The S&P/Case Shiller composite index (graph here) for the month of June was released yesterday (and discussed in yesterday's bits bucket by CRT).
CalculatedRisk: "In real terms, the Case-Shiller National Home price index is off 25% from the peak. Real prices are now back to the Q4 2002 level (nominal prices are back to mid-2004)."
From WSJ Online:
"Home prices are improving in some parts of the country but still falling sharply in places like Phoenix, as the weak housing market and shaky consumer confidence continue to weigh on the U.S. economy.
'We're starting to see some hopeful signals in parts of the country,' said Nigel Gault, chief U.S. economist at Global Insight, a Lexington, Mass.-based forecasting firm.
On a monthly basis, home-price declines in the nation's largest cities slowed in June, according to the S&P/Case-Shiller home-price indexes released Tuesday. Prices fell 0.6% on average from the month before after falling by 1% in May. The June performance was a marked improvement from monthly drops of 2% to 2.5% that occurred earlier this year.
. . .
'Prices are still falling very steeply in the areas that got most overheated and further declines will be necessary in those regions for sure,' Mr. Gault said".
June's difference from peak prices (May 2006): -21.38%
From blog reader Shamrock, a point of clarification:
"The Washington DC area is down about 20% from peak, but that doesn't really tell the whole story since I suspect that PW County is down 35%, Loudoun down 30%, and Arlington down 5%."
29 comments:
It would be nice to see these numbers broken down by zipcode, but I guess that data isn't available to the public. The washington dc area is down about 20% from peak, but that doesn't really tell the whole story since I suspect that PW County is down 35%, Loundoun down 30%, and Arlington down 5%.
Some of this information can be found in the tiered data. The high tier(>470K) is down 15% from peak, while the low tier(<327k) is down 28%. However, the high tier is only up 90% from 2000 levels while the low tier is still up 114% over 2000. So I guess the conclusion is the high end areas (like Arlington) didn't inflate as much during the bubble and therefore have less air to burst.
Wow, I know you must have posted similar things before, but what I picked up on this time is how incredibly flat prices were from 1992 to 1998! and they had been mostly falling for 1991 after a huge blip of a bubble in the late 1980s. 6 years of flat. Wow. So I can kind of see how people feel that prior to 2000-2001 the area was actually under-priced. Hard to say how this plays out in terms of actual prices of individual areas, since the region is fairly heterogenous price-wise for purchases (although rentals are bizarrely equally expensive everywhere). Did the rising tide eventually float all boats? Or were decaying areas holding down the median? I don't know.
Shamrock - even the price tiers do not tell the story as high tier areas like Loudoun County have taken a severe beating that Arlington has not.
Case Shiller has touched on this and suggest it has a lot to do with geography:
"So even as overall sales volume drops, relatively stonger demand for housing will limit price declines in neighborhoods with shorter work commutes, better schools, and easier access to parks, recreation and retail centers...When combined with large inventories of unsold housing on the edges of urban areas, this shift in preferences will mean that prices for homes in outlying neighborhoods will continue their more rapid decline and will be slower to rebound when housing markets finally start to recover."
http://www2.standardandpoors.com/spf/pdf/index/052708_Housing_bubbles_collapse.pdf
At the peak people were paying near the same price for a similar home out in the sticks as inside the beltway.
I was laughing at all those idiots paying nearly 7 figures for a track home in PWC or Loudoun when they could have spent another 50-100k, ( got a 10k sq/ft lot instead of a 25k lot ) and lived 10 minutes from the bridge.
Even worse were the "luxury townhomes" that were going for 500-750k out there in Ashburn or South Riding, and you had a 45 mile commute.
WTF were people thinking? Did they really think that location was anywhere near as desirable as Ballston or Clarendon?
"... relatively stonger demand for housing will limit price declines in neighborhoods with shorter work commutes, better schools, and easier access to parks, recreation and retail centers..."
