Source: MRIS
Monday, August 10, 2009
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98 comments:
The Fairfax numbers surprise me (on the low side). PWC is not surprising given the 100% in 2008.
Va_investor,
FFX county on the low side of your expectations in sales or in median price?
PWC sales dropping 22% YoY is indeed not surprising given the tightening inventory and the 100% gain last year, but the continues march down in median does surprise me.
I guess it's all got to be about the mix. Maybe PWC move-up/luxury market is more frozen than we thought.
The median price gains in Alex/Arl/FFx and Loudoun are a "good" sign even if they too are effected by the mix of sales. The move-up market thawing is just as much of a "good" sign of market health as higher prices on the low end would be, so in a way it hardly matters. If you're buying a $600k house and only financing $300k of it due to move-up equity, today's rates are just as good of a deal for you as they are for a first time buyer (albiet both are in the eye of the beholder).
A peak at my zip of interest tells an interesting tale.
In this summer as in 2007 and 2008, medians and averages moved up in July over June, but as far as I can tell this is from a shift of closings into the move-up/luxury market away from the starter TH's and houses.
This seems to have played out again. To my surprise, inventory has held constant, and sales have dropped from 59 in June to 51 in July. Housebuyer said he'd seen low-end sales tapering off in his area, perhaps that has started in Burke as well.
Median price is still down YoY, but not as heavily as June or this spring. But I think it's pretty clear that's the mix. Percent of conventional is back up again. Perhaps the wave of $8k incentivized buyers is drying up, sooner than I expected. August will tell.
(that would be peek)
It's always interesting to me to compare the rest of the region to NoVa. For DC, Montgomery County, & Prince Georges County, the median YoY changes and Months of Inventory are:
DC
- 8.57%
5.2 MOI
MoCo
-8.09%
4.3 MOI
PG
-24.03%
8.8 MOI
PG I think rivals PWC in its bubble. DC & Montgomery County are probably somewhere in between Arl/Alex and Fairfax, but I think it is clear they are slightly behind in their correction (although the # of sales were high this month compared to last year everywhere).
Cara,
FX on sales. I'm not surprised about medians in any market. It's the distressed stuff selling. That has to be cleared out before we see stable/increasing prices. The "mix" now is weighted to the low end.
btw - talked to a realtor friend this am re: reo's. He said that there are a ton of bank-owned just sitting and not listed. They are too busy to get them on the market - not intentionally controlling inventory. If this is true, expect flat pricing on reo's for some time to come.
va_investor,
He could just mean "a ton" in the sense that he'd really like to be getting the transaction fees on all those listings. Interesting if true though. Only time will tell.
VA_investor, that's interesting about the banks being too busy to list REOs. I'd think, though, that they'd want to get them on the market before the $8k expires and/or interest rates go up ... but I guess that would assume rationality, which as we have seen is probably not a good assumption when it comes to banks...
Although higher than for the same month last year, Arl. # of sales are still on the low end (3rd from the bottom of the 12 year period). FX had a similar result this month.
and AX.
Ace,
I think a better way to make the same point is to look at MOI. For Arlington it's the third highest in 12 years for July, and by a lot, whereas 290 versus 301, 304 sales is just middle of the road, and low sales could be attributed to low inventory, but MOI shows that's not the case.
FFX county by that measure is at it's 4th highest MOI, but much improved, and now vaguely comparable to the Alex/Arl MOI.
Anyone know why the MRIS has so many more "active listings" than the Virginia MLS? Does the MRIS tabulation include under contract/contingencies?
I wish this data set went further back so we could see MOI between 1993/94-97/98. For a few counties it goes back to 97.
Note that PWC and Lou MOI are actually really good. In 1997, PWC's ratio was 7.55. In 2009, it's 3.93. And yet prices went down YoY by 6.54%. In Loudoun prices were basically flat and yet the 2009 ratio of 4.69 is much better than the 1997 ratio of 7.25.
It's unclear to me how important inventory is. It appears many of the localities had low inventory during the late 90s with little movement on prices.
tbw,
That inventory in the late '90's is just before things took-off. Just sayin.
Cara, to each his/her own, but I think MOI is problematic as well (taken alone), primarily because of points made previously about how current inventory may or may not reflect the number of houses available for sale or those that WOULD be placed on the market if conditions were more "normal" or favorable to sellers. To me, as long as the sales # is consistently (over several/many months, which is the case for Arlington) below what is typical for the measurement period - all other factors being equal - then that is useful information indicating that we aren't at an equilibrium point.
Ace,
Normally I agree with you on the feableness of MOI and tbw made a very interesting point there, but the 290 sales is not statistically any different than 301 or 304 sales, making 290 sales absolutely middle of the road for Arlington in July. 3rd lowest out of 12 sounds impressive but the spread is so small other than the low and high outliers.
Another way to turn that around would be to say that it took 3 times as many houses to sell only 290 of them as it normally would because so many of them are listed at prices no one will pay....
Initial comments: Obviously, the one thing that stands out is the positive price trends. In Arlington, this is now 3 consecutive months of positive YOY prices. Note, I still think its possible we will see a few “minus” signs mixed in with “plus” signs, going forward, but I am beginning to waver a bit on that. The one thing that is clear however, is “its moving in/it just hasn’t happened yet” is dead.
Elsewhere, significant consecutive negative YOY pricing trends have been broken:
Alex saw 18 consecutive months of negative YOY median prices
Fairfax saw 22 consecutive months of negative YOY median prices
Loudoun saw 37 consecutive months of negative YOY median prices
All 3 of those streaks are now broken. I figured Alex would turn positive soon, but I thought FFX & Lou would be a few months later. PWC is now at 37 consecutive negative months and counting. However if the other 4 areas are any indication, it will break this trend very soon.
