Home Buying & Selling
Major Price Declines in Case Shiller Housing Price Index
The majority of bubble markets are experiencing large prices declines. In general price declines continue to accelerate. Hat tip to HousingPanic. Indeed, Money Magazine reports that:
Residential real estate has posted another record decline.
The S&P Case/Shiller Home Price index of 20 key markets, released Tuesday, shows that home prices plunged 10.7% in the 12 months ending January. That marks their lowest level since the index launched in 2000.
Of those 20 metro areas, 16 reported record annual declines. Ten of those cities posted double digit declines through the 12 months that ended in January. The survey’s 10-city index fell 11.4% year-over-year, its steepest decline since its inception in 1987.
Las Vegas and Miami reported the weakest markets in January, with each city posting an annual decline of 19.3%. Phoenix was the second worst with a decline
of 18.2%.
The Washington, DC area an average housing unit is down 10.9% from January 2007 to January 2008. I’m sure Lance will say that his desirable rowhouse hasn’t decline that much during that time period. He probably is correct. However, in general, prices are declining precipitously in the outer suburbs and certain condo developments , strongly in the inner suburbs, and slowly in desirable neighborhoods in DC.
Prices will fall further in the Washington, DC area. Despite the paid spinners at the NAR who think this is around the bottom .
A real estate agent that I have worked with, just said that “sales are up 3% in the area and we are really seeing the market make a change. Prices will continue to be high in our area, and I’m not sure that will ever change. ”
Are you a real buyer in Baltimore City? See this Craigslist ad
I’m guessing that this is a realtor that cannot get any offers for his customers.
Here’s the ad link:
Lots of people seem to be looking but are afraid to make a decision to buy. They won’t even make an offer for fear that it will get accepted. And then what would you do?! After all, the market could still drop and you might be able to get it for less.
Sellers NEED to sell.
I have several sellers that I’m working with that just want offers. If it’s reasonable, chances are they will take it. Or at least counter.
This doesn’t mean you’re going to get a property for 25% of it’s value. But it does mean you can probably negotiate a great price.
I have properties all over the city. Most need a lot of rehab. Some are rent ready.
E mail me if you are a REAL buyer! Tell me what you want.
How about you drop the prices of your listings 30%. You’ll get offers then. Since when was housing a used car markup? You guys hate being compared to used car salesmen. Stop acting like one.
Baltimore had the 3rd highest run-up after Miami and Los Angeles. It rose more than DC proper % wise. Everyone knows there was a lot of funny business going on with the appraisals.
People lied about income. The average was like 50% over there real salary . Pretty much says it all. Wake up and understand that the perception of real estate has changed and it’s no longer an investment but consumption.
Will new construction screw recent buyers?
Good article in the Sun the other day about the home builders having tough times and having to cut costs in Maryland . We all know this is because the craziness of the past couple years made a lot of people doing contractor work very fat and happy. Now it comes down to survival of the fittest as suppliers also have to cut costs.
M. Kent Thomas, co-chair of the construction services group with KAWG&F, which does accounting, tax returns and consulting for local building contractors and suppliers, said everyone selling to homebuilders will “need to find alternative types of work.”“The next couple of years are going to be quite challenging for our contractors,” he said.
Talk about an understatement. The thing is that the over expansion and price run-up was not sustainable.
Jamie also talks to some of the challenges facing the folks because of high oil prices and the drop off in building materials …..the drop off in lumber is amazing.
Some material costs have plummeted. Lumber prices dropped from $475 per 1,000 board feet in the middle of 2004 to about $238 for the same amount last week, Markstein said.
But some material prices are still rising, either because they’re also used by industries with stronger demand or because they’re at the mercy of oil costs. Take asphalt, which is made from petroleum and requires gas-guzzling equipment to lay down. Pavement contractors are stuck between a rock and a hard place: penny-pinching builders and homeowners on the one hand, and on the other, material prices jumping along with oil.
“You can’t even get a supplier to guess at what materials are going to cost in July,” said Don Turner, executive director of the National Pavement Contractors Association.
