Standard & Poor's today reported that U.S. home prices fell by 12.7 percent in February versus last year, with 17 of the 20 metro areas reporting record annual declines. All 20 metro areas have declined for six straight months. The narrower 10-city index set a record monthly decline of 13.6 percent.
From the S&P/Case-Shiller Home Price Indices' website (PDF):
“'There is no sign of a bottom in the numbers,' says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. 'Prices of single family homes continue to drop across the nation. All 20 metro areas were in the red for the February-over-January reading. In addition, 19 of the 20 MSAs are still reporting negative annual returns. The monthly data show that every one of the MSAs has now declined every month since September 2007, marking six consecutive months. On top of that, the declines have remained steep with eight of the 20 MSAs and both composites reporting their single largest monthly decline in February.'”
From AP:
"The number of U.S. homes heading toward foreclosure more than doubled in the first quarter from a year earlier. . . . Among the hardest hit states were Nevada, Florida and, in particular, California, where Stockton led the nation with a foreclosure rate that was 6.6 times the national average, Irvine, Calif.-based RealtyTrac Inc. said.
Nationwide, 649,917 homes received at least one foreclosure-related filing in the first three months of the year, up 112 percent from 306,722 during the same period last year, RealtyTrac said."
40 comments:
What do you think will happen to the market if there is a glut of foreclosed homes and the bank will not lower the price from the amount the bank paid on the mortgage at foreclosure? I can see people who *have* to move b/c of death, divorce, relocation having to lower their prices to compete with some foreclosed homes, but when the majority of homes on the market become foreclosures, do you think banks will come to a point where they'll consider bargaining?
On the same note, I visited this house a few weeks ago. The bank lowered the price from $399K to $365K (bank paid $357K for it.)
http://www.franklymls.com/FX6685554
It's in terrible shape. HUGE mold problem. The lot isn't great either, although it's about 1 mi to metro. I can't see anyone paying even $365K for it to tear it down.
1/4 acre lot, big enough for a nice tear down.
But its in the shadow of 66. Not many people in the teardown market want that type of road noise.
Agent - to - English dictionary:
"Well-maintained" = in terrible shape, with huge mold problem.
"Meticulously maintained by original owners" = they haven't put a penny into renovating it in more than 30 years, but want to get one of those high prices they think that the neighbors got.
Feel free to add!
February 2008 Case/Shiller data for the DC area, by price range:
WDC aggregate: -13% YoY in February (accelerating from -10.9% YoY in January), -17.5% from 5/06 peak
WDC "high tier" (over $481k): -7.5% YoY, -13.2% from 6/06 peak
WDC "mid tier" ($335k to $481k): -15.0% YoY, -19.9% from 6/06 peak
WDC "low tier" (up to $335k): -15.6% YoY, -17.4% from 7/06 peak
I looked up the George Mason Unveristy's Center for Regional Analysis study from back in February, and here are some interesting numbers:
National average foreclosure rate:
171 per 10,000 units
Prince William County foreclosure rate February 2008:
522 per 10,000 units
(the number was so high, it did not fit on their chart for the D.C. Metro area)
That rate is higher than Detroit, which had the highest rate of any metro area in the country (499 per 10,000 units).
Jump in monthly foreclosures in PWC:
306 February 2008
1,497 March 2008
Sooo...that would mean the PWC rate is now five times higher than it was a month ago? Which should put it as one of the worst rates in the entire country?
Other county rates in February 2008:
Loudon 276/10,000 units
Stafford 213/10,000 units
Fairfax 173/10,000 units
All of these numbers are huge jumps from December 2007.
Why PWC? How can it be, possibly, the worst rate in the entire country?
mjc, Doug,
In addition to what you have said, that property is in the Marshall High pyramid. I think if it were in the Oakton, Madison, George Mason or Woodson school districts, even such properties could sell close to $350K.
"Why not look elsewhere like the 90% of places where prices have either stagnated or gone up?"-lance 4/29/2008
Tabitha,
PWC's new anti-immigration laws probably explain a lot. They are unique in the whole country for a large metropolitan area.
But those properties/neighborhoods are being purchased. I think the sales rate is still going to show some positive signs in PWC next month as it did last month. People/families/investors are going to appreciate ramblers at 150K.
Interesting.
Stockton , CA is the leader. But PWC can catch up!!! Let's shoot for #1.
Check the REalty Trac new report
http://www.realtytrac.com/ContentManagement/pressrelease.aspx?ChannelID=9&ItemID=4566&accnt=64847
Blogger Leroy said...
"Why not look elsewhere like the 90% of places where prices have either stagnated or gone up?"-lance 4/29/2008
BAHAHAHAHHAHA
Lance's block is about the last place left on earth.
