Sobering news about Property Values

Consider this piece of information if you're about to buy a home:

According to the Zillow Home Value Index (HVI), we have just completed our 17th consecutive quarter in declining home prices as values declined 1.2% from the previous quarter and 4.3% since Q3 2009. Although not a steep decline, it is consistent with other economic indicators pointing to a continued gradual decline as 77% of markets covered by Zillow experienced value dips.

According to Zillow, “with home values 25% below their June 2006 peak, the current housing downturn is approaching Great Depression-era declines, when home values fell 25.9% in five years.”

“While not unexpected, the unceasing declines in home values signal that we’re in for a long, bleak winter of continued troubles for the housing market,” said Zillow Chief Economist Dr. Stan Humphries. “The length and depth of the current housing recession is rivaling the Great Depression’s real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months.

Additionally, Zillow began taking a closer look at other indicators last year, thus began tracking negative equity. Since they began tracking, the percentage of homeowners underwater has crept up to where it sits now at 23.2% of all single family loan holders.

By Tara Steele on November 11, 2010

Housing Affordability: A Possible Good Omen

Four Leaf Clover 068
Four-leaf clover
Amid all the media reports on how housing is still “in the tank,” one piece of news seemed to have escaped many of the pundits. Housing affordability could possibly reach an all-time high of near 200 in the second half of this year. That is, a household making the median income would have twice the income necessary to buy a median-priced home in America. To date, NAR’s housing affordability index reached an all-time high of 184 back in early 2009. It was only slightly above 100 during the housing bubble years, meaning that qualifying income barely met the requirements to buy a home even with a 20 percent down payment (if not using teaser-rate, funny/toxic mortgages). Historically over the past 40 years, the average affordability index was 118. The principal reason for the expected record high housing affordability index reading is the rock bottom mortgage rates of 4.4 percent on a 30-year fixed rate. Add to that modest gains in the average wage rate, which rose 3 percent in 2009 and is up 1.2 percent this year-to-date in spite of the high unemployment rate. Consider now versus then when home prices were at their “bubble” peak in 2006.
Shiny Penny Macro April 30, 20101
shiny penny
Of course, like all things “real estate,” affordability is local as well. There will be considerable local market variations in affordability conditions. Remember that one of the main components of NAR’s affordability index is home prices. Some markets encountered only minimal price declines while others such as Las Vegas experienced a 60 percent nose dive. Still, on a nationwide basis, the affordability conditions have risen to compelling levels. However, if a sizable number of people view – rightly or wrongly – that home prices will fall further and raise the affordability levels to even higher levels, then homebuying will continue to remain soft. That will lead to a further build up of inventory and thus hold back a true price recovery. The price decline potential was evident in July’s housing data. Existing-home sales plunged 27 percent to 3.83 million seasonally adjusted annualized units – their lowest level since 1995. Even though there was little change in inventory (with 4 million homes available for sale), the actual months’ supply of inventory rose sharply to 12.5. The sales decline reflected the aftermath of taking the stimulus medicine away. For nearly all of June, homebuyers knew they had to close the deal by the end of June to qualify for the tax credit. Therefore – and naturally – people rushed in to close in June and not wait till July. Qualitative REALTOR® member survey data about recent homebuyers suggest that investors, all-cash buyers, and buyers of expensive homes stayed in the market in July, but first-time buyers did not.
Sky Palette
rainbow
Going forward, home prices may fall, although I doubt in any meaningful way. Even if they do decline, there is no guarantee that affordability conditions will improve. Again, the principal reason for our current exceptionally high affordability conditions is lower mortgage rates. If prices were to fall 10 percent but mortgage rates creep up to 5.4 percent, then the affordability conditions could actually worsen. As for home sales, there are far fewer people in the pipeline to buy a home in the immediate months after the tax credit expiration. Consequently, expect continuing low sales at least through autumn. But sales should slowly come back because of the high expected affordability conditions. Winter months are generally slow ones for home sales. If sales this coming winter matches up with past “normal” winters, then it would be a good sign that the housing market is getting back on track to normal sales levels. If sales this winter remain 20 to 30 percent lower than normal, then we are looking at trouble with high inventory stuck at a double-digit months’ supply. Remember that the months-supply figure is also impacted by the raw count of homes listed for sale. Since inventory generally declines from summer to winter, the months’ supply will steadily fall, hopefully to 8 or 9 months, and close to the level consistent with continuing price stabilization. For example, inventory fell by 600,000 to 800,000 from July to December in each of the past 3 years. If a similar decline occurs this year and home sales slowly bounce back to 4.5 million (annualized sales) then we can have continuing price stabilization. A compelling argument can be made about the best affordability conditions, but it will be for naught if consumers lack confidence. Confidence in turn will be directly impacted by the general direction of the economy. Unfortunately, the economic recovery is coming to a virtual halt. GDP growth rates in the past three successive quarters were: 5.0%, 3.7%, and 1.6%. The upcoming GDP growth rates could be even lower figures. (If it turns negative for two straight quarters, then another fresh recession is at hand). At such tepid growth rate the unemployment rate could well reach 10 percent. GDP growth in a post-recessionary environment should be 5 percent or better, not only to start growing but to compensate for the recessionary downfall.
Jamieson
Entrance to the Jamieson Condominium
The weak economic expansion means that the job market will continue to look bleak and the unemployment rate could top 10 percent. This does not mean the country is necessary losing jobs on net right now. There have in fact been 763,000 private sector job creations from the beginning of the year to August. The soft economic expansion just means that the job creation pace is too slow to accommodate the rise in the labor force, particularly the recent high school and college graduates looking for work, aside from the need to fully re-hire the near 8 million job losses that occurred in the 2008 and 2009 recession. In a normal good year, there would be 2.5 to 3 million annual private sector job gains. The homebuyer tax credit appears to have done its job in preventing home price over-correction. NAR prices show stabilizing pattern for the past 12 months while Case-Shiller price data show stabilizing patter for the past 18 months. We’ll still need to wait several more months to get a definitive gauge on price stabilization. At this point, we’ll see how the housing market behaves in the absence of the stimulus medicine. As with any sectors in the economy, it is very unhealthy to be dependent on government help for a long period. Compelling affordability conditions and some job creations are a move in the right direction and we have to just allow some time for these factors to work their way into the system. But an important question that will linger is of when consumer confidence will genuinely return to close on the deal. by Lawrence Yun, NAR Chief Economist

