Reselling Is No Longer An Option In Virginia
The Connection reports from Virginia. “Condominium sales have dropped by more than 50 percent, changing the course of some of Northern Virginia’s major projects and crippling sales of one of the regions most important types of housing. Some 20,000 condominiums currently are standing unsold in the region with some 9,500 unsold in Northern Virginia.”
“Between June 2006 and June 2007, Delta Associates VP William Rich reports, only 2,000 units were sold. During the last 12 months, Rich said, about 1,800 condo units were cancelled in Northern Virginia and about 8,800 units were ‘reprogrammed’ to rent as apartments.”
“‘When a condo project has been built and has to change to a rental building, certainly the developer has lost money. He has to hold the asset longer and leasing is a way to pay off the debt.’ Rich said.”
“Jeff Shumaker argues that condos ‘always have a high rate of investor ownership.’ ‘In the old days, you couldn’t get a loan on a condo if the building wasn’t FHA approved, but then they began giving $100,000 loans without FHA approval and investors were taking higher proportions of the units,’ he said.”
“Paradigm Company’s Carlyle Place complex in Alexandria was built on the concept of being part of a new city within a city. The condos were advertised at $300,000 for a one bedroom to a price ‘in the high $700,000s’ for a three bedroom. The buildings were expected to open in 2007.”
“Between the time of conception and the opening, the sales of condominium apartments dropped through the floor. Carlyle Place abandoned the condo concept last year and is now renting apartments, offering one month free rent for a year’s lease on certain apartments.”
“Shumaker says the ‘majority of the people buying those types of condos are planning to buy them for a short period of time and reselling them for a profit. If you did that now, you’ll own that condo for 10 years. Reselling is no longer an option.’”
“Rich too argues that the condominium business will ‘come back,’ perhaps by 2009, but he doubts it will hit the ‘go-go” years of 2003 and 2004. ‘There were never condominium sales like that historically,’ he said.”
The Daily Press. “Stubborn sellers of homes in Hampton Roads finally began to give in somewhat to get deals done in the oversupplied market in July, according to data from the Virginia Association of Realtors.”
“In July, sellers dropped prices and made concessions to get deals done. The data for July suggests that sellers may have even been motivated by a national credit crunch to start making concessions they had stubbornly resisted so far this year. It is still very much a buyer’s market in Hampton Roads, and it takes 35 percent longer to sell than a year ago.”
“The Williamsburg market, which includes sales in upper York County and James City County, continued to swing erratically in June. Prices dropped dramatically, which got more homes sold - and sold quicker - than in July 2006.”
“The median price of $292,000 was down 6 percent from a year ago, and nearly $31,000 from May.”
The Washington Post. “The new house on Allison Street in North Brentwood is two stories higher than the older homes that surround it. It doesn’t have a porch, shutters or any of the other distinguishing features found on the century-old bungalows on the block.”
“‘It’s humongous,’ a neighbor said of the house, as yet unoccupied. ‘It just doesn’t fit in.’”
“The complaints sound the same as those in Chevy Chase and Arlington County: Builders are constructing large houses on small lots, knocking down trees, obstructing sunlight and destroying the character of the town.”
“But in North Brentwood and other small municipalities in northern Prince George’s County, mansionization comes with a twist: Some of the new homes, neighbors and town leaders say, are being used as boardinghouses for several families or unrelated people.”
“‘Our concern with these McMansions is they are not single-family homes,’ LaVerne Williams of Lewisdale told a group of county planners and elected officials in Riverdale. ‘You are turning our communities into rooming communities.’”
“County law declares that no more than five people unrelated by blood or marriage can live in a single-family house. But enforcement has been lax, said Bob Schnabel of College Park.”
“‘There is no penalty,’ he said. ‘Properties in my neighborhood are rented to more than five people.’”
“Del. Barbara A. Frush said she understands the plight of neighbors, feeling helpless while their community is altered. ‘They make these things into not a McMansion but a McApartment building,’ Frush said.”
From NBC 29. “The mortgage market is getting tougher for everyone, but a new national report says it’s worse if you’re trying to borrow $417,000 or more. That’s the line for a jumbo loan and lenders are getting skittish. The question is: is the same true in and around Charlottesville?”
“Last year, for the first time in a long time, housing prices in the Charlottesville dropped. Those prices are a long way from the boom that drove prices sky high a couple of years ago.”
“Charlottesville is definitely a buyer’s market: there are 3,500 homes up for sale -some at discounted prices-and sellers are offering some incentives.”
“While buyers have plenty to choose from, sellers have to bite the bullet. Many sellers are cutting prices, but realtors have high hopes for the future. ‘It’s a great time to buy a home and we just need to get back to market basics and the real estate market will rebound in the future,’ insisted David Phillips with the Association of Realtors.”
“Phillips says in a lot of places people just aren’t buying because they can’t obtain a mortgage and many people are defaulting on the ones they have.”
“‘So our prices while their higher than what we’d like to see them in our community for our size, they aren’t unrealistic. We see folks come down from the north who think our prices here are great,’ shared Phillips.”
“‘Our concern with these McMansions is they are not single-family homes,’ LaVerne Williams of Lewisdale told a group of county planners and elected officials in Riverdale. ‘You are turning our communities into rooming communities.’”
