Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Please post your local house search updates, MLS finds, on-topic ideas, and links here.
"Contrarian said...BTW, Anon, I have posted this chart several times in the past. It shows how, immediately following the stock market crash of '29-'32, the top tax rate shot up from 25% to 63% overnight (then 79% in 1936; 81% in 1941; & 94% in 1944)."Contrarian, in keeping with your thesis of "home prices will crater when tax rates hit 70%" I am assuming that surely we would have seen a massive price plunge in 1932 when taxes went from 25% to 63% overnight...right?Yet when we look at Shiller's 100 year price graph:http://www.irrationalexuberance.com/We see that home prices did absolutely jackshit when that big tax hit in 1932, and only went sideways, or up from there. Why is that?Could it be that the # of people (and thus corresponding # of homes) hit by the highest marginal tax rate are so infintesimally small as to not do much, if anything, outside of the few people affected?++++++++++++++++++++++++++++++++++"Contrarian said...But, really, Anon, this crap is common sense. If you are so deluded to believe that tax rates will not reach 70% until 2035 then you need to check out of this blog and check into the local mental institution."So, let me get this straight. First, you point me to an article that says "70% tax in 2035", and now you are arguing against your own source by saying 70% tax rates will not hit in 2035, but much much sooner? Hilarious!!!Thats it Contrarian...you tell Contrarian how delusional Contrarian was when he linked an article about 70% tax in 2035... Contrarian, tell Contrarian how he needs to "check out of this blog and into a mental institution" LOL!+++++++++++++++++++++++++++++++ "Contrarian said...As far as place like Arlington being "different," I provide this magazine cover. The magazine is about Arlington and the cover of the premier issue says" "BOOM TOWN." That is the biggest contrary signal to indicate prices in Arlington have topped and on a one-way path headed down from here. It is reminiscent of the "Home Sweet Home" Time cover story in June 2005, signaling the top of the national real estate market."So as the Time "home Sweet Home" cover in 05 was a good contrarian signal of impending national doom, the cover of a magazine about arlington entitled "boom town" is your contrarian sign of impending arlington doom? Hilarious!Did you happen to notice that your mag is called "ARLINGTON MAGAZINE"? What do you expect their headline to read? "Mediocre Town"? Do you expect a magazine designted to cater to people who think Arlington is great will ever say anything other than "Arlington is great"?Wow, your desperation to reach for signs of doom these days is palpable!
"pat said... AnonSo you think I made a mistake, paying $1040/Month on rent when i could in the same area bought:http://franklymls.com/AR7276342With Rt 27 in the front yard?" Did I say that? You will recall on several occasions I noted that (due to their continually worrying outlook) some people should never become owners, and would be better suited for renting. I thought you in particular seemed to fit that bill.That aside, the bigger issue I hit on, which you have thusfar ignored is your apparent recognition that the "rent vs. buy" equasion is indeed "different" in some places like Arlington. When you first came to this blog, you saw how few Arl places penciled out and cited this as proof of a big correction on the way. For years, several of us tried to explain to you, over and over and over again, why that may not be the case. Yet, for years you wouldnt listen, continuing to conclude that the big Arl correction was coming. Any day now...That said, you recently noted:"If my personal situation was different, I'd be hanging out here in Arlington, but the rent/buy calculation is different in arlington."So again, as I noted before, its a painful lesson to learn, but I suspect you are indeed learning it. Like so many bears before you, you came to this blog thinking that the bulls were wrong about this, and eventually you would be vindicated as immunozone prices crashed.Likewise, as I previously lashed out at those who correctly explained why some areas like Arl are "different", I suspect you are now lashing out at me, saying things like: "I'm Surprised Anon didn't jump on this one in 05 when he realized all the doomers were FOS."The cycle continues...
Oh boy: “People come back and say ‘I can’t handle $2,400 because my rent is $1,700.’ You have to do the math and say there’s a tax benefit . . . in the long run it’s better to buy in Arlington **because values aren’t going down**.”That sounds eerily reminiscent to 2005. In the end, prices didn't go down, except when they did. Take that to the bank.http://www.washingtonpost.com/realestate/young-professionals-contemplate-the-rent-vs-buy-debate/2011/10/02/gIQA6eqzjL_print.html
What to make of this? I have read 3 articles in the msm in the past week that "suggest" that now may be a good time to buy. WashPo, WSJ and can't remember.Mike,I may be way off in my thinking, but don't most people expect to pay more when they buy? The WSJ had an interesting article reviewing historical ownership costs in various metro areas and suggested that the "investment aspect" looks compelling in many markets.
Mike,That article provides good stats indicating rising rents, falling inventory and vacancy rates, and competition for desirable locations. It is also tempered by a discussion of the housing market having moved sideways and down since the peak.Except for one comment taken out of context, it hardly seems a return to 2005.My $0.02
per NoVa MLS:Today's inventory drops below 8K.Low inventory and msm making noise about buying....Doesn't suggest an imminent drop in price.I'm not suggesting anyone run out and buy something. Too much goes into such a decision; but this is clearly not 2005.
