From today's Washington Post's Real Estate "Live" with hosts Maryann Haggerty and Elizabeth Razzi:
Arlington, Va.: Why wouldn't a house in arlington depreciate from 500k to 350k in a couple of years? Those houses pre 2001 were CHEAP (less than 200k). Sorry, what goes up must come down. Please do not think that the northern arlington area is immune to the housing crisis!
Elizabeth Razzi: I think you answered it right there. Prices below $200k were cheap for a house so close to DC & Metro. What goes up must come down? Are you sure about that? Guess I'd better cash out all my investments and live in a cave.
Maryann Haggerty: Historically, real estate prices have tracked inflation.
15 comments:
Yawn-
Are those two still at twisting the reality outside their window?
The WP needs some new blood....
What Haggerty didnt say is that we have been having record inflation over the past 8 years.
Our real inflation rate has been around 8-10% a year. So yes, perhaps prices to track inflation, but even so they are still too high.
http://www.youtube.com/watch?v=AeHWW5gbc0w
"Historically, real estate prices have tracked inflation."
Ok, so she gets points for figuring out something most of the real estate cheerleaders never seem to(she doesn't think 5-10% yearly increases are normal...) but she can't carry that thought on to the next step.
If real estate prices track inflation... then what the heck was going on these last 7 years?
I think this is a simple case where she is willing to accept higher prices as "normal" after just a few years because that is "good" news in her mind.
Using the August median sales stats for a quick and dirty comparison... Arlington last had a median price of ~350k in 2003. Now here we are four years later and "real estate prices track inflation" therefor they can't go down.
Now I am not predicting that we are going to see 350k in Arlington, but she is far too dismissive of price drops in general in her chats. You don't have to try to time the market down the the exact month to know that prices are falling in most of the region and that in some areas they are in a virtual freefall.
"Our three-level townhome has been on the market for two months now. How soon can we expect to get a sale? What is the average period of time for homes on the market these days?
Maryann Haggerty: In Fairfax County in August, average days on market was 78 days, according to MRIS stats (the local multiple listings service.)"
No question about the price of the townhouse? How can you give any meaningful advice about whether or not a townhouse will sell if you don't know what they are asking?
"PG County, Md.: Is it better to put a Hyattsville house on the market now or wait until spring 2008? I want to relocate back to the Midwest, but I don't need to hurry.
Elizabeth Razzi: If it were my decision, I would wait. There are two reasons for that. First: We're almost halfway through the September-October period, which tends to the market's little hurrah before the big winter chill. Second, for-sale invenntories are high now; you may do better if that gets whittled down a bit."
Yeah... because everything will be better in the spring. A quick glance at MRIS's August data for PG county shows sales down 53% YoY by dollar and 50% by units. Days on the market are up 93%. There were 611 sales with 6800+ houses on the market....
What good does she possibly think waiting 6 months is going to do?
Is there anyone on this blog willing to predict that prices will be above September 2007's numbers anytime in 2008?
When even Alan Greenspan is saying housing prices will fall even more(and his estimate of 10% is sort of a nationwide median), these two WP ladies are holding forth about things they don't understand at all.
Ms.Razzi should have explained why Arlington was 'CHEAP' at that time...and why she thinks the same conditions cannot return over the next couple of years.
It is possible to have 36% nominal decline in a couple of years, though not likely. The more likely scenario is something like a 20% fall in nominal terms over 3 years, which--with rising inflation--can amount to a 36% fall in real-terms.
They just need to stick to talking about benches out front of buildings, whether or not to change the carpet and other nuts and bolts they might have some actual insight into. It is beyond obvious that they are either unwilling or unable to understand what is taking place in the market today.
The reason why real estate myths have legs is that they are based on half truths.
Maryann Haggerty: Historically, real estate prices have tracked inflation.
That used to be true. Here is the real story:
The downturn should not have been a surprise. House prices rose at an unprecedented rate over the past dozen years. For a hundred years, from 1895 to 1995, house prices nationwide increased at the same pace as the overall inflation rate. Since 1995 inflation-adjusted house prices have risen by more than 70 percent. It should have been clear to economists that this run-up was being driven by a speculative bubble. There was no change in the fundamentals of supply or demand that could have explained the rise.
http://tinyurl.com/34n4vt
I did find it interesting that they said several times to wait until the jumbo market calms down. People in the mortage industry tell me that should be by about the end of Q2 2008.
So much for waiting for spring. Wait, weren't they saying that at this time last year? Didn't someone say bidding wars by May? Even the corrupt NAR has said no recovery will happen until 2009.
