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Saturday, November 21, 2009
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111 comments:
i realize i spend a lot of time looking at property
in the "Transition" zones of DC, and,
you folks probably mostly care about Fairfax,
arlington and alexandria, but,
I still see properties just outside the Transition
zone losing price/value and prices getting
reposted lower and lower.
consider this one, the neighborhood is a little rough
but it's close to H street and will transition,
http://franklymls.com/DC7151516
$139 for a doll house in good shape.
now here's an alexandria/fairfax proeprty
http://franklymls.com/FX7185025
listed at 180K and went under contract in 3 days.
now it probably went above market, but, 1/2 mile to metro, off a main road a bit,
4 bedroom cape cod with land?
even at 220 a real good deal, but that one is a Comp killer. Everyone in that subdivision who bought at 450K is now at 220K.
http://franklymls.com/DC7167690
this house has failed to close all summer,
maybe it closes this time, but, it's been relisted.
pat,
Can you raise kids in that DC nabe? Years ago we were looking in Capitol Hill and figured it would be a 5 or 10yr deal for us. I think most of us suburbanites are quite leary of anything downtown that isn't in an already nice neighborhood (which of course would be highly expensive).
If I was young again, I'd certainly consider many parts of DC.
As to your FX listing; I didn't look it up because I don't know how to click on anything that isn't in blue.
I recently saw a closed sale in Falls Church for 236K. It last sold for over 800K. Shoot, the lot alone is worth more than that.
There are some here that don't actually look or, if they do, can't see the possibilities. Their preference is to piss and moan or doom and gloom - either way; not even really put the time in in a productive way.
As for your situation; it's hard to really predict when gentrification will occur. I admit that I know nothing about DC and shouldn't/can't comment. All I can say is that nothing beats "boots on the ground". If you don't look, you won't find.
I had friends venturing into Del Ray 15-20 yrs ago and we all know how that turned out. I remember looking at row houses that were 30K.
Pat I also look at more property in DC than Virginia. I've seen that "doll house" you posted before, my sister lives close to there. That area is just so rough right right now, even the part that is within the "transition" zone. It reminds me of this other house I was watching
http://franklymls.com/DC7174138
Only 5 blocks to metro, but also near the Park-Morton projects on a not-so-pretty block.
Both of these locations are in some of the most dangerous parts of DC in terms of violent crime.
http://www.radicalcartography.net/DCviolence.png
What the heck happened to that Seaton house? It appears it had been renovated then totally trashed.
Jason, wow, that map is interesting. I would not have guessed that the 16th St. north area would be worse than Anacostia. Isn't Dean Baker's house near that purple spot?
On second glance, I think his house is much farther north - but still in a risky area.
"Pat said...
you folks probably mostly care about Fairfax,
arlington and alexandria, but,
I still see properties just outside the Transition
zone losing price/value and prices getting
reposted lower and lower."
Pat -- one of the main reasons the rest of us arent as optimistic as you are is you arent dealing with a dearth of inventory.
CRT made a great point years ago that (for whatever reason) MD and DC were far far behind VA with respect to the inventory cycle.
For example, take a look at DC inventory (first graph).
http://katie.yourkwagent.com/atj/user/AdditionalGetAction.do?pageId=139707
It looks like DC hit its all time peak in inventory in April 2009. Its only now beginning its descent back to normal levels.
By contrast, look at what we here in VA are dealing with:
http://www.recharts.com/nova/nova.html
As you can see, the inventory here in Arl, Alex, Ffx, etc peaked in Summer 2006 approximately 3 YEARS ahead of where you are in DC!!!
CRT predicted 2009 to be the biggest "burn down" year for you guys in DC and MD. So if anything, be glad you are looking in an area that still has a ton of inventory and is so much earlier in the cycle than where we are at here across the river.
Ace,
Good point. reecon attacked me a while back when I said those neighborhoods were not so good. He cited his son living in one of them and that it was safe and everyone was stereotyping. So I recommended Ward 4 to pat recently. I take that recommendation back (although Ward 4 is still safer than where he tends to look).
It appears I was not misled when I got the impression that upper 16th Street is more dangerous than say Arlington or Fairfax.
Where Dean Baker's house is located (16th Street Heights) has its issues, but it's not that bad (I lived there). Yes, it's more dangerous than Arlington or Fairfax but not as bad as Columbia Heights, Park View, and Benning Road which are probably the worst spots. Anacostia does have its issues, but is not as bad as those areas in terms of violent crime, and in fact I've been watching the listings there because the housing stock is lovely. The major issue east of the river is the lack of amenities.
Jason,
I agree with all of that. I just think there are non-racist reasons for someone deciding Dean Baker's neighborhood (or other ones around there) are not for them. It does seem to me fair to say the schools and crime rate are not as good in Ward 4 as Fairfax or Arlington.
Inventory is available in FX - prices are just not reasonable however - sellers are still living in the dreams of good old bubble days.
So, correct way to put it is - inventory is lacking in FX for reasonably priced homes....
Hey Arkey are you out there?
My husband and his BFF are hunting our property today. They donate the deer (if they get any) to a soup kitchen. They saw 3 bucks this am, but they didn't get a good shot (absent a poor Holly tree). I wish my Gramma was around; she really knew how to cook the meat.
Va_Investor,
Did you see this? You've often asked why we expect a delay in foreclosures in say 20194 or 22182 versus Manassas Park or Woodbridge:
On the MBA conference call concerning the "Q3 2009 National Delinquency Survey", MBA Chief Economist Jay Brinkmann said this morning:
# The problem is moving to prime loans, including fixed rate prime loans, and also FHA loans. "We are seeing the first hit on the weaker prime fixed borrowers."
