Thursday, June 15, 2006

Pictures :-)

St Matthews Court in Washington, DC

Office of Federal Housing Enterprise Oversight (OFHEO)

Rowhouses under construction in DC


  1. What's so special about St. Matthews Court?

  2. Where are those rowhouses under construction located?

  3. "What's so special about St. Matthews Court? "

    Interesting alley street in DC with really old alley houses.

  4. Lots of old alley homes in Foggy Bottom. Great history with those homes. They're tiny, but now selling for large amounts of cash.

  5. 400 block of Ridge Street NW

  6. "Interesting alley street in DC with really old alley houses. "

    Oh yeah.....I keep forgeting. This blogsite also serves the purpose of showing interesting houses in DC.

  7. How about stopping the car when you take the picture to post on CL you stupid Jack@ss

  8. Photo of residential housing in Silver Spring MD. click here


  9. Photo of main business district in Brookland in the NE section of DC.

    click here


  10. These are the typical homes in DC that I've been talking about the entire time I've been posting on David's blog.

    click here

  11. Bryce - photos could be of any Squareville Sleppy Town, USA.

    So again, why is it that we pay 50% more for than housing than for rent in DC?

  12. Yeah, these 100 year old brownstones one mile from the capitol building are available in anytown, usa. I wonder what the building you live in will look like 100 years from now?

    (rhetorical question, please don't answer)


  13. There are 100+ year old brownstones all over the country -- Manhattan, Boston, Chicago, Annapolis, Philadelphia, St. Louis, Cleveland, Detroit. Some are filed with crackheads; some are worth millions; some are overpriced.

    But I'm off topic - Why is it that rent is 50% cheaper in DC than owning?

    I live in a house.

    (Rhetorical answer, please don't question.)

  14. i wonder how much those rowhouses being built are going for? and where are they actually being built at? the last time i checked, it wasnt like dc had a lot of land to be built upon..

  15. 400 block of Ridge Street NW

  16. D.C. Market Weak for Homebuilders

    By Nicholas Yulico

    The Washington D.C. housing market continues to see far fewer home orders because of the rising inventory levels in the region, which is hurting homebuilders.

    Contracts in the greater metro region fell 40% in May, and closings declined 32%, according to a research note from Raymond James analyst Rick Murray that was released Thursday morning.

    Inventory for sale at the end of the month totaled almost 25,000 units, which represents 5.9 months of supply, compared with 1.1 months a year ago and 5.3 months in April.

    "Conditions appear to be deteriorating in the D.C. market and we suspect stabilization will not come for some time as immense speculation over the past few years will weigh on the market for some time," Murray wrote.

    Public builders with a major presence in the market include Toll Brothers, Hovnanian, NVR, and Comstock Homebuilding.

    Besides the nation's capital, parts of California, southern Florida and Phoenix have also seen rising housing inventories, which have hurt new home sales at builders in the second quarter.

  17. Hey anonymous...Is that Fred's you got in that picture of Brookland? I used to live there back in the early 70s....Really nice bunch of old Northeaster's used to hang out there...I drank more Schlitz there then probably can be counted...Glad to see 12 street still looks good...

  18. economist ... it's just Bill still making an ass out of himself posting in my name.

  19. no prob, economist


    Interesting report. Long on data


    Nothing speaks like data.


    Here's the link to DC info. Sorry for repeat entries.

  23. DC is a turd town. Nasty and vile, it is one of the worst cities in North America. It is not as bad as baltimore or buffalo, at least it has that.


    Steamy windows, real estate, cheap loans. Oh, baby!

  25. One more thing: Lance, can you explain to us how an S curve would work in the current housing market?

  26. if you haven't seen it - this is in todays WSJ!

    e McMansion Glut
    America's love affair with sprawling homes is showing signs of waning as the real-estate market softens and aging boomers seek smaller houses. Our reporter on nervous sellers and the growing supply of 'faux chateaux.'
    June 16, 2006; Page W1

    Mickey and Jane Finn put their five-bedroom, 6,200-square-foot home in Leesburg, Va., on the market in April, but already they've cut the price to $899,900 from $1.1 million. Now, they've decided to put it up for auction.

    What's the hurry? Down the street in their leafy subdivision, two similar-sized houses are also on the market, and around the corner, five more have for-sale signs. The Finns, who paid $692,000 for the new house in 2002, recently retired and, with their two children grown, they're eager to move to a place half the size. "We don't need this big a house anymore -- if we ever did," says Mr. Finn, age 63.

    The golden age of McMansions may be coming to an end. These oversized homes -- characterized by sprawling layouts on small lots, and built in cookie-cutter style by big developers -- fueled much of the housing boom. But thanks to rising energy and mortgage costs, shrinking families and a growing number of retirement-age baby boomers set on downsizing, there are signs of an emerging glut.

    Interviews with dozens of real-estate agents, sellers, developers and housing economists turn up signs across the country. In an affluent Dallas ZIP Code, where half the houses have four bedrooms or more, home sales fell 31% in the first quarter compared with the previous quarter. But sales rose 23% in a nearby ZIP Code where 7% of houses have that many bedrooms. In Santa Fe, N.M., homes in the 2,000-square-foot range sell within weeks, while larger ones languish for months, says broker Pat French. In the Boston metro area, sales of homes with four or more bedrooms were flat in the first quarter from a year earlier; sales of homes with three bedrooms or fewer rose 14%. New Jersey appraiser Jeffrey Otteau says the inventory level statewide for large, $1 million-plus houses stands at 13 months, more than twice the state's overall average of six months.

