Standouts from August: Prince William County YOY sales up 116%, median price down 43%, inventory down to about 6 months'; Culpeper County sales up 100%, median price down 33%; Fauquier's sellers still can't figure it out; Alexandria City sales at a decade low but still a decent ratio on inventory.
Source: MRIS
Wednesday, September 10, 2008
A Decade of August Sales
Posted by Harriet at 12:25 PM
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27 comments:
First impressions
Inner counties
Prices - for starters, we cant ignore prices -14% is about as big a number as they have ever posted. Still, this is far smaller than the number I had expected for Arlington given it posted an abnormally large +25% last August (MM & Ace – I think I owe you both a dollar on that one :)
Months of Inventory - 3.70 for Arlington & 4.78 for Alexandria. Pretty much exactly where they have been since early 2006, except for that spike in Jan 2008 which now clearly looks to be a fluke.
Sales - Alex is still down, but heres a shocker for you Arlington sales actually increased 1.28% - the first time any inner county has done that since who knows when. Also, contracts & contingents in Arl & Alex certainly suggest that they will beat YOY sales numbers in September.
To be honest, I didn’t think this would or could happen. With months of inventory being so tight, and total inventory being down YOY, it was getting harder and harder each month for the inner counties to ever beat YOY sales figures. For example, in Arlington there are 110 less houses for sale now than this time last year. Yet even with that handicap, Arl posted YOY sales gains. (MM I think you called this last month – I owe you another dollar :)
Now, before anyone jumps on me. I will be the first to acknowledge, one month does not make a trend, and Alex still has a ways to go to beat its YOY sales number (again a very tough task given there are now 163 less houses for sale). Still, we saw this in the outer counties about 6 months ago. First PWC contracts & contingents were up, then sales, then Loudoun & Fairfax started consistently posting YOY sales gains. Thus, perhaps more than anything else is something I think we should all watch very very closely.
Outer Counties
Prices – not much to say here we seem to see the same thing month after month. Fairfax median price drops in the high teens, Lou in the 20s. PWC is notable in that it for the first time hit +40% off – just incredible.
Months of Inventory – here there is certainly some notable improvement. These areas are quickly catching up with inner counties in terms of a forward looking metric. Now the question is, how long will the big price drops continue? How long do they have to pay for their past sins of very prolonged periods of double digit months of inventory? My guess is about 4 – 6 months, but that really is just a shot in the dark.
crt:
great analysis. haven't finished reading it all but wanted to post this about sales increases:
in 2007:
Jul 331
Jun 308
May 307
Apr 252
so yeah it's been a while - one full year before sales increased again. and compare the decrease of near 100 sales from 07 Jul to Aug, the 08 Jul to Aug increase looks more stunning.
what can we learn from the Month-by-Month numbers? Is $455K the new equilibrium in Arlington? Or will we see the med price drops below $400 a year from today???
Arlington County
Year Month Sales Listings Ratio Med Sold Pr Med Pr % Change (MoM)
2008 Aug 238 880 3.70 $453,750 -6.25
2008 Jul 232 1,002 4.32 $484,000 +13.48
2008 Jun 216 1,034 4.79 $426,500 +0.95
2008 May 228 1,054 4.62 $422,500 -11.05
2008 Apr 194 1,042 5.37 $475,000 -2.06
2008 Mar 179 986 5.51 $485,000 +14.12
2008 Feb 137 941 6.87 $425,000 +0.59
2008 Jan 94 859 9.14 $422,500 -12.98
2007 Dec 184 821 4.46 $485,500 +2.23
2007 Nov 149 985 6.61 $474,900 -2.58
2007 Oct 174 1,057 6.07 $487,500 +5.86
2007 Sep 182 1,063 5.84 $460,500 -12.78
2007 Aug 235 990 4.21 $528,000
July 08 vs. August 08 avg. price drops seem pretty unnerving for Alex and Arl
Loc - Jul 08 - Aug 08
Alx - 427k - 389k
Arl - 484k - 453k
Ffx - 379k - 375k
Lou - 350k - 335k
PWC - 214k - 205k
Back in July it was only down -6.6 and -4.15 % YoY for Arlington and Alexandria City. -14% is pretty whopping even with the +25% to correct from. One would expect prices to go a bit lower in September as the end of the summer selling season reality sets in...
