Daniela Deane
Washington Post staff writer
Thursday, May 12, 2005
2:00 PM
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.
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Daniela Deane: Hi folks! Welcome to Real Estate Live. And thank you, as always, for coming ... I've got a lot of questions here, some from nearby and some from as far as Indonesia, so let's get started...It must be the middle of the night in Indonesia now .... I hope our Indonesian poster isn't staying up on purpose just to listen to what I've got to say! Here we go.....
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Washington, D.C.: I'm not sure if you're already covered this, but how about this story idea- People in their 20-30s in this area, buying the homes they grew up in, from their parents, at a discounted price. I would venture to say there have to some people like this out there, who can't afford the insane prices their childhood homes are fetching, but their parents cut them a break and allow them to purchase the house for cheap and it never hits the open market. It would be an interesting comparison, to see if there are any of those scenarios, rather then the constant depressing stories of people with 100K escalator clauses and still losing out on bids.
Daniela Deane: I think that's a great story idea ... I'm going to pass it on to my editor...It's a kinda, sorta variation of kids moving back home with their parents, isn't it? since let's face it, these parents who are selling to their children are definitely taking big hits in the amount of money they're getting for their properties ... So it's parents still helping their kids! I can see my kids living in my investment condos in D.C. when they get out of college...Where else will they be able to afford to live, pray tell?
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Sell now, sell later?, Va.: I know many would want to be in the position I am in, but here goes. We own a house that has been rented out for a year. My husband wants to rent it out for one more year and sell. I would rather sell it now because I am afraid that with the rising interest rates and some inevitable "pricing correction" in the D.C. metro market that we will somehow lose money if we wait. Am I crazy?
Daniela Deane: It all depends on what you believe is going to happen here to this real estate market...Most people who watch this market carefully (local economists and the like) think that what's going to happen here is a slowdown in price appreciation, but not a crash or a correction.They base that mostly on the fact that 75,000 people moved to this area last year and some 80,000 jobs were created here. All those people need to live somewhere. If you believe what I just wrote, I would think your husband would be right since prices will probably go up more this year. So far, they've gone up quite a bit already this year. If you're on the bubble side of this debate and think that prices will correct here, then you'll do what you think. If you want to know my opinion..and that's all it is, my opinion...of what you should do, I side with your husband. As long as renting isn't getting you down too much, and you've got a decent tenant already, why kick that person out to sell now? ... I would stay with it, as long as property management isn't driving you crazy yet...
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Hyattsville, Md.: Hello,
Do you think home prices in Prince George's County will catch up with the rest of the area?
Thanks
Daniela Deane: Prince George's County is our most affordable county at the moment. Prices have certainly gone up there, but not as much as in some other counties, like for example, Arlington Co. and Montgomery Co. I think homes in Prince George's Co. will continue to rise in value as this whole area continues to rise in value...Do I think a house in Bowie will cost the same as a similar house in Bethesda? Probably not anytime soon for so many reasons too lengthy to go into here. Do I think houses in Bowie will continue to rise in value though? Yes, I do. Do I think a house in Bowie is a good investment? Yes, I do. Does that answer your question? Probably not!
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Arlington, Va.: I recently read in the Post that Arlington stands to lose many office space leased to the government due to the buildings' noncompliance with the new government standards. Will this hurt the housing market around that area in the near future as well as long-term?
Daniela Deane: I think Arlington will hold its value forever basically because it's very very close to the city, we've got the third worst traffic in the country now (a recent story we ran said so!) and many people just cannot stand commuting anymore. I also think the development that's going on in Arlington (did you see the story in the Arlington extra today about Crystal City?), the Columbia Pike area, the Rosslyn-Ballston Metro corridor, Shirlington, Clarendon, etc. is exactly the kind of people-friendly development that many people are craving these days. Unless some horrible thing happens to our area (like we were afraid of yesterday with that lost plane), I think Arlington has nothing to worry about whatsoever.
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Arlington, Va.: Daniela,
Could you refer me to an unbiased financial advisor?
My wife and I have two mortgage loans that we may want to refinance. One is a 5 year interest only ARM that has us a worried about rising interest rates. We also are thinking about being able to finance some home improvements.
If it matters: Loan 1 - $352K 5 year interest only ARM with a 5.50% rate. Loan 2 - $70K balloon loan with a 6.87% rate
I am not looking for a long-term ongoing advisor, just some one time advice as how to deal with my current mortgage situation. I fear that the mortgage people that I speak to all have a vested self interest in getting me to refinance.
Appreciate your help.
Daniela Deane: If you can afford to get a foot in the market somewhere (a one-bedroom condo?), I advise that...Buy something and start building some equity is my general advice for owner-occupiers. That's what most financial advisers suggest, to buy your principal residence if you can. You've saved a lot towards that down-payment. Good for you. Remember, you don't have to put down 20 percent. There are so many loan products out there at the moment that require less down-payment than that. Just be sure you can afford those payments no matter what happens with interest rates. If I were you, and I'm not, I would keep looking around to see what I could afford. And then invite your parents over to dinner when you've got something!
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Herndon, Va.: Dear Daniela,
I'm considering the market, and just trying to learn about it while I live with my gracious parents. I'm a 4th year teacher, and have been trying hard to save a lot during this time.
I feel frustrated that although I've saved a lot for a potential downpayment (about $35K), it seems futile. To find a number to guide a "price range," I got a pre-approval for $165K. I've never seen that low of a price range, even for a condo.
I do hope to marry soon ... how smart is it to just wait and continue to live with my parents?
Thanks for any advice.
Sincerely,
Annie S.
Daniela Deane: Uh oh. I made a mistake there. I'm not sure how. The last answer was my response to this question...And now..the financial advisor question. I can't really recommend people, no. I can't do that here. Ask around for recommendations from friends, colleagues and neighbors. Someone will be able to recommend someone to you. Sorry the confusion with the questions, folks!
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Alexandria, Va.: I live in an apt. complex off of 395 and W. King St. They have announced that they are converting to condos very shortly and have given the current residents the pricing information. Supposedly, this pricing is the "insider" price. Being a newbie to the real estate buying process, I wanted to know if these prices are negotiable or not. Thanks!
Daniela Deane: Ask them! Try! I don't know..And check around at prices of comparable units close by to be sure these prices really are good. Usually, on this kind of deal, you can get a good price. But you need to be sure. And the only way to be sure is to be informed. Good luck!
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RE: Sell now, sell later: It wasn't clear to me from the post that the tenant was staying. If they sell now they have to sell with the tenant (no kicking allowed), and the market for investment properties is narrower than the market for owner-occupied homes. For one thing, buyers of investment properties pay a higher interest rate. If the tenant is gone, I say sell now because otherwise you have to re-rent the ranch and are stuck with the new tenant.
Daniela Deane: Here's some more thoughts on that question. If you're on a month-to-month agreement with a tenant, you can give a tenant notice that you're selling. The best thing would be if your tenant wants to buy...Bad choice of word, kicking! sorry! If you've got a lease, then you need to respect that lease, of course. You can always offer a tenant money to leave if you want. And if they want. If your tenant wants to buy the unit, it could be a win-win for both of you. You save commission fees to agents, he saves himself the hassle of bidding for a place. If I wanted to sell a unit of mine, the first thing I would do is see if my tenant wanted to buy it.
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Colorado Springs, Colo.: I have a general question -- does it pay to order Real Estates packages advertised on t.v. commercials -- or is it just a way for the sellers of these programs to make money -- I am 53 and would love to do part time real estate for gain -- but I sure don't need the hype and get ripped off! What's your opinion? Thanks, M. Campbell
Daniela Deane: If I were you, I would first go to your local bookstore and peruse the Real Estate section for books on investing. There are scads of them! And you can actually look at them first. That's where I would start, rather than sending away for anything. But that's just me!
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Bethesda, Md.: Enjoy the chats. I'm on the other side of the poster trying to figure whether to sell her rental property. I'm trying to figure out whether the market is too hot and too overpriced to purchase a potential rental property. Should I have gotten in the market years ago or is there still room in the market to invest?
Daniela Deane: I'm writing a story about that right now for next week's section...It's certainly getting harder and harder and harder to "make the numbers work", i.e. cover your costs. The problem is that prices have gone up so much, and rents haven't gone up much at all, so it's much harder to carry a property these days as an investor...It all depends on your financial werewithal, I would say...Do you feel like carrying a negative cash-flow on a property betting just on future appreciation? Do you have the money to do that? For me personally, prices have now gotten too high to invest anymore where I have invested, which is in the city...I just can't cover my costs anymore and I don't have the financial werewithal to carry a negative cash-flow, so my investing days in D.C. are pretty much over, I think...I'm just breaking even on my last investment...That I can do. It's a much riskier game now than it was a few years ago in this area, that's for sure.
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Fairfax Station, Va.: What percentage of housing in the Metro area do you believe is being purchased as investments? And do you believe these investment purchases are having a significant impact on increased home prices?
Daniela Deane: I'm not sure about the Metro area individually but the National Association of Realtors recently did a national survey that showed that one-quarter of all home purchases last year were done for investment purposes. And yes, I do think investors have an impact on prices. That's certainly what developers have been telling me in my last few days of reporting this story...That's one worrying sign on the horizon these days..so many investors out there...In this area, as I just said, it's getting harder to do, unless you have deep pockets....
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Suggestion on learning how to invest in real estate: Check your local adult education office. They may very well have low-cost classes that would be helpful. Or maybe continuing education at a local college. I would do that before sending away for a commercial product.
Daniela Deane: Yes, that's another thing you can do....But also check out the bookstore, or the library, too, of course...
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Wash., D.C.: Just a comment after six weeks of going to open houses. I am sick of sellers and realtors owners selling a one bedroom, one bath condo in NoVa for $350K plus! Ridiculous! NoVa is not Washington, D.C.
Renting is not a bad deal folks. You get more amenities for your money.
Daniela Deane: That's certainly true at the moment, isn't it?? There are so many cool rentals out there these days with great great amenities! ...The only problem with renting is that in the long-term, it's better for your landlord than it is for you...Does anyone disagree with that last statement? I'm talking owner-occupiers with a long-term horizon in this area...not investors and not short-timers...
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Germantown, Md.: I love your analysis. Forgive me if you've previously covered this point, but how's the market holding up in the D.C. region this spring? Are we seeing the long-anticipated slowdown? And how would you characterize Germantown?
Thanks!
Daniela Deane: Thanks so much! I worry in this forum because it's so quick, and I don't always remember everything (I never remember everything in fact)...I get a bad case of the "should've said" in this discussion, I tell you...But you guys always tell me what I should've said, so that's good! What I'm hearing is that the market was nice and crazy in early spring with prices going up substantially and not much out there to buy...Recently, though, inventory has ticked up as our azaleas have bloomed. More people have put their homes on the market in the last 3 weeks or so...so what I'm hearing from my agent friends is that there's more to look at now. Is that what you guys are seeing? Even a couple of price reductions (gosh!)...One agent told me last weekend that one of her sellers said, "I only want to look at multiple offers!"..Trouble was, he hadn't gotten any! It's all about price.. and perceived value. If buyers see value, they jump. If they don't, they don't jump as much...
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Arlington, Va.: I'm surprised you still think it makes sense to invest and take negative cash flow (while hoping for capital appreciation). I doubt prices will go down anytime soon, but even optimists such as yourself must think prices will likely slow down or even stagnate over the next few years.
So, if you buy an investment property and lose money month-to-month, you might see some capital appreciation for half a year, a year or two years, but it seems like quite an unlikely bet that your appreciation in the next five years or so is going to match your loss of cash.
I know reasonable people can differ on this, but it's getting pretty late in the game, don't you think?
Daniela Deane: I DID NOT SAY THAT!!!!!! What did I say??? I said, it's getting harder and harder to make the numbers work, I said I'm done with my investing because I can't carry a negative cash-flow, I said many people cannot invest in this area any longer. Some people with deep pockets (not me and not most people) are still investing because they can carry negative cash flow and they still believe in upward price appreciation. That's not me. That's not most people. That is some people though (Have you noticed that there are people with money around here???) I'm not telling people to invest at all. If they are looking for their primary residence, though, and have a long-term horizon here, I think you do need to look at buying. HERE IT IS AGAIN: I AM NOT TELLING PEOPLE TO INVEST. Is that clear now?
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RE: Washington, D.C.: That is a good story idea. I wonder what the parents do ... stay ... go? I want to buy the home I grew up in, but my parents still live there (so do I). They have no place to go. I'm living rent free in my inheritance ... sounds good ... not so much though!
Daniela Deane: Yeah, really...Where do the 'rents go? ...That's what my college kid and his friends call the parents nowadays! If they invested in other stuff a long time ago (since it's very hard to do now..got that?), they can go live in one of their condos and give the kids the house! Should I plan on that as my long-term plan??
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RE: People buying homes from their parents!: Hi, I just wanted to let you know that my husband and I bought the single family home my dad grew up in in Chevy Chase, Md. He inherited it and has been renting it out for 20 years. We bought it in Feb 2003 for $150K below market value. We will live there forever and wake up every morning commenting on how lucky we are and how generous my parents are. We are both professionals but still could not afford to live here in this way were it not for them (our home has literally double in value since we bought it). THANK YOU MOMMY AND DADDY!!!!
Daniela Deane: You have a really nice Mommy and Daddy!!!! I'm not sure I'm gonna be that nice of a mommy...Depends on how broke I am, I guess!
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Washington, D.C.: How is your husband doing?
Daniela Deane: He's in remission, thank you for asking....He wishes he had a lot more condos, though, wishes he had bought them a long time ago since he can't afford anymore now because investing has become REALLY HARD! (I'm gonna repeat that about a thousand more times today, I've decided...)
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Washington, D.C: Good afternoon, Daniela!
Do buyers look down on you if you ask for closing help?
Daniela Deane: Do you really care if they do?
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Vienna, Va.: Hi:
I wanted to get your views on the Merrifield area in Virgina. There are a number of new condo buildings and atleast one new single family development coming up in the area (Rte. 50/Gallows Road). While the area seems to be changing, the school district doesn't seem as good as some of the others in Fairfax county.
Daniela Deane: I'm gonna plead the fifth on this one...or at least go for full disclosure. My mom, who's in an assisted living facility, owns two condos in that area. When my 'rents bought those condos in 1990 (very tip-top of the market after never buying anything here!), I remember thinking, gosh, that's far! (Okay, I was living overseas at that point). Now I think, wow, that's a good location! That's really close to all the major road arteries! That's what I think now....
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Daniela Deane: Folks! I'm going to go now...But I've got some news to share...I'm moving on to another job at the Post soon...and so my next Real Estate Live chat will be my last. Real Estate Live will continue on with someone else of course, so please keep tuning in. I'm going to join the Continuous News department here, writing breaking news for the Web site here from the Washington Post building at 15th and L. ...so I'm still going to be where you are now, right here on washingtonpost.com..If you want to take a whack at me here before I go, or ask me one last time whether you should buy, Thursday the 26th will be your last chance in this forum..! (I'm gonna try to show up on another forum, but I don't know yet whether I'll be successful!) I can't even begin to tell you how much I've enjoyed these times with you and writing about real estate for the Post. It's been a true privilege. This is truly a great paper, and I'm not just saying that! Please join me for my last chat two weeks from today, same time, same place. And then afterwards, I'd be honored if you kept reading me on the home page of washingtonpost.com...
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