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Friday, October 24, 2008
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37 comments:
Things have certainly been quiet around here considering the amount of economic news there has been the last few days. Is everyone just in "wait and see" mode?
Yesterday I was having trouble with blogger comments. Seems to be fixed today.
What I was going to point out yesterday was in response to the article about the increase in sales <400K. I suspect that this is largely because of an increase in the number of properties that meet those criteria. For the last several years there were very few houses in Arl, Alex for <400K. Now, a house that might have cost 500K in 2006 might go for 395 and be included in the category.
This is largely artifact of a manufactured statistic.
Econimic news has been a much more compelling story lately. For what its worth, here are september foreclosure rates (foreclosures per thousand households) by county from realtytrac.
VA
Arl 1142
Alx 944
Ffx 271
Lou 200
PWC 87
DC 1353
MD
MoCo 1467
PG 338
How 1267
AA 1267
Again, the higher the number, the better an area is doing.
In VA - no surprises as the core areas are doing much better than the suburban areas by a wide margin. No area did substantially better or worse than it did in august. This is pretty much as it has been since I started tracking this a few months ago.
In DC this is a bit of a surprise in that its always been doing OK (better than VA burbs, but worse than the core areas), but this is the first time it has beaten all of VA. It went from 1 in 435 homes in August to 1 in 1353 now. I dont know if there was a new foreclosure moratorium law or not in DC, but I dont think so. One month does not make a trend but this could be interesting to watch.
In MD, its hard to tell, on its face it looks like they are doing very well, but in reality, this is likely the result of a recent foreclosure moratorium law. If this holds for another few months, it may be noteworthy, but right now its a bit premature to say.
"Eponymous said...
What I was going to point out yesterday was in response to the article about the increase in sales <400K. I suspect that this is largely because of an increase in the number of properties that meet those criteria. For the last several years there were very few houses in Arl, Alex for <400K. Now, a house that might have cost 500K in 2006 might go for 395 and be included in the category.
This is largely artifact of a manufactured statistic."
Its actually not so clear cut. In Arlington there are 19 more properties under 400K for sale this Sept than last, but in Alexandria, it looks like there are 41 fewer listings under 400K than last year. Thus for the two of them combined there are 22 less under 400K properties than last year.
NVAR has some data up which is worth looking at.
It appears that lower end houses are indeed selling better in Arlington, but that condos of all sorts are selling very poorly.
well for me personally if prices don't come down significantly there's really nothing i could do but 'wait and see'. and the way the stock market behaves, the longer the wait the less funds i have available for home buying (renting too actually).
"Leroy Said...
It appears that lower end houses are indeed selling better in Arlington, but that condos of all sorts are selling very poorly."
Not sure how you figure that. MRIS condo sales in Arlington under 400K
Sept 2007 - 308 listings, 65 sales - 4.73 months of inventory.
Sept 2008 - 286 listings, 61 sales - 4.68 months of inventory.
I should say, high end condos in arlington +400K are a bit worse:
Sept 2007 216 listings, 47 sales - 4.59 months of inventory.
Sept 2008 168 listings, 30 sales - 5.6 months of inventory.
Still, I dont know if I would say this was selling very poorly.
Leroy,
I think so -- many people I know are in flat-out shock. Given current circumstances, I would not be at all surprised to see home sales fall off a cliff nationally. People are in serious pullback mode (I've talked to some store owners around here and watched traffic at other stores).
It was one thing when housing itself was falling -- you could convince yourself that since you were going to be the place for years it would even out. But now people are wondering about their jobs and are in no mood to make expensive purchases.
The retailers are going to get crushed for Christmas -- this could not have come at a worse time.
Going to be an interesting next six months.
As I have already explained, relatively low months on the market does not necessarily equate to a healthy market. Both 2008 and 2007 were very very bad years for sales in Arlington.
Look here for NVAR's data:
http://tinyurl.com/62lxb5
This data is not always perfectly consistent with MRIS, I am not sure why.
