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So I was looking at the fairfax county budget expectation for the next couple years to get an indication of an expected home appreciation over that time - I just bought a home in the county and I'm working on a strategy to get rid of my PMI ASAP. Fairfax co thinks homes will appreciate 4% in 2015 and 2016.
I'm not so sure. It was looking like things in the home appreciation dept might go only slightly slower than last year's season - that being a strong sellers market - and my experience in April seemed to validate this. We saw 4 THs our first weekend out and all of them either were already gone by the time we toured or were already bid out of our range, and all these homes had just listed. So the next weekend we found a great location and won out over 7 other bidders only because we had an escalation addendum. Sounds like a sellers market so far, what could go wrong? And this in turn would allow the county to plan for increasing budgets based on rising property values.
However, now in June suddenly the inventory in NOVA is spiking and googling local realty companies brings up dire warnings to sellers that if you don't stage your home it will sit cause suddenly there is a 2 month supply of homes. Looking at YoY trends the sale prices look to be plateauing, where in past years the peak would be mid summer.
Ok maybe it is a temporary lull in buyers, or an off year because the long winter delayed seller inventory. Maybe realtor agents always give dire warnings about staging to sellers, as a first time buyer I don't know. However, there are some worrying trends on top of the inventory spike:
(1) mortgage rates are rising, this should put downward pressure on home values. One realty blog even suggested to buyers to look at ARMs if they are buying starter homes.
(2) home values are now almost to the pre-bubble peak in DC Metro, suggesting that anyone who bought in the frenzy of the peak will finally be able to list their home and break even - this will push up inventory as many people attempt this at once, depressing values.
(3) job loss is still bleeding out due to sequestration and budget cuts. With the wars winding down, federal hiring freezes, falling federal salaries ( no pay rase + inflation = falling salary), and tight contract outlays the local economy has lost 11,000 fed and 9,000 prof business service jobs in the last year, according to GMU. What decent jobs are replacing these lost jobs? How can buyer demand continue with that level of skilled job loss, even considering the lack of affordable housing?
So is the fairfax co budget full of it? Am I doomed to go under water in the aftermath of a localized (in time) housing shortage bubble?
You read my mind. I wish I had answers to your questions. I have all the same questions. I close on a SFH in Herndon mid-July. I was one of those people to buy at the peak last time (2007) and suffered a huge loss on my condo. I was very nervous to buy this time.
I was seeing all the signs you saw with homes going within hrs to days of listing in the spring compared to homes now sitting for weeks. I became so frustrated with the market (or prices) in the spring that I was considering leaving the area all together (still not sure why I decided to stay). If we have another crash, I will... well do nothing I guess. At least this time I have a SFH in an established community versus a new construction condo. So any decline (I hope) is manageable to live out. I plan to stay for a while. I have the same goal to get rid of my PMI ASAP. I am close to the silver line... hoping this helps.
I think the NOVA market might be a little overheated in some places. Vienna for one. There is little to no inventory so it seems like people have been very aggressive with their pricing and generally are getting what they want. Other areas I see more inventory and more reasonable prices. Interest rates will put downward pressure on prices when they rise, how much pressure probably depends on how fast it happens. I don't think you have to worry about another crash like when you bought in 07 though. A lot of the factors that caused that aren't in play this time. But I think the estimates of 4-5% appreciation every year going fwd could be a little optimistic.
Time will tell. I wish I knew all the answers myself.
Outer markets = flat, inner markets = still hot due to a complete lack of supply. There is no major net growth in units inside the beltway. So its two completely different markets, that which is further out and limited due to the commute some are willing to accept and distance from jobs, and the other which is really close in but theres nothing available due to a lack of redevelopment. The couple of properties that added a lot of units to the market in TH, were MetroWest and EYA's Mosaic... both of which sold like gang busters if I recall. Since then, a handful of new luxury infills here and there, but nothing that can address the huge demand for inner burbs right now.
I think that as long as you bought your house with a time horizon of at least 5 years and put at least some money down, you're going to be fine. No, you may not make $100k on your home's equity during those 5 years, but you're unlikely to be underwater either. As FCNova noted, a lot of the things that led to the last housing crash aren't present just yet - and, what I'm thinking about, namely, is the creative financing like interest only loans, piggyback loans, home equity loans in excess of 80 or 90 percent LTV ratios. A lot of people got into trouble because they thought their home was a bottomless piggyback they could use to finance nice cars, vacations, etc., and banks went along with lending them the money thinking the appreciation in house prices had no end either. If you can afford your fixed-rate mortgage, have a relatively stable job, and plan to stay put for at least 5 years, I really doubt you're going to be underwater on your house anytime soon. Are you going to get rich quick? Probably not, but that's really not what owning a home is supposed to be all about anyways, at least in my opinion.
As to the Fairfax County budget projections, well, I guess I have about as much faith in something like that as I do in budget numbers coming from any legislative body run by politicians, that is, none at all. I'm sure they have a vested interest in projecting decent numbers so they can justify increases in home values so as to not surprise homeowners when they receive their larger property tax bills each year.
