Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
August 2009 Northern Virginia Real Estate Sales
As always, I was wrong.FFX County did improve over last year, but by smaller amounts than July. So it looks like the summer selling season is indeed coming to a close. Too bad the frenzy of fall is yet to come. Of course, that should bring the median down even further, but sales, especially compared to last fall should be way up.
In fact,I'm extremely pleased to report that I was totally wrong on Burke too!Total Sold Dollar Volume: $ 17,086,800 $ 28,180,938 - 39.37 % Average Sold Price: $ 348,710 $ 396,915 - 12.14 % Median Sold Price: $ 315,000 $ 353,000 - 10.76 % Total Units Sold: 49 71 - 30.99 % Average Days on Market: 43 89 - 51.69 % (66 new listing compared to 60 new contracts)Other than time on market which is way way down (i.e. vastly improved), number of solds and the median and average prices are down YoY.Maybe it's the mix, $8k having its effect in skewing the market to the low-end side. Seems most plausible. But seriously, the median price in Burke is $315k, affordability, you are here!!You were right, Robert, seasonality does not extend until August. I stand corrected, and darn happy about it.
Weird that I've followed the MRIS numbers for 4+ years, and now I am part of a statistic! Though, I'm not quite sure whether to be happy or not about my zip zooming up. Total Sold Dollar Volume: +131.42 %Average Sold Price: +19.44 %Median Sold Price: +12.45 %Total Units Sold: +93.75 %
I don't know about the health on Arlington and Alexandria... as Ace will soon point out, these are amongst the worst sales numbers since 1998 both in MOI numbers and in absolute terms. 5.4% interest rates and sales are still down since 2008? What's up with that? Buyers seem to be liking the prices elsewhere, maybe it's time for the substitution effect? Not that this will make Arl/Alex crater, but it will steal demand as people chose places with better value, or hold out waiting for better values in Arl/Alex.
Fred,I take it that's a zip code... How many sales were there? Congrats on the purchase.
haha, so, Cara, you saved me the trouble! Tom is right that some of us are predictable (me).
Ace, Well it is really curious, and we have had this same discussion what 3 months in a row? more? MOI is still near 4, which in an absolute sense doesn't seem too bad, but relative to Arlington norms it's terrible. So I'm not really sure what to make of it. I think we can clearly say that fewer buyers like what they are seeing, but I don't know that 4 MOI is enough pressure to change prices.
"MOI is still near 4, which in an absolute sense doesn't seem too bad, but relative to Arlington norms it's terrible."I think it's tough to say without knowing what MOI was in the mid-'90s, because there's the possibility that '98 and '99 weren't really normal years as they preceeded 10-20% YoY increases, suggesting that prices were "too low." So 4 MOI might not mean prices are too high, but that they are about right and there's a balanced market. If MOI was around 4 in the summers of the mid-90's that would be evidence for that, and suggest that the next 3-5 years might follow the same price trend that we saw then (flat).
Lots going on here. For starters - price. Medians are up in Arl, Alex, Ffx, Lou & PWC - something we havent seen since the burndown started in mid 2006. It took a heck of a long time to get here, and the trip wasnt a straight line either. Some areas had burndowns, others had soft landings. Moreover, the reset points for each are not the same as they were in pre bubble days. However, I think we can now safely say these 5 areas are now acting very similarly once again. One moves up, they all move up. One moves down they all move down - "Its moving in", was a farce, "its moving in" was a fantasy. The correction was never moving in. It was hitting everywhere, just with different sized hammers. Now that being said, it is not necessarily "over". The correction is certainly "moving up" the price chain. I will have more on high end MOI later. Moreover, there are some potentially troubling signs even in this report:Sales - are down in 4 of the 5 areas. As I have been saying for months, this should not be surprising. At some point you simply run out of houses to sell. Sales being down 25% in hard hit PWC is not a sign its going to get smashed once again. If this is a rerun of the 1990s bubble, price will continue to stabilize or move slightly up, yet sales wont come back for years. Still, I dont see any way prices can shoot back up (re bubble) without increasing sales.Inventory - interestingly, Arl inventory did NOT go down YOY. First time we have seen that in forever. Is this because inventory is now where it should be? Is it because its flattening like it has in years past? Is it because the market is heating up and people are returning to sell? I dont know, but at this point, 4 years into the downturn, that could just as easily be a positive sign as it is a negative sign. I will watch this one especially carefully.MOI - I continue to maintain this most elemental measure of supply and demand is the best forward looking indicator out there. The whole 6 month rule is very dubious, but "low is good high is bad, higher is worse" seems to be working very well. Its again no surprise that Ffx, Lou & PWC suffered disproportionately given how high MOI was in 2007-2008, and no surprise Arl & Alex largely escaped that pain. By that same token, look at Arlington MOI - its a bit higher than last year. Not concerning yet but certainly worth watching. Could it be that once the market transitions from a foreclosure dominated one to a regular one, MOI rises as there isnt a forcing mechanism to cause capitulation? Maybe. If so, look for an elevated MOI in Alex, Ffx, Lou & PWC as they continue to "improve" and catch up to Arlington in the "its moving up" portion of the downturn.So again, it isnt necessarily over. There are economic factors (jobs etc) which could move all 5 areas higher or lower. There are skewing factors (foreclosures & abscence thereof, or return thereof) that could push median prices higher or lower once again. All these things are certainly still in play.However, I do think all the fireworks that marked 2008 are over. As such, I (a non buyer) am not likely to contribute much any further. The peak was interesting, the burndown was interesting, "its moving in" or lack thereof, was interesting. However, a stagnant market with (possibly) years to go before it moves up in earnest, marked with slow winters, lots of + and - signs and no real direction, it is not exactly my cup of tea.
