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Please note that there was much discussion on this blog about the meaning of the increase in home prices in April 2009. This was the first monthly price increase since 2006. Looking at the larger picture, it still seems that monthly price decreases will resume later this year. The prices decreases are not yet over. Expect small monthly price decreases later this year. In my mind most areas of DC are likely to see another 5 to 12% decrease in home prices.
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I have seen it suggested that we are starting to see higher end homes go to foreclosure now, and this is causing an *apparent* increase in housing prices.
ReplyDeletehttp://www.moremortgagemeltdown.com/download/pdf/T2_Partners_presentation_on_the_mortgage_crisis.pdf
Because the majority of buyers are in ultra low and low-mid prices ranges, the supplydemand imbalance from foreclosures and organic supply will crush the mid-to-upper priced properties in 2009. We already have early seasonal hard data proving this. As the mid-to-upper end go through their respective implosions this year and the volume of sales in these bands increase as prices tumble, the mix shift will raise median and average house prices creating the ultimate in false bottoms. We also have data proving this phenomenon.
Last time i visit this site. No support whatsoever cited for and of the statements in this posting. The site roots for falling prices, which is fine, if a bit depressing, but to each his own.
ReplyDeleteBest thing about CS is its same-house meaning the mix cannot cause an apparent recovery.
ReplyDelete5-12% decrease in home prices? I dont know. Arlington median prices are up YOY, rest of nova looks to follow soon enough. Then again, MD is close to peak rate of decline...
So I guess if you average it all out 5-12% down may not be half bad an estimate...
http://mysite.verizon.net/vzeqrguz/housingbubble/washington.html
ReplyDeleteHere is C-s chart for the mediam prices curve for the DC area. Once again, can anyone explain to mye any reason why this curve will not complete its bell-shape, and retrun back to 1997-1998 prices? Oh, and "it's different here" doesn't cut it.
"Once again, can anyone explain to mye any reason why this curve will not complete its bell-shape, and retrun back to 1997-1998 prices? Oh, and "it's different here" doesn't cut it."
ReplyDeleteI think the area with the greatest median income growth (+30% 2000-2007) in the entire continental US will outperform the rest of the areas covered by CS. Do you disagree? Do fundamentals not matter?
Fundamentals matter. Prices are getting much much more affordable now in the DC area then in 2005, 2006. Household incomes continue to remain high in the DC area. Job losses have been minimal here.
ReplyDelete" Washington DC Metro Area "
ReplyDeleteFrom the amount of coverage this area gets here you would think it was half the size of the US.
Ahh nonpartisan - back again peddling your "bell curves complete" meme, with nothing to back them up.
ReplyDeleteYou would be wise to listen to david -- the same guy who so correctly told us in 2005 the bubble is going to burst.
Back in 05 David was harassed, called a bitter renter, by the bulls. He was right -- they were wrong -- they disappeared.
Now its 2009. After a few years absent, David is back, telling us the bubble is just about over.
Once again, people are angry and upset at his call, cept now its the bears, trotting out memes like "bell curves complete" cuz they read it in some book somewhere.
Question is, will you stick around and take your medicine when he is right and you are wrong? History says you will not. We shall see...
"Anonymous said...
ReplyDelete" Washington DC Metro Area "
From the amount of coverage this area gets here you would think it was half the size of the US."
Had you read the intro to this blog, it says
"National housing bubble coverage, with special attention to the WASHINGTON DC AREA HOUSING BUBBLE"
fundamentals matter. Median Montgomery household family of 4 gross income $65K....Average 3 bedroom home to hold a family of 4 in Montgomery county $900K
ReplyDeletefundamentally, nobody can afford a damn thing in the DC metro area. Fundamentally thats why nothing is selling. Prices may not go down, but the homes will never sell until they reach 3 or 4 times the $65K annual income of the upper middle class in this area.
Those old loans where you can falsify your income and get nearly a million bucks with 0% down are gone friends. The "fundamentals" that you like to bring up no longer exist.
Nonlogic - income is a key fundamental. WHat is your source for these 30% income ncreases from '00 tp '07? ANd - what is the current average income for the DC metro area?
ReplyDeleteAccording to 2007 US Census Bureau Statistics the median household income in Montgomery County is 91,440 dollars. (http://quickfacts.census.gov/qfd/states/24/24031.html)
ReplyDeleteThe reality is that there is large percentage of household in Mongtgomery County who earn between 100 to 150K and can afford houses that are selling at 350 to 500K.
