By the
numbers Andrew Kantor
18 January/february 2011
www.VARealtor.com
Real estate is about numbers. Prices, rates, area, bedrooms,
and of course, sales. There’s nothing wrong with a good anecdote — or 10 — but our business is one like, say, baseball: Stories are fun, but you learn more by looking at the numbers than by listening to the tales. That’s why we compile them and ponder them, massage them and fret over them, and seek out the trends that will tell us that things are looking up.
Virginia Home Sales
Second Thing
Nov 2010
Sept 2010
Jul 2010
May 2010
Mar 2010
Jan 2010
Nov 2009
Sept 2009
Jul 2009
May 2009
Mar 2009
Jan 2009
Nov 2008
Sept 2008
Jul 2008
May 2008
Mar 2008
Jan 2008
Remember, though, to be careful about statistics. “Correlation does not imply causation,” the saying goes — in other words, statistics that seem related may not be. Take a look at this chart:
Third Thing
The blue line shows Virginia home sales from 2008 through 2010. With the exception of the green line’s dip in July 2009, the other two are clearly related, right? Or not. One of those lines shows changes in the price of orange juice. The other tracks Virginia’s average temperature. In other words, maybe there’s a connection, maybe there isn’t. Don’t jump to conclusions.
The most obvious stat when it comes to the real estate market is simply the number of units sold in a given month. (To keep the data manageable, unless otherwise noted the numbers represent single-family homes and condos.) Going back five years (see the next page) shows the typical cyclic nature of the market — sales peaking in early summer and dropping through the winter. Of course, the overall trend was down since 2005, but a careful look — and, perhaps, some wishful thinking — shows that the downward slide appears to come to an end in October 2010.
Volume 18 ● Issue 1
January/february 2011 19
Units Sold Statewide 2009 and 2010, by Month
4,000
6,548
6,259
5,915
7,873
8,365 5,957
8,536 7,152
8,004
10,418
7,084
8,096
8,314
7,212
9,592
6,355
5,390 4,554
4,756
6,000
4,880
6,739
8,000
7,057
10,000
8,864
9,848
12,000
2,000 Jan
Feb
2009 2010
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2009 Total: 90,959 2010 Total: 82,809
You might also notice how much higher sales were at the end of 2009 (compared to 2010). Credit the firsttimer home buyers’ tax credit, which helped push demand. And blame the tax credit — rather, it’s expiration — for the sudden drop in July 2010. Don’t discount the weather, though. Blizzards in January and February
2010 hurt demand, while warmer temperatures in March caused a bump — at least, so goes the theory. Economists predict that, absent artificial stimulation, Virginia’s market will begin to stabilize this year, although sales may continue to lag behind 2010 levels during the first half of the year.
Units Sold Statewide 2005-2010, by Quarter 40,000 35,000 30,000 25,000 20,000 15,000 10,000
20 January/february 2011
Q4-10
Q3-10
Q2-10
Q1-10
Q4-09
Q3-09
Q2-09
Q1-09
Q4-08
Q3-08
Q2-08
Q1-08
Q4-07
Q3-07
Q2-07
Q1-07
Q4-06
Q3-06
Q2-06
Q1-06
Q4-05
Q3-05
Q2-05
Q1-05
5,000
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Looking at the data going back to 2005 (lower chart) gives a clearer long-term picture, including an almost textbook bubble in 2005 when the median price statewide was almost 50% higher than today.
The median price of a Virginia home is, generally, on the rise. In the fourth quarter, for example, it was about 4% above the same period in 2009. In general, sale price tracks sales — up in the summer, down in the winter.
$234,300
$235,000
$237,400 $225,000
$230,000
$223,500
$230,000
$239,000
$250,000
$249,000
$235,000
$235,000
$231,000 $221,000
$227,500 $218,000
$220,000
$215,000
$220,000
$215,900
$230,000
$225,000
$240,000
$235,000
$250,000
$240,000
$260,000
$239,700
$257,000
Statewide Median Sale Price 2009 and 2010, by Month
$210,000 $200,000 $190,000 Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2009 2010
Statewide Median Sale Price 2005-2010, by Quarter $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000
Volume 18 â—? Issue 1
Q4-10
Q3-10
Q2-10
Q1-10
Q4-09
Q3-09
Q2-09
Q1-09
Q4-08
Q3-08
Q2-08
Q1-08
Q4-07
Q3-07
Q2-07
Q1-07
Q4-06
Q3-06
Q2-06
Q1-06
Q4-05
Q3-05
Q2-05
Q1-05
$0
January/february 2011 21
5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500
Northern Va
Roanoke/Lynchburg/Blacksburg
Hampton Roads/Chesapeake Bay
Greater Richmond
Other
Central Valley
Dec 10
Nov 10
Oct 10
Sep 10
Aug 10
Jul 10
Jun 10
May 10
Apr 10
Mar 10
Feb 10
Jan 10
Dec 09
Nov 09
Oct 09
Sep 09
Aug 09
Jul 09
Jun 09
May 09
Apr 09
Mar 09
Jan 09
Feb 09
0
Southwest/Southside
Median Sale Price 2009-2010, by Region The up-and-down real estate economy was felt throughout the state, although it affected some regions more than others. The Central Valley region saw the lowest sales drop from 2009, while the Roanoke/Lynchburg/Blacksburg area saw the biggest decline in sales. And while more homes were sold overall in the Virginia Beach-NorfolkNewport News area, there was much more volatility as well.