    [Go to Chart]
    Sales of larger homes are flagging in many markets. See a comparison of home sales in nearby ZIP codes.

    There is no formal definition of what constitutes a McMansion. (Some would say it's any home bigger and showier than your own.) One broadly accepted definition, used for this article, is a house larger than 5,000 square feet -- about double the national average -- with four or more bedrooms that is built cheek by jowl with similar houses. Most have been erected since the mid-1980s, when major developers such as Toll Brothers and K. Hovnanian Homes began to chase couples who wanted more space -- and luxury -- than they had when they were kids. These houses often boast grand, two-story entryways, three-car garages, double-height family rooms and master-bedroom "suites" equipped with sitting areas and whirlpool tubs. Developers market the homes under names such as the Grand Michelangelo, Hemingway and Hibiscus -- while detractors have dubbed them "garage mahals," "faux chateaux" or "tract castles."

    Big Fuel Bills

    The 2003 American Housing Survey, the latest available, found nearly 3.2 million homes in this country with 4,000 square feet of space or more -- the largest category the group tracks -- up 11% since the previous survey in 2001. Part of the big-house mania was fueled by speculation as home prices surged, says housing economist and consultant Thomas Lawler in Vienna, Va. "Folks bought megasized houses well beyond their needs to increase their investment in real estate," he says.

    Now, some boomers in their late 50s are counting on selling their huge houses to help fund retirement. Yet a number of factors are weighing down demand. With the rise in home heating and cooling costs, McMansions are increasingly expensive to maintain. Nationwide, electricity rates have risen 12% over the past three years, while the price of natural gas for heating has risen 43% in the same period, according to the U.S. Energy Information Administration. That means it can cost $5,000 a year or more to heat and cool a 5,000-square-foot house in a city such as Farmington, Conn., according to Connecticut Light & Power Co.

    The overall slump in the housing market also is crimping big-home sales. The volume of newly built homes sold fell 11.2% in the first four months of the year from a year ago, while sales of existing houses fell 5.7%, says the National Association of Home Builders and the National Association of Realtors. Yesterday, one of the biggest home builders, KB Home, cut its earnings outlook for the year, citing declining demand. Bruce Karatz, chairman and chief executive, said demand has fallen "largely due to a sharp reduction of speculative purchases and an oversupply in new and resale inventory."
    Tom Green threw in a high-definition TV to sell his house in Loudoun County, Va.

    Meantime, the jump in interest rates has put the cost of a big house out of more people's reach. With 30-year mortgages at 6.2% yesterday, a $700,000 loan costs about $4,300 a month, up from $3,900 when rates were 5.28% in June 2003, according to "The young people coming up don't have the means to absorb these big houses," says Mr. Otteau, the New Jersey appraiser.

    Since February, Kris and Ray Victory have been trying to sell their five-bedroom house in Brookville, N.Y., built in 1987 with a sunken living room and a fireplace in the master-suite wing. The couple raised three children in the 8,000-square-foot home, but they say younger families seem turned off by its $1,000-a-month utility bills and $25,000 annual taxes. "Buyers tell us it's too big," says Mrs. Victory, a 45-year-old electrical engineer. The couple recently shaved $200,000 off the $2.35 million price.

    This dynamic could become more acute in coming years. As the nation's 78 million baby boomers, born from 1946 through 1964, become empty-nesters and hit retirement age, many are already selling their trophy homes and trading down to smaller models. There are roughly the same number of people in the next pool of potential buyers, but they're marrying later and often have smaller families: U.S. Census statistics show that the average household size in 2005 was 2.57 people -- down from 3.14 in 1970.

    Already, the McMansion oversupply is acute in places like Loudoun County, Va. In the fast-growing area northwest of Washington, D.C., thousands of hulking, red-brick colonials sprouted over the past 10 years on quarter-acre lots that had been carved from farmland and woods. In May, 4,719 houses were for sale, more than three times the year-earlier level. The number of sales dropped 39% to 484 in the month, and the number of days a home remained on the market lengthened to 70 from 14. "Sellers are dying out there," says local real-estate broker Michele Stash.

    In one Loudoun subdivision, Tom Green, a 47-year-old airline pilot, put his five-bedroom house on the market six months ago for $1 million so he and his wife could downsize to a $592,000 townhouse nearby. But his home had to compete with 38 others for sale in the neighborhood with four or more bedrooms. His 5,600-square-foot, five-bedroom house, which he bought new for $515,000 in 2000, didn't get a nibble for months. Finally, a relocating California family agreed to buy it if the Greens would leave behind their high-definition TV and a lifesize Spiderman statue that had been a gift from Mr. Green's sister -- plus slash the price to $820,000. (They also had to throw in a cookie jar with "Biscuit" -- coincidentally, the name of the buyers' dog -- written on the side).
    Mickey and Jane Finn have decided to auction their Leesburg, Va., house (left); the pool and waterfall at the Mumme house in Phoenix (right).

    The Greens complied. The buyers, John Zuccaro and Cindy Fonseca, say they were emboldened to make their demands when they saw how much the market had cooled since April 2005, when they sold their three-bedroom house in Torrance, Calif., for its full asking price of $759,000 in only five days.

    Though huge houses continue to be built across the country, many architects and builders appear to be responding to shrinking demand for McMansions. In the latest quarterly survey by the American Institute of Architects, 68% of the 500 residential architects polled said home sizes are stable or declining, compared with 58% a year ago.

