‘The Downturn In Washington Is In Full Swing’
A housing report from the Washington Post. “And so the great real estate boom has ended. Signs of a deteriorating market are everywhere, even in Prince George’s County, where the housing market conditions had remained close to boom levels even as other neighborhoods cooled dramatically.”
“‘The downturn in the Washington housing market is in full swing,’ said economist Mark Zandi. ‘The market is weak and getting weaker.’”
“Sales have plunged in every jurisdiction; in August, the latest figures available, 8,300 homes changed hands in the region. That’s down by a third from a year ago, according to the area’s MLS. As of the end of last month, 46,000 homes were on the market, up from 21,000 the same time last year.”
“One thing is clear: Buyers are overwhelmingly in control now. Year-over-year median prices were down 4 percent in August in Prince William and Loudoun counties, whose share of unsold homes account for roughly a quarter of the homes on the market in the region. Prices were also down in Arlington (14 percent), the District (9 percent), Fairfax County (6 percent) and Alexandria (2 percent).”
“Condo sales have been hit particularly hard. In Arlington, the District and Alexandria, condos account for more than half of the homes on the market. In Fairfax County, they account for a quarter.”
“Those who really do want to sell ‘need to recognize that they need to be the best house at the best price this week,’ broker David Hawkins said. ‘What the neighbor got a year or two ago has no bearing on the market now.’”
“Arlington renter James Cave is still waiting to buy. In the spring, he said he thought the housing market was overpriced and headed for a fall, so he is feeling quite smug these days about his decision not to plunge in.”
“‘There was no way I was going to jump into the real estate market that wasn’t grounded in reality,’ he said recently. ‘But what’ll happen to all these people who bought?’”
“Cave felt a lot of pressure from his friends and acquaintances to buy a home. He has been socking away half of his salary into savings for several years, and could have easily produced a substantial down payment. Instead, he spends $1,400 a month to rent a condo in a new building in Arlington.”
“‘I’m totally happy,’ the Washington-area native said. ‘All the people who were bragging about prices going up are suddenly silent and worried about what their properties are worth.’”
“Cave continues saving his money, waiting for what he thinks will be a flood of foreclosures when people are faced with escalating payments and can’t sell for enough to cover their mortgages. ‘What I’m waiting for is when the housing market is at its bottom,’ he said. ‘I think we’re a long way from there. I personally think it’s going to get really bad. It’s like the Internet craze.’”
“It seems to him that the investors who own units in the building, like his own landlord, are becoming more anxious to sell. He frequently visits open houses for new condominium complexes in the area. He has been noticing how many are offering generous incentives, and there are still several new buildings under construction.”
“Now he thinks he will wait for the market to drop enough so he can afford to buy a single-family house. He thinks he would be willing to pay $300,000 for such a house, not the $600,000 many owners are now asking. He said, ‘I believe my patience will work for me.’”
“He thinks he would be willing to pay $300,000 for such a house, not the $600,000″
He will be overpaying at that price. I am renting a 600k house in Norva, and I would not pay $220k for it (what it would have gone for in 2000)
house in my NVA hood for rent for 1900
wow a 1995 type price
seems even rentals are weak
“He thinks he would be willing to pay $300,000 for such a house, not the $600,000″
It is refreshing to start to see these quotes hit the mainstream media. I imagine when Joe Sixpack reads this while enjoying his morning cup of coffee in his overpriced POS purchased with funny money at the top in 2005, a real fear will start creeping into the back of his mind. I cannot imagine how it would feel, to enter into the biggest purchase of ones life, only to realize shortly thereafter, that the value might easily be reduced to half. This will be devastating to a lot of marriages and families. In life, many lessons are learned the hard way. Some will see the experience as an opportunity to better themselves, others will allow it to destroy them.
Nah, Lereah says the markets gonna pick up again next Spring, just after the Super Bowl. No worries.
- “Now he thinks he will wait for the market to drop enough so he can afford to buy a single-family house. He thinks he would be willing to pay $300,000 for such a house, not the $600,000 many owners are now asking. He said, ‘I believe my patience will work for me.’”
Note to James Cave . . your patience will be rewarded
He said, ‘I believe my patience will work for me.’”
Ditto.
Good for him. Clearly, he’s a smart guy who will buy something he can afford. If others were like him we wouldn’t be in this mess.