Incomes depend on the area (say Fairfax Co. vs DC proper) but they average 70-100K. My source is the same as David's
ReplyDeletehttp://factfinder.census.gov/home/saff/main.html?_lang=en
The biggest thing is the income growth here (+30% areawide) versus areas like say like Cleveland where it rose a mere 4% over the 7 year timeperiod.
david/nonlogic - SHHH! Dont educate this guy you are ruining all the fun!
ReplyDeleteIt was gonna be interesting to see him clam up this summer as CS rises, see him return with new, emboldened strength next fall/winter, and then watch him scratch his head as CS levels out around 155-160 levels (mid 2003 nominal pricing).
I wanted to see how long he went with the "bell curves complete" meme before he admitted he was wrong or just went poof and disappeared. Now you are ruining it :(
"The reality is that there is large percentage of household in Mongtgomery County who earn between 100 to 150K and can afford houses that are selling at 350 to 500K."
ReplyDeletePotomac incomes dont buy homes in wheaton David. If you are going to quote $150K potomac salaries, then quote their $1.7M price.
Anon,
ReplyDeleteThere are plenty of households who are earning between 100K - 150K who have own or are planning to buy homes in Silver Spring.
Households are looking to buy in Potomac are usually making more the 150K.
yawn
ReplyDeletepartisan - agree with 03 levels in 2010, but then 02 levels around 2011-2, and 01 levels in 2012-3, ....and eventually 1997 levels.
the slope of the curve decreases as we reach the bottom. this mean there will be a deceleration (but progression) of price decreases.
Do you know what a bell shape is?
here is a link to educate you
http://www.ushistory.org/libertybell/
"Households are looking to buy in Potomac are usually making more the 150K."
ReplyDeleteWell not according to the link you provided. Montgomery county makes $90K? Well that includes Potomac AND Bethesda. You cant tell me Potomac makes more than $150, cause that would mean people in Rockville would have to make nearly $0 in order for that to average out to $90K across Rockville and Potomac.
Facts are facts....Houses in MoCo on average are near 8 times annual incomes in this area. Unless you are cherry picking Potomac incomes and quoting Silver Spring prices
"Nonpartisan said...
ReplyDeleteagree with 03 levels in 2010, but then 02 levels around 2011-2, and 01 levels in 2012-3, ....and eventually 1997 levels."
Nonpartisan, ill ask again, what about incomes (+30% in the DC area) do they not matter?
"Anon said...
You cant tell me Potomac makes more than $150"
Actually, David is right. In potomac the median household income is $154,370.
http://factfinder.census.gov/servlet/ACSSAFFFacts?_event=ChangeGeoContext&geo_id=16000US2463300&_geoContext=01000US%7C04000US51%7C05000US51013&_street=&_county=potomac&_cityTown=potomac&_state=04000US24&_zip=&_lang=en&_sse=on&ActiveGeoDiv=geoSelect&_useEV=&pctxt=fph&pgsl=010&_submenuId=factsheet_1&ds_name=ACS_2007_3YR_SAFF&_ci_nbr=null&qr_name=null®=null%3Anull&_keyword=&_industry=
Amazing thing is that actually understates it because 37% of the households make over 200K (the highest bracket possible)...Thus, the average household income in the area is $228,641.
Whether or not you believe prices have much further to fall seems to depend a lot on your status as a homeowner/renter.
ReplyDeleteThe data presented on income growth in rationalizing elevated home values sounds a lot like the pre-bubble assurances from the likes of Greenspan. If you'll recall, the bubble was inflated by easy access to credit for which borrows did not have the means to support. Presumably, this access no longer exists. The pool of buyers has shrunk. Additionally, homeowners who might otherwise be in the market are locked into mortgages that exceed the values of their homes. This will have a drag on the market, but the market will be driven by affordability for the foreseeable future.
We should also keep in mind homeownship levels when citing meidan income levels. Homeownership is typically around 50%, higher for areas with higher median incomes and lower for areas that have lower median incomes. The point is, prices for lower end homes do not have to be affordable to those below the median income level, because chances are they are not going to be homeowners anyway.
"The data presented on income growth in rationalizing elevated home values sounds a lot like the pre-bubble assurances from the likes of Greenspan."
