Sunday, October 31, 2010

The Daily Progress Reports on a Niche Market: Local Builders Finishing Bank-Owned Properties For Resale

It's an interesting story about some guys staying afloat in these tough times.  The article goes on to explain the downward price pressure that short sales and foreclosures are putting on pricing in this market,  then  accurately describes the Shadow Inventory.

But the article takes a left hand turn into Wha--huh? when the reporter says,
The local market reflects national trends, but the market here remains more stable than in the country as a whole.
No.  Not even close.  This lil ole market has seen a 225% YOY increase in foreclosures (as recently reported by same writer), sales have plunged down to the 1990's levels, every month sellers have about a 6% chance of unloading their property, the current 18 months of inventory is nearly twice the national level (8+ months for new homes, 10+ for existing); while 1 in 4 Virginia homewners owes more than the house is worth, and local private sector employment is vanishing.

If by "stable" it's meant that this market is going to continue with these negative trends for the next several years--then yes,  this market is "stable."


craigger said...

Prices HAVE been more stable here. They have only come down 10-15%. Also, YOY increased % of foreclosures doesn't really tell any story relative to the national market because we have a DRASTICALLY lower number of homes that are undergoing foreclosure relative to our total housing stock versus the average place in the U.S. We are starting from an extremely low base of foreclosures, which makes the % number look more meaningful than it is.

I'm not bullish on housing in the Ville, as I think we are going to see another 10-15% leg down. But the future looks better here than the average housing market in the U.S. and the Sand states in particular. I'm just trying to keep it fair an balanced.

John Doe said...

Craigger--you should use the past tense: Prices "were" stable. The "correction" has come to town, and the market is in a period of instability. Recent purchases are motivated by those who actually need a place to sleep and, to a lesser degree, by low interest rates.

Prices dropping only another 10-15% would be the best case scenario.

Prices are coming down fast and furious since the 3rd Quarter began and, it being Nov. 1 and the market essentially DOA for the next 4 months, "look out below."

The expiration of the tax credit PLUS Fannie Mae's ( and BOA's quick turnaround in unloading foreclosures not only brings local prices down, but puts more bubble owners underwater.

Which means no refi, and no move-up.

The charming Belmont cottage that, last Spring, was $215k is now $185k. $700k is the new $900k, and $350k has replaced $499. Sure, there are holdouts--which aren't selling.

This is instability, as is the large number of hopeful sellers currently listed at prices less than what they paid 2004-2009. Pick some sellers at random and check out the purchase histories. These sellers, who aren't publicly listed as short sales, will either bring thousands (or tens of thousands) to closing, or wind up in foreclosure.

In fact, for some, a strategic default might be better than seeking a short sale that pours money into the wind for months with no hope of a buyer, only to later foreclose.

There's nothing in the local, regional, state, or national economies that indicates housing prices are going anywhere but down.

There's certainly nothing in the local economy to suggest there will suddenly be buyers to supply the demand necessary to rescue all the sellers who need to unload. Where are the jobs? The new Kohl's at Hollymeade Town Square? The ushers at the mythic new movie theatres? All the new hires at UVA and Martha Jeff after the "worst is to come" year of 2012?

But hey--we'll keep an open mind. QEII starts on Wednesday. Mortgage interest rates could be at 3% a month from now. And with all those tax cuts Robert Hurt promises if elected, folks could be rolling in it and eager to buy.

And of course...we could see Gonzalo Lira's description of hyperinflation kick in...and then housing will pretty much be moot.

Anonymous said...

then you have Realtors telling sellers to list in next 60 days to try to get higher prices because they won't have foreclosure competition

Anonymous said...

Interesting comments. The principal of this blog is listing a house for $517K which was purchased for ~529K about 2 years ago. If he were consistent (with his blog entries) he should list the house for $410K, I think.