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Wednesday, April 30, 2008
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36 comments:
te**Updated**
So let's see where everyone stands on when DC Metro area median house price will rebound.
What's the DC Metro Area?
Per wikipedia
http://en.wikipedia.org
/wiki/Washington_Metropolitan_Area
(approx 30 square miles around DC)
What's a rebound? 2 Quarters of postive growth in the Median DC Metro Home Price.
So pick the quarter and just give a brief statement as to why.
I'll gather all the info from this post and put it on a web site.
Prices will be taken from National Assoc. of Realtors web site.
Dc Metro 2007 Quarter Recap:
I - 427.5 k
II - 455.3 k
III - 437.6 k
IV - 400.l k
2008 Q1 results will be up on May 13 (I'm expecting 385k)
Current Picks
Steve - 2009 QIV
Doug - 2013 QIII
joel and sonia - 2009 QIV
wannabuy - 2010 QIII
William - 2009 QIV
tedk - 2010 QIII
gt - 2010 QIII
one of my "favorite" buildings in nova: 3101 n hampton in alexandria:
take a look at the range of sale prices in this building. large 2-bedroom+den condos go from 350k to 520k. i wonder if any of the original 2005 buyers will avoid foreclosure.
On Craigslist:
"This home is perfect for a handy man that can buy it, fix it, and enjoy it or sell it. Property values in Warrenton are increasing at a steady rate, so this is a steel!"
harriet,
i knew quite a few of IT guys from india who did real estate on the side, they were smart enough to unload their investment properties in 2005. this person waiting for the village idiot probably is a tester-for-life.
steve,
You missed mine. But I probably had a slightly different criteria. Based on these terms, my prediction:
2012 QIII will be the second quarter with price growth.
A healthy decline in Dupont Circle:
1754 CORCORAN ST NW #48B
WASHINGTON DC 20009
List price: $222,500
Prior sale: $266,287 7/03/07
List date: 4/29/08
-16.4%
Interesting article in today's news (link below), predicting a 50 percent increase in traffic congestion in the Washington area in the next 25-30 years. The effects of traffic are already being felt in local resl estate prices -- PWC and Loudon, particularly, suffering steep drops, while areas in Alexandria and Arlington near Metro stations (particularly Arlington!) aren't suffering at all. Indeed, in 22207 neighborhoods near Metro in Arlington, prices are up. I was at an open house in Waverly Hills last Sunday (just checking out what my neighbors' houses are like) and the realtor had run out of literature to hand out!
http://www.examiner.com/a-1367238~Traffic_congestion_in_area_seen_rising_50_percent_in_25_30_years.html
steve- since you're using NAR's median measure, then i'm guessing Q3 '10. C-S index of similar-unit sales will show a median rebound around 2015.
washington think tank says end of 2008.
Disappearing now: $6 trillion in housing wealth
http://latimesblogs.latimes.com/laland/2008/04/disappearing-no.html
"Repeating again: The CPER says prices are falling so rapidly that the bubble will be gone by the end of 2008, but the loss of housing wealth will be massive."
http://www.msnbc.msn.com/id/24359826/
more than double:
"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."
Pennsylvania was a notable standout in the latest foreclosure data. The number of homes in the state to receive a foreclosure-related filing plunged 24.4 percent from a year earlier.
Sharga credited the decline to the state’s foreclosure relief measures, noting that cities such as Philadelphia put in place a moratorium on all foreclosure auctions for April and implemented other measures aimed at helping slow foreclosures.
hahaha why not just let them tack these months onto the end of the payment with interest? give them some free months to catch up and start paying??
“What would normally alleviate the foreclosure situation in a normal market is people starting to buy properties again,” said Rick Sharga, RealtyTrac’s vice president of marketing.
However, the unavailability of loans for people without perfect credit and a significant down payment is slowing the process, he said.
listening to people here you think the money was still easy to come by! hahahaah dream on!
Steve-
I think I mentioned both Q4 2009 and Q1 2010 in my previous post, but I'd like to amend my pick to be solid on Q1 2010 if it's not a problem.
My guess, DC will rebound in First Quarter of 2012.
