The S&P/Case Shiller® composite index (graph here) for the month of March was released today.
"'Declines in residential real estate continued at a steady pace into March,' says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. 'All 20 metro areas are still showing negative annual rates of change in average home prices with nine of the metro areas having record annual declines. Seventeen metro areas recorded a monthly decline in March, with Minneapolis, Detroit and New York posting record monthly declines. On a positive note, nine of MSAs are reporting a relative improvement in year-over-year returns and nine of the 20 metro areas saw an improvement in their monthly returns compared to February. Furthermore, this is the second month since October 2007 where the 10- and 20-City Composites did not post a record annual decline. Based on the March data, however, we see no evidence that that a recovery in home prices has begun.'".
79 comments:
No spring upturn in prices here. All three tiers still down MoM. Maybe April will be better.
Graph the Case-Schiller Index to your hearts content at
www.papereconomy.com
Surprisingly, the tiered index shows the most price support came from the low end. In fact, low end prices actually went up (seasonally adjusted & non seasonally adjusted) - first time in 24+ months.
High and mid end are still going down. In fact, high end rate of price decline got a bit worse YOY.
ah, the papereconomy isn't updated yet with March. Non-immediate gratification, so sad.
So, the low-tier showed an uptick huh? Hey, my on the ground reporting about TH prices is borne out. Hoocodanode?
The first closing on a TH in our neighborhood (since our closing in late February) happened last week. It closed for ~$48K above our price. Ours was a SS, the one that just closed was a healthy sale. There are five more on the market all of which are under contract. I'll be watching them closesly for closing prices - primarily because I'm obsessed with my local market!
It does support what you are saying about the lower end/TH market though Cara. Whether it is temporary or not, the lower end seems to have hit some type of bottom.
U.S. consumer confidence sees biggest jump in 6 years
Housing goes down, yet consumer confidence is increasing. So what is that saying?
dgg,
If you look at papereconomy you can see that each spring in the downturn, the rate of decrease abated, only to turn steep again from late summer to mid-winter. This time the low-end is getting an actual spring bump up, but could still see some more losses in fall/winter. TH's may go as much as 10% lower than what you paid, but there's no guaruntee they will, and you got to live in your new home while the rest of us are waiting, so I'd say it all works out.
kob
At a guess? It's the Onion story-line: Americans ready to be lied to about the economy again. But they're doing it all by themselves so it should be, Americans lying to themselves about the economy again.
oh, and if it weren't for the $8k 1st timer bribe, I'd hazard that a spring bounce means that 2009-Feb2010 is the last of the declines for the bottom tier in this area. But between continuing job losses and perverse incentives, I don't think you can safely make that conclusion. It could be true, but it's not as certain.
Just as a comment. The Case Shiller index is an average of prices from the previous three months. So the March number averages Jan,Feb, and Mar.
The numbers had been -2%/month since October so my guess is Jan and Feb were probably -2%, which means March would need to be a small positive number to make the average -1.2% for the whole period.
"Data presented in the spreadsheets above are calculated monthly using a three-month moving average and published with a two month lag. New index levels are released at 9 am on the last Tuesday of every month. "
thanks housebuyer, that was a subtlety I hadn't yet noticed.
No spring upturn averaged ACROSS the entire metro area--but some individual properties will do worse or better than that -1.2 percent for March, and based on seasonality, April/May/June/July/August should be better than anything in the past 18 months: probably (region-overall) price changes (drops) of between 0.0 and -1.1 each month.
THEN the question is, do we go back to months of -2.0+ percent drops for September-February?
tbw,
yeah, that seemed backwards to me too, but I think it's more along the lines of the bottom for the sub-starter rung will happen first. And then the rung of what should have been starters but had been pushed up into move-up territory will come, but it will take longer.
I'm just getting bitter, you're tired, I'm bitter, but at least we're not 33% in the hole.
TBW-
I think all of the strength is coming in the starter home area. Prices have finally fallen enough that with the 8K and great interest rates its not a bad time to get your first place. Most first time buyers care about location, they do not have kids so they don't need the extra land that the further out areas give you.