# Remember the delinquency rate includes loans in modification (something to remember - especially for the 90 day delinquent loans).
# MBA expects unemployment rate to peak in Q1 or Q2 2010, and delinquencies to peak sometime after the unemployment rate peaks.
# Brinkmann expects foreclosures to possibly peak in 2011 (last quarter he said late 2010). He changed the forecast for two reasons: he expects unemployment to stay fairly high, and he thinks the prime borrowers will hang on before defaulting, and all the foreclosure moratoria will delay foreclosures - a longer trailing effect than usual.
Article
The part in bold is something we've often discussed. The richer you are the longer you can delay the inevitable. Two working class people are more likely to be living paycheck to paycheck than the professional couple.
I bet in 2010 and 2011 there will be plenty of people who wished they listened to the housing bears in 2007 or 2008 and just did a strategic foreclosure. They would then be up to four years past the stain of a foreclosure on their credit report and three years from it being gone.
Wow. Even Bob Toll is sounding like a bear regarding FHA:
"Yesterday’s subprime is today’s FHA,” said Toll Brothers CEO Bob Toll at a UBS home builder conference in New York. “It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money.” And that from the luxury home builder.
http://www.cnbc.com/id/34038967
tbw,
I do care to some extent what happens in the next 5 yrs because it affects my financial statement. The reason that I don't lose any sleep or care too much is #1 - I know what I'm doing; #2 - I know the risks; #3 everything will be paid-off by tenants in 15yrs or less.
How do I lose? Does the stock market beat me? Fat chance. Does the world end? Then what difference will it make?
tbw, FHA is definitely a disaster in the making. The standards have been relaxed so much that - it seems to be worse the Fennie/Fredie mess. Chicken will eventually come home to roost!!!
Stop FHA
"Spider said...So, correct way to put it is - inventory is lacking in FX for reasonably priced homes...."
Yep -- the bulk of the screaming deals are now gone and we are left with a bunch of stubborn buyers -- talk about stickiness -- let the long grudge match of stagnation begin!!!
Agreed, TBW and The Anonymous.
Spider, I'd say the same thing you said about pricing of inventory, about Arlington. The neighborhoods that are "doing just fine" are relatively lower priced neighborhoods in Arl. Realistic sellers even in higher end neighborhoods are also doing well. The stubborn sellers are those who apparently don't have to move or who don't want to give up much of their bubble gains. I wouldn't call buyers particularly stubborn, unless they insist that, for example, 2008 PWC conditions exist in Arlington and thus prices should also.
Until this loosens up and sales volumes (outside of the large # of bargains in 22204/6) start to look more like the average level over the past 12 years (rather than significantly below) we just don't know when or where price levels will stabilize.
The picture is also muddied by investors holding on several properties in this market. However, they can't do that forever. Also, banks are holding on to quite a bit of inventory while trying mortgage "modification". Most of this is just delaying tactic on their part while hoping for good old days to return.
Price discovery will have to eventually happen. I suspect this winter will lead us in the right direction.
The trigger if you ask me might be:
Price declines in national home price index in next few months. This should provide a wake-up call to most sellers when they stampede to cut their losses.
Prime mortgage borrower meltdown - Ha. Who? Not here. The layoffs here have been in retail and construction. NOVA lost a total of 13,000 jobs in the last 12 months. We have 1,305,600 people working. I guess since Anonymous debunked the whole recast/reset/Alt-A/option ARM for this area, you guys are searching for something else. Keep dreaming.
spider -
I don't think you were posting earlier this year, but there were a number of posters warning about the looming termination of foreclosure moratoriums self-imposed by all of the big banks. We heard February, the April, then July. What happened? Inventory went down. Not even flat. Down, and down a lot. So please forgive me for not trembling about banks holding inventory while waiting to see if mortgage modification plans work.
All
1) Yeah, most of DC is lousy for raising kids, the schools are bad, the parks aren't great, but
things change. The schools will improve
2) I believe in the case shiller index, I believe that it means the
metro area has a lot further to decay in price.Wether that occurs quickly or slowly will be up to the treasury
Case Shiller index for September is coming out on Monday. Given that quite a few were still jumping in the fire in order to not miss out on the bribe at that point, we probably have to wait for October/November report to see the continuation of the meaningful downward trend.
Robert - it will come, be patient. It is a fact that, modifications are real and has delayed the bottoming process. Prime borrowers are starting to get into trouble now and unemployment hasn't peaked yet. As much as this is going to be unfortunate for a lot of people, it has to happen for economy to grow sustainably in the long term.
pat,
i bet you like to gamble, too? or just the glass-is-half-full type? you seem so confident that area will transition and schools will get better. dc schools never really get better, despite all the $$$.
OTOH, you could easily cover a 139k mortgage with a section 8 voucher tenant, if you moved into the area and decided it was a little too lively for your liking, or didn't transition before you were over the urban pioneer thing.
Have you looked up in Michigan Park in NE? It may be too suburban for you, but it is cheap for the houses you can get.
eg:
http://franklymls.com/DC6937248
OK, this description with the doctor in the basement is kind of creeping me out:
http://franklymls.com/DC6802640
meshell
I'm a cycles of revolution kind of guy. in the 60's georgetown was
scummy drug addicts soon enough it became trendy then top shelf.
meridian hill was once the richest neighborhood, then it was truly awful now it's getting better.
the DC schools will improve soon enough especially as people get sick of long commutes and high gas prices.
now that house with the doctors exam rooms? i know a gal who's a professional domme who would love that house.
Robert: "Inventory went down. Not even flat. Down, and down a lot."
Here's a definition of inventory going down a lot. Zip code 22305
The current count in the list (this is an apples and oranges deal but it's good enough for this place) is 36. I've seen over 100 places for sale a couple years ago.
