The crisis of low inventory that plagues the nation’s housing market, particularly in sought-after locations such as Washington, is expected to continue this fall. While homeowners in the city may be relieved to know their home equity is expected to remain intact or rise, prospective buyers face another season of limited choice.
“Inventory in the city is down to a 1.4-month supply,” says Nela Richardson, chief economist for the Redfin real estate brokerage in the District. “People who own property in the city want to stay in the city and they aren’t moving. There’s very little available even in the move-up market.”
Richardson says that while a few more listings tend to come on the market after Labor Day, house hunters in the fall are more likely to be first-time buyers looking for small, affordable homes and condos. She doesn’t anticipate an increase in listings at more affordable prices.
“Those buyers aren’t tied to the school calendar and are more willing to move in any season, while parents drive purchases in the spring and early summer so they can get their kids settled before school begins,” Richardson says. “However, the fall buyers will be competing for the limited number of homes affordable to first-time buyers in the city.”
The 2016 housing market looks very similar to 2015 and 2014, says Jonathan Hill, vice president of marketing and communications for multiple-listing service MRIS in Rockville, Md., following typical seasonal patterns.
The median sales price in the District rose 3.8 percent, from $524,900 to $545,000, when comparing January through August 2015 with that same period in 2016, according to MRIS. The number of homes sold through August rose by 5.3 percent, from 5,485 in 2015 to 5,777 in 2016. In August, there were 221 detached houses for sale in the District, a decrease of 9.1 percent from August 2015, and 335 attached townhouses for sale, a decrease of 5.9 percent year-over-year. The number of condos on the market also declined in August by 3.9 percent compared with August 2015. These inventory declines are expected as the peak summer selling season draws to a close.
“As the condo supply decreased, prices went up, with the median sales price in August at $471,750, an increase of 11.7 percent over August 2015,” Hill says.
Prices for townhouses rose by 1.8 percent to a median of $639,000, and detached-house prices increased 8.8 percent to a median of $849,000 in August. Hill says the higher end of the D.C. housing market is a little softer than that for more-affordable homes.
Buyers at the top of the market in the city are more likely to be able to find a property to purchase, Hill says. The number of houses that sold (105) between $1 million and $2.5 million increased 78 percent over August 2015 and the number of sales (14) between $2.5 million and $5 million increased 180 percent over last year.
The price range with the most single-family houses is from $1 million to $2.5 million. The largest segment of townhouse listings is priced at $600,000 to $800,000. The largest segment of condo listings is priced at $200,000 to $300,000.
“People are afraid to buy at the top of the market,” says Richardson. “They’re looking for bargains in areas that are about to take off and rise in value, so some of the neighborhoods that have seen sales volume increase in the city are more affordable places like Woodridge and Fort Lincoln and Takoma.”
Richardson says that the housing market appears to be slowing nationwide as prices have risen.
“Home prices have outpaced wage growth, and I expect prices to stabilize over the next few years,” she says. “This is a long-term housing issue, with the market not turning over fast enough. People aren’t moving for their jobs or downsizing as anticipated, so this makes it harder for first-time buyers to get into the market.”
While an increase in newly built houses can help buyers in some areas, relatively little new construction is planned for the District, primarily because of the lack of land, says Ben Sage, director of Metrostudy’s Mid-Atlantic Region in Chantilly, Va.
“One neighborhood where we see applications for new development increasing is Brookland [in Northeast Washington], where there are plans for more townhouses,” Sage says. “Otherwise, we mostly see smaller condo developments in various pockets of the city. Most of the multifamily development in the city is rental housing.”
Sage says that while there’s no question that the District is interconnected with the Maryland suburbs and Northern Virginia, the city housing market remains tighter than the suburbs.
“Demand is outstripping supply in the city and there doesn’t appear to be enough new construction to begin to meet that demand,” he says.
While outsiders may think that an election year has a heavy impact on the D.C. housing market, particularly if there’s a turnover in the dominant political party in the White House or Congress, most local real estate experts say elections have little impact on the local housing market. Hill says nothing in the housing data as yet indicates any unusual reaction to the November election, but he says any real shift is more likely to show up in the spring, after the inauguration.
“This year’s election season has been so strange and unpredictable that more people seem to be talking about the possible impact on the real estate market,” Richardson says. “We may see more turnover after November, mostly because some homeowners are waiting to decide whether to list their homes. There’s a general sense of unease that may be making more people hesitant to buy or sell until after the election.”
Whatever the election’s outcome, it appears likely that buyers in the District will need to wait through the fall and winter before they see a significant increase in the number of properties available for sale.