Tuesday, January 31, 2006

Update: 3015 Baltimore Avenue, Baltimore, MD

The lovely renovated rowhouse is still for sale at a reduced price of 349.9K. Back in October it was listed for 367K [To see more pictures click on previous link].

Will it sell at the reduced price?

Most Probably Not. It needs to be reduced much more. Despite its lovely renovation it is still only 2br and it is located on the gentrification frontier.


  1. it is easy to cherry pick properties in Baltimore and DC that fit you bill of bubblicious properties. There are plenty of idiot home owners out there that still think they should expect 25% yearly appreciation rates. Just because these boneheads are out there doesn't confirm that there is a bubble. Some of the other information on this blog lends more to that idea in my opinion. So stop focusing on the idiot down the street that is trying to fleece some unsuspecting soul. The market is slowing in areas right now, condos, far out suburbs, etc. But still seems viable in some hot spots. I used to enjoy this blog but it has become so biased and single minded I think I may be moving on to greener pastures. Numbers are a good predictor of behavior for real estate - but if we could truly predict future results we would not be on a blog trying to confirm our thoughts. The truth is we don't know what will happen - the smart money is that real estate cools off - but sometimes not following convential wisdom is what makes you the big bucks. I am not suggesting being foolhardy. Just my five cents folks - feel free to start ripping me apart.

  2. I agree with you. This blog has become dominated by people who apparently are rooting for the real estate market to completely collapse and financially screw over millions of home buyers. It is also becoming dominated by those who ridiculously claim that renting makes the most financial sense over the long run. This blog still has some great posts, but it is becoming tedious in its cherry pickign to prove its bias.

  3. Anons,

    Please register or just use a name bc it is hard to respond to so manyt anons.


  4. Anons,

    I agree that there is a pervasive lack of maturity on this blog. The out and out glee at the prospect of a collapse is simply sour grapes and does nothing to advance the discussion, let alone lend any credibility to this site.

  5. Hmmmm...as a Ph.D. economist who current rents, has run the numbers and has decided to save and invest the extra $2000 a month I save by not owning, I'm curious what numbers anonymous has run that proves it is always financially advantageous to own rather than rent.

    In my opinion the own/rent cost-benefit analysis is heavily influenced by factors such as expected job/life stability, rent/price ratio, expected housing appreciation, expected alternative investment return, personal savings and investing behavior.

  6. This blog has become dominated by people who apparently are rooting for the real estate market to completely collapse and financially screw over millions of
    home buyers."

    I do not want to see millions of my fellow Americans in financial ruin.

    "It is also becoming dominated by those who ridiculously claim that renting makes the most financial sense over the long run."

    For most people who do NOT own, renting makes sense in the bubble markets as price will fall signicantly in real dollars over the next few years. I am a strong believer in homeownership, but getting a toxic mortgage to buy an over priced housing unit that will depreciate over the next few years does not make financial sense. Renting in the bubbe market is much cheaper then buying.

    "This blog still has some great posts"


    "but it is becoming tedious in its cherry pickign to prove its bias. "

    Please provide concrete examples

  7. David,

    I actually like the specific examples of properties. I also like general statistics and the statistics show in the past several months that inventory is up and demand is down. But it's also nice to get specific examples of properties that are sitting and having to reduce prices. I agree with the others that this does not prove there is a bubble, but I like having both the statistics and the real life examples.

    With respect to people's attitudes, there are some taking glee at others' misfortune but I think this is due to the fact that many people have been priced out of the market and it's hard not to be resentful of those (investors) who played a large role in pricing them out. I'm not condoning the attitude but I think it's understandable.

  8. I am anon #1 - I guess what I was trying to say was that listing individual home listings does not really confirm the presence of a bubble. All it confirms to me is that some simple minded fool is trying to make money hand over fist in a more realistic market. By highlighting the greedy investor that thinks money grows in trees is not helpful to me. Highlighting one house on the blog is delighting in others misfortunes. Would you want your house on the internet listed on a blog saying it is overpriced when you are trying to sell it? Doubtful. Google that address and this blog is likely to come up. Just seems nasty to me. But hey - that is my opinion and in this great country we all have them and are free to express them. Your blog is good and has a multiude of great points, insights and facts. I just wish that we could leave unassuming people out of the fray.

  9. Let me add something. A townhouse in my part of Alexandria was originally listed for $999,000 about 1.5 years ago IIRC. It was laughable, even at the height of the bubble that a cheaply built townhouse next to projects would sell for that when well constructed, custom townhouses were selling in the 800s not that far away in a "better" part of town. It eventually sold for about $699,000.

