If the fact that home sales are down, relative to previous months and years, comes as a surprise to you, you probably haven’t been paying attention.
Contracts were down in June and July in the aftermath of the government’s homebuyer tax credit. Thus, closings were down in July and will probably be down in August as well.
I’m coming to the conclusion that the Charlottesville real estate market is neither good nor bad … it just is. And part of that “is” is that last month in Charlottesville and Albemarle, 85 single family homes closed and 22 attached homes closed. The market’s slow, but it’s not dead.
Attached Home Home Closings in July for the past ten years:
Single Family Home Closings in July for the past ten years: I’m actually surprised that there were so many closed transactions last July.
Now, looking back of June and July for the past ten years … The Spike in 2009 seems to be new construction attached properties in Abington Place, Brookwood and the Pavilions at Pantops (more on new construction’s impact on MLS data in a later post).
Single Family home closings in Charlottesville and Albemarle for the past ten years:
“The market’s slow, but it’s not dead”
I suppose if you have any number higher than zero, yes, its not dead…but seriously I think “slow” is a tad hopeful.
It may be hopeful, but it’s the truth. I don’t know … maybe 100-150 transactions a month is the new “normal” (whatever that is). Either way, I think we’re still trying to find equilibrium after the tax credit.
That’s the best use of the word “is” since Bill Clinton.
It is all about perspective. 🙂 I’m awfully tired of seeking hindsight and am looking forward to when this is over … it seems though that foreclosures will be a continuous trickle rather than a massive wave …
Jim – I think the problem with your “new normal” theory is that yes, if inventory were such that 100-150 a month was a sustainable sales number at current price levels, then fine, we’d just have a slower market going forward, no biggie. The problem is imo (and you would know the numbers better than I) that inventory is historically high, not low. Therefore, it follows that prices need to adjust significantly for the market to clear. What is playing out in Cville is a classic example of a time-worn behavior in asset markets, whether stocks, commodities, houses, etc. When the Bid/Offer gets too far apart, the market starts to trade extremely thin (this is also happening in equity markets as I type, witness yesterday having lowest volume of the year), leaving it fragile and open to a dramatic move one way or the other in order to find a clearing price where supply/demand once more come into balance. Kind of like a ball balanced on a fulcrum, one little push either direction and momentum builds. So the question is which direction is the push going to come from?
Unfortunately, I believe we’ve been witnessing the push in action over these past months and the ball is now rolling the wrong way. Of course, I also think that the tax credit is being overplayed here as the reason for the fall-off in volume, particularly since that fall-off appears to be mirrored across price levels where the tax credit would have had no impact on buyer behavior.
Could the Cville market tread water for 5-7 years with flat pricing as sellers hold their ground and wait for buyers to “catch up”, sort of like Cville managed to do after the 90s recession? I can’t tell you it’s impossible the “ball” could just stay balanced there for years of thin trading in the market, as underlying positive fundamentals catch up. But the macro picture of the next ten years is highly unlikely to replicate the 90s, with its expansion of liquidity. We’re headed the other way right now, and barring the “hyperinflation” scenario (not saying full-blown, Latin American style, but at least 70s inflation style), which doesn’t seem destined to kick in for a little while yet if it does, Cville seems due for a significant further drop in prices (10%? 20%? 30%?) over the next 9-12 months. In the end it will be a much healthier real estate market for it, with an abundance of new household formation and the resultant economic boost for businesses in the city/county. But we’re not there yet, and high housing prices and stubborn sellers are holding up the train (not that I blame them, I’d hold out too if I could). Deflation in this case is the patient trying to cure itself, imo.
Of course, having just done it, predicting prices is a fool’s errand for most people, myself included, so as you point out, we’ll just have to wait and see what happens and hope for the best!
yeah, what “the wait” said.
No (or rather slow) foreclosures will not create the catalyst for big price drops. It could be a longer wait than 9-12 months. Refinancing into a 5.3% 30 year Jumbo from a 5/1 arm is not nearly as painful as the 7% many people were having to do in 2009. Sigh.