To help celebrate Independence Day, we decided to look for the right mix of mansions and modest homes in our Nation’s Capital
So far we’ve looked at the mix of home prices in San Francisco and Boston. This month, we’re focusing our gaze on our nation’s capital – Washington, DC. Long synonymous with power and politics, the city designed by Pierre L’Enfant is home to the White House, the Capitol, the Lincoln Monument, and many, many Smithsonian museums. Attractions like these bring flocks of tourists and American history buffs year round, but what’s it like to live there? Are there any affordable neighborhoods where you can rub shoulders with DC elites (and we’re not just talking about the infamous “Real Housewives of DC”)?
If you’re hoping to live near the “DC Cupcakes” shop in Georgetown or be super close to iconic buildings like the Capitol Building and the Supreme Court in Capitol Hill, it might be a bit more difficult to find an affordable place. However, contrary to popular belief, you may actually find a steal in Dupont Circle, Adams Morgan or Logan Circle, granting you easy access to some of DC’s most famous attractions. But if you’re looking for a much more affordable, residential area, you might want to check out what’s east of the Anacostia River. When you’re looking at homes, it’s not just about the median prices in a neighborhood, it’s important to look a bit deeper at the mix of home prices on the market. It turns out that there’s something for everyone in our nation’s capital, whether you want to have the nicest house on the block or be surrounded by mansions.0 comments
In Trulia’s latest American Dream survey, people told us they want to super-size their homes and expect prices to return to their bubble-era highs.
Trulia’s latest American Dream survey reveals that consumer optimism is rebounding– faster than the housing market itself is. Prospective homebuyers are looking at bigger homes, thinking more seriously about buying and optimistically hoping for higher home prices in both the short-term and long-term.
To get American’s take on homeownership, we worked with Harris Interactive to conduct an online survey of 2,205 U.S. adults between May 22-24 and 2,230 U.S. adults between June 4-6. For the full methodology, see here.
The Return of Super-Sized Homes
Remember when Americans started looking for smaller-sized homes after the bubble burst? Well, it turns out that downsizing was not here for good. After a few months of encouraging housing market news, the “bigger is better” way of thinking is making a comeback. Now, 27% of Americans say their ideal home size is over 2,600 square feet–up from 17% in 2011. Furthermore, the “super-sized” house category, 3,200 square feet and up, saw an even more dramatic increase in interest. While just 6% of those surveyed in 2011 expressed desire for a super-sized home, 11% now say they want a home of this size — that’s almost double a year ago.
It turns out that new-home builders spotted this growing appetite for size: the Census recently reported the average home constructed increased from 2,392 square feet in 2010 to 2,480 square feet in 2011.0 comments
The Facebook IPO has made a lot of my Bay Area neighbors very rich, at least on paper. And many more of my neighbors are hoping that Facebook’s IPO will set off a strong wave of housing demand that lifts local prices and finally consigns the housing bust to history. And I say to my neighbors: be careful what you wish for. Rarely are there winners without losers. Here’s what Facebook’s IPO – and the strengthening local economy – mean for the Bay Area housing market.
Over the past year, house prices have picked up and rents have been booming in the “Facebook Metropolitan Area” — the 10-mile circle around the Facebook’s Menlo Park campus, roughly from Foster City on the Peninsula down to Sunnyvale in the South Bay, plus Union City and Fremont just across the bridge in the East Bay.
Change in asking prices*
Change in asking rents*
|Facebook Metropolitan Area||
|San Francisco Bay Area (including Facebook Metro Area)||
Note: based on the Trulia Price Monitor and Trulia Rent Monitor, which adjust for the mix of homes and neighborhoods. Changes are year-over-year.
Even before today’s IPO, home prices and rents were rising in the Facebook metro area faster than in the San Francisco Bay Area overall. As Facebook’s flush owners realize their gains, there’ll be even more money chasing real estate in the Facebook metro area and in the San Francisco Bay Area generally. This new wealth should push up prices more than rents since many of Facebook’s employees will make the move to homeownership. And, Facebook aside, job growth in the Bay Area is already strong, so the Facebook IPO is adding fuel to an existing fire.
