Washington Post Columnist Elizabeth Razzi garnered some quotes from John McEnearney, 81, founder of McEnearney Associates, and P. Wesley Foster Jr., 74, founder of Long & Foster Real Estate. Her lengthy article is a good read. Here are some highlights:
"How does this market compare with others you've seen?
Foster: I've never seen anything like it.
McEnearney: It's a little bit disconcerting; 1980 to '81 was a terrible market because interest rates got up as high as 18.45 percent. We had to go through novel approaches to put a deal together.
Foster: But this damn thing we're in here now is another one that's giving us hell. I mean, pure hell. We're sweating.
McEnearney: I agree with that wholeheartedly.
Foster: Right now we're fighting for our lives. We're closing offices, laying off people. We're going to make it, but never in 40 years have we lost money. This could be the first year we've lost money, though we're fighting like hell not to.
. . .
How much longer might this go on?
McEnearney: I would say it's probably going to be at least another year before we're going to be out of this. This market could continue into 2009 before returning to a more normal level of activity, as it surely will.
Foster: My pick is the third or fourth quarter, we'll see a little bit of pickup. Next year will be fair. Certainly by 2010 there's gonna be so much damn pent-up demand.
We're seeing life in some places already. Our Gaithersburg/Potomac office is just as lively as it can be. We're going to have a good April. And yet other places are still floored. Close-in has perked along pretty well, anyway, and it's still lively.
But, yet, and I've never seen this before in all our other recessions, there is a ring around Washington now. You go out to Prince William County, 40 to 50 percent of our sales are foreclosures or short sales. Go out to Prince George's County and 25 percent are foreclosures or short sales. Loudoun, it's probably 20 to 25 percent. Montgomery County is not nearly as bad, say it's 12 to 15 percent, and 13 percent of Fairfax. That has never been! This has never happened here!"
84 comments:
HA ! I sincerely hope she doesn't think that's what *this* blog is all about.
What do you think of bloggers who seem to root for an even bigger bust?
McEnearney: I'm not seeing that.
Foster: Good Lord. I'm not either. I'm hoping it's just a fringe bunch of nuts. Because, you know, I think that would be awful for the whole economy.
"Bigger Bust" -- if property prices are/were unstustainable, then "rooting" or not, they'll come down.
There really seem to be a lot of people out there that misunderstand what is taking place.
The whole idea that higher housing prices are a good thing is to blame I believe.
The media and the real estate industry always cheer rising housing prices without really explaining why, and what that they mean.
Housing is a necessity. When housing is overpriced it doesn't mean everyone is getting richer, it means everyone is getting poorer. People are being forced to spend more money to get the same thing. It is not that different from rising gas prices or rising food prices. It is great for the industries involved... but bad for the public.
People like to think they have made money on their house, and are thus happy to see prices rise, but that is simplistic. You can't get that money "out" unless you sell and rent or sell and leave the area. For the large majority of homeowners rising prices mean little more than higher taxes.
I am predicting a return to sustainable housing price levels. This is a good thing for me personally and the city in general, but that isn't the same thing as "rooting for a bigger bust."
This was unfortunately the biggest bubble in a very very long time. The bust is painful and that is unfortunate, but the bust is inevitable and ultimately beneficial.
What should buyers do now?
Foster: Stay away from ARMs. I wonder if this was his advice 5 years ago?
McEnearney: It's a good time to buy. Interest rates are under 6 percent. I would argue it's a better time to buy than it was in 2005/2006. By next year, we'll know if it really was a good time to buy in Spring '08.
What do you think of bloggers who seem to root for an even bigger bust?
McEnearney: I'm not seeing that.
Foster: Good Lord. I'm not either. I'm hoping it's just a fringe bunch of nuts. Because, you know, I think that would be awful for the whole economy.
Yeah, all those crazy people rooting for affordable housing. They're probably rooting for cheaper food and gas too.
I guess I don't see myself as "rooting" for a bigger bust so much as trying to understand how the bust will alter circumstances.
Harriet,
Great find! I recommend everyone reads the article in its entirety.
McEnearney: I can't say we've never lost money. The first couple of years we were in business we definitely lost money. Also in 1991. But we haven't since then. But this is a tough market to make a profit.
And the graphs show we won't hit the bottom market momentum probably until early 2009. Price bottom in ? DC could be as early as 2012.
They say five years of boom... So if that's followed by the normal five years of bust, then 2010 would be the bottom. But we've never had a boom like this one... Oh wait. We did in Florida... that one took 15+ years to recover!
Gruntled has a good point. We aren't rooting for a bust so much as preparing for the obvious outcome. We're rooting for affordable housing. Before this bubble, that was a good thing. Why did affordable housing become a dirty concept?
I like being a fringe nut. ;)
Got Popcorn?
Neil
Pardon the double post, here is something for the 'its different here' crowd:
But, yet, and I've never seen this before in all our other recessions, there is a ring around Washington now. You go out to Prince William County, 40 to 50 percent of our sales are foreclosures or short sales. Go out to Prince George's County and 25 percent are foreclosures or short sales. Loudoun, it's probably 20 to 25 percent. Montgomery County is not nearly as bad, say it's 12 to 15 percent, and 13 percent of Fairfax. That has never been! This has never happened here!
Emphasis added.
Price bottom is usually 30 months after the foreclosure peak when a region goes south. We haven't yet found the foreclosure peak. So the earliest price bottom is late 2010 but more likely 2011 or 2012. High end 'desirable areas' hit bottom well after the ex-urbs start recovering.
Got Popcorn?
Neil
But you all ARE rooting for a "bigger bust" and NOT for affordable housing ... though apparently you don't realize it.
Affordable housing is simply that ... housing that even people without a lot of savings (or more likely "family money") can get into. That means low down payments, available financing, more construction of houses/condos available for sale without all the extras or in places where it's less convenient to live. Additionally, and most importantly, it means having a robust economy that will make it possible for people needing housing to earn the money to buy these places. And yes, it also means prices rising so that these same people have the equity to move up as their and their family's needs expand. It means a lot of things.
It doesn't mean prices dropping and the economy going to hell in a handbag so that someone like Neil with oodles of cash can swoop in profit off of the misfortunes of others through the plunging prices and bad economy he's been wishing on us all.
