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Wednesday, September 1, 2010
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27 comments:
Hey, look over here - price drop!!! Oh wait...it's still above the original listing price and has been on the market nearly two years:
delusions die hard
Maybe the seller is waiting for interest rates to go to -4%.
In fairness to the seller, the original listing price was pre-construction. This is still a cut from initial post-construction prices. The house has only been available since April.
Tradition builds nice houses and has sold quite a few houses in Arlington in recent years. I'm not very good at figuring out what price houses should sell for in Arlington, but I'd guess that after aiming a little high to start, they're getting close to a price that house will sell at.
Diana Olick has a new blog post regarding an attempted between MSNBC and Trulia to forward-look the housing market based on internet search frequency and patterns. The first results show the DC area in decline.
Not sure quite what to make of it, given its so new. Anyone care to comment?
Oops...forgot the link
http://www.cnbc.com/id/38949458?__source=RSS*blog*&par=RSS
Dan-
It seems interesting, although I would doubt that it really shows much. The problem is that both buyers and sellers probably hit the site a lot, so you can't tell if an increase means more sellers (lower prices) or more buyers (higher prices). In addition I am not sure that seasonal impacts are similar across the country. I bet you almost no one sells houses in Maine during the winter when there is 4 feet of snow, but I bet the retirement communities in Florida probably have decently good sales during the winter.
So while I think it is interesting and may be somewhat relevant we will find that prices do not move with their indicators.
It is interesting though how badly DC did. We have 4 of the top 10 decreases in hits. (Bethesda, Silver Spring, DC, and Arlington)
Dan, HB
yeah I'm pretty darn skeptical. Brand spanking new made up indicator shows 30% or higher MoM changes. Ummmm, whatever.
Cara-
I don't think that it is housing price changes. They are just saying that there are 30% fewer people looking at Trulia. My guess is that it will be a very volatile metric with little correlation to housing prices.
I still think that each month is counted once rather than grouping all the sales. I think the monthly numbers could look something like this
Value 3M Avg MoM Return
Sep-09 178.9
Oct-09 179.8
Nov-09 178.8 179.2
Dec-09 177.8 178.8 -0.2%
Jan-10 175.9 177.5 -0.7%
Feb-10 175.7 176.5 -0.6%
Mar-10 174.0 175.2 -0.7%
Apr-10 189.0 179.6 2.5%
May-10 184.8 182.6 1.7%
Jun-10 183.3 185.7 1.7%
Although we will will find out next month. If the numbers are weighted by sales we will likely see next month as a ~1% gain. If the numbers looks similar to what I showed above next month will look something like a 1% loss. This is obviously a huge range so I think I any of our predictions for next months number are going to be volatile based on how the index is actually calculated.
HB,
I agree I think the Trulia thing is going to be a very volatile index, and one with no good idea what to anchor it to. (unlike things like MOI).
For CS, did you take a look at the formulas in the methodology pdf? It says (paraphrasing from memory) each sales pair falling within the 3 month time interval will be counted thrice as if it occurred at three different offset time pairs. It's possible this is clarified differently elsewhere in the pdf, but if you just look at the math it's pretty clear that the rolling average is of sales pairs, not of the index calculated separately for each month. One could even argue this is normally a preferred methodology, as it's questionable that the normal low level of sales in say January should get equal weighting to those in March, say.
The English just says "rolling average" but that's the thing about English, it's not math and it's left open "average of what?" (If really they did pre-calculate the single month index, why would they never report the finer scale data?)
In any case it's a very small and minor point, compared to the mix of sales, condition and everything else they're trying to account for. Sorry to harp on it.
Cara-
I think you might be right, although the language is definitely confusing and there appears to be a lot of wiggle room, which lets them do what they want. (they can under/overweight pairs they think are not representative of the market...)
Either way even with weightings that are representative of what the market did you can still paint a picture that next month will be negative
Sales Actual 3M Avg
Sep-09 1.00 178.9
Oct-09 1.00 179.8
Nov-09 1.00 178.8 179.2
Dec-09 1.00 177.8 178.8
Jan-10 1.10 176.0 177.5
Feb-10 1.20 176.0 176.5
Mar-10 1.30 174.4 175.4
Apr-10 1.50 187.0 179.6
May-10 1.10 186.3 182.6
Jun-10 1.00 183.0 185.7
Jul-10 0.70 182.0 184.0
I still stand by my earlier comment that at best we are using an arbitrary guess for next month and it could easily be between plus or minus 1-2%
KeithK,
The typical Arlington high quality new build takes far less time to complete (than from original listing until April of this year), typically does not show a higher price after initial listing (particularly not when it has gone unsold a long time), and typically sells well before the time for this house.