The Facebook IPO will create lots of winners in the Bay Area. These include employees and investors, of course, who can spend their new wealth on homes or whatever else they want. Other winners are people and businesses who have what Facebook millionaires want – including homeowners looking to sell, luxury car dealers, exotic-adventure-vacation tour operators, and so on. The dry cleaner and coffee shop owners in Menlo Park will be happy, too, but Facebook won’t change their lives: Facebook employees might celebrate their IPO by buying a car ten times more expensive than their current clunker (just don’t drive it to work), but they’re probably not going to go from one latte a day to ten.
But because Facebook is in the Bay Area, its IPO will create losers. Here’s why. If Facebook were in Texas or North Carolina, developers would have been building new homes in anticipation of this day. But in the Bay Area, water and the hills leave little land for development: the area in the bay under the Dumbarton Bridge would be an easy commute to Facebook if you could only build housing on the water. In addition, building regulations make development difficult on the precious flat land that exists. As a result, little new construction is underway in the Bay Area – far less than in other metros with similar job growth. Furthermore, San Francisco and San Jose were spared the worst of the housing crash and have relatively few homes in foreclosure. Without new construction or foreclosed homes coming onto the market, Bay Area housing inventory is vanishing: it’s down 40% year-over-year.
So all that new Facebook money will be competing with the rest of us for the limited supply of homes and apartments. Even if you’re that luxury car dealer watching your sales go through the roof, the kid you just sold the Lamborghini to will outbid you for that home in Woodside. Rising home prices and rents – good as they are for current homeowners and for landlords – raise the cost of living in the Bay Area. That means that businesses across the Bay Area will need to pay their employees more to keep up with rising housing costs – or decide to conduct their business elsewhere.
These are by no means new challenges for the Bay Area. Steady demand for housing, combined with tightly constrained supply, has kept real estate prices in the Bay Area – and in much of California — among the highest in the country for decades. Before this recession, when people in the Bay Area said “housing crisis” they meant a shortage of affordable housing. The recession and drop in home prices pushed concerns about affordability into the background, with foreclosures and overbuilding taking center stage. But as the Facebook IPO sends home prices higher, we’ll look back at today as the day the Bay Area stopped worrying about falling prices and remembered how expensive it is to live and do business here.0 comments
Trulia’s Spring 2012 Metro Movers report takes a deep dive into why people are searching for homes where they do.
Every three months or so, we take a close look at the home searches on Trulia: where are the searchers, and where are the homes they’re looking at? This time around we’re taking a close look at why people search where they do, and we’ve uncovered these two facts:
—- Most short-distance searches (under 100 miles away) are toward the suburbs or smaller cities.
—- Long-distance searches (more than 500 miles away) are toward more affordable markets with worse job prospects.
People want sprawl and don’t care about jobs? Of course, it’s not quite that simple – but there’s more than a grain of truth in that statement. Let’s start with the short-distance searches and move to the long-distance searches.
Staying Close, But In Need Of More Elbow Room
Over the past year (April 2011-March 2012), 44% of all the searches on Trulia were within a metro area, and 56% were to another metro area (not including searches from outside the U.S.). Of these “cross-metro” searches, roughly one-third were “short-distance” (less than 100 miles away), one-third were “middle-distance” (100 to 500 miles away), and one-third were “long-distance (more than 500 miles away). The top 10 searches were all short-distance searches, with more people looking from Los Angeles to Riverside-San Bernardino than between any other pair of metros. Of these 10, seven are from bigger to smaller metros (e.g., Dallas to Fort Worth) or from a dense urban metro to its suburbs (e.g., New York to Long Island). Here’s the list.
