- The Washington Times - Wednesday, March 1, 2006

Cumulative statistics for 2005 show that median home prices in the Washington metropolitan area shot up by 19 to 31 percent last year. In many jurisdictions, prices rose even more than they had in 2004 and 2003.

In the past three years, home prices rose 65 to 98 percent.

The largest price hikes came in the area’s most affordable markets. Buyers, drawn to these communities because their prices were low, bid prices up dramatically last year. Median prices went up 29 percent in Prince William, 30 percent in Prince George’s and 31 percent in Stafford County.

Such dramatic price increases contributed, I believe, to the market slowdown that began last fall.

Throughout the white-hot seller’s market of 2000-2004, I often wondered what was going to slow things down.

Most of the time, I imagined that interest rates would rise so high that they would suck the life out of the market. I figured rates would hit 8 percent or so and the market would cool off.

But that wasn’t it. Rates remained quite low in 2005; the market cooled off anyway.

So here’s my theory about why the market slowed: Home prices reached a tipping point.

Area home prices finally got so high that buyers lost interest or simply couldn’t afford to buy any longer.

As buyers stopped buying, the inventory of homes for sale rose and the energy behind the seller’s market simply slipped away.

How did that slowdown affect home prices at the close of 2005, however? Many have wondered if prices fell at the end of last year. And what will they do this year? Stay tuned.

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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