Home sales in South Hampton Roads soared as prices slid during November as first-time buyers rushed to beat the now-extended deadline for a federal tax credit, according to a report released Wednesday.
Last month's sales volume was up 5.1 percent from October and 87 percent over November 2008, according to Real Estate Information Network Inc.
The Virginia Beach-based multiple listing service reported 1,164 homes in the region sold in November, compared with 623 a year earlier.
Despite increased sales, home prices continued to fall, partly reflecting activity by first-time buyers at the low end of the market. The multiple listing service reported that the median price for existing homes in November was $199,950, down 7 percent from a year ago and at the lowest point in 10 months.
November marked the six month in a row of growth in local home sales and the biggest year-over-year gain in 2009. The rebound contrasts with the market a year ago, when sales were plummeting amid deteriorating economic conditions.
"The tax credit has had a significant impact on sales activity," said Vinod B. Agarwal, an economist at Old Dominion University. "I would expect sales volume to start to show a decline beginning next month."
The $8,000 tax credit for first-time buyers has buoyed sales for months. Congress recently extended the credit, originally scheduled to expire last month, through April and expanded it to include $6,500 for homeowners who have lived in their home for five years and want to buy a replacement residence.
Foreclosures and distressed sales accounted for nearly 18 percent of the sales across both South Hampton Roads and the Peninsula, the multiple listing service reported.
Josh Brown, (757) 446-2318, josh.brown@pilotonline.com
Josh Brown, (757) 446-2318, josh.brown@pilotonline.com
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Cash For Clunkers But For Houses
This is just another Cash for Clunkers type program where the Government give away cash to get people to buy, but when the program stops, so does the buying.
Anything sells if the price is right
This is the basic tenent to Macro-economics supply and demand. The right price is: Home prices should never exceed 200x one months rent - the principle of capitialization rate/yield/return rate. Modest single family home rents in VB are ca. $1200 per month. The amount a person borrows should not exceed 2.5x (some say 3x) income. We think $199,000 is cheap for a home, However a person/family putting down 20% on such a home should be making $65,000 per year to live within their means. I believe average household income is around $75K in this area so the low $200's are where homes will sell. These are general rules, of course people can get second jobs, invite the in-laws to live with them etc. As home prices FALL into zone described above, of course they will sell - then it makes sense - the price is right. I don't think banks are going to finance unqualified people to live in a McMansion anymore and therefore don't expect to see $350K homes jump to $500K anytime soon. Prices can only rise on fundementals not on leveraging.
But what about inventory?
But what about inventory? You have a huge supply of high end homes. Plenty of foreclosures, and a huge amount of shadow inventory that the banks are sitting on in their move to make everyone believe they are more solvent than they are (if they flood the market with houses and prices go down, their portfolios shrink as these assets are marked to market?).
But what about demand? As I understand it, as boomers die off there is going to be a down trend for demand for housing.
Job stability is pretty much gone. There is a huge benefit to being mobile. The exception here of course is working for the gov't, since they just go more in debt to fund their spending.
I dunno, I just don't see the huge gold rush over houses. Sure everyone believed it, the newspaper here is doing there best to re-spike the punch bowl. But it's not that big of a deal to put up a house. They aren't gold.
And if everyone in America owns 3 or 5 of them to get rich, there will be no one left to rent the houses that are not the primary residence.
Gov't shouldn't be
Gov't shouldn't be interfering with the market. The taxpayers are backing much of these shaky loans (70%?). Extending large amounts of credit to people with nothing of their own on the line, and at the edge of their affordability, with bleak outlook on employment isn't wise.
If gov't doesnt interfere, China or Arabia will
Everything will meltdown to very very cheap. Compound that with the falling dollar then "private equity" groups from abroad will come and buy all these homes and rent them back to delinquents and before you know it, all our assets will be owned by very few rich foreigners who will then, thru ownership, gain influence over our nation. Its better to have the government intervene than China or the Saudis.
$800-$1000 a month isn't too bad for a house.
With a 20% down payment, @ 4.5% interest for 30 years, last month's median priced home's monthly payment (not including ins. and taxes) would be ~$800/mo., ~$1000/mo. if they put $0 down, which most banks won't do even more. Compared with local apt. rates, that's pretty favorable when you consider that you are building equity.
The bottom line is, if you don't have the income, down payment, or credit requirements met without the tax credit, the bank isn't going to loan you the money for the house. Most of the homes sold are at the lower-priced, "starter" homes, so it's apparent that many people feel that buying a home now, if they do have a stable job and good credit, is a better option than renting. I suspect that many of these buyers would have bought a home even without the credit, since $8K is only about 4% of the median sales price. Why would you put $40K toward a home, then take a loan out for $160K, just to get another $8K? It doesn't add up to me.
Wrong. FHA, Fannie, Freddie
Wrong. FHA, Fannie, Freddie will let people use the $8K dough for dumps as the down payment. It's still possible to buy with nothing down.
Also, using the 3 year rule with no down payment, $200K home requires an income of $66K. Not really that high, but if you look at what $200K gets you in this region it's pretty sad. Basically all the stuff that's been run over by flippers and the like.
Then look at how much of the nicer inventory is rotting. All the stuff that should be $300K-$400K that is priced much higher. You see people asking $700K for vinyl wrapped stuff. $300-400K asking for houses on concrete slabs.
I think 11% of buyers who bought in 2009 are already underwater on their loans.
If people had to come up with 10% down, there would be few sales. Meanwhile it's rumored that lots of people are one paycheck away from not being able to cover bills.
NOT TRUE
You can still get 0% down with a VA loan and under 5% with FHA.
Thanks for the correction
As one who used a VA loan only last year, I am well aware that you can purchase a home with little or no money down, but most homeowners are not eligible for that program. Also, unlike non-VA home loans, the appraiser is an independent party, hired by the VA, not the seller, buyer, or one of their agents. This makes it a lot tougher to get a loan approved for a home above the appraised value, which in today's market is generally good for buyers, not so good for sellers.
Where are we on this graph,
Where are we on this graph, now?
http://www.seodisco.com/images/home-values.gif
Still sure it's a good market for buyers?
It would be a good market for first time buyers if interest rates were 8% or higher. That would be nice.
Interesting graph, it shows "value of housing as an investment"
I am much more interested in a home's value as an asset that once paid for, I can live in without having to pay anything other than taxes or insurance. If the house happens to appreciate over time, fine, but I'd much rather be spending my money to buy my 5 sq. ft./mo. than to get nothing after paying the rent for an apt. I know some people would rather rent forever, but I like knowing that one day, I'll never owe another penny for my home, save the taxes, insurance, and upkeep. So, of course once people stop looking at their home as a big piggy bank instead of what it is, a place to live and raise a family, home prices will fall somewhat before rising again with inflation. Since your graph is from 2006, and many of the areas hardest hit by the housing crisis (AZ, CA, NV, and FL) lost as much as 50%, I think we are much closer to the 100 than to the 200 on the graph.
I'm all for buying houses,
I'm all for buying houses, assuming the buyer can afford to do so without the taxpayers at large having to back the loans to make it happen.
My issue is the 100% increase in price over the past 6 years, when similar gains weren't seen in salaries. The housing market is nothing more than a textbook definition of a speculative mania. No one wants to admit it, though.
There is a carrying cost to home ownership. If you own outright, chances are you purchased before the bubble. It's possible the bubble helped enable you to purchase. The older generation expects the younger to pay much more for housing, meanwhile a portion of the older generation has destroyed many of the future job opportunities for their own greed. Credit and debt is filling the gap. Lets fix that. Forget propping up the housing bubble, work on job creation instead.