Inventory Growth ‘Strong’: Virginia Realtors
The Virginia realtors have their February numbers out. “Home sales in Virginia dropped for the sixth consecutive month in February, as home-price appreciation posted stronger than normal gains, the Virginia Association of Realtors reported Tuesday. Closed sales fell 9.5 percent in February to 7,109, down from 7,856 for the same month last year. Year-to-date, 13,818 home sales have closed, 12 percent less than last year’s year-to-date total of 15,743.”
“Fredericksburg and Prince William County saw the largest drops, with sales down more than 25 percent in each market.”
According to the association PDF file, Prince William sales volume fell 41%, and the Richmond metro had sales lower by 39%. The Dan River region saw sales drop 50%.
“‘The number of homes placed on the market in Virginia continues to show strong market activity in a historic context,’ explained VAR President Kit Hale of Roanoke. ‘The market definitely peaked last year, growing from just over 7,000 in 1999 to the 10,716 we saw last year. As the demand settles back into a more normal range of activity, we expect to see a much better balance between buyers and sellers.’”
And thanks to the reader who provided this link showing northern Virginia active listings up 315%. ‘Although the volume of single family homes and condos sold in February 2006 in Northern Virginia was 20 percent below the units sold totals for February 2005, average sales prices have increased 6 percent, to $514,116. More than four times as many active listings were on the Northern Virginia market in February 2006 than February 2005, up 316 percent from 1,584 to 6,588.’”
“Active listings in the Greater Northern Virginia area were significantly higher in February this year than in 2005. February’s total of 14,662 active listings were more than 250 percent greater than the number last year, which was 4,173.”
Going back through these reports, the average sales price has been falling.
$550,069..October 2005
$543,170..September 2005
$545,311..November 2005
$552,621..December 2005
$524,314..January 2006
$514,116..February 2006
Of all the links I reviewed for this post, not one mentioned standing inventory. This is where the state realtor groups really fail the public. Just try and find the median price data for the last six months or a running tally of inventory. Just when people need this information the most, they hide it.
You mean this?
http://www.benengebreth.org/housingtracker/location/DC/Washington/
But Norfolk is the most bubblicious!!!
Yes, NoVA, you’ve had your day in the sun, but get with it! What is the new garden sport of the east coast? According to that self-same housing tracker, none other than our own little slice of paradise, Hampton Roads!
Sure, it’s true that one other nirvana, New Orleans, actually has had more appreciation in the last 6 months than Norfolk, but come on now, can’t we confine our comparisons than places actually ABOVE sea level? While all the other wussy markets are in small single digits or actual declines, SE VA has continued its manly 10% plus appreciation.
And ok, while its median and 75th% numbers aren’t exactly Califoria, the only other cities that can be mentioned in the same breath are Miami, Boston, and our nation’s capital.
Little did we know the dockworkers, sailors, and airmen of the nation’s first permanent settlement could pull off their patriotic duty to inflate prices from such a paltry wage base!
I tell ya, The Neptunes, lately rapping about gang violence and racism is Va Beach, are gonna have to sing a whole new tune now!
Wow, a fellow Homicide Roads resident!
Lots of condo inventory coming online. Granby Towers, lots of stuff downtown. The Rotunda (barf). All priced well above what the employers are looking to pay.
I’ve been thinking about going to the various economic development groups (HREDA, etc) and asking them to remove the low cost of living and cheap workforce lines from their marketing materials.
I can’t wait for the bubble to pop in Norfolk. Housing Tracker shows growing inventory. Check out the Realty Times comments for Virginia Beach, someone admitted there is lots of speculator/investor activity.
Last year a realtor told me that the Witchduck lake condos were “limiting” their investor base to 25%, so yes I believe there have been lots of speculators (I’m guessing from NoVa). Check out realtor.com, though — above $300,000 prices per square foot are beginning to come down from last year. It’s especially noticeable in Williamsburg, where last summer’s $155-$175/sf prices have declined on average to about $135-$155/sf. It’s starting.
http://www.virginiamls.com/charts/index.htm has daily inventory for Northern Virginia. The trend is obvious. Inventory for Fairfax Co is up 516% YOY as of yesterday. Loudoun is up 378% not including the massive amounts of new construction out there.
Headline grabbing YOY price declines will be here in June or July. The real big price declines will be in 2007 when all the funny money ARMs start to reset.
