‘Twenty Year Cycle In Housing Market Has Finally Peaked’
Inman News reports on the latest numbers from the Washington, DC area. “Washington, D.C., metropolitan area dropped significantly between June 2005 and June 2006, while prices maintained modest growth, according to statistics released Friday by Metropolitan Regional Information Systems Inc.”
“In Washington, D.C., home sales dropped 21.2 percent in June from a year ago. In Prince George’s County, Md., sales fell 21.5 percent year-over-year last month. Sales in Montgomery County, Md., plummeted 31 percent.”
“In Alexandria, Va., sales dropped 33.3 percent. Sales in Fairfax County, Va., sank to 1,680 in June, down 38.6 percent from 2,737 a year ago.”
The Washington Post. “The era of double-digit property assessment increases for Northern Virginia homeowners appears to be over. Government officials say a rapidly cooling housing market means residents can expect minimal growth in the value of their property this year.”
“In Fairfax County, listings of homes for sale have increased more than threefold since May 2005. ‘The period of double-digit growth in home assessments has abruptly ended,’ Fairfax County Executive Anthony H. Griffin told the Board of Supervisors.”
The Baltimore Sun. “Housing sales in the Baltimore area skidded more than 22 percent last month from June 2005 levels, the biggest drop in more than seven years. Even Baltimore City felt the impact. Listings piled up and sellers in popular areas like Fells Point and Canton took price cuts.”
“‘The market has changed to significantly more sellers,’ said (realtor) Stephanie Bamberger. ‘The buyers I’ve been working with are not as anxious to jump on properties as they’d been in the past year. There’s more hesitation and not wanting to pay the price sellers are asking.’”
“Celia Chen, director of housing economics for Moody’s Economy.com said, ‘Sales are slowing and house price appreciation is weakening. The housing market is definitely on the downside of the cycle.’”
“Home sellers increasingly are disappointed to find they need to drop their price or offer cash for closing costs to entice buyers, real estate agents said. ‘Instead of 10 houses in your neighborhood for sale, there might be 20,’ said agent Ann Mangels. ‘If it isn’t priced fairly, the place is going to sit there until the seller realizes they have to reduce it.’”
The News Leader in Staunton, Virginia. “Not long ago, the housing market in Waynesboro was a seller’s paradise. Those days are gone, area agents say. Drive around any neighborhood in the area, and one is sure to find a ‘For Sale’ sign planted in many a front yard. Drive around the same neighborhoods next week, and chances are many of those same signs will still be found.”
“(Appraiser) Bill Cason, said a 20-year cycle in the housing market has finally peaked. ‘We’re at the top of the cycle, and we’re starting a downward trend,’ he said. ‘Now, it’s going more toward a buyer’s market.’”
“With 800 new homes planned in Waynesboro, Cason predicts existing home sales will take a hit. ‘It’s going to overload the market, it’s really going to slow down,’ he said. In fact, Cason said the slowdown has already begun. ‘Our appraisal work has dropped off.’”
“One telltale sign of a slowdown is an increase in price reductions on homes already listed. ‘There are a lot of price reductions coming through, more than we’ve seen in the last two years,’ said (broker) Vonda Lacey. Lacey said anywhere from seven to 10 reductions occur daily.”
“Like Lacey, mortgage banker Vickie Painter, said higher prices and higher mortgage rates are helping put the brakes on a once-blistering market. ‘The buying power is changing,’ she said.’The bidding war is done.’”
Thanks to the readers who contributed to this post.
Ben…You are AWESOME. Thanks for a continuing great job on this blogsite! I don’t know what I’d do without you!!!
ECR Capital, canary in the mortgage purveyor mineshaft:
http://www.xanga.com/russwinter
Awwwesome research russ! I came over here ready to post your current blog website, just in case you did not.
Indeed — I would highly recommend Russ’ site. I started reading it a few weeks ago and now it is part of my daily bubble blog rounds. A solid companion to this site with a focus on the financial mechanics of the bubble.
