Tuesday, August 31, 2010

City of Charlottesville Lures Away Albemarle County Business With Tax Incentives

Student travel company WorldStrides has agreed to move 230 employees to a new location.  So the 6-story Waterhouse project (much-changed and much-delayed) will finally be built just off the  Downtown Mall, near the Omni Hotel and Ice Arena.  Target move-in date: Halloween, 2011.

Friday, August 27, 2010

Thursday, August 26, 2010

Home Price Depreciation: How Much More Will Prices Drop In Charlottesville Real Estate? 10%? 20%? 30%?

Update 8/26 pm: see comments and a note on this post.

According to the following data, the Charlottesville single family home market segment has seen a decline in pricing of 11.47% since the all-time high in the 4th Quarter of 2007.

National sales plunged to a 15 yr low in July, and the Charlottesville Albemarle area did much worse. Across the Country, prices in the most "bubbly" areas have corrected 30-50%.  The expectation is that with sales so low, prices will keep dropping and values aren't going to rebound any time soon.

Charlottesville has had a huge run-up in prices.  While here's been price depreciation for the past five quarters, it's not at a pace that indicates how low sales are.  Other markets with similar rates of appreciation were in the "big bubble" states of CA, FLA, NV, AZ (see fig. 1).  While others are worried about the "double dip," this area hasn't even seen its first bottom.  So...what's to happen?

With the lack of buyers at all price points,  can current sellers hold out for years?  Could commenter  "The Wait" be on to something?  

"The Wait" left the above comment on a post about July's low sales over at RealCentralVA.  

Charlottesville would have a long way for prices to drop in order to get back in line with area median income, let alone to burn through the excess inventory, which grows daily.   And, of course, there's the shadow inventory: foreclosures and owners who become unintentional landlords.

Here's the rate of annual appreciation for the Charlottesville single family homes thru Q1 '10 from Forecast.com using the HPI.  Quoted material begins here:

Last Year  . . . . . . . . . . . . . . . .  -7%          

Last 5 Years  . . . . . . . . . . . . .   13%          

Last 10 Years  . . . . . . . . . . . .   84%          

Last 20 Years  . . . . . . . . . . . +146%       

Decline From All Time High -11.47%

Home Price appreciation rates for Charlottesville, VA are shown above for five time periods through 1st Quarter, 2010 

The all time high in the Charlottesville Home Price Index was in the 4th Quarter, of 2007.  That's a decline of -11.47% below the Charlottesville Home Price Index all time high.  The Home Price Index indicates that the Charlottesville Market is up 84% over the last 10 years.
The Home Price Index indicates that the Charlottesville Market is up 134% over the past 20 years.  Home Prices in the Charlottesville Real Estate Market have lost 6.99% over the last 12 months.

The Charlottesville Home Price Index has declined for the last 5 consecutive quarters.

The highest annual home appreciation rate in the Charlottesville Real Estate Market was 20% in the twelve months ended with the 2nd Quarter of 2005. The worst annual home appreciation rate in the Charlottesville Market was -7% in the twelve months ended with the 1st Quarter of 2010.

The highest home appreciation in the Charlottesville Real Estate Market over a three year period was 50% in the three years ended with the 1st Quarter of 2006. The worst home appreciation over a three year period in the Charlottesville Market was -10% in the three years ended with the 1st Quarter of 2010."

End of quoted material.  Chart, below, copyright same source.  Bolding, emphasis = BB.


Economists say that, going forward, 
"...housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment." 

Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.  NYTimesReal Estate's Gold Rush is Gone Forever. 
 Michael Snyder at The Economic Collapse:
"Those waiting for U.S. housing prices to return to the levels of three or four years ago are living in fantasy land.  Absent the onset of hyperinflation (which would cause the price of everything to rise dramatically), housing prices are simply not going to return to those levels."  Read more.
Related Reading:
Median Prices and Increases 2001 - 2009, All Property Types, Charlottesville, Albemarle, Greene, Fluvanna, Nelson

Wednesday, August 25, 2010

July "New" Home Sales Go to Record Low

Shocker Again?  Sales of newly-built homes have to compete with cheaper "existing" homes, 33% of which were Foreclosures or Short Sales in July.  The "Existing" homes nosedive was announced yesterday.

