Friday, March 18, 2011

Nest Realty Group: Major Year-Over-Year Home Price Declines in Charlottesville Area - February 2011

Nest Realty Group has released its report (at the link and also embedded below).  Sales are at about the same level in 2011 as in 2010--and why wouldn't they be with such large price cuts?  Inventory remains high, and compounds daily.  For the City and surrounding Counties, it would take 18 months to clear it all.

Median Prices January and February 2011:

City of Cville
Single Family Homes
2011 January up 20% over 2010 ($260k v $210k)
2011 February down 38% over 2010 ($160k v $257k)

Albemarle County 
Single Family Homes
2011 January down 10% over 2010 ($225k v $248.6k)
2011 February down 14% over 2010 ($334.5k v $386.2k)

Fluvanna County
Single Family Homes
2011 January same as 2010 ($209k v $210k)
2011 February up 2% over 2010 ($213k v $210k)

Greene County
Single Family Homes
2011 February down 15% over 2010 ($222k v. $261.4)

Louisa County
Single Family Homes
2011 January down 67% over 2010 ($94k v $285.5k)

Nest Realty Charlottesville's February 2011 Market Report




SEE ALSO 




Realtor Greg Slater pointed out that February 2011 new inventory was 50% higher than in 2010; Realtor Jim Duncan recently pointed out that in the first two weeks of March 2011, new inventory was 23% lower than in 2010.

22 comments:

almost ready said...

I've been sitting on the sideline renting since mid 2009. I've been a fellow skeptic about housing and following this blog with enjoyment.

Just got new lease contract. They want too much. Rent is going up in Cville. While I think home prices may still be up 5% in Cville, for renters like me the decision comes now, or a year from now.

Looking at price to rent ratios in Cville, there are starting to be some houses listed in the 15XAnnual range or 6% whichever you choose.

Its time to play my hand. Is inflation around the corner along with an increase in interest rates? The latter will put downward pressure on housing prices, but allow us to inflate our way out of a long sideways slide like Japan's lost decade. Or, will prices drop 10% more in the next year or two as Cville slowly unwinds? For that to happen, rents would also fall with it (for multiple reasons) and we'd be seeing deflation.

ASSUMING Cville conformed to national trends, things are close (not all the way, but close) to historical norms by rent and inflation ratios.

http://cr4re.com/charts/charts.html?Home-Prices#category=Home-Prices&chart=RealHousePricesDec2010.jpg

http://cr4re.com/charts/charts.html?Home-Prices#category=Home-Prices&chart=PriceRentDec2010.jpg

However, Cville is still inflated by 5, or maybe 10% compared to Virginia. I say that looking at the only interactive repeat sales index I know of...

http://www.fhfa.gov/Default.aspx?Page=14

If you take the time to plot the VA HPI (NSA) along side the calculated price of the Charlottesville MSA (no downloadable data for Cville, so you have to use the calculator to impute it and plot it in excel). Cville has been coming down (based on the data) slowly since 3rd Q 2007. Happy to post my graph, but don't know how in this comments section.

It remains to be answered whether Cville will slide to conform to Virginia, or is it truly protected and have we come to rest at the high price of a "world class city." We're already seeing price increases in Washington DC and Northern Virginia. (Again, from calculatedriskblog.com)

As for me, I think the only way this country is getting out of all this debt and all the underwater homeowners is to inflate our way out.

I'm going all in. No more bluffing. Going to make an offer on a home that is listed for less than it was purchased in 2004.

After all, if you wait for everyone to say it is a great time to buy any investment, you've usually missed the bottom floor.

Wish me luck.

Anonymous said...

Houses are consumables not investments. James Altucher's Why I Am Never Going to Own a Home Again should be required reading for buyers.

Montpellier said...

@Almost Ready: The issue with your analysis is that you're not looking at how out of whack c'ville salaries are with c'ville house prices. Our sales mix is...mixed up...so the numbers are trending down, but in fits and starts...asking prices are still badly skewed for middle and upper end listings.

Another year, I think.

Reluctant Buyer said...

Calling Bullsh*t on this comment. You are not an actual buyer. You are trying to provoke response using data that an actual buyer wouldn't use.

And if you are actually a buyer, you are uneducated about how local regional and national market data inform each other.

We are capitulating and buying this year because we need a place to live as well as a public school that we actually choose.

But for every house we look at we calculate the thousands of dollars we WILL lose if we have to move before the many years we hope to stay in the place.

