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.

Where's the bottom?

(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



Currently there are 2,622 properties on the market.

346 have been on the market for at least one year (103 for at least 18 months)
924 have been on the market for at least six months
1658 have been on the market for at least three months
2293 have been on for at least one month
One thing that we are seeing is that more houses are being withdrawn from the market and listed as rentals – ultimately this is a very good thing, as it pulls for-sale inventory off of the market.
Of the 614 properties that are under contract –
207 have Continuous Days on Market (CDOM) of less than thirty days. This is a very, very good sign that sellers are becoming realistic.
288 have CDOM of less than 60 days

347 have CDOM of less than 90 days

If you price your home well/aggressively, you have a much better chance of selling than if you do not. It sounds simple, but it is often a painful, laborious decision that may involve either deciding not to sell right now or asking the question, “can we afford to sell and lose X amount of money?


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

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  1. Scott R July 14, 2008 at 07:24

    Hi Jim –

    This is a great update. I love the histogram, and if you find some idle time on your hands, I think it would be wonderful to see several years – 2002 through 2008 – overlaid. Because the peak of properties is tightly bunched between 200-300k, and that’s hardly representative of the bulk of inventory, I predict things will remain very slow. Until sellers can get down into that range, assuming they can go that low, transactions will remain slow.

    The reduced inventory isn’t really reduced – it’s just being put into storage (rental), which will depress rental prices, and keep that rent/own ratio favorable to buyers.

    Finally, the news of IndyMac’s failure, and the troubles at Fannie and Freddie point to the continued (if not accelerated!) contraction of credit. Without credit, even otherwise willing buyers are curtailed.

    I used to think prices were headed back to 2003 levels here; now I think we’re heading back to ’00 – all dictated by the credit markets.

    Good luck, and hang in there – I believe agents who do offer buyer or seller value will survive. Lean times though; hopefully all the ants squirreled-away a nice egg to live on during the boom.

  2. Scott R July 14, 2008 at 07:31

    I should have added: your lead picture is the most evocative image for the article. I too am a big CR and Roubini fan, along with Soros, but I have to say: I think this will be L shaped – not U shaped.

  3. Arthur July 14, 2008 at 08:06

    I expect Scott is right that excess inventory is being stored as rental property, which is why I wish some enterprising blogger would track the rental market. My (very anecdotal) sense is that the rental market is actually much stronger than it has been in years. Maybe the flood of “temporary” supply is still to come. Or maybe I’m just wrong.

  4. tc July 14, 2008 at 14:26

    I’ve seen $400,000+ properties listed for rent for less than $2,000/month, which makes this a renters’ market, not a buyers’ or sellers’ market. Why would anyone want to buy into this market when prices are still fairly high?

  5. Arthur July 14, 2008 at 16:08

    A couple of data points from developments in the city that are fairly new and uniform.
    Burnet Commons- One sold in March for $335,000; One is listed for $399 and one is for rent at $1850/Month

    Melbourne Park – Several units sold in 2008 from mostly around $285; two are listed at $340,000; two are for rent at $1750-1800.

    Prices in these developments seem to be roughly 150 -200 times a month’s rent. That isn’t cash flowing for landlords, but it is much more rational than things were a year or two ago.

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  7. tc July 15, 2008 at 07:35

    Good info, Arthur. Bad cash flow for the landlord.

  8. michael guthrie July 16, 2008 at 15:18

    I would be interested to know where you get the information that an agent has done dual agency. The listing agent could have sold the property to a buyer disclosing that they represent only the seller in the transaction.

  9. Jim Duncan July 16, 2008 at 15:35

    Michael –

    Thanks for reading and for catching that. I did make an assumption in that the MLS shows the agent had both sides; my assumption is based on the fact that there is no notation in the MLS that indicates the buyer had no representation.

    I’ll likely change the post to reflect “maybe”.

  10. Pavel July 16, 2008 at 20:37

    Regarding the “dual agent” and MLS, isn’t there a “NONAGENT” choice for selling side? Naturally, when “NONAGENT” is chosen it’s not a dual agency (see Cherry Hill transactions and Ryan Homes) and when a listing agent and a selling agent is the same it implies dual agency. Unfortunately, MLS is not as accurate as we’d like it to be.

  11. Pavel July 16, 2008 at 20:45

    By the way, AWESOME STUFF, Jim. Thanks for doing the analysis!

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