The decline in area home sales indicates that the Washington region is headed for a housing market downturn, said a leading economist Monday.
“It’s a sign that the region’s housing market is rapidly weakening, and it’s going to be a tough couple of years for the broad D.C. housing market,” said Mark Zandi, chief economist for Moody’s Economy.com.
Sales of existing single-family homes and condominiums fell significantly in the region during the first quarter, according to data released Monday by the National Association of Realtors. The District and Virginia both saw the number of homes sold drop by about 18 percent from the first quarter of 2005. Maryland’s resales fell by 6.5 percent. Nationally, sales of existing homes dropped by 2.1 percent and 26 states posted gains.
The data “is a good indicator of where house prices are headed because, as transaction volume falls off, that indicates people are not willing to purchase homes at their current prices,” Zandi said.
“It’s the first sign the market is weakening and shows sellers are going to have to cut prices in order to sell their homes.”
Virginia is more likely to see a “crash” — which Zandi defines as a drop of more than 10 percent from peak prices — than Maryland because investors in the housing market focused on Northern Virginia.
“The aggressive investor demand was particularly active on the Northern Virginia side,” Zandi said. “The most serious downturn in the housing market will be on that side.”
The Northern Virginia housing market is already lining up with Zandi’s predictions. The number of homes sold in Northern Virginia dropped by about 24 percent between April 2005 and April 2006, and the number of condos sold dropped by nearly 20 percent. The average sale price dipped 4.5 percent.
Declining home sales in D.C. and Virginia are primarily due to an oversupply of condos in those markets, not a weak market for single-family homes, said Holly Worthington, president of the Greater Capital Area Association of Realtors.
Falling home sales in the Washington region
D.C.
Number of existing single-family homes or condos sold:
» 1st quarter 2005: 13,200
» 1st quarter 2006: 10,800
» Percent change: -18.2 percent
Maryland
Number of existing single-family homes or condos sold:
» 1st quarter 2005: 135,200
» 1st quarter 2006: 126,400
» Percent change: -6.5 percent
Virginia
Number of existing single-family homes or condos sold:
» 1st quarter 2005: 187,600
» 1st quarter 2006: 154,400
» Percent change: -17.7 percent
Source: National Association of Realtors
