District of Columbia Housing Monitor: Spring 2007

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Abstract

The District of Columbia Housing Monitor provides a quarterly look at the Washington, D.C., housing market, tracking home prices, real estate listings, new construction, and affordable housing. This issue's special section examines mortgage lending trends through 2005 and highlights the declining share of low income home buyers in neighborhoods throughout the city.

Introduction

The quarterly District of Columbia Housing Monitor uses the most recent available data to illuminate housing market and affordable housing trends in the city. In addition, each report includes a special focus section that analyzes, in greater depth, developments that are shaping the Washington, D.C., housing landscape. In this issue, the special section uses mortgage lending data to examine trends in home purchase loans through 2005 and to present a ward-specific analysis of the changes in the characteristics of District home buyers from 1997 to 2005.

The information presented in this report is supplemented by data provided on the NeighborhoodInfo DC Web site (www.NeighborhoodInfoDC.org/housing).

Key findings:

• Housing demand continues to slow; median thirdquarter sales prices for single-family homes and condominiums are down from one year earlier. In the third quarter of 2006, sales of single-family homes were down 11.6 percent from the prior year, while condominium sales dropped 54.1 percent. Prices are starting to fall in response to the slower demand. The median sales price of a single-family home dropped to $465,000 in the third quarter of 2006, down 5.3 percent in inflation-adjusted prices from one year earlier. The median price of a condominium was $354,000, down 10.2 percent in real terms from the third quarter of 2005.
• Real estate listings of single-family homes and condominiums decreased between the third and fourth quarters of 2006, but the time houses spend on the market continued to increase. The number of single-family housing units listed for sale averaged 1,486 per month for the fourth quarter of 2006, a decrease from the third quarter but still considerably higher than the 2005 average of 774 listings per month. Listings of condominiums and cooperatives decreased to an average of 1,659 units per month in the fourth quarter, but are still more than twice as high as in 2005. Further evidence of a market slowdown is provided by the increasing time that both single-family and multifamily ownership units spent on the market.
• Prices show definite signs of declining or flattening in all wards except Wards 7 and 8. The two highest-priced wards in the city, Wards 2 and 3, saw real decreases of more than 10 percent in the median prices of single-family homes between the third quarters of 2005 and 2006. Meanwhile, prices in the two lowest-priced wards, Ward 7 and 8, grew by more than 8 percent in real terms. Other wards experienced modest price changes (declines or increases) over the year.
• Home building slowed in the fourth quarter of 2006, and housing permits for the entire year were down for the first time since 2003. New, privatelyowned housing units authorized by building permits totaled 2,105 for 2006, down from 2,294 units in 2005 but still higher than the 1,936 units approved in 2004.
• Denial rates for home purchase loan applications rose again in 2005; almost one quarter of all loan applications in Wards 7 and 8 were denied. The denial rate for new conventional home purchase loans increased to 14.3 percent of all applications in 2005, up from 13.4 percent in 2004. Denial rates were highest in Wards 7 and 8, at 24.8 and 24.9 percent, respectively.
• Home buyers in Wards 5, 7, and 8 were more than 12 times more likely to take out a high interest rate loan than were buyers in Ward 3. In 2005, almost one of every five conventional home purchase mortgages originated in the District was a high interest rate loan. While only 3.1 percent of home purchase loans in Ward 3 were high interest rate loans, Wards 7 and 8 had the most prevalent use of such loans, 44.3 and 45.0 percent, respectively.
• The share of home purchase loans for secondhome and investment properties continues to increase. Between 1997 and 2005, the share of home purchase mortgage loans to borrowers who did not intend to use the home as a principal dwelling (second-home buyers and investors) almost tripled. In 2005, the highest rates of second-home and investment borrowing occurred in Ward 8 (30.7 percent), Ward 7 (24.3 percent), and Ward 5 (21.2 percent).
• As housing prices have increased, the share of home purchasers who are very low income has dropped dramatically. In Ward 2, one of the highest- priced wards in the city, the share of borrowers who were very low income dropped from 11.5 percent in 1997 to 2.0 percent in 2005. In Ward 5 (mid-priced), very low income buyers accounted for 33.9 percent of home purchase loans in 1997 but only 3.9 percent in 2005. In Ward 8 (low-priced), more than half of all home purchase mortgages in 1997 (52.6 percent) were to very low income households, but since then the share has dropped to 20.7 percent.

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The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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