Wednesday, July 22, 2009

Local Outlook is All that Matters: Inventory Down, Prices Up

As I’ve been saying for months – the Northern Virginia market is totally in a seller’s market. The only price range not fully recovered is the over $1 million price range. Every other price range from the $100,000 condo to the $700,000 single family is selling like the proverbial hot cake. Fresh off the griddle, and ready for the butter and syrup. And therein lies the problem – or should I say, opportunity.

When it comes to housing data, sales prices, inventory levels, pending sales, etc., it doesn’t matter what’s happening across the country when you’re looking for a house in your locality. All that matters is what’s happening in the market where you want to sell or buy. It doesn’t matter that foreclosures are slated to increase nationwide when they are selling like hotcakes in Fairfax, VA.

The challenge for buyers in Northern Virginia is they have little inventory from which to shop. As a result - the bonus for sellers is that prices are on the rise. Not year over year, mind you, but month to month, they are definitely on an upward ascension.

Since January 2009, the overall average sold price has increased 15%. The average price in January was $376,669. In May the average price tapped at $433,257. (Source: Metropolitan Regional Information Systems, Inc.) Is this a trend? Well, consider this: the last time we had a 4-month, month-over-month increase in sales prices was in 2006. (At that time, by the way, the average price hit $553,618).

Why is this happening?
* Foreclosures rates are dropping in Virginia (Source: George Mason University, Center for Regional Analysis)
* The inventory is beginning to include private-seller owned properties (instead of banks), stopping the price drops and pushing them forward and upward.
* Buyers are taking advantage of the affordable housing prices, the historic interest rates and the First-Time Buyers Tax Credit (up to $8,000) before it expires November 30, 2009. (But there’s talk on Capitol Hill to extend the sunset period.)

So what? What does this mean to you? Buyers get in line. You will be competing for well-priced homes now. We have multiple offers in all price ranges. (The highest I’ve heard told of so far is 23 offers in a weekend).

Sellers, get ready to sell quickly if you are priced competitively and start using home of choice clauses and ready to move into your new home sooner. (The higher up you move in price, the more inventory that’s available). You have the opportunity to move up into your bigger home for a smaller price for the home and a smaller interest rate for the loan.


CoachingByPeter said...

Learning about real estate also involves knowing what areas are going for and being able to calculate what a property is worth. This comes from years of knowledge and you can add this valuable tool to your arsenal by doing research. You should try to view as many properties as you can and start learning how to judge there worth.

Sweth Chandramouli said...

Anthony -- I think you're partially right; NoVA isn't "totally in a seller's market", but in the same way that we're currently seeing a seemingly-paradoxical "jobless recovery" from a recession, the NoVA area is also seeing a seemingly-paradoxical "high-inventory seller's market".

Basically, all of the inventory and days-on-market numbers seem to be pointing to either a buyers or a balanced market, but buyers in the field are finding exactly the sort of competitive bidding situations that you talk about. This is, as far as I can tell, because we currently have in effect two separate markets in the area--the realistically priced, well-maintained homes, and then all of the distressed properties, unrealistic short sales, etc. The latter are all dragging down the market stats, but since most buyers aren't seriously considering most of those properties, the buyers end up all putting in offers on the same few properties that are most appealing.

M. Anthony Carr said...

Sweth - I don't understand what "high-inventory" you're talking about? The only price ranges that are more than a three month supply are the homes in the millions, which don't even make up 15% of the market.

Even with 4,000 listings on the market, that is a very small amount of homes for an area with more than 1 million residents.

When dividing those houses up by location and price, the inventory gets even smaller. For instance, in Burke, VA, one of our burbs, last year at this time there were 300 houses on the market and an absorption rate of 4 months. Now there are 68 houses on the market with an absorption rate of 1.1 months. That means, we sold 61 houses with only 68 houses on the market in the last month.

That, my friend, is a sellers market. And throughout Northern Virginia, you'll find the same data in price-range after price-range.