Question: How has the Arlington housing market compared to the rest of the region?
Answer: The 2022 housing market reached a full sprint by the 2nd week of January and the question everybody is trying to answer is whether we’re in for yet another monstrous year or if the craziness will settle as interest rates climb and more inventory hits the market in the next 4-8 weeks. My personal prediction (and hope) is that January and February will be intense but once we start seeing more properties listed for sale (March-June), the market should gain some stability, albeit still very competitive.
Cause of the Craziness
If there’s one metric that best illustrates why the January market is already so brutal, it’s Months of Supply, a measure of current supply and the pace of demand. Housing economists say that ~6 months of supply is a balanced market, and the lower that number, the more favorable things are for sellers.
Nearly all local and regional markets including Arlington, Northern VA, and the DC Metro closed out December with the lowest Months of Supply for single-family detached homes ever with Northern VA and the DC Metro heading into January 2022 with less than two WEEKS of supply and Arlington coming in just a fraction over two weeks. Loudoun County entered the new year with ONE week of supply…
Even the condo market made significant improvements in the last quarter of 2021 after taking quite a beating during the first 12 months of the pandemic. On a quarterly basis, Months of Supply for the condo market in Northern VA, the DC Metro, and Arlington dropped significantly relative to the last 5-6 quarters. Months of Supply in Arlington’s condo market is now much closer to pre-pandemic levels than where it has been since the pandemic started.
The Problem is High Demand, Not Under-Supply
Months of Supply is affected by supply and demand, but the incredibly low readings for single-family detached homes are being driven almost completely by insanely high demand (see Absorption Rate chart below) because we have had a healthy/normal dose of inventory listed for sale over the last 18 months (see New Listings charts below).
Prices Have (Obviously) Responded Accordingly
No surprises here…the average price of single-family detached has quickly trended upwards while the condo market managed to hold on, despite a worrisome period from summer 2020 through spring 2021. The questions I’m looking to answer are whether there’s even more room for appreciation in the single-family market and if the uneven pace of appreciation between the single-family and condo market will cause a delayed upward price reaction in the condo market because single-family (and townhouse) has gotten too far out of reach for many buyers.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.