In this data Arlington detached houses below $700k are showing increased sales over last year, while houses over $700k are showing reduced sales.
In the case of condos all price brackets are down with the exception of the very bottom.
"I think so -- many people I know are in flat-out shock. Given current circumstances, I would not be at all surprised to see home sales fall off a cliff nationally. People are in serious pullback mode (I've talked to some store owners around here and watched traffic at other stores).
It was one thing when housing itself was falling -- you could convince yourself that since you were going to be the place for years it would even out. But now people are wondering about their jobs and are in no mood to make expensive purchases.
The retailers are going to get crushed for Christmas -- this could not have come at a worse time.
Going to be an interesting next six months."
I agree completely. One of the really exceptional things about this housing bust is that it started while the economy was still relatively good. Now that the economy seems to be heading into a relatively serious recession I think the housing market is going to just keep diving.
Many people will decide not to buy at all. Many of those that do decide to buy are going to be a lot more conservative. The scary thing is that we are likely still relatively early into this mess.
Leroy, I see the S&P 500 is at its same level as it was back in July 1997. Given that the index had a low dividend yield then the Clinton prosperity gains are almost wiped out. And you are saying we are in the early stages of this mess. If that is the case, then I don't see people getting off the sidelines for at least the next 5 years. I wonder what President OBama is going to do if the markets never start to recover? Blame the last 8 years?
Some of you will remember this property:
http://www.redfin.com/VA/ARLINGTON/1606-KIRKWOOD-Rd-22201/unit-2/home/17464326
This in-fill new build on Kirkwood Rd. was for sale a while back at $1.6 million. They couldn't sell it, so they lowered the price to $999k. It still didn't sell.
So what does any logical seller do? You raise the asking price by $400k and try again. Amazing.
leroy,
That is really cool data. I was looking at FFX county condos and attached SFH (which I presume means duplexes and townhomes). It's really interesting to just compare the solds by price bracket and watch the entire inventory shift up (to lower prices in the table) by at least 1 bracket ($100k!) into price ranges that practically didn't exist last year. Things are now moving a bit better, almost twice as many sold total, but wow the price declines are dramatic to say the least. I love graphs.
On a similar note, I was updating my spreadsheets this morning. About a year ago, I had picked a bunch of neighborhoods, streets, and condo buildings, and decided to track them through the FFX tax database. At that time, I had used Zip realty to find exemplars of different types of homes (4br colonials, 3br garage townhouses, condos).
I hadn't updated the condos in a while, but wow, did some folks take a bath. Condos that sold for $250k 2 years ago going for $100k. Others that sold for $400k going for $200k.
For fun, use Redfin or your favorite realestate browser, and find a few condo buildings with units for sale. Go the tax database and find equivalent units in the same complex (base on tax appraisal from 2 years ago). Some of these drops are amazing.
It's also funny to see, when you sort by date, that the last 4 sales in some complexes were to some guy named "Deutsche".
I agree this is an interesting set of data:
http://www.nvar.com/market/marketstats/sept08/FX_SFA_sep08.pdf
Fairfax attached homes for Sept 2008 are 28% below their Sept 2007 level. I am guessing they are at least 30% their Sept 2006 level. The average price for an attached home below 3 times the median income if you were to use Census Bureau and Fairfax County sources. See:
http://www.fairfaxcounty.gov/demogrph/gendemo.htm#inc
Contrarian,
Lots of people in Congress are talking about lots of future measures, so it is hard to know what will become of all that.
Sheila Bair is talking about guaranteeing some mortgages. She is saying prices may overshoot on the way down and she wants to prevent it. How does she know the fair value of a home to be able to make those "overshooting" decisions?
There is a powerful lobby against taking away the tax deductions for mortgage interest, so it won't be easy to do such things.
But I am sure the recession will cause prices to drop further no matter what the govt/FDIC/Treasury does.
