Thursday, September 14, 2006

NAR's Written Statement Before The Senate Banking Committee

Written Statement of the National Association of Realtors (NAR) before the Senate Banking Committee. Here are excerpts:
NAR represents a wide variety of housing industry professionals committed to the development and preservation of the nationĂ‚’s housing stock and making it available to the widest range of potential homebuyers.
How does cheerleading dramatic home prices increases help the 'widest range of potential homebuyers?' The NAR continues in its written staement:
After five years of outstanding growth and being the driving force of the U.S. economy, the housing market is undergoing a period of adjustment. I have experienced this first hand as my prior home has been on the market, in Northern Virginia, for over a year. Existing home sales in July fell 11.2 percent from a year ago. New home sales are down 22 percent from a year ago. The inventory of unsold homes on the market is at an all-time high of 3.9 million, which is a 40 percent rise from a year ago. Given the falling demand and increased supply, home prices have seen less than 1 percent appreciation from a year ago compared to the double-digit rate of appreciation in 2005.
Ok. Does the NAR think there is a housing bubble?
Contrary to many reports, there is not a '“national housing bubble.'” All real estate is local. For example, the housing market in California is extremely different from Oklahoma. Home price-to-income ratio, home price-to-rent ratio, and more importantly, mortgage debt servicing cost-to-income ratio have greatly increased in some markets to worrisome levels. Markets in Florida, California, Arizona, Nevada, Virginia, and Maryland exhibit trends far above the local historical norm, thus it would not be surprising for these markets to experience a price adjustment. However, these states have solid job growth Ă‚– Because of solid job growth, price declines are likely to be short-lived as new job holders provide demand and support for the housing market.
The "solid job growth" that the NAR speaks is made only possible because of the housing bubble. As the housing market declines the 'solid job growth' will reverse course and there will be layoffs in the housing industry. NAR on a what sort of landing there will be:
NAR understands that the housing sector could not maintain a record setting pace indefinitely. A soft landing is certainly possible and under the right circumstances likely, but that soft landing is critically dependent upon policies that support a transition to a more normalized market and mitigate changes in local markets in the availability of mortgage financing and other essential elements to homeownership
They conclude by saying "The NAR stands ready to work with Congress to continue to open the door to the American Dream of Homeownership." A lower price would certainly help.

81 comments:

  1. But it's always a good time to buy, you know.
    Roidy

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  2. "The "solid job growth" that the NAR speaks is made only possible because of the housing bubble. As the housing market declines the 'solid job growth' will reverse course and there will be layoffs in the housing industry."

    David, job growth means increasing numbers of jobs. Even if we were to assume that real estate related jobs were significant to the economy around here (which I don't see how they could be), I think we could both agree that at least that for this past year there has been no real growth in the number of real estate related jobs since as you often point out, things aren't selling like before. I can't see more hiring going on here. No, the job growth is coming from elsewhere. In this area, that growth is coming specifically from the additional billions of dollars being spent locally by the federal government in its efforts to move all its operations into the technilogically savvy 21st century ... increasing its command, control, and other capabilities. This job growth is financed by taxes raised throughout the nation, but spent disproportionately here. It is not going to reverse itself anytime soon.

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  3. Lance,

    You have a fair point if we were talking about locally. I was talking about nationally.

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  4. David,

    Every local market is different even in the same county. For example, in Los Angeles County, the Westside, San Fernando Valley, Santa Clarita Valley are similar markets but are not the same. We cannot combine them all into one. Also, calling anything National is wrong. Some markets may decline more than others. Some might even rise.

    Buyer have not left the planet. Renting is also not an option for many. It's only a matter of time when buyers will jump back into the market for great deals. Hopefully, rates don't increase to levels where homeowners can't afford paying their mortgage payment.

    Richard Johnston, REMAX
    http://www.estates.la

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  5. Why would the Senate Banking Committee would want NAR to weigh in on the current housing bubble.

    NAR has a vested special interest in the market, selling houses pays their salarys; not to mention dues they collect from the agents.

    The Goverment is covering their rear, when the market dumps and the nation enters a recession.

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  6. Owning your home outright is being just like the rich people are. Paying nobody interest is just like saving money. Using your freed up capital to invest in other ventures is more rewarding.

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  7. "Hopefully, rates don't increase to levels where homeowners can't afford paying their mortgage payment."

