It’s True. I said on Twitter:
Granted, the above responses are all from Realtors, but they are the ones who will have the “boots on the ground” experience.
Locally in the Charlottesville real estate market, buyer activity seems to be increasing – in some cases, significantly so. I’m not saying that there are “lots of buyers who are buying,” but there do seem to be “lots of buyers” who are kicking the tires, and some of them are writing offers (and believe it or not, some of these offers are becoming Contracts).
Take the following anecdotal evidence for what you will –
1 – I’m busy (and still taking on new clients), showing a lot of houses all over the City of Charlottesville and Albemarle County (for some reason, my clients seem to cluster, no one in Waynesboro or Fluvanna yet this year)
2 – A Real Estate III agent told me that she had fourteen groups of interested folks through one of her public open houses last weekend – all with no advertising.
3 – A Montague Milller Realtor told me that on a recent Sunday open house, she had nearly twenty groups of interested people* through on a Sunday open house.
* Note that I am not saying “buyers” but “interested parties” because I have no way to determine whether they were were ready, willing and able buyers. That said, that people are looking is a good sign.
4 – Showings are up.
Look – I am under no illusions that we have hit bottom – I have been consistent with my calls for patience with regards to calling bottom – we need eighteen months of hindsight before we can point to a bottom. But … it’s hard to deny that recent buying activity is starting to show an uptick.
Here’s the takeaway –
I’m cautiously optimistic. (of course, I said this last year, too)
It’s too early to draw any conclusions, but I am going to post an early analysis next week on Wednesday, when I will be on the Coy Barefoot show on WINA.
** Follow me on Twitter **
This means absolutely nothing. No one has disputed that there are buyers in the market, but we are smart buyers, not willing to overpay 30% for properties. One possibility is that the weather is nicer and people feel like getting out of the house after a long winters nap and taking a look at what they will be comparing to the mass listings of homes coming this spring and summer. Sorry, not being very optimistic considering the current economy, but as long as posts like this are put up on the internet and realtors in this are continue with propaganda talk about this being an isolated market, there will unfortunately be a few people suckered into buying way overpriced housing.
Obviously, I disagree.
What, if anything do you infer from open house activity going from nearly nothing to a relative flood of curious lookers?
And yes, there have been discussions about the dearth of buyers, not here necessarily, but offline, certainly.
Nobody is trying to sucker anybody into anything, my goal with this post is to provide a perspective that is occasionally missing from much of the reports one sees.
Please point out anywhere where I have said that “it’s a great time to buy.” You’ll find that I hedge – it can be a great time to buy – for some.
Frankly, I’m tired of the pessimism. I’m good with realism, and feel unrepresented by those in elected positions who are continuously throwing good “money” after bad (see: GM) – but if there’s a glimmer of optimism, I’m going to point it out.
From where do you conclude the 30% number?
If that REIII open house is the one on Locust, I’m pretty sure it was curious neighbors. Like me. We’d like to buy, but are in agreement w/Bill and the earlier post that has all the buyer comments. Sales will pick up when prices are better.
And that’s exactly why I explicitly did not say “buyers” when describing the visitors.
How would you determine a “fair” price? How will you know when is the right time – for you – to buy?
(This is an honest question – I’m always looking for any and all insight/knowledge I can find)
I agree with you, I think your optimism is well placed. I believe a large part of the increased activity is due to the fact that many sellers are adjusting their prices downward and are coming closer to a more realistic selling price. I still think things have got a way to go. Especially on the higher end market (properties > $1M) I feel there is still room for at least a 25% price correction.
There are many buyers out there that will do a deal if it is the right house and the right price. It also doesn’t hurt that more people are actually starting to do open houses too! 🙂
I really enjoy your blog and I find it informative for the local area. I have been a bit surprised by some of the down right bitterness from a few posters on the blog. The funny thing is that those posters appear to be buyers. I would have thought sellers would be more irritated, maybe they are but just not as vocal on your board.
My advice is if you are a buyer you don’t have to be bitter…. all you have to do is wait. Eventually reality catches up with everyone and prices will fall, and they will fall fast.
