2010 Year in Review

Overall 2010 was an improvement over the previous year. the townhome market continued to improve through the spring and the single family sector Saw a bump up in pricing for the first time since this whole mess started. The number of foreclosures and short sales in the market ebbed and flowed but overall the numbers were slightly lower than in 2009. Rates stayed pretty steady at rock bottom levels for most of the year but jumped rather significantly, almost a full percentage point in rate, in December. Overall lending requirements became more stringent and it is tougher to get a loan today without question. The new home market has cranked up again and some of the deals that once were are no longer. A pivotal point in the rear was April when the stimulus program ended. Sellers rushed to get on the market and buyers moved their buying decisions up to catch this benefit. In other words, we robbed Peter to pay Paul in some respects. The most noticeable was in the townhome sector where we saw the number of contracts written in May fall off dramatically going from 123 in April to just 53 in May. June was more of the same but this was to be expected. It was a little disturbing too when you compared May of '09 to May of 2010 in that in '09 we has 102 contracts written and in '10 just the 53. It is also disturbing to see that it has continued like this for the rest of the year, inventory growing and number of contracts written dropping form the previous year's levels. This is the reverse of what we had seen since mid 2008. The single family sector has been more stable and, as I mentioned earlier, for the first time since 2005 we saw a bump up in pricing. I attribute this directly to the activity in the townhome market and the appreciation that townhomes had enjoyed for the last year. The number of sales was substantially higher in March and April over the previous years because finally the move-up market was back. Following those months, though, demand(# of contracts written) dropped back to the same levels as the previous 4 years. he good news is that single family demand is very consistent month after month. The concern, though, is that the townhome market will slow as supply (# of listings) continues to grow and demand stays at the lower levels as this will affect both categories. Looking at the numbers overall though, 2010 was the turnaround year and 2009 was the bottom. First the townhome sector: Average Days on the Market dropped to 30 from 44 in '09 and 83 in '08, Average number available in any given month was 73; just one unit higher than 72 in '09 and down from 255 in '08! (Consistent with when we believe the TH's started their turnaround) If you took the first 6 months of '10 and the last 6 months of '09, the number would be much lower. The average list price of the townhomes that came under contract jumped up to 273,962 from 258,578 in '09 lower than the 288,239 in '08 but that is because the market was continuing its downhill slide from the high of 403,017 in '05. The disappointing number was the number of contracts written which was 814 down over 20% from 1,057 in '09. Again, the first half of the year was stronger than the last half. The overall high was 1503 in '04. The good news is that the number of new listings dropped slightly to 779 from 838 in '09 and 1,196 in '08. It has consistently dropped from the high of 1,672 in '05. The single family sector showed similar numbers. The average list price of the homes that came under contract was 506,175 up from 477,894 in '09, although a long way from the high of 669,321 in '05. Good news though is this the first year that number has risen since '05! The average days on the market was 47 down from last year's 69 and '08's 103. The number of contracts written increased slightly to 366 from 339 last year and 338 in '08. That again is consistent with the "move up" bump that we saw in Mar-Apr and shows how consistent the single family sector is. The average number of active listings did increase a bit from 55 last year to 60 this year but still much better than the 128 of '08. The number of new listings coming on the market jumped almost 25% from the low of 345 last year to 428 this year. While there has been a little increase each month the lion's share of them came in Mar-Apr as they tried to catch the stimulus. The good news is that in both categories most of the new inventory was regular, healthy sales and not foreclosures. As this year's market unfolds I will, as usual, keep you informed.

