This year is off to a good start. Washington-area real estate appears to be headed for a strong year, pulling out of the housing slump ahead of most of the country.
January and February sales were the best since 2007. That’s remarkable, because one year ago the federal homebuyer tax credits were boosting sales - albeit temporarily.
“That artificially created a statistical bubble last spring, but the impact is now gone. No one ever mentions it again,” says Alana Lasover, branch vice president at Coldwell Banker’s Bethesda Downtown office.
“We have virtually no inventory right now, but it’s beginning to grow a bit,” Ms. Lasover says. “The homes we do have for sale are moving fast. Incredible excitement. Multiple offers. Last week, our office listed a Cape Cod in Bethesda for $579,000. By Monday night, we had received 26 offers!”
That kind of competition among buyers is a sure sign that the housing market is bouncing back - especially in Virginia.
February sales were up by 8 percent on both sides of the Potomac, but a lower inventory of unsold homes in Virginia is generating more competition among buyers there than in Maryland. In 2007, the Virginia side of the Washington metro area had more unsold homes than the Maryland side did. In 2008 they were about even.
During the past three years, however, Virginia’s inventory has fallen dramatically. Maryland’s inventory has been dropping, too, but not enough to impact prices in the way they have rebounded in Virginia.
“Sales chances” are a convenient shorthand for understanding how sales and inventory affect the competitiveness of the market.
Sales chances are calculated by dividing a month’s sales figures by the inventory on the last day of the month, resulting in a percentage. Typically, a figure below 20 percent indicates a buyer’s market. Higher figures indicate a balanced market or a seller’s market.
If you look at the entire state of Maryland, the most competitive market in February was Montgomery County, with a sales-chance figure of 27 percent.
In Virginia, you will find eight jurisdictions with chances above 27 percent. The city of Manassas led the entire region with chances of 67 percent in February - making Manassas a seller’s market for certain.
“We are suffering from a shortage of listings out here,” says Linda Wooldridge, an agent at Long & Foster’s Manassas office for 32 years. “There are more buyers than there are listings. Last week I wrote a contract on a home, and we were one of six offers.”
Because of that kind of competition in much of the Washington region, home prices are beginning to rise again.
Buyer competition causes prices to rise because buyers battle with one another to get the homes they want. In 2003-05, it was common for buyers to include an “escalation clause” in their offers - automatically increasing the amount they were willing to pay in order to beat other offers.
“Back then, buyers would offer more than the asking price, and add an escalation clause on top of that,” Ms. Lasover says.
When the market tanked, however, escalation clauses disappeared. Their return is a sure sign that prices are going to be increasing.
“The offers now come in at or below the asking price, but more buyers are adding escalation clauses these days,” Ms. Lasover says. “We’re seeing a lot of them now.”
The other challenge buyers face in a more competitive market is cash offers.
“We are seeing a lot of cash offers coming in from investors,” Ms. Wooldridge says. “It is especially hard for a first-time buyer to compete with that because they have to get financing from a bank, and sellers often prefer the ease of a cash offer.”
Please read our comment policy before commenting.