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Wednesday, November 5, 2008
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26 comments:
Nobody? It's almost 4:00 in the afternoon and no one is awake!
We are all tired from watching returns last night...How will election results impact the "bubble fallout"?
Housing prices will go up or down...or maybe the other way, unless I am completely wrong and they do something else.
NAHB plan to get the housing market going. I had to laugh.
* up to $20,000 tax credit for homebuyers in 2009
* Govt interest rate subsidy in 2009. Would adjust up to current market rates in 2010.
"...The home builders would like to include their plan in a second stimulus bill if Congress passes one. The group did not offer any specific proposals to pay for its proposal, but said Congress could pay for it by adding to the deficit..."
That link I posted a few days ago about a $479,000 3/2 within 0.5 miles to the Ballston metro went under contract in less than a week.
AR 6911313
Price it competitively, and it will sell.
i was hoping this 22207 3/1/1 Rambler on 6,300-sf lot would go below half mil before getting a contract, but apparently somebody jumped the gun... oh well.
"* Govt interest rate subsidy in 2009. Would adjust up to current market rates in 2010."
Teaser rates!
I like the sound of that!
AR6911313 is right on Wilson also. Expect major road noise. My guess is the new owner will rent it out to 4+ students.
Interesting article in Nov. 6 Washington Post's Arlington/Alexandria supplement about the economic picture and forecast in those two areas, from a recognized expert in N. Virginia's economy. Helps explain why those darn house prices in N. Arlington are staying so high!
Article:
The Right Port in an Economic Storm
Good Jobs Buoy Alexandria And Arlington
By Brigid Schulte
Washington Post Staff Writer
Thursday, November 6, 2008; VA01
With gloomy headlines about job losses and the constant drone of 24-hour cable news shows instilling fear, if not outright panic, in even the stoutest of hearts, economist Stephen Fuller has a few words for residents of Arlington and Alexandria: Snap out of it.
This is one of the best places in the nation to ride out a recession.
Yes, there is unemployment, but it's lower here than nearly anywhere else in the country. Home sales are actually up from the same time last year, with houses spending fewer days on the market. And the local economy is adding jobs.
In speeches across the region in recent weeks and on radio and TV appearances that have taken on more of an air of reassuring hand-holding than statistical number crunching, Fuller drives home this point: In the Washington area, and particularly in places like Arlington County and Alexandria, the "R" word is not recession. It's resilience.
"There are a lot of worried people. Yet they're working 60 hours a week. They're making as much money as they made last year," said Fuller, a professor at George Mason University and director of its Center for Regional Analysis. "Yet the headlines give you reason to worry. It's hard not to worry when you see the market doing what it's doing, even if you don't have any money in the market. So they're concerned. They overreact. They don't get the reference points."
And the biggest reference point they need to understand is this: "It's nice to have a rich uncle," Fuller said. Uncle Sam, that is.
"Arlington and Alexandria are just very well positioned to take advantage of these economic conditions," he said. "Because they're so close to Washington, they benefit from a stable federal government. They have a housing mix that's attractive to the middle-income professional. There's good public transportation, which is certainly an advantage given the high cost of transportation. People are saving time, saving money by living in Arlington and Alexandria, close to where they work. All of the trends, the demographic, economic and cost of living, favor Arlington and Alexandria. Their economies ought to do just fine."
Fuller has analyzed many of the 11 national recessions since World War II. He's been presenting audiences with a chart that shows how the Washington area performed compared with the country as a whole. "We're positive," he said. "And the nation's negative."
He has no patience for those who throw out comparisons to the Great Depression. "Even Alan Greenspan came out the other day and called this a 'financial tsunami,' the worst since the Great Depression," he said. "There's no comparison. This is a major event, but banks were failing at 50 times the rate during the Great Depression. The International Monetary Fund came out with a report of 74 financial crises around the world since World War II. This one is sort of average at this point."
In fact, as Fuller works on forecasts, he has a different take on the dour headlines. A $700 billion government bailout? More regulation? That means more jobs in the Washington area.
"We're getting a lot of federal contractor jobs because of the additional work that the Treasury and Justice departments and Fannie Mae and Freddie Mac and other regulatory agencies are going to undertake on behalf of the banking industry," he said. "Just remember how the Resolution Trust Corporation added a lot of jobs here in the early 1990s when they were bailing out the savings and loan associations."
The much-mentioned Federal Deposit Insurance Corp.? It has a major facility in Arlington, said Terry Holzheimer, the county's director of economic development. Federal agencies, which lease office space and account for more than one-third of what fuels the local economy, are a large part of what cushions the impact of any financial downtown. "If anything," he said, "they are going to expand."
