Special to The Washington Post
If you look at the latest housing data, the Washington area housing market has been performing better than any other market in the nation. But that doesn’t tell the whole story. The recovery is uneven across the region, and home prices aren’t going up everywhere.
In general, home prices in the District of Columbia have been up in the last 18 months and remain fairly strong. In some District neighborhoods, prices are back to peak levels.
The turnaround in Northern Virginia began in September 2009 and home prices have returned to about 85 percent of the peak, though the recovery has been somewhat stronger in closer-in jurisdictions. The run up in home prices in suburban Maryland lagged that of Northern Virginia by about a year; however, the recovery in suburban Maryland has not followed the same timeline, with prices continuing to fall.
What makes the performance of the Northern Virginia and suburban Maryland housing markets so different? (It’s difficult to make comparisons with the District because there are relatively fewer sales in the city, which makes the price data jump around quite a bit from month to month.)
A major difference in Virginia and Maryland has been the pace at which foreclosures have been taken out of the inventory, particularly in Prince William and Prince George’s counties, the region’s two “hot spots” for foreclosure activity. Foreclosed properties can be listed at a 40 or even 50 percent discount, keeping prices of nearby houses low.
In Prince William County, there was significant sales activity early, with cash buyers and other investors buying up foreclosed properties, in the summer of 2008. This activity took these lower-priced properties out of the inventory and helped stem the rapid decline in prices in Prince William County. While prices in the county are still 35 to 40 percent below peak levels, they have been on the rise for 18 months.
In suburban Maryland, foreclosures remain a persistent problem in Prince George’s County. The slower resolution of foreclosures in Prince George’s County is partly due to the longer judicial process in Maryland, compared to a non-judicial foreclosure process in Virginia.
In addition, Maryland implemented a mediation law in 2010 which allows a homeowner to request a court-supervised meeting with his or her lender in order to try to avoid receiving a foreclosure filing. While the intent of this law was to help struggling homeowners, it also slowed the pace of foreclosure filings, and simply delayed, rather than stopped, many foreclosures.
The foreclosure process was also stalled in 2011 when the state’s attorney general joined with other states in investigating the so-called “robo-signings” at many large banks. As a result, the number of foreclosures in Maryland’s hardest hit areas—like Prince George’s County—has built up and foreclosure continue to be a drag on the local housing market.
The good news is that sales of foreclosed properties in Prince George’s County did pick up in 2011 and should continue in 2012. There is uncertainty, however, about the extent of the shadow inventory of foreclosures—that is, the number of homes in the foreclosure pipeline that have not yet reached the market.
Looking ahead, the Washington area housing market should improve in 2012, with increased sales activity and modest price appreciation regionwide. Closer-in neighborhoods and neighborhoods near transit and employment centers—including Montgomery County—will experience stronger price growth. Prices in Prince George’s County, however, will likely remain flat in 2012, as the number of foreclosures in the inventory will go up before it goes down.
Related: S&P/Case-Shiller 2011 report
Lisa A. Sturtevant is an assistant research professor at George Mason University’s School of Public Policy and the Center for Regional Analysis.
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