Anyone trying to sell right now in the suburbs should be scared of the statements above that have bought in the past 2 years. The same floorplan in the same subdivision in places like Perry Hall and Owings Mills might be badly underwater, especially if they are not done with the build out. During the texas oil downturn houses built right beside each other were 1/2 price within 2 years.
Raw land has already dropped 40-50 percent. Now materials. That’s like 50% less for lumber. Do not get me started on the labor aspect. There are guys who have not worked in months and will drive from the eastern shore for work.
2 years from now we will likely find a bottom IN NEW HOUSES ONLY. No one is building this year. Next year, I expect a couple smaller builders (the ones that are not bankrupt) to test the waters mostly because they need to revenue. The large builders….not so much. They are done building for a while and probably will overcorrect before they break construction ground gain.
Ability to offer incentives is also going to be a clincher. With the need for downpayments again I believe the builders will find a way to gives incentives to get people in. It’s going to take the feeling of a deal for the qualified buyer to jump in.
Renters Paradise - Price to Rent
Wow, what a weekend; Carlyle , Bear Stearns , a Sunday evening emergency rate cut to the prime rate of 25 bps (which is 0.25%) and I’m beginning to look for a new pad to rent. My lease is not up till August, but my I’m anxious to find a rental on the cheap; getting easier each day.
I took a tour of High View up in Hunt Valley again to see the condos since I’ve seen quite a few for rent with the best deal here . Its a 2/2 that use to sell for $340,000 base price without any upgrades and now it sells for $340,000 with $20,000 of greasing, I mean upgrade/closing cost help/off the top incentive.
So to buy this place today would cost $340,000 (I’m assuming the $20K would be spent on needed upgrades as the place looked pretty low-end and closing costs/moving expense) and to rent it costs $1550. I forgot to mention the month condo association fee (COA) is $320 or something close to that which the owner would play in addition to their mortgage while the renter only pays $1550 (the association fee is already included in this rent price).
$340,000 at 6.5% for 30 years is $2,149.03 a month plus $320 COA = $2,469.03 per month
Your choice $2,469.03 or $1,550 per month? One has considerable downside risk to a price correction while the other costs about $900 less per month without the risk of a home value correction. And after you add in taxes and upkeep your probably at an extra $300 - 400 extra per month.
One thing to note on these condos and townhouses at High View in Hunt Valley is they are built like crap! The glue is already bleeding out of the cheap counter top joints. The tile grout already looks worn, and the general craftsmanship left something to be desired; and this was the model condo.
My next example of a good rental deal is very high end, but such a good deal I had to show. If you can afford $4,500 per month (and the associated utilities) then I found a great deal. This house ( click here ) was for sale at $1,325,000 and is the Montjoy model house from the 2005 development off Rt. 100 just east of Rt. 29.
$1,325,000 at 6.5% for 30 years is $8,374.90 per month and it probably has a home owners associations. You can rent this for almost half the mortgage cost. Now thats a good Price to rent ratio. What a deal you say, well wait a second, this house is probably only worth $850,000 considering how close it is built to condos, apartments, and townhouses. It also has very little land.
Real Estate Number from MRIS February 2008
The new monthly numbers for February 2008 are out from the MRIS (Metropolitan Regional Information Systems) the multiple listing service for the area. YoY = Year over Year, that is the comparison between February 2008 and February 2007. These numbers include all housing units ( not just single family residences but also condos and co-ops). These are for housing units listed on the MRIS’s MLS (and thus do not include some foreclosures or private sales, or many new home sales).
The housing market in the Washington and Baltimore area has been declining in the Washington, DC for about 2 years. Thus the year over year comparisons only represent a portion of the declining housing market.
