Everyone Got Used To The Craziness
The News Post reports from Maryland. “The average price of a home sold in Frederick County in the first quarter of 2007 fell by $5,800 and spent more time on the market. In April, 196 homes were sold in Frederick County, dropping nearly 27 percent from 268 in April 2006, according to the Greater Capital Area Association of Realtors.”
“Inventory is too large, said Realtor Stephen Mackintosh. A healthy housing stock is about 1,000 homes. The county has 2,000 on the market, Mackintosh said.”
“Mackintosh said the silver lining in the market could be for buyers wanting to move up to a larger home. ‘There’s a lot going on where they can get a good deal,’ he said.”
The Times Dispatch from Virginia. “What a difference from a few years ago when builders in the Richmond area couldn’t build fast enough and received multiple offers on houses in the planning stages. ‘Everyone got used to the craziness,’ said Rich Napier, president of the Home Builders Association of Virginia. ‘We’re back to a more normal pace,’ he said.”
“Local builders are sweetening the deals to unload existing inventory in a soft market for new homes. They aren’t cutting costs, as they would if the market tanked, but they are offering incentives to entice more buyers. Centex Homes, with houses for sale in 16 subdivisions here, is offering $30,000 in upgrades. Main Street Homes, one of the largest Richmond builders, will build a basement at half price.”
“It’s a buyer’s market, particularly in the $400,000 to $650,000 range in the Richmond area, Napier said. ‘There’s a lot to choose from for that, not only in new homes but existing homes.’”
“Napier built the Richmond Symphony Designer House last year. The 7,600- square-foot French country home in Founders Bridge, Chesterfield County, is still on the market for $1.95 million. The house has $125,000 worth of electronics, and $200,000 worth of discounts is built into the price, Napier said.”
“‘I’m not happy that it’s sitting there, but there are not that many $2 million buyers walking around out there,’ he said. Still, ‘for those who think the sky is falling, it’s just not happening,’ Napier said.”
“Economist Christine Chmura said the housing industry may have hit bottom. The number of building-permit applications statewide flattened over the last three months, and that could signal a turn, she said.”
“‘It’s unusual for the general economy to be strong overall but the housing market to be in a recession,’ Chmura said. ‘The main problem is affordability. Prices are rising faster than income, and that makes it difficult to purchase a home.’”
“Richmond saw double-digit appreciation during 2005, but it never rose more than 20 percent as it did in the Northern Virginia area, which was hit harder by the softer market. ‘We expect the Richmond area to turn up sooner, because the housing industry here is in better shape than the nation,’ Chmura said.”
The Daily Progress from Virginia. “In an increasingly common scenario in Central Virginia, on Tuesday attorney John G. LaFratta stood on the steps of the Albemarle County Courthouse to auction off a foreclosed property.”
“The number of foreclosures in the Charlottesville region has jumped dramatically, reflecting a trend seen both across Virginia and nationally. ‘The problem is absolutely as bad as people are saying it is and it’s going to get worse,’ said Michael Martin, loan officer and CEO of Crown Mortgage Services in Charlottesville. ‘There’s some chickens coming home to roost.’”
“During the first three months of 2007, there were 128 notices of foreclosure filed with The Daily Progress, a 27 percent increase over the same period in 2006. The number of area families who have fallen behind on mortgage payments appears to be even higher.”
“The Piedmont Housing Alliance, which seeks to help homeowners keep their homes after they have defaulted on mortgage loans, has seen its number of clients skyrocket from one or two people per week in early 2006 to two or three per day so far in 2007.”
“‘It’s really scary,’ said Shelley Murphy, director of program services for the Regional Homeownership Center at PHA. ‘We’re having so many more clients come in that we’re almost not able to handle them all.’”
“Supervisors like Murphy are taking on cases at the homeownership center. ‘We’ve never seen so many cases,’ Murphy said. ‘And they’re from all levels of income. It’s not just low-income folks - it’s everybody.’”
“The number of foreclosures statewide jumped by 137 percent during the first three months of 2007, compared with the first quarter of 2006, according to RealtyTrac. A Richmond nonprofit agency estimates that 10,000 families in Virginia will have lost their homes by the end of the year.”
“As the subprime lending industry exploded, lending companies began to relax their standards for who could borrow. ‘There’s a lot of people out there who are in homes that really should never have been given a loan,’ Martin said. ‘There’s a whole vulture system out there that preys on these people.’”
“Some homebuyers saw adjustable rate mortgages as the only path to homeownership in the Charlottesville-area housing market, where the median housing cost was $289,900 in 2006.”
“Troy Johnson, of Absolute Appraisals in Charlottesville, assesses the value of properties on behalf of lenders and mortgage brokers after a homeowner goes into default on a loan. In recent months, Johnson said, his firm’s business has increased substantially.”
“‘Last year we were getting hired on these jobs once every two months or so. Now it’s about one every week,’ he said.”
“Johnson said he has also observed that more homeowners who took out home equity lines of credit to pay for renovations, college tuition, new appliances or other big-ticket items in 2004 or 2005 are now finding themselves stuck with homes that are actually worth less than their total loan amount.”
“‘People are upside down in their own houses, so to speak,’ he said.”
‘ When Byron Armstrong’s elementary-school students ask him to watch their Little League baseball games, he said it kills him to say that he can’t make it because of the long commute back to his house in West Virginia. The physical-education teacher at Evergreen Mills Elementary School in Leesburg spends 45 minutes in the morning on the road to school.’
