After that depressing jobs post, here's a little good news: nationwide sales of previously owned homes rose from November 08 to December 08. Of course the story does say that foreclosure rates continue to rise and home prices continue to fall, so even the good news is tempered.
The city leader's of Winston-Salem would like to have the ability to use eminent domain to take at "fair market value" properties that they consider eyesores and then either raze it or rehab it as affordable housing. I have real problems with eminent domain being used in this way because there have been cases in some cities where people have lost homes that they were living in because the city took them using eminent domain because they wanted the land for an office building or some other use. To me this is plain un-American.
Today I received a press release from Senator Burr's office announcing that North Carolina had received $52,303,004 from the federal Department of Housing and Urban Development's Neighborhood Stabilization Program. According to the release "North Carolina may use this grant to assist individuals in purchasing foreclosed homes, acquiring and rehabilitating abandoned homes, establishing land banks for foreclosed homes, demolition of blighted properties, or redevelopment of vacant or demolished structures. All NSP funds are required to benefit individuals or families at or below 120 percent of area median income (AMI) and at least 25 percent must be targeted at those living below 50 percent of AMI. Funds awarded under this grant must be used within 18 months."
Back when the real estate bubble was in full swing I had some pretty strong feelings about the real estate business, in particular the idea that realtors were getting paid a 3% commission when they had to do next to nothing because the houses were literally selling themselves. Of course I ticked off some friends (and strangers) in the real estate business, but even if we disagreed about the merits of the payment structure we did agree that when times got tough a lot of the realtors would disappear because it's tough to make a living when you're getting paid 3% of nothing.
It was only a matter of time before something like this happened:
But in nearly every other respect, he is unlike any real estate
agent you've ever met. He is unshaven, drives a beat-up car and wears
grungy cut-off sweat pants. He also breaks into the homes he shows. And
his clients don't have a dime for a down payment.
Rameau is
an activist who has been executing a bailout plan of his own around
Miami's empty streets: He is helping homeless people illegally move
into foreclosed homes.
“We're matching homeless people with peopleless homes,” he said with a grin.
Rameau
and a group of like-minded advocates formed Take Back the Land, which
also helps the new “tenants” with secondhand furniture, cleaning
supplies and yard upkeep. So far, he has moved six families into
foreclosed homes and has nine on a waiting list.
Later in the article Rameau says he's not afraid of being arrested and that he's doing the homeowners a service by helping prevent vandalism and destruction of property. I guess that's why he has to break in.
Real estate in Winston-Salem isn't exactly hot; existing home sales in October 08 were 34% lower than October 07, and average home prices were down 7.6%. From the Journal article:
People in the local real-estate industry had hoped for better
numbers as sales of existing homes started stabilizing somewhat during
the summer.
Glenn Cobb, the chief staff executive for the Winston-Salem Regional
Association of Realtors, says he believes that such factors as the
country's economic downturn and recent presidential election played a
part in helping to slow housing sales in October.
Several people in the housing industry have said that potential homeowners have been in a wait-and-see mood.
"The fundamentals are all still there," Cobb said. "You've got a
great selection. You've got great interest rates and a real stable
market for us ordinarily, so it still should be a good buyers' market
right now."
He doesn't expect the climate to change for the better until the spring.
The Thanksgiving and Christmas season tends to be a slow time for the housing industry.
Julie Poplin, the president of the Winston-Salem Realtors
association, said that business has been sporadic and said 2008 was the
first year that she had consecutive months where she didn't have a
closing.
But Poplin, who is also a broker for Allen Tate Realtors, is ending the year on a good note.
She is encouraged by the fact that she has three closings scheduled
in December. "People are still looking for bargains, and people are
still buying homes."
I've taken the realtors to task in the past for being just a tad delusional with their interpretations of the market and the effect of the economy on real estate, but in this case I actually sense a little bit of realism in their remarks. My only point would be that Mr. Cobb missed one crucial factor in his comments about the fundamentals being good: while interest rates and prices might be low, lending standards are much, much tighter and until that changes a lot fewer people will be out of the market and not by their own choice.
I stumbled across the blog for realtors Brad and Angela Lawrence and they have a chart on there that's just plain depressing, but before I get into that let me give them a compliment for having the blog in the first place. I know I've taken some realtors and their association to task in the past, particularly for saying things that make them seem obtuse about current market realities, but that doesn't mean I have it in for all realtors. There are some I really respect and I think they play an important role in the housing market, so it's nice seeing Brad and Angela using blogs and email newsletters to augment their shoe leather sales.
Now, to the numbers. They have a chart showing the housing market activity for the Piedmont Triad for the week of 11/1/08 – 11/7/08. What struck me is that the percentage of listed homes that sold seems really low and more houses were newly listed than were sold, which means that the inventory of unsold homes actually grew. I don't know if the numbers were higher or lower than historical norms, but they just seem really, really low. Here they are by county:
The following numbers are the Pendings/Solds/New Listings/Actives for Week of 11/1/08 – 11/7/08
Source – Triad MLS
| County | Pendings | SOLDS | New Listings | All Actives |
| Guilford | 56 | 17 | 130 | 4620 |
| Forsyth | 39 | 22 | 111 | 3421 |
| Davidson | 8 | 11 | 34 | 1271 |
| Randolph | 10 | 8 | 34 | 748 |
| Davie | 0 | 0 | 14 | 407 |
| Stokes | 4 | 1 | 8 | 300 |
| Surry | 3 | 1 | 9 | 421 |
| Yadkin | 2 | 2 | 7 | 117 |
| Alamance | 7 | 1 | 7 | 378 |
| Rockingham | 9 | 3 | 13 | 548 |
If I'm doing my math right then there were actually 80% more homes newly listed (367) than were sold or pending sale (204). Also only 1.7% of all homes on the market were sold or pending sale. This really can't be good, especially if those kinds of numbers are consistent for months on end. Maybe someone out there with access to historic numbers can tell us if this is representative of the market over time.
On another post about where people look for home listings Brad and Angela say the following:
In our area (Piedmont Triad), the preferred online search tool is Listingbook.com,
it is a service that is fed from our MLS every 30 minutes. No doubt it
is best search tool, it is far superior than any other search tool that
we have experienced. It allows buyers to have their own personal
account, save favorites, make property notes, communicate back and
forth with their agent through property notes, very customized search
critera and FREE………here are more benefits of Listingbook.
We do not know of any buyers that look in the newspaper or magazines
anymore, if we get a call, they saw it online or a yard sign.
What I really like about this is that they take the time to provide information that may not lead directly to a sale, but it does show their expertise and understanding of the market. Good stuff.
When we moved to North Carolina from Northern Virginia four years ago the real estate market here in the Winston-Salem area was one of the few in the U.S. that wasn't experiencing the bubble that the rest of the country was enjoying. At the same time the real estate market in Northern Virginia was one of the most over-heated markets in the country. Of course this worked in our favor at the time, but it's been interesting to examine the differences between the two markets during the current mortgage meltdown.
In general both areas are down, but since Winston-Salem already had depressed real estate prices relative to the rest of the country it didn't have as far to fall as the DC area. Still, I think in the near future DC has much brighter prospects than we have here in the Piedmont Triad area of North Carolina and two news items I read this week helped mold my thinking.
First, I was reading an article about Obama's surprising success in Virginia and in the article was this paragraph:
Prince William County is where we lived for the last eight years before we moved to North Carolina, and I can tell you that it's absolutely not surprising that it is experiencing such a bump in mortgage delinquencies. In the early '00s houses were exploding in value but much of that was due to the fact that money was so cheap; any fool could get a loan with incredibly low ARMs. That made it possible for someone who could only qualify to buy a $200,000 home in the late '90s to qualify for a home in the $350,000 range just a few years later. Well, guess what happened when those adjustable rates re-set?
On top of the cheap money Prince William also had the distinction of being an ex-urb that was more affordable than the suburbs closer to DC. Add to that a set of political leaders whose governing philosophy can best be described as "build, baby, build" and you had the recipe for a massive real estate bubble. Thank God we got out when we did.
Unfortunately for Winston-Salem it's still been a painful year despite not having as far to fall. Just this morning the Journal reported that foreclosure filings in September were up 55% over September 07. This area has seen hard times for years so relatively speaking the change in Prince William seems starker than the changes here. Believe me, when we left Northern Virginia that area felt like Northern California must have during the Gold Rush of 1849. Housing developments sprang up seemingly overnight. Traffic clogged every highway, and often many neighborhood roads. People bought houses and flipped them months later for a tidy profit. Heck it got so crazy that they tore down a prison and built townhouses, houses and a high school in its place. So when prices started to fall, it must have felt like Armageddon.
All that being said, the prospects for Prince William are probably much better than they are here, at least in the near to medium term. DC's economy is historically insulated from experiencing the worst of economic downturns because of the recession-proof industry known as the federal government and government contracting. Once the home prices have settled to a normal level there will be buyers because unemployment will likely be lower there than in the rest of the country. And of course jobs will attract more people and eventually the housing glut will be filled, there will be a shortage of available homes and new homes will need to be built. It might take a few years but mark my words that unless something truly catastrophic happens the DC area will see home prices rise before much of the rest of the country.
Here in Winston-Salem things will take longer. Yes our housing prices didn't have as far to fall, but we still saw lots of building that happened thanks primarily to cheap money over the last few years. Consequently we have a rather large housing inventory. Unfortunately we're also bleeding jobs, a continuation of the decline of the textile, furniture and tobacco industries that started well over a decade ago and an impending decline in jobs related to the current economic meltdown. The region is actively pursuing new industries, but it's going to take a while for them to get rooted and growing. In other words even as the housing prices settle we're not going to have a lot of buyers in the near term so the lower housing prices are likely to be with us for a longer period of time than in other parts of the country.
You might think that I regret the move. Well, that couldn't be further from the truth. Life is a marathon, not a sprint, and I'd take the environment here over the DC region any day. Our standard of living is quite high with little traffic, affordable housing (obviously), easy access to the mountains, the beaches only a couple of hours away, a decent education system, easy access to the I-40 and I-85 highways, a leading private university (Wake Forest), two state universities (University of NC School of the Arts and Winston-Salem State University), one of the oldest colleges in the country (Salem College) and a well run local government. Eventually there will be a lot of companies that will discover the benefits of this area and I'm confident that within the next twenty years this will be a very strong economy. Honestly you can't lose the majority of your industrial base and expect to replace it overnight, but when you have as many positives as we have it's only a matter of time before you see the positive effects.
The timing should be just about right for us. We'll be able to make a killing on our house and then I can buy that Winnebago and Celeste and I can see the country in our old age. I'm sure she can hardly wait.
Remember the Chamber of Commerce and local realtors insulting our intelligence the week before last when they tried to justify calling for a moratorium on development regulations by, among other things, saying that the decline in zoning board cases was due to the "difficulty in doing business here" and conveniently forgetting that we’re in an epic credit crunch? Well, today brings us a whole new case of what I’ll call "Realtor Reality." From today’s Winston-Salem Journal article titled July Home Sales Fall:
In Forsyth County, the housing market is not as bad as some parts of
the country, said Julie Poplin, the president of the Winston-Salem
Regional Association of Realtors.She said that comparing July 2008 to July 2007 is skewed because last year was an abnormally good year for the local market.
"We are getting back to a more normal marketplace," she said. "We’re
flat, but that’s not a bad thing. The good news is that we are having
sales, and that’s great."At Allen Tate Realtors where Poplin is a broker, Poplin said that
brokers are active but having a lot of trepidation because of news
reports about overall woes in the housing market. But they are busy and
finding creative ways to market homes."They are really working hard for every deal," she said.
