The virtual collapse of US home prices continued in December, including record annual declines in the S&P/Case-Shiller Home Price Indexes released today.
The 20-city price index was down 2.1 pct for the month and recorded an
annual decline of 9.1 pct.
Washington Biz Journal reports that in the Washington area the "Case Shiller Home Price Indices report released Tuesday found price declines in the Washington area averaged 9.4 percent this past December, compared with December 2006."
The Washington, DC area is now13.3% below peak prices. Anonymous wrote that "Prices dropped 1.7% in November and another 2.5% in December - both record decreases in the last 21 years. The fact that prices are ACCELERATING downwards still is a very bad sign considering we're already 13% off the July 2006 highs." Very well put!
The declining housing market is far from over in the Washington, DC areas. Thus far outer suburbs have experienced much larger prices declines then inner part of the region. Similarly, condos have experienced larger price declines then single family residences. The housing bust is far from over in the Washington, DC area.
Posts
David,
ReplyDeleteYou're a smart guy. Seriously consider the economics of the DC region over the last 50 years. What major contributing factors lead to the current asymmetric price drops in the metro area?
Here are a few factors:
- The auto industry, post-WWII
- The Eisenhower Presidency, which established the interstate-highway system we know and love today
- The road building industry
- Labor unions and their (former) political clout
- The big oil companies
- 'Cheap' farm land in 'rural' VA and MD. (Consider the history of Tyson's Corner and Reston)
In many areas, in-town and close-in values fell over those 50 years, and the list above indicates many, but not all, of the forces that came together to blight much of the city and give rise to suburban strip-malls and cookie-cutter neighborhoods. The outer areas of Fairfax and Montgomery counties rose during that period to become some of the richest real estate markets in the country. Seven Corners in VA and Rockville in MD used to be 'nice', but now even they are considered undesirable "close-in" areas. Why? Partially because of the ease of access to major employment centers (Washington and Arlington), that all the new cars and roads made possible.
The same formula applies to most major US cities. Close-in areas were abandoned for roomier, larger, newer homes made accessible by spiffy new roads and sparkling new cars. Through it all, a relatively few people became very rich in the process.
Now consider what factors will come together to make a few rich people even richer. Will the modern generation of market-shaping factors include the items on the list above? What will the population of the region look like in 2058? Fifty years is a long time in terms of home-buying, but if you consider how much change can be packed into those fifty years (jet engines, space flight, collapse of the Soviet Empire, the Internet etc.), it is a remarkably short period of time.
I'm talking about the factors that affect where we all live and how we all work and live on a day to day basis. These factors, including those on the list above, shape our foreign policy, our collective health, and the very landscape that we see each day.
What will be different moving forward from here? If you wanted to get out ahead of the next wave of life-shaping factors, and your timeline for buying a home was within the next ten years, where do you think you would be making that purchase?
David,
ReplyDeleteWell done on your prediction for home price decreases. We're trending towards the upper end of your prediction.
It is interesting these would be record declines for the index...
Got Popcorn?
Neil
It's true that the suburbs are leading the way down. In Prince William County, there are now over 900 homes under 200k, many of them 4 bedroom houses with garages. If you check the sales records, they were selling for well over 400k at the peak. PWC posted a 25% drop YOY last month.
ReplyDeleteI see it spreading now to other areas. Herndon/Reston, Centreville, Loudoun county and other areas are seeing massive drops too.
DC is holding up well in comparison right now.
Gasoline prices are predicted at $4 per gallon for regular unleaded by Springtime, 2008.
ReplyDeleteVirginia DOT just announced they are widening I-95 southbound at the Springfield Interchange in an attempt to alleviate the horrendous traffic congestion that exists there. (but what about everywhere else?) Most urban/civic planners will tell you that widening any highway to alleviate congestion is a lost cause right from the start.
Google the above topics for references.
If your life depends upon driving everywhere: Good Luck. You're going to need buckets of it.
"If your life depends upon driving everywhere: Good Luck. You're going to need buckets of it."
ReplyDeleteThanks for clearing up your opinion, "landed." I had a feeling that is what it was - same old tired, worn out argument - and you just should have said so instead of penning that unintelligible screed of nonsense at the outset.
Everyone knows that streetcars are coming back to DC, right?
ReplyDeleteThey were a staple of city life until they were put to death by the auto industry. Oil is currently trading above $101 per barrel, by the way.
from ddot.dc.gov
For Immediate Release: Tuesday, January 29, 2008
Media Contact: Karyn Le Blanc 202-671-3490
*MEDIA ADVISORY*
Mayor Adrian M. Fenty and DDOT Break Ground on Benning Road/H Street Streetscape and Streetcar Project
Second Great Streets Project Being Prepped to Begin Construction
(Washington, DC) The District Department of Transportation (DDOT), on behalf of Mayor Adrian M. Fenty, invites you to a press conference to announce plans for the highly anticipated H Street and Benning Road Great Street Streetscape and Streetcar Project. Work on Benning Road began in late December 2007.
