The Washington area is one of the few regions in the country where home values have been consistently climbing in recent months, with typical prices increasing 8 percent since hitting bottom two years ago.
The rebound has given a lift to the local economy and begun to ease the pressure on many struggling homeowners, who became more vulnerable to foreclosure when the equity in their property evaporated.
Single-family home prices have soared 27 percent in the District and 26 percent in the Virginia suburbs from the low point, according to a Washington Post analysis of sales records. In the Maryland suburbs, where housing prices fell later and not nearly as far, the rebound has been more modest, 3 percent since their bottom early last year.
"There are still some issues in the D.C. condo market, but single-family homes are doing well," said Fred Kendrick, a Washington area real estate agent at TTR Sotheby's International. "We are seeing neighborhoods come back that had lost a lot of value, and there are multiple offers on homes in some areas."
Richard Oder, a Long & Foster agent, said that even in Maryland, the well-established close-in suburbs are especially hot. "I'm working with some buyers who are looking for a home in Chevy Chase because they want to be in that school district, but they're having a hard time getting a contract accepted," Oder said. "There are multiple offers and strong demand."
But many homeowners who are looking to sell still face steep losses because the recent gain in home values has been not nearly big enough to offset the steep declines of the previous four years. In the third quarter of last year, 54 percent of sellers accepted less than they had paid for their properties, according to a Washington Post analysis of sales records.
To make up for the shortfall, many sellers are bringing cash to the table - tens of thousands of dollars in the most extreme cases - to offload their homes. Those owners who don't have the cash are renting out their homes or staying put until the market improves.
Some sellers are being forced to take a loss because they must move out of their homes because of divorce or job relocations, area real estate agents said. Angie Isidro Bresnahan, a Weichert agent in Northern Virginia, said that she represented a couple who were divorcing and that one spouse came to the table last month with $67,000 in cash to sell their Loudoun County home. "It's painful, very painful to sit there at the closing table in that kind of situation," Bresnahan said.
The turnaround in home values came faster in the Washington region than in most other parts of the country because of the area's plentiful supply of jobs and federal contracting work, which helps encourage home purchases and drive up prices.
The most recent Standard & Poor's/Case-Shiller index shows that the region was one of only four in the nation to post a year-over-year price gain for single-family homes in November, and the uptick in Washington was the highest, at 3.5 percent.
Homeowners who bought before the surge in prices a decade ago are, on balance, way ahead. The median price of a single-family home in the District is 77 percent higher than in 2000 when adjusted for inflation, the Post analysis shows. Prices are up 42 percent in the Virginia suburbs over that period and 46 percent in the Maryland suburbs.
But homeowners who bought at the peak of the market in 2005 face an especially tough challenge. Median home prices more than doubled between 2000 and 2005, according to the Post analysis. Then the real estate market crashed.
Despite the recent comeback in prices, nearly 29 percent of area homes were underwater as of October, meaning the owners owed more on their mortgage than the property was worth, said Sam Khater, senior economist at mortgage research firm CoreLogic. That's down from 31 percent last January but well above the 23 percent national average. On average, underwater homeowners in October faced a deficit of about $73,000.
"The volume of underwater loans is still way too high," Khater said. "Those people need to come up with money in order to be able to move, but the problem is that the typical homeowner's wealth is tied up in their property. The question becomes: Where do you come up with the cash? If you can't come up with it, you're stuck."
When Glennon and Craig Melton sold their Sterling home eight months ago, they came to settlement with $140,000 in cash. After considering their situation for months, they decided they wanted out because they were afraid their mortgage interest rate was about to jump to an unaffordable level. They were paying only interest on their loan and not making a dent in the principal.
The couple bought the house for $570,000 in 2005, sold it for $440,000 in June and kicked in $10,000 for the closing costs.
"We cashed in our retirement, our son's college fund, our IRAs. We just gave them everything," Glennon Melton said. "We felt trapped."
Elsewhere in Loudoun, Saige and Brian Burns were more fortunate. They only had to write a $7,500 check at settlement to sell their Ashburn home. When they bought the home six years ago, they had one child. Now they have three, and they wanted more room.
"We mourned the loss for about 30 minutes, and then we said: 'Okay. We want to do this because we need a bigger home,' " Saige Burns said. "So we got a bigger home at a great price with a better interest rate only four or five blocks from where we used to live."
The outlying suburbs, like those in Loudoun, have taken a bigger hit on prices than more established areas have. The construction boom in the outer suburbs was fueled by easy access to popular subprime loans and exotic mortgages.
Those types of loans started defaulting at an alarming rate by 2007. Foreclosures followed, dragging down area prices. The markets that crashed the hardest were those where prices had climbed the fastest, such as Prince William and Loudoun counties.
Even families who have a little equity in their homes are feeling the pain, several real estate agents said. When it comes time to sell, commissions and closing costs are eating into whatever equity they have left, and sometimes they, too, must put up cash.
"People keep hearing about rising home prices around here and signs of recovery, and they think it's going to translate into a lot of added value for their home," said Richard Bridges, a Northern Virginia real estate agent. "But it's an illusion. Prices aren't getting better at the rate people think they are."
Komran Aghazadeh bought his Germantown townhouse 10 years ago, and it's still worth more than he paid for it. But foreclosures have pummeled home values in his complex, and he says he doesn't have enough equity to trade up.
A few years ago, a townhouse a few doors down from his sold for $430,000, he said. More recently, a similar townhouse next door sold for $299,000. "At that price, we'll never get the down payment we need," Aghazadeh said. "We have to hold off."