The Talk Is ‘How Low Did It Go’ In Washington
Some housing reports from the Washington Post. “On Onion Patch Drive in Burke, neighbors are keeping an eye on each other. It’s not just because they’re neighborly. It’s also because, at a time when more and more for-sale signs are appearing on lawns around the region, what one family does to sell its house can have a big impact on the finances of the rest.”
“Seema Owais and her husband put their detached Colonial on the market several months ago for $619,000, about $100,000 less than others in the neighborhood got when they sold their houses last year. And now she worries that some of her neighbors are depressing real estate values even more.”
“‘They get scared and start reducing and reducing,’ she said. ‘For us, it’s disheartening, but you can’t do anything about it.’”
“Stephen Myers is planning his retirement and wants to sell. He and his wife have owned their house for almost two decades. He dropped the asking price for his house from $717,900 to $649,000 after the house across the street sold in June for $602,000. That owner was transferred, needed to leave town and accepted a low-ball offer.”
“‘I didn’t like it,’ Myers said, but he understood. ‘If I were in his shoes, I’d have done it, too. Did the people up the street like it? No. But we understood it.’”
“A couple of years ago, soaring real estate values kept the chatter at cocktail parties champagne-bubble bright. Now, when neighbors gather together, the talk is still real estate, but the tone can be somber. Instead of how high did it fly, they ask how low did it go. That’s because the competition to sell a house now can be cutthroat: In August, there were 40,870 houses on the market in the Washington area, up from 18,368 in August 2005.”
“And many have noticed that the house with the lowest price often moves first.”
“‘When there are for-sale signs all around you, you sort of watch and wonder, ‘What price is it?,’ ‘Did they finish their basement?’ and then, ‘Oh, they dropped their price again,’ Jenny Kelly said. On a recent warm afternoon, Kelly told the others she had heard that the house down the street sold in the mid-$600,000s, a far cry from the mid-$700,000s of the past.”
“‘That’s not good,’ Nicola Bullis said, shaking her head. ‘I heard they had an odd decor,’ Alyssa Hoard-Stewart said, adding that the owner of another nearby house for sale is adding a deck to attract potential buyers.”
“A similar conversation takes place frequently amid the big single-family houses on Tate Court in Oakton. Raghu Reddy combs Internet listings and online property transactions to keep abreast of prices. He thinks prices have fallen 10 to 15 percent in the past year, a decline of at least $100,000 on houses that cost $1 million.”
“Mack Dennis has plenty of negotiating room because he bought the unit during the last slump. Now the deciding factor can be the level of desperation, or the relative financial ease, of the seller. People who need to sell fast are the quickest to drop their prices. And people who bought long before the soaring prices of the past five years have a financial advantage.”
“Just a few doors away, John Palm has put his townhouse up for sale. He and his wife have moved to Leesburg, so he is eager to get out from under one of the mortgages. He bought when prices were low, in 1992, so he has been able to lower the price’.”
“‘The bottom line is, they’re in a different situation than us,’ Mark Bolt said. ‘If we keep dropping our prices, we can’t afford the place we want in Leesburg.’”
“How long will it take to sell your house these days? Longer than you might think, say real estate agents and some frustrated sellers. ‘I don’t know how long it should take now, but we’re still here,’ Charlene Hout said. She put her Georgetown townhouse on the market in March for $1.95 million as a ‘for sale by owner’ listing. In July, she hired veteran Georgetown agent Nancy Taylor Bubes. They recently dropped the asking price to $1.79 million.”
“With two to three times the inventory to choose from around the Washington area this year compared with a year ago, buyers are just not willing to jump anymore, agents said. They have to be convinced that they’re not paying above market, and they also are ‘demanding more’ in the terms of the contract, said Holly Worthington, president of the Greater Capital Area Association of Realtors.”
“Terry Belt, a Vienna agent, said, ‘People look at what their neighbor’s house did last year, and want that price or more. But in this market you can’t compare to last year. You can’t even do comparable sales from three to six months ago.’”
“A ‘good strategy,’ he said, is to look at similar homes that are on the market now and ‘to price your house at or about 3 percent below them.’”
