Original article available on WashingtonTimes.com
Somewhat surprisingly, 2011 turned out to be a good year for the Washington-area real estate market. Buyers were more active than they have been in five years, and the backlog of unsold homes fell to its lowest point in seven years.
“It has been a really positive year, continually outpacing other markets in the U.S.,” said John Heithaus, chief marketing officer of Metropolitan Regional Information Systems, the database used by area real estate agents.
“Throughout the region, we’ve seen areas of really strong performance. Of course, we have to remember that all markets are very local.”
The point Mr. Heithaus makes is important to remember when considering real estate. National news outlets typically report on nationwide real estate trends. But the Washington-area economy is doing much better than average, and the local housing market reflects that.
The “real estate is local” rule goes deeper still. Within this region, you will find hot markets where prices are rising and others where sales are slow and prices are still falling.
“Imagine someone says home prices are up 3.9 percent in this area, and I’m up in Baltimore trying to sell my condo,” Mr. Heithaus said. “I may be expecting to make another 3.9 percent profit on my sale, but my broker says, ‘No, it just doesn’t work like that.’ “
It doesn’t work like that because home prices rise only when buyers are competing with one another for a limited number of available homes. This is happening in some markets, but not all of them.
Still, in most of the Washington-Baltimore region, sales rose and inventory fell in 2011. That combination meant buyers competed with one another more than in any other year since 2005.
One small market in Virginia showed more of that competition than anywhere else: Manassas.
“The resurgence of Old Town Manassas has been received so well,” said Cindy Stackhouse, a Manassas-area broker who was 2010 president of the Virginia Association of Realtors.
“People like being able to walk from their home to Old Town, and the rail has been very popular. Old Town Alexandria has always been prime real estate. People are trying to return to that feeling, and Manassas has it.”
Throughout the year, Manassas and Manassas Park City had a high level of buyer competition. The limited supply of resale inventory has even caused a reversal of fortunes for long-suffering homebuilders.
“Construction had kind of came to a halt, but it is coming back,” Mrs. Stackhouse said.
“My office is doing a lot of new homes right now. We have people who don’t want to wait six months or longer for those short sales to be approved. And builders are paying closing costs and offering things like free finished basements.”
Things weren’t always that rosy in Manassas and Prince William County. The market was so bad that home values fell further in 2008 than in any other jurisdiction in the area.
“We were at the forefront of all the short sales and foreclosures, the first ones to have that devastating flood,” Mrs. Stackhouse said. “We had to learn that process before anyone else.
“But we have also recovered faster than others. So we now have a steady market like we want it to be.”
Foreclosures and short sales remain large parts of the local housing landscape as 2012 nears. Will that dampen next year’s market?
“Our foreclosure percentages aren’t as high as other markets in the U.S.,” Mr. Heithaus said. “And the local economy has a lot going for it. Government spending is very good for real estate, and our unemployment rate is much lower than the national average. Mortgage interest rates remain very low. So that’s the ‘best of times’ part.
“On the other hand, it can be very hard to get a mortgage. Buyers have had a lot of issues with appraisers who are under increased scrutiny from banks and who have trouble finding comps.
“So we are cautiously optimistic about 2012. We are projecting the inventory will remain about the same, within 5- to 10-percent variance from 2011.”
Mr. Heithaus has good reason to be optimistic about inventory. The number of listings coming on the market was remarkably low in 2011. About 100,000 homes were listed from January through November, a drop of 10 percent compared with 2010 and far lower than 2006 when 173,000 homes were listed by the end of November.
“I’m feeling good about next year,” Mrs. Stackhouse says. “I’ve been watching a trend where the number of ‘regular’ resales [homes that aren’t foreclosures or short sales] is increasing.
“Plus home affordability is back in line, which is important for first-time homebuyers. As we get them moving, the move-up buyers will follow and everything will improve.”