“There’s Now A Counteroffer Mentality”
A condo report from the Washington Post. “With tens of thousands of new condos entering the market, some developers are moving beyond luxury cars, plasma televisions and other inducements to lure buyers. Instead, they’re starting to negotiate the base price of homes, a tactic unimaginable during the condo-selling frenzy of recent years.”
“‘There’s now an offer/counteroffer mentality, a back and forth,’ said David Mayhood, president of a McLean firm that has marketed condos since 1983. ‘That would have been unheard of as recently as six months ago.’”
“Newly engaged Bryan O’Keefe (and) his girlfriend spotted a two-bedroom condominium they liked at the Four Winds at Oakton for $345,000, about $30,000 less than the original asking price. The deal got even sweeter when the developer offered to give back 6 percent of the sales price, or about $20,700.”
“And the concessions kept coming, even after they signed a contract in October. ‘That’s when they called to say they lowered the price on our unit and they gave us a $5,000 price reduction, just like that,’ said O’Keefe.”
“The price of new condos fell 4.6 percent in the District and 2.6 percent in Northern Virginia in the third quarter of this year compared with the same period a year ago, according to Delta Associates.”
“But many condo units remain to be sold. At this point, if no other condos were added to the market, it would take another three years to sell them all, and builders are eager to find buyers for the units already available. There are also thousands of units available for resale by their owners.”
“Bush Construction has slashed prices twice since it began marketing the Arlington condos in June 2005, said VP Andrew Viola. Condos originally marketed for $380,000 to $660,000 now sell for $317,000 to $565,000. Even with price reductions, some potential buyers stayed on the fence, waiting for prices to drop further, Viola said.”
“Developers usually hate reducing the base prices of condos because it hurts profit and often angers previous buyers who forked out more money for similar units. ‘For them, it comes down to taking less profit or not paying off a bank loan,’ said Michael Larson, an analyst in Florida. ‘Lower prices are the third stage after they’ve tried incentives and then more aggressive incentives.’”
“Most developers are courting the real estate agent community they once shunned. ‘They’re offering us bonuses, paying us commissions and serving us lunch,’ Charlene Lois Schaper, an agent in Old Town Alexandria.”
“The marketing spree aimed at consumers and agents is more a sign of the changing market, PN Hoffman VP DeSantis said.”
“‘If you had come in two years ago and tried to offer less than the asking price for one of our condos, we would have been polite about it, but we would have said: ‘Sorry, there is somebody right behind you willing to offer full price,’ DeSantis said. ‘Now, it’s no secret we’re willing to entertain offers.’”
The Virginia Pilot. “Associate broker Charlie Laurens, said the pressure on prices was greatest for homes selling for $500,000 or more. That’s because buyers in Hampton Roads have many more choices, including a large inventory of new homes, he said.”
“‘Gone are the days when you could throw up a sign in your yard, and someone would pay you more than you were asking,’ Laurens said.”
“Prices in Hampton Roads have come under pressure because of weak demand, said Steve Rockefeller, VP of SunTrust Mortgage in Virginia Beach. ‘I’m seeing a ton of concessions being made by the sellers,’ said Rockefeller.”
‘Brokers who write the blurbs for property listings are trying to lure you in with their ads and fliers, a task made more challenging in a market where houses can sit unsold for weeks, despite price reductions and rebates. Aggressive language is appearing more as the market has cooled, according to agent Frank Borges LLosa, (who) specializes in the Northern Virginia real estate market.’
‘I work more with buyers, so I look for trigger words like ‘bring all offers’ and ‘motivated sellers,’ LLosa said. ‘I also hesitate when I see a listing with a ton of exclamation points, as they tend to exaggerate the features of the house, but on the other hand, it can show another sign of desperation and an openness to a lower offer.’
‘We’re Near the Bottom in Virginia. I can say with certainty, that we have seen a 10-15% give back in our previously white hot market. All the data we have compiled supports this figure. This puts us at price levels we haven’t seen since winter 2004. Short term, we are sitting on a lot of inventory and the resales have taken a hit.’
‘The builders are getting rid of their specs and will now sell to anyone with a pulse and a credit score above 580. Builders have flooded our market, and some have folded their tents and left.’
‘The builders are getting rid of their specs and will now sell to anyone with a pulse and a credit score above 580.’
Well now, you can hardly blame the builders. After all, if they could only sell to buyers with at least a 620 credit score, teeth, and a grade school education then they would have been out of business 24 months ago!
Did you notice the buyers in the WP article were early 20 YO’s?
Yes, and the main “breadwinner” of the family is a researcher at a think tank. I am sure that they make diddlysquat income. I wouldn’t be surprised if it is $30k or less. I hope he doesn’t work for CATO. If he does I am going to cut back on my big December donation. Ha-ha.
