patrick.net

DC is ground zero for Lobbyists. Business is better than ever and they need to live somewhere.
follow the money.

Seems still very much pending a correction.

http://www.housingbubblebust.com/OFHEO/Major/MidAtlantic.html

http://www.deptofnumbers.com/affordability/district-of-columbia/

Rents have been tracking income in the region. Prices have well-exceeded income, as well as rental parity. Lack of unemployment and fewer foreclosures indicate a delayed price discovery in the area. Some outer areas around DC do not exhibit this pattern.

Nevertheless, I’m curious about the factors that allow the market to remain either steady or rising in the face of declining markets in other areas.

I would say, there was greater exposure by the media on Housing Bubble in areas like Vegas, Miami, and Arizona. They are the poster child of the bubble.

http://www.housingbubblebust.com/OFHEO/Major/Florida.html
http://www.housingbubblebust.com/OFHEO/Major/SouthWest.html

As such, prices at above regions corrected (back to normal) much more swiftly.
Other regions are pending corrections for some time to come.

IMO Inside the DC beltway will always be hot. so many different Government Agencies. lots of $$.

It is pretty clear that govt jobs, contract work, and lobbying have kept DC floating better than other major metropolitan areas. The question is how long this is going to last. If quantitative easing ends, the gov't shuts down, or federal spending otherwise goes down, does the bottom fall out in the nice areas?
I think that there is a good possibility of major price declines here. We are thinking of buying a cheap place outside of DC where prices are already low. We'll wait a few years before buying a more long term place.

klarek says

http://www.deptofnumbers.com/affordability/district-of-columbia/
Rents have been tracking income in the region. Prices have well-exceeded income, as well as rental parity. Lack of unemployment and fewer foreclosures indicate a delayed price discovery in the area. Some outer areas around DC do not exhibit this pattern.

It wasn't that long ago that most of Maryland had relatively inexpensive housing prices (pretty much the whole state except for Montgomery County and some places near Annapolis). I'd have to think the state will get back to that at some point, or close to it.

I visit Patrick.net daily, and am always interested in the news and opinions I find on this site. Most of the news, however, is very California-centric.

I find that's common in other housing market related websites as well.

Federal Government
The "Tech Corridor" (headquarters of many major telecommunications companies)
Lobbyists
NSA / CIA / FBI Headquarters
The Pentagon
Defense Contracting (SAIC, General Dynamics, Booz Allen Hamilton, DynCorp, SRA, Alion, and about 600 others)

Nearly 60% of the households in Northern VA make over $100k a year, almost triple the national average.

Saying, "yes I get the Federal Govt and contractors...but..." is like saying, "Why is NYC so high priced?.....yeah, I get all that Wall St. and Financial stuff..but".

It is heading for a correction of it's own, but there are plenty of owners there who are quite underwater, who weren't in the 55% DTI clan to begin with and are thus not as prone to foreclosure or strategic default. And there are a lot of fools who are not panicking, but are patiently waiting for someone to put in an offer near their asking price of $850k, when the home is clearly not worth more than $600k anymore. I have a friend up there now looking to buy, and the disparity between what people think their home is worth and what kind of offers are going around is enormous.

The real danger for employment in the DC area is not so much the federal workers as the defense contractors. If the military budget were slashed by 25% overnight, the DC metro would be in a world of shit.

Schizlor,

Any sources of information on the # of or percentage of people working in the defense sector here? There was talk of cutting around 100 billion from defense spending this year. That's around 10%. If there are 3 million households in the DC area, and 100 billion was reduced from local salaries, that would be a reduction of $30,000 per household. Of course the reduction to salaries would be lower, but I'm wondering if you had any data or estimates on that.

Schizlor says

The “Tech Corridor” (headquarters of many major telecommunications companies)

What was left of Verisign (started in Silicon Valley) is now located in the DC area.

I supposed DC will see the biggest price declines -eventually - such as declines matching AZ and FL once the QE/Money printing is done (when will it end? maybe never?)

