Nice try making something out of the Potomac address, but Washington crossed the Delaware on Christmas eve in 1776 to attack the Hessians at Trenton (the Potomac river doesn’t touch New Jersey).

The Potomac river runs next to Washington, D.C. and divides Maryland and Virginia.

The listing agent has been invited to our discussions:  http://www.myscgroup.com/

I noticed that the debt-to-income ratios you use in your illustrations are overly generous.

Figuring 20% down and a mortgage 2.5X the borrower’s income, you really need an income of $233,000 to buy this house, if you put 20% down (which is not likely).

A borrower with an income of $182,250 should borrow no more than $455,625, and it might be wise to stick with $400K or less, given that we are looking at massive hikes in fuel and food costs. Given that these core necessities are consuming a much bigger portion of our budgets, and that people in CA are much more auto-dependent and tend to have longer commutes, people might want to drastically revise their notions of what is affordable.

I personally plan on borrowing no more than 2X my income, which is substantially less than $182K, in consideration of near-future steep hikes in utilities and property taxes.

The drastic increases we’ve seen in the cost of basic necessities, and the likelihood of even larger hikes in the near future, are going to have a very chilling effect on house prices and may deepen and prolong the housing bottom for many years. Increased joblessness and the disappearance of many job niches won’t help.

These are things to factor in when you are considering a place. I’d figure another 30% off current ask prices, in all areas of the country, based on these factors alone.

My bad. I should have done my research before writing the post. I guess my memory of East Coast geography and American History is not what is should be…

Happy 4th everybody.

Our founding father-persons were people just like us and some of them had a debt problem.

Jefferson, proud owner? of Montecello (sp?), owed a million bucks when he died.  Don’t know if that was now dollars or then dollars, is still a lot to be negative.  So his slaves had to be sold; not Sally H’s kids, I believe.

I wouldn’t pay that much for that house, but I think it’s pretty.  I think somebody could figure out some way to place the furniture.  I personally don’t like 2 story rooms; how the heck do you even get the cobwebs down?

Somebody on Calculated Risk figured convincingly
that Miami is 2/3rds of the way to the bottom; that would be 40% off peak.  Given an overshoot,
I think this gives me something to advise buyers/borrowers.  Sellers which are not banks and even most banks are not yet willing to face reality.  Maybe in another year. . .

So how much should you pay for this and not be a knife catcher?  20% more off?

These are really great observation.  Don’t forget the debt that most typical Americans are already servicing on their cars, boats, etc.  And, then there are childcare and other personal services costs, which CA is now also thinking of taxing.  I think there’s an argument that CA is so much more expensive then other areas of the country the median home price should actually be lower than average.

Good to hear from you, lawyerliz.

If the only problem we had right now was a massive overstock of housing and a huge affordability gap, we could expect at least another 20% drop in prices.

However, we have many other larger problems. The fuel situation is cascading through every pocket of the economy and is wrecking everyone’s best-laid recovery plans. Right now, gasoline is still cheap at just over $4 a gallon, what price reflects LAST YEAR’S oil prices of $65-70 a barrel.

So what will fuel, food, clothing, road repairs, health care, vital machinery, and other essentials look like when prices reflect $144 a barrel? We can sit here and pray that prices back off to under $100 a barrel, but I’m not hopeful.

The two-story living room in this house is ludicrous. So much wasted volume to heat. Believe it or not, developers here in frigid Chicago burbs have gone fairly crazy building double-height living rooms, and in the city, the trendy folks want raw lofts with double height ceilings, and the original UNINSULATED brick walls. I am hearing of $800-$1000 a month heat bills from these places, and it occurs to me that many of the more interesting housing types popular in the boom years will be impossible to sell as we enter a prolonged economic slump in combo with northward-ratcheting fuel costs. Double height rooms and 6’x6’spa tubs will be seen as unjustifiable extravagances.

I expect at least another 20% from current going prices in most locales, but some areas will be hit much harder due to massive overbuilding. I expect, for example, that new high rise condos in the laughably overbuilt South Loop of Chicago and Miami Beach’s South Beach, to go for 15 cents on the dollar. I also expect the outer suburbs of Chicago and other midwestern and northeastern cities to drop another 50%, due to the difficulty and expense of long commutes, that were no problem when gas was under $2 a gallon.