Leroy ... okay, I will bite. List out the places in the metro area that are "down" ... and I mean really "down", I don't mean "where the avg price is 15% less than last year" or "the median price is 10% less than last year" ... That's noise too easily influenced by the mix of what is selling at any given moment. I stand by my statement that 90% of this area is either stagnant in price or going up. You're going to have a hard time finding more than 10% where avg or median values have fallen by any meaningful amount. And just so that we don't disagree, I'll give everything over a 15% drop in median and average prices.
lance, i wonder if in 6 month your criteria for "noise" will move to 25%. not even mentioning inflation.
"lance, i wonder if in 6 month your criteria for "noise" will move to 25%. not even mentioning inflation."
History suggests it will move as far as it has to, he can't be wrong.
I mean honestly... how far in denial do you have to be to insist 10% down isn't down?
All of these numbers are huge jumps from December 2007.
Why PWC? How can it be, possibly, the worst rate in the entire country?
These numbers are scary and sad. Unfortunately this is the result of the demise of predent lending practices. In the past, the DTI was limited so that if the 'homeowner' hit a speed bumb, it wasn't fatal. In the past, the homeowner, excluding low end 'first time' housing, put down enough of a down payment to make it worth while.
Not to mention in the past most people didn't extract equity to buy toys! It was pointed out on this blog yesterday that the greater DC area has the 5th (IIRC) worst mortgage quality in the nation.
The only way to stabilize the system is to restrict loans to 'old school' sensible lending practices. (FHA for 'entry level' only, 10%+ down for conforming, 25%+ down for jumbo, with a 28% to 35% DTI limit). Its cruel putting people into the loans that were allowed during the bubble.
Got Popcorn?
Neil
Leroy,
I've ALWAYS said to expect up to 15% down for most single family homes (higher for condos). Go through the archives at Bubble Meter. You'll find that's always been my prediction. And no, that to me is not a Bubble bursting. That is just the market taking a breather from the booming times we just went through.
Leroy said:
"The only way to stabilize the system is to restrict loans to 'old school' sensible lending practices. (FHA for 'entry level' only, 10%+ down for conforming, 25%+ down for jumbo, with a 28% to 35% DTI limit). Its cruel putting people into the loans that were allowed during the bubble."
I would rather just see the govt refraining from bailing out lenders (or borrowers) with tax dollars. (I'm okay with the govt acting as an honest broker in resolving difficulties, I just don't want to see it subdizing business decisions.)
"Why PWC? How can it be, possibly, the worst rate in the entire country?"
My guess is its a mix of immigration and fraud. As to immigration, think of how much that county changed in the last 10 years. Manassas went from a small hick town to a place with a sizeable MS-13 problem (remember the reports of machete attacks)? The rapid transformation there was remarkable.
As to the fraud, its sad to say but much of the immigrant community preys on its own. One of the partners in my former firm lived out there, and he said that half the realtors and title companies out there were Guatemalan, Honduran or El Salvadorean and would sign up as many unsuspecting spanish speaking only families they could into no doc option arm liar loans - knowing full well that the day would come where they could not refinance. These families had no idea what they were signing, and were relying on the "spanish connection" to give them the sweet hook up.
On top of that, once the anti immigrant crackdown started, it added more fuel to the fire. A good percentage of the latino families out there were (stereotypically yes) in construction and possibly housekeeping. When the building slowdown started, these guys got laid off first. Then when the rest of the area felt it, my guess would be one of the first things an affluent family in Loudon Co. would cut back on was housekeeping.
So now you have 2 people out of work in a house they could barely hold onto in a community that doesnt want them. Sounds to me to be the near perfect mixture to cause a catastrophe like the one we are seeing out there.
anonymous,
very astute.
"I've ALWAYS said to expect up to 15% down for most single family homes (higher for condos)."
Even if that were true lance, that wouldn't mean a thing in the context of the current discussion.
-10-15% is most certainly down. You made the ridiculous claim that 90% of the area is stagnant or rising. That claim is obviously false.
Instead of just admitting that you were wrong... you are now trying to find some way to spin your way out of it, and looking like a fool.
Leroy,
"Stagnant" does not mean "up" or "exactly at zero". It means:
"not advancing or developing (a stagnant economy)"
(www.merriam-webster.com/dictionary/stagnant)
If the best you can do is find that in a single month the average or the mean is down 15%, the best you are doing is proving that prices aren't "advancing or developing". You are not proving that they are "bursting" as your BH Theory would demand.
Now if you are admitting that we're not going to have a "bursting" bubble, and have since reconsidered your position that there was ever a bubble out there to "burst", then we may very well be in agreement. Just please don't try to redefine "bursting" to include "stagnant"/"not advancing or developing".
spin spin spin...
Don't admit you were wrong lance. Avoid that at all costs...
Falling is not stagnant. Falling is falling.
