- The Washington Times - Wednesday, March 9, 2005

In case you’ve been out of the country for the past five years, here’s some news: Home prices are up. Last year, the median home price rose by more than 20 percent in every area jurisdiction but one. Only the city of Alexandria failed to post 20 percent price growth, most likely because prices there were already incredibly high.

Compared with five years ago, last year’s home prices were astronomical. Since 2000, home prices have more than doubled in Prince William County and the District. Most other communities saw prices shoot up by more than 70 percent.

You might think such sharp increases in home prices would be over with by now, but I don’t think so.

This year is proving to be even more competitive than last year, and it is competition among buyers that drives up home prices.

What could dampen price escalation now? Very little. In the long term, a decrease in job and population growth would slow the market down, but that doesn’t appear in anyone’s forecasts for our region.

In the short term, interest rates would be the most likely price arrester.

The historically low rates we’ve enjoyed during the past several years have allowed buyers to purchase homes that would be otherwise unaffordable.

If mortgage interest rates rise, the area’s expensive homes will finally climb out of reach for many buyers.

That would increase pressure on the condominium market, which has been the most popular sector in the region.

Condo prices rose more last year than the prices of single-family and town homes because those properties have become too expensive for many buyers.

If interest rates do rise in the near future, I would expect to see buyers fighting even more fiercely for condos and driving even farther to find affordable homes.

True affordability is found only to the north and east. Of the 17 jurisdictions in today’s charts, Baltimore city and Baltimore County were the only ones with a median price below $200,000 last year. Baltimore city is a particularly affordable place to shop for homes — the only place in the region with a median price below $100,000.

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

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