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Welcome to a Real Estate Live Special. For this discussion, Post real estate editor Maryann Haggerty talks about the special Housing Outlook section. She'll answer questions on local housing trends such as price fluctuation from county to county and what your home is worth - emotionally as well as financially. She'll also discuss home assessment and appraisal.

Maryann recently made an appearance on News Channel 8 to discuss local real estate trends. Check it out!

Maryann Haggerty has been Real Estate editor of the Washington Post for a little over two years, although she has been at the paper as a writer and editor since 1987. As Real Estate editor, she oversees the Saturday Real Estate section and coverage of related residential issues.

The transcript follows.

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.

Maryann Haggerty: Hello, all. Glad you could join us for the second half of today's real estate chat marathon. (My colleague Daniela Deane has just finished up an hour, too. If you missed her, check the transcript later today. I'm going to try to keep this hour focused on house values--where they're going, what that means. If I miss your more generic question, you might want to try Daniela's next chat, at 2pm tomorrow.

I hope you've had a chance to see the special Real Estate section in today's paper. Also, my thanks to the web folks for the super job they've done putting that info on line!

Here goes...

Springfield, Va.: Maryann:

We just bought a house (single Family house) this fall for 320,000.00 in the West Springfield area. We will have to move next year due work assignments. Are housing prices going up in this area? Please advise if it is worth selling or renting the house.

Maryann Haggerty: Prices are going up all over, but holding a house for just a year or so & then selling is often a losing proposition. Real estate agent fees, moving costs,. etc., can wipe out property appreciation gains. That's why the long-time rule of thumb is that you should only buy if you're going to stay put 2 to 3 years. But lately, a lot of folks have gotten lucky.

Alexandria Va.: A lot of newspaper articles talk about the fact that a big problem in this market is that there the demand for houses exceeds supply in all price brackets. But I haven't found any explanations for this is so. Why are sellers staying put? Is it the capital gains tax changes?

Maryann Haggerty: In recent years, job creation in this region has outpaced housing creation. More jobs equal more people.

Arlington, Va.: First, congratulations on the Saturday insert, as I think if people say they don't wait for that to come out, they're lying. Just wondered...do you think there are some people that just cannot buy? As a thirteen-year renter, I'll never buy, I don't think. Is this a problem and is there help?

Maryann Haggerty: Yes, there are people who can't buy, for many, many reasons. But if you WANT to buy, you probably can . It involves a lot of financial discipline to get your credit rating in shape, shop for a neighborhood you like & can afford, etc. The advantage in the long run: You are no longer at the mercy of your landlord, & future price appreciation translates into savings for you, rather than rent increases.

Dupont Circle: Hi - I read the Post's article today about the recent property assessments. My property assessment went up 44% this year! Although the assessment is slightly less than the price I paid for the condo in May, the article mentions a 25% cap on assessment increases this year. Is this true and can I protest my assessment even though it is lower than the recent sales price? Thanks for taking my question!

Maryann Haggerty: I'm not entirely clear on the details of the District's proposed cap-I doubt the politicians proposing it are, either. But if your assessment is lower than the recent sales prices, the odds are that you will NOT succeed in an appeal. Your unit is under-assessed; the sales price is its market value. Just be glad your assessment didn't come in higher than it did.

By the way, I know what a shock it can be--my assessment went up 70 percent...

Washington, DC: I know you don't have a magic crystal ball but ... what's the word among realtors regarding the current seller's market, particularly in Fairfax County? Does anyone foresee a cooling off any time in the future? Shouldn't the money shortage problems of the County (which will result in either higher taxes or sacrifices in services) give buyers some pause before jumping into insane bidding wars!?! Thanks!

Maryann Haggerty: Nope, no crystal ball. The real estate agents & economists we talk to all say that they see a slowing or flattening of appreciation, but not a drop in prices. (Of course, this can vary neighborhood by neighborhood.) As far as higher taxes/local fiscal problems causing buyers to think more: In a perfect market economy, that certainly would happen. Not all individuals behave the way the economics textbooks say that they should.

