"May 13 (Bloomberg) -- Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its eighth consecutive quarterly decline in revenue as demand for new homes tumbled."
"TOL said home-building revenue in the quarter ended April 30 slipped 30% from the year-earlier period to $817.9 million. Net contracts for new homes, after cancellations, dropped 44% to 929 homes.
'The just-completed spring selling season was quite weak in most markets as buyers remained on the sidelines,' said Robert Toll, chief executive, in a statement. He said buyers are afraid to buy a home, only to see it fall in value."
Tuesday, May 13, 2008
Toll Reports
Posted by Harriet at 9:23 AM
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77 comments:
Oh darn Bob, this makes 3 in a row.
So much for the Spring Bounce ('06,'07 & now '08).
Let's also check back (about mid summer I'd say) & see just how many of those purchasers can actually GET a loan & close on your houses currently under construction.
Housing Prices Tumble in Two-Thirds of U.S. Cities (Update3)
By Kathleen M. Howley
May 13 (Bloomberg) -- The median price for a single-family home in the U.S. dropped 7.7 percent in the first quarter, the biggest decline in at least 29 years, as values tumbled in two- thirds of U.S. cities, the National Association of Realtors said.
The median, the point at which half the homes sold for more and half for less, was $196,300, down from $212,600 a year ago, the largest decline in records going back to 1979. Sales of single-family houses and condominiums fell 22 percent to 4.95 million at an annualized pace, the slowest in a decade, the Chicago-based group said in separate reports today.
Home prices are falling as foreclosed properties reduce the value of nearby real estate, said Lawrence Yun, the realtor group's chief economist. U.S. foreclosure filings more than doubled in the first quarter from a year earlier, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said in a study released April 29.
. . . . .
The Biggest Losers
Lansing, Michigan, had a 27 percent drop in prices, and San Diego tumbled 23 percent, according to the report.
Home sales fell in 46 states and the District of Columbia in the quarter. Three states had increases and one, New Hampshire, did not have data available, the trade group said.
Maryland had the biggest U.S. sales decline, at 39 percent. The District of Columbia tumbled 35 percent, Utah fell 34 percent, and California dropped 33 percent, according to the report.
http://tinyurl.com/69ygv9
zerodown,
MD and DC got intoxicated with real estate later than NoVA. So the stats are not surprising. Significant price drops in MD and DC will follow slowly.
There will be no price drops in DC/MD, because cops and metro workers working overtime will prop up the market...
"Maryland had the biggest U.S. sales decline, at 39 percent. The District of Columbia tumbled 35 percent, Utah fell 34 percent, and California dropped 33 percent, according to the report."
Don't worry, I have it on good authority that DC isn't feeling the bust.
lance,
as you probably understand nobody is feeling the bust if he had enough sense to buy a propery not to flip it, but to live in it long-term and finance it in old-fashioned way with some reasonable amount of equity.
if somebody gambled and his loss can be to my benefit --- i'll take it with a happy face. by the way, when i lose, i keep the happy face as well.
iraqi death comment is very nice, i think we can start witch-hunting commission here, it will be fun.
Lance, you do not rate to casually throw the deaths in Iraq into your little rant, as a way to make a rhetorical flourish. The fact that you would feel comfortable doing so disgusts me. I don't often get riled up over random blog comments on the Internet, but one of the many things that is so wrong with the way our country is dealing with the war in Iraq is the fact that 99.99% of its citizens are completely OBLIVIOUS to the ACTUAL pain and suffering being endured by members of the armed forces. Most of America goes on its merry way, say, blogging endlessly about their real estate ventures, but I have to draw the line at what YOU consider a casual, throw-away comment directed at your internet foes.
(And for the record, while I have appreciated the very kind comments others have made on this blog in support of my family's military connections, please, we have sacrificed so little compared to others, it is embarassing to read anything like that directed at us.)
Please, stick to discussions, however heated, about real estate. Do not disgrace the memories of our fallen men and women by using them to take a cheap shot in an almost mindless debate.
Tabitha,
Please don't pull this "holier than thou" stuff on me. I have family much more directly involved in Iraq than you do ... and I myself have done much work in support of our military. The plain truth is that BHs' glee (and hopes to "pick up something for nothing) is premised on wishing real harm on others ... and THAT is the point I was making.
But it sounds like you didn't get it. Why is it you can't understand that the gleeful "let there be blood in the streets" comments by Leroy and others of his ilk are more than mean-spirited ... If they get what they are gleefully hoping for, real people will experience real hurt .... and through no fault of their own. And no, I'm not talking about me ... I'm fine. I'm talking about people who wanted nothing more than a place to call home for they and their families ... And now we have "vultures" wishing bad on them so that they can buy their homes for cheap. It's as if they don't realize (or even care) that these are real people. In what other circumstance (other than this bubblemania) have you seen people openly wishing bad on others in the expectation that they can profit off of others losses. Do you honestly think that is right? It's as if BHs ... yourself included ... have forgotten that there are real people and real families in those homes you are wishing get foreclosed.
Lance, you exposed yourself again. Someone with a true appreciation for the military would not make cheap comments in the first place, and would not feel the defensive need to suggest military connections to cover them up afterwards.
I ask you to back up your accusation that I have gloried in the miseries of others who have lost their homes with a single hard example. Others have asked you to do similar things after your attacks in the past, and you have been unable to do so. I have expressed indignation over the shameful exploitation of hapless buyers many a time, especially those who apparently were targeted due to their ethnic backgrounds. There were many wrongdoers the past several years...it really seemed like everyone lost their heads simultaneously. But there were many, many careful predators out there, and they caused incalculable suffering. There is no justice in this world.
I am so sorry that you are unable to see how lost you are...but then again, your existence actually serves as an example of how free our country really is...and where there's life, there's hope...
lance said "and hopes to "pick up something for nothing"
too funny. cause that is what all BH's want!!! I guess you didn't have any glee when you made a little money on your condo. You probably were sad that the poor people buying it had to give you more money then they should. After all, from your point of view, if house prices go up, it capitalism, if they go down, people just want something for nothing. Privatize the gain socialize the risk. People like you make me sick. Plus, I am a vet, and I don't get happy when my fellow brothers get hurt or injured in anyway. However, I am happy when someone gambled on a house they couldnt afford and are loosing big. There is a big difference, and if you cant see it, well, you just never will.
Oh, and on lance.
30 yr IO only loan on a 900k row house, first 10 are IO, then the monthly mortgage payment jumps huge as the loan converts to a 20yr fixed on 900k!!!! Ouch. Plus, as of a year ago he was under water 100k from what he paid.
Also, he is over 50. So, his get rich on real estate dreams and retire into the sunset plan is fading fast..
Just so you understand his motivations.
I know its hard Tabitha, it reminds me of when I balked at a housing price and was told, "This is what they are going to retire on!". Like I really care when the people I buy a house from are going to to retire.
The mentality that sellers have that somehow they are owed high prices just because we do a walk thru. Or in Lances case owed respect, just because we want to talk about housing prices and he thinks he has more rights.
Its easier to ignore him, or call him a twit whenever he posts.
Speaking of Arlington:
Zoning Plan Raises Divisive Questions
At issue is an effort by housing advocates to amend Arlington's zoning ordinance to allow homeowners in single-family neighborhoods to build rental units on their properties. The additional housing would be limited to 750 square feet and permitted only on properties occupied by their owners and would presumably rent for less than stand-alone housing.
http://tinyurl.com/5cs95d
Lance said...
