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! Welcome to Real Estate Live on Inauguration Day... I'm working from home today because I was scared to even venture downtown. The last two evenings (the guy who threatened to blow his van up and then the snow), it took me about an hour to get home and I live in Arlington. I thought about all my readers who live further out... The traffic can get so crazy here, can't it?

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Woodbridge, Va.: Hi Daniela,
We are currently renting a home ($2200) and will more than likely be in the area for four or five years. We have excellent credit rating and sufficient funds to cover a down payment. We are looking at buying a home in a desirable area (588K), but not exactly sure if we should continue to rent or buy. We have researched a wide-range of interest only products thinking that would be the best way to finance. Your sound advice and counsel are very much appreciated. Thanks in advance!

Daniela Deane: Hi Woodbridge. Rent or buy, rent or buy, the perennial dilemma. Most financial planners will tell you that you should purchase your primary residence. That's the widespread advice. But then there's also the you gotta hold it advice for real estate. Five years is a good time span. Or even seven, for holding the real estate you buy now. Not less. I find the interest-only products out there quite interesting these days. They're certainly a way to afford a bit more. The downside is that you don't pay down any principal with these products. But, you don't pay down much principal in the first five years anyway. If I were you, I would definitely consider them for your timeframe. Best of luck!

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Alexandria, Va.: Deja vu all over again... average rate on a benchmark 30-year fixed mortgage fell to 5.67 percent this week, Freddie Mac. That's the third straight weekly decline.

A little kindling to get the spring market hopping, perhaps?

Daniela Deane: Thanks for giving me the weekly rate! Since I'm not at the office, I didn't see the email from Freddie Mac. Hey, I promise I'm not loafing...I was out reporting my next story this morning. In any case, you're certainly right. If rates stay that low, I would say chances were high that we would see a good spring market.

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Germantown, Md.: I'm not sure if you've addressed this topic, but what are your thoughts on escalation clauses? I had one on the recent purchase of my first home and was very uncomfortable with it. It felt like I was playing poker with all my cards displayed. How do I know the process is on the up and up? Not sure I'd do it again.

Daniela Deane: I like your analogy...poker with all your cards displayed...Our real estate market has been exactly like that for buyers for going on uh, about five years now. Buyers have basically just had to pull their pants down and say, spank me, spank me, haven't they? Unfortunately but true, escalation clauses have been the only way to get some properties in this market. And the jumps in prices have gone up. Used to be a few years ago, you could do, a $2,000 jump. Now, that's chump change. It's $10,000 or forget it now, it seems. Anyway, I know what you mean about them, BUT in many cases, they've been simply unavoidable.

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Gainesville, Va.: Daniela,

I have decided to move from the far suburb into D.C. However, my knowledge of D.C. is minimal. I want to find a place that has lots of amenities and close to everything. I have heard a lot about Logan Circle and Dupont. My price range will be under $500,000. Could you give me some recommendations? Thanks a lot.

Daniela Deane: I can certainly understand why you'd want to move into the city, especially after the commutes of the last couple days. Yes, Logan Circle and Dupont are beautiful areas. With your price range, though, you're talking mostly condos in those areas. My advice is don't limit yourself to only those areas. Look a bit eastward and a bit northwards from there. Dupont is one of the most expensive neighborhoods in the city. Good luck!

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Washington, D.C.: The whole Washington area is becoming more and more an area of haves and have-nots. It's almost impossible to buy a house on a single income if you don't want to dodge bullets. Do you think we're moving more to becoming a Manhattan, an area where only the wealthy can afford property and everyone else scrimps by and rents?

Daniela Deane: Yes, I think we are. I was asking an economist a couple weeks back about that, about how prices could continue to go up at the rate they have without incomes going up that much...He said basically that Washington was moving towards a San Francisco-like area, where policemen, teachers, and other middle-income folks have to commute a long time to get to their places of employment. BUT...we're not there yet. So buy now, I guess is the answer. (I'm not sure what the answer is frankly.)

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Oak Hill: Hi Daniela,
I signed a contract with a builder to buy a new condo in March 2004. They told us the delivery date will be November 2004.
We want to do 1031 exchange with another town home.
We sold the town home at the end of August, so we asked them when they can deliver the condo, they told us about Jan. 2005. In this way we still can use the money from the 1031 exchange. Recently we did not get any info, so we called them again, they said the condo cannot be finished In Feb., which mean we cannot use the fund from 1031 exchange.
So what can I do? Any idea will be appreciated.

Thanks

Daniela Deane: Oh dear. What a dilemma. I think you need to talk to a tax advisor to see if there's any leeway at all. And then after that you need to schedule an appointment with the builder's rep to see if there's any way they can squeeze in, or close in time for you. Let me know what happens. I'll be thinking of you. I really hope that doesn't go south for you.

