Cautiously optimistic. That’s how I choose to start this year. Additionally, we won’t know where the proverbial/mythical “bottom” was until we have the benefit of 18 months of hindsight. Finding consensus among the optimists is like asking teenage girls to choose which boy they like – it’s impossible. Seemingly every expert has an agenda and a bias; knowing those agendas going in is helpful.
Looking at 2007 versus 2006 – the numbers are not great. However, looking at 2007 versus 2005 – housing seems to have appreciated. I would have run the 2004 numbers, but the MLS was acting up. End of January numbers will provide some insight, but we won’t have a clear indication of where the market is going until February/March.
Independent of the fact that I make my living representing clients buying and selling real estate in the Charlottesville area, I have been told by several clients that they perceive right now to be an excellent time to buy.
Today, in Albemarle, Charlottesville, Fluvanna, Greene, Louisa, Nelson (and Augusta/Waynesboro, as hey are becoming such a part of our market)***
As of 1 January, there were currently 2206 properties on the market in the Charlottesville market area, and 400 were under contract. A quick look back at the past three years shows that our market has changed dramatically. On 3 January, there are 2443 active on the market, and 467 under contract.*
I’m choosing to start the year off with this thought in mind:
But let’s be frank: After such a run of down and bad numbers through most of 2006 and 2007, will it really be a big surprise if housing demand and sales and new construction finally begin showing signs of recovery — even modest recovery — in the year ahead?
Looking back (and stating the obvious), the National Association of Realtors did not have the best track record,
while the Mortgage Bankers Association was a little bit closer:
*Charlottesville market area has been: Albemarle, Charlottesville, Fluvanna, Greene, Louisa, Nelson
** The tables do not include Waynesboro/Augusta, as they did not begin to participate in our MLS substantially until 2007.
*** Going forward in 2008, I am going to try to include Waynesboro/Augusta as well.
Technorati Tags: albemarle, charlalbemarle, charlottesville, psychology, real-estate, realtor, waynesboro
As one of Jim’s buyer clients, I would say a year or two from now will be an excellent time to buy.
Currently too many sellers think it’s 2005, and are expecting what their neighbor got that year. Personally we have bid on two homes and found each seller to be quite unreasonable:
Home 1- our first bid was $45,000 off the asking price, seller countered $9.5k off, we countered again at $28.5k, seller countered the same $9.5k off (i.e. “take it or leave it.”). We left it, and the home eventually sold for $33k off the asking price (plus any seller subsidy). We had been willing to pay up to $20k off the ask so the seller missed out!
That home was priced according to what the seller owed from his purchase one year prior. I’m sorry you paid too much, bro…but don’t expect me to get in your pyramid!
Home 2- This home was trashed, needing $30-50,000 in repairs (without the benefit of a home inspection, which may have turned up more under the surface). Offered the seller $100k less than his ask. His reply: “I already turned down an offer of $25k more.” (A week later, the house went under contract for only $25k less than his ask, proving that there are still suckers out there).
On the flip side, last year I heard this great quote: “Sellers want last year’s prices, and buyers want next year’s prices.” True.
Well said, Mark. And thanks.
And to clarify – for some, the time is right now, for others, the time will be right in five years when they’ve saved up an adequate downpayment. Making blanket statements about any market that apply to everybody is, more times than not, going to be inapplicable.
Every decision for everybody is going to be different.
Jim — You say housing “seems to have appreciated” between 2005 and 2007. That isn’t right! Using your stats, the average house price (not seasonally adjusted) for 2005 was $347,143. The average (again not seasonally adjusted) for 2007 was $354,769. That might look like a gain — albeit a tiny one — but it ain’t, because between 2005 and 2007 there was, of course, inflation. Using the government’s calculation for the consumer price index, the median price would have had to have risen during this period to $373,587 just for the homeowner to stay even with inflation. So the stats actually show that the homeowner with a median price house has lost almost $19,000 of his equity over the past two years, or, put differently, just over 5% of the total value of the home.
So that’s the story. Housing prices are down 5% in REAL terms over the past two years, using your stats. And of course real — i.e., inflation-adjusted — terms are the only terms that count.
I’m still predicting 20% or more real depreciation over the next 4 years. We’re 25% of the way there.
Thanks, and all best,
Keep that fancy math up and I’ll have to ban you.
That being said, I believe that we are returning to a more traditional market, where people will be buying and selling less frequently – actually staying to enjoy their houses rather than buying or selling every two years.
I think we’ll see a return to the way my mother (also a Realtor) used to see it – if you bought and sold in 3-5 years and didn’t lose money, you’d made a good decision.
So … over a three to five year period … house prices are up.
That said, I don’t think we’re going to know that status of today’s market without the benefit of 12-18 months’ hindsight.
Hey, fancy math is fun! And it ain’t even that fancy — 10 mins w/Excel and the U.S. Dept. of Labor CPI stats and we have a nice set of results.
As for 3-5 years, well yes, we’re in agreement on that — at least as a long-term outlook. Your mother’s traditional perspective is wise and seems to me to be where we’re headed. A house isn’t a short-term investment. Enjoy living in it for awhile! And then you’ll most likely enjoy some nice gains when you sell.
That said, we are at the moment in a situation where prices have risen sharply for years. And that means that the question facing buyers now is where prices need to go to get back to that stable equilibrium of *reasonable* price appreciation that you’re talking about. This is where the iron law of mean reversion comes in. We’ve had about a decade of way-above-trend growth in housing prices. By “way” about trend, I mean about 5x — historical growth is less than 2% per annum ex inflation; growth recently has been, in many markets (including ours) in double digits. So — where are we headed? The odds are for an extended period of below-mean price growth. That is, negative price growth, in real (inflation-adjusted) terms. So the next 3-5 years may be a period of continuously falling house prices. Perhaps not in nominal terms, but that isn’t the relevant measure.
Alright. Back to work. Happy new year, and all best, AC
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