Yep, I've been noting this on this site for some time now. Which is why N. Arlington SFHs within walking distance of Metrorail in the Rosslyn-Ballston corridor are doing just fine.
doug: considering that most people in South Riding do not work inside the beltway, then South Riding is more desirable to them than Ballston.
the homes i've watched in alexandria, were 450k in 2003/04.
they topped close to 700k in 06.
they are only 600k now.
i would jump in at 560k TODAY if it was possible.
Novawatcher - thats because most buyers in South Riding were housing speculators and now dumped their worthless properties on the market!
LOL!
Doug, this has been hashed over to many times. Not everyone (not even most) prefer Arlington to Fairfax or Loudoun. There are more jobs in Fairfax than Arlington. Most people prefer to drive than take metro. Arlington is not suffering price declines of the same magnitude in part because there was little expansion of supply during the bubble. And so on.
For example, here are the results of the reader poll: All else being equal, where would you prefer to live? Note how Arlington comes in 2nd.
Fairfax County: 105 (29%)
Arlington: 100 (27%)
Alexandria: 37 (10%)
DC: 31 (8%)
Loudoun County: 30 (8%)
Falls Church: 25 (6%)
Prince William County: 12 (3%)
Fauquier County: 7 (1%)
Further Out: 7 (1%)
Stafford County: 4 (1%)
True, not everyone wants to live in Arlington, as the reader preference poll shows, Fairfax is 2% ahead of Arlington, 29% to 27%.
Now look at that in terms of demand. As of 2006, Fairfax County has 388K housing units versus 94K for Arlington. (I couldn't find the number for single family homes, but I'm pretty certain that the ratio of Fairfax SFHs to Arlington SFHs would be even larger than that for housing units in general). Arlington is about 26 square miles and Fairfax county about 395. If the reader preference poll reflects general sentiment in the region, this helps explain the high prices in Arlington.
Of course, that whole 27% cannot fit in Arlington, so prices rise until supply and demand come into balance. And through the magic of the substitution effect, the remainder of that 27% find someplace else to live (or for those of you who don't believe in the substitution effect, they vanish from the face of the earth).
Note 1: This post is not meant to contradict anything shamrock said.
Note 2: How long before the supply of those $1.5 million dollar + teardown replacements exceeds the demand for $1.5 Million houses in Arlington? These things have been popping up everywhere around me in the last couple years - including right next door, many of them spec homes by builders. Can the demand, measured not in people who would like to live in such homes, but in the number would like to live in such homes and are willing to spend that much money, keep up with the supply. I'm skeptical.
doug: most people bought in South Riding to live there.
I knew this home would sell fast, but under contract in just 6 days? man, are buyers out in forces bargain hunting or what?
3/2/0 Colonial in MILBURN TERRACE 22207, listed at $585K (08 Tax Asmnt: $597,700)
(courtesy of franklymls.com)
what does this (pending) sales tell us about the price change in this particular No Arl neighborhood/street? here's the sales history of the home across the street:
5108 27th ST N
DATE PRICE
7/25/2007 $715,000
6/28/2005 $750,000
they are identical homes size and style wise (don't believe me? go to the Live Search Maps on msn.com), but are they 'comps' without seeing inside? let's just say yes for the fun of it.
so, let's assume 5109 got a full price contract, then the potential YoY appreciation for 5108 would be: -18%.
sounds about right to me...
Dang a lot of angry south riding people on here, lol.
Im sorry you bought out there and lost all your money, while Im way, way ahead since purchasing in North Arlington almost a decade ago.
Fact of the matter is, location is everything, and South Riding is a garbage location compared to N Arlington.
And since there are no jobs in South Riding, everyone there sits in awful traffic on Rt 50 every morning, I know because a guy in my office lives there. He absolutely hates it there.
Actually, I don't live in South Riding or near that area at all, but I do know those that do. A few years ago, SR did a survey of residents on their commuting habits, and most worked in the Dulles coridor or nearer. I was suprised by how few actually worked inside the beltway (I was also surprised to see a few that commuted to MD, yikes!). I've been trying to google it and search their web site, but I can't find the survey results anywhere.