Perhaps I'm being naieve, but I can't beleieve these people have a forum to give out such horrifically bad, unsubstantiated advice. Well, its free, so I guess you get what you pay for.
At least she admits that monthly numbers for Arlington can be misleading.
"Elizabeth Razzi: He's expecting property values to decline 36 percent in the next year or two. The DC-area economy would have to get pretty nasty for that to happen. And he still wants to live here, expecting that?"
[Why would the economy have to get "pretty nasty for that to happen?" The economy wasn't "pretty nasty" when prices were 36% lower just a couple of years ago, right? And even if the economy would have to get "pretty nasty," why does this consequence preclude the cause from occuring?]
"Maryann Haggerty: Yeah, that's a drop that even Detroit isn't seeing. It's also much bigger than even the most bearish of analysts are calling for. I continue to believe that timing markets on a micro level is foolish."
[First of all, other areas have seen drops that large recently (think lots of cities in Florida). But whether or not another city has already seen a drop that large is irrelevant because the question wasn't about what has happened so far, it was about what might happen in the future. Maryann's response is ridiculous because its essence is "it hasn't happened yet so it can't happen."]
"Elizabeth Razzi: I think you answered it right there. Prices below $200k were cheap for a house so close to DC & Metro. What goes up must come down? Are you sure about that? Guess I'd better cash out all my investments and live in a cave."
[The follow-up commenter didn't mean cheap in terms of valuation, he meant cheap compared to today. In other words, why is $350,000 an impossibility if houses sold for even less than that just a few short years ago? And Elizabeth's implication that prices were cheap in terms of valuation in 2001 is complete nonsense. The numbers don't support that claim and no experts were claiming houses were cheap at that time. This is revisionist history at its worst.]
[In addition, Razzi should be smart enough to understand that when the commenter said "What goes up must come down", he wasn't saying all appreciation eventually disappears for all assets, but rather that price appreciation not supported by fundamentals will disappear. How could anyone logically disagree with this?]
"Maryann Haggerty: Historically, real estate prices have tracked inflation."
[True Maryann, so since prices rose significantly faster than the rate of inflation in recent years, why is a drop in prices back to levels that would have tracked inflation (such as those suggested by the original commenter) out of the question and an impossibility?]
It's funny hearing bubbleheads such as JF and Caveat going to such extremes to try and counter the simple logic expressed so brilliantly by Haggerty and Razzi.
It's clear that bubbleheads have an agenda and that anything, even logic, that counters it is wrong.
Incidentally, I hear that Haggerty has her Georgetown property on the market for $1.7 million. I guess she'll be the one with the last laugh on the bubbleheads.
What simple logic?
Oh yeah... real estate never goes down. I forgot about that "simple logic."
DC is the next Manhattan right?
New-paradigm-pan-global-economy-it's-different-here, right lance?
"Didn't someone say bidding wars by May?"
Yeah, I think that same person live in 20009, a zip code where house prices have fallen over the last 2 years.
Incidentally, I hear that Haggerty has her Georgetown property on the market for $1.7 million. I guess she'll be the one with the last laugh on the bubbleheads.
Ah, so good. So good.
Maryann actually lives on Capitol Hill. She's mentioned it several times on the chats.
mortonjr77@hotmail.com said...
"Incidentally, I hear that Haggerty has her Georgetown property on the market for $1.7 million. I guess she'll be the one with the last laugh on the bubbleheads.
Ah, so good. So good.
Maryann actually lives on Capitol Hill. She's mentioned it several times on the chats."
She may have lived there before ... and may still own the property (renting it out?), but she now lives in Georgetown ... and has her property on the market. I can't say how I know, but I know ...
"She may have lived there before ... and may still own the property (renting it out?), but she now lives in Georgetown ... and has her property on the market. I can't say how I know, but I know ..."
Dude. Ah, you're the best. Still living with your mom, huh.
"simple logic expressed briliantlly"
The unsupported delusion continues. Lance thinks buy saying something is true, it becomes true, rather than counter our points.
Perhaps this is evidence why lance believes real estate appreciation at 70 time the rate of inflation is sustainable. Because he didn't refute this point. He just said stating facts is "going to extremes."
Perhaps I need to use much more normal, mainstream means of arguments, like thinking up some completely bull shit theory and coining some important sounding name, like pan-global economics. Yes, that makes much more sense lance.
But if what you say is true about Haggerty, then that reveals her bias. she just wants to cash in on the big dollars, and how dare people use facts and figures to deny her that, right lance?
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