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 20+ 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 EARLY-ON 2019 DMC REAL ESTATE MARKET IS DRIVEN BY A MIX OF LOW PROPERTY INVENTORY LEVELS, GOOD BUYER DEMAND AND STABALIZED MORTGAGE INTEREST RATES. Current resale property inventory levels are only 25% of normal levels for this time of year compared to the same time periods in past years and have further decreased in the past month. The latest decrease in inventory occurred while there was a 7% increase in buyer contractual activity during the same period. While inventory levels are projected to increase with onset of the spring market, the data indicate that we will also have very good buyer activity in the 2019 spring market that will quickly buy up the increasing but still relatively low inventory levels...these two forces will combine to drive up DMC home prices during a very robust 2019 spring market.
Mortgage interest rates seem to be more cooperative recently for buyers and sellers as well that should also contribute to a very robust 2019 spring market. After the 30-year fixed-rate mortgage rate rose to its highest level in 7 years to nearly 5.0% in 2018, the rate has been declining in recent weeks and dropped this past week to its lowest level in over a year. Freddie Mac weekly survey reporting indicated an average rate of 4.37% this past week. The Federal Reserve Board increased the prime interest rate 4 times in 2018 to offset inflationary pressures in the economy and has indicated the possibility of two prime rate increases in 2019. A major concern with higher interest rates is that they may serve as a knock-out punch for some homebuyers, particularly first-timers. However, Freddie Mac indicates that the real culprit may be the continued lack of actual housing inventory in affordable price ranges for entry-level buyers (and continued increasing home prices). But, to the contrary, mortgage lender have indicated a recent increase in mortgage loan applications with the recent decline in rates.
Based on our most recent analyzes of market absorption rates, 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 0.7 months of available inventory and condo data indicate 1.0 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.
Our MARKET PROSPECTUS FOR 2019 is to expect continued JOB GROWTH in the Capital Region, to have continuing LOWER THAN NORMAL INVENTORY LEVELS for residential property, to continue to have STRONG BUYER DEMAND and contractual activity, to have ATTRACTIVE MORTGAGE INTEREST RATES and to have APPRECIATING PROPERTY VALUES particularly during the spring market. Overall, we should continue to have a HEALTHY DMC REAL ESTATE MARKET in the foreseeable future.
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 20 years.)
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