Tuesday, November 6, 2012

President Obama Wins Second Term...And That's Good For the Charlottesville Area Housing Market

You know the old saying: anything is possible.  But many things aren't probableMitt Romney has an 8% chance of victory.  So we're going with Mr. Obama as winner and heading off to imbibe at some victory parties, and a couple of wakes, right now as the polls close at 7pm.

The good news: Mr. Obama's victory is just fine for the C'ville/Albemarle area housing market. The disastrous national economy that Barack Obama inherited (as he likes to say) has been showing distinct signs of improvement.  And locally, throughout 2012, right up through Q3, the Charlottesville Housing Market has seen some nice signs of activity.  While this isn't technically a "recovery," meaning a return to the pricing and sales volume of the housing bubble, folks are now willing to buy and sell.  As detailed in this long post about the area market, buyers from the bubble-era still face trouble; but buyers and sellers going forward are in much more confident positions.  2012 is the year of the bottom in this area, and 2013 will be exciting.

And we have much to thank Mr. Obama for in this turn of events. This housing scorecard is pretty good.  Since Mr. Obama has been a friend to Wall Street and TBTF banks, the fear that the "shadow inventory" would destroy housing prices with a flood of inventory never happened because banks haven't been forced to mark the devalued homes to market (see #1,2,3).  And with Fed Chair Ben Bernanke and Treasury Secretary Timothy Geithner solidly in place during the first four years, we have QE Infinity and a ZIRP that result in +/- 3.5 30 yr fixed mortgage rates.  Even Freddie is doing better.

So raise a glass and look #Forward....

Photo: The Times of London.

Friday, October 26, 2012

In 2012, the Charlottesville Area Real Estate Market has been trying to form a bottom in pricing, and the number of transactions is up. There are many positives, alongside some negatives and ongoing challenges for bubble-era buyers. Here's a look at the complicated "bottom" process. And for troubled homeowners, here's a reminder. Our next post will appear in early November, and cover Charlottesville's return to Protected Market status. Until then, something soothing.
See the original.

Thursday, August 16, 2012

"Carpe Diem" Trumps "Caveat Emptor" As "Bottom" and "Recovery" Chatter Increase in the Charlottesville Real Estate Market Mid 2012

2011 was a painful year for the Charlottesville Albemarle housing market.  Forget it.  And forget the pain of 2010 and the ancient history of '09 and '08.  Forget "New Normal."  2012 offers a different, unanticipated scenario: and those who want to buy and sell real estate are recognizing the paradigm-shifted, bifurcated, even fragmented nature of the RE market.  Buyers, many who have waited for years, are tempering caveat emptor with carpe diem

Every year since 2007 there have been folks calling the bottom.  And every year they've been wrong. The WSJ has been particularly enthusiastic in this pursuit.  Yet in order to consider that there's a "recovery" taking place, the financial status of the American family as well as these three charts must be ignored.  This is exactly what's happening.

"Traditional" buyers and sellers exist in one market while underwater or unemployed owners, banks, and investors exist, for the most part, in another.

So buyers and sellers are taking note.  What is currently being touted as the "bottom" and the "recovery"--whatever they are-- may be all there is.  In Charlottesville Albemarle, which have suffered big drops in sales and prices  since the bubble's burst (graphs, below),  informed sellers with equity are hopping off the proverbial fence and listing.  And buyers who see what they need, or like,  are inking deals.

Of course, in certain segments prices aren't finished declining or hitting "bottom."  And true "recovery"--a return to the way things used to be--isn't possible.  But what experts and amateurs expected, hoped, and feared would happen, just didn't.  For today's buyers and sellers, the past and the "other" market matter less than ever. 

Below is a look at persistent housing market myths and the current "reality" as selling season 2012 comes to a close. 

Myth #1When the Shadow Inventory is released on the market, home prices are going to plummet.

Reality:  The landslide of listings were expected after settlement of the "Fraudclosure" scandal.  But the shadow inventory is never going to be released en mass, so the correct answer here is False.

There may be nearly 10 Million homes in the US in distress and owned by banks, which need to be relisted and marked to market value.  The optimistic WSJ hopes the number is far lower, asserts that there will be tornados but not floods, and that low levels of new construction will help the problem.

In Charlottesville, the number is absolutely unknown and possibly significant (podcast: listen to minutes 18-28).

Analyst Josh Brown, The Reformed Broker, explains why the shadow inventory means little to today's market:
[T]he Fed is making it so the banks can keep millions of foreclosed properties on their books forever and never mark them down.  Elsewhere, there's also been some accounting changes that allow the banks to mark-to-make-believe to some extent....They put the banks in a position of flexibility in terms of pricing and the timing of when they sell them off.

There are buyers for foreclosed homes - Wall Street is raising billions of dollars in new vehicles to scoop them up.  Hedge funds are buying them up as well. 

The typical housing permabear [doesn't] get it - [the inventory] won't be coming to market at all.  At least not until such time as the banks want to offer it.  And now there are hungry buyers, negating that aforementioned stale thesis even further. [emphasis added]
The good news: Whatever the number, keeping all that junk off the market has preserved equity for some folks, and has helped prevent the United States from sinking into a lasting Depression.

And the result of this is:

Myth #2The United States has hit a housing "bottom" and is now in a housing "recovery."

