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

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=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?[/quote]

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?[/quote]

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.[/quote]

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?[/quote]

sO uEmploYment MusT be VerY HIGH in tHe Dc Area and Low elesWHERe?[/quote]

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.[/quote]

[img]http://media.insidepulse.com/old/columnImages2006/image22886.jpg[/img][/quote]

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