The S&P/Case Shiller® composite index for the month of July was released today.
"'Home prices crept forward in July. Ten of the 20 cities saw year-over-year gains and only one – Las Vegas – made a new bottom, as the impact of the first time home buyer program continued to fade away,' says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. 'The year-overyear growth rates for 16 of the cities and both Composites weakened in July compared to June. While we could still see some residual support from the homebuyers’ tax credit, which covers purchases closing through September 30th, anyone looking for home price to return to the lofty 2005-2006 might be disappointed. Judging from the recent behavior of the housing market, stable prices seem more likely'.
'In the monthly data, 12 of the 20 MSAs and the two Composites were up in July over June; but the monthly rates also seem to be weakening. The next few months may give us an idea of the true strength of the housing market, as the temporary economic stimuli will have ended. Housing starts, sales and inventory data reported for August do not show signs of a robust market, and foreclosures continue.'"
52 comments:
As an aside, im glad I backed off my "years of 160-180 sideways" prediction and went with a 170-190 range. I still like it here, even at 187.
As for those who predicted 165 (march 2009) was but a mere stopping point toward a lower, or even much lower level -- I think it may be time to come to Jesus as they say...
Harriet-
Thanks for the update :)
Anon-
I agree with you that your prediction of 170-190 is still looking pretty good. I still would not be overly surprised if we got close to the old 165 lows, but want to hold off judgment on that until we see what the losses are going into the winter. It really is difficult to try and say what the market would have done recently without the stimulus and seasonality going in its favor. Also you would imagine low interest rates have been supporting prices.
It looks like the fed plans to continue with its easing so perhaps low interest rates will be around longer than a lot of us (myself included) thought.
I do agree there should be a come to Jesus for people expecting another 15+% down from here.
ROAR
I have not seen any price increases in the Vienna, Oakton, or Fairfax neighborhoods I watch. Indeed, they still seem to be going down slightly. The mortgage rate has gone from ~5% to ~4.4%. My monthly costs continue to go down.
I would also like to see where this whole defense contractor cut goes.
what i like is the disconnect, every owner is convinced their tract house will go up 15%/year but their zip code will go down 4%/year.
Pat-
I agree that is pretty humorous. People generally aren't very good with dealing with macro events. Historically when asked what inflation will be people over estimate it by 3+%. People really are pretty uninformed on making decisions that are based on facts.
"Two high-profile leases boost Reston market"
Wash. Business Journal (9/24-30 issue).
"VeriSign, which is shifting its headquarters from Mountain View, Calif., to Northern Virginia, will move into Reston Town Center...."
"The Defense Intelligence Agency has signed a 523,482 square foot lease at Patriots Park near Reston...."
Think the gov't contractors will be adding jobs in Reston?
VA_I,
That DIA lease is for the NGA building that NGA is abandoning for Ft. Belvoir EPG next year. DIA is consolidating some of personnel in Reston, most who are already in the DC metro area.
You are right Hayfield, it may be a wash with losing NGA and part of sallie mae. The fact that NoVa (and the Dulles corridor) continues to land these large tenants bodes well. I see great things happening in Reston as the metro draws nearer.
As always, my glass is half-full.
Until Reston developes a street culture it will be Tysons
Until Reston developes a street culture it will be Tysons
Yeah, that Tyson's Corner thing has been a real flop.
Cara: Your absence around the CS release makes me think you have had your baby. Please let us know how you are doing. We are putting a sister-in-law's house on the market in Vienna's Barrister Place in January. Our agent recommends we do more work there than we did in Springfield because of the prices and the buyer expectations in that market. Anyone have recent experiences around the Lawyer's Rd area?
Robert-
I agree, Tysons may not have a lot of culture, but property values are extremely high. I'm sure VA will be very happy and make a ton of money if Reston prices rise to Tyson's property price levels.
I am actually curious about south not west of Tysons. A ton of money is being spent in Merrifield to make it more walkable and have a Clarendon feel too it. I will be very impressed if they actually succeed. Also if they succeed I wonder if they will try and push further towards renovating the less nice areas of Falls Church
Anon -
When did your forecast go to 190? It was 180 last I recall and like you said, for many years to come.
Robert -- back in February (ironically when I was giving you a hard time about your forecast)
https://www.blogger.com/comment.g?blogID=4787878578920468587&postID=7769196563173215953
Heres the text:
"Paging Robert...paging Robert. According to your V shaped recovery, CS is to hit 188 a mere 3 months from now. Still confident in that?
