N Virginia Home Prices Fall With Surge Of Inventory
Reader sent in some statistics on Virginia’s housing bubble. “Although the number of single family homes and condos sold in January was down by almost 30% when compared to 2005, the average sales price did top the 2005 January average sales price by 10.3%. Active listings increased dramatically when comparing homes on the market in January 2005 versus January 2006, with a 392.5% increase.”
“Sales prices for the first month of 2006 in Greater Northern Virginia (including Prince William, Loudoun, Fauquier, Culpeper, Madison, Clark, and Rappahannock counties) also followed an upward trend as did closer-in Northern Virginia region. Units sold were 28.1% below January 2005 levels with 2,292 units sold in January 2006. Active listings were up 330% when compared to the number of listings in January 2005.”
“The average sales price was up 13.4% from the January 2005 average of $440,426 to the January 2006 sales price average of $499,456.”
But from the December report. “Sales prices in Greater Northern Virginia followed the same upward trend as the closer-in region. The average sales price was up 18% from December 2004 at $525,274 for December 2005.”
People like to talk about how the DC area is less prone to drops because of the govenment as the main employer, but it certainly doesn’t mean people here are not living beyond their means…
“Living beyond their means”.
I’m a member of an offtopic forum and there is a thread there approximately 9 pages long where other members have posted pictures of their recently financed 400k-500k McMansions. Most of these guys are 20 and 30 somethings and I still can’t figure out how they do it on 60k/yr jobs. I earn more than twice that and would never sign for 400k on what I earn.
Are they really that confident that their job won’t get shipped to India? Are they stupid or am I just a gloom and doomer? I don’t see my currently salary extending beyond another year, MAYBE.
I’m missing something.
Are they really that confident that their job won’t get shipped to India?
Many federal workers are.
In all fairness, a coupled pair of federal workers can make $200K gross. It’s really not a big deal to buy a 4 or 5 hundred dollar house on that nut. The problem is that literaly, 4-500k buys 900 square feet in the ghetto, and that’s about it right now. There are no $400,000 “McMansions” in DC or its suburbs. Think 7-900K, and the bureaucrats in our example are out of their league and in for a spanking.
Are you kidding? Maybe a couple of GS-15s, but that’s the top of the pay scale. A GS-12 step 6 makes $65,500. Times two is $130K. They can reasonably buy a $400K place; $500K would be a big stretch, and your average $600-700K Arlington condo would be financial suicide.
Well I’ll lay it out for you as most of my friends are in their mid twenties living in NOVA. Of my friends the guy is usually a gov contractor making 65k and can expect a bump up to 80-85k once a high level clearance goes through. Their wives are admins, teachers, or tech editors, making 40k-50k. Assuming a combined salary of 108k they take home about 6k a month after taxes/401k/Medical. They wouldn’t qualify for the house they wanted with a 30yr loan so a year or two ago they went with a 5/1 IO ARM. The rates then were 3.75-4.25 on the IO. A 500k loan @ 4% is 20k in interest a year all tax deductible. So that is about 1700 a month add in an extra 300 for taxes and its an even 2k. Insurance is a minor expense that is more than offset by the tax deductions for all that interest.
These yuppies are betting that rates will be low again by the time their ARMs adjust or they will have much higher incomes to make up for it. Also they expect that their homes will appreciate further and could easily be sold in 2009 or 2010 when their ARM adjusts. Some have annual rate caps of 1% so their rate will adjust slowly. Some may spend lavishly and be hit with payment shock in 2009 when their payment doubles due to a rate moving from 4% to 6% and the addition of principal repayment based on 25yr amortization.
I guess the original question of Lingus was how those people can afford the bells and whistles? A trip to Home Depot would reveal that everything related to remodeling costs a fortune. You can easily hit $3K just for a puny backyard project. It’s a mystery to me too. Is HELOC really the only enabler?
more YOY bs
it’s going down dude, I’m watching ringside in N VA
sales numbers lag inventory for the 10th time !
