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Moving On In

An editorial in the New York Times discusses a subject we've explored often in this space, the decline in the exurbs.

Remember that this is an editorial and not news. The writer has a stake in being right.

That said, I agree with most of what he is saying.

Local communities should take note. Our towns (Warrenton, Culpepper, Bealeton, Gainesville, Haymarket, etc.) are not set up to profit from this trend right now. We need more housing around town centers and more high paying local jobs that allow people to work where they live.

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Reason Number Five - Gas Prices

Yesterday we talked about four reasons home prices aren't likely to rise much any time soon. Today we'll talk about a fifth reason that has the potential for an even bigger impact.           


Gas prices shot up 20 cents yesterday in Warrenton. Sheetz Exxon was charging $3.09 yesterday morning but was showing $3.29 on the sign last night. That's quite a one day jump. And it almost inevitably means a slow down in home sales in our area.

Like it or not, home sales in our area are primarily driven by people commuting into DC or northern Virginia. That's an ugly commute on the best of days and I often talk to people trying to figure out if it makes any sense to spend 3-4 hours a day in their cars. If you add a large spike in gas prices it becomes a lot clearer to some people that this is not a good trade off.

A recent story on Marketplace on NPR talked about the premium you now get for owning a home near mass transit. Home prices for properties near mass transit actually didn't really appear to show much of a bubble and haven't tumbled. Home prices in far flung suburbs, on the other hand, got hit the hardest. You only have to look at Culpeper to see the truth of that.

I don't know if $3.29 is the number that starts to put the brakes on what's already a fairly slow market. I know that if it goes much higher heading into the busy spring season I'll be worried.

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Why Prices Aren't Going Up

The actual title of this piece by the Planet Money team is "4 Reasons Home Prices Are Likely to Keep Falling". But early in the article they tell you that this area is one of the few where prices are not falling.

These reasons are all valid, however, even here. And they are all a part of the reasons home prices have stabilized here but are unlikely to rise much in the forseeable future.

The four reasons they site, in a nut shell are:

  • Glut of homes on the market.
  • Too many foreclosures and short sales.
  • Rising interest rates.
  • Reduced government support for mortgage market.

Tomorrow, I'll talk about the 5th reason we're about to see prices not rise (if we're lucky) and sales are likely to slow in our area.

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Can Anyone Afford to Buy Here?

Housing Virginia has a great tool called Sourcebook that allows you to take a look at the affordability of housing in Virginia by county. And it allows you to look at the data in about a dozen different ways. I've looked at the local counties and it's an interesting picture.

First of all, I think you'll be surprised at the overall affordability of the homes in Culpeper, Fauquier, Rappahannock and even Prince William. The national standard for when a home is considered affordable is if the payments are less than 30% of a family's income. By that measure, all of these counties are easily rated as being affordable. And, renting is cheaper than owning in three of these counties. (Prince William is the exception.)

If you look at the Housing Cost Burden, you'll see that the burden appears to be easing in some of these counties. Prince William is a good example of that. This statistic measures how many households are paying more than 30% of their income in housing costs. Unfortunately, in places like Fauquier County, this number is not only too high, it appears to still be rising. (Although note that the data stops in 2009 for this statistic.)

One of the charts that paints the most dramatic picture of what's happened in our housing markets is the Loan Activity charts. For the most part, each county looks like a giant backwards check mark. Except that the short part of that check mark is pretty darned flat! Prince William even shows some additional declines after beginning to bounce back.

Overall, I recommend taking a good look at these statistics. They will be most helpful to anyone trying to decide whether to buy or rent right now. But they will give any buyer or seller a good snapshot of what our market looks like right now.

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Breaking Up Government

There was a fascinating editorial in the Washington Post this last weekend suggesting that we should be moving big bunches of the the federal government out of the greater Washington DC area.

This is not a plan that's likely to be well received in this area. It will do nothing for our local economy. Demand for real estate surely goes down if this were to occur. (A VERY high percentage of my clients make their living in ways either directly or indirectly related to the federal government.)

But my hunch is that it may be the right thing for the country as a whole.

Let's move a whole bunch of government jobs to places with horrendous unemployement; think Ohio or Michigan.

Is it even possible any more for a large group of people to come together and decide to make a sacrifice for the greater good of the country?

