The market in the Washington, DC area is starting to stagnate. A reasonable argument can be made that DC prices may stagnate but it is not a bubble market because of the solid fundamentals. Here are some quotes from the Washington Post article:
Home sales tend to slow in the summer, but the number of houses for sale in the Washington area has climbed by 50 percent in recent months. The available inventory has risen to about 35,300 homes, up from an average of about 23,000 in
the past three years, according to Metropolitan Regional Information Systems Inc., which runs the local multiple-listing service.
Local real estate brokers say they are seeing signs of a change."The market has slowed for sure, especially at the high end," said Wes Foster, chairman of Long & Foster Real Estate Inc.
Foster said the market is returning to "normalcy" after a frenzied era of multiple contracts, bidding wars and desperate buyers waiving their right to property inspections or appraisals.
It's very healthy," he said. "It worried the pure hell out of me the numbers we were seeing. I remember Boston in 1982 to 1989, when [prices] went up 25 percent a year for six years, and then in one year [they] fell 87 percent. The ride up for everybody selling was wonderful but the ride down was awful. . . . It was very painful and I don't want to see that here."
Foster said the recent manic market has been fueled by what he called "crazy fools running around buying houses as investments," with "bad loans, interest-free loans."
They'll get hurt, and I think they should," as prices inevitably correct themselves, he said. A slowdown is needed because so many average people have been priced out of homes or compelled to pay high prices, he said.
Towards the end of the article:
In Falls Church, Josefina Villegas, 71, thought her house would sell in just a few days when she put it on the market in late June and that she would soon be winging her way, carefree, to visit her grandchildren in Florida.
Houses in her woodsy neighborhood had been selling in the $900,000s, so she priced hers at $925,000 and waited for the bids to come in. She waited some more -- no bids. She dropped the price to $899,00. Three weeks later, still no bids.
I think houses are going slower now," she said, as she worried about getting the lawn mowed once again to keep up its pristine market-ready appearance. "Send
me somebody to buy."
Deborah Davenport, 50, listed her single-family house in Fairfax County last week at $569,000. Her husband, an echocardiographer who does heart ultrasounds, was offered his "dream job" with pediatric cardiologists in Tucson. In the past week, her home has been visited by just one set of prospective purchasers.
We haven't gotten any nibbles, unlike a month ago, when people put their houses on the market, and poof, they'd be gone," she said. "I figured it had to slow, it had to stabilize; but I hope it hasn't completely stalled -- for our sake."
The Washington, DC market is stagnating. If the Washington, DC housing market which has strong fundamentals is stagnating, then certainly there will be stagnation in bubble markets which do not have strong fundamentals. Look for stagnation in bubble cities such as Miami, Orlando, Los Angelos, Merced, Bakersfield and Reno. The price stagnation in these bubble cities will be followed by price declines.