http://blog.redfin.com/blog/2013/04/the-2013-real-estate-bubble.html

Sorry, but, yeah...this is a mini-bubble.

22,000 lost gov't and gov't contractor jobs (read: high paying) slated to be replaced by construction and service industry jobs (read: low paying) does not a successful local economy make.

Sorry, but DC's boom over the past decade is over. Budgets are flat, if not being cut, and to those saying "but look, Sequestration hasn't affected jobs here!"...please keep in mind that Sequestration hasn't even occurred yet, be ready to start reading headlines come July (when the cuts are actually scheduled to happen). You'll have extremely upper class, and then lower-middle class jobs...this is evident to anybody who has actually worked at a DC gov't contractor (for instance, my five years spent at Lockheed at various locations in the DMV). All the jobs they are cutting are redundant senior management roles that paid for these ~$400-$500k houses in the 'burbs. Those jobs are declining and you're left with people like me, an analyst whose direct manager was a division VP. Enjoy!

Anonymous wrote:Generally the best sign of a bubble is when folks start denying that there is one...

Really what prompted this guy to post this? Even if there is a bubble, there's no value to that knowledge unless you know when it will pop...

Yes, it will not be the same kind of bubble. But a bubble fueled by Federal MBS buying and government mortgage guarantees, and low-down payment FHA loans (has the FHA been bailed out yet? or has the Fed managed to pump enough money supply to avoid it? http://www.nytimes.com/2012/11/17/business/audit-shows-housing-agency-facing-shortfall.html), is still a bubble. But yes different than bubble from 'creative' bank financing.

Also, to some degree, this *nationwide* bubble is fueled by an inventory pinch, which results from hedge funds and private equity scooping up property and pushing inventory down, ie supply-side bubble versus our earlier demand side bubble. They are looking for yield b/c the Fed has driven rates so low.
http://online.wsj.com/article/SB10001424127887324034804578346800317118568.html



Or maybe huge swaths of the DC region are filled with lawyers and lobbyists all pulling in 500k household income, and they are making thousands more of such households every year. I guess that is possible too..

Naw, I disagree. Well, not totally. I wouldn't have started this thread, but I'll tell someone who is convinced there's a bubble that there are many many facts that fly in the face of that declaration. But at the end of the day it doesn't really matter, really. We all have to live somewhere.

Bid it up

The washington post makes a lot of money off real estate ads. Its always a good time to buy in WaPo land.

Anonymous wrote:Clearly you guys have not lived in this area very long. About every ten years or so it gets like this.

Well, it hasn't been 10 years since the last housing boom.

Prices in the core rise because of population pressure. Prices outside the core rise because prices in the core are rising. Eventually the market in Dumfries, Manassass and the like craps the bed.

And prices in the core flatten for a year or two before rising.

Clearly you guys have not lived in this area very long. About every ten years or so it gets like this.

You are forgetting inflation. It's not just going on in DC area, this is also happening in other strong RE markets that didn't quite tank during the recession after bubble burst, but had a little bit of depreciation. Now the prices are back to their bubble levels, not just here. I don't see job markets picking up anywhere honestly, not like new jobs are created en masse or new companies are relocating to the already expensive metro areas, in fact, they are looking to expand in cheaper COL places instead. The fact of the matter is that 1 mil is not 1 mil it used to be 10 years ago. 2 mil is a new 1 mil and people are not quite used to this idea. Not just RE has gotten more expensive, prices are up for a lot of necessities like gas and food and educational services.

And, expensive metro areas do have a lot of people, who have accumulated wealth over the years working for decades in lucrative fields available in that area, plus the more recent crowd of younger high earners and those who took advantage of the tech boom and then RE boom of the 90s and early 2000s. While some people are overextending to buy, others are cashing out from their previous home purchases and upgrading, the situation is not uniform across the board like it might have been in 2005, simply because it is harder to qualify and thus, overextend yourself to the same degree as before.
But it is not impossible to see foreclosures in the future, especially if the employment situation of those who are more leveraged were to change.

I think there is a bubble. DC will always be a high-income area, and real estate here will never quite collapse like in other markets (Las Vegas, Detroit).

*but* what's going on now is unsustainable.

And as strong as the DC job market is, it has peaked. The trajectory of defense and defense-related jobs/contractors is going down due to budget cuts. I don't foresee the creation of any *new* agencies in this climate. And like it or not, the creation of Homeland Security and proliferation of defense contractors played a role in the real estate boom in NOVA.

Or maybe huge swaths of the DC region are filled with lawyers and lobbyists all pulling in 500k household income, and they are making thousands more of such households every year. I guess that is possible too..

Ha. Go look at the "should I go to law school" thread in Jobs and Careers.

Generally the best sign of a bubble is when folks start denying that there is one...

Really what prompted this guy to post this? Even if there is a bubble, there's no value to that knowledge unless you know when it will pop...

Yes, it will not be the same kind of bubble. But a bubble fueled by Federal MBS buying and government mortgage guarantees, and low-down payment FHA loans (has the FHA been bailed out yet? or has the Fed managed to pump enough money supply to avoid it? http://www.nytimes.com/2012/11/17/business/audit-shows-housing-agency-facing-shortfall.html), is still a bubble. But yes different than bubble from 'creative' bank financing.

Also, to some degree, this *nationwide* bubble is fueled by an inventory pinch, which results from hedge funds and private equity scooping up property and pushing inventory down, ie supply-side bubble versus our earlier demand side bubble. They are looking for yield b/c the Fed has driven rates so low.
http://online.wsj.com/article/SB10001424127887324034804578346800317118568.html



Or maybe huge swaths of the DC region are filled with lawyers and lobbyists all pulling in 500k household income, and they are making thousands more of such households every year. I guess that is possible too..

the demand for rental housing and for smaller, more moderately priced owner housing will outpace the demand for larger, more expensive housing.

LOL - the notion that "demand" and ability to pay are separate is funny. The takeaway for me is that we're not looking another "permanently high plateau."

Anonymous wrote:http://www.washingtonpost.com/blogs/where-we-live/post/is-the-washington-dc-area-housing-market-bubbling-again/2013/03/25/1f73a2fa-9588-11e2-ae32-9ef60436f5c1_blog.html

The takeaway from the article for me is:

Higher paying Federal government, business services and professional jobs will decrease and construction and (lower wage) health care jobs will increase. "As a result of the economic and demographic changes in the region, the demand for rental housing and for smaller, more moderately priced owner housing will outpace the demand for larger, more expensive housing.

This makes complete sense because the loan standards are extremely stringent and buyers have the ability to afford and pay them back without resorting to IO, negative arms etc...

http://www.washingtonpost.com/blogs/where-we-live/post/is-the-washington-dc-area-housing-market-bubbling-again/2013/03/25/1f73a2fa-9588-11e2-ae32-
9ef60436f5c1_blog.html