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Realtor Julie Emery reports: "If you're looking at properties in Prince William County that are under $350K we're back to multiple offers, bidding wars and potential buyers tripping over each other in houses." You can click to read her experience showing three houses there yesterday.
Tuesday, March 10, 2009
Northern Virginia Bits Bucket 3/11/2009
Posted by Harriet at 10:56 PM
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43 comments:
yeah, i've heard something like this from my realtor friend, who is pretty realistic person (given her occupation). still, it's another bear market rally and local one for that.
NPR reports on the possible bottom in Florida.
"Optimism Boosts Florida Housing Market
by Greg Allen"
"Sales are picking up and the inventory is going down."
My comment, the Dow shot up yesterday. Probably a coincidence...
dow shot up today, yeah, another sign of the bear market rally. caused by the unofficial memo by the certain vikram pandit, person who we should trust and respect a lot these days, since his integrity is unquestioned and business acumen amazing. gonna see more headlines on creative accounting soon. like declaring fed money infusions as operating profit.
Konstantin
"like declaring fed money infusions as operating profit."
I can't stop giggling over that one. Oh boy, I hope you're wrong, I really hope you're wrong.
Although I totally concur that this bear rally was just as irrational as the random drops in recent days where I kept saying, heh? what part of this is news to Wall Street? Why haven't they "priced this in" yet. The "leaked memo" practically ammounted to a statement that yes, credit cards with over 15% interest rate charges are still a profitable business if you don't account for any losses in other sectors. Which sounds almost like a tautology to me.
Uh, yes Julie Emory.
Houses (mostly foreclosures) under 350K in PWC are affordable & people will look at & buy them.
Help me out - where is the suprise/news in all of this?
A little while ago some people were asking why condo assessments in particular were getting slammed when prices hadn't yet dropped visibly. While I doubt this is actually why assessors did that, this is why it may become the new reality. From the OC register, one of the 6? mortgage insurers is no longer insuring attached condos, at all. If this spreads to the rest of them, there will only be FHA, aka the Federal government left to enable purchases of condos with less than 20% down. If 20% down becomes the new norm on the lowest rung of the housing ladder, the least likely to have downpayments ready, the most likely to be planning on creating equity _after_ getting into the home, prices will plummet until 20% down is more like 20k than 60k. And even 20k seems a bit optimistic.
All this is still hypothetical, but it could easily come to pass. We're at the lose your losers stage of the game, and condos are big losers for PMI companies.
what do you folks make of these listings?
developer running out of cash? 4 unfinished THs for 4MM+?
or,
flipper comes to terms with the new reality? new home drops 150K+ and still sitting?
so is this one (there're actually two available) DOM 430 and being re-listed over and over again.
MM,
On that last one, is it just me or does that bathtub have three windows overlooking a tenement? Or at least a huge slew of neighbors' windows...
Did they decide to make this "craftsman TH" monster (weren't you supposed to be able to build your own craftsman home from a kit, wouldn't that generally have implied by yourself on your own land? anyway) because the area is strictly zoned for attached housing?
"However, prices in Prince William are likely to increase this year if current trends continue."
I like Julie Emery, but does anyone who has scrutinized PWC really think prices could INCREASE this year?
Anecdotally, I agree that multiple bids are back on the nicer low-end properties, or fixer-uppers in nice neighborhoods. Some of it makes rational sense, as banks price very aggressively, in an apparent strategy to generate multiple bids and/or sell quickly, like this house:
http://franklymls.com/MN7000528
Great neighborhood, walk to school, less than a mile from VRE/Old Town. We tried to buy a house on the same street last year, and were told we were insane to think we could get one of those houses in the $300Ks. A house right across the street is still asking $450K.
Other instances make me shake my head--some new exuberance seems to have infected people:
http://franklymls.com/MN6996806
It's on a through road, facing tiny brick box houses and an apartment complex. Sure, it's close to the VRE, but it's not in a neighborhood, and it offends the eyes. Is this really someone's dream home?
Spring will be fun, as long as we have found a place and can watch from the sidelines...
MM gave me an idea. Does anyone have favorite listings that exemplify a certain kind of sale?
I still have the flyer from 2006 for this one, when they reduced it to $699K:
http://franklymls.com/MN6747559
It's frozen in 1979 inside. It's my "I need my retirement!!" sample home.
