Prices aren't as sticky IMO due to large scale production by national scale builders, and massive purchases of SFR for investment purposes by small investors/investor groups. I don't believe either of these two factors existed in any housing run-up since WWII. People actually living in homes can postpone selling as they reduce discretionary spending to make mortgage payments. Investors owning multiple homes are more likely to cut price to exit the investment or go bankrupt putting homes on the market through REO.

Oh the rewording possibilities of this fresh PR from WM:

WaMu's Fresh Face Confronts Piles of Delinquent Home Loans

Fresh Piles.....the mind is awash..

Ciao
MS

TPTB are depserate. If only we could deconstruct index futures buyers. LAte day rally to bolster confidence in itself. then again when you are spending hundreds of billions what is another few millions (or billion)to press up the market at 3:30. govt gets there hoped for headline market finiishes up 260 but people watching the market know that this was as unhealthy and low conviction as can be

So if everyone would just hurry up and lose their shirts already then the economy would improve? Can't imagine why that's not a campaign slogan yet.

Copied from EconLog dated Aug 6...

"Freddie Mac's Whistleblower
Arnold Kling

A Freddie Mac Press release says,

The story is apparently based on the word of David Andrukonis, a former employee who was involuntarily terminated in 2005. It describes a memorandum – one we can't confirm the existence of, one we don't believe Mr. Syron ever saw, and one that Mr. Duhigg never produced for us. Although the reporter was aware of these facts, he cited the individual's account without mentioning them, instead portraying the former employee as having left amicably to become a schoolteacher.

The story they refer to is from the front page of yesterday's New York Times.

In an interview, Freddie Mac’s former chief risk officer, David A. Andrukonis, recalled telling Mr. Syron in mid-2004 that the company was buying bad loans that “would likely pose an enormous financial and reputational risk to the company and the country.”

Freddie Mac was big enough, and important enough in the mortgage market, that if they had said "no" to these loans, it might have made a difference. The charter for Freddie Mac is to purchase investment quality loans. All they had to do was stick to the charter.

My guess is that there are people at Freddie Mac who remember what happened, and they will back Andrukonis' version of events. I hope they know that there are whistleblower laws to protect them, because the party line at the top of the company appears to be to demean Andrukonis and challenge the integrity of the former Chief Risk Officer and twenty-year veteran employee of the firm. I knew Andrukonis when I worked at Freddie, and I think that trying to impugn his integrity is like trying to question Tiger Woods' ability to play golf.

How will the conflict between Syron's version of events and other people's versions get resolved? I would think that the truth will come out. Shareholder lawsuits could be one avenue. Perhaps some journalist will go after the story.

There won't be a Congressional investigation. The relevant committee chairman is Barney Frank, who has close ties to Syron, the Freddie Mac CEO.

UPDATE: The Boston Globe writes,
Freddie had to balance the risks against affordable housing goals, Syron said. Andrukonis and other executives disagreed on that balance, he said.

So according to the Freddie web site, Syron didn't get the memo. But according to the Globe, Syron disagreed with the memo that he didn't get.

I think Freddie's story could use a little more polishing."

Guess the govt did get the bad loans...

Ooops, somehow missed the first line that it was a cut and paste.

Paulson pukes???
http://www.msnbc.msn.com/id/21134540/vp/26605855#26605855

"Heaven helps us and our nation, if..."--Treasury Secretary Henry Paulson
http://www.msnbc.msn.com/id/21134540/vp/26605855#26605855

even if they don't build any new houses for ten years more supply is still coming on line as the number of households decrease due to family consolidation and space sharing to help lower living costs.

Prices are only good signals for asset allocation in market economies. After this weekend, there no longer exists even the pretense of a market economy in residential real estate.

Paradoxically, the lack of a market price as a useful signal makes the market less, rather than more, unsettled, and therefore less, rather than more, likely to allocate assets efficiently.

middle class disappeared like a fart in the wind 30+ years ago

Its a meth lab.

HC-
sounds like more reasons not to buy..

i agree that prices will continue to fall, but one key thing that the price/rent and price/income charts don't caputure is lower interest rates. a better chart would be price to debt service over time.