The feds are spending DOUBLE of what the tax revenue they take in. The other half is printed from thin air. When/If this ends its housing armadeggon in DC. All this is completely unprecented except in argentina, or like during WW2 (are we at war? not really). Its a mess.

The whole economy is in uncharted, never before seen territory. It might be ok, or there might be a cliff over the next hill we are heading to at 500 mph. No one can predict what will happen.

If buying in DC i would get a 3.5% or zero down FHA loan (have seller credit the 3.5% and simply pay them a higher price). This way you can walk away when u need to. For the future of the DC market you only need to study Las Vegas. THe government spending bubble is the current bubble and its creaking and cracking.

Once the bubble of this size pops it NEVER comes back in your lifetime probably (like vegas). But we are probably talking about the end of the empire -so it could last another 50 years - who knows.

Re: DC

Schlizor's point about a correction is not unfounded. Incomes in the area increased during the last decade at a higher rate than the rest of the country (25%-40% depending on the county/zip). It's not unreasonable to suspect that this will recede (underperform inflation) a bit over the next ten years. I use this in my own bearish way to estimate risk about purchasing, but it's probably number 5 or 6 on my list of "what-ifs".

Regarding the housing market as a whole here, there is a LOT of delusion in many towns. The fundamentals don't support the regional price levels as a whole, but it's completely spotty. In Arlington, DC, and certain pockets of Fairfax County, prices are still DOUBLE what they were a decade ago, clearly outperforming household income. In other areas, mostly Prince William and Loudoun counties, prices are at fundamentally-supported levels. Thus as an aggregate of the region, it doesn't look too out of whack (though still obviously overpriced).

Everybody here (paying attention to this sort of thing) has their own theory. Some people see these pockets as newly desirable, protected by an unquantifiable (and baseless) shroud of psychological value conservation. Frankly I do not buy it. I see people buying in these areas and actually using the "prices haven't fallen much, so it's safer" as a self-reinforcing phenomenon. Thus I think you nailed it when you questioned if people more willing to throw caution to the wind in this area. Yes, I think that many of them are living in a fantasy world. It will not come crashing down on their heads, but they'll be wondering in ten years why their house's value is unchanged from 2011.

The only thing I see that can really explain this chasm is the lack of foreclosures. Move-up buyers during the bubble had significant down payments, and very few are in default in the "special" areas (Arlington/DC/Mclean/Oakton). If housing prices inevitably revert to fundamentally-supported levels and if there's nothing fundamentally different about a particular town or zip code over several years, then price discovery is merely delayed, or smoothed out by inflation over a long period of time.

I'm less knowledgeable about the District itself since there has been a lot of gentrification in certain areas, but I keep a close eye on prices and demographics in Northern VA. The region as a whole may not drop significantly, but there's nothing indicating that it will rise.

In the end, I see buying a house in "special" parts of the DC region the same as going back in time a few years ago and buying an overpriced house in some of the areas that today have fallen 30% from those points.

Maybe an analogy will help?

I collect stuff. Baseball cards and memoriblia, toys, etc.

Some of it has value, nearly all created by a supply/demand dynamic. Even moreso with the presence of Ebay as now collectors have a vehicle to bring items directly to market with minimal cost.

When a certain toy line gets "hot"...ie demand rises, its often fueled by "inserts" or short printed items. Often these "short prints" will be packed on per 10 cases or whatever. And what happens at that point is interesting. Obv the item is coveted by the core collectors of the line. And there actually may very well be enough to go around. But the supply side at this point no longer behaves like a free market. And instead a bunch of middle men get involved due to the profit potential. Shop owners, scalpers, and even people who have zero interest in the item, but get wind that a certain item is "worth" a lot. And so you have a supply that is not only affected by the actual market, but now also has to deal with a bunch of people seeking to get their grubby paws on whatever profits. So supply is now artificially restricted. And as a result, prices rise.