I agree with VA_I & MyTwoCents on this one. Conditions are pretty different in Arl. from what they were at the bubble peak in 2005-2006. And there is a lot of variation within Arl. Some neighborhoods (e.g., Lyon Village, Ashton Heights) seem to have edged (not bubbled) over the past 5 years back to their highest values (of course, the real values are lower, given inflation since then). Other, less primo neighborhoods bubbled up on a %-age basis more than did the more expensive areas in the years pre-2006. They then fell more dramatically, with more foreclosures, and are edging up but haven't reached their bubble peaks yet. I think that, unless we see significant employment drops, or long term pay freezes, for the types of jobs held by people who live in most of Arl., we will continue to see flat nominal prices or small increases. Inventory has been low a long time in Arl., because people don't see a need to move, not because they can't sell. Nice houses priced appropriately are still selling quickly.
VAI & Ace. Agree with your general comments, and continue to believe the key to any sort of "return to 2005" thesis is once again inventory. Unless and until you see anything like the 2005-2006 spike in inventory, any comparison to the go-go bubble bursing days look more like wishful thinking than anything.http://www.virginiamls.com/charts/FairfaxCounty.htmAlso, looking back at that graph, I cant help but remember the bear theories about the "shadow inventory" of sideline sellers. The bear theory of late 2008, early 2009 was, "inventory isnt truly 'declining' much...as soon as we see any strength in pricing, sidelined sellers will 'stampede' the market, flooding the inventory ranks, causing a 2nd leg down in pricing...." This bear view was helped along with articles like this, hysterically titled "the sellers are coming - be very afraid"http://www.minyanville.com/businessmarkets/articles/nahb-TOLL-buyers-sellers-NAR/5/21/2009/id/22760Of course, our moderate bulls (CRT, CARA, etc) suggested while some people are indeed holding out for better days, its unlikely they will appear en masse so as to cause another leg down in pricing.In fact, when you look at the inventory graph, when the bottom was hit in 2009, inventory did indeed bounce in 2010. However, it was nothing close to the hyperbolic suggestions of "stampede of sellers" "flooding the market" causing the dreaded second "leg down". Once again, the bear worries were a big fat nothingburger as inventory increased very very modestly (2010), and is now continuing to decline once again.
I think several of you have (purposely?) misinterpreted my point. Obviously, the market conditions now are not the same as 2005. BUT, the advice to buy now, even though renting is cheaper because, inter alia, "**values aren’t going down**" (emphasis in my original post) IS eerily similar to 2005. That advice was dead wrong in 2005. That advice now, in 2011, is careless and dangerous given what happened post 2005. All the more alarming is that the advice, given by a loan officer, is presumably in reference to the condo market. The article itself acknowledges the condo market faces serious headwinds. But hey, what’s to worry when “borrowers can put down as little as 1 percent of the sales price.”
Mike, given your additional comments which seem to suggest that you believe the market (at least for condos) IS going down, why do you believe people were misinterpreting your original comment? The point several of us are making is that we believe that, although the words may be similar to those uttered in 2005, and though they were not prophetic in 2005, there are reasons to believe the same words DO constitute a reasonable prediction today, because of the evidence we currently have about conditions. It's a bit like saying "I think the Redskins are sure to win the next game" when they will play the best team in the league, versus when they will play the worst. The words are the same, but the prediction is not equally laughable at both times, even if the speaker has something to gain if you believe him/her.Any prediction may prove to be wrong. And, I agree with you that predicting condo price directions is more difficult than predicting those for SFHs.
ps, Mike, as noted in your quote, the loan officer was speaking specifically about the Arl. market, whereas many of the anecdotes and other info in the article included other areas. Note also that Dean Baker (also quoted in the article), and pretty accurate in predictions at other times, IIRC, predicts a general (not just Arl.) flat real price future. The point is not that you must agree with the "buy now or forever be priced out" 2005 mania, or even with "I don't think Arl's prices will go down (in the near future)" but rather than the context matters.
"that", not "than."
