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Wednesday, March 30, 2011
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25 comments:
Updated inventory numbers have been posted by mris/va. mls.
We seem to be staying in line with 2010 so far. I think inventory is a key number to follow. I knew the party was over/ending in the summer of 2005 by following inventory trends.
VA-
I agree, I would think that if inventories continue to follow the same path as last year we will have another fairly flat year (plus or minus 3%). Assuming the government doesn't intervene in the markets again. Although I saw a few reports yesterday saying they are trying to pass a law where banks would need to hold a portion of the mortgage if the person does not put 20% down. If this passes it will probably tighten credit some.
"Assuming the government doesn't intervene in the markets again. "
depends wether Goldman is long in MBS or shorting CDS.
Here's an interesting Redfin column re: national trends (our local mileage may vary):
Redfin
"Bill McBride, who called the housing bubble in 2005 on his blog Calculated Risk, is also mixed. He wrote yesterday that nationwide price indexes won’t fall more than 2% – 7% from current levels because there are so many all-cash investors, especially at the low-end. All-cash sales are at record levels, especially in the most distressed markets."
...
"The Stand-Off Continues: Nobody Wants to Sell at These Prices
Our own business saw a 25% increase in March closings but April seems likely to be only slightly better than March. Usually at this time of year, we expect demand to jump from month to month through June.
Part of the problem is limited inventory, as the winter stand-off between buyers and sellers continues: home-owners are unwilling to list their homes at current prices, and buyers are tired of looking at last year’s listings. One reason we’ve been seeing lower prices is just because of low-end inventory, not low demand: the only homes to buy are pretty bad."
I agree with the Redfin analysis. A quick look at 22124 on franklymls shows that over 50% of the homes in my old search were for sale at this time last year when I was looking - although most have delisted over the winter and come back on so they have lower DOM's.
What does this mean?
I'd say there isn't that much "distress" out there. People that don't have to sell, aren't.
The lower end (which is the market that really got creamed) is being snapped up by investors and first-timers.
This is what the "it's moving in" crowd failed to grasp; wealthy areas house wealthy people (who have assets to get them thru a job loss, if need be), wealthy areas did not have the turnover necessary to create substantial numbers of underwater buyers, wealthy area are generally populated with move-up buyers who put substantial $$$ down.
Location, demographics, average length of ownership, etc. are the important factors.
I think it means the numbers look bad because only the low end is selling. The higher end is saturated with overpriced homes that have sat on the market and become stale. It's not that prices are going down, just that things aren't selling at current prices. At least that is my take.
You're guess is as good as mine who gives in first. Obviously you think it will be the buyers since the sellers aren't "in distress" in this area. I think the buyers will just keep looking and renting until they find a "less overpriced" house in the same neighborhood - at least that is what we did. There is currently a home for sale on the next street down from us listed at 100k more than we paid. We went to that open house before our home was on the market. Ours came on last spring/summer overpriced by at least 150k, and we bought it in November for 150k off initial list after they dropped the ask 100k.
Forgot to mention that the home for sale is the exact same model as our house.
So perhaps you did well Jeremy. The fact is that people, by and large, don't need to sell. I doubt the mid-upper tier is "saturated" with desperate seller's. There will be some here and there but not in the volume required to make a difference.
I fully agree that many will continue to rent eventhough we are at 20yr highs in affordability. The recent debacle will make many afraid to buy for a few years.
"wealthy areas did not have the turnover necessary to create substantial numbers of underwater buyers,"
There are far fewer wealthy people then you imagine.
I don't know if we did well or the sellers here are just super delusional. I just checked and the one I mentioned down the street started out 75k higher than the current overpriced list when they originally came on the market last Spring. Obviously they aren't distressed or in a hurry to sell. I think there are a lot of people in this area who are ready to retire if only they can get that bubble price for their house, so why not list it and see what happens. My neighborhood was built in the early 80's, so many of them are probably retirement age. All my immediate neighbors are (I'm hoping some couples with kids move in as we have kids).
http://www.bubbleinfo.com/2011/03/31/housing-is-dead/
granted its national and international...
