Local Housing Market Shows Some Life, but Prices Still Falling

First-Quarter Home Sales Jumped 15 Percent, Study Says

The Washington area's housing market showed signs of recovery in the first quarter, but has not hit bottom and probably won't do so until 2010 at the earliest, according to a study scheduled for release today.

The most notable sign of life was that the number of homes sold in the quarter jumped 15 percent across the region from the same period a year ago, according to the study, jointly compiled by research firm Delta Associates and the local Multiple Listing Service. That was largely because sales in the outer suburbs -- Prince William and Loudoun counties in Virginia, and Frederick County in Maryland -- were up 40 percent.

The housing markets in those suburbs have been among the hardest hit in the region and remain dominated by aggressively priced foreclosures. Low prices mean buyers are snapping up those homes. Clearing out the excess supply of homes is generally regarded as a critical step toward stabilizing prices and beginning a market turnaround.

The region had an average 7.7-month supply of homes for sale as of last month, the report said. That's down from 10.9 months at the same time last year, but still above the five- to six-month supply normally found in a healthy market.

"We're starting to see some sign that supply and demand are coming closer to the right balance," said Ann Marchand Thompson, a senior associate at Delta Associates. "Prices should move up slightly when we start to see the supply of homes fall below the six-month mark."

But for now, prices continue to fall and may keep tumbling until about late 2009 for close-in communities and until 2011 in the outlying areas, the report said.

Overall, the region's prices fell 22.3 percent in the quarter from a year earlier. The average price dropped 10.7 percent in the region's "core" area -- the District, Arlington and Alexandria. It fell 20.4 percent in the next-closest ring of suburbs -- Fairfax, Montgomery and Prince George's counties, and Falls Church and Fairfax cities.

The steepest drop was in the outlying suburbs, where foreclosures dragged prices down 28.7 percent. These distressed properties will most likely keep weighing on prices well into next year, the study said. It is unclear when the foreclosures will clear the system, especially because many lenders have not yet listed homes they've repossessed.

The study's data are from Metropolitan Regional Information Systems, the local listing service where real estate agents market homes for sale. It does not include yet-to-be listed foreclosures, homes for sale by owners and other types of homes for sale. But it offers a reliable representation of market averages, the study's authors said.

The average number of days a home remained on the market in the region dropped to 110 days in the quarter from 117 days a year ago, with the longest stretch in the inner suburbs (117 days) and the shortest in the core area (96 days).

For the first time in recent years, homes in the inner suburbs did not sell as quickly as they did in the outer suburbs, where they sat on the market for 107 days on average.

In addition to economic factors, psychology also played a role in how long homes remained on the market and what they ultimately sold for, Thompson said. The average selling price in the quarter was 89.9 percent of the list price, the lowest in at least six years, suggesting that sellers asked for higher prices and then lowered them after a home languished on the market.

"There's a bid-asking gap," Thompson said. "Sellers are taking lower prices on homes to close the deals."