I expect the Pacific Northwest to actually gain in value, and I don’t think SanFran will drop very much- I can’t remember a time when this city wasn’t really expensive relative to almost everywhere else.

Wierd - I was thinking it was the Potomac as well.  Good catch.

The overall point is still valid which is that the people who fought for this country would not be pleased to see what America looks like in the year 2008.

They sacrificed greatly so that you could have the privilege of defrauding your mortgage lender, defrauding your employees and shareholders.

They fought to preserve your human rights and allow you the decency of a slap on the wrist rather than be hunted down and stoned to death by the angry masses.

It’s rather unfortunate that all today is to most people is a day off work to go shopping at the mall, do some binge drinking, and watching some fireworks.

Happy 4th.

People will discover there is no bottom to the Miami/Florida condo market.

I suspect sellers will nearly give them away just to get away from the HOA fees.

The condo mkt yes.  80-90% off.  Single family & established townhouse condos off 45-65% depending.  We don’t have “unattached” condos.

I posted on a thread today how one of my walkaway mtg clients told me he had a friend who wanted a condo and got a bid accepted for 280 on a tower unit formerly selling in the 800s.  Remember, Fla is the land of low salaries.  He wanted a guarantee the assn fees wouldn’t go up for a year or so.  Nope, only for 3 months.  No deal.  That said, if he found 10 or 20 friends who wanted to buy waterfront, maybe he and they could hold out until more units were sold. . . nah, probably not.  The bank will have to take them all back and start from scratch.

While walking on a Collins Avenue in middle Miami beach there was an ad stuck in the ground for an open house by owners “Vulture Fund” llc, in a tower.  I was tempted to tell the hub that I wanted to see it for laughs.  But on the way back from breakfast, the sign was no longer there.

Actually, South Beach isn’t quite so overbuilt, as a lot of it is historic low rises.  Towers downtown facing the water, towers downtown not facing the water, only the dirty Miami River, towers north of South Beach, yes.

And then there’s Dadeland.  This actually ought to be desirable.  Low to midrise towers, across from a huge regional mall, walking distance to countless restaurants, supermkts, 2 not 1 big bookstores, 5-10 minute drive from an excellent hospital; walking distance from metrorail, an hour drive or a bit more from the northernmost key, Key Largo.  Most of the condos have small and large stores on the first floor.  I would regard it as an excellent place to retire to. But it was built too fast, and at the same time as all the stupid towers.  I assume that it has the same assn fee problem as the towers.  Maybe somewhat less, as a lot of these were actually sold and title transferred.  Many of the newest towers aren’t quite finished yet, and I’m sure anybody who bought will walk away unless the fee problem is addressed.

Please tell this to Chris Dodd, Conrad, Obama, our two houses of Congress, our president.
We are aiding these individuals to continue defrauding the system, to continue corrupting our way of life.
I still don’t understand why we need to bail them out?
Where’s accountability?
Where are individual’s responsibilities to society?
I guess none of them matters anymore!

I suspect San Diego will have much the same. If they stop building they’ll maybe be okay with only 60-70% off, but if they build what is planned, it’s nuke city.

Perhaps, this was how the fall of Roman Empire felt like? History may be repeating itself.

No, this is more like what the end of the Roman republic felt like.  The empire lasted 500 more years.  If you include Byzantium/Constantinople/Istanbul, it lasted another 1500.

We have a similar problem with fees here in the south loop. Many of these monster high rises are half-vacant with numerous units in foreclosure and REO on which the remaining resident-owners are having difficulty collecting the accumulated assessments owed. This is a very large financial threat to the remaining owners, who often bought honestly and within their means, and really couldn’t be expected to guess that a couple of years hence, they would be shouldering the burden of hundreds of thousands of dollars in unpaid assessments owed by REOs.

The banks that own the REOs are balky about paying and have platoons of lawyers to delay the collection, while the remaining owners are, while often affluent, no match for them in either means or knowledge of tactics.

