Friday, September 15, 2006

Condo Conversion in Washington, DC

Condo Conversion in Washington, DC, in the Petworth Neighborhood


  1. Proof positive that VA Investor and Lance are what make this blog interesting. Without them, "David" would be head cheerleader, and dctoo would be a subordinate cheerleader.

  2. Never a photo from Silver Spring MD. Always DC. Always.

    Remember what I taught you about editorial bias in phtographs, "David".

  3. That's a top dollar unit, VA- you better dig that cash out from under your mattress and Invest. Don't miss the boat on this one!

  4. David,

    Isn't this the side of the building? Most buildings look better from the front ...

  5. At least that DC condo looks better than this one.

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  7. the economist said:
    "You cant see thru the razor wire."

    This is somebody's home. the economist, you should be very ashamed of yourself for putting down somebody's home. Ditto David ... though he said nothing explicityly.

  8. whitetower,

    If you honestly think that property is worth nothing, that speaks volumes to your ability to navigate your way through life.

  9. if you can't understand that that property can't have a zero value, then I have to wonder if your "name", the economist, is simply deceitful advertizing by a someone with little (to none) economics knowledge.

  10. The land still has value though. They need to knock down that piece of crap building first though.

  11. I'm having a real hard time understanding why anyone would think the building is as "bad looking" as it's being made out. Folks, we are looking at the fricking side of it! The part that usually gets blocked from view in a city because of other neighboring buildings. I don't see how the side of this building is really any worse (or better) than the sides of other buildings. Take a look at the front on the left. It looks like a normal enough building. Why is it bubbleheads seem to see everything in negative terms? You guys must be a lot of fun to have as friends. I know the type ... They walk into a room and start complaining about this thing and that thing ... and end up making everyone there as miserable as they are ...

  12. Ok, here you go:
    2077 houses sold in Orlando in August.
    3134 houses sold in Orlando last August .
    This gives an acceleration of (2077 - 3134)/12 = -88 houses /month^2.
    Fine. BTW, I'm a physicist so acceleration is either positive or negative with me.

    Now, about that ten month supply:
    Average rate over the year = 2077 - 88(12)
    Average rate over the year = 1020 /month.
    How long to sell 21,077 houses?
    21,077/1020 = 21 months.

    Now, 21 months could be an overstatement, but you have a number of problems:
    1) This assumes that there will be no more houses coming on the market.
    2) It also assumes that the negative acceleration of the sales rate does not get any worse OR better.
    3) This is just a rather sophmorish attempt at numerical analysis. Of course more and better should be done. Still, it is probably not far wrong.

    My next question: what happens if a house does not sell for 21 months with more coming on the market? Gee, doesn't look to good.

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  14. TK said:
    "it looks like some windows have been closed up???"

    That's pretty common in older buildings since most have been through at least one renovation and sometimes windows just don't belong in a certain spot anymore. In my last condo, two columns of windows in the middle of a sidewall had been bricked in during the 80s renovation of the building (when it went condo). As on the other side of those windows were closets, it probably made sense to brick them in. Some buildings are actually built with "bricked in" windows. This occurs when for whatever reason it is not practical to put a window where it would otherwise go, and one doesn't want to lose the symetry of the building. As an aside, you'll find numerous buildings in the British Isles that were constructed with "bricked in" windows. The Brits used to calculate property taxes partially based on the number of windows a building had. The more real windows you had, the more you paid ... So real windows got minimized, while for aesthetics bricked in windows got constructed in their place

    Economist, I can appreciate your loving the woods. I too can enjoy them .. for a while. But you couldn't pay me enough to want to live there full time. I rather be where there is more in the way of people and culture, than in the way of trees and animals. Personal tastes vary fortunately ... or our prices in a coveted city like Washington would be even higher! Using your line of reasoning, I guess I could claim your house out with the wilderbeasts has negative value!

  15. WT said:
    "the owner could not receive anything of value in exchange for them."

    First, I disagree with you. Even if low-valued, there still is value. Second, boy did you pick a bad example! With the baseball stadium going in to Southeast, those properties are worth a mint! We're talking small properities going in the millions of dollars!

    You're belief though that some properties are actually worth nothing supports the suspicion that many bubbleheads won't "settle for something beneath them" .... You gotta have the expensive upper NW property and if it's too expensive for you to afford, then prices are too high and can't be maintained!

  16. Lance,

    First, not all of southeast is on the waterfront or close to the new stadium.

    Second, there have been plenty of abandoned places that have essentially no value. In many cases, the cost of removing the run-down structure is more than the intrinsic value of the land itself. Add possible environmental cleanup and you can see that some land essentially has a negative value.

  17. It has become clear to me that the "Fashionably Negative" (aka "Bubbleheads") are confusing the resurgence of DC with a housing bubble.

    The two aren't mutually exclusive. However, the economic revival of Washington is _Long_ overdue. Look at 8th St. SE near the Marine Corps Barraks as a microcosmic example of what is happening in DC on a larger scale.

