Lower interest rates are starting to bring potential home buyers back into the market agains.
It's no boom--not even a boomlet -- but the number of people out looking at homes has risen significantly over the past few weeks, and sales have made modest gains for the first time in a long time.
Home sales throughout the Washington area were higher in September than they were a year earlier, the first year-to-year increase the area has seen since early-to-mid-1981. And local housing industry experts say October is shaping up better than September. Of course, last year's figures were dismal, so this spark -- while welcome news to homesellers -- is still no bonfire of activity.
The number of applications for government-insured FHA home loans in the last half of September leaped to an annual rate of 576,900, just about triple the level of one year earlier, according to the Department of Housing and Urban Development. In the Washington area, the numbers last month were four times their level for September last year.
Last year's figures were severely depressed -- September 1981 was the month the FHA rate reached its record high of 17 1/2 percent. The rate is now 5 percentage points lower at 12 1/2 percent, and Federal Housing Commissioner Philip Abrams said HUD has had to hire temporary employes to handle the higher workload caused by the spurt in applications.
Whether this period will prove to be just a brief respite in a continuing housing depression or the long-awaited beginning of real recovery will depend largely on the direction interest rates take. Economists are divided on whether they will continue to go down or start to rise again at the end of this year.
But in the meantime, people are trickling back into the market.
"I had just about given up hope until interest rates started to come down," said Walter White, a renter who last weekend was out looking at models of single-family homes at the Indian Queen Estates near Indian Head Highway in Prince George's County.
At the nearby Arrowhead subdivision, Arthur Allison said he and his wife had been looking off and on since 1981 but had dropped out of the market earlier this year because of high rates.
"Now we're back shopping," he said.
Bernard Mejean, a 27-year-old computer programmer, meanwhile was out last week at The Arbors of Arlington, a conversion of the former Highland Hill apartments at Glebe Road and Rte. 50. He, too, credited the recent drop in rates with turning him into a serious prospective buyer.
"I think it's the time to buy right now. People keep saying that the interest rates will get even lower, but I believe the longer you wait, the harder it's going to be, because inflation may take over where the interest rates are leaving off," Mejean said.
Industry representatives will say basically the same thing, that if sellers see that rates are not going to go up again, they will gradually start increasing the prices. Since prices have been depressed for the last couple of years, sellers have had to either lower their prices drastically or finance the deal themselves at below-market rates, or both.
Salespeople also say they are hopeful that the largest influx of new and returning buyers will be in the next couple of weeks, as buyers decide that what is available now may be the best they will get for awhile.
"There is always a noticeable lag after a rate drop for people to gain confidence and establish their position. They ask themselves, 'Is it going to go lower, or what?' " said Joah Etchells, sales manager for the Hylton Enterprises office at the Princedale community in Dale City.
"Previous to this week it was disappointing, but this weekend our traffic took a noticeable jump," Etchells said. "We're getting people that had been here before but dropped out because of the high cost of money."
Mike Brenneman, president of the Washington Board of Realtors and a condominium specialist, had called the downtown condominium market "a wasteland" as recently as early August. But now he says that starting in the last half of August there has been "a noticeable upturn in both traffic and sales."
September was his company's best month in 15 months, and October will be at least as good, Brenneman said. But he said he may be doing better than some others because he generally is selling a product in the lower price ranges. Sales contracts at two suburban projects, Woodburn Village and Chestnut Grove, priced from the high $40,000s to low $70,000s, rose from 15 in August to 41 in September, he said.
"It's still nothing to write home about, but it is a very substantial improvement over what we have been seeing," he added.
Local and national figures generally bear this out.
Sales of single-family homes in the District were up 13.4 percent in September from a year earlier, according to the District assessor's office. In the first half of this year, sales were off 25 percent from the year before, and in August they had been down by 3 percent.
Condominium sales in the District, however, countered the upward trend with a whopping 57.6 percent decline in September from year-earlier levels.
In both Montgomery and Prince George's counties, September sales were 10 percent higher than the year earlier, and in Northern Virginia, sales were up 8 percent from year-earlier levels, according to the boards of Realtors for those areas. For all of these regions, it had been more than a year since they had recorded plus figures.
And according to a 35-city survey this week by the National Association of Realtors, traffic in homes and projects across the country has increased substantially since a poll taken in early September, when NAR officials were surprised to see that the interest rate declines had not yet resulted in more people looking.
Whether traffic actually turns into sales is another question, and so far the survey data on that is mixed, said NAR spokesman Bill Ellingsworth.
"The most encouraging pattern is that . . . a very large number of first-time buyers are coming into the market," Ellingsworth said. "This is a harbinger of good news."