Jill Chodorov, an associate broker with Long & Foster, writes an occasional column about local market trends and housing issues.
All these factors point to what should be a strong housing market in the Washington area. So, why are so many real estate agents here bellyaching that the market has come to a screeching halt?
Last month, the median home price in the region rose 5.3 percent compared with October 2013, according to RealEstate Business Intelligence, a subsidiary of Rockville-based multiple-listing service MRIS. But sales dropped 2.8 percent during that same period.
“All the marketing in the world is not getting us offers,” said Valerie Blake, an associate broker with Keller Williams Capital Properties.
Jeff Jennings, director of strategic alliances with MRIS, said the local numbers substantiate the concern of Blake and numerous other area real estate agents I interviewed. Looking at the stats of the immediate Washington area, including Northern Virginia, D.C. and Maryland, the number of days on market is up and the number of settlements is down in recent months. Properties stayed on the market almost 21 percent longer in October 2014 than in October 2013.
The just released Long & Foster Market Conditions Report for October demonstrates a similar decline in prices, the number of units sold and an increase in average days on market. There was a decrease of 15 percent in total units sold in September 2014 compared to August 2014 and a 3 percent decrease in October 2014 compared to September 2014. Also in October 2014, the average number of days on market was 46, an increase of 24 percent from October 2013. And in October 2014 the average sale price was 0.08 percent lower than this time last year.
This phenomena is unusual for our market, and nationwide. August is typically a sleeper month for the market. Agents take vacation time in August, knowing that their clients are most likely away on vacation as well. We return to town expecting the usual upswing in business in the fall. We enjoy our vacation, banking on generating some sales after Labor Day.
But the tide has turned and agents are frantically devising new game plans, for their clients and themselves. We have had the dreaded talk about price drops and incurring costs on improvements that would increase the appeal of the home.
We have re-examined our own budgets and our ability to launch new marketing strategies. We are desperately trying to dissect the new mindset of the market and craft new marketing strategies for these changing times.
So what does all this mean for buyers and sellers in the Washington metropolitan market?
Buyers are offered more time to consider making an offer on a home. There are some exceptions to this rule when it comes to a select few neighborhoods that continue to see multiple offers and bid escalations, but overall buyers are in control.
Buyers have more leverage in the negotiations, including price, earnest money deposits and contingencies. The longer a home sits on the market, the more control buyers will enjoy.
For sellers, it is another story. Sellers who must sell now will have to become more flexible on their asking price. They will most likely be faced with offers that are below asking price and are loaded with contingencies and other stipulations. And they will have to hunker down for the long haul. It will take longer to find a buyer.
Sellers will also need to review the appeal of their home and make necessary improvements to garner more interest. They will need to weigh the financial and time costs of making improvements versus the costs of a price drop without improvements.
Sellers who are not pressed to sell immediately can opt to remove their houses from the market and try again in the spring. However, there are risks with that strategy. Sooner or later, interest rates will rise.
In light of Federal Reserve Chair Janet Yellen’s announcement that the economic stimulus program known as “quantitative easing” will halt by year-end, rates are expected to rise sooner rather than later.
When rates rise, buyers can afford less. Thus, prices will fall. This is strong case in favor of keeping your house on the market through the winter, in the hopes that the house will sell before rates do rise significantly.
Going forward into 2015, I predict a strong spring market, as buyers and sellers come out of hibernation and consider jumping into the market again.
But the renewed inspiration may not last long. It will all depend upon interest rates and the gains made by housing advocates in Congress and the Senate. Housing affordability, access to financing and home ownership incentives must continue to improve, making home ownership accessible to more Americans. Home ownership must continue to be at the forefront of the American dream.
For now, the statistics and the bellyaching of local agents speak for themselves.
Previously from Jill Chodorov:
Jill Chodorov can be reached at firstname.lastname@example.org.