By the way, FFX county is now officially saying that for Fiscal 2010, there is a $400 million budget shortfall. The county is conducting public hearings on how to address that issue. But I expect that gap to get worse because of the recession.
"Fairfax attached homes for Sept 2008 are 28% below their Sept 2007 level. I am guessing they are at least 30% their Sept 2006 level."
Not only that... but just look at the way the inventory has moved down in price.
Last year there were 8 listings under $200k. This year there are 248.
Last year there were 262 listings under $300k, this year there are 846.
The same story is visible in the sold numbers. Last year there were only 23 sales under $300k. This year there were 247. (10x as many)
We really are watching an historic bust.
I assumed everyone was aware of this page and its charts. I would have posted it sooner if I knew not everyone had seen it.
"Leroy, I see the S&P 500 is at its same level as it was back in July 1997. Given that the index had a low dividend yield then the Clinton prosperity gains are almost wiped out. And you are saying we are in the early stages of this mess. If that is the case, then I don't see people getting off the sidelines for at least the next 5 years."
The good news is that the stock market tends to race down anticipating what is to come and is likely a lot closer to its bottom than the real economy is. I think we are likely to see an unemployment spike and some actual belt tightening before this recession is over. Many many businesses and governments just grew too much during the long run-up.
I want to be clear that I am not happy to see people unemployed or forced to endure any other hardship, but this was inevitable and the end result will be a more balanced economy.
(Unless the government is successful in pushing the mess down the road a few years with one massive bailout after another. Personally I put the odds of that at less than 10%)
Leroy, I saw on Yahoo Finance that the NYU Economist Roubini is expecting a 2 year deep recession. When did the recession non-officially start? I keep hearing the likes of Buffett and others that it really started at the beginning of 2008. And reliably that coincides with a major spike oil prices.
If the market is priced 6 months ahead of the economy then maybe it will bottom in summer of 2009.
novawatcher, not sure if your comment re: Deutsche was tongue-in-cheek, but could that "buyer" be Deutsche Bank, i.e., repossessions?
John F., thanks for the laugh. I predict it will be in short sale status soon.
Ace: Yep, it was tongue-in-cheek
The fourth quarter 07
may be been the start of it.
At this point anyone who makes a grim prediction is on the side of angels. If you think the market will tank at 6000, you're probably right. If you tell me bottom at 5000, I may argue against it, but I would think about the possibility.
But I'm optimistic.
This crash will bring long needed changes.
A couple I am very close to quit their jobs years ago and started a coffee shop bookstore after one developed a heart issue. They decided not to put off their retirement dream, and act now because time may not be on their side.
But then the other spouse developed cancer (which has been successful fought. As a result, their insurance cost kept rising.
Both are in their 50s; vibrant, active, smart, and the career change may have been the best thing for helping the heart to mend.
But, as a result of all this, they now pay about $1,500 a month for medical insurance and have to had to expand their business to help pay for it. It meant longer hours.
There many other people in this position.
Many will drift into bankruptcy because of it.
So I hope the good that comes out the economic destruction are policies and systems that can find a way to solve this problem.
So here's hoping we emerge out of this with new models that in the end, make us stronger, more powerful and able to move ahead on our dreams.
Kob, I totally agree. I keep reading the government wants to import more foreign works (i.e. H1B Visas) and we can't even provide enough jobs to fully employ our own technical professionals. We have become a nation of MBA's and lawyers. Our chief export seems to be our treasuries and savings bonds to China, and other debt holders.
What is so tragic is that even the Clinton prosperity gains of June 1997 to 2000 have been wiped out.
Here's a house on Lloyd's Lane in Alexandria City (this is a very very nice area within KH's immunozone). Rent for $4,000/mo or buy for $1.185M, down from $1.275M. Owner paid $1.225M in 8/2006. It's been sitting since April.
So, owner wants 24.5X annual rent, or 296X monthly rent. I don't see it happening. Looks like owner will have to rent at negative cash flow.
http://tinyurl.com/5c6j6t
Terminator X , are you implying that it is time for Arlington and Alexandria Counties to start to undergo the corrections that Fairfax and the outlying counties have undergone?
