Question: How did the DC area housing market perform in 2023?
Answer: I will publish my annual Arlington housing market review in the next 2-3 weeks, but in the meantime, I thought it would be helpful to share a higher-level view of how our regional DC area housing market performed in 2023 and what it looked like entering 2024.
Home Sale Volume Crashed
The most significant market trend was the steep drop in total homes sold in 2023, with total sales in the Greater DC Metro about 25% lower than the historical average and more than 40% below 2022 sales volume. The drop in housing units sold was not the result of lower demand demand remained quite strong despite interest rates spending most of the year at 7-8%+.
The decrease was driven by the lack of supply, with very few homes hitting the market for sale, primarily due to homeowners not wanting to give up their low mortgage rates. The second chart highlights the extent of the supply problem, with nearly two straight years of mostly double-digit year-over-year decreases in monthly new listing volume. The only positive year-over-year reading in the past two years was a .4% increase in new listings in February 2022.
Prices Increased at a Lower Pace
Normally with supply so low one would expect to see prices increase sharply, but high interest rates made most buyers reluctant to overpay and kept price appreciation modest at 2.5% on the year, well below the historical average of 4.3%. Appreciation in the Greater DC Metro market came in just under the national average of 2.9%.
2024 Starts with Low Inventory, Increasing Demand
2024 started with one of the lowest number of homes for sale on record with just over 4,700 housing units on the market. With current demand, this equates to just over one Month of Supply (MoS), a measure of supply and demand where lower MoS favors sellers and six MoS is generally considered to be a well-balanced market. The national average for MoS coming into the new year was 2.9.
With interest rates falling into the 6-6.5% range over the last couple of months, we entered the new year with strong demand momentum, and we have seen that play out in the first few weeks of the year with high showing volume, busy Open Houses, and strong competing offers on many properties. The natural effect of low supply and high demand is another jump in home prices.
Another sign of increasing demand can be seen in the third chart below, showing year-over-year change in total monthly pending sales (homes under contract). Despite negative year-over-year monthly total pending sales, due to fewer homes available to purchase, the year-over-year decrease got rapidly smaller through the second half of 2023 and turned positive in December (coincides with the drop in interest rates). This suggests strong momentum on the demand side of the market.
Looking Ahead
There are early signs that more supply will be coming, and we might finally see positive year-over-year numbers in new monthly listings. Expect the increase in supply to be met with a higher increase in demand if interest rates remain flat or trending downward, which should lead to prices increasing at or above the historical average of ~4.3% in the Greater DC Metro area.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Video summaries of some articles can be found on YouTube on the Eli Residential channel.
Eli Tucker is a licensed Real Estate Agent in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
