Welcome to Real Estate Live, an online discussion of the Washington area housing market with Post Real Estate editor Maryann Haggerty.

Maryann has been with The Post for 18 years and has served as real estate editor for the last five years. She's been a business and real estate editor and reporter for about 25 years. In all that time, she still hasn't figured out where you can find a lovely but inexpensive house in a charming neighborhood.

She's online twice a month to answer your questions about the local housing market -- from condos and investment properties to contracts and mortgages.

For more on local real estate, visit washingtonpost.com's Real Estate section .

The transcript follows.

____________________

Maryann Haggerty: Hello, folks. We are here this afternoon to chat about real estate -- ups and downs and whatever else. Send on your questions and comments!

_______________________

Leesburg, Va.: I see the stock market moving ahead and read that the economy is still growing in spite of a downturn in the housing market. Does housing follow such increases in other financial areas or does it move independently? Alternatively, might housing pull against the upward movement of other indicators?

Maryann Haggerty: This is a matter of great debate in economic circles. Will the housing slowdown drag down the economy? Wise and well-paid economists have not reached consensus. Some argue that housing prices/sales are most closely tied to interest rates/mortgage costs. Others argue they are most closely tied to job creation.

_______________________

Arlington, Va.: I often read that the real estate market will experience a "correction" in prices. What percentage correction can we expect in the D.C. area? I bought a One Bedroom Condo, conversion condo, for $335,000. I am curious (and concerned) to learn how much of a decrease in value I should expect for a condo like mine.

Maryann Haggerty: The gloomiest prediction I have read lately--a week or two ago, from Moodys.com--called for a 10 percent correction in the Washington market off 2005 highs. (This is measured using the OFHEO housing value numbers.) This may vary, of course, if you look at micro-micro markets. Historically, the one-bedroom condo market has been more susceptible to swings than the single-family house market.

_______________________

Arlington, Va.: I've been looking to buy a One Bedroom condo in Maryland or Virginia. The prices for new construction are in the $300,000s. Do you think such highly priced condos will ever really appreciate? If I pay $330,000 for a One Bedroom how long would it actually take for that unit to appreciate? If anything it looks like prices will go down a lot before going up.

Thanks.

Maryann Haggerty: Historically, real estate prices have more or less tracked inflation, sometimes pulling ahead, sometimes falling behind. But in the long term, consider your principal residence as your hedge against inflation rather than as any type of way to print extra money.

Of course, remember that inflation is the single greatest enemy of long-term savings, so having an inflation hedge is a Good Thing.

_______________________

Herndon, Va.: Hello Maryann, thank you for taking my question.

There has been a lot of talk about builders and new home inventory. I recently signed a contract for a builder's inventory home and wanted to ask your opinion on the value of a home inspector when purchasing a new home. Because the home is under warranty and has never been lived in, is it worth it to hire an inspector? I would appreciate your thoughts on this issue.

On a side note, many people talk of the doom and gloom with the real estate market; however, as a first-time homebuyer, it has been a great experience in this market to be able to look around and take the time to make a well thought-out decision. I seriously considered purchasing a couple of years back and refused to get caught up in the frenzy of bidding wars and paying what I thought was way too much for a home at the time.

Back then I saw one home the first day it started showing and before I could even think of an offer that day, the seller accepted an offer for $50k over list price. But in today's market, I was able to find a home after taking my time, looking at multiple homes and being comfortable with the purchase. I believe buyers should start venturing back into the market, albeit cautiously, and my advice would be to find a home you like, set a reasonable number you're willing to pay for it, and stick to that number.

As for sellers, you really need to be realistic and reasonable with your selling price, or you'll be on the market for a long time.

Maryann Haggerty: I would definitely have an inspection of a newly constructed home. Houses are built by human beings and human beings are imperfect. There are always flaws, even with the best builders. These are problems of wear and tear, they are problems of construction. You may not discover them on your own within the warranty period.

And thanks for your other observations.

_______________________

Mount Pleasant, D.C.: I will probably have to leave Mt. Pleasant in February, because my landlords are returning from India. I'm trying to buy a house or condo, which is frustrating, because although I have more than $80,000 saved, no debt, and great credit, 28 percent of my income is only $1,275. That's not even the going rate for most above-ground 1br rents in most of the neighborhoods I like. (Ledroit, Shaw, Columbia Heights, Mt. P, Petworth.)

However, if I buy a two or three bedroom place, and get roommates, it might be possible. (Currently share a $2150/month house with two roommates.)

