Reply to What would you do with budget of 600-700K?

Forum Index » Real Estate

Reply to "What would you do with budget of 600-700K?"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Wait a year or two, and things will be more affordable.  The DC market has been by far the hottest market in the whole country because this is the one place with a healthy job market.  But the federal budget cuts are going to change that (not so much through effects on federal workers, but more through effects on contractors).  Prices won't drop the way they have some places (you'd have to be crazy to think we'll get a drop like the 60% drop Las Vegas has had).  But prices will probably drop 10-20% in good neighborhoods in DC and close-in areas.[/quote]

I agree prices are going to drop.  But it'll take a bit longer, and the drop will be bigger than you're suggesting.  More like a 30% drop over the next five years.[/quote]

Why do you think prices will drop 30%?[/quote]

1) Federal budget cuts.  12:25 already covered this, so I won't bother elaborating.

2) Interest rates are going to go up.  Not in the next 2-3 years, but 4-5 years out.  Everyone I know who is buying in DC or a close-in neighborhood is pushing to the limit of the loans they can qualify for, so if rates were higher, they wouldn't be able to pay today's prices.  Not only that, but some of them are using ARMs, so if their salaries stay flat and rates rise, they'll be in trouble.

3) This is probably the biggest one.  Everyone in DC and close-in suburbs seems to have learned the wrong lesson from the housing crisis.  The rest of the country learned that real estate prices can go down.  People here have concluded that real estate prices can go down everywhere else, but that in DC and close-in suburbs, it's impossible for prices ever to go down.  So they're happy to pay a very high price for a house because they're confident it's risk-free, and that if they want to move, they'll be able to sell for an even higher price.  That works as long as prices don't drop significantly, but if prices start dropping and that confidence goes away, that'll be one more reason for prices to fall.  The job loss and interest rate changes might mean a 10-15% drop, but this feedback effect could easily turn that into a 30% drop.

I'd feel differently on this if the DC homebuyers and homeowners I know were saying something like "I know it's risky to pay this much for a house, but I really want to live here, so it's a risk worth taking."  But that's not what they're saying.  They're saying that it's [b]impossible[/b] for prices in desirable DC neighborhoods to go down.  It sounds like what the rest of the country was saying back in 2006.  And that makes me very nervous about the market here.

Does that mean for sure that prices will drop?  Of course not.  Nothing's for sure.  But there's a lot of risk there, and everyone buying in the expensive parts of DC and the close-in suburbs right now seems to be convinced that there's no risk at all.[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics