Transcript: Friday, July 7, 2006, 1:00 p.m. ET
Real Estate Live
Friday, July 7, 2006; 1:00 PM
Welcome to Real Estate Live, an online discussion of the Washington area housing market. Post staff writer Kirstin Downey fills in for Post Real Estate editor Maryann Haggerty.
Kirstin Downey has been a business reporter for more than 20 years, covering a wide range of subjects, from retailing to workplace issues to the economy.
She joined The Washington Post in 1988, covering real estate, and has witnessed, firsthand, several market cycles. She's also covered the boom in values in the '80s, when things went up, up, up, and tracked the market down, down, down when it fell in the early '90s, culminating in the banking, savings and loan collapse and the subsequent taxpayer bailout of the nation's financial system. Now things are up once again, with home values at record levels, but people are wondering what the future holds.
For more on local real estate, visit washingtonpost.com's Real Estate section .
The transcript follows.
washingtonpost.com: This discussion will begin momentarily.
Bethesda, Md.: Hi Kristin -- We have been watching the market for a long time. Seems like houses in the Bethesda/CC/Potomac area are sitting on the market a LOT longer. So, how long should we wait until making an offer that is significantly lower (say $100,000 less) than the asking price?? We don't want to offend the sellers, but we think the asking prices are still too high (especially with rising interest rates). We also may want to make our offer contingent on the sale of our own home. We'd like to take advantage of the fact that sellers may be starting to get more realistic. Any ideas of when to take the plunge would be appreciated. Thanks!
Kirstin Downey: Hello everybody. Good to see there's already some questions waiting so let's get started.
This question looks like a good place to start. First, let's start by emphasizing that houses ARE selling, but they are indeed selling a lot more slowly. The most recent numbers from the Metropolitan Regional Information System shows the inventory of unsold housing rising. In Washington, D.C., houses sold in 25 days last June; this June it took 49 days. In Montgomery County, it took 20 days to sell last June; this June it took 44. Of course, longest time on market is Northern Virginia, now at 49 days, up from 15 last June. (Big shift, and most pronounced in the outer suburbs.)
So should you take a chance and lowball an offer? Looks like a good time to do it. Lots of people made so much money on their houses during the run up in prices that they have some flexibility to lower their prices, and may be dying to unload the place. Also, I wouldn't worry about offending the seller (although of course as Miss Manners would say, being politer is always better than the opposite). After all the seller isn't worried about offending you with an outrageously high price!
Northeast Washington, D.C.: I live in Lamond-Riggs, a neighborhood on the edge of the District which has never been profiled in your newspaper. I know this because I did a Lexis search for ANY story about this neighborhood, which is fairly quiet and filled with nice well-kept homes owned mostly by retirees. I've seen stories/profiles ad nauseam, however, about Dupont and Logan Circles, Columbia Heights, and Arlington, Va. Any chance you might step outside the box, as you always advise posters who are searching for reasonably-priced houses in decent and safe neighborhoods, and take a look at Lamond-Riggs? Thanks.
Kirstin Downey: Thank you and good point. We do "Where We Live" features weekly in the Real Estate section that profile different communities, and we may be way overdue on Lamond-Riggs. Please send me an e-mail at firstname.lastname@example.org with some particulars, and I will make sure it gets to real estate editor Maryann Haggerty, who makes the decision about what runs where. Thanks for letting us know it's been overlooked. As region spreads, we have such a big geographical area to cover these days--not just Maryland, D.C. and Virginia, but now even stretching into West Virginia and Pennsylvania. It's a heck of a lot of neighborhoods to keep in mind!
Kingstowne, Va.: What the heck has happened to the market lately? I see tons of ads offering thousands towards closing costs. I even saw a sign in the neighborhood offering to throw in a 2006 Mercedes Benz with a full-priced offer! Is it the interest rates or something else?