    Focus on Smaller Homes

    For anti-McMansion activists, who hate to see big homes supplant smaller "teardowns" in established neighborhoods, a decline in demand may be good news. Homeowners in some areas have successfully lobbied for laws designed to rein in the light-and-view-blocking monsters: Last year, Arlington County, Va., limited home footprints to no more than 30% of a lot, while Wood-Ridge, N.J., recently said homes could take up no more than 55% of a lot.

    Faced with dwindling demand and a fall in their stock prices, many national builders are starting to focus more on smaller houses, which often feature separate dining and family rooms but just two bedrooms. K. Hovnanian Homes, long known for McMansions, is building such houses under its "Four Seasons" label in nine states. Toll Brothers is creating communities like Cranbury Brook Villas in Plainsboro, N.J., which has two-bedroom homes ranging from 1,656 to 1,958 square feet that can be equipped with lofts, sunrooms and dining-room accent columns (the "Bayberry" model starts at $389,975).

    Yet some families have found it hard to downsize. In Phoenix, David and Mary Mumme, both 49, are selling their 4,938-square-foot house, partly because their oldest son is heading to college and partly because maintaining the house and yard -- with pool and waterfall -- takes about eight hours a week. They're asking $1.8 million, about three times what they paid for it six years ago, because they saw nearby houses sell quickly for about $2 million last year. But even though the house has 12-foot ceilings, marble countertops and skylights in the closets, no one has made an offer during the month it's been on the market.

    John and Barbara Fiore, both 54, had to slice $50,000 off their $900,000 price to move their 5,500-square-foot house in Warwick, N.Y. Ms. Fiore, who has five grown children, says she worried that no one would want her six-bedroom home while it sat on the market all last year, because today's families are smaller. (The eventual buyer was a married doctor with three young children.) The delay in selling "was scary," says Mrs. Fiore. The Fiores, who built the house 14 years ago, now live in a three-bedroom house nearby that's less than half the size. Meanwhile, Mrs. Fiore's parents recently sold their Warwick house in a month -- but it's only 2,500 square feet.

    And even some young couples who have tried the big-house life are getting out of it, trading space for higher-quality construction. Last October, Andrew and Sheri Leppert of Alpharetta, Ga., both 32, exchanged their four-bedroom, 2½-bath home for a smaller one that has only three bedrooms and two baths -- yet, at $450,000, cost 50% more. Ms. Leppert, a homemaker who now has a young child, says she was attracted by the new house's details -- including beaded-glass windows, wide-plank flooring and 9-foot-tall doors made of solid wood -- which elevated it in her mind above the "Georgia sprawl" house she was leaving. She and her husband never used the fourth bedroom of their old house, she says, and she doesn't miss cleaning the extra space. "Taking care of it became a burden," she says.

    Write to June Fletcher at

    A Tale of Two ZIPs

    In many markets, sales of bigger homes are flagging while smaller ones are doing better. Here's a comparison of nearby ZIP Codes for the first quarter of 2006:

    Dallas 75205 49% -31% $365,000* There are many new homes in both ZIPs, but in 75206 they're selling better because they're typically half as big, and cheaper. For sale in 75205: a 6,390-square-foot home for $3.5 million with wine room and library; in 75206, a 3,300-square-foot Tudor, $599,000.
    75206 7% +23% $125,000*
    Miami 33133 19% -8.1% $538,500 Miami's market has cooled, agents say. In 33133, which includes trendy Coconut Grove and Coral Gables, a 6,900-square-foot, three-year-old house has dropped $1.25 million, to $3.5 million.
    33132 0% +32.7% $340,000
    Seattle 98119 21% -9.8% $499,500 Anti-McMansion sentiment runs high in Seattle. In 98121, most homes are tiny and relatively new. Newer homes in the older neighborhoods of 98119 are pricey: a six-year-old, 5,200-square-foot house with Puget Sound views asks $3.3 million.
    9812 10% +5.4% $395,000
    Tucson 85718 39% -9.7% $401,500 Tucson's had a big growth spurt since 1990. In a gated community in 85718, a 6,100-square foot home, built in 2003, has fallen $200,000 in asking price, to $3.3 million. In 85704, $600,000 buys a new, 2,400-square-foot pueblo-style custom house.
    85704 28% +3.9% $279,500

    *Census 2000

    Sources:, and local multiple listing services

  27. Looks like those rowhouses under construction are going to be condos.

  28. Anon 6:54
    I saw the 1 BR floorplan on the website (
    The floorplan looks similair to a mobile home. I would be better off in a mobile home in West Virginia and taking the MARC into DC.

  29. "the floorplan looks similair to a mobile home. I would be better off in a mobile home in West Virginia and taking the MARC into DC."

    methinks that is how you live now.

    but back to the point; these places are made out of concrete; walls, floors, and ceilings. also, they are located in a place OTHER than wva. they are worth a few bucks more than a single-wide in bergoo.

  30. Thanks, pass. I'll keep my 2.5 acres away from the stupid, smelly humanoid masses.

  31. Anon 8:40
    "methinks that is how you live now"

    Sounds like you are as low your perception of trailer park people.

    Concrete walls and floors. Oh Boy!
    At least they not getting ripped off as you would get ripped off on this property.

    Poke fun of them if you want, but they are still better off then any resident of these units. I'm sure they are enjoyed a few chuckles at the people buying properties like this.

  32. "Sounds like you are as low your perception of trailer park people."

    what you don't know, is that i *AM* "trailer park people". i just managed to get out long ago by ceasing to be complacent and, um, going to good schools and not being afraid to make bold moves with an eye toward the future.

    and bergoo? how would i know about a tiny place like that? 'cause that's where i'm from, baby.

