Local Housing Market

Washington Post staff writer Tomoeh Murakami Tse was online to answer your questions about the local housing market. She writes in an article today that there are discrepancies in how various economists, banks and analysts view the health of the market because everyone has a different idea of how it should be measured.

A transcript follows.

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Tomoeh Murakami Tse: Hello everyone. Thank you for tuning in.

First, a disclosure: This is my first online chat since starting my job here three months ago, so please be patient with me... I'm still learning about the different neighborhoods, developments and players in the local real estate market. I'm looking forward to hearing about your observations and learning from you. Let's get started.

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Arlington: Do you ever feel as though these economists get lost in the data? I look around the DC metro area and I see a strong local job market and a large influx of young professional workers each year. I feel as though housing is priced so high because there is such a huge demand to live in DC and Arlington. As long as people have high paying jobs, they are going to want to live as close to the city as possible.

Tomoeh Murakami Tse: Perhaps. I know I certainly do sometimes!

And yes, what you say is true. We have a lot of people who come here and make a decent living. At the same time, we have a lot of people with entry-level jobs who spend significant portions of their pay to make rent. It's a mix.

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Owings, MD: Why is it that when I read most articles about housing projections the articles quote real estate brokers etc. Aren't they a bit biased towards always saying that we are in a strong market? Are there any non-biased sources?

Tomoeh Murakami Tse: Hmm. None of the people I quoted in my story today had any real estate brokers.

That said, my colleagues and I try to get a range of voices and opinions in our real estate stories - economists, analysts, home-buyers and sellers, home builders, developers, and yes, real estate agents too.

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Washington, DC: Good article. Simply put today, the DC region continues to attract and lose residents who come and go (starting with the politicians). They must live somewhere. Thus, real estate here will sell no matter where it is or the home type. Crime, poor schools, high prices, lack of space from your neighbor. Doesn't matter.

What's your feedback on this reality?

For those who bought before or during the boom, they'll earn a profit regardless by selling (after multiple years of 25%+ appreciation).

Tomoeh Murakami Tse: Thank you for reading the story.

yes, we are experiencing job growth now, but remember, that hasn't always been the case.

In the late 1980s and early 1990s, we actually saw some job losses and home prices fall. Some of the people who had to go during that time actually lost money.

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Prince William County: Thank you for taking my question.

The end of the article presents the option that "the market could fall 5 to 10%..." As far as housing prices adjusting to the market, is this a likely scenario? Of all the people (experts or not) who speculate, hardly anyone predicts that housing prices will go down. We're tethered to this area and to move any further south, it'd be closer to Richmond than DC! Do young couples/first-time home buyers have any chance at affording something??

Tomoeh Murakami Tse: Well, it's hard for those who have been observing real estate markets for a long time to agree on what will happen. One economist I quoted says prices could very well drop by 25 percent. On the other hand, you are right - quite a few experts predict a soft-landing for this housing boom, with prices either flattening out or declining modestly before the next cycle starts.

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Laurel: What fraction of the housing market is for sale at any given time? I ask because it seems plausible that prices are being driven up just because there aren't that many people who want to move.

Unlike stocks, that can be bought and sold with the click of a button at a cost of fractions of a percent of the transaction value, buying and selling homes is expensive and time consuming.

Tomoeh Murakami Tse:

The number of homes on sale vastly differ from market to market, neighborhood to neighborhood. My colleague, Kirstin Downey and I recently reported that active listings are up compared to last spring season, particularly in Loudoun County.

here is the story:

http://www.washingtonpost.com/wp-dyn/content/article/2006/03/25/AR2006032500992.html

The number of active listings also vary by types of housing. Some neighborhoods in NW-DC and Northern Virginia have the highest share of condo listings, according to the MRIS.

We will be doing a story on this shortly.

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Vienna, VA: The Washington DC metro area undoubtedly benefits from government spendings, specifically the housing market and the job market. As government spending is at historic high, one would expect that to change, probably by the next administration. Would you say that the housing market and the job market may change also? I think that the real estate market has already begun to change for a number of reasons.

Also, with the number of foreclosure on the rise because of adjustable mortgage rates and interest-only loans maturing in mass in 2006 and 2007, one would think the worst is ahead in one or two years down the road for the housing market. What are your thoughts on this?

Thx.

Tomoeh Murakami Tse: Good question.

yes, foreclosures are up - and that means bad news for lenders and for people who can't afford the payments. But it may also provide an opportunity for people looking to buy who were not able to do so earlier.

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Washington, DC: Your article mentioned that home values lost a fifth of their value in New York in the mid-1980s. Is there a more recent example of a city in which the "housing bubble" burst? If so, what parallels can we draw between that city and Washington, DC?

Tomoeh Murakami Tse: In their report, Dean Baker and David Rosnick mention San Francisco as a place that lost 23 percet of home value after a run up in home prices that ended in 1982.

Another place they mention is Honolulu, which lost 32 percent of home value, after a big run-up in home prices over rent that ended also in 1982.

you can find their full report on http://www.cepr.net/

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Washington, DC: Good article! Have you seen any discussion of condo and house prices going in separate directions? It seems like there are a gadzillion condos coming on the market (good for the area but probably bad for prices) while the close-in housing stock is more stable.

