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Friday, June 6, 2008
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43 comments:
Funny Powerpoint Presentation that's been floating around on the housing mess and how it all got started. Check out the high quality art work.
LINK
More North Arlington price declines...
http://tinyurl.com/666h7q
bubbletrouble, what improvements to the house were made between 2004 and 2008?
If you don't know, then you can't interpret anything from the sales records alone.
Take a look at the chart for June 5th at the San Diego bubble blog.
This suggests an explanation for why the inner and more expensive areas haven't yet experienced a major correction: we're a little past the peak for resets on subprime-- but still many months away from the wave of option arm resets to come. Since lenders are reporting that 70-80% of option arm holders are paying the minimum I think we can expect some major pain from the double whammy of interest rate resets and beginning to make amortizing payments.
From a tour of the house and conversation with the realtor, nothing major. Maybe some minor landscaping.
bubbletrouble:
nice updates!
when was the kitchen redone?
http://tinyurl.com/5o5qkk
http://tinyurl.com/6nnuku
Thanks, zerodown, the kitchen and downstairs updates look post-2004 to me, but maybe not. And the sales price of $625K at the end of 2004 for a completely updated 22207 house of that size seems low.
Sarah, interesting chart and comments.
Around here, there are many houses >$1M that have been sitting on the market a long time, with few price drops. Maybe these owners have no reason to have to move (but just want to see what they can get for their houses). Or maybe they don't agree that as time goes by there are going to be fewer and fewer qualified and interested buyers due in part to an increasingly restrictive financial market and in part to reductions in the prices of the homes that the buyers must sell to move up. A buyer who has to take less for his/her house due to market conditions is not about to give a seller a 2005-era price.
Re: 2238 Columbus, notice that the "edited facts" state that the house was updated in *2006*, i.e., between the time of the 2004 and 2008 sales.
http://tinyurl.com/5xsbea
I see an example of a house selling for more in 2008 than in 2004. So, what's the point? Is there someone on this forum that claims that that couldn't happen? Did someone say that prices in this area had fallen to 2004 levels?
"Sarah said...
Take a look at the chart for June 5th at the San Diego bubble blog.
This suggests an explanation for why the inner and more expensive areas haven't yet experienced a major correction: we're a little past the peak for resets on subprime-- but still many months away from the wave of option arm resets to come. Since lenders are reporting that 70-80% of option arm holders are paying the minimum I think we can expect some major pain from the double whammy of interest rate resets and beginning to make amortizing payments."
Sarah - I have looked into that and honestly I think that issue is overblown. For anyone who hasnt looked at the finer details of that chart, take a look at this which shows where the garbage loans are located on a county by county level that I think Zerodown gave us. http://www.newyorkfed.org/regional/subprime.html click on the ALT A report by county and look for option ARMs
For starters, you will see that even when you account for population, the bubbly areas in CA have something like 4 times as many garbage loans as our worst offender PWC - a truly staggering amount. Thus, that chart we have all seen really doesnt tell us much about how this area will be hit.
Secondly, when they do hit, guess where those loans are concentrated? Thats right, outer counties. As a percent of all households, Option Arms make up the following percentages:
Arlington 0.44%
Alexandria 0.46%
Fairfax 0.81%
Loudon 1.29%
PWC 1.43%
The same thing can be seen with negative am loans, alt A's nearly every type of garbage loan imaginable. Every single type of garbage loan out there is concentrated in the areas already hard hit.
The reason for this discrepancy is simple if you think about it. Close in, for every person who has a new garbage loan, there are 10 long time homeowners who never got into the garbage loan game. The farther out you go (especially where all the housing is new), there are fewer long time homeowners to offset the garbage loan holders.
Thus as was the case with subprime, and so many other causes throughout this crisis, once again, the deck is stacked against the outer areas. Inner areas may very well experience "some major pain from the double whammy" as you put it, but when that happens, the outer areas will have to suffer from excruciating pain of a quadruple whammy.
crt:
While some Alt A loans are option ARMS, many, probably most, option ARMS are prime loans which will not be reflected on the Alt A charts.
http://tinyurl.com/4ydfkf
Does anyone know what happened at the June 5 auction of Ann Page's house at 1495 Evans Farm Dr, 22101?
MD 30 days late payments up 70%!!!!
http://www.wtopnews.com/?nid=25&sid=1416718
Does anyone know what happened at the June 5 auction of Ann Page's house at 1495 Evans Farm Dr, 22101?
I heard that it didn't sell.
"zerodown said...
crt:
While some Alt A loans are option ARMS, many, probably most, option ARMS are prime loans which will not be reflected on the Alt A charts."