Dean Baker's acting on his belief that the bubble would burst, back in 2004:Baker
Sorry for the multiple posts, but I think I'm seeing more of the problem.Mike, here's what's quoted in the article:"SunTrust Mortgage loan officer Richard J. Donohoe, said at the housing fair, “Some people are missing the opportunity to buy because of the initial payment shock.”“People come back and say ‘I can’t handle $2,400 because my rent is $1,700.’ You have to do the math and say there’s a tax benefit . . . in the long run it’s better to buy in Arlington because values aren’t going down.”"Especially given that we don't know what was said before or after the quote, and we don't know what was cut in the ". . ." I can see how you interpreted this loan officer as saying, "who cares how much more buying costs than renting? You should buy anyway, BECAUSE housing prices are not going down."I did not interpret his saying this. In fact, the second part of his quote doesn't seem to relate to the first, so I suspect some important content was omitted. I took the quote as his saying a buyer has to run all the numbers for the full picture, rather than simply looking at the initial PITI vs. the current rent.
contrarian,Who here is predicting a never-ending bull market for DC? We all saw the correction of the past few years and also that real estate is very local. It seems you have created a strawman. I've always thought we would bump along basically flat for up to a decade. By "basically flat", I'm thinking within a 10% range.I pointed out the articles as something to think about. If attitudes are turning on the desire to buy, that should be a topic here.It's my opinion that we will see a strong spring. Given the fact that it is only the more qualified people buying, the chances of a significant leg down due to foreclosures down the road is much more remote. There will always be foreclosures but not the huge wave we have/are experiencing.Mike,You should target the people who you believe are making reckless statements; not the responses thus far on this board. You are free to voice your opinion, but I see no one here saying "buy now or be priced out forever". In fact, the more reckless statements are voiced by our resident doomer.Many are getting tired of renting and deciding to buy. Clearly it's a better choice now than it would have been in 2004-2006 (for most areas). Whether they could purchase at a lower price in a few years is the whole point of this blog.The point of the articles that I read is both price and monthly payment.
contrarian,We are well up from 3/09 in the areas I follow (and for CS regionally). I recall most here thought bounce around. I don't think we will see 3/09 CS again unless something major happens.The good majority posting in 3/09 thought a second leg, shadow inventory, reo tsunami, etc. They clearly were not right. I can't predict the future, only make reasonable guesses based on what I see (rates, inventory, 20 somethings turning 30 and getting tired of waiting).As discussed over and over, the places that got crushed did so for a reason. Late 2008 was when I re-entered and now I'm basically out. I thought that the madness would end far before 05 or 06 (more like 03).
"most" in the second sentence should be "many".
"“People come back and say ‘I can’t handle $2,400 because my rent is $1,700.’ You have to do the math and say there’s a tax benefit . . . in the long run it’s better to buy in Arlington because values aren’t going down.”"sounds like anon.
"If my personal situation was different, I'd be hanging out here in Arlington, but the rent/buy calculation is different in arlington.""Please don't over-interpret my words.My comment means that Arlington is a lousy place to invest and remains so.The Areas I have been most interested in and i have posted numerous links to have been Capitol Hill, Old City 1 and 2, Brookland and Trinidad as well as Alexandria (Huntington) and Arlington 22204.Solid cash flows, positive investments by the city, and demographic changes in the DC ones.Cruddy yields and investments in Arlington and Alexandria.I'd have been content to rent for significantly less then the cost of buying in Arlington, but in DC, I"m preferring to buy vs Rent in the areas i like.Now in Georgetown or NW, it's better to Rent then Buy. In NE and SE it's better to Buy then rent with the exception of Close in Capitol Hill.Now I note you skip over my principal argument that it was in my economic interest to wait to buy.3/20/2011 $274,900 264/15/2011 $249,900 -9.1% 877/12/2011 $224,900 -10.0% 669/17/2011 $199,900 -11.1% 5Should I have Raced in Earlier?Please explain to me the benefit inRacing?http://franklymls.com/DC7365167Should I have gotten into a bidding war for this charming row house, in a similiar area and similiar size?As for arlington, let us see what the next year holds.i will note i was not in a bidding war for the property i am under contract for.Should I have gotten into a bidding war for some of those properties?
