NOVA Real Estate (the bottom has passed...) (Arlington, Alexandria: foreclosures, renting)

[goozer]

Originally Posted by spidercharm

It's going to take a long time for NoVA RE to bottom. I have been on sidelines for almost 2 years now. Most seemingly reasonable prices are on really old properties and still unreasonable.

There are more and more short sales happening because sellers are not realizing their insane price points until they are under the gun to sell from their lenders. (Not entirely their fault as some of them paid up too much and others just don't want to admit that the appreciation from '01-'06 was unreal)

It seems we have to wait for few years (at least until 2010-2011) before NoVA bottoms....25% more to go....400k may seem seem reasonable to you..but it's actually not knowing that they have been bought originally around 150-200k just about 10 years back...

People thought financial stocks have bottomed in the middle of 2008.....but now we know. Conventional wisdom says that RE is way slower to adjust...Japan RE took over 10 years to bottom...

Unfortunately pain just started...2009 will be more brutal for RE than 2008...my 2 cents anyway!!!

I agree. I think there is going to be more pain in the real estate market before things get better. When you think about it, the housing market only turned down about a year and a half ago. And all indications are this recession is more severe than the brief one we had earlier this decade and the early 90s one as well. We might not see the bottom of the market for a few more years. Of course, that doesn't mean housing values will drop 20% a year like they did this past year. It may slow to 5% depreciation for the next 3-4 years before it hit bottom.

[ck90211]

With banks going back to tighter lending standards (actually verifying income and job stability), the bottom will only be reached when housing prices are in line with income levels, and people can once again sustain their home purchase with their real earnings.

So NoVA, and most of US, still has ways to go before hitting the bottom.

Have patience, bargains will come, when our government stop bailing out the banks and foreclosures. That will come too, when our government realizes $ trillions spent still cannot boost real people's income to buy homes.

[spidercharm]

Originally Posted by goozer

I agree. I think there is going to be more pain in the real estate market before things get better. When you think about it, the housing market only turned down about a year and a half ago. And all indications are this recession is more severe than the brief one we had earlier this decade and the early 90s one as well. We might not see the bottom of the market for a few more years. Of course, that doesn't mean housing values will drop 20% a year like they did this past year. It may slow to 5% depreciation for the next 3-4 years before it hit bottom.

One other thing I would add is to be very careful about jumping on any property too soon without making sure you are paying the right price. RE is one of the biggest financial decision one would make in their lifetime (specially first time buyers, like me)

Also, McLean, Vienna, Falls Church with really good school districts have not yet started the "real" decline yet. But, the differential in RE prices between not so good school districts and ones with the good schools is becomiing so much that it's just a matter of time when high flying areas like McLean/Vienna decline. For example it may make much more sense to buy 150k TH in Herndon/Sterling/South Riding (not to say it won't go down further) and pay for private school instead of commiting to over 900k in other "unreal" bubble markets. Commute may be few additional miles, but I would prefer that over 4500k in mortgage in this economy and sure loss in my equity.

Or even better, I may just continue to rent for next couple of years in top school district with very little commute and ever declining rent..

[JD984]

Originally Posted by spidercharm

One other thing I would add is to be very careful about jumping on any property too soon without making sure you are paying the right price. RE is one of the biggest financial decision one would make in their lifetime (specially first time buyers, like me)

Also, McLean, Vienna, Falls Church with really good school districts have not yet started the "real" decline yet. But, the differential in RE prices between no so good school districts and ones with the good schools is becomiing so much that it's just a matter of time when high flying areas like McLean/Vienna decline. For example it may make much more sense to buy 150k TH in Herndon/Sterling/South Riding (not to say it won't go down further) and pay for private school instead of commiting to over 900k in other "unreal" bubble markets. Commute may be few additional miles, but I would prefer that over 4500k in mortgage in this economy and sure loss in my equity.

Or even better, I may just continue to rent for next couple of years in top school district with very little commute and ever declining rent..

If that's how you view the market, I do think you'd be better off renting in an area that you like with an excellent school pyramid (of which there are many in NoVa). Keep in mind that these areas also tend to have other nicer amenities that make family life more enjoyable - access to better parks, stores, sports leagues, recreation facilities; less crime, etc.

Your notion of buying in an area like Sterling where the prices have already gone down considerably, and then taking the money you'd save against buying elsewhere to spend on a private school sounds like an interesting arbitrage - but you have to reconcile that with the fact that NoVa really does not have the breadth of private school choices that you'd find in either Maryland or DC.

[spidercharm]

Originally Posted by JEB77

If that's how you view the market, I do think you'd be better off renting in an area that you like with an excellent school pyramid (of which there are many in NoVa). Keep in mind that these areas also tend to have other nicer amenities that make family life more enjoyable - access to better parks, stores, sports leagues, recreation facilities; less crime, etc.

Your notion of buying in an area like Sterling where the prices have already gone down considerably, and then taking the money you'd save against buying elsewhere to spend on a private school sounds like an interesting arbitrage - but you have to reconcile that with the fact that NoVa really does not have the breadth of private school choices that you'd find in either Maryland or DC.

Actually, I wouldn't buy in Sterling/South Riding myself. But, the point is given the declining rental prices and arbitrage opportunity around metro area (north, south and west), "so-called" immune markets are bound to fall. When it becomes realistic to buy into key metro areas, we will likely see the bottom in NoVA. I really think we should be around 2000-2001 price points in metro area and we are far from it.

I am no expert, it's just my humble opinion applying basic economics and history of RE market crashes in other countries.

[Peripateticshutin]

Originally Posted by tankdude

Not all areas in DC are created equal.

Well said.

The Fortune magazine article specifically mentioned Arlington and Alexandria as places where real estate is expected to drop in 2009. The article doesn't give a detailed description about the data they use to make this forecast, however. Of course, those predictions could be completely wrong.

[ck90211]

I agree with JEB77 about renting in good areas and wait for bargains in the right locations. It's not too difficult right now to find a 2br apartment in good school districts for $1500-2000, and you don't even have to pay tax, HOA or maintenance (which home ownerships will require). Better yet, you get to check out the neighborhood, schools, commute, safety, etc. without a long term commitment.

[tankdude]

Originally Posted by spidercharm

Actually, I wouldn't buy in Sterling/South Riding myself. But, the point is given the declining rental prices and arbitrage opportunity around metro area (north, south and west), "so-called" immune markets are bound to fall. When it becomes realistic to buy into key metro areas, we will likely see the bottom in NoVA. I really think we should be around 2000-2001 price points in metro area and we are far from it.

I am no expert, it's just my humble opinion applying basic economics and history of RE market crashes in other countries.

Unfortunately, your example is extreme, unrealistic, and a bit absurd.

People who are looking to buy a TH in McLean for 900K don't care if there's a 150K TH in Sterling, Gainesville, or Herndon.

[tankdude]

Originally Posted by Peripateticshutin

Well said.

The Fortune magazine article specifically mentioned Arlington and Alexandria as places where real estate is expected to drop in 2009. The article doesn't give a detailed description about the data they use to make this forecast, however. Of course, those predictions could be completely wrong.

I'm surprised there's no disclaimer at the end of each of these type of articles that they could be and most likely will be flat wrong.

Of course, hype sells more magazines.

[lchoro]

re: Alexandria and Arlington

They seemed to be the late toppers.

There was an recent article by a real estate broker that housing downturns historically tended to work their way from the outer suburbs in towards the city. The large drop in the price of gasoline doesn't favor the inner suburbs now.