I'm just happy about the consistently down 20% this year for the greater Fairfax area. And I think since this is median, not Case-Schiller, that the higher end properties that are percieved as less of a risk are still skewing the median price higher than a property to property comparison would give on the low end stuff I'm looking at (in Franconia/Springfield, I make no such claims about Arl/Alex). Because the low-end stuff is mostly just sitting there. I think the other low-end buyers never thought they'd need to save up even a 3.5% downpayment and so can't jump in yet, even if they wanted to. And those FHA loans come with a lot of baggage that you don't have to pay if you actually have a 20% downpayment ready, which pushes the monthly payment up (in addition to the obvious fact that you're paying on closer to the full purchase price).
MM Cara & 0.0 - personally I dont put much stock in MOM numbers. Sarah tried this once and nearly drove herself crazy.
That said, big drops started everywhere in about March of this year. Since Mar of this year Arl & Alex keep jumping around from drops in the mid single digits to drops in the low teens with a positive number or two mixed in.
In fact, 2 months ago Arlington improved from -14.61 (June 08) to -6.02 (July 08). At the time, Cara, you and I agreed its pretty much noise. Are you seeing something different now?
Now, you may be able to glean something from the outer counties in that they do have some consistency with their drops MOM. There is a general upward trend MOM and they do not seem to vary more than a point or two month to month.
For an example of what I am talking about, here is Alex vs. Lou, Jan-Aug 08 (Alex is obviously the first #)
Mar -13.4 -19.9
Apr -5.6 -19.0
May -9.4 -19.3
Jun -9.3 -17.8
Jul -4.8 -20.1
Aug -14.3 -24.6
Finally, FWIW, I think DC proper has posted a positive or flat median price like 7 of the last 8 months - another reason why I hate MOM comparisons.
Nice catch CRT. I did indeed feel it was noise. Good example of how when the data matches what you want to see you believe it, when it doesn't you dismiss it. (or rather, "I", or, "one")
Fairfax is bigger and less noisy, greater volume of transactions to make the numbers more meaningful, and indeed they appear to be a bit smoother in their declines.
YoY declines Fairfax 08
Aug -20,
July -20,
June -15
May -13
April -18
...
In MoM terms it looks as if there was some brief optimism in May and June, but not much. Whereas that optimism was in July for Alex/Arlington. Perhaps transaction times are longer on average for higher sales prices, due to more complex financing and greater likelihood of move-up-buyer contingencies?? Or maybe it's noise.
Yes, CRT - I should know better than fall into the m-o-m trap - I've certainly made fun of local commentators touting the occasional m-o-m gain (usually in transactions rather than price) to signal the end of the slide. Still - I didn't realize m-o-m was usually that volatile - which I'm seeing in the year of m-o-m for arlington that mm has posted.
Still - the overall price trend remains brutally and inexorably down. Just glad there's not as much inventory to work through in the close-in precints to go with this trend.
No worries Cara & 0.0 - I do it myself some times. The longer that bouncing around continues, the more you have to conclude its not as bad as the worst months, nor as good as the best.
In that regard, I do put some weight behind annual median prices (the average of all MOM prices) reported by MRIS in February of the next year. I like these because they smooth out all of the volatility and give you a decent picture of what happened - calendar year 2008.
In that regard, with 8 months in the books, unless there are dramatic changes the last 4 months, I think we have a good idea how each county will end up for the year.
Because of the bouncing, Arlington & Alex are likely to come in only around -7 to -9% for the year - likely disappointing to the bears hoping for the low teen drops and the bulls hoping for the low single digit drops in any given month. This is what happens because of the bouncing around. For example, last year Alex I think had positives and negatives but ended up being +2.47% in 2007. On the other hand Loudoun was more consistently negative meaning it was -9.26% in 2007.
For the year, if I had to guess, Fairfax will likely be down in the mid teens, Loudoun around -20% and PWC an astounding -30%.
Amazingly, for the year, DC proper is likely to eke out a small gain. I sure hope lance doesnt see this!
some Aug #s in tom's neighborhood (22207), aka, Manhattan South.
price sales listings
$450,000 - 499,999 1 3
$500,000 - 599,999 7 7
$600,000 - 699,999 6 13
$700,000 - 799,999 8 21
$800,000 - 899,999 7 10
$900,000 - 999,999 6 16
total 35 70
2008 2007 % Change
Avg Sold Pr:
$796,608 $921,749 - 13.58 %
Median Sold Price:
$750,000 $797,000 - 5.90 %
Total Units Sold:
50 41 21.95 %
Cara: "it looks as if there was some brief optimism in May and June" -- that's what I'm seeing in the parts of Fairfax I'm tracking.
It's as if a small group of folks shot in, bought houses, and that was that. More specifically, imagine that you have 10 houses in a price range (e.g. 7-800k) that came on the market at the same time. Half were scooped up in a short time. The remainder have just sat there, with not even price reductions helping them. And it's not as if they are bad houses -- a few I thought were nicer than the ones that sold. And looking at the sales prices, its not as if they sold because the owners accepted lowball offers (darn!). Instead, it's like a limited number of qualified buyers swooped right in. And then they ran out of buyers.
Something else touched on months ago & probably bears repeating - high end stickiness - where we see it and where we do not?
It is assumed with financing being tight, the high priced close in stuff is going to have to fall. Plus with prices having dropped so dramatically in outer counties, you might assume outer county high end stuff is selling well again. Not so.
Here is each county listings/sales & months of inventory (MOI), broken down by price tier (high end only) per MRIS:
ARLINGTON
700-800K 62 lists/16 sold (3.9 MOI)
800-900K 30 lists/9 sold (3.3 MOI)
900K-1MM 29 lists/11 sold (2.6 MOI)
1-2.5MM 128 lists/22 sol (5.8 MOI)
As it was months ago, remarkable consistency among the highest tier this picture is exactly the same as it was months ago in just about every subcategory - no better no worse. Next:
ALEXANDRIA
700-800K 42 lists/11 sold (3.8 MOI)
800-900K 36 lists/4 sold (9.0 MOI)
900K-1MM 17 lists/3 sold (5.7 MOI)
1-2.5MM 55 lists/10 sold (5.5 MOI)
Again, remarkably consistent - perhaps a hint of weakness at the 8-900K level, but given the last 3 months in this subcategory were 4.3, 7.0 and 3.2 MOI, this is not really a concern. On to Fairfax where the picture is a bit more dicey:
Fairfax
700-800K 318 list/60 sold (5.3 MOI)
800-900K 234 list/40 sold (5.9 MOI)
900K-1MM 154 list/16 sold (9.3 MOI)
1-2.5MM 678 list/61 sold (11 MOI)
Finally, it looks like the low part of the high end is moving, but the higher 900K -2.5 MM still isnt that hot. For the last 3 months, these top 2 subcategories have had 10, 8 & 12 MOI and 10, 14, & 14 MOI respectively so this isnt an anomaly either. Not great, but certianly better looking compared to our next participant. Lets see if beat down prices have caused sellers to capitulate in Loudoun:
LOUDOUN
700-800K 200 list/25 sold (8.0 MOI)
800-900K 122 list/5 sold (24 MOI)
900K-1MM 81 list/3 sold (27 MOI)
1-2.5MM 178 list/2 sold (89 MOI)
Talk about stickiness, despite the beatdown prices this market has already incurred, the market is sending a message loud and clear - We dont want your McMansions anymore! This month is slightly worse than normal, but it isnt really an anomaly either. 10-25 months of inventory has been common place since the spring. Not good, but even wose than this is Ole PWC:
PWC
700-800K 53 list/3 sold (18 MOI)
800-900K 61 list/2 sold (31 MOI)
900K-1MM 34 list/0 sold (34+ MOI)
1-2.5MM 69 list/1 sold (69 MOI)
Now, in fairness, the 7-800K has seen 10 MOI in the past so maybe this month is a fluke. But for the other 3 subcategories - 30-70 months of inventory has been the story since the spring. So even after the huge price drops this areas has seen, PWC high end still has so much farther to go.
In sum, the high end picture is very similar to what it was months ago. For those of you looking for big price drops in high end stuff close to the city, there is nothing here to indicate its going to happen. Im sure there are a few sticky sellers out there, and you can find a deal on a foreclosure here and there, but I dont see it happening for the market at large. For the most part it seems that, if you list it, give a few concessions, it sells - end of story.
For those of you looking for high end stuff in Fairfax - you probably will see some respectable price drops before all of it starts moving again. The best though is those of you who are looking at pricey stuff in Loudoun & PWC - despite the huge price drops these areas have seen so far, I see no way that these sellers do not have to capitulate en masse. So take heart, your day is coming!
