Fairfax Living Real Estate Blog

This morning, I wrote a short blog on the reason,based on what I had been reading, that the economy was in turmoil due to a lack of jobs. We have historically low interest rates yet home sales are way down. It turns out the predictions were not as bad as thought regarding jobs. The stock market took a tumble but we are not necessarily set for a double dip as the talking heads originally had said. Here is an article on the less than expected job losses.

Looking at today's paper over the angst at the looming jobs report where 250,000 temporary census workers are expected to lose their jobs. The recent, predicted here on Active Rain by many, 30% drop in existing home sales after the tax credit ended April 30th, are clear signs that what is keeping the economy down is a lack of a J-O-B. In some cases, the fear of losing ones job is enough to make you want to stay in your apartment.

A case in point, in my neighborhood are several families within spitting distance of my house that have contemplated selling their homes and cashing out. All of them have lived here long enough to still have equity. They are the lucky ones. One neighbor says work is drying up for his government contracting. Another says his wife is probably going to lose her job. I spoke to my webmaster in Maryland the other night, and he tells me his wife has been laid off. Things are tight. I am not sure where my income is coming from either. In better times, I am sure I would have had the security of knowing another one was just around the corner. I am not sure that I feel that way these days. I am certain that is what is keeping most potential home buyers out of the market.

Hopefully. the ecomomists will be wrong and the market will turn out better than anticipated. Wall Street seems to be expecting the worst. Lets just hope they are plain wrong and its better than anyone could expect.

As I write notes for this blog on my Blackberry to be edited later,I am noting that I am sitting in the #1 high school in the entire nation. The public school was for two years in a row rated #1 in the nation for academic achievement by US News and World Report. Apparently, they slipped a bit in 2008 and came back for the #1 spot in 2009.

My son is here tonight to play basketball. He tells me on the way that the "Nerds" at his school say "TJ" is a dump. "TJ" is the nickname of Thomas Jefferson High School for Science and Techology. You don't go there because you live in the district. Even though it is a public school, you have to pass an exam to enroll. This is no ordinary high school.

My son is right. It is a little worn and looks like it was originally built about the same time as the school I went to Junior High School was built; in the late 50s or early 60s.  My sons school often is in the top 100 nationally so it is a good school. His school is more modern even though it is 36 years old and looks a heck of a lot better. "TJ" looks like a prospect for the wrecking ball or at least a major rehab job (except the state and county government are flat broke). If my memory serves me, I think the #1 school in the county, with the exception of this "special" one, is "Langley High School" in McLean. McLean screams money! Its a little worn but in a little better shape than "TJ."

So, what's in a building? some of the local school buildings are dumps but they are the best academically in the nation. Several I have seen look worse than the schools I went to in Florida in the 1960s and 70s. Florida schools, with some exceptions like Cocoa Beach High School, are general somewhere between mediocre to good. Some of the best schools in the South but that is not much to brag about.

The point here is that it is not the building, it's what is in the building that matters. Kids grow up dirt poor in shacks, go to one room schoolhouses with dirt floors and grow up to be successful every single day (Well, they used to). The same could be said for a house. Do you really need a 14 bedroom house, with a bathroom for each one and a few to spare? The latest economic trends, according to the Washington Post, are that Americans are going to come out of the current economic crises with a new austere lifestyle much like our grandparents came out of the depression era. I was at the Wal-mart the other day, the place was standing room only, and it was just another Tuesday night. It's not the building, it's the soul within that matters.

One of my favorite events as a bond owner of the Sideburn Run Pool in Fairfax, VA is the annual 4th of July pool party. Every year there are at least a couple of kegs of beer flowing, Chateau de Cardboard wine (wine in a box) and plenty of sodas and bottled water. Luckily, I can walk to the pool (or walk home if I need to). Even though the pool has a large parking lot that is rarely filled at other times, cars will be double parked for this event and the pool will be packed. There will be a waiting list to play pool basketball. You can forget doing laps. No room for that except in the one lap line that will be open (you may have to wait to use it). Every year thus far, in addition to the drinks, the Sunburn Run Recreation Association (SRRA) has supplied some chips and other snacks. If you would like to order something like pizza, wings or other more substantive food, there are plenty of pizza carriers and fast food deliveries coming to the pool (you even get a pool special for making a pool order). If you are a bond member or just a Summer pool user, we'll hopefully see you there. If you live in 22032, 22015, 22039, perhaps you should consider joining the pool. This has been the hottest June on record in the D.C. area.

Senator Robert Byrd passed away last night at age 92. No matter what you may have thought about him personally, he was an icon in the U.S. Senate and he fought for the people of West Virginia. Senator Byrd was know for moving federal jobs to West Virginia to help the state with its high unemployment and reputation as one of the poorest states in the country. An example is the FBI fingerprint office which was moved from Washington, D.C. to West Virginia several years ago. Senator Byrd will be missed in the Senate and by the people of West Virginia. Here is a link to the article from marketwatch.com.

While in the grocery store the other day, the cover of Time Magazine caught my eye, The feature article was about the bankrupt (or heading in that direction) state governments across the country. Just this past week, I read in The Washington Post that after receiving tens (or maybe it was hundreds) of millions for road construction in 2009, and only $238,000 in 2010, Fairfax County, Virginia (population about 1.1 Million) will only receive $1024 for road repairs and construction in 2011 from the state. One county supervisor commented that amount would not even cover lane striping on one section of roadway. To top it off, tonight, I learned on NBC News that California is facing a 1.7 Trillion dollar deficit, A council member in Oakland stated that if every library, several other government agencies, and city hall were closed, they still could not close the budget gap. And finally, the city/suburb of Los Angeles, Maywood, is laying off every single city employee and outsourcing essential services to other juristictions.

What the Hell is going on? Yes, there are alot of foreclosures, but the banks still pay the taxes don't they? Sales tax revenues are down but by that much? Wow! this sounds like a major shift in the way we live as Americans. This is truly scary, the foundation and infrastructure that made this country great is collapsing. What will that do to quality of life and the housing market over time? What scares me is I have seen pictures of cities in some other third world countries that looked fantastic 40 years ago only to see pictures today and see a crumbling infrastructure. One city that comes to mind off the bat, actually two cities, are Havana and Manila.

The D.C. area already has the second worst traffic in the nation after Los Angeles, what more if the road construction on state owned secondary roads is halted or the condition of the road is allowed to deteriorate.

I don't have an answer. If I did I would offer it. What will likely happen is those with money will pay a fortune to live on a metrorail line (that system is in sad shape too) or walking distance from work. The District of Columbia has actually been seeing steady growth and neighborhodds being rebuilt even in this recession.

In closing, if you are or need to move to the D.C. area, one of the main things you need to think about is how you are going to get to work. Based on what I have read,seen, and personally experienced, you will want to minimize your driving as much as possible in order to maintain your quality of life and that may mean paying more, and getting less, for the convenience of being near work.

I thought I would get your attention with that. In Today's Washington Post section "Sunday Ready To Rent" that advertises all of the apartments is an article on why you should rent rather than buy. On the surface it may make sense to some folks after seeing their housing values plummet. One glaring error, if not just misconseption stood out like a boil on your forehead. Before I begin, I should point out that the editorial was produced by the Washington Post "special sections department" in conjunction with Apartments.com and it is clearly stated that it "did not involve the editorial department of this newspaper" (i.e. - A biased piece or advertising editorial).

Here are the reasons the article says you should rent. The first being that 43.7% of respondents in a survey said they preferred to rent because of a strong desire for the convenience of a maintenance person available for household repairs, not having to tend a lawn or snow removal.

The National Multi-Housing Council (NMHC) survey also stated that 23% or renters do so for financial reasons. I Interpret that as bad credit, no downpayment, or inability to seek financing for whatever reason.

