Historic Home Blog

     This 3rd quarter 2007 report - just out - from the MRIS (the DC area multiple listing and statistics monolith). It is very positive about the market conditions in the DC area. One can see that the statistics are in surprising conflict with gloomy media reports. The 22 PAGE REPORT.  I have pulled out the high points and placed them below, however, the conclusions of the report are very clear. The real estate market in the METRO DC area is off its high of several years ago, but it is by no means depressed. Alot of “qualified” people are buying homes - the prices in many METRO areas are increasing, days on the market are shrinking, and the market is stabilizing. In short, home buyers who do not listen to the ”national” media are benefiting from the exceptional inventory of well priced homes and historically low interest rates. The report concludes that their will be an “uptick” in sales in the spring and an improved market by summer. The buyers that I am working with already know that their best buying opportunity exists now. Come spring there will be more competition, less inventory and perhaps higher interest rates.  

     A word to historic home sellers, especially in the outlying areas of the METRO DC area. This report is a very positive. Already the Montgomery County market is heating up, with 4% price increases in many areas (re: statistics in this report). This will continue to encourage buyers to look further out for affordable, sensational historic properties.

 THE REPORT HIGHLIGHTS-

   After a languid winter and spring, many experts expected the slow pace of sales to continue through the summer, traditionally a slow time in the industry. The residential market remains in an adjustment phase at 3rd quarter 2007, though there are signs of creeping back toward equilibrium. Average metro-wide prices in July and August were more than 4% above prices the same time last year, and showed a slight increase in September. The average number of days on the market has consistently declined since the beginning of the year, indicating the market is on a path to stabilization.
But the gains are uneven, with desirable areas inside the Beltway showing strong price gains and shorter listings, while the reverse is generally happening as distance from Washington increases.
     According to Freddie Mac, the average on a 30-year fixed rate mortgage in September 2007 was 6.38%, down 2 basispoints from the same time last year, and up 22 basis points from March’s low of 6.16%. Uncertainty surrounding
interest rates paired with tighter lending practices have worked against buyer activity accelerating in the market.
     Today’s market requires REALTORS® to employ a bit more patience with clients, considering the inventory available, and to use creative marketing techniques to connect buyers and sellers. The Wall Street Journal recently reported that clients are becoming more demanding of their agents, who are increasingly being asked to help declutter homes and attend to other personal chores. But sellers recognize the importance of using a REALTOR® in the slower market. After sale prices declined more than 3% in 2006, an analysis of MRIS data shows an increase in sale prices eight out of nine months this year (on a trailing 12-month basis) for all housing types.

     Buyers continue to have more negotiating power because of the large supply of homes for sale. Today’s buyer enjoys a high level of negotiating ground for price and incentives. Unlike buyers five years ago, buyers should be mindful of staying in a home for its long-term investment value. The Washington Post recommended that buyers only enter the market if they plan to stay in a home for at least five years. Financing is also a concern for buyers. The Credit Crunch has caused banks to tighten lending standards, reducing the pool of eligible buyers in the market. Sellers have been forced to become more patient, as the number of days on the market remains above the long-term average of 76 days, averaging 90 days in the Washington metro through the 3rd quarter. Buyers lack confidence in the market, which continues to be a hurdle for sellers.

     Home price appreciation has slowed in many areas of the country, and is negative in a few markets that experienced rampant speculation. However, a dramatic drop in consumer spending has not yet been felt in the United States due to a strong economy with consistent job growth and wage increases. According to Freddie Mac’s Primary Mortgage Market Survey®, in the 2nd quarter the refinancing share of mortgage applications averaged 42%. The average age of the loan refinanced was 3.5 years old; the average home appreciation over that time was 23%. Homeowners who bought as the market was heating up in 2003 are now enjoying the appreciation of the past few years. In the Washington metro area, the Office of Federal Housing Enterprise Oversight (OFHEO) reported a 1.2% annual increase in home prices through the 2nd quarter of 2007, compared to 15.7% the prior year. (It is important to note that OFHEO and NAR use different methodologies to calculate price changes.) The Washington metro is following the same trend as some other metro areas around the nation, with home prices still rising but at a slower rate.

Reductions in price growth in most markets and elevated interest rates have taken away troubled borrowers’ options to access home equity or refinance their mortgages for recently purchased homes. This has led to a rise in subprime foreclosures in some areas, further exacerbating the inventory of unsold homes throughout the United States. In response to the rise in the subprime foreclosure rate, which many attribute to predatory lending and the lack of lenders properly educating borrowers on loans, organizations like NAR have begun to emphasize the importance of implementing responsible lending policies throughout the industry.

      Despite volume below the long-term sales rate, the Washington metro area housing market still showed strength in the 3rd quarter of 2007.An analysis of MRIS data shows that total sold dollar value was $6.9 billion in the 3rd quarter, compared with $8.7 billion in the 3rd quarter of 2006. Total volume year to date is $21.7 billion, compared with $26.1 billion in the same period a year ago.
     The Washington area economy continues to expand at a decelerating pace, with job growth and federal procurement
spending growth easing in the region. Washington area job growth continues to outpace the supply of affordable housing units. The housing market is still adjusting to the rapid price appreciation experienced in 2004 and 2005. Sellers have been slow to accept lower prices, but buyers have become reluctant to overextend themselves. Sales volume has dropped and the average number of days on the market remains above the long-term average of 76 days. Fluctuating interest rates and the Credit Crunch have affected the pool of buyers, causing the adjustment of the housing market to take longer than most experts predicted.
By spring 2008 we expect that consistent demand (generated by steady job growth, net migration, and a rising immigrant population) and a decline in construction will stabilize pricing, leading to an uptick in sales activity, with improvement in market conditions appearing by summer.