Wednesday, January 14, 2009

A matter of perspective

Found this through a comment on a post at our friends, DCist. Per the Examiner, in an article about MRIS' December home sales report:

"Meanwhile, the District of Columbia posted a modest 12.5 percent drop [in median price], with the median price falling to $350,000 last month from $400,000 the previous year."

Since when is a 12.5% price drop in anything considered modest? The median average home price dropped by an eighth!

The MRIS data show that in 2008, the District's dollar volume was 25% lower, 26.6% fewer homes sold, and Fortune magazine says the DC area is the tenth worst real estate market in 2009, yet the puffers continue to spin positive:

"It's definitely down, but compared to the rest of the country, it's actually in pretty good shape," he [Fred Kendrick, an associate broker at Sothebys Realty] said. "The real estate market is generally in good shape — it's consumer confidence that's the issue."

Consumer confidence like "can I get a jumbo loan to buy this house that won't cost too much?" Like "will this house's value drop another 10-15% in 2009?" Silly consumers. And then you read this:

"Anthony Yezer, professor of economics at George Washington University, agreed that the Washington area's housing market has generally been better than it has nationally.

"If we look longer-term — past 10 years [ago] — the increase in housing prices has been greater here than in the rest of the country," he said. "We certainly didn't have the wild market booms" that occurred in places like Phoenix, Florida and California."

According to Case-Shiller, DC area prices more than doubled in less than 9 years - that isn't a wild market boom?

I know, my expectations for quality reporting from the Examiner are too high. I'll stop.


Anonymous said...

"Huge foreclosure inventory
And what's worse, Sharga thinks that as many as 70% of the bank-owned homes listed on RealtyTrac's site have not yet been posted on multiple listings services (MLS), the industry databases of homes for sale. Those homes are less likely to be sold because most real estate agents won't know they're available.

"Either banks are overwhelmed and can't get the houses on the MLS quickly, or they're deliberately slowing down so they don't have to take markdowns to actual home values on their books," Sharga said. Either way, it has the effect of underestimating the foreclosure inventory problem."

The picture painted is rosier than it actually is, in general. The number of District condos is higher than actually on the website.

Anonymous said...

Funny thing is - even though I dont mean to do this, I see DC real estate like the puffers do.

We are in the midst of one of the most severe global recessions of all time - EVERYTHING is going down across the board - median prices out in the boonies are down 50% (FIFTY PERCENT)!!!

The entire US median home price is down 13-14% - the US as a whole did not experience nearly as big a bubble as DC proper did - yet DC proper is holding its value better.

When the bubble started bursting, I expected values in the entire DC area to be down 40% - no exceptions. I thought the whole thing was a ponzi scheme of liar loans top to bottom.

It now looks like close in areas like DC will not experience anything like the 40% or more dropoffs that the far out burbs are experiencing - even though the median prices rose just as much in DC (2000-2005) as they did everywhere else. So relatively speaking in light of all these factors, I find DC's performance simply remarkable.

billyhacker said...

Spot on. "Consumer Confidence" is portrayed as a naive psychological hiccup rather than what looks to me more like a rational economic decision given price declines coupled with many prices still above historical rent/price and price/income ratios. I will say that it's not just the Examiner writing this nonsense...

Keith said...

Anonymous @ 10:08:

"It now looks like close in areas like DC will not experience anything like the 40% or more dropoffs that the far out burbs are experiencing..."

The fat lady hasn't even started to warm up on this recession yet so don't assume it can't happen. There were those in 2005 who said prices could only go up...

Keith said...

Sorry, my last response was to Anonymous @ 10:48...

To [the real] Anonymous @ 10:08:

I noticed a significant number of repossessions as I processed the District's sales data for July - September 2008. Deutsche Bank seems to be taking it on the chin in the District.

Anonymous said...

"The fat lady hasn't even started to warm up on this recession yet so don't assume it can't happen."

I agree Keith. I think though there were 2 fat ladies. First was the "bubble fat lady". She was great because she rewarded patient renters by taking away property from people who couldnt afford it, and lowered prices. We like her...

The bubble fat lady had a scratchy throat by the time she got here from the exurbs. She didnt last long. However, we now have the "recession fat lady". The recession fat lady lowers prices too, but she does it in a bad way by taking away jobs not only from homeowners, but renters too. We dont like her as much.

Basically, if I had my way, I would have want the Bubble fat lady to perform longer. I like her more than the alternative.

Unknown said...

Thanks so much for this helpful blog. Like all of you, I'm very eager to see how D.C. performs in the coming 24 months.

It is starting to seem to me like it's a good time to *carefully* inch back into the market. Even though asking prices haven't dropped as much as most of us would like, would-be buyers are gaining negotiating room, making it much easier to get properties in popular buildings/neighborhoods that just three years ago attracted multiple offers and mile-high escalator clauses. I don't think buyers will gain instant equity in these properties, but it is a chance for people to get into properties/neighborhoods that might have been out of reach a few years go.

Just a thought.