Saleswise – Arl Alex & even FFX continue to see more YOY sales. As I expected, Lou & PWC sales are down as there simply isnt enough foreclosure laden inventory to sustain trends. Some may see this as a sign of trouble ahead – dont. In my opinion, doing so would be to fall for the same headfake as the “its moving in” crowd fell for when Arl & Alex were showing negative YOY sales a few months ago.
The reason Lou & PWC sales got so high is there was a ton of foreclosures to lubricate the market. Now that the # of foreclosures in the inventory pipeline is way down, it should be no surprise sales are down too. Fairfax could still go either way –it never was foreclosure dominated the way Lou & PWC were, but it was never relatively foreclosure free the way ARL & ALex were. Will FFX sales go negative again before they go positive? I guess we shall see.
Sorry, my last post was probably unclear - when I am talking about consistent results, I mean that for many consecutive months since 2008 (or earlier?), e.g., Aug. 2008, Sep. 2008, Oct. 2008, etc., to the present, # sales in Arlington have been consistently at 11/12 year lows for the respective months. I believe AX has had similar long term results; I think only recently has FX begun to look like that.
Those data are not shown on one month's chart alone, but are shown on the monthly charts over time. If you look at Harriet's charts over a long time (for only one small area), the numbers stick in your head.
Va_Investor,
That's why it would be helpful to see what it was. It appears that the inner suburbs (Ffx, Arl, Alex) always had pretty low MOI and that did not translate into price gains.
I think just as we have ridiculously low unemployment here usually we also might normally have low inventory. Hence it takes bubblicious MOI like less than 2 for prices to increase much here.
Claims like this Traditionally, 6 months of inventory is considered a balanced market. More than 6 months of inventory means that the market favors buyers. Less than 6 months of inventory and sellers are favored. may have never really been true here. I suspect 2006-07 might be the only years in my lifetime that Fairfax, Arlington, or Alexandria have ever had more than six months of inventory (Arlington never even got up to six months at least in July).
If MOI was always below six in the area and prices did not budge between 93-98 then it shows that less than six months is not a hot market/seller's market.
CRT, have to disagree with you about what the data say about Arlington, once again. Until sales are at a strong level, the sales price numbers do not tell the full story.
TBW, I agree that it would be very interesting to have older data as well.
CRT,
From a snapshot of zipcode level data in the MRIS, the median movement upwards in FFX is definitely a mix towards "larger" more bedrooms and more expensive (based on list price) homes, not necessarily an increase for comps. (other than the 10-15k one I'm seeing in THs). I still think this is a positive sign for market health, but it's definitely not a sturdy one against further declines.
I don't know about the mix in Arl/Alex. But if the murmurs in other high end markets prove true here too of huge overhangs, that could still effect prices. That's not so much "moving in" as it is the economy in general effecting different segments differently...
Are you or Tabitha interested in posting the sales/listings for over $800k (or whatever your typical cutoff was) again?
If MOI was always below six in the area and prices did not budge between 93-98 then it shows that less than six months is not a hot market/seller's market.
TBW, this is an interesting theory and I think you might be right. It is difficult to figure out what is "normal" but I could believe that while 6 MOI is normal nationally, for the urban parts of the DC metro area with lots of jobs and high resident turnover (people moving in and moving out all the time), 6 MOI indicates things are relatively slow, especially for July. Granted, Arlington and Alexandria are well below 6 MOI, but Montgomery County and DC are not. It wouldn't surprise me to see MOI in the fall go back up to 5-6 for Arlington & Alexandria, and 7-9 for MoCo & DC. (Unless the anticipation of the $8k expiring causes a buying hysteria...)
Also, as many here have noted, part of the issue we have here is a different mix of properties selling. Just as we saw the massive low end foreclosure laden sales skewed medians way down, the lessening of that wave (with or without high end sales) will skew them back up. That is some of the explanation of what we see now.
Please note however, the high end while thawing, is still experiencing some distress:
Arlington
7-800K 3.4MOI
8-900K 2.7MOI
9-1MM 12.0MOI
1-2.5MM 8.0MOI
Alexandria
7-800K 3.3MOI
8-900K 4.3MOI
9-1MM 7.0MOI
1-2.5MM 9.5MOI
Fairfax
7-800K 4.1MOI
8-900K 4.5MOI
9-1MM 7.9MOI
1-2.5MM 10.9MOI
Loudoun
7-800K 7.7MOI
8-900K 10.8MOI
9-1MM 18.5MOI
1-2.5MM 72.0MOI
PWC
7-800K 12.6MOI
8-900K 21.0MOI
9-1MM Infinite (zero sales)
1-2.5MM 31.5MOI
Once again, the pain is far more concentrated the farther out you go. Also, in Arl, Alex & FFX the low part of the high end is starting to thaw. These numbers are better YOY and significantly better when things were seizing up this winter. Lou & PWC are seeing a bit better numbers but they are still awfully high. There is no possible world where 72 months of inventory (2 sales over 144) listings can be described as healthy.
Bottom line, while this is certainly partly a mix issue. Lets not kid ourselves here. This is the strongest report the NOVA market has seen in years. Low end (everywhere) has likely bottomed and is likely moving back up. Low part of the high end is getting better, (especially inside the beltway). That said, the higher part of the high end lags. If this is your target market, I see no reason to get concerned just yet.
Okay here is price divided by median household income for Fairfax:
1999 $209,000 / $81,100 = 2.58x
2000 $213,000 / $82,000 = 2.59x
2001 $244,900 / $84,700 = 2.89x
2002 $282,700 / $85,300 = 3.31x
2003 $325,000 / $80,800 = 4.02x
2004 $397,000 / $88,100 = 4.5x
2005 $503,000 / $94,600 = 5.31x
2006 $485,000 / $100,300 = 4.83x
2007 $485,000 / $105,200 = 4.61x
2008 $379,950 / TBD = TBD
2009 $390,000 / TBD = TBD
I bolded median household income for 2003 because it went down. I never noticed that before. Here is the link to the Fairfax County gov website where I got the figures.
