Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Please post your local house search updates, MLS finds, on-topic ideas, and links here.
According to Zillow the DC metro prices have fallen ~7% from last year. I wonder why Zillow & CS have such different views on what housing prices have done. Assuming CS prices continue to fall slowly it will show prices roughly flat at the end of Q1 (adjusting for 3M rolling average).Either way I wonder, which one is more accurate.
Longtime lurker here. I was wondering what the regulars here would have to say about the latest Zillow report. I can't link to this right now, but google "Market Watch" and "Brett Arends" for his take on this latest Zillow data.
cheryl says"Are prices falling locally? What is an example of your rent/buy scenario? Ex. this house would sell for X but it rents for Y."The answer would be All of PG, and much of Loudon, PW and FQ. Harriet's data shows the ideal market has been DCand that ARL/AX/FX/MC have done decently.So, if you wanted to, now would be a good time to buy something out in the sticks, a condo in Reston,or almost anything in PG.
housebuyer,Probably a difference in the regions they're measuring. For instance, if C-S is measuring Arlington, DC, and Bethesda, it would probably show price increases. If Zillow is looking at counties further out, it would show price decreases. Or vice-versa, I don't really know, but that's more likely the reason than the different methodology they are using.
Kevin-They both claim they are the entire MSA, but maybe that accounts for some of the difference.Susan-I am starting to question CS as the gold standard in housing prices. Zillow, corelogic, and a couple other indexes have basically agreed that housing prices are much lower than CS. CS has also had to revise its numbers lower almost every month recently. I am starting to wonder if CS has some upward bias to its numbers
I don't know much about the indexes, but one thing has always struck me as strange about the C-S methodology. If I understand it correctly, it tracks the sales of the same houses (not similar, the same house) over multiple years. Since most houses are not sold very often, by definition, houses that are sold 2 or 3 times in a 7 year period, for example, are unusual rather than typical, and therefore probably not representative of houses in general--or even of all houses sold in a given year--in at least a few ways. And if they aren't representative, that may distort the price picture. For example, houses that are sold frequently may tend to be in neighborhoods that are selling better, for better prices, than houses in other neighborhoods. On the other hand, maybe the sellers would feel more urgency to sell these houses, keeping prices lower.
http://www.zillow.com/wikipages/Zillow-Home-Value-Index-vs-FHFA-and-Case-Shiller/ Differences between FHFA, Case-Shiller and the Zillow Home Value IndexThe chief major difference between FHFA and Case-Shiller lies in the fact that FHFA numbers are based only on homes sales with conforming home mortgages (loans less than $417,000), which eliminates a fair percentage of real estate transactions. Case-Shiller looks at all home sales, regardless of the mortgage amount.The Zillow Home Value Index takes a different approach to constructing its market index. Zillow generates valuations several times a week on more than 80 million homes, or roughly three out of four homes in the U.S., and calculates historical values dating back to 1997 (thus creating over 13 billion Zestimates). This complicated process allows us to aggregate these house-level valuations into indexes at the neighborhood, ZIP code, city, county, metro area, and national levels. This Zillow Home Value Index eliminates the bias present in median sale prices by looking at the value of all homes in a region, not just those homes that sold.The statistical models underlying the Zestimates control for the mix of housing for sale by finding patterns in the types of homes that are selling (no matter how unrepresentative of the overall set of homes) and then applying these patterns to all homes. For example, if only a few homes of a certain type sell in a given period, the models can extract the information from those sales and apply it to all homes of that type.So basically, the Zillow estimate takes houses in the Conforming level, and then just builds a correlation line by zip code, and market. C-S i think takes the exact house, which may show the volatility in that people are upward sticky and unwilling tolook at losses.
I think CS would have a downward bias as so many sales have been distress in the past few years; unless, of course, you consider beat-up reo's to be comps.
AnonFor a walk down Alzheimers lane, here's a good one.http://franklymls.com/AR7438062Sold during the Bubble in 05 for 395K,now it's flipping in and out of contract for 225. Now had someone bought that place in 05, and been paying it's mortgage off for the last 6 years, they would be ???150,000 underwater or so. I think one can make a glugging sound now.what do you think?Timing matters, valuation matters.
Pat-Thanks for describing the differences.VA-They adjust for the type of sale. They also remove houses that sell for a lot more or less than they would expect, because it likely means the interior has changed for the better/worse. The problem is there are a lot of places they can adjust prices so to some extent they get to pick what they want the results to be.
Have the CS/Zillow numbers caused any of you (who are looking to buy) to take a step back?