    What you are either ignoring or failing to understand is that if rates do increase, then home prices will have to come down (albeit gradually); otherwise nothing will move. If people can't afford it, then they can't afford it. It really is that simple; although the last few years of financial recklessness has confused the issue just a bit.

    Further, the *general* environment now & going forward is one of tightening lending standards...so no new "progressive" mortgage products are likely to be rolled out to help people "afford" over-priced homes.

    In other words, put a fork in it.

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  8. Job growth continuing due to government contracting? I don't know about that ... we're looking to bring in younger new hires directly from undergraduate schools to fill junior engineering positions and everywhere we go we hear something along the lines of "NoVa is a nice area, but the cost of living is too high; can't afford to buy a place and I don't want to live with 3 roommates for 5 years." My personal experience is telling me that this sharp increase in prices over the last few years is actually hurting our ability to bring more folks into the area.

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  9. "This job growth is financed by taxes raised throughout the nation, but spent disproportionately here."

    Let's see, the U.S. was in the red last year (again), Congress authorized raising the debt ceiling to something like $9 Trillion and Homeland Security and other Departments are cutting back on spending. Seems to me that job growth is not being funded by taxes, but rather, by deficit spending and that cutbacks are going to begin to affect those contracts.

    Albeit, war with Iran may affect the above in either way- positively (more government spending of money we don't have) or negatively (attacks in DC).

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  10. so they are saying there is local bubbles, then right after that, there is a national soft landing.. pretty easy to see they are saying there are local hard landings.
    i'm pretty surprised they're this honest

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  11. "and I don't want to live with 3 roommates for 5 years."

    That's great and certianly illustrative of this POS overpriced market!

    In any normal market, LL's actually abhor renting to numbers of roomates and most would not even consider it. Here, however, they actually encourage and advertise it! LOL.

    I guess, however, that it's better than living with your parents till your 40 under the new David Lereah "Euro-dynamic."

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  12. anon 7:18, junior ee in nova here. you mind saying what company that is?

    as for job growth, i guess the intel and hp layoffs, to name a few, in those states arent a big deal

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  13. NAR is only saying if you bought in California, Florida, Arizona, Nevada, Maryland, DC, Colorado or Massachusetts in the last year........you're screwed.

    There's more places but these areas will drag down the national median.

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  14. Ah Mr Remax, posting on bubble blogs? You must be desparate for buyers. This is the deal. Blanche from Realty Times emailed me and said enthusiastically that there is a robust market in Dallas. I emailed her back and stated that it doesn't matter what is going on in Dallas, or, as the NAR says, Oklahoma. The reason is that the dollar value of real estate is modest in those places compared to the bubble states. Eight normal houses for sale a block from me are worth 50 million dollars taken together. In Oklahoma it would take over twenty regular houses to be worth that much.

    I drove by a house here in Nevada which is an older house, with 4k square feet, but is offered for just under one million dollars. This is an older tract house with some rich upgrades. Who on earth with a mil to spend on a house would want a tract house? It makes no sense. It is pure insanity.

    So, Mr Remax, house values will fall, and there are forces causing that, like the outsourcing of good paying jobs, the creation of poorly paying service jobs, the lack of wage gains by the middle class, etc. Many have decided it is too risky to buy in this environment and I agree with them.

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  15. Lance,

    Job growth in the DC area, may be affected by this developing trend:

    Firms Brace for Softened Market
    Government Slows Tech Spending


    http://tinyurl.com/nmlt8

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  16. NAR is a lackey mouthpiece organization for the real estate profession. they would promote a housing tract next to a plutonium dump if it could make them and their members money..

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  17. For any market to grow at 20% a year for more than a few years (2-6) the fundamentals that support such a market must grow at the same rate. Simplistic analysis surely, but basically correct. For Miami I heard someone predict that the South Americans would come in and buy to support high growth rates. By year six can we really count on there being that many rich South Americans to buy Miami condos? Back to DC can we really expect the Feds and private industry to expand the workforce by 20% a year, every year, from now on? Well, the Feds would like to, and since they don't have to make a profit and can just keep raising taxes, they could. But private industry surely can't and won't.

    No, we are back to the speculative bubble scenario to explain the last five years. POP! Oh, did anyone else hear that?

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  18. I watched the report on cspan2. I was suprised. I thought stevens from NAR actually painted a pretty grim picture, I was impressed. I thought the guy from fdic was sort of cheerleading. Iterestingly though, when one of the senate guys questioned the housing builder reps assumptions, he actually fessed up and said it could get really ugly.

