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Prices Falling In Washington Dc

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Sounds like panic is setting in across the pond .................

Doors Close for Real Estate Speculators

After Pushing Up Prices, Investors Are Left Holding Too Many Homes

By Kirstin Downey

Washington Post Staff Writer

Saturday, April 22, 2006; A01

Investors who sought quick profits buying and selling real estate in

the Washington region are in full retreat, dampening demand for homes,

most notably for condos.

What is becoming apparent, market watchers say, is how big a part

speculators played in the region's real estate boom of the past few

years. Not just condominiums, but also townhouses and single-family

houses, were snapped up by investors using no-money-down financing and

non-traditional loans. They helped send prices soaring at

unprecedented rates. And now many are trying to sell, or rent at a

loss. Some may eventually dump properties at low prices to get rid of

them. That could weigh down values for everyone.

Sales of new condos fell 43 percent in the first quarter of the year,

compared with the first quarter of 2005, according to one report, and

there are almost four times as many existing condos for sale than last


"We think the softness of the market is largely due to the pulling out

of investors," said Gopal Ahluwalia, staff vice president for research

at the National Association of Home Builders. "They have not only

pulled back, they are canceling purchases."

David Bath, a retired dentist in Reston, rode the boom up. A condo he

bought in Vienna for $97,000 sold for $250,000 in a single day. He was

able to sell another condo in Herndon for an even bigger profit.

Now he wants out. He has had no luck finding buyers for two investment

houses and a four-unit apartment building he owns in Florida. He has

been stuck making mortgage payments on vacant houses that took a lot

of time and money to repair.

"It's a lot of work and I don't see the returns anymore," he said.

"I'm going to the table to cash my chips in."

While condominiums were the product of choice for investors, luxury

neighborhoods also fell prey to real estate speculation, leading to

the prospect of price drops even in affluent subdivisions.

"Here we had it even in $1 million homes," said Kenneth Wenhold,

Virginia and Maryland director for Metrostudy, a real estate

information firm.

Robert Toll, chairman and chief executive of Toll Brothers Inc., which

builds luxury homes, said in a recent conference call with analysts

that the Washington market was the hardest-hit in the nation by

investors who bought properties intending to flip them, and who have

put the homes up for sale. "We can feel the impact of speculative play

coming back into the market," he said.

Nobody knows exactly how much of the real estate boom was driven by

investment and speculation. Experts say that between 15 and 30 percent

of all purchases were made by investors, rather than by people who

bought homes intending to live in them. Some bought the properties for

cash, sometimes with equity they pulled out of their own homes, so

there is no loan record. Other buyers pretended on loan applications

that they would live in homes they really intended to flip, so that

they could qualify for better loan terms or get around developer

restrictions on investor-buyers.

Some projects became particular investor magnets, and, more recently,

the subject of real estate blogs criticizing speculative excesses. For

example, the local Internet blog Bubble Meter focused last month on

what it called "the bubblicious bench." At one recently completed

condominium called the Halstead at Dunn Loring, a luxury condominium

complex in Fairfax County, a park bench outside the building bristles

with real estate agent lockboxes to permit vacant units to be shown to

prospective buyers or renters. On a recent morning, there were 49

lockboxes there, outside a building that has about 200 units.

Manuel Tagle, a real estate agent with Fairfax Realty in Falls Church,

is representing two units there, both owned by investors, one of which

is for sale and one for rent. He owns a unit there himself, which he

has rented out.

"There's a very high concentration of investors," he said. "I have

seen a lot of investors selling now. They see values going downhill."

The prevalence of investors -- and now their disappearance -- is

causing real problems for owner-occupants who want to sell, sometimes

against competitors willing to cut prices substantially because of

profits they made in 2003 or 2004. Mike Pugh, a real estate agent with

Re/Max Allegiance in Arlington, is trying to sell a condo at the

Halstead for a woman he says bought it for her retirement home, then

became ill and went to live with family. Pugh said his client, who he

believes was one of the few purely owner-occupants in the complex, is

likely to lose money she had saved over a lifetime.

"We aren't investors, but we are being punished by the market as

though we were," he said.

They face plenty of competition. Delta Associates, an Alexandria real

estate research firm, said there are about 25,853 new condos being

marketed locally now. But only about 1,996 new condos were sold from

January to March, down from 3,520 in the first three months of last

year. And the area's multiple-listing service, which lists mostly

previously owned properties, showed about 5,500 condos and co-ops for

sale in March in Washington and the close-in suburbs. That was about a

fourfold increase from about 1,400 listed in March 2005 with the

service, Metropolitan Regional Information Systems Inc.

