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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Without trying to read the tea leaves on proposed budget cuts, my take on the DC area is that [b]housing costs are way beyond historical norms, relative to HHI.[/b]  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.  [/quote]

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.[/quote]

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.

[b]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 [/b]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.[/quote]

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.[/quote]

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