It’s All Coming Home To Roost In Virginia
The Rock Town Weekly reports from Virginia. “Heidi Sallee and her husband, Dave, have done most of the things required to sell a house. The 3,000-square-foot house in Lakewood has been on the market since mid-May and Dave starts a job at Radford University near Blacksburg the second week in August. Initially the house was priced at $389,900 but the Sallees dropped the price to $359,900.”
“‘We’re renting in Blacksburg,’ Sallee said. ‘We don’t want to buy until we sell this house.’”
“The Sallees are sellers in a buyer’s market. And the buyers are reluctant, said Sallye Trobaugh, president of the Harrisonburg Rockingham Association of Realtors. ‘I think the market in Harrisonburg and Rockingham County is recovering,’ Trobaugh said. ‘But consumer confidence is wavering because of the national news of a housing slump.’”
“Trobaugh suggests pricing the home according to other houses that are being sold and consider the time frame. ‘If you need to sell immediately, price it in the lowest range you can,’ she said. Pricing in the higher range in a buyer’s market is risky, she added.”
“‘People look at the house and look at it and then they stop looking,’ Trobaugh said. ‘And then you’ve hurt yourself.’”
“‘In Winchester and Northern Virginia, there were dozens of national builders who overbuilt,’ said Matthew Robertson, president and partner of Stratford Companies Inc.”
“Harrisonburg and Rockingham County has a good number of homes priced above $600,000, which are slower to sell, says Rodney Williams of Coldwell Banker Funkhouser Realtors. ‘I had a home listed at nearly $1 million. The owner got an offer for $800,000 and didn’t take [it],’ Williams said. ‘Now the home is listed at $699,000.’”
“The high-end market tends to see less movement, Trobaugh said. High-priced existing homes also are competing with new construction, she added. ‘If I’m going to spend $900,000 on a house,’ she said. “The thinking is, ‘Why not build exactly what I want?’”
The Examiner from Virginia. “Fairfax County saw five times the number of home foreclosures in the first half of 2007 as it had during the same period last year, according to county figures. ‘Fairfax, basically, is not immune from what’s going on in the rest of the country,’ said Ira Rheingold, executive director of the National Association of Consumer Advocates.”
“Rheingold said the issue is rooted in the popular misconception that lenders won’t qualify people for loans they don’t have the ability to pay for. ‘Time and again, there were loans being made that people could not afford,’ he said. ‘Now it’s all coming home to roost.’”
The Connection from Virginia. “There were only seven homes listed as foreclosed under a Herndon address throughout 2006 according to a real estate database run by Metropolitan Regional Information Systems, Inc. But as the national housing market began to cool off and homes began to sit on the market for longer periods, the dust of the regional real estate boom began to settle.”
“‘Foreclosures used to only traditionally happen when you had to face death, bankruptcy or divorce,’ said real estate agent Jeff Shumaker. ‘But now we’re starting to see all over that it’s no longer the case. People with jobs, with family incomes are starting to default throughout the whole area.’”
“In the first six months of 2007, there have already been 51 properties listed as foreclosed in Herndon, according to real estate figures. As some agents do not list their homes as foreclosed outright, that number is ‘more realistically 70 to 80,’ said Schumaker.”
“‘People were buying at the height of the market and they were getting into these loans that they just couldn’t afford,’ he said. ‘It was the people who got loans who had no ability to pay off these loans, that’s who we are seeing popping up in these foreclosures.’”
“Five years ago, with residential and commercial expansion drenching the local economy with new jobs and housing options, the easiest investment in the world to a number of area residents appeared to be in real estate, Shumaker said.”
“‘It blew up very quickly, the property value escalated at a huge rate,’ he said. ‘Everyone was buying into this pipe dream that they were going to be rich overnight through property ownership.’”
“And when some lenders began to take notice of the land grab, ‘unethical practices’ were brought into play, according to Shumaker.”
“‘You had people who had no business getting mortgages, and these lenders were filling out their applications for them, putting down whatever it took to get them approved,’ Shumaker said.”
‘”These people would have never received their mortgages if they would have filed them normally. They were giving out loans to anybody with a heartbeat.’”
“‘You now have an industry that has basically imploded on itself,’ said Shumaker. ‘When the market came down, tons of jobs in the [construction] industry were lost, drying up a large amount of the cash used to pay mortgages.’”
“And the growing immigrant and Hispanic population, many of whom were depending on home construction and related jobs as a main source of income, faced the brunt of the deflating housing balloon. More than half of the foreclosed homes in Herndon that Shumaker has sold over the course of the year belonged to Hispanic residents.”
“‘I saw definitely that there was predatory lending, and that the Hispanic families were being targeted,’ said Jorge Figueredo, president of a regional bank catering to the Hispanic population.”
“While working as the executive director of the Hispanic Committee of Virginia five years ago, Figueredo and others recognized these practices and worked with other non-profit and Hispanic groups to set up safe home-buying seminars. ‘One thing is what you desire, but another is what you can afford’ was our motto,’ he said.”
From NBC4.com. “Real estate experts said too many condominiums are being built, and too much inventory is forcing prices down. On Massachusetts Avenue, new condos are under construction just around the block from condos that have been on the market two years.”
“A new report by Delta Associates found there are more than 20,000 new condos for sale in the D.C. area. The report said another 18,000 are brought on the market every three years.”
“William Rich, Delta’s vice president, said buyers backing out are hurting sales.”
“Experts said Maryland is also facing a condo glut. Of the 600 new residential units at Rockville Square…most are being offered as rentals.”
From Delaware
‘Sussex County is experiencing the highest number of foreclosures in years due to so-called exotic mortgages. So far this year, there have been 511 reported foreclosures in Sussex County, most of them in June, reported the Office of the State Banking Commissioner. That’s 30 percent more than the previous high of 396 foreclosures reported in 2003.’
‘ The highest concentration of foreclosures is in the Georgetown, Seaford and Laurel areas, said Gerry Kelly, Delaware’s deputy bank commissioner for consumer affairs. The increase in foreclosures is being blamed on exotic mortgages, which include subprime mortgages and quickly adjusting loans.’
