From CBS News: "It's a Good Time to Work for Uncle Sam"
"There's little belt-tightening in evidence in Washington, D.C.: Counting benefits, the average pay per federal worker will leap from $72,800 in 2008 to $75,419 next year.Still, the Bureau of Labor Statistics reports that D.C. and all 21 jurisdictions surrounding it had a higher unemployment rate in March than a year ago:
. . .
"Some of the Feds' hiring increases have been stunning. If you look at the four-year period from 2006 to 2010, the number of Homeland Security employees has grown by 22 percent, the Justice Department has increased by 15 percent, and the Nuclear Regulatory Commission can claim 25 percent more employees. (These figures assume that Congress adopts Mr. Obama's 2010 budget without significant changes.)"
From the Washington Business Journal:
"The City of Fredericksburg had the highest unemployment rate in the area at 10 percent, followed by D.C. with a rate of 9.5 percent. Those two jurisdictions exceeded the unadjusted national rate of 9 percent unemployment in March. The remaining 20 jurisdictions were below the national rate.
Arlington County recorded the lowest unemployment rate at 4.4 percent. Other Northern Virginia unemployment rates include Fairfax County at 4.7 percent, Loudoun County at 4.8 percent and Prince William at 5.7 percent."
58 comments:
If anyone foresaw the bursting of the housing bubble and didn't foresee that consequence, I think you should realign your forecaster.
I am calling bottom in eastern PWC in the lower end of housing stock. Housing prices may just stay relatively flat for years, but I don't think they will drop lower. Judging by the houses in my subdivision (Newport, Woodbridge), pretty much every house that was bought at bubble prices (since 2004) has been foreclosed on and re-sold. There's no more shadow inventory there, so any new houses that come on the market will not be bank-owned fire sales, just private sellers. Add to that the first-time homebuyers credit, increased gov't spending and BRAC plans, and continued low interest rates, and that's it. I think we're done for the most part down our way. Bubble over.
Calling a bottom to housing now is to early I think ... We are still left with ALT-A home loans which is due to reset between 2009-2012 or as we know it "the 2nd wave".
Peak in house was in 2005 so a 5 year interest only home loan won't reset until 2010. Sorry to be a bear of bad news but saying that we are at the bottom is silly ... IMHO
Theres actually a good argument to be made for PWC bottom despite the so called Alt A "2nd wave". The old credit suisse reset chart is so dated now its of little relevance.
For example, the number of foreclosures seen in PWC thus far already accounts for every subprime loan and Alt A loan ever made. Surely, some of them still exist (i.e. not just those with less than prime loans went to foreclosure), but in far less numbers than suggested by the reset chart which shows a second wave coming.
Take out the few sales, the few modifications, the large number of refis and the large number of early foreclosures & suddenly that "2nd wave" isnt nearly as intimidating as that chart suggests. In that case, especially in PWC where prices are at 10 year trendlines plus inflation, calling bottom isnt so silly afterall.
Since when is a 3.5% increase "a leap"?
Is this like the descriptors on the stock market's daily volatility, "plunged", "sky-rocketed" for 1-2% movements when just recently 4% daily was the norm?
But, yes. We do have jobs, the DC area is a good place to weather the recession.
CRT do you have data to back up your claim? I'm currently going by this chart http://static.seekingalpha.com/uploads/2008/12/16/saupload_tl.jpg
Robert: why do you think the gov is manipulating interest rates?
The government is manipulating interest rates to "force" a bottom in housing prices and turn the aircraft carrier that is housing prices in the opposite direction. It will work, because the government has unlimited money. Inflation, sure, but year after year of falling home prices...no, the government won't let that happen.
sseedragon - back when the NY fed let us see county by county data, we learned PWC had 10,400 subprime & Alt A mortgages combined. (Now its just state by state).
http://www.newyorkfed.org/regional/subprime.html
Realtytrac tells us that PWC has had approximately 15,000 foreclosures in the last year. This figure is probably inflated - at worst by double. Thus, the real foreclosure number is probably around 8,000 - 8,500.
