Housing inventory down, prices up in D.C. area
Monday, May 17, 2010
The glut of homes for sale in the Washington area has shrunk dramatically since the housing market's darkest days in 2008, and supply is now close to healthy in some spots.
The number of area homes for sale last month was down 25 percent from April 2008, when supply was swelling to record highs after the credit market dried up and buyers retrenched, according to the most recent data from the local Multiple Listing Service.
The supply fell in nearly all of the region's counties and cities since that time. It was down by more than 20 percent in Montgomery and Prince George's counties; about 30 percent in Virginia's Fairfax and Loudoun counties; and 55 percent in Prince William County, including Manassas and Manassas Park.
"There are tons of buyers out there, but there aren't enough good houses, especially entry-level homes under $400,000," said Vivianne Couts, a real estate agent with Coldwell Banker in Fairfax. "I've been sending out letters to owners to see if any of them would want to sell to my clients."
The shrinking supply is a promising sign of the housing market's recovery. Clearing out the glut of homes -- especially foreclosed properties -- is key to stabilizing home prices. Average prices in the area rose about 5 percent in the first quarter from a year earlier after dropping for most of the past four years, according to research firm Delta Associates. Bringing supply and demand back into balance is critical to reviving the housing market.
In turn, restoring health to the housing market is crucial for returning vitality to the financial system and fostering growth across the broader U.S. economy.
Nationally, the excess supply of homes has been declining for nearly two years, to the point where bidding wars are breaking out in some cities. The national inventory has plunged about 22 percent since peaking in July 2008, according to the National Association of Realtors.
Eager buyers have done their share to cut into the inventory. They've been chasing after good deals, attracted by aggressively priced foreclosures, record-low interest rates and a lucrative tax credit that expired April 30. The number of houses sold in the area jumped 9.2 percent in the first quarter from a year ago, according to Delta.
But the tightening supply also has a lot to do with homeowners. Many refuse to put their properties up for sale because values have eroded, making it financially painful, if not impossible, to sell.
Nearly 31 percent of Washington area residents have no equity in their homes, according to First American CoreLogic. They are "underwater" because their property values have dropped and they owe more on their mortgages than their homes are worth. In order to sell, they must bring cash to the table.
Since many homeowners are unable or unwilling to do that, they don't list their homes for sale even though they want to, said Michael Briggs, vice president of professional development at McEnearney Associates, a local real estate brokerage. "That's a whole bunch of properties that should be on the market right now and they're just not in the game," Briggs said.
Several analysts said the share of homeowners who are underwater grew over most of the past two years as values continued to fall, further constraining the housing supply.