Fairfax County - SOLD
sales
517 merlins ln, herndon
previous sale 3/30/2006 569,000
sold 4/10/2008 315,000(-44.6%)
1115 bicksler dr, herndon
previous sale 479,000 5/11/2006
sold 4/4/2008 290,426 (-39.4%)
2410 ripllemead ct, herndon
previous sale 9/13/2005 750,000
sold 4/12/2008 575,000 (-23.3%)
12404 melmark ct, reston,va
previous sale 8/3/3004 420,000
sold 4/14/2008 420,000 (0%)
2242 cocquina ct, reston,va
previous sale 9/29/2005 421,000
sold 4/17/08 249,900 (-40.6%)
1249 woodbrook ct reston,va
previous sale 7/24/2006 660,000
sold 4/16/2008 623,000 (-5.65)
710 hemlock, herndon
10/19/2004 314,900
4/25/2008 319,587(+1.4%)
13337 hungerford pl , herndon
6/17/2005 343,500
4/21/2008 215,000 (-37.3%)
2349 stone fence, herndon
7/7/2006 600,000
4/7/2008 436,000 (-27.3%)
13012 park crescent , herndon
8/30/2004 450,000
4/28/2008 366,000 (-18.6%)
2211 lofty heights,reston
6/8/2006 380,000
4/9/2008 199,600(-47.3%)
1607 greenbriar ct, reston
12/15/2005 580,000
4/24/2008 618,500 (+6.5%)
11534 links dr , reston
1/7/2005 369,000
4/14/2008 409,000 (+10.8%)
Tom @ 1:28PM:
"[A]reas in Alexandria and Arlington near Metro stations (particularly Arlington!) aren't suffering at all. Indeed, in 22207 neighborhoods near Metro in Arlington, prices are up."
There are lovely neighborhoods in 22207. With that said, however, please note that, according to MRIS, sales in 22207 for the first three months of 2007 were 106, while sales for the first three months of 2008 were 61. While prices of completed sales are not decreasing, asking prices are not enticing as many buyers as before. If you've followed the comments here, you know full well about the stickiness of real estate prices. Decreased sales volume is the first sign of trouble; decreased prices follow.
I'm baffled by the notion advanced by some here that there is no substitution effect in real estate. It's as though one conceptualizes a buyer that will only buy in zip code XXXXX at any price regardless of alternatives, like a hedge fund manager who can't live outside of Gramercy Park. Yes, a house near the Metro is great (I own less than 1 mi. from Braddock Rd. Metro), but it's only one factor that buyers consider. Price, yes price, is another factor. And if prices fall enough in adjoining areas, marginal buyers will bolt from 22207.
Term-X: 22207 has another trait of particular interest. Almost all SFH are 4+ BR. That makes it difficult to track median prices in a meaningful way. Median sales price can actually rise while prices, controlling for the houses' attributes, are actually falling.
As you said, the best indicator may be inventory, which has risen considerably in that zip (and all others I follow) in the past year.
Harriet
You may not believe this, but I live in Warrenton and prices have only dropped dramatically on the McMansions built by the national homebuilders. Realy nice, unique properties either in the historic district or in very desirable horse farm areas really haven't come down much--I know because I am looking to buy one of those. Warrenton is an extremely desirable place to live-as long as you don't have to travel on Route 66 to go to work!
Terminator X said...
"I'm baffled by the notion advanced by some here that there is no substitution effect in real estate. It's as though one conceptualizes a buyer that will only buy in zip code XXXXX at any price regardless of alternatives"
Terminator X - I advanced a theory on this the other day. I asked people to poke holes in it as I was making it up as I went along (thus far no one has). Judging by your comment I think you are very in tune with this concept so I welcome to hear your comments (see below):
"I think the difference between Leroy and FD is not the substitution effect, but the severity of a drop you must see for it to motivate people.
Case in point, an urbanite on another blog posted his experience driving through PWC with some of his city dwelling friends. They came across a new McMansion development - monolithic KB homes in the "Low 400s", with the only hope of retail being some strip mall filled with usual suspect chain stores.
The question was asked of all of them, how cheap would these places have to go for you to sell your house and move there? For like 6 of 8 of them, the answer was $0! Question then was, same house but in Fairfax? A few would pay like 300K, but for a majority the answer was like 50-100K.
For the majority who would not pay more, the reasons were all over the place (1) dont want the long commute (2) like walkable communities (3) will not live in soulless McMansion dine in McCulture chain restaurants, (4) environmentally insensitive to live in a big house, etc, etc. The point is, for these people, the substitution effect would have to be MASSIVE to motivate them.