Save that $ for your next down payment, crt -- you still had the principle right! :-)
CRT:
in 22207, most of the high-end homes (800K+) that went under contract had price cuts. But no big drops - largest is 39% (AR6550893) but still sitting; the 2nd biggest is 18+% (a short sale). I think this echoes your conclusion. Since sales is very slow (8/100), it's clear the stare-down continues.
MLS# ListPrice OrgPrice PriceChange Percentage
AR6659249 $1,489,000 $1,619,000 $130,000 8.03%
AR6755146 $1,345,000 $1,444,000 $99,000 6.86%
AR6833712 $1,289,000 $1,289,000 $0 0.00%
AR6736865 $799,000 $975,000 $176,000 18.05%
AR6765604 $925,000 $925,000 $0 0.00%
AR6736377 $799,000 $900,000 $101,000 11.22%
AR6427405 $769,000 $869,000 $100,000 11.51% (after 380 DOM!!!)
AR6781434 $769,000 $825,000 $56,000 6.79%
on the other hand, the 600K-800K homes are quite the opposite - 8 under contracts with only 2 had price cuts.
FWIW.
crt-- A few points. In regard to the months of inventory statistics, shouldn't we be using an average over a longer period here as well? After all, people typically don't make the make a buying decision over a single month's period and on the basis only of what's on the market that month. If we look at last month's inventory levels for Alexandria and Arlington-- 4.8 and 3.7 months of inventory-- they look pretty good. Averaged over the last 12 months, however, that becomes 6.5 and 5.6 respectively. (Just averaging the months of inventory here, since I'm too lazy to go back and recalculate for sales/sales over the last 12 months-- shouldn't make too much difference, tho'.) This puts Alexandria over and Arlington pretty close to the 6 month level which is supposed to matter.
Also, looking at those numbers from the perspective of trying to predict the direction, at least, of prices, over the last 26 months (since its first price decline) Arlington has had 19 months of decline and 7 months of improvement. Over that time there have only been 5 months with 6 months or more of inventory.
Alexandria's pattern is fairly similar except it has not had so many down months-- only 13 over the last 26, but had 9 months with more than 6 months or more of inventory.
Since, looking back to 1999, when we first have MRIS statistics, both Arlington and Alexandria seem to have often had extremely low levels of inventory even before the bubble began, this suggests to me that both places require lower levels of inventory than 6 months in order to maintain prices. How much lower? My guess, just looking at the data over the last few years, is that anything over about 4 and a half months, over a sustained period of several months, will generate declines.
Finally, my theory on why close in is doing so much better than farther out: just as in the bubble, it's expectations of future price levels. The new conventional wisdom is that closer in won't fall much and will recover quickly. Anyone with the money and the desire to buy now is likely to be taking that into consideration. If the 'it can't happen here' meme is shaken-- as it was in Montgomery County last fall-- then you will likely see much steeper declines.
thanks crt for the details.
I think one thing to consider when comparing these numbers is to compare like-to-like in house/land terms rather than dollar value. Accordingly, I would say that in Loudoun and PWC the 700-800k tranche is most equivalent to the 1-2.5 million dollar tranche in Arlington and Alexandria, in the sense that a house that would sell at 1.2million in Arl/Alex could only command 700k at most in the outer counties. And that bottom of the top tranche in LC is at similar months of inventory to Alex/Arl top listed tranche. PWC is out of whack this month, but has often been similar.
So I would speculate that the uber-high-end homes, whether that's above 800k in PWC and Loudoun, or over 2.5million in Alex/Arl. are selling very slowly, but I thought the conventional wisdom was that this is always true simply because of the tiny pool of both buyers and sellers. The 1.2-2.5million tranche close in is the most populated of the tranches you list, so it must not be the truly creme de la creme.
Still, while I differ on how best to view the numbers for most reasonable interpretation, what you've given us in numbers is still a good basis for comparison. Thanks.
This fall's going to be interesting... (autumn)
Sarah - you bring up a few good points. If I may:
"In regard to the months of inventory statistics, shouldn't we be using an average over a longer period here as well? After all, people typically don't make the make a buying decision over a single month's period and on the basis only of what's on the market that month."