|Table 1: Top 10 Home Searches|
|#||Origin Metro||Destination Metro|
|1||Los Angeles, CA||Riverside-San Bernardino, CA|
|2||New York, NY-NJ||Long Island, NY|
|3||Orange County, CA||Los Angeles, CA|
|4||Dallas, TX||Fort Worth, TX|
|5||Los Angeles, CA||Orange County, CA|
|6||Detroit, MI||Warren-Troy-Farmington Hills, MI|
|7||New York, NY-NJ||Newark, NJ-PA|
|8||Newark, NJ-PA||New York, NY-NJ|
|9||Warren-Troy-Farmington Hills, MI||Detroit, MI|
|10||Washington, DC-VA-MD-WV||Bethesda-Rockville-Frederick, MD|
Note: all of these top 10 searches overall happen to be short-distance searches.
Neighboring metros share many of the same features: they tend to have the same weather, for instance. But nearby metros can differ a lot in other ways. House hunters searching within 100 miles are twice as likely to look at more suburban or smaller markets, where neighborhoods typically consist of single-family homes with yards, than at more urban or larger markets where homes are smaller and more likely to be apartments or condos (measured by density). Suburban and smaller-city markets also tend to have had bigger price drops during the housing crash and lower-cost housing now. However, these places still attract more home searches even when they are just as expensive as nearby urban markets. More than twice as many searches are from crowded Los Angeles to suburban Ventura County than in the reverse direction, even though homes are just as expensive and the housing bust was similarly severe; same with Boston and Cape Cod, and New York and Fairfield County CT.
Clearly, house hunters face a dilemma. On the one hand, people tell us they want the benefits of city living: nearby shops and restaurants, public transit and a shorter commute. But when it comes to searching for homes, they’re more likely to sacrifice these amenities in favor of more space. That’s not just because people love sprawl: many government policies, like interstate highway investments and strict regulations on urban development, encourage faster growth in lower-density areas. When people look from dense cities to sprawling suburbs, it’s partly because that’s where the homes are available at the price they can afford. In the future, people could start looking more toward big cities if baby boomers want to leave the suburbs; if rising gas prices make commuting from the suburbs too expensive; or if government policies become less biased against cities. But for now, people still have their eye on the ‘burbs.
The top middle-distance searches (table 2) include lots of rival city pairs: Dallas and Houston, Washington DC and New York, and so on. Eight out of the top 10 middle-distance searches are in the Sunbelt states – nine if you count Oklahoma. What explains these middle-distance searches? Lower density is still the main draw, as well bigger price declines.
|Table 2: Top 10 Middle-Distance Home Searches|
|#||Origin Metro||Destination Metro|
|1||Oklahoma City, OK||Tulsa, OK|
|2||Los Angeles, CA||San Diego, CA|
|3||Houston, TX||San Antonio, TX|
|4||Houston, TX||Austin, TX|
|5||Tucson, AZ||Phoenix, AZ|
|6||Los Angeles, CA||Las Vegas, NV|
|7||Phoenix, AZ||Tucson, AZ|
|8||Dallas, TX||Houston, TX|
|9||Washington, DC-VA-MD-WV||New York, NY-NJ|
|10||Los Angeles, CA||Phoenix, AZ|
Note: “middle-distance” searches are 100-to-500 miles away.
Going the Distance for Bargains and Warm Winters, But Not Jobs
Long-distance searches are where the really interesting story lies. These searches for homes 500 miles or more away account for 20% of all searches on our site. Of these long-distance searches, 54% are toward the west and 62% are toward the south, thanks in part to all those New Yorkers looking at homes in Florida (table 3). Los Angeles to New York is the only eastbound or northbound search on the list. The top long-distance searches look really different from the top short- and middle-distance searches – and it turns out that people searching for a home near where they currently live are looking for something very different than people looking to move far, far away.
|Table 3: Top 10 Long-Distance Home Searches|
|#||Origin Metro||Destination Metro|
|1||New York, NY-NJ||Los Angeles, CA|
|2||New York, NY-NJ||Miami, FL|
|3||New York, NY-NJ||West Palm Beach, FL|
|4||New York, NY-NJ||Atlanta, GA|
|5||Chicago, IL||Phoenix, AZ|
|6||New York, NY-NJ||Orlando, FL|
|7||New York, NY-NJ||Fort Lauderdale, FL|
|8||New York, NY-NJ||Tampa-Saint Petersburg, FL|
|9||Los Angeles, CA||New York, NY-NJ|
|10||New York, NY-NJ||Chicago, IL|
Note: “long-distance” searches are more than 500 miles away.
