Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Wow, I knew it felt slow, but I didn't think it was that slow. Glad to know I am not the only one feeling it, though.
Wow. Arlington County continues to show its strength in housing prices. Shows you how this close-in community with excellent public transportation (especially Metrorail) has pretty much escaped the housing downturn in the Washington area. As I've observed, a house within walking distance of a Metro station in Arlington has suffered no loss of value in terms of sales price. I expect with the hike in gas prices, that trend will only strengthen.
It looks like Fairfax County is joining PWC and Loudon, which are already toast. Fairfax is huge, so perhaps demand remains strong in areas near the Metro, or in McLean. But the correction is moving closer in.Tom:I agree that proximity to DC/Metro is allowing Arlington (and Alexandria City) to hold on, but sales volume is dropping and months' supply is increasing. Why should demand drop when employment is stable? There's a stare down between buyers, many of whom will no longer pay peak prices, and sellers, who are holding out for those buyers who are still willing to pay peak prices. Thus, lower volume without price decreases. Real estate prices only decline after a sustained period of diminished demand. We shall see; employment and borrowing/refinancing costs will be most determinative of how Arlington and Alexandria weather the storm.
Tom, we all know what is happening to condo sales in Arlington, and houses will be next. Your RE shill trolling comments won't change that.
yes Tom. Terminator is correct ... kinda. Terminator said:"There's a stare down between buyers, many of whom will no longer pay peak prices, and sellers, who are holding out for those buyers who are still willing to pay peak prices."The area is changing. It's growing in importance and value and with that growth comes an increase in salaries for those who can and will pay for that new value ... those who want to be "in the center of it all" and can afford to be "in the center of it all". Arlington like the nice neighborhoods in the District will continue to soar in value. In at least these areas, the Realtors were right when they said "Buy now or forever be priced out!"
Awwwww...the RE trolls are out in force tonight. The financial pain is keeping them up.
Sounds like Not Me has a king-size set of blinders on!I agree with Terminator and Lance: the neighborhoods in Arlington and Alexandria that are within walking distance of Metro stations are weathering the housing downturn just fine. As gas prices increase and as Washington's traffic woes worsen, these neighborhoods will continue to strengthen in value. These areas are obviously not representative of the general housing market in the Washington area; they are, in effect, high-value islands in a sea of declining housing prices. Over the past few months, I've tested this assessment on a number of real estate-savvy people. Several attempted to refute me based on recent (reduced-price) sales in Arlington. But when I charted the locations of these properties on a map, they acknowledged they weren't within walking distance of Metrorail. That really seems to be the main factor.
Tom:I did not mean to suggest that Arlington and Alexandria are "just fine". The sales volume in Arlington and Alexandria was much lower in October '07 than in every October going back to 1998; this is counter-intuitive, since population in the area has increased in the past 10 years, and unemployment remains low. What's going on beneath the surface? A stare down. Buyers, even in close in areas, are more reluctant to pull the trigger at current prices, and sellers will only lower prices when forced to. Neither the buyer side nor the seller side has a critical mass of eager or desperate transactors to push prices significantly up or down. Not yet. The situation in Arlington and Alexandria is weaker than prices would make it appear.
