With guests like these …”We’ve never seen inventory levels like this.””We need to fix affordability.”Home sales are falling sharply, housing starts are falling sharply.”We have the biggest supply of excess homes in US history”.”Inventory levels aren’t going to clear out for a quarter or two””You’ve got to clear the inventory …”I sometimes wonder why I watch CNBC.Below are the inventory levels for single family homes in the Charlottesville MSA.This week brings national housing numbers and consumer confidence data – the results and release of which may feed each other.Below is a trend analysis of inventory levels in the Charlottesville/Central Virginia region, from 2004 (earliest available in the statistical analysis) through 2007. The trend lines are in sync, although significantly elevated.”The real estate bust scenario is not like the tech bust scenario. I repeat, the wider housing market is not like the stock market…. …So a widespread housing BUST in an environment of anything short of an ECONOMIC bust just does not make sense to me.
Browsing Category Market statistics
August’s housing numbers for the Charlottesville region
Another month brings another set of data and observations on the Charlottesville area housing market…. Continuing my series in comparing 2004 to 2007 -Sales are down significantly, (100 fewer transactions in Charlottesville/Albemarle) inventory is up and absorption rates are way up.With the caveat that MLS numbers, while still the best source of data, do not have all properties for sale and that have sold (primarily new construction and condo conversions which are frequently never entered into the MLS) -Sometimes, there is absolutely nothing a seller or Realtor can do to induce a sale (or even traffic), and this is one of the most frustrating aspects of this current market. Some observations and anecdotes:- More and more, buyers are making offers continent on the sale of their existing property.- Sellers – if you get an offer, hold onto it!- The last few homes on which I have closed (as the Buyer’s Agent) have sold for between 13% and 15% under asking price.- If you don’t need to sell your home, you may want to strongly consider staying put.When comparing 2004 and 2007, sales in Charlottesville/Albemarle are down about 35%.2004 Sold – Charlottesville & Albemarle – Single Family homes, attached homes and condos2007 Sold – Charlottesville & Albemarle – Single Family homes, attached homes and condos2004 Sold – Charlottesville & Albemarle – Single Family homes and attached homes2007 Sold – Charlottesville & Albemarle – Single Family homes and attached homesThere may be a couple of things at play here — Satisfaction with one’s current home…. We may be moving to a less transient market, and this is going to take some time to shake out.- Buyers and sellers are very reluctant to buy or take a lower price, respectively.- There is no easy wayRegarding the “real estate agent” bubble:111 agents have had 10 or more “sides” so far this year.438 have had between 2 and 10 sides.223 have had one side.Approximately 500 have not had any transactions at all so far this year.
Housing appreciation in the Charlottesville region – second quarter 2007
The OFHEO has recently released their study looking at housing data for the first two quarters of this year (PDF).“House prices were basically flat in the second quarter despite tightening credit policies, rising foreclosure rates, and weakening buyer sentiment,†said Lockhart…. To the extent that recent mortgage market instability may have affected housing demand and prices, those effects would be evident in OFHEO’s next HPI release.The chart at the right, courtesy of housedata.info, shows the appreciation rate of the Charlottesville housing market since 1985.For the Charlottesville MSA,Our national ranking is 102The one-year rate of appreciation is 4.66%The second-quarter appreciation is .71%The five-year appreciation rate is 71%The number that should be of most importance to most people is the five year rate of appreciation – the timeframe by which most people should now be basing their purchasing decisions.For some context, in September of 2006, the Charlottesville MSA’s 5-year appreciation rate was 79.93% and our national ranking was 64. In 2Q of 2004, our 5-year appreciation rate was 52.86%, 2Q 2002 was 41.93%, and 2Q 2000 was 19.8%In short, with all the turmoil that is happening right now, housing likely will remain a good long-term investment for most people…. *These numbers do not necessarily reflect new-home cancellations.*The Charlottesville Metropolitan Statistical Area consists of Albemarle, Charlottesville, Fluvanna, Greene and Nelson Counties*The Case-Shiller home price index does not track the Charlottesville market specifically (PDF) – while it is an excellent source, using the Washington metro area to draw correlations to our market would be silly.
An update on a “million dollar home”
I wish only that I could get an update on the other properties shown in the CNBC piece. The one referenced in April as having been on the market for only two weeks with an asking price of $1.19 million? It’s asking price is now $975,000. What are the chances that CNBC’s Diana Olick will revisit these properties?
Condo conversions in the Charlottesville area
However, to a lesser degree, we may have some “growing pains.”From Saturday’s Wall Street Journal (temp free link):For the nation’s real-estate lenders, the other shoe may be about to drop: condominiums.Already plagued by rising home-loan defaults and foreclosures among overstretched consumers, major markets across the country — including parts of Florida, California and Washington, D.C. — are seeing rising foreclosures and bankruptcies of entire condo projects….The condo market, while tied to the housing market overall, behaves differently under stress…. So while the speculative overhang of newly constructed single-family homes may have peaked in many markets across the country, the full force of the condo glut is starting to hit now.With single-family homes, “you put up a couple of model homes and build the rest as you get sales contracts.”… (when was it registered with the Commonwealth?)- How many of the sold units have been sold to owner-occupants?To give a very high-level (and admittedly somewhat inaccurate due to GIGO) overview of the Charlottesville condo market, here are the results of a quick MLS search with no status attached:Condos in Charlottesville/Albemarle marked as new construction: 313Not marked as new construction: 3,333Conclusion – there have been far fewer new condo developments built than have been converted to condos…. we have the mostly unrelated condo conversion issue, which was nothing more than an arb of the overheated housing market vs. relatively low rents.But too many of these “conversions” were nothing more $1000 of new paint and countertops slapped into formerly rental units and that was supposed to support valuations 20, 30 even 50% over the income property valuation (even at today’s crazy cap rates).
Notes from the frontline
For the past week, I have shown most of the inventory in the $300k-$550k price range in the City of Charlottesville and the urban ring.1) Appraisals from four, six, eight months ago do nothing other than lead the seller astray…. (and, no, I do not necessarily see this as a “price drop” – it is the non-realization of unreasonable expectations.2) Negotiating from what you “need to make” is an untenable position. While completely relevant from an individual financial point of view, this position is not relevant from a market-value point of view.3) As a seller, you might not get a better offer. You got to know when to hold ’em, know when to fold ’em,Know when to walk away and know when to run.You never count your money when you’re sittin’ at the table.There’ll be time enough for countin’ when the dealin’s done.4) There are a lot of buyers in the market – they simply have more to choose from and often times, there is more than one “right” house for them.5) Summarizing the broader Charlottesville market is impossible.
A macro view versus the reality of million dollar homes in Charlottesville
Somehow I missed this story on CNBC earlier this year:In this university town, there are about 30 homes priced at $1 million or more, if you’re in the market to buy…. “Every window, and there are a lot of them, is a scenic overlook.â€The house we visited is about 20 minutes from downtown Charlottesville and sits on ten acres…. It’s home to the University of Virginia.Expanding on and clarifying stories such as this is one of the goals of this blog.Using data from today:- There are currently 126 single-family homes in Charlottesville/Albemarle with asking prices over one million dollars. – 24 of the 126 are marked as being new construction.- In the City of Charlottesville, there are six homes currently on the market with asking prices of at least a million dollars- 43 properties have sold for more than $900k and 34 have sold for more than one million dollars in Charlottesville/Albemarle so far this year; eight of the forty three were identified as new construction.The point of this article is not to find fault with CNBC’s reporting, but to demonstrate the limitations of such a broad overview of any particular real estate market.