Tuesday, October 23, 2007

Senate Sqaure Condos are Now Available for Rent

Senate Sqaure Condos are Now "Luxury Apartments for Lease." Check out their website.

Senate Sqaure (Bubble Meter, August 2006)

143 comments:

  1. Who's renting all these "luxury" apartments?

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  2. Who's renting all these "luxury" apartments?

    Depends on the price. ;)

    Oh, the WSJ is speculating Merril's write-down on mortgage losses are going to break $7 Billion.

    "Merrill Lynch & Co. is expected to announce its third-quarter losses are more than $2 billion more than first projected, ratcheting up the pressure on Chief Executive Stan O'Neal to demonstrate he has a grip on the firm's risk level."

    from:
    http://online.wsj.com/article/SB119319811534969583.html?mod=hps_us_whats_news

    when is the last time you heard of an I-bank losing money and the CEO being "under pressure?" Yea, me too.

    But hey, we're just the crazy bears who have always been wrong. ;)

    Got popcorn?
    Neil

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  3. I went to a presale event in late 2005. I work near there and thought that it would be neat to walk to work. They had a fancy party in Union Station with string quartet, filet mignon and gift bags with scarves. I finally received a price list after much insistance and a 2 bedroom with den (~1000 sq ft) was listed for $700,000 with a monthly condo fee of $650. WTF? To live in the hood? That is what first prompted me to start doing a little internet reserch because it just did not seem right. Apparently, it did not seem right to a lot of other people either.

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  4. My Bad. Things weren't as bad at ML as I posted before; they are worse.

    Merrill Lynch Lost even more money on poor performing mortgage loans than expected:
    http://online.wsj.com/article/SB119321271755269627.html

    hat tip calculated risk.

    Got popcorn?
    Neil

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  5. Very soon, all the abrasive bulls will be hugging their knees to their chests, rocking back and forth, crying, repeating "real estate never drops in price, up up up, location, location, location."

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  6. According to lance this is a "normal cycle."

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  7. This comment has been removed by the author.

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  8. "...a 2 bedroom with den (~1000 sq ft) was listed for $700,000 with a monthly condo fee of $650. WTF? To live in the hood?"

    Bwahaha....

    It really is a miserable neighborhood. I wonder if you can see the lovely railroad yard from the swimming pool deck?

    Bwahaha....

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  9. Anon 7:47,
    It most certainly is a normal cycle. And it's actually quiet tame from a homeowner's perspective compared to the last time around. This time it's the lenders and not the homeowners taking the brunt of the "adjustment".

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  10. lol, keep them coming lance.

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  11. Wow! Isn't he so smart?! Tell us more, Lance! Tell us another one!

    You say you come by here because you like debate but all you ever do is issue platitudes. You deserve to lose every penny that's been dropping through your foundation.

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  12. Lord Lance shall tame the "not" homeowners.

    So the Chronicle of Lance records in the unbubblishous year of 2007.

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  13. Did I say I love all the new anons... Well, it needs to be said again. Let sir Lance-IO-a-lot have it for his completely ridiculous statements.
    Bob

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  14. "It really is a miserable neighborhood. I wonder if you can see the lovely railroad yard from the swimming pool deck?"

    Oh, and you can take a nice stroll around the "revitalized" H Street corridor and get shot for $5 while walking your Paris Hilton purse dog. Or, you can stroll up to NY Avenue and get assualted by AIDS-infested whores and their lunatic pimps. Beautiful place to spend a near a million bucks on a home and raise the kids.

    But, you know, that's all that wonderful DC diversity that RE agent scum tout as a selling point.

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  15. anon 10:28 said:
    "But, you know, that's all that wonderful DC diversity that RE agent scum tout as a selling point."

    Well, the good news is we know you won't be moving in here anytime soon!!! The World's Capital is safe --- at least for the moment!

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  16. Neil,

    When you aren't laughing at your friends' misfortune in FL and inventing inventory levels for Miami (always under 3 months - there you go again, thinking in 2yr time-frames!), I'm sure you have capitalized on this housing correction in a big way.

    I hope you have anyway. With your insight and prescience you are probably worth millions. I am just concerned that you have missed all those sure-things (shorting builders and lenders, etc.) by being wrapped up in your obsession with other people losing money. You've missed your chance to make some.

    I appreciate your concern in asking me (mockingly) how my FL properties are doing. Quite caring on your part. My response to your inquiry allowed your brethren to come piling in with the "lying and bragging" crap. Nicely done!!

    Reminds me of pro-wrestling tag teams!

    OK, time to twist around Lance's loan terms. I think skinny is lurking about, he's very good at this straw-stuff.

    VA.

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  17. I don't know about Neil, but housing puts treated me right.

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  18. "OK, time to twist around Lance's loan terms."

    VA, you didn't hear? Lance got very special terms because he is 16 feet from a Transitional Neighborhood BUT on the correct side of the 16th St. Divide (it's a special federal loan program).

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  19. No one has twisted lance's terms. This is one of the only things I give lance credit for, at least he appears to be honest about the loan he took, which, probably was a bad idea.

    he said he took a 30 yr loan with a fixed interest rate.

    The first ten years are interest only.

    So basically he took a 10 yr IO loan and a 20 yr fixed term loan.

    I am sure he was hoping to either sell or refi at the 10 yr point. Cause, if I am right, his payments will be astronimical.

    20 yr fixed financing 700k, I am assuming he put 200k down, will give him a mortgage payment of 5000$/month not including property taxes or maintenance.

    You can now see why he has to rent out his basement. Or as some people have accused David of, "he is living in a group home".

    bob

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  20. Whomever the bulls are who keep prodding about "where's the recession?"

    I thought you might be interested in this article. Here's the headline and first paragraph for a little sneak peek at what you're in for:

    U.S. "undoubtedly in recession" - Jim Rogers

    LONDON (Reuters) - The United States has entered a recession, according to highly-regarded investor Jim Rogers, who told Britain's Daily Telegraph newspaper on Wednesday he was switching out of the dollar and into yen, the yuan and the Swiss franc.


    Deny, deny, deny, then it will all stop, right bulls? :-)

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  21. bob,

    You make my point. Lance's interest rate is fixed at 5% for 30yrs. So what if it's interest only for ten years then amortizes over 20. There is no reason to say that this loan is not a financially prudent, even sophisticated, choice. You guys kill me. And, sure, renting out a basement apartment is akin to living in a group home. You are really grasping.

    Too bad that you didn't buy a starter condo when Lance did and then trade up to a nice family home. Now you guys can start twisting what Lance said about his new income...and his neighborhood and ....GET A LIFE!

    btw bob, what is your living arrangement? How old are you and how many years have you been renting? Waiting for Markets to Crash is not what I would consider a good financial plan, but to each his own.

    The point is that perhaps you and your anon pals can make a cogent argument without the strawman being the prominent factor. Do you think so?

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  22. "These days, I wouldn't put my worst enemy's shekels into homebuilding shares."

    EVERYTHING'S FINE EVERYONE! EVERYTHING'S FINE, INVESTING IN THE HOUSING INDUSTRY IS EVEN PRUDENT!

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  23. "So basically he took a 10 yr IO loan and a 20 yr fixed term loan."

    Basically he has a dressed up rent-to-own arrangement.

    He claims he put 25% down, the total purchase price was 900k so your numbers are in the right ballpark.

    You are also correct that he is looking at roughly $5000 per month once his loan adjusts.

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  24. "There is no reason to say that this loan is not a financially prudent, even sophisticated, choice."

    That depends on how you view paying $5k a month for a house in a slum...

    His interest rate is 5.5%. At least that is what I remember him saying.

    The fact is that lance is going to be looking at his loan adjusting to ~$60k per year right around the time most people are thinking of retiring and he is going to be making those payments on a house that will likely be worth well less than he paid.

    Yeah, real "sophisticated."