“Please don't pull this "holier than thou" stuff on me. I have family much more directly involved in Iraq than you do ...”
Of course you do Lance. You’ve made it quite clear that you’ll never be one-upped upon on a housing blog.
tabitha: so wrong with the way our country is dealing with the war in Iraq is the fact that 99.99% of its citizens
I've wondered about that for a while so I've started pointing out to friends how little coverage the Washington Post gives to the two wars.
It should be on the front page, above the fold, every day.
I point out what does make the front page. Some days, it is embarrassing.
Can't really blame the general public when neither Afghanistan nor the Iraq wars exists on the front page of the Post.
What's on the front page? Look for yourself.
When I looked it was:
China Quake
Suicides in the deportation system
Attitudes about the economy
Yesterday's rain
Obama and Racism
VA raising taxes for roads.
What war?
the image is even more bothersome.
tabitha:
I have the greatest respect and admiration for the men and women who serve in our armed forces.
JOhn said...
I know its hard Tabitha, it reminds me of when I balked at a housing price and was told, "This is what they are going to retire on!". Like I really care when the people I buy a house from are going to to retire.
That is the mentality that is unraveling the market. Why do slower sales matter? Simple, you are more likely to see someone who has plenty of equity 'discount' down to the new market value. A home isn't a retirement investment. Its the roof you might have covering you during the silver years.
Nothing wrong with wanting a home at a fair affordable price. But some people won't look at the standard of living of young families. Why should they be in as much debt as they are? We'll be so much better off as a society as home prices correct. (Long term)
Oh well. The market is correcting the problem of housing affordability. It will be interesting to see what the 'pending to closing' conversion rate is later this year. Already its pretty poor.
Thankfully my best friend was able to sell. Funny thing... After looking at homes, his wife has decided its ok for them to do a 'short term rental.' As long as so much is available to rent, there isn't the push to buy anymore. I bet they'll extend their lease.
Got Popcorn?
Neil
"I am so sorry that you are unable to see how lost you are..."
WTF kind of self righteous BS is this? Only God can judge people in this manner, go to church once a while please! Or if you do go, actually listen to what is being said!
wow . . .
The housing bust is coming closer and closer. We aren't done yet.
Let's see Doug, kh, and lance have all gotten more vehement, obnoxious, and out-of-control in their denial.
The bust will be over when doug, kh, & lance slowly but surely sulk away b/c their are about to lose their homes.
So Doug . . . worried about losing your house yet to a foreclosure or to all the money you sucked out of your house to pay for a monster SUV that is now sucking tons of gas?
"No, DC isn't feeling a "bust" ... it it feeling nothing more than "a return to normal"."
Yeah, because 35% below decade lows is "normal"...
As for the rest of that sad post, I think the others here handled that as well as it can be handled. That was pathetic lance.
"The mentality that sellers have that somehow they are owed high prices just because we do a walk thru. Or in Lances case owed respect, just because we want to talk about housing prices and he thinks he has more rights."
Obviously he is entitled to continued bubble pricing. Who can possibly suggest anything else?
Anyone who questions his right to get rich off his home is obviously just wishing for his misery.
"Nothing wrong with wanting a home at a fair affordable price. But some people won't look at the standard of living of young families. Why should they be in as much debt as they are? We'll be so much better off as a society as home prices correct. (Long term)"
Obviously all those young families should have had the good sense to buy 10-15 years ago!
They are nothing but slackers!
They should have bought in college, if not high school.
"The bust will be over when doug, kh, & lance slowly but surely sulk away b/c their are about to lose their homes."
but that goes too far...
There any need to play into lance's nutty world where anyone who doesn't buy into the real estate cult is out to get him personally.
Lance et. al really should stick to the inner-beltway - D.C. blogs, and yes, they exist.
After all, this is a "Northern Virginia RE blog", NOT a D.C. blog.
Let us Northern Va BH's post our observations here!
Wannabuy said...
"It will be interesting to see what the 'pending to closing' conversion rate is later this year. Already its pretty poor."
Speaking of which, I noted in the "decade of sales" post that PWC had its 2nd straignt month of YOY sales increases, and FFX and LOU were now within striking distance of beating YOY sales as well (ARL & ALEX are still lagging).
Out of curiosity, I checked "contracts & contingents" and compared them to the same point last year, and here is what I found:
Contracts & Contingents
Alexandria
04/07 – 225
04/08 – 224
Arlington
04/07 – 288
04/08 – 245
Fairfax
04/07 – 1400
04/08 – 1650
Loudon
04/07 – 459
04/08 – 668
PWC
04/07 – 530
04/08 - 1220
I think its safe to say, PWC will have 3 months of YOY sales increases in May. Also, its not unreasonable to say that Lou & FFX very well could beat YOY sales in May as well. Anyone else find this interesting?
Doug said:
"WTF kind of self righteous BS is this? Only God can judge people in this manner, go to church once a while please! Or if you do go, actually listen to what is being said!"
Hey Doug. You are right on. What's most interesting is that many of these BHs are self-righteous out of self-interest. They'd be doing themselves a lot more good if they learned to be a little less self-righteous and a lot more attentive to what is being said on both sides of the issue. You'll note that most of them are still here "waiting". You'd think that would jog something in them to realize "Hey, this wait for the Bubble Bursting thing ... may not be all it's been made out to be ..."
No ... like Va_Investor once expressed, believing in the Bubble is an article of faith. You just can't question it ...
"I think its safe to say, PWC will have 3 months of YOY sales increases in May. Also, its not unreasonable to say that Lou & FFX very well could beat YOY sales in May as well. Anyone else find this interesting?"
Neil-
This increase in Sales are the REO's & Foreclosures that Spring knife catchers are purchasing ( that is, if they can actually get a loan & close the deal)
- not intersting, just predictable !
zero down quoted:
"May 13 (Bloomberg) -- The median price for a single-family home in the U.S. dropped 7.7 percent in the first quarter, the biggest decline in at least 29 years,"
That's pretty telling. 7.7 percent is the biggest decline in 29 years ... Yet when 7.7 percent is positive, it certainly isn't the biggest increase in 29 years ... no, it's just "normal". hmmm ... so, we had increases of something like 20% or more per year for at least 4 years there mid-decade ... and now all we get is a 7.7% decline to bring us back in balance? And we'll probably need to wait another 29 years to get an additional 7.7% decline? ... hmmm ... sounds to me like that bubble isn't bursting anytime soon ...
Lance said:
"You'd think that would jog something in them to realize "Hey, this wait for the Bubble Bursting thing ... may not be all it's been made out to be ..."
No ... like Va_Investor once expressed, believing in the Bubble is an article of faith. You just can't question it ..."
Or they might think that:
1 ) There was a bubble. I only need look at FL/CA and locally PWC to know that. Don't need faith for that.
2 ) It isn't over yet. Look at the reset charts and the destruction comes closer each month. Again, facts. CA usually sets the trend for the country two years ahead. Could be nuts here in 2010.
3 ) I don't need to buy a place, and when I buy one I want a reasonable (to me) price so I can afford to wait. This might be faith-based, but looking at trends I'd have to say the odds are in my favor. You may differ.
Actually, Lance, I think the person with faith is *you*. You've taken some serious risk IMHO with a 10-year IO if that's the case. Hope it works out.
joel and sonia said:
"Actually, Lance, I think the person with faith is *you*. You've taken some serious risk IMHO with a 10-year IO if that's the case. Hope it works out."
