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Monday, May 12, 2008
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83 comments:
novahog said...
"Money Magazine forecast through May, 2009
Washington, DC: -13.2%
hog"
Lance said: Thanks for giving us the source of your crystal ball. Can we use it to know who the next president will be too? LOL
Here's the link again. It's a forecast for the 100 largest U.S. markets. Since most of the discussion here has something to do with where prices are headed, i thought some might find it interesting.
Sorry Lance, that article only deals with housing. Maybe this site can help you: Crystal Ball '08
hog
Nice article in the Post today.
http://tinyurl.com/4w3sqb
Interesting in that it makes several of the same points Lance has been making -- the economy is more stable in DC, prices will fall in the core, but not dramatically.
And so, I file that away and consider that -- deep breath -- Lance/KH might be right.
I'm still not fully convinced, but we've the option of watching and waiting and we'll continue to do that -- I still believe the option payment loans have yet to make their impact here. The prices in the core are such that we don't *want* to buy there. Buying housing to me is a lifestyle choice -- the freedom to pound nails or paint walls however/wherever you want. But don't expect the average homeowner to make lots of money -- there used to be an old rule of thumb that you had to be in a place at least five years just to break even!
And any discussion that this is a new paradigm/reality just makes me get even more suspicious. Yes, gas prices and traffic have their effects, but overall it evens out. The extra price for gas is currently overshadowed by the huge increase in housing cost.
"Interesting in that it makes several of the same points Lance has been making -- the economy is more stable in DC, prices will fall in the core, but not dramatically."
I didn't see much in the way of price predictions in that article.
(The author seemed confused at points about whether he was talking about the housing market or the economy.)
It made the point that DC's economy is generally more stable than the rest of the country, which is of course true, but the only prediction about housing price losses being confined to the outer areas was sourced to nameless "people in the real estate industry."
"People in the real estate industry say that while prices are dropping in most of the region, the major damage -- steep price declines, foreclosures and such -- will probably be confined to parts of Prince William, Loudoun and Prince George's counties, where there was the most speculative building and lending activity."
It sounds like something the author threw in there to make the piece appear "balanced." He had made it quite clear that the market is out of line with its fundamentals just before that line:
"So how much does the Washington economy need to adjust? Not as much as those cities, perhaps, but more than a lot of the nation, where home prices didn't increase as much. The average home price here rose 140 percent, while per-capita income grew 27 percent."
"And any discussion that this is a new paradigm/reality just makes me get even more suspicious. Yes, gas prices and traffic have their effects, but overall it evens out. The extra price for gas is currently overshadowed by the huge increase in housing cost."
The phrase "new paradigm" is about as big a red flag as you can get when it comes to an investment.
When the bulls can't come up with any better explanation than "its a new paradigm" to justify higher pricing warning lights should be flashing in your head.
There are of course a handful of examples of actual new paradigms that have emerged over the last hundred years... but they are probably outnumbered 100:1 by various bubbles and schemes that ultimately imploded. We all saw the same thing during the internet bubble for instance...
Shifting gears for a moment... I suspect we may soon see the DC economy subjected to an unusual test. There is a good chance that the new administration will cut spending significantly, one way or the other.
When that happens the cuts will be felt most strongly in the DC area.
I've live in the DC Metro Area for over 30. I've seen administrations come and go. There is always this fear of the "new administration" cutting government spending. Those cuts never seem to effect the local area. You're never going to see lines of government workers, defense contractors, and lobbist apply for unemployment. Sorry the Government is just too huge. That's why this area is in much better shape than most of the country.
Leroy, that shows an astounding naivite about the way government works. Exactly what spending do you think Obama, say, would cut? You may have missed it but we are not exactly dependent on Bath and Pascagoula type spending.
"You're never going to see lines of government workers, defense contractors, and lobbist apply for unemployment"
I am not predicting anything dramatic like that, but if there are cuts or even a slowdown in growth that could be a factor in this area, especially considering how weak the market already is.
I suspect McCain would be much more likely to make cuts around the beltway than Obama, particularly to contractors, but then again McCain is certainly the underdog at this point.
Just to clarify before one of our local strawman artisans tries to claim I am predicting some sort of massive government cutback that wrecks the DC economy... I am not. I am just saying in an already weak economy with an already falling housing market even modest cuts would be felt more strongly.
"Leroy, that shows an astounding naivite about the way government works. Exactly what spending do you think Obama, say, would cut? You may have missed it but we are not exactly dependent on Bath and Pascagoula type spending."
Ah, I see I was too late with my prior post... I guess it takes longer to write a post with some thought than it does to just hammer something out...
Quick question; can anyone here recommend a real estate lawyer in the NoVa area? We'd like to review a contract that a seller backed out of to make sure all the t's were crossed and the i's were dotted.
Gotta say, I can see why people can't stand real estate agents. This is the second time we've seen agents try to use 'shady' tactics to get out of contracts. The first time would have been in our favor and we refused to be a party to it. This time we got stung.
Not all government spending is local. For example, if the next administration cut spending to defense contractors and shifted that spending to NIH, you'd see nearly all of that money flow out of the region.
Look, that argument is a red herring.....federal employment was here in the 90's, and it's here now.
That does not explain the massive runup in prices. It is a static situation that DID NOT CHANGE.
As such, the runup in prices is not due to federal largesse, but to the same housing bubble in pretty much every metropolitan area in the US.
Every area has their own red herring argument for why it can't drop. But if prices doubled in five years (some did more), the runup is unstable.
For others, yes I can imagine seeing long lines up unemployed defense company workers at the very least.
Regarding the Money Magazine forecast of -13.2% drop through May '09: Does anybody know if that means the DC housing market is expected to drop another 13.2% in addition to the 10.7% it has already dropped (for a total of 23.9%), or is the -13.2% a total of how far housing will have dropped from the peak (meaning, another 2.5% decline between now and May '09)?