Off topic - What exactly is going on with the stock market? I know that people say it's "6 months ahead of the economy" but come on! The way it's going nuts seems to indicate that the economy will not only be out of the recession in 6 months but at a level MUCH HIGHER than it is now.In other words, you have 100 dollars in the bank, you lose a dollar a week for 40 weeks. You stop losing money. You sit at 60 dollars for 10 weeks. You have not recovered. You have simply stabilized. In economic terms, when the decline ceases, the "recession" is over - never mind how bad the economy is, how few people have jobs, and how profits are not increasing. They have stopped going down, so no longer in a recession. Common sense would say that you've "recovered" when your bank account is back to 100 right?Well, the way the market is recovering seems to show not a V recovery but a N recovery (without the first leg of course). Maybe I'm too pessimistic but I just don't understand how the market could rally so much. Perhaps some is inflationary pressure?
Jeff- I think there are two reasons it is rallying. One a lot of people thought it should have never gotten much below this. So even if the economy doesn't grow stocks could be fairly valued. The other is there is a lack of better places to put it. Currently you get basically nothing putting it in treasuries or in banks. Historically the P/E ratio of the market has some loose correlation to the inverse of the 10 year treasury. Obviously with treasuries yielding 3.3% the market could go much higher. I would expect in the next couple of years treasuries to perform fairly poorly and for the market to be up a little, but basically flat. This is my opinion which is hopefully worth a couple cents but we will have to wait an see.
Jeff - inflationary pressure is a possibility in my mind. Also think of it a bit differently: When Lehman collapsed last year, dow dropped to 8,500. You can make the argument, the market "knew" that was the other shoe to drop and hence the bottom.Despite that, it spent the next 6 months going from 8,500, to 6,500, but why? There was no major news during that time, there was no other shoe that dropped. Everything we thought we knew at 8500 was merely confirmed in the winter and spring, and yet we tanked to 6500 - why? My only thought is that the market was pricing in the possibility of a deflatonary sprial. That I believe was an overly pessimistic view. It was a possibility - it still is - yet it looks less and less likely as time goes by.Thus, imagine if the market bottomed at 8500 (the post lehman world) and not 6500 (contrarian's deflationary spiral world). If the bottom was 8500, this move up to 9500 is not nearly as dramatic, and in fact might make some sense.
August 2009 sales in FFX CTY are down by 33% relative to Aug 99 where the poulation was much smaller and there was no $8,000 tax credit for 1st time home buyers. The prices have a long way to go down in this county.
Cara said,CR median income FELL between 2007 and 2008.I'll see if there's any area specific data...Very interesting. Cara -- the ACS for 2008 comes out Sept 22, 2009 according to the Census website. I suspect we can get county by county data then. Will the local counties follow or beat that trend? My guess was that Ffx Median Income would be up for 2008 but down in 2009 meaning we wouldn't get that bad news until late 2010. However, it's possible enough of the recession hit here in 2008 that it will show up in the median household income stats.
For once I agree with CRT:Despite that, it spent the next 6 months going from 8,500, to 6,500, but why? There was no major news during that time, there was no other shoe that dropped. Everything we thought we knew at 8500 was merely confirmed in the winter and spring, and yet we tanked to 6500 - why?The stock market totally overcorrected. Heck, I think even going to 8500 was a bit much.