Read the Altucher link. RIP $100,00 is correct.

AliG said...

almost ready,

great analysis of your situation and the market. I think it is important to distinguish between where houses are selling at (perhaps within 5-10% of the bottom) and where most are listed at (still in fantasy land).

I agree that the Fed/White House has come to the conclusion that the easiest way out of an almost untenable budgetary clusterf-ck is to inflate our way out of it (i.e. steal money from savers). However, I don't see how this is going to be possible in the short to medium term. QE1, 2 and possibly 3 can have no impact except for commodity inflation through speculation and therefore margin compression. But it will not cause income inflation until the government starts spending a lot more money - a situation unlikely to unfold with the current congress. So we are more likely to see stagflation than inflation, and credit dependent assets (housing) is likely going to continue to deflate.

Good luck with your offer - please let us know how it goes.

Montpellier said...

I agree that the Fed/White House has come to the conclusion that the easiest way out of an almost untenable budgetary clusterf-ck is to inflate our way out of it (i.e. steal money from savers).

Two points:

1) It's not just this whitehouse or even the fed - it's what the US government has done with nearly every single massive budget shortfall - starting with the revolutionary war and going forward...long before there was a "fed".

2) The "savers" you're stealing from are, by and large, the top 1% of the country who hold a wildly disproportionate (nearly half) percentage of our total wealth (savings) - the top 20% have nearly all of it. Those "savers" are in fact the core of the modern Rentier Economy - non productive rent-seekers who tax the regular economy by hoarding the "means of production" (ie, capital). Inflation is indeed a hidden tax, but a tax mostly on wealth, and the wealth of that group.

The rest of your comment is 100% dead on. The problem is that we are unlikely to have wage inflation - any time soon - for a variety of reasons - not just government spending - but mostly due to outsourcing and H1B import sourcing. What we really need, following housing, energy and commodity inflation, is a round of wage inflation...but that's been on the downward trend for over a decade now...which is why everybody was HELOCing up to their eyeballs .

Anonymous said...

Almost Ready please give the price range and city or county or even neighborhood or subdivision

you've probably thought about this but just because the home is listed for less then what current owners paid doesn't mean it is a reasonable price

AliG said...

Montpellier,

I don't agree with your second point. The savers who are stolen from are those that hold their wealth in cash and bonds/treasuries. The value of those assets diminish with inflation. Other assets such as property, businesses, stocks etc, inflate with inflation.

I doubt there are many in the top 1% (or 20%) of the wealthy who keep a significant portion of their wealth in cash and fixed income assets. The ones that do tend to be middle class who are close to or in retirement and need a safe stream of income.

While it has been true in the past that inflation has tended to hurt creditors (the wealthy) and assist debtors (the low and middle class) we now live in a different age. The big banks are themselves leveraged to the gills (i.e. they are themselves debtors), are mostly insolvent when marked to market, and continue to receive unprecedented backdoor tax payer bailouts via the POMOs/ quantative easing programs. (The fact that the populace is not demonstrating in the streets and setting up guillotines, is probably due only to the fact that they do not realize how badly they have been shafted and how much worse it will get.) If, in fact, inflation did take hold, this would benefit the banks as it would allow for a housing market recovery and prevent the ongoing massive deleverging that is currently crippling banks. It would also serve to bolster the ponzi scheme of a "stockmarket" that is currently highly unstable and the source of much of bank income now that the banks are no longer earning a living making loans to regular people.

Almost Ready said...

AliG, the scenario in your last post is the scary one.

If we see serious deflation, we're all going down and it doesn't matter whether you rent or buy; you'll be fighting for survival and food.

HOPING that it doesn't happen, one still has to contend with the price of living in Cville. Expensive rent, or expensive house. Yes, housing is a consumable not an investment, but you still have to deal with it, even if you don't over-consume and live in a "typical" home relative to your income by historical standards.

If, Lord willing, you will stay at your current job for the indefinite future, it is more affordable to buy (at today's price/rent ratios in Cville). Of course, if the gov't takes away the mortgage deduction, the whole equation gets turned on its head.

To answer other respondents...yes Cville prices still elevated compared to income, but such is the case in the rest of the state. If you were to rank Virginia cites by median income and look at home prices, I think you'd see a close correlation.

Back of the envelope stuff here. Using the fhfa calculator (I obviously love that thing) gives some interesting #'s. A home price estimate for 4th Quarter 2010 (most recent index data available) based on a 150K home purchased 1st Quarter 2000 is as follows.