Having said, that, there were flippers, and I can actually give you some addresses. But most of the people who moved out there wanted a quiet place to live that they can afford. For those folks, Arlington would be a garbage location, as it wouldn't be close to work (MCI, AOL, Dulles corridor, etc.). In fact, for those jobs, commuting from Arlington would have been as stupid as commuting from SR to DC.
novawatcher, facts don't matter to morons like doug, LOL!!!!! bah hah ha h!!
Here's the assessment website (if my link attempt works):
assessment
MM, as I've posted ad nauseum, in Arlington, you have to know what updates have been made because (a) many of these are so costly and (b) Arlington houses vary dramatically in the level of updating. You can have one owner of the same house for 30 years who's done almost nothing to it - or rented it out, so that it is not only worn out, but possibly beaten up and neglected. Next door you could have a young couple who bought one of these and put $200-300K in it--without increasing square footage--and it is much nicer, and much more valuable. It helps to look at the Arlington assessment website, although that doesn't tell the full story.
In this case, there are differences shown on the assessment website BEYOND any updates. The one at 5109 27TH ST N has apparently been rented out--the owner's address is different from 5109. It is assessed at $597700. From the photos it needs a LOT of $$$ and work in upgrades. The one at 5108 is owner-occupied, smaller, 1161 square feet, but has a porch and 2 fireplaces, and is assessed 9% *higher*, at $652K (2008). Maybe there is a shopping center or gas station behind one side the street but not the other?
Arlington also shows the assessment values of these houses have declined in the last few years, but not dramatically. Of course this does not reflect changes from July 07 to July 08, which will determine the Jan. 09 assessed value.
So without seeing the upgrades to 5108, my guess would be, yes, the area has lost some value like everywhere in Arlington since 2005/6, but that you couldn't get the one at 5108 for anywhere close to what you might get the one at 5109, because it probably has some major but not complete upgrades.
For the record, Arlington is down more than 5%. It's down about 10% to 15% so far, with no signs of the declines coming to an end.
And I always get a kick out of folks like tom who ignore facts and continue to make unsubstantiated and false statements like "SFHs near the metro are doing just fine." I live in Clarendon and prices have dropped about 15% here (in what is probably the most sought after area in Arlington). Tom, do you make these false statements because you think you'll actually trick people into believing "everything is just fine" or do you really believe what you are saying? If it's the former, I don't think you are fooling anyone here.
matter of fact: Cheap built houses should be cheaply priced. Where in the world do they build expensive houses with fake walls (drywalls) and thin frames (called 4x 4s)!!!!
Arlington or South riding prices should be based on a single test: How long can a 10 year old biy bring down the house with a hammer???
ace said: "...you couldn't get the one at 5108 for anywhere close to what you might get the one at 5109..."
maybe. but i asked myself this question: on 6/28/2005, could 5109 have sold at $750K??? i tend to think yes, at the peak of the bubble years, it could very well have.
therefore, the 18% drop is not as impossible as you may think. (seriously, it's just my wishful thinking so don't read too much into it.)
MM, my point is, "use the evidence you have to reduce the amount of speculation you have to do." This will help you find that house in 22207, or somewhere else, at the right price, much more quickly than wishful thinking will.
I don't see any evidence that 5109 would have sold for $750K in 2005, and there IS evidence that it would not have done so. $750K is much more than the Arlington Co. assessed value, the other houses nearby were not that under-assessed in 2005 (given sales info), and according to the pictures and assessment info, 2109 is a rental and needs a ton of costly work. That is why that individual house may go now for a low price, not a general neighborhood decline of that magnitude. But obviously you have to decide for yourself whether it's a bargain given the size and condition.
ace:
have you not seen homes that needed tons of work yet still sold at that price during the boom?
but in any case i can't tell from the pictures that it needs a ton of costly work. could use a lot of updates, sure, but that's up to the new owner.
a month or so back another home just a few doors down was listed at $599K. same size of lot, same colonial, but has unfinished/weird additions. it got a contract, then went back to active for another month or so, then taken off the market. this one truly needed a ton of costly work, but apparently was priced to high.
btw, i never look at county assessment as evidence of the market. nor was anyone during my buying and selling experience. i think it's total BS that serves nothing but tax purposes.