Here are a few reasons that did make sense:

1. Young Adults just beginning their careers - This makes sense if you are unsure where your career will lead you in the short term. If you think you may have to relocate or anticipate having to move for a promotion in the near future then renting does make sense. You are likely not going to have a downpayment saved up yet. 

2. Single parents who do not have time for maintenance or the money to buy a house in a desired school district - I am all for getting your children a great education. If there is no way you can afford a home in a good school district then perhaps you should rent until such a time that you can buy.

3. Professionals who relocate often - I only partially agree with this. My advice on this would be to buy a condo and rent it out (just make sure you buy in an area that has good rental potential). Have the condo managed professionally (i.e.- put it on cruise control and let the rent pay the mortgage and the property appreciate when you move).

Points I do NOT AGREE WITH:

 1. Empty nesters who want to travel - I disagree with this. You should just buy a condo so at least your property has the potential to appreciate while you are not there. Rent is a total waste of money especially if you are using an apartment as a storage unit.

2. Anyone tired of long commutes to work - Instead of buying a single family home further out, take advantage of today's low, low mortgage rates to buy a condo close in. With the tax deduction, your mortgage will likely be close to what you would have paid in rent and you have a potentiall appreciating asset. If nothing else, you should get out of it what you put in it. Can you do that when you rent?

3. Anyone who wants abundant amenities and social activities where they live - You could say the same thing about a condo complex if you pick the right one.

Here is the most incorrect point made in the infomercial editorial

The article states that you should rent and put your money in stocks and mutual funds that appreciate on average 7% a year for stocks and 8% for bonds while real estate historically only appreciates at 5% a year.

Why is this such an uninformed statement? Let's take a closer look. Suppose you have $10,000 to invest. You could put 3.5% down on an FHA approved condo and buy a $285,000 unit. If that unit were to appreciate at 5% a year (there are no guarantees of course) then you would build equity in the first year of $14,250 not to mention the tax deduction on mortgage interest and taxes. That is a 42.5% return on your investment.

Assuming you picked the right stock or bond, you would earn $700 and $800 respectively and if you sold them would have to PAY taxes on the gain.

No one can predict what the housing market is going to do next with certain accuracy nor can anyone predict what will happen in the stock or bond market. I will leave you with a paraphrased quote from one of Gary Keller's books that is striking. In about the year 2000, the average renter had a net worth of less than $10,000. The average homeowner at that time had an average net worth of $175,000.

This article, although meant to spur interest in apartment living has some fundamentally incorrect information regarding home ownership. While apartment living, or renting a house, can make perfect sense in some instances, the "editorial" is misleading and does not represent the true facts of home ownership.

Just a quick note. There is a market update coming across that the IRS has found that $9,100,000  has been conned by inmates in prison and many serving life sentences.The worst part is that IRS employees have been caught scamming the treasury as well in this latest news report.

It's this kind of activity that hurts legitmate homowners/buyers and makes it harder to justify extending the credit. If you haven't noticed already, traffic seems to have dropped off since the credit expired and that seems to be backed up by the media reports in the past 24 hours.

Here is the link to the article.

If you are a minority and have been hit with a foreclosure, you are not alone. Whites had significantly more foreclosures but the percentage of minority foreclosure rates was much higher. Between 2207 and 2009 blacks lost about $240,020 homes to foreclosure, Latinos, 335,950. The actual number for whites was not availabe but the foreclosure rate for whites was 4.5% versus 7.9 and 7.7% for blacks and latinos.

A couple of reasons were cited. Higher unemployment rates among minorities and less cash reserves in these two groups versus the general population.

The FBI has busted 500 people in a mortgage fraud operation known as "Operation Stolen Dreams." The government works slower than we would like but they tend to eventually get around to getting things done.

http://www.fbi.gov/page2/june10/mortgage_061710.html