These morons have no idea what they are up against. Peak Oil is here, it is real and it is only going to get worse. Gas prices are only going in one direction (long term) from here on out: up. Living 40 miles from your job will no longer be a viable option for most people.
There is not going to be any rebound in the outer suburbs in 2009, 2010 or any time after that. Welcome to the new exurban ghettos.
It's not just about getting in, it's about staying in. There is a difference between Affordable Housing and an affordable (livable) housing market.
30 years ago a Fed Supergrade could get a 4 BR house in Rockville, Kensington, Vienna at about 2-3X salary. Now it's about 6X salary. And that leaves the rest of the Feds and most of the private sector living in the ring of fire or unable to move up. Telling people that they are winning in a robust housing market when they are forced to live 25 miles from work is offensive.
If the average home is much more then 4-5X the average salary in that area, the population can't support that market. As we are seeing now.
If teachers, firemen, police, nurses can't afford to live in an area and that's okay with the residents, why the hell should they want to commute to that area to work? Much less shopowners, mechanics, travel agents and ministers?
I don't see anyone rooting for a big bust. I just see a bunch of cry-babies. You know, the ones whose soccer leagues never had losers.
Proponents of any industry must be optimistic. That is part of their job. That is why if I want to know about the coal pollution, I don't go to someone within the industry. Instead I go to experts whose job is to observe the coal indusdry, analyze its processes, order ubiased scientific studies of the impact of burning coal and submit their findings in peer-reviewed journals.
Never, ever, would I or have I gone to a realtor to get unbiased information on RE markets. Good grief. They are spokespeople for their business, just like the coal industry spokesperson represents his or her industry.
The only time I have seen an industry admit (finally) that their product was and is dangerous is the tobacco industry. They admitted only after 30 years, billions of dollar in law suits, scientific studies and irrefutable evidence. I don't expect those whose business is RE will ever say we are screwed for a long time. They have to filter information to suit their future. Most RE people are not savvy in economics, finance or management. They are salespeople. They sell RE and they must sell to stay alive, feed their families and pay their support staff.
Truth can be a science and it this case it is. This happened and is still happening. You can follow the crumbs back and forth. The housing crisis was engineered and the engineering has failed miserably.
Lance,
You twist things far too much. I'm not trying to take advantage of others. But the market has overshot any sustainable level. When its obvious that the market will correct to a better buying opportunity... Its simply delayed gratification.
You just want people to buy so you get your commission. No concern if people can actually afford to stay in the home. Your strawman arguments are old. They were old two years ago. For years you've pretended to be an angel while insulting everyone who didn't agree with you. Bullying won't qualify people for loans. It was about two years ago I first told you about debt exhaustion. We're there.
And Lance, remember, I still think its a recession. You mock history because you do not understand it. Its not what I want. We're mal-invested into real estate. That is coming to an end.
It takes real estate to pull us out of a recession. So when it leads us into a recession, as it has, its a longer and deeper recession. Not what I want.
But you want people to buy property they really cannot afford. Why? I'm going to invest as is best for my family. We had a mania. Its almost over. Now for the flip side...
I don't set mortgage DTI requirements. But its easy to see where they're going and what is to my advantage. I'm not catching a falling knife for the benefit of a speculator who just wanted to get rich off me.
The REIC will be assigned responsibility for the damage they caused; just like Florida 1925/1926.
Affordable housing is returning. We should all calibrate that. :)
Got Popcorn?
Neil
motcollins said:
"30 years ago a Fed Supergrade could get a 4 BR house in Rockville, Kensington, Vienna at about 2-3X salary. Now it's about 6X salary."
Rockville, Kensington, Vienna are hardly the same places now they were 30 years ago. I guess you don't remember when these had no metro service, White Flint was the only decent shopping center in the Rockville/Kensington area (Bailey's Crossroads in Virginia), and Walter Johnson High School was in the middle of cow fields.
The DC area is hardly the same place it was 30 years ago. I was here. I suspect you weren't, or you wouldn't be serious about your indignation that these areas are now less affordable.
motcollins said:
"If teachers, firemen, police, nurses can't afford to live in an area and that's okay with the residents, why the hell should they want to commute to that area to work? Much less shopowners, mechanics, travel agents and ministers?"
It's called supply and demand. If the teachers, firemen, police, nurses can't afford to live in an area (or want to commute to it), then that means these communities will need to pay these people more so that they CAN afford to live in these areas or at a minimum be persuaded to commute to them. The market works both ways.
Neil said:
"You just want people to buy so you get your commission."
LOL ... One day you're calling me a IT technician, the next day a real estate agent. Wrong on both counts .. but keep trying.
Actually, I'm a native Washingtonian, thanks. 30 years ago the White Flint land was a driving range and the old GEM store. Montgomery Mall, Wheaton Plaza and Congressional Plaza were around long before White Flint, as was shopping around Chevy Chase. Most of the trendy overpriced White Flint stores failed within a few years. And while the Metro didn't reach that area until the early 80s everyone was certainly already paying for it.
The issue remains that if the upper middle class can't afford the upper middle class areas, how can anyone below them hope to buy anything?
Saying the market is balanced when people can't live anywhere near they work is antithetical to urban planning. And if you think the rich folk care do anything but complain about the big box stores down the street and wouldn't dream of taking Metro you need to get out more.
But since the market will correct itself anyway, it doesn't really matter.
lance . . .
"It's called supply and demand. If the teachers, firemen, police, nurses can't afford to live in an area (or want to commute to it)"
Do you always try doublespeak lance?
This is exactly what most people are saying . . . prices are too high for the vast majority of people in this area. They can't afford their homes if they had to buy them today. Not just firemen, but engineers, government personel, new homeowners, etc.
Only two things will remedy that, higher incomes and/or lower prices.
Are you so dense as to not realize housing prices are still WAAAY out of wack with incomes and are not sustainable.
Unless of course you want everyone to buy a house and then eat bread and crackers for 10 years until their income catches up to their mortgage payments.
GTE said:
"Unless of course you want everyone to buy a house and then eat bread and crackers for 10 years until their income catches up to their mortgage payments."
If you're dependent on the prices of close-in, desireable housing to go down (vs. being focused on getting your income to go up), then yes, it is time that you started eating bread and crackers ...
