Real estate market report 2005

by Dan Krell © 2005

Many experts are not only talking about the real estate bubble, but how it’s about to burst. I was interested in finding out how many articles and proclamations exist about the bursting bubble, so I googled “housing bubble Washington, DC.” There were over 800,000 links to people and articles (some going back to 2002), talking about how the bubble is about to burst. Many talk about concerns of financial impact and others talk about a doomsday scenario when the bubble bursts. It sounds a bit negative if you ask me.

If you look at the mid year statistics, it seems that the Washington D.C. real estate market is still in full swing. You can decide for yourself based on the statistics for single family homes in Montgomery County. So, here is the mid-year report card, based on the statistics compiled by the Greater Capital Area Association of Realtors (GCAAR). Homes listed for sale for June 2005 totaled 2,004, up from the 1,971 homes listed in June 2004, an increase of 1.7%. The fact that more homes are coming on the market sounds encouraging, however, the total active listings in June 2005 (homes listed for sale but not under contract) are down 4.5% from the same time last year. So, although the supply of homes being listed for sale rose, the actual amount of homes available on the market has reduced because there are homebuyers ready to gobble these homes up as they come onto market.

It seems as if the homebuyers’ appetites for homes are insatiable. The number of contracts and settlements are up for the period of January to June 2005 as compared to the same time period in 2004. The number of houses where status changed from active to contract during the first six months of 2005 increased 1.3% compared the first six months of 2004. Additionally, the number of homes that were settled during the first six months of 2005 increased 2.5% compared to the same six month period in 2004.

Interestingly, I would like to note the sales of homes that sold for $1,000,000 or more increased from last year. There were 389 of these million dollar plus homes that sold in the first six moths of 2005, compared to the 265 sold in the same time period in 2004, that is a 46% increase! So far, for 2005, the average sale price in Montgomery is $544,719. Compared to $477,937 for the same time period in 2004, it is an increase of $66,782! (These statistics can be found at the GCAAR website www.gcaar.com).

Looking at the statistics above, you may ask yourself, “can prices continue to climb and record numbers of sales continue year after year?” Looking at the big picture, the real estate market is like all other commodity markets, such that it is subject to economic influences. Rather than having a bubble burst and having residue all over the floor, the real estate market may correct itself as economic factors change. Don’t get me wrong, a correction in the market is not pretty, but it does not mean the end of the real estate market either (does anyone remember the correction in the real estate market in the early 1990’s).

This column is not intended to provide nor should it be relied upon for legal and financial advice.
This column was originally published 7/18/2005.
Copyright Dan Krell 2005.