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The free market will always control prices and as demand increases, so to will prices. As demand decreases, supply increases, and price appreciation slows or backtracks ("corrects"). However, the decrease is rarely as dramatic in appearance as an increase is. That's because inflation mutes the valleys and accentuates the peaks. After all, a house bought today at $100,000 can be "worth" $134,000 in 10 years even if the appreciation is "zero". Because a 3% annual inflation rate would push the dollar "value" of the home up.
If someone goes into shock at the thought of paying $400,000 for a small home in Alexandria on 0.20 acres, consider those paying $800,000 for the same house in Oakland, CA. Again, the free market controls prices. We can't always blame banks. Individuals and families ultimately sign on those dotted lines, paying what they believe a home is worth.
Lower income folks have _always_ played second fiddle to the people with more buying power. The most convenient or attractive setting, once "discovered", will invariably be gentrified gradually. Hence the term growing up on the "wrong side of the train tracks", among others. Lower income folks might have to choose between living in deplorable homes in deplorable neighborhoods with a short commute, or make the choice to commute an hour one way in order to get a $250,000 house and shoulder a tremendous burden of debt while they chip away at their mortgage, car payments and nervously watch the price of fuel dig into their disposable income.
Renting is a good idea if you're not going to hang around for more than a few years. After all, most everyone in NYC rents and last time I checked people were paying kingly sums for apartments in dodgy neighborhoods.
The good news is is sellers are now having to more aggressively reduce the selling prices of thier homes in all the market east coast markets. A lot of the aggressive price drops are occuring over a period of time...so if you have patience and continue to wait. You should be able to snag a better price, and or still have bargaining power to make an offer lower than the asking price!! Many reliable real estate sources are indicating that houses just aren't selling at the high prices...and are now averaging a six month listing time before serious offers, and or a sale is made.
The housing market will turn around. It is a question of when, not if in this area. I read a stat that since 1980, no one that bought a house in Northern Virginia lost money on it after staying in the house at least 7 years. Following that statistic, it may be 2012 before housing prices go up again enough for someone who bought at the peak to make money on the sale.
I'm thinking that by 2009 or 2010 there will be more price pressure on homes as people relocate to Ft. Belvoir and Quantico.
Right now it's a buyer's market where those with the ability to buy are able to make demands and have a lot to choose from.
I was just looking at Realtor.org statistics and it looks like May 2007 average and median sales prices for existing homes have returned to 2006 level figures after dipping below 2006 figures for the beginning of the year. So, I'm getting the sense that the market has already corrected itself and sales have begun to pick up the pace, albeit more slowly than the boom of 2004 and 2005. I suspect with the slowing economic growth we'll be experiencing over the next 12 months, middle income market homes will appreciate modestly (in general). However, with respect to the baby boomers, there will be older affluent folks opting to pull some of that equity and relocate for their retirement, which may be a good sign for folks selling homes in the upper income market. Particularly in areas that have that nice balance of natural beauty and nearby urban access. Just my opinion.
Of course, the market is miserable in a few notable states. They are Florida, Hawaii and Nevada. No surprise that they _were_ some of the top retirement locations for boomers. Alot of new retirees are apparently looking elsewhere (and I don't blame them).
Dirt cheap prices in places like KY, ND, WY and AR never actually saw a market decline, and continue to appreciate in the 5% and up range. Real estate is a really complex picture.
I would wait on the housing market. If I were looking at buying, I would require a comparison analysis between sales listings and rentals in the same neighborhood. There are almost as many rentals in my area of Reston as there are sales. The net rental incomes don't currently justify the asking prices for these homes.
Median and average price can be misleading. The newer, larger, and more expensive homes from 2004-2006 are just entering the market as resales and pushing up the median. Some of the realtors monitor year over year changes for comparable homes and the comps appear to have declined by 10-15 percent from last year. The county assessment of our Reston home's value dropped by 14 percent.
County assessments and market values are rarely in parity, but I hear what you're saying. Virginia has many regions and market conditions vary from region to region. Reston was one of the hottest markets in Virginia, and as the _overall_ market slows, Reston will be one of the hardest hit. Is Warrenton part and parcel of the same conditions affecting Reston?
Even in cooler markets rental properties are generally rented at a price notably lower than the mortgage payment would be for the same property, assuming the home is newly purchased and the buyer put only 20% down. A relative of mine owns an investment property management company and from what I gather from him, many homes under his care are homes that have been owned outright for decades. The owner of the property simply wants to hold the property rather than sell it, because the appreciation of the real estate say, in 20 years, is a huge ROI. In very hot markets, a speculator may buy an "overpriced" home and rent it out for notably lower than he/she is paying on the mortgage, because the appreciation more than compensates for the loss when the investor sells the property.
Look at today's mortgage rate of +/- 6.8% on a 30 year fixed. That's $651/mo on a $120,000 home with $20,000 cash down. And property taxes and insurance aren't figured it. Here in the Roanoke metro, a $650 rent would yield you a much nicer home than $120,000 could afford to buy outright. I've got friends in Alexandria who own a modest sized duplexes in less than steller neighborhoods that could sell for $300K even in this depressed market. That would be a $2,000/mo mortgage. You'd get much nicer digs for $2,000/mo if you rented. So I'm not convinced that comparison analysis between rentals and sales in the same neighborhoods is sensible given the outside pressures at hand.