    The fact that you try to promote him as sophisticated shows what a skewed agenda you really have. Debt is not wealth. Taking out a massive loan does not make you rich.

    Even at his "below market" interest rate he still took out too big a loan. It is a standard car dealership trick. Offer you a great interest rate and a "great payment" on a badly overpriced car.

    Housing is an expense. Lance bought his house because he bought into his own crap about real estate in DC rising to Manhattan levels.

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  25. Is everyone here anon?

    Well it's interesting that you know so many of the intricacies (sp?) of Lance's finances. Who says he's not in a position to pay that loan off alot sooner should he desire. Many financial advisors do not advocate paying down mortgages, especially those at 5%. You do realize what the after-tax cost of that money is?

    Anyway, back to the renters (who, obviously, didn't make 200K on the sale of their condo). If you wait until 2012, as Neil advocates, try adding 30 yrs to your age at that point. Not pretty, I would imagine.

    Personally, I don't like to have alot of debt and have always bought under my level of affordibility on my residences. This has allowed me to have vacation homes and rentals, and stocks and bonds and cash. If I were past my mid-20's and sitting in a rental, I wouldn't be throwing stones at anyone. You are looking at a long road before your house is paid for. And don't forget about college tuition and retirement savings.

    But feel free to laugh at Lance. Whatever gets you through the night.

    Va.

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  26. Lance's mortgage notwithstanding, just where *is* the recession? That's actually a really good question, because I'm a dyed-in-the-wool bubblehead. I'm worried about where the credit problems will end up, but sales, profits, productivity, inflation - they're all pretty darn positive. I'm sure the credit problems aren't done, but they've got a lot of good news to overcome. Anyone have any thoughts on that?

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  27. Anon 11:36,

    Your comments epitomize where the BHs find themselves ... unable to face facts and having instead to invent new facts that justify the way they wish things were ... rather than the way they are. Yes, Dupont Circle is a slum, my interest rate is what you say (and not what I've told you) ... and your Silver Spring group home is a little Taj Mahal. Keep living the fantasy! It'll get you far!

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  28. 16 feet lance

    lol

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  29. http://www.reuters.com/article/businessNews/idUSL2474133320071024?feedType=RSS&feedName=businessNews&rpc=23&sp=true

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  30. kevinr,

    Steve Forbes just today said "no recession". The White House says no recession. Greenspan says less than 50/50 chance. Now it's starting to look like the Fed will cut. According to David J., we were supposed to already be in a terrible one, possibly ending in Depression.

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  31. "According to David J., we were supposed to already be in a terrible one, possibly ending in Depression."

    So, here is the wishful thinking translation - David was wrong about when a recession would hit so the actual price declines in housing that are actually occuring really aren't.

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  32. NICE!

    See what I mean about the strawman, folks? The discussion was RECESSION, not house prices. btw, how close are we to those 50% to 80% haircuts?

    va.

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  33. VA said "btw bob, what is your living arrangement?"

    My wife and I rent, and have been since 2004 when we came to DC. Why, because we ran the numbers and found out that we could rent for half the price of buying including all deductions. Every realestate calculator we ran said we would need to make something like 7% appreciation to make a break even point of 7 years. THUS, NOT SMART TO BUY.

    "How old are you and how many years have you been renting? "

    I am just 33yr old GG-15, been renting since 2004.


    The other thing that is commonly left out of the housing game is the reality of how much money is spent on a home. Lets say lance can pay his loan and pays it off in 30 years. He will have paid something like 810,000 dollars in interest assuming a 30yr fixed and 700k loan. That is a lot of money.

    Over the last 3 yrs he has paid something like 128,000 in interest.

    I have paid 57000 in rent. Lets just pretend his house didn't lose money, it has the same value. Who is better off? The thrill of being a homeowner and all its percs set aside, who is better off financially? Well, I think its me because I have stashed over 150k into my bank account and another 150k into my 401k. I guess it comes down to a big differnece, I was trying to be financially smart with my money (you should appreciate this VA). I want to do the best I can with what I make.

    Is owning a home better then renting. YES

    Would I rather own a home and never have to move again. YES

    Was 2005 a good time to buy a home? HELL NO.

    Is now a good time to buy? Doesn't look like it.

    Will I buy when a mortgage payment for a house I like approaches rent? YOU BET.

    Bob

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  34. Anon 12:10,

    Are you the Jolly Green Giant? I mean, you must have very big feet! LOL

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  35. The problem is that these luxury apartments aren't in a luxury neighborhood.

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  36. "That depends on how you view paying $5k a month for a house in a slum..."

    It's Dupont Circle, you friggin imbecile.

    Lance overstated the "transitional" part of the Logan neighborhood, by the way. The 16th St divide is very 2002. Things only start to get "transitional" by about 12th or 13th St these days.

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  37. "Even at his "below market" interest rate he still took out too big a loan. "

    Are you privy to more of lance's personal financial information than we are?

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  38. "It's Dupont Circle, you friggin imbecile."

    Right... because "Dupont Circle" has always been cool...

    That place is 10 years from being a slum, and might still be ten years from being a slum.

    Buying real estate in a mismanaged dump of a city is a shitty gamble. There are numerous parts of DC that used to be nice areas that degenerated into slums and there is nothing that says that won't happen again soon.

    The only thing that has been propping up DC real estate is the same thing that was propping up real estate in Gainsville. It was too expensive to live somewhere nice so people had to buy in the district.

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  39. bob,

    I may not have bought in 2004 either. Alot would have depended on how long I planned to stay in the area. I do believe in renting for a year in a new locale to get the lay of the land. We did, however, see prices jump up to 20% between 2004 and 2005. But no one has a crystal ball right?

    I must take issue with your assertion that you are that much farther ahead than Lance, for example. Obviously, you can't include the 300K in 401 and savings. The real number is Lance's after tax cost and your rent figure.

    So, it's probably 90k or so for Lance vs. 57k for you; assuming similar properties and locales. It's also informative to know that Lance did not enter the market in 2005, he merely traded assets (condo to SFD). This seems to be lost on all the Lance bashers. If you sell low, buy low OR sell high, buy high, it is pretty much a wash. Lance did what I did in 2004 and 2005. He traded out of lesser performing property into one(s) with a better current and future potential. He may have, as I did, sell for top dollar and buy a bargain.

    Again, the fallacy, in my mind is the 2 (in this case 3) yr time-frame. We are all talking about "history" at this point. If I could cherry-pick 2003 and 2004 (or 2004 and 2005) and cite that time period for the rest of my life, I would always come out on top of the buy vs rent debate.

    Are you actively looking now or do you believe that prices will drop dramatically from here? I find the inventory charts on virginiamls.com to be interesting. Inventory is trending downward in all Counties except Prince William. Rates are dropping as well. The 10yr is noticeably lower than a couple months ago. A fed cut seems baked in at this point.

    You won't be alone in buying when monthly payments are closer to rents. More expensive properties (which as a "15", I imagine you will be buying) are rarely a close call on the rent vs buy calculation. You are far more likely to see modest TH's or low cost SF houses "pencil out". I doubt you would be happy in either.

    Best of luck to you.

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  40. "
    That place is 10 years from being a slum, and might still be ten years from being a slum. "


    The point is, you were absolutely wrong. Stop digging yourself deeper. You look like an ignorant moron.

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  41. "Buying real estate in a mismanaged dump of a city is a shitty gamble. There are numerous parts of DC that used to be nice areas that degenerated into slums and there is nothing that says that won't happen again soon."

    If that's how you feel, have you ever considered getting the fuck out of here?

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  42. "That place is 10 years from being a slum"

    So you were only 10 years off, huh moron?

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  43. The Centex blowup(Semtex?)and then the Merrill MOAB were really big losses. I wonder when the enormity of the losses will start to make a dent on psychology. What if puppies, not dollars, were lost instead? I try to make the analogy in tonights post.