I recently moved to the area and purchased a home in a Crozet subdivision in August. Of the 15 lots available, 8 houses have been built (7 purchases, 1 model) since we moved in. We have recently noticed a definite increase in the number of interested observers visiting the neighborhood/model over the past several weeks. Maybe it is attributable to the season, interested neighbors, etc. Nonetheless, we recently learned that two more lots were placed under contract in the past 2 weeks. So, from our small micro perspective, the market does not seem entirely dead and activity seems to be picking up after a slower end 2008-early 2009. We’ll see if it sustains….but, another piece of anecdotal evidence to add to the fodder.
Thank you for stopping by. I don’t doubt that we’ve still a (little?) ways to go, increased activity is a good sign.
That said, there are still a lot of resale sellers who have not yet “gotten it” quite yet.
As a longtime reader of this blog, accusations of Jim being a propagandist are misdirected. Jim turned me on to CalculatedRisk long before the bubble burst and lesser bubble monitors began cropping up everywhere. No doubt he wants houses to start selling again, but the guy has stayed remarkably sane and reasonable in boom and bust.
Increased buyer activity is good news for realtors! Feb has seen a 50% increase in sales MoM!
Sounds impressive, until you realize Jan sales were 57, and Feb MTD are 79. Which is down about 66% since last year and even more since the totally bubblicious 06-07 period. Not so great is that current inventory is sitting at MORE THAN THREE YEARS. Plus Jumbo’s are 200bps higher than conforming, and Obama is looking to reduce the mortgage interest deduction for mortgages greater than ~500k. It’s hard to think higher priced homes will not go down 25% in general, with an extra 15-20% possible if the mortgage interest deduction gets polaxed. At least the government will reduce the incentive to waste tax payer dollars on subsidizing more house than any reasonable person would need.
Arthur, long time reader here too. I’m not reading Bill’s comment as saying that Jim is a propagandist but that there’s a lot of protected market talk in this area. As you know from Calculated Risk nobody no market is protected. The headline does say “buyer activity” not “looker activity.” Even though Jim clarifies this in a comment to me. Jim as a realtor may be more realistic than many of his peers but he still doesn’ t have the perspective of a buyer. Scott, Bill, me. Jim: here’s how I start researching a price on a house. If I laugh outloud while looking at the description, location, and price, I know that when I look at last sale this response will be justified. If I email the listing to my accountant and he replies “a fool and his money are soon parted,” I know there’s room for the price to go down. If I send the listing to friends in NYC or SF and I get replies like “you’ve obviously been smoking pot” or “LOLOL,” then I know there’s wiggle room in tte price. All kidding aside (though I have gotten these responses) I look at last transfer, what’s been done or not, what houses have sold for nearby (not in price range, but nearby, big difference), what’s happened to the economy. And the huge inventory. Just huge. If the house has a markup of 150% but was last sold four years ago do I think it has really accrued this much value? Absolutely not. But it’s true that somebody else might come along and think the house is “worth” this. I’ll buy when I find something that I will still love even if it depreciates and when the price won’t wake me up at night. Like many I just lost a lot in stock/retirement and I don’t want to continue the downward spiral with a house.
I believe my comments are being misinterpreted. If I thought Jim was a propagandist I would not visit the site nor would I waste my time commenting on this site. It is just appearing to me, based on my interactions with potential “buyers” agents, that the local community of realtors have decided to keep the campaign of “Charlottesville was rated the best place to live” alive. It appears to be a last ditch effort to keep the housing prices from slumping and halting the buying (which already happened).
I really enjoy the site and I enjoy reading the comments of all, and what I am really trying to say that this isn’t 2004 anymore, and I don’t believe Money Magazine even rated Charlottesville in the top 100 in the 2008 issue of best places to live in the U.S. I am very frustrated that I cannot even call a “buyers” agent without hearing the speech about how great it is to live here and how now is absolutely the time to buy. I feel as a potential buyer that this does not offer me any potential for good representation.
I was reading the Daily Progress and there was an article about recent activity in the real estate market and it actually listed who bought and sold and it appeared that a majority of the “activity” is actually investors selling properties to other investors. hmmmm….. interesting…
Keep up the good work Jim! And always, enjoy reading your work…. And criticizing it as well… Guess that comes with the territory!
P.S. I call myself a realist not a pessimist ***smile***
Bill and Nobody,
Sorry if I misunderstood. I haven’t been within ear or blog shot of other realtors for a while, but it comes as no surprise to me that the group is full of buy-a-house-zeal. I just thought you were lumping Jim in with the crowd unfairly.