    Listening to the senate though, I had one moment of clarity. All of these congressman and senators have a vested interest in dc real estate. I think they will try has hard as possible to not let it crash, unfortuantely. Like the one guy said, he was pressuring the fed not to raise rates any more!

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  19. The fed isn't going to stop raising rates because a Senator may lose money on his house in DC.

    They have now choice but to raise another 50 basis points before the end of the year. The Fed rate will be 5.75% at the end of the year.

    Mortgage rates will press up against 7%.

    The end isn't near....it's here!

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  20. The NAR is hardly an unbiased source. How can they brazenly make these statements. By the way, how hard is it to become a "realtor" Does it compare with the education of an MBA or for that matter a pharmacist, nurse or engineer? Why do people trust these folks with their biggest single purchase?

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  21. thanks mred for bringing up an important point. just what does it take to be a "professional realtor" compared to the other professions? NOT MUCH....high school education, piece of cake real estate exam, and then some powder puff courses on basketweaving..some profession..ranks right down there with used car salesman and politician..

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  22. Those who can't do teach. Those who can't teach become Realtors.

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  23. hemm...lol..check this out:

    "Ford Motor Co. and the United Auto Workers union have agreed to offer buyouts to all of the auto maker's approximately 75,000 UAW workers in the U.S., according to local union officials," the Wall Street Journal reported on its website today."

    what are these poor folks going to do when their "ARM" resets?????

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  24. VA, if you liked that one you will love this:

    AmEx Allows Customers to Charge Condo Down Payments

    "American Express Co. will begin allowing select customers to use its credit cards to charge their condominium down payments. Currently, the service will be limited to buyers of luxury condos in Manhattan, as American Express rolls out the program with New York real-estate firm Moinian Group for one its projects under construction."

    A bubble in all its historic manifestations!

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  25. do you get miles? I've charged new cars to get the miles; only to pay it off at the end of the month.

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  26. I'd charge a house downpayment in a heartbeat to get miles. Why not? Some people have large credit lines and will charge huge amounts only to pay it in full at the end of the month. Big Deal.

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  27. One of the reason home values increased so rapidly was because the money to acquire properties became easier to get and there was so few properties to buy.

    The purchase of a home involves more than Realtors. Lets focus on the bigger picture and also not get ahead of ourselves.

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  28. Folks, the Federal Reserve Bank is insulated from congressional pressure by design. They don't care about some senator's house.

    Nor, really, does the senator. The senator is worried about the electorate, period, as in, "What happens to me if all my constituents are really pissed off?"

    We also know that the fed has little influence over long-term interest rates, which determine mortgage rates. The fed can only regulate lending standards, and Congress can weigh in on that, too.

    The politicians are positioning themselves for the blame-game, nothing more.

    The news is poor and getting worse on the housing front, nearly everywhere. Keep in mind that real estate agents, like the fellow openly posting here, are wholly dependent on sales commissions to feed themselves. No sale, no dinner.

    They have no credibility whatsoever in their predictions or advice, which we all know is that "it's a great time to buy!"

    Buy if you must, but know the bust will be as spectacular as the rise. It has always been so, thus it will be now.

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  29. MRED1 asked:
    "Why do people trust these folks with their biggest single purchase?"

    Real estate agents are experts at the sale and purchase of real estate. They'll be able to tell you if you're getting a good price for your house or if you're overpaying for your new house in conjunction with where the market is now. They'll also be able to steer you toward people who can help you with the financing. But if you are counting on them to make your financial decisions, then it is you who is at fault!. For example, if I want a kitchen renovated, I might find a great contractor to do the work, but I wouldn't trust the contractor with doing the design for the new kitchen. I'd go to a designer for that. It's the same thing when it comes to your finances. If you have allowed a real estate agent to consel you on your finances, then you are the fool.

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  30. creativemind asked:
    "what are these poor folks going to do when their "ARM" resets?????"

    use their buyout money to pay off their mortages?

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  31. Creativemind said:
    "AmEx Allows Customers to Charge Condo Down Payments"

    Creative, do you know the difference between a credit card and a charge card. Charge cards have to be paid off in full monthly ... no credit.

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  32. "if I want a kitchen renovated, I might find a great contractor to do the work, but I wouldn't trust the contractor with doing the design for the new kitchen."

