Wednesday, January 23, 2008

BubbleSphere Roundup

Capitalism's Enemies Within (WashingtonPost)

NAR commends Ben 'let's cut rates fast' Benranke. Message to NAR: Housing prices will continue to fall despite Bernanke's cutting.

HousingPanic (HP) is planning a Housing Panic convention in Las Vegas. Will there be a debate between a Realtor who has just called the bottom and Keith the loud leader of HP?

Foreclosures up 353% in S.D. County in 2007 (San Diego Union-Tribune)

According to VirginiaMLS the number of available listings as of January 17 in Northern Virginia is 16,853 which is up 31% from one year ago. Meanwhile sales are way down from last year. Increase in supply, lower demand.

25 comments:

  1. Quote from Tabitha at the NOVA Blog

    "Doug has a good point. I've told some people here about prices further "in" and they don't believe me. I shared an anecdote on this blog about a local Rent-a-Car employee who in 2005 was convinced his two-story colonial tract home in Culpeper County would be worth a cool million very soon. I get the feeling that sellers are comparing their asking prices to what others got *locally* and forgetting about massive competition in communities much further into the urban NoVA area."

    Looks like alot of people are forgetting this in that they want so desperately for the close in prices to fall dramatically.

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  2. Dont let Leroy or Neil see that - they will go nuts!

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  3. Sales were just over 5.6M nationally versus 7.07 million in 2005. Many are predicting we'll go back to the historical norm: 6% of owner occupied homes or 4.6 million sales in 2008.

    Oh... and everyone's 'hope' is higher down payment loans with income verification. For that is what Fannie and Freddie going jumbo means. Oh... it will happen.

    Inner core DC has high inventory. The huge foreclosures in California and Florida are going to tighten credit.

    Got popcorn?
    Neil

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  4. "Inner core DC has high inventory."

    Neil - Here is a snapshot of NOVA inventory levels (months of inventory per MRIS) going from (roughly) most inward to outward areas:

    D.C. 6.1
    Arlington 4.5
    Alexandria 5.4
    Fairfax 8.2
    Loudon 9.8
    Prince William 15.5
    Faquier 14.3
    Stafford 20.5
    Culpeper 29.0
    Clarke 46.7

    Most people here define "inner core" as the first 3 or 4 places listed. See the difference?

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  5. See the difference?

    Yes. 46.7 months is a meltdown. Anything above 8.7 months has a fast bleed down of prices. Above 5 months? A sustained high inventory is correlated with slow price declines; like Arlington in November... Sales in December in Arlington in Nov were 184 versus 331 in 2003...

    But compare those inner inventories versus 3 years ago... much higher. And look at this month's inventory, its steadily climbing when normally its flat. Normally the inventory is flat until early/mid March.

    Its so much cheaper to rent now than to buy. DC now has a surplus of rental units (3.5% are un-rented , a very high level). I cannot help but notice what one's money gets today is more than a year ago...

    Everything is coming into play as the bears predicted. Slower than we first thought? Ok... Did I mention its easy to find a rental unit? As I posted before, rental supply is projected to exceed demand for 3 years. Home prices are out of whack with rents... and rents are projected to drop. :)

    high inventory is relative...

    Got popcorn?
    Neil

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  6. Oh, I forgot to mention, overall DC inventory just broke 60,000. It didn't do that until mid-May of 2007. That's 14,000 more properties for sale in greater DC than in 2007... Almost one third more in late-January 2008 than late January 2007... Last year the minimum inventory was 2/8/2007. This year it was earlier 1/3/2008.

    Funny how the bulls quote from 'Northern Virginia Housing Bubble Fallout' data. A bearish blog... If real estate were such a buy, there would be statistically oriented bullish blogs out there. And yet they claim to know statistics...

    The mean December sales have been 244 for Arlington county...

