Our local residential real estate market started a remarkable turnaround starting last June that is still going strong. The chart at left shows the change in the supply of houses on the market in Prince William County, Manassas and Manassas Park starting in May which has steadily declined through December 1st. The number of houses for sale now is approximately the same number that was available in March of 2006, and at this rate will arrive at back pre-bust inventory levels in about six more months.
The number of homes that are available and not under contract has been dropping by an average of 9% these past six months, and this will soon contribute to a stabilization and recovery of residential prices as the huge advantage that buyers now have in the market evaporates. The problem over the past several years has been too few buyers chasing too many properties and foreclosures have only exacerbated the problem.
In May, there were 6,172 residential properties on the market without a contract in the Prince William area. As of December 11th, there are 3,503. That’s a more rapid change to stabilize the market than the run which destabilized it over the past few years.
Local governments are bracing for further weakness in the residential market, which makes sense even if the cause for such doom-and-gloom seems to be dissapating. After several years of tough budgets, the last thing they want is to end up with a potential deficit again, and they’ve been cutting spending as hard and strong as they can. When the next round of residential assessments is complete, if the balance of buyers and sellers in the market has returned to reasonable balance, property values should at least level off, and most likely will start climbing again. That lag means that local governments will be the last to benefit from the turnaround.
As much as we like to dump on investors, they’re a big reason why this turnaround has been happening, especially in the lower-priced properties where the market slide has been most pronounced. While a decreased home ownership rate introduces additional challenges, and the potential for another round of residential overcrowding problems, market stabilization is what will be needed to restore confidence to potential homeowners and increase their participation in the market. By next summer we should see if this trend holds out, and if it does a lot of local residents, as well as local governments will be breathing a lot easier.
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