Matthew Branch and his wife, Rachel Sayre, decided to finally put down roots in Washington. After several months of searching for a house, the couple just made an offer on a detached home in the Northwest neighborhood of Takoma. Branch, 32, doesn’t seem particularly anxious about diving headfirst into the area’s housing market. “I think it’ll probably appreciate, but it’s anybody’s game,” he said. “It’ll be interesting to see what happens.” ¶ Interesting? Indeed. After all, it’s 2012 — six years after the country’s housing market began its downward slide, and zero years into a whole-hearted, full-fledged recovery. Most of the Washington region has been insulated from the worst of the housing crisis, but the local market is nonetheless in an unpredictable spot. ¶ Still, not all is random. Many of the issues and conditions facing those who enter the real estate market this year can be assessed and even prepared for. Here’s a rough guide to what home buyers and sellers should take note of in 2012.
The year things start to get better?
On the national scene, analysts are hopeful that this is the year home prices finally begin inching upward again. Lawrence Yun, chief economist for the National Association of Realtors, predicts that low interest rates and rising rents will lead to a 5 percent boost in home sales, with prices increasing by about 2 percent. And new housing starts should be 15 percent greater than last year, said David Crowe of the National Association of Home Builders. But according to RealtyTrac, foreclosures are also slated to rise, which will result in a flood of cheap homes on the market that could depress prices for another year.
The prediction for the Washington region is generally sunnier than the national forecast. “Housing prices are higher now than they were a year ago and inventory is lean, so it looks like we should be poised for some recovery in the housing market,” said Stephen Fuller, director of George Mason University’s Center for Regional Analysis.
But the area will be affected unevenly. Fully half of the region’s federal spending occurs in Northern Virginia, so real estate in Arlington and Fairfax counties and Alexandria should continue to boom. But suburban Maryland had major job losses last year, probably pulling down housing prices in some areas in 2012. Prince George’s County in particular will see a rise in already-high foreclosure numbers that will continue to undercut the market there.
The District is a bit harder to predict. “The outlook for 2012 depends on which neighborhood you’re looking at,” explained Ed Downs, president of the D.C. Association of Realtors. Still, certain neighborhoods are in very high demand, and inventory across the city is fairly tight, indicating a healthy market.
FHA vs. Fannie and Freddie: Pros and cons
One of the big housing policy issues of 2011 was the lowered limit on mortgages backed by Fannie Mae and Freddie Mac in October. Congress had voted to decrease the ceiling of these loans, which are eligible for lower interest rates, from $729,750 to $625,500 — a crucial difference in a high-cost market like Washington.