The market stats look depressing at first view, especially given the titles of articles in the media right now. But the story is more nuanced than the way it is being presented.
A general update
June 2023 was better than June 2020 at the beginning of the pandemic. Markets in general are down 20% compared to last year. Arlington is only down 3%. Sales are looking better than the first quarter. Even though the median time to contract is longer than last year, the typical summer slowdown is not nearly as slow as in regular years because of the intense level of competition.
Demand is still high as we head through the summer season. Showing activity is still similar to 2019 levels which is what we have seen before. The days on market for each property is increasing. We are running 6 days longer than last year.
Look at the above chart, 2020 and 2021 were outlier years for the pandemic. 2023 is right in line with 2022 and 2019. In fact, as you can see in the below chart, DC active listings is almost the same in June 2023 as June 2022. We need to stop comparing the housing market to 2020 and 2021. The pandemic was a (hopefully) once-in-a-lifetime event. The housing market is back to what is normally is. It is time for us to change our mindset and just realize – we are back!
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Stories from the Front Lines
While chatting about the market, Michael, Melissa, and I were discussing ways to help you understand the realities of the market right now. Michael suggested we share some real stories. So here they are:
1) The first clients dialed back what they were originally looking for. This allowed them to carry their current home and move to DC into a home that will work for several years. And it will be a good rental if they decide to upgrade to what they originally wanted to purchase. This was really smart. They also attacked that offer like Freddy Kruger riding Jaws. They had no qualms about waiving what they needed to get the house.
2) The second clients knew what community they wanted and wrote an offer sight unseen. They did a video tour but they were confident after seeing other homes in the community that this would work, and they submitted their offer before the seller was even ready to go to market. Side note: Another home they had submitted an offer on used their offer to drive up the price of another bidder. After my client ratified on the next home, the other people came back and said their buyer walked away.
3) The third clients had their expectations dashed by friends who were also trying to buy a home in DC. It’s competitive here, that is true. But one person’s experience may not match yours. You just don’t know what kind of house your friend is looking for, what their financial situation is like or how they are putting offers together. They developed a wish list and sent it to me and it only had a few items on it. I was worried they set their expectations too low, but the truth is that they were super flexible and understanding of the market and we went for a place that was over their price cap, but negotiated it down into their range. We lucked out finding a home that was just mispriced a bit, and we snagged it quickly.
Fun fact – two of my current contracts have the same lovely listing agent. So, relationships help too I believe.”
Michael Sheridan: “I would love to share some of my recent success stories to provide context for the current market:
We recently had two listings in Virginia, one in Alexandria and one in Woodbridge. Both were military clients looking to sell their homes and move into the next chapter. Both homes received multiple offers with great terms including over-asking price. The sellers were in a position to take what worked best for their goals. As a fun bonus, these transactions were between military sellers and military buyers! For those who are serving or have served, thank you for your service.
We also helped a long-term client purchase their second investment property, which was a condo in Del Ray Alexandria. We had just competed on a condo in the same building and we were unsuccessful in the multiple offer situation. We were able to network off-market with an agent and found another unit that was coming on the market. We went under contract on this unit pre-market and our clients were able to beat all the competition. We helped them to successfully rent the unit and it is earning them money!”
And I would like to add two success stories of my own. I recently worked with two sellers, both of whom were houses being sold by the estate for a loved one that had passed. These transactions are both sensitive due to the emotions involved and also due to the legal requirements. It is important to navigate the probate process with their attorney properly, to ensure the legal party can sign for documents, etc. In addition, I take my role in helping the families with the house and the items in the home very seriously. There is always work around furniture, art, and other items. I try to help my clients focus on taking the items of value and significance for themselves. And then I try to take the burden off of them for the rest of the items. It also requires more time and care to take care of the property itself as they are often vacant and need more attention. Both of these properties successfully sold off market with great terms!
Back to our regularly scheduled, programming. Let’s review Inventory/Housing Supply/What is on the Market.
We have less than 1 month inventory in most jurisdictions. The highest is DC at 2.35 months. If you look at the luxury markets, $1-2 M and $2+M are also very low for those markets. We don’t expect to see this number change a lot in July or August.
The Fed & CPI
We should expect future rate hikes this year on a slower pace.
Some good news here! Prices are beginning to return to normal levels. Prices rose 3% in June compared to 4% last year. Housing is the main driver of the continued inflation. 70% of June’s increase in prices comes in rent cost. Rent is up 8.3% from last year. Rent is a lagging indicator so we should start to see this change soon (hopefully). Places where we are seeing the impact is used cars and meat, and airfare and hotels are beginning to come down as well. Wages have also grown faster than inflation for four straight months.
The average 30 year conforming fixed rate is now above 7%.
This upward trend is being driven by a resilient economy, persistent inflation and a more hawkish tone from the Federal Reserve.”Sam Khater, Freddie Mac’s Chief Economist
Maryland My Maryland
Bright MLS. July 10, 2023. “Weekly Market Report: Week Ending July 9.”
UrbanTurf. July 11, 2023. “One-Third of Realtors Say Inventory Stopped Clients From Buying in 2022.”
UrbanTurf. July 6, 2023. “6.81%: Mortgage Rates Continue to Climb.”
Rachel Siegel and Abha Bhattarai, Washington Post. July 12, 2023. “Inflation drops to lowest levels since March 2021 as economy cools.”
Lisa Sturtevant, Bright MLS. July 13, 2023. “June 2023 Market Report.”