‘It Has Been Too Pretty For Too Long’
Some housing bubble reports from the Washington, DC region. “The market for McMansions has dried up almost overnight in Hampton Roads. At one point last week, nearly a hundred homes priced from $500,000 to $700,000 vied for buyers around Nimmo Church in Virginia Beach. It could be a long wait; only 11 in that range have sold all summer. That’s bad news for the owners yoked to McMansion mortgages, and to the builders addicted to luxury homes.”
“No money down and no payments until 2007. Some restrictions apply. It sounds like a car ad, but it’s an offer for new, two- and three-bedroom condos at the Bryson at Woodland Park in Herndon. The deal also includes no closing costs.”
“The Bryson is not alone. Don’t miss ‘closeout prices’ on condos at Legato Corner in Fairfax. ‘Save up to $50,000′ on condos at Park Place in the Lorton Town Center. Get one year of free condo fees, $10,000 towards options and $5,000 towards closing costs in a ‘limited time’ offer for condos at Cameron Station in Alexandria.”
“Selling a condo is clearly much more difficult than it used to be. ‘We know it presents the greatest challenge right now in the real estate market,’ said Jill Landsman, for the Northern Virginia Association of Realtors. ‘I know a lot of Realtors are using secret weapons by putting in a lot of perks.’”
“Nearly three times as many condos are on the market today compared to last year, according the MRIS. Last month’s condo sales dropped 18 percent compared to last year. According to Lawrence Yun of the NAR, the condo market is always more susceptible to purchases by investors and speculators. ‘Now these short-term investors have left the market,’ said Yun.”
“The overwhelming problem in the market remains a disconnect between what sellers expect their homes to sell for and what the market will bear. ‘Managing sellers’ expectations is one of our biggest challenges,’ said (realtor) Amanda Wallingford.”
The Gazette in Maryland. “Homebuilders have not had to work hard to sell houses in Frederick County, until now. A previously booming industry is laying off workers, offering cheaper upgrades and advertising heavily.”
“Dan Ryan Homes, which has been in business in Frederick County for 16 years, recently laid off about 20 percent of its employees and, for the first time ever, is depending on advertising. ‘In the building industry it used to be that we were more or less order-takers. Now we are reaching out, advertising our experience and value,’ Cheryl Kostreski said.”
“Other major homebuilders are also laying off workers, said Brian Patchen, director of the Frederick County Builders Association. ‘Builders had been building at full capacity and the layoffs are obviously a reflection that they are not at full capacity anymore,’ he said. ‘They can’t afford to carry extra employees.’”
“The decline in homebuilding began in the winter, industry experts said, as interest rates climbed. The number of houses for sale in Frederick County more than quadrupled this year from last summer. In June 2005, 375 homes were on the market; this June, 1,690 homes were available.”
“‘We knew it was going to happen,’ Kostreski said. ‘It has been too pretty for too long.’ The dip is part of a natural ebb and flow of the housing industry, she said.”
The Washington Times. “It must be exhausting, trying to sell a home in a region that has suddenly become a buyer’s market to rival the slowest years of the 1990s. It has to be particularly frustrating to sellers who considered selling last year, which turned out to be the last great sales year of a six-year sales boom.”
“Last month, only 7,868 existing homes were sold in the Washington metropolitan area, a drop of 31 percent compared to July 2005. At the same time, the number of homes for sale has continued to grow. On July 31, there were 48,737 homes on the market in the area. We’ve never seen that many homes for sale in our area. Even back in July 1992, which was the slowest sales year in my records, only 36,895 home listings languished on the market.”
“Buyers had the most leverage over sellers in Prince William and Loudoun counties. Sales were down 50 percent in Prince William and 42 percent in Loudoun. (July) was the toughest month to sell a home in the District since 1997.”
“I believe area home sellers are just going to have to get used to these new market conditions because it’s not likely to change for a long time. Speaking very generally, buyer’s and seller’s markets in our area seem to last about five to eight years. It’s a cycle that has repeated since the early 1980s. If it holds true, it is possible we won’t see another seller’s market until at least 2011.”
‘According to Lawrence Yun of the NAR, the condo market is always more susceptible to purchases by investors and speculators. ‘Now these short-term investors have left the market,’ said Yun’
You can always spot NAR talking points. Even local realtors say this. Those speculators are still there and will accelerate the downturn as the negative cash flow eats them up.
