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.