‘The high cost of living not only affects Armstrong’s pocket; it affects his social life, too. ‘I’m way out in the middle of nowhere,’ the 26-year-old said. ‘For a single teacher, there’s not much to do out there. None of my friends live out in West Virginia. If I go out, I go out in Northern Virginia.’ In an effort to see his friends on the weekends, Armstrong said he has to sleep on friends’ coaches.’
‘Armstrong said he works with a couple of young teachers who rent apartments in Loudoun County. He said they pay an average of $1,200 a month. ‘That’s half our paycheck. It’s a waste of money and I want to make an investment,’ he said.’
I call bs on this guy. First of all, many, many people commute further than the 45 minutes he does and still are able to make it to things they want to do. What does he want his commute to be? Let’s say he wants it to be 20 minutes. If he really wanted to go to the games is 25 minutes a deal breaker?
Just whining and a convenient excuse.
double BS– teachers get paid well for the 203 day contract in Fairfax co- add 11K$ a year for that 80 % pension
Loudoun starts at $41k (and since he is 25, we can assume he’s making close to that). So, $1200 is roughly 33% of his paycheck and roughly 50% of his take-home.
And, yes, I think 45 minutes is a bad commute. That’s 8 hours of your waking life spent driving every week.
The 90 minute commutes listed below aren’t bad, they’re outrageously stupid commutes.
If he doesn’t want a wife, he should get a roommate. Together they could do a $1500/mo place that would allow some private space.
Teachers still whine and moan a lot. But, in general, they now have a pretty sweet deal.
My ex-wife is always bitching about how “stressful” it is to be a teacher. But she makes a really decent salary, only works 7 hour days 9 months out of the year, has complete job security and insanely good benefits.
Most of us are looking at flat wages, declining benefits and zero job security these days. So I don’t have much sympathy to spare for teachers.
Some teachers have it VERY stressful. I don’t know what school system your ex teaches in, but for many I consider their benefits and schedule “combat pay”. And it’s gonna get worse.
My SO used to be a teacher. After several years, she went back to school and got her engineering degree. She says that being a teacher was much harder and much more stressful. Sure, she got a few months off a year, but her work weeks were closer to 60 hour weeks rather than 40 hour weeks.
As a teacher, I must say that just like any job, you take on as much stress as you choose. Some teachers, (like EVERY job!) CHOOSE to get stressed, CHOOSE to work 60 plus hours a week, etc. Others live by the motto of “fit my job into my life, not my life into my job”. I love being a teacher. Lots of vacation time, EXCELLENT benefits, and I consider it very low stress. I show up and leave with the kids. If my supervisor (Pricipal) wants me to stay late and/or work weekends, I say “nope. Not gonna do it”. I get to wear jeans and sneakers every day (I don’t but I do so often) if I want. Is the job perfect? Nope. The school is rodent infested and falling apart. The people who are teachers and complain about their jobs, are the same people that complain about everything and everybody, “my soup is cold”, ” you didn’t cut my hair the exact way I wanted it”, “the dry cleaners lost my pair of pants, I am suing for $75 million!!!!”. The silent majority of course would love more money (who wouldn’t), but realize we have it pretty good.
My wife is a teacher, and I would say it’s true that if a teacher wants to he/she can only work 7 hours a day. The reality is that most teachers put in more like 8-9 hour days. My wife gets to school 45 minutes early to set up her classroom for the day and stays typically an hour after school to grade papers. The pay is as poor as advertised. With a Masters Degree and 3 years experience she takes home about $2000 per month. The 3 months summer vacation is more like 2 because teachers have to start work 3 weeks before school starts. There is job security, but only if you have seniority. Younger teachers have no job security, and a couple of young teachers are being let go at her school because the enrollment levels are changing.
The quickest way to get my wife steamed is to insinuate that she has a cushy job.
i think it may be 45 miles not minutes. a co-worker of mine lives in west va and commutes to mclean va. it takes him an hour and a half to commute and that is leaving very early.
NO! This guy isn’t kidding. I did a google map search, and the distance between Jefferson County, W.Va and Leesburg, VA is about 26 miles, which takes about 45 min. to drive.
It can take 45 minutes just to get to the freeway onramp here in So Cal during rush hour.
It can take 45 minutes to go from the 101 south 3 miles to the 405 south interchange..
I was going to say the same thing. If you think a 45 minute commute is bad let me explain what is a truely bad commute.
Example #1
My boss lives a little North of Riverside and drives into UTC San Diego on a daily basis. That’s about an hour and a half commute.
Example #2
My co worker lives in Mexico and spends 45min to an hour and a half waiting to come into the US at the broder crossing on daily. Both ways!
Example #3
I get into work at 6am and it only takes 15-20 minutes to drive in. But if I was to try and get in at 8am it would take me an hour and 30 mintues both ways.
So cry me a river if you think 45 minutes is a bad commute.
My commute?
10 minutes by taxi, US$3 each way.
30 minutes if I walk.
“In an effort to see his friends on the weekends, Armstrong said he has to sleep on friends’ coaches.’”
Ben - funny, that never seemed to work for me…..
as long as he isn’t sleeping on friends’ students, I don’t care. He is just another whiny 20-something making bad financial decisions.
25 years old, and he’s whining that his commute is too long and he is too far from his friends? Because he himself chose to live in the boondocks?? Oh please!
When I (and most of my friends) were 25, we hadn’t a hope in hel1 of buying a house; we just rented apartments — usually a 1 bdrm apartment if we weren’t sharing. In a mediocre neighborhood.
Actually, I remember exactly when I was his age (25). For part of that year I had a 120-mile RT commute toa crap, high stress job and shared a dumpy place with my brother for a while. Then I got my own 1bdrm apartment close to work, just past the runway lights by the airport — cheap rent! Hey, I wanted to save money, be flexible, and be near my social life.
