Lynn Edmonds and his wife, Sebnem, could barely wait to sign on the dotted line back in May when they committed themselves to pay $796,000 for a three-floor townhouse under construction in Alexandria's Cameron Station.
But since May, the sales prices for the development have fallen -- and units like the one the Edmonds bought are now being sold for $699,900. The Edmonds are facing the prospect of a $100,000 loss in value before they even walk through the front door.
"We blithely stepped into the contract, thinking it would hold its value -- but that's not the case," said Edmonds, 46, a program analyst and Air Force veteran. "I feel so stupid putting myself into it. It's real estate -- I knew on a theoretical basis that it might go up and it might go down, but now I know it on a practical level."
New data released yesterday show that in the past year, home sales in the Washington region have declined sharply, the inventory of unsold homes is up significantly, and prices have flattened and, in some cases, fallen.
The trend is most striking in Northern Virginia, where most of the region's growth has occurred, but it is evident almost everywhere. Statistics on home sales released by Metropolitan Regional Information Systems Inc., the regional multiple-listing service, show that:
* In the two counties and three cities that make up the Northern Virginia market, more than twice as many homes were available for sale in October as in the same month one year ago -- 7,122 homes, compared with 3,254 -- and sales are off 28 percent.
* In the District, listings are up 62 percent and sales are down 28 percent.
* In Montgomery County, listings are up 49 percent and sales are down 8 percent.
* In Prince George's County, the listings are up 45 percent. But home sales have remained fairly stable, dropping only 2.6 percent.
The last time the region had this many houses for sale was the late 1990s, the MRIS figures show.
With housing supply higher and demand lower, prices have fallen from their summertime peaks -- though prices fluctuate every month and often decline in the fall because summer is the busiest home-buying season. Nevertheless, some slides are evident almost everywhere: In the District, the median price -- the point at which half the houses cost more and half cost less -- was $425,000 in October, down from a high in August of $435,088. In Fairfax County, the peak was in July, when the median price was $503,000; in October, it was $489,450. The peak in Montgomery County was also in July, when prices hit $460,000; the median price in October was $429,000.
The notable exception in the region was Prince George's County, where October's price was an all-time high of $315,000 -- possibly because demand, spurred by prices that are still less expensive than elsewhere in the region, has remained high.
The MRIS, which is jointly owned by the 25 local associations of Realtors, has been tracking home sales since the late 1990s, compiling its monthly figures from 72 counties in four states and the District. Its data mostly reflect sales of existing homes, since builders usually sell new developments themselves, rather than through real estate agents. But new-home sales are also faltering: Within the past two weeks, two of the biggest developers in the region, Toll Brothers Inc. and NVR Inc., have reported that their sales are slowing.
Many local real estate agents say the market is returning to normal. "We're rebounding in terms of evolving to something close to a balanced inventory," said David Howell, a past president of the Northern Virginia Association of Realtors and executive vice president and managing broker at McEnearney Associates Inc. in McLean. He said the true aberration occurred from 2003 to early 2005, when the number of listings fell to record lows, causing what he called "unbelievable and untenable" increases in appreciation.
Howell and others point out that the Washington area is unlikely to experience a major decline in prices because of its continued job growth and the prevalence of government jobs, which tend to be more stable than private-sector employment. "We're the most insulated of any market in the country" from extreme price volatility, Howell said.
The slower market "is so much healthier, it really is," Susann H. Haskins, president of the Greater Capital Area Association of Realtors and a broker at Long & Foster Real Estate Inc. in Potomac. "It's a better balance between buyers and sellers."
Economist Gregory H. Leisch, chief executive of Delta Associates, an Alexandria-based real estate consulting firm, said consumers would benefit in the long run from the slowdown because house prices had been rising so quickly that the market was destabilized.
"The market is fatigued, and it should be taking a breather," Leisch said. "It's healthy that it takes a breather."
Housing experts say the slowdown is occurring for several reasons. In the past few months, a lot of homeowners put their places on the market speculatively, hoping to cash in, creating a surge in housing supply. Many investors, whether speculators or landlords, have done the same, either because they believe the market has peaked or because they cannot make enough money in rent to support the mortgages.
They are finding fewer buyers because the double-digit price appreciation of the past few years has priced many people out of the market. The recent rise in mortgage interest rates, which causes monthly payments to rise, adds to price pressures. And now, with fears that the market has peaked, more people are simply afraid to buy.
Meanwhile, new construction is inflating the housing supply, as condominium developers rush projects to market. According to a recent report by Delta Associates, 47,000 units in dozens of projects are hitting the local market in the next three years, which is about five times as many condo units as were sold last year.
Some real estate speculators are starting to feel burned by investments that have turned sour.
Merzad Ranjbaran, a real estate agent with Weichert Realtors in Bethesda, bought a one-bedroom condominium at 1150 K St. NW in the District a year ago at a pre-construction price, hoping to flip it quickly. But it has not sold. He said he will only break even on the sale, after taxes and other costs.
"The market is changing from a seller's market to a buyer's market," Ranjbaran said.
Real estate investor Andy Cabral has had a townhouse on the market at the Wheaton Metro station for 11 months, and though he has steadily dropped the price, it has not sold.
"It's now below the appraised value," Cabral said. "I'm really not happy."
His sister-in-law, Sandra Cabral, a real estate agent with Re/Max Pros in Kensington, puts it more succinctly: "He needs to get rid of it; it's an alligator eating all the money."
But she sees an upside to the situation, with good opportunities to make purchases cheaply in the future. "Within two or three years, there's going to be a whole lot of foreclosures, because with all of the interest-only loans, a whole lot of people don't realize that in two years their payments are going to go up."
Homeowners who want to sell, meanwhile, are drumming their fingers and waiting for buyers to knock on the door.
Violain Romans-Murray, 33, is sick of the long commutes from her four-bedroom home in Gainesville; it can take her husband three hours to get home from his job as a technical manager for General Dynamics Corp. in Fair Lakes. The couple put the house on the market last month for $589,900, hoping to buy a home closer to their jobs. But three weeks have passed, and only two buyers have even visited. When they sold their previous house in Centreville in 2002, it sold in five hours.
"Honestly, we're thinking we might pull it off the market," said Romans-Murray, a mother of three and special projects coordinator for a trade group based in Herndon. "It's scary."
But many would-be buyers have withdrawn from the real estate market, saying prices are just too high to consider making a purchase. Dan McGrath, an organizer for the Service Employees International Union, and his wife, Teresa, who works at the Environmental Protection Agency, have been married for four months, have a combined income of about $100,000 a year and would ordinarily be good candidates to become first-time homeowners. But the McGraths, who live in the District's Shaw neighborhood, have been shocked and repulsed by the prices for homes in the area, including the $400,000 price on one 800-square-foot studio they visited.
"We can't figure out who -- for the life of us -- would buy a place with two doors for $400,000," said McGrath, 28. "We want to think about a future but homeownership here is just not possible."