Will real estate prices drop (Alexandria: how much, job market, school)

[CAVA1990]

Originally Posted by twinmma

IMO, it depends. If the government takes away the tax break for home owners, I think prices will drop b/c people will shy away from buying...might as well rent then Otherwise, I think they are leveling off for now. Just a guess though...no crystal ball!

Well of course prices would drop by an amount equivalent to the present value of the deduction but that's not going to happen. They'll get rid of social security before the mortgage deduction, meaning never.

[vermonter16]

Houses in Blooms Mill in Manassas have been slowly but steadily increasing; this is in Prince William County.

[smagid]

Most neighborhoods in Northern Virginia are quite stable and in many further south, Prince William County, the prices have increased since last year. This is also due to a smaller inventory of homes.

[anonymous703]

Originally Posted by twinmma

IMO, it depends. If the government takes away the tax break for home owners, I think prices will drop b/c people will shy away from buying...might as well rent then Otherwise, I think they are leveling off for now. Just a guess though...no crystal ball!

The tax break should be last on a list of reasons to buy. Anybody who puts that first doesn't have a good grasp on financial matters. Assume a relatively simple home buyer who is married and takes the standard deduction. Borrowing $250,000 at 4.5% results in $11,167 in deductible interest in the first year. (And it will decline from there). In 2010, the standard deduction for married filing jointly is $11,400. Sure, itemizing allows you to add in property and income taxes. Assume $3000 for property taxes and a similar amount for state income taxes, so an extra of $6000 in deductions. At the 15% bracket, that provides a net "rebate" of $900. At the 25% bracket, it provides $1500 back. In other words, we're talking about no more than $125/mo.

If we're talking about a $400k house at 7% interest, removing the interest deduction would likely cost someone around $500/mo. So it's basically like getting fee real estate taxes.

To make an own vs buy decision solely based on tax reasons is ignorant at best. What's really going to impact prices are increasing mortgage rates.

[CAVA1990]

Originally Posted by anonymous703

To make an own vs buy decision solely based on tax reasons is ignorant at best. What's really going to impact prices are increasing mortgage rates.

As I said, neither is going to happen anytime soon and with jobs and incomes continuing to grow in the area, I don't see prices going anywhere but up over the next few years, particularly close-in.

[anonymous703]

Originally Posted by CAVA1990

As I said, neither is going to happen anytime soon and with jobs and incomes continuing to grow in the area, I don't see prices going anywhere but up over the next few years, particularly close-in.

But are jobs and incomes continuing to grow? If the feds get anywhere with their plan to shrink DoD contracts sector, then that will have a significant impact on incomes. (Not necessarily jobs, as I suspect the feds will end up absorbing most of what gets cut.)

[Qasim75]

The bigger question for a buyer (like me) is "What is the Fed going to do tomorrow?" If a second round of quantitative easing pushes down interest rates more, its good to buy, until homeowners figure out money is cheap and raise prices accordingly.

Mostly I think NOVA has seen its dip. The economy is strong here.

In the long run . . .previous posters have covered that. If the budget gets cut, civil servants, contractors and lobbyists will likely get cut as well, and the local economy. Of course, this current administration's idea of a budget cut is freezing (not shrinking) sectors of discretionary spending, with homeland security, Justice, the IC and DoD being exempt. Even if Gates succeeds in his "war on contractors" the discussion will revolve around conversion of jobs to civil service or cutting a few major programs and a 10% reduction across the board. After the Virginia Congressional delegation has its way with these plans we will probably reach stasis- no growth, but no big cuts either. So, not great for future growth, but not disastrous either. (I'm not making a value judgment on any of these possible decisions here, just looking at the outcomes.)

Of course, if we hit years of Japan-style stagnation or if the US dollar stops being a reserve currency then all bets are off.

-Q

[CAVA1990]

Originally Posted by anonymous703

But are jobs and incomes continuing to grow? If the feds get anywhere with their plan to shrink DoD contracts sector, then that will have a significant impact on incomes. (Not necessarily jobs, as I suspect the feds will end up absorbing most of what gets cut.)

You seem to be implying contractors make more than federal employees. I'm not sure that's true.

[oneasterisk]

Originally Posted by CAVA1990

You seem to be implying contractors make more than federal employees. I'm not sure that's true.

Federal News Radio 1500 AM: Public-private pay gap is widening

Not sure how it breaks up to the DC Metro area's higher cost of living, but it is telling of the differences in pay.

I'm currently a contractor and applied yesterday for a position in the Fed Gov't. It's a similar position that I'm currently holding but with wider responsibilities. I'll actually be getting a raise if I get the position so I'm excited for that. Here's me crossing my fingers.

[vermonter16]

Yeah, I don't know a lot of admin assistants in the private industry making 100k....but I know a lot employed by the federal government making that much.