I appreciated receiving this February real estate letter from the William and Alexandra Lohr team of Long and Foster.
Check out the months of inventory in Northern Virginia as of February 16th.
Tuesday, February 17, 2009
February Market Update
Posted by Harriet at 5:00 PM
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16 comments:
The best part is percentage of sales/DOM by price range.
Aint nothing over $800k selling. Eyeballing their graphs, the months of inventory for Fairfax look like this:
2.4 months <$400k
3.8 months $400-$800k
12.5 moonths >$800k
...Also, I like their graph of average townhouse price for that neighborhood. I wish it went back farther, to 1998 or so.
If you assume that a 2002* price is a reasonable price today, then houses in that neighborhood are still overpriced by 25%.
I also like how price stabilization over 2 quarters is their sign of a bottom. If you look at their graph, they also had two consecutive quarters of stable prices in 2007.
I also like their use of the appeal-to-authority fallacy by citing anonymous experts (e.g. "Experts predict the Northern Virginia real estate market will bottom out this year").
* 2002 was a bubble year, but if you adjust for inflation, 2002 prices wouldn't be bad prices today.
At long last, median prices for the entire year 2008 are available. Price change by area in 2008 is as follows:
Arl -5.47%
Alex -8.02%
Ffx -19.35%
Lou -20.46%
PWC -38.65%
In most cases, there were losses in prior years too. Thus total losses from peak to 2008 are:
Arl -10.02%
Alex -8.02%
Ffx -22.55%
Lou -27.84%
PWC -43.41%
FWIW – before the downturn, price gains from year 2000 to peak were:
Arl +129%
Alex +134%
Ffx +129%
Lou +132%
PWC +182%
However, thanks to the disparity in price declines by area, price changes from year 2000 – 2008 are:
Arl +106%
Alex +116%
Ffx +78%
Lou +67%
PWC +60%
One follow up on median prices - who declared Arington to be the leader in immunity when the true immunity capital (2000-2008) is clearly Alexandria :)
NoVAwatcher,
I can think of one recent "expert" (well, at least a now-ex-Fannie-rich guy) who wrote for the WSJ this NoVA nearing bottom article.
There's a lot we learn from looking at the market statistics, and then a lot of other factors to consider when thinking of future prices (now the economy problem). But I shake my head and think of how many federal jobs $800 billion buys.
I liked the Woodbridge rental story.
"the true immunity capital (2000-2008) is clearly Alexandria"
Wait until this hits the news.
Remember this $89K charmer? It's 2 blocks away.
Wait until this hits the news.
Based on the link, it's already hit the news.
I remember another poster that disappeared a little while back that was a big Alexandria fan. He/She always posted links using mcenearney.com. KH?
I have been reading this blog for about a year now and wanted to offer an excellent reading recommendation that I came across this weekend.
John R. Talbott has written a number of books over the last 7 or 8 years predicting the tech bubble and burst, housing bubble and burst, even Obama's achieving the dem nomination and winning the presidency long before anyone was really taking about him seriously. His latest book "Contagion" includes an indepth discussion of the current crisis and how we got here. He also describes how this will all effect our global economy and foreign relations for as far as the eye can see. I highly recommend it for this crowd. Talbott has an incredible handle on housing and does an excellent job helping consumers/readers figure out how they can protect themselves if they act with their brain and common sense. His last book from 2005, "Sell Now" incredibly described the scenario we are in right now.
As someone who lived in San Diego during the height of the boom and believed I was actually buying in here in Reston at a good time in 2007, I wish I had found his books sooner.
Not waiting til spring is an interesting point. We sold in Feb 07 based on our (excellent) realtors' advice and seriously, there were like 5 other houses in our zip code within 50k, and they were all craptastic.
CRT,
thanks for the posts. are they numbers adjusted for inflation?
CRT - thanks (I guess).
After 3 years of declines, Arlington has given up 10%.
Now if it will just hurry up and give up another 27% real quick, it will get back to the prices I PASSED on in 2003!
The discussion here often turns to historical norms/averages etc., and I'll be honest: I'm never sure quite sure what that means when I try to assess a fair price on a property.
But in the interest of history, I looked up what I could find in DC property records about a little alleyway in Foggy Bottom I lived next to for about 10 years.
It's Snows Court, which runs between 24th and 24th between K and I.
