Last Thursday, a Bloomberg Business report noted an interesting shift in some of the country’s hottest real estate markets. In places such as Seattle and Austin, Texas, where homebuyers once seemingly needed to pledge their first-born children to win bidding wars, homes were sitting on the market longer and selling below list price. Economist Robert Shiller was quoted as saying, “This could be the very beginning of a turning point.”
Let’s explore some national and local trends to find out if this cooling effect is a real phenomenon.
A Softening Market?
A review of the June existing-home sales data provided by the National Association of Realtors reveals at least some evidence that this theory may be correct. The report showed that sales prices for existing homes had their smallest year-over-year increases in over a year.
On the inventory side, the months supply of homes for sale has jumped quickly to 4.1 in 2018. To find the months supply of inventory for an area, you divide the number of active listings for sale by the number of homes sold per month on average during the previous 12 months.
We all know that real estate is local. No matter what is happening on the national level, we need to look at what is happening close to home. I advise my homesellers best by studying the local trends monthly and providing advice on list pricing and market activity. I consider providing sellers with insights and managing their expectations to be one of the most important parts of my job.
D.C. on the edge?
With its super-tight inventory and exploding restaurant and nightlife scene, the Washington, D.C. real estate market has been scorching for several years. Does the data show anything to worry about?
A quick peek at the single-family June sales data shows that prospective homesellers in the District shouldn’t have concerns. Despite higher interest rates and sky-high prices, buyers are still pouring into the city, even driving the supply of homes for sale down 18% below last’s year level to an incredible 2.12 months.
A Different Story in the Maryland Suburbs
I also serve Montgomery and Prince Georges Counties in Maryland, the jurisdictions closest to Washington. The June sales data shows that, indeed, there has been a bit of a slowdown in the suburban areas. Inventory in June and in May is up over prior years, to 2.6 months.
True, that number is still extremely low. Most real estate agents would consider a market to be balanced if there were a six-month supply of homes for sale. However, it is notable that this is the first time since May of 2015 that this number has been in the positive, breaking an amazing 37-month streak!
The Bottom Line
It is still way too early to call anything that we see here a trend. Still, every market shift must begin somewhere. I held an open house in the Maryland suburbs yesterday and had 17 families visit. Buyer traffic is still strong, but the change in inventory levels is something worth taking note of.
If you are thinking about selling a home soon, you should ask your real estate agent to check this type of data for your local market. And if you are in D.C. or Maryland and you need assistance, I would be happy to help you. Please visit LoveLivingDC.com for more information.
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