Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Please post your local house search updates, MLS finds, on-topic ideas, and links here.
I posted this property in the 6/13 - 6/14 bucket:5140 Harford LaneIt was listed at $180k - only 12% above the lowest sale in this neighborhood - and in the remarks section the realtor said he/she had 32 offers. I posted because it didn't make sense if 32 offers were received, why was it still listed as 'available.'As you can see, the house is now under contract, but the list price was changed to $225k - which is 40% above the lowest sale in this neighborhood.Anyway, here are the comments after I posted this property:Novawatcher said...Robert: if 32 contracts were received, why is it still on the market? What's the point in changing the listing to say "32 contracts received"? VA_Investor said...Nova,Do you not realize that it may take the bank a week or two to accept one of offers?Remarks is just telling other agents not to bother.Sheesh.You can see VA_Investor is right and she continues to be right about what is going on behind the scenes. Novawatcher is lost.Novawatcher said...Va_Investor: It says it ended on 6/10. I guess they need to do that because realtors can't read?Sheesh.VA_Investorclueless....Novawatcher said...Bite meCara said...Robert,(1) It's under 200k. And as someone else said, 32 offers but no sale???An aside, a long time ago someone suggested that being closer to Braddock road was a plus. I think you'll see by the closing prices that it's clearly a minus, either that or the THs are just crappier, which this one looks pretty darn depressing from the outside.Renting next to Braddock road is a great idea. Buying there for the long term is a whole lot less appealing.So, Robert you interested in the swarm of price drop notices I got this weekend? You can now get a two bedroom condo for under 150k. Desperation apparently just hit a handful of those owners/banks that have been listed all spring with no nibbles. It's June, do you know where you buyer is?VA_Investor said...Nova, Cara,32 offers and no sale...The offer submission date just ended on the 10th. If, in fact, that many offers were submitted (actually, in any "multiple" situation), the Bank is going to pick the best 4 or 5 and ask for "higher and best".For all practical purposes, it's sold.Cara said...Va_investor,Would you agree that it was easily cash-flow positive and hence likely to attract investors? (There may not be a ton of lee-way on that if it gets bid up).Really my reaction boils down to, ugh, not interested in that particular property, and gee, what did you think was going to happen with a TH listed for $180k in June? What, did you think everyone was going to hold out for $175k? Of course it got multiple offers, it was cheap, and easily cash-flow positive if you managed to "win" it for the list price.
Housing Wire: Fed purchases of MBS halved this weekApparently the falling rates due to decreased inflation worries have also assuaged the Fed. Maybe I'm over analyzing, but I would take this as a sign that the Fed doesn't think the RE market needs rates near 5% to continue to function. Which is not to say they will let rates get up near 6% anytime soon, either.Robert,$225k should still just barely eek out being cash-flow positive, but its calling it awfully close. I would say that the 32 offers managed to pull in some people who were afraid of missing out on the "deals" available now and chose to buy a bit foolishly. If, however, rents do start going back up this year, then they should do fine after the first 3 lean years. It's also possible that they got a owner-occupant, which would explain why someone was "happy" to pay $225k, because that's way under rental parity. I stand by my statement that that area of TH's near Braddock is the pits though.It could indeed be the case that some 1st time buyers are trolling through the rental properties for opportunities to buy at below rental parity. Given the small current inventory, and the strong $8k incentive, that's not surprising. And, in fact, some of the rental THs may be the best choices if you're going to go that route. Why? Fewer foreclosures. If the long-term landlords never sold for the bubble profits, there's no one to foreclose on! This is the problem with areas like Old Keene Mill Woods I &II that did get bought by owner occupants during the boom, and are really suffering a lot of REOs now, and will probably continue to do so.Still, if that's all I can afford to buy? I'll keep renting thank you very much. To each his own.
Robert,In terms of Braddock Rd being a minus that $225k close price is still well below the $250+ close prices for similar size THs further from Braddock Rd, closer to the VRE. So, even with the huge bidding activity it didn't reach the price level of the THs deeper into Burke.Cara, holding out against all hope, that the $8k 1st time credit will not be renewed. It's a pipe dream, I know. Delusional even. Barney Frank will never let that happen, the Boston/Cape market's slow as sludge.
40% of from peak selling price. That's 2003 prices for that neighborhood.
Cara-Seeing that the house is under contract not sold we don't really know what is going to sell for. It very well may end up selling for ~250K I have seen sale prices all over the map compared to list prices recently.We also have opposite hopes. Now that I am under contract I am hoping they pass the 15K just as my place closes. Maybe I am being a little greedy.
Around here, when a house has one list price, and then changes it semi-simultaneously with making it "under contract" status. That's been a completely accurate reflection of the final sale price (gross, not net after seller subsidy).So, while they may really have bid $225k with a 5-8k kick-back? That's about the only change I would expect.And yes, you are being greedy. You'd like your free 15k without suffering the consequences of the market manipulation bound to happen thereafter. If they do it, some people will indeed be that lucky. Might as well be you, but the consequences for everyone else will be pretty nasty. I'd like my free pony too, but that's the problem, when everyone gets a free pony it's not free anymore.
