Northern Virginia Housing Market on Cruise Control

July 26, 2006

The Washington Post has an article on the front page below the fold announcing a housing slowdown for most of the D.C. Metro area based on change in median prices from the same period last year and rising inventories. Here's their opening excerpt:

After 5 Years of Growth, Home Prices Drop

Inventories Swell in Parts of D.C. Region

By Tomoeh Murakami Tse
Washington Post Staff Writer
Wednesday, July 26, 2006; Page A01

In what may be the most telling sign yet that the real estate market here has shifted downward, median prices of homes in several parts of the Washington area have declined when compared with the same time last year.

Read the full article here.

In addition to some statistics, the article contains interviews with a select group of sellers that tell their price cutting stories. Experts are in disagreement on potential price declines...some say only a few percent, some say 10 to 20%. Is a 20% decline a disaster? In my mind the answer is no. A 20% decline would bring prices back in line with 2005 since we have enjoyed gains much greater than 20% last year.

From our own experience, our more realistic clients dropped prices an average of 10 to 12% from their original list price to attract a buyer. In one case, a specialty property was lowered 32% to attract a contract.

We take a daily sample of the Loudoun market (see graph) and display the most recent 30 day activity. What is astonishing is how it appears there is relatively little change in the numbers. The number of new listings, new contracts, homes sold, expired listings and withdrawals are nearly constant; like some great force has put the market on cruise control at a constant slow speed. Inventory does appear to be on a slow decline. At the current rate of change, it will take years for the inventory to return to somewhere "normal" (I'm not sure anyone can define normal. Normal might be pre 2004 before the extreme market heat.)

At any rate, if you need to sell in this market, look around at your competition and offer a better value proposition: more home for a lower price!

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