Foreclosures, Falling Prices Spur Pr. William Home Sales
Friday, October 17, 2008
Freewheeling American capitalism may be falling out of fashion on Wall Street, but in the western suburbs of Northern Virginia, it is driving one of the greatest home-buying sprees the region has ever seen.
The epicenter of the boom is Prince William County, where enterprising investors are scavenging the wreckage of the housing bust at a furious pace. Last month, 1,116 homes were sold in the county, a 235 percent increase from the same period last year and more than in any other September on record, according to the Northern Virginia Association of Realtors.
The buying frenzy is the silver lining of a staggering decline in home values. With banks choking on a glut of empty, foreclosed properties, the median sale price for detached single-family houses in Prince William plunged 41 percent in the past year, from $405,000 to $239,900. In September, 118 homes in the county sold for less than $100,000, and many foreclosed townhouses sold for less than $70,000. One three-bedroom Manassas townhouse recently sold for $43,500, even though it was assessed at $273,100 in 2007.
"Prince William County is a fire sale," said Joey Remondino, a "ridiculously busy" real estate agent with StoneHouse Realty in Manassas. "People are looking for amazing deals, and I'm writing offers as fast as I can," he said.
Nowhere else in the region has the drop in prices and surge in sales been so extreme. Home buying in the county gained momentum over the summer but shot upward last month, when more detached single-family homes were sold in Prince William (579) than in Fairfax County (541), which has three times as many houses.
Sales of detached single-family houses in Fairfax County were up 71 percent last month from September 2007 and the median price was down 24 percent. In Loudoun County, sales were up 47 percent and the median sale price declined 17 percent. The housing markets in Arlington County and Alexandria were generally more stable.
Sales in the Maryland suburbs was comparatively subdued as well.
In Prince William, the turnover of thousands of homes might have implications that extend beyond the real estate market. Neighborhoods with high numbers of foreclosures are likely to become more transient as investors convert properties into rental units. In other areas, families with enough cash and good credit will have access to neighborhoods once deemed unaffordable. And homeowners who bought at or near the market peak in 2005 may be stuck making monthly payments two or three times as high as their neighbors are making for comparable houses.
"I think the values will come back. A lot of people still see Prince William County as a good investment," said Supervisor W.S. "Wally" Covington III (R-Brentsville). "I'm hearing that a lot of young military families are buying into the county."
Much of the dealmaking has been led by investors, according to real estate agents who specialize in foreclosed properties. Doctors, lawyers, engineers -- anyone with good credit and disposable cash -- are becoming part of a burgeoning class of landlords. Some are forming business partnerships to acquire properties; others are realizing that they can buy cheap homes and rent them out for more than the monthly mortgage payments.
Some savvy customers are paying cash to beat out bidders who offer more but need financing, real estate agents said. And because investors have so many properties to chose from, few are willing to look at properties that are not bank-owned. Even with the surge in sales, there were more than 5,000 active listings in Prince William last month, down from 6,500 a year earlier.
Because of the oversupply, banks are likely to continue slashing prices, dragging down property values for nearby homeowners, in order to maintain a competitive advantage over other sellers. But the competition hurts banks as much as sellers by depressing prices negotiated for short sales. In a short sale, the lender does not foreclose but agrees to accept the proceeds of a sale made for less than the amount of the loan.