"Terminator X , are you implying that it is time for Arlington and Alexandria Counties to start to undergo the corrections that Fairfax and the outlying counties have undergone?"
I am not terminator obviously...
but both Arlington and Alexandria have undergone some fairly significant corrections already with more to come.
Thus far they have avoided the massive one year drop that was seen in most of the rest of the area but they are falling pretty darn quickly by any other standards and will continue to fall until they reach a reasonable level.
I'm still thinking this is not going to be a recession, it will be a full blown depression, with 15%+ unemployment.
I also don't think it will be reported as such until years afterward, sue to manipulation of the numbers. The country is being robbed blind by those in power, and tehy are doing their best to cover it up until they can get away clean.
anthony d,
I've been posting here (and before that at Bubblemeter) since 2005. My views are reflected in the archives on this site.
I own in a nice area of Alexandria City, and what I've observed is similar to what's revealed in the MRIS data. Prices in desirable parts of Alexandria City and N. Arlington have decreased about 10% from peak, but there are few distressed sales. The market is not healthy, however: sales are at 1998 levels and inventory is low. Sellers are demanding too much relative to demand, pulling their houses from the market, or are refusing to list their homes altogether. The folks who come here to gloat about the price of their place near the Orange Line are whistling past the graveyard, IMHO.
The local economy will start bleeding jobs in earnest after the holidays, which I predict will finally cause a price/rent equilibrium in prime areas such as Lloyds Lane in Alexandria. That is, anxiety about job loss in lobbying/law firms will cause the prime areas to correct.
BTW, this place in the center of Del Ray has been listed and pulled from the market at least twice:
http://tinyurl.com/6l299u
As bad as the economy is going to get, "bleed" isn't necessarily the definition I would use for this area.
Right now, NOVA's unemployment is about half the national average and I suspect it will remain that way. (And that's not counting thousands of federal jobs that I do not believe are in the employment estimates, namely intel.)
I also think that this area may see a population influx as the economy downturns, as a result of increasing competition for available jobs.
Terminator, I have to agree with Kob's opinion. I can't see the next administration decimating the government contracting environment like what was done in 1990-1995. There will be scale backs, but also consider less money being spent in Iraq means more money to be spent here.
kob and anthonyy:
Check out the BLS numbers regarding the DC area. More than 3/4 of jobs are in private industry. That's what I'm worried about. And beyond that, it's the high paying private sector jobs that drive the price of real estate close in. My wealthy neighbors don't work for Uncle Sam: they work for law firms, lobbying firms, or high tech.
We're seeing the financial sector implode, lending tighten, and a consumer-led recession is upon us. The worsening recession will rival the one from the early 1980's. DC won't be immune.
BLS on employment in Metro DC:
http://tinyurl.com/5l7ajf
Anthony,
My sister and some extended family live in the Bay Area, so I refrained from commenting the other day. Patrick.net looks cool. But why the mispelling of the city? I love SF, but I have been going there since my grandparents moved to Cupertino (i.e. Silicon Valley) almost 30 years ago.
That long flat time for SF proper (and the better parts of Silicon Valley)? There's your sign of the top of a bubble (combined with the insane price to rent ratios). See, it's not so hard to time a market, both the top and the bottom are flat for a good long while before movement. Both SF and Arlington/Alexandria are going to see significant declines over the long term, it's just a matter of how (inflation versus nominal price decreases) and when. The rest of the Bay area, like where my sister is in suburban Oakland, is tanking hard from the stress of nearby foreclosures even when they're not in your exact neighborhood. It's just a matter of time until bargain hunting becomes the norm for the upper end homes as well.
Oh, and Silicon Valley folks don't commute from SF. That's a long freakin way, even on the commuter train. There's plenty of nice properties in Cupertino and Mountain View. The richest SF neighborhoods are for the lawyers and the people from the Financial Center downtown.
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