Thanks ... it already has. I've been enjoying my home now for over 3 years. Financially all is fine too. It's today valued at more than I paid for it, and I also won't have to worry about stopping redirecting my monthly investment dollars to the mortgage in year 10 ... as I'm already earning enough more now 3 years later to easily cover the difference.
Getting yourself into a good situation takes good planning ... Something I think you are doing from your posts. I even think your analysis of the trends (as stated in your last post) is reasonable. I just don't think that if you are looking at places that haven't yet fallen much in value, that that will happen. I agree it's a matter of opinion and the only thing I can offer to support mine is that what you're predicting to occur has never occured before. There have been plenty of times in the past where places such as PWC (or their equivalents in Calif.) and places such as inner-city transitional places have swung in value to the degree you're banking on ... But never has that occured in places already considered 'valuable' such as Arlington, Marin County (Calif.), Georgetown, etc.
And while you ARE doing your homework and legwork ... I think you're still giving blind faith to the bubble theory that wild fluctuations in price can occur in the kinds of places where they have never occured before. But, perhaps "it's different this time". We'll have to wait and see. In the meantime I am happy enjoying my home. I wish you and yours the same.
Spunky said...
"This increase in Sales are the REO's & Foreclosures that Spring knife catchers are purchasing ( that is, if they can actually get a loan & close the deal)
- not intersting, just predictable !"
Spunky - no disrespect intended here, but what was "predictable" is that PWC will have less sales YOY. This was a trend that has not been broken once since sometime in 2004. After 40 consecutive months of less YOY sales, PWC has now posted 2 straight months of YOY increases and very likely to post 3 months in May. Why the sudden change in buyer sentiment?
Also, had this just been PWC I may be more inclined to agree with you about them being knifecatchers. PWC has been overrun with fraud & flipping that made REO a commonly understood term. However, now we are talking about Loudon AND possibly Fairfax as well. Correct me if I am wrong, but it seems to me that the amount of fraud & speculation that went on in FFX was only a fraction of what went on in PWC. So again, what (if anything) is happening here to cause potential buyers to look at this area?
Perhaps my real question is, at what point is YOY sales increase(s) something we should take notice of?
crt,
The sales numbers you quote have to be looked at in conjunction with the Active Listings for any meaningful interpretation of trends.
Some points / questions?
1. So how is the Listings/Sales ratio doing for these counties?
2. Is there a correlation between that ratio and prices? if so, what does that say about the price trends?
3. What percentage of these sales numbers are heavily discounted bank-owned and foreclosure sales?
4. Are these numbers seasonally adjusted?
I don't think one can extract anything meaningful out of the monthly sales data you quote at this time. But if the sales activity persists by October/November, we can see if there is anything to it.
From WSJ column:
The National Association of Realtors on Tuesday released its long-awaited report on prices from the first quarter. The price drops were startling.
In many of the former hot spots, from Florida to Nevada to the Californian "Inland Empire," single-family home prices plunged by 20% to nearly 30% in a year.
Even more remarkable was how far prices had fallen just from the previous three months. In greater Las Vegas, for example, single-family home prices are down about 20% compared to the first quarter of 2007… and about 9% compared to last fall. In certain parts of California, the quarter-on-quarter declines are more than 10%. And there are similar pictures from Boston, Mass., to Tucson, Ariz., to, well, lots of places in Florida.
And this, ultimately, is good news. We know prices have to fall. The sooner it happens, the quicker the market can clear.
We may not be at that stage known on Wall Street as "capitulation," but there is more than a whiff of it in the air.
Far too many people in the real estate market have spent far too long insisting that denial is just a river in Egypt. They refused to accept there was a bubble on the way up, and refused to admit it even on the way back down. (There's a few still out there: Last week I got an angry email from a broker who blamed the whole slump on "the media".)
It is simply remarkable how slow this bubble has been to deflate. That, bluntly, is part of the problem.
In the Las Vegas area, for example, NAR data shows single home prices peaked in early 2006. Yet by the middle of last year, when everyone and their Aunt Sally already knew we were deep into the biggest housing bust since the Great Depression, prices had only been cut by around 4%.
No wonder sales volumes collapsed and the number of unsold homes skyrocketed.
You can imagine what fantasies the sellers were clinging to. "Well, two years ago this home was worth half a million bucks."
The problem: So what? It doesn't matter what prices were three or two years ago. We were in a bubble. Market psychologists call this "anchoring", because people anchor their expectations to the past, and it's a fallacy.
Just five years ago, the same home sold for $270,000 and 10 years ago just $200,000. Are those relevant anchor points too?
http://tinyurl.com/6oxjnw
"I agree it's a matter of opinion and the only thing I can offer to support mine is that what you're predicting to occur has never occured before."
This is about the most honest assessment of your knowledge/stance as I have ever seen you offer...
It is all "opinion" and no support with you. You state what you want to be true and can't support any of it.
As usual, your basic assumption is wrong.
What we are predicting HAS happened before. It just hasn't happened before in this particular city, just like a bubble of this magnitude has never happened before in this city.
We have been in uncharted territory for quite a while now, both in the record breaking run up during the bubble years and since then in the already record breaking bust.(Which is a long way from complete.)
When we were talking about the run up you claimed it was a "new paradigm."(because you liked the idea)
Now that the bust is unfolding... you say "it has never happened before" as if that somehow means it can't.
tedk said...
"Some points / questions?
1. So how is the Listings/Sales ratio doing for these counties?
2. Is there a correlation between that ratio and prices? if so, what does that say about the price trends?
3. What percentage of these sales numbers are heavily discounted bank-owned and foreclosure sales?
4. Are these numbers seasonally adjusted?"
Good questions Ted. I should have mentioned:
#1. with respect to listings/sales All 3 outer areas have improved MOM. PWC has gone one further and even improved YOY.
#2. I dont know - thoughts from anyone else?
#3. See my most recent response to Spunky. For PWC it is certainly alot, but is it so for FFX? I am asking I really dont know.
#4. If by "seasonally adjusted" you mean YOY the answer is yes. If you dont mean YOY, Im not sure I understand the question.
Leroy said:
"Now that the bust is unfolding... you say "it has never happened before" as if that somehow means it can't."
Again, I don't see that unfolding. All I see is the same old places (i.e., the "new" suburban and redevelopment areas) experiencing the same drastic price declines these types of places have experienced each and every time the real estate cycle has gone into the down cycle. Nothing new here.
Conversely, I see a lot of things happening in the world to support big price increases in valuable parts of the city of cities poised to benefit from the formation of a true global marketplace/production area.
Yeah, it'll seem like these same kind of places that went down in value in the past are going down way faster/arther this time, but that'll only be because they got dragged up way too high to begin with ... having benefited (temporarily) from the euphoria of the real rises being experienced by the real valuable places.
"The sales numbers you quote have to be looked at in conjunction with the Active Listings for any meaningful interpretation of trends. "
Ted, recall to my post from a couple of days ago - YOY inventory for NOVA as a whole is down from its 2006 peak, and should pass below 2007 inventory (YOY) soon. On a county by county level, 4 of the 5 are below their 2006 peak, and 2 of the 5 (Alex & Lou) are below their 2007 peak as well. The lone holdout is PWC. However, PWC has less inventory as of 5/9/08 than it had on 1/1/08 (that particularly I find shocking)!
CRT-
"However, now we are talking about Loudon AND possibly Fairfax as well."
