KW Metro Center-Q1 2023 Market Report

NORTHERN

The 2023 1st quarter results are in for the Greater Washington, D.C. Metro area and they confound what we typically understand as to how the real estate market operates based on the historical metrics used to measure and interpret the health of a market. To the average home buyer, real estate agents and experts, the numbers paint a confusing picture when reviewing what is actually happening based on those metrics in several of our markets. When inventory levels continue to grow at the pace they have over the past several months you would expect home prices to decline and unit sales to growbasic supply and demand. That has not occurred in either of these cases. Home prices have remained somewhat stable for Q1 2023 YOY although we are seeing the rate of home prices declining YOY in a few specific markets. As well, unit sales are down significantly almost universally across all markets we service. So, what’s driving these numbers and what does the forecast look like moving forward?

Certainly interest rates will and have played a major role in the ambivalence of buyers to once again get actively involved in the housing market. Interest rate predictions for 2023 range anywhere from 5.5% to 6.5% but most experts believe rates will land around 5.5% by year end. Consensus is that we will not see 3% rates anytime again in our near future. Affordability continues to be a top concern in this equation as can be witnessed by the significant decline in first-time home buyers. The National Association of Realtors research shows the participation of first-time home buyers dropped from 34% in 2021 to 26% in 2022. In addition, the age of first-time home buyers purchasing homes increased from 33 years old to 36 years old further prolonging the purchase of homes for this demographic. According to US News, less than 20% of renters can afford to buy a starter home. Inflation concerns as well as the uncertain economic outlook continue to impede any quick return to the normalization of the real estate market in 2023.

On a brighter note, job growth continues to be fairly robust throughout the DMV (VA 3.2%, MD 2.7% and DC 4.8% as of March 2023) with little reason to believe the job market growth will end anytime soon. The endless big ticket construction projects that can be seen throughout our area continue to help bolster the local economy and the new and proposed projects may help mitigate the “affordability” factor for those buyers on the cusp of being able to purchase a home. It won’t completely erase this factor but some news is good news. Single family housing starts are projected to decline in favor of multi-unit construction (town homes, condos and apartments) creating additional opportunities for potential entry level price point buyers as well as providing ancillary business to our local economies.

In 2023, we will start to see a slow return to the “normalization” of the real estate market. Inventory levels will continue to grow both in single family home resales and in new construction (primarily multi-unit) with home prices starting to level off from the growth of the past couple of years. The 5% - 6% interest rate will now become the “new norm” as we move forward into 2023 and beyond. Hopefully, inflation will continue to decline making affordability less of an issue for all. The National Association of Realtors predicts a “recalibration” of the market in 2023 in terms of inventory and home prices but have high expectations for 2024. Their forecasted outlook for 2024 is for a 10% growth in unit sales and a 5% increase in overall home prices.

As you know, the Washington, D.C. Metro area housing market has for years operated in a “bubble” of sorts and our housing market has consistently outpaced the rest of the country. As such, we are starting to see buyers returning in larger numbers with waiving contingencies, multiple offers and offer price being significantly above list price once again becoming commonplace. With that being said, 2023 will certainly be a transitional year for us. However, make no mistake we will rebound with a roar! Look for stronger growth in the 4th quarter of 2023 and a robust real estate market in 2024!

Photo Courtesy of Tam Nguyen (opposite)

WOODBRIDGE LOUDOUN CO PRINCE WILLIAM CO

28% → single family homes FAIRFAX COUNTY

1,453units soldQ12022

1,052 units sold Q1 2023

MARKET BALANCE

The market balance is determined by the average months of supply, Mar 2023

SELLER’S BALANCED BUYER’S $1.1B TOTAL SALES (SINGLE FAMILY HOMES) Q1 2023

37% → condo & co-op WASHINGTON, D.C.

1,206units soldQ12022

762 units sold Q1 2023

MARKET BALANCE

The market balance is determined by the average months of supply, Mar 2023

SELLER’S BALANCED BUYER’S

$439M TOTAL SALES (CONDO & CO-OP) Q1 2023

BETHESDA CHEVY CHASE

27% → single family homes MONTGOMERY COUNTY 884 units sold Q1 2023

1,215units soldQ12022

MARKET BALANCE

The market balance is determined by the average months of supply, Mar 2023

SELLER’S BALANCED BUYER’S

$801M TOTAL SALES (SINGLE FAMILY HOMES) Q1 2023

MONTGOMERY CO

PRINCE GEORGE’S CO SAINT MARY’S CO