eight dozen houses listed, ranging from $3-million to $5-million, went unsold for 2 to 3+ years in the McLean & Great Falls area... any idea why?

One such example is an amazing house that I drive by every morning. It has
been "FOR SALE"(Weichert) since around August 2004. I got curious one day
and checked its price online. Turned out to be $3.9-million.(went down from
$4.5 originally) As of this morning, the FOR SALE sign is still sitting
in front of this house....

I guess all the spoiled Sauds skipped town when their countrymen started using jets as missiles here.

That and the yuppie jerks who brought the homes to try to flip them in a few months for profit. 2004 sounds about right for the boom before the bust.

You have to remember buying a more expensive home begins to limit the number of people who can afford them. The higher up you go the smaller the pool of potential buyers. Go smaller home, closer in. You will usually get more buyers.

Personally, even being a home owner, I like to see the market go down. It means the speculators get screwed.

Half the reason is the interest rates. Even with 50% down the numbers tell a story

A $2,000,000 at 4.25% 30 year loan = $9,838.80 Month (P&I only)

A $2,000,000 at 6.375% 30 year loan = $12,477.40 Month (P&I only)

4.25% is pretty close to where the market bottomed out at a few years ago and 6.375% is pretty close to where the market is now. Then add property tax, insurance, etc. you got the equivalent of one years college tuition.

I know mortgage people will argue for ARMs and the like, but for most of us, ARMs and other exotic loans are not all they are cracked up to be. Plus banks are under pressure to scrutinize these jumbo loans more carefully and lend money more wisely.

I think the other part of reason is that most people who wanted to buy a house in that price range, did.

They also push what is called a bridge loan. Buying another home depending on you selling yours. If yours doesnt sell in a six months you are stuck with two mortgages. You would have to have a strong stomach for that kind of loan.

Do rich people finance the purchase of multi-million dollar homes?

I doubt that many do.

They probably pay cash....or let their corporation or trust buy the house.

They probably pay cash....or let their corporation or trust buy the house.

Paying straight-up cash would be a horrible idea for those homes, in any market. I always thought it was just rich folks pushing their equity around.

GuntherVA Wrote:
-------------------------------------------------------
> eight dozen houses listed, ranging from $3-million
> to $5-million, went unsold for 2 to 3+ years in
> the McLean & Great Falls area... any idea why?

because they cost three to five million dollars.


"the wisdom of the wise will perish, the intelligence of the intelligent will vanish."

TheMeeper Wrote:
-------------------------------------------------------
> They probably pay cash....or let their corporation
> or trust buy the house.
>
> Paying straight-up cash would be a horrible idea
> for those homes, in any market. I always thought
> it was just rich folks pushing their equity
> around.


Yes, generaly speaking, it is always better to finance a home. The mortgagew interest tax deduction is the main reason. They did not get "rich" by throwing money around".

A friend of mine may have owned one those houses. He told me he sold it because he wanted to downsize. He could afford it, but it was a hassle to keep up. He had maids and maintenance people, but said you no more and get one thing clean or fixed and then it's something else.

He finally sold the place and moved into a smaller house.

The cost is not just the mortgage, it's also you're paying double or triple for everything else and you know the repair people are going to jack up their rates on you.

Radiophile Wrote:
-------------------------------------------------------
> TheMeeper Wrote:
> --------------------------------------------------
> -----
> > They probably pay cash....or let their
> corporation
> > or trust buy the house.
> >
> > Paying straight-up cash would be a horrible
> idea
> > for those homes, in any market. I always
> thought
> > it was just rich folks pushing their equity
> > around.
>
>
> Yes, generaly speaking, it is always better to
> finance a home. The mortgagew interest tax
> deduction is the main reason. They did not get
> "rich" by throwing money around".

I've never understood why the mortgage interest deduction is so wonderful. On a home loan you pay back about 3 times what you borrowed....that's a LOT of money pissed away on interest. So what if you get a fraction of it back in a tax deduction?

I'm a RARE American...my real estate holdings are owned outright. Most people will never experience that...

My grandpa told me years ago..."Interest, don't pay it...collect it! Rent, don't pay it....collect it!"