FYI OC Jack, my grandfather had no teeth and a grade school education. I don’t think he had a credit score - not sure if he even needed one since he payed cash for everything.
However, he ran a successfull dairy farm for several years until retirement and raised a family of 5. He sold his farm when he retired and paid cash for a nice 4 bdrm house where he lived comfortably and supported relatives with teeth and a high school education until he died at the ripe old age of 88.
DC_Renter - you stole half my tag line, damnit! We must be related though, cause my grandfather paid cash for everything, too. Grandma made he, my dad and uncle move once a year, without fail, during the depression. My dad still says it was his mother’s hobby, “to move.”
Why? Cheaper and cheaper rents, that’s why. Smart woman. I’m sorry I never met her. My grandfather finally got fed up, in 1939, and smacked down $12,000, cash, for a 4-bedroom house in Brooklyn. He lived until he was 92 and never experienced a mortgage or car payment. Everything, cash!
I have alot of respect for the Depression Generation . I have talked alot with those people and they are really great people .
That’s good to hear, ’cause we’re grooming another one right now. Instead of the stupid Gen Y, it’ll be the greater Depression generation.
Then watch how morals turn around in this country. No time for drugs, mtv, & multiple abortions when you’re just trying to keep warm and fed.
Paul
On that note, being Christmas time, one of my favorite scenes in It’s A Wonderful Life, w/ Jimmy Stewart is in the bar just before Bailey considers suicide. He gets punched out by the husband of his daughter’s teacher. At the ‘Puncher’ is being shown the door, he protests:
“Wait a minute! I wanna pay for my Drink!!!”
They show him the door anyway, but I’m sure it has been several years that a patron as insited upon paying his tab before gettin 86′d. People are people, but responsibility warms my heart.
Paul
My grandparents sat me down to tell me about the great depression… How sad it is having friends starving and because you got food on the job on week and they didn’t… could be the difference between survival or not. Watching siblings go hungry and what a good person is willing to do then…
Yep, they paid cash for everything, donated generously, and really appreciated the simple things in life.
Today’s generation is in for a lesson,
Neil
No kidding - my grandma is 85 and still works 40 hours a week at the factory that she started in the 60’s. When I borrowed a downpayment for a house at the peak of the bubble (this last June), she sat me down and let me know how bad she thought things would get and how much she worried about her grandchildren (even though she was willing to give me whatever I needed to borrow). I took her words to heart and did some serious research, which led me to this blog. I seriously owe her my financial future for talking me out of that $500,000 loan that I couldn’t afford. I found out later that she had babysit a family of children in Kansas when she was 10 all day for free just to get to eat dinner. She didn’t want to be a burden on her parents at age 10. That really sobered me up and I’am now one of very few that I know in the Gen X generation making over $100,000 a year (with my spouse) who is okay renting and having old furniture to keep money going to savings and to become completely debt free.
Although I have to say, my siblings flat out won’t go hungry no matter how bad things get, or I’ll go Bonnie and Clyde first.
I was refering to meth addicts, not senior citizens! I think we all have had tooth challanged grandparents who teach a lot about what we’re going through — if they were still arround.
Ben,
Any thoughts on this second linked article that is predicting Metro Dc is at bottom, will plateau for a year & then go up 7% a year indefinitely!! Plus the BRAC comments are one’s I’ve heard from several people. Namely that any base that is the beneifactor of jobs being transferred will cause the realty around the base to go up. I am not so sure if just because a job will have a new location w/in a metro area that the person filling the job will move to follow the job. New hires not from the metro area sure, but are new hires coming into jobs relocated to a new location enough to stabilize a local market? Metro DC is job rich, but most gov’t jobs do not pay enough to buy a place in the area w/o a huge “equity discount coupon” and such coupons are not very easy to come by nowadays.
That guy is a dolt and is prospecting for a bigger dolt than himself.
Near the Bottom, you are kidding right? Wait until the Banks are cutting prices on the foreclosures. This is not the only bubble, it is going to sound like Rice Krispies, Snap, Crackle and Pop
‘Lower prices are the third stage after they’ve tried incentives and then more aggressive incentives.’
I am holding out for stages 4, 5 & 6. You know, where the builders have been forclosed, the bank listed with an agent, then bundled up 100 units and hired an auction company. That is when you can by the units at 10 X’s the rent, and get real cash flow. Who in their right mind will buy anything with negative cash flow in the next 10-years. Hello folks, appreciation is over until 2015.
Paladin,
EXACTLY!!
