Wednesday, February 16, 2011

Housing "immunozones" getting hit

According to The New York Times, America's housing "immunozones" are continuing to suffer home price declines, even as some of the early crash cities start to recover:
The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained.

In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.

The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.
With that in mind, here's a home price graph for my local Washington, DC housing market. The city of Washington, DC has seen median home prices fall $65,000 (15%) since the peak, and they're still sliding down slowly.

Washington, DC has been the most immune of the immunozones due to its ability to suck on the federal government's teat. What's the biggest threat to that teat? Senator Rand Paul.


  1. "With that in mind, here's a home price graph for my local Washington, DC housing market."

    James, your link sends us to Zillow's "home value index". However, if you click on sale prices, Zillow says prices are exploding at +14% YOY and have just hit a new all time peak price.

    Any idea on the discrepancy?

  2. Zillow's home value index estimates the value of ALL HOMES in the city. The sale price only measures homes that have sold. If the mix of homes that are being sold changes, the sale price graph can give a misleading view of home values.

    My guess is that we're increasingly seeing only high-end homes in DC selling, while low-end homes are not.

  3. I've watched Zillow reduce, over the past few months, the value of my condo somewhat dramatically. I live in DC, Adams Morgan.

    But my mortgage and maintenance costs, in total, are well in-line with what it would cost to rent.

    Based on what I've read, I'm expecting, at least, another 10% reduction in paper value this year.

    To James point about low-end sales; I would tend to agree.

    Prospective buyers, particularly in the condo market, are making offers based on prices nosediving. I can not blame them. I would do the same.

    I know people who would like to sell and have either pulled their property off the market or won't list it at all. The general sense is that buyers and sellers are both wasting their time.

  4. Let the lumpen masses eat cake! We have tremendous mortgage obligations on real estate in the District of Columbia, which proves that we are better than the lumpen masses!

    (that was sarcasm, in case you missed it)

  5. Condo prices are nosediving? I thought we saw the last of that?

  6. Interesting tweet from Ryan Avent today:

    What's the biggest threat to that teat? Senator Rand Paul.

    Was this some sort of joke? If so, it's a bit too subtle for me. If not, I have to say I'm a bit surprised. Generally you're a bit more level-headed than this. There's been some tinkering around the edges for show, but the idea that anyone is going to "threaten the teat" is laughable.

    The money's in Defense, Homeland Security, and other parts of the security state. No one is ever going to cut that ever. The DC area defense contractors will get paid with the last pennies in the US Treasury, just before they turn out the lights.

  7. Zillow appears to use tax assessments in its calculations. Tax assessment drops are lagging and what we're seeing now are the drops of a couple years ago being reflected in Zillows numbers.