CaraThe problem isn't that "When everyone get's a free pony, it isn't free. No. It's free. The problem is thatwhen everyone gets a pony, there is an awful lot of horse shit that begins getting produced."
Cara,I think your point about Barney Frank and his local market is poignant. I've blathered about how the CA market is the make/break housing market for keeping the current incentives or expanding them.The peak selling prices in that neighborhood are $400k. It is a good neighborhood to watch because the houses are so similar. These are the slums of Burke where I grew up.The lowest sales were $160 (one) to $175 (several). This is obviously a V off of the bottom. I think the V is still in formation, meaning there isn't a plateau in sight. I do expect it to plateau and then rise steadily with jobs and income growth.However, the market continues to surprise even me. My opinion is that the tighter inventories get, the more likely the V continues.Perhaps more REO's will hit the market and you might have some sellers come out of the woodwork. On another note, I DO NOT think the jobs + income growth that I expect from the Stimulus and Obama's expanded health care, energy, and education spending has hit the local real estate market.
Robert,We shall see, but if the V continues and never crashes back to a level that doesn't require the $8k incentive and pure FHA insanity to be supported, then we simply won't be buying. We'll continue to save our hard-earned, hard-saved cash and maybe buy something nice 2 or 3 years from now on higher incomes, or maybe rent closer in indefinitely, buying a nice get-away home for cash later in life. But we're not buying a TH in a suburban slum for 2 hundred thousand dollars. This may seem like chump change to you, or maybe to all of NoVa, but it's not chump change.
Cara-I was clearly joking about the 15K. I don't really see huge consequences from the market manipulation. There are winners and losers from it. All sellers win, buyers with low savings win, and buyers with lots of savings lose. Ohh and tax payers lose. So there really are a lot of winners you just end up in the double loser category as both a buyer with savings and a tax payer. Maybe if you weren't so gosh darn responsible you could also be a winner :-pI agree I am more worried about the government giving away too much money and having to raise taxes in the future to fund it. I would rather them slow the spending soon...
Robert, don't get dragged into the mud slinging or the rehashing, you are better than that.State your position, provide your links, make your case, and ignore the sniping from the peanut gallery. The peanuts are not the Blog owner, nor do they pay your salary. Ignore them.
housebuyer,Sorry, didn't catch the joke, too close to the bone.The Burke market is literally seeing a 30-50k price increase from a $8k incentive. You can see it clearly in the FHA buyer percentages skyrocketing since March. That's a scary amount of artificial demand. I shudder to think what $15k to everyone would do to prices. When it was first being suggested I warned that it would be multiplicative, and everyone here calmed me and said, no at most it will give $8k more to sellers. This may be true somewhere in the US, but in my neck of the woods, the $8k has succeeded beyond the designers wildest dreams.So, yeah, a bit of a sore point. Sorry for jumping on you.
Cara, don't you think the rise in prices since Dec '08 - Jan '09 or so also has to do with low interest rates? That seems a lot more plausible to me than an $8k subsidy causing prices to rise by $30k.
Anon412,That's indeed a big factor too. No way we can tease them apart. 75k gets you to 299k at 5, but only 269k at 6%, so that is a direct link. Although, they also need to pay the mortgage insurance, so their real rates are more like 6.5% now anyway, such that they need higher incomes to reach the typical Burke TH right now.But what's happening is more buyers than inventory, and that's an incentive thing creating artificial demand, and then the rates are determining how high those FHA/VA buyers can go in their bidding. But last June/July, conventional outnumbered FHA/VA heavily.
Cara-No problem and sorry for not being more clear. I also would think part of the uptick is people are less afraid of losing their jobs now. Banks have also raised a lot of money so it is less important for them to sell properties at any price to raise cash. I am sure years from now economists will be looking back at these policies to determine how well they worked. It is the ultimate case study to see if the depression was avoidable. We came into this with similar circumstances to the depression so if we come out fairly unscathed then people will conclude policy was a major driver for the depth and length of the depression.
I think the "low-end" bounce has more to do with investors than the 8K "bribe".It's my understanding that Banks are reluctant to go with a "financed" purchase because of the large "fall-out" rate. A cash investor will go to the top of the heap and often pay less than a financed purchaser.Just my 2 cents.I think we are seeing a mini "v" off the low-end because there was an over-correction.Everyone thought the world was ending last fall; but are now realizing that the sun will continue to rise every morning (once the rain ends, of course).Once this over-correction ends, my thoughts are that we return to an "L" recovery. I speak only of the lower tier, because that is what I am following. I'm stunned (pissed) to see so many shorts and reo's that have fallen out coming back on at 20-30% price increases.The Banks, from what I can tell, are not interested in back-ups (perhaps thinking a higher price is down the road).
