Recent low sales and perceived "low" median prices, combined with some other factors, prompted the local newspaper's weekly investment columnist to suggest several reasons that "now" is the time to buy:
"Home prices are well below 2005 averages, and time on the market is well above the healthy market average of 90 days. Sellers have been slow to realize that their home isn't necessarily worth the appraised value or what they paid for it or even what they owe. Houses are simply worth whatever the market will bear, which is a lot less than it was at the peak of the market three years ago. National trends have followed a similar cycle."The piece could stop right here and be required reading for all sellers. Instead, it goes on to this:
"...markets can turn quickly. Now we are contrarians again, looking at the trends and trying to gauge if there will be a second precipitous drop before the bottom. I don't think so. I think that we are near the bottom and brighter days lie ahead."There's plenty of data to back up the idea that housing is heading toward a much lower bottom. But there's no data indicating "brighter days lie ahead." Consider:
- these home price charts
- this REO data
- this chart showing inventory overhang
- and negative equity afflicts 11.2 million or 1 in 4 mortgageholders
- "Recovery" was temporary
- without government intervention, home prices are falling
- and don't miss this
RealCentralVA has the 30 Day Moving Median Price for New Listings, April 10 - May 10 2010.
There's no "rhyme nor reason" to support this exuberance. In the Charlottesville Albemarle area, 2008 real estate sales were the slowest in a decade. And then came The Great Recession and 2009 ended with even lower sales than 2008. It wasn't hard in Q1 - 10 for some areas of Central Virginia to beat the same time period in 2010.
Inventory dropped for a couple days at the beginning of May. Below are the numbers from May 10 (top is May; bottom is April). With the way inventory is piling up, by the end of the week, May will exceed April's inventory. Image copyright CAAR.
detached single family homes in Charlottesville were down -20% over the same time last year, while 2009's sales were down -46% over 2008). Inventory is up +20% this time over last year in this sector; ditto for Albemarle County.
Thinking of buying a house? That asking price is somebody else's notion of value. A buyers first duty is to lowball, and keep these things in mind.