Northern Virginia (Fairfax County, Fairfax City, Arlington County, Alexandria City, & Falls Church City, VA (NVAR))
* Median Price: $411K
* Median Sales Price YoY: -8.6%
* Average Sales Price YoY: -5.1%
* Total Units Sold YoY: -37%
* Average Days on Market YoY: 7%
* Active Listings YoY: 40%
Baltimore City Area (Anne Arundel, Baltimore City/County, Carroll, Harford, Howard (BALT AREA) )
* Median Price: $263k
* Median Sales Price YoY: -2.5%
* Average Sales Price YoY: -4.4%
* Total Units Sold YoY: -36%
* Average Days on Market YoY: 43%
* Active Listings YoY: 24%
Washington, DC (just the District of Columbia, no suburbs)
* Median Price: $414k
* Median Sales Price YoY: 6.4%
* Average Sales Price YoY: 3.6%
* Total Units Sold YoY: -32%
* Average Days on Market YoY: 14%
* Active Listings YoY: 27%
Prince George’s County, MD
* Median Price: $290K
* Median Sales Price YoY: -12.4%
* Average Sales Price YoY: -14%
* Total Units Sold YoY: -63%
* Average Days on Market YoY: 60.5%
* Active Listings YoY: 71%
Montgomery County, MD
* Median Price: $415K
* Median Sales Price YoY: -3.4%
* Average Sales Price YoY: 9.9%
* Total Units Sold YoY: -37%
* Average Days on Market YoY: 26%
* Active Listings YoY: 53%
Loudoun County, VA
* Median Price: $375K
* Median Sales Price YoY: -10.7%
* Average Sales Price YoY: -12.3%
* Total Units Sold YoY: -29%
* Average Days on Market YoY: -11%
* Active Listings YoY: 15%
Arlington County, VA
* Median Price: $425K
* Median Sales Price YoY: -9.6&
* Average Sales Price YoY: -3.1%
* Total Units Sold YoY: -33%
* Average Days on Market YoY: -6%
* Active Listings YoY: 30%
Frederick County, MD
* Median Price: $295K
* Median Sales Price YoY: -3.2%
* Average Sales Price YoY: -1.3%
* Total Units Sold YoY: - 41%
* Average Days on Market YoY: 23%
* Active Listings YoY: 23%
Fairfax County, VA
* Median Price: $405K
* Median Sales Price YoY: -9.8%
* Average Sales Price YoY: -8%
* Total Units Sold YoY: -38%
* Average Days on Market YoY: 9%
* Active Listings YoY: 45%
Prince William County, VA
* Median Price: $275K
* Median Sales Price YoY: -25.7%
* Average Sales Price YoY: -24.9%
* Total Units Sold YoY: -6.4%
* Average Days on Market YoY: -2%
* Active Listings YoY: 42%
For more numbers on jurisdictions not mentioned here please go to MRIS Market Statistics.
These numbers show a declining housing market in the Washington - Baltimore area compared to last year. For every jurisdiction listed inventory remains elevated and sales remain low.
The Washington - Baltimore area is not recovering from the housing decline. Prices continue to fall. 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 will not see increasing prices. Housing busts usually last many, many years. Further price declines are coming this year.
Lawrence Yun Proposes Federal Dollars to Grease Home Buying
Lawrence Yun proposes federal government dollars to grease home buying :
What is critically needed at this important point in the housing cycle is a measure to assuredly and quickly raise home buying activity. This can be accomplished by providing a homebuyer tax-credit. A nationwide $5,000 tax credit (the same amount currently in existence for homebuyers in Washington, D.C.) will cost the federal government $40 billion. If factoring in rising economic activity and accompanying rising tax revenue, then the true cost could be minimal or even positively favorable. A reversal in the weakness in the housing market, which has been subtracting about one percentage point off GDP growth, can add $40 billion to the U.S. Treasury - essentially offsetting the cost of the tax credit. If the initial $40 billion cost is harder to swallow than a more targeted tax credit for only the first-time homebuyers will cost the government about $15 billion.
No way! This discredited Realtor hack ’s proposal is ridiculous. The US Government should not give out more incentives for people to purchase overpriced housing units. The US Government already has a large deficit and enormous debt. It would be unwise to spend needed money to assist and encourage people to buy depreciating assets.