The S&P/Case Shiller® composite index for the month of December was released today.
"'We ended 2010 with a weak report. The National Index is down 4.1% from the fourth quarter of 2009 and 18 of 20 cities are down over the last 12 months. Both monthly Composites and the National Index are moving closer to their 2009 troughs. The National Index is within a percentage point of the low it set in the first quarter of 2009. Despite improvements in the overall economy, housing continues to drift lower and weaker.' says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's.
'Unlike the 2006 to 2009 period when all cities saw prices move together, we see some differing stories around the country.... Looking deeper into the monthly data, 19 MSAs and both Composites were down in December over November. The only one which wasn’t was Washington DC, up 0.3%. With December 2010 index levels of 99.73 and 99.48, respectively, Cleveland and Las Vegas have the dubious distinction of average home prices now below their January 2000 levels. Detroit was the only market that was in that group prior to December.'"
22 comments:
As I noted before, Im skeptical of the MOM increase as it came in the (seasonally weak) winter. I would not be surprised if it is revised away next month.
That said, assuming it is not revised away, or assuming the revised MOM decline is smaller than last december, it does look like the 2nd derivative (i.e. the YOY rate) is increasing.
This one is a real shocker to me. As you can see, last May, prices were increasing +7.74% YOY. Slowly, the YOY rate decreased til October when the YOY increase was a more modest +3.09%.
I thus fully expected the YOY rate to go negative by next spring as the 8K buyers bribe was worked out of the system, and expected to see the bears back in hysteria mode (all the while ignoring that we were still far far above the March 2009 level of 165.94).
This projection of mine is now looking increasingly pessimistic. I earlier thought that we stay in a banded range of 170-190, but now that too is looking too pessimistic. Another month or two of this, and I may need to ditch this "L" shaped recovery view and fall into the "v" shaped camp.
Anon-
I wouldn't dump the L shaped camp yet, as long as nationally housing is getting destroyed. I know housing is local not national, but it is an uphill battle to fight the national trend.
Also I find it funny hearing the difference between Case and Shiller's perspectives house prices
Case thinks that we are at a bottom although it will be bumpy. Shiller thinks we have another 15-25% to go down nationally.
For those interested in the FFX Co. tax situation yesterday:
Fairfax's budget likely won't include raises for county employees for third straight year
"County officials say Griffin will present a budget that relies on no change in the official tax rate of $1.09 per $100 of assessed value - a tax rate that could still translate into a small increase in tax bills as assessments on home values make post-recessionary gains."
RE: assessments
My house is unchanged YOY. The two rentals I checked are up about 10%.
FX CTY really pulled some funny stuff in the earier-mid 90's. I got 8 notices within a few days. All were completely unchanged; with the land value increasing by the exact same amount as the improvements decreased. Quite the coincidence (?). I called the newspaper (Fairfax Journal) and a couple weeks later there was a good sized article about the situation.
I'd guess they aren't quite that stupid in rigging assessments these days, if that is what they are doing.
Well on my street things the tax assessments were strange. The two houses sold in 2010 had increases proportional to the price paid. All the other houses were unchanged.
u,
Hard to say what their methodology is. I'd suspect zip by zip? Hard to believe that they drill down on individual houses absent some permit being pulled.
My experience is that assessments are a yr or more behind the market, both up and down.
I called the assessor's office in FL a couple years ago and got a 20% reduction for the entire development. I'm sure some (potential sellers) were not pleased. Hard to believe what a simple phone call will do.
VA_I, there is another explanation of what you described, and that is that FFX may have underestimated land value relative to structure value, then abruptly switched to a different (though more accurate) model.
If you use a regression model (which Arlington likely does--they're not explicit about it-- and so likely FFX wanted to try) and you include the right variables (including what vacant or tear down properties) as predictors of sales prices, a result will be that land values may be much higher than the structure values the closer in your get, but that wasn't always true. For example, 10 years ago, a 1500 square foot SFH in Clarendon might have had a land value of $150000 and a structure value of $150000, but the same house today (without significant improvements) probably has an assessed land value of $55000 and an assessed house value that is the same or only slightly higher.
This method also produces some strange results, in (in Arl. anyway) a 1500 square foot condo may have a much higher structure (excluding land) value per square foot than does a single family home, but if you compare apples to apples for SFHs, it makes sense considering what tear downs sell for.
Unless total house (land and house) selling prices declined during that same assessment period, your properties' total value shouldn't have declined when land vs. structure values were reallocated.