I’m in NOVA, watching ringside too. I’m in Woodbridge, and the builders are still building like crazy. Along Rt. 1, they’ve got literally hundreds of acres totally cleared all the way to the Potomac where they have something like 5000+ townhomes going in. Speculators are already trying to bail out (some streets have half the homes on the market), and the builders have only just gotten started.
What’s it like where you’re at?
I am in Reston. My Neighborhood is still selling rather briskly and not too much inventory. This is for SFH. Condo’s are not moving and I have seen prices dropping.
va_investor,
NOT TOO MUCH INVENTORY?
Single Family Homes
Now: 3,942
This time last year: 891
I love people, whether on fox news, or elsewhere make bogus claims.
Not too much inventory here. Everything is pretty normal. blah blah blah
I said my neighborhood. Not my entire zip code. I also said single family homes. Have you been in North Point lately?
dont agrue with va_investor - he comes in here to pick fights!
I simply made an observation of my neighborhood. Arlington came back swinging about “bogus” claims and (the ever mature) “Blah, blah, blah”.
BTW - as of this moment there are only 20 Single Family Homes for sale in my entire zip code 20194.
(Active listings were up 330% when compared to the number of listings in January 2005.”)
think about that!
gov workers now make more than private sector employees
no one ever gets fired
everyone gets a raise
America is a socialist nation now- cheers
No they don’t. Private contractors for government agencies make a lot more than government employees plus most govvies have trouble gettting a raise every year.
But gov’t workers make more with benefits (pension, subsidized commuting costs, thrift savings plan, group auto/legal insurance, etc). And gov’t workers hardly ever get laid off in a recession.
The Government as an employer is America’s version of Social welfare.
(Yes, there are excellent people working for the Government. I meant those other people whose work you do.)
I don’t work for the government.
The joke around DC is that defense contracting is welfare for white people.
It’s despicable that the industry insiders are hiding month-over-month declines behind the glitter of year-over-year appreciation. Its a way of lying by omission.
Option,
That’s a good point…I’ve also noticed that in the Wash Times when they show the “housing snapshot” they have chosen strange sets of data. In January, I think I saw one that was from March to Sept. of 04 vs. the same time during 05.
I expect that as month-month changes increase to the downside, they may increase the length of their time horizon quoted in their price comparisons. At some point, they may try to sell us on decade over decade price changes…
The Wash. Times is garbage. And so is the Post. All the media is crap. Distorted views/statistics for the sheep.
Agree the media is all sham…I was watching KRON SF Bay Area last night…” Housing increasing again?” The only “facts” were they had one RE agent on ,and said she had one unit she had to reduce 25K 2 weeks ago, then had 2 sales over asking so she said the market looks like it’s over it’s slump???
Based on one predjudiced agent ,and comparing 3 listings?
…that is news??
If these trends continue, and they are repeated in starts and stops around the country, July on looms large. A slight seasonal up-tick in sales for spring is likely, then the start of a gritty fall on out to 2008 or 2009. We go up, whee! We go down, whee! The smart prosper, the others smart. So it goes.
Ben:
Just saw this out..
Cancelled home orders: Latest bubble prick?
Experts say jump in cancelled orders for new homes is latest sign of how investors inflated the real estate market recently, and how the market is due for a downturn.
http://money.cnn.com/2006/02/24/real_estate/home_cancellations/index.htm
Cancelled home orders: Latest bubble prick?
Experts say jump in cancelled orders for new homes is latest sign of how investors inflated the real estate market recently, and how the market is due for a downturn.
“In Arlington and Fairfax counties alone, more than 14,000 condominiums are under construction and another 128,000 units are in the pipeline”
http://www.finance-commerce.com/item.cfm?recID=124262
i don’t know where this guy gets his 128,000 number but even if it’s only half that, there’s no way to absorb that w/o major reductions. enjoy the fire sale!
128,000 sounds high, but I’m an eye witness to huge amounts of condos starting to hit the market in Nova.
Speculators still holding the bag will feel pain, as well as some unlucky first time home buyers.
128,000 is clearly some kind of error, as the total number of housing units for the NoVa area is around 650,000. 12,800 would be more reasonable.
