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November’s (Charlottesvile MSA) Real Estate Market Wasn’t So Bad

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Charlottesville Nest Report - November 2012

Inventory is down (everywhere), contracts are up (broadly), sales are up (generally),

But.

– Quality inventory is still low.
– The fiscal cliff generated by the irrepressible idiots in Washington is creating uncertainty – something we don’t need.
– One month isn’t a trend, particularly as the numbers are so broadly skewed in some cases.
– As I noted yesterday, more foreclosures are needed in order to find a definable, sustainable recovery.
– Your market – whatever that is – is part of this report, but for a true understanding of whether you can sell or should buy you need to seek out and find specific advice and insight to your situation.

The data’s not bad. Not bad at all.

Download the two-page report here or click through to see the embedded report.

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Low Housing Inventory Stinks – in Charlottesville – Albemarle

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If you’re a buyer in the Charlottesville market, you know that right now, inventory is low. Quality inventory is lower. Depending on your market segment, much lower.

Be prepared to wait. And then, be prepared to move quickly when the right house comes on the market. Now is the time to start your education on and about the Charlottesville real estate market, so that when January comes, you’ll be ready. (Seriously; if you’re looking, ask me what the first steps are)

There are a lot of reasons for this low inventory, starting with time of year/seasonality of the market, number of transactions (broadly) are up – see the bottom of this post -, reduced foreclosures and a few other reasons, but I have a working theory on why we’re going to see this type of reduced inventory for a few years. Starting with an example that lends credibility to my hypothesis:

I was showing houses this weekend (I’m a real estate agent donchaknow) and we saw a house in Charlottesville.

Asking price is $550k, slightly reduced from its initial asking price nearly a year ago.

House sold in 1993 for $290k

Sold in 2001 for $380k

Sold in 2007 for $570k.

Worth (in my opinion) significantly less than what they paid in 2007.

Not many people have accrued ~ $50k – $100k to get out of a house. And this homeowner isn’t alone.

I propose that we still have a ways to go to get through the inventory of homes owned by those who still can’t afford to sell … and with the fact that getting a mortgage after foreclosure is easier than ever, the business decision of walking away still makes sense for some (many?)

In short, I think we’re going to see low levels of quality housing inventory – for homes that many buyers want to buy – at low levels for years to come. This low level is going to lead to some interesting trends I’m starting to see; more on this in another post.

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3rd Quarter Nest Report – What’s the Charlottesville Real Estate Market Doing Now?

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A few highlights (there are more in the report) –

1 – Inventory is down across the Charlottesville MSA. Quality inventory is seemingly non-existent, depending on your market segment.

2 – Buyers are smart, savvy and patient. Prices go down, sales volume goes up.

3 – New construction costs are up across the board.

4 – Distressed sales continue to drop; they still comprise a significant volume, but less now.

5 – Shadow inventory remains an unknown and thus, a concern.

Click through to read the entire report.


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(Some) Real Estate Prices up in Charlottesville and Albemarle

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Are we in a bottom?

Looking at some real estate data the other day, I came to a conclusion: for some segments of the Charlottesville real estate market, we might actually be in the “bottom” – bottom meaning that prices are either not declining anymore or are in fact, wait for it … rising.

This belief was bolstered further when I looked at some of the numbers –

May, June, July – for the Charlottesville MSA, Year over Year:

– 777 homes (condo, single family, town home) sold this year versus 709 last year – an increase in volume of nearly 9%
– Median Price was up about 5% to $261,645

For the County of Albemarle:

– 418 homes sold versus 375 in this period last year; an increase of about 10%
– Median price was up nearly 12%

For the City of Charlottesville:

– 230 homes sold this year versus 146 last May, June, July; an increase of ~15%
– Median price in the City of Charlottesville rose nearly 8%.

BUT

There are still a lot of people in this market who cannot sell and not lose money – and I think this is going to remain the case for several years. Yes, the above news and data are very positive, and if you’re looking to buy and know you’re going to be here for several years, now could be a tremendous time to buy – you might lament your delay. But … every real estate market is local – down to the individual – and specific.

