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Sunday, December 11, 2005

Loudoun County housing bubble just "ran out of stupid people"

From Business Week:
Psssssfffffft. That's the sound of the air finally leaking from the real estate bubble in Loudoun County, Va. Since 2000 it's been the nation's fastest-growing county, where eager homebuyers always seemed to outnumber happy sellers. Until now.

Bob Semmens, a 60-year-old retired pressman, has heard that sound. After he offered up his 3,000-square-foot colonial, with three acres and a swimming pool, in early July for $759,000, he sat back to wait for the frenzied offers. A year before, houses had remained on the market for just 20 days and were snapped up in bidding wars. But "very few people were even coming out to look," Semmens recalls. After four months, he was about to take the house off the market until next spring. But then he struck a deal -- for $620,000, an 18% price cut. Semmens rues his bad timing: "Just at the time I was getting the house on the market, everything really started to slow down."

By October, agents had 2,908 existing Loudoun houses on the market, an increase of 127% over a year earlier. The average time on the market had climbed 62%, to 42 days, since the fall of '04. And in just two months, from August to October, the median sales price for houses dropped from $506,100 to $480,000. In kitchens and coffee shops from Purcellville to Leesburg, anxious homeowners swap stories about a market rapidly going soft: The real estate agent who gets 10 to 15 e-mails a day from developers now offering price cuts of $10,000 or more to move new houses. The sign installer who's putting up three "For Sale" signs for every two that he takes down.

What's happening in Loudoun is a rapid shift in psychology -- a classic sign of a market turn. The buoyant optimism that fueled speculation and expectations of ever-rising prices is now succumbing to the fear of being left standing when the music stops. Real estate, the hottest play of the century in Loudoun, is rapidly cooling.
And of course, my favorite part:
Loudoun's real estate community insists the market is merely reverting to a more normal state. "We're coming back to more of a balance," says Karen Overheu, a Long & Foster Realtor with listings in Loudoun County. "You don't have to make up your mind [about buying a house] in an hour or risk losing it to someone else. It's a little insane to have it the other way."

There's another explanation, says insurance agent Joe Kelly over lunch downtown at the Leesburg Restaurant. "They ran out of stupid people."


Blogger GOPHokie said...

"Ran out of stupid people"
Greatest quite ever regarding the real estate market.

10:42 PM

Blogger Shaun Kenney said...

Perhaps, but homes in Fredericksburg are still selling "from the low 700's."

Low 700's?!

I tend to agree with the temporary cooling theory rather than the bubble bursting. After all, more jobs, fewer (affordable) homes, and they're all big monsters on 5 acre lots.

As soon as localities start approving and developers start building townhomes again, the market is going to get hot again... watch. Six months at best.

12:30 AM

Blogger Bwana said...

This comment comes from Burke, VA, in the belly of the housing beast...and think that you should consider the following ideas:

A) The NoVA real estate market always cools down in the late summer through winter...folks with children want to sell or buy or move in the spring or over the summer so they don't have to yank their children out of school.

B) Loudoun and SW fairfax have experienced continued home building, so supply is/has caught up to demand. The value that comes with these home in Loudoun is that you pay high $$ for a large home where you can relax after a soul killing commute. You room, wine cellar, etc. However, from PWco to loudoun that type of home is what is primarily beign built these days, and the supply/demand curve is leveling.

C) With really limited public transit, and a road system that is choked, there will always be a hot market for homes in close, and that matter of location, location, location will keep the close in market hot every spring.

Example-we were fortunate in getting the home we have, and depending on traffic I can be from doorstep to doorstep home to work in 25 minutes...which stinks for the Shenandoah Valley, but is great for the DC area. However, our home is not a mcmansion, but a basic single family home built in 1980. We don't have fancy amenities and media rooms and wine cellar...but I have a short drive to work.

So I suggest that before we get around to completely buying into the idea of a collapsing housing market in Northern Virginia, we have to wait until spring 2006 and see if teh seasonal fire lights back up.

9:06 AM

Blogger John K. said...

Good points all, bwana. Note, too, that Arlington County just approved a new set of lot coverage restrictions that likely promise further exhaustion of land available for development. In the longer term, this can only drive up home prices....

11:05 AM

Blogger GOPHokie said...

The key here is that we have now seen a price decrease. That has not happened in at least 5 years. This will start driving out investors (since the stock market is doing better now too) and could continue to hurt prices.
I don't think the market will collapse, I just think its not going to continue to grow like it has.

11:22 AM


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