For the past few years, sellers have had all the power in the local real estate market. Today’s buyers and sellers are accustomed to a market marked by rapidly increasing prices, low inventory, fast offers and bidding wars. But real estate is cyclical and a perpetual seller’s market can’t last forever.
In terms of supply and demand, it’s still very much a seller’s market. But we’re seeing some small signals that the market may be shifting back — just a little — toward buyers.
First, let’s analyze the regional data. Across the Washington area, the number of homes for sale has fallen year over year for 18 months straight. The region had about 2.6 months of supply in September, well below the six months that represents a market balanced between buyers and sellers. Homes are still moving quickly, with the typical property finding a buyer in 27 days, six days faster than last September.
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Economics tells us that fewer homes for sale will cause prices to rise. That’s true, but prices are not growing at the same pace they were last year. Across the metro area, the median sale price was $375,000 in September, that’s just 0.7 percent higher than September of last year. Year-over-year price growth has been less than 1 percent in each of the past three months.
Here’s a look at how the market is faring in Washington, Northern Virginia and suburban Maryland:
Inventory is dismally low in the District. Despite the fact that the number of homes for sale has increased year over year in every month except January, it hasn’t been enough to pull the city out of its deep inventory hole.
With just 2.1 months of supply in September, it’s interesting that the median sale price fell 2.6 percent in September. That marks two months in a row of year-over-year price declines. Prices fell across all home types: single family, townhouses and condos and co-ops.
What’s behind the unexpected price decline? Our agents say the overall quality of homes on the market isn’t at the level that buyers expect. While we continue to see bidding wars and price escalations for well-priced properties across the city, many of our buyers are unenthusiastic about the overall inventory of properties available right now and aren’t seeing the value.
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Today’s buyers don’t have the same sense of urgency they had in the past. Understandably, they feel that if they are spending top dollar, they don’t want to budge on their wish list items and will opt to wait until the right property comes along.
The dynamics in Northern Virginia are similar. In Fairfax, Loudoun and Prince William counties, inventory was down by double-digits in almost every month this year. In September, every county had fewer than three months of supply. In September, prices were up in Alexandria (+18.2 percent), Arlington (+1.5 percent) and Loudoun (+2.2 percent). They fell in Fairfax (-0.4 percent) and Prince William (-1.5 percent).
Buyers seem to be less urgent and more hesitant to get into a bidding war. After a long stretch of low inventory, sellers expect buyers to flock to their listing, but that is only the case for homes that show well and are priced well. Even in this low inventory environment, a home that is overpriced will sit.
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Redfin’s Virginia agents have seen an increase in buyer demands with home inspection repair items. Smaller maintenance items and repairs that may have been overlooked by buyers during the spring are now considered mandatory repairs. Many times, sellers feel pressured to take on more than planned in fear their buyers will walk.
The data tells a fairly similar story in the Maryland suburbs. Both Montgomery and Prince George’s counties have seen year-over-year inventory declines for the past 18 months. The median sale price in Montgomery County was $410,000 in September, up 1.2 percent compared with last year. The median sale price in Prince George’s was $285,000, up 7.5 percent compared with a year ago.
In Montgomery County, certain neighborhoods in Silver Spring and Rockville are very hot, but farther out regions are starting to see days on market creep up.
Prince George’s has seen very rapid price appreciation this year. Price growth has been more than 5 percent in every month since April 2016. Home sales have been incredibly strong this year. In September, home sales were up 36 percent compared with a year ago. We attribute the growth in sales and prices to the relative affordability of homes in the county. First-time buyers who are priced out of other areas are flocking to Prince George’s where they can get a lot more house for their money.
It’s hard to make broad declarations about the real estate market. Everything is pretty situational. One house may get 10 offers in a weekend. Another home will sit on the market for months.
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We are sensing a subtle shift. Pickier buyers with less urgency are meeting sellers with unrealistic expectations that we’re still in the hot spring market. This dynamic is reflected in the slower rate of price growth across the region and the notable price decline in Washington.
Shifts in the real estate market don’t happen overnight, but buyers may be regaining a bit more of the bargaining power.
Marshall Park is a real estate broker at Redfin in Virginia who writes an occasional column on the local real estate market.