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

[Anonymous]

Anonymous wrote:http://www.aikenstandard.com/article/20130426/AIK0106/130429651/1013/us-applications-for-unemployment-aid-drop-to-339k

Last I checked...you don't get to apply for unemployment just because your job is furloughed. You still have a job, so you're not unemployed! You're just going to get paid less because you have fewer working days.

Also, this is directly from the article you posted to support your position:

"Still, layoffs are only half the equation: Businesses also need to be confident enough in the economy to step up hiring. Many companies have been advertising more jobs but have been slow to fill them. Job openings jumped 11 percent during the 12 months that ended in February, but the number of people hired declined, according to a Labor Department report this month."

Along with...

"In March, employers added only 88,000 jobs. That was a sharp drop from the previous four months, when hiring averaged 220,000 per month."

So...basically, employers aren't firing people, they're just not hiring new people and they're furloughing the existing employees to reduce their payroll budgets without allowing the employee to file for unemployment.

That sounds like improvement to you? Again, what you have to prove is job GROWTH and/or income GROWTH...stability is only enough to justify a rise in prices concurrent with the rise in inflation, anything above that without a fundamental economic change is just hype.

http://articles.washingtonpost.com/2013-03-22/business/37925332_1_job-gains-leisure-and-hospitality-unemployment-rate

"The unemployment rate in the Washington metropolitan area rose in January to 5.4 percent from 5.3 percent, even as the region added 41,900 jobs."

The federal government subcategory lost 3,500 positions during the same period, suggesting that the gains came from state- and municipal-level governments.

Fuller said these employers are finally getting back to pre-recession job strategies after years of working on shoestring budgets.

“As they get right-sized, I see that growing not quite so strongly. That looks out of scale right now,” Fuller said."

[Anonymous]

I am interested in this thread but please don't string all the quotes together...

[Anonymous]

http://cdn.styleforum.net/3/34/345fbdd4_Stephen-Colbert-Popcorn.gif

[Anonymous]

I think that we have a good indicator in the link below. It hasn't been updated in nearly a year. I think that the bubble deflated, if not burst and we aren't in one now.

http://novabubblefallout.blogspot.com/

[Anonymous]

or this one http://bubblemeter.blogspot.com/

maybe the chicken little guy should start his own blog

[Anonymous]

Anonymous wrote:I think that we have a good indicator in the link below. It hasn't been updated in nearly a year. I think that the bubble deflated, if not burst and we aren't in one now.

http://novabubblefallout.blogspot.com/

The fallacy of this meter is that it measures housing prices against the 2006 inflation-adjusted peak. There has never been another proper analysis conducted on a post-bubble asset class that measured valuation to peak. You look against market low prior to the bubble, along with long-term averages. In the long-term (since 1970), homeowners in the DMV paid aprox. 2.7x home price to median income. During the bubble that got as high as 6-7x, we're currently looking at 3.5x.

Average inflation-adjusted median income in the DC market has remained at ~$100k since 2000, at that point, inflation-adjusted housing prices were close to $270,000 (in today's dollars). This coincidentally ties to the average, healthy market ratio of 2.7x median income for a house price.
Current average house prices in DC are around $350,000, wages have remained flat (adjusting for inflation).
Unless we're assuming some massive improvements in the local economy that have, as of yet, to be advertised...healthy average home price for this market is $270k.

Here's where you can very easily chart the change in both nominal as well as real home prices in the DC market since 1987:

http://www.jparsons.net/housingbubble/washington.html

A proper analysis would compare today's housing market against how it stood prior to the bubble (which started in 2001).

The wrong question is this:

Have we returned to 2006 market-high valuation?

The right question is this:

Have we returned to 2001 market-low valuation?

Sorry guys, we're never going to see 2006 home price valuations again, that was a fluke. It's a pipe-dream to stack up a recovery against that number. Feel free to wait it out if you'd like, but that's a foolish game, IMO.

