D.C. area’s housing market is bucking typical market forces
Something unusual has been happening in the D.C. area’s housing market recently.
Sales are strong and inventory is low. Typically those factors push prices higher. Instead, prices have been steady the past few months.
What’s disrupting the usual market forces? A number of factors are likely at work, but one could be tighter lending standards. Mortgage lenders haven’t loosened their requirements much. That’s limiting how much home buyers can borrow, which in turn is causing downward pressure on prices.
“While we can say that there are a lot of programs out there, people are still finding it difficult to qualify [for mortgages],” said Bonnie Casper, president of the Maryland State Association of Realtors and an agent with Long & Foster. “The prices are staying even because a lot of the lending issues that are going on out there.”
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The number of homes sold in the D.C. region last month was 10 percent higher than in February 2015, according to data provided by ShowingTime RBI based on listing activity from MRIS, the area’s multiple listing service. The 2,874 sales marked the 15th month of year-over-year increases and was the highest number of sales for February since 2007.
Pending sales – those homes that went under contract but the deal had not closed – were also higher, an indication that the spring selling season will be strong this year. The 4,533 pending sales set a new high for the month, besting the previous record of 4,501 in 2012.
The number of houses listed for sale at the end of last month was 8,293, slightly higher than a year ago but down 64 percent from the peak of 23,282 in 2008. February’s 1.4 percent year-over-year increase in inventory was the smallest rise since October 2013. As the market moves into the spring buying season, the lack of homes for sale is likely to make for a competitive environment.
One jurisdiction where the inventory is growing is Prince George’s County, which saw the biggest percentage increase in new listings last month compared to February 2015. The number of listings there rose by 20 percent.
The median price of homes sold in the region last month fell to $380,000, a $10,000 drop from February 2015. The median price has not risen year-over-year in the past five months.
Although median prices were slightly higher in most jurisdictions, they were up significantly in the District ($537,500 last month from $499,500 in February 2015), Fairfax City ($490,000 from $448,000), Frederick, Md. ($265,000 from $250,000) and Alexandria ($535,000 from $509,250). Falls Church jumped to $865,000 from $712,500 but its median price was based on three sales.
Prices fell slightly in Anne Arundel County ($280,000 from $287,800), Arlington County ($500,000 from $508,000), Fairfax County ($444,000 from $447,450), Prince William County ($313,500 from $315,500) and Howard County ($349,730 from $350,000).
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“Lending has not loosened up a lot,” Casper said. “While there are programs out there and there’s money out there and you can find something, [the lenders] have not really loosened their requirements and so therefore there aren’t as many buyers out there.”
Casper says overall the market isn’t favoring either the buyer or the seller right now.
“If it truly were a sellers’ market, I think you’d see a larger run up in prices,” Casper said. “And if it were truly a buyers’ market, you’d see perhaps more of a downward curve in pricing. If it’s not a clear statement as to which it is, it means it’s pretty equal between the buyer and the seller. That’s a good thing. What happens then is both the buyer and the seller feel they’ve gotten value and a good deal. Nobody feels that the other side got the better of them.”