Home prices in the Washington area have a 92 percent chance of dropping over the next two years, according to a recent report.
Rising foreclosure rates and burgeoning unemployment were the two major factors contributing to the increased risk, according to the report released by the California-based PMI Mortgage Insurance Company.
After dropping for two consecutive quarters, mortgage foreclosures nationwide rose in the first quarter this year to 1.34 percent, compared with 1.01 percent in the fourth quarter of 2008. Unemployment in the D.C.-Arlington-Alexandria region was 6.1 percent in the first quarter.
Home prices in the Maryland suburbs are also projected to drop. The Bethesda-Frederick-Gaithersburg region in Maryland has an 82 percent chance of home prices being lower in the first quarter of 2011, the report said.
“Despite the strong base that the government gives [the D.C.region], there are still many economic fundamentals É that can’t be overlooked,” said LaVaughn Henry, senior director of U.S. economic analysis for the PMI Group.
Henry said that increased foreclosures are creating excess supply, and people who actually had good credit are now out of the market because they’re losing their jobs.
“Either way you cut it, there’s a pressure on prices to fall,” he said.
The median sold price for residential homes declined by about 7 percent in May from 2008 in the Fairfax-Arlington-Alexandria-Falls Church region, from $405,000 to $375,000, according to the most recent data from Metropolitan Regional Information Systems. D.C.’s median price fell about 10 percent in May, from $440,000 to $394,950. Montgomery County’s median price fell about 12.5 percent, from $410,000 to $358,117, and Prince George’s saw a 21 percent drop, from $285,000 to $224,900.
Stephen Fuller, director of George Mason’s Center for Regional Analysis, said recently that first-time homebuyers were helping the market somewhat, but added that “the trade-up market hasn’t functioned normally yet.”
California, Florida, Arizona and Nevada had the riskiest markets, the report said. The risk index does not measure the magnitude of the declines in home prices.
Second Quarter 2009 PMI U.S. Market Risk Index (First Quarter 2009 data) Risk Risk Affordability Rank MSA Index Index High Riverside-San Bernardino-Ontario, Calif. 99.9 114.95 High Washington-Arlington-Alexandria 91.7 126.37 High Bethesda-Frederick-Gaithersburg 84.2 119.75 Risk index is the percentage predicting the probability that home prices will be lower in two years. Affordability index measures how affordable a home is now compared with a baseline index in 1995. Scores above 100 mean homes are more affordable today and scores below 100 mean they’re less affordable. Source: The PMI Group Inc.
