The Washington area’s housing market finished 2012 with a healthy fourth quarter, and the recovery seems likely to continue. Though uncertainty over the government’s fiscal health hinders robust growth, prices are still rising as the number of buyers exceeds the number of sellers.
The average price of a Washington area home sold in the fourth quarter of 2012 was $423,502 — 10.8 percent higher than in the fourth quarter of 2011. The volume of sales in the fourth quarter was up as well, climbing 15.5 percent over the same period a year ago. The jump is a contrast to 2011, when the number of homes sold throughout the region was down 4.5 percent from 2010, marking 2012 as a year of significant turnaround.
Overall, homes in the region sold in an average of 57 days during the fourth quarter, down from 80 days one year earlier and below the 10-year average of 63 days. For all of 2012, homes in the region sold in an average of 62 days.
While many tax relief programs expired on Dec. 31, federal lawmakers moved to save a handful of important initiatives. One was the Mortgage Forgiveness Debt Relief Act, which aimed to help people who sold their house for less than the value of the loan they had taken out. Extending the act spared these so-called short sellers from having to report as taxable income any mortgage debt that had been forgiven by their lender. Many lenders have been forgiving the difference in hopes of avoiding a foreclosure process that can drag on and on. Prince George’s County, given its abundance of potential foreclosures relative to the region, will likely be one of the largest beneficiaries of this legislation.
While new lending standards restrict the market for many first-time home buyers, cash-wielding investors are still snapping up properties, often for rentals, keeping inventories low.
Several factors are likely to sustain the Washington for-sale housing market in 2013, including:
Growing confidence by both lenders and buyers that the height of market risk has passed.
Mortgage interest rates that remain near all-time lows during 2013.
The survival of real estate tax breaks beyond the fiscal cliff, though uncertainty persists.
An end to the local structural shift away from home ownership and toward rentals.
The region’s housing market recovery will likely remain steady as price appreciation helps more homeowners get above-water on their mortgages, meaning their homes are again worth more than the remaining balances due to their lenders. This transition may happen slowly, however, as many potential sellers struggle with the cash needed to cover transaction costs. Buyers will likely continue to outnumber sellers, putting upward pressure on prices.
Alyson Bode is senior vice president at Delta Associates. Staff at Delta Associates contributed to this article. For more information, please visit www.deltaassociates.com.