W - Peterson Noll & Goodman is a lawfirm in Tysons that does real estate law. They review real estate contracts regularly. Gary Peterson is who you should ask for. 703-442-3890
mjc, i'm pretty sure they’re talking about May, 2008 – May, 2009 declines. So, that's in addition to any declines that have already occurred.
“Pity the residents of Stockton, Calif., whose homes are likely to lose more than half of their 2006 value”
The chart forecasts a decline of -16.8% for Stockton.
hog
The Federal government isn't going to close down like some AutoPlant in Detroit. The Jobs will always be here.
I'm not saying home prices aren't going down just because the government is here. I believe it's going down for at least the next year and half to a leveling off level. Probably 2003 / 2004 pricing.
1st Quarter 2008 Metropolitan Median Area Prices and State Existing-Home Sales, May 13, 2008, 10am ET.
That does not mean defense contractors will not be laid off if pursestrings are tightened. Defense contractors will happily lay-off if budget cuts come.
There are also expected to be huge waves or retirements in the next ten years...it would be politically palatable to not fill 100% of the positions.
I am also quite curious as to how much a typical federal employee makes. 70-K? 80-K? 150-K?
In the DC area the average federal employee makes somewhere in the mid $80k range. (extrapolating slightly from the 2006 number given in this article: http://tinyurl.com/3swecf )
This is a fair bit higher than the national average of ~$65k. I suspect DC's median is a fair bit lower than $80k because this is where the vast majority of GS-15/SES level federal employees are located.(Who are the only ones who can pull in much more than $100k.)
$80k would be a very good salary in most of this country but it doesn't come close to supporting bubble level pricing in this area.
Federal pay
"Federal workers earned an average of $106,579 in 2005, including benefits, or about twice the average private sector compensation of $53,289 with benefits included. This marked the first time federal compensation reached this point; for 2004 the bureau's statistics put it at slightly less than double the private sector's.
Without benefits, the difference for 2005 is less. Federal employees earned an average salary of $71,114 while their private sector counterparts earned $43,917."
Followup, since that was 3 years ago you can estimate that it's 15% higher for 2008, plus, the Washington D.C. area is likely a much higher average than overall.
Sidelined and Leroy, looks as though your estimates/data are close, since benefits vary widely but on average are around 30% of total comp.
Someone correct me on this, but I believe that only about 1/4 of the labor force in the DC area is employed by the federal government. There are a lot more private sector and non-profit orgs. here than people may realize. For example, the universities here employ a lot of people - some jobs well-paying, but most probably are not (lots of staff (non-faculty) jobs pay less than $50K).
oops, it was Shamrock (not sidelined) who had posted the info on fed. pay. Sorry.
Ah, Leroy, again showing very little knowledge of the upper end DC economy. Virtually any lawyer who has been in well-paying private practice more than a couple of years and then goes to the gov will make 125 at least, and will not be anywhere near GS 15. Not to mention the SEC, Hill and other places where many people make 130+ and again are not GS 15. Do you actually know what competent hill folks with any seniority at all get paid? It is not 200K but is over 100K in virtually every instance.
"Ah, Leroy, again showing very little knowledge of the upper end DC economy. Virtually any lawyer who has been in well-paying private practice more than a couple of years and then goes to the gov will make 125 at least, and will not be anywhere near GS 15. Not to mention the SEC, Hill and other places where many people make 130+ and again are not GS 15. Do you actually know what competent hill folks with any seniority at all get paid? It is not 200K but is over 100K in virtually every instance."
You continue to impress with your high dollar arguing skills...
Go back to my original post and read the statement you decided to nitpick... I said in the DC area the median is likely to be lower than the average because in the DC area are most of the highest paid government employees in the country.
Federal employees making much over $100k are rare in most of the country but in DC are much more common... thus the average is pulled up.
Your little rant about government lawyers making more than $100k supports my point.(Though they are far smaller in number than GS employees.)
Capital Hill staffers are not included in the original 80k number, as was explained in the article if you bothered to read it, and are thus irrelevant to the median/mean discussion.
I hope you provide your customers with a better argument service than that... at the least you should find out what it is you are arguing about before firing off.
You said GS 15/SES "are the only ones who can pull in much more than $100k"
clueless.
LOL, I used to date a lawyer that switched from her 240k a year job to the SEC when she got married. Still makes 165k but only pulls 40 hour weeks now.
Metro drivers and police officers around here make 100-120k with overtime.
Leroy vastly underestimates salaries in this area - probably because he works in retail or some other service industry that pays garbage.
I know entrepreneurs that pull in 300-500k, medical sales making 200-250k. And Im not even talking about the lawyers I know that have made partner. People close in who work in the city make sick money in this area and can afford a lot more house than you think.
doug said: Metro drivers and police officers around here make 100-120k with overtime.
ummm, i'm going to need to see proof on this one!
"You said GS 15/SES "are the only ones who can pull in much more than $100k"
clueless."
Ok, add your lawyers to the list if that is the only way you can sleep at night. They are very small in number in comparison to the GS/SES workforce.
This whole thing is a waste of time as it does nothing to change my original point. As I said before, you are just nitpicking, or misunderstood what I said in the first place.
"Metro drivers and police officers around here make 100-120k with overtime."
Let me second the call for actual data here. Unfortunately your credibility is such that we can't expect to take your word for this.
"Leroy vastly underestimates salaries in this area - probably because he works in retail or some other service industry that pays garbage."
I am doing quite well, but am not going to say more than that as it is irrelevant. In the future why don't you try to limit your personal attacks? It isn't exactly helping your case...
"I know entrepreneurs that pull in 300-500k, medical sales making 200-250k. And Im not even talking about the lawyers I know that have made partner. People close in who work in the city make sick money in this area and can afford a lot more house than you think."
Ah yes... back to the favorite housing pumper myth... that everyone in DC is pulling in six figures and is rolling in money.
