For fellow housing bears

[Anonymous]

Millennials in DC area got 400k to 800k help from parents for downpay.....go figure

[Anonymous]

Anonymous wrote:Millennials in DC area got 400k to 800k help from parents for downpay.....go figure

Not sure where you get your information

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Without trying to read the tea leaves on proposed budget cuts, my take on the DC area is that housing costs are way beyond historical norms, relative to HHI. This has been made possible by abnormally low interest rates. When rates rise (and they will) to historical norms (the average thirty year rate is 8.5% or higher) housing will be hit and probably hard in this area.

Households can and have borrowed four and five years' income at three percent interest for housing. That will be impossible at 8.5% or higher. Ergo, prices will come down. The math determines it, not some agent's opinion.

DING, DING, DING! Virtually everyone I know sitting in a 1.8 million house had one or both of the following:

1) "Help from family" - which is to say, money that was likely not earned in the region
2) The enjoyment of some ridiculous equity explosion, that they kept rolling forward to properties - which is to say, they could never pay to house themselves and live a good life in the region, while saving for a $700,000 down payment. They "saved" for their down payment by living in a house that just magically increased in value.

DC salaries, when you look at other ultra expensive cities are very low. We don't have loads of hedge fund folks or techies who are getting multmillion dollar bonuses, and we consider "rich" people to be big law attorneys. Further, government salaries are capped very low at $200k.

Also, Millennials have absolutely no money. Yeah, sure, a few of them do. I am a Millennial and it is very hard to break into the housing market, and no Millennial is going to enjoy the easy equity Gen X and Boomers took for granted. Millennials also aren't willing to buy properties they don't like. Millennials spend all their money on chai lattes and Chop't salads, and they want the best of everything with minimal inconvenience. In 10 years, do you think they're going to line up to buy your crappy new build which will by then be dated and probably falling apart?

I love that you started this thread, OP. I am a home owner (hot area, close in burb, straight 10s on the schools), and I'll still be delighted when this ridiculous market right-sizes.

You may have to wait a minute on the market right-sizing if it ever does.

I own 3 homes in DC 2 in NW and one in NE. I have owned 8 homes in my life time and 6 have been in DC. I have been in the DC market since 95'....here are my thoughts on DC proper market, not surrounding area. I think there are a lot of people in DC sitting on multi million dollar homes. Some have brought straight out and others just brought at the right time and equity in home exploded. There is talk of slow down in federal jobs, but most federal workers, not all, live outside of DC. Mostly because of kids and the schools. So who is in DC proper? The very wealthy, but not the kind of wealth you see in NY or SF or the techies out west. We are seeing Lawyers and lobbyist and some other industries in the city occupying homes for sure. You have a certain level of the poor financially, but expensive home who would be hard pressed to find another place to live in the area should they sell the house with tons of equity. A lot of these folks are elderly, and it will be up to their families to manage the asset after their death. More often than not you see these home sold to be flipped and resold at price well beyond what grandma/grandpa brought it for. Lot of these homes need extensive repairs because the money wasn't there to invest in the house. Homes like this through out the city attract a variety of folks with pretty significant incomes. Who would have thought the day would come when renovated homes in Brookland(NE) would routinely sell for a million or more. See Monroe street in the past year for sales.

Where do I think this is all going with rising interest rates? I think home prices will continue to rise but at a much slower rate. It won't flatline or decline unless a particular neighborhood becomes undesirable and don't see that happening as I have watched the "Line" of where to buy in DC shift further east every year. When I first arrived it was told to me not to buy east of Rock Creek Park. Now you hear people speak of Woodridge(has had a million dollar home sale), Brookland and a lot of the neighborhoods that boarder Eastern Ave. There have even been significant sales of home in SE because it is becoming one of the only places in the city that even has close to reasonable prices. Younger folks are going to have to get smart about buying in the city. Maybe going in on a house with several friends that they are already paying high rents for prime neighborhoods. Consider Anacostia, Bloomingdale was no better than any neighborhood in Anacostia back in the 90's and look at it now. You can't get anything decent for under 700k. DC is getting a lot like Manhattan as far as housing and we don't have the level of rent control that NY City has so makes for an even more difficult challenge. Along with the fact that you can only go so high in the sky in DC and land is very scares. People are going to have to seriously start looking at Prince Georges County cause there is really no where else to go. Get past the stigma and get a short commute into the city and a ton of land under your house. Go east.