My question -- would offering 10 percent below asking price be so insulting to a seller that they wouldn't negotiate? What if the ad says 'motivated'? Are builders more or less likely to take less than list price than private owners?

Maryann Haggerty: No, an offer 10 percent below the asking price would likely not be considered an insult. It would be considered an opening bid. If hte seller advertisers himself as "motivated," he is begging you to make an offer. Builders are still more likely to insist on list price than private owners, though they obviously have wiggle room on incentives.

_______________________

Fairfax, Va.: My husband and I are shopping for a house/townhouse. Here are some tips for sellers- put pictures of your home online including the interior rooms. We don't even look at homes without online pics... There is too much on the market and we don't have time. Also, photograph the ROOMS not your furniture. Look at what else is on the market in your neighborhood and price accordingly. If you haven't updated your kitchen and baths and you home is still priced more than your neighbor's and they HAVE updated, you are being unrealistic -- no matter what the rest of your home looks like.

Maryann Haggerty: Yes, isn't it annoying to click thorugh the photos and see pix of, say, the furnitire and rug that are going to leave -- but be unable to tell whether there are windows in the room?

_______________________

Alexandria, Va.: Hi Maryann,

I have recently noticed a lot of ads for homes or condos being auctioned. I didn't think much of it but now there are two homes in my neighborhood being auctioned! Is this now a popular way to sell a home or does this mean the homes are in foreclosure?

Maryann Haggerty: There are always, it seems, auction companies claiming that they're the newest latest and greatest in real estate sales--that they can get sellers top-of-market prices in non-distress situations.

I admit to a great deal of skepticism about this. There are places where auctions are the dominant form of sales -- Australia comes to mind. (It's actually kind of cool. People go to house auctions on Sunday afternoons instead of open houses.) However, this has never really caught on in the United States.

_______________________

Maryland: I'm a young professional and last fall I bought my first condo in a building that is a conversion (apartment to condo). The location is great because of its close proximity to 495 in Maryland. However looking back on it I am starting to repent. The developer has not even sold half of the units in the building, and while the builder hasn't reduced prices I've seen prices of similar condos in other buildings in the area priced $20,000 lower than what I paid.

I feel bad because I believe I purchased a property that was overpriced and hence it will take much longer to appreciate. Anyways given the fact that I have overpaid, what would be your suggestion for someone in my shoes? Am I better off to try and sell my condo after another 6-12 months, to avoid losing more money as the value of my condo decreases?

Maryann Haggerty: If you sell in 6-12 months, you WILL lose money. Repeat after me: Real estate is a long-term investment.

_______________________

Washington, D.C.: It's seems fundamentally dishonest for economists studying the D.C. housing market to treat Bethesda as a separate entity while lumping the rest of the D.C., Va., Md., W.V. market together (see Moody's report). Why is Bethesda, an inner Beltway suburb, considered a distinct entity, whereas Leesburg, a distant exurb, gets lumped into the D.C. analysis?

Maryann Haggerty: Basically it has to do with the way that the federal government classifies what it calls "Metropolitan Divisions." According to the feds: "If specified criteria are met and an MSA contains a single core population greater than 2.5 million, the MSA is divided into Metropolitan Divisions."

In what we think of as our area, there are two divisions ot the greater Metropolitan Statistical Area. The one called "Bethesda" consists of Montgomery and Frederick Counties. The one called "Washington" is DC, PG, southern Md., Northern Va. down to about Spotsylania/Stafford and out to Jefferson County WVa. (Berkeley & Morgan counties, WVa, are lumped into the Hagerstown numbers. Anne Arundel and Howard counties, Md., are in Baltimore.)

It is all an attempt by demographers to lump together suburbs that are part of the same economic sphere.

You can find out more than you ever want to know about this by poking around the census web site, or simply following the links in the footnotes of the OFHEO Web site. Trust me, you WILL be bored.

_______________________

Laytonsville, Md.: In case anecdotal evidence of the market picking up again in Montgomery County is interesting to anyone, I think it is.

A house on my street went under contract in about 10 days, and a farmette I was eyeing went under contract in less than a month. Neither was what I would call attention-grabbingly low priced (but not obscenely high priced, either).

However, I do note that a new development near me is no longer advertising units starting at $1 million. They're now starting "under $1 million."

Maryann Haggerty: Thanks.