Kirstin Downey: It's a really unusual time. Lots of things feel kind of upside down. The bottom line, however, is that not many people can afford houses at these prices. Wages just haven't risen commensurate to the costs, and it is now becoming clear that many buyers made their purchases in the past three years with new and innovative (some say risky) loans, adjustable-rates, or interest only, that allowed them to reach further to pay more but that could leave them at financial risk. More financially conservative people may not wish to go that route...Rising interest rates aren't helping either. Each percentage point increase pushed about three million people out of the market, including about 300,000 to 350,000 who were likely buyers.
Franconia, Va.: Kirstin,
Great article about the tight rental market and increasing rents.
It shed light on the fact that intelligent people are making the decision to rent instead of buy. They know the market's prime for retrenchment, and the rental market will loosen once floppers begin releasing their inventory b/c they're faced w/ selling at a loss ... then it'll be time to negotiate the rent, move to somewhere even cheaper, or maybe even buy from a desperate flopper trying to end the financial slow bleed in one big cut!
I personally loved the quote from the real estate professional that mentioned a condo glut but quickly followed it with "prices are flat, not dropping" even though they are dropping. High comedy!
washingtonpost.com: Missed Kirstin's article? Check it out:
Kirstin Downey: Thanks! Yes, it's a strange market out there. We had expected that the surge in new condominiums on the market would cause rents to fall, as investors put the units up for rent when they couldn't sell them. Instead we seem to be seeing rents rising because so many more people are priced out of the for-sale housing market -- or are opting out of it--because prices seem treacherously high to them.
As to condo prices, the sheer volume of new units entering the market would suggest falling prices to me!
Ashburn, Va.: I'm so mad at my neighbor. I bought my new home here in Ashburn last summer and plan to sell it next year (after holding two years to avoid taxes) to make a nice return on my investment. The problem is my neighbor is trying to sell his house (very similar to mine) right now and he keeps lowering his asking price. Each time he lowers his price, I see my potential profits next year getting squashed. Doesn't he realize he's hurting the comps for all of his neighbors by doing this? I don't think he is acting very "neighborly" by doing this. I want to say something to him and tell him he should stop putting his interests ahead of his neighbors. Its people like him who are ruining the market for the rest of us. If he would just refuse to lower his price, we could maintain our comps and everyone would benefit. What can I do to stop him?
Kirstin Downey: Wow. Interesting question. There's nothing you can do. It's his house, of course. It's frustrating, to be sure. One word of advice: Don't resort to violence.
Seriously, he may just be desperate to sell. Perhaps he has an adjustable rate mortgage that is rising, or maybe an option ARM that is resetting to a much higher monthly payment. Maybe he's getting a divorce or has lost his job and doesn't want to talk about it. Or maybe he wants to move to Tahiti. (I do sometimes, don't you?)
I hear from many, many buyers and sellers each month, and many sellers are finding the only way to sell a home amid this growing inventory is to cut the price. Perhaps last year's prices were just illusory after all.
Bristow, Va.: Townhouses in my neighborhood are listing at $340,000 and not selling, one year ago they were listing at $390,000 and selling fast. Inventory is high, buyers are no where. How much further can it go down? At some point won't speculators move in and start buying low, and thus prop up these prices? Or is this a bottomless fall?
Kirstin Downey: The market feels different than it did in recent years, but homes are still selling. But let's be frank about the prices: $340,000 is still a heck of a lot of money for most people. Just six years ago, homes in prime subdivisions in close-in suburbs went for that amount of money.
Hampton, Va. (hoping to relocate): I'm hoping to move up to the D.C. area soon. I have mobility issues and need a house with no steps. I'd be interested in something like a ranch condo, but the only listings that seem to be similar are for the 55+ communities. I'm not 55 (yet) -- do you know if those communities will make exceptions for people who really need the accessibility features? What other options might there be for housing in the Maryland area (say, Silver Spring over through College Park/Riverdale)?