I think its reasonable to assume the bulk of the 8,000-8,500 foreclosures came from the 10,400 subprime & Alt A loans ever made. If so, that doesnt leave alot left to cause a "2nd wave" of any consequence.
Lastly, the problem is everyone of those charts Credit Suisse uses is derived from work Ivy Zelman did for them back in early 2007. Ms. Zelman does not work for Credit Suisse anymore, but she has confirmed that her infamous chart is so dated its of little relevance anymore (that doesnt stop the media from using it regardless). If you want, you can ask her about it yourself
http://www.zelmanassociates.com/
She is actually quite pleasant to talk to.
Bottom line is, the whole idea of the second wave completely ignores the early defaults we have seen thus far. If those early defaults came largely out of the "2nd wave" pool as many suspect, that 2nd wave aint gonna be much when it hits.
Robert, congrats man ... LIBOR rates won't be low for to long ... and here is why Link
Hey contrarian, I'm in the same boat as Robert but my ARM won't reset until late 2010. I tired to get a fix rate but the Bank won't modified because i'm 175K under water ... Luckly when I took out my home loan I only took 40% that I was approve for. And I'm in the process of finding a second home with a fix rate and dumping this POS or renting it out.
The discussion about Manassas/20110 vs Manassas/20111 the other day, and the above calls for "bottom" of the lower segments, led me to update some charts I've been making since last May, and they've led to some interesting conclusions.
First, let's do median sale price, rounded for clarity:
20110
179K 5/08
156K 6/08
173K 7/08
142K 8/08
139K 9/08
125K 10/08
124K 11/08
130K 12/08
144K 1/09
130K 2/09
148K 3/09
140K 4/09
20111
187K 5/08
175K 6/08
171K 7/08
165K 8/08
155K 9/08
147K 10/08
145K 11/08
136K 12/08
136K 1/09
138K 2/09
150K 3/09
130K 4/09
So median price seems to have stabilized.
Then % change YOY:
20110
-40.48% 5/08
-50.48% 6/08
-38.83% 7/08
-55.77% 8/08
-53.22% 9/08
-56.13% 10/08
-51.91% 11/08
-45.88% 12/08
-33.05% 1/09
-43.48% 2/09
-28.81% 3/09
-30.25% 4/09
20111
-40.65% 5/08
-49.12% 6/08
-56.15% 7/08
-47.20% 8/08
-49.18% 9/08
-54.29% 10/08
-43.09% 11/08
-38.88% 12/08
-46.87% 1/09
-34.91% 2/09
-44.65% 3/09
-36.86% 4/09
% change YOY stopped increasing at the end of 2008, but is still impressive.
Inventory:
20110
699
673
614
526
470
410
399
356
369
353
328
313
20111
599
588
535
468
420
374
386
357
341
310
288
282
Inventory has basically halved.
Sales/Available >$500K
20110
0-14
0-13
0-10
0-9
0-9
0-7
0-6
0-4
1-3
0-4
0-3
0-2
20111
1-32
2-29
2-26
3-23
0-18
0-16
3-12
0-12
0-12
1-14
0-13
0-20
The upper end of these zips is dead, and lower inventory is due to price drops out of the upper tier, not sales.
So while the bottom of the market may have found a soggy bottom, the upper end is still rather dramatically coming down. DOM remains atrocious for >$500K, while it has improved significantly elsewhere.
So, as Duh was careful to do, you may be able to find some peace in some segments of the market in some areas, but it is a mistake to lump together all tiers.
Sorry so long, but what do you know? I miss my numbers!
Merle Hazard: “Will we Become Zimbabwe or will we be Japan?”
Tabitha, I completely agree with your analysis. Upper end, and very upper end suck.
However, just one anecdote. Know a friend that bought a townhouse in 2002. Now with 2 year old and the only thing she thinks about is selling her TH and buying a SFH. She could sell for a small profit, but not enough to buy SFH she likes. Yet, another 10% or so in TH appreciation, she will have enough for downpayment on SFH.