Some developers are struggling to sell units in the face of

competition from the investor-buyers who want to dump the properties.

Many had sought to protect themselves against an invasion of investors

for just this reason.

A National Association of Home Builders survey of builders last year

found that about 52 percent of builders tried to sell only to

owner-occupants, 33 percent prohibited renting the unit out during the

first year after settlement, 29 percent declined to make multiple

sales to people with the same last name and about 28 percent kept the

right to buy back the unit at the same price if the owner sold in the

first year.

But many failed to ferret out investors or could not resist the buzz

of a fast sell-out when speculators flocked to purchase. A quick sales

pace allowed the builders to ratchet up prices more quickly for those

who got to their doors behind the early birds.

Speculative buyers at the hottest part of the market were able to put

down a $20,000 deposit on an uncompleted unit, then close on the

transaction and sell it to someone else the next day, pocketing

$60,000 or $70,000.

That spawned a "get-rich-quick" mentality, said real estate agent

Frank Borges Llosa, of FranklyRealty.com, who said that the people who

got in earliest made the most money, while those who came later are at

greater risk. Unlike with stocks or bonds, which can simply be sold, a

seller of real estate has to find a willing buyer or renter because a

mortgage obligates the owner regardless of the value of the asset.

"People who got caught are in trouble," Borges Llosa said.

Some investors are holding on to the properties they have, but they

are not expanding their empires. Ruben Cuya, 37, a Peruvian immigrant

who works as a quality control technician at Cuisine Solutions Inc. in

Alexandria, bought his first rental property, a townhouse in Lorton,

in 2002, using the equity from his own home for the down payment. Then

he bought an additional rental property in that same way each of the

next two years.

"This year I'm not buying," Cuya said. "It's not a good year to buy."

The situation has made home shoppers more wary about making purchases.

Real estate agents say many are so leery about where prices are headed

that they are engaged in a kind of stare-down with sellers as they

seek to negotiate for lower prices and more concessions.

"The buyers are there, there are people who want to buy," Borges Llosa

said. "But they see no immediacy to buy now versus next week."

Some buyers are even walking away from transactions. Lawyer Angana

Shah, 36, almost bought a new one-bedroom apartment in Adams Morgan

last month for $454,000, but as the settlement date approached, she

found herself "petrified" over the high price and worried that values

would fall.

Then, during the walkthrough, she learned the place was smaller than

she had been promised. The developer was unwilling to cut the price,

so she decided to walk away from the sale and got her money back. She

was glad she did because prices have flattened and she can now afford

a two-bedroom instead.

"I don't want a one-bedroom anymore," she said. "I want a two-bedroom.

Now people are begging people to buy one-bedrooms. The market is

better. I couldn't have bought a two-bedroom last fall and prices for

one-bedrooms are falling."

Washington Post

Google groups ....The housing bubble has officially burst

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Same happens in England and the BBC would run around shouting how good it all was and track down some mortgage lender, one of the few remaining who are willing to talk up the market and give over a good propertion of the news as a platforn to convince would be buyers what a spiffing idea it is to borrow this much money now that inflation is to be kept so low.


reading such an honest piece makes me want to reach for the gaffer tape a cheese grate and track me down the breakfast news manager for the BBC...

tie that sucker down and grate some smelly cheese all over him..

Thats what i meant

Edited by apom

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Wouldn't it make a refreshing change if our media actually got off their arses and did some investigative journalism and ferreted out similar stories over here (they do exist - newbuild crap flats etc).

It would make a refreshing change from simply being a mouthpiece for VI's peddling their dubious week-end survey's etc (in particular BBC Online, business section - AKA Halifax, Shepard's Bush Branch).

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Yikes. I know D.C. area well. It was one of the places where people always claim "House prices will never fall here" and where at parties you have to listen to people discuss how much their homes have appreciated. (We are vulgar in the U.S. about money and talk about our personal wealth whenever we get a chance.)

Hmmmmm....I think I'll e-mail some people in Washington tomorrow and ask them if they've read the Post article. B)

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My sister-in-law is trying to unload their townhouse/condo in Columbia, Maryland--a commuter town for DC and they thought they would make a quick profit. Its been on the market for 8 weeks without any interest. A year ago and a line would have formed at their door and a bidding war would have ensued.

Its different this time for the UK. IN the Great Crash* the UK was ahead of the US crash by about 6-12 months. This time the US are taking the lead (or their VIs are more truthful).

How quickly a boom turns into a bust. :o


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At least, good news :D

One of my friend is living in Washington DC. He wanted to buy a house with his wife but they are still students so bank refused to "lend them enough money". When I told him about housing bubble, he always answered with a smile on his face... now maybe he is going to believe me :)

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