Real Estate Live

Welcome to Real Estate Live, an online discussion of the Washington area housing market, featuring Post staff writer Daniela Deane.

In her Live Online discussions with the audience, Deane discusses the specifics of the market, from condos and investment properties to contracts and mortgages.

Deane has covered real estate for The Washington Post since 1999 and has worked as a reporter for more than 20 years.

The transcript follows.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

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Daniela Deane: Hello everyone! And welcome to Real Estate Live. I've been interviewing a slew of economists, professors, builders, and realtors this past week about the future of the housing industry for next year for a forecast story that's running on the 1st of January....So I am a wealth of information today on what the so-called experts think....I'm going to share all that information with you as we go along this hour, even though I still want you to plunk down the 35 cents to read the actual story on January 1!....Let me get started here. I have a bunch of questions, as always. Thanks for coming! And please chime in with your thoughts, suggestions and experiences. Remember: I'm nothing without you!

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Paris, France: Hi Ms. Deane,
Submitting early because of time difference. I'm an American living in Europe with a European spouse.
We recently purchased an apartment using a large European bank. We are thinking of moving soon to the U.S. because of a possible job transfer. My husband does not have any credit history and I have very little if any credit in the U.S. (I've lived out of the country for the past 7 years).
So my question is: would it better to use a European bank to finance the house in the U.S.?
Or even with our lack of credit could using a U.S. bank also work? I remember you mentioning buying and selling a place in London, did you use a U.S. bank? And when you came back home did any banks give you a hard time for the lack of credit activity?

Daniela Deane: Hi Paris! I'm answering you right away, because of the time difference. I want you to be able to go to bed! When I moved back here from 19 years overseas and with a British husband, I had a similar problem. He had no credit history at all, and I luckily, had one American Express card that I had kept since college, so a little bit of credit from that...When we bought our house about 3 weeks after we got here (had to get my boys in school), we bought the house and mortgage in my name only. My husband also didn't have a green card yet (I recommend you start the green card process in Paris -- we should have done that.) or a job...I had a job and this limited credit, so we managed to get the house on that (prices were so much lower then). We systematically tried to build a credit history for my husband, by putting the car loan in his name, and by opening silly department store credit cards for him. Slowly, and I mean slowly, we built up a credit history for him. Mine was easier. I also put my name on the car loan, got a Bloomie's card, a Hecht's card, like that. Anyway, my suggestion is to build up your credit here. You'll need it anyway, so might as well start. You may have to start out like we did with the property only in your name. You can do it! (My husband's credit score is still lower than mine because of "length of credit history." ... And when we've re-financed, we've been asked why he has no history past 7 years....I'm serious about the green card though...If we had started the process at the U.S. Embassy in Rome, it would've been a much shorter process, we've been told...Bonne chance! and Welcome Home! By the way, my husband loves the U.S.!

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Arlington, Va.: I am thinking of selling my Fairlington condo to MAFC Residential of Chantilly. They buy homes on an "as is" basis without the need for a real estate agent. My rough calculations indicate that the price they quoted me is about what I would get on the open market, minus the agent's commission and the fix-up costs that I will avoid.

Any horror stories I should hear about before signing on the dotted line?

Daniela Deane: I don't know enough about MFAC Residential to give you any first-hand advice....They've contacted me to introduce themselves but I know of no one who has used them. Is there anyone reading today who has first-hand experience with MFAC? Do some poking around on the Web to see what you can find out about them...Also, you could ask them for names of people who have sold to them so you could chat to them (although they'll give you the names of satisfied customers). Meet with someone from the company to ask them anything you're thinking about. Basically scout around to see what you can find out.

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Ashton Heights: Will allowing poor people to live a block from Clarendon Metro (at the First Baptist Church site) cause property values in Lyon Village to plummet?

Daniela Deane: There isn't an easy answer to this, is there? This covers so many issues....BUT...no, I don't believe property prices in Lyon Village will PLUMMET. That's a big thing, plummeting, isn't it? Lyon Village is a highly desirable neighborhood for many reasons -- the properties are cute, the location is incredible, now there's incredible retail and restaurants around it, too. And people just love Lyon Village. Now, if crime becomes an issue -- or loitering, or drug dealing, or anything like that -- some undesirable behavior, that could affect prices. But not in any substantial way, in my opinion. First of all, I don't think the community would allow any big problem to develop. So my answer is NO.

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Maryland: Would be shocked if a foreign bank would be willing to finance personal real estate in the U.S.

They might not even be able to, legally, unless they have branches in the U.S. I'm a bank regulator. Not my area of specialty, but I'm almost certain you can't use a foreign bank that doesn't ordinarily operate within the U.S. for consumer transactions to get a mortgage here.

Daniela Deane: Yes, that's the other consideration I didn't even get into...My answer was long as it was...Anyway, basically finance it here is the answer.

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Washington, D.C.: That lady in Paris should still keep some U.S. based bank account/credit card etc. open - that goes for all Americans living overseas!
With electronic mail, it doesn't really matter where you are, and you can use a friend/family member's address for any physical mailings. Makes things much easier upon re-entry!

Daniela Deane: Yes! That's what I found with my sole credit card....Gotta keep your financial ties going with home!

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Washington, D.C.: Please give us an update on the forecast for the condo market. I am about to sign on new construction in an 'emerging' neighborhood...should I or should I wait? Please help, I am a petrified 1st time home-buyer!

Daniela Deane: Basically, the forecast for the entire metro-wide market is continued good! The ranges of price appreciation for 2005 for this area that I heard was anywhere from 7-10 percent. The Washington real estate market is expected to out-perform the national market -- again. And it's all about the local economy: jobs, jobs, and more jobs. Forecasters are predicting another 75,000 jobs will be added here in 2005, after 70,000 this year. One economist said to me today that history has shown that the only time prices have dropped substantially was on economic hard times -- i.e. a loss of jobs. In no way is that going to happen here. The condo market is also expected to remain strong, as empty nesters and people priced out of other forms of housing continue to turn to condos...There are a lot of condos being built out there, which sometimes scares me, but the truth is we're not creating enough housing to satisfy demand here. Where did you buy? I bought a condo under construction recently too...(I have no idea how I'm going to pay for it when it's done, but I've got a year to sort that out!). If you believe even a hair of what all these experts are saying, you should feel good about your purchase.

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Washington, D.C. (Dupont Circle): Hi Daniela,

Just out of curiosity, what would you guess the average realtor in D.C. earns?

Thanks!

Daniela Deane: I've never seen a breakdown for the D.C. area (maybe I should have!) but all the breakdowns I have seen show that realtors don't make as much as you would think, because many don't sell very many properties...Not all of them sell a lot...Those are the ones we tend to notice.

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Arlington, Va.: You should re-think your answer about Lyon Village. Having police officers, teachers, and employees of nonprofits living in your neighborhood must cause values to plummet. As we know, affordable housing brings in "those people".

Daniela Deane: Ouch!!!! Lyon Village is really expensive, let's not forget that...It's not what you'd call an affordable neighborhood.

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Washington, D.C.: "Will allowing poor people to live a block from Clarendon Metro (at the First Baptist Church site) cause property values in Lyon Village to plummet?"

Poor people need somewhere to live, too. God bless you, too.

Daniela Deane: I knew I should've stayed away from that question!!!!! We could write a book about this issue, couldn't we? Anyway, I was answering the question as it was phrased...Did I think values would PLUMMET? ... Here's a question: Will residents there allow values to plummet???

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Washington, D.C.: Hi Daniela:

I have a condo dilemma. My wife and I live in a condo near the National Cathedral, and the board recently passed the budget to raise our condo fees by 35%. Is that legal? Around 70 owners feel cheated, and the board is just ignoring us. Do we have anyway of reversing this issue? But, mainly, is this raise legal in D.C.?

Regards,

Rob

Daniela Deane: I think it probably is legal. Did these people go to the condo meeting where this was decided and air their concerns? Why were the fees raised so much? Are there no reserves? Is there some work that needs to be done there that money needs to be raised to cover it? There must be a reason for this, isn't there? Nobody likes to have their fees raised like that....

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RE: Lyon Village: Those people? I can't believe you let someone post that. Police officers and teachers are not riff-raff!!! If you ask me they are the ones who should be paid enough to live in the expensive neighborhoods. (From daughter of a retired teacher)

Daniela Deane: Yes!! I think being a teacher in the public school system is one of the most honorable worthwhile jobs there is.

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RE: Ashton Heights/Lyon Village: We live in large, luxurious, four-story townhouses dumped right in the middle of public housing in Old Town Alexandria. Original price tags two years ago were mid-$500s and one just sold for $725K, despite the "poor people" across the street.

I think Ashton Heights needs to keep a few things in focus, like that "poor people" can still be neat and clean and violence-free -- it's a shame that the perception of poor and violent are associated in the same sentence.

Daniela Deane: Very well put!

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Washington, D.C.: I was thinking this morning and realized something. I heard the market in D.C. on average appreciated 24% this year. OK, let's call it 20% and say my house was worth $400,000 on Jan 1.

That means my house went up by $80,000 in 2004 and I 'earned' about 1500 buck a week just by living there.

I just wish I "earned" that much in my job!

washingtonpost.com: Home Values Up 13% Across U.S., With D.C. Region's Prices Rising 24% (Post, Dec. 11, 2004)

Daniela Deane: Amazing, isn't it! We're all making more on our houses than anything else...Now you see why I tell people to buy?!? And now they're saying up to 10 percent next year.....What investment is bringing in that kind of return????????

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RE: Lyon Village: Don't think those posters were fussing at you -- you gave a serious answer to a serious question. Think they were more miffed at the person posing the question.

Daniela Deane: Yeah! I don't take anything personally here folks....Don't worry! For the record, I wish I lived in Lyon Village! It is so darned cute!

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Rockville, Md.: Do you see any substantial changes in the housing market over the next 6 months or so, enough to potentially caution people who are considering buying a house to wait "it" (high house prices) out a bit? Or is now as good a time as any?

Daniela Deane: Here's what the economists say could slow things: a further deteriorating dollar, oil price hikes, and a ballooning budget deficit....and of course, god forbid, a terrorist attack....Those are the things that could threaten the housing market because they could cause interest rates to rise significantly...Most economists predict those things won't happen and that there will be only a slow rise in interest rates over 2005 to something like 6.75 percent. This week, they closed at 5.68 percent. (amazing).

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RE: "Those people": I think the "those people" comment was meant as a joke - and not to criticize all the teachers, firefighters, not-for-profit people, etc. Sometimes people shouldn't take things so seriously.

But on the flip side, I think the comments by the initial poster were quite ugly...

Daniela Deane: Lyon Village is our topic for the day! Or rather affordable housing?

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RE: Lyon Village: Daniela, I think the issue here was the assumption that "poor" people are the ones causing values to plummet. I take a poor retired teacher living next to me that a rich drug dealer any day. The original poster was somewhat, well, ok, was rude.

Daniela Deane: Me too! I love teachers...I'm wondering whether I'd be a decent high school teacher. A friend of mine called the other day. She used to be a producer at CNN. Now she's an elementary school teacher in inner city L.A. I was SO PR0UD of her....Aren't you?

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Germantown, Maryland: Hi! I was just wondering what you opinion was on the state of the real estate market in the D.C. area. Is it flat, slowly growing or what?
Thanx!

Daniela Deane: If you believe the "experts," the answer is: growing and growing for the foreseeable future. I have seen higher-priced properties (over $800,000) sit on the market longer, however, since last fall....Realtors are saying the market will pick back up after the New Year. We'll see if they're right.

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New York City: Hello,

Last week I asked the following question and you kindly responded. The exchange is below. Specifics: My basement condo is a 2b/2b with a parking space in Georgetown. I have a nice positive cash flow from the renters and have no problem renting to students. My concern it that it may not continue to appreciate substantially because it is a basement condo. That while nice, does not appreciate as rapidly or sell as easily as its above grade neighbors. I am contemplating selling to take advantage of the current market. I would use the cash to buy in New England to take advantage of nicely appreciating rates 12-14% annually on condos in a growing area. As this area is 40 miles outside of NYC, next door to Greenwich, Conn. It is considered to be a suburb and it is growing quickly.

Because this question is highly specific, I can understand that you may not want to answer it online. However, I would appreciate your candid assessment considering your experience in the condo market and housing market overall. I am an avid reader of all of your columns.

Thank your for your time and consideration.

Happy Holidays!

Exchange:
New York City: Hello,
I have a rental property in D.C., (a basement condo in a very nice N.W. neighborhood that has seen nice appreciation), but I am wondering if it is time to sell to take advantage of a similar real estate growth spurt in the New England area. My thought is that the basement condo may have seen its maximum appreciation and that the proceeds could be reinvested elsewhere to achieve greater profits for multiple condos. Any thoughts are welcome!

Thanks from the North.

Daniela Deane: Hi NYC! It's hard for me to give a full opinion not knowing how big your basement condo is (1 BR?) nor where it is...A couple things to keep in mind: If you've had that condo a long time, you're probably getting positive cash flow from the rental of it, right? Something you may no longer get buying at today's higher prices. It's much harder to get a positive cash flow these days...Generally, the thinking on investments says hold, rather than sell. I don't know if it's become a problem for you to manage this from NYC or not? But if you do sell, look into a Starker Exchange (you can look on irs.gov) to avoid capital gains taxes....

Daniela Deane: Hi NYC. Nice to have you back. I don't know the market in Greenwich, Conn. at all, unfortunately, but I do know the market here. Your basement condo in Georgetown will continue to appreciate. Georgetown, of course, is highly desirable and you have a nice sized condo with parking. Whether it will appreciate as much as another property in Greenwich, I don't know. Here's what I think though, for what it's worth: You've got a good property here in D.C. It'll continue to go up. You have good cash flow now. No trouble renting. There's really no point in selling. If you want to buy a place in Greenwich, buy another place. Finance it from equity here or some other source. I don't think there's much point in selling what is a top-notch investment in an incredible neighborhood in an incredible metropolitan market (Washington). That's my two cent's.

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Washington, D.C.: Daniela: I want to use the equity in my house (about $90K) to buy another property. Do I go to the bank and say I want to buy another property and have them pre-approve me the way they did for my current loan? How do I figure out how much I can afford to buy? Also, is the interest on a rental property deductible on your taxes as it is in your primary residence?

Daniela Deane: Talk to a mortgage broker or your bank. Tell them what you want to do. They'll help you. That's how I paid for my condos -- using equity from my house.

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RE: "Us people": I live in an ADU about 1/2 a mile from the Vienna metro. I have a college degree and a good career but due to the outlandish prices of housing in this area I could not afford a "rich people" home. (Oh, and I'm Caucasian, young, and a U.S. citizen). Mine is one of 21 houses in the ADU program. There is no crime, loitering, drug activity or any other kind of undesirable element here. Houses in our neighborhood outside the program are selling well into the $800k range.

That's the problem with this kind of thinking. You "richies" think we're beneath you. Just keep in mind my friend, there are a lot more of us than there are you and we live here too. Did I mention I'm a native of the Northern Virginia area too? Thank goodness this program came along so I could stay here.

Daniela Deane: I hope you're not including me in the "you richies!" Even though...I'd like to be rich!!!

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Alexandria, Va.: I recently bought a 2-bed/2ba condo and have two mortgages: a line of credit and a 5-year ARM where I'm paying interest only. If I plan on selling within the next two years, do I really have any incentive to significantly pay down the mortgage if the market is slowing down (as it appears to be doing)?

Daniela Deane: I don't see much incentive, no....About your comment about the market: What I'm hearing is that at lower price ranges, the market is still incredibly hot. Remember it's the holidays now. The period from September to December is always the slowest time of the year for real estate. Let's see what happens in the New Year....

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Washigton, D.C.: What's your opinion on McLean Gardens? Why does it seem undervalued?

Daniela Deane: I like it! And I didn't know it was undervalued, so thanks for telling me. I'll go see what there is over there!

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Columbia, Md.: 19 years in Europe? You only look about 19 in your picture!

Daniela Deane: What a sweetie! Actually half that time in Europe (Rome, London) and half in Asia (Manila, Hong Kong)...Gosh, I'm getting wistful just writing about it....

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Maryland : Hi Daniela!

In response to the comment about "Those People". My mother taught in the public school system as a classroom teacher for 35 years. She is now just shy of Millionaire financial status. Guess "those people" who use their heads to live below their means and invest well just don't fit in anywhere!

Informed student

Daniela Deane: Wow! How impressive!

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Gaithersburg, Md.: In the D.C. metro area, the dramatic appreciation of housing prices over the past few years has left homeowners feeling the pinch. As real estate values appreciate yearly and homes are reassessed regularly, higher property taxes and home insurance costs follow. Are homeowners resigned to accepting these increases? Although we willingly welcome the increased value in our homes, these unrealized (until we sell) gains can have a significant impact on our finances every year. What can homeowners due to limit the impact of increased property values on their taxes and insurance rates?

Daniela Deane: Yes, that's the flipside to all this appreciation, huh...Well, you can fight your assessment, although don't hold your breath on winning....And you can up your deductible on your homeowner's insurance to keep your rate down...I don't see much else you can do...Do you? The counties want a bit of that appreciation too, and really, it's only fair, I guess.....

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Washington, D.C.: What is your opinion of Brookland? Good neighborhood for a family with kids?

Daniela Deane: I personally like Brookland...and wrote a story about it not that long ago....I recommend checking out a neighborhood thoroughly...Go there night and day, do your commute to work from there, see what kids are there that your kids could play with. In short, do your homework, so you know what you're getting in to. This applies to any neighborhood you're considering.

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New York: How are you?

Daniela Deane: Pretty good. You? And who are you?

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Daniela Deane: Folks! Thanks for coming! I'm sorry if I didn't get to your question...I had so many today. I'm honored so many of you take time out of your busy day to come talk to me....Come back please, January 6, same time, same place. Until then, happy holidays!!! I hope you'll get a break from work....Enjoy your loved ones and family over the holidays. I'll be thinking of you all!

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