Point is, there are a lot of folks in condos, TH's that want to make the move, but the market isn't quite there. Once it is, it'll all float up like it always had for eternity.
robert,
What, you think they'll go to negative rates?? Um, this doesn't take a crystal ball. Unless the Fed decides to permanently underwrite all risk associated with home mortgages, then rates will go up someday. Now, given that the Fed is currently being run by people in the same circles as the Goldman Sachs etc geniuses that thought they could eliminate risk for corporate banks by securitizing it, perhaps the Fed thinks it can do likewise for government held risks. I wouldn't put it past them to have a god-complex. But nor do I truly believe they can sustain these rates against the true risk-profiles for more than another year or two.
how's that ticking time bomb of yours? Just because we don't know the half-life doesn't mean it won't still decay. (sorry for terribly mixing metaphors)
Robert,
She "needs" 10% appreciation on her TH to get a DP for a SFH? And she can't do that by saving it up now, why? If the answer to that is, because her mortgage on her TH is too large to have leftovers for saving then her TH is going down not up.
Read, irving housing blog's, "desire is not demand" post. A few times if need be.
an IHB classic post.
Desire does not equal demand. Keeps talking about pent-up demand. Don't care if there is or isn't pent-up demand. Don't need pent-up demand to have rising house prices.
Real estate prices are rising in the the lower end of the DC area market. Show me a housing bear that foresaw that coming. These bears see the future, why didn't a single one predict this "dead-cat bounce"?
Because they can't see the future. They only peddle their gloom and doom because there is always a market for doom and gloom. I'm thinking about writing my own doom and gloom - "THE GREAT DEPRESSION OF 2011" or some similar title, even though I don't believe it, just to cash in on the people that eat that stuff up.
I think interest rates will move higher. Problem for the housing bears is that once 30 year fixed rates are 7% or 8%, home prices will be 50% higher. They'll be crying over their Desire isn't Demand articles.
tiredbullblewatcher -
Woman I'm talking about that lives in TH and wants SFH, isn't sure she'll be able to afford it. She wants SFH in nearly the same neighborhood. If she can sell TH for $320k, she will have enough for $600k SFH. We agree that lower end of market <$500k is strong, weaker as you move up the price scale. If TH goes to $320k, and SFH is still $600k, she will move. Otherwise not.
The point is that a fire under the TH and condo market will "almost" surely start to move up the ladder because of people like her.
Robert,
I think you are are wrong, only very naive people expect 50% appreciation in the next 2-3 years, as a savvy investor with a great business acumen I know that the housing prices are bound to triple in next year alone. This is trivial, look at all the government and private business hiring, how incomes grow here, how demographics move.
No one predicted a dead cat bounce???
What? I've been saying it will happen since last August at least!
Dead cat bounces always happen, in particular right when affordability is first breached.
Really? You don't need fundable loans to facilitate the transactions needed to create the comps that allow for more transactions at those price points that facilitate more funding? Really? Don't need that for appreciation, huh?
Um, whatever. If you read IHB more thoroughly, you'll see he's not just your average doom and gloomer. He's actually analyzing the market with respect to all the previous bubbles they've had in SoCal.
There's patrick.net or Mr. Mortgage if you want non-stop doom and gloom, but IHB and Calculated Risk if you want a realistic appraisal of where the economy is going. Lumping them all together is a mistake.
(caveat, we are way way further along in the bottoming process than Irvine is right now)
Funny that you should bring this up, Robert: Calculated Risk, currently the market is one and done.
A bottoming in the TH market is indeed a necessary precondition for a bottoming in the SFH market. Until the TH/condo market bottom is in, the SFH starter home market will continue to be hurt unless it drops into the first-time buyer category (some of it already has).
Your friend sounds as if she would be well served by waiting until her target SFHs drop closer to her current mortgage amount. Saving up in the meantime to pay the difference between the sale price and the mortgage note, may be even more effective in getting her the home she wants later at a reasonable price than doing it the old-fashioned way of hoping her appreciation equity magically carries her there.
tbw,
am i joking? the hell i am! i insist, i demand housing prices to quadruple tomorrow! no, today! my whimsy rules!
