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Foreclosures bringing down prices in Washington

The number of residential properties sold in the first quarter of 2009 jumped 15% compared with a year ago, according to a new study from research firm Delta Associates and the local Multiple Listing Service.

Sales in the outer suburbs of the area are particularly strong with Prince William and Loudoun counties in Virginia and Frederick County in Maryland up 40%.

The housing markets in these suburbs have been among the hardest hit in the region and remain dominated by aggressively priced foreclosures. However low prices mean buyers are snapping up bargain priced property. Clearing out the excess supply of homes is generally regarded as a critical step toward stabilizing prices and the beginning a market turnaround.

'We're starting to see some sign that supply and demand are coming closer to the right balance. Prices should move up slightly when we start to see the supply of homes fall,' said Ann Marchand Thompson, a senior associate at Delta Associates.

So while sales increase because they are mostly foreclosed properties prices are expected to keep falling until late 2009 and early 2010 with some properties in outlying areas continuing to fall until 2011, the report says.

Overall, the region's prices fell 22.3% in the quarter from a year earlier. The average price dropped 10.7% in the region's core areas of Arlington and Alexandria. Prices fell some 20.4% in Fairfax, Montgomery and Prince George's counties and steepest drop was in the outlying suburbs, where foreclosures dragged prices down 28.7%.

It is unclear when the foreclosures will clear the system as many lenders have not yet listed homes they've repossessed.