That's a geemongous drop.
There are two TH (2924 Landover and 2922 Sycamore), part of the 605 TH Warwick community. I saw 7 - 10 for sale a couple years ago. 2 is a low number.
Below roughly $600,000, places are not exceptionally nice. There are nice homes but the asking prices are up there. Check out the listings.
It's in balance, I guess.
lol, pat, the housing market truly has something for everybody.
Meshell
Yeah, that gal who'se the domme
would love the doctors house.
We went to a art-opening that
was held at her place, the upstairs
is 1950's suburban, the downstairs
is like a movie set.
there was a X rack, there was a 4 poster bed, but the posts were designed by paul bunyan with big eyehooks every 3 feet.
half the basement was hollowed out into a pit, there had been a closet
that was turned into a sensory deprivation chamber and there was a big shower room with the most unusual shower attachments
and finally there was a "Medical" room.
I bet if you put Khaled Sheikh Mohammed into her hands, she'd have
gotten him to talk.
@J
check out Realty Trac,
They show for Arlington county
975 total properties available
549 for sale
232 Bank Owned
189 Trustee Sales scheduled.
that's almost equal.
now i met a gal from fannie mae who was their economist who said "Ralty trac is ratty data" but i said
"It's the only data i got".
she says the MBA Mortgage bankers association is much better, and MBA
says 1:7 nationwide mortgages are in default or not performing.
it is very hard to resist that national trend.
Thanks Pat,
Realty Trac is a mess.
I like the presentation at Frankly much better.
I know the ins and outs of my zip code. I've watched sales in 22305 for more than 20 years. There were 2 or 3 times the places available for sale in 2007 as during other times.
This year, the for-sales dropped back to normal, if not sub-normal. I can see prices not just firming but rising.
My reference is the "Warwick" village rowhouses. There are 605 of these, all built exactly the same. Many have been modified but you still end up with a 3 level, 500 sqft/floor TH.
During the peak of the mania, a half dozen sold for close to $500K but most, even during the nuttiness, sold for $400K-$450K.
A couple years ago, when 10-12 were on the market at one time, prices fell all the way down to $350K for a few places.
There are now two on the market. Asking prices are over $400K again.
Good evening. I've posted some reviews of Maryland listings on my blog.
http://marylandbubblefallout.blogspot.com/2009/11/it-has-been-while.html
Hmm, @J@, I am not sure those examples make your point--that prices near you are now going up--very well.
Both units are unsold so we don't know the eventual selling prices so we can't really compare apples to apples. However, AX7162135 sold for $420000 net about 1.5 years ago. The *asking* price NOW is just a little more than that, and the unit has been sitting awhile (albeit mostly at a higher asking price). It is not now under contract. I'll be generous and assume there have been no updates since it was last sold. All this suggests to me is that it will sell for about what the current owners paid for it a year ago -- or less.
If you look at your entire zip on MRIS you will see that October 2009 prices fell > 20% compared October 2008. This was on a small # of sales, however. The last couple of months before that showed small increases Y-O-Y, also on small volume. So when you factor out the "noise", I would not say the trend is clearly upward.
continuing - my guess is that the variation in the prices is probably more due to differences in upgrades (e.g., new windows in one of the $400K units as you posted) and end unit location than to price recoveries. And in this price range, the buyer bribe likely has made a difference.
As more info - if you search Frankly's last 4 years of solds ("22305 Warwick") you'll see that of the top 40 priced units, only 6 were sold in 2009; of the bottom 40 priced units, 10 were sold in 2009, unless I overlooked something with my quick counts. This does not suggest an upward trend in nominal prices over time, and instead suggests a downward trend in real prices, at the least.
Finally, I'm not sure how you define the peak of the mania or what's close to $500K, but franklymls covers the last 4 years, and no units shown there, not even in early 2006, sold for more than $482K.
5 of the bottom 6 in price ($279-$310K) over the last 4 years were sold in 2009.
I think this illustrates how anecdotes aren't as helpful as looking at the full set of data - and someone else may want to do more analytics and refine or correct what I've said.
Ace -
With inventory at these levels, price direction would most probably be up. IMHO.
Is there any inventory level, that if breached, would sway you that prices would more than likely move higher?
Inventory will be plenty as soon as it is realized the trend is still downward - there could even be stampede by many investors to get out before it is too late.
In the meantime, celebrate flat prices...
I found my data.... which shows how poor memories are. In 2005 and 2006, I kept week by week records of the places for sale, prices, addresses, and when MLS marked them as "SOLD" or KO.
I was tracking Warwick because I was in a heated argument with a good friend who was absolutely certain that my place in 22305 would crash in price to half or less.
Warwick is a "metric". There is only so much you can do within the framework of a TH.
He argued that prices would plunge. He makes Contrarian look like a wild housing, economy pumper. He said that I should sell in 2004, 2005, etc.
Here's what my records show:
Highest Asking Price: $525K Sep 2005, 215 Burgess, eventually sold after price reduced to 476K. City shows it closed on 12/22/2005 $469,900
Most # for sale at one time in 2005. Nov, 15 units. Average asking 461K. Lowest asking that week, 223 Burgess, city shows it closed 01/17/2006 at $424,900. Current assesment is $364K. Highest asking that week was 232 Tennessee and 230 Tennessee both at $499K. 232 sold 02/17/2006 $490,000, current assessment is 428K. 230 sold 07/10/2006 for $445,000. Current assessment $399K.
2006 is similar.
Peak offered for sale was in July, 18 units. I misremembered 10 or 12.
The lowest asking price in 2006 was 2940 Landover at 365K. At that time, the average asking price was in the range of $425-450K, about what it is today.