Annandale, Va.: I have a question about residential housing prices that I haven't seen much written about. If the current rising prices are being fueled by high demand due to low interest rates, what will happen when the interest rates go up again? The interest rate makes a big difference in the loan amount that a buyer can qualify for. It seems to me that these high prices won't be sustainable if the rates go back up to say, 8%. A lot of us who bought during this boom will be left owing more than our houses are worth. This happened to me in the 90's and I'm afraid it will happen again. Any thoughts on this? Thanks!

Maryann Haggerty: Indeed, yes, higher interest rates should dampen housing price increases. And that can be scary if you overpaid for a house during a price bubble. At the individual level, we may see sellers who have to bring cash to closing. (Yes, as you remember, that DID happen to a lot of people. And it is absolutely no fun.) The only way around it is to stay in the house long enough to wait out the ups and downs of the market. In other words, if you bought at the top of the market, don't sell at the bottom.

Landover, Maryland: I am thinking about moving to someone where like Greenbelt or College Park. Should one focus on appreciation or home quality when purchasing a home for living in about 10 years. I am considering Montgomery county for home appreciation reasons.

Maryann Haggerty: Different people have different views, but I strongly believe you should focus on quality of life. I mean, you're LIVING in the house. Appreciation is a welcome plus.

Washington, D.C.: It has been widely reported that a very large number of baby boomer, Federal employees will be retiring soon. OPM statistics are that approximately 19 percent of the current, full-time permanent work force is likely to retire in the years 2001 through 2005. Is it rational to expect that this could have a discernible impact on the local real estate market? I'm thinking of a much needed increase in houses up for sale from these retirees moving south (Florida) or to smaller homes in the area (empty nesters). I just need SOME glimmer of hope that the market will open up to normal, non-millionaire buyers.

Maryann Haggerty: If baby boomers retire & move en masse--& everything they do seems to be en masse, doesn't it?-then that should indeed open up housing stock, depress prices, etc. It will be interesting to watch the long-term effects.

Washington, DC: It seems that the DC area is bullet proof from the slow sales some of the other housing markets around the country have seen. Why are we such a strong market, and how do you see that trend continuing over the next 12-18 months?

Maryann Haggerty: So far, we do indeed seem to have been bulletproof, at least this time around. (That wasn't the case a decade ago.) We just haven't had the severe job loss, & thus population loss, of a few other markets, such as the SF Bay area. Also, new construction still seems to lag demand.

Silver spring, Md.: Do you think that real estate agents are for the most part knowledgeable and unbiased sources of information about price trends? If I'm debating with myself about whether to sell now while prices seem high, or keep the house and risk declining or stagnant prices, what other sources of info can you suggest? Is the Post going to be providing more coverage of this interesting and important topic?

Maryann Haggerty: I think agents are often highly, highly knowledgeable about the neighborhoods they specialize in. Sometimes, I find that they seem a bit optimistic about price trends (they're glass-half-full people, as a rule.) But the last several years, I must admit that they have been right! And yes, we consider housing price trends a basic topic of week-in & week-out coverage.

Reston Virginia: We are shopping for a single family home in some of the older Reston neighborhood. We note that in the areas approximate to future Dulles Corridor Rail Stations, housing costs are climbing significantly. Will this trend continue until the rail is built, or will it diminish once the residents around the stations are faced with higher office and retail densities?

Maryann Haggerty: I suspect it will continue, as it did around the VRE stations further south. Many people are coming to hate long commutes. And many consider more office/retail density around transit nodes a plus, not a minus.

Falls Church, Va.: Is the new home market really flat for Northern Virginia area? I have read conflicting stories. Some say that the market is very down and that nationwide new homes sales have hit new low. Others claim that the market is still pretty good in DC area. Do you think it is still a seller's market right now? I know no one can accurately predict the market trend, but what do you personally think the market will be like for the rest of 2002? The 30-year mortgage rate has gone up a little. Do you think it will continue to go up? At what pace? Again, I know you don't have a crystal ball. But I will appreciate it if you can let me hear your personal opinion.

Maryann Haggerty: I think most would probably still call it a seller's market, though there have been short times of softening (like in October). As the spring selling season heats up in the next few weeks, we will be watching closely. As far as interest rates: As the economy picks up, rates will go up, too. That's likely to slow price appreciation.

And as far as my personal opinion: I keep waiting for things to stall, & they don't. So my personal opinion is that I better keep watching.

Capitol Hill: The Post had a graphic that showed how housing prices have faired in different areas. In the district, prices went up in almost every area. I live in 20002, where it said there was "no change". 20002 is a really large area, though, and I'm wondering if it is fair to lump all of it together? Does a report like this have any affect on people's perceptions about where they want to buy? I don't know much about the north part of 20002, but the southern part is booming.

Maryann Haggerty: Zip codes are indeed large areas to lump together, but when you get much smaller than that, you get such small numbers as to be meaningless. The charts & maps in today's section (& every Saturday) are meant to be guides, not Gospel.

Arlington, Va.: I'm a first time homebuyer who makes 6 figures. I haven't saved all that much as I've attempted to pay down school loans and credit cards. But I think it's about the right time to buy. I hear D.C. is favorable to those of us first time buyers with little to no money down? Is this true, and will having little money saved hurt my chances of buying a condo or townhouse?

Maryann Haggerty: DC is indeed favorable--that $5,000 first-time buyer tax credit is a real winner. It's possible for buyers today to get into a house with a very, very small down payment. (Think 3% instead of 20%.) Paying down those school loans & credit cards is the best thing you can do for your credit rating. If you want to buy, go for it.

Shepherd Park, D.C.: Regarding tax assessments, are more expensive homes assessed at lower values than less expensive homes. I checked the assessed value vs. purchase price on homes that sold in the last year in my neighborhood, and those that sold for under $300k had assessments generally within $35k of their purchase prices. Those that sold for more were usually assessed at $100k-$150k below their sale prices!

What gives?

Maryann Haggerty: I'm guessing it's a trick of percentages. Being within $35K of $350K is pretty much the same as being within $100k of $1 mill. Assessors are supposed to aim for 100 percent of market value, but they really do it on sort of a bell curve. And I bet there are plenty of upper-bracket buyers who would dispute your finding...

Washington, D.C.: On your answer to Annandale, you mentioned that sometimes sellers have to bring cash to closing. What did you mean by that? Sellers paying for closing costs usually paid by the buyer in a hot market? Thanks.

Maryann Haggerty: Back in the bad old days--think 1992 or thereabouts--it was not uncommon for a seller to get a price that was less than they owed on the loan, once commissions, etc., were subtracted from the sales price.

Del Ray: Thanks to that piece the real estate section ran on Del Ray in Saturday's paper, I think I have lost all shot at appealing my tax assessment.

Maryann Haggerty: Sorry. We just calls 'em as we sees 'em.

And the reality: Many of these nasty-high assessments reflect what's actually happening.

Laurel, Md.: Hi! My husband and I bought our townhouse in the Russett Community in 1983. The selling price four comparable houses has finally exceeded what we paid for it! The houses are currently selling for about $155,000. We really want to move to a single family home in the same community, but am unsure when we should sell. Should we try to move as quickly as possible since interest rates may be heading back up or should we take our time and search for the perfect single family house?

Maryann Haggerty: I'd start looking first, see what's out there. When it's time to sell, you may be able to turn over your place quickly enough (if the bubble doesn't burst). Sorry, still can't get that crystal ball working right...

Re: DC First Time Homebuyer: Isn't the tax credit for first-time buyer's income-dependent? I'm wondering if a "six-figure" earner will qualify.

Maryann Haggerty: Good point. It does phase out depending on income; I forget where the top point is, but I suspect it is under 6 figures.

To the 6 figure first time buyer...: I would revise your answer to say that paying off (or down) the credit card debt is very important. School loans are seen as "good debt" and loan officers are more understanding of these. Those school loans are likely the reason this person is making 6 figures.

Maryann Haggerty: ... And on the same question. Right. Credit card debt bad. Schhol loan debt OK (unless it throws off your borrowing ratios, because it still does count on them.)

Gaithersburg, Md.: How soon should you start looking for a home?? My lease is up in July.

Maryann Haggerty: You might as well start looking as soon as you can. It might take you a few months to find a place to like, unless you're the decisive type.

Gaithersburg: I bought a 2br condo for $88K four years ago and now similar units in my building are selling for almost 150K! I'm getting tired of the suburban life and have considered taking my capital gains and moving into the city, but from what I can see it won't get me very far in the neighborhoods I like in NW. Since I work in the city I'm considering the option of buying a row house in a neighborhood walking distance to the Camden Train station at Baltimore's Inner Harbor (ironically for less than a 1br condo in Dupont) and taking the train in to work. Have you heard anything from others who have taken this option? Is it realistic?

Maryann Haggerty: I know several people who have done this. They're all mega-fans of Baltimore. And they all insist that the time that they spend on the train is quality reading-and-concetrating time. If you have the kind of job where the hours are stable enough to catch the train, it can work for you.

Southern Maryland: I was sorry to see that Calvert County Md. was left out of the series today. I have recently moved there and am interested in what the future holds for the county. People are surprised that it isn't much farther than Loudoun or Stafford counties in Va., but much more reasonable.

Maryann Haggerty: I'm a water person, so I think the scenery is prettier, too. If you work downtown, the commute is indeed much the same as from Loudoun. If you work in Virginia, though, it becomes a real bear.

Wash., D.C.: My wife and I bought a house last year for $450k with an 80/10/10 mortgage. The rates are 7.125 for the first and 8.25 for the second. Now our agent tells us the house is worth around $550k.

Does it make sense to refinance to get rid of the second mortgage? How does this payoff happen? Also, if we took out a new loan for the full 80% (440k), would the new lender give us the difference between 440k and the principal amounts of the other two loans?

Thanks in advance for the advice.

Maryann Haggerty: It almost definitely makes sense to refinance. Sit down with your calculator--or call a mortgage officer or mortgage broker & ask them to do so. Basically, you get one loan, for up to 80 percent of appraised value; at settlement, the money goes to pay off all 3 of those old loans. If there's cash leftover, & you decide you want it, you get a check.

Silver Spring, Md.: Hi,

My husband and I want to get rid of our PMI as soon as we can. We bought our house in Jan, 2001 for $175K, and the county assessed it a few months ago at $200K. We have also done a lot of work on it like new windows, new roof, electrical heavy up and painting the whole inside of the house. What do you think our chances are for applying to get rid of the PMI?

Maryann Haggerty: You may not have been in that loan long enough to drop the PMI simply on the basis of value appreciation. But it never hurts to ask your lender. And don't forget: If the value has really gone up that much, you can refinance & drop the PMI. (By the way, lender won't take an assessment as proof of value. They'll require an appraisal, by an appraiser they pick.)

Arlington, Va.: Is there a difference between a "townhouse" and a "rowhouse"? Is the former a condo? Is it just a suburbs versus city thing?

Maryann Haggerty: It's just a regional variation in what things are called. No one in Philadelphia would ever call an attached dwelling a town house [that's how we spell it here at The Post]; most Washingtonians never think of them as row houses...

For Gaithersburg: There are more areas of D.C. than just NW to consider without heading to Baltimore (nothing against Baltimore, but the commute would kill most of us). Capitol Hill has wonderful houses that are similar in size and character to Georgetown, with better parking, access to metro stops, and at much lower prices. Something you may want to consider. My husband talked me into looking on Cap Hill last year, and having bought there and lived there for about a year, I wouldn't trade it for anything!

Maryann Haggerty: Thanks, neighbor... I live on the Hill & like it, too, tho sometimes those 12-minute Metro rides downtown seem to take forever. (just joking.) The scary thing: Many of our prices are going through the roof, too.

Wheaton, Md.: We bought a one-level house in Wheaton (3 BR, 2 BA) last June. The kitchen is 8x12 and hasn't been redone in about 20 years, I think. We're definitely going to be redoing the kitchen, but we're wondering whether it would be worth it to build a small addition to make the kitchen bigger. We don't have the lot space on that side to radically enlarge the kitchen, but even an extra 6x12 space would be an improvement. We just don't know if the cost and hassle would be repaid in a higher sales price than if we just redid the existing space. What's your opinion?

Maryann Haggerty: 8x12 is tiny. Get some prices, sure, but all the numbers show you'll recoup most or all of the investment. (As far as the construction hassle, well, everyone has their own threshold there.) More important: You'll have a kitchen that doesn't make your life miserable.

Herndon, Va.: How will the lender react if the buyer is expecting to be laid off in a couple of months after the purchase?

Maryann Haggerty: AFTER the purchase? Lenders don't ask you to foresee the future, thankfully. They do care about whether you make every payment after they give you their money.

A bigger question: How will YOU react if you get laid off a couple months after the purchase? Will you still be able to pay the mortgage. Or should you maybe scale back your expectations & put some money in the bank now?

Listing a house: If I decide to sell my house in North Arlington, how does one decide on a real estate agent?

thanks.

Maryann Haggerty: Ask your friends. Ask your neighbors. Ask your co-workers. See who's the most active in our neighborhood. Then sit down and talk with several agents, are what they have to say about our house, ask them for a comparative market analysis, check their references. Then go with the one you've decided is right for you. (Hint: If you can't stand the super-agent, then don't pick the super-agent. Pick the one who doesn't drive you crazy.) Oh, and sign a 3-month, not 6-month listing.

Somewhere, USA: Is it typical for people to spend 1/3rd of their income on housing? This seems like an awful lot to me.

Maryann Haggerty: Yep, that's typical for people who are starting out. Lenders will allow you to go above a third, up to 39 percent (if I remember my ratios. I may be off by a % point or so; it's been a long week.) People with low incomes can sometimes finding themselves paying up to half to find anything decent. Theoretically, as we ago, our incomes go up, our housing costs don't go up as much, and the percentage goes down.

Hill Rat: Maryann,
As a fellow Hill Rat, I'm sure you are feeling my pain of a 50 percent hike in property tax.

Here's my situation: We bought our house last April for around $300,000. At the time, our tax assessment was $100,000. For fiscal 2003, it's $150,000. Given that the assessment if far below our buying price, is it worth appealing? Obviously, the tax hike costs us serious cash, but I'd hate to have an appeal backfire.

If we did appeal, what do we say beyond, "$50,000 is too much for us."

Thanks.

Maryann Haggerty: You're pretty much out of luck as far as an appeal. The assessor knows what you paid. That's what the house is worth. There's no logical argument otherwise. ("I don't like it" is not a logical argument.) Keep your head low.

Washington, D.C.: Should prospective home buyers (if they have time and some expertise) look at things such as the comprehensive plan and zoning districts for the county/area where they wish to buy (to get a better sense of what the future may hold right next door)? Or does this sound like obsessive overkill? I'm really planning on staying on whatever house I purchase for a long, long time. Thanks!

Maryann Haggerty: Yes, yes, yes! Then you won't be one of those people who says "I never thought that empty lot next door to me was going to be turned into 50 town houses. I figured it would always be my private dog park. It's not fair!"

North Arlington, Va.: more on the kitchen remodel question: We're planning to update the ten-year-old kitchen in our 1950s split-level. The kitchen is small (10 x 12), and I love big kitchens. However, we don't want to stay in this house for more than 5 years and would prefer to move closer to the center of Arlington (which would necessitate saving another $60,000 to add to the equity for our down payment). Our agent thinks we should do it up for as cheaply as possible (i.e. don't punch out a wall), save money for a down payment and then move. We think he's right. What say you?

Maryann Haggerty: I think he's right, too. Keep a tight hold on the purse string if you won't be there long to enjoy it--you hate to over-improve & then just bet on rising prices. But do update it as well as you can within reason. Little things can make a big difference. (It's amazing what under-counter lights, for instance, can do to make a kitchen SEEM bigger.)

Hill Rat Again: Thanks for the response. I figured as much.

Why was the Hill hit so hard? Every house on my block had their tax assessment go up about the same amount -- $50,000 or more.

Maryann Haggerty: My last Hill answer, I promise: The last time around, 3 years ago, Hill prices were still wallowing. They have shot up hard in the last 2 years. Spend a Sunday traipsing around open houses & swallow hard in disbelief about how much people think they can get for two little bedrooms, no parking, but loads o' charm. If your assessments went up just $50K, your houses are small.

Alexandria, Va.: For the person looking up the comprehensive plan: Howard County has that information on-line. You can see the current master plan (including areas slated for high-density housing, renewal, rural preservation, highways, etc.). You can also use their subdivision finder tool to see what subdivision/land use proposals are in the process of approval with the county. Go to the Howard County homepage, then to the planning department. It's important in counties like Howard that are growing so quickly.

Maryann Haggerty: It's really astounding how much useful info local counties have made easily accessible on line. You no longer have to go over the local planning office on Alpha Centauri for info about demolition plans. (Obscure sci-fi reference.)

About the 1/3 Rule: When you say "Lenders will allow you to go above a third, up to 39 percent" (to be spent on housing), do you mean 39% of the gross income or of the disposable income (after tax, 401K, etc.)

Maryann Haggerty: It's gross, NOT disposable. So it's gonna feel like half your paycheck goes to the mortgage.

Alexandria, Va.: Maryann,
Ok, here's an interesting assessment/appraisal/home sale price example for you: we bought our house in Alexandria last year for $100K under our new 2002's tax assessment, and $175K under(!!) the independent appraisal we had done for the mortgage. Since our sale price is under the tax appraisal, but our appraisal was much higher, can we still contest our tax assessment due to the sales price? Confusing, I know, but thanks.

Maryann Haggerty: I'd try. You don't have to show them your appraisal. But to buttress your sale price argument, go & look at other comparable sales, if you can find them.

Lyon Park: My Husband and I currently own a house in Lyon Park, Arlington. A small 2 bedroom bungalow. We want to find out if we should sell now so we can upgrade while interest rates are still low, or if we should ride it out another year and see if prices settle down a bit.

Thank you!
Maria

Maryann Haggerty: I see this as a lifestyle question, not a money question. Do you want to move? If buying prices drop in some sort of realignment, selling prices likely will too. (Same for rising prices.)

Arlington, Va.: For resale purposes, is it better in a small kitchen to have eat-in space or more counter and storage space? We can't fit in both. We have eat-in space now and very little counter/storage space. We have a formal dining room. Thank you.

Maryann Haggerty: I've always been told that buyers prefer eat-in kitchens. I assume that's because they don't cook. Get a decent designer to see if he can figure out how to create more storage space in the eat-in area. (Shelves, under-table storage?)Or maybe there's a way to make a food-prep island that doubles as a breakfast bar?

Maryann Haggerty: It looks like we're running out of time. I appreciate your attention & questions. I'm going to close out by just retransmitting, with no comment & no way to verify all the details, one chatter's contribution about a change in DC assessment law.

Washington D.C. 20001: Not a Question but an update on DC Assessments for 2003:
DC Council Passes Emergency Property Tax Legislation from the office of Jack Evans:

I am proud to announce the passage of my legislation, the "Owner-Occupant
Residential Tax Credit Emergency Act of 2002." This measure prevents
property tax bills for owner-occupied residential property from rising more
than 25% in any one year. I am happy to report it passed by a vote of 12 to
1 (Council member Harold Brazil voted in opposition).

The Mayor is currently drafting a proposed budget and financial plan for the
2003 fiscal year. As such, I believe the emergency legislation was
necessary to ensure the cap on property taxes increases be included in the
budget and financial plan which the Council will review in March.

Many taxpayers, myself included, were shocked when they opened their
mail and saw how their assessed property values had soared -- some increases
are more than 50%. Much of the increase stems from the change from the old
system where property assessments were evaluated once every three years to a
new system with annual evaluations. Most of Ward 2 is affected by the
change for the first time this year. Nearly every section of Ward 2 that was
re-assessed this year experienced an average increase over 25% and many
areas experienced increases much higher than that. I suspect next year we
will see many Ward 2 neighborhoods face significant increases as well.

The cost of this legislation in lost revenues is $15.5 million in FY 2003,
$18.5 million in FY 2004, $4.0 million in FY 2005, and $3.5 million in FY
2006. However, responsible management of District budgets should offset the
loss.

When reviewing the property tax bill you recently received, make certain to
calculate the 25% increase limit. After including the cap, if you still
believe with your property tax assessment is too high, it may be appealed.
The deadline for filing the appeal application is April 1. The appeals
application is available on the District's web site:
"http://www.cfo.dc.gov/services/tax/property/how_to.shtm".

Maryann Haggerty: Good-bye, all!



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