I suspect the ACS data will show lower median household income in the 2009 data (as in the data that is released in late 2010 not the data being released next month).
By the way, ACS data is scheduled to be released Sept 22, 2009. Source As higher unemployment/stock market crash really got going in late 2008 I think we might see stable or positive median HH growth this year.
However, I think Robert is under the impression that median HH income never goes down in our area. That appears to be incorrect given the 2003 figure. I suspect the lower HH income will lag here as well (since the recession was 2001 and lower income came by 2003).
CRT, it is striking to see how things are so different on either side of around $900k. I've noticed that also looking on franklymls.com where above $900k or $1M there are tons of properties with very few of them going under contract but $700-$900k actually seems like a hot market. It seems crazy to me since I think $700k is a lot of money to spend on a house and so many of the houses going for that price are to me completely not worth it, but I guess it speaks to the high incomes and relatively low unemployment in this area that we can be seeing these kinds of sales even during a recession....
Thanks CRT
the 8-900 versus 900-1, in Arlington is really interesting, how many things are in these buckets, or is this just counting statistics?
If it's not just a integer number effect, it sure looks like 800-900 is a real well of support price-wise for Arlington, with wishing prices just above that just sitting.
It's hard to interpret however, whether the stock at 1.2 million is that much better than those at $800k such that overhang (and hence future price declines) of the 1.2 mil stuff will pull demand away from the low-high-end or whether the 1.2 million stuff is dominated by wishing prices and unrealistic sellers. If it's mostly new cool infill, then buyers like Ace could be looking at a great future, even if her price range is under 800k, just due to the cool stuff coming down under a million.
I know some of you feel pre-1999 prices were too low and so the bottom will not be when prices are ~2.6x median household income.
But even if we allow it to be 3x median household income that would mean in 2009 the median household income needs to be
2009 $390,000 / $130,000 = 3x
I don't think median HH income is that high.
"Ace said...
CRT, have to disagree with you about what the data say about Arlington, once again. Until sales are at a strong level, the sales price numbers do not tell the full story."
Ace - just keep in mind what we saw last time round in the late 80s early 90s bubble. In the NVAR region:
In 1990 the region had 23,000 sales.
In 1992 sales dropped to 17,000 and prices fell YOY.
In 1995 - 3 years later. Sales bottomed out at an all time low of under 14,000, a sales number not seen in 14 years - a staggering drop considering how much the area population grew from 1982 - 1996.
However, even though sales bottomed in 1995, prices bottomed in 1992 and then started moving up (very slightly) for the next 3 years. My understanding why is that inventory and MOI continued to remain very tight during the 92-95 period.
Thus, we could see something like that again. As inventory continues to shrivel up, sales could continue to decline for years to come. However, as long as the sales and inventory remain relatively balanced, you may not see much if anything in the way of price declines.
TBW-
I know we argue about this all the time, but I am still convinced that people only pay attention to monthly payments. So at current 5.5% interest rate housing is equally affordable as housing that is 15% cheaper and 7% interest rates.
As a buyer I would prefer to see prices fall 15% and interest rates go up to get to a 3X range, but I am not sure that many people real pay attention to the difference.
housebuyer,
Of course interest rates play a role. However even with lower interest rates in 2003-05 people were paying more per month than they were in 1995-2002. Unless they had an ARM loan (which many did.)
I think down payment requirements play a large role in the income-price multiple. As we are starting to see more banks require a decent down payment it makes it harder to just pay whatever silly number a seller wants.
Anon 412 I agree. The disparity above/below 900K point wasnt really noticeable til recently, but you can see it now. One of the reasons I excluded the 2.5MM+ market was that it is so thinly traded, its not uncommon to have houses linger for a long time - even in good markets. Interestingly, the above 900K market looks alot like that now.
Cara - they are very thin buckets above 900K, so this likely causes some noise. Now that FFX is finally pulling back even with Arl & Alex, maybe its best to look at the NVAR stat to see how the whole above 700K market is doing.
housebuyer,
BTW it's not like interest rate hikes equal a corresponding decrease in home price. Sure the following is roughly the same:
$500,000 mortgage at 5.5% interest = $2,838.95
$425,000 mortgage at 7% interest = $2,827.54
$11.41 * 12 * 30 = $4,107.60 saved by waiting (no need to wait for that)
But if interest rates go from 5.5% to 7% but principal goes down 20% instead of 15% it's a huge savings.
$500,000 mortgage at 5.5% interest = $2,838.95
$400,000 mortgage at 7% interest = $2,661.21
$177.74 * 12 * 30 = $63,986.40
HUGE incentive to wait there. And even more of an incentive if one thinks during the 30 years they may be able to pay off the loan quicker.
I don't have time to calculate how much less it is b/c of the mortgage interest deduction (btw is it safe to assume that deduction will be around the next 30 years? maybe not) but it's still going to be a five digit difference in price.
Remember also that interest rates are not set in stone. While I think these 5s mortgage rates might be a one time lifetime thing, sub-7s is likely to happen a few more times. Certainly sub-8s. Anyone who gets stuck with 8 or above is almost certain to have a chance to refinance.
TBW-
That is definitely the case. I was just saying if you compare the current environment to 2002 it may be somewhat even. (Particularly because both times peoples savings were hurt by stocks)
I agree if banks go back to requiring 10+% down it will hurt housing prices. Although this is conditional on FHA ceasing to exist. As long as FHA loans exist(I see no reason why they wouldn't) down payments are really small.
TBW-
I agree I think 5% mortgage rates vs. 7% is much bigger difference than 7% vs. 9%.