2940 Landover sold 01/10/2007 for $340,000. Current assessment is 360K
There are 2 places for sale. Asking prices are about what they were 5 years ago. Between then and how, there was very little variation.
I have the data and it shows no price collapse. It shows a pull back similar to the 10%, 15% in the 1990's after the S&L crisis.
I've never thought of Warwick as worth $500K. Just because a few bold sellers asked that in 2005, that doesn't make it so. Warwick was $425K, maybe $450K. You can see that in "Sold Prices" if you drag the city's records.
After years of the bubble-bursting, Warwick is $400, maybe $425K.
The graphs suggest that we're past the nadir. We won't know until 2012 - 2015, some time in there.
The rest of 22305 and Immundria extrapolate from Warwick. A small SFH is 1.5 times Warwick, $600K A large place with all the trimmings is 2 times Warwick, $800K.
I think someone was asking about what the assessments might look like for 2010 when it comes out.
It seems that they are going much lower for 2010 as well as 2011. Fairfax county has also projected significantly lower property tax revenues through 2011.
"On a monthly over-the-year basis, average price declines ranged from 10.4 percent to 23.6 percent during the first
five months of 2009. These decreased prices will be a factor in determining FY 2011 assessments."
"Due to budget shortfalls in FY 2009 and FY 2010, the Commonwealth of Virginia reduced funding to localities in both years. Thus far, County funding has been reduced $5.7 million in FY 2009 and $9.4 million in FY 2010."
FX County Budget Forecast
There shouldn't be any question as to what county officials themselves think where prices are heading.
It is hard to argue with this numbers when they are projected by someone who is responsible for assessments and would like to keep them as high as possible for the revenue.
spider -
Why don't you go back and look at projections for 2002, 2003, 2004, and 2005 and let me know how many times they predicted 20% YOY increases in prices.
Robert, I don't think that inventory alone provides much info regarding predicting future prices; it suggests only a part of the supply picture and nothing about demand, right now. I believe that, at least in some areas and price ranges, some sellers who would like to sell but don't have to are staying on the sidelines right now because they don't believe conditions are good for getting the prices they want and/or because the move-up house they want isn't on the market or is overpriced.
I think you have to look at a lot of factors to predict what might happen going forward - and even then prediction is unclear (partly because some of these factors, such as future interest rates, are unknown. I'm sure people whose job it is to project and who examine all the available data do a much better job than I would, in any case.
@J@, thanks for the additional data. They don't change the conclusions I drew, however. I didn't predict a price "collapse" or say that there had been one; you are the one who maintained that prices have dropped from "close to $500" to the 300s more than a year ago, and back upward now.
Instead it appears to me that there has been a somewhat steady decline, not a collapse, since 2006 (and possibly earlier) as with certain other areas near 22305, and that there is some variation in the cost of the townhouses probably due to updates and location.
I am not as convinced as you that prices are now heading upward (except to the extent that temporary conditions, such as very low interest rates and the buyer bribe) are playing a role, which they may well be, in the case of these townhomes in this price range. While some of the townhomes may now sell in the 400s, as you say, as franklymls clearly indicates, several recent sales have been in the low 300s.
Inventory will be plenty as soon as it is realized the trend is still downward - there could even be stampede by many investors to get out before it is too late.
Inventory is down 15 months in a row, without a single uptick. The weak hands (investors) have already been shaken out. They've sold. The strong hand are now swooping in and getting bargain prices.
What exactly is going to break the trend now? Interest rates are lower than they have ever been. The tax credit has been extended and expanded. Unemployment is trending lower. Investment is pouring in. Infrastructure projects are on-line. People are moving to the region for jobs. Obama is spending like FDR and LBJ.
I have three words for you spider: local, local, local. The real estate recovery will be uneven. Winners and losers. NOVA will be a winner. Some cities in Texas will be winners. NV, CA, MI, FL, AZ will be losers.
between the buyers bribe and low interest rates, i think the average house has jumped up 20-30K, but,
that' won't last forever.
http://polijamblog.polijam.com/?p=11367
i can't come up with a direct link
but SNL did really capture the flavor of the Obama/Jintao meeting.
Now if Obama will pull out of afghanistan, fast and dump iraq, and just focus on energy policy and health care, we would be in better shape in the long term.
Someday the chinese will demand
a higher interest rate and that will
just poleaxe real estate prices.
pat -
How long have people been saying that? If they sell after I die, what do I care?
Robert said - "Interest rates are lower than they have ever been. The tax credit has been extended and expanded."
Yes, everything has been thrown at this by government now - not too far in the future this help will have to be pulled including local stimulus money. Interest rates are at almost zero - only realistic direction I see is up, up, up...Tax credit will sure expire...
Just think - without all this help, where do we end up? How much of current environment is actually real??
@J@, during 2/06, 232 Tennessee sold for $481,572 per franklymls, which shows the seller subsidy (many county sites do not). That was the highest sold price for a Warwick townhouse on frankly shown as sold in the past 4 years.
Yes, everything has been thrown at this by government now.
I've seen this comment before by housing bears. Do you really believe EVERYTHING the USG can do has been thrown at the housing market.
Is $8k to first-time homebuyers and $6500 for move-up buyers EVERYTHING? Come on. They only threw enough to get it started. If it doesn't start, they will throw more. And more after that. The best predictor as to when the government has to stop is interest rates. Recent auctions of our debt have been met with record demand....by foreigners.
Also, @J@, 232 TN was an end unit and "completely renovated." From the photos on Frankly that was an accurate description and the renos were nicely done.