    That is really stupid, Lance. Any competent contractor can "design" a kitchen, for God's sake. It's not rocket science.

    I agree, though, that listening to a real estate agent is a really bad idea, unless you are asking for the time of day. I might double check that, too, though.

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  33. dc_too said:
    "That is really stupid, Lance. Any competent contractor can "design" a kitchen, for God's sake. It's not rocket science."

    yeah ... I'd luv to see your kitchen!

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  34. Address: 1822 4TH ST
    SSL: 3094 0825
    Neighborhood: LEDROIT PARK
    Homestead Status: ** Not receiving the Homestead Deduction
    Owner Name: CNC REAL ESTATE & FINANCIAL SERVICES LLC
    Mailing Address: 1822 4TH ST NW; WASHINGTON DC20001-1817
    Sale Price: $2,500,000
    Sale Date: 08/03/2006

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  35. lance, Amex has cards which carry a balance..the article did not state the terms. further, when their "ARMS" reset you are assuming that they CAN SELL THEIR HOUSE....i enjoy your posts but you are not sure of the facts yet you do not hesitate to jump to a conclusion...

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  36. lance = :troll:


    he's a plant to get people to debate.

    nobody can be that bullish on RE when all the signs point to pain ahead...unless he just buoght a house with an ARM.....oh wait....

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  37. here we go again...Lance has a FIXED RATE LOAN.

    Perhaps, some of the "experts" around here can explain it for the hundreth time. Nikki? Robert?? Oh, John Fontain knows everything! You'll feel like a deer in the headlights when he finishes.

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  38. i could have swore that in Lance's early trolls he said he had an ARM????

    oh well i guess i've been corrected.

    :-)

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  39. TK said:
    "oh well i guess i've been corrected."

    yes, I have a fixed rate loan.

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  40. creative mind said:
    "lance, .... when their "ARMS" reset you are assuming that they CAN SELL THEIR HOUSE...."

    No, I'm simply making the point that the payouts aren't paltry ... I think I read that the longtermers were getting something like $140K as a buyout. In most areas where Ford has manufacturing plants (such as Michigan and the Deep South), houses don't go for much more than that. I guess the bigger point is that you can't always guarantee life ... There will always be risks.

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  41. va_investor said...
    “Perhaps, some of the "experts" around here can explain it for the hundreth time. Nikki? Robert??”

    Someone invoke my name?

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  42. yes robert, after your illuminating info on VA loans, I thought you would be the perfect one to explain Lance's loan to threadkilla.

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  43. Dave,
    You should call this the Lance and va_investor blog. They really have hijacked what could have been an awesome blog on the bubble in d.c.

    Like all the baby boomers getting ready to retire from the gov are going to stay in d.c. and all the new younger gov employees are going to buy a condo as condo prices fall. yea right.

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  44. A lot of the govies I know getting ready to retire (or already retired on the jog) have tropical shirts and ready to get out of dodge.

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  45. LANCE HAS A VARIABLE PAYMENT LOAN THOUGH, SO DONT CONFUSE PEOPLE BUY SAYING FIXED RATE!!!!!

    Traditionally when people say fixed rate in "common speak", they mean fixed rate fixed payment. Lance has a fixed interest rate at 5%, but is payment is going to go up significantly when his interest only portion resets to a conventional loan, which will convert to a 20yrear fixed rate loan at 5%, from what I understand. He has taken all sorts of risk with this loan. If his salary doesnt go up enough, he is screwed. I am sure if he were being honest he would admit this. If he has to refi in 10years, and his house is stil upside down he will have a impossible time refinancing. Almost no bank will refi an upside down mortgage.

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  46. Here we go again. Lance has already received pay increases sufficient to off-set an increased payment when the loan starts amortizing. The payment is interest only for ten years at 5% and then automatically (ie no refi necessary) converts to a 20yr am at 5%.

    Of course, he can pay principal any time he feels like it prior to the conversion. This is "risky"? Give me a break. Better yet, consult robert - our resident mortgage expert.

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  47. And I came in with 25% down. And since then it's value has risen a minimum of 25% based on what neighboring properties of similar size and condition have sold for since I bought. I'm currently already at something like 45% equity. 9 years from now (when it resets) ... I can't predict the future, but even minimum annual increases will bring my equity share to well over 50%? 60%? more? Upside down? Not a chance.