Home Prices Continue Gains Over 2009

U.S. home prices, including distressed sales, increased by 2.9 percent compared to the same month last year, according to CoreLogic in its monthly index. May was the fourth straight month prices showed a year-over-year increase. "Home price appreciation stabilized as home buyer tax credit-driven sales peaked in late spring," says Mark Fleming, chief economist for CoreLogic. "But given that the labor market and income growth remain tepid, we expect prices to moderate and possibly decline the rest of the year." Source: CoreLogic (07/13/2010)
  • Julie Nesbitt

    Julie Nesbitt
    Julie Nesbitt knows the back trails and by-ways of Northern Virginia real estate.

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  • Enjoying Winkler Botanical Preserve

    We had a great time walking the trails. 

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  • Don’t take chances with real estate.

  • REDUCED: 7202 Churchill Rd, McLean

    Open House, Sunday, 1-4 BIG PRICE DROP! 7202 CHURCHILL ROADMcLean, VA 221016 Bedrooms5.5 Bathrooms6,752 SF $1,695,000

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  • Good Shepherd Housing and Family Services

    Fairfax County
    Established in 1974 with a mission to reduce homelessness, increase community support and promote self sufficiency, the Good Shepherd Housing and Family Services is operated by a multi-denominational board of directors and staff managing over 70 housing units. Good Shepherd Housing and Family Services is located in the Mount Zephyr Business Center at 8305 Richmond…

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How does number of bedrooms impact price if square footage is equal

Question:

All homes listed have 1.5 baths, are close in square footage (1200-1270 sq feet), historic, built in same time period (1870s-1880s), and located in the same neighborhood: Home #1: Sold for $517/sq ft this month. Three bedrooms. Two of three bedrooms are small but would accommodate twin bed, nursery, or office. Home #2: Sold for $518/sq ft this month. Two bedrooms. Renovated kitchen with granite, cherry, stainless. My house, home #3, sold for $480/sq ft one year ago. One true bedroom. Also has a large room (but no door) that is used as informal living space or could be a home office. A third small room is used as a laundry/walk-in closet. If the closet fittings were removed, it could be used as an office or nursery (it has windows). For listing purposes, it was counted as a second bedroom. To access the "laundry" room and the full bathroom from the rest of the house, you must walk through the bedroom. What is Home 3 worth now relative to Homes 1 & 2?

Answer:

The prices of residential real estate are often "notional". That is to say that notions in the buyers and sellers of real estate will impact the price in ways that we can't always quantify. In a large market like Alexandria, real estate is a commodity in the sense that it is difficult to find something the market hasn't already rewarded or punished. But is it not a commodity in the sense that you can tally a square footage price and add an amount per bedrooms or multiply the price by a certain factor based upon the number of bedrooms. Are they at the same address? In the same building? In your example above, what is the view from these units? Is the condition of these properties identical? Even a licensed appraiser with answers to all these questions would be hard-pressed to give you an answer without know the tax assessments and the contract price on these properties. In the end, a home is worth exactly what a buyer will pay for it, if the seller will sell for that amount.
Will Nesbitt
Will Nesbitt
Will Nesbitt is the principal broker of Condo Alexandria / Nesbitt Realty.

Now is the Time to Buy, Investment Firm Says

When you compare the real estate downturn to the real estate market in the 1980s, Blumberg Capital Partners, which provides real estate investment management, finds similarities that lead the company to think now is an optimal time to buy. Its analysts point out that the recession of the 1980s lasted 16 months, running from July 1981 to November 1982. Unemployment peaked in November of 1982 at 10.8 percent. From that point it took 38 months for the economy to recover fully and for unemployment to fall below 7 percent. It was another 10 months before unemployment was consistently below 7 percent. Philip Blumberg, CEO of Blumberg Capital Partners, said in a note to investors that the real estate cycle is still three or four years from an optimal selling period, so now is the time for investors to buy. Source: Blumberg Capital Partners (05/19/2010)
  • Home Prices In Arlington Continue To Hike

    Glendale
    The housing market in Arlington County is getting more and more expensive as potential buyers continue to have fewer homes and condos to choose from.

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  • Inlet Cove is near Fort Belvoir and Potomac Mills

    Inlet Cove outside Belvoir
    Inlet Cove is alongside Route 1 This neighborhood of townhouses is near grocers and eateries Inlet Cove is close to Fort Belvoir, Alexandria, and Potomac Mills shops, in the city of Woodbridge Interior to these properties are multilevel Inlet Cove is serene

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  • Pending Home Sales on an Upswing

    home inspector
    Pending home sales increased again in March, affirming that a surge of home sales is unfolding for the spring home buying season, according to the National Association of REALTORS®. The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, rose 5.3 percent to 102.9 from 97.7 in February, and is 21.1…

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  • A Good Time to Buy a High-End Home

    Station Square
    Some of the best housing deals are on high-end homes, many over $1 million. Some of them need TLC or they aren’t in the most-coveted locations. But there are plenty of desirable properties and lots of sellers who are getting impatient. Buyers with cash have the best opportunities. Buyers who need a mortgage should move…

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  • Who is today’s homebuyer and why are they buying?

