- The Washington Times - Wednesday, December 1, 2004

If you have been paying any attention to the real estate market in the Washington region, you know prices have risen this year.

But do you know when they rose? Would you guess that they rise a little bit each month throughout the year? You’d be wrong. In 2003 and 2004, home prices rose dramatically during four or five months preceding summer and hardly at all during the rest of the year.

This came as a surprise to me when I charted monthly median prices for the first time. I had never studied price data in this way, and it was a revelation.

If you study the adjacent fever chart for a moment, you’ll see something fascinating. Look at Fairfax County in March 2003. Follow that line up to the beginning of July.

See how dramatically prices rose in those four months? Now, follow Fairfax County from July 2003 to March 2004. Eight months later, the median price was virtually the same. Then, during the next four months, prices shot up dramatically, leveling off once again in July.

And this didn’t just happen in Fairfax County. Nearly every Washington-area market followed the same pattern.

Why did prices do this? Only one reason: competition. This year’s unprecedented level of competition has been caused by a record number of sales and a record shortage of homes for sale. It has been the most extreme seller’s market on record.

The fierce competition among buyers this year pushed prices upward as home shoppers outbid one another to win the homes of their choice. Many used escalation clauses, promising to pay thousands more than any other offer.

Time after time, properties in the most popular neighborhoods sold for more than their already-high asking prices.

But buyers are not this aggressive throughout the year. From July until February, buyers face less competition for a larger number of homes. As a result, prices don’t rise as rapidly, if at all.

What are the implications for individual buyers and sellers?

First, a word of caution.

Don’t confuse home-price statistics with home values. The value of your home is whatever a willing buyer pays for it. That’s the textbook definition.

If you sold your home in the District for $370,000 in July, don’t think this chart means your home’s value plummeted in August and September. It didn’t.

Once the value of your home is determined by the market to be $370,000 — that benchmark stands. It would take a prolonged period of declining home values throughout your neighborhood before your home lost any value.

However, if you want to sell a home for the most money, you will probably do best to wait for the spring market. Realtors have always advised this, but I never knew how right they were until I made this chart.

When the maximum number of buyers are vying for the minimum number of homes, you are going to do well as a seller.

If your home is on the market right now, don’t fret. You will still find the market to be more competitive than any winter market on record. You will do very well.

But know that this winter will certainly be less competitive and potentially less profitable than the spring market was.

Chris Sicks

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