The Covid-19 pandemic shook the real estate market a great deal. It led to high demand and a low housing supply, leading to a rise in house prices. This could be because many people had to work from home, thus requiring more space. Also, during a period of uncertainty, rich people enjoy buying properties because they are much cheaper. We can also argue that the rich had much more disposable income because they were not traveling much or eating out a lot. Hence, they could invest that money in buying homes. However, from 2022 the prices started going down, especially luxury real estate in Washington DC. We could attribute this to homes not being in demand as interest rates have risen.
What Has The Real Estate Market Been Like in DC?
The DC real estate market has been consistently strong for a couple of decades now. The median home prices have been increasing as much as 10% year-over-year. This can be attributed to the expanding employment opportunities offered by the Federal government, Government Contractors, Law Firms, Lobbyists, Medical Professionals, and many other industries present in the DC Region leading to a strong economy. However, the pandemic shook the real estate market in DC. Many homebuyers fled the city to the suburbs and exurbs. The market quickly recovered in 2021 and started following recognizable patterns.
In May 2022, the Median Price of a home that sold in DC was $650,000, 7% lower than in April and a 5.3% drop from the previous year. It took a listing in DC an average of 23 days to sell. The number of new listings on the market was 1,421, a 2.8% decrease from new listings in May 2021. The market of Montgomery County, which is a part of the DC metro area, remained strong. The Median home sold price in Montgomery County was $620,000, a 5.6% increase from April and 12.7% from the previous year. Homes in Montgomery County sold on an average of 12 days. Montgomery County had 1,575 new listings, a 15.1% decrease from May 2021. This shows that Montgomery County is highly competitive, especially at higher price points. At the same time, it appears that the housing market in DC is starting to soften.
Washington DC’s median home listing price was $625k in June 2022, a 4.3% increase year-over-year. The median home sold price was $736.5k. An important point to note is that the median price is not the same as the average price. The median price means that half of the homes were sold above the price, and the other half were sold below the median price. The median price gives a rough estimate of how much homes cost in a certain area. On average, homes in Washington DC sold after 42 days on the market in June 2022.
What Shows the DC Real Estate Market is Slowing Down
- There are more price reductions off list prices and more properties staying on the market past the first week and not selling until the second or third week.
- The people winning offers before, in many cases, came with no strings attached for sellers, as buyers were forced to fight for one by bringing lots of cash to the table. They agreed to not have the home inspected and asked the seller to make any repairs. Now, more buyers can add some of the contingencies back in their offers.
- Previously in 2021 and the first half of 2022, properties received four offers. Currently, we’re seeing one to three offers, although they are still very strong.
Here are Some of the Trends with the Highest Impact on The DC Housing Market
In January 2022, the DC neighborhood had 3031 new and active listings and six weeks of supply. In other words, the real estate in Washington DC would run out of inventory in six weeks if the current sales rate persisted. This was nowhere near the 6 months of inventory that healthy, balanced markets exhibit. With more than the average city inventory, Washington DC hasn’t seen its home prices increase at the same level as the national average.
Home Price Trends
Although Washington DC has more inventory than most cities of a similar size, the supply remains tight. As a result, home prices appreciate at a fast rate. In the last year, demand, competition, and the threat of rising interest rates increased home prices by as much as 5.7%. Luxury homes in DC also experienced an uphill trend.
Interest Rate Trends
The Federal Reserve increased the interest rates aggressively to combat inflation. Mortgage interest rates have also increased up to nearly 2% per year. This has increased the cost of home ownership in an already expensive market. This has made competition in the market quite high.
Rental prices in DC have followed the same trends as home prices. Rental prices had increased by nearly twice the rate of home values in January 2022 and continued to outpace appreciation rates because buyers continued to be priced out of the market.
From the above information, we can see that the real estate prices in DC have started to stabilize, if not drop. The market has become balanced for both sellers and buyers. The luxury real estate market in DC is also very fair at the moment.
Here at The DC Team at Long & Foster, we have a variety of Washington DC luxury real estate for sale, and we have been helping our clients buy and sell luxury homes in DC.