David Howell, executive vice president and chief information officer at McEnearney Associates, writes an occasional column about market conditions in the Washington region.
One of the questions real estate agents get asked the most is: “How’s the market?” However, the question you want to ask an agent when thinking about buying or selling is: “How’s the market for me?”
Think of it this way: If someone asked about how the stock market is doing, it would be accurate to respond: “It’s doing very well.” Since bottoming out in 2007, the Dow Jones industrial average has hit record highs, and it has been on a solid, upward path. Sounds a lot like the real estate market. However, someone who owns Radio Shack stock — currently trading for 30 cents after being at $20 five years ago — will have a little different perspective on the stock market than someone who owns Apple, Google or Disney shares.
[Editor's note: For more analysis of the local real estate market, check out the Real Estate section's Spring Home Guide on March 14, 21 and 28 and online sites Where We Live and washingtonpost.com/realestate during those weeks.]
Fortunately, the real estate market doesn’t see such wild swings in value, but there are significant differences in the real estate marketplace. For example, let’s look at the number of month’s supply of inventory. This number explains how many months it takes for all homes currently available on the market to sell given the current pace of new contracts.
The overall supply of homes in Washington is less than two months, and in some price ranges it’s tighter. D.C.’s sweet spot — homes priced between $750,000 and $1 million — is 1.4 months. In Loudoun County, there is a three and half month supply overall, but an eight-month supply in the $750,000 to $1 million price range.
While both of these markets are considered healthy by any historical standard, D.C. is a seller’s market while Loudoun’s is balanced. Conditions in Northern Virginia and suburban Maryland are quite different from D.C. and Loudoun. And because of that, buyers and sellers alike will need to set their expectations and determine their negotiating strategy based on very local market conditions.
Buyers this spring in D.C. will have far fewer choices in a given price range than a suburban purchaser, and if they are serious about buying they had better be prepared. They should be ready to drop what they’re doing and go see that hot property that just came on the market and ready to come in with a strong offer quickly if they want it. That’s especially true for homes on Capitol Hill, in the U Street Corridor, Columbia Heights and the Southwest Waterfront. So far this year, 25 percent of all properties in the District have sold above list, so paying above the asking price or – something we hate to see, waiving appraisal or home inspection contingencies — might be what it takes to win in a multiple offer situation.
Some patience may be in order as well. For those buyers who don’t want to get caught up in the frenzy of multiple offers and fewer choices, sitting on the sidelines for a while may make sense. But the biggest decision to make is to weigh the benefits of waiting until the market is a little calmer against the likelihood of higher interest rates and higher prices in the future. For sellers in D.C., there are three words of advice: Don’t get cocky! An overpriced listing will get passed by even in a seller’s market. Almost a third of the available homes in the District right now have reduced their price since coming on the market, and 40 percent have been on the market for more than three months.
For buyers in the suburbs, areas closest to Metro are still hot, so the “be prepared to act quickly” guidance applies if you’re looking along the Orange Line in Arlington, or Rosemont and Old Town in Alexandria, Falls Church in Fairfax County or Silver Spring in Montgomery County. In communities like Ashburn in Loudoun County, Burke in Fairfax County and Rockville in Montgomery County, you’ll find a better balance between supply and demand and are less likely to be in competition with other buyers for the same property.
[To see an interactive map of your Zip code or other Zip codes, click here.]
For sellers, always remember that your home is worth what someone is willing to pay for it and how much you need when you sell isn’t important to buyers. There are almost 500 homes that have been on the market for more than a year in our suburban markets, but on the flip side, more than half of what is selling is on the market for 30 days or less. Your pricing strategy and when you first come on the market have a great deal to do with which side you’ll be on.
While the key market indicators can give you sense of the overall market, remember that every neighborhood, every street, every price range and every home is different. Not every home in a hot neighborhood will sell quickly, and a home in a slower area can still sell the first day on the market. That’s why specific, local research and knowledge are so important.
Here’s a list of neighborhoods across the region that are poised for growth in sales and price appreciation in 2015:
• Shaw/U Street
• 16th Street Heights
• Fort Lincoln
• Potomac Greens
• Lyon Park/Lyon Village
• South Arlington (in general)
• Reston (because of the Silver Line)
• Franconia/Kingstowne (because of Springfield
Town Center renovation)
• Huntington Metro area
• Merrifield/Mosaic District
• Silver Spring
March 12, 2015