Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

No, that's not it, though I'm sure there are a few examples to the contrary.

It's simply economics. Demand is greater than supply. This causes prices to rise.

There are several reasons why demand is outstripping supply in DC, and they've mostly been mentioned already: demand is high because there is serious job and income growth in this region, especially when viewed relative to other regions; supply is low because traffic makes distance extremely relevant and there are immutable constraints on the amount of houses close-in; supply is low because the rate lock-in effect makes the prospect of moving to another home less attractive; supply is low because retirement accounts took a huge hit and caused a delay in retirement (I'm not sure if this is true; it's an empirical question).

So, we have demand>supply. Looking at the reasons stated above, which of these do you expect to change going-forward? The cessation of sustained job and income growth in the region? No. Traffic suffocating homes with longer commutes? Doubtful, though self-driving cars may change this landscape (of course, not within a decade). Interest rates reversing so that it's more attractive to move? No chance, period. Retirement accounts recovering? Yeah, that should happen, but the effect won't be large. (Again, I question whether this is actually relevant in DC at all; I honestly don't have a clue.)

All-in-all, I foresee little reason to think we won't have a continued disequilibrium in which demand>supply for years to come. In an odd way, I'm not more bullish on DC housing than I was before writing those lines. I'd enjoy hearing from others on this.

People keep talking about the job market here. What jobs are growing?

1) Attorneys: DCUM is full of stories for firms folding, and warning about how there has been a shift and discouraging future lawyers (as well as oversupply from the many many law schools)

2) Lobbying: Congress is basically deadlocked and lobbying has been down since recession. http://www.marketplace.org/topics/economy/new-business-lobbying

3) Tech: DOD budget is down, what 1/2 trillion for next 10 years? So defense contractor cuts. Living social is a flame out. Maybe some big data/nimble tech analytics are flourishing, but only b/c they are cheaper and leaner than the beltway bandits and Big-5 Defense contractors from whom they are taking business.

Where is this job growth?? I do concede we don't see massive layoffs and a fairly stable job market, so hence we don't see people selling b/c they have to nor waves of foreclosure.

This is a total supply-side induced bubble. Short supply is a large part b/c people were holding out for prices to go back to bubble levels (even folks who bought decades have this delusional thought that they lost money b/c it was at one point worth $XXXX, so are waiting for prices to return that point and beyond). Prices are just at bubble levels now, but I think the run-up was so fast, folks are getting greedy and sitting on their house, because "real estate never goes down".

This locked up market will persist for a long time, and end in tears I'm afraid.

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

No, that's not it, though I'm sure there are a few examples to the contrary.

It's simply economics. Demand is greater than supply. This causes prices to rise.

There are several reasons why demand is outstripping supply in DC, and they've mostly been mentioned already: demand is high because there is serious job and income growth in this region, especially when viewed relative to other regions; supply is low because traffic makes distance extremely relevant and there are immutable constraints on the amount of houses close-in; supply is low because the rate lock-in effect makes the prospect of moving to another home less attractive; supply is low because retirement accounts took a huge hit and caused a delay in retirement (I'm not sure if this is true; it's an empirical question).

So, we have demand>supply. Looking at the reasons stated above, which of these do you expect to change going-forward? The cessation of sustained job and income growth in the region? No. Traffic suffocating homes with longer commutes? Doubtful, though self-driving cars may change this landscape (of course, not within a decade). Interest rates reversing so that it's more attractive to move? No chance, period. Retirement accounts recovering? Yeah, that should happen, but the effect won't be large. (Again, I question whether this is actually relevant in DC at all; I honestly don't have a clue.)

All-in-all, I foresee little reason to think we won't have a continued disequilibrium in which demand>supply for years to come. In an odd way, I'm not more bullish on DC housing than I was before writing those lines. I'd enjoy hearing from others on this.

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

BS. First off this would show up in sold record which is still way down.

And if RE is becoming an OTC market, I would think we would all agree that things are very very broken.

Maybe this applies in rarefied thinly traded 4M+ markets? Some logic there I suppose.

Anonymous wrote:The issue is that unless you bought in an area that was extremely undervalued for a long time and has experienced rapid appreciation you are stuck.

Example you bought in Pimmit Hills or Petworth and experienced a 30-40% increase over the last few years and want to move to McLean, Arlington or NW which experienced a 10-15% increase. You might be able to use the equity to get you into those target areas.

Unless you experienced a life event which increased your income you don't have that much mobility within the same area to trade up to a bigger house. In fact you may be more inclined to stay if you locked in a really good interest rate.

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

BS. First off this would show up in sold record which is still way down.

And if RE is becoming an OTC market, I would think we would all agree that things are very very broken.

Maybe this applies in rarefied thinly traded 4M+ markets? Some logic there I suppose.

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

Anonymous wrote:The jobs comment is spot on. People generally "move" for 4 reasons: (1) to adjust housing consumption, (2) to get a new job, (3) to retire or (4) they die (the final move). When there are no jobs elsewhere, (2) dries up. When seniors aren't comfortable with their 401k balances, (3) dries up. Because there are fewer type-(2) and type-(3) moves, there is less inventory, so moving to getting a bigger/smaller home becomes less prevalent. We then end up with a housing market that is entirely driven by the death of the elderly. Virtually every home in our neighborhood that has gone up for sale in the past two years has been an estate sale. QE arguably made things even worse in places like DC because of the interest rate lock-in that could jam up the housing market for the next decade. I suspect that in terms of volume, things are not going to be back to normal for a very long time.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Besides people not wanting to give up their low interest rates, they also can't sell even if they wanted to because there is no house to move to unless they are moving out of the area or way out to the burbs. The entire market is just locked up.

I think this is accurate in a lot of cases. Every house we've seriously pursued since we've been looking has been owned by an older couple with grown children who is retiring out of the area. However, we've looked at a lot of houses owned by younger families, too, so it's not universally true. I don't know where those families planned to go, though.

What's going to break this self-reinforcing cycle?

Job mobility and growth in the rest of the country outside the bubble areas of DC/SF/LA/NYC...

There used to be booming economies in the sunbelt, but now they have nothing. Rust belt is barely hanging on. Texas is not doing too bad but can't absorb everyone.

It's really a jobs problem, which is why Yellen will fix it.

Also, people can't retired and move to Florida b/c their 'conservative' investments are earning 0%; retirees are freaked out by stock market roller coaster, so can't (and shouldn't) take on riskier assets, so they really can't retire fully either. Yellen will fix this too: QE winds down 2015, 6 months later rates rise. Boom retirees now have a little cash flow and can buy that condo in Boca AND have money for food/med.