I hate to let facts get in the way of this discussion, but I definitely disagree with this discussion. One home does not a trend make, but there is a home listed within 3 blocks or so of Pentagon City in Aurora Hills listed at 585k that sold for 605k last year. And it is starting to just sit--and don't lecture me about how one house isn't a trend, I know that. There are definitely some places that are still at or very close to peak prices, but for every one that is selling there is another one sitting there, getting foot traffic in open houses but just priced too high for the market. Yes, having a metro station absolutely provides a pillow that will help with a soft landing as opposed to falling straight through the floor (see William, Prince). However, just like "there's no more land on the strip," it is a fallacy to say that because there's no more land within walking distance of Metro stations, prices won't come down. There are far too many inputs external to mass transit that affect housing prices, and to try and simplify it to that level is a foolish endeavor. I think insulated areas will fall about half as much as exposed areas (PWC & outer-Fairfax, Loudon vs. Arlington, Close-in Alexandria, McLean, NW DC, Chevy Chase, Bethesda), but they will still fall. And there will be pockets that don't, but you can't factor the uniqueness of a street or house into regional prices. The other problem with relying on inputs like Metro and Gas Prices on Home prices, is that there is always the consideration that through-the-roof gas prices will push more employees/employers to telecommuting (meaning you can buy that big house in Centreville because you don't have to sit on 66 every day), while at the same time Metro's questionable service/timeliness (have you tried to get on the Orange Line in Courthouse at 8am?) has gotten worse. Just food for thought
It's a bit silly to suggest that falling prices in Fairfax county and beyond won't affect the District and Arlington. 6-12 months ago Fairfax was still holding up pretty well, while Loudoun and Prince William were already crashing hard. As the outlying areas dropped in price they became more compelling for the few buyers out there, eventually forcing Fairfax prices down.So despite the advantages of being in or near the city Fairfax is an alternative, and as the price drops out here it changes the equation for DC/Arlington. A year or so ago I saw a great graphic suggesting that housing bubbles generally start in the close-in areas and move their way out, then start crashing in the exurbs and move their way downtown. I can't find it for the life of me, though, so if someone knows what I'm talking about and can re-post that would be great.-Jason
Sean, Jason, Terminator, et al. You can think anything you like, and give any one-off examples you like ... followed by "and don't lecture me about how one house isn't a trend, I know that."But the simple fact is that Tom was referring to the following posted by Harriet: Arlington County Year Sales Active Listings Ratio Median Sold Price 2007 174 1,057 6.07 $487,500 2006 197 1,195 6.07 $465,500 2005 245 809 3.30 $525,000 2004 280 381 1.36 $415,500 2003 298 365 1.22 $356,750 2002 272 501 1.84 $315,000 2001 268 348 1.30 $249,750 2000 296 324 1.09 $217,450 1999 246 511 2.08 $198,450 1998 240 N/A N/A $214,250 i.e., over the last year AND over the long term (which is the period homeowners purchase for) prices in Arlington are going up up up.
Heh,Talk about missing the forest...Those numbers hardly show Arlington is going "up up up."Those numbers show Arlington is well below its peak pricing and it is experiencing the lowest volume of sales it has seen in at least a decade. The other posters here are right, falling prices are generally moving from the outer areas towards the inner areas. Whether you like it or not PWC and Loudon do compete with Fairfax. Fairfax in turn competes with Arlington and Alexandria.It will take time for the process to play out. Of course as usual you would like to point to this one month's data and say "see? I told you so! Arlington isn't down!"but you are completely missing the trend.The whole area is getting hit. Arlington may be the last to go but prices are falling everywhere. Alexandria city is also holding up relatively well, but it is also now getting hit.I will repeat again since it still doesn't seem to have sunk in. Real estate markets move slowly. It will take a years for the whole process to play out.
The same chart also indicates that prices may be up less than 5% year over year (based upon a fairly volatile monthly figure), but they are still down more than 7% from their 2005 peak. In addition, the chart indicates that volume is down 12% over the previous year, 29% over the last two years, and 58% from 2003. Anyone with experience analyzing Real Estate statistics will tell you that prices generally lag volume (and this is not hard and fast, there are exceptions to every rule). I am attempting to take a more forward-looking perspective, and this can be a foolhardy excursion, but I try to provide reasoning to back up my opinion. In fact, Lance states that prices in Arlington will "continue to soar in value." Where is the soaring in price since 2005? Oh, and Lance, in regards to your "fact"? I was responding to Tom stating "As I've observed, a house within walking distance of a Metro station in Arlington has suffered no loss of value in terms of sales price." I gave a concrete example refuting this, with the caveat that I understand this does not prove that house prices have dropped, as every sample group always has outliers in both directions. I am no sky is falling prognosticator, especially in regards to certain DC areas, but to believe in a constant surge in prices is fairly ridiculous. I'm sorry, but there is too much historical evidence to the contrary. Will housing in these areas be more expensive in 30 years? You betcha. Will it be more expensive in 10 years? I think so, probably. Will it be more expensive in 2-5 years? I highly doubt it. Either way, we'll all find out in time.