And, Fuller said, "a new administration always creates new jobs."
Arlington and Alexandria, like the rest of the country, are beginning to see job losses in retail, construction and financial services, Fuller said. "But we're picking up new professional jobs in business, education, health, utilities and information services," he said. "So although the unemployment numbers have gone up slightly, the picture is not as bad as the numbers might indicate. Because the jobs we're adding pay more than the jobs we're losing."
Arlington officials have been widely circulating a report on Business Week's Web site that crunched economic and demographic data and determined that the county was the best place in the nation to ride out a recession. Nearly half of the 119,222 jobs analyzed were rated as being in such "strong industries" as government, government contracting, lobbying and professional, scientific, education, health and technical fields. Arlington got high marks because only 7 percent of its residents work in the vulnerable financial, real estate and insurance industries. Regions hit harder, such as Charlotte, a banking center, have double that number.
Holzheimer said that even in the midst of some of the most depressing economic news, he's been attending groundbreaking ceremonies lately for buildings in such hotspots as Shirlington, Crystal City and Ballston. Developers have 2,737 residential units under construction, along with three hotels and more than 250,000 square feet of retail space.
"Arlington County Manager Ron Carlee has been describing this year as the glass being only 95 percent full," Holzheimer said. "The line that we've used before is 'serious but manageable.' Obviously, this is something we have to pay attention to, but certainly we can manage our way through it."
Not to say that a serious downturn won't be hard. Retailers and small businesses are feeling the pinch as worried consumers cut back on spending, buying a cup of coffee and a cookie, one coffee shop owner said, rather than a pricier latte and a muffin. And people living on fixed incomes are certainly struggling.
"But the fact is, this has happened before," Fuller said. "The market fell 22 percent in one day in 1987. The economy recovers. The market rebounds. Three to four years from now, people's 401(k)s will have surpassed their previous value. It's going to be a cold winter for a lot of people. But here, we'll get through it."
He tentatively predicts an economic recovery by the second quarter of 2009. This spring.
"...economist Stephen Fuller has a few words for residents of Arlington and Alexandria: Snap out of it..."
no Stephen, you snap out of it.
Quite a snappy (and nonsensical) rebuttal!
Stephen Fuller: the only guy in the US who knows exactly what to say when his wife asks him if she looks fat in these jeans.
Tom, take a little visit to franklymls.com and look at all those North Arlington houses that have been sit, sit, sitting at inflated prices. Then factor in houses that were pulled from the market because they didn't sell. "Middle incomes" aren't high enough for many of those homes. And there are a lot of households with a single professional income earner or if there are two, both incomes aren't that high. So yes, unemployment is low, education levels are high, etc., but incomes haven't gone up anywhere close to the rate of increase in A/A housing costs since 1999. The willingness of sellers to believe exaggerators like Fuller (and the refusal of builders to accept slightly lower profits and understand that not everyone willing and able to buy is a 30 something dual professional couple looking for a five bedroom, 4000 square foot family home for $1.8 million), rather than face market realities, are why so many houses are sitting.
One day after the election and the morning news (NBC4) was already touting the coming mini real estate boom from the change of administration. Twits. They admit in their coverage that the number of new residents expected (40,000 by their tally) is equal to the number of departing residents, thus making this a boon only for transactions and associated leeches not for demand, but misleadingly stated that while national home prices are down 15%, in D.C. they're up 3%. Um? maybe if by D.C. you mean just Capital Hill, Georgetown, Foggy Bottom and Chevy Chasse. But 40,000 people don't all go live in those areas... Gah. I hate the morning news, anything on there, I should just believe the opposite.
On the other hand, additional transactions should accomplish more accurate price discovery, which is a good thing. And if you're adding the same number of buyers as sellers, then you do change the ratio between them, which should improve market health (by making that ratio closer to unity from either direction). Still, the greatest boon is to real estate agents and brokers, if enough people moving into D.C. on a short term appointment (of 4 years or less) are foolish enough to buy a house for that short of a time-frame in this housing environment. If collectively they all decide to rent, then we just get more motivated sellers out of this. Given the high cost of real estate relative to the rest of the country, I'd expect many of the newbies to baulk at buying in this market.
Doug:
Nothing wrong with buying a competitively priced place and renting it out at positive cash flow.
"from a recognized expert in N. Virginia's economy. "
Recognized expert? lol
This guy's predictions have been hilarious.
Tom,
It is not incorrect to say the current crisis is the worst since the Great Depression. Where does that imply it must be comparable?