Me too James! But prices are still way above 2004 levels around here - discounts or no discounts.
He does have his head on. Will he buy at $300k? That I question. If he was smart enough to see the bubble, he is probably smart enough to know when inventory is still unstable.
David, this belongs on your blog!
Neil
This is the first rather substantial article I have read where the reluctant buyer, Mr. Cave, has been shown in a positive light. The MSM loves winners and the renter is the new smart pragmatic individual! Way to go Mr. Cave!
Shown in a positive light, yes, but not overwhelmingly: to wit, “he is feeling quite smug these days.”
“Smug” is loaded, implying feelings of undeserved superiority. What’s wrong with “confident”?
Cave is a saver. Savers are more likely to feel skeptical about the bubble prices because they actually understand what it takes to acquire amounts such as $50,000, $200,000, $600,000, etc. Nonsavers don’t have much reference point for the real value of actual dollar amounts.
That’s a very good point. And since the savings rate in the US is negative, we now have a partial explanation of how this mess got so out of hand!
agreed, that is an excellent observation. Unfortunately, currently there aren’t many savers, but I think that too will change.
posted “Cave is a saver. Savers are more likely to feel skeptical about the bubble prices because they actually understand what it takes to acquire amounts such as $50,000, $200,000, $600,000, etc. Nonsavers don’t have much reference point for the real value of actual dollar amounts.”
Neither do the lenders!
Cave is a saver. Savers are more likely to feel skeptical about the bubble prices because they actually understand what it takes to acquire amounts such as $50,000, $200,000, $600,000, etc. Nonsavers don’t have much reference point for the real value of actual dollar amounts.
Excellent point as it took me forever to build up a $30,000 nest egg which I though was all the money in the world.
Something is only worth what someone is willing to pay for it. That means buyers control prices and not sellers.
“Sales have plunged in every jurisdiction; in August, the latest figures available, 8,300 homes changed hands in the region. That’s down by a third from a year ago, according to the area’s MLS. As of the end of last month, 46,000 homes were on the market, up from 21,000 the same time last year.”
Do these figures include the cancellations booked as new home sales in the official new home sales statistics? Figures don’t lie, but liars do figure.
Arlington renter James Cave is still waiting to buy. In the spring, he said he thought the housing market was overpriced and headed for a fall, so he is feeling quite smug these days about his decision not to plunge in.”
“‘There was no way I was going to jump into the real estate market that wasn’t grounded in reality,’ he said recently. ‘But what’ll happen to all these people who bought?”
Golly- I don’t know! What WILL happen to all of those poor, dumb bastards?!? Wait a minute- Lets ask Va Investor! With a profound and unique insight into this baffling, new-paradigm (real estate ONLY goes up) market, that is the only person who could possibly divine the future (real estate ONLY goes up) in these uncertain times.
LOL
Oh, don’t worry. Va Investor bought every property at rock bottom 100 years ago, has enjoyed full appreciation, they are all disgusting cash flow positive, and have not dropped one dime in value. Kind of reminds me of all those people who sold their Yahoo at 350 and bought it at 10. Yet, they’re still driving a Yugo
Well yeah, gotta be rich to drive a Yugo. It’s not the initial cost, it’s the repair bills.
Guy walks into an auto parts shop and says, “I’ll take a gas cap for my Yugo.”
Clerk replies, “Sounds fair to me - Here’s your gas cap - now give me the keys and sign the pink slip.” -
Yeah, Chick- I hear you, but most people that really have serious money ( and I do know a few) normally don’t repeatedly feel the urge to tell everyone on an anonymous forum how wealthy they are. They also don’t acknowledge how wealthy they are due to renters and their multiple investment/rental properties and in the next breath rant about “jealeaous, bitter renters”. Thats a lot like Harlan Sanders telling you how much he hates people who don’t fry their own chicken or Dave Thomas telling the world that only an idiot would buy a square hamburger. I’m calling ‘bullshit’ on the whole facade. I’d like Va Investor to publish locations/addresses of their MASSIVE holdings so that I can see just how incredibly wealthy they truly are and laud them in proper fashion. What are some addresses of your vast empire, Va Investor?
And my brilliant bro-in-law in suburban MD was able to convince both of this kids to buy houses right at the peak in late 2005. He told them that they would never be able to afford a house if they didn’t get in now with 40 year mortgages. One daughter was just out of college and really doesn’t even have a job. Her BF delivers newspapers….and they are now “condo-owners”.
