Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Please post your local house search updates, MLS finds, on-topic ideas, and links here.
http://www.wtopnews.com/?nid=30&sid=1420421house prices keep dropping - except dc
Good find, bas!!At these gas prices, we might be walking to work. I'm not certain that mass transit is so terrific. Metro (Orange line) and MARC both had problems the other day.
As some people may recall, this is what happened in the region in general in 2005-2006. Prices increased, but sales stalled. I went been through this several times in California and it's typical. Prices fall first and hardest in the outlying areas. The high end is last to fall, but it's also last to recover.
The WTOP article left out that sales in D.C. dropped 23% YOY, and put in rather a pathetic historical showing for a city that's supposedly growing and attractive.May sales, DC2008 5332007 6912006 7252005 9102004 8252003 7792002 6942001 6382000 7011999 6571998 5891997 460
Also, Contracts YOY (441 - 609) -27.59%Contingents YOY (188 - 228) -17.54%Contracts + Contingents YOY -24.85%
Right. That's the pattern: The volume peak comes first, followed, some time afterwards, by the price peak. The problem is, if you wait for the price peak you may not actually sell. By the time prices actually start to fall, the volume has dropped way off and you have to both price significantly under the market and be prepared for a nail-biting wait.
Sarah said...Prices fall first and hardest in the outlying areas. The high end is last to fall, but it's also last to recover.Sarah - out of curiosity, do you have a reference for that? I have always heard the inner areas are the last to "stagnate" (no more price drops), but the first to "recover" (price increases). See below.http://www.itulip.com/housingpriceregionscascade.htmhttp://www2.standardandpoors.com/spf/pdf/index/052708_Housing_bubbles_collapse.pdf
New ETF linked to moves in housing markethttp://tinyurl.com/6gyo7u
Harriet said:"The WTOP article left out that sales in D.C. dropped 23% YOY, and put in rather a pathetic historical showing for a city that's supposedly growing and attractive."2008 5331997 460I beg to differ. Considering that the upturn began in DC in 1997, we are still doing better than that upturn period. Perhaps my expectations are different than others, but when you are talking about well-established areas, far less in the way of sales are required for them to be "healthy" because, as KH has annectodatally illustrated, the more established an area is, the more households there are that "aren't going anywhere". Over the longterm you reach a point where an established area gets close-to-totally built out, and what little housing becomes available gets fought over by the increasing numbers of folks wanting it. As such its natural that there would be less sales (there's less available with the halt in new construction 'cause of the credit crisis), and this only serves to further push prices up as supply dwindles. Aren't months of inventory in the District dropping?
Aren't months of inventory in the District dropping?Don't think so.RE ChartsMonths of Inventory chart third from the bottom.
Lance said, "I beg to differ. Considering that the upturn began in DC in 1997, we are still doing better than that upturn period."So, high sales are good for home prices and now low sales are good for home prices? I see what you are saying here but you aren't really taking the whole picture in. Home prices boomed here because of easy credit and population growth. Over the last 5 years both have went away. Google DC are pop growth and you will actually see this that the poplulation has acutally went down in this area over the last 5 years.In 1997 we had X population. In every zone some certain percentage of X home sales occur relating to the population at large, size X. As population grows you expect X home sales to grow to say X*.05 (where .05 would be the percent increase in population on a year to year basis).So, saying that because 2007 homes sales is greater then 1997 so the housing market must be better off than then is completely wrong. You have to take into account for population growth as well as household development. I would be that we have 30-40% more people in DC then we did in 1997, maybe more. I bet we have 70-100% more housing units then we did in 1997, but at least 30-40%. So, if you were to look at total volume of sales, it should be at least 30-40% more then 1997 to be considered normal. Make sense?
The high end is last to fall, but it's also last to recover.It also falls fast when it does fall. Not much exciting will happen this summer. But wait for Fall (probably late Fall). Don't think so.Thank you for the link Harriet. The YOY graphs are very interesting. But hey, its just we bears like our statistics. ;) Got Popcorn?Neil
"Lance said...Aren't months of inventory in the District dropping?"Overall, its come down alot since January (when it was at 10.something) to 6.7 but its higher than it was YOY (like Arl & Alex). What is fascinating about DC is that the cheap stuff is not selling but the pricey stuff is. Condos below 300K basically sit, as do SFH priced below 600K. Here months of inventory is way up. This probably explains why median prices are up (instead of slightly down as they are in Arl & Alex where the cheap stuff is selling).Given the credit crunch, I am absolutely amazed at how high end DC is holding up. Everything between 600K and $2.5 million sells in less than 6 months. To be fair, sales were better last May, and stuff over $5 million sits (but it did that even during the boom years). Still, I have a hard time faulting a market where YOY months of inventory "slipped" to an absorbtion rate of 4.3 months of inventory!
crt-- Sorry, I don't. I was just speaking from experience. I looked at your itulip link, but it doesn't seem to have any actual data concerning price-patterns by area. I couldn't get the Standard & Poors link to open. I'd be very interested to see what, if any, studies have been done and what criteria they used to compare areas within in regions. I had started to write a long comparison myself of various DC metro areas, but actually I see that I didn't really express what I meant. I should have said that inner area prices take longer to start falling, but they also fall for a longer period. Which areas begin to rise again first is, I think, an open, although interesting, question. It seems like we're still a long way from that point and any number of things could change in the mean time.
Harriet said... "Aren't months of inventory in the District dropping?Don't think so."The chart you pointed to shows a definite downtrend for the 3 month moving average over the last 3 months. That means that months of inventory have been dropping for at least 3 months, or as much as 5 months (i.e. the 3 month moving average for 3 months back.)
