High Demand Keeps Home Prices Up

High Demand Keeps Home Prices Up

Despite steadily increasing real estate prices, experts say the Reston market is not experiencing a bubble.

The house had been listed in the upper-$700,000s, but that didn't stop three potential buyers to make offers two weekends ago that were significantly higher than the asking price.

"It was not a cheap house," said Michael Guthrie, real estate firm Long & Foster's Reston manager. "But there were several people who were willing to pay way more than it was listed for — well into the $800,000s."

Having several aspiring homeowners clamoring for residential properties has become a common occurrence in Reston, said Guthrie and other longtime observers of the real estate market.

As more and more jobs come to the area, demand for housing has skyrocketed in recent years. And because job growth is outpacing the residential real estate market, house and condominium prices are rising steadily.

But despite the housing market's steady price increase, experts said the area is not experiencing a bubble because of jobs and inventory. Unemployment in Fairfax County is holding at 1.9 percent, well below the national average of 5.7 percent, according to a report by the Virginia Employment Commission.

And the lack of available housing has caused home values to increase by as much as 53 percent, according to a study conducted by the Northern Virginia Association of Realtors.

"A lot of people want to buy, but there just aren't enough houses," said Amy Ritsko-Warren, NVAR's spokeswoman.

THE RESTON residential real estate market appears to be almost recession-proof, Ritsko-Warren said, largely thanks to the homeland security and defense contractors located there.

During the late-1990s rise and fall of Reston-based Internet companies, the housing market remained strong. Throughout everywhere else in Fairfax County, the residential market suffered slumping sales along with commercial real estate sales. But because Reston is convenient to the Dulles Toll Road, Tyson's Corner and Washington, D.C., Reston home sales kept steady.

"Reston is doing really, really well," Ritsko-Warren said. "Particularly in Reston, there was a huge impact from the dot-bomb, but during that whole time, the residential market stayed strong."

IF INTEREST RATES rise, however, the market could very well slow down quickly. Rates have held at 6 percent, but if they go up more than a few points, the cost of a local home could surpass most people's ability's to pay.

"Are interest rates going to go up?" Guthrie said. "If they go up more than a point or two, people aren't necessarily going to be able to buy."

Eventually, analysts expect, the residential market in Reston and Fairfax County will slow down, equalizing home prices.

But when the market cools off, the condominium market is expected to be affected most, possibly leaving owners with a loss.

"A lot of people think they're going to make a whole lot of money, but if all those condos come on the market at the same time — and interest rates increase — that's a formula for loss," Guthrie said.

Guthrie advised people interested in real estate investment to avoid the new high-rise condos around Reston Town Center, which sell for as much as $1 million. Instead, he said, a safer investment are the older, less pricey condos in the surrounding area.

"You're not putting as much into it," he said. "You hedge your bet."