From all that I have read/investigated, Loudoun is right behind PWC in all aspects of the slowdown/bubblebust - IMO people have been purchasing REO'S & foreclosures & GREATLY discounted re-sales this Spring.
Local Builders have had a decent Spring as well, but the Nationwide boys (Toll et al) have had another "bad" Spring Market.
Let me state : I AM NO ECONOMIST OR EXPERT.
But I have gone thru a RE "Cycle" before & remember how it plays out.
And it ain't pretty
"Perhaps my real question is, at what point is YOY
sales increase(s) something we should take notice of?"
They are most certainly noteworthy, and I mean right
now.
This signals that the market in PWC is exiting the
buyer/seller standoff stage and sellers are now
capitulating. Prices are still plummeting but sales
volume is climbing.
(Just like the article above states, sellers are
finally coming to terms with the fact that their house
isn't worth what it once was, and won't be worth that
much again any time in the foreseeable future.)
Rising volume does not mean that price drops are done.
It just means that seller mentalities have shifted
sufficiently to allow transactions to be made.
None of this should be any surprise really. We have
all known that the prices were the problem. At the
right price point the demand is there.
In the inner areas the demand isn't there, sales have
plummeted to decade lows. Volume will return when
sellers become more realistic.
As for Fairfax... it is hard to say what is taking
place there. I don't think we have enough data there
to make any strong assertions. Unlike PWC we haven't
seen an actual increase in sales volume. All we are
seeing in Fairfax is a YoY increase in pending sales.
Even that increase is somewhat suspect.
Broken down into Contracts and Contingents...
2007
Contracts: 919
Contingents: 481
2008
Contracts: 898
Contingents: 752
The growth from 1400 to 1650 was due to an increase in contingent contracts.(Actual contracts fell.) It is possible the increase in continents is due to contingents that aren't successfully transitioning to completed transactions. If large numbers of "buyers" are waiting on their other house to sell... but it isn't...
"On a county by county level, 4 of the 5 are below their 2006 peak, and 2 of the 5 (Alex & Lou) are below their 2007 peak as well."
Ted - what I meant to say was 4 of the 5 are below their 2006 YOY numbers and 2 of the 5 are also below their 2007 YOY numbers. Recall that for most areas from May until Oct, the YOY inventory was LESS in 2007 than it was in 2006. Thus the absolute peak for this area was likely summer 2006. This can be seen more clearly by looking at this graph.
http://www.recharts.com/nova/nova.html
"It is possible the increase in continents is due to contingents that aren't successfully transitioning to completed transactions. If large numbers of "buyers" are waiting on their other house to sell... "
Good point Leroy - that is something I had not noticed. I think the increase in contingents is not only "contingent on selling their other home" but also "contingent upon obtaining financing". Both those things together mean the # of contingents that will become contracts will certainly be less than last year.
At the same time however, it is interesting to note that prices are such that buyers are now starting to notice (i.e. they are trying to buy even if they cant due to financing or selling their other place).
Incidentally, I appreciate you and Ted K taking the time to give this some critical analysis. I encourage others to do so as well.
"Again, I don't see that unfolding."
Of course you don't lance, we all already know you are incapable of seeing anything you don't like. The bubble has been all over the news, all over the developed world. If at this point you still can't "see" it then the problem is not the availability of sufficient information.
To use a phrase I am sure you are familiar with from your IT work, the problem is between the monitor and the chair.
"All I see is the same old places (i.e., the "new" suburban and redevelopment areas) experiencing the same drastic price declines these types of places have experienced each and every time the real estate cycle has gone into the down cycle. Nothing new here."
Oh really? Let me guess... this ties back into your silly "90% of the area is stagnant or climbing" statement...
The large majority of the region has seen significant declines and we are a long way from done.
"Conversely, I see a lot of things happening in the world to support big price increases in valuable parts of the city of cities poised to benefit from the formation of a true global marketplace/production area."
Considering your demonstrated lack of knowledge about even the fundamentals of economics, let me just say that your ability to judge global economic trends is... suspect.
"Yeah, it'll seem like these same kind of places that went down in value in the past are going down way faster/arther this time, but that'll only be because they got dragged up way too high to begin with ... having benefited (temporarily) from the euphoria of the real rises being experienced by the real valuable places."
LOL, right right, let me guess... your house pulled up the whole region right?
You need to educate yourself. These drops don't simply "seem" like they are dropping faster/farther, they ARE, and they aren't done yet.
We have already seen the largest nationwide decline in prices since the Great Depression with a lot more to come and you are still sitting here trying to argue that this is business as usual.
Sometimes I can't tell if you are just trolling or if you really don't understand what is going on.
Leroy - to follow up, these were my comments from the other day that got lost in the minutae. If you look at FFX & Loudon sales on MRIS, you will note that in percentage terms they are getting closer and closer to YOY sales numbers.
"FAIRFAX & LOUDON. I think these are the 2 most interesting counties. We were all caught off guard a little when PWC started posting YOY sales increases. However, notice how Loudon & Fairfax are both within striking distance of their previous year's monthly sales.
Back in January, they were both at about 50-60% of prior YOY sales numbers. In Feb they improved to about 67-71% of prior YOY sales. In March, they improved again to 73-79% of prior YOY sales. Now they are at 90-94% of prior YOY sales numbers. If this continues, they should start seeing YOY improvement, perhaps as early as next month."
Question:
One day on one of the Bubble Meter posts, someone mentioned that "Robert" was actualy David J. ... That he was using this alias to post without being recognized that the blog owner. Anyone know if that is true?
thanks
"Back in January, they were both at about 50-60% of prior YOY sales numbers. In Feb they improved to about 67-71% of prior YOY sales. In March, they improved again to 73-79% of prior YOY sales. Now they are at 90-94% of prior YOY sales numbers. If this continues, they should start seeing YOY improvement, perhaps as early as next month."
There are two possible explanations that come to mind at first glance.
1. The markets are transitioning out of the standoff phase and volume will naturally rise. (Though prices will continue to fall.) This will eventually happen, it is just a question of exactly when. Sooner or later we will see sales volume climb from the decade+ lows we have been observing recently.
2. Sales were falling all through last year... last year this time was when the first really huge issues started hitting the credit markets. The real credit crunch didn't begin until late summer but by this point it was starting. Thus, sales this year might eventually match last year's sales even without sales this year increasing. What would be really handy would be a multi year graph of sales volume, similar to the inventory graphs that the housing charts webpage puts up.
To illustrate...(these are not real numbers)
Q1 07 sales 50
Q2 07 sales 40
Q3 07 sales 30
Q4 07 sales 20
Q1 08 sales 20
Q2 08 sales 20
Q3 08 sales 20
Q4 08 sales 20
Doing a YoY comparison of sales volume would show 08 closing in on 07(by percentage), even though 08 isn't increasing at all.
Spunky - sorry I missed your earlier post. A few comments:
"From all that I have read/investigated, Loudoun is right behind PWC in all aspects of the slowdown/bubblebust - IMO people have been purchasing REO'S & foreclosures & GREATLY discounted re-sales this Spring."
I think thats probably true, LOU has been very hard hit in the speculation game. It would make sense however, if PWC was the leader that LOU wouldnt be far behind. Leroy brought up a good point about "contracts" vs "contingents". I checked Loudon YOY and look what I find:
Contracts
Apr 2007 276
Apr 2008 334
Is LOU going to now start posting YOY sales increases?
"Local Builders have had a decent Spring as well, but the Nationwide boys (Toll et al) have had another "bad" Spring Market."
