My Christmas near the Fiscal Cliff
Well, it would appear that we avoided that whole “end of civilization” thingy. Phew. As one friend put it, if the Mayans were so smart, there would still be Mayans. I am relieved, nonetheless. I still have some unfinished year-end business – like posting something here before our three readers conclude that I have been abducted by evil-doers and write my off as a goner.
In the old days, back when our blog was just a baby and was fed on a more regularly basis, I relied heavily on the tax deductions I spawned for my best material, somehow finding ways to weave their wacky goings-on into real estate related musings. Alas, Daughters #1 and #2 are tax deductions no more, and I need GPS to locate them at any given moment. Over time, it has become increasingly hard to stitch amusing anecdotes together from a smattering of Instagram posts and Foursquare check-ins.
So it was that I was looking forward to this holiday season when we would finally have a quorum of the shared gene pool – a real warm blooded, nuclear family reunion! We collected #2 from at the airport on an incoming eighteen-hour flight from Madrid (the one in Spain) on the very eve of the end of the world. And having long ago relinquished my Mother of Year trophy, we plopped her on a redeye 48 hours later for some Forced Family Fun in our nation’s capitol. Child abuse? Perhaps. But holidays are times you spend with family, dang it, and ours happens to be currently strewn about like a really bad scatter diagram. She’ll get over it.
Daughter #1 is a Capitol Hill reporter and has been sequestered since August – first because of some silly elections and, more recently, because of some silly fiscal cliff. And since the idea of “A Very Texting Christmas” seemed a little, how do you say, pathetic and depressing, we decided to take Christmas to her.
And what do a bevy of Bergs do as they dance in the frozen DC tundra at the edge of the fiscal abyss? They look at real estate, of course.
Real estate always occupies a sizable quadrant of my modest cerebral processing center, and for obvious reasons; it’s how I pay the pizza guy. But this time, I was pondering all things real estate while wearing my whimsical, “what if?” consumer hat. That is because Daughter #1 is a renter, and calculating rents in Washington, DC requires one of those fancy calculators with an exponential function. For instance, if you were to ask what her current monthly rent is, the correct answer would be “$1.489e14.”
And that is when I remembered that interest rates are really, really low right now. As a trained professional, I also know that prices are not getting any lower anytime soon. So, assuming one had the down payment (or, as I like to call it, "my kitchen remodel”), one might be able to enjoy home ownership and a lower monthly payment – maybe something like $1.342e11.
Before I continue, I will briefly digress – like one of those little television flashbacks – and speak to our local market. (I’m doing this just in case one of our three readers lives west of Omaha and is here on purpose, not because he typed “Mayan kitchen remodel” into his search bar.)
The Case-Shiller home price index for October was recently released. In San Diego, they showed an increase in prices of 6.02% year-over-year. This was expected; we have been watching the price creep first hand as our own clients repeatedly experience the fun and frivolity of multiple offers. And by “multiple,” I don’t mean “two.” On the last two offers I wrote (on the first day the homes were on the market), there were ultimately 19 and 39 offers on the properties respectively. This has become our new normal.
Inventory is a real problem for us right now and, while we should see the usual increase in offerings after the holidays, I don’t expect the increase in inventory to be dramatic – at least not dramatic enough to satisfy the latent buyer demand. In Scripps Ranch this morning (92131 Zip code), inventory is the lowest I remember since February, 2003. If you exclude Stonebridge Estates, there are 19 detached homes and 4 attached homes on the market – this from a total inventory on the ground of approximately 8,000 and 4,000 homes respectively.
Now, here is what I think we will see as we turn the corner into 2013. The supply side of the equation will get slightly better, but the overall supply/demand curve will still be off kilter, so prices will continue to rise, albeit gradually. The other thing I anticipate is longer market times, a by-product of what one of our agents calls “seller greedy eyes.” All of the buzz about rising prices will cause many sellers to be a little too over exuberant in their pricing, which will in turn cause buyers to resist.
Having dispensed with that bit of local flavor and prognostication, back to our regularly scheduled programming. I am a licensed broker in California; not so in Washington, DC. And like any good do-it-yourselfer, I had a bit of a learning curve while familiarizing myself with real estate on foreign soil. Here are a few of the things that I learned while I was wearing my civilian clothing:
1. Brokerage and agent sites that have a home search feature without a map search should be immediately nuked, as they are completely worthless to me. Yes, I am talking to you, big brand name brokerage! It's not hard; even little old San Diego Castles maps searches. You see, being 2500 miles away (give or take), I do not know U Street from 17th from North Capitol. A listicle is useless. On the other hand, I can find my daughter’s current home on a map, as I can find the public transit stops, the Capitol where she flashes her press badge every morning, and the Trader Joe’s she likes to frequent.
2. Zillow’s data sucks just as much in The District as it does in San Diego. I knew that going in, of course, so I purposely avoided Zillow when I set out on my online window shopping expedition. However, as I was initially relying, as so many do, on the old Page One Google search returns, and given that the search results on the broker/agent sites read like the phone book, I eventually found myself on Zillow where I was forced to resort to a tedious forensic process. The process involved finding a home that met my search parameters, scouring the page with my magnifying glass to discover the listing agent and, if I was lucky, a link to his site, and following the link to discover that the home was either under contract or had sold during the Reagan administration. Out of shear frustration and fearful that I might die of old age before I uncovered a real listing, I remembered that…
3. Washington, DC’s MLS, MRIS, has a consumer-facing website that rocks. And I mean “rocks” as in the information is time certain, correct, complete, and map based. Our own Sandicor does too, by the way, but you won’t find either site in your Page One search results, so you have to know (or remember) to go looking for them.
4. Our San Diego closing costs are starting to seem downright cheap. Our rule of thumb for buyer closing costs in San Diego is 1% of the purchase price, not including loan fees or points. In DC? A minimum of 2.5%, I am told. As an example, here sellers generally pay for owner’s title insurance (the buyer pays for lender’s title); there, the buyer gets the honors for both. Their recordation tax alone is 1.1%. Yikes-a-rama. Make that two kitchen remodels.
5. Real estate is local. OK, I didn’t learn that. I already knew that, but I was reminded in a big way. Their seasonal swings are different (if for no other reason than they have seasons), and their market swings are less wild in general, which I think has more than a little to do with all of those government jobs. Plus, this suburban California girl has a lot to learn about urban living. Stuff like co-op versus condo, presence or absence of an elevator or parking space, and (get this) distance to a thing they call “the Metro” all factor into value. I have a new appreciation for Walk Scores. And attached garages.
I don’t know how Kris’s Big East Coast Real Estate Adventure will end (I am still in the tedious “discovery” phase), but there is one thing I do know. Washington, DC is flipping COLD in December! You couldn’t pay me enough to be one of those snipers on the roof of the White House when it is sleeting sideways, even with the unobstructed view of Bo frolicking in the Rose Garden. Which is why I am fairly certain that if there is another crisis at the Capitol during the holidays next year, Daughter #1 will have to settle for “A Very Skyping Christmas.”