Worth noting that the French Revolution was precipitated by a financial crisis where the royal treasury had run up massive debts...Wikipedia lists the following:

"-Louis XV fought many wars, bringing France to the verge of bankruptcy, and Louis XVI supported the colonists during the American Revolution, exacerbating the precarious financial condition of the government. The national debt amounted to almost 2 billion livres. The social burdens caused by war included the huge war debt, made worse by the monarchy's military failures and ineptitude, and the lack of social services for war veterans.
-An inefficient and antiquated financial system unable to manage the national debt, both caused and exacerbated by the burden of a grossly inequitable system of taxation.
-The continued conspicuous consumption of the noble class, especially the court of Louis XVI and Marie-Antoinette at Versailles, despite the financial burden on the populace.
-High unemployment and high bread prices, causing more money to be spent on food and less in other areas of the economy."

Any of those factors sound vaguely familiar?

As a person who has been "waiting on the sidelines" this bailout certainly concerns me.

My wife and I sold our house in late 2006. We have been renting ever since and waiting for prices to come down. I have been following the market closely and thus far prices have dipped about 15%.

Since I am trying to time this purchase, does the bailout really hurt me from a housing perspective? Does it just drag out the decline or will it make mortgages easier to come by and therefore stop the decline as crazy loans become available again?

Any guesses?

Good God, revolution? I look around me and people are not even close to doing badly. While you're all bitching everyone I know is working. And frankly no one, even at work, has anything to say about the GSEs other than, "good I hope something will change now" or "it's about time they stepped in".

You people are like weathermen in the studio...get out and look around. And, frankly, no one who isn't selling cares a wit about their house price. I certainly don't for another 15 years or so. So all of this is academic, really. And anyone in this area can buy, as I'd be shocked if we dropped even 10% more here. If your timeline is long, who cares? Again, think J6P...what's my monthly payment? How much more than rent is it? That's the answer to everything here.

Man you sure got some skin in this game eh? Are you one of the Merrill guys marketing this psy-ops?

I might also report that everyone I know in RE around here is reporting DROVES of people now coming out and looking. If anything has a price reduction, it is snapped up immediately...and the prices are around 2001/2002 levels which seem like a bargain.

I'm going to say it again...the purchase decision by 80% of people looking is governed by the housing payment relative to rent, NOT the income to price ratio. And THAT is very, very localized. And I would posit that if I plugged in the average rent in a zip code, and the decline, you'd see it start to converge on some multiple of the rent when the interest rate was figured in.

When the rent for some 600 sq ft studio in the back bay is 1200 a month, you figure out at what price point a condo looks like an attractive alternative...1400 a month? 1600 a month before the mortgage deduction? How much can you buy for that? And that's exactly the question everyone asks.

Fortunately, in the US we have a system where we can change government at the ballot box. That is the obvious difference between US now and France in 1789. Regardless of how the elections go there will be major changes in the US govt leadership.

Hc-
Trust me I'm one of those prudent ones..but I see very little benefit, if your a 1099 earner you get all same tax benefits or more, rent will still be cheaper and savings can go into the right financial sectors.

If this is drawn out as you say ala japan..why would the prudent buy now..
the govt also put a quasi-ceiling on real estate yesterday...

no need to rush...

Still having trouble with the whole "rising rents" concept. I don't understand what that means, please explain.

AllenM Writes:

"Mish keeps on harping about credit destruction- so what? Credit is created at the flick of a switch- look at how much was just made golden today- $5 trillion is now as good as treasuries."

Whilst this is certainly true on the wholesale side it is NOT translating to credit extension on the retial side. The banks appreciate the liquidty being created - but only so far as it helps their financing costs. They are not in turn lending more to retail consumers. THIS is what will cause the deflationary cycle to being. Consumers don't have savings or high enough disposable incomes to maintain consumption without credit. Hence lower demand, and you all know the rest.

"I'm going to say it again...the purchase decision by 80% of people looking is governed by the housing payment relative to rent, NOT the income to price ratio."