    What I find amazing is how people can make such obviously envy-driven statements in public. I'd be too embarrassed to say such things! It really doesn't reflect well on someone to wish bad on others. Envy is not a pretty emotion.

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  48. In taking a loan like this for one's primary residence, one agrees to pay massive amounts of interest on a debt that will not be fully satisfied for 30 years, or until the house is sold, and the note is paid.

    Bankers know the average house owner stays put about seven years. This type of loan is pure profit from an accounting standpoint - money owed banks is an "asset" in their world.

    Interest on even a conventional mortgage is front-loaded. It will be twenty years before any meaningful amount of principal is repaid by Lance.

    He is a renter with tremendous liability and, ironically, none of the flexibility accorded to renters. Prices are falling. Lance is stuck.

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  49. d_c too,

    Looks like you are a lifetime renter. Good luck with that.

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  50. Wrong, VA. I was a buyer after the last bust, a seller into the frenzy. You know that.

    What is up with you? I saw you on another blog today belittling an "investor" that tried to "unload" properties on you.

    You say you're an "investor." I think you're a "Realtor," (tm), telling everyone to buy, now.

    Cap rates on real estate are today below returns on U.S.Treasury securities. By definition, then, real estate is a bad investment. If you were a real "investor," you would understand that.

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  51. lance said,
    "What I find amazing is how people can make such obviously envy-driven statements in public. I'd be too embarrassed to say such things! It really doesn't reflect well on someone to wish bad on others. Envy is not a pretty emotion. "

    I please reread my post and tell me where I showed envy? I was just setting the record straight. You dont have a fixed loan, your payment will sky rocket in ten years. These are the facts as I have determined from your posts.
    1. your rolled 25% equity.
    2. you took an IO loan that turns into a 5% fixed 20 year loan in ten years.

    Here are my assumptions.
    1. You bought a house that you probably couldnt easily afford with a traditional mortgage hoping that your salary would increase in ten years by enough so you could afford your payment or your home would increase and you could just sell it if you couldnt afford it. I think this is probably a good assumption. Ten years is a long time.

    Howerver, there is a lot of risk taken on by you. Alot. I dont think you are stupid for taking your risk, people take risks every day with investments, but you must recognize it was a risk. You could have stayed in your previous place with a lot less risk. Now, that houses are turning you are likely feeling a little bit of heat, understandably.

    I dont envy you at all. I am so glad i dont have a mortgage right now. After seeing all of the reports over the last few years, I think we are in for a very long recession, worse then I thought a few months ago.

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  52. sorry dc, I don't keep as close track of you that you obviously keep of me. That "investor" was a newbie realtor who is going to get crushed. I guess you missed the point.

    Keep renting until you are happy with the "cap rates" (age 75). Good luck with that.

    btw, what year did you sell?

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  53. "He is a renter with tremendous liability and, ironically, none of the flexibility accorded to renters. Prices are falling. Lance is stuck."

    brilliant post, lance and VAinvestor probably will never fully understand this statement.

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  54. real bob,

    Why get so worked-up about Lance's house. You can sit in your nice rental until your final days. Enjoy it! Owning is not for everyone. Ask dc_too.

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  55. yea, I am worked up. I am just trying to clear up the lies that you keep telling on this board so people dont read your lies and believe them. Anyone who cannot recognize and ADMIT that there is a severe problem in real estate right now, either has a vested interest and would be greatly affected by the drop, or they are just dumb. You need to be honest with yourself and figure out which category you fall in.

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  56. VA - I sold Spring '04. Comparable properties in that neighborhood did not appreciate materialy afterwords. Prices are down and are falling, by all accounts. Selling was the right thing to do personally and financially.

    650% increase in 6 1/2 years. Sold for over 1,000 times downpayment. Had roof over my head in good neighborhood for a steep discount to renting.

    None of this makes me smart. Real estate in our area developed into a classic bubble. It is popping.

    I will buy again when it is right for me personally and financially. You are barking up the wrong tree. Good luck with those commissions.

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  57. dc,

    650% in 6 1/2 years? What are you smoking?

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  58. real bob,

    Let's see...ivy league and law review - guess I'm not stupid. Denial or vested interest? No, I think everyone knows my master plan. It does not involve selling anything in the next 30yrs or more.

    Just want the rents paid, thank you.

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  59. I am smoking nothing. Your questioning my numbers, publicly available and factual, reveals your ignorance of what has happened in DC.