  33. anon 9:56
    Sorry I did not mean to offend anyone who is living or has lived in a trailer park. I also went to a good school, have made bold moves and always kept my eye towards the future. Still I would rather be in a trailer park in WV than get ripped off by the developer of the rowhouses.

  34. "especially when it is 50% CHEAPER to rent in DC right now.

    Renting is 50% cheaper because, at the end of your life, you have nothing. No estate to transfer to your heirs.

    Owning is more expensive because, at the end of your life (or the term of your loan), you own real property (look up the legal definition of that term. "Real Property". In caps.)

    While you are in the process of paying your mortgage down, you own a stake in real property (look it up). The law, and the societies which the laws make possible, ALWAYS holds the owner of real property in higher regard.

    Renter = Sharecropper of the 21st century. Sure, you can grow some peas on my land to feed your family. Just make sure you give me the majority of your crop. When you die, I'm kicking your family out.

  35. "Owning is more expensive because, at the end of your life (or the term of your loan), you own real property (look up the legal definition of that term. "Real Property". In caps.)"

    I agree that owning is generally better than renting, but I can't believe that you are making justification of the current higher cost to own. 4 years ago, you would not have been able to make this argument because it would have been about the same price to own, so what the h*ll are you talking about? You speak of the current prices as thought they have always been that way.

  36. "Renting is 50% cheaper because, at the end of your life, you have nothing. No estate to transfer to your heirs."

    No, no, no. You do have something. You have 50% more money to invest in stocks, CDs, bonds - whatever you like. Plus, you have no maintenance expenses, condo fees, and property taxes.

    I'm sorry you feel you have to equate renters with "sharecroppers." However, if you're not in debt to a landlord, you're in debt to bank. And -- well, it's still debt. You're a sharecropper to bank, instead.

    Work your "renters must have low self-esteem, that's why they rent" magic elsewhere on some other blog. Won't work here. Folks have enough sense to know when to NOT buy (e.g., now). That's why they visit this blog - to stay informed. (Thanks, David.)

    Well, eternal housing cheerleading Lance is different. Of course, he's a RE agent and things are slow for him. I have my own barometer to know when to buy - when Lance stops posting, I'll purchase, b/c then I know he's busy and it's becoming a seller's market again.

  37. Well put, Bill, I agree with your premise. I am enjoying a break from owning, though I do have one rental property that I have decided to keep. Housing is simply another form of investing, and it had its time. It will have its time again, and the best thing that any thinking man can do is to prepare for that time. A simple mantra to investing states that as an asset price rises, the risk becomes higher, and the potential reward becomes lower. Many of those in denial are little Neros fiddling while Rome burns.

  38. To add onto your comment, buying a home should be seen as an "investment" for shelter; not an investment for cash flow, like stocks or CDs. Nonetheless, all investments run the risk of losing value - contrary to what some might say about housing prices not going down in DC or certain special economic conditions here precluding it from happening.

    If folks want to invest in real estate, better try out an REIT - perhaps, commercial ones, since residential is so highly questionnable right now (check out dividend paying stocks NNN, O, AFR, HRP).

    With REITs, if the RE market goes belly up, easier to move money out of an equity asset than to sell a building.

  39. Godot:

    "Housing is simply another form of investing"

    You sound like a real estate agent. Nothing could be further from the truth. Buy vs. renting has little to do with "investing" other than that you are sure to be far far wealthier if you buy than if you rent even if a terrible market such as the current one. Buying means taking on a adult responsibility that leads to having a stake in the community and what that community becomes. Yes, you can say it is an investment, but it is not as much an investment dollarwise as an investment in yourself and your town/city/neighborhood. Renters don't put anything into a property and the surrounding town/community/neighborhood other than "time". They use the resources around them but don't contribute back. And why should they? They have absolutely no stake in what happens around them. Like the gypsies of days gone by, when the going gets roughm they can just pull up their wagons and leave. They've given nothing to the community around them and have nothing to lose. longterm renters.

  40. Interesting poll ... How many of the renters on here serve on neighborhood committees or other civic organizations? When was the last time you made a donation to support activities such as a local park renovation? When was the last time you gave your time to such an activity?

  41. Huh? I do volunteer work - teaching ESL to immigrants and helping out at food pantires during the holidays - wherever I live, whether I buy or rent. As do other renters in my building. Moreover, we do volunteer work through our work places.

    And where are you getting your information to base this argument that renters are less involved in their communities than home owners? Renters pay the same at local restaurants, bars, and supermarkets as home owners. They pay the same taxes -- minus property tax (which is passed on to us in the rents though). They send their kids to the same schools.

    No, renters don't invest in the buildings in which they live - that's what the landlord does.

    So Lance, where are you going with this line of discussion? (In circles as usual, I imagine.)

    Do us all a favor and please stop throwing out your crap ideas that have no basis in fact, data, or studies. Please get seriuous and stop wasting our time.

  42. Why do renters care about an overpriced housing market? Because they'd rather buy than rent.

    Otherwise, they'd pay no attention to the RE market.

    If renting were all about "freedom" and copious "excess cash" to spend or invest; you'd think it would be a no-brainer. But it isn't a no-brainer, as all the complaining and emotional insults coming from renters continually demonstrate.

    It isn't a no-brainer, because renting sucks, renters know it sucks, they want to buy, they can't afford it, and they complain loudly and attack people who own homes.