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  44. getyourself,

    There is no enormity in the losses, nor are they enormous, compared to the housing or financial industries much less the overall economy. Media types have to exploit these stories like pimps in order to sell advertising. It looks like you're ready to kill puppies yourself in order to get people to visit your blog. Do you have something to sell?

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  45. You guys act like Dupont is some kind of quality neighborhood. Anyone that believes that has spent way too long in DC.

    Try getting out to a real city sometime and you will see that Dupont is just an average neighborhood in a far below average city.

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  46. "You guys act like Dupont is some kind of quality neighborhood. Anyone that believes that has spent way too long in DC.

    Try getting out to a real city sometime and you will see that Dupont is just an average neighborhood in a far below average city."


    Uh, when did I say that. I was just pointing out the fact that you, who called it a slum, are an ignorant moron. Each time you respond, you prove me correct all over again. You fucking imbecile.

    Keep it up though.

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  47. Anon 5:08 said:
    "Try getting out to a real city sometime and you will see that Dupont is just an average neighborhood in a far below average city."

    Yes, it's true that DC (and Dupont) is not yet where other cities are ... which accounts for its relatively inexpensive real estate ... when compared to these other cities.

    Here's one example. Note that "Bay Bay" is Boston's equivalent to DC's Dupont ...

    BOSTON

    A strong historical society and preservation movement has kept the picturesque brownstone facades of the Back Bay (which was formerly a stagnant pool) and historic Beacon Hill, though many have been gutted to create lofty two-family residences that frequently top $5 million. Other popular properties have a more Manhattan feel – hotel living in the downtown waterfront from familiar names such as the Mandarin Oriental and the under-construction W hotel. They offer amenities, but these properties can reach $1,300 per square foot, with two-bedrooms starting at $900,000.
    http://70.47.124.114/node/914

    And as DC gets to be more like "these other cities", what do you think we can expect in terms of prices?

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  48. But "it's different here"!

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  49. "And as DC gets to be more like "these other cities", what do you think we can expect in terms of prices?"

    First off, nothing in DC compares, period.

    Second off, DC is not getting to be like Boston.

    Damn do you live in a dream world.

    DC is a run down dump with some of the most ineffective city government to be found anywhere outside of the developing world.

    keep dreaming lance...

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  50. "And as DC gets to be more like "these other cities", what do you think we can expect in terms of prices?"

    DC does not have the financial markets that Boston, NY, and Chicago have. It will never "be like those other cities," no matter how much you wish it to be, Lance. Those markets provide very high salaries to a large number of people. The big money in DC, which you are always promoting as the reason DC will be the next Manhattan, are very few in comparison. I work on K Street and own a SFH in Chevy Chase, but the current home prices simply can't be sustained by the bread and butter jobs that provide the relatively stable DC economy, which are GS level federal jobs.

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  51. Oh, and you can take a nice stroll around the "revitalized" H Street corridor and get shot for $5 while walking your Paris Hilton purse dog. Or, you can stroll up to NY Avenue and get assualted by AIDS-infested whores and their lunatic pimps. Beautiful place to spend a near a million bucks on a home and raise the kids.

    LOL, that's so true. I rent a rowhouse a block away from senate square. Word to the wise: they're not just whore, they're transvestite whores! For what I'm paying in rent (it's hella cheap), I'm willing to put up with some of this. The whores leave you alone, I haven't had any issues living here. But to buy a 3/4 million condo? Get real. BTW, the guy that owns my place has monthly expenditures that are about 3 times what I pay in rent. He bought in early 2006.

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  52. "the current home prices simply can't be sustained by the bread and butter jobs that provide the relatively stable DC economy, which are GS level federal jobs."

    Even if you assume the "best case" scenario of a high step GS-15 you are still only looking at someone that is making ~150k a year.

    That was good money for most of DC's history because DC has historically been a cheap city to live in. For most of the recent history a 15's salary allowed a government employee to buy a nice house in Northern Va and live a comfortable life. (which they had certainly earned, only the small minority of government employees hit GS-15, most top out in the 12-14 range)

    By conventional measures of affordability a person making 150k can afford a roughly 450k house. At the peak of the bubble that wouldn't even buy a run down <1000sf 1950 tract house inside the beltway. (and these are late career people 90% of the time)


    The DC area simply doesn't have the earning power to support prices like what are seen in Boston or Manhattan. DC is not a northeastern city.

    DC is a southern city. It is more similar to Dallas, Atlanta, etc. It has a city center, but most of the city is now urban sprawl. That type of city just doesn't support super high land prices. Both Dallas and Atlanta have far greater industry and earning power in general than DC, but neither of them has, or will ever have, NY or Boston level RE prices.


    Lance's dream of seeing RE prices rise to Manhattan, or Boston levels is never going to be fullfilled, and he is an idiot for even wishing for it.

    Think about it, your house doesn't change one bit just because it gets more expensive. You just end up paying more for the same thing. Even in a best case scenario where you own your house 100% you still have taxes to worry about.

    The fact is that for all lance's talk about not seeing your home as an investment, that is clearly how he sees it. He WANTS bubble prices to continue because he thinks somehow he will get rich off his house.

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  53. Dallas, Atlanta, and Boston also don't have the private practice lawyers that DC has. And we are making wild shitloads of money these days. Fresh out of school we're making significantly more than some GS-15. And it goes up fast.

    Hope this helps.

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  54. "Dallas, Atlanta, and Boston also don't have the private practice lawyers that DC has. And we are making wild shitloads of money these days."

    LoL.. here we go again...

    The attorneys you mentioned are RARE. They make up a tiny tiny fraction of a percent of the total population.

    Every time this subject comes up someone seems to forget that.

    Dallas, Boston, Atlanta, Houston, etc all have vastly greater economies than DC. There is simply no comparison.

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  55. LOL ... anony basing what DC real estate should be going for based on what GS-15s earn. Anony is living in the past ... back when the government hummed along on the efforts of government workers. That changed a long time ago. Most government work is now performed by contractors ... and the GS-15's private industry counterpart isn't making $150k/year. Try a multiple of that ... $300K/year, $450K/year, even more ... PLUS stock options and other incentives. The lawyers and lobbyists aren't the only ones getting rich around here with Washington's increased importance in the world's economy.

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  56. anon 5:00am said:

    "By conventional measures of affordability a person making 150K can afford roughly a 450K house."

    Let's put this one to bed. 3x income was the rule of thumb when interest rates were double what they are today. Let's use the proper standard of affordability shall we.

    Ratios - front and back end - have been the gold standard for ever. Jumbo ratio's were always 33/38.

    150K per year is 12,500 per month. Using the tried and true ratio of 33%, this income supports a mortgage of 600K plus.

    You suggest that these 15's are "late" in their careers. Would it not be safe, then, to assume that this would not be a first home (for a fifty year old)?

    It would be more than reasonable to assume that they have owned their prior home for AT LEAST 10 years. So, the downpayment would be in the 6 figures (200K or so, I'd guess).

    This puts them in an 800K+ house; hardly a crappy house by anyone's standards.

    Why do people constantly hang their hat on 3X annual salary? Probably because it makes a false impression of affordability. Banks have NEVER used this to qualify anyone.

    va.

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  57. Oh, please. "150K supports a 600K mortgage" is such BS. Still shilling, VA_Realtor?

    First of all, to get the lowest possible interest rate, you must have stellar credit AND 20% down plus an emergency fund. The 600K mortgage, then, applies to a 750K house.

    How many $150,000 households also have 150K in cash, plus a cushion, to do the deal? Not many.

    For those that do, they are facing a mortgage of about $5,000 (remember, no more "easy money" - loans above Fannie's 417K cap are expensive now).

    The 750K house will also have a $700/month property tax bill, give or take. It will have to be fully insured, too. Oh, and heated. And painted, etc. The maintenance "rule of thumb" is 1% of the cost of the house.

    Has the bubble changed that, too, VA? Maybe, if only because house prices are so grossly inflated.