    If you were a real "investor," paying attention, you would know what has happened.

    I have said before and I will say agian, properties could be bought for well under 100 times one month's rent in the mid '90's. I bought mine for 50 times rent.

    That you don't know that was the norm eight years ago tells me you are a fraud.

    VA_Investor is a real estate agent. You heard it here first.

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  60. dc,

    Show me a property that went up 650% between 1998 and 2004 (that wasn't in the path of the new baseball stadium)?

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  61. No, do your own homework. Find mid '90's sales prices in Dupont Circle (proper, Lance lives in the ghetto, masquerading as Dupont) and look for current comps.

    The increases are staggering. If you can't find the numbers, you are not only an inept investor, but an inept real estate agent. But then again, I would not be surprised.

    What happpens moving forward is subject to all of our opinion. How dare you question the facts as to what has happened.

    Tell you what, let's argue about tomorrow's weather. Fair game.

    I will take you to the government's archive of last weekend's weather, should you wish to ask what I am "smoking" when I tell you what the temperature was last Saturday. It was measurable and recorded.

    Like I said, good luck with those commissions, VA.

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  62. dc,

    A little exercised are we? The smoking remark was tongue-in-cheek. No offense.

    650% over 6 1/2 years is not believeable. End of discussion. Maybe you dreamt it?

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  63. End of discussion? I think not. Do your homework. I am going to bed now, but I will offer this:

    If David is willing, I will send, in PDF, a HUD settlement sheet from the mid 1990's, for the purchase of a Dupont Circle property. All the numbers will be on it. I will "black out" personally identifying information. David will use the PDF as a blog "post."

    You can decide for yourself how much prices have gone up since then.

    I must add that it is curious that DC government internet records do not predate 2000. Those sales recorded prior to that year are recorded as "0.00" for some reason. Go figure.

    If David is willing to post my HUD settelment sheet, I will send it.

    VA_Investor will then learn what 650% in six and a half years looks like, mathematically.

    David? What say you?

    I will check back in the morning.

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  64. dc,

    What possessed you to sell such a great house? I hope you saved all your profits or you will never be able to afford such a house again.

    Happy renting!

    p.s. look forward to seeing your HUD-1.

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  65. DC_Too,

    You're really something else. Let's see, you're "curious that DC government internet records do not predate 2000"? ... Hmmm, could it be that 1999 is the year they rolled out the on-line system? Yep ... My second condo was bought that year and was in there. My earlier condo bought in '96 was not ... only "unavailable". Of course, this skeptism coming from a bubblehead doesn't surprise me. The whole premise of a bubble is only possible if one believes in a conspiracy promulgated by the infamouse Real Estate Industrial Complex! I guess when one cannot understand and/or accept the facts behind a situation, it is human nature to believe some all powerful force has conspired behind your back. I.e., paranoia lurks inside many of us only raising its ugly head when we are confused and maybe feeling threatened ... but have no explanation for what is happening and thus no way out ... unless we invent that explanation!

    Secondly, actually, I do believe you about your 659% increase. But, what you are failing to acknowledge --- or at least mention --- is that MOST of that increase was due to a real and non-argueable increase in value due to a changing city. Dupont is not the same place today it was in the early '90s. Nor is DC now that it is no longer in bankruptcy and the crime rate is vastly down from what it was then (despite the so-called "crime emergency" triggered by a few, well-publicised deaths and assaults in very well-heeled areas. You've sold thinking you will re-purchase when "the bubble bursts"? I've got news for you. The bubble only speaks to "unjustified" price increases ... NOT justified price increases as the changing neighborhoods in places like where you sold have experienced over the last 10 years or so. I think even David would agree that he doesn't mean bubble bursting to mean that properties/neighborhoods that are substantially and verifiably improved in real terms such as safety and desirability will return to the same sales prices as pre-this real improvement. That's just not what bubble means. That means you going to have to settle for "the hood" again, if all you are looking to spend is what you paid in the early 1990s. But, something tells me that won't bother you ... afterall, you bought in an area that WAS the hood back when you bought ...

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  66. "What possessed you to sell such a great house? I hope you saved all your profits or you will never be able to afford such a house again."

    You just don't get it do you?

    Houses are getting CHEAPER right now.

    Prices are falling. They are going from higher to lower. They are going from up to down. If I wait a month the average house will be cheaper, not more expensive.

