Hampton Roads Housing/Real estate/and Economy

[Telmnstr]

All the money is coming from soaring salaries and a steady economy. People were gambling that their salaries would go up and rates won't go up too much so that they could switch to a fixed-rate loan once their ARM's initial period ends. That is looking more and more likely every quarter. Also, with oil prices dropping, the housing market cooling off, and exports rising to offset the increase in salaries (since productivity has little room for improvement), inflationary pressures are subsiding. Therefore, the Fed should hold off on more rate hikes (as they did today) which means fixed-rate loans will be within reach of most ARM holders. Some analysts even think the Fed may start lowering rates by next year. Again, I'm not saying that prices will go up. All I'm saying is that the housing market isn't going to collapse leading to significant drop in prices. Probably a 5% correction as the assessed price and the market price come into equilibrium, but not a bubble burst.

On a national level, salaries have not increased since 2001 when adjusted for inflation. I don't know about you, but I haven't seen that much traction in salary gains. The company I was contracting with, one of Hampton Road's 25 fastest growing companies laid off a bunch of people. So I took a new job at one of the regions high technology, high research center and their offer was lower than what I was getting, which wasn't stellar. Meanwhile I was getting calls every day from recruiters trying to get me out of the area.

I hate to say it, but the companies do _not_ pay that well in this area overall, outside of the gov't contractors. Trader is a sweatshop. Housing basically needs to fall about 40% to come back in line with salaries. Also, I have a huch that the $60K household average is off, because navy guys aren't recorded in that figure (they don't make it into the local arbitron ratings, either). To save the US Dollar, the fed will need to raise rates, which will nuke lots of borrowers. Also, fixed rate loans aren't going to be in reach of ARM holders ,because their properties won't match appreciation! You see the stuff in Chicago where condos are 20% down? Yikes. Equilibrium is 40%-50% drop. I actually made it onto a talk radio show the other day (local, 850AM) and the guy said the same thing that you just said. He is a realtor salesguy, and was giving out really really bad advice. As soon as the investors start loosing money on all the subprime loans, then the subprime loans will be gone, and the market will just die.

It's already happening. The faster it crashes, the better it will be for Hampton Roads.

Make no mistake, the cost of living is having a negative impact. Right now homeowners feel rich because they see the paper gains, and some are extracting it to buy vehicles and vacations and home depot out their houses. That is where the positive energy is coming from, and the money for consumer spending. Not from salaries.

I **CANT WAIT** for the market correction. Bring it ON! Even though they spun all my arguments back to positive in that call, it felt so good... Given the chance to speak, I could combat every "RE never goes down" argument they had.

What does this say to you?

[hoobo]

I started writing a rebuttable, but as I did it I ended up with good arguments in my favor and good arguments in yours. And although there are a lot of similarities between this housing boom and the late 90's tech boom, there are also a lot of differences. As long as the home building boom has ended, then at least supply has been significantly reduced from the new home side of the market. I don't disagree that market prices (read: different from assessed values) won't go down. But only 5-15% in most markets with good economies. Rust belt areas will see more but that's because of the economic downturn there while investment crazy areas like Vegas, Miami, and SD might approach the 40-50% you predict, although I think 25-30% may be more likely. But with metro populations growing and suburbs expanding further away from job centers, either the job centers will decentralize or people will compete for housing closer to work. The latter is part of the run-up right now and I believe it will remain propping up home prices. I guess we'll see in 1, 2, maybe 3 years who's right. Also, just found yet another fun tool: the Chicago Merchantile Exchange has a housing price futures index available for trading. It started earlier this year. Very entertaining. There are also futures for snowfall in NY and Boston.

Edited September 25, 2006 by hoobo

[spiker3]

The quality of the market is signified by the little things too:

Drove past Bobby Wright's 400 Granby St lofts (building with Baxters in it), on the back of the building is a GIANT banner with the phone number and website, with this little tidbit across the bottom:

INVESTORS WELCOME!

