There is no housing bubble in the DC area so get over it

[Anonymous]

I looked at that old article. Is a big difference now that no one is doing ARMs? Or do bank still do these? I simply don't know. Obviously they are a stupid concept, but the way I figure it, if someone is taking advantage of low interest rates now to buy, at least they wouldn't be in danger of not being able to afford their mortgage payment with a fixed rate loan, right? So what is the harm?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The Washington DC housing market is not a bubble for 3 reasons:

(1) This is a government, defense, and high-tech center. I believe we have either the 3rd or 2nd-worst traffic in the country. Everyone wants to be here, because this is where the jobs are. That puts upwards pressure on house prices, and it isn't going away any time soon.

(2) There is a TON of money running around this town. It's clearly shown by the fact that people can handle $3500-4500/month mortgage payments. And because of the level of incomes here, that's not going to change any time soon, either. As my dad said, this is as close to a recession-proof town as you'll find.

(3) Shortage of land. Every bit of unbuilt land - even small plots that are only big enough for 10-20 houses - is being gobbled up by eager builders who sell half their houses when the houses don't even exist, and will not be built until 6 months after they're sold!

In this area, we have a total seller's market. The situation may drift back and become somewhat more of a buyer's market (and I actually would see that as positive), but there's no way it's going to become a total buyer's market. I don't know how young families buy into Washington, but it really doesn't matter. SOMEONE is buying, as fast as they can!

Silly me! I forgot to put the link to that quote:

http://www.businessweek.com/the_thread/hotproperty/archives/2005/07/washington_dc_bubble.html

Oh...and the time when that particular homeowner said those words...July, 2005.

Gosh those arguments sound all too familiar, don't they? You know what the difference between 2005 and 2013 in the DC area was? At least you still had expanding federal budgets, that's stopped...so PLEASE! raise those same bullsh*t arguments to support price-to-income ratios higher than the 30 year average on a housing market ready to fall again.

Completely different situation with the type of loans and buyers and by 2005 the boom had already been going on for 5 years.

Todays buyers are very qualified and have a lot of extra income and savings to brunt any dips in the market. The previous glut of buyers who started the drop in prices couldn't afford their homes with continual appreciation.

I'm sorry, but that's complete nonsense. My wife and I were approved for a $550K mortgage on a combined income of $110K, with 5% down on a conventional 30-year fixed. Highest midpoint credit score was 680. This was operated through BofA. It took them four hours to pre-approve. If that's what you're considering "very qualified" then I have to question your sanity.

Gotta agree. To me, all the talk about stricter lending standards is hype. With interest rates so low, banks are actually MORE enticed to lend riskily because their margin for error can be greater and still make a profit.

Add to the fact that there is already publicized growing political pressure for banks to ease up lending standards:

http://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_story.html

Yeah...gonna agree, market fundamentals points us to 2000-2001 levels for home prices, on an inflation adjusted basis. We had previous dips and rises in the econoomy because the government was able to take on more and more debt to leverage the country up (look at the cycles that people point to, they always coordinate with an increase in government deficit). The simple fact of the matter is that the Fed has played it's best card, and it's helping buoy the markets along...once that artificial support falls, you're going to see a return to 2000 level home prices on an inflation adjusted basis.

Right now, in the DC market, the average home price to household income ratio is 3.5, over the past 30 years, that number has been 2.7. The ONLY reason that people are able to spend more for a house right now is low interest rates, job growth in the area has remained flat, and incomes haven't risen...so what else could be driving the increase in demand?

+1 This is all driven by low interest rates. People with real money aren't buying $800k ramblers in North Arlington. The buyers are middle class professionals who can only afford to pay those prices because the Fed's efforts have kept interest rates low. When interest rates go back up, no one will be buying those overpriced crap houses anymore.

Did you get outbidded? Is that why u r angry

[Anonymous]

Sorry a PP here. If we are middle class buyers who are able to afford to buy into an amazing school cluster and the house we buy has appraised higher than we bought at, I don't see how this makes us stupid. We had a ton for a down and low interest rates got us into a wonderful house in a beautiful neighborhood inside the beltway. We were looking to buy anyway so why not buy now instead of waiting? Serious question. The size is fine for us too, and we plan to stay very long term. Should we have waited or something? Why miss out on the lower interest rate?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The Washington DC housing market is not a bubble for 3 reasons:

(1) This is a government, defense, and high-tech center. I believe we have either the 3rd or 2nd-worst traffic in the country. Everyone wants to be here, because this is where the jobs are. That puts upwards pressure on house prices, and it isn't going away any time soon.