So he’s 25 on a modest salary. And he wants to live close to work. And in a nice house. As an investment! Oh, and in a nice neighborhood, I bet. SPOILT ROTTEN!
P.S. His “investment” should more precisely be fully labelled: “poor investment”. The best investment for him would to NOT buy real estate. Too late, sucka.
In an effort to see his friends on the weekends, Armstrong said he has to sleep on friends’ coaches.’
Sounds like he has more social life than he lets on.
I bet he sleeps on his friends’ couches for free then wakes up and tells them how they are losers wasting money on rent. Just like people used to brag to me about how environmentally friendly they were and how much money they saved by not having a car. This was almost always shortly followed by a request for a ride home because they didn’t want to wait for the bus. Never offered me gas money either while gloating about how expensive cars are.
“You have inspection fees, the sprinkler requirement and the (Frederick County) commissioners just increased the recordation fee,” he said. “All of that is passed onto the buyer of a new home. That is something that affects us locally and might not show up in the national home sales reports.”
Another gag, puke, cough article from the Gazette and their shills…
Well, from what I read up there (and it seem to be sensible), they’ve added a LOT of new and expensive fees. Of course they get added to the price of a new house. That might even drag prices of older houses up a bit as well, assuming there is a tight supply-demand matchup.
As for the recordation fee, it’s “only” $1,000 for a half-million dollar house, which on the face of it sounds like no problem, just another $7/month on your mortgage, right? Still, it’s one more fee on top of one more fee, and over the course of the last 10 years, they (and other places around here) have added a lot to the cost of a house.
Oh yeah, the sprinkler requirement: Sure, it’s “nice”, and all about the extreme safety people in this country seem to love. But it costs thousands. And if you’re not on city water, add even more thousands for the oversized welll/pump you need. Ah but ’tis only rich people they want in Frederick County anyway, right?
Next time some commissioner there (who voted for these fees) complains that his kids can’t afford to live there, I’ll be wanting to smack him!
When the Titantic went down, it didn’t stop til it hit bottom
Rumor has it, a bronx cheer went up amongt those in the lifeboats above water, upon this happy happenstance…
The thinking was that this could signal a turn~
Please tell me you aren’t the idiot sister of another no brains & a little braun ex pro jock?
You most definitely are an e-CON-omist
“Economist Christine Chmura said the housing industry may have hit bottom. The number of building-permit applications statewide flattened over the last three months, and that could signal a turn, she said.”
I don’t understand half of your posts.
Nice to hear you understand half of them…
“The Piedmont Housing Alliance, which seeks to help homeowners keep their homes after they have defaulted on mortgage loans,”
Why does this sentence make no sense to me?
i live in northern va. my wife and i have been watching the housing market around here for about a year. it is my gut feeling that the D.C. metro area is a good six to nine months behind other areas that have been hit hard.
i’m not saying “it’s different here”. i do think it will get much worse. our boom was just as significant as florida, arizona and california but it seems to be taking its sweet time turning down.
that is just my observation. i am curious if any others from the same area feel the same way.
15 months of inventory in Prince William County, VA.
In my area housing is juxt moving sideways. A little more inventory, prices more or less holding. At a barbecue last night, an IT guy transfered here said that they would be renting a house for a year rather then buy due to likely price drop.
It is just a matter of time for this boom in homeprices to go flat on all four tires.
My experience is that the spring buying season ends right around June 15 and by the July 4th weekend, all the unsold houses that pulled their listings last year waiting for the bump of 2007, will throw in the towel (capitulate) and the real estate slaughter, even in DC, will truly begin. Got to double up on my pop corn order.
I agree. And Montgomery County Maryland may even be behind northern VA. When I talked to colleagues who have lived here a long time, they tell me that local politics in Mo County is split between the people who take money from developers and the ones who don’t. I get the odd impression that this dynamic (local politicians who stand up to developers and don’t take their money) is even less present in VA. No evidence really, just an impression based on how bad the traffic is and how badly overbuilt the area is. God knows how northern VA will deal with traffic if the condos bought by speculators are ever actually occupied by human beings who need to commute to work.
The funny thing is I think that the reason for the delay may be pure psychology backed up just a bit by a good job market. The jobs we have don’t support the prices of the homes, but since people think that the jobs here are stable, they somehow magically think that people can afford more house. It is such garbage. A $50,000 - $150,000 a year household income can’t support a no downpayment mortgage on a $600,000 to $900,000 home. It just can’t. Doesn’t matter if you are a government worker who probably won’t get fired.
I blame the banks and other mortgage originators. When I moved here in early 2005 my friend told me not to sign a lease at all but buy a condo immediately. She said that banks would just throw money at anyone starting a civil service job. She was probably right. I hadn’t found this blog or really analyzed the credit bubble independently at the time, but the whole idea made me uncomfortable, so I ignored her advice. Hopefully, that decision will pay off in the end.
Other people have mentioned Vermont and Philadelphia as areas that are lagging behind the rest of the country in this correction. I agree that DC area should be added to the list. Any place else?
Seattle, Portland, SLC….
Up until just the last two weeks the San Antonio area seemed really stubborn. Only very recently have we begun to see price drops. $499 to $465 and $465 to $450 on two nice spec homes (completed since early Jan) and $459 down to $399 on a resale. Not a lot but it is a begining. Finally!