Sean said:"Will it be more expensive in 2-5 years? I highly doubt it."Herein lies your confusion. No knowledgeable, responsible, home purchaser buys a home for such a period of time and expects to get everything they put into it out. I've said it before and I'll say it again, Bubbleheads have confused flipping with home buying.
"Arlington like the nice neighborhoods in the District will continue to soar in value."I guess 20009 isn't one of those nice neighborhoods. 20009 was down 6% in median price and 8% in average price YOY.
"Herein lies your confusion. No knowledgeable, responsible, home purchaser buys a home for such a period of time and expects to get everything they put into it out. I've said it before and I'll say it again, Bubbleheads have confused flipping with home buying."Are you trying to misinterpret what he said or are you honestly confused?He said prices are likely to be lower in 2-5 years. He was clearly talking about the housing market. The market is currently falling. In 2-5 years the market will almost certainly be lower than today. He said nothing about flipping, turning a profit, or even buying.
Leroy,"He said nothing about flipping, turning a profit, or even buying". The purpose of this blog is "Should I buy now or should I wait. Nice canard you threw in there, but again, but responsible and knowledgeable homeowners know you don't make that decision based on what the "cashout" value of their home will be so short a term out. I guess you couldn't address the question at hand? I.e., should it matter to anyone what the "experts" think 2- 5 years out. As KH pointed out, that is but a guess and subject to wide swings. What matters is the long term.
leroy 10:39,Thanks for the post. I would like Lance or any other housing bull to address the drop in transaction volume. Why were there less sales in Arlington and Alexandria City during October 2007 than there were in October 1998? Or 1999, 2000, etc. There is no bullish answer to that question.
"The purpose of this blog is "Should I buy now or should I wait."Oh is it?Says who?
Terminator-X said... "leroy 10:39,Thanks for the post. I would like Lance or any other housing bull to address the drop in transaction volume."(a) I am not a housing 'bull'. I've said from the start that your personal home is not an investment but an expense ... and the objective is to minimize that expense over time .. i.e., everything from moving costs to interest rates and community stability needs to be factored in. It's more an art than a science ... Bottom line though is that if the home provides you want you need AND is afforadable over the long run in light of your budget, get out of the "flipper" mindset where the objective is to make the most money off your home over the short term ... irrespective of the non-quantifiable costs involved. A housing bull is an investor ... and not even an investor like Va_Investor for that matter. A housing bull is the counter of a bubble head. I am not (nor is Va_Investor) as we've said over and over again we just don't believe people should be gambling with their homes for their financial security. Bubble Heads and Housing Bulls have each bought into all the "your home is your greatest financial investment" hype from the NAR. We haven't ...2) Transaction volume decrease. This is a question for someone who is "bullish" on RE. Again I'm not bullish. I'm glad the volume has decreased to "normal" from the "way above normal" it was for a number of years. In that respect, it's easier for people to get into their first homes now. Far harder in respect to getting the financing, etc. ...
The purpose of this blog is to examine the Northern Virginia real estate market. Housing choices (buy/rent) are completely up to individuals and their unique circumstances. There's a nice debate over at the craigslist housing forum (hint!)If someone wishes to buy in the Prince William/Fauquier area, with 19 months of inventory, logic would dictate that patience is best for a few more months. And by waiting since 2005 they've saved their family from paying down an extra ~200K in principal and ~230K in interest for 30 more years. In the long term we're all dead, but saving money along the way is helpful to some of us.For the uber-wealthy like Lance, 430K is lunch money at the fancy bistros within walking distance, but it's different for the proletariat in NoVA.
