- The Washington Times - Wednesday, January 31, 2007

It isn’t breaking news, but sales really slowed down last year. The numbers hit you differently once you tally the total sales for the year. Only 94,291 existing homes sales were registered in the Washington metropolitan area last year — a drop of almost 30,000 sales compared to 2005.

It was an abrupt and often-frustrating shift in market dynamics for area home sellers.

Perspective can’t make it any less frustrating, but it might help us understand what happened.

Last year was a year of transition from a seller’s market to a buyer’s market. The seller’s market began in 2000, when the demand for homes began to gobble up existing homes for sale. Soon, buyers were bidding against one another for a limited supply of homes, and prices began to climb. That continued until the fall of 2005 when the seller’s market began to fade.

Back when the seller’s market began in 2000, only 93,000 homes were sold all year. Last year, 94,000 homes were sold.

The point is this: Last year’s sales weren’t some out-of-the-blue crash in the housing market. It was a return to a buyer’s phase in the real estate cycle. I know that doesn’t take away the frustration if you tried to sell a home last year, but that’s what happened.

Last year’s sellers took some time adjusting to the new market. At the beginning, many continued to reach for the stars when pricing their homes. Those homes didn’t sell.

Eventually, sellers realized they actually had to compete with one another to attract buyers, something they hadn’t done much since the 1990s.

How do sellers compete? Three of the most important things are:

• Make your property look great.

• Help the buyer with closing costs.

• Price your home aggressively.

The last one is the most significant. Once every seller on the block cleans up his home and starts offering to pay closing costs, price becomes the key.

By mid-2006, sellers understood this. They began accepting lower offers and dropping their asking prices.

Prices — and sales — fell. In Virginia, sales fell 31 percent last year, compared to only 17 percent in Maryland.

The median sales price in Loudoun in December was down by 14 percent compared to December 2005. Sales there were down 35 percent last year.

Compare that to Prince George’s County, where sales did fall 16 percent, but prices were up 5 percent.

Is the adjustment period from seller’s market to buyer’s market over? Do sellers understand the new market dynamics, and are buyers going to start bidding up home prices in 2007?

It’s just too soon to know. We’ll have a pretty good idea by the end of the first quarter how 2007 is going to shape up.

Contact Chris Sicks by e-mail (csicks@gmail.com).

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