Yes, I’ve been thinking the same thing. D.C. metro (especially in the beltway) has not experienced the meltdown Florida or parts of Ca have so far. But things went up way too far, way too fast here for there not to be a correction of some sorts. I think maybe all the defense spending going on here is temporarily propping it up ? But yeah, we’re due.
I lived in Laurel md breifly
wow, move to N VA - you’ll love it
Very few of the realtors around here think that there is anything wrong with a 2 bedroom plus nursery going for 500+. They talk a good game and convince less informed buyers that they are getting a good price for what is essentially a starter home. As the people willling and able to make such a purchase dwindle, there will be a correction.
All those townhomes and condos are significantly cheaper now. The SFH’s are close behind. The people I worked with in Herndon 2 years ago were making $65K on average and ponying up 400-500K for 3 BDR townhomes near the Dulles toll road. I bet their feeling stupid by now.
WTF? I was making that much 5 years ago, had insanely good credit, had owned a house before moving here, had no debt, and had cash for a downpayment. But the most I could afford (and the banks would let me borrow) was $200k (30-year fixed). So, with my 20% downpayment, I was able to buy a townhouse for $250k, which felt overpriced at the time (I was close to renting an apartment instead).
Of course, that $250k townhouse bought in 2002 is the same as the $400-500k 3BDR that your friends bought a year or so ago. The difference being that I could honestly afford the monthly payments, as opposed to only being able to afford them for a year or two or three, or whenever the mortgage resets.
I’m seeing plenty of foreclosures spring up on Yahoo Foreclosure. I just started keeping track a month ago, but Alexandria foreclosures are up 15% in one month, Fairfax (22030) up 22%, and Loudoun (20152) up 18%.
I’m in DC and I think that’s an accurate assessment. “Priced right” is selling fairly quickly, but “wish price” is not moving. There is a ton of condo inventory half-built to almost complete that will be coming on line within the year. It will be interesting to see if the added inventory accelerates the price declines.
I recently saw a statistic that there are only 30,000 people who actually live in DC (not N. VA etc.) with incomes of greater than $100,000. A majority of those people will move to the suburbs when it comes to raising a family. So, there is a really small population of invididuals who can afford the median priced abode here on a long-term basis.
The Case-Shiller index for DC definitely shows a downward trend:
http://macromarkets.com/csi_housing/msa/washingtondc.asp
Tulips - I think you’ve just stumbled onto to something that is not well understood about DC. FWIW, Commerce Department reports median income, for two-adult, childless households at about 85K. The family median is half that.
Here is the real kicker IMHO - DC has always been a very transient place, particularly with respect to younger professionals. It is generally not a place in which people “settle down.” Historically, when people - singles or famillies - came here for two or three years to work, they rented.
During the boom, that changed, of course. Why not buy a place , and make a few bucks, right? Well, if you ask me, as prices stall and fall, that in and of itself will remove signficant demand - those who would never have bought in the first place will “revert to the mean,” bahaviour-wise, and rent while they are here. Look out below…..
I think it depends where you are in the DC area. DC itself and close-in areas aren’t seeing the bloodbath yet. I live in Crystal City, and I’m still seeing houses sell at what I consider to be ridiculous prices. But take a trip out to Loudoun or Prince William County, if you want to see blood in the streets. Prices are coming down very quickly out there, and I have a feeling that it’s only a matter of time before that works its way in toward DC. The closer-in housing is much more desireable, given the hellish commutes in our area, so naturally it is going to take longer to fall.
Although I think the entire region will eventually get slaughtered, it’s going to hit the exhurbs, as well as condos inside the beltway, first.
I live in the town where the PHA is centered; we have a terrible affordability problem - have had one for far longer than most bubble areas - where most local workers can’t afford to live here. That includes teachers, firemen, police, etc. - it (the entire county) is an enclave for the independently wealthy and upper-upper-”middle class”. All the “affordable” development has taken the form of super-cruddy exurb-style development in super-rural counties which are so desparate for ‘revenue’ and so petty-corrupt, that they’ll allow just about anything a developer wants. The profusion of manufactured housing ‘developments’ is a good example.
Although I’m generally a strong believer in allowing markets to work their magic, very few markets are truly “free” or un-distorted. One of the local sources of market distortion locally is the influx of people whose economic base isn’t local - therefore housing is disconnected from the rest of the local economic engine. Declines in local value-added engines (eg, manufacturing) aren’t reflected in declining population or declining housing values (like say, Detroit). The service economy (baristas, and other restaurant service workers) is super-healthy, but you can’t buy (as this blog notes) a $450k home on a McJob - at least not once that first reset on the ARM hits.
I suppose we could all emulate Aspen, Co, and simply build a worker housing enclave the next county over, and just bus those folks in, but I think that degree of haves vs. have-nots really isn’t good for the Democratic Society of self-sufficient, independent farmers that Thos. Jefferson (our original local-boy-made-good) - it’s much closer to wage serfdom.
The PHA is an attempt to have at least semi-affordable housing - to keep us from having a sign at the county border that says, ‘less than $150k/yr? Out of the county by sundown!’ This being the South, You can appreciate that such a thing is not really all that imaginative.
My brother managed the Chart House in Aspen…all of the people who worked at his place lived in that trailer enclave by the airport. They live 3/4 to a trailer. Believe it or not, the local businesses subsidize the trailer rent.
House Cost to Much. Buyer’s income cannot support these high prices. The only reason people paid those high price before, was because they were going to flip the house.
That party is over, and we are going to see a reversion to the mean. Prices will decline to the point where regular people with regular jobs can afford a regular house. These macmansions are SOL.
gordo, how are you adjusting to the Daytona area? Must be a bit of culture shock after NYC living. What do you like about it, what do you dislike?