Agreed, but this isnt a new phenomenon. This high end divergence seems to have existed for the better part of 2 years now. Here is a quick comparison Alex Vs. Lou in the high end price tiers, months chosen at random (Alex first # Lou second #):
June 2006
7-800K 4.7....10.4
8-900K 4.6....13.4
9-1MM 6.8....34
1-2.5MM 3.6....30
Feb 2007
7-800K 6.1....13.4
8-900K 5.0....64
9-1MM 15.0...60
1-2.5MM 7.7....17.5
Aug 2007
7-800K 3.6....9.6
8-900K 4.3....11.8
9-1MM 5.2....18.9
1-2.5MM 12.6...18.0
Apr 2008 (bad month for all)
7-800K 5.2....14.5
8-900K 14.6...18.7
9-1MM 6.6....100
1-2.5MM 12.8...104
So again, this is not a new thing. Alex will have an occasional high month in one subcategory, but it isnt endemic. By contrast Lou is usually at best in the low double digits, but can swing into severe triple digit numbers.
"Since, looking back to 1999, when we first have MRIS statistics, both Arlington and Alexandria seem to have often had extremely low levels of inventory even before the bubble began, this suggests to me that both places require lower levels of inventory than 6 months in order to maintain prices."
Not exactly. If you look at the top 5 counties, ALL of them were very similar for most of the bubble years. It seems that for most of the decade, every county posted somewhere between 1-2 months of inventory which seemed to correspond with 20% gains per year. Again, very little divergence county by county.
A funny thing happened starting with the bubble bursting - here again is a Alex Vs. Lou months of inventory run down since 2005 (again Alex first # Lou second #):
2005..Alex....Lou
Jan...0.78....1.41
Feb...1.06....1.87
Mar...1.05....1.34
Apr...1.30....1.66
May...0.97....1.86
Jun...1.17....1.79
Jul...1.58....2.62
Aug...1.64....2.66
Sep...3.14....4.27
Oct...3.77....5.53
Nov...3.70....5.91
Dec...2.62....3.60
Notice how tightly packed they were for the first half of the year. Notice too the rise in the second half of the year as the flippers started heading for the exits. On to 2006
2006..Alex....Lou
Jan...4.90....7.28
Feb...4.42....7.47
Mar...4.57....6.77
Apr...5.26....9.24
May...4.97....9.75
Jun...5.50....9.53
Jul...6.26....11.17
Aug...5.08....9.90
Sep...7.10....10.90
Oct...5.63....10.23
Nov...5.85....9.35
Dec...4.14....6.15
Here you can plainly see how big and how quickly the divergence arose. Its amazing to think a year earlier, they were within one month of inventory of each other, only to see a few times in 06 where Lou almost doubled Alex! On to 2007
2007..Alex....Lou
Jan...5.67....7.98
Feb...3.96....7.82
Mar...4.56....7.39
Apr...4.58....7.50
May...4.91....8.12
Jun...4.43....8.10
Jul...4.32....7.84
Aug...4.31....9.03
Sep...7.55....13.03
Oct...6.61....11.89
Nov...6.94....12.12
Dec...5.41....9.79
For starters, notice how both places improved on YOY numbers up until Sep. The divergence was still huge, but they both improved marginally. Notice too the credit crunch in Sep...both felt it right away and tacked several points on their months of inventory score but again, the divergence is a killer. On to 2008
2008..Alex....Lou
Jan...10.18...14.97
Feb...7.99....12.58
Mar...7.96....9.79
Apr...6.02....8.45
May...5.00....6.82
Jun...4.81....6.05
Jul...4.61....5.99
Aug...4.78....5.50
For starters, notice the huge spike in Jan for Alex. It was at this point that I really started to panic - I thought here we go, here comes the "close in" meltdown! That panic was short lived as Alex quicly worked off its excess and went back to the 4-6 months of inventory - essentially the same place it has stayed for the entire bubble period.
By contrast, Look how bad it briefly got in very wealthy Loudoun county. On the back of several double digit months in late 07, this was just crippling - it appears the rout was on.
Notice too how Loudoun dramatically improved about the same time large price drops appeared. Amazingly, Loudoun has worked off alot of excess (albeit forced off via foreclosures), but it appears that the worst of it is over.
BTW, I choose Alex & Lou because they are neither the worst nor the best. In each category in each month Arlington almost always does best, PWC the worst, and Fairfax right in the middle. Now, if you want to see something real dramatic, you should compare ARL vs PWC!
"Cara said...