Good point - something I wasnt thinking of.
That said, here is what I found on option resets (presumably prime & nonprime):
http://www.businessweek.com/common_ssi/map_of_misery.htm
Again, it looks like places like CA will take a lions share of the option resets.
Locally, due to the mix of new versus old homeowners I noted above, something tells me that there is once again an inordanite number of option arms the farther out you go. Would you have any reason to suspect otherwise?
Not to upstage Harriet, but some early "whisper numbers" are out for May 2008.
Arlington:
Listings: 897
Sales: 209
Months of Inventory: 4.29
Average prices: -4.2%
Alexandria
Listings: 780
Sales: 174
Months of Inventory: 4.48
Average prices: -5.5%
Fairfax
Listings: 7084
Sales: 1217
Months of Inventory: 5.82
Average prices: -10.2%
Nothing yet on Lou or PWC & nothing on median prices anywhere. If these numbers hold up, it would appear that:
- For all 3 counties, months of inventory is down for 5 straight months and for each area is now less than half what it was in January.
- Alexandria and (surprisingly)Fairfax are beating their YOY months of inventory numbers. Arlington still trails.
- Last month, I suggested PWC, LOU & possibly FFX could all beat YOY sales figures. Jury is still out on PWC (likely) and Lou (possible). However, I missed on FFX its back to 95% of YOY sales.
- Arlington & Alexandria are still far behind on YOY sales. (63% & 84% of last year respectively). This is still an improvement (MOM) for Alex but NOT for Arlington. Will this lack of improvement start to drag ARL down, or will its impressive 4.29 months of inventory keep it afloat? Tune in next month to find out!
CRT said...
"Arlington & Alexandria are still far behind on YOY sales. (63% & 84%of last year respectively). This is still an improvement (MOM) for Alex but NOT for Arlington."
That is why months of inventory is a more important metric. There are 23% less houses to choose from in Alex now than last year (780 vs 1007) so its expected you cant sell as much when there isnt as much on sale in the first place!
By contrast, sales are down only 16% YOY. Thus, since sales are not down as much as inventory, months of inventory dropped (i.e. the sales/inventory market is better than last year).
Excuse me now while I go jump of a cliff - goddamn metrics close in continue to defy the laws of gravity. 03 prices are long gone!
As a percent of all households
crt-- is that really a percentage of all households? (As opposed to all households with mortgages.) If so, the higher percentage of renters in Alexandria and Arlington might explain the difference.
I frankly see very little difference between my old Del Rey neighborhood and my sister's neighborhood in Rockville-- except that there are more and larger single-family homes in her neighborhood. And the speed and size of the downtown there was truly astonishing.
In 2006 prices were still going up. In 2007 they began a slight drift down and were hovering slightly above 2005 prices -- until fall, when we had a sudden rash of short sales which mostly, over the following few months, turned into REO. Until then I hadn't seen any property for less than $300,000 and most of it was around $400,000. Now, after months of steady pressure down there's very little over $400,000 and a least a quarter under $300,000. Some of it's beginning to press the $200,000 barrier.
I think the substitution effect is likely to be seen quite soon, given that families buying close in will probably be considering the added expense of private schools for the kids whereas in these areas 30 minutes from the center by metro they can send them to good public schools.
crt:
I wish I had better information on option arms in the dc area. I know they are out there, but I have not found a break down by jurisdiction.
Here are some articles . . .
During the boom years, option ARMs were wildly popular in major metropolitan markets across the country.
http://tinyurl.com/4jnsbf
Option ARMs have zoomed from a tiny niche product -- no more than 3 percent of new home loans in 2004 -- to 25 percent of all mortgage bond pools rated by Standard & Poor's in 2005.
Option ARMs are popular with home buyers -- especially in high-cost areas of California and along the Eastern seaboard -- because they enable consumers to cut their interest rates to as low as 1 percent for limited periods of time. Option ARMs give buyers a choice of several payment plans, ranging from minimum monthly payments (like a credit card), interest-only or fully-amortizing.
http://tinyurl.com/3gj6l3
Interest only was popular here in 2005:
About 54 percent of home buyers in the District purchased their homes using interest-only loans so far this year, according to LoanPerformance, a San Francisco-based company that tracks loan originations nationwide. About one-third of buyers in Maryland and Virginia are buying with interest-only loans.
http://tinyurl.com/937ar
What private schools?? That makes no sense unless you are talking City of Alexandria or Arlington south of 50. North Arlington, McLean, Bethesda, i.e. the close in suburbs, have the best public schools in the country. Certainly a lot better than Manassas or Woodbridge.