First, I wasn't saying anything about DC salaries in general. I was talking about federal employees and provided numbers on what they actually make. (Not the usual anecdotes and exceptions to the rule you guys love to dig up.) So there is really no need to speculate is there?
Second, I have also provided numbers on incomes in this region on numerous occasions. Yes there are some people in this area that make a ton of money, but they are not the norm.
Why do you even bother trying to bring out this tired old argument again and again about someone you know who makes a lot of money? Of course there are people in this area that make a lot of money... but look at the actual data and you will see they aren't that large a chunk of the population.
Here you go...
http://www.examiner.com/a-669683~Metro_drivers_make__100_000_in_pay.html
Oh, and You are the one lacking credibility. I back up all my numbers unlike you and your "theories", LOL!
The 2nd part of that link...
ke__100_000_in_pay.html
"Ah yes... back to the favorite housing pumper myth... that everyone in DC is pulling in six figures and is rolling in money."
What planet are you from?
We are talking about Home Owners here, not the cattle who work at the mall or wash our cars.
Of course they all make 6 figures! Ive been making 6 figures since my late 20's, just like everyone with a college degree around here! If you are talking about advanced degrees - change that to mid 20s!
Leroy said...
""Metro drivers and police officers around here make 100-120k with overtime."
Let me second the call for actual data here. Unfortunately your credibility is such that we can't expect to take your word for this."
As usual, Leroy is so full of himself that he can't imagine the possibility that "average people" could make more than him. Never mind that there's a whole slew of them in this area ... in addition to the "high paid lawyers" that he likes to bring up constantly.
In 2006, the top-earning hourly worker was a train operator who received a salary of $77,893 and made $72,304 in overtime, for a paycheck of $150,197. The highest paid Metrobus operator had a $74,527 salary and $68,716 in overtime, for a paycheck of $143,243.
Metro Costs For Overtime Are Up 56% Since 2002
By Lena H. Sun
Washington Post Staff Writer
Tuesday, June 5, 2007; A01
http://tiny.cc/03k76
Here are STARTING salaries for MPD officers. These are BASE SALARY numbers not including overtime (both departmental and private duty such as the supplement officers in Adams Morgan on a weekend evening.)
What is the starting salary for police officers in the MPDC?
The starting salary for police officers is $48,716 a year. After 18 months of service, most police officers can expect to earn a base salary of approximately $53,299 a year. Lateral officers' starting salaries range from $51,151 to a maximum of $71,971, depending on their previous experience.
So, you take one starting MPD officer married to one Metro bus driver ... and you have a combined family income which Leroy thinks is only possible for "a few high paid lawyers".
here's the link to above stats:
http://tiny.cc/3fchE
leroy: doncha know, the whole area is teaming with entrepreneurs making $300-500k a year!
Hell, everyone in their mid-20s with a college degree is making $100+k a year! The streets are paved with gold!
Though Doug's 100K+ point was inartfully phrased, perhaps, it is a fact of life in the DC brain economy, and those who don' see it are just not a part of it. Again, this has nothing do to with IT people in Herndon or whatnot.
Lerory: DC is teaming with married couples -- metrobus drivers and cops (in their 20s) -- whose combined salary is easily $200+k with overtime.
Those PhDs making $70-120k at NIH, NRL, Booz-Allen, Georgetown, etc. are slacker renters.
And thats without overtime Lance.
EVERY cop works overtime, most work 4 hours extra every day at 150% pay.
Wow, you guys are really spun up into a little frenzy this morning aren't you?
"We are talking about Home Owners here, not the cattle who work at the mall or wash our cars. "
Cattle?
I bet you make charming company at a dinner party...
As for the article you posted... it does little to back up your claim. According to your article only 125 of the 2900 metro drivers made $100k+.
You said : "Metro drivers and police officers around here make 100-120k with overtime."
That is a very different statement than: "The top ~5% of metro drivers make 100k+ with overtime by working 20+ hours of overtime a week..."
Your claim made it sound like it was somehow typical for a Metro driver to make $100k+ but in fact it is only about one in twenty and they are only able to do so by effectively working two jobs.
As usual lance your "contribution" here is primarily strawmen...
"As usual, Leroy is so full of himself that he can't imagine the possibility that "average people" could make more than him. Never mind that there's a whole slew of them in this area ... in addition to the "high paid lawyers" that he likes to bring up constantly."
Where on earth do you get this "average people" bit? I am not the one calling them "cattle."
...and I am not the one with an obsession with high paid lawyers. They are out there, but they are small in number when compared to the general population. Yet they get brought up every time anyone mentions salaries....
"So, you take one starting MPD officer married to one Metro bus driver ... and you have a combined family income which Leroy thinks is only possible for "a few high paid lawyers"."
Here you are just lying... where did I ever say anything to that effect? Heck, in this very thread I was talking about highly paid government employees...
Whatever!
I didnt say that most of them make 100-120k, I said that you can make that much with overtime and I was right.
You were wrong. :)
And you are still wrong if you think unmotivated slackers working in retail are going to be able to afford purchasing a home in N. Arlington.
It just wont happen, ever, not as long as MOTIVATED semi-skilled workers can pull in 120k/yr with overtime.
If you arent making that much, you better re-evaluate your career!
"Of course they all make 6 figures! Ive been making 6 figures since my late 20's, just like everyone with a college degree around here! If you are talking about advanced degrees - change that to mid 20s!"
See, here is where your credibility problem comes in...
In Arlington County for instance 60% of the population over 25 years old has a college degree. (With 30% holding graduate or professional degrees...)
See:
http://www.arlingtonvirginiausa.com/statistics/_11.pdf
But shockingly enough... only about a third of Arlington households bring in $100k+. (and many of these will consist of two college educated individuals...)
See:
http://www.arlingtonvirginiausa.com/statistics/_24.pdf
Why don't you puzzle over that for a bit?
