Arlington: the rules still apply
Well, the cat's out of the bag about Arlington, thanks to today's story by Sacha Pfeiffer. We looked hard – and eventually bought – in Arlington for all the reasons mentioned in the story, and we're delighted with the our new house, friendly neighbors, and thriving town. But after looking at over 30 homes here during our search, it was clear to us that the fundamentals still apply, even in a "hot" market.
Rule 1: Overpaying is still dangerous. We also saw deliberate underpricing going on here, and in fact lost one house to buyers who paid about $20,000 over what the house was likely worth. That might be a calculated long term risk, but what if you unexpectedly have to sell? Ask the lovely people who sold our house to us. They took a $25,000 loss from what they paid for the place in early 2006. That’s a lot of money to owe the bank at closing, and we felt for them. Another house in our neighborhood sold for $10,000 less the seller paid in late 2005. And these are nice houses in a desirable location.
Rule 2: The price and location still have to be right, as Pfeiffer’s article briefly noted. We saw several nice but overpriced houses in Arlington languish and even go off the market unsold. Buyers here are still picky, and the only times we had to compete hard were with very nice houses in great locations. Arlington might well be the region’s hottest market, but it’s still not the magic kingdom for sellers.
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Well ... they didn't exactly "owe" the bank the money, since the public record shows that they put down over $300,000 in cash at closing, in 2006. So, they just didn't get back everything they put into it, and "lost" even more due to the commission they had to pay on the deal.
But, really, what were they expecting, that they could turn around in just one year and make a profit? Unlikely, except in the absolutely best of times.
John K is correct about the sellers -- I simplified their situation in my post for the sake of brevity and clarity. Many sellers in this situation really do have to write the bank a check at closing, and that should be a sobering thought to anyone who is tempted to make the Ebay mistake.
Eric,
You make a great point about overpaying. Do you feel comfortable that you didn't? the couple before you lost money , yet you still paid 60k over assessed value. I would have some concerns paying 2 1/2 times more for a house than what it sold for 10 short years ago, especially considering that during that span we have experienced what most believe to be an unrealistic and unsustainable bubble....
Interesting article--considering that a cursory check of the Warren Group data shows that Arlington sales to date are DOWN over 2006.
Sacha's article is total bunk...
Read here to find out why...
The Boston Globe has gone way over the line this time... good job... keep pumping the farce.
PaperEconomy
The way I read Sacha's article, Arlington is "hot" relative to the rest of the (lackluster) Boston market. From our recent personal experience, we did face a lot more competition in Arlington from other buyers for the nicest houses, compared to other nearby communities. But it's clearly not the bonanza that sellers experienced before the market turned. No place is. Most places still sell for under list price, and I wouldn't say bidding wars were exactly rampant -- but we did see them, and I don't hear of that going on in other towns.
Speaking to Ken's question, we hope to have minimized our risk by shopping in the town that seemed the least affected by the downturn, and buying a place we could comfortably keep for 10+ years. But no home purchase is without risk, no one knows how much or when or if the bubble will burst, and everyone has a different risk tolerance. IMHO, the amount paid over assessment on one house is meaningless in isolation (since almost all towns assess lower than current sales). We did track the percentage paid over assessment for comparable Arlington houses and made sure we didn't exceed that when we bought -- an imperfect measure for sure, but useful.
Reading "Arlington is hottest place in Eastern Mass." would lead most people to believe that Arlington exists in some kind of real estate bubble. Unlike other towns, we're told, Arlington is special and doing quite well: prices are stable, activity is brisk, behavior is frenzied, home sales are robust.
A real estate professional tell us that the market in Arlington is quite strong and remarkable. The reader is given stats proving that homes in Arlington remain on the market for a much shorter period of time than in other towns. We also get stats on the median home price in Arlington compared to other towns, such as Lexington and Bedford.
All this information is intended to prove the thesis that Arlington real estate is performing quite well. But with quick internet research, it is clear that this information is clearly cherry-picked.
What we're not told is that the median price of a single family home sold in Arlington this year, according to the Warren Group, is the lowest it has been since 2003. Here's the data:
2007: $465,500
2006: $475,000
2005: $493,000
2004: $467,000.
The data is very easy to find. It's here: http://rers.thewarrengroup.com/townstats/search.asp
Yet Ms. Pfeiffer did not report this vital information. I guess she did not want to undermine her thesis or her false statement that "prices are stable."
This blogger might want to review your comment before posting it.
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