There is positive news about the national housing market every day it seems. However, even amid the generally upbeat forecast, stories abound about a continuing foreclosure crisis and the potential for a new wave of foreclosures ahead.
But foreclosures aren’t the story in the Washington region. Indeed, recent data from RealtyTrac indicate that the foreclosure rate in the Washington metropolitan area is very low. Data and analysis by RBIntel reveals that foreclosures and short sales comprise a relatively small and declining share of sales and inventory in the region.
The Washington area housing market — which has been on its way to recovery for more than two years — is at little risk of a second foreclosure wave. Rising demand, insufficient inventory and affordability concerns are much more pressing problems here.
The Washington area housing market recovery was early and more robust than in many other places in the country. Prices have been up regionwide for 28 out of the last 32 months. Even in places where recovery has been slower, such as Prince George’s County, prices have been climbing for several months in a row.
In Prince George’s County, less than 10 percent of the homes for sale are foreclosures. In Prince William County, the share is less than 5 percent. And foreclosures are practically non-existent in some jurisdictions, comprising less than 1 percent of the inventory in the District and less than 2 percent of Arlington and Alexandria’s inventories.
As new foreclosure activity slowed, short sales become a larger part of the story. A short sale is a sale where the proceeds will be less than what is owed on the home. A short sale involves negation among the homeowner, potential buyer and mortgage holder. These transactions, while still complicated and often lengthy, have gotten somewhat easier over time, and have become an alternative to foreclosure.
But even short sales are lessening in the region. Short sales comprised nearly one-third of the inventory in the Washington area at the beginning of 2012. However, the inventory of short sales has dropped dramatically, currently accounting for only about 11 percent of all homes for sale in the region.
There is little evidence of a “shadow inventory” or a coming foreclosure wave in the Washington region. In the District of Columbia and in Maryland, there have been freezes on foreclosures to give homeowners more time to avoid foreclosure. There was a fear that a renewal of foreclosure processes by banks would flood local markets with distressed properties.
In our area, however, that has not happened, by and large. Rather, potential foreclosures have become short sales or homeowners at risk of foreclosure have been able to refinance. The Washington region was not hit as hard by the foreclosure crisis as were many other parts of the country. And, now, the distressed inventory remains a small and shrinking part of the region’s housing market.
Lisa A. Sturtevant is an assistant research professor at George Mason University’s Center for Regional Analysis.
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