Holy cow! Who on here predicted that first? We have more bedrooms available than ever here in the US. If subdividing McMansions is the next trend… we’re done building for five years (instead of two or three).
Got popcorn? Parking?
Neil
You’re right, posters here suggested that McMansions would be subdivided a long time ago. It seemed unlikely at the time, but given the unpractical nature of these things, it made sense. And how many years of condos do they have to sell in Virginia now? Where is the Post on this!
This is why I dont want to buy in DC until things shake out, regardless of affordability. There are massive communities here that I feel this is going to happen to.. King Farm, Ketlands, Urbana village, etc… The list goes on and on. Any multi use development (condo, TH’s, and SFH’s all in one) are going to be the first areas to go to the boarding style envrionment. I can already see it happening in King Farm where I rent. Cars are starting to litter every inch of the street, although the overall vacany is supposedly down. Meaning, that there are many empty homes but people are packing it into the ones that are being lived in.
fx co refuses to do anything about illegal boarding homes
Its not politicaly correct to do anything about them. That would be racist. Or “poorist”, or something. VA definitely has the worst problem with illegals in this whole area.
“fx co refuses to do anything about illegal boarding homes”
Yeah, and the first time one burns down, killing lots of people, and it was determined that there were no sprinklers, fire alarms or other mandated safety features required for apartments, they will change their mind about enforcement. Too late, of course…
I would estimate Montgomery (eastern side specifically) has a worse problem with illegals than Fairfax.
A friend and I biked through King Farm while it was still half under construction. Plow up a farmfield (not a single tree) and throw blocks and blocks and BLOCKS of townhomes up. Stick in a plastic picket fence to separate the kiddies from the 4-lane speedway through the middles and call it a “community.” We started calling it Hell. And that was in 2000, just before the wave of illegals hit, which is where all those cars might be coming from.
(IMO the illegals hit DC really fast. It seemed that every restaurant — even the pricey ones — went Latino within the space of two years.)
And don’t get me STARTED on those “steps from” the “vibrancy of the city” condo ads in the Post and the Times. I’m so glad to be out of that region.
Got attached product? (King Farm does.)
Where is king farm?
Shady Grove Metro stop.
“Got attached product?” –oxide
Nice.
Luv, Jen
Here’s another thing that should give you pause about DC:
“About 2,000 prisoners come back to the District every year — an average of five a day. As many as 60,000 D.C. residents — one in 10 — are felons, 15,000 of them under court supervision.”
http://www.washingtonpost.com/wp-dyn/content/article/2007/09/01/AR2007090101344.html
Does that include politicians??
Apparently one in every fifteen people has served prison time, so this might not be as bad as it initially sounds.
You should see the houses they are building out in Bristow. We saw street after street with 5000+ Sq Ft homes that all had the exact same floor plan! What’s the point of having a “trophy” home if it’s the exact same as everyone elses. These aren’t desireable neighborhoods either, no yacht/country club, golf course or green space, 35 miles from the city. This is strictly a working class area with huge houses built during the boom. 10 years from now these will become very expensive to maintain. They’ll be like 50 foot boats, expensive at first, cheaper than smaller ones when used, and the first to go on the scrap heap.
Cars are starting to litter every inch of the street,
I’m seeing that where I’m renting too. Some is due to people using the garage as living space (witnessed one garage set up as a living room!) or storage (you wouldn’t believe how many two car garages are about to burst). But I also see it due to “roomate situations.” I think we’re at the start of a major contraction in living space per person. Something had to happen to all the people displaced by flippers… this could have been a major sink of them…
Got parking?
Neil
I’ve also read that Reit’s may be formed with the intent of becoming rental agents for the thousands if not millions of REO’s about to pelt the market.
It would make a lot of sense.
Somebody with a ton of REO would incorporate and transfer the REO assets to the REIT at “fair market value”. Since the REO never actually went to sale, the CFOs would make up the value.
Then, show some trumped-up profits for a quarter or two (I have full faith that a capable CFO can invent that for 2Qs), sell it to the public, unload as many shares as possible.
Voila, you avoid a REO mess on your books. It’s definitely going to come across more than a few minds this winter.
Isn’t there a limited supply of tenants in this country? Or are we going to have to start importing them from other countries?
No problems here –we’re “doing our part” in CA –and THEN some.
Ben asks where the Post is on this–sad answer is out to lunch. Below is a recent exchange I had with the Post’s intrepid real estate columnist Elizabeth “it’s special here” Razzi. My favorite part is that she is expected to “convey and informed point of view” and fails to acknowledge the link between shabby lending and inflated pricing.
Dear Elizabeth,
I’ve followed your housing chats with Maryann since your arrival at the Post. I am sorry to say this, but, your stories are continuously slanted toward optimism for the housing market, ditto your chat responses.
I doubt you are conscious of the bias in your work but it is very apparent to a discerning reader. I hope it isn’t a problem with separation of church and state—just a bias that developed because most of your sources are advocating (and willing themselves to believe in) a bullish housing position that suits their financial interests. This is known in the financial community as “talking your book.”
Unfortunately, whatever the cause, the bias is apparent and I no longer view the articles written by Post real estate writers as objective or credible. That is a real shame.
Sincerely,
Ben
Dear Ben,
First, allow me to set the record straight. I am a columnist at the Washington Post. Unlike the reporters on staff, I am expected to convey an informed point of view. And, so, whatever disagreement you have with me, allow that burden to remain upon me, and not on the news reporters.