A long-distance search is very different from a short-distance search: if you’re open to moving anywhere in the US, you’ve got a huge diversity of places to choose from: sunny, snowy, mountainous, coastal, booming, affordable, old, new and so on.
Affordability matters a lot for long-distance searchers, who are 1.7 times more likely to look for homes in markets with bigger price drops in the bust, relative to where they live now, than in markets that held up better. They’re also 1.4 times more likely to look for homes in markets with a lower price-per-square-foot, relative to where they live now, than in more expensive markets. Long-distance searchers also factor in weather: people are 1.8 times more likely to look for homes in markets with warmer winters than in markets with colder winters, relative to where they live now. Density matters less for long-distance searchers – most people don’t need to move across the country just to find more space.
Here’s the surprise. You’d think that people would search where jobs are plentiful, but you’d be wrong. Most long-distance searchers look for homes in markets with higher unemployment and slower job growth than where they live now. For instance, seven times as many people in Washington DC (5.9 percent unemployment) looked for homes in Orlando (10.3 percent unemployment) than in the reverse direction. Here are other searches where twice as many people searched from the lower-unemployment market to the higher-unemployment market than in the reverse direction:
|Table 4: Searches Toward Higher-Unemployment Metros|
|#||Origin Metro (Lower Unemployment)||Destination Metro (Higher Unemployment)|
|1||Washington, DC-VA-MD-WV||Atlanta, GA|
|2||Cleveland, OH||Cape Coral-Fort Myers, FL|
|3||Seattle, WA||Detroit, MI|
|4||Oakland, CA||Las Vegas, NV|
|5||Philadelphia, PA||Los Angeles, CA|
|6||Boston, MA||Orlando, FL|
|7||Minneapolis-Saint Paul, MN-WI||Phoenix, AZ|
|8||Chicago, IL||Riverside-San Bernardino, CA|
|9||Baltimore, MD||Tampa-Saint Petersburg, FL|
|10||Long Island, NY||Tampa-Saint Petersburg, FL|
Note: listed in alphabetical order of destination metro. Each pair has at least twice as many searches toward the destination metro than in the reverse direction, and the destination metro has an unemployment rate at least two points higher than the origin metro. Unemployment rate is averaged over 2011 plus first two months of 2012.
People aren’t masochists: they’re not looking to move in order to be unemployed. Rather, they are looking primarily for affordable, warm locations, and those locations happen to have much higher unemployment rates than other markets do. The relationship between affordability–as measured by home price declines during the bust–and unemployment is especially strong: markets like Las Vegas and Bakersfield may have great bargains, but those price drops went hand-in-hand with job losses and high unemployment. This is true overall: the bigger the price drop, the higher the unemployment rate. And, as a general rule, metros with more inbound searches had bigger price drops and have higher unemployment than those with more outbound searches.
Not every search, of course, is by someone who is about to move and will need a job. Retirees, investors and people just looking for fun might not care about the unemployment rate in markets where they’re searching for homes. But the rest of us probably need a job wherever we’re moving. Few metros have bargains (big price drops) AND a low unemployment rate. Phoenix, Tucson and Fort Lauderdale almost fit the bill: they saw big price drops yet unemployment remains lower than other metros where prices plummeted.
Bottom line: if you’re making a big move and looking at markets across the country, don’t ignore the job market. Unless you’re retired, buying an investment property, or are expecting to live off your Facebook shares, remember that markets with great housing deals tend to have higher unemployment. If you still have to work for a living, you should know what the job market looks like before you plan your next move.