Actually, I shouldnt talk too much because I am going to have to backtrack off my, bracketed 160-180 L shaped recovery. I expected some slight declines but not this slight.
Even when the govt training wheels are taken off, I simply dont believe we will have the downward "oomph" to hit 160 again. Soo, let me go ahead and admit I was wrong right now, and restate as follows:
Case Shiller will trade somewhere between 170-190 over the next 18 months, before there is any chance for a significant rise thereafter.
So I think it is still an L shaped recovery, but more like a slight "/" shape before we get to the sawtooth part of the L (if that makes any sense at all).
So IMO while the bottom has indeed been hit and is likely permanent, there is still little to no chance that prices rise quick enough that you need to worry about it. Thats my story and I am sticking to it.
2/23/10 5:47 PM"
hb,
I'm no expert on future development, but I would think the first choice would be along the Silver Line.
Interestingly, here are some other predictions from back then:
___________________________________
"spider said...I stick to mine - we hit 155 some time in next 18 months.
2/23/10 9:01 PM"
Well this one is just a FAIL waiting to happen.
___________________________________
___________________________________
"housebuyer said...I will stand by my prediction that we will stay between 165 and 180.
2/23/10 9:56 PM"
HB has since backed off this, so nothing more to say. Plus he gets bonus points for dismantling Spider's insipid case for why we hit 155 again (Spider was convinced the end of QE was gonna be a whopper).
___________________________________
___________________________________
"contrarian said...I'm sticking by what I predicted - a cataclysmic economic collapse is underway and the bottom in housing is far away.
2/23/10 11:04 PM"
Nothing to say here but GLUG, GLUG, GLUG!!!
___________________________________
Heres a shocker:
___________________________________
"Cara said...I still see 160 as a real possibility by June."
Still, im not giving a public rebuke to Cara. Want to know why? Always the careful hedger, she later says:
"What could prevent this? If the REO trickle continues to slow in this area. Jobs picking up enough that people start moving here for work in significant numbers. Interest rates staying in the 4.8-5.2 range indefinitely. If all these things happen I don't think we'll see 160 again.
2/24/10 8:16 AM"
___________________________________
Right you were Cara - nicely done.
Robert-
I would agree I think there will be a lot of new development on the silver line. The only reason that I mentioned merrifield is that every time I go to Chipotle I walk by two massive construction projects. Both the mosaic district and the hallstead 3 are expected to be completed in the next 2 years. They should add housing for a few thousand people and are trying to revitalize the rest of the area. It is a little strange that the entire orange line area in VA is pricey except Dunn Loring.
Seeing that VA is one of the few parts of the country without a huge housing overhang I would imagine housing companies will put a lot of their projects in VA so the Silver line will also get plenty of money.
Anon-
I fully admit my earlier predictions were wrong. I thought that most people who cared about the 8k bought during the first tax credit. Based on the huge spike in sales and subsequent drop off I was blatantly wrong about this. I also underestimated seasonality.
I really am curious to see what the CS numbers will look like two months from now. Until they come out it will be hard to gauge how much of the recent uptick is real vs. government/seasonally induced.
No need to worry HB. Everyone is wrong from time to time, and you have the intellectual integrity to admit it. Plus being wrong on both the optimistic and pessimistic side shows you are the type of moderate voice this blog needs.
Its interesting to see this blog evolve. 3 years ago, everyone was pessimistic (and rightly so at the time). However, the abject pessimism would get out of hand (particularly for the immunozones), and the only optimists (KH & especially Lance) were so out to lunch that it was hard to take them seriously. This changed when CRT arived as the voice of sanity willing to take on all the doomers at once, and take down KH and Lance for their outlandish optimism. Later it was Cara, and now you (along with a supporting cast of characters, Ace, $0.02, TedK, etc.) who serve this role.
This blog is now much more rational, and there are very few "Spiders" anymore. And Robert is a pessimist compared to Lance back in the day. True we still have Contrarian, but he never really counted anyway :) In any event, thanks for continuing to serve as a voice of reason on this blog.
Has anyone been to Reston Town Center lately? It appears not. I would guess that Dunn Loring is two decades behind in developing something along the lines of RTC and we don't even have the metro yet.
It will never have the feel of an older or more urban neighborhood, but it is jammed on weekends with a high income crowd dining and shopping at upper end establishments.
I'm not sure of the number of housing units or square feet of office space but am sure it will keep growing at a fast pace.