‘Subprime mortgages and loan programs were being offered just to move houses in the past and now residents are paying for it.
And I’m a bit surprised at the fact that foreclosures are highest in inland areas like G-town and Laurel. They are working class towns set apart from the tourist areas. Given the fact that much or most of neighboring towns near the beach like Rehoboth, Dewey, etc are 2nd/vacation house towns, I would expect those areas to implode first. Take a trip down the Delmarva penninsula on Highway 1 and you’ll see more new McMansions than you’ll ever need to.
“And the growing immigrant and Hispanic population, many of whom were depending on home construction and related jobs as a main source of income, faced the brunt of the deflating housing balloon. More than half of the foreclosed homes in Herndon that Shumaker has sold over the course of the year belonged to Hispanic residents.”
This is why we should not let illegals into the country. Because they keep wages down, and people stick them with homes they can’t afford.
Good points Tom, it’s terrible when people go from cardboard boxes in Mexico to homes they can’t afford, very sad
I predict there will be a card board box bubble soon.
Good thinking Tom, with the retreat of many back to Mexico we should be getting long cardboard box futures, they will need housing!
I just bought some puts on cardboard boxes.
A couple of weeks ago I went through all the listings in Manassas Park, VA and out of 243 houses For Sale 53 of them were either banked own, short sale or in some part of a foreclosure. 44 of the 53 where own by Hispanics.
Food for thought
“44 of the 53 where own by Hispanics”
im gonna take a wild, unsubstantiated guess at the reason..
Newer immigrants lacked enough time to become aware of the underlying complexities of this society and it’s economy and so lack a appropriate amount of fear…
Of course a lot of natives were sucked in also, so i suppose the root problem is ignorance.
WOW. Good catch.
Sorry when I gave those figures I was at work so now that I am home and I have the data infront of me here you go.
240 houses were listed
50 were either banked own, short sale or in some part of a foreclosure
44 of the 50 where own by Hispanics
That reason is a bit suspicious. Educated people from places like England take some of the jobs that I might be interested in, not some peasants from south of the border.
“And the growing immigrant and Hispanic population, many of whom were depending on home construction and related jobs as a main source of income, faced the brunt of the deflating housing balloon. More than half of the foreclosed homes in Herndon that Shumaker has sold over the course of the year belonged to Hispanic residents.”
- Is this the ‘California’ post or the ‘Virginia’ post? I can’t tell the difference.
Caught that to. Must be that all illegal immigration is local.
Plenty of immigrants here in the DC Metro (which includes northern VA), but from different countries… biggest population here is from El Salvador, not many Mexicans. In fact, it’s damn near impossible to find authentic Mexican food in DC; most every “Mexican” restaurant is really a Salvadoran restaurant that added Mexican items to the menu to suit American tastes.
“…people stick them with homes they can’t afford…”
From what I can gather few people are getting “stuck” with anything or being taken advantage of.
For instance, the cleaning lady at my job “owns” a pair of 600K properties in the DC Metro area.
She and her husband who works as construction contractor bought the places with the specific intent of renting them out to other immigrants, eventually reselling them and heading home with a heap of cash.
“She and her husband who works as construction contractor bought the places with the specific intent of renting them out to other immigrants, eventually reselling them and heading home with a heap of cash.”
Wasn’t there a story here in the blog not long ago about immigrants who were doing exactly that and then got stuck because their tenants moved on due to lack of work?
And, they increase competition for available resources, thereby leading to price inflation.
“‘I saw definitely that there was predatory lending, and that the Hispanic families were being targeted,’ said Jorge Figueredo, president of a regional bank catering to the Hispanic population.”
Everyone was being targeted you racist dipsh*t.
we were all targets. some of us are just smart enough to realize that we should not buy things we cannot afford.
Testify, Florida Watcher. A “regional bank catering to the Hispanic population”. Imagine if someone had a bank “catering to the Anglo population”. Wow, would you ever hear about it. Time we called these race mongering idiots for what they are. The “advocacy group” called “La Raza”, means “The Race”. Just plain vicious, IMHO. This sort of thing should not be accepted in this country. If you can’t cater to Americans of whatever race or ethnicity, period, you shouldn’t have a business license. Isn’t that what the civil rights movement was all about?
You summed up what I was trying to communicate palmetto. You summed up the situation perfectly.
Yes, testify, FW. I was thinking the same thing. Furthermore, he had a bird’s eye view of predatory lending, I’m sure HIS bank was doing it.
FYI to all, I ran a D&B report, and came up with his name as the secretary (not the president) of Security One Bank, 5881 Leesburg Pike Suite 203, Falls Church, VA.
Agreed Chad, “he who smelled it dealt it.”
LOL, how true.
“Isn’t that what the civil rights movement was all about? ”
Many thought so at the time, yes. Now? Civil rights is just another rent seeking industry trying to justify its continued existence by practicing a variety of forms of extortion.
Kind of like what “ARP” does for “elderly” folks.
In a few months, I’ll be able to start trashing membership offers from the AARP. I can’t wait.
” A “regional bank catering to the Hispanic population”. ”
That phrase probably doesn’t mean a heck of a lot, except they made sure a chunk of their front office staff spoke Spanish and advertised in Spanish in whatever newpapers or radio stations were prominent in those communities. I’m sure that you would not have been turned away or discouraged in any way of availing yourself of their services if you had walked in their door.
But you wouldn’t have wanted what they were selling.
Not to fan the flames, but that would be pretty much every other bank in the country. Redlining is real.
Redlining has expanded to included everyone the shysters think they can get. That was Florida Watcher’s point. I was “redlined”, Chase offered me a half million dollar mortgage I couldn’t afford and they dang well knew it. Yep, I was a potential target, just like anyone else. Hispanic has nothing to do with it.
Hey Palmetto,
as a white american, I am officially part of a minority here in NYC. Maybe I should try to find out what programs and handouts are available to me as a minority group member. Is there an advocacy group called “The Race” which will aggressively attack anyone who gets in my way? Can I find a regional bank which caters to members of the white community? Will Amnesty International defend my right to go to any country I please, forge documents and demand health and welfare benefits, as well as a path to citizenship and anything else I can dream up?