Thanks, Cara.Only 31 sold, vs 16 last year in our zip, so not much of a sample size. We saw the same thing that everyone else did, a lot of activity at the lower price points, and not as much in the middle. So, we decided to adjust our thinking, and instead of trying to bid for a lower-priced home that we would grow out of in 5-10 years, we decided to up our search range and see if we could get something a little more pricey that was kind of languishing. So, we ended up getting an estate sale in a good, but un-updated condition in the low $500s in a neighborhood where the more cosmetically updated houses are selling in the upper $500s. The buyers bribe was a nice addition, but wasn't a determining factor for purchase. We barely squeaked in under the limit on the MAGI for '08, and won't even be close this year, so I am glad that we can adjust the '08 return.
TBW-I will be surprised if the DC median goes down. There are too many government workers whose salary goes up every year. I could believe the mean salary fell because lawyers and lobbyists got hit pretty hard, but I think the median will continue up both years.
Fred,Sounds like the plan worked out well! Saved at least 6% if not 12% right there on transaction costs.(yeah those percentages sounded like small numbers...)
housebuyer,Median household income went down in Fairfax County in 2003 so it can happen despite government workers. 2000 $82,0002001 $84,7002002 $85,3002003 $80,8002004 $88,1002005 $94,6002006 $100,3002007 $105,200http://www.fairfaxcounty.gov/demogrph/gendemo.htm
TBW-Yeah I have seen that number before, so I guess you are right it is possible. I thought the tech crash was a bigger deal for the DC area than the recent recession, but maybe I am crazy. Did the government give pay raises that year? I remember my Dad being mad that one year around then Bush did not give raises or something like that...
tiredbubblewatcher, CRT,on the stock market: people pulled money out coz we feared TARP wouldn't stop the next shoe to drop. no?
MM- Some people had that fear. I think most people pulled out because they are sheep and just follow the crowds. They saw the market falling every day and no one thinks of valuation, but instead says ohh its fallen a lot it will fall forever. If you look at inflows/outflows of money from retail accounts you will see that basically people always time the market exactly wrong. They put the most money in at the peak and pull the most money out at the trough.
"ramin_amiri said... August 2009 sales in FFX CTY are down by 33% relative to Aug 99 where the poulation was much smaller and there was no $8,000 tax credit for 1st time home buyers. The prices have a long way to go down in this county."Not to pick on our new friend here, but this is EXACTLY why I think focusing so much on sales is a red herring. Lets take his argument and apply it (nearly verbatim) to PWC. If so we could argue:"August 2009 sales in PWC are down relative to Aug 99 where the poulation was much smaller and there was no $8,000 tax credit for 1st time home buyers. The prices have a long way to go down in this county."It is true that sales are less than a decade ago, but does anyone really believe prices "have a long way to go down" in PWC? The sales levels are espacially astounding given PWC was the 2nd fastest grower in the last decade behinde loudoun. Yet its sales are less than 1999 - simply amazing!!! So, again, PWC, the place which was -50% off peak prices and is still -45% off peak today, is the low sales:(a) a sign that since inventory is down over 50%, its simply running out of homes to sell or (b) a sign that prices "have a long way to go down"?You decide...
CRT said...However, a stagnant market with (possibly) years to go before it moves up in earnest, marked with slow winters, lots of + and - signs and no real direction, it is not exactly my cup of tea.What supports this conclusion? We all know what happened in the 1990's, but is this true of other bubbles in stocks, real estate, or tulips? Is it a gut feeling? Up 150% in 5 years and then down 30-40% in just a few and now a long flat period? Do you really feel like price discovery has been achieved and that's it for a while?
"MM said... tiredbubblewatcher, CRT,on the stock market: people pulled money out coz we feared TARP wouldn't stop the next shoe to drop. no?"Maybe so MM. I view Lehman and TARP as basically part of the same timeperiod/ transaction. But yes, I think that could be it.Robert said...What supports this conclusion? We all know what happened in the 1990's, but is this true of other bubbles in stocks, real estate, or tulips? Is it a gut feeling? Up 150% in 5 years and then down 30-40% in just a few and now a long flat period? Do you really feel like price discovery has been achieved and that's it for a while?"My conclusion is that despite the correction to date and the income gains to date, prices are still to high! They are getting close to normal but they still arent there yet.Accordingly, to see a v shaped price trend would be exceedingly rare in that it isnt supported by fundamentals. The only way I see a v is if we undershot fundamentals and are now correcting back up. Outside of PWC I dont see that happening. Likewise, given that we are close to fundamentals, I doubt we will go from stagnation to another scorching decline. At some point, stickyness was likely to take over while fundamentals slowly rose to meet the overinflated (but stagnate) prices, and I believe that has happened.Out of curiosity, do you believe that prices are fairly valued, under valued? I see you all the time addressing jobs and I understand where you are coming from, but I dont think ive heard your opinion on the valuation question.
