Thursday, August 30, 2007

Flying to New Orleans

I'm going to New Orleans this weekend to relax on our balcony, grab a bag or two or three of Zapp's [salt and vinegar, please] from Royal St Grocery [they're CLOSED!], mix a few stiff drinks to help wash 'em down, and visit our friends.

Have a great Labor Day!

Tuesday, August 28, 2007

DC Sales: July 2007 [First Look]

I've begun scrubbing, fixing, and geocoding sales recorded in the District during July 2007. For the month, 770 sales were recorded. It'll take me a few evenings to complete the task, but I do have a first cut at the results for each ward:

I had to omit the $82MM home in Glover Park and the $33MM condo in Kalarama from this table, at least until I verify whether the District recorded the correct prices; I doubt it did.

Monday, August 27, 2007

A matter of perspective

Today's NY Times has the following headline: "Existing Home Sales Fell in July". The article discusses data released by the National Association of Realtors [NAR] that reported the following data points:

Home sales slid 0.2 percent in July to a seasonally adjusted 5.75 million unit annual rate, according to the National Association of Realtors.

That brought the supply of unsold homes at the current sales pace to 9.6 months' worth, the highest level on record since 1999, when the association began tracking all types of properties, such as condominiums, together with single-family homes.

The supply of single-family homes, the bulk of the inventory included in the association's data, rose to 9.2 months' worth, which was the biggest supply on hand for sale since October 1991.

...median home prices fell 0.6 percent from a year ago to $228,900.

None of this sounds good. Indeed, "key business economists ... concluded that the risk of massive defaults on subprime mortgages and heavy debts is a bigger threat to U.S. economic prosperity than terrorism."

So I went to the data source to see what I could learn. The headline of NAR's press release: "Existing-Homes Sales Stable In July." Their discussion of their data points:

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – slipped 0.2 percent ... and are 9.0 percent below the 6.32 million-unit level in July 2006.

...national median existing-home price for all housing types was $228,900 in July, down 0.6 percent from July 2006 when the median was $230,200...

Total housing inventory rose 5.1 percent ... which represents a 9.6-month supply at the current sales pace, up from an upwardly revised 9.1-month supply in June.

Single-family home sales slipped 0.4 percent ... and are 9.3 percent below the year-ago pace...

Existing condominium and co-op sales rose 1.4 percent ... but are 7.5 percent below the 811,000-unit level in July 2006. The median existing condo price was $230,600 in July, up 2.4 percent from a year ago.

NAR's article actually reports more dismal data than that of the NY Times, yet "sales are stable." And they can explain it all:

Lawrence Yun, NAR senior economist, said the market is holding on despite temporary mortgage disruptions. “Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months...”

I have no idea how he can make that claim. And, as for as the "mortgage liquidity" problem he speaks of, it didn't exist a month ago so it could not have had any impact on July sales.

The NAR reports the data it's collected, but it doesn't adequately put it in the same market context as the NY Times. However, you'd have to look at the NY Times' graphics to get a true grasp of the YoY changes in the market; to its credit, NAR does state that sales volume has fallen 9% YoY.

It's interesting how using differing mixes of text, graphics, and headlines to report the same data can result in differing stories.

Sunday, August 26, 2007

"Apres moi, le deluge"

France's King Louis XV came to mind this evening as I read two articles in today's NY Times [doesn't this happen to you?]. As described by the introductory paragraph in his entry in Wikipedia:

Louis XV, called the Beloved (French: le Bien-Aim̩) (February 15, 1710 РMay 10, 1774), ruled as King of France and Navarre from 1715 until his death. Unexpectedly surviving the death of his entire family, he enjoyed a favourable reputation at the beginning of his reign. However, in time, his inability to reform the French monarchy, his lack of morals, and his foreign policy on the European stage lost him the support of his people, and he died as one of the most unpopular kings of France.

Among other things, Louis XV famously said, "Apres moi, le deluge [After me, the deluge]." While some may debate whether he meant "after me, comes the revolution" or "after me, I don't care what happens," I think of Alan Greenspan and Ben Bernanke. After a real estate boom fueled by the Greenspan-led Federal Reserve policy of cheap money and now causing [I hope] many sleepless night for Bernanke as the financial markets teeter on the edge of panic, the NY Times writes in one of two articles that the median home price in the US is going to decline 1-2% this year "for the first time since federal housing agencies began keeping statistics in 1950." We now face the prospect of price declines through 2009:

In all, Global Insight expects a decline of 4 percent, or roughly 10 percent in inflation-adjusted terms, between the peak earlier this year and the projected low point in 2009. In California, prices are expected to decline 16 percent — or about 20 percent after taking inflation into account.

