Tuesday, December 23, 2008

End of Year Report: 26 Months of Inventory in the Charlottesville Area

26 months of inventory.



And the 26 months inventory figure does not include "shadow inventory," properties that owners or banks want to sell, but which are not in the MLS because they are:

  • *Houses that have been pulled off the market for the winter or until the market "turns;"
  • *Foreclosures not yet put up for sale again;
  • *Houses that have been offered for sale but are now rentals due to lack of buyers.
Sales are down over last year:

Albemarle County - 33%
Charlottesville - 11%
The region - 25%

The 26 months and sales percentage figures (as well as the graph) are from Realtor/Blogger Jim Duncan of RealCentralVA. In his End of Year Market Report for the Charlottesville Area, he cautions that MLS information may be unreliable. But unless he's made a big error, as far as he can tell the number is 26--up from November's 18 months of inventory.

*What does 26 months of inventory mean for sellers?
It means there's a need to price aggressively lower than what "comparable" properties are priced.

It means that if a seller needs to "make" a certain amount on a sale (due to a HELOC or ARM, etc.) the seller is in a much less favorable position than a seller who has the ability to accept any offer.

*What may 26 months of inventory mean for buyers? Lowball offers. Nationwide, and in this area, houses will continue losing value over the next 12-24 months; Dr. Doom sees the bottom in 2010. There's just too much inventory, too many foreclosures on the way, and the jobs recovery is two years out from this recession.

Many economists believe the worst is yet to come. Additionally, the housing market's not coming back; the overvaluations seen in this decade are gone forever.

Our region is not protected. This recent post, about local economic troubles, contains merely the latest updates.

But the upside is that for those who do wish to buy right now, not only is there plenty of selection, but mortgage rates are hovering at historic lows. For those who are seeking a house for the sake of comfort, security, and as a reflection of habit, tastes, and predilection, there's plenty to choose from. If a lowball offer is declined, move right on. Next!

But for those who think of a house as an appreciating asset? No. That's the wrong reason to buy. Better to look into gold (and even then....)

Read the complete End of Year Market Report for the Charlottesville Area. This report has much more data, including availability figures, median prices for the surrounding Counties, number of properties under contract, and so forth.

After the holidays, we'll have more information on buying/selling in this shockingly slow market and troubled economy.

14 comments:

Anonymous said...

For several months now, I've heard realtors pass the buck and blame the sellers for the irrationally inflated expectations and listing prices in the local market. Now is the time for them to grow a pair and start telling the sellers either to price their homes realistically or to walk away. Quit wasting everyone's time, face up to reality and unlock this market.

Real C'ville - The Bubble Blog said...

26 months of inventory is more than twice the national average of 11 months.

"Home sales declined dramatically last month and housing prices posted their sharpest decline in four decades...."

"The median price of a home fell 13 percent from October to November, to $181,300 from $208,000 a year ago. That was the lowest price since February 2004."

"The troubles plaguing the housing market...are only multiplying as the broader economy deteriorates."

http://www.nytimes.com/2008/12/24/business/economy/24housing.html?_r=1&hp

solon said...

I'M GOING TO SUGGEST THAT ANY AGENT WHO CONTINUES TO USE THE PHRASE "PROTECTED MARKET" SHOULD BE INVESTIGATED FOR VIOLATING THE EXTREMELY HIGH ETHICS STANDS OF THE NATIONAL ASSOCIATION OF REALTORS.

Jim Duncan said...

Interestingly, Professor Ed Burton said on the WINA morning show this morning that Charlottesville's housing market is somewhat protected due to UVA's presence. I have to agree with him to a certain degree - having a large, relatively stable employer is a tremendous asset for our area. While they are, like any big company, facing hiring freezes and possible layoffs (his words), they are a positive influence on our area.

Will they protect/insulate us? Possibly a little bit, when you compare our market to others ... they certainly aren't going to harm the market.