    Calm down and think about it. It is true.

    Renting sucks.

  43. anonymous 8:52 am

    you're absolutely right ... they know it sucks having to be subserviant to their landLORD ... but what gets me is that I came on this site thinking that there would be rational discussion ... but that isn't going to happen because they are so guilt laden with not having made the right decision to buy some 3 or 4 years ago, that all they are looking for is to attack those who did make the right decision.

  44. Btw, I don't agree with your assessment that "they want to buy, but can't afford" ... these guys fall in one of 2 camps:

    1) the commitment-phobe - Can't buy because it means commitment. Can't just up and leave whenever things get difficult. Terrified by prospect of actually being held responsible for something. Their inability to buy is demonstrated in many other facets of their lives. They don't have a significant other (or kids, God forbid!), they don't climb the work or social ladder 'cause that requires commitments to people, values and ideals, they don't do much of anything other than "instant-gratify". They'll make splurge decision such as when to buy the 50 inch plasma or take a vacation with no notice to anyone ... even their boss. Secretly, they'd love to buy their own place to live in ... Just like mommy and daddy did ... but they just can't seem to do that "splurge" decision with buying because buying is intense activity ... and commitment. They'll probably never buy BUT will become homeowners. After getting totally priced out of the market because of their inability to commit, they'll end up moving back in with mommy and daddy and when those 2 go, they will indeed be homeowners. They won't hold on to the house long though, as owning it will have been all their worse dreams come true! ... harder on them even then the demises of mommy and daddy.

    2) the "I'm soooo smart I can't figure out the numbers even when they are spoon fed to me" type - Keith is a prime example of this. Sooooooo stupid he thinks he's smart! My rule in life has always been to listen to the folks who admitted there are no clear cut yes and no answers in life and that things require in depth discussion. This guy instead, KNOWS things to be true because mommy and daddy ... or the other random person down the road TOLD HIM it was true. No discussion required! His mind is well made up before the first posting is made. And in this case, he's decided for himself that there is some conspiracy out there intended to keep him from being a homeowner at a "reasoanble" price as defined by his UNreasonable expectations ... which are of course right because someone told him that those should be his expectations. The world is a confusing place for him so he makes it less confusing by just refusing to think and not even aknowleding usefull info even when it is spoon fed to him.

    Both are examples of what Darwinian Theory describes as survival of the fittest. To ensure continuity, the human race seeks to eradicate weak traits such as inability to commit (no children in which to pass on these genes) and just plain "dumb" ... in the past it was the wild boar that he went to pet that did this type of guy in, nowadays it is his inability to see past his hubris that leads him to eventually having to sleep on a park bench. Evolution is alive and well!

  45. Okay ... another survey: Do women (or men) get all excited when you tell 'em you're a renter!

  46. To those with the herd mentality - you know who you are:

    I have been fortunate to be on both sides of the coin. I have owned, and I have rented - I have not found the people in cookie cutter subdivisions to be overly involved in their communities any more than renters. If they have kids, then they often are involved in the neighborhood a bit more, I will give you that.

    I don't see how you can equate owning with becoming an adult. I owned, I still own a rental, but I rent a big house for at least half what it would cost to own, and I save more than 20% of my income during this period of uncertainty. What does that make me? An adult that reverted to a kid again, or someone who does not care what everyone else thinks? To me, it takes more of an adult to be less concerned with image. I used to drive a BMW with payment to the bank, but now I drive a Taurus (company car), and I am as happy or happier in this vehicle. Therein lies the real freedom.

    So many have bought into the premise that when you "own" a home, even though you have tweaked the financing to get as much as possible with arms, and neg-am loans, that you have arrived to adulthood, and have something. This desire to get a little piece of the american dream, at any cost, is exactly what will bite you in the end. Those who can set the emotion aside and make a decision based on fundamentals and opportunity costs will come out much better in the final analysis.

    RE: Commitment Phobe: Damn right I don't want to get stuck in a 600k dump - sometimes it makes sense to not commit
    RE: The numbers: Housing is not exempt from the law of supply and demand. It is a relationship that works together - there used to be no supply, thus increased prices. Now there is a huge supply - you tell me what happens next. Maybe you don't believe in this relationship. This will seem so obvious in a year or so, it will be like looking back on bubbles from the past.

  47. Answer to survey:

    Women like you more when you own, but they tend to hold out on the sex because they don't want you to think they give it up to easily.

    On the other hand, I get laid more when they know I am a renter because they are not trying to impress me as much. I find it interesting that a guy is nearly punished for being someone that the girl likes; thus, a waiting period for sex.

    Hopefully you can find a girl that likes you and not your house, otherwise, she may be taking half of it ina few years...

  48. Not all renters are "gypsies" who don't care about the neighborhood or anything around them. Heck, I've tried to improve various things around the apartment complex, but I have mostly been ignored. Sure, we have our share of bums who barely pay their rent and live like animals, but I've seen and lived near home-owners like that as well. Scum is still scum, even if it owns instead of rents.

    I rent because I got out of college when the housing boom had already begun. I've saved my money, invested wisely, and make a good salary. And you know what - that doesn't mean a hill of beans in the Maryland-DC area because housing prices have simply climbed too high, too fast. No savings rate can keep up with them. Sure, I could take out a "funny money" loan and buy some overpriced dump of a house in the area, but why? Prices have to come down since very few people can afford anything that is being offered.

