DC Metro Area Real Estate Market: A Quick Update

August 18, 2009
1 Comment

by Will Smith

Donna Evers, president of Evers & Co. Real Estate, pens a brief monthly report on the state of the housing market in the Washington, DC area. Below is the latest installment for July.

Butterfield House in Capitol Hill

July was the second month in a row to show an increase in dollar volume of sales; June was 4% higher than last year, while July was 8% higher. This is certainly starting to look like a trend. As for inventory, the area has a mere 4.9 month’s supply so far this year compared to 7.2 month’s supply for 2008.

The third trend that bears noting is price. The average price for all of last year only went down 4%, but the average price for this year so far has declined 14%. This part of the puzzle may not seem to fit, but prices only come down well after there is reduction in sales volume. Of the three areas in our study, Fairfax County, which has had the greatest price reductions in recent years, is now showing the lowest month’s supply and less decline in prices than the other areas. The District shows the sharpest price reductions and has the highest inventory, and Montgomery County is in the middle.

If the economy continues to improve, we should see all three areas picking up in sales. Fairfax County may be the first to show a gain in prices from the previous year, and it looks like the District of Columbia and Montgomery County may still have to go through further price reductions. All the areas continue to show an oversupply of product in upper brackets properties, with the cheapest homes and condos selling the fastest.

* Statistics are taken from the Metropolitan Regional Information System for three areas: Washington, D.C.; Montgomery Country, Maryland; and Fairfax County, Arlington, Alexandria and Falls Church.

This article originally published at http://dc.urbanturf.com/articles/blog/dc_metro_area_real_estate_market_a_quick_update/1247

1 Comment

Janson said at 4:26 pm on Wednesday August 19, 2009:
I know that agents are probably a little more interested in volume than price. I think the volume data is relatively easy to understand.

Unfortunately the price data is not what it seems. Average price is unlikely to reveal price trends because the mix of housing is also changing. The Case/Shiller index indicates that price changes in each of three tiers in the DC metro area are not synchronized, they don’t even go in the same direction.

So if MRIS reports an increase in average price, it might be caused by a change in the mix of sales and not a change in the underlying value of the homes sold.

For example, say that in May three houses sell: two for a million and one for a hundred thousand. Average price is $700,000. In June three more houses sell: one for a million and two for one hundred thousand. Average price is now $400,000 for a 43% month over month decline in average price.

Obviously this change in average price is meaningless if you are interested in understanding how the market values real estate.

There are a lot of things that cause changes in sales mix other than simple consumer preference. One example is when there’s a change in the pricing difference between a prime and a jumbo loan.