Don’t suppose you could post text here ? My company blocks that site for some stupid bullshit reason.
from Russ’s site:
“ECR Capital, Canary in the Mineshaft
There is a toxic mortgage purveyor that I’ve been stalking (I mean tracking) called ECR Capital (ECC). I wrote a blog on it earlier. I was going to wait until they reported for the just ended quarter, but just couldn’t resist going ahead now, because it’s so representative of what I’ve been talking about lately.. I certainly don’t expect their picture to be any prettier though. What I’m focused on right now is their held mortgage portfolio, and their ridiculously low loan loss reserve of $6.1 million against that $3.75 billion portfolio, and in turn their capital requirements (if any).
You can see the portfolio makeup here. About half consists of 2/28 ARMS, with only 20% constituting 30 year fixed. The average FICO score is borderline subprime at 623, income to debt ratio is 41%, and the LTV is stated as 80% (LOL). They have a major California exposure. At the end of 1Q in March, the average coupon was 7.23%. No doubt that payment obligation for their debtors is and will move higher yet, and we have three more months worth of cohorts subjected to rate resets under our belts. We will get another look when they report in a few weeks. But here’s what past dues looked like in March:
-loan loss reserves on $3.75 billion held portfolio, was $6.1 million.
-30 days past due: $222.6 million or 5.93% of held portfolio
-90 days past due: $113.3 million or 3.02% of held portfolio
- plus they had $2.42 billion of mortgages held for sale, which they certainly aren’t getting 100% on.
And who provides credit facilities to this outfit? They have a big repo warehouse tied to one month Libor provided by the usual suspects like Wachovia, Credit Suisse, Bear Stearns, and MER. Here’s my big question, WHERE ARE THE BANK EXAMINERS, the accountants, and what are the usual suspect loan officers doing? Are there any examiners and credit officers even left in America? Are these boyz (and gurls) subject to any regulations or responsibilities at all? Even if outside the scrutiny of banking regs, how can they get away with a $6.1 million loss reserve when $113 million in held loans are 90 days past due, and a total of $222.6 million are 30 days, and the fictitious collateral backing these nonperforming loans is heading south? Does ECR really have any capital at all? Stock market values the stock at one buck, or $100 million, and of course I’d say that’s really pushing it.. Still, in aggregate ECR has been provided with another $1.1 billion in debt and repo financing between 2Q, 2005 and 1Q, 2006. What are their warehouse providers thinking and doing? Guess we will see when they report?
New Century Financial is the second largest originator of subprime loans. Ameriquest is first.. NEW announced another big routine wash, rinse, repeat increase in loan production for the second quarter. I will look at their portfolio performance when it’s reported in a few weeks. Take special note that non-prime borrowers have been hit with an 15 basis point increase in rates in the last several weeks, suggesting that competition is waning, and conditions may be tightening? This item hit the wires yesterday as well. First Franklin is the number 8 purveyor of subprime mortgages. Finally this scathing rebuke of little ole Fannie Mae and Freddie Mac also hit the wires, speaks for itself.
“The risk has certainly been reduced by the remedial actions that the two management teams have put in place at our direction,” Lockhart said. But it will take a number of years — two, three or more — for the two companies to get their financial houses fully in order, he cautioned.
In addition, he said, “There’s still some arrogance in the culture. … There are certainly people in both organizations that have retained and will retain some of that arrogance.”
Lucky for them, the FCBs have been a force, by purchasing $240.5 billion in housing agency Old Maid Cards, since the end of 04. Now with yields at multi-year highs, nearly every security they bought should be selling at a loss at this point. Do FCBs have examiners or oversight too?”
You are going to miss important collobrating links I provide when when posted and read in this manner.
Yes, but at least we can read the text if you post it. Other companies also are blocking you, or preparing to do so: “Personal/Dating” or some such BS was the reason. Hmmmm…
Are these boyz (and gurls) subject to any regulations or responsibilities at all? Even if outside the scrutiny of banking regs, how can they get away with a $6.1 million loss reserve when $113 million in held loans are 90 days past due, and a total of $222.6 million are 30 days, and the fictitious collateral backing these nonperforming loans is heading south?
The “fix” is in at the top. The politico’s all know the only thing which has been holding up the economy for the last decade is “cash-out” refi’s and the market creation of fictional equity.
Lehman Brothers blocking me? They are one, and I take it as a badge of honor.
