The bulls appear to have deserted the concrete canyons of Wall Street for the more pastoral surroundings of suburbia. At least, that's the message that many Alexandria and Mount Vernon Realtors are detecting from their clients.
In a survey of real-estate firms with listings throughout Northern Virginia, but concentrating primarily on the two jurisdictions hugging the Potomac River, the consensus was that "many people are pulling out of the market and putting their money into real estate."
As Diane Hicks of Lydia Odle Realtor in Alexandria put it, "People are more willing to pour money into a house now than into the stock market. One client told me she had lost enough in the market and wants her money in real estate. But, location is still the driving force."
Ann Duff of McEnearney Associates also sees more people are putting their money into real estate because "they can touch it, live in it, even hug it."
Duff said, "They consider it a real investment rather than something like Enron. They want something they can trust and where they have more control."
She also maintained, "Buyers are willing to give up certain amenities to get away from the endless commute. Many are reverting to some of the old ways of having kids share bedrooms and settling for smaller space. I always ask potential buyers who are thinking of living farther out to drive the drive before they decide."
THE ONLY ADVERSE impact is that "it has affected the rental market somewhat. With the low interest rates, more people would rather buy than rent. But it has not been a significant drop," she said.
In the past year prices have skyrocketed, with many sellers getting more than the asking price due to competing buyers. This has been increasingly true for Alexandria, particularly Old Town, and in the Mount Vernon area south of Old Town.
"I had one newly married couple who were ready to buy their first home and had spotted a property in Old Town. We put in a bid that was well over the asking price and still didn't get it," Hicks said. "They told me to call them as soon as anything came up that was within their specifications."
Hicks noted that the wife had been living in Old Town in a rental property and "just could not imagine living anywhere else." The husband had two dogs and was drawn to Alexandria by its dog-friendly reputation and the numerous dog parks available.
"When I got a listing, I immediately called them. The house was listed at $535,000. They eventually paid $560,000, after their sealed escalation-clause bid was accepted."
HICKS EXPLAINED that escalation clauses have become common practice in the last year or more. Such a clause provides that the buyers will increase their bid, usually in $1,000 increments, up to a predetermined ceiling if the seller receives higher offers than they have made. The documents are presented in sealed envelopes and not put into play unless a bidding war ensues. If the price escalates beyond their predetermined ceiling, they can still lose out.
As Hicks noted, it's still "location, location, location" in real estate, and this is proving particularly true for Alexandria and the Mount Vernon area between the river and Route 1.
"People seem to be willing to compromise on everything but location," she observed.
This was verified by Dennis Simmons in Coldwell Banker Residential Brokerage's Old Town Alexandria office. "There is a trade-off buying in Old Town, particularly with the historic properties, but people are willing to do that for the convenience of being inside the Beltway and close to core services," he explained.
"To live close in becomes a commuting issue. It enhances the quality of life. None of us wants to live in a parking lot in traffic. Although you can get a lot more house in Kingstowne than Old Town, the commute is at least one half-hour longer each way each day," he said.
"People are even willing to get rid of furniture and give up other amenities to get away from the traffic jams and the commute," said Deborah Saunders, also with Coldwell Banker. "They want a lifestyle with shops, restaurants, cultural activities, and basic services within walking distance or nearby."
THERE IS ALSO THE change in basic lifestyles, according to Saunders. "The largest number of clients I've seen in the last couple of years is what I call the ‘Lock and Go’ group," she said.
"The kids are grown. They have sold their McMansions in the outer suburbs and want more urban lifestyles. Many have also purchased second homes in vacation areas. They want homes where they can put the car in a secure area, lock the house, and leave for longer periods.
"They also want to be close to work and don't want to cook a lot. They prefer to be near good restaurants. Big selling points are low maintenance and on-site services such as concierge, gyms and pools. The condo prices have been rising substantially," Saunders noted.
Hicks has also seen an escalation in the condominium market. "The condos at Belle View are now up to the high $100,000 bracket," she said. "It wasn't long ago that they sold in the $80,000 range. I have had clients buy condos for investments rather than stocks."
Chris White with Long and Foster in the Mount Vernon/Fort Hunt area found that in addition to people being willing to make sacrifices for a close-in location, "They are also willing to pay substantially more for a house that has been updated.
"So many people are so busy today that they don't have the time or the interest in planning the work or overseeing it. They also don't want to deal with the hassle of not being able to get the proper work force when they want it." In addition, White cited low interest rates as a major element behind the hot real-estate market.
Marjorie Spires, Partners in Real Estate, located on Richmond Highway, buttressed the construction analysis. "In order to get the quality construction found in older homes, people are giving up luxury baths, large island kitchens, and some of the other amenities found in new houses," she explained.
"If you want an all-brick house, which is available in older homes, you can tack on $40,000 to $50,000 in new construction. But the main driving force is traffic and the long commute," Spires said.
ON THE FLIP SIDE of the commute argument vs. prices of close-in properties are those moving to Baltimore and commuting to jobs in the District or Virginia. "I have three clients presently who are moving to Baltimore. They are getting far more for their money, and the commute is only an hour," said Martine Irmer of Long and Foster Old Town.
"One couple owned a condo on Bashford Lane and a house on Mount Vernon Avenue. They sold them both and bought in Baltimore. And I don't mean on the outskirts. I mean downtown Baltimore," she said.
"But there will always be a market for Old Town," she said. "Particularly for the plaqued, historic homes. People are willing to give up closet space, large rooms, garages, modern baths and kitchens, just to get in closer and have that location. As for people who lost money in the market and are now turning to real estate, a lot of them came too late for the really good deals."
Strengthening that point of view, several saw the market cooling from its overheated status of last summer. Jean Varney, Weichert Realty, explained, "It's slowed down somewhat to a more reasonable pace. This summer there might have been only six or seven homes open to tour. Now there are 30 or 40 available."
She noted, "People were desperate to find a home this past summer, and they were willing to give up a lot of amenities and scale back their desires. Now they seem more willing to wait. Maybe it's just that fall has always been slower than spring and summer. Also, the market slows as the holidays approach."
Saunders observed, "One change recently has been that upper-bracket properties on the market are moving very rapidly. These are properties in the $800,000 to over $1 million range. People are willing to pay for them. Those in the $400,000 to $700,000 range have seemed to slow somewhat."
Simmons analyzes the slowing as "a swing toward the gray area. It's a more balanced market, and that is good for everyone. We are seeing a stabilization of prices. But we are still in a very dynamic sellers' market.
"I've seen a shift in the last two weeks. But as long as interest rates remain low, we will continue to have a hyped market. And the people moving here from middle America and Texas are really suffering from sticker shock."
Sticker shock or no sticker shock, slowdown or no slowdown, there seems to be one common denominator that all those interviewed agreed upon. The desire for a better quality of life, sans commuting time, is the primary driving factor as to where people are choosing to put their money when it comes to real estate.
And, a lot of that money seems to be flowing from stock investments to land investments as indicated by increasing condo prices and more sales in the fiscal stratosphere. As summarized by Spires, "The desire for a better quality of life is overriding price."