Once cannot make the same arguments about transportation costs when the price of a gallon of gas goes from $1 to $2 to $4 and then to $2.50. Proximity matters for many reasons but that has not changed in history. So people promoting real estate try to find other reasons such as transportation cost, but its impact is highly exaggerated.
The claim that in 3-4 years people will have their 401K's back to previous levels is also questionable; when there have been severe crises like the current one, it has taken much longer.
Stephen Fuller and John McClain, the GMU real estate guys, have made serious errors of fact and logic in their predictions before, so I normally dismiss their views, even if some of their points are valid.
Inventory charts were recently updated for the big 5 counties:
http://www.recharts.com/nova/nova.html
A few things I found noteworthy:
- Alexandria inventory has now broken below its 2007, 2006 AND 2005 levels. It now joins Loudoun as the 2 counties whose inventory is down year over year over year over year! By contrast, Arl, Ffx & PWC still trail, and I do not expect them to achieve this YOYOYOY status until early next spring.
- Areawide, by and large the "fall bounce" in inventory did not happen this year. Last year in Arl, Alex, FFX & Lou, inventory rose, or at least remained flat last Sept/Oct. This year, that really didnt happen with one exception (see below).
- Arlington did see a bit of a fall bounce. In fact, while inventory is still down YOYOY, it looks to be inching closer to 2007 levels, not 2005 levels as with the rest of the area. Is this an early sign of new stress?
- In that regard, now that the "moving in" theory is pretty much dead, and all areas and all sellers in NOVA seem to act in unison, one would assume that if the market turmoil is causing marked stress, it may be bad enough to cause inventory to rise once again or (at least not fall) as buyers hesitate on buying. In that regard, while I normally disregard the smaller areas, I have to ask, whats up with the inventory "spike" in Manassas Park City (MPC)? These smaller areas can give lots of head fakes, but the trend reversal is nearly a month old now.
Is this new possible trend in MPC, along with the respectable "fall bounce" in Arl, the canary in the coal mine? Is this a new indication of housing market stress? Conversely, is this a sign that these areas have "bottomed out" and inventory is now behaving normaly? Or is this all just noise and I am seeing things? Thoughts?
Sorry - I review my prior post, it should have said
"if the market turmoil is causing marked stress, it may be bad enough to cause inventory to rise once again ANYWHERE IN THE METRO AREA"
In that regard, I would particularly like to hear from anyone "on the ground" in Manassas Park City - has anything changed in the last 2 months, or am I seeing things?
"In that regard, now that the "moving in" theory is pretty much dead..."
Where on earth did you get this idea?
Certainly it was a simplistic prediction, but it has proven to be accurate overall.
Price declines have generally proceeded from the edges of the city in towards the middle.
At the beginning of this year, when inventory had a high start, the thought was, its coming, big busts everywhere, just give it more time. I saw this too, and it looked plausible to me.
Then, when inventory started declining in April or May (around the same time these areas posted huge price declines), the assumption in the outer counties was, capitulation has started, price discovery is here!
Curiously, around that same time, the inner county inventory started declining too (with mild to moderate price declines), yet the assumption for these areas was its not price discovery, its sellers holding out. Really?
Further, its not so clear that the declines started at the edges of the city and went to the middle.
Ive been tracking median price declines for several areas on a spreadsheet since Jan 2006. Want to know the first area to show a negative median number? DC proper (march 2006).
Want to know the first area to post a double digit negative median? Arlington (August 2006).
Guess which area posted the most negative median numbers in 2006? Fairfax (7 mos May-Dec).
Guess who had the worst single monthly median decline in 2007? DC proper (sept 07). Second worst in 07? Arlington (Jan 07).
Obviously, I am cherry picking a bit here, but you see the point right? If you look at all the price declines from the beginning on one sheet, its not so clear it worked out that way.
The difference was one of consistency. The core areas kept posing occasional positives, but the outer areas were consistently going negative, and recently hugely negative.
The clincher for me was Montgomery County. For the first 20 months I tracked it (Jan 06-Apr 07) it posted only 3 declines! In that same time period, Arlington posted 11 (out of 20) monthly declines, and its VA counterpart (Fairfax) had 14/20 monthly declines.
That all changed in Sept 07 when the credit crunch hit. Since then, Mo Co has posted 13 straight montly declines, and is only now coming off of its peak inventory and (if the past 3 months are any indicator) its starting to burn down faster than Arlington or Alexandria.