Neil:
Price bottom is usually 30 months after the foreclosure peak when a region goes south. We haven't yet found the foreclosure peak. So the earliest price bottom is late 2010 but more likely 2011 or 2012. High end 'desirable areas' hit bottom well after the ex-urbs start recovering.
Where did this come from?
Is it that folks who own paid off, close-in places will decide after 2010-2012, that they won't be emotionally fulfilled unless they can drive 3 and 4 hours every day, spending $1,000+/month for gasoline?
Lance, that means you. You'll be moving to PWC in a few years. It is in-evitable. It is the dark side of the force, may it be with you.
Food for thought.
As of January 2008, Federal Wage Table for GS levels.
Federal Executive Wage Table for the SES'rs.
As you can see Federal workers, most of who have not topped out at the GS15 level and most SESr's don't make enough money to a high life in this area. The vast overwhelming majority never will.
The Federal government is this area's largest employer (duh). Recruiting for high level positions is the worst it has ever been. Agencies can't lure quality people from other areas of the country to move here. Most often mentioned reasons: housing too expensive, can make more in the private sector and general cost of living. Go figure. Another "duh."
:-)
LA county in California is reporting a 29% median price drop (y-o-y; for existing home sales) in March. If such a sharp drop can't focus attention of the bubble-deniers, what will?
See:
http://www.car.org/index.php?id=Mzg0MzE=
"The issue remains that if the upper middle class can't afford the upper middle class areas, how can anyone below them hope to buy anything?"
Exactly...
Despite lance's fantasies, this area has not suddenly turned into Manhattan and every little region of this city didn't suddenly transform into an exclusive enclave for the super-wealthy.
A senior government employee should be able to afford a nice house in a nice neighborhood. If a GS-15 can barely afford a "starter" home inside(or even near) the beltway what the heck are the vast majority of government employees going to afford?
"LOL ... One day you're calling me a IT technician, the next day a real estate agent. Wrong on both counts .. but keep trying."
Ok, lets correct that...
You are the son of a realtor and a former realtor yourself.
Happy?
"Is it that folks who own paid off, close-in places will decide after 2010-2012, that they won't be emotionally fulfilled unless they can drive 3 and 4 hours every day, spending $1,000+/month for gasoline?
Lance, that means you. You'll be moving to PWC in a few years. It is in-evitable. It is the dark side of the force, may it be with you."
This is called a strawman argument KH, and it wasn't even a good one.
BTW, when did you start your real estate speculation? It would be interesting to know when you bought into the market.
"wannabuy said...
Pardon the double post, here is something for the 'its different here' crowd:"
Neil - here is something for you to suck on: CASE SHILLER SAYS THE INNER AREAS ARE DIFFERENT!
http://freakonomics.blogs.nytimes.com/2008/04/22/suburbs-are-hurting-from-birth-rates-and-gas-prices/
http://www.npr.org/templates/story/story.php?storyId=89803663
I want to give my own personal hat tip to the blogger Tom who cited this a few days ago. At first I assumed it was just a fluff piece with quotes from realtors. Instead, the lack of price drops was attributed to Neil's high priest - CASE SHILLER.
Neil - just cause I WANT prices to come down close in doesnt mean I am not a realist - and they very well could come down soon. However, you have been on a 4 month campaign to prove the inner area had fallen in line with the rest of the area. Now your legs have been chopped out from under you. Your lord your liege - Case Shiller says you are WRONG.
Leroy said:
"A senior government employee should be able to afford a nice house in a nice neighborhood. If a GS-15 can barely afford a "starter" home inside(or even near) the beltway what the heck are the vast majority of government employees going to afford?"
LOL ... I know lots of government employees who DO own nice homes in nice neigbhorhoods. Again, you are constructing strawmen. Your "they can't afford it" is based on your "given" that these folks aren't coming in with substantial equity/savings. If we're talking about a "senior" government employee as you say, I'd bet they have enough socked away to put a 50% or greater down payment ... if they wanted ... and that's not even counting the equity they are bringing with them from their last home. Please stop coming up with this ludicrous "they can't afford it if they are depending only on income from their job" ... People don't live only off of the income from their jobs ... unless they are just starting off ... And normally someone just entering the workforce isn't looking to buy ...
anon:
the 1st article you quoted is trash . . .they can't even get the facts straight. They say outside the district prices have fallen 18%, in the district they have risen 11%.
I have no idea where they get 11% (unless they cherrypick 1 zip code, hardly "in the district") b/c according to the MRIS page DC prices have FALLEN ~5% YOY.
Nobody in the 2nd article is saying its different.
I love how all the HH are crowing about how Arlington has fallen or MY neighborhood hasn't fallen.
Just b/c it hasn't doesn't mean it won't, and if you have any least bit of a brain you can look at the actual VOLUME of sales and determine that volume is down, way down 30-40% YOY. If you know ANYTHING about investing or even economics for that matter you can see that price will soon follow.
This is the same attitude that lance, kh, and now you have presented 2 years ago in 2005 saying . . . "oh the bubble hasn't burst so now it won't". Even though you could plainly look and see volume way down YOY, it was only a matter of time before the volume translated into price.
It's not rocket science . . . people can not live here at these prices! Prices and/or incomes MUST adjust.
okay lance . . . sure . . . considering the average savings in the US is something like <10k sure keep dreaming they all have 100k stashed away.
lance: your govt people bought 20-30 years probably.
The fact is that ANYONE now has a hard time buying.. People who bought before 2002 were saying in 2005, "there is no way I could buy today!"..
HELLO PROBLEM, HELLO BUBBLE
gte said:
"Prices and/or incomes MUST adjust."
Actually, there IS a third viable option. Those whose income can't adjust ... can look elsewhere. There are plenty of cities on the East Coast alone where the cost of living is much cheaper.
I don't mean to be mean. It's just cold hard facts. When areas go through the transition that this area is going through, those who haven't locked down their housing costs earlier (or saved saved substantial amounts) DO end up getting priced out. That's how the market works ... to make available houses and condos for those new arrivals bringing in the bucks reflecting the new realities. I guess you could say that at least in the case of some folks, there was some truth to "buy now or be forever shut out". Personally, I think there are always work arounds where there is the will. But some people will obviously think it is not worth it to live in a smaller/"farther out"/"less nice" place just to stay in this area. The market sends signals.
gte811i said...
"okay lance . . . sure . . . considering the average savings in the US is something like <10k sure keep dreaming they all have 100k stashed away."
