A Recovering Market without Govt Intervention
Free-market purists have to love the lead in The Washington Post story Friday about the real estate market in Prince William County, Va., a suburb of Washington, D.C.
"Freewheeling American capitalism may be falling out of fashion on Wall Street, but in the western suburbs of Northern Virginia, it is driving one of the greatest home-buying sprees the region has ever seen."
The story goes on to say that Prince William County experienced a 235 percent year-over-year increase in home sales in September, with 1,116 homes sold -- more than any other September on record.
Fans of laissez-faire capitalism have been cringing through waves of massive government interventions over the past few weeks, but can point to what is happening in Prince William County as an example of how a real estate market can recover without the giant, bumbling hand of government reaching down to help.
In fact the county's surge in sales is occurring before any of the legislation passed in Washington (just a few miles down the road and across the Potomac River) over the past few months has filtered down to local communities. Most of the provisions in the mammoth housing rescue bill passed in July -- including $4 billion to buy up foreclosed homes, of which Prince William County has been allocated more than $4 million -- did not take effect until Oct. 1. And the deus ex machina promised as a savior in the recent $700 billion bailout bill has not yet materialized.
Of course there are costs to a free-market recovery, primarily decimated home values and loss of home ownership. The county's median price is down 41 percent from a year ago, from $405,000 to $239,000, according to the Post story. And neighborhoods that once comprised primarily owner-occupied homes have transformed into more transient communities as foreclosed homes were bought up by investors and converted to rentals.
But according investor Chris James quoted in the story, "bargain-hunting investors are the best hope for stabilizing foreclosure-ravaged neighborhoods."
Author and Investor Lance Young, who has authored several eBooks on buying foreclosures, lives near Prince William County and said he's purchased "several REOs and other properties since April 2008. I am rocking and rolling properties out here in the D.C. area." (More from Young and other investors who are in full buying mode in the November issue of the Foreclosure News Report.)
So is this pattern in Prince William County evidence that the free market is still capable of a healthy and sustainable recovery, or is it a temporary uptick before things once again get worse? Do we need a bigger, more monolithic solution from Washington to truly solve the problem?