I think YOY declines will probably come sooner.
http://www.novabubble.blogspot.com
I have some articles on my blog about the inventory picture in N. Va. I have several graphs showing inventory and sales since 1997, YOY appreciation, etc.
http://www.novabubble.blogspot.com
Like the comparison to 1999. LOL. Really reaching.
“strong”….like that’s a good thing.
North Virginia Inventory up 315% y/y as of Feb
http://www.nvar.com/market/pressrelease/prnvfeb06.html
thanks, that’s the prettiest bit of data i’ve seen on here in a while.
Wow! Thats UGLY!
Bearnake sez - “Oops!”. Loved how the article talks about price appreciation of YOY of 6% while from Oct 05 -> Feb 06 we’ve dropped ~10%!
The year over year twist won’t work any more around, probably, May. How will they continue to put a positive spin on prices drops?
Maybe they’ll start reporting something like - “Median prices reached 450,000, up 100% since May 2001″
They’ll say, prices are dropping, now is a great time to buy. Get in before they go back up.
http://www.novabubble.blogspot.com
Oh well, there’s always those heloc checkbooks to fondle . . .
miss me?
Actually, another year or two before I break out the checkbooks. Already seeing many foreclosures from 2005 & 06 loans already- but no equity there.
Sorry for the OT long post but this gem is too good to pass up.
My good friend became a real estate agent early last year (I really tried to talk him out of it) so I’m always trying to get a read on his client’s attitudes whenever I talk to him. In order to protect the innocent (or stupid in this case) I will make some “minor” changes to the figures, but honest to god everything else is spot on. I always have spirited disagreements with him regarding his business, but try not to lay it on too much for fear of him getting upset with me. I have not told him about this blog yet.
Here’s his latest client….He has a listing in the SGV (So Cal) for 400K. It is a basic home in a not too desireable city. Comps are going for 5-10 thousand less, but his seller has upgraded the house a bit so obviously, seller feels it is wortth a lot more than the comps. The seller wanted to list it for 405K but my friend thought that would be too high due to the slowing market and homes sitting a bit longer than a few months ago. He had to really talk down the seller into listing it for 400K.
It’s been on the market for a couple of weeks with a few calls but no offers, then an offer comes in at 406K. Buyer has a very solid FICO and cash in the bank but wants to do 100% financing. OK fine…should be a done deal right….NOOOO, seller balks at the offer saying that they’ll wait because they think they can get a better price??? Seller doesn’t like the buyer’s package because of the 100% financing part. Seller comments that the Fed just increased the rates (no sh!t sherlock!) and the buyer could just backout whenever they feel like it.
WTF????? What the hell is wrong with these sellers??? F*cking greed! Not only is the offer ABOVE the asking, lender says the buyer will have ABSOLUTELY no problem funding the loan. You would think that with the seller well aware of the current rate situation, they’d be all over this offer like flies on sh!t, just to get out of the market. Seller has had the home for more than 5 years so plenty of equity to play with.
Keep in mind this house is VACANT and the seller is carrying the mortgage in the meantime.
Folks, I’m sorry to say, with stories like this, I think it’s going to take a really LONG time to unwind this mess.
This I have never understood from sellers. Why do they care how it’s financed if it’s mainstream financing or what masquerades as mainstream financing. When the escrow closes it’s the same amout of cash whether the buyer put down 0% or 100% it’s doesnt change the amount of their check at the end of the day.
I agree with you with him knowing the fed just raised the rates I’d be trying to close that sucker before the rate increase hit the open market. That’s baffling
It depends on how marginal the buyer was with qualifying .The buyers agent shoould of brought in a pre qualifying letter explaining how much the buyer qualified for and up to what rate . In a changing market the realtor for the buyer should of done his homework to make the seller comfortable that he would not be wasting his time . Apparently the buyers agent didnt want to do the extra work required to make the deal fly.
should have.
One can always go back and try again , if the buyers worth it and you really think he will fly on a loan .
Why, I wouldn’t I’d simply tell my clients next. If your silly enough to be a buyer in todays market their are plenty f people who would be willing too take your over comparable and over list price offer. You like this neighborhood do you Mr Buyer lets go knock on the neighbors door down the street and see if he’ll entertain you puhleeze.
If that deal is done in SoCal I doubt if the agent just put a 8 page C.A.R. in front of the seller and say sign here. From reading the post he mentioned fico and cash in the bank. So the buyers agent probably put a standard package in front of the guy, pre-qual letter which btw is not worth the paper it’s printed on, bank statements, and the first page of a credit report showing fico’s how much more info would the seller need. Did you read the post or did you see the word Realtor and just start typing away.
