Thursday, June 10, 2010
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29 comments:
Nothing surprising in the overall chart. Sales and prices are up almost across the board in the inner counties.
The monthly reports are also available.
NVAR reports
Things of semi-note in the FFX cnty data:
1) June will be the start of much tougher YoY comparisons in case anyone doesn't remember that that's about when median prices started being around their current levels.
2) Pendings are down, gee really? condo, TH, and SFH are all almost at February pending levels.
3) Take a gander at the dramatic change in the distribution of SFH sales. Despite the tax credit which one would have expected to goose sales under $400k preferentially, all categories under $500k are down YoY, but all those above that point are up. The move-up market has awakened and the days of pure domination by first-time buyers in one-and-done transactions is fading (for now, it could resume if shorts and foreclosures ramp up). The $800k to $900k could still be small number statistics, but most people can't move up from a $300k house to an $800k house, and it's the $500-$600k bucket that saw the most dramatic YoY increase (with NO difference in the number of listings).
Some of you old-timers may remember this now-sold authentic Craftsman house when it was on the market previously.
http://franklymls.com/AR7327339
Notice the price history. And, bear in mind that a developer bought it mid-stream and did work on it. The developer also subdivided the lot and slapped up a McMansion on it. But even taking the latter into account, it's an interesting transition from delusion into reality.
cara -
Good to still see you here..you should stick around till I buy....
All,
What price difference one would assign to unfinished basement vs finished?
Spider-
To me, a finished basement is approx. worth 50K
But it depends on how decked out you get, of course...!
spider,
Just for the big numbers days each month.
Interesting...50k. I was thinking more like 25k or so. Thanks though.
What do you mean by decked out?
spider,
basements,
I would look neighborhood by neighborhood for that. In my neighborhood the premium seems to be no more than $8k-$15k for simply having put up drywall and put down padding and carpet, which is not very different than the cost to do it yourself. Not everyone likes fully finished basements, and especially in older houses I think more buyers are thinking about the possibilities of a wet basement, which seems to get ignored in new housing developments where you could get a much higher premium for a finished basement.
So, I'd give it at between 75% and 125% of the cost of the renovations themselves, depending on the neighborhood.
Spider-
I assume by decked out Spunky is talking about things like a nice full bath, good lighting (perhaps recessed lighting), good flooring not just cheap carpet...Although it is just the basement there is a big difference between what Cara was talking about (carpet/drywall) and making the space really nice.
hb,
Yup. Things like adding a bathroom, or finishing it in such a way that there's another legitimate bedroom, have their own costs/return. Hence my uselessly large 75% to 125% of costs range for what the added price is, which should apply regardless of how much was done.
But I do think that's the right basis to be thinking from. How much did it cost to do whatever was done, and then what fraction of that do you as a buyer have to pay for. Over 100% for recently well done in neighborhoods where move-in ready is an expectation, under 100% for finished but lived-in and enjoyed (with unknowns behind that drywall, under the freshly cleaned carpet).
I received a flyer from a Realtor I wasn't familiar with today. I found one of his statements interesting (re: Arlington, primarily):
"The housing market for homes priced less than $1M is going through a transition this spring. Inventory is still abnormally thin because many homeowners simply can't afford to sell. They owe more on their mortgages than the market is likely to pay them for their home if they sell it. For those homeowners lucky enough not to be in this position, the market is good. That is, if priced right the home can sell in less than 2 weeks and many times with multiple offers."
We've talked a lot about what the inventory levels mean. I don't think I have seen this point of view expressed previously though.
Cara-
I agree with your comments I was just trying to take a guess at how you could get to 50k and what a decked out basement means.
Ace-
That is interesting perspective. It normally does not get brought up, because many people (myself included) are sick of trying to convince some people on the board that Arlington prices have actually fallen. I would not be surprised if many people who bought between 2005-now are trapped, which for a young growing city is probably a pretty large percentage of the buyers.
housebuyer,
I agree.
As just one anecdote (but the assessor's #s provide similar evidence), the house behind mine sold for ~$840K during that time frame. Houses of similar size, features, location and (very well updated) condition are currently selling for about $730-$750K. It's not the same decline in every neighborhood, but you'll see similar (or larger) percentages in some of the best neighborhoods as well as some of the less desirable ones.
Ace-
So although percentage wise going from 840 to 730-750 is only only 10-15% (much better than most areas around here). I would not be surprised if a lot of people who bought near peak put little down and they do not have the 200-300k+ needed to pay off their mortgage, pay realtor fees, and still have a 10% down payment for their next house.
i'm still firmly anti-Realtor so take this with a grain of salt:
i agree the 'spirit' of what he says, but
"...because many homeowners simply can't afford to sell. They owe more on their mortgages than the market is likely to pay them for their home if they sell it..."
does not seem to be true from what i gathered. in N Arl, i'd argue, very few home owners are underwater as prices have been mostly flat since '06/'07 peak. the only likely road to negative equity is HELOC, but by '07/'08 HELOC was thing of the past.
my take is, most newer N Arl home owners don't want to sell because they can't climb up the housing ladder due to flat market, and are content with staying in their homes. it'll take years to build up enough equity unless the high-end market crashes - which is not gonna happen after seeing data of last few months.
