Housing market slump?

[Feersty]

...not in my neighborhood

A house in my neighborhood just went for $699,000, the most any house has gone for. My family bought our house for $179,900 in 1987.

[Kaan]

From 1987 until now... going from nearly $200k to 700k isnt that "great" or unheard of. remember, $200k in 1987 was ALOT of money still. hell Old Town alexandria stopped selling homes surrounding the "projects" for $1 in 1985. Think about how much your row house would be worth today if you only paid a dollar for it! they are selling for a million plus in that part of town.

[Mike]

200k in '87 < 700k in '07... by far...

[BLAIR]

ever heard of INFLATION? haha

[Kaan]

no way! you are smoking crack. 200k in the 80s was pricey as hell. my parents bought their old house on the potomac off the GW parkway, with a dock, 3k sqft for $145k in 1986... it was pricey as hell for that day in time... just like 700k house in springfield is pricey now!

[bassmangrammy]

From the finance major perspective:

Assuming 4% annual core inflation over 20 years, a $200,000 house in 1987 should be worth $438,224.63 in 2007. This is a simple time value of money calculation utilizing 20 period compounding of 1 + i, or in this case (1.04)^20.

Given this, it's safe to say that Feersty's neighborhood has exceeded core inflation nationally, BUT without factoring local inflation (i.e. cost of living), you cannot accurately confirm or disconfirm that your area has avoided the housing slump nationally.

On another note, it's important to realize the main drivers of the slump. First, the volume of homes for sale has increase, and sub-prime mortgage default and default fears are increasing uncertainty. However, the effects of the latter are regionalized and NoVA doesn't appear to have much exposure. Certain areas of California are beginning to suffer due to direct exposure. But donÔÇÖt get excited yet, because weÔÇÖre not quite clear; the inverted yield curve over the winter and the potential of blue chips suffering from sub-prime lending could lead to a recession. (Although, Ben BernankeÔÇÖs sole purpose for living now is to prevent a recession.)

All in all, the value of homes in NoVA reflects the ability to earn wages in the area. I'm looking forward to see how the sub-prime collapse affects NoVA. It should be interesting.

[Kaan]

in NOVA you cant assume 4%... especially over the last 4-5 years.

[G.Irish]

He's not, he's just saying that the rice in price has outpaced inflation. Obviously real estate prices have spiked by way more than 4% per year in the last couple years here.

Still, its not really sustainable IMO. A lot of people like to say, "Oh but the area has lots of jobs" Which is true, but these jobs aren't all of a sudden magically paying 2 and 3 times as much as they were a few years ago. Another indicator is the fact that average rent is way out of whack with the average monthly mortgage payment. Then when you look at the new units that have been built or are being built in the area and its all but certain that prices have to correct themselves (which is happening now).

Don't know how much prices will come down but it definitely hasn't stabilized yet.

[WRXtranceformed]

We sold 5 in January, 8 in February and 5 this month just in our community outside of Chantilly alone. We've been reducing incentives and the prices will soon start to rise again. Another thing we're noticing is that our client's homes are on the market for much less time than they were this time last year.

Analysts will tell you the market hit bottom in September of last year. Since then, things have normalized and are beginning the rise back up in the spring market! Bring on the sales baby!! Daddy needs an IS-F when they come out!!

[Feersty]

Prices in this area should only go up, due to the BRAC and 23,000 jobs relocating to Fort Belvoir from Meade, Norfolk, and Aberdeen.

[Ginger]

Prices in this area should only go up, due to the BRAC and 23,000 jobs relocating to Fort Belvoir from Meade, Norfolk, and Aberdeen.

That doesn't necessarily mean a price rise...

[Mike]

Assuming 4% annual core inflation over 20 years, a $200,000 house in 1987 should be worth $438,224.63 in 2007. This is a simple time value of money calculation utilizing 20 period compounding of 1 + i, or in this case (1.04)^20.

Thank you.

What I think drove the silliness that we see today is all these funny new financing terms. People who have no money are suddenly able to buy houses. These people assume that their property will increase in value forever and they'll be able to gain equity despite only paying interest. What has happened is that prices have gone so high that young people cannot get in to the base level houses. Without this influx of new owners, prices cannot go up. People panic, people sell, prices drop, foreclosurers on these stupid deals increase, market floods, prices drop even more.

Now is not the time to buy. I see far too many friends trying to buy just to buy... It isn't worth it unless you're certain the market is about to rebound or you plan on living there for 10+ years. People who bought $350k condos expecting them to rise forever and then buy a house with that money once they meet someone? F'd. They've now sunk all of these costs/payment in to something that is going to net them nothing. HUGE LOSSES.

I'm very eager to see how the next couple of years go around here. If it doesn't go the way I expect it (30-40% drops), I'll be moving to Charlotte, Charleston, Asheville, or Cali

[WRXtranceformed]

One of the biggest reasons why there have been so many foreclosures is that sub-prime loans were in existence. If you read the newspaper, you've probably heard something about it. The Fed basically stepped in to the lending market and said that it's time to eliminate those loans.

Now basically every lender across the board cannot do: NINA loans, NIVA loans, definitely not MTAs hah, No Ratio loans, even 100% financing and second trust mortgages are now extremely extremely hard to qualify for. This literally just happened within the past two months... a friend of mine almost got screwed on the settlement of his house because of the loan program they originally qualified him for (his parents are rich and would have picked up any financial slack, so he was fine anyway).

I wouldn't hold my breath waiting for home prices to drop by 30-40% in this area within the next few years, it simply won't happen unless there is some national economic disaster. Charlotte is a good call though, I may be buying some property down there soon...the housing market is on fire right now. A friend of mine works down there for our sister company and she and every other salesperson in her division are pulling in $200k-350K years no problem hock:

[.RJ]

[Apoc]

I'm very eager to see how the next couple of years go around here. If it doesn't go the way I expect it (30-40% drops), I'll be moving to Charlotte, Charleston, Asheville, or Cali

Better start packing. I'll give you 10%, maybe 15% but I seriously doubt you're going to see a 30-40% drop in the next few years. The more expensive houses are somewhat protected by a higher cost basis and being owned by people who have been working 30 years. Even if people start defaulting on entry level homes I can't really see the lower cost housing dropping more than 20%. I mean you're talking about a $300k condo dropping to $200k or even lower? That's one hell of a bubble burst.

[Mike]

Yes, I am talking about 300k condos going for 200k. Such a condo is generally intended for a younger person. Maybe someone single who is a few years out of school. 300k is not affordable (realistically) unless you're making 150k/yr.

[WRXtranceformed]

Yes, I am talking about 300k condos going for 200k. Such a condo is generally intended for a younger person. Maybe someone single who is a few years out of school. 300k is not affordable (realistically) unless you're making 150k/yr.

Or you go in with someone else or rent the other room(s) out.

[.RJ]

Or you go in with someone else or rent the other room(s) out.

Or you live out in winchester... neither of which are too appealing really.

You can post up all the sales numbers, and growth, and all that stuff but the bottom line is that housing prices are out of line with salaries. Maybe the market wont crash here, who knows.

[HAULN-SS]

Or you go in with someone else or rent the other room(s) out.

but the bottom line is that housing prices are out of line with salaries.

Plus Juan

[ScottyB]

no wonder we get so many DC'ers moving down here

which is funny because Jen and i will be back up north to VA or NC once grad school is done with. housing prices or not, it's hard to beat that part of the nation for nice places to live.