Reality: Yes, the exclusions make it look like we are in a housing recovery.     Fake, engineered, manipulated--whatever it can be called, it's the current market.    

Read this.  And this.
Click on image for larger version.

More data on the "bifurcated market": to call current conditions the "bottom" or the "recovery," one ignores, locally and nationally, all the negative equity numbers and effective negative equity numbers and fails to recognize that even many of 2010's buyers took a hit.

There are segments of, and buyers and sellers in, this market who are permanently hobbled, at all price points.  Many of these folks won't buy again for years, if ever.  Included among the walking wounded are the most spectacular demises, ever, in Charlottesville: Patricia Kluge; and Halsey Minor; and failed development and developers of Biscuit Run; and failed Western Albemarle subdivisions; and failed development Bundoran Farm.

Without the shadow inventory, and all those underwater "owners" who can't move up, there are fewer houses available.  

Which leads to:

Myth #3Lower Inventory = A Healthy Market With Higher Prices.

Reality: True and False.  It's not a "healthy" market.  But prices will indeed rise and have already in certain segments. 

This blog started to cover the lower inventory issue back in October 2011.  The WSJ reported the national trend that month.  It is an ongoing phenom.  Here's a plethora of charts on low inventory from the Matrix.   Lower inventory may in certain sectors  drive up prices and lead to multiple offers.  See this post from Twin Cities Real Estate Blog. 

But, again, for current buyers and sellers, the "health" of the overall market doesn't matter.  The important point is the rising prices.

Myth #4 The Charlottesville Albemarle real estate market is "protected."

Reality:  From the days of Thomas Jefferson to 2006, True.  2007-2011, False.  

2012 onward is ???.  For homes priced between $250k-$575k and proximal to the center of the City, and easy access to UVA, the answer may well be True.  And now that the  recent unpleasantness  is resolving (though not quite over), things are looking forward. That old "protected" mantra referred to the buffer offered by UVA, defense, biotech, the hospitals, insurance company.  It was annihilated for years.  But now...?

The City of Charlottesville is the flower of Central Virginia, and Albemarle County is its handmaiden in ease of access.  There's a lot of progress here that looks like economic health: A major new outdoor shopping mall (though it ironically comes just as the death-knell sounds for brick-and-mortar stores); a Wegman's and Fresh Market supermarkets; a luxury hotel may finally be completed on the historic Downtown Mall; the (ok, controversial) Western Bypass may be built; and there may be more biotech growth.  Nothing to sneeze at.

Myth #5 - Albemarle Exceptionalism

Reality:  True.  Albemarle County actually is exceptional.

And not just for the conservation tax credits for millionaire faux-farmers.  Scroll through the St. Louis Fed pdf "The Afermath of the Housing Bubble" linked here, notice, beginning on pg. 27, what happens to Albemarle County.  The foreclosure rate is remaining consistently low. 

Myth #6 At some point, sales are going to return to the high numbers they were at the peak of the bubble.

Reality: False.  But they don't need to jump for prices to go up.  See #3 and #7.

Despite 100's and 100's and 100's of new units of all types being built in Charlottesville and Albemarle County, and thousands of new citizens, sales are not going to keep climbing.  Besides declining prices and negative equity, there's the issue of the sluggish American economy, as well as the issues of the disappearance of the short term buyer and the curtailing of the move-up buyer.

But sales don't need to return to those levels to have a "stabilizing" market.  This year's sales are up:

Albemarle County


Sales increases year-over-year from RealCentralVA:

Sold in Albemarle County
1/1/11 – 6/30/11 – 588
1/1/12 – 6/30/12 – 654 — Up 11%

Sold in City of Charlottesville  
1/1/11 – 6/30/11 – 212
1/1/12 – 6/30/12 – 252 — Up 19%

Myth #7 : Prices plunged, but now they're going to shoot back up.

Reality False.  It could be another decade or so.  "Incremental" and "seasonal" are the watchwords here.

Buyers still are reluctant to pay for the financial mistakes of others.  Despite the coming job opportunities mentioned in #4, the income of local folks just isn't shifting.  Enough.

At the moment there has been a small increase in prices.  "Move-ups" are back: after waiting for prices to stop plunging, those who wanted larger homes are transacting.  Additionally, the local cost of new construction is rising; and new construction is turning into the choice of many buyers who know they will be there long-term and/or desire "going green."  But the "seasonal component" must be kept in mind, where  prices go up in the warm months and will decline again  for Fall and Winter.

Longer term: In certain sectors--such as close-in and move-in ready--prices may continue an incremental riseBut for the surrounding counties; old and unimproved homes; those priced under $200k; and above $600k; --these prices are not finished declining.  The $3M+ market is standing still.  At the lower and higher ends of the family market, the problem is the same:  lack of buyer capital, but for different reasons.

Peaks: Here's a recap of pricing, as an example of how far prices have dropped.  This is for Q1's:

Those are some big drops. 