Cara - A long time ago I thought that (even without market manipulation) there could be a small 'v' in the sense that the moment the bottom feeders realized they couldnt undercut each other, they would panic and overdo each other, causing a slight bump up.However, once that phase disappeared, the long "L" shape would continue. I still see way to many excesses in this market for much of a real sustained bounce. Hopefully thats all you are seeing, meaning that things will go flat again soon enough.
Cara,There is nothing "artificial" about demand when there are more buyers than sellers.The question is whether this will continue.It's certainly NOT the false demand we saw with all the new construction flippers.
CRT,I hope so. What I'm seeing is that places listed under market get bid up 30-40k, things listed over-market go for 10-20k under list.There's a pair of almost identical SFH 1000 sq ft homes, one listed at $319k, went under contract, sold for 299k, the next one came on the week after the other one closed, listed at 299k, sold for 319k. Both REOs, I did like the second one better, but still.Hopefully this will calm down, $225k really is pushing it for cash-flow positive, so it really should plataue soon. I also hope that all the recent listings that I've seen coming on at 15k or more over the previous sale sit and rot awhile only to realize that the reason the other one got multiple bids was because it was below market, duh! But who knows, some buyers are definitely getting desperate to "secure the family home" before school starts and rates go any higher.
Also, I think somehting alot of people here may be forgetting is that its spring. With the exception of 2008 where it was pretty much straight down every month, 2009 has seen a bounce very much in line with what you would see in a normal seasonal market.If thats the case then you should see some softening in the upcoming months as the cyclical seaonal market winds down. Note too that also means there is a chance we really arent at bottom but are just seeing a seasonal bounce followed by an autumn decline, followed by another seasonal bounce in spring 2010 at slightly lower YOY levels than what we see today. I hasten to say this because my gut tells me this is bottom and I dont want to give people false hopes. Still, I think the chance for any real upside is so small that if "I" wasnt ready to buy, I might be willing to wait it out one more season*. *with the caveat being there is probably a 5-10% chance of a v shaped recovery. For me that risk is small enough to where I would accept that risk if it got me into a better buying position.
Va_investor,If, as you and CRT suggest, it is landlords, competing to get one more property at today's lows, then yes, there is nothing artificial about it.But if we're talking about owner-occupants, then there's a lot that's artificial, we're stealing buyers from the future, to make sales now. Everyone who was convinced to buy now while the rates are low and you get $8k in free money!!! Is someone who won't be buying next year. Hence the "artificial" aspect.(if these are landlord's they're still getting conventional financing, not all cash, only ~4 cash deals in Burke so far this spring, but we'll see what June July numbers hold)
Another "short" story,I put an offer in a few days ago. It turns out that there were 8 offers. I won't say how it turned out, but you can guess whether it went over asking.It is tenant occupied (another foolish "investor" bought at peak) which is a big plus for someone like me - no down time, no painting, no new carpet, etc. But, it's under lease until 12/31 (this lease is not wiped out under a short as it would be under an reo). So, that eliminates owner-occ. They have to move in w/in 30days to qualify for financing.My point is that the suggestion that these contract numbers are false and some sort of conspiracy are untrue.Perhaps people ARE overpaying. I'm a numbers person when it comes to rentals, but I also consider location (and future appreciation). There is a trade-off.Reston Town Center is exploding - for now. I happen to think it's a good bet. I am paying far less than 2002 pricing for superior property (again, in my opinion).It went for 10% over ask. I won't say whether I got it or not.
Cara-You could look at it as buyers are being taken from the future, but you could also take it as these were the buyers who would have bought last year, but the market was tanking so they waited. So I guess we will find out over the next couple of years whether these took all of next years buyers or whether this was just pent up demand of people waiting for a bottom to form.
Va_investor,In Reston Town Center I would whole-heartedly agree, that location trumps pure immediate cash-flow. Between the coming metro stop and the flow of new jobs there, I think you'd be doing fine to ignore the first year or two or just breaking even.There's no jobs in Burke itself though... So I think this landlord got a little too enthusiastic, maybe they'll get some concessions at the inspection stage.Anyway, for both our sakes, I hope there are better deals again this fall/winter. We'll see!!
housebuyer,In terms of below median income folks, they overbought during the bubble, (based on the FFX County numbers in the ACS reports) so I don't think there's much pent-up demand there. There were almost twice as many sales per month last June/July/August as there were this spring. So I see no evidence of waiting.There is excess pent-up demand, it's just concentrated amongst the over 100k earners, particularly the over 120k earners. So I expect that to show up amongst the 350-450k houses this year, which it is to an extent.
