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Tuesday, February 16, 2010
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61 comments:
WSJ Article: "Foreclosures Seen Still Hitting Prices."
"More waves of foreclosures will keep downward pressure on home prices in parts of the U.S. over the next several years, two new studies project.
"The studies—by John Burns Real Estate Consulting Inc. and Standard & Poor's Financial Services LLC—both conclude that most efforts to modify loans with easier terms will delay, not prevent, the loss of homes to foreclosure.
"The John Burns study estimates that five million houses and condominiums on which mortgages are now delinquent will go through foreclosure or related procedures that put them on the market over the next few years. That would represent the bulk of the estimated 7.7 million households behind on their mortgage payments.
"This 'shadow inventory' of homes expected to hit the market is enough to last about 10 months, based on the average sales rate over the past decade, the Irvine, Calif., firm says.
"The problem is largely concentrated in Arizona, California, Florida and Nevada. The shadow inventory is equivalent to 27 months of sales in Orlando, 24 months in Miami and 18 months in Las Vegas, the study estimates."
"Over the past nine months, home prices as measured by the S&P/Case-Shiller index have increased modestly after a three-year plunge. That is largely because efforts to avert foreclosures have slowed the flow of foreclosed homes onto the market, temporarily constricting supply."
WaPo Article: "U.S. looks to reluctant foreign investors to help fund the housing market."
"The Federal Reserve is scheduled at the end of March to halt its purchases of mortgage-backed securities, a move that could drive up the low interest rates that have helped the housing market show new signs of life. The Fed is gambling that private investors will step in to buy the securities, helping to keep rates from spiking. Senior officials in the Obama administration and at the Fed say they are counting in part on foreigners to keep the housing market funded."
"If funding evaporates in the absence of federal support, that would mean higher interest rates -- making purchases more difficult for buyers and payments more expensive for those with adjustable-rate loans.
"But some financial analysts said U.S. officials consider a healthy housing market so vital to an economic recovery that they would roll out new policies to keep mortgage rates low if sovereign wealth funds and other private investors fail to step in with enough funding."
http://www.washingtonpost.com/wp-dyn/content/article/2010/02/15/AR2010021503143_2.html?hpid=topnews
when are the new 'spring bounce' listings going to hit MLS? Thursday? i'm sick and tired of what's on the market for weeks.
MM, I've noticed a bunch of new sub $400k homes in Nauck area of Arlington recently enter the market. Instead of only 3 or 4 in that range there are now about 10.
Hopefully there will be more to come!
i saw a bunch of inventory come out right in the first of the year,
i expect the banks to start
writing down hard, on RRE because
they are getting screwed on CRE soon.
What is RRE and CRE?
Thanks!
Wunderbar-
RRE=Residential Real Estate (basically houses)
CRE=Commercial Real Estate (Offices/Malls...)
MM,
I'm with you - nothing good (in my price range) has hit the N. Arlington market in weeks. If it wasn't for the snow, I think we'd have alot more listings.
I am pretty sure that the cyclical inventory doesn't normally show up for another month or two. I am sure you are right that snow has kept some inventory off the market, but I think the summer season also has a little more time before it starts.
My wife and I started looking at houses in earnest this weekend. Not because I think we're really ready, but because it's a necessary step in the process.
I am absolutely stunned by the pace!
We went to an open house and drove by a foreclosure to peek in the windows on Saturday. Both are now under contract.
Admittedly, we're looking for a property in the PWC wheelhouse price range, so I knew there would be high turnover. I picked out a dozen properties to view if our agent was available. She wasn't, and by the weekend a quarter of them were gone, so we looked at the two we did.
It is officially Spring, people!
Xpovos-
Wow that is interesting news. I think it really shows how much location/price have to do with speed. The pace is still very slow where I am looking.
What you are talking about reminds me of when I first started looking. I had been keeping track of interesting properties for Jan-March 2009 and none had gone under contract for this whole period I got an agent and looked at a half dozen properties in mid March and next thing I knew they were all under contract that weekend.
some financial analysts said U.S. officials consider a healthy housing market so vital to an economic recovery that they would roll out new policies to keep mortgage rates low
Those moronic financial analysts need to realize that correlation does not equal causation.