Conclusion: A Market Bifurcation Into "Traditional" and "Distressed" Plus Low Inventory Results in a New Housing Paradigm.  But This is the "Reality," Right Now, For Those Who Want to Buy and Sell

In this age of the "personal," where folks are FBing and Tweeting and Pinning and Google+ing, decisions are more idiosyncratic than ever.  It's been a hard landing.  The loss of equity and, worse, homes, isn't finished locally or nationally.  Charlottesville and Albemarle will remain a fragmented market for some time to come, with a distinct divide between the haves and have-nots.  And the local is part of the national where 95% of new mortgages are owned or backed by the US Government.  There's still lots of trouble--foreclosure starts are rising again.

But for those who have been waiting to buy and waiting to sell, there's more clarity than ever.  The 30 year fixed rate mortgage is currently at 3.6% (Aug. 15).  Buyers who have waited for years and are well-cushioned financially aren't looking at a house as an investment but as a home.  For those with stable jobs and a 7-10 year event horizon plus a capacity to absorb price wobbles, buying looks attractive.  And there are many equity sellers getting off the fence, realizing that they'll never get that dream of the missed bubble price: but acknowledging that moving on or moving up and getting things settled has a value greater than money.

Wahoowa!  It's going to be an exciting year here.  


*There's always the chance of a Black Swan.  Or something lesser to cause reversion to 2011.

**Additionally, rising mortgage rates could cause home prices to drop again.  There's only so much the strapped consumer can afford.  The Fed isn't expected to change its ZIRP practices until 2015.  While there are other issues that impact mortgage rates, the consumer can only afford so much.

***A Romney Administration could negatively impact housing.  The Obama Admin is a known quantity, at least.

****A huge headwind in most housing markets is the lack of younger buyers.  College Bubble etc.

******This post is an observation of market conditions at the moment. This post is not investment advice, particularly since this blog does not view a consumable that requires constant upkeep and tax payments as an "investment." 



A Recap of the First Seven Months of 2012: RealCentralVA
The Obama Administration Housing Scorecard: HUD
Buying Beats Renting in Many Cities: Zillow
The Break-Even Horizon in Charlottesville is 4.2 Years [Really?]: Zillow
The Economic Impact of An Increase in Home Prices: CalculatedRisk

Reliable Sources Analyzing the National and World Economics
Naked Capitalism
The Big Picture
The Automatic Earth

Wednesday, July 18, 2012

Mid-2012: Would Your Decision to Buy or Sell Real Estate Change If You Believe Prices May Not Recover In Your Lifetime? - Video

If housing's not going to recover any time soon, and is likely to keep struggling, is now a good time to sell?  And if interest rates keep hitting new historic lows, is now a good time to buy?

The latest mid-year Charlottesville data indicates that home sales are up in 2012 over 2011: see Nest Realty and the CAAR report.  While that's progress, consider the historic numbers for context2011 sales were at a decade low, and 15% lower than 2010's.

Home prices are still declining in many segments of the local market, but sales figures in some segments are starting to stabilize.

Nationally, despite cheerleading stories like this one (which presumes not only that the reader is a simpleton but that s/he is not going to make it to paragraph 12) the market is bleaker.  Not everybody lives in a company town like we do.

That home prices may never recover is the concern of Yale economist Robert Shiller, also of the eponymous Case-Shiller Price Index.  Though it tracks just 20 major metros, the index influences buy/sell decisions all over the USA. When asked to compare the current housing crisis to a baseball game and pick the inning, Shiller stated "Maybe we're in the fourth."

So what about C'ville?  Where are we?  Apropos the bigger picture, Shiller says, "A lot of people have the mistaken impression that we must be at a bottom."  But if C'ville is now in its own little bubble--in a good way--we may have the New New Normal: we may be insulated by the big employer(s), the major acceleration in price declines may be behind us, and we may be seeing a low but stable volume of sales.  So what should a buyer or seller do?

Watch the video as Robert Shiller discusses housing with USAWatchdog's Greg Hunter.

Tuesday, June 19, 2012

Charlottesville Area Real Estate Update, May 2012: The Last Days of Housing Market "Stability" For the Year

April was a cruel month.  May muddled (see below).  Closings in June and contracts written in June (which will close in Jul/Aug) will suffer, since the University has been hijacked by a real estate developer from Virginia Beach and Charlottesville has been thrown into chaos. Did. Not. Need. This.

From Nest Realty Group.
Nest Report May 2012

Landmark Creditors Owed $17+M; Hotel Shell Goes at Bankruptcy Auction For $6.25M

As mentioned in January, pennies on the dollar.  Specialty Finance alone had a lien worth $13+M, and the City was owed nearly $200K in RE taxes.  But the good news is that the awful blight on the Downtown Mall may eventually be finished.

Of course, all this optimistic hotel planning came while UVA was still one of the most respected "Public Ivies" in the country....One day later, and Charlottesville is a different world.

Wednesday, June 13, 2012

UVA President's Ouster Could Bring Another Headwind to Charlottesville Area Housing Market

June 10 could very well be the exact date that began the next leg down in the Charlottesville Area's ongoing home price slide.  It was on June 10 that a seemingly capricious, secretive decision, tantamount to a putsch, was unveiled: the UVA BOV, Rector Helen Dragas, and President Sullivan have a "philosophical difference of opinion" and Sullivan will no longer serve.

The Charlottesville Area housing market has continued to suffer price declines and weak sales (see April's price slide, and this and this from Q1 2012).   But there has lately been a growing acceptance of the "New Normal"--knowledge that prices will continue declining, and sales volume will remain low--that has led those with secure jobs to get off the proverbial fence and buy.

