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My wife and I are looking for a 4BR home in Lyon Village or Lyon Park. So far, we've had zero luck, despite what we consider to be an oversized budget. Seems like reasonably priced homes are all being snapped up by developers. Other listings that come on the market are seemingly gone in a matter of days and at or above list price. Given that real estate is still recovering in the rest of the country, I'm a bit shocked at what we're seeing in this area. What the heck is going on?
Oh, and if you happen to be considering putting your house in Rosslyn/Courthouse/Lyon Park/Lyon Village/Clarendon on the market, let me know and we can save the realtors fee. =)
That's interesting. I was just talking with a co-worker who lives in Arlington who wants to put his house on the market but he's in the middle of resanding his floors right now. He says what he sees happening (because it's happening in his neighborhood too) is that the houses are being purchased, many of them torn down and new houses built and then sold. Not sure how large his house is but I can ask - he doesn't live too far from Clarendon, but I don't know the area well so I don't know exactly where in relation to Clarendon he is.
My wife and I are looking for a 4BR home in Lyon Village or Lyon Park. So far, we've had zero luck, despite what we consider to be an oversized budget. Seems like reasonably priced homes are all being snapped up by developers. Other listings that come on the market are seemingly gone in a matter of days and at or above list price. Given that real estate is still recovering in the rest of the country, I'm a bit shocked at what we're seeing in this area. What the heck is going on?
Oh, and if you happen to be considering putting your house in Rosslyn/Courthouse/Lyon Park/Lyon Village/Clarendon on the market, let me know and we can save the realtors fee. =)
The conventional wisdom is that buyers increasingly want somewhat walkable areas that have good schools and are close to where they work. These areas are in relatively short supply in the DC suburbs. While one does need a car if one lives in many parts of Arlington, you've identified several areas that are fairly close to Metro stations, and that drives the price up even further.
Combine that with the fact that a lot of younger buyers have lived in apartments in Arlington and want to stay in the area when they are ready to buy a SFH and you have a hot RE market. A lot of Arlington residents liked to call their areas "immunozones" that would not suffer nearly the same type of price declines as other areas when RE prices started to come down several years ago. That turned out to be a bit of a conceit, as Arlington prices fell in 2009, but prices there have since come back up.
I think JEB is right about the renters, too. A lot of people moved here thinking they would be here just for a year or two, to ride out the recession. However, the recession (or whatever you want to call it) is lasting longer than people thought. The longer you stay in a town, the more you're likely to put down roots. Many get married or start families or just want to settle down. For many, the longer you live in a town, the more it grows on you. For all the reasons and more, I think a lot of people have have decided the time has come to stop renting and buy a place. Many temporary residents have decided to they're here for the long haul.
Cost of ownership in jumbo loan is probably at historical lows, so properties may seem cheap, at least now, to those looking in that market: If Prices Are Falling, Why Are the Rich Buying?
Quote:
Rates are at historic lows and the spread for jumbo loans has shrunk dramatically. As CNN Money explained:
Normally buyers have to take out a jumbo loan to finance any mortgage beyond the $417,000 threshold (http://www.fanniemae.com/aboutfm/loanlimits.jhtml - broken link) ($729,000 in high-cost cities such as New York). These loans have higher interest rates because they are considered non-conforming — or higher risk — and are not backed Fannie Mae or Freddie Mac. In 2009 buyers of high-end homes paid 1.8 percentage points more in interest than the average buyer. But in 2010, that spread had shrunk to just 0.6 points more.
They can also fix that rate for 30 years. The 30-year-fixed-rate-mortgage may be a victim of the new lending reforms. Mark Zandi, chief economist of Moody’s Economics addressing the administration’s recent report on reform:
“A private system would likely mean the end of the 30-year fixed-rate mortgage as a mainstay of U.S. housing finance. A privatized U.S. market would come to resemble overseas markets, primarily offering adjustable-rate mortgages.”
It will probably be interesting to see what same people think, perhaps 5 - 10 years down the road, when rates have normalized and 30 year fixed may have totally gone away. When cheap financing you can get now goes away and buyer down the rate has to pay much higher rates, perhaps reality will return and those home prices will then more closely reflect replacement costs (but still including premium for location with easy commute into DC and lack of new land to build on).
If someone is truly buying a property, or more specifically a desirable piece of land with great location that can't be replaced, for the long-term, probably still does represent great deal going forward.
For someone who will try and flip house in 5 years, my guess is ouch... (plus, I believe there is still a lot of shadow inventory banks are keeping off market, government has that wage freeze, and government may be shrinking going forward when politicians actually have to really start slashing U. S. debt, sounds like starting in 2013 and transitioning in over a decade or so).
Last edited by mshan242709; 04-19-2011 at 10:16 AM..
There are several factors at play keeping prices high, in addition to those others have mentioned. (Disclosure: I live in Arl., but not in one of the neighborhoods the OP likes).