Contrarian -
I understand you're still priced out living in your parent's basement, but prices are RISING in the lower-end of the market. Foreclosure prices are RISING, normal resales are RISING.
You picked a bad area to be a housing bear. DC is going to grow in the next few years. Obama loves government workers. Wants to pay them more than they're worth too. Perhaps you should try Phoenix, Vegas or Miami. But those markets will turn someday too and you'll still be living in your parent's basement telling you mother that prices need to fall another 35% and then it'll be safe to get back in the market.
robert,
rising? really? by how much? It's called spring, to every thing there is a season, and this too shall pass. I've seen the move-in ready REO 1,400 sq ft. TH's go from $235 closed back up to $260-275. So, actually I agree with you that prices this spring are not what they were this winter. But with the $8k buyer bribe, and the first affordable spring in 5 years, I'm not surprised. It's called a dead-cat bounce. There's a reason there's a name for it. That's because it's a known phenomenon that happens in bubble deflations.
Great job on getting everyone's goat though, Robert.
CNBC fluff reporting piece on that other "shadow inventory", people renting out their homes at a lose hoping for better times. Prices are going to stay flat for a long time at this rate. (if only this were actually quantifiable...)
Housing Predictor a real doom and gloomer, but with numbers!Does anyone think his -13% for Alex and Arlington and -19% for the DC area in 2009 will come to pass? Given he's positing an increasing inventory which we're not seeing, as well as burgeoning REOs which I also havent' seen yet, I'm guessing this prediction is either in dire need of updating, or not very closely researched. He's very light on methodology. Heavy on predictions though. This is one doom and gloomer who wouldn't have predicted the spring dead-cat bounce.
Contrarion, your thoughts? Do you think another 20% down in just 2009 is going to happen? (not over the course of the credit bubble correction, but in just this year?)
Cara, that is what my landlord is (famously) doing, renting til he can get the price he wants. But his clock runs out next spring for capital gains tax exclusion. Then again, he's been bringing in $1900/month since the fall of 2007, so that's positive, I guess.
I still can't believe he had renters move in the day after we moved out.
And the funny thing is, he could have caught the dead cat bounce if he had just put the house on the market after we left. When we were moving out, people would pull over and ask hopefully if the house was coming on the market. He could have gotten somewhere in the mid-$200Ks for it for sure. But he wants $300K.
How many more are there like him?
tbw,
I've been coming around to Razzi, especially with the advent of this blog. She seems to be trying hard for actual reporting (unlike Haggerty, who's just a know-it-all NAR cheerleader)
tiredbubblewatcher -
RE: Federal employees - perhaps Obama will hold the line on pay increases.
Clip from Post article:
President Obama's budget is so ambitious, with vast new spending on health care, energy independence, education and services for veterans, that experts say he probably will need to hire tens of thousands of new federal government workers to realize his goals.
The $3.6 trillion plan released last week proposes spending billions to begin initiatives and implement existing programs, and given Obama's insistence that he would scale back the use of private-sector contractors, his priorities could reverse a generational decline in the size of the government workforce.
Exactly how many new workers would be needed remains unclear -- one independent estimate was 100,000, while the conservative Heritage Foundation said it is likely to be closer to a quarter-million.
100,000 or 250,000, some of those will be here in DC. We can argue about how many, but each Federal job adds to the economy and creates ancillary jobs -- dry cleaners, waiters, etc.
I don't see the job and income base of the DC area shrinking over the next two years. I do think it will increase. Jobs and incomes we all agree have the most impact on local real estate.
tiredbubblewatcher : don't forget all of the FDIC people being hired in Florida and other states!
Robert: I fail to see prices rising in the low end.
Re: FDIC
I have a friend at FDIC who said the prior admin. had allowed the # of employees to drop to about half of the # that had been there previously (my recollection - I could be off a bit on this estimate). She said there were employees who had not had a day off in months because so many banks were in trouble, as you all know, and they were so grossly understaffed, that employees who were still there were working all the time. Even allowing for some exaggeration (and there may not be any), this sounded believable to me. So it makes sense why they are doing a lot of hiring now, but I'm sure they lost irreplaceable experience and will now have to invest a lot in training.
