The Washington region has one of the strongest housing markets in the nation, but it would be booming if not for the lack of homes available to purchase. As inventory continues to fall to historic lows, experts say the scarcity of supply is holding back what in most other respects is a bright spot in the area’s economy.

According to RealEstate Business Intelligence’s monthly housing market update, the number of active listings in the region at the end of October was 8,766. Not only was that number a year-over-year drop of 37.2 percent, it was also the first time listings had fallen below 9,000 since July 2005.

“The lack of inventory for single-family homes is suppressing the market, and it’s the first time I’ve ever seen that in 30 years in the business,” said Holly Worthington, a Long and Foster managing broker in the Washington area. “I’ve never actually seen a dearth of inventory at that level for single-family homes.”

That dearth of available homes comes as demand is growing, picking up again in October after a sluggish September. All market indicators were above last year’s levels, and many were at multi-year October highs.

“Some of the increases you’re seeing year-over-year is because last October was a pretty slow month,” said Paul Valentino, president of Coldwell Banker Residential Brokerage in the Greater Washington area. “Having said that, the market is really very strong.”

But inventory isn’t catching up, and that’s plaguing the market. Last month’s active listings were roughly half of what they were in October 2010. The 4,588 new listings for October were the lowest in more than a decade.

“The big hurdle we have to jump in our market is getting more inventory on the market,” Valentino said. “A lot of people are out of the market because they haven’t found anything of any interest. They’re just kind of waiting on the sidelines. Unfortunately, there’s just not enough inventory out there for people to get that excited about to make the move up. There is some inventory out there for people who are thinking about making that first purchase.”  

RBI Key Housing Trend Metrics - Washington metro area

All residential Oct 2012 % MoM Sept 2012 % YoY Oct 2011
Units sold 3,269 0.4% 3,256 16.1% 2,815
Median Sales Price $362,500 0.7% $360,000 13.3% $320,025
Pending Sales 4,459 6.3% 4,195 5.8% 4,215
Active Listings 8,766 -7.9% 9,514 -37.2% 13,953
New Listings 4,588 -10.5% 5,124 -3.8% 4,767
Average DOM 54 -10% 60 -30.8% 78
Listing Discount 4% 4% 6.6%
Avg SP to OLP ratio 96% 96% 93.4%

Source: RealEstate Business Intelligence

The Washington region had 3,269 sales last month, a 16.1 percent jump from October 2011 and a 0.4 percent increase over September 2012. Condos saw the biggest gain, a 23.4 percent increase from October 2011. Single-family home sales were up 14.2 percent, while townhome sales rose 12.6 percent.  

New contracts were at their highest October level in seven years. Townhomes showed the largest new contract growth, with an 11.4 percent increase from October 2011. New contracts on condos rose 8.9 percent, while new contracts on single-family homes rose just 1.3 percent.

“The reason that there’s interest in those [townhomes and condos] is that the inventory for single-family homes is almost nonexistent,” Worthington said.  

Added Valentino: “If you look at the number of new listings coming on and the number of new pendings, we’re taking off the market as many as are coming on the market.”

The low number of homes for sale has also helped push up prices. The median home price in October rose to $362,500, a 13.3 percent increase from October 2011 and the highest year-over-year increase for any month since December 2005. Prince George’s County saw the biggest growth in median prices, a 20 percent increase from October 2011. Falls Church’s 31.4 percent decrease is mostly due to the paucity of homes sold.

Median Sales Price by Jurisdiction — October

2012 2011 YoY
DC Metro $362,500 $320,025 13.3%
Falls Church $527,500 $769,000 -31.4%
Arlington $497,500 $487,500 2.1%
Alexandria $435,000 $385,500 12.8%
Washington DC $445,000 $399,900 11.3%
Fairfax $415,000 $383,000 8.4%
Fairfax City $380,000 $355,000 7%
Montgomery $355,550 $327,250 8.6%
Pr. George’s $180,000 $150,000 20%

Source: RealEstate Business Intelligence

Median Sales Price by Jurisdiction — Year to Date

2012 2011 YoY
DC Metro $365,000 $340,000 7.4%
Falls Church $560,000 $545,000 2.8%
Arlington $509,900 $490,000 4.1%
Alexandria $455,000 $425,000 7.1%
Washington DC $429,000 $399,000 7.5%
Fairfax $422,000 $400,000 5.5%
Fairfax City $427,500 $398,000 7.4%
Montgomery $369,995 $350,000 5.7%
Pr. George’s $169,900 $160,000 6.2%

Source: RealEstate Business Intelligence

 “This is a great market, nothing wrong with it,” Valentino said. “We’re just a little imbalanced in terms of inventory. And, wow, bar the doors if the inventory comes back up.”

Both Valentino and Worthington said indications are that November could be another strong month.

“The confidence level of the consumer is much higher than it used to be,” Worthington said. “You can feel it in dealing with the public and talking to them. They’re much more confident.”