‘Real Estate Landscape Has Changed’ In DC Area
The Washington Post has this update from the DC area. “In what may be the most telling sign yet that the real estate market here has shifted downward, median prices of homes in several parts of the Washington area have declined when compared with the same time last year. The drops are significant because they mark the first time in half a decade that home prices have fallen in a 12-month span, illustrating just how much the real estate landscape has changed after five years of double-digit growth in home prices.”
“The areas with declines have some things in common: swelling numbers of houses for sale, slowing sales and lots of new houses on the market.”
“In Loudoun, nearly 5,000 properties are for sale via the MLS. That compares with 1,800 a year ago. In the District and Fairfax County, the number of unsold homes and time on the market has also increased, boosted by a large supply of condominiums.”
“The question for many local buyers and sellers is whether the small declines foreshadow big price reductions in the months ahead.’Could it be a 5 percent drop in prices? Could it be 10 percent? Whatever it is, it will be short-lived, because demand is right there on the sidelines,’ said David A. Lereah, chief economist of the NAR.”
“But others see a steeper, prolonged downturn in prices because of overbuilding in some areas, speculative buying and a run-up in prices that has outpaced affordability. Prices, they added, have actually declined more than the statistics indicate because sellers have been offering such incentives as help with closing costs.”
“Too many sellers have not accepted that their houses are not worth as much as they had thought, said economist Mark Zandi. ‘The market can’t complete its correction until that happens.’ Zandi sees Washington area home prices declining over the next six to 12 months by an average of 10 percent, with the condo market experiencing larger price drops. The good economy, he said, is ‘not enough to save the market from this housing correction.’”
“Scott and Shirley Porter of Ashburn had no choice but to cut the asking price for their townhouse, there are just too many others for sale nearby. From their back yard, they can see three for-sale signs across the street. Out front, more neighbors are selling. Around the corner, there are four more.”
“The Porters put their end-unit on the market last month for $458,000. That was right at the middle of other townhouses for sale in the neighborhood, he said. But in no time, the Porters found that their place had ended up at the top of the price scale after neighbors reduced their prices. So they lowered theirs, too, to $435,000.”
“‘It’s amazing how much the prices have come down,’ said Scott Porter. ‘You feel like you’ve missed the bus.’”
“Neighbors Sheila and Chris Boyce put their three-bedroom, 2 1/2 -bath unit up for sale in March for what they thought was a competitive $445,000. They have since reduced it to $437,000, still $42,000 more than the $395,000 they paid two years ago.”
“After costs, they would not be making nearly as much profit as they had imagined, even if they get their new price. ‘We weren’t trying to get rich on it or anything,’ said Sheila Boyce. ‘We thought it would be a lot more. Not hundreds of thousands, but at least something to put away.’”
From Richmond Virginia:
‘In June 2005, Lafayette said Richmond had 1,200 new listings year-to-date for 2005. In June ‘06, the year-to-date listings reached 2,000. Yet she said that as opposed to the increase creating a buyer’s market in Richmond, it’s merely leveling out from the seller’s market of ‘04 and ‘05. ‘We really have always been fairly consistent [in Richmond],’ Lafayette said. ‘We haven’t had - people talk about a bubble burst - that’s just not going to happen in the Metro Richmond area.’
The word about the housing bubble is really getting out there to Joe Government Contractor or Worker in the Washington, DC metro area.
David
http://bubblemeter.blogspot.com
what does a gov worker care- they get a raise every year- in the decline they’re kings
Maybe because CPI numbers are cooked up?
Actually, the CPI has little to do with the raises that Feds get. http://www.federalnewsradio.com/?nid=22&sid=849817
It tends to run behind in really booming times and ahead in slow times. It is certainly true that in these increasingly uncertain times, the value of the steady stability of government jobs has risen.
My wife and I joke that we’ll one day be encouraging our sons (now 4 and 7) to get goverment jobs, just like patents do in the third world (”global south”, whatever).
“parents” not “patents”
Yeah, but as a contractor in gov facility, they don’t make enough to live anywhere near this city… 3 percent of nothing, isn’t very much..
