In the heyday of the Washington area real estate boom, Hyman Alpert and his nine-person sales staff sold 100 houses a year. Telephones in their 7th floor Silver Spring offices rang constantly, like those of Wall Street stock brokers. Salesmen ate lunch on the run.
Those were the days when empty shells on Capitol Hill were turned into five-figure profits overnight. Speculating in real estate was a seller's market that transformed the faces of many of the District's inner-city neighborhoods and created small fortunes for many.
This year, Alpert's firm, Alpert Realty, has sold only three houses. There are 60 more on the market, but no one is rushing to buy them -- even at sharply reduced prices. One by one, Alpert's sales staff has drifted away. One has gone into the dry cleaning business. In his 20 years as a real estate speculator, Albert says, business has never been worse.
"We used to put houses out for sale at prices we'd never hope to get. And we'd get 'em," Alpert recalled wistfully the other day, "Now I have to call brokers and agents all the time to stir up interest."
Soaring mortgage interest rates, dwindling rehabilitation loans and forecasts of an economic recession at a time when many speculators like Alpert and smaller investors are overextended and vulnerable have turned the one-time high spirits of restoration fever in Washington into a throbing financial headache.
"OUR D.C. market is virtually dead," said Alpert. "I've never in my life encountered anything like this. I expect to lose money this year."
A small investor with fewer holdings than Alpert and thus more vulnerable to the economic downturn was even more pessimistic. "There's a lot of blood on the street," the investor said privately. "If the market doesn't break, we'll all go broke next year."
Some have left the business in Northern Virginia, where the area's slumping housing market -- sales were down 40 percent last month -- has swelled the ranks of real estate agents who have found they simply cannot make enough money selling property to make it worth their while.
John Wallace of Sterling, who a year and a half ago dreamed of making a million dollars in what was then the faster growing industry around, is now running a copy machine for $4.50 an hour.
Catherine Elder of Alexandria, a member of the real estate industry's coveted "Million Dollar Sales Culb" in nine of the past 10 years, is spending more of her time on leisure activities like self-development courses and delivering newspapers to neighbors in a little red wagon.
Anybody who will tell you there's nothing wrong in the real estate market is giving you a snow job," Wallace said.
Statistics indicate a sharp slump in the real estate market throughut most of the metropolitan area. The Northern Virginia Board of Realtors reported this week that March sales were down 40 percent from a year ago. Sales have been dropping for the past six months.
March real estate sales were down 43 percent in Montgomery County. Excat figures for the District were not available, but spokesmen for the Washington Board of Realtors estimated that the sales slump here also ran well into the 40 percent range.
Skyrocketing interest rates are a major source of the problem. Only two years ago, 10 percent mortgages were common. Now rates hover at about 16 percent. Larger down payments are being asked and monthly house notes are higher.
Two years ago, a family that bought a house with an $80,000, 30-year mortgage with a typical 10 per cent interest rate paid $700 a month in principal and interest. That same mortgage, at 13 per cent interest, would jump to $885 a month. And with many lenders charging around 16 per cent today, that mortgage requires a monthly payment of $1076 -- $376 more, an increase of more than 50 per cent.
As a result, most of the homes being sold are those whose owners can provide below-market financing, or where investors have their own cash.
Other factors have made the situation more acute for speculators. Many local lenders have already stopped making new mortgage loans to investors and even to buyers who planned to live in their homes. And, as part of President Carter's tight money policy, the Federal Reserve Board is discouraging lenders from making any kinds of speculative loans.
Speculative properties often are bought under arrangements that allow the investor to pay interest but no principal for from two to five years, with the full amount due later in a "balloon" payment. As those payments become due, investors and speculators who can't talk their noteholders into giving them more time to sell their properties face foreclosure.
Michael Zitin, a real estate agent with Urciolo Realty of Washington who owns several houses in the District, said he has been forced to use money from his savings account to cover his investments.
"That means it's tough times," Zitin said. "I don't have a lot of cash. I tied it up based on previous market conditions . . . My timing was bad. I was off a couple of months. Zitin estimated that the residential investment market in the city has been cut back 75 per cent from what it was six months ago.
The fact that many speculators and investors are being forced to sell their holdings means that those with cash can get good deals, investors said.
Michael D. D. Brown, a former Capitol policeman who has been highly successful in the Washington real estate game, said he paid more than $2 million in cash to buy about 70 single-family houses last month.
Brown, and others, said foreign investors are buying Washington homes now "in droves," realizing they can buy at low prices in many instances. "I get inquiries from their lawyers all the time," Brown said. "I've owned my properties for a long time. I have equity in them. I can offer my own financing."
Small builders say they, too, are feeling the crunch. Thomas P. Turchan of Turchan Builders in Washington, who established his development firm about four years ago, said, laughting, "We're drinking a lot."
Turchan said his company had just finished developing three small buildings with 23 condominiums between Dupont and Logan Circles downtown priced at between $54,000 and $90,000 -- low to moderate by Washington standards.
He plans to begin selling them next month, and although condominiums have been selling well, Turchan still is worried.
"We're scared to death," Turchan said. The market is so fragmented, no one has any idea what's happening. I can't go to a yacht in Florida and tell them to call me when this is over. If I had a half million in the bank, times like these could be for a built-in vacation . . . But right now, I can't even think about a nest egg. Now I'm just trying to stay alive, to get to 1981."
Larger companies have not escaped the problems altogether.
With company sales down 20 percent, Colquitt-Carruthers Inc., one of the area's largest real estate brokers, announced last week that it will close regional offices throughout the area temporarily next week.
At least 100 agents presently working in the firm's Darnestown, Rockville, North Bethesda, Dupont Circle, Woodbridge and Potomac branches, will be asked to transfer to some of the remaining 24 neighborhood offices.
The downturn in the real estate industry poses very special problems for the agents, a few of whom have outside income but many of whom rely on commissions as their primary source of income.
For Elder, an army widow who draws a government pension of $30,000, the real estate market's roller coaster ride is only a minor annoyance. "It's no sin if you're not making money in real estate right now," she says. "This gives me a chance to sit back and so some of the other things I like to do."
Wallace had fever options.
Wallace, who worked in Loudoun County selling the under-$100,000 homes that experts say have suffered the most serious setbacks, decided to go back to college and work the copying job half-time when steep interest rates cut many first-time buyers out of the escalating Virginia market.