Just saw an example of the elusive "shadow inventory" in an unexpected article on cnn money about tax law stimulus efforts.
Lost money? Score a whopping tax refund
Without the IRS refund, Hewitt's firm would have been forced to unload assets -- commercial and residential buildings, in his case -- at fire-sale prices to free up cash. The refund gives him enough of a cushion to wait the market out a bit longer.
No point, just thought it was interesting.
The rich really are insulated from this recession:
Calculated Risk
Labor utiliization as a function of household income.
So if you're waiting for those job-loss-related foreclosures in the hyper expensive areas, you'll be waiting a long time. Yes, people will still need to move for work and end up underwater, but that's about it.
I pointed out this home a few weeks ago:
http://www.redfin.com/VA/Arlington/4405-8th-St-S-22204/home/11261064
Ask is $685k for a 3 bdrm/2.5 bath in S. Arlington. 2010 Tax assessment is $499k.
It went under contract last night - I'll be curious to see what the new owners end up paying for it. I think it is overpriced, even with the addition.
Jeremy,
If your wife commutes at 6 AM then she could almost live anywhere in Fairfax County and have a decent commute. And I forgot that she had ties to the Oakton area.
I will just add (not for you but for anyone wondering if they could get something like Oakton in the City of Fairfax) that there are some pretty scenic places in the City of Fairfax. Here are two -- both have large lots (0.69 acre and 0.48 acre)
http://franklymls.com/FX7211240
http://franklymls.com/FX7129138
One plus the City of Fairfax has is lower property taxes than Fairfax County which is different than one minus of being in the Town of Vienna or Town of Herndon where you pay even more in property taxes. I'm not sure how Fairfax City does it but I would guess it is because they piggybacked on Fairfax County's schools and library system (as opposed to Falls Church which does their own for each.)
However, note that these are pretty much by the Fairfax County Parkway so I would not view these as equivalent commutes for you as the Mantua area would likely be.
I would be very tempted by some of those western Fairfax City homes if our area had invested more in mass transit and the Orange Line had been further expanded west. Of course if there was an Orange Line stop at 66 and Ffx Co Pkwy or 66 and/or 66 and 50 these homes would cost more.
It would only be fair to have the Orange Line go out to 66/Rt 28 in Centreville. That is an equivalent distance from downtown DC as Shady Grove is. It's only because VA developed later than MD that we got less rail.
dc2 - this is me whining :)
Do you think they ever would expand the orange line, or are thoughts in the works? Are they just focusing on "silver line" though?
tbw,
I'd argue it's more about taxes, and local ideology bases than development timeframe. But I'm not old enough to say specifically.
Whatever the reason, the facts are pretty clear, VA has gotten the metro shaft. VRE makes up for some of it, but not enough.
Jewel et al,
I blame it on the snow. It's hard to sell an overpriced property with 2 feet of brown snow on unplowed streets and another 2 on the deadbeat neighbors' side walk.
sehrwunderbar,
Fairfax County definitely has Orange Line expansion in the plans. They include it in Tysons Corner planning (I suppose under the theory some will take the Orange Line from Centreville to WFC; transfer to the Silver Line). Rep. Connolly has sought federal funds for studying it.
I think it's definitely going to happen just not any time soon. So it will not help out people Jeremy, housebuyer, spider, kevin, or my age but I think it might be a reality or almost a reality when those born 1993+ are looking at SFH.
Or to be fair I think for a lot of us it might be around when we are in our 40s. But that would mean probably a 10-15 year period in a house in western Fairfax County with a 15-20 minute commute to the Vienna Metro station. So I think eventually relief would come in our working lifetime and a substantial portion thereof.
I do think we are fortunate to have the Wiehle Avenue stop opening up relatively soon. That makes a lot of Oakton and Reston much more appetizing for those of working in DC.
"MM said...
when are the new 'spring bounce' listings going to hit MLS? Thursday? i'm sick and tired of what's on the market for weeks."
Dont worry MM -- in case you havent heard, spider told us last November there would be a STAMPEDE of inventory in Jan 2010.
http://www.virginiamls.com/charts/index.htm
Please ignore the fact that there are 5,689 units available NOVAwide as of today, down from the 6,300 units available when Spider told us about the hallowed STAMPEDE last Nov.
