- The Washington Times - Friday, January 15, 2010

Good news: Sales of new homes in the Washington area were up 3 percent over 2008.

Bad news: Sales were still awful compared with a few years ago.

By the end of October, new-home sales for 2009 had reached 7,826. In 2005, however, 18,427 new homes were sold during the same period.

Of course, that was when a lot of artificial demand was being generated by lenders giving mortgages to people who never should have bought homes in the first place. A huge number of those homes were sold in Northern Virginia. Virginia’s share of the region’s new-home sales was 11,179 in 2005, compared with just 6,582 in Maryland.

PDF: Charting the market

But last year, Maryland actually sold more new homes because the Virginia markets slowed so dramatically after 2005. Just consider Fairfax County as an example: 2,675 new homes were sold there during the first 10 months of 2005, but only 292 were sold in the same period last year.

Still, we shouldn’t think of 2003 through 2005 as normative years because sales then were boosted by all that irresponsible lending. We need to look back a little further for our comparison. Sadly, doing that only makes the current market seem even more dismal.

From January through October 1999 we saw more than 26,000 new-homes sales in the Washington area - more than triple the number of homes that builders sold last year. In fact, 7,986 homes were sold in 1999 in just Prince William and Loudoun counties. That’s more than the entire region sold last year.

We may never see a year like 1999 again because there just isn’t as much buildable land out there as there was 10 years ago.

So builders have had to adjust to new realities. As the land dried up close to the Beltway, builders started building homes farther away. Now that sales have dried up there, builders have to compete for the buyers who want to live back here, closer to the District.

And the way to compete with existing-home sales (which made up 91 percent of area home sales last year) is to lower prices. As you can see in today’s charts, home builders lowered prices sharply in many jurisdictions last year.

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