I don't think you can entirely extrapolate from the sales of these homes to SFD's that cost twice as much (in your example), because the buyer's bribe wasn't available to many of the buyers of the latter, until very recently. Even now it will help only those who have a lot of equity from a prior home and who don't have a high income (by this area's standards for a married couple). The new bribe may make it easier for this couple (and singles) to sell their $500K home (or to get a better price), but it will help only some of these couples and very few singles (who are disqualified at only $150K, not enough to afford an $800K+ home without a lot of equity) buy in this range.
", as franklymls clearly indicates, several recent sales have been in the low 300s."
Could someone who knows how to tease the data out of Frankly find out if any of the places were sold by a "Lois Neebe" aka the slumlordess of Warwick.
Or, if you post the addresses, I'll dig that info out of the city's DB.
I'm not saying that 1.5 X Warwick is a hard rule. It's just that there are 605 identical units. The major variations are:
end unit v. inside
shared stoop v. private entrance (this is a dumb one, they should have made all of them private. The last thing you want is to open your door and find people sitting there.)
walk out basement v. dungeon
flat v. peaked roof
Some people have fixed up their places great. Others are 1950's original. The kitchens are small. The rooms are small. Solid oak floors polish up nice.
Once you get by the outliers on the high (fixed up nice) and low (the Neebe rentals) end, you converge on a "price".
With only 2 units on the market (compared to 12, 15, 18), I doubt that prices will fall.
The jobs thing could cause unpredictable results. Factor in that the overall "For Sales" are low in 22305.
My apples and oranges comment referred to TH and Condo developments selling several units in one listing. That is happening now in 22305. 36 is really ... 40 ... 45? But this happens inconsistently so how do you correct for it without extreme effort?
Too bad that Frankly doesn't go back 10 or 20 years.
Here, J, if you search by Neebe in 22305 you get 19 results:
http://www.washingtonpost.com/ac2/wp-dyn/admin/homepricereports?includePage=/jsp/hsales/html/advancedSearch.jsp
"entirely extrapolate from the sales of these homes to SFD's that cost twice as much (in your example)"
It's not a hard parameter, it's rule of thumb. Given the 605 units and the limited modifications possible, the price converges on "something", might be $425K today. The average price at the absolute peak might have been $450K or $475K.
The average price at the trough? Maybe $375K. Someone could calculate it if they had a few hours to drag the data. I collected data for 2005 and 2006 and lost interest when it became clear that the long awaited price plunge was not happening.
Even if the price fell to $350K, it's over $400K today.
It's interesting since there are so many of these places and they are so similar.
As for a nicer SFH being 2X, a SFH, larger, lot bigger than the 1,200 sqft of a TH. No common walls, private parking, etc.
If Warwick is $425K, say, and a small SFH shows up for $650K, a whole lot of folks who have major equity will jump at it.
The price delta has to be enough to dissuade those who have $200K, $300K of equity from making a run at the place.
Ditto a really nice SFH at 2X or $800+K but now there are move-up buyers from Warwick AND the smaller SFH.
"Robert said...
Inventory is down 15 months in a row, without a single uptick. The weak hands (investors) have already been shaken out. They've sold. The strong hand are now swooping in and getting bargain prices.
What exactly is going to break the trend now?"
Robert -- people have had a hard time accepting inventory has peaked for years now. For the better part of 3 years, we have heard theories like Spiders as to why suddenly, the trend we have seen since peak in summer 2006 will turn around.
With the exception of a bank dump (which is an ulikely but everpresent threat), all of them have failed -- each and every theory advanced -- poof gone. You will get used to these after a while.
I do think however inventory could rise modestly this spring -- my understanding being the reports of "bottom" traditionally draw out longtime sitters waiting for a better day. This is not a reason for concern -- its just part of the natural bottoming process (and part of the reason I think the recovery will be very much "L" shaped)...
Robert said
you guys are searching for something else.
Actually I was just quoting the Mortgage Bankers Association chief economist and Bob Toll. I don't think either is a housing bear. I'm sure both were gung-ho in 2005-06.
The layoffs here have been in retail and construction.
Not sure where you got that impression. I know laid off lawyers, non-profit employees, and defense contractors.
Sometimes you just say the silliest things. I mean just yesterday you admitted AOL and Sprint were laying people off. Do you think those were "retail and construction" workers? You are just trolling as always.
Robert said
Federal Reserve Bank of St. Louis President James Bullard said past experience suggests policy makers may not start to raise interest rates until early 2012.
I'd like everyone to look at the Bloomberg article that Robert is quoting. Robert is 100% misquoting Bullard. Bullard pointed out that the Fed is seriously discussing the argument made by many people that Greenspan seriously screwed up by keeping rates for so long after the last recession.
Either Robert has poor reading comprehension or he deliberately lies. I'm guessing the latter.
Bloomberg Article
Nov. 18 (Bloomberg) -- Federal Reserve Bank of St. Louis President James Bullard said past experience suggests policy makers may not start to raise interest rates until early 2012, while concern borrowing costs have stayed “too low for too long” may prompt an earlier move.
“If you look at the last two recessions, in each case the FOMC waited two and a half to three years before we started our tightening campaign,” Bullard said today in a speech in St. Louis. “If we took that as a benchmark, that would put us in the first half of 2012.”
Bullard added that in the debate on when to tighten policy, “the idea that you might be creating asset bubbles by keeping rates too low for too long will be an important argument.”
...
“That should be the baseline that is in your head because that is the way the FOMC has behaved in the past, in the ‘90s and this past decade," he told reporters after his speech.
"There are reasons to think the FOMC won’t actually wait that long this time because of this ‘too low for too long’ argument, **********************which is a powerful argument,******************" Bullard said. "It apparently created a lot of problems for us and blew up on us in this crisis. So we are going to have to debate that and think about that, going forward."
tbw - that's right on...I would think FOMC will not make that same mistake again - at least not to that extent. We will see the change in their statement next time around and possibly first move up the one after.