Out on a Limb

This time of year is usually fairly easy to forecast but we could be in for some surprises this year. I can say with certainty that the last quarter of any year, 2003 include, is always slower and homes always sell for less than they did in the spring. This is because buyers tend not to compromise at the time because they think more and better inventory will come on in the spring. They will sit on the sidelines in the holiday time and wait until spring UNLESS there is some mitigating factor that creates urgency such as rising interest rates. Sellers who "have to sell" can typically only compete on price so they get out in front of the market, which is why we see the decline in pricing in the last quarter. This year could be different though in that we have stellar interest rates, the lowest I have seen in my career, and despite what you hear on TV and read in the paper our fundamentals are strong here in Northern Virginia. Consumer confidence is the issue but once people realize that what they read about in the paper is happening in Florida, Nevada, Ohio and other states but NOT Northern Virginia they will feel better and realize that this market is slipping away. It might take the stock market bouncing up, administration changes in the mid terms, announcements that the job cuts announced for Virginia are not in our area but down in the tidewater area or some other bit of positive news but at some point the pent up demand will be unleashed. That is where it gets iffy in predicting the next 90 days or so because I feel there is pent up demand to buy and once buyers feel confident or more importantly once they fear the market is slipping away and that the bottom is gone they will all pounce on the market. Rates staying low and there being no indication of change in the near future will probably mean that there will not be a mass rush and in fact we may not see a change until spring but I do believe that those deals that are out there now will disappear and next spring pricing will build off of these numbers. I can't begin to stress enough that real estate is local and that the negative news you are getting pounded with is national, our local market is alive and well, going strong. We are the highest group in the nation as far as job creation and the lowest as far as unemployment numbers. The builders are back to buying land and everyone is gearing up for a steadily improving market. I look to see steady activity at worst and solid improvement at best. We will watch the numbers for you and as usual, keep you informed.

Front Lines

We saw some appreciation in the single family sector for the first time in years this spring. The townhome sector continued it's steady 19 month trend of increased sales and diminished inventory levels. The spring was very good for both sectors but that changed in May for the townhomes as we saw the number of sales com in at 53, a drop of 57% from April's high of 123. I attribute this to the fact that any buyer in the market pushed to get a contract in place by the end of April so that they could cash in on the Feds stimulus plan. April took May and June's buyer's. It is a bit disturbing in that August's number only increased to 66 sales compared to August '09's 78 sales. The more disturbing trend is that the townhome inventory levels have increased slowly but steadily for the last 3 months. Prior to that they have steadily decreased for the previous 23 months! In August '09 we had only 49 available compared to 213 in August of '08 but that has increased to 86 in August of 2010, an increase of 44%! Our absorption rate is now over 30 days for townhomes and approaching the 60 day mark. Not a good trend. This is bound to influence the single family home sales, as it will once again be a challenge for a move up buyer. With increased inventory and fewer buyers the "have to sells" (foreclosures being a big one) will compete solely on price and squeeze out the move ups who need the equity. We finally saw the positive impact of move up buyers this spring in the single family home sector. Once the townhome inventory level got down to where an owner occupied seller could compete in the marketplace. There was enough demand that the pricing increased and vacant foreclosures were gobbled up leaving the owner occupied homes as virtually the only choice. These people sold and moved up to a larger home in the same school district increasing the single family home sale numbers. We also saw a little bump in single family home pricing!! Inventory levels declined and we saw more sales in every month than in the same month last year. Since May though we have seen inventory levels increase and that does not bode well for the future. As of August we have 68 single family homes on the market, a 32% increase over the 46 available in August of '09. The good news is that single family sales this August were up by 20%over August of '09, with 30 compared to 25. the number of foreclosures has increased correspondingly in virtually every category but our inventory is not increasing due to a higher number of foreclosures so do not worry about that. Our inventory has increased because the slight bump in pricing has allowed some sellers to finally be able to enter the market. The problem is that as we hit the historically slower "post school starting" market of the fall increased inventory means that those seller that absolutely "have to sell" will only be able to compete on price and we will more than likely give back some of the gains we saw this spring. All told though it has not been a bad year for real estate so far although filled with challenges. As the year continues to unfold we will, as usual keep you informed.

