Question: Is the housing market slowing down?
Answer: Over the last 2-3 months I’ve experienced a noticeable slowdown in the single-family and townhouse market relative to what we’ve experienced most of the last 12+ months. While slower than it has been, the market is still very competitive, and prices are holding.
Properties that would have gotten 8-10+ offers a few months ago might get 2-3 now. Escalations over asking are still common, but less extreme. And in some cases, Buyers can secure modest contingencies (inspection, appraisal, financing). I believe the main factors in this change are:
- Buyers have distractions they didn’t have for much of the lockdown (vacations, events, commute, etc)
- Asking prices are more reflective of market values now that 6+ months of closed sales in 2021 are available for market pricing analysis
- Some Buyers have given up after months of struggling to find/win a home
- Normal seasonal behavior. Demand usually subsides in the summer, relative to the previous spring.
Home Demand Index Readings
To put the receding demand into perspective, I pulled out some charts from the most recent Bright MLS Home Demand Index, which tracks regional and local demand by analyzing data ranging from buyer showing activity to closed sales to feedback from local real estate agents.
Demand in the overall Washington DC Metro housing market dropped 17% from June to July and 13% year-over-year. The July 2021 Demand Index reading of 123 is lower than the Demand Index reading in 10 of the last 14 months, with the four months from November 2020-February 2021 being the only months with lower readings since May 2020. July 2021 is also the first month with a year-over-year decline in demand over the last 12+ months.
The Index uses the same price ranges to track demand across all Bright MLS market centers (DC, Baltimore, Philadelphia) so the price ranges aren’t the best for the DC Metro/Arlington, but still provide a good indication of regional and local demand trends.
The Demand Index for single-family homes $395k-$950k dropped 19% from June to July and 9% year-over-year. For single-family homes over $950k, the Demand Index dropped 29% from June to July and just 2% year-over-year.
While these reports show significant drops in demand recently, the actual demand is still very high and is enough to support recent price appreciation.
Listing Volume Still High
The number of condos listed for sale over the last 12 months is significantly higher than any other 12-month period we’ve seen in Arlington, but July listing volume settled down to finish closer to historical averages than we’ve been seeing. This is a sign that the surge in condo supply may be tapering off while we’re also seeing condo demand increase relative to the 2nd half of 2020 and early 2021.
High market values and changing housing needs have also led to an increase in the number of single-family homes listed for sale in Arlington lately, but that volume is much closer to the historical average than what we’ve witnessed in the condo market. It also does not seem like it to most Buyers because demand has quickly absorbed the extra supply.
There’s usually an increase in demand and homes listed for sale after Labor Day and I expect to see similar seasonal behavior this year until we reach the winter/holiday market starting around early November when demand and listing supply both tend to retract.
Historically, it has taken until late February/mid March for demand and listing volume to ramp up towards their spring peaks, but the last few years we’ve seen the ramp-up period, especially for demand, start in January. I expect a similar pattern next year, but will be surprised to see anything like the double-digit price appreciation that we experienced in 2021 repeat in 2022.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.