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Maryann Haggerty
Washington Post Real Estate Editor
Monday, March 26, 2007; 1:00 PM

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.

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Largo, Md.: I LOVED the special Real Estate Outlook section. I hope The Post does more of these. I was especially struck by the couple trying to buy a house in Prince George's County. Their yearly income was about $150,000 I believe and they wanted a $600,000 house! This is why we have the foreclosure problem we do today! What happens when one of the couple gets sick or loses their job? They would lose their house for sure. And I think I recall reading that they want to start a family. It makes me feel like banging my head against the keyboard. Don't people even think about or plan for unexpected expenses?

washingtonpost.com: Missed it this weekend? Check it out here: The Post's 2007 Housing Outlook

Maryann Haggerty: I'm glad you liked the section. Those of you who haven't seen it can explore it online ...

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Loudoun County, Va.: Thank you for taking my question. Simply, Do we fix our 1960s fixer-upper ranch to a sellable state (still won't be perfect) or sell it as is? The first will cost us money we don't have and will have to pay out of pocket if it doesn't sell quickly. The last will take some time to find the right buyer who wants a potential estate. What to do?

Maryann Haggerty: You balance the two options, which you have laid out pretty clearly here. Either you spend money to make money, or you take longer to sell the place, for less money.

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Rockville, Md.: Thank you for the extensive coverage in this weekend's Post. There is a great need for thoughtful analysis and I appreciate you and your staff putting so much effort forward in the articles.

In Dina ElBoghdady's article "Taking Time for the Right Place and Price," she writes about a poll conducted by Fulton Research and Consulting in which more than half of the 1,017 prospective home buyers excepted prices to decline this year, following with the following line:

"The doomsayers believe that a big drop has just begun. Conventional wisdom is that the real estate market should stabilize next year, if not earlier. But there is no sure answer."

While overall the coverage was excellent, the above surprised me on a number of levels. The strawman "Doomsayers" carries with it no small amount of negative connotations, but even more surprising was the unsubstantiated and vague party of "conventional wisdom," who argue for stabilization. "Whose conventional wisdom?" was my first question, as each has their own stake in the matter: the realtors, the renters, the banks, the homeowners, the buyers. Who might be the source of the "conventional wisdom" (was the stabilization question part of the poll?), and who are the "doomsayers"? Without attribution, the terms more likely seem to reveal the reporter's own feelings on the subject than that of others.

Wouldn't it be possible to compare the housing market against historical norms in order to offer a better picture of the current market and its possible trajectory, rather than relying on rhetorical flourishes? For example, adjusted for inflation, how does the recent rise in prices compare to other "boom" periods, and can we infer anything from historical flattening of prices that came with those previous booms? And if the skyrocketing market over the past six or so years is so outside the norm that no comparison bears out, doesn't that pretty much make "conventional wisdom" -- no matter who offers it -- pretty much moot?

Thanks again for your continued coverage of this important topic.

washingtonpost.com: Taking Time for the Right Place and Price, (Post, March 25)

Maryann Haggerty: I think "conventional wisdom" is just that -- a sort of consensus of the usual suspects, mainstream division. In this case, it is probably best embodied in the Federal Reserve -- the chairman and the folks at the regional banks.

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Bethesda, Md.: Hi, Maryann. Thanks for the chats. The house next door to my mom's is going to be torn down and a $1.8 million McMansion will be squeezed into a small lot on a street of very modest houses. Besides writing to one's county councilman, what can homeowners do to prevent this from ruining their neighborhood, not to mention the loss of relatively affordable homes? Thanks!

Maryann Haggerty: Generally, contacting local politicians is indeed the only way. But this is a complex question: What some neighbors see as "ruining" a neighborhood, others see as improving it -- or at least improving their own financial position. Let me see if we can find a story we ran last summer about the ways municipalities are dealing with the question.