"Wannabuy said...The high end is last to fall, but it's also last to recover.It also falls fast when it does fall. Not much exciting will happen this summer. But wait for Fall (probably late Fall)."Ill ask again then, WHY? Everyone seems to parrot that mantra, but few can say where exactly they got it from. It seems to me there is a difference between "high end" and "high end" in close. Loudon county is about as high end as you can get it had the highest or 2nd highest median family income in the nation - it fell 2 years ago!http://www.mris.com/reports/stats/Hows it doing now - lets look at its high end 600K to 2.5 Million - just like DC. D.C. Sports a healthy 4.3 months of inventory. More wealthy Loudon - after 2 years of problems and 25% price drops? Its high end is still showing 14.83 months of inventory! Wouldnt you think that after 2 years and 1 year after the credit crunch hit ALL AREAS SIMULTANEOUSLY, that all "high end" areas are feeling it at the same rate? Again, I may just be a simpleton, but it seems to me its not just "high end" but its high end and geography.
And what does the data show about your "90% of the area is stagnant or climbing" claim lance?Or for that matter your claim that the bottom had already passed last year...Your use of data is... highly selective... it seems.
"Sarah said... crt-- Sorry, I don't. I was just speaking from experience. I looked at your itulip link, but it doesn't seem to have any actual data concerning price-patterns by area. I couldn't get the Standard & Poors link to open. I'd be very interested to see what, if any, studies have been done and what criteria they used to compare areas within in regions."No worries Sarah. I appreciate your thoughtful and insightful responses. Also my last comment is not directed toward you - I get a bit annoyed at the hit and run blurb that was just offered up by another poster after you."I had started to write a long comparison myself of various DC metro areas, but actually I see that I didn't really express what I meant. I should have said that inner area prices take longer to start falling, but they also fall for a longer period." Now that I get, and that is something I could get behind. Its the whole stickiness concept. Still, I think you have to see houses not selling for this to happen and DC high end doesnt have this problem (though low end certainly does). "Which areas begin to rise again first is, I think, an open, although interesting, question. It seems like we're still a long way from that point and any number of things could change in the mean time."BTW as to the S&P link go to yahoo and search the term "Housing bubbles collapse inward". It will be the first link you see. To your credit, neither link I provided offers up any real research to back up what they are saying. I am more or less implicitly trusting they have something to back it up. Also, their rationales intuitively make sense. Either way, I think you are right about it being an open ended question and alot could happen between now and then. Cheers.
CRT, as you noted people seem to be confusing "close in" and "high end" frequently. Much of what is close in is in no way "high end" while much of what is "far out" is very high end.The bust appeared first in the marginal parts of the outer areas of the city. That is where the greatest concentrations of risky loans, speculators, new construction, etc were concentrated. Initially these declines were dismissed by the various real estate pumpers as isolated and limited only to the outer fringes of the city. Numerous media outlets ran stories about how "the bust isn't everywhere and some neighborhoods are still going up!" ...It has only been in the last 6 or so months that the general public has begun to realize that the bust was absolutely not limited to the outer fringe of the city and buyer psychology began to shift.Closer in areas were slower to begin falling because they had fewer motivated sellers, fewer subprime loans and generally more people willing try to "wait it out."(Anecdotally I have spoken to several realtors that have told me they are advising sellers to wait until "next year" if they can... has anyone else heard this?)At this point all major areas of Northern Virginia are showing significant declines. From here on out it will just be a question of how long sellers are willing to avoid putting their house on the market while hoping for a return of the bubble. The decline in close will be slower than the freefall that is being seen out west and probably less extensive. In the end prices will return to fundamentals.
" Leroy said... And what does the data show about your "90% of the area is stagnant or climbing" claim lance?"LOL - I forgot about that one. If I recall correctly, he was tecnhically still correct on that - mostly because the definition of the "area" included only beltway counties and in - none of the icky stuff outside the beltway.Well, now that Fairfax AND PG have passed that metric (using this years declines and last). That claim (as silly as it was to begin with) is officially dead. Lance - not to give you more grief but seriously that wasnt your best thought out statement.
"LOL - I forgot about that one. If I recall correctly, he was tecnhically still correct on that - mostly because the definition of the "area" included only beltway counties and in - none of the icky stuff outside the beltway."Nah, he was wrong from day one. He tried to weasel out of it by claiming that only falls of greater than 15% "counted" but honestly... I mean who the heck doesn't consider a 10-14% decline a decline?You are right though, even by his ridiculous 15% standard, that 90% claim is pretty laughable at this point......not that he will ever admit it. He has been claiming more recently that his advice has always been that buyers should be careful to only buy in areas that won't see declines. (not that he ever advised that... but hey, it is lance... and facts aren't really an issue.)
Leroy - I should have said you arent allowed to help - I knew you knew the answer!We do still disagree on a few points - for starters, im not convinced the whole problem wasnt just speculators to begin with. Speculators are the most motivated sellers of all, and close in speculators are no different. The disproportionate increase in sales out west (even when population is accounted for) highly suggest they were more heavily concentrated in the areas with the heaviest declines. Plus I remain convinced that the absolute inventory spike that EVERYWHERE saw mid 2006 was all the speculators headed for the door. Close in (where they werent that concetrated to begin with - even in close in condo's amazingly) they made it out. Further west they didnt and swamped the market. The other thing is the whole "wait it out" scenario. I still cant understand for the life of me, why when you have 3,4 & 5 months of inventory, why exactly you need to wait it out. That makes sense out in Loudon where they are still dealing with 10 months of inventory in "high end" stuff, but not close in where (if its listed) it is selling. True, last year at this time it was 2, 3 & 4 months, of inventory - so things have gotten worse - however, the thing is if they put it out there and give a few concessions - it mostly sells (they call months of inventory "absorbtion rates" for a reason). My own personal belief (something I cannot prove) is that it is all out there - there isnt a delay between western and close in areas any more. The credit crunch hit about a year ago and it hit everywhere at the same time. Places that were safe like Montgomery county (which had little speculation til the end) were OK until the crunch hit. Now it is worse than close in areas! Thing is - expensive close in stuff is still selling (not as fast as last year - but faster than 2006 by the way) but selling nonetheless.