Contrarian,
I was looking through that neighborhood home value/income link someone sent the other day. Several of the neighborhoods I watch in the 22205 and 22203 zipcodes have household incomes averaging $140k per year. At a traditional 2.5-3.0 times multiplier, that's an easy mortgage of $350k-$420k. With a downpayment or equity from an earlier purchase you're easily talking homes valued from $500-600k.
So how do these neighborhoods drop significantly when the average family living there can afford the average home there on 20-35% of their gross income?
Curious...
My $0.02.
Anon-
Thanks.
VA-
I am not sure whether your post was in reference to mine, but I agree RTC is nice. My comment was saying that other parts of Reston will be built up all the way along the silver line. I assume that you do not own that many properties in RTC (wealthy areas tend to be less cash flow positive for rentals).
Reston as a whole is less built up than some of the inner areas. e.g. RTC is smaller than Tysons/Arlington, and the rest of Reston is less built up than the orange line corridor. I was just saying that I continue to believe Reston will grow at a faster pace than the rest of these areas. I wasn't trying to saying anything bad about Reston, instead I was just saying that I think it will get a disproportionate amount of the growth going forward.
I brought up growth in the Dunn Loring / Merrifield area because it is less clear. I was curious if anyone else had any thoughts on this matter.
$0.02-
The stock market is going to fall 90%, everyone will lose their jobs and have no income. So the average income will fall to $10K so houses will fall to ~$30K :-p
HB,
And then bears will swoop in!
:)
My $0.02
"contrarian said...
Anon,
Housing prices are still early in their collapse. You're simply delusional. 9/29/10 11:17 AM"
Right, right. It just hasnt happened - yet. Hey, speaking of delusional (or should I say naive), we still have this prediction ahead of us:
___________________________________
Contrarian said...
The Anonymous, are you naive enough to believe that at this time next year the market will not be lower than it was back in March (2009)? 9/30/09 11:33 AM"
___________________________________
Dow is at 10,800 right now. Will it fall 4,200 points by tomorrow afternoon and prove that I was "naive"? I guess we will find out soon. Glug, glug, glug...
hb,
It wasn't directed at you in particular. I just don't think a comparison to Tyson's OR the Ballston corridor OR DC, is particularly relevant.
Land values in Tyson's have always been very high. I'd be very surprised if anything can be done to make Tyson's "walkable" or a place with a nightlife.
You are right about cash-flow and I only have one property at RTC and I bought that a long time ago. I do have some properties across the street that command high rents and some others that are quite close to the future Wiehle stop.
I have seen the plans for the Wiehle stop and they are quite substantial.
p.s. I used to live in Dunn Loring (close to Tyson's) and it was quite nice and very convenient.
mytwocents said...
At a traditional 2.5-3.0 times multiplier, that's an easy mortgage of $350k-$420k. With a downpayment or equity from an earlier purchase you're easily talking homes valued from $500-600k.
the ability to save $150K to $180K on a $140K income is beyond amazing and should be awarded a presidential medal
mytwocents,
this un-updated DOMINION HILLS 3/2 SFH sold for $551K. surprised?
http://wapo.st/be5bl3
"But the gain is merely temporary, analysts say. They see home values taking a dive in many major markets well into next year.
That's because the peak home-buying season is now ending after a dismal summer. The hardest-hit markets, already battered by foreclosures, are bracing for a bigger wave of homes sold at foreclosure or through short sales. "
Pat,
That WaPo article also said:
A much brighter outlook is forecast for some areas of the country, especially major cities that never experienced an outsized housing boom - and bust.
Doesn't much of the NoVA area fall into this category? Yes, we have our harder hit areas, but I don't think it's anything like Vegas, Orlando, etc.
"Contrarian said...You simply make stuff up out of thin air and attribute it to me."
Heres the thread -- anyone can judge the veracity of the statement itself.
http://novabubblefallout.blogspot.com/2009/09/northern-virginia-bits-bucket-9282009.html#comment-2463858820118826913
The bottom handful of posts covers everything. Your comments are (as always) deleted, but we can see where they were @8:57 and 9:19pm on 9/29/09. I quoted you the next morning at 11:33am.
Look Contrarian, im sorry you are angry you got caught being wrong, but the fact of the matter is you said:
"The Anonymous, are you naive enough to believe that at this time next year the market will not be lower than it was back in March (2009)?"
