Jonathan Miller, CEO of real estate appraisal and consulting firm Miller Samuel is also a Curbed contributor. Here is his Three Cents Worth column.
The year 2011 is not quite over but I'm calling it a "closed deal" (sorry). I was trying to come up with a name for 2011 as has been my tradition for the past several years:
· 2008: Year the Music Died (Lehman Tipping Point )
· 2009: Year of the First Time Buyer
· 2010: Year of the Short Sale
2011 was supposed to be the Year of the Foreclosure, but the "robo-signer" scandal made that name obsolete.
But a name for 2011 isn't coming so easily. Some of my ideas included:
· 2011: Year That Wasn't a Recovery; or
· 2011: Year That Foreclosures Took a Breather; or
· 2011: Year without HARPing About Mortgage Modifications
For now I think I'll go with:
2011: Year Without Political Housing Debate
As 2011 became the launching pad for political debate with an eye towards the 2012 US election, what has been largely absent from the fray has been intelligent discourse about the challenges facing the housing market. (ie Fannie Mae, Freddie Mac, FHA, Consumer access to credit). Perhaps that's because the DC Metro area housing market has continued to remain one of the best housing markets in the country and the political denizen that "occupies it" therefore does not fully feel it personally (yes I know many of their home states do).
It's important to remember that DC Metro being one of the best US housing markets is a "relative" depiction. In other words, "best in show" means "stable". Here are a few thoughts on 2011, data-wise using the MRIS/RBI treasure trove of stat nuggets:
Sales activity slowing - There were 40,284 sales in 2011 (December 2010 - November 2011), down 11.1% from 45,302 in the same period in the prior year. Although the 2010 federal homeowners tax credit in 2010 wreaked havoc on the data, the takeaway should be that the first half of the year was artificially high sales-wise and the second half was artificially low sales-wise and therefore somewhat of a wash. The year-over-year drop in activity is a direct reflection of the tightening of mortgage lending.
Average Sales Price edged higher - The average sales price was $422,776 in 2011(December 2010 - November 2011), up 2.4% over the same period last year as the mix shifted to somewhat larger properties and new development gained a little traction.
Active Listings fell sharply - The supply of housing fell 17.8% to 12,582 active listings in November 2011, from 15,309 in the same month a year ago. This is 13% less than the monthly average since January 1997. This is a significant year over year drop and is one of the reasons housing prices remained firm (after considering seasonality). I submit that the drop is largely due to sellers holding back from the last 6 months of economic browbeating we have all taken, perhaps waiting for better times to come. In addition foreclosures have been held back as a result of the "robo-signers" scandal a little more than a year ago. Servicers want to make sure they can prove they own the property they are foreclosures before listing them for sales.
Average Days on Market slows - The average property took 76 days to sell in 2011, up from 66 days in 2010. This is consistent with the 10 day increase in the year over year results in November. The decline in active inventory is probably going to press this indicator a little lower in the coming months. The average monthly days on market since 1997 was 66 so the market should now be characterized as "slower." ...And who can blame the average homebuyer? The debt ceiling debate, S&P downgrade of US debt, turmoil in Europe, Congressional gridlock and a whole lot of politicking with the traditional misinformation stream. All that adds up to longer marketing times.
Housing price edging up + sales down + listings down + longer marketing times = stability (i.e. fragile)
Which brings me to the chart.
Although this is not very scientific, I do find it interesting that in the last 4 presidential terms, the housing market was clearly defined by active inventory trends:
Clinton (2) - His second term marked the beginning of the credit bubble (morphed into housing bubble) with the repeal of the Glass–Steagall Act in 1999 that removed the barrier between commercial banks and investment banks. The Dot-com boom was well underway, inventory plummeted and sales activity was surging.
Bush II (1) - The first term saw continued momentum to deregulate the financial markets. Fannie Mae lobbying was at maximum strength and the SEC was effectively neutered. The housing market was in its glory, with prices rising sharply, sales rising and a chronic shortage of inventory.
Bush II (2) - The second term was the beginning of the end of the housing party with a whole lot of denial being used. Yet diminished affordability began to choke off sales volume. By mid-2007 the party was clearly over yet the Federal Reserve and Treasury continued administer a hands-off approach and used the word "Contained" a lot. The Lehman tipping point in October 2008 made the end of the credit/housing boom official nationwide and probably influenced the outcome of the next election.
Obama (1) - The current administration, while inheriting the credit/housing train wreck, has shown little understanding on how to fix what ails housing. Credit has actually tightened and loan modification programs have not been effective. The homeowner tax credit may have stopped housing's precipitous drop (jury still out on that) but it was based on a dated "priming the pump" stereotype of how housing actually works (hint: people need jobs and access to credit).