This seems nonsensical to many suburbanites whose primary concerns are enough space for the family, a yard for the kids, etc. For them, it makes a ton of sense to move 10 minutes further out to live in a similar house, similar way of life, similar opportunities for their kids, etc. Conversely, for them, the prospect of living in a condo near the orange line has little to no value.
Now if this is correct, it could have serious ramifications for the substitution effect. For many urbanites (not all but many), there are very, very few places the would consider living. For them, 10 minutes further out may not really be an option.
By contrast, for many suburbanites (not all but many) there are a number of decent substitutable housing arrangements 10 minutes further out, further north, in another county, etc. Thus for them, the number of substitutes, and therefore the substition effect, is greater.
I pretty much came up with this as I was typing so feel free to poke holes in this or point out things I am missing. However, at first glance, this might explain alot of the difference in attitutdes and prices we are seeing."
I should mention too that I live in Old Town Alexandria and an fiercely partisan to the type of lifestyle a compact walkable area offers. Therefore for me, the substitution effect would dictate neighborhood preferences as follows (2) Del Ray (3) DC (4) Arlington (5) San Francisco (6) London (7) Dubrovnik.
Notice how few alternatives there are for me around here before I would be willing to change jobs and move thousands of miles to get a comparable "living experience" if you will. I recognize I am probably a bit extreme but this attitude amongst certain segments of our population may be more common than you think.
CRT @ 11:25 PM:
"Now if this is correct, it could have serious ramifications for the substitution effect. For many urbanites (not all but many), there are very, very few places the would consider living. For them, 10 minutes further out may not really be an option."
Thanks for your reply. First, every person has a price, and, if prices "10 minutes further out" drop sufficiently, buying there is an option for the marginal buyers who actually set the price of real estate. It is when a critical mass of marginal buyers bail on the "hot" area for a cheaper substitution that the hot area falls in price.
Second, there is no absolute dichotomy between either the urban oasis and exurban wasteland. There are in-between gray areas, such as portions of Fairfax County. I wouldn't live in Dale City unless it was really cheap, but I'd gladly sell my Del Ray house for a place in a good school district in Fairfax County if I saw a good deal. In this regard, look at the data that Harriet has been posting here. The correction is moving in from PWC to Fairfax County.
Lastly, consider that housing costs are but one of many living expenses. A cheaper house in a neighborhood near the hot area may permit you to put more towards retirement, or college for your children, or for health care, or for nicer vacations. You get my drift. The marginal buyer will compare the 4/2 bungalow listed for $800K in the hot area with the $450K 4/2 colonial 10 minutes away, and then he or she will do the math. Likewise, the marginal buyer for the $450K colonial will compare it the $300K rambler another 10 minutes further out. Thus, the correction creeps in. This isn't some novel theory.
So many of your on here hate Realtors, well I know how you feel. I hate my girlfriend's Financial Advisor. You can read about it here:
http://tinyurl.com/48kxnp
Love to get your comments, including how you hate Realtors, if you feel like venting.
Ok... I have to ask:
"2) Del Ray (3) DC (4) Arlington (5) San Francisco (6) London (7) Dubrovnik."
How the heck did Dubrovnik get on that list?
I have been there, it is a lovely town... but it is a very small place with as far as I can tell only one industry. (tourism)
Why put Dubrovnik on the list but not any number of a 100+ other small European towns?
"I advanced a theory on this the other day. I asked people to poke holes in it as I was making it up as I went along (thus far no one has)."
I think sufficient holes were poked in it. I don't think it is a bad theory exactly, but it isn't really a new one either.
You could say the same thing about people that simply must own horses and won't live anywhere they can't.
Or that must live within sight of the beach, or ...
There is still a substitution effect and incomes are finite. When the price is right people will compromise. (As a group that is, there is nothing that says a particular individual has to.)
Too true, Frank!
There is still a substitution effect and incomes are finite. When the price is right people will compromise. (As a group that is, there is nothing that says a particular individual has to.)
I watching this unfold. My best friend's wife wants to buy in the 'West Side' of LA. At first it was Pacific Palisades or nothing (they should be able to afford there, but currently cannot). So they move out... and out... until they realized the "shacks" they looked at in "the Valley" (30 to 40 minutes out) were their only option.
When she saw the shacks were dropping in value ($75k to $100k for the homes of interest)... they're going to rent where they want to live. Like most cities (not NYC, yet), there is a surplus of available rental property.
