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Monday, February 7, 2011
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50 comments:
Ace,
my friends put a contract on this house pending sales of the current home. looks like a good trade-up move.
hopefully you'll find a good one soon :)
MM, that's a very nice house (too rich for my blood of course!). Congrats to your friends! And I hope both of us get lucky this spring.
http://franklymls.com/DC7489371
sells for 300k, assessed at 385K
"he bottom line is the Country is out of money "
or the country needs to increase taxes.
if we taxed banks we would be fine
Long time lurker. What do folks think about the pricing of this
property listed at 649K. Zillow has it at 575K. Best comps I can trivially
find are 602K on 2010/08/27, which has the deck on the main
level and backing to parkland not the falling apart tennis courts; 597K on
2010/09/01 which has an extra room above the garage; 601K on
2010/12/09 which has an larger kitchen.
Contrarian-
First, we have a printing press so saying we are broke doesn't really mean very much. We can always print more money, there can be a lot of negative side effects, but it is a possibility. I am not sure why you think all of a sudden the fed/treasury will decide they can no longer use the printing presses. Sure maybe China will stop buying treasuries, but that would just mean you need to turn the printing presses to a faster speed.
Pat-
Are you kidding about the bank tax fixing all of the problems? The entire banking systems profits have never been much above $200B. The run rate on the deficit for several years is well above $1T. So even if we put a 100% tax on bank profits it would not come close to fixing the problem. Also taxing the banks 100%, would just cause them to pay their employees more since there is no incentive to have a profit.
David-
I haven't looked into that area that much, but I would think that it would probably sell for a little of 600K. Although there were a few reasons as you pointed out that makes it less attractive than some of those houses it also was slightly more updated than some of them. So maybe the pricing is a little high, but usually owners expect to sell the house for less than list price, so it is definitely not way out of line.
HB -
Thanks. The reason I posted and was soliciting comments is that the sellers are being somewhat stubborn on the price. They are, essentially, not moving on the price.
VA MLS - NoVa Inventory
Trending down when it should be increasing? Too early to see if spring supply will be low. Could be the bad weather has people holding off listing, but this wouldn't affect reo's.
Something to watch.
HB
May i remind you of the NY Times Budget Simulator tobin Tax
"A 0.01% Tobin tax, which would have to be imposed in all the major financial centers to catch the full flow, would thus yield about $54 billion per annum in tax revenue, of which perhaps $15 billion to $20 billion would accrue to the U.S. government. "
Banks are unprofitable because of control fraud, but a Tobin tax would capture that and bypass the control frauds.
reecon
I don't know where you grew up, but where I grew up in Chicago in the 70's a man could support a family on their earnings alone. If the wife worked, they did because they wanted to not because they had to.
What we have today is a system that is predicated on failure, the Dual Income Family is more likely to face bankruptcy, some 2-4X greater then a single income family.
http://www.calculatedriskblog.com/2011/02/daily-color-years-to-absorb-excess.html
2 years inventory in Virginia.
pat is that NoVa? I believe I pointed out that most of the current and coming reo's are down south (VA Beach area, etc). This was confirmed by an article I read last week.
In reviewing recent Trustee Notice's in the WaPo, it is striking how many are in Stafford, F-Burg, Winchester, etc.
Does the article show County by County or the entire state?
pat,
I read the article (what little of it there was) and it is Statewide and imo of little relevance to our discussion.
In addition, the very item that the author uses to "qualify" his assumptions is a change in number of people per household. There has been much recent discussion here about people moving out of their parent's home or shedding roomates as job confidence increases and/or the boomer kids age a little.
The author also states that population growth can affect his predictions. I would guess that NoVa will attract a disproportionate share of future population growth in Virginia.
Pat-
First banks are profitable, I just said they couldn't pay more than ~200B of taxes. Sure they would have no problem paying $50B, but you have to be joking if you think $50B will put a big dent in our budget issues.
David-
60 days without out a price cut isn't that uncommon. If they go 90 I think they are being stubborn. The other reason 60 isn't that bad is they listed their house in mid December a time period when almost no one is looking at houses.
Well it looks like a high percentage of current buyers won't need to worry about negative equity. Last year 28% of sales were all cash with a high percentage of sales being all cash in the hardest hit cities cash sales
Pat I grew up in Arlington and have lived there all my life. My wife grew up in Fairfax on a farm and moved to Arlington when we got married. As soon as the housing market plummets, you should be able to buy any house you want and re-create the 1970s life you had in Chicago. Based on the women my 4 sons married though, I am not sure where you will find a woman who will want that type of life
hb,
How do you think this has impacted the national equity position of all owners? The most recent info I found was from June of 2009 (CR) and stated that 31% owned free and clear and that national equity was slightly over 20%.
The 20% obviously includes the full spectrum of way-underwater to free and clear.
I would guess that '09 and '10 saw a large drop in underwater mortgages (due to SS's and foreclosures) as well as an increase in cash purchases.
