Home sales in the Washington area have slowed down this fall after several years of rapid growth. The once-unshakable residential real estate market has been rattled by several factors, including the September 11 attacks, falling consumer confidence and rising unemployment.
But Realtors are quick to point out that the market, though slower than last year’s record sales pace, remains strong by historical standards.
Home sales declined in October, compared to October of last year, throughout the region, with the exception of Prince George’s County. For the year, however, sales remain on a par with last year.
“We have been expecting a slowdown, but how much no one can tell. It could be five, 10, 25 percent,” says Yolanda Mamone, director at the Greater Capital Area Association of Realtors (GCAAR) and agent at Randall H. Hagner & Co. in Northwest.
Meanwhile, the economy is slowing down: Many economists predict that this quarter will register negative growth. Unemployment jumped to 5.4 percent in October, from 4.9 percent in September. Businesses cut more jobs in October than any other month since May 1980.
Still, Realtors say sales remain strong, as many prospective home buyers are enticed by extremely low mortgage rates and a host of tax incentives targeted to first-time home buyers.
“We have at least the same numbers of sales and listing as we had prior to the tragic event and prior to the mention of the ‘R’ word (recession),” says George Creed, an agent with Weicher Realtors in Vienna.
It is not clear whether this decline will continue, bringing an end to steadily rising home prices, or if buyers will return in force next year.
Despite the uncertainty, some trends are popping up. Worried about the economy, home buyers are starting to resist high prices. In response, some Realtors are cutting prices. More homes are hitting the market, but they are taking longer to sell. Meanwhile, distant suburbs are finding it harder to attract home buyers as the District and its immediate suburbs.
A low and a high
The September 11 attacks, which jolted the whole economy, were especially jarring for real estate agents, who had been working at a breakneck pace for years.
Northern Virginia, perhaps, suffered the most. Sales there were down 15 percent in September, while the number of listings of houses on the market rose 24 percent. The same number of people were selling, but far fewer were out looking. That trend continued in October in Northern Virginia as sales fell 10 percent.
“The houses are not selling as quickly,” says Anthony Carr, spokesman for the Northern Virginia Realtors Association. “Realtors were saying ‘Nobody’s coming out and we’re not even going out because of what happened.”
Many Realtors note that sales, though lower in October, remain strong, especially in Washington.
“We’re still in a very robust residential market,” says Brooke Myers, broker and owner of City Houses in the District. “I’m not anticipating a big slowdown at all in Washington.”
The main recent change Ms. Myers is seeing is that she is selling fewer houses under $150,000. But that’s because fewer houses of that price are available, she adds.
The city, which experienced an affordable housing shortage in the past several years, has seen more new construction than ever. That too is driving the market, as people who were waiting to buy are coming out and choosing from the increasing inventory.
“For one thing, condos and co-ops have been in very high demand and supply has been limited,” says Ms. Mamone, whose October sales rose 22 percent compared with the like month a year ago. “And we did have a little more product this October than last October, so there was a lot of pent-up demand.”
November, so far, has held up as well with sales in the first week ahead of last year, Ms. Mamone says.
Overall in the District, sales of condos, co-ops and homes this October slipped to 582 units from 648 units last year, according to GCAAR. The slip was due to a smaller number of single-family homes available, Ms. Mamone says.
In Montgomery County, the demand for co-op housing was unmet, resulting in a slip of sales to 1,154 units from 1,236 in October 2000.
Prince George’s County held up well. Prices there grew along with sales in October. Some 916 units were sold in the county compared with 881 units a year ago.
Homes sales in Northern Virginia for October fell to 1,976 from 2,110 last October.
Great interest rates
Economists attribute the continued overall strength of the housing market to historically low interest rates, which have made mortgages very affordable.
The average rate for 30-year low fixed mortgages nationwide slipped to 6.42 percent in early November from 7.84 percent at the same time last year, according to Bankrate.com, a Palm Beach, Fla., a firm that tracks the financial industry.
“We’ve got some consumer-confidence problems even in our region, but we’ve got the lowest interest rates in 40 years so there’s a huge incentive,” says Charles McMillion, chief economist at MBG, a D.C.-based business information firm. “It could slow significantly but as long as interest rates stay as low as they are, and as long as they don’t spike up, which I don’t see happening any time soon, the housing market in this region is going to continue to be an important engine for the region’s economy.”
