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 folks! It's snowing out there! Geez... I'm ready to answer all your questions... or try to anyway...on our favorite subject, real estate! I'm hearing, by the way, that the market is hopping again. Anybody else have some insight into the market in our area? Let's get started.
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Woodley Park, D.C.: Hey Daniela! How hard would it be to set a new "bar" for home prices in Woodley Park these days? Similar homes have been going in the $900k range... but looking to sell at about $1.15 million. Is the demand there - or will it be later in the spring? If not... seems like this neighborhood is stuck a bit. Thanks a bunch!
Daniela Deane: I'm not exactly sure what you're saying here (I'm dense, sorry!), but what I'm hearing is that inventory is low, there is multiple bidding out there and that prices are going up. I was talking to an agent from Northwest D.C. this morning and she said the market started picking up in late January after a lull last year, perhaps due to the elections, winter, holidays, etc. But she said that properties that are priced too aggressively can sit there, as always. The buyer bears have come out of hibernation was her direct quote! What are others seeing?
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Chantilly, Va.: Hi Daniela: Love the chats.
How sick is it that many of us ordinary but very fortunate and just a bit wise folks will soon be living in "million dollar homes"?
We moved from Chantilly in Fairfax to Chantilly in Loudoun in 2002, taking what we then considered our whopping profit on the old house and dumping it into a new one near South Riding.
Just by waking up each morning, we've made (on paper) over $200k in 2.5 years. We'll probably be here until our six-month-old twins graduate high school. I can't even imagine what our house will be worth by then.
God bless America! LOL :-)
The only problem is... who will be able to buy our house and the thousands like it?
Daniela Deane: Yes! ...There's also the flip side of rising assessments. My own assessment went up 24 percent this year. ...It seems that the market is picking back up too, after a lull of a few months. It does feel good to be a homeowner these days, though, doesn't it? (even with the assessments, truthfully). I wonder myself though. Who will pay $900K for a modest rambler like mine???
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Alexandria, Va.: I own a condo in Alexandria's West End. There is currently a Section 8 apartment building next to us, and the city is adding some affordable housing units (rentals) next to that. Prices have gone up in the area just as much as elsewhere, but do you think the addition of affordable housing units and the section 8 apartments will affect the value of the condos on the street?
Daniela Deane: I don't actually. Alexandria residents have been living in neighborhoods that include Section 8 housing for a long time. And prices have gone up a lot there. It's nice when a neighborhood is mixed-income, in my opinion. I wouldn't worry too much if I were you. Unless there was a crime issue or something like that.
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Arlington, Va.: Daniela,
Your article on Shirlington was great... but it was almost a year late. Detailed development plans have been available on the Arlington County Web site for almost a year. This includes a detailed map of everything that is in the works.
Also, could you elaborate on the connection between the Fairlington residents who are upset. As presented it was a very odd point of view. Fairlington is on the other side of 395 and is approximate to several of their own older grocery stores and has been shopping centers. If anything they should be glad a nicer grocery store is coming to Shirlington, but without disruption to their "Truman Show" like environs.
washingtonpost.com: Making Shirlington a Magnet (Post, Jan. 29, 2005)
Daniela Deane: Well, thanks, I guess! Sorry it was late, as you say...We cover this entire area...and this entire area is quite big. Sometimes it takes us awhile to get onto what you may consider important. The development only just started to break ground, so that was our "peg," if you will! I spoke to the Fairlington Citizen's Association and their position was that instead of just new restaurants and arts venues, they wanted more neighborhood stores like a hardware store, etc., more stores that they would use on an everyday basis. That's a common complaint of residents that live near these new developments. They were also worried about traffic thru Fairlington and wanted clear signs that showed visitors the way out that didn't include driving through their development. I think it's going to be great. I'm one of those people who go there on the weekends to catch a movie. When I was growing up, Shirlington was a run-down strip mall.
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Bethesda, Md.: For a first time buyer, how many months would you allow for "shopping" for a home before getting frustrated? I'm enjoying the process - now - but fear getting burnt out with overly high expectations.
Thanks!
Daniela Deane: Gosh, it's hard to put a time limit on it. Shop until you find something you like... and can afford, I would say. That can happen in a few days...or take quite a few months. Overly high expectations will get shot down pretty quickly in this market, I would say. Anyway, persevere. Many people have written me here that they persevered...and they got something. If you want to buy, just keep at it. And let me know.
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Fairfax, Va.: Should I put down more than 20% as a first time buyer? What if I move before 5 years, is it still wise to put a huge sum down?
Daniela Deane: No, probably not. Most financial planners recommend putting 20 percent down at the most. You don't want to tie more money that that, I wouldn't think.
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Washington, D.C.: I am interested in purchasing a townhouse this year or next year. I am thinking about some place in Prince Georges's County. What should I do to begin this process?
Daniela Deane: Get out there and look around. Look in the paper and go to some open houses. Check out the different neighborhoods to see which one suits your needs. Drive around. Test the commute. Look at the amenities each neighborhood offers. See what's out there. You don't need an agent yet. Just spend some time familiarizing yourself with different neighborhoods and see what's available there and for what, so that when you're ready to buy, you are well informed.
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Arlington, Va.: Looking to buy again, but the situation looks grim. Hopefully your advice can help. Bought a townhouse, sold it after a year for 40,000 more. Completely out of debt now, live on a teacher's salary (50,000), wife in med. school (on loans) planning on first child summer of 2006, and want to buy again after the summer (large 2 bedroom or smaller 3 bedroom -- condo or townhouse). However, we need to stay in either Arlington, Alexandria, Falls Church, or Fairfax. With $15,000 to put down on a house and only one income, how is that possible to find an affordable place to buy with all of that and prices seemingly out of reach? HELP!!!
Daniela Deane: Congratulations on all the exciting things in your life! Med School, huh? That should help you afford something down the line... your income is probably going to go up substantially in the next few years, so what I would do is buy something now just to get back on the equity ladder. Look at mortgage products where you put down less than 20 percent (there are many). Look at the zero-interest products out there now too, where you only pay interest for the first few years. Talk to a mortgage broker about what you can afford. And look in south Arlington. There are many cute condo-like developments there like Fairlington, Park Fairfax, the Columbia Pike area, etc. Buy what you can afford now knowing that your financial situation will very much change for the better in a few years and you can trade up. Does that help at all?
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RE: Alexandria and Section 8: I live in the same neighborhood as the Alexandria poster and I can say without a doubt that our townhouse (only 2 years old) has increased in value nearly 30% in that time. I think the "mixed" neighborhood gives it character -- and I mean that in a good way -- and the housing in that area will do nothing but go up, up, and up. There are lots of plans for additional condos-on-top-of-retail developments in that quadrant of old town, and that way, everybody wins.
Daniela Deane: Yey! That's a nice posting... I agree with you.
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Washington, D.C.: A coworker of mine has been trying to convince me that Anacostia is a good place to buy these days. I know it's affordable, but will it really appreciate the way other neighborhoods are?
Daniela Deane: It's hard to say at what rate it'll appreciate. In general, so far, it has appreciated at a slower rate than Northwest D.C., for example. But so much is planned for that area... including our new baseball stadium...that it's definitely worth looking at, in my opinion.
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Columbia, Md.: Market appreciation being what is... has been for the last few years, my wife and I feel completely priced out of the market. After renting for too long, we decided that we want to buy a single family detached home in Maryland. Montgomery County and Howard County are just untouchable (our max price is $250k). How far north can you say the D.C. suburbs extend? We're looking in southwest Baltimore County and are hoping there might be some appreciation left in the market after we buy.
Daniela Deane: The D.C. suburbs extend a lot further than they used to!!! Some say they extend all the way into West Virginia... a builder said to me the other day that Leesburg is considered close in for a builder. But saying that… you have to be sure you're comfortable with a lengthy commute. Some people are -- some people just aren't. Some people like the commute from Baltimore, for example, train into Union Station. If you work near Union Station and live near the Baltimore station, it can work... buy what you can afford, but be sure you won't be miserable there. If you are, it's hardly worth it. And good luck.
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RE: Low-cost housing: I used to live in one of the more affordable neighborhoods in Springfield. The home right in front of us was owned by a family who rented out their rooms to day laborers. I'm not racist or anything but it's irritating that all street parking spots are occupied by all the cars of their "room" renters. What did I do? I moved. I feel that their presence devalued the neighborhood a bit. I'm not saying that all the low cost housing areas will have this problem but I wanted to share my experience. Not a crime issue but irritating nonetheless.
Daniela Deane: Thanks for your comments. I can understand how that situation got irritating for you.
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Washington, D.C.: With the sharp increase in D.C. property taxes and the strict tenant rights law, which prevent landlords from increasing rents. How can landlords pass the property tax increase on to the tenant? Soon landlords will be paying the tenants to live in there property. I read plenty of articles in the Post regarding the rights of tenants and homebuyers, but none about the rights of the landlord. Maybe the Post should try to level the playing field.
Daniela Deane: Woo! Come on, it's not our fault! I hear what you're saying, but landlords are allowed to raise rents when tenants leave in D.C. ...and I've found as a D.C. landlord, that people do tend to leave here!!! (Maybe it's just my units). And then landlords who have four or less properties aren't subject to rent control. I think many landlords in this city have found that renting units is actually quite a good game, despite the tenant-friendly laws in the city.
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Washington, D.C.: What is your take on interest only loans in this D.C. market? It seems that appreciation is going to be great no matter what because of all the money/jobs that this town will always generate, and that taking a leap with an interest only loan might be worth it. The rates are certainly lower, similar to arms. Any thoughts? If it matters, we bought a house in AU Park in D.C. Thanks!
Daniela Deane: I think interest only loans are a good way to be able to afford something in this market. The drawback, of course, is that you're not paying any principal back. But remember that with most conventional loans, you're hardly paying back any principal for the first five years anyway. So, I like them especially if you're going to hold five years or les (not too much less please!). For some buyers, they've meant the difference between buying and not buying. If that's you, I would definitely look into them. Talk to a mortgage broker. Many mortgage brokers are pushing them aggressively these days because they've realized that people couldn't afford a property otherwise. There is the no-principal payment drawback though.
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Seven Corners, Va.: Just thought I'd add an update on real estate in my area. In my small neighborhood of 20+ yr old town homes, two homes were just listed on the market. In less than one week, they are under contract, both for above the asking prices. Both asking prices were new "highs" for the neighborhood. Wow.
Of course, now I'm awaiting the thud of Fairfax County assessments...
Daniela Deane: Wow, indeed. It does seem like the market has come out of its lull. The fact that the Fed has increased short-term rates six times recently may be making some buyers feel in a hurry to make a decision now. Average 30-year rates are still low, though. They closed this week at 5.63 percent. Thanks for sharing what's happening in your neighborhood. Oh, and mind that thud! Mine came a couple weeks ago. It's frightening.
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Arlington, Va.: Daniela, I went to an open house this past weekend in my neighborhood. The house was a small cape cod with a family room and kitchen addition. Maybe 1600 sq. ft. or so total. The list price... $825,000. This place was OK, but honestly was a bit of a fixer-upper. When are people going to finally say, "It's not worth it!" You could easily rent a house like this in the same neighborhood for less than what the mortgage would cost.
Daniela Deane: Oh my gosh... that's unbelievable. Where in Arlington? (She asked, curious as all get out!). Are you sure it was only 1,600 square feet??? That is amazing. Your question is a good one. When are people going to say, no, no, no?... Apparently, not, not, not yet.
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Washington, D.C.: Dear Daniela,
What do you think about buying condos pre-construction? My wife and I already have a house in Columbia Heights, but my mother is interested in moving closer to us in the future. A big development on 14th street (Kenyon Square) has just announced a pre-sale for their condominiums and they haven't even broken ground on the 8-story building. I thought this might be a good way to lock something in before things get too pricey. But the selection of units is limited and even the pre-construction prices are just crazy--480K for a one bedroom and way up from there (yikes!). Is it better to lock in now or might the flood of new condos cause the prices the fall once they actually come on line? Thanks!
Daniela Deane: If the market continues to go up, it's a great way to make some money on very little money (the power of leveraging). Think about it: You put down 5 percent or so now and then you pay the rest when it's done, maybe a year, 18 months from now. So you're getting to buy something that you pay for tomorrow at today's prices. If prices go up 10-12 percent (which is what most economists are predicting for this year, but it could be more), you're making 10-12 of the ENTIRE price with only putting down 5 percent. Leveraging is what makes real estate so good. Now, there's the flip side. If prices go down, it's not so pretty. Nobody is predicting that though, and prices seem to be going up now. By the way, it's really snowing now!!!!
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Md.: You're right-- there is no tax advantage to putting more than 20 percent down. In many cases, the lower your mortgage, the lower your deductions. Besides, no matter how much you like the house -- if it hasn't been built to your specifications -- you'll need the money for renovations. We re-did our kitchen last summer and it cost us nearly double what we originally planned -- since we put down only 20 percent on the purchase (my hubby wanted to put down 30 percent!), we were able to get a smaller HELOC.
Daniela Deane: I love it when people say I'm right! You'll always get your question/comment posted if you're nice to me!!! (Or maybe not.)
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Silver Spring, Md.: First of all, thanks to the Post for the great series of articles this week in rising property values and the corresponding increase in tax assessments. I live near Kemp Mill Estates and am fortunate to have gotten in when the going was good. However, I am concerned about all this "bubble" talk. What is this so-called "bubble" anyway? The point at which home prices cannot not be sustained in terms of going higher? It has me a little concerned as we found this in our last home (process didn't move for about ten years). Is the Washington market more immune to this than others?
Thanks and love your columns and chats.
washingtonpost.com: Paying the Price For a Land Boom (Post, Feb. 2, 2005)
Rising Price of the American Dream (Post, Feb. 1, 2005)
Daniela Deane: Thank you for your compliments. Yes, those stories in the Metro section were fabulous. Our Saturday cover is about appealing your assessment. So look out for that too. Now, whether we've got a bubble or not...The overwhelming majority of economists say we do not have a bubble here, that the increase in jobs (phenomenal), and the increase in people who live here through immigration and in-migration will keep property going up here. NOW most of them say that prices cannot keep going up like they have been. Last year, prices increased more than 20 percent here. That can't keep happening. So most of them are predicting 10-12 percent appreciation for 2005. But very very very few of them say prices will drop here. It's mostly about jobs, jobs, and more jobs.
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Alexandria, Va.: But I think people are starting to say no, no, no. I can name three people who in the last few months have decided to sell their condos because with the comb of skyrocketing condo fees on top of their mortgage, they have realized they can save $800 - 1000 (minimum) per month if they rent. I know that the place I rent would be a heck of a lot more if I wanted to buy it. And yes, I understand the benefits of owning, but right now, there is more benefit to being able to eat.
Daniela Deane: I hear you! An owner of a rental company said to me yesterday that renting is starting to be a good deal around here. A few years ago, buying seemed much better than renting. That was just before he said that rents were starting to go back up, though. The only problem with renting is that it's giving money to your landlord, pure and simple, it's paying his mortgage for him. Most financial planners say you should own your principal residence. Anyway, you make some good points.
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Washington, D.C.: Can you recommend any appraisers who are good?
Daniela Deane: No, I'm sorry. We don't recommend individual people. Start with an online search...that's where I start with everything these days. Ask your friends for referrals. Look in the yellow pages.
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Catonsville, Md.: Daniela --
For Columbia, Md., asking about Baltimore, two thoughts.
(1) The best way to get into D.C. from here is, as you mentioned, the trains. But you don't have to live right downtown for that -- there are stops all the way down. The stops at BWI and Odenton (on the Penn Line) sometimes have express trains. Halethorpe is also very easily accessible, and all have nice older neighborhoods nearby. It's great -- I live 10 min. from the train, 15 mins. from downtown Baltimore, and on weekends can walk just about everywhere I need to go on the weekends (Sidewalks! We have actual sidewalks here!).
(2) You probably don't want to drive. I used to leave my old house at 6:00 a.m. and be at my office in downtown D.C. at 6:45 (5-6 yrs ago). Now that we've moved back, that same commute takes at least an hour, if not an hour and fifteen minutes. Very annoying (luckily, we now have a Baltimore office). Of course, if someone's already used to the D.C. commute, another 10 min. up from Howard County probably isn't a big thing.
Daniela Deane: Thank you so much Catonsville! Very good suggestions. Your commute is a big issue.
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Washington, D.C.: Do you recommend creating an LLC to purchase rental property? What are the pros and cons? Thanks! Love your chats.
Daniela Deane: I'm not in the business of recommending, but yes, a lot of people who buy rental property do create LLCs and then put the property in the name of the LLC. The main benefit is that if a tenant sues you, they sue the LLC and they can't go after all your own personal assets. Consult a real estate lawyer for all the ins and outs of it.
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Washington, D.C. (Southeast): Hi. I have a 2-bdrm Capitol Hill rowhouse with a basement. Purchased for $140K in 1993, it's still in OK condition. My question is this: Whenever I sell, will it make financial sense to use a home equity loan to have it gutted and completely re-done in order to sell it as brand-new? I've never taken any equity out of this property. Obviously, I'm trying to maximize my profit from the sale.
Daniela Deane: That's a very interesting question for me because my husband and I have this very same discussion a lot. He says we should borrow money to "pop up" our rambler right before we sell to make a lot more money on it. I say it's not worth it at that stage. He says a builder could easily do it anyway and make a bundle on it. So I've put this question to several agents (while I'm reporting, I just go to my own personal questions!)...Most of them say that it's not worth the hassle just to sell that if you want to do that kind of thing do it now and enjoy it first. They say just "stage" your house, make it look as good as possible with new carpet, floors redone, things like that, to get as much as you can...The truth is I don't know the definitive answer here. So I haven't helped at all! Ask some agents and see what answers you get. I bet you'll get the same answers I got...But I still in the back of my mind think my husband could be right (not that I would ever tell him that!).
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Daniela Deane: Folks! It looks like a blizzard out there! Thank you so much for joining me. I've enjoyed it, like I always do. And please come back again in two weeks, same time, same place. I'll be here.
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