02-19-2013 04:51 PM - edited 02-19-2013 04:52 PM
Well, that thing crazy Aunt Nancy and nutty Uncle John said would never happen now has a very real chance of happening right at the start of the spring real estate market. According to reports, 200,000+ jobs could be loss in the NoVa area, not to mention all the furloughs (http://www.stripes.com/defense-department-set-to-a
Thoughts? It seems to me that if you plan on selling, you better do it now and if you want to buy, wait a year or two until this all settles out.
02-20-2013 01:53 AM
as many as 450,000 jobs in the DC area....now, please, don't tell me that's not going to impact our housing market...
02-21-2013 06:06 AM
Of course sequester will have an impact. But fortunately for the majority of us, we are not looking to sell. Our house is our home and I really couldn't care about short term market fluctuations. For the rest of us it will be a wash...sell low, buy low.
I look at the long term benefits of dramatic government action. We reset our public finances and the economy booms for another 20 years. Now that will impact all of us
02-22-2013 04:30 AM
Not sure what you were looking for. You asked a very general question: "Thoughts?"
I actually disagree about the impact on the local economy/RE market. I have lived here for 26 years. I used to assume that the area was full of government employees and obviously, there are a lot of them. However, I've come to realize that there is a huge amount of money in this area that is not derived from government-related work. Where it all comes from is a mixed bag. Now admittedly, I live in western MoCo, so I have a skewed view, but still - I am always wondering "where does all this money come from?"
Offsetting the impact of the sequestration is the extremely low inventory, particularly for middle-class homes that are in good condition. Plenty of 1950s "scrapers" out there, but middle-class homes in good condition are rare.
02-22-2013 05:58 AM - edited 02-22-2013 06:16 AM
Quite the bunch of helpful folks...
What are you looking for ? Validation of your prognosis that the RE market will tank or slide downwards, or a contrarian view ?
I own a house because it is an asset (I didn't say investment, and has physical depreciation) that will relatively cap my housing costs when I'm not working or have no earned income. The cost to acquire the house (before cost to maintain it) is also fixed (mainly mortgage) while I'm paying for it with inflated money (2-3% long term inflation) and the house value is also inflated at a similar rate (for heartland America).
I (involuntarily) relo'ed to the DC area from Silicon Valley in 2010, and my house in Calif which I sold is now valued at about $100,000 more while the house I bought in Arlington/McLean in 2011 is flat (as expected). In both markets, the data say, on the average, an owner's equity is either the same or slightly up if they bought in 2004 or before. Basically, I don't know of ANYONE who feels it was a bad financial decision if they bought before 2000, and have a lot more equity/appreciation if they bought around 1995 & before.
So you want to make a decision based on quarterly or semi-annual crises, like sequestration, Euro breakup, Fed QE and interest rate strategy, political unrest around the world, pending currency devaluation with major trading countries, then go ahead.
Everybody wants to market time their decision, like wait for a 5% price dip (serious money $25-$50K in this market) and then buy. Guess what, the 5% dip happens, then you wait for another 5% dip, and then it moves up, but you're not convinced the positive trend up is persistent because you're monitoring the latest quarterly crisis that is making financial markets volatile. And you do nothing, which would be the best decision you made because you just got laid off, or a bad decision because your rent & interest rates are going up and all your "nesting" plans are on hold in a place that you don't own or can't hang a picture without some greedy landlord keeping your deposit as the result. Ask stock investors who pulled out on or before 01/20/2009 -- the Dow is up, what, 60% since then, and now trading near or around the high before the crash (10-15% is a correction, 25% is a crash, and 40% is a 1929 crash), and now the upside potential is not attractive enough to re-enter.
In this great recession, and if, on the average, a time horizon of 7-8 years is what's needed to get through another one, how does this fit with your time horizon ?? So, quarterly crises are interesting and you may want to defer your decision quarterly-by-quarter, but if you're ready in late 2013 when things are more clear to you, you may not find the market waiting for you when inventory is in Winter mode, and the house you wanted often sold for less than your budget 2 months ago, and now you start your search again. Or, it drops 5% and you harvest $25-$50K.
Excuse my narrative, but you also seem to be picking a fight about the effects of sequestration or any market disrupting development.
If you want to reinforce your sentiments about perhaps not buying, Robert Schiller, co-founder of the Schiller-Case housing index, made a recent sound bite advising not to buy a house in the long term. Others are seeing that the Fed is discussing ways to wean everybody off low interest rates (lenders at these rates will get hammered if inflation exceeds the benchmark). If you can figure all this out on market impact, maybe day trading would be the most lucrative job.
02-22-2013 09:06 AM - edited 02-22-2013 09:21 AM
I agree. However, I for one don't anticipate prices to crash through late 2010 levels. The reason is that for the eighteen months preceeding we saw artificial pricing pressure due to massive foreclosure dumping.
Going forward, The Protecting Tenants at Foreclosure Act (PFTA) will likely keep us from seeing a dramatic increase in foreclosure activity for some time (until the act sunsets in Dec. 2014), which will counteract some of the pricing fallout due to an increase in forced-sales as a direct consequence of the sequester's adverse effect on many homeowners' incomes.
02-22-2013 12:26 PM
For perspective, they are talking about $80B in cuts for 2013, out of total federal spending of $4.5T for 2013... roughly 1.7%. That total spending will still exceed total Fed spending in 2012 ... so, it's a cut in the growth rate of fed spending as opposed to an actual decrease in spending .... IF they even end up cutting the full $80B. And that reduction will be spread throghout the USA (world actually).
The 2% (payroll) tax increase that took place on January 1st is more of an issue, along with the rising gasoline prices. Not to mention the 3.8% "health-care" tax since that only impacts the wealthy (making more than $250k).
On the margin, this hits families with two Fed employees with low seniority ...20% fewer paid hours when unexpected is pretty harsh. ... if it happens. Both sides seem to like the brinkmanship ... and pat themselves on backside when they heroicly save the day at the 11th hour while simulataneously kicking the proverbial can down the road.
02-22-2013 02:47 PM
I'm primarily wondering about inventory in the DC area. It appears to be at exceptionally low levels, even for this time of year. Do people decide not to put their homes on the market and try to wait things out or, if we see an exodus of jobs in the DC market, will their be that much more inventory (400k is nothing to sneeze at...but yes, nationwide, I think the impact will be minimal). I appreciate the responses.