LuxManor Real Estate

How Have Home Values Changed Over the Last Ten Years?

Q: How have home values in the the DC Metro Area changed since 2005?

A: The DC Metro region is comprised of very different areas that reacted very differently to the adjustments we saw in the market. Call it a bubble, an adjustment, or a fluctuation in property values, some areas were hit harder than others.

Lower income areas saw their values appreciate quickly but were hit the hardest. They had the most NINJA (no job, no income, no assets but you can still buy a home) loans as well as other risky loans being pushed by the government and banks. The result was as follows: these areas experienced the most foreclosures and depreciation of property values. Other areas did not fluctuate as much as far as home values during this ten year span.

Q: Does it matter if I bought a condo vs. a single family detached home?

A: Yes. Between 1999 and 2005, many condos appreciated very quickly and people were rushing to get in on rapid property values. The lending market changed and banks began to foreclose on the people who took loans they could not repay. The condo owners who had not been paying their mortgages were also rarely paying their condo dues. Some condos and home owners associations (HOAs) became ineligible for certain financing due to their very high delinquency rates. This increased the number of investors which then affected their owner occupancy rates. These two factors severely exacerbated the problem for condos and HOAs and lead to more foreclosures and a further decline in values. These issues were not spread throughout all of the DC Metro Area but took their toll on certain cities and neighborhoods. LuxManor Real Estate believes the worst is long since over and that condos can make wonderful homes and investments. In fact, many condo buyers have done well over the last few years by buying and holding.

 Q: Where are home values now?

A: Some DC Metro areas have not yet returned to their peaks while others have exceeded them. This post comes from a question from an investor who bought a nice condo in a gated community in McLean, VA. Only now are we seeing the value equal to the price he paid in 2005, despite a healthy community and a new metro that opened nearby. Fortunately, he now has a lot of equity in the home and has had a great renter (yes, just one) and no vacancy all these years.

 Q: Are we likely to see another major dip in property values in the DC Metro Area in the next ten years?

A: LuxManor Real Estate does not believe so. This is based on the relatively small number of existing risky loans and therefore a low number of foreclosures is likely in the future. Banks have been very strict (perhaps too strict) for a decade as far as those eligible for financing. Provided smart decisions are made with lending standards going forward, we may never see such home value volatility again in our lifetimes.

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Jim Roy
Jim Roy is the broker of LuxManor Real Estate.