To the point of Bill’s original comment, I don’t think we can expect much signal to come out of the average realtor noise one way or another. Their optimism is not a sign that the bottom is not here any more than that it is. It is just a sign that they’re realtors.
Bill you are right, Charlottesville didn’t hit the map at all on the Best Places to Live in 2008. http://money.cnn.com/magazines/moneymag/bplive/2008/states/VA.html
I would argue one of the top reasons for the real estate bubble deflating here in Charlottesville is the lack of viable employers that can pay over $100K. The workforce is dominated by either Government/Military, University, and Healthcare with a smattering of corporate employers. On average I would say that (excluding doctors and executive management) most make below $100K.
In 2007 the median income for Charlottesville was $50K. (http://money.cnn.com/magazines/moneymag/bplive/2007/snapshots/PL5114968.html). Purchasing power for homes if we follow very strict guidelines of 33% of gross income towards house payments only gives the median buyer the ability to buy up to $290K (assuming 4.5% interest rate and $58K down payment).
Here is the breakdown on required income:
(assuming 4.5% and 20% down)
$250K home – $37K salary
$500K home – $74K salary
(assuming 6% and 20% down)
$750K home – $131K salary
$1M home – $175K salary
$1.25M home – $218K salary
Working backwards means that at $100K salary a person afford to buy a house priced at $678K with a $135K down payment.
Unless you are able to buy with cash, the banks are going to be very picky on the assessment. Which means that sellers have to get real if they want to transact sooner as opposed to later. Better to take your price cut early and sell before everyone starts taking the price cut and the new “lower” high gets set.
My thought as far as transactions go is that prices need to fall at least 30% across all ranges in order to meet the needs of the buyers. Unfortunately at those price points it doesn’t usually fit the needs of the sellers… but some cash is better than negative cash or foreclosure.
Thanks for the criticism – without it, this wouldn’t be as much fun or educational (hopefully for everybody, and not just me 🙂 )
“Bubblicious” is the best way to describe these comments, so we feel right at home. Jim’s blog has educated lots of buyers. It’s a testament to his blogging that so many are commenting on pricing, IOHO. (BTW, don’t miss the “Are You Kidding?” link in the sidebar, which is bubbleblogging at its finest.) If these comments are any indication, there will be lots of buyers/lookers this Spring/Summer. The season is here: there are more than 30 open houses in Cville/Alb alone tomorrow (Sun. March 1). But these are buyers who have their financials worked out down to the last penny.
FWIW, sellers do need to take into consideration that economists and analysts are saying what Scott posted, which is that it may be better to get the house sold sooner rather than later when other sellers who are “waiting out the market” can’t wait it out any longer (since it’s not “coming back” for years) and the unsold inventory will only grow larger. This is certainly true in this area, where as Nobody pointed out, the inventory is huge. Three years, by Craigger’s calculations.
Scott’s math is on the right track, but possibly optimistic. Median income for a family of four in Cville is $68K; in Albemarle it’s $63K (US Census, 2007). That’s four people who need to be fed, clothed, schooled, entertained, etc., in addition to housed. Too, you have to toss in car loans, credit cards, and student loans when calculating a Debt to Income ratio, which can lower the amount of mortgage $ available. And since US savings rate over the past decade has hovered around zero, how many have a 20% downpayment? (But that’s what an FHA loan is for, a 3.5% downpayment. Capped at $437K, though.)
Besides lack of buyers who actually earn good livings in this area, there’s the income to price ratio. Back in the “old days,” buyers paid 2.5x annual salary for a house. For a gross of $68K, that means the median price in this area would be $170K.
What do you get in this area for $170K? It’s shocking, and not in a good way. “Starter homes” for a family of four, or a couple planning on children, run more like $290-$450K. And in many cases haven’t been updated since the era of Reaganomics.
We have more on this in a future post. But this is the short version of why the lower end of the market is basically frozen. Why Jumboland is frozen makes for interesting reading, too….
I have relocated to Charlottesville and have been trying to find a house (that I think is priced right) since August. I could pay cash for my house if I had a nickel for everytime I have heard about the industries here being recession proof and that Cville was ranked top place to live so the market will not go down anymore. I have performed my criteria search on CAAR/Realtor.com everyday since mid July. Needless to say, I have not missed any houses I have been interested in yet. Before I found this blog people were starting to convince me that I was just being too picky!
