Washington, D.C. Housing Inventory Down

Is it a sign of a healthy housing market when homeowners choose to rent out their houses rather than sell because they can't get what they paid for them just five years ago?

According to a recent Washington Postarticle, it is. The Post's Dina ElBoghdady tells us that inventory is down, and prices are up in the D.C. area, and this is a sign of a recovering market.

The number of available houses for sale in D.C. is down from a year ago in nearly all the region's communities, and houses are spending less time on the market. In many cases, the period that listings are on the market before they sell is near 1999 rates.

And that's considered a good sign, since 1999 is the year generally thought to be the last "normal" year before the market exploded and then imploded in Washington.

Prices are up as well, but aren't quite high enough for two homeowners interviewed in the story. Both bought in two of the area's most desirable communities, Arlington, Va., and Bethesda, Md. (pictured), near the top of the soaring D.C. housing market in 2004 and 2005. And both have decided to rent out their homes rather than put them up for sale.

The owner of the Arlington condominium who bought in 2005 was told he'd owe up to $30,000 if he sold now. And the Bethesda homeowner decided to rent out his home when he realized he wouldn't get the $899,000 asking price.

Public records show the homeowner paid $784,000 for the house in 2004. It sold in 2003 for $723,000. And back in 1999 -- that magic year before housing values began their double-digit climbs and middle-class Joes could still afford to buy in Bethesda or Arlington -- it sold for $475,000.

According to the article, researchers believe that a smaller inventory, no matter what the cause, will help revive the housing market. In Prince William County, Va., inventory is down by 55 percent from the previous year.

This is a remarkable turnaround for the county hardest-hit by foreclosures in the D.C. area. Prince William is one of the few areas near D.C. where first-time homebuyers can find a single-family home for less than $300,000, so it's likely that the first-time homebuyers' tax credit and current interest rates are drawing new owner-occupants and foreclosure deals are luring investors.

With the inventory stabilizing, price stabilization shouldn't be far behind, say analysts. Yet prices remain high, albeit not by 2005 standards. According to NeighborhoodInfo DC, the median sales price in the area rose 6.6 percent to $315,000 in the year ending December 2009. This is 29 percent below the peak in 2007, but is still 41 percent higher than in late 2000.

So is price stabilization at this point a good thing in Washington? The area experienced an outlandish seller's market for six years, from 2000 to 2006. Starting in late 2007, the bubble softened but did not completely burst in this government town that stayed fairly insulated from a collapsing economy. Now it's a buyer's market, but still an expensive one (remember, $400K for a starter home).

It seems like shoppers should still have a couple of years of a "buyer's market" before sellers expect to recoup their 2004 and 2005 purchases.

homes for sale in Washington, D.C., Maryland and northern Virginia at AOL Real Estate.
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