I wouldn’t take it personally. I would guess that the problem is that Xanga is widely considered to be a trashy teenage bloghost, sort of like MySpace. A lot of big companies want nothing to do with their employees hitting these sites, irregardless of specific blog content. I’d suggest mirroring your blog on a more mainstream bloghost.
bravo!
jmf (germany)
DC Bubble - Where are you??
Most excellent question! LMAO
In denial with his newly idle real estate agent brethren, no doubt. The DC blogosphere is overrun with bitter realtors angrily denouncing any and all who question the greatness of housing. Their explanations as to why DC is “different” are at once fantastic and hilarious. We’ve another year or two before we find out just how “different” it is.
Underwater
I’m surprised at all of the properties listed under the keyword “auction” at the D.C. area’s craigslist.
Here’s an old wallpapered jewel under foreclosure in Haymarket, VA, for 699K. http://washingtondc.craigslist.org/nva/rfs/180278566.html
Interesting sales history:
$697,537 3/6/2006 LONG BEACH MORTGAGE COMPANY XC
$845,000 9/2/2005 TREJO JAVIER
$784,000 4/21/2005 AMAN ZERLESHT
$250,000 11/27/1995 HARRIS DANIEL G TR
A new desperate seller posting at the Wash. Post Real Estate board today. Her cats are “obviously” the problem, in spite of the fact that the neighbors haven’t sold either. (And she talks about 25K “losses”. Oh, please. Over the highest sales price last July, likely).
“From: Swartzenkat 1:09 am
To: ALL (1 of 7)
My house has been on the market for 3 months, and the listing is about ready to expire. Am happy with the marketing efforts of my realtor - Lots of visits, open houses. But no sale, no offers, which is surprising to me, as the place is in a really great location and shows well. Lots of upgrades. Although other units like mine are not selling either (or are selling at a $25,000 loss), a couple of the agents commented on odor due to my pets . . . Meanwhile, I bought a new place in the Charleston, SC area, very low mortgage. Monthly payments on the old place are going to start really hurting in about 2 months, so I don’t know if I want to keep trying to sell it, or re-finance, then rent it out and hope the market picks up in a year or two. If I do the latter, I will be out of pocket about $500 a month. Any advice? (no I won’t get rid of my cats). Thanks for any suggestions. Am pulling my hair out and losing weight over this. “
Thanks for any suggestions. Am pulling my hair out
__________________________________________
Rogain!
The ripple effect from people like the cat lady will grow and eventually make prices crumble. This lady wants suggestions to get her house sold. She is apparently clueless that the main reason her house isn’t selling is the high price. So my advice, cut your price 10% below your competition for starters and see if you get any action. If not, repeat in 5% increments each week until its sold.
Otherwise the cat lady is going to be forced to hold her smelly property through the long, slow summer and fall selling seasons.
Blaming the lack of sale on cats is step above the “I drive a gas guzzler and need to live closer to work” excuse.
However, if a real buyer is out there and looks at her place, and it smells of cat (or dogs), and there is a comparable place with no bad smalls, the buyer will walk. I usually do.
“losing weight over this”
I can see the new diet infomercials now:
“The latest and best diet plan with guaranteed results. Just follow diet guru David Lereah’s new diet plan and shed those unwanted pounds fast. The secret is in buying as big of a home, or preferably a condo, as possible for the highest price possible. Then wait until the market cools before looking for a greater fool. We’re so sure it will work that we’re offering a money back guarantee*
*By money back, we mean we guarantee you’ll never get your money back from the property. But at least you’ll lose those unwanted pounds.”
If you’re fat then losing weight is a plus!
I would guess that as price growth goes negative (and we’re almost there) potential buyers will be much more reluctant to enter the market. This will probably occur near the same time the media is reporting the upside-down situation of many FBs. It feeds on itself on the way up and on the way down.
Exactly. Buyers will no longer worry about being priced out forever, but instead about how to pay off a $450,000 debt one dollar at a time.
The Sun isn’t quite ready to put down the pom-pons yet. But they are running out of ways to sugar-coat the numbers. This is a remarkably subdued report for this paper.