The podcast isn't up yet on WINA's site, but I'm going to listen to it when it is, as I wasn't able to catch the whole thing.

http://wina.com/WINA-Morning-News-with-Rick-and-Jane/3063569

Montpellier said...

Ed Burton isn't 'fessing up to the coming budget crisis at UVa. But, he's a long-time GOP/pro-'deregulation' cheerleader - so of course he's going to still be soft-pedaling the utter havoc wreaked by the reckless (and Laffable - see Laffer, A.) policies that allowed this bubble to be inflated.

He knows the disaster this short-term profiteering has unleashed on the unsophisticated public, and fears the quite real backlash.

Perhaps WINA wasn't able to get a more balanced academic instead of a GOP cheerleader ala Mankiw - UVa has plenty (in no particular order):

Simon Anderson
Charlie Holt
Bill Johnson
Len Mirman
Ed Olsen
Steve Stern
Wake Epps
Roger Sherman

Yes, there are some notable exceptions among the more popular faculty.

The last two are emeriti and I would imagine have the time to speak to the media. Of course, Burton's a publicity hound and schmoozer rather than an academic, so there you go.

Anonymous - I'm not a fan of Realtors (gleeful vitriol being the standing order), but from a practical perspective: it makes no sense for an underwater borrower to agree to a sale for anything less than the payoff. You are very likely right: they will not sell. But the bank will be forced to foreclose, and the 'owner' will get to hand in the deed instead of repaying the loan, particularly since the banks generally send in a shill to bid up to the face value of the note. The seller is genuinely better off going to foreclosure than agreeing to either:

- show up at closing with cash (they don't have).
- getting the bank to agree to a short sale and then having the bank come after the seller for the difference (delayed variation of the first option).
- having to pay taxes on any forebearance the bank allows to get out of the first two options.

What would you do?

This downturn will not end well for anyone. Perhaps in five to ten years, it will actually be affordable for those of who work here to live here.

Anonymous said...

It's a great time to sell. Just ask any REALTOR.

Rob said...

I would like to take the time to say thanks and happy holidays to the Bubble Blog, Jim Duncan, and to all the regular contributors to their blogs. Everyone has informative facts and opions that are entertaining.

Happy Holidays,
Rob

Real C'ville - The Bubble Blog said...

Usually, 1099s won't be issued.

"The Mortgage Forgiveness Debt Relief Act of 2007"

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Banks have been reluctant to do short sales because they take the loss. With foreclosures they got the property back and until recently have believed that they could sell for what they paid (though not in BIg Bubble states).

Nowadays with capital infusions from TARP, the losses are less of an issue. We unfortunate taxpayers are covering their ass--ets.

Montpellier is 100% right about too many sellers having to bring cash to the closing and therefore holding fast to their inflated selling prices. It's the cash that should have been put down when they "bought" the house in the first place.

A lowball offer works best with someone who didn't buy during the bubble. And with a seller who realizes Things Have Changed.

And Jim, if UVa is such a steadying presence, how come area sales are so low? Why aren't more UVa employees buying?

That's a rhetorical question. We all know why: Home price to income ratio is completely skewed here. Prices too high.

NAR's Bozo Mouthpiece, the economist Yun, is calling for tax breaks for new homeowners. Well, anything might help....

Anonymous said...

lop $50 grand off the 200G listings, 100G off the 300G listings, 200G off the 500G listings
$300G off the 700G listings and we'd be approaching a place to then start declining prices by 20-30%.

that's how baloony prices are in this tiny town which has the prices of Seattle or Boston or Los Angeles.

except all those places are actually cheaper now

Real C'ville - The Bubble Blog said...

Rob, Thanks for the holiday sentiments. RIght back at you. And thanks for visiting this blog and taking the time to comment.

Anonymous #3, we looked into the prices in the cities. We found some interesting material, including many graphs, and we'll also put this up as a post in the New Year. Thanks for your creative take on how to price houses. :0)

Calif. is one of the bigger bubble states, and prices have declined dramatically. (There are zip codes that haven't seen huge declines, with property prices akin to Albemarle farms/estates but there are also very few transactions in the higher priced areas according to DataQuick).