Now what? With the area's largest employer in turmoil? How many buyers will rethink that major purchase?  Forego the first-time pad, or decide the current house is just fine, and stay put?

With the current opaque chaos at Virginia stemming from President Teresa A. Sullivan's "resignation," the greater Charlottesville area is facing an unanticipated--and very unwelcome--period of economic and psychological instability.  And all thanks to--apparently--just three members of UVA's Board of Visitors.

Confusion, anger, and instability rule as the leader of the area's largest employer seems to have been ousted in a secret plan arranged by a handful of people:
"I have never seen a board act so recklessly, arrogantly, and secretly in my entire life," says [prominent UVA media scholar Siva] Vaidhyanathan, who calls Sullivan's ouster "very scary" and "deeply embarrassing" to the University. "Everything they've done," he says, "is 180 degrees away from the scholarly tradition that had made UVA great."
The chair of the Board of Trustees of the Darden School Foundation, Peter Kiernan, sent a letter to other trustees, assuring them that Board of Visitors Rector Helen Dragas "has thing well in hand."
But the UVA community, and the general public, has only received this reassurance through leaked emails.

As outrage grows, Chairs and Program Leaders from the College and Graduate School of Arts and Sciences have sent a letter of protest to UVA's Board of Visitors, which includes this:
Our surprise and concern arise directly from the fact that we have been very pleased with the direction in which President Sullivan and her administrative team have been leading UVA and with her accomplishments thus far. She is an extraordinary academic leader, with superb administrative abilities, the heart of a faculty member, and evident strength of character.
UVA impacts this entire region, and this event could ripple outward--economically--for months to come.  It could have an immediate and dramatic impact on the local housing market, as well as on area commercial establishments--stores, restaurants, services.  This could well be tantamount to a local Black Swan event.

Let's hope that last sentence proves to be hyperbolic and false....

UVA is--once again--receiving much unwanted local and national media attention.
Washington Post:  What Happened? and Anger
The Chronicle of Higher Education: Overview and Faculty Seek Answers
WINA - June 12 podcast of former UVA President Robert O'Neil on Sullivan Ouster

Orig posted 6/13 3.23 pm; revised 6/14 2:12pm.

The Housing Crisis Wipes Out Two Decades Of American Prosperity--A 40% Decline in Net Worth Between 2007-2010.

 This post contains detailed charts. 

Wednesday, May 30, 2012

(F)ailing Wintergreen Resort Rescued By Magnate Who Paid Top $ For Albemarle Acreage, and Rescued WV's Greenbrier Resort

Jim Justice is rescuing the 11,000 acre resort in Nelson County, which has been slammed by the Great Recession as well as by Mother Nature: lack of snow.  As The Hook reports,
Wintergreen Resort– stung by a pair of weak snowsports seasons, challenged by state officials over tax credits, and losing its credit line– has found salvation in the arms of one of the region's richest people, James C. Justice II, the billionaire who yanked the venerable Greenbrier resort out of bankruptcy by building a glitzy casino.
Justice also paid $23.75M for 4,500 acres of Albemarle County in April 2011; plans have not yet been revealed for the Albemarle County acreage, in the historic "viewshed" of Monticello.

Monday, May 21, 2012

"April is the Cruelest Month" - Charlottesville Area Home Prices Edge Lower, Again

December 2011, and Jan-Febr-Mar 2012 saw freakishly warm weather in C'ville and across the Country, and the spring selling season was pulled forward, as reflected by April's decline in prices.  Sales declined in Albemarle, but rose in Charlottesville.  Much of what is coming on the market can't find buyers--even though inventory is lower.  But lower inventory is not necessarily a good sign: it means that owners have negative equity or effective negative equity and can't move "up," downsize, or move away.  Is the road to "recovery" in this area going to be blocked by rising asking prices and people stuck in their homes?

Median Sales Price Declines:
-12.24% City of Charlottesville year over year
-5.84%  Albemarle County year over year

See also:
City of  Charlottesville Sees Painful Price Declines in Q1 2012
First Quarter 2012 Average C'ville Area Home Prices Decline 7.5% Y/Y

The report is from Nest Realty Group.  Read Jim Duncan's post.

Nest Report - Charlottesville Real Estate Market Report for 12 April 2012
In March and April a bunch of folks came out calling for the "bottom."  Too early, flawed reasoning, and ignores the shadow inventory and the actual condition of the economy and unemployment.  But hey, makes for good filler and headlines.

    The NAR Had A "Rally For the American Dream" In D.C.: Member Participation Rate Was 2.7%, and It Was Ignored By the Media

    Read this analysis of the May 17 debacle by a Realtor who is widely respected by his peers.  Realtors may not have "caused" the housing bubble and subsequent crash, but like many other entities they contributed to it.  But for buyers and sellers, Realtors are the face of the bubble and crisis.  And unfortunately for the good folk among them, the NAR, a salesmans' trade organization, is not trustworthy.

    Bottom-Caller Linkfest

    In March and April a bunch of folks came out calling for the "bottom."  It's too early for this, the forecasts have flawed reasoning, and they ignore the shadow inventory (millions of incomplete foreclosures, as well as underwater would-be sellers) as well as the actual condition of the economy and unemployment.  But hey, makes for good filler and headlines.

    Monday, May 14, 2012

    Over: The Decades-Long Belief That A House is An Asset

    A house is a consumable, just like shoes or apples.  Useful, but not a money-maker or "savings plan."   There is a 15 second ad before the video begins.  See related article.

    Thursday, April 26, 2012

    Albemarle County Home Sales Q1 2012: Will the Road to "Recovery" Be Blocked By Rising Asking Prices?

    The sales and price data come from the Nest Realty Group Q1 market report, embedded below.  See also a recap of City of Charlottesville Sales and Price Declines in Q1 2012.

    The positives in Albemarle County:
    •  Inventory is lower.
    • The sales activity is highest since Q1 2007.  
    • There are reports of "multiple offers." 
    • There are "well priced" homes that sell in under two weeks. 
    • Buyer activity is up in comparison to 2011, as assessed by contracts which will close in the Second Quarter.
    The negatives in Albemarle County:
    •  Lower inventory isn't necessarily a positive: locally or nationally.
    • There are still hundreds and hundreds of "mispriced" or "mislocated" properties that are  not selling.
    • The enthusiasm for believing the market is closer to "recovery" will lead to a rise in asking prices.  Anecdotally, this started happening in March.  
    • Price increases will lead to lower sales. As buyers have shown repeatedly over the past five years, there's only so much they are willing to pay. 
    • There simply aren't enough folks in this area "moving up" to relieve the amount of high-dollar inventory.  "Family homes" (McMansions) priced $600K-$1.3M are a slow market.  These already-built homes are competing with new construction, which is now less expensive, often "greener," and can be customized to the buyer's specifications.
    • There are listings at all price points offered for tens and sometimes hundreds of thousands under what the seller paid. 
    • Banks are still holding foreclosed inventory, at all price points, off the local market. 
    • At the highest end, the "farmette" and "estate" listings from $1.5M-$16M, pricing and valuation remain highly subjective--more than ever a matter of "opinion."  (Example: Donald Trump offering $3M+ for the foreclosed Albemarle House, which Bank of America has listed at $16M.)

    The data:

    Single Family:
    Median price increased +10.1%: $343.5K from 2011's $312K
    Sales rose +10.8%: 2011 130 v. 2012 144 

    Median price increased +20.9%: $238.2K 2012 v. $197K in 2011
    Sales rose +9.4%: 58 in 2012 from 53 v 2011 

    Median price declined -2.5%: $101.2K  2012 v. $103.7K 2011 
    Sales rose +62.5% 26 in 2012 v. 16 in 2011 (investors are grabbing these)

    Your micromarket may vary.

    Recapping the Nest Report in podcast.
    A list of the headwinds that continue to face the market.
    The CAAR report.

    Q1 2012 Charlottesville Real Estate Market Report

    Tuesday, April 24, 2012

    As Prices Continue to Decline, 61% of All Home Sales in the City of Charlottesville Were Under $250K in Q1 2012

    The details come from the Nest Realty Group market report, embedded below.

    The report states "The reduction in prices likely has had a positive impact on generating more sales." Additionally, mortgage interest rates have been  at or under 4% since the Fall of 2011.

    The positives: Price declines are a big positive for buyers.  And buyer activity is up, with significant increase in contracts written; the closing dates occur in the second quarter. 

    The negatives: price declines can hurt anybody who bought during the bubble years, whose equity is being wiped out.  There are many would-be sellers who simply can't lower their prices, which can lead to short sales or foreclosures.

    Pricing still remains prohibitive for single family homes in the City: price is often not based on a beautiful product; it's based on paying a premium for proximity, or building on a bubble-era valuation.  City prices often rely on the mortgage holder(s) spending much more than the historic home-price-to-income ratio of 2.5%.  

    There is a significant inventory priced at or below $200k in the City.  Problems: many of these props need a lot of work; or are too expensive for investors hoping to turn them into rentals.  And they're too expensive for lower-income families that don't have the downpayment (even for an FHA loan) and/or can't qualify for a mortgage.

    The data:

    Single Family:
    Median price declined -4.3% over 2011
    Sales rose 40%, from 42 to 59 over 2011
    69% of all sales in the City are single family detached homes

    Median price declined -26.2%
    Sales dropped 25%, from 8 to 6 in 2012

    Median price declined -26.3%
    Sales dropped 23.3% y/y from 2011

    There are currently 258 units total units available.
    181 of these, or 70%, are single family homes.
    In Q1, only 2 listings above $750k sold.

    Click on image for larger version.

    Recapping Nest Report in podcast.

    A list of the headwinds that continue to face the market.
    The CAAR report.
    Q1 2012 Charlottesville Real Estate Market Report

    Tuesday, April 17, 2012

    First Quarter 2012 CAAR Market Report: Sales Rise As Charlottesville Area Average Home Prices Drop 7.5%

    Supporting the old saying "There's nothing price won't fix," the greater Charlottesville Area (City plus 5 counties) is seeing a rise in closed sales as well as properties going under contract.   The -7.5% year-over-year decline in average price represents all property types combined.  The "American Dream" category of the single family (detached) homes in the Greater Charlottesville Area fell more: a -9.3% year-over-year decline.  Average Q1 prices have now fallen -23.5% since 2005.  Despite the loss of $$$ in home eq and for sellers, the current CAAR prez sees the sales portending "blue sky" ahead. Is it a Great Time To Buy?   The full report is embedded below.

