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"The 330 thousand [new home sales] in June is the worst June on record. With all the gyrations, it is difficult to see what is happening month to month, but overall this was a very weak report".
Monday, July 26, 2010
Northern Virginia Bits Bucket 7/26/2010
Posted by Harriet at 6:00 AM
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19 comments:
Just a CR post that I think deserves to be unburied:
Calculated Risk
Existing home sales and inventory as a percentage of owner-occupied housing.
Obviously this is national, so interpret this to the local area at your own discretion and peril. But I still think it's a very interesting graph. You can read annualized MOI of it visually, from 1993 to 2005 under 6 months, now, looks about 8ish. I would interpret CR's point to be that sales are still historically high under this metric, so expecting more sales to accompany any recovery or stability in price is not a given.
But I think it mostly reflects the necessary turnover of homes from those who bought them at prices they couldn't afford to those who can afford them now (or soon) at the current market price at the time. The "normal" market doesn't include this turnover as a large chunk of the sales.
It's unfair because some of the bubble buyers could have afforded today's prices if they had been available, and I guess that's the point of the people calling for principal reductions. Thus some of this turnover is "uneccesary" if the banks/investors are willing to take their losses without the house changing hands. But it is what it is.
Cara-
I agree it is not clear that housing sales will increase when the bubble is done with. Although assuming they go back to the average since the 70s is not clear either. The population has gone up over 50% since the 70s and the number of households has increased even faster seeing that family size has been decreasing over time. I would also think that we are more mobile now than our parents and grandparents were, which could also increase sales (I have no data to prove this).
Either way I think there are a lot of reasons why housing sales may/should increase in the future, although I do agree its not clear they have to.
hb,
Given that it's as a percentage of occupied housing units, only a greater mobility would explain it, not an increasing population (unless I'm having another fuzzy math morning, which is possible).
Cara-
I was mostly looking at the first chart not the second. Apparently I am still in weekend mode.
Also it is possible the number of owner occupied houses will increase quickly when housing rebounds. There were a lot of buildings planned for condos that became apartments when the housing market fell apart. It is possible these become condos in the future, which would increase the number of owner occupied houses quicker than expected. Although this is very minor and I think the mobility issue is far more important.
you assume condos will finance.
right now it's very hard to finance condos.
which is good, because they are bad investments.
Pat-
At the right price they will finance. I am not saying I expect this to happen soon. Instead I think this will happen when the housing market is healthier 5+ years from now
Pat,
I agree with you that condo's are not the best investment. But they are very easy to manage and if the cash-flow is there, I'll take them at 50%+ off peak. I think that some in good locales will turn out to be good investments.
I'm finding the rental market quite hot. This reminds me of the '90's. Flat purchase prices, but a great rental market.
I like the fact that there is very little new construction and believe Contrarian has wrong data about the percentage of retiree's who "age in place".
Calculated risk says housing prices have fallen 4.6%-6.8% since the end of the housing credit. They site some survey, so who knows if that will happen locally, but I think it likely will. We should find out by the end of the year. If so this should quickly undo all of the gains we saw related to the credit. I think prices will continue to fall after this, but it will be at a much slower rate. Maybe by the time I end up buying I will actually like the house I get for the money :)
"va investor said - Flat purchase prices, but a great rental market."
Flat?? We will see...
Do you think rental income outweigh the likely decline? I don't think so. Rentals are coming back for sale slowly but surely, as people realize it ain't getting any better.
cheryl
condo's can make good investments for
outside investors who want cash flow
but they usually make lousy investors for homeowners.
investors buy when they are cheap,
homeowners buy when the market is rising,
i'm seeing more investors trying to rent out their properties,
i think aftter 2-3 years of misery as a small landlord they will be tempted to cut their losses.
spider,
I should have qualified my prediction as it mostly applies to the lower end. I have an opinion about this Market because most developments I follow have minimal inventory which seems to fly off the shelf.
As for rentals in the lower end, the inventory (again, in my areas of interest) is very thin.
As far as the flat prices prediction, only time will tell. I think that we have seen the worst and may only see a small change in the mid-upper range.
I tend to watch only certain areas and don't find Prince William and Loudoun relevant to me. That said, those areas experienced the brunt of the declines (due to a number of factors). My extended neighborhood is down 10-15% - nothing devastating.
We had a divorce which was in bad condition with no updates in almost 20 yrs ( a short) that sold for about 25% off-peak. Not that it would have sold for peak in 2005 or 2006, due to the condition.
You may see further drops that you consider considerable. Whether these will be across the board remains to be seen.
I saw a relatively flat market in the 90's, but we are in a different situation now. Clearly (absent some calamity- that will make all of this uesless) you would agree that the worst is over.
hb,
A big problem developing with condo financing is the % of investors.
Increasingly, developments are getting kicked off the "approved" list.
pat,
I'd be ready to kill myself if I bought a 400k+ condo where rent only covers half the costs (or even less). Double whammy - severe price drops and high negative for years.
Saved without comment...
"contrarian said...
Don't hold your breath for a bounce in home prices
Price drops of more than 10 percent are expected in the Phoenix, Miami and Las Vegas areas over the next year, according to Moody's Analytics. Those areas have already been scorched by 50 percent declines in home values.
Moody's predicts that other areas - New York, Los Angeles, San Diego, San Francisco, Denver, Detroit, Cleveland, Minneapolis, Tampa, Fla.; and Washington D.C. - will see declines of 2 to 8 percent by next July.
7/27/10 1:11 AM"
Saved without comment (other than Glug, glug, glug...)
"contrarian said...
Notice the preceding article says "by next July."
What they fail to mention is the worst part of the resets begins next July.
7/27/10 1:22 AM"
It mostly reflects the necessary turnover of homes from those who bought them at prices they couldn't afford to those who can afford them now at current market price at the time.
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Mark
House Prices
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