    Now this sold last summer at the end of the bubble. So just because you can cherry pick houses and say their prices are being reduced, well, it doesn't really mean anything. This particular seller was just a jerk trying to rip people off.

    That being said, I absolutely do believe that condos around here are horrendously overpriced for what you get. Single family homes, not so much.

  10. Hum, the single family home I rented this year for $1550 is Silver Spring would sell for $450,000(last summer any way). This rental is not a unique deal, as I had a few to pick from in the 1500-2000 range. I don't under stand how they are not way over priced. Could someone tell me the flaw in my thinking. I can't figure out how to buy a $450,000 for $1550 a month.


  11. I like following the specific reduction examples and I don't believe they are being cherry picked to fit a bias on this blog. There are about six homes still sitting in my current location, which I know were overpriced and have been reduced, and are still overpriced and still sitting and sitting. It's not cherry picking of an example if there's many examples to choose from.

  12. " Would you want your house on the internet listed on a blog saying it is overpriced when you are trying to sell it? Doubtful. Google that address and this blog is likely to come up"

    Nope. However, I would also not want to be a buyer who overpays 150K or whatever. Often, I also say positive things about the property.

  13. David - I, don't mind seeing the individual properties. After all, if they are in the MLS or otherwised advertised they are in the public domain.

    What bothers me are the useless and stupid (for want of a better word) statements that "I'll pay 200K, no more". This idiotic banter diminishes the site. If it is meant to be humor (which I don't think it is) it is , not only not funny, but,worthless.

    These are people who give no real thought to the topic and lower the bar.

  14. Call me Skins fan.

    I don't see the problem with the prespective on this and other blogs. First off, David does not have the perspective that some of the more extreme posters (myself included) have. I believe that real prices of DC area housing should take at least a 50% haircut over the next 10 years. But not everyone on here, and certainly it doesn't seem David (though I won't speak for him), would agree with that.

    Secondly, if you want to read a perspective that says we are in for a soft landing, or people ought to buy, or whatever, there are about 100 million sources you could go to, including your daily paper. Blogs like this one provide alternative viewpoints, thank goodness.

    Finally, while anyone can read the stats, and stats are important, the individual anecdotes here are VERY interesting and keep me coming back. I don't think David has found particularly extreme examples; my observations are that his examples are right in line with the general market.

  15. Skins fan here again.

    Vaininvestor said:

    "What bothers me are the useless and stupid (for want of a better word) statements that "I'll pay 200K, no more"."

    I have probably made statements like that, and if so, I stand by them. They are not an attempt at humor. They are my honest valuation of what I think the property is worth, factoring in the view I have of the house, the available land, the traffic and crime in the area, etc.

    Would my view change if I actually went and saw the house? Probably- but my value could go up or down. Also, it is useful to have such a number in my head to avoid even bothering seeing a house. When I see a 50 year old house on a 1/8 acre lot in a crime and traffic-ridden neighborhood selling for 500K, and I know I wouldn't pay more than around 175K, there is no point in me looking.

    If my (or anyone else's) value is way out of line with reality (as you seem to think), then that is my problem. If I think it's 175K, and the rest of the world thinks it's 500K, then I'll be out of the market to my own detriment. If I'm right in the long run, though, good for me.

    But what's also important to remember is that some of these stated values that you find "idiotic" are very close to what the same type of house sold for only 5-6 years ago. Saying that a house that sold for 150K in 1999 is now worth no more than 200K is hardly "idiotic," even if someone is trying to sell it for 500K.

  16. to all the anon's who are bashing the bubble meter.

    get over it - you are yourself cherry picking examples of properties that may be "ridiculously" overpriced instead of "somewhat" overpriced.

    But the aggregate facts speak for themselves. Inventories in NoVa are up between 200-400% depending on area or house/condo. Borrowing costs for ARM's (since that's all people use anymore) have gone up SIGNIFICANTLY in the past year, yet the average house-seller still firmly believes that they will get a price somewhere near that at the top (which was spring/summer 05).

    That conclusion of similar prices is mathematically impossible if you follow the laws of economics and declining prices are inevitable.

    In my opinion, you can point fingers all you want and claim housing blogs are sensationalists who are accelerating the problem, but your wasting your breath b/c prices in aggregate ARE going to come down and give those of us who weren't lucky/fortunate enough to have bought 3 years ago another chance at homeownership in a reasonable range of affordability.

  17. In response to Don't Buy Yet:

    i don't think anyone in this thread has questioned the bubble - just questioned a technique used on this blog. Check the thread above and show me where someone is saying there is no bubble in DC.

