The go-go days of the Bethesda-area housing market are gone for now—and maybe for a very long time. The era of homes appreciating 10 percent a year is over. No more multiple bids above asking price with zero contingencies.

But all of this might not be a bad thing, according to three leading Realtors who participated in a recent round-table discussion with Bethesda Magazine. The Realtors were Jane Fairweather, Coldwell Banker’s No. 1 broker-agent in the Mid-Atlantic; Gary Ditto, a Long & Foster agent for more than 30 years; and Kara Sheehan, of Washington Fine Properties, who specializes in $2 million-plus homes.

All three say a return to a sane real estate market ultimately would be a good thing for buyers and sellers. They are optimistic that 2010 will be better than 2008-09, but they say some sellers’ price expectations remain too high.

Fairweather: We’re noticing there are a lot of buyers coming out and looking. You’re seeing some of the stuff that’s been frozen in place starting to move [with] people taking advantage of the $8,000 [first-time buyer tax] credit, and the move-up $6,500 credit [for current homeowners wanting to buy].

[Of course], there’s also stuff that says the real estate recession is over. It’s totally not over.

Sheehan: When you’re talking $2 million and under, people are still financing, so they’re limited to the constraints of the credit market. I definitely see signs of recovery, but we’re far from where we need to be.

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Fairweather: There are no discretionary sellers out there now. The casual and wishful seller is gone.

Ditto: Last year, I had one move-up discretionary buyer, and I think they had family money. This year, I’ve already had several calls from people who want to sell the small house and move up to the big house.

Sheehan: You just rolled off a cliff in 2008. Buyers were scarce. There’s still a lot of inventory out there, but the buyers, due to articles they’ve read and to economic indicators, are starting to come out of the woodwork again. At $2 million and up, they don’t need financing, they can simply write a check.

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Fairweather: There’s always a certain segment in any recession or depression at the top of the pyramid that’s doing fine and they’ve got cash and can buy in the $5 million range.

Sheehan: [But] there’s a psychological aspect, too. Buyers who had the income to buy a $3 million to $7 million home in 2008 and most of 2009 were reluctant. It just wasn’t the thing to do. The big house, the square footage, all the bells and whistles are not necessarily what’s appealing today. It’s just not tasteful today to be over the top. Smart space, I think, is the trend…and location. But there just aren’t that many upper-bracket, close-in homes on the market.

Ditto: What’s happened to your upper-end market bears little relation to my market—the 20895 ZIP code [Kensington] and surrounding communities, where they really depend on financing. It crashed in 2008. The only things moving were houses that could be bought with [FHA-financed] conforming loans [up to] $417,000. Houses priced at $700,000 to $800,000 were a dead zone.

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In March [2009], the [federal] stimulus package [increased] loan limits, and suddenly the market opened up. We had a terrific run from March until July. But once again, it was primarily the seller who really needed to sell. There weren’t a lot of discretionary purchases.

Fairweather: What people are doing in a recession is putting off their plans to move up or move down. A lot of people are waiting until they see that they can sell their house for more than they could this year or last year. People are saying, “I got to wait so I can make my numbers work.”

Ditto: In 2005 to 2007, the availability of money was staggering. You infuse this incredible demand into the marketplace and it just drove prices crazy.

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Fairweather: You had madness—you had manic buyers and you had manic sellers, which was never sustainable.

Ditto: Historically, real estate always went up in value with inflation. In the last decade, we were way over inflation. Most who owned their house in 2000 had about a 10-percent increase each year. Have we had a 10-year period with 10-percent average increases? I don’t think so. We’re actually back to 2004 prices. Anyone who bought a house in 2004 could just about get out of it and break even. So maybe that’s some of the excess that has to get wrung out of the marketplace.

Sheehan: That’s what it should be; 2006 and 2007 were an anomaly.

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Fairweather: In a normal market, when there wasn’t crazy financing, you had to live in your house from seven to 10 years to get [back] your closing costs and your sales costs and appreciation so you could move. But when the market started to get hot, you had that minute in time when investors came in and sold the moment the building was done and made a lot of money—and then the curtain came down, so the investors are gone.

Sheehan: The people who bought in the last seven years almost feel they’re entitled to have a 20- to 30- to 40-percent return even in this short period, just because of what happened in 2005-2007. You really have to get down to brass tacks with sellers today to help them understand there’s not going to be this big return on investment in a short period anymore.

Fairweather: Sellers have to understand that they can set the price, but buyers determine value. Days on market are the learning curve. When sellers suffer from the misconception the market’s going to give them a certain price, it takes longer for them to notice they’re not going to get it. There’s been a considerable adjustment down, down, until they got to the price that caused it to sell.

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Sheehan: There’s definitely in the upper brackets quite a large gap in what sellers expect and what buyers are willing to pay. At some point, you have to look them in the face and say, “We’ve marketed your house heavily. There’s nothing else to look at but price,” and I believe 2010 will be very price-driven. You also have to talk about interest rates. They’re historically, artificially low. When they go up, it will have a grave effect, and we need to tell people that this is really a good time to buy.

Fairweather: Twenty-five percent of recovery is going to be confidence, but you still have the old banking issues. So again: You feel good about your job, but you never saved any money. Your stock portfolio has come back some, but not enough so you want to deplete it for your down payment.

Ditto: I think we’re in a paradigm shift. A characteristic recession is 18 months in and out. This is not a recession. This is something bigger. We’re two years into it, and nobody can see the exit door. We don’t know where it is, and it’s related to jobs.

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Fairweather: And credit.

Sheehan: Inside the Beltway—and I’d include Potomac in that—it’s such a different animal. It’s just healthier inside; it’s where all the money is concentrated, and it’s frankly where the demand is. And I don’t necessarily see that demand waning.

Fairweather: I can tell you there are way more buyers than a year ago, but they are price sensitive and market savvy. Some people have gotten some back in their stock portfolios. The people who have jobs are feeling more secure. Last year, I would’ve said I’m not optimistic at all. Now, people are coming out of the woodwork saying, “Come talk to me.” Now, half the people, once I talk to them, will try and kill themselves when I tell them what their house is worth. But half will say, “I’ll take a Valium and let’s go forward. I’ve got to move on with my life.”

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Ditto: I’m optimistic about this year. The values in my market have stabilized. I think we’re headed back to where people bought a house to live in, not as an investment. It’s a great way to build long-term wealth. But the whole short-term gaming thing, I’m glad it’s [gone]. It really distorted the market, and there are a lot of very damaged people out there. We’re back to old-fashioned real estate.

Edited and condensed by Eugene L. Meyer, a contributing editor for Bethesda Magazine.