Ignore too that inventory rose a measly 3.7% from 1/1/2010 til todays date. Ignore too that inventory rose 22% during the same timeperiod (1/1/06 -- 2/16/06) when there really was a stampede back in the early going.
Ignore all that cuz if Spider says there will be a stampede, there will be a stampede...any day now...
Wunderbar-
I agree with TBW I expect they will expand the orange line at some point, but it will probably take 10+ years before they agree to do this and then 5-10 years to actually complete it. They have shown many times with the silver line that they have little interest in getting things done quickly.
They will also need way more orange line trains when they do this. The rush hour trains are already full by the time they get to WFC. I can only imagine what adding an additional 5-10 stops would do to this, if they didn't get way more trains.
Cara-
Am I missing something or is this just telling me that if I make a lot of money its because I have a job, and if I don't make a lot of money it may be because I don't have a job.
It sounds like they are using current income vs. current unemployment. It would have been much better if they looked at income from a couple of years ago vs. current unemployment. I am sure the results still hold, but are not as stark.
housebuyer,
I didn't read the whole paper to see how this was treated, just the CR entry which didn't specify as far as I can tell.
Cara-
I skimmed the article and it didn't say, which is what led me to believe it was current income. I would think they would have said what year it was unless it was the current year. It also strengthens there argument by using current year incomes.
expanding/extending metro doesn't make sense to me. if we're talkinga bout 15-yr timeframe, then sprawling local lightrail network connecting to main commuter rail hubs makes more sense.
housebuyer,
I would have assumed the previous tax year would have been the most reliable source.
Who knows what can and can't get through peer review in their field. I personally would avoid anything that would inherently make the result "stronger". Kinda defeats the purpose of doing the study. But it's not my field so I can't speak to what their standards of evidence are or are not.
Cara-
Nevermind I am an idiot, I read one of the responses not the actual article. The actual article says the methodology uses 2008 earnings. Although this still has the same problem. Seeing that the average unemployed person has been unemployed 30 weeks or something like that using 2008 earnings is probably not as good as using 2007 earnings, but it is MUCH better than using 2009 earnings.
MM-
That would make more sense, but it would be more intrusive on more neighborhoods, because you would need to create more rails. The over/under fight in Tysons shows that neighborhoods will fight to make sure rail does not get to close to their houses. So I find it unlikely we could succeed in creating a system like you want.
Cara et al.,
I don't think the paper has yet been published in a peer-reviewed journal, has it? The cover page said only that it was prepared for the Mott Foundation.
Ace,
I don't think it has. But one would still expect the weight of public scrutiny would move the authors to bias their work towards smaller but defensible results rather than clearly tainted ones. Otherwise, why bother?
(unless one has a clear agenda, in which case all bets are off anyway)
Jewel,
I'm guessing just under $615K. But I'm usually $50K from market reality.
What's your guess?
housebuyer,
I used to live in Jersey and commute to Manhattan with 20M fellow riders everyday. It wouldn't have been possible without NJ Transit and Path. But perhaps I'm seeing this rail issue through that tunnel vision. After all DC is about 1/10 (?) the size of Manhattan and NY Subway goes to all five boroughs and LIRR serves more specific needs/customers.
Cara,
My point was just that the article may not hold up to peer-reviewed scrutiny. There are many examples where the media go crazy over findings without a good enough basis. I don't mean to criticize the authors - I've only glanced at the study and it isn't my field either - I'm just saying that those of you who take issue with the design may be right and that reviewers will catch it later.
RE: Snow and new listings
What I want to know is, who managed to put an offer in on the house up the street from me, when that section of the street has been an impassable ice-sheet for over a week now?
One assumes they looked at it before the storm hit... but maybe they were the ones in the truck that got stuck near the house on Superbowl Sunday. Maybe the fleet of helpful neighbors coming to their aid sold the house...
But if things are going under contract in less than 14 days in this weather... what's going to happen once the side-roads are passable? Or should I be asking, what's going to happen when the MBS purchases stop and the buyer incentives go away? If the sales pace keeps up this way, prices will be another 2-5% higher by the time that rolls around.
