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Thursday, August 11, 2011
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33 comments:
http://blogs.wsj.com/developments/2011/08/10/is-the-turmoil-in-d-c-hobbling-its-housing-market/?source=patrick.net
The report, released jointly by RealEstate Business Intelligence LLC, a research firm associated with a large multiple-listings service and Jonathan Miller of appraisal firm Miller Samuel Inc., says that the number of sales contracts in the Washington metro area fell 10.9% in July from June, the second consecutive monthly drop in pending sales activity.
Pending sales are actually up 29.3% from July 2010, when the market was in a lull following the expiration of the first-time homebuyers’ tax credit.
Median sales prices on closed home purchases, also ticked down slightly, to $370,000 in July, from $379,990 in June.
The report comes on the heels of fresh worries about the D.C. market.
"Pending sales are actually up 29.3% from July 2010...."
Did you read the entire article? It's clearly not doomish. There are multiple offers (you know that from personal experience). You need excess inventory for prices to fall in any meaningful way.
I WISH there was more inventory.
Todays Washington Post:
"Local real estate still draws investors"
Area firms attract hundreds of millions of dollars in capital.
What do you think pat?
The article specifically addressses potential DOD and other cuts. Seems the money thinks DC is the place to be.
Va_Investor, you are very bullish on nova's housing market which is a good perspective.
However if you are a realtor, it may be nice to have a disclaimer.
I found this article amusing:
10 housing markets that will collapse this year
Nothing in NOVA, but Bethesda makes #9 on the list:
9. Bethesda, Md.
Expected price drop: -11.5 percent
Median family income: $114,100 (the highest)
Unemployment rate: 5.1 percent
Median home price: $417,000 (5th highest)
Projected to hit lowest level: Q3 2012
Bethesda, the extremely wealthy D.C. suburb, has the highest median family income in the country — $114,100. It also has the fifth highest median home price, at $417,000. That position may change, however, as Case-Shiller projects home values will drop by more than $60,000 by next year.
It's already mid-August, where is the price drop?
Jewel,
Paragraph 4 is interesting when looking at Bethesda!
Vinny,
I am an investor (buy and hold landlord). I am bullish in that I don't see a drop of more than 5-10%. I don't pay retail and believe that I bought close to (if not at) the bottom. Rents are terrific and I see that continuing. Can you think of a market you would rather be in if your focus is real estate? I did not put any new money into the market from 2003 thru late 2008.
That said, not all local markets will fare the same. I have my preferences. My tenants are buying houses for me.
Another reason that I post upbeat news is to counter doomer articles - even if only the headline is doomerish.
p.s. I bought my first rental almost 30 yrs ago, so I'm not a get rich quick specuvestor.
VA_Investor,
Agreed, the article seems to contradict itself. Paragraph 4 reads:
"This link between unemployment and expected future drop in home prices shows again how insidious the housing price problem is."
And the unemployment in Bethesda is 5.1% according to the same article.
5% unemployment is big for bethesda, it's usually zero.
The real case is how many people are underemployed. How many consultants, etc are without steady work.
http://www.washingtonpost.com/local/dc-enclaves-reap-rewards-of-contracting-boom-as-federal-dollars-fuel-wealth/2011/06/27/gIQAWQC5HJ_story_3.html
"Last year, with her two sons grown, Talwar and her husband, Madan, moved from Fairfax Station to their sprawling home in Great Falls. They were drawn by the country ambience and friends who lived nearby.
When asked if her neighbors had felt the impact of the recession, she smiled quietly and said she didn’t think so.
“I think the economy is very different in Washington, D.C., than in the rest of the country because of the federal dollars,” she said. “Directly or indirectly, we all work for the federal government.”
Pat: the article you posted regarding the fall in DC sale contracts in June and July pretty much conforms to my limited, personal experience in following certain markets. It'll be interesting to see CS numbers for those months.
mike
I'm still bearish on the market because it's being underpinned by free money from the Fed. When that ends as all things must end, it will be very interesting.
Will prices just stagnate for a decade or will there be a fast correction
Pat,
Any data to back up your assertion that Bethesda had 0% unemployment at some point?
"Jewel said...
Pat,
Any data to back up your assertion that Bethesda had 0% unemployment at some point?"
Im curious about that too Pat -- my guess is the Bethesda MSA would rarely have gone below 2-3% unemployment in the last 20 years.
That said, do you have any evidence that it was once "zero" or is this simply another case of hyperbole/exaggeration we see so much of on this blog??
Pat-
Why do you think free money must end. First the fed has said it will be at least another two years (it will likely be longer) and if you look at Japan it has had free money for two decades now.
HB
Look a how well Free Money has served Japan. 200% Debt to GDP, zero growh for 2 decades, negative population growth, miserable consumer life,
Hopefully the american people will flense bernanke before he tries it anymore
Anon
I used to live in Bethesda, for at least a decade anyone who wanted a job could get a job.
I just take a peek and I discovered your awesome blog. You’re such an intelligent person. Big thanks and keep sharing.
condo manila
It's absurd to stick a pin in Bethesda and say that market will be down drastically.
Why would Bethesda fare any differently than other affluent, desirable locales?