I think it is unlikely we will see 5% again after this crisis is compete, but if you get a 9% rate you are right that you will likely be able to make that rate 7% if you wait a couple of years.
Cara, with an n of 12 almost no difference will be statistically significant.
Once again, you're looking at July in isolation; you need to look at the sales numbers over the course of many months to see the trend. The point is that Arl. sales have been near the bottom of the 11/12 years of data for many consecutive months. The fact that for one month (July) the number is not as close to the bottom as it consistently has been isn't meaningful to me. Once I see the # in the middle or above FOR SEVERAL CONSECUTIVE MONTHS, then those "calling bottom "for Arlington will be more convincing.
CRT, we shall see! Thanks.
housebuyer,
I used to worry that FHA was going to be the new subprime but I don't think they are used as often as some of us feared. I think the seller has to qualify to take them so it's more common in new buildings?
Going to the MRIS website that this post links to:
http://www.mris.com/reports/stats/
and clicking on zip code statistics I see that in July 2009 in 22181 (Vienna) out of 26 loans there were 20 Conventional, 4 FHA, 1 VA, and 1 Assumption (whatever that means). 22182 (Vienna) = 29 conventional, 3 FHA, 3 cash. 22201 (Ballston) = 40/67 Conventional, 17 FHA, 2 VA. 22102 (Great Falls): 16/27 conventional, 1 FHA, 7 cash.
I guess the really rich buy cash. ;)
Anyways, there's a clear correlation if you play around the zip codes with condos and FHA loans.
FHA loans are around but not the majority of buyers in a lot of our markets.
IMO-
Rates go up, look to Arms and buy-downs. Maybe some seller financing. Not necessarily a correspondent drop in prices.
Ace,
True this is the first month where the Arlington sales numbers could be described as the middle of the pack. So if one took a running average to get higher statistics then yes, sales are still down on a three month running average.
TBW,
I think the correlation is with price not necessarily with condos. Burke has lots of FHA and VA loans. Close to half in recent months (though it's back down to like 1/3 this month with the shift to higher priced homes).
The real way to check your hypothesis of higher downpayment requirments would be to track rate quotes for 5,10,20 % down at a good sample of major banks. If banks really don't want the business of low-downpayment customers anymore it will be reflected in the rates.
Assumption is when the new owner takes over the old mortgage debt, with or without managing to keep the same interest rate terms.
housebuyer,
Oh btw 3.5% down payment for FHA loans is new. It used to be 3% as recently as last year.
I suspect Congress might slowly continue raising the down payment requirement.
Cara,
Correct. Price is probably the bigger factor than type of home.
Cara-
I thought by default they get the same interest rate. I thought it was more or less they just take over all aspects of the loan and get the property. Is this not always the case?
I am pretty sure only FHA and VA allow someone to assume your loan. People generally assume loans for one of two reasons. First it generally decreases closing costs significantly. The other reason is interest rates have gone up. You can imagine that if you have a 5% loan and interest rates are 7 or 8% someone would happily pay more than the market value of your house in order to get your loan...
tbw,
raised the dp to 3.5% and then handed out $8k to first time buyers with "low" incomes that can now be used as the dp. Ah the pschephrenic congress. It's almost as fun as psycho-analyzing the stock market.
But you could be right. I think it would be smart. 5% down + 3 months living expenses saved is really not that onerous. If it "works" for private mortgage insurance outside the FHA, why would one expect the FHA could do any better (unless government really is more efficient)? Of course 5% down isn't actually working all that well for MI...
In any case, I hope you're right, but I think that's a good 2-3 years away. Once the low-tier reaches bottom, FHA is going to need new premium payments from non-underwater borrowers to replenish its funds, so they need the competitive advantage of keeping their DP limit under market.
housebuyer,
Actual assumption of the rate and terms was the only instance I could think of where assumption makes sense, and was the only example I know off that has happened, but I couldn't exclude the possibility that there was some other form of "assumption". It being a FHA/VA thing in particular makes more sense.
Running my old logarithmic reversion, HH median income increased by 3.25% annually 1999-2008. That seems almost too reasonable...
How did we miss this?!?!?!??!?!
WASHINGTON (August 6, 2009) – U.S. Senator Johnny Isakson, R-Ga., today criticized the Senate’s rejection of his amendment to stimulate housing demand and boost the economy by expanding the first-time homebuyer tax credit to a $15,000 tax credit for any buyer of any home. The Senate rejected Isakson’s amendment, which he sought to attach to the “cash for clunkers” bill, by a vote of 47 to 50.
Isakson Criticizes Senate’s Refusal to Stimulate Housing Market by Expanding Tax Credit for Homebuyers
TBW,
I think you are missing a significant change to home ownership that rarely seems talked about, but contributed to the housing bubble. In 1997, Clinton passed the $250k for singles and $500k for couples home sale exemption. This makes home ownership a much more attractive investment vs. other asset classes. I understand your prices to income numbers, but secularly lower interest rates + the home sale tax deduction can explain a new higher threshold for price to income calculations.
Another thing that is rarely talked about: Housing prices are rising DESPITE the toughest credit standards in a generation. Yes, interest rates may move up, but credit is only likely to LOOSEN going forward.
Luxury homes problems are numerous, and I don't expect a turn for at least 12 months. Historically wide spreads between conventional and jumbo, absence of low-doc/no-doc loans, high inventory levels causing savvy buyers to wait for the turn, and low stock prices.
I remember posting a few MOM numbers and getting all this screeching about how YOY numbers are still down. Now we have some positive YOY numbers, but home prices have been rising for months. Also, think about YOY numbers toward the end of this year. If prices FLATTEN here, YOY numbers will be in the double digits because house prices slid nearly 2% a month at the end of last year.
Agree six months MOI is probably not the break even point for Northern Virginia.
The National Association of Home Builders (NAHB) is calling on Congress to extend the $8k credit for a year.