    Got popcorn?
    Neil

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  7. Hi, long time reader, first post here. I love this blog. I first started reading it in 2004 when I was living in a small town in Iowa, owned a house there. I sold it and took a small hit, no big deal. When I moved to Milwaukee, I had started believing in the bubble and decided to rent, now prices here are about 10% down from 2 years ago.
    I have a question about commercial real estate, I couldnt find any good blogs on commercial RE so posting it here. I have a few friends who are getting together to buy this strip mall property. All the partners put in some money for the down payment, the loan is already approved. It is right on the main commercial street here, and is about 90% occupied.
    So my questions are : are there any good commercial RE blogs?
    Is this a good time to buy into this, I know a possible recession might mean more vacancies. Does commercial RE prices drop like home prices do?
    Thanks for any replies.

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  8. "Most people here define "inner core" as the first 3 or 4 places listed. See the difference?"

    It's CREEPING INWARD!!!!! I can SEE IT SO CLEARLY!!!!

    And I LOVE POPCORN.

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  9. David,
    This is worth discussion:
    https://www.cwbc.com/ContentManaged/files/SoftMarkets.pdf

    DC has been given a category 4 rating by Countrywide. As bad a rating as falling apart San-Diego. The same mortgage rating as overstocked Palm Beach, Port St. Lucie, and Orlando.

    I did a quick search to see if Countrywide considered inside the beltway any different; I didn't find any.

    Got popcorn?
    Neil

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  10. wannabuy said...
    "David,
    This is worth discussion:
    https://www.cwbc.com/ContentManaged/files/SoftMarkets.pdf

    DC has been given a category 4 rating by Countrywide. As bad a rating as falling apart San-Diego. The same mortgage rating as overstocked Palm Beach, Port St. Lucie, and Orlando.

    I did a quick search to see if Countrywide considered inside the beltway any different; I didn't find any."

    Neil, if this is the case, then please explain why I keep getting emails and letters from banks and lenders (including Countrywide btw) asking me to refinance at their lower interest rates? Incidentally, I'm getting far more of these than I ever did during the boom.

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  11. Neil, if this is the case, then please explain why I keep getting emails and letters from banks and lenders (including Countrywide btw)

    Lance, You made your 25% down payment, so by the category 4 rules, you still qualify. But as they teach in business school, no one of us is the market. You should be getting more solicitations! Too many people don't have your equity.

    I've never proposed a break in the dam. Just a boiling frog. Higher inventory and slowing sales. Rental inventory in such surplus the Post predicts slow to deflating rents for 3 years...

    Got popcorn?
    Neil

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  12. "Neil, if this is the case, then please explain why I keep getting emails and letters from banks and lenders (including Countrywide btw) asking me to refinance at their lower interest rates? Incidentally, I'm getting far more of these than I ever did during the boom."

    Ever heard the phrase... "You can fool all of the people some of the time, and some of the people all of the time...?"

    They got you once, now they are just hoping they can get you over and over again.


    Your stupid anecdotal report is not some kind of refutal of Neil's information.

    But hey, what does Countrywide know about mortgages? Obviously not what you do!

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  13. Probably because they don't know you're upside down.

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  14. You get those letters because your mortgage company is scared that they will get sued for giving a loan to an idiot.

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  15. Lance said...
    “Neil, if this is the case”

    Sorry Lance, it’s not “if” this is the case:

    https://www.cwbc.com/ContentManaged/files/
    SoftMarkets.pdf

    ReplyDelete
  16. Interesting - after the discussion between Neil and his anonymous counterpart, I looked up inventory from 3 years ago - nearly every area from DC to PWC had an inventory of 1/2 to 1 months supply.

    At the same time however, here we are 3 years later, and the discrepancies between the inner and outer areas are huge. My question is does anyone know WHY the huge divergance now exists (i.e. what was the "trigger" and why didnt it hit everywhere around here proportionately).

    Feel free to speculate as I am just curious and have no idea myself.

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  17. Lance,

    You must have decent credit and some equity left -- the lenders are desperate to put together some performing loans to balance the garbage they are writing down.

    Lenders make money lending. This crisis will pass in time. Those with good credit and a large % equity will still be making payments years from now when things turn around.

    To test this, try getting a nothing down interest only no documentation loan on 120% of the appraisal. Probably won't get many banks to bite on that one.