Yes, I was telling many people that all the crazed flipping that inflated prices in the Wilmington DE Riverfront just guaranteed that there would be zero appreciation for a decade, and only a loss for anyone who has to sell in that time frame. Prices are cracking as the last of the flippers now search for the bottom; People realize the developer is not going through with the plan as presented in the sales pitch thus taking what was prime riverfront and turning it into just another ghetto hood in wilmington, just newer; and The city is doing nothing to address crime and only jacking up assessments. Hence, what was suppose to the be next Baltimore Riverfront is quickly turning into an ill conceived and failed gentrification initiative that will be luxury ghetto section 8 townhomes & towers in a few years.
But those discount outlets are great, aren’t they?
“If you had come in two years ago and tried to offer less than the asking price for one of our condos, we would have been polite about it….”
HA! Absolutely the funniest line I have read on this blog.
yeah yeah yeah ,. all well & good but I want to see BLOOD IN THE STREETS before I’m satisified that the arrogant builders/sellers are humbled.
I want sappy letters to each buyer begging for a sale, promising to care & nurture the pile of money as if it was their own.
and squirrel feed just for good measure.
yeah.
that might do it
maybe
you want blood in the streets?
http://www.youtube.com/watch?v=fbLg0t5bluY
Just a few missed payments and they take ‘your’ house? Who knew?
The Sheeple, woefully witless and predictably last into the Ponzilicious Dutch Tulip Memorial Housing Price Musical Chairs Tournament, will have their collective home-’owning’ throats cut by the Bumpy-a$$ Ride Back Down to the Mean…2007=A Reckoning.
No asset class is safe! Economic Thermonuclear Fubar is a parting gift from Repugz to 2008 Dem Prez a.k.a. “Jimmy Carter version 2008.” Bloodthirsty Kleptocracy for the Multinational Few means TOTAL CARNAGE for the well-meaning but fearful and TV-stupid Sheeple!
*rant off
dvo, skipped your meds again?
‘ … and feed the chipmunks at least once a week’
‘In the Washington, D.C., metropolitan area, also a hot market for condos during the past several years, roughly 10,000 units are likely to be removed from the pipeline of projected condo units in the fourth quarter, according to William Rich, a vice president with Delta Associates. He noted that the figures are working estimates and have yet to be finalized.’
‘Of those 10,000, about 3,000 are likely to become rental apartments rather than condos, said Grant Montgomery, a Delta Associates vice president.’
The amount of scraped dirt in the early stages of development in Northern VA in the 30-50 mile range west and south of DC is simply astounding. My guess is that much of these will be abandoned, grass seed planted, and then either wait it out and carry the land, or sell it. I simply can not imagine that the builders will build THAT MUCH more inventory given the market direction. Altogether, it has to be thousands and thousands of homes that were planned in these yet to be built developments.
Builders deserve to bleed and suffer…
Mortage Bonds hit by delinquencies & housing slump.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aJpnPI7qhPck&refer=exclusive
I often drive in an area of Northern VA where there are signs at the side of the road(its illegal to place them there, incidentally) advertising the Four Winds condos. The first time I recall seeing them-maybe a year ago-it said from the $320’s. Maybe six months later it said from the $280’s. Most recently(like within the last week) the signs now say “from the low $200s”.
These are “entry level” properties in a very desirable, fairly close in suburb of DC. If this segment of the market has already taken this big a hit then I’d say you can stick a fork in the entire DC Metro area real estate market. At this point there’s no chance whatsoever for a soft landing. MRIS should have the Nov. numbers out by next Friday. I think we’ll see a large reduction in prices even from Oct.
Yes, if you google “four winds oakton” the hit summary shows “Oakton, VA Luxury Condominiums starting from the $260’s.”
But when you go to the site it is the “low $200s” Ha-ha. Also the fourth hit is from rent.com that you can rent the larger 2 BR units for $1290. So they probably still asking at least $300k for these and renting for $1300…. hmm….. let me think about it…. good investment?…..
Methinks price must drop a lot more or rent increase….
*Sales price $219,900; No Down Payment required. Interest only 1st trust for $935.00; Interest only 2nd trust $312.00; Property taxes $163.00; Condo fee $106.00; Total Monthly payment $1,516.00; Estimated monthly tax savings $330.00; Net monthly payment after tax savings $1,186.00. Net Monthly based on a 25% tax bracket. First trust APR is 7.128%. Limited offer, valid to qualified buyers only and buyers purchasing primary residence. Prices, taxes and terms are subject to change without notice. Please see sales manager or on site loan officer for details.
And that’s for a crappy 707 sq. ft. condo……. How the hell do they come up with that kind of tax savings? That assumes no standard deduction/exemption.