It's neither of these things. In this asset-bubble economy, people first look at whether something is going up or not. If yes, then jump onto the bandwagon before it's too late. If not, then it is a cancer to be avoided. This is the psychology of bubbles.

Bubble chasing has replaced (non-existent) income raises for a lot of folks.

Rates are fine right now..jesus it's the credit implosion...are you saying the USGSE is going to buy 50%dti, 38%dti, no money down, 500 score soon to be jobless consumers...

Jobless consumers? The unemployment rate isn't that high yet, and even THAT is very localized.

I know TONS of people in their 20s and 30s that have 10% down. Imagine what opens up if the mortgage rates are back down in the low 5's, and the market is more liquid. You think that these people that have been waiting to buy wouldn't respond to a low REAL (not teaser) rate and a price reduction on the order of 5% off price now? I don't know where you live, but inventory would fly here. There's three years of pent-up demand out there.

I'm not saying price isn't important, but it is the combination of price and rate that counts. And the rate will get better with this move.

ipodius, are you familiar with a concept called "shadow inventory"? Max from sacrealstats did a pretty good job blowing the lid off of that story a few weeks ago. Put simply, the shadow inventory are houses that are foreclosed on, but are not for sale on any website, auction house, or the MLS. Right now in some of the bubblezones, there are literally TWICE as many foreclosures than there are even houses on the MLS! In other words, there is a literal mountain of foreclosures out there that aren't even for sale and the Alt-A reset wave is just getting started. What do you think will happen when this mountain is put up for sale? In my book, that's called capitulation and all of those 20-30 somethings with 10% down would get wiped out immediately if they were to buy now. Better to wait a while, no?

Sacramento Real Estate Statistics: Insight into Shadow Inventory 

Lionel I live in Boston. The bubble burst in August of 2005 and prices have been falling ever since. About 13% off peak now in, and about 23% if you factor inflation in. So we've now had three years of falling prices. The rest of you are late to the party.

And the economy is not doing badly at all. No revolution because, you know, you could have figured out where those price declines would be. They're certainly NOT in the better sections of Boston, nor in the better burbs. They are in the ex-burbs and the sections that were marginal to begin with.

We all aren't CA you know. And things are still selling here. The issue is when people extrapolate local behavior to the country in general. In fact, you can't even do that by zip code around here and get a right answer.

Ipod- typo in my last comment should read 38%pti..

good points but...

These tons of people you speak of could have bought last week at 6% or less by buying down rate...Nothing changed...Why now run to purchase when a 70 year old company, the largest bailout in history and jobs being crushed..If your in l.a. jobs are rapidly disapeering..Finance and high paying jobs are gone along with constuction, banking and retail etc..

Auto is down huge and credit profiles are ugly, trust me I see a lot of those from all over the country...

Where I live you would need 100K down and 150K a year income...

"ipodius writes

And the economy is not doing badly at all. No revolution because, you know, you could have figured out where those price declines would be. They're certainly NOT in the better sections of Boston, nor in the better burbs. They are in the ex-burbs and the sections that were marginal to begin with."

Same thing I am seeing here in close in DC market. Here, the exurbs have cratered, the inner suburbs have declined maybe 5-10% from peak (early 2006), and the city itself is flat. Unemployment in the area is running about 4% - 1/2 of what is is in CA. The area is still gaining jobs.

Inventory (YOY) around here peaked in 2006 and down about 40% now. Months of inventory is less than 6 months. Also, the to the shadow inventory darth toll alluded to - exurbs have a ton of it. However, in one of the close in counties there were only 175 foreclosures all last year - about 1 month of sales. As such, the shadow inventory where I am looking is about nil.

I hate to say it, but it looks like this bubble is highly highly localized. 20 miles from here in the exurbs, its armageddon. Close to the city, its a big freaking yawn!

"I hate to say it, but it looks like this bubble is highly highly localized. 20 miles from here in the exurbs, its armageddon. Close to the city, its a big freaking yawn!"

You guys just don't get it. The exurbs and other marginal areas are where a higher percentage of subprimes are. The higher-end stuff is where a lot of Alt-A is. You guys have seen the reset chart for Alt-A vs. subprime right? And you realize that Alt-A is ten times bigger right?

