- The Washington Times - Thursday, September 2, 2010

Profit and loss in the world of real estate is usually a matter of holding onto a property long enough to enjoy the benefits of appreciation.

Of course, the past few years have proved housing prices can fall - even in the Washington area.

With the recent surge in sales activity, however, we have seen prices recover even in jurisdictions that suffered sharp declines in home values.

For instance, if you purchased an existing home in the District in 2000, you would have bought in a stable real estate market with a median sales price of $159,000. From there, prices shot up to a median of $422,000 in 2005. That was the peak of the seller’s market and the year home prices maxed out.

When the market began to slow in 2006, prices held steady for a while, but by 2009, home prices had fallen throughout the region.

Still, homes in the District were selling for a median price of $375,000. Not too bad if you paid $159,000 in 2000.

Prices outside the District fell further, however. You can see in the charts that prices dropped drastically in Virginia counties such as Prince William, Stafford and Spotsylvania. The number of foreclosures in those jurisdictions had a lot to do with that.

Since prices reached bottom last year, we saw an explosion of sales activity in the spring that was driven by the now-expired federal tax credits. That activity caused home prices to rebound in many jurisdictions. You can see prices in July were even higher than in 2005 in the District, Alexandria and Arlington.

However, without those tax credits to spur buyer activity, we can’t expect prices to rise for the rest of 2010. And 2011 is quite hazy right now because we can’t predict with much certainty what employment figures and mortgage rates will look like next year.

One word of warning: July’s data is not as reliable as the annual data represented by the other three bars. Home-price data for a single month is susceptible to fluctuations caused by the sale of a few very expensive or very inexpensive homes. Those fluctuations even out in annual data, making 12-month data preferable for serious analysis.

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