And a bit about that point of view. I believe the real estate market is cyclical. I am also a bit of a contrarian. When the market is down, that means it’s likely to go up….I just don’t know when. And, from a buyer’s perspective, all the distress we see on the resale market right now spells opportunity–if you have enough cash to ride out the cycle.
I have lived in this area since the early 1980s, and have ridden out quite a few of these cycles, including the rather nasty downturn that occurred in the late 1980s-early 1990s. I’ve been through the savings and loan meltdown; I remember the many layoffs that happened across various local economic sectors at that time. As bad as that cycle was, it didn’t last forever.
There are a few underlying reasons why I think it remains a reasonable choice to buy a home–as long as you intend to live there three to five years–at a minimum:
–The DC-area economy remains strong. We have the second-lowest unemployment rate in the US, and strong immigration. These new residents have to live somewhere. Investors–more accurately, speculators–distorted the market, but that is being worked out of the system now. I don’t know how long the hangover will be.
–Rents have been held down lately by the surge of would-be condos that are being poured onto the rental market, along with house/townhouse rentals from distressed owners. You can get an affordable rent today–but you can’t lock it in.
–DC itself has changed a lot over the two decades I’ve been observing it.
It is much more attractive to young, creative professionals. Part of the price rise we’ve seen is a reflection of that increased quality. We shouldn’t forget that DC is one of the world’s major cities. It is finally starting to look and act like one.
–Stats on house price appreciation do not take into account the massive investment in remodeling/rehab that has occurred over the past 10 years, particularly inside the Beltway. If someone buys an old house in Bethesda or Arlington, puts $100k or $200k into rehabbing it (not at all uncommon), the stats make it appear as if that $100-$200k gain was due to market appreciation. Just isn’t so. Much of the local housing stock, particularly inside the Beltway, has been improved this way. That’s real value added; not market fluff. And the stats don’t capture it.
As to my own financial interests. I own one house. I live in it, and I don’t plan on going anywhere soon. I have never earned a commission selling real estate. I have no “book” to talk. By the way, may I recommend you read the “Local Address” column I wrote for the July 14 Post. You’ll find bulls and bears alike quoted therein.
Keynes said “In the long term, we’re all dead.” I don’t know if the housing market’s recovery is quite that far into the long-term, but, as you said, I’m optimistic.
Sincerely,
Elizabeth Razzi
She’s right, we have strong immigration in the D.C area. The problem is that it’s the “illegal” type…
The prices of RE in DC won’t be entirely based upon the local DC economy, where the federal government being so essential to its health. Prices will be determined also by the national markets, and most of the country has been in a bubble that is or about to collapse. The real truth is that affordability has peaked and there is no where else to go but back down to historical norms, back to where people can actually afford places to live and not have it all become some insane form of speculative investment. I’m optimistic that prices will decline and for the health and future of the nation and society, this is a good thing. Being optimistic that they will remain at absurd levels is truly selfish and misguided.
Group houses are very common in metro DC. How else can a young person just out of college afford to live here on $50k/yr? As home prices drop, more and more of those people will be able to afford to buy, so there will be a bottoming out at some point in this group house trend.
Actually, this was just the type of thing that
James Howard Kunstler has predicted for a long time, especially in his book, “The Long Emergency.”
Just wait until the squatters start ripping the copper wiring starts from the walls of unoccupied homes, which I’m sure has probably already happened somewhere. This is not going to be pretty, folks.
In our area in NE Ohio wiring, plumbing, fixtures, etc have been ripped out of vacant houses for years. Not so much right where I live, but in Youngstown that’s the norm. It’s basically like stripping a car parked on the street.
This is a big problem in South Bend, IN as well. The city enacted an oridnance earlier this year that requires someone who tries to sell over a certain amount of copper to explain how they got it. This is also a great example of bolting the barn door shut after everything has escaped because the practice had already been rampant for years.
Scrapping, as it is called here, can also turn deadly. Last January, 4 homeless men were killed by 2 other homeless in a dispute over ownership of some stripped out copper and other metals.
This is old news in Detroit too. Every couple months or so there’s a story in the paper about someone getting zapped trying to steal copper wire that, unfortunately for them, was still attached to a live source.
Hmmm, Industrial Metals Recovery Technician - someone call the D. of L. - sounds like job creation to me!
Lol, maybe the Governor can take credit for this new job creation!!!
I’ve seen that already. A Countrywide REO in CT. Bought for 340k in Jan2007, Countrywide took ownership in June2007. Took a stroll through on my own. STRIPPED. Even the copper pipe….. (laughing)
BubbleViewer: James Howard Kunstler:
The suburban build-out is over.
http://www.kunstler.com/mags_diary22.html
a few years ago copper strippers where high-grading the old telephone lines out in the middle of nowhere in SE Utah. They’d just knock the poles down. I don’t know the specifics, but they were leaving toxic waste piles behind them, too, something to do with getting the copper out - sorry for the lack of info on this - it turned some rather historic areas into dumps
Often they burn the insulation off. It’s worth more as uninsulated copper, and harder to identify the source. This leaves piles of melted plastics.
