I’ve spent the day at a Charlottesville Realtor Economic Summit, and the following was a very good presentation by Barry Merchant, the chief economist for the Virginia Housing Development Authority.
More analysis will come later this evening, but I wanted to put this up in the meantime.
The entire presentation on Thursday was impressive, but Barry Merchant’s stood out for its relevance to our market – the Charlottesville real estate market – the high-level overview was excellent, but when looking at economic data and information, the “local” is key.
Thoughts on the slides –
- On the Credit Suisse scary ARM slide – some of these ARMS might just reset down, rather than up.
- On the “trailing NoVa” slide – this is what I have been telling clients for a few months now – the Charlottesville market seems to track about nine to twelve months behind the Northern Virginia market … we may have a little ways’ to go before we experience a “turn” similar to the one they are seeing now.
- There’s plenty of blame to go around. Rather than seeking to place blame, we need to instead focus on the causes, and ensure that we don’t repeat these mistakes caused by greed and short-sighted (policy) decisions.
Mr. Merchant’s four points warrant reiterating in their entirety:
We must re-instill the confidence of first-time homebuyers
1. The industry must work together to motivate qualified potential buyers in the face of uncertain employment and declining home prices
- This requires a common focus on the core values of homeownership that derive from the traditional idea of “one’s home as one’s castle” rather than the recent notion of housing as an investment tool—
- Security of tenure
- Stability in housing costs arising from long-term,fixed rate financing
- Pride of ownership and control of one’s living environment
2. We must avoid unintended stimulus consequences
- The current crisis resulted from excessive market stimulation
- Loose lending from 2004 to 2007 was a short-term expedient to maintain high home sales and loan volume following the peak of the trade-up and refinance booms earlier in the decade
- The industry must avoid new stimulus measures that will wreak further market damage when the props are later removed
3. We must manage the return of prices to sustainable levels
- The housing industry cannot achieve full recovery until prices return to historic norms
- However, a rapid drop in prices is itself destabilizing to the market
- Our challenge is to avoid a price “crash” without unduly subsidizing artificially high prices
4. We must build consensus on sustainable means for meeting future housing needs (bolding mine)
- Pent-up demand is growing—the longer and deeper the recession, the greater pent-up demand will be
- We lack the right mix of housing types in the right locations to address future demand—The uncertain long-term ownership of distressed properties further complicates the balance of supply and demand
- The housing industry needs to find a new consensus with government on the regulatory structure and subsidy support needed to sustain a thriving post-recession housing sector
“The right mix of housing types in the right locations …” simple, poignant and wildly accurate, and warrants a follow-up post in and of itself.
*This post remains a work in progress … thankfully, my time this week has been limited by work with buyers and sellers … please bear with me and I welcome your thoughts and questions.