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January 2013

01/27/13 by David Howell

TIME TO RE-STOCK!

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.

 

ABSORPTION RATE BY PROPERTY TYPE

The following tables track absorption rate by property type, comparing the rates in the just-completed month to the rates in the same month of the previous year. The absorption rate is a measure of the health of the market, and tracks the percentage of homes that were on the market during the given month and in the given price range that went under contract. [The formula is # Contracts/(# Contracts + # Available).] An example: The absorption rate for detached homes priced $500,000-$749,999 in December 2012 was 34.2%. That compares to a rate of 22.7% in December 2011, and the increase means the market was better in 2012 for that type of home. If the absorption rate was less in 2012 than in 2011, we have put the more recent absorption rate in red. This month there was improvement for 16 of 18 price categories.



ABSORPTION RATES - CONDOS & CO-OPS

  • The overall absorption rate for condos and co-ops for December 2012 was 40.3%, an increase from the 30.4% rate in December 2011.
    Look at the dramatic difference in listing inventory – 448 in December 2012 vs 805 in December 2011.

 


Fully Available Listings - Northern Virginia October 2011 vs October 2012

ABSORPTION RATES - ATTACHED HOMES

  • The overall absorption rate for attached homes in December 2012 was 49.8%, an increase from the 34.9% rate in December 2011.
  • Again, the big difference in inventory: just 308 at the end of December 2012 vs 579 in December 2011.

 


Month's supply of housing October 2011-October 2012 Northern Virginia


ABSORPTION RATES - DETACHED HOMES

  • December 2012’s absorption rate for detached homes was 27.2%, an increase from the 20.9% rate in December 2011.
  • Inventory under $300K is virtually non-existent because prices have gone up.

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