Albemarle County Had 260 Little Emergencies Today

How's that budget cuts and holding-the-property-tax-rate-steady thing working out?   Read.

Nationwide Home Sales Drop 26% to 15 Year Low...Charlottesville and Albemarle Home Sales Were Even Worse

Welcome Back, 20th Century.  Hello, Double Dip. Housing led the US economy out of 7 of the last 8 recessions, but this time it might torpedo an already weak "recovery."  Tuesday's national news shows that, absent the Federal Homebuyer Tax Credit ,"existing home sales" in the national housing market
  • Dropped 26% YOY from 2009
  • Single family home sales dove to a 15 year low
  • In the South, the drop was 23%
  • June to July drop 27%
  • 33% were "distressed" sales
See all data at Bloomberg.  Watch video.

As this blog reported earlier in the month for local sales:

The reality of this market, with sales 57% lower than 1999:
  • Multiple listings come on this market every day.  
  • Some DIA relocating buyers will help get rid of some of the massive inventory overhang, but
  • Anecdotally, there's a lack of  UVA and MJH  "first time" "and move-up" buyers.  With a new president at UVA and ongoing wage/hiring freezes, cuts, and reorganizations, plus a relocating hospital that's making many changes, many folks are waiting to buy.
It's not a question of "Confidence."  Local buyers are aware of these factors:

Buyers see and know:

57 single family homes sold in July Albemarle; 27 sold in C'ville.

JULY 2010 Sales Single Family Homes Cville and Albemarle 1999-2010 
July 2010 is lower than July 2009 by -46%
July 2010 is lower than June 2010 by -52%
July 2010 is lower than July 1999 by -57%
Click for larger image in new window.
 Below, in a different form.
Click for larger image in new window.

2008-2010 Single Family Home Sales Albemarle County
Click for larger image in new window.

JUNE AND JULY Single Family Homes Cville and Albemarle
2010 is 42% lower than 1999
Click for larger image in new window.

JULY 2010 Cville and Albemarle
Townhouses (Attached Homes)  1999-2010
Click for larger image in new window.

Underwater house via Getty Images. 
Gray/white graphs RealCentralVA.
Colored graphs Cville Bubble Blog.

CalculatedRisk has a chart of sales declines in other areas of the country from Housing economist Tom Lawler:

*Existing home sales comprise 90% of the nations' sales, vs. 10% new construction.  The term refers to single family homes, townhouses, condos.  The Cville Area statistics available via internet make a distinction between "new" and "existing" home sales only during quarterly and annual reports.

Related Reading:

Tuesday, August 24, 2010

Kiplingers Puts Charlottesville on Another "Best Place" List

Is there a problem at the advertiser magazine?  Is it a lack of resources, or reporters, or the ability to analyze data?  Though many locals told the advertiser magazine's editors they were flat-out wrong (comments section)  apropos their last list, K has decided C'ville is a good place to live, this time for retirees.  Lots of doctors and free cultural events, courtesy UVA.  The drawbacks they note?  High cost of living and housing, inadequate public transportation, and lack of tax breaks.  And...oh yeah, lack of significant services for seniors.  But: Hey, Seniors!  Come on over!  RE sales are in the toilet here--Come spend your life savings, as this area needs all the help it can get.