DC isn't your average area. There are lots of folks with lots of money who have to be here for one reason or another. You can bet that they will use their money to out-bid you and get what they need.
"GTE said...
I love how all the HH are crowing about how Arlington has fallen or MY neighborhood hasn't fallen."
As I noted before, I rent and I WANT prices to fall and I believe they WILL FALL. At the same time, I am a realist as far as how mild the fall has been thus far.
This quote was directed more at Neil than anything. He is convinced that there is no difference in the washington area price drops. He more or less believes the disparity in drops is not accurate. His ace in the hole is Case Shiller this and Case Shiller that.
I think he was doing this because he knew that Case Shiller was not broken down by area and was not going to be - he could thus hide behind the enormity of the area and assume it is all going down at the same rate. Now we have a comment from Case Shiller saying this is not true.
For Neil, his flawed argument has now been exposed, and I personally am a bit pleased to see it. The arrogance and hubris evident in his posts assured us that despite all the evidence to the contrary, he was right. Now his arrogance and hubris is his undoing.
Leroy writes:
A senior government employee should be able to afford a nice house in a nice neighborhood. If a GS-15 can barely afford a "starter" home inside(or even near) the beltway what the heck are the vast majority of government employees going to afford?
There is another easy solution. Relocate. :) No wonder so much work was moved to Huntsville. Not my first choice... but enough to encourage more government relocations.
GTE writes:
b/c according to the MRIS page DC prices have FALLEN ~5% YOY.
And we know only the best and cleanest properties are selling. That implies real prices have dropped much further.
Lance writes:
LOL ... One day you're calling me a IT technician, the next day a real estate agent. Wrong on both counts .. but keep trying.
I've never called you an IT technician. I refered to IT engineers being relocated out of DC. You're a lawyer per your previous posts. Judging by your posts, a RE lawyer.
In other words, your posts need to be read through that filter. :)
You like to claim I've posted things I haven't. Or twist one post of mine to mean something very differnt.
So let me be clear. I hope all current home owners keep paying their mortgage. I wish for no one to lose their job. But it in no way makes economic sense to buy in the next two years. A simple spreadsheet shows everyone renting is going to come out far ahead. Its sad how many people are struggling financially. Everyone seems to know someone. I wish everyone well and I know that everyone who saved up a 'rainy day fund' will do ok. :)
Don't forget the post article noting their will be a surplus of rentals in DC through 2011. :) Good luck to the housing bulls creating a sense of urgency for buying. The historical correlations show there is no reason to buy now.
You always moch history. Is that because you do not understand the correlations or because you do not like the scary picture they paint?
Affordability will return. The market is out of its mania. :)
Got Popcorn?
Neil
the most arrogant thing neil has written is 'got popcorn?'
let's just all agree that housing within a half mile of a metro station will be better off than the rest of the area and leave it at that. oh and that the bus system here is non-existent.
the anonymous:
I want to give my own personal hat tip to the blogger Tom who cited this a few days ago. At first I assumed it was just a fluff piece with quotes from realtors. Instead, the lack of price drops was attributed to Neil's high priest - CASE SHILLER.
Yes, the high priest, the press, and realtors are now talking about the outer rim.
After 3 or 4 year of this and the price drops still stop at the beltway but that's not meaningful.
Why is it meaningful that new to the area GS-15's can't buy close-in. Somehow, thousands of folk who earn much, much less, some as little as 30K/year, live in these close-in areas.
I have neighbors who are retired, living on small pensions, earn small salaries, perhaps their social security. They own half million dollar+ homes that they paid off years ago, exactly as Lance has described.
Paid off! They were here when I moved in.
The problems of a GS-15 or supergrade aren't their problems.
I have neighbors who work in Crystal City, 2 miles away. They're not about to sell and move to PWC so they can drive 2 and 3 hours a day, spend $1,000/month on gasoline.
Why should they sell? What can you offer them? A half million bucks? They'd laugh at you.
Try one million.
No deal.
Now try one and a half.
No wait, you don't have one and half million so there it is. It's just the market and market forces. Pretty much as Lance has described.
Realize that my neighbors probably do not give this much thought, other than knowing that they are fortunate.
They're not selling, not because they expect prices to continue up but because they simply do not want to move.
"Your "they can't afford it" is based on your "given" that these folks aren't coming in with substantial equity/savings. If we're talking about a "senior" government employee as you say, I'd bet they have enough socked away to put a 50% or greater down payment ... if they wanted ... and that's not even counting the equity they are bringing with them from their last home."
Ah yes, the everyone in DC must have bought before the bubble or just have a trust fund argument... another of your stronger cases.
I wonder if you could say this stuff in person with a straight face. I kind of doubt it...
A government employee bringing in 130K or so can expect to afford a house in the 400k range.
What is the catch? Few government employees will reach that level until well into their 40s, if ever.
(most never will)
What kind of house does that get them? A 900 square foot 3bd 1ba from 1948?
Oh but wait, they probably have a half million in bubble equity or family money in the bank...
"I don't mean to be mean. It's just cold hard facts. When areas go through the transition that this area is going through, those who haven't locked down their housing costs earlier (or saved saved substantial amounts) DO end up getting priced out."
and like clockwork we are back to the old "priced out forever" scare tactic...
So let me get this straight.
First everyone in DC is making hundreds of thousands a year. T
hen, once you have been shown the stats enough for them to sink in...
you say incomes don't matter because everyone has vast funds that don't show up in their incomes....
then you are right back to the whole priced out and have to leave the area idea...
but no matter what. Housing prices in DC won't drop, it just can't happen.
You spin and spin and spin, and at the end of the day it all comes back to you trying to find a way to justify DC not being part of the bubble seen across the country.
Feeling dizzy lance?
"After 3 or 4 year of this and the price drops still stop at the beltway but that's not meaningful."
Welcome to last year...
You need to move the goalposts faster KH, the market has passed your denials...
lance,
Your comment that people could leave the area and look elsewhere for affordable housing reminds me of the South Park episode in which Kyle recommends that South Park get rid of all the poor people -- then there would be only rich people left.
Who would work at the malls, grocery stores, restaurants, etc. if the poor look elsewhere for affordable housing? Perhaps you weren't trying to be mean; however, I cannot understand such a comment.