But wait, it gets better:

On an inflation-adjusted basis, the national median price — the level at which half of all homes are more expensive and half are less — is not likely to return to its 2007 peak for more than a decade, according to Moody’s Economy.com, a research firm.

The Times article discusses the Case-Shiller Index (CSI), to show that although government data has never reported declines in the past, CSI's method does demonstrate that they've happened:

For all the attention that the uninterrupted growth in national house prices received, some economists argue that it was misplaced. The Case-Shiller index, which many experts consider more accurate than the government measure, did show a drop in prices in the early 1990s. (Unlike the government’s measure, it includes mortgages of more than $417,000, which are not held by Fannie Mae or Freddie Mac.)

After adjusting for inflation — the most meaningful way to look at any price, economists say — even the government’s index fell in the early 1990s.

The Times also has a great graphic, with an explanatory video, showing YoY growth in home prices in 19 cities compared to the national median, using the CSI. The graph shows that DC metro's inflation-adjusted housing prices have been clearly outpacing the national median for most of this decade and have been declining for the past four quarters.

Friday, August 24, 2007

Condo Sales: The Sonata

The Sonata is one of those buildings that require a little extra processing when I collect District sales records. Although the property's official street address is 301 Massachusetts Ave NW, the District's property records list its address as 301 303 H St NW. As this fellow said, "they've somehow wormed their way to a Massachusetts Ave address."

Its targeted "delivery" was November 2006, but the first sale was recorded in January 2007. At an estimated development cost of $28M, it is described as:

...part of the Mount Vernon Place mixed-use development, is one of two towers that will create a dramatic gateway to Mount Vernon Place from Massachusetts Avenue. The 12-story building features 75 condo units with loft-style design and includes eight penthouses. Prices started in the $300s. Mount Vernon Place, being developed by Quadrangle Development and The Wilkes Company, is a mixed-use development located in the Mount Vernon Triangle and consists of one million sq. ft. of commercial and one million sq. ft. of residential development.

The other tower mentioned above is Madrigal Lofts. In fact, the Sonata is the first of 11 buildings in the Mount Vernon Place development. The developers envision the Sonata and a future condo building to be the "Massachusetts Avenue Gateway" to Mount Vernon Place. Or maybe it's the other way around?

Apparently, the Sonata sold out within two months of launching pre-construction sales in February 2005, but the District's real property assessment database shows that 20 units are either unsold or have not had their deeds recorded yet, so I assume a few deals fell through.

The Sonata 301 Massachusetts Ave NW, DC, 20001

Sales Through July 2007

Of the Sonata's 75 units, the District has recorded 55 sales through mid-July. The chart below shows the distribution of sales by price point:

The table below details the average and median prices and sales volume for each month's transactions.

Actually, the District has recorded 56 transactions at the Sonata this year. One unit, #903, has been flipped, but I'm excluding it from the analysis because the recorded sales price of the second sale makes no sense and the District's Recorder of Deed's records offer no clarification. The unit was purchased in February for $727,100 and resold in May. However, the District recorded the second sale's price as $163,000, which I have to believe is an error.

Of the 20 units that are available, three are on the 11th floor, units #1102-1104. Unit #1103 [MLS DC6318679], a 2/2 with 1266 sq ft and a $871/month condo fee, is available for $825,000, or $652/sq ft. One floor higher, unit #1203 [MLS DC6318693], a 2/2 with 1361 sq ft and a $871/month condo fee, is available for $835,000, or $614/sq ft.

Rental / Resale Activity

To date, no units have been flipped aside from the unit mentioned above. As of August 24, one unit is listed for rent on craigslist:

This unit, on the seventh floor, had been advertised for rent one week earlier for $2900.

Thursday, August 23, 2007

A sign of the times?

Or, maybe, "it can't happen here?"

I love primary colors. I've driven a convertible since 1995, first a Miata and now something a little more expensive. When buying each car, I adhered to my father's admonition: "A convertible should always be a primary color." Miata: red. New car: black. Why do I talk about primary colors here?

Well, let me tell you the sign at right, attached to the hurricane fence in front of 1706 T St NW, was quite an eye catcher this evening; I couldn't help seeing it as I parked on T St to go to the gym. I wasn't the only one who noticed - quite a few folks stopped to look at the sign as they passed by.