The problem politically for FFX, which caused them to backtrack, was making the change suddenly and without adequate explanation.
uechi,
I believe both FFX's and Arl.'s website says that they do make adjustments based on recent sales.
They likely regress all sales prices on square footage, # beds., # baths, lot size, and other factors. They can use the resulting equation to calculate average houses for all houses. But if an individual house sold for more than that average value (maybe because it was in better condition), the then counties reason that they have better FMV info than the broad average, so they may adjust to the specific sales info.
PS yes, they do these analyses by neighborhoods within zip codes. But I think both counties are deliberately somewhat vague because they don't want people to game the system.
Does anyone have any notion of what is happening in the NoVA residential rental market? With labor demand being strong relative to most, if not all, of the country, it would seem that either home prices and/or rental prices would be moving up. If folks in the area can't buy due to various issues, I would think that they would be looking to rent.
Ace,
I actually got a phone call from a FX Cty assessor in 1994 asking me why my house purchase was so cheap. I thought for a second or two and immediately told him what a trashed-out mess the place was (and whatever else I could think of to keep my assessment down).
I was quite taken by surprise. This call was a first for me. He started talking about the adjacent lot (15K sq ft) which was conveyed to us at 5K. I told him Herndon said it's unbuildable (which was true, although we were in Court). He laughed out loud. They raised both assessments, the lot going from 5k to 60k. I guess I'm not too good at that sort of stuff.
hj-
I think the rental markets are fairly tight and rents are going up low-mid single digit percentages. You also need to take in the amount of new building that is going on when saying the demand is up so the prices need to be up. There has not been a lot of new supply so demand is important, but I think supply has been starting to increase and will continue to increase going forward, so that should help moderate the increase in demand.
hj,
As a landlord, I'd have to say that rents are strong and increasing. My experience is very limited County-wise, but I have had people write letters attached to applications and others, literally, jump up and down when told their app is approved. I'm looking at some big increases when current leases end.
Demographics suggest that gen x and y will supply a significant rental pool as marriage and kids are delayed. Gen y is larger than the "boomer" generation.
hj
population is increasing slowly,
vacancy is lower.
shadow inventory is doing something...
pat,
Slow? Perhaps, but it's the highest on the East Coast (over NYC and Boston). Come out of your cacoon.
Are many of the foreclosures being renovated and turned into rental properties or are they mostly being flipped and sold?
Thanks for the info!
HJ
VA_I,
On the contrary - sounds as if you were very good at getting the deal. Much more important than swaying the assessor. However, he probably should have gone with the actual selling price, if he was being consistent.
Sorry for all the typos in my post- I really need to use preview. Here's a corrected version of the pgh. with the most typos:
If you use a regression model (which Arlington likely does--they're not explicit about it--and so likely FFX wanted to try a similar one) and you include the right variables (including what vacant or tear down properties sold for) as predictors of sales prices, a result will be that land values may be much higher than the structure values, the closer in (to DC) you get. But that wasn't always true. For example, 10 years ago, a 1500 square foot SFH in Clarendon might have had a land value of $150000 and a structure value of $150000, but the same house today (without significant improvements) probably has an assessed land value of $550000 and an assessed house value that is the same or only slightly higher as 10 years previously.
"HJ232 said...Are many of the foreclosures being renovated and turned into rental properties or are they mostly being flipped and sold?"
HJ -- when this was a much more active blog, we got a few reports of people buying foreclosures in bulk from the banks at massive discounts, and then turning around and putting most (but not all) of them on the rental market.
I cant be sure, but I assume they are still renting them out as of today.
This was in the late 2008, to early 2009 timeframe and mostly in lower end properties out in Loudoun & PWC where low land costs allow places to "pencil out" from a landlord's standpoint.
Cheryl
In Montgomery at least in the 80's and 90's they would weight heavily on land value, some 60-70%, that way,
they could say "Land value is up",
and no matter what you said about the house it wasn't a big effect.
Of course what was good was that additions didn't show up until someone sold, then, everyone's land value went up....
hj,
That's what I am doing (with the occasional flip). Mainly long-term rentals. The "bulk" deals have come and gone as far as I know.
Contrarian-
Government bonds rallied, because they regularly rally when people get worried. The inflation bonds rallied more than normal treasuries so the breakeven inflation (aka the markets expectation on inflation) increased today. So while every other asset was falling today people were predicting inflation because of the oil price risk.
Looks like prices are flat to slightly higher.
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