Oh, and while on the subject of $100k+ Metro drivers and police... they are counted in that top 30% as well.
Leroy, come on, that lumps in all the non-profit/NGO folks.
Are you really doubting that reasonably sharp, well-educated 30 year olds who lives in Arlington, and works in D.C. for a profit-maximizing enterprise do not generally make at least 100K? If so, again, it just shows how out of touch you are with that segment of the population.
This doesn't have anything to do with real estate prices, just the community we live in...
"I didnt say that most of them make 100-120k, I said that you can make that much with overtime and I was right.
You were wrong. :)"
Um, you said : "Metro drivers and police officers around here make 100-120k with overtime."
Less than 5% of them bring in that much money and they only do it by working far in excess of their normal hours.
What would you say if I said: "Lawyers around here make 30-60k," when in fact that only represented the bottom <5% of the lawyers in the area and that they were working well less than 40 hours a week ... or for some little non-profit group?
You can find isolated cases of people in many lines of work that make far more than is typical by working far more hours, or holding multiple jobs.(Plumbers, nurses, salesmen/bartenders...)
They aren't typical.
At this point you are just following the lance model and trying to spin your way out of what you said.
If it is true that "Metro drivers and police officers around here make 100-120k with overtime."
Then it is equally true that "Lawyers around here make 30-60k."
"And you are still wrong if you think unmotivated slackers working in retail are going to be able to afford purchasing a home in N. Arlington."
Where did I say "slackers in retail" are going to be able to buy in North Arlington. Yet another strawman...
No your quote of lawyers making 30-60k is much more absurd.
The median metro employee makes 75k a year according to that data - only 25% less than the people in the range I was quoting.
The bottom 5% of lawyers in DC still make 100k + a year - not 30k a year!
I know because my wife works for a DC law firm and they hire them at $115k a year right out of school.
LOL @ lawyers making 30k!
You are crazy out of touch with salaries! Either that or in massive denial!
30K For a lawyer in DC! ROFL!
"Leroy, come on, that lumps in all the non-profit/NGO folks."
As well as all the highly paid lawyers, bus drivers, and policemen...
That is exactly why real data is far more valuable than anecdotes. This is a very wealthy area, but even in this very wealthy area salaries far above $100k are in the small minority.(Remember, these are household statistics.)
"Are you really doubting that reasonably sharp, well-educated 30 year olds who lives in Arlington, and works in D.C. for a profit-maximizing enterprise do not generally make at least 100K? If so, again, it just shows how out of touch you are with that segment of the population."
Is this yet another strawman or have you just not been reading what I have been saying?
I never said there aren't highly paid people in this area. Of course there are... but they are not the majority, not even close, and they aren't the only ones that buy houses.
In the case of Arlington county only about 10% of the households make >$150k.(according to the most recent data I have seen)
...and again, these aren't the only people buying homes...
The Northern VA area ranges between ~75% and ~40% owner occupied houses. (With Arlington and Alexandria in the low 40% range and everywhere else around 70% or higher.)
See:
http://www.arlingtonvirginiausa.com/statistics/_04.pdf
"This doesn't have anything to do with real estate prices, just the community we live in..."
Of course it has to do with real estate. Incomes are a major factor in the real estate market. The fact that housing prices are out of line with incomes is one of the most recognizable features of the bubble.
"No your quote of lawyers making 30-60k is much more absurd.
The median metro employee makes 75k a year according to that data - only 25% less than the people in the range I was quoting."
I would like a 25% pay raise, would you?
The fact remains, you tried to claim that metro drivers make $100k+ when in fact that is the top <5%.
"The bottom 5% of lawyers in DC still make 100k + a year - not 30k a year!
I know because my wife works for a DC law firm and they hire them at $115k a year right out of school.
LOL @ lawyers making 30k!
You are crazy out of touch with salaries! Either that or in massive denial!
30K For a lawyer in DC! ROFL!"
And again we return to your credibility problem... where did I say they worked for private law firms?
I specifically mentioned non-profits, etc.
Don't forget, we are talking about the BOTTOM <5% here, just like you were talking about the top <5% of metro drivers...
Here is some data for you:
Salary information on lawyers hired by the department of justice...
(http://tinyurl.com/59ob9e)
New hires brought in right out of law school?
GS-11... $55k-$72k.(including locality pay)
According to George Washington's law school statistics:
(http://tinyurl.com/4slay8)
19% of their graduates went into either government or public interest work.
The starting salaries for the 16% that went into government work ranged from $30k to $126k, with an average of 60k.
The starting salaries for the 3% that went into public interest work range between $27k and $50k with an average of $39k.
According to Georgetown's law school statistics:
(http://tinyurl.com/5v4wma)
The median(half made less) starting salary of their graduates that go into public service employment is 43k a year.
The median(half made less) starting salary of their graduates that go into government employment is $54k.
These two groups make up 12% of their graduates...
Now, would you like to revise this claim?
"The bottom 5% of lawyers in DC still make 100k + a year"
Bottom 5%, the lowest of the low... think about that.
NOVA's wealthiest zip codes
(not sure how they ranked these but interesting nonetheless):
Rank
City Zip
2007 Median Household Income
2007 Total Population
2007 Median Home Value
County
1
Greenway 22067
$191,428
228
$1,210,317
Fairfax
2
Great Falls 22066
$202,451
18,031
$1,106,221
Fairfax
3
Fairfax Station 22039
$184,052
19,655
$910,030
Fairfax
4
McLean 22101
$161,886
28,579
$905,626
Fairfax
5
Oakton 22124
$158,766
16,083
$812,337
Fairfax
6
Vienna 22182
$158,706
24,260
$834,375
Fairfax
7
Clifton 20124
$154,495
15,633
$789,873
Fairfax
8
Waterford 20197
$134,604
1,765
$904,126
Loudoun
9
Vienna 22181
$151,395
14,725
$722,000
Fairfax
10
Reston 20194
$129,661
13,924
$640.649
Fairfax
11
Paeonian Springs 20129
$145,941
268
$794,643
Loudoun
12
McLean 22102
$109,207
19,724
$809,455
Fairfax
13
Alexandria 22308
$127,962
12,524
$631,576
Fairfax
14
Arlington 22207
$131,653
29,429
$783,556
Arlington
15
Herndon 20171
$135,875
42,888
$600,847
Fairfax
http://tinyurl.com/4aa358
See also:
http://tinyurl.com/3zkrqa
IRS data by zip code:
http://tinyurl.com/3smoz9
Wealthiest Zip Codes
Share | Print By Mary Clare Fleury
Northern Virginia claims most of the area’s richest neighborhoods.
