A housing-affordability crunch in the Washington region is leading more prospective buyers away from the single-family sector and into condominiums and townhouses.
But that, in turn, is pushing up costs and adding to the affordability challenge in those sectors, too.
In just a single month (July to August), the median condominium price rose a significant 1.9 percent across the region, according to new data from Bright MLS.
Across all housing types, the median regional sales price of $585,000 recorded by Bright MLS was up 5.4 percent from a year before and represented the third month of year-over-year increases after three months of declines.
While some prospective buyers are moving down to the townhouse/condo sector owing to higher prices and interest rates, others are being priced out of the market altogether, Bright MLS chief economist Lisa Sturtevant said.
“New pending sales are significantly lower than they would be in a more typical housing market, and showings also are down,” she said.
Total sales for the month stood at 4,583 regionally, down just under 14 percent from a year ago. Figures represent sales in the District of Columbia; Arlington, Fairfax and Loudoun counties and the cities of Alexandria, Fairfax and Falls Church in Virginia; and Montgomery, Prince George’s and Frederick counties in Maryland.
Interest rates, which had hovered in the middle of the 6-percent range for months, moved upward to 7 percent and beyond over the past month. A one-percent increase in interest rates paid on the median home price of $585,000 equates to and additional $350 coming out of a homeowner’s pocket each month.
Adding to the affordability issue has been a lack of inventory during much of 2023, as many sellers opt to sit tight rather than give up rock-bottom interest rates they obtained at the depths of COVID.
“Available inventory is just half of what it was prior to the pandemic, with the supply of [single-family] homes the most constrained at only a third of pre-pandemic levels,” Sturtevant noted in parsing the August data.
Year-over-year active listings on the market had been up for six consecutive months beginning in the fall of 2022, but have been down for the past five months.
Fairfax County had the biggest drop-off in the number of active listings, off 36 percent in August from a year before. (Of all the localities in the region, only the District of Columbia and the smallish city of Falls Church had more inventory in August than a year before.)
A recent increase in homes coming onto the market may help, but listing activity is expected to remain low throughout the year. For those who are selling, that should mean a quick turnaround and little haggling from buyers.
Year-over-year home sales across the region have been down 21 consecutive and 24 of the last 25 months, and now stand down about 28 percent from the same period in 2019, before the pandemic hit.
Figures represent most, but not all, homes on the market. All July 2023 figures are preliminary and are subject to revision.
