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With so few homes for sale in the D.C. region, and with such high sale prices, could the D.C. region be seeing a return of the housing bubble?
This year, the number of houses on the market is two-thirds what it was last year, and about half of what we had in 2008. As a result, prices are up, and the number of days a house stays on the market is down.
Samia Patel, who buys, renovates and sells houses in the D.C. area, says these days, houses are on the market for an average of a month, "but I've seen houses, that are gone in one day, five days, six days."
Patel began flipping houses in 2007, "when the market was at its peak," she says. "And I finished my first house just as the market was tanking!" she adds with a laugh. "So then I stopped doing it, and got back into it about two years ago. So I have actually got a good perspective over the bubble, the bubble bursting, the bubble coming back, and I'm actually very surprised by now, how much of a seller's market it's become again."
Patel's latest renovation is a five-bedroom, two-bathroom house in Kensington, Md. It recently went on the market with an asking price of $490,000. Patel suspects it will be snatched up soon, but she says shiny, renovated homes aren't the only hot sellers these days.
"I went to an auction for a house in Garrett Park," she says. "It was like a tiny house. It had mold all over the basement; I don't even think you could be there for more than five minutes safely. There were 100 people that showed up outside that house for the auction that day. It was listed at $199,000. It ended up selling for over $400,000!"
Thing is, whether we're talking houses for flipping, or houses for living, the situation seems to be the same: inventory is low, prices are high, and as a result, says Lisa Sturtevant, deputy director of the George Mason University Center for Regional Analysis, home ownership rates in the D.C. region are falling.
"Rates have been falling nationally, but they've been falling faster here," she explains. "They have fallen from about 69 percent at [their] peak to about 63 percent."
The reasons, she says, are manifold. More jobs in D.C. are attracting more people in their 20s -- people who are more likely to rent. Home loans are harder to come by. Foreclosures have shifted more single-family homes to the rental market. And, of course, for-sale inventory is down.
"There was for a while a lot of hesitancy for a seller to put their home on the market," Sturtevant says. "They weren't sure, frankly, that they would be able to find a house to buy themselves if they sold their house; if they were going to stay in the region they needed to find that move-up house. And there are a lot of people, frankly, who are underwater on their mortgages, and they can't sell their house."
There's also, she says, a historically-low supply of new homes, "because new-home construction basically ground to a halt during the recession.
"We have been seeing an uptick in residential construction in the region over the last couple years, but it's primarily been in multi-family rental housing. It's only just very recently that the single-family has started to come back."
Then, Sturtevant says, we have the issue of sequestration. With so many federal employees in the region, there's growing concern about how federal spending cuts may affect people's jobs.
"If the budget cuts go through, our analysis shows that the state of Virginia, for example, will lose 207,000 jobs," she says.
So if those cuts go through, "there's going to be less demand for housing here. And that would result in a slowdown in the housing market in the winter and then spring."
If, on the other hand, the federal government makes decisions that inspire more economic certainty, "then we'll see a stronger winter and spring housing market. So we don't know! It all depends, sort of, on what the Feds do!"
In the meantime, though, Lisa Sturtevant has advice for potential homebuyers out there: "If you're going to stay in a region for, they say generally between five to seven years, and you want to be a homeowner, then it's still a good option for people."
Though in this region, adds house-flipper Samia Patel, you'd better act fast!
"You just have to jump in this market," she says. "If you see something you love, and it's in your price range, or even if you have to stretch a tiny bit, but not to the point of uncomfortable, just do it."
And realtor Eric Rice agrees: "You don't want to act without being educated, so look at the comparable, make sure you're paying a fair price, or if you're paying slightly over the market value, you know that you're paying slightly over the market value.
"But if you're entering the market, be ready to move quickly, or be ready to lose the first house that you love!"
[Music: "Home (Myndset Remix)" by Edward Sharpe & The Magnetic Zeros from Myndset Remixes]
Photos: D.C. Realty
With jury selection completed on Monday, opening statements are expected this morning in the corruption trial of former Virginia Gov. Bob McDonnell.