Friday, December 30, 2011

Real Estate Recap - The Top Stories of 2011 In Charlottesville, Virginia

The following is a list of highlights/lowlights of real estate in the Charlottesville Area during 2011; many of the stories will continue on through 2012 or 2013.  This list is not ranked in order of importance; rather, it has a certain logic to it, and unfolds accordingly.  The Kluge and Trump stories appear near the end of the list because they've been extensively covered in local media.


1. The Virginia Housing Development Authority Market Forecast - Charlottesville Area home sales are at a 13-year low, and the agency expects further price declines. 

2. "Distressed Sales" Are a Growing Segment of the Market - How significant are Foreclosure resales and Short Sales?   The Multiple Listing Service of the CAAR indicates 17%, or nearly 1 in 5 sales.  Others, including a Realtor known for providing local consumers with transparent data, Jim Duncan, suggests the number is between 25-30%, or nearly 1/3 of sales.  This is more in line with the national average.  As of October (most recent data) foreclosures were 25% higher than in 2010.  Data for November shows Virginia is #19 in ranking of 50 states. 

3. 2011's Home Sales in Central Virginia - have exceeded 2010's.  This is what foreclosure resales, short sales,  lower prices, and a mortgage rate hovering at the historically low 4%, can do for a market. For all sorts of reasons, we're not out of the woods, however, which leads us to...

4. The Market is Still Looking For a "Bottom" - Defined as an end to price declines and a stabilization in number of transactions.   Local Realtors, and this blog, offer opinions, and weigh in again, then add even more to the topic.  Finding a bottom is made more difficult by certain factors such as... 

5. One in Seven Virginians owes more than the house is worth  - Negative Equity is a plague on local and national housing.  But the story is even worse: in the US 50% of homeowners have effective negative equity, which means they can't move or "move up."  For instance: 

6. Charlottesville City Manager Maurice Jones - has been unable to fulfill a contractual obligation and move into the City because his house is now worth less than what he paid.   No buyer thus far.  He's a publicly-known example of many struggling homeowners in this area. 

7.  New Construction - As of the end of Q3, new homes accounted for 15% of all salesIn many neighborhoods, it is cheaper to buy a new house than a bubble-era "used" home for which (sadly) the seller still owes $$$. 

8. Habitat For Humanity - Has been responding to the need for affordable low-income housing for years now, in a City where about 20% of residents live at or below the poverty level.  C'ville Habitat becomes the first Chapter in the Country to begin transforming a trailer park into single family homes and attached units, while keeping the residents in place.

9. The C'ville Area is Having an Apartment and Townhouse Building Boom - Local developers, following a national trend (folks unable to get a mortgage, or actively shunning purchase), see the need for 100's of new apartments and townhomes.  This leads to unbelievable congestion on 

10. Rio Road - While many complexes have been planned adjacent to the road, little or no consideration has been given to the infrastructure impact on traffic, sewers, schools, etc., in the area.  It is an unfolding debacle  When is Park Street going to be widened? [right!] Add in....

11. The Meadowcreek Parkway - the County's portion is set to open in January.  The City still has no firm dateEgregious.

12. The Western Bypass - It's been in the works for two decades, its price has suddenly doubled, and buyers and sellers are already taking its potential existence into consideration.

13. Bundoran Farm Foreclosures - BF was a planned agrarian utopia that was a great idea, if only it could have started 10 years earlier.  In separate foreclosure auctions, the original Manor House went back to the bank for $2M and  2,000 prime Albemarle County acres purchased for $33M went back to the bank for $7.3M.  While the developer remained optimistic, no plans have been solidified to continue the project. 

14. Earthquake! August 23, magnitude 5.8Louisa County was home to the epicenter, Mineral, and suffered millions of dollars in damage to schools and 1400 homes.  Additionally, The North Anna Nuclear Power Plant is the only US reactor to ever shut down from earthquake vibrations.  Giant concrete waste casks, weighing tons, moved several inches.  It is unknown what impact was felt in the many miles of piping beneath the plant.  The nukes were  restarted on November 11. 

15. Louisa County - the housing market, already suffering, took a big hit from the earthquake. After a lot of wrangling, FEMA finally grants aid to Louisa and to the damaged schools.

16. The Shops at Stonefield - formerly known as Albemarle Place, the mixed-use shopping center project broke ground on May 10 at Hydraulic Rd. and Rt. 29.  As of this posting, many acres of land have been graded and lots of giant sewer pipes have been installed, but no building has begun.