Affordable housing benefits the poor and middle classes. Let me emphasize *affordable*. When teachers, firefighters, grocery store workers, retail workers, etc. can actually afford to purchase a home in the area in which they work, this is a good thing. Since you promote homeownership, I would think you'd agree. Furthermore, since lower income people are far less likely to save for their own retirements, putting them into homes (again, let me emphasize *affordable*) to build equity would be beneficial.
Kristina said:
"Perhaps you weren't trying to be mean; however, I cannot understand such a comment."
On the contrary, you did not understand it. You missed the part where I said: " I think there are always work arounds where there is the will. But some people will obviously think it is not worth it to live in a smaller/"farther out"/"less nice" place just to stay in this area. The market sends signals."
I.e., It's not that these folks can't live here, then can. But they have to be prepared to get less for there money in terms of space, convenience etc. That's what happens as a city gets bigger and more important. At the extreme is Manhatten. Even the richest of the rich live in apartments there. For some people that "4 bedroom colonial with the 3 acres to mow" is very important. They will choose to live in a place like Atlanta rather than Manhatten ... or DC. It's all a matter of choices and the freedom of making choices.
KH,
You make some good comments about most of the people "close in" just not wanting to move for just about any price. I know there must be a shortage of homes out there as at least twice a month I get letters from different Realtors asking if I would consider selling as they have some clients interested in buying in the area. The letters then go on to state the prospective buyers' requirements.
"Your comment that people could leave the area and look elsewhere for affordable housing reminds me of the South Park episode in which Kyle recommends that South Park get rid of all the poor people -- then there would be only rich people left."
That isn't far off the mark.
Lance's theory is that as DC becomes the next Manhattan his house will become incredibly valuable and he will thus become "successful" based on his house's value. He will get to live in a neighborhood of the super rich without being super rich himself, which I guess is the next best thing in his book.
Obviously you can't make an omelet without breaking a few eggs. If an inflated housing market is bad for everyone but him personally... well everyone should have bought years ago as well.
Don't fear however, because lance's track record with predictions is right up there with Wile E Coyote's track record with gadgets...
Leroy as usual has to resort to making up others' intentions since he has nothing of substance to offer to the discussion.
Kristina
the South Park episode in which Kyle recommends that South Park get rid of all the poor people
Moving past the fact that you are talking about a cartoon... I like THE Siiimp-sonnnns ... The fact is, Alexandria has been unaffordable to many for 15 or 20 years.
This is not news and this is the way it is as cities grow larger.
The historic solution has been, lower your expectations from SFHs first to row houses, then high rise apartments, also push out farther and farther.
We are past the time that row houses work, those being built are too expensive because of land costs.
Lance says that everyone lives in high-rise apartments in New York City. That's not exactly true. Some people own Brownstone rowhouses in Manhattan. These places can cost tens of millions.
But back to the historic solutions. Highrises are failing us too. Partially because the cities are controlling high rise construction, partially because of the feds height restrictions, partially because of National airport.
Wanting affordable housing, a moral imperative for affordable housing, will not make it happen. We are past that time. Don't like it? As they say, "Deal!"
Similarly the wishes, hopes, needs, and dreams of GS-15's, supergrades, will not force my neighbors, retired clerical workers, cashiers, from their paid-up homes.
The fact that high-wage earners have to drive 3 hours round trip from Leesburg to Crystal City (The building signs read Boeing, SAIC, Lockheed-Martin, Northrup-Grumman) is not the problem of my neighbors, who may be lower level workers in those same firms.
My neighbors know that when they sell, they will never, ever afford to buy again in this neighborhood. They know that compared to the few thousand square feet under their feet, money is worthless.
(I'm not so bold as to claim "buy now or forever be priced out." I'm saying that in my neighborhood, the owners believe that if they sell, they personally will not have the where-with-all to buy back in.)
Don't take this wrong. While I don't know Lance's area, this zipcode is still "affordable". You can buy a very nice, mid-size SFH for about $750K.
This is out of my price range but it is affordable enough that places are selling.
I'm reminded of Chip's apartment. I gather it's small but Chip has plans for furnishing and decorating it.
Those who buy these small places, will make it theirs too, furnish it, live a quality life that includes amenities of their choosing. These house don't have "great rooms" or "formal dining rooms". They may have a 8x9 dining room off the kitchen and a 1950's living room, maybe.
It is wishful, magical thinking to imagine that people here will sell and choose a miserable commute, because, because, well, BECAUSE.
The "cute" BH rhetoric about "not in my zipcode..." and "no one can afford to buy, therefore prices will fall." simply does not overcome the reality.
No one here wants to sell.
A few will because of personal circumstances. Death, divorce, want to retire to New Zealand, a big promotion to another city. That's just a healthy market.
The Lockheed, SAIC, and Northrop employees I've known over the yaars (and I was one of them, once) work in Warrenton, Manassas, Chantilly, Reston, and Tysons. They work there most of the time, and also travel all over the world. Our family's bread & butter comes from an international firm located 50 miles from DC. It, too, involves world travel.
But again, it probably boils down to demographics. The people I mention made it a point to seek out suburban/exurban jobs because they have families to raise, and they chose not to commute.
But of course locating around the Pentagon is what a number of defense contractors do, and that building probably will continue to be a jobs magnet.
Lance:
... I get letters from different Realtors asking if I would consider selling as they have some clients interested in buying in the area. ...
That's a healthy market.
Your BH friends are still in "thinking-thinking-thinking" mode and aren't facing the reality.
Which is strange as they have the facts at their fingertips. They just choose to interpret the facts in their own way.
The biggest fact is that prices "inside the ring" as the articles put it, have not fallen in spite of everything that's happened since 2005.
This is 2008, when will it happen?
My butt-headed neighbors are stubbornly refusing to sell their paid up or low mortgage homes. Some are on fixed income, some earn a low salary but they are not selling. The nerve of them!
Some earn big salaries. There's all kinds around here.
Since they bought years, decades ago, as you have patiently explained, their housing costs are low, real estate taxes, utilities, a tiny mortgage, that's about it.
One neighbor bought about 1985. A few years ago, they noticed that they had enough cash to pay off their house. So they did.
I looked up their place at the city's tax website. They bought for about $120K. Places like theirs are selling for over $600K.
I'm guessing but I think they were earning under $50K when they bought and now earn over $100K. In effect, inflation took their housing costs from 2.5X salary to zero times salary.
