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 & OUTLOOK: OVERALL, THE DMC RESIDENTIAL REAL ESTATE MARKET IS BEING DRIVEN BY LOW PROPERTY INVENTORY LEVELS, LOW MORTGAGE INTEREST RATES, COMPETITIVE BUYER DEMAND AND THE CORONAVIRUS CRISIS.
Inventory levels of DMC residential housing increased by 50% in the past 30 days as new listings were added for spring marketing even in the midst of the COVID-19 virus crisis…the inventory levels increased but still remain low at approximately 20-25% of normal expected levels for this time of year. Buyer contractual activity increased by 50% in the past month while the days on market for listings dropped by 14 days on average for all types of residential housing in the DMC. With the continuing low inventory levels and increased buyer contractual activity, market absorption rates clearly indicate a continuing SELLERS MARKET. Market data shows that property values appreciated +0.9% per month on average in the past 3 months due to continuing buyer competitive activity associated with low mortgage interest rates and low inventory levels. Likewise, market data show that these factors should result in continued appreciating property values in a post-coronavirus crisis setting.
The Virginia Association of Realtors conducted a Virginia-wide FLASH survey this past week involving nearly 2,500 realtors currently active in the real estate market to determine the impact of the COVID-19 crisis on buyers and sellers. Here were some of the findings from that survey:
Based on these survey results and our market data analyses, the COVID-19 virus crisis appears to be presently slowing both listing and buyer activity which likely is moving the real estate demand and supply timelines in the DMC to the right. If the current COVID-19 virus crisis wanes in the next 3-4 weeks and the nation begins to return to societal and economic norms, the impacts on the DMC market may be minimal except for possibly slipping the normal spring market surge into the summer months or later.
Mortgage interest rates should continue to be good news for both home sellers and buyers. The 30-year mortgage interest rates have declined by over 1% since March 2019 and were near a 50-year low at 3.29% until two weeks ago. Freddie Mac weekly survey reporting indicated an average rate of 3.5% this past week for a 30-year fixed rate mortgage. Freddie Mac attributed the recent rate bumps as reactions by the financial markets and investors to uncertainty caused by the coronavirus crisis and due to lender efforts to mitigate phenomenally high loan refinancing demand...the resulting higher interest rates that are expected to recede once lenders work through the backlog of borrowers seeking to reduce their monthly payments. Freddie Mac also indicated that low mortgage rates led to a 7-year high in new loan applications for refinancing, resale homes and new construction; however, loan applications for resale homes began to decline in mid-March. The Federal Reserve Board has dropped the prime interest rate numerous times since last year and recently lowered the rate to near zero to help offset adverse impacts caused by spread of coronavirus during this national emergency. If the coronavirus crisis is contained near-term, mortgage rates should remain relatively low and the real estate market should be a core contributor in our national economic recovery.
Based on our most recent analyzes of DMC inventory levels and competitive 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 0.7 months of available inventory, while the townhouse market absorption rate indicates a supply of only 0.4 months of available inventory and condo data indicate only 0.6 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 analysis of available market data, our MARKET OUTLOOK in a post-coronavirus setting is: for continued JOB GROWTH in the Capital Region; to experience continuing LOWER THAN NORMAL INVENTORY LEVELS for residential property; to enjoy STRONG BUYER DEMAND and competitive contractual activity (may be slipped into the summer months and later); to continue to have relatively LOW MORTGAGE INTEREST RATES; to experience a continuing SELLERS MARKET; and to generally experience APPRECIATING PROPERTY VALUES during the remainder of 2020.
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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