We’re two months into the summer, so back-of-the-envelope that’s 1.5 years supply. Add in the new units and you’re looking at a 2+ year backlog. The specu-gator is going to have a feeding frenzy.
Seeing as my dental hygienist hasn’t mentioned liquidating all the properties she bought in the run-up as I recommended to her, I have a feeling the speculators are still there, they just haven’t realized its already too late.
“…my dental hygienist…”
Hope they don’t start charging you by the tooth.
“Some housing bubble reports from the Washington, DC region. “The market for McMansions has dried up almost overnight in Hampton Roads. At one point last week, nearly a hundred homes priced from $500,000 to $700,000 vied for buyers around Nimmo Church in Virginia Beach.”
Hampton Roads and Virginia Beach area are not the Washington, DC region. Please correct.
Ditto David’s comment. Virginia Beach and Hampton Roads are as much in the DC region as LA is in the San Francisco Bay area.
Interesting stuff, though. The Tidewater area is overwhelmingly military and military-related. Who the hell is making enough money there to afford $700k houses???
Exactly! There are some decent paying jobs, and Virginia Beach’s median income is pretty high… but the prices around here are out of line with fundamentals.
BTW, I find it interesting that the local paper (Virginia Pilot) doesn’t report this type of news. We are 4 hours from the DC metro area, 4 hours from Raleigh, NC, and 2 hours from Richmond. The region has grown a bit, as people cash out of other markets and move here. Due to the military, there are a good number of contract jobs that remained stable thru the .com bust. But the salaries aren’t that good.
Of course, this article, entitled “Silver lining to housing slump,” was from the Pilot, and went on to discuss the issue of affordable housing extensively.
OTOH, I certainly don’t recall any previous article from the Pilot acknowledging that the market was changing.
On the PilotOnline homepage, the only article I saw this morning that was RE related was “Property Values Soar near Camden County.” Kudos to whomever found the article, it appears to be buried somewhere (or perhaps linked from HamptonRoads.com, a sister site tied to the Pilot).
The article was in yesterday’s paper. It was still available online this morning. If you have a secure email address, I could be persuaded (don’t want to post the whole article for copyright reasons).
The Hamptons are just big phony baloneys.
different Hamptons, Marc. Hampton Roads, VA is overwhelmingly lower-middle class. “The Hamptons” are on Long Island and overwhelmingly rich rich rich.
Be careful, Williamsburg VA is part of Hampton Roads. Between there, and the Virginia Beach oceanfront, there is some money around. Someone on UrbanPlanet.org owned me in a debate with the fact that the median income in Virginia Beach is higher than New York City.
I believe that the a good portion of the housing market has been fueled by people cashing out of other regions and moving here to take advantage of what once was a low cost of living.
We are loosing the Ford plant, and with that goes a number of high paying jobs. We have seen a decent expansion in the modeling and simulation industry (Military war modeling), but there is a limited amount of those jobs. Dice.com and Monster.com will show a majority of military contractor jobs when you look under computers/IT/tech fields.
And of course PETA is headquartered in downtown Norfolk. How many job losses there after FBs give up worrying about the ethical treatment of anything but themselves?
VABeyatch,
A side note….I have prop mgrs working on this, but if you know anyone interested in renting a very nice 3 & 2-1/2 townhouse off Warwick(NNews, U.S. Hwy 60), it will be available Sept. 5th. I’ve owned it since ‘99.
(Now back to your regularly scheduled program.
)
BayQT~
“We have seen a decent expansion in the modeling and simulation industry (Military war modeling), but there is a limited amount of those jobs.”
Holy smoke! Are we finally running out of wars?
I guess we can expect the major Wall Street builders to rally on news that McMansion demand is drying up, as these stocks always go up on terrible news…
Other major homebuilders are also laying off workers
So, how many municipalities were counting on these income taxes for their current and future budgets?
And how many of these ex-workers are overleveraged with multiple mortgages?
Layoffs, layoffs, and more layoffs - and it’s only just begun. I saw a piece yesterday about the terrible summer some of the big eating establishments are having. It’s going to be an interesting autumn. Any idea on how bad this Christmas shopping season is going to be?
The mantra last year was - All these great jobs will keep real estate strong. What happens when all the real estate jobs disappear? Many here have said those jobs will disappear as sales and build starts drop. Jobs losses and mortgage resets are only begininng - Wait until they accelerate.
