In this issue:

• 2006 Real estate year in review
• National: Existing-home sales improve in January
• Local: Housing market improved in January and February, with more opportunities for buyers
• The average sold price for all homes in Montgomery County rose almost 7% in February 2007 to $515,371, compared to the same month in 2006
• Absorption rates are dropping!

2006 Real Estate Year in Review

National:  Existing-home sales in most states declined from year-ago levels in the 2006 fourth quarter, marking the likely bottom for the current housing cycle, according to the latest quarterly survey by the National Association of Realtors® (NAR). Prices dipped slightly overall, as sellers were more willing to negotiate. “This information confirms 2006 was the year of contraction,” says NAR Chief Economist David Lereah. “Hopefully the fourth quarter was the bottom of this current business cycle.” He says home sales are leveling at historically high levels, and examination of data within the fourth quarter shows home prices began to stabilize near the end of the year. “When we get the figures for this spring, I expect to see a discernible improvement in both sales and prices,” he says.

The national median existing single-family home price was $219,300 in the fourth quarter, down 2.7 percent from a year earlier when the median price was $225,300. The median is a typical market price where half of the homes sold for more and half sold for less. However, for all of 2006, the median price rose 1.4 percent to $222,000.

Montgomery County:  Home sale prices increased in the county during 2006. The county’s average sold price for the whole year was $529,511, up 4.37% from 2005 when the average sold price was $507,340. The county’s median sold price for the year was $439,000, up 3.29% from 2005 when it was $425,000.

U.S. House Price Appreciation Rate Steadies:  The rate of home price appreciation in the U.S. remained steady in the fourth quarter of 2006, extending a general trend of deceleration begun earlier in the year. Home prices, based on repeat sales and refinancings, were 1.1 percent higher in the fourth quarter than they were in the third quarter of 2006. This is slightly above the revised growth estimate of 1.0 percent from the second to the third quarter. Prices in the fourth quarter of 2006 were 5.9 percent higher than they were in the same quarter in 2005.

Price appreciation in 2006 was substantially smaller than the tremendous price gains of recent years, which ranged from 7.4 percent in 2002 to 13.2 percent in 2005. The figures were recently released by Office of Federal Housing Enterprise Oversight (OFHEO) Director James B. Lockhart, as part of the House Price Index (HPI), a quarterly report analyzing housing price appreciation trends.

“These data show that, on the whole, prices are still rising, albeit at a much slower pace,” said Lockhart. “This suggests that house price appreciation is, for now, more in line with historical norms.”

National: Existing-Home Sales Improve in January

Sales:  Sales of existing homes rose in January and February, according to the NAR. Total existing-home sales – including single-family, townhouses, condominiums and co-ops – increased 3.0 percent to a seasonally adjusted annual rate of 6.44 million units in January from an upwardly revised pace of 6.27 million in December. In February, total existing-home sales rose 3.9 percent to a seasonally adjusted annual rate1 of 6.69 million units, but are 3.6 percent below the 6.94 million-unit pace in February 2006. Last month’s increase was the biggest monthly rise in three years. David Lereah, NAR’s chief economist, said the strong gain is a bit of a surprise. “Some of the rise in home sales may be from mild weather that brought out shoppers in December, but fundamentals have improved in the housing market and buyers see a window now with historically-low mortgage interest rates and competitive pricing by sellers,” he said.

Prices:  The national median existing-home price for all housing types was $210,600 in January, down 3.1 percent from January 2006 when the median was $217,400. In February the national median existing-home price was $212,800, down 1.3 percent from February 2006 when the median was $215,700. The median is a typical market price where half of the homes sold for more and half sold for less.

Inventory:  Total housing inventory levels rose 5.9 percent at the end of February to 3.75 million existing homes available for sale, which represents a 6.7-month supply at the current sales pace compared with a 6.6-month supply in January. Raw inventories peaked last July at 3.86 million, and supplies topped at 7.4 months in October.

Consumers start the year upbeat: Consumers were feeling good in January and February — about the job market, autos, and housing. The Conference Board, a Washington, D.C. research group, reports its Consumer Confidence Index rose to 110.2 in January (from 110 in December) and to 112.5 in February. This was the highest January index in five years, giving economists confidence that consumers will continue to spend.

Local: Housing market improved in January and February, with more opportunities for buyers

While it is good to keep up with the national housing statistics and trends, local details should be more significant than national patterns. Paying attention to local changes, improvements and patterns is crucial when determining real estate value for a number of reasons, for example, demographics. The movement of people in or out of a local area closely parallels housing demand and prices.

Montgomery County Sales: The average sold price for all homes in Montgomery County rose almost 7% in February 2007 to $515,371, compared to February 2006 when it was $481,848 (see note below).

Average Selling Prices for February 2007 in other areas: Washington, DC: $490,276, down 2.47% from February 2006; Prince George’s County, MD: $349,843, up 7.81% from February 2006; Frederick County, MD: $343,392, down 3.95% from February 2006; Fairfax County, Fairfax City, Arlington County, Alexandria City, & Falls Church City, VA (NVAR): $504,943, down 1.78% from February 2006; and Loudoun, VA: $486,292, down 7.80% from February 2006.

Note: The only valid comparisons for average prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Data source: Metropolitan Regional Information Systems, Inc.

Absorption rates are dropping!

Absorption rates from around the region are showing an exciting trend for astute buyers and sellers. In February, the Washington D.C. absorption rate was 4.5, down 25% in just 5 months. The Montgomery County absorption rate was 4.6, down 23% from 5 months ago when it was 6. Absorption rate is the ratio between the number of homes listed for sale and the number of homes sold in the last 30 days, that is, it is the amount of time in months that it would take to sell the entire current inventory.

Mortgage Rates: The 30-year fixed-rate mortgage averaged 6.29 percent with an average 0.4 points in February. That's up from 6.22 percent in January and 6.25 percent a year ago. (A point is 1 percent of the loan amount, and should be added to loan rates to reflect the true cost of the mortgage). Still historically low rates. Nothing to write home about.