And thats what I see in DC...or really any similiar type market. That supply is artificially restricted in some "desireable" areas. And as a result, prices are artificially inflated by the influx of "middle men" who really have no interest in anything but unintentionally conspiring to to restrict supply in a small market segment.

The DC market is still ripe for a downtrend. The DC market has always looked eerily like California (50 year old 4/2/1 piece of crap on a quarter acre lot for $500-750K.....and it's a bargain!), but lately it's starting to look more so.

Look at any of the "decent" locations like Bethesda, Chevy Chase, Potomac, in the city (NW), Mclean, Great Falls etc etc and any half decent property is north of $800K. That's just not sustainable. Yes, I know all about lobbyists and the transient nature of the region (administration change potentially every 4 years), but those are precisely the reasons, why those folks don't BUY. They rent. If you know you'll potentially be moving in 4 years, it'd be naive to buy in any market, let alone today's market.

I sold my house in Maryland in 2005 and been renting ever since. In fact we (got married since then) have been in our curent rental for over 3 years now. We rent a nice 2400 sqft townhouse in MD (3/2/1) for $1700 a month and to "buy" the same house, my carrying cost would have been almost twice in 2005/2006 and is still about 60% higher than our rent. Even after the tax deduction (and we're in the 39% bracket), the math still doesn't work out.

We are sitting on a sizeable amount of cash and liquid investments (~400K) and make decent amount of income a year (~350K/yr) and would LOVE to buy a nice house, but the math just doesn't make sense. Even now. A "good" house, something that LOOKS nice, is spacious enough (~4-5K sq ft) in a good location is still north of $1M. I just don't see the point of that. I can easily make ~2-3% on our investments with almost no risk, so whay would we tie up a significant amount of equity in an asset that's way overvalued? (even today) and with a low probablity of return on investment??

Yes, I know, a house is not an "investment" and yadda yadda, but it IS one of the most (if not the most) expensive things a household will ever buy. Still looking....sadly. (And I've been tracking the market for almost 10 years)

kapone says

I sold my house in Maryland in 2005 and been renting ever since. In fact we (got married since then) have been in our curent rental for over 3 years now. We rent a nice 2400 sqft townhouse in MD (3/2/1) for $1700 a month and to “buy” the same house, my carrying cost would have been almost twice in 2005/2006 and is still about 60% higher than our rent. Even after the tax deduction (and we’re in the 39% bracket), the math still doesn’t work out.

This describes almost exactly my current renting scenario. There is no justification for where prices are in my town. "It's special" is not a good enough explanation for me. If there were something fundamentally different about the town or zip code, it would correlate with demographic data. That's not the case, or at least not that I've found so far. I try to keep an open mind and look for new reasons or rationale behind this economic aberration, and the only thing that adds up is that a lack of foreclosures have delayed price discovery in certain areas.

kapone says

Yes, I know, a house is not an “investment” and yadda yadda, but it IS one of the most (if not the most) expensive things a household will ever buy.

Correct. And for all the time that the typical person spends pursuing an education, trying to get a raise at their job, and haggling a few grand on a car purchase, they spend practically zero time (by comparison) researching the single biggest purchase in their life. Perhaps they believe that their trusted and market-sophisticated realtor would alert them to the likelihood that they're making a stupid and costly purchase thereby forgoing his own commission.

kapone says

Even now. A “good” house, something that LOOKS nice, is spacious enough (~4-5K sq ft) in a good location is still north of $1M.

4000-5000 sq ft in the DC area? That's a mansion. My house is 812 sq ft.

btw, I don't consider myself a "real estate master" or anything, but with just a bit of rational thinking, most people would realize the pros and cons of buying a house, quite easily. When I bought my house in 2002, I had a buyers agent and that was when I was buying a brand new house. (what was I thinking??) That agent got almost $8K for NOTHING. I closed on the second new house we saw. She probably spent $50 on gas money. :-)

Fast forward to when I sold my house..... :-) I spoke to the "real estate experts" and when they mentioned their extortion/take of 6%, I said....WHAT?? I quickly went into learning mode, spent about 2 months learning the ins and outs and did an FSBO sucessfully in 3 months. That would have been almost $24K to agents that I didn't have to spend.