Like all credit busts, the cancer starts at the margin and moves into the core. BTW, FNM just got taken over. That means the cancer has now spread to the core and the whole house of cards will be collapsing soon.

4) housing prices collapse.

Darth,
There is no question, in my mind, that in the next 5-10 years, housing will collapse.

Bottom line is that parents cannot keep up with the bills and cannot hope to sell their overpriced crap to their kids for millions when they bought in '06 for 600K.

I keep telling my wife this and anyone who will listen, but it is hard to get people to believe it.

If you bought for 600K, don't expect to sell for a mil in 30 years to your kids. Salaries will not support these insane levels.

Rent vs. Buy and all those other models are out.

20% down, 36% DTI, and 30 year (should be 20 years) conforming loan.

Except in rare, prudent instances, all other mortgages are silly.

"Except in rare, prudent instances, all other mortgages are silly."

Very, very true. And this shows how much trouble we are in.

Strangely, for as smart as a lot of folks on CR are, there is still a lot of confusion as to what all of this means, or even a basic recognition that this is a historic credit bust.

Burbed, I have two things to say to you:

Calculated Risk: IMF: Mortgage Reset Chart

Calculated Risk: MBA: Prime ARMs to Dominate Foreclosures

Any questions?

Ipod: I live in Boston (well, Cambridge). I have observed the phenomenon you describe pretty well, though I think that Boston is going to fall eventually as well, as deflation catches up with us as well.

You're right though, Boston proper, Cambridge, etc aren't getting hurt that badly. The places that are getting hammered are places like Framingham, Lowell, etc. So far, the central Boston market has been a bit of a fortress, and friends of mine are doing the same rent/mortgage calculation that you describe.

In any case, I'm still waiting, especially since I'm a comparatively highly paid contractor with questionable job security, so for me it's better to simply save, let the bubble deflate, and rent. Then, when I think home prices are more sustainable and I have a better idea what my sustainable salary is going forward, I'll buy.

Ha-ha-ha, jolly good ol' time. Course, we're not part of the good ol' boys club. This will just cause the 3 house owners, the Hamptons boys to have to sell. No REAL downside. Ruination.
http://www.msnbc.msn.com/id/21134540/vp/26605855#26606830

Darth - mind you, 2 years ago, I was thinking differently about this. Back then, I saw inventory rise, and I kept telling the bulls, just wait its coming, its coming.

2005 Inventory rises everywhere, close in far out, everywhere, its a tsunami on the horizon I said!

2006 - Exurbs got hit first - months of inventory rose from 4 monts to a wretchedly awful 8-9-10 months. Close in areas remained at 4-5 months. I kept saying, its coming, just wait.

2007 - Exurbs got hit harder - months of inventoyr rose to a armageddon style 16-18-20 months of inventory. Close in areas remained at 4-5 months. I kept saying its coming just wait.

2008 - Exurbs start improving...significantly, now they are down to 6-8 months of inventory and working though their shadow inventory as well. Close in areas remained at 4-5 months - tax records reveal only a few hundred foreclosures to begin with. I said, god damn it it aint coming after all!

Dont get me wrong, Im happy I got my 10% off, and hope to maybe wring another 5% out of this. But at some point we all have to come to jesus. I simply cant deny reality forever.

RENTS WILL NOT GO UP. Look for the ratios to drop to between their historic 1 and 1.1. I greatly doubt that higher rents will contribute. I expect average annual rent increases of 3% -- or less with an aging baby boom population and plenty of second homes that will need to be rented. Home purchase prices rose only because people could promise to pay later via borrowing (mortages) -- while this is an option with rentals. IF you don't have the cash today you don't get to rent today. I expect Rents will fall unless people start making higher raises than historically normal, or other costs -- like education and food and medical start to go down. You can't pay more if you don't have the cash.

lama writes:
Burbed,
Have a look at the mix of resets. Most RE anywere near DC is prime or Alt-A. You can see how the resets have not really started there.
We want to move out of our very rentable duplex into a nice area and have been stopped by the prices as well. Maybe we should be happy we didn't buy into the hype?
You sure as heck are not losing money by renting these days, BTW.