Editor’s note: discussion of metros with large price drops from peak revised 5/24/12.0 comments
March marks the start of the housing season. Prices peak in May, sales in June, and inventories in July. In colder regions, seasonal swings are bigger, and the market peaks later.
The housing market rides the seasons. Year in and year out, market activity has predictable ups and downs. Sometimes those seasonal patterns are hard to see when longer-term trends (like plummeting housing prices) or one-off events (like the homebuyer tax credit) drive movements in prices, sales and other housing indicators. But seasonal patterns are there, even when they’re beneath the surface.
To understand the effects of long-term trends or one-time events on the market, housing wonks like to “seasonally adjust” data. That means we strip out the regular seasonal patterns in order to highlight trends or events. This is useful for deciding whether the market is really in recovery or assessing the impact of a housing policy.
But these seasonal patterns help show us what’s really going on in the housing market, which is important because they give us hints about when we should search, list, buy, sell or build. In this post, I look at five measures of housing activity: search activity (Trulia), asking prices (Trulia), new construction starts (Census), existing home sales (NAR) and housing inventory (deptofnumbers.com).
Starts and Sales Swing with the Seasons
New construction starts and existing home sales fluctuate more throughout the year than other housing activities. The chart below shows that sales are typically 29% above their annual average in June and 31% below their annual average in January. Construction starts also swing 25% above and below their annual average over the year. No wonder builders and agents say theirs are seasonal businesses. Other activities float rather than swing with the seasons. Search activity rises 12% above its annual average in March. But inventories stay within 10% of their annual average every month, and asking prices stay within 5% of their annual average every month (see note below on asking prices).
The Spring Thaw Comes First to Buyers, then to Sellers
As the market comes out of winter hibernation, buyers wake up first. The table below shows when each measure hits its highs and lows. In the winter, all activity rests: searches, prices, starts, sales and inventories all slide to their yearly low in December or January. Life resumes in March, as search activity pops up and stays above normal through August. Prices rise too and reach their annual high in May. Summer has endings and beginnings: sales peak in June, as do new construction starts. But inventory keeps climbing as some sellers miss the sales peak, topping out in July and August.
What do these patterns tell us? Homebuyers are a little ahead of sellers. Asking prices peak at the start of the season, so demand appears to rise ahead of supply. As supply catches up, prices ease back down and sales peak. After that, inventories build up a bit further through the summer.
High-Season Comes Stronger and Later in the North
Harsh climates fuel seasonality. It’s harder to build homes in the snow, and a lot less fun to go to open houses (or host them). Construction starts in the Midwest are 2.5 times higher in June than in January, but in the South, construction starts are only 50% higher at the summer peak than at the winter low. Sales seasonality too is stronger in the Midwest and Northeast than in the South and West.
The best time to buy or sell? Depends on where you are. If you want to buy when inventory swells (or want to avoid those months for selling), inventory peaks in the summer across most of the country, but not in the Sunbelt. In Miami, Tampa and Orlando, inventory peaks in March; Las Vegas inventory peaks in October, and Phoenix inventory peaks in December – just in time to buy a home for Christmas.
Looking to buy low or sell high? Nationally, asking prices peak in May and bottom in December, so sellers can get top dollar in the spring, while buyers can find bargains later in the year. In other words, buyers should be more patient than they are, while sellers should move faster to get their home on the market. But prices tend to peak earlier in the South, as the map below shows, and later in the North, so the best deals come later in the year the farther North you are. And the harshest climates create the biggest swings: prices for similar homes vary more with the seasons in Minnesota, Illinois and Maine than in any other state.
— All data presented are the seasonal factors from the Census X-12 seasonal adjustment model, applied to at least five years of unadjusted raw data from each source. As each data source allows, I estimated separate seasonal factors for each metro, state, or region as well as for the US overall.
— Asking-price data from Trulia.com are adjusted for housing characteristics and neighborhood attributes. Therefore, the seasonal pattern in asking prices is not affected by seasonal changes in the types of homes that get listed.