Source: MRIS; [Click on image for larger version].Active listings for housing units have increased dramatically in the Washington, DC metro area in the past year. The chart on the right shows the active listings percentage increase year over year (YoY) for March 2006 in the larger various jurisdictions that comprise the DC Metro area. In Prince William County, VA, an exurban area, the inventory has increased almost 500%. T he speculators are trying to sell, and buyers are balking at the high prices.
The April numbers are expected to show an even higher YoY percentage increase. Stay Tuned.
Posts
I recall some readers-some would say trolls-have made some comments such as 'what is the point of this post, Dave?', or 'this doesn't prove anything, Dave'.
ReplyDeleteWould you like to know what the point of this post is?
I'll answer: It means if you're in your 20's and a first time home buyer, buying at the top of a housing boom would be a very risky.
ReplyDeleteThanks arlingtonva. It also shows that the housing market is in a very different place then last time this year. The supply side has increased dramatically in the pasy year.
ReplyDeleteI believe that the DC housing market has been bubblelicious and overpriced, and I've rented as a result. I can always invest my money elsewhere besides housing.
ReplyDeleteBut I've had some issues with some bubble sites, because I believe they're a little quick to call a crash or look for signs of a bubble at every turn, no matter what. A lot of bubbleheads also can't deal with any information that conflicts with their worldview.
One example of this is "inventories rose by 300%! What a bubble!"
That 300% increase doesn't tell me anything unless I know the base. If inventories rose from 1 day to 3 days (a 300% increase), that's a hot market. If inventories rose from 2 months to 6 months (a 300% increase), that's a hot market that's stabilized, and if inventories rose from 4 months to 1 year (a 300% market), that's a market that's going to fall.
So which is it?
One final point. If somebody says housing prices are going to fall by 45% (Dean Baker), somebody else says they'll rise by 5% (David Lerah), and housing prices actually fall by 20%, then the minus 45% guy was just as far off as the plus 5% guy.
Sure, inventories are way up, but the drop in prices will depend on how many of these units for sale are owned by people with a purely financial/investment interest in them, rather than living in them. If I lived in a place that I owned, I'd just say "well, i'm gonna be here until the market improves." But if I'm making payments on something, I'd be more inclined to cut my losses and move product. If flippers are still big in the game, and with condos there are flippers *and* developers, so I do expect to see their values plummet, then the SFH market will fall too. Otherwise, as much as I hate to say it, this might just be a 5-10% drop rather than the 40% that I'd love to see (so I can afford a house)
ReplyDeletecheck out the MRIS.com reports for base information.
ReplyDeleteActually arlingtonVa, what this means is that it is a GREAT time to buy!! With increased inventories it means that buyers have many more options to choose from. Unlike in fast rising markets where buyers must make quick decsions on a small selection of available houses, the current market is great for first time buyers as they can choose exactly the home that's perfect for them!!
ReplyDelete"One final point. If somebody says housing prices are going to fall by 45% (Dean Baker), somebody else says they'll rise by 5% (David Lerah), and housing prices actually fall by 20%, then the minus 45% guy was just as far off as the plus 5% guy."
ReplyDeleteThey're only equally wrong until you think about the impact of the decision you would make based on the advice. Follow Dean Baker's advice and don't buy, and you end saving 20%, still coming out ahead. Trust Learah and buy now, and you end up down 20%.
This is purely anecdotal, but in my neighborhood (south of H St corridor NE) we are seeing a lot of price reductions. Everyday when I walk my dog I take note of the properties for sale and go online later to check the sales info. The majority of them are being advertised on MLS as price reductions. Albeit some of the price cuts are minor ($10k off a $789K house for example), while others are a little higher on a percentage basis (a $20K price cut on a $479K house).
ReplyDeleteStill I've also noticed that houses are sitting for a long time, which in addition to buyer apathy it may also indicate that sellers are willing to wait for the right offer. I don't think prices are going to fall that hard though, a lot of expensive upgrades have been made to these homes (at least in my neighborhood) and keep in mind that labor and materials costs to these contractors have been pretty inflated as well. taking into account potential profit margin, you do wonder about how low sellers really can drop the price without taking a loss.