[Anonymous]

Anybody thought of this situation also adding to the problem:

http://www.ft.com/intl/cms/s/0/6a268d3c-adc8-11e2-a2c7-00144feabdc0.html

"One of the largest tax breaks that would have to be curbed is the deduction that some 37m US homeowners claim for their mortgage interest payments, estimated to cost the government $68bn in 2012."

On average the mortgage interest tax break "costs" the government $100B a year. With all the talk of Congress scrambling to find some sort of deal to avert Sequestration's effects still (see: FAA deal), which coincidentally stands at $100B a year over the next decade...do any of you honestly think this will last in its current form? Especially considering that the primary beneficiaries are what the rest of the nation would consider to be wealthy households, with incomes above $100k (not wealthy by DC standards), and that the growing sentiment that we see is that this tax deduction is a taxpayer-subsidized payment to homeowners?

The tax code is prime for overhaul, last time it was visited was 1986, and prior to that, ALL interest was tax deductible and that was changed in the face of ever growing Federal deficits. Doubtful they will cut it outright, but I think you're making a losing bet if you think it's going to stand "as-is" over the next decade. Especially now that all the banks are getting into the rental game and are issuing fewer and fewer mortgages...just a thought

[Anonymous]

I don't think it's a "bubble" but I do think that prices are driven by 1) current inventory being low 2) low interest rates 3) a lot of people who have wanted to buy or sell in the past few years but waited.

The "bubble" will burst only if we have too much supply and not enough demand. Demand may go down once budgets are cut or interest rates go up. The question then will be, what will inventory do?

I think that with the rental market the way that it is, more people will rent out their properties, rather than sell it for less than they want to get.

I just did this recently - I didn't need the money for a down payment, so instead of selling my SFH, I rented it - for more than I pay.

I'll rent it as long as it is profitable to do so, or until I can sell it for a nice surplus.

[Anonymous]

The FED will not make the mistake of raising rates like they did before. Housing should always increase in value or else it will destroy the economy again.

[Anonymous]

Anonymous wrote:I don't think it's a "bubble" but I do think that prices are driven by 1) current inventory being low 2) low interest rates 3) a lot of people who have wanted to buy or sell in the past few years but waited.

The "bubble" will burst only if we have too much supply and not enough demand. Demand may go down once budgets are cut or interest rates go up. The question then will be, what will inventory do?

I think that with the rental market the way that it is, more people will rent out their properties, rather than sell it for less than they want to get.

I just did this recently - I didn't need the money for a down payment, so instead of selling my SFH, I rented it - for more than I pay.

I'll rent it as long as it is profitable to do so, or until I can sell it for a nice surplus.

The supply side is peculiar. As the DC area is notoriously slow to process foreclosures.

Also, there was a massive increase in new build permits, especially for multi-unit dwellings, in the past year. I think rents are going to become a lot more competitive over the next three years.

http://m.theatlanticcities.com/housing/2012/05/top-us-cities-new-home-construction/1935/

[Anonymous]

Anonymous wrote:The FED will not make the mistake of raising rates like they did before. Housing should always increase in value or else it will destroy the economy again.

That's a false claim. Historically, since 1890, housing only appreciated a little over inflation.

http://visualizingeconomics.com/blog/2011/03/23/real-vs-nominal-housing-prices-united-states1890-2010

[Anonymous]

Anonymous wrote:

Anonymous wrote:The FED will not make the mistake of raising rates like they did before. Housing should always increase in value or else it will destroy the economy again.

That's a false claim. Historically, since 1890, housing only appreciated a little over inflation.

http://visualizingeconomics.com/blog/2011/03/23/real-vs-nominal-housing-prices-united-states1890-2010

While I agree with the intention of your assertion that the ol' adage of housing always being a good investment is patently wrong.

It should be noted they did say that house prices should only appreciate in value, not by how much, which is true.

[Anonymous]

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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.

I wonder if you expressed the same sentiment back in the early 2000's? Refute any of the points made above.

Noone has, as of yet, been able to express what in the local DC economy has improved over the past year. Feel free to offer up an idea if you have one.

The economy is humming along fine and confidence in the economy is better as well as the restrictions on loans are easing, that is what happened. Take your doom and gloom to your next losing bidding war.