The Post looks back at an earlier time:
‘When prices were relatively stable, eight to 10 years ago, then it often made sense to sell if you were going away on a two-to four-year assignment,’ said Bob Healey, a property manager with Weichert Realtors. ‘People sold because prices were about the same when they returned.’
Were crystal balls widely used 10 yrs. ago? I wasn’t aware of that.
Sorry Bob, No it didn’t you liar. In fact, eight or 10 years ago people NEVER did that. I remember. In fact, back when there was still a bubble debate I used to bring this up in conversations — everyone now thinks a house is a liquid asset. Going to grad school for TWO years? Sell your house, buy another, then move back and buy again. That wouldn’t have happened 8-10 years ago — only in the magic bubbleland .
“And many have noticed that the house with the lowest price often moves first.”
Quick! Write a paper in the Journal of Finance with this terrific insight!
it’s definitely something new, because until lately the house with the highest price was sure to attract the most buyers (well, speculators).
If prices always go up and there is zero risk for the buyer, why not take the most expensive home you can get from the bank? People still think this way in most of Europe …
“People still think this way in most of Europe … ”
but will they continue to think this way in 2008 after watching the u.s. housing market tank? i would bet quite a bit of that constantly expanding euro-equity has been reinvested across the pond, in manhattan coops and florida condos….
completely upside down logic (’buy the most expensive rather than the cheapest house’) can only be sustained through mass hypnosis. eventually someone wakes up, and decides to actually seek a good deal and a cheaper price. and then the whole house of cards will collapse even more quickly then we are seeing stateside. i don’t see how ANY bubble, trees-to-the-sky, prices-only-go-up party can be maintained forever, not even with the iron fist of the ecb telling the public that prices simply can’t come down. it’s just a question of when the party ends. no ‘ifs’ about it. maybe i’m just naive!
p.s. your post was hilarious, nhz, and your europerspective is certainly an invaluable enrichment to this blog. thanks!
but will they continue to think this way in 2008 after watching the u.s. housing market tank?
America watched Japan tank, yet I still meet people who think they’re Donald Trump because some bank gave them an i/o loan for 600K on a condo conversion…
And we wonder who buys crappy US MBS bonds…
good point! if your friend in the mbs biz is right that most of the riskiest tranches are bought by asians and europeans, it could be a doubly rude awakening or our euro/asian friends. their u.s. houses falling! u.s. paper falling!
maybe this really was greenspan’s brilliant master plan to reduce our huge national and consumer debt by spreading it around the globe. it might just work!
‘for’ our euro….
write this one down, too!
“The market is doing what it wants, and we are just trying to keep up,”
So many of these stories are written by people who don’t have any grasp of economics. “Mack Dennis has plenty of negotiating room because he bought the unit during the last slump. Now the deciding factor can be the level of desperation, or the relative financial ease, of the seller. People who need to sell fast are the quickest to drop their prices. And people who bought long before the soaring prices of the past five years have a financial advantage.
Anyone can have the “advantage” of an old owner. Just lower your price! There’s nothing magical or privileged about it! And if you don’t lower your price, the house won’t sell.
…And now she worries that some of her neighbors are depressing real estate values even more…They get scared and start reducing and reducing,’ she said. ‘For us, it’s disheartening, but you can’t do anything about it.’”
For goodness sakes, stop making this so personal! The market prices has plummeted because of the behavior of thousands of sellers and thousands of buyers. It’s not your neighbor’s fault. They don’t set the price.
I know of family that bought house in Potomac for 1.25 million back in 1987. They ended up selling their property due to financial difficulties. After cutting price many times final sold price was 785k. Expect similar price cut if market worsen. Big difference back then was that interest rate was something like 13%.
- John Palm has put his townhouse up for sale.
- He and his wife HAVE MOVED to Leesburg,
- so he is eager to get out from under ONE of the MORTGAGES.
- Mark Bolt said “‘The bottom line is, they’re in a different situation than us,’
- ‘If we keep dropping our prices, we can’t AFFORD THE PLACE WE WANT in Leesburg.’”