The further out areas also have way more foreclosures because of the over expansion. So I do not expect them to bottom out anytime soon.
My actual prediction is the middle areas bottom first(Fairfax, Vienna, Falls Chruch...) then both the inner and outer areas bottom
Here's the link I posted yesterday about white immigration into Arlington that got broken:
https://www.blogger.com/comment.g?blogID=4787878578920468587&postID=2944447743414252338&page=1
correction 33% ->~ 150% loss if you're basing it on a 20% downpayment.
Cara: "I'm just getting bitter, you're tired, I'm bitter, but at least we're not 33% in the hole."
Same. I'm unbelievably bitter these days. My dad asked me the other day when I'm going to buy again and my long response boiled down to "probably never". Still, better to be a renter for the next five years than to be stuck underwater and house poor.
I feel your pain Kevin. Still, renting has its advantages too.
We're moving into a SFH in Vienna next weekend and we really dig the little cottage we found. We can try out Vienna for a year to see if we might might to buy there in the future. Renting gives you a lot of freedom to check out different neighborhoods and it's kind of interesting settling in different areas every year or two.
I'm ready to buy a house but I don't mind renting all that much.
tbw,
good points. I'm just bitter because I want to get on with it and buy a house. I do, however still get people demanding how could I possibly not buy now!!! Don't I know this is the opportunity of a lifetime??? How dare I not validate their self-worth that they've apparently invested in their house price?
But this weekend it was really just doing things socially with people and having all of those things happen at other people's places because ours just won't fit more than 6 people tops. And all of them bought at varying levels of terrible times to buy, but they seem okay with it. ("Seem", may be the important caveat here).
I'm jealous, it's true. Maybe my girl side is just coming out finally as we get closer to the bottom, and are now seeing many options that we could afford and could just choose to settle for...
Jeff B,
What's your monthly rent going to be, if you don't mind my asking? And did you end up getting it through MLS listings or craigslist (or other methods)?
I'm starting to think biting the bullet and moving again this year into something with more breathing room is the best long-term plan. I should at least look before we try to negotiate a month-to-month or other short term leasing with our current landlord.
Jeff: "We're moving into a SFH in Vienna next weekend and we really dig the little cottage we found."
That's exactly what I'm renting right now, off of Nutley. Crummy little house, but great location. I would never pay $400k for them though.
tbw,
good suggestions. :)
I especially like the invoking of a realtor...
I did actually have a very refreshing conversation this weekend with a friend of mine's mom, who was able to supply my reasons for holding off before I had finished each sentence. Why would you buy now if you don't have kids? Fall's way better. etc.
Cara,
Our rent is $1750 for a 1000 sqft (very roughly estimated) 2BR 1 BA SFH on a 1/2 acre lot. It's old and small but suits us perfectly.
Pros:
Very nice neighborhood
Private, shady lot
Great 1/2 acre landscaped yard
Pet friendly
Right amount of space for us
Cons:
No central air
Older house, relatively un-updated
We use craigslist heavily for rentals, a lot of nice places show up there. My wife also found a few real estate sites that had decent search engines. I believe she found this place on a real estate site and it did have an MLS listing number.
We were in a tiny 1BR condo in Courthouse and were getting a little sick of the lack of space. We're paying $1785 for that place and have been there two years. We'll be getting a lot more space, can get a dog, and will have a nice outdoor space to use. The major downside will be a worse commute and losing the ability to walk to almost anything. We're excited about the move though.
tbw and cara,
You two are tired/bitter--I'm just getting bored/impatient.
Having sold in 2007, I've been waiting patiently for MY "I can buy for cash dance" moment.
It's gotten closer, but it's not nearly here yet, especially for the low end of the upper tier of properties in downtown or very close in. But this segment seems to have cracked, and seems not to be reflattening to a bottom, so let's just see where things are in Jan 2010.
I'm quite encouraged that I COULD move to ANOTHER city and pay cash for a house/condo in my size--but probably won't do that, perhaps not until retirement, because of the difference in job availability and pay levels.