I knew they hadn't sold out yet but wow. The Weltons i don't think sold out either, nor did the new building next to Scotty Quix. But for the craze of condos in downtown, not exactly a good sign. Of course the fact that asking prices are over 350K have alot to do with it too. There's also the slew of projects announced during the climax of the housing boom that aren't likely to come to fruition, the Kiterides (i know i didnt spell that right), the Hoffler Tower, etc, they were announced in February but i dont like the odds of them being built in the current market. The condo market is going a bit too soft, i think the high end luxury market is still stable, evidence from Westin and Granby point to that, but the medium range 250 - 400K market simply isn't strong enough in this market right now. Look at Harbor Walk in Ocean View that just cut their prices because demand wasn't strong enough. I think this is gonna become a trend around the area, developers announced a project at the upper 200s, becomes starting at $250K closer to completion then $225K at constructions end to fill the building. Supply is going to blow demand out of the water once these projects complete, and then the prices will have to come down or investors are going to lose money by the truckfull. Real estate may never go down, but condos most assuredly do, they're the first to go and last to rise.

[urbanfan]

The quality of the market is signified by the little things too:

Drove past Bobby Wright's 400 Granby St lofts (building with Baxters in it), on the back of the building is a GIANT banner with the phone number and website, with this little tidbit across the bottom:

INVESTORS WELCOME!

I knew they hadn't sold out yet but wow. The Weltons i don't think sold out either, nor did the new building next to Scotty Quix. But for the craze of condos in downtown, not exactly a good sign. Of course the fact that asking prices are over 350K have alot to do with it too. There's also the slew of projects announced during the climax of the housing boom that aren't likely to come to fruition, the Kiterides (i know i didnt spell that right), the Hoffler Tower, etc, they were announced in February but i dont like the odds of them being built in the current market. The condo market is going a bit too soft, i think the high end luxury market is still stable, evidence from Westin and Granby point to that, but the medium range 250 - 400K market simply isn't strong enough in this market right now. Look at Harbor Walk in Ocean View that just cut their prices because demand wasn't strong enough. I think this is gonna become a trend around the area, developers announced a project at the upper 200s, becomes starting at $250K closer to completion then $225K at constructions end to fill the building. Supply is going to blow demand out of the water once these projects complete, and then the prices will have to come down or investors are going to lose money by the truckfull. Real estate may never go down, but condos most assuredly do, they're the first to go and last to rise.

I do know that Kotarides is not a Condo Development. It is strictly apartments. Not sure about the Hoffler tower though.

[rusthebuss]

I do know that Kotarides is not a Condo Development. It is strictly apartments. Not sure about the Hoffler tower though.

That is suppose to be apartments as well.

[spiker3]

My point was simply that for a year there were project after project announced, yet nothing's really been heard since the announcement. 201 21st St is at least going before the commission, but what about the Ellington, 12 condos on the corner of Hampton Blvd and Redgate? That was supposed to be finished by this December, but that project went idle and now it's no more. How many fantastic projects were announced but not going to come to light? The large tracts of SFH will more than likely be developed, but it's always the condo projects that get scrapped first. That's why, in my opinion, we were concerned and frustrated with Granby Tower. Knowing how the market was going, the likelihood of the project getting off the ground decreases as time goes on. Thankfully it is finally moving forward but what about these other projects? I think the SFH market is leveling out, inventory is increasing but still moving along, but the condo market is going to go stagnant in a hurry. Westin has sold out of their lower range condos, the remaining few dozen are in the 600 - 900K range. But besides new construction, the condo market is very slow right now. Drive around Ghent and West Ghent and you see For Sale and FSBO signs on every street. I'm not a bubble-monger like Tel, but i'm skeptical as to the market in general, but especially the condo market.

[vdogg]

Brambleton and Hoffler are pretty much sure bets. Hilton wasn't anywhere close to a sure bet but is now. 201 as you alluded to is going before the planning commission. Cosmo 418 has run into resistance from the planning commision and that is the sole reason for that delay. Ghent South, which we received an update from vtfan about a month ago, is still in the predevelopment phase and is moving forward. Due to its hotel, condo, office mix its on much more solid ground than these other projects. The Spectrum at Willoughby Pointe is fully under construction now. Most of the projects announced are currently moving forward in some form. Since they haven't been built yet, we have yet to reach that oversupply that you allude to. I think the biggest contrast you'll see in the slow down is not in currently announced projects, but in the number of projects announced from here on out. They will likely be smaller with fewer amenities, or a different mix all together with maybe condos accounting for 10-20% of a project vice the 50 and up we've become accustomed to. You'll likely see much more emphasis on apartments as well (I think we're already seeing that shift). Btw, like Brambleton and Hoffler, 201 twenty one will also be all apartments.