17. The Reserve at Belvedere - Belvedere, once touted as a "Green" housing project comprised of single family homes, townhouses, and a retail component, off Rio Road, suffered a crisis in 2009 and then sold land for an apartment complex component, a late addition to the Development, in 2010; it broke ground in March, 2011.  The apartment buildings are rising quickly and will be ready for rental in 2012.

18. The New Martha Jefferson Hospital - Opened on Pantops Mountain in August, taking away a reliable tax base for the City of Charlottesville. 

19. The Old Martha Jefferson Hospital Building was bought by Octagon Partners for $6.5M. The CFA Institute will pay Octagon $24.5M to refurbish the building for a 2013 opening. CFA's HQ are currently in UVA's Fontaine Research Park; when the CFA moves into MJH, they will add 45 new jobs and infuse some cash into the City's tax base. 

20. The Waterhouse Project - After years of changes in the planning stage and downsizing, the Downtown success story met its tax deadline for completion, and the company it lured from Albemarle County, World Strides, is able to move in and benefit from tax breaks given by the City.

21. The Landmark Hotel Remains Unbuilt - a blight on the Downtown Mall since 2008, the problem of the hotel and its debts made appearances in various court rooms and court documents this year.  This blog believes it will never be finished.

22. Most Illuminating Local Real Estate Reporting - Biscuit Run - the scandal over appraised value and tax credits combined with what seems to be political favoritism.   The story has been growing since December 2009, when the land was sold to the Commonwealth in a surprise late December deal for a State Park that may not open until 2020.  The Hook has scrupulously researched the story, the latest of which includes the developers suing the Commonwealth of Virginia for $20 Million more in tax credits.

23. Most Misguided Local Real Estate Reporting - "Health" of the C'ville Market - With new construction at a 50 year low, The Daily Progress touted the opinion of a trade publication with a banner headline and puff piece.  This blog pointed out the problem with the reporting. 

24. Patricia Kluge's Multiple Foreclosures - Albemarle House and Kluge Estate Vineyards and Glen Love and Fuel C-Store Bistro.  Finally, Kluge and husband Bill Moses Filed For Bankruptcy.

25. Donald Trump becomes a property owner in Albemarle County - buys Kluge Estate Vineyard and installs son Eric as Vintner, with help from Kluge and husband Bill Moses.  Trump tells Bank of America that Albemarle House is Worth $3M.

How bad has the housing bust been?  On December 21, The National Association of Realtors Admitted it Misled Consumers, Congress, and Wall Street - The trade association inflated home sales by 6.5 Million units from 2006-2010, meaning the bust was 14% worse than reported.  Here's the impact on C'ville.

What has the Too Big to Fail Banking Oligarchy done for homeowners?  We're in the middle of a systematic dismantling of property rights and, as a consequence, the destruction of the middle class.

Lastly, DIA/NGIC new hires,  hoped for in '09 and '10 as market-revivers, weren't in 2011, either, and still can't get there from here.

Related:
The Hook's RE Wrap Up
Free Enterprise Forum's Top 10 Stories to Watch

Thursday, December 29, 2011

Chart: A History of Home Values - Updated

The chart below is by Yale Economist Robert Shiller of the eponymous monthly Case-Shiller Home Price Index (most recent--yikes).  We last posted it in August, 2010.  Now it appears in The Atlantic Monthly in an article about Americans' savings strategies.  The article points out that by historical standards 1) houses still  remain overvalued; and 2) homes are no longer a way to "force savings" as values continue to decline.  Click on image for larger version.

Related: 
The NAR Misled American Consumers, Congress, and the Media By Inflating Home Sales 
The Growing MERS Scandal: Undermining American Property Rights, Transferring Wealth to Big Banks

Tuesday, December 27, 2011

Three Realtors and A Bubble Blog - Part 4: Where's the Bottom in the Charlottesville Area Housing Market? What Impact Do External Factors Have on Home Sales and Prices?

This is the last in a four-part series.


Related:  After this series began, the National Association of Realtors disclosed that they'd inflated home sales by 6.5 million units between 2006-2010.  Lawrence Yun, the trade org's chief economist (who allowed himself to make pronouncements about market health and announce monthly sales that were nothing more than a series of bad guesses) suggested that consumers should rely on local data.  Good advice.  But there's more to the story than that, which is covered in "So the NAR Inflated Sales From 2006-2010.  What Does This Mean For the Charlottesville Area Housing Market?"