The Washington Business Journal recently published a list of the 50 wealthiest Zip codes in the area. Virginia neighborhoods dominated, with 27 appearances, followed by Maryland’s 19 and DC’s 4. The rankings take into account household income, average net worth, home values, and the rate of increase of wealth.
Neighborhoods in Fairfax and Montgomery counties filled out the top 14 spots, until Loudon broke through at number 15. DC didn’t even appear on the list until number 18, and even then it was in Georgetown’s 20057 Zip code, home to the University—and only 33 households.
Here’s the top ten:
http://tinyurl.com/3zkrqa
IRS data:
Washington DC
http://tinyurl.com/3jt74a
v.
New York
http://tinyurl.com/4867gv
Now, would you like to revise this claim?
"The bottom 5% of lawyers in DC still make 100k + a year"
Bottom 5%, the lowest of the low... think about that.
Dude - your quotes are nationwide median - not DC! You think some okie out in the midwest is going to be paid anywhere the same as here?
You truly are a fool if you believe that!
And the FACT is - I NEVER said all metro drivers make that - i said you CAN make that as a metro driver.
Big difference.
If I say plastic surgeons can make 500k a year Im not saying all plastic surgeons make that, DUH!
So stop making up facts and ADMIT you are WRONG about the salaries in close.
I personally dont know any one person my age making less than 100k a year, or any couple making less than 200k combined. I mean EVERYBODY I know is making those types of salaries because those are normal fair wages for middle aged college graduates.
Doug,
Do you mean even the lawyers in such areas as Immigration law, Family Law and Medical malpractice are raking in $$. I happen to know some who appear to be struggling to find clients.
Your own circle may not include such people, but I think Leroy's basic argument that such high-income people are only a small percentage of the households in the area appears to be valid from my own obervations as well as data.
Also, there may be wild swings in income when self-employed.
if you CAN make 100+k as a metro driver, then that is about as telling as saying that you CAN make 30k as a lawyer.
This blog likes to follow house prices over time so I thought I’d add a bit to this discussion by doing a case study of one on earnings. My salary has always been public so I don’t mind sharing. Also, this is just salary at the moment of job-change; I have a doctorate; and am now 34. (dare I say I’m not a “fixer”?)
2001-NIH Post Doc 34K
2003-Legislative Aid, US Senate 50K
2004-NIH GS-13 70K
2008-Non Profit director level 120K
I have a group of friends with similar trajectories (n=12).
As for the “Cattle” flipping burgers, a little respect please. I paid for my undergraduate degree by making pizza and working a second job at a nursery school.
"Dude - your quotes are nationwide median - not DC! You think some okie out in the midwest is going to be paid anywhere the same as here?
You truly are a fool if you believe that!"
Actually, the DOJ link I provided you included data for DC specifically, $55k-72k.
Here is yet another link for you... 61 DC lawyers qualified for this particular program this year, one condition of participation is that their annual income not exceed $65k...
http://www.dcbarfoundation.org/
There are some relatively poorly paid lawyers in DC. You are making yourself look very foolish by continuing to argue this obviously lost point.
If you limit yourself to bottom <5% of lawyers in DC you are going to be looking at some very low salaries. It is going to be a bunch of lawyers just starting out at various NGOs, government jobs and so forth. They absolutely won't be making >100k as you asserted.
Again, this comes back to your lack of credibility. If you were honest you would aknowledge that you hadn't thought things through completely instead of simply continuing to argue when you are clearly wrong.
"And the FACT is - I NEVER said all metro drivers make that - i said you CAN make that as a metro driver.
Big difference."
You said: "Metro drivers and police officers around here make 100-120k with overtime. "
Big difference...
And the fact that you continue to misquote YOURSELF when the real quote is available for everyone to see... well that comes back to your lack of credibility.
"If I say plastic surgeons can make 500k a year Im not saying all plastic surgeons make that, DUH!"
But if you said "plastic surgeons make 500k a year," like you did with the metro drivers... you would be talking about plastic surgeons as a group, not the <5% at the very top.
"So stop making up facts and ADMIT you are WRONG about the salaries in close."
Making up facts? You can't even quote yourself accurately. As for "salaries in close" I posted actual statistics. If you think those statistics are "made up" you should contact Arlington County...
"I personally dont know any one person my age making less than 100k a year, or any couple making less than 200k combined. I mean EVERYBODY I know is making those types of salaries because those are normal fair wages for middle aged college graduates."
lol, this has got to be the weakest argument of all.
You personally don't know "one person" making less than 100k a year therefor they don't exist?
The fact that you would even say something so poorly considered as that ... well that comes back to your lack of credibility. Even a child should be able recognize that argument as faulty.
If those are "normal fair wages" then how do you explain the actual statistics I provided you with?
60% of Arlington residents have college degrees yet only 30% of HOUSEHOLDS bring in 100k+, and only 10% bring in $150k+...
Look at all the income data others have provided in this discussion...
Give it a rest dude, you are making a joke of yourself.
"The bottom 5% of lawyers in DC still make 100k + a year - not 30k a year!"
Tell that to the peope that finished in the bottom half of their classes. Lawyer salaries vary widely. Top 50 firms like mine pay $160K starting, but a lot of lawyers in local law make less than $100K, even in NOVA.