We also have an issue here in DC and Maryland with illegal immigrants. See 3 or 4 families to one house is not uncommon. I wonder what will they do when the construction industry slows down.
beg, borrow, and steal
And go on welfare. The lack of construction work may prevent new immigrants from crossing over the border, but for those already here, a 3-4 year housing boom was plenty of time to have 2-3 children.
got attached product?
We had a discussion on what market would be nailed worse some time back: urban condos, exurban McMansions, aging houses in older suburbs, etc.
Here in metro NYC, urban gentrification advances in housing booms, but “affordable housing” advances in housing busts. Neither line, each expanding out from the center, ever retreats much. I expect we’ll see some affordable housing in the suburbs five years from now, and a massive, nationwide zoning war.
We had a discussion on what market would be nailed worse some time back: urban condos, exurban McMansions, aging houses in older suburbs, etc.
I think condos everywhere are going to be the worst. If the banks pull back on financing them at all, who is going to buy them. Plus I read that in every downturn condos take the biggest hit. Used to be in the late 90’s you couldn’t get a loan on a condo in our area unless the occupancy rate was at least 2/3. That meant they had to have a lot of cash buyers.
This was predictable. And has been happening with immigrants for years. No one can afford these homes. You need 4 to 6 incomes to pay for them. Muliple levels of families have bought and lived in homes every where in the united states but especially the bubble areas.
Construction companies bring in the foreign workers and put them all up in one home and pay them $8/hour with two to a bedroom. This is the same as the foreign student summer work. They are living many people to a room and when you complain to the officials or your landlord they do nothing - they collect their money and are happy. Living under a housefull of people who come and go at all hours is a result of high rents and high home prices. This will get much worse. Has in much of Florida already - If prices do not come down this is the only way people will be able to live - just like third world countries.
I was told by a realtor in VA that if the room had a closet it is a bedroom. Thus a 9 X 9 room w/closet is bedroom…NOT.
Not just bedrooms, but “libraries” and “studies” and “Dens” and “home offices” and “master suites” which are easily the size of three bedrooms.
If you look at McMansions floorplans, it’s blazingly apparant that designers were filling up all those square feet with rooms that are named anything but a bedroom, anything so that the McMansions never had more than 4 bedrooms. Maybe that’s the psych limit on bedrooms; more than that and suddenly it scares off the buyer.
Also, don’t a lot of the McM’s use septic systems? Septic size is based on # bedrooms, not # of toilets. Can’t wait to see these septics meant for 6-7 people at most trying to handle 25…
Got attached product?
“‘Our concern with these McMansions is they are not single-family homes,’ LaVerne Williams of Lewisdale told a group of county planners and elected officials in Riverdale. ‘You are turning our communities into rooming communities.’”
I predicted this first.
It’s the only way the “Buyer” can avoid default.
Riverdale is a huge center for illegal aliens. These houses weren’t originally built as SFHs, but were always intended to be boarding houses. If I lived nearby, I’d be POed too.
Now here’s a unique builder’s incentive:
http://www.freehouseboy.com/
I was following right along there until the pic of the feet.
LOL… I’m sure someone would attempt to explain, but seems unlikely to make it through the spam filter…
How about a “Not Safe For Work” warning?
Perhaps Las Vegas can throw in a few prostitutes with each home. May be that will get sales moving in Nevada.
For your own personal use, or to pay the mortgage? ‘Cause if it’s the latter, you’ll need more than a few unless you give prices another year or three to come back to earth…
Amazing, isn’t it? The whole kit and kaboodle has gone from high-style living to the bottom of the dump, and “no one could have seen it coming!”
I guess that makes us a bunch of nobodies.
During the last 12 months, Rich said, about 1,800 condo units were cancelled in Northern Virginia and about 8,800 units were ‘reprogrammed’ to rent as apartments.”
“repurposed” - the word is repurposed.
My nephew is living east of Detroit MI and he’s renting a condo, with option to have your rent applied to the downpayment. One whole building is nothing but builder’s rentals. He said the builder is still building more, but I think maybe he was at the point of no return and has to finish up the rest. My nephew’s only renting because he moves around a lot as a district manager for Sam’s. He could easily buy a house and pay cash, but right now with his job it’s not practical. He’s loving all the reduced rents and incentives right now. Builders are going to be full time property managers pretty soon.
Curious…..where’s he at, and who’s the builder??
No, “reprogrammed” is the right word, since these units are Terminators.
termite-nators?
E.D.
On Boston’s NPR station - Wbur, there is a discussion on the mortgage meltdown right now. See http://www.wbur.org
Speaking of the mid-Atlantic, does anyone know how King Farm in Rockville, MD is doing? Have prices declined? A frenemy bought there in 04-ish and would love to be able to gloat.
I watch the prices alot in king farm. First, the neighborhood is really getting trashy. A lot of people just hanging out all day, not working. Many homes having multiple families in them.
Prices are a mixed bag. Some things are selling some are not. Condos are not selling at all. Townhomes are definitely way off there highs. There are two brands of townhomes, high and low end. The high end ones were selling for between 650 - 800k at there peak. They are definitely not selling for more then 600k right now. Long and foster has many listed for sale in the 500k range. I have seen a few outliers listed at odd prices like 605. If you zillow these you find out that the owner bought in 03, heloc’d to 605 and is just trying to get out and cant/wont drop the price cause of the loss, so it sits.