If they had been renting, their rent might be about $2,500/month today. Call it $30K/year or $150K in rent receipts over the last 5 years.
I'm behind them as you seem to be but like Chip and other owners, we'll get there.
We have inflation, population pressures, a broken system of paying for highways, gasoline costs, builders going bust, all that and more working for us.
If Virginia implements that $20+ density toll on I95/I495, your mail box will fill with more of those letters pleading with you to sell.
As for what will really happen? Beats me.
I'm still hoping for a property tax break.
kh said...
"No one here wants to sell. A few will because of personal circumstances. Death, divorce, want to retire to New Zealand, a big promotion to another city. That's just a healthy market."
i was wondering why the inventory was two!
j/k redfin says 22305/22202 inventory is 250
Who on earth is saying your neighbors are going to be forced to sell?
The last several posts from you have been nothing more long winded strawman arguments.
It simply doesn't matter one bit if your immediate neighbors do or don't sell. The fact is that some people are always sellings. People die, people get married, children are born, people retire... obviously people who have their houses paid off are not going to be forced to sell.
The simple fact that some people own their houses free and clear, which is always the case, doesn't mean the market isn't going to continue falling.
Second, Alexandria has not been unaffordable for 15-20 years, not even close. You of all people should know this...
Did you become a real estate pumper before or after your started speculating? I am curious what came first.
Leroy said:
"Did you become a real estate pumper before or after your started speculating? I am curious what came first."
Another one of your subtle strawman arguments? KH hasn't once "pumped" real estate. On the contrary, he's just laid out the cold hard facts. There's only so much close-in, desirable real estate and while the demand for it increases each and every day, "they ain't making any more land".
But again, it probably boils down to demographics. The people I mention made it a point to seek out suburban/exurban jobs because they have families to raise, and they chose not to commute.
The inverse is just as real. The people who live close in to the 1st tier jobs, close to the RFPs flowing out of the Pentagon (and other near by agencies) similarly chose not to commute.
Contractor offices in Crystal City aren't there for the convenience of the employees, they're there to serve the government and to be responsive.
Crystal City and Rosslyn are both 2 Metro stops from the Pentagon. Makes attending bidders conferences, etc, convenient.
...Then there's Federal Triangle, NASA HQ, the FBI, State Department, Capital Hill, all on the metro.
Lance:
the cold hard facts. There's only so much close-in, desirable real estate and while the demand for it increases each and every day, "they ain't making any more land".
Not 100% true in the general case but more than true around here.
They can make more land by building up. This area doesn't build skyscrapers so that's out.
They can make more land by building more highways so that commuters can speed in from the boonies. I66 in Arlington is a disgrace. I395 isn't much better. Route 50? The GW Parkway?
They can make more land through light and heavy rail. Dulles Metro? Not going to happen. VRE? I hear it's not bad. There's a train from Frederick to Union Station too.
They can make more land through telecommuting. It's not going to happen for DOD and most other government work. If they can't make it happen in Silicon Valley, what chance do we have?
Most of the telecommuting work is going to India, China, Eastern Europe, the Philippines and not PWC.
“Another one of your subtle strawman arguments? KH hasn't once "pumped" real estate.”
KH at 4/2/08, 8:11 AM:
“Everyone I know who bought real estate for the long haul has done well.
I'd play the house odds. The house always wins.”
************
lance, stop using the word “strawman.” You don’t know what it means and it makes you look worse than you already do. If that is even possible.
Domenic,
It's a strawman argument when KH is unjustifably labeled as "a real estate pumper" to help foster a suspicion among the readers that KH has unspoken motivations for speaking the truth. I.e., Leroy knows what KH is saying is true and can't directly attack it, so he must undermine KH's credibility and in so doing subtly change the actual scenario from KH giving actual heartfelt advice to KH having a sinister motivation behind him.
KH is a real estate pumper, his/her numerous previous statements establish that irrefutably.
It is KH that claimed his/her only interest in housing was the potential for higher taxes... only months later did KH finally admit that yes, he/she was a real estate speculator.
You and KH both like to claim that you are only interested observers... or here to offer advice... but both of you are heavily invested in real estate and are obviously here because you feel you have a financial interest.
You go from one tired old argument, excuse, justification, or outright falsehood after another seeking to find a way to support your real purpose here... keeping prices high.
KH is a real estate pumper, his/her numerous previous statements establish that irrefutably.
It is KH that claimed his/her only interest in housing was the potential for higher taxes... only months later did KH finally admit that yes, he/she was a real estate speculator.
You and KH both like to claim that you are only interested observers... or here to offer advice... but both of you are heavily invested in real estate and are obviously here because you feel you have a financial interest.
You go from one tired old argument, excuse, justification, or outright falsehood after another seeking to find a way to support your real purpose here... keeping prices high.
"Gas prices are only going in one direction (long term) from here on out: up."
Feh, what do you know? Everyone around here knows these high gas prices are not sustainable. I'm still waiting for them to fall to the 'sustainable' price of $0.90.
And who every heard of paying $250k for a single-family home. My parent's paid $20k in 1973. I'm waiting for those sustainable prices to return.
And how do they justify charging $2.50 for a loaf of bread. The fundamentals just are not there!
Leroy said:
"You go from one tired old argument, excuse, justification, or outright falsehood after another seeking to find a way to support your real purpose here... keeping prices high."
Leroy, if you really believe that "prices can be kept high" by a couple of posters on a blog who are saying "this bubble thing is non-sense", then I don't think KH, myself, or anyone have any chance of speaking any sense to you.
Oh I don't think you have any realistic chance of affecting public opinion... even if you were able to put together a well reason argument your ability to change minds would be extremely limited.
I think you are here primarily because you can't bring yourself to admit your mistakes, or even to just disappear one day.
You used to claim afterall that the "bubble theory" was an internet blog phenomena. You decided to take it upon yourself to "educate" the bloggers only to find yourself in way over your head, arguing about subject matter you don't understand.
Ever since then you have been fighting a losing battle against the world that you can't bring yourself to give up fighting.
"As the whole idea of blogs is so new, it's doubtful that Lereah's calculations would have taken into account the drops in value incited by these "panic-inciting" blogs.
...
