According to economists who follow the local housing market, early indicators show that the 2012 spring season could mark the first year in a long time that we see any kind of real price appreciation. The number of foreclosed homes for sale is now a much smaller part of the market than it was even a year ago. Real estate agents say they are encouraged to see more multiple offers.
But don’t get too excited — many experts caution that price appreciation is likely to be modest and will apply to only to the most highly desirable neighborhoods, not across the board. And what’s happening in Northern Virginia is not the same story for suburban Maryland or even one quadrant of the District compared with another.
But generally speaking, real estate experts say the spring season is showing signs of strength compared with last year; the question is whether the region can build on that momentum.
In February, the median sale price for a Washington area home rose 6 percent, to $317,900, compared with February 2011. More people put their home on the market last month than the same month a year ago. The total was the highest since May 2011, and fewer of those homes are foreclosures, which indicates the market is growing some sea legs.
“We’re on a trajectory upward,” said research assistant professor Lisa A. Sturtevant of George Mason University’s Center for Regional Analysis. Sturtevant said the center’s forecast predicts 24,000 more jobs will be added to the region this year, and many of those will be high-wage jobs, which should stimulate the housing market.
However, other economic analysts are cautious about the likelihood of federal spending cuts, which probably would hit the region hard because so many government contracting jobs depend on federal spending.
“The first half of 2012 is going to be paralysis, as people are trying to wait for an answer on the federal budget,” said Sandy Paul, national research director at Delta Associates. That unknown factor — spending cuts — makes the market more volatile, he said.
Overall, Delta projects that the Washington region will see modest improvements in sales volume and prices, perhaps a low single-digit increase compared with 2011.
One bright spot: the condominium market. The region’s condo market had been hard- hit, as first-time home buyers shied away from investing, and financing has become tougher. But Delta predicts 2012 will be the first year since 2008 in which prices of condos appreciate, in the range of 1 to 3 percent, said William Rich, a vice president.
Rents have risen so high that some people who can afford to buy are taking the plunge.
Also, new properties with higher-quality units have come on the market recently, while the less-desirable properties that sat on the market for a long time have cleared out. More than 60 percent of condos on the market have been for sale for two years or less. That compares with the last quarter of 2010, when 90 percent of condos on the market had been for sale for more than two years.
“The condo outlook has changed” from even last fall, Rich said. Sales volume will also rise, he predicted, to about 5 percent. “It is exciting.”
But the housing recovery story varies widely by state. Northern Virginia has led the housing recovery, in part, Sturtevant said, because the state cleared out its foreclosures quickly, whereas Maryland’s judicial process means many of those homes are still going through the process, in which they remain on the market and drag down the prices in the communities where they are located.
She said much of Northern Virginia’s housing market hit bottom in 2009. In Maryland, some parts, such as Prince George’s County, haven’t hit bottom yet. “It depends where you are,” she said.
Indeed, many sellers still face a harsh reality check in putting their home on the market. If they purchased during the boom years, it’s tough to look at the possibility of selling a home for less than what they paid.
“People are getting good prices for their houses, but they have to be realistic,” said Eileen Marousek, a Coldwell Banker agent in Old Town Alexandria. “Sellers never feel they are getting enough [for their home] and buyers are worried they will overpay; it’s still a market where there’s not 100 percent certainty.”
Real estate agent Ken Montville, who works in northern Prince George’s, said he’s concerned about a new wave of foreclosures that could come on the market in his area now that state attorneys general have reached a deal with five large banks accused of fraud foreclosure proceedings. The lawsuit against the banks had caused the lenders’ foreclosure processes to stall.
“I’ve heard there definitely is a shadow inventory” in Maryland, said Montville, of ReMax United Real Estate in Upper Marlboro. He said he’s concerned that “it’s substantial enough to keep downward pressure on prices, because these foreclosures are going to be fairly cheap when they come on the market.”
Still, Montville said, not all of the county is struggling; some northern parts, such as College Park, appear to be stabilizing in terms of pricing and the number of days a home spends on the market before going under contract.