Despite an increase in inventory, home prices in Northern Virginia continue to soar by more than 20 percent since last year.
The average home sales price last month reached $543,129, up 23 percent from last year, which was $442,815. Listings have increased by 18 percent compared to last year, according to statistics from the Metropolitan Regional Information Systems (MRIS).
“We’re still dealing with a housing deficit,” said Amy Ritsko-Warren, director of communications for Northern Virginia Association of Realtors (NVAR), “so we still have many more buyers than sellers."
“So while more inventory is a wonderful thing because it means more buyers will get into houses, it doesn’t make up for the housing deficit,” said Ritsko-Warren.
“So we’re hoping that if the inventory trend continues to increase that it will slow sales prices a bit,” she said, adding that a lot has to do with prices as well as low interest rates and steady job creation.
“May was a very strong month and a very nice way to end the spring,” said Zinta Rodgers, a Realtor at Remax Allegiance. “But I would have to say from working with my fellow colleagues and talking with a number of agents, that May might have been our last hurrah [until the fall]."
“Things have come to a screeching halt in many respects,” said Rodgers. “For the first time we’re seeing a lot of price reductions of $10,000 or more.”
Rodgers, a Realtor since 1989 who focuses on Arlington and the I-66 corridor, said that she is still very optimistic for 2005 home values. “There’s been no bubble bursting — a lot has to do with the summer in this area — it’s time for vacation,” she said. “I do think that 2005 will end up as a great year in home values.”
Ernest “Ernie” Miller, office manager of Better Homes Realty in Springfield, agreed. Miller, who has 33 years of real estate experience, has also seen an increase in price reductions. “It’s not that the market is weakening, it’s just that people have to get their expectations in line,” he said, adding that the public's hopes have exceeded the market. “It’s still a hot market.”
“We’re not anticipating the prices to go down, but we’re hoping they slow down a bit,” said Ritsko-Warren. For one, putting the breaks on home price escalation would make things easier for first-time buyers.
THE HOUSING DEFICIT, Ritsko-Warren said, makes it very difficult for everybody, especially first-time buyers. “If you financially qualify to buy a home, you will eventually find something, but they have to be patient right now,” she said, adding that, with the many bids on homes and the common use of escalation clauses, buying a home right now can be a stressful process.
“We’re seeing that first-time buyers of condos and townhouses under $400,000 will typically write four contracts before one is accepted,” said Miller, adding that an escalation clause or overbid is often required.
The price increases for condominiums in the region makes it even more difficult for first-time buyers. Condo prices averaged $263,304 in May 2004, but rose to an average of $332,662 in May 2005 — an increase of 26 percent. “A lot of buyers, especially first-time buyers, look at condos just to get in the market,” said Ritsko-Warren. From last year, condos have increased in value faster than other types of homes.
Looking past May, Rodgers said a slower summer could benefit first-time buyers and those looking to move-up. “What I’m seeing across the board is that properties are staying on the market a little longer,” she said.
Single family homes, however, have an increased inventory from last year of 11 percent. “Because there is less inventory,” said Ritsko-Warren, “there is actually more potential [for prices of single family homes] to go up, but it’s hard to say because you have to consider the number of people who can buy in that price range.”
Average sales prices in Greater Northern Virginia — which also includes Prince William, Loudoun and Fauquier counties — had a similar average home price increase of 23 percent, jumping from $405,639 last year to $500,476 this year.