What if the people in this region demanded that this be done? How would it change the attitude of people in the rest of this country towards those boogeymen "Government" and "Washington"?

Worth a try?

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Where We're Going

We're a restless bunch in this country. If you want to see where we're coming from and going to, Forbes just published this great map using IRS data.

It let's you look at a specific county and see where people are coming from and moving to in that county. It's a fun map and I'm going to spend a lot of time playing with this one.

The one thing I notice after looking at this for a little while is that most of the movement is very local, within Virginia. You don't see huge migrations in Fauquier, Culpeper or Rappahannock either from or to other states. Now look at Prince William or any of the more traditionally "northern Virginia" counties. Lots of movement both from and to many other states.

Now think about the real estate implications. Generally, looking at this map you'd expect to see more turnover in inventory in Prince William than in Culpeper, Fauquier or Rappahannock. And, you'd be right!

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March Local Market Numbers

It's been a few months since I've written about the overall market stats for the area. So, let's see what's changed.

We'll talk about Rappahannock first for a change. How does it compare to a year ago? 86 listings now compared to 76 then. 6 sales in March 2010 compared to 3 last year at the same time.

Note: Remember, real estate is seasonal and year over year numbers are a much smarter comparison than month to month.

The one Rappahannock statistic that jumps out is the number of new contracts in March. There were 8. That's the highest number of new contracts in one month since August, 2006.

Culpeper has 433 active listings compared to 464 last year at this time. While sales in other counties jumped in March after a couple of slow months, March still looks pretty flat in Culpeper. But the median sales price is up almost 10% year over year. That's 2 months in a row that have shown price increases. If you look over a longer time horizon, it's certainly easy to make the case that prices remain flat to slightly higher. The number of contracts ratified in March is down, year over year, but up significantly month over month. Last year at this time there was an increase in contracts from February to March. As always, I'm reluctant to speculate on what these tiny data points mean, other than to say, stay tuned.

Fauquier County also shows declining inventory, 516 now vs. 556 a year ago. Sales are 73 in March of 2010, a significant increase from the 43 in March of 2009. In fact, you can pick just about any metric you want in Fauquier, including price, and it's up. The absorption rate would indicate a very balanced market. That's slightly misleading since there's little inventory available at the lower price ranges.

Prince William County continues to be the place where the buyers are lining up to buy. As an example, a listing came on the market in Gainesville this morning and by this evening when I tried to take my clients to show it, I was turned away and told it was already under contract. Inventory has dropped year over year from 3079 a year ago to 2595 now. Sales have dropped though, from 750 a year ago to 559. I believe that has more to do with a lack of properties in the lower price ranges rather than a lack of interest by buyers. And inventory is coming on the market at a slower pace. Last year in March 1219 new properties were listed. In March 2010 only 964 properties came on the market. Prices reflect the shortage of inventory. Prices have been climbing in Prince William County for months now.

It's a great time to be a buyer in our area if you don't mind bidding wars and competing against cash offers! It's a great time to be a seller if you are not expecting prices at 2005 levels!



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Area Still Growing

There was an article in the Washington Post this week that talks about the region's population growth. The good news (if you're looking to sell your home) is that this region continues to grow.

The area grew 3% in the last few years. That's faster than any place else on the Eastern seaboard.

It gets more interesting from my perspective when you look at the local populations trends.

Every local county, except for Rappahannock has continued to grow. We're not seeing the big population jumps that we saw in 2004 and 2005. But the trend is definitely slow but steady growth.

Culpeper County has grown the fastest in the last decade. It's 35.7% growth between 2000 and 2009 make it the 17th fastest growing county in the nation.

Fauquier County has grown at 23% over the same period. And, if you look around you notice that there aren't as many new subdivisions in Fauquier. (Not that there aren't still plenty!)

Rappahannock actually lost about 1% population over the last decade. The county continues to hover around the 7000 mark. It's hard to see anything changing that in the short term. It wouldn't surprise me to see Rappahannock at almost the same population a decade from now.

Prince William County grew almost as fast as Culpeper. The 34.8% growth rate also made it one of the fastest growing counties in the country. Prince William County benefits from the proximity to DC, VRE access and lower housing costs than the inner suburbs. In fact, while growth in Culpeper and Fauquier has slowed considerably since the 2004/2005 time frame; Prince William County is growing at almost the identical rate now as then. Buyers trying to buy in Prince William County have definitely noticed! New construction has definitely not kept pace with that kind of growth.

