- The Washington Times - Friday, March 30, 2001

The calls started in late January. The caller was reasoned and polite, but insistent. He was very interested, he said, in buying the homeowner's house. There was only one problem. The homeowner had no intention of selling. In fact, his five-bedroom house, the only five-bedroom house in his upper Northwest neighborhood, was not even on the market.

"I kept telling them our home was not for sale," says the homeowner, "but he didn't seem to want to take 'no' for an answer."

Such a situation is becoming more and more common in Washington, real estate agents say, because inventories are tight and the market is strong.

"The overall market has gone up in the past couple of years," says Chadley Toregas, a real estate agent with Pardoe ERA in Georgetown. "Even now, interest rates are still so good, financing is easier and there is more mortgage money available."

Compared with the national average, the Washington area fares quite well, according to Kevin Thorpe, an economist with the National Association of Realtors.

"Sales in the Washington [Metropolitan Statistical Area] actively remain strong compared with the rest of the nation despite the overall slowing of the economy," Mr. Thorpe says.

The Washington Metropolitan Statistical Area (MSA) includes parts of Maryland, Virginia and West Virginia along with the District of Columbia.

If a property is well-priced, in a good neighborhood and is a "good, solid house," it will be sold very quickly, says Mrs. Toregas, who sells houses from Georgetown to Logan Circle and up through Chevy Chase.

According to Mr. Thorpe, in the fourth quarter of 2000, the most recent period from which statistics are available, the median price of a single-family home in the Washington MSA rose 11.6 percent. Nationally, the median price of a single-family home rose just 4.9 percent.

That's a statistic that's played out in practical terms for home buyers relocating here from other areas.

Nationally, the median income is $36,169.94 and the cost of living and single-family-home price indexes are set at a "norm" level of 100.

The District has a median household income of $43,293, a cost-of-living index of 127, and a single-family-home price index of 176 27 and 76 points respectively above the national norm. Compare that to Dallas, where the median household income is similar $37,478. There, the cost-of-living index is 110, just 10 points above the national average, and the single-family-home sales price index is 112.

Of course, home prices in the District compare favorably to prices in New York. There, the median household income is $43,783, the cost-of-living index 122, and the single-family-home price index a whopping 269.

"Prices are high here, but we're not as high as New York or San Francisco," says Mrs. Toregas. "Things could be worse."

Another comparison measure is the House Price Index (HPI), published every quarter by the Office of Federal Housing Enterprise Oversight (OFHEO). OFHEO uses mortgage data from Fannie Mae and the Federal Home Mortgage Corp. (Freddie Mac) to come up with a benchmark figure of home price appreciation.

In the Washington MSA, single-family homes appreciated at an average annual rate of 9.7 percent. That's compared to an appreciation rate of 9.65 percent for the West Palm Beach/Boca Raton area. Boston had an appreciation rate of 14.8 percent. Denver's was 15.2 percent. Oakland, Calif., had a rate of 22.2 percent. Philadelphia's was just 6.2 percent.

While the HPI doesn't allow a direct comparison of home prices from one state or one city to another, it does enable a comparison of appreciation rates, a reliable measure of market health for a particular area.

Reasons for the continued strength of the real estate market in the Washington area are simple, Mr. Thorpe says.

"Mortgage rates remain enticing, and the economy in the local area has remained strong," he says. "Things are pretty well-balanced."

It is a balance, however, that depends in no small measure on a very few number of available homes. According to Mr. Thorpe, 2000 was marked by the tightest inventories on record.

"Very few homes come up on the market anymore," Mrs. Toregas says. "That means buyers frequently have to resort to nontraditional methods, such as calling up a homeowner directly when they see a house they like."

"Oh, that happens all the time," Mrs. Toregas says. "We hear that story a lot."

Meanwhile, Texans who are relocating here to work for the Bush administration find themselves in for a bit of a surprise.

"There's a bit of 'sticker shock,'" says Iverson Moore of the National Association of Realtors. "The Washington area runs about $50,000 more than places like Dallas."

The median price of a single-family home in the Washington area is $187,100. In Dallas, the median price of a single-family home is $126,200, according to Mr. Thorpe. That increase can cause no small amount of consternation for families moving into the area.

Even for those able to afford the increase, the Washington area hardly offers easy pickings. The strong market means that buyers are far more likely to work with agents who can ferret out opportunities before they appear on the Multiple Listing Service.

"You're more likely to find a house with a good agent," says Mrs. Toregas. "In fact, we are working with a lot more buyers than we used to."

At Pardoe in Georgetown, Mrs. Toregas doesn't see the sticker shock as much as she sees astonishment.

"People are surprised by the lack of choice," she says.

Low inventories coupled with high demand means an explosion in prices.

"Inventories have shrunk so much that you end up with a bidding war," Mrs. Toregas says. "That means that the market, not the value, determines how much a house is worth."

A home that came up for sale in the District's West End neighborhood recently ended up with 12 contracts.

"It's a very difficult situation for agents and for everyone," Mrs. Toregas says. "To go through that many offers is extremely time-consuming."

In the District's up-and-coming neighborhood of Logan Circle, Mrs. Toregas recently sold a two-bedroom town house for "almost $300,000."

"It was an older brick house that had been completely renovated," she remembers. "It had a complete full kitchen downstairs."

By comparison, a similar two-bedroom, two-bath renovated town house in a downtown section of York, Pa., costs about $110,000 tops.

Those who want more house for the money are forced to move away from the city's core. In the Washington area, that means moving farther and farther out, with daily commutes measured in hours, not minutes.

"That's what you get for $50,000 more house," one television traffic reporter said gleefully as he watched an image of bumper-to-bumper traffic inching its way from Gainesville, Va., recently.

Perhaps one of those cars is that of the caller in the night, thwarted in his attempt to find a five-bedroom home in a certain northwest Washington neighborhood. But he won't be alone.

"There's no reason to think that the trend will not continue," Mr. Thorpe says. "I anticipate continued strength in the real estate market and strong price appreciation."


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