Being smart and realizing that a lil bit of education goes a long way...is apparently a lost art.

zzyzzx says

kapone says

Even now. A “good” house, something that LOOKS nice, is spacious enough (~4-5K sq ft) in a good location is still north of $1M.

4000-5000 sq ft in the DC area? That’s a mansion. My house is 812 sq ft.

Not really. The average new single family house is over 3000 sq ft on two levels. So 4-5K is not a "mansion", but I agree, a bit larger than average. But, I'm not looking for a "bargain". I look at price/sq ft and that should be within the ballpark whther it's a 1000 sq ft house or a 5000 sqft house.

kapone says

btw, I don’t consider myself a “real estate master” or anything, but with just a bit of rational thinking, most people would realize the pros and cons of buying a house, quite easily. When I bought my house in 2002, I had a buyers agent and that was when I was buying a brand new house. (what was I thinking??) That agent got almost $8K for NOTHING. I closed on the second new house we saw. She probably spent $50 on gas money. :-)

I bought at the same time and my agent's commission was about the same amount, for no work.

Fast forward to when I sold my house….. :-) I spoke to the “real estate experts” and when they mentioned their extortion/take of 6%, I said….WHAT?? I quickly went into learning mode, spent about 2 months learning the ins and outs and did an FSBO sucessfully in 3 months. That would have been almost $24K to agents that I didn’t have to spend.

Being smart and realizing that a lil bit of education goes a long way…is apparently a lost art.

This is something that I really wish I had done. I paid $18k in realtard fees and it burns my ass to this very day. I was in a rush to sell at the time so I didn't want to take any chances, but the lesson is imprinted in my mind.

Keep in mind though that you still probably would have had to spend 3% on the buyer's agent. In my RE license course, our instructor (a broker) had no qualms in telling us she would not show a listing where the buyer agent's commission was not paid by the seller. When I pressed her over the ethical implications of her position, she immediately backpedaled and said "well um I mean I would let the buyers know that they had to pay for it". Such bullshit... they totally steer and manipulate their clients like they are putty in their hands.

klarek says

Keep in mind though that you still probably would have had to spend 3% on the buyer’s agent. In my RE license course, our instructor (a broker) had no qualms in telling us she would not show a listing where the buyer agent’s commission was not paid by the seller. When I pressed her over the ethical implications of her position, she immediately backpedaled and said “well um I mean I would let the buyers know that they had to pay for it”. Such bullshit… they totally steer and manipulate their clients like they are putty in their hands

This actually gets interesting and I speak from experience from an FSBO perspective. Was I willing to sell to someone that had a buyer's agent? Yes. But, I also let them know that the price would be 3% higher. :) An agent's commision should not factor into the valuation of a house and if the buyer felt the need to have an agent, they can damn well pay for it.

And since the agents can be crafty, so was I. I let the buyers know "confidentially" that if they fired their agent, and came back to buy the house, the price would not include the commission, and I'd offer an incentive of $1500 for moving expenses. :) 3 of my potential buyers fired their agents before they made an offer. One of them finally got the house.

Between me and the buyer, we paid a grand, princely sum of $600 for lawyer fees at settlment (not including the state/county recordation fees etc).

kapone says

This actually gets interesting and I speak from experience from an FSBO perspective. Was I willing to sell to someone that had a buyer’s agent? Yes. But, I also let them know that the price would be 3% higher. :) An agent’s commision should not factor into the valuation of a house and if the buyer felt the need to have an agent, they can damn well pay for it.

