The past decade has been a real estate roller coaster. The first half saw record low inventories of homes for sale and sky-high prices, while the latter part saw inventory swell and prices drop.
The Washington area market is now settling into a new normal, experts said, with indicators such as the absorption rate and inventory-to-sale ratios showing movement toward more stable inventory levels.
“There has been a shortage, but it’s becoming a more normal market with more homes coming on as people have the ability to move up,” said Jon Wolford of Long & Foster in Northern Virginia. “We’re beginning to see new listings and numbers like we did with the rebate last spring. I would never have expected that.”
Wolford remembers in 2006 when inventory peaked in Northern Virginia at more than 11,500 homes on the market with only 16 percent under contract.
“Nothing was selling. We started seeing settlements on foreclosures in 2008 and a low base for prices began to form, hitting bottom in 2009,” he said. “Prices rose overall in 2010 and now we have 6,800 listings with 48 percent of inventory under contract today,” he added, citing March statistics from Metropolitan Regional Information Systems, the local listing service for real estate agents.
The Washington area’s absorption rate, which estimates the time it will take the market to sell off its current inventory, has reached something of an equilibrium.
“The February 2011 Real Estate Business Intelligence [report] shows that for the entire metro D.C. region, we have 6.2 months of supply,” said Suzanne des Marais, president of the Washington D.C. Association of Realtors. “Around six months of supply is typically regarded as a healthy real estate market — balanced pretty well for both buyers and sellers.”
From March 2006 to February 2008 in the District, the number of available units stayed in the 2,400 range. In recent years, there was an increase and then a leveling off.
Des Marais said the number of units sold in the city in 2010 was about the same as in 2009.
“It might not be very exciting to see the same volume from year to year, but hopefully it reflects the stability in our marketplace,” she said. “I’ll bet if you ask any real estate agent who was working during the boom years (and is still in business), they’ll tell you they prefer stability.”
In Montgomery County inventory started declining in 2008, from 5,500 to 3,200 homes on the market, and bottomed out in early 2010. The fall inventory increased, putting downward pressure on fall prices. Now single-family home listings are up 15 percent and prices down by 4 percent over last year at this time.
Assistant research professor Lisa Sturtevant of George Mason University said a normal market averages five listings per sale.
“We’re not quite back to normal yet,” said Sturtevant. “In January we were at 7.5 listings per sale. That’s like mid-2008. Homes that are moving are in the affordable ranges. In the $500,000 to $800,000 range, homes are sitting. The shortage is in the more affordable markets.”
In 2008 when prices started to tumble, the local market peaked with inventory at 16 to 17 listings per sale. In 2003 and 2004, at the height of the boom, the ratio was two listings for every sale.
“We should have seen it coming. Prices rose 14 percent in 2003. In 2005, houses were on the market for seven days when the average had been 90. We haven’t been normal for awhile — you have to go back to 1998 to 2000,” she said.
“The market changes so fast I have to keep a moving spectrum of what is happening,” said Wolford, who monitors inventory levels and sales activity. He noted that in March the average time a house spent on the market, the days-on-market, had dropped below 60 — down from 77 in February.
In January 2010 there were more than 6,300 properties available in Arlington, Alexandria, Falls Church, and Fairfax County with 42 percent under contract. This month, 6,800 properties are available with 46 percent under contract.
“It’s a more normal market,” he said. “What also gives us optimism today is the 35 percent sold in the $800,000 to $900,000 range.”
The percentage of homes under contract in Northern Virginia has increased in the higher price ranges since 2009, Wolford said. As those numbers increase, more people can move up. That is a sign of a healthy economy, when people can move up at all levels.