THE QUESTIONS:

4.  In your experience, OTHER than economic needs (liens, debt) why don't/won't sellers who CAN lower their prices?  Is there anything you can say/do to convince them of market realities?

GREG SLATER

I feel like I could write a book on this topic.  In short, sellers don't lower prices because they are not motivated enough to take less than they want to get for their home.  In some cases they believe their home is worth more than the data suggests.  There are many scenarios and every seller has their own story.  I work very hard at sharing data and market information to help my clients understand the market to make good decisions.  I am immersed in this information every day.  Sometimes it takes time for a homeowner to come to terms with the reality of their situation.  For some, that means being on the market and getting a feel for the market through showings and offers, or lack thereof.  In some cases, there is nothing I can do or say to convince a seller of market realities.  Sometimes it's not that they don't understand market realities, but more that they are not ready to deal with market realities.  Sometimes, people just disagree on value. 

JIM DUNCAN

Great question. Often those sellers who choose not to lower their prices even though they can, choose not to because they

a) Feel that their house is worth more (feelings are sadly irrelevant in the market(
b) Don't want to believe that they've lost X
c) Don't have to sell; they'd like to sell but there is no compelling reason to sell. Most often they would like to sell so that they can buy/move to do something else and if they can't make x, they can't do y. Unfortunately, buyers and the market care neither about what the seller wants to do or what the seller needs/wants to make.

I can't convince sellers of anything other than if they want to sell, they need to price it here. Sellers don't need to be more patient; if they want to sell they need to price it to sell.


MICHAEL GUTHRIE 

Many sellers think their home is in the best location and in the best condition therefore deserving the best price.  They for the last few years wished upon a shining star that the market would come back allowing them to get a better price.  Folks who have a significant amount of equity including 2nd home owners or folks who are retired thought they could wait this market out.  I think the market has been tough enough for too long and that sellers are finally waking up to the fact that unless they lower their price, they will not be able to sell their home.

 


C'VILLE BUBBLE BLOG
  • What it comes down to is this: Sellers are pricing for what they hope to get in the immediate moment.  See this.
  • Rational, educated Buyers know they are going to live in the place for 7-10 years and that in the near-term, 1-3 years (and that's possibly optimistic) prices are going to decline by 15+% more on average.  Some sectors will be worse.  Think high-end.  Think McMansion.  We don't see any home out in the county, 1,000 acres or less, as worth more than $3 Million.  Buyers are trying to price for tomorrow so they don't make the same mistake as bubble buyers.  This is a prevalent fear, when even 2010 Homebuyer Tax Credit Buyers are now underwater.

5.  Care to speculate on where the PRICE bottom is in this market?  What quarter?  Year?

JIM DUNCAN

The bottom. Well, I was wrong. But hey, I tried. We've been trying to find the bottom of the real estate market for so long, I'm not sure what it even looks like. I have no idea. I've also been saying for years that:
a) We have another 9 to 18 months of decline.
b) Prices are likely to decline an additional 5% to 7%.

I'm sticking by my predictions. Again.
I'll let you know when we've hit bottom when we've had two years of stagnation. 

MICHAEL GUTHRIE 

I believe we are bouncing along the bottom now and that prices won’t decrease much more.    I think we will continue to see uncertainty with little or no appreciation for the next year or so. 


C'VILLE BUBBLE BLOG 

At the moment, we're going with Q4 2015, which is what our blog header states.  This is based on the fact that price peak was in 2007 or 2008 in this area, and the average unwind of a bubble takes 7 years.  It's also based on likely recession in 2012. And that there are no short term buyers and move-up buyers are scarce.   After the price bottom, "appreciation" will be negligible.  Click for larger image in new window.
 


5a.  Care to speculate on when Inventory may be balanced again, neither in favor of buyer or seller? 


JIM DUNCAN 
 
We're going to have a balanced inventory when the distressed sales - short sales and foreclosures - have worked their way through the market. The banks and the government have screwed things up so badly that I really have no idea when that's going to be. Speculating on when incompetence -deliberate or accidental - will accidentally stumble into success is a fool's game. 