Overall, I take that as another positive sign for outer counties where all the building is going on. As to local vs national - I think its entirely reasonable to suspect that NOVA was one of the "trendsetters" when it came to going into the bubble. If so, it should be no surprise, we are leading the nation the other way as well.
"Let me state : I AM NO ECONOMIST OR EXPERT.
But I have gone thru a RE "Cycle" before & remember how it plays out.
And it ain't pretty"
I dont mean to bust your balls but let me ask, with regard to PWC & LOU there is nothing pretty about them - in previous cycles, have any areas been rocked as hard as LOU & PWC have been recently?
As leroy noted, this does NOT mean that prices are headed up, or even flat - far from it. What it MIGHT mean is that for some areas, the worst of the SEVERE price drop is over, and now a more MODERATE price drop is upon us.
I bought a long time ago (and am still way up) so I dont have a dog in this fight. I do like reading the tealeaves and I am fascinated as to why the inner areas are holding up so well in comparison (that is a discussion for another day). However, for those of you who are looking to buy, you should take notice of this. I still think the window to buy is very very long and the chance of price increases is ZERO. However, if you are looking for the severe price drops to continue, you may (and I streess MAY) just be out of luck.
Freddie Mac: Price declines first quarter 2007 to first quarter 2008:
http://tinyurl.com/4k46w6
Toll drops base price 20% ?
15081 SAWGRASS Pl
I'm pretty sure that's the model home in the picture. It's huge...Over 6,000 sq/ft, plus a 3,000+ sq/ft basement. Price change:
Sep 25, 2007 $882,975
May 13, 2008 $705,975
'The just-completed spring selling season was quite weak in most markets as buyers remained on the sidelines,' said Robert Toll, chief executive, in a statement. He said buyers are afraid to buy a home, only to see it fall in value."
hog
Leroy said...
"What would be really handy would be a multi year graph of sales volume, similar to the inventory graphs that the housing charts webpage puts up."
There is such a thing - take a look at the 4th chart on this page.
http://www.recharts.com/mris/mris_11.html
Click on the other counties on the left hand side and you can see the same thing.
Now, its kinda difficult to read, but it looks like the severe sales drop (due to the credit crunch) "hit" some time around June or July. Thus, its entirely possible any increase in YOY sales that is seen before then is a true indicator of demand and not a product of the severe credit crunch.
Toward the 2nd half of the year, YOY sales should be up and up by a lot, but that is due more to the lenders shutting of the spigot if anything. Either way however, if what we are seeing is not an anomaly, it seems likely that annual sales will increase this year as well.
CRT said...
"However, if you are looking for the severe price drops to continue, you may (and I streess MAY) just be out of luck."
I see exactly what you are talking about, and if you are right, that spells doom for me seeing 2003 prices indide the beltway. God I hope you are wrong!
Leroy said...
"They are most certainly noteworthy, and I mean right
now."
This is why I respect Leroy's opinion so much. Just because he is a bear doesnt mean he is so embedded to his position that he cant see a possible trend. He is not saying "its over" by any means. However, he is admitting it "MAY be getting less bad"
What about the rest of you? This is a potentially serious change that CRT pointed out. Does anyone else have anything relevant to say on the subject? If you think CRT is wrong, I want to know (give me hope dammit). Harriet, if you are out there, I think this is could merit its own discussion point.
I have no "dog" in this fight either - I bought in Fairfax in '01 & sold in '06 :)
I was in another RE bust in another part of the Country in the 80's, so I am not familiar with Nova RE cycles.
CRT said:
"I still think the window to buy is very very long and the chance of price increases is ZERO. However, if you are looking for the severe price drops to continue, you may (and I streess MAY) just be out of luck."
At the level presented, I tend to agree with your statement 100%. BUT ... the question comes up, where do you see prices going if we are looking at 2 different markets in the metro area: the first, the well-established, already-valued areas (NW DC, Arlington, MoCo, etc), and the second, the new developments/future growth areas (PWC/Louden/HoCo, etc)?
Frankly I think you are correct about there being no further "severe" price drops in either of these areas. But, I think once the hysteria stops (i.e., the media gets on to another issue), the well-established places will start to go up in price again. Remember, many of them have been going up consistently throughout this so-called "bust". What do you think CRT?
The Anonymous - I should note that what I am noticing is really only outside the beltway at this point. I "think" I can see something similar emerging inside the beltway that is only a few months behind, however its way too flimsy at this point to say anything about that...yet.
Lance - as I noted above, I do have some thoughts about inside the beltway prices, but again, with all due respect I want to defer on that subject for now. My thoughts on that are still not very well formulated, and if I present them here, it will only confuse the issue (i.e. is there something going on in the YOY sales department)? I would prefer to stay on this point for now until I hear other voices on this issue.
Spunky. Again, I was not picking on you and if you dont really have thoughts about this one way or the other, thats fine. As the Anon suggested, I do want to hear what others think about this - even if it is as simple as saying "I dont know" or "im not sure what to make of it". Leroy pointed out there is a problem with my analysis of contracts versus contingents, and as a result of that, I need to back off on FFX a bit (LOU still looks OK).
At the same time however, there are some really sharp people out there and I would love to see if they can point out things I am missing or see things differently than I am. Anyone?
crt:
I have limited time to go into details point-by-point now. Just some general thoughts. Let me look at it county by county.
PWC--Listings/Sales ratio is still above 1997 levels. And Median prices have dropped roughly 30% in just a year. That is a sharp drop. Since the median price is only about $45K above 2003 levels, further drops may be moderating somewhat. So, I would agree with Leroy that it is just expected.
However, I think what we see now is only the initial wave and there may be another minor wave of price drops once the current wave of drops has spread to the inner areas of DC.
FFX-- I would need to see the sales data broken down by zip codes before I make any serious assertion. But I have been following at least 3 zip codes just outside the Beltway and I don't really see any sharply higher sales activity or deep price cuts as seen in PWC.
It is only areas like Herndon, Chantilly and Centreville (maybe Lorton, too) that are showing higher sales and significant price drops. These are the areas where the bank-owned/foreclosures have been high, perhaps only a tad below PWC levels.
Fairfax City proper and areas closer-in in FFX CO are a different story, but countywide stats don't show this. Your assumption that FFX didn't see the same type of fraud/foreclosures as PWC is true of only such areas, not the entire FFX Co. Serious price drops may be moderating in the outer areas of FFX CO, but it is still slowly spreading within the county
Loudoun-- The Listings/Sales ratio is lower than in 2006 but higher than in 2007. Sales have been flat or even smaller y-o-y, but the Active listings have also become smaller. I don't think we can make out a a trend at this time for this county.
Closer look at PWC for April:
All contracts vs New listings:
4/2008 1220/2061
4/2007 530/1921
4/2006 790/2270
% contingent contracts/all contracts:
4/2008 43%
4/2007 30%
4/2006 22%
Sales/active listings:
4/2008 738/6905
4/2007 477/5770
4/2006 705/5189
Avg Sale Price as a percentage of Avg List Price:
4/2008 87%
4/2007 94%
4/2006 98%
Med. Sold Price:
4/2008 $253K
4/2007 $360K
4/2006 $380K
Closer look at Manassas for April:
All contracts vs New listings:
4/2008 99/197
4/2007 48/184
4/2006 78/202
% contingent contracts/all contracts:
4/2008 46%
4/2007 29%
4/2006 13%
Sales/active listings:
4/2008 67/706
4/2007 41/508
4/2006 69/360
Avg Sale Price as a percentage of Avg List Price:
4/2008 85%
4/2007 94%
4/2006 98%
Med. Sold Price:
4/2008 $200K
4/2007 $300K
4/2006 $350K
So:
Contracts are definitely up, but how many will actually close, when almost half are contingency contracts?