Are you serious?

http://www.prnewswire.com/news-releases-test/marylanddc-manufacturing-jobs-decline-23-over-past-year-162579106.html

How about this one...?

http://www.forbes.com/sites/emsi/2013/04/02/states-that-lead-and-lag-in-job-growth-and-competitiveness/

Or how about this one...?

http://www.dailyfinance.com/2013/03/26/consumers-confidence-in-the-economy-falls-in-march/

Care to bring forward some of your sources for your sentiments? Actual numbers would be appreciated.

Even better for DC. If you haven't figured it out if the economy sinks people come to DC for jobs.

That's only because the federal government ran up deficit after deficit in order to help prop up the aggregate demand in the economy with ever increasing budgets and spending. Take that away and that dynamic changes entirely.

http://www.cato.org/blog/federal-spending-trend

Do you honestly believe that the federal budget can grow at the pace we saw over the past decade for the years ahead?

Ah. Okay, well at least this explains why you seem to know so little.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I don't think it's a "bubble" but I do think that prices are driven by 1) current inventory being low 2) low interest rates 3) a lot of people who have wanted to buy or sell in the past few years but waited.

The "bubble" will burst only if we have too much supply and not enough demand. Demand may go down once budgets are cut or interest rates go up. The question then will be, what will inventory do?

I think that with the rental market the way that it is, more people will rent out their properties, rather than sell it for less than they want to get.

I just did this recently - I didn't need the money for a down payment, so instead of selling my SFH, I rented it - for more than I pay.

I'll rent it as long as it is profitable to do so, or until I can sell it for a nice surplus.

The supply side is peculiar. As the DC area is notoriously slow to process foreclosures.

Also, there was a massive increase in new build permits, especially for multi-unit dwellings, in the past year. I think rents are going to become a lot more competitive over the next three years.

http://m.theatlanticcities.com/housing/2012/05/top-us-cities-new-home-construction/1935/

Yes, but there are not a lot of places to put new building. So those of us who own properties in desireable areas, such as on a metro, may not have to worry about new building permits.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I think that we have a good indicator in the link below. It hasn't been updated in nearly a year. I think that the bubble deflated, if not burst and we aren't in one now.

http://novabubblefallout.blogspot.com/

The fallacy of this meter is that it measures housing prices against the 2006 inflation-adjusted peak. There has never been another proper analysis conducted on a post-bubble asset class that measured valuation to peak. You look against market low prior to the bubble, along with long-term averages. In the long-term (since 1970), homeowners in the DMV paid aprox. 2.7x home price to median income. During the bubble that got as high as 6-7x, we're currently looking at 3.5x.

Average inflation-adjusted median income in the DC market has remained at ~$100k since 2000, at that point, inflation-adjusted housing prices were close to $270,000 (in today's dollars). This coincidentally ties to the average, healthy market ratio of 2.7x median income for a house price.
Current average house prices in DC are around $350,000, wages have remained flat (adjusting for inflation).
Unless we're assuming some massive improvements in the local economy that have, as of yet, to be advertised...healthy average home price for this market is $270k.

Here's where you can very easily chart the change in both nominal as well as real home prices in the DC market since 1987:

http://www.jparsons.net/housingbubble/washington.html

A proper analysis would compare today's housing market against how it stood prior to the bubble (which started in 2001).

The wrong question is this:

Have we returned to 2006 market-high valuation?

The right question is this:

Have we returned to 2001 market-low valuation?

Sorry guys, we're never going to see 2006 home price valuations again, that was a fluke. It's a pipe-dream to stack up a recovery against that number. Feel free to wait it out if you'd like, but that's a foolish game, IMO.

Depends where you're talking about. We're not going to see 2006 home price valuations again *nationally*. But you don't buy a house in "Nationally". You buy it in VA. Or MD. Or DC. Fortunately I bought in DC and am up about 50% from 2006. I don't expect to see such gains in the near future, obviously. But rents are increasing faster than house prices.

Obviously anyone who bought a house in Manassas (or Las Vegas, god forbid) in 2006 was a sucker. But there are places where there was (and is) no bubble.