He's Obsessed With Condo Prices -- But Can He Ever Buy One?

Houses are now on the market in Arlington for an average of 59 days, up from 22 days a year ago, according to the most recent statistics from the Metropolitan Regional Information Systems, and the number of condo offerings is mounting. In February 2005, 94 condos and coops were for sale in Arlington; in February 2006, that number had increased more than four-fold to 444 units.

But many buyers can't afford condos even at today's prices. When Cave does the numbers, he finds it hard to justify the expense. A couple of years ago, he noted, one-bedroom condos were selling for $175,000, and now they are listed at twice the price.

Sitting at the computer in the video production firm where he works, Cave calculates how much he could afford to pay, at various interest rates and with different amounts of down payment. Take, for example, the Arlington condo he rents for $1,400 a month. Units similar to his have sold for $480,000. Recently the investor who is his landlord offered to sell him the place for $440,000. Cave could buy it, but he turned down the offer. He figured out it would cost him more than $3,000 a month to own the place, assuming a 20 percent down payment, taxes, insurance and the condo fee. He can't see spending twice as much to own as he does renting. That would leave him constantly strapped for cash and stripped of his savings, he said.

"It seems like the moorings are coming undone from reality," he said. "It's like the Internet stock craze -- you'd sit there and say something doesn't compute here. . . . What's happened in the last three years? My salary hasn't gone up anything like that."

He reflects on the old rule of thumb that people shouldn't pay more than one-third of their income for housing. When did that change? Some of his friends, he said, say they are paying 60 percent of their income for housing, doing it with interest-only loans, facing the prospect of balloon payments that will come due.

He worries that too many investors bought condos in recent years and that their speculative purchases do not reflect real demand.

"They can flip it and leave someone else holding the bag," Cave said. "That's the world we live in now. They don't care if you're hurt or if you can't pay your mortgage anymore."

So now Cave watches carefully, walking his target market, which runs from Clarendon to Ballston in Arlington, checking out construction sites to see what is planned, and visiting the model homes when they become available. He does a lot of his searching on the Internet, comparing square footage, floor plans and locations.

He clicks into one Web site he frequently visits, http://www.arlingtoncondo.com , which shows both existing for-sale listings and new complexes, to see what is available. He quickly notes that there are now 47 new complexes being advertised for sale, which strikes him as a lot. He had been noticing that prices seemed to be dropping, and now when he visits the site, he notices that the listed prices are no longer available.

"It's like they're hiding the prices now," he said. "They've all taken the prices off the list."

Still, he said, his friends keep urging him to buy. Some who bought homes several years ago are hundreds of thousands of dollars richer than they were as renters. They say the Washington area market is different than that in other parts of the country because there is so much job growth here and because so many jobs pay well. They tell him the population is growing faster than the number of houses being built, and that prices always reflect supply and demand. They talk about the tax advantages they are enjoying.

And, he said, they tell him, "You're throwing your money away."

Next Saturday in the Real Estate section, listen in as Cave and a group of his friends debate the merits of homeownership and renting in the Washington market.