After all, I demand equal protection–if other ethnic groups act like balkan countries, why should white americans restrain themselves?
Immigrants are needed to support our Seniors comfortable way of living.
“Immigrants are needed to support our Seniors comfortable way of living.”
Bogus. Immigrants cost taxpayers hugely, return very little.
They run up property taxes for education for their children, bilingual teachers, etc. They use highways, libraries, roads, parks and other public amenities for which they pay nothing. They bankrupt hospitals when they show up for emergency care with no insurance. They drop an anchor baby or two to grab welfare benefits and food stamps. They dump their elderly relatives on SSi disability (no citizenship required). And that’s just a partial list. Add to that the 1 million plus alien felons now in American jails.
Yeah, they do wonders for America.
I’m talking about the legal ones, not the illegals.
(Off topic) California
Was talking to a friend who owns a real estate company in California and he was telling me that in Tustin they had only 37 transactions all year for homes ranging in price from $500,000 to 700,000, which is the median price out there. That blew me away, things must be much worse in California than is being reported.
FW: Not sure how to guage 37 transaction for a “real estate” company. I pressume you mean 6%’er aka Realtor / Broker. How many people involved ? If it is one person, 37 is good biz.
37 transactions for the entire city for the entire year in the $500,000 to $700,000 range. Tustin used to have 37 transactions in that price range each month.
Business is way, way down in California transactionally. I do not believe what the media is reporting out there regarding how bad things are.
Wow- you are right 37 for a city is negligable.
Your friends must be reporting escrow closings (commission paid); the media will keep reporting “entered escrow” as a sale. But the later doesn’t pay the bills… only the former.
I’ve heard various numbers on the conversion factors from entered escrow to closed escrow. Is anyone blogging this?
Got popcorn?
Neil
Hey Got Popcorn (Neil) entering escrow doesn’t mean anything just ask the people who’s homes have fallen out 3 or 4 times. Are you telling me that every time they enter a new escrow the media is reporting this as a sale? What a scam and fraud the officially reported sales numbers are then.
I talked to a friend yesterday who is working on the Huntington Beach project on the mesa next to the wet lands of the 350 units going in, they have 13 left he said all the others are sold. Now, they are not done yet, and who knows how many are going to back out, or maybe they are tightening up the legal ease of backing out now? Then again maybe he is over stating the numbers as well…but it is prime RE in the middle of moron ville so I wouldn’t be surprised to see 50% of those being speculators as well.
Wonder how many won’t be able to get approved for mortgages on those phantom sales.
I can tell you this - the builder is grinding the hell out of him to build these houses now. He went into a meeting with his checkbook it was getting so ridiculous and asked them how much he should pay them to build these houses now. They thought that was a bit over the top, but it shows how desperate they are to make a profit and how scared they are to extend themselves with this high end project. If this was last year I doubt they would be sweating the small stuff and working on a tiny budget and hard timing a builder working on a 5% margin asking for another 10% off.
Just talked to my boss about this and he said that this was wrong as the guy who is selling these asked him the other day if he would like to see them. There is a waiting list, but I guess as far as purchasing these that hasn’t happened yet…..so whatever.
Good God Patricio, I hope your friend makes sure the people fronting the project have the liquidity to pay him so he doesn’t have to get stuck filing liens or suing them to collect.
I can’t help thinking that what’s happening — and what is soon to happen — in the housing market will be a major issue in the 2008 Presidential election.
It will certainly have an effect. It will make the mess in Iraq, which is driving politics today, seem less important.
Basically the 60s generation is now running everything — it accounts for just about all the candidates, save Obama. And they have been re-debating the issues of their youth by seeing the current conflict with and within Islam through those eyes. Cultural issues are also in the forefront.
Once the campaign gets beyond the activists, however, the economy, the safety net for those adversely affected, and the cost of that safety net will come to the fore.
I think you’re wrong. When people think about how much is being wasted each month versus what the Fed makes available to your average citizen, I think people will get more upset over Iraq… in other words, it will be the rock in the shoe underlying all issues related to satisfaction with government (thus masking underlying issues of class, etc.)
Will it help Ron Paul or will the general population buy some proposed *economic magic* where the government taxes/borrows us into prosperity?
See The Secret sales figures for your answer.
Too right it will. Economic performance at that snapshot in time influences voter decisions.
The top dog in every country likes to take cudo’s for how good economy is doing on their watch. Similarly, They’ll try not to but will get blammed it for going in the crapper.
IMO, the repub’s will take a hammering. Even if they could re-incarnate Lilcoln or Washington as a candidate for GOP, he would still loose. Come to think of it, we are such a superficial voter base who are influenced by celebrity, neither of them would get voted in.
Lanky and dour Lincoln would make John Kerry look like Brad Pitt and wooden teeth Washington would well, make the inbreeds from “Deliverance”, photogenic.
As for the ‘MBA president’, who should have an understanding of economics, least said the better. I just hope he goes quietly. Tech bust was not Bush’s fault but what happened afterwards, fast forward to today.He has the inverse Midas touch.
On the otherhand, I have no faith in “Dems”.
Au contaire. The reason the Repubs threw the election to the Dems was to keep the border open and so they could blame the impending economic disaster on them. Both Dems and Repubs are responsible for non-enforcement of our laws and creating the environment for this mess. But I bet the Dems end up being the fall guys.
Me, I’m voting for Ron Paul.
What impending disaster????? The comments on this blog are hilarious sometimes.
“I can’t buy a house so the entire economy must collapse”
I got to agree…. Outlandish statements are funniest. Like “The reason the Repubs threw the election to the Dems”.
As if the repugs weren’t desperately hanging on to power.
hehe .. well who knows what’ll happen and who will get the blame? or credit?
The ultimate result will be a huge glut of surplus housing units of various flavors.. most of them easily available at prices in line with incomes.. aka “affordable housing” for anyone who can scrape together a few bucks.
And then maybe the GOP will try to reclaim the “blame” for this disaster..
Trust me, there is nothing to reclaim. It’s their creation, they own it.
imo, the blame lies with everyone who participated..
But politically, what matters is the sheeple’s opinion, which is quite easy to manipulate.