This one is "bought too high then probably refinanced immediately and now is like OH NO!":
http://www.redfin.com/VA/Manassas/9569-Park-St-20110/home/12236107
(doesn't show up on franklymls for some reason)
MM, one thing they all have in common is poor locations on busy streets. When will builders/sellers "get it" that if people have that kind of money for a property, they often want to avoid living on a busy street? So that greatly reduces the # of potential buyers, and the price will have to reflect a significant discount to get buyers in this market.
CRT,
Bringing our discussion from a few threads back forward: I like the shadow inventory term. I've heard it before, but it's rarely applied well to discussions.
The bank-owned properties are marginally shadowy. I mean, it's obvious to me that the houses are vacant, and with a little research I can find the owner of record. What makes some of these more shadowy is that the owner of record is not a bank.
Add that to the 'shadow inventory' of people who'd like to sell, but are not compelled to, but find the current market and prices unacceptable... those are the truly shadowy. There's no way we can analyze that statistically.
Add all of this to an MLS listing rate that is well above historical averages, and even if they're clearing quickly (low or decreasing MOI), there's just too much supply. End result of that has to be a decrease in price over time.
Tabitha Said...
"I like Julie Emery, but does anyone who has scrutinized PWC really think prices could INCREASE this year?"
MOM (i.e. seasonally), its possible. YOY (i.e. real price increases) chances are very close to zero.
I like her too, but I am surprised she was surprised PWC inventory is headed down. If YOY sales decline this summer (a real possibility), I'll be curious to see if she realizes this may not be a bad thing, but a sign of a correcting market.
Xpovos Said...
"Add that to the 'shadow inventory' of people who'd like to sell, but are not compelled to, but find the current market and prices unacceptable... those are the truly shadowy. There's no way we can analyze that statistically.
Add all of this to an MLS listing rate that is well above historical averages, and even if they're clearing quickly (low or decreasing MOI), there's just too much supply. End result of that has to be a decrease in price over time."
Xpovos, I disagree about the threat the "homeowner shadow inventory" poses. Reason being, in every prior downturn, part of the correction process is discresionary sellers decide not to list/ hold on for better days.
In these prior downturns, it appears they return not in a burst, but slowly over time. Reason being, when some decide its safe to go back in the water, others think its way too early. This micro analyzation takes place among tens of thousands of potential sellers, and each one comes to a different determination (in time) as to when it is safe to list again.
In these prior downturns, once they return, they have never been forceful enough to drive prices down even further. I dont expect it to be different in this downturn.
Thus the real threat (i.e. the one thing different between this and any other prior downturn) is the vast amount of Bank Shadow Inventory. This is the one we should be more concerned about.
At the end of the day people either will or won't buy. I cant see how people can call bottom when the season hasn't even started.
I have noticed PWC SFH detached post 2000 prices have gone up above the 300k pricing. But thats the limited inventory that is out there now. Realtors most likely are telling folks to hold off on putting their "shadow inventory" (as you all have termed it, and i like that term) on the market right now. Sort of like systematically baiting sharks. Put all your chum in the water and its a feeding frenzy. Which would decimate pricing. Put a little in at a time and its controlled.
Nothing but real inventory will affect prices from here on out.
I still don't know how people can call bottom however... but if it bottoms how long will it take to recover...and recover to what?...
"Add that to the 'shadow inventory' of people who'd like to sell, but are not compelled to, but find the current market and prices unacceptable... those are the truly shadowy. There's no way we can analyze that statistically.
There might be a way, but the data might not be readily available (at least to us).
I'm thinking of houses that had been on the market, but their listing was pulled without ever going under contract. That could give a vague measure of how many folks are trying to "wait-out the market".
The bottom in PWC (or anywhere else with significant foreclosure rates) will have been reached when the rate of foreclosures decreases by double digit percentages for 3 straight quarters and the MOI is still falling.
Not there yet, but we could be in quarter one of proof-positive.
why is this the right indicator? Because foreclosures measure distress and job loss coupled with an inability to sell for the amount of the note. If things are selling really well, then foreclosures can be avoided in areas that haven't seen as much of a downturn yet. If things are selling well then buyers (and their banks) must be content with prices. In more distressed areas a slowing tide of foreclosures means a slowly diminishing supply of houses to market.
CRT is looking at a market chart, I'm trying to look at a causally related indicator. You could always chose the Baltic Dry Index NPR's Planet Money if you wanted a more obscure economic indicator that's starting to point upwards now.
bottom??? meh
http://tinyurl.com/bhoexg
MW - foreclosures hit record level in February.
