Tuesday, April 13, 2010

House hunting in DC

Megan McArdle is shopping for a home:
We've been dipping our toes into the DC housing market recently, but after this weekend, I think I'm just about ready to give up. Anything that comes on the market at a decent price is snapped up almost immediately—by my count, mean time from listing to contract is under seven days.
From a supply and demand perspective, if a house is selling in seven days, it means the price is too low. It may be too high from a long-term discounted cash flow perspective, which means potential home buyers should rent instead, but on a short-term supply and demand perspective the price is too low and the sellers should raise their prices.
The only things that stay on the market long enough to look at fall into one of two categories:

1. The owner bought the house between 2004 and 2007, and wants to get their money back out, hopefully with a little profit . . . and has therefore priced their home at least $100,000 above what the market will bear.

2. The house has been rented, and the tenants, familiar with their copious rights under DC housing law, are essentially refusing to allow the house to be shown. ...
I get the sense that Megan is being unrealistic about what the market will bear. How long are these supposedly overvalued houses staying on the market? Months or years? The $100,000 figure seems dubious because, according to Zillow.com, the median value of a house in DC has fallen by only about $65,000 since the market peak. High-end homes have generally been more resistant to price declines than low-end ones.
Why can't we find anything?

In part, because that shadow inventory isn't coming on the market. There are two components to this, one DC-specific, one not. The specific part is the aforementioned tenant laws, ... The only way to break a lease is to be a single-family owner who wants to take occupancy. The bank has to let the tenant's lease run before they are evicted, as well as give them ninety days notice of the intent to vacate the property....
I don't see how this is bad, unless you're a house buyer who wants to kick someone else out of their home just so you can have it. If a bank has foreclosed on a home that is occupied by a responsible renter, why should the bank rush to sell? Isn't the bank earning rent on the home in the meantime? Renters who adhere to the conditions of their lease should be protected by the law. Besides, most leases only last for 12 months anyhow.

Note to Megan: Pay up, rent, or move to Manassas.


  1. "High-end homes have generally been more resistant to price declines than low-end ones."

    I thought it was the other way around?

  2. "James said....Note to Megan: Pay up, rent, or move to Manassas."

    I like Megan, but I agree with your assessment. She strikes me as one of those "champagne tastes, beer budget" types.

    I too was priced out of buying in the city proper years ago. The sooner I realized that and became cmfortable with renting for years, the more content I became.

  3. Buy in DC and raise ignorant children (the schools suck beyond comprehension). Even the few good charter schools are being forced into closure. DC is just not family friendly.

    I refuse to even eat in DC because of Mayor Fenty's bag fee. I just can't imagine how that moron gets away with the levy of a bag tax to keep the bags out of Anacostia river. Its time for everybody to throw bags into the Anacostia river to protest the taxes.

  4. IIRC, Ms. McCardle, like many people in DC chooses to remain childless.

  5. "champagne tastes, beer budget"....hmmm, I like that one. Can't believe I haven't come across it before. Nevertheless, I agree that Megan fits this description, and I encourage her to stick with it. The champagne sale is coming, and it is going to be very buyer friendly!!!

  6. It's difficult to buy a home right now because it's the right time to buy, especially for renters turned first-time homebuyers. I disagree with James in that sellers should price their homes higher because they are selling. The buyers in the market are not the same buyers bidding up the price of homes in the bubble years. The bubble buyers believed that they would get back what they were overpaying with appreciation. Buyers today realize that the market is at best going to remain stagnant and likely decline further in the near term. If getting cash in your hand in the form of a tax credit isn't that important to you and you'd be just fine with getting the amount of the tax credit deducted from your purchase price, then wait til this summer to buy.

  7. Hey - my old buddy Nonpartisan is back!

    Say friend, what did you think of the latest case shiller numbers? I asked you about it at the time, but you were nowhere to be found - hmmmm.

    CAW! CAW! CAW!