The Death of Equities
Business Week, the weekly magazine publication declared equities dead in 1979, just before the biggest run up in stock prices in the worlds history. My point....stocks don't die, they just go through tough times.
Robert,
I sort of agree. Pessimism on housing is reaching a crescendo IMO. And of course, once everyone agrees on something, it usually means the market is already changing directions.
I'm keeping my eyes open for that next great indicator: a book by a housing expert with a title to the effect "How You Will Never Make Money In Real Estate Again."
My $0.02
Robert & $0.02
I agree about the pessimism peak. In fact, Pat's source in this "housing is dead" article, Harry Dent is perhaps the ultimate contrarian indicator.
In the year 2000, just as the dow was hitting its peak, Dent declared the Dow would hit 40,000 by the end of the decade.
Then sometime in late 2008, early 2009, Contrarian pulled out a Harry Dent article where he came up with some absurdly doomish prediciton for the dow by the year 2010.
"Pat said...There are far fewer wealthy people then you imagine."
Were you not here when we found these stats?
Lets just say that our first wave of bears started fleeing in droves when we found them...
Pat,
The city data website shows that the nicer Arlington zips have average household incomes in the $130-140k range. And this includes a lot of rental areas that are likely pulling down the average. That type of income, while perhaps not wealthy, can readily support home prices anywhere from $400-800k depending on age, equity, and risk tolerance.
With entire zipcodes being reported as able to afford the housing stock, what are you getting at with your statement?
My $0.02
Not to pile on Pat, but we do live in the wealthiest region of the Country (based on median income). What do we have - 5 or more of the top ten counties nationwide?
Anyway, my point was a little broader...
Folks
http://www.ritholtz.com/blog/2009/12/elizabeth-warren-the-coming-collapse-of-the-middle-class/
130K household income, based upon dual incomes, higher tuition costs
more medical costs.
Don't think that this is sustainable.
"sustainable"? That is clearly the buzzword put out regularly by the bearish set.
What is not sustainable and why? We are talking about this region. You grew up here (bethesda?), what has been the trend?
Do you really think that the fed gov't is going to cut local spending in a meaningful way?
Pat-
Medical costs are not an issue for most people buying houses here. Most people buying houses here are fairly young and employed at a place that gives medical insurance. For someone in their 30s who is not self employed medical costs are just not that expensive. Sure medical costs are very high for 50+ year olds, but most of these people own their houses outright.
HB, as many others have done here, you are looking at only one subset of buyers, mostly first time buyers. Move up buyers and second home buyers have a different life situation.
Ace-
In this area most move up buyers have a lot of equity from their first house so its not just their income that is supporting prices. Also usually medical expenses don't really start adding up until people are in their 50s at least if not 60s. (Although I do understand that for some medical expenses come earlier). This is not a time that many people decide they need a much large house and the cost that comes with it. Also tuition expenses usually mean kids are leaving your household not entering, so yet again is an unlikely time for people to get a larger more expensive house.
HB,
The Warren report that pat referred to described the role of medical bankruptcies and showed that the vast majority of these homeowners were insured at the time they got sick.
The typical move up buyer is not "fairly young" unless you are including middle aged people in that category.
For every downsizer (who isn't near 65), I would bet you there is an upsizer (in price or home size) at least in this market. I know at least four others who are in my situation, looking for a house that better suits us and that would could not easily afford x years ago due to other expenses, lower equity, lower pay, etc. Realtors have also told me there is a ton of people just like us, which is why it's hard to find what we want at the price we want.
"VAI said...What is not sustainable and why? We are talking about this region. You grew up here (bethesda?), what has been the trend?"
IIRC from the data we found here, the "trend" is massive income growth in the DC area (#1 in the country) and very large increase in the number of households making over 200K per year.
I guess its not "sustainable" in that you simply cannot outpace the rest of the country forever.
Still that says nothing about how much higher incomes (and prices) shall be when we finally get back to a trend of merely "average" income growth.
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