I have a family friend who just did this. He was a buyer and found an FSBO. The lady lived in the house for a long time, knew that the realtor deal was a ripoff, and was going on a limb to find a buyer who would also have the same sense to avoid the cartel's greedy clutches. I advised him to get a RE attorney and go for it. His only concern was that as a first time buyer he would not have a hand to hold at the closing table. Someone that could help if there's something awry with the transaction which would screw him over. I told him that the only thing they're attending the closing for is to collect their big paycheck and that they would do anything to keep the transaction from failing, including letting him get screwed. He bought the house for a really good price, and hopefully will spread the word to his peers.

It's actually a lot worse when you're buying without a buyer's agent and the house is listed with a broker/agent. The commission - say 6% - will be paid out entirely to the listing agent and their broker if you show up unrepresented. I took the RE license instructor to town on this, asking her how it's justified to double-dip on the already-overpriced commission. Her response was that because it was in the contract that the seller signed, that makes it right.

kapone says

And since the agents can be crafty, so was I. I let the buyers know “confidentially” that if they fired their agent, and came back to buy the house, the price would not include the commission, and I’d offer an incentive of $1500 for moving expenses. :) 3 of my potential buyers fired their agents before they made an offer. One of them finally got the house.

Depending on whether they had an agency exclusivity contract with the buyer, they can come back and collect their commission from the transaction. I actually somewhat empathize with agents on this issue since they're doing their job (as bullshit as it is) and getting shafted. Opening a door is a bullshit reason to get paid $12,000, but they might be contractually guaranteed that amount if their prey (client) signed the contract and the agent opened the door to the house they ultimately bought.

klarek says

It’s actually a lot worse when you’re buying without a buyer’s agent and the house is listed with a broker/agent. The commission - say 6% - will be paid out entirely to the listing agent and their broker if you show up unrepresented. I took the RE license instructor to town on this, asking her how it’s justified to double-dip on the already-overpriced commission. Her response was that because it was in the contract that the seller signed, that makes it right.

Well......not always. That may have been true during the yester years, but people HAVE wizened up...to a degree. For e.g. I'm in the "buyer" mode now. I approached one of my friends who is a realtor and offered her this.

I'd pay her 1% of the sale amount up to $3K for her "representation". She doesn't have to do ANYTHING. I'll look for the house, I'll do the negotiations (with her present, if needed) yadda yadda. The purpose of her representing me is that she agrees to give me back the final buyer's agent commission minus her representation fee ($3K or 1%). That way the seller's agent doesn't get to double dip. They are dipping regardless....screw them. I have no empathy for them. I think of it as a 1.5-2% cash back on the house I'm gonna buy. Might as well get some furniture....:)

klarek says

Depending on whether they had an agency exclusivity contract with the buyer, they can come back and collect their commission from the transaction. I actually somewhat empathize with agents on this issue since they’re doing their job (as bullshit as it is) and getting shafted. Opening a door is a bullshit reason to get paid $12,000, but they might be contractually guaranteed that amount if their prey (client) signed the contract and the agent opened the door to the house they ultimately bought.

That may have been true historically, it's a grey area now. What happens if the buyer sees the house on realtor.com or homedatabase.com or any such place, after they fire their agent? (and they will since these places pull their listings from the MLS systems). That information is in the public domain now, with no recourse from the agent's perspective.

That rule was designed when the agents controlled the information, and/or the listing was not publicly available. The realtor will have a real hard time in court.

kapone says

Well……not always. That may have been true during the yester years, but people HAVE wizened up…to a degree.

They still write up the same seller agency contracts that they did in years' past. Seller agrees to pay 6% commission which typically gets split. I presented an argument to my instructor that as a buyer, I could make an offer sans agent with the stipulation that the seller not pay the 6% (the argument being that there is only one agent). The savings passed to the seller will be seen by the buyer in terms of a lower sales price while the agent still gets their fat cut (say 3%). This enraged her, and she assured me that because of the contract with the seller that it would never occur (I guess in her world contracts cannot be altered or amended). I even went so far as to suggest that the buyer's offer be contingent upon a re-written agreement between the seller and his agent (thus undermining her bogus premise that it can't be done). She said she would never present such an offer to her client. I pointed out that by withholding the offer she would be in violation of the state's REB rules and potentially lose her license, and she immediately changed the subject.