MICHAEL GUTHRIE 

Inventory is why we won’t see improvement.  There is nothing to give us any reason that this high level of inventory will be reduced any time soon.  The reason for this is the shadow inventory created by short sales and bank owned properties.  This along with all the property owners who would like to move if the market improves will keep inventory levels in favor of the buyers for some time to come. 

GREG SLATER 

I don't [care to speculate - bb].  Both of these are impossible to answer with any certainty and potentially different segment by segment of the market.

C'VILLE BUBBLE BLOG

In this market, and many others, a decline in inventory does not necessarily lead to a rise in prices. 

6.  Are there any national economics websites or news sources that you direct buyers or sellers to, in order to assist with an asking or offer?

JIM DUNCAN 

Right now my favorite economics sites are:



GREG SLATER

In general, no.  When working with buyers, the process, conversation and the sharing of experience has always lead to a clear offer strategy.  Different clients rely on my advice on different levels.  If you get to the point of making an offer on something, it's my hope you have spend enough time evaluating the market over a period of time to feel confident in one's decision.  I do share information from a variety of sources I peruse on a regular basis that I deem relevant to current and potential client relationships. 

MICHAEL GUTHRIE 

No.  We try to keep the information local and feel the statistics caar.com offers if used properly can educate our clients as to what it means to them buying or selling property.
I will watch the Keeping Current Matters blog, RISMedia, and Inman News to keep up to date as well as staying current with what VAR, NAR, and our relocation broker network (leadingRE.com) are saying about the market.



C'VILLE BUBBLE BLOG

We read/reference the sites on Jim's list on a regular basis.  Also: 

7.  Got any PIIGS/ Euro fears?

Wikipedia on PIIGS 

JIM DUNCAN 

Nothing specific other than the fact that our world's economic situation is tenuously held together by hope and fear of what might happen, and a strong desire for our government to neither get involved nor to loan anyone other than Americans money. Further, every day as I flip between Bloomberg and CNBC I come to realize just how interconnected our collective economies are and how our dependence on cheap, plentiful fuel is dangerous - to the world's economy, our economic stability, our involvement in wars and regions around the world and human settlement patterns … which leads back to the local housing market. Everything affects housing.

That said, these are three relevant (as of today [Nov. 1]) perspectives:

MICHAEL GUTHRIE 

Sure.  Anything that can cause negative economic results for our country have to be of concern.

GREG SLATER

Not really.  When it comes to national and global economics, my concern is what it does to overall confidence. 

C'VILLE BUBBLE BLOG

PIIGS, the collapse of the EuroZone, the wipeout of capital, plunging us into another global recession, Iran's current shenanigans, the ongoing oil crisis, money printing, social unrest, some Black Swan event, etc etc etc,  all are great reasons to buy rural property right now.  A couple acres with a garden plot, sheds for cow and chickens, a well, solar panels and generators, guns and ammo, a place to stockpile food, a pack of dogs, fencing, your HAM radio.  You hope for the best but  prepare for the worst.  If nothing else, you'll be ready for the growing problem of weather emergencies (Cville's microbursts, Hurricane Irene, Louisa Tornado, Snowpocalypse, Snowmageddon, Aug. 23 earthquake).
 
8.  Any comment on new HARP program, or the rumor of principal reduction that could come with the Attorneys General settlement over MERS / robosigning?  Help or hurt the market? 

JIM DUNCAN 

MERS concerns me greatly. Realistically, it may be as big of an issue to the system of real estate ownership as foreclosures. MERS doesn't seem to be in the conversation with many (most) real estate professionals with whom I speak, nor many associates with real estate … it's under the radar unfortunately. I can't even begin to speculate on the scale and scope of this other than to say it's likely to be HUGE. 

MERS (Mortgage Electronic Registration Systems) seems like a nice enough, small business (about 50 full-time employees) located in Reston, Virginia. But MERS has turned into a monster that is wreaking havoc over our foreclosure process.

What is MERS? (read the whole thing)

What is MERS |Background
MERS was founded in 1995 by Freddie and Fannie, Bank of America, and Chase, as a way to upgrade and modernize the country's centuries-old handwritten system of land records. By making this process more efficient, banks were now to make the process of securitization (bundling loans and selling to investors) quicker, cheaper, and easier. As a reward, MERS holds the titles to over 50% of all mortgages, or 60 million loans!