Wow, people talking about 30-50K price increases in housing.REO's at 20-30% price increases.Oil going from $37 all the way "down" to ... $70.Gold going "down" from $800 to $970 (now $935)Stock market from 660 to 950.46" televisions from $2500 to ... $2500.Meat prices up 3-5% from a year ago.Gee, that ol' deflation's really a b----h, isn't it??
housebuyer,I think that there have been many people (first time buyers mainly) that have been sitting on the sidelines since 2003. How much pent-up demand this represents? I have no idea.
va_investorWhen I state demographic data from the ACS, do you retain any memory of it? We know that for FFX and DC as a whole, there is no excess of pent-up buyers in the under 100k bracket of renters prior to 2007, there's a deficit in most places actually. After 2007, we don't have data, so I agree that there could be 1-2 years of pent-up demand in that income bracket as well once it became clear that there wasn't anything worth buying at a price they could afford, and then again once it became clear that prices were coming down. Earlier, however? not a chance. Only for those with above median income.
Okay catching up to the last comments yesterday.CRT,We are in agreement then. I agree that there were some really nice structures built pre-1940. The Greater Greater Washington blog sometimes shows historical structures that used to exist in DC. There were many excellent structures in Dupont Circle and Logan Circle (which was for the creme de le creme in 1900) that were torn down for boring boxy condo buildings. Although some historic mansions still exist.I know people in upstate NY who were able to buy homes dating back to Civil War times. I can see the appeal in that. A structure built on the cheap to take advantage of the GI Bill though? Or some Sears catalog home? No thanks.Cara,I kind of like not having the fourth level of government. It seems like it just adds another level of property taxes with not much to show for it. Plus it's not like they stop a non-Town of Vienna resident from using one of their parks. I know the Reston Association charges non-members more but I don't think that extra charge really equals the cost of the extra layer of property taxes.I also liked being part of one big school system (FCPS) rather than New Jersey style where each township has its own school system.
Robert,In the US News that came yesterday they went over a variety of dismal economic indicators. One thing that is interesting is that the moving rate for 2008 was the lowest it had been since 1946 (or somewhere around there I don't have the magazine handy.)Now maybe the next set of data will show the Great Migration to DC but maybe even if people want to come to DC for jobs they cannot because to sell their home would require putting up cash to cover the loss of equity they don't have.
Also in yesterday's US News was an interview with Suze Orman. I'm not endorsing her but if people want to quote Jim Cramer, then I can quote Suze Orman. Anyway, asked about how the recession is affecting the young she said it was a great thing. Here is her rationale:If the economy kept running the way it was, you guys would have been broke for the rest of your life. Real estate was going up and up. You would never have qualified for real estate, companies were shipping jobs offshore. So where were you going to get a job? The price of tuition was so high so [graduates] owed $150,000 in student loans. The price of milk and other prices were so off the charts. What were you people going to do? The stock market was at 14,000, so every time you put money into your 401(k), you bought less and less shares.--------I wonder why the Roberts (and others) of this blog never really thought about that. Why they never realized that if this real estate boom continued that everyone born after 1975 or so was never going to be a homeowner without inheriting a property.
Cara-There may be a deficit in total, but still be a lot of pent up demand. A lot of people bought a house in their early 20s that might have waited 10 years otherwise. So people like this made the home ownership rate go up. These people probably will not sell so to that extend it will keep the ownnership levels high until they would have bought normally(maybe 5 years from now). On the other hand there were also a lot of "prudent" people that didn't stretch so they are buying houses now. So the fact that there were more people in category 1 than 2 is what caused the ownership rate to go up. As long as group 1 doesn't sell as category 2 starts to buy the ownership rate could rise even higher. Implying a deficit may still exist.
Scott - here is what "deflation" has done so far relative to what it did in the great depression & other recessions:http://3.bp.blogspot.com/_P6hcLu1z9Nw/SjnfAp05AYI/AAAAAAAAAh0/z2ZgfLPB3RQ/s1600-h/inflationn.gifSo far, it looks like the fed has kept deflation very much in check.
"Robert, don't get dragged into the mud slinging or the rehashing, you are better than that.State your position, provide your links, make your case, and ignore the sniping from the peanut gallery.The peanuts are not the Blog owner, nor do they pay your salary. Ignore them."And if THAT doesn't work, just run off for a little while, before returning with a new name so you can pretend to be someone else...
housebuyer,In case you haven't noticed? Category 1 is going into foreclosure.... And has been for some time. So they're not going to be selling, they'll be renting.There are people who have waited. And in the over 100k bracket more waited than bought. But what matters is the number of buyers compared to. Compared to the number of young workers reaching that life stage anyway, compared to the number of foreclosures, compared to the size of the inventory.There are many, like you and I who have waited. But there are many many more who bought thinking they'd be priced out forever, and are now sitting with a 3 or 5 year I/O loan waiting for disaster to happen or to get bailed out by the Fed.
http://www.bls.gov/news.release/laus.nr0.htmMay unemployment numbers are out by stateVirginia 7.1% up from 3.8% last year, 6.8% last month.So, I guess that's all downstate right? Nothing to see here, move along.