The continuing influx of new residents will eventually begin pushing prices up again at a faster clip. I don't predict any return to the craziness we saw in the last bubble. But there's also clearly no reason to expect a second drop in prices in this area.


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2010 - A Forecast

Let's start with the look at the larger economic picture. As always, it will play a major role in what happens this year with local real estate.

While the Fed continues to keep money cheap (I closed a deal at the end of the year with interest rate under 5%) that can't last forever. If the real estate industry and economy seem to be doing well mid-year we may start to see some adjustments upwards in rates.

I expect lending to remain very, very tight. Your credit will need to be very good and/or you'll need a hefty down payment in order to buy a house this year. Because of these conditions, I expect to see more USDA Rural Development mortgages in 2010.

The jobs picture is likely to remain gloomy throughout 2010. It will be less gloomy in the greater DC area, but the angst that goes with those high unemployment numbers will remain and will continue to impact people's willingness to buy homes.

The majority of sales are likely to be short sales in 2010. There are plans in the works to make the short sale process easier and faster. I have my fingers crossed that they will work!

It's going to surprise a lot of you to hear that one of my biggest worries about 2010 is a lack of inventory! Who'd have guessed a year or two ago that that would be possible!

But Prince William County is down to only 4.5 months of inventory. That's technically a strong seller's market. Culpeper is at 7 months of inventory, a balanced market. Fauquier is at 9 months. Rappahannock has what looks like an astonishing 16 months of inventory, but things continue to work a little differently there! I expect inventory in Prince William County to stay about at current levels in 2010. Culpeper and Fauquier are likely to shrink further. Rappahannock should be down to 12 months of inventory by the end of the year.

Here's the problem with the inventory situation. Banks have additional inventory, but they're holding on to it and releasing it more slowly. They don't want any further depression of prices because that kills their bottom line. And, with the bailout from the government and the cheap money they're able to borrow from the Fed, they don't need to dump them in a hurry. So, we'll continue to see foreclosures hit the market but only in dribs and drabs.

That leaves the rest of us homeowners as potential sellers. Most homeowners have seen a tremendous amount of value wiped out on paper and aren't anxious to realize that loss by selling and locking it in. I can't say as I blame them. Of course, the underlying assumption there is that if I hold on another year, or maybe two, I'll get a lot of that value back.

Is that true? Will 2010 be the year we see a spike in home prices? We've certainly already seen some price increases in Fauquier and Prince William counties. Culpeper still shows a year over year decrease as does Rappahannock county. But yes, I think we'll see small price increases in all four counties in 2010. Just don't expect to get back to 2005 prices for a long, long time! Expect 5-8% price increases this year.

The big unknown this year in my mind is what the buyers will do. If the economy, and by economy I mean unemployment, improves significantly, I think we see a big increase of buyers and those price increases could get a lot larger. But I'm not optimistic about the jobs outlook. And, I think buyers remain relatively scarce. Look for the volume of transactions to be flat in 2010. And it wouldn't surprise me if there's actually a small decline.

I expect the DOM (Days on Market) for properties to shrink slightly simply because of the lack of inventory. Those homes priced right and in great condition will continue to sell relatively quickly.

The summary is that 2010 is going to be another year of trying to get solid ground underneath the real estate market. It will be another year of slow, painful climbing out of the ugly market we've had. There are bright spots and there's certainly the potential for happy surprises. But I'd hang on for another bumpy ride if I were you!

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2009 Year in Review

As we head into 2010, let's start by looking backwards into 2009 and see how my predictions fared.

First of all, it's clear to me now that years from now we'll look back and see 2009 as the year when the real estate recovery really began to take hold, at least in this part of Virginia. That doesn't mean that the prospects are entirely rosy going forward, but the contrast between 2008 and 2009 are simply incredible.

Whereas the big story in 2008 was price drops, the big story this year is price increases, year over year, across the board. Whether you're talking about Culpeper, Fauquier, Prince William or Rappahannock County, prices are up year over year. Now bear in mind that's after several years of steep declines. And these increases are very modest, in the single digits. On prices, I was too pessimistic, anticipating another year of falling prices. I've never been so happy to be wrong! I predicted a price decline of 10% with that primarily coming on properties at the $400K and above price point. In reality, the only place we saw any price weakness was at the very high end of the market.

