Housing Bust Leaves Most Sellers at a Loss
Monday, May 25, 2009
Never mind a profit. Breaking even would have been nice.
But Tammy and Charles Bloomer are losing more than $100,000 on their Silver Spring home, which they bought for $525,000 four years ago. The house, now under contract to be sold, lost value even though the couple had remodeled the kitchen and replaced the roof, furnace and windows.
"Unfortunately, we bought at the peak of the market," said Tammy Bloomer, a federal worker who is moving to take a job in Chicago. "The market is terrible now."
In the past six months, most Washington area sellers have lost money on houses they purchased since prices started climbing in 2000, according to a Washington Post analysis of residential sales. In the first three months of this year, 62 percent of local home sellers accepted less than they paid for their homes, in part because aggressively priced foreclosures have dragged down prices around the region.
While the drop is painful for sellers, experts say it is a necessary part of getting past the excesses of the boom years. This region experienced one of the sharpest run-ups in home prices in the nation. Those prices must be brought down in order for buyers and sellers to deal with each other on more equal footing, as they had for decades before the boom.
Predictions vary about when the region's prices will hit bottom. They may keep tumbling until late 2009 for close-in communities and until 2011 in outlying suburbs, according to a study by real estate research firm Delta Associates and the local Multiple Listing Service. But so much depends on whether the economy suffers some unforeseen blow and on how many more foreclosures the banks add to an already-bloated housing supply.
Of course, these falling prices are reason to celebrate for would-be home buyers, especially coupled with low mortgage interest rates and the $8,000 federal tax credit for first-time buyers.
But as long as distress sales continue to dominate, the market will not bounce back to normal, said Nicolas P. Retsinas, director of Harvard University's center for housing studies. "The norm requires that a preponderance of transactions take place between willing buyers and sellers, not sellers who would take any price to unload a property."
By that measure, Kimberly Thompson's Upper Marlboro community has not hit bottom.
In Thompson's Zip code, the proportion of homes in some stage of foreclosure is twice the national rate, according to RealtyTrac, a private company that follows those statistics. Many more homes, including her own, are listed as short sales. Those are arrangements that allow homeowners to sell for less than they owe on their mortgages.
Thompson and her husband bought their house for $564,000 in late 2007. He lost his job six months later. By then, the home's value had dropped by $100,000. This week, it is under contract for $372,000.
"We were down to one income, one kid and one on the way," said Thompson, a computer programmer. "We realized we did not have money to cover the mortgage and our other expenses."