(2) There is a TON of money running around this town. It's clearly shown by the fact that people can handle $3500-4500/month mortgage payments. And because of the level of incomes here, that's not going to change any time soon, either. As my dad said, this is as close to a recession-proof town as you'll find.

(3) Shortage of land. Every bit of unbuilt land - even small plots that are only big enough for 10-20 houses - is being gobbled up by eager builders who sell half their houses when the houses don't even exist, and will not be built until 6 months after they're sold!

In this area, we have a total seller's market. The situation may drift back and become somewhat more of a buyer's market (and I actually would see that as positive), but there's no way it's going to become a total buyer's market. I don't know how young families buy into Washington, but it really doesn't matter. SOMEONE is buying, as fast as they can!

Silly me! I forgot to put the link to that quote:

http://www.businessweek.com/the_thread/hotproperty/archives/2005/07/washington_dc_bubble.html

Oh...and the time when that particular homeowner said those words...July, 2005.

Gosh those arguments sound all too familiar, don't they? You know what the difference between 2005 and 2013 in the DC area was? At least you still had expanding federal budgets, that's stopped...so PLEASE! raise those same bullsh*t arguments to support price-to-income ratios higher than the 30 year average on a housing market ready to fall again.

Completely different situation with the type of loans and buyers and by 2005 the boom had already been going on for 5 years.

Todays buyers are very qualified and have a lot of extra income and savings to brunt any dips in the market. The previous glut of buyers who started the drop in prices couldn't afford their homes with continual appreciation.

I'm sorry, but that's complete nonsense. My wife and I were approved for a $550K mortgage on a combined income of $110K, with 5% down on a conventional 30-year fixed. Highest midpoint credit score was 680. This was operated through BofA. It took them four hours to pre-approve. If that's what you're considering "very qualified" then I have to question your sanity.

Gotta agree. To me, all the talk about stricter lending standards is hype. With interest rates so low, banks are actually MORE enticed to lend riskily because their margin for error can be greater and still make a profit.

Add to the fact that there is already publicized growing political pressure for banks to ease up lending standards:

http://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_story.html

Yeah...gonna agree, market fundamentals points us to 2000-2001 levels for home prices, on an inflation adjusted basis. We had previous dips and rises in the econoomy because the government was able to take on more and more debt to leverage the country up (look at the cycles that people point to, they always coordinate with an increase in government deficit). The simple fact of the matter is that the Fed has played it's best card, and it's helping buoy the markets along...once that artificial support falls, you're going to see a return to 2000 level home prices on an inflation adjusted basis.

Right now, in the DC market, the average home price to household income ratio is 3.5, over the past 30 years, that number has been 2.7. The ONLY reason that people are able to spend more for a house right now is low interest rates, job growth in the area has remained flat, and incomes haven't risen...so what else could be driving the increase in demand?

+1 This is all driven by low interest rates. People with real money aren't buying $800k ramblers in North Arlington. The buyers are middle class professionals who can only afford to pay those prices because the Fed's efforts have kept interest rates low. When interest rates go back up, no one will be buying those overpriced crap houses anymore.

Did you get outbidded? Is that why u r angry

Outbidded isn't a word.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The Washington DC housing market is not a bubble for 3 reasons:

(1) This is a government, defense, and high-tech center. I believe we have either the 3rd or 2nd-worst traffic in the country. Everyone wants to be here, because this is where the jobs are. That puts upwards pressure on house prices, and it isn't going away any time soon.

(2) There is a TON of money running around this town. It's clearly shown by the fact that people can handle $3500-4500/month mortgage payments. And because of the level of incomes here, that's not going to change any time soon, either. As my dad said, this is as close to a recession-proof town as you'll find.

(3) Shortage of land. Every bit of unbuilt land - even small plots that are only big enough for 10-20 houses - is being gobbled up by eager builders who sell half their houses when the houses don't even exist, and will not be built until 6 months after they're sold!

