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 of you who have followed these analyzes for the past 21+ years, we believe that you will attest that the analyzes have been quite accurate in providing real-time assessments and forecasts of the local real estate market. Besides the market summary and forecast that follows below, we also provide important recurring updates to individual market status indicators (current mortgage interest rates, etc.) that you also may find of interest at the bottom of this blog.
MARKET SUMMARY & FORECAST: THE DMC RESIDENTIAL REAL ESTATE MARKET IS BEING DRIVEN BY LOW PROPERTY INVENTORY LEVELS, LOW MORTGAGE INTEREST RATES AND BULLISH BUYER DEMAND. Current resale property inventory levels are only approximately 10-15% of normal levels for this time of year compared to the same time periods in past years. Inventory levels continued to decrease as is typical with seller withdrawal of their listings during the Holiday Season. Buyer contractual activity decreased by 40% over the past month, similarly to the December 2018 period. Low inventory levels and market absorption rates continue to indicate that we have a SELLERS MARKET. Market data shows that property values appreciated +0.4% per month on average in the last 3 months of 2019 instead of typically depreciating property values...this is probably attributable to strong buyer competition associated with low mortgage interest rates and low inventory levels. Likewise, market data indicate that very low inventory levels, combined with low interest rates and bullish buyer activity, may result in surge in appreciating property values early-on in 2020.
Mortgage interest rates have proven to be great news for both home sellers and home buyers and have been a key contributor to a robust 2019 market. After th 30-year fixed-loan mortgage rate rose to the highest levels in 7 years to nearly 5.0% in 2018, mortgage rates have generally declined since March 2019 and have generally stabalized at or near the lowest levels in over 3 years. Freddie Mac weekly survey reporting indicated an average rate of 3.60% this past week for a 30-year fixed rate mortgage. Freddie Mac indicates that this low rate is about a quarter point above all-time lows and further indicates that the very low rate environment has clearly had an impact on the housing market as both new construction and home sales have surged in response to the decline in rates, the rebound in the economy and improving financial market sentiment. Also, associated with these these lower mortgage rates, the Federal Reserve Board dropped the prime interest rate three times in 2019, each time a quarter-discount point. Data indicate that the economy continues to hold strong and continuing lower mortgage interest rates should help contribute to bullish buyer activity in 2020.
Based on our most recent analyzes of DMC inventory levels and bullish buyer contractual activity, market absorption rates indicate that we continue to have a SELLERS MARKET in the DMC. The market absorption rate for single family detached (SFD) homes indicates that we currently have only 1.4 months of available inventory, while the townhouse market absorption rate indicates a supply of only 0.8 months of available inventory and condo data indicate only 0.9 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 (a market situation 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 this range indicates a buyers market.
Based on our analyses of MLS market data, DMC property values appreciated on average at 4.0% in 2019. There may be instances of some pockets of properties within the DMC that may have fared better or worse than this average. However, since 2010, the year that the DMC market showed initial signs of recovery from the previous market downturn, we have had a continuous SELLERS MARKET in the DMC. Based on further analyses, DMC property values have increased on average from 2%-4% per year since 2010 except for 2013 when property values increased just over 6%. One can possibly conclude from these analyses that DMC property values since 2010 have increased at a rather steady pace, year over year, and have not shown run-away, spiraling inflation that has been evident in other regional market areas nationally... based on available data, the DMC market does not seem to be developing a real estate bubble that may be subject to bursting like some other areas.
While evidence indicates a continuing SELLERS MARKET, our current MARKET PROSPECTUS is: for continued JOB GROWTH in the Capital Region; to experience continuing LOWER THAN NORMAL INVENTORY LEVELS for residential property; to enjoy continued STRONG BUYER DEMAND and contractual activity; to be blessed with continued LOW MORTGAGE INTEREST RATES; and to experience APPRECIATING PROPERTY VALUES, particularly early on in 2020. Overall, our current prospectus calls for a HEALTHY DMC REAL ESTATE MARKET in the foreseeable future.
Again, for sellers and buyers who are already active in the real estate market or planning to enter the marketplace in the near term, we highly recommend that you monitor our continuing blog updates on the local market and to review the latest detailed data for each of the important market status indicators on our Team website at this link: R&R Team Blog: Local Real Estate Market Status. We attempt to update this market status blog on a weekly basis or more often if needed.
(*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 21+ years.)
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