Some are selling though. I thin for the most part people in this area still have the mentality that the housing bust doesn’t apply to this area. Even when I quote that the median for this area has dropped something like 12% in a year, they just pretend like they didn’t here me or it was a lie, or it will go back up next year by 20%.
Ha Ha Haaaaaaaa (evil laugh.) Tell me more about how it’s getting trashy.
You know, it really is pretty funny. The king farm has this sect of wanna be elitest “house wives” who think they are millinares because they have a house in king farm. Meanwhile, the basketball court is covered with low lifes (of all creeds and colors) dropping F-bombs and having fights. Every other house has four or five cars in front of it cause the couple who bought the house moved their parent and all brothers and sisters in to help them pay the bills. Yet the elitest soccer moms still think they are princess’s living a charmed life. At first it used to disgust me, but now I just feel sad for them and their kids because the only life their children are going to know is dodging speeding cars to run over and play in the common area park sitting in dog pooh and pee while listing to the sounds of foul language rain down upon them.
I miss the midwest.. We had a backyard.. I know, that is weird.
Yet the elitest soccer moms still think they are princess’s living a charmed life. At first it used to disgust me, but now I just feel sad for them
No don’t feel sorry for them.
The external conditions don’t bother them one whit. All that matters is that they can go the local trendy mall and shout across Pottery Barn how HUGE their house is.
I’m a real estate attorney - spoke with a Fannie Mae facilitator yesterday (his business is steering condo projects through Fannie Mae approval - necessary for financing of the project as well for the mortgage approval for the unit buyers) Fannie Mae abruptly ceased their program of approval of condo projects as of last Friday -they will promulgate rules in 60 days for lenders to follow but until then lenders are in total limbo. After that they will have to attempt to comply with the Fannie Mae rules (the task of which will likely be dumped on the least experienced paper shuffler). The end result will be that most lenders will pull out of all condo financing.
wow WOW
that’s big
so 20% down coming up for condo buyers ?
Sounds like 100% coming up for condo buyers.
I recently saw (I think over at bigpicture) an email from a lender to their brokers stating recent changes in policy. It clearly stated “no more FL condos”. Also included second homes and homes that aren’t owner-occupied.
I want a 3 bedroom FL condo for $50k cash. I wonder how long it will take?
I expect that in the near future many condos will be free with a committment to pay the tax/condo fees for 10 years.
CynicalGirl — do you have a link for that?
I can’t find it again, but it was somewhere over at http://bigpicture.typepad.com/ a few weeks ago.
I worked with a guy who was heavily into Tech Stocks in 2000, then bought a condo in FL in 2004. I have to see what he’s up to now. That’ll be the next bubble.
CG - thx.
Fannie Mae abruptly ceased their program of approval of condo projects as of last Friday -they will promulgate rules in 60 days for lenders to follow but until then lenders are in total limbo. After that they will have to attempt to comply with the Fannie Mae rules (the task of which will likely be dumped on the least experienced paper shuffler). The end result will be that most lenders will pull out of all condo financing.
WOW is right! This is the equivalent of not only kicking somebody while they’re down, but whipping it out and pissing on them. Sadly, the worst condo owners/builders are going to see isn’t over. Effectively the neighbors are bringing over their dogs to play with the new “chew toy.”
Then again, what were condos outside of NYC doing breaking $1M?!?
Got popcorn?
Neil
Thanks a lot! I was reading this while eating carrot nubs. I started to laugh so hard that I ended up almost choking to death. There are little orange bits all over my desk
You mean the ones in Jersey City that had that fire the other day while still under construction? Nah, they were only $750.
BTW, isn’t there someone here keeping track of these types of fires?
Amazingly, some chick who has been legal counsel for a few Tier 1 auto suppliers around Detroit has decided to put a group together to build and sell million dollar condos in downtown Detroit. What perfect timing!!!
Looks like it would affect condo builders, not condo buyers.
All of the unit buyers (unless they are cash buyers of course) will need financing. Their lenders used to be able to see that the condominium was Fannie Mae approved and move on to verifying income (or not as it seems lately). Now the individual lender for that buyer will have to go through the Fannie Mae rules (won’t be out for 60 days) and determine whether the project complies which involves seeking voluminous documentation from the developer which has to be analyzed by the lender - who has no expertise whatsoever in doing this (it had been done for the last 30-plus years by Fannie Mae). This will have to happen with every buyer.
Could you explain how Fannie Mae approves condo financing? Is it different from single family home approval? Is there something extra required and why are they different?
Roger - Fannie has (or had, in the old days) guidelines on condo loans that measure the owner-occupancy ratio of the condo association. It is (or was) a fixed percent.
If, say, more than 40% of the units are occupied by renters, they will not buy a loan in that particular building. It can aggravate a tough market by removing “conforming loan” status, even for small mortgages.
Does “approval of condo projects” mean Fannie financed builders too? If so, no more condo building.
And then 20% down for largely first-time buyers who have no equity and no cash. Aw gee, I guess all those 24-year-olds won’t be allowed to paint their walls in chocolate brown or lime green, like those failed model “hosts” on HGTV.
Got attached product?
‘In the old days, you couldn’t get a loan on a condo if the building wasn’t FHA approved, but then they began giving $100,000 loans without FHA approval and investors were taking higher proportions of the units,’ he said.”
ok so this is possible again maybe. But only if we take the $400K condos and divide the price by 4.
