The Washington area is still at high risk for drops in housing prices by the end of next year, despite a recent uptick in home sales and prices, according to a new report.
There is a 77 percent chance that local home prices will be lower in the fourth quarter of 2011 than in the fourth quarter of 2009, according to the second-quarter 2010 Risk Index published by PMI, a mortgage insurance company.
Though the figure declined from an 89 percent chance from the third quarter of 2009, the report still classified the area’s risk of price declines as “high.”
The area’s unemployment rate and affordability ranked relatively well, but prices — which declined 15 percent year-over-year from the fourth quarter — really hurt Washington’s score, said PMI spokesman Joel Luebkeman.
Updated data from the first quarter, though, showed price stabilization, Luebkeman said.
“If all other factors remain the same … you would expect the risk score for the D.C. area to show additional improvement,” he said.
“If all other factors remain the same … you would expect the risk score for the D.C. area to show additional improvement,” he said.
Other highlights of the PMI risk report:
» Of the nation’s 384 metro areas, 356 had a declining risk score, with only one — Ocean City, N.J. — showing a slight increase and the rest unchanged.
» The number of areas in the riskiest category (90 to 100) fell by 26.4 percent during the fourth quarter, while those in the least risky (zero to 10) surged by 79 percent.
Source: PMI
Demand is still high locally, said David Dowies, principal broker for Portfolio Realty in Chantilly.
“It’s still pretty competitive,” he said, adding that houses in the $350,000 range are “still flying off the market in Northern Virginia.”
Dowies said prices will flatten out or slip toward the end of the year, then could fall during the winter as banks start to release more foreclosures onto the market.
But Andy Bauer, regional economist with the Baltimore branch of the Richmond Federal Reserve, said the area should see a modest increase in home prices by the end of the year.