  49. waiting for godot ... my post wasn't aimed at you or others like you. YOU dicuss things rationally and make your decisions based on all the facts ... not just those that selectively fit a "commitmentphobe" or "can't get the numbers right" mentality. From the start I have said that people need to look at their own situations and look at all the factors currently running loose in the real estate market before making a decision. You have done exactly that. You and I are on the same page. My post was definitely aimed instead at those who who don't do their homework and instead unequivocally delare homeownership today (i.e., buy in the last year) to be a bad thing for everyone with no individual considerations taken. I haven't even bothered to mention before that the rents from the two efficiencies in my new house (one in half the basement and the other in the carriage house over the garage) cover my mortgage payments ...leaving me with only the taxes and insurance to pay. But it doesn't matter 'cause these bubbleheads don't want to hear that buying can be a good deal even in these times of inflated values. They can't see the forest for the trees. So, they spend their time cheering and hoping for a 50% price reduction that anyone with any experience whatsoever in real estate knows that is as likely to happen as the tooth fairy giving them a down payment. I could have done the same, instead I basically bought my retirement by buying in an inflated market. Oh yeah, did I forget to mention that when I retire some 25 years from now I expect the rents from my two rental units to not only be paying the mortgage (which will be close to paid off anyways) but giving me spending cash ... 'cause, afterall, rents in real dollar terms will have gone up a lot in 25 years ... a hel of a lot!

  50. anon 10:35

    your situation may indeed warrant waiting ... just don't wait for a 50% price reduction ... that's not going to happen ... and when you're ready, take a closer look at that "dump" ... a fixer-upper can be a great way to earn "sweat equity" ... and with everything changing around here, today's "bad" neighhorhood might be tomorrow's "in" neighborhood. And as for prices "having to come down since very few people can afford anything that is being offered." Keep in mind that that is not what has happened in the past. Usually it's instead been the case that salaries caught up with prices instead. And, more importantly, you just need to know that if you really do want to buy now, you really can ... And waiting a year or two just to save maybe 10% or 15% if/when prices "crash" it may not be worth it for you in your circumstances. I know it wasn't for me. Opportunity pass by is opportunity lost forever.

  51. Lance,

    I imagine that you got in at a good time if your two apts are covering your entire mortgage, and from the sounds of it, you must have a 30yr fixed, or are paying it in such a way as to pay p&i. I don't think the bubbleheads take issue with this type of responsibility, because if everyone had done this, we would not be experiencing the excesses that we see today. I somehow doubt that you would like to have people living in your basement for the rest of your life, but maybe you will rent the top and move into something else. I see the people on this site and I put them in three categories:

    1 - Those who are young enough to not have had the chance to buy, and now it looks unlikely that they will unless there is a price correction.

    2 - Those who don't have the money to buy, and now it looks unlikely that they will get the money to buy.

    3 - Those who sold out of fear, or out of good sense,and now are waiting for the market to correct.

    Bottom line is that this market has created a lot of "have nots" out of hard working people that would not normally fall into this category. So what is one to do?

    1 - Move to a cheap town in the middle of nowhere? This would be an admitted defeat for those who bail on the place that they want to be because they cannot afford to stay. I think that they would be haunted by this move because they were forced to move because of external conditions.

    2 - Rent - Hope lies in this decision because if prices come down, and I think that they will, then they will be poised to buy what they want and get some concessions from the seller.

    3 - Buy now - probably the dumbest thing to do. The "bubble" markets are clearly shifting to buyers' markets, and any deals that you can get now will certainly be better in the winter when times are slower. I don't know of anyone predicting that the spring selling season that did not happen will be posponed to late summer, fall, or winter. When I see a house listed for 500k, I used to think, "I will probably pay $550k by the time it is said and done." Now I think, "I'll bet that I could get that house for $450k and have the sellers pay the closing costs."

  52. waiting for godot,

    Yes I do have a 30 yr fixed, however it is interest only for the first 10 years ... then goes p&i for the next 20 years. I know "interest only" has gotten a lot of bad press lately, but I still think it was a very good fit for my needs. In a 10 year period, it's not unreasonable to believe that natural rent increases from both units will allow me to cover the higher mortgage payments starting in year 11. (And this isn't even counting expected pay increases along the way such as the one I recently got when I changed jobs.) While I plan to stay in the house a long long time, I also know that statistically, people move on average every 7 years in the U.S. So, despite my current best intentions, chances are good that I won't even still be in the house when I reach year 11 of the mortgage. So interest only was definitely the way to go for me especially since I can deduct the whole payment from my taxes (state and federal). So, you are correct I did my calculations. Also, I really don't mind have people in the basment. Almost all rowhouse basements in downtown DC have evolved into separate units since they are English basements (i.e., only 1/2 in the ground), and the impingement on the privacy of those in the house-proper is close to negligible.

  53. Makes sense...technically, a 10 yr Interest only, is a responsible loan if managed properly and a chunk of interest is paid with each "interest only" payment. The thing is that many people get the interest only becasue they can't afford the full P&I payment. I think that this is a mistake - If they can't afford it, then they can't afford it, and the short term arms are an especially reckless, leveraged gamble.

    I believe that prices at the peak, after adjusting for a generous 5% increase per year since 2001, are still about 30% overpriced. They may not come down that much; on the other hand, they may overshoot to the downside - Nobody knows. If rates go from 6.3 to 8%, like they were in 2001, then the overvaluation will be 30% plus the percentage difference in payment from 6.3 to whatever interest rate exists at the time.