Lama - yes unfortunately. The ALT A resets in close in DC are 40% done. Primes are resetting much slower, and I have no idea what percet of them are done. However, since so few of these guys are underwater to begin with, they simply refinance.

I agree 100% - I am not losing any money by sitting on the sidelines - with some luck I may see another 5% off. But I seriously doubt I am going to see the 40% off our exurbs are seeing, or the 50% off that CA is seeing. It is what it is.

Owned in Cambridge, MA and residential exemption makes property taxes inexpensive compared to many other places. 440K condo, $1400. Public schools are awful, though.

Burbed, I see where you're coming from. Relax though, the cancer is spreading! If inventory is declining in your area and 4-5 MOI is the uptake, you REALLY need to take a hard look at this right here:

Sacramento Real Estate Statistics: Insight into Shadow Inventory 

Granted, this is CA specific, but guess what? Official inventory has declined significantly in Sac and MOI uptake has "improved", which is exactly like your area. This brings out the bottom-callers but they are missing the big picture. Foreclosures are actually being created FASTER than the inventory uptake! Also, there are literally TWICE as many foreclosures as there are even MLS listings!?!?!

Look, the RE market is basically broken out here and yet it APPEARS as if a bottom has come in. Don't believe it and hang in there! If you look at the foreclosure map for my area, you can see that the cancer is spreading to the pricier areas. You also have to look at what percentage of sales are foreclosure sales vs. other types of sales. All true bottoms will be a reduction in all inventory (not this huge shadow inventory overhang that keeps growing) and you will see foreclosures being created at dramatically lower rates than sales.

House prices are still WAY too high. All the attempts to prop up the market are merely efforts to protect the banks and mortgage industry from their own greed. It is in the national interest to have low house prices, just as it is in the national interest to have low energy prices.

All those who are attempting to prop up the housing market through government intervention are either corrupt or communists. Since there are very few communists in the US government and on Wall Street, it means they are all bent and corrupt.

Nuke Washington! Nuke Wall Street

NoVa's story about Lancaster, PA sounds exactly like Livermore, CA in the East SF Bay. Things were spiraling upward and onward until the credit crunch hit and Bechtel took over the Livermore national lab and laid off some 500 people. Now people are starting to question whether Livermore really needs a costly regional arts theater and fancy downtown condos.

Keystone, sorry I must have missed your post. What area are you in? I'm showing over 2,000 foreclosure/preforclosure in the DC area from RealtyTrac. Is this not accurate?

About real prices. I know that normally CPI and wages rise together, and house prices with them. But wages aren't rising - and it seems that house prices track wage inflation better than CPI inflation. Any comments?

"Normally" ended when Reagan was elected and the War on the Middle Class began.

Sinan writes:

"So you CA guys can go on all you want about "no place is immune" and such other nonsense... but until you can tell me an area that has 4.5 months of inventory is poised for a bit decline - its clear - you have no clue what you are talking about."

Well I'm sitting here in MD, east shore and I have a real good idea what I'm talking about. You and anyone else who thinks this is over is fooling themselves.

Darth Toll - you are correct there are probably several thousand foreclosures in the DC area itself. What I am talking about is Arlington County - a tiny area about 5 miles square with about 190,000 residences. Surrounding suburban & exurban counties have 1 foreclosure per 150 residences. In this county, it is like 1 per 1400 residences - miniscule.

Realty trac and some others do have it a smidge higher, but in order to look it up myself I went down to the county courthouse and confirmed - very very few foreclosures. I assumed with enough time, the surrounding counties would drag it down. Now, it looks like the reverse is happening, it is dragging up the surrounding areas. Sigh...

Fairfax Co 554 foreclosures
Loudoun Co 199 foreclosures
Prince Geo 307 foreclosures

Not including delinquencies. It's early in the game so take your time.

"Spoogie writes:

Well I'm sitting here in MD, east shore and I have a real good idea what I'm talking about. You and anyone else who thinks this is over is fooling themselves."

Well it makes sense now. Of course it looks bad to you it should because eastern shore is a disaster waiting to happen!!!