GREG SLATER 

I think the jury is still out on this.  I think most feel past programs were a failure and there is a built-in prejudice regarding this program or any speculation or new proposals until there is real evidence they are working as planned.  I did just see this article today: new HARP refinance statistics, from Oct. 31. 

MICHAEL GUTHRIE 

I find myself concerned when the government is once again spending money they don’t have with no plan as to how to raise what they spend.  It could help the market however short term because it has the ability to keep more homes being foreclosed on and coming on the market at bargain basement prices.  The more this happens, the less chance there is of home prices stabilizing

.

C'VILLE BUBBLE BLOG

What Jim said. Caveat Emptor.


9.  In many parts of the US, well-priced NEW construction is pushing the prices down of "used," existing homes.  But not in City of C'ville, and not in much of Albemarle (even when seller has equity).  What's up with that?

GREG SLATER 

I've always said new construction prices set the market.  Speculative building has subsided and the majority of new sales are "orders" for new homes.  This is valuable data.  This is representative of the leading edge of demand in the market.  I can show evidence of this in segments of our market, but usually in places where over building occurred at the top of the market.  Demand has changed.  The reason this is not more evident in Cville and Albemarle is the lack of supply for buildable lots in some locations.  There are very few new home options in the city right now and not everyone wants to move to Crozet.  Essentially, if the home you're selling is competing with new construction, you need to take this into consideration when pricing your home.  There are a few communities that have been stuck in the pipeline [development process - bb] that could arrive in 2012. These will have an impact on the market.


MICHAEL GUTHRIE 

I have already addressed why some sellers are not willing to reduce the price to a point that it will sell.  Ultimately, well priced NEW or EXISTING  homes will sell and the others will have to follow suit if they want their property to sell.  Case in Point—Much has been made about the increased sales activity in both Belvedere and Old Trail over the past year.  Yes, both communities are now offering the amenities that had always been promised but I believe it was more about price point.  Not until the developers reduced the lot prices so that builders could build homes in the $300K + price range vs. $400-500K did sales begin to take off.  The Home Energy Performance features and the community amenities are nice but I believe price is what is driving the up tick in sales.




C'VILLE BUBBLE BLOG

Click on image for larger version.





JIM DUNCAN 

I'm going to attribute this to the fact that while a large portion of the buyers want new construction, there are more who want existing homes' locations. There's a balance here that is being drive in part by the market segmentation that we are developing. But.
In the City, new construction (right now) does not make up a large segment of the market - right now there are 317 homes on the market or under contract in the City; 35 are marked as being new construction. In the County of Albemarle, those numbers are 1306 and 347 respectively. That said, we have seen one builder in particular who has had a significant impact on the local market - they are selling so inexpensively that for many buyers, buying new is a better option. This impact is seen most dramatically in the town home market. I can't tell you how many times I've heard this year from buyers that they like a particular existing town home, but they can buy a new town home with more square footage and a garage for less. I'll write more on this later, but we have seen that existing home prices have been driven down by new construction. 

10.  Care to speculate on Western Bypass and impact on market?  

Cville Tomorrow has a website devoted to the road, which includes the Dec. 2011 update that 9 firms have been approved to proceed with bid proposals.



JIM DUNCAN

wrote earlier this year that "The Western Bypass isn’t the perfect road, and may not even be a good one, with it northern terminus being south of Forest Lakes. But this area needs transportation improvements." 

I think the Western Bypass may be built. But, like the Meadowcreek Parkway, I doubt that if we were to design a road today to be built tomorrow, we would design the Western Bypass. Our region's epic inability to implement transportation/transit solutions is legendary. I tell my clients that just because a project is being debated, it doesn't mean that it's going to be built. But … never assume anything.
Buyers should do their due diligence when purchasing a property. Look at the property, historic records, adjacent properties, the County sites for planned developments, infrastructure, etc.

MICHAEL GUTHRIE 

I don’t think the Western Bypass or the Meadowcreek Parkway will have any impact on the real estate market.  They are much needed for alternative travel but don’t think their completion will impact pricing except for those properties that actually back to the roads and a few neighborhoods that would benefit from easier access in and out of Charlottesville.  My experience has always been that the fear of what the roads’ impact will be creates more consternation than when the road is finished so folks don’t have to guess what the road will look like.