[Telmnstr]

I started writing a rebuttable, but as I did it I ended up with good arguments in my favor and good arguments in yours. And although there are a lot of similarities between this housing boom and the late 90's tech boom, there are also a lot of differences. As long as the home building boom has ended, then at least supply has been significantly reduced from the new home side of the market. I don't disagree that market prices (read: different from assessed values) won't go down. But only 5-15% in most markets with good economies. Rust belt areas will see more but that's because of the economic downturn there while investment crazy areas like Vegas, Miami, and SD might approach the 40-50% you predict, although I think 25-30% may be more likely. But with metro populations growing and suburbs expanding further away from job centers, either the job centers will decentralize or people will compete for housing closer to work. The latter is part of the run-up right now and I believe it will remain propping up home prices. I guess we'll see in 1, 2, maybe 3 years who's right. Also, just found yet another fun tool: the Chicago Merchantile Exchange has a housing price futures index available for trading. It started earlier this year. Very entertaining. There are also futures for snowfall in NY and Boston.

Yes I remember the announcement of the housing futures trading system. Boston is hurting. They have a net outflow of people every year.

In regards to rust belt cities, I read a bit about Pittsburgh, one of the rust belt cities that was hurting. It is my understanding that they have not had high speculative purchasing leading to rapid deterioration of affordability for locals. And on top of that, they may actually continue to grow well. This is due to schools and lots of young people, and lots of aging folks who will fund medical. There is also a decent amount of research in the area (not sure if this is due to CMU or what). I've been there a few times, didn't seem to bad to me.

If you look at Ralleigh, they have a GOOD tech sector (even though it was hurt badly by the .com crashes.. Nortel). Their houses are still affordable given salaries. They have RedHat, and RedHat money working on new things (Bob Young). I understand North Carolina is starting to battle Hampton Roads in regards to recruiting companies. I bet Ralleigh/Durham would be a better bet than Hampton Roads for any technology company, given cost of living, i95 access, etc.

Back to the situation at hand... (compton and long beach, I know you understand it ain't nothing but a G thang baby... err okay I'll stop). My 30-40% numbers are simple. Housing should be priced around that of 2001 + 3.5% a year. Salaries have not increased that much overall to support the market. Main stream media has caught on, and there is lots of attention turning now. It's going to unravel pretty quickly. Look at the unemployment article in the Pilot. The #1 employment gain is construction. This is largely responsible for employment gains since 2001, and when the building stops so do the jobs. This is the good news! Many of the large builders are public held companies, so they need to continue to produce product to produce profits to satisfy shareholders. So this very well might drive them to continue building and lowering prices. We haven't seen the $100K and $150K price cuts on product here yet, but it's out there in other markets. We will be after the other markets, just like our run up.

I just look at salaries and costs of houses. Fundamentals. Inventory is high now, but it will grow. Lots of people are preparing to back out of their purchases. Buying a house didn't used to be regarded as "I'll just pick one up now, sell it in 2 years and get what I really want instead of renting." There are transaction costs, and a bunch of other stuff.

Anyways. More things to reply to!

[Telmnstr]

out, inventory is increasing but still moving along, but the condo market is going to go stagnant in a hurry. Westin has sold out of their lower range condos, the remaining few dozen are in the 600 - 900K range. But besides new construction, the condo market is very slow right now. Drive around Ghent and West Ghent and you see For Sale and FSBO signs on every street. I'm not a bubble-monger like Tel, but i'm skeptical as to the market in general, but especially the condo market.

Condos are always the first to go. Let's face it, the american dream (as created by the mass marketing people) is a yard, a fence, a single family home, a garage, a car, a dog, kids, etc. I fail to see the advantage of a condo over an apartment. Your governed by an association. Often times the fees are very high (depends on the condo). Your sharing walls. In our market, they are very very expensive.

I moved to downtown Norfolk because I worked down here. But now the job laid off, and I wasn't happy there anyhow, so my next job has me in Newport News. I want to continue living here, but commuting out of downtown is going to be a hassle. JFCOM might have been easier, but I understand the tunnel is a hassle. And for anyone that moved out near JFCOM, if they work somewhere else the commute is rough. The work spots for us tech people are all over the place, and jumping jobs is common (it's one of the only ways to get a decent raise, plus the contracts always come and go).

I don't mind the apartment (which I consider idential to a condo in some ways)... but I need a garage, BADLY. And not just for cars. I don't really care about a yard as much as noise isolation... but the way I look at it, the condo fees are more than lawncare + maid service in many regards (not that I would get a maid).

*shrug*

I bet if the condos priced themselves lower, they would move them quickly. But they are priced above what people can afford (when not using funky loans). And the builders can't lower the prices too much, because the land owners want megabucks. The land value has to collapse first, then perhaps builders could profit on making condos and sell them cheaper.

Like I said, people haven't grown that much richer since 2001. It's just the messed up lending that has allowed things to play out like they have. As someone who is making above the median household income in Hampton Roads, there is *absolutely* nothing I would consider buying in this market. It's stupid. Prices are out of line with the product. There is nothing that makes anything that much more valuable than 2001.

I'm tempted to look into buying commercial, and converting part to residential. I'm sure the cities will fight it though.

[hoobo]

Dude, Raleigh has RTP the land of IBM (now Lenovo), Pfizer, Fidelity, and soon Novartis among others. There's also RBC and Progress Engery downtown. Not to mention 3 major universities. And Raleigh has been going after tech for 30-40 years now. So I think Raleigh has a slight edge on HR even with Jeff Labs, Langley, and the M&S industry.

[Telmnstr]

You just don't give it a rest do you? Its going on the old Farm Fresh site and not the Levins site.

I emailed someone and hopefully will get some info that I desire.

Most of these developments are not for the avg. family. This is for some of the high end that has been lacking in this city.

The levins mix up came because Levin's apparently has permission to park a very large truck on the site, perhaps for advertising purposes when the truck isn't making deliveries. I know exactly where the site is now!

[Telmnstr]

Here we go again. The article stated that rents have not yet been determined but that luxury apts were going for $2000. That is probably for 3 bedrooms. The TC Cosmo rents 3 bedrooms for between $2000-2300. People renting for that much are either groups of young professionals so yeah, their combined household income would approach $150,000 or more or they are well-to-do singles/couples who believe they can do better with stocks than property.

I'm sorry, I just don't see the market. $2000/month in rent would generally assume a take home pay of $6000. I think it is a field of dreams. I just did a poll on the chat room of my friends, and one of them swears they will easily rent them, with 8 or so ODU students in each unit. Recalling what it took for two friends and myself to rent a SFH in Virginia Beach, they are NOT friendly to frat houses. We were responsible, kind dudes. Even with my lasers, and my roomates 2000 pound industrial robot arm. Oh and over 100 computers. Man those were the days.

Back to chat:

23:09 < koft> "You've just got too much wood chasing too few orders," said

Cunningham.

23:09 < koft>

http://today.reuters.com/news/articlenews....ment_n_analysis

23:09 <@Ganon> Title: Housing bashes lumber price despite U.S.-Canada deal {sodEmoji.|}

Reuters Recommends {sodEmoji.|} Reuters.com (at today.reuters.com)

23:10 < koft> hey tele, now you can make a post about how the housing bubble is

causing builders to loose wood

23:10 < telmnstr> hahaha... done

[rusthebuss]

Is that all your brain is programmed for? You can't talk about anything else besides this so called housing bubble.

[spiker3]

Worrying signs in state of the region report

A slowdown in the surge of defense spending in Hampton Roads and the closing of Ford's truck plant next year will hobble economic expansion in the region, forecasters at Old Dominion University warned in the university's annual State of the Region report.

"All things considered, our economic prospects for the remainder of this decade are much less favorable than they have been over the past few years," the forecasters said in a sobering assessment of the region's prospects. "The 'good old days' have passed."

and just for tel...

In its analysis of real estate activity in Hampton Roads, ODU's forecasting team - led by Vinod Agarwal and Gilbert Yochum - warned that the increase in home prices in the region will slow sharply, in part because the impact of higher housing allowances provided to military households has already taken effect.

When measured against such fundamentals as household incomes, jobless rates, building costs and mortgage rates, the average house in Hampton Roads is over priced by 20 percent, the economists said.

[vdogg]

^^^ About the only thing that report is missing is a swarm of locusts and the plague. Should we start gathering 2 of each animal?

[spiker3]

^^^ About the only thing that report is missing is a swarm of locusts and the plague. Should we start gathering 2 of each animal?

i thought it did seem rather alarmist, the pilot is usually the one pushing the, the nation sucks but we're still good image too. But if it comes to killing our first born, then we know something's really wrong in the market

[urbanvb]

.

This chart really speaks volumes. We are almost at 1996 levels.