"if you CAN make 100+k as a metro driver, then that is about as telling as saying that you CAN make 30k as a lawyer."
Yep... that of course isn't typical, but neither is making $100k+ driving a bus.
It is pointless to continue bringing up one anecdote after another about people one real estate pumper or another "knows" when we have good quality data on incomes in the area.
This is a very rich area. This area has numerous very rich and very well paid people. However, even in this area those people are in the small minority.
guys, if you want to tie the income to the housing prices locally better try to get your hands on the data profiling the real buyers in the neighbourhoods you are discussing, it goes without saying that lawyers/metro drivers are not a good representation of the population as a whole.
i live in 22201 and i would tell you it is extremely difficult to put an estimate on the incomes of people there. quite a few renters here --- a lot of students, a lot of government contractors who rent as well. their income can vary, obviously.
median income does not say much, i would use the home-owners median/average income as a measure.
all these discussions about making 100k/200k per household are kinda funny, anecdotal evidence does not mean much. i would say that quite a lot of jobs in the area pay 100k+, but somehow a lot of folks with a decent education make less. and many more households make less than 200k. and even with a 200k household income it will be not that easy to afford a home in 22201. which reminds me again --- a lot of people say that they won't be able to buy their own house given current prices --- and we are not talking retiress here.
Good point Konstintin. We just purchased in 22205 and it took 20% down and a household income of nearly 200K/yr to afford it. We are not normal (we have no debt, put down 20%) and that worries me. But, the money is still easy (under 6%). From meeting our neighbors, I'm sure some of them could not afford to buy now but then again, some are "retired" and about 55!
konstantin said:
"which reminds me again --- a lot of people say that they won't be able to buy their own house given current prices --- and we are not talking retiress here."
And so you've hit on the very reason why it takes that not-the-norm family income to buy into some of these neighborhoods. As KH has been saying, many people are happy just to stay where they are at ... and probably couldn't afford to buy where they are at today if they weren't already there. (I'm one of them.) That leaves relatively few places available to be bought ... And those few will go to those with the exceptionally higher incomes because they can afford to outbid the others. It's as simple as that.
Not that $100,000 a year for a an individual is exceptional around here.
lance,
simple question for you:
1) do you have evidence that during last five years proportion of the households making above the norm (seems to be 200k+) significantly increased in this area?
2) what is the reason that recently arlington became so much more lucrative for these making-above-the-norm folks?
i've lived in arlington in 1999 and it was same nice place as now, close to jobs/univerisities in dc, good school system, nightlife/shopping within walking distance, quiet green streets, etc.
prices were kinda lower then. i would say 2-3 times lower.
i absolutely love arlington but i do not see the reason that number of people who love it suddenly tripled, or their incomes grew 3 times instantly so that they can afford these houses/condos at 3 times 1999 level.
100k/per individual is certainly not an exception, most of the professionals in their 30s make between 80-120k. 200k per household is not that common though (just check the household data by zipcode in this thread). add the rising costs of schooling/daycare, healthcare, expectations of life with a 200k household income (nice cars, vacation in a nice place once in a while, restaurants, gadgets, etc), and 800k-1200k house on 0.25 acre will not look that attractive.
Konstantin,
There are several reasons why prices in Arlington have risen so much since 1999. The first is that Arlington was seriously undervalued to begin with in 1999. As the market sorted itself out, prices in Arlington started to climb to get to where they should have been to begin with. (Lucky/smart people such as KH knew this pre-1999 and bought there.) Secondly, beginning with the coming of the Bush administration, the upper-income types naturally disposed to Arlington suddenly started to (a) make lots more money (i.e., lawyers, lobbyists, IT professionals, national security professionals, defense contractors) AND (b) increase in number significantly. Little ole Arlington didn't increase significantly in terms of the number of houses available ... but the number of people wishing to live there --- and the amount of money at their disposal --- did. Thirdly, the area reached that magic threshold in cars on the road where suddenly a commute from Fairfax into the city or one from Chantilly into Arlington no longer took a standard 30 mins. Suddenly that commute time became an unknown ... staying at 30 mins if you were lucky or maybe stretching into 1 hr and 30 mins ... And it was the same in either directions. (We can thank VDOT for that!) And lastly, all this was capped off by run-away gas prices starting a few years ago.
Considering the relatively small amount of houses for sale at any one time in Arlington, ANY of the above reasons would have been enough to push up prices dramatically ... but ALL of them occured. Frankly, I think Arlington is still quite a bargain ... despite the recent price increases. 10 years from now there'll be plenty of former BHs saying "Who would have thought that prices there could go so much higher? ... But they did!"
"Secondly, beginning with the coming of the Bush administration, the upper-income types naturally disposed to Arlington suddenly started to (a) make lots more money (i.e., lawyers, lobbyists, IT professionals, national security professionals, defense contractors) AND (b) increase in number significantly. Little ole Arlington didn't increase significantly in terms of the number of houses available ... but the number of people wishing to live there --- and the amount of money at their disposal --- did."
Any theory to explain why these people don't show up in the income data for Arlington?
For what must be the dozenth time...
http://www.arlingtonvirginiausa.com/statistics/_24.pdf
Look at the difference between 2000 and 2005.
In the five years between 2000 and 2005 the number of households making 150k+ increased from 9.5% to 10.5%.
Over a five year time period that increase is nothing special. Where are the "upper income types" you just claimed started moving to Arlington in large numbers in 2000? Where are the people that supposedly starting making "lots more money" in 2000?
Taken together it appears those people made up ~1% of the population...
Maybe you should look at data and THEN formulate theories, rather than just decide on an outcome you would like and then try to invent a theory that explains it.
"Thirdly, the area reached that magic threshold in cars on the road where suddenly a commute from Fairfax into the city or one from Chantilly into Arlington no longer took a standard 30 mins. Suddenly that commute time became an unknown ... staying at 30 mins if you were lucky or maybe stretching into 1 hr and 30 mins ... And it was the same in either directions."
As usual, some data to support this claim would be nice...
...you know, maybe something like a chart showing how we hit the "magic threshold" and suddenly traffic got far worse in 2000...
Surprise us lance, produce some data that supports your "magic threshold" theory.
That is the standard "it's different ploy" used by realtors for every bubble city.....in my neighborhood in California, I am told that anyone making less than 500-K shouldn't even THINNK of moving in....of course median income is ~200-K. Median house is 1.5-M.
So let's use Leroy's data:
2000 Median Income: 107-K
2000 Median House: 225-K
2000 Price-to-Income: 2.1 >>affordable by traditional lending standards, median family can easily afford median house
2005 Median Income: 125-K
2005 Median House: 571-K
2005 Price-to-Income: 4.6
>>>median income cannot afford median loan twice as expensive as previous.
If it makes you feel any better, Price-to-Income is 10 where I am. Which really sucks.
Sidelined: ....in my neighborhood in California, I am told that anyone making less than 500-K shouldn't even THINNK of moving in....of course median income is ~200-K. Median house is 1.5-M.
In my neighborhood, some HH's earn very little.
How do they afford 22305? They bought a long time ago.
I suspect that most people in Arlington and Alexandria bought a long time ago and have no interest in selling.
That's one reason that the affordability guidelines combined with area income, make little sense when you use them to "prove" that house prices must fall.
Some have paid off their homes.
Many have small mortgages having bought a while ago. As Lance keeps pointing out, inflation worked in their favor.
They drag down the average salaries for the area.
Of course prices could fall but as a home owner, I'm not betting on it. I'm taking house odds.
-kh
sidelined said:
"If it makes you feel any better, Price-to-Income is 10 where I am. Which really sucks."
And California usually leads the nation. I.e., like I said, 10 years from now the BHs will be saying "Gosh, I wish I'd bought in Arlington when I could have!"
If it makes you feel any better, I lived briefly in California after college. I returned to the East Coast because I thought housing costs way too high out there. I just "knew" someday they'd have to come back. Everyone said that the prices out there were only high because of the "liberal spending" and that when the chickens came home to roost the economy would falter and the prices would go down. Well, I worked out there this winter ... and lo and behold ... I realized that prices are higher than ever! In the Bay area (where I was at) I'd say it's still something like twice as expensive as the DC area (which is what it was back in the mid-80s when I was there before.) So, while I felt shut out of there before, I am really shut out of there now. I mean "twice as expensive" is still "twice as expensive" ... but when you look at the difference in terms of real dollars ... Twice as expensive when it's $200,000 vs. $100,000 is a lot different than Twice as expensive when it's $1,500,000 vs. $750,000. Part of me wishes I'd bit the bullet back then and just gone ahead and bought something at the cheaper "Twice as expensive."
Sidelined said...
"So let's use Leroy's data:
2000 Median Income: 107-K
2000 Median House: 225-K
2000 Price-to-Income: 2.1 >>affordable by traditional lending standards, median family can easily afford median house
2005 Median Income: 125-K
2005 Median House: 571-K
2005 Price-to-Income: 4.6
>>>median income cannot afford median loan twice as expensive as previous.
If it makes you feel any better, Price-to-Income is 10 where I am. Which really sucks."
FWIW - MRIS reports arlington median house prices were
2000 $218,250
2005 $499,000
Leroy, to be clear, you are stating that Arlington has undergone no changes in the last 10 years that are not captured by those median income stats you keep citing?
I live in Arlington, and I'm a lawyer, and one of my biggest pet peeves is that all lawyers in DC rake in 6 figures right out of law school. This is only true if you work for a big firm, but big firms only recruit from the top 15% or so of the class. So where does the other 85% find themselves? At other jobs--at small firms, at the government, at nonprofits, or even doing contract work. I know many people who were only earning $50k here in DC when they started out, myself included. Add $160k of student loan debt on top of that, and you understand why all us lawyers aren't homeowners. Get a clue.
That should say "my biggest pet peeve is that people assume lawyers in DC make 6 figures right out of law school."
WW said...
"That should say "my biggest pet peeve is that people assume lawyers in DC make 6 figures right out of law school.""
Okay ... we now understand why you weren't in that top 15% ... ;)
ww,
Well said. And many new lawyers who land in BigLaw jump ship when they realize how much they have to work for the money. A select few make partner. The best advice I heard in law school was to live well below my means while at BigLaw, thereby avoiding the golden handcuffs of the law firm salary.
I encourage everyone to listen to this outstanding podcast from NPR:
http://tinyurl.com/5fl6z7
Warning: It's nearly an hour long, but it explains in detail how the lending bubble was created by people who should have known better. It includes interviews with borrowers, investment bankers, mortgage bankers, and mortgage brokers.
Leroy,
The problem here is that you’re basing your conclusions on facts and providing the data to back it up. If you made your argument based on the ingredients in a can of tomato soup, these guys would be falling down to their knees in worship and shouting “New paradigm! New paradigm!”
Lance, yeah right. You've truly got it figured out. Price-to-income here was 3 in 2000. Now the only houses that get sold are when the seller wants to "deal" unless it is very fairly priced when first put on market.
You are truly a fool. I pity any prospective clients that sign up with you.
WW, 15% may be true for American but not GW or GT or many, many other law schools. Come on. Biglaw DC has been growing rapidly for years.
"In my neighborhood, some HH's earn very little."
HH? You mean homeowners?
"I suspect that most people in Arlington and Alexandria bought a long time ago and have no interest in selling."
Of COURSE they don't, but that is almost always the case in almost every neighborhood. It doesn't mean a bubble/bust can't occur. Evidence doesn't support your theory in the slightest.
"That's one reason that the affordability guidelines combined with area income, make little sense when you use them to "prove" that house prices must fall."
Ah yes, the old: "everyone moving into this area is earning huge amounts of money, much much more than the previous owners theory."
The only problem with that of course is that for some strange reason those people don't show up in the income statistics...
A 1% rise over 5 years? and that rise includes people that didn't move into the area but who's salaries grew pushing them into the new price bracket...
That means after 5 years of the bubble <1% of the population of Arlington were potentially high earners that moved into Arlington from out of Arlington.
That isn't even close to what it would take to explain the bubble level prices.
Sorry, your theories are not supported by data. They are supported by your own wishful thinking, and of course your desire to turn a profit on your speculation.
"If it makes you feel any better, I lived briefly in California after college. I returned to the East Coast because I thought housing costs way too high out there. I just "knew" someday they'd have to come back."
You do realize that CA had a giant real estate bust right? (Shortly after you were there... )
Since then another bubble has formed but prices there fell by a huge chunk prior to the start of this bubble.
"And California usually leads the nation."
Oh really?
And where is it "leading the nation" these days?
lol
"Leroy, to be clear, you are stating that Arlington has undergone no changes in the last 10 years that are not captured by those median income stats you keep citing?"
Where did I ever say that?
Stats are never perfect, but if you are going to claim: "Oh, prices in Arlington are being driven by large numbers of super high earners moving into the area."
You had better have a good explanation for why there aren't large numbers of high earners showing up in the stats.
As a general rule, a theory should be supported by the available data.
In the rare case that a theory describes the exact opposite of what the data shows... a very good explanation for why this is the case is required.
The issue here is that our local housing pumpers decided on the outcome they WANT and are trying to make up theories to support that outcome.
They are working the problem backwards, and they aren't even bothering to check their theories against the available information once they get there.
They claim a "magic threshold" for traffic has been reached...
Ok, that is an interesting theory. Do you have any data to support it?
[silence]
They claim incomes in Arlington have shot up and that large numbers of high earners have moved into the area..
...but the data shows that Arlington hasn't experienced anything like that kind of income growth...
Well, Lance, unfortunately this blog doesn't allow any editing. ;) I tend to think faster than I type, so I definitely have to proofread what I write several times.
That 15% holds true for any institution not in the top 12-14 law schools. And biglaw hiring isn't on the upswing. In fact, there are several firms who have had to engage in embarrassing layoffs recently, and summer classes (which are the biggest indicator of biglaw hiring) are down in size.
The fact is that there is a huge gap between the highest earners and the lowest earners, but people who refuse to acknowledge that are the ones who like to bash lawyers anyway.
WW,
BigLaw plans summer hires well in advance, so the "hit" will be reflected in the amount of 2L summer associates that receive offers. Also look to this fall's interviewing process. Large law firms are fiercely protective of their reputations, so I would not expect industry-wide layoffs until one of the mega prestige firms announces layoffs.
But there will be law firm cutbacks. The transactional work such as real estate, securitizations, and M&A has been diminished due to the credit crisis. Lending isn't occurring and less deals are being completed. I've seen this before during the recession in the early 1990's and the dot com bust of 2000-02: law firms grow rapidly to meet their clients' boom time needs, and when the business cycle changes, the firms must retrench and adapt.
In terms of the class rank needed for BigLaw jobs, I have no idea. Suffice it to say that there will be less high paid attorneys in the DC area one year from now. And associates worried about keeping their jobs aren't buying luxury homes.
Terminator-X And associates worried about keeping their jobs aren't buying luxury homes.
How will the other employment sectors do?
I track a couple segments of the IT business, the jobs keeping the data and money moving in Arlington near I395.
Any guesses?
"But there will be law firm cutbacks. The transactional work such as real estate, securitizations, and M&A has been diminished due to the credit crisis. Lending isn't occurring and less deals are being completed. I've seen this before during the recession in the early 1990's and the dot com bust of 2000-02: law firms grow rapidly to meet their clients' boom time needs, and when the business cycle changes, the firms must retrench and adapt."
Terminator X - I think I have to disagree a bit with you on that. I do mostly transactional work and we are as busy now as we have ever been. Before it was aquisition loans and the like, now it is a restructuring of thos same acquisition loans because the borrowers are now out of covenant and the last thing the bank wants to do is call the loan. For the few who do call the loan, guess who they talk to to do the work of "calling" it?
I saw the same thing in the tech boom. An absurd amount of M&A during the boom to an ungodly amount of dissolutions, bankruptcies, etc.
I think you hit the nail on the head when you said the firms must "retrench & adapt". If they are too specialized, they will certainly have layoffs. However, if they can adapt, the work is certainly there.
Even if you do see layoffs (wouldnt surprise me) do those attorneys have the crossover skills to do the work now required? If they do, they will be snapped up in a millisecond.
A senior partner at our place once described it best, we thrive on turmoil (either a run up or implosion). We dont thrive when everything is at even keel.
This might be some of that good turmoil, CRT.
the other sectors are rebounding
Booz Allen Units to Part Ways
McLean Consulting Firm's Government Division Being Sold to Carlyle Group
...
Booz Allen, based in McLean, has 13,000 local employees and is one of the government's largest providers of services. Carlyle, based in the District, has $81.1 billion under management and is one of the largest private-equity firms in the world.
...
Chief among them: New York-based Veritas Capital bought Falls Church contractor DynCorp for $850 million in 2005.
...
Carlyle's experience could help Booz Allen gain more business at the Pentagon, where it runs up against bigger firms such as Boeing and Lockheed Martin.
...
Private-equity expert Robert A. Profusek, a lawyer at Jones Day, said the deal shows that "the credit markets are clearly better than they were at the height of the doom and despair." But he said the money is nowhere near as readily available as it was a few years ago. "It's a return to the pre-bonanza time," he said. "It's a typical private-equity financing."
Pretty much as Lance has been saying.
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