Region's Home Prices Continue To Fall; Some Pockets Thrive

That has some concerned about areas such as Prince George's County, where 42 percent of the home-purchase loans made in 2006 were subprime, according to the National Association of Realtors. Median sale prices in the county declined only 8 percent in December, according to MRIS data, but some analysts are concerned that prices could be pushed down more as these loans adjust and homeowners are unable to keep up.

Fast-climbing prices transformed Sterling Park over the last seven years. Median home prices in the neighborhood of construction workers, nurses and mechanics rose nearly 100 percent from $237,086 in 2001 to $468,496 in 2005 at the height of the market, according to a review of MRIS data conducted by a local real estate agent.

The initially low prices attracted first-time buyers who couldn't afford homes closer to the city and ultimately would not be able to keep up with their mortgage payments. California-based RealtyTrac, which tracks foreclosures nationwide, ranked the Sterling Park Zip code among the 100 top areas for foreclosures in November 2007. (The Woodbridge Zip code of 22193 is also on that list.)

As of mid-December, 39 percent of houses for sale in Sterling Park and neighboring Sterling were either foreclosed on or being sold in a short sale (when owners sell a home for less than what is owed on the mortgage), according to analysis of MRIS data by Danilo Bogdanovic, a Loudoun County real estate agent with Keller Williams Realty. "The only thing selling right now are foreclosures," said Bogdanovic, who runs a Web site called Loudoun Foreclosures.

Foreclosures have dragged down sales prices, as banks discount properties for sale or allow owners to sell them for less than their mortgage value. The median sales prices of homes in the Sterling Park Zip code dropped from $365,000 in December 2006 to $298,000 a year later.

Residents and real estate agents say the situation has translated to empty houses with overgrown yards that prompted the Loudoun Board of Supervisors earlier this year to warn about overgrown grass. "It used to be location, location, location. In this market it is price, price, price," said Rick Martindale, an agent with Realty Direct in nearby Chantilly. Martindale recently lowered the price of a four-bedroom foreclosed house in Sterling Park from $330,000 to $250,000.

The competition with foreclosed properties has frustrated some owners who are seeking to sell their homes, but are not ready to lower their prices. After 25 years in Sterling Park, Betty Skelton wants to move into a retirement community. But on her block, at least two other homes are for sale. "I saw another sign up. I don't remember seeing the sign up before," she recently lamented.

After two months on the market, Skelton isn't ready to budge from her $399,900 asking price. During the housing boom, similar houses were selling for $500,000, a price she acknowledges was inflated. "I am not going to be able to go down further than where I am," she said. "I don't think I can give the house away."

Meanwhile, prices continue to rise and homes are selling quickly in some neighborhoods. Jeff Kohn, an environmental specialist, said he was "totally nervous" when he placed his three-bedroom home near the Tenleytown Metro station on the market earlier this month. Kohn and his wife had found a bigger house in Takoma Park with enough room to accommodate his parents who stay with them during the week.

More than 70 people came to the open house, and five days later it got a contract for more than its $875,000 asking price. "It felt like the whirlwind of the early 2005 market," said Kohn's agent, Kimberly Cestari of W.C. & A.N. Miller of Long & Foster. "I kept telling my sellers all we need is one good offer, and we got three great offers."

Researchers Richard Drezen and Eddy J. Palanzo contributed to this report.