    Anyway, your 150K per year friends are looking at nearly $7,000 per month in housing expenses when all is said and done. That is well over half of gross salary.

    What about saving for retirement? What about car payments and expenses? What about groceries? New sneakers?

    Heaven forbid there are children in this picture.

    And what ever happened to value? What do I get for this outrageous amount of money in the DC area? A 1,000 sq foot rowhouse in a "transitional" neighborhood? A McMansion with a three-hour roundtrip commute to my 150K job?

    Good grief, there is no value here. I know, I know, VA, real estate is a "good investment."

    Just becuase you can "afford" 100 shares of Pets.com at $400 per, doesn't mean you should run by it...or that it's a "good investment." Sheesh.

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  58. In addition to the property taxes, house insurance, PMI, etc...that 33% also has to include the HOA fees. When you start adding everything in, that $600K begins to drop down to around $500K. I guess we could use 3.3X instead of 3X to make VA happy.

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  59. anon 8:11

    Even accepting your inflated tax and maintenance numbers, A 20% dp puts you over 600K for a house price. What do you think? That someone making 150K should live in Great Falls or Bethesda? Last I knew the Median Home Price around here was in the 400's.

    You further discount that fact that anyone in their late career would have a substantial downpayment (you ask where they would get the 20% down). Unless this is a typical Bubblemeter person, this gs15 has not pissed away the last 15 yrs renting. They will come swinging substantial equity for a downpayment.

    Ah, but I forget the strawman! They used their previous house as an ATM and have no equity. They never contributed to the thrift savings plan and have no pension or retirement funds, and lastly, they are so financially irresponsible that they haven't put any money away for college.

    va

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  60. I didn't give any tax or maintenance numbers, so not sure how they could be inflated...but anyway...

    Downpayment has always been independent of how much you can borrow and the 3X rule of thumb. Heck if I put 95% down and make 150K a year I could afford a really expensive house, but is meaningless to the discussion of how much I can afford to borrow.

    What do I think?...I think 3X (or 3.3X to make you happy) gross income to determine loan value isn't an unreasonable rule of thumb. While you make a valid point in your first post mentioning that interest rates have gone down you fail to note that property taxes, HOA fees, etc have generally gone up.

    Now is the 3X rule of thumb something I would recommend people using in a specific case? No. There are much better calculators out there today, but one thing they have in common is they calculate how much you can borrow and then add in how much you have for a downpayment. Kind of like what we used to do in the old days before the internet using 3X gross income and adding in what you had to put down.

    I'm not the person that posted that someone making 150K could roughly afford a 450K house. As you say, the downpayment amount will greatly affect the amount of house this make believe person can afford. Perhaps they have no money down, 20% down or 50% down or even 95% down. It seems to me the person who posted originally was assuming no money down or possibly 3-5%, which in recent history isn't really an unheard of way of purchasing property. Of course, since I'm trying to sell two houses right now...I like your approach where we assume everyone can put down huge wads of cash since that would help me move these dang things. heh

    ReplyDelete
  61. anon 10:16,

    So the 3X annual income "rule" (which I heard back when rates were 12-14%) trumps ratios? Baloney! RE Taxes have increased over the years, but so have wages.

    Explain to me why the gold standard of front end and back end ratio's takes a back seat to some stupid multiple that has nothing to do with affordability.

    va

    ReplyDelete
  62. What the heck are you talking about? Where did I say the 3X rule of thumb trumps ratios???

    Did you actually read my comment? I specifically said, in specific cases there are much better calculators out there today (and yes they tend to use the ratios sometimes 33/38, sometimes the more conservative ones).

    The point you seem to be avoiding though is the 3X rule of thumb tends to get you pretty close to those ratios when you add in all the housing costs to meet the 33% or 28% or whatever. Perhaps it's 3.3X or something in that neighborhood but the way you dismissed it in your original post was misleading and I called you on it.

    ReplyDelete
  63. Don't worry about trying to be reasonable with VA_Investor. She has to be right about everything, all the time, ESPECIALLY when she is wrong.

    Why do you think she is on here all day long trying to talk people into taking on more debt?

    There are several different reasonable ways to estimate how much a person should pay for a house but they do generally result in similar answers.

    Anyone who is trying to say that a person on a 150k salary without any realist expectation of a major raise should go out and reach to spend 4x or more of their annual income doesn't have that person's best interest at heart.

    VA_Investor is quick to say that the person in question would be mid to late career and have a big downpayment and therefor that they should spend 800k+...

    but there is of course no mention of the fact that at that point in a person's life they shouldn't be taking on huge debts. They aren't going to be working for 30 more years and they aren't going to see any more big raises.


    The fact that a high GS government employee can barely afford a starter home in the worst neighborhoods inside the beltway should tell you something.

    Mid-level tradesmen making ~50k-60k 7+ years ago were buying nicer houses with conservative financing than a GS-15 could buy today.

    Don't worry though, affordability hasn't changed... so long as you just trust VA_Investor anyways and dont' look at the actual statistics.

    ReplyDelete
  64. I don't know why she came back. Market must really be getting her down, therefore she has to vent somewhere.

    ReplyDelete
  65. OP said the guy was "late in his career". Maybe he SHOULD stay put.

    Yes, let's go back to the "market must really be getting her down..." I thought we just discussed this strawman. What's your excuse? Worried about those inventory numbers or Steve Fuller's remarks? There will always be West Virginia - don't panic.

    Do you like me inventing your motives? Why not discuss the issues, not me or Lance? You make yourself look like a know-nothing fool. I'm embarassed for you.

    va

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  66. Fuller? Who pays attention to that clown at this point?

    Nobody with a clue...

    ReplyDelete
  67. "DC does not have the financial markets that Boston, NY, and Chicago have. It will never "be like those other cities," no matter how much you wish it to be, Lance. Those markets provide very high salaries to a large number of people. The big money in DC, which you are always promoting as the reason DC will be the next Manhattan, are very few in comparison."

    I'm not so sure about this. I wish I remember where I read this, but while the per capita earnings in places like Manhattan & Boston are higher than D.C., they are severely top weighted. Specifically, NE had a decent number of people with a net worth of 10-100 million. However, if you look at people in the 5-10 million net worth range, there are more of them in close to DC than anywhere else mentioned in the piece. Thus, while the NE has the superwealthy, the "everyday millionaires" are all over this area. Certainly, these people can afford the D.C. prices, and it looks like they have been moving in in waves over the past 10 years.

    ReplyDelete
  68. anon 12:58. Great example. Did you know that Miwaukee,WI is in top 10 list for most people making 100k per year, per capita? Yep its true. Does this mean that milwaukee is on its way to becoming the next Manhattan, NO!!! Manhattan and Boston each have unique features that make them the way they are, Manhattan more so. I could see Boston's market declining slowly over the next 20yrs as people migrate futher south.

    This has been debated a million times over, DC is no Manhattan. Its no Boston. Its no Chicago. Its no LA. I agree with the above poster, we are closer to Atlanta or Dallas.
    bob

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  69. I read something awhile back about how DC always perceived itself as a sleepy gov't town and underspent as a result. Looks like the faucet was turned-on and the money has been flowing since Mayor Williams was the first business friendly Mayor in (ever?)....it's not just the housing market that grew more expensive in DC. Everything got more expensive. To say that the city hasn't changed drastically and become a more desirable place to live is ignoring what is all around you. Combine that with traffic in the burbs where you live 4 hours a day in your car, and that expensive house downtown seems all the more worth it. While we may not have have the Manhatten gazillioaires, we do have lots of very well-paid and very secure workers.

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  70. "I agree with the above poster, we are closer to Atlanta or Dallas."

    Which in no way is a bad thing.

    Who the heck wants higher prices?

    You might as well wish for higher gas prices, or food prices.

    All higher prices mean is that you pay more for less.

    The only people cheering for higher prices are idiots like Lance who think that it will make them rich. That is the real reason he spends so much time trying to argue that DC is the next Boston or Manhattan.