Tomoeh Murakami Tse: Well, there are lots of houses coming on the market too.

But they are in different areas. Condos tend to be closer-in to DC, while new developments of houses are further out.

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DC "Bubble": I took Economics. When all is said and done, it's simply a matter of supply and demand. Right now, and for the forseeable future, demand for housing in the DC area exceeds supply. So, there will be no decline in housing prices. Plateau, maybe, but no decline.

What do the "experts" rely on that takes precedence over the simple law of supply and demand, and in cases where demand exceeds supply, does it really matter what the average cost is for a rental property?

Tomoeh Murakami Tse: You make a good point. But one thing demand and supply does not take into account is the fact that people may want houses, but may not be able to afford them.

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Ashburn, VA: We have been reading, in WaPo among other publications, for some time now about the so-called housing bubble, complete with predictions of what areas are going to be most affected by the market crash that so many deem to be inevitable. Given the fact that a home's value is determined solely by the amount of money a knowledgeable buyer is willing to pay and the amount a knowledgeable seller will accept, aren't these predictions based less on hard statistical and mathematical analysis and more on pure guessing?

If the housing market (like the stock market or the results of sporting events) were predictable, then wouldn't we all be millionaires by strategically placing risk-free investments?

Tomoeh Murakami Tse: Well, a knowledgable buyer would look at what homes in the area went for recently.

The economists think the numbers will actually help people make decisions and I guess we will see if they are right.

As the story today notes, the economists don't agree with each other so that's one way of keeping those millioaire counts to a minimum!

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Cheverly, MD: One item the article did not mention was where the "bust" would be felt first. Wouldn't condo's and higher priced houses ($800,000 plus) feel the pinch first?

Tomoeh Murakami Tse: That seems to be what is going on. Relatively lower prices homes are moving faster in general.

While the average number of days on the market for Prince George County for example, was 40 for March, compared to 35 a year ago, homes in Fairfac County are now taking 59 days to sell, compared to 19 a year ago, according to the MRIS.

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Arlington, VA: I bought my house, a duplex, in 2001 and it has since doubled in value. This is a blessing in disguise, however, since all larger houses in my area increased even more and I am unable to purchase a larger detached house. Are there any solid 3 bedroom houses in Arlington selling for less than $600K? How far out do I have to move to get what I want for the amount I want to spend?

Tomoeh Murakami Tse: I can't speak to whether the houses are solid--it's tough to tell that on a computer!--but I just did a search using the form at the top of The Post's Real Estate page, and I found 74 three-bedroom-plus houses/townhouses in Arlington for sale for $600,000 or under...

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Washington, DC: I didn't understand the point some guy was making in your article that somehow the lack of land doesn't affect rentals, has he looked at these $1800-$2000 rentals in DC? You can't even get a buy in the bad areas of town, and you're risking your life for it.

Tomoeh Murakami Tse:

Basically, what he is saying is that the huge increase in home values here in recent years is not supported by economic fundamentals because rents have not gone up by nearly the same rate. He is looking at the rates of change in both cases, not the actual home price/rent themselves.

He and his colleague make the assetion that there is no apparent reason why factors like limited land, population growth and growing incomes should push up home prices now, when such things had not previously lead to increases for the country as a whole.

You can find the study in its entirety at: http://www.cepr.net

You can also link to a story I wrote a little while ago that talks about whether to rent or buy:

http://www.washingtonpost.com/wp-dyn/content/article/2006/03/24/AR2006032400857.html

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Falls Church, VA: My husband and I waited until this spring to buy a house in Arlington with the idea that the slowdown in the housing market would result in much lower prices. Unfortunately what we're seeing is a situation where anything decent sells within the first day or so, we went to one open house 10 minutes after it opened and the realtor said they already had 3 contracts that morning. There are more houses on the market but most are on busy streets or have something wrong with them. How much longer can this continue?

Tomoeh Murakami Tse: Thanks for the report from the frontlines.

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Mclean, VA: Call me crazy but I don't see home prices in the DC area dropping by that much, especially in the inner suburbs. Unemployment is very low and new will probably stay that way with the increased government spending and new companies relocating to the area. Undeveloped land is scarce so builders are paying more to tear down existing homes, further driving up asking prices.

Tomoeh Murakami Tse: And there are economists who agree with your soft-landing scenario!

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Drew - DC: Someone called "bubble" just talked about supply and demand but wondered why it mattered what a rental property goes for. Isn't a house supposed to be a place to live? How come rent is so cheap right now, compared to buying? Is it possible rent reflects supply and demand of houses, as places to live, better than sales prices?

Tomoeh Murakami Tse: Take a look at that link I posted a couple minutes ago on rent vs. buying. Folks are predicting that the rental market is tightening. I'm thinking of writing a story soon about how you make the decision to go from rent to buying. If you or your friends have recently gone through this process or are contemplating it - and are willing to talk about it - please contact me at tset@washpost.com

Thank you!

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Tomoeh Murakami Tse: Oh, I thought of another story that maybe you all could help me on - - I'm looking for some condo sellers in the 20009 or 20001 Zip Code. Anyone?

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Tomoeh Murakami Tse: I'm afraid our time is up.

Thank you so much for writing in!

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