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washingtonpost.com: The Big Question, (Post, Aug. 12, 2006)

Maryann Haggerty: Here's that story on mansionization

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Landover, Md.: With the down turn in the market and the sub-prime crisis, are loan officers and realtors more likely to lose employment? Looking at a job change to being a loan officer.

Maryann Haggerty: This is generally not seen as a good time to enter the mortgage lending field.

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Petworth, D.C. : Maryann -- Great job to you and your staff on the real estate reporting this weekend and today.

Re: Downey's article this morning ... how does a mortgage broker sell a supermarket cashier a $410,000 house? Even if it's legal, wouldn't the market's intrinsic checks and balances prevent such a mortgage from being approved? The woman in the article made $2,400/mo. and her mortgage was $3,800/mo. Was every person involved in that transaction either delusional or scheming?

washingtonpost.com: Here's that story: Foreclosure Wave Bears Down on Immigrants, (Post, March 26)

Maryann Haggerty: Delusional or scheming? Probably.

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Round Hill, Va.: When considering the cost of housing or the ability to get a mortgage, commuting cost seems to be ignored. Is it?

Many communities, including mine, provide some affordable housing. How can a house be affordable when the cost of commuting could easily exceed $200 per month?

Maryann Haggerty: There are some mortgage programs that do indeed give you a break for a short commute--Maryland's Live Near Your Work program comes to mind. But in reality, most people don't take this into account--either the dollar cost of commuting or the psychic cost.

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Arlington, Va.: My agent had me sign an exclusivity agreement, that if I bought within the following 90 days, she was entitled to the commission. I'd intended as much, but she forced the issue by saying that if I didn't sign, she was legally obligated to represent the seller when I made the offer. Is that true?

Maryann Haggerty: I sometimes get a bit lost in the ins-and-outs of of agency rules in the various states, but essentially, yes, if you don't have a signed buyer representation agreement, then the agents have a fiduciary responsibility to the seller.

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Fort Lauderdale, Fla.: Why do you consider people who voluntarily committed to purchase property that they could not afford "victims"? They made bad decisions, hopefully they will have learned from them. But what sense does it make to base public policy on the shortsighted-ness of overreaching consumers?

Maryann Haggerty: People who voluntarily make a decision, with dull knowledge of the consequences, indeed are difficult to see as victims. The debate will be over whether people did indeed have full knowledge of the consequences.

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Anonymous: I could really use your help. I bought a house as a single mom eight years ago, which was a big financial triumph for me. Boyfriend moved in a couple of years ago and has contributed "rent," fairly. We are now buying a house together. The entire down payment will come from the sale of my house. (He has not owned a house and doesn't have a chunk of change to contribute to the down payment.) Though I don't predict a break-up (who does?), what should I be thinking about? How should the new mortgage be divided? (Is the answer, equally, but I write up a little something saying that if we break up, I get the whole amount of my down payment, plus interest, back?) Even if we stay together forever, what's fair to me in this situation? Do I "get" anything for the fact that I'm pitching 150-180,000 (very hard-earned) into our new home through the entire down payment? Thank you so, so much for your help!

Maryann Haggerty: You should write up (better yet, have a lawyer write up--we're talking a lot of money here!) a partnership agreement to protect the interests of both of you in the case of a break up. Most people indeed would set that up so that you get your equity back first, then you split what's left. (I'm not sure about the "plus interest." That would be assuming that you are lending him the money, and that seems clumsy. But do-able, if that's what you want.)Also think about how you want to title the house; it affects what happens to your share should you die. As far as "fair" or "getting": Fair is what you think is fair. If you two can't agree on how to handle this, you may be looking at other problems ahead.

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Fairfax, Va.: What is the latest information on the possibility of the federal government buying property near the Huntington Metro station? Under what conditions could they buy and what would be the owners' rights?

Maryann Haggerty: You mean in relation to the flooding there a year or so ago? I don;know anything else. I think that's a question best asked of your elected county officials.