Builders Call on Congress to Extend and Enhance Home Buyer Tax Credit
They also are whining that they lose one in four new home sales because appraisals come in low.
Sounds to me that a $15k credit is dead and at most $8k is extended. Otherwise I think NAHB would still be pushing for a $15k credit.
Robert -- I hear the sound of belt tightening in Congress. ;)
tbw
Good find. I'm not sure what to take away though. 47 senators think $15k for everyone is a good idea, and hence $8k extension is bound to pass the senate?
But it was the House that pared it down last time, so I suspect the House will be the sticking point again.
If it had passed it would have killed the cash-for-clunkers extension because they wouldn't have been able to caucus with the house... Thus it's altogether possible that this undercounts the number of senators who think this is a good idea (some pro-cash-for-clunkers folks couldn't afford to vote for it).
Robert,
I think the 97 tax law changes have been discussed frequently in the bubble blogosphere. True we don't discuss it much lately but I think we all agree it was a factor.
By the way, just as they upped FHA from 3% down to 3.5% down (although as Cara points out many buyers can use the $8k credit to wipe even that paltry requirement away), they got rid of some of the excesses of the capital gains exclusion.
You used to be able to exclude all $250k/500k if you lived there two of the previous five years. Now if you were only living there 2/5 years you only exclude 40% of the capital gains.
Congress has done a few responsible things that do not get much attention. Maybe it's because my ilk don't like to trumpet it too much because we know how difficult it is for Congress to do these responsible things. We also like to keep on the down low that few people are getting mortgage modifications from the various gov't programs.
I'm politically and philosophically opposed to the credits, but I'd almost be in favor of the $15K and widening it. In a sense, it's pushing the pendulum further and further until it's unsustainable and snaps back.
Plus it would make really entertaining political theatre for a year.
No kidding, I had no idea that the $15k credit was even on the table until the Fall.
I would note that the vote was 50-47 against. Also note that Isakson has been pushing this legislation since January 2008. Unlikely he will be discouraged and will continue to push it forward in the Fall.
TBW said...
They also are whining that they lose one in four new home sales because appraisals come in low.
I totally forgot about appraisals. Not only are credit conditions tighter than they have been in a generation, but appraisals are killing home purchases at a rate NEVER seen before.
AND prices are rising. I expect appraisals to return to historical norms going forward leading to increased activity and of course, higher prices.
"CRT said...
The one thing that is clear however, is “its moving in/it just hasn’t happened yet” is dead."
It still amazes me the collective delusion this blog used to suffer from. One year ago for this very same July "decade of sales" stat, a prominent blogger on this site confidently declared:
"Prices fell 22% in Fairfax County in July! The tsunami is working its way inward."
Yes yes, if we simply wish for it hard enough a great TSUNAMI will drown Arlington -- just wait -- you will see -- glug, glug glug!!!
And how ironic is it that since I am now considering Alexandria instead of Arlington, it goes out and sets an all time record median price? I know its only one month and largely meaningless, but its as if the housing gods know where I am looking and really really want to smite me.
Cara,
You are probably right that this was seen as a poison pill amendment for cash for clunkers since the House had gone to recess already. Looking at the roll call it's a pretty party line vote. So it probably includes some Rs who wanted to kill cash for clunkers and excludes some Ds voting nay to ensure cash for clunkers passed.
Nonetheless I think there's gotta be some intel that led NAHB to give up on $15k and push only for $8k.
From a WSJ article:
A recent survey by the NAR found nearly three-quarters of real-estate agents said buyers were purchasing smaller houses due to tighter credit requirements. "We're in a 'trade-down' environment for the first time since the 1930s," says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.
High-end homes are also being hurt by changing perceptions about how much home one should own. For years, people were encouraged to buy the most expensive home they could afford because there would be a payoff when it was time to sell. But buyers can't count on that any longer.
Include me in the "it's moving in" crowd. I guess I'm supposed to say "GLUG, GLUG, GLUG!" :) Actually, I think it already has moved in. I'm sure you'll find the higher end of Arl/Alex went down in price.
Why Home Prices Will Continue To Fall
The article says a lot of what we have been saying before. It's a bifurcated housing market.
You used to be able to exclude all $250k/500k if you lived there two of the previous five years. Now if you were only living there 2/5 years you only exclude 40% of the capital gains.
TBW, this was a small segment of homeowners using rental properties to try to get the exclusion. Statistically insignificant.
Census data shows that U.S. homes shrunk in size last year for the first time since the mid-1990s.
Expensive homes miss the recovery
WOW.
For all these reasons, a high-end recovery will come much later than the rebound some analysts are already predicting in the rest of the housing market. J.P. Morgan Chase mortgage-bond analysts estimated earlier this summer that these high-end prices may not bottom out until 2012, when prices will be down 60% from their peaks.
Robert -- any reason not to believe JPMorgan? You know, one of two banks that weathered the storm pretty well.
I am confused everyone here seems to be saying that FHA lets you use the 8K to pay your 3.5% down payment. Is this actually correct?
I thought I had read that you need 3.5% down, but they will let you use the 8K to put a larger downpayment. AKA if you were buying a 100K house you would need 3.5K, but they would let you use the 8K so that you put 11.5K down and had a mortgage for 88.5K
Is this wrong?
TBW-
The reason not to believe JPM is that they are always extremely negative. The reason that they survived was that they always plan for the worst, so if anything else happens they are ok.
So they could be planning for the worst with that scenario.
I don't really know much about their analysis, so it may be correct, but I wouldn't just trust them because they survived.
Robert,
Although this is an anecdote I think it shows a weakness in your stimulus jobs = lots of new home buyers in DC area. They have to sell their old house first!
Unable to sell his home in nearby Winnetka, Ill., Brad Davis, a 43-year-old attorney, has commuted to Washington, D.C., for the past year after taking a new job there.