I have seen one house on my block go in less than a week, and another has been sitting for more than a month. It has a lot to do with the individual property as well as its price. Houses are not like DVD players at Wal-Mart.

_______________________

Re: Inspecting New Homes: When my husband and I purchased a new house from a builder, the smartest money we ever spent was for a pre-drywall inspection. For a few hundred dollars we have saved thousands, plus avoided endless aggravation in subsequent years.

Our inspector uncovered quite a bit of troublesome things including insufficient support under the master bath shower, inproper floor joist installation, and plumbing issues. Many of our neighbors wish they had done the same -- they have spent a lot of time repairing leaking ceilings and other big problems. I'm just glad we read a book that mentioned arranging a pre-drywall inspection -- we had no clue!

Maryann Haggerty: Some builders really resist pre-drywall inspections, saying they will only agree to a inspection at the time of the walkthrough. But an experienced inspector can tell you how to get the builder to agree.

_______________________

NoVa: I purchased a condo about over a year ago and have discovered that I hate suburban life and cannot wait to get back in the city. How do I determine the rate at which I would be taxed for capital gains if I sold and moved before my two years of ownership was up? Thanks!

Maryann Haggerty: I am going to get the capital gains tax rate wrong, I know, but I seem to recall that it is a maximum 28 percent on investments of less than a year and 15 percent on those of more than a year. It varies depending on your income.

If you sell and move before your two years of ownership are up, you will either owe the full rate, or be able to shelter a portion of the gain. You can only shelter is you meet one of the tests for moving before two years.

To quote my columnist Bob Bruss: "Internal Revenue Code 121 specifies if the reason for the principal-residence sale after less than 24 months of ownership and occupancy is a health reason, change of employment location qualifying for the moving-cost tax deduction, or "unforeseen circumstances,"each qualified co-owner might be eligible for a partial deduction." Just hating the 'burbs is not in and of itself a sufficient reason.

On the IRS Web site, look for Publication 523, "Selling Your Home," for more details.

_______________________

Arlington, Va.: To the young singles who are considering buying 1-bedroom condos in the near future, think about how long you actually plan to live there. Unlike a single family home or townhome, you probably wouldn't live in a 1-bedroom condo more than 5 years or so. You might get married, find a dream job across the country, etc. After this recent run up in condo prices, I think it's unlikely that condo prices would appreciate at all in the near term. But that's just me.

Maryann Haggerty: Yes, when you make your decisions, you really have to look to the future. Where do you see yourself five years out?

And that is a particularly difficult thing to accomplish when you are still young and still trying out your life options.

Of course, none of us at any age can REALLY be sure. But you do want to test against the most likely options.

_______________________

I Hate No-Photo Listings!: If a home for sale does not post several interior photos online, we won't bother with it either. First, it makes me wonder what they're hiding. The inside must be a real mess, I think. Second, it's lazy of the seller and his/her broker. You want me to pay over half a million for your house, but you're too cheap to buy a $75 digital camera and post a couple of pics on your listing web site. Forget it! I'm not THAT desperate.

Maryann Haggerty: Hey, borrow the camera from your real estate agent is you have to!

_______________________

Fairfax, Va.: Hello Maryann,

I had a question regarding the 30-year fixed rate mortgage. Will my payments be affected if interest rates go up in the future?

Also, does it make sense to start making bigger payments toward my house mortgage(more than the regular payment) if I can afford it? Don't I end up paying less (interest) in the long run?

Maryann Haggerty: This is the beauty of fixed-rate mortgages: They are fixed. The interest rate market does not affect you. (Other things can bring your monthly cost up, such as property taxes, but not interest.)

As far as extra payments: Making them greatly reduces your interest cost. One of the easiest and least painful ways to do this is to make 13 payments per year instead of 12. Mark that final payment as "principal only." (Long-term, that's better than deducting a bit more interest.) You will pay down your 30 year loan in around 22 years.

_______________________

Condo fees: We're looking to buy in D.C. and largely cannot afford a house so we're looking at condos. some of the condos though have very high fees - over $500/month. On the one hand, I know that every additional $10,000 in housing prices represent about $65 per month in mortgage fees, and therefore $500 condo fees represent around $80,000 so it may be worth it to spend that much more to get an actual house, not a condo.

On the other hand, we both work a lot and don't want to spend every weekend repairing things. I like that a condo will take care of the grounds and the roof, etc. In the case where you just really don't want to spend your life fixing and maintaining a house, does it make sense to go for a condo, even when the fees seem ridiculously high?