Couldn’t agree more. This snowball is growing quickly as it gains speed down the mountain.
Let them rot.
The ripple in the pond that just started will be a tidal wave shortly, then a tsunami down the road.
That “terrible summer” (that, btw, started by Febuary) for eating establishments is only going to get worse. Every indicator I’ve looked into that would denote how the middle class , lower middle class, or working class are doing are pointing down.
Christmas? People will continue to borrow every penny they can to keep up the lifestyle they “deserve.”
Its only going to make 2007 that much uglier.
Neil
In today’s Syracuse Post Standard, Deluxe (check writing) is eliminating its 260-person call center. That’s probably just because more people are banking online.
But also Thomasville (furniture) has shut it’s retail store in one well-heeled local community and the article read that their Rochester store wasn’t faring any better.
The Thomasville store happens to be just a few doors down from the Stickley retail store (Stickley is from Manlius by the way) I couldn’t tell you how sales are doing but I couldn’t help but notice they’ve got a heck of a lot of help wanteds posted. Whenever I see that many positions available, I can’t imagine it’s a happy place. Looks like people are bailing. Either that or they are doing gangbusters and expanding. I’m gonna have to do some research on that one.
We just had an article in the Wash. Post about the big furniture stores here (Mastercraft, Stanis) closing second stores or going bankrupt. It’s a number of factors, housing being one of them. There are cheap imports from China, and also a change in the way people buy furniture. They seem to be preferring less expensive, more contemporary pieces that they can change often. (Ikea, Pottery Barn, Pier One, etc.)
The company my husband works for does high-end renovations in the DC area. So far business seems to be holding up, but I’m expecting the pain to spread here soon. Luckily the husband’s past 60, and we sold our home last year, but I don’t know what his younger co-workers with small children are going to do…
Its going to get ugly. There will be lots of cars available - I know people already “giving back” (repo’d) their luxury cars and SUV’s, hoping to hold onto the home and two vacant rentals a little longer…
You”ll be able to get a great deal on boats, Sea Doo’s, golf clubs, flat screens, and anything else that wont fit into a three-bedroom apartment…
When The Washington Times admits there’s a problem, you know it’s already hit the fan and the blowback is headed toward you.
The market should now be classified as ” The quick and the dead”. Sellers that are quick to adjust down and grab a buyer will survive, the slow and stuborn sellers will be dead.
‘I know a lot of Realtors are using secret weapons by putting in a lot of perks.’”
- secret weapons !!!! Yikes…holy Batman & the Joker/ Riddler.
I’m wondering, too, how the whole illegal worker drama is gonna play out. If the builders keep the illegals and fire the legals there could be a backlash, possible violence, and an even louder roar for securing the borders/employer sanctions. Or, if the legals stay and illegals are laid off will we see more demonstrations, crime (riots?) — or will it just lead to attrition (i.e. a “soft landing” for the illegal problem)?
I also wonder about the trickle down effect on the whole economy. Out of work people in all walks of life, businesses making less money, restaurants with fewer customers, fewer haircuts, less travel and hotel business, big box stores laying off part-timers . . . .
Tax revenues down, gov’ts having to cut back on programs, entitlements cut. It ain’t gonna be pretty. If you live in the city or burbs, who’s gonna treat and pump your water, take away your garbage, keep the AC on if workers aren’t getting paid? It could be like Russia after the fall of communism.
Although, I’m engaging in a bit of schadenfreude myself (I love to see the mighty and the arrogant fall), I see a lot of future suffering for Joe and Mary Six-pack. The middle class is gonna get creamed, me-thinkest. Keep your powder dry!
I think you’re right on, in your prediction
I agree about the potential for violence. I recall the Salvadoran riots in Mt. Pleasant (D.C.) quite a few years ago. It’d be on a much grander scale next time, I would think. Now, the illegal community has expanded considerably in Fairfax and Montgomery Counties and waaay beyond. There’s been gang activity in Frederick and Carroll Counties, recently. They may be “celebrating diversity” with some real fireworks.
Keep your powder dry, amen.
Forgive me, but I have to tell this story ’cause it’s just blows my mind the way people think. My bro-in-law, who I talked into selling his house last Spring in Riverside, passed this one on to me. He had a friend who he found out recently went into contract on a new home down there. When my bro-in-law confronted him to tell him he was nuts and to walk away before it’s too late, the friend replied that there can’t be a housing bubble, because if there was and housing went down, then the whole economy would be in trouble. What the….?!!! My bro-in-law tells me he just stood there with a “what, are you kidding me” look on his face and then walked away.
