Posted on Thursday, June 30, 2011
The nation’s Capitol stands out as the “shining star” in nearly every market report that crosses the wire.
Washington, D.C. has consistently defied the recent declines in home prices. The latest S&P Case-Shiller index upheld D.C. as the only city where home prices are increasing on both a monthly and annual basis. That coincided with an official “double dip” in home prices at the national level, brought on by new cycle lows for home prices in such markets as New York, Chicago, and Minneapolis.
Sales activity likewise bucks widespread trends. New numbers from RealEstate Business Intelligence, LLC show that the number of contracts signed for purchases of D.C. homes in May 2011 was the most for any month of May going back to 2005. RBI says the average number of days a property sits on the market is now 68, the region’s shortest sales cycle in seven months.
So how has D.C. been able to weather the ongoing storm? Industry insiders who live, work, and play in the area say the D.C. market can’t rightfully be used as an apples-to-apples parallel because other markets just don’t stack up.
Foreclosure activity, too, has been almost non-existent of late, thanks to what Jeffrey Fisher of the Fisher Law Group in Maryland explains as “an unofficial moratorium” that’s been in place since last November.
RealtyTrac’s latest foreclosure report pins 28 foreclosure filings on D.C. for the entire month of April.
The lull in foreclosures, though, could soon come to an end. The temporary freeze followed the Saving DC Homes From Foreclosure Emergency Act signed by Mayor Adrian Fenty late last year. Lenders laid off foreclosure actions until the act’s mediation procedures could be put into place.
The procedures became effective May 25th. The new law requires lenders to notify delinquent borrowers of their right to a mediation session prior to foreclosure.
The rules lay out a strict timeline for the pre-foreclosure mediation schedule should the borrower request it, and hefty fines that accumulate daily should a lender fail to meet certain criteria, for example, a $500 a day penalty for any missing documentation or failing to negotiate “in good faith.”
According to a statement from the D.C. Department of Insurance, Securities, and Banking, “This emergency rulemaking is necessary…to provide important safeguards to protect residents of the District of Columbia who have a mortgage default and face the danger of losing their homes to foreclosure.”
The department says additionally, “the immediate commencement of the program will enable residential mortgage lenders to reduce expeditiously the backlog of mortgage defaults that have accumulated.”
Rosenberg & Associates is Freddie Mac-designated and Fannie Mae-retained attorney counsel for the District of Columbia. Azer Akhtar, an associate with the firm, says he expects the new mediation rules to lengthen the process. He notes that the pre-foreclosure progression alone is now 120 days under the mediation timeline.
The emergency mediation rules are in effect for 120 days from the May implementation date, unless the Department of Insurance, Securities, and Banking decides to make them permanent.
“We think that will happen,” said Mark Meyer, a senior associate with the Rosenberg firm.
While foreclosures have been sitting dormant for six months now, Meyer says he doesn’t expect a surge in foreclosure activity. He says D.C. might experience an artificially high number of filings once lenders fall into place with the new rules two or three months down the road, but beyond this initial wave, Meyer expects the area’s anomaly of stability to be evident.
“The lingering question right now,” Meyer said, “is what the title insurers have to say about it” since failure to comply with the new law could raise title issues in the future if the validity of foreclosure is questioned.
While it might seem rational to tie the District’s defiant market performance to the absence of foreclosure properties because of the temporary moratorium, local experts don’t see that as the defining factor.
Brian Coester with the Coester Appraisal Group, based just outside of D.C., says the metro “has not been as negatively affected by the whole foreclosure meltdown” as other hard-hit markets, and he says, properties move fast.
“People snatch up homes so quickly, it’s just incredible,” according to Coester. Some areas – areas that are 700K to 800K – “haven’t even skipped a beat at all,” he says.
Coester points to the fact that in D.C. “you’re dealing with relatively high demand in a limited geographical area.”
He says no other area in the U.S. has similar economic situations because of so many factors that favor high real estate prices, such as limited zoning, strong economic support from the money that goes along with the nation’s political hub, and the inflow-outflow dynamic of people always moving through the area for work or business opportunities.
As Coester puts it, Washington D.C. is just “a different animal.”
By: Carrie Bay DS NEWS