Slow, steady growth predicted for 2011
Just about a month into the new year, the Washington-area real estate market continues to experience slow but steady growth.
December statistics extended a 12-month trend of price increases for the District, Northern Virginia and Montgomery County over the same period a year ago and showed signs of an uptick in sales for all three areas.
Experts said prices will continue to increase by 3 percent to 5 percent and inventory levels will hover in the four-to-six-month range, characteristic of a balanced market.
Interest rates also are expected to increase in 2011 and this will have on impact on the climate for homebuyers. At a market forecast meeting last month, George Mason University economist John McClain predicted mortgage rates would reach 6 percent in 2011 and that the foreclosure inventory would be significantly reduced in 12 to 18 months.
With Wall Street ending the year on a high note, and the area's strong job market underpinning consumer confidence, early indications have led to a sense of cautious optimism for continued stabilization and recovery.
"I am encouraged," said Adrian Hunnings, president of the Greater Capital Area Association of Realtors. "I'm seeing an increase in prices and in transactions in D.C. We had the same inventory as we had last year with greater sales."
Prices increased in the District by 9 percent over the same time last year and annual sales grew by 11.2 percent last year from 3,467 units in 2009 to 3,857 in 2010, according to the Metropolitan Regional Information Systems.
Interest rates remain a wild card in the mix, and will affect the market's ability to grow in the coming year. Hunnings said he remains concerned about the unpredictable nature of mortgage rates and their impact on a buyer's purchasing power. An increase from 4.25 percent to 7 percent on a $427,000 home, the median price in the District, would increase a monthly payment by 35 percent.
For this reason, he said, buyers are looking at the market with some concern.
"Buyers will face a greater sense of urgency in 2011," Hunnings said. "If prices continue to rise, if interest rates continue to rise, the pressure on buyers will build to make a necessary decision while values are still good."
Recovery under way across the D.C. area
In Northern Virginia, prices increased by 3.8 percent last month. More than 1,400 homes were sold in December 2010, an increase of about 4 percent from December 2009.
"There is a pent-up demand," said Karen Trainor, president of the Northern Virginia Association of Realtors and an agent with Weichert. "Sellers are past the point of realizing they won't get back what they made in 2004 and are jumping in. If it's priced correctly, it sells. Everything is selling in Arlington and Alexandria."
The market for new homes is also beginning to regain strength in Northern Virginia.
"I have spoken to several new homes sales reps who tell me that they are getting more buyer traffic and offers because sellers have been able to sell their current homes," said Pat Kline, NVAR chairman-elect and a broker at Avery-Hess. "Although the seller may have discounted his or her property, they are realizing a discount on the new home as well."
Overall, suburban Maryland shows signs of recovery. Modest price increases in Montgomery County have been the recent norm with prices rising 4 percent in December over the year before. Data show 580 homes sold last month, an increase of 3.7 percent over last year.
"In Prince George's County, most homes are selling for over 90 percent of their list price," said Joanne Darling, president of the Prince George's County Association of Realtors. "This indicates that we are moving out of the declining market and are entering a level market."
The area real estate market varies from neighborhood to neighborhood, Trainor noted, adding that it still takes a great deal of stamina to navigate the market. It certainly is not a "walk in the park," she said.
But Trainor is not seeing the same number of foreclosures hitting the market in places such as Ashburn and Loudoun County, which is encouraging.
"At this moment in time I'm positive," she said. "We're having a good January. Things seem to be moving in the right direction."
HIGH DEMAND FOR SHORT COMMUTES
Traffic considerations and rising gas prices are driving demand for homes located near Metro stations and inside the Beltway.
"As you look out over the long term, the cost of the commute is not going to go down," said Adrian Hunnings, president of the Greater Capital Area Association of Realtors. "Demand for city housing will continue to grow. I'm seeing a big push for inside the Beltway. Employment and population growth will be a source of added demand in the D.C. market. Washington is perceived as one of the top cities in the country to live in."
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