HB, yes, that's one way of looking at it. Another is simply that the loss is the same regardless of the amount one puts down on the same house. Someone who puts down $200K on an $800K house and then would like to move, is going to lose 6% of the selling price, plus the other transaction costs (maybe 3-4%), plus moving costs, plus the $80K or so of the price decline. That down payment could have instead gone for many other things. It's a real loss.
Selling and losing 10% of an $1 mill. house's value means a loss of a lot more dollars than losing even 30% of a $200K house, for example. The first owner may or may not be better about to "afford" to lose it, but the dollar loss is greater, so if the $800K owner does not HAVE to move, why would s/he give up that money?
So I don't know if the Realtor has the numbers (I'll bet he has some anecdotes) but it makes sense to me, and might explain why prices appear to be holding steady even if inventory is "low."
MM, look at the assessor numbers for Arlington (even in many 22207 neighborhoods) and you will see a lot of drops of 10%.
Congress Considers Tax-Credit Extension for Some Home Buyers
"On Thursday, Senate Majority Leader Harry Reid (D., Nev.) said he would back a measure to extend the June 30 closing date to Sept. 30 for buyers who had met the April contract deadline."
""Everybody who got under contract at the end of April deserves to get the tax credit," says Stephen Adamo, president of Weichert Financial Services, a division of real-estate brokerage Weichert Realtors. "For reasons out of their control, they're in jeopardy of losing it.""
"That is causing heartburn for buyers like Alan Nickelson..."
Boo-hoo. If you bought a house just for the tax credit, then you're a dumb*ass.
MM said...
i'm still firmly anti-Realtor
I'm pretty sure that is an irreversible position. They are reprehensible sales people and rarely offer any worthwhile insight.
Ace hits the nail on the head!
No distress, no sale, no inventory.
Why on earth would someone run out and sell their house just because the value fell?
obviously, this does not include "forced" sales.
HB, Cara - now that makes more sense in terms of how you arrived yet 50k.
Va investor said - "Why on earth would someone run out and sell their house just because the value fell?"
They will once they know value is going to fall further...better cut your losses.
Ace,
Jeff Royce makes a similar point on his blog http://ourfairfax.com/
"It’s interesting to note that the break even mark for sellers is about a year and a half behind us. People who have bought in the last year and a half are above water and people who bought the several years before that have lost money on their homes. As prices rise and time passes, more and more owners will have the ability to sell without losing money, which will encourage more inventory on the market. Currently, most owners who bought or cashed out on a refinance from 2004-2008 and want to sell now, either need the cash to cover their losses or are short selling their houses. Many people see neither of those as good options, so are staying in their homes to wait out the market."
Yes, a major difference is that your realtor in question is making this point in Arlington not Fairfax City/County. And Jeff's not pushing the, "if you want to sell you can sell it in a couple weeks!" angle.
But homeowners needing to take a loss in order to sell is, and has always been the logic behind the "long slow flat period" and price stickiness in general. It's why I was worried about an extended period of low selection once the bottom did set in. (although I didn't translate that into a higher bottom at the time).
Why that realtor specified that price range in particular and if that has any validity or grounding in what's happening is another question. But it's a plausible price range for things that you could have easily gotten an 80/10/10 loan on during the bubble, as opposed to practically requiring a whole previous house worth of skin to buy. And an 80/10/10 with transaction costs is still going to mean money out of your pocket with even a 5% loss.
(The gain from the previous house may have been bubble driven, and some owners may be able to be philosophical about that, but they're still real losses if you sell.)
spider,
Cut your losses and go where? Do you plan to uproot the kids and move when you can afford your house payment? Are you bringing money to the table or is this a "strategic default"?
Is rent less than your mortgage? Is it worth it to wreck your credit on the possibility of further declines? Lose your security clearance or the chance of a new job?
You do realize that once your house is paid for it won't matter what the initial cost was. Do you want to lose a 5% interest rate?
If you take the loss and rent for less, where do you invest your "savings"?
Have you considered the possibility that you are selling at the worst time in 20 yrs?
Up, down, flat - home is home. My loan has about 8 yrs until payoff. I could take my equity and move in a heartbeat, but there is no way I would unless I found an absolute steal hundreds of thousand under market. Even then I doubt I'd move. I did that 8yrs ago and have no desire to move again for at least 10yrs.
As for the rentals, I could take my equity (and do what with it?). My tenants are buying houses for me.
Novahog,
WaPo's coverage of the same bill.