The seller is a crackpot, if that agent had any sense he would’ve walked out right behind that turned down offer all the while cancelling all ad’s and having his sign removed as he cranked up his car.
You got to go the extra mile with sellers because they dont want to take their property off the market and than be in a worst market .Some sellers are like that and they want additional assurances .
This is one of the hardest type of markets to operate in .I have been there done that . I have been in markets that I had to sell properties 5 times because the market was changing so fast with interest rates going up.
Housing Wizard-
Oh for chrissake what more could the guy have done except give him a crackpipe and a blow***. If that’s what was required see the above post where I recommended he should walk away.
Stupid seller. Just get a large non-contingent, non-refundable deposit. Who the heck cares what financing the purchaser obtains.
I often put “all-cash” on the offer and back it up with asset statements. Then I get a mortgage. Inexperienced sellers can be extremely nervous and know little about financing options.
That said- alot of these pre-qual/ pre-approved letters are worthless.
Maybe the buyer doesnt have alot of assets , but has a good job and good credit . I wouldn’t be a realtor right now if someone paid me because I think prices will drop so it would be hard for me to sell a piece of property .
Why would the assets of a buyer be of any concern to the seller. If the bank has said yes thats all a seller should be worried about. And last I checked per the guys post Cash is an asset.
My whole point of the post was to show how crazy the seller’s expectations are in this market. Even with all signs pointing to a slowdown in housing, here’s this seller with the ONLY offer to cross his eyes (and above asking to top it off) and they want more. What the hell are they chasing? 5K, 10K, I mean really….accept the damn offer and pray escrow doesn’t fall apart before the market really tanks.
And that’s just one story, there’s a bunch of loony seller’s out there right now.
As a matter of fact, a bunch of loony buyers too!
Exactly
Because the buyer is a no down buyer ,which suggests he might be short on cash . The seller needs to know if the buyers has the funds to pay points , escrow fees etc. Buyers are known to tie up properties and end up dropping out . I have had sellers want to see tax returns on buyers to make sure they will fly .
I don’t know WIZ, if it is the right deal I would recommend it. In other words, if I would buy it myself I would have no problem sleeping at night. This assumes the buyers can afford the place (30yr fixed).
Wizard, the last 3 years have been a no money down market. Why should this seller expect anything more?
For a 400k deal, oh spare me you are reaching. If I’m on a 400k deal and the seller asks for tax returns. He’s going to get a kiss my *** whether I represent him or the buyer. That’s just over the top bs. Now if I’m on 5 million then hey that may be a different story not much but maybe a little depending on the property and how the deal is structured. But 400k that’s not going to happen.
The buyer may be a smart guy who figures leverage is my friend. As long as the check is in the sellers name at the end of escrow what does he care. If a deal falls apart because the buyer can’t come up with fee’s for points and the rest of his fee’s then all the agents the loan man and the escrow people should be fired and the seller should run far far away.
There’s no way to rationalize that kind of foolishness. Especially the way this market has turned
Hey elo from the block
I don’t dispute you that the seller is greedy . Any deal that he can get is better than the deals will be down the road . But at the same time if you have a seller like that
you got try to give him what he wants . If you can’t give him what he wants he will just die on the vine with his listing and loose alot of money .
Wizard,
My buddy did say he felt this seller was going to be difficult when he took the listing so he knew it going in. I asked him what he thought the seller’s motivation was, cause from where im sitting, it doesn’t look like selling his house is a high priority.
He really does want to just let this seller go but he thinks he can salvage this deal. I wished him good luck.
Look , I use to review a 1000 or more deals a year , the contracts and the real estate escrow instructions ,( Im retired now ) . I have seen how deals get messed up . I dont like greedy sellers and I dont like buyers that waste peoples time either. IMO the market is going to be changing and alot of buyers and sellers and lenders will be harder to work with .
Yep I agree that things will be tough going forard in this market. heck when i bought my house back in 99, there was more than a few times i thought the deal was going to fall apart.
Well, my daddy day care shift is up. i’ll give you guys and gals another true story tomorrow. have a good one
good day and good luck
I can understand the sellers reasoning. Unless the loan can close within 30 days, the house is off the market and the prospective buyer can walk with no penalty of any sort. If the ProBuyer were willing to put a good faith deposit of $10,000 down (even with a bad check that won’t clear this year) then the seller should probably take the offer. He would have recourse for the bad check.