So maybe you're right that people are getting wise to realtor scams, I really hope so. I doubt it though. These people run an ironfisted cartel and are hostile to even the suggestion of changing the game. I'm pretty sure the game remains unchanged.

I’d pay her 1% of the sale amount up to $3K for her “representation”. She doesn’t have to do ANYTHING. I’ll look for the house, I’ll do the negotiations (with her present, if needed) yadda yadda. The purpose of her representing me is that she agrees to give me back the final buyer’s agent commission minus her representation fee ($3K or 1%). That way the seller’s agent doesn’t get to double dip. They are dipping regardless….screw them. I have no empathy for them. I think of it as a 1.5-2% cash back on the house I’m gonna buy. Might as well get some furniture….:)

I'm doing roughly the same thing with my current agent since it's the only way to not let the seller's agent double-dip or risk them taking my offer from the fax and putting it in the trash . But they absolutely do get to double-dip otherwise. The conversation I had with the broker in my class was kind of intense. Her reaction when I mentioned re-writing the agreement with the seller told me everything about the con game she knows she is part of. I challenged her "secret" to earning double commissions on both an ethical front and a contractual one and she was not happy. The conversation leading into this was about how it's really good for sellers agents to have open houses and lure in unrepresented buyers so you can double-dip. That these people can say this with such a straight face and sleep at night is unfathomable to me.

kapone says

That may have been true historically, it’s a grey area now. What happens if the buyer sees the house on realtor.com or homedatabase.com or any such place, after they fire their agent? (and they will since these places pull their listings from the MLS systems). That information is in the public domain now, with no recourse from the agent’s perspective.

It depends on the contract. Just firing the agent isn't always good enough. You have to terminate the contract with the broker. They will try to talk you out of that (of course) and since your beef was with the agent, they'll either assign you another agent or represent you directly themselves. The commission they make from every warm body that walks through the door is always worth chasing. If you effectively terminate an agreement with a broker and go to a house they never showed you, you should be fine.

Again, we're talking about some really greedy and unethical fuckers here, so don't be surprised when they try shaking you down at the closing table months down the road while threatening you with the "procuring clause", even if they're not legally entitled to anything.

kapone says

That rule was designed when the agents controlled the information, and/or the listing was not publicly available. The realtor will have a real hard time in court.

They still control everything. Those listing agreements and agency contracts are all written from the broker's house. NAr has its recommended guidelines and such, and the firms' attorneys draft them up accordingly. Your typical buyer and seller doesn't realize that they are agreeing to a contract that is solely designed to protect and promote the interests of the broker. That is because your typical buyer and seller would have no reason to suspect such a thing since no other business model in existence comes close to that level of treachery and thievery going on in real estate.

klarek, a question for you.

Just set those realtor BS and the lies from them aside for a moment... what price level do you think we're in now and what price level it should be for homebuyer-wannabes to pull the trigger? What level do you think we'll see in, say by next year? Tell your opinion on that, if possible.

Here's what I am thinking. I think it's in 2006 level (I think the peak was 2007 summer in DC market) or 90% of the peak, and it should be somewhere arround 2002 level to be sustainable. And the last one... that I am not sure. Maybe 10% from now, which still be 2005 level.

i am in the DC market and I also believe the market is wildly overpriced.

Give it some time...

If DC prces followed the Bubble up, then it will follow the bubble down.

Supply and demand. The DC area has controlled growth policies coupled with the explosion of the federal government over the past 20 years has produced limited housing supply especially within the Beltway. The median family income in my area (halfway between DC and Baltimore) is over $80k a year. The value of the land (building site) is what is driving prices.

Bayview.

it's a bubble thats all. PG has gone nowhere for a decade.

This is what redfin says.

http://blog.redfin.com/washingtondc/2011/04/buds_on_the_trees_the_spring_market_has_officially_started_march_insider.html

In short...

