Washington Post 'Housing Market Cooling, Data Say"

As has been reported on the housing bubble blogs "home sales in the Washington region have declined sharply, the inventory of unsold homes is up significantly, and prices have flattened and, in some cases, fallen." The Washington Post continues to get high marks for covering the local housing market.

Today's article primarily relies on the MRIS ( Metropolitan Regional Information Systems) for inventory and sales data. The trend of rising inventory and small price declines is most evident in the Northern Virginia component of the DC metro market.

In the two counties and three cities that make up the Northern Virginia market, more than twice as many homes were available for sale in October as in the same month one year ago -- 7,122 homes, compared with 3,254 -- and sales are off 28 percent.

In the District, listings are up 62 percent and sales are down 28 percent.

In Montgomery County, listings are up 49 percent and sales are down 8 percent.

In Prince George's County, the listings are up 45 percent. But home sales have remained fairly stable, dropping only 2.6 percent

With the rising inventory and the fall season slowdown prices in much of the DC Metro area are falling.

( Click on image for larger version)

In the District, the median price -- the point at which half the houses cost more and half cost less -- was $425,000 in October, down from a high in August of $435,088. In Fairfax County, the peak was in July, when the median price was $503,000; in October, it was $489,450. The peak in Montgomery County was also in July, when prices hit $460,000; the median price in October was $429,000

The below chart shows the median prices in the sub markets that make up the DC market.

So what happens next? Some bubble naysayers are saying that the small price declines in much of the DC area are a result of a 'seasonal slowdown.' However, inventory is rapidly rising in the metro market last fall. The rising inventory will continue to lower prices in the coming months.

Many local real estate agents say the market is returning to normal. "We're rebounding in terms of evolving to something close to a balanced inventory," said David Howell, a past president of the Northern Virginia Association of Realtors and executive vice president and managing broker at McEnearney Associates Inc. in McLean. He said the true aberration occurred from 2003 to early 2005, when the number of listings fell to record lows, causing what he called "unbelievable and untenable" increases in appreciation

Housing experts say the slowdown is occurring for several reasons. In the past few months, a lot of homeowners put their places on the market speculatively, hoping to cash in, creating a surge in housing supply. Many investors, whether speculators or landlords, have done the same, either because they believe the market has peaked or because they cannot make enough money in rent to support the mortgages.

They are finding fewer buyers because the double-digit price appreciation of the past few years has priced many people out of the market. The recent rise in mortgage interest rates, which causes monthly payments to rise, adds to price pressures. And now, with fears that the market has peaked, more people are simply afraid to buy.

Meanwhile, new construction is inflating the housing supply, as condominium developers rush projects to market. According to a recent report by Delta Associates, 47,000 units in dozens of projects are hitting the local market in the next three years, which is about five times as many condo units as were sold last year.

The boom has ended in the DC area. The huge price appreciation is a thing of the past. Currently, housing inventory is surging, prices declining, and the 'speculative fervor' is thankfully over.