(Probably not a good idea to tie up all that cash in a house anyway, especially if the stock market or commodities might be found to be a good investment in the near future. But still, it would be a great personal financial milestone to reach the point where you COULD.)
scott,
Yes, the moment at which we first COULD buy for cash out in Woodbridge was a pretty good feeling. And in a way, I'm reassured just by the existence of listing that we could afford (which was not the case last year at all!). Prior to retirement, it's probably not a good plan to buy for cash, especially if that cash represents a goodly chunk of your net worth, but yeah, it would be a nice feeling to know you could.
That WaPo article on the area market touted DC's relatively flat prices as if it meant that DC was going to stay flat. Completely ignoring the repeated pattern of a 1-2 year flat top before price declines set in. But, yes, I do have to thank my lucky stars that I'm looking out in FFX where we are further along in this process of deleveraging our homes.
Cara: "I did actually have a very refreshing conversation this weekend with a friend of mine's mom, who was able to supply my reasons for holding off before I had finished each sentence. Why would you buy now if you don't have kids? Fall's way better. etc."
Yeah, I don't get many scary lectures from people these days telling me I'll "miss out". Most folks worth their salt know that this market isn't going anywhere. Lower inventory and a lot of buyer activity? Wait it out. No point bidding up a price on a house with six other people, all of whom are looking to cash their $8k and take advantage of low rates. Screw 'em, let them pay bubble prices.
"TBW said...
If the low end is showing an uptick that would confirm my suspicion that the WaPo article yesterday had it backwards: the bottom end further out places will bottom in 2009 (not 2011) and the higher end inner suburbs will bottom out in 2011 (not 2009)."
TBW - dont confuse low end with geography. Last I checked, the low end close in is actually selling as fast or faster than the low end farther out.
Same thing goes for the high end. High end everywhere is struggling, but the struggling 700K+ market in Arlington is outselling the 700K+ market in Loudoun by a mile.
So I think its more accurate to say low end bottoms in 2009, high end not til 2011.
Kevin-
I would hardly say people buying now are paying bubble prices. Prices may continue to fall, but they are already 30-40% below the peak. Also if you fit an exponential through the Case Shiller index you get that prices are below trend. Even if take out 2004-2007 then prices are right about the trend line.
I don't think housing prices are going up, but I am almost positive that interest rates are so it still may be a decent time to buy.
housebuyer,
Even if your interpretation of the chart were accurate, Kevin's point is primarily that these outside forces are artificially creating demand. When this demand is removed, prices will fall. It's called stealing buyers from the future. Those buyers will be gone, and demand will be artificially lower. The government is creating an overshoot below fundamentals by trying to prevent a sustainable bottom level price from coming "too soon".
All those tempted into settling for a nice TH now? Will not be on the market if job losses move the REOs up the housing ladder. The bottom rung of the SFHs has yet to come to terms with needing to be priced based on people's actual incomes. That has to happen before a true bottom will set in. Why? because there is no move-up equity from THs and condos.
If the goal is to get a SFH within 5 years from now, buying into the bottom rung of the housing ladder before any true risk of inflation has reared its ugly head, is a fool's bargain. Better to save-up more money and wait for those SFHs to come in line with incomes alone. Because that TH or condo may not see any appreciation for 10 years.
tbw,
This segues nicely into a point I forgot to make over the weekend. >4% yearly appreciation over 31 years doesn't account for the fact that in the intervening time, more housing that's nicer than yours has been built, than has housing that's smaller or attached or both. (and obviously nothing's been built that's older than yours). Thus, with housing skewing bigger, with more amenities, bathrooms, etc. the position of a ~1000 sq ft SFH goes down, such that it no longer can command 3x the median income that might have been reasonable when it was new. So for stuff that's getting left behind and largely becoming rentals, just keeping up with CPI is asking a lot.
tbw,
good point. Burke is not the job-nexus that Reston or Tyson's are, but it is indeed not as much of a "boondocks" as when it was first concieved. It doesn't have that many tear-downs yet (probably because there's "plenty" of land just a little further from the VRE), but it does have decent tear-down potential if the various HOAs allow for that. But the lots are small, even for the current houses. One would have to look into the land-use restrictions to see if building larger homes were even an option.