Poor kids are presumably underwater on RE in their early 20s. We tried our best to warn them about all this.
No offense but bro-in-law = luzr.
The neighborhood newspaper boy owns a condo? No way!
posted “The neighborhood newspaper boy owns a condo? No way!”
Yes it is only a condo, if he were a night manager at Taco Bell he would have 5 or 6 house’s.
When they start to feel squeezed hard, advise them to consider mailing in the keys. Better a black spot on their credit report than servitude forever.
The kiddies should move back in w/ bro-in-law forever.
That would be a sweet dose of poetic justice.
OT, but I think a must read for any true housing bubble’ist
damn, link didn’t work
http://www.financialsense.com/fsu/editorials/willie/2006/0929.html
http://www.financialsense.com/fsu/editorials/willie/2006/0929.html
Are you kidding, this guy’s a kook. All derivatives are “financial sewage”?
> All derivatives are “financial sewage”?
A simple counter-example is Southwest Airlines hedging of fuel costs. That alone allowed them to be the most profitable major airline over the last several years.
Just for the record American Airlines “hedging” of fuel costs was just simple longterm commodities contracts. A future contract came up at a price they liked so they bought it (and actually accepted delivery no less)
Have you read up on derivatives? Finacial sewage sounds about right to me
“And so the great real estate boom has ended.”
How many times will we get to read this identically-worded pronouncement over the next five years?
The long expected, knew it all the time, been predicting it for years, downturn in the housing market is finally here,
signed, love and kisses, David L. XXOOXX
did i read this right? “Prices were also down in Arlington (14 percent), the District (9 percent), Fairfax County (6 percent) and Alexandria (2 percent).” arlington median is down 14% y-o-y.. that’s a good chunk.. it thought Arlington supposed to be one of the more stable areas where prices are either going up or staying flat
14% in Arlington is an exaggeration, or more precisely a statistical anomaly, skewed because cheap condos are selling, pricier condos and high-end SFHs are not. However, SFH prices are starting to suddenly be reduced 50K at a time, in June price drops were in the 10-20K range.
Also, no way Cave is going to get a house in Arlington for 300K. Maybe in real terms seven years from now, but no way nominal prices are returning to 2000 levels, not after there had been negative nominal price appreciation (and 50%+ real depreciation) since 1989.
only if the LP gets elected
then DC would be cleveland
“Also, no way Cave is going to get a house in Arlington for 300K.”
Why, is it different there?
Don’t forget the WSJ article about the Herndon 5BR/4BA McMansion that was offered at $1 Million, but at auction only brought a top bid of $475K. It ultimately sold for $530K as I recall. $300K for a small, older Arlington house will be the norm by next year. And the sellers will be happy to get it.
“Also, no way Cave is going to get a house in Arlington for 300K.”
Why, is it different in Arlington?
Don’t forget the recent WSJ article about the McMansion in Herndon that was originally listed for $1Million and only drew a top bid of $475K when the owner decided to try an auction. She settled for $530k as I recall, and that was for a 5BR/4BA house on 1/2 acre.
$300K for a small, older SFH in Arlington will be the going rate by next year.
I disagree, i think he may be able to get his house at 50% discount in the near future..
14% decline in a year is a pretty big declien, whether or not the number is exaggerated.. this will trigger many more to sell and cover their profits (or cus their loss?)
No, I think it was a misprint prices never go down. DC metro inventory in now at 60,000 units (ziprealty)
The SFH was flat in Arlington but the condos took a dive.
Do recall that 3 bed/2 bath homes do compete with 2 bed/2 bath condos as an alternative. When the condos tanked in Miami, they slowed the sales of the SFH due to buyer indecision on which was the better deal.
That 300k in a few years? Quite possible.
I should amend what I wrote. 300K for a small, old house in South Arlington is not impossible.
Here is the scoop for Arlington in August (yoy):
overall median -14%
overall average -9%
condos -10%
2br sfh -8%
3br sfh -5%
4br sfh -4%
2br th -11%
3br th +9%
4br th +75% (only 4 units sold)
Arlington County was widely thought to be immune from falling prices because of its proximity to the city, desirability, blah, blah, blah. See you at -40% sometime soon.