    Remember, housing is an expense, not an investment for 99% of everyone.

    Lower prices are good.

    ReplyDelete
  71. "Miwaukee,WI is in top 10 list for most people making 100k per year" Correct, and Milwaukee city center is experiencing a renaissance commensurate with that income. There is a difference though between 100K a year and 5-10MM.

    "DC is no Manhattan. Its no Boston. Its no Chicago. Its no LA" Culturally, I could not agree more. My point had more to do with the economic engine driving the cit(ies) & the amount and proportion of the people benefiting from it.

    "Boston each have unique features that make them the way they are" What we have here is this giant teat called the federal government who has no idea how do do anything and has thus attracted thousands of beltway bandit types here to nurse from it. I am not talking about govt workers - they are just a drop in the bucket. What I am looking at is the govt consultants, contractors, their subcontractors, lobbyists, lawyers, etc. As long as the bloated govt continues to pay $900 for a hammer, these types will be here to fill that need.

    ReplyDelete
  72. "
    The attorneys you mentioned are RARE."

    Hahaha, you fucking idiot. I love it. Sure, not too many of those rare attorneys making big bucks in Washington, DC! Crawl back in your hole, imbecile.

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  73. "Hahaha, you fucking idiot. I love it. Sure, not too many of those rare attorneys making big bucks in Washington, DC! Crawl back in your hole, imbecile."

    What percentage of DC's population would you say are lawyers?

    This should be an interesting answer...

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  74. I have no idea, but there are tens of thousands.

    Every time BH's try to have this conversation, they end up exposed.

    ReplyDelete
  75. I forget, was it Neil or Bob who insisted there were about 1000 large firm lawyers in Washington. LOL, you people are absolutely amazing.

    ReplyDelete
  76. "
    What percentage of DC's population would you say are lawyers?

    This should be an interesting answer..."

    What percentage of the city would you say is at all suitable for a professional person?

    This should be an interesting answer...

    ReplyDelete
  77. Anon asked:
    "What percentage of DC's population would you say are lawyers?"

    What does it matter if 5% or 50% of the area's population are these high paid lawyers? Money spent gets respent. From what I remember from Economics 101, depending on the savings rate, an average incremental dollar added to an economy grows that economy by $5 once all is said and done.

    So, if you for example you had only 2.5% of the DC population being lawyers, and their earnings in 2000 made up 10% of all dollars earned in the DC area, what happens if you double the amount of dollars they earn? To put dollars to percentages, this 2.5% of the population no longer brings in $100M of a $1B economy (made up numbers), but instead bring in $200M. Now does that grow the economy from $1B to $1.1B? No. Because the additional $100M gets spent and respent in the economy, it actually brings in an additional $500M. Because of this 2.5% of the population's having doubled their income, you now have an economy that has expanded from $1B to $1.5 B. Lawyers earnings in DC more than doubled since the Bush administration came. Now what happens if the number of lawyers ALSO doubles? It looks like we are at at least a $2 B economy ... all due to that "small" percentage of the total population being lawyers.

    There was a Post article about that some months back. Due to increased lobbying efforts and opportunity for changes to regulation, the article talked of earnings for lawyers and lobbyists as a group going up some ten times what they had been prior to 2000. It also spoke of similar changes occuring in other fields such as government contracting.

    The long and short of it is that it isn't the relative size of a particular group that matters, but rather their relative wealth and how that effects the money the rest of us have in our pockets. That 2.5% doing well for themselves means the rest of us can do better for ourselves too with all that extra money waiting to be spent and respent on our services and assets.

    ReplyDelete
  78. Good points, Lance. And you know how many of our clients are in DC? Virtually none. Which means all the money is coming IN from elsewhere.

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  79. LOL...

    Lance, it is beyond obvious you have never taken an economics class at above a HS level.

    Do you even have a college degree?

    ReplyDelete
  80. LOL 6:09 ... so when you can't intelligently rebut an argument you throw out childish insults? Didn't you leave that childish behavior behind in middle school? Or are you maybe still in middle school. If you, please accept my apologies. You are what you.

    ReplyDelete
  81. Lance, your whole post was a tangent.

    Someone earlier said that lawyers were rare and was clear that they were speaking as a percentage of the DC population.

    Some idiot came back and said they weren't rare.

    So someone else(maybe?) asked them what percentage of the population they made up.

    Then you joined the discussion in your typical dipshit way with a longwinded, ignorant, and poorly written post that has NOTHING to do with what was being discussed.

    Finally, WTF, DC is NOT a high earning city. Of course there are some people in the area that make a lot of money, but on a per capita basis? Not even CLOSE to places like Boston.

    Why do you even bother? You just make yourself look like an idiot.

    ReplyDelete
  82. Well, thats one heck of a post.
    No wonder people love to stay here, however they could also take a visit at http://homes.relatedlistings.com, its one lovely place to look at also.

    ReplyDelete
  83. While I can't say that all are super-high earning. I read a few years ago that 1 in 7 on the street w/in District lines is a lawyer.

    When you think about the condensation around Capitol Hill, Golden Triangle, Metro Center, etc. Well, everyone you run into is a damn atty, like it or not.

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  84. "While I can't say that all are super-high earning. I read a few years ago that 1 in 7 on the street w/in District lines is a lawyer.

    When you think about the condensation around Capitol Hill, Golden Triangle, Metro Center, etc. Well, everyone you run into is a damn atty, like it or not."


    And large swaths of the city - NE, SW, much of SE - are not relevant. No attorneys would consider moving there. For all intents and purposes, it's not the same market.

    These people live in NW, Bethesda, Potomac, Chevy Chase and parts of Arlington and Alexandria. And that's it. Keeps prices very high there.

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  85. Excellent point.

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  86. "These people live in NW, Bethesda, Potomac, Chevy Chase and parts of Arlington and Alexandria. And that's it. Keeps prices very high there."

    Those people were already there in 2000.

    For the 100th time, the presence of lawyers doesn't explain away the bubble.

    ReplyDelete
  87. If I recall correctly, on a percentage basis, the inner burbs did not experience nearly the same increase as the outer burbs did. Thus, they wouldnt have as far to fall.

    ReplyDelete
  88. Look here for info on price gains.

    http://tinyurl.com/2xz9ok

    Arlington and Alexandria City climbed roughly as much as Fairfax County as a whole.

    ReplyDelete
  89. "Those people were already there in 2000.

    For the 100th time, the presence of lawyers doesn't explain away the bubble."

    Moron, for the 1000th time, there are many more of them now making much more money. You are a fucking idiot.

    ReplyDelete
  90. Anon 12:36 said to "idiot/moron":
    "Moron, for the 1000th time, there are many more of them now making much more money. You are a fucking idiot."

    "idiot/moron" thinks that the free market allocates based purely on needs. He might get the "there are more attorneys" part, but he doesn't get the "there are more attorneys making more money part."

    he thinks geez, even if they now make up 5% of the population compared to making up 2.5% of the population back in 2000, it's still only a very small percentage of the population. those few extra people still leave lots of housing around for the rest of us. they're not bidding up the price

    I tried to explain to him how this "new money" for the attorneys multiplies itself into "new money" for a lot of other people --- all of which are competing for the same relatively limited innerburbs housing, but he didn't understand what I was saying. It obviously wizzed right over his head. Would someone else please try explaining this to him?

    ReplyDelete
  91. LOL, lance... you really think we don't know that you and the annoy poster above are the same person?

    We have been over this 100x.

    You try to cheery pick some subgroup of people and claim that they are making dramtically more money.

    But actual income data doesn't show anything like the increase that would be necessary to justify the increase in prices.

    You look like a fool. Go take the break you said you were going to.

    That or go try to read a chart again, that at least was amusing.

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  92. This comment has been removed by the author.