    That whole "buy now or forever be priced out for ever and ever and ever and die a pauper in an Argentinean shanty town" line is old and worn out at this point.

    Seriously, get a little integrity.

    With the exception of the last few years, a well documented anomaly, housing prices have rarely appreciated faster than salaries for any significant period of time. The simple truth is the "buy now or get priced out" line is, and never was, anything but pure BS.

    If in fact "DC_Too" turned the kind of profit he claims he did AND had the vision and guts to sell when he did, then he has made the investment of a lifetime. A supposed "real estate investor" like you should be congratulating him on playing the game like a pro instead of attacking him with juvenile scare tactics about being priced out of a falling market.

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  67. "That means you going to have to settle for "the hood" again, if all you are looking to spend is what you paid in the early 1990s. But, something tells me that won't bother you ... afterall, you bought in an area that WAS the hood back when you bought ... "

    Why would he have to settle for what he paid in the early 90's?

    Assuming he didn't blow the money he still has it and it is a very safe bet that any decent investment account will beat the real estate market over the next couple years by a wide margin. You don't even need to see price declines for that to be true. Even in the "soft landing" scenario we have all heard so much about RE prices are likely to stagnate for years before SLOWLY starting to climb again.(and a soft landing is not what we are seeing right now)

    As for your: "The bubble only speaks to "unjustified" price increases ... NOT justified price increases as the changing neighborhoods" theory...

    Nobody is saying prices will fall back to where they were in the mid-90s... but they may very well drop 15-20%, and that is a lot of money.

    The simple truth that you seem so unwilling to admit is that this is a bad time to jump into the RE market. Sitting on the sidelines for even a few more months while what is likely to be the sharpest phase of the correction takes place would save a potential buyer a lot of money.

    You can insist RE isn't an "investment" all you want, but then food isn't an investment either. Does that mean I should fill my freezer with steaks on Friday when the weekend advertisements show me saving 20% on Sat?

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  68. This comment has been removed by a blog administrator.

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  69. leroy,

    Unless one wanted to move anyway, I don't see the point in selling one's home in anticipation of a market correction. Costs of sale, moving, loss of good financing and loss of place down the amortization schedule are all factors to consider.

    Physically moving is not a pleasant experience. The actual dollar costs are probably about 10%; then there are the costs of re-enty. It is a fool's game unless one wanted to relocate or downsize anyway.

    dc sold in 2004 thereby missing the appreciation of 2005. The bump of 2005 was probably 20%. Add this to the aforementioned "costs" and what is the real "savings"? Illusory, at best.

    Hoping for a sufficient downturn to make it worthwhile? Not my idea of good planning and time well-spent. After 6.5 years on the am schedule, some real progress was probably being made on the loan paydown.

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  70. Keep up the GREAT posts
    David.

    Never get the truth from these Bums.

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  71. "Physically moving is not a pleasant experience. The actual dollar costs are probably about 10%; then there are the costs of re-enty. It is a fool's game unless one wanted to relocate or downsize anyway."

    You might not find moving convenient but then it all depends on how much money we are talking about here. As for the 10% costs... those are costs on what sounds like a very profitable investment. How many times have people sat on an over inflated stock because they were scared of paying taxes or transaction fees on their profits?

    A smart investor knows when to get decisive. Assuming what he said is true it was anything but a "fool's game."

    If he invested the profits from his house even semi-competently in all likelihood he will be FAR ahead of the RE market in 3-4 years despite the costs of selling his house simply because the RE market is going nowhere in that time frame.

    "dc sold in 2004 thereby missing the appreciation of 2005. The bump of 2005 was probably 20%. Add this to the aforementioned "costs" and what is the real "savings"? Illusory, at best."

    It is impossible to know how much his house appreciated in 2005 without details, not everywhere in the area hit 20% appreciation. It is plausible from what he said that his neighborhood could have been nearly flat. You are right that in all likelihood he didn't time the market perfectly but so what?

    Besides... even if he missed out on 20% appreciation most, if not all, of that 20% he "missed" is going to evaporate over the next year. And RE is likely to be stagnant for several years afterwards. Meanwhile his money will be earning a solid rate of return.

    Financially his decision was an excellent one. You can go on and on about "pride of ownership" or the inconvenience of selling and moving or whatever... but you nedd to make up your mind if you are a "real estate investor" or not.

    Because from an investor's standpoint... this guy just made a killing.