I would say that in Loudoun and PWC the 700-800k tranche is most equivalent to the 1-2.5 million dollar tranche in Arlington and Alexandria, in the sense that a house that would sell at 1.2million in Arl/Alex could only command 700k at most in the outer counties."
Cara - perhaps, but I do like the heads up comparison - mostly because, I dont think most people think that way. I think most people (especially at the high end) are of the mindset "Im willing to spend XYZ dollars on a house - where can I get the most bang for my buck?" Thus, is the buyer choosing the 1MM arlington Arts & Crafts or the 1MM Loudoun McMansion with 4 turrets?
Incidentally, from what I know of you, I think you are the exception - very few seem to have the discipline to spend far less than they can afford :)
"And that bottom of the top tranche in LC is at similar months of inventory to Alex/Arl top listed tranche. PWC is out of whack this month, but has often been similar."
Im not so sure about this, again, if you look at my comment to Sarah above where I choose months at random, even the high tranche close in has consistently beaten the lowest tranche out in the exurbs - that is to say, most of the last 2 years. They do seem to be tightening up now, but remember how bad the price drops in Lou had to be to get back within striking distance!
MM, thanks for the very interesting numbers. It's nice to see documentation of what I thought I was seeing. I'm afraid those sellers are just going to dig in more (stare harder?), now that the interest rates have declined with the Phoney and Fraudie takeovers.
"Cara said
So I would speculate that the uber-high-end homes, whether that's above 800k in PWC and Loudoun, or over 2.5million in Alex/Arl. are selling very slowly, but I thought the conventional wisdom was that this is always true simply because of the tiny pool of both buyers and sellers. The 1.2-2.5million tranche close in is the most populated of the tranches you list, so it must not be the truly creme de la creme."
Cara - I didnt really look here because its thinly traded the numbers look strange, plus I doubt sellers in this tranche flipped, had junk loans, or are stressed if it doesnt sell. Still FWIW here is a head to head comparison ARL vs ALEX vs LOU in the 2.5-5MM category for the last 6 months.
......Arl...Alex..Lou
Aug...0/5...0/9...0/30
Jul...0/7...1/8...0/30
Jun...0/7...0/7...1/28
May...2/8...1/8...1/27
Apr...1/6...0/8...0/23
Mar...0/4...0/8...1/21
So yes, sales are slow, but with so few units, its really hard to say how slow. I do find it interesting though that Loudoun which has about 1/2 the population of Arl & Alex, has roughly twice the inventory to work through as the 2 inner counties combined. Still, this is so thinly traded, I doubt it counts for much.
crt,
For any given person I think you're right, it is about I have XYZ to spend, now what are my priorities? My thinking is more along the lines of who are the top 5% of the income bracket in each place and where do they live, and how is the crunch effecting them? Because the people with the 800k 1920's mansion in PWC probably "feel" as rich as those with the 1.2 million remodeled craftsman in Arlington. So, it's not the same people, but in some sense it's the same tier...
But yes, I am the exception. I don't personally know anyone who bought a house who did not follow the real-estate mantra of buy the full amount you can qualify for, after searching around for the bank that will qualify you for the largest amount. All of my contemporaries who bought fell for this line. Which is part of why I expect the option-ARM implosion to be so bad. I know how tight their finances are, I know how much free-lance work they needed to take on to keep up with the mortgage and a new cheap car when their old car got totaled, etc.
"Sarah said...
Finally, my theory on why close in is doing so much better than farther out: just as in the bubble, it's expectations of future price levels. The new conventional wisdom is that closer in won't fall much and will recover quickly. Anyone with the money and the desire to buy now is likely to be taking that into consideration. If the 'it can't happen here' meme is shaken-- as it was in Montgomery County last fall-- then you will likely see much steeper declines."
