Kevin McManus wanted to sell his North Arlington, Va., home back in January, but his real estate agent suggested he wait until spring. McManus listed the home on March 13th, and it sold seven days later — right on the vernal equinox.
“I was very surprised because it’s an old home — it does have issues,” admits McManus.
The property is by a major interstate highway, which McManus thought would be a negative, but it may illustrate why the Washington metro area is faring so much better than the rest of the nation.
“Maybe that speaks to people wanting to be close to D.C. and the convenience of Metro,” says McManus.
He is likely right. Thanks to high gasoline prices, today’s home buyers want to be close in. D.C., with so many close-in, thriving suburbs from Maryland to Virginia, and an expansive Metro system, offers ample opportunity. McManus got close to his asking price.
“The D.C. Metro-area housing market is slowly improving with rising sales activity and stabilizing prices,” says Jonathan Miller, a real estate appraiser and consultant. “The sharp drop in inventory over the last six months and rise in contracts has helped keep prices firm.”
Pending home sales (signed contracts) were up 11 percent in February year over year, but up nearly 39 percent so far this year.
Meanwhile, active inventory has plummeted 27 percent from a year ago. The decline in inventory is a combination of factors, including reduced distressed inventory due to delays from the so-called “robo-signing” foreclosure paperwork scandal. In addition, contracts are rising at a faster rate than normal in 2012, and seller confidence has begun to appreciably weaken in the summer of 2011, as a series of negative events bombarded the consumer. Many would-be sellers thought they wouldn’t get their “price” and held off testing the market.
February data also show that many homes are selling in approximately two months time on average, according to a recent report from Long and Foster Real Estate.
“We have seen a steady increase of consumers testing the waters of the housing market, thanks to increases in median sale price, quickly selling homes and historically low interest rates,” says Jeffrey S. Detwiler, president and CEO of Long and Foster. “These dynamics continue to drive positive momentum in the residential real estate market throughout Washington, D.C.”
The median price of an area home was up 6 percent in February from a year ago to $317,900, according to Miller, who puts out a monthly report. That’s about twice the price of the national median existing home and is the biggest year-over-year gain for the corresponding period in 2007-08.
“However, the dropoff in foreclosure activity likely skewed the average up higher than it likely would have been,” he says.
The sharp drop in the number of homes for sale may be temporary, but if rising contracts continue, home prices will fare better as distressed sales return to the market.
Now that the “robo-singing” settlement is behind us, banks are ramping up foreclosure activity, and that means more distressed properties will be heading to the market.
While Washington real estate has always benefited from its largest employer, the U.S. government, it is in no way immune to the larger issues facing the mortgage market, like rising interest rates and still tight underwriting.
That’s why McManus is not rushing to buy another home.
“Will I buy? I’m a little leery,” he says. “I couldn’t sit by and wait for prices to rise, that’s a crystal ball; by the same token, as a buyer now, I wonder if I shouldn’t sit on the sidelines for a while and be ready when I think the time is right to jump in.”