"Now the verses I've sang
Don't add much weight to the story in my head
So I'm thinking I should go and write a punch line
But they're so hard to find
In my cosmic mind"
My first house offer was rather indicative of the current market situation here in the D.C.-Baltimore corridor. At least it's not northern Virginia. (Then again, northern Virginia's average salary is better.) This house - the first I've really liked - went on the market Sunday. I toured (and offered) on Monday. House went under contract on Tuesday to one of the other six offers on it. And my offer was almost 4% more than the asking price with no contingencies.
The average housing prices rose roughly 13% during 2002, and have risen nearly 30% since 2000, and I believe have finally crested the $200,000 barrier in a few of the central counties.
Obviously, this comes nowhere to competing with larger metropolitan areas, but unlike those areas, salaries have remained fairly static. (The area is largely government and services - government salaries are fixed, and services has been suffering from the recession like everywhere else.)
So why have housing costs been skyrocketing? A housing shortage, reports the media. Despite unprecedented levels of new housing development in the area. There are several hundred units going in right down the road from me. You get your choice of a 2200 square foot townhouse starting in the 300's, or any number of the 4000+ square foot mansions (on a tenth of an acre) starting in the upper 600's. (Provided you want I-95 in your backyard. If not, expect to shell out another $90K to $130K for the lot.)
Who's buying these homes? Not the upper class, who aren't selling their upscale homes. They're not appreciating very much, because there isn't much of a shortage, and the builders are more than happy to fill in the demand.
No, it's the middle class. Folks who bought a pittance of an house a couple years ago who have seen their effective housing value double. They're taking the money and trading up.
I asked a builder why, given that it's lower-end housing that is in such demand, they aren't building more of those. After all, you could fit more in, and they'd make a handsome profit with the inflated prices.
The answer: "We wouldn't make as much."