Dont try to confuse the poor fella with facts and information…he believes it to be true so it is….kinda like our faith based foreign policy. Iraq is a democracy right? And the republicans balanced the budget, kept government out of our personal lives, and reduced the size of government? right?
“The question for many local buyers and sellers is whether the small declines foreshadow big price reductions in the months ahead.’Could it be a 5 percent drop in prices? Could it be 10 percent? Whatever it is, it will be short-lived, because demand is right there on the sidelines,’ said David A. Lereah, chief economist of the NAR.”
_________________________________________
KEEP DREAMING. The FAKE speculator demand is gone for at least a few years. The Cheap Money Crowd (1% loans) is gone for at least 50 years. SORRY FAKE DEMAND is gone for some time. Its all down hill from here!
I’d like to see a few disillusioned buyers sue them for the false claims a few years from now when it’s clear that those claims are nothing but lies.
I can’t stand david lereah. I hope someone rights his two books into financial history in the vein of Fischer from the 20s and 30s, or Hoover declaring the depression was over.
Why not ask what his bonus from NAR has been lately…
What you dont think he gets a pop from every show he is on? Think again…
Last nite on CNBC and analyst who covers RE gave a gloomy prediction on RE. He saw deep drops in hot markets.
Does anyone here think DL actually believes what he says?
He probably has doubts, as every economist should have. But he does his job better, if he suppresses them before they got a hold in his conscious mind.
The .dom burnout should have been an easy lesson. From 5000+ to 2000 today, and not a specuvestor in sight is the future for housing. it’ll just take 5 years instead of 1.
It’s time to recall Bubble’s the Clown’s anagrams for NAR’s spokesman:
Rearranging - ‘David Lereah’ - makes:
“Drivel ahead.”
“Lie hard, Dave!”
(thanks, Rainman18)
David Lereah has been around for a long time, so, he knows that real estate comes in cycle.
It’s just that he works for the NAR. Part of his job is to “sugar coat” things as much as possible, which is an increasingly hard task.
I’m not trying to defend Lereah. More like feel sorry for the guy.
Think of all the riches he has accrued by fooling FBs into drinking the koolaid. He hardly qualifies as a sympathetic character in my book.
Right on, Crispy&Cole. Too much of the demand which fueled the price blowout was only there because of high rates of Ponzi appreciation. Now that news of falling prices is spreading like an epidemic from San Diego to Chicago to Washington DC, most of what recently masqueraded as housing demand will prove to have been demand for deceptively fleeting but temporarily very large capital gains.
that’s a 2004 price for a market w the most secure jobs in the world- fed gov parasites
most of the fed gov parasites you mention, making a secure 23K per year, cannot afford 2004 prices. maybe they could afford 1998 prices. don’t forget that their are also fed gov parasitic lobbyist & fed gov parasitic businessman, basically parisites of all kinds, living the area.
nope- starting pay at DHS is 90k for a “project manager” its not Buaer from 24 hours either
That’s well above the median income for feds. There are a darn sight more clerk typists around than project mangers. I wouldn’t be surprised if you actually compared that project manager position to a position(probably a vice presidient) responsible for similar amounts of money and subordinates the private employee often was paid more. Of course the clerk/typist probably has a better compensation than an equivalent in private industry. After all, there are probably 1000s of CEOs that have better compensation packages than the president or his cabinet members despite having much less responsibility. For good or bad, the federal payscale is much flatter than in private industry.
“Whatever it is, it will be short-lived, because demand is right there on the sidelines,” said David A. Lereah, chief economist of the NAR.
Future demand has been drained by the frenetic pace of buying in the past few years.
Nice try though.
But every market has 1000 people moving into it every month !
(What does a gov worker care- they get a raise every year- in the decline they’re kings)
Good point! Government workers tend to get priced out in the booms. You hear all kinds of stories about cops and teachers not being able to afford houses because of the bubble. But they still have good incomes — verifyable and steady incomes that banks might be willing to bank on when feeling the opposite of irrational exuberance — during the busts.
