Looking Back | Bubble Trends
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December 31, 2005
Fusion Charting Loudoun County 2003 - 2005
Several weeks ago I said I would provide trend charts for the sales statistics for Loudoun County. They are finally here for 2003 through 2005. First, a note about the requirements for your browser to view them:- Java scripts must be enabled.
- The Shockwave-Flash plugin must be installed
(if you don't have it, you can get it here: Macromedia Flash). - If you get "Error loading data" with Firefox, click the "Average Price Analysis" button at the bottom of the chart area.
- Report any problems viewing these using the Comment feature. This is an experimental installation at this point and we may not have found all the quirks.
- Average Price Analysis:
- The blue line is the average price on a monthly basis for residential property in Loudoun County.
- The green line, centered at $300,000, is the rate of change of the Average Price. Above the center line is a positive rate of change and below the center line is negative (e.g. decreasing prices).
- The red line is Momentum centered around $0.00. Think of this as stepping on the gas (+ Momentum) or brakes (- Momentum) in a car.
- To carry the car analogy a bit further: the blue line is distance, the green line is speed and the red line is acceleration (or deceleration).
- Inventory Trends: There are three lines: Total Active Listings (green), New Listings (blue) and the sum of Sold plus New Under Contract (red) on a monthly basis.
- Days on Market: Straightforward, average on a monthly basis.
- Sales to List Price Ratio: Also self explanatory. It looks like wide swings but keep in mind the scale is very narrow.
You can draw your own conclusions about what you see. There are definite patterns, especially in the inventory charts. Buyers started disappearing last July and sellers were on a listing frenzy from last March to September (notice the sudden downturn). The result: a huge inventory bubble, almost twice anything we have ever experienced before. It appears to be moderating with the December data but it is too soon to really tell.
Another interesting pattern is the Days on Market is back to what it was at the beginning of 2003. The Average Sale to List ratio (%) has dropped 3% from a peak last March.
What does all this mean? For one, the volatility the last nine months has been significant (see the wide swings in Momentum). There are many rationalizations to try to explain what is happening and I have given several of them in previous articles. What is important is to look at the past and try to make some judgement about the future. This we do know:
- Real estate goes through cycles like everything else in our economy;
- 20% to 30% appreciation rates are not sustainable and now it is correcting like markets do;
- Rising interest rates are helping to cool the market;
- Investors over speculated and now contribute to the inventory;
- Home builders are starting to slow the rate of new developments (although, looking around Loudoun we see a many new developments starting);
- Buying and selling is emotional, the BUBBLE talk is causing caution.
In the first half of 2005, prices appeared to be swirling almost out of control, as eager buyers bid up the prices, waived their rights to home inspections and even penned pathetic little notes pitching themselves as the most attractive purchasers to picky sellers who acted more like they were giving a child up for adoption than conducting a real estate transaction.So, this is my final Hurrah for 2005. Market dynamics are intriguing. I'll keep watch and these charts will evolve over time. The second version is on its way charting the last six years (2000 through 2005) with some moving averages and other fun stuff. Also, these will be updated monthly, probably add a month and remove the oldest. Other things I have in mind is to be able to slice these by various time and market segments (such as zip code and price range).
Its been one heck of a year for Pam and I. We enjoyed it immensely. We hope you have enjoyed our blog. I think it is here to stay.
Happy New Year!
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