FROM THE BROKERYEAR IN REVIEW 2022

from KW Metro Center-Q4 2022/ Year In Review Market Report

2022 is finally in the rear view mirror and no industry or group of people are happier to see it go than those that work in the real estate world. Interest rates driven by inflation, economic concerns and financial uncertainty unnerved both buyers and sellers that led to the transitional year we experienced in 2022. Typically, our real estate market is generally more stable than other large metro areas, but our markets showed unit sales having suffered significant declines albeit not to the extent of other national markets. All counties, cities and municipalities in the Greater Washington, D.C. metro area experienced similar metrics in terms of increasing inventory and declining unit sales.

Northern Virginia unit sales showed a signiﬁcant decrease of -25% YOY while the average home price landed at a respectable increase of +7.9% YOY. This metric was down slightly from 2021’s increase of +9.3% YOY. Moving forward for Northern Virginia, inventory levels continue to rise at a rapid pace providing some positive signs for a modest market recovery in 2023.

The story remained the same for the Washington, D.C and Montgomery County markets. Unit sales in D.C. were down -20% while home prices came in at an increase of +2.4% YOY (down signiﬁcantly from the +8.1% increase the previous year). Similarly, Montgomery County unit sales were down -23% and home prices landed at an increase of +6.6% YOY. The outlying southern Maryland counties (Calvert, Charles and Saint Mary’s) experienced much the same as the rest of our “in close” markets with regard to unit sales (down -35%, -24% and -22% YOY respectfully). However, these counties all saw a drop in home sale prices and slight increases in DOM (days on market). Similarly to Northern Virginia, the increase in inventory for these counties will provide buyers greater opportunities as we progress into the spring market.

Looking forward into 2023, we do see a market in transition. It appears we are returning to what might be considered a “normalization” of the market. Significant home price reductions on active listings, contingencies making a comeback, swelling open house crowds and sellers willing to negotiate with potential buyers are becoming commonplace. That being said, uncertainty will still be the watchword as we move further into 2023. Unit sales are forecasted to fall in the first and second quarters but will start to flatten out in the second half of the year. Home prices will continue to “decelerate” or increase just slightly but will remain close to the levels for year ending 2022. Although our markets will face some headwinds with recession worries, continued high interest rates and market uncertainty, the uniqueness of our market continues to put us in a more favorable position than others. Virginia continues to have one of the highest concentrations of technology talent in the US as demonstrated by the announcement of Boeing and Raytheon moving their headquarters to Arlington as well as smaller firms relocating to the D.C. and Maryland areas. New construction will continue to be a contributing factor to our overall market stability (especially with regard to jobs) but will shift from a concentration of single-family homes to that of multi-unit construction. Affordability continues to be a limiting factor for some, especially first-time home buyers, hence the move for developers to multi-unit construction; However, as interest rates start to stabilize, this too may ease. Finally, although we are technically in a ”seller’s market”, buyers will wield considerably more leverage than they have over the past few years resulting in a distinct reversal of fortunes for sellers. In the short term, 2023 will continue to be a challenging year but predictions from multiple sources favor a more positive outlook for the third and fourth quarters. All in all, most experts still believe the purchase of a home remains one of the best financial investments.