MM, if you don't look at relevant data, and weigh it together with everything else, then you lose out on valuable information that your competitors for houses ARE using.
The other house that you describe sold recently was less than 1000 square feet. That is extremely small, even by Arlington standards. And the house has a correspondingly low assessed value.
The assessed value is correlated with the selling prices even in the few examples you are providing.
In answer to your q about houses selling for a lot over their assessed values at peak periods: I have owned in Arlington for 8 years and have been watching the market since before that time (I looked for almost a year before buying). Only extremely rarely have I seen SFHs sell for values that are dramatically above what their condition and what the values of the neighborhood warrant. During bubblemania, if houses were bid up, the neighborhood was being bid up as well -- and then Arlington raised the assessed values for taxes.
I owned two other single family houses previously. 2 of the 3 houses have required substantially renovation. So I do have some experience about what is required and what things cost. If you don't have this experience or can't do the work yourself, you need to be extremely careful about judging values because you will likely underestimate what it will take to bring a neglected house up to the standard of one that has been kept up to date. I'm not talking about painting; I'm talking about new roof, heating and electrical systems, landscaping, chimney repair or lining, tuckpointing, sump pump systems, new plumbing, new kitchen, etc., etc.
The assessment info is not a perfect predictor of the selling price of the house. For one, Arlington generally does not take into account the improvements to the house that do not increase square footage (too much work for them). So you really have to use other info, such as direct inspection of the house and its condition and needed upgrades, if you are trying to put a value on an individual house. But when the assessment values are showing you some very tangible reasons why houses might be varying in selling price (even though it doesn't capture all of them), that is valuable information.
Please let me know when several top condition houses near those you cited sell for a lot less than the assessed value of the home any time soon. Then I would say you have the makings of a trend.
This is not intended to be a put down at all; it is intended to be helpful.
MM - if I may, I need to weigh in with respect to what Ace is saying.
I remember years ago when I was buying - two houses in old town - same block, same age, similar size (one 50sq ft larger), both "renovated" yet one was selling for double what the other was.
I couldnt understand it until I got a realtor to show me both. The cheaper one was renovated the way you might think. Tile, refinished hardwood floors, new appliances etc. Nothing special but a nice place.
The second one was unbelievable - gutted from the inside out (and I mean everything including the 2nd & 3rd floor). A completely open layout, some vaulting all the way to the 3rd floor - much of the roof was now made of glass. A true work of art like nothing I had ever seen before (or since). Suddenly that double price seemed cheap in comparison to what was done.
Again, they looked the same from the ouside - and they only had a front of the house picture on MRIS (a true disservice to the more expensive house IMHO).
This is an extreme example, but you get the point. This sort of extreme variation between similar looking houses is not that uncommon in old town, and I suspect the same thing to a degree in Arlington. Just something to keep in mind when you are doing back of the envelope calculations of what a house might be worth relative to another.
ace, crt:
thanks for continuing the conversation.
i think crt's example proves my point that tax assessment gives you nothing. was the better home assessed twice as much as the other? i don't know but i'd think not. probably not even close.
same thing with 5108 and 5109. how much of that higher assessment was a result of 5109's previous sales prices - $750K in 05 then $715K in 07, rather than the 'actual' improvement/updates? and how much of that sales prices were a reflection of the bubble market or the true improvement/updates?
unless the tax men had previously toured both homes, then it's very likely these numbers were all coming from a computer program designed to maximize tax dollars.
again i'm not saying 5108 would only sell for $585K in today's market. i was saying 5109 could've sold around $750K in aug 05 - simply because i think they would've been comparables in that market. but someone with ace's experience didn't think so, and back it up with solid arguments, and i appreciate it very much.
but to me, the 'assessment bubble' is seeing correction too, but it's not happening soon or fast enough to catch up with the market. so whether a home sells for a lot less than assessment or not has no value to me to decipher what the market is trying to say.
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