As owner of The R&R Team and as a graduate economist/research analyst, I take great pleasure in completing monthly analyzes of the *Dulles Market Corridor (DMC) residential real estate market and in providing the results of these analyzes to our clients in this blog. We strive to ensure that the analyzes are consistently accurate by using only highly reliable data. For those who have followed these analyzes over the past 19+ years, nearly all will attest that the analyzes have been quite accurate in assessing the status of the current real estate market and forecasting a near-term prospectus. Besides the market summary and forecast that follows, we also provide updates to individual market status indicators (current mortgage interest rates, market absorption rates, etc.) that you also may find of interest at the bottom of this blog.
MARKET SUMMARY & FORECAST: The DMC market cooled off after a hot spring market and prospects are that the local real estate market will further cool as we go into the fall market. While we have seen a 5.2% increase in DMC property values over the past year, the data indicate that DMC property values depreciated slightly during the summer market at -0.1% per month and some depreciation is expected during the fall market. MLS data for the real estate market in the DMC indicate that during the past month buyer contractual activity eroded by an added 13% compared to the previous month while inventory levels decreased by 5% during the same period (latter is primarily attributable to increased listing withdrawals and expirations). At present, our analysis indicates that current inventory levels remain approximately 35-40% below normal levels for this time of year. Overall, as we continue into the fall market, our analyses indicate that we can expect further decreasing buyer activity/competition and that property values are likely to continue to depreciate at least slightly.
Our most recent analyzes of market absorption rates indicate that we still have a sellers market. The market absorption rate for single family detached (SFD) homes indicates that we currently have 2.4 months of available inventory, while the townhouse market absorption rate indicates 1.4 months of available inventory and condo data indicate 1.9 months of available inventory. FYI: Market absorption rate represents the number of months needed to sell off existing inventory for a particular property type based on recent buyer activity. Real estate pundits nationally and regionally indicate that market forces typically need to stabilize home inventory levels at a 3-to-4 month-supply-level to constitute a normal or balanced market (where economists say that supply and demand are in equilibrium). A market absorption rate that falls below this norm indicates a sellers market, while a rate that is above indicates a buyers market.
Based on U.S. economy performance indicators, the Federal Reserve Board increased the prime interest rate again at its June meeting by another quarter point to 1.25% but have held off on any further increases since then. Contrary to expected results from these recent Fed rate hike actions, mortgage interest rates responded by declining most of 2017 while the 30-year fixed-rate conventional mortgage dropped and remains below 4.0%. However, if the Fed further increases the prime interest rate as is expected later this year, most pundits believe such actions will eventually lead to higher mortgage interest rates.
With continued job growth in the Capital Region, relativity low inventory levels, reasonable buyer activity and currently attractive mortgage interest rates, we expect the DMC real estate market to continue to be more robust than in past years but to be still significantly slower during the remainder of 2017 compared to the spring and summer markets that we just experienced. This annual slow-down beginning with the summer market and continuing into the fall market is normal for the local real estate market. However, as is also typical, we can expect a major uptick in buyer activity early on in 2018.
For sellers and buyers who are already in the market or planning to enter the market in the near term, we highly recommend that you also monitor on a continuing basis the latest detailed data for each of the individual market status indicators provided below.
You can also review Real Estate Business Intelligence monthly updates for Northern Virginia and the Capital Region on our Team website at this link: Northern Virginia Market Watch.
(*NOTE: The Dulles Market Corridor (DMC) encompasses the large market area of Herndon/Oak Hill, Reston, Sterling/Potomac Falls/Dulles, Ashburn/ Broadlands/ Brambleton, Leesburg/Lansdowne, South Riding/ Chantilly (Loudoun County), Stone Ridge, Aldie/ Arcola and Chantilly (Fairfax County). The R&R Team has been tracking market data closely in the *DMC for the past 18 years.)
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