The Metropolitan Regional Information System (MRIS, the group that runs the Multiple Listing Service) has released its Q3 Trends in Housing Report. It’s an interesting read. You can view the full 22 page report here.
– Job Growth: Over the 12 months ending in August 2007, over 47,000 new positions were added-—5.8% above the 15 year average. Interestingly, all of the government job growth came from local governments, not Federal. The local unemployment rate dropped even further, to 3%, the lowest in the nation for any major metro area. Even more jobs are expected to be created in 2008.
– Residential housing market – “remains in an adjustment phase at 3rd quarter 2007, though there are signs of creeping back towards equilibrium….Average metro-wide prices in July and August were more than 4% above prices the same time last year…The average days on market has consistently declined since the beginning of the year.” This next part is critical: “But the gains are uneven, with desirable areas inside the Beltway showing strong price gains and shorter listings, while the reverse is generally happening as distance from Washington increases.”
– Outook: “By spring 2008 we expect that consistent demand (generated by steady job growth, net migration, and a rising immigrant population) and a decline in construction will stabilize pricing, leading to an uptick in sales activity, with improvement in market conditions appearing by summer.”
So what does this mean? A few points:
Not surprisingly, and consistent with other posts I’ve made, the job market is a huge driver of where the real estate market will ultimately head. More jobs = either a) more people moving to the area or b) higher salaries (more employers competing for the same employees), or some combination of both. People with higher salaries are more likely to buy, and people moving to the area need a place to live, whether it’s renting or buying. (More demand for rentals will translate into higher market rents, which will in turn make buying a more attractive option.) Either way, it’s going to result in an uptick in housing. So if job growth is good, eventually the real estate market will follow.
Next, the point about uneven gains is clear to anyone who has been tracking specific neighborhoods in the past year. All those foreclosures and short sales you read about? The overwhelming majority of them are in the outlying suburbs – Herndon, Leesburg, Woodbridge, and similar areas.
But what about 1BR condos in 22201 (that includes Ballston & Clarendon)? So far in 2007, the average 1BR condo stayed on the market for 40 days. In January, the average 1BR condo in 22201 sold for $305,644. By August? $363,252. Granted it’s come down a bit since August, to $320,183 in October, but if you’re waiting for 1 BR condos to bottom out in the orange line corridor, you just may have missed it. (Side note – January was the lowest price of any month in that zip code in 2007, and not surprisingly, since fewer buyers means more negotiating leverage. Implication: This is a great time of year to get started with your search!)
My point isn’t that you should try to time the market down to the month, but rather to take a more macro view that the coming months are in fact a good time to buy. If you don’t buy in a buyer’s market, when should you buy? Never? I doubt you believe that or you wouldn’t be reading this post.
This too, like any other buyer’s market, will eventually turn to a seller’s market. The tricky thing about changing markets is that you don’t know when it changed until long after the fact. It’s not like the Post will suddenly have a headline that reads “Real Estate Market Bottoms Out This Month.” Think longer term, and if the circumstances of your life have you thinking you want to buy, pick the one or two neighborhoods that you’re interested in and really dig into that data to see whether the micro trend reflects what you’ve been reading in the papers. Then make the “buy or wait” decision. You may find that what you “save” by waiting isn’t a savings at all. (see rent vs buy calculator post here – this one has great options that aren’t normally included that allow you to account for condo fees, tax brackets, and rate of return for the alternate use of your funds .) If you’re thinking of buying in Woodbridge though, I’ll save you the trouble: wait.
Data Source: MRIS. All data deemed reliable but not guaranteed.