    The resurgence of DC is here now, and the Fashionably Negative don't want to acknowledge it. To do so would be..... unfashionable.

  18. the "Fashionably Negative" (aka "Bubbleheads") are confusing the resurgence of DC with a housing bubble. The two aren't mutually exclusive.

    I, for one, am not denying that there has been a resurgence in DC and property values will (or have) reflected that.

    What the housing heads refuse to understand is that both are at play here. Property values have increased because of a resurgence (rational and sustainable) and the bubble (irrational and unsustainable). Don't fool yourself in believing that the latter had no impact on housing prices.

    Also, keep in mind that this blog also covers areas such as Fairfax and Leesburg where it's almost entirely bubble-driven price increases.

  19. Anon 11:30 AM,

    Great point that needs to be repeated. People are looking for 450K+ for their small townhouses in Chantilly and calling it a commuter's dream location.

    The insanity was everywhere not just the locale du jour on the DC waterfront.

    Expectations are changing. In my opinion, there will be at least a 12-18 month period of time where buyers will expect to be able to underbid the most recent comps. Just like on the way up, they expected to have to overpay, the pendulum will come swinging back the other way until prices undershoot their long term trend.

    My $0.02.

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  21. my2cents said:
    "In my opinion, there will be at least a 12-18 month period of time where buyers will expect to be able to underbid the most recent comps."

    We're in agreement, the general dip in house prices will last no longer than 12 - 18 months. Yes, some locales may do down forever, but that would be do to other local factors such as a plant closing.

  22. Personally I think 12-18 months is very optimistic. I would not be surprised if it takes 3 years or so. Of course that all depends on how steep the drop is.

  23. anon said:
    "Personally I think 12-18 months is very optimistic. I would not be surprised if it takes 3 years or so."

    I think in some areas there'll be a drop and it'll take 10 years for them to "recover". But that's because they'll be those areas where the increase was never justified to begin with. I don't know enough about other areas to point at any one locale, but I am sure there are places out there where prices inflated just because they were seeing prices inflate elsewhere. I mean some of the very far-flung suburbs of DC might qualify as well as some of the "less than transitional" neighborhoods where one has to duck gunshots. But, I can say with confidence that the DC metro area in general, as well as places like the NYC and LA metro areas, will not experience a general drop in prices for longer than 12 - 18 months. The fundamentals of job growth and economic prosperity for those "players" in a global economy are just pulling in the wrong direction to realistically expect prices to go down rather than up in the "more than short term" period.

  24. The NAR presentation posted a few weeks back showed the most recent housing declines in a variety of markets - the range of time from peak back to peak prices was 7-9 years.

    This boom may be much worse because of the magnitude. This boom may be much better because of the internet/flow of information speeding things along (but this is a maybe, information may keep people hesitant longer too). In either case, we are still look at a decline of more than 18 months.

  25. Whitetower said:
    "places like Columbus and Kansas City will have less housing price deflation because their 5- and 10-year price increaseswere more rational than, say, Naples, San Diego or Washington DC."

    In making this statement you are personallizing the term "rational". Considering the little, if any, real growth occuring in places like that in light of their increasing irrelevance in an increasingly global world economy, I think we could easily argue that any price appreciation they experienced was irrational.

  26. whitetower said:
    "Specifically: housing price increases were caused by the Federal Reserve, which by inflating the currency supply allowed unjustifably cheap credit."

    Whitetower, let's assume this is correct. (And I can't say I disagree with you here assuming you recognize that this is but one factor at play in areas where other factors could be at play such as in DC where real revitalization occured.) If this is correct, then the unjustifiably cheap credit was only step one. It was the step that permitted to currency supply to grow faster than the real wealth it is supposed to represent ... which in turn leads to the next step which is wholesale inflation as the value of the currency quickly erodes. This negates your next step that houses prices must come down in order to make them more affordable. What happens instead is that nominal salaries go up while house prices stay the same. Yes, it's not overnight, but once inflation kicks in, it'll happen quickly. This is exactly what happened in the late 70s/early 80s. So, the people you think are locked out of the market, won't be for long ... Their pay will increase to match the prices. (This doesn't take into consideration other factors at play such as the real value of revitalized properties going up, or the whole "have vs. have-nots" issue discussed earlier.) Now, where does that leave people who bought earlier with a mortgage? They are left in a great position because what they owe is now easier to paydown with their salary increases due to infation. So, it is a win/win for those already in homes and for those looking to buy a home. So, who gets hurt? Flippers of course. Flippers make their money buying low and selling high. They need quick turnover. In the scenario I am describing (which has occurred repeatedly before), the REAL value or property goes down and this in turn hurts flippers, but NOT current homeowners or future homeowners ... And the flippers get the "bad" that comes with the "good" of gambling ... Incidentally, I don't believe your scenario of nominal prices falling has occured at anytime since we went off the gold standard. (When we had truely "hard" currencies backed by real gold, your scenario would have made more sense. Without something "hard" to anchor values, values will always slip as governments allow currencies to be produced in volumes higher than real value being produced by society. They have to, the alternative is to strangle real value being added.)