    Would you agree that if we hit 8% 30yr fixed, and since the 2yr/10yr spread is inverted thus eliminating any advantages that existed in arms, that we would be in store for a 20-30% correction? (granted that employment remains steady)

  54. Lance bought last year (said so in a previous posting), so he's a bit nervous.

    By posting on this blog, he hopes to hold up market values to enable to sell at a fat profit in ten years when the Candians and Mexicans get sick of our shit and decide to invade DC.

  55. waiting for godot:
    "Would you agree that if we hit 8% 30yr fixed, and since the 2yr/10yr spread is inverted thus eliminating any advantages that existed in arms, that we would be in store for a 20-30% correction?"

    Sorry, I don't understand what you mean by 2yr/10yr spread? (Are you a mortgage of financial broker?)

  56. anon 4:49

    "By posting on this blog, he hopes to hold up market values to enable to sell at a fat profit in ten years when the Candians and Mexicans get sick of our shit and decide to invade DC."

    yep, am also stocking up on tequila and molsen's before increased demand for these items in washington make them unaffordable! Bill is out buying Canadian dollars already ... all enthused about the big savings he's gonna get when he gets to buy that condo with Canadian dollars! (He heard he can get something like a dollar and a half Canadian for every American dollar he has! He's broken into his piggy bank and started counting his many pennies!)

  57. "Sorry, I don't understand what you mean by 2yr/10yr spread? (Are you a mortgage of financial broker?)"

    Nah, Econ Major. The 10 year note is the the indicator that mortgage brokers use to determine the 30yr fixed rate; whereas, the shorter term rates such as the 2 year note are used for the ARMs. It used to be that you could get a one, three, or five year arm for next to nothing which would drastically reduce payments, but now the 2year note and the 10 year note are both around 5.10%, so someone in the market to buy a house would have little reason to get an ARM at this point. Greenspan calls it a conundrum, because the short term rates are rising with the fed funds rate, but the long term rates are sitting put.

  58. waiting for godot"

    "Would you agree that if we hit 8% 30yr fixed, and since the 2yr/10yr spread is inverted thus eliminating any advantages that existed in arms, that we would be in store for a 20-30% correction? (granted that employment remains steady)"

    Thanks for the explanation on the term "2yr/10yr spread". If I follow correctly, you are basically saying "if monthly mortgage payments go up by "x" because of increased interest rates, then prices have to go down by a factor of "x" that brings mortgage payments back in line with what they were previously." This is a good analysis, however there are a couple other considerations to take into account here.

    Firstly, not everyone needs to finance to buy a house. About 40% of all houses/condos are owned free and clear. (
    Also "82 percent of vacation homes and 75 percent of investment properties are owned free and clear." (
    So your relational formula would have to factor in that for a substantial number of buyers, the interest rate out there is irrelavent in what the property will cost them to purchase. They just pay cash for the property. And, if their investments in the stock market aren't doing too well anyways (because of rising interest rates), what do they have to lose by pulling the money out of the stock market and buying more investment properties? The inducement to do so of course accelerates more and more as the prices begin to drop. So, we're already "up from" the 30% "down" that your relational formula renders. I don't know how to figure out by how much the 30% drop has been negated, but it can be substantial since there is so much "free and clear" real estate holdings already ... Also, another consideration is that the last time interest rates rose tremendously (late 70s), the problem was lessened by "seller financing". In order to allow buyers to more easily purchase their properties at the asking price, sellers willingly carried back large portions of the sale. This was easy enough for them to do because --- like now --- inflation had given them a lot of equity in their homes, so when they sold they would get enough cash to cover their mortgage payoffs (and remember 40% of people have no mortgage) and then finance the balance at what for them were really very good interest rate or return on their money. (I think anywhere from 9% to 12% was the "going rate".) These loans were interest only and for no longer than 10 years. They were intended to let the seller get his price and the buyer buy the house at a time when bank rates were anywhere between 17% and 20%. Incidentally, my seller who had owned his home free and clear (except for a small equity line), financed for me at one percentage point below the going rates last year (i.e., my loan is at 5.0%). This was at least two percentage points above what he would have gotten by placing his proceeds into a certificate of deposit. It was a win win situation. (We also cut out having a Realtor in the transaction ... but that is another story.) So, now you have even more of a negation of the 30% slide you calculated. Again, I don't know how much of a negation ... but again, there are a lot of houses owned free and clear out there where the buyers would be thrilled to finance and make more off of their money than they could otherwise.

    So, yes I agree your formula has merit, but it needs to be adjusted to account for those transaction that can be carried out without the benefit of bank financing (i.e., cash sales and/or owner financing at lower than bank rate.) It also needs to be adjusted to account for the fact that as interest rates rise, stock investments become less attractive ... thus leading investors to take their money out of stocks and put them into real estate ... i.e., "bidding" up prices that without the extra buyers out there might otherwise drop more. Taking all this into account, my belief is that the 30% drop you calculate gets tempered to somewhere closer to "no more than a 15% drop" ...
    Also, an end result of the consequences of rising interest rates is that those least likely to qualify to buy a house/condo (first time homebuyers, etc.) are those most affected by the rise in interest rates. Unlike the investors and established homeowners, they don't have the luxury of paying cash ... and possibly don't have credit strength and/or sufficient down payment to convince a seller to finance for them. (I.e., the seller won't lend to them if there isn't enough of a down payment to know that if the buyers defaulted they would have already collected enough cash up front to have made foreclosure and reselling worth it.)
    So, the big irony in lots of folks cheering for higher interest rates, is that those cheering the loudest (i.e., those already most shut out of the housing market) will be those the mose effected negatively if rates rise. The only silver lining for them will be that longterm the very same inflation that is causing interest rates to rise, will cause their salaries to rise ... But, of course, that will lag since employers are always a lot quicker to raise prices than they are to give raises.