Front Lines

Once the snow melted the market heated up pretty quickly. March built on February's numbers and while inventory grew a little in March, sales surged keeping active listings below '09 levels. As of March 31st, there were 56 townhomes available, up 10% from 51 in February but down 51% from January '09's 109 active listings. A far cry from the 315 active listings in March of '08. The single family sector saw similar numbers with 54 active listings as of March 31st, up 50% from 36 in February but down 61% from March of last year's 87 active listings and well below the 146 of March of '08. Townhome sales bumped up 62% with 115 sales from February's total of 71 but stayed consistent compared to 110 sales in March of '09 but still well above 56 in March of '08. There was a notable jump in the single family sector with 53 sales, up 89% from February's 28 and a 39% improvement over the 38 sales in March of '09. Sales more than doubled March of '08's 24 sales. This is outstanding news but not entirely unexpected and right in line with what we have discussed in our most recent Out on a Limb. The townhome market has been improving steadily now for 19 months with inventory steadily dropping and sales well above '06-'08 levels. Many segments of the townhome market have seen 12-15% appreciation over the bottom of the market a year ago. The real good news is that this has finally moved into the single-family sector in the past 4-6 weeks. I attribute this to owner occupied townhome sellers finally being able to move up and buy a larger home. This has been missing from our market for a number of years and finally we have seen an impact. With each passing day and small bits of good economic news consumer confidence has risen as well giving relocation buyers the desire to own as opposed to renting. There has been pent up demand to buy a larger home and it is finally starting to be released. Interest rates have risen only slightly, which is a surprise to me but a good one. I had expected a more substantial jump once the Fed pulled out of the mortgage backed securities business but that has not happened...yet. I still think it will at some point but clearly I called it wrong thinking we would see a more substantial jump in rates by now. The stimulus plan ends in April and I feel that will have some effect on the townhome market but I do not think that it will be as significant as some do and certainly not have the impact that a rise in interest rates will.

Out on a Limb

I look for April to continue in the same way that March did. New inventory coming on and strong sales continuing, keeping inventory levels low. That being said some of the pent up demand has been sated and April is always a big month for new inventory to come on the market so I feel that the townhome market will stay the same but we will see some increase in the available single family properties for sale. Townhomes will stay the same, as those that are motivated by the stimulus plan are rushing to buy before the plan ends on April 30th. There is not that kind of drive in the singe family market but move ups will continue to bolster sales there compared to previous years. It will be interesting to see if May continues the same way. I expect townhome sales to slow a tad but for the most part stay status quo. I look for our foreclosure listings to increase a bit as well. Competition in the single-family sector will be fierce as those that "have to sell" start aggressive adjustments in May realizing that the spring market is all but over. This will level out some of the frenzy from March and we may even see a slight pull back. That being said our market is strong, sales will continue, good homes on good lots in good condition will sell. As our market continues to unfold I will as usual keep you informed.

Real Estate Taxes

While writing this I had a gentleman stop by my office asking about his current real estate assessment. Once again the county is playing games with land values and house values and this is causing confusion. Bottom line though is that the county needs to generate "X" number of dollars in real estate tax revenues. They have 3 numbers they can play with to do so, land vaules, improvement values and the tax rate. It is always unpopular to raise the tax rate and actual house values are easier to track because of neighborhood comps. So switching land and improvement values around further confuses the issue and the homeowner. At the end of the day though folks do not let that cause you any stress. Simply look at the total value that you are assessed and then look at your local neighborhood comps. If the comps are higher then there is no argument but if they are lower then we can argue with the county. If you need us to send you comps we are happy to do so; just let us know. While I hate paying the taxes I am tired of seeing my assessment go down!!

Out on a Limb

Not that the snow is gone I look for a surge in inventory, especially in the single-family sector. Typically March is when inventory really starts to grow and I believe that many who would have come on in February were prevented from doing so by the weather. I also feel that many savvy sellers are umping in early trying to catch those buyers that are active now trying to buy so they can get the tax stimulus incentive before it goes away in April. I think that is a smart strategy. I still look for interest rates to start creeping up, regardless of what the fed does, in response to the government getting out of the mortgage backed security business. I must admit that I am somewhat reassured that we have not already seen a larger spike in rates and believe me this is something I hope that I am wrong about. I think there is pent up demand for good housing to come on the market and I think that what comes on in March that is good will be snapped up. I look for increased relocation activity to boost that demand. I am heartened to see the short sale process drawing the attention of the bigger banks and efforts being made to somewhat streamline that process. That would be a huge plus to the marketplace and would certainly go a long way to relieving the fears of the looming foreclosures and shadow inventory. All that being said I believe that March will be a great month in the marketplace and that the influx of inventory will be gobbled up by current demand. The townhome market will continue to generate multiple offers and be fiercely competitive. The single-family market will also continue to move well although the highest brackets will not see the same level of activity as the lower and mid level price ranges. As our market continues to unfold I will as usual keep you informed.