Sarah - I personally think its all about credit & flippers and how they weigh on the market. This also goes to how this correction plays out...(a) it works its way in geographically hitting everywhere with roughly equal force...(b) it works from west to east, hitting with varying degrees of force, or (c) it hits everywhere simultaeously, just with varying degrees of force. Our biggest bears like to think it is (a). I used to think that, but now I am leaning towards a combo of (b) and (c) and here is why:
Recall that Mo Co, never had the problem with flippers that VA did. Yes Mo Co had stretchy buyers, but not flippers - we know this because there is not a huge spike in sales years 2004-2006 and a huge spike in inventory (2006) in MO CO the way there was in VA. Recall too that Mo Co was immune until late last year. Well, thats correct, and we can see its immunity in months of inventory:
2006..Alex....Lou....MoCo
Jan...4.90....7.28...3.91
Feb...4.42....7.47...3.52
Mar...4.57....6.77...3.52
Apr...5.26....9.24...3.85
May...4.97....9.75...3.86
Jun...5.50....9.53...3.87
Jul...6.26....11.17..4.63
Aug...5.08....9.90...4.19
Sep...7.10....10.90..5.62
Oct...5.63....10.23..5.37
Nov...5.85....9.35...5.23
Dec...4.14....6.15...4.05
Here, flipperless MO CO was the best of the bunch, while (some flippers) Alex and (Many flippers) Loudoun were having varying degrees of problems.
Not surprisingly, Median prices in Lou were down nearly every single month that year, Alex had a mix of up and down months, and MO CO had almost all price increases that year.
Here comes 2007, and again notice what happens in Sept (i.e. the credit crunch)
2007..Alex....Lou....MO CO
Jan...5.67....7.98...5.16
Feb...3.96....7.82...4.41
Mar...4.56....7.39...4.93
Apr...4.58....7.50...5.78
May...4.91....8.12...5.83
Jun...4.43....8.10...5.37
Jul...4.32....7.84...5.95
Aug...4.31....9.03...6.20
Sep...7.55....13.03..10.73
Oct...6.61....11.89..9.72
Nov...6.94....12.12..9.89
Dec...5.41....9.79...8.93
Once again, the effect of the credit crunch in Sept 07 is painfully obvious - and siumltaneous - all 3 markets took a big hit. But look at what happened to previously immune Mo Co - for a while it was neck and neck with flipper "burdened" Alex, but suddenly it was suffering much more - and almost as bad as flipper "infested" Loudoun. Again, all areas felt, it simultaeously in Sept - no delay, no working in... all suffered, but Alex was suddenly on top.
On to 2008 and the severe disruptions. If the correction was truly "moving in" now that flipper free Mo Co was hit, surely flipper burdened Alex would now fall.
2008..Alex....Lou....Mo Co
Jan...10.18...14.97..12.56
Feb...7.99....12.58..11.82
Mar...7.96....9.79...11.01
Apr...6.02....8.45...9.36
May...5.00....6.82...8.92
Jun...4.81....6.05...7.38
Jul...4.61....5.99...7.56
Aug...4.78....5.50...7.94
The move in didnt happen, Alex maintained the best of the bunch and was the first to improve. Remember 2 years ago, when Mo Co was consistently doing better than Alex. Note too that they are all improving and coming to the same point of equilibrium. Surely, if it was "working in" Alex would be seeing a growing months of inventory? It doesnt - its been more or less business as usual since the credit crisis began.
Also, months of inventory has a cumulative effect. Thus, its no surprise to me, that Mo Co median prices first went negative right when the credit crunch hit (about the same time Alex did) Its also no surprise to me that Mo Co has had double digit price declines for the last 2 months. Like everywhere, it has to pay for its past sins Sept 07 to early this year - and I think thats what we are seeing now.
The only question I have now is how bad will it get in Mo Co? I used to think it was going to suffer greatly - just a year behind NOVA (i.e. a moving west to east theory). Now I am beginning to think its flipper free status saved it from round 1 (2006 til credit crunch), now its suffering in round 2 just like everywhere else is - just to varying degrees.
"Sarah said...Finally, my theory on why close in is doing so much better than farther out: just as in the bubble, it's expectations of future price levels."
With regard to explaining the relative immunity of N. Arlington to big price drops (such as 22207), don't forget the desire of many to flee the traffic nightmares that continuously afflict outer suburbs, as well as sky-high gas prices. The premium buyers will pay to have walkable access to Metrorail -- something many neighborhoods in 22207 offer -- continues to go up.
tom:
i agree largely with your point, but premium buyers, by definition, don't really take metro themselves. i think the fact of geographically close-in plays a much bigger role in holding property values than having metro runs through. premium buyers will more likely to sit through 30 minutes traffic congestion then mingling on subway trains for 45 minutes. that's why i said before 22201 condos are doing poorly but 22207 SFHs (many are nowhere close to metro) are declining less.
MM wrote: "I agree largely with your point, but premium buyers, by definition, don't really take metro themselves."
Well, this is one premium buyer who does!
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