@J@ - Thanks for the advice, but... Leroy, ESAD!Cara, most of the buying is not the $8k, it is the once-in-a-generation pricing in Northern Virginia.I think the $8k is here to stay. You would be foolish to wait for it to expire and the market to fall apart. I think there is a greater chance of the $15k incentive to pass than for the $8k to expire. And throw in a $3k refinance package as well.I've said CA is the make/break for more or less housing incentives. I'm curious what you think will determine whether the $8k gets extended, expanded, or killed?TBW, there is/are no death of folks that need employment and can relocate.Uh, you're right, I never sit around and fret that young people are priced out of any market. Do you really lose sleep at night because a newly minted MBA working in downtown Manhattan can't afford a studio apartment there? Move to a different city.
Cara-I guess that is true. I really don't know what percent of people are going into foreclosure rather than just being miserable that all of their money goes to their house. I guess I am just using a limited sample, but I feel like many of my friends mid-upper 20s are buying now. As I said this is a very limited sample and it probably not representative of the average person.
"Cara, most of the buying is not the $8k, it is the once-in-a-generation pricing in Northern Virginia."Once in a generation?5-6 years ago is a generation now?
Cara-For the unemployment numbers it really would be interesting to know the Nova vs. southern Va numbers. You have to imagine that southern Va has higher unemployment. I didn't realize how low it was last you 3.8% is pretty amazing, it really showed that getting a job must have been amazingly easy.
Cara,Virginia unemployment went from 6.8% in April to 7.1% in May. The month-over-month change was 0.3%There was exactly ONE other state that had a smaller differenetial 0.2%, that was South Dakota.And only ONE other state tied with Virginia, North Dakota, also 0.3%. The other 48 states and DC had larger surges in unemployment. Virginia is weathering the recession very well.
"Once in a generation?5-6 years ago is a generation now?"I will prefice my statement by I don't think this is the best metric to track, but if you track median income to median monthly payment when the rates hit 4.5% it actually was a once in a generation buying opportunity.As I said I don't like this idea since no one lives in their house 30 years so this metric falls apart when you have to sell and interest rates are higher.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=al5p85mlike0some possible real hope for underwater ARMS!they're contemplating allowing refinances up to 125% LTV. Your neighbors REO's be d%@#$nd. This might actually "help". Allow responsible people to move into fixed rate loans as long as their willing to maintain the responsibilty of having bought at the wrong time.(says me with too many underwater friends on I/O loans)Robert,Prices of a generation? Are you kidding me? You were here in 1998, right? When my boss bought a nice recently built 4 bedroom SFH 1 mile from the metro (in MD) for $225k? Now those were prices of a generation.But yes, I don't think there's any real possibility that the $8k won't be renewed for at least one more year. I don't think the country can withstand waiting to phase it out until CA has "recovered", but I think this year will be a renewal, and if things are okay in most of the country, next year's renewal will be a 4 quarter phased phase-out, just like the hybrid rebate.
Robert,Even fewer states had statistically significant changes in employment (4th? table) and we are not one of those. So the 6.8% to 7.1% is noise, essentially.But in the land of dual-income households being "required" to get that house you always dreamed of, a couple more months of 7% unemployment could mean a lot more foreclosures 6-9 months from now than prices or fancy mortgages alone would dictate.Not to mention the people like TBW who look at their saved up downpayment as an nice little emergency back up fund right about now.
the metropolitan stats are released on a different schedulefrom June 3rd:http://www.bls.gov/news.release/metro.t01.htmMarch 2008 March 2009 April 2008 April 2009for number of employednumber unemployedand percentages thereto:Washington-Arlington-Alexandria....... 3,012.3 2,998.0 3,018.2 3,002.0 98.1 176.0 89.1 168.8 3.3 5.9 3.0 5.6this shows April doing marginally better than March (some of that being seasonal since it's true in both years) both way worse than last year at over 5.5% unemployment.ask and you shall receive. With a long delay admittedly. (given that April is the most recent data)
"housebuyer said... Cara-For the unemployment numbers it really would be interesting to know the Nova vs. southern Va numbers."Housebuyer -- last month, when the state number was 6.8%, the rate for the Nova region was 4.9%. If its now 7.1 for the state, my guess is it would be 5.1-5.2% to be the nova unemployment figure when the VEC releases it later this month.
metro-wise:Interestingly, it looks like the increase in unemployment comes primarily from an increased number of people looking for work not a decrease in jobs (which is there, but smaller)The other thing is that this does not include FFX County, PWC, PG County, MD, so we don't really know what's going on there or throughout the metro region.Perhaps, jobs are disappearing from Tysons, but some of those people live in Arl/Alex.