This isnt counting the forclosures that have been put on hold during the start of the selling season.
Theres smoke.. i can smell it... just not sure where its coming from.
tbw,
nah, I'm just a pontificator.
TBW--
To be honest, some of the townhouse neighborhoods around Manassas that have been hard-hit by foreclosures have actually improved now that many are vacant. Vacancy can actually be preferable to what was there before.
Some single family developments are also doing well despite huge numbers of foreclosures. I am thinking of some neighborhoods in Bristow now, like New Bristow Village and Braemar. Nice young families are swarming over the REOs, best I can tell.
But I am certain the Cleveland-style malaise is in some parts of the county--Georgetown South in Manassas comes to mind, though there has been an enormous community effort to clean it up, and since my kids have swimming lessons in there, I can say it at least looks better on the outside.
I remember a Post article last summer about unmowed lawns, stinky pools, and snakes/bugs/wild animals taking these abandoned houses back to nature (the empty house nextdoor to me has produced a litter of kittens and some very large possums), but it seems banks are slightly more on top of things nowadays--or maybe that's just because it's winter.
Has anybody tracked crime statistics in foreclosure-heavy areas?
tbw,
I don't know of any area in PWC that used to be nice and now isn't which has become crime-ridden as a result of foreclosures. I would argue that foreclosures are a lagging indicator in that formula. That is, the neighborhood went to pot, and then property values declined, marginal buyers got in, and old buyers lost substantial value, both types are now being foreclosed on.
As a result, the amount of crime in those areas is going down a bit, but the ratio of crimes to persons is way up.
"Cara said...
CRT is looking at a market chart, I'm trying to look at a causally related indicator. You could always chose the Baltic Dry Index NPR's Planet Money if you wanted a more obscure economic indicator that's starting to point upwards now."
Yes - The Nothing (and others) I want to stress my call is based on the second graph down in this link...
http://www.recharts.com/mris/mris_11.html
Notice how the PWC median prices quit falling and abruptly flattened at 170K - exactly where they were (inflation adjusted) in 1998-2000. In economist speak, its data lining up exactly with theory.
Note too, my bottom call is data driven, and the data is low end foreclosure driven. If you are looking at anything other than the bottom of the barrel in PWC, I dont think bottom is there yet.
My point being, if you are looking at the 500K market, and it needs to drop to 350K to clear, when that happens, that is not going to be reflected in the data - reason being theres just so many low end REOs selling right now that any actual "real seller" sales wont be reflected in the price data.
So in sum, if your market is anything in PWC other than low end foreclosures, bottom is not here yet, but unfortunately, the data wont reflect it. However, if your market is low end foreclosures in
PWC, the data suggests the bottom is starting.
crt--
do you think >$500K needs to drop to 2000 levels to clear? what i mean is, back then there were very few >$500K for sale, and proportionately few buyers. there just wasn't much of a market for such houses at all. makes sense, in that 2/3 of workers in PWC work outside the county, and if you have big bucks, why not live closer to work? even up to 2004, there weren't that many >$500K houses for sale, and inventory floated between 2-4 years 7 of the last 10 years.
i see this playing out in bristow now. just about the entire market has gone under $500K.
what i mean is, will >$500K houses NEED to shrink back to the small, select market it was around 2000 in order for the bottom to be reached?
or are there exceptional areas, like haymarket/gainesville, which draw >$500K buyers, in a way that simply did not exist in 2000? and those new high-end areas have permanently moved PWC past its more humble 2000-type housing?
"Cara said...
The bottom in PWC (or anywhere else with significant foreclosure rates) will have been reached when the rate of foreclosures decreases by double digit percentages for 3 straight quarters and the MOI is still falling."
Cara - that could be an indicator, but I see another way.
Assume PWC inventory continues to fall or stabilize, yet sales continue to ramp up during the summer season. If this happens we could see a very very hot (like 1-2 MOI in PWC), yet no rising prices. If this happens, this suggests to me that there is a large, unseen supply of Bank owned shadow inventory that gets listed every month (i.e. bank lists 750 homes, they get sold, bank lists 750 more, cycle continues till exhausted).
After the REOs are exhausted & we are left with a non REO dominated market, sales would fall and MOI would rise since all that is left is real sellers with "sticky" prices.
