Wednesday, October 03, 2007

WaPo 2008 Outlook: Falling Prices

Last Sunday's WaPo published a series of articles on DC's real estate market entitled "Property Values 2007." In "Housing Experts See Further Price Declines in 2008," home and condo prices were discussed. Generally speaking, the consensus appeared to be:

In an industry with more question marks than answers, housing experts are predicting a continuing drop in single-family-house prices in the Washington area through this year and well into 2008, a bigger drop in condominium prices, and slight rises in prices of homes in certain neighborhoods.

"In general, for the metro area, there will be modest declines," said David F. Seiders, an economist with the National Association of Home Builders. "But it depends on the exact locality."

What about the DC condo market?

During the real estate boom earlier this decade, developers put up an unprecedented number of new condominiums.

"There's clearly a glut of condos, particularly in D.C.," said Dean Baker, co-director for the Center for Economic and Policy Research, who is predicting that housing troubles nationally are likely to drag the economy into recession.

Condo prices locally will decline sharply, he said. "I wouldn't be at all surprised to say 20 percent. The time period is very hard to say. You can get meltdowns very quickly."

Will houses fare better?

[Guy] Cecala of Inside Mortgage Finance, who lives in Bethesda, said that even in popular neighborhoods such as his, he expects a decline in single-family-home prices of at least 10 percent over the next year.

Right now, he said, "$45,000 is not a big drop in price" for homes selling at $800,000 or more, and "$100,000 is not a big drop for a million-dollar home."

"I think we're subject to significant price devaluations," he said. "I think anybody who doesn't think we're going to see a drop in housing prices is kidding themselves."

Their advice?

Peter Morici, an economist at the University of Maryland, said that with that [price declines] in mind, "buyers should not feel any sense of urgency to buy a home."

"Sellers would do well to sit tight if they don't have to sell," he said. "Postponing to next spring or summer might pay. Between now and then, it's going to be hard to unload houses."

3 comments:

Jesse Kaye said...

Keith,

I must first say that I am a local RE Agent and that your posts are very informative and well supported.

I had to comment on todays post because in many of your posts all that is said is now is NOT a good time to buy, but very little is said about a SOLUTION. So where is a good place in DC to buy and hold for 2-3 years and expect increased sales prices and a secure investment in your future?

I'll answer!

4 Places:
Brookland, NE DC. Douglas Jemal of Douglas Development owns several acres at 6th & Rhode Island NE and is doing a HUGE mixed use retail/condo/shopping area behind the blue Cavalry Church School. He will break ground this April and its going to completely turn around the Market. At the opposite end of Brookland at McMillian Reservoir, near the Washington Hospital Center, EYA Development was approved to develop the 68 (-ish) acre site to townhouses, retail, condos, and apartments along with several other developers. My understanding for what will be there is something similar to King Farm in the sense that shopping & retail will be in the middle and housing around the outside. The development will also be located in the subdivision Ledroit Park and will also help to maintain stability in the area.

Old City #1/H St Corridor: A great area to buy and hold. There is a Marriott hotel going in at Florida and New York, the Wendy's is being cleared for a traffic circle, the Sunoco closed down due to a sale to a condo developer and there is a Costo going in behind the Hess Station on Florida. Additionally, there will be several large mixed use buildings all around the area in the Farmers Market as parcels are sold off to developers.

The last place is Shaw. With the Wonderbread Factory between 6th and 7th being demolished for room for Broadcast Center One, the entertainment district of DC is sure change the Shaw area drastically.

One place I havent mentioned but dont have an opinion on yet is Anacostia. The RFEI/proposals from developers for Poplar Point are due October 19th. It was originally supposed to be the new DC United Stadium but MacFarlane, the owner, and Fenty couldn't find common ground. Poplar Point is the 130 acre site that is in the process of being turned over from the Feds to DC in Anacostia.

There is supporting evidence and more stats on my Blog if you want to help steer people towards "Wise" investing locally. Feel free to reference freely.

Keith said...

Thanks for the compliments. I'm aware that H St NE is undergoing a change, I'd planned to check it out myself.

I think you bring up a good point: given that the current market has hit a speed bump, where is a good place to invest for the long-term in DC?

james said...

"where is a good place to invest for the long-term in DC?"

Nowhere right now. Now, if youre looking to buy a home to live in, there may be some places that wont lose as much money as others.laz