    Average Prices.  Click on image for larger version.

    See also: Q1 Prices and Sales 2002-2011 and Ongoing Headwinds in C'ville Area RE

    Charlottesville 1st Quarter Real Estate Market Report 2012

    Image, report, copyright CAAR.

    Thursday, April 12, 2012

    1st Quarter 2012 Charlottesville Area Housing Market Report: Upside, Downsides, Expectations, and A Recap of Sales and Prices 2002 - 2011

    2012 First Quarter price and sales data for the Charlottesville Area Real Estate market will be published soon.   The closed sales from January and February, contracted a few months earlier, show Winter weakness: 

    February 2012 Charlottesville Area Single Family Home Prices Drop -32% Since 2010 
    January 2012 Home Sales: Charlottesville Down -39%, Albemarle Down -15%

    Those numbers give pause, but the first couple of months of 2012 have seen healthy buyer activity.  And this is specifically because prices have declined.  Additionally, the 30 yr fixed has been at or below 4% for nearly five months.  This buyer activity has just started to show up in the data: so the closed sales for Q1 won't necessarily reflect the foot traffic agents have reported. Nevertheless,

    Expect Some Spin for Q1 2012 Reporting -- As Usual

    Every Spring there's the hope that the turn toward good times--that is, price appreciation--is just around the corner.  Realistically, in this area, it's not for some time.  But RE lives in the moment.  With contracts and viewings up over 2011, there will be froth on Realtor blogs and in the local media outlets that report the trade association data without perspective. There will be comparisons of 2012 v. the past two years (previous years be damned).  There will also be anecdotes about well-priced properties (ie, those at 2003 levels) receiving multiple offers.  All of this is the expected celebration.  But it doesn't necessarily translate into a market "recovery" or sales to hit a sustainable pace for the rest of the year.

    Buyers need to beware of being "bid up" due to transient market characteristics (ie, Spring).
    Sellers need to beware of overpricing for the same reason, and therefore missing their sale.

    The potential Upside? 

    The "Move-Up Buyer" may be back here and elsewhere, based on seller listings, after disappearing for the past couple years.  This can make the median price rise, even as the "low end" of the market continues to lose value and remain unsold.  "Move up" in this instance and area is used to mean homes priced $350K-$599K.  The $600K-Millions segments will continue to struggle--and continue to drop in price.

    The Downsides?  We have the same old local headwinds

    A) The inventory, lower than in previous years, does not indicate C'ville Area market "health"
    B) Foreclosures are still coming at a steady pace
    C) There's a significant local shadow inventory (bank re-po'd props that haven't been relisted for sale)
    D) The number of local folks underwater is staggering
    E) Local owners with "effective negative equity" cannot sell
    F) There's a lack of first-time buyers due to price points, college debt, and change in priority
    G) Home-Price-to-Income Ratio remains out of whack
    H) Unemployment remains exceptionally high for the area 
    I) The pent-up seller hopes, especially from $600k-$3M price points is significant
    J) Sales volume remains lower than in the late '90's
    K)  And, o yeah, there's the issue of obtaining a mortgage

    Historic Perspective: Q1 Data 2002 - 2011

    The info, below, appeared in a post on April 19, 2011:

    C'ville Area RE First Quarter 2011: Median Home Prices Slide Back Six Years, Fall $70,000

    The Charlottesville Area Association of Realtors quarterly market reports typically recap the past several years.   But the new one-page format only compared 2011 to 2010, which resulted in the headline "Central Virginia Home Prices Fall $19,000."  The reality is that area home prices have moved more than this.

    2011's $220k actually means that this area is back down to the median in 2005

    For individual City/County, the declines are steeper from the peaks, which also occurred later than the National peak in 2006:

    Albemarle  $250k down $94,400 or 28% from 2006 peak
    Charlottesville  $225k down $56,250 or 20% from 2008 peak 
    Fluvanna $210k down $52,650 or 17% from 2007 peak 
    Greene $235k down $79,900 or 25% from 2007 peak 
    Louisa $199k down $50,000 or 22% from 2007 (and, tax cred, 2010) peak 
    Nelson $220k down $119,000 or 34% from 2006 peak 
    Orange $140k down $171,525 or 57% from 2007 peak
    • This aggregated "median home price" is found by combining all sales categories (single family homes, condos, and townhouses) then identifying the number halfway between high and low.   
    • These figures indicate what buyers were willing to pay in the first part of 2011.   
    • Though the figures have limited use for buyers/sellers interested in only one category, the aggregated median is the most widely reported dollar figure each quarter. 
    Prices have been falling steadily, accelerated since the expiration of the Homebuyer Tax Credit April 30 2010.
    Click image for larger version in new window.

    2006-2010 Q1 Median Home Prices

    2002-2007 Q1 Median Home Prices


     2011 Compared to 2010

    All images copyright CAAR.  These images may be found in the First Quarter 2007 and 2010 Market Reports at the "Market Reports" link in the upper right of your screen at the CAAR website.

    Friday, March 23, 2012

    The Wall Street Journal Features Albemarle County's Georgetown Farm: Listed at $17M in 2009, Now Asking $10.3M

    It's a tough market everywhere for multi-million dollar properties, and while Charlottesville calls itself "A World-Class City," obviously we're not NYC (or even DC) and Albemarle County is not the pastoral equivalent of, say, The Hamptons.

    Back in the good 'ole days, though, high-end properties traded faster and at more $$$.  Even in 2008, post-bubble but before the September collapse into The Great Recession, six $5M+ properties traded hands; July '08 saw a $14.5M prop, and August had 3 sales totaling $21.5M.

    Slow Down
    • There are currently 22 properties on the market in Albemarle County listed from $5M to $16M.
    • In 2009 two props sold, a $6.6M, no DOM, and $7.2M, DOM 676.
    • In 2010 there was one $14.5M sale, DOM 784.  
    • In 2011 there were two sales: one at $9.1M, DOM 397, and one at $7.4M, no DOM recorded.
    • Caveat: there are also properties that never appear on the MLS which trade.
    Georgetown Farm: Former Seagram's honcho Edgar M. Bronfman owns the place, and the 8,100 sq foot 5 bedroom, 8 bath house in Free Union, Albemarle County, VA listed  for $17M with 600+ acres in November, 2009, the depths of the Great Recession.  The price was reduced to $15M in October 2010.

    It is now listed by local RE broker McLean Faulconer as either house plus 120 acres for $3.8M, or house plus 540 acres at $10.3M, with various other structures etc. added into the mix or negotiable.

    In the WSJ article, RE agent Andrew Middleditch of McLean Faulconer calls the current price  "competitive." What does "competitive" mean at the high-end of the Charlottesville RE market?  Of the priciest properties in Albemarle County, many remain on the market for years, as indicated by the DOM of the solds listed above.

    Georgetown Farm is a lovely place with beautiful views and fertile farmland.  Perhaps the WSJ article will be the marketing kick it needs to change hands.

    More props that have been on the market for years:  The most famous example is the $16M foreclosed Albemarle House which started at the asking price of $100M.  But others catch the eye of locals:  Coran Capshaw's Seven Oaks is now $8+M, while "Keepers," rumored to belong to DMB himself, has been marketed to no avail.

    Read "Open House: 1921 Georgetown Farm Road" in the WSJ.

    The main house at Georgetown Farm:

    Photo copyright McLean Faulconer via WSJ.

    Monday, March 19, 2012

    February 2012: Charlottesville Area Median Price For Single Family Homes Drops -32% Since 2010

    Although there's been some chat about contracts rising, hard data shows that January 2012 completed sales stank.  Now the February Nest Realty Group report shows that for the Greater Charlottesville Area in February, completed sales rose because prices have declined; for the single family home, it's -32%, and for condos/townhouses, it's -14% since 2010.  That year, of course, was the height of the Homebuyer Tax Credit; this "gift" from the Federal Government propped up prices before it the scheme, and then led to a local sales collapse for the second part of 2010 and significant sales and price  weakness in 2011.

    Details of February's pricing are in the graphic, below.  The entire Nest Report, which details individual counties as well as property types, is embedded below.  Click for larger image in new window.

    Charlottesville Home Prices Drop At Faster Rate Than National Average
    Nest Report Charlottesville: February 2012

    Friday, March 2, 2012

    Property Tax Assessments As Fantasy Valuation: "The Hook" Confirms Charlottesville Doesn't Include Short Sales and Foreclosures in Its Calculations

    How's the Charlottesville real estate market?  As we just noted, prices here are declining much more than in Cities tracked by the most widely-watched national index.  Many owners are drowning in negative equity or effective negative equityBut you wouldn't know it from the tax assessments.

    We've posted about why assessments mean so little to buyers (see also this) and have opined about it for the C-VILLE.   How the City of Charlottesville assessor counts a sale as "arm's length transaction" is all "subjective." 

    As The Hook exposes,  a sale will be considered valid for tax assessment computation only if it benefits the City of Charlottesville coffers.   Unfortunately for current owners stuck with absurd valuations, the appeals deadline just passed.

    The Shilling Show has examples of properties and their ridiculous valuations: Fleeced By the Barbour: Charlottesville's Annual Real Estate Taxation Swindle.

    In the past, Albemarle County marked a foreclosures as "Invalid Sale" under "Type of Sale" on their public property records.  "Type of Sale" has disappeared off the website.  Is Albemarle County fudging just like Charlottesville?

    Local v. National: Charlottesville Area Home Prices Decline Much More Than Cities Tracked By Case-Shiller Index

    Good news for buyers.

    Average Price Declines - Single Family (Detached) Houses

    Case-Shiller Home Price Index
    Standard and Poor's  national composite, the "leading measure of U.S. Home prices," fell by
      -4.0%  Q4 2011 over 2010
      -3.8% Q4 2011 over Q3 2011

    City of Charlottesville
      -29.0% Q4 2011 over 2010
      -10.6% Q4 2011 over Q3 2011

    Albemarle County
      -18.8%  Q4 2011 over 2010
      +2.5% Q4 2011 over Q3 2010

    The Greater Charlottesville Area
      -18.0% from 2004 through end of 2011.
       -6.5% 2011 over 2010
       -2.5% 2010 over 2009
     -10.5% 2009 over 2008

    This week saw the troubling news that the triple dip in national housing prices is here as the "leading measure of U.S. home prices," Standard and Poor's Case-Shiller Home Price Index, reported new post-bubble lows for all three metrics.