  8. I have seen the Case Shiller charts I guess you were unable to see Obama, Bernanke, Yun, Barney Frank and the rest of their ilk sweating and exausted as they were trying to push the curve back up?? I could see them plain as day - and after Arpil 30th, I think they will quickly collapse to the ground (with the curve crushing their puny skulls), unless of course they can concoct another trillion dollar steroid to inject. However, like Lyle Alzado, the rhoids will some day kill them if they don't quit soon....

  9. I have been renting for the last 3 years (previous townhome owner who sold at the peak) and my lease is up on june 30.

    This market sucks! I have cash and don't want the 6500 move up buyer credit, because it is artificially bringing buyers to the market and propping up prices. I am also hearing that a lot of current transactions are FHA.

    Despite the obvious, responsible people get screwed by pubic programs, I just don't want to go through two moves with my family. Is there going to be any real inventory soon?. I am seeing Split foyer hell everywhere!

  10. "Nonpartisan said... and after Arpil 30th, I think they will quickly collapse to the ground (with the curve crushing their puny skulls)"

    WOW such rhetoric! Did you read that folks, not just correct but "quickly collapse" - nothing unambiguous about that. Expect nothing less than the full on, biblical style "rapture" by mid summer!

    God bless you Nonpartisan. Continuing to provide us with excellent quotes to ridicule you with in the upcoming months and years. Bless you kind sir!

  11. "Partisan said... I guess you were unable to see Obama, Bernanke, Yun, Barney Frank and the rest of their ilk sweating and exausted as they were trying to push the curve back up?? I could see them plain as day"

    If you could "see them as plain as day" why did you say something about it back when you called for Case Shiller back at 100 in the next 3 years?

    Fact of the matter was that was an idiotic comment and this troll Partisan is going to make you pay for it.

  12. Should renters be subsidized like homeowners? If the government can provide funds to keep homeowners in their homes, why can't the government provide renters with some financial assistance. After all, we weren't the idiots who bit off more than we can chew. I will say this, I want this government to fail. I want the whole system to fail. Selfishness to complacency, from complacency to apathy, from apathy to dependence....this country is finished!

  13. "I will say this, I want this government to fail. I want the whole system to fail."

    Really? Massive protests, riots, marshall law and factional violence - along with possibly war with an occupying force is not my cup of tea.

    Look, I rent too. Yeah, the govt policies fu*ked me in favor of owners, but otherwise, you need to recognize we got it good here, real good.

    My landlady is from El Salvador. She tells horiffic stories about seeing soldiers kill her father and brother, and then beat and gangrape her, her sisters, and their mother. She came here to have a better life, and she got it as a simple cleaninglady.

    Thus, every time I get down on this system we have, I think back to my travels to fu*ked up places like Macedonia and Egypt (saw solders sit idly by as a guy was doused with gasoline and lit on fire). I think of my landlady and how she "lives like a queen" here in the sh*thole USA, and I thank God every day that I was born here where my biggest problem is I have to rent.

    Grow up and be careful what you wish for.

  14. OK so wake us up! Tell us what its gonna be like in this country when the government "fails". Describe in detail. We dont understand? Teach us.

  15. "Tell us";"We dont understand?"

    Inappropriate use of pronouns. Do not speak on behalf of the people of this blog. YOU are the only person who wants to know the consequences of a failed government. However, I don't have the time for you.

  16. Ha, personally, still laughing over the term "marshall law."

    Hee hee.

    Hopefully that is a kinder, gentler law than "martial" law, does it come with balloons and teddy bears?

  17. "Anon @2:53 said...However, I don't have the time for you."

    Hmmm, let me go out on a limb and say this sounds an awful lot like our resitent horseshit artist. This is the guy who makes up things "i.e. 75% of loans today are zerodown" and then when called on it, he wont admit he was wrong, he just fabricates a reason why he is secretly right "i.e. trust me it is 75%, but I cant show you the stats because I would get fired".

    In this case anon with the "marshall law" spelling error called out horseshitter and said describe it to me what its like when the govt fails, to which horseshitter says "I dont have time to explain".

    Horseshitter, it looks to me like you were caught again. I think you said "I dont have time to explain" because you recognize that it could be as bad as "marshall law" said, and you dont want to admit this.