Inventory continues to rise, even as more houses go under contract.
Sellers are having to ask for less, and expect to get less than they ask.
So isn't this proof that the bottom is yet to come, especially with the foreclosure rate 2-5 times what it was last year?
TedK - I appreciate your response given your limited time to respond. A few comments:
"PWC--Listings/Sales ratio is still above 1997 levels. And Median prices have dropped roughly 30% in just a year. That is a sharp drop. Since the median price is only about $45K above 2003 levels, further drops may be moderating somewhat. So, I would agree with Leroy that it is just expected."
I think we are all in agreement on that. It makes sense too, PWC should be the canary in the coal mine for any of this.
"However, I think what we see now is only the initial wave and there may be another minor wave of price drops once the current wave of drops has spread to the inner areas of DC."
I did say this is could be the end of the severe price drops and the beginning of the moderate price drops, and I think that is what you are saying too. I may even go farther and say there WILL be a wave of minor price drops.
"FFX-- I would need to see the sales data broken down by zip codes before I make any serious assertion. But I have been following at least 3 zip codes just outside the Beltway and I don't really see any sharply higher sales activity or deep price cuts as seen in PWC."
In a way thats my point, FFX is by far the toughest case I am trying to make (I have no case for Arl & Alex at this point). However, it seems like there is some increase of activity even IN SPITE of the large & of foreclosures and huge price drops. Now, Leroy correctly showed us that most of the increase was in contingencies instead of contracts and many of the contingencies wont happen. Leroy noted:
Apr 2007
Contracts: 919
Contingents: 481
Apr 2008
Contracts: 898
Contingents: 752
At the same time however, for contracts we are now showing 898 vs 919 a year ago - a very small decrease. Also, lets look at March contracts & contingents vs April sales
March Contracts - 721
March Contingents - 596
April Sales - 1073
For April contracts & contingencies and (last May) sales we have
April Contracts - 899
April Contingents - 752
May 07 sales - 1273.
So, March activity (contracts + contingents) was 1317 netting us 1073 sales in April.
Now April activity (contract and contingencies) was 1658. Will this be enough to beat the 1273 sales last May? We will know in about 4 weeks but it sure seems possible.
"Fairfax City proper and areas closer-in in FFX CO are a different story, but countywide stats don't show this. Your assumption that FFX didn't see the same type of fraud/foreclosures as PWC is true of only such areas, not the entire FFX Co. Serious price drops may be moderating in the outer areas of FFX CO, but it is still slowly spreading within the county"
Funny you shoud mention FFX city. They are way to small to rely on their data much, but as luck would have it, this is what MRIS says about the city Contracts & Contingents
Apr 07
Contracts - 13
Contintingents - 7
May 07 sales - 20
Apr 08
Contracts - 15
Contingents - 8
May 08 sales - ?
Again, the data set way too small to put any stock in it. However, if we are seeing increased sales even IN SPITE of little speculation and not large price drops (as in fairfax city), it seems this could suggest that even areas that only saw moderate drops could start experiening increased sale and even more moderate moderate price drops.
"Loudoun-- The Listings/Sales ratio is lower than in 2006 but higher than in 2007. Sales have been flat or even smaller y-o-y, but the Active listings have also become smaller. I don't think we can make out a a trend at this time for this county."
Loudon is an interesting case. In some ways, Loudon is acting more like Alex (except with big price drops) in that they both are currently below 2006 and 2007 inventory levels (I think they are the only two). Further, Loudon inventory is basically flat from the beginning of the year. Lets compare dates Jan 1 to May 9 (the latest available) for the last 3 years.
1/1/06 - 2152
5/9/06 - 4230 (87% increase)
1/1/07 - 2714
5/9/07 - 3312 (22% increase)
1/1/08 - 3009
5/9/08 - 3061 (2% increase)
I just dont see any real increase in Loudon inventory this summer and I would not be shocked if it even decreased. Without the increase in inventory, even the slightest increase in sales (which seems possible given the increased activity I noted in a previous post) would translate into a lower months of inventory (YOY) in probably a month or two.
In any event, sorry for the rambling. As you can tell, Ive been reading the tea leaves for some time so I am pretty amped up in that I think I may be on to something. I appreciate your response and look forward to any further response you (or anyone else may have).
BTW I think most of you know this, but all the data I just cited can be found here
http://www.mris.com/reports/stats/monthly_reti.cfm
AND
http://www.virginiamls.com/charts/index.htm
Tabitha 2 comments
"Inventory continues to rise, even as more houses go under contract."
I dont think this is totally accurate. The increased sales is knocking down the inventory number even though its still up YOY, also some just expire naturally and are not renewed. True, YOY inventory is UP, but if you read the tea leaves closer, there is another intereting thing going on. Take a look at this (comparison of inventory Jan 1 vs May 9 - latest available date).
PWC Inventory
1/1/06 - 2368
5/9/06 - 4599 (+94%)
1/1/07 - 3487
5/9/07 - 4934 (+41%)
1/1/08 - 5171
5/9/08 - 5060 (-2%)
That last number is a real shocker - its up YOY but down from a traditionally quiet beginning of year. It shouldnt start going down at all until the fall. However, it has been going down nearly every day since Jan 1. Now as to Manassas city, you are right, but a similar trend is emerging.
1/1/06 - 158
5/9/06 - 362 (+29%)
1/1/07 - 316
5/9/07 - 490 (+55%)
1/1/08 - 562
5/9/08 - 647 (+15%)
As I said to Ted K, I dont put too much faith in the smaller data sets (A few people change their minds and the whole city looks to be in a new trend). However, even if you do have faith in the small data set, a 15% increase in 5 months isnt much, especially related to prior years.
As to the second thing you said:
"So isn't this proof that the bottom is yet to come, especially with the foreclosure rate 2-5 times what it was last year?"
You are 100% right. I was afraid that given my numerous remblings, people might think I am saying "bottom" - that is not what I am saying by a long shot. If you look carefully I am saying I THINK we are transitioning from SEVERE price declines to MODERATE price declines. Thus, as I said before the window for buying is still huge, but it may be closer than was previously thought.
Lance said...
“One day on one of the Bubble Meter posts, someone mentioned that "Robert" was actualy David J. ... That he was using this alias to post without being recognized that the blog owner. Anyone know if that is true?”
I’m flattered.
I was looking at the Washington Post recent sales for PWC online. It includes a feature to click on sales and see the buyer, seller, price, and assessment for several years. Looking at a sample of sales, especially those less than $300,000, a large number of them showed the buyer as a bank and the seller as an individual. Many others showed an individual buyer with a bank seller. The sales by individual to individual were a minority, and several of them seemed to be retitling to a surviving spouse or a house deeded to a trust with the same last name as the seller.
I think it's hard to conclude that things are improving yet if the increased sales come from foreclosures or banks dumping homes they obtained through foreclosure. Of course my survey was neither random nor robust, so you can't conclude that the increased sales figures are caused by foreclosures either. It just raises an explanation of the sales statistics that has to be eliminated before you can conclude that the situation is improving.