Have you seen any data that is more current? Or any reliable data on the pipeline?
Of course the truly meaningful data is for our metro area (not even VA as a whole).
VA-
Sorry I also haven't seen any good data on this in a long time. It obviously helped the equity position, but seeing that last year had the fewest house sales in over a decade I doubt it changed the equity position by more than a few percent.
hb,
I'd have to believe that the change would be more than a few percentage points given that the vast majority of sales were reo or short and then we have to add in the percentage of all-cash.
For those of you screaming for data, here is some interesting information on Arlington.
http://www.city-data.com/city/Arlington-Virginia.html
If you scroll down just below the photos you can actually break down all of the information by zip code. At the very bottom, there's also detailed information on the number of loans and their types originated, applied for, denied, etc at the bottom.
A quick look shows that in 2007 (the latest year there is info for) the average conventional home mortgage loan (which is by far the largest segment) was $334,576 in 2007. The mean home cost over all housing units was $570,661 in 2009.
CRT used to pay much closer attention to this type of information and I believe his conclusion was that the funny money loans just weren't that prevalent in Arlington.
My $0.02
VA-
I can't quickly find full year data, but this at least has data for November and December and says distressed sales were only ~33% of the sales. If I recall there were ~4MM houses sold out of ~100MM, so only ~1% of houses were REO/short sales last year.
hb,
I am definitely confused. I don't fully understand the relevance of total housing units vs sold units. I understand percent of sold that were distress. Would it not be more informative to look at homes sold as opposed to all home inventory (ie. not for sale)? How much turnover should we expect as normal?
The fact is that the "turnover", in my mind, represents a wash-out of underwater (neg. equity) homeowner's; those sitting pretty remain because no duress exists.
Couple this with cash buyer's and you and I reach very different conclusions.
well phoenix is now a trap for feckless foreign investors.
Aussies are buying ghetto property in arizona for all cash, they are cashing out their retirements to buy "Steals" and will soon get burned hard.
"What can one see from 7500 miles away that local investors miss? What can one overlook from 7500 miles away that local investors see?"
The Arlington SS on N. Manchester going for $425k went under contract today.
Does this typically mean the homeowner accepted the offer but the buyer is still waiting to hear from the 2 lenders?
VA-
The reason I was pointing out the percentage of homes that change hands is these are the only homes that are having equity change. For example if only one house sold and the new person bought with cash that would hardly impact the average amount of equity of all households. On the other hand if everyone sold there house and they were all bought with cash then home equity would be 100%.
In reality ~95% of people did not sell their house so there equity remained fairly flat. So what really matters is how much equity is gained during the sales
Jewel-
Yes the house goes under contract when the seller agrees to the price. The two lenders will likely take several/many months to either decide yes or no to the price.
Jewel & housebuyer,
i think it'd be a long wait if it closes at all (or so said my agent...).
check out this SS - contract to closing in 66 days - there're two trusts: $520K and $50K but maybe one lender?
(hard to believe it ended up as a short sale: the buyer put down $130K for $650K sale price in 05. such a bad luck.)
MM-
My guess is that the buyer probably only put down 80K not 130K. They probably got one loan for 80% and the other loan at the same time for almost 10%. So They really only put down a little over 10%
housebuyer:
it's possible - though on record the second trust $50K obtained on Jul 17 2006.
it's likely they spent that $50K for "Updated kit. baths." then market (for Belvedere Condo) went south and then something else happened that forced them to sell quickly. divorce maybe?
Thanks for the insight into the short sale. I hope the next person who moves in takes better care of that house.
RE: Belvedere Condo
The kitchen has a new countertop, but it doesn't look terribly updated. Although there are no pics of the bathrooms. Maybe they used the $50k for something else?
I could be completely wrong - but the furniture seems like something an "older" couple would buy. (i.e. the wing chairs and heavy drapery) Not sure if that provides a clue into their situation.
That condo is coming in around what I've always pegged them to be worth: around $200k per room. That seems to have an extra room with the enclosed porch and is a lot of space at 1200+ square feet.
They bought right at the peak in June of 2005 too.
My $0.02
Contrarian-
I think you are missing my point. They can print as much money as they want too. There is no reason they couldn't print a quadrillion dollars...
Yes there will be major consequences if they did this namely our currency would be worthless, but that doesn't mean the government can't print that much. Nowadays they don't even need paper to print money, they just need a computer to send the money electronically.
I think more people would listen to your comments if you stated them as an opinion and admitted that they may be wrong. Most of the people here are willing to admit they may be wrong and there is an upside scenario and a downside scenario to their estimates. The fact you refuse to think it is even possible that inflation would be used to fix a debt problem seems odd.