So thats a process where sales fall, MOI rises, and yet PWC is recovering. One of many possible ways I see this resolving. The key however is as you said, the decline in foreclosures.
I wonder, considering I don't think PWC is a first-choice location for *most* buyers, if/when places like Fairfax, Loudon, and Alexandria start to really come down in price, PWC prices will have to come down even more to compete? Does this sound like a reasonable scenario to anyone?
"Tabitha said...
do you think >$500K needs to drop to 2000 levels to clear? what i mean is, back then there were very few >$500K for sale, and proportionately few buyers. there just wasn't much of a market for such houses at all."
Hard to say Tabitha, looking at the Feb MRIS numbers (broken down by 100K price points), it looks like the last level of clearing is 300-350K (5.8 MOI). The next level up (350K - 400K), MOI plunges to 10.8 and just gets worse the higher you go, so its clear that market isnt nearing bottom yet.
As to getting to 2000 prices (inflation adjusted), thats certainly possible. Census ACS data (thank you Cara) shows there has been tremendous growth in PWC high earning households (27K new households in years 2000-2007) but the number of new homes build (2000-2007) is 31,000+. Clearly, this looks like a surplus to me, plus PWC still has plenty of buildable land left - so I see no reason why prices will rise above Year 2000 levels (inflation adjusted).
Note, this will likely be the slowest level to adjust - taking years later than the low end housing due to stickiness. In the end it may look like prices are higher than they were for low end, but thats likely just because inflation has increased since then.
Elaborating on my comment, above, my thinking is that it would seem unlikely that one area could "bottom" while nearby areas are still falling and nowhere near bottom. I'm thinking maybe the foreclosures in PWC are cheap as they're going to get (or close to it), but the non-foreclosures need to come down in price to compete with falling prices in more desirable areas. So I guess this could show up as the bottom of median sales price, but that doesn't mean that individual properties aren't still over-valued.
anon412,
Generally speaking I think substitution of one area for another nearby area is important and real.
However, PWC has been so hard hit that it's possible that the decrease in the pool of buyers who want to buy there has already happened. During the run-up it had a huge amount of speculators and that buying pressure is totally evaporated (as of like 2006). There is an argument that the next round of "investors" who are now looking to PWC for deals will soon look elsewhere when those places provide better value (in the price to rent-earning or potential for appreciation ratios). However, amongst owner-occupied-buyers, I would guess that the only people buying in PWC now are those that chose to. If you were a marginal buyer such that the price meant that much to you, you'd be renting somewhere right now not buying in PWC.
(as I argue both sides of the coin)
Well, I’ve been around a bit and no one I have talked to actually said ‘Yea I want to live in PWC, but it is where I could afford’ – There is one small exception and I will talk about that in a bit. If you have a job anywhere from Chantilly to DC, PWC is not your first choice UNLESS you want significant land (5+ acres). If you work in Chantilly and you have the money you live in Chantilly. Most of PWC is an Eastern European Ghetto in comparison; not to mention the with traffic drive.
I bet if you said to Tabitha, hey you can choose one place to Live Vienna/McLean or PWC, cost is no object but you are limited to less than .5 acres…she would not choose PWC.
The Sticky sellers simply will not sell…ummm 400k house in PWC or 400k house in Chantilly…..ummmm Do you really have to think about it?
-King
crt,
Yes, the path of MOI may be more circuitous depending on the stickyness of the current owners/ would be sellers. I think it depends on the size of the gap between live-in-sellers and REO prices when the REO's start drying up. The longer the "good" houses sit, they will creep towards the REO prices. If the gap between selling and not selling is small by the time the REOs start disappearing then there should be less stickyness.
Anon,
I think it's more the corollary. The already low prices in PWC will continue to pull the prices further in down. That's the substitution effect. That balancing act will not result in PWC going further down. It's a matter of which side of the balance is being pushed. Clearly, PWC is. FFX, etc. will bring it to equilibrium, eventually.
King,
For a while I was more than happy to live in PWC (been here a long time), and moving further in was never even on my mind, even if I could afford it. The past 5 years though have been unreal for PWC. The build-up and population growth has not been well designed and not been properly accounted for in improved transit, particularly. I urge people to compare the drive end-to-end on 7100 the FFX Co. Parkway and 3000 the PWC Co. Parkway. Or Braddock vs. Old Bridge. The only spot where PWC is better is that 95 is better than 66, and FFX is more 66 oriented. Even then the traffic through PWC along 95 is one of the worst bottlenecks for the commute. If you're coming from Stafford, you hate PWC.
