The Washington-area housing market had another solid year in 2018, neither overheating nor free-falling, but instead drifting placidly along.
For the most part, home prices rose modestly across the region. The limited supply of homes for sale put pressure on prices, but higher mortgage rates through most of the year kept them somewhat in check. The lack of inventory had a more profound effect on sales, which were sluggish overall.
“The D.C. metro area housing market is performing well, but not real well,” Terry L. Clower, director of the Center for Regional Analysis at George Mason University, wrote in an email. “If you are a seller, and have reasonable expectations on selling prices, you are likely thinking the market is very good, on average. If you are a buyer, not so much.”
Two significant events — Amazon’s announcement that it was putting its second headquarters in Crystal City, and the prolonged federal government shutdown — came too late in the year to influence the 2018 numbers. Clower says the region will absorb the increased demand for housing caused by Amazon in the long run.
“In the near term, there is some data and anecdotal evidence that investors are purchasing homes to convert to rental units and some sellers who have opted to wait until we see the first wave of HQ2 jobs arrive to [put] their homes on the market,” he wrote.
The consequences of the changes to the tax laws that went into effect last year are unclear. The loss of the mortgage interest and state and local tax deductions has made owning a home less affordable for some homeowners, but the impact hasn’t been noticeable so far.
The District enjoyed the biggest median price gain in single-family houses in the region last year, according to data provided by Black Knight, a national real estate analytics company. Prices improved to $679,000 in 2018 from $635,000 in 2017, the ninth consecutive year of increases in the District. Median price is not the same as average price. The median price represents the midpoint, meaning half the homes were sold for more than that price and half sold for less. D.C. condo prices were up slightly, rising to $451,000 from $450,000.
Condo prices were separated from single-family house prices to provide a more accurate picture of the market. Condos tend to be less expensive than houses and can drag down the median price in a Zip code.
Virginia saw the next-greatest increase in single-family house median prices, rising to $582,000 from $566,000. Virginia condo prices jumped almost as much, increasing to $360,000 from $350,000.
Maryland single-family house prices climbed to $386,000 from $380,000, while its condo prices slipped to $268,000 from $271,000. Although Maryland’s overall prices were lower than either the District’s or Virginia’s, its Zip code 20815 has the highest median price for a single-family house in the region last year. It was $1,175,000 in the Zip code for Chevy Chase, Md., one of nine Zip codes in the region where median prices were above $1 million.
The District had four Zip codes with single-family house median prices above $1 million in 2018, up from three in 2017: 20007 (Burleith, Foxhall Crescent, Georgetown, Massachusetts Avenue Heights, Glover Park) at $1,056,300; 20008 (Cleveland Park, Woodley Park, Van Ness, Kalorama) at $1,150,000; 20015 (Barnaby Woods, Chevy Chase) at $1,007,000; and 20016 (AU Park, Cathedral Heights, Friendship Heights, Wesley Heights, Tenleytown, Spring Valley, Palisades) at $1,065,000.
More than 15 percent of the single-family houses and 4 percent of the condos sold in the District in 2018 were for more than $1 million. Taken together, that means one in every five homes sold for $1 million or more in the District in 2018.
Virginia had three Zip codes: 22201 (Clarendon, Ballston, Lyon Village, Lyon Park) at $1,125,000; 22101 (McLean) at $1,090,000; and 22102 (McLean) at $1,150,000. The two in Maryland were Zip codes 20815 and 20816 (Bethesda) at $1,010,000.
“The pricing gains are not anywhere near levels that indicate a bubble,” Clower wrote. “Still, overall affordability remains a major challenge for many households in the region.”
Sales of single-family houses in the District dropped to 3,581 last year from 3,723 in 2017, while sales of D.C. condos sank to 3,550 from 3, 844. Sales of single-family houses in Maryland fell to 30,141 from 33,182, while Maryland condos were down to 18,537 from 20,287. Sales of single-family houses in Virginia slid to 22,132 from 23,799, while Virginia condos decreased to 20,283 from 20,925.
Chevy Chase, Md., where half the single-family houses in 2018 sold for more than $1 million, has plenty to recommend it. Although the Zip code 20815 encompasses 10 to 12 neighborhoods, each with their own characteristics, they mostly share a similar housing stock of well-built, older homes on ample size lots with access to good public schools and a central location just over the District line and near the Beltway.
Houses in the 20815 Zip code tend to be snapped up quickly. Elysia Casaday, a real estate agent with Compass who has lived in Chevy Chase for the past 15 years, recently had a listing for a 1920s house in this area that was priced at $1.3 million.
“It sold with five offers over asking price in a matter of five days,” she said. “For the most part, houses under $1.1, $1.2 million move pretty quickly.”
“Some of North Chevy Chase and some of the neighborhoods closer to the Beltway are going to have that walkability, which is going to really [boost] property values in those areas,” Casaday said.
The scarcity of new home construction is one reason prices remain high. An October report by the Metropolitan Washington Council of Governments found the region needs to increase the number of housing units by 100,000 homes between now and 2045 to sustain economic growth and improve quality of life.
But after a discouraging 2018, new home builders seem more optimistic.
“I think [2019 is] off to a good start,” said Jeff Kottmeier, a market research adviser for John Burns Real Estate Consulting. “The main reason is interest rates are down. Talking to builders, being out in the field, I’ve definitely heard that’s been a big impact on buyers coming back into the market. We’ve seen a lot of good traffic at their sales offices. Fewer people than there were last year, but the people tend to be more qualified buyers.”
Still, single-family building permits were down in 2018, and Kottmeier expects them to be flat in 2019. The Burns home value index predicts price growth of 2 to 3 percent for all housing types and 2.5 percent for new homes this year.
“We still see low supply, which will put pressure on prices,” Kottmeier said.
Clower also expects home prices to continue to rise this year, but the increase will be constrained.
“Overall housing affordability remains a challenge,” he wrote. “Younger households, the millennials, simply won’t qualify for homes if prices escalate too much. We also expect that the economic cycle will slow the pace of economic growth in the region, even with the first phase of HQ2, and that should, theoretically, keep housing price increases bound within the range of 2.8 percent to 3.2 percent.”