While home sellers may enjoy the feeling of having the upper hand in the local housing market, buyers have been frustrated for several years by the limited number of homes for sale, rising prices and heavy competition from other buyers. Prospective buyers may feel somewhat less pressure this fall in Northern Virginia, where the market appears to be stabilizing a little.
“The housing market is strong throughout the D.C. area, especially in the city and Prince George’s County, but we’re beginning to see some early signs that it’s starting to transition to a more-balanced market,” says David Howell, executive vice president of McEnearney Associates in McLean. “Even though inventory is still below where it needs to be, it’s down less than it has been in the past.”
Inventory, which refers to the number of homes on the market, was down 8 percent in Northern Virginia in August 2018 compared with August 2017, according to the Northern Virginia Association of Realtors (NVAR). In these statistics, Northern Virginia includes Fairfax and Arlington counties, the cities of Alexandria, Fairfax and Falls Church, and the towns of Vienna, Herndon and Clifton.
“We haven’t seen a ‘normal’ market in about 15 years in this area,” says Howell. “In a normal market, we’ve got a four-to-six months’ supply of homes, but right now we have about a two months’ supply.”
Howell anticipates a moderation in price appreciation, not a downturn, as well as increasing inventory that will result in a balance of power between buyers and sellers.
“Other areas of the country are starting to see a balanced market, and I think that will trickle to our area, too,” says Jennifer Halm, a real estate agent with Compass real estate in Alexandria.
The median sales price in August 2018 rose to $515,848 in Northern Virginia, up less than 1 percent over August 2017.
The number of homes sold in Northern Virginia in August was less than 1 percent higher than the number sold in August 2017, according to NVAR. Pending sales, which refer to homes that are under contract but have yet to go to settlement, were down 13.6 percent in August compared with August 2017, an indication of a much slower late-summer market than the previous year.
“Inventory is lowest in the $600,000-to-$900,000 range in Alexandria and Arlington,” says Halm. “Homes in that price range that have been updated and priced right have the most competition among buyers. In higher price ranges, there’s a little more inventory.”
Buyers looking for an updated house in a close-in suburb in that price range should be fully preapproved for a loan, with their finances in order and be prepared to search for a few months, says Halm.
Redfin brokerage ranks Aurora Highlands and Penrose in Arlington and Fairlington in Alexandria at the top, with an 82 out of 100, in its “Compete Score,” a measurement showing buyers where they are likely to face the most intense bidding wars.
“Even though there’s competition, sellers need to realize that buyers aren’t biting on everything and they especially won’t bite on something that needs updates,” says Halm. “Buyers are more value-conscious and more educated than ever, and they won’t overpay for a house.”
Northern Virginia, like many other parts of the country, is seeing a growth in the desirability of walkable communities and those close to the city. Median home sales prices in Arlington County rose 3.7 percent to $565,000 in August 2018 compared with August 2017, according to Rockville-based Bright MLS, higher than the District’s median price of $560,000. Sales in Arlington rose 10.3 percent in August 2018 compared with August 2017, according to Bright, the biggest increase in the region. The number of listings in Arlington was down 17 percent in August 2018 compared with the previous August, the biggest inventory decline in the region.
“People want livable, walkable neighborhoods, which is a big change since the last normal market 15 years ago, when people wanted center-hall Colonial-style houses on one-half-acre lots,” says Howell. “This change is really clear when you look at the success of newer developments like the residential part of Reston Town Center, the Mosaic District and One Loudoun.”
The trend, especially among millennials, toward a walkable urban lifestyle has already turned Great Falls into more of a buyer’s market, says Halm.
“People can get a better price there and buyers can negotiate, although it’s still an expensive housing market,” says Halm. “There’s about seven months of inventory available there and the $800,000-to-$1 million price point is a little lower than it used to be, especially for an acre or more of land.”
New construction down
Halm says sections of McLean that are outside the Beltway are also shifting to a buyer’s market for the same reason.
“Sellers need to realize that this market is different from 2005, even if they’re in a competitive area,” says Halm. “Then, you could put a sign in your yard, and even if it was the worst home on the block, it would sell. Now, your house has to shine and be priced right. Not everything is flying off the shelf.”
New home construction was anticipated to bring new supply to Northern Virginia, but the pace of new construction is down in the region by 7 percent for the first half of 2018 compared with the first half of 2017, according to Metrostudy, a housing market research company. The number of finished but vacant new homes was 969 at the end of the second quarter of 2018, the lowest number in four years.
“Some builders are beginning to pivot to build homes that cater to first-time buyers, with prices under $300,000, but they tend to be in the more distant suburbs,” says Ben Sage, Metrostudy’s director of the Mid-Atlantic Region.
For Northern Virginia buyers and sellers in the inner suburbs, a more-balanced market could be a breath of fresh air after years of overheated competition.