ReplyDeleteActually, no, it sounds like rationalizations based on FUNDAMENTALS... and there is nothing more fundamental than income.
to Tuskenrayder:
ReplyDelete"prices for lower end homes do not have to be affordable to those below the median income level, because chances are they are not going to be homeowners anyway."
I agree with this... but I'd like to posit that this is so not because the monthly mortgage payment on a lower end home is not affordable... it is because people need to save money for the requisite down payment and closing costs... which lower income people have a problem with.
You know, as much as I wanted to leap to the defense of my fellow bears, the statement above struck me:
ReplyDelete"Actually, no, it sounds like rationalizations based on FUNDAMENTALS... and there is nothing more fundamental than income."
Thats really what its all about isnt it? I mean for years I was demanding proof that there was something other than easy credit behind the whole thing, and clearly there is.
Like my fellow anon, I am a bit surprised at the strength of incomes in this area. I too would have thought of 65K as "upper middle class"...clearly thats not true for this area.
If this is the end of the declines, so be it. 4 years of patiently waiting has alowed me to accumulate a siginficant amout of cash to put into a DP - plus have plenty saved for a rainy day fund. I have no regrets by waiting as long as I have.
"Actually, David is right. In potomac the median household income is $154,370."
ReplyDeleteWell something doesnt add up then. Either the census is wrong on the entire county median income, or they are wrong on potomac. Cause I cant believe cities like Rockville and Bethesda making negative incomes to bring down the whole counties average.
"Like my fellow anon, I am a bit surprised at the strength of incomes in this area. I too would have thought of 65K as "upper middle class"...clearly thats not true for this area."
ReplyDeleteWell when I said $65K I was quoting Rockville incomes.
"Well something doesnt add up then. Either the census is wrong on the entire county median income, or they are wrong on potomac. Cause I cant believe cities like Rockville and Bethesda making negative incomes to bring down the whole counties average."
ReplyDeleteYou dont need "negative incomes" to get a mean household income of 91K. Bethesda consists of 56K people - thats it. Rockville 51K people - no mas.
By contrast, the whole of mongomery county, (inlcusive of the cities and the vast expanses of unincorporated areas) consists of 917,181 people. As such, the income strength of tiny areas (i.e. the 47K in Potomac) is washed out in the great morass of near one million people countywide.
Think of it this way, imagine that everyone in Bethesda & Rockville made half million bucks apiece, whereas everywhere else they made 50K. In this case the average would be 95K and the median would be 50K.
This is a fiction, but thats the point. There is nothing to suggest "negative incomes" is remotely in play in order to round things out. Go back and play around with "median" and "average/means" and you will see how easy it is to have pockets of 200K households hidden among the great unwashed found in a county of nearly a million people.
This is a fiction, but thats the point. There is nothing to suggest "negative incomes" is remotely in play in order to round things out. Go back and play around with "median" and "average/means" and you will see how easy it is to have pockets of 200K households hidden among the great unwashed found in a county of nearly a million people.
ReplyDeleteToo mathy for me. I fold...
But seriously, can we stop using the phrase "DC Metro Area" in relation to C-S, or anything else RE-related. I can't think of a category that's less meaningful.
RE markets are hyper-local. Especially in this region. To say, "I expect prices to fall in the DC Metro Area" is to say nothing of any interest whatsoever.
I'm bullish about the close-in 'burbs and the city itself. When it comes to the exurban areas, I can't imagine how anyone paid anything at all, much less the ridiculous prices they did. So I guess that makes me a bear.
But if you're going to talk about the "DC Metro Area" as defined by C-S, you may as well predict what the weather is going to be like on Earth year.
Should I buy a sweater? No worries, the weather on Earth is expected to be warmer over the coming years.
"But if you're going to talk about the "DC Metro Area" as defined by C-S, you may as well predict what the weather is going to be like on Earth year."
ReplyDeleteThat is ridiculous as these areas are to a large degree competing with each other for buyers. During the boom years thousing in the city and inner suburbs rose dramatically and during the bust prices fell in both. Albeit less dramatically in the closer in areas.
"You dont need "negative incomes" to get a mean household income of 91K. Bethesda consists of 56K people - thats it. Rockville 51K people - no mas."
ReplyDeleteuh last time I checked montgomery county is only Rockville, Potomac, Bethesda and Gaithersburg.
If everyone except gaithersburg is a billionaire, gaithersburg families must be making negative 7 trillion dollars a year. Either that or they have the population of India.
