After 5 Years of Growth, Home Prices Drop

"We think we'll be more visible," said George Garrigan, with wife Susan, of their decision to offer a new car as an incentive to purchase their house. (By Rich Lipski -- The Washington Post)

The possibility of falling prices seems to have made many home-shoppers hold off on buying, despite rising interest rates. After all, even a minor correction could mean that houses cost tens of thousands less. For home sellers, that means much hand-wringing as they start to slash prices below what neighbors got just a year ago.

Scott and Shirley Porter of Ashburn had no choice but to cut the asking price for their townhouse -- there are just too many others for sale nearby. From their back yard, they can see three for-sale signs across the street. Out front, more neighbors are selling. Around the corner, there are four more.

"The townhouse right next to us sold for $462,000, and it was on the market for three days," Scott Porter said last week.

But that was last year. The Porters put their end-unit on the market last month for $458,000. That was right at the middle of other townhouses for sale in the neighborhood, he said.

But in no time, the Porters, who both work in the District and want to reduce their commutes, found that their place had ended up at the top of the price scale after neighbors reduced their prices. So they lowered theirs, too, to $435,000.

"It's amazing how much the prices have come down," said Scott Porter, 45. "You feel like you've missed the bus."

Neighbors Sheila and Chris Boyce, who are moving to Arizona, put their three-bedroom, 2 1/2 -bath unit up for sale in March for what they thought was a competitive $445,000. They have since reduced it to $437,000 -- still $42,000 more than the $395,000 they paid two years ago. After costs, they would not be making nearly as much profit as they had imagined, even if they get their new price.

"We weren't trying to get rich on it or anything," said Sheila Boyce, 32. "We thought it would be a lot more. Not hundreds of thousands, but at least something to put away."

Even in areas where the prices haven't gone below 2005 levels -- at least on paper -- they are clearly moving at a different speed. Prince William County, for example, last month posted a 1.8 percent increase in median home price, compared with the same time last year. That compares with a 31 percent jump from June 2004 to June 2005.

For George and Susan Garrigan of Woodbridge, simply cutting the price on their home of 28 years no longer seemed enough. There are 112 detached houses for sale in their Lake Ridge neighborhood. Forty have been on the market for more than 100 days; 114 townhouses are also for sale.

Never mind that two similar nearby houses -- split-level, built in the early 1970s on quarter-acre lots -- sold for $50,000 more last summer. Or that they pulled their house off the market after two price reductions this spring brought no bidders.

Yesterday afternoon, the Garrigans came back with a new lure: the brand-new Toyota Corolla sitting in the driveway, free with the purchase of their house.

"I feel it's a wonderful deal for a family not to have that car payment," said Susan Garrigan, 66.

"We think we'll be more visible," said George Garrigan, 70, when asked why he did not simply cut the asking price by $17,000. "Everybody's dropping the price. So you're still in the same pool of houses. There's nothing that says, 'Hey, look at my house twice.' Or 'Look at my house once.' "

Because of the slowing market, their retirement home in Front Royal will not feature the "dream furniture" that she had hoped for, nor the rooftop observatory that he wanted. But that's okay, they said.

"We're realistic and we're moving forward," Susan Garrigan said. "We have to take our knocks. We can't change reality."