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D.C.-area housing market welcomes back summer lull

Posted on: Wednesday, 17 August 2005, 08:16 CDT

WASHINGTON (Reuters) - Strong federal spending and job growth has made the Washington, D.C., area one of the hottest U.S. housing markets, but there are some signs of a return to normalcy: the summer lull is back.

For the previous two summers, Congress' recess and the U.S. capital's August exodus have failed to ease the bidding wars, escalation clauses, and lightning-fast sales of area homes.

Serious buyers stayed home from the Delaware shore to pore over listings and race to open houses.

But this year, the inventory of unsold homes on the market is up significantly in the last three months and the number of days it takes to sell them is creeping higher. Property agents are stepping up marketing efforts.

"We don't have tons of inventory, but buyers do have some choice now," said Lisa Bailey-Harper of Weichert Realty in Alexandria, Virginia. "You don't have to jump on a property as soon as you see it."

In the District of Columbia and eight surrounding Virginia and Maryland counties, there were 17,016 homes on the market at the end of July, up 31 percent from April and 15 percent from July 2004, according to Metropolitan Regional Information Systems Inc., which operates the area's listings service.

The average number of days on the market in July climbed to 23.8 from 22.4 days a year ago.

Agents across the Washington area said the high end has been affected the most, with homes priced above $600,000 taking longer to sell. The hottest bidding activity has shifted from the tony suburbs of Bethesda, Maryland, and Alexandria, Virginia, to the blue-collar areas of Prince George's County, Maryland, where there are still townhouses in the $250,000 range.

Although it may take more like 2 to 3 weeks to sell a home versus as little as 3 to 4 four days in recent months, agents said patient sellers are still routinely achieving more than their asking price. But the competition among buyers is less frenzied.

"Houses are starting to sit on the market a little longer, but there are still multiple offers on good houses that are priced well," said Yvette Chisholm, a broker with Long & Foster Companies in Rockville, Maryland.

Price appreciation has remained impressive. July's median transaction price in Alexandria, Arlington and Fairfax counties in Virginia, was $500,000, up $101,000, or 25.3 percent since July 2004, according to MRIS. Prices in April rose 24.3 percent year-on-year.

In the District of Columbia the July median was $429,850, up 17.5 percent from a year ago after an April year-on-year gain of 25 percent.

Agents were reluctant to use the term slowdown, arguing the market has a traditional autumn surge once the hot and steamy summer ends.

"The fall will be a normal catch-up time, particularly if interest rates stay very acceptable, as they are now," said Barry Bluefeld, a broker with RE/MAX Allegiance in Washington.

Indeed, economists say the Washington area, which had the nation's lowest big metro unemployment rate of 3.8 percent in June, has strong fundamentals fueled by defense and homeland security spending.

"A very high proportion of that job growth is occurring in high-paying professions," said Wachovia Bank senior economist Mark Vitner. "This is a demand-driven market and demand vastly exceeds supply."

Bluefeld said he believed the only thing that could derail the market was a significant rate increase. But the stellar price gains coupled with a recent uptick in mortgage rates may tempt more homeowners to cash out and plant "for-sale" signs.

He is urging extreme caution among buyers still hoping to turn a quick profit.

"This is definitely an excellent time to cash out, and it's a good time to purchase only if you have a long-term view," he said. "We could go through a period of five years where there's no appreciation. But that's OK, because you'll make up for it in the five years after that."

Source: REUTERS

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