Housing market tightens again as inventory hits historic lows

Nationwide, housing inventory — calculated by dividing the number of listings by the number of sales in the most recent month — is up from an all-time low in January 2022. But it is still lower than ever before at this time of year, with 3.1 months of supply on the market, according to the National Association of Realtors (NAR). In addition, one in three sellers are receiving more than asking price on listings, said Jessica Lautz, NAR deputy chief economist.

In the Washington area, which includes the Northern Virginia and Maryland suburbs, monthly listings were down nearly 30 percent from a year ago, according to data released by the multiple-listing service Bright MLS at the end of July. The D.C. market had a 1.33-month supply of housing, according to that report. Inventory for the Mid-Atlantic region was a little better, at 1.52 months. Maryland’s Frederick and Montgomery counties and Virginia’s Fairfax County all had less than a month of inventory on hand.

Meanwhile, prices are climbing. The median sales price for all types of housing in the D.C. region was $590,000 as of July, up 4.8 percent from that month last year, with especially big increases in some of the suburbs. The median price in Fairfax City, Va., made a standout year-over-year gain of 9.1 percent, to $730,000, from July 2022, according to Bright MLS. In Fairfax County, the median price jumped 8 percent, to $702,000. In Frederick County, Md., on the northern outskirts of the D.C. area, it rose 7.8 percent, to $485,000.

“We’re experiencing a somewhat dysfunctional housing market at the moment,” Avi Adler, president of the Greater Capital Area Association of Realtors, said in an August press release. “There are fewer buyers due to higher interest rates and even fewer sellers, who feel handcuffed to their existing home and low mortgage rate.”

In D.C., the median price in July was $625,000 for all kinds of housing, down 3.3 percent from last year, according to Bright MLS.

Throughout the region, median price growth for condominiums remained modest, according to NAR — up just 1.1 percent, to $365,000, year-over-year, as of June 2023.

Lisa Sturtevant, chief economist for Bright MLS, said falling prices elsewhere in the United States, notably parts of California and other Western states, fed false hopes of a more buyer-friendly local market in the offing.

“Some buyers might have, back in the spring, been thinking, ‘Oh, I’m going to wait. … It’s just a matter of time before [house prices] come down in Washington,’” she said. “And the fact is, we simply haven’t seen that.”

Analysts said D.C.-area buyers will probably have to adjust their expectations and compete even harder for available housing: spending more and buying smaller or commuting farther.

Almost everywhere in the region, listed residential properties are spending less time on the market than they did a year ago. In Loudoun County, Va., northwest of D.C., residential properties spent an average of five days on the market in July, down from eight a year before. Elsewhere in Virginia, listings in Fairfax County and Alexandria sold in an average of six days, down two days year-over-year. Arlington County, Va., and Prince George’s County, Md., both bordering D.C., held steady at nine days on the market.

D.C. was an outlier. Residential properties spent an average of 17 days on the market in July, according to Bright MLS, up two days year-over-year. D.C.’s relatively stable condo market may account for the difference.

The ability to pay cash, often an advantage, is especially handy in a real estate market with rising prices, low inventory and the likelihood that mortgage interest rates will continue to climb. Nearly one in four residential properties, 24.7 percent, sold in the D.C. area in April 2023 were bought entirely with cash, according to the Redfin real estate brokerage, up 5.5 percentage points from the previous year. First-time home buyers without the ability to pay cash face the worst odds, said Gunnar Blix, director of data strategy for Black Knight, a mortgage and real estate technology and data provider.

“They have no equity to go into this market,” Blix said. “They are facing a 7 percent interest rate. They’re facing very tight inventories. They have nowhere to go.”

Add to the economic realities the uncertainty of future work arrangements as companies revisit pandemic-inspired remote-work policies and the White House pushes for federal employees to return to the office. It’s enough to persuade some would-be buyers to rent instead, at least for a while.

Rents in August increased just 0.3 percent year-over-year in D.C. and 1 percent in the surrounding suburbs, according to Chris Salviati, a housing economist with the rental research and data aggregator ApartmentList. In August, according to the Zillow real estate website, median rent for a one-bedroom apartment in Washington was $1,849, up $98 from the year before. In Manassas, Va., median rent increased $43, to $1,752, for a one-bedroom unit, while in Laurel, Md., it increased $96, to $1,617.

With the local rental market expected to remain cool at least through the end of the year, “I think the scales have definitely started to at least tip more in the direction of renting being a more favorable financial decision,” Salviati said.

If a prospective homeowner’s budget can handle the onerous mortgage rates, it’s best not to wait for the market to change, said David Mount, real estate agent and chief operating officer of the Redux Group of eXp Realty, which operates in the D.C. area.

Mount said he advises his clients to buy now if they can. There’s no evidence, he explained, to suggest that home prices will go down in the next five to 10 years. Many of the buyers he deals with, he said, are not seeing any houses they really like among the scant offerings available, and they have to settle for a longer commute or a smaller property than expected. But they, at least, have made a start at homeownership.

“Over time, as homes appreciate, if you want to upgrade, you can sell that property, roll the equity into the new property, and then you’re in a better position, but at least you get your foot in the door,” Mount said.

To those who can’t afford to enter the market now, or who find themselves getting outbid on homes, Mount advises patience and strategic thinking. For example, he said, the housing market hits predictable lulls around the holidays and tends to get busy again in January. A savvy home buyer, therefore, might get a competitive bid accepted by moving on a property in the latter half of December.

“You want to zig when other people are zagging,” he said. “Then, ideally, you want to buy before them.”