Like someone yelling FIRE! in a crowded theater, the blogs are sure to have an effect ... albeit a temporary one as people realize the predictions are based on falsehoods."- Lance Nov 29 2006
And how do they justify charging $2.50 for a loaf of bread. The fundamentals just are not there!
What about the ratio of renting bread as opposed to buying bread? Did you think of that?
Regarding this amusing bread comparison.
I think the point is, someone who stretched to buy a house for 500K in 2005 is worse off than someone who can now get that house for 400-425K. The latter person, by prudently waiting, is saving nearly $600/month in expenses.
That extra money will go to a better quality of life. And a few more loaves of bread, even at $2.50...
My $0.02
mytwocents said:
"I think the point is, someone who stretched to buy a house for 500K in 2005 is worse off than someone who can now get that house for 400-425K. The latter person, by prudently waiting, is saving nearly $600/month in expenses."
Perhaps, but what about the person who did their homework and bought the house in 2005 for 500K that is now only available for 600K? There are a lot of us out here like that.
I'm loathe to respond to Lance but in this case...
From what I've read, the percentage of people who purchased in 2005 and are today ahead, is much smaller than the percentage of people who are behind.
Quite content to sit out the irrational exuberance,
My $0.02
mytwocents said:
"From what I've read, the percentage of people who purchased in 2005 and are today ahead, is much smaller than the percentage of people who are behind."
And what do you think the percentage is of people who "do their homework, do the walking necessary, and generally know the market they're buying in"?
You'll do okay under any conditions if you've taken the necessary steps ... That's the message KH and I have been trying to get across. I.e., It's not by "hoping the market will hand it to you for cheaper".
Chances are that house that's gone down in value from $500 to "$400K - $425K" will go down a lot more in value before all is said and done. Losing propositions easily reveal themselves, winning ones don't. You have to work for those.
"Losing propositions easily reveal themselves, winning ones don't. You have to work for those."
Ah, another of your better theories lance.
Clearly anyone that bought in an area that is now falling between 2005 and 2007 just didn't "work" hard enough picking out their house.
Lets see... that is everything outside the Beltway, most of what is inside the Beltway, and much of the District...
Not to mention most of the country including pretty much all of CA, and FL...
Yep, it sure is a good thing you worked so much harder than all those people lance! If they had worked as hard as you they would have bought exactly where you did!
...but they didn't! Next time they will just need to work harder!
Lance: Perhaps, but what about the person who did their homework and bought the house in 2005 for 500K that is now only available for 600K? There are a lot of us out here like that.
I wonder how many there are, on either side. One of the "teachings" is that a whole lot of people paid too much and used teaser ARMs which are about to reset.
If not then they have HELOC's that will do the same thing.
In my neighborhood, several houses were expanded, doubled in size. Most though, seem unmodified although I expect a few have a new tub or kitchen counter.
I'll come clean, I bought a stainless steel appliance. One.
The other question is how many SFH, TH, garden apartments, etc. are in this zipcode. I'm guessing several thousand, perhaps 4 or 5 thousand.
In normal seasons, 50 to 100 places are for sale. So, how many places sold high, or too high in 2005 and 2006?
Five is too low a number. Five hundred seems too high but that's only 10% of the housing base.
Fifty? 1%.
A hundred? 2%?
I know, I know, Lance. I've lost your BH-good-buddies again. You'll have to taunt them, get them to put their thinking caps on.
Without a whole mess 'O overpriced houses, poised over the market like a hung-neck-vulture, how can prices fall?
Oh, my neighbor who drives 2 miles to Crystal City saw me out front yesterday, waved me over.
"Do you know what gasoline costs?"
"What?"
"I just filled my car and it took $62! First time I bought gas since March." (the car takes premium, it's a turbo-V6.)
"Really?"
"Well! Gas prices are outrageous! I'm invited to a party in Herndon next week. I'm not going all the way out there at these prices."
You go girl! Hundred plus grand a year salary. Couch bag. Paid for six hundred grand house and bitching about 3 gallons of gas to go to a party in Herndon.
Honey, I wish I had your sense of thrift. I'm just a crazed, irresponsible shopper.
Wow, how long did you spend typing up that rambling mess of anecdotes and cluelessness?
What the heck was your point anyways?
Hey I can't help but notice that you keep forgetting to respond about your investment properties. When did you begin speculating KH?
"You'll do okay under any conditions if you've taken the necessary steps ... That's the message KH and I have been trying to get across."
Lance - I gotta call BS on this one. You mean to tell me, if you were looking to buy in PWC in 2005, you knew there was a bubble so you lowball a guy 15% and he takes it, you mean to tell me he cant lose money?
Sorry, something tells me there were a bunch of people in PWC who did their homework got 15% off, and are now down another 20%.
"Sorry, something tells me there were a bunch of people in PWC who did their homework got 15% off, and are now down another 20%."
His point is that anyone who "worked" hard enough would have been buying in one of the few neighborhoods that hasn't fallen much yet.
Obviously nobody who worked hard would ever want to live in PWC.
Anon,
"Sorry, something tells me there were a bunch of people in PWC who did their homework got 15% off, and are now down another 20%."
And what does that matter? They're in the house, aren't they? And by the time they go to sell 10 years from now they'll have all but forgetten about the time their house was "down" ... If they even ever knew it was.
"And what does that matter? They're in the house, aren't they? And by the time they go to sell 10 years from now they'll have all but forgetten about the time their house was "down" ... If they even ever knew it was."
It matters because SH*T HAPPENS! What happens if, despite their original desire to live there 10 years they get laid off (or whatever) and have to sell after only 2?
Yes, SH*T HAPPENS! So why make any commitment in life or take any chances? You never know what is coming down the road ... and if you don't have a 100% sure exit strategy, then you should not proceed forth. Just stay where you are at. Forever.
anon:
it looks like you might be figuring out what most of us have figured out about lance.
You're arguing with someone who cannot comprehend economics . . . I try and avoid him . . . unless I feel like arguing with a brick wall.
"Yes, SH*T HAPPENS! So why make any commitment in life or take any chances?"
Hold on a minute - You ask a question - I give an answer - you dont like the answer so then you spin off on a tangent. No, sorry thats not how it works.
Lets try that again, YOU asked why does it matter, I answered with a perfectly rational manner. If you have any integrity at all, you now have to give a rational response.
So, what say you?