I got my finger poised over the mute button and am all set for Round 2 of “It’s the economy, stupid.”
“But politically, what matters is the sheeple’s opinion, which is quite easy to manipulate.”
Only if it doesn’t go in your favor. Otherwise, their opinion is acceptable.
“I can’t buy a house so the entire economy must collapse”
Err, if housing prices drop 50%, then we’ll have banks going under like it’s ‘32. Do the math, seriously.
And yeah, your deposits are insured. But where, exactly, do you think the money to pay off the failures will come from?
Might not be so bad, true, but I think it’s up to folks like you to explain why it won’t, rather than up to me to explain why it will - the numbers speak for themselves.
If you have some stake in it, then sheeple opinion and the consequent election results matter.. but what more can we do but vote? After that, life goes on and people adapt or die.
cool
I like when he brought in more $ than St John
DD- I don’t think the Repubs want to hand over power via a “throw away election” to the Dems. They are not that clever.
They are not Wall Street who will ramp something up and then sell out to the public.
“he would still loose”…this reminds me….there are handwritten sighns going up all over Orlando that say “don’t LOOSE your house to foreclusre call 555-555-5555.”
Loose or lose. Their or there or they’re. It’s or its. “…for my wife and I” instead of “…for my wife and me.” I even saw one poster here use “he’s” instead of “his,” i.e., “He tried to rent he’s house.” It was used several times, so not a typo.
This stuff shows up in newspapers, magazines, periodicals, and the broadcast media. In another generation or two, people will be totally incapable of communicating coherently. The fraudsters will then have a field day when no one can read. Oh, that’s another one seen here- noone instead of no one.
Rant off.
“This stuff shows up in newspapers, magazines, periodicals, and the broadcast media. In another generation or two, people will be totally incapable of communicating coherently.”
And while we’re at it, nite instead of night. After all, it makes much more sense to spell things a certain way because that’s how they were pronounced in 1400 A.D.
Sheesh, language changes, accept it and move on. Some rationalization of spelling in English would *not* be a bad thing.
“the issue is rooted in the popular misconception that lenders won’t qualify people for loans they don’t have the ability to pay for”
When did the idea that bankers wouldn’t loan you “too much” money supercede the fundamental need of all borrowers to figure out what THEY could afford?
I know we’re pretty far down the road of someone else ALWAYS being the cause of our, personal, problems and ALWAYS expecting others to look out for us but, come on! These are loans of hundreds of thousands of dollars!
If the only benefit of this debacle is that people, generally, go back to understanding that they have to look out for themselves FIRST, then I’d argue that the billions lost may actually be worth it.
” the issue is rooted in the popular misconception that lenders won’t qualify people for loans they don’t have the ability to pay for.”
Actually, this statement is right on. The lenders have the final say as to whether a deal is financed or not. This final say used to be predicated on whether the loan would be paid back or not. The lenders used to care about the loan being paid back because they used to have to keep the risk that went with the loans.
But the financial machinery evolved to a point where the lender could pass the risk off to someone else, thus the lender began to stop caring whether the loan was ever going to be repaid.
This situation only began to reverse itself when the lenders were forced to once again hold onto the risk assoiciated with the loans they were making.
Also ,there is a problem with how the loan risk was rated that caused loan investors to buy loans based on a understated risk .
Certainly if the only way the lenders could get funds is by misrepresentation of risk ,and the only way the borrowers could get funds is by liar loans that misrepresented risk ,we had loan funds given based on fraud .Last time I checked ,fraud was illegal .
You really wonder why the lenders agents were given a commission if they had no duty to underwrite and prevent fraud . You really wonder why the appraiser was given a fee if they had no duty to give a true market value .
The borrower had a duty to present a loan application ,void of fraud . The borrower had a duty to not buy something they knew they couldn’t afford . In some cases the borrower didn’t really know what they could afford and they relied on the underwriting of the bank to determine it, and others simply bought the sales pitch that they could refinance the loan they knew they couldn’t afford long term . Borrowers and lenders alike were betting that real estate going up would hide all loan sins .
In many cases the borrower is not this victim that they are making themselves out to be .The borrower was in on the investment scheme where the loan industry gave them the means to get a undeserved loan .
But , there would be alot of borrowers that would assume that the bank knows best ,(based on long term prior lending standards ),and this is especially true with first time buyers and uneducated people .
The lenders agents are vunerable because they failed in their duty to underwrite loans and prevent fraud . In fact they passed on loans they knew were fraudulent and they pressured
appraisers to hit the mark. There are laws against this sort of business practice .
The lenders and industry people were helping the borrowers commit fraud for personal gain ,so you can’t say they are not in on some blame .I have said it many a time ,it was a group effort .In some cases the lender is innocent and they were taken in by a crime ring .
If our business systems are so corrupt ,that the only party to blame is the one that signed on the dotted line ,than it will reach a point that borrowers will feel they have no protection under the law and borrowers won’t buy anymore . The “buyer beware “,laws were in part replaced by some duty on the part of all parties involved in a transaction . A fraudulent contract is a voidable contract in alot of states .
Anyway ,sorry for the rant . I’m just saying that many parties are to blame for the record-breaking foreclosure rate we are seeing now . They have a concept in law about a parties contribution to the negligence of a situation ,that might come into play in alot of these cases .
Disclaimer (No, I’m not a lawyer, so do your own research ).
“Experts said Maryland is also facing a condo glut. Of the 600 new residential units at Rockville Square…most are being offered as rentals.”
I was talking to a coworker just this morning about the housing market north of DC (we work in Rockville). He rents now and is looking to buy a yet-to-be-built condo located just south of Frederick. He was on the phone this morning to a sales agent for the complex and she told him that last month she completely sold out one building that had just been completed. But, she added, seeing as sales have slowed somewhat recently, they are knocking off $15K bring the price near $350K.
He said (to me) that was BS and he was being hustled. He said he might offer $300K, possibly $325K. I told him that prices are going to drop a lot more than that and mentioned how they had to turn 3 of the four new condo building in Rockville Square into apartments because of lackluster sales. He is still going to go look this weekend at the condos and offer $300K, but he may also wait one more year.
Offering 300K is way too much for a condo, even in Rockville. And time will prove it.