Kirstin Downey: There are many condos for sale, usually in high-rise or mid-rise buildings, and that might be your best bet. Lots of people of all ages living in them, particularly in the District. In fact, a plethora of that kind of housing is why some gerontologists call the Connecticut Avenue corridor a "naturally occurring retirement community."
Sterling, Va.: The person mad at his neighbor could buy his house for his really low price and sell it for a profit.
Kirstin Downey: Yes, or lose a lot of money in the process.
Laytonsville, Md.: Ack! Ya can't win these days: if you cut the price, you're ruining the comps. If you don't cut the price, you're greedy!
Kirstin Downey: Yep!
Arlington, Va.: With the immediate D.C. area housing market starting to cool and get more realistic, how will this affect the market for second homes? For example, will lakefront property on places like Deep Creek and Lake Anna go down as well? Or will the rising age of the boomer generation keep those prices out of reach for middle income folks?
Kirstin Downey: The demand for second homes remains very strong, especially, as you note, amid baby boomers. But we're hearing some reports that some developers and home sellers in vacation communities are more open to lower bids than they had been in the past. If you are seriously interested in buying, it is worth the risk to make an offer, even if it's considerably lower than the asking price. I talked to a reader last week who made a bid $100,000 under the asking price, and the seller countered. He ended up getting the property for $80,000 under the asking price. He was ecstatic.
Fairfax, Va.: Hi Kirstin,
Have you seen a change in the market since the price of gas has shot up? With prices "falling" inside the Beltway, why would anyone sit in traffic for an hour or more and burn up their savings and their time?
Kirstin Downey: Yes, there's been a lot of speculation on that issue. It's noticeable that the weakest real estate markets are those in the most distant suburbs and gas prices could be playing a role.
Alexandria: "... people who make $70,000 to $90,000 a year -- too much to qualify for housing assistance but too little to be able to afford to buy a home."
That had to have been the most depressing thing I've read since I fall in the middle.
Kirstin Downey: The line you refer to was in the story I wrote earlier this week on the apartment market. Yes, the prices and rents are wildly out of whack in this market and a few others, such as New York and California. Housing prices are causing people real problems and affecting their quality of life. We were hoping to see some moderation of the trend, and it may happen gradually, if more houses go onto the market, don't sell and become rentals, but so far younger residents in the area, those too young to have bought before the run up in prices, are really getting squeezed.
Arlington, Va.: Wow, Ashburn totally made me laugh with "I want to say something to him and tell him he should stop putting his interests ahead of his neighbors." Why on earth would the neighbor feel obligated to preserve the poster's future home value? Clearly, he's moving away -- whatever the reason, it's his right to sell his house for however much/little he wants.
Kirstin Downey: Maybe he doesn't like the neighbors?
Mountain Lakes, N.J.: I'm in a similar situation, where I'm trying to sell my townhouse and my neighbors are unhappy that I've lowered the price. But I've moved to a new area and have to sell so I can close on my new house -- I don't have the luxury of holding the place for a year, because I can't afford double mortgage payments. It's not that I'm not neighborly -- I just don't think being neighborly means that I have to drive myself into bankruptcy.
Kirstin Downey: Thank you. Good point.
Laytonsville, Md.: So, how long should we wait until making an offer that is significantly lower (say $100,000 less) than the asking price?
I vote go ahead and make an offer, even a low one! You never know how badly a seller wants to sell, and you never know what other offers may come up that could be similar to yours.
I had a house on the market last spring and it didn't sell quickly; I really needed to sell and accepted an offer that was fully $34,000 off the list price ... the list price that I had already lowered twice during the time it was for sale.
So, you just never know!
I don't think a low offer would be considered rude. I would look at it as the market talking!
Kirstin Downey: Makes sense to me, too.
Arlington, Va.: The person mad at their neighbor should relax a bit, especially if they are not selling until next year.
