The S&P/Case Shiller® composite index for the month of February was released on April 24th.
"'While there might be pieces of good news in this report, such as some improvement in many annual rates of return, February 2012 data confirm that, broadly-speaking, home prices continued to decline in the early months of the year,' says David M. Blitzer, Chairman of the Index Committee at S&P Indices. 'Nine MSAs -- Atlanta, Charlotte, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa -- and both Composites hit new post-crisis lows. Atlanta continued its downward spiral, posting its lowest annual rate of decline in the 20-year history of the index at -17.3%. The 10-City Composite declined 3.6% and the 20-City was down 3.5% compared to February 2011.'"
40 comments:
I think it's fair we are in wave 2,
the issue is how deep this wave will be.
The good thing is the supply input has been so slow for long enough, that inventories are starting to dry up.
the issue is all the ones who are underwater, paying on houses, that may not be above water for another 5 years.
actually heres' a good bet.
Which will be more likely we are out of Afganistan by 2014 or the median buyer from 2006 is above water?
It appears medium-high end TH in prime locations are also pretty hot. In my new development near the Vienna metro TH are (~550-800K). They have now raised the prices ~10K two months in a row and are planning on doing this a third time (they sold 28 TH in April at the current prices). I really thought I was overpaying by ~20K when I bought right as the development opened, but figured my wife and I liked the house and 20K isn't that much to have a house you want in the location you want. Since then they have raised the price 20K and are about to raise it 10K more.
It really shows that there is a lot more demand for places in convenient locations than there is supply.
I still expect that once all the houses have sold people will think more rationally and the prices will come down some, but who knows.
"I still expect that once all the houses have sold people will think more rationally and the prices will come down some, but who knows."
Well, inventory dropped 20 overnight in my zip and prices are still going up. There just isn't enough inventory to meet demand, so people are willing to pay more for less.
Corelogic has come out with some interesting March over March stats. Completed foreclosures and 90 day delinquencies continue down YOY.
What's interesting for those trying to make sense out of CS - Wash, DC., there is a state by state breakdown of 90 days delinquency rates.
VA is 3.9%
MD is 8%
DC is somewhere in between.
HB,
I was wondering if anyone was actually putting down money on those places near the metro. They seemed way overpriced to me. Especially when you have single family homes that are essentially the same walking distance to the metro with 1/2 acre lots available for less than 500k.
Out of curiosity what houses are you talking about? Most of the houses with a big yard I have seen in the area are 800 to 1.2 million. Either way the answer is yea they are moving very quickly. I think they have sold well over half of the houses. They are also selling them much faster than they can make them.
I am curious about exactly what houses you are talking about, but my guess is that if the houses are truly under 500k and near Vienna the houses will be very small and in rough shape. There are a lot of people who would rather have a larger a house that has nice features than a smaller house with a big yard
Look at James or Bel Glade. They are older houses, but most of them have been updated. You're generally looking at 1400-1700 square foot ramblers, not including the basement. And from looking at the Pulte website, the smaller town homes are only 1500 square feet, so the size is comparable.
There is currently nothing for sale in that price range. There is land with no house for sale for 550K a house for $1MM and a house for $1.8MM. It looks like in the last year there were 2 places that fit your description. Both at least in my opinion looked rather old and somewhat dated. Neither had particularly open floor plans either.
I think for better or for worse when there are relatively small older houses on valuable land the house ends up adding almost no value, because many of the buyers just intend to knock it down and add a larger house.
I should also say that my last comment is not trying to offend anyone, by saying what type of house is better or worse. Some people really like to have more land and others prefer less land with a newer house. It is all just a matter of preference.
HB, I agree. The TH are likely to be in much better shape and probably newer. It's an apples-to-oranges comparison, even if there were SFHs in that price range, as you said.
Interesting #s, VA_I.
Sorry about the deletion.
HB said...I think for better or for worse when there are relatively small older houses on valuable land the house ends up adding almost no value, because many of the buyers just intend to knock it down and add a larger house."