In this area, we have a total seller's market. The situation may drift back and become somewhat more of a buyer's market (and I actually would see that as positive), but there's no way it's going to become a total buyer's market. I don't know how young families buy into Washington, but it really doesn't matter. SOMEONE is buying, as fast as they can!

Silly me! I forgot to put the link to that quote:

http://www.businessweek.com/the_thread/hotproperty/archives/2005/07/washington_dc_bubble.html

Oh...and the time when that particular homeowner said those words...July, 2005.

Gosh those arguments sound all too familiar, don't they? You know what the difference between 2005 and 2013 in the DC area was? At least you still had expanding federal budgets, that's stopped...so PLEASE! raise those same bullsh*t arguments to support price-to-income ratios higher than the 30 year average on a housing market ready to fall again.

Completely different situation with the type of loans and buyers and by 2005 the boom had already been going on for 5 years.

Todays buyers are very qualified and have a lot of extra income and savings to brunt any dips in the market. The previous glut of buyers who started the drop in prices couldn't afford their homes with continual appreciation.

I'm sorry, but that's complete nonsense. My wife and I were approved for a $550K mortgage on a combined income of $110K, with 5% down on a conventional 30-year fixed. Highest midpoint credit score was 680. This was operated through BofA. It took them four hours to pre-approve. If that's what you're considering "very qualified" then I have to question your sanity.

Gotta agree. To me, all the talk about stricter lending standards is hype. With interest rates so low, banks are actually MORE enticed to lend riskily because their margin for error can be greater and still make a profit.

Add to the fact that there is already publicized growing political pressure for banks to ease up lending standards:

http://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_story.html

Yeah...gonna agree, market fundamentals points us to 2000-2001 levels for home prices, on an inflation adjusted basis. We had previous dips and rises in the econoomy because the government was able to take on more and more debt to leverage the country up (look at the cycles that people point to, they always coordinate with an increase in government deficit). The simple fact of the matter is that the Fed has played it's best card, and it's helping buoy the markets along...once that artificial support falls, you're going to see a return to 2000 level home prices on an inflation adjusted basis.

Right now, in the DC market, the average home price to household income ratio is 3.5, over the past 30 years, that number has been 2.7. The ONLY reason that people are able to spend more for a house right now is low interest rates, job growth in the area has remained flat, and incomes haven't risen...so what else could be driving the increase in demand?

+1 This is all driven by low interest rates. People with real money aren't buying $800k ramblers in North Arlington. The buyers are middle class professionals who can only afford to pay those prices because the Fed's efforts have kept interest rates low. When interest rates go back up, no one will be buying those overpriced crap houses anymore.

Did you get outbidded? Is that why u r angry

Outbidded isn't a word.

ohhok

[Anonymous]

Anonymous wrote:Sorry a PP here. If we are middle class buyers who are able to afford to buy into an amazing school cluster and the house we buy has appraised higher than we bought at, I don't see how this makes us stupid. We had a ton for a down and low interest rates got us into a wonderful house in a beautiful neighborhood inside the beltway. We were looking to buy anyway so why not buy now instead of waiting? Serious question. The size is fine for us too, and we plan to stay very long term. Should we have waited or something? Why miss out on the lower interest rate?

There are certainly deals to be found out there. And if you don't care whether or not your home appreciates in value, then more power to you. I have a question for you though...how are local schools funded again?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The Washington DC housing market is not a bubble for 3 reasons:

(1) This is a government, defense, and high-tech center. I believe we have either the 3rd or 2nd-worst traffic in the country. Everyone wants to be here, because this is where the jobs are. That puts upwards pressure on house prices, and it isn't going away any time soon.

(2) There is a TON of money running around this town. It's clearly shown by the fact that people can handle $3500-4500/month mortgage payments. And because of the level of incomes here, that's not going to change any time soon, either. As my dad said, this is as close to a recession-proof town as you'll find.

(3) Shortage of land. Every bit of unbuilt land - even small plots that are only big enough for 10-20 houses - is being gobbled up by eager builders who sell half their houses when the houses don't even exist, and will not be built until 6 months after they're sold!

In this area, we have a total seller's market. The situation may drift back and become somewhat more of a buyer's market (and I actually would see that as positive), but there's no way it's going to become a total buyer's market. I don't know how young families buy into Washington, but it really doesn't matter. SOMEONE is buying, as fast as they can!