DC area price went up 14%
Inventory went down
Seller's market rather than the other way
Whatever happens in the other part of country, it's not the case here in DC.

That's WTH. :)

I just moved here 6 months ago and am mortified by what you get for $800k inside the beltway. I would like to live in northern va and am making myself crazy trying to figure out when/if to buy here.

Saw this today. What does everyone make of it?

http://www.washingtonpost.com/wp-dyn/content/article/2009/09/08/AR2009090804053.html

Well. good to have another alexandrian, Montacute. How you feel about the area so far?

In these days people in descent part of DC metro wants 2006 price.

For instance,
http://www.redfin.com/VA/Arlington/3402-8th-St-S-22204/home/11261222
http://www.redfin.com/VA/Alexandria/6454-Waterfield-Rd-22315/home/9754794

Or even a long time shortsales jacked the asking price ove 10% in last month.
http://www.redfin.com/VA/Alexandria/6005-Keble-Dr-22315/home/9783374

So, are these guys really tring to sell or what?

Are they that delusional?
Maybe, or not. You being a 100K'er or your HH income being 200K does not mean a shit in nova area, Many people can affort to make home price afloat, and keep doing it till a fool knocks the door.

When it comes to DC, commuting is one of the most important thing they're looking for. We hate noise from highway, raildroads etc though, some people are willing to pay 600K for the railroad in the backyard, and Beltway right in front of the door.

So, what do you think? It's seller's market, pretty much is. Even if it looks like the other way.

Thanks Seaside. So far, I think the area is a mixed bag. There is lots to do, and some lovely areas, but the congestion is awful and the house prices leave me depressed. I got a big increase in salary moving up here, but if I bought a house, I think my standard of living would be lower. I have to commute to DC, like everyone else, so I need to live inside the beltway.

Has it ever been a buyer's market here? I just don't know how to judge buying here and am trying to educate myself.

Kapone -

I found your post interesting. I live in the NoVA area and have been actively looking for probably the past 3-4 years now. We sold our home in NoVA when I perceived the housing market was going to fall. We were not in the McLean/Great Falls area. We have been renting the same home since then (current landlord got caught - bought a new home; but, prices fell and became an involuntarily landlord). It is approximately 2400 sq. feet on a 1/3 of an acre with a fenced yard. We are actively-looking because of our young kids.

We are also not finding what we are looking for. My position has been - I need to find something that meets 95% of my criteria. I do not believe housing prices will fall 'that' much in the NoVA area. I have no crystal ball; but, I am looking at the Silver Line and believe that will actually help set a bottom on housing where I am looking at. The Silver Line may or may not help; but, at least by trying to find a place close to those stops, I've maximized my ability to stop the depreciation. My belief is that eventually, gas prices will start forcing people to look for public transportation options (if they cannot or are willing to not live downtown). If housing corrects here in the NoVA region - I would expect another 3-5% drop on average, with 10% being the maximum (and the upper range indicates to me SHTF in the U.S.). To me, if housing in NoVA depreciates significantly - there are much BIGGER problems. I've always viewed a home as a place to 'live' - not necessarily an investment. It is true, I can get 2-4% return on my cash investment - conservatively; but, at the end of the day - renting does suck (to me).

My personal belief is that in the FFX region - you have 3 separate classes. You have people buying around the $600K and lower range; 600K-900K, and those above (I acknowledge - arbitrary figures). The people at $600K and below WILL be affected by higher interest rates - that's where much of the foreclosure activity will be centered around since they are more prone to have taken exotic loans. The 600K-900K people will also be affected; but, are in a better place to weather and stay put (I would say around 10-20% of those owners have exotic loans vs. 50% of lower-priced). So, you will have homes that do come up for sale; but, are quickly snatched up if they are in good condition. Those above that price seem to be even more immune (maybe only around 10% undertook exotic loans). Loudoun county is where many people were pushed out and I think will see a more significant correction in terms of foreclosures because of higher interest rates. That is how I see it playing out .... housing will slow down in the upper 2 tiers - but, will not collapse because of the stronger economy here (government, defense, lobbying, tech corridor (bio-tech for you in Md, etc.).

