House Hunting
Well, the search for a new house in D.C. has begun. So far, everything we've looked at has fallen into one or more of the following categories: (1) too big; (2) too small; (3) too weird; and/or (4) too shitty. If you've ever shopped for a house, you know what I'm talking about.
But here in D.C., there's the added dimension that you can look at a house that really needs a lot of work--like, a new kitchen, new bathrooms, a new roof, and more--with a $750,000 asking price. Ouch.
The good news, for us, is that it is a buyer's market. We looked at a couple places today that had been on the market for months--a far cry from the market a few years ago, when the time nice places would stay on the market was reckoned in hours, not days. The bad news is that, even in a buyer's market, the housing in D.C. still seems overpriced to me.
posted by Number Three @ 5:33 PM
3 Comments:
There are many indications that the housing bubble may still need to deflate for some time, especially in markets where it had really gone up (a good place to get some perspective on this is Paul Krugman's articles and blog posts in the NYT). The credit markets are really weird right now, and what started in the subprime mortgage industry is slowly creeping through every credit market, including home equity lines of credit (many banks have shut down hundreds of thousands of the latter in recent weeks). When the chickens come home to roost in the other credit sectors, including credit cards and car loans, there will almost assuredly be a very big slowdown followed by more defaults on home loans, followed by a bigger glut of houses, followed by falling prices.
Coupled with the fact that the Bush administration has politicized all the economic data, I believe the economy right now is far worse than were being led to believe and the future looks even bleaker. The Bush administration has lied about every other facet of political life, why should the economic data be any different? Here's an example: The US government stopped reporting the M3 money supply in August of 2006 (some lame excuse about it being too expensive to do), so now you have to work really hard to figure out how many greenbacks the Fed is printing, and thus what inflation may result. The trajectory of M3 was just beginning to jump when it ceased being calculated, thus suggesting it was about to go wild. Of course it has to have gone wild, given the spending binge on war while cutting taxes. Ergo: we're probably heading for some very steep inflation.
Take the effects of paragraph one and combine it with the effects of paragraph two and you have stagflation.
If a Democrat is elected, I predict all the ugly data and news will consistently get reported on the front pages of the newspapers and web sites rather than being stuffed in the back like it has been until recently. Call it the Jimmy Carter strategy.
In short, it is entirely possible that housing prices will have to fall much further, and places on the coast like DC that rode the wave in the last decade may very well see significant further drops. That's a tough pill to swallow if you have house-buying fever, but it may be wiser to wait another year. I'd also look in the Fall when prices tend to be lower.
I think that buying a house is a huge, difficult, tension-creating, life-changing action/decision. And because of that, those not directly involved in the process (e.g. ME), should keep their mouths firmly shut when other people are going through this process.
But I'm going to break that rule and join Paul in urging you to consider not buying right now. I've bought 3 houses and sold 2, with the third on the market. I mention that because aside from reading blogs (and Krugman and others) I am NO EXPERT. But it is my opinion that in the next 12 to 48 months there is a very good chance that the cost of housing in DC will drop by 10% to 40%.
If you're definitely going to stay in DC for more than 5 years, then this might not matter to you. But if there's much of any chance of moving, then please consider waiting. Even if the market stays flat, just the transaction costs on a 750K house will be over 50K.
Also, please note that I may just be justifying my own decision, as we are going to rent in Baltimore while waiting for the market to drop.
Now, if you can read irvine housing blog and you still think it's a good idea to buy, then definitely do so - but that blog (and a few others) scared me to death!
Fro, Baltimore? What's the 411? E-mail me if this is on the QT.
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