Inventory declined dramatically. I got this one partially right in that I predicted a continued decline. But it's been more rapid than I expected. Inventory in Culpeper is down 20% year over year and we're now at 11 months of inventory. Still a buyer's market there but better than a year ago.

In Fauquier County the decline was 21% but we're down to only 8 months of inventory. And in both counties, quality inventory at the lower price points is scarce and snapped up quickly.

Prince William County had an amazing decline of 37% in year over year inventory! We're now looking at only about 4 months of inventory here and it's clearly a seller's market in every way except price. But we'll get to that.

In Rappahannock County, after an unexpected inventory surge late in the year, we've started falling again. The November numbers show us pretty much flat, year over year. But preliminary December numbers show a December drop off. Some of that will be sellers deciding not to bother having their homes on the market over the holidays. But some of that inventory will not be coming back.

And now for the volumes. This is the area where I was probably the most off. I predicted 640 homes would sell in Culpeper in 2009. In fact, even with the tax incentives that number was only 595, the exact same number as in 2008.

In Fauquier I predicted that 645 homes would sell in 2009. I was conservative there, with 675 selling a significant increase from the 600 in 2008.

Prince William made me look especially inept, with only 7825 sales as opposed to my forecast of 8800. In my defense, the miserably small inventory kept a lot of would-be buyers on the sideline. That 7825 is actually a decrease over the roughly 8000 sold in 2008. It's a troubling trend.

All in all, my performance as a prognosticator was mixed. I was too optimistic in some areas, not optimistic enough in others and got it just about right in a few.

Despite my lack of perfection, I'll risk looking foolish again later this week with my 2010 predictions!




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Kojo Show Does Real Estate

I don't know of another local radio or TV personality who does a better job of keeping people informed about the local real estate market than Kojo Nnamdi on WAMU. He's had two shows in the last week that illustrate that point.

First he did a show on townhouses and rowhouses that was very interesting. Part of what I like about what Kojo does is that he does the big picture stuff. This piece looks about this important piece of the urban housing picture.

More recently he did a piece on the home buyer's tax credit. It's a more complex subject than most media reports would indicate and it's great that people have another place to go and ask questions. Some of the questions are as informative as the answers in helping me gauge how much people know and understand about the subject.

Take the time to listen to these shows. If you're not a regular listener to Kojo's show, you may become a fan!

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Tax Credit Local Impact

I could take a look in detail at the October numbers for Culpeper, Fauquier and Prince William Counties. But they don't show any shockingly different results or trends. And, I thought it'd be more interesting to take a look at the impact of the First Time Home Buyer Tax Credit in our area.

Obviously, without interviewing every buyer it's impossible to know the precise impacts. But I think it's fair to compare the pace of home buying in each county over the past few months and see how we were doing a year ago without the tax credit and how we've done this year with the credit.

Culpeper is first up. Here are the total sales May through October both in 2008 and in 2009:


Month 2008 2009
May 63 43
June 57 57
July 54 42
August 64 53
September 53 65
October 58 49

Hmmm...if anything the volume of sales is lower in 2009 with the tax credit available.

How about Fauquier?


Month 2008 2009
May 49 70
June 67 68
July 117 62
August 57 65
September 53 65
October 49 66

The evidence is more mixed here. Was the increase in August, September and October because of the tax incentives?

Here's how Prince William looked:


Month 2008 2009
May 724 753
June 834 701
July 866 693
August 838 671
September 934 588
October 841 628

Clearly there was no help from the tax incentive in Prince William County.

I'll do Rappahannock County, just to be consistent, but I'd tell you the results there without even looking:


Month 2008 2009
May 3 7
June 4 6
July 2 3
August 5 2
September 1 3
October 4 3

This is Rappahannock County. Trust me, there weren't many first time home buyers in that lot!

The overall picture is not one that suggests the tax credit had any appreciable impact at all. Were a few extra homes sold? Probably. Was it enough to make any appreciable difference in the market? It seems unlikely. The only argument you could make for that would be that the market would have declined significantly without the tax credits. I'd be hard pressed to find data to support that argument. We'd likely have been in the same relatively flat pattern we've seen for some time now.