Talbot & Queen Anne Co each have 22 months of inventory. Caroline is at 25 months and rising. Kent Co. is a joke 33 months for god sakes! Over there you can see it, its seller denial, pure & simple - much much more pain to come...

It aint like that here in Arlington. You guys have peak inventory now. We had it 2 summers ago, and it has fallen ever since. At our very worst, we got to 9 months of inventory. That lasted for like a month, and now we have 4-5 months of inventory and its been like this all summer.

The rest of the places, loudoun, fairfax, & PWC are starting to recover, but it makes sense they had 25-50% price drops. 3 years in, Arlington & Alexandria still look healthier than the other areas, but it only took a 5-10% drop to get there!

In a nutshell, this is the difference in perspective, and goes back to the original point - this downturn is vastly different depending upon where you are in the area. From where I am sitting, the worst of it is over. I dont think prices will rise for a while - years perhaps. But if you think areas that spend the last 3 years at 4-5 months of inventory are poised for a big drop, you are dreaming!

Spoogie, Lionel & others. If you want to see what I am talking about, look back on that last inventory chart CR put up with this post. Huge spike of inventory peaking now - not 2 years ago, but now. Most areas in the country look like this.

By comparison take a look at this chart:

Alexandria Virginia MLS Housing Inventory

Peak inventory was 2 years ago and it aint coming back. Translation, most of the country has much more pain to come, but in this area, the worst of it is over.

"Spoogie writes...
Of course it is.;)And it's all contained too. Lets see... Arlington county inventory is up 475% from 2004 levels. "

You showed so much of your ignorance with that comment. See the thing is, in 2004, we had this thing called "the bubble". When we had "the bubble" inventory did strange things - In 2004 for example, inventory was wayyyy to low to be considered healthy same thing in 2003 & 2002. Back then, houses didnt have a chance to sit - it was put it up and it sold - instantly.

Back in the days before this thing called "the bubble" we had about 700 or so units of inventory. This is what we would consider "healthy". Today, there are about 775 units of inventory - about 10% bloated if you will. So, perhaps you want to revise your statement?

Prices are usually sticky in a down turn because most people do not have to sell. They can wait for their price.

In this case a lot of the selling is by banks, selling foreclosures. Their need to get them sold and they are willing to cut prices to do so.

If you take the forced sales out the equation and look at normal sales (with REO's taken out) the prices would still be stickier.

SO the reason for the difference is the large numbers of forced sales.

"rdc writes:
Prices are usually sticky in a down turn because most people do not have to sell. They can wait for their price.

In this case a lot of the selling is by banks, selling foreclosures. Their need to get them sold and they are willing to cut prices to do so.

If you take the forced sales out the equation and look at normal sales (with REO's taken out) the prices would still be stickier.

SO the reason for the difference is the large numbers of forced sales."

RDC - I dont know if this comment was directed at me, but lets assume it was.

Now, in the exurbs you are right, there are a large number of REO's and forced sales, thus those markets are starting to look OK again (in terms of months of inventory).

Thats not the case in the core markets I am discussing where there is little distress in the first place. As was noted, there were only 175 foreclosures in the last calendar year - 100 of which were re sold - roughly 8 per month if you will.

Now, In Arlington VA, there were 232 sales last month. Lets be generous and assume that 32 sales were distress sales and the other 200 were normal. Since the inventory overhang is so small, you are still looking at 5 months of inventory.

In sum supply and demand are still in balance. 5 months of inventory does not indicate stickiness, it indicates health. Sellers are putting stuff on the market, at 5-10% off peak prices, and buyers are still gobbling it up.

Incindentally, want to know something funny RDC - we do see stickiness in some areas around DC - except we see in out in hard hit, high end exurbs.

Lets do a head to head comparison of Loudoun County, a high end DC exurb - (the wealthiest in the nation) and Arlington, a high end DC core area. Lets also look at sales in the category of 500K or higher since we can assume the high priced areas are the most sticky. That in mind, looking at July sales, what do we see?

