Housing.com News, Analysis & Opinion: Wednesday Housing News: Special D.C. Edition

Those of you who follow the insane housing market in D.C. might be interested to know two bits of real-estate related news emanating forth from the nation's capital.

First, one of the District's most prominent real estate developers was indicted on charges of bribery. The accused, one Douglas Jemal, is alleged to have bribed D.C. government officials with gifts and cash in exchange for leasing property to the gov't at artificially inflated prices. What's scary about this is the amount of property under Jemal's umbrella--8 million square feet of commercial and residential turf, if you believe the company's Web site. Of course, given the source, I am skeptical.

WASHINGTON (AP) - The D.C. government could be forced to refund as much as $44 million in taxes from city homeowners under a ruling in D.C. Superior Court.

Even a city as affluent as D.C. can't afford to lose 44 million dollars without jacking prices or taxes up somewhere else. But if this case goes the distance, it might actually be of benefit to middle-income homeowners who are otherwise completely locked out of the still-ludicrously-expensive market. This could goose the slightly sagging bubble in D.C. to slide a bit further, opening the doors of affordability to those who can make it.

Also of note is the fact that property prices can bubble due to purely artificial means--that is, the greed of people who seek to skirt the system for their own ends. "Market forces" aside, those higher property prices Jemal was getting from D.C. meant higher taxes for those who live in the District...one has to wonder if the faulty tax formula affecting those who live in Cleveland Park (A very ritzy, classy neighborhood for those who aren't familiar with it) was implemented for just such a purpose.

Even though this isn't related to D.C. specifically, I want to leave you with these pearls of wisdom I found in Bradley Inman's blog. I like to call them "The Ten Commandments For A Housing Bubble."

The dirty little mortgage secret
Here is the story:
1. Mortgage market is flush with too much liquidity.
2. Home loan lenders push to find customers anywhere.
3. President and Congress push for higher homeownership rates, blessing the anything goes philosophy.
4. Lenders lower underwriting standards, pushing all types of eaeeeeeeeezy loans.
5. Higher rates on sub-prime reduces risk for secondary market.
6. Borrowers lower their standards and begin to secure risky financing.
7. Wall St. gets nervous, lenders pull back.
8. Fed Chairman raises fears.
9. Sub-prime market gets tighter.
10. Lenders with a mis-managed portfolio get into trouble.

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Those of you who follow the insane housing market in D.C. might be interested to know two bits of real-estate related news emanating forth from the nation's capital. First, one of the District's most prominent real estate developers was indicted on charges of bribery. The accused, one Douglas Jemal, is alleged to have bribed D.C. government officials with gifts and cash in exchange for leasing property to the gov't at artificially inflated prices. What's scary about this is the amount of property under Jemal's umbrella--8 million square feet of commercial and residential turf, if you believe the company's Web site. Of course, given the source, I am skeptical. Second, here's an interesting blurb I picked up from The Associated Press: City Taxes Ruled Invalid WASHINGTON (AP) - The D.C. government could be forced to refund as much as $44 million in taxes from city homeowners under a ruling in D.C. Superior Court. Judge Eugene Hamilton invalidated a third of the city's 2002 residential property tax assessments in a ruling yesterday. The ruling will likely be appealed. The case arose after homeowners in Cleveland Park noticed they were receiving identical tax increases. Peter Craig says he filed a class action suit when the problem continued. The suit argues that the city's tax method is flawed because it doesn't assess each property individually. Instead it uses a formula based on recent home sales to determine how much assessments should rise or fall in a neighborhood. Hamilton found that the formula forces owners of less-expensive houses to shoulder too much of the tax burden. City officials say they'll defend the case on appeal. Even a city as affluent as D.C. can't afford to lose 44 million dollars without jacking prices or taxes up somewhere else. But if this case goes the distance, it might actually be of benefit to middle-income homeowners who are otherwise completely locked out of the still-ludicrously-expensive market. This could goose the slightly sagging bubble in D.C. to slide a bit further, opening the doors of affordability to those who can make it. Also of note is the fact that property prices can bubble due to purely artificial means--that is, the greed of people who seek to skirt the system for their own ends. "Market forces" aside, those higher property prices Jemal was getting from D.C. meant higher taxes for those who live in the District...one has to wonder if the faulty tax formula affecting those who live in Cleveland Park (A very ritzy, classy neighborhood for those who aren't familiar with it) was implemented for just such a purpose. Even though this isn't related to D.C. specifically, I want to leave you with these pearls of wisdom I found in Bradley Inman's blog. I like to call them "The Ten Commandments For A Housing Bubble." The dirty little mortgage secret Here is the story: 1. Mortgage market is flush with too much liquidity. 2. Home loan lenders push to find customers anywhere. 3. President and Congress push for higher homeownership rates, blessing the anything goes philosophy. 4. Lenders lower underwriting standards, pushing all types of eaeeeeeeeezy loans. 5. Higher rates on sub-prime reduces risk for secondary market. 6. Borrowers lower their standards and begin to secure risky financing. 7. Wall St. gets nervous, lenders pull back. 8. Fed Chairman raises fears. 9. Sub-prime market gets tighter. 10. Lenders with a mis-managed portfolio get into trouble. The foundation of our housing market exuberance feels shaky. Amen.