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Woodbridge, Va.: How do lifestyle centers (Reston Town Center, Fairfax Corner) effect housing in the immediate area? There is one currently under construction in Woodbridge called Potomac Town Center and many home builders are using this as a strong selling point (value, location, etc.). Do these town centers impact real estate in a positive way?

Maryann Haggerty: They appear to have indeed been good for the surrounding market, when done well. Reston is the big example of this. But it is very difficult to tease out one effect and say it is solely responsible for price trends, particularly when you look back on a time when a rising tide was indeed lifting everything.

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Bethesda, Md.: Do you see much geographical variation in demand in the housing market? For example, is there more weakness in the market new homes in the outer suburbs than the close-in areas? So is it across the board? The builders reporting earnings problems like DR Horton and KB usually do large developments in the outer suburbs.

I wonder if their data is skewing the market?

Maryann Haggerty: Well, there's not a lot of new-home construction in what most would consider inner suburbs. So you may have a chicken-and-egg situation there

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Maryann Haggerty: I think I may have mistakenly typed "dull knowledge" a few answers back when I meant "full knowledge." Sorry.

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Washington, D.C.: Hello, Maryann. Love your chats! The housing section in last Sunday's newspaper shows that the overall median price for D.C. sales (excluding condos) was seven percent in 2006. I was shocked when I saw that, I thought we were due for a major price correction. Is this what they call a "soft landing"?

Maryann Haggerty: I'm not sure if there is a dictionary definition for a "soft landing," but indeed, most areas were not in fact showing dramatic drops in median prices. Some of this is of course an artifact of how medians work -- they can't measure how much you get for your money, just how much money you spend. And people still spend a lot for housing here. Zip codes with both an appreciable number of sales and a double-digit percentage drop in the median price were pretty much clustered in Fairfax County.

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Burke, Va.: As a local Realtor who has listed homes in the D.C. Metro area for nearly a decade, I always struggle to know how buyers find their home of choice. Is it by searching the Internet, print ads, signs, word of mouth, etc. I am wondering if you have any data on this that you could share?

Maryann Haggerty: We of course would like to believe that it is print ads. But various surveys tend to show that it is an ever-shifting mix of Internet, traditional ads, and info from agents.

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Sell or rent?: Hi, Maryann. My husband and I are in a position where we either need to sell at a loss or consider renting a home. We relocated to an area with a GLUT of brand new homes. We purchased a modest brand new home home we could easily afford since we were trying to sell a home in the state we came from. We put down about 15 percent. We sold the other home and so we only own one home right now.

Now it looks like we need to move again (yah!! but the house thing...). We are going to lose if we sell the house we have owned for about six months. And, yes, we can technically afford to lose $8,000-20,000 but we hate to do it. We have plenty of cash for another down payment on a new home. We would love to just rent but, unfortunately, we are in a position that we have to buy a home in the city we live in.

Now we are considering renting the house to a tenant. It is honestly a perfect fit since the home is modest, we are not emotionally attached to it and the area has a lot of people coming and going from it. We are going to live hundreds of miles away, though.

What kind of questions should we ask ourselves? I don't want to lose money but I don't want some jerk ruining a home we bought.

Maryann Haggerty: The question: Will you be able to find good tenants and run the property at a distance? Or do you need to hire a property manager to look out for your interests? At your library or bookstore, look for books such as Nolo Press's "Every Landlord's Guide to Finding Great Tenants."

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D.C.: Are you familiar with the affordable mortgage programs through ACORN or NACA? It looks like there are a number of hoops to jump through, which I can deal with. Just wondering if there is any "too good to be true" going on with these. Thanks.

Maryann Haggerty: They are both reputable programs for mortgage financing to low-to-moderate income buyers. They generally work with lenders that are trying to improve their outreach to underserved communities. There are, as you mention, a lot of hoops--and that's because these are programs that strive to educate would-be buyers so that they become responsible borrowers/buyers.