The fact that year-over-year inventory is up is not a good sign, but the fact that it's growing more slowly is.
Bears - CRT goes on and on about his theories on why things are a changin. He gives you all sorts of openings to point out errors and innaccuracies. With the exception of a few posts by Leroy, TedK and Spunky your response was - crickets....
Personally I think he might be right, but im just an idiot what do I know? I really dont want to believe this because it is another nail in the coffin for me (having passed up on buying in Arlington in 03 because the prices were too high) but some of you have to give me something. In the words of Agent Mulder - I WANT TO BELIEVE
ANYONE??????
Washington Post:
Luxury Foreclosures
Growing Number of Affluent Homeowners Can No Longer Afford Their Mortgage
http://tinyurl.com/6q8v2v
Of course Bob Toll wants to paint doom and gloom for homebuilders. He wants blood on the streets. He's the only one that has half a chance of being around after the dust settles. Toll is in trouble, but has better footing than any of his Wall St. competitors. In 10 years when the cycle pivots, he could very well be the only guy in town.. naming his price. Brilliant!
"Personally I think he might be right, but im just an idiot what do I know? I really dont want to believe this because it is another nail in the coffin for me (having passed up on buying in Arlington in 03 because the prices were too high) but some of you have to give me something. In the words of Agent Mulder - I WANT TO BELIEVE"
Honestly I don't think we are going to drop below 2003 prices in nominal dollars, at least not area wide.
I wouldn't be surprised to see PWC go slightly below 2003 prices but I don't think the city as a whole has much chance of that.
Real estate busts almost never fall all the way back to where they started in nominal dollars. It is stagnation/inflation that does most of the work at the end of the bust over a period of several years.
As for PWC showing signs that it is entering a new phase of the bust... I don't have a problem believing that. PWC is already down roughly a third from peak. At some point the rate of decline will have to start slowing.
"Growing Number of Affluent Homeowners Can No Longer Afford Their Mortgage"
Wow, I am surprised they were able to find a formerly brilliant real estate investor that is willing to admit just how badly things have turned out for them.
Easy come, easy go I guess but it still shocks me to see people that were so blinded by the money that they couldn't see the bust coming.
Have you held on to your investment properties KH? When did you buy into the market?
KeithK - I wouldnt try to read too much into WaPo sales as I think you sumised yourself. What they do is search land records in each county. I speak from experience here when I say that a good half of the recorded deeds at land records are confirmatory deeds, no consideration deeds, retitling for liability purposes, divorce, etc. Since none of these have a profit motive, none of them show up in the MRIS (i.e. no agent was involved).
Anon - I basically agree with Leroy when it comes to 2003 prices, especially when you are talking about Arlington. If we were talking about PWC I could see 2003 pricing, even in nominal dollars for a while. However given the relative strength of Arlington, and that we are now seeing capitulation in PWC (and although I admit being premature on this, possibly Loudon & Fairfax too), I just dont see Arlington getting down that far - sorry.
KeithK--
You have a good point. Go to the PWC assessor's website and put in any parameters you want for recent sales, and you will see a very high percentage of the listings that come up are actually banks taking over houses. There has been discussion here before that since those repossessions happen through auctions, those numbers do not get counted in MRIS reports. That may be so. But the important aspect of that discovery is that as many houses as are selling (and, as you said, many of those sales are banks to individuals for incredible discounts), there are many, many more houses that will return to the market once banks list them with an agent. For some price ranges, there were more foreclosures than sales in 2008, from what I have seen.
Excellent points have been made about inventory stabilizing in PWC. But there is a new wave of inventory that might dwarf anything seen over the past 8 years, once this year's foreclosure numbers are known.
Tabitha said...
"There has been discussion here before that since those repossessions happen through auctions, those numbers do not get counted in MRIS reports."
and
"Excellent points have been made about inventory stabilizing in PWC. But there is a new wave of inventory that might dwarf anything seen over the past 8 years, once this year's foreclosure numbers are known."
Tabitha - this got me thinking. For every house that is now foreclosed on the courthouse steps, I would bet that a very very high percentage of them were once listed for sale. As such, they were "in MRIS" and were contributing to its inventory levels. As the person could not sell and the foreclosure commenced, the place was de-listed and removed from the inventory ranks. Thus, the decline in inventory we are seeing in PWC is almost certainly "artificial" in that a good percentage of it is houses that did not sell but went to foreclosure.
At the same time however, I do not think this new wave will dwarf what we've seen in the past. If the banks do try to sell via a realtor (which many will) all they really will be doing is relisting a property that was already part of the inventory ranks a few months earlier when the desperate homeowner was trying to avoid foreclosure. Either way, I see it as a zero sum gain for the inventory levels.
Tabitha - I meant to highlight this quote of yours:
"But the important aspect of that discovery is that as many houses as are selling (and, as you said, many of those sales are banks to individuals for incredible discounts), there are many, many more houses that will return to the market once banks list them with an agent. For some price ranges, there were more foreclosures than sales in 2008, from what I have seen."
Again my assumption is that all those houses that return to the market once the bank gets an agent were already part of the inventory ranks a few months before (when it was the desperate homeowner trying to sell). As you are the one with your ear to the ground in PWC you probably know this better than anyone else. However, my guess is nearly all of the houses you may now be eying as foreclosures were once part of the inventory ranks as regular or short sales. (i.e. its a zero sum gain).
crt,
>>#4. If by "seasonally adjusted" you mean YOY the answer is yes. If you dont mean YOY, Im not sure I understand the question.>>
If one is trying to discern a statistical trend in a time series, there are ways to adjust the data so that any seasonal trend (e.g., Spring selling season for Real Estate, Shopping during X'mas) is excluded. The BLS, Census Bureau, etc., have their different ways of doing this. But I was thinking that since the Realtors' data are raw, even when comparing y-o-y, doing so with seasonally adjusted data would be the best way to discern trends. However, only people who gather such data and have the software tools to quickly create seasonally adjusted plots--mostly professional economists--would be able to give a clear answer on any statistically significant trend.
crt: >>However, if we are seeing increased sales even IN SPITE of little speculation and not large price drops (as in fairfax city), it seems this could suggest that even areas that only saw moderate drops could start experiening increased sale and even more moderate moderate price drops.>>
The point is that I don't see significantly increased sales happening (other than the seasonal uptick also seen the previous 2 years) in areas of FFX Co where there wasn't much speculation. Properties are on the market for several months and sellers are holding onto wishing prices.
Zips 22031, 22032 and pockets of 22003 outside the Beltway, which I have been following, are not showing high sales activity. The few that get sold are mostly distressed (or bank-owned) sales and have their prices cut to late 2003/early 2004 levels.
The issue is that outside distressed sales, price drops have always been slow as sellers stay emotionally wedded to high prices. But I don't see a new trend of price drops moderating in the FFX Co zips just outside the Beltway.
Tabitha:
Our discussion here is largely academic. PWC median dropped roughly 30% y-o-y in April; 'moderating' price drops could well mean that by next April you might see another drop of 15% and in the year after that, 5--10%. Not surprising.
CRT,
That is an insightful observation--that future bank-owned sales were once desperate-homeowner-attempted sales. Certainly, a great number of houses will follow that exact path. But there is a phenomenon that may be uniquely widespread in PWC: homeowners leaving suddenly, even in the middle of the night, without ever having tried to sell the house, and without anyone knowing they were in trouble before they left.
