If a retailer had this little inventory to sell, they’d swear someone had been shoplifting! To keep the doors open, they’d have to re-stock their shelves with saleable merchandise, and that’s exactly what needs to happen in Northern Virginia’s real estate market.
In our last issue of MarketWatch, we focused on the opportunity for buyers because of historically low interest rates. But we believe there’s an even bigger opportunity for potential sellers because there are so few listings on the market.
Here’s one narrow example of the acute shortage: one of our great McEnearney agents was working with a buyer during the first week of January looking for a townhouse in Arlington around $600,000. And there weren’t any. In fact, there were no townhouses priced between $500,000 and $750,000 on the market in all of Arlington County. At the end of May, there were 15. We recognize that inventory is always lower in the middle of winter than it is in the spring, but this isn’t just seasonal. Inventory is down 34% from this same time last year, and there was an 11% drop in the number of new listings coming on the market in December as well. In the past six months, 50 townhouses in that $500-$750k price range went under contract, so the demand is clearly there – but right now there’s nothing to buy. When there’s plenty of demand and little or no supply, prices are going to rise – that’s just a simple economic fact of life.
Anyone who is thinking about selling their home in the next year or two should really consider doing it now. This includes would-be sellers who purchased at the top of the market and think they don’t have equity. A couple of caveats: every submarket is different; the time still has to be right for your personal circumstances, and given the low inventory, finding your next house could be a bit of a challenge. Nonetheless, we know there are plenty of sellers who are in for a pleasant financial surprise in the next few months. If moving up or moving out is on your agenda, give us a call and we can help you craft a strategy to accomplish your real estate goals.
So what’s in store for the Northern Virginia real estate market over the next few months? We know the low-inventory issue isn’t going to be solved overnight, so expect that supply will remain very tight in significant portions of Northern Virginia through at least the first six months of 2013. The Fed has made it clear that they intend to keep interest rates low, and while we know that they can’t stay under 4% forever, they should stay there for another six months as well.
So what’s really ahead is more of the same: a healthy market with tight supply, low rates and rising prices. But – and there’s always a but - we’re still keeping a watchful eye on the sequestration and budget ceiling negotiations. Some defense contractors have already started job layoffs given the uncertain situation, and folks don’t buy houses when they’re out of work. The nation’s economy - and the region’s housing market - remains vulnerable if Congress and the White House can’t find a long-term solution.
For more information, charts, and a video, please click here .
MarketWatch, authored by David Howell, is published on a bi-monthly basis by McEnearney Associates, Inc. It provides useful and insightful summaries of current housing market trends. MarketWatch statistics include housing sales from all companies serving our Virginia - Washington DC - Maryland Metropolitan area.