The804.com–Richmond VA Real Estate Blog

• The Associated Press is blaming an overall weakening stock market to the real estate sector.  (Weak housing sales collapse on market)
• For some reason, Richmond radio news was picking up this obscure Reuters story this morning: H&R Block, other mortgage lenders’ shares slump  H&R’s mortgage unit, Option One, is reporting a number of loan defaults by subprime (aka shaky credit) mortgage customers (gosh, who would have predicted?).  I thought the significance here was not necessarily the story itself, but rather the popular press picking up the story for its mass audience.  This time last year, no news editor in their right mind would run some irrelevant quarterly announcement story like this (yawn, boring, radio dial moving).   Many economic crashes start off like this when the popular culture itself begins to feed on the story, perhaps, irrationally (ie, Tulips in Holland, Early 90s dot-coms, etc).  In a sense, we all become willing rubber neckers to this car crash (with the outcome being slowing traffic or in this case, the economy).  Since economics is essentially group psychology, these crashes tend to become self-fulfilling prophecies as people jump on the group think bandwagon (the sky is falling).  Yeah, I’m getting too philosophical here and will stop. But I just want to say one thing, it’s actually a great time to be an investor!
• This June USA Today article nicely summarizes the recent woes of builder stocks: Housing’s hot, but builders’ stocks are not.  Let’s peek at the recent stock histories of the builder industry courtesy of Google Finance.  Having looked at the historical 1-year price charts for a couple major builders who operate here (Pulte, Ryland, and Toll Brothers), there is an easy pattern to catch.  Most of these stocks were probably over-priced during the boom and started their slides last December/January to today’s level where many of them are close to book value.  For the savvy investor who can pickout the survivors (think bargain buying Yahoo, Amazon, and Ebay during the dot-com crash), there is money to be made here.  I end this post with a quote:
  Occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics is equally unpredictable, both as to duration and degree. Therefore we never try to anticipate the arrival or departure of either. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. Warren Buffett

Virginia Business is a “rah, rah” business monthly published by Richmond’s Media General.  For the August issue, I have collected real estate related stories of interest:

• Will Washington swallow Richmond? Ahhhh!  Actually, if you ever take an Amtrak early in the morning on Staples Mill, you will see the Richmond-DC army of commuters with their coffee and laptops.  Apparently, cheaper Richmond real estate is the big draw.  When you do the math, would you rather live in Lorton and commute one hour in maddening traffic or take a leisurely train where you can work on stuff on your blackberry ?  Still, 2 hour commute?!  Ahhhh!  Interesting note, VRE could expand their commuter rail to Richmond:  “We have tentative plans to examine the potential to get to the Richmond market,” says Mark Roeber, manager of public affairs and government relations for the VRE. “We believe it is one [market] that would be well served. But we need to work with the commonwealth, along with CSX to make capital improvements to the track south of Spotsylvania in order to make that happen.”
• Arlington County program attempts to make home ownership more affordable Talked about this a little in last week’s blog (How come they had Good Times on Happy Days, but never Happy Days on Good Times?).  And true to my promise, I added a special Affordable Housing section to the main site.  Maybe, I’m being a jerk or cynic, but I get real skeptical when big developers and financial institutions are leading the march on this issue.  Reeks of lip service.  Anyhow to learn more about Arlington’s Wrokforce Home Benefit, see press release
• Store’s closing was a symbol of change This brought back warm memories of bygone days.  This article previews The Virginia Historical Society’s latest exhibit: “Virginians at Work.”  A special focus is given to that once great department store institution, Thalhimer’s.  God, I miss their Christmas windows!  The common perception of downtown is that parking (or lack therof) was its downfall, as consumer demographics shifted to the parking friendly shopping and strip malls.  How true this argument might be.  Check out the recent Washington Post article No Matter How They Are Pitched, Parking Solutions Often Fall 
• Urban mystique helps drive interest in city’s revitalized neighborhoods Finally, since we’re on the topic of downtown Richmond, will the creative class be the ones to finally re-vitalize downtown?  It’s already happening. If it’s been a while, you need to get out of the blah suburbs and make a visit.  Start with coffee at Lift, lunch at Chez Foushee, check out some art galleries or museums,  afternoon tea at the Jefferson, catch a show at the Carpenter Center (ah crap, not yet), and finish up with dinner at Comfort.  And if you’re lucky enough to be there on First Friday, you’ll feel like you spent a day in Greenwich Village. 

