Monday, May 22, 2006

Open Forum

Post Away! :-) [I will delete unfounded accusations]

21 comments:

  1. I'm looking for a nice apartment in the DC suburbs. Any suggestions?

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  2. Sorry you have to post your disclaimer...I'm seeing major resistance to price reductions here in Baltimore, and as a result, the inventory keeps building to historical levels, according to MRIS and it's predecessor. Does anyone else here think that the longer they wait to adjust their prices, the harder the subsequent price drop will have to be? They can keep listing at 2005 prices even though they're not selling well at all, and inventory will grow and grow and grow until the smarted guy says I'll cut $75K and be done with it--then reality hits home, and the greedy suffer, as well they should.

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  3. Nikki- Inventory build-up is always a precursor to price drops, historically speaking. I'm not sure there's any correlation between waiting and the magnitude of a drop - in a macro sense. The risk is to the individual seller.

    As has been discussed, many sellers will typically "follow the market down," by reducing an asking price behind recent comps, thereby missing every incremental step, or opportunity to sell, on the way down.

    On the way up, the market will "correct" an underpriced house by bidding it up. On the way down, "the market" will simply ignore a house that is twelve dollars more expensive than the one next door or around the corner. Ouch.

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  4. I follow Bethesda SFHs in the 600-900k range. Minus a few laggards, properties seem to be turning over before a month is up. Of course, I don't know what price sellers are getting. Any suggestions on the best sources to check data for asking prices and selling prices for properties? I realize it takes a few months to be public information.

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  5. for asking: zip realty

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  6. Maybe price drops are more difficult in RE than price increases because of the nature of debt financing: Buying into an overpriced market can be financed against the equity in the home while sellers can't sell, even at a loss, because they need to bring a check to the table. What if they don't have $100K lying around? Aren't they better off going into chapter 7?

    So ultimately, won't price drops require a lot of foreclosures/bankruptcies? That may require some time. In the meantime, there should be incremental price drops of 5% per quarter or so.

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  7. It's so tough to predict what will happen because we are really in uncharted territory. I think that the price run-ups of the last few years are unprecedented, so there isn't really a pattern from the past that we can observe.

    A Redskins fan

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  8. Unfounded Allegation That I believe is true.

    David is one of the best real estate bloggers out there.

    Tom

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  9. I'm sure he'll appreciat that Tom.

    PolishKnight: It doesn't take "a lot of foreclosures/banktrupcies" to lower prices. I think you are confusing cause and effect.

    All it takes for price drops is no willing/able buyer at a given price level. Sooner or later, someone has to blink and at this point it is likely the seller.

    Don't forget, either, there are a lot of people who have lived in their houses for many years and can lower their prices significantly and still make out like bandits. There will also be people who MUST sell for any number of reasons and will lower their price accordingly.

    Now, the important issue here is that appraisals and bank lending depend on the most recent comps. When Old Man Applebee sells the house he bought in 1959 for 10,15 or 20% below "peak price," that impacts the whole neighborhood - banks see that and cap the amount they will lend accordingly for a comparable house. Do you see where this is going?

    It only takes a handfull of sales at low prices to tank the whole neighborhood, because it restricts the ability of buyers to borrow against the "market value" of the house. Oh, and let's not forget that when it becomes crystal clear to banks that prices are falling, they will demand 20% downpayments, just like the old days. Cheap, easy money has driven this animal and it will dry up, eventually, as it always does.

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  10. Yeah, who knows what the DC real estate market will look like by 2008.

    I take a pessimistic view that the DC real estate market will become highly valued for many years to come. The DC market will be hot as long as you have the federal government pumping out dollars for contracting and jobs and continued Republican political dominance that calls for a proliferation of well-paid corporate attorneys and lobbyists. Washington, DC is pure yuppie heaven.

    If I were a single-family home owner, I wouldn't worry about a thing. Condo and townhome owners should be concerned though. We could have a strange real estate market where the real estate value of SFH's INCREASE in price while prices for condos flatten or decline through the next 3-5 years.

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  11. I have a question regarding new home prices. If a community has begun selling homes, will new home prices fall or will builders just add more incentives to encourage buyers? I'm interested in purchasing a new townhome with a 6 month delivery date but I'm concerned about falling prices in the area. Should I gamble and wait until the prices of these homes fall or do builders typically just add incentives to encourage buyers?

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  12. Rhonda

    Wait until the prices fall. Builders do not typically add incentives to encourage buyers. I bought a townhouse in Columbia Md. in Fall 2000. No incentives. All units sold out within several months after I placed my deposit. I have not seen incentives until recently (less than a year). I can not see how builders can keep the houses on inventory at these prices when they have to pay for all the materials and subcontracters and people are not buying. I can't believe that the cost of building these houses are anywhere near what they are selling.

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  13. http://www.apartmentratings.com/rate/MD-Silver-Spring-Springwood-Apartments.html

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  14. "I'm looking for a nice apartment in the DC suburbs. Any suggestions?"

    Apparently, at a site full of apartment dwellers, not one can recommend a nice apartment complex, or even engage you in a conversation about your needs.

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  15. "Apparently, at a site full of apartment dwellers, not one can recommend a nice apartment complex, or even engage you in a conversation about your needs."

    Mr. Real Estate Industry Troll, this is not a forum for recommending renting or buying property. Try Craigslist for that stuff.

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  16. Yes, it is a site for like-minded solipsists. Diversity is unwelcomed here.

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  17. Anony-mouse:

    Obviously, diversity is welcome since you are here.

    Do you have a point? A view? So far you've not made one. What exactly is the "diversity" you wish to add??

    p.s. I owned a condo and a beach house and sold both the past two years. Save your "site full of renters" - and your five figure investment portfolio - for someone else. There are as many liquid investors here as there are lifetime renters.

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  18. LOL. I sure hope this is a site full of renters. I would hang out here more often. Good company among smart, fiscally prudent people.

    Anyway, I'd rather be a renter than an "owner" who owns less than 10% of his/her property.

    And ihateyuppies, I am not a Republican, but I certainly don't think the amount of DC lobbying would be substantially reduced with a Democrat, esp. a Clinton Democrat, in charge. But that aside, increased lobbying is almost certainly not the issue. Some huge percentage of house purchases in the DC area were financed with ARMs last year. Take that away, and no matter how much lobbying, immigration, gentrification, etc. that you have, and I think prices will fall. But I agree, they could fall very slowly. It only took a few years to convince people that old, poorly maintained houses in slums were worth half a million or more, but it may take longer for them to accept that they may need to take a lot less to sell.

    A Redskins fan

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  19. David said:
    "[I will delete unfounded accusations]"

    Someone said:
    "Save your five figure investment portfolio - for someone else. There are as many liquid investors here as there are lifetime renters."

    David isn't a hypocrit, he just hasn't had a chance to delete the offending posts yet....

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  20. DAVID TOUCHES LITTLE BOYS.

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