Back to this idea of wealthy high end areas holding out - it seems to me that if anyone has the capacity to do that it would be wealthy counties in MD. MD didnt experience speculation like NOVA did and they have 2 counties (Montgomery & Howard that are wealthier (by HH income) than either Arlinton, Alexandria or DC. Further, neither of them seemed to have any real problem until the credit crunch hit in mid 2007. Thus it seems if ANYONE around here could "hold out" for a better day, it would be them (wealthier, little speculation, later hit) right?Well if thats true, we should see it in sales and listing records. Now, to be fair, as Ted K pointed out, Mo Co has some marginal areas & issues with immigrants that can give it problems - fair enough. Lets exclude these areas by only looking at "high end" homes (say, priced 500K and above).Lets look at months of inventory in all 5 markets. Again, all we are looking at here is high end stuff - the theory is people close in are holding out for a better day. Again, if that is true, we would expect wealthier Howard and Mo Co to fare better than close in Arl Alex & DC right?Here is months of inventory in each county based on 100K price intervals (MRIS may sales)http://www.mris.com/reports/stats/ARLINGTON MAY SALESPrice Range - Months of Inventory5-600K - 3.06-700K - 3.87-800K - 4.78-900K - 10.6900-1MM - 141-2.5MM - 4OK - maybe some weakness in the 800K to 1 MM categories. Then again last month (Arl was at 7.8 and 6.2 months in these 2 price ranges). Either way, if you say this is weakness - Ill grant that - lets move on. ALEXANDRIA MAY SALESPrice Range - Months of Inventory5-600K - 4.66-700K - 2.27-800K - 6.08-900K - 4.1900-1MM - 5.81-2.5MM - 5.0Now here we see NO weakness - yes sales are down from last year, but heres the thing, if you put it out there it sells! On to DC:DC MAY SALESPrice Range - Months of Inventory5-600K - 7.46-700K - 3.77-800K - 4.38-900K - 4.1900-1MM - 4.51-2.5MM - 4.4OK - 5-600K looks marginally weak - ill give you that, but look at the rest of the categories top to bottom no real problems. In fact, this might be the strongest of the bunch.ON to Maryland:MONTGOMERY CO MAY SALESPrice Range - Months of Inventory5-600K - 8.16-700K - 6.27-800K - 5.98-900K - 9.9900-1MM - 7.61-2.5MM - 13.5Wait a minute, look what we have here. Now these numbers arent awful but across the board they arent as strong as either Arl Alex or DC. Again, why can the wealthy in Arl, Alex & DC "hold out" and wealthy high end homeowners in Mo Co cant? Finally lets look at Howard - the wealthiest county in MD, and #3 in the whole US:HOWARD MAY SALESPrice Range - Months of Inventory5-600K - 8.26-700K - 8.67-800K - 10.88-900K - 10.6900-1MM - 311-2.5MM - 24Again, this is THE wealthiest area of the 5, it didnt have speculation, it didnt get hit until the credit crunch last year - yet it is the WORST of all 5 by a mile. How can that be? The answer, it seems to me is geography. Maybe its gas prices maybe not, but the point is, closer areas (none of which are as wealthy as the burbs) are doing better. Thus, it seems to me that all 5 areas have been "hit" its just that close in took it and are continuing to take it that better. If anyone should show weakness at this point, it should be Alex, Arl & DC which had specuation, arent as wealthy, and had to deal with the substitution effect from nearby fairfax which has been falling apart. Further, the wealthiest of the 5 Howard County is doing the worst by a long shot - as it turns out it is also the farthest away from DC. Again, it seems like geography is the difference. So again, maybe I am missing something, but it seems to me that if anyone is holding out at this point, it is wealthier, later hit Maryland. If someone sees something I do not here, please tell me. Otherwise it seems to me, close in isnt "holding out" - its just that when their high end stuff is listed - apparently it is priced right because it is selling faster than the stuff in MD. Clearly this is just one month, and things could change on a dime, but it seems like if there is weakness and holding out, this is where we would see it. Am I missing something here?
Also, FWIW here is the same "high end" sales metric for the rest of VA. All have been hit hard in median prices for 2 years - is this translating to less sticky prices in the high end?PWC May SalesPrice - Months of Inventory5-600K - 14.86-700K - 17.77-800K - 15.68-900K - 25900K-1MM - 431-2.5MM - 75Loudon May SalesPrice - Months of Inventory5-600K - 6.56-700K - 10.77-800K - 10.68-900K - 19.4900K-1MM - 251-2.5MM - 28.4Fairfax May SalesPrice - Months of Inventory5-600K - 5.86-700K - 4.77-800K - 88-900K - 9.1900K-1MM - 13.21-2.5MM - 14.0Overall - not the worst Ive seen - high end stuff in Fairfax below the conforming limit is moving - maybe in Loudon as well. Ultra high end still has problems everywhere though, and despite 2 years of beat down prices not wealthy PWC still has a long way to go in high end stuff. Even after 2 years of pain, it seems to me that high end stuff far out has a long way to go. I expect to see some continuing weakness here in fliptacular VA suburbs but not in wealthy latecomer MD - what am I missing?
crt,This will be just another quick note. Do you include only flipping and fraud as speculation? There are a lot of people who stretched to buy homes way beyond their incomes would allow, based on the assumption that housing prices never fall--only rise, or at worst stagnate. To me, that is also a form of speculation. And by that measure, speculation was widespread even in MD. I saw plenty of speculation there. That includes many Latino families that appeared to have bought homes in even high-end areas by pooling resources from multiple people/families who all lived in one home.Also, though Howard and MC are richer than ARL, ALEX or DC on a per household basis, the distribution of very high net-worth families is not clear.Generally, I tend to think that it is a period of transition for the whole region, and we cannot come to any conclusions yet based on inventory or how homes are selling now.