Especially in Rockville.
Hey, don’t you mean North Bethesda! LOL
Hey, Ive been to those condos, at least the brewpub underneath them. Believe it or not, they have a couple of million dollar units there. One million dollars. For a condo unit. IN ROCKVILLE.
$300,000 for a condo south of Frederick, Maryland! Really?
Uh, I think you can go lower.
A condo south of Frederick? As in, not Frederick. How far south? Germantown? Or way up in Urbana? My gawd, that price a bit dear for a *condo*, at least up there.
I would love to be there when he throws his $300k offer on the table. Obviously, the first thing the sales agent will want to do is pounce on it and have him sign it all in 10 seconds, but with true corporate-instilled discipline, she will grimace, bargain, and in the end squeeze him for that extra $5k or so. And he’ll walk away feeling good. Arrghhh!
Tell the fool not to even go up there till this all plays out. If he’s buying it as an investment, he’ll get burned. If he’s buying it to live in, it’s like a really expensive 30-year lease.
And, well, uh, I can hardly imagine living in a condo in rural Frederick County. You know the old saying, right? “All the conveniences of the country, and the space and quiet of city living.”
Things are still selling in Montgomery County. Met a guy who just moved here who settled on his Potomac house last week. It was on the market about four months. Know another who got a non-contingent offer on his Rockville house this week after about three months on the market and 18% worth of serial reductions. He and his wife knew the situation and were quite aggressive in their reductions. But they owned it for about 14 years and no HELOCs or serial refis, so they’ll still make out just fine.
Unfortunately they’re the ones who bought their retirement place in the Daytona Beach area in Spring 2006. That house has probably lost 20% of its value in the last year.
It’s in Urbana, but he didn’t know the address. He was actually pretty aware of the housing situation. I only started this job recently, but he told me he’s been looking for a year knowing that something has to give.
Oh my, a condo in Urbana. Noooooooo!
Let me count the disadvantages:
(1) Dead, dead, dead nightlife and restaurant scene. On the good side of the coin, there IS a supermarket, at least.
(2) Too much buildable land in Frederick, which can keep a lid on prices over the long run.
(3) I-270 is one of the worst commutes in DC Metro, and no plan to widen it for 15 more years.
(4) Frederick County people think condos are a weird way to live; that can affect the resale by removing lots of local yokels from the buyer pool.
I wouldn’t do it. A townhouse if he must, but never a condo. Not there. And certainly not for $300k.
““Harrisonburg and Rockingham County has a good number of homes priced above $600,000, which are slower to sell, says Rodney Williams of Coldwell Banker Funkhouser Realtors. ‘I had a home listed at nearly $1 million. The owner got an offer for $800,000 and didn’t take [it],’ Williams said. ‘Now the home is listed at $699,000.’”
Whats the Avg Salary in the region ? Only some $30K annual.
At 800K this must be another example of homes going 5-6x in 10 years. Avg home is only some $125K… WTF I bet a fat +60% decline may happen in Harrisonburg to get back to fundementals.
http://www.infoplease.com/us/census/data/virginia/harrisonburg/economic.html
A classic race to the bottom.
Virginia is very over-priced. I was in Richmond recently…..WOW. Nice area, but substantially over-priced.
So is the Hampton Roads area ( Norfolk/Va Beach and surrounding areas for those that are unsure where Hampton Roads is). A week or so ago the local paper ran a story about the woeful national housing market and another story beside about how Hampton Roads was still going strong. Yet according to this link inventory keeps going up.
http://www.housingtracker.net/askingprices/Virginia/VirginiaBeach-Norfolk-NewportNews/
Methinks this area is heading for a big adjustment soon…
Good Point. The affordability issue cannot be avoided.
As for Condos in DC, there’s some big lying going on. I’ve cribbed this from a writer to the Washington Post. In summary, the reader compares advertisement for a new condos to how much the would rent and how much they would really cost to own:
Condo ad here:
http://www.555massave.com/comparison.htm
[I like the constipated hipster on the right: "Yeah, I just scored, dude!"]
Condo ad claims rent would be $1950. Later a reader claims comparable rent might be closer to $1500.
===============
What are condos, but apartments that you own? You are an idiot to buy if the monthly costs for renting are siginficantly less.
Case in point: 555 MassAve (www.555massave.com). Assuming rent is around $2000k a month, how much would one of their 1br condos cost you a month? They sell for $360k, so let’s assume 20% down, or $72k. So, your loan would be $288k, or $1800 a month. Hey, that’s $200 cheaper than renting. But, we also need property taxes ($300), condo fees ($300), and insurance ($40) — by the way, I’m taking a wild stab at the condo fees and taxes, but they should be in the ballpark — and presto, now you are paying $2,440 a month! Hey, that’s more than renting!
Note that the above is the rosey scenario: if you don’t put any money down, your monthly payments will be much higher ($2980)!
Looks pretty stupid to buy a condo, right (we’ll ignore the fact that condos are depreciating assets right now)? Now, let’s take a look at what the 555 MassAve web site says (www.555massave.com/comparison.htm):
20% down -> $1527.86 (after taxes)
0% down -> $1879 (after taxes)
hmmm…big discrepency
What’s going on?
555MassAve’s web site is disengenuous: (1) They didn’t include the condo fees (shame on them), (2) their 5/1 IO mortgage is for chumps. Use a realistic mortgage that doesn’t shoot up after several years (the IO will shoot up in less than 5 years if you do not pay enough), and all of the sudden $1,527 becomes $2,440! Since most folks don’t have $72k for a down payment, their monthly housing expense would be $2980 (not $1879).
Not only does this mean that renting is much cheaper, but the rent indicates that condos are way overpriced. Those condos should be going for $225-$275k for positive cash-flow (depending on the cost of the mystery condos fees).
I put 70K down on a 350K townhouse in the northern va area. The HOA dues were $100/month on top of PITI of just over $2000 per month.
My company was renting a near identical townhouse for an office across the street (literally, I shared WiFi) for $1800 per month.
When prices were going up, like while I owned, owning was better, but now there is a clear $300+/month advantage + $350/month opportunity cost on the principle + what ever money you would be loosing as the market falls (probably $2000 per month) advantage to renting.
