Posted on Tuesday, January 4, 2011
The Washington region posted the highest year-over-year home price gains in the nation this fall, as real estate values slumped in nearly every other metropolitan area, a key housing report said Tuesday.
A healthy job market, particularly for high-salaried workers, buoyed demand and prices for housing in the D.C. area, local economists said. Home values climbed 3.7 percent in Washington in October from a year earlier, making it one of only four regions nationally to avoid a dip in prices, the Standard & Poor's Case-Shiller home-price index said.
It is unclear how long the region will be able to buck the national trend. One of the anchors of the local job market - private government contractors - may face significant cutbacks over the next several years as the Obama administration has vowed to rein in defense spending. But many economists expect that the local housing market is strong enough to weather layoffs now that prices appear to have stabilized.
Still, pockets of the region continue to lag behind. In some Maryland counties, values are falling due to aggressively-priced foreclosures, according to new data from George Mason University's Center for Regional Analysis.
The steepest plunge took place in Prince George's County, where the median home value fell by nearly 16 percent from January through November compared with a year earlier. Prices also fell, but less sharply, in Maryland's Charles and Frederick counties, which dropped 4 percent and more than 2 percent, respectively. In contrast, prices in Montgomery County rose almost 2 percent, while those in the District enjoyed a nearly 3 percent gain.
The Northern Virginia suburbs, where job growth has been stronger, did well across the board this year, the George Mason analysis showed.
Prince William County prices jumped nearly 20 percent this year after being hit hard by the housing crisis. The county cleared out a sizeable portion of foreclosures quickly, experts at George Mason said. Meanwhile, in Fairfax and Loudoun, two of the wealthiest counties in the nation, prices rose by more than 8 percent.
"We think prices have made the adjustment and we can move on," said Jim Diffley, chief regional economist at IHS Global Insight. "Given the area's employment picture, we feel there is less risk of a fall in the Washington region than in other parts of the country."
The Washington market's strength contrasts sharply with sagging real estate trends elsewhere in the country.
Of the 20 major metropolitan areas tracked by the Case-Shiller index, only three regions aside from Washington posted year-over-year gains: Los Angeles, San Diego and San Franciso.
The results are more dismal when looking at the results from September to October. Over that span, prices of single-family homes fell 1.3 percent and in every region, including Washington. It was the third-straight month of declines.
What's more, in six regions - Atlanta; Charlotte; Miami; Portland, Ore.; Seattle and Tampa - prices fell in October to their lowest levels since their housing markets began deteriorating in 2006. This "double dip" in real estate represents one of the worst fears of housing analysts and is developing just as it appeared that the overall economy was recovering.
A sustained rebound in home prices is considered critical to getting the economy back on track. But many economists predict that home prices will continue to slip in the new year and possibly beyond.
"There is no good news in October's report," David M. Blitzer, chairman of the S&P's index committee, said in a statement. "Home prices across the country continue to fall."
Yet others contend that a substantial drop in prices is necessary to get past the excesses of the boom years, especially in regions that experienced sharp run-ups in home prices.
"We built too many houses in too few years," said Joel Naroff of Naroff Economic Advisors. "The only way to eat up that supply is by having prices fall."
The Case-Shiller index measures repeat sales of single-family homes and reflects a rolling three-month average, so the October data captures transactions that closed in August and September, as well. Those months essentially comprise the end of the real estate selling season.
The index shows that prices in Washington, while still off their peaks, have been flat for several months, suggesting that home values locally may have finally stabilized, local analysts said.
John McClain, deputy director of George Mason University's Center for Regional Analysis, credits the strength of the region's job market, which added 49,200 jobs between November of 2009 and 2010. Most of them were in high-paying sectors, which helped fuel demand for homes, he said.
The Washington unemployment rate has consistently remained roughly three percentage points below the national average throughout the downturn in the economy.
"We're not immune from recession, but we're not affected by it nearly as much as everywhere else," McClain said. "That's why Washington area prices have bottomed out."
The potential cutbacks in private defense contracting jobs are worrisome, but the effects are not likely to be disastrous, said Gregory H. Leisch, chief executive of real estate research firm Delta Associates.
Private defense contracting jobs make up roughly 200,000 of the area's 3 million jobs.
"If there's a cut, we will hardly notice it because we will be growing 40,000 to 50,000 jobs a year here even if there's not an increase in government contracting activity," Leisch said. "It will impact the volume of transactions in the area rather than home prices, and I don't think it will impact volume dramatically."
By Dina ElBoghdady
Washington Post Staff Writer