Monday, April 10, 2006

In DC Proper Median and Average Price Decline Year Over Year

In case you haven't received the memo, the housing boom in Washington, DC is over. The housing bubble is popping as inventory explodes, sales drop, speculation wanes and prices fall. All these numbers include condo units.

In Washington, DC for the month of March 2006 the median sales price was $397,000 which represents a decline of .75% from March 2005 when the median sales price was 400,000.

The average sales price also fall, in March 2005 it stood at $490,024 which represents a decline of 5.13% from March 2005 when the average sales price was $516,515.

Additionally, the number of housing units sold in DC for the month of March 2006 was 651 which represents a decline of 20.32% from March 2005 when 817 housing units sold. Source: MRIS.

The major papers in the area (Washington Post, Washington Times, City Paper) need to inform the public about this ASAP. We now have Year over Year (YoY) price declines in Washington, DC proper.

23 comments:

  1. There's a fair bit of noise in the monthly data on median and mean housing prices in higher-end markets. New York has experienced this for years.

    If 600 housing units are sold in a month, and one of them costs $6 million, the average price goes up $10,000 that month. A couple high-end properties can really distort the picture. It's not surprising that people were dumping really expensive houses last spring but not this spring, which probably explains most of the "decline" this year.

    My guess is that the quarterly and annual data will show slowly increasing (or maybe flat) prices in the area with rising inventory. Any real estate bubble in DC is deflating slowly at this point and is far from a popping catastrophe, as you suggest.

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  2. I posted this elsewhere on the NoVa post but none of the bubble proponents deigned to respond:

    Without commenting on the bubble issue with respect to co-ops/condos or SFHs in the outer suburbs, the SFH market in Arlington still appears to be fairly healthy. Granted the median is slightly down from March 05, but the average is flat Y/Y and the average and median are significantly up from February 06. In addition, settlements are only slightly off Y/Y (and up YTD) and are mostly off at the lower price levels. So, again, without speaking to the other markets, I think SFH in Arlington is still (relatively) strong, though obviously treading water somewhat.

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  3. "If 600 housing units are sold in a month, and one of them costs $6 million, the average price goes up $10,000 that month."

    The MEDIAN also declined YoY. Sure it was only .75%. But once, you figure inflation it is significant.

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  4. There are stickiness issues of course, but I think that once the condo prices
    come down (and they simply must - too much supply, too little demand, and flippers will start to panic-sell, feeding supply and further drying up demaind) condos will start to compare more favorably to SFHs, lowering demand for SFH. Also, as interest rates go up, fewer people will be able to get their hands on $800K to spend on a bungalow, further softening demand.

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  5. The papers are ignoring the bubble correction or have their heads in the sand. Why, I don't know. Blogs such as this one are scooping the papers on a weekly basis. That Halstead lockbox bench should have been on the front page of the Post's real estate section.

    Talk to anyone who doesn't follow the bubble closely and they all still think prices are going up.

    The papers aren't doing their journalistic duties on this issue.

    Two weeks ago, somebody (maybe it was David?) on the Post's r/e chat asked why the media wasn't reporting the decline in prices since the peak last summer? The Post gave a whimpy response that they like to get YoY numbers on the record (this was three months after the end of the year, mind you). What BS!

    This past week I posted this loaded question to the Post's r/e chat(note I had to pretend I didn't think we were in a bubble): "In a recent issue of Business Week, CEO Angelo Mozilo of mortgage lender Countrywide Financial predicted home price declines of 30 percent in areas where you have had heavy speculation. This shocked me. My friends and co-workers all tell me that prices are going to continue to go up. Does the D.C. area fit into the category of an area of heavy speculation? Are there any other prominent market observers who think prices could decline this much around here?"

    An honest or knowledgeable response would have been yes and yes. Instead the Post responded: "Surveys and predictions are all over the place now. Some say this is a volatile area, others that it's a safe one. I just don't know."

    Another poster responded to my post: "We are still on the list for "corrections" but not the massive 30 percent ones."

    The Post responded: "Correct."

    So which is it? Does Maryann Haggerty really not know or does she believe we won't see a big correction?

    Why is the Post not reported on the reality of the correcting bubble?

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  6. The major newspapers will not apprise the general public of the realities of the real estate market. To get real news about what is happening to the DC area real estate market you have to read papers from other cities. Why? Because newspaper people own properties too. Like crime reports that are watered down so that a city looks safe, reports about the current state of real estate here in DC are tailored to serve property owners interests.

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  7. Papers are in business to make money. Once one realizes this, one understands why the papers publish what they do.

