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More Proof that D.C. Real Estate is... umm.. oh yeah, AWESOME! :)

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October 08, 2007 – Comments (4)

After all, if things weren't so great, why would Ryland houses be selling at auction for giant reductions?

Not sure why people are shedding tears of joy to be shelling out nearly half a million in this market, however. Let's do a little sleuthing, shall we?

The minimum bid for the 2,068-square-foot Fairfax County home was $429,999. Won-Ki Choi wrote his name down minutes before the auction was scheduled to end at 3 p.m. He was the only bidder.

Ouch. Paid too much then. And if we look at Ryland's web site to figure out what they're selling in Fairfax, we get only one listing: Condos. In fact, here's the very unit type they bought (biggest in the complex). I just called Ryland and association fees are $220 a month.

Payments, then? Let's consult the Fool calculators, shall we?

With a 10% down payment, it comes to $3,079 per month, including taxes, insurance, association fees, but not PMI and no maintenance. Note, that payment (even after a substantial pile of money down) would consume 57.7% of the median monthly take-home pay for this area.

Let me finish by noting that I rent a town home in a rental complex that is in a much better location (2x closer to DC) and is in an area well liked for its shopping, schools, and lack of sprawl. (Fairfax is strip mall hell...)

To be fair, this Ryland unit is bigger, newer, and nicer. But otherwise, they are fairly comparable. We've got 3 BR, 2.5 baths too, about 1500 sq feet, two levels. We pay about $1700 a month in rent, and zero maintenance, zero tax, zero association fees. We have a pool and health club as part of the community, as well as free shuttle to the local metro stop (a five minute ride). That's right, comparable living, 45% cheaper to rent.

Any more questions on which way prices are going to keep heading?

 

4 Comments – Post Your Own

#1) On October 08, 2007 at 2:10 PM, TMFBent (99.81) wrote:

Oh, and I was serious about strip-mall hell. This one's also located right on the back of the busiest road in the area. Check it out.They built 'em right in the old drainage ditch, from the looks of it. Sweeeet.

SP32-20071008-140645

And here's how pretty they are(n't).

SP32-20071008-133822

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#2) On October 08, 2007 at 2:46 PM, floridabuilder2 (99.26) wrote:

Every one of my homebuilder contacts says that the 3rd quarter is going to be brutal, that the 4th quarter is going to be worse, and that 2008 is going to be far worse than 2007...  Considering that those 5 contacts come from the top 10 builders in the US... well that is pretty sobering...  People are going to be shocked over the next 6 months....  Stephen Kim, Citibank analyst, better put down his party favors and blockade his door... because as soon as all his dimwitted investors realize we are taking another step down after his rah rah appraisal of homebuilder stocks, he is going to have a lot of explaining to do... first his go long builders prediction in Dec 2006 and then in Sep 2007.... 

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#3) On October 08, 2007 at 9:49 PM, TDRH (99.65) wrote:

The Saint Louis market is much more reasonable in comparison, but relative to the median wage, it must put a lot of stress on home owners.

The housing/real estate meltdown is just the beginning I am afraid.   Consumer confidence declines with their property.  Their houses are no longer ATM machines to cover credit card indiscretions, medical emergencies etc.   

From Econ 101, the economy is based on C (Consumer) + I (Investement) + G (Government).   If consumer confidence and spending declines, what is going to help us dig out of a recession?  It will not be the strength of our exports, as we do not make anything.   This is going to get extremely ugly,   I am thinking that this could last through the first quarter of 2009.   I am thinking gold, consumer staples, and Healthcare. 

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#4) On October 09, 2007 at 7:54 AM, TMFBent (99.81) wrote:

Some interesting commentary (fund manager, interpreted through Mauldin's e-letter) makes the case that recessions are never simply a big drawback in spending, but usually represent the shift of consumption away from a good/service package towards others. In other words, stuff there's been too much of, or that got inflated, falls by the wayside and overall, growth falters until those excesses are worked out. This is in line with exactly why we should prefer capitalism: its self-correcting mechanisms allow the flow of capital to more worthy investment/consumption.

Of course, nowadays, the Republicons and the Demicrocks are both socialists. They all believe that government intervention can fix the situation, and they're more than willing to try because, after all, it's not by standing up for systems and institutions (that are sometimes painful) that you get votes. You get votes by purchasing them directly, whether that's earmarks or Ponzi-scheme economic "growth" supported by Fed printing presses or bureaucratic bullying (FDIC chair and ARMs) or short-sighted legislative attempts.

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