A strong economy and excessive supply is causing the Northern Virginia housing market to slow down from the accelerated pace it has been on in recent years.
“After experiencing several years of overactive sales and escalating home values, we finally experienced a correction in 2006,” said Margaret Ireland, the Northern Virginia Association of Realtors chairman of the board.
It’s generally a slow time of year for home purchases, said Scott Koval, a Fairfax County Realtor at Samson Realty, but it isn’t business as usual this January.
“Usually, I don’t do anything this time of year,” said Koval. “I think it has to do with the fact that prices have come down a lot and rates have stayed low. With spring comes higher rates and increases in prices usually, so buyers are trying to beat that out.”
Around the middle of 2005 is when Northern Virginia’s real estate market went from a seller’s market to a buyer’s market, said Koval. Inventories of listings went way up, and the overpriced market began to stabilize. That slow-down is what local Realtors and experts say gives buyers the upper hand in negotiations now. “Buyers have the ability to bargain for a better price or concessions,” said Ireland.
Since sellers can’t expect to make the huge percent increases they have in recent years, the negotiating process is more reasonable, said John McClain, deputy director of the Center for Regional Analysis at George Mason University.
“If you’re looking to buy a house to live in, now is a lot better time to buy than several months ago,” said McClain. “If you’re looking to buy just to turn around and sell in a year, you might want to be more cautious.”
McClain attributes much of the market’s stabilization to the economy, specifically procurement spending by the federal government. Procurement spending makes up about 17 percent of the local economy, said McClain, and it topped more than $50 billion in 2006, compared to the mid-1990s when it peaked around $20 billion.
Escalating prices from recent years is another important factor contributing to a more steady housing market. Investors tried to take advantage of the prices and flooded the market’s inventory, causing prices to decrease, said McClain. The decrease is relative though, since it follows a period of vast inflation.
“We’ve gone through a pretty serious adjustment in the last few months,” said McClain.
In November 2006, 26 homes were sold in Fairfax City. Nine were sold in less than 30 days, and it took more than 120 days to sell six of the homes. On average, homes in the city stayed on the market in 2005 just about as long as they did in 2004 — around 20 days. The 2006 year-end statistics were not yet available when this newspaper went to print.
“We’re going to come back into more normal market conditions [in 2007],” said McClain.
Price decreases are expected after a period of such high inflation, according to local Realtors. In 2005, the average sold price for a home in the city was $476,056— up 26 percent or nearly $100,000 from the previous year. The increase was 19 percent, about $60,000, between 2003 and 2004.
"I think price is really still driving buyers," said Kathy Sparks, a Realtor with RE/MAX Premiere Selections specializing in sales in western Fairfax County. "It's going to be a good year as long as the interest rates stay good."
Sparks said buyers are generally looking for the most bang for their buck, but in Fairfax, location is key. Many people like the town atmosphere in the city, but the sprouting up of town centers and mixed-use developments throughout the county are providing a similar feel, she said.
Since it's a buyer's market right now, City Councilmember Scott Silverthorne said the drafting of the Route 50 corridor master plan needs to incorporate that into the process. Many areas along that corridor, and throughout the city, can be redeveloped into condominiums, he said, and prospective buyers are abundant. While a market still exists for rental units, Silverthorne said condo ownership would provide a better sense of community.
"People who own their properties get more involved," he said.