Housing Prices Fall

By Loudoun Insider

“Drop is first in 11 years as supply swells” – WaPo

Not only does this raise questions about the continued push for more housing in Loudoun and elsewhere in NoVA, it will turn into a very hot political potato as assessments drop and property tax revenues fall. According to a recent National Association of Realtors report, prices are down 4 percent from a year ago in the northeast and sales are down 12 percent in the same span.

I liken the last couple years of the housing boom to the earlier tech stock boom. Prices rose at an unsustainable pace, largely fueled by market speculators. At one point I saw that one third of new housing sales were for non-primary residences, with a high proportion of investment buyers. Many of these buyers may now dump their properties, further dropping prices and hurting any average homeowner wanting or needing to sell. This further strengthens my opinion that dumping additional excess housing capacity into Loudoun is counter-productive.Â


Comments

  • Fides says:

    There was a great graph in the NYT by Robert Schiller of Yale. Warning: It may cause high blood pressure and heart palpations in current real estate owners.

    The axis is a bit distorted, but it does show that the current bubble is a great deal bigger than prior bubbles, and the big conclusion is that we may be in for a very hard landing.

    The other scary aspect to this is how much of job creation and economic growth has been due to new housing starts. Once prices start to drop and inventories rise, that activity will be greatly curtailed, and there could be a lot of laid off construction workers out there.

  • Overtaxed in LC says:

    When, if ever, will we see the drop in assessments? I sure hope we will not be expected to pay real estate taxes based upon last year’s values but I’m not optimistic about getting any relief any time soon. What we need is a Proposition 13 like they have in CA. Listen up, Loudoun County.

  • Had to Say says:

    Are you sure all those properties were bought as investments? Out here in Pr. Wm. county a lot of Hispanics are buying houses with 2 to 4 other people. They all live in them which is creating part of the overcrowding problem in this area. I don’t know if that has been a problem in Loudon or not.

  • Dean Settle says:

    It’s here, and we’re bound to cover that ground as well. Steve Jenkins has opened that bag in Culpeper. I went to school with Steve, so this is particularly amusing to me.

    LI….. EXACTLY. Thank you for putting it here for all to see.
    Had to say… yes, people were earning way too much in expendable cash, and now that type ofd behavior will bite them back.

  • New in the Post today (Wed.) – condos have a three year supply sitting on the market.

  • Ray Hyde says:

    What that says is that people prefer not to live in condos.

    If supply is starting to push the price down, why is that a reason to limit the supply? What was that someone said here about not having the value of your investment guaranteed?

    What was that someone here said about restricting housing supply being more a matter of greed than of environmental issues, infrastructure, or taxes?

    If the cost of housing drops by half it will cost you far more than another $500 tax increase, so maybe th real reason to fight additional housing is mostly greed. Ask yourself, if the proffers and impact fees were set at twice the level that costs and economics justifies, so that every new hous actually lowered my taxes, then would I be in favor of unlimited building? I think not, so all those arguments about building causing rising taxes are mostly just smoke.

    If we do see a drop in assessments, it is sure to be accompanied by an increase in the rate. The real question is when will we see taxes based on the income to pay them and not on passive investments which provide no cash?

  • sassy girl says:

    What it says is that condos cost too much money, that’s why people who were forced to buy condos in the last few years market (because they couldn’t afford single family) are having difficulty selling them. The average absorption rate for single family homes in the county is 9.2 months, which is not great. The move-up buyers can’t buy the single family because they need the assets from their resale hence, the problem. S.F’s sit for 8-9 months and have many price reductions. Yes, things needed to get normalized, it’s good prices have come down. If someone purchased a home in the last two years it’s likely they are bringing money to the table if they didn’t put a significant amount down. That’s too bad, but it’s the way it is. We have to sit tight for next 5-7 years before we’ll see any appreciation. Ultimately, price is everything. If it’s priced below the market it will sell. My point is we don’t need more new housing to flood the marketplace.
    sassy girl

  • Ben Dover says:

    Sassy Girl -

    I concur with your assessment. It may not be 5 – 7 years before we see renewed appreciation, however – I just read a fascinating article in this month’s issue of Smithsonian Magazine on the changing demographics of America.

    We are just about to pass the 300 Million threshold, and it is anticipated that we will grow at an annualized rate of roughly 1% per year, a good chunk of this growtn is the result of immigration. The article highlights an interesting challenge, namely, that at the present rate of growth America is required to accomodate and absorb the equivalent of one “Chicago” each year. This means homes, infrastructure, schools, services, etc., for 2.8 Million people annually.

    I think I just heard today that Housing Starts, nationally, exceeded projections (for last month). I believe much of the housing market boom is attributable to cheap money (loans). Personally, I hope that the highly leveraged interest only loans go away – I see long term fiscal danger (and a lot of foreclosure activity) looming as a result of these loan structures.

  • Diphda says:

    Some people will get hurt, and maybe justifiably.

    That is the beauty of the market.

    The more you screw around with it by artificially creating a shortage or atificially creating demand, the more people will get hurt, and the more likely that the jsutification for them getting hurt is false.

    The idea that people prefer not to live in condos, and the idea that condos cost “too much” are exactly equuivalent. If someone moving out of a condo also brings additional money to the table,it implies what his desire and discipline are, and waht the market will bear. If someone will wait 9.2 months to sell, then that is also an indication of whaat the market will bear.

    If the county tells a builder he must proved a $77,000 profffer or impact fee as a condition of building and he goes elsewhere, then that is a market signal too. The 300 million threshold is nationwide; that and the 1% growth threshold may mean nothing locally.

    The(government disrupted) price means sellers are willing to wait as much as it means sellers cannot find a buyer. It means buyers are willing to wait as much as they are willing to pay more.

    Where it really gets screwed up is when the government makes plans the exceed the span of a person’s life. The government is omniscient and pevasive and we are not, we are mortal. If the government makes plans that disrupt the market on a more or less permanent basis,then who does it benefit?

    The old folks or the young?

    The newcomers or the established?

    Those who are willing to pay, or those who are willing to wait?

    If assessments are based on “the market” then at what point does manipulating the market benefit the government, and at what point does RICO apply to government activities?

    SNAFU

  • Jill Anderson says:

    We should look at the bright side of this situation if it is indeed true. Housing in Loudoun County has been overpriced for working folks for a long time and artificial incentiving tools like the County’s ADU program only helps a small segment of the population.

    I for one hope that housing prices do fall back a bit. This will help more Loudoun teachers, firefighters, deputy sheriffs, and other key members of our population possibly be able to afford to live in Loudoun County.

  • Ray Hyde says:

    Funny, this week the Wall street Journal had an article on the effect (hardship) of rising housing costs combined with stagnant wage increases.

  • Sandy says:

    Is it just me, or over the last 5 years in Prince William County home prices have tripled. I bought a SF home in 2001 for 199,000. Today that home would cost me 625,000. How can this be justified? By what? I know for me, my income has incease by 0 in that time, in fact I had to take pay cuts just to stay employeed. I really don’t see how anyone can afford a new home at all. Or why there hasn’t been a major fallout from this tremendous rise in prices.

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