    So horseshitter, if you want to bolster your argument, explain it to anon and myself, what its gonna be like when the govt fails. Dont just run away and say, "I dont have time". (I predict you do have time to respond to me) So please, explain what its gonna be like when the govt fails...we are all ears...

  18. "IIRC, Ms. McCardle, like many people in DC chooses to remain childless."

    Soon, DC will be an official 'child-free zone" What could be better than a jurisdiction devoid of children?

    As for the choice to remain childless; its brilliant. The only thing better would be if the parents of those choosing to remain childless had been as brilliant as their children. Then we wouldn't even be having this discussion!

    Oh Darwin, must you always be proven correct?

  19. The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending April 9, 2010. The Market Composite Index, a measure of mortgage loan application volume, decreased 9.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 9.5 percent compared with the previous week. This is the third lowest Market Index recorded in the survey since the end of June 2009.

  20. The number of homeowners who defaulted on their mortgages even after securing cheaper terms through the government’s modification program nearly doubled in March, continuing a trend that could undermine the entire program.

  21. Anon said...Pussy, everyone knows it is you who is the author of "marhsall law".

    Better yet, whose to say I wasnt the author of this email as well. Perhaps this entire thread was fabricated by me as some sort of elaborate dinner theater where I play the protagonist and antagonist all at the same time? All 22 posts and counting!!!

    That aside, help me continue on with this elaborate ruse of mine. Tell me (and anon who may or may not be me, and you who may or may not be me as well) what its gonna be like when the govt fails?

    Balls in your court horseshitter. Will you educate us now, or will you simply respond in a non responsive way (because you "dont have time" to explain it to us).

  22. I see the policy for improving the quality of comments is going well.

  23. Bringing this back on topic, I'm going to have to agree with James here. Megan makes no attempt to explain why she feels that renters should be kicked out other than that she wants a house. Is she suggesting that they're not paying their rents and DC law prevents them from being evicted regardless? If that were the case, it would be all over this article.

    Does this mean that the real estate market in DC is down? To an extent, yes, but that seems to be how it's organically developed. Banks aren't selling homes not because those dirty renters are preventing the banks from showing them. They're not selling because while there is unquestionably a demand, there is no interest in supply. The equation that factors money and effort together indicates that not selling is the best way to go right now. It happens.

    At one point people will choose to sell homes again, and banks will be willing to not sign new leases with tenants. However, in the meantime, this seems more like sour grapes than anything else.

  24. However, in the meantime, this seems more like sour grapes than anything else.

    Basically all that needs to be said in re: this stupid woman and her stupid "thoughts".

    Funny how the DC real estate market is *always* in free-fall...unless you talk to someone trying to buy a place.

  25. Megan is a selfish yuppy scum. Renters should have better rights -- it's one of the few things that the District does right.

    I've been through rejecting everything in my price point in the District 15 years ago. The problem is that there is a limited number of places with what everyone wants: easy metro access, decent neighborhood, some outdoor space, a little character, access to parking. If she has any intent to whelp, I highly recommend that she consider the suburbs.

    I rent. Been renting for several years -- since we moved back into this area, in fact. Our rent, while ridiculous, is roughly half of the mortgage/insurance/tax load on the house we rent. Why on EARTH does she want to buy? She should take advantage of those terrible renters protections that she decries.

  26. "champagne tastes, beer budget"

    One definitely can not say this about the DC area. There is not a single location in DC that one could really describe as a champagne taste....nor is there anything able to be bought on a beer budget, even the most run down mold damaged 800 square foot p.o.s.

  27. "Funny how the DC real estate market is *always* in free-fall...unless you talk to someone trying to buy a place."

    and yet prices are still on the decline ;)

  28. Re: Tenant rights- actually, it doesn't matter when a lease is up. Even when the lease is up and you want to sell your rental, your tenants have an indefinite right to stay until you have a contract and they have had a right of first refusal. On top of that, they have 90 days vacate. This means you cannot do any significant repairs and that you are forced to put the property on the market with the renters living in it. These rights apply to all Landlords, not just the big apartment buildings. DC should have thought about the negative impact on housing prices and tax revenue.