I can offer no numbers, as most of my evidence is anecdotal, but since I have been PWC-real-estate-obsessed for almost two years now, I have come across several dozen hard examples of this happening here in Manassas. The cause of these sudden vacancies is not a mystery; PWC, and especially certain pockets within PWC, was heavily populated with a mobile immigrant influx during the last 6 years or so. These particular home buyers often paid the most, in the riskiest ways, with the least attachments to the local area. And their defaults tend not to happen gradually, after trying to sell.
Don't forget the over-development out here, too. So many new developments still have empty lots to fill, even as their previously-built homes fall into foreclosure. So besides the regular sales, bank-owned sales, short sales, and empty model home sales, there are new homes needing to be built by struggling developers. (I always shudder at one developer's billboard in particular, where they keep on painting over the old "from the upper $600s" sign. Now it's at "from the mid-$300s.")
And here's just a few numbers to consider: all of last year, there were 3,300 foreclosures in PWC. In March alone this year, there were 1,500, according to the Post, which got its info from RealtyTrac. Last year, inventory hovered between 6,000-7,000 active listings, if I remember correctly. If those foreclosure trends continue, new foreclosures alone will far outpace total active listings right now.
But I can see the argument that the most drastic drops have happened already. We're already solidly in the realm of 2003 prices.
TedK - if I understand you correctly, as to FFX you are saying the only areas that are seeing any increased sales activity are the areas that had the most speculation. The areas that did not see as much speculation in FFX are not now seeing much if any increased sales activity.
If that is the case then we may very well not be seeing true "capitulation" by sellers, but instead "forced capitulation" via the banks that are now unloading their properties. If so (which you very well could be right about), we wont see true capitulation from homeowners for a while still.
"Tabitha:
Our discussion here is largely academic. PWC median dropped roughly 30% y-o-y in April; 'moderating' price drops could well mean that by next April you might see another drop of 15% and in the year after that, 5--10%"
Tabitha I agree with this 100% - as I noted before, the chances of any price increases are ZERO. Also, everything I am saying in this thread is me trying to read the earliest of the earliest "potentially" emerging trends. I can say this, if I dont see increased sales activity in Loudon in the next month or two, or if PWC sales drop, I will abandon my whole theory so fast it will make your head spin!
"But there is a phenomenon that may be uniquely widespread in PWC: homeowners leaving suddenly, even in the middle of the night, without ever having tried to sell the house, and without anyone knowing they were in trouble before they left."
Excellent point. I had accounted for all the overbuilding, but the walkaways is something I had completely forgotten about. Walkaways never really happened in large numbers in previous downturns (at least not to my knowledge) - and they certainly did not add to the inventory roles until after the foreclosure.
Givent the stereotype of the Latino family dependent on construction for a livelyhood, this walkaway phenomenon may be even more widespread than you thought and very well could weigh heavily on that market.
Incidentally, would it be fair to say this sort of thing was concentrated in Manassas? If so, it could be why when I looked at PWC vs Manassas inventory PWC is down from the beginning of the year while Manassas is still up like 15%
CRT,
I do think certain pockets within PWC have been/will be particularly hard hit: Manassas, Manassas Park, and Woodbridge, then a little in far-out areas like Gainesville, Bristow, and Haymarket. But yes, Manassas in particular is exceptional. When you compare its numbers to the hardest-hit cities in the entire country, it is right there with them, though I know it is so small, you can't read too much into that fact.
crt: >>If so (which you very well could be right about), we wont see true capitulation from homeowners for a while still.>>
Correct. That has been my observation. I don't pay much attention to the low-end condos, which have indeed seen sharp price drops even in 22031. That segment may show some pickup in sales.
But for SFH/TH's, the wave that brings sharp price drops and increased sales is still somewhere in the Western/Southern parts of FFX. But it is slowly spreading east/north, so I think any discussion on Arlington or Alexandria's prices holding up is premature.
CRT,
I'm a little late to this conversation, and I've only skimmed quickly, but it seems you find the following data points compelling for finding a bottom. From your post:
PWC Inventory
1/1/06 - 2368
5/9/06 - 4599 (+94%)
1/1/07 - 3487
5/9/07 - 4934 (+41%)
1/1/08 - 5171
5/9/08 - 5060 (-2%)
In an attempt to poke a constructive hole in whether this is compelling information:
If May is the peak selling season, and peak listing season, then we would probably assume that in a healthy market, inventory builds to this point in the year.
Since total volume of listings in May '08 is still higher than the previous 2 years, all the higher January number says to me is that there are more listings languishing for a longer period of time.
For instance, if you are a typical, non-distressed seller, you are going to wait until Spring to list your home. 1 - you want the listing fresh. 2 - you want the great weather for foot traffic. 3 - that just seems to be the way to sell real estate.
If you are on the market in January, you 1 - really need to move, 2 - are a distressed seller, or 3 - have already been on the market quite a while.
My interpretation is one of a long period of steady state listings that are not moving into and out of the market like they would in a normal cycle. It's just, "everything is listed all of the time."
Not sure how strong of an interpretation this is but I figure it might help you to refine your view of the tea leaves.
My $0.02
TedK - I think I am coming around to your way of thinking re: YOY sales increases in PWC LOU and even FFX may not mean much if it was only in the areas where there was a ton of speculation/REO's etc.
I am curious though, as you seen to be following FFX more closely than me. Based on your observations, do some areas seem more poisoned than others. (i.e. you said Herndon Chantilly Centreville & Lorton [a bit] had it, FFX city did not). Do you have any guesses about Annandale, Springfield, Reston, et al? I dont want you to check but if you just knew off the top of your head, I would appreciate it.
$0.02 - I always welcome constructive criticism - I think most of us here are truly open to learning a thing or two and help sharpen our thinking on this.
As to PWC inventory...
"If May is the peak selling season, and peak listing season, then we would probably assume that in a healthy market, inventory builds to this point in the year."
CORRECT
"Since total volume of listings in May '08 is still higher than the previous 2 years, all the higher January number says to me is that there are more listings languishing for a longer period of time.
For instance, if you are a typical, non-distressed seller, you are going to wait until Spring to list your home. 1 - you want the listing fresh. 2 - you want the great weather for foot traffic. 3 - that just seems to be the way to sell real estate.
If you are on the market in January, you 1 - really need to move, 2 - are a distressed seller, or 3 - have already been on the market quite a while."
I AGREE. This flatness suggests a ton of desperation out there. It abandoned its normal cycle last October (it didnt go down) and now its all inventory all the time!
"My interpretation is one of a long period of steady state listings that are not moving into and out of the market like they would in a normal cycle. It's just, "everything is listed all of the time."
I THINK I agree. I dont take a -2% decrease to mean much, but the complete lack of any increase is interesting. I see this going one of two ways:
(a) if this market is closer to being healthy than we may suspect, I would expect inventory to probably stay flat until Oct and then show a respectable decline (at least 10% or more).
(b) Tabitha brought up a few things I hadnt thought of. If this market is not "healthy" (this being a very relative term at this point). I think everytime there is a drop of a few hundred units, the banks will backfill their REO's and inventory really doesnt decline at all until possibly next fall. (this is probably similar to your line of thought).
Finally, Tabitha did think there could be another big slog of inventory out there that "could" flood the market. I disagree thinking most of it was already out there, or if it wasnt, the banks will not let it all out at once and overwhelm the markets (its already a write off to them and the do seem to start to understand the principles of supply and demand). HOWEVER - if we see an increase of say more than 5% from where we are now - she might be right and all bets are off!
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