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.

Haggerty is joined by Washington Post columnist Elizabeth Razzi. Razzi is the Local Address columnist for The Post's Sunday Real Estate section in Business. She's written about real estate and other personal finance topics for magazines and newspapers since the days of double-digit interest rates. She is also the author of two consumer-advice books, The Fearless Home Buyer (2006) and The Fearless Home Seller (2007).

Today, they'll discuss 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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Elizabeth Razzi: Hello, everyone! Thank you for whatever rain dances you've done recently. They've done the trick. This Sunday's column will be about the Solar Decathlon homes. Did any of you folks visit it? I'd love to hear your reactions.

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Maryann Haggerty: Hello, all. It looks as if we won't have to spend the weekend deciding whether to water the garden. Instead, it will be time to check for all those roof leaks and basement leaks you didn't know you had!

Let's talk about that and the other joys and sorrows of real estate...

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Arlington, Va.: I placed an offer on a house that has been sitting for over a year in various stages. It's now in it's renovated form and the owner/agent wouldn't even negotiate below the asking price. Keep in mind this offer only included an inspection contingency. Are there people really that deluded out there? I would have at least expected a counter offer.

Elizabeth Razzi: Was the asking price unreasonable?

Maryann Haggerty: Generally, if your offer was reasonable, you wqould usually have expected a counteroffer, too. But the key: Was it reasonable: If you offered some arbitrary lowball just because you've read about people doing that, the seller is free to ignore that offer.

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Washington, D.C.: My question goes to the issue of how real estate values are calculated in the District of Columbia's residential market place. While we all know the housing market is now a bit soft due to the ARM mortgage issue/problem. This situation will, in due time pass. Can you tell me; from your perspective, how like residential structures, in terms of size, design and basic living amenities (like number of bed rooms, etc.)change so dramatically (in the range of $ 200K -$ 500K more) in, let's say neighborhoods around the Nations Capital. For example, if you take a 1 mile radius from the Capital Building, the symbol of the free world in any direction, the cost of a home can change dramatically from the South West Quadrant to the Noeth East quadrant. Why?

Elizabeth Razzi: Values aren't calculated. They reflect supply and demand, and the same house becomes more expensive if it's in a neighborhood that appeals to more people.

Maryann Haggerty: There are all sorts if academic theories about land planning, demographics, etc. But many of these patterns have deep historic roots. In the case of the District, you can look back and see the effects of class and race by neighborood over the decades.

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Mitchellville, Md.: I am three, almost four months behind on my mortgage. (Not because of the subprime loans) My uninsured mom became gravely ill and needed my financial assistance to save her life. I am more than capable of paying my mortgage on time if I can just get back on track. Is there anything that I can do? I do not want the banks to foreclose my home.

Maryann Haggerty: CALL YOUR MORTGAGE SERVICER NOW!

Yes, I meant to yell. If you can't bring yourself to make that call, at least call the counselors at the Homeowneship Preservation Foundation, 800-995-HOPE.

If you are facing a temporary problem, you may be able to work something out.

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York, Pa.: I am looking to find a condo or town house on the MD eastern shore, with a price range of $250,000 to $450,000.

I would appreciate any suggestions.

Elizabeth Razzi: You should be able to find something in that price range, particularly if you don't have your heart set on being within walking distance to the ocean. My best suggestion would be to spend a few weekends down there in the off season, drawing up a target list for places where you might like to buy.

Maryann Haggerty: It always strikes me that vacation homes (if that's what this is) are something of a matter of the heart. You may want something near sailing, or birds, or hunting. Find the area you love, and spend some time there getting to know it. Spur-of-the-moment vacation home buying can lead to a lot of second thoughts!

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Old Town: What do you think of the housing market in Old Town Alexandria for a first-time homebuyer?

Elizabeth Razzi: I think it is a particularly expensive neighborhood for a first-time buyer, but congrats if you've got the budget for it.

Maryann Haggerty: Yes, even the 10-foot-wide houses there cost a bundle.

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Arlington, Va.: When a realtor for a house that I want to buy offers to act as my buyer's agent, what is in it for him? Does this allow him to charge an extra three percent to the seller? Is a buyer's agent required in a real estate transaction? Why do I need a buyer's agent if I did the work of contacting the realtor to look at the property?

Maryann Haggerty: The seller is already paying that 6 percent no matter whether you have a buyer's agent of not. But the seller's agent gets to keep the whole thing if he brings the buyer to the transaction, too.

