Real Estate Slump Hits Manassas, Va., Hard
MELISSA BLOCK, host:
At the bottom of the current economic mess is the housing market: All those mortgages where more is owed on the house than the house is worth, all those homeowners who fell behind and face foreclosure, all those securities that were backed by those mortgages. Well our colleague Robert Siegel went out to a foreclosure hot spot: Manassas, Virginia. And Robert, you're here to report that you think you have seen the bottom.
ROBERT SIEGEL: I may have seen the bottom, Melissa.
BLOCK: What's it look like?
SIEGEL: It look like Manassas, Virginia, a city about 35 miles away from Washington D.C., but 38,000 people live there. There have been so many foreclosures in Manassas. I'll give you some numbers. The cities chief assessor is John Grzejka and he told me how many foreclosures there've been recently compared to the fairly recent past.
Mr. JOHN GRZEJKA (Chief Assessor, Manassas, Virginia): From 2005 we had total of two.
SIEGEL: Two foreclosures.
GRZEJKA: But started picking up in 2007 where we had 313. And last year we had 922.
SIEGEL: Now there are only about 10,000 dwellings in Manassas. So over the past couple of years more than 10 percent of the homes in the city have been foreclosed. And that's a colossal rate of foreclosures and bank sales - homes that you sold either after foreclosure in some cases to avert a foreclosure.
BLOCK: Well, why are things in such a dismal state in Manassas?
SIEGEL: Manassas is sort of at the outer edge of what had been the rapidly expanding Washington D.C. area. This was a place at the end of a commuter rail-line where somebody could buy a family home for reasonably good price. This was a place where a lot of say Hispanic immigrant construction workers could find a townhome. And there were townhomes in Manassas. They were going for, say, almost $200,000 five or six years ago, that by 2005, 2006, were in the high twos and some of even reaching $300,000. This was bubble town U.S.A.
BLOCK: Bubble town U.S.A. then - what about now?
SIEGEL: Now John Grzejka, whom we just heard, told me that 92 percent of all of the residential real estate sales in Manassas last year were bank sales. And here is the wisdom he told me about banks.
Mr. GRZEJKA: You know, bank don't want to be owning property. So they're forced to move them at dirt cheap prices.
BLOCK: And when he says dirt cheap prices what does he mean?
SIEGEL: Remember when I was telling about mid twos almost $300,000. I went to look at some of the townhomes like that with Sue Jacobs(ph), who's a local real estate broker, who is now largely in the business of selling off properties for IndyMac, which made so many of bad mortgage loans that they finally failed last summer. And IndyMac still has lots of properties to divest. Sue Jacobs has the quintessential real estate agent's key ring: Tremendous number of keys for the fleet of cars for the brokerage and also for lots of houses on the market. And she drove me to a working class neighborhood of 40-year-old row houses, or townhomes, that's called Georgetown South and as we rode through it, she pointed one foreclosed property after another.
Ms. JACOBS: That one was a bank property that one next to it was a bank property and that one, flat 22 was a bank property.
Ms. JACOBS: Yeah, there is one there.
SIEGEL: These were the houses that were going for $250,000 three years ago, when all you needed for mortgage was a name and a pulse.
Ms. JACOBS: 9619, that one just settled. I think the last one we settled that was 43,000.
SIEGEL: I was reading real estate records for Manassas last week and you could see town homes dropping one after another from the mid or high 200s - in 2004, 2005 - and down to $60,000 and $50,000, one actually in the 30s.
Ms. JACOBS: This is only a little two-level.
SIEGEL: She showed me a corner townhouse. It's on Taney Road, which is a foreclosure hotspot even by Manassas standards. And this is a two-story home -three bedrooms upstairs. It's not even on the market yet. Sue Jacobs already as two interested buyers. And their likely price?
Ms. JACOBS: In the 60s, 50s.
SIEGEL: In the 50s, 60s.
Ms. JACOBS: Yeah, because this has got the two and half baths. We'll get just a little bit more for this one.
SIEGEL: In the 60s, for a property that two years ago would've been well over $200,000.
Ms. JACOBS: Absolutely, close to 300.
SIEGEL: Yeah, that house actually sold. That very house went for $265,000 in 2006.
BLOCK: Wow. Well, Robert, who's buying?
SIEGEL: What's happening with the townhomes is it's investors. And they're paying with cash. As Sue Jacobs told me she has never seen so much cash in her life selling real estate. If you run the numbers, owning one of those townhouses right now is cheaper than renting one. So, if you can get a tenant in there for $800 to $900 a month, it's worth becoming a landlord. And the buyers are turning up. I looked at the townhomes, by the way, in Manassas and in neighboring Prince William County, Virginia. More expensive private homes have also seen big drops typically from prices up in the 400s to now down on the 200s. And there, a first-time home buyers - often young couples with children - are buying.
BLOCK: Well, with these young people coming in does that mean things are looking up in Manassas?
SIEGEL: Not yet. Remember John Grzejka, the chief city assessor. He's been watching property tax receipts, nosedive along with the foreclosure rate and the city government of Manassas has laid off and cut back. And he faces a conundrum that accessories face in much of the country. When they assessed properties, he told me, they've tended in the past to regard bank sales as anomalies. They wanted just to compare normal sales - where there's a homeowner selling to a homebuyer. But what do you do when a bank sale is the norm? Are people going to actually get assessments that say, that townhouse is now worth $43,000? The long answer is, no. Jurisdictions like Manassas just wouldn't be able to function, if real estate taxes went that far down.
BLOCK: Okay, our co-host Robert Siegel back from Manassas, Virginia.
(Soundbite of laughter)
BLOCK: Robert thanks a lot.
SIEGEL: Bye bye.
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