So, how do you feel about the extension and expansion of the home buyer tax credit now? Is it worth your tax dollars?

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2009 Predictions Updated

At the end of 2008 I made some predictions about what the real estate market would likely look like for this year.

We've now got enough data from the first half of the year to take a look at how accurate I've been.

First of all, I predicted that the Obama administration would intervene in the housing markets and that this intervention would make a difference in the real estate market locally.

I got this one partially right. They did intervene almost immediately with a moratorium on foreclosures. You could argue about how much it helped, but we did see some let up on the loads of foreclosures coming on the market in the 1st quarter. And I would argue that it gave some mortgage holders time to rethink their strategy. Some of them decided dumping large numbers of foreclosures in the same market at the same time was not all that smart!

But I also anticipated that the adminstration would use that extra time to put in place a real plan to reduce the number of foreclosures. Unfortunately, this administration's plans, like those of the Bush administration before it, have proved inadequate to the challenge at hand.

The one measure that I would say has made a considerable difference in this market is the $8000 first time homebuyer tax credit. There are homebuyers out there buying homes purely because of this incentive. Between that additional demand and the reduction in the dumping of scores of foreclosures, we have indeed, seen some bottoming.

I was partially right and partially wrong on the inventory question as well. I anticipated that while the overall trend would be down, year over year, that we'd see a rise in inventory briefly in early spring, 2009. This is a seasonal pattern and I expected to see what we've normally seen. I was wrong and the decrease in inventory continued, even through the early spring. There was a blip of an increase in Fauquier County. And Rappahannock continued it's tradition of bucking the trend with an inventory that continues on an upward trajectory. But overall, inventories have declined steadily throughout the year.

I suggested prices would stabilize during the summer months. I may still get that right, we'll see. What it looks like right now is price appreciation at the lower price ranges, price stabilization in the mid range and continued price declines in the upper price ranges. The average sold price is down 31% year over year in Culpeper County thus far. The median sold price is down just 11% (close to my prediction of 10%). In Fauquier the average price is actually up an astonishing 45%, with the median sold price down 8.69%. In both of these instances I'd pay a lot more attention to the median number. The average is too easily skewed by large transactions. In Prince William county the average price is down about 5% and the median down 6.67%. But anyone trying to buy a home in Prince William under $400K knows how tough the competition is. Prices are definitely increasing in that market segment.

The number of homes sold for the year looks like it will slightly beat my projections. We're slightly ahead of where I thought we'd be right now. Barring a large drop off, we'll beat my projections, probably by 5-10%.

At this point, nothing I said makes me look like an idiot, always a good feeling! But it's only August!

Want to go out on that limb with me? What are your projections for the rest of the year?


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June Market Stabilization

There is nothing dramatic in the numbers for June. This is good news. The market is relatively stable at this moment.

With the exception of Rappahannock County, inventory remains almost unchanged from May. Rappahannock had a huge jump (for Rappahannock) from 89 to 100 homes for sale. But they also had another good month for sales with 6 homes sold.

In Fauquier, Culpeper and Prince William Counties there was a change of a few properties in the overall inventory. But look at year over year and it's amazing how much we've improved. Prince William has roughly half the inventory it had a year ago. No wonder we're seeing things go under contract in days with multiple offers!

While Fauquier and Culpeper haven't seen the dramatic decrease we've seen in Prince William, each of them has at least 30% less inventory now than a year ago.

As you'd expect, the county with the lowest inventory, Prince William at less than 4 months, shows the most stability in prices. Culpeper and Fauquier both have roughly 8.5 months of inventory and prices still appear to be declining there. But the stats are a little misleading there. Year over year stats show a price decline of approximately 25%. And, while June stats show a price decline over May, the month to month numbers are not very reliable in this category. Because the volume of homes sold in any given month is relatively small, the numbers are easily skewed. Still, prices remain at bargain basement levels.

We are bouncing along the bottom in my opinion, maybe moving up a little in Prince William County. The big question here is still, how long will we stay on the bottom.

I'll be working over the next couple of weeks on a look back at my 2009 predictions and how I'm doing so far. Stay tuned for that and your chance to make fun of my skills as a prognosticator!

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The Great Bank Conspiracy?

Fellow agent and blogger Danilo Bogdanovic just wrote a post on Agent Genius suggesting that perhaps the lack of inventory is actually a plot by the banks to all withhold their foreclosure inventory and thus drive up prices.