It sounds like John and Mark are greedy bastards.
Sounds like they’re all greedy bastards. I wouldn’t like to go to that block party.
—-
““Stephen Myers is planning his retirement and wants to sell. He and his wife have owned their house for almost two decades. He dropped the asking price for his house from $717,900 to $649,000 after the house across the street sold in June for $602,000. That owner was transferred, needed to leave town and accepted a low-ball offer.”
When did the “wise” get so greedy. I hope they loose another 200K.
in my town there are several examples of people who purchased their home for less than 100.000 euro long ago (1985/1990), did some improvements over the years (maybe 50K euro) and are now asking more than 1 million. These homes have been on the market for more than 5 years and they never lowered their asking price (but they did switch realtors a dozen times).
So yes, people can be extremely greedy (maybe they cannot afford to be less greedy because the equity has already been spent - but that’s just a guess).
i’m not convinced that a 6.66 x gain (150K to 1M) over 20-25 years is a ‘greedy’ return. calculators out?
Over 20 years it’s 10% per annum; over 25 it’s 7.9%.
Not outrageous (given the high inflation in the early half of that period).
Oops. Just saw that your numbers were a red herring, Manhattanite. He mentions 1985/1990 which is 15-20 years not 20-25 years as you wrote.
Over 15 years, that’s 13.5% per annum. Which is on the high side since inflation post-1990 hasn’t been anywhere near that.
1985-2006 is 21 years.
If salaries don’t go up by the same amount, then that kind of return is unrealistic & unsustainable. Even more so when the savings rate is so low and people are up to their eyeballs in debt.
This home as bank account, college fund, 401k and rainy day fund is going to take a brutal toll on the economy.
All they need to do is sell their house at current market values, then rent for a year while prices drop further. Then they will probably be able to afford it. While prices were going up it made financial sense to buy before you sold but now they have the opposite situation.
“People who need to sell fast are the quickest to drop their prices. And people who bought long before the soaring prices of the past five years have a financial advantage.” “‘The bottom line is, they’re in a different situation than us,’ Mark Bolt said. ‘If we keep dropping our prices, we can’t afford the place we want in Leesburg.’”
Am I getting this right? So these folks figure that since they aren’t desperate to drop their price that they won’t be affected by the ones that are? Hey, new home sales set the comps, period. It doesn’t matter if your desperate or not, your home just dropped in value. You can kiss Leesburg goodbye.
People must be thinking that the drop in values is temporary and if they just hold out, they will get what they think the house is worth.
The real issue, in my opinion, is who will be buying the house. If there are people out there that cannot or choose not to afford the mortgage necessary to buy the home at the current asking price, it will go down.
“If we keep dropping our prices, we can’t afford the place we want in Leesburg.”
Blessing in disguise!
He’s probably doubling his commute time. But from the rest of the article snippet, it sounds like he might have already bought that house in Leesburg — and now won’t be able to afford it if he carries these other mortgages.
Friend of mine is halfway in the same predicament. He and his girl just bought the cookie-cutter-house of his dreams. Fortunately for him, he was broke enough that he HAD to sell his overpriced townhouse just to afford a down payment, so contingencies went in, and he managed to ditch the townhouse the day before closing on the (more-than-twice-the-price) SFH.
That was the fortunate bit. The unfortunate bit is that now she’s trying to unload her… yes… her N. Virginia condo. Oh no! No buyers, no lookers even last I heard. I think he said they won’t have a mortgage payment ont he new place till Nov 1st, so that’s buying them some time. He’s still so excited and enlivened by having his near-full-price offer accepted for his dream house (and he is ranting about “building equity” already, no less!) that I just couldn’t bring myself to tell him that he might ought to get used to making two mortgage payments for a while.
When are people going to learn that in a market like this you can’t be buying another house until your house sells . A seller doesn’t know how low they will have to go and they might not get enough money to afford the new overpriced house they bought at a higher value .
Some sellers are going crazy over the incentives they are offering on new houses and they grab them up thinking no problem in selling their current home and than it just sits .
If you simply must buy another house before your home sells , at least make it subject to your other house selling within a certain amount of time . You just don’t know in a declining market what your house will end up going out for so how can one determine how much you got for the new one until you know the figures .It also stands to reason that if one has to compromise on their home price the house you are going to buy will have to go down also in price . Better yet , sell and don’t repurchase for 5 years .
“If you simply must buy another house before your home sells , at least make it subject to your other house selling within a certain amount of time .”
Housing Wizard, that’s exactly why so many of the few contracts being written are being cancelled…the ones smart enough to put in a contingency can get out. Lots of “back on market”.
Realtors…if they put that contingency in the contract they are doing what they’re supposed to and protecting the buyer…but, unfortunately, many don’t, and then panic/push their buyers into doing the stupidest stuff. Jackasses.
Right Catherine . I just don’t like it when a realtor puts a person into a “urgency position” by not protecting their ass . To me it was absurb that many new home tracts took contracts that set up loss of deposit if the sellers couldn’t sell their old house .If you have to give up good business practice ,than something is wrong .
The realtors do it intentionally. They want the transactions to take place no matter what. If the seller/buyer can’t get the price they thought they would, they may just take it off the market. Hence, no transactions, no comissions.
It gets ugly in a hurry. They ride 2 homes down in value rahter than 1. Usually, the purchase transaction requires a bridge loan - costly in terms of fees and interest, and, when the original property sits… causes panic and substantial price reductions to get out from under all the debt service. A casual decision like this can cost in the hundred thousand range easily… if it doesn’t cause bitterness, divorce & bankruptcy first…
“….He dropped the asking price for his house from $717,900 to $649,000 after the house across the street sold in June for $602,000. That owner was transferred, needed to leave town and accepted a low-ball offer.” “‘I didn’t like it,’ Myers said, but he understood. ‘If I were in his shoes, I’d have done it, too. Did the people up the street like it? No. But we understood it.’”
If you’re still asking over 602K Mr. Myers, I have serious doubts you or your neighbors have “understood it”.
Ok, who on this blog made that lowball offer?
We on this blog would perhaps bid $220,000 if they baked us some brownies.
Naaa, $300k with good cupcakes.
Cupcakes are the new “Granite Countertops”!
Really, that struck me as bizarre too. The guy is claims he understands what’s occurring in the marketplace around him but refuses to participate.
Here’s what Mr Myers needs to come to terms with - There are a lot more sellers chasing a rapidly shrinking pool of buyers, many of whom will need to sell their homes first to close. He will definitely chase the market down unless he prices substantially BELOW the last sale. What might differentiate his home from the SEA of others is a LOWER PRICE, not the color of the carpeting in the living room — PERIOD. How hard is that to grasp?
The Post, as usual, talks about “last year’s 715K.” For God’s sake, Burke, VA, is an old-fashioned, middle class suburb. It is not McMansionville. 12-1500 sq.ft. detached SFH’s on modest plots, some with garages, some without. These things cost mid-200’s five years ago.
Anyone who bought more than three years ago and is whining about the current market is a candidate for TXChick’s 20-pound trout, if you ask me.
Exactly right…whoever paid the $602K “lowball” is a moron who got skinned.
DC Bubble where are you? Thats two days in a row of Dc/Va home prices tanking - Please comment.
*two days in a row of articles on homes prices tanking
Consider, for example, two townhouses for sale on Paddock Wood Court in Oakton. Mark Bolt, a middle school teacher, and his wife, Karen, a homemaker, have their place for sale for $449,900. They would like to move to a larger home in Loudoun County, where they would have a bigger yard for Jessica, 4, and Addison, 16 months, to roam. But they can’t do it if they can’t get enough for their house.
How can a middle school teacher afford to live in a $450K house and have the wife stay at home? Most couples I know in the DC/NOVA region both work and with their combined salaries they still are just getting by.
That is not hard. They might have bought the house when it was selling for less than $200 K only a few years ago, and middle school teachers with some years of experience can easily afford a $200K home.
They named a child “Addison”. They deserve bankruptcy, just for that.
“He dropped the asking price for his house from $717,900 to $649,000 after the house across the street sold in June for $602,000.”
This is an excellent illustration that in a thinly traded market only a small number of transactions (sometimes only one) are required to radically alter the comps and the “market price” going forward. So home prices do have the potential to move quickly in either direction. Well OK, one direction.
Also sellers have to consider that the lenders might not be thrilled these days to come in with a high market appraisal .
That Countywide Funding 80 mil. loss fraud case in Va. sent shock waves throughout the industry, believe me .
believe me .
Can you expand on that? What is the effect of the shock wave?
jp. When lenders hear about a big lender getting nailed by fraud like that on inflated appraisals on over 100 loans its causes concern over loose underwriting /appraisals . Apparently all the red flags were there on this fraud case but they were ignored . So you get the lenders starting to watch for the red flags and checking the appraisals more .
Alot of lenders have to buy back the loans if the loan defaults within the first year of the loan and on fraud cases the loans usually default really quick . The lender does not want to end up holding the bag .
Correct! Real estate prices are set on the “margins”.
Exactly. It doesn’t matter how “sticky” any individual’s price is to him. All that matters is 1 last comp in the sea of hundreds of comps drops and that sets the new market price. Appraisers need to be quick to respond to the new market dynamics. An appraisal that’s 2mos old may be off by 20% in this market… as transactions slow to a crawl and price is the only differentiator…
“And many have noticed that the house with the lowest price often moves first.”
Many? Often? How can the Washington Post managing editor even allow such journalistic tripe as this see the light of day?
What’s that stench coming from Washington? No, for once its not our government, but the smell of home owners’ greed morphing into fear as the bubble collapses.
“stench coming from Washington… greed morphing into fear”
Same source, different context.
I’d rather be an intern for Mark Foley than a seller in this market.
Is there any difference?
Didn’t Bill Clinton have an ‘Intern?’
Yep. At least she was a she and she was over 21, for crying out loud.
I thought “she was a she” only mattered to Republicans?
“It’s only a scandal if they find a live boy or a dead girl.”
I wish I could remember when / where I heard that, but it’s been a long long time…
Edwin W. Edwards..Gov of Louisiana…
I could only lose if they find me in bed with a live girl or a dead boy.
http://www.bartleby.com/63/35/635.html
At least Bubba likes girls.
Monica Lewinsky was female? Holy cow. You learn something new every day.
Holy “cow” !!!!!!!!!!!
Big difference between a 21(?) year-old intern and a 16-year-old page.
He was a Page! Interns are generally college students. Pages are High School students.
“Stephen Myers is planning his retirement and wants to sell.”
Stepehen, how much do you owe on your house? Where are you planning on living?
Let me guess -
1. Even though you lived there 20 years, you did a cash-out refi to buy an overpriced retirement home last year and now you are stuck because you owe more on your current home than it is worth.
2. You owe very little on your home and you want some sucker to buy it so you can live in that full-service retirement community on the beach.
Chances are that those getting ready to retire are trying to “stick it” to the younger generation on a number of fronts: Social Security, Medicare and now, Overpriced Homes.
Hopefully Mr. Myers hasn’t already bought his retirement house. Someone I know in the D.C. area bought his Florida retirement home in June of this year. Talk about perfect timing. Now for the next 9 months until he retires, he gets to watch his current home and his Florida home both depreciate. Ow!
And a new exciting insurance bill.
I know of a 60+ owner in Northern VA try to selling a house with 30+ occupancy. Purchase price was $70k and they spent a considerable sum for an addition in the 80s or 90s.The goal summer 2005 was to sell for $1.1 million but didn’t hit the market until last fall — agent convinced him that market was not as strong anymore, so it listed for $1m. A month or so ago it went down to $800k and the seller is getting quite antsy? Why? Not just greed but he apparently owes in the high $600ks on the house and he has burned $50k, maybe, in holding the house for a year. So he will be lucky to cover his debts with a sale.
I wonder how many examples like this exist with long term occupants?
“A ‘good strategy,’ he said, is to look at similar homes that are on the market now and ‘to price your house at or about 3 percent below them.’”