Poplin advises sellers to have their houses competitively priced and be ready to move.
"But if you are a buyer, you need to take advantage of these
interest rates before they go up, and they will be going up," she said.
I tell you what, they must be serving some mighty fine happy juice over there at Allen Tate. I mean what she’s saying is akin to saying, "Well you just totaled your car and had both your legs and one arm amputated, but we’ve seen cases similar to this where people have lost all their extremities and gone blind and deaf too, so in the grand scheme of things you’re not doing too bad."
If you want to be more honest about local real estate you should say this: "Well, in the Triad we’ve suffered through agonizing economic times while the rest of the country experienced unbelievable growth, thus we never had a real estate bubble. Heck, we didn’t even have a real estate burp so you could say that we didn’t have as far to fall. Yet we’ve fallen anyway. Yeah for us!"
Her statement that 2007 was an abnormally good year for the local market has me curious as to what her frame of reference is. Abnormally good compared to the last five years? Ten years? Twenty years? I mean we’ve been bleeding jobs around here for over a decade, and when the rest of the country had houses appreciating at incredible rates each year while ours inched up incrementally. Don’t believe me? Here’s a report on real estate from 1997-2007 prepared by Donald Jud, who was also interviewed for the story in the Journal (and I’d guess he wouldn’t necessarily agree with Ms. Poplin’s view of the situation). And I quote:
Since the 1st quarter of 1997, existing home prices in the Triad have risen at an average annual rate of 3.2 percent, outpacing the consumer price index (CPI) which has increased an average of 2.5 percent annually. The appreciation of housing prices in the Triad has lagged substantially the rise in housing prices nationally. For the nation as a whole, existing home prices have risen at a 7.6 percent annual rate from 1997.1 through the 4th quarter of 2006, according to the Office of Federal Housing Enterprise Oversight (OFHEO).
In short our houses appreciated at less than half the rate of the average of the rest of the country. You don’t want to know how far we lagged behind hot markets like Washington, DC, California, etc. So if you want to say that 2007 was better than we’d had for the last five or ten years, then well I guess you could be right. Or not.
If 2007 was such an abnormally good year, how much better was it than 2006? Let’s see what the report says…seasonally adjusted home values increased 4% so that’s good, but on the other hand the number of homes sold decreased by .1%, the time on market increased by 9.8% and the spread between the list and sales price decreased .8%. Abnormally good?
Now in her defense maybe she was just referring to July existing home sales so if you go to this page on the Winston-Salem Regional Association of Realtors statistics page with links to all the monthly reports and compare all the July reports you can see that indeed July 07 had higher sales than July 06 by about 6%, and that 2006 was significantly higher than the previous few years and that July 08’s numbers are back in the range of 05 and before. Still, that doesn’t mean that 07 was great, just that it and 06 weren’t as crappy as the last decade or more. And that’s just looking at the number of houses sold, not things like price, time on market and spread.
The best you could say is that we might have gone from really miserable in the early ’00s to kind of miserable in the last couple of years and are now returning to really miserable status. Not a real comforting thought unless of course you live in Realtor Reality Land.
Disclaimer: I have a few friends who are realtors and brokers. They are smart people who see through un-tinted glasses and I hereby officially exclude them from the Kool-Aid bunch who live in Realtor Reality Land.
Here’s the first sentence from a Wall Street Journal article on the seemingly never-ending mortgage meltdown:
Mortgages issued in the first part of 2007 are going bad at a pace that far outstrips the 2006 vintage, suggesting that the blow to the financial system from U.S. housing woes will be deeper than many people earlier estimated.
To paraphrase The Godfather: Just when we think we’re out they pull us right back in.
If you’re sitting on some cash you should be seeing some once-in-a-lifetime real estate deals in the next couple of years.
Befuddled 