Washington, DC Home Sales Continue to Dwindle

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While certain high price areas show no sign of slowing down, the DC metropolitan housing market is singing a different tune. We’ve seen many economically healthy cities experience resurgence in home prices, a phenomenon largely motivated by the gradual climb in home sales. This produced a self-motivating effect where homebuyer confidence let to more purchases, and the subsequent rise in values encourage further homebuyer confidence.

That being said, we’ve seen certain metros hit a distinct tipping point. The price /purchase rate escalation can only rise so far until too many potential homebuyers get locked out of the market. As a recent Washington Post story notes, we’ve seen purchase rates decline for the third straight month as of the close of March. We’ve seen a disappointing overall first quarter for home sales in DC this year, which is a disappointing trend considering how strong they were during the same time last year.

As the Washington Post story notes, this could have to do with other factors than pure economic trends. The constant snowing throughout the mid-Atlantic has chilled home sales overall, but it’s still significant enough that it can’t be attributed solely to the weather. The report also points out that tougher mortgage rates and tightened loan standards might also be contributing to the decline in home sales.

As a point of comparison, figures cited from RealEstate Business Intelligence note that sales in the DC metro region were down 11.3% in March against the same timeframe from last year. The same report notes that DC homes sold in March of this year recorded at the lowest tally since March 2009, in the depths of the recession. This might portend a long-standing trend, or could merely represent a temporarily slowdown in local sales.

What are the Possibilities?

Some of the data points to Q1 2013 standing as a temporary cooldown period for the DC housing market. There’s a likelihood that homebuyers have been (in a sense, literally) weathering out the winter period in anticipation of the friendlier spring home prospecting season. The Washington Post strongly hints at this possibility, especially in light of the recent increases in local housing inventory. Releasing new homes onto the open market should help ease the elevated price of local real estate, which should coincide nicely with the homebuying-friendly summer season.

To offer a more direct figure, the Post story notes that more homes came on the market in March than in the entire eight months before that. In terms of price, there’s a chance that demand is so high that new homes on the market might not diminish prices too strongly. That being said, even if home values do continue to escalate, it could have the broad impact of helping homeowners who are still struggling with negative equity. This too could, in time, allow for more homes to go up for sale.

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About Author

Harrison Stowe is a writer for NVR Inc., a prime developer of Baltimore new homes. Addressing a range of topics including investing, mortgages, and real estate, Stowe combines finance knowledge with additional experience working with Ryan Homes in the current real estate market.

4 Comments

  1. What also isn’t accounted for is the chilling effect government shutdowns are having on the people. I now think there is a general since that many “non-essential” government workers are now not so sure how secure their jobs are. Coming from the DC region, the vitriol toward federal workers and government spending is at a high point. I don’t think contractors or federal workers are assured that the money will always be there for jobs.

  2. Sara Cunningham on

    Lisa makes a good point. My husband works for the government and it is unsettling. We are relocating to D.C. this summer from Italy. We don’t plan on buying a personal residence but are looking at investing there so this could work in our favor initially.

  3. This is unsettling news. I remember in 2007 I was the listing agent for a seller transferring from So Cal to D.C. I was talking to his D.C. agent on the phone and she said the housing market was dead. She said two weeks before it was going gangbusters and then it just stopped. She warned me it was coming. At the time SoCal was flying high and on fire; I told her it wasn’t going to happen here because there were too many buyers and everything was peachy. About two months later, it hit in So Cal almost overnight. I sure hope the slowing in D.C. isn’t going to take the same path and head west. Although, with prices rising so fast in So Cal, I wouldn’t be surprised.

  4. I am in Northern Virginia and have seen a dramatic difference YOY in the lower-end in some areas and more inventory at all prices. We seem to be leveling off after several yrs of gains. I have a place for sale now that would probably have sold within a week last year. I have been out of the Market for a couple of years. The numbers don’t work for me anymore – I’m glad that I bought what I did from late 2008 to 2012. I hope that a new Administration will beef-up Defense spending and other gov’t spending. This does remain, however, a great place to invest. Rental demand is very strong – again, with regional variations. Months of inventory remains very low (2 in my area) and unemployment is well below the National average.

    Like always, if you “buy right” you’ll be fine.

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