This is an example of how worthless many of these predictions are.
pat,
You seem to ignore the price corrections that we have already seen in the region as a whole. You used to spend alot of time posting homes that were listed at 50% or less of tax assessment.
Pat-
Free money was not the reason that Japan's economy has sucked for the last 20 years. It sucked because they had an asset boom that was substantially larger than ours and they have no population growth.
We are much better off if we can use zero money policy for a few more years until their has been enough population growth to get demand back to where it needs to be to get the economy growing strongly again. If we raised rates now that would just cause deflation and more job losses...
I'd like to address pat's belief that higher interest rates will cause a serious price decline.
Ace pointed to a flaw in my observation of steady prices during the high interest rate period of the early 80's in that I failed to account for price erosion caused by inflation.
It is true that stagnant prices in an atmosphere of high inflation result in values dropping, but there is more to consider.
First; Stagnant prices do not put people upside-down on their mortgages.
Second; We now have much more diligence in underwriting (understatement). We won't see anywhere near the inventory of distressed sales.
Third; High inflation generally means higher wages.
Fourth; Homeowner psychology is entirely different when prices (nominal) don't drop. We won't see strategic defaults or buyer fear of purchasing.
"pat said...
Anon
I used to live in Bethesda, for at least a decade anyone who wanted a job could get a job."
So thats your proof that unemployment rate was "zero"?
Do you really think that "anyone" could get a job such that they were continuously employed at all times? In most of the US, 95% employment is considered full employment, in large part because it takes some time for fired individuals to obtain new employment.
So again, do you really think that 100% of the Betheada population had a job 100% of the time, or was your "unemployment rate of zero" just another example of exaggeration/hyperbole, vis a vis your one time comment "dont ever get into a bidding war"?
Anon
You must work for the government
to have so much free time to pick at every statement.
If you are so bored, why don't you get the BLS breakdowns by zip code by year, and have a good time with that.
Please, I don't have time in my life
for your petty wasterlings.
HB
"It sucked because they had an asset boom that was substantially larger than ours "
Um Nikkie Boom vs NASDAQQ Boom?
Their real estate boom versus ours?
When the japanese bubble popped,
how many japanese banks imploded?
How many europeans? How many americans?
But in the American bubble? When our
bubble popped how many american banks/Financial institutions went south? Merrill? Lehman? Bear?
Need I say more?
Pat-
If you are claiming Merril and Bear went bust than there are several Japanese banks, because lots of banks got support.
Although you seemed to miss my point on how large their bubbles were. Their entire market had a P/E of ~80. Also for their land bubble at one point the value of all the land in Japan was more than the land value of the entire rest of the world. So although we both had bubbles, there bubble was far worse than ours. You also failed to comment on my point about there population is flat while ours continues to grow, which will help eventually drive demand...
"Pat said...Please, I don't have time in my life for your petty wasterlings."
Well you obviously do, seeing as you have responded to me....twice.
Seeing as your most recent coment had nothing but ad hominem style comments, I shall assume that you concede that your initial statement about "zero unemployment" was mere breathless hyperbole meant to greatly exaggerate the severity of the current situation. Thanks for confirming that...
"HB said...You also failed to comment on my point about there population is flat while ours continues to grow, which will help eventually drive demand..."
Agreed. Frankly, I kinda wish that Japan's lost decade had never been brought into our consciousness, such that we wouldnt have to hear people trot it out as a cautionary tale of what is/will happen here.
The reality of the situation is, if you look at their demographics, Japan is in for at least 20, 30, 40 years of continuing stagnation/deflation, and there is nothing that can be done about that, short of paying people to have more kids.
That is not the situation we have here. While our indigenous population has a birth rate similar to japan & western europe, thanks to immigration, we have a growing population. As such, we have more and more people competing over scarce resources, which is entierly different picture than that in Japan.
It sounds like your faith in our economy is much like one's faith in a ponzi scheme. More will keep coming in, scarcity will drive demand.
Kev -- thats not a bad way of putting it. We keep adding new entries to the bottom rung of the ponzi, and as long as they continue to appear (via birth or immigration), its largely BAU for the economy in the long (10-20 year) term.
That said, restrict our immigration too much, combined with below replacement rate births, then yes, in that case we really would be "turning Japanese".
True, but keep in mind that as the rest of the world's standard of living catches up to ours, the impetus for coming here will be diminished. A projection of growth and sustainability based on a ponzi scheme-like model is always missing the bottom line.
"Kevin said...True, but keep in mind that as the rest of the world's standard of living catches up to ours, the impetus for coming here will be diminished. A projection of growth and sustainability based on a ponzi scheme-like model is always missing the bottom line."
Agreed, but thats further down the line...like 30 or so years from now. In any event, the "US is like Japan" comparisons in the present timeframe are pretty ridiculous given how different the demographics look now.
"contrarian said...
kevin said...
True, but keep in mind that as the rest of the world's standard of living catches up to ours, the impetus for coming here will be diminished.
Kevin, dude. I got news for you:
It's not a matter of the rest of the world catching up with the U.S. Rather, over the next 5 or so years, the U.S. will decline to be more comparable with the rest of the world.
Anon is too clueless to comprehend this salient fact.
8/22/11 3:25 PM"
More comedy gold!!! Glug, glug, glug, glug, glug, glug, glug, glug, glug, glug!!!!!!!!!
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