The Washington region may be headed for a housing market crash, a leading economist said Thursday, leaving homebuyers who recently entered the market to pick up the pieces.
Housing prices are expected to decline by as much as 10 percent in dozens of major metropolitan markets across the country in the next several years, said Mark M. Zandi, chief economist for Moody’s Economy.com. About half a dozen of those cities, including D.C., could be headed for an even bigger falloff as the market corrects itself.
Zandi spoke Thursday at the National Association of Home Builders’ annual spring forecast conference in the District.
With the rapid appreciation of home prices over the last several years — home prices in Northern Virginia alone leaped nearly 60 percent between March 2003 and last month — a 10 percent dip won’t make a huge dent in home values. But for those who recently bought property hoping to make a profit shouldn’t count on it, Zandi said.
“For the average homeowner who moved into the region awhile ago, it may not be a worry,” he said. “It’s painful for the person who put no money in … if you’ve been depending on your home to raise cash.”
The Northern Virginia region is even more at risk than Maryland’s suburbs, Zandi said, because the market has “been more hyped up.”
Industry officials in Northern Virginia’s real estate market continue to say housing prices are simply falling back to Earth after several years of unusual appreciation.
“We are totally suspect of that kind of prediction,” said Jill Landsman, a spokeswoman for the Northern Virginia Association of Realtors.
“Any dip would be a balancing out. We have no fear the sky is falling.”
But signs that the market is beginning to cool are already apparent. Data released by the association shows that housing demand fell by 17 percent between March 2005 and March 2006. The average growth of housing prices has also slowed. Housing prices between March 2005 and 2006 grew by about 6 percent. Between March 2004 and 2005, they increased by 21.4 percent.
Zandi acknowledged that Washington’s strong economy could cushion a crash, unlike like cities such as Las Vegas or Miami, which have “thinner” economies.
Slowing sales in N.Va.
» Single family homes sold in March: 1,295
» March 2005: 1,544
» March 2004: 1,659
» March 2003: 1,461
» Average price in March: $535,633 (prices up 6.3 percent)
» March 2005: $504,081 (up 21.4 percent)
» March 2004: $415,269 (up 23 percent)
» March 2003: $337,612
Source: Northern Virginia Association of Realtors
