Have Washington, D.C. area Real Estate Prices Hit Bottom? At least one local economist thinks that we may be close...

I attended a seminar last week where Dr. Steven Fuller, of the Center for Regional Analysis, spoke about the current status of and the future projections for the DC area real estate market.  He began by stating that the national media’s economic reporting has caused a myriad of problems, and that this is especially true in local markets like Bethesda & Chevy Chase.  

Some Notable Points: 

• The 10 recessions weve experienced since World War II have not come with as much hype as we’re seeing today.
•  Although nationally we are clearly in a recession, the D.C. Metro area just isn’t seeing the same type of economic downturns (i.e., loss of jobs) as other areas of the country.

Where It Started: Any Guesses?!

Dr. Fuller believes that much of the problems that caused the crisis we’re in today began in the early 2000s when people “day traded” their houses.   Historically, the average rate of appreciation for Washington DC Real Estate (all housing types - home, condos, townhomes etc...) is about 7% per year.  This number skyrocketed in the early 2000s and maxed out in 2005 at 22% per year.  This overly enthusiastic price change combined with the availability of “easy” (with a capital "E") mortgage money built the foundation for the failures that are plaguing us today.   It could be as simple as the fact that people got greedy and now we’re paying

DC is Not Recession Proof...But

Dr. Fuller argues, the Washington, D.C. area economy always outperforms when the national economy is weak….and sometimes outperforms when the national economy is strong.  We are somewhat cushioned on the downside of the business cycle because our job market is strong.  Currently, the DC Metro area has the 3rd strongest job market (behind Dallas and Houston – can you say “oil”?) among the 15 largest job markets in the U.S.  Of those 15, only 6 are seeing job increases.  And our job market is only predicted to get stronger in 2009.  Also, the jobs we are losing (mostly retail and service) are being replaced by more professionals….so there is a net “gain” in the local economy. 

DC Real Estate - Econ 101?

Dr. Fuller also points out that most economic problems are inventory induced…i.e. supply and demand.  According to him, the Washington, D.C. areas “normal” real estate market offers 4 properties for every one buyer.  In 2004 and 2005, this number dropped to 2 properties for every one buyer (thus, multiple offers).  Today, we’re dealing with 8 properties for every one buyer.  But, our active listings have decreased over the past year and Dr. Fuller believes that we will continue to work thru this inventory…especially as prices are dropping and the affordability factor is increasing.

DC Metro Area Real Estate Market Prediction:

Dr. Fuller’s conclusion is that our market should begin to see improvement in the 2nd or 3rd quarter of 2009….a much rosier prediction than what we’re hearing on a national basis.  He argues that if his prediction is correct, we are getting close to the bottom and that it’s a very good time to make a wise buying decision.
 

 Contributing blogger - Gretchen Koitz, supporter of Sarasota real estate

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