MM,
I think a fair price for that house based on what I've seen is about $625k - Alittle less than 10% off of list.
My auction date is steadily approaching... Very nervous/excited. Will report back what happens. The auction has not been cancelled... yet.
Cara et al,
Why are we calling this "low inventory"? From Harriet's numbers for active listings in Fairfax County:
Jan 2008 7,076
Jan 2009 5,771
Jan 2007 5,252
Jan 2006 4,458
Jan 2010 4,235
Jan 1999 4,161
Jan 2003 2,764
Jan 2000 2,430
Jan 2002 1,861
Jan 2001 1,798
Jan 2004 1,608
Jan 2005 874
TBW,
I'm not personally calling it low inventory, I'm just saying that the inventory that is available is no good ;-)
It seems like the number of new listings in recent weeks has really dropped off.
Jewel,
In a relatively neutral market between buyers and sellers like May 1999 we saw 4,704 active listings in Fairfax County. So January 2010 had peak buying season type inventory in the middle of winter.
Jewel,
have you tried calling the trustee to see if they'd share any additional info with you?
good luck, and don't be late. :)
i have a feeling investors are not buying properties like it - there's no room to flip or tear down, and too expensive for a rental. if it does go to auction you might be bidding against other potential owner-occupants.
TBW,
What point are you trying to make?
Your own numbers show that Jan of 2010 is not even 2% higher than Jan of 1999. What are you trying to show by comparing Jan 2010 to May 1999?
My $0.02
MM,
I tried calling the trustee several times, but they don't answer their phones. I'm going to try emailing them next.
And I learned my lesson, won't be late time time around :)
When I was at the trustee sale last time, everyone struck me as investor types who were looking for very good deals.
Jewel,
That's my point. It could be just you and me bidding. j/k.
MM,
Just talked to someone from the trustee law firm - to paraphrase, they will not provide any information whatsoever beyond whats in the trustee sale ad.
Oh well, it was worth a shot...
Jewel, MM,
I have some phone numbers that are answered. These are not the numbers posted in the paper.
Does the ad have a specific deposit or say 10% of sales price. I always got cashier's checks payable to myself so I could easily redeposit them or keep them in a folder for future use.
I usually got 3 or 4 in different amounts; ex., 30K, 20K, 10K, 5K.
It used to be that there was little competition over 500K. This may have changed over the past 8 yrs. I had only one guy going up against me on my house, but he took me up 65K.
TBW:
The People of Fairfax behaved like the Geogetowners as regards the Orange line.
When 66 was built there was specific room left for additional metro rail down the center, but the Reagan Administration slashed funding for Mass Transit and the Fairfax residents used that space to add lanes.
now to add metro, you need to sacrifice 2 lanes each way for the duration of construction and 1 lane at least permanently.
it would have been nice to run the Orange line out at least as far as 28 and then loop up to Dulles, but now with no plan i'm not sure if it could be done.
it took 30 years to get Metro through Tysons, it may take 30 years to do this on the orange line.
Georgetown has been crying for years about traffic and they hosed them selves.
mytwocents,
The point is that inventory is not currently low. It's lower than the incredibly high inventory of recent years but still way above the bubble years.
We would need more data to determine at what inventory level price gains happen but eyeballing it from these charts the price gains Cara talked about (2-5% annual gain) seem 2000-ish and I think we are still a thousand or two thousand active listings above where we see such price gains on average in Fairfax.
and on a side note Jan 1999 was a little fluke-y. If you do the Dec numbers you get this:
Dec 2007 6,915
Dec 2008 5,967
Dec 2006 5,420
Dec 2005 4,218
Dec 2009 4,024
Dec 2002 2,489
Dec 1999 2,315
Dec 2001 2,134
Dec 2003 1,552
Dec 2000 1,530
Dec 1998 1,304
Dec 2004 1,227
Seems clear to me we are still dealing with above-average levels of inventory.
Jewel said
"If it wasn't for the snow, I think we'd have alot more listings."