Danilo uses the word "Collusion". If you're a buyer right now you may find this persuasive. But I'm not convinced it's all an evil plot.

If the banks are fans of "Buy Low, Sell High" it makes sense for them to hold on to assets until prices improve. And, as inventory has gotten scarce prices are starting to improve.

A banker friend has also suggested that any publicly traded company would logically spread out losses so that they don't all show up on the balance sheet in the same quarter.

And, given what I've seen dealing up close and personal with banks on short sales and foreclosures for a couple of years now, I doubt most of them are capable of the planning that would be necessary for this level of collusion!

If you're a homeowner you're probably thinking this sounds like the best idea ever. If the banks put one or two foreclosures up for sale each year, your home might actually begin to appreciate again!

Either way, I suspect we're giving the banks way too much credit in thinking collusion is responsible for what we're seeing right now.

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May Numbers

May proved to be mostly a month where the numbers went sideways.

Whether you're looking at Culpeper, Fauquier, Prince William or Rappahannock County, there are no dramatic changes.

There were some subtle signals that things have slowed down a tad in Culpeper county. Both new contracts and sales actually fell last month.

In Fauquier county inventory actually rose, ever so slightly (3 houses). But sales jumped month over month from 54 to 70, well above last year's pace at this time.

Prince William continued to shed inventory with only 3.7 months of inventory now available. I continue to see buyers discouraged with what they're finding available under $400K in Prince William.

Rappahannock County had the biggest jump in sales with 7 units selling last month. This being Rappahannock and the universe being so small, it appears to be a big jump (SALES TRIPLED!). But inventory is exactly where it was a month ago and we're unlikely to see any sudden movements in this quiet corner of the market.

Overall, signs would still seem to indicate we're at or very close to a bottom. Prince William still looks to be on its way back up with price appreciation. And, with a tiny amount of inventory available, prices there will likely continue to rise throughout the summer months.

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The Bad and the Ugly

There have been some positive signs lately in the real estate market. And, being an optimist at heart, I probably tend to focus on those pieces of news. (Let's face it, it's easier to get up and do this every day if I'm optimistic!)

But I don't want to be an unthinking cheerleader for the industry. The news is truly mixed right now and I want to highlight a couple of pieces today that give you the other side of the picture.

Bloomberg has a piece today on the latest mortgage delinquence/foreclosure numbers. To say the numbers aren't pretty is to put a little too good a spin on it. The delinquency rate and the numbe of loans entering foreclosure are both the highest since 1972. And, these are not sub-prime loans. We're talking about the loans any lender, in any market, would have thought were good. These are foreclosures occurring because of a combination of a terrible economy and the huge decrease in the value of the homes. If you lose your job and your house is worth half of what it was 5 years ago; even if you put 20% down, there's a good chance you've got a problem. If you have to sell quickly there may not be buyers at a price that gives you even enough to pay off your mortgage. Foreclosures continue to drive prices down and they continue to come onto the market at an alarming rate. Even locally, whether you're talking Prince William, Fauquier or Culpeper counties, the foreclosures are a continuing problem.

Meanwhile, the Wall Street Journal (subscription required) takes a look at whether a home is even a good long term investment. The article is not exactly an encouragement to buy instead of rent.

Here's the heart of their argument:

Yet look at the numbers. Since 1987, when the Case-Shiller index of 10 major cities begins, it's risen from an index value of 63 to 151. Annual return: Just 4.1% a year. During that period, according to the Bureau of Labor Statistics, consumer prices rose by 3% a year. Net result: Home prices produced a real return of just 1.15% a year over inflation over that time.

Critics may point out that the analysis is unfair -- after all, it starts counting near the peak of the 1980s housing boom. Fair enough. Look at the performance since, say, early 1994, when home prices were near a historic trough. Surely someone who bought then has made a bundle.

Not necessarily. Since then the ten-city index has risen from a value of 76 to 151. Annual return: 4.7%. Inflation over that period: 2.5%. That's still only a real return of 2.2% a year above inflation.

They go on to add that a home could cost you an additional 2% in things like property taxes, insurance, repairs, maintenance, etc.

I'm not saying I agree with their analysis. They admit that focusing on these 10 cities is not necessarily a representative sample. But I do think that not everyone should own a home and that it's important to think it through carefully before you buy, especially now.