Agree. In fact, you can make the argument that the place would be more valuable as raw land than one with a house the buyer planned to demolish.
Case in point, years ago, my uncle paid 180K for waterfront property with a rickety old house, and then paid 10K for someone to demolish the house and haul it away. Had it been raw land to begin with, he gladly would have paid 189K, and be better off, with no house whasoever...
Anon,
You used to be able to "donate" the house to the local fire dept. They would use it for training. I got an appraisal once on a house and had an agreement with the fire chief. The IRS has since fought and won these deductions. Sweet while it lasted.
DC makes list of top five most expensive cities in which to buy a house (measured as price per square foot):
DC is third
5 years without a mortgage payment evicted.
http://www.washingtonpost.com/local/fort-washington-couple-evicted-from-million-dollar-house/2012/05/04/gIQAkTCc2T_story.html
that couple who made the post, for owning a million dollar house for 5 years without making a single payment, were evicted friday, about 6 months after the bank was finally able to issue a foreclosure action.
this may bea sign that PG county is bottomed out and going to rise again.
http://2.bp.blogspot.com/-Vown4-yJCCA/T6QQUjOlXQI/AAAAAAAANMY/q7-0DuUIses/s1600/BurnsHousingSummary2012.JPG
this graph is a pretty good summary of the US Housing market.
12 million units vacant or expected to work their way through the system.
12 million units who are renting with a forced mortgage.
Thats a large chunk of people who will not be in the buying business again for a long time.
Bernanke and Geithner and Obama may want to restart zero down mortgages but that just kicks the can down the road.
http://www.calculatedriskblog.com/2012/05/graph-us-housing-market-summary.html
heres the story to go with the graphic.
"I think the estimate of excess vacant housing units is too high. Using the Census 2010 state data, I estimated that the number of excess vacant housing units was above 1.8 million on April 1, 2010 (the date of the Census). See: The Excess Vacant Housing Supply. The number of excess units is lower today, and I think it is now less than 1 million units nationwide. A key difference is that I used both the 1990 and 2000 Census data to estimate the excess supply, and Yamano only used the 2000 Census data.
As Yamano noted, he made a "simplifying assumption" on delinquencies to make the chart readable (I think the chart is great). However it is important to remember that not all delinquent borrowers have negative equity, especially those in the 30 to 90 day delinquent category. Even in good times, around 2 million borrowers are one to two payments delinquent, and that is probably happening now too. This probably means there are another 1 to 2 million borrowers with negative equity that are current than shown on the chart. That is a key category since these properties could become distressed sales in the future - and that is why these borrowers are the main target of the HARP refinance program."
it's not a perfect graph but it still shows the apple going through the snake.
Pat-
As a heads up the 12MM number you point out for vacant houses is very normal. These mostly are houses where the owners have a couple of houses (summer/winter) or rent them out for only a couple of seasons (e.g. beach houses/ski houses...)
http://www.calculatedriskblog.com/
http://www.calculatedriskblog.com/2012/05/mish-on-rentership-and-house-prices.html
HB
Aren't summer rentals, not vacant?
the bigger one is the vast pool of the underwater but still in service, when they figure out that they are
renting and going to take a big hit when they have to sell, well,
that's going to be a mess.
I read an article by CNN that cited sources (the census?) indicating that about 1/3 of homes counted as "vacant" are actually second homes.
Pat, I don't understand your point. "Vacant" second homes are not shadow inventory and should be subtracted. And, what is the tax issue?
Pat
Vacant means that no one was there when the survey was sent or census stopped by. So at this time of year most likely the summer house wold be vacant, but if it isn't then whoever is renting it would have an empty house.
Also most of the people who are current and underwater are less than 10% underwater and have been underwater of 4+ years. Why do you think all of a sudden they are going to leave especially since rental markets are finally getting tight so renting is more expensive than owning in most of the country
HB do remember that every person foreclosed upon creates one new renter and one ultimate rental housing unit.