This area is probably one of the best to weather the storms that may come ... and, it is always a calculated risk buying something. If we buy - we want something that we know we can live in for at least the next 15 years. Our house price may be cut in half - but, to be honest, its paper money and always has been. All of this 'theoretical' value of housing is meritless to me. It is 'paper value'. It may make one 'feel' wealthier by having a higher number; but, it is not a liquid asset. I would rather purchase a home well within our price range that still allows me significant liquidity.

seaside

http://www.rbintel.com/statistics/northern-virginia

Total Sold Dollar Volume $1,022,418,134 -20.94% +9.66%
Closed Sales 2,448 -25.3% +2.68%
Median Sold Price $360,000 +6.67% +8.93%
Avg Sold Price $417,654 +5.84% +6.8%
Avg Days on Market 63 days +40% -8.7%
Avg Sold to Orig List Ratio 96.27% -1.62% +0.41%

not exactly healthy

Montacute says

Saw this today. What does everyone make of it?

A bunch of nova scumbag realtors puffing up the market. Same thing I've been hearing for years now.

btw, the prices Do seem to be on the downward slope. :) Even in places like Potomac, Great falls, MClean Vienna etc.

I have full access to MRIS, and I'm starting to see the asking prices coming down to the 2000 level or so for quite a few properties. Sure, there's way more properties where the sellers still want 2005 pricing, but they are not selling. Especially on the upper end. On $1M+ homes, the prices are almost coming back to the 99-00 levels.

I don't know, but I'm happy that the house across the back alley from mine was vacant all winter so that I could dump my snow there. It's been listed at 100K for about 6 months now, and the moron who owns it hasn't repriced it even once. Other people in my neighborhood are asking 60K-85K for their house.

Just checked prices in another area I know well, Severn, MD. Prices there are still quite high compared to what they should be. Like double, and with outrageout property taxes compared to what they used to be. I actually pay less in Baltimore City.

I see the same thing Kapone when we were looking at Potomac, McLean, and Great Falls. Prices are coming down - and, the thing is -one can never predict a full bottom. The calculations that I am starting to wonder about is the higher interest rates that many of us believe will come. People are making an assumption that house prices will need to fall in proportion to the increase in interest rates.

I just do not see that happening at least here in NoVA. A rough estimate is every 1% rise in interest rates requires home prices to fall by about 10%. So, if rates went to 5.5% (1% more than today's rates) - that same home would need to fall about 10% to have the same payment. If rates go to 6.5% - then, we are talking 20% drop, etc. It could happen; but, I just do not see it happening lock-step in that fashion.

Back when interest rates were around 10-15% for home loans - you just did not have the volume of sales that we've seen in the past 5 years. I think that will become the norm rather than home prices necessarily approaching fire sale levels if the home is in the right location. I would think people in Loudoun county/Prince George's, etc., would be more susceptible to the higher interest rates than those that reside in Montgomery/Fairfax/Arlington/Alexandria counties.

kekua says

I just do not see that happening at least here in NoVA.

It'll happen. :) money is money. The average American homeowner is only now waking up to the fact that a house is a fairly illiquid, money eating asset and that the local governments will keep squeezing and raising taxes on homes. They don't have a choice.

Unless we amend the constitution and dissolve state and local govts, a home will always be at the mercy of the political morons. Hell, owning a home is worse than holding credit default swaps, where you also have an ongoing "maintenance fee", but atleast they are not illiquid. You can get out in a heartbeat and without a 6% extortion from the "broker".

The reason I still want to "buy"? We want a slightly bigger home and there's very few decent rentals that we actually like. I have no qualms in paying $4,000 a month in rent, but the property has to be "nice". We'll be living in it after all.