You are looking in two of the most expensive and in-demand areas of Arlington. You like those areas for the same reasons that many other people do. You may have better luck if you are willing to consider some other Arl. neighborhoods. For example, many parts of 22205 have some of the same advantages (though a longer commute to DC and maybe not as good metro access) with somewhat lower prices.
Or should you wait for prices to change? I don't think so.
There was a huge demographic shift in Arlington in the past decade, compared to most other parts of the metro area (similar to parts of NW DC). The median incomes there went up much more than they did in most other areas. So you are competing against other well-heeled buyers.
Arlington never went up in price as much in %-age terms as did Prince William, for example, so it didn't have as far to fall. It didn't fall nearly as much in part because of that and in part because there have been relatively few foreclosures and distressed sales. And, probably, condos that amateur investors tried to flip, and overextended buyers in some lower priced parts of so. Arl. accounted for a disproportionate chunk of the fall that did occur.
It's possible that future lowering of the super jumbo cap may have some impact, but since many people may be moving up and have equity from a prior house (or some other savings) and aren't seeking super jumbo mortgages, it's not clear how much of an effect this will have in your preferred neighborhoods. W/r/to replacement costs, in Lyon Village and nearby, one has to consider that a big chunk of the cost is the land value, which is not part of a replacement cost. A typical tear down in that neighborhood may go for over $600K.
Until there is much better metro access throughout the area (which isn't happening--even the Dulles rail, though a big improvement doesn't begin to address the huge needs), the metro accessible parts of Arl. and similar areas will continue to benefit. Unless the competent (though imperfect) county government collapses, and schools fall into a decline and crime soars, Arl. will probably continue to compete well for future homeowners with the nicer parts of SFH - residential NW DC, except that you have to deal with the Key Bridge traffic if you don't metro to work or to enjoy DC.
On the supply side, houses in Arl. were generally built when 4 true bedrooms (vs. 1 or more closet sized room called a BR above ground, or more typically, 1 or more of the 4 bedrooms located in the basement) were very rare, and most houses without additions are quite small. Further, within the past 5 years, Arl. has responded to residents who objected to McMansionization of neighborhoods, and it changed zoning laws to restrict lot coverage and other building rules to a greater extent. Many lots are too small for adding on the size you may want. So 4 BR houses without significant faults are few and in great demand. Also, many long term home owners in those primo neighborhoods can't afford now to move because they bought when homes were much more affordable on their incomes. They may be living in a million dollar house on $100K, for example. So they just fix up as they can, and stay there, and that may be cheaper and more desirable even than downsizing (and since most houses there aren't that big to downsize from, you don't see much of that); many don't want to leave familiar and convenient places, friends, easy commuting, etc. So you don't have as many sellers as you might otherwise.
These things all suggest that we aren't likely to see much change going forward (at least not in time frame in which you may be interested in buying), and that Lyon Village and to a lesser extent, Lyon Park, are no longer in a bubble. Sorry this is not the answer that you would want, but it's my best attempt to understand what's going on there.
Before buying, perhaps you should read this 2007 Rent vs. Buy article from NYT, and if you are not a truly long-term buyer in this market in that area, at least weigh what you can get for comparable rent?:
NYT has updated that article (just google New York Times Rent vs. Buy), but IIRC, later article said a Rent to monthly mortgage ratio above 20 was threshold where it just made sense to rent.
Obviously you have to weigh transactions costs of buying vs. selling, unexpected repairs, etc, and seeing first hand what you get for your monthly payment and decide what is best for your family. Given difficulty of many in terms of actually qualifying for mortgage, plus inflation picking up, it does seem like annual rental rates may be increasing going forward, but that is tradeoff from having a lot of money tied up in a relatively speaking illiquid investment.
Good Luck!
Last edited by mshan242709; 04-19-2011 at 02:24 PM..
I gave up on trying to find a reasonably priced house in Lyon Village a long time ago. Whenever I meet anyone that lives there and moved in within the past 10 years or so, they almost always are some power couple with young children. Meaning like a junior partner at a law firm making $400K to $700K per year, so spending $1M+ on a tiny house on a small lot isn't a big deal. They generally like the character of the neighborhood, the good schools, the nearby shops and restaurants, and the door to door commute to downtown DC in less than a 1/2 hour. You can't find that combo anywhere else in NoVa and only downtown Bethesda or Chevy Chase is similar.
That's your competition. So if there is an estate sale of a beat up house that has never been renovated, a developer will scoop them up and rehab or tear it down to sell it to those rich folks. That's just the way it is.
Lyon Park is similar, but some of the housing isn't as convenient to the metro and the middle and elementary schools are not as desirable. So Lyon Park is more affordable, but still expensive, especially the closer you get to the metro.
It's not a bubble in Arlington. It is just a VERY desirable place to live and the cost of housing reflects that. Whether it's people with huge incomes or developers looking to tear down and build a 5000 sq ft house on the lot, there is a lot of competition.
Many people live in Prince William County because the housing is more affordable - I'm sure many of them would love to live in Fairfax or Arlington County, but you get a lot more house for the money in PWC.
If you can't afford Arlington, look further West. It's what everyone else does.
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