According to my realtor, buyer interest picks up after Christmas but the increased inventory traditionally does not start hitting the market until the weather gets warmer and stays that way.
and of course buyers (aka sales) makes a huge difference. The ratio is what really matters. Here is where we are:
Dec 2007 8.21
Dec 2008 5.19
Dec 2006 4.43
Dec 2009 4.02
Dec 2005 2.60
Dec 1999 1.71
Dec 2002 1.38
Dec 2001 1.28
Dec 2000 1.06
Dec 2003 0.77
Dec 2004 0.58
So the bulls have a right to be happy the numbers are getting better but we are still a far way away from a seller's market.
pat,
I was talking about why in the 1960s there was a shorter Orange Line designed than the Red Line. Montgomery County's development was farther along in the 1960s than Fairfax County's. So it made sense to build all the way out to Shady Grove whereas it would not have made any sense to build all the way out to Centreville unless you were very, very, very forward thinking.
I don't know all the details about what land VDOT has but if you look at I-66 between Rte 28 and Nutley Street many parts already have a median and all of it has room to expand if need be. Even in Arlington VDOT has space for expansion without needing eminent domain.
It's solely a funding issue.
TBW
In the 60's the state of Maryland was
interested in Metro, and particularly
MoCo.
You are right that Rockville was more developed then any other location in Fairfax but that reflected values.
MoCo was pushing urban neighborhoods.
And while there is median on parts of 66, that's not enough to put a metro in.
It looks like the contemporary in Vienna that Jeremy looked at over the weekend is already under contract (within a week of its listing). Some might consider that a sign of a seller's market in at least some segments of the NoVa RE market.
pat,
http://virginiadot.org/projects/studynova-rt66.asp
This has been studied ad nauseum. I've never read an article that implies VDOT/WMATA lacks the capability to extend the Orange Line to Centreville.
It was not a "values" issue or Maryland vs. Virginia thing. Look at the Metro map. The western Red Line extends the farthest beyond the Beltway. The right edge of the Red line not as far and then the Orange, Blue, and Yellow Line ends in Virginia. But the lines that end in Prince George's County almost all end at the Beltway. This is because Prince George's County was later with its development just like Fairfax County.
TBW
MoCo also paid for metro extension
as I recall, in the 80's MoCo was paying which is why the line runs
up to Shady Grove, and not as
far out elsewhere.
if i recall properly, the deal was the state/County was supposed to pay 25%, MoCo fronted the 25%, which is
why the line ran up to rockville.
Mozart said...
It looks like the contemporary in Vienna that Jeremy looked at over the weekend is already under contract
I'm not going to lie, I'm really surprised at this. I guess the staging (the tv's were fake and closets/cabinets were all empty), creaky pergo, and cheap new carpet impressed somebody. I will make sure to check back to see the final price, although to sell so quickly they must have gotten near list.
tbw,
It's because you're looking at the MRIS numbers which is the total actives over the whole month not the current actives again. Do we need to rehash that, or can you recall the arguments?
The point is look at this graph for actual actives at any given time:
active today
We are now sliding down to where we were in the summers of 03 and 04. Those were the inventory numbers in the middle of a frenzy. SFHs are going under contract in 14 days in January in the middle of a snowstorm. That's not normal.
If you want to do your comparison you'll need to correct the inventory for population increases. From 2004 I think we can agree that it's close to negligible, but at some point it does kick in.
There are two things one can discuss about inventory. The absolute overhang that we saw back in 06, or the inventory of homes priced "well". In 06 there were essentially no well-priced homes, that's why they weren't selling. Now, there's a goodly chunk that buyers and sellers are agreeing are a reasonable price. The fact that those are still in January going under contract in 5-20 days means there are buyers waiting in the wings for each new listing as it comes out. That's low inventory.
Now, if the prices that you think will eventually happen, or that you can live with, haven't happened yet, then concievably there's still "zero" real inventory, and you can then discuss the whole available inventory as if it were overhang. The fact that we're now, in January, above the summer inventories in 03 and 04 should indeed give you some hope. But until and unless there's an upswing in available inventory this spring I wouldn't start cheering yet. The trend is still down. It is winter, so that's to be expected. And it will turn sometime, all things do. But at this point, I think when it does turn it will be marking the new "normal" bottom level inventory that we'll see for the next 3-4 years of the flat period, assuming we get a flat period.
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