    I simply questioned the tactic of showing a property that hasn't sold and then giving us the enlightening quip, "Will it sell at the reduced price? Most probably not" What happens if it does sell at the reduced price - do we ever concede that point? Nope we barrel forward to another property that has been on the market for a few months and poin to that as proof of the bubble. Increasing inventory, interest rates, etc. is a reasonable basis to infer the bubble is popping.

  18. so if we are all on the same page it seems sort of counter-productive to debate semantics, style-points, or message delivery methods.

    It's going to be a long-slow path down/sideways, and the disparity of offering prices relative to value is likely to get even worse before it gets better as some sellers wake up to the new reality while some uninformed/greedy sellers still hold out hope.

    I think the more info that's out there on mis-priced properties and the more widely disseminated that information gets, the better. All the faster that reality will change, prices will go down 15-30% and we can all get on with our lives instead of obsessing about housing prices and letting those dictate our living arangements

  19. don't buy yet said...

    "and give those of us who weren't lucky/fortunate enough to have bought 3 years ago a chance"

    Says it all, doesn't it. Woulda, shoulda, coulda. I don't see any empathy for your friends and co-workers who did buy 3 years ago. Their equity should be wiped out - so, in hindsight, you can have your chance (I mean entitlement)>

  20. I am against speculative episodes.

  21. The posters at the beginning of this chain have said everything I've been thinking while reading this blog during the past few weeks or months.

    The number of posters lusting for a 50% or more market crash indicates a disturbing level of simplistic reasoning. This detracts from the overall quality of the site. Don't posters hoping for a such a dramatic market crash realize that, if there were a crash, the entire local overall economy—including yourself—would be adversely impacted. Don’t you realize that, since many people would lose their jobs if such a crash occurred, it would probably be of no use that a house presently listed for 699k could be had for "no more than 175k." A cursory knowledge of past economic catastrophes shows that the ultra wealthy survive and relatively proper during them, but all of the lower classes suffer the most. In other words, if you can’t easily afford an “overpriced” house now, you probably won’t be able to afford a “price reduced” house after a major market crash due to the economic impact of the crash.

    David’s postings showing price reductions on selected properties, although entertaining, are not highly informative. I would have to know the owners’ basis for the property before I’d make any conclusions on the meaning of the price reductions. For example, I recently sold a property for 15% less than my asking, primarily because I wanted to close as quickly as possible for tax reasons. This reduction was of no real consequence to me since 1) the 15% reduction was a wash due to tax savings; 2) the selling price was still twice the property basis.

    In addition, a truer indication of an “actual” price decline (which I suppose would be the best evidence of a bubble) would be a comparison of past sales price to the offers that the sellers accept. I don’t think many sellers are selling for a loss, and I don’t think many sellers would realize a loss even if they lower their asking prices 15-20%. If I buy a property for 200k, list if for 600k one year later, and after an asking price decline, accept an offer for 550k, does this mean there’s a bubble? I don’t think so. This is the type of property David highlights as “proof” of bubble bursting, but I don’t think my example necessarily supports David’s conclusion.

  22. I do not bring these example as 'proof' that there is a bubble. To bring proof there is a bubble macro facts and figures should be presented not a collection of micro examples.

    The point of these listings is too show overpriced housing that is not selling. I like to watch how the sellers reduce or hold on to the price as the market continues to weaken.

  23. Skins fan here:

    To anonymous 12:19. I am not "lusting" after a 50% decrease. I do think a real decrease in prices of 50% is inevitable. Prices seem to have more than doubled in the DC area in the last four or five years ... why is a decrease of 50% (which might still leave prices higher than 4-5 years ago) be "simplistic"?

    Would a 50% decrease in prices have adverse effects on many others? Absolutely. It is awful that our policymakers have allowed this bubble to happen.

    That doesn't mean that the bubble won't pop.

    Too many people look around, observe what has happened the last 2 years, and don't question. A few years ago, an old house on a small lot in a marginal neighborhood in the DC area was priced at under 200K... and not that many people were interested in buying it. Now, if I say that real prices are going to go back to those levels, I am being unrealistic? I don't think so.

    But time will tell.

  24. vainvestor,

    sorry to "burst your bubble" but for the past 230 years of American History (save for brief speculative episodes like the one we are currently in) residential housing has not been an "investment" akin to a stock, commodity, or speculative land. If you bought Google at the IPO for $84, then hats off to you; it doesn't affect my life or anyone elses, and you are better off - A positive sum gain. Housing prices going up 150% while I was settling in the area and not ready to buy does affect my life (and many others) - zero sum gain.