Maryann Haggerty: You save a lot of timeby not doing your own exterior maintenance. You also save a lot of unexpected jolts to your cash flow by not having to shell out for stuff like a new roof or new boiler.

What you want to be sure of with a high condo fee is that the fee is well managed -- that is, that a sufficient amount is being put into reserves for those big-ticket expenses. It all is -- or should be -- in the condo docs you get before you bid is final-final. Read them!

_______________________

Oakton, Va.: Hi Maryann,

My husband and I purhased our home in July 2005 at what has been considered the "peak" of the market. We recently applied for a home equity loan to make some improvements on our new home. We figured that it would be no problem to take the cash out even if our value had gone down, because we put a lot of cash down when we bought.

We were shocked when our appraisal had come back $80,000 higher than when we had purchased. We called the appraiser and he said that he only used comps from the last 30 days, which there where several. I guess the market is not that bad in certain areas. So buying overall is a good decision.

Maryann Haggerty: Thanks for the input.

_______________________

Arlington, Va.: We live in a two-bedroom condo in Rosslyn and are looking to sell and move to a house by the end of the year. Several new condo buildings have popped up around the neighborhood and we're afraid of the competition. Is it worth it for us to redo our kitchen (appliances date back to 1985) and spend thousands of dollars on that with the hopes of recouping the expense in the sale or just sell the unit as is at a lower amount?

Maryann Haggerty: The rule of thumb is that kitchen upgrades can pay for themselves.

Yes, those new condos are your competition, and they will outshine you. Considering the costs of housing these days, though, I wonder if there's not a marketing angle you canplay there. "Sure, a marble counter is great -- but do you want to pay for it for 30 years? Here's a well-kept home you can afford!"

Talk to some real estate agents who are active in your neighborhood for additional opinions.

_______________________

Arlington, Va: Maryann,

I was wondering what your take is on the future rental market in the Arlington/Falls Church area. I am looking to rent a five-bedroom house though my potential roommates and I are unsure of the best time to do this. We have been going back-and-forth on whether it is better to find the first resonably priced house on the market now or to wait a few more months hoping that prices on rental units will be going down. None of us have any urgency to move right away, though some of us would rather be out of the parents' house sooner than later.

Thanks.

Maryann Haggerty: I wouldn't count on rental rates going down, I really wouldn't.

_______________________

Re: Mt. Pleasant: I agree that an offer 10 percent below would not be considered an insult to the seller, at least it shouldn't be. Negotiating a price is merely that, negotiating a price. If it's too low, then the seller won't sell. If it's too high, the buyer won't buy. In any transaction I've had, buying a home, buying a car, etc., where you negotiate, I wouldn't worry about insulting the seller.

If they didn't like the offer, it was a simple "no." If they take offense, I would be skeptical about the seller and would be wary about doing business with them. If they blow up and get angry, just move on, there are tons of properties out there and I'm sure you'll find one.

Maryann Haggerty: Yes, that's how negotiations work -- that's how a willing buyer and a willing seller agree on a price.

However, there are plenty of people who let their emotions get tangled up in business deals and do indeed take offense. These people can be very difficult to work with as the deal progresses.

_______________________

Sterling, Va.: Maryann,

I was thinking of giving my basement out for rent. What are the formalities involved (like getting a clearence from my county)? Thanks for your time.

Maryann Haggerty: Check directly with the county. You do in fact have to meet legal requirements. They involve zoning, construction codes, etc.

Particularly with basements, you have to make sure the space is up to code -- that there are two legal means of egress in case of a fire. Many older basements do NOT meet the requirements.

Please, please: I known there are people who skirt legal requirements by not getting the proper landlord licenses, etc. If you are even considering this, please please make sure your basement meets the fire exit codes. People die in fires in illegal basement apartments.

_______________________

Washington, D.C.: I bought a house approximately 18 months ago, and planned to stay in it for many years. However, recent changes to the neighborhood (gangs, shootings, etc.) have made me feel really unsafe and I am thinking about selling. I don't have much equity yet, and I'm worried that I won't even be able to sell the house for what I paid for it.

After paying realtor commission and closing costs, there's a chance that I won't have enough money to pay off the mortgage. What happens in this situation? Will I have to come up with cash to pay the difference, or will I be able to make arrangements to pay it off over time?

Maryann Haggerty: You will likely have to come up with cash at the closing table. However, some lenders have been known to work with borrowers to come up with solutions, if the other option is foreclosure.

