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Tuesday, June 28, 2011
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21 comments:
Huge move in CS. It was up 3%, which seeing that it uses a 3 month rolling average seems a little unbelievable. I wouldn't be surprised if it is lowered in the future, but it will still likely stay very positive. The low tier was up 3.7%, the mid tier 3.5%, and the high tier was up 2.1%.
I find this interesting, because I didn't see this move in the few areas I follow, but clearly not good news for the bears.
Prices are now where they were in late 2008. So we have three years of stagnating prices (with some volatility) I hope that we can have another ~5 years of roughly flat prices in DC as inflation brings down the real prices.
Yep big move here - huge. I agree there is a good chance it will be revised down somewhat next month, but it will still be a big move.
Even with the revision to the March 2011 number, the hugely important 2nd derivative has again increased. Last month prices were moving up at +3.4% per year. Now, they are moving up at +4.0% per year.
Bottom line, this is yet another kick in the nuts for the "march 2009 @165 was nowhere near the bottom" bears. Year 3 since the bottom has now begun. Prices are now roughly 12% above the March 09 levels, and moving up at a rate of 4% per year.
I agree that a strong summer season this year makes it far less likely that we will revisit the March 2009 lows unless our economy falls off a cliff. I currently expect unemployment to stay ~8-9%, inflation to stay at ~2%/year, and interest rates to stay low for a few more years. As long as this happens housing will likely remain sideways. I think the only significant risk to this forecast is if the Republics really have their way and cut spending $500-$1000 billion/year. If this happens I think our country will go into a recession and this area will be particularly hard hit.
I should comment that I think his is a fairly unlikely and most likely cuts will be a more manageable ~200-300B/year with some long term cuts to social security/medicare
Terrific news. Wouldn't the March '09 @165 represent places that actually went under contract in Jan. and Feb.? It doesn't really matter but would match up with my observations of the market back then.
anon
let me give you a good example of madness.
I bid on that place in south arlington that was listed at 187.
it was clearly priced to ignite a bidding war, 30 bids came in
I bid 199 because it was underpriced.
some crazy MF with no doubt a cow of a wife bid 302.
302 for a place with no front yeard, a 5 lane blvd, a fire station all just across the porch
and the place was in very bad shape. needed at least 50K of work from roof leaks, failed furnace, HWH, Oh and it was Fugly outside.
Now this place is Ugly, has about 10 years deferred maintenance, and
while the yields are good at the ask price, they can easily collapse if you run the price up.
I figure it needs at least 50K in work.
Now look, if some crazy MF wants to come in and bid $400K for the place? THey are welcome to it.
So i don't like bidding wars fortunately this place will more likely attract seasoned investors.
pat,
You do realize this means there are 28 other homebuyers/investors out there looking at the same market you are with the cash/financing to bid against you on the next property that comes available, don't you?
Wake up, buddy.
I'll be honest, this is surprising and unexpected news.
It's not really the DC news that surprises me (I noticed a flurry of April activity locally), but how well other areas apparently did. Although, truth be told, I would not have predicted DC's number, either.
FWIW: there seems to be a slow-down locally (at least in the hoods I follow), so I wouldn't be surprised to see that reflected in the June & July C&S. I'm seeing many more reductions in price and returns to "active" as opposed to "contingents." It sucks that we'll have to wait so long for the June/July info.
But, who knows, maybe ppl will be scrambling to get their jumbo-size mortgages before the government removes it support from that market, as per the article contrarian posted.
Robert
302K, add in 50K of work.
Look, I'm renting a 2 BR/1Ba for 1just under 1100/month.
my trick to lock in low housing costs would be to sign a long term lease.
That would be a really good one.
now frankly, i think the feds have been playing with the market and ultimately that game can't last forever.
Mark to Fantasy accounting, ZIRP,
The feds picking up 90% of all mortgages.
The bubble cities are dead, dead, dead. Vegas, Phoenix, these are at Case Shiller 101. Not bad for 11 years.
Cleveland, detroit, other industrial cities are below that.
Now Sure DC is growing, but at the expense of the nation. When the peasants catch on, they will be pissed
"Although, truth be told, I would not have predicted DC's number, either."
Agree. I attributed alot of the gains in 09 and 10 to the tax credit. This bounce and overall resilience of DC is far greater than I have imagined.
While no one has gotten this spot on, in my time here, the one that seems to be the "most right" in the sense of direction and timing is (and I hesitate to say this) The Anon.
The Anon, while I think that market projections will make a fool of all of us eventually, I have to ask where you see the going in the near to mid term?
Robert
It just means there are at least some number of individuals willing to accept very small cap rates.
