Friday, May 30, 2008

Washington, DC Area: Housing Price Declines Accelerating

Despite many housing bottom callers in the past year, a bottom has not been reached in the Washington, DC metropolitan area. Prices are still declining and inventory remains very elevated.


As we can see in the chart from 2000 to 2006 prices had gone up two and a half times in the Washington, DC area (blue line). Now, this was the average increase in this area, some areas saw prices triple during those 6 - 7 year period.

The recently released Case Shiller index for the Washington area showed that prices from March 2007 to March 2008 had declined by 14.4% (nominally). Prices declines are indeed accelerating, as prices in the last 6 months have fallen 11.1% which on an annualized basis is much over 20%.

Prices continue to fall. Although prices are falling slowly in the desirable neighborhoods within the Beltway. Far out suburbs and condo units are experiencing larger percentage price declines. In the metropolitan area a declining housing market is a reality.


Inventory continues to remain very elevated. Most areas there is a months supply which is greater then 6 months which usually corresponds with declining prices. In the inner suburbs of Northern Virginia the months supply stood at 7.3 in April.
  • Washington, DC proper: 9.8
  • Prince George's: 20
  • Montgomery County: 9.3
  • Loudoun County: 8.4

There are still a boatload of foreclosures on the market. "Although Fairfax has not been hit nearly as hard by foreclosures as neighboring Prince William and Loudoun counties, the number of foreclosures has risen dramatically as a result of the subprime mortgage crisis -- from 198 in 2005 to 4,527 in 2007. Most of the foreclosures are clustered in Springfield, Herndon, Centreville and the Route 1 corridor. The situation has raised concerns about depressed property values, a decline in maintenance and higher rates of crime, including vandalism. Waashington Post May 20th)"

Another wave of foreclosures is coming as the option arms reset. Foreclosures are making a significant contribution in lowering prices in areas hard hit by them.


The Washington - Baltimore area is not recovering from the housing decline. Prices continue to fall and inventory remain very high. Prices are falling slowly in the desirable neighborhoods within the Beltway, howeever far out suburbs and condos are experiencing larger price declines.

In the metropolitan area a declining housing market is reality. For real estate, this spring's real estate season has largely been a bust. Housing busts usually last many, many years. Further price declines will continue this year.

Wednesday, May 21, 2008

Skyrocketing Gasoline Prices

Skyrocketing Gasoline Prices.
Housing units where working people live which are far from jobs are being affected by high gasoline costs. Prices are now experiencing further downward pressure due to high commuting costs to jobs. Think Lancaste, CA or Prince William County, VA, and Pahrump, NV.

Tuesday, May 20, 2008

From 2005: Mocking the Existence of A Housing Bubble.

From 2005: Mocking the Existence of A Housing Bubble.
From the discredited shills at the California Association of Realtors.

Thursday, May 15, 2008

Price Per Sq. Foot Plummets in a N. Va Condo Building

The lovely Byron Condominiums,
"A Luxury Condominium Complex in the Heart of Falls Church"

A person who wishes to remain anonymous sent me illustrative information regarding falling prices in a condo building in Northern Virginia (suburbs of Washington, DC) . Thank you to this individual.

"Sales data collected from the City of Falls Church real estate assessor's site. The sales are listed in chronological order. There have been 67 residential unit sales, with 18 units still unsold. The most interesting take away from the table is the incredibly significant decrease in the price per square foot. The peak price of $505 / sf was in Dec 2006. The trough to date is $345 / sf in Feb 2008."

"A scatter chart of the Price/sf relative to Date of Sale. Again, incredible."

In October 2006 a 2br condo unit (#404) in this building which has 1814 sq. feet sold for 808,226K. This is 446 per sq. foot. On the floor below it there is unit #304 which has the same layout and size. It sold in February 2008 for 625,000. These two units, #304 and #404, in 2008 were assessed for about the same (less then 1% difference). These units for nearly all purposes are equivalent. However, the price for this type of unit in this building has fallen 22.5% in nominal terms or about 183,000 dollars. In inflation adjusted terms this type of unit is down more more then 25%. Falls Church is an inner suburb. The price per sq. foot has fallen from $446 to $345, or 22.5%. Waiting to buy a housing unit has been prudent over the past few years in the Washington, DC area.

