Thanks to Larry for the comment:
Local buyers are aware of the national trend, and are acting accordingly.
Local sellers are starting to get a clue, too: many have dropped their prices by 15-20%, which translates to 25K to 75K…and the houses STILL aren’t moving.
There’s many months of backlog on the market here in C’ville/Albemarle, which doesn’t include houses pulled OFF the market for the winter. It’s a glut, and will get worse in two months.
BUYERS are waiting for the market to go lower, especially first time buyers, so they don’t make the same mistake that plagues many current homeowners: an inflated property value that will go down 15% in 2008 and 10% more in 2009, if the Merril-Lynch report is accurate.
Agents should inform sellers who really need to move their properties that they need to price accordingly. THIS is what will make the local market move again.
Local sellers are starting to get a clue, too: many have dropped their prices by 15-20%, which translates to 25K to 75K…and the houses STILL aren’t moving.
So, I’m following onto the comments on FSBOs, but here’s my feeling:
Our local economy is different, employment is more stable than many of the big bubble areas. However, our housing market, according to OFHEO, has been quite expensive for a long time now. Look at the c’ville MSA relative to the Valley (west), Lynchburg (south), Richmond (east) and even slightly to the north, and we are very pricey by comparison. We are more expensive than the differences in local salaries account for.
The national trend, at play here as much as anywhere, is the access to very cheap and easy credit from 2002-2007. This allows buyers to drive up pricing. Jim – I know you’re also a big CalculatedRisk fan. The credit markets are really the key to understanding all this.
I don’t think this is a matter of buyers just sitting on their hands and waiting things out – it’s anecdotal, but I have at least two close acquaintances who, despite my counsel to wait, bought in the past four months, and will very likely be underwater by June (one already is), simply because they did have access to credit.
The lack of sales right now is a reflection that prices haven’t dropped sufficiently to be truly affordable when sound underwriting guidelines are applied – that would be guidelines that don’t assume 10% yoy appreciation – guidelines that actually consider the borrower’s ability to pay over the life of the loan.
(snark)I suppose the real problem is, there just aren’t enough new doctors being brought in to work at the medical center to be able to gobble up our excess inventory!(/snark)
NGIC will bring some well-paying new jobs, but not well-paying enough. Sales will pick up when pricing gets back in line with local incomes.
House prices in Ch’ville are utterly over-inflated and it amazes me as to how anyone other than a rich retiree from the Northeast or an incoming surgeon can afford to live here.
We make great money, we’ve got a huge downpayment because we sold our house a couple of years back and we’re not in a chain, yet for 400-450K my only choice is another cookie cutter house in another over-crowded subdivision. It’s crazy.
450K won’t even buy me a decent view unless we go to Crozet, where again, they’re packing em in and the traffic is atrocious.
And you can’t even touch downtown with a barge pole unless you go to Belmont and you just can’t get decent sq ft there.
Something is going to have to give.
Cupcake –
Thanks for the comment.
First – the traffic in Crozet is atrocious? Really? I live in Crozet and the word “atrocious” is a significant hyperbole when describing Crozet’s “traffic.”
There are 104 single family properties in the MLS with at least 3 bedrooms, 2 baths and on at least .7 acres (which eliminates many of the “cookie-cutter” subdivisions – 95 of which are not in either Crozet elementary school district.
What kind of house are you looking for?
Jim,
I have to agree a little bit with cupcake. I know that real estate in Charlottesville was considered overvalued by almost %20 in 2005. I realize that value is a pretty nebulous term because the market bears different things.However, I thought that a little quick math might be interesting. My husband and I gross a little over $150000 a year which we feel is respectable. We only have student loan debt,and we have almost saved a down payment of $50000. We are shooting for $100000. This takes a lot of time. Now at present credit terms with those factors keyed in at bankrate.com we qualify (possibly) for a home in the $450000 -$500000 range.
That comes roughly to a $3500 a month mortgage payment. That is a pretty large mortgage, but not near what we need for the neighborhood that we want. All of the houses that have caught our eye are downtown and in the $600-700,000 range. Are we just spoiled? It would seem we are, because all of these homes are roughly the same square footage, and lot size of our previous home. We like 2000 sq feet, and we want to be downtown. It seems some days like Charlottesville is definitely out of our reach, but we are determined to keep saving and try anyway. However, we find the prices here to be somewhat ridiculous. Just our opinion. I am certain there are tons of buyers out there who can qualify for an $800,000 home and we are just experiencing sour grapes:)
Compared to other parts of town (excluding 29N at Hollymead) the lines of cars to get onto 250W / Ivy Rd. at peak hours of the day are pretty bad. Not NoVA bad, but still bad for this area. And with all the new developments that have gone in, the infrastructure really isn’t there to support the 2+ car families that are moving out that way. I definitely wouldn’t call it an easy commute IMHO.