Warrenton is a weak market because of oversupply. There's a considerable number of new homes being built in nearby Gainesville, Lake Manassas, and Bristow as well as in Warrenton. I believe that there's an ongoing buildout of communities to the west of Warrenton towards I-81 as well. My travels usually only take me down towards Culpeper so I see the many new towns going up around Manassas and Route 29.
All of the outer suburbs of Washington DC have weak housing markets because of the overbuilding, the high cost of gasoline, and the inability of the roads to handle the additional traffic. PWC, Loudoun, Warren, Facquier, and Stafford were among the hottest markets because of the availability of land. They now have 1-1 1/2 years of inventory on the market.
A lot of people were qualified for and approved for mortgage loans who should not have been...during the time when the market was "hot". All of those loans are defaulting, and from what I've heard from agents who work a lot of foreclosures...we're looking at 2-3 years before all of the "bad loan" foreclosures will work their way out of the market.
After reading your concerns, experiences and the comments I wish to add my two cents...We have been sitting for sell in Tucson, AZ trying to get to Virginia since January. I have had two different RE agents and have lowered my prices twice down 10K each time and our home has been shown 20+ times. I will say I really agree about the comments from the person that said to just lower you price and sell it. There are no magic formulas. You mentioned you can't afford to lower any more due to commissions. I will be signing up with a nation wide for sale by owner company where I can lower my price further, only pay one side of the commission and a flat rate to list. Bottom line is you have to get under your competition if you have done all the staging etc...In a normal market I would go with an RE agent again not to have to deal with the unknown...but this is all out warefare. Over building and investor buying have not helped the market I know here. Per my agents advise we have done special showing, flyers, photo tours...you name it...folks want a bargain. You need to incent the one whom is going to buy and do the work. You can pay the buyers agent what you want usually 3% and give the buyer a trinket of some money or closing costs in escrow...In closing I feel your pain but remember like the other person said I believe. "What you give up on your end, you will get back on the other when you are in the buyers seat"..good luck
We've been looking from Ashland to Williamsburg for a home to buy. Have been here for months. Our house on the West Coast sold early this year, so we have money earning interest and are just going to sit and wait. There are almost 1300 properties for sale in Williamsburg alone, so it's not like ALL of them will have to drop their price in order for us to find something we feel is worth buying. Right now, though, we see builders adding all sorts of features & upgrades in order to sign a deal and seller's who have started to conceed are dropping prices by TENS of thousands of dollars. We have seen at least two dozen properties drop between 40-100K over the past few months.
The post who wrote that buyers are "very very picky" is very very correct! With over 11 months of inventory to choose from, buyers can afford to be very very picky. Especially buyers with no contingencies and money in the bank!
I suppose until sellers start viewing today's real estate market in the same light as stockholders, they'll continue to believe "it will come back, it's just a matter of time". How many millions of investors have lost money in the stock market? People think, "Well, I'll just wait until the stock price goes back up again before I sell." How about the companies that tank, go bankrupt and you never recover your investment? I was once a millionaire on paper. Had plans to wait until the stock hit a certain price, just a tad higher than it was at that time, and cash in. Then the company whose options I held fully vested started to decline. Everyone kept believing it would come back, so we all sat and watched as our portfolios lost money each day hoping it would come back. Before we knew it, our division was closed in the company's desperation over trying to get that stock price to go back up. It never did. By the time it was over, we all joked that our stock was worth 85 cents (down from $108 per share), which wasn't even enough to buy a hamburger.
Why do you think there are so many foreclosures these days? And what about the HUGE influx of foreclosures now flooding the market with even MORE inventory? Do you not see that it will take several years for the inventory to level out? You're not going to re-gain the upper hand in these transactions until the supply is less than the demand, and that's not likely to happen for a LONG time.
Yes, some of you sellers may own your homes outright and feel you cannot afford to lower your price any more. Or, perhaps you are trying to make just enough to cover your investment and pay off the mortgage. IMHO, you'd better consider cutting your losses and moving to something smaller and more affordable, facing foreclosure yourself, or simply staying put for the VERY long haul. This market is NOT going to catch up by March 2008 when it sits all winter with little to no action. What you'll have next spring is probably even more inventory because everyone who pulled their home off the market after this spring/summer will be back to the drawing board. I keep seeing homes we've looked at fall off the MLS. When I inquire, I see that the listing simply expired or the seller just decided to give up for now. This seems to be happening a lot, so you have to add back into the inventory at least a decent percentage of those homes next spring or summer. Sure, some will just quit or make other plans, but there are plenty of sellers who want to sell and just can't right now. They'll be back, adding another large lot of properties to next year's MLS.
So, unless there is a miraculous selling off of 11 months' inventory over the fall and winter, it's not going to turn around in the coming year. Do the math folks.
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Buyer's Market
Challenging Housing Markets...
