- The Washington Times - Thursday, September 15, 2005

I just took a look at the real estate figures for August, and I’m shocked. Home sales in the Washington metropolitan area slowed last month — enough that I am now certain the real estate slowdown has begun.

There were 10,932 existing-home sales last month, a drop of 5 percent compared to August 2004. This is surprising, considering that buyers have so much going for them.

The first thing buyers have in their favor today is the supply of homes for sale.

Back in March, sales fell 7 percent because there weren’t enough homes to buy. Eager buyers faced incredible competition for a limited number of properties.

In the summer, however, that began to change. Record numbers of homes appeared on the market, yet buyer interest was beginning to fade. As a result, homes sat on market longer than they had in years.

By the end of August, the inventory of homes for sale had risen to 21,300.

That’s an increase of 35 percent over last August. Buyers haven’t had that many homes to choose from since November 1999.

So, buyers had that going for them. They also had low interest rates, which for years have been making homes affordable for buyers. That hasn’t changed.

So what has changed that would cause area buyers to stop buying at the furious rate we’ve seen the past few years?

Well, I think it has to be high prices.

What else could cause buyers to stop buying, when demand has been so strong for so long?

I believe that we have reached a level where home prices are beginning to affect buyer interest negatively.

One evidence for this is the list of counties that didn’t see sales fall last month: Stafford, Frederick, Charles and Anne Arundel.

All four are outside the Beltway, and all of them are significantly more affordable than the rest of the market.

In the coming months, I expect we’ll see the supply of available homes rising, and one result of this will be a stabilization of home prices.

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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