“condos were advertised at $300,000 for a one bedroom to a price ‘in the high $700,000s’ for a three bedroom.” Oh no! Even subdividing will not take care of this. This is going to cause a severe problem to get worse when these reset. So what do you think? $300k back to $50k? To zero?
Roidy
160 times rent will be the final sales price. However, I predict rents will drop 20% to 30%. Of course, adjust for HOA/ammenities.
Condos run the risk of dropping to 120X rent (due to the HUGE oversupply). That will further drop rents…
In areas with high bubble condo building… the spiral will be… severe.
Got popcorn?
Neil
So much popcorn makes me sick man!
160 times rent is for a stable market. I doubt it will be the final price in this case. The problem is that supply is far out of kilter with the demand. Even with people moving from SFH or some such it will still be oversupplied in many areas. I think we have a worse problem than even we believe.
Roidy
OT, a little Michigan humor I just received:
A Japanese doctor says, “Medicine in my country is so advanced that
we can take a kidney out of one man, put it in another, and have him out looking for work in six weeks.”
A German doctor says, “That is nothing. We can take a lung out of one person, put it in another, and have him out looking for work in four weeks.”
A British doctor says, “In my country medicine is so advanced that we can take half a heart out of one person, put it in another, and have both of them out looking for work in two weeks.”
The Canadian doctor, not to be outdone, interjected, “You guys are
way behind. We took a woman with no brains, sent her to Michigan where she became Governor, and now half the state is out looking for work.”
lol
Sorry to say, but Michigan wasn’t in much better shape when I left for good in the early 1980s.
Agreed. I went to Chicago for a year, then Colorado for a few more. I wish I hadn’t come back, but hey, I got two great kids out of it.
“Rich too argues that the condominium business will ‘come back,’ perhaps by 2009, but he doubts it will hit the ‘go-go” years of 2003 and 2004.
Riiiiight! The Condo market is going to be burnt beyond recognition. I remember in the mid 80’s here in S.C. Condos that had sold for as much $150,000.00 going for $18,900.00 at the bottom. It will be very fugly for a long time.
chuckle…
The condo market in some areas is overbuilt until 2012 (or later)…
So Riiiight… is the correct response. 15 to 20 cents on the dollar just might be the bottom.
Got popcorn?
Neil
WMBZ — are you in S. Carolina, or a different S.C.?
Wow. If some of these numbers hold out, i might be able to pay cash for a condo in a year.
chuckle…
I’ve thought the same thing. Albeit, in 30 months.
Neil
Maybe. Im living in NOVA/DC, so i expect it to fall quite a bit here. I think it may fall faster than most of the RE folks are thinking, just because the availability of information about prices and help from the internet. I think it might hit bottom by the end of 08.
–
Rents remained artificially high because during 2004-05 many of the apartment buildings were planned to be converted into condos and also new condos were sitting empty in the hope of selling. Now, all those empty condos will be sold or rented and the net effect would be glut of rentals and a fall in rents. It takes time but excess building means lower sale prices and lower rents.
Jas
I can recall my former landlady (who rented to me for almost 13 years) lamenting the state of Tucson’s rental market.
And this was before the current wave of stuck flippers who are now thinking they can “just rent it out.” Oh, if it were really THAT easy…
I saw this in Naples FL. They were going to “eminent domain” the golf course where my Dad owns a manufactured home and then build affordable housing on it. I told him they’re actually surrounded by affordable housing, it’s just tied up as second and thrid and fourth homes there and are falsely commanding $350,000 for a townhouses and condos. Sure as sh!t stinks, they don’t hear anything about affordable housing anymore down there or requisitioning the golf course for dirtbag housing. The development (of empty housing) that took place down there is insane. In 20 years Naples will look like Miami, weedy and overrun with illegals. What a shame. It was a nice area. It won’t be for long. The old section of Naples may remain ‘ok’ and be treated as an enclave of decency (albeit at a 50% haircut), but the rest of the area is toast. Having been to Vegas during the bubble, I think Naples is every bit aas bad or worse than the bubbliciousness as Vegas.
I’m sorry but who exactly would want to live in the DC area anyways? I don’t see what’s so great about it. You get the worst of all worlds there if you ask me: you get Big government, you get to deal with both the elitist snobs from the blue States and the toothless hillbillies and maters from the Red states, you have the theocratic government in VA and the Feds and the weird government of MD on top of you, you have huge congestion, you deal with your military types, you have the ridiculous cost of living, and you have the super high crime and looters and so forth. I don’t care if there are all kinds of big companies and all of the “cultural diversity’ from the big cities, the DC area is a warzone. No meaning to step on people’s feet here, but why? WHY? At least in NYC you deal with real blue state types. If you’re a red state type you can go to Georgia or one of the Third World countries in the SE USA and have fun there.
lmao….. classic truth….
Very high wages somehow keep attracting people to the mess.
Both Fairfax and Loudoun have median incomes of $100,000. Highest median income of any large county in the country. It is easy for a couple of college grads to get married and have a combined income of $150,000 to $200,000 just a few years after getting their bachelors. Jobs are stable and plentiful with the lowest unemployment rate of any major metropolitan area in the US. The weather is temprate so you have real seasons but fairly short winters where the snow is a novelty. Some of the best public schools systems in the country is another benefit if you have kids or just want to be around educated people.