I'm sure your grandfather had to work very hard to get anyone to give him any kind of interest.

duh Wrote:
-------------------------------------------------------
> Radiophile Wrote:
> --------------------------------------------------
> -----
> > TheMeeper Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > They probably pay cash....or let their
> > corporation
> > > or trust buy the house.
> > >
> > > Paying straight-up cash would be a horrible
> > idea
> > > for those homes, in any market. I always
> > thought
> > > it was just rich folks pushing their equity
> > > around.
> >
> >
> > Yes, generaly speaking, it is always better to
> > finance a home. The mortgagew interest tax
> > deduction is the main reason. They did not get
> > "rich" by throwing money around".
>
> I've never understood why the mortgage interest
> deduction is so wonderful. On a home loan you pay
> back about 3 times what you borrowed....that's a
> LOT of money pissed away on interest. So what if
> you get a fraction of it back in a tax deduction?
>
> I'm a RARE American...my real estate holdings are
> owned outright. Most people will never experience
> that...
>
> My grandpa told me years ago..."Interest, don't
> pay it...collect it! Rent, don't pay
> it....collect it!"

Since the average house in Fairfax County costs 3 to 5 times the purchasers yearly income, it must be nice to have the means to pay cash for your home.

If we took a l poll here, home many people have $500,000 in LIQUID un spoken for assets that would allow the purchase of a home outright? And if you collect rent - those properties are not exactly liquid - meaning easily and quickly convertible to cash at a very low cost.

I guess I'll kick this thing off.....

I'm slightly over $500k liquid with about 85 percent in brokerage securities and the remainder cash / CDs (not acquired via inheritance). Then again, I'm in my mid 30s, have been working for over 14 years and purchased by first home at age 22. Illiquid assets are roughly valued at $350k, mostly in the form of home equity, 401(k) and a vehicle. -§

I agree 100% with 'duh' in the above post. There is very little benefit of an interest deduction via mortgage unless your taxable income can be lowered by 10% or more. Even if knocks you down a bracket, it's rediculous that a $500k home would end up costing you an additional $800k - $1MIL over 30 years. -§

Do the math, people!

Over the long term if you put the $ into the market, you would get a return of 8-10% a year.

Your home will go up also, but not as fast as the S&P 500, historically. Even with the recent bubble.

So, you pay 6.375 interest on the home, which is deductible, so your real intrerest rate is something like 4.5%, you take the other monies and put it in the market and make 8-10%, which is taxed at the 15% rate _ not your overall tax rate.

Even in bonds, which currently pay about 5%, you are better putting your money in bonds than buying a house. The flaw in the argument is you cant live in a bond. So you get the bonus of living in a house.

So buy a house over 30 years and invest the money you would otherwise use to pay cash for thew home. You will win in the long run.

Now I know everybody here has lots of money, 3-4 rental homes,and a 401(k) that is fully funded, and the are under 30. But I would bet there is at least one person who does not have 3-4 homes, bunch of cash in the bank, and whose IRA is not quite where it should be.
Shocking, but I believe it to be true.



Edited 1 time(s). Last edit at 06/08/2007 04:07PM by Radiophile.

I agree in principal, but in this day in age, there are less people who go long on real estate. That was the previous generation when housing made up a significant portion of one's net worth and people lived in the same place for 30+ years. You'll wind up ahead if you pay majority cash on a medium-term basis to reduce your interest load or to purchase a home using a 15-yr. product. Purchase during a cycle; sell during the next cycle.

Remember, once you hit 55, your portfolio should be inverse. You've got 25 years of peak earning to work those equity positions and you can't really waste it on the borrowing of unnecessary funds. -§

A couple of things you need take into account with real estate instead of bonds is that real estate:

1) Can drop in value
2) You have to pay personal property taxes on it
3) There is up keep on each property

Up keep can be a killer

§ Wrote:
-------------------------------------------------------
> I agree in principal, but in this day in age,
> there are less people who go long on real estate.
> That was the previous generation when housing made
> up a significant portion of one's net worth and
> people lived in the same place for 30+ years.
> You'll wind up ahead if you pay majority cash on a
> medium-term basis to reduce your interest load or
> to purchase a home using a 15-yr. product.
> Purchase during a cycle; sell during the next
> cycle.


Perhaps, again it depends on your tolerance for risk, stocks over the long term produce much greater returns than real estate.

The problem with a 15 year loan is obviousely the interest rate is lower, but not by a whole lot. Currently, 30 years is 6.19 versus 5.89 for 15 years. These numbers are on Bankrate.com but the actual numbers will be simmillar.

If you may not have the extra cash to go for a 15 year loan, or the consistant payment makes you uncomfortable, go with a 30 year loan - throw in a couple of hundred bucks extra a month and you got a 15-20 year loan.

