My wife and I moved from Fairfax County a few years ago (where I grew up) to Indianapolis. Most of our reasoning was because, despite the fact that we worked two wonderful jobs, we knew we’d never be able to afford a decent home.
We were able to purchase a new single family home just a mile from the heart of downtown Indy for less than half of what we would have paid in Fairfax County. All the benefits of city life - including walking distance to fine dining, amphitheaters, and major sporting events - at a fraction of the cost.
We still have may friends and family members back in Fairfax. Can’t say we miss it!
I just looked up my childhood home in Alexandria, which was new when my parents bought it in 1997. They purchased it for $350k. It’s now estimated at 1.1 mill. Crazy.
Keep up the good work. As an urban pastor, I really benefit from what you do!
Thank you for this comment. You're not the only pastor who has found my newsletter! I love the idea of a church with an orientation towards the city in some way. I've never been to Indianapolis, but I believe I have heard it is a good deal in terms of urban amenities and housing before.
This is interesting. I grew up in Alexandria, and my cousins still live in the area. One of my cousins and her husband recently moved to Richmond because they were priced out of Northern Virginia. I wondered how that could possibly be, as they both work for private consulting companies, so presumably both make six figures. But now it all makes sense!!!
As a first-time homebuyer, the trouble with condos as starter homes is they do not appreciate like townhouses and SFHs since you aren't buying the land, which, as you point out, is what is really the driver of the price appreciation. Most of the condos are aging buildings with astronomical HOA fees that either appreciate slowly, or even depreciate, while SFHs and townhomes continue to climb ~3-5% in a year in NoVA. Also, very few new condos are actually being built. Most new multifamily buildings are corporate-run rentals. In theory, newer condos shouldn't have the same deferred maintenance costs that you see with the older condo buildings and would be more modern and desirable. At current interest rates, and given the older stock of condos, renting just makes more sense but pushes people away from homeownership.
The differences in areas like Fairfax and central Illinois utterly fascinate me. It’s like reading about an entirely different country. Or planet.
That excerpt was mine; yes, I have a 3,500-square-foot Victorian with a nice yard in a safe, quiet, walkable neighborhood close to everything. Yes, I paid just under $100K and no it’s not worth much more than that now. I don’t expect it ever will be. So there’s no big appreciation in value to be captured later. It’s a home, not an investment. I couldn’t not have afforded to pay more and renting an apartment would’ve cost as much as buying a house so buying was a no-brainer.
You guys live on Mars compared to me. The differences blow my mind.
It’s so insane. I grew up in Fairfax county and my parents bought their house for I think $75k in the early 80s. The houses I see listed now for so much more than that, that are frankly so much crappier houses — it’s just true insanity. There is nothing wrong with a very small house in a nice neighborhood with good schools. But that house should be affordable for someone working class or lower middle class, not someone upper middle class or wealthy. Who will buy it and then tear it down, often.
I mean, what makes the Fairfax Schools good - and they are world class - is that lower middle class and working class people can’t afford to live there
And I think this speaks to Addison's whole point about development -- that when we stick to zoning rules that only allow single family homes, our neighborhoods do not stay the same -- they change into places where only the wealthy (or elderly folks who've been there for decades) can afford to live. And that was never the intention when creating these communities.
The cost difference between buying and renting seems under-discussed relative to discussion of the high cost of either. It's something I'm constantly reminded of since I'm moving back to the DC area this year after seven years away.
While my wife and I do own a house right now, we don't have a ton of equity in it. That leads to a situation where we could easily rent a rowhouse in Arlington or Alexandria for $4-5k but to buy an identical one would cost us $8-9k per month. We would need about a 50% down payment - about $500k - just to get to break even. If we had that much sitting around in cash, I'm not convinced it would be a smart move to put it into housing instead of investments; I assume that the people who are buying have a lot of existing housing equity since that has to stay in housing to avoid capital gains tax. The situation is even worse with condos because of high association fees.