Condo prices are definitely falling in the Washington, DC area. Generally, prices on condos have fallen significantly more then single family housing units. Condo prices have generally fallen 15 - 40% in inflation adjusted dollars from their peak. Expect further prices declines on housing units in the Washington, DC area.

Wednesday, May 07, 2008

BubbleSphere Roundup

The Federal Reserve Building in Washington, DC

U.S. Consumer Debt Surges in March (Calculated Risk)

Jonathan Miller is interviewed in PBS Nightly Business Report Clip for 5-6-08">[In The Media] PBS Nightly Business Report Clip for 5-6-08.

Do we need a Blanche Evans Watch? She is the senior hack from Realty Times!

A letter to the editor: "One lesson we should all be able to draw from the foreclosure crisis is that the government has a duty to protect and inform consumers about what is not only the biggest investment most individuals make, but also the cornerstone of family wealth and community stability." Amen brother! Amen!

Are you an Angry Renter? Are you against a housing bailout? Then check out Angry Renter!

Tuesday, May 06, 2008

He's Baaaaaaaaack!!

David Lereah is back giving more opinion on real estate on the mainstream media. This time in a Newsweek article. Remember, Lereah was probably the biggest cheerleader for the housing market during the bubble years.

Lereah is infamous for calling the bottom many times. Will he call the bottom once more?
His answer: not yet. "We're not at the bottom," he says. "[People] want it to be near the bottom, but we're not there yet. The leading indicators are still very bad. Pending home sales are still in bad shape. Mortgage applications are low … There's still supply out there in abundance … This thing is going to get worse before it gets better."
Wow! Lereah is actually saying that the housing market will continue to decline. The article continues ".. That's quite a turnabout from the view he articulated in his book, first published in 2005." In his book he wrote that "Today's real estate market is the result of rational decision making based on supply and demand conditions with today's economy, home owners are in no danger of experiencing a widespread fallout of home prices."

So what is David Lereah up to these days, career wise?
It turns out he has recently set up a new firm called Reecon Advisors, which is advising Wall Street firms and institutional investors about the real estate market. "Wall Street has an intense interest in [this], because they're looking for when is the recovery going to come, and at what point does the cycle turn," Lereah told me.
After Lereah's history of grossly wrong predictions, why are Wall Street firms taking advice from him? Anyone? Lerah continues and discusses what he got wrong.
Oops. "You knew there were a couple of [regional] balloons out there, and [I] said you could have a couple of these balloons pop," Lereah says now. "But I didn't think this would turn into an all-out bursting of a balloon for the whole nation." He, like other prognosticators (including Greenspan), points to his lack of understanding of the profound effects that subprime lending was having on housing markets. "[I] just didn't realize the scope, the extent, the magnitude of the loose underwriting—not looking at incomes and wages, just providing so many mortgage loans based on [expected] future price appreciation rather than the creditworthiness of the borrower," Lereah says. "That got so out of hand, and none of us realized the magnitude of it until it was too late."

None of us? There were some who did warn about these issues including by not limited too Dean Baker, Robert Shiller, the Economist, and the housing bubble bloggers. It is simply plain wrong to say no one realized what was happening. It is easy to blame his wrong predictions on the subprime mortgage mess. Lereah is desperately trying to restore his credibility be saying 'well gee no one was correct about this mess, so I'm ok.' Lereah is wrong. Others did realize what was happening and let it be known and did speak up. David Lereah has lost his credibility a long time ago.

My other blog, the David Lereah Watch was linked to in the Newsweek article. Thanks for the link. :-)

Here is what others have to say about Lereah's statements in this article: