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! Welcome to Real Estate Live on this blustery Washington day ... I'm back from my trip (boo hoo) … I got interested in the concept of time shares while I was there, since there was a big one near our hotel … Worth a story, I was thinking. What do you think? ... Anyway, let's get started!
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Arlington, Va.: Daniela,
I am a long-time follower of this chat and your column ... (constantly looking for good information). Just wanted to celebrate a little -- my wife and I just bought in Arlington (Arlington Village off of Columbia Pike) -- and to say thanks for the encouragement.
Daniela Deane: Thanks so much for saying that I encouraged you, although everyone knows that that comment scares the pants off me too! (Remember, no crying to me later....) ... I still think you made the right choice buying in this area, even though you probably paid more than anyone has ever paid for a condo in Arlington Village ...(that holds true for everyone who's buying now, not just you.). I think Arlington Village is an adorable little development and Columbia Pike has some real upside to it. And of course Arlington is all about location, location, location. Congratulations! My guess is that you'll be happy with your decision for years to come. Thanks for writing.
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Bowie, Md.: RE: Middle Class Drives Soaring Purchases of Second Homes
How much of this trend is present in the D.C. area market?
washingtonpost.com: Middle Class Drives Soaring Purchases of Second Homes (Post, Mar. 2, 2005)
Daniela Deane: The trend to buy send homes, whether for investment or for recreation (since both constitute a "second home") is very prevalent in the Washington area...Prices at the Delaware shore, for example, where many Washington area second-home buyers purchase, have exploded. Ski resorts near here have also seen a serious up tick in sales and prices. The Washington area market is prime for this type of buying because of the way values of primary residences have shot up here. Using money built up in your primary residence was the second source of funds for second homebuyers last year, according to the survey I quoted in the story. The strength of second-home buying has taken many economists by surprise. The people who put the survey out had seriously under-estimated the strength of this market. A big caveat, of course: Second-home buying is not for everyone! And like every investment, also carries risk.
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Arlington, Va.: RE: Renting out vs. sell
Hi Daniela,
I bought a 950-sq. ft. two-bed room condo near Courthouse late '03 with a 5-year ARM. The condo will soon be too small when my second child will arrive later this year. I'll need a bigger house but I don't feel comfortable spending over a half-million dollars in this market ... so renting/leasing is the only viable housing solution for my family.
Now, what do I do with the condo once we move to a new home?
Selling it or renting it out? My wife wants to keep the condo citing equity building, appreciation and tax advantages and so on. But my observation is the price gap between condo and house are ever widening. So unless the market crash keeping the condo don't make much sense to me. What's your take on this subject?
Thanks much for your time!
Daniela Deane: My take is don't sell to then rent. That seems silly to me. You lose out on all those advantages your wife is talking about to then go rent. You'll lose the appreciation we're still enjoying in this area...I know people are going to jump down my throat, but most local economists and housing watchers are predicting appreciation of some 10-15 percent in this area this year. That's HUGE. Then, you'll lose the tax advantage having a mortgage gives you, one of the biggest tax breaks our government allows us. I'm totally on your wife's side. Sell your condo only if you're gonna pump that money back into the next property you buy. Don't sell your condo if you're just gonna go rent. Sorry. That's my two cents.
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Washington, D.C.: Ms. Deane,
How does the New York City real estate market compare to D.C.'s market? My wife and I will be relocating. We are considering hanging on to our Arlington home and buying a home in N.Y. Is that considered one of the more volatile markets? The information I've obtained off the web suggests that the N.Y. market has faired well, but not nearly at the same pace as here.
Your thoughts would be greatly appreciated.
Thank you.
Daniela Deane: I'm not an expert on the New York market ... shoot, it's hard enough trying to be a quasi-expert on this one! From the cursory look I've taken there, though, it's a lot more expensive than here. And what I've read is contrary to what you're saying: They've also seen great appreciation jumps there, although I can't speak for every borough, neighborhood, or anything that specific. I know many parts of Manhattan have seen huge appreciation over the past few years of this market, similar to here really. If I were you, and of course I'm not, I would hang on to your Arlington home if you can even if you move to New York...As long as you can stomach being a landlord, there's not a lot of question in my mind that you'll be happy you did.
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Georgetown, D.C.: Is it me or are the prices in D.C. surreal? To get something affordable, I would have to buy a tiny apartment similar to the one I lived in during college! No closets, no sunlight, no parking, very little space. Will the bubble burst?
Daniela Deane: No, it's not you. The prices in the D.C. area are surreal. House values in our area went up 24 percent last year, according to a recent federal report. That's not a typo, folks. And that comes on top of several other years of appreciation. Now, is it going to burst? The million-dollar question (a million bucks doesn't buy what it used to, that's for sure!)... local economists, housing watchers say no. A very few say yes. The majority opinion by far is that it's not going to burst, but rather moderate. Prices won't go up 25 percent again this year (my gosh) but that they'll still go up between 10-15 percent. This is all based on our incredibly healthy local economy, one of the best local economies in the country, if not THE best...Thank you, federal government. This is not my opinion. This is the opinion of people who are supposed to know ... but who knows, huh?
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Washington, D.C.: Yet another Fairlington question, but if you could answer this it would be MOST appreciated as I leave for India on Sunday and need to make a decision now. Is a one bedroom in Fairlington worth $300K, for a meager 711 sq. feet? I am looking at an adorable unit now, and it is going to list at 285K and maybe go up to $300K. As a young 30-something looking to have kids in the next 2-3 years, am I crazy? I love Fairlington, and could live here for a few years and then rent it out, but do you advise I use my $300-330K more wisely? Thanks so much for your help!
Daniela Deane: If you believe what I just said, which is the fruit of my reporting rather than any opinion of mine, yes, it is a good place to put that money. 10-15 percent this year?? It all depends on whether you believe this...these predictions are based on demographics, supply and demand, and jobs, jobs, and jobs. An expected 80,000 more this year for this area. Added to some 80,000 last year...Anyway, I don't want to be accused of being a shill for the real estate industry, which someone in this forum accused me of not that long ago. This is based on my extensive reporting. But heck, maybe everyone's wrong! I'm not saying that's not a possibility. I'm just passing this information along to you.
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Washington, D.C.: If money were no object ... what neighborhood in the D.C. metro area would you choose and why?
Daniela Deane: If you make me say it, I will. Georgetown. It's beautiful. And a location to die for. Big BUT...I don't have the money and never will to live in the Georgetown house I want...Oh, and I like Cleveland Park a lot too. And uh, Old Town Alexandria. What I like is being able to walk to things, like I was in Europe ... but who the heck cares what I like?
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Bethesda, Md.: RE: Sell or rent ... but don't forget -- if you rent a property that was your principal residence, you're setting yourself up for a huge hit on capital gains tax.
Daniela Deane: Yes, but not for 3 years. If you live in a property for two of the past five years, you can still claim the capital gains tax exclusion. Look on irs.gov for details.
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Springfield, Va.: Just wanted to share a successful home buying experience. Last summer, my husband and I bid asking price without an escalation clause on a townhouse four days after it went on the market. We included a letter describing ourselves and why we wanted the house. They accepted the offer the next day. We later found out that they got higher bids but sold us the house because of the letter. Also, they were good friends with all of their neighbors, and did not want to stick them with buyers who were not actually going to live there themselves. Thanks for letting me share and for all the great chats!
Daniela Deane: Sweet, sweet, sweet! Thanks for sharing. I've heard the old letter and picture trick working in other occasions, too, like pictures of your sweet baby. All you buyers out there: Get those pens out! Or not!
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Alexandria, Va.: I am 23 years old, just bought a condo in Alexandria close to Skyline in June 2004 and I have a big dilemma. I recently entered my tax information expecting to receive a refund and it came out that I owed 2000 dollars in taxes! I thought a house was suppose to give you a tax break. I have never owed. The only thing new from this year and last year is my house purchase and I rolled over my 401K from my old job to my new job ... I don't understand
Daniela Deane: I'm not a tax expert, and it seems you need to talk to a tax advisor. But yes, owning property does give tax advantages. You get to write off all that interest you're paying, basically, one of the biggest tax breaks there are. I can't answer any more specifically than that...Don't despair. I still think it's good that you bought a property at your tender age (very good) whatever your taxes this year may be. Keep that in mind when you write that check.
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Fairfax City, Va. re: timeshare: RE: Timeshare ... we've owned for four years in Virginia Beach and my perspective is that it's great if you buy wisely and IF YOU USE IT. We pay about $400 a year in maintenance fees, $100 a year to the exchange company, and $100 each time we trade (the condo was $10k, which is paid off).
What makes it worth it to us is that our unit it highly desired by other travelers, so we get two weeks from the timeshare company every time we deposit our one. So for $700, we get two weeks in condos that we've used in Spain, St. Marten, Ft. Lauderdale, New Orleans ... it works for us!
Daniela Deane: Wow, that sounds really interesting! Thanks for sharing. When I get around to writing this story, I'm gonna ask for you to come back to me on this forum with your number. I want a time-share in Barbardos, darn it!!!
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RE: Guy with Courthouse condo & 2nd child on the way: Daniela is so right. Do not sell that place unless you're going to buy a house. And why don't you want to spend $500K on a house? If you don't have it, that's one thing, but if you do have it and you're hung up just on the numbers, you're going to miss out on owning a home for you and your family. My husband and I sold an Arlington condo to buy a (then) $600K house and despite the high mortgage payment and the killer property taxes, not a day goes by that we don't thank our lucky stars that we bought our house. No one can kick us out of our house or not renew a lease. Your kids will be thankful they have a stable place to call home.
Daniela Deane: How can I resist posting a question that starts with "Daniela is so right." Besides the ego patting, don't listen to me, here's someone with first-hand information. Again, if it were me, and it isn't, I would NEVER sell to then go rent in this area at this time. But that's just me folks. And again, for the thousandth time, I COULD BE WRONG.
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RE: Second home trend ... risk?: Daniela,
I read your response to Bowie, Md. on second home and you made me wonder about what the risk is. So, what would be the risk if I've bought a second home on Delaware shore to use for vacation for us only for the next 15 years?
Daniela Deane: I have to be careful here. I don't want people running out and buying things because Daniela told them to. My gosh. If I liked the Delaware shore (and I do) and thought I was going to use a place there enough (and I would rent it out if I didn't), I would definitely buy a second home there, like you're considering. One risk I see is getting in too much debt (that's a big one). I don't know if that's your situation, but that wouldn't be advisable, obviously. Another risk is not going there enough (but then rent it). A third risk is not liking being a landlord ... look, I'm scraping the bottom of the barrel here. You know what I really think, don't you? And that's what you're asking, isn't it?
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Gaithersburg, Md.: Another successful buying experience: Last August, my partner and I, with a combined income of considerably less than $100K (alas!), found a nice condo/townhouse in Gaithersburg (near Muddy Branch and Great Seneca) for $250K. It needed quite a bit of cosmetic work, but it was appraised at $269K and comparable units in our development are now selling for $299K. It's a squeeze to make the payments, but it's definitely worth it and we'll do well if we ever sell and leave the area. There is hope for anyone who doesn't make a 6-figure salary!
Daniela Deane: I like upbeat stories...I'm working on a story now about how buying in this area is often a compromise, which I really believe it is. People are compromising on location, size, style of house, and a bunch of other things these days to become Washington area homeowners. I'm glad you're happy. So glad really. Congrats! We gotta buck each other up here! (Doesn't anyone want to whine about assessments today?)
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Washington, D.C.: Hi Daniela,
Gosh I do love your chats, and don't mean you any harm or disrespect, but I can kind of see why someone suggested you're a shill for the real estate industry. Also, that piece you did on H Street, N.E. after you bought a property there?!?! C'mon. You don't have to post this, but really, let's be real.
Daniela Deane: I never bought a property on H Street. What the heck are you talking about? Get real please. And get off my back.
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Hyattsville, Maryland: Oh pooh! Why do I have to keep reading about individuals unable to afford even a condo or the family feeling like they can't afford a single family home! You can ... just expand your horizons a bit. Hyattsville just made the Washingtonian's "Great Places to Live" issue for the second year in a row, and Cheverly was mentioned as well! These places offer quick commutes (by either car or Metro) to DC, great housing stock, and wonderful involved communities. There are even (gasp) good schools within Prince George's County. It's so worth taking a look, talking with neighbors, etc. Until then, please, please, please don't complain about the high housing prices.
Daniela Deane: Thank you for sharing. A lot of people on this forum have mentioned Cheverly of late ... I'm still fuming about H Street. Sorry. That's truly insulting to me. And blatantly untrue.
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Northern Va. I just purchased my first condo last summer in Northern Va. How do I tell what my condo is worth today? I only know of one other unit in my building that has sold since then, and I don't think it was in terrific shape, unlike mine. Thank you.
Daniela Deane: Well, the only real way to tell what something is worth is by comparable sales. So I guess you gotta sit tight until there are some. Looking at asking prices doesn't really do it (although it is an indication of what sellers and agents are trying for, of course) because that doesn't mean that's what a property will sell for. Appraisers base their values on comps, comps and more comps. Something will sell sooner or later in your building.
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H Street, N.E.: The fact that you think it's truly insulting is insulting to the folks that live on H Street!
This is still my favorite chat!
Daniela Deane: What I think is truly insulting is that you're saying that I bought a place somewhere and then wrote about how good it was. That's impugning my integrity as a journalist and the integrity of this paper. And frankly, we don't deserve it. And I think you know that.
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Silver Spring, Md.: Hi,
I recently finished my taxes and just want to ask about further tax advantages of homeownership. I purchased a condo in mid-2004 so I was able to deduct mortgage interest and real estate taxes. Do you know how else I can maximize my deductions? My CPA suggested I get a home equity line of credit to pay for home improvements, etc. and then I can deduct the interest paid on that on my taxes. What is your opinion on this?
On a side note, reading your chats really helped me before buying. I think I was pretty lucky with my purchase since a similar unit is now selling for $50,000 more than what I paid.
Thanks.
Daniela Deane: You can also deduct any points you paid ...your CPA should know more than me, I would hope. You're paying him! And yes, you can deduct the interest on a home equity loan. But you don't want to get a home equity loan and use that money just for the tax advantages, do you?? You do have to pay interest on that money, you know ... free money, anyone??? Hey, I'll have some if there's any going!
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RE: Tax question: You might want to check to make sure that you entered your 401(k) information correctly. If it was rolled over, you shouldn't have to pay any tax on it. We got hit the same way when we cashed out my husband's 401(k) to use for closing costs. No regrets, that investment has appreciated way more than it would have in the stock market!
Daniela Deane: Thanks for your comments.
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RE: Second home trend ... risk? : No one is stupid enough to go buy a second house if they can't afford it, are they?
I mean ... if you have too much debt and skip payments, the bank will take your home away eventually.
Anyway, it does not seem like much of a risk if one loved the DE shore, plan to go often and only 1/3 is financed by a loan. I just thought I missed something when you mentioned "risk."
Daniela Deane: Oh, people can be stupid, can't they? Or people can make mistakes or fall on hard times, can't they? Isn't that what bankruptcies and foreclosures are usually about? Look, I'm trying to give both sides if I can. You guys are never happy! It sounds to me like your mind is made up. And didn't I say I'd do it if I were you? You want me to come with you?
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Washington, D.C.: I've been a renter in D.C. for 20 years. In the past 6 years, with so much press about historic, low interest rates, and an ever appreciating real estate market, I periodically gave a half-hearted effort at looking into buying a home.
Since I'm single and in a job I've disliked for about 7 years, I was always uncomfortable assuming such a huge debt, regardless of the tax benefits, etc. I guess in large part because I've always equated buying a house with putting down roots and making a home, rather than purely as an investment (I've only lived in 3 apts. over the 20 years, i.e., I don't make changes frequently).
Well now I look around my Dupont Circle studio apartment, nice and economical as it is, and think, "I am not always going to be content in such a limited space."
But, tell me, have I completely missed the boat? I make $75,000, and outside of retirement accounts ... have very meager savings. I have good credit so I know someone would lend me a lot of money, but for all practical purpose will I have to give up living downtown and Metro-accessible in exchange for owning my own place?
Daniela Deane: What can I say? You should've given that half-hearted look at it six years ago...But heck, we all shoulda, coulda, woulda all the time, right? Anyway, even though prices have gone up hugely in Dupont over that time period you're talking about, if you believe what the "experts" predict, it's still not too late. Get out there and look around at what you can afford. And be prepared to compromise. A lot. But don't just think about it for another six years is my HUMBLE AND COULD BE WRONG opinion.
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Alexandria, Va.: I am confused!
I am thinking about purchasing a property with a friend ... splitting all costs. I am confused about capital gains tax when we sell. I know that if we both live in the property 2 to 5 years, no capital gains tax. But if my friend moves out and doesn't meet the aggregate of 2 years vs. 5 years test, my friend will owe capital gains tax, but will I?? If we decide that I will take all the profit, will my friend still owe taxes?
Thank you!
Daniela Deane: I'm not confident enough to give a definite answer here. I have an idea, but I don't want to say it without being sure. (I think I've been bashed today, haven't I?) Talk to a tax advisor or start off by perusing irs.gov.
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Washington, D.C.: Hi Daniela, I am a first time home buyer with a 160k mortgage and am thinking of buying in S.W. or N.E. Do you know of any specific areas within S.W. or N.E. that are good to get "bargains" -- can it still be done? As a single female I'm concerned about safety and being near a metro. Secondly, on my limited budget would a studio be a good or bad decision to buy? Thanks for any advice!
Daniela Deane: H Street? I've got a couple condos there that I could sell you! That's not even funny, is it? BUT IT IS A JOKE....
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D.C.: Meow!!!
Why are people being so nasty to you today?
Daniela Deane: Sniff, sniff, I don't know ....
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Washington, D.C.: OK, I posted that first one about H street, not the second one (even though it made me laugh -- we're they serious?!?!) Now girl, I heard you did buy on H Street, but now it seems you haven't. Thanks for creating such a friendly open forum that I felt comfortable bringing that H Street thing to the table. Now you've clarified -- ouch and sorry for asking.
Daniela Deane: Okay, I may forgive you at some point, but not today. For journalists, a charge like that is really serious. I promise I'm not over-reacting. I would lose my job here if that were true. This paper is very serious about ethics, and that's why I'm proud to work here. If people can't believe me, or think that I'm only reporting what I believe to be the truth, without pushing my own self-interests, what the heck do I have? I'd be the old emperor with no clothes. Anyway ... I want to make up with you. I just want you to believe I have integrity. And that this paper does. Because we do. Honestly.
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Daniela Deane: I'm going to go cry now. I've gotten emotional. Thankfully, it's 3:00 too, so it all coincides. I'll talk to you again in two weeks, same time, same place, same battered host. Join me then. If I decide to come, that is.
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