At the same time, though, data from Zillow suggest that the region’s proportion of underwater homeowners surpasses the national average.
We asked Jeffrey S. Detwiler, president and chief operating officer of Long & Foster, to discuss the top and low ends of the market and offer his forecast for the rest of the year.
Many D.C. neighborhoods during the past year have seen large increases in median sale prices. What are some of the neighborhoods in the city experiencing the biggest gains and what makes them so hot?
Detwiler: In April, the neighborhoods posting the largest year-over-year gains include Brookland and Woodridge, Logan Circle and Dupont, and Capitol Hill Northeast.
It’s important to remember that we’re talking about median sale price — not averages. So while the trend is increased prices, it can be impacted by the mix of houses that were sold. We have seen that a couple of higher-priced transactions push the median price upward. Overall, though, we are seeing stabilizing prices in many areas.
A likely reason for the large increases in median sale price is that we are seeing a recovery at the luxury end of the market. More movement in the high-end market with move-up buyers is pushing the median sale price upward.
Neighborhoods are “hot” for the reasons that have always driven the fundamentals of homeownership — good homes, good schools, a place close to work, a backyard patio where you can put your grill. Even with everything the market has been through in the last few years, the bottom line is that sales are primarily driven by consumers’ personal choices and preferences about where they want to live and what type of house suits their lifestyles.
What does the recovery portend for the people who are underwater? Do you think the recovery will spread or does one situation not have anything to do with the other?
Detwiler: As the recovery takes hold and prices stabilize and even improve, homeowners’ equity positions will improve over time. Giving more consumers the flexibility to move past the housing downturn and make future homeownership-related decisions will likely lead to more activity in the housing market, and it will certainly put us on a path to settle into the new normal of the housing market.
If D.C. is the epicenter of the housing market, and we believe it is, we are seeing in the monthly housing data how this recovery is spreading outward. The recovery, especially as it pertains to a more balanced market between the amount of inventory that is available and the number of buyers coming into the market, has spread outward from D.C., and we are now seeing strengthening in areas such as Loudoun County and Frederick and Montgomery County.
In the meantime, are homeowners who are underwater stuck? Do they have any hope?
Detwiler: There is opportunity in the marketplace, even for buyers who are underwater, to take advantage of historically low mortgage rates and moderated pricing. We have seen some qualified buyers come to the closing table with cash to move up to their dream homes. They may be taking a hit on their current mortgage, but if they’re getting a more significant deal on their move-up home, it’s a decision that may make financial sense for some buyers.
Have we hit the bottom here? What’s your forecast for the rest of the year?
Detwiler: We believe that, for the first time in several years, tomorrow looks better [than] today and today looks much better than yesterday. We are forecasting a year that’s relatively flat — similar to how 2011 played out and perhaps up slightly. But looking forward, we’re anticipating modest increases in 2013 and beyond. It will still take the market several years to play through all the distressed assets, but we anticipate a more normalized market — the new version of normal — in 2014 and 2015 and beyond.
In a few years, we’re likely to look back at this time as a historic opportunity to buy a home.