CRT,You'll be missed. but if something really exciting happens you'll come back right?Are you still going to accumulate the high-end stats for us this month or should we go collect them from the mris ourselves?
Out of curiosity, do you believe that prices are fairly valued, under valued? I see you all the time addressing jobs and I understand where you are coming from, but I dont think ive heard your opinion on the valuation question.I have no idea. I don't follow any valuation metrics. I hope it is fair to say that over the last 10 years, greed and fear drove home prices not income and rental equivalents.But, they -- jobs and income - do matter. The more of both support home prices going higher -- generally.So, do fundamentals completely take over and greed and fear take a backseat? Got me. The momentum has shifted and I bet with the momentum until it suggests otherwise.
CRT,One more thing: someone gave me a stock tip when I was pretty young. He said never buy a stock unless someone said it was overvalued. It's worked pretty well and when I have deviated from it, I've been burnt.
When talking about the sectors in which people are working (govt., law firms, tech, lobbyists) and trying to project employment effects on housing, don't forget that a huge portion of the population in this area is in health care services or education (at multiple levels). Their employment trends, pay trends, etc., don't necessarily track with those of the tech sector, law firms, govt., etc.
housebuyer,Yes there were pay increases each year for federal workers. Bush always proposed pay increases; he just sometimes proposed increasing military enlisted salaries more than federal workers. Congress usually overturned that in the budget (usually because of the local House and VA/MD senators). Side note -- Obama has proposed doing the same thing this year (proposing increasing military salaries more than federal salaries.)
housebuyer said,I think most people pulled out because they are sheep and just follow the crowds. . . . They put the most money in at the peak and pull the most money out at the trough."Agree 100%. In fairness, part of it is stupidity and part of it is all the financial advisers giving idiotic advice. They'll see you are 25-40 and be like "100% of your money should be in stocks; even money you need for rent!" etc etc They'll even tell 60 year olds to keep a ton of money in stocks even if they plan to retire in less than five years because otherwise they'll "run out of money when they are 90." Ignoring that most of us will not live to 90 and ignoring that most of us do not need 75% of pre-retirement income each year.If people invested long term and only put money they did not need to touch for 10+ years in the stock market we would see less irrationality in the market. While I was a little bummed about the bear market of 2008, it did not really affect me much because I did not put all my money in the market like an idiot financial adviser would have advised for someone my age.
Fred..Kudos and congrats. You bought smart. Any old timer would give this a healthy nod of agreement.
Collecting Cara's approximation of CRT's usual list for how the high end is fairing this August.price, sales, actives, MOIAlex700-799 9 41 4.55800-899 3 31 10.3900-999 2 14 71.0-2.5 5 48 9.6Arl Cty700-799 13 62 4.77800-899 13 44 3.38900-999 7 28 41.0-2.5 15 125 8.33FFX Cty700-799 80 258 3.225800-899 35 154 4.4900-999 27 149 5.521.0-2.5 57 604 10.6PWC, Manassas City + Mannassas Park (PWAR)500-599 29 96 3.3600-699 4 66 16.5700-799 5 32 6.4 800-899 0 34 infinite...900-999 1 22 221.0-2.5 1 37 37LOU700-799 18 115 6.39800-899 6 73 12.17900-999 5 60 121.0-2.5 5 142 28.4I added a couple more bins for PWAR, because you can get a lot of house for under 600k in PWAR, so I felt the over 700k gave a unfairly pessimisstic view of the region.Arlington and Alex seem to be doing great this August, a great ripe time to sell an expensive home. I say that the slightly high MOI in some brackets is just small number statistics. Those inventories do seem really small, though I haven't made a MoM or YoY comparison. FFX County high end was hopping!! Wow! No small number statistics to fight there, and everything under a million dollars was under 6 MOI! and 10 MOI for 1-2.5 is really not bad for that price range.Loudoun and PWC nice move-up market is doing great, but the ranches complete with space for horses, and tennis courts were just non-existant in sales. I'd day this mostly means this was not a good year to try to sell that product. There's definitely the potential for some pain there, but it really depends on how many of those sellers actually have to sell. There's definitely the opportunity for a couple good deals for the mega-rich to get the country estate if they don't already have one, from whatever fraction of these people become more motivated to sell. But I think if the stock market retains it's gains, and stays above 8500, the fear should drain, and these will start moving again.
Cara - thanks for doing the update. I have to catch a plane this AM and didnt have time. Note one thing you said..."I added a couple more bins for PWAR, because you can get a lot of house for under 600k in PWAR, so I felt the over 700k gave a unfairly pessimisstic view of the region."When this whole excercise started it was because 700K was the breakpoint where jumbo financing was really dried out - so its not surprising to see there is a real break in the action once you get above 700K.
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