U.S. housing slump continues, but D.C. area is doing better

By Sonja Ryst
Washington Post Staff Writer
Saturday, July 24, 2010

The housing bust isn't over, but the worst is past, according to economists participating in a U.S. Chamber of Commerce panel this week.

Despite a period of "relative stability" in home prices in the past year, Mark Zandi, chief economist at Moody's Analytics, said he expects further price declines. "The housing crash is about over, but not quite," Zandi said.

After some improvement, the percentage of homes that are losing value is on the rise again, according to analysts at the real estate Web site http://Zillow.com. In May, 57 percent of U.S. homes were worth less than a year earlier. That's up from 52 percent in April.

However, the Washington area has fared much better than the country in general. In May, 36 percent of homes here were worth less than a year earlier, according to Zillow's data. That's an improvement from 47 percent in April.

The Washington area has benefited from economic sectors, such as government, education and military-related businesses, that have done well recently, said Stan Humphries, chief economist at Zillow. He expects the regional stabilization that occurred in 2009 to continue. "We're cautious about saying they're out of the woods," he said, but the area is likely to continue to benefit from these strong sectors.

Of the 126 metropolitan areas that Zillow tracks, Washington is one of 17 where home values improved in May, compared with a year earlier. Values didn't change from May to May in 12 areas, and the rest experienced price declines.

According to the Zillow Home Value Index, the median price for Washington area homes was $331,200 in May, up 2.6 percent from a year earlier. "We don't get really hyper real fast and then drop real fast" in Washington, Donna Evers, owner-broker at Evers & Co. Real Estate in the District, said in an interview. "It's more of a steady climb." She said that when there is an economic crisis, the government gets bigger, which helps buffer Washington real estate.

It also helps that not many people are moving out of the area and putting their homes on the market. Nor are builders creating much in the way of new supply, she said. That keeps the supply down and bolsters prices. Evers said there is about a four-month supply, on average, in local markets, excluding Prince William and Prince George's counties, which were hit hardest by foreclosures. That inventory is down from the 4.6-month supply typical of 2009. In 2008, there was about 6.7 months' worth of housing on the market.

The rest of the country isn't so lucky. Humphries told the Chamber of Commerce gathering that he expects home values to continue falling nationwide until at least the third quarter of this year. People are struggling with unemployment, and their homes are selling for less than they paid for them. Many communities still have an excess supply of homes for sale. And the government's home buyer tax-credit program expired at the end of April.

Nationally, inflation-adjusted home values might not appreciate for three to five years, Humphries said. Even so, analysts don't expect values to plummet again as they did between 2005 and late 2008.

On a national level, existing-home sales have slowed recently. The National Association of Realtors said Thursday that existing-home sales in June were at an annual pace of 5.37 million units, down from a 5.66 million pace in May. Despite the monthly drop, sales handily beat the 4.89 million-unit annual pace set in June 2009.

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