The following excerpt taken from a live Q&A session with the Washington Posts Real Estate Editor Maryann Haggerty on May 5 may shed some light on the current state of the
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The Lovely Penn Quarter, D.C.: (Q) My friends and I came up with the idea last year that we could make a living by buying condos, living in them for two years, selling for a big profit and repeating. The appreciation would be more than we could make by working and the profits would be tax free. What could be better, right?
So I bought my first condo in Penn Quarter at the end of last summer. Now all my friends have decided to hold off. They say that they aren't sure real estate is "it" anymore. But I'm counting on my condo to appreciate significantly over the next two years to help me pay down some credit card debt I've been carrying for a while.
My condo hasn't really gone up in value since last summer, but I'm thinking the market is just taking a healthy breather before skyrocketing again. Should I be getting worried at this point or are my friends just being chicken littles during the market's pause in appreciation? I don't want to own my place if its not going to increase in value soon. Help!
Maryann Haggerty: (A) You, my dear, are a real estate speculator. In a normal market, no one would expect that owning a home for just two years would provide enough appreciation to cover the cost of selling, let alone to live on. But I'm assuming that you have a very high tolerance for risk, and that's why you decided to take this gamble. And it was a gamble, not an investment, right? You knew that?
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Clearly this person can’t possibly be representative of a large number of buyers but I think that this is an instance of a story for the history books. After the bubble has deflated, we will all be telling our wild tales of the run up days… open house bidding wars, mega jumbo no interest no money down adjustable rate loans, block after block of gut rehabs, flippers, and poor bastards buying ridiculously inflated properties with the assumption that there is no downside.
Oh well, now that the media is starting to pick up on the burst (see the covers of this months Fortune and Harpers magazines) I wonder how long it will be before the notion of a potential “soft landing” gives way to widespread panic.