Bill #2 (’cause Bill #1 was here first 🙂 ) –
1 – You know I’m a Realtor, right? You can always contact me if you have questions. 🙂
2 – I think that anyone who says our area is recession-proof or immune or protected is just not paying attention. To anything.
3 – Where are you coming from? Where are you looking?
4 – Have you seen anything that you thought was within striking distance of your expectations – price/location/etc?
BB and Scott-
Thanks, as always for your comments. An upcoming post I am working on is about the challenges I have with tempering peoples’ expectations about what Charlottesville is and has to offer. Many perceive us as being utopia, but just cannot afford it – and that’s not good for anybody. (all of the “Top 10” rankings – healthiest/fittest/best/etc don’t help so much)
Jim, I have a question that I haven’t seen addressed anywhere…. (btw, I like your blog & appreciate the information you provide)
Of the people out there “looking”… what is your best guess as to the % of them who actually are buying, % waiting for prices to drop, and % needing to sell their own home before buying? My guess (my house is on the market & we’ve had a lot of “activity”)… is that most people simply can’t move right now until their homes sell. I fall on the “realist” view of the Charlottesville real estate market, and I would love to see this town boom again, but my gut tells me that’s just not going to happen anytime in the near future at all because people just can’t get out of their own homes first across the US. Did I read correctly… 7 homes sold in Alb Cty the entire month of January? That’s kind of scary – this can’t only be due to people waiting for the prices to drop.
I was wondering about this too. I know that we are certainly interested with the interest rates and tax incentives. We have been waiting for 5 years, and are continuing to do so. It is all because of the prices in the neighborhoods that we would prefer. I know of two other couples who have said the same thing. One of them has been waiting 2+ years and the other couple have been waiting for over 3. They both still think prices are too high by at least 30%. Just our humble opinions though. The open houses are fun to check out, so you can cross things off of your list, or leave them in the running:)
How would you determine a â€œfairâ€ price? How will you know when is the right time – for you – to buy?
Jim asks an interesting and difficult question. I don’t know exactly how to answer it, but one way (or perhaps one factor) might be to look at what sellers are asking for in terms of annualized return over investment, based on the asking price and the seller’s purchasing price, or, for homes bought more recently (say, in the last 4-7 years), over the highest available assessment, which is rather generous to the seller. In Cville/Albemarle, it’s common to see asking prices yielding 12-15% (or more) annualized return.
If we’re asking about fairness, that seems like too much. A return of 7% would be near the average historical rate for the S&P. That would be a decent rate over the long-term, and, in this market, it would be a very good one. But twice that? And sometimes over 5-10 years (or more)? That’s enough to make me wonder about the fairness of prices.
A few thoughts.
Cville is an interesting market and has many varied ‘microecosystems’. It is not an easy market for outsiders to ‘learn’- that takes time. The per sq. ft. prices within city boundaries are currently a function of mispricing in the 2002-2006 bubble and are not likely sustainable if unemployment increases locally. Scott P is pointing us in the right direction. The most significant item he noted was down payment- 20%. Despite the recent rise in the US saving rates, the likelihood of a critical of prospective buyers accumulating a 20% chip for the game any time soon is low.
My wife and I moved here in 2004 and had the money for better than 20% on a home, good credit etc but the flood of NY, NJ, MD etc retirees and others into the area was a strong signal that the market was overbid and that the assets were being wildly mispriced. Very few properties in Cville are worth $200 sq.ft. IMHO, 110 to 120 is a sharper price. After the owners at inflated prices are re-accomomdated in the market, a process of price discovery will ensue. The banks are trying to hold back something that can’t be detained.
I completely agree Mr. Pershing and MRegan. I would love to see an anonymous poll of buyers to find out how long they’ve waited out this local market, and their main reason for not purchasing. Jim has done something similar to this, but I was wondering if it’s possible to bigger numbers to respond with a few more details. Just a thought. Thanks.
Fun Times, why don’t you list your MLS # here and let Scott price the place, and all the other buyers tell you their opinions. Seriously.
We don’t have to sell before buying and Downtownenvy is per comments a longterm renter. Don’t know about Scott or Serious Buyer or Mregan or Nobody, etc., in terms of answering your question about percentages.
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March saw that house prices increased for the first time since October 2007, however some are cautioning that investors should not be expect an immediate change in the market as lenders will be increasingly more cautious going forward. http://www.telegraph.co.uk/finance/personalfinance/investing/5119055/House-prices-Is-it-time-to-go-back-into-property.html