Signs point to a strengthening housing market in much of the the Washington region, but experts warn the recovery will wane when hit with a second round of foreclosures and the end of a hefty tax credit for first-time buyers.
The gains parallel a more robust market nationally, revealed in Tuesday’s release of the pending home sales index by the National Association of Realtors. The index, a leading indicator of actual sales, was up nearly 7 percent nationally from June 2008, and up almost 4 percent from May.
The southern region, of which D.C., Maryland and Virginia are all a part, grew by 9 percent in the past year and 7 percent since May, the widest gain of all four regions measured.
In Northern Virginia, the average sale price of a home climbed to about $451,400 in June, up from $406,000 in April. Even so, June’s figure was 14 percent below its mark in June 2008.
In Maryland, the average sale price for the entire state was about $322,000 in June, down 12 percent from one year earlier, but up from $295,000 in April.
“We’re participating in the economic recovery,” said Jed Smith, an economist with the National Association of Realtors. “We do expect to see a growth in sales, but not a barn burner. It’s a gradual improvement.”
As optimists remain hopeful, skeptics point to approaching pitfalls.
The first is familiar — foreclosures. Analysts expect a second round in coming months as people who purchased an adjustable rate mortgage at the middecade market peak find themselves unable to refinance before their interest rate soars. Many bought into the adjustable rate on the assumption that home values would continue to go up, making refinancing simple.
“There will be some increase,” Smith said. “And that’s keeping pressure on prices, so they’re not going up as rapidly as they would absent foreclosures coming onto the market.”
A second cloud on the horizon is the expected end of an $8,000 tax credit for first-time home buyers, who made up a disproportionate 29 percent of all buyers in June.
“When that happens it’s not clear that the nascent momentum will be sustained,” said Anirban Basu, economist and chief executive officer of Sage Policy Group. “After all, throughout the balance of the year and into 2010, unemployment will be drifting higher under the most likely scenarios, and compensation to workers remains quite flat by historic standards.”
