Will DC’s Low Housing Inventory Mean Higher Home Prices?

by Shilpi Paul

image

Since news came earlier this week that the DC area ended 2011 with its lowest housing inventory since 2005 and foreclosures have fallen almost 60 percent over the course of the past year, UrbanTurf has been wondering what this will mean for the area housing market. By simple supply versus demand math, we initially felt that the low inventory would push home prices up in the coming year. But it may not be that simple.

Jonathan Miller, president of the real estate appraisal and consulting firm Miller Samuel, was able to provide a different perspective. As he sees it, the overall numbers all come back to foreclosures and may not indicate a healthy housing market with prices on the rise.

Miller’s take:

While I’d still characterize the DC metro as having one of the better housing markets in the country, a lot going on in the data has to do with the drop in foreclosure activity.

The robo-signing scandal in late 2010 served to hold back foreclosure inventory entering the market as servicers still needed to figure out how to prove they actually owned the properties they are foreclosing. As such, the rate of foreclosure filings and inventory has fallen not just in DC, but across the country for the past year. The decline in foreclosures has little to do with the problem taking care of itself, or some sort of hidden strength in the market. It’s better characterized as the market being given a reprieve for a year or two while lenders/servicers get their act together.

As a result, the DC metro inventory market share of foreclosures fell by half, and the absorption rate slowed. This is probably why the inventory of homes for sale in DC is at a multi-year low. I am skeptical that this will translate into an uptick in housing prices in 2012 since foreclosure product is not the same product as non-distressed properties. As servicers/lenders begin ramping up their disposition of distressed assets, all markets will likely see an uptick in foreclosure activity in 2012.

In other words, the DC area seems to be holding its own — which is a good thing — but the foreclosure anomaly/reprieve of 2011 is a “one-off” that has little to do with showing the housing market is improving and more to do with the legacy of bad mortgage lending decisions of the last decade.

This article originally published at http://dc.urbanturf.com/articles/blog/will_dcs_low_housing_inventory_mean_higher_home_prices/4912

3 Comments

  1. StringsAttached said at 11:55 am on Friday January 13, 2012:

    Makes sense…good reporting.

  1. SRL said at 2:20 pm on Saturday February 4, 2012:

    agree - big shadow market nationally and in DC that is tied up with the current Administration’s policies. short sales are taking 6-12 mos, not 3 months anymore.
    also, prices in DC area are down 10-20% off peak and people just don’t want to sell or list their property and not get 2005-2007 above median prices!  maybe in 3-5 years they will list, and it will be below peak, just expectations will be rational.

  1. Dana Hollish Hill said at 4:33 pm on Monday March 12, 2012:

    Because the inventory is low, most active buyers have already seen the homes that have been sitting on the market. When a new property comes on the market and it is either in great shape or competitively priced, it immediately goes into a multiple bidding situation. During the winter months, there were several multiple contract sales that sold below list price, but that is not what I am seeing now. People are bidding homes up in order to win. Until more people put their homes on the market, there remains a large number of buyers waiting to buy and very little inventory to show them.

Join the discussion

UrbanTurf now requires registration in order to post comments. Register here, or login below if you are already registered.

Click here if you forgot your password.



Erik Lars Evans

Coldwell Banker, Dupont

202-731-3142

Serving:

Bloomingdale

Shaw

NEW!

DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We’ve collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!

Northern Virginia

Profiles of 14 neighborhoods across Northern Virginia

Ballston
Looking to Give People A Reason to Stay Past 6pm
Clarendon
Happily Straddling the Line Between City and Suburb
Columbia Pike
Arlington’s Neglected Stepchild is Getting a Makeover
Crystal City
Turning Lemons into Lemonade
Lyon Village
Developing An Air of Exclusivity?
Rosslyn
Hitting Its Growth Spurt
Shirlington
An Urban Village Hitting Its Stride
Del Ray
Virginia’s Small Town Near the Big City
Eisenhower Avenue
The Vibrancy Might Take a Few Years
Huntington
The Quiet Neighborhood By the Beltway
Old Town
Mayberry By The Potomac
Parkfairfax
132 Commerical-Free Acres
Downtown Falls Church
Staying the Same in the Midst of Change
Tysons Corner
Radical Change Could Be On The Way

See more Northern Virginia »

