Based on my experience as a Realtor, the real estate market for the D.C. region has showed some slight signs of slowing down this spring—residential properties on the market for longer, fewer multiple offers being submitted for desirable properties, some residential properties actually selling for less than their list price—so I decided to do a more systematic study of the May figures in the whole DC region using current market data and going back five Mays to May 2011.
Why May? Because May is typically the busiest month of real estate sales (and spring is typically the busiest season), so I wanted to look at the market peak for each year in order to get the greatest possible differentiation between Mays.
What I found surprised me, and it may surprise you, but the market is still definitely a seller’s market and some measures actually point to an increase in the conditions that characterize a seller’s market. Let’s look at those conditions as grouped in different colors in the accompanying table.
The first group is related to the availability of residential properties. “Months Supply” is a figure that measures how long it would take to sell off the inventory of currently available properties if no more were to be added to the market. The greater the months supply, the greater the buying opportunities for buyers; the lower the supply, the more competition among buyers (and the higher the price paid for properties). “Days on Market” is part of the calculation of months supply, being the number of days a property is on the market before it comes under contract. The lower the days on market, the faster that properties are placed under contract. In this situation, buyers have to be prepared to jump quickly to snag a property. Looking at the availability measures in the table, we can see the months supply has steadily decreased over the preceding five Mays to currently being the lowest of any May. The days on market measure declined in 2011 and 2012, but has been at its current value (more or less) for the four most recent Mays. Both measures in this group point to a continuing seller’s market.
The next group of measures relate to market activity. “Pendings” are the number of residential properties currently under contract, but not yet settled (i.e. sold). “Actives” are the number of properties listed on our regional multi-list service (MRIS) that are available for purchase. From the table, you can see a general increase in properties under contract (i.e. pending) and a general decline in the number of available properties (i.e. active). The important relationship between these measures creates the “Contract Ratio,” the number of pendings divided by the number of actives. The lower this ratio, the more favorable the market for buyers; the higher this ratio, the more favorable the market for sellers. Looking at the table, you can see that the contract ratio has been steadily moving higher since May 2011. In fact, for the past four Mays, it has actually been higher than 1.0. That means that there have been more residential properties in the D.C. region under contract than there have been available properties. This ratio definitely points in the direction of a strong seller’s market.
The final group of measures is about price and price ratios. You can see that “Median Prices” (the middle value) for residential properties in the D.C. region has risen year by year over the last six Mays. While this past May has seen the lowest “Increase/Decrease from the Previous May” (1.88 percent), it still posted the highest median price of the preceding five Mays. Further, the “Average Sold Price to List Price” ratio has been the highest this last May, though it has been above 100 percent for the last four Mays. This means that the average residential property in the D.C. region has sold above its asking price for the past four Mays.
So, what do we learn from this investigation? Clearly, we are still in a seller’s market. Sellers, there’s still time to put your property on the market to take advantage of the latter part of the spring market or the fall market starting in September. Buyers, if you can wait, look for places during the summer season or late fall when there is less competition (but also less inventory) and prices are not as high.
Happy sales to you.
Ted Smith is a licensed Realtor with Real Living | at Home specializing in mid-city D.C. Reach him at TedSmithSellsDC@rlathome.com and follow him on Facebook, Youtube or @TedSmithSellsDC. You can also join him on monthly tours of mid-city neighborhood open houses, as well as monthly seminars geared toward first-time home buyers. Sign up at meetup.com.