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Fort Washington, Md.: Shouldn't unscrupulous realtors and mortgage brokers be held liable for bad advice they have given immigrants and others? It results in buyers being unable to afford their homes while the realtors and mortgage brokers make tens of thousands of dollars off of each transaction.

Maryann Haggerty: Some eventually will be held responsible--at least of the ones who crossed legal lines. Some won't -- the ones who stayed within legal lines (or who managed not to get caught.) But you know what? Not everyone who has pushed a bad loan onto an unqualified buyer, or who skimmed over the unfavorable part of the loan terms, will be caught.

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A comment from Arlington, Va.: I think it's important for readers to know that the sales prices you reported, while technically accurate, don't reflect the realities of the current market. Your sales price numbers for 2005 and 2006 are full year averages. In both years, prices rose steadily over the first half of the year and then dropped off for the remaining half. Prices in the first half of 2006 were higher, on average, than prices in the first half of 2005. The opposite was true, however, for the second halves, where prices were lower in the second half of 2006 than they were in the second half of 2005.

This is important, because there is a significant downward trend in sales prices since mid-2006 that isn't clear from the full year averages. Your full year averages show only marginal overall changes in prices (up or down a percent or two) on a year over year basis, but mask an important downward trend in prices. If you look below the surface, prices are in fact falling in double digit percentages from the peak for most of D.C. and Northern Virginia.

Maryann Haggerty: You have to make some decisions: Year-over-year numbers have some problems, as you point out. But comparing a shorter period to that same shorter period the previous year also presents problems, namely in that there are fewer transactions, so you can't narrow the geography down as much.

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RE: Largo, Md.: Am I missing something? Shouldn't a couple making $150,000 per year be able to easily afford a $600,000 house? Especially, if they put some money down?

Maryann Haggerty: That actually was the advice: Save for two years so that you have the money for a down payment. Without a down payment, costs skyrocket.

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Silver Spring, Md.: The thing about ACORN and NACA is just because you go through the program and get does NOT mean you are in the clear.

Sellers usually look at other bids with more lucrative packages (larger down payments) first before they will accept a NACA/ACORN bid on a home they are trying to sell.

Just because you can get a no/low down payment loan doesn't mean the seller will take it.

Maryann Haggerty: This of course assumes the seller has other bids.

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Carroll County, Md.: Once again you omitted us. Probably for the best. We don't need your growth.

Maryann Haggerty: Of course we love Carroll County. But it really isn't part of the core area, and we had to stop somewhere...

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Washington, D.C.: Why on earth -- in the middle of the sub-prime meltdown -- is one of your three featured buyers this weekend being advised to take on two interest-only mortgages?

Your experts suggested that Gill, the young man, take a first "fixed-rate 30-year loan at 6.25 percent with interest-only payments for the first 10 years" and a second "25-year fixed-rate loan at 8.25 percent with interest-only payments the first five years." The reason, the expert said, was that this arrangement "helps him qualify for more and keeps his payments lower." At the end of the interest-only time periods, of course, the young man would need to refinance....or foreclose, per the front page of today's paper.

Please explain why this advice isn't as irresponsible as it appears to be?

Maryann Haggerty: Well, I'm not going to defend the recommendations that others make, but it does strike me that there is a real difference between a 10-year-fixed interest-only period and a one-year-fixed interest-only period.

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Arlington, Va.: I thought the article on condo-selling in Saturday's paper was very interesting, particularly the advice to not sell now unless absolutely necessary. Does the same advice hold for townhomes, particularly in the Rosslyn-Ballston corridor? Has that stretch of road held up, or would it be better to find a renter until the market picks up again?

washingtonpost.com: If You Must Sell, Name Your Price Carefully, (Post, March 24)

Maryann Haggerty: Our numbers show that prices near Metro pretty much held up last year in Arlington, but if you truly are thinking of selling, it behooves you to take a close look at prices in your exact neighborhood.