1706 T St NW is an apartment building, one that looks like it's seen better days. If the housing market was more like that of 2005, I'm sure some developer would be snapping up this property to convert it to condos, like its neighbor Dupont Renaissance (1704 T St NW). A little digging in the District's real property assessment database shows:

  • The property's 2007 assessed value is $1.5MM. The District's proposed assessment for 2008 is $2.8MM.
  • It appears the tenants bought the property in May 2006 for $3.1MM.
  • Taxes grew from $9200 in 2005 to about $13,600 for tax year 2007. They still owe for the second half of 2007.

Obviously, I'm not privy to the details of the purchase, and it appears quite convoluted when looking at the transactions listed in the Recorder of Deeds database (the Unitarian Universalist Affordable Housing Corporation, now the Open Door Housing Fund, was involved), but on the face of it, it appears the tenant's overpaid for the property and they're now in arrears, hence the primary colors parked in the front yard.

Given current market conditions, I wonder if we'll see more signs like this in the District.

Tuesday, August 21, 2007

Announcing: DC Housing Prices Report

I haven't updated the blog for the past few days because, when I wasn't enjoying the weekend at Rehoboth Beach, I've been busy putting the final touches to a long planned offering, the DC Housing Prices Report.

As I've mentioned in the past, I have a database of more than 60,000 home and condo sales recorded in the District since 1999. I've used this data in writing the monthly sales analyses I've posted on this blog. In keeping with my efforts to make information more freely available to District home buyers, I've decided to publish my data so that others can use it as they research and prepare to buy their own homes.

The report is divided into three sections:

  • A summary of the past month's analyses from the blog.
  • The data tables used in the month's analysis.
  • And, I believe most importantly, a listing of almost every home and condo sale recorded in the District that month, sorted by zip code and, within each zip code, by housing category and price.

I don't believe this type of sales data is available in this format from any other source in the District, aside from a real estate agent. And while a real estate agent will provide listings information, they will rarely provide past sales information to a client, at least in as comprehensive a manner as is available through this report. For example, in the report I'm publishing today, the 704 sales recorded in June span 48 pages encompassing up to 22 zip codes.

The report is available for purchase and download under the "DC Housing Prices Report" section on the right side of this page; click on "Add to Cart", you'll be transferred to Paypal, and the PDF file [~1.7MB] should then be automatically downloaded to your PC/Mac.

However, this does not mean I will no longer blog my analyses of current housing prices and trends in the District; I'll continue to do so. I'm simply using another channel to provide more detailed information to those who want it.

Thursday, August 16, 2007

Should we short?

I posted the chart included in this article several months ago, but it warrants [no pun intended] another gander given the current correction underway on Wall Street. 

A "Jumbo" credit crunch?

An ominous paragraph in today's NY Times article about Countrywide Financial's cash squeeze:

"In a statement released early today, the company also said that 90 percent of the home loans it will now make will be to standards set by Fannie Mae and Freddie Mac, the big purchasers of mortgage loans, because it is not able to sell them to other buyers. Less than two months ago, the company had said about 50 percent of its loans were eligible to be bought by the two government-sponsored agencies."

A lot is left unsaid in this paragraph, but my take is they're pulling out of the non-conforming loan business. Jumbo loans, widely used in DC, are non-conforming since they exceed the $417,000 limit set by Fannie and Freddie. Since Countrywide is "the nation's largest mortgage lender," accounting for 17% of all mortgage loans in the US, what does this portend for the ability to get jumbo loans in DC and, moreover, for DC's housing market?

Wednesday, August 15, 2007

Condos being "Undelivered"

An interesting article in today's WaPo.

A growing number of condominium developers are backing out of projects as the worsening real estate market causes lenders to tighten their standards.

For buyers, a project's cancellation can be an unexpected jolt. They get their deposits back but nothing for their time and aggravation.

In the past 12 months, nearly 20,000 condo units have been removed from the glutted local development pipeline, said Gregory H. Leisch, chief executive of Delta Associates, a real estate research firm in Alexandria. By Delta's count, in the second quarter of this year, developers abandoned plans for 22 local condo projects.

The market's correcting itself and some unfortunate buyers are getting caught up.

And projects are being canceled.

The list of abandoned condo projects is growing.

Level 2 Development of the District decided late last year to build View 14 at 14th Street and Florida Avenue NW as luxury rentals instead of condos. "It was clear to us from the sales pace and activity that we were going to have a difficult time preselling the number of units required to meet both the lenders' presale requirements and our own investment criteria," said Jeff Blum, a principal at Level 2.