    As RealCentralVA has pointed out, Case-Shiller doesn't track this market.   But as the most widely-reported price index in the nation it has a psychological impact on buyers everywhere, in addition to the ability to move this market, the stock market, government policy, and the mainstream media.

    But the good news for local buyers is this: As reported by the CAAR, home prices in the Greater Charlottesville Area (which includes the surrounding counties), and specifically in Charlottesville and Albemarle County are showing bigger declines in average prices than the national index.  Of course, the prices are still much higher than the national average, but that's a different story than percentage declines.  Prices will remain higher here even when the Bubble has finished correcting.

    And the price declines, even while putting many sellers in negative equity, are helping sales. Contracts for Jan/Feb '12 are up over '11 due to sellers getting realistic about pricing and  ongoing low (4%) mortgage rates.   

    Spring Selling Season seems to be  looking up, though Jan '12 closed home sales (contracted in Nov/Dec '11) were lower than Jan '11.


    18% Drop From Peak: Greater Charlottesville Average Prices, Detached Single Family Homes
    Source: CAAR 2011 Year-End Report. Click on image for larger version.

    Data below from Nest Realty Group Q4 Market Report

    City of Charlottesville Average Prices

    Albemarle County Average Prices

    Case-Shiller Index: The "Triple Dip" in Home Prices

    Thursday, March 1, 2012

    Chart: All the Housing "Recovery" Government Intervention Did Not Buy

    The chart, below, comes from The "Housing Recovery" In One Index.  The chart's publication is coincident with the National Foreclosure Fraud Settlement, which will ultimately have little impact on housing.  See also Robert Shiller's A Bottom?  What Are They Thinking?  And Robert Reich lays out the crush housing is having on the middle class.

    All of this is coincident with the release of the latest Case Shiller Home Price Index, which shows all 3 indexes at  new post-Bubble lows.  Click on image for larger version.

    The End of An Era: Good-Bye Home Sweet Home As Asset or Investment

    Former Labor Secretary Robert Reich lays out the drag on "recovery" that is the housing sector, and how it impacts the dwindling Middle Class in America.  His analysis appears at the same time that the Case Shiller Home Price Index reports new post-bubble low prices and the 8th consecutive month of home price declines.

    Tuesday, February 21, 2012

    January 2012 Home Sales: Charlottesville Down -39%, Albemarle Down -15%

    Nest Realty Group has released its January Home Sales Report, which is embedded below.  Sales of all types compared to 2011:

    Charlottesville down -39% 
    Albemarle down -15%
    Louisa down -50% (earthquake)
    Greene up +112% (due to NGIC/DIA)
    Fluvanna up +58% (price collapses have lead to higher sales)
    Nelson up +12%

    Mortgage rates have been at or below 4% for the past 3 months.

    C'ville inventory has increased +44% and Albemarle inventory has increased +22%.  But Nest Realty views lower inventory of the MSA as a positive.  Disagree:  the new normal (and it's nationwide) is due  to this area's prospective sellers understanding they can't unload their current home for what is needed to "move up."  And this area's persistently high--for us--unemployment.

    On the upside, Nest notes as a positive the rise in contracts written during January.

    Related:   C'ville Area Home Sales in 2011.  C'ville Area Home Sales in 2010.  The "new normal" is lower sales.  Where's the Bottom?

    Nest Report Charlottesville: January 2012

    Central Virginia Lockbox Activity: Who's Looking At Houses?

    Nest Realty Group and associate broker Jim Duncan are reporting that lockbox activity is up for January-February 10.  The lack of winter in Central Virginia this year is certainly helping, as are declining home prices and historically low interest rates under 4% for the past three monts.  But will the lookies turn into closed sales?  Buyer activity was also up in 2009; the current 2012 lockbox activity is lower per listing, since 2009 was a year of Homebuyer Tax Credit.

    Caveat, as per RealCentralVA: the graph shows listings are up for the MLS - the multiple listing service in Central Virginia, not the MSA - Metropolitan Statistical Area of Charlottesville, Albemarle, Fluvanna, Greene, Louisa, and Nelson.

    Lockbox activity, from Nest. Key: purple = 2012 / rust = 2011/ yellow = 2010
    The increase is translating into more contracts written in January, but whether this will translate into closed sales won't be seen until March-April.

    Friday, February 17, 2012

    Chief Economist / Sr VP of Nat'l Association of Home Builders Tells Blue Ridge Tradesmen That Things Are Looking Up

    The trade association economist had words of encouragement for 60 area builders, according to The Daily Progress.  2011 was one of the 10 Worst Years for new home sales.  There's not really anywhere to go but up when we've been at a 50 year low.  

    Click on image for larger version in new window.

    Thursday, February 16, 2012

    How's the US Economy Doing?

    The housing data begins at Slide 48, but there's much to look at, from Government Spending to the Eurozone Mess to Inflation to the Stock Market.  Lots to worry about.   Jeff Gundlach, via ZeroHedge.
    2-14-12 JEG Webcast Roman Empire - FINAL