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National Price Declines Don't Tell the Whole Story

The nationwide numbers out today show that, year over year, home prices continue to decline. That decline was over 18% nationally. Because everyone hears national numbers, rather than local, the tendency is to assume that whatever you're hearing is also the situation locally.

Year over year, our numbers look worse than the national average. The latest numbers available from the local multiple listing service show year over year price declines between 23-32%. But that's only one piece of the picture.

If you're buying a foreclosed home or possibly even a short sale, you may not feel the pricing power you were led to believe you'd have. You see, all the buyers are looking in the same price range. So, even if there are 25% fewer buyers than there were a couple of years ago, if they're all looking at properties, say, on the western end of Prince William County under $350K there is little or no buyer leverage.

So, the pricing picture is considerably more complicated than what you hear in the national press. I'm not blaming them. You can't write a coherent article about prices everywhere! Just be aware that the picture here is a little more nuanced.

The other piece of information in the home price report was that prices nationwide are now at 2002 levels. I suspect we're not quite that low yet. But I haven't yet had an opportunity to do an analysis. I am seeing people who've been in their homes five years or more still under water.

And, if you're wondering when we bounce back up, this Bloomberg article wasn't particularly optimistic:

 “There are very few V-shaped recoveries in the history of real estate, and this one is likely to be even slower because of the size of the bubble,” said Robert Shiller, the Yale University professor who, with economist Karl Case, created home price indexes in the 1980s now used by Standard & Poor’s.

In short, don't expect any rebound in prices soon. I believe from a price perspective we'll bounce along the bottom for quite some time, perhaps a couple of years before we begin very slow appreciation.

If you're looking for a ray of sunshine, one analyst on CNBC suggested yesterday that we could fix the housing problem any time we wanted by increasing the number of immigrants.

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April Market Numbers

April results are in and for the first time in quite awhile we're seeing a small uptick in inventory in most counties. It's not large enough to be a concern at this point. In fact, given that we're in the busy spring/summer season, it's surprisingly small.

In Culpeper there are currently 494 homes for sale. That's still less than we had in January. And it's a huge improvement over the 800+ homes for sale there a year ago. Sales remain strong with 62 homes sold as opposed to 48 last year at this time.

Fauquier remains flatter. Inventory also rose slightly here. There are 569 homes for sale here now as opposed to 556 a month ago. And we're still much better off than April of 2008 when there were 764 homes for sale. But sales aren't much better than a year ago. 54 homes sold in Fauquier County in April. 49 were sold in this period a year ago.

Prince William was the exception to the increase in inventory. It continues to shrink there; good news for sellers, not good news for first time home buyers. There are 2944 homes for sale in Prince William county, roughly half of what was for sale there a year ago at 5880. Sales decreased very slightly month over month: 741 this month vs 750 last month. But homes are still selling much faster than they were a year ago when only 639 sold in April.

Rappahannock County showed a very large jump, from a percentage point of view. There are now 89 homes for sale here vs 76 last month. 27 new properties came on the market, a lot for this small county. That's the highest number of new listings coming on the market in one month in the last four years. But the number of contracts written also jumped to 5 even though sales fell to 2 last month. Large jumps in inventory in Rappahannock previously have resulted in a subsequent withdrawal of many of those listings as people tested the market and then changed their mind about selling. We'll see if the same scenario plays out this time around.

Overall, the market appears to continue to recovery. The only worry here is the seemingly unending stream of foreclosures coming on the market. Between foreclosures and short sales there appears to be no likelihood (except in Prince William) of price increases any time soon.

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Gainesville Dying?

A Reuters article this week suggests that Gainesville is a dying community.

I think the article gets some things right and others wrong.

Gainesville home sales are jumping. And in the lower prices we're seeing bidding wars and/or multiple offers. That doesn't signal to me that the entire community is dying. And, yes, there are still a lot more foreclosures to come. If they come at a measured pace the market will quickly absorb them.

On the other hand, I continue to see buyers less willing to do the long commute. So, unless the pool of jobs within a reasonable driving distance of Gainesville increases, the community has some tough times ahead.

And, the further out you go (think Fauquier County) the more commuters have opted out.

Are new, good jobs going to be created in these communities? Or, are we simply going to be smaller?

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