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  93. Anon 1:21,

    The only one cherry picking is you. There being a lot more lawyers out there making a lot more money is but one example of the fundamental changes occuring in this metro area. But I understand, in order for you to refute the irrefutable, you need to set up a strawman. You need to pretend we've been saying that the area is changing simply because there are lots more lawyers making lots more money. No, we've never said that. We've said the area is changing ... and one of the manifestations of that change is that there are a lot more lawyers making a lot more money. There are, incidentally, also a lot more other people out there also making a lot more money. That was the gist of my earlier posts which since you cannot argue with, you need to try to "strawman".

    Income Soaring In 'Egghead Capital'
    'Knowledge Economy' Pushes Earnings for All Ethnicities Near the Top Nationally, but Stark Racial Disparities Exist

    By N.C. Aizenman and Dan Keating
    Washington Post Staff Writer
    Sunday, September 2, 2007; Page C01


    www.washingtonpost.com/wp-dyn/content/article/2007/09/01/AR2007090101234.html

    ReplyDelete
  94. To follow on Lance's article, here is another one about the high income of DC. As far as I can tell, this looks at the city itself, and not the surrounding Metro Areas - however it does show that DC is heavily weighted (must be all the lawyers) toward high incomes, and is apparently higher than both NY and Boston. Interesting to see the housing price averages in 05 too. http://www.forbes.com/lifestyle/2005/10/27/richest-cities-US-cx_sc_1028home_ls.html

    ReplyDelete
  95. Once again the Moron Lance Speaks! Lol! The only fool bigger than Lance is Va Investor. What giant trolls. rotflmao.

    ReplyDelete
  96. anon 7:24

    You only show yourself to be a jealous moron. Good luck, you'll need it. I don't know too many people with a (self earned) net worth approaching 8 figures that are fools, do you?

    ReplyDelete
  97. I think Va Investor is about 95% right on everything.

    She obviously has more experience owning/buying/selling real estate than most people typing on this blog.

    ReplyDelete
  98. "I think Va Investor is about 95% right on everything."

    Is the remaining 5% the part where she has been telling people it is a good time to buy for the last two years?

    Or is it the part where she tells everyone that this is a "normal cycle" despite the various records that have been set already(early in the bust)?

    VA_Investor is a real estate pumper. The time to buy is always now. The amount to buy is always more. (yea yea, she might respond to this and say "buy only what you can afford" but then in another thread she will argue that you can "afford" so much more than you think and that conservative metrics aren't necessary...)

    ReplyDelete
  99. anon 5:16 says:
    "despite the various records that have been set already(early in the bust)?"

    a) what records? just because you haven't been around to see this all happen before, doesn't mean it hasn't. it has

    b) how do you know we are early in a bust when nothing has busted? nothing more than a usual correction has begun ... and even then, it has been more tempered than in the past ... unlike past corrections, many properties are continuing to increase in value.

    You are doing yourself (and only yourself) a disservice grasping at straws.

    ReplyDelete
  100. "a) what records? just because you haven't been around to see this all happen before, doesn't mean it hasn't. it has"

    LOL...

    "(CBS) The already rough real estate market may be about to get bumpier.

    Economists predict a government report due out Thursday will show a national drop in the median price of single family homes since last year. If economists are right, it will be the first time that's ever happened."

    Normal cycle...

    "WASHINGTON -- Homeowners, struggling to deal with sharp increases in their adjustable mortgage payments, got hit with a record number of foreclosure notices in the spring as the crisis in subprime lending intensified."

    Normal cycle...

    "NEW YORK (CNNMoney.com) -- In the latest sign of weakness in the housing market, there are now a record number of homes sitting vacant and for sale in the United States, and the percentage of Americans owning a home has slipped slightly.

    A Census Bureau reported Friday that there are were a record 2.18 million homes for sale in the first quarter, which were not occupied, up 4 percent from the record levels seen in the fourth quarter, and up 38 percent from year earlier levels."

    Normal cycle...

    "October 16, 2007 - Builder confidence in the market for new single-family homes was further shaken in October due to continuing problems in the mortgage market, substantial inventories of unsold units and the perceived effect that negative media coverage is having on potential buyers, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI fell two more points to 18 in October, its lowest point since the series began in January of 1985."

    Normal cycle...


    Lance, this is very nearly as stupid as your inability to read the chart from yesterday.

    Thanks for the laugh though.

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  101. anon 7:32am just punked lance in a big way. I love it. This is where he will come back with his staples:

    "Bh's want something for free"
    "You just dont understand because you are a renter"
    "this doesnt apply to dc"
    "My house is only going up, it has went from 1 mil to 2 mil in a year"

    Anon, you cant educate someone who wont open their mind. In lance's mind realestate in DC went up this year even though the stats say a drop of 18%. He will just state,"that doesnt apply to my street".
    Bob

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  102. I still find it amusing that he typed that DC dollar volume was UP 35% YoY and didn't think there MIGHT be something wrong with that.

    I doubt he even looks at the data. If he did he couldn't possibly have said something so stupid.

    Why would he need data anyways? He already knows he is right...

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  103. This sales volume error really shows his true nature. He is not man enough to admit he made an error and take his lumps. How can we possibly learn anything from someone who thinks they are never wrong and when they are wrong wont admit to it? I guess we cant, he is delusional.
    bob

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  104. Bob,

    Nice strawman. What was posted was 2006 to 2007 with the sales rev listed below the respective years. 200Kandchange was listed below 2006 and 300Kandchange was listed below 2007. Now, if the BH who posted that meant it to be reversed, they should have posted it reversed. You are laying one of your strawmen arguments AGAIN. And you are probably the person we posted the numbers one way and now claim they should have been the other way ... and that I should have guessed that you'd posted them backwards. Stop playing games, it isn't going to help you get that house you want so badly. And don't say you don't .. you wouldn't be on here if you didn't want it.

    ReplyDelete
  105. Those numbers were cut and pasted from the MRIS site.

    Sorry you can't read a chart.

    Sorry you are too stupid not to have realized that sales volume in DC isn't up 35%.

    Oh yeah, and I can't help but notice you didn't admit you were wrong. Or apologize for calling anyone who can read that chart correctly an idiot.

    You are a sad little man.

    ReplyDelete
  106. Here is what was pasted. Turns out it was a single month's data and not Year-on-Year (talk about significant ... especially in light of the temporary credit market adjustments.) Your cut and paste is below. Now, what does it say? Didn't anyone ever teach you that numbers get lined up under their column headings .. and don't get reversed?


    "Washington D.C.
    From: 09/01/2007 to 09/30/2007 Statistics generated on: 10/09/2007

    Total Sold Dollar Volume: $ 222,879,288 $ 353,753,262 - 37.00 %"

    ReplyDelete
  107. Lance said...
    "(... especially in light of the temporary credit market adjustments.)"

    Temporary? I doubt we’ll see loose lending standards and the proliferation of exploding ARMs anytime soon.

    ReplyDelete
  108. Robert,

    I see you know how to use strawmen too? The adjustments occuring (i.e., reduction in dollars being lent) are temporary as lending standards and interest rates adjust. No one said (or implied) that we'd see "loose lending standards and the proliferation of exploding ARMs" ... except for you.

    Incidentally, remind us of your situation ... Aren't you a 40-something (or 50-something) year old who's always rented? I know we've heard a lot of the younger folks couldn't buy previously because they weren't in a position to buy ... for example, they were still in nursery school. What is your reason for having delayed so long?

    ReplyDelete
  109. Like it or not, ARMs are alive and well.

    --A real estate atty.

    ReplyDelete
  110. "Here is what was pasted. Turns out it was a single month's data and not Year-on-Year"

    It was Sept 07 compared to Sept 06.

    That is a perfectly reasonable comparison in the RE world.

    If you didn't understand the chart... doesn't that make you an "idiot" as you put it so eloquently?

    BTW, you still haven't admitted that you were wrong little man.

    Says a lot about you that you can't just come out and say say it even when it is just a little issue.

    spin spin spin lance, but never EVER admit you were just wrong and didn't read the chart correctly.