Don’t piddle around with 3 percent reductions from the neighboring comps. I recommend giving your list price a good whack of 10 percent off the wishing prices your neighbors are asking. You might get lucky like a SF seller described in last week’s WSJ who sparked a bid war with twenty offers by listing the home he thought was worth $750K for only $650K. I don’t recall the exact figure the FB paid, but it was north of $800K.
I actually like his 3% rule: If 20 houses come on the market sequentially, each lowered by 3%, the price has dropped by nearly 50%.
I can work with that.
Good point. The bubble is hissing due to the holes created by thousands of pin pricks.
Definately a good point. I’m ok with 3% underpricing… (That’s $21,000 on a $700k home.)
That quickly translates into a 6% drop per month ($42,000).
Why, that ends this bubble in only a year!
Neil
Really. Let’s be done with the pretense. Sellers should just say,
“Ok, give me 50% more for my house than what I paid for it last year, because I put wire potato bins in the pantry, put these really nifty halogen lights in the kitchen, and besides, I’ve already moved.
And I’m a big time player, so pay me for being so crafty in the real estate business.
I love the name of the street “On Onion Patch Drive in Burke”. How appropriate as the homeowners get teary eyed as the ponzi/get rich quick scheme, I mean housing prices fall.
lol, I heard the onion is going to be the new flower for northern VA
It is Mr. Unsympathetic here. Any moron buying one house,and expecting the other to sell quickly (so they own two) deserves to lose their A$$ on both houses until their savings is all used up, bridge loans maxed out (and cc), and the sheriff is at each house tossing their crap out onto the street.
Haggarty has got to be on vacation to allow this article and the two from yesterday to print, that or she’s in a coma.
Yes, Mayrann Haggarty is a real piece of work.
I enjoy her live online chats. A couple of months ago, she was trying real hard to channel the spirit of Marie Antoinette - she claimed that, historically, most Americans didn’t own their homes, and that we’re just returning to the historical norm, and so we’d better get used to permanently high RE prices.
“And many have noticed that the house with the lowest price often moves first.”
That’s right — it is a reverse bid war, where the sellers of comparable housing compete to see who can afford to part with their overvalued home for the largest discount to the wishing price. Darwin would be impressed.
notice to folks familiar to my blog, Bubble Markets Inventory Tracking. That foreclosure shark that have been lowering prices $5000/week has finally reached red. And this gated community “Belleza” was featured a month ago because it had 5 homes in foreclosure. Well, add another one to make 6 foreclosures in one community. (total of 187 homes in there)
Another No. Va. poster here who has been slow to comment. There isn’t a powerful enough hallucinogenic drug to make me believe that a 1972 crackerbox in Burke is worth $600,000, let alone $700,000. I actually like Burke, but no way are the folks who can legitimately afford that much going to want to live there. That’s a few miles outside the Beltway and a pretty ugly commute to downtown DC, since it’s in a bit of a commuter ‘black hole’ with no freeways anywhere nearby. Heck, I live in inner Arlington within walking distance of two subway stops, and the SFHs in my neighborhood sell for $600-700k. No way would I pay that much for a sucky Burke commute.
Northern VA is full of delusional middle class people who think they have succeeded beyond their wildest dreams because they bought a house in 2000, say. Still, they took all the equity out out of their houses so they owe just as much or more as first time buyers, drive around lexus SUVs, corvettes, with a kind of “look mom, i’ve made it cuz i’m gifted!” vibe. people here wouldn’t be caught dead driving a car made before 2001. thrift is for losers. very many dreadful people riddled with class anxiety.
Greed is very pervasive here in No Va. I moved here from the south a few years ago, and it really hit me pretty quickly how tightly I had to hold onto my wallet. Shame - it’s such a pretty area.
Ain’t that the truth. Whenever I see an $80,000 Mercedes tooling around No.Va. (other than Middleburg, McLean or Great Falls), I pretty much assume that the driver is leveraged up to their eyeballs. And cars turn into junk so quickly around here, that you’re so much better off driving the hell out of a $20k Toyota than springing for some snobmobile.