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  18. "According to VirginiaMLS the number of available listings as of January 17 in Northern Virginia is 16,853 which is up 31% from one year ago. Meanwhile sales are way down from last year. Increase in supply, lower demand."

    It's the same over here in Reno,NV.

    Demand can't keep up with the supply.

    Good post.

    -Joe Salcedo

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  19. "Lenders make money lending. This crisis will pass in time. Those with good credit and a large % equity will still be making payments years from now when things turn around."


    You guys crack me up with this "when things turn around." They ARE turning around, back to normal price vs. income ratios, albeit very slowly. A return to fantasy bubble prices is not in the offing until incomes can match. Translation, if you bought in the bubble, be prepared to watch homes around you sell for less for a long, long time. Sheeeesh, it is simple economics.

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  20. anon asked:
    "At the same time however, here we are 3 years later, and the discrepancies between the inner and outer areas are huge. My question is does anyone know WHY the huge divergance now exists (i.e. what was the "trigger" and why didnt it hit everywhere around here proportionately)."

    Outer areas were getting the prices they were getting on the expectation that the boom would continue and that their being "next in line" for experiencing what the inner areas had already experience was on its way. It didn't occur. The boom stopped before the outer areas could be transformed by the boom into all the boom promised. Hence, with "potential" now pushed off a number of years, "real" value gets priced in.

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  21. "please explain why I keep getting emails and letters from banks and lenders (including Countrywide btw) asking me to refinance at their lower interest rates?"

    Because despite all your bragging and BS, you can't even figure out how to opt-out.

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  22. Anon 1/28 10:31 AM,

    I would speculate that it was easier for builders to get land and sprawl new buildings in the outer suburbs than inside the beltway. So during the boom building time a lot more units went up than inside the beltway.

    So once demand gets turned off as credit freezes the inventory shoots up very quickly and diverges from the inner suburbs.

    Just a thought.

    My $0.02

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  23. "Interesting - after the discussion between Neil and his anonymous counterpart, I looked up inventory from 3 years ago - nearly every area from DC to PWC had an inventory of 1/2 to 1 months supply.

    At the same time however, here we are 3 years later, and the discrepancies between the inner and outer areas are huge. My question is does anyone know WHY the huge divergance now exists (i.e. what was the "trigger" and why didnt it hit everywhere around here proportionately).

    Feel free to speculate as I am just curious and have no idea myself."

    I think one difference is that the majority of the outer areas are newer construction so the ratio of new owners/mortgages is much higher. The inner area has a higher relative ratio of older mortgages and more established owners based on the age of the neighborhoods. Most of the new neighborhoods are further out and logically a higher percentage of those folks will have the really bad loans that were given out over the last 6-7 years. The result is that less people are being forced to sell in the inner areas compared to the outer areas so there's less inventory relative to what's actually selling.

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  24. My question is does anyone know WHY the huge divergance now exists (i.e. what was the "trigger" and why didnt it hit everywhere around here proportionately).

    Adding to the things the other people noted, here is another - the "flipper factor". In my old, established, inside the beltway neighborhood, I NEVER, NOT ONCE, EVER saw a flipper! I wasnt even aware of the phenomena existed until I read stories about people lining up at new housing developments (which we never had) in order to get in at "pre construction prices". What a bunch of losers! I mean most developers are smart enough to bid up prices to what the market will bear - so who the hell did the flippers plan to sell to other than...more flippers!!!

    Those guys are now long gone and thus the outer areas have suffered accordingly. We did have them in our condo markets but not in the SFH market. Therefore, whatever drop the inside the beltway sees will be nothing compared to the outer flipville losses.

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  25. Lance said: "The boom stopped before the outer areas could be transformed by the boom into all the boom promised. Hence, with "potential" now pushed off a number of years, "real" value gets priced in."

    This is also true for areas like the H Street corridor, U Street and LeDroit Park (according to Realtwhores that place has been "up and coming" for effing 10 years now). Bet Yale Steam Laundry condos are gonna be a hard sell starting at $500k a pop.

    ReplyDelete