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Arlington, Va.: I knew this market was insane, but I think my wife and I were stunned at how much people were willing to pay (or overpay). I mean we got outbid on our first home by $20,000 even though we offered $15,000 more than the asking price. Plus we didn't think we would be in a bidding war this early since this is the supposed "slow season." I can't even imagine what its like in spring, I don't think we would stand a chance. And it's not we aren't coming in with solid offers, we have 10% of a $400,000 home. Sometimes I just want to take my money elsewhere. Just a note, we are looking in Alexandria.

Daniela Deane: So it's that insane right now, huh? I haven't done a widespread market check yet this year. I was waiting for the spring market, which will probably start in about February, even though it won't be spring at all! Once you start seeing more places on the market, you'll know it's spring. (or whatever). Some agents say the spring market starts right after the Super Bowl.

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Washington, D.C.: Hi Daniela:

I'm an aspiring/hopeful first-time condo purchaser in the District. My one deathly fear is that I'll close and realize too late I have costs I had not originally accounted for -- such as a surprising and unexpected condo assessment for repairs, or utility costs (right now, I'm paying a comfortable utilities - included rent payment), etc. How can I anticipate, beyond the cost of PITI, what I would pay on a monthly basis and still maintain my quality of life worry-free? How can I project a reasonable budget? I've been pre-qualified but not yet pre-approved. My understanding is that lending institutions often suggest you can afford more than you really can... is there some reliable source (my broker?) who can really help me nail down the hard facts as far as what I can and can't afford? Thanks.

Daniela Deane: Hi. Yes, you need to talk to your mortgage broker. But on the condo. Each condo development is different, obviously. You need to look at the reserves situation of the condo board and then you also need to look at the condo building itself. Does the roof look new? Or old? Are there a lot of grounds, bricks, building, that will need maintaining? Or is it a small building? That can make a difference. A sprawling condo development will obviously have more upkeep involved. And yes, banks are letting people borrow a lot these days. But decide yourself how much you're comfortable with paying monthly. Let that be your decision, not theirs. Once you make the decision, go for it, and be happy. If you're going to drive yourself nuts with it, maybe you should just rent. It's about mental health too.

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Alexandria, Va.: Daniela -

PLEASE DON'T LAUGH.... How do you suggest I find realtors that do lease purchase I know the market is awesome, but I only make 47,500 am still in college and a bankruptcy from 1 year and a half ago.

My rent is $1125. I have yet to find a way to save for a down payment and pay all other expenses I currently have. I could put away a little a month, but by time it would accumulate to a nice sized payment -- God only knows how much more housing will be.

I'm a single mom but my son is already 14, so I don't need an east and west wing... just something to call mine.

Any advice is greatly appreciated.

Daniela Deane: Sweetie! Why would I laugh? My God, I may cry instead. There really isn't anything that funny about this market and these prices for people trying to buy. And I sympathize totally, I assure you. Okay, I'm not sure exactly how to find realtors that do lease purchase. So I'll just tell you what I would do if I were looking. First thing always these days is an Internet search. Then, call a few brokerages in the area you're looking in and ask them. That'll get you started. And best of luck. Let me know how it goes.

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Bethesda, Md.: Daniela,
You have two dramatically different do's in the two pictures of you on the web site. One your hair is shoulder length and the other it's permed. Which style are you wearing now?

Daniela Deane: Aaaah!!!!!!! That's it: we're taking that one inside off. My producer is working on it as we speak.... But here's your answer: On one picture, I had it blow-dried. And the other, I didn't. Okay, now that's WAY too much information about me..... Actually, we're going to take some new pictures... I can't scare you guys off!

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Boston, Mass.: I just had a condo inspected and have been reading the condo docs. The main concern is that the condo association is not in very good shape. There is almost no reserve, they are between management companies and the condo fees are clearly going to have to go up. My inspection doesn't show that major repairs will be needed in the next few years, but minor ones will be needed. It's only about 50% owner occupied. How bad of an idea is this?

Daniela Deane: I think you're wise to realize that condo fees will have to rise, because that certainly sounds like the case. I had a very similar situation with a condo I bought. The condo fee was really low (easier to sell, huh?) when I bought it. The company that was managing it pulled out, we had to find a new one, form a condo board and fees went up. We're working to build up our reserves now. I think it would be good if you thought about getting involved in the condo board if you bought at this building. Decide whether you can afford a higher condo fee (which seems inevitable) and whether you like this unit/building. I wouldn't let it put me off it completely, but I would go in with my eyes wide open.

