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Old 02-25-2009, 05:45 PM
 
3,576 posts, read 5,903,599 times
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I'm trying to convince one of my friends to go for the home in McLean, VA that's selling for 15% off peak. I told them this one home will not last very long on the market. The home sold for 1.6 million "at peak" in November 2005. For those of you who do not know McLean, VA, that's where the money is. Colin Powell leaves there, US Senators live there. Many prominent CEO or former executives from Mobile Oil still have homes there. The Langley High School district is probably the best public high or at least one of the top 3-4 in the area.

The homeowners have agreed to sell the home for around 1.2-1.3 million and just take the 300-400K hit. These are very wealthy homeowners but they are not going to just give the home away. The home has been on the market for less than 40 days. They already had an offer for 1.3 million but the financing fell through last month. Their realtor already has 4 more showings planned this weekend.

Now my friends want to look into a home in Chantilly, VA that's selling for only for about 680K. It was purcased for 1 million at "peak" in 2005. It's going to be a "short sale" They feel like they can get "better" value out in Chantilly.

Money is not an issue for my friends. But they feel like they should go with the masses and bargain hunt.

I told them 15% off is about as good as its going to get in Mclean Virginia. Look at the schools. The Langley High School has a less than 1% "free lunch/reduced lunch population" compared to 11% in the other school district. Look at the homeowners. One is a short sale because the homeowner could not pay the difference in their home. The McLean, VA homeowners can take a 300-400K hit and it probably won't affect them.

I think you get what you pay for.
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Old 02-25-2009, 05:59 PM
 
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Location.
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Old 02-25-2009, 06:13 PM
 
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I think it is ridiculous to do comparisons off of peak prices. People talk about it like that was a fair valuation and prices are just depressed now and will return to the peak once the economy improves. The peak was caused by artificially inflated home demand driven by a ridiculous ponzi scheme called our lending system. It will not recur.

I think a much better way to look at a value is to compare to historical price valuations - go to zillow and pull up a trend line and compare current price to that trend line slope pre-bubble (you will see the bubble on the chart). I would also look at the amount of inventory in each location. If you have 1 year + inventory, you can wager that prices will continue to fall. The greater the inventory, the greater the fall.
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Old 02-25-2009, 06:19 PM
 
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Quote:
Originally Posted by sean&diane View Post
I think it is ridiculous to do comparisons off of peak prices. People talk about it like that was a fair valuation and prices are just depressed now and will return to the peak once the economy improves. The peak was caused by artificially inflated home demand driven by a ridiculous ponzi scheme called our lending system. It will not recur.

I think a much better way to look at a value is to compare to historical price valuations - go to zillow and pull up a trend line and compare current price to that trend line slope pre-bubble (you will see the bubble on the chart). I would also look at the amount of inventory in each location. If you have 1 year + inventory, you can wager that prices will continue to fall. The greater the inventory, the greater the fall.
It's just very difficult to do these fair valuations in prices in McLean, VA have these custom homes and each home is so much different than the next home.

The Chantilly Virginia home was built with one of the Luxury homebuilder (not sure but it was probably a Toll Brothers home) but they have very similiar homes along in the same subdivision within Chantilly.
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Old 02-25-2009, 08:25 PM
 
339 posts, read 1,350,154 times
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I agree - Location.
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Old 02-25-2009, 08:28 PM
 
Location: Halfway between Number 4 Privet Drive and Forks, WA
1,516 posts, read 4,126,675 times
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Location, baby!
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Old 02-25-2009, 09:22 PM
 
Location: Virginia (soon Ellsworth)
653 posts, read 1,677,820 times
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If the money is not an issue, i would go with 1.2 mil home. when market go up 10%, 10% of 1.2 mil is much larger then 10% of 680k.
on the side note, how the parent of 1% freelunch kids afford to live in 1 mil+ area.
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Old 02-26-2009, 08:24 AM
 
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Originally Posted by boonelsewhere View Post
on the side note, how the parent of 1% freelunch kids afford to live in 1 mil+ area.
There is a less than 1% freelunch kids because of "diversit laws" They have to bus kids in from elsewhere in Fairfax County if the parent's request it. Basically if they are hispanic/african-american from another part of the same county, the parents can request to have their kids in the school system up to a certain limit.
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Old 02-26-2009, 04:07 PM
 
957 posts, read 861,029 times
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Quote:
Originally Posted by boonelsewhere View Post
If the money is not an issue, i would go with 1.2 mil home. when market go up 10%, 10% of 1.2 mil is much larger then 10% of 680k.
Works both ways!

I say location is paramount (took me a decade of homeownership in the exurbs to become convinced of that). However I suspect that the 15% off will eventually become 30% off, and the 35% off will become 50% off. Might be best for them to rent where they want to buy until prices fall further.
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Old 02-26-2009, 08:58 PM
 
Location: Mpls - south for the winter
140 posts, read 474,010 times
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Heiwos - your right buyers should be very cautious! I keep hearing about investors snapping up properties in Phoenix and Tampa because their such bargains. Well if prices continue to drop - next year they may not have been such a bargain.

I just bought an REO in Minneapolis, 60% below it's 2005 price. Planning to use it as rental for 5-10 years. Hopefully in that time period this whole real estate mess will resolve itself.

Ultimately homes in prime locations will hold their values better - but even those can take a tumble - the house I bought, at 60% off, was in a very desirable, close-in neighborhood.
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