    It used to be that most housing was banded by affordability. Sure, if you were a doctor/attorney/successfull businessman, you could afford a nicer neighborhood/bigger house. But in any case, you borrowed something akin to 2-3x your annual salary and bought a place. That is why housing historically tracked inflation and wages.

    When doctors/attorneys/successfull businessman can't afford close in-town and suitable housing (except condo's) b/c they didn't buy 3 yrs ago, they will leave the area or make the conscious decision NOT to buy.

    Now, that is where we are; in a process of returning to that normal band of affordability.

    It's not a grudge thing to me. I feel sorry for people who were shoe-horned into places they couldn't afford b/c the collective wisdom was "buy now or be priced out forever" but that's an unfortunate an unintended consequence.

  25. Dont buy yet,

    Sorry, but your post doesn't make any sense to me. So I am unable to respond except by referring you to my earlier post to you.

  26. Vainvestor,
    what a cop-out.


  27. According to this...

    It's total value is about $150K -- what does that mean on a chart like this?

  28. Way too much salivating at other people's possible misery.

    And a drop of 50% in housing prices in the DC area? I'm sorry, but that's just ridiculous. The only way the average price would drop that much is if, God forbid, a major catastrophe occurred in the DC area.

    I have no doubt that some houses are "overpriced". But how does one define "overpriced"? Saying something childish like "Well, I wouldn't pay more than $175k for that house being offered for $500k" isn't indicative of a house being overpriced; it merely means the person won't pay the asking price. Good for them. Now what if someone else comes along and pays the asking price? Doesn't that mean the house was correctly priced? Or if several people come along and get into a bidding war and the house sells for $600k - doesn't that mean the house was underpriced?

    And for the PhD poster, Anon #2 never said it *always* makes sense to own versus rent. He/She was disparaging those who have claimed that renting is always better than owning. And as a Nobel Peace Prize winner, I am unimpressed with your credentials.

  29. vainvestor...

    perhaps if you exhibited some of the "maturity" you talked about wishing to see in the postings on this blog, you would be able to read and comprehend my post.

    I am beginning to think that you are not interested in fostering housing discussion, but are rather "sour grapes" yourself at having bought investment properties in virginia (that is your name, after all) recently and are now worried that they just might be underwater.

    Maybe you should hold out till spring. Things will turn then, as they always do - oh, and remember that real estate never goes down, people are always moving here, and besides, DC is different.

    Anyone feel free to let me know if I have missed any real estate cliche's for Vainvestors benefit.

  30. Stop being an ass.

  31. Don't buy yet,

    No intent to insult you. I really did not understand your post ( in light of, and following the thread).

    Don't cry for me. I am neither a bull nor bear. I don't want to see the catastrophic declines some here hope for. As someone else pointed out, the economic fall-out will be horrendous (think bread lines if we see the 80% drop some of you want).

    As for me, I have a rather large portfolio that I started accumulating in the early 1980's. As you might imagine; overall LTV under 20% and positive cash flow.

    I am fully prepared to take whatever hit comes my way - same as I did with the stock market. I don't understand your belief that real estate is not an investment like stocks, bonds, precious metals etc.

  32. Complaining about a perceived bias seems a bit ridiculous when the name of the blog is called Bubble Meter.

    David, keep up the good work.


  33. My word, I am sorry to have missed this lively discussion. Though I agree it is in very poor taste to celebrate another's woe, it must be said that those of us who have chosen to rent, rather than participate in the mania, and it is a mania, have been subjected to a degree of scorn that is equally disheartening.

    I, for one, have been "introduced" by neighbors, as "a renter," while the kind soul doing me the honor rolls his eyes. For added disdain, I am usually referred to in the third person, while present, as in "..he's a renter," as though this simple fact reveals something meaningful to a prospective new acqaintance.

    There is no joy in watching others suffer. However, it is comforting to know that one's personal judgement is being validated, in temporarily eschewing homownership. And I hope all appreciate the irony I see, as a renter, at being lashed, yet again, by real estate investors, who are beginning to realize that they may indeed be in very big trouble.

    Thank you, David, for putting your time into the maintence of this forum. Perhaps, when the mania ends, you could publish some of it as a warning to future "investors." They will ignore it, of course, as it will undoubtedly be "different," next time.

  34. I readily admit to getting much joy out of watching flippers and suckers get burned. I don't think we should be ashamed to admit it.

    We are headed for a deflationary depression when Ford and GM bankrupt and housing collapses.