“(Appraiser) Bill Cason, said a 20-year cycle in the housing market has finally peaked. ‘We’re at the top of the cycle, and we’re starting a downward trend,’ he said
Only foolish people would buy at the top of a downward trend…
Agreed. This situation really has me spooked. At this rate, my wife and I may be able to put down at least 50% by the time we’re willing to enter the market. People probably think we continue to rent because we can’t “afford” to buy….ha!
“People probably think we continue to rent because we can’t “afford” to buy”
It’s best to just smile politely and say “yes, that is why I’m a renter”, all the while chuckling (”heh heh heh!”) inside your head. Works wonders.
Also works when your friend shows off his new H2 while you still drive a minivan with 200K miles on it…heh heh heh!
Check out these numbers:
http://www.nvar.com/market/pressrelease/prgnvjune06.html
9.5 billion in sales for this year. That’s a 3.5 billion drop from last year.
Graphs sometimes speak for themselves:
http://virginiamls.com/charts/Loudoun.htm
Nice graph….appears to be a *slight* upward trend.
Excellent graph.
Sellers must be crapping their pants, especially those looking to make a quick turnaround before their ARM adjusts upwards. Oops.
I wonder if that guy will give Suzanne a call and thank her for pushing him into the great deal she got them.
Beware when using numbers from a Realtor though. I noticed some revisions to their numbers in early July. Yes, revisions to previously posted numbers without any comment. The graphs however have not been updated. I first noticed this when July 1st inventory read 9,036 over the weekend of the 4th. A few days later it was updated and inventory for July 1st was lowered to 8,347.
Check the difference between the FFX co graph versus the new lower inventory numbers for each month.
Yes. So did I. virginiamls.com was showing 27,000+ of inventory and then when to 25,000 in one day.
I’ve noticed that this virginiamls agent bases the graphs on the 1st of the month numbers. The problem is, listings expire on the 30th and then houses get re-listed or else the numbers just start rising on their own again. So using the 1st of the month numbers make the graphs a bit funny.
But I keep track of my own inventory and for a good part of June and July his inventory started to list quite a bit higher than what I had been tracking from the mls search at fairfaxrealty.org. So perhaps he did have erroneous data.
It could be that they realized they had some rogue rentals in there under sales or something. A simple filter for a minimum price of 25k could fix it. But whenever you restate data that was previously reported a comment is generally in order. Virginiamls should be applauded for making these stats readily available though. I agree they won’t be happy to check the logs and find thehousingbubbleblog as their biggest refferrer.
They may have software that allow you detect where people are coming from. If everyone is coming from thehousingbubble.com, they may not appreciate that
Wow.
General questions for those living or aware of the RE taxes in metro DC.
Are the RE taxes fixed at the time of purchase like California or are they marked to the market?
They are based on yearly property assessments.
Virginia has annual assessments to adjust to market rates. Maryland has assesments every 3 years.
DC has annual assessments but caps the tax appreciation at 10%.
This may explain one of the reasons Virginia prices on existing homes are falling faster than other areas.
Thanks for the answers NOVA fence sitter and Northern VA - A very sad position for owners. IMHO the sales number declining without corresponding drop in RE prices (per NAR) suggests truly f’d owners since there will be no reduction in assessed value.
>>>Virginia has annual assessments to adjust to market rates. Maryland has assesments every 3 years.
While Loudoun County, Virginia does re-assess real estate annually, this a county-level decision in Virginia. Fairfax County is also annual, but other counties have 2 year and 4 year re-assessment cycles.
I have to point out that in PG county, the assesment is phased in over the 3 years that it applies to.
I am still waiting for the front page Washington Post, or Jim Vance on the network news to scream YOY Prices Fall in DC Metro area. It will happen this year and it will be a great day for all the people on this blog who have been shunned for their bubble views by friends and coworkers. Select counties have been in negative territory already.
It looks like the market is finally bifurcating as the outlying areas like Loudoun (-2.8%) and Stafford (-3.4%) show falling YoY prices, closer counties such as Fairfax (+2.2%) show slight appreciation, and the closest counties such as Arlington (+9.9%) and Alexandria (+9.8%) show very strong appreciation. The combined result of these bifurcating markets is the +3.9% appreciation for NoVA overall.
