The past few years have thrown some long-standing real estate patterns for a curve. But as we look back at the first few months of 2023, we can already see some new (and returning) patterns emerging, along with perhaps a return to some level of predictability—in some areas, at least. Here are three trends we’re watching as we move into Q2.
According to the National Association of Realtors, the median existing home sale price nationwide was up 1.3 percent in January, compared to the same period in 2022. Within the Washington metro, we’ve seen a decade-plus-long pattern of sales prices rising to a peak, and then falling slightly. The most recent peak in the DMV is held in Q2 of 2022, while Q4 2022 fell to a recent low. This is a number to watch as Q1 2023 numbers release. If the trend continues, we can expect prices to rise a bit throughout the area, as would follow the trend line and the expectation for prices to rise in-line with spring inventory numbers.
One thing that may throw the traditional trend line pattern is the continued rise of interest rates. Historically speaking, when interest rates continue to rise, buyer demand lessens. Given current high interest rates as we enter a period of traditionally higher buyer interest and inventory, we may see the trend shift a bit—unless the interest rates begin to drop, something that many hope for but few currently anticipate.
Inventory shortages maintained a sellers’ market into 2022, but January 2023 numbers show us the shortage may be improving.
Nationwide, home inventory grew to 2.9 months’ worth of inventory—up 1.6 months’ worth since January 2022. While inventory typically improves as we move into spring, the year-over-year indicates we may be seeing a return to more regular levels. Also, with inventory having been a large contributor to elevated listing prices—following basic supply and demand rules—we may see prices continue to stabilize in the months ahead.
One questionable element to the inventory puzzle remains new home construction. As of Q4 2022, new home permits across the spectrum remained lower than usual. While this number has trended downward over the past decade as a whole, there was a slight pickup in Q4 2022, making this an area to watch for buyers looking to find their perfect home.
In whole, nationwide pending home sales rose 8.1 percent from December 2022 to January 2023. While this jump is already significant, the southern zone, which includes the DMV, among other southern states, is seeing a slightly higher rate of 8.3 percent. This additional movement shows more buyers are finding homes and successfully progressing in their home search.
While this growing rate gives hope, its progress will once again likely be largely affected by interest rates which are perhaps the most influential trend of all.
As we look ahead to Q1 DMV real estate market health, interest rates—and whether they rise or fall—are likely to influence everything from buyer confidence to time on the market for existing properties, construction permit numbers and increases, and demand.