Burning down the House

The doom and gloom on the local housing market picks up the pace today. The Washington Post has a one-two combo: a front page story and Tom Toles's editorial cartoon. Apparently houses aren't getting snapped up after only two hours on the market anymore. Wes Foster of Long and Foster tells the Post a scary story from Boston:

"It's very healthy," he said. "It worried the pure hell out of me the numbers we were seeing. I remember Boston in 1982 to 1989, when [prices] went up 25 percent a year for six years, and then in one year [they] fell 87 percent. The ride up for everybody selling was wonderful but the ride down was awful. . . . It was very painful and I don't want to see that here."

Ouch. 87% in one year? How'd you like to be holding an interest only loan for $800K and find your home worth about $105K? Am I doing the math right?

The interesting thing about the Post article however is that homes in the District as opposed to most suburbs actually sold more quickly compared to last year's numbers. Their chart, on the right, indicates DC and PG dropped in days on the market. Additionally, the Post reports, "In the District, the number of houses sold dropped by 8 percent" in comparisons between June 2004 and June 2005.

Of course, uber-investor Warren Buffett in May had already cooled to the urban property market, citing this cheery little tidbit:

A lot of the psychological well being of the American public comes from how well they've done with their house over the years. If indeed there's been a bubble, and it's pricked at some point, the net effect on Berkshire might well be positive [because the company's financial strength would allow it to buy real-estate-related businesses at bargain prices]....

Nice to know someone's ready to scoop up the bargains once the bottom drops out. Someone always is.

Then again, there's this suspender-clad lawyer on "legalwhiz.com" -- would you trust this guy? -- who scoffs at the very idea of a real estate bubble. However, after a lengthy discussion of the semantics of "bubble" and "crash," he offers this sage advice:

The bottom line is, the real estate market may go up, and then again, it may go
down. So what?

Paging Lionel Hutz.

And one of my favorite critics of contemporary foolishness, Mike Davis, opines that the housing bubble is the only thing floating Bush's weak economic boat:

Similarly, the hottest home markets -- Southern California, Las Vegas, New York, Miami, and Washington, D.C. -- have attracted voracious ant columns of pure speculators, buying and selling homes in the gamble that prices will continue to rise. The most successful speculator, of course, has been George W. Bush. Rising home values have propped up a stagnant economy and blunted criticisms of otherwise disastrous economic policies.

Hmm. If Davis is right about the housing bubble floating the economy, then more than homeowners will be in for a world of hurt if the housing market crashes. For my part, I've seen some crazy prices around here. This development in particular is hilarious. I visited their open house and found out they wanted $525K or $545K for a 1 bedroom + den -- and this unit had no parking.