The result? It takes only nine days for most homes to be snapped up by hungry Washington home buyers. The region’s entire inventory of homes for sale could be consumed in as little as two months.
This tight inventory is pushing up home prices, setting up bidding wars and pricing new home buyers out of a market that is still enjoying historically low mortgage rates.
Homes in the $300,000 to $600,000 price range are selling the most quickly — usually in a week, according to June data — making the market particularly hard to navigate for first-time home buyers who want to live close to the District. Just a year ago, those homes sat around for at least three weeks.
Even homes at the higher end of the spectrum — from $600,000 to just shy of the $1 million mark — are on the market for eight days. On the other side of the scale, homes priced lower than $300,000 are available for just over two weeks.
Washington’s strong labor market and relative immunity from the housing crisis meant that demand never really dried up here, analysts say. But supply hasn’t kept pace.
Washington’s market has traditionally been far more robust than most of the rest of the country, thanks to the concentration of government and military jobs. The region’s stable economy continues to attract people looking for work, economists say. Even the recent budget cuts from the federal sequester have not significantly affected the local labor market. And Washington’s expensive rents are motivating some people to become first-time home buyers, experts say.
Those factors have led to an inventory shortage, which is worsened by a lengthy foreclosure process that’s holding up supply in the District and Maryland.
Forget about the dream home. In the current market, Washington buyers have to settle for what they can find — usually for a higher price.
When Alexandria resident Rodney Barredo began looking for a home in Northern Virginia’s red-hot real estate market, he quickly realized his options were limited. Every open house was “packed,” he said, and most homes were off the market a few days later.
“I know I’m not going to find the perfect home,” he said. “I might have to settle for one and just get what I can get.”
The tight supply is forcing real estate agents to become more creative. A personal — and heartfelt — letter may get the attention of some sellers, said Susan Mertz, a Realtor with Keller Williams Capital Properties in Virginia. When she has a client set on a particular neighborhood, Mertz said she knocks on doors and asks residents to contact her if they consider selling.
Some homeowners don’t realize the current value of their home, agents said. “I don’t know that the reality has caught up with sellers yet,” said Djana Morris, a Realtor with Long and Foster based in Washington.
In addition, a significant share of homeowners remain underwater on their mortgages, owing more than the homes are worth even with the recent rise in prices. And if the value has finally caught up with the mortgage, the homeowner still may not have enough equity to cover the cost of selling and relocating, analysts say.
Still others are waiting to see how much higher prices will go before deciding to list their homes.
“Some folks out there still don’t want to sell,” said Svenja Gudell, senior economist at Zillow. “They’ve hung on for so long, they want to hang on a little longer.”
But for those who take the plunge, the result can be surprising. Laura Belin and her husband, James, decided to sell their three-level Fairfax townhouse when the housing recovery looked as if it was on surer footing, she said.
The house went on the market earlier this month, received three offers within two days, and is currently under contract. The winning bid was more than $10,000 above the asking price, Belin said.
“I think our timing was good,” she said.
There is little doubt that the national housing market has entered a boom phase. Sales of existing homes jumped about 15 percent in June, according to industry data out earlier this week. The sale of new homes reached a five-year high in June, jumping 38 percent compared with the same period last year, according to Commerce Department figures released Wednesday.
That boom came under stress recently as mortgage rates climbed on fears that the Federal Reserve could scale back its bond-buying program early. Mortgage rates are above the 4 percent mark and are unlikely to fall below it again, analysts say, but they note that the rates are still historically low. The increase could push some to hurry and buy before rates get even higher but over the long term could price others out of the market altogether, experts say.
National inventory is also tighter than a year ago, but it has started to ease since the beginning of 2013. Not so in the nation’s capital.
In the Washington area, the number of new listings edged up over the past three months, but sales also picked up dramatically, resulting in virtually no change in the months-supply, a gauge of how long homes are on the market. June’s new listings were up more than 10 percent from last year, for example, while sales increased more than 12 percent, according to a report by RealEstate Business Intelligence, a Rockville-based data firm.
The housing shortage is being felt throughout the region. Most homes in Fairfax County are on the market for only a week, compared with two weeks a year ago — the tightest market in the area. In Montgomery County, homes are on the market for a median of 11 days, and in Loudoun County for nine, according to RBI data.
Even in Prince George’s County, where many troubled mortgages are slowly making their way through the foreclosure process, homes aren’t sitting idle for long. The median number of days that a home is on the market fell to 17 in June from 37 days a year ago, according to data from RBI.
That likely reflects the affordability of homes in that region, said Morris, the Long and Foster Realtor. “If you want a property under $300,000, you sort of have to look at PG County,” she said.
Pockets of suburban Virginia, such as Prince William County and Loudoun, face a scarcity of new land, builders said. Buyers in those areas have diverse needs — everything from townhouses to small units to single-family homes, they said.
In Prince William, for example, most available land is already sold to developers, said William Gilligan, regional president for Maryland and Virginia at home builder Toll Bros. Local government also has been hesitant about allowing more construction, he said.
Builders in Prince William and Loudoun, he said, “are burning through the inventory that was there, and there’s not much coming along to replace it.”