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Washington Home Prices Strongest in Nation

Weather housing boom, bust the best

Home prices in the Washington area have fared better than anywhere in the country over the past 10 years, according to a new report.

Local home prices are 78 percent above their January 2000 levels, according to the latest S&P Case-Shiller Home Price Index. Los Angeles and New York were ranked second and third, respectively. Detroit, which has been ravaged by the recession, was the only market out of 20 in the index whose average value is below its 2000 level.

One reason for the area's strong performance is the relative scarcity of land for development in parts of the close-in region, said Anirban Basu, chairman and chief executive officer of Sage Policy Group, an economic and policy consulting firm.

Montgomery County's agricultural reserve, for example, encompasses about a third of the county and limits the amount of residential development in that northern section of the county.

Conversely, areas such as Prince William and Prince George's counties, which have been hit hard by the downturn, had less constrained development during the boom times, Basu said.

Jobs are another key factor. The area's unemployment rate was among the 10 lowest in the country every year between 2000 and 2008 out of metropolitan areas with a census 2000 population of 1 million or more, according to the Bureau of Labor Statistics.

And while housing prices aren't where they were during the peak of the boom, they have recovered from their lows. Over the past few months, Mary Bayat, a broker in Alexandria, said she has seen both sales and prices increase.

"D.C. and Virginia are really going fast," she said. "We have a lot of foreign investors buy in D.C."

Prince William County, which was inundated with foreclosures several years ago, is showing signs of recovery; the median sale price for a residential home, including condos, was up 31 percent in February from February 2009, according to Metropolitan Regional Information Systems Inc.

The county introduced a program that leverages money though investments, at no taxpayer cost, to get foreclosed and vacant properties off the market. More than 30 homes have been closed on through the "Home Help" program, said Allen Scarbrough, county treasury manager.

"To see that kind of positive demand regarding the housing market -- it was really needed ... and it's certainly always welcome," he said. "We're really serious about not spending a dime on this."

Still, despite the apparent mini-rebound in some areas, analysts remain wary about the region's housing prospects.

"Housing starts continue at extremely low levels, recent reports of home sales suggest the market remains difficult, and concerns remain about further foreclosures and a large shadow inventory of unsold homes," said David Blitzer, chairman of the index committee at Standard & Poor's.

The shadow inventory and its potential effects is difficult to quantify, he said, but "one expects that it will be impactful."

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