Lance - if you want to revise your original comment about "do your homework and youll be safe" that is fine too. Sometimes I think of stuff that seems fine on the surface until someone points out an error in it - nobody is perfect.
That said, if I am missing something, please enlighten me. If there is some safe way out of the hypo I gave you (i.e. what happens if you have to sell in 2 years) that I am not seeing, I will happliy concede the point.
Just stay where you are at. Forever.
Lance, they're getting to you. I suggest you ignore the trolls. It really works wonders.
You can do it simply by ignoring the blather or you could write code that breaks the underlying .html by scanning for the div tags and the "/img/b16-rounded.gif", which delimits the posts. Then key off the rel="nofollow", the next lexical unit is the poster's name.
-bing-
No more trolls.
Not to imply that the anonymous is a troll.
There is a strange construct there, which you, Lance, didn't point out.
Lance - I gotta call BS on this one. You mean to tell me, if you were looking to buy in PWC in 2005, you knew there was a bubble so you lowball a guy 15% and he takes it, you mean to tell me he cant lose money?
Sorry, something tells me there were a bunch of people in PWC who did their homework got 15% off, and are now down another 20%.
That's a hypothetical that could not happen, Lance is the "city guy". He would never look outside the city. It's like asking him about property values on the moon.
So suppose, Lance, you took loss of your senses, and in your mania, decided to lowball some rube in PWC.
Given that Lance went nuts, finds and buys a place for 15% off, then the place falls 20% after that. The guy who sold it made out great. The seller didn't lose.
Fast forward a few years, 2007, 2008, PWC is in serious decline, 20% as stated. Lance is out there on his Green Acres. He's down on equity as is everyone else out there but his loss is less since he beat down the price by 15%. Good job, Lance.
If Lance isn't planning to sell, he just keeps on living, paying his mortgage, watching the grass grow or whatever it is that people do out there.
At some point, maybe when gasoline hits $5.00/gallon, maybe people get tired of the drive, maybe the two wars end, the feds cut back and all the jobs that spilled out to boonies after 9-11-2001 evaporate, are consolidated back close in, maybe PWC falls another 20%.
So yes, Lance then takes a major loss and there is no mitigation.
Or maybe everyone decides that PWC is the happening place and prices start climbing. In this case, Green Acres Lance does OK over the long term.
Either way, it still seems odd that Lance is supposed to defend buying in PWC.
"It matters because SH*T HAPPENS! What happens if, despite their original desire to live there 10 years they get laid off (or whatever) and have to sell after only 2?"
Did you notice he didn't do anything to answer your original question?
"You mean to tell me, if you were looking to buy in PWC in 2005, you knew there was a bubble so you lowball a guy 15% and he takes it, you mean to tell me he cant lose money?"
Instead he just tries to spin his way out of yet another foot in mouth moment.
Even if nothing unexpected happened and a family was able to stay in their house as long as planned... that still doesn't mean it is a good thing that they overpaid by a huge amount. That is the sort of mistake that can set a family behind the curve for life.
Just imagine if they put that extra $500 a month into their retirement... what kind of a difference would that make after 30 years?
Overpaying is never a good thing.
Key KH, you might want to look up "troll."
and while you are out doing your homework, why don't you tell us when you started speculating on real estate.
I think that would do a lot to explain your inability to grasp what is taking place.
I have noticed that recently kh and lance have become a lot more adamant that their neighborhoods are not falling and why should they be concerned about anywhere else in the DC area, b/c we all know that their areas are doing just fine.
Only those with money (and lots of it) or those who bought 20 years ago, or who had it passed down will live in their areas. Nobody wants to sell b/c their area is so great. Everyone who is anyone wants to buy in their area.
Their area will never fall . . . and if it does it won't fall by much (<5%).
Personally I think they are elitist, and scared to death.
Let's see Arlington Co. holds <10% of the entire population in Nova. That means that 90% of the population has and is experiencing deep declines. If that's not elitist, I don't know what is.
Oh but wait . . . why would you want to live out in dirty Fairfax or Loudoun . . . you have to drive so far . . . ummm b/c there is a lot of business out there and people do actually work out there.
Seriously unless you are one of the following, why in the world would you visit this blog? 1) Future buyers (2-3 years) 2) Future sellers (2-3 years) 3) Real Estate Investor/Flipper.
If you did as lance/kh suggest they did and buy for the long term 10-15+ years.
Why would you WASTE your time posting comments about the current housing market?
kh, least you forget (and not to speak for harriet) but the NAME of the blog is "Northern Virginia Housing BUBBLE Fallout".
It's kind of hard to be a troll when you are supporting the thesis of the blog! Considering the thesis of the blog is "a bubble exist/existed" a troll would typically be someone who incites inflammatory remarks to the contrary!
So my real question is . . . why in the world would lance and kh waste their time posting comments on a bubble blog when both have supposedly bought for the long term! Unless they are scared to death that a) their prices will go down or b) they might have to sell when their mortgage adjusts.
So kh/lance, why do you post?
I used to have more respect for kh, but recently he/she has gotten a lot more shrill, like lance.
Lance Re: my post last night - nothing, you have no response? Look sometimes we are all wrong and it is no sin to admit that.
Perhaps you are still away, but I have to admit, I expected better than this from you. The only blogger who habitually refuses to acknowledge their mistakes, and then runs away when questioned is NEIL!!!! You dont want me to add you to that category too?
Anon,
KH's explanation was right on target. Additionally, let me add to that that your issue has absolutely nothing to do with what prices are doing in PWC. It's a red herring you are using to help yourself feel better about your being very afraid to commit to buy anywhere. Period. There are no guarantees in life and I am sure even you know that. If you try hard enough, as you are doing, then you will always find a reason not to commit yourself to a house, neighborhood, community. If you are so concerned that PWC will go down in value and you won't be able to get out in 2 years if you had to, then why are you looking there? Why not look elsewhere like the 90% of places where prices have either stagnated or gone up? No ... then you'd have to face the truth ... and that is simply that you are too afraid to make the commitment that one must make when they buy their home. Your issues have nothing in common with either the HHs or the BHs posting on this site.
btw, the "anon" name is right in line with someone who is afraid to take responsibility for anything ... even their own words on a blog ...
"Why not look elsewhere like the 90% of places where prices have either stagnated or gone up?"
lol
Next time you want to make something up why not make up something at least somewhat credible?
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