I certainly don't want to encourage you to live in a place where you feel unsafe. However, I do encourage you to take a few deep breaths first. Think about what you liked about the neighborhood in the first place. Make sure you are not overreacting to isolated incidents.

I know I totally freaked out when my house was burglarized. Utterly, completely, I-will-not-stay-here-one-more-night freaked out. We very quickly upgraded the security system and also examined some of our own security-related life patterns (where you park, etc.) I eventually calmed down and am still there, a decade later.

_______________________

Arlington, Va,: Although the Orange line to Dulles is being delayed by at least a year, what impact do you think the completion of the Metro extension will have on that area's real estate market?

Maryann Haggerty: It will make it more desirable. Local governments are likely to encourage higher-density development near transit, too, so you can expect every building permit to be debated.

_______________________

re: Fairfax questions on 30-year mortgage: Faifax asked if their rate would go up on a 30-year fixed mortgage and if they'd pay less in interest if they paid down faster. I don't understand how they got to the point of owning and financing a house without knowing these basics. Did they not ask any questions to the lender before signing on the dotted line? Did the lender just take advantage of ignorance? If these are the questions people are asking after they bought a house and financed, it is no wonder so many people go into forclosure. Educate yourselves before buying, not after! They probably have a rate 3 percent above average just because the lender knew they were too ignorant to challenge it.

Maryann Haggerty: Don't be so harsh. There are a lot of people who don't understand all the ins and outs, and they get along just fine. One immediate possibility comes to mind: In many families, one spouse handles financial stuff, but the other sometimes becomes curious about details.

Yes, educate yourself. But part of educating yourself is to ask questions. If your wife handled all the details on the home financing--say, for instance, she's a newspaper real estate editor -- you should still ask questions about what is going on. Even if the subject bores you to tears. And it's never too late to ask.

_______________________

Anonymous: I own a couple of mixed-use commercial properties with a partner. Can we become a REIT and continue buying properties with benefits as such? Thanks for any light you can shine on this question.

Maryann Haggerty: OK, ask questions -- but ask people whose answers you can trust. In this case, you need to ask a lawyer, and it has to be a lawyer with experience in the area. This is not one for amateurs.

_______________________

Alexandria, Va.: I had an inspection done on my luxury new build townhouse back in 2000 -- the builder tried like crazy to talk me out of it. I resisted, paid the $300, and nothing bad was found. I don't regret having it done and would do it again today if I were buying a new home. You can't put a price tag on peace of mind.

Maryann Haggerty: Actually, you just did: $300.

For what it buys you, it is remarkably cheap, in my view.

_______________________

Silver Spring, Md,: I am on the other end of the condo-to-single-family move. I've owned my home for about 20 years and now that we are empty nesters, want to sell it an move to a condo. However, I'm not sure what, and how to go about updating the house. I don't want to put more into updating it than I get back, but I know that the current kitchen and baths need to be redone to make it attractive to a buyer. What rule of thumb should I use to determine what to do and what would be best to leave alone and take a lesser price for the house for?

Maryann Haggerty: You have to look at the other houses you are competing against and see what is standard. See what brings how much.

Again, the rule of thumb is that a nice (but not outrageous) kitchen or bathroom upgrade will bring you back the investment, plus maybe some. Most people like houses they can move right into, and especially these days, a hosue that doesn't show well just isn't going to excite buyers.

With the earlier condo questioner, I think I was trying out a counter-intuitive marketing idea, one step short of "handyman's special."

_______________________

New Brunswick, N.J.: Hi Maryann,

Great chat! Can you give your impression of second home development in the Virginia portion of the Delmarva Peninsula? This seems like an under-developed gem of an area with great potential. Thanks.

Maryann Haggerty: Well, yes, it is underdeveloped -- because it is poor, with almost no jobs, and an agricultural/maritime economic base that is struggling.

Also it is far -- far from populations centers, far from services, far from medical services (and that's really important.)

But if you like it? Then hey, you have your own little piece of underdeveloped heaven.

_______________________

Maryann Haggerty: I have to go now, folks. Thanks for your time.

Please try to pick up tomorrow's Real Estate section. There's an enlightening story about Islamic home financing, and a thought-provoking piece about the decisions you need to make when the kids have flown the next. Plus plenty of Qs and As and advice.

Have a great weekend!

_______________________

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. washingtonpost.com is not responsible for any content posted by third parties.