Thanks for the link and analysis. These are 1-bd apartments, and $2,000/mo rent seems high. To add to your calculations: a buyer has to pay realtor and closing fees; and if they put 20% down ($72k), they will be lossing 5% investment income ($3.5k/year or $300/mo).
And then there is a risk premium. If you buy a condo, something could go wrong with the building, with the neighborhood, with the market, with the neighbors (too loud, too many renters), etc. Should not the owner be compensated for these risks?
But if you put $72k down, it’s true that you’ll be losing 5% investment income (i.e. interest) of $3.5k a year, but it’s saving you from having to pay $5.2k (at 6%/30) to $6.3k (at 8%/30) a year.
Either way, rent is around $1500 a month. PITI + condo fees are $3000+ a month. I think it would be fare to say that those condos aren’t worth more than about $150k.
“[I like the constipated hipster on the right: “Yeah, I just scored, dude!”]”
ROTFL.
It’s also still a kind of so-so neighborhood. It is getting safer and more fun as other condos come into the area — but, at the same time, you’re also competing with that increased inventory that is making the neighborhood “better”
It’ll be interesting to see how many of the still-upcoming projects become apartments instead.
Being a first time borrower in 2004 in the DC market I got the usual “you’ll be priced out forever” The bank let me take out a loan for 4.3x stated income (30 year fixed). Within a year property taxes pushed my monthly payment up $200/month as my property was readjusted from 300K to 350K appraisal. Fortunately I sold in March 2006 as the market was turning.
A young couple bought a townhouse across from me for 80K over what I paid for my townhouse. They had an interest only loan and probably made less money than I did.
Many houses in this neighborhood were having bidding wars that waved inspections and pushed prices as high as 100K over what I paid in November 2004. These 1800sqft, 10 year old town homes were going for $450-480K and my insurance company estimated 120K to rebuild.
My realtors (a nice older couple and a former CPA) kept saying that prices wouldn’t really go down. I believe that these realtors were honest people who drank their own koolaid, so I cannot imagine what the damage done by the dishonest ones.
I bought in ‘02 for $245k, sold in 07 for $375k. During that time, prices peaked at$495k in ‘05. The $495k price was a little atypical (if you can compare the atypical to the atypical), as most during that period (summer 05-summer 06) peaked around $450k, but that’s what can happen in a mania when folks are afraid they’ll be “priced out forever” and they have access to liar-loans.
The latest sale in my old neighborhood was for $335k a month ago — the townhouse next door to it sold for $430k a year earlier. Still $335k is was too much: if you do a cash-flow analysis, these places are worth no more than $265k (and that’s pushing it). But, that’s what the mania has done to the DC metro area.
On a side note, like you, a young couple with a young kid bought my townhouse. I doubt their income was much more than mine, and they paid 50% more than I did. They also put no money down. I wish them luck.
In contrast, my realtor knew that prices were going down. We actually had an honest conversation, and she was shocked that prices had skyrocketed like they had. She blame the stupid loans that started a year ago. And although her business is hurting, she seems to be doing better than others by getting referrals for clients with plenty of equity that aren’t afraid to undercut the rest of the market to make a sale.
To be fair, I used the same realtor to sell my house and she talked me into accepting 390K instead of holding out for more. After seeing other houses going for $430K+ it was tough to see that much *virtual* profit go, but hind sight shows that she was right.
I was lucky enough to get that offer in the first hours my house was on the market, but wanted to hold off until after the first open house the next day… good people can make bad choices, even people who are generally responsible.
Most people make the assumption that they are operating in a stable economic environment and that no MAJOR swings in prices will get them.
Without long-term perspective many people have no idea what the housing market is supposed to be like or how houses are SUPPOSED to be valued. People get sucked into comparing to other houses today instead of any kind of fundamentals.
I bought in ‘02 for $245k, sold in 07 for $375k. During that time, prices peaked at $495k in ‘05.
Dude, according to my greed-based mental accounting, you just “lost” $120k in sweet, sweet equity.
I just moved to DC and am FLOORED by the prices. A condo in my neighborhood, which could be politely described as an early stage transitional neighborhood, goes for 400K. SFH with little no renovation go for a half a mil. And people brag on DC blogs about owning these places. Now that the market has slowed and lending will continue to tighten-who in the heck has the money to buy these ratholes?? A recent condo buyer said her realtor told her the prices of condos in DC will never go down because everyone’s parents provide them with the downpayment so there was no sense in her waiting. She bit. Crazy!
Ha! That’s funny, because when I balked at looking at condos in 2002, my realtor said that they’re not bad places to live, but you have to be careful, because they were the first to fall and the ones to fall the farthest in the previous downturn.
“I just moved to DC and am FLOORED by the prices.”
I’ve lived in the DC Metro my entire life and you have good reason to be floored by the situation here. I think DC will crash at least as hard as California a little ways down the road.
You can find plenty of insane sales in the near suburbs right up until April or so. I get the impression that other parts of the country really fizzled out a few months earlier.
Also, a lot of the money in and around DC is pretty new to the area, come by way of government contract spending post 9/11.
If “The War on Terror” ever slows down there will be a massive exodus from DC.
I moved to the DC metro two years ago. I never considered buying anything in the area since I did an enormous amount of research prior to the move. It was obvious values were skewed from basic fundamentals. After the move, I would drive around and look at the junk with for sale signs. When I say junk I mean junk. The SFHs and townhouses selling for $500K to $750K looked like slums found in my hometown. It was and is a joke. I laughed and decided people in this area were 3 bricks short of a load.
The summer of my move I met a realtor in DC whose specialty was $2 Million + properties. He told me not to buy in the area under any conditions for at least 5 years. “The piper will be paid for this insanity.” That is a quote. When I would tell others about it, they laughed saying he was crazy. “DC was different.” Right.
BTW, I leased a 1900 sq. ft. new condo for $1400 month. Am still in it. Great locale and high standard of living. Bought property in my hometown that my daughter leases from me. I have no regrets. Did not buy here, will not buy here for the foreseeable future.