VA-In a very small sense yes. There were two houses that I liked that were both dramatically overpriced and the owners were unwilling to negotiate. If CS had been going up ~1%/month since last year the houses would have been close to market and I might have considered their prices. Seeing that prices have instead been falling I am not about to pay 10% more than the best comps from 8 months ago.So in conclusion I am not that worried about the fact CS is going down, but it is making me slightly less willing to overpay for a house. So I am still intending to buy, but I see no rush to do it right now.
Va Investor: These numbers do make me think that it might be best to wait, at least until next Spring. We're been sitting on the sidelines waiting to buy a house in NoVA for 6 years now. (We're renting a two bedroom condo in Alexandria. We have two small boys and never dreamed we wouldn't be in a house by now.) Six years ago, we were simply priced out of the market. In recent years, we've been waiting because we thought that the tax credit had simply generated demand and kept the market from fully correcting. For the last few months, especially after the last CS reports, I had started to consider that we might be wrong, after all. Now I'm wondering whether we were right to stick with our instincts that NoVa real estate has further to go to correct. It never fully corrected after the bubble and that just doesn't make sense. I am not that knowledgeable about real estate, but it never made sense to me that prices never fully corrected in NoVa. When the CS numbers kept saying that NoVa prices were rising, I finally told myself that the demographics had changed and that the real estate must simply be more valuable, although it was difficult for me to believe that. Someone said that the trick will be to find the "sweet spot" where the house you're buying is still overpriced, but you're still able to get a fixed rate mortgage. Not sure what we will do, but I do know that we will wait a bit longer.
VA_I, not really. C-S numbers are delayed, so what they're reporting for several months ago doesn't change my perspective or plans. Mostly, it's just confirmed what I was expecting based on other observations. It might however impact whether I buy soon or not since it splashes a dose of reality on sellers' faces:)
Re: Zillow...certainly the 'Zestimates' aren't even close...always high.The market in Great Falls, VA is not good. Houses sitting. Prices being cut.
Robert-I think whether the zestimates are high or low depends on your neighborhood. I have seen many areas where the zestimates are always to low. Although I agree it seems like overall they tend to bias high.I agree with you that sales appear very weak, but that is not just in great falls, but most of the area. If you look at the monthly sales reports they are at or near all time lows in most of the counties.
If you look at Zillow's "description" of their methods, it is pretty ambiguous. Although they are entitled to do that as a business practice, obviously, the lack of transparency renders the validity suspect. In my neighborhood and in some others that I've explored, they have calculated wild swings in value, which obviously can't be valid. In trying to sort out why, I've come up with a few guesses.1) They rely heavily on published assessed values to set a baseline. As we all know, these can be close or way off because they may omit a lot of relevant factors for a given house.2) When there is a sale in the neighborhood, and the house has been upgraded and fetches a good price, all houses with similar "hard" characteristics, e.g., square footage, garage or not, lot size, # of beds., # of baths, etc., get adjusted upward substantially. Ditto when a ruin is sold, except downward. Obviously your own house is only in one condition, so it shouldn't vary that widely, but its Zestimate does.3) If there are few neighborhood sales, your house's Zestimate, and those of the neighborhood, really get distorted if most of those sales are of either significantly upgraded places or ruins. I don't know what other data Zillow could be using, since it doesn't survey people or inspect houses, as far as I know, and doesn't do anything else to gather info on houses that are not sold.
I've seen a lot of No. Arl. houses with price cuts in the past month, but in my opinion, all of them were pretty badly overpriced to start with, relative to the competition. The ones with competitive prices are selling quickly. So, it doesn't look like a downward trend to me, but the eyeball test is not always a good one.
Ace set a competitive prie and you will get competition.set an uncompetitive price and it won't move.
Pat, not sure what your point is, since I don't think anyone here is debating the general idea of markets. My point was that I don't see generally declining prices in NA; the price drops are not drops from 2010 values but rather drops from asking prices set well above them. Sorry if that was unclear.
RE: ZillowCompletely unreliableEX. I just looked at at a couple of mls listed properties on redfin. One is a short and the other is an reo. Exact same model in same development. Both remodeled by the developer in 05/06.property one: mid number is 168Kproperty two: mid number is 185KBoth UC but not yet closed. One has a ton of pictures, one has zero. I've been inside the "zero" and it's nicer than the one with 16+ pictures.This is a huge discrepancy based on % of "value". I fail to see the value of zillow.btw: one unit is uc at 217K and the other at 180K. Guess which is which?
Zillow has some serious flaws that need to be corrected before I give it much creedence. I once saw on another blog that Zillow lisitng prices in CA were surging dramatically upward. Someone else then pointed out that 6 months earlier, list prices surged as well, but they were later revised to show list prices were actually down. Later, a guy claiming to be from Zillow commented that this was one of the problems with their "Zestimate" and that they were working on it.Sure enough, that latest surge in CA list prices disappeared, yet another new one appeared. We dont know if it is legitimate or phantom since Zillow is still "working" on the problem.
Corey,I think it's much more accurate to access actual sales (comps) thru the tax assessor and mls. Mls descriptions often tell you about condition, updates, etc. Knowing your target market is the best starting point.
Federal Retreat on Bigger Loans Rattles Housinghttp://www.cnbc.com/id/42987471/[again, this will effect the DC market, and not for the "good." I'm not predicting fire-sale prices, but it is another head-wind facing this region, as well as many others]For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods in high-cost states like California, New York, New Jersey, Connecticut and Massachusetts. Without the government covering the risk of default, many lenders would have refused to make the loans. With the economy in free fall, Congress broadened its traditionally generous support of housing to a substantial degree.. . . The National Association of Realtors, 8,000 of whom have gathered in Washington this week for their midyear legislative meeting, is making an extension of the loan guarantees a top lobbying priority. “Reducing the limits will put more downward pressure on prices,” said the N.A.R. president, Ron Phipps. “I just don’t think it makes a lot of sense.” But he said that in contrast to last year, when a one-year extension of the higher limits sailed through Congress, “there’s more resistance.”Brokers and agents here in Monterey said terms were much tougher for nonguaranteed loans since lenders were so wary. Borrowers are required to come up with down payments of 30 percent or more while showing greater assets, higher credit ratings and lower debt-to-income ratios
Mike,The general consensus seems to be that prices are at 2003-2004 levels.When did the limit for conv/jumbo go up? Seems we are probably close to what things looked like before.I'm not saying that this isn't bad for expensive areas; just questioning how bad.Are lender's allowing secondary financing? (70/10 or 70/20)My home would fall into jumbo range but I believe most buying would be trading up and/or have other $$$ for a downpayment.If past "cycles" are any indication, it will be a number of years before conventional financing loosen's up.OT - to those concerned about low sales numbers, I would point to inventory. As long as we don't start seeing a steady climb in inventory, I am not worried and will stick with my "bounce along the bottom for a number of years" prediction. I expect to see CS reflect this. We don't have a long enough trend to make any conclusions about a double-dip.
Corey, interesting.VA_I, agree. There is a house around the corner from mine that has exactly the same floor plan (built long ago) except his had space added onto the kitchen many years ago, and mine has a porch that was finished recently into another room for the house (he has no porch). The records Zillow is using probably do not note which rooms were expanded/added. He has a third bath in the basement. His lot is smaller. We've put a lot more money into our house and yard recently, but we know Zillow doesn't know about that. Zillow says his house is worth 15% or so more than ours, apparently because of the basement bathroom. But that should only add about 3% of value, if everything else is exactly the same, which they aren't.Although the huge difference could be explained if Zillow has mis-chosen the comps., or if it uses a regression equation that weights baths too highly, in no way do the Zestimates match what the actual value difference would be for these two houses. I think Z's pretty close right now on our house, but pretty far away on his. There is another nearby similar house for sale now listed at an inflated price well above the Zestimate. Once again, there are old updates, but the seller thinks they're worth top dollar. I think that owner and my neighbor will be disappointed at what the selling price will be, but they really shouldn't be, if they've been paying attention to sales of other comps.
Ace,I note your examples and why Zillow may be inaccurate. But what about my example - 2 properties that are exactly the same (same model!!!).
VA_I, yes, as I said, I agree -- it's a good example.
Cheryl Says"When did the limit for conv/jumbo go up? Seems we are probably close to what things looked like before."2008. wikipediaA temporary increase in the Conforming Loan Limits for high-cost areas of living has been incorporated into the 2008 economic stimulus package. Congress has authorized an increase of the single family residences limits to the lesser of $729,750 or 125% of the median home value within the metropolitan statistical area (MSA). High-cost loans are only available through FHA loans.The bill was signed into law by President Bush on February 13, 2008, but the new rates are still not being honored by any lenders (as of March 30, 2009).The new Jumbo-Conforming program has been adopted by Fannie Mae and Freddie Mac effective April 1, 2008
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