Special to The Washington Post
The number of for sale signs in yards and the advertisements of weekly open houses indicate that there are homes out there for would-be buyers.
But buyers in the Washington region are facing a limited supply of homes in lower price ranges, particularly in the closer-in jurisdictions. It is a sellers’ market in the lower price ranges, which will put upward pressure on prices and may lead some potential first-time homebuyers to remain renters.
According to data from MRIS, there are about 27,000 homes listed for sale in the Washington metropolitan area. (The Washington metropolitan area includes the District and 21 counties and cities in Maryland, Virginia and West Virginia.) In recent months, inventories have been falling as sales activity has picked up. Demand has been particularly strong for lower-priced homes, and the data suggest this is where supply is becoming more limited.
Currently a little over half of the homes listed for sale in the region are priced under $350,000. But these more moderately priced homes are not evenly spread throughout the metro area. A disproportionate share of these homes is in the outer suburbs. While the more distant jurisdictions account for 22 percent of all homes for sale, they include 28 percent of homes priced under $350,000.
If a potential homebuyer is looking for a townhouse or single-family house in the under $350,000 price range, his or her options are very limited closer-in. In Arlington and Alexandria, for example, more than 90 percent of the inventory under $350,000 are condos; less than 10 percent are townhouses or single-family detached homes. In Fairfax and Montgomery counties, between 40 and 50 percent of the inventory under $350,000 are condos.
The sales data indicate that homes in this price range are in demand. While half of the inventory is under $350,000, more than 60 percent of the sales in the last six months were in this price range. In many jurisdictions, there is a substantial mismatch in the supply and demand of lower-price homes. In Fairfax County, for example, 42 percent of sales over the last six months were homes priced under $350,000, but only 28 percent of the current inventory is in this price range. In Montgomery County, 53 percent of recent sales compared to 42 percent of listings are under $350,000.
Inventories will increase this spring. Potential sellers who have been cautious about entering the market will put their homes on the market. Some of these spring sellers will be move-up buyers who want to sell a smaller, more moderately-priced home.
But the upward pressure on prices will persist and the lower-priced market will likely continue to be a sellers’ market. With rising gas prices, first-time homebuyers will be less likely to want to “drive to qualify” to buy a home farther out. Some buyers will choose to buy a multi-family or townhouse condominiums in closer-in jurisdictions, but some will also remain renters. Watching the choices of this group of potential buyers will be important to understanding whether we will see a rise in the homeownership rate, or whether the shift to renting is the new status quo.
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