WSJ Article:
I wish I had a couple of hours to discuss this sentence with the author ... wish he would've been a little more precise, descriptive and supported it with data:
"Meanwhile, some areas that appeared overvalued relative to historic norms, such as Washington, D.C., may not completely return to pre-crisis levels thanks to structural changes in the economy that support higher prices."
http://online.wsj.com/article/SB10001424052748703313304576132291585938656.html?mod=WSJ_hp_LEFTTopStories
Contrarian-
I agree many municipalities will go bust, although I probably would think a smaller number than you. I do not think states will default in the next several years, but over the next 10+ years it is possible some states default.
As for comparing the US to Greece and Egypt those comparisons are silly. First, Greece can't print money because they do not have their own currency. Egyptian have effectively been living in a military dictatorship with very high inflation. Is it possible that people will totally rebel and get rid of the Fed for printing too much money. Sure this could happen, but is very unlikely unless we see significant inflation, which cuts into peoples standard of living. In this scenario we have inflation, not the deflation you are predicting.
I am not sure why you are bragging that you have been predicting deflation for several years. You do realize that prices have been going up for the last two years and if you exclude oil we never had any deflation in the first place. Housing prices started falling 5 years ago. If we still haven't seen deflation why will it all of a sudden happen immediately. Sure there are lots of risks to the economy, but these risks are nothing new the economy is much stronger than it was a couple of years ago. I don't expect high inflation any time soon, but am fairly confident that core inflation will continue to stay positive for the foreseeable future as the amount of slack in the economy continues to fall.
Mike-
I agree that would be interesting to see what he is talking about. I assume it is some mix of wages have gone up faster in DC than other areas, the city itself has improved (safer,cleaner...) dramatically over the last 10-20 years, and large areas to build new houses near the city are very scarce.
"Contrarian said...
What makes you think $1 trillion or even $5 trillion will have an impact on $315 trillion (and counting) in liabilities????"
Who said it could be a mere $1 trillion or $5 trillion? Why cant they print $500 trillion or $1,000 trillion, or $1 trillion trillion?
Think this is impossible? Check this out:
http://edition.cnn.com/2009/WORLD/africa/02/02/zimbabwe.dollars/
15 years ago, a zimbabwe dollar was close to value of a USD. However, here the govt printed and printed and printed til even ONE HUNDRED TRILLION DOLLARS could not buy a single loaf of bread. Today, just 4 single bills would be big enough to wipe out an entire $315 trillion debt, and have $85 trillion in change.
As HB said, while there would almost certainly be massive problems (a high risk of going to war with China comes to mind) why do you continue to insist it is "impossible" to stop deflation?
Like Zimbabwe, $315 trillion in debt could be wiped out with the mere flick of a switch, if the US government wanted to destroy its currency.
Note, im not saying this is likely. Far from it, as the govt has already extinguished deflation for only a trillion or two. Still, if it rears its ugly head again, it will be just as easy to stop as it was in 2008 - simply by flicking a switch.
So again, if the deflating debt was $315 trillion, why cant they print $400 trillion just like Zimbabwe did?
Mike and hb,
WSJ quote seems to dovetail nicely with the data from Clear Capitol cited in The Atlantic showing DC #2 nationally in prices gains for 2010 and projected to be #1 in 2011.
Housebuyer:
It's possible the author was referring to the three things you named, but I wouldn't necessarily think the last two qualified as "structural changes in the economy." The author also referred to "some areas," i.e., more than just DC. So, I'm not sure your explanations could be extrapolated to other areas.
Also, as an aside, I never thought of the DC as having a land problem. There seems to be plenty of land near the stadium; the city is offering generous tax-breaks in order to fill the commercial space there. You mentioned "land to build new houses," but I'm not sure that is what driving prices in neighborhoods with pre-existing housing stock.
from Mikes WSJ Article
"They also examine the relationship between house prices and rents. Measured by the price-to-rent ratio—the price of a typical home divided by the annual cost of renting that home—prices are fairly valued, or undervalued, in around 20 markets. Nationally, the price-to-rent ratio stood at 14.85 at the end of September, above the 1989-2003 average of 12. The data suggest pockets of the country have further to fall."
DC is one place where rents and prices aren't pencilling out yet.
HB
The reason a bank tax will help a lot on the deficit is a large chunk of the deficit was to bail out the banks from the trouble they caused.
Taxes will make banks boring, and force capital into physical industry growing the economy.
Pat-
I agree that most of the deficit is to help the economy and the banks caused the economy to be bad. Although this is the case almost none of the deficit is going to help banks (unless you count the money going to Fannie/Freddie, which is still only 10% of the deficit). If you look at programs like TARP the feds made money on the banks and even with the bailouts that the banks got from AIG the government will still break even on AIG. The only part of TARP that is losing money is from GM and Chrysler.
Also the financial crisis caused the Fed to buy tons of assets which have had enormous profits which have helped to reduce the deficit (I believe ~$80B last year alone).
Finally I don't think that taxing a bank will make it safer instead if you want to make them safer just continue to increase capital requirements like Basel III is already doing.
HB
"Finally I don't think that taxing a bank will make it safer "
Ever hear of FDIC? a group premium imposed by law on banks, which provides reserves and limits bank activities?
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