So, I don't think it's unfair at all to the seller to note that it was silly to raise the price of an unsold house (especially when it could no longer be customized) and expect that it would sell.
I'm not sure what the relevance is of the time it takes to build a typical Arlington high-end house. The only possibly relevant question is how long it took to build this specific one, though I'm not quite sure why that even matters.
In any case, he could have listed when he obtained the property and completed the plans, and he completed the house about 14 months later. If it took him 4 months to get the Arlington County permit approvals after submitting the plans, like it took me (with no variances required), then it isn't so unreasonable. Even if this is too long, so what? Is there something in taking too long to build a house that makes him more delusional?
If a house is already sold prior to being built it significantly reduces the risk to the builder. To stay solvent in the long run, a builder prices in risk. If a house is sold up front, the builder is not carrying the entire cost of building and holding through to some unknown settlement date. If you look at the economics of building it makes perfect sense to charge less to attract the pre-build buyer. The builder's costs, and potential costs, are lower.
KeithK,
It appears we will simply have to agree to disagree.
I do agree with your more recent post that it's not clear that the length of time to build is relevant. But you're the one who brought up the issue of how long it has taken to build it by suggesting that it matters that the house has only been "available" since April, yet was on the market more than 400 days before then.
In any field, what your competition is doing is highly relevant to whether your product will sell. I don't see why the housing market is any different. The point is that if this house, or any other, has been on the market, unsold, for >560 days without an offer near the asking price, particularly where houses that are fairly priced are selling quickly, there is something very wrong with its price.
ACE,
The finished house has only been on the market since April. A "mostly finished" house has been on the market a little longer, probably since February when the new price was set. That's the time it's been on the market competing with existing houses. After 195 days the builder saw it was too high and lowered it $40,000. I don't know about the county as a whole, but in my immediate neighborhood the three new or nearly new houses in the million+ price range stayed on market a lot longer than that - and one hasn't sold after more than a year.
Yes the price was too high. Maybe it's still too high. But I think it's too early to call it delusional.
Look at the areas it selected though the hardest hit are the winners, and some of the nations most resilient are "losers"... I don't see how its such a stretch to think this might be a gauge of interest in the area.
Nearly 900 days on market? FX6697889 Wow.
http://franklymls.com/DC6951459
assessed at 376K, lists at 249K sells at 150K
60% off assessed.
http://franklymls.com/DC7162476
if we can't sell it for 439K a year ago lets try now?
672 DOM.....
Newbie - That property is listed as a short sale. Just because they listed it at that price, doesn't mean that the mortgage lender agreed to it, let alone approved a lower offer. That could be the reason why it hasn't sold.
Redfin just notified me that this house went from pending back to active. It has been so long since it went pending (March 2009) that we aren't even considering that area anymore. Apparently 757 DOM is a good time to bump your price from 700k to 870k too.
Jeremy-
I amazed that a house that sold for 400K in the 80s and 500K in 2000 wasn't able to sell for 700K now. The house must be in pretty bad shape
I think this was an interesting interview NAR
The speaker basically says NAR is screwing themselves. They continually are putting a positive spin on everything so people continue to think that their house will appreciate so there is no reason to sell it now for what the market will accept. He continues that if they were more honest about the market conditions (houses are 10-15% too high)than people would be more willing to sell houses rather than setting a stupidly high price that no one will pay.
He has a point I think we all agree that houses priced correctly tend to move fairly quickly and houses that are too expensive sit for a very long time. I also agree that if most people either thought housing would be flat to down over the next 1-5 years they would set the market clearing price rather than waiting for 2006 prices...
Did you see Case's (of Case-Schiller) op-ed in yesterday's NY Times?
A Dream House After All
newbie,
Yeah, I read it... What amazed me the most was his statement (paraphrased from memory) that houses were only worth what someone would pay for them and that's highly emotional.
No rent versus own comparison, no supportable price as a function of incomes... No "fundamentals" at all. It confused me.
newbie-
Wow Case is a lot more optimistic than Shiller. In general Case doesn't come out with nearly as many articles, so I never realized he sounds almost like someone at NAR. Shiller on the other hand is usually fairly bearish, although his track record of calling tops and bottoms in the housing, stock, and bond markets have been impressive.
Cara-
I agree I think pricing a house is a lot easier based on rent costs than pricing a company compared to earning. Historically the P/E ration on the stock market has been between ~5 and 50. This is a huge difference. Housing costs have always been between ~80%-250% of renting costs which is a much smaller range.
I must admit I liked the concept of "net imputed rent from owner-occupied housing."
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