How bad are things, really?

Yes, there’s a lot of bad news out there and, based on reading the papers, it seems like the sky may finally be falling on us here in the Nation’s Capital. This led us to take a closer look at what is going on in real estate.
As usual, when you dig a little deeper you learn some interesting facts. On average, home prices in the District of Columbia have actually increased over the previous year, ever so slightly, in each quarter of 2008. This is not true of the suburbs. But if you own real estate in the District of Columbia, you are actually holding steady through what one newspaper has described as the “nastiest recession in decades.”
And if you look at DC plus the inner suburbs of Arlington/Alexandria and close-in Montgomery County, the average sales price of a home is, even now, very close to its peak in the second quarter of 2006. The average price now is right at $540,000. The peak was around $560,000.
Trends are starting to look a little better, in fact. The inventory of homes on the market is declining, construction has slowed dramatically, interest rates are trending lower, job growth and in-migration in the region remain strong. These trends combine to project a balance in supply and demand for housing by the middle of next year in the District and a little later in the suburbs.
Let’s look at just one factor in the District: construction permits. The number of permits issued peaked in 2006 and has declined in 2008 to only 20% of what it was at its peak. This suggests that the District will soon face a shortage of housing v. demand. With a new administration coming to town, we should see that demand pick up by the middle of 2009. After all, a lot of the folks who move here for a political job never leave (Tom Daschle, Karl Rove, Al Haig, Colin Powell, etc). That means they’re not giving up their homes to the next wave.
So, if you own property, cheer up! If you don’t, buy something!