The housing market in Arlington reflects location, location, location. Also note they were building condos like mad, converting over rental apartments to condos, etc. Then the fedgov decided that DoD and others should vacate most Arlington buildings because they were not threat-safe. Eventually the lobbyists and other lawyers will come (from DC, from the outer burbs, etc) and refill the buildings, but in the meantime…
this is where are good unbiased buddy lereah owns multiple properties - fairfax county and the district.
and kudos to cave. he’s a good man
Glad to hear Lereah’s misguided cheerleading will come back to haunt him.
DC area is last and least down- first up
because the sheople believe in GIB GOV LUV
W has no spending vtoes to date
Hate to burst your, er, bubble, but all the W Republicans live in N. Virginia. It just so happens to be a true fact. DC went over 90% for Kerry in ‘04.
I’m just hoping W will vetoe some spending–
Yeah, that’s gonna happen. But hope springs eternal.
Why would he? Cheney told him that deficits don’t matter.
posted “DC went over 90% for Kerry in ‘04.”
It also went 100% for that crackhead mayor Mairon Berry.
Fairfax and Arlington also went to Kerry, only the rural areas in VA or MD went for Bush.
The market will go down significantly in DC area due underperforming job market.
I am switching a job, and it took me the longest time ever to find a new position during my lifetime. There job market in DC is shrinking rapidly in my field (engineering) since this spring. Job market fairs are packed with hundreds of people competing for several inferior positions. The job section in Washington Post has a fewer adds every week since beginning of the year, which seems that the local economy entered significant slow down. Except the government, nobody is creating good paying jobs in the private sector in DC metro area for past 6 years. Since the war in Iraq is taking heavy financial toll, DoD, DHS and other agencies imposed hiring freeze. Plus add layoffs at AOL and many other companies, the job market is not really good. DC is also depended on tourism, and services, which don’t pay much money. 60% of people in DC makes less then 42K per year, and the housing cost is much higher than Boston, where people earn more. Unemployed people don’t buy homes, and individuals who earn less then monthly mortgage payment on McRoach home cannot afford one here.
don’[t go to NE
I know what you mean I’m a capitalist and the DC area is very alienating- all gov parasites
My ex-neighbor is disgusted with the option Arm loan, what used to be an affluent neighborhood with defense Lawyers and Psychiatrists is now inhabited by the lawyers defendants and the “shrinks’ patients, he says everyone can afford this now.
He’s wrong. They can initially “purchase” stuff there, but they most definitely cannot afford it.
Won’t be good for him. When the buds were making money, it was perfectly acceptable to rub it in ol’ Jimmy’s face. But the downside? He will say nothing; will see anger, pain and jealosy - all because he refused to be suckered. His victory will be buying some family’s foreclosed house - if his investment money still exists.
His victory will be buying some family’s foreclosed house
Why can’t he buy something brand new but never lived in? Or, say, a house someone bought at the bottom of the last cycle? Why do you think his victory has to come at someone else’s expense?
I think there is this great assumption that the housing market is going to destroy everyone. But what about the other (smart) people like James who bought at a reasonable price, consider housing an expense and not an investment, and neither have to nor want to sell? I don’t think my parents, for example, care one whit about the housing market. And why should they? Their house is paid for and they’re not going anywhere.
Here is the original article where his friends made fun of him over dinner one night for not getting in on the real estate action:
http://www.washingtonpost.com/wp-dyn/content/article/2006/03/30/AR2006033002349.html
“For three years, there has been a spirited but light-hearted dispute between Milton, a homeowner, and Cave, a renter, who are both Washington area natives. Milton, married with a 16-month-old daughter, bought a townhouse in the Lorton area for $210,000 in early 2004. Since then he has been ribbing Cave, who is single but who has saved enough money for a down payment, about his failure to make a purchase.”
“Milton likes to remind Cave of how much housing prices have risen since he bought his townhouse, smiling as he mentions the recent tax assessment he received, which indicated the value of his property had gone up $30,000 in a year.”
“Two years ago, he should have bought,” Milton told the group, nodding to emphasize his point. “At some point you’ve got to get in. Real estate is the only sure investment.”
“Casey jumped into the conversation. Like Milton, she is a fan of ownership. “I could be renting and throwing away a great amount every month. . . . [owning is] like putting my money into a savings account.”
“Homeownership makes Casey feel as if she has more control over her destiny, even though she pays 75 percent of her net income for housing, including the monthly co-op fee.”