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Alexandria, Va.: Could you please tell me how to locate "affordable" housing? I have yet to find something that I can afford on my modest $40,000 annual salary. Sadly I cannot even find a decent efficiency that I could mortgage for under $1,000 a month. My agent says many of the places I'm looking at are "affordable" if I consider something other than a 30-year fixed loan, which, considering the recent news, I don't want to touch with a ten foot pole.

Is "affordable" housing a myth, or is it just a way for the government to say they're helping their citizens.

Maryann Haggerty:"Affordable" is in some ways a flexible concept--what Joe can afford maybe Jack can't. But in another way, when you look at government definitions, "affordable" means "within the budget of someone who makes X percent of the local median income, and thus in some way subsidized." Frequently, that also means rental, rather than ownership. But under $1,000 a month at 30-year fixed means a either a big downpayment or a purchase price of under $150,000. There just isn't much of that left anywhere in this region anymore, I'm sorry to say.

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Dupont Circle, D.C.: How does one go about finding foreclosure properties to buy? What recommendations do you have or pitfalls to avoid?

Maryann Haggerty: I'm always a bit leery of advising people to get into buying foreclosure properties. That strikes me as a game for the pros. If you're really interested, you can find more info than you can likely assimilate at a library or bookstore.

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Rockville, Md.: The federal government expects a large percent of its work force to retire in the next five years. How will that impact the market? Will people stay or leave? (I retired last July and will stay, but in an apartment.)

Maryann Haggerty: While federal employees are a big part of the local market, they are no longer the only game around. There are lots of private-sector employees here, too (even if most of them work for federal contractors.) That's a big reason why the population here has continued to grow.

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Response to anonymous: Your relationship needs work before you should think of buying a home with boyfriend. >The entire question posted to Maryann is why it is bad to live with someone before you get married. You obviously have zero intention of marrying yet you want to live with him even though you think he is a bum. And yes, your question to her convinced me you think he is not as financially together as you are.

My husband and I had homes before we married. We pooled our profits. It is OUR money. That is what people do when they want to make a commitment to each other for the rest of their lives. He had much bigger proceeds than I did. He never brings that up.

Deeds and titles are so complicated and Maryann is right about what to do if you die. Talk about complicated. This is why I am so glad I lived in my own house until the day I walked down the aisle.

Maryann Haggerty: Marriage provides a legal framework for the sharing and un-sharing of property. Those who are not married must watch out for their own rights with things such as partnership agreements. This is true whether you share a bedroom or just the kitchen.

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Woodbridge, Va.: Thanks for taking my question. Do you have any insight on gated communities? I read that they are very popular in some parts of the country. Do gated communities have any effect on the prices of homes in the community? Tend to be higher or lower.

Maryann Haggerty: In some parts of the country they're pretty much expected. I don't understand it, frankly--those are frequently places where there aren't a lot of bad guys for the gates to keep out! But generally "gated" can be equated with "pricey."

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Arlington, Va.: My question is related to the Jeff Gill story. I cannot believe the advisor wanted him to take out an interest-only loan on the 80 percent (not to mention purchase a place that was five times is annual salary). This can be dangerous for someone his age unless they are a doctor. He could move for a job, a spouse, go to grad school, or lifestyle in the next five years. The house/condo may not appreciate enough to cover closing and real estate transaction costs. In addition, there are a lot of costs unrelated to the mortgage payment each month that a person has to consider when they purchase a place.

Why do young people who are straight out of college so quick to try to purchase a residence on their own? There are tons of advantages to renting at his age. He has no commitments at his age. Housing is not the investment (Primary residence should not be viewed as a stock) it once was. It is turned back to the norm. People straight out of college should enjoy renting (letting someone else take care of HVACs and plumbing). There is plenty of time to be a home owner once you have more commitments (like a spouse/significant other).

washingtonpost.com: Here's that story: From Here to Home, (Post, March 24)

Maryann Haggerty: I'm going to post this and a few other comments from y'all without any comment from me, OK? We're just about out of time...