[hoobo]

This chart really speaks volumes. We are almost at 1996 levels.

HR can't sustain 6% annual growth. Unless it is a developing nation.

[Telmnstr]

I don't like the ODU guys either. They already released a report that said that there would be no declines in home prices in Hampton Roads. I don't trust schools at all. Harvard released a report that said, basically, that there is no bubble and there will be no price declines and everything is hunky dorey. when you dig to find out who funds the group that released the report that is quoted everywhere, it's all realtors and home builders. Seriously! Not an independent study at all. I swear the guy from Rose & Womble was saying his son was involved with the report. The guy on the radio on Saturday mornings.

Crazy world man.

[erdogs]

.

This chart really speaks volumes. We are almost at 1996 levels.

Atleast it's not the rollercoaster we were on in the 90's. I wouldn't start panicking just yet.

[Telmnstr]

Is that all your brain is programmed for? You can't talk about anything else besides this so called housing bubble.

Unfortunately, it's a big part of my life. Wages haven't moved much since 02 or so (just got a new job at a pretty hardcore place)... but with the cost of living increases, it's killer. I read up on it after asking myself "What justifies these sudden huge increases in prices? I can't think of anything that is changing." I didn't know at the time it was lax lending standards. After reading quite a bit about it, it is pretty obvious how bad it is for our country, and it amazes me that the main stream media and others haven't called it out. Of course, NOW the federal government is looking to take action, but it's a bit too late.

I do pay a bit of attention to the goings on of Hampton Roads, and know a bit of it's history, having lived here for 30 years (all my life).

[Greekboy80]

Unfortunately, it's a big part of my life. Wages haven't moved much since 02 or so (just got a new job at a pretty hardcore place)... but with the cost of living increases, it's killer. I read up on it after asking myself "What justifies these sudden huge increases in prices? I can't think of anything that is changing." I didn't know at the time it was lax lending standards. After reading quite a bit about it, it is pretty obvious how bad it is for our country, and it amazes me that the main stream media and others haven't called it out. Of course, NOW the federal government is looking to take action, but it's a bit too late.

I do pay a bit of attention to the goings on of Hampton Roads, and know a bit of it's history, having lived here for 30 years (all my life).

Yeah, but this morning in the pilot there was an article about the top 100 markets that "experts" were ranking that were going to fall victim to the "housing bubble" and nowhere in hampton roads was on the list....

[Padman]

We're not among the worst "bubble" markets, but the coastal effect seems to have raised our prices somewhat more than markets like, say Richmond. Our economy has not been especially robust lately either. So we should expect some drop in home sales and prices. The next few years might be good for military related technology and other fear driven industry though. The Census Bureau just released a study indicating that many more households are spending over 30% of their income on rents and mortgage paymants, so housing affordability is a growing national problem.

[Greekboy80]

We're not among the worst "bubble" markets,

Nope, and from that article, not even close. At the bottom of that list were the "average" markets. Were not even close.

[hoobo]

I'm sorry, I just don't see the market. $2000/month in rent would generally assume a take home pay of $6000. I think it is a field of dreams.

Ok, so after taxes, you would need 3 people who earn about $30,000 a year. Are you telling me that these people don't exist in HR? Even factoring in a 20% pay cut to work in HR, I would fit that profile and I'm a civil engineer, not the highest pay job out there. A physician's assistant or nurse practitioner grosses between 65-80 out there. Accountants/financial analysts fit the bill too. As would other engineers especially electrical and mechanical. I'm just trying to throw some examples. It's not a question of can but of want. Do you want to pay $700 for a room when you can probably pay less elsewhere even in the same neighborhood? Would you rather pay for luxury and convenience or save your money for something else?

Also, Padman is right about the coastal effect. Wilmington, NC, Charleston, Savannah, and Jacksonville all are in the same price range as HR. Wilmington and Charleston are more expensive than other more economically rich parts of their respective states. HR and Jacksonville, though, are more or less in line with their states and they are major job centers. If prices are too high in Wilmington or Charleston you can move to less expensive Raleigh, Charlotte, and Columbia which also have more jobs. But with HR and Jacksonville, there really aren't any less expensive places in their states to go which have a lot of job opportunities. You're kinda stuck. So I can see Wilmington and Charleston dropping before HR and Jacksonville do. And Tel, you're my proof. If things are so bad for you, Raleigh is only 4 hours away.