Several voting members have already started to make hawkish statements. There is also growing concern with the commodity asset bubble that's being created. There is no hiding place this time around.
Also - to the dismay of someone like Robert, once the move starts - it will be swift on the way up as much as it was in the other direction - as already made clear by Bernanke.
pat said
the DC schools will improve soon enough especially as people get sick of long commutes and high gas prices.
glug, glug, glug ;)
First of all the majority of jobs in the DC area are *not* in DC. This is not 1950. While some singles desiring city amenities might live in the city and reverse commute out to Tysons or Bethesda or whatever, few families would do that. Even in a far out area like Ashburn plenty of people have half-hour commutes because Ashburn is mostly a suburb for *suburban* jobs.
Second, let's do a reality check. For many families in suburbia the high school with the best reputation in DC (Woodrow Wilson) is not good enough. But WW is not even in the picture for them.
Take a two parent, two kid family with a dog that make a middle-class income. They cannot afford any home (or rowhouse) west of 16th Street so they are not in that district. [Heck, they cannot even afford west of 9th Street NW probably]. And don't say they can buy a condo in that school district. First of all they are lucky if they can even afford a 1 BR condo anywhere in that region, let alone a 2 BR. Neither is big enough for that family nor would they downsize that much.
So let's say they look at the area you are talking about. Depending on where they go they will be zoned to either Dunbar, Eastern, Spingarn.
Here are the pitiful results on the D.C. Comprehensive Assessment System at each school (percentage proficient).
Dunbar: 22% reading, 19% math
Spingarn: 19% reading, 17% math
Eastern: 23% reading, 6% math
That means at Eastern 94% of their students failed the math exam. I think you may be underestimating how large the gap is between DC Public Schools and its suburban counterparts.
spider,
I agree. However, the earlier sign will be what happens after the MBS buying program ends next spring. The Mortgage Bankers Association projects a 1% increase in the mortgage rate once that program ends.
So the test will be does the Fed let the market react to ~6% interest rates then or does it start a new MBS buying program? I suppose Robert thinks it will be the latter.
TBW
once rural schools were just awful.
now these are overcrowded schools in
loudon and fauquier.
Fairfax schools were nice now they are great.
DC schools were amazing in the 50's
now they are awful.
now everything changes.
If Obama starts rolling work back to the federal work force, we will see a large change in how tysons and reston are set up.
Detroit was once the great city, now it's not.
chicago has cycled up and down.
The DC schools need to be fixed.
Maybe the charter schools are the route to this. How do the charter schools look in their stats?
pat,
I see no evidence that families are moving to the cities (outside of a small segment of uber-wealthy Americans who can afford $1M+ homes and private schooling for their kids). Most of the improvement in DC neighborhoods has come from DINKs and singles. If you want to map out some improvement in the neighborhoods you are looking at via more of those groups I'm all ears. I just think it's naive to think middle class families are going to give up suburbia for crappy parts of DC.
SNL Obama China Trip Skit
I thought some of you would find this amusing given we often discuss America's debt problem.
"Here, J, if you search by Neebe in 22305 you get 19 results:"
Thanks, from the listings there, I'm guessing Lois Neebe died about 2003 and her heirs began selling off the empire.
Rumor in the 'hood was that she owned dozens of places.
"I do think however inventory could rise modestly this spring"
Of course it will. From my read of the 2005, 2006 Warwick data, the increase may be small and there will be an associated price increase.
I don't think prices are poised to "run away". I don't expect that for a few years.
Prices have been flat to very slight falling (in Immundria) since 2006.
A job market collapse could be a Black Swan Event.
AOL's layoffs may trash RE prices in their immediate vicinity but that has nothing to do with Immundria and Immunington. It's too far for any substitution effect.
TBW said...I agree. However, the earlier sign will be what happens after the MBS buying program ends next spring. The Mortgage Bankers Association projects a 1% increase in the mortgage rate once that program ends.
So the test will be does the Fed let the market react to ~6% interest rates then or does it start a new MBS buying program? I suppose Robert thinks it will be the latter.
Federal Reserve Bank of St. Louis President James Bullard said Sunday that the U.S. should continue buying mortgage-backed securities past the first quarter of 2010, when asset purchases are due to end.
------
The broader point here is similar to many of my previous posts. The government won't quit until the housing bears are all dead.
Also - to the dismay of someone like Robert, once the move starts - it will be swift on the way up as much as it was in the other direction - as already made clear by Bernanke.
Really? Spider, I really think you should get out of the interest rate prediction game. More then one poster has made a fool of himself predicting higher interest rates. Perhaps they've even lost some money following their own failed predictions. Of course, they would never admit it here.
Not sure where you got that impression. I know laid off lawyers, non-profit employees, and defense contractors.
Sometimes you just say the silliest things. I mean just yesterday you admitted AOL and Sprint were laying people off. Do you think those were "retail and construction" workers? You are just trolling as always.
TBW, not sure if you are playing dumb here. You know I'm talking about net job differences. To be more clear, there are always layoffs in every industry, but if that industry creates 1.3 jobs for every layoff, the net for that industry is job gains. The net for retail is lower - more retail staff have been laid off than have been hired.. The net for construction is also lower. The net for white collar jobs is higher - more white collar workers have been hired than laid off.
Spring is setting up to be gangbusters. Barring a black swan, inventory will be much lower than the previous Spring. Interest rates look like they will be similar. The stock market is significantly higher. The tax credit has been extended and expanded. Workers have moved to the region.
I think this Spring you will see a capitulation from buyers. They will realize that prices simply are not going to go down, so they will give in and buy.
'gangbusters'?
