While homeowners were forced to hunker down for a cold summer in real estate, statistics show the exurbs have been hardest hit by the region’s cooling housing market.
“The closer one is to the [Washington, D.C.] city center, the better the market is,” said David Howell, managing broker of the McEnearney Associates in McLean. “But the further out you go, the more significant the decline in contract activity is.”
In Washington, D.C., home contract activity fell 7 percent in July compared to a year ago, according to Metropolitan Regional Information Systems, Inc. In Montgomery County, Md., activity slowed 24 percent. In Arlington County, activity slowed 23 percent compared to last year. In the City of Alexandria, activity fell 28 percent.
For Fairfax County, activity was cut by more than a third. In Loudoun County, contract activity slowed more than 40 percent. In Prince William County, activity slowed nearly 50 percent compared to last year.
OVER THE SEVERAL months leading up to July, the trend has become more pronounced.
“In my mind, it is folks making decisions on quality of life issues,” said Howell, who suggested high gas prices and stifling traffic could help explain the difference between inner and outer jurisdictions. Consistent with the trend, home sales near Metro stops have remained steady, said Howell.
Ernie Miller, a broker with Better Homes Realty in Springfield, said the market decline started from the outside and worked its way inward. “I’ve been doing this for 34 years, and when it slows down, we see slowing from outlying regions, and then it starts to creep in,” said Miller.
He thinks the real estate boom of the past five years pushed prices up too fast. When homes were selling at the peak of the market, buyers overreached, taking out adjustable mortgage loans and buying at the top of their ability. In addition, speculators entered the market hoping to profit off 20 percent or higher home appreciation rates.
JUST A YEAR AGO, despite where a property was located, it seemed to fly off the market for above asking price. But, sellers are starting to see the difference that an additional 30 minutes to a commute can have on home values.
“[The market] just had to catch up with itself,” said Miller.
In Northern Virginia, home sales fell the past 14 consecutive months, and the number of houses on the market surged. Last month, inventory was more than double what it was the same time last year.
Together the two trends have put buyers in the front seat, but many are being patient. “Some [buyers] are just waiting for all this to settle down,” said Miller.
But Howell has no doubt that the market has transitioned to a buyers market.
YET HOMEOWNERS continue to put their homes on the market at a pace that exceeds sale activity.
Lawrence Yun, senior economist with the National Association of Realtors, explained why he thought the number of homes on the market continues to rise. He said that, in addition to slowing sales, some people missed the market’s peak and are now trying to play catch-up.
But he says there’s another reason. “Some people are forced to put their homes on the market,” said Yun, adding that many sellers may no longer be able to cover their mortgages after being squeezed by adjustable interest rate loans that had extremely low introductory rates.
“They may not be able to service these debts,” said Yun.
SEVERAL REALTORS have noticed the same thing. “All of a sudden interest rates have jumped up and it’s just taking its toll. There’s nothing left for groceries and so on,” said Miller. “We’re seeing foreclosures now like you can’t believe.”
Whatever the cause, the trend doesn’t bode well for price growth in the region. According to MRIS, home appreciation in July dropped 4 percent in Northern Virginia compared to last year.
“With so much supply in the market, there is very little opportunity for price growth,” said Yun, who thinks potential buyers may be holding out until the cooling ends.