The decline isn’t over until the civil servants start buying. I was a public employee myself when I bought in 1994. Several other teachers/cops/firemen bought at about the same time. None of us could afford the neighborhood today.
Good thought line here. The ‘true’ value of a home might be reasonably tagged to the willingness of government workers to purchase.
Not willingness, ability (with non-toxic loans)
Neighbors Sheila and Chris Boyce put their three-bedroom, 2 1/2 -bath unit up for sale in March for what they thought was a competitive $445,000. They have since reduced it to $437,000, still $42,000 more than the $395,000 they paid two years ago.”
400k dam!!!!
Here’s what we get in SoCal, ya I put my house on the market for 950k but in the last few month i reduced down to 899k because of inventory!
The depression effect. wonder at the impact of ‘lost paper wealth’ on the willingness of people to consume? Hard to justify that new toy when you feel you just lost $100,000!
In SoCal most home going up now are homes theyv’e own for 10-20years or in deep Shit, so any lose to those long time owners is still a BIG Gain here In OC!!!
The funny part even if it drops too 899k some fool buys it using an arm loan??
$42,000 on a $395,000 home is about a 10.6% increase over 2 years. Is this the double digit gains we had been told about?
After the RE and government locusts take their comission & cut, the Boyses will be left with about $12k profit.
‘even if they get their new price’
That’s still only on paper.
Government locusts? They won’t have to pay any capital gains since they lived there for 2 years.
I was referring to the local locusts and their little fees and transfer taxes.
It’s a small world…I know these people.
This underscores a unique aspect of D.C. and that is many people move in and move out. A lot of people HAVE to sell because they are moving.
I know some people currently in the position of having to sell. But really, unless you bought at the top of the bubble, all you have to do is be a bit aggressive in underpricing and the house will move. The seller who’s been in the house a few years will still see a substantial profit at what things are selling for right now.
There are a lot of people who already purchased another house and are relying on money from thier old house. Being caught in a rapidly deteriorating market will cause these people a lot of pain. Some will have miscalculated what their old house is worth and will be unable to unload it in time. The cashflow strain of 2 mortgages in bubble areas can quickly destroy most middle class families.
Even families who are moving out of the area can often be caught in the 2 mortgage trap in a slowing market. Underpricing the market will always sell a house but if others begin to do the same it quickly becomes a race to the bottom.
“The Porters put their end-unit on the market last month for $458,000. That was right at the middle of other townhouses for sale in the neighborhood, he said. But in no time, the Porters found that their place had ended up at the top of the price scale after neighbors reduced their prices. So they lowered theirs, too, to $435,000.”
“‘It’s amazing how much the prices have come down,’ said Scott Porter. ‘You feel like you’ve missed the bus.’”
It’s amazing how much the prices have gone up in a first place. Those crapboxes have been selling for 180k-200k in 2000
You need to read the bus schedule.
“‘It’s amazing how much the prices have come down,’ said Scott Porter. ‘You feel like you’ve missed the bus.’”
Scott may have to take the bus after he sells his matched “his & hers” SUV’s to keep the monthly float going.
“They have since reduced it to $437,000, still $42,000 more than the $395,000 they paid two years ago . . . After costs, they would not be making nearly as much profit as they had imagined, even if they get their new price. ‘We weren’t trying to get rich on it or anything,’ said Sheila Boyce. ‘We thought it would be a lot more. Not hundreds of thousands, but at least something to put away.’”
In a rational market, would 2 years EVER be enough time to own a home and expect a profit?
rule of thumb used to be 3 years to break even.
Yeah, I hate this entitlement attitude. The woman expects free money.
The first few years of a mortgage are almost all interest payments. For only 2 years, a reasonable person would only hope to retrieve their downpayment, and have just enough equity accumulation and appreciation to have covered their original extraneous purchase costs (e.g. closing costs).
Realistically, most people should expect a loss after only 2 years.
Your so right cow cat . How about the group that expects a 100K gain on a 200k house in 3 months ? I held my last house for 23 years and in the first 5 years I would not of made a profit because of a downturn .It took a long time for that house to go up . But I bought the house to live in .