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Arlington, Va.: Sorry if this is a dumb question, but -- I bought my first home (a condo in Arlington) last summer. Yesterday I got my real estate assessment and, as reported in the Post, it went up a lot! My question is: what next? In the blur of financing my home I think I remember something about the taxes being included in the mortgage payment, although maybe I hallucinated that. So now I'm wondering, will my monthly payment go up, or will I have to cough up a bunch of money in the spring? Thanks!

Daniela Deane: Ah, I was waiting for this question.... I got my assessment yesterday and it went up 22%. Geez. Yes, most tax payments are rolled into your mortgage payment. So, yep, you're right, your mortgage payment will go up, or you'll be asked to pay it in a one-time lump sum payment. Your mortgage company will write to you (you don't have to do anything, besides SAVE!) saying there was a shortfall in your escrow balance. Would you like to pay that in one lump sum or monthly? That's the extent of what you'll get to decide...Well, you could appeal your assessment if you wanted, but people don't have huge success with that.... You need lots of evidence if you're gonna do that.

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Washington, D.C.: Any comments on the area around Fort Myer on Arlington Blvd.?

Daniela Deane: I don't know enough to comment intelligently (not that that usually stops me!). Tell me about it.

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Clinton, Md.: Any advice for a moderate-income single young woman, trying to find a house in this market (P.G. County)? I've looked everywhere HUD, foreclosures, reos, still no hope. Is there something I'm missing? Should I put the search off until I really can come with a 20% deposit? Faith is fading fast.

Daniela Deane: Prince George's County is our most affordable county, so you're looking in the right place. Look all over it. And no, I don't think you should put off the search until you come up with 20 percent. There are so many loan products out there now where you don't have to come up with 20 percent, particularly for an owner-occupied residence. Talk to a mortgage broker about what you can afford. Talk to him about less than 20 percent products. Talk to him about interest-only products. Look into first-time homebuyer assistance programs (search the Web under the county, look at the county Web site). Look at different housing types, including condos. Buy what you can afford and start building equity. Look now that it's allegedly slower. And most important of all, if you really want to buy: DON'T GIVE UP.

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Manassas, Va.: Hi Daniela,

Here's another one for your "how hot is the market now?" file. We listed our SF home in Manassas on Jan. 4th and got an offer for full asking price on Jan. 6th. Considering it's Manassas and not D.C./Alexandria/Bethesda, we thought that was pretty amazingly fast for January.

Oh, by the way, we did our best to "stage" our house for sale -- decluttered, hired professional cleaners for cleaning inside and out, made sure everything was in good working order, etc. Now that we are buyers walking through sellers' homes, we've been surprised by the lack of effort a lot of people put into their homes to sell them. One example: during an open house the kitchen appliances had obvious (grimy) smears on them, the beds were carelessly made, and the bathrooms looked a little icky... not even a quick pre-clean before people came through, and it was a mid-day weekend showing. The realtor seemed oblivious to it. Ugh. This was not unique, either -- most homes were either in serious need of cleaning or decluttering. It was a big turnoff, so much so we ended up deciding to buy a newly built house. Is this a widespread problem or am I too finicky?

Daniela Deane: Congratulations on selling your Manassas home so quickly! And bravo to you for staging it. Whaddya think? Was it worth it? I think your experience, as a buyer, is probably more widespread than we think.... Anyway, things went great for you! And I'm really happy for you.

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Arlington, Va.: I recently bought a 3BR TH with 2 full baths and 2 half-baths. The way the layout is, I'm thinking of remodeling one full bath and one half bath into one large, upgraded full bath. In this process I would be losing a half-bath but turning a full bath into a "luxury" bath (multiple sinks, soaking tub, shower, etc). How do you think this would affect my re-sale value?

Daniela Deane: It's hard to know precisely what would sell better since I think both options would appeal to potential buyers. BUT...and people who have been listening to me drone on for a while know what I believe here. DO WHAT YOU WANT. Make the bathroom you want to live with. And there will be somebody down the line that will want that bathroom too. Do it. And enjoy it. You're going to be there for a few years, right? (If you're moving in a year, maybe leave it and save the money.)

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Hyattsville, Md.: I'm thinking of selling my property now. Do you think the prices for one-bedroom condos will increase more than the expected 12% this year?

Daniela Deane: I don't know how much they'll increase, but I certainly think they will increase. Most of the economists and pundits I interviewed for my forecast piece on this year (ran Jan. 1), predicted double-digit appreciation for this area this year, along the lines of 10 to 12 percent, but maybe more. Not that they actually know. But that's what they're predicting.