This a alley, but it is mostly a collection of very small two story townhouses. I've been in a few. Each has two small bedrooms and a postage stamp back yard. I looked at one in 2000 and it was selling for about $170,000. I thought it was an absolute bargain, even then, based on my experience in New England and housing prices there. Here it was one block from the Metro, eight blocks from the White House, and it was selling for about the same price of a house in Northern Connecticut.
A few observations about this data. First, as far as I can tell nothing has been sold on Snows Court since mid-2007, so the last prices recorded pretty much reflect the top of the bubble.
The prices were consistent until about 2002 -- I remember the upturn that year in townhouse. And then they went off the chart.
But what would be the right price today, minus the bubble? I don't know. I think almost any answer would be a guess. I just felt like sharing the data and enjoying my trip down memory lane ...
1999, 630 Sq Ft.: $140,000
1999, 702 Sq. Ft.: $186,000
2000, 648, Sq. Ft.: $177,000
2001, 864 Sq Ft.: $210,000
2002, 700 Sq. Ft.: $308,000
2005, 700 Sq. Ft.: $489,000
2006, 528, Sq Ft.: $368,503
2007, 884, Sq. Ft.: $549,000
2007, 700 Sq. Ft.: $450,000
Here are my problems with the realtor's "news"letter:
1. As always, the realtors figure out an angle on why now - RIGHT NOW - is the absolute best time to transact (in this case sell):
"if you want to sell, now is the best time. Take advantage of the winter’s low inventory and sell your home now. "
Never mind the fact that sales prices are always lower in winter months than in the busy spring.
2. Reference to so-called experts without naming them or providing a reference to their quotes:
"Experts predict the Northern Virginia real estate market will bottom out this year."
For some reason, I'll bet their experts were also saying r/e prices would never drop in the first place. And why do I get the funny feeling that their experts are the trustworthy fellows at the NAR?
3. Suggesting that price should be a buyers guide to value rather than value itself:
"Most importantly, prices appear to have stabilized over the last two quarters."
So if prices have held flat for two quarters then they can't or won't fall any further? Why not encourage buyers to compare prices to underlying values in order to determine the likelihood that prices will continue to decline?
4. Not looking out for their prospective buying clients' best interests:
"Be prepared to act quickly if you want an investment. We continue to receive multiple offers on homes that are well priced."
These realtors are probably not even aware of how their message conflicts with their duty to the buyers whom they represent. Their fiduciary duty to their buyers is to look after their best interest with respect to the purchase of a home. Encouraging your buyers to make hasty decisions and enter into bidding wars seems contradictory to protecting their best interests.
I could go on, but you get the point.
This is a reponse to John Fontain's comments:
Mr. Fontain made some pretty flip comments regarding Bill's and my newsletter and our assessment of the market.
First, any of our past clients would attest to our integrity and due diligence. We are in the business of creating and maintaining real estate equity no matter what the market conditions.
Second, our newsletter was not a piece of professional journalism nor an academic work. We are attemping to give an overview. If we do not sight a source ("experts,") you are welcome to ask.
Third, Mr. Fontain asserts prices are higher in the "busy spring." Busy means higher inventory. As supply increases, prices fall. Many sellers see the best price in January February before all their neighbors go on the market.
We have NEVER blindly followed NAR's guidance. We have at times, advised our clients to rent instead of buy, and to hold instead of sell.
Yes Mr. Fontain, you could go on, but I'm not sure we will get your point....
"We are in the business of creating and maintaining real estate equity no matter what the market conditions."
So then you advised all of your prospective buyers to avoiding buying over the last several years of the bubble when prices were well in excess of underlying values, right? And you encouraged all of your prospective sellers to sell and rent until the bubble popped, right? Please provide links to your old newsletters from 2004, 2005, and 2006 (or even one example), where you put preservation of equity first and told people to stay away from the housing bubble.
"Second, our newsletter was not a piece of professional journalism nor an academic work."
Didn't say it was, and obviously it was not.
"If we do not sight a source ("experts,") you are welcome to ask."
Ok, who are the experts and where are they quoted as saying the markets will bottom out this year?
"Third, Mr. Fontain asserts prices are higher in the "busy spring." Busy means higher inventory. As supply increases, prices fall. Many sellers see the best price in January February before all their neighbors go on the market."
Market statistics do not support your claim. Period.
I anxiously await your responses.
Don't mean to horn in but wanted to offer one comment: "Busy" can mean both more sellers and more buyers, which would not necessarily mean prices would rise or fall.
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