Earlier this year, the Joule in Arlington, developed by Ed Peete, also went from condos to rentals. In Leesburg, Comstock Homebuilding went so far as to repurchase 58 of the 316 condominium units at the Bellemeade for $12.8 million before selling the building to a Midwestern apartment operator in June.

Tuesday, August 14, 2007

MRIS July Housing Report: Christmas in July

Last Friday MRIS released its report on July sales of existing homes and condos in the District, those listed or sold by real estate agents. If the market tanked in June, realtors partied like it was 2005 in July because the sales data is startlingly robust. July's YoY data show healthy increases across all metrics [see figure below]:

It is as if the negative signs from June's data were flipped to positive signs - the numbers are almost exactly the same, just positive. For the second time this year, homes led condos in percentage share of units sold and walloped condos in share of dollar volume. In June we see:

  • Sales volume. Overall, up 10.61%. YoY, condo sales volume was up a robust 12.62% and home sales volume increased 8.72%. All but two categories of single family homes experienced positive growth in sales volume.
  • Dollar volume. In aggregate, up a whopping 17.92%. Dollar volume for condos rose 17.23%, homes did better, up 18.31%. All categories of housing had positive growth in dollar volume YoY.
  • Average sales price. Up 6.61%. Average prices for condos were up 4.09% to $408,103, but that average price was about $20,000 less than June's. Homes did well, up 8.82% to $718,924, well above June's $659,314.
  • Days on market. Yes, on average the DOM grew to 60 days, but a closer look shows that more than 2/3 of all homes [69.5%] sold within 60 days.
  • Inventory. Based on July's transaction rates and active listings, there is a 4.24 month's supply of condos, a decrease of 13.41% over June, while home inventories fell 13.08% to 4.16 months.

Looking at July's data to see whether a "Chase Point" effect may be in play, I find that 9.9% of purchased units were sold for more than $1MM compared to 8.5% in July 2006, but MRIS' data lacks the granularity necessary to see whether that skewed the month's results. I guess we wait for August's data to see whether July was an anomaly or the beginning of a late summer buying season.

Detailed Data

Average Sales Price

Dollar Volume

Transaction Volume

Saturday, August 11, 2007

A WaPo analytic innovation

Today the WaPo discovered the idea of analyzing real estate sales by zip code. The article used higher average/median prices and dollar volume in zip code 20015 to prove its point that some zip codes are doing well. The story would have been stronger if it'd looked at unit volume, too, to see how it all tied together; as it is, the article told half the story. I don't dispute the WaPo's analysis, I've commented for several months that the high end real estate market is doing quite well while the rest of the market is on life support.

To show them a "best practice", I performed a similar analysis [June 2007 versus June 2006]. I included all types of housing [condos and homes] in the analysis so zip code 20015's data will reflect the "Chase Point effect"TM. The table below shows the percentage change YoY for average/median prices, unit and dollar volume.

As the WaPo discovered, zip code 20015 had a good month, as well it should when you see that one home sold for $3MM, another for $1.6MM, that tired place for $1.2MM, and then all those $1MM condos at Chase Point. Zip code 20006 had zero sales in June 2006 so anything in June 2007 is a good thing.

Average and median prices rose in zip codes 20001, 20005, 20010, 20012, and 20016 despite falling unit and dollar volume; one can only assume that high end homes/condos were responsible for the price growth. The real story is that of 22 zip codes in the District, 17 had lower sales volume [unit and dollar]; of those, 11 also had lower average and median prices. That didn't make today's WaPo.

Ultimately, while the WaPo is accurate in reporting that some zip codes are doing well, it's cold comfort to the rest of us to be told once again the old story that the wealthy are doing well.

Friday, August 10, 2007

MRIS sales data for July is out

This morning MRIS released data for sales of existing homes sold and/or listed by real estate agents that closed in the District during July. I've not had a chance to do an in-depth analysis yet, but it looks like all metrics are positive YoY: dollar volume, average and median prices [aggregate and by category], and the number of units sold are up. I expect to complete my analysis within the next 24 hours.

Wednesday, August 08, 2007

Home Sales: Anything for less than $500,000?

A few weeks ago I posted an analysis of the market for condos costing less than $250,000. Following up on that, I've just completed a similar analysis of the District's home market. Specifically, can you buy a house in the District for less than $500,000? It's a fair question to ask when the average price of a home sale recorded by the District in June 2007 was $635,385 [my analysis].