The substitution effect is well documented in real estate. Its why the old (pre-bubble) house buying books warn not to buy on 'snob hill' as over 20 years, snob-hill's neighbors will have a much higher ROI. I do not have an online link, but I do have them in my bookshelf.
I should mention too that I live in Old Town Alexandria and an fiercely partisan to the type of lifestyle a compact walkable area offers
Great! Live where you wish how you wish. I love that form of urban planning. Stuttgart Germany has done the best example. But I have a large number of people who work for me who will not buy without room for shrubs between neighbors ('good fences make good neighbors'). That is why there is a market for homes. Markets have manias...
Got Popcorn?
Neil
bay400,
Fauquier has a lot of properties sitting hopelessly high-priced. But there are indeed foreclosures that are leading the market (i.e., buyers are waiting for those).
I saw a new colonial with outbuildings on 10 acres go for $400K about a month ago in Marshall. Three years ago the starting price would have been around 800K. That was a foreclosure and it went under contract in just a few days for its asking price (no bidding war).
terminator, I agree. Notice also that for houses throughout Arlington with prices >$1 million, exactly 4 were sold in February and 10 were sold in March (according to the NVAR monthly reports). In Feb., 105 houses in that range remained on the market (106 in March) (i.e., 10-20 months of inventory). In many cases, sellers' asking prices are still "sticky" per franklymls and well above Arl. assessed value for last year. Now, the April figures may change dramatically, but I suspect sellers are still holding out hope for spring to bring out those buyers willing and able to buy these houses. Will it?
CRT,
I see two potential holes:
1. Of the entire population of people looking for homes, I suspect their needs fall into many different categories. The category you fall into values the "walkable" urban style community. However, is the opposite true? Does the walkable urban style community *only* attract buyers with that predominant buying criteria? I would hazard a guess and say no but I don't really know.
2. It seems from what you write that you are referring to individuals that already own. When it comes to first time buyers, a lifestyle that was established while renting (or first moving to an area) is not necessarily the lifestyle sought in purchasing. Therefore, I would postulate that first time buyers are much more susceptible to the substitution effect.
On another note, 22207 is often thrown around as a nice metro accessible close in neighborhood. While I agree it is nice, convenient, close in area only small portions of it are within a mile of either the Ballston or EFC Metro stops. Most of the daily metro riders I know consider "metro accessible" to be a half mile or less. Sure some are willing to walk further but I'm guessing if you plotted a bell curve of the average distance people walked to use metro on a daily basis, the peak would likely be under a half a mile. I wonder if metro has this statistic anywhere?
I shall look.
My $0.02
"Notice also that for houses throughout Arlington with prices >$1 million, exactly 4 were sold in February and 10 were sold in March (according to the NVAR monthly reports). In Feb., 105 houses in that range remained on the market (106 in March) (i.e., 10-20 months of inventory)."
I have seen almost the exact same thing in Mclean. There are numerous extremely expensive houses sitting on the market and virtually none of them are selling.
The market is still in the buyer-seller standoff phase. The high end sellers will generally be capable of holding out longer than lower end sellers, but in the end the buyers set the prices. If these houses aren't selling prices will ultimately come down.
In Mclean (22101, 22102) there were 11 houses over $1 million sold with 242 on the market.(22 months inventory)
TermX & CRT:
Your discussion on the substitution subject was brilliant. It crystalized thoughts that I've been having for the last couple of years.
As a prospective buyer, Im a test case for the subsititution idea: I had been planning on buying a metro-accessible 2bdrm / 2bath condo in Arlington or Alexandria. But I recently found that for about the same price, I could get a McMansion in Leesburg or Ashburn or Manassas or Woodbridge, etc,etc.
So I'm re-considering. Why pay $500/sq ft when I can pay $150/sq ft?
The NAR line that all markets are micro and hyper-local is so obviously a lie. But an Arlington condo is not an equal substitute for a Leesburg McMansion either. The truth is somewhere in between.
So, a practical question which arises from this discussion:
Will the continuing mess in the ex-urbs/suburbs take a further bite out of prices in urban areas?
My guess is yes, but not a very big bite. I think that if Arlington or Alexandria prices were going to drop off the cliff with PWC/Loudon, they would have already.
To all - thanks for your comments, I sometimes like to think out loud and liven up the discussion and I thank you all for humoring me. I would like to think I am on to something, but what the hell do I know.