The phones have been ringing off the hook at mortgage company Allfirst Bank. Last month, when the Federal Reserve slashed rates for the 10th time this year, was particularly busy, says Philip Hosmer, spokesman for Allfirst.
“Our mortgage loan closings are up 43 percent ahead of all of the year 2000,” he says. “Our phone call volume of people calling about [the lower rates] is up 50 percent from September alone.”
A big part of the surge in the mortgage business has to do with refinancing, but a lot of it is also new customers wanting to buy homes, Mr. Hosmer says.
Economists say the housing market could weather the current economic downturn. But what could hurt sales would be new terrorist attacks in the region.
“There are a number of things that could have a negative effect,” Mr. McMillion says. “But I think the chances of them are less than 50-50, so hopefully through the holidays and next spring we’ll have a good year.”
Tim Stephens is one of many local home buyers who could not resist the low mortgage rates.
“I work in Dupont Circle and wanted something close,” says Mr. Stephens, who moved into his new condo on 14th and Chapin streets, NW, last week.
For $221,000 he got the property manager, Chatel Real Estate, to put two small units into a nearly 1,100 square foot, two-bedroom home for him.
At 39, Mr. Stephens has bought property in the District twice. He owned a condo on 16th and Q streets, NW, which he sold in March.
The 46-unit building he’s moved into is still under renovation. Yet more than half of the condos sold in January, when the building first opened, says Francesca Dahlgren, the seller’s agent from Chatel Real Estate. Now all but 11 units are gone.
The price Mr. Stephens is getting is rather good, says Dale Mattison of Long & Foster Realtors, who was his agent.
The slowing economy is forcing people to think about saving, agents say, so those purchasing homes are looking to spend less than before.
“There is a resistance building,” says Mr. Mattison, also president-elect of GCAAR. “The greatest resistance is building in the city, and it will eventually filter out to the suburbs.”
That is already happening especially in high-priced areas says Weicher Realtors’ Mr. Creed.
“Things are still moving rather quickly,” he says. “But at $225,000, $250,000 and up especially over $300,000 they are sitting out there.”
To keep the market moving, agents are dropping their prices.
“A property with a price of $275,000 I might have placed at $285,000,” Mr. Creed says. “But it doesn’t sell so I bring it back. But it’s not like we’re dropping way down.”
In Maryland, the higher priced properties are hurting as well.
“The real high-priced homes, $700,000, $800,000 and above have slowed somewhat in comparison to last year,” says Jim Kneussl, agent with Weicher Realtors in Potomac. “But the lower prices, $500,000 and under, have continued to hold strong.”
Renters fight back
“The Class A housing market is loosening up a bit especially in Northern Virginia,” says Mark Teather, director of the apartment practice for Delta Associates, an Alexandria firm that tracks the regional market. “Vacancies are increasing and rents have plateaued.”
Vacancies at apartments in garden communities rose 2.3 percent over the past year. While low, that is the highest level in five years. Rents grew too, but drastically less than before. The past year saw a rise of 0.6 percent in rents a large contrast to the 17.2 percent they jumped from 1999 to 2000.
In Maryland, the housing market is in much better shape, with a low overall rental property vacancy rate of 1 percent. Rents at garden properties grew 5.4 percent and high rises inched up 5.8 percent, according to Delta.
In the District, rents of upper-end apartments are easing and vacancies growing.
Lansing Price, a lobbyist for an environmental group, lived in a Dupont Circle efficiency for $800 a month. This summer the building management raised his rent by $75.
So he’s apartment hunting again and finding that affordable apartment is just as difficult to find now as last year. Weekend open houses still attract dozens of people and prices are still high.
Suzanne Shaddad, a registrar at a Georgetown art brokerage firm, agrees. Having moved for work from Los Angeles three months ago, Miss Shaddad has been sleeping on the floor of a friend’s room in a Capitol Hill group house.
“What I found has not been great, and still you can’t apply fast enough if it’s in a desirable area,” says Ms. Shaddad, who is looking for a one-bedroom apartment near Metro for $700-$900 a month. “Just for one bedroom, for the price you end up paying, you’re living in a shoe box.”