The response to this is usually "drive 'till you qualify." Go live in Woodbridge or Manassas and deal with the long commute downtown until you can collect enough equity to afford to move closer. Leaving aside my desire not to raise my children in a place where they can't have any independence until they learn to drive, it's still a tough sell. The problem is, even at 32 years old I'm out of time. My daughter is two years old; if we bought today and there isn't a massive unexpected spike in the housing market, she'd be in middle school by the time moving closer was on the table. At that point, it's a lot harder to move, since she'd have school friends we'd be forcing her to leave, so realistically it's a 20 year "starter" home bought in an undesirable location with likely worse schools than in places we could afford to rent for less money.
So the logical move is to rent. Maybe it's just social conditioning about homeownership being the ultimate good, but the conclusion makes me anxious. I keep feeling like there's something I must be missing, even though I'm sure there isn't.
I wonder how much of this is due to real estate being an asset class for investment, and a pretty recession-proof one. Probably not many more reliable sources of earnings than home equity in the DC suburbs. Are there a lot of financial institutions buying homes there?
I don't think so, there really just are not enough homes. I do think financialization is an issue inasmuch as most small-scale development is not allowed, so most of what does get built is large and backed by large companies. More small-scale incremental building would open up competition, I think
Or perhaps, it's not so much a "failure" at all ( aside from morally and in terms of long term vision(!) but instead is mostly a hearfelt desire among existing homeowners to NOT be more inclusive and to keep a wide birth from those whom they feel less comfortable around. After all, "those people" (less desirables, workers!) can live in Prince Georges County, the far exurbs, the Baltimore area, or better yet just leave the greater DC region altogather if not strictly needed as servants for their betters in suburban DC's favored quarter... Sorry, I couldn't help it!
Looking at the $600k teardown example really shows how badly zoning screws up an economy.
Realistically, for a project like that to make sense financially, you'd have to replace it with a full apartment building, which absolutely isn't happening. What it really shows is that land values are out of control, which can only really be fixed with relaxed zoning, and also land value tax to spur more productive development.
If you replace that SFH with any multifamily, you have reduced the number of SFHs in the area, making the remaining ones more valuable. This isn’t merely a zoning issue.
My wife and I moved from Fairfax County a few years ago (where I grew up) to Indianapolis. Most of our reasoning was because, despite the fact that we worked two wonderful jobs, we knew we’d never be able to afford a decent home.
We were able to purchase a new single family home just a mile from the heart of downtown Indy for less than half of what we would have paid in Fairfax County. All the benefits of city life - including walking distance to fine dining, amphitheaters, and major sporting events - at a fraction of the cost.
We still have may friends and family members back in Fairfax. Can’t say we miss it!
I just looked up my childhood home in Alexandria, which was new when my parents bought it in 1997. They purchased it for $350k. It’s now estimated at 1.1 mill. Crazy.
Keep up the good work. As an urban pastor, I really benefit from what you do!
Thank you for this comment. You're not the only pastor who has found my newsletter! I love the idea of a church with an orientation towards the city in some way. I've never been to Indianapolis, but I believe I have heard it is a good deal in terms of urban amenities and housing before.
This is interesting. I grew up in Alexandria, and my cousins still live in the area. One of my cousins and her husband recently moved to Richmond because they were priced out of Northern Virginia. I wondered how that could possibly be, as they both work for private consulting companies, so presumably both make six figures. But now it all makes sense!!!
As a first-time homebuyer, the trouble with condos as starter homes is they do not appreciate like townhouses and SFHs since you aren't buying the land, which, as you point out, is what is really the driver of the price appreciation. Most of the condos are aging buildings with astronomical HOA fees that either appreciate slowly, or even depreciate, while SFHs and townhomes continue to climb ~3-5% in a year in NoVA. Also, very few new condos are actually being built. Most new multifamily buildings are corporate-run rentals. In theory, newer condos shouldn't have the same deferred maintenance costs that you see with the older condo buildings and would be more modern and desirable. At current interest rates, and given the older stock of condos, renting just makes more sense but pushes people away from homeownership.
The differences in areas like Fairfax and central Illinois utterly fascinate me. It’s like reading about an entirely different country. Or planet.