I'm disappointed that you couldn't work the word 'savvy' into there somehow.
"Robert said - Really? Spider, I really think you should get out of the interest rate prediction game."
You don't have to be a rocket scientist or even an economist to predict that there is only one direction interest rate can go from current 0.25%.
In case anyone was under the impression that the Fed's purchase of MBS winding down is a done deal, I give you the WSJ:
Fed’s Bullard: Asset Buying Efforts Should Remain Active
According to CR, Bullard will be a voting FOMC member next year. I.e. when that decision will be made.
Cara,
Doesn't that make you wonder why he thinks that? His thoughts are motivated by the understanding that current market can not be sustained realistically without the extension. He probably expects crash without MBS program extension. His lack of confidence in this propped up market smells like a bearish news to me for housing market longer term.
Demand pull-ahead effect sounds like trouble for 2010.
Linky
@J@, it's easy to find the info you want. Go to franklymls.com and search the 4 year solds for "warwick 22305" then sort them by sold price.
http://franklymls.com/default.aspx?p=4&m=R&l=0&h=1500K&x=sold&s=warwick+22305
Then click on the property you want and click on the box for county assessment for the property and you can see the details from Alexandria's assessment, owners, price sold, etc.
The lowest priced 5 sales occurred in 2009. Several were foreclosures/bankowned. The name you mentioned didn't appear on any of them, nor on the next lowest 2009 sale a few slots higher.
Robert said...
"I think this Spring you will see a capitulation from buyers. They will realize that prices simply are not going to go down, so they will give in and buy."
Robert, sometimes I think you're just F-ing with us. If prices go back up, you think someone like me is then going to buy? Are you kidding? Nobody that hasn't bought yet believes these prices are sustainable.
spider,
What he's specifically worried about is not housing persay, but the transition to an MBS market with greater investment involvement. Still, for the nation as a whole it is a cautious bearish signal.
Part of my premise for a long time has been that I believe the economy in the DC metro area (although not necessarily DC proper) will recover sooner than the nation as a whole. Thus that the Fed's actions which must protect the nation's economy may be excessive versus what is actually needed here.
With higher credit standards, higher downpayments, and much greater monthly affordability, every house that sells today, is one less house that will get foreclosed on tomorrow. The question is whether the Fed's actions can bridge us over into the long slow flat period. There exists some time period for the "artificial" supports which is long enough that the housing market here will have stabilized. The question is, will the Fed's actions be long enough to cover that, so long that they create a new bubble, or too short such that there's another leg down before the stagnation or normal appreciation (in the case of an overshoot)?
I doubt it will be goldilocks, but I don't know, do I?
Cara, please forgive me, but I think you mean "per se."
Great point about how the actions taken in response to national problems (as perceived by Cong.) will affect our local markets.
Ace,
ah that's how you spell that. It's tough to look up phrases in the dictionary when you think they're just one word. Thanks!
There exists some time period for the "artificial" supports which is long enough that the housing market here will have stabilized.
What are the odds that the Fed will time interest rate hikes so as exactly not to create another asset bubble? I think an asset bubble is in the cards. It doesn't necessarily have to be American real estate this time, but current Fed policy will create an asset bubble. Take that to the bank.
The German and Chinese governments are already complaining about it. It's looking like gold, real estate in Hong Kong, maybe tech stocks, tulips? and who knows what else.
Robert,
CR brought that up too. How might fear of an asset bubble in something influence the Fed's interest policy? They might increase interest rates sooner than they otherwise would, which might curtail the low interest rate period "too soon" for the DC area market. Might, might, might. I put this firmly in the category of things that are beyond my ken.
Greenspan has already found a place in the history as one of the worst Fed chairman. Everyone is aware of this, which ensures that this isn't repeated. I see this as a done deal as far as the speed of fed reaction goes when it comes to that.
Regardless of that, I don't think even a bull can ignore the fact that current time is the best environment for housing in quite a while - low interest rates, buyer bribe, mortgage modifications, FHA insurance etc. It can only get worse from here the way I see it.
This is also what Bullard said:
"It does seem like our policy in the early part of this decade might have encouraged asset price bubbles, maybe we don't want to do that [again]," he says. "It really hurt us."
spider,
It doesn't matter whether it can "only get worse" what matters is what the timescale for that is relative to renewed real demand for housing in NoVa.
A way way back I looked at the Census housing data for 1997 and 2007. For FFX county there were 14,000 more renters making over 150k per year in 2007 than in 1997. (after adjusting for increased population overall even). That's what we have to contend with. 14k more households with the means for ownership that sat on the sidelines through the bubble years. So far that still well exceeds the total number of foreclosures + pipeline in the county. And the REOs are coming preferentially in the lowest rungs of housing, while these rich renters are coming in the higher rungs of income. That's a lot of very real demand with very little inventory right now to sate it. Some portion of these folks have already bought, but the remainder have presumably had even longer to save up a downpayment.
I'm going to be just like Robert and state all my opinions as facts. This year will be just like last year. Every "move up" home market will be going for even less than the year before, giving those buyers no incentive to jump in yet. Only the well-priced homes will sell, providing more comps like daggers to the hearts of the delusional sellers. Inventory will remain at current levels, which are historically "normal" when compared to anything but the bubble mania recent years. Unemployment will stay very high, and there will be more and more articles about all the college kids living at home unable to secure the high paying jobs they feel entitled to. Every move up buyer who buys in 2010 will be better off than everyone who bought in 2009, but the 2011 buyers will get in even later in the decreasing-to-flat graph and be better off yet.
Jeremy - can't agree more. Everybody said 2008 was the best time to buy..it actually wasn't, 2009 trended lower as expected.
