- The Washington Times - Friday, June 5, 2009

If you are at all interested in Washington-area home values, today’s charts are worth studying for a minute. They reveal just how dramatically home prices fell last year and why this year is looking somewhat better.

The fever chart shows how Northern Virginia home prices move during the year. The chart was put together by David Rathgeber, owner of Your Friend in Real Estate LLC. The data includes the counties of Fairfax and Arlington and the cities of Alexandria, Fairfax and Falls Church.

Starting with a January baseline, the chart reveals how prices change each month compared to January.

To download a PDF of the chart, click here

One line shows the average price movement during the years 1990 through 2007. It reveals that prices typically rise in the spring, which makes sense. That is when sales activity is strongest and the supply-demand ratio favors sellers the most.

After the spring market, prices tend to remain level for the rest of the year.

The other line on this chart is what I find painful to look at and shocking. It shows what happened to prices last year. As you can see, early in 2008 we saw the kind of modest price increases you would expect in the spring.

After the spring market, however, prices tanked. They just fell through the floor. By November, the average sales price was 20 percent lower than it had been in January.

“I have been watching this market since 1990, and I’ve never seen any price movement like this,” Mr. Rathgeber says. “And I’m reasonably confident that it had never happened prior to 1990.”

Why did prices fall so much? The overwhelming number of foreclosures and short sales encouraged a lot of buying activity last year, but also pushed down sales prices. The huge backlog of unsold homes we’ve been stuck with since 2006 finally forced prices down enough to stimulate buying activity. Those buyers wanted a great deal, and they got it.

It is quite possible that they bought at the bottom of the market.

“Looking at the 2008 price trend is scary,” Mr. Rathgeber says. “But the downward pricing trend has been reversed this year.”

Although the change is modest, and it only compares April to January, you can see that many parts of the Washington area have seen median prices start to rise this year.

Just remember that small markets like Alexandria generate smaller data sets, which can cause price figures to fluctuate up and down each month.

Also, remember that this comparison (April to January) shows the same kind of price increase we see almost every spring.

What will happen to prices during the remainder of 2009 is hard to say. We still have a heap of foreclosures out there, which are stimulating some sales activity. A lot of those buyers are bargain hunters who aren’t likely to bid prices up too much - if at all.

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

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