Ben:
OT…….
Something funny going on with not being able to post a link to an article?? Tried but doesnt work. Anyway….
I just saw a pretty good article on CNNMoney
Cancelled home orders: Latest bubble prick?
Experts say jump in cancelled orders for new homes is latest sign of how investors inflated the real estate market recently, and how the market is due for a downturn
It is on the CNNMoney dotcom website … On the homepage and also in the real estate section…
Regards,
Vic
ooopssss Sorry about all those double postings above. Clutter….thought something was wrong…. never mind.
BB,
I had the same problem (or THOUGHT I had a problem) a few topics back. I learned it’s just a matter of patience.
I just had to wait a few minutes. But then again other posts I’ve made show up right away….go figure. 
BayQT~
This site has a good format for reading D.C. area MRIS data.
http://www.mris.com/reports/stats/
Fairfax County is the most expensive county in Northern VA. The median sold price is up 10% YOY and the number of units sold is down a huge 32%. In December the YOY price increase was 18% and in November it was up 22%. We are down and heading lower. I feel it’ll show negative numbers soon enough.
Other Jan. YOY numbers
Jan. 2005 up 25%
Jan. 2004 up 18%
Jan. 2003 up 10%
Jan. 2002 up 14%
Jan. 2001 up 13%
Jan. 2000 down -.05%
I should revise that comment about Fairfax County. Obviously Arlington County and Alexandria City are the most expensive. Fairfax is just quite a lot larger in terms of available housing.
Arwen,
Your numbers will help us understand what percent and how long a market typically experiences rising inventory before price declines begin occuring.
I use virginiamls.com for inventory by county in Northern VA. They have some nice graphs and daily updates from the MLS. Inventory is up about 5X in Fairfax county YOY but keep in mind the inventory of the last few years was very low so percentage increases dont mean a whole lot. The # of months inventory is a much better metric as it takes into consideration both supply and demand. In January even with the massive increase in inventory we had less than 5 months supply. Of course one important thing to note is that for the last few years inventory dwindled from December through March; this year inventory has begun to steadily increase in both January and February. When sales are slowing 30% and inventory is growing rapidly I think we are going to see the # of months supply turn into an all out glut by this fall. The MLS numbers don’t include the massive spec building of new houses either.
As for prices, we are starting to see reductions but they are still crazy. Home builders prices are even more crazy than the existing homes listed in MLS. What kind of nimrod would buy 700k townhouses in Herndon or Sterling? Or how about 400k 1BR condos in Reston? Home builders have started incentives but most new construction needs a good 30% haircut to be realistic.
It looks alot like the late 80’s. In my experience houses dropped about 25% thru the mid 90’s and condo’s dropped up to 40%. Should we expect the same this time around?
i grew up in NVa, have lived in Arlington for 7 years, and my mother is a realtor in Oakton. I firmly believe the massive bubble is over and on the downward slide and it could get real ugly. i’m a 29 y/o professional makign good money, and cant afford anything halfway decent. most of my peer group is talkign about leaving the area. DC really isnt that special. its not the govt empoyees fueling this bubble either, they’re not makign all that much, they’re the ones typically buying in places like Woodbridge and Leesburg and dealing w/1.5 hr commutes. and i cant even fathom another 50k condo’s, let alone another 128k. the party has ended. i’d get out of investment related asap.
D.C. has a lot of people come and go. DC is a good place to get started in a career, yet it’s a good place to leave once you are started. I too find a lot of young people who haven’t bought a house yet talk about moving out, and I’ve witnessed in the last 6 months a lot of people move out.
Lets hope for a 50% or more haircut. 128,000 new units? That is expecting 250K+ people to move in? Unbelievable.
That’s expecting 250K+ people to move in AND no one move away. But people will be moving away, putting up their condos/homes on sale adding to the inventory.
People have already moving away. I know of 3 people of the top of my head that sold and moved out of the area in the last 6 months. There are many reasons to move out, but I know cashing in on the rise in housing was on the list of reasons.
