We’re a victim of our own success. A little less than three years ago I wrote an entry to this blog, titled “Washington DC Bubble?” that was fueled off of a return visit to D.C., where I lived for nine years (’89 to ’98). We were visiting old friends over Spring Break, and one of the houses next to my old place was on the market – for more than $500,000! (We’d sold our house for $228,000 in late 1998.) I went through the Nine Levels of Sellers Remorse, unable to believe how much money we’d “left on the table,” but after I calmed down, and did more thinking and more research about the DC housing market, I came to this inescapable conclusion: The Washington market was a big soapy bubble that at some point would pop.
I penned that entry, was quickly taken to task by Washingtonians who didn’t agree with my view, and the battle was joined. That thread became the most followed in the history of Hot Property – with, as I type this, nearly 1,300 entries! But we’ve gotten complaints from some followers of the thread that it’s become too unwieldy – that it can take forever for the full page to load. We consulted with our programmers to see if they could chop the thread’s comments into three different entries, but they couldn’t. So there’s only one solution: I’m starting a new thread, “Washington DC Bubble? The Debate Rages” and ask that you post comments here.
And here’s my latest two cents on the DC market: Several weeks ago I posted a new entry that my old house was on the market, with the current owner asking $529,000, which was well above what I’d sold it for but below the latest valuation estimates from Zillow et al.
As I noted at the time, in my view that price was still way to high. I now have news that the house sold after just a few days on the market, but first a big confession and concession on my part:
This is not my house. My apologies, and I wasn’t trying to mislead, but there are a couple of houses on my old street that are pretty much cookie-cutter, and this was one of them. This house is a couple doors down from mine, and when my wife and I saw this house listed as a "Featured Home" on Realtor.com, and was listed on Monticello Avenue (a cul de sac with only 10-12 houses), we assumed it was ours. But that said, it’s a pretty good proxy for what my old house is worth, since they’re pretty identical. And I just got the sale price courtesy of Frank Borges LLosa, a real estate agent who runs the FranklyRealty web site. The sale price: $520,000.
I know what the bulls are saying: A house is worth what someone else is willing to pay. I’m sorry, but that’s still way to high and I think the buyer is going to regret paying this in a few years. I did some calculations estimating what this house should be worth, if the DC housing market had followed a more realistic trajectory (the inflation rate plus a couple points of “real” appreciation). By that measure, this house should have a “fair value” of around $370,000.
So in my mind, it’s just a matter of time before the house like this on Monticello Avenue in Alexandria hit $370,000 – either by falling to $370,000, or by treading water for enough years – say, about a decade -- until the trend line actually reaches $500,000.
So that’s my two cents. Anybody want to debate the point?