"Add that to the 'shadow inventory' of people who'd like to sell, but are not compelled to, but find the current market and prices unacceptable... those are the truly shadowy. There's no way we can analyze that statistically."
Agreed. Frankly I'm disinterested in that "inventory" because it's unquantifiable. And irrelevant. Their heads are in the sky, living in a bubbled 2006.
Yeah, I think I agree with CRT on this one. Based on inventory I think you could say *DC* is just getting started, as well as MoCo ... but Arlington continues to show a baffling (to me) resilence. I think prices will certainly fall at least another 15% there, but perhaps not much more.
Re the choice that KingMar gave Tabitha - if you're in McLean (22101) you probably are on a lot that's 1/2 acre or smaller, just like in North Arlington.
The town of Vienna has many 1/4 and 1/2 acre lots, and many FFX county neighborhoods (not in the town) north of Vienna with Vienna mailing addresses have lots closer to an acre - it's more like Great Falls/McLean (22102).
So, for some, it's not really a choice between 2 acres in PWC or 1/4 acre in Vienna.
My brother just pointed out to me that a $500K house today is more like a $385K house in 2000, due to inflation. I should have taken that into account.
I just checked RealtyTrac to see if their February numbers were out, and I noticed something curious. Within PWC, Gainesville and Bristow have higer foreclosure rates than Manassas. I haven't kept track of that long-term, but I know prices have not come down as far from peak there as here, though very recently (past 3-4 months), I have noticed what seems to be the exact phenomenon CRT described: a few new foreclosures for sale at aggressive prices that go under contract quickly, then a few more come on, repeat.
I think you're onto something, CRT!
Every time I think that I have to be the most bearish person out there on the housing market I go take a walk through the comments at Ben's national blog. (It's also linked to from the front page here)
Whew, it's like a fresh breath of sanity for me. Not that I'm saying those folks are sane, but that it comforts me to see people more insane than I am?
"Freddie Mac seeks $30.8B in US aid after 4Q loss"
http://news.yahoo.com/s/ap/20090311/ap_on_bi_ge/earns_freddie_mac
These are the guys we are counting on to keep the housing market afloat?
Tabitha/Anon412 - now dont give me too much credit! Ive made some terrible calls in the past -especially with regard to PWC (I thought when sales first went up last spring price drops could start moderate - oops).
Its worthwhile to question everything, look at all the angles, etc. Its this process by which we learn all sorts of new stuff some of which we like, some of which we dont. In the end, the market is going to do what the market is going to do - still its nice to think we have some idea of what is going on!
Hi,
I am planning to bid for a house presently listed for a short sale. Can you please help me on following points:
1. What contingencies should I specify in the contract? I don't expect to put contingency like house must be in move in condition. But what are the ones I should definitely cover?
2. It may take bank couple of weeks/months to decide on my offer. In the meanwhile if I want to bid for another home, how can I get out of this offer?
Thanks a lot,
Vinny
Vinny - the one contingency I would make sure I covered is that the home is subject to financing. Even if you have great credit, given the way the mortgage market has been lately - I see this as an essential.
As far as getting out of a offer you made - general contract law stipulates any offer can be revoked before it is accepted. Thus, if you had a short sale offer haning out there, then you found another house you wanted, you should send a revocation in writing to the bank indicating that the offer to purchase has been revoked. Good luck.
Tabitha, We got it right here:
http://franklymls.com/MN6959132
As for whether anybody thinks properties can go up... please ignore my answer if you don't know me, as it will sound like just another Realtor, but YES.
But in the same breathe, they can still tank more.
I know, not very helpful, but there is TONS of data showing another flood of foreclosures, but there is also a ton of data showing the market inventory dropping at unheard of rates. Back to 2004 levels. That and bidding wars, the obama plan to stop foreclosures.
I had TWO buyers lose an under contract short sale because the seller wanted to evaluate the Obama plan that would save them. This is real stuff. TWO in one week. Less short sales= less bank listings= higher prices.
It is all a supply and demand game. If that balance is lost, prices can go quickly in any direction. Both Up and Down.
Solution? Buy when you want to buy, and don't try and time the market. If you feel uneasy, JUST RENT. It is still MUCH cheaper to rent, even after tax savings.
Frank
Broker FranklyRealty.com
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