How can demand be right there on the sidelines if we are the historically high level of home ownership already? Does not make much sense and none of these “journalists”/morons have the intellectual wherewithal to ask the effin’ question.
Excellent point.
“The question for many local buyers and sellers is whether the small declines foreshadow big price reductions in the months ahead.’Could it be a 5 percent drop in prices? Could it be 10 percent? Whatever it is, it will be short-lived, because demand is right there on the sidelines,’ said David A. Lereah, chief economist of the NAR.”
As Housing Bubble stories start multiplying in the media, Ol’ Honest Dave keeps popping up like a broken, demented Jack-in-the-box with his relentlessly upbeat assessments. What a joke!
“’Could it be a 5 percent drop in prices? Could it be 10 percent? Whatever it is, it will be short-lived, because demand is right there on the sidelines,’ said David A. Lereah, chief economist of the NAR.”
Unless irrational exuberance is a permanent fixture of this New Era of housing market activity, demand will stay on the sidelines until the devastating effect on prices of a sudden vacuum left by exiting flippers and 100% leveraged I/O option-ARMed subprime borrowers out of the buyer pool is resolved. Meanwhile, anyone with a credit rating and savings who is dumb enough to fall for David Liareah’s sales pitch gets to catch a falling knife.
And by the way, a ten-percent drop on a typical $600K San Diego SFR
would set the median SD household back by more than a year’s worth of after-tax income. Don’t be a fool — watch and wait out the storm.
It’s real simple–Mr. and Ms. America cannot afford $600,000 houses unless they get some kind of funny-money mortgage. Period. Most of us can’t really afford $400,000 houses, for that matter, if you’re talking about a traditional 20% down, 30-year market-rate mortgage.
I’m beginning to think that this housing market crash is going to take a lot less time than some people think. Once the I/O balloons and ARM resets start hitting en masse and the tales of woe start hitting the media, how many fools are going to be out there willing to take on such a loan, even assuming there are lenders still willing to make them?
I miss DC Bubble and Lingus - they were good for a few rants and this report on DC would have had them both going!
What a tool.
The following MAJOR contributors to the mania will NOT be on the sidelines to save this busted bubble:
1) Speculators who flip properties.
2) People looking to “buy” a house for 2 years, cash in on the appreciation, and move on.
These two parties make up a significant portion of the bubble market, and now that they’re gone, the market will NOT be the same moving forward.
No appreciation = housing bust.
Negative appreciation = market free fall
http://www.fdic.gov/bank/analytical/regional/ro20062q/na/t2q2006.pdf
“Based on historical experience, and despite recent strong performance, a gradual rise in delinquency and foreclosure rates could occur over the next few years. Mortgage delinquencies are likely to increase over time as rising interest rates and the expiration of below-market teaser rates result in higher monthly payments for many borrowers. Some households with limited financial assets, lower incomes, or an inability to refinance due to poor credit, lack of appreciation, or high leverage may not be able to accommodate these higher payments. Finally, if a recession or other severe economic shock were to send local home prices and incomes sharply lower, or interest rates sharply higher, this additional stress could contribute to higher mortgage losses.”
For George and Susan Garrigan of Woodbridge, simply cutting the price on their home of 28 years no longer seemed enough. There are 112 detached houses for sale in their Lake Ridge neighborhood. Forty have been on the market for more than 100 days; 114 townhouses are also for sale.
Never mind that two similar nearby houses — split-level, built in the early 1970s on quarter-acre lots — sold for $50,000 more last summer. Or that they pulled their house off the market after two price reductions this spring brought no bidders.
Yesterday afternoon, the Garrigans came back with a new lure: the brand-new Toyota Corolla sitting in the driveway, free with the purchase of their house.
“I feel it’s a wonderful deal for a family not to have that car payment,” said Susan Garrigan, 66.