$600,000 $500,000 $400,000 $300,000 $200,000 $100,000
Northern Va
Roanoke/Lynchburg/Blacksburg
Other
Central Valley
22 January/february 2011
Southwest
Hampton Roads/Chesapeake Bay
Dec 10
Nov 10
Oct 10
Sep 10
Aug 10
Jul 10
Jun 10
May 10
Apr 10
Mar 10
Feb 10
Jan 10
Dec 09
Nov 09
Oct 09
Sep 09
$0 Aug 09
Jul 09
Units Sold 2009-2010, by Region
Greater Richmond
Southside
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regions, for example) see deeper discounts being given. And — while Charlottesville, Winchester, and Washington areas have seen the final sale price move closer to what’s been asked, most of the rest of the state has seen the opposite as homeowners are willing to accept less. (Unfortunately, there’s no way to know exactly what effect short sales and REOs have on these numbers.)
Realtors® are pretty good at knowing the right asking price for a home, so it’s no surprise that the sale price is usually close to the asking price in terms of percentage. But a small percentage difference can still mean hundreds or thousands of dollars difference, so any trends are worth noting. The ask/sold difference statewide tends to hover around 98%. But some areas (the Danville and Kingsport
96.64
96.36 96.98
98.89 97.73
97.53
97.07 96.58
95.86
95.05
97.02
96.37 95.95
95.18
96.28 95.50
90.88 91.23
92
94.34
94
93.73
94.36 94.00
95.5
96.55 96.19
95.95 96.17
95.65
94.88
96.26
96
96.00
98.14
98
97.99 98.23
100
98.66
Sale Price vs. Asking Price 2008-2010, by Region
89.31
90 88 86
Winchester
Washington
Va Beach
Roanoke
Richmond
Lynchburg
Kingsport
Harrisonburg
Danville
Charlottesville
BlacksburgChristianburgRadford
State Average Ask/Sell Ratio
84
2008 2009 2010
Foreclosures Foreclosures across the state remained almost unchanged from 2009 to 2010, but that figure is misleading. Only the Northern Virginia region saw a decline in foreclosures, and the area’s large stock of housing skewed the overall results. Most areas, in fact, saw an increase in foreclosures. For example, while NoVA saw a Volume 18 ● Issue 1
28.2% decline in Q4 foreclosures (compared to 2009), every other region saw an increase — 32.4% in the Central Valley, 45% in Southwest Virginia, and 71% in Southside. However, quarter to quarter (i.e., Q3 to Q4 2010), every region saw declines in foreclosures, from a 4% decrease in Hampton Roads-Chesapeake Bay to a 29% decrease in the Central Valley. January/february 2011 23
fortune didn’t extend to home sales, which continued to be buffeted by other forces, from economic forecasts to the often-unseasonable weather.
In 2009, the U.S. stock market began to recover from the previous year’s declines. (It’s risen about 10% since January 2009.) But the stock market’s
Dec 10
Nov 10
Oct 10
Sep 10
Aug 10
Jul 10
Jun 10
May 10
Apr 10
Mar 10
Feb 10
Jan 10
Dec 09
Nov 09
Oct 09
Sep 09
Aug 09
Jul 09
Jun 09
May 09
Apr 09
Mar 09
Feb 09
Jan 09
Virginia Home Sales and the U.S. Economy (scales mixed for comparison)
Units Sold US Unemployment S&P 500
30-Year-Fixed Mortgage Rate 2010 6.00 5.50 5.00 4.50 4.00 3.50
Dec 10
Nov 10
Oct 10
Sep 10
Aug 10
Jul 10
Jun 10
May 10
Apr 10
Mar 10
Feb 10
Jan 10
Dec 09
Nov 09
Oct 09
Sep 09
3.00
* Taking into account people receiving unemployment and those who have exhausted their benefits but still seek full-time work.
24 January/february 2011
Meanwhile, the U.S. unemployment rate began to decline from its high in January 2010, but remained above 13 percent almost all year,* while consumer confidence dipped in February, peaked in May, but otherwise remained fairly stable. Inflation, which started the year at about 2.7%, dropped sharply in July and didn’t reach 1.5% until December. Nationwide home sales showed a recovery toward the last half of the year, according to Lawrence Yun, NAR chief economist, but still remained below the 2009 pace. (For 2011, Yun predicted that “The recovery will likely continue as job growth gains momentum and rising rents encourage more renters into ownership while exceptional affordability conditions remain.”) Existing-home prices were slightly www.VARealtor.com
below 2009 levels, perhaps because of a more distressed homes being on the market — 36% in December 2010 vs. 32% the year before. (Distressed homes typically sell for 10 to 15 percent below traditional homes.)
And real bargains continued to be had in the mortgage market. Despite a jump in December, rates for 30-year fixed loans remained among the lowest in history: 4.7% in December, part of trend that began in mid 2009.
Finally, a quick look at property pricing. Not surprisingly, homes costing between $100,000 and $300,000
make up the majority of sales, although plenty also sell in the tiers just below ($50,000 to $100,000) and just above ($300,000 to $400,000). l
Market Share in 2010, by Price 600,000-700,000 500,000-600,000
1-50,000
00 -35
0-1
00
,00
0,0
0,0
50
30
,00
0
0
00,00
000
00-5
00,
0-4
400,0
,00
350
700,000-800,000 800,000-900,000 900,000-1,000,000 1M-2M+
00
100,000-1
250,000-300,000
50,000
150,000-2
00,000
-
00
,0 00
0
,00
0 25
2
Additional data for this story comes from the U.S. Bureau of Labor Statistics, Freddie Mac, Standard & Poor’s, and the Conference Board. Volume 18 � Issue 1
January/february 2011 25