlington, Alexandria & parts of Fairfax fell a grand total of -10%, and again, this was against the backdrop of the worst signs of distress and largest economic downturn this area has seen in several decades. Thus it seems very curious that prices should fall "10-20% over the next year or two" now that housing fundamentals like inventory and absorbtion rates are looking fairly healthy.
My own view? Largely in line with Ace. If you are ready and are comfortable with the risks, I see no reason to wait. If you are not, there is no rush. Prices are going up, but only at a mild pace -- there is no real risk of being "priced out" anytime soon.
Terry,
You mentioned that you worked in Crystal City and Fairfax. It seems logical to look in the Merrifeld area or Falls Church.
If it were me, I'd probably look for something in the Ballston Corridor or possibly Del Ray.
I'd want to be very close to the Crystal City location and have a reverse commute to FX. I really can't say what the commute from Arl to FX is like as I have no knowlegde of it.
I believe Arl. and Alex. have more upside and a more vibrant lifestyle than Merrifeld or Falls Church. I know Merrifield is half-way and I haven't been over that way in quite some time...but the image in my mind is blah.
fwiw.
VA-
While I agree with you that Arlington and Alexandria are more vibrant I would not live in these locations with a 300-400K budget. In these areas you will likely end up in a very small condo that is not that nice. In falls church or FX you can at least end up with a fairly nice 2 bedroom condo close to the metro. Which would make a commute to Arlington decent (assuming that the office is near a metro).
hb,
I don't follow arl or alex. You can't get a nice 2 bd for 400K? Prices are higher than I thought.
"housebuyer said...
VA-
While I agree with you that Arlington and Alexandria are more vibrant I would not live in these locations with a 300-400K budget"
Its clearly right on the fringe. 450K would do alot to expand his choices. Still, he did say he was willing to consider a condo and his old place was too big, so size may not be an issue for him. If he was comfortable with something in the 800-950 sf range, 400K is possible, and gives you decent choices.
Anon
Consider two people Anon and Tabula Rasa.
Anon Buys at 736K in 2006, 6.5% Interest, add 1.5% for Tax/Insurance,
we will skip Principal because we can assume it's coming back.
Anon pays 10% closing costs of 73K and 4906/Month ITI.
assume the offer is at list, so,
the place sells for 65K more, so that just about offsets closing costs.
Now Tabula Rasa rents, the whole time for $3K/month.
So Anon Pays 4900/month and needs to get the tax deduction to get close to the rents Tab is paying.
Now if Tab is wealthy, and paying lower cap gains, such as 18%, or less, then Tab prefers renting.
If Anon is working as a wage slave, then the deduction is the only thing that doesn't make him a schmuck.
basically if they both are W-2s Anon pays 200/month for the privelige of mowing the lawn and painting the house.
Tab gets his landlord to do that.
if you consider maintenance, costs,
figure maintenance runs 1.5% of cap costs/year, anon pays $400/month towards all that.
I'm Sure Tab feels bad that he didn't get a gain at the end, but,
Anon put a lot in for a pretty small cap gain at the end.....
This is not meant as a slap at you and is merely a investment analysis.
Pat,
Have you ever owned a home? Have you ever seriously looked at the costs to own a home in this area?
It boggles my mind that you would estimate closing costs at 10%. And you still consistently way over price the cost of insurance and taxes. The total for them is about 1% plus or minus 0.1%. No where near the 1.5% you're estimating.
My $0.02
I was under the impression that Terry was looking for a condo. Terry should chime back in.
mytwocents-
How much would you say closing costs are if you counting the buying and selling. I would have thought 10% is pretty close maybe its only 8-9%. (You could also make it lower if you are using discount agents on both sides of the transaction)
VA-
I think Terry does want a condo, I agree with Anon that at 450K you could get a 2 bedroom ~800-900 sq.ft. place. Although if the budget is 300-400K I thought 450K was too expensive. In FX you could get a ~1000 sq.ft. condo on the metro for 300-350K. I guess it just depends how much wiggle room there is in the budget.
mytwocents,
In Fairfax County the property taxes are 1.09%. I'm not sure if the city of Alexandria charges anything additional on top of that, but I bet towns like Vienna do. I don't remember off the top of my head what my homeowner's insurance costs, but I could see taxes & insurance getting up to 1.5% in parts of Fairfax County.
The 10% for closing costs was way high though. Maybe 10% if you are looking at 80k foreclosure townhouses in DC as I believe pat was at some point.
Just looked up Vienna and the town tax rate for 2010 is 24.48¢ per $100 in addition to Fairfax County property tax. So those residents pay 1.33% property tax plus insurance costs.
Jeremy,
The rates in Arlington have bounced around a bit but I believe they are at $0.94 per $100 now. As for home owners insurance, I pay around $440/year on a home the county values at $490k. So less than .1%.
HB,
I would estimate closing costs at around 1.5-2%. When I purchased, I didn't pay any points. Really the only costs were things like the inspection and county recording taxes and the like. I think over the course of my purchase, and subsequent refi I paid less than 2% of the value of my home.
I wouldn't count closing costs upon sale since there aren't any major costs to close out a loan.
My $0.02
"Pat said...basically if they both are W-2s Anon pays 200/month for the privelige of mowing the lawn and painting the house."
Pat as ive said many times in the past, for some people, depending upon their situation, it is best that they rent, perhaps forever.
In my case, I figure I got about 50 more years on this planet. If I looked at a rent vs buy calculator in short (5-7 year) spans, it always made "more" sense to rent.
That said, I really do want to quit paying to live someday. Realistically, most of us (who buy) will pay for 25-30 years, and the sooner we start, the sooner we can finish.
In my case, had I first bought when I wanted to, I would be about 1/3 done by now, with maybe 20-19-18 years to go til I pay pretty much nothing. Instead, my clock is starting now at zero.
Again, had I been looking strictly at rent vs buy calculators, it would say to keep on renting, perhaps til I die. That said, I really, really, really do not want to be writing a rent check at age 65, and beyond.
MyTwoCents, I think Pat is using an estimate based on sellers' (rather than buyers') costs, including 6% sales commission, in addition to fixing up expenses, maybe moving expenses, etc. Whether those are relevant depends on what kind of transaction(s) he's considering. Obviously if you are a renter and you decide to move, you won't have all the sellers' costs that a homeowner would have.
Jeremy * mytwocents-
I think Pat is talking about closing costs on both sides. I think he is assuming something like ~2-3% going in assuming you pay a point. He is then assuming when you sell the house you pay 6% realtor commissions and perhaps some additional small fees. So maybe 10% is high, but I would think 8% is about as low as you can get without using discount agents.
Ace-
Sorry it looks like you beat me to the punch on what Pat was trying to say :)
Terry,
Why dont you take over this condo?
No down payment needed and it is one of the better condo environments in Alexandria -- free shuttle to metro, cameron station
https://sites.google.com/site/cameronstationcondoclub/
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