You claimed that 90% of the area is stagnant or rising when in fact that large majority of the area is showing clear declines.
Why do you even bother trying to wiggle out of your statements if you can't do a better job than you are?
As bad as the original lie was, you are making yourself look even more foolish by trying to defend it.
Lance Said...
"List out the places in the metro area that are "down" ... and I mean really "down", I don't mean "where the avg price is 15% less than last year" or "the median price is 10% less than last year" ... That's noise too easily influenced by the mix of what is selling at any given moment. I stand by my statement that 90% of this area is either stagnant in price or going up. You're going to have a hard time finding more than 10% where avg or median values have fallen by any meaningful amount. And just so that we don't disagree, I'll give everything over a 15% drop in median and average prices."
Why dont we go by the 5 counties/areas most commonly cited by Harriet Alex City, Arl, FFX, Loudon & PWC? If we look at March 2007 yoy median sales prices we get:
Arl +3.21%
Alex -3.71%
Ffx -13.38%
Loudon -20.45%
PWC -29.73%
Lets assume the "area" is the same for each county 1 county = 1 area - (unless you want to go by square footage which would hurt Lance's case more). Why dont we even throw in DC which is only -8.06 down. So even if we take this in the light most favorable to Lance, 2 of the 6 areas (33%) are "down" and if Fairfax moves a little further, it could be 3 of 6 (50%) down.
Lance, do you want to clarify or restate?
Also if you were to say "I was speaking about "area" in terms of population", note the 6 areas together =2.649 million people, of which 650K are in Loudon and PWC. Even by this metric, 25% of the population is down, and if and when Fairfax hits 15% it will be 1.729 million, or 65% of the population "down".
Lance - again, I am not going to throw you down the well on this just yet - I think you were speaking a bit off the cuff when you said the 90% stagnant or down thing. That said, are you sure you want to keep this position, especially how close FFX very likely to make this area majority down in the coming months?
Finally, say you want to include Montgomery & PG. That would be fair given their location. Neither one is at -15% so now we have 2 of 8 counties or 25% "down" and 75% "stagnant or rising" even closer to your 90% mark. However, watch out, PG is at -13.46% down YOY and is much more likely to get below -15% than FFX is in the next month or so.
We can also include the true "outer" counties if you wish (i.e. Clarke, Culpeper, Charles, etc.) but trust me, you wont like where that takes us.
My wife and I inherited a house cleaner (for lack of a better term). For about 6 months, we had bi-weekly service. But, when we started thinking about it, we couldn't really justify paying someone that much money to clean our house every two weeks. We're fairly clean folk, but it is nice to have someone come in and clean just in case we get overloaded. So, we cut back to once-a-month. Then it dawned on both of us: housing cleaning would probably be the first thing people cut out as the economy slows, and that segment of the workforce would end up hurting badly.
anon,
good analysis ... except to be fair, you can't look at each of your "areas" as having equal weight. they differ vastly in terms of population (2006 est.'s)
Arl +3.21% 199,776
Alex -3.71% 128,923
Ffx -13.38% 1,010,443
Loudon -20.45% 268,817
PWC -29.73% 357,503
Washington -8.06% 581,530
Given these numbers, then about 25% of the area has drops greater than 15% in median price. If we're looking at that alone, then yes it is significant.
But how about average prices? That was part of my criteria ... median AND average prices dropping 15%. The average is important because there are situations (such as in the District) where the mix of what is being sold today is different than it was a couple years ago. For example, there are tons of condos that have suddenly come on the market in DC. A condo costs less than a house (usually.) Remember, the average price of Single Family Houses in the District rose 7% last year. The average price of condos in the District similarly went up by something like 1.5%. So, how is it that you have a median price 'down' 8%? Simple, a lot more condos than usual got sold ... driving the median down.
Please get back with average prices changes for the jurisdiction and we can analyze further.
anon, that's correct, if you calculate by population and correctly include the other counties adjacent to the District (i.e., MoCo and PG) we're more likely looking at 10% ... and that's before we even look at the "and average below 15% drop" requirement ...
MoCo 932,131
PG 841,315
That puts us with 14.5% using median alone as the guide.
BUT ... if you think about it .. why are we counting Louden and PWC as part of our area to begin with? We aren't including Howard and Frederick, are we? You do realize it takes something like 2 hours to get into DC from these areas in the morning. What do the problems there have to do with the problems here?
That said, I can understand why Harriet and those bloggers out there would care. Perhaps we have to agree that yes, there is a grave problem "out there" but no, there isn't a problem "in here". 2 very different areas ... separated by a 2 hour commute ...
Lance average YOY drops
Alex -2.01%
Arl +0.65%
FFX -11.9%
Loudon -19.94%*
PWC -28.00%
*Note - accidentally gave you Loudon's average before, not its median. The number above is its Median, and its average is -20.45% - in either event however, both are "down".