Gah!!! Sept 30th to close? What on earth are they thinking? Do they want to shut down the housing market for the entire summer? Have they not noticed that sellers could use some of those buyers coming back into the open market?
July 30th I could vaguely understand, but Sept 30th is purely for short sales, which have no guaruntee of happening by then either. Why extend false hope?
Freaking twits. With mortgage applications down this far you'd think brokers/banks should have plenty of time on their hands to get through the backlog in time.
Gah. As if all these contracts didn't have clauses to deal with what happens if the close isn't in time for the buyer to get their government cheese. Yeah, right. Betcha if this passes there will be a lot of closings in July where the buyer gets both $8k from the Fed and an additional $8k off the purchase price or towards closing costs...
(please let sanity reign and this die)
Cara-
I am a little surprised that Jeff thinks that people who bought in the last 18 months can sell. Sure in some of the really beaten down markets (less expensive/foreclosed houses) this is true, but as a whole prices are only up a couple of percent from the bottom according to CS so by the time you factor the cost of moving and Realtor fees they would need to bring a pretty substantial amount of money to the table. I guess it doesn't matter much, because usually people aren't moving 1 year after they bought anyways, but I still find it interesting that Jeff thinks they could if they wanted too.
Cara-
I also don't think the new bill will matter much. If I read it correctly the people needed to be under contract by April 30, but instead of being given two months to close they will get 4 months. But this shouldn't impact any buyers/sellers that are not already under contract. My guess is that a bunch of people tried to get short sales, but didn't realize they take several months to close.
hb,
Jeff works in the really beaten down markets. There were a heck of a lot of homes in my neighborhood that sold for the $350's last year that can easily get close to $400k this year. Yes, they are mostly foolishly asking $450k, but that's not the point. Prices may not be up enough to cover closing costs in every neighborhood out here, but it's close. The bump up that happened starting last summer has not been erased, and in some sub-divisions has continued to grow slightly.
A funny thing I have noticed? Buyers are less willing to pay top dollar to someone who bought in 2009 for a low price than they are to someone who bought earlier. They know how much leeway a seller has and want and sometimes successfully get some of last year's discount.
Take this sale for instance:
http://franklymls.com/FX7269655
close: $342k 6/10/2010
last close was an REO: $365k 6/19/2008
It's all wierd. (something very strange is happening with the split-foyers anyway, the current discount for them is way high... but we'll have to see what happens to those under contract)
This is not the case for all of NoVa, but it is definitely the case for Burke/Springfield/Fairfax City.
Of course it's all a bit moot, since who buys a home and then sells it again within a year?? Other than flippers.
As for extending the credit the reason I think it could have an impact is that when I was predicting that pendings would return in June/July, I was counting on 20-30% of the pendings in April falling through and those buyers re-appearing. The "sellers" however may go back to the sidelines, discouraged, have gotten a loan mod in the interim that negates the need for a short sale, or now be so thoroughly in the foreclosure process such that the home won't appear again for months.
Some of that will still happen regardless of the extension.
Cara, thanks, it's interesting that Jeff has said something similar. I wonder if that opinion is shared by quite a few Realtors. Re: the two weeks, I don't interpret that he's pushing that--he's just stating a fact; that's what I have seen happening also. If sellers are willing to set the price low enough, houses have been going quickly around Arl. for maybe 6 months.
That's a good point also about flat prices--due to transaction costs, even many people who bought pre-peak and post-peak will lose money, as will many of those who put more $ into their houses post-sale, and will those who buy now if the prices remain flat for awhile.
There may be two definitions of "under water", or maybe we need another shorthand expression. One is that the owner owes more than his/her house is worth. We need a new short term to refer to the owner has more invested in the house than s/he could sell it for.
The people who put down more may be more *able* to close and move (if they had more $ in the first place than the high borrowing counterparts) but there's no reason why they would be any more *willing* to lose that same amount of money.
Good question also about why he picked the range he did. It may be something very simple--a nice round number. And months of inventory in the >$1 range has been relatively high for quite some time in most zip codes, for several reasons, including the one you gave, and others we've discussed here.
Cara, very good points about that new bill.
Ace,
I nominate "break-even". Where "break-even" could mean (a) you can sell for the same price you paid, (b) you can sell for enough more than you paid to cover transaction costs, or (c) you can recover your downpayment but not necessarily any principal payments you've made in the interim which may need to go to the transaction costs.
So, underwater would mean literally that the mortgage amount owed is greater than the potential sale price of the house, but not being at or above break-even is just relative to the purchase price. (If you paid all cash, then to be fair you should use the lack of a rent payment to offset the transaction costs).
Now those definitions of "break-even" are different things and different price points. Some people will hold out for (b) till the cows come home, insisting on keeping all their paid-down equity. But these varying definitions also allow flexibility for people to be able to rationalize their choice to move on, and justify it to themselves that they didn't lose any money. (even if the net costs on their mortgage was way bigger than rent)
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