Even if someone agrees we are at a bottom (I don't think we are even close) - prices remain flat for many years after a bubble like this one bursts.
In general, as a rule - home prices don't go up that much, if many many years of history (barring 2002-2006) is an indicator.
Even the most optimistic scenario (unlikely) looks pretty bad to make any housing decision right now with a sane mind.
spider,
How's the rent vs buy comparison where you're looking?
Where I'm buying it's pretty much a wash at current interest rates. That's a lot of why sane people are willing to take the plunge.
I know when interest rates rise, this will no longer be true without prices falling further. But I just wanted to check to see if whereever you're interested in still has rent versus buy as being out of whack in addition to prices not conforming to wage-inflation adjusted norms, or 2.5-3x income or whichever other metrics you are using to determine fundamental value. (if that's what you're doing).
I think this Spring you will see a capitulation from buyers. They will realize that prices simply are not going to go down, so they will give in and buy.
Snagged. Printed. Posted.
You are sitting on a goldmine if this is true. If you have a ready source of buyers whose sole trigger is frustration, you need to print that list out and start hawking it to every emaciated listing agent in the DC metro area. You'll be rich by Christmas, retired by New Years, and blogging from Tahiti by the first week of February.
Otherwise...
Thank Ace.
Frankly MLS, shows Solds in 22305
pretty interesting. The actual SOLD prices at the trough are lower than I thought.
Robert said
More then one poster has made a fool of himself predicting higher interest rates. Perhaps they've even lost some money following their own failed predictions. Of course, they would never admit it here.
You have yet to quote anything where I was wrong. All I have ever said is interest rates will go up in the future and that will have an effect. Everyone here but you agrees that interest rates will go up in the future. Even someone optimstic about housing like Va_Investor is confident interest rates will go up -- recall that she noted the possibility that FHA mortgages will be very valuable because they are assumable and that would be helpful given interest rates are likely to go up.
You sure talk a big game. I wonder what you will be saying when interest rates are at 6%.
As for losing money -- no I have not lost any money over interest rates unless you mean I didn't put all my money into CDs when they were paying 5% in 2007. I don't try to time the CD market, the stock market, or any market. I'm a very conservative investor.
Jeremy said...
"I'm going to be just like Robert and state all my opinions as facts..."
LOL except there are elements of truth to your opinions.
Cara,
Yeah I saw Bullard's quote last night. As I said to spider an interesting test will be the MBS program.
So far the Fed is still saying the program ends in the spring. Next meeting is December 15-16. We'll see if they change their tune.
I'm not sure exactly what Robert's argument is. That we'll see 5% interest rates the rest of my life? We'll see 5% interest rates for the next five years?
tbw,
Given that mortgage rates are flat to down and around 4.83 on average, I doubt they'll change dates in the December meeting unless that trend goes away. I personally don't think 5.2-5.3% is sufficiently higher to trigger disaster (another leg down) in the housing market.
On the other hand, it wouldn't surprise me if they do change the language slightly to imply that the winding down of MBS purchases will be dependent on the continued health of the post-GSE market. (assuming that's not already what it says).
Cara,
Just to be clear I'm not saying there will be some huge disaster the minute the MBS program is over. I'm not a "tsunami" kind of guy. I just think at whatever point the Fed stops the MBS program we'll probably see a long term trend toward higher interest rates. We might only top out at 5.5% in Dec 2010. I have no idea. I do think though that 7% mortgage rates by 2012 or 2013 is certainly not out of the question.
You have to remember this is unprecedented territory. Everyone wants to quote the long flat period from the 90s after the 88-91 bubble. Well, mortgage rates were declining between 91-97. Which means that looking just at monthly mortgage payments homes *got cheaper* during the "long, flat period."
tbw, all,
keep in mind that when the buying public does see rates inching up and does think the end of the epoch of historically abnormally low rates is ending, that should/would/could trigger a buying spree far fiercer than any $8k buyer's bribe ever could.
Just a thought. I could be wrong, but talk about a window of opportunity closing... It's just like the fear of being priced out forever that prevailed during the bubble, except directly in terms of monthly outlay instead of in price. Once it starts waiting that one out as well would be wise... Methinks.
tbw
re: the long slow flat period of decling monthly housing costs,
That's an interesting point, and one that hasn't been put quite that way before. I'd need to mull over that one.
Cara,
Remember also that even with flat (or even slightly up prices) between late 2008-09 that homes have gotten cheaper because the Fed lowered rates from 6% to 4.8-5%. So again just using the housebuyer metric of just looking at monthly mortgage payments and not price of home we have seen decreased prices from 2006 to the present.
Cara, the threat of low rates ending soon has been out there for two years. I can probably dig up a handful of emails from my mortgage broker swearing that if I didn't jump in "now", I'd be stuck with higher rates.
Given that it's an excuse in every NAR commercial we've been hearing since 2002 ("rates are at/near an all time low" etc), I think that the scare factor has done its damage. These sort of behavioral trends can't endure forever.
Cara,
"when the buying public does see rates inching up and does think the end of the epoch of historically abnormally low rates is ending
what would the selling public think?
I've since excluded all external factors (barring early lease termination by landlord) in my buying decision and will be buying on my own schedule, pretty much like what you've done I'd say.
mm,
That's true. The selling public may likewise think it's the last opportunity to get out while the going's good. Which could play out really badly in terms of inventory for those who wait it out...
Yeah, to heck with the Fed and the bubble's timelines. Buy when it's right for you. Prices aren't that bad.
Cara said...
"Yeah, to heck with the Fed and the bubble's timelines. Buy when it's right for you. Prices aren't that bad."
Where you are looking, and at your price point.
jeremy,
very true.
@J@, you're welcome. Franklymls.com is amazingly useful - and addictive for some of us!
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