Cara,Thanks for finding the unemployment stats. I've been waiting with baited breath for new hard data because I knew it would contradict Robert's pie-in-the-sky musing about employment in Northern Virginia.As I believe twocents put it, this process is still just starting. I know plenty of people who were laid off but given a few more months to find another job (which is likely to be fruitless) and many people working on contracts who do not expect that to be renewed. Also, hidden from unemployment stats are people who are working part-time but want to work full-time. According to US News, that's another ~5% (meaning those wanting full employment are about 15% right now nationwide).Add in all the people who are taking pay cuts, lower benefits, etc. And even those who still have their job are feeling insecure. Well, except for Robert who claims not to have met anyone who lost a job or had a paycut.
housebuyer,Insert "chesterfield county unemployment rate" into google. Then using the menu on the left find Fairfax County and you can compare the two unemployment rates. You will see Chesterfield County (a suburb of Richmond) has averaged only 0.5% more than Fairfax County. Virginia Beach (Hampton Roads area) also has historically done as well as Chesterfield or Fairfax County.Plenty of parts of Virginia have had very low unemployment rates. It's a false stereotype that the rest of the state is poor. The Richmond and Hampton Roads areas have done quite well as have the college towns in the rest of the state. And some parts of Northern Virginia are doing worse than Chesterfield et al (City of Manassas, City of Fredericksburg)
TBW,You are a smart guy. I know you looked at the metro statistics and realized there are more people working in April than in March. Same is true for VA as a whole.These #'s support my thesis, not contradict it. The numbers are doing exactly what I said they would do. The employment base is UP, but so is the unemployment rate. I said that would happen.I told you before that the unemployment rate isn't what drives real estate price. It is the net income of the metropolitan region that drives real estate price.
Robert,that's seasonality for you. The metro ones are not seasonally adjusted.Last years March to April decrease in unemployed was higher than this years in both number and percentage.As I implied before, these numbers are flat. Unemployment is high for the area, high compared to last year and not improving. Though tbw should note that you did hedge earlier in this bucket, by saying the stimulus jobs haven't hit yet.
Actually, here are non-seasonal employment rates (for April) for the 10 metro areas in VA1. Nova 4.9%2. Charlottesville 5.5%3. Harrisonburg 6.0%4. VA Beach 6.5%5. Roanoke 7.0%6. Lynchburg 7.2%7. Richmond 7.6%8. Winchester 8.0%9. Blacksburg 8.2%10. Danville 12.4%
Robert's view of Northern Virginia's employment future:Sunshine, lollipops and rainbows,Everything that's wonderful is what I feel when we're together,Brighter than a lucky penny,When you're near the rain cloud disappears, dear,And I feel so fine just to know that you are mine.My life is sunshine, lollipops and rainbows,That's how this refrain goes, so come on, join in everybody!Sunshine, lollipops and rainbows,Everything that's wonderful is sure to come your way
Robert,In all seriousness, I disagree. Median household income matters of course but so does the unemployment rate.Here are two major things that happen if you have higher unemployment (especially if it sticks around for a while):1. More foreclosures2. More crimeI think you know that foreclosures and crime = lower property values.
"I will prefice my statement by I don't think this is the best metric to track, but if you track median income to median monthly payment when the rates hit 4.5% it actually was a once in a generation buying opportunity.As I said I don't like this idea since no one lives in their house 30 years so this metric falls apart when you have to sell and interest rates are higher."Yeah, but that isn't price. I am still amazed at how many people struggle to differentiate between "payments" and "price." There is a big big difference between the two. ( I am not saying you are one of those people. )I think some people have gotten so used to paying for everything on a monthly basis that they just don't think about it anymore, assuming they ever did. Student loan payments, house payments, car/car-lease payments, credit card payments... etc etcI found myself discussing the housing market back in DC with a coworker recently, something I generally avoid. I mentioned putting down 20% on a $500k house and he looked at me and said... "yeah, but where are you going to get $100k?"The concept of writing a $100k check out of a savings account filled with money you have saved was completely alien to him.
District of Columbia ........10.7Maryland .....................7.2
Link to May unemployment numbers (seasonally adjusted) posted above:http://tinyurl.com/7cst9
http://franklymls.com/FX7012929almost made me call a realtor, oh well
Leroy,I have never understood the car payments thing. If you cannot afford a new car, get a used car. Or get a cheaper model or make. If you really want to scare the co-worker show him the annual cost of having a child attend UVA, WM, JMU, Va Tech, GMU per year times four times the number of kids. And then to really scare him show how much GWU costs. ;)
GT,Why not call a realtor, because it's a short, or because the move down to 399k was just a head-fake.Or is it under contract and we can't see that?
May Unemployment (seasonally adjusted):May 2008/May 2009/ChangeVirginia .......................| 3.8 | 7.1 | 3.3Maryland .......................| 4.1 | 7.2 | 3.1DC..............................| 6.6 | 10.7 | 4.1April 2009/May 2009/ChangeVirginia .......................| 6.8 | 7.1 | .3Maryland .......................| 6.8 | 7.2 | .4DC..............................| 9.9 | 10.7 | .8All May 2009 numbers are preliminary.
