News about the real estate market can be confusing. How can the market be declining, yet still be considered ahead? Inventory is increasing, yet new listings are decreasing. If prices are decreasing, why is this a seller’s market?
When analyzing the market, we look at past performance. Typically, comparisons are year over year, and month to month. However, when analyzing data, it is important to recognize where the market was historically, and if the comparison offers a true picture. In the last few years, the market has experienced several upheavals. There was a significant drop at the beginning of the pandemic, which eventually turned into a buying frenzy. Its peak occurred in May 2022, when prices were at their highest, inventory at its lowest and days on market almost non-existent. Sellers were overjoyed, and buyers were extremely frustrated, but it was clear that the accelerated pace would not be sustainable. Another turning point began with the Fed’s promise to increase interest rates. In 2022 the average 30-year rate jumped from 3.22% in January to a high of 7.08% at the end of October.
With so much recent turmoil, to get a true understanding of how housing prices are faring, it is helpful to refer back to pre-pandemic stats, when the market was behaving more predictably. For example, in December 2022 the Washington DC Metro area saw median price decrease 1.3% from last year and is now 15% below peak levels. According to Bright MLS, this is the first time since September 2016 that home prices have declined year-over-year in the region. This sounds drastic, but is it? Median price in December 2022 was $513,315. In 2019, the median price was $459,950 (a 3.4% increase over 2018). Prices have decreased, yet the market is ahead of pre-pandemic levels by 11%.
Inventory can also be confusing. Housing stock has increased in our area from last year. Active listings in December 2022 were up 30% from last year, yet new listings were down 30%. Fewer people are selling their homes, but there are more homes for sale. Inventory has increased because days on market have increased. In other words, inventory is accumulating. Last year the median time for a home to sell in December was 10 days, this year that number has risen to 22. Even though it is taking longer for homes to sell, it is important to note that our area only has 1.04 months of supply. This means that if no new inventory is added, current inventory would be sold out in a month. A healthy balanced market has 4 – 6 months of inventory. This is why we continue to have a seller’s market, even though prices are decreasing.
Our real estate agents will help you understand market activity and put it into perspective so that you can make wise decisions. Call us if you have questions about current trends and predictions.