Incidentally, if we wanted to be truly fair, we would include the year prior so I looked back at the YOY numbers for March 2006 to March 2007. Lets just say that you wont like what they have to say because by this metric fairfax is officially "down".
"there is a grave problem "out there" but no, there isn't a problem "in here".
Lance - forgetting that you said the "area" for a second, if I were you I still wouldnt want to stand by the statement "in here" either. Reason being, in here would include PG, Mo Co., FFx, Arl, Alex, & DC. As I just showed you, include 2006-2007 and FFX is down and even if it isnt yet, PG will be there in a month or 2.
Thus, if you want to say "the area" is only these 6 beltway & inside areas, understand that this statement is highly likely to come back and bite you as soon as PG goes down (which given its inventory is double that of PWC its likely to happen soon - well before anyone forgets this discussion).
Lance, I live in PWC and my commute downtown is about an hour each way. Public transportation is a beautiful thing. I get a whole hour to read or nap while the nice conductor drives the train. As for why we are counting Louden and PWC as part of our area to begin with, it's because Loudoun and PWC are part of Northern VA. Isn't that what this blog is about? Northern Virginia real estate?
no, no lance and kh really need to start a blog and call it
"Arlington and inside DC Housing for Life Blog"
Or maybe
"Arlington and inside DC Housing for Life Blog--- ah screw it, it's MY neighborhood Real Estate Blog and how it WON'T go down"
Or maybe
"Housing is the best investment ever . . . if you don't live where I live . . . suckers!!!"
to be fair, lance did claim that housing would drop 10-15% from the peak, in the fall of last year.
BUT....
This was after he said a year early that all bubbleheads were crazy and housing would not drop but would level to a normal 5% gain/year.
THEN....
He went nutz one day when the first negative figures on housing came out and blame bubbleheads for causing the downturn with their blogs. I am not making this stuff up, although it seems to ridiculous to be true!!!
All of this information is 100% true and verifiable if you search the bubblemeter blogs.
So lance, tell me that you didn't say this... I dare you. Then I will post the link to your quotes and everyone will know you are full of it.
Why are we going by what Lance calls "down"? 15% median AND 15% average down? And we have to do it by population weighting? And only what areas? NOVA encompasses a huge area. This blog is not solely setup to see how the "best" areas are doing.
90% stagnant or going up!? Absolutely ABSURD. Lance, please admit that you misspoke.
I may have to revamp my predictions of 20-30% off peaks. Seems we are getting closer with no end in sight.
My main prediction is we will see price/income levels +-5% around historical terms which were about 3, it's still currently sitting at around 4.75 per housingtracker website.
How we go from here to there . . . is rather immaterial to me. I figure it will be another year of sharp declines, and then stagnation for a long while.
"This was after he said a year early that all bubbleheads were crazy and housing would not drop but would level to a normal 5% gain/year."
Not only that, but at various points he declared that the bottom had already passed...
"Why are we going by what Lance calls "down"? 15% median AND 15% average down?"
It beats the heck out of me... this is his standard operating procedure when he sticks his foot in his mouth.
Rather than just admit he was wrong he tries to dodge the issue or move the goalposts.
Who honestly calls -10% stagnant?
The fact is that he made up some numbers and now feels compelled to defend them no matter how absurd that makes him look.
Leroy said...
"The fact is that he made up some numbers and now feels compelled to defend them no matter how absurd that makes him look."
The irony in all of this is that (my guess is) Lance set a standard that he assumed could not be met. Not saying I agree with that standard mind you, but even with the most generous interpretation of that standard I could think of, AND trying to anticipate his responses (you note I posted the population rebuttal before he mentioned it - which is fair) we still cant get there.
Lance like I said, assuming the most generous standard I can think of (beltway counties and in - which really is borderline intellectually bankrupt) we are already 25% "down" (thanks to FFX). Also, assuming PG succumbs - (which it will) by your most generous standard we are likely to be 40% "down" in a month or two. Sorry my man, but I think you need to throw in the towel on this one!
It pains me to see so many highly impressive critical thinkers wasting their time debating with someone who displays no capacity for the same.
My $0.02
In an attempt to liven up the mood a little, here are some specific insights into the S&P/CS data (for DC) that were just released.
Looking at year over year percent increases in the overall DC index since Jan 1988, the past 10 consecutive months have seen the largest percent decreases in the last 20 years. That is, there is not a single month before May 2007 that saw a larger year-over-year price decline as those seen EVERY month between May 2007 and Feb 2008. Put simply, DC has been clobbered in the last year.
Second, the top tier has done very bad too. So far, however, its year-over-year price declines have not been as bad as those seen during March and April of 1991.
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