Pat said...My comment means that Arlington is a lousy place to invest and remains so.Understood and agreed. Many people here told you this many many many times, how certain areas have not "penciled out" for a long time. And have described multiple reasons (other than being overvalued and due for a price drop) why that may be. Yet you continued to insist your interpretation was right, until you finally admitted "but the rent/buy calculation is different in arlington".+++++"Pat said...I'd have been content to rent for significantly less then the cost of buying in Arlington, but in DC, I"m preferring to buy vs Rent in the areas i like. Now in Georgetown or NW, it's better to Rent then Buy. In NE and SE it's better to Buy then rent with the exception of Close in Capitol Hill."Again, further proof that you now understand that some places dont "pencil out" and (hopefully) understand that means they are not necessarily due for a price crash.++++++++"Pat said...Now I note you skip over my principal argument that it was in my economic interest to wait to buy."Sorry, I didnt know this was your "principal argument". Remember our most recent interaction started a few threads back where you lashed out at me vis a vis "I'm Surprised Anon didn't jump on this one in 05 when he realized all the doomers were FOS." That said, I will address your "principal argument" below.+++++++++++"Pat said...3/20/2011 $274,900 264/15/2011 $249,900 -9.1% 877/12/2011 $224,900 -10.0% 669/17/2011 $199,900 -11.1% 5Should I have Raced in Earlier?Please explain to me the benefit inRacing?"Skipping for a moment the emotional component attached to the word "Raced", and skipping too that this person obviously overpriced the property -- as we discussed, Case Shiller, NVAR, Zillow, medians, etc unequivocably show that the bottom was roughly 2 years ago -- even in zip 20002, and prices are up 5% to 10% since.Thus, the benefit of "Rushing" in as you call it would have been 2 years/24K less rent paid, and prices 5-10% below Sept 2011. Oh and dont get me wrong, im not saying that you should have gone in instantly the market turned. None of us will ever time the bottom perfectly, and each of us needs time to see that it "holds" before we act. You, I, all of us, have our own personal wall of worry to climb first -- and you just took longer to scale yours than I did mine. Thats fine. Thats your perogative. No one should feel they need to "Rush" into buying. Nevertheless, note that the fact remains you likely would have scaled your wall earlier if you had listened as to the reasons why certain areas may not "pencil out" on the rent vs buy comparison. +++++++++"Pat said...i will note i was not in a bidding war for the property i am under contract for.Should I have gotten into a bidding war for some of those properties?"Personally, I think yes. See, the moment we buy, by definition, we become the "greatest fool" able and willing to pay more than any other person in the market at that particular time. Thus, we need to be comfortable with that fact. For me, personally, I like knowing that my evaluation of the worth of a property is in the ballpark of others, and that I just edged them out (i.e. became the greatest fool) by a very small amount of money -- say 1K or so.However, had I offered on a house like this that had sat for a very long time and had obviously been very overpriced to start, doubt would creep in...why doesnt anyone else other than me think its worth 199K?...If I had not bid, how much further would the price have fallen to attract another bid? 189K?...179K?...what does everyone else in the market see about this house that apparently I do not?...
Anonymous,I do agree with a lot of your comments but let's be honest here about bidding wars, particularly in Arlignton. It is highly improbable that you can enter a bidding war and win by $1K over the listed price. That never happens. In a bidding war you end up paying easily $50K or more over the listed price. This dynamic happens because it is like an Auction, where people increase the price thinking it most be worth more if others also like the house. This is what happened during the bubble. Low inventories were causing bidding wars and many of those homes did not retian that value. To me it is more sane to walk away from that scenario and bid on another house.
"DC2 said...It is highly improbable that you can enter a bidding war and win by $1K over the listed price. That never happens. In a bidding war you end up paying easily $50K or more over the listed price."DC2 - I wasnt concerned about the list price -- only what the 2nd best offer would have been, regardless of whether 50K above or 50K below asking -- or anywhere in between. Remember, at the end of the day, the list price is meaningless in that its the marketplace of buyers, not the sellers that set the market clearing price.Think of it this way, suppose the "market clearing" price for a house is roughly 100K. If the seller lists it for 200K, he has not set the price. Instead, it will attract no bids (other than "lowball" 100K offers), sit forever, and stay that way unless and until the seller is willing to meet the willing and able pool of market buyers near that 100K price point. Once he does, the house will sell, for roughly 100K.Likewise, if the seller lists the house for 10K, he has again not set the price. What he has done is immediately trigger a massive bidding war amongst the pool of market buyers, each of them overbidding one another til only one remains at (again) roughly 100K. So at the end of the day, the list price is meaningless. The real question is what will the market (i.e. the buyers) bear?Thus, with regard to the question of bidding wars, if I knew (thanks to other bids) I outbid the rest of the market by a mere 1K, I would be happy, knowing that my idea of that houses value was largely in line with the rest of the pool of buyers. However, if (per my example) no one else bid, I would always wonder...did I just buy a 100K house for 150K??? Not a comforting thought in the least...
dc2,I outbid someone in North Arlington by $3k. I used an escalation clause. Not sure this qualifies as a bidding war since they never made a counter.Regardless I got my house, for a mere $3k more than the next bidder, at less than the asking price and well below the tax assessment.I personally valued the house higher than what I got it for so I was willing to bid up. I see nothing wrong with this strategy. Especially when the price difference amounted to less than 1% of the value of the home.My $0.02
Anonymous,My point is that the "market price" realized in a bidder war is not the true market price. Psychology plays a lot in these bidding wars to drive the price up excessively and beyond comps for example. During the bubble years, this is what happened, and people were more willing to outbid the other because they thought the house value will double again in 10 years, so the more they paid the more they would make later. I am concerned about paying any significant amount above a listed price I consider fair based on comps. As I said, I much rather pass the opportunity and buy another house or even an ugly duckling which I can fix to my own taste and will then be valued higher. In fact I have never met a house I did not think needed some kind of renovation or change. So even those houses that go into bidding wars often require more $ to make them your own.
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