In other parts of the country, this is a ridiculous question. When I lived in New Orleans, $500,000 bought a nice very home in Uptown, if not the Garden District. I'm talking the nicest part of the city and, better yet, on "high" ground [maybe 3' above sea level]. You could have called Anne Rice "neighbor", which would have been relatively easy since she owned three homes in the Garden District alone before she abandoned the city for the Northshore [the home on First Street that all the tourists gawked at, her stretch limo parked in front; the party house on St. Charles; and the old St. Elizabeth's orphanage on Napoleon Avenue]; I lived between homes #1 and #2.

However, it's an interesting question now for District residents because of the current meltdown in the mortgage industry and the credit markets. Why? Well, at this time any loan greater than $417,000 is a non-conforming loan, requiring the borrower to take out a jumbo loan that typically costs a few basis points more than a conventional mortgage. Nothing new there. But when Wall Street and the financial community wake up and discover that risk really does exist in the credit markets, that there's a reason the terms "risk free rate" and "risk premium" exist, then it becomes a problem for anyone in the District who wants to buy a home using a jumbo loan. As discussed in a WaPo article today:

Rising mortgage defaults have caused Wall Street investors to stop buying many securities backed by home loans, thus shutting off the flow of money that had financed much of the housing boom. Dozens of mortgage lenders and at least two hedge funds have shut down, while companies in other industries have shelved plans to borrow money.

Home buyers are finding it virtually impossible to obtain mortgages unless they are willing to document their income, make sizable down payments and demonstrate a history of paying bills on time -- a drastic shift from the looser borrowing rules of recent years.

Even borrowers with good credit histories have seen mortgage interest rates jump on "jumbo loans" worth more than $417,000. Such loans were used heavily in the Washington area and other regions where home prices soared during the boom.

Wells Fargo made news last week when it hiked interest rates for jumbo loans from 6 7/8% to 8%. Looking at Bankrate.com, a jumbo loan in the District (30 year fixed, $500,000 with 5% down, zero points) will run anywhere from 6.801 - 8.384%. So let's say you want to put 20% down on a house to avoid getting a jumbo loan and you've found a mortgage company that can loan the funds: can you find a house for $500,000 or less to make this work?

I analyzed sales data for 5271 homes sold in the District from May 1, 2006 onward. Of those, 2964 sold for up to $500,000, about 56% of units sold. In the aggregate, the data show the following average and median prices:

Summary

Looking at the data, we see:

  • The preponderance of sales were in NE.
  • No surprise here, Ward's 2 and 3 had the fewest sales.
  • Zip codes 20002, 20011, and 20019 comprised more than half the sales. Amazingly, 20015 and 20016 each had sales of 7 units, much more than I would have expected.
  • It's interesting that in 13 months, not one house in 20005 sold for $500,000 or less.

Distribution of Sales by Price

Prices and Volume by Quadrant

Prices and Volume by Ward

Prices and Volume by Zip Code

Monday, August 06, 2007

The Best Laid Plans...

I don't remember when it started, but Monument Realty bought the Watergate Hotel a few years ago with plans to turn it into an exclusive co-operative building. The WaPo reports this AM that the hotel has closed:

After 40 years, the hotel was looking a little tired. So its owner said it was time to shut down for 18 months and launch a $170 million, top-to-bottom renovation of the landmark 13-story building on Virginia Avenue NW on the banks of the Potomac.

But what happened to the plans for a co-op?

For Monument, the hotel renovation was Plan B.

The company bought the hotel with the intention of converting it to upscale cooperative apartments. Some residents in the Watergate complex argued that a hotel was better for the health of the Watergate complex and challenged the conversion in court.

Meanwhile, the condo market softened and the hotel industry thrived.

With all that, Darby [principal of Monument Realty] said, "it was an easy decision."

The WaPo had another article this AM about the softening real estate market in Rehoboth Beach. Incredible deals are being offered:

[The buyer is] considering a property along the canal, Blue Point Villas, where the developer is offering to pay her mortgage for six months, plus six years of condo association fees, $5,000 toward closing and a 15 percent "developer closeout" discount on the sale price.

I might be able to buy that beach Route 1 front retirement home after all!

Friday, August 03, 2007

The Whitman: Because I care

In case you missed it, I'm letting you know The Whitman is cutting prices by $15,000 on its remaining condos. Parking is included.

Update [August 7, 2007]: I just checked the District's real property assessment database. As of today, 37 units have not been deeded to someone other than the developer, i.e., they're either unsold or the deed hasn't been recorded in the new owner's name yet. One could interpret this to mean that 37 of the 182 units built [20% of the total] are still for sale. I'm just saying...