Maybe for some people it's just worth letting it sit for months. There is a decent looking renovated house on a corner near me that was first listed in June of 2005. The price from what I can tell has been cut at least twice by small increments. Still at this point I figured the owner would have just dropped the price drastically just to unload this thing. But nope. There it sits. vacant. Who knows what the psychology is behind this one, maybe there's no mortgage on it so the seller doesn't care how long he has to wait. I've never been inside it so there may be something really wrong with the house, who knows. But I have seen it being shown several times. Maybe they can have an open house to celebrate the 1 year anniversary of the listing.
--HSTREET
Maybe for some people it's just worth letting it sit for months.
ReplyDeleteThe interesting time will be when people are saying: "Maybe for some people it's just worth letting it sit for years."
Once the ARMs resets get going, there will be a desperate segment setting the comps. And that will continue through 2008, at least.
Arlington,va - the increase in inventory is pretty dramatic but please remember that we are coming off of several years of extremely low, low inventories. Look at the ten year chart.
ReplyDeleteReal estate is cyclical - always has been. If anyone had a crystal ball....
Anyway, I've got my eyes open for some foreclosures in the next year or so. The question about the "point" of this blog was aimed at some of the immature and ridiculous statements that were being made (i.e. price drops of 80%, laughter and jokes about people losing their shirts - just plain sour grapes type stuff).
Guys like Dean Baker (and Bill Fleckenstein) were saying to beware the stock market bubble in the late 90s. They were right. They were a couple years too early, but they were right.
ReplyDeleteI am very glad I listened to them then. Personally, I would listen to them now as well.
A Redskins fan
I'm sure out of the thousands of people making predictions there will be some correct "guess's" (grammer?). Especially, if you include a 2 year window.
ReplyDeleteIn my opinion, some people get too worked up about time "windows" when evaluating forecasters.
ReplyDeleteThe reality is that no one can accurately forecast what is going to happen in one year. Most "successful" forecasters really end up just saying that next time period will be the same as this one.
However, analysts can tell you whether there are serious fundamental problems or not.
People like Fleckenstein and Baker have accurately pointed out areas of fundamental problems (the stock market bubble, the housing bubble) in the past. The fact that they could not predict how colossally stupid late 90s investors would be in pouring money into the "New Economy" stocks even as late as 1999 and the first two months of 2000 does not make their analysis less valuable.
Other analysts, like Ted Butler, Matt Simmons, and Bill Murphy, have been pointing out fundamentals that have made the silver, energy, and gold markets great investments for the last four years. They've been pointing these things out for slightly longer than that; they weren't right immediately. But if you followed their advice, you could have made some serious money.
IMHO, fundamentals trump forecasts every time.
A Redskins fan
My wife and I have been looking to buy in Fairfax County for nearly a year. This past weekend may be indicative of a surprising and welcome positive turn for buyers: while attending an open house at a property listed at $989,000.00 in the Vienna area, the seller verbally offered to lower his price by $100,000.00 if we would make a serious offer that day. We didn't, but were encouraged that the prices are slipping and sellers are trying to cash out before the market softens even more.
ReplyDeleteYeah, the market definitely is changing. We went to a Stanley Martin speculation site in Falls Church in that gentrifying area between Arlington and Annandale a few weekends ago and Stanley Martin is clearly in the midst of a sell-off in anticipation of the market retraction. They were offering a choice of $10K or a home theatre system as a buying incentive, but also wanted $50K in up front money prior to purchase (that's before the down payment). More interesting was that the model house at that site had clearly been slapped together very fast and the 2 sales reps were pushy-pushy about how wonderful these homes were and how fast they had nearly all sold out. Yet in this model house the walls were scratched and beat up, many of the stair railing joints did not come together squarely, the exposed ceiling beams in the unfinished part of the basement were ragged, splintered wood, there was no insulation molding around the front door, and the windows were of cheap quality. I'd be afraid for the person who buys this place. The area builders are cearly seeing trouble for themselves in the next year.
ReplyDeletethe seller verbally offered to lower his price by $100,000.00
ReplyDeleteThese are such crazy times. It sounds like a game show.
Deal... or no deal
;)