Silly me! I forgot to put the link to that quote:

http://www.businessweek.com/the_thread/hotproperty/archives/2005/07/washington_dc_bubble.html

Oh...and the time when that particular homeowner said those words...July, 2005.

Gosh those arguments sound all too familiar, don't they? You know what the difference between 2005 and 2013 in the DC area was? At least you still had expanding federal budgets, that's stopped...so PLEASE! raise those same bullsh*t arguments to support price-to-income ratios higher than the 30 year average on a housing market ready to fall again.

Completely different situation with the type of loans and buyers and by 2005 the boom had already been going on for 5 years.

Todays buyers are very qualified and have a lot of extra income and savings to brunt any dips in the market. The previous glut of buyers who started the drop in prices couldn't afford their homes with continual appreciation.

I'm sorry, but that's complete nonsense. My wife and I were approved for a $550K mortgage on a combined income of $110K, with 5% down on a conventional 30-year fixed. Highest midpoint credit score was 680. This was operated through BofA. It took them four hours to pre-approve. If that's what you're considering "very qualified" then I have to question your sanity.

Gotta agree. To me, all the talk about stricter lending standards is hype. With interest rates so low, banks are actually MORE enticed to lend riskily because their margin for error can be greater and still make a profit.

Add to the fact that there is already publicized growing political pressure for banks to ease up lending standards:

http://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_story.html

Yeah...gonna agree, market fundamentals points us to 2000-2001 levels for home prices, on an inflation adjusted basis. We had previous dips and rises in the econoomy because the government was able to take on more and more debt to leverage the country up (look at the cycles that people point to, they always coordinate with an increase in government deficit). The simple fact of the matter is that the Fed has played it's best card, and it's helping buoy the markets along...once that artificial support falls, you're going to see a return to 2000 level home prices on an inflation adjusted basis.

Right now, in the DC market, the average home price to household income ratio is 3.5, over the past 30 years, that number has been 2.7. The ONLY reason that people are able to spend more for a house right now is low interest rates, job growth in the area has remained flat, and incomes haven't risen...so what else could be driving the increase in demand?

+1 This is all driven by low interest rates. People with real money aren't buying $800k ramblers in North Arlington. The buyers are middle class professionals who can only afford to pay those prices because the Fed's efforts have kept interest rates low. When interest rates go back up, no one will be buying those overpriced crap houses anymore.

Did you get outbidded? Is that why u r angry

Outbidded isn't a word.

ohhok

Oh, and if this low interest rate situation doesn't infuriate you, you don't know much about how our government is financing this operation. It's taxpayer dollars, which means, like it or not, you and I are supporting these artificial home prices. Money doesn't just "come from somewhere else", everyone (American man, woman, and child) owes aprox. $50,000 in taxes over their lifetime thanks to the stimulus package. Unless you're happy just forking over $50k without a say in the matter to support those who overbought on their homes, you should be mad too. Quite frankly, if you're not mad, you're either dumber than a bag of rocks, or you're not paying attention.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Sorry a PP here. If we are middle class buyers who are able to afford to buy into an amazing school cluster and the house we buy has appraised higher than we bought at, I don't see how this makes us stupid. We had a ton for a down and low interest rates got us into a wonderful house in a beautiful neighborhood inside the beltway. We were looking to buy anyway so why not buy now instead of waiting? Serious question. The size is fine for us too, and we plan to stay very long term. Should we have waited or something? Why miss out on the lower interest rate?

There are certainly deals to be found out there. And if you don't care whether or not your home appreciates in value, then more power to you. I have a question for you though...how are local schools funded again?

I get this but the neighborhood we bought in has had amazing schools for ages. There is big money there. So unless you are suggesting that all of a sudden an amazing school cluster is going to go right down the tubes when it didn't sink an inch after the big bubble burst, then I don't get the danger. We certainly are aware that property taxes will rise, and while nobody wants to pay more taxes, that is something we will do eagerly since good schools are one of the biggest drivers of home values.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Sorry a PP here. If we are middle class buyers who are able to afford to buy into an amazing school cluster and the house we buy has appraised higher than we bought at, I don't see how this makes us stupid. We had a ton for a down and low interest rates got us into a wonderful house in a beautiful neighborhood inside the beltway. We were looking to buy anyway so why not buy now instead of waiting? Serious question. The size is fine for us too, and we plan to stay very long term. Should we have waited or something? Why miss out on the lower interest rate?