crt: if that is true, we would expect wealthier Howard and Mo Co to fare better than close in Arl Alex & DC right?Oh, very good. Excellent. A little more and you'll be one with Lance.Consider my zip code, 22305, and the people who live here.I know people who have been here 20 and 30 years. The widow down the street is probably in her 80's. She and her retired husband were here when I moved in. I expect that she has a small pension, likely substantial savings, and owns her SFH outright.Her counterpart, out thar in distant Monkey County, is a thirty-something couple, perhaps dragging down a two hundred grand income and strapped to pay for their McMansion.We've gone around and around about how 22305 and Alexandria's income ain't way up there. How can that low income sustain the prices? The answer, and Lance has harped on this over and over, is that many places here are paid off, paid down, or are paying against 1997 size mortgages. People in older, established neighborhoods are the tortoises who have won the race to home ownership. Waiting at the starting line for just the right moment, puts the house-hare far behind. If you think about the dynamics and see it as continuous varying opportunities, it's obvious why prices have held up in the older, close-in, premium areas. As you said, Thus, it seems to me that all 5 areas have been "hit" its just that close in took it and are continuing to take it that better. You got it. There's no wave moving in. What nonsense to imagine that. Overpriced, new construction, and areas with recent shaky loans are doing badly. That's out thar. The news of mortgage problems was known everywhere at the same time. People inside the beltway didn't care.
1. This is the NOVA blog, not the Lances block blog.2. We all pay the same price for food. If your on a pension, I hope you do not have to eat cat food. Its not fit for people food.3. Gas prices have risen, and yet I live in NOVA and still only drive 5 miles to work. The METRO and Mark Train broke down this week, 15 MPH is what the news said commuters would travel. Jobs will leave DC.4. Contractors are being laid off in droves, jobs have left DC.5. "The news of mortgage problems was known everywhere at the same time. People inside the beltway didn't care.". GOOD, stay an that side of the beltway. Maybe the new administration will buy houses and spur sales in DC(thats sarcism LOL)
TedK - as always great questions - thanks. "Do you include only flipping and fraud as speculation? There are a lot of people who stretched to buy homes way beyond their incomes would allow, based on the assumption that housing prices never fall--only rise, or at worst stagnate. To me, that is also a form of speculation."By that definition, I guess I dont. To me, if you plan to live there for at least 5 years and pay down equity thats not speculating. Case in point the wife and I really stretched to buy in 2002 - probably close to 40% of our pay. We were both straight out of law school and had only 5% down. We struggled for a year or two - but this was expected as we were at the beginning of our careers and had higher earnings ahead. Three years later, both our incomes had doubled (as we assumed when we bought), plus we have plenty of cash to cover us if the market whent down (I thought I was overpaying by a bit in 02 :) Now we are probably at 15% of our income (combined) and either of us could quit working and paying it down wouldnt be a problem. Either way, I would hate to think what we did was speculating."And by that measure, speculation was widespread even in MD. I saw plenty of speculation there. That includes many Latino families that appeared to have bought homes in even high-end areas by pooling resources from multiple people/families who all lived in one home."This is true and a good point. Plus, the latino families tend to congregate - and this could be part of Mo Co's problem (probably not Howard). Then again, close in areas had them. Chirlagua (called little el salvador for a reason), and Culmore on the Arlington/Alexandria border are great examples of that. Demographics also indicate there is a slightly higher % of latinos in Arlington & Alexandria than Mo Co. In Howard their population is very very small. Further, to the extent this sort of speculation happened - this was on the lowest of the high end. None of that was present past say 650K anywhere - still the weakness pattern above this line is still evident. "Also, though Howard and MC are richer than ARL, ALEX or DC on a per household basis, the distribution of very high net-worth families is not clear."Fair enough - and true. "Generally, I tend to think that it is a period of transition for the whole region, and we cannot come to any conclusions yet based on inventory or how homes are selling now."Im not sold on this yet myself - that is why I ask these questions out loud - and I appreciate the critical inquiries. Then again, if a gun was to my head and I was forced to make a conclusion on where inventory and sales are going - I think I feel good enough to go with what I am saying. "KH said...Oh, very good. Excellent. A little more and you'll be one with Lance."KH - no offense to you or Lance, but I really dislike the implication here. Deep down - there is a nugget of brilliance in what Lance says and some of it I really agree with. At the same time however, I would like to think I have a decent amount of credibility here which I would lose if I was tied too closely with him (Sorry Lance - it is what it is).
crt: At the same time however, I would like to think I have a decent amount of credibility here which I would lose if I was tied too closely with himSorry but as a critical thinker, you are asking the questions that lead inexorably to LanceFor contrast, consider those who close with a mantra, well, of course, prices close-in will fall, next year or the year after.There's a big difference between noticing that income seems low in Alexandria-Arlington, concluding that this fact means that prices must fall and asking, what is the cause of what I observe. The truly strange are those who reject the explanation. My elderly neighbors own their million dollar houses outright and have modest pensions. They have no intention of selling, ever. Their children will inherit the stepped up value.You are going over to the Lance-side of the force.
There are a lot of people who stretched to buy homes way beyond their incomes would allow, based on the assumption that housing prices never fall--only rise, or at worst stagnate. To me, that is also a form of speculation.Thanks, TedK, I was just about to bring this up.Case in point the wife and I really stretched to buy in 2002 - probably close to 40% of our pay.Not wanting to speak for TedK, crt, but I don't think this is really what he meant. What you and your wife did is the sort of rational calculation based on future earnings expectations that people have always done. My first husband and I did the same thing in California around 1979. Furthermore, banks have generally been willing to accommodate them. What people have not generally done is what his realtor recommended to my brother-in-law in 2005 -- to buy the maximum for which he could get a loan-- or about 5 times joint income, rather than the more modest house they did buy-- purely on the basis of the expectation that prices would continue to rise and that the profit on a more expensive house would therefore be greater. Unlike you, my brother-in-law is at the tail end of his career and his income will diminish considerably in another 5 years or so, when he was hoping to retire. His experiences in buying in the past also illustrate another problem with 'stretch to buy' as general advice: unlike many people his age he did not bring equity from his last house to the purchase of this one because a divorce forced him to sell into the middle of the last downturn. Instead of building equity, he ended up bringing a significant hunk of cash to the closing when he had to sell. In short, 'stretching to buy' is always a gamble, but when you are young and at the start of a promising career it's exactly the sort of 'safe' bet people-- and banks-- have always made. For most others, however, it's anything but safe. And although in a period of rising prices many people have always been willing to make Las Vegas-style gambles, banks have not. That limited the upside of previous booms by more or less restricting it to people using equity from previous gains or raising private capital for property 'investment'. Contrast that to the current situation where, even after problem mortgages have threatened the entire financial structure the supposed 'tightening of lending standards' primarily consists of no longer offering 0 down, 'stated income' loans to wage earners. Interest only, neg. amortizing loans with qualification based on the minimum payment are still being offered as an 'affordability' product. The question of why the wealthier areas close in aren't falling now and whether they are likely to in the future is interesting. My theory is that the waves are simply offset by a couple of years. In 2006 the better areas of Alexandria and Montgomery County were also still rising. I'll see if I can find some data on inventories for those areas to compare to the inner areas today.I really appreciate your ability to discuss these questions intelligently, crt. They are very interesting and I believe they deserve to be examined from all angles. I don't think you have to fear for your credibility as long as you continue to base your arguments on evidence and reasoning. On the other hand, it's probably wise not associate yourself with Lance anyway, since he as antagonized so many, even of those who, like me, agree with him on some points.