He recently cut the asking price on his four-bedroom brick Tudor by $100,000 to around $1.4 million after it didn't draw any offers in eight months on the market. Most potential buyers have a big obstacle: They would first have to find buyers for their own homes.
"You're not sure if it's a price issue or if there just aren't any buyers," says Mr. Davis, a father of two young children. While he says he doesn't mind the long commute, "not being able to come home every night is the hard part."
Add in Geithner and Bair as people who have not bought in DC since they are still waiting to sell their old home.
High-End Homes Frozen Out of Budding Housing Rebound
housebuyer,
Okay. I threw that line in mainly because Robert likes to take quotes from financial analysts and be like surely this person knows what they are talking about (he did this with some Kiplinger's study on the DC area once).
I do think JPMorgan probably is correct about it likely being 2012 the way things are going but I agree we shouldn't just agree with it because it's JPMorgan. Instead it's more that a loud chorus is seeing pain in the higher end market.
The Anonymous, yeah, I think it's pretty clear by now that there will be no bloodshed in Arl/Alex, just a long, slow bleed...
There are probably schools / commute reasons why it wouldn't work for you, but in Montgomery County, MD and DC, prices are still falling and inventory is higher than in NoVa. But if you decided to look there, maybe those places would start to turn around also ;) Anyway, good luck.
Robert -- any reason not to believe JPMorgan? You know, one of two banks that weathered the storm pretty well.
Detroit or Washington?
The ENTIRE national market? Yes, 2012 sounds right, but that is heavily skewed toward California where, what, 50% of all homes over $1M are located? Washington DC will be different. It's different here. Next Summer. But it will work it's way up the housing ladder, $700k, $800k,...
Oh if glug, glug, glug meant there would be a massive quick price drop then I don't believe that. But if glug, glug, glug means that you think ultimately Arlington and Alexandria will lose bubble gains (although slowly) like the remaining suburbs then I am a glug, glug, glug-er. I thought CRT et al felt Arlington-Alexandria were still "immunozones."
Robert,
Your various rationalizations just remind me of the quote from the op-ed I posted above:
One explanation for this is that real estate is not as liquid as stocks or bonds. Psychology plays a larger role, and without foreclosures to establish market prices rapidly, denial can be a powerful force. Homeowners will invent reasons to differentiate their property from their neighbor's – even if the square footage, age, and lot sizes are identical – to avoid admitting that 2006's bubble price is now a memory.
TBW,
You've read my posts. You know I have said the luxury market is still falling and inventory levels do not suggest a turn anytime soon. Is that not realistic enough for you? My youngest graduates from HS in 2016. I can afford my mortgage payments. What, me worry?
"Include me in the "it's moving in" crowd. I guess I'm supposed to say "GLUG, GLUG, GLUG!" :)"
TBW - you were never part of the "its moving in" cult. Its moving in was hemmoraging members by this spring when you got here.
"Actually, I think it already has moved in."
Of course it has. It just wasnt that all powerful 40% off blood in the streets event the "its moving in" thought we would see.
"I'm sure you'll find the higher end of Arl/Alex went down in price."
I agree prices are/will come down. Dont think I am in the "prices only go up" cult. Thats an even older cult that really started to lose steam in 07. Archaeology records indicate it died about a year ago when its high priest Lance left.
Robert,
There's a big difference between what these people are saying and what you have been saying.
Yesterday you said an $800k home near W-L HS would be worth $1M in 2012. They are saying that the $800k home will be worth hundreds of thousands of dollars less in 2012.
TBW-
As an additional comment I completely agree with you that the high end market will take far longer to bottom. These people have lots of money so they can just not sell their property for a long time denying reality. I do think the rest of the market bottoms before the super wealthy markets.
TBW, you know what my answer is before I write it. It's different here. CA, NV, AZ, FL, MI...yes, probably beyond 2012. Texas...no, before 2012.
The Anon - I think "its moving in" was a defensible view for the early days of the bubble. Remember, back in 07, Fairfax was part of the "inner area" because it had yet to show major price declines. That said, the idea that "its moving in" still had adherents early in 2009 was a little ludicrous.
"TBW said...
But if glug, glug, glug means that you think ultimately Arlington and Alexandria will lose bubble gains (although slowly) like the remaining suburbs then I am a glug, glug, glug-er. I thought CRT et al felt Arlington-Alexandria were still "immunozones."
TBW - my view was, is, and remains, that different areas will see different results, but all the areas in NOVA are moving in the same general direction. Moreover the timelines, at least for NOVA are near identical. To wit.
Inventory:
All 5 areas, Arl, Alex, Fairfax, Lou & PWC had low inventory in mid 05, rising inventory in late 05 and spiking (all time high) inventory by Mid 06.
Now 3 years later, all 5 areas have significantly reduced inventory - nowhere near peak levels. Most areas are below 2005 levels, and all will be by this autumn.
Price Declines:
The first area to see YOY price declines was Fairfax (May 06). 4 months later, by Sept 06, Arl, Alex, Lou & PWC saw them too.
The issue was consistency - namely FFX, LOU & PWC were down and sometimes down significantly, whereas Arl & Alex were down less and occasionally showed a positive number (but no clear trend).
Likewise, the first area to emerge from the YOY price declines was Arlington (May 09). 2 months later, Alex FFX, Lou show this too. PWC will likely show it soon.
There are a number of other stats that show this trend, MOI, DOM, Volume, etc. etc. For the last 43 consecutive months I have been tracking them, I have found one clear thing. When one goes down, they all do - give or take a few months - just some worse than others. When one goes up, they all do - give or take a few months.
So given that trend, lets go back to what you see to propose.
"if glug, glug, glug means that you think ultimately Arlington and Alexandria will lose bubble gains (although slowly) like the remaining suburbs then I am a glug, glug, glug-er."