Cara said...
And all of them bought at varying levels of terrible times to buy, but they seem okay with it. ("Seem", may be the important caveat here).
Wow, we really have different sets of friends. People I know bought their first place in 1980's, 1990's, 2000's. Most people have hundreds of thousands of dollars STILL in profits, including me. Very few do I know that bought in '05, '06, and '07.
You must be exaggerating?
SHADOW BUYERS
This message board seems filled with, can I call it, shadow buyers. All of this blather of shadow inventory, it makes me wonder how many people out there are like contrarian, cara, TBW, kevin that are sitting on the sidelines waiting to jump in. If you folks, and the thousands of others out there jump in the market at the same time....WOW, what a pop that will be.
Robert,
It probably is just like you said, that you have a very different group of friends. In my case I graduated in 1998 so I have very few peers that bought prior to around 2002. I'm not sure I know anyone personally in this area that bought before the late 90s.
As for the shadow buyers...there can't be a spike or prices would move past what we'd pay :) We'll stop buying if prices start going up excessively. Bubbles can only be created by irrationality.
robert,
yes. we do have very different sets of friends. No I am not exagerating. 1 couple, 1st timers, under 30 when they bought in 2005. 2 couples, moved to DC area and didn't recognize the bubble for what it was, just thought that DC was moving up in the national hierarchy (2004,2006). 2 family members bought in other markets in the bubble (2006,2006). 1 couple bought May 2008, but I get the feeling they have money to burn... law school paid by dead uncle fund, trust fund tax mess on the other half.
so, yeah, no exageration, just a slightly different generation.
Cara -
This article included April sales figures and confirms what you said about a pop in home prices...Bottom in DC Area Prices
Kiplinger reaffirms projection that DC will be in the top 3 cities to emerge from the recession.. Top Cities for Jobs 2009
The only people I know who bought before 2006 are my friends' parents, so the generation before mine.
I'm 30 years old, and only 3 of my friends in this area own property. One couple bought a sfh in Falls Church at the peak of the market in 2006 and are now at least $100,000 underwater. The other two bought in Arlington in 2008 and 2009, both from estate sales, interestingly enough.
Yikes, what about all the infrastructures projects going on...Dulles Silver Line, Dulles Airport Expansion, Woodrow Wilson Bridge, and here, the HOT Lanes... Jobs, jobs, jobs
Give me another city with the number of major infrastructure projects and the $$$$ amount.
robert,
There is shadow demand. But much like your scenario where owners absolutely won't sell until their dreams are fulfilled, the shadow buyer inventory has it's own price points at which it's willing to jump in. The difference being that the buyers for the most part are basing that on sustainability relative to income, whereas the sellers in your scenario have to be dim-witted enough to only look at their profits without regard to what they'll need to pay for housing going forward. In fact, exactly the oppposite group of people. Which one outnumbers which do you think???
The previously shadow buyers are exactly who are buying right now. Kinda like the zombie home-owners who'se houses are ready to be reborn as REOs. The huge transaction numbers tells you exactly how many buyers are out there waiting for prices to come down to reasonable levels and are now giving in.
And I repeat, what happens when these shadow buyers have been lured into THs that won't be appreciating anytime soon? Think hard about my generation. People 2-3 years ahead of me in their financial situation or job stability are stuck underwater. Many people at my stage or a year or two behind are buying THs now while rates are low and they can pay only 3.5% down and get $8k back. We're talking 5-8 years worth of buyers here that won't be moving up on schedule. That combined with coming retirements of people with long-held SFHs doesn't scare you?
There are TWO major job creation bonanzas going on in Congress. #1 is the stiumulus...44,000 "command, control, tracking, and oversight... high paying jobs from the stiumulus#2 is Obama's $3.5 trillion budget, with huge numbers for energy, health care, and education.
Everybody descending on the DC area looking to get a piece of the pie.