Final comment: map the place and it is right smack next to I-66 so it’s going to be quite noisy! To me this is not a desirable location. It’s 2 miles from Vienna metro. The particular area has nightmare traffic. To go shopping you have to fight gridlock traffic up into Vienna. Uggh. You would have to pay me to live out there in a freaking condo. Oakton is known to have nice houses but tearing down some woods near I-66 and building some matchstick condos with granite countertops….. what a joke.
Actually I think these place are not bad. I looked when I was in the market. There are so few entry level place being built. These are in an area of much more exspensive townhouses and single familys. Location is literally a 5 minute (1.5 mile) drive to Fair Oaks, one of the largest regional shopping malls, a nice upscale one. Also more useful shopping grocery, Kmart, Wal Mart ect…also near by as well as Fairfax County Gov. Center. FF County is one of the largest wealthiest counties in US. My objection was that like many suburban location you’re dependent upon a car. Though the mall is only 1. 5 miles away you would get killed trying to walk and cross the highway. I too noticed the buyer are in their 20s. If you work in downtown DC why would you choice to live at least an (rush) hour’s commute away from work?
Cripes! My GF lives about a block from there, and she shares a 3 bedroom townhouse which rents for about $1700/month. Why the hell would someone want buy one of these condos? My guess is that when they were apartments, they rented for ~$1200 a month.
Builders deserve to bleed and suffer…
huh? Builders are AWESOME! build, build, build & build some more, please.
Now, local zoning idiocies, lack of public infrastructure (parkland, etc), the “kunstler 9 yards”, I have an issue with, but the builders are welcome to do what they do best, by me.
concurr
Building is good as long as there is rational urban planning (roads, subway/rail if density justifies, parks, etc.)
The areas that were shortest on housing when thsi started will be the most buried…
Neil
“‘There’s now an offer/counteroffer mentality, a back and forth,’ said David Mayhood, president of a McLean firm that has marketed condos since 1983. ‘That would have been unheard of as recently as six months ago.’”
Once the high risk lending finally shuts down, there will be more of a no offer mentality.
Speaking of which, the realtor I was talking today was telling me Countrywide has really tightented up on its underwriting. They actually insist on appraisals now! Lordy lordy lordy.
Countrywide shut down their main San Diego office last week as well.
Josh
“‘If you had come in two years ago and tried to offer less than the asking price for one of our condos, we would have been polite about it, but we would have said: ‘Sorry, there is somebody right behind you willing to offer full price,’ DeSantis said. ‘Now, it’s no secret we’re willing to entertain offers.’”
I shouldn’t do this, but because I’m into my cups, I will. Dave DeSantis was a Clinton Administration official, worked for the Federal Trade Commission, I think. He left in ‘99 or so to work on a .com start-up. Needless to say, he went looking for work again pretty soon.
Looks like he hasn’t learned his lessons. Helluva nice guy, though. Good luck with the next “big thing,” Dave!
When we left Herndon in 2005 crappy SFH’s in Sterling that were barely 1400 sq. ft. and reeked of cigarette smoke (never mind the 30 year old lino) were going for $430K.
The 3BR Pulte townhomes around the block from us started at 469K and had been bid up by flippers to 629K. Well, here we are in late 2006 and those same TH’s are listed at 395K (negotiable of course) and SFH’s in Sterling (clean ones) can be had for 350-375K. I’d say that’s a hell of a haircut. Funny how almost all of the ads now say
“reduced 40K”, “make us an offer”, etc.
2 years ago your realtor was telling you to write a poignant letter and overbid by 10% otherwise, well, you know the rest of the story :>
It’s only going to get much worse in that area of Sterling also. It’s MS-13 central out there.
What’s a “YO”?
It’s a from the Rocky movies.
“YO ADRIAN!
Grubby(tm)
My parents are depression generation people.
They are ok but anytime you transplant morals from one time to another, you can end up with problems. They have a garage with cans of nuts and bolts from 1932. They never throw anything out and it’s dangerous because I had an old ladder collapse on me. By being honest and ethical they got screwed in the workplace throughout their lives.
Methods of survival belong to the time you live in. You have to evaluate these things in real time. It’s yet to be seen whether going seriously into debt for a house (asset) is going to turn out to be a problem. If the US gets into hyperinflation, all real assets will gain value quickly. I’m not betting on that but it is a possibility. In that case, those of us who didn’t buy will get screwed. We will also be taxed to pick up the tab for the welfare for those who lose their homes. Nice.
We had a huge residential area being built up in some places near Los Angeles called Chino and Norco. They were right next to cow farms and the stench of animal feces was choking when we went to the open houses. I wonder how desperate people are who buy under those conditions.