Ignoring that the fundamentals got so much stronger in Arl & Alex than the other areas, are you suggesting that these areas - the same ones that have more or less moved in lock step for the last 43 months, are going to decouple? Are you suggesting that Arl & Alex are going to now see declines whereas FFX, Lou & PWC will see gains?
TBW - I think too you may be equating "high end" with "close in". If so, that might be the issue.
For example, I think you suggest high end in Arl & Alex arent at bottom yet. If so I agree, especially for the 900K market where MOI is high.
Clearly you dont mean to suggest that while Arl & Alex have more pain to come buy that Lou & PWC high end are at bottom already - especially given the 900K+ segment has between 18.5 and 72.0 MOI, correct?
Likewise, consider the low end. The assumption is, low end has few resources, cannot hold out, more subject to price shocks, etc. The view that low end has bottomed is defensible and something I agree with.
That said, are you suggesting that Low end outside the beltway has bottomed, but that, low end in Arlington & Alexandria, are somehow, someway, still holding out and will not bottom til some point in the future?
CRT,
You can't really talk about all these localities as single units. They each have submarkets that behave very differently. Within each locality is very expensive areas, expensive areas, and moderately priced areas.
[Because this is such a high-income area there are not really any low cost areas.]
So within each market I believe we will see the moderately priced areas bottom first, then the expensive areas, and then the really expensive areas.
Arlington and Alexandria have a higher percentage of very expensive areas than Fairfax, Loudoun, and PWC. Fairfax has a higher percentage of very expensive areas than Loudoun and PWC. Hence Arlington and Alexandria are bottoming slower.
CRT,
Ah we just addressed the same issue. No, I think high end in the exurbs is taking a while to correct itself as well.
It's just that it's a smaller percentage of those counties. There's more high end as a percentage of overall housing stock in the inner suburbs than the outer suburbs. [There's more high end in Fairfax County numerically but not as a percentage of overall county homes.]
"Ah we just addressed the same issue. No, I think high end in the exurbs is taking a while to correct itself as well.
It's just that it's a smaller percentage of those counties. There's more high end as a percentage of overall housing stock in the inner suburbs than the outer suburbs. [There's more high end in Fairfax County numerically but not as a percentage of overall county homes."
Sounds like we are on the same page then. Just so you know, thats a whole different animal then "its moving in". Its moving in as in geography hasnt been defensible for a long time. "Its moving up" as in up the price ladder - is.
Btw, I don't think a lot of the "low end" has bottomed yet. Some of the low end bottomed because they were areas with a lot of mortgage fraud leading to huge numbers of foreclosures (Manassas Park, Manassas, Woodbridge, Sterling Park, condo/bad TH parts of Herndon).
But a lot of "low end" Northern Virginia has much more room to fall. And some of that fall was delayed by the $8k tax credit.
Took 11 kids to the pool today, and look what I missed! Excellent discussion following fascinating data report.
Just checked my favorite zips from Manassas, and a few items of note:
Sales down about 30% YOY. DOM down 30-50(!)% YOY. Median price still down 10% YOY in Manassas City. Arkey, I saw your 4 >$500K sales, but they were all <$600K, so the real high end is still dead.
And someone said FHA loans are rarely used? Not out here! FHA loans have been used in a huge chunk of sales for months and months around me--43/79 in July in 20110. Cash is a close second.
Observations: Prices still falling, and sellers--at least under the high end--have come down towards buyers, so people are getting closer to their asking price, and quick. Not quite as many cash buyers, not as many investors, not as many sales. High end is dead.
I wonder what will happen now that foreclosures are skyrocketing again?
"CRT said...Remember, back in 07, Fairfax was part of the "inner area" because it had yet to show major price declines. That said, the idea that "its moving in" still had adherents early in 2009 was a little ludicrous."
Yeah, credit should be given for when the members of the cult of "its moving in" saw the light. Early adherents like Neil, (40% off in Arlington/people crying on their couches) were early to abandon it. He was gone by Mid 2008 and later recanted, suggesting Arlington would only fall 1/2 as much as areas like Loudoun & PWC.
"They (bank) are too busy to get them (REO) on the market - not intentionally controlling inventory."
We have a house across the street (pwc)that has been empty & bank owned since last November! No activity at all. They could have sold it this spring if they listed it a certain time.
"Early adherents like Neil, (40% off in Arlington/people crying on their couches) were early to abandon it."
Well if he did, I didnt see it. I remember him as being unbelievably obstinate.
Also, I think you should cut a break to new bloggers. For example, the blogger Kevin came here (I think) late 08/early 09 and came to the conclusion that Arlington was a "PWC in waiting". However, once I had a chance to go over the stats with him, he abandoned that theory real quick.
So I give guys like him credit. He was new and made a reasonable assumption - prices are much higher - therefore it must be moving in. Yet when he saw the data, he came around quickly.
Contrast that to the guys who would look at the data and cook up kooky theories, or just go silent - only to reitirate it a few days later. Neil was one such hit and run artist that very much comes to mind.
housebuyer it was a moving target, so I'm not sure exactly what it ended up with and if the implementation is state by state or what, but this is the best I could find:
FHA and the 1st time credit
"FHA Insider: Need clarity on FHA’s allowance of the first-time homebuyer tax credit?
Mon, 2009-08-10 16:00 — Jeff Mifsud
FHA Tax Credit Pic
If you are, you are definitely not alone. This Federal Housing Administration (FHA) update is from Mortgagee Letter 2009-15, which establishes the guidelines for the use of first-time homebuyer tax credit as settlement funds."
This suggests you can get a second lien for the full downpayment and closing costs, essentially using the credit as collateral, and pay it back once you've received it. (but it can't go towards other things like moving etc, there must be enough dp and closing to eat up the full loan amount.)