What culture is there in either of the places anyway?
1 - Still, ‘for those who think the sky is falling, it’s just not happening,’ Rich Napier said.”
2 - ‘We expect the Richmond area to turn up sooner, because the housing industry here is in better shape than the nation,’ Chrisy Chmura said.”
Well, I guess that Virginia will lead the nation out of the bubble!
Here in the New York metro area, housing prices remain very high and very unfordable. While it is true that houses are spending more time on the market, if prices are coming down, I am not seeing it.
I feel it’s the same way here in NOVA. All this doom and gloom talk still haven’t dropped prices enough. I was actively looking in Fairfax (Fair Lakes area) last Sept - fiance’s idea, I was able to get it out of her system by telling her that things would drop by spring - but prices are still sitting at the exact same levels. Not only that, but things are actually selling, tho at a slower rate, but there are still buyers for this crap. I want a crash and I want it now! =]
“Richmond saw double-digit appreciation during 2005, but it never rose more than 20 percent as it did in the Northern Virginia area, which was hit harder by the softer market. ‘We expect the Richmond area to turn up sooner, because the housing industry here is in better shape than the nation,’ Chmura said.”
SO let me get this straight… Richmond ONLY went up
So let me get this straight… Richmond ONLY went up 15-20 % per year (less than 20% like Northern VA) therefore “its different here”?
““The number of foreclosures statewide jumped by 137 percent during the first three months of 2007, compared with the first quarter of 2006, according to RealtyTrac. A Richmond nonprofit agency estimates that 10,000 families in Virginia will have lost their homes by the end of the year.”
Am I reading this number correctly? Good gosh!
VA statewide foreclosures were up 137%
The Washington/Arlington/Alexandria VA region foreclosures were up 304.33% (On April 25, I made a little foreclosure chart based on the RealtyTrac numbers).
Foreclosures (from http://www.foreclosure.com).
“Active” Foreclosures 05/27/2007
Arlington: 11
Fairfax: 260
Loudoun: 171
Prince William: 418
Frederick: 38
Fauquier: 20
Culpeper: 24
Stafford: 79
“Active” Foreclosures 04/09/2007
Arlington: 8
Fairfax: 183
Loudoun: 116
Prince William: 255
Frederick: 24
Fauquier: 11
Culpeper: 18
Stafford: 51
The 10,000 number, that is … if things get to that scale, the bad news is really going to accelerate, especially if it’s happening in Northern VA, where there isn’t generally an employment problem.
Don’t you just love builders who give tens of thousands away in incentives, but refuse to lower their price. They’re trying to keep the prices up so they don’t take a bloodbath down the road, if prices would fall.
I guess if the incentives are working for them, and they must be. At some point, the credit well will finally truly dry up as defaults become a bigger and bigger nightmare for lenders and they will have no choice but to lower prices or hold their inventory for a very long time.
Hey! News from Home! We have had a very similar runup here in Central VA to NoVa, and affordability has just been really, really lousy. I’m glad to have been in the market to buy back in ‘97, and not to have HELOC’d my paper gains.
I am not sure things will get as bad here - we are somewhat buffered by having the University of Virginia as our largest employer, so employment stability is better. We did turn up on the WSJ’s Sub-Prime watch map, but Richmond is far worse, as is Tidewater. I am not terribly surprised by this as it’s been evident that prices for shacks were insane.
As someone who lives in a university town as well, I see two sides to that coin. (1) Universities provide stable employment and are therefore buffered from booms and busts; (2) Universities generally don’t pay terribly well, so there are a very limited number of local employees who can afford an expensive home. (I should add that faculty are notoriously thrifty, so that even if they can afford a more expensive home they are unlikely to splurge.)
The bottom line: it is hard to explain the runup in university town RE other than placing in the national RE bubble context.
I can vouch for the thrifty part. Maybe it’s a side-effect of all of those years as a grad student (eating ramen, milkcrate furniture). When I lived in a college town, I knew senior faculty members whose household income was equal to the value of their house. Granted, housing was much, much, cheaper than NoVA or San Diego, but nonetheless, they were perfectly happy with their house (nice 4br) and saw no need to move up or to live an extravgaent lifestyle.
I knew of one senior faculty member who was making $200k (world-renowned researcher), and when it was time to trade in his 10 year old Honda Accord, his wife finally convinced him that they should get something a little bit nicer, like a BMW 325. So, their combined income was >$250k, their PITI had to be less than $750/month, and he was reluctant to trade up from a $25k car to a $35k car.
Well, your point about lower salaries is correct; the thriftiness of faculty is not so much at issue.
The runup we’ve experienced, with the University-related properties, has been student housing: mom & dad buy a second (or third) home in which to house Biff & Buffy while they attend school and rent out rooms to Biff & Buffy’s friends, generally sufficiently to cover the financing. Biff & Buffy get a free house to live in, and Mumsie and Daddy have been selling at insane runups to offset the entire adventure - tuition & expenses for four years. It makes good economic sense. I think those days are over.
All that notwithstanding - that’s a micro-trend limited to University neighborhoods - the macro (county-wide) runup got underway here in 2001 - the general “affordability” problem has been with us for 20+ years. Most of ours is driven by the steady influx of super-wealthy folks seeking the small horse farm they looked for in Loudon and Faquier 50 years ago.
Albemarle County is only 58th in the nation (Arlington, for example, is 9th) in a per-capita measure, but the averaging down from the have-nots really skews that. I can’t find the number right now, but we have something like the 10th highest density of millionaires of any county in the country - I’m not sure how reliable that number is, but the general idea is that we have a lot of outside money driving up the market.