Here’s this week’s big real estate roundup of stories complete with my pithy commentary (mostly culled from the Post and Times).  Readers of this blog (all 2 of you) know that I draw very heavily from these two sources.  I’m a big believer that the uber markets of NYC and DC are bellwethers for real estate trends and developments for the nation.  Learn and apply to the smaller market (like our beloved Richmond) and you win, baby! 

• Let us begin with interest rates.  Yeah, covered some of this stuff in last week’s blog.  The Times outlines What Really Moves Interest Rates.  Essentially, the argument is that too many freakin’ people have adjustable rate mortgages (”According to Moody’s Investors Service, 19 percent of all mortgages originated in 2003 were ARM’s. In 2004, the figure reached 34 percent, then settled at 31 percent last year.”).  Since the chickens is comin home to roost ya’ll in the form of higher house payments, the Feds (except for the Richmond guy) got the yips.  With “the nation’s household expense for mortgage interest expected to rise by nearly 18 percent this year”, consumer spending/the economy is fragile.  Further, coupled with the inflationary pressures of high energy costs, there is a perfect storm on the horizon.  Anyhow, in another article, the Post reports that mortgage interest rates on the street have actually declined with the Fed’s decision to do nothing (Mortgage Rates Decline Again, to 6.52% ).  So you got an ARM and want to amputate?  Two recent articles with lots of advice…
• Fudge! (except I didn’t say Fudge): “Some industry experts say that at least half a trillion dollars’ worth of loans with reduced initial payment terms are scheduled to reset this year…Many of these mortgages carry “negative amortization” features that permit borrowers to pile on additional debt beyond their original balance by making minimal payments for the first several years. Once the initial period is over, however, payments could double as the loan resets.” (WP: To Avoid Reset Shock, Plan Ahead)
• Washington Times chimes in with a related question in their real estate mailbag: Just paying interest has pros, cons
• For my real estate investor readers, I submit to you:
• Rents Are Rising Rapidly After Long Lull According to government data, average rent across the country went up 3.5% this year.  I could have easily placed this bullet point to the “Interest rate” section above, since there is a connection between the two issues.  Higher interest rates and jitters are pricing people out of the home buying market leading them to a tighter rental supply.  Bottom line: Damned if you buy, damned if you rent.
• College-Town Real Estate: The Next Big Niche? I’m convinced that VCU is playing a major part in the (slow) re-development of Downtown Richmond.
• Sellin ain’t as easy!  Here is my Buying and Selling 101 Roundup:
• Let’s Make a Deal  (This was the cover story of the Times Real Estate section). “The broker’s most important goal is to close the deal, and that’s not necessarily your goal as a buyer or seller because you care more about the quality of the deal”  This excerpt reminded me of a passage in Benjamin Graham’s book The Intelligent Investor.  Why do stock traders cheer EVERYTIME the bell rings whether the market is up or down?  Because, they make money either way.  Keep that mind when you are working with any broker.
• From a Crowded Open House to Victory Nice vignette, more of an “only in New York” kind of story…although, I found a practical nugget.  Apparently, there is a company called CircleLending (circlelending.com), which designs interfamily loans to maximize tax benefits of a mortgage. File that away for folks with rich uncles.
• Bubblewatch: You know real estate is in a bear market when columnists start to write about these kinds of topics:
• Seller Financing May Attract Buyers Who Won’t Bite Otherwise
• Buyer’s market grips area
• Miscellaneous roundup:
• Why Some Homeowners May Not Be Smiling for These Cameras  Does anyone whether Richmond or any of the counties are using this Pictometry technology?  If you hated the assessor office before, wait till they get this new toy.
• Chelsea: Where the Commute Is 30 Seconds Damn, gays know how to design.
• Single Girrrl Power!  The Washington Times (House-buying women larger part of market) recaps a recent report published by the Joint Center for Housing Studies at Harvard University: Buying For Themselves: An Analysis of Unmarried Female Home Buyers.  (btw, personal pet peeve.  How come newspaper articles never link to the more detailed source material?  I guess that’s what bloggers are for)