2nd Quarter Market Update for Charlottesville Region

Very little has changed since last month’s comprehensive market analysis, published just over a month ago.

First, a quick look back at my responses to the calls of “bottom” over the past eighteen months.

(photo courtesy)

- The market is a bit like the axiom – “a watched pot never boils.” We won’t know how the market is doing today until we look back from a six- to nine-month removed perspective. We can gain insight by looking at the numbers – interest rates, 10 year Treasury notes, pending sales, recent solds … but to get an accurate understanding, we have to look in the rear-view mirror. December 2006

- We’ll know whether we’ve hit bottom today in 18 months when we have the benefit of hindsight. Interest rates remain low. Sellers are motivated, and it really and truly is a great time to buy a house – so long as you do the appropriate due diligence, detach your emotions and negotiate well. September 2007

- I think that the calls for the proverbial “bottom” are premature. When I was a kid I wouldn’t know the bottom of the swimming hole until my toes dug down into the muck and I was heading rapidly back to the surface. Our current market is very much the same. We won’t know when we hit bottom until we have the benefit of 18 months of hindsight – or, to continue the swimming hole metaphor, until we’ve crawled out and told our friends – holy cow! It’s really deep! April 2008

- We may not have seen the worst of what this cycle has to offer. I believe that the bulk of short-term ARMs have not yet reset, and until this happens (likely in 2009 and 2010) we may not see the proverbial “bottom.’ That being said, we won’t know the bottom until we have the benefit of nine to eighteen months of hindsight. June 2008

- The problem with saying we’ve “hit bottom” is that we don’t have anything to base that on other than speculation Yesterday on Twitter

Even Barron’s is saying that we might have hit bottom; the Big Picture respectfully disagrees.

At least I’m consistent. I’m not saying that we haven’t hit the bottom, but that calling it as such with so many unknowns and new variables in the equation would be the wrong thing to do right now, despite Lawrence Yun’s statement – “Without Forecasts, we don’t look credible.”

The Realtor update (1):

1st half 2005: 115 had more than ten sides, 296 had more than five sides, 679 had at least one, with about five hundred or so not having a single transaction

1st half 2006: 107 had more than ten sides, 285 had more than five sides, 740 had at least one, about four hundred fifty not having one.

1st half 2007: 73 had more than ten sides, 232 had more than five, 687 had at least one, about four hundred with zero

1st half 2008: 44 had more than ten sides, 169 had more than five, 619 had had least one, leaving about seven hundred with zero transactions so far this year. (out of 1201 sold residential properties)

From the DP on Saturday:

Many real estate agents may not manage to weather the moribund market before it solidly rebounds, Savage said. A full 15 percent of the Charlottesville area’s 1,110 real estate agents are expected to drop out of the business by January.

“We’re seeing a lot of good Realtors leave the business,” she said, citing the example of two agents in their mid-30s who are quitting soon.

“It’s been a tough time for sellers and it’s been a tough time for Realtors,” Savage said.

Personally, this has been one of the hardest parts of this market – seeing good people leave.

Related reading: A Market in Transition – October 2006

An interesting note: 115 agents have done Dual Agency so far this year (and at least one who has spoken openly against the practice), versus 140 last year and 190 in 2006.

Market Update (2): – Click images for larger versions

Courtesy of one of my favorite writers in the real estate space:

“It’s a buyer’s market… only if you’re actually buying,” I say, having gone through this same exchange on more than a few occasions in recent months.

- This too shall pass. We’ve been in this downturn for about twenty months now. I predict that we will start to come out of it in the Spring of 2009 at the earliest. Nothing is going to happen before the election, and little is likely to change before December of 2008. Early 2009 will be the time to recover, take our collective breaths and hope for what 2009 will bring. There are too many unknowns right now to make any sort of accurate prediction.

- All real estate cycles come around, and this one will be no different. I subscribe to an outlook that is a mix of Calculated Risk and Nouriel Roubini, in that this recession may look like a “U” rather than a “V” and I sincerely hope that it will not look like an “L.”

- New construction coming onto the market has slowed dramatically, and the number of builders in the Central Virginia region is waning. Ultimately, this may be a good thing.

- Those who survive this downturn (God-willing I’ll be one of them) will come out on the other side far stronger and knowledgeable about the market.

Managing fear is an ongoing task. News about IndyMac and the bailout of Fannie and Freddie is inescapable. Why is nobody listening to this man?

First half market report 2007, with interesting comments.

1 – Realtor Update includes Charlottesville, Albemarle, Greene, Fluvanna, Louisa and Nelson, ~1200 agents total, a “side” is either the buying or selling side of a transaction

2 – Includes Charlottesville, Albemarle, Greene, Fluvanna and Nelson