QE has caused every asset bubble and once it becomes bloated and unsustainable, raising rates crashes values. The FED is trying to baby step this, but it will end in tears just like it always has.

We are in an unprecedented market, expect unprecedented results.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Millennials in DC area got 400k to 800k help from parents for downpay.....go figure

Not sure where you get your information

Look at all the early 30s buying homes in mclean

[Anonymous]

Even setting aside what might happen with government employment / budgets / draining the swamp rhetoric, the Trump election has to be fairly bad for the DC housing market (my comments are for DC proper and not the burbs).

DC has benefited tremendously from the steady stream of young people moving to the city - a trend that really started after Obama's election in 2008. Recent college grads started moving to DC in bigger numbers to reverse the net domestic outmigration of the decades prior - many were young idealist who were moved by the hopey/changey things that Obama promised and wanted to answer the call for public service through direct federal environment or working for some other idealistic half brained idea/NGO/eco system that was supported by federal or do gooder priorities. These are the people who wanted to live in U Street/Columbia Heights/14th st logan circle. Cool people attract other cool people and their friends which started a virtual circle of population growth in DC. Immigration also played part at both the high end (tech/finance/International orgs) and low end.

Again without even assuming anything around budgets or federal employment, Trump's election changes the attractiveness of the city for both young people and immigrants. I'm not really a Democrat but honestly how many 22 year olds are dying to work for Lets Make America Great Again causes/jobs (and the minority who do want to hardly have the cool factor to be a draw). Heck he can't even fill the top jobs in his own administration at the senior level much less draw throngs from across the country who want to start their professional lives in DC. Add to that he is rounding up immigrants and making it harder to obtain legal visas in tech...and you can see how migration in DC might significantly slow down.

As many have pointed out that population growth (i.e. in-migration in the case of DC) is a key driver of real estate. My guess is the next few years young people will look to other parts of the country once they graduate college. People who have already laid down roots in DC will probably stay but the net migration trends will reverse...and by proxy property market will get softer by probably not a major correction.

For a major correction you have to add to the above scenario: real budget/agency cuts, gutting regulation (yes - additional regulations supports more bureaucracy, lawyers, paperwork that keeps the local economy humming) and simplifying the tax code (where every obscure provision supports several lobbying jobs) - combine all this and things start to get ugly. My guess is that the recently gentrified areas get the worse of it and the more established neighborhoods in NW see a smallish negative impact.

Before anyone chews me out for creating false correlations between Obama and DC population gorwth....take a look for yourself. Slide 5 shows how clearly the 2008 was the inflection point in DC population inflows and slide 3 shows the neighborhoods that have benefitted as a result of these people moving:

https://dme.dc.gov/sites/default/files/dc/sites/dme/publication/attachments/Office%20of%20Planning%20Presentation%20for%20CSCTF%204%2026%2016.pdf

My advice for someone looking to buy in the district would be to wait a year or two if you can till some of these trends play out....

[Anonymous]

Sigh. Sometimes I can see why posts sound so snarky when they don't intend to.

12:24, college grads have always moved to D.C. This is not a 2008/Obama-related phenomenon. what's new is the number of children born in the city, who stay in the city school age. Your link is focused on families/children.

Plus, this is about house purchases, not rentals. I haven't seen data saying all these 22 year olds purchase homes.

[Anonymous]

Who stay in the city_once they are_

[Anonymous]

Anonymous wrote:Even setting aside what might happen with government employment / budgets / draining the swamp rhetoric, the Trump election has to be fairly bad for the DC housing market (my comments are for DC proper and not the burbs).

DC has benefited tremendously from the steady stream of young people moving to the city - a trend that really started after Obama's election in 2008. Recent college grads started moving to DC in bigger numbers to reverse the net domestic outmigration of the decades prior - many were young idealist who were moved by the hopey/changey things that Obama promised and wanted to answer the call for public service through direct federal environment or working for some other idealistic half brained idea/NGO/eco system that was supported by federal or do gooder priorities. These are the people who wanted to live in U Street/Columbia Heights/14th st logan circle. Cool people attract other cool people and their friends which started a virtual circle of population growth in DC. Immigration also played part at both the high end (tech/finance/International orgs) and low end.