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  8. john fountain,

    I share your surprise at the way the big media is NOT handling this issue.
    steinravnik is right on: it's about the money.
    I look forward to big media's slow death as blogs, craiglist and google base destroy their revenue base.

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  9. Hey is dcbroker around. 2 months ago he was talking about how D.C. proper is different ;)

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  10. Anonymous at April 10, 2006 8:49 AM:

    The issues that you bring up in regards to the various statistical measures are constant from year to year.

    What is important here is the trend compared to previous years, more than the actual numbers. And this trend is what has changed dramatically.

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  11. Anon 9:08

    "Without commenting on the bubble issue with respect to co-ops/condos or SFHs in the outer suburbs, the SFH market in Arlington still appears to be fairly healthy. Granted the median is slightly down from March 05, but the average is flat Y/Y and the average and median are significantly up from February 06. In addition, settlements are only slightly off Y/Y (and up YTD) and are mostly off at the lower price levels. So, again, without speaking to the other markets, I think SFH in Arlington is still (relatively) strong, though obviously treading water somewhat."

    Anon, since you asked, I will respond: What is your point?

    In all asset bubbles, BTW, the weakest fall first. That does not mean that a SFH in Arlington will be spared, as you seem to imply. It only suggests that marginal properties, in marginal suburbs, will suffer first. We are seeing that now. The rest will follow.

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  12. It's incorrect to suggest that there are fewer million plus houses on the market now than last year. The opposite is true. Last year in Arlington there were very few, this year there are dozens and dozens, many of them new or newly rebuilt.

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  13. A .75% decline year-over-year hardly constitutes a crashing market. The units that are not selling are the ones that priced looking at the summer 05 peaks.

    I would not be surprised if prices remain flat or down only 5 percent for the next year or so.

    www.dcbubble.blogspot.com

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  14. "A .75% decline year-over-year hardly constitutes a crashing market. "

    True. This is just the start. Inflation adjusted this represents about a 4% decline.

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  15. Big news. It has NOT been a good investment to hold DC real estate for the last year. Maintenance, transaction, and holding costs aside, the nominal return was less than zero, and the real return more negative.

    A CD was better than real estate for the last year. Is that a clear way to put it?

    A Redskins fan

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  16. DC BUBBLE - I THOUGHT DC WAS DIFFERENT. LOOKS LIKE YOU WERE WRONG! PRICES DOWN AND HEADED LOWER!

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  17. I am now a DC resident. Just signed a lease on a rowhouse on Parker St, between 2nd and 3rd NE. I'm two blocks north of the new condo development going in at the old children's museum site.

    I found out from a neighbor who just happened to be the real estate agent that sold the place that the owner "investor" just bought it a week ago for $450,000. I'm renting it for $1200/month. When will these people ever learn?

    The house is pretty nice, it's newly renovated with the obligatory granite and stainless. It's about 1200 SF. Since I work downtown, I'm looking forward to being much closer to work.

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  18. I think its quite the decline when you consider the appreciation from March through August of last year. So to have YOY decline March - March means we are way down from the peak.

    As for flattening out instead of dropping further, please point out one huge increase in asset value in history that was followed by a plateau, instead of further dips and peaks. Asset cycles dont work that way Son.

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  19. "If 600 housing units are sold in a month, and one of them costs $6 million, the average price goes up $10,000 that month."

    The MEDIAN also declined YoY.

    BWAAHAHAHAHAHAHAHAHAHAH

    durh? durh!!!!

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  20. I just cancelled my Washington Post subscription because I know that the Post is not accurately reporting on the news. This is not limited to the RE market. They aren't reporting on a ton of issues. They have serious conflicts of interest that limits their reporting and coverage of events and issues. I agree that blogs that tend to have fewer conflicts are way ahead of mainstream media at this point. (I also don't have a TV and haven't seen an ad for about 4 years.)

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  21. How long before we see Townhouse prices in Fairfax County fall?

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  22. This is like watching a train wreck in slow motion. YoY finally tipped negative after a month of defying gravity. Condos are renting for 1/3 of their monthly debt service and expenses. A massive jump in inventory is hailed as a 'buy' signal.

    I'm getting dizzy.

    But I'm not complaining. Just sold a property that appreciated 12 fold in five years. Got in the way of a new development. Much more luck than sense, but it all spends the same.

    viva la bubble!

    Word to the wise: if you must buy now, pay cash and live there at least a decade and you'll be fine. You will be able to sit tight while the flippers turn to shark chow.

    Real estate has gone down before, and it will go down again, and is the process of doing it right now. Buy as little as you can and borrow less than you can 'afford' and you will be OK.

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