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: While we had a hot spring market in 2017, the DMC market cooled some during the summer months and further cooled off quite significantly during the fall market. As is typical beginning with the Thanksgiving holiday, sellers began to withdraw their listed properties from the market and the inventory of available listings has dropped by 45% in the past month. At present, the inventory is only 35-40% of normal levels that we expect for this time of year and the inventory will continue to decline through the Christmas- New Year holiday period. Also, while we have seen a 3.2% increase in DMC property values over the past 12 months, data indicate that DMC property values have depreciated slightly during the past 3 months at -0.5% per month and some continued depreciation is expected during December. MLS data for the real estate market in the DMC indicate that during the past month buyer contractual activity dropped approximately 20% compared to the previous month. We do not expect for seller or buyer activity to increase until after the New Year.
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 2.0 months of available inventory, while the townhouse market absorption rate indicates 1.0 months of available inventory and condo data indicate 2.0 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 the Fed rate hike actions earlier this year, mortgage interest rates have declined and have remained below 4.0% on new 30-year fixed rate mortgages since July 2017. However, if the Fed further increases the prime interest rate as is possible in 2018, most pundits believe such actions will eventually lead to higher mortgage interest rates as high as 4.4% during 2018.
During 2018, we expect to see continued job growth in the Capital Region, relatively low inventory levels, increased buyer activity and attractive mortgage interest rates. With this scenario, we expect the DMC real estate market to become quite robust once again 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 that are provided below.
(*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 19 years.)
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