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No Housing Crisis in/around DC?


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2009 Sep 3, 7:00am   5,081 views  23 comments

by MelAdams   ➕follow (0)   💰tip   ignore  

I read many of the articles on the web site and found a lot of truth especially about
the market being driven by the real-estate business.
However i live in the DC area and it seems there is no housing market crisis. House built in the 60s with 0 or little improvements and not even a full master bathroom sell very quick for $650K. That is the same price as they sold last year.
My expectations are that for this price one should expect a more decent house. What is wrong: my expectations or the market? Or is it just because it is the DC area?

I'd appreciate any feedback even a tough reality check ;-)

#housing

Comments 1 - 23 of 23        Search these comments

1   opal   2009 Sep 3, 8:46pm  

I live in the DC area and have had the same thoughts. I think prices are going down here, but slower than in other places based on the number of government jobs (my federal job is the only reason I'm in the DC area), the terrible traffic (which I assume is what makes those mediocre 1960's ranch houses in close-in Bethesda worth 650K) and the fact that parents will pay a premium to be in areas considered to have better schools. However, I have also seen plenty of "Redcued" signs and houses staying on the market for months on end in my area (Rockville/Bethesda). Remember, even if prices just go sideways for several years, that is the bubble unwinding as well, although not as quickly as we would hope.

2   jl444   2009 Sep 5, 12:27pm  

We live in the Hampton Roads areas of VA and it has a similar dynamic as DC. The area is replete with federal jobs and military installations.
The notion that these areas are largely immune from decline is fallacious. Yes, employment is an important factor, yet housing also reflects the supply side of the market. There is healthy and continuous demand in these areas, but demand doesn't unduly determine price unless demand far outstrips supply. There is plenty of supply here, yet there is enough demand to largely perpetuate the artificial pricing left over from the bubble.

At some point there will still be a relative devaluation. DC and HR was really the last area, IMO, to balloon, but later than the West and FL.
The fact that people must live in these areas is critical but will not prevent a solid decline.

There are two factors that I surmise to be peculiar to these places:
First, the real estate community is very well entrenched in Hampton Roads, and thus rarely do we see a vibrant FSBO market, etc. There is an aspect of collusion by which enough real estate agents tell people that their house is worth what it is. Now, in fact, there have been many local agents who have rejected listings because potential sellers want too much, yet nevertheless, the perceived value is still buttressed by agents and sellers in denial. And the chickens can't come home to roost because of the second:

There is so much turnover via the military (come and go every 2-3 years) that numerous people have delayed selling because they can rent to military. And military allowances for housing still largely reflect overvalued pricing though they don't justify rent/price/income valuations. We pay 2100 in rent for a 2400sq.ft house that was valued at 460k/tax in 07 that is now down to 390k tax, though a similar house across the street just sold for about 325k. So things are going down, albeit more slowly. Thus there is more "rented" shadow inventory in this area, and this prevents falling prices, for a time. In short, real estate collusion/illusion wields more influence because a unique rental demand props up housing.
Just my two cents.

3   d3   2009 Sep 9, 1:55am  

state says

Rents are falling. Stuff is sitting on the market for 6+ months. It’s not nearly as bad as other cities, I’m guessing partly because of the very low unemployment here.

Actually rents are still going up in many areas inside of the beltway. In my home town rents have actually been going up continually over the last few years and 2008 was no exception. It is also still hard to find a vacancy in some areas despite the economy or raising rents. http://www.arlingtonva.us/departments/CPHD/housing/hpp/CPHDHousingHppHsgData.aspx

4   zzyzzx   2009 Sep 9, 1:59am  

I live in the DC area and have had the same thoughts. I think prices are going down here, but slower than in other places.

I live in Baltimore and have made the same observation there.

5   d3   2009 Sep 9, 2:11am  

"We live in the Hampton Roads areas of VA and it has a similar dynamic as DC. The area is replete with federal jobs and military installations."
I have a lot of family in the VA beach and drive through norfolk area periodically and I do not consider the are to be comparable to DC. Although there is a lot of military jobs in the area, the population is much more spread out and unless you have to go through the tunnel one can live 15+ miles outside of the city without having to worry about an hour plus commute every day.

6   zzyzzx   2009 Sep 9, 2:21am  

I think so far in the DC area it's mostly pricey condos that have taken a big hit. The rest not so much. Empty houses are all over the plaec though.

7   SF Mikey   2009 Sep 9, 2:27am  

I live in San Francisco and have noticed the same phenomena - i.e., 3BR / 2BA houses selling for $1M. We are probably only 10% off the highs here in SF but I can't see these prices being sustainable over the long-term. Prices went up from 200-300% over the last ten years and now at 10% off all-time highs people are thinking they are getting a great deal WTF! I think the coming tsunami of foreclosures are going to put a world of hurt here in the Bay Area given all the Alt-A / Option ARM loans that have been prevalent in this area given the high cost of housing.

