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Tuesday, March 22, 2011
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14 comments:
"State By State Estimate of Shadow Inventory"
Search brings up many studies. "The Economist's Outlook" does not require membership and contains several articles, charts and graphs; including the estimated months to clear and YOY trends.
Virginia appears to be squarely in the middle. My "guess" is that NoVa is better off than state-wide (did you expect I would think differently?). I base this on unemployment, job creation, net migration, housefold formation.
Anyone want to discuss?
VA-
I agree that Northern VA, has a lot less inventory than the rest of the state/country, but this is offset by the fact that we also have a lot more construction going on most of the state/country. In most of the areas where there is too much inventory there is no building so the inventory is slowly coming down. Here we have about the right amount of inventory so builders are putting together a lot of projects, which I think will mostly balance the new demand going forward.
Its possible the builders are under/overbuilding, but I don't think we have enough data to show either of these. I will admit though that most of the major projects will not finish until the end of this year or 2012, because they were put on hold during the recession.
hb,
Do you know where we can get info on what is in the pipeline for NoVa?
I was surprised to see the construction in progress on RT 50 in FX. I hadn't been down that way in awhile and saw many near-finished TH's.
I am aware of two condo projects in the works at Reston Town Center. Both are slated to be "luxury" rentals and total about 750 units. There is no plan approval as yet, so I doubt they will deliver before 2013 (or 2014-15).
As I mentioned before, Archstone plans a large rental project in Falls Church. There is a buy-out in place for an older co-op community, but this will not even close for a year+ and then demo and construction will commence - putting this inventory at least 3 yrs out.
Perhaps County Planner's can shed some light on what has been approved to date.
VA-
Sorry I don't have any good source. I know in my back yard there is Halstead condo complex with ~1000 units that will probably be ready within a year (They have already completed most of the structure). The mosaic district is another block away and will have 500+ apartment units and 100+ THs (will be finished by fall 2012). By the Vienna metro they are working on metrowest, which will have ~2K units (although this project has been going on forever so who knows if they will finish it). I have also seen a lot of construction in FX city.
These are the only huge places that I see regularly, but I assume if I am seeing 5K+ units within a couple mile area that similar projects are going on across the area. I haven't too many developments with SFH in the inner suburbs. I assume this is because it is significantly more profitable for the developers to squeeze as many units in an area as possible.
Sure, 5k units per 2 square miles...or 1M units for all of Fairfax County because it has 400 square miles.
hb, you see what you want to see.
Robert-
I clearly don't think there is anywhere near that much building. I pretty clearly said that we do not have enough data on what is coming on the market.
All I was trying to say is that even if we do not have as much of an inventory overhang in this area as other areas we will likely have more new building here than other areas. If you were a builder and sell places for ~10% less than 2006 prices here or for 40% less than 2006 prices in Florida which would you do. I think builders are smarter now than in in 2006, so I don't expect overbuilding, but I do expect building to keep inventory above 2002-2005 levels.
Do you really think that NoVa will not have more than its fair share of building over the next several years. Are you really projecting that the building just continue to see inventory fall and prices to increase with no response?
"VAI said...Anyone want to discuss?"
I wish they would spend more time discussing how it is going to be disposed of versus how big (or small) it may be.
For example, if you have 10 years of shadow inventory, and the banks release it over the course of 2 years, you are going to see prices drop back to the stoneage. Conversely, if you release that same 10 years of shadow inventory over the course of the next 20 years, you are going to see prices rise (much as they have been doing as they continue to drip drip drip out the shadow inventory since 2009).
Instead, almost all reports focus on the amount. This excites the emotional, gullible, bear types whose eyes glaze over and are filled wiht the fantasy of a TSUUUUUNAMI if they simply wait long enough.
The problem of course, is what if the tsunami never comes? What if the drip drip drip continues for the next 1, 2, 5 or more years? If it does, those waiting for the big tsunami to swoop in and pick up a place at firesale prices will suffer one of the bigger disappointments in their lives.
Anon-
I think at this point it is fairly clear there will not be a tsunami of inventory coming on the markets. The speed may increase a little or decrease a little, but banks just aren't going to decide after 5 years of slowly letting it out that now they should dump everything. I think we also decided that the shadow inventory reports are likely overstating the inventory by including many properties that have already been sold.
I think the housing market will continue to come down to the economy. As long as the economy continues to do well and the government does not drastically reduce local spending (jobs/contractors) the DC market will do fine. I think it is unlikely the government will cut local spending significantly, but they may keep pay raises smaller going forward which would slow the speed prices increase in the long term compared to the past rate of increases.
I think housing related news is just becoming less exciting as the chance of massive drops/increases is going away. I think it is becoming more clear that after a crazy decade things are calming down and double digit YoY price changes are very unlikely.
anon
what the shadow inventory is also matters.
1) if it's all condos those are a snap for investors of all types.
2) if it's all SFH's those rot without ongoing maintainance.
it also matters how many trillions Bernanke wants to give the bankers.
Statute law says the banks have to sell this off, but, if Bernanke won't enforce the law, it's meaningless
Robert-
I should have also mentioned that over the last decade the population in Fairfax went up ~5K/year. So if the 5K units I talked about come on over the next 2-3 years they will be able to absorb a large portion of all the population increases. Assuming that people here also know about some units coming on in Reston, FX city, Annandale... we probably could show that there will be enough new units over the next couple of years to handle the increase in population.
Pat-
I'm pretty sure that Bernanke does not have the right to chose to enforce or not enforce laws. That is up to the people who make laws, the police and the judicial system.
As for houses rotting, you are definitely correct this happens. Although a lot of the shadow inventory is still being lived in, so although these people aren't taking good care of the house they are probably helping avoid water damage and mold issues (they probably do not want to be sleeping in wet moldy houses either)
"Sales of previously owned U.S. homes fell sharply in February, after several months of increases, according to a report released Monday, in an another blow to a sagging housing market that may have further to fall.
Existing home sales dropped 9.6 percent from January to February to an annual rate of 4.88 million units"
now this is national, but, t can't be good for the local market.
pat,
I don't know what the local figures are but my "alerts" are showing alot of under contract. Granted, I tend to follow the lower end and cash investors are all over this stuff.
Last I read FX CTY has only 4 months of inventory. DC was one of only two Markets to see YOY price gains last year and is predicted to be #1 this year.
We don't know if there will be a "give-back". We don't know if shadow inventory will be absorbed in an orderly fashion - or even how much is out there.
I think in a normal market we should see inventory increase (particularly in August - November).
Do I believe things are somewhat tenuous locally? Yes. Do I believe we will return to the inventory levels of 2008 and 2009? No. Do I believe we will revisit the prices of those years? No.
As to your concerns/beliefs about vacant sfh and th's, I think the Lender's are more on top of things now. I see many properties that are winterized, ect. I haven't really looked at many places with basements lately. Back in '08 and '09 I did see alot of water damage and mold. This was due to a very wet climate and no sump pumps due to electricity being off.
If we keep trending down on unemployment (last figures I have: FX 4.4, Loudoun 4.2, Arl 3.7) and maintain/increase population and household formation, the only wild-card is inventory. I believe that demand is there (whether rental or purchase) and vacant units won't be an issue.
Another example of a tight rental market. I placed a call for HVAC servicing at a rental and was asked by the scheduling person if I had anything available in Manassas. Don't own anything out there and also have no vacancies anywhere.
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