Traffic is DC’s worst problem I’ll agree with you there. Although some people are smart enough to find a job in the suburbs and live near their jobs. There are actually more people in the DC metro area that work in VA than within the DC city limits.
Don’t fool yourself: DC and NoVA is a cultural wasteland. I’m still dumbfounded at how such a rich and well-educated county (Fairfax) can have so few bookstores.
I’ve lived in several mid-sized cities throughout the midwest and south, and the lyrics “The suburbs have no charms to sooth the restless dreams of youth” never really hit home until I moved to NoVA. I’m trying to keep my chin up, in case I can’t get out of here, but I’m gone the first chance I get.
Sprawling on the fringes of the city
In geometric order,
An insulated border,
In between the bright lights
And the far unlit unknown
Growing up it all seems so one-sided
Opinions all provided,
The future predecided,
Detached and subdivided
In the mass production zone.
Nowhere is the dreamer or the misfit so alone.
Subdivisions -
In the high school halls
In the shopping malls
Conform or be cast out
Subdivision -
In the basement bars
In the backs of cars
Be cool or be cast out
Any escape might help to smooth
The unattractive truth
But the suburbs have no charms to soothe
The restless dreams of youth
Stable employment, good schools (at least in the suburbs), a reasonable amount of culture and diversity (yes, I know it’s not NYC or Paris or Hong King, but it’s still a pretty interesting area, some reasonably stable (though not perfect) state governments in Maryland and Virginia, and reasonably income and property tax rates. Decent climate, too — summers and winters are both tolerable.
Every place has its plusses and minuses. I couldn’t imagine living in much of the Southwest or Southern California for climate and demographic reasons — especially in some house on a tiny lot in a huge development with nary a tree for shade. But obviously, it works for some people.
Where is your sliver of exalted paradise?
The Mayflower has a really good Sunday brunch
Old Ebbitts is better…
Wow, how many stereotypes can one idiotic bigot post on this website?
Aeyra, you are truly a mental giant and a credit to ‘real Blue State types’. I’m sure they are proud to call you one of their own as you truly define ‘Blue State types’ of NYC where cultural diversity means stuffing your face with tofu phad thai, slammin’ a mojito, and choking it all down with a churro from an oh so quaint Latin street vendor while you and your other ‘Blue State types’ lament the fate of Darfur.
It’s all about the jobs. Best place in the world to find a useless, high-paying paper-pusher job.
RE is way overpriced here in Metro DC, but it’s never going to be at Milwaukee or Cleveland prices.
I concur. The reason people keep coming here is the jobs, and don’t ask me why companies bother to locate in this dump. The jobs here are really not that much better paying than equivalent jobs elsewhere in the country (and definitely not better enough to justify the housing costs), but there are just lots of white collar jobs and that brings lots of college grads here and makes Loudoun and Fairfax the highest household income counties in America. I think having 25 illegals in a house (very prevalent in this area) might also drive up household income, but thats another story. This place is certainly the most disfunctional place I’ve ever lived. There are way too many units of government who don’t get along and never get anything done, they just do endless studies and lawsuits. In addition the place is filled with self-important NIMBYs and “public interest” organizations who do anything possible to hold up progress. I really don’t think the schools here are that much better than those of any suburban school districts where the parents are equally likely as here to have a degree. What makes household incomes high and schools good for this region is that the percentage of people with degrees is probably the highest in America. The problem is that due to our crazy housing prices if you didn’t buy your house prior to 2003 and don’t work for a lawfirm you can’t afford to stay here and live in a part of the area where the schools are good, so all the twentysomethings I know plan on getting out of here after a few years.
And to the posts below, I believe JFK was the one who said this…
“DC has Northern charm and Southern efficiency”
“I’m sorry but who exactly would want to live in the DC area anyways? ”
Thats where my job is?
Moved to Chicago from DC and I do not miss DC even a little.
Moved to Chicago from DC and I do not miss DC even a little.
I live in NW DC (and work in Rockville near Kings Farm).
There is a very large park behind our building, there is food of almost every variety within walking distance, my wife, who still works downtown is 2 metro stops from her office and can walk to the gym in the evenings. We have interesting local friends with diverse experiences and opinions. Our neighborhood isn’t plagued by crime. There’s a lot to like about parts of DC.
That said, I’d rather be in Chicago as well. But DC would still be in my top 5 US cities to live in. DC, suburbs, though, that’s another story altogether.
To each his own… almost all of my coworkers prefer the suburbs to DC.
I recruited to Northern VA 2 years ago for the career. The pay is great. DC is where I take guests when they come. When I want to go to a play or lecture I take the Metro and get home as quickly as possible. Wouldn’t live in the District if someone paid me. As soon my contract is over (6 years) I will head to NC. Get the heck out of Dodge.
Two people in my division live in DC. I have seen what they live in, no thanks. Higher-end ghetto by my standards. Those with families by and large prefer the suburbs. Schools in DC…well, if you value your child’s safety and care if he or she gets an good education, forget it. The cost of living coupled with private schools requires incomes few can attain.
Most of the people I meet who absolutely love the District are into urban living, have no children and a great many have never lived in cities I have had the privilege of living in. They really don’t have anything to compare it to.
We’re all different. I am very content to stay in the burbs.
