Buyers, It's Your Move

Contracting Market Pulls Power Away From Sellers

And so the great real estate boom has ended. Left in its wake are anxious sellers and hopeful renters, fidgety buyers and freebie-wielding developers, deserted open houses and blocks crowded with for-sale signs, scaled-back retirement plans and first-time homes that suddenly seem within reach.

Signs of a deteriorating market are everywhere -- even in Prince George's County, where homes are still relatively inexpensive and where the housing market conditions had remained close to boom levels even as other neighborhoods cooled dramatically.

"The downturn in the Washington housing market is in full swing," said Mark Zandi, chief economist with Moody's Economy.com. "The market is weak and getting weaker."

Sales have plunged in every jurisdiction; in August, the latest figures available, 8,300 homes changed hands in the region. That's down by a third from a year ago, according to Metropolitan Regional Information Systems Inc., the area's multiple listing service, which tracks mostly resale homes. The spring home-selling season is long over, but its remains are scattered all around the region. As of the end of last month, 46,000 homes were on the market, up from 21,000 the same time last year.

And after a full year of slowing sales and more houses on the market, the median prices of existing homes in many parts of the region have begun to show year-over-year declines for the first time in half a decade. However, in other parts of the region, median prices have continued to rise, especially for single-family houses. The median is the point at which half of the homes sell for less and the rest for more.

Nationally, the median price of existing homes fell 2 percent in August compared with a year earlier, marking the first time in 11 years that prices have fallen in a 12-month span, the National Association of Realtors said this week. "This correction is necessary. Without it, sales would continue to plummet," said David Lereah, the trade group's chief economist.

New-home median prices nationally are also down from August 2005, according to the Commerce Department. Locally, average prices for new homes were down 6 percent in August compared with a year earlier, while sales dropped 11 percent as inventory soared, according to Hanley Wood Market Intelligence.

So what now? Have prices hit bottom, or will they decline further? Is now a good time to buy, or a fool's time to buy? Should sellers accept a lowball offer before the market really sours, or simply wait a few months until ambivalent buyers finally realize the market isn't crashing?

Most analysts don't foresee a free-falling housing market. The region's job growth and solid economy won't allow it, they say. Still, they stressed, things will get worse before they get better -- housing has simply become too expensive for too many people.

Just how much worse, and for how long, depends on whom you ask. Some economists say prices will bottom out before spring, others say it will take much longer.

But consider: The Realtors group, which tends to an optimistic view of the market, lowered its home sales forecast earlier this month, saying there is "an inventory and price imbalance."

"We're still in a contraction," Lereah said in an interview this week, adding that he expects to see year-over-year declines in prices for several more months. "We really don't know how long this will last and the magnitude. . . . My educated guess here is that it will take the remaining months of the year."