Worse, many of the buildings in the south loop have really horrible construction problems. One extremely disreputable developer did 5 projects there, all of which have really serious construction problems that are really expensive (and sometimes impossible) to mitigate. One of their 60-story highrises has massive water infiltration problems, and the residents are looking at special assessments of $50,000 or more each for mitigation. Worse, problems like this that appear when the building is new are likely to be with it forever. The word has gotten out, and no one wants to buy these places even for 25 cents on the dollar, because of the potential liabilities for both construction problems, as well as unpaid assessments owed by the numerous vacant units.

This area is a brand new neighborhood that is, because of all of the above, effectively DOA. It will never retain its value relative to other downtown nabes and will probably slip into marginality within 20 years, as these bad buildings age.

There is a lot of “collateral damage” as a result of the 6 year coast-to-coast binge of bad lending and worse building. The righteous are dying just like the wicked- honest buyers who bought within their means are stuck with homes worth way less than the price paid, in buildings and neighborhoods that are deteriorating rapidly as a result of bad construction and numerous vacancies.

I do not believe we will recover within my lifetime.

Because of the hurricane thing, our building tends to be somewhat better.

I’m surprised that the lawyers for the banks are fighting the assn fees.  Here, there’s virtually no basis for it.  Here, the assn takes the bank to court, wins, and collects the back fees, and atty fees AND interest.  And then the stupid banks fall behind again.  Why do the banks feel that not paying the fees is a good thing?  If it prevents insurance from being bought and we have another Andrew, it could be Sayanara for the building.  I suppose the answer is that they don’t have the money to pay.

The problem is BEFORE the bank takes the property back.  The owner stops paying maintenance and the HOA can only collect a limited amount of fees from the bank dating from before the foreclosure goes through.  I anticipate that some of these buildings will go back to the County for failure to pay property taxes after a few years.  Hmmm, but that assumes that none of the unit owners will pay taxes.  What if one or 2 of them do?

This happened to platted lots in Dade County after the 1926 hurricane, and the GD I put the kibosh on the great bubble of the early-mid 20s.  Eventually all the property in some plats were put back together, except you’d see one or 2 lots which had owners who did pay taxes, that were little holes in the doughnut.  Here we may be seeing the same thing, only vertically.  Except that the land wasn’t subject to HOA fees, so there was one less problem.  I think if I owned one of these things, I’d stop paying fees immediately and dare them to do something.  I mean, if they can’t buy insurance for the building, why pay?  You can insure your own separate unit and I have known some failed very small condos which have done just that.  But if you are on the 20th floor and the electricity is shut off, what do you do?  The low rise failed condos you just walk up the steps.

Visions of Apocalypse.

Are any of the politicos even thinking of any of this?

I do remember this property being listed a few months back. I can’t remember the specific price, but it was high enough for me to dismiss it as too high for that Northwood neighborhood. I remember it because the first picture was not of the front of the house, but of that staircase. I thought the same thing.. “that’s an odd looking place for that.“

IR,

About your comment re: “I don’t recall seeing this one listed for sale.“

I saw this house listed for sale in May 08 on ZipRealty.  I want to say the old listing price was higher than its current listing of $729,000.

Happy 4th!

Chicago used to be famed for the quality of its buildings, and used to have some of the tightest codes in the country, but the corruption in city government in the past 6 years has been unspeakable. City inspectors were signing off on buildings for $100 bribes, and some are being prosecuted. I hope the prosecutors snag a few AlderBeasts while they’re at it.

One small condo association in Bronzeville, by dint of the efforts of one very dogged Board president, was able to make the owning lender pay all back assessments on its REO unit, but not before the 7 other owners were forced to ante up a few hundred dollars extra a month in assessments to cover the gap. In more expensive buildings, owners are having to come up with $1000 or more in extra assessments per month to keep the water turned on and the elevators running.