  59. Lance

    There are so many variables (as you illustrated), that it would be impossible to calculate an accurate outcome, especially since a change in one of these variables would have an impact on its relationship to the others.

    I was looking at it more as a reversion to the mean. As prices went up, it created a frenzy of buying partially because people were afraid they would never be able to buy if they did not buy now, and the gold rush mentality of “how much money did I make on my house this month.” Add in a splash of increased demand, creative financing, and the miserable returns of the stock market, and you get a recipe for the huge run up that we have experienced. Buying begets buying.

    The housing market has clearly turned, and the risk is that the same frenzy in buying could turn to selling. It is a unique time, because we don’t know how far or how long it will last. My money is on a reversion to the mean that would make about a 30% correction given the current interest rates. The rates may go up and exacerbate the correction, or they may go down and soften it, but the price reductions that I am witnessing coupled with the increased inventory could easily make this correction a reality. It is also difficult to quantify the outcome when you are dealing with people that are purchasing based on emotion rather than fundamentals (witness the condo cancellations and loss of deposits). Bottom line is that it is anyone’s best guess as to what will happen. Any stat or anecdote supporting a continued boom could easily be countered by an equally plausible premise for the decline, and it is interesting to see how people build a case for one side or the other when they really have no idea what will happen.

    When will I buy another property? When either the correction takes place, or the rents rise (and they have been rising) to a level in which the house could be rented to cover the P&I if needed.

  60. “Lance said...
    “…..Firstly, not everyone needs to finance to buy a house. About 40% of all houses/condos are owned free and clear…..”

    Was that 40% always free and clear, never to have had a mortgage or are they now free and clear?

    And from your link:
    …..For all second home owners, their most recent property was purchased a median of six years ago. However, most have held additional properties for longer periods……

    …..The median size of a vacation home is 1,480 square feet, 29 percent were new when purchased, and owners estimated the current value to be a median of $300,000……

    I would not put too much faith in an “owners estimate”

    ……..Even so, 35 percent of all investment-home owners said they were planning to buy another home within two years. For those who currently own four or more investment units, 64 percent said they planned to buy another property within two years, and 17 percent said they planned to purchase five or more additional properties…….

    Buying within two years? Why not within two months?

  61. waiting for godot:

    "The housing market has clearly turned, and the risk is that the same frenzy in buying could turn to selling."

    Were this equities we were talking about, then yes, this would be not only a possibility but a likelyhood. However, it is real estate we're talking about here. And real property is not analogous to a equity share (i.e., stocks, etc.) The differences between the two "markets" are numerous and fundamental.
    Once such fundamental difference is that the lion's share of real estate is owned by people who are living in it. So, when you say "the same frenzy in buying could turn to selling." you aren't taking into account who was the doing the frenzy in home buying ... and why they were doing that frenzy. Most people doing that buying were people looking for a home in which to sell ... And they were in a frenzy to buy because they feared never being able to buy the higher the price of condos and homes went. So, now that they have secured their homes, what could possibly induce them to frenze to sell their homes? For the sake of argument, let's say the value of the properties all around them started dropping by 50%, would this homeowner who bought in a frenzy on the fear of being "locked out" of the market similarly go into a frenzy to sell his home and move his family on the fear that in the future the value of his house (like all "replacement" houses that he might move into) might go down in value? No, I don't think so. One fundamental difference between the purchase of most real property and equities is that most real property is purchased with the intention of providing shelter while ALL equity shares are purchased with the intention of increasing wealth or generating revenue. So, when prices are rising, the prospective homebuyers can collectively get themselves into a frenzy and bid up the price of properties each fearing they will be the one left standing without a musical chair to sit on when the music stops. The same can't be said if values are dropping. If the value of my house dropped 50% and the value of my neighbor's did too, how would I be affected? First, there would be nothing driving me to sell ... Second, even if I did have to sell because of a job move or whatever, I'd be comforted in knowing that with the proceeds I could still buy my neighbor's house which had similarly gone down in value. So, the frenzy that fed the build up in values isn't there to bring down that same build up.

  62. I wrote:
    "Most people doing that buying were people looking for a home in which to sell"

    I meant to write:
    "Most people ... in which to live"

  63. lance, people don't need a place in which to live. get real. ;}

  64. but for those rare people who actually do NEED a place to live; they're better off buying in west virginia than inside the beltway.

  65. Anonymous (10:43) said...
    "but for those rare people who actually do NEED a place to live; they're better off buying in west virginia than inside the beltway."

    Yep, much easier to be driving 2 1/2 hours each way with 18-wheelers by your side and lack of sleep ... seeing the friends and family really only on weekends ... than to work on fixing up a wonderful early 20th century row house in LeDroit Park, getting to know your neighbors (old and new), making a difference in your community ... and actually LIVING rather than DRIVING. Oh yeah, you won't have the 20 acres to brag about ... but then, at least you'll be able to see your family and friends daily to brag about all the real things you have ... like "a life".

  66. Early 20th century? That's so... last century. ;-) I'm enjoying (most of the time) a late 19th century beauty that was built like a, like a, well; "Like a brick, HOUSE. (spin up da' funk!) Like a brick, HOUSE.

  67. anon (7:48) ... nothing wrong with late 19th century brick beauties ... that's what I have myself ;)