Sellers continue to run the table as we enter the spring/summer real estate season throughout the region, with bidding wars and above-asking sale prices remaining the norm. Even amid the backdrop of high inflation and rising interest rates, a substantial edge still belongs to sellers, with the economic impacts yet to be seen.
With prices up and inventory remaining low, market numbers continue to follow a recently predictable track—with just a few exceptions.
In March, average home sale prices were up more than 11 percent in Washington, D.C., compared to March 2021, and the story is similar throughout the region: Arlington County, up 3.6 percent; Alexandria City up 6.9 percent; Fairfax County up 14.7 percent; Prince William County up 13.3 percent; Montgomery County up 7.4 percent; and Prince Georges County up 12.4 percent.
We’ll address inflation and interest rates shortly, but supply and demand is definitely a contributing factor to such increases. Just taking a snapshot of the number of new active listings to reach BrightMLS, our local multiple listing service, is quite revealing.
With few exceptions, listings remain scarce, and comparing last month to March 2021 is quite revealing. Home shoppers with the wallets and wherewithal to pursue the D.C. and Alexandria City markets saw the biggest boost in inventory, with new listings in March up 6.3 percent and 6.8 percent respectively.
Throughout the rest of the region, the story was quite different. Comparing March 2021 to last month, the number of new listings in Arlington County was down 5.1 percent—from 490 to 460. In Fairfax county, 201 fewer listings hit the market—a 9.3 percent drop. Prince William County was down 8 percent, Montgomery County down 7 percent, and Prince Georges County was down 5.7 percent.
Inflation and Interest
Another factor is the inflation rate, which hit 8.5 percent in March—a rate not seen since December 1981. As of this writing, the current interest rate on a 30-year fixed mortgage is just over 5.12 percent, according to bankrate.com. That’s up from 4.95 percent a week ago. Just a year ago, the 30-year fixed mortgage rate was 3.3 percent. Put simply, higher inflation typically translates to higher interest rates.
Where that will take us remains to be seen. Over time, higher interest rates and inflation can definitely impact buyers in many ways—not only with the amount they’re willing to spend, but the amount they can ultimately borrow, as higher interest rates mean higher monthly payments for buyers.
This reality actually could signal some relief for buyers out there, simply by culling the amount of buyers and reducing competition for properties on the market. At the same time a substantial increase in homes entering the market—something we tend to see this time of year—can also have a tempering impact on that competition.
The real question is where this might shake out. Prices are up assuredly, but if other market forces come into play, how might that tamp down some of the price increases as we move into the summer?
Overall, we’re fortunate to be in such a robust market. Higher prices, which are evident not only in the real estate market but also at the grocery store checkout counter, tend to shape consumer habits as much as anything else. With the number of buyers apparently exponentially higher than sellers throughout the region, the upward path of prices and competition remain. And the economic trigger that might alter the path of the local real estate market has yet to happen.
One thing’s for sure, the current market is surely emphasizing the economic value of real estate. So we’ll definitely keep our eye out. Stay tuned for our regular updates and features, as we bring you the latest from the region—and your neighborhood.
Christopher Prawdzik and his wife Angela Logomasini are licensed Realtors® with Samson Properties in Alexandria and are members of the Northern Virginia Association of Realtors® Top Producer’s Club. Operating as D.C. Region Real Estate, they offer comprehensive real estate services, including 4½% full-service listings, throughout the entire Washington, D.C. real estate market. Angela is licensed in Virginia, Washington, D.C., and Maryland. Christopher is licensed in Virginia and Washington, D.C. In addition, Christopher holds a broker license in North Carolina and is affiliated with McGary & Associates.
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