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)* (defined below) residential real estate market and in providing the results of these analyzes to our clients. Our analyzes and market forecasts have proven to be consistently accurate over the past 21+ years...we believe that you may find the results of our most recent analysis and forecast for the DMC real estate market to be of interest in the midst of reopening efforts from the ongoing COVID-19 coronavirus pandemic. Besides the market summary and forecast that follows below, we also provide important recurring updates to individual market status indicators (current mortgage interest rates and other market data) 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 extremely low inventory levels, historically low mortgage interest rates, active buyer demand and, continuing, believe it or not, to a lesser extent, the COVID-19 coronavirus crisis. Inventory levels of DMC residential housing decreased by 6% in the past 30 days primarily attributable to a 3% increase in buyer contractual activity...in fact, overall, inventory levels not only dropped and currently remain extremely low at approximately 15% of normal expected levels for this time of year. With continued COVID-19 face mask/social distancing restrictions, buyer contractual activity again increased during the past 30 days versus the previous month: a total of 903 residential properties in the DMC went under contract versus 878 contracted properties the previous month. Year over year, these 903 contracted properties exceeds the 726 residential properties that contracted in the same 30-day period in 2019. With the continuing low inventory levels and active buyer contractual activity, market absorption rates clearly indicate a continuing SELLERS MARKET. Also, market data shows that DMC property values continued to appreciate at +0.4% per month on average over the past 3 months due to continuing buyer competition associated with historically low mortgage interest rates and low inventory levels (and in spite of COVID-19 restrictions). And looking at the horizon, market data indicate that property values will continue to appreciate at least for the near term in the DMC. Based on FLASH statewide surveys of realtors as to the impacts of the COVID-19 virus crisis on the real estate market and economic reopening efforts, realtors recently indicate that the slowing of listing and buyer activity statewide was abating and that properties listings and buyers are returning to the market with ongoing economic reopening successes. The past two months of uptick in DMC buyer contractual activity indicates that the demand and supply curves for real estate had moved to the right and that we should expect to continue to see robust market activity for the remainder of the summer market as economic reopening continues.
Mortgage interest rates continue to be great news for both home sellers and buyers. The 30-year mortgage interest rates have declined by over 1% in the past year and has continued to decline over the past 2 months. The current mortgage interest rates are holding at or near all-time historical lows (since tracking started in 1971). Freddie Mac weekly survey reporting indicated an average rate of 2.88% this past week for a 30-year fixed rate mortgage. Mortgage rates track to performance of the 10-year Treasury market. Based on Federal Reserve Board actions this year with the prime interest rates, the 10-year Treasury market has declined by over a full percentage point, yet mortgage rates have only declined by one-third of a point. Based on this, Freddie Mac predicts that...there is room for mortgage rates to move downward and that we should expect for mortgage rates to drift slightly lower in the second half of 2020. The outlook is for mortgage rates to remain relatively low and for the real estate market to serve again as a core contributor in our local, state and 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 0.4 months of available inventory, while the townhouse (TH) market absorption rate indicates a supply of only 0.3 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.
In summary, based on our recent analysis of available market data and considering that successful economic reopening efforts from the COVID-19 pandemic will continue, our MARKET OUTLOOK for the DMC is: to return to continuing JOB GROWTH in the Capital Region; to experience continuing LOWER THAN NORMAL INVENTORY LEVELS for residential property; to enjoy PENT-UP BUYER DEMAND and competitive contractual activity (for the remainder of the summer market and beyond); to continue enjoying historically LOW MORTGAGE INTEREST RATES; to see no change from a continuing SELLERS MARKET; and to enjoy APPRECIATING PROPERTY VALUES during the remainder of 2020.
(*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.)
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.
Have a question or a comment? Please send us an email or call us at 703-625-5586.