‘Everyone got used to the craziness,’ said Rich Napier, president of the Home Builders Association of Virginia. ‘We’re back to a more normal pace,’ he said.
No, Rich, this is not going to be a more normal pace, and you and a bunch of your friends in the BAV are not going to like the NEW craziness.
Is Mr. Napier really so clueless, closing his eyes like a pigeon and thinking the cat doesn’t exist?
I’m bullish !
http://biz.yahoo.com/ap/070529/economy.html?.v=2
he has to sleep on friends’ coaches.’
He shouldn’t complain, a lot of guys have to pay for that . . .
Economist Christine Chmura predicts, “We are near the bottom.” Sweetheart, I don’t know where you took your degree but you don’t seem to have a knack for economics. Try something else. How about becoming a realtor?
I bet she can turn a mean spatula…
You’d trust someone with this sense of timing cooking your food?
“She received her Ph.D. in Business with a major in Finance and a minor in Economics from Virginia Commonwealth University”
a) Her PhD is in business, not economics (I thought you had to have a degree in economics to call yourself and Economist. For example, mechanical engineers can’t call themselves surgeons).
b) She went to VCU, one of the worst universities in the state. She aint no Chris Thornberg.
c) At least she’s not the grad student at GMU that got her tuition paid for by NVAR.
“‘I’m not happy that it’s sitting there, but there are not that many $2 million buyers walking around out there,’ he said. Still, ‘for those who think the sky is falling, it’s just not happening,’ Napier said.”
Talk to me in 3 months when you’ve lowered the price 20%.
Right. And there aren’t that many $1,600,000 buyers walking around out there either.
There really aren’t that many $900,000 buyers walking around either. People forget just how much money that really is.
Maybe it’s approporiate for the article, Region sees fast rise in Foreclosures”, in the Daily Progress to have a bright bright ad to “Pick you OWN Strawberries” at Chiles Peach Orchard right next to it.
The Famous Strawberry” Pickers from California must be TOO BUSY Buying $720,000 Homes to help out here.
Ya know, given how outrageous the strawberry picker story is, I hope the family sells their story to Lifetime or something…
(I’m cutting Spanish speaking migrant farm workers a tiny bit of slack that they weren’t prepared to understand what it takes to buy a house)
Maybe that’s why I DON’T buy great big Castles while visiting Romania…I DON’T speak the Language ? ha ha Give me a Break !
Exactly, mikey. Don’t forget, the same word can have different meanings and definitions. Illegal immigrants tend to misunderstand what “Land of the FREE” means.
It’s not the castle, it’s the money. I have to believe that the magnitude of lending, where the lender is willing to give you money that they know you can’t pay back, and they don’t even really care whether you do… that has to be a first in terms of the history of Earth.
Plus, all the locals are doing it.
“Mackintosh said the silver lining in the market could be for buyers wanting to move up to a larger home. ‘There’s a lot going on where they can get a good deal,’ he said.”
How do you know if you are getting a good deal when prices just started dropping off their all-time highs relative to incomes and rents? If the correction plays out over six years, those who buy now will rue the day they jumped early on a ‘good deal.’
Mom lives in Frederick County, Maryland. She’ll need to have her house repainted and maybe some wood siding replaced within the next year or so. She got a few estimates, but they seem kind of on the higher side. I advised her to wait until the fall or spring and try those estimates again. The theory being, construction prices will go down as housing inventory continues to rise (as it looks like it will).
Here in Denver, there continue to be more foreclosures. They mainly tend to be crap houses in crap parts of town, and they’re too much money anyway ($225K to live in Thornton or Aurora? You gotta be kidding me). Lots of new condos in Denver being built, starting at $200K. Rents meanwhile are roughly $1 a square foot, per month, in nice neighborhoods near downtown.
My point is, prices still aren’t falling, nationwide. My theory behind this is that banks are still loaning too much money. Once banks tighten up even more on the lending standards, then prices might go down to reasonable levels. But there might not be a way to do this without causing some serious economic pain.
But here’s my question: What will cause the banks to tighten up? And by banks I really mean banks, central banks, governments, hedge funds, private equity firms, etc., etc. Because I don’t see what the catalyst will be. For all we talk about the subprime meltdown, the global credit machine didn’t skip a beat. They just switched to M&A. Losses don’t seem to matter anymore, particularly when our own government is going to start offering zero-down FHA loans to any and all comers. Someone elighten me because I don’t see it stopping.
Oh, it’ll stop. Soon those toxic MBS & CDOs will be marked to market — BOOM! “Sovereign Wealth Funds” (i.e., FCBs) are diversifying out of Treasuries & Agency debt — BOOM! Slowing exports are resulting in less dollar recycling — BOOM! The hits, they just keep a comin’…
Ode to Roger Miller…
Subprime for sale or rent
Rooms to let, we’re hellbent
No money, no pools of jack, just wait til’ the Credit Suisse resets
I ain’t got no prospects…
Ah, but 2 years of pushing my loan
Temporarily buys one a home
I’m a man of no means
King of the loan overlode…
I ALWAYS had a MINOR conflict between NAR’S “It’s a Buyers Market” crap and Dad’s “Never Make a Bad Move Quickly” Philosophy.
WHO do you TRUST ?
WAY to GO Dad !
Nope, still a sellers market. Most potential sellers can still get out with incredible gains if they bought before 2002. Those in big trouble paid at least twice or more what the homes are worth and are indebted beyond their wildest nightmares. I would rather be tarred and feathered than be one of the losers buying today or at any time in the last 4 years.