We both figured this moron deserves his fate.
Actually the guy isn’t crazy. He’s nailed it! Housing is heading for a correction of Biblical proportion, and the resulting fallout will do the same to the economy. He couldn’t be more correct!
Your bro-in-law should have replaced the ‘WTF’ look with a big grin, and rapidly nodding his head up & down. Then shake the guys hand and thank him for grabbing his well deserved piece of the big collective housing title.
Apparently flat markets for the last 6 years which were accompanied by ballistic debt driven consumer spending (which is now ending), would be no indication that things will change going forward. You’re both being too hard on him.
Having said that ….. me still thinks ‘Sticky’ coming down ……2010. This should be favored by the ‘Schadenfreudians’, because so much more fun to watch this guy’s disheveled appearance and demeanor unfold at work over several years, rather than the quick ‘hit by a truck’ event……
Speaking of flat, who is buying builder stocks (DHI,PHM,TOL) but themselves? All should be at about $10, but seem to be happy in the $20’s for quite awhile. Must have been some good news again today, because they all went plus late in trading ….
Publish multi-lingual local maps to the homes of developer and mortgage company executives, general contractors and local politicians, you know, sort of like those celebrity home maps they have in Hollywood. Hand them out at the demonstrations.
Gadfly, you beat me to this one, I was going to post in on my blog — without the housing engine to keep all these illegals employed, we are going to see even more how they have been taking jobs from American citizens. In essence they were an unofficial guest worker program, and now that the need for them is gone, they will have to leave, as in be deported.
Some of those “undocumented” workers profited quite nicely from the housing boom. There was a story about it in our local paper a while back. Many took the money they made, went back across the border and purchased their own homes in Mexico for far, far cheaper than they ever could in the US. They’re no fools. Now they’re kicking back and bubble sitting. Saved their money and paid cash for their homes. No mortgage, no banks to enslave them.
Here is a wild guess. It gets so bad that illegals can not find job and turn themselves in to INS for a free ride home and a meal.
That seems plausible, actually. Not too far from win-win, either, if we’re talking about just to the Rio Grande. No violence, minimum taxpaper cost overall.
*I think you forget that these folks aren’t going to have a job in Mexico, El Salvador, or wherever they came from either. So they will probably stay here where they can get free medical care and free education for their children. Some will turn to charities, others to crime to feed themselves. Instead of 3 families living in a single family house you may get 6. It is wishfull thinking to believe that a significant number of the 12 million illegals here are going to pack up and leave. No matter how bad the recession, the US isn’t going to turn into a 3rd world country like the places these folks came from.
Just recall the stories your (great?) grand parents told you about the 1930s.
Condos are still going up like gangbusters in Silver Spring (just over the MD line from DC), with plans for more. A new hi-rise is going up too — I have no idea who’s going to live there. You can’t touch a 1 br for less than $270K. But the market is slowing badly. There’s one ugly — very ugly — complex of brand new “luxury” lofts (with the obligatory tiny granite countertop), at least 1/3 of which either have For Sale signs or look empty. They’ve never been lived in — filpper heaven. One condo office that had been there for years on a major street hi-tailed it outta town.
The only condos that I think would sell are the “ecco” condos right next to the Takoma station. But they’ve only just cleared the land for that. We might be in a Depression before they are finished.
Perhaps the one good thing about the bust will be that granite countertops will finally be seen for what they are — gaudy baubles of the bourgeoisie!
Granite countertops are the avacado green appliances of the new century.
The Last FB: Taken, for granite.
‘Save up to $50,000′ on condos at Park Place in the Lorton Town Center. Get one year of free condo fees, $10,000 towards options and $5,000 towards closing costs in a ‘limited time’ offer for condos at Cameron Station in Alexandria.”
Limited time offer is $50,000 now… next month a new offer will be $100,000
I’m glad to see the Washington Times printing reality again. I’m a loyal Post reader myself, but I started reading the Times last summer/fall because they were the only ones printing the facts. Then they got rah-rah for awhile and I almost gave up on them. I hope we see more like this in the future.
If they start giving away condos to anyone who has a pulse than I can see some interesting stuff happening. If you rent a rat-infested hellhole and you don’t care about your FICO score because you never had a credit rating anyhow, and someone offers you a nice new condo for nothing (even $10,000 in options that you can sell for food), why not just live there as long as possible without ever paying for anything? Just remember to comb your hair and brush your teeth before you go to sign the papers.