    ReplyDelete
  111. Lance said...
    Robert,

    “I see you know how to use strawmen too? The adjustments occuring (i.e., reduction in dollars being lent) are temporary as lending standards and interest rates adjust. No one said (or implied) that we'd see "loose lending standards and the proliferation of exploding ARMs" ... except for you.

    Incidentally, remind us of your situation ... Aren't you a 40-something (or 50-something) year old who's always rented? I know we've heard a lot of the younger folks couldn't buy previously because they weren't in a position to buy ... for example, they were still in nursery school. What is your reason for having delayed so long?”

    Not strawman. The root of the bubble (I/O, ARMs, toxic mortages, No Doc, NINJA,loose lending, specuguessers) has been removed. So, “The adjustments occuring (i.e., reduction in dollars being lent) are temporary as lending standards and interest rates adjust.” I guess that will only drive prices up further huh Lance?

    What “lending standards” are temporary Lance? What then, will/are lending standards based on now and in the future? Say, I don’t know….income? Something that has been lacking in the last few years and replaced with toxic loans and EZ finanicing.

    Incidentally “Lance”, data gathering/presentation and fact finding remains your weak point. I sold in ’05 due to a job change. I now have hundreds of homes to choose from, priced lower than last year, with no fear of bidding wars (as you predicted). With inventory and foreclosures continuing to climb and rental prices remaining low (again due to inventory), there’s no need to rush. The only thing I have to worry about is that someone will gladly accept my first lowball offer (you know, if they accept your first offer, you paid too much)

    ReplyDelete
  112. Stupid,

    Again, look at what was you pasted here:

    "Washington D.C.
    From: 09/01/2007 to 09/30/2007 Statistics generated on: 10/09/2007

    Total Sold Dollar Volume: $ 222,879,288 $ 353,753,262 - 37.00 %"


    I.e., What you pasted says UP 37% (223k -> 354k) during the month of September. Get your numbers straight, is it up as you posted or is it down as you now say you meant.

    ReplyDelete
  113. Lance said...
    “I.e., What you pasted says UP 37% (223k -> 354k) during the month of September. Get your numbers straight, is it up as you posted or is it down as you now say you meant.”

    You know “Lance”, this would be a perfectly good opportunity for you to do a little research and tell us if its up or down.

    ReplyDelete
  114. Robert, either way, up or down, the single month of September is not relevant. Like Va_Investor has said, you gotta get out of short term time frames.

    Incidentally, we haven't heard anything from David lately. Do you think he might be out house hunting?

    ReplyDelete
  115. "I.e., What you pasted says UP 37% (223k -> 354k) during the month of September. Get your numbers straight, is it up as you posted or is it down as you now say you meant."

    http://www.mris.com/reports/stats/

    Look it up numbskull.

    Again, if you can't understand the chart that isn't our fault. The fact of the matter is, you were wrong.

    I am sure you will argue until the cows come home that somehow the chart was wrong and it wasn't you... lol

    Funny, how did everyone else read it correctly then?

    You are a little man lance. Every moment you try to argue that it somehow wasn't your fault you couldn't read the chart confirms that.

    ReplyDelete
  116. Lance said...
    “Robert, either way, up or down, the single month of September is not relevant. Like Va_Investor has said, you gotta get out of short term time frames.”

    Careful Lance, are you’re on the verge of an epiphany?

    Please, let’s get out of short term time frames! Absolutely, the single month of September is not relevant!

    But what if, for the sake of data gathering, we look at September, August, July, June, May and so on. Does a trend emerge? Let’s look at other real estate cycles/trends. According to you and VA_ this is a “normal cycle”. Looking back to, let’s say 1989 to 1996, what happened to real estate prices? Did they go up? Down? By what percent? Please provide links to your data so that we too may become knowledgeable, and verify the data for ourselves.

    Furthermore, let’s look at real estate prices starting from 1997 to present. My data shows that prices skyrocketed. What caused the price increases? Are the causes for these price increases still viable? Are they still around? Does the amount of inventory affect prices? Does the amount of/rate of foreclosures affect prices? Do free upgrades from builders affect prices? Do the discounts from builders affect prices? Do lending standards affect prices? Do DOM averages affect prices?

    ReplyDelete
  117. Robert,

    I don't have links. I have only my personal experience with the market in NOVA, and to some extent Montgomery County, in the 80's and 90's.

    I had some places that doubled in price from 85 to 89. I was flipping new construction. The "players" were making millions flipping land in Loudoun and PW. I flipped a "lot" in two weeks for a 100% profit, I sold a house for double in 2 yrs, I bought a pre-construction townhouse in Tysons and sold it a week after closing for a 60K net profit (that was big money back then), we bought a new construction house and sold it after 6 mos. for a 50% profit, etc. There were ARMS, NegAm and no-doc loans available back then. There were also FHA and VA assumptions that required no qualification and, often, nothing down. There was loan fraud going on (not by me).

    Then things peaked in 1990. Prices on SF dropped up to 25% in my neighborhood in Vienna and up to 40% on a condo we owned at The Rotonda. We had about 8 other properties and, frankly, I didn't have exact numbers. We just buckled the seat belt and hung on.

    We wanted to move in late 1993. We found a terrific bargain but couldn't sell our house (without giving it away), so we leased it out at a negative.

    I think that late '93 was the bottom, but prices remained flat until '97 or '98. Then we started the run-up which I fully expected to end by 2002 or 2003. The excess over those prices (after accounting for inflation and lower rates) is what I think the downturn will be.

    We were in a recession in the early 90's and so far we don't have that situation. It is psychological in my mind and also a normal cycle. RE has booms and busts. The unemployment numbers just released (see saturday's WAPO business section, page one) for NOVA are very bullish. Commercial seems to be back on an even keel (see last week's Wash. Businss Journal).

    Prices increased in the 70's due in some part to women entering the work force in large numbers and in more professional jobs. More money in households chasing the inventory. Interest rates played a large part in the more recent run-up. Of course loose lending and speculation is what caused the froth that we are now working through.

    I know of people buying 10, 20 and 30 condo's. False demand. It will take some time to burn it off, but I don't see any 50% drops coming, ever. People that don't have to sell will sit tight.

    va

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  118. Va,

    Your post should be enlightening to all. It's not that we don't see the same things as the BHs, it's just that our experiences have shown us that they aren't recession causing/bubble bursting events. We've been through 'em before. This is just a normal real estate cycle running its course. And as you point out, this time we have a better general economy running concurrently to the correction. In my mind this means this correction will be shorter and less deep than previous ones where the economy usually caused the real estate correction.

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  119. Lance said...
    “Va,

    Your post should be enlightening to all. It's not that we don't see the same things as the BHs, it's just that our experiences have shown us that they aren't recession causing/bubble bursting events. We've been through 'em before.”

    Thanks VA_. Lance, I could take the 25% drop on a SF like a previous “normal cycle” and be pleased with it. But again, I’m in no rush. Plenty of inventory out there

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  120. From the desk of Gary North...but then once again Lance and VA Investor know better:'

    "The U.S. housing market is down – on paper – by over a trillion dollars, CBS News reports. But who knows how much? The report cited one forecast that says it will be down by another $3 trillion in a year. I think this estimate is plausible.

    Median prices are down by about 4%, year to year – the first national decline since 1933. Sales are down by 8% nationally, and by 25% in the Southwest.

    Why are prices not falling faster? Because sellers think this decline is temporary, that in a year, their homes will be worth what they were a year ago. Sellers learn slowly. Their homes will not rebound just because sellers think they are special, that they can beat the market.

    In a year, there will be real fear. Sellers will not be able to sell. Inventories will be much higher. Sellers will be stuck in their homes, or worse, paying the mortgage on their now-empty houses and rent on the one in the new location.

    Contracts that are contingent on the sale of a home by the buyer will fall through. Reality will set in.