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  72. dc_too,

    I'll post yoru HUD info from Dupont

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  73. leroy,

    I moved 9 times in 10 yrs. Kept most of the old houses as rentals. You are right, moving can be a good idea. It depends what stage of life you are in.

    I would not sell my home to live in a rental. dc treated his/her HOME like a day traded stock.

    The transaction costs together with missing 2005 appreciation probably wiped-out any potential "savings".

    So much for "timing".

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  74. "I would not sell my home to live in a rental. dc treated his/her HOME like a day traded stock."

    So? On both counts I don't see why that is relevent in the slightest. You kept some previous houses as rentals, he took the cash out option. I don't buy the "pride" aspect of home ownership for a second as an argument against selling. "Owning" a home might make you sleep better at night but that is a personal thing.

    "The transaction costs together with missing 2005 appreciation probably wiped-out any potential "savings"."

    This isn't simply about savings. I already explained that above. Even if the housing market does not fall far enough for his old house to drop beneath what he sold it for (including the costs of selling) he is still going to make more money when you consider that he probably invested his profits at a far higher rate of return than the housing market is going to show over the next 3-4 years.

    He probably got about ~10% on his money in 2005. He will probably show a similar gain in 2006. Barring a serious recession he can expect similar returns in 07, 08, and 09.

    That is a lot of 10%'s when you start adding them up. There is absolutely zero chance the housing market is going to come close to that in the same time frame.

    By the time the housing market starts to creep up again from whatever it falls to he will probably be 50%+ ahead of where he started in 2004 on that money.

    Financially, the decision was excellent.

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  75. "I can't predict the future, but even minimum annual increases will bring my equity share to well over 50%? 60%? more? Upside down? Not a chance. "

    Lance,

    Don't be too bold. If this decline is like the last one, well, I have a set of inversion boots you can borrow. With a fixed rate loan and no plans to move you can ride things out.

    Despite the news, the economy is pretty good, there is no banking crisis visible, so this storm could blow past with only a 20% decline from the peak, which many markets have already seen.

    There is a buyer's strike right now. We'll just have to see how long it lasts.

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  76. "Like all the baby boomers getting ready to retire from the gov are going to stay in d.c. and all the new younger gov employees are going to buy a condo as condo prices fall. yea right."

    Doesn't the Bubblehead creed dictate that FL and CA are unviable markets? But aren't those markets traditionally the destination of retirees? So on the one hand, all retirees are going to bail out to warmer climes, but on the other hand, the warmer climes are uninhabitable because of existing bubbles. So which is it?

    Will the exodus from DC drive prices down here and sustain the bubble markets in warmer climates indefinitely? We need to exclude FL of course; just look at David's posts about how FL is a constant nightmare because of hurricanes and associated factors.

    No no, in reality - Retirees will move into cities to take advantage of the cultural amenities that cities offer. Dining, entertainment, convenience, reduced dependence upon automobiles, proximity to quality healthcare, etc.

    Washington DC is a good (and getting better) city to retire to. I'm talking about *DC* here. Not manassass; not Gaithersburg. *Washington*

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  77. "Washington DC is a good (and getting better) city to retire to. I'm talking about *DC* here. Not manassass; not Gaithersburg. *Washington* "

    Well then, you should be buying with both hands. Sell a kidney and get a couple of extra townhouses. The last two reversals didn't really happen. DC got hit, FLA got hit, and CA really got hit in the late 80's early 90's.

    Even if you buy at the peak, if you live long enough, and can make your payments you will eventually surface.

    Good luck.

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  78. "Well then, you should be buying with both hands. Sell a kidney and get a couple of extra townhouses. The last two reversals didn't really happen. DC got hit, FLA got hit, and CA really got hit in the late 80's early 90's."

    "FLA" ceased to represent the state of Florida (FL) sometime in the 1970s. That was over 30 years ago; about the same time that FL was a desirable place for fed employees to move to after retirement.

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  79. "solid job growth" ???


    Lets see Maxtor which was acquired by Seagate lays well over half world wide.

    Intel Layoffs 1,000 mid level (well paid) workers. Mostly in Santa Clara, California. The heart of the No Cali Housing Bubble.
    They are about to layoff another 15-20,000 across the board. Again Highly paid from California.

    Sun Micro systems still pondering on another 15-20,000 in layoffs.

    HP has already laid off 10-15,000
    mostly in No Cali.

    Plenty others still be taken out due to high cost of doing business and low profit return.

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