- The Washington Times - Tuesday, May 16, 2000

A prospective home buyer can't purchase a house he wants, even with $500,000 in cash on the spot.

A Georgetown residence changes hands twice in a month for $250,000 more the second time.

Around Annandale, Va., houses sell for $40,000 to $50,000 above list price. One buyer makes six offers and loses them all.

The stories of the region's housing market are giving statistics a bad name, because numbers alone do not show how hot the market really is.

"In 28 years in the business, I've never seen inventory so low," said Dale Gabardy, a Long & Foster broker who works in the Burke, Va., area. "It's just the demand."

The housing market caught fire last year and hasn't cooled yet. Having consumed much of the existing supply, the market is putting buyers through extra pain. They are paying more money for homes in more distant locations and taking longer, more frustrating efforts to close the deal.

"It's daunting," said Bob Winteringham, who just bought a house on 15th Street NE, in the District of Columbia, last week after a four-month search. "It can be very discouraging. You begin to think, am I ever going to hit it?"

He walked through about 20 homes, excluding a few he wanted to see but were taken off the market before he had the chance, he said. After his first bid was beaten by two others $10,000 higher than the price asked, he clinched his two-story, Victorian row house with a bid slightly higher than the $129,000 list price.

Residential real-estate agents across the region tell similar stories.

"If a house comes on the market on a Friday, and it's priced correctly, it will go within the weekend, usually with more than one offer," said Donna Evers, a District residential real-estate agent.

The strong market is helping to push the frontier of District housing sales east into such neighborhoods as Logan Circle and Capitol Hill, brokers said.

But with buyers lining up wherever they find a for-sale sign, owners are sitting pretty almost anywhere, said another District broker.

"It's the sellers' call," said Cathie Gill, who runs a residential brokerage in the District.

Buyers today are paying the price. Usually that is 5-to-10 percent over the list price, but competition among house hunters has driven prices up further.

One house in Silver Spring, Md., just sold for $325,000 $50,000 more than asked, said real-estate agent Ellen Sandler.

That's in a market that's not known for such aggressive bids, unlike Bethesda or Chevy Chase, Md., she said.

The sales price isn't the only area where buyers are giving ground, she said. They also are dropping traditional contract conditions that relate to appraisals and home inspections.

"The risks for sellers are now the buyers' risk," Ms. Sandler said. Buyers sometimes line up financing in advance and bring home inspectors with them when they first walk through houses, knowing they may need to bid quickly. Also, if the appraisal doesn't rise to the level of the price, sometimes they go back to lenders and ask for bigger loans, she said.

Sellers are pressing the advantage. Some take a few extra days to wait for higher bids, Ms. Gill said. But in general, demand is helping push sales in every neighborhood in the District.

"Right now every area is going," Ms. Gill said. "The only exception is that overpriced listings are not selling."

Too many buyers for too few houses explain the phenomenon. The area added almost 70,000 residents in 1999, according to the Greater Washington Research Center.

At the same time, the inventory of homes for sale has dropped across the region. Depending on the jurisdiction, 24 to 40 percent fewer homes are up for sale.

"Over the last two years, there's been an increase in sales per month," explained Anthony Carr, spokesman for the Northern Virginia Association of Realtors. That has used up the supply of salable housing faster as a result.

The shortage has been compounded by difficulties in the residential construction industry. Shortages in labor and materials have been keeping contractors from finishing work as quickly as in the past, Mr. Carr said.

But the tide may be starting to turn, said one brokerage office manager.

"In the last few days, some are staying on the market a little longer," said Pat Lawless, who runs the Long & Foster office in Centreville, Va. "Buyers are starting to back off on some of the prices which have been going up and up and up.

"It's a little indication that the frenetic level is beginning to subside" or perhaps just pause before starting up again, she said. Her brokers don't really know.

The threat of rising interest rates may be to blame, she said. The Federal Reserve is expected to raise interest rates by a half-point today. That would make it costlier for buyers to obtain mortgages. The Fed has raised interest rates by a quarter-point each five times since June.

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