I guess I should be more specific about my first time buyer position regarding current inventory. I think it’s not just a national market slump that is making first time buyers in this area wary – it’s also the lack of a “value for money” proposition.
If I’m going to drop 500K for a house, it better be something pretty special, especially as the median household income for this area can’t afford to spend a half million on a house.
But then when you look in the 400-500K bracket, it all starts to look the same in the city and Albemarle county. Big colonials or new builds with less than .5 of a lot with no “X” factor, no character, tiny kitchens, and middle of the road appliances. It all looks the same. And trust me, I’ve been looking at the MLS every day since September of last year.
I think prices will have to come down 15-20% to actually entice buyers to part with their money or start giving them more bang for their buck. Who wants to live in a McMansion style house with no soul on a postage size lot where everything looks the same?
First time buyers are expecting more perks/value/features than what the market is offering at the current prices and so we still have a way to go to accomodate them.
And what makes it even worse is that my price range is probably significantly higher than another first time buyer.
(I should add a footnote that I am not interested in Crozet or 29N and so maybe all the good properties are in that area . . . I don’t want to deal with the traffic hassles)
Cupcake and downtownenvy:
I am a second-time buyer, currently with a contract pending on a 1800sf home in the city (aka the People’s Republic of Charlottesville, or PRC). It has a city lot, .15 acres I think, but that is fine with me (big enough for the 3 kids to run around and not too big to mow).
I have been renting here for 5 months. My first advice would be rent, it gives you time to look around. We can all agree that prices aren’t going up anytime soon, so the only cost of renting is that moving again will be a pain. Plus renting is far cheaper here. All these suckers who paid too much for their “investment house” gave up on selling and there is plenty to rent around here.
Second piece of advice is lower your SF expectations if you want to be in the city. Drive around some neighborhoods, if you haven’t already. There are a few nice places available. You have to sort through a lot of overpriced, bland, crappy homes, though, I’m not gonna lie. Also, 75% of city homes are postwar brick ramblers, 1200sf, you know the deal. They are solid and well-built but generally too small for anyone with kids and/or of German origin (i.e. anyone needing lebensraum).
Personally I don’t know what the hell I would do with 3000sf, other than vacuum a lot more- and we have 3 kids and are planning on more.
Jim has been my agent since last July and has done a terrific job. We wrote 4 contracts before finding a reasonable seller. Jim negotiated shrewdly and unemotionally. Best of all, he never tried to push me into something that wasn’t right just so he could pocket his commission (like at least 50% of agents would do). Go with Jim or someone of similar caliber.
A lot of sellers have unreasonable expectations. Avoid those who base their asking price on “what I need to make to break even.” That was the case on 2 of 3 unaccepted offers. You can’t really tell who got a HELOC, but the online city and county records will tell you recent sales and prices, and a lot of other good data.
Don’t want to dump a lot of advice here. I just disagree that there is nothing to choose from. There’s not a lot, for sure, but there are places. Refine your mycaar skills, filter through the crap, and you’ll find a few nice homes. Maybe they’ll even be priced reasonably!
Good luck. If you want, e-mail me, I’d be glad to give you any help I can based on my experiences as an oft-frustrated wannabe buyer here in the PRC.
Mark-thanks for the information. I actually use Jim as my agent as well. We, also, have made two offers with Jim’s very sage advice. I am also sure that my expectations sound crazy, however, we have been in the market here for 3 years waiting, and renting a house that we love. We are committed to waiting because we know that when we buy we are buying what we want.
We own a business here in Charlottesville, so we are planning on being here until our far-off retirement. With that in mind, we don’t really want to do any more house or neighborhood jumping when we do finally buy. We also don’t need 3000 feet or a half acre lot, we do however insist on downtown. I, like you, am an old hand at CAAR browsing, and I believe that with Jim’s help our house is out there somewhere. When we have the downpayment we want saved, that’s when we’ll jump.
We are making our decision based on long term economics for our family so we know that for us, waiting is part of the deal. I really appreciate your points, and agree with all of it. Congratulations on finding your new home-isn’t Jim great? That’s unsolicited by the way:)Thanks again.