Moving Median Price for Charlottesville MLS - 2011 - 2012

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Charlottesville Bubble Bloggers’ Take on the Current State of the Market

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It’s not often that I say something is a “must read”, but the Charlottesville Bubble Bloggers’ “Carpe Diem” Trumps “Caveat Emptor” As “Bottom” and “Recovery” Chatter Increase in the Charlottesville Real Estate Market Mid 2012 is such a post.

Broadly-sourced, logically articulated, they debunk a lot of the myths and stories underlying the Charlottesville real estate market – from shadow inventory to Charlottesville’s “protected” nature, to reduced inventories, home prices and more. I highly recommend reading it.

Their closing echoes much of what I have been saying here and in conversations with clients for months:

But for those who have been waiting to buy and waiting to sell, there’s more clarity than ever. The 30 year fixed rate mortgage is currently at 3.6% (Aug. 15). Buyers who have waited for years and are well-cushioned financially aren’t looking at a house as an investment but as a home. For those with stable jobs and a 7-10 year event horizon plus a capacity to absorb price wobbles, buying looks attractive. And there are many equity sellers getting off the fence, realizing that they’ll never get that dream of the missed bubble price: but acknowledging that moving on or moving up and getting things settled has a value greater than money.

If you’re going to buy a home in Charlottesville, understand that now is normal, or as an agent said to me several years ago: “It doesn’t matter whether the real estate market is ‘good’ or ‘bad’ – it is.

And so it is.

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The First Seven Months of 2012 – Charlottesville Real Estate Market Update

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The Questions:

– Can I sell my house in Charlottesville (area) right now?

– Should I buy a house in Charlottesville (area) right now?

Answer to both: It depends.

Buyers: If you need to live somewhere and know you’re going to be somewhere for at least 5-7 years, now might be a great time to buy … ** interest rates remain extremely low. But … there is a dearth of quality inventory on the market right now. I’m finding that buyers are searching for (much) longer timeframes, so that when the right house does come on the market, they are prepared. Start early; do your research and be prepared to move quickly when the right house comes on the market.

Sellers: If you need/want to sell, understand that buyers are still looking for quality and value … and that selling a home is work. (It’s hard work; I task my seller clients with loads of prep work) , but know this: unless your home is one that is priced and conditioned to sell in two weeks, be prepared to be patient. And to defend your price with data and facts, not emotions and expectations — neither buyers nor appraisers care about what you need/want to make or how much the house is worth to you.

Year over year:

(Inventory level = # of homes on the market)

Charlottesville – Inventory level is down nearly 20%, median price is up slightly to $255k – up about 7% (but still way below 2010)

Albemarle – Inventory level is down a bit, median price is up about 5%

Fluvanna – Inventory is down about 8%, as is the median price.

Greene – Inventory is down a little and the median price is up significantly – about 30% … keep in mind that this increase was based on 11 closed sales this July versus 19 the previous July.

Louisa – Inventory down about 23% while the median price down nearly 20%

Nelson – Always an inconsistent market due to the variety of product mix there … Inventory is down about 12% while median price is down 24%.

The takeaways from this month’s look at “what’s happening in the Charlottesville real estate market”:

1 – In some segments of the Charlottesville – Albemarle MSA (Metropolitan Statistical Area), the buyers’ market looks like it’s over. Good houses that are priced well are moving … sometimes in a matter of days and occasionally with multiple offers. Inventory is down, some prices are up. (Low Inventory isn’t necessarily a sign of recovery though)

2 – Foreclosures and short sales are still out there, and are seemingly comprising a smaller portion of the market than we’ve seen over the past few years. But there are anecdotes everywhere – I almost showed a short sale in Albemarle in which the asking price is $450k … down from the initial asking price was $1.19 million … in 2008.