Perhaps, I should get into Hard Money lending on Short term notes.
I think many of these buyers are overpaying, just as they overpayed in 06.
Look if DC continues to be nutty, i'm better off buying a place in Philadelphia. Big City, cheap housing, express train service to DC and NYC.
Meanwhile, Zillow changed its algorithm, and now claims that my part of Arl. is essentially at its 2004 value (a huge drop from their prior algorithm). Go figure.
According to CNBC, Virginia tops the nation as the best state for business. This years study was just released.
Cheryl
Bear in mind, when CNBC means a state is the best for business, very rapidly it also becomes the worst place in the union to live.
Texas routinely used to top that list and Houston was viewed as the most business friendly state.
That means that Texas institutionalized wage slavery,
zero worker protection, houston became the most polluted city in the country, there are no environmental rules. etc, etc, etc.
Let's not forget the Japanese were being business friendly when they let TEPCO build a nuclear reactor on a active fault line close to a tsunamai zone. See harsh, nasty regulation would require the reactor in 1965 to have been hardened against a Richter 9 quake and have a 15 Meter Tsunamai protection. But because they wanted to be "Fair to Business" they waived all that because Fukushima was under-developed and the reactor would bring jobs to the northern hillbilly country.
So, don't get too entranced with Business friendly.
Oh pat,
The glass is always half-empty. Are you aware of the correlation between negative thinking and results in life.
"Pat said...
I bid on that place in south arlington that was listed at 187.
it was clearly priced to ignite a bidding war, 30 bids came in
I bid 199 because it was underpriced."
Pat, my snarky comment the other day was with regard to your earlier stance -- the one where you said in absolutist terms "no one should ever get into a bidding war".
Of course, your comment above tells me everything I need to know about what you do versus what you say.
Look, I know that you are a diehard supporter of blog rule #1 (never ever admitting you were wrong), even on a throwaway comment like "no one should ever engage in a bidding war". Thus, I am going to make this easier for you by putting words in your mouth. Please review and tell me what part if any, is incorrect.
+++++++++++++++++++++++++++++++++
"Pat (would have liked to have) said...
A few months back, I said that no one should ever engage in a bidding war. This was a hasty statement that I would like to take back.
The reality is, bidding wars can sometimes, in certain, very limited circumstances lead to deals. However, people have to know what they are doing, have to be able to keep their emotions in check, and have to be able to walk away if the price rises above what they are willing to pay. If they cannot do this, then they shouldnt engage in bidding wars."
++++++++++++++++++++++++++++++++
So there you go Pat. Please correct as necessary, or respond tangentially about what you pay per month, what bernanke is doing, or someones "cow of a wife". However, if you do not make any changes to the text between the + signs, we shall go ahead and attribute this (quite reasonable IMO) quote to you going forward. Thanks.
I guess pat would consider me a "cow" and my husband a @#$%$ since all 12 of the places I bought in the past 30 months have been in bidding wars (multiple offer situations). I talked to him about this yesterday and told him what the current value of those properties is today.
This is the reason I don't care about cap rates. I am not going to buy a dump in a war zone to make a cap rate of xyz. I'd rather have good properties in nice areas with a high likelihood of upside appreciation.
There are reasons that cap rates look so good in certain metro areas. A bad tenant or two will wipe out a yrs worth of cashflow - this is what they don't teach in those get rich quick seminars.
But, I digress. Pat is facing bidding wars in the war zones!
"VA investor said...
I guess pat would consider me a "cow" and my husband a @#$%$"
Probably. It seems Pat suffers from the syndrome that his view of the market is the only "correct" onewho bids more than he deems the reasonable will be labeled such.
I guess its human nature though. When on the highway, you drive the perfect speed, and anyone who drives slower than you is a "moron" and anyone who drives faster than you is a "maniac".
Pat's risk tolerance doesn't seem appropriate for what he wants to do. He wants a profitable business from the get go and doesn't seem willing to take on risk (ie higher costs) in the first few years.
It seems to me that the 28 people he's bidding against, are willing to make less now to earn more later. As VA_I can probably attest, she's probably making huge amounts of revenues on her older properties in comparison to what she's making on the newer properties. But time, appreciation, and rising rents will only help her. And eventually get the newest properties to the cash flow point that Pat would demand (and likely not find) today.
My $0.02
Actually MTC,
I'd be hard pressed to remember a time when the numbers were so good for buying rental property. So some older places that still have mortgages do not cash-flow as well as the new ones. The places that I have been buying are break-even on a ten year amortization and, if the the price increases hold, I already have a 100% return on my cash-in.
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