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Monday, October 5, 2009
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11 comments:
NOVA Inventory through 10/4/2009
Thanks Robert,
The actives there are still technically falling for everywhere but PWC and Falls Church (or one of the other so small as to be statistically meaningless, places), but they are definitely flattening out. Looks like the freefall in inventory will be over soon (for the winter, anyway).
Which is great news. You no longer need to fear that if you don't buy now there will be no houses left in 6 months.
The percent of listed homes that are active continues to be the wierdest story. I think what it's showing us now is primarily the percent of listings that are short sales, because having listings stay under contract for 4-8 months rather than the usual 1-2 is pretty distortionary. I know, there are also some shorts who are still listed as "Active" despite having a contract in, but everything I've seen tells me that fraction is tiny compared to number of waiters, and I'd place good odds that there are also a fair number that are listed as "under contract" whether or not the buyer has long since voided it, because the LA is waiting to hear back a price from the bank.
Cara,
Inventory is declining, but at a slower pace. That's all I take away from the numbers.
I think we're all still clueless as to what numbers represent a balanced housing market. IMHO, all we know is that August 2006 numbers represent too many sellers, and March 2005 numbers represent too many buyers. Of course, a "balanced market" could be a moving target.
One thing I find interesting and that the housing bears will like is that between March 2006 and August 2006, inventory in NOVA went up a staggering 10,000 homes. Since there weren't any layoffs and subprime was still in its infancy, those listings were most likely regular homeowners that wanted out at peak prices. So, those folks are still out there in case prices run back up. In stock market terms that is overhead resistance.
So, while I disregard the conventional "shadow inventory" of foreclosed homes, there is a legacy inventory of sellers ready to list if homes hit their target prices.
Robert-
I agree I think the number of accidental landlords is at or near an all time high. I know of several different people that intended to flip houses, but bought at/near the top and are now renting it out and have the cover the difference out of pocket. I am sure all of these people would be very happy to sell if prices went up. I think this is why you end up with a long flat period. Buyers will come in if prices fall to early 09 levels, but owners start to sell if prices rise.
Yet instead of reconsidering the public incentives that encourage real estate gambling, the federal government seems ready to double down, with another $35 billion in Treasury support for state agencies that subsidize borrowing, and the reauthorization of an $8,000 home buyer’s tax credit.
Link
Although these are loan guarantees, the recovery is likely to be substantially less than $35B. I think it is reasonable to assume this is going to cost the government 50% of that money, or $17.5B. This comment is a shot across TBW's bow and his lack of understanding about the fiscal recklessness of the President he voted for. I will now take cover for bringing up politics.
Here is a piece about the $15k housing credit and the estimate cost being approximately $45B if it is enacted for one year.
For the record, I don't support either of these policies.
Robert,
Other than FFX Cnty, the pace of declines in active inventory is considerably slowed from this spring. Given that you were the lone voice who called continued price gains in the summer season after only one month of them, I'm surprised at your unwillingness to call a leveling off of inventory in the winter season based on 1.5 months of a declining pace of inventory absorption.
Not that "winter happens" will be a surprising event, but "summer happens" caught a number off guard here.
I would say that evidence of seasonality, while a healthy sign of the market approaching a balance, is not sufficient to tell us really whether the current inventory numbers are "too much" or "too few".
However, winter versus summer return to their normal place as the main source of fluctuations in price and inventory? Sounds like good news for a housing "recovery" to me.
where anything other than a continuation of the grind downwards constitutes "recovery".
Seems to me like that 10,000 of inventory in 2006 was probably mostly amateur investors trained from late night informercials. Or, at least, the segment of them that were savvy enough to notice that early that the music had stopped.
Not "regular homeowners that wanted out". I don't think so many "regular" homeowners "want out" of real estate speculation. They want to make a house a home and stay in it, and keep their kids in the same school, and have the same commute, and enjoy the basement they built out with a wet bar, etc. They aren't house traders.
I may be an exception to that rule--but I'm in the subset of people who had relationship/job shifts that justified a housing change.
Some of these amateur investors, especially ones who did NOT get out early, won't be back any time soon or at all, and some will only be back in the lowest price tier (as we perhaps are seeing from that tier having the biggest price recovery) because they simply lost the money they would need to reenter the mid-tier investments, especially in the supposedly tighter-credit environment.
Cara,
To me, a balanced market is one where prices are flat. The L-shaped recovery you speak about.
This is what we saw in the Spring and Summer. I'm not sure what's going to happen to prices, but I would go with the trend unless there was some macro numbers that have hit recently like huge layoffs, higher interest rates, or a stock market crash.
Robert,
Prices are never going to be flat through all seasons. That chart looks impressive, and is a cool way of displaying it but note the scale. It maxes out at like 8%. The drama of it is due to cropping the scale. Since prices usually rise 3-5% in the spring and summer anyway, and the mix of houses sold moved from 40% or more REO's to under 20% REOs and in higher brackets in the summer, I'm not impressed.
And unless we get more than a 10% downturn in the median or C-S this winter, I won't be impressed and start thinking another leg down is happening either. It's just that the usual seasonal pattern is getting exagerated by the significant presence of distressed properties.
If you can put down 25%, here's a simple loan rate table from ING bank.
Robert
Why would I want a 5/1 or 7/1 ARM if I can put down 25%?
I think homes cost so much in NOVA that the days of always being able to buy up are gone, at least for the near future. The transaction costs on selling houses $350,000+ requires the market to continue to go up (or my salary to continue to go up), and I think none of us is really certain that within 5 or 7 years the market is going to go up enough to make refinancing or selling attractive enough for me to purchase an ARM now using 25% down.
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