Obama is spending $787B over the next two year and he's cutting $17B. Some of that money will flow through DC. Of course nothing near half or even a third, but 5% is still a huge number. Even 3% would impact the area significantly.
FDIC: Well, when they don't have any work to do (2002-2007) it makes sense to reduce the staff. Probably should have been more than half. BTW, I'll bet there are a few people in NY that know something about finance that would be happy to fill spots at the FDIC.
Novawatcher, by definition, you are a NOVA watcher. You don't see prices moving higher? Some of the data is very recent -- April, and now May, but prices are moving higher...from the bottom, which was somewhere between November and January. YOY? Probably still down.
"Cara said...Housing Predictor a real doom and gloomer, but with numbers!Does anyone think his -13% for Alex and Arlington and -19% for the DC area in 2009 will come to pass? "
His rationale for the declines is completely off (i.e. he says inventory is rising which has been false for years), but his predictions seem high, but reasonable.
I personally wouldnt put this site in the permadoomer category. His front page has a section on how some markets may be bottoming.
Incidentally, I think the IHB blog is a bit overdoomish, but generally realistic. CR however, is tops - guy calls it as he sees it every time. I once put together a list of bubble sites based on my take of their view of reality. I should post that here and see what you all think.
If FDIC cut their staff, that was their own doing. I thought they were like the Post Office and were self-funding. I found this on the FDIC website:
The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities.
Robert, Hayfield,
One could argue that the FDIC had a lot they should have been doing during the time you indicated, but because of managerial choices, didn't or couldn't do it. But regardless, the key point is that they certainly have had a lot to do in the past couple of years and that accounts for the staffing increase.
Also: "The FDIC is managed by a five-person Board of Directors, all of whom are appointed by the President and confirmed by the Senate, with no more than three being from the same political party."
http://www.fdic.gov/about/learn/symbol/index.html
Hi Robert,
Certainly the Fed has been keeping rates low (they forcibly pushed them down with the QE buy) but that game continues for only so long. You may win your gamble, but make sure you are prepared if we go the other way.
Things to consider:
1 ) Treasury rates *have* begun to climb. Fed has let this happen because they view it as a positive sign.
2 ) More disturbingly, Japan's opposition party just announced that if it was elected it would not buy bonds denominated in dollars. If a government funding crisis does come to pass (and I consider it high possibility) then rates will shoot up -- hard.
Think Japan (or China) would not really do that? They already did long ago -- during the Carter years. No reason it can't be done again.
Best of luck -- we're in a "may you live in interesting times" period. Problem is -- that was an old Chinese curse.
joleandsonia -
You mentioned the game can only continue so long. I would contend that the game can continue forever.
You seem to understand Quantitative Easing, so what do you think is the maximum amount of treasuries that the Fed can buy? They announced last month that they would be buying $300B in bills, notes, and bonds. They don't need approval from Congress for that. Who's to say it won't be $500B, $1T, $2T, whatever. The worry is inflation, deflation is off the table.
What do you think most homeowners would tolerate, losing 20% on their house or gasoline at $5/gallon, $6, pick your price.
Fed is eroding the value of the $. That's good for real estate, bad for people that have money in cash, CD's, bonds, etc. Stocks and real estate will do fine in hyper-inflation.
Homeowners are voters. More tax breaks and incentives are on the way from Congress. If $8k home buyer purchase don't work. Look for $15k (already proposed), $20k, whatever, you pick the number.
The government won't stop until real estate prices start moving up.
Forgot to address your point on China and Japan. Threat has been there for decades. Go look back to the Regan years and Japanese buying US bonds. Didn't happen. Will China shift 5%, 10% into alternative investments? Sure. But where are you going to put your money? The US has a 250 year history of creating wealth. I don't think this little financial crisis is going to change perceptions noticeably.
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