There are certainly deals to be found out there. And if you don't care whether or not your home appreciates in value, then more power to you. I have a question for you though...how are local schools funded again?

I get this but the neighborhood we bought in has had amazing schools for ages. There is big money there. So unless you are suggesting that all of a sudden an amazing school cluster is going to go right down the tubes when it didn't sink an inch after the big bubble burst, then I don't get the danger. We certainly are aware that property taxes will rise, and while nobody wants to pay more taxes, that is something we will do eagerly since good schools are one of the biggest drivers of home values.

So, let me get this straight...you don't care about the home's intrinsic value, because you're willing to pay more in taxes to maintain it's intrinsic value? Are you serious? Tell me you see the flaw in this logic...

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Sorry a PP here. If we are middle class buyers who are able to afford to buy into an amazing school cluster and the house we buy has appraised higher than we bought at, I don't see how this makes us stupid. We had a ton for a down and low interest rates got us into a wonderful house in a beautiful neighborhood inside the beltway. We were looking to buy anyway so why not buy now instead of waiting? Serious question. The size is fine for us too, and we plan to stay very long term. Should we have waited or something? Why miss out on the lower interest rate?

There are certainly deals to be found out there. And if you don't care whether or not your home appreciates in value, then more power to you. I have a question for you though...how are local schools funded again?

I get this but the neighborhood we bought in has had amazing schools for ages. There is big money there. So unless you are suggesting that all of a sudden an amazing school cluster is going to go right down the tubes when it didn't sink an inch after the big bubble burst, then I don't get the danger. We certainly are aware that property taxes will rise, and while nobody wants to pay more taxes, that is something we will do eagerly since good schools are one of the biggest drivers of home values.

Welcome to Bizarro World! Where spending more earns you more money!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Sorry a PP here. If we are middle class buyers who are able to afford to buy into an amazing school cluster and the house we buy has appraised higher than we bought at, I don't see how this makes us stupid. We had a ton for a down and low interest rates got us into a wonderful house in a beautiful neighborhood inside the beltway. We were looking to buy anyway so why not buy now instead of waiting? Serious question. The size is fine for us too, and we plan to stay very long term. Should we have waited or something? Why miss out on the lower interest rate?

There are certainly deals to be found out there. And if you don't care whether or not your home appreciates in value, then more power to you. I have a question for you though...how are local schools funded again?

I get this but the neighborhood we bought in has had amazing schools for ages. There is big money there. So unless you are suggesting that all of a sudden an amazing school cluster is going to go right down the tubes when it didn't sink an inch after the big bubble burst, then I don't get the danger. We certainly are aware that property taxes will rise, and while nobody wants to pay more taxes, that is something we will do eagerly since good schools are one of the biggest drivers of home values.

So, let me get this straight...you don't care about the home's intrinsic value, because you're willing to pay more in taxes to maintain it's intrinsic value? Are you serious? Tell me you see the flaw in this logic...

Okay let me be clearer, I am willing to pay a lot more money for amazing schools because of the value that I place on education for my child. That is the biggest driver of a home's intrinsic value to me. My son will be getting great schools. Now, it follows that I am willing to pay more in property taxes to maintain the quality of those schools so that my son will get a great edication. And, good schools help property values; so while we are not looking to flip the house for a profit, it is good to know that there is a lower risk of the area losing values in homes because of that factor. That is pretty logical to me.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Sorry a PP here. If we are middle class buyers who are able to afford to buy into an amazing school cluster and the house we buy has appraised higher than we bought at, I don't see how this makes us stupid. We had a ton for a down and low interest rates got us into a wonderful house in a beautiful neighborhood inside the beltway. We were looking to buy anyway so why not buy now instead of waiting? Serious question. The size is fine for us too, and we plan to stay very long term. Should we have waited or something? Why miss out on the lower interest rate?

There are certainly deals to be found out there. And if you don't care whether or not your home appreciates in value, then more power to you. I have a question for you though...how are local schools funded again?