There are tons and tons of unsold homes in outlying areas around DC. As prices crumble in the outlying areas, the impact will be felt in immediate closer-in areas. Its like a big wave with the xurbs collapsing first and bringing down everything else like a wave until it reaches DC.
The median sold price (as opposed to the average price, shows the same story but even less appreciation).
Fairfax
Median Sold Price: $ 500,000 $ 500,500 - 0.10 %
Arlington
Median Sold Price: $ 535,000 $ 500,375 6.92 %
Alexandria
Median Sold Price: $ 459,900 $ 443,000 3.81 %
Loudoun
Median Sold Price: $ 485,000 $ 491,000 - 1.22 %
Don’t forget the fed is pushing jobs out to Fort Belvoir and Fort Meade for safety reasons; it’s not safe to have all the jobs centered in D.C.
Arlington and Alexandria are not immune from falling prices.
And Culpeper County, oddly enough. You should see the disastrous empty-house developments there.
I’m already getting accolades for not buying at the top; this from the same people urging me to buy within the last 2 years.
This is good progress. A year ago, almost no one would even acknowledge that real estate has cycles. The early 1990s price decline? Clearly an aberration caused by recession and aerospace cutbacks, nothing to do with an overheated housing market.
This pullback is an abberation caused by the media spooking buyers.
Riiiiiigggghhhhttt…..:-)
It’s the cats’ fault, from the Washington Post:
“General - House not selling due to kitty odor
From: Swartzenkat 1:09 am
To: ALL (1 of 7)
My house has been on the market for 3 months, and the listing is about ready to expire. Am happy with the marketing efforts of my realtor - Lots of visits, open houses. But no sale, no offers, which is surprising to me, as the place is in a really great location and shows well. Lots of upgrades. Although other units like mine are not selling either (or are selling at a $25,000 loss), a couple of the agents commented on odor due to my pets. [. . . ] Meanwhile, I bought a new place in the Charleston, SC area, very low mortgage. Monthly payments on the old place are going to start really hurting in about 2 months, so I don’t know if I want to keep trying to sell it, or re-finance, then rent it out and hope the market picks up in a year or two. If I do the latter, I will be out of pocket about $500 a month. Any advice? (no I won’t get rid of my cats). Thanks for any suggestions. Am pulling my hair out and losing weight over this.”
A year ago, they wouldn’t have even bothered cleaning up the cat shit before entertaining offers.
OT, but I don’t care how low prices for units drop in LA, if they do drop at all. Owning rental property here basically brands you as a criminal, and subjects yourself to all sorts of inspections and penalties which you have no right to contest. If there are any landlords out there, I’m sure you know what I’m talking about, what do you think about a “strike” whereby we all leave one unit vacant? That should have an impact given the shortage of rental housing here.
Wouldn’t that hurt you the most?
I meant, I’m not buying any more income property here, no matter what the $$ decline.
“what do you think about a “strike” whereby we all leave one unit vacant?”
OK, you go first.
In all seriousness, why not just sell your LA holdings? Income properties in LA are hideously overpriced. Buy in another (friendlier?) market, or take your profits and run (as my “pro” friends have done).
Run where? I live here. I’m not going to fly to NM or AZ to collect rent, and managers are a bunch of thieves.
lainvestorgirl,
Get used to it, it’s part of the game. In my area, the local politicians stay in office by demonizing landlords. You’re always a sitting duck if you own property.
Keeping units off the market does you no good, unless you have unlimited resources and time. I have seen a few people do this here in SM - one owner kept an entire building off the market for ten years after the 1994 earthquake in order to get out from under rent control. I have trouble believing that this worked out for him financially - but apparantly he was rich enough and patient enough to make his point.
If you really want to get even, sell your property to a hard-a$$ slumlord and move on to greener pastures. That will make the point better than holding a unit off the market.
she a dm cnt
I bought my TH (now fully paid off) in DC suburbs seven years ago for 140K and have been frustrated for last 2.5 years since the market was so crazy that I did not want take any part in it.
I have been waiting for this bubble to burst and am now doing my part by putting my TH on market at the bubble price (> 350K) thereby increasing the inventory. I expect the bubble to fully burst by sometime in late 2007. At that point I will sell my TH for whatever prevailing market price I can get but I am sure I will get my next SFH at a much attractive price.