Sarah: My theory is that the waves are simply offset by a couple of years.And the basis is? The first time I was aware of talk about "a bubble" was in 2001. I've been on the Lance side of this discussion since then. Like Lance, my expectation was a 10% to perhaps, 15% brief pullback similar to the early 1990's. Jingle-mail? Abandoned houses like in Texas decades ago? Never happen here. 2001? Several BH have admitted that valuations kept climbing after they called bubble. Some bought and held and to their surprise, didn't lose their shirts.2005 - Prices peak and start to fall, except inside the beltway. BH call out "Bubble, it's happening. Praise be Shiller." 2008 is approaching a decade after the first discussions of the "Bubble". It still has not happened inside the beltway.Regular gas nadired at 99¢/gallon in 2001. It's $4.00+ today. This is having a compressive effect on cities. My neighbor who drives 2 miles to Crystal City is indifferent to the price rise. The other neighbor, the widow, is planting tomatoes. Inventories are dropping. Builders aren't building. Still no sign of a bubble.Maybe it'll be different this time but it sure looks like a rerun of the 1990's.
kh said:"Jingle-mail? Abandoned houses like in Texas decades ago? Never happen here."I didn't see Texas decades ago; certainly not first hand. Nor do I think you consider PWC to be "here".But in the neighborhood in PWC where my parents live--a bedroom community of SFH--about 5% of the homes are currently vacant. Another 5% are for sale and not vacant. Not all the vacancies are for sale. Some of them are just shells, owned by a bank hoping for a miracle.
kh said: "2005 - Prices peak and start to fall, except inside the beltway..."Many areas inside the beltway have already lost value since the 2005/2006 peak.kh said: "...Maybe it'll be different this time but it sure looks like a rerun of the 1990's..."Housing: It'll get worse"Indeed, prices are falling faster and further than in any other post-war housing bust. During the bust in Austin, Tex., which started in 1986 and is one of the worst on record, prices fell 25%, according to Local Market Monitor, a financial data provider. And that cycle took four years to bottom outIn other major downturns, prices in Los Angeles fell by 21% during a six-year period in the 1990s, and Honolulu home prices saw a decline of 16% in the five years starting in 1994."Yes, nice parts of Arl/Alex will be better off than the far out suburbs, but that doesn't necessarily mean they're immune. I assume that's what you meant when you said "inside the beltway".hog
novahog,Look at Harriet's data: prices are falling everywhere, even in the "nice" areas. More importantly, sales have fallen to levels last seen in 1998. This is telling you that the correction is still occurring. I make no prediction about when it will end or how far it will correct. KH @ 7:10AM,Your e-mail is driven by pure emotion; you've contrived strawman arguments based upon a caricature of a so-called "BH." To illustrate:2001? Several BH have admitted that valuations kept climbing after they called bubble. Some bought and held and to their surprise, didn't lose their shirts.What BH called a bubble in 2001? Sounds more like BS. And who cares if prices didn't immediately drop after some "BH" called a bubble? Given all of the problems that imprudent lending (and borrowing) has caused to our economy over the past year, it would seem that the BHs were right all along. I'll concede that some BHs were not precise on their timing. Jingle-mail? Abandoned houses like in Texas decades ago? Never happen here.Define "here." If you mean select zip codes in Arlington and Alexandria, then I defy you to find any post where any so-called "BH" predicted an catastrophe in Arlington and Alexandria similar to what occurred in the Oil Patch during the 1980's.2005 - Prices peak and start to fall, except inside the beltway. BH call out "Bubble, it's happening. Praise be Shiller."The folks who listened to Shiller in 2005-2006 are much better off than those who listened to David "Real-Estate-Only-Goes-Up" Lereah. Shiller's bubble call, both on dotcoms and real estate, have been proven correct. 2008 is approaching a decade after the first discussions of the "Bubble". It still has not happened inside the beltway.The data reflects that sales and prices have fallen in the "nice" areas. But you've moved the goalposts to convince us that you were right along and that the "BHs" were wrong. In your mind, the BH's predicted an epic collapse everywhere, and they're now idiots because such a collapse has not occurred. It has always been my contention that the correction in desirable areas won't be as great as those in the far-flung exurbs, where intrinsic demand isn't as great. I recall that most other "BH" posters here have felt the same way.Maybe it'll be different this time but it sure looks like a rerun of the 1990's.Nationwide, the current correction is far worse than what occurred during the 1990's. And IIRC, after the 1990's correction, there were bargains to be had; if we have a rerun of the 1990's, I'll gladly wait to scoop up some bargains.