I’m moving to San Diego!
Your suggesting fraud and I don’t think thats a good idea .I don’t think your ready for any kind of home ownership if your thinking along these lines.
Just a follow-up, I think the previous poster was jesting. At the same time, for those of you willing to live in short term digs, there are going to be plenty of opportunities in overbuilt markets — not fraudulently, but as ‘placeholders.’
“It must be exhausting, trying to sell a home in a region that has suddenly become a buyer’s market to rival the slowest years of the 1990s. It has to be particularly frustrating to sellers who considered selling last year, which turned out to be the last great sales year of a six-year sales boom.”
*******
That quote reminds me to ask - where is “mr. d” and did he sell his house this past spring in the DC area?
I and others thought perhaps he was taking an unnecessary risk by waiting to list it; if I recall he was convinced there would be a spring selling season, if not a “bounce” of some kind.
We all know how that turned out. Anyone?
Here’s a link to Reno Gazette-Journal story.
http://tinyurl.com/o2sgd
Declines in Northern Nevada.
“The moderate drop in prices we have seen over the past few months is not alarming or surprising in light of how much and how quickly prices rose (during the housing boom),” said Brian Kaiser, analyst for the Nevada Small Business Development Center at UNR. “So overall, we should expect prices to flatten out over the next few months.”
He says that prices should flatten out… but they are already falling. So, what does he mean?
Anyway, he said this in August 13, 2005:
“Numbers-wise, people are still buying almost as fast as last year,” said Brian Kaiser, an analyst at the Nevada Small Business Development Center at the University of Nevada, Reno.
“I honestly don’t believe this is a bubble,” Kaiser said of local figures that have rocketed in recent months.
“I don’t see the bottom falling out. Yeah, things have gone up really fast. But I’d expect similar numbers for the rest of the year as long as interest rates stay low.”
As a longterm renter in Arlington, VA, I wonder how the average worker will EVER afford even a little Unit (a.k.a. luxury condo). I mean with prices starting in the upper 300’s they would have to fall 40% to be affordable again. Does anybody really think that will happen?
Yes. Arlington is going to be flooded with new condos in the coming months. You see all the cranes don’t you?
As I watch this house of cards tumble down I think……
As a christian I do feel sorrow for the folks that got into this market because price fear got them into it, yet it’s of their own choice. To them I say learn a lesson and embrace your hopes and not your fears.
As for the rest of the greedy fks, flippers and speculators that figured they could live off easy money for the rest of their lives I say : ‘Don’t shoot them , let them burn’ (Saving Private Ryan).
More job idling at Ford:
http://hosted.ap.org/dynamic/stories/F/FORD_PRODUCTION_CUTS?SITE=CADIU&SECTION=HOME&TEMPLATE=DEFAULT
Starting to get ugly out there….
Dearborn-based Ford, which lost $254 million in the second quarter, said last month that the speed of the market shift away from trucks had taken it by surprise.
Well, ya think? Gas prices went up, when, last fall? You’d think they would have pondered this sooner, but no. You’d think they’d ramp up the latest technology to provide large, yet fuel efficient cars and trucks, but no.
What kills me is that right down the street from the Woodland Park condos (Herndon), there are two even BIGGER condo projects being built, both of which you can see from the Dulles toll road.
“Nearly three times as many condos are on the market today compared to last year, according the MRIS. Last month’s condo sales dropped 18 percent compared to last year. According to Lawrence Yun of the NAR, the condo market is always more susceptible to purchases by investors and speculators. ‘Now these short-term investors have left the market,’ said Yun.”
But Lawrence, don’t you remember what you said less than a year ago? Zero chance of housing declines?
It’s right here. I didn’t make it up.
http://nvar.com/newsdetail.lasso?articleno=nvarn100595
Short-term investors are TRYING to leave the market.
Arlington — nice find — this time ’round, the Internet and its easy archive-retrieval will cause unending embarrassment to a lot of pundits who formerly assumed the usual 90-day memory of the populace would provide them future cover. In the last couple of elections, we saw it eat some politicians. Now it’s the economists’ turn.
Nice work!
But the realtors were saying the housing supply would only get WORSE AND WORSE:
http://nvar.com/newsdetail.lasso?articleno=nvarn100455