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Housing Market Cooling, Data Say
The MRIS, which is jointly owned by the 25 local associations of Realtors, has been tracking home sales since the late 1990s, compiling its monthly figures from 72 counties in four states and the District. Its data mostly reflect sales of existing homes, since builders usually sell new developments themselves, rather than through real estate agents. But new-home sales are also faltering: Within the past two weeks, two of the biggest developers in the region, Toll Brothers Inc. and NVR Inc., have reported that their sales are slowing.
Many local real estate agents say the market is returning to normal. "We're rebounding in terms of evolving to something close to a balanced inventory," said David Howell, a past president of the Northern Virginia Association of Realtors and executive vice president and managing broker at McEnearney Associates Inc. in McLean. He said the true aberration occurred from 2003 to early 2005, when the number of listings fell to record lows, causing what he called "unbelievable and untenable" increases in appreciation.
Howell and others point out that the Washington area is unlikely to experience a major decline in prices because of its continued job growth and the prevalence of government jobs, which tend to be more stable than private-sector employment. "We're the most insulated of any market in the country" from extreme price volatility, Howell said.
The slower market "is so much healthier, it really is," Susann H. Haskins, president of the Greater Capital Area Association of Realtors and a broker at Long & Foster Real Estate Inc. in Potomac. "It's a better balance between buyers and sellers."
Economist Gregory H. Leisch, chief executive of Delta Associates, an Alexandria-based real estate consulting firm, said consumers would benefit in the long run from the slowdown because house prices had been rising so quickly that the market was destabilized.
"The market is fatigued, and it should be taking a breather," Leisch said. "It's healthy that it takes a breather."
Housing experts say the slowdown is occurring for several reasons. In the past few months, a lot of homeowners put their places on the market speculatively, hoping to cash in, creating a surge in housing supply. Many investors, whether speculators or landlords, have done the same, either because they believe the market has peaked or because they cannot make enough money in rent to support the mortgages.
They are finding fewer buyers because the double-digit price appreciation of the past few years has priced many people out of the market. The recent rise in mortgage interest rates, which causes monthly payments to rise, adds to price pressures. And now, with fears that the market has peaked, more people are simply afraid to buy.
Meanwhile, new construction is inflating the housing supply, as condominium developers rush projects to market. According to a recent report by Delta Associates, 47,000 units in dozens of projects are hitting the local market in the next three years, which is about five times as many condo units as were sold last year.
Some real estate speculators are starting to feel burned by investments that have turned sour.
Merzad Ranjbaran, a real estate agent with Weichert Realtors in Bethesda, bought a one-bedroom condominium at 1150 K St. NW in the District a year ago at a pre-construction price, hoping to flip it quickly. But it has not sold. He said he will only break even on the sale, after taxes and other costs.
"The market is changing from a seller's market to a buyer's market," Ranjbaran said.