I get this but the neighborhood we bought in has had amazing schools for ages. There is big money there. So unless you are suggesting that all of a sudden an amazing school cluster is going to go right down the tubes when it didn't sink an inch after the big bubble burst, then I don't get the danger. We certainly are aware that property taxes will rise, and while nobody wants to pay more taxes, that is something we will do eagerly since good schools are one of the biggest drivers of home values.

First off, the risk is called the "death spiral". Here's how it works...when incomes in an area remain stagnant or decline, house prices decline because fewer people are moving into the area for well-paying jobs.

Local taxes, which pay for schools (as you rightly noted, are a primary driver in an area's house value), are assessed on local home valuations. Lower prices, at the same tax rate, equals lower tax revenue. Lower tax revenue, equals lower funding for schools, less programs, less qualified teachers, etc.

Local taxes, as a percentage, get raised to recoup the loss.

People, as a whole, don't like paying taxes. This reduces the marketability of any given area over another, again, whether or not that's enough to dissuade them from moving is another point entirely. All other things being equal, home prices decline again.

Property taxes get raised.

Home prices decline again.

Property taxes get raised, again.

See the cycle?

The reason the DC area has been immune from this effect over the past decade is because the DMV benefits from Federal budgets more than any area in the country. The Federal government has the magical ability to make money appear out of thin air, via government debt and money-printing. However, this is getting a lot of press lately and getting a lot of calls to stop. Frankly, the DMV economy has been an anomaly over the past decade because of these government deficits, once you throw that out the window...suddenly things get a LOT more fair to the rest of the country really quick, wanna bet on which way that's gonna turn out for the local economy that's already been in this position for a little under a decade?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Sorry a PP here. If we are middle class buyers who are able to afford to buy into an amazing school cluster and the house we buy has appraised higher than we bought at, I don't see how this makes us stupid. We had a ton for a down and low interest rates got us into a wonderful house in a beautiful neighborhood inside the beltway. We were looking to buy anyway so why not buy now instead of waiting? Serious question. The size is fine for us too, and we plan to stay very long term. Should we have waited or something? Why miss out on the lower interest rate?

There are certainly deals to be found out there. And if you don't care whether or not your home appreciates in value, then more power to you. I have a question for you though...how are local schools funded again?

I get this but the neighborhood we bought in has had amazing schools for ages. There is big money there. So unless you are suggesting that all of a sudden an amazing school cluster is going to go right down the tubes when it didn't sink an inch after the big bubble burst, then I don't get the danger. We certainly are aware that property taxes will rise, and while nobody wants to pay more taxes, that is something we will do eagerly since good schools are one of the biggest drivers of home values.

First off, the risk is called the "death spiral". Here's how it works...when incomes in an area remain stagnant or decline, house prices decline because fewer people are moving into the area for well-paying jobs.

Local taxes, which pay for schools (as you rightly noted, are a primary driver in an area's house value), are assessed on local home valuations. Lower prices, at the same tax rate, equals lower tax revenue. Lower tax revenue, equals lower funding for schools, less programs, less qualified teachers, etc.

Local taxes, as a percentage, get raised to recoup the loss.

People, as a whole, don't like paying taxes. This reduces the marketability of any given area over another, again, whether or not that's enough to dissuade them from moving is another point entirely. All other things being equal, home prices decline again.

Property taxes get raised.

Home prices decline again.

Property taxes get raised, again.

See the cycle?

The reason the DC area has been immune from this effect over the past decade is because the DMV benefits from Federal budgets more than any area in the country. The Federal government has the magical ability to make money appear out of thin air, via government debt and money-printing. However, this is getting a lot of press lately and getting a lot of calls to stop. Frankly, the DMV economy has been an anomaly over the past decade because of these government deficits, once you throw that out the window...suddenly things get a LOT more fair to the rest of the country really quick, wanna bet on which way that's gonna turn out for the local economy that's already been in this position for a little under a decade?

sO uEmploYment MusT be VerY HIGH in tHe Dc Area and Low elesWHERe?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Sorry a PP here. If we are middle class buyers who are able to afford to buy into an amazing school cluster and the house we buy has appraised higher than we bought at, I don't see how this makes us stupid. We had a ton for a down and low interest rates got us into a wonderful house in a beautiful neighborhood inside the beltway. We were looking to buy anyway so why not buy now instead of waiting? Serious question. The size is fine for us too, and we plan to stay very long term. Should we have waited or something? Why miss out on the lower interest rate?