Town Home????
“In Washington, D.C., home sales dropped 21.2 percent in June from a year ago. In Prince George’s County, Md., sales fell 21.5 percent … Sales in Montgomery County, Md., plummeted 31 percent.”
“In Alexandria, Va., sales dropped 33.3 percent. Sales in Fairfax County, Va., … down 38.6 percent
From Lereah at NAR today:
“Existing-home sales are expected to decline 6.7 percent to 6.60 million in 2006 from 7.08 million last year. That would still be the third highest level on record. New-home sales should fall 12.8 percent this year to 1.12 million from 1.28 million in 2005. Housing starts are forecast to decline 6.8 percent to 1.93 million this year from 2.07 million in 2005.”
Either DC/No.VA is fairing far worse than the rest of the country or the people at NAR are in for a very rude awakening. I have a feeling Lereah’s numbers are going to be revised substantially.
For the record Lereah has been a little more bearish in each of his monthly predictions until now, though this one is statistically indistinguishable from May.
I’m looking for the YTD sales numbers to see where we stand compared to the same time last year.
I got this statistic today.
Fairfax County, VA has more residents than seven states: Alaska, Delaware, Montana, North Dakota, South Dakota, Vermont and Wyoming. So I would think sales being down here 33% might be a blip on Lereah’s radar, considering he lives here as well.
The CEO of Lennar recently said that D.C. was the worst market in the country for new home sales.
(Virginia has annual assessments to adjust to market rates.)
Virginia is a state where people don’t want to pay state income and sales taxes. That means public services can be decent in Northern VA based on property taxes, and crappy elsewhere (the Virginia poverty program is a bus to NYC).
Sounds to me like the housing bubble has bailed out public services there — and a meltdown will cause a decline in schools and road maintenance in addition to the deterioration of empty homes going through foreclosure. Not a happy picture.
Our property tax gains are limited in NYC, but we have had a bubble in real estate transfer taxes, which the Mayor said a year ago will not last.
Virginia is a state where people don’t want to pay state income and sales taxes. That means public services can be decent in Northern VA based on property taxes, and crappy elsewhere (the Virginia poverty program is a bus to NYC).
Right, and in Maryland, just over the river, they just loooove to pay taxes! They have a nice, steep income tax. And a 5% sales tax. And property tax on a $500k townhouse in Montgomery County can be $7500/year (depending on the town/city). Well, good for THEM, I say!
Good for you too, in NYC; we’re happy for you that you enjoy your taxes. If we want low service for low tax, that’s our business.
Virginia poverty program is a bus to NYC
No, no, too expensive. Bus ticket to Maryland!
Now one thing I will say about Maryland is that in at least some counties they are using a “constant yield” property tax collection method, so that if property assessments run up (say) 10% over previous years, the rate is adjusted down (say) 10% so that the net result, **on average**, is no net increase in tax on existing property. Not all counties voted for that, though, since it’s really hard for them to turn down a windfall.
We live in Annapolis, and we pay $7000 per year in property taxes. However, our public schools (Anne Arundel county) are outstanding, so I feel I am getting my $7K worth with two kids doing great in the public system.
Foreclosures Soaring in California, Arizona
Foreclosures have been soaring throughout California and parts of Arizona, according to Default Research Inc., a foreclosure research company based in Mt. Pleasant, Pa.
2007 will be much worse. SoCalMtgGuy refers to 2007 as “the day of reckoning” due to all the ARM resets.
SoCalMtgGuy -> See how bad this has gotten? Other people are quoting you…where are you SoCalMtgGuy? Where are you??
I work in Mountain View (SF Bay Area), and it looks like there are new For Sale signs every week.
is it really a 20 year cycle? thats a loooooooong time to bottom
It could mean 10 up and 10 down. But I’m not sure. We’ve had lower interest rates now since the late 80’s. I heard some “expert” call it a “delicious 20-year run”.
I bought a 3000sf house in Chandler AZ for $280,000 at the end of 2002. We put more than 20% down and got a 30 year fixed mortage which I refied down to 5.37%. My mortgage payment is $1250 a month. Very reasonable. We could not afford this house if I had to buy it today. So I’m putting in a pool and staying awhile