If this is true, Arlington will have a 32% drop in sales YOY:
307 (May 2007) to 209 (May 2008)
Arlington:
Listings: 897
Sales: 209
Months of Inventory: 4.29
Average prices: -4.2%
Sarah - it is adjusted to account for renting - apparently it included renters' whose owners had a mortgage, but did not include multi family renters (i.e. apt buildings) so it looks pretty accurate.
Unfortunately, I checked my link again and it appears they have switched from a County level (last I checked in January) to a State level. Earlier, you had access to all sorts of info for 6000+ counties across the USA. Novawatcher - if you are out there, any idea why they changed it?
"I frankly see very little difference between my old Del Rey neighborhood and my sister's neighborhood in Rockville-- except that there are more and larger single-family homes in her neighborhood. And the speed and size of the downtown there was truly astonishing."
I really dont get it either. Why is Rockville getting beat up but Del Rey Ok? There is some evidence that people are now looking to move closer in and to smaller walkable places (see the writings of new urbanists like Richard Florida, James Kuntsler, etc), but it seems remarkable that people made such a dramatic shift in the last 5 years.
"I think the substitution effect is likely to be seen quite soon, given that families buying close in will probably be considering the added expense of private schools for the kids whereas in these areas 30 minutes from the center by metro they can send them to good public schools."
Thats the other thing Florida, Kuntsler, & even David Case suggest - changing demographics close in (translation lots of singles and dinks). Normally good schools is a sign of a good place to buy, yet Alexandria schools suck and DC schools are some of the worst out there - however, schools would not matter much to singles and dinks. Again, it would be remarkable to think the transformation happened in a mere 5 years of the bubble, but I guess its possible.
Zerodown said...
"I wish I had better information on option arms in the dc area. I know they are out there, but I have not found a break down by jurisdiction."
Unfortunately, all I had was on subprime as seen in that link - I dont have anything on prime either.
Of all the articles you cite, most simply say "metro area" or DC metro and the like. Again the question is where in that area? The most persuasive article is the one that said 54% of the buyers IN DC used junk loans but again, are they prime or subprime? They could be in marginal ares near the PG border where I know there was A TON of fraud & flipping going on very late in the game.
Then again, they could be genuine and a whole slew of resets on its way to DC. DC has shown some weakness relative to Arl & Alex lately (I have no whisper numbers on them yet). Could close in be shrinking again? Maybe...
"If this is true, Arlington will have a 32% drop in sales YOY:
307 (May 2007) to 209 (May 2008)
Arlington:
Listings: 897
Sales: 209
Months of Inventory: 4.29
Average prices: -4.2%"
So far it looks that way. But remember as the Anon so astutely pointed out, given that inventory has dropped so much over last year, its hard to have as many sales when there isnt that much out there for sale.
For example, say inventory dropped to 250 (humor me there). How can you possibly have 300 sales (like last year) when there is only 250 houses for sale? Obviously you cant.
Thats why months of inventory is a far more important metric. Currently Arlington is at a pretty impressive 4.2 months of inventory - weaker than it was last year (3.72 months), but still the strongest market out there by a long shot.
Bubbletrouble-- Actually, I was thinking of the Central DC and Alexandria areas that Lance as always touting as safe from any price reductions vs. the suburbs just beyond Bethesda on the red-line.
Anonymous, who knows how it will play out here, but it's certainly typical in California that the higher end stuff begins to fall later and the drops continue longer. And as I say they've come very hard and suddenly to my sister's Mont. Co. neighborhood.
It seems logical to me that that's the way it would work. The higher end people have more resources -- savings, stocks and 401Ks -- to spend down before throwing in the towel.
On the demand end, although there may be a few who would truly never consider a place near the VRE line even if it were free, most of us have a point at which it becomes tempting. I reached mine today, looking at the 20110 property around the Manassas station. ;-) Hell some of it's getting down to around what we paid for our first house in LA almost 30 years ago.
crt said... I really dont get it either. Why is Rockville getting beat up but Del Rey Ok? There is some evidence that people are now looking to move closer in and to smaller walkable places (see the writings of new urbanists like Richard Florida, James Kuntsler, etc), but it seems remarkable that people made such a dramatic shift in the last 5 years.
That's the thing, though-- my sister's place is also very walkable-- they walk to the metro every day and there are some good restaurants --also within easy walking distance. I suspect people just don't know it's there. Much like Del Rey when we moved there in '99.