You are retarded you know that? 4 cities?
ReplyDeleteThe following is a list of unincorporated areas in Mo Co that are neither in Gaithersburg, Rockville, Potomac or Bethesda
1. Brookmont
2. Burtonsville
3. Chevy Chase
4. Clarksburg
5. Colesville
6. Damascus
7. Darnestown
8. Forest Glen
9. Germantown
10. Glenmont
11. Glen Echo
12. Hillandale
13. Hyattstown
14. Kemp Mill
15. Kensington
16. Laytonsville
17. Olney
18. Poolesville
19. Redland
20. Rossmoor
21. Somerset
22. Travilah
23. White Oak
There are many many many others...
That is ridiculous as these areas are to a large degree competing with each other for buyers.
ReplyDeleteNope. That's the point: successful younger people would rather eat their own liver than move from areas like Arlington/Alexandria/DC to places like Centerville. There's no competition, because they're not the same product.
During the boom years thousing in the city and inner suburbs rose dramatically and during the bust prices fell in both.
During the boom years, the (quite rational) rise in housing prices in the city and inner suburbs drove a corresponding (and quite irrational) rise in housing prices in the outer suburbs.
Compare Capitol Hill from 5-10 years ago with Capitol Hill today. Not even the same animal.
Compare Falls Church or Gaithersburg of 5-10 years ago with today. They're the same place with slightly less affluent demographics and much, much worse traffic.
That trend will continue.
"IBC said...
ReplyDeleteDuring the boom years, the (quite rational) rise in housing prices in the city and inner suburbs drove a corresponding (and quite irrational) rise in housing prices in the outer suburbs."
IBC - I agree with you generally, but I see this paragraph in reverse.
If there had been no bubble, the gentrification would have continued and would have outperformed the burbs with prices going up at 8-10% vs (3-5% in the burbs) This is what we should have seen as an indication of true increases in value of these hoods.
However, once the bubble caused undifferentiated suburbia to go up 20% YOY, the newly desirable immunozone areas had to go up the same amount just to keep pace (i.e. maintain their new place in the pecking order of desirability).
Once the bubble was removed, the places that had no support (suburbia) collapsed, fell back to their pre bubble prices, plus the 3-5% rates of appreciation.
By contrast, the inner areas stagnated, giving some ground, but doing well cuz the 8-10% increase in fundamentals was driving it.
Longer term, once all the new desirability is priced in, the immunozones will drop back to 3-5% just like everywhere else, but that wont be till all the pawn shops are gone, the nefarious characters further marginalized, etc.
Places like Arlington have probably tapped out - they cant get much nicer so 3-5% will be likely from now on.
Places like DC - if the improvements continue, who knows how much more it can fly...
Good points. I think the continuing improvement of DCPS and the collapse of the road system will have a multiplier effect.
ReplyDeleteWhen the pawnshops are gone [as you say], I think we'll see DC public schools grow to become some of the best in the region.
The flip-side of that coin is that exurban schools will decline as the social ills that have been confined to The District get priced out of the city.
"When the pawnshops are gone [as you say], I think we'll see DC public schools grow to become some of the best in the region. "
ReplyDeleteYep - its gonna take a while however. Everyone talks about how good the Arlington schools are, without realizing that it is a very new (last 10 years) phenomenon.
20 years ago, the idea that Arlington had "good schools" was laughable. DC will have "good schools" as the underlying city improves, but it will likely be another generation before they are considered as such.
We may soon see a "recovery" but this is an articifial recovery based on pure speculation, a bit of govt manipulation, and no real GDP supporting it. The thing to watch out for is inflation which will cause interest rates to soar, and this will extinguish any kind of housing bounce. We will see a flatline bounce for several years and once people realize they can't depend on RE for their retirement, they will sell again and move that money to safe havens that are beating high inflation. Thus, the bounce will be a sucker's bounce, because there's nothing supporting it. People will get back in, only to lose a second time in a row.
ReplyDelete"The thing to watch out for is inflation which will cause interest rates to soar, and this will extinguish any kind of housing bounce."
ReplyDeleteEveryone seems to forget housing IS a hedge against inflation. Rising interest rates do not have to necessarily kill housing. The issue is why are rates rising?
If interest rates rise due to lenders pricing in additional risk (such as increased cultural acceptance of defaults) home prices will suffer. However, if interest rates rise due to increased inflation (as we had in the 70s) housing will increase along with inflation.