KH... you are getting nuttier by the day."2005 - Prices peak and start to fall, except inside the beltway. BH call out "Bubble, it's happening. Praise be Shiller.""Not inside the beltway? Have you not been reading the data Harriet has provided? Every single county in NoVA is now showing declines, in most cases large ones. Not only that... but we are nowhere near the bottom."2008 is approaching a decade after the first discussions of the "Bubble". It still has not happened inside the beltway."A decade? Who the heck was saying there was a bubble in 1998? This is nothing but another lame strawman...With prices falling throughout the region and even the "best" counties already hitting or passing your 10% drop prediction with much more to come you now appear to be left with nothing but strawmen and a bruised ego.Just to be clear though, since you still cling to your 10% drop prediction... are you now calling the bottom? Both Alexandria and Arlington are now down more than 10% in the latest data...
"KH - no offense to you or Lance, but I really dislike the implication here. Deep down - there is a nugget of brilliance in what Lance says and some of it I really agree with. At the same time however, I would like to think I have a decent amount of credibility here which I would lose if I was tied too closely with him (Sorry Lance - it is what it is)."Portions of what lance says really are true, occasionally even insightful, but when it happens it seems to be nothing more than an occasional bit of insight buried in a mound of misunderstood economics, bad predictions and outright lies. He will obviously say, and possibly even believe, anything that he thinks supports his decision to buy in 2005. On the one hand the District has improved from its nadir in the 1980s and some neighborhoods really have changed their character. There is even a real trend back towards urban living, again, after most big cities bottomed out sometime in the 80s.That said... DC is the next Manhattan? Buy now or be priced out forever? Your chance is slipping away.(2006) Subprime loans will not be an issue.(2006) The bottom has already passed.(2007) "90% of the area is stagnant or climbing"(2008) etc etc... Every step of the way he has been trying to scare, threaten, or goad potential buyers into jumping into the market against their better judgment. He has never owned up to his numerous bad predictions. Instead he just tries to move the goalposts, hide behind strawmen, and generally try to weasel away.
"Terminator X Said...I defy you to find any post where any so-called "BH" predicted an catastrophe in Arlington and Alexandria similar to what occurred in the Oil Patch during the 1980's."Terminator - since I take some of the blame in stirring up some of the current debate allow me to answer your question. Below is our friend Neil (i.e. Wannabuy's) statement in reference to Arlington:"Yep. 2007 wasn't a great year. 2008 will make used home salespeople pine for 2007. I've watched people from 'high end areas' crying on couches because their homes lost 40% of their 'value' in nominal dollars before. Is not something I want to see again, but its coming." Neil - Jan 30, 2008http://recomments.blogspot.com/2008_01_01_archive.htmlNow he seemed to get of that kick for a while, but his post about 1/3 of the way down this thread hes now suggesting that they will fall fast when they fall. If he wants to believe that thats fine, back it up with something explain the how, the why, whatever - dont just make a borderline assinine statement and then just run away. Thats what got me so riled up yesterday. He is obviously a smart guy but he really doesnt seem to see what could possibly different between say Arlington & Ashburn. FWIW I dont put you in Neil's category. I really think there is a pretty general consensus - bulls & bears alike about how this will all play out pricewise for "close in" areas its only the timing that is still an issue. That said, there are still some outliers like Lance and Neil that get people like Leroy and myself all riled up. (incidentally, Leroy, we both should know better by now).
KH...man, you are losing that cool that I saw from years ago. I think the fall in prices is actually starting to make you bitter. I can see it in your posts. You seem to have latched onto Lance completely.Like Lance, my expectation was a 10% to perhaps, 15% brief pullback similar to the early 1990's.Where? Everywhere? Let me remind you of May's numbers :Arlington2008 - (12.89%)2007 - (8.23%)Alexandria City2008 - (9.38%)2007 - (2.27%)Fairfax2008 - (13.26%)2007 - (5.59%)Arlington and Fairfax are well past 15%. Alexandria City is over 11%. Don't bother looking at PWC or Loudon. If you expect the 1990s, we have about 8-10 years of stagnant prices coming! What are you predicting? 7% growth from here on out?Jingle-mail? Abandoned houses like in Texas decades ago? Never happen here.I can't talk to this point as I don't know much about it. But foreclosure numbers are WAY up. This simply cannot be denied. I'm not sure if you call that "jingle mail" or not.2001? Several BH have admitted that valuations kept climbing after they called bubble. Some bought and held and to their surprise, didn't lose their shirts.Those who said there was a bubble IN 2001 were off base and were very few. Looking at the data, they did not have a leg to stand on. I sold in 2005 and felt that it was peak - lucky guess. The data shows the real bubble STARTED 2001. Just look at Harriet's last entry...it shows yearly increases from 10%-30% until 2005. Look at Faquier from 2003-2004 - 54.79% increase! Yeah, that's normal.2005 - Prices peak and start to fall, except inside the beltway. BH call out "Bubble, it's happening. Praise be Shiller."Prices did peak, but not at the same time. The data is showing a lag effect which you will gleefully ignore. Basically the only area holding is DC. I surmise that will not hold.2008 is approaching a decade after the first discussions of the "Bubble". It still has not happened inside the beltway.Come ON KH, don't write foolish things. A DECADE later? You can't honestly say that people were arguing a bubble in 1998 or even 2001. From my view point, peak was ~2005, so we are 3 years in to the declining side. 2001-2005 up, 2005-2009 down. We have a year and a half to go. How's that? :)Regular gas nadired at 99¢/gallon in 2001.[SNIP]Ahhh, the gas argument. I drive from Old Town to Sterling for work - @$4.33/gallon, it cost me $10.83 each day. At $1/gallon, it would cost $2.50. I do this 14 days a month, so in a year, this is $1,400 more. Of course, we are ignoring 7 years of inflation. I don't know about you, but that added amount was more than covered by my raise in 2001. I know in MY mind, it's not worth $100K more house to save on GAS...now my TIME, that's different. I'd have to move OUTSIDE of the beltway to save money. Ironic indeed. :)Does anyone have job figures to see where most jobs are in NOVA? I'm curious.KH, can you please explain this?"Her counterpart, out thar in distant Monkey County, is a thirty-something couple, perhaps dragging down a two hundred grand income and strapped to pay for their McMansion."Why did you use "Monkey County"??? I don't understand the reference. I assume you meant Montgomery county.BTW, CRT...good comments. I like that you are working with numbers and trying to make the argument fit the numbers, not the numbers fit the argument!-Alex