So its not so clear the price declines work from out to in either. In hindsight, it looks like sellers (everywhere) were moving in lockstep the whole time, and there were price declines everywhere, even in the beginning.
Obama has said he wouldn't listen to lobbyists.
If I am not mistaken, ex-Senator Tom Daschle, who will probably hold a senior Obama administration position, was himself a lobbyist. So, that claim should be taken with a pinch of salt.
But it is possible that the lobbying industry may no longer be as flush with cash.
Obama has also said he would use fewer outside contractors in government. As Leroy and others have said, this contracting industry, including defense contracting, has become wasteful and more expensive than using full-time government employees. What will be the impact of such changes?
We can expect real estate promotors to downplay such issues.
"Ted K said...
As Leroy and others have said, this contracting industry, including defense contracting, has become wasteful and more expensive than using full-time government employees. What will be the impact of such changes?"
Right now, the presumption is, defense contractors will do fine...
Obama Election Win Could Boost Defense Companies...
http://economictimes.indiatimes.com/News/PoliticsNation/Obama_election_win_could_boost_defense_companies/rssarticleshow/3674234.cms
The real question I think is when Obama said that (pre or post sept economic meltdown)? Any position he had before then should now be viewed as suspect, partly because his staff includes some prominent Keynesian style economists.
Keynesian philosophy of how to get out of a bad recession is (a) spend all the money you have and (b) spend all the money you dont have in an effort to stimulate the economy.
Right now, the thinking is he will head down this path, especially as the current fear about deflation, low treasury yeilds, and a relatively strong dollar is essentially a license to print money in the hopes we can soon resume with inflation.
Thats part of the perversity of this area. I have a book on the history of Old Town - one of the biggest booms ever was during the 1930s as the rest of the nation suffered under the great depression. Other big booms were the panic of 1907 (resuled in Potomac Yards), WWI (the torpedo factory), etc. I dont think it will be nearly like that, but the thing is, the worse the nation gets, the more this area seems to benefit from the governments efforts to fix it.
crt,
Keynesian fiscal stimulus may mean infrastructure investments throughout the country. The previous crises including the Great Depression happened at a time when DC didn't already get significant infrastructure investments. Now it may not get more on the same scale.
Also, the Fed government work is not all in DC. A great deal goes out to other areas. The Dept of Agriculture has large investments in the Kansas City area. Defense work is handled in a number of states. The auto and clean energy industries, where Obama may invest substantially, are mostly outside this area.
So it is not easy to make the case that DC will get more investment than other areas from a fiscal stimulus or an expansion of government, but I can't deny that DC is one of the few areas that will handle the recession better than the most parts of the country.
Ted K - after reviewing my previous comments, I should have been more clear, I think the direct investment in DC infrastructure is next to zero.
Instead, the benefit to this area is the administration of all this infrastructure. There are a number of companies lining up to help price the TARP plan, administer the energy spending, data tracking on the restructuring of CDO mortgages, proprietary software meant to "streamline" Obama's healthcare investments, etc, etc, etc.
The point is, take the total sum of money meant to help the country - take 3-5% of that amount (heck take even 1% of that amount), and assume it will be eaten up locally in "administration". Suddenly, you are talking some real serious money circulating through the local economy.
"So its not so clear the price declines work from out to in either. In hindsight, it looks like sellers (everywhere) were moving in lockstep the whole time, and there were price declines everywhere, even in the beginning."
You are right about the cherry picking so I am not really going to go into those specific examples you listed.
Price declines most certainly did begin around the edges of the city and those areas are still those showing the greatest declines today.
DC is a big city with a lot of very different neighborhoods. No simple prediction is going to accurately describe what has taken place throughout the city, but "outside moving in" has proven to be about as accurate as you could hope for.
We are also certainly not done with price declines yet. As usual the market moves frustratingly slowly. Several years after the downturn became undeniable we are still watching it unfold. It will likely be at least several more years before we will be completely through the bust.
"Obama has also said he would use fewer outside contractors in government. As Leroy and others have said, this contracting industry, including defense contracting, has become wasteful and more expensive than using full-time government employees. What will be the impact of such changes?"
This is indeed the big wild card. There are huge numbers of contractors sitting in desks doing the same work as the government employees sitting all around them, and getting paid more.
It has become almost a standard career track to get some experience working for the government and then move to a contractor either when you "retire" or even sooner.
Most of it is nothing but an amazing waste of money.
For all talk about the flexibility and private industry know-how the contractors like to roll out... the quality the government is getting for what it is paying is simply terrible.
Now I have no clue whether Obama will actually try to change this... he did pledge to at one point but who honestly knows?
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