What’s happening in the local housing market?

A question I get asked a lot is, “Has the bubble burst yet?” Usually folks have some evil grin on their face when they ask, as if they’re hoping for bad news --- presumably that would put realtors out of business. I never quite know how to respond. Real estate schadenfreude is a popular pastime, I guess.

My answer to the bubble question is … I’m not convinced (and never was) that there actually is a housing bubble in DC. There is a change in the market these days, but I certainly won’t go so far as to say it’s a result of a bubble. With that said, what is actually happening in the market today?

• Undeniably, the market is much less seller-oriented than in the recent past; it’s a much more balanced market, which is encouraging to purchasers, who’ve been treated pretty badly over the last few years. This is a good thing. It’s never great when either buyers OR sellers are in complete control of the market. What this means in real terms is that there aren’t so many frenzied multiple bid situations. In most cases, properties are selling under (sometimes *just* under their list prices. Buyers are asking for, and getting, the opportunity to have home inspections.
• Sellers are having a hard time viewing their homes as “investments,” the value of which can go up *or* down. Just like the stock market, the housing market *can* go down in value. Every investment has risk. That said, unless you bought your home six months ago, you’re likely to benefit --- in dramatic fashion --- from the recent sellers’ market, even now. Because of the current volatility in the market, though, you must be extremely careful with pricing.
• The average amount of time it’s taking homes to sell is going up. All neighborhoods in the whole metropolitan area have been affected. Some areas have been more affected than others. The areas that are most affected are those where the rates of appreciation over the last few years has been so astronomical (condos in the sexy areas, like Dupont and Logan; emerging areas like Trinidad, Deanwood, etc.). These neighborhoods in DC are likely to feel the shifting market more than others. These areas are seeing an increase in inventory, with many homes sitting on the market.
• Generally speaking, inside the Beltway, selling prices today are in line with selling prices of LAST August and September. This reflects a 20-25% deflation in the overall market. This sounds very scary, I’m sure. BUT my personal feeling is that we’re simply in a sort of shake-down period after the hyperappreciation of the recent spring and summer market.
• What’s also happening is that many buyers who’ve taken themselves out of the market over the last few years are suddenly realizing that the current environment is friendlier --- so many are jumping back into the ring. If this happens in great enough numbers, we may soon begin to see some more competitive bidding situations. Currently, though, there seems to be enough inventory to go around for some time to come.
• Interest rates are still very, very attractive (e.g., 30-year fixed as low as around 6%).