15 Signs the US Housing Market Is Headed Toward Collapse

Business Insider features an article, complete with 15 charts, by Michael Snyder of The Economic Collapse.  Read:
The U.S. housing market is dying. You will only hear hints of this on the mainstream news and from the politicians in Washington D.C., but as statistic after statistic continues to roll in, the reality of what is happening is becoming very difficult to deny.
Up until the end of April, the giant tax credit that the U.S. government was bribing home buyers with helped stabilize the real estate market, but now that the tax credit has expired the decline of the U.S. housing market has resumed. Mortgage defaults continue to set new records. Foreclosures continue to set new records. Home repossessions by banks continue to set new records. The number of homes being constructed and the number of Americans applying for home loans is at stunningly low levels.
For decades, owning a home has been touted as the very heart of "the American Dream", but today that dream is out of reach for an increasing number of Americans. Why? It is because there are not nearly enough jobs for everyone. Without a jobs recovery, there simply is not going to be a housing recovery. Unfortunately, as the U.S. economy continues to come apart like a 20 dollar suit, even more Americans are going to lose their jobs and the U.S. housing industry will continue to experience a very painful decline.
The truth is that this is not a short-term downturn in the housing market. During the past two decades, an insane amount of debt fueled an artificial housing bubble that drove home prices to ridiculous levels. Now the U.S. housing market is trying to correct itself, and no matter how many trillions of dollars the U.S. government throws at the problem the fundamentals of the marketplace are still going to have their way eventually.
The U.S. economy is in decline. The employment situation is going to go from bad to worse. Americans without jobs are Americans that cannot buy homes. Millions of Americans who are employed are finding it increasingly difficult to make it from month to month. The truth is that there is no way that Americans can afford the ridiculously inflated home prices that we have seen over the past decade any longer.
So, yes, the U.S. housing market is headed for a complete and total nightmare.

The 5 Stages of America's Housing Bubble
Albemarle County Home Sales Plunge 46% in July 2010

Monday, August 23, 2010

Charlottesville is Still at Stage #1 On This List: The Five Stages of America's Housing Bubble

This "list" is a much worse position for sellers than for buyers.  The majority of sellers in this market have to sell.  Bubble prices have come down 30% nationally, here, much lower, despite record inventory.  Buyers have the luxury of time.  And since the national view is that housing is no longer a way to build wealth and housing is not going to "rebound" in the financial lifetimes of current buyers...the amount of $ lost in this area boggles the mind.


Wednesday, August 11, 2010

Albemarle County Single Family Home Sales Cliff Dive -46% YOY in July 2010

Update August 12 5pm: NBC29 has picked up this story.  See * below.

This is a telling graph.  July is the first month that reflects sales levels without an infusion of Federal government aid.  July's closed contracts were written in May and June, very busy months in this area--but after the April 30 expiration of the Homebuyer Tax Credit.

It's time for the educated seller to go to Plan B.

The Federal Homebuyer Tax Credit ran from April 2008-April 2010 in various forms; in 2010, the tax credit was available not only to First Time Homebuyers, but also to many current owners.   

Albemarle County Single Family Home Sales:

July 2010 is lower than July 2009 by -46%
July 2010 is lower than June 2010 by -52%

Click for larger image in new window.
Inventory is currently at 15+ months.  There will be some new buyers provided by DIA, but the inventory overhang will remain large for the foreseeable future.  The broader economy is slowing down, and the region's unemployment remains significantly higher than two years ago.  

While sellers and their agents may try to convince anybody who will listen of "value,"  the educated buyer knows what tack to take. 

 The next few months will also have low completed sales.

 Meanwhile, there's talk of having hit bottom (see this and this).  The "bottom" can't be determined without at least a year and a half of hindsight.  This gabble is a way of trying to distract from the real conversation.   The obvious response to these sales numbers would be #^%*$#**;@!!!

The above graph comes from the numbers via Nest Realty Group, which provided these sales charts and the term "Cliff Dive".  Click for larger image in new window.
Revisiting the contracts:  May and June contracts plunged. (June below, copyright RealCentralVA; click for larger image in new window).