You can take a pile of ka-ka put a pretty bow on it and say it’s worth $500K. I don’t believe you. If you buy that line…you will own a pile of pooh worth ZERO. Even the ribbon and bow are ruined.
I still think much of DC is 3 bricks short of a load.
More Brokeroutpost rumors.
http://forum.brokeroutpost.com/loans/forum/2/148504.htm
I got a kick out of this cat fight. http://forum.brokeroutpost.com/loans/forum/2/148501.htm
These are the folks that lead lives of quiet desperation that Thoreau talked about.
Here is another good link. Brokers are freaking out about no longer being able to do no-doc or high LTV loans. Sample:
“Well to me this is tragic…. Most consumers have an average score of 675, which where does it put them…alt a for now…
Some markets are impossible to do full doc… We work in a highly immigrant area, where you literally need to go stated or no doc or no ratio based on the way their employers pay them…
Oh well, in this case I am screwed…. Its not that I don’t have clients, I do, but without alt-a, I truly will not be able to close loans. It is 98 percent of my offices business”
Mortgage Brokers see future and are scared **itless
Looks like SallieMae is recruiting some employees on broker outpost. They state they are a “stable” lender. They probably think that because they know the gov’t will bail them out.
http://forum.brokeroutpost.com/loans/forum/2/148554.htm
This is a funny exchange on broker outpost.
http://forum.brokeroutpost.com/loans/forum/2/148195.htm
MALIZNA says
Well to me this is tragic…. Most consumers have an average score of 675, which where does it put them…alt a for now…
Some markets are impossible to do full doc… We work in a highly immigrant area, where you literally need to go stated or no doc or no ratio based on the way their employers pay them…
Oh well, in this case I am screwed…. Its not that I don’t have clients, I do, but without alt-a, I truly will not be able to close loans. It is 98 percent of my offices business
peter says
understand that large depositary institutions like national banks
do have their sources of fund and are not entirely dependent on
the capital market. So, big national banks like Wamu, Wachovia, etc.
will always have their Alt-A products or their portfolio products.
So, even if the capital market (secondary market) runs dry of
investors for Alta-A, these banks being flushed with CDs etc. will
invent in-house portfolio loan products (like World’s)to sell thru
brokers. All banks need to lend to stay in business.
I will just sit tight and row the boat without worrying that
the river will run dry as I will find a creek somehow to row on.
Peter
RDwyer says
ALT- A Product Offering Suspended
Effective immediately 8/2/07, Wachovia Mortgage will temporarily suspend accepting new loan registrations and/or locks on our Alt-A suite of products through the Wholesale channel. Alt-A loans currently locked will be honored provided they close by the expiration date.
Equity Products
Additionally, the maximum CLTV on all transactions involving a Wachovia equity product will be limited to 95% effective immediately 8/2/07.
clack29 says
Well there goes that theory…….
Yes, I read that thread; it’s amazing. A few minutes spent reading Brokers Outpost really shows how screwed up our society is. No wonder our communities are falling apart. Very depressing reading.
We work in a highly immigrant area, where you literally need to go stated or no doc or no ratio
Where does this misperception of “need” come from? No one “needs” a NINJA liar-loan to buy a house, unless their market is currently infested with reckless idiots using them –in which case the sensible thing to do is rent and wait. Once the reckless idiots and their liar loans are flushed out of the market, prices will revert back to levels that can be supported by local rents and incomes –problem solved.
Didn’t you know that immigrant workers NEED to buy houses. It is so humiliating to rent.
Extremely enlightening.
I f**king glad my job is not directly based on such tenuous financial alchemy.
“The incredible [foreclosure] spikes that we’re seeing right now really are a product of banks being out of control in their lending practices,” he said.
Rheingold said the issue is rooted in the popular misconception that lenders won’t qualify people for loans they don’t have the ability to pay for.
- This is absolutely true. People honestly don’t realize that just because you CAN borrow hundreds of thousands of dollars, doesn’t mean you SHOULD. People BELIEVE that the banks wouldn’t lend them money thay can’t pay back.
How silly.
Where are people supposed to learn what they can and cannot pay back? I have more financial sense than most, but even that extra sense didn’t protect me from putting myself in a dangerous position. I got lucky and now I know better, but still.
Shouldn’t financial stewardship and sound principles be taught and ingrained in our children by the schools? I know parents also have that responsibility, but parents cannot teach what they don’t know.
People look at monthly payments and the Jones and not much else. Who teaches about the true cost of interest or the rewards of delayed gratification? Who teaches about fiat money, the federal reserve, and debt? Who teaches rent/own fundamentals? I didn’t learn many of these things until I stumbled across it on the internet.
People are stupid, but that is because they are not taught critical thinking skills.
The only thing I was taught in school and college was basic supply/demand and how to balance a checkbook (something most people don’t do these days).
So I do not think it is fair to blame people for *not knowing* when they were just trusting the experts and *society* to advice/protect them like they were taught in school.
But Ditech says “people are smart”
There was a time when I was unemployed that I lined up a job as a high school math teacher in Jersey City, NJ (never took that job as I got an offer in my field for 2 1/2 times the salary a few weeks before school started, but that is another story). I had every intention of requiring every student in any algebra or pre-algebra class to write a paper requiring an analysis of something important in their life using math: the real cost of operating a car; what you pay for a large ticket item from a rent to own store vs. credit card vs. saving in advance; how much you can save in a month by clipping coupons and shopping sales at the grocery store; etc. I expect that I would have gotten a lot of push back from the administration since the only thing they asked me in the interview was if I was willing to teach to the test. But what a great thing for a kid to actually accomplish. I figured it would make a college application essay for those headed to college and a great answer to an interview question for the rest.
I know I had to take the other job, but I still think the teaching might have been fun.
I’ll keep saying it. 99.9% of Americans, including those in financial services, can’t answer two simple questions:
What is money?
What is a dollar?
GS, you will love this:
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=IMB:US&sid=arI6xLXXeF34
Perry wrote that U.S. Senator Christopher Dodd called him yesterday morning “seeking an understanding of `what is really going on and how can I and Congress help?”’ Dodd, a Connecticut Democrat, is chairman of the Senate Banking Committee.