Now there is a lag, in that people foreclosed upon need a place to stay right away and the foreclosed unit may take 6-18 months to hit the market, but the real driver for demand is Household formation, population immigration minus death rate.
there are lots of places where houses can be bought for a dollar.
HB
I do agree that rising rents and rent/price parity are starting to rationalize the market.
wether there will be overshoot or will the Fed come up with something else to prevent that, I can't tell.
Pat-
I agree with your comment about what matters is household formation, but you also need to compare that to the speed new houses are being built. Even though formation slowed significantly during the recession it was always substantially higher than the number of new housing units. In fact CR has shown on a couple of times that almost all of the excess units created during the boom have been absorbed. Even though this is the case houses are still being made at a very slow pace, so if this continues inventory will get unnaturally low.
pat, there are no dollar houses around here and, I believe, if you look you won't see them in Detroit anymore. I predict a housing shortage in a couple of years. We are 6 yrs off peak (7 in my book). Flat prices may last for 3 or 4 yrs, speaking in very general terms, and then the shortage will drive prices higher. Do you disagree that the worst is behind us? When you say "wave 2", what exactly do you mean?
Time to "hang-up" this forum. It's over.
Cheryl
there are no Dollar houses in DC, but there may be some still in baltimore :-( it's pretty scary up there.
now detroit, lots of cruddy market left, it's all depending upon autos still and thats a unhealyty industry.
given the builders have started building again, it's probably a sign that buyers want hat isn't in the invetnory.
of course, lets see what the heck happens. Europe seems back in recession, Japan is in recession, china, well it's "Soft Landing", so
will the US economy stall out this summer?
CoreLogic HPI March 2012 data is out. Cites Washington as one of the strongest Markets.
This data is months ahead of CS.
Per Transunion, First Qtr mortgage delinquencies are down YOY (6.1% to 5.7%) and expected to continue to trend lower throughout the year.
Also, I caught the tail-end of a housing prediction of price increases of 4% per year over the next 5 yrs. Sorry, I missed the source. I doubt we will be below the trend.
thanks VaI...is there a link?
I don't have a link but the prediction on future pricing was made by Fiserve.
cheryl
to be fair, a lot of the housing bears are going to hibernate or calling a bottom.
i'd say given the 5 year stoppage on supply and the movement towards multi family, it's probably a sign that
something is happening.
of course we are in a zero interest rate environment, it's unlikely
we will see strong price appreciation, and more likely, sort of the death by a thousand cuts.
http://www.nytimes.com/2012/04/28/opinion/nocera-my-faith-based-retirement.html?_r=1&hp only 22% of the boomers now have adequate retirements, amazing.
Pat, I saw that article earlier. If you follow the link to the article that supposedly reports the 22% and other similar statistics, IIRC, you won't find them in the linked report. The reason I searched for it was that most people have multiple 401k and other retirement accounts. So I wanted to see whether EBRI asked respondents about the total they had in all accounts, versus "what is the average balance in any single account"? Since I couldn't find it, I suspect that the small account account balance is for a single account and grossly understates what people have saved or vested in all their retirement accounts.
PS Pat, I think you said in an earlier thread that you were nearly 50. Depending on how "nearly", you also are a baby boomer, which includes people born 1946-1964. The NYT article referred to people 55+. The oldest boomers are just now becoming eligible for full retirement benefits, so lots of retirees or near-retirees are actually from an older generation.
definition of Baby Boomer
The EBRI report says that nearly half of the people nearing retirement (I think -- the report is not clearly written) have a defined benefit of either a major or minor amount available, but this was not included in the savings figure, nor was the value of their homes. I personally agree that the home value should be excluded, unless people are prepared to sell their houses and live in rent-free boxes. But the value of DB plans is important. Someone who has a military pension and health care is typically a very comfortable retiree. Someone who has a $7K per year pension from a few years of service at a company they quit, or the fed. govt., is obviously in a very different position, everything else being equal.
Beautiful house.. I like it
http://www.arthurrutenberghomes.com/?page_id=25
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