*UPDATE: NBC29 picks up this story.  They show David Sloan and quote him: "Traditionally, this is a slower time of year...."  (Other real estate agents will say that this area is tied to the school year, and that March-August are the busy times).  The newser also features CAAR president Greg Slater who mentions that the first six months of 2010 saw 15% higher sales than 2009, and sees this as a "positive."  That's only a "positive" for the real estate agents who actually managed to make some coin during that period.  For sellers, this news is dire.

Related Reading:
CAAR's 2010 Mid-Year Market Report Shows Dramatically Low Sales
What Equals a Lowball Offer in This Area?
Here's What's Missing From CAAR's 1st Q Market Report
Graphs: Declining RE Sales in Central VA
The VA Housing Development Authority Market Conditions and Challenges Report

Daily Progress reporting on local sales:
Mid-Year 2010: Subsidies Boost Sales, Future Looks Bleak
Mid-Year 2009 "Area's Mid-Year Home Sales Reflect Continued Struggle."   
Mid-Year 2008: "Is This the Bottom?"

Albemarle County Townhouse Sales Plunge -63% YOYin July 2010

July is the first month in which completed sales happened without the (up to) $8k tax credit.  July numbers reflect contracts written in May and June, after the tax cred deadline of April 30.  The Federal Homebuyer Tax Credit ran from April 2008-April 2010 in various forms; in 2010, the tax credit was available not only to First Time Homebuyers, but also to many current owners.

Without the tax credit, this market's sales collapsed.  The strongest part of RE sales in this area are in the "under $300k" segment.  But these are buyers who need $$$ help for downpayments and closing costs.
  • Month over Month: June-July Sales Dropped -69%
  • Year over Year: July '09 - July 10 Sales Dropped -63%
Click for larger image in new window.

Townhouses have become the purchase of choice for many first-time buyers in this area because they're "affordable" (usually around $200k) and everything is bright shiny new.   Notice the Nov '09 spike: this came with the threat that the tax cred would expire.

The broader economy is slowing down, and the region's unemployment remains significantly higher than two years ago.   

An appropriate response to these sales figures, on the part of sellers, would be panic to re-evaluate asking price.  The big hope is that DIA will "save" the market.   Many websites  have been devoted to trying to drum up business from DIA/NGIC personnel  (have some Google fun and see all the websites for yourself).

Related Reading:  July 2010 Single Family Home Sales in Albemarle County Cliff Dive

The numbers in above graph come from this chart, provided by Nest Realty Group:

Tuesday, August 10, 2010

The DIA Ribbon Cutting is Today....What Impact Will There Be On the Cville Area Housing Market?

Instead of focusing on the DIA ribbon cutting like NBC29, for some reason the Newsplex has a story focussing on the local hope that there will be a "boost" to the real estate market.

Just as the new facility opens, new data shows just how low real estate sales have dropped in Albemarle County.  Once the federal Homebuyer Tax Credit expired, available from April '08 to April '10,    the sale of single family home sales plunged 52%, while the sale of townhouses plunged 69%.

The DIA will boost the economy with new bodies needing materials and services, and it will boost the tax base.  Most of these jobs, however, bring employees with themSome of these folks will want to buy, but a good number will rent.  And of the ancillary jobs created in the community (many of which will be food service, Lowes, and Walmart workers), the wages don't equal the ability to buy a "home."

The bubble's not likely to get reinflated, even with a few hundred new employees wanting to buy between now and 2011 (the projected date of full employment).  Albemarle is hurting for business and has a housing crisis--at least 15 months of inventory for single family homes, lots of folks losing their shirts in short sales, foreclosures, or unable to sell because they bought at the peak and are now underwater. And:  When the Homebuyer Tax Cred ended on April 30, sales plummeted.  Where's the main stream media reporting on this?

So what impact will DIA buyers have? 
Sadly for the C'ville Albemarle area, however, there are far better real estate deals--and better commutes--north of DIA: Greene County, Madison County, even Orange County all have better pricing and easier commutes.  Culpeper has been swamped with foreclesures, which mean much better prices.  

