The average sales prices of homes in one-third of the District's residential neighborhoods declined in the first half of this year -- the first such widespread decrease in the past two decades, the city's property assessment office reports.
Price increases in most of the other neighborhoods "have come to a screeching halt" because of mortgage financing woes, one assessor said.
Property values aren't necessarily going down in these neighborhoods, he emphasized, but "the sorts of year-in, year-out, double-digit increases that people have seen for much of the last decade are over -- at least for the immediate future."
Declines in average sales prices were registered in a wide spectrum of neighborhoods, ranging from Northwest's high-cost Woodley (down 26 percent) and Forest Hills (down 18 percent) to moderate-cost Michigan Park and Riggs Park in Northeast (down 24 percent and 15 percent, respectively).
Statistical gains were registered in a majority of District neighborhoods during the first half of 1981, but the study's authors attribute the largest increases to neighborhoods with luxury condominium construction under way in the $300,000-and-up brackets.
The rapid cooling of the District's once-torrid real estate appreciation rates could have significant impacts on property tax assessments and city revenues, beginning late next year.
If current interest rates and federal employment layoffs continue for another six to 12 months, an assessment official acknowledged, "there is the possibility that property tax valuations on some homes in the neighborhoods would have to be lowered" in future years.
The city collected more than $50 million last year from home property taxes, up from about $40 million the prior fiscal year. Even a flattening out of assessment levels could have sizable revenue effects on the budget-strapped city government.
Any actual declines in home assessments in a few neighborhoods would be a fiscal shock to a city grown accustomed to hefty annual returns from its housing boom. The District's valuation levels tend to run 12 to 18 months behind actual price movements in the marketplace. Property tax assessments for fiscal 1983, which are based in large part on price movements during 1980, won't be mailed out to homeowners until next February. Assessments that would reflect 1981's depressed market won't be sent to homeowners until February 1983.
The new study, which analyzes sales volume and prices of single-family homes during the first half of 1981, was done by Charles Horwitz and George B. Altoft, the top residential assessors for the city's Department of Revenue and Finance. The study did not cover condominiums or cooperative units.
It documents, in the words of Horwitz, a housing market "that isn't recession-proof, that isn't able to cope with 18 and 19 percent mortgage rates, and that isn't going anywhere at the moment."
Sales volume in the first six months of 1981 was off 14 percent from the same period in 1980, and down nearly 50 percent from the same period in 1978.
The average sales price of a home in the city rose from $95,000 to $105,000 during the year -- an 11 percent jump -- but Altoft and Horwitz discount the statistical importance of that increase. For one thing, they said, the citywide average, as well as certain neighborhood sales price figures, have been biased upward by the large number of newly constructed luxury town houses sold this year in Georgetown, Foxhall and other areas in Northwest.
The average sales price of newly built single-family homes sold this year in Northwest, for example, was nearly $270,000. The average for new homes in Southeast, by contrast, was $67,000.
Northwest neighborhoods with major new construction projects under way produced huge statistical jumps in average prices between 1980 and 1981. The Berkley area near Georgetown, for instance, registered a 62 percent gain during the year, from an average of $206,000 (on five existing home sales in 1980) to $333,000 on 19 new sales in the first half of 1981 -- a direct effect of new condominium sales.
Spring Valley registered a 43 percent jump in its average (from $236,000 to $339,000) on the strength of new sales at the former Rockefeller estate.
Widespread seller-assisted financing of purchasers, particularly in the middle- and upper-price brackets, Horwitz and Altoft said, also tends to pull the reported price up.
True market cash values, they noted, would be lower in most sales without concessionary seller take-backs of first and second mortgages.
"The fact of the matter is that a part of that 11 percent citywide increase is attributable to special financing deals, Altoft said. "We're looking at a flat market, not a market rising by 11 percent a year at all."
Horwitz noted that statistical aberrations explain some of the neighborhood drops in average prices. With fewer homes being sold, neighborhoods are more apt to register sharp movements up or down in computing averages. A few very high-priced sales can skew the average up, and an unusually large number of low-priced sales can pull the average down, Horwitz said.
Regarding the possibility of lowered assessments, Altoft and Horwitz said it's still too early to make judgments. If financing and employment conditions worsened over the next few years, both agreed, the pressure to drop valuations would be intense. On the other hand, a decline in mortgage rates could put life back into the District's home real estate market and could boost prices again.
Other assessment neighborhoods were average sales prices fell in the first half:
Southwest D.C. (Redevelopment Land Agency area),-26 percent; Lily Ponds, -24 percent; Central, -15 percent; Hawthorne, -12 percent; Colonial Village, -9 percent; Ft. Dupont Park, -8 percent.
Also, Congress Heights, -2 percent; Observatory Circle, -2 percent; Foxhall, -2 percent; Marshall Heights, -1 percent; Deanwood, -1 percent; Chillum, -0.8 percent; Anacostia, -0.3 percent; Brentwood, -0.2 percent.