The honest owners continue to pay because they see the place as their home, though your approach does make financial sense. If you do not pay, you will surely be foreclosed, which is what these owners are trying to avoid. They are trying to make their investment work in the face of mounting evidence that it’s a bust and that they were taken. There are many people left to whom a foreclosure is a very serious thing, and so is a ten-year black spot on their credit reports. I’m one of those people- at a certain age, you can no longer figure you’ll pull it together later.

In Georgia and I suppose a number of other states a lender is not liable for any arrears in HOA fees prior to the time that it forecloses and takes title.  Obviously, the missing payments will have to be made up by the remaining owners.  Sad.

“I don’t think this is what George Washington was fighting for”

Actually George was long dead before the Star-Spangled banner was even penned.
Additionaly, our National Anthem had nothing to do with Washington or the American Revolutionary War;  it was written in 1814 inspired by events of the War of 1812.

Stop talking about what people 200 years ago meant and fight your own wars!

But what will this mean? LA/OC area is already the largest metro area in the world (without the biggest population). It’s unlikely that it will keep expanding especially if the gas prices stay high (which could be another bubble, but even still). This could lead into more centralization into multiple city centers which start getting more expensive while the suburbs surrounding them collapse in prices. Like what has already happened to places like I.E., Temecula, etc… The real question I think is where are the jobs, where do people have to go everyday? Those are the locations that will start commanding a higher premium with increasing gas prices.

I larned in my edoocation in Baltimore that Key wrote that during an actual battle.  In Ft. McHenry, maybe?  I wasn’t paying too much attention.

A little off topic but revelant information:

Fed Actions thus far:
1. Lowered interest rates caused $$ value to fall and resulted in rise in inflation, thereby cutting consumers buying power and accelerated housing bust.
2. Decrease in consumer spending resulted in slowdown across the board, resulting in job loses and further cut in consumer spending and further job loses and housing busts.
3. Who has benifitted from low interest rate? Credit card rates are up way up, home loans rates are up and going higher, loans have become hard to come by, so 2% Fed interest rate was only for Fed’s buddies banks and brokers who borrowed and invested heavily into commodities and oil. $35 billion/day was borrowed starting March 17th 2008. GS and MS has most positions in Oil and comodities futures, all from borrowed money.

I think interest rates will need to rise quickly to curb inflation, boost $$ value. Until that happens, housing will be on a downward spiral, after the rates go up, housing will fall further due to higher loan costs.  Going forward, in next 12 months I predict US will report inflation in double digits, unemployment in double digits, so we got a looong way to go. I renewed my lease on Jan 1, 2008 for two more years thereby postponing my purchase plans until Jan 2010.

If this house doesn’t prove that prices are headed toward $150 sq/ft in Irvine, nothing will. It is a reasonable $305 sq/ft now. Yet it is you basic box, with a nice staircase, and not even a decent entry way. Backs to Yale, only a couple blocks north of the Santa Ana Freeway…give it time.

I think that many of the Miami units are recreational second homes. I don’t think that San Diego has the same situation.

Liz and Laura,

Thanks so much for doing such generously long and compellingly interesting posts all afternoon.

Price

I’ve been interviewing in Chicago the past few months. I used to live there several years ago, but I’ve been waiting for a time when my salary would go up and housing costs would go down. I’m apparently at that nexus and would like to read up on the housing situation, so I’ll know what places to avoid. I can’t seem to find any good sites for Chicago real estate, and by that I mean not propaganda opps for the desperate real estate agents.

Do you know of any sites I can read to become a wiser housing consumer? We need IR to branch out to other cities!

Thanks.

I am just glad to be an American. I don’t know much about the Potomac and the details.

It is good we can have our own freedom.

not to pile on or anything, but you know that famous painting depicting the event, with Washington heroically perched near the bow?

Its title - which I thought every schoolchild learned - is Washington Crossing The Delaware.

Happy (very belated) 4th.

...and Bush’s 2000 election theft == Julius Caesar declaring himself emperor.

Except, you know, Caesar was rather competent and actually knew something about winning a war. If only we were to be so fortunate with our tyrant.

...shame what we have done with it.

This house is not listed for $699,000 and also, listed for rent on Craigslist for $2,600.

Oops, meant “now” listed.