I thought this was interesting too. Over the next 3 years, there will be an additional 384,000 jobs that need to be filled from by exiting federal employees. Many of those 384,000 will stay in the area. Even if it's 50%, that's another 200,000 people that'll need housing in the next 3 years. KABOOM!
The federal government will need to hire an additional 200,000 workers over the next three years as a result of President Obama’s stimulus plan and additional spending included in his budget plan.
That may sound like a lot of jobs, but it’s just slightly less than half of the 384,000 additional employees Uncle Sam already needed to pick up between 2009 and 2012 just to replace existing federal employees expected to leave their jobs. “That 384,000 is a projection for retirements, voluntary separations, reductions in force and a few folks who will die on the job,” says John Palguta, vice president of policy for the Partnership for Public Service, a Washington, DC, advocacy group working to advance public-sector careers.
Jeff said...As for the shadow buyers...there can't be a spike or prices would move past what we'd pay :) We'll stop buying if prices start going up excessively. Bubbles can only be created by irrationality.
You're assuming that every shadow buyer is using the same analysis to jump back in the market. I'm suggesting that there is a floor under prices from all of the pent-up buyers out there waiting for #1 low prices, or #2 (more likely) increasing prices that will make them fear they are being left behind.
tbw,
It appears that Robert bought his house during the bubble - I think there's some worry there that prices will decrease. Otherwise I'm not sure why he's so interested in NoVa housing prices. I suppose he could be looking to invest in another property.
"It's called stealing buyers from the future. Those buyers will be gone, and demand will be artificially lower. The government is creating an overshoot below fundamentals by trying to prevent a sustainable bottom level price from coming "too soon"."
HMMM, I'm not sure I've thought of it THAT way before. Wow, if that is true, rather than just the molasses-slow correction to trend, then any patience and willingness to keep renting that I can continue to have will have an even bigger wealth dividend than I already feel it is having!
Which means this modification to agents' usual spiel: "it's a great time to wait!"
Robert
That "article" on DC area housing? Is a 2 paragraph NAR BS load that we've already discussed. In fact, that I've already discussed. These averages are meaningless if we don't know the mix. 'Nuff said.
And as for jobs? Has anyone here (other than contrarion) seriously disputed the idea that DC is a good place to ride out the storm? Not that I can recall. There's no one to argue that with (again, other than contrarian). Is that why you're pushing harder, and seeing, well if they agree this is a good place to find employment, maybe I can get them to believe there's a reason to be afraid of future price increases? I don't get it.
Those shadow buyers who were capable of fear of being priced out forever have already bought, or are buying now. The ones who are left aren't going to be scared by pure speculation with no lasting trends.
Seriously, look at the Case-Schiller graphs at papereconomy, look how each spring there was a 2-4 month abatement in the rate of decline, and tell me that this tiny bump is not part of the same pattern.
If all the shadow buyers really are like the posters here, you're in big trouble, because we can read graphs and accurately interpet them.
scott,
well, it is wishful thinking on my part. And my personal talent is for being able to make a rational sounding argument for anything. So, just because it makes sense, doesn't mean its true. I think it does have some truth to it, but there are always other unforeseen things that can interfere. And the $8k buyer bribe should only be an influence for units priced under $375k, since most people with under $150k in income who would also be tempted by this bribe have significant levels of other debts.
TBW, you're putting toooo many words in my mouth. Make your argument without building a straw man out of me.
Cara,
Just pointing out that the tsunami of foreclosures is going to be easily met by the tsunami of jobs from the stimulus and Obama's budget for education, energy, and health care. It won't even be close. Smart investors are buying now. The macro trends are just too hard to resist. You will never see December/January prices in your lifetime.
"And it probably only harms him to have our generation continue to be renters and not directly pay property taxes. "
Well I've often thought this too, but I now think the word "directly" is the important one--don't apartment buildings pay property taxes, as well as corporate taxes on the rental income? (I suppose the corporate taxes might not be as "local". I don't know--my CPA friends would know how commericial residential tax law works.)