I think that as long as you bought your house with a time horizon of at least 5 years and put at least some money down, you're going to be fine. No, you may not make $100k on your home's equity during those 5 years, but you're unlikely to be underwater either. As FCNova noted, a lot of the things that led to the last housing crash aren't present just yet - and, what I'm thinking about, namely, is the creative financing like interest only loans, piggyback loans, home equity loans in excess of 80 or 90 percent LTV ratios. A lot of people got into trouble because they thought their home was a bottomless piggyback they could use to finance nice cars, vacations, etc., and banks went along with lending them the money thinking the appreciation in house prices had no end either. If you can afford your fixed-rate mortgage, have a relatively stable job, and plan to stay put for at least 5 years, I really doubt you're going to be underwater on your house anytime soon. Are you going to get rich quick? Probably not, but that's really not what owning a home is supposed to be all about anyways, at least in my opinion.
As to the Fairfax County budget projections, well, I guess I have about as much faith in something like that as I do in budget numbers coming from any legislative body run by politicians, that is, none at all. I'm sure they have a vested interest in projecting decent numbers so they can justify increases in home values so as to not surprise homeowners when they receive their larger property tax bills each year.
Fairfax County Home Prices and Home Values - Zillow Fairfax county assessments have actually lagged behind market price in recovery... I dont think anything they are doing is disingenuous or not tracking with reality. Anyone that can show me that their tax payment went up 10% from last year, I think you have a case as to why to approach the county and argue the increase. Otherwise, realize Fairfax is a desireable location, with limited supply, and that the assessed values are actually correct for the most part.
Fairfax County Home Prices and Home Values - Zillow Fairfax county assessments have actually lagged behind market price in recovery... I dont think anything they are doing is disingenuous or not tracking with reality. Anyone that can show me that their tax payment went up 10% from last year, I think you have a case as to why to approach the county and argue the increase. Otherwise, realize Fairfax is a desireable location, with limited supply, and that the assessed values are actually correct for the most part.
I hear you. I don't have any knowledge of how Fairfax County develops their projections for budget purposes, nor do I think that expected appreciation of 4% is completely unreasonable. I just generally have a distrust of anything that comes directly or indirectly from elected officials. When OP tells me she is looking at budget projections from the county, my gut reaction is to not pay much attention to them, at least as it concerns my expectations of where the value of my home is headed. But, maybe I should not dismiss them so easily.
I hear you. I don't have any knowledge of how Fairfax County develops their projections for budget purposes, nor do I think that expected appreciation of 4% is completely unreasonable. I just generally have a distrust of anything that comes directly or indirectly from elected officials. When OP tells me she is looking at budget projections from the county, my gut reaction is to not pay much attention to them, at least as it concerns my expectations of where the value of my home is headed. But, maybe I should not dismiss them so easily.
Thats fair as far as projections. Thought it would be good for people to recognize the reason their bill went up this year is because of actual assessments in the market going up. I actually wrote a post about this. We've seen a whopping avg $20 increase in real estate taxes over the past 8 years. We had a huge decrease in payments after the bubble of course. People only ever notice when it goes up, never when it goes down, or when its actually returning to what it was.
Thanks for the comments, I am mostly inclined to agree with you folks that at worst I might encounter flat. I didn't buy inside the beltway, I'm in the Lake Braddock district which is supposed to be good (waiting for the axe to drop...am I correct?). I certainly do love the area so far, though my recently flipped house has some hackery that needs fixing. This area is like night and day from the rt 1 corridor where I was previously. In addition, my commute into southern DC is actually the same (!) despite being about 10 miles further out because the traffic on rt 1 is that bad.
Looking on zillow, the homes in my part of fairfax co are sloped up in value with quite a steep incline over the last 2 years, and I think inventory is relatively low (at least on town homes under the jumbo loan mark, there are sfh over 500k but I think the buyers for those are fewer). But as I've said, I don't see this incline as continuing and I think things have already started to flatten. The only question is whether it plateaus or drops.
I do have a fixed rate, stable job, and plan to stay for now (in fact a huge factor in my choice was to hedge to be in a good school district since I can't afford private school and don't know that I'll be able to easily upgrade) - but I gambled going for the pmi hoping that with some appreciation I could get out of it in 2-3 years. I'm not trying to get rich off my house, I'm trying to keep up with my bills as my no raise salary depreciates. (Guess who I work for). Not having rent go up every year is a good start.
The bottom line about this city is that it has a 2-class society separated by time. If you bought before 2005 you are doing just fine and have a good quality of life. If you came here in the last decade you got screwed and can barely make your bills. And as the younger generation begins to realize that this city is a pyramid scheme for baby boomers, they will likely leave for better prospects. I think I'm with bjm243 - if things don't look up in the next few years the plan is to break even if possible and get out.
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