Again without even assuming anything around budgets or federal employment, Trump's election changes the attractiveness of the city for both young people and immigrants. I'm not really a Democrat but honestly how many 22 year olds are dying to work for Lets Make America Great Again causes/jobs (and the minority who do want to hardly have the cool factor to be a draw). Heck he can't even fill the top jobs in his own administration at the senior level much less draw throngs from across the country who want to start their professional lives in DC. Add to that he is rounding up immigrants and making it harder to obtain legal visas in tech...and you can see how migration in DC might significantly slow down.

If you are referring to the H1B workers who work in IT, then you should know that this group never found DC proper attractive. They like suburbs with good schools and green neighborhoods. They are not in the US to imbibe the urban cool.

[Anonymous]

Atlanta Fed Slashes Q1 GDP Forecast To Just 0.5%, Lowest In Three Years 4/14/17

"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 0.5 percent on April 14, down from 0.6 percent on April 7. The forecast for first-quarter real consumer spending growth fell from 0.6 percent to 0.3 percent after this morning's retail sales report from the U.S. Census Bureau and the Consumer Price Index release from the U.S. Bureau of Labor Statistics."
https://www.frbatlanta.org/cqer/research/gdpnow.aspx?panel=1

Putting the Atlanta Fed's forecast in context, a 0.5% GDP would mark the weakest quarter in 37 years, or going back to 1980, in which the Fed hiked rates. Then again, considering today's abysmal CPI and retail sales data, the narrative to focus on next is not so much hiking, or balance sheet normalization, but when the Fed will resume easing, cut rates (as per Donald Trump's recent suggestion) and/or launch QE4.

http://www.zerohedge.com/news/2017-04-14/atlanta-fed-slashes-q1-gdp-forecast-just-05-lowest-three-years

You went the wrong way with the rate Yellen.

[Anonymous]

Prices are still below 2005 in almost all metro neighborhoods .

Interest rates were 50 percent higher in 2005.

Much more affordable now.

[Anonymous]

Anonymous wrote:Atlanta Fed Slashes Q1 GDP Forecast To Just 0.5%, Lowest In Three Years 4/14/17

"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 0.5 percent on April 14, down from 0.6 percent on April 7. The forecast for first-quarter real consumer spending growth fell from 0.6 percent to 0.3 percent after this morning's retail sales report from the U.S. Census Bureau and the Consumer Price Index release from the U.S. Bureau of Labor Statistics."
https://www.frbatlanta.org/cqer/research/gdpnow.aspx?panel=1

Putting the Atlanta Fed's forecast in context, a 0.5% GDP would mark the weakest quarter in 37 years, or going back to 1980, in which the Fed hiked rates. Then again, considering today's abysmal CPI and retail sales data, the narrative to focus on next is not so much hiking, or balance sheet normalization, but when the Fed will resume easing, cut rates (as per Donald Trump's recent suggestion) and/or launch QE4.

http://www.zerohedge.com/news/2017-04-14/atlanta-fed-slashes-q1-gdp-forecast-just-05-lowest-three-years

You went the wrong way with the rate Yellen.

But...but recovery!

[Anonymous]

Anonymous wrote:Prices are still below 2005 in almost all metro neighborhoods .

Interest rates were 50 percent higher in 2005.

Much more affordable now.

2005 was also bubblicious. Why do you keep talking about 2005 like it was some kind of banner year? It wasn't.

[Anonymous]

LOL I bet the realtors are mad this thread is still up and running.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Prices are still below 2005 in almost all metro neighborhoods .

Interest rates were 50 percent higher in 2005.

Much more affordable now.

2005 was also bubblicious. Why do you keep talking about 2005 like it was some kind of banner year? It wasn't.

Of course it was a bubble , but this is 12 years later and prices haven't even made it back with massively lower interest rates so now is way not a bubble. In past bubbles prices tend to shoot up after the ten year period it took to recover previous highs so historically we are on the verge of a price escalation . The economy also feels poised for big growth after a long period of malaise.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Prices are still below 2005 in almost all metro neighborhoods .

Interest rates were 50 percent higher in 2005.

Much more affordable now.

2005 was also bubblicious. Why do you keep talking about 2005 like it was some kind of banner year? It wasn't.

Of course it was a bubble , but this is 12 years later and prices haven't even made it back with massively lower interest rates so now is way not a bubble. In past bubbles prices tend to shoot up after the ten year period it took to recover previous highs so historically we are on the verge of a price escalation . The economy also feels poised for big growth after a long period of malaise.

"The economy" != Washington, DC economy.