"That said, there are still some outliers like Lance and Neil that get people like Leroy and myself all riled up. (incidentally, Leroy, we both should know better by now)."Yeah, I guess it is beyond obvious at this point that nothing productive can come of trying to educate lance as he isn't interested in learning something he doesn't want to know.(The same appears to be true of KH.) As you said there is a consensus about the general outline of how this will unfold moving forward. Regardless of whether you are relatively optimistic or pessimistic about the long term future of the market every reasonable observer now agrees that over the next few years the market is heading down. The big questions now surround just how far down various parts of the market will fall, and in what time frame. Will the close in areas see a steep drop in the coming months or will they continue their slow erosion? Will the outer areas over correct or is stabilization near? I am actually bullish on the city's long term prospects. It is growing rapidly and has a strong economy. However, that doesn't mean it can't have a real estate bust... see LA, NYC, etc.Shifting gear again, Is it possible some markets are simply naturally tighter than others? I know the general rule of thumb is that >6 months of inventory means a buyers market and <3 months means a seller's market... but does this rule of thumb apply everywhere?Is it possible that for some markets >3 months of inventory means a buyers market and <2 months is a sellers market? I don't have a theory to explain why that might be the case, but we do have an issue with the inventory levels in the "close in" counties. Although inventory is still balanced by "traditional" standards prices are falling rather rapidly. (10% in a year is a significant drop)Maybe the inventory numbers appear healthier than they really are because significant numbers of potential sellers are waiting on the sidelines rather than listing, or maybe 3-4 months of inventory just doesn't mean the same thing in Arlington as it does in PWC. Why would that be? I don't have a good explanation, but it is worth considering that months of inventory comparisons between counties/zipcodes may not be apples to apples...
2005 - Prices peak and start to fall, except inside the beltway. No, actually, they don't. As it happens I've just spent the day graphing out price, sales and new listings data for Alexandria, Manassas, Washington DC, Montgomery Co. and Loudon Co. to see if it supports my theory -- and to see how it matches my memory that prices were generally stable for both the close in and outer areas through 2006 and that the price drops in the places that have since fallen came quite suddenly and dramatically in 2007. Here's what I found: In May, 2006, when I start the graph, median sales prices in all 5 areas-- were up year over year-- except for DC, which was down very slightly (around 1%). Median sales price in Alexandria was $479,900, in Manassas $368,200, in DC $420,000, in Montgomery Co., $449,000, and $479,900 in Loudon Co.There are wide month to month swings in median price in all these areas through February of 2007. These swings are up and down, but show no sustained trend in any of the areas through this time period. The highs and lows are as follows:Alexandria: $479,900/$402,500Manassas: $374,900/$307,500DC: $455,000/$375,000Montgomery Co., $467,000/$410,000Loudon Co., $486,500/$419,900Then in March 2007, Manassas' median sales price suddenly drops to below $300,000 for the first time (after being at $350,000 in February). All of the other areas are still selling within their previous price ranges at this point. From here on, Manassas begins a fairly steady descent, with only occasional breaks upward, finishing as of this May at $178,500.The other 4 areas continue to sell in their previous ranges until November, 2007, when Loudon Co.'s median sales price falls to close to $400,000 for the first time. In January, 2008 it falls to $370,000. It's currently $351,000.Of the 3 remaining areas, DC has stayed in the same broad price range it was in in 2006, while Montgomery Co. and Alexandria, after reaching highs of $490,000 and $485,000 in July and June of 2007 have both been selling near the bottom of their previous ranges, with Alexandria, in recent months, showing a very slight upward trend and Montgomery Co. falling, several times slightly below its previous lows.I also looked at data on number of sales and new listings but I couldn't really see any pattern there that might indicate a clear correlation between price, number of sales and number of listings.
Sarah...is your data in excel sheets? Can you post it?-Alex
Alex--Yes, It's in excel. I'm going to play with it a little more and try and get some decent looking charts. Then I'll try and make it available through google.
Sarah said..."No, actually, they don't. As it happens I've just spent the day graphing out price, sales and new listings data for Alexandria, Manassas, Washington DC, Montgomery Co. and Loudon Co. to see if it supports my theory -- and to see how it matches my memory that prices were generally stable for both the close in and outer areas through 2006 and that the price drops in the places that have since fallen came quite suddenly and dramatically in 2007." HOOOOOLD the phone there Sarah. For a second, I was going to take you to task, but then I realized - you are comparing month to month numbers not year to year numbers arent you? (I.e. you are comparing May 06 to Sept 06 instead of May 06 to May 07 or Jan 06 to Jan 07 to Jan 08) Correct?If you are - there is a problem with your methodology in that for whatever reason median prices rise and fall dramatically over the course of a year, but show very clear patterns when comparing the same month (and only the same month) on a year to year basis. The only way to do a real comparison is to do Year over Year [YOY] numbers (i.e. May 06 to May 07, Jan 07 vs Jan 08), etc. While I do not have anything handy on Manassas for DC I do have YOY median prices for Alex, Loudon and Montgomery. As it so happens, these numbers show a VERY clear and VERY consistent pattern May 06 to May 08(25 months):1. Loudon county median prices have been up 1 month (may 06) and down 24 months. 2. During that same time period, Alexandria median prices were up 16 months and down 9 months.3. During that same time period, Montgomery median prices were up 13 months and down 12 months. 4. Loudon prices have been down the past 24 consecutive months. 5. Alexandria prices have been down the past 5 consecutive months.6. Montgomery prices have been down the past 9 consecutive months.7. In that time period, montgomery never had a double digit drop in median prices. Alexandria did once (Mar 08). Loudon has posted double digit declines 10 TIMES, and for the LAST 5 MONTHS CONSECUTIVELY. 8. For the entire year (i.e. averaging all the monthly YOY median prices together). Neither Alexandria nor Montgomery have posted a down year. By contrast Loudon was down a scant -0.2% in 06, but a very significant -9.2 in 2007.If anyone wants to check my work, it is right here - the same place Harriet gets her decade of sales data we all use.http://www.mris.com/reports/stats/No matter how you slice it though, the data shows a very clear and very consistent pattern - you just have to know how to look at it.