Terminator X - respectfully I think you are missing my point. Note I didnt say there was anything absolute about it but I think it exists to varying degrees. For example if for people in McLean moving 10 minutes further out meant the biggest "lifestyle" change would be a longer commute maybe 4 in 10 would do it. By contrast, if for people in Clarendon moving 10 mintues further out meant you would "have" to get in the car to do anything (or even buy a second car) maybe only 3 or 2 in 10 would do it. Its not just a car/non car thing, but it is one of the factors that makes up my point.
Secondly, when it came to prices, as the rambler 10 minutes from both Clarendon and McLean (humor me on that) fell, I would guess it would be much less likely to hit the Clarendon people's market clearing price before it was already snapped up by the McLean crowd, increasing the inventory in McLean, and so forth.
Leroy - very good point about the horse people particularly. In Loudon I would be curious how middleburg is holding up in relation to sterling. You are correct it isnt exactly urban/suburban as much as it is lifestyle change. Thanks.
Oh and as to Dubrovnik, its a personal favorite of mine and was put there mostly for effect. Push comes to shove, it would not be #7 on the list, but it would be there somewhere. Incidentally, if I may, what the heck do you do that allows you so much international travel?
Novawatcher - both excellent points especially #2. I havent given any thought to 1st time buyers. I dont know what I will do with that nugget, but I will certainly try and figure it out.
" But an Arlington condo is not an equal substitute for a Leesburg McMansion either. The truth is somewhere in between."
Of course, but it is important to remember that we aren't just talking about comparisons between Arlington and Leesburgh, it is going to be relatively rare that potential buyers will be making that comparison.
A far more common comparison will be Arlington to Vienna or Falls Church... other areas in the same general vicinity that are also Metro accessable. These areas in turn compete with other areas farther out.
In the end prices at the edge of the metro area will ultimately affect prices throughout the city, through intermediaries if not directly. That is one reason why it is taking so long for the bust to move through the region. It is like dominos in slow motion.
I don't think you can make any kind of rule about substitution because there are too many variables. Personally, my biggest factors are location and style of house. I prefer to commute an hour each way just so I don't have to be too close to the city and so I can live near woodlands and the river. Since I don't want a huge townhouse or McMansion or to pay condo fees, I'll buy a small single family house that's a bit older and provbably remodel. And since prices out my way (PWC) are still falling and a lot of the neighborhoods with small single family homes are transitioning through the foreclosure process, I'm going to keep renting until the market stabilizes.
bay400 said...
You may not believe this, but I live in Warrenton and prices have only dropped dramatically on the McMansions built by the national homebuilders. Realy nice, unique properties either in the historic district or in very desirable horse farm areas really haven't come down much--Warrenton is an extremely desirable place to live-as long as you don't have to travel on Route 66 to go to work!
Bay 400 - I missed your post earlier, but I would believe this quite a bit especially after Leroy pointed out the same phenomenon I am thinking about can happen outside the urban core (in horse country). My guess is historic Middleburg, Upperville, The Plains, etc. and other unique areas
out there have held up relatively well too.
McMansions out there are completely fungible goods. Even wose, they are much more likely to appeal to commuters - the same group who is perhaps the most price sensitive and are now getting hammered by gas prices. By contrast, the unique areas out there have a dedicated following and relatively fewer substitute goods to consider. Because the substitution effect woudl be less for them, my guess is they too would do relatively better than comparable McMansions neighborhoods even very close by.
crt . . . if I bought I would buy in the Warrenton area . . . it is fascinating the price structure there right now. For some reason prices in Warrenton have not fallen too much so far. I'm positive they will though.
You can find much better housing for a much better price in Bealton and Remington, which are only 15-20 min. away. The only downsides that I know to those places are the water.
Warrenton is a nice place to live, but I don't think there is anything that justifies the high prices there.
Frank @ !:44AM:
I don't hate realtors; some are very good at what they do. The negative reactions that you see here are in response to press articles involving realtors. Such articles tend to report the NAR's or an individual realtor's views as though they were impartial observers of the local market. We know that's not the case.
In terms of your girlfriend's situation, she should have a "fee only" financial adviser who is paid on the basis of time worked, not upon commissions. EFTs are indeed a wonderful investment; you get all the advantages of a mutual fund with lower fees, deferred tax on the fund's earnings, and potential capital gains treatment for appreciation of the EFT share. Your girlfriend should consider diversifying into small cap and international stock EFTs instead of putting everything into SP 500.
That should be "ETF". Duh!
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