H Street NE and Benning Road are vital corridors serving the near northeast communities in the District of Columbia. Plans for their improvement began with community and business leadership and vision. DDOT is pleased to be able to make that vision a reality through the investment of over $50 million in streetscape, safety, and transit improvements that will transform the corridor from 3rd Street to Oklahoma Avenue NE.
What: H Street and Benning Road Streetscape and Streetcar Project
Press Conference
Who: Adrian M. Fenty, Mayor
Emeka Moneme, Director, District Department of Transportation
When: Thursday, January 31, 2008
10:30am
Where: Starburst Intersection and Plaza Intersection of H St., Benning,
Maryland Ave, Bladensburg Rd, and 15th St NE
(by Maryland Avenue/Bladensburg Road)
Karyn G. Le Blanc | Acting Public Information Officer & Public Affairs Specialist | Office of the Director | District Department of Transportation
desk 202-671-3490 | fax 202-671-0650 | cell 202-497-4572 | www.ddot.dc.gov
This article is a must read on this topic of changing demographics of cities vs. suburbia.
ReplyDeletehttp://www.theatlantic.com/doc/200803/subprime
"This article is a must read on this topic of changing demographics of cities vs. suburbia.
ReplyDeletehttp://www.theatlantic.com/doc/200803/subprime"
Silver Spring is on the rail lines and it is already declining into slum. According to that article, it shouldn't be.
I think suburbia is there to stay. What will change is how the workforce will interact in the future. Instead of going to the office telecommuting and video conferencing will become common place. My company for instance, a Sillicon Valley tech giant, encourages telecommuting. I work out of rural Texas with the help of a 10 Mbps broadband link. No commute there.
ReplyDeleteWell, I wrote that "screed" about why the landscape is the way it is today, and where it is heading in the future.
ReplyDeleteYet all I needed to do was reference an Atlantic article, and I would have saved myself a lot of time and effort.
Thanks for posting that link. Very interesting.
(By the way, my name, "Landed Gentry", is meant to be ironic)
I worked in Silver Spring when it was a slum... more than ten years ago. Anyone who knows anything about Silver Spring knows that retail and commercial enterprises have rebounded in Silver Spring.
ReplyDeletehttp://www.downtownsilverspring.com/
landed gentry asked:
ReplyDelete"What will be different moving forward from here? If you wanted to get out ahead of the next wave of life-shaping factors, and your timeline for buying a home was within the next ten years, where do you think you would be making that purchase?"
Good post. My high-level "guess" is that commuting will become far less of a factor in determining where one lives since so much our work can be done either remotely from home or via a relatively short jet flight. Other factors such as nexus to one's interests (personal and/or work-related) will become the determining factor. People will have greater choice ... not being tied down to specific cities/places simply because they must live there for work ... as that will be less and less the case. Combine that with the fact that the world economy is being a single unified economy ... with the Western nations taking on the responsibilities (and priviledges) or directing the whole shebang ... and we have interesting opportunities and challenges out there. Will the McMansions of the exhurbs be as valued in such a world? What about the downtown condos?
From the Atlantic article mentioned above:
ReplyDelete"Many of the fringe counties in the Washington, D.C., metropolitan area, for instance, are projecting big budget deficits in 2008. Only Washington itself is expecting a large surplus. Fifteen years ago, this budget situation was reversed. "
LOL! The best part? Its TRUE! I love it.
"I think suburbia is there to stay. What will change is how the workforce will interact in the future. Instead of going to the office telecommuting and video conferencing will become common place. My company for instance, a Sillicon Valley tech giant, encourages telecommuting. I work out of rural Texas with the help of a 10 Mbps broadband link. No commute there."
ReplyDeleteYou better pray that your vision of the future will not come to pass. Imagine instead that the job went not to the guy from "rural Texas" but instead to the guy from "rural Rājasthān" after all he's just as educated, hard working, and will do the job for 1/3 the price. Face time may be needed from time to time, but once everyone is a "planeride" away, it doesnt really matter where they live.
Imagine too what that will do to suburbia. Suddenly, there is no reason to live there at all. The telecommuting society will move further out and get the true slice of nature that suburbia only hints about (just like you do in rural Texas). Also, for those remaining near a city who need "face time", why live in the suburbs when suddenly there is so much less competition for the close in housing? If your vision of the future comes to pass, suburbia is doomed.
"Other factors such as nexus to one's interests (personal and/or work-related) will become the determining factor."
ReplyDelete"Will the McMansions of the exhurbs be as valued in such a world? What about the downtown condos?"