We faced a similar situation while selling our condo in Arlington. Another unit with the same floor plan came on the market $35,000 below our asking price. At the time we had someone ready to make an offer on our place that instead purchased the other at the lower price. We were patient and hung in there and eventually received and offer very close to our asking price. We felt no need to lower our price because all of the comps showed we were at the right price. The lower comp was almost completely disregarded by our buyer and more importantly the appraiser. So, don't get too worked up about it. A lot can change (and probably will) in a year.
Kirstin Downey: And another good point. Thanks for weighing in, gang.
Manassas, Va.: The County values my house around $495,000. Personally, I think it is over value. I would love to sell it at the price. Since like the market is cooling down, will the county lower the value next year. As you can see, it is my first. I do not have a lot of experience with that.
Kirstin Downey: The last time house prices fell in the Washington area, in the early to mid 1990s, savvy people were quick to contest their property tax valuations, and some got big reductions. So there is some good news in the slowdown -- people who are getting pinched by rising property assessments will get some relief now.
Vienna, Va.: The Post's recent article about tight rental market and condos that are to be turned into apartment brought a realization to me that I may never afford a three-bedroom condo in D.C. This might as well be because D.C. does not have a good public school system and a grocery store in Penn Quarter where I would want to live. Thanks Wash. Post for the good article.
By the way, with prices in Vienna dropping as much as $100,000 from original ridiculously highs for previously owned single homes, it probably makes more economical sense to buy a single home than a condo in D.C.
Kirstin Downey: That's what happened during the last slump. Prices for single-family homes dropped to the prices of condos, and then condo prices really began to fall. People who had resigned themselves to accepting life in a condo but who waited to buy then happily ended up with single-family homes and townhouses. On the other hand, however, during that slump in the 1990s, employment also fell off dramatically, but now, we are having good and steady job growth. So past may be prologue -- or maybe not.
Washington, D.C.: I notice you are using the term "slowdown" to describe the market. Slowdown implies a reduced rate of growth (i.e. continued forward progress at a reduced). Decline is probably more accurate since what we are seeing is falling prices.
Kirstin Downey: Hmm. Yes, it's a bit of both. A housing-sale slowdown. With declining prices.
Crofton, Md.: I don't think making a low offer is rude, but I had a potential buyer try to hide a low offer in a contract by asking for thousands in closing help. That really aggravated me and I told that person to get lost.
Kirstin Downey: Thanks for speaking up. There's always some risk in making a lowball offer. Just FYI, however, people who can stretch to make a payment will sometimes pay more for a house but lack the cash to get to the closing table. Giving money toward the settlement costs could help sellers snag a better price.
Madison, Wisconsin: Hi from the heartland. Just wanted to note that we bailed on D.C. last spring and are SOOOO happy to be living without the traffic, stress, and high cost of living in D.C. So if you have portable jobs or marketable skills, consider leaving this high-priced and stressed-out area for a more affordable and livable part of the country. Sure I miss things like the National Gallery and 9:30 club, but geez, it's not like everywhere outside of the eastern corridor is Mayberry!
Kirstin Downey: Madison is supposed to be great. Glad it's working out for you. I've heard from a great many readers recently who are talking about making similar moves elsewhere. They are questioning whether it is possible to get ahead financially here with housing prices so high. In the late 1980s, that's why I left San Francisco. Loved it there, but didn't think I could make myself a good financial future.
Germantown, Md.: We live in a townhouse with a neighbor who is selling a "handyman's special" almost 10 percent under what we just bought our place for, which also needed some work. Should I start kicking myself for buying too high, or talk to the neighbor about their low price. I don't think their agent is very knowledgeable since they've been on the market for over a month without an open house and are showing by appointment only.
Kirstin Downey: This line of discussion -- how people are reacting to the lower prices being offered by their neighbors -- strikes me as great fodder for a news story. Please e-mail me, email@example.com, with your stories. I'm sure it would make a really interesting story.
And please remember, we love to hear from readers. We depend on hearing from you to do our jobs well in monitoring the market.
I'm going to sign off now. Hope you have a great weekend. It's beautiful out there today. Thanks for joining me. Love your great questions. Bye!
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