3 – I don’t feel like a complete fool saying that the recovery is near. I don’t know when “near” is, but I do know that “normal” is a moving and shifting target. “New normal” is an absurd term; today is normal. So is tomorrow. So is yesterday.

4 – Product mix shift – anecdotally, we’ve seen this coming, but we’re seeing more and more buyers are opting for single family detached homes as opposed to attached homes. Condo volume seems to be stabilizing … the condo buyer of today is more interested in the condo lifestyle (location, no maintenance or yard work) than we saw in the previous market*. What we’re also seeing is a demand for the condo lifestyle in single family homes; that solution doesn’t really exist yet, but there’s a market for it!

5 – Real estate market Data is but part of the conversation and analysis – experience and conversations with other experienced real estate agents matters tremendously. It might sound silly to in-lookers, but being able to tell that a property is great and will sell soon is crucial. Example: I showed a house on Saturday and told my buyer clients that I expected it to sell in the “next couple days” … then I heard Monday that the sellers got three offers. That insight comes from experience, not just looking at data. … and educating my buyers so that they are able to discern a well-priced, well-marketed home is one of my favorite things.

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First Half 2012 – Charlottesville MSA Real Estate Market Report

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So … the the first half of 2012 is over. Everyone is looking for signs of recovery in the Charlottesville – Albemarle real estate market – in large part because they want/need the answer to one of these questions:

1 – Can I sell my house/condo/townhouse now?
2 – Can I feel comfortable buying a house now?

The answer to both questions is (as long time readers know): it depends.

Spend some time digging in the data; ask questions, but understand that as localized as this report is, your market – your part of the county, neighborhood, street even is likely to be not be covered by this report. For a true understanding of how you fit into the market, seek professional help (full-time, not part-time/hobbyist advice). Seriously. I do this every. Single. Day. and I can’t imagine trying to make decision or give advice unless I was living and breathing real estate stuff.

– The Days on Market, while an unreliable data point, are down
– The shift to single family homes continues – buyers are buying for longer timeframes – they are buying homes in which to live for 5, 7, 10, 20 years. Smaller condos and attached homes frequently don’t meet those goals.
– Fluvanna was hot. But – Fluvanna has challenges beyond the real estate market that will continue to affect the market and the locality.
– Home prices are up in many segments in the Charlottesville MSA

Sales volume is up, inventory is down.

But … lower housing inventory is not necessarily a sign of recovery.

Lest we get too confident, keep in mind that lower inventory is not necessarily a sign of a recovery; there are a lot of upside-down homeowners who would love to sell but can’t. Until we see appreciation to the point where they can sell, we’re not going to see a true recovery.

In smarter words:

… in markets with unusually tight inventory, prices are being “goosed” higher, not because the housing market is improving, but because there are fewer houses in the game. Low mortgage rates are artificially creating excess demand, with those buyers fighting over the slim pickings of sellers who can actually sell.

But you know what? There’s nothing we can do about that; the market is what it is. We can acknowledge it and make the best decisions possible with the information, data and analysis available.

See:

– Brookings Institution’s Metro Monitor
– Corelogic’s most recent negative equity report (4Q 2011) shows that Virginia has 23% negative equity and 6% “near negative equity.” Lamentably we don’t have more localized data to the Charlottesville MSA. These numbers feel about right (broadly) for Charlottesville though; Fluvanna’s going to be different than Charlottesville and some condos are different than single family …
– Foreclosure Supply and the Housing Market –

Mark Hanson makes some interesting points, and this raises the question again of why supply has fallen so sharply. There are probably several reasons for the decline in supply: 1) negative equity keeps people from selling (and buying as Hanson notes), 2) banks aren’t foreclosing quickly and are focusing more on modifications and short sales, 3) cash-flow investors have purchased a substantial number of houses, especially at the low end, and they will not be sellers for some time, and 4) seller price expectations (when sellers expect prices to stabilize, they no longer rush to sell).

My theory from January holds steady, but I may have to revise the percentages a bit to account for underwater homeowners as well.

If you believe these guys, The Housing Bust is Over.

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