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Gaithersburg, Md.: You mentioned in an earlier session the "spring market." When does this begin? Is it worth waiting till then to put a home on the market? Thanks.

Daniela Deane: The spring market is beginning earlier and earlier it seems to me...The last departure time was right after the Super Bowl...Or when the weather gets better. Or who knows. Agents usually say it is better to put your home on the market in the spring. But, if you're in a hurry, I would think that now is as good a time as any.... It seems there are buyers out there plunking around in the snow as we talk. Are you going to sell by yourself? Or with an agent? If with an agent, ask them what they think is the best time...They gotta make that 6 percent somehow, right?

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Reston, Va.: Will the real estate market crash in 2005 in D.C. metro area?

Daniela Deane: Not likely. But of course who knows.... Most economists and pundits predict another good year for real estate in this area, although not as good as the 24 percent appreciation we saw last year!!! They credit the incredible job growth we've had (another predicted 75,000 jobs created this year), immigration, household formation, and longer life spans.... Washington is a hot area these days; I think we've all realized that. Most of it is about federal spending.

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Arlington, Va.: About the Fort Myer Area on Arlington Blvd. (rt. 50)...

We just bought in Nov. in Arlington after looking all over for almost a year. The neighborhoods just south of 50 to the left of Rosslyn, Courthouse, etc. are a lot cheaper (by at least 100,000) then Lyon Park/Clarendon etc. Houses tend to stay on the market a bit longer too. In the case of one house on rt. 50 it had been on the market over 60 days... priced too high for "south" Arlington.

Daniela Deane: Yes, I had noticed that divide. Thanks for sharing your expertise. Great you found something after that long search. And of course wherever you are in Arlington, you're close in, so that's good.

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RE: Staging: Interesting comment from the earlier reader. I plan to put my house on the market this spring and starting to do little projects now (cleaning out closets, painting, etc.). As I thought this was the norm in the current market (I'm actually on the lower side under $300K, so will likely have good luck anyway, but still...), but I can guarantee if I get my house all spruced up that if I go into houses where people haven't bothered, I'm not gonna feel inclined to make an offer.

Daniela Deane: I think staging actually works...For those of you who may have missed it, I wrote a story about staging your house for sale (you can find it on the site). As agents love to tell me, buying a house is an emotional decision. And when it's clean, clear and spruced up, you FEEL better about it. It's just common sense, really.

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Fairfax, Virginia: My wife and I bought our house in December 2000 for $250,000. We are in the process of selling it for $1,000,000, which makes $750,000 capital gain. I do know that we are excluded $500,000 from tax. My question: is there any way to avoid the rest of the profit ($250,000). Thanks
Mike Lee

Daniela Deane: WHAT???? Oh my lordy.... Now, THAT'S what you call appreciation, buster. Please tell me you did a lot of work on it. Anyway, capital improvements are deductible. Talk to a tax advisor. You need one with that kind of money! Congratulations. I'm just jealous!

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Alexandria, Va.: Hey Daniela, am I totally insane? Husband and I just moved into brand new town home last April. We're pregnant with first child. I'm now realizing that, especially with equity built up in our house, we could actually afford to move into a single family home. My thought: our salaries won't be able to keep up with the escalating prices of single-family homes. Therefore, let's sell the townhouse; use the equity as a down payment on a single family home while the prices are still in reach. The equity over the course of a year should (key word: should!) offset the slamming capital gains tax that will hit us next year. Soooooo - play it safe and wait 1.5 more years to buy a SFH in this lovely market, or take the plunge, assume equity build-up to offset the pain from the tax penalty? Thanks!

Daniela Deane: That's a tough one. How have you calculated that equity build-up will offset the capital gains? What appreciation are you using? ... Do you have a tax advisor? Maybe you should talk to them...If it were me (and it's not), I might enjoy my new town home for two years and then worry about it, just because it gives you some breathing room. But then, you're right, you're probably looking at 20 percent more on top of the price of a SFH by then. Shoot, maybe you should look now. You know what: I'm not sure what you should do! It's a toss-up.

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Arlington, Va.: I have heard lots of talk about the housing bubble bursting - which makes me nervous. If I buy a dinky little house in Arlington for $400k, and this supposed bubble bursts, does that mean my house could actually decrease in value?

Daniela Deane: If you believe all the "experts" then no, that dinky little house will increase 10-12 percent this year and then who knows what next year...But then, people also say: Real estate is cyclical. This can't continue. That argument is pretty persuasive too.

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Daniela Deane: Folks! It was so nice to talk to you, as always, even from home! Please join me again in two weeks, same time, same place. And we'll try to make some sense of this crazy market again then. Until then, stay well.

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