I believe it is the only time you ever provided us with a time (9/29/10) and a price (below 2009 lows), and I just happened to save it before you deleted it.
Dont worry though -- all the rest of your predictions lack some element of time or price (i.e. the collapse is ongoing and the bottom far far away). Thus, with everything else, even if someone brings it up 10 years from now, you can always say "it just hasnt happened...yet".
Still, you will just have to learn to live with this one. You made a prediction -- it was wrong -- you got called out on it.
Sorry, but it is what it is my friend.
hb,
You may find this interesting.
Anon,
contrarian will obviously be right, eventually...the sun is projected to swallow the earth in four billion years. That can't be good for the stock market.
MM,
I'm not terribly surprised. It looks like a larger home footprint than the standard cube-like brick homes.
Contrarian,
Mortgage/interest deductions will not dissappear. Worst case they'll be capped. And it'll phase in over several years.
And if the market collapses and interest rates spike, how are the baby boomers going to retire? Only the first ones out would reap the rewards of their home values before the prices collapsed keeping those late to the selling party in their homes and working.
The problem with your nay-saying is that you don't think about the time it'll take for these things to happen. And the fact that people will react to, and try to change for the better, that which is happening to them.
My $0.02
Robert-
Thanks that is interesting link.
No need for Calculus here...
Unemployment in the Washington region remains at the lowest level among large U.S. metropolitan areas.
The highest unemployment rate remained Detroit, at 15.7 percent.
In places like Detroit , it’s the economy that is keeping home prices from rising. Ten cities saw year-over-year gains in the Case-Shiller index, while Las Vegas saw a new bottom at 100.91 -- meaning its current prices have returned to their 2000 levels. Detroit had the lowest index, 71.17, and Washington the highest, 187.98, followed by Los Angeles, New York and San Diego.
don't use the stock market as your argument that things are back on track to normal - the average investor is pulling their money out and the dow has absolutely no bearing on the health of the economy going forward regardless of its level. it's more a function of robot trading, fed activity, witchcraft, voodoo what have you...
not to mention epic interest rates.. i still can't imagine anyone thinking anything is back on track...
187, down 8% will end up at 173.
if rates increase it will descend more.
au contraire,
Did you read today's Post? A judge in Montgomery County threw this argument right out the window. Do you think people are going to get their homes back (on which they defaulted) on some stupid technicality?
There only needs to be one question asked by a judge: Can you prove you paid your mortgage?
newbie says
"A much brighter outlook is forecast for some areas of the country, especially major cities that never experienced an outsized housing boom - and bust.
Doesn't much of the NoVA area fall into this category"
um you are a newbie but most of DC was a bubble.
http://www.macromarkets.com/real-estate/MSA/washington_dc.asp
this is very cool graph DC vs comp-20 vs Cleveland you tell me where a bubble was.
Newbie
http://bit.ly/cEqQww
did this look like a bubble to you?
so were you a prisoner in afghanistan the last 6 years?
IF sales are actually reversed, it will be due to more than a failure of a low-level employee to review files. Having purchased a foreclosure once where the Bank forclosed on the wrong house, I now how lucrative it can be for an investor to be in this situation.
Of course, those stupid enough to buy without title insurance will face some steep legal bills.
Pat,
Nope, not in Afghanistan. Nor denying there was a bubble. Just commenting on the difference between DC and more distressed cities.
The WaPo article doesn't refer to DC explicitly, so the question is whether it is more like Reno, Orlando, or Las Vegas, where analysts see risk of further price drops, or Dallas or Houston, with their lower unemployment and price stability and "brighter outlook".
Your mileage may vary; seems to me there's evidence -- like Robert's comment at 4:28P re DC's low unemployment and higher CS index -- to support that DC is closer to the latter than the former.
What pat fails to acknowledge is the huge disparity by neighborhood. Some rose moderately and some (mainly lower end) rose ridiculously. We all know where the majority of fall-out has occured and we have clearly bounced off those bottoms.
VA_I,
Further to your point, CRT providing compelling evidence, markets that tracked each other, and sound reasoning differentiating those neighborhoods. All we get out of the bears is "nyah nyah nyah, just you wait and see!"
Okay, maybe it's not that bad from some of the bears but a doomsday quote here and there from an expert about an unspecified market in an unspecified time frame is hardly compelling and pertaining no where near the analysis CRT did.
My $0.02
Ugh. That should be "provided" in the first line and "certainly" in the last.
Auto correct went off on a tangent there...
My $0.02
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