I think the main think is square footage demand--warm bodies, such as baby boomers having kids, creates demand for larger high-value property taxable units, whether they decide to own or rent.
I'll modify that and say warm bodies with good, well-paying jobs create demand for reasonably priced square footage.
I think all of us have stated that's one of the main reasons why DC has been so "successful" at having high prices per square foot (not to mention all the urban renewal that has been going on.)
But the question for housing already-bulls is: will it continue?
Will DC continue to have as many or more warm bodies? As many or more good jobs? As much good pay? Will prices become and stay reasonable?
I think all have to happen if house prices (per sqft) will continue to rise and be a good investment.
But I think this crisis period of fed spending might be the peak of THAT bubble right now. And if baby boomers DO start to retire or die off, there go the warm bodies--and since DC has been one of the biggest continuing benefactors of boomer employment, it might have a bigger worker shortage than many cities when that happens.
And if we don't fix some of our poor national attitudes ("war is job #1", "spending and debt is the patriotic duty of every american", etc) then we won't have any good pay either--all the money will be in China, Saudi Arabia, India, etc.
Then all we'll have left is the square footage, and if you want the price to go up you'll have to sell a LOT of it to foreigners and take foreign currencies.
Which, setting aside the security/sovereignty implications, actually wouldn't be a bad way to preserve some fraction of our recent standard of living, to give to the next generation. Which is why all U.S. children should be learning foreign languages and multiculturalism.
Just watch California home prices to determine if the $8k buyer's credit will be extended and expanded. Obama loves California and their 54 electoral votes.
Scott,
You are depressing.
Robert,
You make me laugh big time. If you look at 2004-2005 sales in the area you'll see they were record high and most of that stuff was either
1) people buying their first home in the boondocks (because that's where it was still possible to get something under 400-500k, and a lot of these folks bought above their means,
or
2)people with move up equity who also had a tendency to overshoot.
first group of people in general is in the hole, but for many of them their incomes improved somewhat and they can pay their mortgages, but this is not really nice situation, they never intended to stay in boondocks for life. so they either short sale, foreclose or rent out their properties.
with second group of people it is usually a major loss of equity.
do not forget about all these folks who bought long ago, refinanced with cash out and spent this money to help us economy strive.
Robert,
This was also interesting from the WBJ/Kiplinger article:
"Charlottesville, Va., was ranked No. 4."
Just out of curiosity, how was Kiplinger at recognizing the bubble and predicting the collapse? That's one of the factors I use in determining how much faith I should put in housing market predictions. (The other main one is how much sense their arguments make).
tiredbubblewatcher writes (mistakenly):
>And it probably only harms him to have our generation continue to be renters and not directly pay property taxes. <
and:
>If those currently in their 20s and 30s are "priced out forever" and remain renters and don't care what the property tax rate is, then they may start asking for more and more county services. Starting teacher salaries to $50k-60k! Lower class sizes. More rec centers. More dog parks. [etc"<
Here's the real problem with the younger generation:
NY Review of Books, Universities in Trouble, May 14:
"Among adults in the age group 55-64, we still lead the world in the percentage who are college graduates -- which means not only that over the past three decades many nations have surpassed us, but that in the aggregate, younger Americans are less well educated than their elders."
From the same piece:
"In 1976, federal Pell grants for low-income students covered 72% of the average cost of attending a four-year state institution; by 2003, Pell grants covered only 38% of the cost."
So, yes, the younger generation will be less educated and remain renters because of smaller incomes. The standard of living in the U.S. is now declining.
The renting class realizes that they're screwed because they don't have affordable access to education. So, as the theory goes, all the renters demand educational improvements because they feel unattached from property tax increases (and can't get 2nd mortgages anyhow to pay tuition), which means more public money for education and improved affordability. This leads to higher educational levels and improved incomes and home buying.
So, if you want to improve the standard of living in the U.S., make home ownership impossible for the younger generation. Nothing works as well for fostering change as a completely pissed off generation. It's exactly what we need right now.
Robert said...