The Arlington schools south of 50 are perfectly fine; it's a myth that they aren't. I think the high school south of 50 ranked more than 300 spots above TC Williams in Alexandria, for example, in a recent survey. They are much more highly ranked than most of those elsewhere in the metro area, and the only reason some don't rank as highly as McLean, some of the north Arlington schools is that a higher proportion of students have English as a second language or come from more disadvantaged backgrounds, not because of lower quality of teaching, facilities, etc. Arlington invests a lot in all the schools, which it can afford to do in part because there are so many households without kids who are paying taxes to support them.
crt, I agree that months of inventory is a better metric, but there really can't be a ceiling effect on sales when there are far more houses for sale than there are sold homes. The only time that argument is reasonable is in the example you cited, but if there are instead 800 houses on the market and only 200 sold, the reason is not that there aren't any houses to buy. It could be because no one wants to buy them at the prices offered, but that's a completely different issue.
And, the same argument that is used to suggest that there would be more sales if there were more houses for sale can also be used to suggest that there would be more sellers putting their houses on the market if they thought they could sell them for a good price.
PS crt, I'm not sure where you are getting the numbers about Arlington's inventory dropping this year. According to MRIS, the # of available listings in May 08 (923) is higher than in May 07 (851). Inventory was also higher in April 08 than in April 07, March 08 > March 07, etc.
http://www.virginiamls.com/charts/index.htm
Why is Rockville getting beat up but Del Rey Ok?
Take a look at a map.
Rockville is way out there, compared to Del Ray.
Del Ray is a small, trendy neighborhood surrounded by major employment centers.
Topographically speaking, Del Ray has more in common with Mass Ave than Rockville.
That's an explanation for what you observe.
BusinessWeek:
The Next Real Estate Crisis
By April, 2009, hundreds of thousands of option ARM mortgages will begin resetting, bringing on a fresh wave of foreclosures
http://tinyurl.com/5dt6on
Interesting Chart:
http://tinyurl.com/6lk7dy
CRT: Novawatcher - if you are out there, any idea why they changed it?
I missed where you got those numbers from -- who is the 'they'? NVAR?
Chopping Koppel
TED Koppel could be the king of all price-slashers.
The former "Nightline" host has chopped the price of his suburban Washington, DC-area home by more than half since he first put it on the market in 2005 for $4.1 million.
He's now asking $1.94 million for the nearly 9,000-square-foot spread in Potomac, Md., after lowering it to $2.3 million last August. The six-bedroom Contemporary on 2.5 landscaped acres includes an indoor pool, a gym with a sauna, maid's quarters and a horse barn.
Koppel and his wife, Grace, have since moved to a larger place on the Potomac River a few miles away.
http://tinyurl.com/5o5xp9
Zerodown-- very interesting chart. The one I linked to evidently shows the original recast dates. Yours reminds us of another reason why 'option arms' are so toxic: when prices are falling the loans recast much sooner than the borrower was expecting. So it looks like we're already getting a lot of early recasts of loans originally not set to recast until next year.
The Koppel story gives us the other half of why I think the higher end will start dropping before too long-- there's not just the 'pull' from the bottom end as prices eventually get so cheap that people are lured into areas where they didn't originally think of buying. There's also the pressure from the top, as people looking in the million dollar range realize they could once again buy an actual -- not a 'mac'-- mansion for that money.
Ace said...
"PS crt, I'm not sure where you are getting the numbers about Arlington's inventory dropping this year. According to MRIS, the # of available listings in May 08 (923) is higher than in May 07 (851). Inventory was also higher in April 08 than in April 07, March 08March 07, etc."
Ace - for whatever reason, the numbers from the MLS site never match up perfectly (very close but never perfect). As to the numbers I was refering to, they should appear at this site in the next few days - the same place harriet goes for the "decade of sales" reports she sends every month.
http://www.mris.com/reports/stats/
As to inventory being higher Apr 08 vs 07 Mar 08 vs 07. Thats correct. Remember, when this trend started at the beginning of the year, we assumed there would be a spring bounce and have all time inventory highs - it didnt happen. Instead, as Leroy suggests, inventory is now pretty much flat and will come in far below summer 06 peak levels. I agree.
"NoVAwatcher said...
CRT: Novawatcher - if you are out there, any idea why they changed it?
I missed where you got those numbers from -- who is the 'they'? NVAR?"
Novawatcher - the "they" I was refering to was the Federal Reserve Bank of New York
http://www.newyorkfed.org/regional/subprime.html
Didnt you provide this link to all of us? Maybe it was someone else. In any event back in January you could access stats for 6000+ counties - it was fantastic! Now it "looks" like they only offer info for all 50 states - no longer by county. Maybe that link is stale, or maybe its just gone.