The Anonymous said--"So far, it looks like the fed has kept deflation very much in check."EXACTLY. That's an excellent graph.The Fed has on average kept deflation WELL away during the post war era, chiefly by ensuring steady debasement of the dollar, and they're in overdrive on this now.So far, the sum total of the effect of "it's worse this time" is that the red line is below the blue line--but it's still above zero and trending UP lately.I suppose I can't blame people who are currently misidentifying deflation right now, considering they've NEVER seen it in their lifetimes.If for some odd turn of events (Ron Paul becomes president, etc.) the fed turns to fiscal responsibility and tightens credit--instead of the current mode of looking for ever newer ways to loosen it--THEN we MIGHT see deflation, and if we ever do, we'll KNOW it, because it will be TRULY unlike anything we've seen before, and even *I* will see it and agree on it.Have food prices, clothing prices, gas prices, car prices, TV prices, gone down ANY more THIS recession than the last three? Have rental/housing prices even returned to inflation-adjusted norms, let alone fallen BELOW them?HECK NO!Price shocks (supply/demand shocks) NOT deflation.
TBW,MY hypothetical example of a young couple completing college, both without jobs. No ties to anywhere and willing to relocate just about anywhere they can find work.Resumes go out. Get a few interviews. One of the two secures a position with the Federal government or contractor in the area. Both pick up and move. Rent a place. Second spouse is now in the Metro area looking for work. Once that spouse has lived in the area for four weeks and is actively looking for work, he/she is unemployed.But this is a net plus for the area, despite the rise in unemployment.My thesis is that the employment base increases significantly over the next 3 to 5 years. But situations like the one I outlined mislead you in the health of the metro economy.Second spouse eventually finds position. They save some money. Two years from now make their first home purchase -- TH. Owner of TH has been looking at SFH in good school district for several years. One spouse got a significant raise while living in TH, and they buy SFH.
I met with a realtor today because there are some REOs I'm interested in seeing, BUT like Cara and others I am not in a hurry and if I do get "priced out", oh well! My rent is super low, I'm putting away money hand over fist, and I don't think this whole thing is done unraveling. So many people I know are struggling to find employment, make mortgage payments, etc. This blog does tend to skew towards the highly educated and wealthy, but this is an extremely diverse area economically, and the recession is definitely affecting people more than some on here want to admit. I know people in 400+k houses on a 30-40k salary! They're all holding on by a thread, and saying they'll sell when the market gets better in "1 or 2 years". The fact that inventory is so low has a lot to do with people thinking a recovery in housing prices is just around the corner, but if that doesn't play out, many more will walk away. The realtor told me this morning that he'd "be honest" with me that prices aren't going up any time soon, but interest rates will, therefor now is the time to buy (shocker). But if interest rates go up any further I can't see how the market won't grind to a halt again. So unless I can find the right property, I'm going to wait it out until fall/winter to see where we are. I think the government's market manipulation really caused people to lose their minds this spring. I'm seeing houses that have been on the market since 2007 at bubble prices suddenly go under contract for no discernible reason. Also, I'm looking primarily at DC/MD, I work in Arlington but would never pay current asking prices for Arlington.
Robert,That hypothetical cannot happen because according to anielarke there are no bad school districts in Northern Virginia. ;)In all seriousness though, 22 year olds cohabitating together or married? Are all the new people moving from this area from the Bible Belt and/or Utah (in which case they'd all be married not "living in sin.")You do realize the average age of first marriage is 27. And that's a national statistic. In this region with so many college graduates and advanced degrees it is probably more like 29.You do realize the unemployment rate has gone up not from people moving to the area with a spouse/lover that didn't get a job but because people who currently live here are being laid off. Right?!?
Robert,Also, why no ties to anywhere? Are they orphans? I think what's more likely is these new graduates do not get a job, move in with mom & dad, and don't get found by the unemployment data collector (who instead focuses on whether mom & dad are actively seeking work.)
I think people who live in Virginia and work in DC apply for unemployment benefits in DC because they provide greater benefits than Virginia. This fact may overstate/understate unemployment stats in the two jurisdictions.
zerodown,I think you have to apply for unemployment benefits wherever the job is located. I don't think you get a choice of which jurisdiction but I may be wrong. So DC workers living in VA are not gaming the system if they apply for DC benefits.
zerodownthe unemployment numbers by the BLS are a sample from phone calls to that region. This is separate from the weekly unemployment numbers that are for initial and continued claims.(Robert and I had this fight and hashed it out last week).
Cara:Alright, thanks. I obviously don't read this blog everyday.
zerodown,I didn't mean it that way, just that I didn't feel like providing all the links to prove the conclusions... They're on the BLS pages though.
