- The Washington Times - Thursday, August 25, 2005

I’ll go ahead and say it: The market is cooling down. Finally, after four years of the most unbelievable real estate market the Washington area has ever seen, things are just beginning to calm down.

July’s sales statistics make it clear that buyer interest isn’t keeping up with the supply of homes for sale. If that continues, it will mean that homes won’t be selling as quickly in the coming months and that prices won’t be rising as rapidly.

There were 11,415 existing homes sold last month, a drop of 4 percent from July 2004. But that’s not what leads me to declare that the market is cooling off. It’s the inventory of homes for sale.

At the end of July, there were 19,884 homes on the market — an increase of 19 percent compared with last July. At no time in the past five years has there been that many homes for sale in the Washington region.

With the supply nearing 20,000 homes and the demand falling, I think it’s safe to say that the market has begun its cool-down period. How long that will take depends to a large extent on interest rates.

And it depends on sellers. In the past two months, homeowners have placed their properties on the market in unprecedented numbers. Because there wasn’t enough buyer demand to absorb the additional listings, sales chances fell last month to their lowest level in two years.

Sales chances are my way of measuring the level of competition in the real estate market. Dividing sales figures for the month by the inventory on the last day of the month results in a percentage. A figure below 20 percent indicates a buyer’s market. Higher figures mean we’re in a seller’s market.

Chances in Loudoun County were the lowest in the region last month, falling all the way to 36. If that continues, Loudoun could be a buyer’s market within the next 12 months.

That won’t happen in Prince George’s County, however. Chances there were still high in July, at 99 percent. Prince George’s is likely to remain the area’s most competitive market for a while, considering how close it is to the District and how affordable the homes are.

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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