What ever happened to the thought of affordable housing being a benefit to a community? I guess that since our economy has been based upon selling each other over priced houses and MEW (using house as an ATM) to buy more toys. As a nation we have diverted way too much capital to real estate instead of more productive uses such as manufacturing / R&D, etc. We need strong leadership to turn this country around and get headed in the right direction before it's too late. Trying to re-inflate the residential real estate bubble is a huge waste of $$$.

8   klarek   2009 Sep 9, 2:49am  

zetabeos1 nailed it. This market is purely unsustainable.

9   HeadSet   2009 Sep 9, 3:54am  

jl444 says

First, the real estate community is very well entrenched in Hampton Roads

You got that right. I also live in HR and tried to sell 3 houses during 2003 -2005. No takers when I tried FSBO, but all sold within hours after being listed. I did only pay 4%, though.

All that military turnover you mentioned benefits realtors. Once a military member knows he is transfering in to Langley AFB or other base/post, he can get a "welcome kit" from any number of realtors. This kit has info on schools, neighborhoods, etc. Also, since he only has about 2 weeks for his house hunting trip, it is easier for him to hook up with a realtor who will show him plenty of homes to choose from, rather that drive himself around an unfamiliar area looking at FSBOs. Of course the realtor steers the member to the expensive areas where other military are living. Note the concentration of military officers in "Tabb Lakes," "Running Man," "Coventry," "Kiln Creek"," or other overpriced York County areas.

10   markw51   2009 Sep 11, 4:56am  

Depends on where in the DC area. Inside the beltway has been, will probably continue, very strong, with high prices. Go out into the suburbs and its a whole different story. Lots of foreclosures in Gaithersburg, Md, and Loudoun County, Va.

11   jl444   2009 Sep 23, 7:04am  

d3 says

“We live in the Hampton Roads areas of VA and it has a similar dynamic as DC. The area is replete with federal jobs and military installations.”

I have a lot of family in the VA beach and drive through norfolk area periodically and I do not consider the are to be comparable to DC. Although there is a lot of military jobs in the area, the population is much more spread out and unless you have to go through the tunnel one can live 15+ miles outside of the city without having to worry about an hour plus commute every day.

The "dynamic" is similar with respect to a buoyed market, irrespective of obvious geographic/demographic differences. I don't believe the differences you point out, which I am aware of, bear upon what I'm suggesting.

Sure, there is a difference with respect to the perimeter, but within this , most people live and the gov't/mil demand still unduly drives up or inefficiently affects the market. People want to live within a 20 mile or so range. So the only difference you could maintain is that the Hampton Roads market is smaller than the DC market, but that doesn't change the dynamic, necessarily.

12   jl444   2009 Sep 23, 7:11am  

Headset:

Yup. We've done FSBO before but still had to work against the establishment in another way in TX.

We sold our last place in Dec. 2008 by using a flat fee MLS listing service and paying 3 percent to the buyer's agent. We spent 300 dollars on the listing fee. Got two offers on the same weekend.

Buyers' agents didn't really know, or care (3 percent is good in a down market) what we were paying the listing agent: us. When I told the buyer's agent, his mouth fell open. hahah.

13   HeadSet   2009 Sep 23, 7:30am  

jl444 says

We sold our last place in Dec. 2008 by using a flat fee MLS listing service and paying 3 percent to the buyer’s agent. We spent 300 dollars on the listing fee. Got two offers on the same weekend.

I hope that is a growing trend, where "listers" only get a small flat fee for entering the home into the database. Professional listers do not really deserve anything else. Only the agent who actually brings in a buyer should get a commission.

14   maxweber21   2009 Oct 9, 2:03am  

"DC will not fall" reminds me of the SF claim a year ago. Today's headline is high $ SF RE dropped the most.
Also notice the headline about the FHA. What a joke! FHA is a give-away to RE developers plain and simple. They don't buy cheap houses. They buy new, expensive houses and then, of course, the tenants often destroy them. No man cares for what he has not earned.

For those really wanting to understand the depth and foreknowledge of the housing bubble, read this page to see the entire ponzi scheme was well understood and well studied even by the central banks at long back as 1999:
http://riskinstitute.ch/00013403.htm

So, the credit ponzi scheme continues. Only a small fraction of the fabricated fiat was given to housing... where did the rest go? Where did it go?

Of course some $100's B's goes to DC and surrounding areas; but, the credit ponzi scheme is still expanding; so, I'd not bet on a house there when the devil blowing bubbles. I'm not sure where we'll see the next pop. LTCM was the precursor, Housing Bubble the harbinger, not sure what will give next.