I don’t know when affordabilty departed the Washington region, but I do have my own data point.
In 2002, a single man such as myself (since married) was able to buy a 1400 sf. cape cod on 1/4 acre in downtown Rockville MD. Conforming mortgage, 20% down, 30 yearr. House was in working order, but needed renovations I have since done myself over time with no additional loans. Monthly PITI is cheaper than the rental equivalency.
Some argue the “bubble” started after Sept 11, others say before. I argue it didnt really even get going mad crazyness until 03 thru mid-late 05, at least in my part of Maryland.
Rental equivalency analysis is the key to valuing just about ANYTHING!
And the benefit of a small home? Cheaper energy costs and less furniture to buy!
In my neck of the woods (Loudoun), rent on a townhouse = PITI in summer 2002. Historically, PITI should be around 90% of rent. So, I’d say that 2002 was the first year that houses were overpriced, but not by too much.
Would you mind sharing what you paid? And whether you are walking distance to the Metro/new downtown library/etc.? Just curious. I currently rent walking distance to Twinbrook.
I paid ~$250k, and I’m about 15 miles from a metro. I don’t know where the closest library is. I’m about 10 miles to the closest movie theater or shopping mall (Fair Oaks), and 1/10th a mile from a Starbucks!
I think everyone is now a 1/10th of a mile from Starbucks…
I’m in Warrenton, VA, and we have no less than *three* Starbucks within a 2-mile radius. This was all in the last two years. Two of them are drive-through. We just brew our own at home, though.
Oh, and I’m 2 miles from where the Virginia Tech killer and the police killer went to high school. 8^(
Yeah, it was $328 K, about 4 blocks west of the old courthouse, so its very walkable to the library, restaurants, banks, law offices, 12-15 minute walk to metro, less if you grab a bus.
The nice thing is being able to do lots of things without needing a car. Cars are expensive to operate, walkin’s still free.
I wouldn’t advise anyone buying one of the new condos there, when rent on units in the same complex is about 1/2 of the month-to-month mortgage+condo fee amount !
Yeah, I looked at those on the web for about an hour one evening. It’s a good location, but I wasn’t all that thrilled with the floor plans. Then I took a look at the prices and just about lost it. No way, no how, not a chance. But it is worth keeping an eye on. Some neighborhoods will crash and burn when the forclosures really pick up, but I think that the town government won’t let that happen to the downtown development area even if they have to up policing. They have really pinned their hats on it working and besides, the town offices are there. And it has the long term advantage of being near the Metro.
My one imutable rule is that long-term I have to be within walking distance of public transportation and basic services (pharmacy, groceries, a few other shops, a restaurant or two). Driving in this area is stressful. I had to drive to Baltimore twice a week when I was finishing my LLM and it was worse than 5 days a week commuting on the Garden State Parkway.
Keeping it real . . .
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKQoeHb1MraI&refer=home
From the article:
“Subprime loans are given to borrowers with bad or incomplete credit histories. About eight in 10 subprime mortgages made in 2005 and 2006 had adjustable rates, according to Credit Suisse Group, meaning that borrowers will have to pay higher monthly interest rates after a pre-determined period, usually two years.”
Wrong. With an ARM, the buyer will have to pay higher interest only if the interest rate that the ARM is tied to (libor, etc) goes up. If they know the payment is going up, this isn’t just an ARM, it’s likely a teaser-rate tied to some type of suicide loan. You would think, by now, the media would have a little better understanding of the types of mortgages out there.
close tag. doh
close tag again?
“We’re still being hit pretty hard by the subprime-related mortgage market problem,” Seiders said. “One of the biggest unknowns right now is how serious the change on the mortgages side will be on home sales.”
It’s going to be SERIOUS as a major Heart Attack CLOWN!
“‘I’m not happy that it’s sitting there, but there are not that many $2 million buyers walking around out there,’ he said. Still, ‘for those who think the sky is falling, it’s just not happening,’ Napier said.”
It’s called denial fool. $2 mil house in richmond? lol!
C’mon, there must be at least several well-to-do narcotics dealers there who could afford that.
“Prime Home Builders, a closely held company in Fort Lauderdale, Florida, is advertising a 23 percent discount on a new four-bedroom townhouse with two and half bathrooms in Naples, Florida. The price was slashed to $344,169 from $449,258 in a development where about half the units have been sold, said Keith Thompson, a marketing consultant with Prime Home Builders.”
Imagine the moment where you realize you just took a $100K haircut on your new $450k home….
Philly_guy,
But they are OK with the loss because they bought a home, not an investment…
The US Housing Market is like Fire. It’s works GREAT, until you misuse it and Get BURNED.
Thank God for Ben, other Blogs and the internet now so all the Crispy Critters can scream…”I DON’T like Pain..It HURTS!” and others CAN LEARN.
This REIC and the MSM crowd could have and would have SCAMMED isolated and individual local Buyers FOREVER because they had NO NATIONAL MEDIUM to Complain !
The ONLY real surprise to the REIC Gang was that they got caught… Nationwide!
Ooops!…”COUNTRYWIDE” ?
I rent in DC - - got out here in early 2004 from the Military and was shocked at the housing affortability situation. I’ve been watching the RE machine print money for three years. I’m glad to see a post on our situation here.
Basically, what went before still goes: until I can purchase, on my relatively high salary, a dumpy little starter home in a neighborhood where I won’t get stabbed, I ain’t buying. I expect that to occur in approximately eight months.
When people like me don’t buy dumpy little starter homes, people can’t move out of dumpy little starter homes into nicer single family places. And so on, up the chain.
