After years of extrodinary housing valuation gains, the Washington DC is in the midst of a correction according to local experts. I am sure for some segments of the market, mainly condos, the market looks more like a crash. However, when the marketplace is looked at as a whole, there is a very natural and logical progression going on.

First the market experiences a growth cycle. Then when demand is nearing its peak and new inventory is low, the marketplace bubbles. This bubble typically is not not sustainable for long because the combination of new inventory and logic enters the marketplace and it slows.

Once the market slows a little, naysayers and pundits come out of the woodwork and into the media proclaiming the end is near. Adding to that a glut of inventory from developers that have built for last years demand, the market slows and buyers are not feeling pressured to purchase. But, once the inventory dries up a little, and praying interest rates do not get squirrelly, the market regains its equilibrium and modest and sustainable gains become the norm.

The last 12 months have been tumultuous, said representatives of the three local real estate associations, with prices during 2006 falling for the first time in years.
Housing values experienced double-digit growth between 2000 and 2005, but a spike in inventory and rising mortgage rates kicked the once white-hot housing market into a slump in 2006, they told reporters in Washington Thursday.
In November, for example, prices for single-family homes were down 1.4 percent over the previous year. By contrast, housing prices increased 19.6 percent from November 2004 to November 2005. Condo prices, which shot up 24 percent from November 2004 to November 2005, were down 5.3 percent in November of this year.
Northern Virginia was hardest-hit in 2006 with prices dipping as much as 5.7 percent year-over-year in September — a figure that outpaced national numbers. Montgomery County, Prince George’s County and the District fared somewhat better. While condo prices dipped, single-family homes in those three jurisdictions saw slight appreciation in 2006.
But despite decreasing prices, economists and industry officials continued to stress that market conditions were a “correction” — not a “crash” ­— that had to happen because prices were appreciating at an unsustainable level. Housing prices should bottom out soon and begin to appreciate again — in the single, not double, digits — in the spring of 2007. via the Examiner.com.

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