U.S. Home Foreclosures, Delinquencies at Record High, Bloomberg
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZsnOLX8Ab_Y&refer=home
Old saying: DC has Northern charm and Southern efficiency.
As for Suffolk county (Long Island, NY), it has all the sophistication of the country with the prices of the city.
Yes, I live here because it is where my job is.
“DC has Northern charm and Southern efficiency.”
I have somehow managed never to hear that before, but I’m definitely going to use that one!
I thought it was “Northern hospitality”…
Either way, the saying is so true. To get anything done, I find I have to ride people’s asses. Never had that problem in the midwest. Secretaries leaving work early…hell, look at 66 at 1pm on a Friday: no body works around here. A bunch of lazy sods with a poor work attitude.
Ok, not everyone is lazy and spoiled, so I don’t want to paint everyone with that bad brush, but there is an underlying cultural current here that I would not want to raise a child into. That’s one of the reasons the wife and I are trying to leave the area.
I currently live in South Dakotastan. Granted it’s not paradise but I can’t see how people can live in a place like DC. I guess it’s because I’ve never been too fond of the area and not just because Big Gov is there. South Dakotastan used to be not too bad considering that it’s part of the cowboy states (my term for red states in the west that are hooked on federal money. SD is no pro-liberty state, trust me). Now, we have the realtor types and rednecks and elitists from the outside coming in and bringing all their weird bling and crap. To be honest, I think both the blue state and red state types are queer, and DC epitomizes the intrusiveness and stupidity of both groups of people. The majority of Amurica doesn’t need DC, and we’d likely be better off without it. Yes, I am being politically incorrect when I say that but I don’t care. My idea of paradise is when DC gets out of my backyard.
I’m a libertarian and basically agree with you about much of D.C. employment being unnecessary.
But I’ve always been under the impression that S.D. is divided between the western part of the state that has all of the cowboys and the eastern part of the state that is full of “prairie populists” busy sucking off the federal agricultural subsidies, just like Minnesota and Iowa. I’m Wyoming-born myself, so I have a fondness for the wide-open spaces, even though I live deep in the heart of the D.C. area.
“While the median income for a family of four in Virginia Beach is $64,100, many families she works with make only a fraction of that, perhaps 40 percent or $25,640, she said.”
$64,100 x 3 = $192,300. That’s what the median home in the area SHOULD be selling for. According to Housingtracker.net, the median home price (in the 50 percentile) is $332,900 as of September 03, 2007. Ok, so $332,900 divided by 3 (the formula used when determining mortgage affordability) equals $110,967 per year. How many people in Virginia Beach make that per year? Of course there are people who do make that and more, but they live in the McMansions and more power to them. I’m talking about those in the military, teachers, firemen, policemen, people who work in service industries, etc. The people who make up the majority of this area.
People who are trying to get 2005 prices for their homes today have got to be out of their ever-loving minds. And anyone who buys their artificially-inflated priced piece of crap is a FOOL. Because like it or not, with the sub-prime mortgage no longer being flaunted, the number of foreclosures in the area, and the eye-popping inventory realtors and FSBOs are stuck trying to sell, prices will go down. And anyone who buys a home right now will be sitting on so much negative equity it will make their head spin.
When prices finally do drop in Virginia Beach, the city (who rode the housing bubble wave like a surfboard) will still be taxing on people on their artificially-inflated homes. Who do we have to thank for this? Ostentatious buyers who purchased outside their price range which forced the prices up, sub-prime lenders who sold them those garbage loans in order to do so, and appraisers who valued the garbage sold here at 47% beyond what they should be selling for (just to name a few). BRAVO to all of you! You’ve made it impossible for anyone but the wealthy able to buy a decent home. How do they live with yourselves?
“While the median income for a family of four in Virginia Beach is $64,100, many families she works with make only a fraction of that, perhaps 40 percent or $25,640, she said.”
$64,100 x 3 = $192,300. That’s what the median home in the area SHOULD be selling for. According to Housingtracker.net, the median home price (in the 50 percentile) is $332,900 as of September 03, 2007. Ok, so $332,900 divided by 3 (the formula used when determining mortgage affordability) equals $110,967 per year. How many people in Virginia Beach make that per year? Of course there are people who do make that and more, but they live in the McMansions and more power to them. I’m talking about those in the military, teachers, firemen, policemen, people who work in service industries, etc. The people who make up the majority of this area.
People who are trying to get 2005 prices for their homes today have got to be out of their ever-loving minds. And any who buys their artificially-inflated priced piece of crap is a FOOL. Because like it or not, with the sub-prime mortgage no longer being flaunted, the number of foreclosures in the area, and the eye-popping inventory realtors and FSBOs are stuck trying to sell, prices will go down. And anyone who buys a home right now will be sitting on so much negative equity it will make their head spin.
When prices finally do drop in Virginia Beach, the city (who rode the housing bubble wave like a surfboard) will still be taxing on artificially-inflated homes. Who do we have to thank for this? Ostentatious buyers who purchased outside their price range which forced the prices up, sub-prime lenders who sold them those garbage loans in order to do so, and appraisers who valued the garbage sold here at 47% beyond what they should be selling for (just to name a few). BRAVO to all of you! You’ve made it impossible for anyone but the wealthy able to buy a decent home. How do they live with themselves?