Special to The Washington Post
The warm weather is bringing a swarm of people to see the early blooms of the region’s cherry trees. The unseasonable weather—along with positive economic signals and an increase in consumer confidence—is also bringing crowds to local open houses.
Sales activity in the Washington region was up in January and February of this year compared with the same months in 2011. And while sunny 70-degree weekends are certainly part of the explanation, the brisk pace of home sales portends a strengthening housing market. Prospective sellers, who have been biding their time, are starting to be encouraged to get off the sidelines.
Home sales have been up over the past few months and this increased sales activity has begun to draw down the inventory of homes on the market. According to RealEstate Business Intelligence, at the end of February, there were 16,562 active listings in Washington area.
Inventories of existing homes have been steadily declining each month since late summer of last year and the ratio of monthly inventories to sales has been on a downward trajectory despite stronger sales. In February 2012, there were 5.2 listings per sale, compared with 6.8 listings per sale in February of last year. The February 2012 ratio was substantially lower than the peak ratio of between 15 and 16 listings per sale in early 2008.
The inventory-to-sales ratio has been dropping throughout the region but there is considerably variation across the jurisdictions. The February ratio of listings to sales was 5.6 in Montgomery County and 6.3 in Prince George’s County. Inventory was relatively plentiful in further out jurisdictions, such as Charles County (9.3), Fauquier County (7.9), and the City of Fredericksburg (7.6).
Conversely, inventory is tight in many of the close-in jurisdictions. The ratio of inventory-to-sales was under 5 in the District, Arlington, Alexandria, and Fairfax, approaching levels last seen in late 2005. The relatively limited supply in these jurisdictions will continue to put upward pressure on prices.
However, the limited supply coupled with increased buyer interest will also encourage more would-be sellers to get into the game. As we head into spring, inventories will rise. In neighborhoods where it has been more of a seller’s market, there will be greater balance. Both first-time and move-up buyers will encounter more choices.
The increase is supply may temporarily moderate price appreciation. But ultimately the increase in inventories will signal a return to a more normal market.
What do you think? Tell us what you’ve noticed at open houses in your neighborhood this year and sales where you live, in the comments section.
Other blog posts by Lisa A. Sturtevant:
Related: Washington February home sales
Lisa A. Sturtevant is assistant research professor at George Mason University’s Center for Regional Analysis.