The "Samson Realty" glossy newsletter shows up in my mailbox once a month. Danny Samson, President, writes a market report inside the front cover. The report I read back in November was so startling, I decided to keep following his reports to see if his advice would change. There does seem to be a bit more pessimism in the newest report. As for the advice last autumn, well, it's fine if you're the type of person who can handle the hassles of being a landlord and burning cash at 1-2 grand a month (plus repairs), while at the same time patiently holding out hope for a new housing bubble to form.
Here's a portion of the advice he gave in November, 2006:
Every case is different, but for example, if you could rent your current home at a negative cash flow of $1000 - $2000 per month (tax deductible) and wait a year or so until the market comes back, that would be very advantageous. It certainly beats having to cut your price by $100,000 or more in the current market conditions. I would pull cash from the equity on my current home to put down on the home I’m looking to buy, or do a low money down loan on the home I am buying. This way I’m buying a $1,000,000 home for $850,000. I might even pull out a little more equity to help with the negative cash flow.
May, 2007:
My top agents are telling me that the market is still good. I was hoping for a little more momentum after four good months, as we are now entering the spring market.
The weather and the calendar could have played a role; our hit counts on all web sites have dropped off dramatically. The only good weekend was Easter weekend. . . . If you try to start off in the market priced high to test the market, I think you are making a big mistake. You are going to get the most showings and your best contract early on. By taking the "We can always come down" approach, you will not receive an early contract. You will end up staying on the market longer, eventually come down in price, and end up settling for less than what you could have gotten had you priced it right in the first place. If you have had twenty or more Buyers come through your home without a good contract, THERE IS ONLY ONE PROBLEM, PRICE! I'm sorry to have to put it to you this way, but this rule holds true in any market.
9 comments:
Hmm I wonder what his "not top" Agents are telling Mr. Samson.
Help me out with this Harriet, but does the "Spring " market start in May, as Mr. Samson leads us to believe??? I thought the "Spring" market was after Superbowl weekend thru the end of June in NOVA?! I read other places that this Spring had flopped & current Sellers have about 5 - 6 weeks left to sell in this much anticipated ( and disappointing) "Spring market" ...
Robert I. Toll: "The spring selling season, as far as we’re concerned, ended with Easter and Passover" (from their conference call last week).
Anectodally from agents I've talked to, the interest from buyers has waned as of about three weeks ago.
June-August in D.C. is historically quiet (understatement) for real estate sales. It picks up a little after school starts.
Maybe Mr. Samson wrote his article in early April and the May newsletter is out of date . . .
Harriet,
When do you think the NoVa market will hit bottom--ie, no further nominal declines in price?
My wife and I are renting a house in North Arlington that we couldn't scratch as first time buyers. Our lease is up at the end of July and I'm wondering if we could get a substantially better deal on a house if we waited another year--if not in our neighborhood, then somewhere else in NoVa.
We want to buy something to make our own, but don't want to lose our shirt if we have to move in 4-5 years.
...and thanks in advance for your thoughts.
JLA
jla,
I don't have a particular date in mind for a bottom, but my personal method is to just keep watching the market in the area I'm interested in.
Ziprealty.com allows one to save up to 100 properties on its website. Of those properties, I get an e-mail if one drops the price. If I continue to see price drops, I assume the market's still going down. (The builders used to use the method of raising prices every few months -- it generated even more sales, because people would feel a tremendous sense of urgency to buy. It seems to be working in reverse this time).
Closer in to D.C., the months of inventory numbers are lower than further out counties. It seems a certainty, for example, that Prince William county has further to fall, with an 11-month inventory of houses on the market. Some theorize that falling prices will start from the outside in, as rising prices started from the inside out. Time will tell if that's true.
There are some foreclosures and such that might come close to cash-flowing in Arlington and Falls Church, if you absolutely had to move and desired to rent out your property. Of course, single family houses and condos are different. The MRIS database has a section (check the drop-down menu) where it differentiates between attached and detached sales and sales price trends:
http://www.mris.com/reports/stats/
If you're a numbers geek, you can take the detached sales statistics and follow that data every month to see how things appear to be trending.
jla,
I just wanted to add my comments to what Harriet has said in response to your question.
Personally, I have little doubt that the housing market will continue to fall and prices will be substantially lower in a year.
A bottom will probably not come in a year--it may take much longer. And even if there is a bottom, prices are likely to stagnate for a few more years.
Even if you are under pressure to buy for family and space reasons, the best option is to wait and keep looking for low-balling opportunities until you find something that fits you and is within your range.
My wife used to give me some pressure to buy, but now she herself tells me to wait at least till December because she has seen the rising inventory (driving on the roads) and falling prices.
We are looking at the Vienna/Falls Church/Fairfax area. Prices are still too high, but older properties are falling. Condos are also falling. Newer THs and SFHs are holding up fairly well this spring, but will fall again in the summer and fall.
Based on what I am reading in RE market analyses, I would be afraid to buy in NOVA for awhile. Bets are on that there will be further declines in "value." Once the bottom hits, then it is doubtful there will be great appreciation for years to come. So if someone were to possibly move elsewhere in 4 to 5 years, it is likely they will take a big hit once all the costs to sell are considered. Realtor fees alone could eat up much of the appreciation if not all in the next 5 to 6 years.
Too many builders are calling this area a dead market. Houses still are not selling even with declining prices. The hyperinflation in the market here has probably left its mark for some time to come.
Because I work solely with Federal clients, I hear daily rumblings about jobs being moved out of the area and few new jobs replacing those that are leaving. One guy at NASA said that it was so costly to live here and they have such a difficult time getting people to move to the area that in the future more jobs may move to more affordable areas of the country.
One couple at work are trying to sell their townhouse and haven't had a nibble. Only a few people have been through and it has been on the market for 2 months now. Though I have never seen their house and they have been there for 7 years, I cannot imagine what they would be asking for there not to be any interest.
Question: Was the overpriced market of the late 80s and early 90s fueled by speculative investors? Coworkers tell me the townhouses they bought then dropped in value to the point that it was 2000 before the properties were valued at their original cost.
kcwood,
I have been following a townhouse close to the Vienna Metro station. It sold as a new TH for $235 in 1993, but steadily declined and was assessed by the county at $200K in 2000. So much for the theory that real estate only goes up and that this area near a Metro station is immune to a housing recession.
Today, the TH's county assessment is $475K and it is on the market for more than $520K, a testament to the mania during 2001--2006.
I did some analysis of condos and THs (identical units) in desirable locations (McLean, Falls Church) that were converted and built, respectively in the late 1980s. The peak resale prices were in the 1990-1 time frame (sort of like late 2005-2006). Then units that sold in 1993 dropped as much as 20-30% compared to 1990-1. Then the market flattened. Nominal sales price would not have broken even in 2000-1 and inflation (CPI adjusted) not until 2002. Actually, noticed that a lot people sold in early 2001 at the condo because psychologically they were at break even. If they held on until 2005 they would have more than tripled.
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