OK, finally got a chance to look at the raw data, stupid blocked Google docs.
There was a comment on here a little shocked by PWC's continued decline in the face of general improvements. Arguments attribute it to the mix, which is reasonable. High end PWC is moving even less than high end anywhere else, which is saying something.
But one thing not to overlook is that PWCs stats here also include Manassas, which is it's own brand of bad. Exclude Manassas, and I would imagine that takes enough of the really low end of the mix that you'd see similar numbers to FFX, maybe a 2-3% price improvement on lower sales volume and now significantly lower inventory.
To paraphrase Toll, Manassas is going to suck of PWC's recovery all 12 months of the year.
Meh. CRT may have thrown in the towel, but I have the cajones to say that I still support he substitution effect.
Patience, grasshopper.
LOL, Tabitha, I'm impressed. I need a cocktail after taking 2 to the grocery store ;).
I just now read yesterday's posts, but do have some relevant personal experience I wanted to share if I may:
Per Robert's comment on listing agents not changing the listings once they go under contract- the first of our two short sales continued to be listed as active for the entire 45 days it was under contract. Our agent tried to get the listing agent to change it, per the rules, but she would not.
Also, our second short sale was BofA/Countrywide- the ones that wanted $50K+ over list and wouldn't budge from there. Hopefully their inconsistency and unpredictability will work in others' favor, and has for at least one person here.
Regarding short sale time frames, in our shorts the first one was decided in 45 days- they supposedly had a "professional negotiator," though we were kept entirely in the dark throughout the process, and never even know which lender it was. Very fast for a short, however. In the second, it took two months (the listing agent specializes in shorts and REOs). Also on the faster end.
Tabitha,
11 kids? Have I missed a really interesting biographical note or does that include some friends of your children? If you have 11 you probably can get your own reality show nowadays.
"CRT may have thrown in the towel, but I have the cajones to say that I still support he substitution effect."
Huh?
There is no question whatsoever about whether or not there is a substitution effect, and I don't believe CRT would argue otherwise.
That is a fundamental economic behavior.
That is why it is so idiotic when people make posts to the effect of "this proves there is no substitution effect."
That said, just because there is a substitution effect doesn't mean prices have to drop off a cliff anywhere.
All CRT is saying is that he thinks there has a been a relative increase in the desirability of Arlington compared to the area in general, this is in no way inconsistent with the existence of the substitution effect. (You don't have to agree with him on the relative increase in desirability, but as a theory it is not inconsistent with the substitution effect.)
Second,
"Housing prices are rising DESPITE the toughest credit standards in a generation. Yes, interest rates may move up, but credit is only likely to LOOSEN going forward."
This is just ignorant.
How long is a "generation" to you Robert?
Credit has tightened, but we are a long way from the days when 20% down was the norm.
Thanks Vanka,
I'm still pretty hopeful, but it's good to have a reality check. May I ask how long the second BofA/Countrywide short had been listed before you made your offer? Has it now gone under contract at the Bank's $50k higher list price, or is it still sitting?
Que sera, sera (my spelling in French is even more atrocious than my spelling in English.)
Meshell/TBW,
(OT)
I only have seven (so far). I was babysitting three of one friends' nine kids this weekend because she had a doula conference to attend and her pilot husband was on call, and babysitting three of another friends' nine kids because they practically live at my house on a day-to-day basis.
The math comes to 11 kids because two of my kids went to North Carolina with their grandma and five of their fifteen aunts and uncles to visit a new cousin, the fifteenth grandchild.
The math of my own family (mom from 14 kids, dad from 8 kids, over 100 first cousins), well, let's just leave that alone ;)
And Meshell, believe me when I say that hard drugs appeal to me several times every day. When my husband was deployed and I had to truck my then-five children with me everywhere I went at all times because my oldest was 8 and I homeschooled, I literally lost my mind.
tbw--
If I was followed by cameras all the time, I'd be arrested. That's why we have an 11 acre compound--so the kids can run around outside naked...doing all sorts of activities that would have neighborhood neighbors in a tizzy.
Back on topic:
xpovos, let me get back to you on Manassas being the black hole of PWC. Sounds good, but can a 10% YOY median price dip really offset the entire rest of the county, esp. with such a small # of sales?
Tabitha reports from the parallel universe just outside the outer loop (FFX county parkway). Wow. I could barely handle my two nieces for a weekend and that was with their parents and my husband around. (though the tiny apartment doesn't help)
Anyway, you mentioned a coming wave of more foreclosures... In PWC? How many more could there be? In which price range?
cara, i refer to a graph you linked to from the wash post which showed a spike in foreclosures in PWC, back up to levels not seen since the initial subprime wave. do you remember? because my brain is fried today, more than usual.
from my watching realtytrac's monthly map, it seems that a lot of the activity has shifted to the more expensive parts of the county--while Manassas and Woodbridge still post impressive numbers, Bristow and Gainesville and such have far more foreclosures per total households now (like 1 in 68, versus Manassas at 1 in 122, or something like that). Will all those houses actually become bank owned? Or will the more wealthy owners manage to work out an alternative, thereby keeping those houses from joining the REO inventory months from now?
Tabitha, you're right, I did post that: PWC from WaPo
I just hadn't looked at PWC. Yup, heading back up to the bad old days of Q1 2008. Nasty. And FFX is just now peaking at similar absolute numbers (although I'm assuming FFX has a lot larger base of housing stock).
Cara,
Yes, PWC can certainly have sufficiently more foreclosures to make this a decidedly ugly experience.
Tabitha,
I've seen a lot of activity in Manassas. Way more actual transactions than the bid, contract, fall through, rebid, new contract type of action in Woodbridge. Mostly anecdotal, but the # of sales in Manassas isn't as small as it would otherwise be in a normal market, I think.
Right now, I could believe anything.
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