Local Outlook is All that Matters: Inventory Down, Prices Up

As I’ve been saying for months – the Northern Virginia market is totally in a seller’s market. The only price range not fully recovered is the over $1 million price range. Every other price range from the $100,000 condo to the $700,000 single family is selling like the proverbial hot cake. Fresh off the griddle, and ready for the butter and syrup. And therein lies the problem – or should I say, opportunity.

When it comes to housing data, sales prices, inventory levels, pending sales, etc., it doesn’t matter what’s happening across the country when you’re looking for a house in your locality. All that matters is what’s happening in the market where you want to sell or buy. It doesn’t matter that foreclosures are slated to increase nationwide when they are selling like hotcakes in Fairfax, VA.

The challenge for buyers in Northern Virginia is they have little inventory from which to shop. As a result - the bonus for sellers is that prices are on the rise. Not year over year, mind you, but month to month, they are definitely on an upward ascension.

Since January 2009, the overall average sold price has increased 15%. The average price in January was $376,669. In May the average price tapped at $433,257. (Source: Metropolitan Regional Information Systems, Inc.) Is this a trend? Well, consider this: the last time we had a 4-month, month-over-month increase in sales prices was in 2006. (At that time, by the way, the average price hit $553,618).

Why is this happening?
* Foreclosures rates are dropping in Virginia (Source: George Mason University, Center for Regional Analysis)
* The inventory is beginning to include private-seller owned properties (instead of banks), stopping the price drops and pushing them forward and upward.
* Buyers are taking advantage of the affordable housing prices, the historic interest rates and the First-Time Buyers Tax Credit (up to $8,000) before it expires November 30, 2009. (But there’s talk on Capitol Hill to extend the sunset period.)

So what? What does this mean to you? Buyers get in line. You will be competing for well-priced homes now. We have multiple offers in all price ranges. (The highest I’ve heard told of so far is 23 offers in a weekend).

Sellers, get ready to sell quickly if you are priced competitively and start using home of choice clauses and ready to move into your new home sooner. (The higher up you move in price, the more inventory that’s available). You have the opportunity to move up into your bigger home for a smaller price for the home and a smaller interest rate for the loan.

DC market rated #1 by Forbes

Finally -- it's not just me. Forbes magazine is letting its readers know that the DC market is on the upswing. Take a look at the link above for the Top 10 as rated by Forbes.com

Just Leave Well Enough Alone

Yes, I understand we're in the worst foreclosure real estate market on record; and that a lot of people did a lot of bad things; and that we're probably only half way through getting through this real estate debacle. However -- I just ask that the feds be careful how much they need to push along the recovery in the marketplace -- it's already happening.

On the street, we watch inventory, pending sales and pricing to determine if a market is about to turn around either upward or downward. We could track it in 2006 when it started halting and now it's tracking upward.

Ahh- you say, the prices are still down. Yep. Because that's just the final piece of the equation. Prices are down across the country, and they will probably remain soft until the inventory starts shrinking - which is what's starting to happen.

Consider these sales and pending sales numbers across the country:

• San Jose, CA: Sales up 51% in January 2009
• California: 2008 sales up 26% over 2007
• Northern Virginia (Metropolitan Washington DC): Pending Sales +41%;
• Manassas, VA: pending sales +50%
• Florida: January sales +13%

Market after market, sales are starting their predictable climb upward after prices have dropped by as high as 50% in some areas. Whether we like it or not, feel good about it or not, has no bearing on whether or not the markets are starting to turn around. They are.

(The charts here show Northern Virginia sales price drops that correlate with the number of sales increaseing through 2008.)

In these same markets, agents are starting to report multiple offers on bank-owned properties that need a lot more than just paint and carpet. In my office this week, my team is starting to report that while buyers have finally gotten off the fence, now there's no inventory and what's left is selling for $25,000 to $40,000 more than asking price in a shower of multiple offers.

No - this is NOT 2004. It's now 2009 and we're about to repeat the whole cycle of the last run up. Why? Simple -- supply and demand, mortgage money available and willing/able buyers ready to pick up good deals who have been saving their money for three years for prices to hit the low they've been waiting for. Well, it's hit it and they have pulled out their check books to start the bidding.

It will continue upward as well and here's why.

1. Lack of inventory. The resale inventory has been primarily been made up of foreclosures and the federal programs to rehash old mortgages and stop the foreclosure cycle will create a drain on the need of inventory. Seller-owned properties are scarece because sellers who are okay financially are upside down on their mortgages and must wait till prices return to their previous levels before they can even consider selling.


2. Prices have hit the psychological low. When you've been dealing in prices around a half million dollars for years, a house priced at $300,000 sounds like a real deal. Buyers are diving in with a vengeance and bidding up; again, removing the safeguards of home inspections, home warranties, and appraisals (if they have enough cash).


3. Small new home inventory: New home builders pulled out of the market and must now ramp up again to build the product buyers want. This will take years to get going. They just can't start building, they have to get the infrastructure planned, permited and approved before they can turn the first shovel of dirt - this takes time.


4. Job growth. As go jobs, so goes the housing market. Several job markets have continued churning out employment even through this latest downturn. Washington, D.C.; Boston; Dallas/Ft. Worth; Houston have added, rather than shed new jobs over the last 18 months. Meanwhile, the surge of the stimulus packages (whether you like the package or not, the attention on the urban infrastructure is a good and needed thing - that will create labor jobs) these jobs will create the need for housing in those markets. States are already applying for and spending the stimulus millions.

Economic growth creates jobs; houses are where the jobs go at night. Meanwhile, the prices have hit the bottom in many areas and already started the surge of buyers jumping off the fence. The inventory is shrinking, the next item to tip will be prices.

Anthony Carr is an award winning sales coach and managing broker in Northern Virginia. He's tracked and written about the real estate market since 1989. His blog http://commonsenserealestate.blogspot.com. He's the author of two books and contributor to Donald Trump's The Best Real Estate Advice I Ever Received.

That Bounce Sound Was the Bottom of the Market

I met up with a potential buyer last night at a well-priced listing that is seller owned and completely fixed up inside. She was worried the price was too high, we hadn’t hit bottom yet, things could get worse, etc., etc.

She was not unlike many buyers out there in markets across the country that have already started to show signs of recovery. In Northern Virginia – the bottom was hit months ago. It’s a challenge of Myth vs. Reality.

(See this piece from Mortgage News Daily on foreclosures dropping: http://www.mortgagenewsdaily.com/12112008_realtytrac_foreclosures.asp)

For instance, in Fairfax County (just a few miles from Washington, D.C.), the inventory is down 23% while pending sales are up a whopping 60% over the last 30 days. In addition, average prices have leveled off for months now at pre-2004 levels and starting to rebound.

Buyers are now competing on foreclosures with multiple offers and escalating their offers over list price.

Prices are still thousands higher than they were in 2002 and previous. The good news for homeowners who want to move up is that if they purchased before 2002, more than likely, they can sell for a profit and move up for a lot less than they could have just a couple years ago.

The concept that “My house has lost money” is only important when you’re selling. What the consumer should look at is the purchase price vs. the sales price – not the height of the market value vs. today’s value. If you bought for $275,000 and sell at $375,000 – there’s $100,000 in profit – regardless of the fact that your house swelled in value to $450,000 three years ago. Such a seller has NOT lost $75,000, instead, he’s profited $100,000. In addition, he’ll be moving into a good deal in today’s housing and financing market.