Inventory woes, with demand far exceeding supply, have an impact on the housing market nationwide, particularly in cities such as Washington. There are some indications that the shortage of homes for sale could be easing in the District.
The annual change in inventory, which includes all homes listed in the multiple listing service, shows an increase of 12.9 percent in the District in August year-over-year, according to Rockville-based Bright MLS. While that’s good news, that increase in listings compares the number of homes on the market with a period of extremely limited homes for sale, so the District continues to have a tight housing market.
The median sales price in the District in August was $560,000, up 2.8 percent compared with the median sales price of $545,000 in August 2017, according to Bright. Closed sales in August in the District were up by just 0.5 percent, and pending sales, which refer to purchase contracts that have yet to go to settlement, in the District were down 4.4 percent year-over-year in August, according to Bright.
“The sweet spot in the city with the most activity and competition is in the $500,000 to $750,000 range,” says Heminger. “Under $500,000, there’s just not that much available. At the upper end, showings of condos priced up to $1.3 million increased in September, but above $1.4 million, everything has been slower all year.”
Any property that isn’t selling quickly is usually sitting on the market because of a price issue, Heminger says.
“Buyers are more likely to get into a bidding war and bid up to win, rather than write a low offer on something they think is priced too high,” he says. “Buyers worry about overpaying for property. They understand the value in property and are wary of overspending.”
The District is still in a sellers’ market, but it is a little easier to be a buyer now, says Dan Galloway, D.C. market manager for Redfin brokerage.
“We’re still seeing competition for homes and multiple offers, but inventory has eased a little so we’re seeing three offers or so now instead of six or seven offers like we did last year,” says Galloway. “There are also more price drops around the city.”
Still, Bright’s statistics show that the average sales-to-list-price ratio in the District rose slightly from 98.2 percent in August 2017 to 98.6 percent in August 2018, which means that buyers are paying nearly full price for homes.
In addition, homes are still selling quickly. The median number of days a home was on the market in August was 13, the same as August 2017.
“Sellers need to be solid in their pricing and know the value of their property,” says Galloway. “This is a natural progression. We’ve seen big price increases in the District since 2012 but not as much growth in salaries. This area has lots of people with good jobs, but we don’t have the wealth impact of places like Seattle and San Francisco.”
The Wharf’s residences, restaurants and shops along the waterfront in Southwest Washington have generated excitement since its opening in the fall of 2017, and a new phase of that development is eagerly anticipated. The majority of new construction in the city tends to be smaller projects of ground-up development or conversions of rowhouses into condos.
“The District is mostly a resale market and is still undersupplied,” says Ben Sage, director of the Mid-Atlantic Region for Metrostudy, a housing market research company. “The city is still underbuilt when it comes to condos, too, since most of the larger recent developments in the city have been apartments.”
While competition is rampant throughout most areas of the city and at most price points, it is particularly fierce in neighborhoods with few homes for sale. Redfin’s Compete Score shows that American University Park, Upper Chevy Chase, Takoma, Shepherd Park, Friendship Heights, Tenleytown and Hill East are the neighborhoods where buyers face the most intense bidding wars. Those District neighborhoods each have a Compete Score of 85 to 89 out of 100.
“The areas of the city that are growing fastest with new development and renovations and more sales include Trinidad, Eckington and Petworth,” says Heminger. “Trinidad has a residential feel but it’s close to the H Street corridor. Plus, it’s somewhat more affordable than other neighborhoods, and buyers there feel like they are investing in the neighborhood.”
The term “affordable” seems somewhat ironic in a city where the median sales price is $560,000 and even small new condos are typically priced above $400,000.
“I think the goal should be to increase the availability of ‘attainable’ housing, which in the city mostly refers to condos and a few rowhouses,” says Sage.
Buyers of single-family houses and rowhouses are drawn to Trinidad, Petworth, Brookland and 16th Street Heights, says Heminger.
Condo buyers seeking affordability are looking at new developments in Hill East near the Potomac Avenue Metro station, says Galloway.
In addition to Hill East, another growth area for buyers looking for more affordable homes, says Galloway, is just across the Anacostia River.
“They’re still close to the Wharf and the Navy Yard, but buyers can find more affordable housing there,” says Galloway.
Galloway says both first-time buyers and repeat buyers in the District should look into the DC Open Doors program for down-payment and closing-cost assistance that can increase their buying power. The program has high income limits — up to $140,640 for the borrower’s income, not the household income — and has no limit on the sales price. The maximum first mortgage amount is $453,100. The program is available through approved lenders.
Galloway recommends having a team, including a lender and a real estate agent, in place as early as possible to help you explore all possible options and neighborhoods.
“If you’re a buyer, you should think more about where you want to live, not where you think the market is going,” says Galloway. “It’s great to try something new, but make sure you can see yourself living there for the next five to 10 years.”