Arlington County listings/sales 500K & up = 467/113 (4.13 months of inventory)

Loudoun County listings/sales 500K & up = 1264/140 (9.02 months of inventory)

So yes you are right there is some stickiness, but it is again concentrated in the high end exurbs. Even after 20-30% off peak bubble pricing, the high end exurbs still exhibit some stickiness. (I say some because months ago, Loudoun County had 20+ months of inventory in this category).

At the same time though, Arlington only had 5-10% off peak prices. Amazingly, stuff this close to peak pricing still sells twice as well as stuff in the exurbs - no stickiness required. Once again, this shows, this downturn is highly, highly variable even in areas only 20 miles apart.

Hi all,

I've been reading this blog for months but haven't ever felt qualified to contribute..until now.

I happen to live in DC proper, and have been here most of my life.

What is going on in this market re: price stickiness due to two simple factor.

1. The government seldom lays off employees.
2. Unlike fantasy markets like South Florida and CA, DC actually does see a large influx of well to do people from other locales (and nations) that NEED to live and work here (100,000+ well paid lobbyists plus all of the international finace types at the WB/IMF/IDB consortium)

This has led people to mistakenly believe the relatively low inventories and rapid absoprtion rates will immunize this area from big price declines.

The white elephant in the room is the fact that there is a finite number of lobbyists and World Bank employees to buy all of this overpriced RE and once you satisfy that market, the average salary here (mostly gov't employees) CAN NOT support the ridiculous prices that have been run up in recent years.

The only reason prices are so high in the first place is because of the $0 down, 100LTV, IO, ARM and other creative nonsense that allowed gov't employees and contractors to pretend they were part of the monied classes and trade up into expensive real estate.

Now that the funny money loans are over, we are going to see prices slowly retreat. Very, very slowly.

There won't be an inordinate amount of foreclosures, ala CA or FL, but there will be no more trading up, which means those who can afford to will stay put and those who have to sell are going to be selling to the MUCH smaller market of buyers who qualify for loans under sane lending standards.

This of course means, lower prices.

DC will just take a LOT longer to come to reality.

What can I say, it's a gov't town.

We don't do reality here.

Incidentally, I am not dismissing the possibility its completely over for this area - in demographics its all about trends and for the dc core area, the trend is not the renters friend.

Trends in the core areas were exactly like you would expect to see in a bubble, and exactly what we are now seeing on the national stage - just 2 years later. There is little doubt the worst of if has passed over the core DC area, and now is just a waiting game - no big price drops necessary.

Im also not saying anything about other areas in the country. Places like LA have so much pain ahead of them, its not even funny. All I am talking about here, is this tiny area in core dc and noting how differently it is reacting than even the surrounding metro area.

That said, things could reverse themselves in core DC if something changed. Take jobs for example. Jobs in the DC area have certainly weakened, but it is still far better here than it is in most areas in the country. DC is still gaining jobs. Places like hard hit LA are not.

Now, if we go from a positive job number to a negative job number, you betcha, the core areas will melt down - and this time it will start with the high end core areas and work its way out. I dont deny that this could happen.

Nevertheless, the fact of the matter is right now there is little evidence that will happen. If this national downturn continues for say maybe another 72 months, the job trend could turn negative. I for one however, dont believe we have 72 months of downturn left in us. Thus my conclusion, based on what we see now and what we know now, in core DC it aint gonna happen.

"Spoogie writes:
No my friend. You need to provide the data to back up your assertion. Besides, your link doesn't provide historical inventory.

Now.... where is the data showing inventory prior to bubble years."

Spoogie, I gave it to you in the MRIS link. Perhaps you cant find it - ok fair enough - try a different link:

real estate charts - Alexandria City, VA Sales Statistics

Look at the 8th chart from the top which is inventory.

As you can see, back before the bubble started, we had a 700 unit inventory. Then during the bubble years it shrank - significantly.

This set also shows 2006 was the peak year (unlike the rest of the country where peak is now). This also says we are now (june 2008) getting real close to normal - especially when you consider the housing stock and population have increased about 9% in the last decade.

So go chew on this all you want!

Also, look at the price trend chart 2nd from the top. Both Arlington & Talbot look to be pretty flat - yet Arlington has worked through its inventory snog, and Talbot has not.

