Region's Home Prices Continue To Fall

By Renae Merle

Sunday, January 20, 2008

The slump in home prices in the Washington region is deepening and spreading, according to data compiled for The Washington Post that shows that for the first time, every local county saw a decrease in prices for a significant period of last year.

The data from the Case-Schiller Home Price Index showed that prices for single-family houses fell 7.7 percent in the region during the third quarter of 2007 from the comparable quarter in 2006. That is among the steepest declines in home prices since 1991, when prices fell 5 percent during the first quarter from the first quarter of 1990.

The current slump is worse in counties far from the Beltway, such as Prince William, where prices fell 13 percent year over year, and slight in others, such as Arlington, which saw a 2 percent decrease.

The regional dip is not as steep as in parts of the country such as California and Nevada, but is worse than the 4.5 percent drop in prices nationally during that period. The figures mask the dramatic variations in the Washington region, where some areas thrive while prices have plunged in others, including Sterling, Manassas and Bowie. Those drops challenge the notion that a strong local economy would shield the region from the worst of the mortgage crisis. Instead, the depression in housing prices across the region is deepening and accelerating, according to the data.

Kristin Cockrell and her husband, Jake Cockrell, put their red-brick, three-bedroom Sterling Park house up for sale in April 2006 for $425,000. Then $379,000. They kept cutting to $350,000, then $325,000. Now, the couple hopes the new $300,000 price will attract the buyers they need in order to sell and move closer to family in San Diego.

Photo: Michael Williamson

Experts say Northern Virginia has been hit hard by the foreclosure crisis largely because it once had one of the hottest real estate markets in the country. This photo shows development in the once-rural Brambleton area near the height of the real estate boom in 2005. (File photo)

"Watching the price fall right before your eyes, it's hard," Kristin Cockrell said.

At the same time, some places continue to have stable or higher prices. The distance between a neighborhood thriving or struggling through the current market can often be measured in a few miles and in proximity to good schools and public transportation, real estate agents say. Communities closer to the District with fewer new houses continue to fetch higher prices, they said.

Metropolitan Regional Information Systems Inc., which tracks home sales in the area, provides a different snapshot of sales in December, traditionally one of the slowest sales months of the year. Median home prices were up 3 percent in the District and 1 percent in Alexandria in December from the same period in 2006, according to MRIS. That is a long way from 20 percent-a-year increases that epitomized the housing boom years, but still better than in the struggling communities.

The numbers from Case Shiller and MRIS measure prices differently. Case Shiller attempts to weigh price changes to the same home as it is resold over the years, while MRIS counts homes sold in a particular month, without regard to such things as the size and quality of the houses. MRIS also provides data down to the Zip code level.

Both sets of numbers show similar downward patterns in neighborhoods characterized by long commutes and lots of newly constructed homes. For example, MRIS shows that prices fell 18 percent in December in Sterling Park, about 30 miles from the District in the 20164 Zip code, as a spike in foreclosures depressed prices there. On one street, three houses were recently for sale. A few blocks away, there is a cul-de-sac with two for-sale signs. Two blocks over, homeowners took their place off the market after it languished; it is now for rent.

"Anything that is over 10 percent would be a crash in prices," said Mark Zandi, chief economist at Moody's Economy.com. "I would certainly consider a 20 percent decline a crash."

Whether the crash in prices spreads to other parts of the region will likely depend on whether a community has a high concentration of subprime loans that could force more foreclosures as interest rates adjust and payments increase, analysts said. If homes cannot be kept out of foreclosure, banks would take losses and sell at lower prices, pushing down nearby prices.

That has some concerned about areas such as Prince George's County, where 42 percent of the home-purchase loans made in 2006 were subprime, according to the National Association of Realtors. Median sale prices in the county declined only 8 percent in December, according to MRIS data, but some analysts are concerned that prices could be pushed down more as these loans adjust and homeowners are unable to keep up.

Fast-climbing prices transformed Sterling Park over the last seven years. Median home prices in the neighborhood of construction workers, nurses and mechanics rose nearly 100 percent from $237,086 in 2001 to $468,496 in 2005 at the height of the market, according to a review of MRIS data conducted by a local real estate agent.

The initially low prices attracted first-time buyers who couldn't afford homes closer to the city and ultimately would not be able to keep up with their mortgage payments. California-based RealtyTrac, which tracks foreclosures nationwide, ranked the Sterling Park Zip code among the 100 top areas for foreclosures in November 2007. (The Woodbridge Zip code of 22193 is also on that list.)

As of mid-December, 39 percent of houses for sale in Sterling Park and neighboring Sterling were either foreclosed on or being sold in a short sale (when owners sell a home for less than what is owed on the mortgage), according to analysis of MRIS data by Danilo Bogdanovic, a Loudoun County real estate agent with Keller Williams Realty. "The only thing selling right now are foreclosures," said Bogdanovic, who runs a Web site called Loudoun Foreclosures.

Foreclosures have dragged down sales prices, as banks discount properties for sale or allow owners to sell them for less than their mortgage value. The median sales prices of homes in the Sterling Park Zip code dropped from $365,000 in December 2006 to $298,000 a year later.

Residents and real estate agents say the situation has translated to empty houses with overgrown yards that prompted the Loudoun Board of Supervisors earlier this year to warn about overgrown grass. "It used to be location, location, location. In this market it is price, price, price," said Rick Martindale, an agent with Realty Direct in nearby Chantilly. Martindale recently lowered the price of a four-bedroom foreclosed house in Sterling Park from $330,000 to $250,000.

The competition with foreclosed properties has frustrated some owners who are seeking to sell their homes, but are not ready to lower their prices. After 25 years in Sterling Park, Betty Skelton wants to move into a retirement community. But on her block, at least two other homes are for sale. "I saw another sign up. I don't remember seeing the sign up before," she recently lamented.

After two months on the market, Skelton isn't ready to budge from her $399,900 asking price. During the housing boom, similar houses were selling for $500,000, a price she acknowledges was inflated. "I am not going to be able to go down further than where I am," she said. "I don't think I can give the house away."

Meanwhile, prices continue to rise and homes are selling quickly in some neighborhoods. Jeff Kohn, an environmental specialist, said he was "totally nervous" when he placed his three-bedroom home near the Tenleytown Metro station on the market earlier this month. Kohn and his wife had found a bigger house in Takoma Park with enough room to accommodate his parents who stay with them during the week.

More than 70 people came to the open house, and five days later it got a contract for more than its $875,000 asking price. "It felt like the whirlwind of the early 2005 market," said Kohn's agent, Kimberly Cestari of W.C. & A.N. Miller of Long & Foster. "I kept telling my sellers all we need is one good offer, and we got three great offers."

Researchers Richard Drezen and Eddy J. Palanzo contributed to this report.

Tagged: real estate, Sterling

Your Thoughts...

What do you think about Barack Obama’s decision against choosing Tim Kaine as his running mate?