Looking at property within walking distance of the VRE in Springfield, I found these:
6016 FREDERICK ST, Springfield, VA 22150, List Price: $299,000
Last Sale: 09/15/05
Sales Price: $543,000
MLS #: FX6629699
6008 BACKLICK RD, Springfield, VA 22150, List Price: $300,000
Last Sale: 03/24/06
Sales Price: $565,000
MLS #: FX6647168
6007 FRONTIER DR, Springfield, VA 22150, List Price: $259,000
Last Sale: 04/28/06
Sales Price: $610,000
MLS #: FX6545906
Note: This one is less than a mile from station, but on the wrong side of the spaghetti bowl, so not actually walkable.
6703 JEROME ST, Springfield, VA 22150, List Price: $300,000
Last Sale: 08/31/83
Sales Price: $82,000
Note: This one is quite close to the Franconia Springfield Metro. The copy says, “Seller owned!!! Priced to sell!!”
MLS #: FX6681251
6600 CIMARRON ST, Springfield, VA 22150, List Price: $270,000
Last Sale: 02/22/06
Sales Price: $490,000
MLS #: FX6660658
Note: About a mile from the Franconia Springfield Metro.
5913 BRUNSWICK ST, Springfield, VA 22150, List Price: $279,900
Last Sale: 04/25/06
Sales Price: $484,000
MLS #: FX6649812
5804 BRUNSWICK ST, Springfield, VA 22150, List Price: $259,000
No data on last sale.
MLS #: FX6510436
Notes say 5 minutes walk to Backlick VRE
Just as a point of interest, most of these sold last in 2006 for a little less than the $500,000 Lance was suggesting was reasonable for a family with a $75,000 income.
bubble, I am not sharpest knife in the drawer, but I do not see how $625K in 2004 to $725K in 2008 (sales prices) qualifies as a price decline. I am looking for them as hard as everybody else on this board. Thanks.
zapoteca, I think b.t. was using sarcasm and one example to make the point that others have tried to make here, that in fact North Arlington prices aren't declining at all and are in fact going up. However, for reasons described in replies to b.t.'s posts, the increase in that particular home's value is very likely due largely if not entirely to some nice improvements the owner made 2004-2008.
Ace said...
“zapoteca, I think b.t. was using sarcasm and one example to make the point that others have tried to make here, that in fact North Arlington prices aren't declining at all and are in fact going up.”
Have we now gone from:
Not in NoVa
Not in D.C.
Not in D.C. proper
Not in Arlington
And now to:
Not in North Arlington
robert: Have we now gone from:
Not in NoVa
Not in D.C.
Not in D.C. proper
Not in Arlington
And now to:
Not in North Arlington
More like,
It's about to happen!
2005, 2006, 2007, 2008... No wait. It hasn't. PWC, Manassas, maybe parts of Fairfax but not inside the beltway.
I'm going to buy at a discount. They keep countering with higher numbers. How can I buy if they don't accept my offer, don't they know that the buyer sets the price?
Inventory is up. Inventory is dropping inside the beltway. It's up from 2005. It's down from historic levels other than 2005.
Why is Rockville different from Del Ray? Rockville is outside the beltway and Del Ray is inside.
Here's one that went up! It's a rehab! Is it? How can you tell?
Rents are going down. I'm raising my rents.
I don't care if I have to drive 150 miles, I'll get a place at my price. $139/barrel. I'll just get a smaller car. $4.19.9. Why would you spend 2 or 3 hours each day of your life, 10 or 15 hours a week, commuting?
Then there's gas rationing and gas lines.
I'll just take the VRE. The VRE isn't free.
kh said "Here's one that went up! It's a rehab! Is it? How can you tell?"
If you'll look at the posts above, you'll see the evidence that substantial improvements were made (no one claimed it was a "rehab") to the kitchen and possible elsewhere. For example, there were photos showing a very new and nice kitchen and a link to the seller's/seller's agent's own statement on Zillow that in 2006 it was renovated were presented, among other things.
THAT'S how "we can tell."
kh said "Inventory is up. Inventory is dropping inside the beltway. It's up from 2005. It's down from historic levels other than 2005."
Once again, EVIDENCE from MRIS was linked above that showed that YOY (2008 vs. 2007), Arlington inventory for at least the last several months is UP. Will this continue? I have no idea, but I do know what the numbers show to date.
Not sure why some people view matters of fact as matters of opinion and speculation.
zerodown,
That piece about Ted Koppel's home (if true) should be a real eye opener to all those who think prices close-in will not fall.
If the asking price of a 9000 Sq ft, 2.5 acre home is $1.94 m, imagine what one should get for $1m and $0.5 m? And that is in a very desirable area, comparable to Great Falls and perhaps Bethesda and Mclean.
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