Eligibility for Unemployment Benefits in Other States If you have recently worked or resided in states other than District of Columbia, you may need to choose the state in which you file your claim. Compare benefits here, and visit the other state unemployment information pages by clicking on the state's name below. http://tinyurl.com/npktubDifference in benefits:http://tinyurl.com/m3s7gu
Cara:I didn't take it "that way." I appreciate that you let me know.
zerodown,I guess people in VA and MD are harmed by the fact that the cost of living is so much lower in non-DC suburb areas. I actually had heard that DC was low but I guess that's just compared to NY and MA.One major difference between DC and VA is that VA turned down the stimulus money for extended unemployment benefits. I've already heard about that a million times on political ads regarding Bob McDonnell. Although I suppose Robert feels the interest groups are wasting money noting that in the expensive DC ad market since he feels no one is being laid off in this area.
Hey Robert and VA_investor, just in case you want to get into the fray amongst the 31 remaining bidders on that 180k TH in Burke, here's the next party:http://franklymls.com/FX7089310181,900, Greenfield Farms.Have at it.
Cara,I looked at the elementary school for that listing. Apparently there is a K-3 school and 4-6 school? (And then off to Lake Braddock for 7-12). Why that set-up? Do you know the history behind having two elementary schools? Just curious. I don't know much about that area other than people always seemed happy with Lake Braddock.
Tbw,That's one of my least favorite K-3's in the area around the VRE's. But it's still not bad.They start tracking after 3rd grade. So that's my guess. The "gifted" kids go off to White Oaks at that point, before having secondary at Lake Braddock.(These TH's are also teeny tiny, 1,160 sq feet above ground + basement?)
This is nasty, but if mouse over the pictures of that house on Greenfield Farms, you'll find someone left a present in the toilet. Not for the squeamish.That neighborhood is the sister slum to the block houses between Braddock and Guinea Road where I grew up. That's where we got our drugs.
TBW/Robert, have you considered the simple fact that not everyone is a double income family? When one spouse is working and the other is a stay-at-home parent and the wage earner is laid off, both look for work.
"During deflation (wealth destruction), the government financing of mortgages will be no more."Eh? That doesn't sound like the government in Washington right now. It sounds like something that will cause them to increase government intervention.
JeffMortgage financing during deflation is throwing your money into a black hole. The US government can only have so many black holes and most of them are secret, well known programs can't just be entirely fail. That's one of the reasons the Fed/Treasury is doing everything they can to move the dollar back to inflation (the other is public debt in deflation is a bigger black hole). The big issue is overcorrecting and trashing the dollar. We're very, very close to being in the same position Argentina was in a few years ago or Iceland is in today, but the rest of the world doesn't want to admit it, yet. If that happens Cara's waiting wins, but not because she can buy a cheaper home, because it's damn hard to pick up a house and move it to a foreign country but easier to move gold/cut diamonds/already have bought assets somewhere that isn't falling apart.
Contrarian -If your boy Martin Weiss is sooo smart and such an expert at predicting financial markets, why does he need to sell books and newsletters? Because he wants to help people like ME?Weiss is wealthy because he's suckered guys like you, not because he knows anything more about the market that you or I.
Robert:"This is nasty,..." So, what you're saying is, I give shitty RE advice? ;)"That neighborhood is the sister slum to the block houses between Braddock and Guinea Road where I grew up. That's where we got our drugs."I know, I'm dense, but I can't tell if you're making a joke or advising future landlords that the verified incomes of their renters may be small, but that's not to worry because they'll make up for it in cash transactions?
Jeff,I'm well aware that not everyone is a dual income family. I had a stay at home mother just like many of my friends. There was a time where it was possible to live in Fairfax County with one breadwinner, a stay at home mom, and kids. Unfortunately I think those days are over if Robert, CRT, et al get their way and 2004-06 prices remain.
"TBW Said...Unfortunately I think those days are over if Robert, CRT, et al get their way and 2004-06 prices remain."Seriously? You put me in the same category as Robert?Perhaps you didnt notice, but even in this thread I said:"I still see way too many excesses in this market for much of a real sustained bounce. Hopefully thats all you are seeing, meaning that things will go flat again soon enough."and later on"If thats the case then you should see some softening in the upcoming months as the cyclical seaonal market winds down. Note too that also means there is a chance we really arent at bottom but are just seeing a seasonal bounce followed by an autumn decline, followed by another seasonal bounce in spring 2010 at slightly lower YOY levels than what we see today."Caras saying theres a bottom to perhaps a V shaped "bounce". Im trying to make a case for back to the flat L recovery or possibly no bottom yet. Think you would ever get a comment like that from Robert?I really wish you had been active in earlier years. There was a time when you saw more pessimistic comments from me in 07 & 08 when the facts warranted and I called it as I saw it. Sorry, but I really take umbrage with being put into this category.
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