- The Washington Times - Wednesday, April 5, 2006

New-home builders had a lot to be happy about in 2005. Sales were up 11 percent, and prices were high.

But the Washington area’s real estate market experienced a sudden slowdown at the end of 2005, which will make 2006 a very different year for builders.

“The Washington market has been driving at 110 or 120 miles per hour for the past few years — even though the speed limit is only 60,” says Victor Furnells, regional sales director at Hanley Wood Market Intelligence. “Sustaining a speed of 110 is impossible, so things slowed down. We are now back down to 60 or 70 miles per hour. Things are still good. The market is still strong, but it is normalizing.”

More than 25,000 new homes were sold in the Washington area last year. Most interesting to me is that builders increased their share of the housing market for the first time in years.

Back in 1993, new homes made up 37 percent of the region’s annual home sales. As land for new homes became scarce, that share fell every year. By 2004, only 15 percent of the year’s home sales were new homes.

However, new homes captured 17 percent of the market last year. It happened because condominium sales went through the roof last year.

Fueled in part by strong demand from investors and speculators, condo sales were up 122 percent in Fairfax County, 54 percent in the District, 280 percent in Alexandria and 1,200 percent in Montgomery County.

Now there are too many condos on the market and insufficient demand. Even though the market is flooded, more condos are being built.

“Many of the investors and speculators are now flipping their condos. Due to all the supply, we’re seeing the builders’ profit margin going down considerably on condos,” Mr. Furnells says.

“But that’s looking at the glass as half-empty. The half-full side of things looks at it like this: Condo prices going down means that more people can afford to buy a home — particularly first-time buyers. Now, they face a buyer’s market as opposed to the seller’s market they’ve endured for years.”

Contact Chris Sicks by e-mail ([email protected]gmail.com).

The metropolitan area 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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