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Baltimore, Md.: While I agree that it is difficult to view people as "victims," when they take out larger mortgages than they could handle, at least one of the borrowers profiled could be deemed one. I refer to the person from Afghanistan who said that a salesperson and a mortgage broker, also Afghani, actively promoted more expensive houses, saying that appreciation was a sure thing. Yes, the onus is ultimately on the individual, but the salesperson and brokers certainly played the shared ethnicity for all it was worth. This sort of thing has been going on in America for a long time -- as I recall, the targets of the initial Ponzi scheme were Italian immigrants. I would love to see The Post do a follow-up story on how many people who locked into too much home for their pocketbook were enticed by fellow Hispanics, or Vietnamese, or Afghani, or what have you. Thanks.

Maryann Haggerty:...

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Rockville, Md.: It's interesting that a reader from Fort Washington wants to see mortgage brokers and real estate agents held responsible for "bad advice." In most cases, the brokers and agents don't represent the buyer's interest. If the buyer wanted representation, he/she should have hired an attorney or a CPA.

Maryann Haggerty:...

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Alexandria, Va.: Will this region ever see a true "market correction" for the over-inflated values over the past five year? It really does seem that just about everywhere you look houses are about 10-20 percent over what they "should" cost, especially in another similar market.

This "soft landing" nonsense is just a pipedream invented by realtors to prevent shrinking commissions. If only buyers were smart enough to think for themselves instead of place so much trust in their agents.

Maryann Haggerty:...

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Rockville, Md.: When I owned a house, one of my "rules" was to not have the most expensive house on the block.

Maryann Haggerty:...

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Rockville, Md.: Good afternoon and thank you for taking my question. I think many of the foreclosures are due to people being too greedy. Not the mortgage people, but the buyers. People want the biggest house possible, even if that means they cant afford. Their have caviar taste on a tuna fish budget. My mortgage person was pushing me towards a bigger and more expensive house a few years ago. I took a good hard long look at my finances and said "no." I told her what I was willing to pay a month towards mortgage. We went from there. I told my realtor, I would not pay more than what the house was appraised at. I now have a home that I can reasonably afford and still live. It is not the biggest house on the block, but I'm not panicking over payments. I bought my house based on my reality. Not "pie in the sky" dreams.

At what point are people responsible for their own actions? That they created their own misery?

Maryann Haggerty:...

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D.C.: My heart really goes out to all who were taken in by predatory lenders during the recent housing boom. Of course, no one should believe the too-good-to-be-true-get-rich-quick-schemes, but I think there's a deeper American problem at play here. We define success by things, the bigger the better and there's no such thing as enough. Frankly, as a country, we deserve the hard times we spend ourselves into.

Maryann Haggerty:...

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Silver Spring, Md.: Kudos to you for a great job doing this to a tough crowd. Two silly ongoing conversations I read on here are:

(1) What a typical -- say GS-11 or 13 -- can buy today alone versus eight or 10 years ago. The fact is hard for many to swallow that a typical GS-11 or 13 can purchase a condo today alone, one bedroom in a low crime neighborhood. Not much at all in D.C. My pals in Charlotte and Raleigh and Hampton make a lot less money than we do and all have 2,000 to 3,000 square foot homes not attached to their neighbors. Just a fact.

(2) The silly debate over the right time to buy. Fact is, if one hasn't already purchased, despite falling prices, they'll pay a lot more for the same house from eight or 10 years ago and buy less house with more of their income going towards it.

Maryann Haggerty:...

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D.C.: Shouldn't we end this shark feeding by realtors by regulating the industry and forcing them to receive a commission percentage based on the profit, not sales price, of the house?

Maryann Haggerty:...

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Maryann Haggerty: OK, I'd better go now. If I didn't respond to your question/comment, I'm sorry. Thanks for stopping by!

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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.


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