- The Washington Times - Thursday, December 7, 2006

Most of us knew 2006 wasn’t going to be such a hot real estate market. No one in the Washington metropolitan area should have been surprised to see sales drop and listings rise this year.

The tougher thing is guessing what will happen next year. Has this year’s slowdown been a correction? If so, has it corrected enough? Will home prices rise or fall next year? Will buyers have the upper hand or will sellers regain some of the advantages they lost in 2006?

“It is still going to be a buyer’s market,” says Christine Todd, CEO of the Northern Virginia Association of Realtors. “Interest rates have gone down recently, and rents are going up. But affordability is the driving factor in this region.” Homes in the Washington area became a lot less affordable in recent years due to a strong seller’s market that drove up home prices year after year.

This year, prices have dropped in some markets, almost all of them in Northern Virginia.

Still, homes cost twice as much as they did in 2001. Most area residents haven’t seen their incomes double since then.

“Buyers are patiently waiting for sellers to lower prices,” Mrs. Todd says. “It’s like a game of chicken — who will blink first?

“Our analysis says that sellers are in the position to lower prices because of the tremendous appreciation they enjoyed in recent years,” she says. “Buyers, on the other hand, are scrambling just to qualify for a loan.”

It was that scrambling that caused the market to begin cooling late in 2005. A lot of buyers finally realized that purchasing a home was out of reach, which killed the momentum that had kept the sales frenzy going.

So, has the market corrected enough to bring buyers back in significant numbers? Hard to say. The good news is that our local economy is strong and that the population continues to grow. Those are the foundations of a healthy real estate market.

“Loan applications are spiking, and agents are reporting more activity at open houses,” Mrs. Todd says. “We expect home prices to level off by January and to rise about 3 percent in 2007.”

She may be right.

There are a lot of anxious sellers and conflicted buyers out there who will be watching the next 12 months very closely.

Contact Chris Sicks by e-mail (csicks@gmail.com). The statistics in this story reflect a metropolitan area that includes the Maryland counties of Montgomery, Prince George’s, Anne Arundel, Howard, Charles and Frederick; the Virginia counties of Arlington, Fairfax, Loudoun, Prince William, Spotsylvania and Stafford; the city of Alexandria; and the District.

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