C'VILLE BUBBLE BLOG 

There are many listings in C'ville and Albemarle that are on or near major roads or highways, the 250 ByPass, and even I-64.  Very often the listing will say something like 'private lot with mature landscaping' and make absolutely no reference to the busy road abutting the property.  Here's a foreclosure as an example.  This is perfectly legal under the 'four corners rule' and agency privileges, but it infuriates buyers.  Due diligence is necessary about (including, but not limited to)  roads, neighbors, schools, vacant lots, cell phone and antenna towers, houses of worship, etc., on the part of the buyer.

Friday, December 23, 2011

So The NAR Inflated Sales Numbers From 2007-2010. What Does This Mean For the Charlottesville Area Housing Market?

The National Association of Realtors, whose primary purpose is to boost the profits of its members, has announced it misled home buyers, sellers, Congress, and the Mainstream Media about how deep the housing bust has been.  From 2007-2010, the NAR overestimated sales by 6.5 Million, at a rate of 14.3%.

And here's the kicker: the NAR's new numbers still aren't  accurate.  The NAR still isn't offering an actual, accurate count of home sales, but an estimate, which housing analyst Thomas Lawler says will be revised again.

Savvy financial bloggers have been deriding the NAR's lack of credibility for years (see Ritholtz and Middleton).  With the current debacle, CoreLogic (which outed NAR) and other data providers should become the leading sources for the MSM--and consumers--instead of the trade organization.

Before this post goes further pointing out the fallout from NAR's errors, it must be reaffirmed that this blog has a healthy respect for some individuals who are Realtors: we're in the middle of a conversation with three of them.  There are many real estate agents who outperform their trade organization in intent and detail, and they provide necessary services. Many agree it's outrageous the NAR has duped the American public and humiliated its members.  

The larger impact, however,  is worse than duping and humiliation.

What's the Impact of Reporting Inflated Sales Figures?

Real Estate is National - All real estate transactions may be "local."  But perception of and confidence in real estate is national.   We live in the Social Media Driven, 24 Hr News Cycle World of Constant Contact.

How is this important to C'ville? What happens elsewhere in the Country--price drops, buyer reluctance--eventually trickles its way to C'ville, 12-24 months later.  The bubble bursting, price drops and buyer fear got here a little later...but they got here, and are still going on.

Deception and Duplicity - We've all seen those ads where NAR pretends to be an advocate for families, and Realtors are portrayed almost as Good Samaritans eager to help folks get a leg up into their dreams.  In reality, the ads often used data that was outdated.

How is this important to C'ville?  
  • The duplicity comes from the mixed message: The NAR cares about profits, but some individual agents actually care not just about the money, but also have a sincere desire to help folks get into a home.  But the messages are confused.  
  • Since The Mother Ship has erred, it's even more confusing to consumers.  What about the CAAR? they ask. While the local numbers may not be in error, there are certainly areas in CAAR Quarterly Reports that need "clarification," ioho.  Examples: here and here and here and here.  
  • Are local media entities going to continue to print the NAR and CAAR reports verbatim, or will they do their own analyses? 

Credibility - Combine the false sales numbers with the propaganda, and you may have potential buyers and sellers who can't or don't believe anything that a Realtor says.  
Distressed Sales - Foreclosures and Short Sales now account for a larger market share than previously known.  The larger share of distressed sales pushes consumer sentiment lower. Foreclosures will continue to surge through 2013.


How is this important to C'ville?  Our own foreclosure and short sale crises have not abated.  Estimates range somewhere between 20-30% of total sales.  And then there are those who can't or won't do a short sale, sellers who bought during the bubble; many are hurting.  Here's an example that is being followed by local media.


Demand - There were 6.5 Million fewer buyers over the past few years.  Despite lower prices, low mortgage rates, and 2009-2010 $8K homebuyer tax credit, home sales remained low.  Now that there are approximately 6.5 million (stet) units in the foreclosure pipeline, and 14 million homes expected to be foreclosed by 2013, where are the buyers coming from?

How is this important to C'ville?  Low demand is a hallmark of this area after the frenzy of the bubble: no short-term buyers, and few "move-up buyers"   (It's not like we're raising our kids to stay here--they can't find well-paying jobs that will let them afford the real estate.) Rates are low and prices have dropped here, but we're still waiting for more buyers.

Downward Pressure on Prices - Lower demand and more foreclosures / short sales mean home prices will continue to fall.  The continuing decline of home values impacts the wider economy because folks have less money, fewer jobs are created, people don't buy as much stuff, more jobs are loss...vicious circle.