“We think we’ll be more visible,” said George Garrigan, 70, when asked why he did not simply cut the asking price by $17,000. “Everybody’s dropping the price. So you’re still in the same pool of houses. There’s nothing that says, ‘Hey, look at my house twice.’ Or ‘Look at my house once.’ ”
Riddle me this, Ma and Pa Kettle: Why should I go for a “free” Corolla with your grotesquely overpriced, 28-y.o. split-level (ugh) crap-box, when I can wait a few more months — better yet a year — and get a much nicer house for a better price, PLUS, instead of your “free” Corolla (real cost to me: $17K) I can buy a sweet, almost new firesale Beemer off some desperate FB or unemployed realtor instead.
Hmmm…let me ponder this for a year or two.
My question is, where are these 66 year old Corolla flippers going? Florida, to catch a knife there? A part of me almost wants some sucker to come along and take the house off these folks hands, so they can spend the rest of their eating cat food in whatever overpriced retirement crackerbox hovel they land in down in the swamp.
Couple of years’ worth of the Woodbridge-to-DC “Hell Commute,” and that Corolla will be toast, anyway.
I lived in Lake Ridge for awhile, and some of those early ’70s SFHs there are quite nice. They’ll probably hold up a lot better than the new stuff that’s going up. Of course, since it comes with a monster commute, the buyer won’t be spending any significant amount of time in the house, so what does it matter…
Yeah, a Corolla is hardly the sort of “Aspirational” car that will draw people in. You gotta use the right bait people. If you’re trolling for middle class idiots, you have to show them bling that they otherwise wouldn’t buy.
I wonder if this retard bought this POS car (ok it’s a decent reliable car) and then realized that he couldn’t “afford it” since it became apparent that they couldn’t sell for expected profit.
Otherwise this is the stupidest ploy ever. Just drop the damn price.
The old man says the ‘free’ car is wonderful because the home buyer won’t have to make car payments. Yeah, right. Instead, they’ll be paying for that car for the next 30 years as part of their mortgage. That doesn’t sound wonderful to me.
Does the old man really think today’s buyers are that stupid?
Are you implying that they’ve suddenly changed? Because I think that stupid buyers are at the heart of all bubbles.
As a No. Va. resident, here’s my take:
“Townhouse” in DC-area parlance is generally shorthand for “crappy little semi-detached shitboxes that families only live in because they have no other choice.” I know because I rented one for a couple of years. It was built in 1971, and the floors and walls on the top-level were already sagging so badly that the master-bathroom door would no longer close.
And I’m supposed to pay $450,000 for the pleasure of that? Uh-huh.
From what I recall, the median household income in Fairfax County is approximately $90,000, give or take a bit. That’s quite high by national standards, but not quite enough to afford a $450,000 house under traditional lending standard, isn’t that right? And that’s for a “townhouse” that is effectively a starter home. A real SFH (and I’m not talking McMansion) in this area has been selling for well over $600,000 lately. How many bureaucrats apart from agency heads can legitimately afford *that*? Those townhouse shitboxes should really be selling for about $2-250k, with regular Beaver Cleaver SFHs going for about $3-350k, I’d say. That is, if we’re talking about legitimate lending practices…
Keep in mind a lot of major companies are headquarted in Fairfax Va. That 90,000 includes the extremely wealthy executives living in Mclean Va. They are not going to buy townhouses, condos etc.
http://www.americancompanies.com/location.asp?ID=Washington%20DC
I meant the $90,000 a year average is distorted by all the wealthy executives here. There are a lot of Joe Smith’s making less than $50,000 a year.
True, but actually $90k is about where I would expect the household figure to be even discounting the wealthy folks in Great Falls. Most households here have two incomes, so two middle-class bureaucrats/law firm admin. types per house equals about $90-100k household income per year.
The 90k median is distorted by the large amount of people that make next to nothing doing low-skilled jobs. New college grads usually make 45-50k fresh out of school. Throw in a masters degree from night classes or a security clearance and they will make 75-85k after just a few more years. Multiply by 2 and you have a household in their mid to late 20s making well into six figures.
But that doesn’t mean this couple should run out to spend 500-600k on a starter home. The same people who are taking on interest only ARMs are these young couples that will soon be saddled with childcare, higher rates, principal repayment, and possibly the wife demanding to go part-time.
