Housing Bubble in D.C. Area Bursting?
While still torrid by national standards, the housing market in the D.C. area has cooled off compared to recent years.
Washington area temperatures may be sizzling, but the once-torrid real estate market seems to be cooling off as houses stay on the market longer and the number of homes for sale rises. Home sales tend to slow in the summer, but the number of houses for sale in the Washington area has climbed by 50 percent in recent months. The available inventory has risen to about 35,300 homes, up from an average of about 23,000 in the past three years, according to Metropolitan Regional Information Systems Inc., which runs the local multiple-listing service.
The average number of days a house stays on the market has crept up by two days in Fairfax County, to 16 days in June from 14 days a year earlier. In Montgomery County it has risen to 20 days from 18 days, according to MRIS. Those are, however, still short turnaround times by historic standards. Meanwhile, the number of houses sold in Northern Virginia’s inner suburbs fell by 9.6 percent in June, compared with a year earlier. In the District, the number of houses sold dropped by 8 percent, while in Montgomery County they dropped about 1.6 percent.
Local real estate brokers say they are seeing signs of a change. “The market has slowed for sure, especially at the high end,” said Wes Foster, chairman of Long & Foster Real Estate Inc. Foster said the market is returning to “normalcy” after a frenzied era of multiple contracts, bidding wars and desperate buyers waiving their right to property inspections or appraisals. “It’s very healthy,” he said. “It worried the pure hell out of me the numbers we were seeing. I remember Boston in 1982 to 1989, when [prices] went up 25 percent a year for six years, and then in one year [they] fell 87 percent. The ride up for everybody selling was wonderful but the ride down was awful. . . . It was very painful and I don’t want to see that here.”
Foster said the recent manic market has been fueled by what he called “crazy fools running around buying houses as investments,” with “bad loans, interest-free loans.” “They’ll get hurt, and I think they should,” as prices inevitably correct themselves, he said. A slowdown is needed because so many average people have been priced out of homes or compelled to pay high prices, he said.
One quarter isn’t a trend, but I’m certainly hearing a lot of rumblings in this direction. How much of this is the natural fact of markets being cyclical and how much of this is a result of the idiotic moves of Alan Greenspan and company to ward off non-existent inflation by raising interest rates is unclear.