And please--the work doesn't end when you find a property you like! Often, it is just beginning.

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Silver Spring, Md.: Thank you for taking my question. I want to list my house in the Spring. Is it took early to start interviewing agents and to find out what work they think might be needed on the house to get it ready for sale? I want to be able to budget money and time if there's anything significant that needs to be done.

Elizabeth Razzi: It wouldn't hurt to invite a few agents over for a chat sooner rather than later. Ask for references to a couple of recent clients, and have a little chat with them too. It's smart to tackle some of those repair/maintenance jobs before the cold weather sets in -- assuming we'll get a real winter this year.

Maryann Haggerty: Actually, as of today, we may have passed the pre-winter outdoor-painting deadline.

Take into account that it may take you some time to line up contractors, etc., too. So start budgeting, talking to those agents and thinking about what you need to do...

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Washington, D.C.: I have 30 days until I close on my first house. All my information is in to the bank, we've done the home inspection, the bank is talking to the title company. What do I do now? After two months on nonstop house searching and offer writing and loan applying, I feel like there's something else I should be doing before the closing date.

Elizabeth Razzi: I've been there! It's very strange to just....wait. Think about locking in your mortgage rate, if you haven't already. And just keep paying your bills on time, don't quit your job, and stay on top of any phone calls or emails from your loan officer. Reply quickly to any requests for info. And a week or so before your scheduled closing, tell the title company, loan officer and your real estate agent that you expect to see a copy of the HUD-1 closing statement at least the day before closing so you can review it.

Maryann Haggerty: OK, this is a weird one, but based on personal experience. You are going to need that cashiers check/certified check at closing (ask which one.) Give yourself enough lead time to get it, especially if you are moving money from investment accounts.

I once spent the day before closing chasing a FedEx truck around because the driver had the check from my stock broker that needed to go to the bank to prepare the checking for settlement....

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Fairfax: Did you know that radon is a huge issue in NoVa?

Maryann Haggerty: Radon is not tied to geography, generally. It can be an issue in one house but not next door. That's the nature of that naturally occurring radiation. So test for it as part of the purchase process, and realize that remediation isn't all that expensive.

Elizabeth Razzi: You might want to do it without a pending home sale, too. I tested my townhouse for radon shortly before the birth of my first baby, when she and I would be spending long hours at home.

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Bethesda, Md.: Our home in Bethesda has been on the market for two months. If we are unable to sell the house this year and wait until next year to sell, how different would you anticipate the market to be from what it is today.

Elizabeth Razzi: That's a roll-of-the-dice question, especially when it comes down to a specific house in a specific neighborhood.

Maryann Haggerty: No clue. Absolutely no clue.

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Washington, D.C.: Hi, Maryann. We recently signed a contract for a townhome -considered to be a condo] with an FHA loan. It's a newly built home which will be ready next spring and we received all closing costs along with downpayment (via grant which won't be tacked onto the sale price of the home) paid for by the builder.

Is now a good time to buy or should I wait, because I keep hearing that prices are going to drop and it's not wise to buy now.

Thanks and love your chat.

Maryann Haggerty: What is wise FOR YOU? Do you like that house? Can you afford it with the financial help you have received? Are you planning to live there at least 5 years?

Those are the important questions, not where the market is headed in the next few months before your closing. If you were actually buying that house as a short-term specualtor, then yes, maybe it's worth it for you to walk away from your downpayment. But if you want it as a home? What's the point?

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Trenton, N.J.: Is it crazy for my husband and I to try to sell our house now or in the spring? How much have average home prices gone down?

Thanks!

Maryann Haggerty: Is it crazy? Depends why you want to sell. Have you lost your job? Are you moving to California? Have your kids moved out? Is your neighbor driving you nuts?

I also don't know when you bought, what you paid, what demand in your neighborhood is like or whether your house is falling apart.

In other words, the pattern of average prices nationally or even regionally would not answer your question.

Elizabeth Razzi: Buying is the other side of that question. If your house has fallen in value by 5 percent, and you sell and then buy a different house that had fallen by 6 percent, is that a crazy move? I don't think so.

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Springfield, Va.: Why does everyone believe the National Association of Realtors when they call yet another bottom or say that no one can say if prices will continue to go down (but it's a good time to buy)? It's easy to tell if prices are going to go down or up. Two months of inventory, prices go up, twelve months on hand and prices go down. Immaterial foreclosure activity is the norm, but if you have significant competition from REOs and short sales then prices drop. Cheap and loose credit boosts prices and tight credit reduces them. When you get all three (such as DC suburbs) add in basic unaffordability/income ratios, a rent-to-price disconnect and a recent substantial run-up in prices (when the three fundamentals were at the opposite extreme) and saying the prices will continue to fall isn't a prediction, it's stating the obvious.

Elizabeth Razzi: It's their job to say it's a good time to buy. Car salespeople always say it's a good time to buy a car. I don't understand why this surprises anyone. The sign of a balance between supply and demand is typically six months of inventory. Less inventory than six months means sellers have the upper hand in negotiations; more than six months means buyers can afford to be choosy and to haggle. The consumer must figure out if it's the right time for THEM to buy, based on their housing needs and tastes and their own financial picture.

Maryann Haggerty: It's the job of economists to make predictions. Of course, those predictions are often the target of jabs, just as with weather predictions.

If it were so darn easy, I guess everyone's predictions would always be unbelievably correct and we would all be rich, because we would all invest the right way everytime.

Unlike some people, I don't think predictions are sunny or cloudy because the economists are corrupt. I think they look at different models and make different arguments. (This of course explains the folkswho were, as I have said before, prematurely correct--the ones who called marke tops years before they happened.)

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Understanding Equity: This is a very basic question, but I've never fully understood it. People talk constantly about "building equity" in their homes and how homeownership is so great because you "build equity." How exactly are you doing that? I took out a mortgage which is a loan. I am paying back that loan. As far as I'm concerned, I'm paying off debt, not building anything. What am I missing? Is the concept of equity just a sham?

Elizabeth Razzi: Basic questions are often very good ones. You "build equity" in two ways. One is, as you note, by repaying the debt. The second way happens when value increases. Despite the current market weakness, values do tend to increase over the long term. And so if you buy a $300,000 house today with $30,000 downpayment, your immediate equity would be only $30,000. Let's say, 30 years from now you sell it for $500,000. Your mortgage would have been paid off by then, and you would have $500,000 in equity. The extra $200,000 would have come from the change in home values over those 30 years.

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For Mitchellville: I work in the secondary mortgage market. She should heed your advice RIGHT NOW. I'd be astonished if her lender has not tried to contact her -- probably in a pile of unopened mail. Borrowers often try to duck these letters thinking there's no hope. The bank does not want your house; they won't get much for it, and you will be homeless. Set up a workout arrangement to get your payments current.

Maryann Haggerty: Thanks for the advice. Yes, experience tells us that people in this siyuation often duck their lender, when they should instead be proactive.

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Washington, D.C.: Well, Maryann, you jumped on me recently for living beyond my means with my $2,200 dump and about making jokes about West Virginia. So I've moved to a cheaper two room loft and will no longer make state jokes.

Maryann Haggerty: Good for you. And now the rest of us will refrain from making jokes about loft-dwellers...

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Washington, D.C.: Is it safe to say in a 'normal' market, homes in D.C. area shouldn't appreciate more than 10 percent annually?

Elizabeth Razzi: Wow. It's risky to put "safe" "normal" and "shouldn't" all in the same question! Over the long term, home prices have risen a point or two more than the inflation rate.

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Denver, Colo.: Thanks for reading this. My husband and I recently relocated from the D.C. area, were able to sell our house (though we think the buyer got a great deal) and are now trying to buy. Where we are looking we think the asking prices are overly high and have not adjusted to the market, the prices where houses actually sell are more reasonable, but we've found several of the owners won't take less then their unrealistic asking price even though houses aren't selling for those prices any more. My question is, is sending an explanation for our, lower than asking price, offers a good idea? What we would send would be information on local comps and on the recent news regarding both the national and local market. Might this help them see where we are coming from or would it just insult them?

Maryann Haggerty: I think the comps would help. Articles about the national market wouldn't.

Elizabeth Razzi: Your real estate agent should be able to present the information on comps in a calm, pleasant manner to the seller, or at least to the seller's agent.

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Chantilly, Va.: Hi, Maryann and Elizabeth. When compared to other metro region, Washington, D.C. area has a strong job market and an ever growing population. When do you think the housing market will rebound in this area?

Thanks.

Maryann Haggerty: I don't know. I still don't have a crystal ball.

Yes, the economy here is strong and stable in comparison with many other places, and the population is growing because the job base is growing. Some folks think this means nothing, others that it means everything.

Elizabeth Razzi: Job strength and population growth are what make the DC-area market different from places like Ohio and Michigan. But, locally, inventory is what will predict a rebound. In some popular neighborhoods, there just isn't that much available to buy. But in others, where there's a glut of new construction and mounting foreclosures, the recovery simply won't happen until some of that demand gets whittled away. Nobody knows how long that will take.

Elizabeth Razzi: Oops. Make that until some of that "supply" gets whittled away.

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RE: Understanding equity: Paying off your mortgage does not build one's equity, it merely transfers the equity you have from a liquid asset, namely cash, to a less liquid asset, namely a house. In other words, a person who has $100,000 in cash, a house worth $100,000, and a $100,000 mortgage, does not increase their net worth, or equity, by paying off the $100,000 mortgage with the $100,000 of cash. In either case, their net worth is $100,000.

You are correct about equity increased through price appreciation.

Maryann Haggerty: It does, though, increase the equity IN THE HOUSE, while moving it from one line of the balance sheet to another. That's usually what people are referring to, not the entire portfolio.

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Washington, D.C.: When will Maryann admit she was wrong about the DC real estate market?

Prices are dropping like a rock all without an economic depression.

Maryann Haggerty: Hey, good to have you with us. (And thanks for that blog link sending people here. Traffic is traffic!) I believe my advice has remained pretty much the same as the market went up and as it has gone down--which has gotten me vilified by people along a whole range of the spectrum of opinions.

However, I decided to go an look through the archives and see what I hav said over the years. This is a sample, from March 25 2004. Perhaps the sarcasm was too subtle?:

"Bowie, Md.: When is the party going to stop? It will eventually - just as the stock market of the '90s did, and all must at some time...question is when? Also, how high do you expect rates to go once China and Japan stop floating American's overindulgence in such record amounts? And how fast would the rates rise?

"Maryann Haggerty: I have officially stopped making this prediction. For nigh on 4 years, I have been saying publicly that the bubble is about to burst. Shows you what I know.

"So now, I have new mantras: This Time, It's Different. What Goes Up Does Not Necessarily Have To Go Down. (Maybe I need even MORE coffee today?)"

Maryann Haggerty: To add to that, while the price on an individual house in Prince William County may be much less than when it was bought in an inflated specualtive frenzy, prices around the region and the country ARE NOT dropping like a rock. No matter what you might like to think.

Elizabeth Razzi: Prices dropping like a rock? Maybe if you're one of those speculators who felt entitled to pocket $20K-$30k on the option to buy a condo that wasn't even built yet, yep, that party is over. And good riddance to it. That kind of speculation made it darn near impossible for people who didn't want to play with their money to get into a nice home during the height of the frenzy. But the person who bought a house five years ago, with no intention to flip? The first-time buyer who finally has a shot at a decent house? They get unnecessarily scared by you folks who make wild claims about the market.

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Washington, D.C.: I wonder if it's possible to know the actual appreciation of a property, without tracking two sales transactions and the improves made. Does the Post continuously track some properties in order to get the actual appreciations?

Maryann Haggerty: Nope, we don't. Some economists think they have come up with formulas.

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Washington, D.C.: Can we have an online pool going between potential buyers in this chat? What's a 'reasonable' profit in your mind, in terms of percentage of the seller's original cost? I looked up a home I'm interested and it's listed at 250 percent of its sales price in '97. Now I think 200 percent for this past 10 years is reasonable, but anything beyond is not.

Maryann Haggerty: My employer does not sanction wagering.

According to immutable mathematical laws, money invested at 7 percent compound interest will roughly double in 10 years. So is it fair for a house to more than double in value? It depends on a lot of things--not least what the economic climate was during that time and what risks the original investor took.

Of course, "fair" and "reasonable" have little to do with it. It's all about supply and demand.

Elizabeth Razzi: One more time: It is not reasonable to play with your money.

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Falls Church, Va: Another point about building equity in your home that a lot of 1st time homebuyers do not understand:

The first 10 years or so your mortgage payment is paying mostly interest, not principal, so you get a nice tax break, but do not build up a lot of equity (for the sake of this discussion, do not consider appreciation as equity). As you get further into paying your martgage, you start to pay more principal, less interest, so you build up more equity, altho you lose some of the tax break becasue you are not paying as much interest.

Elizabeth Razzi: Good point.

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Washington, D.C.: I have enough money for a downpayment on a beach house, but that's almost all my savings. Are there any good financial guidelines for purchasing second homes, particularly for rental?

Elizabeth Razzi: Well, one very important personal finance guideline is not to invest all your eggs in one basket. You shouldn't put all your savings into any one asset. Before investing in a beach house with a plan to rent it at least part time, you need to have enough cash to cover vacancies. Figure at least 10 percent of the annual expected rent to be lost for vacancy. You also need cash for unexpected repairs, special assessments from a condo board or homeowner's association, insurance rate hikes, etc.

Maryann Haggerty: Specifically--a beach house is pretty darn low on the list of musts. Before you even think of it, make sure that you have your emergency fund, your retirement accounts/college savings accounts are fully funded and all your credit cards are paid down.

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Silver Spring, Md.: Do people in D.C. area actually shop for real estate using Craigslist? I've found the selection to be overpriced and with a dismal amount of information compared to ziprealty or redfin. Can you, or readers, suggest some other sites that locals have found to be useful?

Maryann Haggerty: I sure can't speak for everyone, but I guess some people have bought homes on Craigslist. But it is by far not the major avenue, according to all known data.

Just about all the big sites--including, by the way, the Post's site--work on the same data base of houses listed in teh multiple listing service. Each site then adds its own bells and whistles.

Craigslist, in contrast, provides free listings to anyone. You would be a fool to try a for-sale-by-owner and NOT list your house there, I guess. (Just don't take any certified checks from overseas as a good-faith-deposit!)

Others ites also cater to FSBOs...

Elizabeth Razzi: I've seen a lot of real estate agents put their listings on Craigslist. Free exposure is free exposure.

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Old Town Alexandria : I looked there for my first home and then bought in booming Downtown Silver Spring when reality hit and I realized there was no way I could afford it. Just some advice: much like "North Bethesda" is not Bethesda, a great deal of listings that claim to be in Old Town are very very very far away from King Street in Alexandria. Just a warning to be careful about wasting your time on pursuing something that you don't want.

Elizabeth Razzi: There is nothing that can replace foot-on-the-sidewalk home shopping.

Maryann Haggerty: Yes, just because they call it "Old Town" doesn't mean much.

But it also strikes me that, money aside, a person who would be happy living in Old Town might not be happy in downtown Silver Spring, and vice versa. The commutes are different. The lifestyle is very different.

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Falls Church, Va.: Why is the process of buying a house so painful? It's multiple times worse than buying a car.

First there are multiple rounds of haggling and posturing over price, then there are multiple rounds of give and take after the home inspection, and then there's more of that for the final walkthrough. Then there's more to it with possibly escrowing money to get fixes done after settlement. I have even talked about the steps needed to get the loan yet!

I'm due to settle on a house in the McLean school district today. Buying under the appraised value. I hope this ordeal won't last too much longer.

Maryann Haggerty: It's probably so painful because the transaction is many many times bigger and more expensiv than buying a car. It's also emotionally more complicated.

Elizabeth Razzi: Home sellers also have a return policy that's much more strict than any retailer!

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Arlington, Va.: I have been looking off and on at condos in the District for a couple of years now. I am in a pretty decent place in Ballston now so I am not under any pressure to move. It looks like prices in some newer buildings in D.C. are finally starting to inch down to reasonable levels while others still seem unrealistically high. Should I keep sitting on the sidelines since there's such a glut of home and more new buildings coming on-line? Of course my other issue will be unloading my place in Ballston if I find something in D.C. that I really like.

Elizabeth Razzi: Analysts at Delta Associates in Alexandria, a company that tracks the market for condos, apartments & commercial buildings, have said the market for condos in the District has held up better than in the suburbs. As always, it's a supply and demand situation. I'd think you might want to sell the Ballston condo before committing to a purchase downtown.

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Elizabeth Razzi: Thanks for stopping by. See you in the Sunday paper.

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Maryann Haggerty: Thanks to everyone for joining in. We need to head out now. PLease pick up the Real Estate sections on Saturday--for an intrsting look at downtwon Frederick and for a list of green remodeling technoligies--and on Sunday, when Elizabeth looks at what some concept houses can teach us about homes in the future.

Also, have a lovely weekend, and enjoy the rain!

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