I understand most people on FFXU have a significant down payment available, but some people may not. 20% used to be the standard, but any mortgage broker will tell you 6% or less is realisticly what a large percentage put down. And 20% down on a $500,000 loan is $100,000. And it may be a little steep for a first time home buyer.

I know there are exotic mortgages out their, but sooner or later you have to pay the piper.

If I were to buy a $500,000 house and my 4012(K) was fully funded and I had $500,000 in the bank, I would probably invest the majority and take out a 215 year or 30 year mortgage.

For long term, stocks and bonds beat out real estate every time. But you can live in a house. Balance your money wisely.

Purchase during a cycle, sell during a cycle. Good idea. Several people in my neighborhood sold during what they thought was the peak, only to see prices go up $100,00 in 7 months. No one can time the market consistently, but in the long run, you can beat it.

That being said, a 55 year old has much different needs than a 20 year old.I am talking first time home buyers in a normal situation. A 65 year old buying his dream house should may do the best by putting 50% down, interest only, with a 10 year ARM, reason being, at 75 years old, he will either be dead or ready to move anyway.

But I fear we have drifted off topic here.

Radiophile Wrote:
-------------------------------------------------------
> But I fear we have drifted off topic here.


a smidge.


"the wisdom of the wise will perish, the intelligence of the intelligent will vanish."

ugly houses with weird stuff -
here's a listing this thread inspired me to find
Price: $3,250,000 - For Sale
MLS ID: FX
County: FAIRFAX Status: ACTIVE
List Date: 01/26/2007

the county assessment for 2007 is $2,507,840 Who would be dumb enough to make an offer on this place? It sold in about 2002 for around 1.7 new and IMHO would now go for about 1.8 based on the location

The interest is deductible only on home mortgages up to one million. A three million dollar mortgage is not deductible.

What's your point? The assessment doesn't mean shit.

It's because people bought an $800K rambler built in the 60s, scraped it, built a multi-million dollar McMansion that was way to big for the lot and are now trying to sell a house for $3.5 million in a neighborhood full of $800K ramblers built in the 60s.

duh Wrote:
-------------------------------------------------------
> What's your point? The assessment doesn't mean
> shit.


Absolutely it does. It would be one thing if property values were going up and the assessment was that far behind the value. But if property values are going down, that tax assessment won't be 2.5 mil next year.

Your property's tax assessment should at least be in the ballpark of what your property is worth. If is off by $700K, like this one, the house simply isn't worth 3.2 mil.

That place Is a house in Great Fall where a builder put a new street on open land. It is an example of stuff that just sits despite a convenient central location near the Safeway and not being on Georgetown Pike..

Some people just refuse to believe the boom is over. Two years ago their neighbor got a boat load of money for his place and now they want the same price for theirs. They are hard headed and refuse to go down on the price.

The biggest hurt is if they have to come to closing with cash before they can sell. Most of those types didnt hold onto the homes long enough to develop equity or they mortgaged way too much in the beginning.

hold em Wrote:
-------------------------------------------------------
> Some people just refuse to believe the boom is
> over. Two years ago their neighbor got a boat load
> of money for his place and now they want the same
> price for theirs. They are hard headed and refuse
> to go down on the price.
>
> The biggest hurt is if they have to come to
> closing with cash before they can sell. Most of
> those types didnt hold onto the homes long enough
> to develop equity or they mortgaged way too much
> in the beginning.

Don't forget the people who took 2nd and 3rd mortgages on their houses to cash in on the equity. I have seen housing hitting auctions that the people owned for 15/20 years. They took out the cash at the top of the market and then something big, like a job move or major medical bill, f-d them up. Now these people are losing their houses.

The party is certainly over.

§ Wrote:
-------------------------------------------------------
> Then again, I'm in my mid 30s, have been working for
> over 14 years and purchased by first home at age
> 22.
-------------------------------------------------------
And how did you get the money to pay for that first house? You mentioned inheritance... if that was the source, you can't really make any "I worked harder than most people and am smarter with my money" arguments.

Reminds me of a friend who likes to say he "bought into a company with his father." In reality, the reason he has any money in the first place is because he was on Daddy's till for the first 25 years of his life.

Or another friend who's filthy rich now because he went into business with a relative. He likes to bill himself as a self-made man, even though the relative fronted the initial investment.

OVERPRICED!!!

Way overpriced, some "Flippers" idea of making fast cash. Give the house about two more years and it will probably drop another $300,000+.



Edited 1 time(s). Last edit at 09/30/2007 08:04PM by Lurker..