By comparison, lets look at Loudoun county. Just like Arlington it has worked through its huge inventory overhang - yet look at the cataclysimc drop in prices (again 2nd chart)

real estate charts - Loudoun County, VA Sales Statistics

So here again, we see it - 2 areas had big inventory overhandgs to deal with one is hard hit loudoun county the other is hardly hit arlington county. Its pretty much over for both places, yet only one takes the big hit.

Sinan - long time lurker first time poster. Im looking to buy in Alexandria, and am stunned by what you have provided. I just assumed that inventory was rising here just like it was in Howard County where I am now.

Question for you, are you sure that it is really gone. And what I mean by that is how do we know it all was purchased. Couldnt it be possible that some of that is people just holding out for a better day?

Sinan - thanks, I think. To be honest, I really dont like the picture you are painting, but I dont see any flaws in your reasoning either.

I dont understand how this happened. How did all that inventory escape without anyone noticing? Do you see any chance for prices in Alexandria to drop another 20%? I think I know the answer, but I want to hear your take.

Lad, don't buy into it. Not for a second. The charts mean nothing as they do not show data for a full boom/bust cycle. The end of late 80's cycle where Arlington, Fairfax and Loudoun counties saw in excess of 45% real price declines beginning in 1991 do not show on those charts. Further, take a closer look at the links on recharts.com (RealTards.com). A direct link to a realturd.

Proceed with extreme caution Lad.

Look Lad... it's your wallet. Do you really think I give a rats ass if you get burned because you refuse to look at an entire cycle? Go for it and put your money where your mouth is. A realtor is your best friend.

Lad=Sinan.

Why would someone talk to himself in a pathetic attempt to lend himself credibility. You're a sad desperate realtard with phony data.

I can talk to myself. See?

You're absolutely correct Sinan. Real estate always goes up.

I'm a big badassed keyboard cowboy. And a cowering sissy in person.

I should apologize for faking a conversation between myself(Sinan) and myself (Lad) but I won't. And don't expect me to be honest about anything else. After all, I sell real estate. Or used to.

Evil realtor/self talker SinanLad has posted a new set of fake numbers.

real estate charts - DC Area Stats

I must stop him because the Post, WSJ & other media outlets (as well as doomer bloggers) all rely on his flawed data. Look he faked Arlington to make it look as sales are UP year over year. This is going to lend to the perception that its all over but the shouting, no big price drops necessary. SOMEONE MUST STOP HIM!!!

Spoogie you are johnny on the spot : ) OK time for some truth here...No I am not a realtor - I have no idea who the woman is linked to that data, but whoever provides it is a godsend. I also have no idea who Lad was but that was a nice way to spin your way out of a jam!

More truth - I am a homeowner in Arlington. I bought in 2001 and thought I overpaid at the time! I knew there was a bubble and expected to see most of my gains go away, but I was fine with that.

Once this started bursting in 2005, I expected to see a lot of my equity evaporate - but I noticed something, big early losses out in the burbs, not so much close in. I wondered why? So I put on my demographers hat and looked for trends - is it really falling apart in the burbs and generally OK close to the city. Everything I have found thus far said the answer is - YES.

So here I sit a happy homeowner up hundreds and hundreds of thousands of dollars - I expected to loose a lot of it 2005 & beyond but I didnt. Now, 3 years later - I am downright smug about the whole thing. I feel as if I won the lottery!

No im not 100% sure about this so in order to test my theories, I put them on this blog and ben jones (handle "DC Investor") to see if one of the knowledgeable permabears can knock them down. In a way your response was typical - I get called a realtor alot...saying its "fake data" is rare, but I get it sometimes...now the alter ego (Lad) thing is new - nice one. But heres the thing...so far, no one has been able to poke a hole in what I see as far as the data goes...many just lash out, or go silent...its depressing for them to see it aint gonna happen.

So thats the whole truth to it. So I now offer this opportunity to you - my new pet project. Want to wipe that smug grin off my face, look at the data, read what I wrote, and show me how it is wrong. I do enjoy a spirited debate - but generally a professional one as well - Cheers!

Jaso