Also, when baby boomers in government start to retire, are they going to want to stay in cold D.C. are move to warmer climes?
I live in nothern virginia. I own land bought at a manageable price…on a 15year fixed loan it amounts to 18-20% of my monthly income. That being said, I am saddened by the way the average man has been squeezed by people with no sense.
I would love to see all these flippers smashed. I dont care how much my land gets affected since I bought that as a place to build my house on and the value of that has gone up 350% since I bought it. In fact I would really welcome a 60% haircut, it does not matter to me anyway, I am not going to sell it. In fact I already have nearly enough saved to pay it off outright.
All this talk of soft landing is real entertaining. Laughable. There is no soft landing, in fact I beleive this is neither a sellers market or a buyers market, there is no market. All the market there is what was there several years ago, the only difference is that a some people figured out how to multiply thier savings using IO/neg am loans and got out the rest are just bag holders. I think there will be price reduction that will catch everyone by surprise by its swiftness I would love a 75% correction…but can live with a 60% downswing and a flat level after that.
Freddie Mac equity extraction report, and followup on the First American title “homeowner equity” study.
http://www.xanga.com/russwinter
Bubblemeter published the charts that go with these numbers. Check them out.
http://bubblemeter.blogspot.com/
Ben, thanks for posting this.
Eric in DC
Transaction volume always dries up before prices fall. That’s what we’re seeing here. It’s classic market dynamics. Same thing whether it’s stocks or houses.
JMO
uhh, vainvestor, i’ve been in north point lately. i’m in north point right now. 4 houses on my block for sale since july. still not moving. SFH. and btw haven’t seen ANY neighborhood around here where SFH are “moving briskly”.
Center Harbor Road Area is where I’ve seen 3 houses come on the market and sell within the past month. Townhouses in my sister’s Northpoint development (whisperhill) are moving as well. I am not saying that we are in for a correction - just that I haven’t seen it yet (except in condo prices).
As of right now, there are only 20 Single family homes for sale in all of the 20194 zip code. I don’t know why you have four on your BLOCK since July(?).
I see more than 20… my that is one expensive zip code!!!
The others are townhouses.
are you sure those aren’t patio homes? patio homes are more like SFH than townhomes, even though they are attached. lots of em in 20194
I only counted detached.
check bennington woods and stowe on MLS. and one was relisted so it won’t show the actual time on the market. but yeah, all 3 on sale since, if not july, september at the latest. and I know of at least 2 who plan to list in the spring. another very close-by SFH has been on sale since october for $1.2 mill.
sorry, make that “all 4 on sale since …”
or just drive by bennington woods on sunday and check all the open house signs on reston pkwy. they’re getting pretty weatherbeaten.
i just checked, and 2 of the 4 are FSBO and no longer on homesdatabase.com, so i guess not on mLS anymore. but they still are for sale, still have signs in the front yard. one has been open house every sunday since autumn. i feel bad for the guy. he has bought a lot of red balloons this year.
He should lower his price if he really wants to sell. I doubt he is too motivated if he is not in the MLS. That is a must in any type of market or you lose 90% of your potential buyers. Everyone has a buyers agent today and uses the MLS to search. The seller is either not motivated or stupid.
he was on MLS for quite a while, and judging from the weekly open houses, he is still motivated. as for refusal to lower his price, isn’t that the point about htis market? everyone is stupid in that they think the “spring market” is going to bail them out. the guy trying to sell across the street from him took his house off the market for a month then relisted the day after Superbowl, b/c that’s another magic date, dont you know. still for sale.
I agree with you. Some (many) sellers are in denial. I think prices will drop for the next few years. One needs to be out in front of the falling prices. Priced properly (undermarket somewhat) at the outset is the best way to go. Once your property has been on the market for months it becomes “stale” in realtor lingo and buyers think there is something wrong with it.
If I were selling, I would not hesitate to get a top listing agent and pay to have the house professionally staged.
A house on my street (similar to mine, but smaller and different builder) came on the market 2 days ago. A top lister has it, but I think it is overpriced. I plan to follow the progress.