Popcorn.
“Dumpy little starter home” in my ‘hood is ten times median income. I have never got stabbed but have seen shootings.
We’re on the same page - - about 8 to 10 times salary. I don’t expect anything fancy, but I just can’t afford to put 75-80% of my net pay into a mortgage, especially for a dump.
i’d say closer to 18 more months… FedGov still printing the funny money that the local economy feeds on.
When people like me don’t buy dumpy little starter homes, people can’t move out of dumpy little starter homes into nicer single family places. And so on, up the chain.
That’s about the size of it. Wife and I are No.Va. residents just waiting on the sidelines, as well. It’s difficult sometimes, when you still see fools plunking down $700k for Cape Cods with window-unit AC, but just remember that there are fools born everyday.
ChrisO:
It will happen in time my friend. In the TH development that I rent in outside of Old Town, about 10 units have been for sale/rent for the past 3 months. 1 has gone under contract- let’s see if it closes. I believe 4-5 were re-listed after not selling last year. A few have the lockboxes. Generally, owners are asking 550-650 for most. After renting one for the past few months, I would not even buy one for the 200-250 that they were originally going for in 2000-2001. All of the walls are wavy, the windows are terrible, the insulation and wood flooring is crap, etc. Also, since October, 2-3 units have had water pipes burst when no one was home.
I’m here in LOW (Outside of Fredericksburg) and the # of houses up for sale is staggering. I have 5 in a row on my street ranging from 259K to 599K. With a bedroom difference in the various models.
The lakefront houses that are not moving are priced in the mid 700’s.
Some of these houses have DOM of 180-360.
I’ve been here 8 months and seen only a handful of the 100+ houses sell.
I really need to post a picture of my favorite, a lakefront property that is literally about to fall down. It needs to be condemmed.
Apparently, there is a buyer at 500K but the owner won’t budge from 519K.
I’d offer 200K for the lot and $50 bucks for the free firewood.
Check out Zillow or Realty Trac for 22508 and explain to me how non lake front houses can range from 220K to 650K?
Even a recently updated home can’t have 400K worth of granite countertops!
Unreal.
If you check the Washington Post’s Sunday RE section, there is a house in 4 corners that they want something like 835K for because there have been 200K worth of upgrades since 2005. Some people are trying to get out of their HELOC hell by asking for all they owe. Good luck, and extra salt on my popcorn please.
inventories reached a 15-year high.”
I like the ring to 15 year high! lol!
Got 20% down?
Help needed:::
Please advise if it is worth buying from a builder in Kearneysville, WV(DC suburb). Details are: Builder Ryan, house is 3100 sq. feet plus basement.
The builder is offering 50% off options and base price is close to 300K. Is it worth buying it for $350k(with 100K options). This house sold for 400K
last summer with all major options.
Is anywhere in West Virginia really a DC suburb? I know places in VA like Arlington and Alexandria and Vienna are suburban DC, but WV?
If you really want to buy this house, understand that you currently have this builder by the nuts. Drive a harder bargain. And make sure you make your offer contingent on a pre-closing inspection. If Mr. Builder balks, walk. That place is going to be cheaper in six months anyway.
What is a pre-closing inspection? Is it needed even if the house is new?
The way houses have been built the last few years, I’d say yes, the inspection is necessary.
He he. I work in Kearneysville but live in VA. There are lots of builders Toll, NVR, Ryan, etc in the Martinsburg/Charlestown area with lots of inventory to unload. Shop around and play them off each other for best price. I think of Jefferson County, WV as a suburb of Loudoun County which is beginning to look more city-fied every day.
Which one of these is it?
Link to “The Villages at Washington Trail”: http://tinyurl.com/35msua
It is the Villages at WT, and Ryan homes. I was thinking of the Avalon model. Do you think th ebuilder would give all options free in the base price.
Here in Maryland, watching this Bubble burst is like watching paint dry… it is SO SLOW!! We still have plenty of junk on the market that has doubled in price (but not value!) in the past few years. Plenty of unneeded new developments going in. Plenty of grand plans for how wonderful everything will be down the line, if you can just ignore the 50% increase in utility rates starting this month and the higher taxes planned for next year. Yep, it’ll all be wonderful. The government will save us, or the BRAC will save us, or “housing always goes up!” or some other BS.
And still the worthless houses sit: A 2 bed, 1 bath junker in Glen Burnie that was last listed for $265,000. No, it doesn’t have central air, either. Maybe it was a misprint and he meant “2 for $65,000 each” since that’s about what it is worth. $600,000 developments in Columbia that are “affordable” - for who? Drug dealers? New McMansions being thrown up here, there, and everywhere, and nothing for sale under $200,000, and little for under $250,000 to $300,000, and that is in the “okay” areas. And yet most people scrap buy on well under $80,000 a year. Tell me again how the math works on all this nonsense?!
I can’t wait for this idiocy to end. Weakness is showing, prices are sliding a bit here and there, but it is like trying to throw a train in reverse. It is just taking forever!
I agree completely. It takes a long time to turn the Titanic around… and that’s just what the greater DC metro area RE mindset is. There are a lot of people who are not thinking long term or at least long term RE plateau… like the WP article where the guy with 7 kids is going to ride it out. Things will start to shift in Aug/Sept as rates reset, Freddie Mac changes occur, lack of vacation sinks in, and kids start their demand for back to school stuff. Then in Jan/Feb, after a tight holiday season, you will see lots more homes on the market at lower prices. Barring a sudden and large drop in prices before then, next spring should be a bonanza.