Resale home values in the Washington area - as well as in other major markets across the country - may be on the verge of one the most rapid spurts in years.
As a result, selling prices in prime neighborhoods in the city and nearby suburbs could jump by as much as 6 to 10 percent within 120 to 150 days. Less active neighborhoods could see 4 to 5 percent jumps in the same period.
In hard dollars, that could mean that a split-level in Fairfax valued at [WORD ILLEGIBLE] last month might bring $105,000 to $110,000 by late June or July. An $80,000 rowhouse, on Capitol Hill or in Mount Pleasant might go for $86,000 to $88,000 by summer. Today's $150,000 brick colonial in Chevy Chase might bring $160,000 or more three months from now.
Underlying these projections are national and local enconomic patterns and seasonal consumer behavior. Among the economic signs here and around the country that point to even higher inflation this year:
The "hard" costs of new housing construction - the brick, mortar and labor, but not land - rose by more than 15 percent last year nationally. They are rising at a rapid pace in this area today.
Donald Childress, president of the Northern Virginia Board of Realtors and head of Aries Real Estate Corp. of McLean, has documented 12 percent rises in the cost of materials in some new subdivisions within the past three months alone. He says he finds this pace "frightening." New construction costs moved up 12 to 15 percent nationally last year and are expected to go up another 14 to 15 per cent this year.
Inflation in the costs of goods and services in the overall economy could hit 8 to 9 percent this year, making real estate, with its built-in tax advantages, even more attractive. Median prices for existing houses, which rose nearly 15 percent during 1977 nationwide, reflect this. Washington's median price topped $73,000.
Mortgage money remains plentiful, thanks to heavy inflows to S&Ls from late 1976 to mid 1977. But lenders are charging 9 1/4 to 9 1/2 interest. In prior years interest rates like this would have sent borrowers packing, but not in 1978. As long as rates don't hit 10 percent, consumers will demand more mortgage money for new and trade-up units.
Demand for resale and new single-family houses is at unusually high levels here this year, especially in higher-cost areas. In Montgomery County, for example, one-third of the 1,700 multi-listed homes for sale in January were snapped by buyers within the month, according to Rockville appraiser Alfred Jarchow.
Compare that with January of 1977, when 450 of the 2,250 houses listed sold in the same month, and you have "what could represent the makings of a fairly inflationary situation," Jarchow contends. The weather may have cooled sales early in 1977, but it wasn't much better this January. If listings continue to be sold at that month's pace, Jarchow said, "I wouldn't be at all surprised by 8 to 9 percent rises in sales prices by summer."
Market values in "high spots" such as Georgetown and other trendy in-town neighborhoods continue to jump. Joseph L. Donnelly, president of J. Lee Donnelly & Son, a Washington firm that handles property appraisals for a large number of S&Ls and banks here, describes current Georgetown prices as "scary" and "incredible."
"I see 50 or 60 property reports coming across my desk some days and a few of the D.C. increases are really hard to believe," Donnelly said. "I'm talking about some properties in Georgetown, and even Mount Pleasant, where sales prices by the middle of the year are going to be 20 percent over what they were in January." In many neighborhoods, price increases of 8 to 10 percent are "very definite possibilities" during the next 120 days. Donnelly maintains.
Seasonal factors will play an important role in the next four months. Appraisers, economists and other real estate market analysts can demonstrate graphically that sales prices of existing dwellings rise faster during the prime buying months of April, May, June and July than at any other time during the year.
Often, prices peak in July, flatten out in summer and rise marginally in the fall and winter. Since consumer demand this year appears to be intense and ready to boom with the onset of warm weather, analysts expect the typical price movement pattern to be more pronounced. Two-thirds or more of the year's price rises may occur before August, they predict.
If market values of prime residential real estate jump 10 to 14 percent here for the entire year, prices by summer should reflect the bulk of that 12-month rise.
Realty agents and the owners of properties themselves also will have a lot to do with pushing prices up fast. Real estate brokers who are canvassing prime neighborhoods door-to-door this year - promising prices that will mean windfalls for owners - have a crucial impact on market values. The tiny, two-bedroom rowhouses in Georgetown may not catch the $145,000 the realtor listed it for, but the outlandish price tugs at the markets' upper limits and eventually helps set the norms.
Forecasts of imminent market value increases do not mean that every property in the community will experience rapid appreciation this spring. Value, as determined by appraisal techniques, is keyed to numerous and often complex factors. Among these is the relative market position of the neighborhood, the price of the house compared with others nearby, type and quality of construction and the resale value of improvements made. The market worth of some of the properties in this area will remain flat or actually decline this spring, due to any or all of these factors.
Most properties, however, will be appreciating, which causes veteran appraisers like John Donnelly to fret.
"I don't know how long values can keep inflating here and in places like California at the rate we're seeing," he said. "Somewhere along the line the bubble has got to burst."
Donnelly, who has been an appraiser here for three decades, hastens to point out that he's been saying the same thing for the last 10 years, a period in which he's seen prices double, triple and quadruple with no let-up in demand.
Kenneth R. Harney is editor of the Housing and Development Reporter, published here weekly by BNA, Inc.