House prices REALY keep dropping.
_Things that make you go hmmmm.....http://www.washingtonpost.com/wp-dyn/content/discussion/2008/05/30/DI2008053001888.html______________________Fairfax, Va.: Good afternoon, love the chat.I finally closed last week on my house after 2 1/2 months and am glad to get in to the property and start making it mine. However, the County updated the records today and the sales price (not the assessed value-although they are the same number) they have listed is 125,000 above what I paid! Who would I contact about this? This makes me wonder about the sales prices listed for other properties I have looked up in Fairfax County.Elizabeth Razzi: It does make one wonder, doesn't it. The first thing I would do would be to check my sales documents to make sure something isn't wrong there. Then I'd call the closing agent title company, which was supposed to file the information with the county, and ask them to get it fixed.
crt-- You're right, of course. That's what I get for focusing too much on one set of numbers. I actually set out to see if I could find any useful relationship with price and some combination of numbers of sales and new listings. I'm still looking at that, in fact, but when I didn't see anything obvious I started looking at the month to month price changes. I did look at the year over year figures for May, 2006 for all 5 areas-- the first month I tracked-- and what I said is true: all are up for that month, year over year, except DC. But of course that was the last month Loudon was up. The trend in year over year changes is obviously important, but it's interesting to look at the data and compare the different areas even without it.I'm plugging in the year over year % changes now, and I suppose I should really go back to 2005 if I want to see if there's any evidence for my theory. Don't know if I'll get to it tonight (we're six hours ahead of you here) but I'll post a google link when it's done.
"Sarah said...That's what I get for focusing too much on one set of numbers. "No worries Sarah - I figured it was something like this. I did the same thing when I first started looking at prices - to this day, its still not clear to me why prices can rise and fall so much in a given year, and do it fairly consistently on a year by year basis. Oh well it is what it is.Also, before you kill yourself on graphing things out - you might want to look at thishttp://www.recharts.com/AroundDC.htmThis guy took all the MRIS stuff and already graphed it - it is a bit hard to get monthly figures specifically, but its pretty fantastic. Incidentally my favorite stat (as you may have guessed by now) is months of inventory. Its econ 101 at its most basic form - supply and demand. Median prices tell you where you have been and even then there are a number of things that can skew them one way or another. By contrast months of supply is a forward looking indicator and a good indication of where prices may be headed. Take a look at some of the differences by area - especially since 2006 - they are dramatic and sometimes shocking.Good luck!
Leroy - re your question about the 6 months metric. Its just one of those things that everyone uses but no one really knows why - I will say that I was curious about that same thing before - close in has stayed mostly below 6 months yet median prices are still slightly dropping - why? I dont want to throw median prices out the window since without them we dont have a lot to go by. Thus the best I could come up with is the substitution effect. No one to my knowledge has ever tried to show why it would be different by area - but I suppose it certainly could be the case.
crt: "...By that definition, I guess I dont. To me, if you plan to live there for at least 5 years and pay down equity thats not speculating..." I would say speculation occurs even when people plan to live for 5 years as long as their 'stretching to buy' is based on the belief that one cannot have a significant loss of equity by buying a home. Or, if people bought at peak prices to live for many years because they thought that something had changed fundamentally about real estate (or if they feared that without buying, even if they had to stretch and use exotic credit, they would be priced out forever), that is also speculation. Leroy/crt:On that 6 months rule of thumb for inventory, there was a study done by some researchers at a university in Texas where they found real estate markets roughly followed that 6 month pattern.It is not clear if their study applied to the inner core of cities. Anyway, such studies apply to normal real estate markets, where buyers and sellers behave in predictable ways--when they have never seen sharp drops in prices.One cannot use such studies when an unprecedented bubble bursts and people witness 60--80% drops not far from their homes. If the rules of the game were different on the way up (Did any economic or statistical theory foresee the bubble's longevity?), why should they be like a normal cycle on the way down? So the asnwer to your questions is that market psychology cannot be easily modeled or quantified.
Washington Post:Foreclosure Filings Continue to Risehttp://tinyurl.com/3qekps http://tinyurl.com/4octwf
Ted K - I think your definition is a bit too rigid - especially your definition that "the 'stretching to buy' is based on the belief that one cannot have a "significant loss of equity by buying a home."That risk is always there - a dirty bomb goes of in Washington tomorrow - riots from the nearby ghetto - whatever. If you think about it, buying a house is always speculating. Renting removes almost all of that risk from the equasion. Yet we still buy houses based on the belief that there will be better (or at least not worse) days ahead.At this point, I am sort of giving you a hard time but I do see your larger point. I hope you see mine though.As to the inventory thing. I think you are probably right about the 6 month rule working in normal circumstances. Clearly these are not normal circumstances. It could be you need a lower number to have gains in a market where there are foreclosures (yes there are even some of those close in). Maybe in a foreclosure saturated market - you need to have say 2-3 months of inventory before you see price rises. Then again, say you took 1/10th of the available inventory dropped it all by 100K (as you would see with foreclosures), you are pretty much guaranteed a significant median price drop even where the non foreclosure part of the market is selling at a good pace. Who knows (that said, I still dont want to throw median prices out the window - its still a decent indicator of how the overall market is doing). I will say this though - the areas where the months of inventory number has remained lower will do better than those that have a appreciably higher months of inventory number. At the end of the day, it still comes down to supply and demand.
crt: "I will say this though - the areas where the months of inventory number has remained lower will do better than those that have a appreciably higher months of inventory number. At the end of the day, it still comes down to supply and demand."Agreed. I have always said that, though close-in areas would see price drops deeper than in previous normal cycles, but it wouldn't be as deep as in the far out areas.
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