"I am not a housing 'bull'."Right right... you are just a guy that happens to think that DC real estate is on its way to catch Manhattan and that anyone who hasn't bought a home isn't a "true citizen."You aren't fooling anyone lance. Your advice never changes.Buy now, don't wait. Prices won't fall. If they do fall they won't fall on anything good.
"yes, I can understand why you need 10 acres to isolate yourselves ... and why you call youself Mrs. Lost. Good luck finding that large a parcel of land so close to DC for so low a price. I hope you do, 'cause when you do ... and you stay there 10 years ... you'll realize what a good choice you made investing in the capital city's expansion. Let's just hope someone didn't already figure that out 10 years ago ... and now want to charge $660K for that opportunity ..." -lance I just thought I would repeat your post from a couple days ago so everyone would see exactly what you mean when you say it is important to get out of the "flipper mentality."You may not have been able to find the area were discussing on a map, but as usual... the best advice is to buy buy buy.After all, it is an "investment in the capital city's expansion."
"Why were there less sales in Arlington and Alexandria City during October 2007 than there were in October 1998? Or 1999, 2000,"Here is one HH's answer.In Alexandria City, in 1998, 1999, and 2000, we were coming off a decade long period of flat prices. Some places, like mine, fell about 5% or 10% in the 1992, 1993 time frame.In 1999, give or take a year, people, for whatever reason, started buying and prices began climbing. By 2002, it was clear that most HH, of which there are many thousands in my zipcode, had essentially won the lottery. Some people sold to move away, some sold to move up, a few sold to move DOWN, take their hundred grand winnings, buy a condo and live mortgage free. The net result was more selling in the 1998-2002 timeframe.By 2005, that itch was out of the system. In 2007, the dynamic is different. There are almost no places like mine for sale. In the past, there were always a choice of several. My place is a small, unassuming SFH; too small for today's tastes but on a good sized lot. What is for sale? Old and new TH's, which are priced above my place. Large SFH in the $1M+ range, which are way pricey to my eyes. And a few garden apartments.I suspect that people who hold places like mine are either not selling or their place sells before it hits MLS. Forward from here? Who knows. In an era when oil doubles or triples, it seems possible that close in places will track up in price. The concept that "rents don't justify sales prices" is like saying, "I don't want to pay $3.00 for gasoline, so the price will fall back to $1.39."
Anyone notice that the 2007 ratio for Arlington and Alexandria are 6.07 and 6.61. The far out areas have 2007 ratio's of 10, 15, 20 and worse. Culpepper is 30.22.Looking back at 2005, the far out areas have ratio's more like 4 and 5. Loudon is 5.53. Seems to say that the close in places are doing just fine.
You're quite right, KH.For those who were critical of my original comment (the second comment in this chain), please reread what I wrote and understand that I'm not saying all of Arlington has escaped or will escape the housing downturn. I'm saying that those neighborhoods within walking distance of a Metrorail station will escape -- or largely escape -- the downturn. Understand that most of Arlington is not within walking distance of Metrorail, so simply going by zip codes doesn't illustrate my point.
"I'm not saying all of Arlington has escaped or will escape the housing downturn. I'm saying that those neighborhoods within walking distance of a Metrorail station will escape -- or largely escape -- the downturn."I believe that's what most HH are saying. Of the close in places, the choice parcels are holding value or increasing. My place, unfortunately, is not walking distance to the Metro. A neighbor works in Crystal City, 4 miles round trip, they buy gasoline every other month or so.
Yeah, the market in Arlington is just smoking, selling like hotcakes 2 blocks from the Clarendon Metro...http://washington.bizjournals.com/washington/stories/2007/09/17/story12.html?page=1Unreasonably high listing prices and no sales is not "showing strength."
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