All of Virginia: 252,994. Washington DC: 295,585. Harrisonburg: 246,784. Cville: 277,625. Winchester: 226,128. Richmond: 243,853. VaBeach/NewportNews: 292,228. Lynchburg: 235,712.

To Reluctant Buyer: Love the handle as I think it aptly describes our family's situation as well. We are pretty clear about the risk of losing a bit on a house. But, if I was THAT worried, I would rent and pay for the kids to go to private school if I lived in a bad district, or consider home schooling.

86 said...

Using HPI is a mistake, imho. Could you please explain why you would use it?

The HPI is for REPEAT sales. It does NOT take into account

*Homes built in this area during the boom that are now for sale at a loss (not even short sale just owner taking loss.) Since they were new construction they haven't been input to index yet.

*The huge inventory with listings growing by 10-50 properties per day which (in any other market) will cause downward pressure on prices

*Foreclosure prices or number of sales

*Number of short sales

*The continuing lack of well-paying jobs that support current asking prices. NGIC isn't doing what was hoped for the market because there are
a. lots of short term contracts
b. commuting from Albemarle County is too long
c. employees own elsewhere/can't sell

2 suggestions:

Take the HPI out of your calculations (and get a new realtor if she's using that) and see where you are.

Find a seller with equity and do a lowball offer.

Almost Ready said...

I am NOT an economist, but I'll reference a more widely used index...

"The S&P/Case-Shiller Metro Area Home Price Indices use the “repeat sales method”
of index calculation – an approach that is widely recognized as the premier
methodology for indexing housing prices – which uses data on properties that have
sold at least twice, in order to capture the true appreciated value of each specific sales
unit.
Please refer to the Repeat Sales Methodology section for details.
The S&P/Case-Shiller Metro Area Home Price Indices originated in the 1980s by
Case Shiller Weiss's research principals, Karl E. Case and Robert J. Shiller. At the
time, Case and Shiller developed the repeat sales pricing technique. This
methodology is recognized as the most reliable means to measure housing price
movements and is used by other home price index publishers, including the Office of
Federal Housing Enterprise Oversight (OFHEO)."

86 said...

A R, I understand how the indices are calculated.

I'm saying that there are many factors which I listed in previous comment that will get you a better price. If you are using the HPI or your realtor is you are not using the best information on where this market is and for that matter where it is headed.

Down.

Montpellier said...

doubt there are many in the top 1% (or 20%) of the wealthy who keep a significant portion of their wealth in cash and fixed income assets. The ones that do tend to be middle class who are close to or in retirement and need a safe stream of income.

You could not be more wrong about this. Although those 'investors' may not hold the instruments directly, they are most certainly invested in Hedgies who in turn are massive bond holders. Who do you thing does all that business with PIMCO?

While it has been true in the past that inflation has tended to hurt creditors (the wealthy) and assist debtors (the low and middle class) we now live in a different age.

Oh, "it's different this time" - kind of like the last RE bubble?

Look, nothing at all has changed about these fundamentals. Having asset-stripped the homeowners, and next the taxpayer, this gang is very concerned that no actual inflation appear (that would mean some of that bailout was leaking out into the main street economy).

The big banks are themselves leveraged to the gills (i.e. they are themselves debtors), are mostly insolvent when marked to market, and continue to receive unprecedented backdoor tax payer bailouts via the POMOs/ quantative easing programs.

I'm quite familiar with this...and it is my point above. But you're drawing the wrong conclusion.

While some banks (more than others, eg, Citi v. GS) are massively leveraged themselves, their owners - whether SWFs or the Koch Brothers & Waltons - their lenders - are not. Those are, in fact, the top 1%. Just because they're hidden behind a lot of shell/holding companies does not mean that the ultimate bagholder/benefactor is any different.

(The fact that the populace is not demonstrating in the streets and setting up guillotines, is probably due only to the fact that they do not realize how badly they have been shafted and how much worse it will get.)

Yes, it is a testament to how financially ignorant and illiterate our general population is. It's just the first of many such illustrations - a quick glance at tax policy - the glaring differences in the rates paid by Hedgies and the rates paid by working schmucks is another stunning example.

Montpellier said...

If, in fact, inflation did take hold, this would benefit the banks as it would allow for a housing market recovery and prevent the ongoing massive deleverging that is currently crippling banks.