Buyers and Sellers:  keep it in perspective.  Many RE "professionals" don't know--or don't want to know--about the realities of local, regional, and national economies.  You're mostly on your own.

Buyers: don't rush in.  The first time you hear the phrase "multiple offers," walk away.  It's likely there are at least a dozen more properties that will suit you just fine.   

Sellers: most properties aren't going to rise in value any time soon; in fact, most will have a hard time selling.  If you price lower than your "competition," you'll have a better chance of selling.

Video from the Newsplex story

This post, like all on this blog, contains opinion that is not to be misconstrued as financial advice pertaining directly to your particular circumstance.

The Fed Acknowledges Economic Recovery Has Slowed

From The NYT:
WASHINGTON — Acknowledging that the recovery has slowed, the Federal Reserve on Tuesday announced that it would use the proceeds from its huge mortgage-bond portfolio to buy long-term Treasury securities.

By buying government debt, the Fed is taking an unmistakable step to maintain the large amount of money that it pumped into the economy, starting in 2007, to prop up the financial and housing markets.
From CalculatedRISK: don't worry about rates...including mortgage rates.  

And from BI: The CHARTS the Fed is using.

Housing Deemed a "Poor investment"

The Federal Reserve has acknowledged that the "recovery" has slowed.  But whether you're worried about inflation or deflation, Euro Pacific Capital's Senior Economist Michael Pento calls housing a "poor investment."   He says:
Homeowners....love inflation....However, a home is a depreciating asset that holds a significant carrying cost. (Its price) has only traditionally increased at a rate slightly higher than inflation. But interest expenses and the cost of maintaining a home increase with inflation. Therefore, although home prices increase in inflationary environments, it is usually just in nominal not in real terms.
Read the whole article.  (bolding, emphasis = bb)

Monday, August 9, 2010

"% Sold Price to List Price" - Why Is This Unreliable Data Still Included In Sales Reports?

In a recent Hook update, the "Asking Price" for 195 Georgetown Road is noted as $299.9k, and the "Selling Price" is noted as $269k.  This would mean the "% Sold Price to List Price" is 90%.

This is completely inaccurate: the original listing price for 195 Georgetown Road was $379,900.  This means that the "%Sold/List" is actually 71%.

If you read RE sales reports, there's always the stat about how close percentage-wise the sold price is  compared to the list price.  This is a way of giving buyers and sellers "confidence" that properties have been priced "correctly" by the real estate professional--as in the property is actually "worth" this amount at "fair market value" (whatever this is, nowadays). 

In the Charlottesville Area, the "%Sold/List" number is typically in the upper 90's (see here and here for recent examples).

The problem?  This is a highly unreliable data point, because it only takes into consideration the last listing price. Properties often have unannounced $10k-$20k reductions as they chase down the market, let alone those price reductions that are declared. 

This blog looked at examples of the sold/list phenomenon in a previous post, Asking v Selling Prices. 

Because nowadays so many properties have price reductions (of the few properties that are actually selling) a more realistic picture of sold pricing would emerge by using the original list price.  This would be far more helpful to sellers as well as buyers.

Related Reading:
What Constitutes a Lowball Offer in This Area?

Tuesday, August 3, 2010

Glenmore's Michael Comer: Embezzles $666k, Pleads Guilty to 5 Felonies, Faces 150 Years in Prison...and Will Serve 18 Months

 Read here. 

Original post, 3pm Tuesday, August 3: Once again, Glenmore's Michael Comer, who plead guilty to money laundering and embezzlement, is due in court at 4:30 pm today, after a July 30 continuance.  All the background here.

Halsey Minor: Save Charlottesville

The Landmark Hotel developer has a new website: www.savecharlottesville.com.  While waiting for his suit against the FDIC to go forward this Autumn, Minor says,
“This is about damages now. Because every damage that comes out of the government comes out of us, I want to put it back into the community,” he says. “It’s basically going to be a redevelopment fund for Downtown Charlottesville.” 
Read the background on this at c-ville.