The Washington Post's Real Estate Editor Maryann Haggerty and Columnist Elizabeth Razzi answered questions today.
Here's a transcript.
Friday, July 20, 2007
Real Estate "Live" Today
Posted by Harriet at 6:23 PM
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16 comments:
"I'm sorry, but you'll have as much luck predicting the weather for July 20 of NEXT summer as you will have predicting the value of any given condo a year from now."
Hot, humid, with a 50% chance of thunderstorms.
ANd your condo is going to lose value.
Easy.
Too funny! Although we're having a gorgeous weekend for weather, I can almost say with certainty that there's a 90% chance that next July 20th it'll be as you say.
Elizabeth Razzi: The prices of seven to ten years ago? That would be a whopping price decline, and I think we'd have to see a lot of job loss to get there. So far, that's not happening.
Maryann Haggerty: For prices to roll back seven or 10 years, we would need an economic cataclysm, I suspect. What's more common is for prices to stagnate or fall somewhat as incomes continue to grow, so things get back in line.
Elizabeth completely missed the point. Maryann eventually caught on that the question really was "will housing prices come back in line with incomes and rents, as they were 7 to 10 years ago?"
That was a good discussion. Hopefully those waiting for prices to roll back 7 or 10 years will have understand why they are wasting their time.
Hey James,
Great point. People should stop trying to predict the marketplace beyond 3 months.
Heck if I see a condo building that usually has 6 units for sale, suddenly have 40 units, sure I can say price are going to fall, but that only works with a very short terms outlook.
In a year, too many other variables can (and do) take place. (war, interest rates, taxes, elections etc)
Frank Borges LL0SA- Virginia Broker BLOG.FranklyRealty.com
Frank,
I'd add to that list the billions in adjustable rate mortgage resets this fall. (And the further question of if local borrowers will be able to refinance).
As you mentioned in another comment, leverage can be very risky. Many borrowers predicted that "real estate prices always go up" and that appreciation would bail them out of mortgages they couldn't afford.
Frank,
People can reasonably say prices will have to come down based on fundamentals. While there can be extraneous variables you mention, assuming these are not a factor, we can say prices will have to go down.
Why would elections matter so much? Republican or Demorcrats, housing market fundamentals based on supply, demand and income levels should not change much.
Where elections may matter is with a new Fed and changes in interest rate policy, but that won't be sudden.
As a very public realtor with a blog, what is your take about the next few months?
Tedk,
You said:
"People can reasonably say prices will have to come down based on fundamentals."
But aren't all the fundamentals out there pointing to ever increasing pressure on prices --- particularly here in the Washington area?
I mean, the economy continues to roar (due to increasing efficiences gained from improvements to information technology as well as the forming of the pan-global economy). The population continues to swell due to very high immigration as well as the birthrate. The income of the highly educated continues to rise quickly (this area has the highest percent of college educated workers in the country.) It's getting harder and harder to find new places to build homes in this area (due to real constraints such as "how far can someone drive?" and man made constraints such as zoning and historic districts.)
I could go on and on, but to me at least the fundamentals all point to increasing pressure on prices ... not decreasing pressure.
lance,
The problem with yopur arguments are that--
1. All the factors you mentioned have been true for at least a decade. There was a huge tech boom in NoVA starting in the mid 90's. But home prices didn't rise so hugely except post-2003. And by end of 2003 or early 2004, the fall in mortgage rates had stopped, but there was still a huge rise in 2004 and 2005. And while household income is high in the area, it is nowhere near high enough to justify the prices. So the fundamentals explanation does not withstand scrutiny.
2.More importantly, as I have repeatedly said in this forum, price increases in the DC area happened as part of a global bubble in housing prices. And have the prices in the less desirable areas fallen enough? No, at least not yet.
It was obvious that easy credit and abundant liquidity played a major role in this--and the DC area has been no different.
While demand will remain high in DC compared to some areas like the mid-west or far outer suburbs in VA and MD, the portion of the price rise caused by the global liquidity bubble will have to be cleaned up even in DC. All signs point to that. And that may take a 30-40% decline.
Of course, Arlington, McLean, Bethesda, Chevy Chase, Falls Church City, Great Falls and Vienna will probably see only more modest drops. But that doesn't detract from the fact that prices will have to come down a long way in the region as a whole.
"I'm sorry, but you'll have as much luck predicting the weather for July 20 of NEXT summer as you will have predicting the value of any given condo a year from now."
"Elizabeth Razzi: The prices of seven to ten years ago? That would be a whopping price decline, and I think we'd have to see a lot of job loss to get there. So far, that's not happening."
"Maryann Haggerty: For prices to roll back seven or 10 years, we would need an economic cataclysm, I suspect. What's more common is for prices to stagnate or fall somewhat as incomes continue to grow, so things get back in line."
It's in these kinds of quotes that Maryann and Elizabeth reveal their hand, which is basically "we can't predict the future of home prices, but we know they won't fall."
If you can't predict the future, how can you dismiss a price correction that would bring prices back in line with fundamentals?
Lance, it's disingenuous of you to refer to overly broad "fundamentals" while ignoring the specific fundamentals of valuation.
Sure the economy appears strong and incomes in the area are high. The problem is that houses prices already reflect these fundamentals and much more.
The bottom line - prices are way out of line with incomes, rents, and affordability. Your spin and attempts to speak in overly broad terms doesn't change that.
Lance, what's up with you?
You are a very tenacious troll indeed!
Blogs of this ilk are places where like-minded folk gather to express themselves. You see, the larger debate is settled, they just want to dig in the minutia. It's there hobby like stamp collecting or civil war reenactment.
Why do you come here? It's like going up to Gettysburg and calling everyone freaks and losers. You have to admit, it is rather antisocial behavior on your part.
model marker,
you have a point. most bh's already have their minds made up and they are just looking to comiserate with like minded folks. i guess i like the idea that someday the honest ones among them will say "Jez, Lance was right. I wish I'd listened to him. I wouldn't be renting a room in a trailer for so much more a month than if I'd just bought a house before prices rose even further and made it impossible for me to ever buy my own place. So much for David J and his pre-pubescent predictions.".
David Jackson won and Lance lost.
David Jackson has gone home with his tail between his legs. 2+ years of predictions of doom and gloom ... and still no recession and still no burst bubble with "blood in the streets" as he liked to put it. Things are just as Va_Investor and I pointed out a multitude of times. Prices slightly and temporarily dipped for condos and new development areas, prices continuing to increase for desireable and established areas, and people just going on with their lives ... Except for the Bubble Heads of course who continue to wait in vain hoping that "bad fortune" will befall others so that they can then swoop down like vultures. It looks like David J. himself has thrown in the towel. I would have thought he'd have the decency to at least admit he was wrong. He owes that to the sheeple he has unintentionally misled.
David Jackson won and Lance lost.
"Except for the Bubble Heads of course who continue to wait in vain hoping that "bad fortune" will befall others so that they can then swoop down like vultures."
mmmmmm, housing puts, yum yum. This is one fat and happy vulture.
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