How is this important to C'ville?  Home prices in this area are falling faster than the national average and have accelerated in 2011.

GDP Revision - NAR's errors could impact the GDP, causing numbers to be lowered, and help to float the Country back to the technical definition of Recession  (We're actually in a Recession/Depression, but the NBER counts differently than folks.)  The Gross Domestic Product of the US was already just been revised down to 1.8% for the 3rd Quarter of 2011.  It's not looking good.  There's been false hope lately in the MSM.  See chart.


How is this important to C'ville? As evidenced by the 2008 financial collapse and Great Global Recession, all economies are connected.

Influence - The NAR spent $16.2 Million in 2011 on lobbying.  It has been peddling false numbers to Congress and the Federal Reserve, both of whom make policy decisions based on the data.  And the financial markets rise and fall every month on the trade association's false data.  Outrageous.

How is this important to C'ville?  We are years away from  price and inventory bottoms. 
The CAAR engages in its own advocacy: there's a trip scheduled to visit Richmond legislators on Feb. 15, 2012.

The upshot is, as always, Caveat Emptor. 

The local and national housing markets are years away from "Recovery," defined as the end of declining home prices and the overhang in inventory.  The charts below, from Housing Story, only lead to one conclusion: we're still in big *&^%$#.  
Don't miss "30 Key Charts to See Before You Buy or Sell Your Home"


This chart is from 2010.  By 2011, the number has grown to 1 in 4.



By 2013, 25% of all homes with a mortgage - 13 million - will have been lost to foreclosure.


Wednesday, December 21, 2011

The National Association of Realtors: The Housing Bust Was 14.3% Worse Than What We Told Buyers, Sellers, Congress, and the Media From 2007-2010

Annually adjusted data, from 2007 through 2010:
  • 2007 lowered 11% to 5.04 million
  • 2008 lowered 16% to 4.11 million
  • 2009 lowered 16% to 4.34 million
  • 2010 lowered 15% to 4.19 million
The NAR -- a salesmans' trade organization that masquerades as a consumer advocate and a reputable source of economic data -- released their long-awaited revised numbers today for existing home sales.   The latest press release  is mostly blather about how the mistakes were made, as well as some false reassurance that this shouldn't impact the consumer.  Paragraph 10 has the data.  

This blog will have an upcoming post on what this news does to consumers, Realtors, confidence, and the C'ville housing market.

Tuesday, December 20, 2011

Charlottesville City Manager Maurice Jones Would Be A Candidate For Short Sale or Strategic Default - If He Were a "Private Citizen"

The DP is reporting the ongoing housing downturn is preventing a local government official from fulfilling the terms of his contract.  Home values in this area continue to drop, and   1 in 7 Virginia homeowners owes more than the house is worth;  and effective negative equity is preventing sales and inhibiting "move up buyers."  These problems have thrown a wrench into the moving plans of the new City Manager, Maurice Jones, who had one year to become a resident, but has been unable to sell his current home.  The deadline for the move was a year from hire: December 6, 2011; it has now been extended 9 months.  
Jones currently lives on Templeton Road in Earlysville.  He paid $393k for a 3 bedroom, 2.5 bath house at the peak of the housing bubble in 2006; the house is currently assessed for $317k.  Assessments don't equal market value; market value is usually lower.   The most recent home sales data: November's 2011 prices were -12.26% lower than in 2010.  And  November's single family home sales in Albemarle County were 37% lower than in 2010.


The house is not currently listed for sale on the CAAR website / Trulia / Zillow.

If Maurice Jones were a "private citizen" -- not one whose own personal housing crisis will be tracked by the local media -- he'd be contacting his mortgage lender to arrange a HARP loan modification, a short sale (bank agrees to take less than what is currently owed on mortgage), or he'd be strategically defaulting ("walking away").  Instead, he is burdened with taking a no-interest loan of up to $90k for a downpayment on a residence in the City.  And he must avail himself of a no-interest loan to pay off the remainder of his mortgage after he sells the house for less than what he paid.  There's no cap on the amount of the pay-off loan.  While Jones has an annual salary of $170k plus use of a car, health insurance, retirement contribution, and Masters education paid for, he is debt  burdened: Even at zero percent interest, the man is looking at approximately an additional $200k in debt, besides his new mortgage, for the sake of living in the City.

Read the article at The DP. 

Image from Albemarle County gisweb.