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If you read or listen to the news lately, you might begin to worry that the banking system is near collapse because of the housing downturn. There are news stories daily about different major banks that are struggling with losses from bad mortgages (or bad management).

On the other hand, if you look at the real estate market in the metropolitan Washington DC area we are getting busy! Over the past 3 months sales have risen dramatically and foreclosed properties are starting to sell and move off the market.

Casey Margenau, a well known realtor in Northern Virginia, states in the July 22 Fairfax County Times that “Fairfax County is always the first to do better, so it’s sales are up nearly 20%.” He also notes that “Prince William County prices have dropped 33% in the past year but sales of house under $500,000 are up 89% from a year ago.” Margenau identifies that houses at the lower end of the price range are currently moving the most. Overall in Fairfax County, “sales have increased 19% from May 2007 to May 2008”.

Several agents I talked to believe there is a pent-up demand for houses in our area. The current problem is not home prices, but home financing. Until the banks can get themselves right, they will negatively impact the housing recovery in our area.

Which creates an unusual scenario; Banks don’t like to own houses they like to own money. Banks make money by lending money, but if they can’t lend money due to reserve shortages, then they can’t make money. When banks are losing money credit becomes tighter, hence negatively impacting home financing.

The ‘BIG HOUSING BILL’ passed the Senate Saturday and full passage seems imminent. Will this solve all the problems in the housing industry? No one seems to think so, but in an election year congress decided they had to do something.

In spite of the headlines, those of us on the front lines of the Metro DC real estate market will go about our daily business and be a part of the recovery that has begun here. Remember every market is local.