The escrow is going to hold on to the check , so it might not be that easy getting the good faith deposit if the buyer walks on the deal . There are so many loop-holes for the buyer to get his check back in small print that the seller is still taking a risk.
If I was dumb enough to be that buyer (but smart enough to mess with the seller) I’d conter offer for 395000. (And get turned down) Then return in a month offering 385000.
After watching the house sit and paying the mortgage on it, sooner or later the seller will cave.
If DC metro prices are falling but the state median is rising, does that mean people are cashing out of NoVa and moving south?
Interesting question. The folks I’ve seen in NOVA have been buying vacation homes and that sort of thing downstate. It’s unusual for a downturn to manifest in NOVA first. Traditionally it’s been the western district and the North Carolina-Tennessee area (Appalachians) where downturns manifest first, spreading to NOVA last. We may see a first however as NOVA suckers see their tax bills, monthly payments and IO loans reset suddenly. They may move south or they may try to liquidate, but it ain’t gonna be pretty.
I talked with a realtor over the weekend. He was claiming rent was going to rise significantly.
My response was:
a) Rent, unlike housing, is calculated into the CPI, which determines how much the goverment needs to spend on government programs. An increase of 20%, is a 20% increase in government obligations.
b) Nobody I know has had their rent raise significantly (more than 5%) in the last 5 years.
c) When the 50,000 new units in the D.C. area hit the market in the next 36 months-which he did not dispute, there is going to be plenty of housing
d) Where are the restaurant workers, grocery store employees, transportation employees and other low wage workers going to live if rent’s cost 2,000/mo.
e) Why am I wasting my time with a Realtor?
That should be the first question.
With the Internet, they’re dinosaurs and add absolutely no value.
Did your realtor friend have any basis for his claim that rent is going to increase? Historically rents have not gone up during down markets for residential house prices.
Seems to me that housing is a commodity where price is driven by supply and demand. Sure, everyone needs a place to live, but nobody needs more than one place to live. Given how much housing has been built (or purchased) on spec the last two years, it seems that the only way the price of housing, whether renting or owning, can go up is if the demand (i.e., humans needing housing) goes up. And I haven’t seen any data that suggest household formation is growing faster than the available housing stock. In fact, the “second homes” that many folks have been purchasing are quite likely to become rental housing very soon (albeit in certain niche markets).
Just because the landlords’ borrowing costs goes up, that doesn’t mean the demand from tenants will go up and the landlords will have any more pricing power. If that were the case, there would not have been crashes in the commercial real estate markets in past decades.
From the update:
‘And thanks to the reader who provided this link showing northern Virginia active listings up 315%. ‘Although the volume of single family homes and condos sold in February 2006 in Northern Virginia was 20 percent below the units sold totals for February 2005, average sales prices have increased 6 percent, to $514,116. More than four times as many active listings were on the Northern Virginia market in February 2006 than February 2005, up 316 percent from 1,584 to 6,588.’”
“Active listings in the Greater Northern Virginia area were significantly higher in February this year than in 2005. February’s total of 14,662 active listings were more than 250 percent greater than the number last year, which was 4,173.”
Going back through these reports, the average sales price has been falling.
$550,069..October 2005
$543,170..September 2005
$545,311..November 2005
$552,621..December 2005
$524,314..January 2006
$514,116..February 2006
Listings have steadily increased over March. They are now above 19000 for NOVA. The buyers haven’t come out for spring yet but the sellers haven’t.
December is sort of an anomalous quirk. I guess people (buyers AND sellers) were motivated to do deals before year end, for whatever reason. I expect price freefall now, though, with very few sales going through compared to last summer.
Thats a big drop in sale prices in a 6 month period of time . To much inventory will do it every time .
6% YOY. Considering Feb 05 through Aug 05 saw prices swell over 15%, it seems that there has been quite a decline already. Mar 05 avg. price was only $10k less than now. It won’t take much to see the first YOY decline.
March report will be the one where YOY price will be negative… and inventory will be 400%, they’ll spin blame on Mason’s run in the tourney. seriously, they will blame the local school’s march madness success. they will do it. those b*stards.
Check out this graph for N. Virginia number.
Also these numbers for N. Virginia
David
Bubble Meter Blog
OT: Brazil in Early Stages of RE Boom (Reuters)
credit needs to dry up to stop this insanity. a few more interest rate hikes and the subsequent pull up of the long yield will kill this dog. until then sit tight folks, you ain’t seen nothing yet.