As reference, these are the current median prices in this area:

Single family: Albemarle $390K, City $290K

Median for ALL properties (condos, attached, houses): Albemarle $320K, City $265K

Sales of properties requiring some form of Jumbo Loan, above $417K, have slowed quite a bit this fall (since the 9/15 collapse of Lehman Bros. and crash of stock market in October). Fewer higher priced properties obviously make for a lower median.

Here's some interesting visuals:
Real Estate Home Depreciation* Graphs for the last 12 months:

http://www.realestateabc.com/outlook/overall.htm

*the title says "appreciation," but it's all negative.

SoCAl 6 county area, including Los Angeles:

"The median price paid for all homes combined last month was $285,000, down a record 34.5 percent from November 2007."

"The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,323 last month."

From DataQuick:
http://tinyurl.com/657o2j

Median price in Massachusetts is $275K down from $330K a year ago.
http://tinyurl.com/9846x5

Median Price in Seattle:
King County = $365,000

http://tinyurl.com/96yq8e

There's also this UW study that shows that local "rules" have increased Seattle's bubble - added $200K to the price of a house:

http://tinyurl.com/3a5efc

Anonymous said...

The post regarding the avg price in Massachusetts is meaningless since the MA market is as diverse as Virginia's. It;s like using the VA state average to compare to Boston.

A fairer comparison is Boston to Cville or VA to MA.

Anonymous said...

Housing Prices: Still Too High
John Carney | Dec 29, 08 8:37 AM

Home prices across the country fell something like 13 percent drop from a year ago, perhaps the worst decline since the Great Depression. Unfortunately, that doesn't mean that homes are cheap or that home prices are set for a comeback. Far from showing a housing panic, these plunging prices represent a reversion to normal pricing. And we still have a way to go down before we reach normal.

Housing economists and authors Susanne Trimbath and Juan Montoya explain that when housing prices are measured against income, home prices are still too high. From New Geography:

Now that prices are falling quicker than incomes, there should be a surge in new buyers. Since 1975, whenever the ratio of mortgage payments to income falls, home sales usually rise. The correlation coefficient indicates that for every 1% improvement in affordability there is a 2% increase in home sales. But now, something is wrong. In 2007, for every 1% improvement in affordability, home sales fell by 2%.

Part of the problem is that prices still are simply too high. Even as recently as August 2008, the median home price was still historically high in comparison to median income – about 4 times. It takes lower rates than in the past for a family with the median income to afford the median priced house. This means that homes are less affordable today than they were 6 years ago.

The last time that home sales fell as they became more affordable was in the 1990s at a time known as a “credit crunch.” At that time, the ratio of home prices to income was actually lower – 3.8 times in September 1990 compared to 4.3 in September 2008. The difference was that between 1990 and 1992 mortgage interest rates averaged a hefty 9.26%. In the last 3 years, the average was 6.14% and while the words “credit crisis” bled in headlines around the world, the regular mortgage interest rate barely budged.

This would suggest that the recession could inflict further pain on homeowners. If income drops, home prices will be even further elevated in comparison. This could set the stage for another huge drop in home prices as the market struggles to reach something like a normal level of housing affordability.

From: Clusterstock.com

snowman said...

There's an idea that C'ville is a place like larger cities when really it's just a town that broke away from a county and is in danger of being swallowed back up. Hobby farms and new home builders have helped drive up the prices around here. Problem: there are lots of hobby farms and acreage on the market now and the new construction started out w/prices already too high do the selling price right now has to be even more inflated than that of existing homes. Nevertheless this place is still a small town and getting smaller every moment what with what the daily progress yesterday referred to as "Cultural Meltdown." More of that to follow, arts disappearing due to recession. In danger of becoming a backwater, LOL.

Anonymous said...

Maybe the local realtors don't have access to the Internet?! http://clusterstock.alleyinsider.com/2008/12/are-we-done-home-prices-drop-for-27th-month-in-a-row