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One sentence says, "who cares what people think, live where it makes you happy."
The other sentence says, "what kind of home will put on more of a front and make people think I am a big shot."
Get your story straight.
Lance said: "My high-level "guess" is that commuting will become far less of a factor in determining where one lives since so much our work can be done either remotely from home or via a relatively short jet flight."
ReplyDeleteBut won't that gut the value of your home and living in the city?
said said...
ReplyDelete"Lance said: "My high-level "guess" is that commuting will become far less of a factor in determining where one lives since so much our work can be done either remotely from home or via a relatively short jet flight."
But won't that gut the value of your home and living in the city?"
I guess you missed the part where I said "Other factors such as nexus to one's interests (personal and/or work-related) will become the determining factor."
i.e., people will live where they need/want face time for personal and/or work reasons. For the programmer writing from Texas, the rural location works since he doesn't require all that much face time with the people he works with. His personal side can be (and is) disassociated from his business side. He could be living in India and get the same work done. For say a diplomat or a lobbyist or other "shaker and mover" ... they need/want more face time. Mingling in person with those in their "industry" is essential. Their social life is more "work" than personal since that is where they conduct their business "deals" ... They need physical proximity to those in their business. Living in rural Texas or India won't work for them. Nor will living in an exhurb McMansion in my opinion ... at least not until such time that the McMansion areas develop a critical mass of such like type individuals.
anon said:
ReplyDelete"One sentence says, "who cares what people think, live where it makes you happy."
The other sentence says, "what kind of home will put on more of a front and make people think I am a big shot."
Get your story straight."
Your gross misinterpretation of what was said speaks volumes about where you are coming from. Hint, neither of your sentences is a correct interpretation of what I said.
"But won't that gut the value of your home and living in the city?"
ReplyDeleteThe QOL is in the city. Fewer want to watch the grass grow compared to those who enjoy the services and entertainment of the city.
"One sentence says, "who cares what people think, live where it makes you happy."
ReplyDeleteThe other sentence says, "what kind of home will put on more of a front and make people think I am a big shot."
Get your story straight."
I like ripping on Lance as much as the next guy, but I think he is saying that location will be the driving factor (i.e. the McMansion is toast).
"Lance said: "My high-level "guess" is that commuting will become far less of a factor in determining where one lives since so much our work can be done either remotely from home or via a relatively short jet flight."
But won't that gut the value of your home and living in the city?"
It will gut them big time - but the city will retain some value for those who can only do their jobs in person, if you will. The suburbs will be absolutely devastated.
People in the countryside will still need to eat, which means food must be trucked into a market for them, and then they must drive to the market to retrieve the food. Unless they are going to do their own farming, which is virtually impossible for carnivores, and requires petroleum based fertilizers (HPK, look it up) and machinery, which will be expensive, not to mention that all that farming will be a full time job, thus preventing the rural telecommuter from telecommuting in the first place.
ReplyDelete(Food prices are steadily rising NOW as a result of higher fuel prices)
Lance, I was playing devil's advocate by asking you that question. But what you've failed to address is manufacturing. In your vision of the future, no one appears to fabricate anything any more. Where will computers come from? Clothes? Will they all be flown in on jets? Don't forget the high price of fuel! No, manufacturing will be what it was: centralized within regions.
Urbanization. Get used to it.
"kh" typically blathered: "The QOL is in the city. Fewer want to watch the grass grow compared to those who enjoy the services and entertainment of the city."
ReplyDeleteIs it really? You don't "know" what "most" people want - idiot.
You also have no idea what "QOL is.
I like to go fishing and cut wood in the backyard for my stone fireplaces, and take hikes up the mountain in my backyard.
If I could telecommute from my country house (i.e. Cumberland Maryland area) I would sell my place here and rarely set foot in the city again. I bet there are many who feel this way.
Lance, I was playing devil's advocate by asking you that question. But what you've failed to address is manufacturing. In your vision of the future, no one appears to fabricate anything any more. Where will computers come from? Clothes? Will they all be flown in on jets? Don't forget the high price of fuel! No, manufacturing will be what it was: centralized within regions.
ReplyDeleteUrbanization. Get used to it.
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You can live in a country, non-suburban setting, and not have to drive into a craphole like D.C. or NYC. There are food markets, other stores and services that aren't located in crime-infested urban ratholes.
The UPS man can also deliver a lot via Internet nowadays.
" hikes up the mountain in my backyard."
ReplyDeleteI have no doubt that you are overweight. LOL!
This is discussion is getting silly. The notion has become that cities will now forever add residents and the suburbs will lose them because of the price of oil.
ReplyDeleteBut what happens when all this R&D that is being conducted (with much, much more investment and more research to come) to develop alternative energy comes to fruition? This suburban/urban, good schools vs. walkability and rampant crime, stuff goes in cycles. Just hope when you buy or sell, you aren't caught in the downside of one of those cycles.