I love the use of the word “strong”. It almost makes something bad sound good. Then again, these realtors don’t care, as long as homes get sold. I guess they hope that if prices come down a little, more units will get sold, and they’ll continue raking in the dough.
To bad for them, it’s like the girl said in Weird Science… “Party’s over!”
-X
BubbleTrack.blogspot.com
You have five factors going against increase in prices of housing
(1) interest rate increasing (2) money market tighting (3) demand
going down (4) inventory going up (5)and inflation on other goods
lowering buying power. THe seller is the one that always pays for these market influences , not the buyer , regarding housing .
Let’s say prices have fallen 20% across the board, so the once $500,000 property you live in will now only fetch $400,000. However, the once $1,000,000 type of property you want to buy will now only cost you $800,000. In other words, before you’d be spendinf $500,000 additional. Now you are only spending $400,000 additional. And if the market continues to downslide, you might sell at 20% off peak and then make a buy down the road when it has plummeted further to say minus 22%.
If you are downgrading from the once $500,000 house to a once $300,000 house, the new numbers are now $400,000 to $240,000. You originally would have saved $200,000. Now you only save $160,000.
A lot of boomer retirees will downgrade and perhaps incur such minor losses. Then, when they all go to the same retirement areas, they will pressure prices up and pay more on that end. Thankfully many of the hot retirement areas are heavily owned by flippers, so prices might collapse as in a house of cards.
The long trendline is prices will go up, but not in real dollars. We’re at a pretty high real dollar peak now - or as I suspect this spring market will reveal - we were last May.
I agree with your basic analysis. Sell to move up? You might get less for your house, but the move-up will be down proportionately. This equals NO LOSS.
test
yes, but don’t you think high-end homes will deflate in value quicker than basic houses????
ps. anyway, personally fwiw I think we gonna go down 80% in real-terms before 2015
Well, at least you are hedged to some extent.
I tend to agree that high end will deflate more. Therefore, restaing what I wrote before, but with a higher % drop, the higher the price of the home:
Let’s say prices have fallen 10% on low priced homes, 20% on average priced homes and 30% on high priced homes. So the once $500,000 average property you live in will now only fetch $400,000. However, the once $1,000,000 type of property you want to buy will now only cost you $700,000. In other words, before you’d be spending $500,000 additional. Now you are only spending $300,000 additional.
If you are downgrading from the once $500,000 house to a once $300,000 house, the new numbers are now $400,000 to $270,000. You originally would have saved $200,000. Now you only save $130,000.
Of course, it’sd never quite this simple, things vary by location and eventually countervailing forces will change the pattern.
I guess lack of demand effects everybody
http://www.reviewjournal.com/lvrj_home/2006/Mar-29-Wed-2006/business/6596239.html
NV homes is trying to “jump start” a small enclave of homes in Culpeper Co. with 85K in options included in the “base price”. That is WEIRD. Builders are supposed to start with a low base price and then add options . . . . the prices are in the mid 4’s to start so they are “dirt cheap” compared to all the other NV homes around. They got the lots from another small builder who is building on spec, and apparently didn’t want to build that many homes.
I’ve also noticed what was pointed out on another of Ben’s articles - both Pulte and Ryan have added teenier models to their lineup at a significant discount to the other ones (that had been listed for over a year). Richmond American have dropped their prices 40K since last year on their McMansions outside of Gainesville. (Also added incentives to that).
I am very much wondering what will happen April 1. All the builder salespeople I’ve talked to say that these “specials” are over March 31, which is the end of their first quarter. All of them seem concerned with the 1st quarter numbers. I am wondering if they will try to raise prices later, or what they will likely do.
(I am anxious to buy something but have a nagging feeling it’s not the right time. We have three little kids who want to feel that our home is somewhat permanent).
Someone in Marshall, VA just put 20-some 1/4 acre lots on the market for 6 million. (9 acres for 6 million!) That’s over 200K per lot. No builder can make money on those. (In 2003 NV was paying about 94K per .75-acre lot.) It seems so ridiculous for this part of the country, but perhaps we are stuck with permanently high prices . . .
NV did the same thing in 1990-91 just outside Tysons Corner. Reduced the size of the homes from 4k sq ft to 3k sq ft and prices from 500 to upper 300’s. Sounds earily like the last correction.
sorry “eerily”
A Northern VA vanity plate spotting today: LOAN RGR.
I wonder if he or she will have the $10 in liquid assets to switch to TONTO in the near future?