“New college grads usually make 45-50k fresh out of school. Throw in a masters degree from night classes or a security clearance and they will make 75-85k after just a few more years. Multiply by 2 and you have a household in their mid to late 20s making well into six figures.”
That seems pretty high to me. Undoubtedly some folks do that, but I doubt it’s the norm.
The same people who are taking on interest only ARMs are these young couples that will soon be saddled with childcare, higher rates, principal repayment, and possibly the wife demanding to go part-time.
———————–
Most families I know of with a SAH parent make that decision jointly. Nobody should “demand” anything, whether it’s to take care of the kids full-time or force a spouse to work outside of the home in addition to taking care of the kids.
Many of us acknowledge the second income is quickly depleted when you take taxes, childcare, car maintenance/replacement, gas, clothing, food expenses into account. Best to have a parent take care of the kids full-time instead. That way there is no battle about who’s going to stay home when the kids are sick or who will pick them up when both are required to work overtime, etc.
Our society always espouses the “children are sooo special” mantra, but quickly dismiss those who care for them as parasites or leaches. We also like to pay our teachers (also considered leaches by many here, apparently) and childcare workers low wages. It really shows what our **true** priorities are in this country.
Rant off, sorry.
Sorry, I meant leeches, not leaches.
Scott and Shirley Porter paid 187k in 1998.
Sheila and Chris Boyce (over) paid 395k in August, 2004. I guess they were planning to hold for two years, then sell for a profit.
As for government workers, I am one, but I don’t take offense. There is a lot of chaff at my agency, but it is all older workers, making good money for doing the NYT crossword puzzle at their desks, etc. The few younger workers work pretty hard for what we are paid, in my opinion. I’ve worked harder at other jobs, but I’ve also made twice as much $$$. Also, we don’t get COL raises here, it is all pay for performance, so if you suck you actually get less money every year (inflation).
Yeah, nobody gets rich working for the federal government. Except for the congressional staffers who get rich AFTER they work for the feds… And they don’t live in Anonymousville, Va., either.
MeShell,
All gov’t workers get COLA every year, some more than others with locality. You’re talking about step raises you don’t get. So what? PFP is much better–if you do your job even moderately well, you can see a raise that would have taken you two or three years in the GS program.
forgot to mention–the Garrigans paid 58k in 1977. Want to bet the place still has the avocado appliances?
wonder how much they are selling for? the article didn’t say, but Woodbridge is pretty nasty.
Hey, hadn’t you heard, ’70s fashion is hip again. It’s a prime selling feature!
It’s a prime selling feature to a flipper who thinks he can make 10000% ROI for putting in granite counters and stainless appliances.
i’d buy it if they figured out a way to make stainless counters and granite appliances.
And yet the more things change, the more they stay the same. Here’s a schmoe asking $435 for a bare half-acre lot in Lorton: http://washingtondc.craigslist.org/nva/rfs/186439542.html
I wonder if it has a prime view of the abandoned prison?
Or has that finally been torn down? Haven’t been out that way in awhile.
Prison is still there. The sewage treatment plant being built across from it is nearly complete, though. They’ve also rebuilt the bridge in Occaquan and driven the parkway all the way through to I-95. That’s nice.
i worked at that treatment plant over my college summer breaks as a laborer for the local plumber & steamfitter unions. almost the worst job ever… beaten out only by my stint in the “bad milk” room at Shenandoah Pride. funny thing, a dude jogged thru the treatment compound every morning around 6am. i’m pretty sure he’s dead now.
“After costs, they would not be making nearly as much profit as they had imagined, even if they get their new price. ‘We weren’t trying to get rich on it or anything,’ said Sheila Boyce. ‘We thought it would be a lot more. Not hundreds of thousands, but at least something to put away.’”
You know, not long ago, it was generally understood that if you sold a home after owning it for less than 5 years, you stood to lose money after factoring in the closing costs on the original transaction and the commissions on the sale. Today, the sense of entitlement is unbelievable. These people should be thanking God if they’re lucky enough to break even, not complaining about how their 2 year-old townhouse isn’t funding their kid’s college tuition. Worried about having something to put away? Try saving.