Is Washington DC real estate poised for a rebound?

Demand for homes in the Washington DC metro is now outpacing supply, The Washington Post’s Elizabeth Razzi reported today. The inventory of unsold homes in June dropped to a healthy 5.1 months supply, according to a report from the local multiple listing service and Delta Associates. This is the amount of time need to sell the homes on the market at the current sales pace. Experts say a market in balance has about 6 months supply. Anything below that is considered a buyer’s market.

That doesn’t mean that sellers can raise their prices yet, but they’re offering less generous incentives, Razzi says. Home prices fell 13.2 percent in the second quarter compared to the previous year.

The metro area includes the battered Prince William County and other distant suburbs that are in terrible shape. I would guess the supply in DC and its inner suburbs such as Alexandria, Va. and Arlington, Va. are much tighter. And home prices there are likely to rise sooner.

DC, which has plentiful federal government and defense contractor jobs, is one of the country’s few economic bright spots and its housing market is a good candidate for an early rebound. Am I being too optimistic here?

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