"You can live in a country, non-suburban setting, and not have to drive into a craphole like D.C. or NYC. There are food markets, other stores and services that aren't located in crime-infested urban ratholes.
ReplyDeleteThe UPS man can also deliver a lot via Internet nowadays."
Wow - this may be the stupidest comment I have ever seen. You so are not getting the anony's point. Where are these non urban "food markets other stores and services" going to get their stuff from? Will this non-urban setting have the critical mass to make and sell all this stuff cheap enough to overcome the cost plus fuel cost to transport it to you.
Maybe the people in these non-urban settings are just so wealthy that they can pay that much more than the urban dwellers do to get it shipped in? Or maybe they can hire people to come on site to make/grow it for them? Then again, once you do that arent you in fact making an URBAN area!!!
Economies of scale is a bitch to overcome. If you want to live in the boonies, get ready to pay bigtime (like helicopter wealth) to pay for all this stuff.
said said asked:
ReplyDelete"Lance, I was playing devil's advocate by asking you that question. But what you've failed to address is manufacturing. In your vision of the future, no one appears to fabricate anything any more. Where will computers come from? Clothes? Will they all be flown in on jets? Don't forget the high price of fuel! No, manufacturing will be what it was: centralized within regions."
The clothes, computers, etc. will come from where they are already coming from. China.
The "comparative advantage" for the 1st world is services. Services are more profitable and require a higher skill set overall than manufacturing. (Why do you think IBM stopped making laptops and sold the business to the Chinese firm Lenovo? Or that clothes are no longer made in the USA ... or even Taiwan for that matter?) Additionally, countries such as China can at least for the moment manufacture with far less requlatory constraints than we can here. From what I hear, the smog in Beiging is really really bad. Just like the famed London "fog" used to be back in its industrial hayday.
"But what happens when all this R&D that is being conducted (with much, much more investment and more research to come) to develop alternative energy comes to fruition? This suburban/urban, good schools vs. walkability and rampant crime, stuff goes in cycles. Just hope when you buy or sell, you aren't caught in the downside of one of those cycles."
ReplyDeleteI keep thinking that way too. The thing is in order for your and my thinking to be right, there needs to be a single, replacement for oil - a plug and play "silver bullet" if you will.
The problem is, the more I read, and the more I listen to a friend who works for BP - there is no such "single" thing. Alot of these eggehead types think our needs are so great that in order to sustain ourselves, multiple, competing energy sources will have to all be put in place, all with differing needs of infrastructure, distribution, adaptation of end uses, etc. etc. Thus, unless there is that "silver bullet" breakthrough. Either (a) energy will become much much MUCH more expensive (and the suburbs are toast) or (b) we just cant meet all our needs and need to re-arrange our living structure (and the suburbs are toast).
"Just hope when you buy or sell, you aren't caught in the downside of one of those cycles."
ReplyDeleteI'm the person who wrote the "screed" at the top of this comments page, and I agree with you.
The point is: Which cycle is now ending, and which is just beginning? And how long do the cycles seem to run? (the one ending now dominated for 50 years)
I think this has been a great conversation over all.
anon said:
ReplyDelete"Either (a) energy will become much much MUCH more expensive (and the suburbs are toast) or (b) we just cant meet all our needs and need to re-arrange our living structure (and the suburbs are toast)."
Yes, we will have to re-arrange our living structure ... But we always have ... The suburbs won't be "toast".
People first moved into places like what is now called Logan Circle and the U Street Cooridor because tram tracks were laid down and people willing to take a tram to work could get much cheaper housing there then they could down by what is now call the Convention Center/Chinatown (was called "downtown" then.) This area even had a name which was something like "the tram neighborhoods". They were an early version of today's suburbs which the automobile made possible. Today no-one would think of them as "suburban". They've changed ... we've changed. People adapt.
Jeez, this discussion is all pointless and silly. But at least it's nice to see Lance staking out his turf again.
ReplyDeleteOil just hit $103 per barrel. (as in: this morning, Feb 29th 2008)
ReplyDeleteYep, that's pointless to everyone in the United States today! Thanks for clearing that up.
"Oil just hit $103 per barrel. (as in: this morning, Feb 29th 2008)
ReplyDeleteYep, that's pointless to everyone in the United States today! Thanks for clearing that up."
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The futures traders currently paying those prices are going to get burned.
At present, there's a slight difference between supply and demand for light sweet crude, which is used for transportation fuel, but there is no oil shortage and nothing to justify $100-plus per barrel for a sustained period.
Plus, even $40 a barrel was enough for boards of directors at big oil to vote to spend money on new exploration in deep water, in sands, and other ares that is now in progress.