There are certainly deals to be found out there. And if you don't care whether or not your home appreciates in value, then more power to you. I have a question for you though...how are local schools funded again?

I get this but the neighborhood we bought in has had amazing schools for ages. There is big money there. So unless you are suggesting that all of a sudden an amazing school cluster is going to go right down the tubes when it didn't sink an inch after the big bubble burst, then I don't get the danger. We certainly are aware that property taxes will rise, and while nobody wants to pay more taxes, that is something we will do eagerly since good schools are one of the biggest drivers of home values.

So, let me get this straight...you don't care about the home's intrinsic value, because you're willing to pay more in taxes to maintain it's intrinsic value? Are you serious? Tell me you see the flaw in this logic...

Okay let me be clearer, I am willing to pay a lot more money for amazing schools because of the value that I place on education for my child. That is the biggest driver of a home's intrinsic value to me. My son will be getting great schools. Now, it follows that I am willing to pay more in property taxes to maintain the quality of those schools so that my son will get a great edication. And, good schools help property values; so while we are not looking to flip the house for a profit, it is good to know that there is a lower risk of the area losing values in homes because of that factor. That is pretty logical to me.

So you're saying that spending more on schooling results in better education?

I'm finding it extremely ironic that along with a housing crisis, we're also having a student loan crisis...why oh why can this be happening at nearly the identical time?! (hint: see individuals like the person who made the comment above)

BTW, it's spelled "education", not "edication". I realize it's a simple spelling error, but come on, you're arguing how much you value education and you misspell the word?!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Sorry a PP here. If we are middle class buyers who are able to afford to buy into an amazing school cluster and the house we buy has appraised higher than we bought at, I don't see how this makes us stupid. We had a ton for a down and low interest rates got us into a wonderful house in a beautiful neighborhood inside the beltway. We were looking to buy anyway so why not buy now instead of waiting? Serious question. The size is fine for us too, and we plan to stay very long term. Should we have waited or something? Why miss out on the lower interest rate?

There are certainly deals to be found out there. And if you don't care whether or not your home appreciates in value, then more power to you. I have a question for you though...how are local schools funded again?

I get this but the neighborhood we bought in has had amazing schools for ages. There is big money there. So unless you are suggesting that all of a sudden an amazing school cluster is going to go right down the tubes when it didn't sink an inch after the big bubble burst, then I don't get the danger. We certainly are aware that property taxes will rise, and while nobody wants to pay more taxes, that is something we will do eagerly since good schools are one of the biggest drivers of home values.

First off, the risk is called the "death spiral". Here's how it works...when incomes in an area remain stagnant or decline, house prices decline because fewer people are moving into the area for well-paying jobs.

Local taxes, which pay for schools (as you rightly noted, are a primary driver in an area's house value), are assessed on local home valuations. Lower prices, at the same tax rate, equals lower tax revenue. Lower tax revenue, equals lower funding for schools, less programs, less qualified teachers, etc.

Local taxes, as a percentage, get raised to recoup the loss.

People, as a whole, don't like paying taxes. This reduces the marketability of any given area over another, again, whether or not that's enough to dissuade them from moving is another point entirely. All other things being equal, home prices decline again.

Property taxes get raised.

Home prices decline again.

Property taxes get raised, again.

See the cycle?

The reason the DC area has been immune from this effect over the past decade is because the DMV benefits from Federal budgets more than any area in the country. The Federal government has the magical ability to make money appear out of thin air, via government debt and money-printing. However, this is getting a lot of press lately and getting a lot of calls to stop. Frankly, the DMV economy has been an anomaly over the past decade because of these government deficits, once you throw that out the window...suddenly things get a LOT more fair to the rest of the country really quick, wanna bet on which way that's gonna turn out for the local economy that's already been in this position for a little under a decade?

sO uEmploYment MusT be VerY HIGH in tHe Dc Area and Low elesWHERe?

Not at all. Unemployment has remained relatively stable over the past year.

What we're not seeing however is job GROWTH and/or income GROWTH. That's the key driver, without that growth, then there is no fundamental reason for this housing rally to be supported.