What you don't seem to understand is this: the banks have taken the rest of us hostage. Sure, inflation helps the banks - by helping their debtors. The rain does fall on the just and the unjust alike, but in this case, you're funnelling the help through debtors, instead of through the banks (as we have currently done). The question is: are you more worried about punishing the unworthy (irresponsible lenders and borrowers) or saving the worthy (the rest of us getting killed by this downturn?).

It would also serve to bolster the ponzi scheme of a "stockmarket" that is currently highly unstable and the source of much of bank income now that the banks are no longer earning a living making loans to regular people.

High Frequency Trading depends on volatility in the market, not the absolute value of the market. That's where they're making their money, and you know what? They're still doing that, today, now, already, even in the nearly deflationary environment we have.

I don't believe anyone can sort out the "good" and "bad" apples at the micro level. At the macro level, it's clear that inflation now, as always, has hurt those who've cornered all the capital - the Rentiers who own all the capital in our economy, and tax - and it is a private tax - every single economic activity the rest of us engage in. In fact, Central Bank Fiat currency control is the only lever the people - the government - have over private interests.

Let the bondholders take a haircut. Maybe they won't have such an appetite for the next round of "AAA" private label mortgage backed securities being shoveled out by GS and it will have the desired "free market" effect of...how would St. Allen Greenspend put it, "correctly pricing risk".

There are no 'savers' in the main street economy anymore and there haven't been since the inflation of the 60s and 70s taught us that we should leverage the hell out of ourselves for inflation-sheltered hard assets (real estate) - that's over a generation now.

AliG said...

Montpellier,

in response to your first comment it seems that perhaps we are of similar mind in more areas than not. However, since I lack a background in economics and finance, and you seem to be well versed in these areas I will conceed that you may very well be correct in the areas that we disagree. That being the case, I can't help but to call it like I see it. So:

"Although those 'investors' may not hold the instruments directly, they are most certainly invested in Hedgies who in turn are massive bond holders. Who do you thing does all that business with PIMCO?"

The last time I checked, PIMCO's holdings in treasuries were exactly....zero. But they sure made a fortune before cashing out. Seems that hedgies are not handcuffed to any type of asset and take advantage as circumstances allow. If you are rich enough you can put your money anywhere.

"Oh, "it's different this time" - kind of like the last RE bubble?"

No - not different in terms of "this bubble won't pop" but different in terms of we no longer have the Glass-Steagall Act, courtesy of Gramm-Leach-Bliley Act, and then, adding insult to injury the Dodd-Frank Sleight of Hand Act. Banks are no longer appropriately limited in the risk/leverage/debt that they take on. They are running a casino and losing big time, but as long as they don't admit it (aided and abetted by the Fed) they can keep the champagne flowing. But it seems that we agree on this.

I have no clue how the Koch Brothers & Waltons are invested, but if they are as exposed to inflation as you suggest, I think they should change their financial advisors.

With regards to your second comment, I did not really intend to put forth a personal opinion about what should happen, just what I see is or might happen. But since it has come up :)

I don't think anyone should be "punished" through economic policy, whether you are rich or poor, have benefited from economic circumstances or not. I do think there should be punishment for those who have broken the law and stolen from others. that punishment should be in the form of real jail time. I think there are many folks around deserving of this and they include bankers, corporate executives and politicians. This has not occurred yet, which serves to encourage continued theft and law-breaking.

There is no way out of this financial mess without significant pain, so the path forward should be one that allows for the possibility of future recovery after the initial pain. Deleveraging and deflation are the natural consequences of the business cycle and IMO is a HEALTHY process of creative destruction. Over the past 30 years, the feds actions have attempted to minimize the impact of the normal business cycle and in the process have created increasingly bigger bubbles and busts. I am certainly not smart enough to know whether at the current time a path of inflation or deflation is better for the overall outcome for this country. Certainly, the Fed's current actions are going to lead to neither (looks like stagflation is coming). But one thing is clear - we no longer have a true free market, and the sooner that is fixed the better for most people.

Almost Ready said...

Have come to some interesting conclusions in looking at houses.

First, and this is also an answer to 86's question earlier, the reference to market price declines in percentages is not evenly applied to the goods for sale. When we say that Cville has seen only a 15% or so decline from the peak, that must reference a standardized number, which is best done with a repeat sales index. To reference the mean or median doesn't give you a comparative analysis.