    Nesbitt Realty 703 765 0300
    The National Association of Realtors recently did a study about the characteristics of home buyers. Some of the findings might surprise you. Thirteen percent of buyers purchased a home with one or more parents and grandparents together with adult children. There were several reasons given for purchasing a multi-generational home. Cost savings; Children over the…

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Upper King Street Fresh Farmers Market

Upper King Street Fresh Farmers Market is located at King Street Gardens Park, 1806 King Street In 2010, the market is open on Wednesdays, May through October from 3 p.m. to 7 p.m with dates and times subject to change.
King Street Gardens
Hanging Gardens
The Upper King Street Farmers Market offers area residents and commuters the opportunity:
  • to shop for fresh
  • locally grown produce meat
  • dairy and bakery items
  • Arlington Urban Village Market at Courthouse

    The Arlington Urban Village Market at Courthouse is an open air market that has been going on since December 2002. SATURDAYS: 9 am - 4 pm Located on North 15th Street, next to Courthouse parking lot. Free Parking is available at 2100 Clarendon Blvd. (County office garage). Enter on Clarendon Blvd. or 15th Street The market features furniture, Art, China,Silver, Jewelry, Books, Photographs, Vintage Clothing, Linens, Lamps, Chandeliers, Antique Tools and Other Treasures...

    Economists Give Housing Mixed Reviews

    Home prices that approach what they were before the bust are at least five years away, says Peter Morici, a University of Maryland professor of economics.
    sunset at Carlyle Towers
    Carlyle Towers
    “I think we’ll see housing values rise 20 or 25 percent and then more gradual appreciation," Morici says. The problem, he believes, is the oversupply of housing. “Supply is a couple of years ahead of demand,” he says. Other housing observers were less optimistic. “Foreclosures are still going to bite the market. Given the preponderance of negative housing data, we may see another leg down,” says Joseph Brusuelas, president of Brusuelas Analytics. Source: Bloomberg, Courtney Schlisserman (03/30/2010)
    • Home Prices In Arlington Continue To Hike

      Glendale
      The housing market in Arlington County is getting more and more expensive as potential buyers continue to have fewer homes and condos to choose from.

      Read More

    • Inlet Cove is near Fort Belvoir and Potomac Mills

      Inlet Cove outside Belvoir
      Inlet Cove is alongside Route 1 This neighborhood of townhouses is near grocers and eateries Inlet Cove is close to Fort Belvoir, Alexandria, and Potomac Mills shops, in the city of Woodbridge Interior to these properties are multilevel Inlet Cove is serene

      Read More

    • Pending Home Sales on an Upswing

      home inspector
      Pending home sales increased again in March, affirming that a surge of home sales is unfolding for the spring home buying season, according to the National Association of REALTORS®. The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, rose 5.3 percent to 102.9 from 97.7 in February, and is 21.1…

      Read More

    • A Good Time to Buy a High-End Home

      Station Square
      Some of the best housing deals are on high-end homes, many over $1 million. Some of them need TLC or they aren’t in the most-coveted locations. But there are plenty of desirable properties and lots of sellers who are getting impatient. Buyers with cash have the best opportunities. Buyers who need a mortgage should move…

      Read More

    • Who is today’s homebuyer and why are they buying?

      Nesbitt Realty 703 765 0300
      The National Association of Realtors recently did a study about the characteristics of home buyers. Some of the findings might surprise you. Thirteen percent of buyers purchased a home with one or more parents and grandparents together with adult children. There were several reasons given for purchasing a multi-generational home. Cost savings; Children over the…

      Read More

    I don’t want to reduce the price of my home.

    view of Pentagon City from the Representative
    view of Pentagon City
    The expert says: “I understand. But no matter what price we set for your property, there is always a chance it may not sell. I would like to set an appointment to review the activity and reconsider the price in two weeks. We will be monitoring the calls from signs, ads, and open houses to determine our best strategy for locating a buyer. Then we will analyze this information and adjust our marketing campaign as needed until it is sold.” — Rich Levin, Real Estate Trainer and Coach It's true: we're still in a buyer's market.  I don't see prices continuing to decline, but there are only two options if you want to sell your home: wait patiently for a buyer to see the value of your home, or lower the price to entice a buyer to act now.  In the past, homes were selling for more than what they are worth. Today, they are probably selling for less than what they are worth. If you have the time to be patient, hold out to get your price.  If you want to act now, don't worry too much because if you sell at a low price, you'll be buying at a low price.
    head shot
    Will Nesbitt
    Will Nesbitt is the Principal Broker of Condo Alexandria.