Maryland

Profiles of 14 neighborhoods in suburban Maryland

Annapolis
Small-Town Living in the State Capital
Bethesda
Bedroom Community Gets Buzzing Cache
Cabin John
In With The New While Maintaining the Old
Chevy Chase
Affluence, Green Lawns and Pricey Homes
Downtown Silver Spring
Experiencing a Resurgence After a Bumpy History
Potomac
A Suburb on Steroids
Rockville Town Square
Despite the Dynamism, Still Somewhat Generic
Takoma Park
More Than a Little Bit Quirky
Wheaton
A Foodie Magnet on the Verge of Change
Capitol Heights
Kudzu, Front Porches and Crime
Hyattsville
Glass Half Full or Half Empty?
Mount Rainier
Artists, Affordable Homes and A Silo Full of Corn
National Harbor
A Development Rises Next to the Potomac
Riverdale Park
A Town Looking For Its Identity

See more Maryland »

Northwest DC

30+ neighborhood profiles for the city's biggest quadrant

16th Street Heights
DC's Sleeper Neighborhood
Bloomingdale
Where (Almost) Everyone Knows Your Name
AU Park
One of DC’s Last Frontiers Before the Suburbs
Brightwood
DC’s Northern Neighborhood on the Cusp
Burleith
DC’s 535 House Neighborhood
Cathedral Heights
Do You Know Where That Is?
Chevy Chase DC
Not to Be Confused With the Other Chevy Chase
Cleveland Park
Coming Back After A Rough Year
Columbia Heights
DC’s Most Diverse Neighborhood, But For How Long?
Crestwood
An Island of Serenity East of the Park
Dupont Circle
The Best of DC (For a Price)
Foggy Bottom & West End
Where the Institutional Meets the International
Forest Hills
Ambassadors and Adventurous Architecture
Fort Totten
Five Years Could Make a Big Difference
Foxhall Village
350 Homes Just West of Georgetown
Friendship Heights
A Shopping Mecca With a Few Places to Live
Georgetown
History, Hoyas and H&M
Glover Park
One of DC’s Preppier and More Family-Friendly Neighborhoods
Kalorama
A Posh View From Embassy Row
LeDroit Park
A Quiet Enclave in the Middle of the City
Logan Circle
Trendy Now, But Not By Accident
Mount Pleasant
Sought-After Homes Surround Main Street in Transition
Mount Vernon Triangle
From Seedy to Sought-After
Palisades
The Long, Skinny Neighborhood at the City’s Northwest Edge
Park View
It’s Not Petworth
Penn Quarter/Chinatown
DC’s Go-Go-Go Neighborhood
Petworth
Getting a Vibrancy of Its Own
Shaw
The Duke’s Former Stomping Ground
Shepherd Park
DC’s Garden of Diversity
Spring Valley
A Suburb With a DC Zip Code
Takoma
Not To Be Confused With Takoma Park
Tenleytown
Not Quite Like Its Neighbors
U Street Corridor
The Difference a Decade Makes
Woodley Park
Deceptively Residential
Adams Morgan
No Longer DC’s Hippest Neighborhood, But Still Loved by Residents

See more Northwest DC »

Southwest DC

The little quadrant that could

Southwest Waterfront
A Neighborhood Where A Change Is Gonna Come

See more Southwest DC »

Northeast DC

Profiles of 10 neighborhoods in NE

Brookland
New Development Could Shake Up Pastoral Peace
Deanwood
A Little Bit of Country Just Inside the District’s Borders
Eckington
Not to Be Confused With Bloomingdale
H Street
A Place To Party, and To Settle Down
Langdon
The Northeast Neighborhood That Few Know About
Michigan Park
A Newsletter-On-Your-Doorstep Community
NoMa
Evolving from a Brand to a Neighborhood
Rosedale
Ripe for Investment Right About Now
Trinidad
The Difference 5 Years Makes
Woodridge
Big Houses, A Dusty Commercial Strip and Potential

See more Northeast DC »

Southeast DC

6 'hoods from Capitol Hill to East of the River

Capitol Riverfront
Still Growing
Hill East
Capitol Hill’s Lesser Known Neighbor
Congress Heights
Gradually Rising
Hillcrest
Notable for Its Neighborliness
Historic Anacostia
Future Promise Breeds Cautious Optimism
Eastern Market
A More European Way of Living

See more Southeast DC »

Upcoming Seminars ▾