Cara -
This article included April sales figures and confirms what you said about a pop in home prices...Bottom in DC Area PricesHummm, me thinks that a 18.6% decline in prices resulted in a roughly 6% rise in sales.. Can we extrapolate further?
(Folks, don’t get Robert confused with robert)
Robert said...
I thought this was interesting too. Over the next 3 years, there will be an additional 384,000 jobs that need to be filled from by exiting federal employees. Many of those 384,000 will stay in the area. Even if it's 50%, that's another 200,000 people that'll need housing in the next 3 years. KABOOM!Bring ‘em all. Thousands of them. But if recent history teaches us anything, the amount of house one can afford is dictated by income.
Why would someone move from one area to another for a job? Could it be that their current local area is experiencing some sort of economic decline? (did someone say recession?) If so, how likely are those folks to have a down payment? Foreclosure? Short Sale? Good credit?
Robert, I can already see that you are the sort of poster who is going to be immune to any sort of logical argument, but just on the off chance you aren't... here are a few questions that I think would help everyone here understand exactly where you are coming from. (assuming you answer them)
What do you think the median income is in the DC area?
What do you think the median income in the DC area will be in 2 years?
What do you think the median income in the DC area will be in 5 years?
What do you think a "normal" income to home price ratio is for the DC area?
Do you think for some reason the "normal" price to income ratio in the DC area will change? Why? to what? and when?
oh no, there's a Robert and a robert! We're going to have to try to keep track of them like the Toms.
Do you think blogging will eventually lead to greater diversity in male names? (I'm so not kidding)
"Robert said...
Cara,
Just pointing out that the tsunami of foreclosures is going to be easily met by the tsunami of jobs from the stimulus and Obama's budget for education, energy, and health care. It won't even be close. Smart investors are buying now. The macro trends are just too hard to resist. You will never see December/January prices in your lifetime.5/26/09 5:51 PM
"
Thanks for the explanation, I was getting a bit lost as to where you were going with this argument. And that last line is priceless. Simply priceless.
To all, yes, the $8k buyer credit is likely to be extended. That's the only way that the program of stealing buyers from the future can ever avoid the negative consequence of a gap in demand once it's rescinded. One almost wonders if NAR is smart enough to know that the artificial deadline is hurting their future revenue stream already, by inflating prices now with the "buy now or lose $8k in cold hard cash!". Even the knowledge that it will certainly be extended will drain some of the current demand and let the flow of new buyers be a tad more gradual (as opposed to potentially evaporating Dec 1). Gradual is good for realtors, transactions are the key and steep price drops are always bad for transaction volume (until they drop low enough to be supported by incomes).
What do you think the median income is in the DC area?
Fairfax County: $105,241
What do you think the median income in the DC area will be in 2 years?
Higher than $105,241
What do you think the median income in the DC area will be in 5 years?
Much higher than $105,241
What do you think a "normal" income to home price ratio is for the DC area?
Depends on mortgage rates, incentives, rental rates, household wealth, others.
Do you think for some reason the "normal" price to income ratio in the DC area will change? Why? to what? and when?
Like I said, there are more factors than price to income ratio.
How can price to income ration be the same when mortgage rates are 5% vs. 8%. What happens if someone like Clinton all of a sudden decides that profits on sales of house are now tax free up to $500,000 and you can do it every two years. The incentives for home ownership keep rolling out of Congress, pushing up prices.
Robert: "Just pointing out that the tsunami of foreclosures is going to be easily met by the tsunami of jobs from the stimulus and Obama's budget for education, energy, and health care."
Yeah, lenders just LOVE people who have been working for the same employer for only a couple months. They'll surely soak up those $600k houses in an instant.
Robert: "What do you think the median income in the DC area will be in 5 years?
Much higher than $105,241"
If you think the Obama spending machine is going to create mostly six-figure jobs in this area, I have a bridge I'd like to sell you. If these are all starter or near-starter jobs, it could possibly drive the median income down. Not to mention the flood of retiring baby boomers. A whole lot of GS-15's and SES-level retirees will diminish the middle-upper class earning pool in the area.
The way I read your answer Robert you haven't given any serious thought to where the housing market is going.
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