    Some sellers will run out of bargaining room. That is when you should be there with cash.

    If you are seller, think "Titanic." Lower your price now and get out while the ship is still afloat. The water will be just as cold next year. Put on a life vest and jump, before the lifeboats float out of swimming distance."

    Lord what fools those mortals be!

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  121. to Anon 8:20 AKA VA INVESTOR

    LOL, it okay to come out VA....once again pumping yourself.....you gave yourself away when you mentioned the eight figures...you jerk! LOL

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  122. anon 11:55,

    Yeah, that was me. It should have been obvious to all but the intellectually challenged. If you read the preceeding post, how would you have thought otherwise?

    I occassionally for get to type in the VA.

    Sncerely,

    VA

    btw - are you the jealous idiot that I was referring to? Sure sounds like it.

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  123. Anon 11:55 AKA VA INVESTOR AKA Lance

    VA if we could believe any of the bull that has come out of your mouth we might believe you actually have some gravitas to you. But you have been so full of bull that none of your claims (even your wealth) has any merit*

    *With the exception of your "paint scrapping ability". ROTFLMAO!

    BTW VA did you know that NOW IS THE TIME TO BUY? LOL

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  124. This comment has been removed by the author.

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  125. Anon 3:19,

    your "now is the time to buy" mantra indicates that you don't understand that home buying isn't about timing. it's about doing your homework and buying when you find a home that fits your needs and is within your budget. it's as simple as that. your home isn't a stock or bond to be timed. once you understand what this means, you'll also understand that you can buy a home anytime you want ... and not feel like you have to wait for a recession, depression, or whatever.

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  126. and if you overpay badly for your home? Hey, its only money right? Who cares if you waste it?

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  127. Anon at 11:55

    You don't get it, do you? VA Investor's knowledge of real estate is the sole result of a brief career as an attorney, which ultimately ended in failure. Whenever David posts an article about a particular market (as in this thread) VA pops up with a description of a property s/he has that's "worth millions". If there is an article tomorrow about the RE market in Kansas, VA will regale us with a description of the apartment building she bought in Salinas that, guess what, is "worth millions". If it wasn't such a sad and obvious cry for attention, it would be funny. I picture a bottle of cheap gin next to the keyboard.

    This will be followed shortly by an hysterical post in which VA will "LOL", assure us all of his/her net worth, and demean all and sundry. Have another pop VA --it will ease the pain.

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  128. Personal attacks? Don't get down in the gutter. Discuss the issues.

    va

    p.s. "Lurker" is that you? How are things in Gainesville?

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  129. "I know of people buying 10, 20 and 30 condo's. False demand. It will take some time to burn it off, but I don't see any 50% drops coming, ever. People that don't have to sell will sit tight."

    Va, I was here too. I took the equity my TH in the late '80's and pumped it into a SFH that I paid too much for.

    I saw the SFH drop back about 5% in 1992. Given the cost of selling and moving, I was down about 15%. Real estate numbers are hard to figure but if I sold in 1992/3, I'd have lost about half my equity.

    The place went nowhere for 10 years. It started up in 1999 and here we are.

    I've expected a worse case pullback like 1992, 1993, 1994, after the S&L crisis.

    Doesn't look like it's happening this time.

    Like you, I know people who see a buying opportunity. They have major cash and are looking at acquiring investment rentals.

    I don't know if the demand is false or not.

    We'll see.

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  130. "Doesn't look like it's happening this time. "

    I would have to disagree with you. A 18% drop in the median price in one year is pretty significant.
    bob

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  131. "
    I would have to disagree with you. A 18% drop in the median price in one year is pretty significant.
    bob"


    Ah, the seedy suburbs. It's good to be bob.

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  132. anon 7:41,
    what are you talking about. The -18% was for the DC area, not the suburbs as you claim. But yes, it is good to be Bob.
    Bob

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  133. Bob,

    If the 18% is, in fact, a valid number, would you not differentiate Woodbridge from N. Arlington? And other areas from the worst hit? Would you also separate condo's from single family? Or is everything the same?

    jeez, almost forgot the "va", lest some moron think I'm trying to hide my identity (like posting "anon").

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  134. I would differentiate these types of properties, but not addressing that there is some link is completely wrong. Why did people move out to Frederick, MD and Fredericksburg, VA? Prices in the city pushed them out. Why did some families buy TH's and condos? Prices of sfh's pushed them that way. So, yes, the rise in the prices of condos and other such properties are linked. SFH's in prime areas will fall last, everyon knows this. But they will fall if everything else is falling. they wont be immune. Dont you agree, or do you thing there are immune properties?
    bob

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  135. The -18% was for DC, not Woodbridge. I suppose you could differentiate for NW DC and SE DC, etc if they gave stats for that which I've never seen but maybe they exist out there someplace. In any case, I don't put much weight in median prices so I tend to take such statistics with a grain of salt.

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  136. "I would have to disagree with you. A 18% drop in the median price in one year is pretty significant."

    It is significant. I agree Bob.

    I just checked mcEnearney.com to see if a whole flood of places hit the market in my zip. They haven't. Only 72.

    The 1/1 condo that was well under $200K is gone. The lowest price is another 1/1 condo, same area, for $214,900.

    I found a 2/1 SFH for -gulp- $479,500. It has the charm of my place, which I thought was worth a bit more.

    Upon closer inspection their lot is 1,332 and mine is 5,000. Their's is frame and mine is brick. I have a garage, they don't. I think my neighborhood is better. They don't have a basement, mine does.

    They're clearly delusional househeads. Their 2007 assessment was $355K and they're asking $479K, I don't think so!

    Of course, if they get anything close to their asking, the city'll have the basis to grab thousand$ from me next year.

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  137. Oh look, more comparisons of assessments to real prices.

    Someone must have doubled up on their stupid pills this morning.

    Hey KH!

    You have me convinced. Prices are obviously shooting to the moon!

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  138. I'm actually starting to suspect that kh is actually a BH in disguise trying to make Lance look bad by making incredibly stupid arguments.

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  139. The pieces fit...

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  140. KH isn't making stupid statements. He is approaching the situation in a way that is very very foreigh to Bubbleheads. He's looking at all the information out there ... i.e., everything that is out there. BHs are like day traders, they look at one thing and one thing only ... price trends ... completely overlooking the fact that prices in the end are the result of many many other factors out there. They are only the end result and in and of themselves don't cause themselves to go up or go down. They are only the final measure. KH understands this and so while he doesn't come out and say it, he does go out and look at all the factors that have a bearing on those prices. This is a concept that eludes BHs and hence blinds them to the realty of where values are ultimately heading. In criticizing KH (and myself and Va) for understanding the bigger picture which they themselves cannot even conceive of in theory, the BHs only make themselves look dumber and dumber.

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  141. Looking at all the available information?

    Like an angry drunk cursing the moon!

    KH is just throwing out BS in an effort to waste time and delay the now inevitable day when he has to admit to himself that prices are coming down, even in his unremarkable neighborhood that he irrationally believes isn't subject to the same market forces as the rest of the country.

    BTW Lance, I couldn't help but notice that you forgot to admit you were wrong about Greenspan in this post as well.

    Seems like a big mature adult like yourself wouldn't need this long to aknowledge such a flagarant misstatement of Greenspan's views.

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  142. Have to disagree Lance. It seems to me the only thing kh looks at is assessments and then tries to compare them to sale prices. I'm not a BH and I think most of them are going to be way off in many of their predictions. That doesn't change the fact that the argument that kh continues to present is flawed.

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  143. Anon 7:09 (seven of nine????) check out the Oct 30 thread.

    The actual sales terrify the BH. Lance was right. They want to believe that they will prevail, in the purity and essence of their precious bodily fluids....

    Seriously, between the fear and anger, this is not about discovering what is happening with Real Estate.

    This blog is a place to keep the faith of bubblehead alive.

    They don't want facts that might bother them. They want soothing, reassuring, lite words.

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