Washington-based Fannie Mae Chairman Daniel Mudd is “telling me that they are `prepared to step up and help the industry,”’ Perry wrote.
Nothing like a “free market” huh?
Washington hot air. Don’t read too much into it. Especially in the Senate. Stuff has to be bipartisan to work in the Senate with the current Repub/Dem ratio.
I’m a settlement attorney in Herndon. Most (virtually all) of the Hispanic homebuyers that I’ve seen getting screwed were represented by Hispanic realtors and Hispanic loan officers. Talk about leading sheep to the slaughter.
Same thing happening here in Tucson. And, if you ever listen to Spanish language radio, guess who advertises there? The sleazeballs, that’s who!
Real estate agents and mortgage brokers and the like have to be very careful where they advertise. You are quite likely to run afoul of fair housing laws if you focus too much on a media outlet that caters to a “protected class” because you may appear to imply that you favor them. The big boys in the industry know this and have lawyers that pay attention to their advertising and make sure that anything outside of the mainstream is balanced, IE a radio spot on a spanish-language station AND another on a polish-language station, but not OR.
The sleazeballs probably have no idea the law exists, they aren’t big enough to be on the radar of the people hoping to catch such infractions, the target audience has no idea fair housing laws exist, and possibly most of all - the sleazeballs aren’t interested in the longevity of their business. Get in, make as much money as possible, and move on.
and if you don’t lend to them RACIST !
“‘I saw definitely that there was predatory lending, and that the Hispanic families were being targeted,’ said Jorge Figueredo, president of a regional bank catering to the Hispanic population.”
Just looking at WCI. Down to 6.86 region. I was just looking at options and was wondering why on earth the Jan 09 17.5 CALL was up by 35c (46%) ! Turns out someone just bought 4 calls. Either they are know something about this soon to be bankrupt company or they mis-bought the call instead of a put.
NOVA: The house across the street from where I live just went on the market (read: ~30-60 days ago). They recently appraised another local house because the long-time owners were putting on an addition. The houses were identical design at construction, but the newly for-sale house does have new advantages:
1) A finished basement, complete with another full bath.
2) Corner lot.
3) ~6 years newer construction
For these premiums, they’re asking $495,900. A $130,000 or ~1/3 increase in price.
I expect to see that house on the market for a looooong time.
The Sopranos will be getting in on the mortgage business. 20% interest rates and if you are more than 60 days late you get whacked.
speaking of this, is anyone knowledgable about hard-money lending without a broker?
like if some private citizen has some cash they are willing to lend.. how much max interest is legal? 10%?
If there is a maximum in your locality, the laws would almost certainly call it the usury rate. If you can’t find any mention in your local or state laws, you probably can charge whatever you feel like charging.
It’s also likely that the rate would be in reference to payday lending businesses, so that may be the best place to start your search.
jeeze.. took just a brief look at how complex the laws are and i know i gotta talk to a good atty who has very current information.
here’s a page with basic info.
http://www.lectlaw.com/files/ban02.htm
calif 10%
kentucky 8% .. “On loans above $ 15,000 there is no limit.”
But if you incorporate in Wyoming, you can lend without any limit, even if you’re both in Cali. That’s how the CC companies do it…
Talk to az_lender — she’s a hard money lender. She ought to be lurking on one of these threads (although she’s been scarce lately).
Brilliant post-game analysis. Where was the in-game coaching?
If you read the Broker Outpost links above, you can see that the statement “putting down whatever it took to get them approved” is still the name of the game, but it’s getting a LOT harder.
only coaching i heard was: “We’re on our own 10 yard line. It’s 4th and long.. what the hell.. lets go for it.”
I just re-read the quote using John Madden’s voice in my head. Kinda funny.
O.T.
Stock Market is spiking big again at the end of the day. I know a lot of people have made comments on this yesterday, but two days in a row?
Expect high volatility in a changing market as there is a frenzy of buying and selling as people shift their positions.
Markets are looking at results that are heady for Starbucks and Disney and Nokia….coffee, cartoon crap and cheap cell phones….yep we built a nation on this stuff….span the continent with steel and cables…..
A good word for it…the Hullucinating Economy….can’t build a g*ddamned bridge to last 40 years but can make a damn fine cup of Joe and with that you can build industrial empires and fortunes to the sky in your mind.
RE and its state is just a sympton of this….we will pay dearly for this mendaciousness and pretend play at REALLY making thing one of these days.
it’s fun to listen to the daytraders.. there’s excitement in every word.
Perspective: Total gain for the S&P over the last two “spiky” up days is a whopping 17 points - 1.2%.
I know, SH!T!!!
“Real estate experts said too many condominiums are being built, and too much inventory is forcing prices down. On Massachusetts Avenue, new condos are under construction just around the block from condos that have been on the market two years.”
I always thought that increased competition was good for everyone because it lowered the cost of goods. Hmmm, why according the the “real estate experts” should this not apply to homes? It’s not like a 2-3 bedroom ranch style home is underpriced at 700K.
Off topic
American Home Will Close as Loan Demand Collapses
Aug. 2 (Bloomberg) — American Home Mortgage Investment Corp. plans to shut down, becoming the second-biggest residential lender to fail this year as bad loans spread to people with good credit records.
The last day for most employees will be tomorrow, Chief Executive Officer Michael Strauss told the staff in an e-mailed memo obtained by Bloomberg. Investment bankers cut off credit earlier this week, leaving the Melville, New York-based company unable to fund mortgages it had promised to thousands of now- stranded borrowers.
Its shares fell to 84 cents in the after hour trading.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aiXHKc1thJYU&refer=home
Toward the bottom of the story it also mentions that Accredited Home Lenders Holding Co., another Alt-A firm, might liquidate. Looks like a surge of Alt-A lenders are about to follow subprime over Niagra in a barrel.
Laurel, MD has a big Hispanic population screwed by ispanic lenders and Hispanic realtors. Areas of Prince George’s County, MD are heavily Black and guess who screwed them over? BLACK realtors and lenders. Each group is absolutely paniced that “the white man” is out to get them, while the whole time, its a member of their own race who iis screwing them.
“The Sallees are sellers … said Sallye
… ummm, let me guess … “by the seashore”?