I HATE that Marty beat me to this, as I’ve been meaning to write about this for some time, but he did it anyway. I’ll just go on record and say that the reason I’ve been delayed in getting to it is because our market is so much better than his!
Anyhow, Marty Martin did a great post today about the real estate bubble and it’s effect on Roanoke. His take on the soapy, gooey mess we call a bubble? He feels there isn’t one! And he’s right!
Full disclosure – I’m in the real estate business and so it’s important to me that we stay ahead of trends, as well as that my team prepares for the ups AND the downs. But the two Valleys (Roanoke and the New RIver) just haven’t seen the doom and gloom the national media is shouting, or the rising property taxes that uber-fast-developing (spell check didn’t like that one) areas are experiencing. Case in point – talked with an owner in FL today who just received a tax bill in the amount of $6000! There just wasn’t enough in escrow to cover the rising taxes … it’s a big mess, and one contributing factor in a disturbing trend.
All the more reason why we love our area, and why rising property taxes – when handled in an intelligent manner – are actually good for our community. Now … where did I put that bottle of bubbles?
You’re exactly right – I don’t think we’ll see a big fallout on defaulted mortgages. Now go find out where that house is! 🙂
You’re exactly right – I don’t think we’ll see a big fallout on defaulted mortgages. Now go find out where that house is! 🙂
Nice work Jeremy. Some of these stats (ie. 1, 2, 4) I’ve seen specific numbers in larger metro areas, (ie. Phoenix, NoVa, Boston). I think being a larger area means these numbers are watched more carefully and thus more easily available. I’ve also seen these stats tracked over time, which is really the only way to track the bubble-ness. One more stat, while we’re obsessing (feel like I’m talking baseball now, must be spring fever): the foreclosure rate. From foreclosure.com, it seems the number is currently pretty small, but I’d be curious how this looks over the last 10 years (as with all these). Some markets (SoCal, Denver) are going to get hammered as people start defaulting. I doubt that will happen here, given our relatively low housing prices and relatively high incomes.
Nice work Jeremy. Some of these stats (ie. 1, 2, 4) I’ve seen specific numbers in larger metro areas, (ie. Phoenix, NoVa, Boston). I think being a larger area means these numbers are watched more carefully and thus more easily available. I’ve also seen these stats tracked over time, which is really the only way to track the bubble-ness. One more stat, while we’re obsessing (feel like I’m talking baseball now, must be spring fever): the foreclosure rate. From foreclosure.com, it seems the number is currently pretty small, but I’d be curious how this looks over the last 10 years (as with all these). Some markets (SoCal, Denver) are going to get hammered as people start defaulting. I doubt that will happen here, given our relatively low housing prices and relatively high incomes.
I love readers that are smarter than me! It’s a long list, admittedly, but still! Once again Ryan brings up excellent points – I’ll try to respond with some sort of intelligent thought.
1) As I mentioned in the Beazer post, I have not personally seen a subprime loan in the last four years. Doesn’t mean they’re not there, but nonetheless I have not seen one so my sense is that they are not prevalent.
2) Lots of alternative programs like ARM and piggyback loans, those have been very popular in the last several years as they allowed buyers into homes they might not normally afford. This is the one thing I’ve been saying for the last year or so that might be a real cause for concern, there are going to be a lot of refis as those short term rates – usually tied to the second loan – climb.
3) The Montgomery County Economic Development folks have household income in the year 2000 as $47239 – adjust that by 8% (the average increase between 1995-2000) and that would leave median salary in 2005 at ~ $54797. If you look at the average sold price of homes just in Montgomery County you’ll find it to be ~ $215000, so the ratio of housing price to income – if I’m doing the math correctly – would be almost 4:1.
4) Who knows?
5) Through Feb 07, across all product levels, we’re looking at about 15 months. Identical to Jan 07, up 2 months from Dec 06, and up 5 months from this time last year.
6) Again from the Montgomery County Economic Development Alliance, because MontCo is representing approximately 50% of the available workforce … there was a 5% increase in the number of jobs between June 05 and June 06, and a 10.2% increase in the number of residents between 1998-2002, the smallest measurable period on record with the Alliance at this point.
I love readers that are smarter than me! It’s a long list, admittedly, but still! Once again Ryan brings up excellent points – I’ll try to respond with some sort of intelligent thought.
1) As I mentioned in the Beazer post, I have not personally seen a subprime loan in the last four years. Doesn’t mean they’re not there, but nonetheless I have not seen one so my sense is that they are not prevalent.
2) Lots of alternative programs like ARM and piggyback loans, those have been very popular in the last several years as they allowed buyers into homes they might not normally afford. This is the one thing I’ve been saying for the last year or so that might be a real cause for concern, there are going to be a lot of refis as those short term rates – usually tied to the second loan – climb.
3) The Montgomery County Economic Development folks have household income in the year 2000 as $47239 – adjust that by 8% (the average increase between 1995-2000) and that would leave median salary in 2005 at ~ $54797. If you look at the average sold price of homes just in Montgomery County you’ll find it to be ~ $215000, so the ratio of housing price to income – if I’m doing the math correctly – would be almost 4:1.
4) Who knows?
5) Through Feb 07, across all product levels, we’re looking at about 15 months. Identical to Jan 07, up 2 months from Dec 06, and up 5 months from this time last year.
6) Again from the Montgomery County Economic Development Alliance, because MontCo is representing approximately 50% of the available workforce … there was a 5% increase in the number of jobs between June 05 and June 06, and a 10.2% increase in the number of residents between 1998-2002, the smallest measurable period on record with the Alliance at this point.
Wow….if I said that rising property taxes were good for our community in Tampa I would be beaten, tarred, and feathered.
If they could get past my ninjas, that is.
One problem with our area, however, is the lack of statistics to really back up our observations. A few key indicators that would help us know how much of a bubble we are or aren’t in:
1) The number of subprime mortgages being used
2) The number of alternate mortgage packages being used (ARM, interest only, balloon, etc.)
3) The multiplier of housing price to household income
4) The number of out of state and out of region homeowners
5) The number of months of housing inventory
6) Job growth versus population growth
Also, it doesn’t help that we have several micro-economies; for instance Pulaski and Dublin (which have been hammered by exiting furniture and manufacturing jobs) have a totally different economy (and housing markets) than Blacksburg and Christiansburg, but they get dumped into the same set of stats.
One problem with our area, however, is the lack of statistics to really back up our observations. A few key indicators that would help us know how much of a bubble we are or aren’t in:
1) The number of subprime mortgages being used
2) The number of alternate mortgage packages being used (ARM, interest only, balloon, etc.)
3) The multiplier of housing price to household income
4) The number of out of state and out of region homeowners
5) The number of months of housing inventory
6) Job growth versus population growth
Also, it doesn’t help that we have several micro-economies; for instance Pulaski and Dublin (which have been hammered by exiting furniture and manufacturing jobs) have a totally different economy (and housing markets) than Blacksburg and Christiansburg, but they get dumped into the same set of stats.
Wow….if I said that rising property taxes were good for our community in Tampa I would be beaten, tarred, and feathered.
If they could get past my ninjas, that is.