Prices in several jurisdictions are nearing those from the peak of the bubble. According to the George Mason University Center for Regional Analysis, the median price for a local home in 2011 was 78 percent of the peak bubble price. Many jurisdictions surpassed this average, particularly those close to the District. Homes in Alexandria, for instance, were selling at 100 percent of the peak bubble price.
The volume of sales in the second quarter is up by 9.2 percent over the same period a year ago. This is a contrast to 2011, when the number of homes sold throughout the region was down 4.5 percent from 2010.
Overall, homes in the region sold in an average of 59 days during the second quarter, down from 70 days one year ago and well below the long-term average of 78 days.
The expectations of buyers and sellers have been growing closer since early 2009 as sellers have become more realistic about setting asking prices and buyers have become more willing to boost their offers to make a deal. Indeed, the average selling price in the second quarter was 98.1 percent of list price. This ratio is the highest since the third quarter of 2005, and is well above the recent trough of 89.9 percent in the first quarter of 2009.
Still, there appears to be a group of potential sellers who are keeping their homes off the market until prices rise further, helping to keep the inventory of homes for sale tight. Inventory at the end of the second quarter was the lowest it has been since 2005 — the peak of the last housing cycle. The Washington area has an average of 2.3 months of for-sale inventory at the end of the second quarter of 2012, down from 3.5 months of inventory one year ago.
Several factors are likely to help the Washington housing market in the 2012-13 period:
A slowly recovering national economy.
Mortgage interest rates that remain at or near all-time lows through 2012, with small, measured increases in 2013.
Improving affordability due to the continued high cost of renting in the area.
An expanding local labor market during the balance of 2012, notwithstanding federal austerity measures.
An end to the local structural shift away from home ownership and toward rentals.
The pace of the recovery may remain volatile, however. In 2012, we expect that rising demand will yield modest yearly housing price gains with likely percentage price increases in the mid-to single-digits.
Alyson Bode is vice president at Delta Associates. Staff at Delta Associates contributed to this article. For more information, please visit www.deltaassociates.com.
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