That excerpt was mine; yes, I have a 3,500-square-foot Victorian with a nice yard in a safe, quiet, walkable neighborhood close to everything. Yes, I paid just under $100K and no it’s not worth much more than that now. I don’t expect it ever will be. So there’s no big appreciation in value to be captured later. It’s a home, not an investment. I couldn’t not have afforded to pay more and renting an apartment would’ve cost as much as buying a house so buying was a no-brainer.
You guys live on Mars compared to me. The differences blow my mind.
It’s so insane. I grew up in Fairfax county and my parents bought their house for I think $75k in the early 80s. The houses I see listed now for so much more than that, that are frankly so much crappier houses — it’s just true insanity. There is nothing wrong with a very small house in a nice neighborhood with good schools. But that house should be affordable for someone working class or lower middle class, not someone upper middle class or wealthy. Who will buy it and then tear it down, often.
Yep
I mean, what makes the Fairfax Schools good - and they are world class - is that lower middle class and working class people can’t afford to live there
That was genuinely not the case when I was growing up. And the schools were great then, too.
And I think this speaks to Addison's whole point about development -- that when we stick to zoning rules that only allow single family homes, our neighborhoods do not stay the same -- they change into places where only the wealthy (or elderly folks who've been there for decades) can afford to live. And that was never the intention when creating these communities.
The cost difference between buying and renting seems under-discussed relative to discussion of the high cost of either. It's something I'm constantly reminded of since I'm moving back to the DC area this year after seven years away.
While my wife and I do own a house right now, we don't have a ton of equity in it. That leads to a situation where we could easily rent a rowhouse in Arlington or Alexandria for $4-5k but to buy an identical one would cost us $8-9k per month. We would need about a 50% down payment - about $500k - just to get to break even. If we had that much sitting around in cash, I'm not convinced it would be a smart move to put it into housing instead of investments; I assume that the people who are buying have a lot of existing housing equity since that has to stay in housing to avoid capital gains tax. The situation is even worse with condos because of high association fees.
The response to this is usually "drive 'till you qualify." Go live in Woodbridge or Manassas and deal with the long commute downtown until you can collect enough equity to afford to move closer. Leaving aside my desire not to raise my children in a place where they can't have any independence until they learn to drive, it's still a tough sell. The problem is, even at 32 years old I'm out of time. My daughter is two years old; if we bought today and there isn't a massive unexpected spike in the housing market, she'd be in middle school by the time moving closer was on the table. At that point, it's a lot harder to move, since she'd have school friends we'd be forcing her to leave, so realistically it's a 20 year "starter" home bought in an undesirable location with likely worse schools than in places we could afford to rent for less money.
So the logical move is to rent. Maybe it's just social conditioning about homeownership being the ultimate good, but the conclusion makes me anxious. I keep feeling like there's something I must be missing, even though I'm sure there isn't.
I wonder how much of this is due to real estate being an asset class for investment, and a pretty recession-proof one. Probably not many more reliable sources of earnings than home equity in the DC suburbs. Are there a lot of financial institutions buying homes there?
I don't think so, there really just are not enough homes. I do think financialization is an issue inasmuch as most small-scale development is not allowed, so most of what does get built is large and backed by large companies. More small-scale incremental building would open up competition, I think
Indevidual small investors and homeowners who want to not just maintain but grow their equity are more then enough...
Or perhaps, it's not so much a "failure" at all ( aside from morally and in terms of long term vision(!) but instead is mostly a hearfelt desire among existing homeowners to NOT be more inclusive and to keep a wide birth from those whom they feel less comfortable around. After all, "those people" (less desirables, workers!) can live in Prince Georges County, the far exurbs, the Baltimore area, or better yet just leave the greater DC region altogather if not strictly needed as servants for their betters in suburban DC's favored quarter... Sorry, I couldn't help it!
Looking at the $600k teardown example really shows how badly zoning screws up an economy.
Realistically, for a project like that to make sense financially, you'd have to replace it with a full apartment building, which absolutely isn't happening. What it really shows is that land values are out of control, which can only really be fixed with relaxed zoning, and also land value tax to spur more productive development.
If you replace that SFH with any multifamily, you have reduced the number of SFHs in the area, making the remaining ones more valuable. This isn’t merely a zoning issue.