“Casey thinks that fortune will be on her side — she’s naturally “lucky,” she said. “I’m Irish.”
“Homeownership makes Casey feel as if she has more control over her destiny, even though she pays 75 percent of her net income for housing, including the monthly co-op fee.”
Apparently Cave likes to hang out with idiots.
Agreed. Although Torres says, “I need to work my butt off,” and Casey says she “could” get a waitressing job, they’re hanging out, eating goat-cheese pizza and drinking beer. Instead of, say, working a second job.
And man, Casey’s twisted (il)logic justifying paying 75% of her net income for her “freedom” makes me fear for the future of their generation.
“Like Milton, she is a fan of ownership”
for things like pride of ownership.. she might as well spend 100% of her net income
How do you fix stuff in your house when it goes if you are paying 75% of your income in your mortgage payment.
Casey is probably toast.
Casey the Lucky Irish Stripper.
Where is DC broker, he was always posting in the good old days when the subject was Washington DC RE?
Maybe he does not have an internet connection anymore. He could not sell any house lately, so the ISP dropped the service for not paying on time…?
Oh, I looove this. I’ve been listening ad nauseum to the garble in dc metro like “my place has increased x amount in just 6 months!!” “We put a contract down on a th but it was worth 50k more when they finished it in 6 mos so we sold it!!!! hahahahhalalalaldidida” “I’ll use my place as a nice nest egg for retirement” aaaaaaaaaaaargh. I swear I have witnessed firsthand over and over and over how greed absolutely destroys peoples’ judgments.
One teacher I work with was a voice of reason in 2004 - “Guess what they say my house is worth now?? 1 Million….ON PAPER. Now we have to pay all these taxes on PAPER profits”.
And all these people witnessed the tech bubble here but “oh no, real estate is different”.
“He thinks he would be willing to pay $300,000 for such a house, not the $600,000 many owners are now asking. He said, ‘I believe my patience will work for me.’”
What’s this?….the TRUTH actually in print.
Hey, look!!! A flying pig!
I think the Arlington cracker boxes might fall back to 220k (or whatever they went for in 2000) in real terms by like 2009-2010. But then we have to argue about
Savers like Cave have been punished by asset inflation since 2000 unless he was a good investor (e.g. energy, gold, home builders thru 2005, etc.) So he’s far from being the driver’s seat.
It’s funny, the owner of my house appealed the 600k assesment upon my prompting (the $/sq. ft. of the land is higher than the neighboring houses for starters). He told me that the form asked how much he thought the house is worth. He put down 200k…..
I think the Arlington cracker boxes might fall back to 220k (or whatever they went for in 2000) in real terms by like 2009-2010. But then we have to argue about the deflator to translate 2010 nominal price back to 2000.
Savers like Cave have been punished by asset inflation since 2000 unless he was a good investor (e.g. energy, gold, home builders thru 2005, etc.) So he’s far from being the driver’s seat.
It’s funny, the owner of my house appealed the 600k assesment upon my prompting (the $/sq. ft. of the land is higher than the neighboring houses for starters). He told me that the form asked how much he thought the house is worth. He put down 200k…..
i’ve said it before, saying it again: Tse & Downey (they wrote the two WaPo articles) rule, their editor Maryann Haggarty must be on vacation this week
You have no idea how many idiots have been telling me for a year that renting is throwing your money away. People don’t realize that owning a property would cost you at least 2X right now than renting the same exact property. You can take the difference and invest it at a relative safe ~5% rate with ING Direct. If you invest a little more aggressive you can get ~6-7%.
Right now rent is 18% of our net income and we save nearly 40% of our net income. That woman spending 75% of her net income is crazy.
The economy
Going down?
Sep 28th 2006 | WASHINGTON, DC
From The Economist print edition
Why the housing slump may spell recession
THREE years ago Rose Hill estates was a dairy farm in Loudoun County. Now it is in the front line of America’s housing slump. The rolling fields are dotted with cut-price McMansions. The asking price for new houses, complete with gourmet kitchens and “extended libraries”, has been slashed by 20%. But business is slow. The pace of home sales in the county has halved since last year while the stock of unsold homes has doubled. “The region is glutted with new houses,” says Lenn Harley, an estate agent. “The market is dead.”
http://www.economist.com/world/na/displaystory.cfm?story_id=7971153