15   maxweber21   2009 Oct 9, 2:07am  

Perhaps the quote from the referenced page is telling... a rated gov loans require no bank collateral... e.g. no cost to bank to loan to gov... bubblicious.
So the DC bubble may not be percieved yet. Just as "real estate never goes doesK so gov loans though unsound and wasteful can never bqckfire. FOOLISH.

17   d3   2009 Oct 9, 5:43am  

maxweber1 says

This chart shows the people in DC are far and away over-paid WRT any other state/territory in the USA.
http://graphs.gapminder.org/world/usa.php#$majorMode=chart$is;shi=t;ly=2003;lb=f;il=t;fs=11;al=30;stl=t;st=f;nsl=t;se=t$wst;tts=C$ts;sp=2.29290322580644;ti=1980$zpv;v=0$inc_x;mmid=XCOORDS;iid=pp59adS3CHWfKPVb7dEexFA;by=ind$inc_y;mmid=YCOORDS;iid=pp59adS3CHWfpdRRHReApCg;by=ind$inc_s;uniValue=20;iid=pp59adS3CHWdzxSyMtIkLXA;by=ind$inc_c;uniValue=255;gid=CATID1;iid=pp59adS3CHWeR0Ufcou95MQ;by=grp$map_x;scale=log;dataMin=10814;dataMax=105368$map_y;scale=lin;dataMin=1.516;dataMax=13$map_s;sma=32;smi=2.05$cd;bd=0$inds=

I am a little confused as to how that means anything close to what you claim it does.
1 if you follow the timeline goes from what one may considered to be overpriced relative to other places in 1980 to something that is balancedly priced.
2. The most current data is from 2006, and I question how accurate any of it is.

18   michaelsch   2009 Oct 9, 6:44am  

mlisaj1111 says

I live in the DC area and have had the same thoughts. I think prices are going down here, but slower than in other places based on the number of government jobs (my federal job is the only reason I’m in the DC area), the terrible traffic (which I assume is what makes those mediocre 1960’s ranch houses in close-in Bethesda worth 650K) and the fact that parents will pay a premium to be in areas considered to have better schools. However, I have also seen plenty of “Redcued” signs and houses staying on the market for months on end in my area (Rockville/Bethesda). Remember, even if prices just go sideways for several years, that is the bubble unwinding as well, although not as quickly as we would hope.

Last year, while visiting Bethesda I saw a for sale sign placed by "EXIT" realty.
No doubt though, Bethesda is in denial. Just wait several months. There are a lot of bankruptcies by homeowners there with a small number of foreclosures. A sure sign many homeowners are too stretched to keep their houses, but do not recognize it yet. This is quite typical for “fortress” towns just before the bubble pops there.

19   michaelsch   2009 Oct 9, 6:46am  

michaelsch says

mlisaj1111 says

I live in the DC area and have had the same thoughts. I think prices are going down here, but slower than in other places based on the number of government jobs (my federal job is the only reason I’m in the DC area), the terrible traffic (which I assume is what makes those mediocre 1960’s ranch houses in close-in Bethesda worth 650K) and the fact that parents will pay a premium to be in areas considered to have better schools. However, I have also seen plenty of “Redcued” signs and houses staying on the market for months on end in my area (Rockville/Bethesda). Remember, even if prices just go sideways for several years, that is the bubble unwinding as well, although not as quickly as we would hope.

Last year, while visiting Bethesda I saw a for sale sign placed by “EXIT” realty.
No doubt though, Bethesda is in denial. Just wait several months. There are a lot of bankruptcies by homeowners there with a small number of foreclosures. A sure sign many homeowners are too stretched to keep their houses, but do not recognize it yet. This is quite typical for "fortress" towns just before the bubble pops there.

20   michaelsch   2009 Oct 9, 6:47am  

oops, double post.

21   HeadSet   2009 Oct 9, 7:20am  

michaelsch says

Last year, while visiting Bethesda I saw a for sale sign placed by “EXIT” realty

Interesting. I just saw an "Exit Realty" for sale sign for the first time today, right here in Hampton Roads.

I wonder if they are a low cost agency.

22   michaelsch   2009 Oct 9, 8:11am  

HeadSet says

michaelsch says

Last year, while visiting Bethesda I saw a for sale sign placed by “EXIT” realty

Interesting. I just saw an “Exit Realty” for sale sign for the first time today, right here in Hampton Roads.
I wonder if they are a low cost agency.

Would be a good name for one specializing in short sales.

23   HeadSet   2009 Oct 9, 8:46am  

I looked up Exit Realty. hoping to see a fresh approach like list for small fee and offer 3% to selling agent.

No such luck. They have a scheme where an agent gets the normal commissions, plus a piece of the action from when each agent they recruit sells a house. The piece comes out of what would be the broker's share, so little chance a fixed listing fee or even paring down that 6% standard.

It is Amway meets MLS.

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