So, what do I mean by interesting conclusion? If 30% of home sales in the last few years have been distressed sales, they account for a leveraged portion of the price decline. You can see it now in the houses for sale. If you want a foreclosure or short sale and are willing to put in the money or work that it will take to purchase, it can be had for a better price. If you want a house in move in condition, sellers are still expecting, IMHO, way above market value. May not get such a "deal" after all for a place we'd like.

I was discussing with a work colleague the angst I feel over our situation (rent vs buy), and how it seems so odd to try to be predicting the market on an essential consumable good like shelter. Seems like you do that over your investments, but not your house. It used to be just save up a downpayment and live somewhere.

He reminded me of the following: "Come now, you who say, “Today or tomorrow we will go into such and such a town and spend a year there and trade and make a profit” yet you do not know what tomorrow will bring. What is your life? For you are a mist that appears for a little time and then vanishes. Instead you ought to say, “If the Lord wills, we will live and do this or that.” As it is, you boast in your arrogance. All such boasting is evil."

Who am I to predict the market? If we need a place to live, the wife doesn't like the rental, we "plan" to be here longterm, is it really worth the potential benefit to wait out the possible/likely housing market crash? If I come with 20% down and buy a house that is no more than twice my gross annual income, I could absorb a potential market crash, but I'd also stop checking mycaar everyday and focus at work. Time to live life.

Almost Ready done with journal entry for the night.

Anonymous said...

Almost Ready, my family and I were in the same situation. We moved from out in the Midwest (which did not see nearly the bubble that other places have) and were very fortunate to sell our home (for $5k more than we bought it for 4 years prior) within 6 months of listing. Since the home was a relatively large size, we were completely cramped in our 2 BR apartment and generally hated it after having the freedom of a house and a yard. My dog wasn't happy either!

My advice would be identify where you want to live and what price you're willing to pay and stick to it. Look for houses above your price range that haven't sold and consider underbidding... that way you won't be tempted to overpay on the home. We eventually found a place within the city that was a "good enough" size (still smaller than our old house), that the very important things (roof, floors, etc.) were in very good condition or recently re-done and the yard was absolutely incredible with landscaping and the size. However the design is stuck somewhere in the 1950's. We underbid by about $65k and, since it had been one family living there their entire lives, no one was losing money by that situation and they accepted the offer. We were fortunate with this offer, I know.

So, my advice would be to look for older homes (particularly if you don't mind some projects) with people who did NOT buy at bubble prices. You can make cost effective improvements in the home that, while you may not see your money back, will help shield you somewhat until we find the bottom of this market unless the bottom just totally drops out of the economy (in that case we're all screwed anyway).

Good luck! We do enjoy being in a house again although the number of projects is mounting very quickly....

Anonymous said...

Give 5 reasons this market is going to improve over the next year, Almost Ready, and then you'll have answered your own question Who Am I To Predict This Market

Anonymous said...

Come ON, anonymous 3:34 p.m. You have to live somewhere. Almost Ready is right on, and we did the same a year ago. In fact, according to the county assessment, we're 20% over where we bought. Haven't regretted buying for a moment--my kids love being settled and so do mom and dad.

Anonymous said...

I didn't say Don't Buy I'm saying you CAN predict the market, unless you're a Realtor and then you claim I Don't Know and hope a buyer believes you

The market has nowhere to go but down so if you do buy now you need to lowball

If your assessment increased 20% you should be challening it but I think this is just an exaggeration

signed 3:34

Anonymous said...

Hey, 3:34, 8:15 here,
I didn't mean to intimate that the assessment had gone up 20% in one year; it went up 4-5%. We are 20% above how much we paid last year to buy the property, according to the county (meaning we were 15% above when we bought it). The mortgage lender actually sprang for three separate appraisals during the lending process, even though we were going in with 20% down, because the bank's appraisals kept coming back so much higher than the purchase price. Of course all this just feeds into the notion that the local market is likely to continue to fall significantly; I don't disagree. My point was simply that 1) people have to live somewhere and spend money doing it and 2) with the right situation, motivated seller etc., it is possible to buy in below current valuations, and has been possible to do so for at least the past year.

Cville Bubble Blog said...

8:15, what the tax man wants you to give him and what a buyer will pay are often two figures that have little resemblance:

http://realcville.blogspot.com/2011/02/on-property-tax-assessments-some.html

The tax assessment isn't the "valuation" that educated buyers will use.